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Case_05_Growing_For_Broke_TN - Teaching Note Case 5 Growing...

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Teaching Note: Case 5 – Growing For Broke Case Objectives 1. To help students understand how a firm makes decisions about what businesses the corporation should compete in, including the pros and cons of acquisition and diversification activities. 2. To investigate possible detrimental managerial behaviors that can erode the creation of value, especially when a firm’s decision-makers choose growth for growth’s sake. 3. To encourage discussion of the implications of a firm’s strategy for the structure of its organization: which structure might make the most sense and create the most flexible and permeable boundaries between internal activities and external parties. 4. To identify the role emotional intelligence may play in effective strategic leadership. 5. To help students understand the challenges and pitfalls of managing the innovation process, creating an internal environment and culture that promotes entrepreneurial development, and creating an entrepreneurial orientation. See the table below to determine where to use this case: Chapter Use Key Concepts 6: Corporate-Level Strategy Acquisition; diversification; growth for growth’s sake 10: Organizational Design Organizational structure 11: Strategic Leadership Emotional intelligence 12: Managing Innovation Innovation; entrepreneurial orientation Case Synopsis The Growing for Broke case presents a corporate level strategy problem in an acquisition environment. Nicky Anaptyxi is the CEO of Paragon Tools, a small maker of machine tools. He accepted the position five years before the case begins, transferring from a senior VP position at a Fortune 500 manufacturer because he saw big potential at Paragon. Nicky wants to follow in his father’s successful immigrant footsteps by working hard, taking risks, and realizing his dreams. Like his father, Nicky believes that “growth is as American as Mom and apple pie,” but he also knows that it’s not just about growth; it’s about profitable growth. During his tenure at Paragon, Nicky had increased sales and gained share by expanding Paragon’s product line and modifying its flagship product. Nicky had also made acquisitions in the industrial signage and electronic-labeling field. Nicky now has an opportunity to acquire MonitorRobotics: a company that would allow Paragon to adapt technology for use on its machine tools, offering Paragon’s customers a rapid-response troubleshooting service. Nicky thinks the Monitor acquisition would give Paragon a strong position in a technology market with terrific growth potential, and might double Paragon’s annual revenue of $400 million, forcing Wall Street to pay attention.
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Paragon’s CFO, William Littlefield, doesn’t agree. He thinks the significant costs associated with the acquisition would put further pressure on Paragon’s earnings, which were struggling to recover from the previous acquisitions. Littlefield thinks Paragon should sell its existing services division, which has become a drag on profits. Several other managers agree. However, Nicky sees in the service business something that might
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Case_05_Growing_For_Broke_TN - Teaching Note Case 5 Growing...

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