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This paper seeks to analyze the applicability of the time‐tested margin of safety principle from value investing to corporate strategy.

The main source of this paper is the book Margin of Safety, supplementation materials, including a discussion with the book's author, Seth Klarman, were also referenced.

The paper finds that the margin of safety principle is broadly applicable to corporate strategy in areas such as M&A, hedging, balance sheet management, share buybacks, special dividends, divestments, and cash management. Each of these areas is discussed in the paper and illustrated by way of timely examples as part of the analysis.

Further research could be conducted into valuation methods in general, including the method practiced by noted value investors. Research could also be conducted into the margin of safety principle and its applications in corporate strategy, corporate finance, strategic risk management, shareholder communications, and operations management.

This is the first paper that the author is aware of that analyzes the applicability of the investment‐based margin of safety principle to corporate strategy and strategy‐related initiatives.

Expansion of large international hotel chains into the Polish hospitality market has radically changed hotel management practices in Poland. The article investigates the impact of these changes on hotels’ economic performance. This impact is assessed by monitoring changes in the break‐even point, the percentage share of variable costs in sales, margins of safety, operating leverage, and other indicators reflecting economic effects of applied management methods. The research results indicate that cost reduction resulting from the introduction of new management methods must in the future be replaced by measures aimed at stimulating revenue growth.

Textbooks often portray capital budgeting as a rather mechanical process: Top management decides whether or not to accept a project by requesting an estimate of net present value from its staff and to see if the number is positive or negative. This paper suggests that the textbook net present value rule is not optimal if the competitive market assumption holds. Better decision rules state minimum acceptable safety margins and may take the form of stating a minimum acceptable profitability ratio.

J.R.D. Kenward was with British Airways from 1950–1977: as Manager, Performance Engineering from 1967: from 1947–50, he was with BOAC in various technical branch posts. After graduation he entered the design office of De Havilland 1946–7. Since 1977 he has been a Consultant in aviation.

This paper aims to illustrates the use of the modern Graham and Dodd valuation methodology as a corporate M&A tool by way of case study.

The paper presents a case study of the 1995 Berkshire Hathaway acquisition of GEICO and draws on previously published Graham and Dodd methodological materials as well as GEICO's publicly available financial information. The valuation presented in the case is the sole work of the authors.

The paper finds that, while Graham and Dodd‐based valuation is a popular investment methodology it has thus far received scant attention as a corporate M&A tool. The results of the GEICO case suggest that Graham and Dodd valuation could be applied successfully to corporate M&A.

The paper explains modern Graham and Dodd valuation in the context of Berkshire Hathaway's 1995 GEICO acquisition. It demonstrates how that acquisition contained a reasonable margin‐of safety, or price discount to estimated intrinsic value, even though it was taken private at a 25.6 percent premium over the $55.75/share market price at the time. The case demonstrates the practical utility of Graham and Dodd‐based valuation in corporate M&A, and provides recommendations for its use in that context.

While Graham and Dodd valuation has been well covered from an investment perspective this is the first work, as far as the authors are aware, that seeks to apply it to corporate M&A.

This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies.

This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context.

This research paper concentrates on the commercial risks NRS throws up for large manufacturing businesses, and how NRS can be approached strategically to position them for sustainable operating success. For a business that must use scarce natural resources to make its products, a combination of specific buffering and bridging strategies can be interwoven to plan and implement the most robust, risk-mitigating margin of operational safety.

The briefing saves busy executives, strategists and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Bicycle industry, emerging markets, competitor analysis, financial forecasting.

This case can be used as a teaching tool in the following courses: MBA/post-graduate programs in management in management accounting, management control systems and strategic cost management; executive training programs for middle and senior level employees; and under-graduate/post-graduate programs in entrepreneurship. It can be used to explain and test the concepts of SWOT analysis, Porter's five forces model and PEST analysis. It introduces the technique of breakeven analysis and its relationship with operating leverage. Moreover, it demonstrates the application and analyses of the Du Pont equation.

Hero Cycles Ltd was established by the four Munjal brothers in pre-independence India. It started off as a business of bicycle spare parts, but quickly expanded in post-independence India, with Ludhiana as its base. The company later joined with foreign firms like Honda Motors, Japan to become the largest manufacturers of bicycles in the world. It dominates domestic markets with a market share of around 40 percent. Ananth Munjal, a learned, ambitious and cautious individual, is the next generation, ready to take over the reins of the company. Being someone who believes in learning from past mistakes, he forms a team to critically examine the decisions made by his predecessors. This team is also directed to utilize forecasting techniques for determining the expected profitability given the existing state of affairs that prevail. Additionally, Du Pont analysis is to be performed for studying the efficiency of the company on the facets of operating performance, asset turnover and associated financial leverage. Also, Ananth's risk-averse nature compels him to study the past with regard to the relationship between operating leverage, breakeven sales and corresponding margin of safety. Furthermore, he wishes to inspect the historical cost structure of the firm, and its influence on company performance.

These include the use of: SWOT analysis to identify the strengths, weaknesses, opportunities and threats to a company; PEST analysis to identify the political, economic, social and technological factors that affect the operations of a company; Porter's five forces model to analyse an industry. The case also helps students: by identifying fixed costs and variable costs that are a part of operating expenditure of a business; in the use of forecasting the financials of a company for the sake of predicting the future outcomes of certain business strategies; by application of Du Pont analysis to examine the efficiency of the various processes and strategies; in determining quantitative terms like contribution margin, breakeven sales, operating leverage, margin of safety, their significance, and the relationship between these terms.

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

WE concluded Part II of this series with the remark that a different outlook is needed for problems of control surface flutter than for those of wing flutter. There are two reasons for this. Wing flutter must be investigated carefully early on in the design of an aircraft so as to provide a safe aircraft without a severe weight penalty, whereas the weight penalty of avoiding control surface flutter is usually small, although not negligible, and modifications can often be made at short notice, so it is important to make a full investigation as late as possible before flight when all the data are available in a reliable form. The second reason is that with wing flutter, as with aileron reversal and divergence, it is usual to think of safety margins in terms of forward speed or possibly wing torsional stiffness; with control surface flutter, on the other hand, quite different types of safety factor become the rule.