Nicholas was enlisted by QUALCOMM Corporation to determine key financial measures of the marketing strategy and performance for a new business venture. QUALCOMM had already started this venture but was still looking to determine the financial implications of their marketing expenditures. The Nicholas team provided three deliverables to QUALCOMM’s management: determined the appropriate marketing spent during different phases of the venture’s life cycle; compared spending strategies of companies who sell business to business, like QUALCOMM, but either depend upon the intermediate business to advertise to the end-use customer or market to the end-use customer directly (for example “Intel Inside”); and determined a measure of success for the marketing of the new product.
According to Nicholas member, Rachelle Roesler, the team attempted to quantify a marketing campaign. To do this, the team had to increase their knowledge of how to value a brand. The members applied their own experiences and interviewed marketing faculty to gain insight into marketing valuation. As part of this information gathering, the team needed to conduct due diligence to understand this specific product as well as the competition and their product offerings. The team utilized their two undergraduate research analysts to investigate competitors and the valuation of their marketing plans. After all of their efforts working with QUALCOMM, the team was rewarded by presenting to leadership at the offices in San Diego in late October.
The accumulation of large credit commitments on the balance sheet of financial institutions combined with the collapse in the CLO and CDO markets has resulted in increased financing costs and an illiquid secondary market for many debt obligations. 3M requested that Nicholas analyze the distressed credit market and provide suggestions on how and where 3M’s pension fund might invest some of its capital. More specifically, Nicholas had four objectives. First, the team was to recommend the top ten debt positions 3M should target for investment and provide supporting information regarding the companies’ cash flows, industry position, private equity sponsor and other relevant factors. Second, the team must develop a recommended size and yield on the investments; they are to build a model for 3M so that 3M can subsequently continue to conduct their own analysis. Finally, they are to present their information to the 3M Investment Management Corporation Board of Directors.
Robert Destromp was a project team member and was looking to have “improved modeling skills, a better understanding of credit analysis, and a happy client” at the end of the project. This project had a lot of substance and the project team had to develop a logical strategy to limit the scope of the potential loans to ensure project completion in four weeks. In the end, the Nicholas model enabled 3M to determine the proper high-yield loans by analyzing both qualitative and quantitative aspects of the loan agreements the banks have struck.
Westlake is a global manufacturer of petrochemicals, plastics, and related fabricated products. Starting in 1986, they have quickly grown sales to over $2 billion and in 2004 listed its shares on the NYSE. It has weathered economic down cycles in its history, most recently in 2001-02, and asked the Nicholas team to develop an Enterprise Risk Management (ERM) framework to manage variation across such broad company objectives as safety performance, governance, and compliance to earnings, cash flows, and customer satisfaction. The project team needed to quickly learn about Westlake’s risk management structure and the new Risk Maturity Model to meet the five business objectives. First, the team had to determine the key business risks for Westlake in terms of loss or gain, variation from the expected, probability of impacts from different events, and uncertainty. Next, Westlake was interested in what variables should be considered when determining its overall objectives including commodity pricing, consumption habit changes, regulatory rulings and labor disputes among many others. The project team needed to provide an analysis of other chemical companies’ ERM systems and focus on the effective interface between corporate and business unit leaders with subject matter experts. Through this background research, the Nicholas team developed an ERM framework for Westlake that addressed programming, risk analysis, solution assessment, decision process, and system administration. Finally, Westlake needed criteria and tolerances to measure the benefits from the ERM and recommendations on how to implement the strategy.
Paul Wirth was excited about this project because he felt Westlake is on the cutting edge by taking such an in-depth look at their risk management. He felt that the work would be applicable across industries in the near future. His team enlisted the help of the risk management department to enhance its knowledge in this area. One of the key aspects the team examined was how to quantify some risks that are not clearly defined, such as a 'reputation' risk. This project was yet another example of how Nicholas projects stretch the comfort zone of students to better prepare them for the “real world.”
Best Buy implemented a densification strategy a couple of years ago. The strategy has three main objectives:
- Saturate the marketplace with new stores
- Change customer perception of the store from a destination to a convenience shop and hence improve customer satisfaction
- Aggressively grow market share to deliver top-and-bottom line performance
The company has announced plans to increase the number of stores by 70% and early results in test markets have shown a 2% gain in market share. The Nicholas team was charged with analyzing the strategy, offering recommendations for success in terms of the critical success factors, and determining other strategic alternatives to meet the desired goals. To be successful, the Nicholas team had to calculate potential market share gains, the impact of cannibalization, and impacts to the Income Statement. In addition, the team needed to develop recommendations for which markets the strategy should be implemented and modifications to the strategy.
Sean Lavin and his team members attacked the project from a broad business perspective by applying their financial skill set and their knowledge of marketing. The team made sure to address each critical success measure by splitting up the work into different packages that they could attack individually and then put it all together as a group. Lavin was in charge of looking at each one of Best Buy’s product segments. By performing an industry analysis in these specific markets, he was able to uncover useful information Best Buy should consider. The team determined the cannibalization of the stores in the test markets that may impact the densification strategy. They were also able to find and analyze crucial information regarding possible competitive response, comparable densification strategies employed by other companies, and industry reports on consumer buying patterns.
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