General Management: A Severe Accountability

Contents [hide] 1 Basic Information of General Management: A Severe Accountability 2 Case Summary of General Management: A Severe Accountability 3 Case Analysis of General Management: A Severe Accountability 4 External Link of General Management: A Severe Accountability 5 Relevent File Cabinet of General Management: A Severe Accountability 6 Article Purchase Link of General Management: A Severe Accountability

Basic Information of General Management: A Severe Accountability

Author: Mark Kennedy
Publisher: USC Marshall School of Business
Case Number: 533-01
Publication Date: Feb, 2005
Course Category: Management

Case Summary of General Management: A Severe Accountability

Accountabilities of GM are demanding and uncompromising.
1. Demanding b/c need to balance competing demands of varied constituents.
2. Uncompromising b/c continuing in GM depends on delivering results.

Job of the GM: set direction, define goals, make plans, structure people and resources to pursue them, do it, and answer for the results.
To whom do they serve: Shareholders? GMs should develop specialties, but also understand broader context and accountability that got them to the top.

5 basic accountabilities of the GM: Governance (government), Organization and Partners (stakeholders) on vertical. Suppliers and Buyers on horizontal axis of star.
What It Really Means to Manage: Exercising Power and Influence

New managers must unlearn the deeply held attitudes/habits they developed when only responsible for self. The GM must learn to set and implement an agenda for a whole group. Two kinds of learning: task learning and personal learning.

New managers focus on their formal authority (rights and privileges of a promotion). Bosses and peers are hard to deal with for the GM. 2 sets of responsibilities: manage their team and also manage the context within which their team resides.

Power: def. as potential of an individual (or group) to influence another individual or group.
Influence: def as exercise of power to change behavior/attitudes/values of that individual or group.

To be effective, managers must find ways to acquire power and exercise influence with those on whom they are dependent. Need to cultivate networks (mutually beneficial relationships with those on whom they are dependent). Metaphor of currency exchange is used in article.

3 important criteria for evaluating power/influence:
1. Is it effective for individual?
2. Is it effective for organization?
3. Is it ethical?

What Effective General Managers really do:
2 fundamental challenges/dilemmas:
1) Figuring out what to do despite uncertainty and an enormous amount of potentially relevant information.
2) Getting things done through a large/diverse group of people despite having little direct control over most of them

Agenda Setting:
a. agendas tend to be less detailed in financial objectives, more detailed in strategies and plans
b. tend to focus on broader time frame
c. contains list of goals or plans that are not explicitly connected
--effective GMs rely more on discussions with others, develop agendas immediately after hire

Network Building:
--develop a network of cooperative relationships among people they feel are needed to satisfy their agendas
--often shape networks by moving, hiring, firing subordinates
--GMs use networks to exert indirect influence on people
--best performers tend to mobilize more people to get more things done, and do so using a wider range of tactics to influence people

Responsibilities of Top Mgmt
--do not put someone in a GM role just because he or she is a successful manager (unless he/she knows the business)
--Growing one’s own executives is a high priority
--Mgmt training courses overemphasize formals tools and unambiguous problems and situations
--People who are new to GM can probably be gotten up to speed more effectively than is the norm today

GE’s Two Decade Transformation

Contents [hide] 1 Basic Information of GE’s Two Decade Transformation: Jack Welch’s Leadership 2 Case Summary of GE’s Two Decade Transformation: Jack Welch’s Leadership 3 Case Analysis of GE’s Two Decade Transformation: Jack Welch’s Leadership 4 External Link of GE’s Two Decade Transformation: Jack Welch’s Leadership 5 Relevent File Cabinet of GE’s Two Decade Transformation: Jack Welch’s Leadership 6 Article Purchase Link of GE’s Two Decade Transformation: Jack Welch’s Leadership

Basic Information of GE’s Two Decade Transformation: Jack Welch’s Leadership

Author: Christopher A. Bartlett
Publisher: HBR
Case Number: 399150-PDF-ENG
Publication Date: Apr 28, 1999
Course Category: Management

Case Summary of GE’s Two Decade Transformation: Jack Welch’s Leadership

Overall
Key for management, recognize environmental change and transform company
8 Transformational Steps: Establishing a sense of urgency
Forming a powerful guiding coalition
Creating a vision
Communicating the vision
Empowering others to act on vision
Planning for and creating short-term wins
Consolidating improvements and producing still more change
Institutionalizing new approaches
(series of phases, often require significant time, can’t skip steps, each step must be successful)
Jack Welch CEO in 1981: Early 80’s radical restructuring
Late 80’s changed culture, values and managerial mind set
1990s managed norms (boundaryless behavior, stretch goals, 6 Sigma)
Questions
How difficult a challenge did Welch face in 1981?
How effectively did he take charge?
What is Welch’s objective in series of initiatives he launched in late 80s and early 90s?
What is he trying to achieve in the round of changes he put in motion in that period?
Is there a logic or rationale supporting the changes?
How does such a large complex diversified conglomerate defy the critics and continue to grow so profitably?
Have Welch’s various initiatives added value? If so, how?
What is your evaluation of Welch’s approach to leading change?
How important is he to GE’s success?
What are the implications for his replacement?
Case
- 1999 revenues $100B+, margins high, earnings per share high… “Most Respected Company in the World”
- Shareholders were worried with Welch upcoming retirement… could the company sustain the pace of change and growth characteristics of the Welch era
GE Heritage
- Stated in 1878 w/ focus on generation, distribution and use of electric power.
- Additionally it expanded into power generation, household appliances, and lighting
- 1978 engaged in diverse aircraft engines, medical systems, and diesel locomotives
- Leading edge of management practice
Jones (Welch predecessor) CEO in 1973, good at strategic planning, company leaders SBU-based structure and sophisticated planning process, he was dubbed CEO or the decade

