Cases and incidents PDF

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Tutti i casi discussi in classe durante le lezioni di business history...

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CASES

WILIAM CODY Before the opening of the Transcontinental Telegraph, became a rider for the Pony Express. In 1867, Cody hunted buffaloes for the Kansas Pacific Railroad work crews, earning his nickname “Buffalo Bill” and his reputation as a “sniper”. May 19, 1883 was the beginning of William Cody’s Wild West Show, a new, unique show, which aimed to make spectators actually experience the adventures of the Western frontier through its smells, its sounds and some typical event. How do you explain such an outstanding entrepreneurial success?     

The careful management of the show’s logistic and organizational structure. It was satisfying a need that people had without being aware, the desire of evasion. It was the only possible entertainment show at that time, therefore the public had no choice. All these people (redskins, cowboys, bounty killers, buffaloes) had lost their job and were eager to be re-employed for cheap salaries, therefore Cody could make a great profit out of it. All this has to be connected to the rising economic and political power of the US and therefore to its cultural influence over the world.

ANDREA BARABRIGO Andrea Barbarigo was one of the most dynamic members of the small and clubby Venetian merchant Élite. Venice’s merchants were thus at the top of the economic, social and political hierarchy of the Republic. And this was fully aware that its power and the lay in a flourishing trade, especially on long distances. Most of Barbarigo’s profits came from trading English cloth, which was his core business. Babarigo’s portfolio of products, however, was broader: in the Levant, he bought raw cotton, cotton thread, and pepper, which he sold on italic and European markets; Has we have seen, Venetian merchants had to build efficient commercial networks. In order to do that, Andrea Barbarigo turned to his acquaintances, friends and relatives. But friendship or kinship were not always enough, and very often a legal arrangement was needed: the consortium. Barbarigo helped the agent to arrange the travel and provided him with a cipher to decrypt the letters that Barbarigo would send him. Yet, unlike Barbarigo, many other Venetian nobles were involved in both business and political activities: as a matter of fact, in Venice this was the norm. St. Mark’s Lion could appear in its usual shape, with the opened Gospel – the Word, and also the Order. ... AND THE SWORD But in other cases something different was needed. When trade was done beyond direct State control, the flag of which was showing a Lion in a very different shape, with the Book closed and a dazzling sword. The Senate not only decided the destination of the travel, but also set a conventional freight price, trying to give every merchant the chance to join the protected convoy.

If the risk is high normally the reward is high. The reason is that Andrea Barbarigo (studied by frederich leyn) is a good example to understand: 1) Acting in an environment that is extremely uncertain 2) Risk was scattered in Asia, Africa ...Ð 3) In uncertain environment you have to shape your business according to the environment (adapting to environment) 4) Political economy of uncertainty. Where risk is high very often entrepreneurs get the support from governments and institutions. at the end he was succesfull (even in the political life). Factor of success 1) 2) 3) 4) 5)

diversification (products, The higher the risk => need for Diversification the network (he used relatives or friends as agents) managing efficiently the time management of information (coding and letters). Different sources of products and prices (informational asimmetry)

Andrea barbarigo was looking for social consensus (not the greed). In Venice you needed to be very rich to have political influence. The doge was the richest. Coming from a family of merchants. He had to rebuild the reputation of the family (the father had a very big debt to repay). he was pretty young when he started his business. for barbarigo sources of uncertainty:     

goods (availability, prices, delivery, quality)- standards weather (objective risk) Pirates (risk) trust of agents time of cash flows (timing uncertainty)

JOSIAH WEDGWOOD Josiah spent his time reading and researching about the craft of pottery. In 1742 Josiah left the family business and joined Harrison & Alders, a minor pottery in Stoke. In 1754, aged only twenty-four, he started a partnership with Thomas Whieldon, eleven years his senior. Wedgwood and Whieldon are credited with several innovations, including "the division of labour, with men employed on different tasks - throwing, turning, handling, decorating, mixing slip."

