Case studies

The learning outcomes of this study are to examine the financial performance of Bangalore Metro Rail Corporation Ltd. (BMRCL) during past five years, to compare the financial performance with the initial projections, to identify the causes of deviations in the performance, to recommend the measures to improve financial performance and to apply the learning from the BMRCL project to other similar upcoming projects in India.

BMRCL has been struggling to perform as per projections made in the initial detailed project report. The situation has further worsened because of the COVID-19 pandemic and its post-impact on the overall economic level of activity. Ramana Rao, the consultant for infrastructure projects, was worried after reading a news article which deemed the project a white elephant. Various articles published in the newspaper also reported that BMRCL was incurring a loss of Rs 45 lakhs every day. The consultant worried about the sustainability of the project. He wanted new ideas and plans which could turn around these losses and convert them into profitable ones. He, however, does not have any immediate plans to execute and is therefore in a dilemma about how a project that was launched with so much fanfare could be made profitable. Because of COVID-19 pandemic, BMRCL’s financial situation, which although improving, had taken a significant hit. It looked like the corporation might need government assistance to cover its losses. The transport utility suffered a loss of Rs 170 crore, as a result of a decline in ridership as well as other revenue sources including parking fees and leasing revenues. This amounted to a daily loss of Rs 1 crore. The pressure on revenues was putting the officials in a tight spot about meeting the company’s debt obligations and market borrowings.

The case study aims to enable participants to understand financial performance and viability of large-scale projects such as metro rail in India.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance

This case looks at a recent shift in the way organizations look to leverage the benefits from India as a cost-effective destination to provide services. What started, around 15 years back, as an activity to outsource all non-core activities to Indian companies to take the advantage of cost-effective resources, has now given way to a new model where the focus is on two key aspects, namely, “insourcing of work” and “transfer of core activities to India”. This is because of the realization that outsourcing may be a short-term solution for non-core activities; however, to build a sustainable capability that is both cost-effective and value-oriented, insourcing is key. Also, it is not just non-core activities that can be supported remotely; many core activities that have been managed by on-shore teams are increasingly being shifted to India to leverage the depth of skills available in the country. First Telecom has undertaken pioneering work in this domain by moving some of the critical functions to India and has created Centers of Excellence (CoEs) providing niche services to rest of the world.

Target audience includes corporate executives, students of MBA/postgraduate program in management in strategic management and/or workshops for understanding the concept of insourcing, cost transformation, business environment analysis and growth strategies for future.

First Telecom has adopted what could be termed as “India 2.0” as the strategy to transform their operations worldwide to utilize the full potential of “India” as a service sector-outsourcing destination. The focus is not only on cost-avoidance but also on standardization of processes and mobilization of resources in a CoE setting to maximize the benefits. This case attempts to understand the way to go about it and the expected returns in a quantifiable manner.

To develop an understanding of business environment in the context of large multinational organizations that are constantly evolving to improve their operational excellence. Also, to develop an understanding of the outsourcing market and how companies are looking to move their core services to cost-effective locations to achieve the next phase of cost transformation after the outsourcing (non-core services) wave.

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 1: Accounting and Finance

The CFO of a diversified baking company must decide whether to issue convertible debt rather than straight debt or equity. In evaluating the proposed terms of the convertibles offering, the student must value the securities by valuing the call option (using option pricing theory) and the bond component. This case introduces the topic of convertible securities. Student and instructor worksheet files are available for use with the case and teaching note.

This case examines the exchange rate risk of a U.S.-based manufacturer of women's luxury shoes that has recently introduced its product in Japan. Students are asked to evaluate the extent of the firm's exposure to currency risk and whether hedging via forward contract or currency option is advisable.

Ever since he had heard her speak at a private equity conference, Babatunde Omotoba had wanted to work for Venita Fields, co-founder and senior managing director of private equity firm Smith Whiley & Company. He wrote and asked her for an informational interview, and was excited to receive her invitation to meet with her at the firm's regional office in Evanston, Illinois. After the interview, however, Omotoba came to the grim realization that despite all his preparations—researching private equity firms, studying the types of deals they make, and evaluating the analytical tools used to perform due diligence on companies and make investment decisions—he did not have a full grasp on the actual day-to-day work private equity professionals perform. He spent time reviewing materials from the career management office about private equity, and he meets two Kellogg alumni for informational interviews. He also reviews the investment process. The case ends with Omotoba having a broader perspective on the human aspect of private equity, beyond the analytical and financial aspects, as he anticipates meeting Fields again, hopefully to get the job offer.

