Case studies

The Hotel Perennial case puts students in the shoes of Dan Jameson, founder and CEO of a boutique real estate private equity firm called EL Investments (ELI), as he wrestles with the decision of whether or not to acquire the distressed Hotel Perennial, a 194-room hotel on the north side of Chicago, Illinois. When making the investment decision, Jameson (and students) must consider various factors: What is ELI's implicit investment strategy, and what are the firm's core competencies? What are Jameson's goals for growing ELI, and how might the acquisition of the Hotel Perennial fit with those goals? What opportunities and challenges might ELI face if it decides to acquire the hotel? How much would a buyer likely have to pay for the Hotel Perennial to achieve an attractive return? In addition to containing a hotel valuation and modeling exercise, the Hotel Perennial case also exposes students to several real estate industry concepts and terminologies, including those regarding the hotel sector, equity sourcing, and distressed investing. The case material assumes that students have taken an introductory real estate finance course or have relevant work experience.

-Show students how an investment decision can go beyond simply “crunching numbers” and projecting an internal rate of return to include considering an individual's or firm's strategic objectives and core competencies. Students should think through how to

Roger Osayende, a former management consultant, must advise the Ministry of Health of Ektu, a fictional country in Central Africa, on how to implement a new point-of-care diagnostic test for infants with HIV. In Ektu, mothers often transmitted HIV infection to infants during pregnancy, delivery, or breastfeeding due to inadequate resources to invest in prevention efforts. The existing procedure to diagnose infants with HIV required collecting dried blood samples at more than two hundred healthcare facilities around the country and transporting them to a central laboratory in the capital for testing. This process was characterized by significant delays due to long transportation times, batching of samples in transportation and processing in the lab, and concomitant congestion in the lab. This delay resulted in loss to follow-up, that is, lost patients due to mothers not collecting their infants' results. A new point-of-care device was about to be introduced, which would obviate the need for this centralized processing and the resulting diagnostic delay. The key decision under consideration is where to place the devices to maximize their effectiveness.

Understand the importance of making public health decisions based on a data-driven, logical framework   Uncover the link between operational performance of the healthcare system and health outcomes at the population level   Appreciate the relevance of operational decisions in enhancing or diminishing the effectiveness of a medical technology   Use process analysis concepts to characterize various components of delays

Gary Parr, deputy chairman of Lazard Freres & Co. and Kellogg class of 1980, could not believe his ears. “You can't mean that,” he said, reacting to the lowered bid given by Doug Braunstein, JP Morgan head of investment banking, for Parr's client, legendary investment bank Bear Stearns. Less than eighteen months after trading at an all-time high of $172.61 a share, Bear now had little choice but to accept Morgan's humiliating $2-per-share, Federal Reserve-sanctioned bailout offer. “I'll have to get back to you.” Hanging up the phone, Parr leaned back and gave an exhausted sigh. Rumors had swirled around Bear ever since two of its hedge funds imploded as a result of the subprime housing crisis, but time and again, the scrappy Bear appeared to have weathered the storm. Parr's efforts to find a capital infusion for the bank had resulted in lengthy discussions and marathon due diligence sessions, but one after another, potential investors had backed away, scared off in part by Bear's sizable mortgage holdings at a time when every bank on Wall Street was reducing its positions and taking massive write-downs in the asset class. In the past week, those rumors had reached a fever pitch, with financial analysts openly questioning Bear's ability to continue operations and its clients running for the exits. Now Sunday afternoon, it had already been a long weekend, and it would almost certainly be a long night, as the Fed-backed bailout of Bear would require onerous negotiations before Monday's market open. By morning, the eighty-five-year-old investment bank, which had survived the Great Depression, the savings and loan crisis, and the dot-com implosion, would cease to exist as an independent firm. Pausing briefly before calling CEO Alan Schwartz and the rest of Bear's board, Parr allowed himself a moment of reflection. How had it all happened?

An analysis of the fall of Bear Stearns facilitates an understanding of the difficulties affecting the entire investment banking industry: high leverage, overreliance on short-term financing, excessive risk taking on proprietary trading and asset management desks, and myopic senior management all contributed to the massive losses and loss of confidence. The impact on the global economy was of epic proportions.

In recent years Lehman Brothers, one of the five largest investment banks in the United States, had grown increasingly reliant on its fixed income trading and underwriting division, which served as the primary engine for its strong profit growth. The bank had also significantly increased its leverage over the same timeframe, going from a debt-to-equity ratio of 23.7x in 2003 to 35.2x in 2007. As leverage increased, the ongoing erosion of the mortgage-backed industry began to impact Lehman significantly and its stock price plummeted. Unfortunately, public outcry over taxpayer assumption of $29 billion in potential Bear losses made repeating such a move politically untenable. The surreal scene of potential buyers traipsing into an investment bank's headquarters over the weekend to consider various merger or spin-out scenarios repeated itself once again. This time, the Fed refused to back the failing bank's liabilities, attempting instead to play last-minute suitors Bank of America, HSBC, Nomura Securities, and Barclay's off each other, jawboning them by arguing that failing to step up to save Lehman would cause devastating counterparty runs on their own capital positions. The Fed's desperate attempts to arrange its second rescue of a major U.S. investment bank in six months failed when it refused to backstop losses from Lehman's toxic mortgage holdings. Complicating matters was Lehman's reliance on short-term repo loans to finance its balance sheet. Unfortunately, such loans required constant renewal by counterparties, who had grown increasingly nervous that Lehman would lose the ability to make good on its trades. With this sentiment swirling around Wall Street, Lehman was forced to announce the largest Chapter 11 filing in U.S. history, listing assets of $639 billion and liabilities of $768 billion. The second domino had fallen. It would not be the last.