In 1759 Wedgwood left Whieldon to become an independent potter, Ivy House was the first pottery factory in England. Wedgwood employed fifteen men and boys. He taught his men the techniques developed while he worked He also arranged for his pots to be decorated by the new transfer printing. During this period Josiah Wedgwood became friends with the industrialist Matthew Boulton and was impressed as he only had a turnover of around £5,000. The following year Boulton formed a partnership with Wedgwood. It was agreed that Wedgwood would supply plain ornamental vases which Boulton would finish by applying colourful gold and purple metal works (ormolu) to vases.

At one of these meetings Wedgwood met the engineer James Brindley This provided Manchester manufacturers with an alternative way of transporting their goods to the port of Liverpool. As this reduced the costs of transporting goods Wedgwood now employed artists such as John Flaxman to design his vases. Wedgwood had a bell he rang it to tell his employees it was time to start work. Wedgwood believed it important to regulate working hours and to stop his workers from spending too much time in the alehouse. Although he insisted on strict factory discipline he also "subsidized an early form of sick-benefit scheme, and conditions for work at Etruria compared favourably with those to be found anywhere in Europe". He is a former artisan. Attended scientific meetings with engineers

GUSTAV SWIFT Significant urban expansion accompanied industrial growth: in this period urbanization grew as never before. Between 1870 and 1900 railway mileage in the United States increased from 53,000 miles to 190,000. During the same years the railroads improved in speed, comfort and safety. Another factor that increased the industrialization of the United States, was the growth of technology. Increasingly, the discoveries and principles of science were exploited to produce either industrial goods or consumer goods. In the last half of the 19th century a number of American industrialists developed food production into an industry. Until the development of the food industry, most food production and processing took place at home and in small shops. The availability of fresh food (vegetables, meat, fish, and the like) started to be a growing issue (and an entrepreneurial opportunity). For instance, the consumption of red meat peaked between the end of the Civil War and 1890, when the diet of average household was heavily meat-based (up to three times a day, in some cases). In What were the steps to sell meat in the East Cost? 1. Cattle were raised in the western prairies 2. Livestock was loaded into railcars and brought to Chicago, a major railway hub in the Midwest 3. From Chicago cattle was shipped alive to East Coast consumption markets Gustavus Swift joined his older brother, Noble, in the butcher's shop he ran but was unhappy with the lack of prospects for advancement. Around 1859 he opened his own butcher shop and then opened a series of shops. He recognized certain principles of retail psychology that helped make his stores a success. His butcher shops were clean, and he tried to display his wares attractively on large white marble trays. He displayed the cuts he needed to sell first and offered smaller cuts, which seemed to induce shoppers to buy more. Swift expanded his operations rapidly. Chicago was the center of the cattle trade in the United States. It was a railroad hub serving all regions of the country and was close to the Great Plains. As the cattle buyer in his partnership, Swift came to realize that shipping live cattle from Chicago to the country’s most populous markets along the Atlantic seaboard was an inefficient strategy. The cattle had to

be fed along the way, some died in transit, and—since the railroads charged per pound—huge freight charges added tremendously to the cost of doing business. Swift believed that butchering cattle and shipping dressed beef was a far more profitable idea. Still, railroad-car refrigeration technology was inadequate for the rest of year, and even in the winter months proved problematic: a shipment might freeze in one city, then thaw in another. Swift used some of that money to hire an engineer to perfect a refrigeration car that used circulating fresh air cooled by ice and established his meatpacking business in Chicago. He contracted ice harvesters in Wisconsin to produce enough ice for the cars and established icing stations along the railroad routes heading east. Local butchers warned of dire consequences. The railroads also opposed Swift, for they preferred the larger freight revenues from shipping live cattle. Forming a cartel against Swift, they began charging exorbitantly high prices for dressed meat. Swift was ingenious in conquering these obstacles. He mounted large-scale advertising campaigns to win public confidence and made advantageous partnerships with local butchers. For transport, he negotiated with the Grand Trunk Swift was also an innovator in automating his plant. Swift’s was one of first companies in modern business history to boast complete “vertical integration”: it had departments for purchasing, production, shipping, sales, and marketing. KSFs: 1) 2) 3) 4)

