Global Executive MBA Program
Theme 8B - Strategy Formulation II
Shanghai – October 29 – November 2, 2015
Thursday, October 29
8:30-9:45
Value Creation and Value Destruction
Professor Campbell
This session begins our discussion of strategies for value creation. We will focus on the
classic Gulf Oil case about a hostile takeover attempt in the 1980s. It raises issues that are
always present in capital markets and they are especially present today. We will start by
examining whether Gulf Oil, under the direction of Jimmy Lee, is destroying value. The question
in the case is whether the policies being pursued by Gulf management could be changed in a
way so as to add value to shareholders and thereby drive up the price of Gulf Oil stock. The
case requires that you determine what price an acquirer should be willing to pay for Gulf and
how that price can be justified. It should be obvious that the same issues that arose in the Gulf
case 30 years ago are crucial for understanding today’s energy market. See the Fortune article
below in order to help apply the Gulf discussion to the current oil market. Also see the slide
deck from David Einhorn at Greenlight Capital (edited by me) which deals with today’s oil
industry.
Reading:



Case Study: Gulf Oil Corporation HBS 9-285-053
Shawn Tully, “The shale oil revolution is in danger,” Fortune, January 9, 2015
http://fortune.com/2015/01/09/oil-prices-shale-fracking/
David Einhorn, Greenlight Capital, slide deck on fracking.
9:45-10:00
Break
10:00-11:15
Derivatives
Professor Campbell
This session will provide an introduction to options and futures contracts and
their uses. It will also provide an introduction to risk management and to option
pricing and a foundation for the sessions on deal structure and leverage.
Reading:
 Background: RWJJ Chapters 22, 23
 Spreadsheet: Black-Schoes Option Pricing Model
11:15-11:30
Break
11:30-12:45
Derivatives Continued
12:45-1:45
Lunch
1:45-3:00
Corporate strategy & multi-business corporations
Professor Campbell
Professor Bhambri
So far, most of our discussions have focused on business unit strategy as opposed to corporate
level strategy. Whereas business strategy focuses on the question of how to compete,
corporate strategy focuses on which businesses to compete in and the extent and type of
coordination across businesses. Today, we will focus on Danaher Corp., a company with a
remarkable record and a disciplined process for managing a diversified collection of businesses.
Global Executive MBA Program
Theme 8B - Strategy Formulation II
Shanghai – October 29 – November 2, 2015
Topics:
Acquisition processes
Value added in acquisitions
Integration across Businesses
Parenting Advantage
Different corporate models
Case: Danaher Corporation #9 708 445
Questions:
1. What is Danaher’s acquisition process? Is it a sustainable process?
1. If you are a business unit manager, what is the value that you get from being part of
Danaher? What are the disadvantages that you face?
2. If you were managing a firm, would you rather compete against a division of a
conglomerate like Danaher or an independent firm? Explain your answer.
3. If you were an investor, would you rather invest in a firm that competes in only one
business or a firm that competes in many businesses?
4. What seem to be the current trends driving conglomerates?
Readings:
Case: Danaher Corporation #9 708 445
Reading: Corporate Strategy – module note 9-713-415
Reading: Avoiding the dinosaur trap, Economist, May 31, 2014
Reading: Return of the giants, Economist, November 21, 2012
Reading: From dodo to phoenix, Economist, January 11, 2104
3:00-3:15
Break
3:15-4:30
Corporate strategy & multi-business corporations
Professor Bhambri
Danaher and corporate strategy discussion continues.
4:30-4:45
Break
4:45-6:00
Group Work
Friday, October 30
8:30-9:45
Derivatives
Professor Campbell
This session will continue the discussion of derivatives begun on Thursday. We will also
discuss the case study on options in compensation packages.
Reading:
 “Valuing Stock Options in a Compensation Package”, HBS 9-914-517
Global Executive MBA Program
Theme 8B - Strategy Formulation II
Shanghai – October 29 – November 2, 2015
9:45-10:00
Break
10:00-11:15
Deal Structure and Leverage