Welch Early Priorities: GE’s Restructuring
1981 Economy in recession, high unemployment, high interest rates… company needed restructuring
1 or 2: Fix, Sell or Close
Welch each business needed to be 1 or 2 competitor in industry… had to be broad strategy because it was a broad corporation.
3 Circle Vision:
Services (acquisitions, note 370 exhibit 3),
Technology (leading edge),
Core (re-invest in productivity)
Support, Outside, Ventures (exhibit 2)
Internally wanted company “lean and agile,” chip away bureaucracy example laborious strategic planning system or budgeting process (targeted towards competitors), reducing hierarchical levels from 9 to 4 ensured all business reported directly to him
Downsizing, de-staffing, de-layering 123,000 staff cut, operating profits rose dramatically, and set base for strong increase in sales and earnings for second half of decade (exhibit 5)
Replace 12 of 14 business heads, called “Varsity Team,” all strong commitment to new management values, and willingness to break old culture, and ability to take charge and bring change… Bold Action
Late 80’s: Second Stage of Rocket
- Restructuring complete, but still culture shock and management exhaustion… needed more solid foundations
- “Software” Initiatives: Work-out and best practices: software changes = cultural changed (too sustain high productivity)
- Norm to be an approach based on openness, candor and facing reality
- Core elements to be speed, simplicity, and self confidence
- 2 initiatives, Work-out and Best Practices
Workout
- Create a culture of small company
- Forum where employees could not only speak their mind, but get immediate response
- Designed a process ride of unnecessary bureaucratic work out of system
- 24 outside consultants, company-wide program
- Style New England town meetings, three days, bosses out of room, but then return here employees and make instant responses
- Productivity increased
Best Practices
- Goal to still increase productivity, studied other firms
- Focused on developing effective processes than controlling individual activities, customer satisfaction was their main gauge of performance, they treated their suppliers as partners, and they emphasized the need for constant stream of high quality products designed for efficient manufacturing
- Changed mangers managing and measuring
Going Global
- During early-mid 1980s, was on back burner
- Not want to impose corporate globalization on corporation, but allow each business to decide
- But now looked at ranking 1# or 2# on global level
- Ongoing effort
- During Mexico downturn, w/in 6 months GE bought 16 companies, positioned for country’s rapid recovery… same strategy for Asia
- 1998 international revenues were $42.5B (doubled in 5 yrs)
Developing Leaders
- Huge task of realigning skill set and mind set of 290,000 employees
- Many felt overworked and residual distrust left from layoffs
- Psychological contract based on perceived lifetime employment, produced a paternal, feudal, fuzzy kind of loyalty
- Wanted to change focus outwardly to competition…wanted staff willing to compete and in exchange get professional opportunities… made a commitment to developing people
- Adapting human resources systems to fit his goals, example reviews known as Session C
- Paid close tabs on upper 500 executives, they were responsible for presenting results in exhaustive 12 hour reviews
- Expected honest feedback, used basic for coaching and developing their staff
- Overhauled GEs compensation package, stock options became primary component of management compensation and expand stock option from 300 to 30,000 people (more aggressive bonus awards)
- Create environment in which people could be their best
- Priority to develop a generation of leaders aligned with GE’s new vision and cultural norms, training center
- Discussion leaders, Welch meet with employees twice a month (exhibit 7)
- Not all managers were able to achieve Welch’s ideal leadership profile (exhibit 8)
- Top level managers were rated on performance against targets plus how the “lived” GE values
- Introduced 360 feedback process
Into the 1990’s: The Third Wave
Foundation had been laid, now task rebuilding company at an even more urgent pace
Boundaryless Behavior
- Initiatives aimed at strengthening GE individual business, create “integrated diversity”
- Open, anti-parochial environment… sharing ideas… remove the barriers among engineering, manufacturing, marketing, sales etc
- Be as comfortable doing business in Budapest as Louisville, and erase group labels as “salaried”
- Wanted to quickly learn from each other, “integration model,” develop a model guided the actions of managers, realigning the organization and remove blockers
Stretch: Achieving the Impossible
- Reinforce his rising managerial expectations, new assault on GE cultural norms
- “Stretch” to set performance targets and described it as “using dreams to set b. targets, with no idea how to get there”
- Targets not replace traditional forecasting, managers still had to hit these basic targets, Stretch goals were set higher but not held accountable… wanted to keep a positive attitude
- Mid-1990s stretch goals were established part of culture
- Increased operating margins from 91’ to 95’ 10% to 15%
Service Business
- 1994 launched a new strategic initiative designed to reinforce one of his earliest goals, reduce GE dependence on traditional industrial products
- 1980s initiated an initial tilt towards service business, acquisition of financial service companies
- Now push for product services… needed to supplement slow growth products with added-value services, example medical business “In Site” for CT scanners and MRI equipment
- Believed they had a strong platform to build off of (ex 9000 commercial jet engines, 10,000 turbines)
- “turning the pyramid upside down”
- 1997 GE made 20 service-related acquisitions and joint ventures (exhibit 9)
Closing Out the Decade: Welch’s Final Chapter
Closing in on mandatory retirement, wanted to keep adding value… said he was not willing to split up company
6 Sigma
- 1995 company survey showed employees were dissatisfied with quality of its products and processes
- Learned from Motorola Six Sigma quality program which improve quality, lower costs, and increase productivity
- GE operating at error of rates 10,000 times the 6 Sigma level (cost $8-12 M)
- Well developed program with detailed implementation, linked series of management meetings “operating system” series of planning, resource allocation, review and communication
- 40% of bonus were tide, returns to company $750 M (exhibit 11)… rapid
“A Players” with “Four E’s”
- Continued to focus on quality of team, wanted to continue to upgrade quality depth
- “A Players” vision, leadership, energy, courage
- 4 E’s energy, able to energize, edge, execution
- Appraisal system every manger ranked employees 5 categories, only top ones received stock
- Believed continuously upgrading was key to success
Toward Retirement: One More Initiative
- 4th strategic initiative- e business, “biggest change I have ever seen”
- Knew they were late, but felt well positioned with strong brands, top ranked product reliability, great fulfillment capability, and excellent service quality… thought dot com would have a hard time challenging them
- Debate on how quickly and effectively GE could pull it off

GE's Growth Strategy

Contents [hide] 1 Basic Information of GE's Growth Strategy: The Immelt Initiative 2 Case Summary of GE's Growth Strategy: The Immelt Initiative 3 Case Analysis of GE's Growth Strategy: The Immelt Initiative 4 External Link of GE's Growth Strategy: The Immelt Initiative 5 Relevent File Cabinet of GE's Growth Strategy: The Immelt Initiative 6 Article Purchase Link of GE's Growth Strategy: The Immelt Initiative

Basic Information of GE's Growth Strategy: The Immelt Initiative

Author: Christopher A. Bartlett
Publisher: HBR
Case Number: 9-306-087
Publication Date: Feb 13, 2006
Course Category: Management

Case Summary of GE's Growth Strategy: The Immelt Initiative

- Taking Charge: Setting the Agenda
• On Friday, September 7, 2001, Jeff Immelt took over for Jack Welchc as CEO of GE. Four days later, the 9/11 attacks occurred and the world was thrown into chaos.
• By the end of Immelt’s first week on the job, GE’s stock had dropped 20%.
• Later that year, GE’s stock dropped again on suspicions from the Enron scandal.
• After a rough start to his tenure, Immelt realized that internal growth would be the key to GE’s long-term success.