Students learn the “tools of the trade” in private equity: managing portfolio company executives, meeting with limited partners to raise funds, managing the fund, selecting investments, and managing their time. Students learn the interpersonal nature of the business, including persuasion and negotiation, and how that is as important as financial skills. Students learn the process of preparing to interview with a private equity professional.

Management Accounting and Financial Modelling.

Undergraduate and post-graduated levels.

Aiman, the Area Manager of GEZ Berhad, realised the importance for petrol station operators to have an understanding of fundamental management accounting concepts such as cost behaviour and cost–volume–profit (CVP) analysis. He also believed that the petrol station operators should be proficient in using Microsoft Excel functionality and able to construct “intelligent” financial model with extended sensitivity analysis. Being a manager responsible for training the petrol station operators, Aiman would like to introduce the CVP concepts and spreadsheet model-building process to the petrol station operators, to aid them in planning and decision making. To construct the Excel spreadsheet model, Aiman sought the assistance of Rizal, a university lecturer in accounting, who in turn gathered the relevant operational and financial data from Baron Service Station, a typical petrol station under GEZ stable. The model should be flexible enough to allow the petrol station operator to anticipate, for example: What will happen to overall profitability of the petrol station if the fuel prices go up? What is the minimum volume of fuel that needed to be sold to break even? How much extra profit can be generated if credit card sale is reduced? and Is it viable to install an automated teller machines (ATM) kiosk and incurring administrative charges from bank to lure more customers to visit the petrol station? As the petrol station sells multiple products (petrol, diesel and convenience goods), the owner is also interested to know which product lines are the most and least profitable. Thus, the model should be able to generate segmented income statement with appropriate allocation of the common fixed costs to the each of the products.

The case discussion is intended to achieve the following learning outcomes: students are able to prepare a financial model which include a segmented contribution income statement based on the information on product mix; students are able to calculate the break-even point and distinguish between fixed and variable costs; students are able to differentiate between traceable fixed costs and common fixed costs; students are able to build a financial model that is sufficiently flexible to allow various what if analysis to be performed; and students are able to use what if analysis tools in Excel such as Goal Seek and Data Tables.

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

Managerial Accounting, Strategic Marketing. More specifically, cost behavior, cost estimation, cost prediction, cost-volume-profit (CVP) analysis, contribution income statement and pricing/promotional strategy.

This case is suitable to be used in advanced undergraduate level.

This case demonstrates the issues relating to pricing strategy of “Video Internet Marketing Training”. Diyana Tahir and her husband, Abdul Rahim Abdul Shukor, established Aras Design & Multimedia Centre (ADMC) on January 17, 2009. The main office was located at Kuala Lumpur. Diyana was a well-known name in the field of internet video marketing training. In its early years, ADMC’s operation was limited to providing printing and graphic design services and offering printing materials for photocopy. However, with the passage of time, the company began to expand its services and offerings. At the beginning of 2010, ADMC offered editing facilities and services for video and multimedia in addition to its core services. As a unique marketing strategy, Diyana offered RM30 as the basic training fee for each participant, which was equivalent to RM470 value offered. In this way, she attracted customers to take part in further advanced level training that was conducted by ADMC. However, she felt that the number of participant to take advanced training was not satisfactory. She thought that it happened perhaps due to the fact that the participants were not much committed to the course since it was offered at a nominal price. Furthermore, she realized that the cost of providing such training had risen in the past six months. Currently, ADMC suffered losses in three consecutive months, and they really needed enough cash to sustain. As such, Diyana was thinking to reconsider the offered course fees whether to increase it. She was in a rush to make a decision to propose the new course fee in the monthly meeting with management committee at the end of April 2013.

