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The consumer-products division of a multinational company is facing a decision on the sourcing of product components: whether to stay in Taiwan or switch to Mexico. See also the supplement to this case, “Cost Analysis for Sourcing Alternatives for Emerson Electric Company ACP Division” (OM-0823).

This case is a vehicle for discussing the theory and practice of option pricing through the valuation of warrants of Chrysler held by the U.S. government and of the loan guarantee provided by the U.S. government to Chrysler.

At three o'clock in the morning on September 10, 2001, Thierry Hautillac, a risk arbitrageur, learns of the final agreement between Pinault-Printemps-Redoute SA (“PPR”) and LVMH Moët Hennessy Louis Vuitton SA (“LVMH”). After a contest for control of Gucci lasting over two years, PPR has emerged as the winner. PPR and LVMH have agreed for PPR to buy about half of LVMH's stock in Gucci for $94 per share, for Gucci to pay an extraordinary dividend of $7 per share, and for PPR to give a two and a half year put option with a strike price of $101.50 to the public shareholders in Gucci. The primary task for the student in this case is to recommend a course of action for Hautillac: should he sell his 2% holding of Gucci shares when the market opens, continue to hold his shares, or buy more shares? The student must estimate the risky arbitrage returns from each of these choices. As a basis for this decision, the student must value the terms of payment and consider what the Gucci stock price will do upon the market's open. The student must determine the intrinsic value of Gucci using a DCF model as well as information on peer firms and transactions. The student must consider potential synergies between Gucci and PPR and between Gucci and LVMH. The student must assess the likelihood of a higher bid, using analysis of price changes at earlier events in the contest for clues.

This case will enable students to understand the operations and business model of an international retailer. The case offers enough insights and learning on a retailer who enters a different market and collaborates with the local players to gain market access; and to understand the marketing techniques and strategies of an international retailer to capitalise on market opportunities.

The case is about a third largest US-based multinational Costco Wholesale corporation which is a giant retailer. The company operated at 803 locations with a revenue of $166.7bn, which makes it the third largest global retailer in 2020. The case offers comprehensive insight into Costco Wholesale’s business model, distribution strategy, marketing techniques and internationalisation. The authors further discuss that how Costco put forth its model among different range of customers and provided them with high-quality products at a comparatively lower price. The focus of the case is towards the Asian expansion of Costco. In subsequent parts, the strategies and challenges of Costco with respect to its Asian competitors have also been discussed. After generating experience in Asian markets, Costco has considered China as its next destination. The case also discusses the foreign retailers’ success, failure and retail format.

This case is designed for undergraduate and postgraduate classes of management and business administration.

Teaching notes are available for educators only.

CSS 8: Marketing.

The case is suitable for use in the topics related to the functions and roles of hedging and the Islamic derivatives/hedging instruments.

The case is designed for undergraduate students, taking courses in Islamic Banking, Islamic Finance and Risk Management for Islamic Banking Institutions.

This case describes the theory and application of Islamic Cross Currency Swap (ICCS) in the market. Having this understanding enables case analysts to understand the functions and roles of hedging and the Islamic derivatives or hedging instruments of ICCS comprehensively. The case begins with Yusof, the new finance officer of Al-Yemeni Sdn. Bhd to analyse the permissibility of hedging and derivatives to hedge against currency fluctuations from Islamic perspective. Yusof had to complete the report before the Board of Director's quarterly meeting, which was within a week. Having in mind that the company's mission was to be a Shariah-compliant stock by 2012, Yusof was responsible for ensuring that the company was administrated in an Islamic way. Besides, he also had to ensure that the company generated income and profit as planned. In doing so, he had to strategise all possible risk exposures that could be mitigated or hedged. This case ends by giving the case analyst information on ICCS offered by Al-Rizky Bank Berhad (ARBB). In this case, Yusof had to find out whether hedging is allowed in Islam. What are the Islamic derivatives? What are the different views of Shariah scholars on various types of derivatives? What is the modus operandi of ICCS? Is the ICCS offered by ARBB Shariah compliant? What are the possible risk exposures being hedged in ICCS?

