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Gannett to follow after Tribune? April 10, 2007

Posted by Stacey Swift in Growth, Stakeholder management, sustainable development.
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During last week’s class we talked about how the Tribune should handle their large variety of different companies.  Their recent acquisitions has gotten other large newspaper companies thinking, should we be doing the same thing?  Gannettis a large publisher of USA Today and many other newspapers for small and mid-size cities (their headquarters is right by my house, its the most beautiful building….but anyways).  Recently they have been under pressure to increase their return to shareholders, as their price earnings ratio is the lowest in the industry.  Shareholders have watched Real Estate mogul Sam Zell buy out Tribune and their value increased.

The article says Gannett has a $13.2 billion value, but also $5 of debt, making it an unlikely candidate for a buy out.  They also say they could create value by spinning off its NBC stations.  This got me thinking, How much responsibility does the company really have to its shareholders?  Do they need to change their current operations just to increase their dividends to shareholders?  Currently their annual dividend is $1.24, but Barrons says they could technically afford to give $4 per share, or they could spin of their stations to increase profits.  Are they responsible to give shareholders as much as they can?  With huge conglomerates such as Tribune, smaller corporations are under even more pressure to increase profits.  Do you think that Sam Zell is setting a trend and we will begin to see more buyouts in the future?


Acquisitions in India April 4, 2007

Posted by breichen in Acquisitions, Growth.

So far this year, Indian firms have made/announced 34 foreign takeovers, with an estimated value of $10.7 Billion. Last year’s total acquisitions of foreign companies by firms in India held a value of $23 Billion, which is five times as much as any previous record in India and more than the total investments made in Indian companies by foreign players. These recent acquisitions have been described as a “buying binge” and demonstrate the “new-found respect that India commands in the global arena.”

If the rate of acquisitions continues at the rate is going, this year will definitely have a greater number and higher value of acquisitions of foreign companies by Indian firms than ever before. During March 2007, the Indian steel companyHidalco bought American rival Novelis for a mere $6 Billion. This made it the world’s largest aluminum -rolling company. This incredibly significant deal took place less than a week afterTata Steel, India’s largest private producer of steel, purchased the Dutch firm Corus for $13.2 billion. This price tag was 9 times larger than any foreign acquisition by an Indian organization before this. Both of these deals reflect the conditions which are permeating through India and encouraging Indian organizations, both large and small, to buy globally in the sectors of car parts, pharmaceuticals, energy, etc.

By one estimate, 60% of India’s 200 leading companies are looking to invest this loot in foreign purchases.

The increase in acquisitions by these Indian firms really represent the changing nature of the Indian organization. It can be said that Indian organizations, at the very least the leading ones, are going global. The trend of Indian investments in foreign companies will only continue to rise and these companies will only continue to grow and expand. To my knowledge, India has long been regarded as a somewhat unimportant player in the global market. In recent years, we have seen many large American organizations outsource to India in order to save money. India however, is now becoming a power player and some of these organizations have been able to purchase foreign organizations several times larger than they are. I think that this is very interesting because Indian companies are clearly becoming important characters in the global business world. I think it would be interesting to consider however, the implications of young and unexperienced Indian firms purchasing larger, more established firms. In the instance of Hidalco and Novelis, this would clearly result in enormous organizational change and many adjustments would have to be made. It would be interesting to see how successful some of these Indian acquisitions of foreign firms have been in terms of organizational mergers.

Gung-Ho on Mergers April 3, 2007

Posted by Kira in Growth, Merger.
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A popular new television show in Japan, called “Vulture”, is about a fictional New York investment fund that buys struggling Japanese companies and imposes harsh American-style management changes. The national broadcaster was surprised to learn that half of the millions of viewers supported the American fund and faulted the Japanese acquisition targets for getting into trouble in the first place.

In Japan, corporate takeovers used to be rare because of the deep cultural aversion to selling one’s company. This was considered a humiliating failure by the founders and owners. There is also a cultural aversion to confrontation. However, with years of slow growth, Japanese companies need to find new ways to increase revenue and profit.

“Japan’s in an M. & A. boom…The thinking has changed here,” says Nobuo Sayama, a professor of management at HitotsubashiUniversity in Tokyo and president of GCA, a merger advisory firm.

There is a new openness in the country’s business culture where takeovers and buyouts are becoming a common business practice. The number of mergers involving Japanese companies as buyers or sellers has more than quadrupled in a decade.

I thought the Japanese would have no interest in the new television show and would hate the American fund for imposing its management style on them. I was surprised to see that the Japanese actually liked the American fund although their style was different culturally. Although M. & A. go against their culture, from a business perspective, I think the Japanese recognized that they have to adapt to the competition or they will be left behind in the global economy.

The U.S. economy is over 2.5 times the size of Japan’s and just last year there were nearly four times the number of mergers in the U.S. compared to Japan. I think that Japan recognizes that in order to grow their economy they need to incorporate M. & A. into a strategic advantage. As we have studied, we know that mergers and acquisitions are extremely challenging and that most of them fail- especially the international M. & A. due to all of the cultural differences.

What do you think would make a merger of this type successful? Are mergers and acquisitions inevitable and simply just an example of Darwin’s survival of the fittest? Do you think that Japan should change their culture for the sake of business? Is it fair to impose American-style management in Japan?

GM Design Change April 2, 2007

Posted by Brian Mulligan in Auto's, Growth, Manufacturing, transportation.

Design is the biggest part of car making. The design either turns a customer off or excites the customer to buy the car. Originally, GM thought that American design would sell well in both the US and internationally, but they were very wrong. They soon employed design teams in each country.