- Building on the Past, Imagining the Future
• Immelt constantly went out of his way to emphasize that GE was not an over-grown, slow to move, slow to react conglomerate.
• He instead viewed the company as a collection of highly correlated businesses made up of world-class people, processes, and strategic initiatives.
• Acting on this, Immelt created a growth strategy made up of 5 key elements:
1. Technical Leadership – A key driver of future growth
2. Services Acceleration – GE already had a large amount of product out in the industry that would eventually need servicing as the products aged and wore down.
3. Commercial Excellence – Shifting focus from GE’s internal processes to external customer requirements.
4. Globalization – Main focus on China and India.
5. Growth Platforms – Build new businesses based on high-growth areas that will provide “unstoppable” opportunities.

- Investing through the Down Cycle
• Immelt felt that investing heavily in the business during the economic slowdown of the early 2000’s was crucial to the long-term growth of the company.
• Immelt quickly made the following acquisitions: the Telemundo and Bravo television networks, Interlogix security systems, and water service provider BetzDearborn.
• He also committed to building several new R&D facilities around the world.
• Despite these efforts, GE’s stock dropped another 39%.

- Ongoing Operations: Rigor and Responsiveness
• Immelt made cash flow GE’s number one financial focus. He used tools like Six Sigma to re-align the business around this objective. It was through improved cash flow that Immelt would continue to invest in the business.
• Immelt also hoped to change the image of being CEO of GE from the cold, results-oriented focus of Jack Welch, to a more open and less hard-edged image. The main offspring of this effort was a renewed focus on social responsibility and the creation of a new role within GE: VP of Corporate Citizenship.

- Rebuilding the Foundation: Beginning a Marathon
• Looking back on 2002, it was a horrible year for GE. Revenues were flat, corporate scandals were all over the news, the economy was struggling, and GE’s stock continued to slide, now 60% off of its all-time high from 2001.

- Rebalancing the Portfolio
• As 2003 began, GE finalized plans to acquire Vivendi-Universal Entertainment. Immelt felt that this acquisition was crucial to growing the NBC business within GE as the deal would provide them with important content, production facilities, cable distribution and a strong management team.
• Shortly after the Vivendi deal, GE announced plans to acquire a British life-science company, Amersham. Immelt felt that Biotechnology would be very important part of GE’s future growth.
• There were many concerns about this second merger, particularly the idea that GE’s corporate culture would stifle the innovation and creativity that had made Amersham successful in the first place. Immelt vowed to not allow this to happen.

- Focusing on Customers, Emphasizing Services
• Immelt named Beth Comstock as GE’s first Chief Marketing Officer in 2001. This move was meant to stress GE’s new focus on their customers and less on their internal processes.
• Acting on the momentum created by the new marketing emphasis, Immelt formed Commercial Council in 2003 to bring together GE’s top sales and marketing leaders. Immelt chaired that council himself.
• GE began to work very closely with their customers to improve their customer’s business (focus on providing service for GE). In 2002, GE completed 6,000 Six Sigma projects with their health-care providers alone.
• Immelt wanted GE service to be a critical part of their customer’s operations.

- Driving for Growth: New Platforms, New Processes
• GE’s top leaders identified 6 business growth platforms that would lead to way for GE’s growth opportunities over the next few years:
1. Health-care information systems, security and sensors, water technology and services, oil and gas technology, Hispanic broadcasting, and consumer finance.
2. These businesses were averaging a 15% annual organic growth rate.

- Aligning Management: New People Profiles
• As GE’s growth strategy began to take hold, Immelt worried that some of GE’s traditional managers may not have the skills to be able to succeed in the more entrepreneurial environment that he was trying to create.
• Acting on this, HR developed new career paths for managers, focusing on more in-depth job experience as opposed to job rotations.
• HR also developed 5 action-oriented leadership traits that they would require all leaders to possess:
1. External (customer) focus
2. Think Clearly
3. Imagination and Courage to take risks
4. Inclusiveness and Connection with People
5. Expertise in a function
• To develop these skills, 20-30 “pillar jobs” were created within each organization which required the continual use and development of these 5 skills.

- Funding the Growth: Operating Excellence
• Throughout GE’s re-investment in itself, Immelt insisted that the companies ongoing operations fund the growth. To accomplish this, Immelt enacted tools such as Lean Six Sigma
• These efforts, as well as an overall simplification and consolidation of the business, allowed GE to save a considerable amount of money by the time 2004 rolled around.

- Preparing for Liftoff: Innovation and Internationalization
• By 2004, the world economy was turning around. By year’s end, 11 of GE’s businesses had turned in double-digit earnings growth from 2003 numbers.
• Immelt felt that this was only the beginning and that GE’s focus on growth and re-investing in itself would soon start to pay off.

- Imagination Breakthroughs
• Imagination Breakthroughs (IBs) were identified as large projects or business opportunities that had the potential to generate at least $100 million in earnings within 3 years.
• Within 1 year of launching an initiative to develop IBs, over 80 had been identified within GE. By 2005, 25 of these were generating revenue.

- Of Town Halls and Dreaming
• Immelt started holding Town Hall Meetings with customers to get a better idea of what they wanted out of GE and how he could serve them better.
• He also created another type of forum known as “Dream Sessions” in which he would meet with major CEOs from major industries to discuss roadmaps, implications for GE, and future opportunities for GE.

