MBA case study analysis of top global companies

Author: Iloka Benneth Chiemelie

Published: 18th of February 2015

AIG CASE

Case summary

The main purpose of the case is to illustrate the factors that resulted in the failure of the American International Group (AIG), and insurance company that presently represent the pinnacle of failure in the history of America from a corporate view, and their failure has been largely attributed to the company’s lack of proper corporate governance measures. Even when it was on the verge of failure, the company still decided to use the money that where acquired from the US government through bailout to pay its employees for their poor performance, which lead to numerous argument and criticism being raised against them.

The Pele factors in AIG

Political factors – following the filing for bankruptcy by the Lehman brothers, the US government under the administration of the then president, George Bush decided on the decision to rescue the AIG group by bailing them out with the sum of $85 billion, which later grew up to $182 billion and represents the hallmark of government bailout for corporations in the US history. At this point, the AIG group were well positioned to rescue themselves from doom, but their made the wrong decision in the management of the fund.

Economic factors– the wrong decision made by the company in the management of the fund was that while the company was suffering from its whopping $61.7 billion losses, it still reverted to the decision of having to pay out $62 billion of the bailout money even when they should have paid substantially lower than that. This raised their economic woes higher and as such put the company into higher risk for failure.

Legal factors – following their lackluster decision, the Dodd-Frank Wall Street Consumer Protection Act was enacted by the US government in 2010 to protect consumers from such act in the future and limits the potential of companies under the brink of bankruptcy using the remaining funds of bailout funds to finance their employees’ salary instead of focusing on the payment of dues that they owe the employee. The act is based on the understanding that what AIG did is internally initiated for their own selfish interest while the interests of the consumers are being put at risk

Environmental factors – as of the time of the issue, the business environment was not stable with numerous companies on the brink of bankruptcy as a result of the economic recession that the world was facing as of that time. This meant that all eyes were on the AIG, monitoring their corporate governance decisions and critiquing those areas that they were found wanting.

Industry analysis

Issues

2008 financial crisis is the main issue that yielded the company’s collapse from glory and this was supported by improper accounting measured which exposed the company to more risks. Additionally, crash of interest was prevail ant amongst of stakeholder, which means that most of the bailout money was used for personal purpose and the company exposed to more risk.

Interest

The company is risk adverse and covers all the associated risks in the business from their customers for the interest of their own gain. There is a no clear definition of risk in the company and the directors are focused on their own personal gain, which makes it very difficult for analyzing associated business risk.

Institution

The shareholders are the primary focus and they institute the business process in the company by directing what needs to be done and how it must be done, ignoring the interest of the stakeholders in most cases. The rating agencies also played a significant role to the problem by giving the company some undeserved credits.

Information

Audit reports housed the real issues facing the company and made it impossible for the customers to visualize. This is basically the case of trying to attract more customers for continued business growth while ignoring the risks these customers are exposed to.

Recommendation based on shareholder’s mapping

		Interest
		Low		High
Power	Low
				Shareholder
				family Direct
	High			government Regulators
				rating Agencies
				Goldman Sachs
				Banks

From the above mapping, it can be seen that the direct influence of shareholders, rating agencies, government agencies and banks are very high and this means that the company need a reversal of its corporate structure. This reversal will include an introduction of a new business model that based on visualization of associated business risk and limiting the potential of reoccurrence in the future.

PREMIER OIL CASE

Case summary

The case is designed to understand the factors that have influence the performance of the company over the years and it looks bot at the corporate governance issues and the business management approaches adopted in the company as well as they risky involvement with Myanmar which puts the corporate image at dent in the view of the westernized world.

The Pele factors in Premier Oil

Political factors – while there are stable political conditions in the company’s home country and other westernized world that they establish presence in, it was made known in the case that their presence in Myanmar is filled with numerous political nightmares. This is because the country is ruled by the military and doesn’t accept democratic leadership, with numerous reported cases of torture and forced labor in the country. This puts the image of the company at risk as the western world views the company as supporting such act.

Economic factors– the economic conditions in the oil and gas industry was very stable at the time of this case, but the company was plunging downwards because of the struggle for power in their system which meant that there was no concrete or uniform corporate objectives as the two major shareholders struggle to attain their own personal interest.

Legal factors – the legal setting is mixed. In terms of the host countries and parts of the world where the company maintain presence in, the legal system is very much stable. However, Myanmar represents a pariah state in which the commands of the military government are the order of the day.

Environmental factors – as Hermes noted, the struggle for power created the wrong environment for profitability as both major shareholders were not willing to commit to the order of the other, but interested only in gaining their own selfish interest.