To combat the needs of international drivers, GM has established 11 design team scattered across the world. The most success for GM has actually been in China. Behind the work of Joe Qiu, the head designer for the highest selling Buick in China, the LaCrosse. He worked with his team in China, totalling 100 people with only one non-Chinese worker from Canada. This is a testament to the changes that GM has gone through.

In the past, GM believed that whatever came out of Detroit was the right thing for selling their cars in both US and abroad. The China office had a paltry 23 people, all American, in their office only six years ago. Now the office is all Chinese, whom are in touch with the needs and wants of the Chinese.

In a effort to promote creativity, GM actually pit all of the 11 offices of design against each other to create the best design for their cars. This created incentive for the designers and pushed them to find new ways to design cars and make them appeal to the public.

“But the executives also understood that they could no longer depend solely on Detroit talent. To compete with the best products, and to serve a global market, they would have to tap creativity in new places and in new ways. Welburn and Lutz decided that competition–the bare-knuckled, no-holds-barred sort–would expose the best ideas, wherever they came from.”

The CEO Ed Welburn decided to place the Chinese office against the North American office for the design of the Buick LaCrosse. The two teams came up with drastically different ideas for the car. In the end, Welburn combined both of their designs to create a car that had an interior inspired by Qiu and an exterior designed by the North American office. The car sold like wildfire in China, only second to the sales in the US as told in the article in Fast Company Magazine, “Made in China.”

Looking forward, the company has made sweeping changes with their design idea and how their company manages their creativity and design.

Do you think each country’s office should design the whole car for each region? Do you feel that this is cost effective? Do you think that GM should stick with this setup or not?

A Family Business April 2, 2007

Posted by Janine in Birth, Growth.
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My father recently opened his own business, a jewelry store in northern VA.  Based on what we have learned in chapter 11, I would like to go over the steps his business have taken, and analyze in that light.

My dad worked for the jewelry business for over 20 years, for a major jewelry company, Sterling.  After years of working successfully in retail, he becomed frustrated with corporate business and the impersonality of it, and he decided to embark on his own adventure and follow his dream. He was an entrepeneur.  He knew and recognized his skills in the field, and decided that he could take those skills to a store of his own.  Subsequently, he opened his jewelry store, and thereby organizational birth took place.  He developed his own business plan and chose his target area.  He found a nice shoppping center, and to control ‘population density’, he had the shopping center specify in his contract that no jelewry store could be opened in the center.

Moreover, since my dad had been in the business for many years, he did not have ‘first movers advantages’ in the field.  He took his experiences from the previous organization, and used them to build off of what worked and what did not.  He used the K-strategy; he was a late entrant into the jewelry market.  In this sense, his move was slightly less risky than being the first in the field or service. 

Furthermore, my father used the specialist strategy for his business, thereby distinguishing these corporate stores from his own.  Unlike many mall jewelry stores, my dad’s customers can create their own designs and have a say in what exactly they want.  My father will then make the piece for the customer.  Stores like Kay Jeweler’s or Jared’s do not offer this service.  This personalized touch sets my dad’s store apart from the rest.

As a result of the many different personal touches that my dad offers his customers, his business is doing well and is in a period of growth.  As the book states, all businesses experience flucuations, so it will be a matter of time to see what happens to my dad.  I will just have to wait and see

Everyone loves GE April 2, 2007

Posted by Brian Mulligan in Consumers, Decline and Death, Growth.

I remember us talking in class about GE and the numerous business sectors that they’re involved in, so i decided to do a little research about the company. It just intrigued me that the company could still function in some many different industries. I came across this article from CNN Money. It’s named “What makes GE great?” and it explains why GE has been the most admired company for the sixth time in the past decade.

GE has been not a specialist in each sector, but has been the best at creating the best management and strongest organization in the world. Since it’s inception over a 100 years ago, it hasn’t focused on a certain product such as insurance or light bulbs, but fosters strong managerial talent. As time passed the company was at the forefront of corporate policy making, this can been seen with the first corporate R&D lab established and groundbreaking work with labor relations. They battled the creation of labor unions by creating pension plans and profit based bonuses.

They also made the famous “blue books”, which contain detailed guidelines for managers at GE. As the company neared the end of the 20th century they focused on leadership development and strategic planning. It almost makes sense to development strong management when you’re involved in so many different fields of business.

Also, the company is ever-changing and always seems to be one step ahead of its competitors. As we read in class, the addition of the emerging product lines and find what is going to be new hot product has become integral part of the business strategy for GE. Additionally, if something doesn’t work, then GE phases it out immediately and business focus changes with each CEO that comes to company.

“Most people inside GE learn from the past but have a healthy disrespect for history,” says CEO Jeff Immelt. “They have an ability to live in the moment and not be burdened by the past, which is extremely important.”

Trying to stay current learning from their mistakes has made a very dynamic company that is ever-changing. Lastly, GE handles their employees very differently from other companies. They develop them, evaluate them and then act on the results and this has created a very demanding environment. GE give the pink-slip to over 10% of the bottom rung employees each year. You may see this a blunt and heartless, but other companies are jealous of GE’s ability to recognize trouble employees and get rid of them.

I think GE has a very strong coporate structure with perfect management and business ethics. They seem to have it right and do what is necessary to keep this behemoth of a company running smoothly, but it does raise some interesting questions.

Does it make sense to invest money in training and developing of employees and then 10% of your work force? What happens when a CEO pursues a dead end business? Can it potentially destroy the company?