These topics are highly related and I have found that I can effectively cover them in an 80 minute session.  However, the amount of time spent on each item can easily be adjusted based on the instructor’s purpose for including this case in the course.  While I often focus heavily on the communication strategy and considering the impact of the composition of the shareholder base in my accounting course, the case has also been used in finance courses with the emphasis being primarily on the decision and process of going public.  Regardless of the intended focus, it appears that most instructors find the class discussion naturally addresses each of the major topics.

One effective way to provide a deeper understanding of communication issues is to follow this case with “The Chardonnay Shortage at Mondavi Winery” (Harvard Business School Case No. 105?021).  That case examines how Mondavi handled communication of a shortage of its Woodbridge Chardonnay during 1998.  The case allows a discussion of communicating performance information, consideration of proprietary costs, communicating to multiple audiences (capital markets, wholesalers, store owners, food industry, and customers) and disclosure of negative information.  When combined with the IPO case, it allows a two-day discussion of several aspects of disclosure.  The time-series development demonstrates the dynamic and on-going nature of disclosure issues.  Focusing on one company also clearly demonstrates to students that a company must manage disclosure on many levels and on an ongoing basis.  Thus, even though Mondavi addressed many issues relating to a long-term communication policy following the IPO, it still faces another set of disclosure issues related to short-term communication of results and keeping the market continually informed.  These are rich topics and I do not suggest they be addressed in a single session of 80-90 minutes.  Rather, I recommend that an instructor first teach the IPO case and then provide students with the case material for the chardonnay case and discuss those issues in the next class meeting. 

1.     Do you agree with the Mondavi family’s decision to list public shares?  What are your major concerns with how this would impact the business?  What are the major benefits? 

 

2.     As Robert Mondavi considers the current problems with the company’s stock price, how would you recommend he respond to the market’s assessment of the company?

 

3.     Consider the process of taking a firm public.  How do the road shows and listing documents assist in developing a communication strategy?

 

4.     What types of investors are most likely to be interested in Mondavi?  How would you best target those investors?

 

5.     What are the greatest communication issues faced by Mondavi?  Are they impacted by Mondavi’s industry, corporate structure or size?  

The company and IPO setting were chosen to facilitate teaching the topics discussed above.  An understanding of the rationale for these decisions may be helpful as the instructor plans and teaches the session.  First, an IPO setting was chosen to highlight the impact of being a public company.  Allowing students to consider the change brought about by the decision to go public, rather than focusing on a company that has been public for some time, helps to isolate the differences in mandatory reporting requirements between being a private and public company. In struggling with the decision of whether to go public, the students can start to understand how the pressures of a diverse shareholder base, which may not share the company’s current long-term focus, would impact day-to-day business decisions.  It also provides a relatively blank slate for considering a communication strategy.  It has been my experience that discussion of already public companies tends to take capital market pressures as a given and focuses on what the company has done “wrong” without allowing students an opportunity to consider the full scope of obligations undertaken once a company goes public.  Similarly, when discussing an already public firm’s disclosure strategy, students tend to focus narrowly on critiquing what the firm is currently doing, rather than considering more broadly the company’s appropriate long-term disclosure strategy.  Finally, IPOs are an important corporate event that many of our students will participate in during their careers (as managers, private equity investors, investment bankers etc.).  In summary, choosing an IPO setting allows the case discussion to focus cleanly on changes to the company, thus providing a strong lens to focus in on the need for communication in public companies.

 

Second, the wine industry has several useful features.   While there is an art to wine making, the basic process is easy for most students to understand (grapes to juice to wine to table).  This makes the case approachable for a wide range of students.  The basic creation cycle may be straight forward, but the wine industry is a long life cycle business and wine making requires patience.  This provides a nice friction with capital markets which have often been accused of pushing for mostly short-term results.  Further, the lack of comparison firms (i.e., successful wineries) removes the temptation to say “just follow industry standards” and allows students to think more clearly about the company’s obligation to educate and keep investors informed on the industry.   The wine industry also has a built in retail investor-base, wine lovers, allowing for an easy discussion of targeting investors. 

 

Finally, Mondavi as a company also has several useful characteristics.  It is a well known company that has been relatively successful in its product market, allowing the students to focus on the communication needs, rather than on changing the company to fix operational issues the students view as problematic.  Most importantly, Mondavi was chosen due to the “teaching” nature of its prior marketing programs.  As pointed out throughout the case, Robert Mondavi and his winery have consistently faced questions about their vision for the U.S.