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Towers Watson (TW) has always conducted its own research into alternative approaches to market cap investing. A senior investment consultant with TW, impressed by a recent presentation by the CIO of Research Affiliates (RA) about an innovative investing concept called the “Fundamental Index methodology,” thinks it might be an important innovation in applying nonmarket cap approaches. But he has some concerns about the approach and whether or not it would be appropriate for TW's clients who depend on the firm to keep them on the cutting edge of institutional investing.

It was early 2015 and executives in iShares' Factor Strategies Group were considering the launch of a new class of exchange-traded funds (ETFs) called smart beta funds. Specifically, the group was considering smart beta multifactor ETFs that would provide investors with simultaneous exposure to four fundamental factors that had shown themselves historically to be significant in driving stock returns: the stock market value of a firm, the relative value of a firm's financial position, the quality of a firm's financial position, and the momentum of a firm's stock price. The executives at iShares were unsure whether there would be demand in the marketplace for such multifactor ETFs, since their value added from an investor's portfolio perspective was unknown. Students will act as researchers for iShares' Factor Strategies Group and conduct detailed analysis of Fama and French's five-factor model and the momentum effect, smart beta ETFs including multifactor ETFs, and factor investing with smart beta ETFs to help iShares make its decision.

Alice Monroe was an admissions officer at the Kellogg School of Management at Northwestern University. It was early January 2017 and Alice had enrolled in Northwestern's 403(b) retirement plan two months earlier. After spending a considerable amount of time examining the mutual funds available through the university's retirement plan, Alice had picked two to invest in: a large-cap equity growth fund and a mid-cap equity fund. (See the related case "Selecting Mutual Funds for Retirement Accounts (A).") Her initial allocations were 50% of her investment dollars in each fund.

Upon further reflection, however, she realized these initial allocations were somewhat simplistic. She recalled, from an investments class she had taken at college, the topic of modern portfolio theory, which held that by adding more funds to her portfolio she might be able to achieve greater diversification and thereby reduce the overall risk of her portfolio and/or achieve a higher expected return. Alice now was considering adding an intermediate-term bond fund and a real estate fund to her retirement account.

She hoped to use modern portfolio theory to prove that these new funds would indeed help her diversify her portfolio. If they did, she would also reassess her portfolio weights to determine the optimal allocation.

This case consists of conversations with six prominent venture capital investors in the United States. The topics covered include investment strategies and relationships with entrepreneurs in the United States and around the world.

Dick Mayo, one of the most celebrated value investors in America was puzzled by the New Economy's continuous bias toward growth investment strategies. He examines the basics of his philosophy versus that of a growth orientation by evaluating the long-term expected returns of several value and growth stocks. This case can be used to pursue several objectives: (1) to define value and growth investing-where the differences lie and whether one approach is superior to the other or whether both have merit; and (2) to discuss issues related to consistency of one's investment philosophy. Should one stay true to one's philosophy even when the market seems to run counter to it for a prolonged period of time? Can value investing deliver value in this New Economy or is it only an Old Economy concept? The students are instructed to perform basic valuations of Cisco Systems (a growth company), CVS, R.R. Donnelley, and Manor Care (value companies) and compute their long-term expected returns. The case comes with an Excel spreadsheet containing the data and relevant valuation ratios for the above firms. The valuations are straightforward, but they tell an interesting story: the expected returns of glamorous stocks in reality may not be so glamorous.

International Expansion; Emerging Markets; Corporate Strategy; Strategic Management.

Senior undergraduate; MBA; EMBA.

This case focuses on the international expansion of Hon Chuan Enterprise, a beverage packaging and filling company headquartered in Taiwan. The company has set foot in Africa after its development in mainland China and Southeast Asia. Its 41st factory has just started production in Mozambique, Africa. The African base may help the company reach the turnover milestone of NT$20bn (approximately US$640m) in the next year. This NT$20bn turnover has been a target every year since 2013, but they have so far failed to reach it. As an original equipment manufacturer (OEM) in beverage packaging and filling, Hon Chuan to some extent relies on customers that own brands. After losing a key customer in mainland China, the company has experienced a three-year slump that forced the company’s president, Hish-Chung Tsao, to modify his strategy. Africa was the new battlefield bearing his ambition. His intention was not just to add another manufacturing base, but to develop its own beverage brands as an OBM. Yet, how could this be achieved in Africa? It would be a new journey full of challenges. Africa was more complex than other markets. The company’s first factory there had just been established, and its future was still unknown.