- Infrastructure for Developing Countries: A New Growth Market
• In 2004, revenues from outside of the US grew by 18%.
• Leading the way was a massive increase from developing countries – an area that Immelt was particularly focused on for long-term growth

- Reorganizing for Efficiency – and Growth
• In 2005, Immelt reorganized the company into 6 major groups:
1. GE Industrial
2. GE Commercial Financial Services
3. NBC Universal
4. GE Health Care
5. GE Consumer Finance
6. GE Infrastructure
• Each group was to focus highly on coaching, developing and supporting younger managers within the group.

- Going Forward: Immelt’s Challenges
• Immelt’s main challenge moving forward is to maintain the momentum that his moves have produced to date.
• “GE thrives because we use our size to help us grow.”
• “Our goal is not just to be big, but to use our size to be great.”

Adoption of a New Product

Contents [hide] 1 Basic Information of Forecasting the Adoption of a New Product 2 Case Summary of Forecasting the Adoption of a New Product 3 Case Analysis of Forecasting the Adoption of a New Product 4 External Link of Forecasting the Adoption of a New Product 5 Relevent File Cabinet of Forecasting the Adoption of a New Product 6 Article Purchase Link of Forecasting the Adoption of a New Product

Basic Information of Forecasting the Adoption of a New Product

Author: Elie Ofek
Publisher: HBR
Case Number: 505062
Publication Date: Feb 15, 2005
Revision Date: May 20, 2008
Course Category: Marketing

Case Summary of Forecasting the Adoption of a New Product

The Bass Model or Product Diffusion Model
- Created by Frank Bass in 1969 as an analytical framework for modeling the first-purchase growth of a new product
- The model makes assumptions about how information is passed between individuals in a social system, and how this affects their timing of adoption
- Assumes that a consumer can adopt a new product only once
- Innovators – individuals who adopt a product independently of others
- Imitators – individuals who adopt a product only after observing that others have done so first; they respond to influences
- Variables in the Bass Model:
N(t) is the total cumulative # of consumers that have already adopted the new product through period t;
N(t-1) is the cumulative # of adopters for the new product through the previous time period (i.e. t – 1)
S(t) is the # of new adopters for the product during the time period t, and can be expressed as N(t) – N(t - 1)
m is the total market size; provides the scale of the demand forecast; gives a total consumer base or terminal value of total adopters that will not be exceeded
p is the coefficient of innovation; represents the rate or probability that an innovator will adopt at time t
q is the coefficient of imitation; accounts for “word-of-mouth” effects that result from interpersonal communication between adopters & non-adopters
- The Bass model asserts that the likelihood of an initial purchase being made at time t, given that a purchase has not been made before, is a function of the # of previous adopters, such that:
p + (q/m)N(t - 1) = likelihood of purchase by a new adopter in time period t
m – N(t - 1) is the # of consumers that haven’t previously adopted by the start of time period t; this is the pool from which new adoptions in the current period can occur
- The Bass model in its simplest form gives us the number of new adopters in time period t by multiplying the rate of new adopters by the # of consumers that have yet to adopt:
S(t) = [p + (q/m)N(t – 1)][m – N(t – 1)] -> the Bass model

• Ex. A1 in the reading shows possible adoption curves for new products, where a product with a high coefficient of innovation will have a sudden increase in the adoption curve before leveling off. Conversely, a product with a low coefficient of innovation and a high coefficient of imitation will have a gradually sloping adoption curve.

Estimation of Parameters
- Market research surveys that assess consumer interest or likelihood of purchase is one way to gauge total market size
- p & q may be determined through the analysis of p’s & q’s for previously launched analogous products
- Several analogous products may be considered, in which case a weighted average of their p & q values is appropriate
XM Satellite Radio and its launch:
- XM used a national telephone survey to gauge interest and determine total market
- There are other factors that influence total market though, such as the % of the market that’s willing to purchase new radios and pay a monthly fee, so it is important to do a sensitivity analysis
- to estimate p & q, XM assumed AM/FM automobile radios, portable CD players, & mobile phones & satellite TV to be analogous products and used weights to determine p & q
- XM forecasted a gradually sloping demand curve after launch due to a model dominated by imitators rather than innovators.
- Of course, market penetration may be affected by price decreases or advertising spend, in which case the ff. generalized Bass model (GBM) holds:
S(t) = [p + (q/m)N(t – 1)][m – N(t – 1)]Z(t)
Where Z(t) = 1 + α[P(t) – P(t – 1)]/P(t – 1);
α is a coefficient that indicates the percentage increase in the speed of diffusion that results in a 1% decrease in price
P(t) is price in period t
And the ff. assumptions hold:
1. a price decrease affects the # of adoptions in that period only
2. the actions of the firm through it’s marketing mix affects imitators and innovators the same way
OTHER MODELS DISCUSSED BRIEFLY IN THE READING:
The Discrete Choice Model
- Use this if 2 or more versions of the new product are already in marketplace, or if prototypes exist
- Develop a set of key attributes by which to compare competing versions of the product, perform a conjoint analysis, & use this data to estimate market share for each product
Data Driven Demand Forecasts
- used when historical sales data is available to forecast future sales, therefore cannot be used with new products
- A Moving Average forecast of demand uses the average sales from previous periods to forecast future sales
- The Exponential Smoothing Method uses an exponentially weighted moving average of previous sales; best used when drastic changes have recently occurred in marketplace; i.e. recent observations are weighted more heavily than older ones
- Be careful not to forecast past the terminal value of m (total market size)

Five Forces Analysis

Contents [hide] 1 Basic Information of Five Forces Analysis 2 Case Summary of Five Forces Analysis 2.1 Use 2.2 The Five Forces 2.3 The threat of substitute products 2.4 The threat of the entry of new competitors 2.5 The intensity of competitive rivalry 2.6 The bargaining power of customers 2.7 The bargaining power of suppliers 2.8 Criticisms of the 5 Force model 3 Case Analysis of Five Forces Analysis 4 External Link of Five Forces Analysis 5 Relevent File Cabinet of Five Forces Analysis 6 Article Purchase Link of Five Forces Analysis

Basic Information of Five Forces Analysis

Author: Michael E. Porter
Publisher: HBR
Case Number:
Publication Date:
Course Category: Strategy, Management

Case Summary of Five Forces Analysis

Porter's five forces analysis is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business School in 1979. It uses concepts developed in Industrial Organization (IO) economics to derive five forces which determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition".
Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their Core competences, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models have been able to make a return in excess of the industry average.