Industry analysis

Issues

The power struggle between the two major shareholder resulted in poor corporate governance in the board and it also meant that there was no clear direction of what the company wants and how they will go about their business objectives. The case of Myanmar is also negative to the brand image in the sense that it created a sense of forced labor in the company as this is what is obtainable from the case of Myanmar.

Interest

The struggle for power meant that the shareholders were solely focused on their own interest and it meant that the minority shareholders were very much ignored in the business. Advices were not part of the board continued the drive for separate corporate images and hired NEDs that were not much what it needed to move forward. The end product is that company pushed forward for growth through any means while ignoring the impact of such forward push on their brand image.

Institution

The UK government and other trade unions disapproves with their investment in Myanmar, a country renowned for forced labor and other suppression as a result of the high military rule it has maintained for the past decade.

Information

The media was quick to react to such investment by publicizing every move made by the company and opening their investment platform for the public to see.

Recommendation

		Interest
		Low		High
Power	Low
				Shareholder
				family Direct
	High			government Regulators
				rating Agencies
				Goldman Sachs
				Banks

It is recommended that at the interest of the minority shareholders, the company should make clear their corporate objectives in Myanmar in order to ensure that whatever business undertaken in the country is in line with the company’s designed corporate objectives. Additionally, a centralized management system should be designed in order to ensure that the business objectives of the company are the building block of all activities in the company and not the interest of the majority shareholders.

ENRON CASE

Case summary

Enron has for long lived on gained reputation for being one of the most successful companies in the world through its continued commitment to establishing sustainable business process by going into partnership with numerous companies in the process – most of which were bought as subsidiary, but this partnership opened the room for risk and their subsequent business failure.

The Pele factors in Enron

Political factors – the political setting in the company was more of a dictatorship with the company not being afraid to turn around the environment and numerous employees shown their way out for merely coming late. The C.E.O, lay, played more of a role of a director instead of a manager, dictating what must be undertaken in the business process.

Economic factors– the company was well performing economically, racking in $101 billion in sales with assets worth $47.5 billion as of 2001. Their success where mainly due to the favorable market conditions and their business approach that allowed them to take advantage of the lower taxation in the countries of their subsidiary businesses.

Legal factors – on the legal grounds, there are favorable conditions in both the company and the countries they maintain presence in. This is because they have well established approach to businesses in terms of the partnership and subsidiary operations that allowed them to maintain major control in the overall business operation of all their hundreds of partnerships and subsidiaries across the world.

Environmental factors – the environment was not favorable as the numerous partnerships and subsidiaries meant that the company couldn’t handle all their businesses with the same strategy. This created a risky business environment that eventually resulted to business failure.  

Industry analysis

Issues

Too many business partnerships and subsidiaries meant that the company ran out of control of all of this business and presence in different countries increased risk as a result of reduction in the risk understanding of its business.

Interest

For the interest of increased profitability and maintenance of gained brand image, the company moved forward to hedge the business risk and establish new businesses in countries with lower tax, but this significantly increased business risk in the end run.

Institutions

External regulators and investment risk investigators pretty much understood the business risk based on their analysis of the company performance, and this exposed their business risk as well as informed potential investors of the risk of such investment.

Information

Information about their business risk where made available through different mediums in the form of press releases and government Medias.

Recommendation

		Interest
		Low		High
Power	Low
				Shareholder
				family Direct
				rating Agencies
				Goldman Sachs
			government Regulators	Banks

It is recommended in this case that the company should adopt a uniform approach to management by defining what is expected from all their partnerships and subsidiaries and determine the right management approach that will be based on openness and attention to external advices.

MCDONALD’S CASE

Case summary

The case is basically designed to understand the external forces that influences business process in McDonald’s and highlight how the company has been successful in managing these forces in order to increase their potentials for continued business growth.

The Pele factors in McDonald’s

Political factors – politically, the company has been supported by the government against the abuse of legal system by the consumers by drafting the CHEESEBURGER Bill and other bills that limits the level of law suit that can be labeled against the company and making the consumers more responsible for their eating habits.

Economic factors– McDonald’s is the largest fast food industry in the world with business operations in over 180 countries and serving 45 million consumers on a daily bases. Their economic success has widely been attributed to the number of franchise agreement the company has signed over the years. 

Legal factors – from the case, it can be seen that the company has faced numerous legal battle with most of these being made by customers for issues such as obesity which they think the company is liable for. In any case, the company has also sued a number of customers, such as Cameron for complaining that his son’s sickness is as a result of easting in McDonald’s – in order to protect their company image (which the company demanded for an apology for a baseless claim in the law suit). 

