First Look

First Look summarizes new working papers, case studies, and publications produced by Harvard Business School faculty. Readers receive early knowledge of cutting-edge ideas before they enter the mainstream of business practice. For complete details on faculty research, see our Working Papers section.

July 25, 2006

Supply chain management continues to be a hot-button topic in business, and why not? Botching relations with vendors and suppliers can quickly undo years' worth of planning and strategizing. In a new working paper, Rogelio Oliva and Harvard Business School's Noel Watson provide a case study of how Leitax rebuilt its internal supply chain process, creating a productive and collaborative engagement between sales and operations planning. Other working papers this week examine a case of leadership in South Africa and the experience of Unilever in sustaining large businesses in India and Turkey "even in the postwar era of hostility to foreign multinationals."

A new case study available for purchase from Harvard Business School Publishing looks at how threat-related national intelligence was handled by various U.S. agencies prior to September 11, 2001, exploring how complex organizations can become vulnerable to threats that cut across jurisdictional boundaries. Another case explores the explosive growth of media businesses around NASCAR.

 

Working Papers

A Gentler Capitalism: Black Business Leadership in the New South Africa

Author's Abstract

Through her efforts to recruit, hire, and develop minority executives at MTN, a South African telecommunications company, [Irene] Charnley attempts to bring a gentler capitalism to post-apartheid South Africa. Like her other colleagues on the Black Economic Empowerment (BEE) Commission, Charnley believed that each black business executive had a responsibility to effect positive change in their particular company, and that through their collective efforts they could have a powerful collective impact on the country. By the time of the BEE Commission Charnley found herself at the top of the pyramid, but she had come from the bottom, growing up in Elsies River—an Afrikaans-speaking, Colored area outside of Cape Town. This paper begins with a description of the economic conditions in apartheid and post-apartheid South Africa, then details the BEE Commission, and finally narrates Charnley's story.

Download working paper: http://www.hbs.edu/research/pdf/06-057.pdf

Managing Governments: Unilever in India and Turkey, 1950-1980

Author's Abstract

A noteworthy characteristic of the contemporary global economy is the uneven distribution of world foreign direct investment (FDI). While in the first global economy before 1929 most FDI was located in developing countries, currently three-quarters of world FDI is located in developed countries. Large emerging economies with little inward FDI include India and Turkey, despite the relaxation over the last two decades of the restrictions imposed on foreign firms between 1950 and 1980. This working paper explores why Unilever, the Anglo-Dutch consumer products company, was able to sustain large businesses in those countries even in the postwar era of hostility to foreign multinationals. It argues that the explanation is multi-causal. Unilever held first-mover advantages in both countries, but it was also prepared to accept low dividend remittances for years. It pursued flexible business strategies beyond its "core" business, even distributing condoms. It maintained a high standard of corporate ethics. It was effective at building contacts with local business and government elites, primarily through localization of management. In short, it took an extraordinary effort by a very large and experienced global corporation to survive the "era of confrontation" which deterred most other foreign firms, and which has left behind a legacy of distrust which helps to explain the continuing low levels of FDI in India and Turkey.

Download working paper: http://www.hbs.edu/research/pdf/06-061.pdf

Cross Functional Alignment in Supply Chain Planning: A Case Study of Sales & Operations Planning

Author's Abstract

In 2002, Leitax, a niche consumer electronics company, suffered serious supply chain planning mishaps due to poor cross-functional integration in the supply/demand planning activities. The poor integration resulted from organization differentiation among the functions and an unsophisticated approach to integration. In response to the planning mishaps, the organization introduced significant changes, which we examine in this case study. After highlighting the constituent responsibilities, structures, and processes, we recognize a system, as opposed to a list of mechanisms, as responsible for cross-functional integration. Operationalizing integration as functional alignment with generated plans, we find collaborative engagement of the functions to be a consistent process feature and operational norm encouraged and maintained by integrators. In particular, the information processing nature of the sales and operations planning (S&OP) process introduced at Leitax is argued effective as a result of this collaborative engagement. We argue that this collaborative engagement positively influences alignment even in the absence of an overall reduction in the level of differentiation exhibited by an organization, which stands in contrast to academic structural recommendations for changes in incentives for achieving integration. Examining a systemic tradeoff consciously acknowledged by the organization, we further argue that alignment encouraged by this collaborative engagement can be more important than achieving superior performance along such dimensions as speed or accuracy in individual information processing steps of the S&OP process, a tradeoff which to our knowledge has not been highlighted in the supply chain management literature.

