Case studies

In early December 2013, Roxann Biller, Associate at the Chicago-based private equity firm Delta Quantitative Real Estate Capital, was asked to assess the risk associated with the firm's first potential overseas investment. Haifu Sentā Gendaino (HSG) was a large multi-tenant logistics property located in the Gaikando area of Tokyo. High-quality tenants currently occupied the property, so at first glance the risks of investing in the property seemed minimal. However, Biller knew that she had to consider the potential drawbacks. This would mean gaining a better understanding of each tenant, trying to forecast the future condition of the Tokyo logistics market, and considering what new risks her firm would face because the property's cash flows were in a foreign currency.

Read any news report on the housing market, and inevitably it will include facts or figures from the real estate data giant Zillow.com. The company initially set out to solve two key economic frictions in the real estate industry information asymmetry and the principal-agent problem by empowering users to access real-time housing data and eliminating the need for realtors. The company soon realized, however, that American homeowners and buyers were not willing to give up the traditional real estate agent model and changed course. In the end, Zillow decided to join rather than replace the middlemen in the real estate industry.

The Arbor City Community Foundation (ACCF) was a medium-sized endowment established in Illinois in the late 1970s through the hard work of several local families. The vision of the ACCF was to be a comprehensive center for philanthropy in the greater Arbor City region. ACCF had a fund balance (known collectively as “the fund”) of just under $240 million. The ACCF board of trustees had appointed a committee to oversee investment decisions relating to the foundation assets. The investment committee, under the guidance of the board, pursued an active risk-management policy for the fund. The committee members were primarily concerned with the volatility and distribution of portfolio returns. They relied on the value-at-risk (VaR) methodology as a measurement of the risk of both short- and mid-term investment losses. In its report for the investment committee, the ACCF risk analytics team recommended the daily VaR at 95% confidence as a measure for short-term risk and reported the corresponding numbers. It is now the task of the investment committee to interpret these figures. The case questions guide the executive students to a critical evaluation of both the reported VaR figures as well as of the VaR methodology.

Understanding the concept of value at risk (VaR); Interpreting the results of VaR calculations; Evaluating the appropriateness of VaR calculations; Critical discussion of the VaR methodology.

This case explores the decision of a fast-growing company to expand its distribution network. Financial information is provided in it so students can understand the basic distribution network design covering inbound transportation, outbound transportation, distribution-center operations, and inventory.

Doug Cook, an MBA graduate, was wrestling with one of the most important career decisions of his life: Which one of three seemingly promising businesses should he acquire? Each acquisition was a viable opportunity, and each had potential to be a successful business. Cook, however, had heard numerous disconcerting stories about other entrepreneurs going through this process. He realized that until this time the biggest purchase he had made in his life was a $250,000 condominium in downtown Chicago. Acquiring one of these companies would require a financial and personal commitment greater than anything he had ever attempted. He felt a window of opportunity was closing. If he did not act now, he might find himself in the corporate world forever. Cook began by writing up a personal criteria list for his acquisition, then researching online and media sources for businesses for sale. Frustrated with that process, he hired a business broker. With the broker's help, Cook found three promising candidates from which to choose: Luxury Tassels, Inc.; Feldco Windows and Doors, Inc.; and Coyote Consulting Company. The (A) case includes income statements, pro forma forecasts, balance sheets, and organization charts for each company, in addition to Cook's financial analyses and valuation of each company. The (B) case features the letter of intent that Cook gave the owner of the company he selected. Ultimately he did purchase the company, and in the (C) case, Cook examines pathways to growing his newly acquired company.

How to be entrepreneurial through acquiring a business The importance of establishing their own decision criteria regarding the type of company they would like to acquire How to research businesses for sale The issues in working with a business broker How to analyze financial statement in the context of buying the company How to make decisions and use financial analysis to support their decisions

This exercise is one in a series intended to help students learn how to perform financial calculations in marketing contexts.

Helmut Schmidt, product manager for Hohner Musikinstrumente GmbH & Co. KG, the world's foremost manufacturer of harmonicas, accordions, melodicas, and ukuleles, was sitting at his desk reviewing his first assignment from the company's senior executive team. Schmidt had been asked to calculate the break-even point for the company's flagship product, the Marine Band harmonica, under a number of different scenarios.

After completing the exercise, students should be able to:

• Calculate unit contribution and margin

• Calculate break-even units and market share

Calculate unit contribution and margin

Calculate break-even units and market share

The Joyoung brand was launched in 1994 when a group of recent college graduates invented the world's first automatic hot soymilk-maker home appliance. After some ups and downs, the Joyoung manufacturer founded the Shandong Joyoung Electric Appliances Co., Ltd. in 2002. It was further reorganized to the current Joyoung Company Limited in September 2007. Joyoung's sales grew rapidly from RMB 6 million in 1994 to 120 million in 1999, and this trend has continued into the new century. By the first quarter in 2006, the signature product of Joyoung—the soymilk makers—alone have already surpassed the sales by Philips Home Appliances in the Chinese market. Contrary to its current success, however, Joyoung Soymilk Maker's launch did not go smoothly. When the first model of the automatic soymilk maker was introducted in 1994, people had no idea what this new creature was supposed to do. The first 2,000 units of Joyoung products remaintroducedined stacked in storage for months. Joyoung then decided to conduct some marketing research. Joyoung's repositioning strategies and new product developments based on their marketing research have been evidently successful, and they have defined a new product category in China and in the world.