Environmental factors – there are a number of pressures facing the company in the environmental phase, and it comes in the form of fight and accusation labeled against it for causing obesity, poor animal welfare claims, vegetarianism, too much antibiotics in their foods which makes consumers less respondent to antibiotics medication, and high level of chemicals in their dishes that are prepared under high cooking pressure.

Industry analysis

Issues

There is a high increase in the level of obesity as a result of the subsequent increase in consumption of calories. This meant that some customers started attributing this to fast food chains such as McDonald’s and the company even received some law suit against them from such claims, which lead to the enactment of the cheeseburger bill to protect the company from consumers’ recklessness.

Information

The whole news was everywhere. McDonald’s is a very prominent in the media and internet as well as numerous articles where written about the company in relation to the issue. Even the film industry was not to be left out as a number of movies appeared in the form of anti-protest against the company’s activities.

Interest

The company was very much concerned about enhancing their production process in order to reduce the level of calories consumption and they also engaged in a number of CSR program to educate their customers and make them awareness of the need to protect themselves from poor consumption hobbit.

Institutions

Numerous institutions where involved in the case, and they sort for the protection of both the company and the consumers. In the case of the company, protection where sort in the form of reduced law immunity against law suits on cases whereby the consumers are viewed as being reckless of their consumption pattern, while protection came for the customers with relation to the food contents by limiting the volume of unhealthy ingredients in preparation process.

 Recommendation

		Interest
		Low		High
Power	Low	USDA		Public
				NRA
				Surgeon General
				WHO & CSPI
	High	Restaurant / F&B		Government

It is recommended that the company should continue with its push for good corporate governance and ensure that consumers’ health is always protected by reducing the level of chemicals in their foods. These factors will ensure an increase in trust, loyalty and directly influence profitability positively.

GLAXOSMITHKLINE CASE

Case summary

The basic element portrayed in the case is the underrating of the controversies that surrounded the company following the preferential pricing approach for AIDS drugs as compared between what is obtainable in the USA and the developing world.

The Pele factors in GSK

Political factors – the FDA laid down the right political setting for the company to flourish by approving the mergers and acquisitions that paved the way for the current company and approving a number of AIDS drugs manufactured by the company.

Economic factors– the demand for AIDS medications where on the rise following the successful cases recorded in numerous situations when the anti-retroviral drugs helped prolong the lives of affected patients. As such, the company has to make use of this advantage to increase their business and economic performance.

Legal factors – on the legal aspect, the company is well protected based on the open approach to investigation and research adopted in the industry as government of numerous nations and the WHO seek for the right solution to help people with the diseases.

Environmental factors – while the company did not experience much legal issues, they has numerous social issues to tackle in the form of increased pressure for NGOs and the media for them to reverse their pricing strategies and create a more favorable pricing strategy that will benefit both the poor and the rich and meet the increasing demand for reduction in AIDS related deaths across the globe.

Industry analysis

Interest

The interest is divided. For the government across the world, the interest is to have access to HIV drugs for both the rich and poor in terms of both advanced and developing nations. This meant that numerous license and approval were given to the company across nations. However, research on HIV is very expensive and it meant that the company had to focus primarily on profit later than reduction in HIV, which meant that the drugs were made available mainly for the advanced nations.

Institutions

The governments, UN, NGOs and other external bodies played significant role in the case by criticizing their actions and encouraging them to reverse their drug model in order to make the drug available to developing nations. This increased their interest in the case and GSK moved forward to increase availability of the drug in developed nations.

Information

Reports about the case where made available in the media and through numerous other platforms that increased availability and awareness of the case for the public end.

Issues

The issue in this case is the pricing differences between advanced and the developing countries which favored the advanced nations at the mercy of the developing countries and the company focused on the advanced nations as well because of the price advantage. This doesn’t create the right medium for meeting the set goals of HIV/AIDS reduction across the globe.

Recommendation

		Interest
		Low		High
Power	Low			UNAIDS
				NGO's
				WHO & WTO
				Local Manufacturer
				Indian Generic
	High	Courts		government

 The recommendation is based on the controversial pricing issue that the company faced, and it is that the company should ensure to undertake their business process in ways that are very much comfortable for both the poor and the rich as such will be a clear demonstration of their committed toward improve health standards and livelihood across the glove. The outcome of such will be an expected positive increase in their brand image and an additional increase in their business growth and profitability.