This case is appropriate for courses in international business, emerging markets, corporate strategy and marketing management. After studying the case, students should be able to understand international expansion of a manufacturing company in emerging markets; understand several key emerging markets of the world and learn what CAGE distances are; identify Hon Chuan’s success factors, challenges and necessary capabilities for future development and then comprehend why it is important to upgrade from OEM to OBM; and learn how to develop beverage brands in emerging markets.

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 5: International Business.

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.

Resource-based view (RBV) theory (Barney, 1991; Barney and Mackey, 2016; Nagano, 2020) states that a firm’s tangible and intangible resources can represent a sustainable competitive advantage (SCA), a long-term competitive advantage that is extremely difficult to duplicate by another firm, when it meets four criteria (i.e. not imitable, are rare, valuable and not substitutable). In the context of this case, we believe there are three sources of SCA to be discussed using RBV – the major league soccer (MLS) team player roster, the use of artificial intelligence (AI) technologies to exploit this roster and the league’s single-entity structure: • MLS players: it has been widely acknowledged that a firm’s human resource talent, which includes professional soccer players (Omondi-Ochieng, 2019), can be a source of SCA. For example, from an RBV perspective, a player on the Los Angeles Galaxy roster: > cannot play for any other team in any other league at the same time (not imitable and are rare), > would already be a competitive player, as he is acquired to play in the highest professional league in the country (valuable) and > it would be almost impossible to find a clone player matching his exact talent characteristic (not substitutable) anywhere else. Of course, the roster mix of players must be managed by a capable coach who is able to exploit these resources and win championships (Szymanski et al., 2019). Therefore, it is the strategic human resource or talent management strategies of the professional soccer team roster that will enable a team to have the potential for an SCA (Maqueira et al., 2019). • Technology: technology can also be considered a source of SCA. However, this has been a source of contention. The argument is that technology is accessible to any firm that can afford to purchase it. Logically, any MLS team (or for that matter any professional soccer team) can acquire or build an AI system. For many observers, the only obvious constraint is financial resources. As we discuss in other parts of the case study, there is a fan-based assumption that what transpired in major league baseball (MLB) may repeat in the MLS. The movie Moneyball promoted the use of sabermetrics in baseball when making talent selection (as opposed to relying exclusively on scouts), which has now evolved into the norm of using technology-centered sports analytics across all MLB teams. In short, where is the advantage when every team uses technology for talent management? However, if that is the case, why are the MLB teams continuing to use AI and now the National Basketball Association (NBA), National Football League (NFL) and National Hockey League are following suit? We believe RBV theorists have already provided early insights: > “the exploitation of physical technology in a firm often involves the use of socially complex firm resources. Several firms may all possess the same physical technology, but only one of these firms may possess the social relations, cultural traditions, etc., to fully exploit this technology to implementing strategies…. and obtain a sustained competitive advantage from exploiting their physical technology more completely than other firms” (Barney, 1991, p. 110). • MLS League Single-Entity Structure: In contrast to other professional soccer leagues, the MLS has one distinct in-built edge – its ownership structure as a single entity, that is as one legal organization. All of the MLS teams are owned by the MLS, but with franchise operators. The centralization of operations provides the MLS with formidable economies of scale such as when investing in AI technologies for teams. Additionally, this ownership structure accords it leverage in negotiations for its inputs such as for player contracts. The MLS is the single employer of all its players, fully paying all salaries except those of the three marquees “designated players.” Collectively, this edge offers the MLS unparalleled fluidity and speed as a league when implementing changes, securing stakeholder buy-ins and adjusting for tailwinds. The “socially complex firm resources” is the unique talent composition of the professional soccer team and most critically its single entity structure. While every team can theoretically purchase an AI technology talent management system, its application entails use across 30 teams with a very different, complex and unique set of player talents. The MLS single-entity structure though is the resource that supplies the stability required for this human-machine (technology) symbioses to be fully accepted by stakeholders such as players and implemented with precision and speed across the entire league. So, there exists the potential for each MLS team (and the MLS as a league) to acquire SCA even when using “generic” AI technology, as long as other complex firm factors come into play.

