Case
Supplementary Resources
Abstract
A major barrier for growth of large multi-business-unit firms is the inability to resource the critical initiatives to win—both in terms of dollars and people. The underpinning of the challenge involves the conflict between resourcing current cash-generating legacy businesses vs. new initiatives which may not, in the short term, produce positive financial results. Most companies do not have a formal portfolio process to deal with this fundamental issue. The Healthcare Solutions business unit of Danaka is a fictional business based on real business experiences. The principle challenge is the need for this business to free up $300 million of current, budgeted R&D projects to fund new, unfunded initiatives to meet its five-year growth objectives. Tools and processes are introduced via interactive spreadsheets that show how to make the tough portfolio decisions on a project-by-project basis.
This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2023 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1: Danaka Corporation Business Units
Exhibit 2: Danaka Corporation Financial Highlights ($ in millions except per share amounts)
| 2006 | 2005 | 2004 | |
| Operating results | |||
| Net sales | $14,690 | $13,900 | $13,090 |
| Pretax operating income | $1,882 | $1,711 | $1,554 |
| Depreciation and amortization | $814 | $747 | $695 |
| Capital expenditures | $740 | $680 | $632 |
| Project funding allocation | $1,390 | $1,300 | $1,246 |
| Financial position, year end | |||
| Total assets | $19,240 | $17,667 | $16,419 |
| Net debt | $1,776 | $1,631 | $1,516 |
| Stockholders’ equity | $5,920 | $5,436 | $5,052 |
| Data per common share | |||
| Net income—diluted | $0.66 | $0.60 | $0.54 |
| Dividends | $0.50 | $0.50 | $0.50 |
| General | |||
| Average shares of common stock outstanding (millions) | 1,003 | 1,000 | 1,001 |
Exhibit 3: Business Unit Snapshot
| Performance Materials | Agriculture | Healthcare Solutions | Emerging Solutions |
| Strategic Direction. Meet the worldwide demand for more productive, high-performance polymer materials, systems, and solutions through expertise in technology and materials science | Strategic Direction. Increase the quality, quantity, and safety of the global food supply by leveraging strengths in biology, chemistry, and biotechnology, complemented with knowledge of the food value chain | Strategic Direction. Become leading providers of technology and services to help healthcare professionals improve quality of healthcare globally | Strategic Direction. Channel emerging nanotechnology expertise toward developing innovative technologies |
| Core Markets. Automotive, electrical and electronics, packaging, construction | Core Markets. Production agriculture, grain and specialty crop sector, forestry, vegetation management | Core Markets. Medical and surgical, dental and orthodontics, health information systems, hospital care | Core Markets. Dental and orthodontics, utilities, fuel cells, skin care, paints |
| Major Products. Nylon resins, acetal resins, polyester films, laminate interlayers, fluoroelastomers | Major Products. Hybrid corn seeds and soybean, insecticides, fungicides, herbicides | Major Products. Medical and surgical products, dental and orthodontics products, health information systems | Major Products. Nanocomposite dental restoratives, nanopaints |
| 2006 Sales. $5.4 billion | 2006 Sales. $5.0 billion | 2006 Sales. $4.1 billion | 2006 Sales. $0.2 billion |
Exhibit 4: Healthcare Solutions Business Unit Project Financial Highlights ($ in millions)
| 2006 | 2005 | 2004 | |
| Segment sales | $4,130 | $3,780 | $3,500 |
| Pretax operating income (PTOI) | $601 | $538 | $494 |
| Annual growth in segment sales | 9% | 8% | 6% |
| Annual growth in PTOI | 12% | 9% | 6% |
| Percentage PTOI/sales | 15% | 14% | 14% |
| Product Line Sales | 2005 | 2004 | 2003 |
| CoTrelTM medical fabrics (3 projects) | $413 | $416 | $350 |
| CoTrel™ medical fabrics (5 projects) | 826 | 756 | 700 |
| ReliantTM antiseptic sprays (10 projects) | 1,156 | 1,040 | 980 |
| GrineTM dental resins (7 projects) | 991 | 926 | 840 |
| AccuronTM information systems (7 projects) | 743 | 643 | 630 |
| Total | $4,130 | $3,780 | $3,500 |
| Product Line Pretax Operating Income | 2005 | 2004 | 2003 |
| CoTrelTM medical fabrics (3 projects) | $50 | $50 | $42 |
| CoTrelTM medical fabrics (5 projects) | 132 | 121 | 112 |
| ReliantTM antiseptic sprays (10 projects) | 197 | 172 | 157 |
| GrineTM dental resins (7 projects) | 89 | 83 | 76 |
| AccuronTM information systems (7 projects) | 134 | 112 | 107 |
| Total | $601 | $538 | $494 |
| 2006 Projected Funding Allocation | |
| CoTrelTM medical fabrics (3 projects) | $88 |
| CoTrelTM medical fabrics (5 projects) | 94 |
| ReliantTM antiseptic sprays (10 projects) | 65 |
| GrineTM dental resins (7 projects) | 119 |
| AccuronTM information systems (7 projects) | 47 |
| Total | $413 |
| 2006 Projected Full-Time Equivalent (FTE) | |
| CoTrelTM medical fabrics (3 projects) | 35 |
| CoTrelTM medical fabrics (5 projects) | 38 |
| ReliantTM antiseptic sprays (10 projects) | 26 |
| GrineTM dental resins (7 projects) | 48 |
| AccuronTM information systems (7 projects) | 19 |
| Total | 168 |
| 2006 number of additional new projects | 8 |
| Proposed allocation for new projects | $105 |
Exhibit 5: Danaka Portfolio Management Process
Exhibit 6: Opportunity Map
Exhibit 7: Market-Driven Growth Initiative Portfolio Maps—Focus on Revenue-Driven Earnings Growth
Exhibit 8: Healthcare Solution Projects ($ in millions except Business Criteria Ranking)
Exhibit 9: Danaka Example Division Short- and Long-Term Tradeoffs
Exhibit 10: Scorecard for Fight the Fade Projects
Exhibit 11: Scorecard for Share Growth Projects
Exhibit 12: Scorecard for Accelerated Growth Projects
This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2023 Sage Publications, Inc. All Rights Reserved