Download working paper: http://www.hbs.edu/research/pdf/07-001.pdf

Optimal Value and Growth Tilts in Long-Horizon Portfolios

Author's Abstract

We develop an analytical solution to the dynamic portfolio choice problem of an investor with power utility defined over wealth at a finite horizon who faces an investment opportunity set with time-varying risk premia, real interest rates and inflation. The variation in investment opportunities is captured by a flexible vector autoregressive parameterization, which readily accommodates a large number of assets and state variables. We find that the optimal dynamic portfolio strategy is an affine function of the vector of state variables describing investment opportunities, with coefficients that are a function of the investment horizon. We apply our method to the optimal portfolio choice problem of an investor who can choose between value and growth stock portfolios, and among these equity portfolios plus bills and bonds. For equity-only investors, the optimal mean allocation of short-horizon investors is heavily tilted away from growth stocks regardless of their risk aversion. However, the mean allocation to growth stocks increases dramatically with the investment horizon, implying that growth is less risky than value at long horizons for equity-only investors. Long-horizon aggressive investors who have access to bills and bonds increase their allocation to both value stocks and growth stocks at long horizons, but they do not actively tilt their portfolios toward growth stocks. These investors increase their allocation to growth stocks as a result of their desire to optimally increase their overall allocation to equities. We also explore the welfare implications of adopting the optimal dynamic rebalancing strategy vis--vis other policies that revise portfolio weights infrequently, and find significant welfare gains from continuous rebalancing for all long-horizon investors.

Download working paper: http://www.hbs.edu/research/pdf/06-012.pdf

 

Cases & Course Materials

Livedoor

Harvard Business School Case 206-138

The president of Fuji Television must decide how to respond to a competing bid for the shares of Nippon Broadcasting Systems (NBS). Livedoor, the other bidder, is a highly valued Internet company that has been accused of financial wizardry to keep its stock price high.

Purchase this case:
http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=206138

Managing National Intelligence (A): Before 9/11

Harvard Business School Case 706-463

Examines the management of threat-related national intelligence prior to the terrorist attacks of September 11, 2001. Describes the actions taken by the FBI, the CIA, the FAA, the Department of Defense, and other government entities to detect and deter such attacks. Explores why complex organizations with multiple missions develop seams and become vulnerable to threats that cut across those seams. Fuels a discussion of whether and how the U.S. government can be managed so that the parts of the government work together better and tragic events like the 9/11 attacks become less likely.

Purchase this case:
http://harvardbusinessonline.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=706463

Promise (B): Navigating an Entrepreneurial Consumer Finance Company in Japan's Financial Establishment

Harvard Business School Supplement 806-139

Supplements the "Promise: Building a Consumer Finance Company in Japan" case.

Purchase this supplement:
http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=806139

The Speedway that Won't Slow Down

Harvard Business School Case 806-124

Dick Berggren, well-known FOXTV announcer for NASCAR races and executive editor of Speedway Illustrated magazine, considers how to grow the business he founded and balance his time, energy, and commitments to his wife. Explores the explosive growth of media businesses around NASCAR, which in 2005 surpassed the NFL in viewership, and Berggren's options in developing a plan to exploit new opportunities for his organization. Challenges students to develop a business plan in an industry where new technology and new demographics are changing the landscape daily, but also to consider how personal life goals impact the ability to make a choice for lasting success.

Purchase this case:
http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=806124

Understanding Corporate-Value-at-Risk Through a Comprehensive and Simple Example

Harvard Business School Note 206-046

Using a comprehensive and simple example of a firm exposed to foreign exchange risk, interest rate risk, and commodity price risk, shows how to use corporate-value-at-risk to measure and manage a firm's global exposure to risk.

Purchase this note:
http://harvardbusinessonline.hbsp.harvard.edu/b02/en/common/item_detail.jhtml?id=206046

 

Publications

Lasting Success for the Christian in Business

A Decision Perspective on Organizations: Social Cognition, Behavioral Decision Theory and the Psychological Links to Micro and Macro Organizational Behaviour

Abstract

The purpose of this chapter is to provide the background for readers to appreciate psychological research that has provided the base for the cognitive revolution in OB, to see its advantages, and to motivate future research. While the term cognition has been used in a variety of ways in the organizational field, we will limit our attention to theories, models, and studies of cognition that have their root in the psychology of how people make decisions. The areas of social cognition and behavioural decision theory will provide the over-arching theoretical structures. This chapter is a revision of the chapter that appeared in the first edition of the Handbook of Organizational Studies (1996). While we have updated many parts of this chapter as well as added new sections, the structure of the chapter remains largely consistent with the earlier version. Because of space limitations, we will refer the reader, at times, to the original chapter for more extensive discussion of certain topics.