Case Studies of Strategic Management

The Accounting Scandal at WorldCom

Abstract

The caselet looks into the ways in which WorldCom corrupted its account books. The changes in
business environment made the company to struggle in the market. The caselet delves into the
pressure of the stockholders to continuously generate good returns, without any focus on the long
term impact, and how that pressure made the company to get into fraudulent behavior.

In the 1990s, the US economy went through a phase of consolidation, in which many major
companies acquired or merged with weaker companies to strengthen their own position in the
market (as seen earlier, WorldCom happened to be one of the key acquirers in this phase). The
share prices of companies play a vital role during mergers and acquisitions.

Therefore companies try to ‘maintain’ the prices of their shares (that is, keep them sufficiently
high). If they fail to do so, they can easily become targets for takeover/acquisition.

Moreover, if a company wishes to raise capital from the market, its performance on the stock
exchange is considered to be very important. The companies are generally valued on the basis of
cash flows they could generate in future...

Questions for Discussion:

1. WorldCom has been one of the most successful companies in the recent past. It was
considered to be a socially responsible firm. Then why did it choose to be unethical?

2. What did WorldCom do to conceal its actual financial position?

CavinKare and Coty's Strategic Alliance
Abstract

In January, 2009, Indian FMCG major, CavinKare Pvt. Limited (CavinKare) entered into a
strategic alliance with Coty Inc (Coty), the world’s leading fragrance marketer. With this
alliance, Coty would expand its operations in the Asian market while CavinKare would gain a
presence in the premium segment of men’s personal care segment in India. Under their
partnership, CavinKare was to market and distribute the Adidas range of fragrances while Coty
was to help CavinKare in building the market. Analysts opined that that the deal was positive
considering the potential of the Indian fragrance market.

On January 30, 2009, CavinKare Private Limited (CavinKare), an Indian Fast Moving
Consumer Goods (FMCG) company, announced that it had entered into a strategic marketing
alliance with Coty Inc. (Coty), a leading marketer of fragrances. Under this partnership,
CavinKare would market and distribute the Adidas and Jovan range of personal care products
in India...

Questions for Discuss-

1. Discuss the benefits accruing to CavinKare and Coty from this strategic alliance. Analyze the
future prospects of the strategic alliance in view of the competitive nature of the market.
2. Do you think CavinKare will be able to achieve its target of acquiring 10 percent of the market
share in the Indian fragrance market? Analyze this in view of the economic slowdown.