Use

Strategy consultants occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic position. However, for most consultants, the framework is only a starting point or 'check-list' they might use. Like all general frameworks, an analysis that uses it to the exclusion of specifics about a particular situation is considered naive.
Porter's five forces include three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers, bargaining power of customers.
According to Porter, the five forces model should be used at the industry level; it is not designed to be used at the industry group or industry sector level. An industry is defined at a lower, more basic level: a market in which similar or closely related products and/or services are sold to buyers. Firms that compete in a single industry should develop, at a minimum, one five forces analysis for its industry. Michael E. Porter makes clear that for diversified companies, the first fundamental issue in corporate strategy is the selection of industries (lines of business) in which the company should compete; and each line of business should develop its own, industry-specific, five forces analysis. The average Global 1,000 company competes in approximately 52 industries (lines of business).
This five forces analysis is just one part of the complete Porter strategic models. The other elements are the value chain and the generic strategies.

The Five Forces

The threat of substitute products

The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand).

• buyer propensity to substitute
• relative price performance of substitutes
• buyer switching costs
• perceived level of product differentiation

The threat of the entry of new competitors

Profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (Perfect competition).

• the existence of barriers to entry (Patents, rights, etc.)
• economies of product differences
• Brand equity
• switching costs or sunk costs
• capital requirements
• access to distribution
• absolute cost advantages
• Learning curve advantages
• expected retaliation by incumbents
• government policies

The intensity of competitive rivalry

For most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc.

• number of competitors
• rate of industry growth
• intermittent industry overcapacity
• Exit barriers
• diversity of competitors
• informational complexity and asymmetry
• fixed cost allocation per value added
• level of advertising expense
• Economies of scale
• Sustainable competitive advantage through improvisation

The bargaining power of customers

Also described as the market of outputs. The ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes.

• buyer concentration to firm concentration ratio
• degree of dependency upon existing channels of distribution
• bargaining leverage, particularly in industries with high fixed costs
• buyer volume
• buyer Switching costs relative to firm switching costs
• buyer information availability
• ability to vertical integration(backward integrate)
• availability of existing substitute products
• buyer price sensitivity
• differential advantage (uniqueness) of industry products
• RFM Analysis

The bargaining power of suppliers

Also described as market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources.

• supplier switching costs relative to firm switching costs
• degree of differentiation of inputs
• presence of substitute inputs
• supplier concentration to firm concentration ratio
• employee solidarity (e.g. labor unions)
• threat of forward integration by suppliers relative to the threat of backward integration by firms
• cost of inputs relative to selling price of the product.

Criticisms of the 5 Force model

Porter's framework has been challenged by other academics and strategists such as Stewart Neill, also the likes of Kevin P. Coyne and Somu Subramaniam have stated that three dubious assumptions underlie the five forces:

• That buyers, competitors, and suppliers are unrelated and do not interact and collude.
• That the source of value is structural advantage (creating barriers to entry).
• That uncertainty is low, allowing participants in a market to plan for and respond to competitive behavior.

An important extension to Porter was found in the work of Brandenburger and Nalebuff in the mid-1990s. Using game theory, they added the concept of complementors (also called "the 6th force"), helping to explain the reasoning behind strategic alliances. The idea that complementors are the sixth force has often been credited to Andrew Grove, former CEO of Intel Corporation. According to most references, the sixth force is government or the public. Martyn Richard Jones, whilst consulting at Groupe Bull, developed an augmented 5 forces model in Scotland in 1993, it is based on Porter's model, and includes Government (national and regional) as well as Pressure Groups as the notional 6th force. This model was the result of work carried out as part of Group Bull's Knowledge Asset Management Organisation initiative.
It is also perhaps not feasible to evaluate the attractiveness of an industry independent of the resources a firm brings to that industry. It is thus argued that this theory be coupled with the Resource-Based View (RBV) in order for the firm to develop a much more sound strategy.

Case Analysis of Five Forces Analysis

The Six Forces Model is a market opportunities analysis model, as an extension to Porter's Five Forces Model and is more robust than a standard SWOT analysis.
The following forces are identified:

• Competition
• New entrants
• End users/Buyers
• Suppliers
• Substitutes
• Complementary products/ The government/ The public

Executive Decision Making at General Motors

Contents [hide] 1 Basic Information of Executive Decision Making at General Motors 2 Case Summary of Executive Decision Making at General Motors 3 Case Analysis of Executive Decision Making at General Motors 4 External Link of Executive Decision Making at General Motors 5 Relevent File Cabinet of Executive Decision Making at General Motors 6 Article Purchase Link of Executive Decision Making at General Motors

Basic Information of Executive Decision Making at General Motors

Author: David A. Garvin, Lynne C. Levesque
Publisher: HBR
Case Number: 305026
Publication Date: Dec 21, 2004
Revision Date: Feb 14, 2006
Course Category: Management

Case Summary of Executive Decision Making at General Motors

“How does an organization achieve consistency, or fit, between the environment and its strategy, structure, and decision-making processes? The GM case will allow us to discuss the question of how to go about aligning an organization with a dynamic environment, and in so doing, ensuring that it is also self-adapting. A last important theme of this case is the role of the CEO.”

Wagoner (Chairman and CEO of GM):
“How to balance the global effective system and local focus expertise? The matrix organization is the key factor. It replaced the historic multi-divisional structure and its proliferation of vehicles, architectures, and processes that had almost cause GM’s demise”

~Case Context~
Alfred Sloan’s GM: Revving up (1920~1956)
• In 1908: Billy Durant
Created the first automotive conglomerate and first vertically integrated company in the industry.
− Challenge: Poor management decision because internal competition and duplication were tolerated and often encouraged.
• In 1918: Alfred Sloan
Reorganized GM’s structure and management processes to be in line with its strategies.
− Strategy: Three major strategies included an ingenuous marketing policy, a commitment to innovation, and international diversification.
− Structure: Multi-divisional structure called “decentralization with coordinated control.”
− Policy and Decision-Making Processes: Coordinated control in the decentralized organization came from Management Committee and the Policy Groups.
ü
Management Committee:
Ultimately responsibility for decisions around resource allocation, spending authorities, and planning for GM’s future resided until 1992.
ü
Policy Groups:
Met monthly to set standards and policies to provide recommendations to Management Committee, while they had no funding authority.
− Result: Ranked #1 of Fortune 500 (in 1955) in both sales and net profits.
− Challenges: Innovation structure is unchanged until 1990; independence and decentralization may not be able to respond the major changes quickly.

