Introduction to the Large-Scale Investment (LSI) Course at Harvard Business School

Benjamin C. Esty

Background Note | HBS Case Collection | October 2003 (Revised February 2004)

Introduction to the Large-Scale Investment (LSI) Course at Harvard Business School

Abstract

Introduces students to the Large-Scale Investment (LSI) course taught at Harvard Business School. LSI is a case-based course about project finance that is designed for second-year MBA students. The course is about project finance, which involves creation of a legally independent project company financed with equity from one or more sponsoring firms and nonrecourse debt for the purpose of investing in a capital asset. In 2001, project-financed investment reached $217 billion worldwide. The LSI course describes what project finance is, why it creates value, and how to structure deals. In doing so, the course helps to sharpen and deepen students' understanding of corporate finance. This note describes the course's key themes, structure, and content. Additionally, there is a brief synopsis of each case study. The cases are available individually from Harvard Business School Publishing.

Keywords: Value Creation; Project Finance; Investment; Projects;

Format: Print

23 pages

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Esty, Benjamin C. "Introduction to the Large-Scale Investment (LSI) Course at Harvard Business School." Harvard Business School Background Note 204-093, October 2003. (Revised February 2004.)

In August 2017, MoviePass dramatically lowered its subscription price from $50 per month to just $10 for up to one movie per day. The idea was to rapidly scale the business to the point where they could generate incremental revenue streams form related businesses (e.g., a share of ticket and concession revenues from theaters, advertising revenue from movie studios; and revenue from ride-sharing companies). Within two days, Moviepass had gotten 150k new subscribers; within six months, they had more than 2 million. But as of February 2018, the company faced three challenges: theaters were resisting the concept, investors were shorting the stock in record numbers, and competitors were beginning to appear. Could CEO Lowe convince investors that they did, indeed, have a viable business model and could monetize their growing subscriber base? At the same time, Lowe had to decide whether to raise subscription prices to cover the growing losses or keep prices low to attract subscribers as quickly as possible.

After losing market share to low-priced competitors such as Harry’s and Dollar Shave Club for several years, Gillette decided to fight back by cutting prices on its razors and blades in April 2017. Bonnie Herzog, an equity analyst at Wells Fargo, must assess how the recently announced price cuts are likely to affect Gillette’s earnings and its parent company’s earnings (Procter & Gamble owns Gillette). As part of her analysis, Herzog must estimate the price elasticity of demand for Gillette’s razors and blades. The case contains scanner data which allows students to calculate both price elasticities for a sample of Gillette products.

Case | HBS Case Collection | November 2019

Hapag-Lloyd AG: Complying with IMO 2020

Benjamin C. Esty, Mette Fuglsang Hjortshoej and Emer Moloney

A new environmental regulation known as IMO 2020 was creating what one industry analyst called “the biggest shakeup for the oil and shipping industries in decades.” According to the new regulation, all ocean-going ships would have to limit their sulfur emissions by January 1, 2020. Senior leaders at Hapag-Lloyd, one of the world’s largest shipping companies, were evaluating three ways their ships could comply with the new regulation: use low-sulfur fuel, use high-sulfur fuel but install scrubbers to clean the exhaust, or convert ships to use liquid natural gas (LNG) as fuel. Each of the options had its advantages and disadvantages, and the most attractive option depended on not only the values of key parameters (e.g., future fuel prices and equipment costs), but also the strategies adopted by the owners of the other 60,000 ocean-going ships subject to the regulation. For the industry as a whole, annual compliance could cost as much as $60 billion; for Hapag-Lloyd, annual compliance might cost as much as $1 billion or more. For a company with net income of $34 million (€28 million) in the prior year, and losses in two of the past four years, getting this decision right was of the utmost importance. Senior executives at Hapag-Lloyd had created a proposed compliance plan and were scheduled to present it to the firm’s supervisory board for approval in June 2018. Whether the team had the right plan and whether the board would approve it are the key questions in the case.

Keywords: Valuation; Ship Transportation; Strategic Planning; Game Theory; Pollution and Pollutants; Supply Chain; Corporate Accountability; Capital Budgeting; Environmental Sustainability; Shipping Industry; Transportation Industry; Germany;

Citation:

Esty, Benjamin C., Mette Fuglsang Hjortshoej, and Emer Moloney. "Hapag-Lloyd AG: Complying with IMO 2020." Harvard Business School Case 220-003, November 2019. View Details

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Introduction to the Large-Scale Investment (LSI) Course at Harvard Business School

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