Using this case, students can learn how a small-scale company can strategize its pricing strategy to survive in the highly competitive online market. The objectives of using this case are as follows: to help students in understanding the interrelationships between CVP in organization that can be used for future planning and decision-making; to be able to identify the cost structure of the basic training course (e.g. fixed and variable costs), determine the contribution margin, break-even point and prepare the contribution income statement that highlighting cost behavior; to help students to think critically while setting the price for the offered services; to develop students’ ability in analyzing the existing situation to come up with a viable and effective solution; to assist students in taking the right move in a right time; to broaden students’ views and understanding in considering the monetary aspect along with the human aspect in formulating an effective marketing strategy; to develop students’ understanding of the way to retain and attract customers through innovative pricing strategy; and to make students aware that innovation is the key to business success.

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 1: Accounting and Finance.

The case describes the origins of money, touching on the gold standard, the Fed’s 1942 purchase of US debt to fund the “war effort”, Bretton Woods (1944), Nixon’s 1971 pulling the currency peg and descent of money from gold to fiat. It also touches on theories of inflation and deflation, quantitative easing (QE) post the 2008 crisis and the “swamp” of (unorthodox) modern monetary theory (MMT). Aside from providing a brief history of monetary policy and economics, the case study seeks to widen students’ understanding of key economic issues including: fiat money, QE, government funding mechanisms, taxation, economic stimulation, inflation/deflation – and of course, the need for an ombudsman to limit excess.

In May 2020, South Africa’s deputy finance minister David Masondo announced that he would support the South African Reserve Bank’s lending to the government. This statement followed President Ramaposa’s earlier announcement of a R500bn COVID-19 stimulus package. The case explores the economic history of money, from barter to gold to cryptos. The case examines the origins of central banks’ printing of money, initially to support the Second World War effort and more recently the 2008 global financial crisis and now the COVID-19 crisis. In particular, the case raises the question of central bank independence – “democratically elected governments always need money, is it appropriate for central banks provide it? And are there limits?”

MBA and Executive Education

Teaching Notes are available for educators only.

CSS: 1 Accounting and Finance.

The application of activity based costing (ABC); calculating the cost of a CNC Process using ABC; designing a pricing strategy.

The case can be used in the following courses: MBA program with specialisation in finance (to teach students the application of costing in services sector); MBA program in general management (to highlight the concept of activity based costing and its application); and under an elective course on management control systems in MBA programs (to highlight the strategy to determine price effectively).

The case highlights the application of activity based costing in arriving at cost and finally leading to development of price to be charged by KK Metals. The company wishes to compute the activity based cost of CNC process and develop the selling price for 194 precision turning services scientifically as opposed to the present strategy of being a price taker, largely on the basis of what essentially is prevalent in the local market within which KK Metals operates. The case gives an insight to numerous control variables that the management can consider while pricing its services.

The case can be used to understand management concepts such as ABC, pricing and the role of efficiency in business processes. It can be used to: teach complexities involved in identifying activity driver(s) in case of ABC as far as application to service sector is concerned; help understand the use of costing as an effective tool in pricing strategy of the company; and help students realize the significance of inputs used for calculating per hour cost.

Teaching notes are available. Consult your librarian for access.

Family members knew something was very wrong when Adolf Merckle, who had guided the family holding company, VEM Vermogensverwaltung GmbH, through dozens of successful investments, left the house one afternoon in January 2009 and failed to return. That night their fears were confirmed when a German railway worker located Merckle's body near a commuter train line near his hometown of Blaubeuren, about a hundred miles west of Munich. It was no secret that the recent financial crisis had taken a toll on Merckle's investments. He was known in Germany as a savvy investor, but had lost hundreds of millions of Euros after being caught on the wrong side of a short squeeze of epic proportions involving Volkswagen stock. This was not the only large bet against that company's stock. A number of hedge funds, including Greenlight Capital, SAC Capital, Glenview Capital, Tiger Asia, and Perry Capital, lost billions of Euros in a few hours based on their large short positions in Volkswagen's stock following the news on October 26, 2008, that Porsche AG had obtained a large long synthetic position in Volkswagen stock through cash-settled options. In the next two days, this short squeeze produced a fivefold increase in Volkswagen's share price, as demand for shares from hedge funds exceeded the supply of borrowable shares.

This case focuses on the massive equity derivative positions entered into by Porsche in relation to Volkswagen stock and by TCI and 3G in relation to CSX stock. Students will learn how equity exposure can be created without buying stock and without prior disclosure. The role of regulators, courts, and investment banks that facilitate these transactions is also explored.