When the Hong Kong billion-dollar revitalization of a set of derelict cotton mills in Hong Kong was first conceptualized by property heiress Vanessa Cheung, the project had a clear direction around which it was to be oriented. The Mills was to be a social institution: a space in which an otherwise poor and fragmented local community could connect with both its past, as a center of textile production, and its future. Financed by Nan Fung Group, Vanessa’s multigenerational family business and one of Asia’s most valuable property development companies, the Mills was underwritten without the diligence that might proceed projects of a comparable scale. Three years from project inception but still several months away from the facilities opening to the public in late 2018, the Mills struggled to operationalize the three business models it had evolved to encompass, namely, an incubation platform including co-working space; shopping space targeting pop-up stores and smaller retailers; a heritage center to operate as a non-profit museum. Vanessa also wondered how her project will deliver on its original vision of creating shared value for its stakeholders.
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This case is intended to take students through the cycle of a direct investment, during which a number of decisions has to be made by the financial investor as the shareholder of the investee company. In a situation where the financial investor is a minority shareholder, it is of the investor’s best interest to be sensitive to the alignment of shareholders, especially with the controlling/strategic shareholder. When faced with a decision as to whether to maximize value for itself, or share value with the controlling/strategic shareholder, the financial investor should look harder to find creative solutions which can add value to both the minority and the controlling shareholder. Often times, additional investment means additional risk, and the then-current reward/risk balance should be carefully considered, including the then-current fundamentals of the investee company, and the competitive environment of the industry.
The Esquel, one of the world’s largest cotton-based textile and apparel manufacturing companies, produces shirts for from scratch through a vertically integrated supply chain for many major brands, including Tommy Hilfiger, Hugo Boss, Ralph Lauren, Lacoste, and Nike, and department stores around the world. Its leadership, comprising Chairman Marjorie Yang, Vice Chairman Teresa Yang, and CEO John Cheh, had made significant strides over the past two decades, fostering and developing sustainability practices across their supply chain. Set in the early part of 2012, this case tracks their decision-making process as they saw an opportunity to develop a greenfield site in the city of Guilin in Guangxi Province, China. They named this new development project “Integral”, following the Buddhist concept of harmony between the natural and surrounding environment, the workplace and the workforce culture, and the pursuit of innovation, community, and excellence. The main issues the Esquel leadership faced were to define the vision and mission for Integral around the short and long-term value proposition of the Integral site. What could be the contribution of the Integral site to the Esquel network, and in what ways could they make the Integral site a showcase for the sustainability focus of the organization?
The Esquel, one of the world’s largest cotton-based textile and apparel manufacturing companies, produces shirts for from scratch through a vertically integrated supply chain for many major brands, including Tommy Hilfiger, Hugo Boss, Ralph Lauren, Lacoste, and Nike, and department stores around the world. Its leadership, comprising Chairman Marjorie Yang, Vice Chairman Teresa Yang, and CEO John Cheh, had made significant strides over the past two decades, fostering and developing sustainability practices throughout their manufacturing network. Set during the summer of 2017, this case tracks their decision-making process during the development of a greenfield site in the city of Guilin in Guangxi Province, China. They named this greenfield site “Integral”, following the Buddhist concept of harmony between the natural and surrounding environment, the workplace and the workforce culture, and the pursuit of innovation, community, and excellence. The case explores the leadership and managerial crisis precipitated by technical problems discovered in the construction of the greenfield site. The company’s high standards and commitment to its 5E-Culture had clearly not translated to the ground operations at the project site, and Vice Chairman, Teresa Yang was tasked with guiding the project development through the crisis, and examining why the problems occurred in the first place.
300cubits is a blockchain application that aims to solve the no-show problem in the cargo shipping industry. Its founders, Johnson Leung and Jonathan Lee, are two HKUST alumni with experience in banking and shipping. They have identified a pain point, in the cargo shipping industry which does not require a pre-shipping cash deposit, results in no-show and cargo roll-over problems. They developed a new Ethereum based cryptocurrency, TEU, to serve as such collateral. They then conducted an initial coin offering (ICO) pre-sale in September 2017, and an official ICO in April 2018. However, the ICO failed to raise a lot of capital. However, the uptake of TEU tokens was very slow in the industry. They are now pondering the next steps forward.
Guanxi, political connections in China, can provide unique competitive advantages, but can expose business leaders to regulatory and political risks in the region. The fictional case focuses on how U.S. banks in Hong Kong, a major financial center for the Chinese market, are pinned upon the horns of a dilemma. Banks can abide by the letter of the law and not win any business; alternatively, they can break the law, in spirit if not actually the letter, and win business at the cost of incurring legal jeopardy and possibly violating one’s own sense of morality by hiring the children of well-connected senior management of a Chinese business who can direct substantial mandates to the employers.
To leverage the powerful innovation ecosystem found in Silicon Valley, Samsung has increasingly reoriented itself away from its Korean roots toward Silicon Valley–based subsidiaries such as the Samsung Strategic Innovation Center (SSIC). Like many other non-US-based technology companies, ranging from Nokia to Huawei, Samsung had long maintained a strong research and development presence in the Silicon Valley. Nonetheless, in recent years, Samsung has taken further steps, more than any other foreign company, aiming to become an authentic Silicon Valley entity. Today, Samsung has aspirations of becoming a top-five employer in the San Francisco Bay Area, building research and development centers in Mountain View and San Jose that are collectively half as large as Apple’s gargantuan new headquarters. The question for Samsung Electronics is how to leverage its existing capabilities in Korea and its new capabilities in Silicon Valley to achieve technological breakthroughs to continue to stay ahead of its Chinese competitors.
Corporate governance is pivotal for Russian companies to ensure sustainable development, to expand beyond national borders, and to attract foreign investments. This fictitious case illustrates the process for establishing internal corporate governance in a state-owned enterprise, MediaRus, focusing on the role of independent directors in corporate boards. The story of MediaRus’s formation and development depicts the evolution of the changing role of the board of directors from an insider model to the outsider model of corporate governance. Readers are encouraged to apply the principles of corporate governance in Russia to the MediaRus case, serving as a point of departure for more detailed analyses of existing codes of good state-owned firms. The case also provides a general overview of current board practices in Russian governmental corporations, highlighting the key tensions faced by independent directors.
Internet Initiatives Development Fund (IIDF) is a venture capital (VC) fund plus start-up accelerator launched in 2013 by Russia’s Agency for Strategic Initiatives at the behest of the country’s President. Kirill Varlamov is the Executive Director of IIDF. The case covers the launch of IIDF, its acceleration model and key strategic challenges.
V.Rose is a Shanghai-based company founded in 2009 by Leo Cui. The company sells natural skin-care products imported from Latvia to Chinese customers. Case A focuses on the company’s business expansion strategy. In 2014, V.Rose faced intensifying competition in the handmade, natural cosmetics market in China. To expand its business, the company had a number of options to choose from, each with pros and cons. One option was to enter the Hong Kong market to raise its brand awareness. Without knowledge of the Hong Kong market, however, senior management was uncertain about how to enter the market and what its managerial and financial implications were. Another option was to expand the online business to reap the benefits of the industry’s fast-growing online sales. This case gives students an opportunity to discuss and compare different business-expansion strategies.