This case covers the period from the sale of Bear Stearns to JP Morgan to the conversion into bank holding companies by Goldman Sachs and Morgan Stanley, including the Lehman Brothers bankruptcy and the sale of Merrill Lynch to Bank of America. The case explains the new global paradigm for the investment banking industry, including increased regulation, fewer competitors, lower leverage, reduced proprietary trading, and-potentially-reduced profits.

Align Inc. is a start-up company with a revolutionary, patent-protected new technology for straightening teeth called Invisalign. Invisalign is a set of invisible plastic aligners made to each patient's specific needs that substitute for metal or ceramic braces in adults (it is not sold for children's orthodontic needs). The company has created tremendous consumer awareness and affect for its product, yet sales results are dismal. Requires the reader to analyze the reasons for such poor sales and what to do to remedy the problem.

To examine distribution channel issues as well as the marketing mix for a new product introduction.

The spin-off of Iridium, a global telecommunications system, represented a significant business risk for Motorola, as many talented Motorola executives joined the venture in the late 1990s. This bold technology gamble suffered from numerous marketing missteps, which led to Iridium's bankruptcy in August 1999.

Microsoft's Office team was developing the marketing communication plan for its new product, Office 2007. Office was a very mature product and several versions of the product had been introduced over more than 20 years. As such, the new version had to overcome the consumer perception that the versions of Microsoft Office that they already have are “good enough” for them. The Office 2007 marketing team has come up with a two-step campaign strategy that sought to first create awareness and intrigue using traditional media, followed by the heavy use of digital media to get consumer to experience the product through different types of “digital experiences.” The team needs to decide how much of its advertising spending it should shift from traditional media to digital media, how to design the most effective digital experiences and how to measure the effectiveness of digital experiences. The case is set at a time when digital media were emerging as a promising way to engage consumers more deeply with brands and products, but marketers were uncertain about the relative effectiveness of different digital marketing tactics and the optimal mix of traditional versus digital marketing channels for different product, market and campaign contexts.

To introduce students to the possibilities of “engagement marketing” using emerging digital marketing channels To emphasize the complementary nature of traditional versus digital media and their relative effectiveness at different stages of the consumer journey from awareness to perception change to behavior. To highlight the opportunities and opportunities in designing and measuring the effectiveness of integrated marketing campaigns when digital channels are added to the marketing communications mix.

In February 2003, President and CEO Nick Lazaris faces critical decisions on Keurig's launch of a new consumer coffee brewing system. Keurig has successfully sold single-cup brewing systems through commercial distribution channels and is now expanding to the lucrative consumer segment. However, a meeting with key strategic partners six months prior to launch raised questions about the product design. This prompted the Keurig management team to revisit its decisions on product design, pricing, and the marketing plan. With six months to launch, what should the company do?

From 2002 to 2011, coffee-machine manufacturer Keurig Incorporated had grown from a privately held company with just over $20 million in revenues and a plan to enter the single serve coffee arena for home consumers, to a wholly owned subsidiary of Green Mountain Coffee Roasters, Inc., a publicly traded company with net revenues of $1.36 billion and a market capitalization of between $8 and $9 billion. In 2003 Keurig had introduced its first At Home brewer. Now, approximately 25 percent of all coffee makers sold in the United States were Keurig-branded machines, and Keurig was recognized as among the leaders in the marketplace. The company had just concluded agreements with both Dunkin' Donuts and Starbucks that would make these retailers' coffee available for use with Keurig's specialized brewing system. The company faced far different challenges than when it was a small, unknown marketplace entrant. John Whoriskey, vice president and general manager of Keurig's At Home division, had to consider the impact that impending expiration of key technology patents and the perceived environmental impact of the K-Cup® portion packs would have on the company's growth. Whoriskey also wondered what Keurig's growth potential was, and how the new arrangements with Starbucks and Dunkin' Donuts could be leveraged to achieve it.

This case is intended to illustrate to readers the challenges faced in 2011–2013 by Amazon's CEO, Jeff Bezos, as he guided his company into the exploding tablet market. Faced with the tough decision between focusing on the e-reader market—which Amazon had come to dominate with its Kindle product line—and making a foray into tablets—for which it had no expertise—Bezos chose the latter. Amazon sought to combine platform assets to create an end-to-end experience that would let users find a “sweet spot” in the mix of features and services. This strategy involved critical decisions such as selecting a customer segment to target and a positioning for the new product, dubbed the Kindle Fire, as the tablet market rapidly evolved. The Kindle Fire was designed to put the full Amazon experience right into the laps of customers, and Bezos was betting that his customers would see the Kindle Fire as the physical manifestation of all things Amazon. To achieve this, Amazon was willing to heavily subsidize the Kindle Fire hardware device. The key assumption was that the superior end-to-end experience Amazon had carefully created would lead to incremental purchases of content as well as physical products and services, and the margins thus gained would outweigh the hardware subsidy.

• Position and define target segments for a new product relative to competition as well as to a company's own products

• Articulate a competitor's strategy and how to compete against an incumbent with a disruptive business model and a differentiated position

• Discuss selling an experience (as opposed to a product or device) and how to create a differentiated service experience

• Determine pricing, analyze business model, and calculate revenue/profit for a technology product

Position and define target segments for a new product relative to competition as well as to a company's own products

Articulate a competitor's strategy and how to compete against an incumbent with a disruptive business model and a differentiated position

Discuss selling an experience (as opposed to a product or device) and how to create a differentiated service experience

Determine pricing, analyze business model, and calculate revenue/profit for a technology product