Technology change Capital issuing Transportation Organizational structure and vertical integration

NITROGEN CARTEL

In Europe and the European-dominated parts of the world, cartels were generally accepted and cartelisation was viewed as a positive force. The nitrogen cartels were among the most influential cartels. Furthermore, given that nitrogen was the basic raw material for the production of fertilisers and explosives, it was regarded as being of strategic importance by national governments. Until 1900, two-thirds of world production of chemical nitrogen came from natural deposits of nitrates, principally those of sodium nitrate in Chile. The process for producing synthetic ammonia by the combination of nitrogen and hydrogen in the presence of a catalyst. During the 1920s, many firms were drawn to the nitrogen industry by the expectations of high profits. In addition, for security reasons, a number of countries were concerned about their dependence on foreign supplies of nitrogen and wanted to produce the basic material for their industries. The creation of new synthetic nitrogen factories threatened the strong position of the major producers, which were Chile (for natural nitrogen), Germany, the UK and Norway

International conference was held in Biarritz (France) at the end of April 1926. The representatives of about ten countries discussed both the current situation and the development of the nitrogen world market. On 26 June 1929, the first international nitrogen cartel was announced, consisting of three separate agreements between the German Nitrogen Syndicate, the British firm Imperial Chemical Industries and Chilean natural nitrate producers. The duration of the pact was initially for one year, and it was renewed and enlarged for another year in August 1930. The agreements provided for cooperation regarding advertising, for price uniformity and for some allocation of production and export quotas. Each country remained in control of its domestic market. Production restrictions were not uniform, but varied according to the country The advantages of the cartel: 1) the guarantee of stable prices, 2) the avoidance of a price war between the European producers 3) the hope that the cartel would discourage a further expansion of production capacity. For the UK, the only advantage was in the area of the prices. On 15 August 1930, that the International Gesellschaft der Stickstoffindustrie A.G. had been set up in Basel. Its shares were owned by members of the cartel. This organisation had to safeguard profitable and stable prices. It also served as a compensation fund to make up for losses due to production restrictions, to fight outsiders and to pay for the cartel’s organisation costs. The government proved to be cooperative, but it was already laid down in trade treaties with Belgium and France that no customs duties were to be imposed on imports of nitrogen. Co-operation that existed at various levels:   

between the firms which were member of the syndicates in Germany, France and Belgium, between the syndicates and their respective governments, and in the diplomacy of the states involved.

In 1934, the cartel was renewed, introducing for the first time a penalty clause for member countries exceeding their export quotas. Needs to have a national champion (for strategic purpose)

HENRY NESTLE’ It’s about the transport revolution Industrial revolution: a process begun in the 18 th century which led to the change f rom an agrarian, handicraft economy to one dominated by industry and machine manufacture (also social economic aspects).    

New materials (iron), new sources (electricity and coal) new organization (factory system) new transportation (train and steam locomotive)

In Us and Germany there was a strong emphasis on science (steel replaced iron). Middle class society emerged.

Similarities with First Industrial Revolution: 1. 2. 3. 4.

Turning point in Human History Increasing in the industrial production Urbanization Replacement of hand work by machines

Belgium and France followed the example of England (first country to have a railroad). The number of large cities doubled between 1700 and 1800. Cities all around the world started to be polluted. Mortality rate exceeded natality rate.

Henry Nestlè was born in Germany (Frankfurt) in 1814. He belonged to a liberal middle-class family (glass merchants). Then he left, going to Switzerland. He worked as a pharmacy assistant nd then bought a property with an attached oil mil, press and small sawmill. Nestlè produced a lot of products (liqueurs, rum, fertilizers, lemonade, mustard powder).

