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The theoretical basis for the case is information asymmetry and signaling theory, with buybacks providing a mechanism for reducing information asymmetry between management and…
Abstract
Theoretical Basis
The theoretical basis for the case is information asymmetry and signaling theory, with buybacks providing a mechanism for reducing information asymmetry between management and investors. The controversy surrounding buybacks has led to political and regulatory scrutiny, which, consistent with evidence from academic research, may affect corporate behavior.
Research methodology
The compact case is based on secondary, public information about stock buybacks. All sources used are cited in-text, with full citations included in the references section at the end of the teaching note.
Case Overview/Synopsis
Stock buybacks, a means of providing returns to shareholders, have recently received increased scrutiny by politicians, media and shareholder activists. Proponents have argued that buybacks result in efficient allocation of capital by returning funds to shareholders, whereas opponents have criticized buybacks for enriching executives, providing tax advantages to shareholders and contributing to income inequality. Corporations did not curtail their use of buybacks after the Inflation Reduction Act of 2022 imposed an excise tax. The case frames the buyback debate in current events and focuses on the buyback activity of Apple. The case provides students the opportunity to analyze alternative ways that companies can provide returns to shareholders, evaluate impacts of buybacks on corporate stakeholders and appraise the reasons for, and implications of, current controversy regarding buybacks.
Complexity/Academic Level
This compact case is appropriate for upper-level undergraduate or graduate courses in financial accounting, tax and finance. This case provides an opportunity to analyze and evaluate stock buyback decisions in the context of the current controversy related to buybacks.
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Nabil Al-Najjar, Ichiro Aoyagi, Guy Goldstein, Ted Korupp, Bin Liu and Suchet Singh
Boeing and Airbus are contemplating entry into very-large-aircraft (VLA) markets. Both firms are convinced the market cannot support two players due to the extremely high R&D…
Abstract
Boeing and Airbus are contemplating entry into very-large-aircraft (VLA) markets. Both firms are convinced the market cannot support two players due to the extremely high R&D costs and the limited (and highly uncertain) state of demand. The key strategic issue is the uncertainty surrounding Boeing's development cost: to what extent would Boeing's experience with the 747 help it reduce the R&D cost of a new VLA prototype? The main point is that Boeing's strategic moves signal its private information, and that this eliminates any first-mover advantage Boeing might have had in this market.
To introduce some of the strategic issues arising in natural monopoly industries in which the winner takes all, and focus on the issues of credible preemption and signaling.
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Robert F. Bruner and Casey S. Opitz
In mid-1992, Christine Olsen, the chief financial officer (CFO) of this large CAD/CAM equipment manufacturer, must decide on the magnitude of the firm's dividend payout. A…
Abstract
In mid-1992, Christine Olsen, the chief financial officer (CFO) of this large CAD/CAM equipment manufacturer, must decide on the magnitude of the firm's dividend payout. A subsidiary question is whether the firm should embark on a campaign of corporate-image advertising and change its corporate name to reflect its new outlook. The case serves as an omnibus review of the many practical aspects of the dividend decision, including (1) signaling effects, (2) clientele effects, and (3) finance and investment implications of increasing dividend payout.
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Rohit Bansal and Sanjay Kumar Kar
After completion of the case, students will be able to understand the following: how to understand financial statements, income statements and cash-flow statements with the help…
Abstract
Learning outcomes
After completion of the case, students will be able to understand the following: how to understand financial statements, income statements and cash-flow statements with the help of ratios; understand the concept of shareholding pattern along with different entities, namely, non-promoters, foreign institutional investor, domestic institutional investor and others; financial ratio analysis with traditional DuPont and extended DuPont analysis; understand the differences between comparable firms; how to analysis return, risk, covariance, correlation, market risk and capital assets pricing model (CAPM) and how to suggest an appropriate investment strategy.
Case overview/synopsis
The case presents company background and financial statements of four companies listed under departmental stores in India, namely, Vmart retail, V2 retail, Avenue Supermarts (known as DMart) and future retail. Students are asked to determine, which company is performing better to make a recommendation for investment. Students learn the tools of financial ratio i.e. profitability, efficiency, liquidity and market-based ratio along with the traditional DuPont decomposition and the extended DuPont analysis. Students also learn how to measure stock return, standard deviation, covariance, correlation, market risk and CAPM.
Complexity academic level
This case is suitable for management accounting, financial analysis and security analysis and portfolio management courses at the post-graduate or graduate levels. The case can be used in similar courses such as in financial statement analysis courses or security analysis and portfolio management courses.
Supplementary materials
Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.
Subject code
CSS: 1 Accounting and finance.
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Amonrat Thoumrungroje and Olimpia C. Racela
Corporate diversification, product portfolio analysis, industry structure, international business expansion, beverage industry.
Abstract
Subject area
Corporate diversification, product portfolio analysis, industry structure, international business expansion, beverage industry.
Study level/applicability
The case is suitable for senior undergraduate and graduate MBA strategic management, international business strategy, and marketing strategy courses.
Case overview
Thai Beverage Public Company Limited (ThaiBev) was Thailand's largest beverage company and was among Asia's major alcoholic beverage companies. The case situation takes place during the latter part of August 2010, two years after the public announcement of ThaiBev's ambitious intentions to become a comprehensive and integrated beverage company and after having recently re-launched its acquired Wrangyer energy brand, a move signaling ThaiBev's strong commitment to its non-alcoholic beverages. The case describes the beverage industries at the global, regional, and country level and discusses ThaiBev's range of businesses. Marut Buranasetkul, Senior Vice President of Corporate Service and Deputy Managing Director of Thai Beverage Marketing, the sales and marketing arm of ThaiBev, must decide on the direction for ThaiBev to pursue to bring ThaiBev's non-alcoholic beverages to account for at least 10 percent of the company's total revenue. This case presents a number of important strategic topics, particularly in discussing industry structure and competition, as well as diversification issues encountered by a firm that was attempting to create a greater balance between the revenue contributions from its market leading dominant businesses and that of its younger and newer business lines.
