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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.

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.

New entrepreneurial businesses are one of the key drivers of innovation and economic development. However, one of their greatest obstacles is accessing capital, especially since they are often initially unprofitable and lack tangible assets in the first few years of operation. Since debt financing from banks can be difficult for them to obtain, their capacity for growth can be limited. This case introduces students to Kabbage, a company that reduced the barriers associated with start-up and microbusiness lending by using a fully automated, data-driven platform. Kabbage made instant decisions on whether these businesses should qualify for a line of credit by reviewing its clients’ electronic data, analyzed quickly and accurately using specific algorithms.

Given the applied nature of the case, the data were gleaned from a wide range of secondary sources, specifically popular business press which was verified for authenticity.

This case can be used in a variety of undergraduate courses. Some course examples include small business management, introduction to entrepreneurship or entrepreneurial finance.

This case provides comprehensive coverage of a firm's decision to undertake an IPO and the process of going public. The case follows the sequence of events from the company's incorporation in 1999 through the completion of an IPO in September 2005. In addition to raising capital, the TRX IPO case also includes consideration of another motivation for going public. At the time of its incorporation in November 1999, TRX attempted to go public but in the ensuing dot-com collapse, the IPO was never completed. In response to the failed IPO, TRX president and CEO, Trip Davis, turned to strategic investors to raise $20 million in a note convertible into equity at $11 per share. Although Davis had hoped the strategic investors would provide guidance and business opportunities for TRX, they never materialized. By 2004, he had come to believe that the largest strategic investor, Sabre, Inc., was not working in TRX's best interest. Thus, the IPO is motivated by a twofold purpose: to raise money and to provide for a strategic reorganization of the firm's ownership structure.

The key learning objectives are mentioned as follows: to understand the attractiveness of the co-living sector using Michael Porter’s five forces model; to do competitive analysis of ZOLO by understanding its objectives, strengths and weaknesses; to understand various competitive strategies which ZOLO’s competitors could apply against it; and to understand application of various defense strategies, which ZOLO would follow to retain its market leader position.

ZoloStays (ZOLO) was an Indian real-tech start-up based in Bengaluru. It was in the business of co-living, i.e. providing affordable accommodation for students and young professionals who had to leave their home and temporarily settle in other cities in search for jobs or education. ZOLO had grown 300% and had served over 50,000 customers across 10 Indian cities, since its inception in 2015. It had claimed to be the largest co-living brand in India in FY 2019. Nikhil Sikri (Sikri), who was a Co-founder of ZOLO, had big plans of expanding the firm to a million beds in 5 years. However, increasing awareness of a huge untapped market in the co-living sector had led to entry of a flurry of competitors. Notable among them were Nestaway, Colive, StayAbode, CoHo and OYO Life. Facing such intense competition Sikri had the challenge to be able to sustain his company’s early momentum. How would he retain ZOLO’s market leadership position? What would be the best strategy to achieve further growth? Should ZOLO diversify into allied services or apply a more focused strategy? Sikri was facing all these challenging questions and had to quickly address them to continue to lead in this competitive race.

The case can be taught in advanced undergraduate, MBA or executive-level programs dealing with marketing. This case study helps students in dealing with issues pertaining to a given market sector where a firm is operating, the strategies that could be used by the competitors and application of competitive strategies which the firm can apply.

Teaching Notes are available for educators only.

CSS 8: Marketing

After a successful discussion and analysis of the case, the participants will be able to distinguish and appreciate the situations of conflict of interest (COI), whistle-blowing, etc. Initiate appropriate methods to avoid/minimize the impact of COI and ensure justice and fair-play to all stake-holders. Identify and appreciate the work-context of each executive-position and initiate standard operating procedures to protect the interests of the enterprise and all its stakeholders. Appreciate the relevance of whistle-blowing and to initiate appropriate methods to ensure justice and fair-play to all stake-holders.

In the context of the Industrial Credit and Investment Corporation of India (ICICI)-bank, the systemic inadequacies seemed to have failed in preventing the incidences of COI. The organization was too centralized to be able to respond proactively to the allegations. The case lays bare the inadequacy of professionalism among the media in responding promptly to such instances. The case generalizes that, with increasing globalization, such incidences have global ramifications and the organizations face much greater risks than ever. The case concludes that to emerge as a mature and leading organization in the global market, ICICI-bank needed to strengthen various aspects of corporate governance; similarly to emerge as a developed economy, India needed to develop independent watchdogs to monitor the activities of corporations continuously. Media needed to be independent and mature to fulfil its duty of continuous and transparent communication to the public.

The case can be understood and analysed by management students in the post-graduate level or by working executives with at least four to five years of experience in the corporate sector.

Teaching notes are available for educators only.

CSS 11: Strategy.

This case study is a compilation of data gathered from secondary data sources.

Roger Federer has won a record setting 20 grand slam titles in his career and has an impressive 103 ATP singles titles to his name. He has stood the test of time and is widely acknowledged as one of the most distinguished players of all times. His personal charisma, classic shot making abilities and consistent stylish on-court performance over a long period of time has created a brand – Roger Federer. Inevitably, as he will have to wind down his career, it would be challenging to brace the brand and identify ways for its endurance. Various models of brand management, namely, Brand Identity Prism and Customer-Based Brand Equity model, have been applied for the brand – Roger Federer. An analysis of brand-building practices can help to understand how sportspersons build brand equity and factors which characterize personal brands that develop in a professional arena. This case study also helps to dwell on how human brands will sustain themselves after the players retire.

This case is designed to teach the concepts of brand in courses such as brand management, marketing management and sports marketing to both undergraduate and postgraduate classes of business management. This case can also be used in various executive programs and in customized short-term courses.

International business, Accounting and Finance.

Undergraduate and Postgraduate levels (advanced financial accounting, international accounting, other accounting and business courses with an international setting.

The case uses the Asia Pulp & Paper Company’s (APP) entry into the international debt market to highlight the consequences of different business practices between the East (in this case, Indonesia) and the West. On the one hand, it shows that APP was set up as the “front” to access international debt capital; on the other, it reveals the naïvety of Western lenders who parted with their funds without conducting a thorough background research on the financial viability of the company they invested in. The APP debacle is a poignant reminder for market participants and business/accounting students that the divergence of the business settings across countries can make business contractual arrangements tenuous and corporate financial information irrelevant to its users. It also exposes the unique ways of how some Asian countries conduct their business affairs.

The following are the expected learning outcomes: comprehend the impact of differences in culture and ethnic origin on business practices; evaluate the impact of cultural nuances on the legality of contracts in the international business setting; understand the impact of currency fluctuation on the financial position of multinational firms; and be more cautious in conducting business and entering into contracts with foreign firms.

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

CCS 1: Accounting and Finance.

Tourism & Hospitality

Post graduate

The South African-based Sun International Group (SI) develops, operates and manages hotels, resorts and casinos. In its mission statement, SI describes itself as a “leisure group offering superior gaming, hotel and entertainment experiences”. In 1984, SI was listed in the travel and leisure sector on the Johannesburg Stock Exchange. SI is looking for growth opportunities.

Strategic options analysis to create new market spaces. Practical application of blue ocean thinking frameworks.

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