The correlation between illness a nutrition was becoming important. Nestlé exploited this idea to produce infant milk. (he was authorized to sell medicines and prescribe). The invention of Nestlè is not a new discovery but just a rational application of substances. Liebig: modern experimental research methods. There were actually other similar products on the market but he managed to combine all the various ingredients known at the time into one easily usable product, a powder made by Swiss cow’s milk, sugar, flour and potassium. LOGO: bird’s nest (family reminder). In the rising chemical industry, Germany and Switzerland were the leaders. Evolution of swiss railways and major peaks of alps were conquered. The tourism started to become popular and a specific business (Thomas Cook organized trips to Switzerland and partnership with hotels). Also SPA became popular. Production System:

Procurement and production had to be parallel and synchronized. (high quality was essential). He started building up relationships with local farmers. Then He decided to establish farms, which served his factory directly, in order to avoid any shortage. They were marketing the idea of uncontaminated nature place. In 1875 Nestlè sold the firm to three entrepreneurs. They gave it a financial structure and expanded globally

Discussion: The HQ is in Switzerland. To maintain the historical roots. And to reflect the idea of the country (precision, richness, high Human Capital). Henry Nestlè funded the company in 1868 and sold the company in 1875 to three entrepreneurs. (7 years of story). The success is achieved in a very short time. 1) WHO: Not properly a scientist (he didn’t attend the University) he was more a practitioner. He was continuously doing different products (lemonade, minerals, powder of bones). Restless entrepreneur (trial and error). Respectful to Scientific community. He wanted to be Independent 2) PRODUCT: Milk powder + flour + sugar + potassium. For children that cannot be fed by breast milk. It was not really an innovation but rather a combination of ingredients that already existed. There were many competitors doing the same business. 3) MARKETS: there was a change in the perception of children nutrition. Middle class was becoming more important. (GDP per capita was increasing). Decline in birth rates cause the increase in the life expectancy. Nestlè was selling Germany and France (mostly in urban centres, Frankfurt). Nestlè spoke German, that’s why he was selling in Germany. He is physical located along the Geneva lake. Strong railroad connections. Doctors and hospitals were the channels through which he sold his products (other meaning if you sell through medical channels => it’s a medicine, not a cosmetic) The tourism helped to know Switzerland and its healthy perspective. 4) BRAND: Nest (family and parenting, natural products). The tree is an oak. 5) STRATEGIC CHIOICES:

SLOAN Sloan was adapting something that inveneted Dupont He was one of the most influential executives in America. He worked for General Motors over decades. Attended MIT obtaining a degree in electrical engineering. The father was producing billiard balls. Sloan started working for Hyatt as a draftsman. He met once Durant, an entrepreneur that in 1908 put all these products (automotive components) under a single corporate umbrella, named General Motors, an holding in which portfolio there were brands as Buick, Oldsmobile, Oakland (later Pontiac), Cadillac and other companies involved in the production of parts. Durant saw Sloan at Hyatt and offered him a job within United motors (a component manufacturer) S. was appointed president of United Motors. In 1918 United was absorbed by GM and S. became a director and member of GM’s executive committee. In the early 1920s Durant lost his presidency to Pierre du Pont.

By 1923, S. became president of GM when Pierre DuPont, a major shareholder, retired after three years on the job and became board chair. Although the financial crisis in 1929, Sloan achieved to pay large dividends to shareholders; he remained chairman of the board of directors until 1956, when he officially retired. Sloan was responsible for giving GM, its operations, and its innovative management style, his own personal stamp—one that endured decades beyond his retirement. During his first years as president in the 1920s, GM doubled its manufacturing output and broke sales records. It also absorbed much of its competition, and some of the smaller carmakers either folded or were folded into General Motors during this time. The way in which S. structured GM revealed him as one of the first theorists of management as a discipline in modern American business. S. was responsible for structuring GM into five separate divisions, each producing and marketing cars aimed at a particular segment of the market, from affordable Chevrolets to elegant Cadillacs. In this way the divisions were able to share development and engineering costs. Sloan introduced a segmentation in the market. Such a strategy was later adopted by the Japanese automakers. decentralized management structure with centralized financial operations at GM. Business divisions for each type of car

IRI

The origins of IRI: between emergency and strategy European countries started to be active in the entrepreneurship IRI came out of a devastating crisis, the one that started on Wall Street in October 1929 and hit Italy, a semi-peripheral country, in the second ...