Expected learning outcomes
Students will: understand the challenges faced by large conglomerates wanting to change their market position; learn to apply different frameworks such as Porter's Five Force Model, portfolio analysis, SWOT and to assess the competitive environment; learn to evaluate a company's current product portfolio and to recommend strategies to improve its allocation of resources; and learn to identify key success factors necessary to compete in a highly competitive industry.
Supplementary materials
Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.
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Francis E. Warnock and Peter Debaere
A hedge-fund strategist had two decisions to make. First, what was the path of core euro zone long-term interest rates likely to be over the next year? Was the dramatic decline in…
Abstract
A hedge-fund strategist had two decisions to make. First, what was the path of core euro zone long-term interest rates likely to be over the next year? Was the dramatic decline in German long rates over the past few years an aberration that would soon be reversed, or was it part of the “new normal” that would persist for some time? Second, how would periphery long rates evolve relative to core rates? That is—the spread between long rates in the likes of Greece, Spain, and Ireland and those in Germany—how would they evolve over the next year? Was the dramatic divergence in euro zone long rates likely to persist, or would the coming year see a continuation of the modest reconvergence that has occurred since mid–2012? He knew many factors influenced long-term interest rates; he would have to use his entire toolkit to address this issue. The evidence was in no way clear-cut. Some factors pointed toward lower German rates, some toward higher, some toward a widening of euro zone spreads (even a dissolution of the euro zone as we know it?), and some toward reconvergence.
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Arvind Krishnamurthy and Taft Foster
This case presents financial and macroeconomic data for the United States between 2007 and 2013, a period covering the financial crisis and Great Recession of 2007–2009 and the…
Abstract
This case presents financial and macroeconomic data for the United States between 2007 and 2013, a period covering the financial crisis and Great Recession of 2007–2009 and the slow economic recovery from 2009 onward. During this period, the Federal Reserve had set the federal funds rate, its primary monetary policy instrument, near zero and was using additional monetary policy tools to stimulate the economy. One of these additional tools was quantitative easing (QE).
Students will use the data provided in the case to examine how financial markets reacted to QE actions by the Federal Reserve and to analyze the potential impact of QE on the macroeconomy.
After reading and analyzing the case, students will be able to:
Apply the event study methodology to analyze economic effects
Recognize how macroeconomic news affects the prices of financial securities
Describe the connections between the prices of financial securities and the macroeconomy
• Debate the relative costs and benefits of quantitative easing and the optimality of Federal Reserve policy
Apply the event study methodology to analyze economic effects
Recognize how macroeconomic news affects the prices of financial securities
Describe the connections between the prices of financial securities and the macroeconomy
• Debate the relative costs and benefits of quantitative easing and the optimality of Federal Reserve policy
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Steve Meyer, the chief marketing officer at Trilogy, was evaluating the best way to move forward with an innovative, customer value-based pricing approach for its enterprise…
Abstract
Steve Meyer, the chief marketing officer at Trilogy, was evaluating the best way to move forward with an innovative, customer value-based pricing approach for its enterprise software solutions. Trilogy had radically transformed its business from a product-centric organization to a customer-centric one, and value-based pricing was a pillar of this transformation. Meyer had to evaluate three pricing approaches: traditional license based, subscription based, and gain sharing. He had to assess which pricing approach Trilogy and Trilogy's clients would prefer and the conditions under which gain-sharing pricing would work. Meyer also had to address several adoption barriers that prevented customers from embracing the gain-sharing pricing approach.
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The spin-off of Iridium, a global telecommunications system, represented a significant business risk for Motorola, as many talented Motorola executives joined the venture in the…
Abstract
The spin-off of Iridium, a global telecommunications system, represented a significant business risk for Motorola, as many talented Motorola executives joined the venture in the late 1990s. This bold technology gamble suffered from numerous marketing missteps, which led to Iridium's bankruptcy in August 1999.
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Margaret Ake, Kristine Kelly, Lauren Fournier and Jacob Kidder
Early in 2008, Tony Truesdale, President of the Vitamin Shoppe, was preparing for a meeting with the company's investment bankers. In particular, he was wrestling with supply…
Abstract
Early in 2008, Tony Truesdale, President of the Vitamin Shoppe, was preparing for a meeting with the company's investment bankers. In particular, he was wrestling with supply chain issues that were becoming increasingly pronounced in light of the company's aggressive growth plan. Truesdale recognized that it was nearly impossible to effectively manage the company's large and fragmented supply base, resulting in higher than necessary costs and lower than desired performance. The company also relied too heavily on one supplier for a significant amount of the company's volume. Truesdale recognized that it was nearly impossible to effectively manage the company's large and fragmented supply base, resulting in higher than necessary costs and lower than desired performance. The company also relied too heavily on one supplier for a significant amount of the company's volume.
Further, in the company's single distribution center, 95 percent of the available storage capacity was utilized throughout most of 2007; well above what was considered optimal. The lack of space was driving excessive product handling and increasing operating expenses. The company's inbound and outbound transportation strategies also contributed to inefficiencies and unnecessary costs. Operating efficiencies could be achieved if all transportation needs were brought together under one strategic umbrella. Truesdale was certain that in order to reach the company's growth targets and maintain its competitive advantage, addressing these supply chain issues was critical. Students are asked to describe the specific issues affecting supply chain performance and recommend approaches to solving the problems