Academic journal article Journal of the International Academy for Case Studies

Zeit Saic: The Entrepreneurial History of a Family Business in Argentina

Academic journal article Journal of the International Academy for Case Studies

Zeit Saic: The Entrepreneurial History of a Family Business in Argentina

Article excerpt

CASE DESCRIPTION

The primary subject matter of this case concerns developing an action plan to attempt to save an old line Argentine manufacturing and service firm in the face of a collapsing economy in Argentina and significant technological change making their main product obsolete. The primary focus is that of general management and as such encompasses most of the business disciplines, but stresses primarily finance, marketing and corporate strategy issues. Secondary issues include the role of preparing and analyzing financial statements to aid management decisions and an appreciation of international issues. The case has a difficulty level of four, and is positioned for use in an undergraduate senior level cap stone strategy and policy course. The case is designed to be taught in ten class hours and is expected to require about five hours of outside preparation by students.

CASE SYNOPSIS

This case follows the career of George Brown, particularly in relation to Zeit, S.A.I.C., his family's business. After an on and off early association with Zeit, George, late in his career, joined the Company permanently in 1990 as V.P. In 1998, against the objections of his family, he purchased full control of the Company. That year was momentous since it began a steep decline in the business fortunes of Zeit precipitated by both changing technology and the Argentine financial collapse. The setting for student recommendations is in the middle 2003, near the bottom of the Argentine depression.

ZEIT SAIC: THE ENTREPRENEURIAL HISTORY OF A FAMILY BUSINESS IN ARGENTINA

The Beginning.

The muddy water of the Rio de la Plata slapped against the hull of the old British freighter as the city of Buenos Aires (Bs.As.) came gradually into focus through the morning mist. The long and dangerous journey from Southampton was nearing its end. German U-boats prowled the Atlantic and would have liked nothing better than to send this or any English ship to the bottom. The year was 1940 and an eight-year-old boy, George Brown, his extended family and all of their limited physical possessions were aboard. They were about to begin a new life in what most would then agree was the greatest city in the richest country in the southern hemisphere. Even though their prospects appeared bright, Buenos Aires was a very foreign place. None of the Browns spoke Spanish; in fact, only the children were truly fluent in English. Six years prior the Browns, then known as the Brauns, left Germany ahead of Nazi oppression of the Jews. The Browns were not only smart to leave Germany early enough to assure their safety; they were smart enough to get a substantial sum of money converted to British pounds sterling and have it wired to Barclays Bank in London. Despite that money was frozen in the bank because of the war prohibitions, it acted as a guarantee for a big loan from a distant relative and provided the cushion necessary to re-establish themselves in their new home.

Argentina in 1940 was very different place both absolutely and relatively than it is in the early days of the third millennium. The country's population was only 15 million and of that 4.5 million were Portenos, versus 36 million and 11.3 million respectively in 2001. Some would argue that Argentina had passed its peak position in relative wealth prior to their arrival. In the late 1920s it was estimated that GDP per capita was equal to that of France and not far behind the U.S. or the U.K. In 2001, the Argentine per capita GDP was 38%, 28% and 41% of that in France, the U.S. and the U.K. respectively. The Great Depression, still going strong in most of the world, had not been kind to any country, but the associated falling prices for commodities such as wheat and beef, particularly devastated the Argentine economy. Good prices and high demand had not yet returned. In 1940, Argentina produced little sophisticated manufactured goods. Yes, it was self sufficient in its simple needs such as pots and pans, soap and furniture, as well as fully competent to process its agricultural based exports. …

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