Professor Campbell
In this session we revisit the topic of leverage and deal structure initially
introduced in Theme 3. We will examine a major leveraged buyout of a US
company, Hospital Corporation of America, and its subsequent public offering.
Reading:
 Review: RWJJ Chapters 15, 16 and 17
 Assignment: “Risk and Reward in Venture Capital”, Sahlman, HBS #N9-811036
 Assignment: HCA (A) HBS #9-207-276, HCA (B) HBS #9-208-070
11:15-11:30
Break
11:30–12:45 Deal Structure and Leverage
Professor Campbell
In this session we will continue our discussion of how to construct an effective
analysis of a levered deal and model the deal in a spreadsheet.
12:45-1:45
1:45-4:30
Box Lunch Drive to site
Field Trip GEMBA VI & EMBA LA XXV Lonking
Saturday, October 31
8:30-9:45
Making Acquisitions (1)
Professor Bhambri
Having discussed a multi-business perspective of organizations, we will go deep into a
discussion of a specific acquisition. Specifically, we will discuss a case series that starts with
a bid and then track the subsequent acquisition of Adams by Cadbury Schweppes.
Case: Cadbury Schweppes: Capturing Confectionery (A)
9 708 453
After reading the A case:
1) As a member of the Board of Cadbury Schweppes would you approve a bid of more
than $4 billion for Adams? Why? Why not?
2) What is your view of the strategic justification and the challenges?
3) What is your view of the organizational justification and the challenges?
9:45-10:00
Break
10:00-11:15
Making Acquisitions (2)
Case: Cadbury Schweppes: Capturing Confectionery (B)
Professor Bhambri
9 708 454
Global Executive MBA Program
Theme 8B - Strategy Formulation II
Shanghai – October 29 – November 2, 2015
After reading the B case:
1. Do you agree with the methods used in the valuation calculations?
2. Are you more supportive of the bid after you review the detailed calculations? Why
or why not?
11:15-11:30
Break
11:30–12:45 Raising Capital for New Ventures
Professor Campbell
In this session we will examine a term sheet for a proposed venture financing
deal via the Trendsetter case study. The purpose is to understand the basic
structure of venture financing and how to structure a term sheet. The
Trendsetter case uses convertible preferred securities. In order to understand
the use of these securities it is necessary to draw on your understanding of
derivatives covered earlier in the week on on so-called agency problems,
discussed in the readings assigned for this session.
Reading:
 Case assignment: Term Sheet Negotiations for Trendsetter, Inc, HBS #9801-358
 Background: “A Note on Private Equity Securities”, Lerner and Hardymon,
HBS #9-200-027
 “The Basic Venture Capital Formula”, Sahlman, HBS #9-804-042
 Spreadsheet: “Trendsetter”
12:45-1:45
Lunch
1:45-3:00
Raising Capital for New Ventures
Professor Campbell
In this session we will continue our discussion of venture financing.
3:00-3:15
Break
3:15-4:30
Project Workshop
4:30-4:45
Break
4:45-6:00
Project Workshop
Sunday, November 1
8:30-9:45
Prosperity & Demographics
Professor Campbell
In this session we will discuss some of the key economic and financial issues facing the
global financial system.
Background Reading (all are available via the internet):
Global Executive MBA Program
Theme 8B - Strategy Formulation II
Shanghai – October 29 – November 2, 2015

“World Population Prospects and the Global Economic Outlook: The Shape of Things to
Come”, Nicholas Eberstadt, American Enterprise Institute, February 2011.
http://www.aei.org/paper/society-and-culture/citizenship/world-population-prospects-andthe-global-economic-outlook-paper/

“Bye-Bye Baby” Teitelbaum and Winter, NYT, April 4, 2014,
http://www.nytimes.com/2014/04/05/opinion/sunday/bye-bye-baby.html

“The amazing, surprising African driven demographic future of the earth”, Max Fisher,
Washington Post, July 16, 2013,
http://www.washingtonpost.com/blogs/worldviews/wp/2013/07/16/the-amazingsurprising-africa-driven-demographic-future-of-the-earth-in-9-charts/

“Africa’s Stalled Fertility Transition”, Wilson Center, October 15, 2014,
http://www.wilsoncenter.org/event/africas-stalled-fertility-transition-causes-cures-andconsequences

“The Future Will Be More Religious and Conservative Than You Think”, Eric Kaufman,
May 8, 2012.

