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Business internationalization into emerging markets.

BA Level.

On March 23, 2014, Yves, Patrick and Pascal were on their flight back from Udaipur, India, to Zurich, Switzerland thinking about all the experiences they had during the last 12 months and especially in the last three weeks when they visited India to do the feasibility study for their water shop concept. They still had many questions that were unanswered before leaving India. Do they have the sufficient Indian contextual knowledge and expertise to run a business? Are they considering all relevant aspects to successfully establish a water shop in rural India? Have they developed the conducive mindset? Are they ready to leave their comfort zone, friends and family behind to embark on an once-in-a-lifetime adventure? Do they have enough social capital to assist them in the process of setting up the water shop? Shortly before landing at Zurich airport, Yves knew that they now either had to become serious and really spend at least a year in India to turn their concept of a water shop into reality or stay back in Europe starting with their masters studies. The case offers a true story about three BSc students that decided to evaluate whether they could implement a business opportunity that they had identified during a “Doing Business in India” course at their university and subsequently developed into a serious business case. Based on this situation, the case study offers the opportunity for students to better understand what it takes to create the right mindset (i.e. “Triple I” mindset) before actually implementing a market entry or expansion project in India.

The case focuses on teaching the “Triple I” mindset to discuss the prerequisites of a successful market entry or expansion in India: investment mindset, intercultural mindset and infrastructure mindset The case study also highlights the importance of networks and networking locally (i.e. building social capital) as a prerequisite for a successful market entry or expansion. This approach including the “Triple I” mindset, the role of social capital as well as the actual market entry or expansion project is summarized in a metaphor that we call the “Archimedes’ Screw of Internationalization”. The case study proposes to work on the following five assignment questions to drive the intended learning objectives by discussing the different prerequisites of a successful market entry or expansion in India.

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CSS: 5: International business.

Hedge fund Magnetar Capital had returned 25 percent in 2007 with a strategy that posed significantly lower risk to investors than the S&P 500. Magnetar had made more than $1 billion in profit by noticing that the equity tranche of CDOs and CDO-derivative instruments were relatively mispriced. It took advantage of this anomaly by purchasing CDO equity and buying credit default swap (CDS) protection on tranches that were considered less risky. Now it was the job of Alec Litowitz, chairman and chief investment officer, to provide guidance to his team as they planned next year's strategy, evaluate and prioritize their ideas, and generate new ideas of his own. An ocean away, Ron Beller was contemplating some very different issues. Beller's firm, Peloton Partners LLP, had been one of the top-performing hedge funds in 2007, returning in excess of 80 percent. In late January 2008 Beller accepted two prestigious awards at a black-tie EuroHedge ceremony. A month later, his firm was bankrupt. Beller shorted the U.S. housing market before the subprime crisis hit, and was paid handsomely for his bet. After the crisis began, however, he believed that prices for highly rated mortgage securities were being unfairly punished, so he decided to go long AAA-rated securities backed by Alt-A mortgage loans (between prime and subprime), levered 9x. The trade moved against Peloton in a big way on February 14, 2008, causing $17 billion in losses and closure of the firm.

This case analyzes the strategies of the two hedge funds, focusing on how money can be made and lost during a financial crisis. The role of investment banks as lenders to hedge funds such as Peloton is explored, as well as characteristics of the CDO market and an array of both mortgage-related and credit protection-related instruments that were actively used (for better or worse) by hedge funds during the credit crisis of 2007 and 2008.