Category Archives: Business Strategy

Lean Manufacturing in Crisis?

Izak Duenyas is the John Psarouthakis Professor of Manufacturing Management and Area Chair of Operations Management at the Ross School of Business, University of Michigan.

In the last several months, there has been several articles in the popular press questioning whether companies  are now ready to move away from “lean manufacturing.” Undoubtedly, this is due to the fact that “lean manufacturing” is based upon the Toyota Production System and Toyota has had an overwhelming influence on the development and popularization of its  principles. The very large number of recalls that Toyota has had in the last year (Toyota has now recalled more cars in the last year than it manufactured) has led some popular analysts to question whether the Toyota Production System and some of the  principles behind the system are at fault. A typical example is a Wall Street Journal article “How Lean Manufacturing Can Backfire”.

Several colleagues and I have been researching and teaching the principles of lean manufacturing at the University of Michigan for the last 15 years.  Our students in the Tauber Institue for Global Operations have also been involved in numerous projects over the same time frame in implementation of these principles in many different manufacturing (and some service) companies.  I believe, based on this experience, that it is not lean manufacturing and its principles that caused some of Toyota’s recent problems. Arguably, it is the fact that in the last 10 years Toyota did not seem to follow many of the principles it contributed to developing previously  that resulted in many of the problems it is facing now. Continue reading Lean Manufacturing in Crisis?

The Successful Business Acquisition Process – Steps #10– Letter of intent and formal due diligence & #11-Valuing and pricing the company

Letter of intent and formal due diligence

This chapter introduces some of the basic concepts of valuation of the company.  Although four basic approaches, the profitability method, the asset method, historic cash flow and discounted cash flow, are all described, the discounted cash flow method is considered the most accurate valuation of the company.  However, a comparison of values from different methods can provide useful insights, especially in the early stages of valuation of the business.

This chapter also points out the distinction between value and price.  The value is the worth of the company as will be operated by the buyer. The price is the amount you wish to pay for it.  The synergy you can realize from the sale, the motivation of the seller, and the projected growth of the industry, and the type of financing are just a few of the factors you might consider in negotiating the final price. Continue reading The Successful Business Acquisition Process – Steps #10– Letter of intent and formal due diligence & #11-Valuing and pricing the company

Goldman Versus the SEC

Finance Professor Nejat Seyhun had the following interview with the University of Michigan News and Media’s Terry Kosdrosky. With his permission we also present the interview. (http://bit.ly/aKqf39).

In the biggest shot at Wall Street since the 2008 financial crisis, the U.S. Securities and Exchange Commission (SEC) has accused banking giant Goldman Sachs Group Inc. of fraud over a financial product tied to sub-prime mortgages. The SEC, in a civil complaint, alleges Goldman didn’t tell investors that Paulson & Co., a hedge fund betting against sub-prime, helped select the pool of mortgages in a synthetic collateralized debt obligation. Goldman says it did nothing illegal. Professor Seyhun says the reputations of both Goldman Sachs and the SEC hinge on the outcome. The problem for both is that neither side has an open-and-shut case. Seyhun, the Jerome B. and Eilene M. York Professor of Business Administration, thinks the SEC’s move and the way it was announced make it clear the Obama administration is serious about financial regulation. Continue reading Goldman Versus the SEC