Case studies

In August 2007 the Mainsail II SIV-Lite was frozen by its trustee as a result of the ongoing credit crisis. The state of Maine held $20 million of Mainsail commercial paper in its Cash Pool portfolio, a short-term portfolio that puts temporary, excess state revenues to work. When word of the potential loss became public, the Treasurer came under attack. The case introduces the functions of a state Treasury department, with particular emphasis on the investment objectives and guidelines for the cash pool as well as its composition. The case reviews the events leading up to and including August 2007, the month when the credit markets first began to seize and when the financial crisis effectively began. It examines securitization, structured finance, and the Mainsail SIV-Lite structure in some detail.

Early in 2008, Tony Truesdale, President of the Vitamin Shoppe, was preparing for a meeting with the company's investment bankers. In particular, he was wrestling with supply chain issues that were becoming increasingly pronounced in light of the company's aggressive growth plan. Truesdale recognized that it was nearly impossible to effectively manage the company's large and fragmented supply base, resulting in higher than necessary costs and lower than desired performance. The company also relied too heavily on one supplier for a significant amount of the company's volume. Truesdale recognized that it was nearly impossible to effectively manage the company's large and fragmented supply base, resulting in higher than necessary costs and lower than desired performance. The company also relied too heavily on one supplier for a significant amount of the company's volume.

Further, in the company's single distribution center, 95 percent of the available storage capacity was utilized throughout most of 2007; well above what was considered optimal. The lack of space was driving excessive product handling and increasing operating expenses. The company's inbound and outbound transportation strategies also contributed to inefficiencies and unnecessary costs. Operating efficiencies could be achieved if all transportation needs were brought together under one strategic umbrella. Truesdale was certain that in order to reach the company's growth targets and maintain its competitive advantage, addressing these supply chain issues was critical. Students are asked to describe the specific issues affecting supply chain performance and recommend approaches to solving the problems

Doug Scovanner, CFO of Target Corporation, was about to present his proposal at the November 2008 Board meeting. He was prepared to discuss immediate strategic actions which would provide support for working capital for the discount retailer. The retail community was about to suffer their worst fourth quarter in recent memory. Consumer spending had contracted, unemployment was rising and the deflated housing market had driven the economy into a recession. Although discount retailers had fared better than other industries during the second and third quarters, they were not immune to the overall economic downturn which had become a global crisis. To further complicate matters, Target's largest competitor, Wal-Mart, just posted third quarter growth even though Target was bracing for a busy holiday season. Scovanner anticipated further strain on working capital before year-end as cash flow tightened and the capital markets remained at a virtual stand-still.

Traditional Craft Designs is a sole proprietorship located in Trinidad and Tobago, West Indies. The firm's owner, Ms. Debra Atwell was recently offered an attractive opportunity to lease space at the Crown Point International Airport, Trinidad and Tobago to establish a retail outlet. She then met with an officer of the National Entrepreneurship Development Company to discuss the opportunity and seek a $40,000 loan to finance the capital and operating costs associated with the proposed retail outlet. Students are required to assist Ms. Atwell with the preparation of historical financial statements and a financial analysis that must accompany her loan application.

Small to medium-sized enterprises, SMEs, play a critical role in the global economy. They comprise 90% of the global firm population and employ more than 50% of the labor force in the private sector. This case study examines issues related to sustainable supply chain management and social entrepreneurship in the SME context. Being small does matter and the efficiencies of small to medium-sized companies struggling for competitive advantage in the global marketplace warrants consideration. Philosopher's Wool Co., located in Inverhuron, Ontario, Canada, is a woolen producer and woolens product manufacturer that partners with other Ontario wool producers and American wool processors and distributors. Its sustainable vertical supply chain system increased local woolen farmers' revenues contrary to the “conventional” price wisdom in the Canadian woolen industry and turned by-product cost into profitable end use. It also effected social change in its local business community and in global customer relations through resource efficiency and socially responsible employee and consumer policies. However, the struggle to maintain a foreign distribution network and remain competitive and profitable was problematic. Students are challenged to solve the problems of an SME operating in a global economy.

In 2007, BP sought and received regulatory approval to expand operations at its Whiting Refinery in northwest Indiana. Had the project gone forward as planned, the refinery would have discharged significantly higher levels of pollutants into Lake Michigan, but would have also contributed to economic development in the region. The result of BP seeking and being granted regulatory approval triggered a firestorm of controversy from multiple segments of society. This case study draws from secondary sources to examine the positions of a variety of stakeholders who influenced BP's decision as to whether or not it should expand its Whiting Refinery. Relevant stakeholders included for analysis are citizen and environmental organizations, political groups, trade associations, BP's employees, and stockholders. The intended target audience for this case is upper-level undergraduate business students studying issues related to business and society, such as corporate social responsibility and sustainable development.

The financial statements of public companies located in the United Arab Emirates provide excellent examples of the impact that reporting investments at fair value can have on net income. This is because of the wide fluctuations in securities prices and real estate prices in recent years. Using an actual company, National General Insurance, which is located in Dubai in the United Arab Emirates, this case provides examples of the impact of fair value accounting for investments under International Financial Reporting standards (IFRS), for both securities and property investments. As US financial reporting moves towards harmonization with IFRS, it is critical to understand how reporting for investments under US Generally Accepted Accounting Principles (US GAAP) compares with international reporting standards. Specific learning objectives include gaining an understanding of the reporting requirements for investments under IFRS, understanding the difference between reporting requirements for investments under US GAAP and IFRS, and understanding both the positive and negative impacts on reported net income from using fair values for reporting investments.

This case examines the ethical issues raised when businesses contract for the military during time of war. Dow Chemical Company was a military contractor during the Vietnam War and the primary producer of Agent Orange - a defoliant used to clear vegetation. Agent Orange has been linked to a number of serious medical conditions in war veterans and Vietnamese civilians. In 2004, Vietnamese citizens filed suit against Dow for illnesses they believe were caused by exposure to Agent Orange. Dow thought the issue should have been addressed through political and social policy, while Vietnamese citizens and U.S. Vietnam war veterans believed Dow was ethically responsible. As the case moved through the U.S. judicial system, some of Dow's investors grew uncomfortable with how it was handled. Dow CEO Andrew Liveris was left to wonder what his company could have done differently and what they could learn from the Agent Orange episode that might prevent similar problems in the future. This incident appeared to be a relatively distinct case, but in July of 2007 it was reported that the number of private contract employees in Iraq exceeded that of U.S. military personnel. Consequently, it is likely that companies and their stakeholders will have to address similar issues.