OutlineUsing online resources (see links below) find the latest spot rates for the chosen foreign currencies relative to NZD
Choose two foreign currencies to analyze. For these two foreign currencies, perform the following analysis (New Zealand – home country):
_Using online resources (see links below) find the latest spot rates for the chosen foreign
currencies relative to NZD. Use HSBC’s forward calculator (or other relevant resources)
to obtain 1-month, 6-month and 1-year forward rates for the chosen currencies relative to
NZD. Calculate 1-month, 6-month and 1-year forward premium/discount for the chosen
currencies (New Zealand – home country). Interpret the obtained numbers and comment
on market expectations on the value of the foreign currencies in the coming year.
– Reserve Bank of New Zealand website: http://www.rbnz.govt.nz/statistics/tables/b1/
– Yahoo Finance website: https://nz.finance.yahoo.com/
– The Wall Street Journal: http://online.wsj.com/public/page/news-currency-currenciestrading.html (go to Complete Currency Data /’New York Closing’ link)
– Financial Times: http://markets.ft.com/ft/markets/currencies.asp
cAse study application
CULTURE CHANGE AT IBM
IBM began in 1914 as a maker of cheese slicers, scales, and tabulating machines. Thomas Watson, its founder who became famous for the “Think” watchword, created the company on three values called “Basic Beliefs:” “respect for the individual,” “the best customer service,” and “the pursuit of excellence.” Based on these values, IBM grew into one of the great industrial giants of the world, routinely hailed as a “best managed company.”
By the late 1980s and the early 1990s, how- ever, IBM’s enormous success had an unin- tended consequence. The firm became complacent; its basic beliefs provided a rationale for stability. “Respect for the individual” had morphed into an entitlement mentality where lifetime employment was reinforced by cultural norms. The “pursuit of excellence” gave way to corporate arrogance and a failure to listen to cus- tomers or the marketplace because IBM knew what was right. Finally, its devotion to large, cen- tralized computer systems rather than PC-based distributed architectures led to its downfall. IBM’s stock price dropped 75% between August 1987 and September 1993.
To turn things around, IBM appointed Lou Gerstner CEO in 1991. When asked how he would lead IBM, this former GE executive retorted: “The last thing IBM needs right now is a vision.” Over the next few years, Gerstner cut IBM’s workforce in half, abolished lifetime employment, and refocused business strategy from hardware to software and services. The spectacular success that followed is regarded as one of the great turnarounds in business history.
So what would you do as the CEO who followed Gerstner? Sam Palmisano, a lifetime IBM employee, was appointed CEO in 2002. He strongly believed that IBM’s continued suc- cess depended on re-laying its foundation. “We couldn’t be casual about tinkering with the DNA of a company like IBM. We had to come up with a way to get the employees to create the value system, to determine the
company’s principles. Watson’s Basic Beliefs, however distorted they might have become over the years, had to be the starting point.”
To clarify and shift IBM’s culture, Palmisano orchestrated a process that began with the corporation’s top 300 executives. Together, they generated the basic categories for the new values, including respect, cus- tomer, excellence, and innovation. These cate- gories were tested in focus groups and broad surveys with more than 1,000 employees across levels, locations, and functions. Based on this input, three proposed values— commitment to the customer, excellence through innovation, and integrity that earns trust—were submitted to “ValuesJam,” a 72- hour process where all employees at IBM were invited to comment on the proposed values via IBM’s intranet. ValuesJam organized employee discussion around four forums. A company values forum asked general ques- tions about the importance of values. A “first draft” discussion forum asked for reactions to the three proposed values. A third forum asked about IBM’s value in society, and a fourth asked people to describe IBM when it was at its best. Including Palmisano, 50,000 employ- ees made over 10,000 comments about the company’s culture and identity. The following were some early-on comments:
• “The only value in IBM today is the stock price.”
• “Company values (ya right).” • “I feel we talk a lot about trust and taking
risks, but at the same time, we have end- less audits, mistakes are punished and not seen as a welcome part of learning, and managers (and others) are consistently checked.”
• “There appears to be great reluctance among our junior executive community to challenge the view of our senior execs.”