Coasting Toward Collision (1960s-1990s)
Increased competition and oil crisis in 1970s tested GM’s prevailing strategy, structure, and senior management process. However, GM’s internal focus and its ‘not invented here’ attitude didn’t help.
− Strategy: With focus on market share, the divisions compete with each other. Top managers became more focused on cost than revenue.
− Structure: The effectiveness of decentralized organization began to break down as operational complexity and internal competition increased. Each division and global region has its own functions and lacked of the economics of scale.
− Policy and Decision-Making Processes: Slowed down decision-making by adding a new layer of required review, and managers focused on lining up needed votes before meetings. The staff kept executives from knowing what going on with customers and employees.
− Result: GM was branded a “dinosaur” by the early 1990.

Getting Back on a Common Track (1992 and Beyond)
In 1992, Jack Smith was in charge of CEO and Chairman. He eliminated Policy Group, abolished the two vehicle groups, and replaced the Management Committee with President’s Council.
− Strategy: Reduced overlapping product lines, developing common systems for product development, focused on speeding up to decision-making process, and eliminating the interdivisional competition.
− Structure:
  1. In North America, GM consolidated automotive engineering, manufacturing, and purchasing into one North America organization.
  2. In 1998, GM established a single Automotive Strategy Board (ASB) chaired by Wagoner.
  3. Also in 1998, GM was reorganized into matrix organization, or ‘basketweave’, including four Region Presidents and twelve Global Process Leaders covering critical functions.
− Policy and Decision-Making Processes:
  1. Regional decisions: Responsible for developing, reviewing, and approving regional operating budgets and business plans.
  2. Functional decisions: Global Process Leaders were responsible for their functions across the entire company.
  3. Balancing the matrix: The regions were initially given the dominant role in the matrix, with budgeting and financial reporting accountabilities. Functional staffs had dual reporting system.

The Automotive Strategy Board (ASB): The Matrix in Action
In the new organization, the regional strategy boards and the global process councils came together at ASB, which, along with GM’s Board of Directors,
− Role of ASB:
  1. Governance and oversight: ASB made decisions about financial commitments and resource allocation.
  2. Policy setting.
  3. Alignment: The ASB played additional roles that promoted organizational alignment, coordination, and communication.
  4. Strategic decision-making: Strategic issues, such as acquisitions, growth strategies, and resources allocations were decided through ASB.
− Support the Matrix
  1. Doublehatting: Asked the top managers to work both sides of the matrix as a Regional Presidents and Global Process Leaders.
  2. Performance management plans: To improve alignment, Wagoner wrote the Performance Management Plans (PMPs) by hand for each individuals ASB member, who then had a week to respond.
  3. Meeting groundrules.
− ASB Operating Mechanics
ASB met monthly for two days of the month. Between two meetings, there were weekly telephone conferences. Besides, all regional strategy board met prior to the ASB meeting in preparation.
  1. Pre-meeting preparation: Collected the agenda candidates and voted before the ASB meeting to select focused agenda.
  2. Meeting format: The agenda was usually organized into seven categories. The single most important agenda item is the one-hour “roundtable” because people bring in those items that they think really matter, that others need to know, or when they need someone’s help.
  3. Evolution over time.
− ASB Decision-Making Dynamics
  1. Senior management interactions: In the view of some members, the ASB was largely rubber stamp. Others saw the ASB as an efficient mechanism for speedy decision making.
  2. The CEO rule: In some members’ view, Wagoner was an active participant and ensured there was healthy debated. Others saw Wagoner using the ASB primarily as a sounding board as his own decision-making. Wagoner himself admitted that his role often changed, but he was not concerned about the diverse roles he played in the process. He mentioned, “I like having flexibility, which makes the organization better by putting pressure on it….In the end we have to think.”

The Future of GM’s Basketweave Structure
In spite of substantial progress, GM had continued to wrestle with the challenge of maintaining the right balance between local interest and the need for the centralized coordination to ensure economics of scope and scale.
− Challenges still faced
  1. Unlike Toyota and VW, GM still lacked a single global product plan.
  2. Regionally base product development groups and programs had continued to lead to duplication.
  3. Sharing among the regions was not happening naturally.
− Action: Changing the responsibility for the product development and engineering budgets. GM would centralize the responsibility in the Product Development and Planning/R&D functions.
− Concerns of Wagoner:
”Are we ready to manage the complexities of holding Region Presidents accountable for business results when they are no longer autonomous business unit, without their own product portfolio or product development/engineering staffs?”

Evolution and Revolution as Organizations Grow

Contents [hide] 1 Basic Information of Evolution and Revolution as Organizations Grow 2 Case Summary of Evolution and Revolution as Organizations Grow 3 Case Analysis of Evolution and Revolution as Organizations Grow 4 External Link of Evolution and Revolution as Organizations Grow 5 Relevent File Cabinet of Evolution and Revolution as Organizations Grow 6 Article Purchase Link of Evolution and Revolution as Organizations Grow

Basic Information of Evolution and Revolution as Organizations Grow

Author: Larry E. Greiner
Publisher: HBR
Case Number: 98308
Publication Date: May 1, 1998
Course Category: Management

Case Summary of Evolution and Revolution as Organizations Grow

• Companies go through a series of developmental phases as they grow. Each phase is characterized by:
1. Period of Evolution – brings steady growth and stability
2. Period of Revolution – substantial organizational turmoil & eventually, change

