The EVA Challenge: Implementing Value-Added Change in an ...

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136 The EVA Challenge companies were too dissimilar to hold forth the prospect of success, Blystone’s optimism notwithstanding. There were other factors as well. The entire market was declining, and the auto parts suppliers—including Federal-Mogul and Dana, as well as SPX— declined even more steeply, as they generally do. Auto parts suppliers tend to be very volatile, both because they are highly leveraged and because they are dependent on the cyclical character of the auto industry. There was a happy ending, however. After that October low, SPX’s share price began an impressive comeback and reached $94 on July 21, 1999—a year and a day after the merger announcement. It then fell back a bit, into the mid-80s, in the late summer and fall. Clearly, the market now thought the merger had been a success. In December, SPX announced that one of its units, Inrange Technologies, had introduced a “fiber channel director” for storage area networks. It caused quite a stir among investors who follow developments in the computer world. SPX’s shares went to 122, before falling back; its closing price nearly hit 180 in August 2000 and in mid-November it closed at 118.94. We turn now to the strategic alliance as an alternative to acquisition. Acquisitions can present extraordinary opportunities for value creation, but they are inherently costly because of the inevitable premiums that have to be paid. Moreover, the deal often involves the acquisition of less attractive businesses as part of the package. The new operations can also be very difficult to integrate into the acquirer’s organization because of differences in cultures, financial systems, pay plans, and the like. What can be achieved expensively through an acquisition can often be gained more cost-effectively through a strategic alliance. Analysis of the viability of a strategic alliance begins with the premise that it takes three things to introduce a product: you’ve got to design it, make it, and sell it. Many companies automatically assume that they will perform all three of these functions. This is
EVA and Acquisitions 137 particularly true of old-line industrial companies with a long tradition of vertical integration. By contrast, the analytical thrust should be: how critical is it for us, as a company, to control all of these functions? Can any of these functions be done better, faster, or with less capital by someone else? Figure 8.2 represents the basic model for using alliances to support a high-value business strategy. In the center circle is the core business. Strategic alliances and factored products are used to build around the core. Alliances and factored products can be used to fill gaps in product offerings and expand on the core business to complete a company’s strategic plan. Figure 8.2 represents a continuum of control. For the core business, you need to control all three of the functions discussed previously: Factored Products (Control Specs and Quality) Core Business (Control All) Strategic Alliance (Control Part) Figure 8.2 Corporate Business Strategy
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The EVA Challenge Implementing Valu
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Advance Comments on The EVA Challen
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This book is printed on acid-free p
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Chapter 1 The Problem Back in the e
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The Problem 3 for systems to get ma
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The Problem 5 for a building, but i
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The Problem 7 Not only does EPS dis
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The Problem 9 significant and growi
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The Problem 11 admiring articles in
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The Problem 13 few years. Forstmann
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Chapter 2 The Solution What is Econ
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The Solution 17 There is a signific
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The Solution 19 than projections. E
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The Solution 21 (R&D) costs, (2) ad
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The Solution 23 capital, Tate & Lyl
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The Solution 25 is usually the chie
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Chapter 3 The Need for a Winning St
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The Need for a Winning Strategy and
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Chapter 4 The Road Map to Value Cre
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The Road Map to Value Creation 53 T
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The Road Map to Value Creation 55 i
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The Road Map to Value Creation 57 r
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The Road Map to Value Creation 59 o
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The Road Map to Value Creation 61 b
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Value Creation Capital Structure
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The Road Map to Value Creation 65 m
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The Road Map to Value Creation 67 2
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The Road Map to Value Creation 69 c
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Chapter 5 The Changes Wrought by EV