To provide exposure on the concepts of hedging from Islamic perspectives; to provide exposure on the concepts of Islamic derivatives/Islamic hedging instruments; to stimulate understanding on the modus operandi of ICCS in ARBB; and to help case analysts understand what makes the Islamic hedging instruments become Shariah compliant.

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

The case examines the development and launch of an exchange-traded fund (ETF) based on JUST Capital's socially responsible corporate ranking methodologies. The case provides a market overview of Environment, Social, and Corporate Governance (ESG) and socially responsible investing (SRI), what has driven growth in those areas worldwide, and several best-practice investment approaches. Following the overview, the case describes the founding and development of JUST Capital, explores JUST Capital's ranking methodologies, and presents the decision point faced by the CEO: requisite selection of one of three strategies in order for JUST Capital to generate “self-sustaining” revenue.

The main pedagogical objectives of the case are: illustrate how Latin American companies dedicated to the production and harvesting of commodities can be vertically integrated to gain a larger share of the value created throughout the production chain. Understand how futures and options contracts in commodities can be used to hedge price risk on long and short positions in the underlying products. Understand how option contracts add value by hedging risk in those contexts where the counterparty has optionality. Discuss the implications of Fair Trade for commodity traders and producers.

In the case, Hernan Arosamena, CFO of The Specialty Coffee Trading Co. (TSCT), faces the challenge of designing an effective strategy to hedge the price risk caused by the increasing demand of the so-called Fair Trade coffee. Hernan Arosamena decides to review how the company has typically managed the price risk in its business transactions using future contracts to then incorporate the additional elements that trading Fair Trade coffee may entail. The typical price risk hedging strategy involves the use of coffee future contracts in long and short positions to ensure that the company obtains the desired margin in its coffee trading negotiations. To hedge the exposure to the risk of fluctuations in the price of coffee when the company sells Fair Trade coffee requires the additional use of put options.

The case is appropriate for students enrolled in courses or specialization programs at both the undergraduate and graduate levels.

Teaching notes are available for educators only.

CSS 5: International Business.

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.

An industry adage held that “there are two types of rental car companies: those that lose money and Enterprise.” The company that would become Enterprise Rent-A-Car was started in 1957 in St. Louis, Missouri, by Jack Taylor. Taylor set up Enterprise offices in neighborhoods rather than at airports because he believed that Americans would welcome a local option for renting cars when their own vehicles were being repaired. In 2010 Enterprise had more than 6,000 rental locations in the United States and a fleet of 850,000 cars in service. Its parent, Enterprise Holdings (comprising Enterprise, National, and Alamo brands) accounted for nearly half of the car rental market and was more than twice the size of Hertz, the number two competitor. Enterprise's competitive advantage was the result of the combination of its practices in hiring, training, compensation, organization, customer service, IT, and fleet management, among others.

Identify the influence of contextual variables (i.e. politics) in the strategy of a military organisation. Analyse and evaluate strategic change options of a military organisation. Decide on a strategic change from the resources and capabilities model.

Colombia Aeronautics Industry Corporation (CIAC) is a Colombian mixed economy company that commercialises, maintains and repairs civil and military aircraft and aeronautical components. The case presents the decision that the manager must make regarding a change in corporate strategy because of the entry into force of the peace agreement between the Government of Colombia and the Revolutionary Armed Forces of Colombia (FARC). This agreement assumes that the main line of business of the CIAC would be weakened (i.e. repair of military aircraft used in the internal armed conflict with FARC), because in a new peace scenario, the aircraft would not need as much maintenance as in the most critical stages of the conflict.

Master of Business Administration level (suggested courses: strategy, strategic management and organisational change). Undergraduate level (suggested courses: strategy and organisational change).

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 11: Strategy.