Five Key Dimensions Which Shape an Organization
1. Age of the Organization
- management problems are rooted in time
- the same organizational practices are not maintained throughout the org’s life
- org. procedures tend to become too rigid & outdated with time
2. Size of the Organization
- problems change as organization grows e.g. problems of coordination, communication, increasing hierarchy levels, new jobs created
3. Stages of Evolution
- also called prolonged growth period
- typically 4-8 yrs of growth w/o economic setbacks or internal disruption
4. Stages of Revolution
- serious upheaval of management practices – new ones are needed to foster next period of growth
- note that a major solution in one period will eventually cause problems for the next period
5. Growth Rate of the Industry
- evolutionary periods tend to be shorter in fast-growth industries & longer in mature or slow-growth industries
- evolution may be prolonged & revolutions delayed when profits come easily

Phases of Growth
• Each evolutionary period is characterized by the dominant management strategy and each revolutionary period is characterized by the dominant management problem
• Each phase is a result of the previous one and a cause for the next
1. Creativity Phase
- new orgs tend to have an emphasis on creating a product and market; founders are usually technical or entrepreneurial in nature
- characterized by frequent & informal communication, long work hours, modest salaries, management acts as customers react
- but larger production eventually requires increased manufacturing efficiencies, more employees require formal communication, more capital will be needed, etc.
- a crisis of leadership occurs
2. Direction Phase
- characterized by a functional org structure, specialized job assignments, formal accounting systems, more formal communication & growing hierarchy
- GM & key supervisors institute direction, lower-level supervisors are treated as functional specialists rather than autonomous decision-makers
- but employees eventually resent directive techniques, they have more knowledge than supervisors
- a crisis of autonomy occurs
3. Delegation Phase
- characterized by greater responsibility for lower-level managers, bonuses to motivate employees, infrequent communication from top mgt, etc
- larger markets are penetrated & new products developed
- eventually top management will lose control over a too-decentralized organization
- a crisis of control occurs
4. Coordination Phase
- characterized by formal systems to coordinate groups, established planning procedures, each product grp. is treated as an investment center, stock options and profit sharing, etc
- the company’s limited resources are more efficiently allocated; local managers learn to look at bigger picture & justify actions to HQ
- eventually the numerous systems lead to resentment & procedures take precedence over problem-solving
- a red-tape crisis occurs
5. Collaboration Phase
- characterized by self-discipline, problem-solving through cross-functional teams, simplified control systems, increased experimentation team performance-based awards
- most U.S. orgs are at this phase, and the author can only speculate on what comes next
- a crisis may arise out of employees who are physically and emotionally exhausted from team pressures & constant innovation
- may be solved through programs that allow employees to periodically rest, reflect and revitalize themselves
- some examples currently in practice: sabbaticals for employees. 4-day workweeks, interchangeable jobs & cross-training, etc.

Guidelines for Managers of Growing Organizations
1. Know where you are in the developmental sequence – know when time for change has come, but learn from and develop strengths from previous phases
2. Recognize the limited range of solutions – each stage can only be resolved by certain specific solutions, usually different from ones used before
3. Realize that solutions breed new problems – managers should look at current problems with historical understanding instead of blaming current market factors; this will also enable managers to predict problems & prepare solutions

Embraer:

Contents [hide] 1 Basic Information of Embraer: The Global Leader in Regional Jets 2 Case Summary of Embraer: The Global Leader in Regional Jets 3 Case Analysis of Embraer: The Global Leader in Regional Jets 4 External Link of Embraer: The Global Leader in Regional Jets 5 Relevent File Cabinet of Embraer: The Global Leader in Regional Jets 6 Article Purchase Link of Embraer: The Global Leader in Regional Jets

Basic Information of Embraer: The Global Leader in Regional Jets

Author: Pankaj Ghemawat, Gustavo A. Herrero, Luiz Felipe Monteiro
Publisher: HBR
Case Number: 9-701-006
Publication Date: Jul 10, 2000
Course Category: Strategy

Case Summary of Embraer: The Global Leader in Regional Jets

2006 snapshot (not in the case):
- Embraer is the 4th largest commercial aircraft manufacturer in the world behind Boeing, Airbus and Bombardier, with revenues US 3.8 billion in 2006.
- Revenues streams in 2006: 72% commercial aircraft, 15% business jets, 7% services (training, material management, spare parts, repair and overhaul) and 6 % defense products.
- Embraer has opened a US$50-million plant in Harbin in 2004, the capital of Northeast China's Heilongjiang Province and has recently announced an important sale of 100 aircrafts to a Chinese operator for its 100 seat platform (Embraer 190). For several analysts this sale is considered strategically important.
- In 2006 Embraer had a workforce of almost 20,000employees and had announced that will be hiring 4,000 employees in 2007 to support the production of its new business jet products.

Embraer’s History
Embraer was created in 1969 as a state owned company in Sao Jose dos Campos (55 miles from Sao Paulo – largest city of Brazil). At the time aeronautics was a priority for the country given its limited transportation infrastructure.
The creation of supporting institutes and education centers was fundamental to the establishment of an aeronautical company in Brazil.
- ITA – Aeronautical Technology Institute – a renowned aeronautical engineering school (initially run by MIT professors brought by the Brazilian Government).
- CTA – Aeronautical Technical Center
- IPD – Research and development Institute
In addition, as a state owned company Embraer has received from the government some special benefits such as:
- Tax incentives - For several years Embraer did not pay taxes and duties on imported material and other corporations had an incentive to invest in Embraer (tax deductible).
- Government agencies would only buy aircrafts and services from Embraer – this made Embraer an “excellent” partner for any company aspiring to sell aeronautical products or services in the Brazilian market (Aeromachi from Italy was one the first companies to partner with Embraer – Xavante project).

Product Evolution
- 1973 - Bandeirante (turboprop) was the 1st important product to launch Embraer’s name internationally – 500 units sold.
- 1985 – Launched the Brasilia (pressurized turboprop) which was considered a success despite some arguments regarding the profit margins of the product – 350 units sold.
- 1985- 1990 – Embraer developed the CBA 123, an advanced turboprop that was considered far too pricey.
- The CBA 123 was never commercialized. The failure of the CBA 123 combined with a global recession and Brazil’s serious macroeconomic problems (37,000% inflation) led to a significant reduction in the company workforce (from 13000 to 6000).
- 1994 – The company was privatized, bought by a financial services group (Bozano Simonsen) and 2 of Brazil’s major institution investors (pension funds).