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The Changes Wrought by EVA 73 and t
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The Changes Wrought by EVA 75 all d
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The Changes Wrought by EVA 77 Even
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The Changes Wrought by EVA 79 Reduc
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The Changes Wrought by EVA 81 hardl
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The Changes Wrought by EVA 83 prese
Page 94 and 95: 86 The EVA Challenge mechanical cou
Page 96 and 97: 88 The EVA Challenge company fired
Page 98 and 99: 90 The EVA Challenge skirmishes of
Page 100 and 101: 92 The EVA Challenge but the reduct
Page 102 and 103: 94 The EVA Challenge We now move on
Page 104 and 105: 96 The EVA Challenge employees, man
Page 106 and 107: 98 The EVA Challenge 3,500. The thr
Page 108 and 109: 100 The EVA Challenge with economic
Page 110 and 111: 102 The EVA Challenge November 1998
Page 112 and 113: 104 The EVA Challenge their drawbac
Page 114 and 115: 106 The EVA Challenge to establish
Page 116 and 117: 108 The EVA Challenge It is helpful
Page 118 and 119: 110 The EVA Challenge Managing for
Page 120 and 121: 112 The EVA Challenge After a coffe
Page 122 and 123: 114 The EVA Challenge EVA 101, the
Page 124 and 125: 116 The EVA Challenge facilitator t
Page 126 and 127: 118 The EVA Challenge The classroom
Page 128 and 129: Herman Miller—Continental North A
Page 130 and 131: 122 The EVA Challenge in an organiz
Page 132 and 133: 124 The EVA Challenge In the modern
Page 134 and 135: 126 The EVA Challenge efficiencies
Page 136 and 137: 128 The EVA Challenge A company tha
Page 138 and 139: 130 The EVA Challenge units and imp
Page 140 and 141: 132 The EVA Challenge Witter’s re
Page 142 and 143: 134 The EVA Challenge $70.8125 eigh
Page 146 and 147: 138 The EVA Challenge design, manuf
Page 148 and 149: 140 The EVA Challenge you can lose
Page 150 and 151: 142 The EVA Challenge Allen-Bradley
Page 152 and 153: 144 The EVA Challenge Disadvantages
Page 155 and 156: Chapter 9 EVA Incentives We revert
Page 157 and 158: EVA Incentives 149 EVA incentive pl
Page 159 and 160: EVA Incentives 151 For a typical di
Page 161 and 162: EVA Incentives 153 bonus by 10, div
Page 163 and 164: EVA Incentives 155 these approaches
Page 165 and 166: EVA Incentives 157 quarters of the
Page 167 and 168: Chapter 10 How EVA Can Fail What mo
Page 169 and 170: How EVA Can Fail 161 created by a d
Page 171 and 172: How EVA Can Fail 163 Stern Stewart
Page 173 and 174: How EVA Can Fail 165 pay. Monetary
Page 175 and 176: Chapter 11 New Frontiers: Real Opti
Page 177 and 178: New Frontiers: Real Options and For
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Page 190 and 191: 182 The EVA Challenge Question 2. W
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186 The EVA Challenge Question 6. M
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188 The EVA Challenge framework suf
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190 The EVA Challenge problems ofte
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192 The EVA Challenge Only after th
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194 The EVA Challenge followed by a
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196 The EVA Challenge There are two
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198 The EVA Challenge floor, the fi
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200 The EVA Challenge Consider the
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202 The EVA Challenge 5. Provide bo
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204 The EVA Challenge degree, but t
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206 The EVA Challenge annual sales
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Epilogue EVA and the “New Economy
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EVA and the “New Economy” 211 W
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EVA and the “New Economy” 213 b
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EVA and the “New Economy” 215 a
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EVA and the “New Economy” 217 d
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EVA and the “New Economy” 219 i
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EVA and the “New Economy” 221 h
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EVA and the “New Economy” 223 L
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EVA and the “New Economy” 225 W
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EVA and the “New Economy” 227 O
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EVA and the “New Economy” 229 a
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EVA and the “New Economy” 231 o
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Acknowledgments This project has be
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Acknowledgments 235 monitoring mana
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Acknowledgments 237 Approximately s
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Acknowledgments 239 business and pr
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Acknowledgments 241 seemingly insur
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Acknowledgments 243 assignments to
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246 Index Competitive positions (Po
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248 Index Incentive plans based on
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250 Index Takeover artists, 11 Tate
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