This case relied on information that was widely reported within media, press interviews by MLS officials, announcements by various organizations, journal articles and publicly available information on MLS. All of the names and positions, in this case, are actual persons.

MLS started as a story of dreaming large and of quixotic adventure. Back in 1990, the founders of the MLS “sold” the league in exchange for the biggest prize in world soccer – the rights to host the 1994 Fédération Internationale de Football Association World Cup before they even wrote up the business plan. Today, the MLS is the highest-level professional men’s soccer league competition in the USA. That is a major achievement in just over 25-years, as the US hosts a large professional sports market. However, MLS has been unable to attract higher broadcasting value for its matches and break into the highest tier of international professional soccer. The key reason is that MLS matches are not deemed high quality content by broadcasters. To achieve higher quality matches requires many inputs such as soccer specific stadiums, growing the fan base, attracting key investors, league integrity and strong governance, all of which MLS has successfully achieved since its inception. However, attracting high quality playing talent is a critical input the MLS does not have because the league has repeatedly cautioned that it cannot afford them yet to ensure long-term financial sustainability. In fact, to guarantee this trade-off, the MLS is one of the only professional soccer leagues with an annual salary cap. So, the question is: how does MLS increase the quality of its matches (content) using relatively low cost (low quality) talent and still be able to demand higher broadcast revenues? One strategy is for the MLS to use AI playing technology to extract higher quality playing performance from its existing talent like other sports leagues have demonstrated, such as the NFL and NBA. To implement such a radical technology-centric strategy with its players requires the MLS to navigate associated issues such as human-machine symbioses, risking fan acceptance and even altering brand valuation.

The case is written and designed for a graduate-level (MBA) class or an upper-level undergraduate class in areas such as contemporary issues in management, human resource management, talent management, strategic management, sports management and sports marketing. The case is suitable for courses that discuss strategy, talent management, human resource management and brand strategy.

Wildcat Capital Investors is a small real estate private equity company. Its MBA intern, Jessica Zaski, is asked to develop a financial model for the purchase of Financial Commons, a 90,000 square foot office building in suburban Chicago. By simple metrics, the property seems to be a good value, but with credit conditions tight, Jessica must consider whether outside investors would be comfortable with the risks of investing in the midst of a severe commercial real estate downturn. Wildcat is designed to give students exposure to both the quantitative and qualitative aspects of investing in commercial real estate through a private equity structure. Beyond the numbers, the case allows for a discussion of the process of finding suitable real estate investments. The importance of the simultaneous negotiations that Wildcat must have with the seller, the lender, and the outside investor can be emphasized.

By working through the financial models, students will take a given set of assumptions and analyze the cash flows expected to be received by the equity partners of Financial Commons. With a given deal structure, the students can then model the cash flow to both outside equity investors and Wildcat, learning the mechanics of private equity. The model will allow students to investigate how the variations in the underlying assumptions affect returns to the property and to the investors.

In early December 2013, Roxann Biller, Associate at the Chicago-based private equity firm Delta Quantitative Real Estate Capital, was asked to assess the risk associated with the firm's first potential overseas investment. Haifu Sentā Gendaino (HSG) was a large multi-tenant logistics property located in the Gaikando area of Tokyo. High-quality tenants currently occupied the property, so at first glance the risks of investing in the property seemed minimal. However, Biller knew that she had to consider the potential drawbacks. This would mean gaining a better understanding of each tenant, trying to forecast the future condition of the Tokyo logistics market, and considering what new risks her firm would face because the property's cash flows were in a foreign currency.