Turnaround
- New CEO – Mauricio Botelho
- Cut workforce by 1,800, targeting employees with higher salaries. In 1997 Embraer had 3,200 employees and an average salary of US$ 500, compared to U$ 2,100 before the privatization. From there Embraer began to hire again, emphasizing young workers.
- Institutionalized an incentive system where it distributed the equivalent of 25% paid in dividends equally among its employees.
- Stimulate outsourcing – several employees that used to work for Embraer were hired as a third party contractor.

Eli Lilly and Co.

Contents [hide] 1 Basic Information of Eli Lilly and Co.: The Flexible Facility Decision--1993 2 Case Summary of Eli Lilly and Co.: The Flexible Facility Decision--1993 3 Case Analysis of Eli Lilly and Co.: The Flexible Facility Decision--1993 4 External Link of Eli Lilly and Co.: The Flexible Facility Decision--1993 5 Relevent File Cabinet of Eli Lilly and Co.: The Flexible Facility Decision--1993 6 Article Purchase Link of Eli Lilly and Co.: The Flexible Facility Decision--1993

Basic Information of Eli Lilly and Co.: The Flexible Facility Decision--1993

Author: Gary P. Pisano, Sharon Rossi
Publisher: HBR
Case Number: 9-694-074
Publication Date: Mar 22, 1994
Revision Date: Apr 21, 1994
Course Category: Operation

Case Summary of Eli Lilly and Co.: The Flexible Facility Decision--1993

Set in 1993, the case focuses on a difficult decision faced by Steve Mueller, manager of strategic facilities and planning at Eli Lilly, about the type of manufacturing facility to construct for the three new pharmaceutical products that the company plans to launch in 1996. A number of growing industry and company specific conditions have made this decision particularly relevant and have sparked debate with management and throughout the company. In response to these conditions, Lilly management decided to establish a set of company-wide goals that focused on improving time to market for its products in development and a reduction of manufacturing costs. Specifically, these goals were:
1. Reduced new product time to market by 50% from the current 8 -12 year process
2. Reduce the cost of manufacturing by (25%)
The key to achieving these goals was Mueller’s decision of what kind of manufacturing facilities should be used to produce the new products. This equated to a debate between a strategy of “specialized” manufacturing plant which had worked well for Lilly in the past, and a proposed strategy of building “flexible” manufacturing facilities that could accommodate almost any of the company’s new products. It was required that whichever facilities strategy chosen must align with the two company goals listed above.

Efficient Markets, Deficient Governance

Contents [hide] 1 Basic Information of Efficient Markets, Deficient Governance 2 Case Summary of Efficient Markets, Deficient Governance 3 Case Analysis of Efficient Markets, Deficient Governance 4 External Link of Efficient Markets, Deficient Governance 5 Relevent File Cabinet of Efficient Markets, Deficient Governance 6 Article Purchase Link of Efficient Markets, Deficient Governance

Basic Information of Efficient Markets, Deficient Governance

Author: Amar V. Bhide
Publisher: HBR
Case Number: 94602
Publication Date: Nov 1, 1994
Course Category: Management

Case Summary of Efficient Markets, Deficient Governance

U.S. stock markets—widely respected as broadest, most active, and fairest anywhere
Yet, system nurtures market liquidity at expense of good governance. Rules that protect integrity of markets also foster antagonism between shareholders and managers.
Extensive Web of Regulation
--passed Securities Act of 1933 and Securities Exchange Act and created the SEC in 1934
Protected investors before they incurred losses:
    A. Required issuers of securities to provide information about directors, officers, underwriters and large shareholders
    --penalties for false/misleading statements
---ð> to help investors make informed trading decisions
    B. Required every officer, director and 10% equity owner to report securities they owned
    --insiders had to turn over any short-term trading profits to company
---ð> to discourage insider trading
    C. Eliminated manipulation and sudden and unreasonable fluctuations of prices
    --no manipulation of prices or making of false statements
    --deregulating stock commissions (so brokerage fees fell quickly)
    --regulated financial institutions that managed funds
---ð> to protect investors

The Basis of Market Liquidity
--SEC reassures speculators by certifying the integrity of market exchanges
=> The more investors diversity => the more fragmented the stockholding of co. => promotes liquidity by increasing odds of a trade
--US has more regulations than our European counterparts

The Catch
--not only sustains market liquidity, BUT also drives wedge between shareholders and managers
--special restrictions on investors who hold more than 10% of stock, serve on board, or receive any insider info
--so institutional investors receive to receive any private info from managers
--market liquidity weakens incentives to be an insider
--free rider problem—oversight and counsel of 1 shareholder benefits everyone else
--allows investors to sell out quickly at less than a nickel in commissions
=> results in outsiders holding most of US stocks
--even today, investors act more like German and Japanese stockholders
--Berkshire Hathaway’s Warren Buffett—serves on boards of 9 companies that he
Invests in and will intervene to protect investments

The Effect of Governance
A. Basic nature of executive work calls for an intimate relationship between managers and stockholders
B. Managers have broad responsibility to act in best interests of stockholders
C. Shareholders must maintain candid, ongoing dialogue with managers (but impossible)
D. Managers cannot debate critical issues in public and insider trading prohibits private discussions
E. Managers have trouble advancing interests of the anonymous shareholder
 public equity markets are an unreliable source of capitalà managers and shareholders must regard each other with suspicion è
--companies issue equity to reduce their leverage in anticipation of increased risk
--during “windows of opportunity”, investors are able to trade “hot” stocks
 workings of a stock market that facilitates capital flows actually immobilizes capital within companiesà

The Limitations of External Discipline
--Raiders serve as a check only against incompetence and abuse
--outside shareholders and analysts cannot easily distinguish between CEO’s ability and luck
Reduced oversight by stockholders => better analysts reports and greater support for hostile takeovers

The Moral Consequences
--Fiduciaries have broad obligation to put clients’ interests ahead of their own
--There will always be rationalization of conflicts between moral values and shareholder wealth

The Case for Reform
BIG PROBLEM: ignorance of connections between investor protection, market liquidity and governance

Good governance requires real policy trade-offs.
--cannot just change the rules
--if inside stockholders could block acquisitions, many deals would disappear
More trust => opportunities for greater fraud

Better governance could unlock enormous value by reducing the invisible inefficiencies that external markets can’t detect.
--current system robs managers of the respect and approval of their shareholders