“Global Warming’s Terrifying New Math”, Bill McKibben, Rolling Stone, July 19, 2012.

Alex Davies, “Elon Musk’s Grand Plan to Power the World with Batteries”, Wired, May 1,
2015, http://www.wired.com/2015/05/tesla-batteries/

Michael Levi, “A Clean Energy Revolution is Tougher than You Think,” Council on
Foreign Relations, Energy, Security, and Climate Blog, May 21, 2015,
http://blogs.cfr.org/levi/2015/05/21/a-clean-energy-revolution-is-tougher-than-you-think/
9:45-10:00
Break
10:00-11:15
Prosperity & Demographics continued
11:15-11:30
Break
11:30-12:45
Acquisitions & Platform Development
Case: Qihoo
Professor Campbell
Professor Bhambri
HBS 9-615-017
In this session, we will discuss Qihoo, a young company that has rapidly grown to become one
of the largest interenet companies in China. To compete with some of the other Chinese internet
giants, Qihoo is considering acquiring the third largest serach engine firm, Sogou. Using
concepts of acquisition strategy that we have discussed so far, and your understanding of
strategy, we will apply these concepts in a new space.
Preparation questions:
1.
As Zhou, would you buy Sogou? If your order is rejected, would you increase your bid?
Global Executive MBA Program
Theme 8B - Strategy Formulation II
Shanghai – October 29 – November 2, 2015
2.
Evaluate Qihoo’s growth opportunity in the PC market. How and why did Qihoo
succeed?
3.
How could Qihoo replicate its PC market success in the mobile segment?
12:45-1:45
Lunch
1:45–3:00
Integrating Acquisitions
Case: ArcelorMittal (A)
Professor Bhambri
910M01
Like many mergers, this deal was promoted as a merger of equals and, like all major deals,
integration difficulties could have destroyed value creation from the merger.
Preparation questions:
1.
What is your assessment of the merger from the point of view of Arcelor? Of Mittal?
3:00-3:15
Break
3:15-4:45 pm Integrating Acquisitions
Professor Bhambri
For this session, we will experiment with a multi-media case about a global advertising
company.
Multi-media case: Havas: Change Faster
HBS
9-615-702
Monday, November 2
8:30-9:45
Strategic Alliances
Professor Bhambri
While some companies develop capabilities in house, many companies, regardless of size,
are partnering to develop and leverage capabilities. In this session, we will look at the
imperatives, benefits, and challenges of global alliances.
Key topics:
Key Success Factors in Strategic Alliances
Different types of alliances
Evolution of strategic alliances
Creativity and Design in Strategy
Case: Bharti: Flying on the Wings of Others (A) IMD-3-1115
Questions:
1.
If you were leading the negotiations for Bharti, what would be your position?
Global Executive MBA Program
Theme 8B - Strategy Formulation II
Shanghai – October 29 – November 2, 2015
What is your strategic goal? What would you compromise? What would you hold
firm? What alternatives should you consider? Analyze the logic of your position
clearly.
2.
If you were leading the negotiations for BT, what would be your position? What
is your strategic goal? What would you compromise? What would you hold firm?
What alternatives should you consider? Analyze the logic of your position
clearly.
9:45-10:00
Break
10:00-11:15
New Executives and Taking Charge
Professor Bhambri
Today, we will look at a short case, Mega Corporation, in which I will ask you to put yourself in
the role of Tom Rice, the newly appointed CEO of Mega Corp, and ask, “if you were appointed
to lead a new business, what would you do?” We will use today’s session to pull together much
of what we have covered in theme 8.
Case: Mega Corporation (A)
Questions:
1.
If you were Tom Rice, what would you do? On the first day? In the first week? In the first
month?
Readings:
Mega Corporation (A) (USC case)
When New CEOs Succeed and Fail, Greiner, Cummings & Bhambri, Organizational Dynamics,
2003
11:15-11:30
Break
11:30-12:45
Strategy Review
12:45-3:00
Lunch on main campus and photo
3:15-4:00
Evaluation
Professor Bhambri
GEMBA office
Global Executive MBA Program
Theme 8B - Strategy Formulation II
Shanghai – October 29 – November 2, 2015
Professor Bhambri Readings:
from HBS
Case: Danaher Corporation #9 708 445
Corporate Strategy – module note 9-713-415
Cadbury Schweppes: Capturing Confectionery (A) 9 708 453
Cadbury Schweppes: Capturing Confectionery (B) 9 708 454
Qihoo
HBS 9-615-017
ArcelorMittal (A)
910M01
Havas: Change Faster HBS 9-615-702 (note: this is a multi-media case, it may not need to be
downloaded or printed, just obtain and give the students an on-line access code)
Case (not from HBS, but have used before in GEMBA)
Bharti: Flying on the Wings of Others (A) IMD-3-1115
Articles and cases attached:
Mega Corporation (A) (USC case)
When New CEOs Succeed and Fail, Greiner, Cummings & Bhambri, Organizational Dynamics,
2003
Articles to download:
Avoiding the dinosaur trap, Economist, May 31, 2014
Return of the giants, Economist, November 21, 2012
From dodo to phoenix, Economist, January 11, 2104
Professor Campbell cases/readings which need to be ordered from HBS:


Shawn Tully, “The shale oil revolution is in danger,” Fortune, January 9, 2015
http://fortune.com/2015/01/09/oil-prices-shale-fracking/
Gulf Oil Corporation HBS 9-285-053



Term Sheet Negotiations for Trendsetter, Inc, HBS #9-801-358
“A Note on Private Equity Securities”, Lerner and Hardymon, HBS #9200-027
“The Basic Venture Capital Formula”, Sahlman, HBS #9-804-042
“Risk and Reward in Venture Capital”, Sahlman, HBS #N9-811-036
HCA (A) HBS #9-207-276, HCA (B) HBS #9-208-070



Valuing Stock Options in a Compensation Package”, HBS 9-914-517
Other items to order or download. Most are not subject to copyright protection.
Global Executive MBA Program
Theme 8B - Strategy Formulation II
Shanghai – October 29 – November 2, 2015

“World Population Prospects and the Global Economic Outlook: The Shape of Things to
Come”, Nicholas Eberstadt, American Enterprise Institute, February 2011.
http://www.aei.org/paper/society-and-culture/citizenship/world-population-prospects-andthe-global-economic-outlook-paper/

“Bye-Bye Baby” Teitelbaum and Winter, NYT, April 4, 2014,
http://www.nytimes.com/2014/04/05/opinion/sunday/bye-bye-baby.html

“The amazing, surprising African driven demographic future of the earth”, Max Fisher,
Washington Post, July 16, 2013,
http://www.washingtonpost.com/blogs/worldviews/wp/2013/07/16/the-amazingsurprising-africa-driven-demographic-future-of-the-earth-in-9-charts/

“Africa’s Stalled Fertility Transition”, Wilson Center, October 15, 2014,
http://www.wilsoncenter.org/event/africas-stalled-fertility-transition-causes-cures-andconsequences

“The Future Will Be More Religious and Conservative Than You Think”, Eric Kaufman,
May 8, 2012.

“Global Warming’s Terrifying New Math”, Bill McKibben, Rolling Stone, July 19, 2012.

Alex Davies, “Elon Musk’s Grand Plan to Power the World with Batteries”, Wired, May 1,
2015, http://www.wired.com/2015/05/tesla-batteries/

Michael Levi, “A Clean Energy Revolution is Tougher than You Think,” Council on
Foreign Relations, Energy, Security, and Climate Blog, May 21, 2015,
http://blogs.cfr.org/levi/2015/05/21/a-clean-energy-revolution-is-tougher-than-you-think/