Frank Stronach, Founder and CEO of
by Kelly Hutchison, MBA2
Could you start your own business and grow from one employee to a major multi-national organization with over 42,000 employees? If you think so, what do you think is necessary to achieve this success? According to Frank Stronach, Chairman and founder of Magna International and the recipient of this year's UMBS Eugene Applebaum Entrepreneur Award, you will need a combination of skill, luck, original thinking and vision. Frank Stronach's invigorating speech, presented last Thursday at UMBS when he received the entrepreneur award, mixed a homespun personal philosophy with years of experience in getting the job done.
Frank Stronach emigrated from Austria to Canada in the late 1950s with nothing to his name but a working background in tool and machine engineering. After working for six months with a small firm, he was offered partnership. This early success convinced Frank he could run his own business. With his personal savings, he rented a garage and started a small tool & die company known as Multimatic Investments Limited, which later expanded into production of automotive components. He successfully grew Multimatic and merged with Magna Electronics Corporation Limited to form a business entity known as Magna International Inc. Today he continues to lead Magna, an auto components supplier, into new markets and new areas of growth (Magna was the first western company to build a factory in Russia after market reforms there).
Stronach's philosophy is that success in business is easy. Success only requires that you fulfill the simple proposition to make a better product at a better price. The real challenge, however, is to manage people. To meet this challenge he has structured Magna to be a bank for human capital. He is a long-term investor in all employees through a simple profit sharing plan that distributes 10% of profits to employees, 6% to management and 20% to shareholders. A company charter that spells out a corporate bill of rights and the company's philosophic principles reinforces this distribution.
Importance of principles
He feels that principles are stronger than people are. It is absolutely critical that your company have a set of unifying principles, and that employees understand and uniformly share this vision. When principles are clearly stated, and substantiated by profit sharing, you can motivate people to superior performance. Managerial accountability, employee motivation, as well as a healthy dose of inter-departmental competition to keep everyone honest, helps Magna avoid the bureaucracy that stifles the decision-making ability of many large corporations.
How does Stronach ensure that Magna employees and managers cooperate to build a better product? By recognizing that personal gain and the individual pursuit of self-betterment are universal and are the most fundamental forces in human nature. Greed is everywhere, so use it your advantage. Stronach challenged the audience during his speech to design a system so that every individual's drive for self-improvement only improves the bottom line. Individual ownership and accountability, localized decision-making, small-scale operations and factories (less than 200 people at each site), and decentralized management are all mech anisms by which Magna sustains high employee productivity. Frank also encouraged his listeners to use a civilized approach and cultivate a sense of corporate citizenship to temper individual pursuits (Magna contributes 2% of its profits to charity).
Advice for the future
What advice would he give to young, newly minted MBAs considering starting their own business?
1. Get a job and become an expert in a specific, preferably technical, skill.
2. Develop a sense of purpose and direction to give you focus at work.
3. To increase your chance of success, do something you enjoy. This will lead to motivation and a superior skill-set.
4. Live modestly and save for the day you launch the startup. Using your own money to finance the startup will increase its chances of success.
5. Do what is necessary to keep the critical, valuable people on board.
Another factor and consistent quality in Frank Stronach, which helps him lead people, is his ability to communicate. He can clarify ideas, deliver principles and explain concepts simply, avoiding long-winded explanations. For example, when considering his new plant in Russia, he commented to his Russian counterparts that the Russian auto manufacturing industry was incapable of making a quality vehicle. His future partners were shocked by his statement. They could not grasp the idea that open market competition leads to better products. To convey his point, Frank Stronach pointed to the Russian Olympic record of victories, and made the straightforward illustration that competition fuels an athlete's desire to win. As Frank Stronach said, "When there is only one runner in a race, there is not much point in keeping track of time." You can be sure that with Stronach as coach, Magna will continue to run a great race.
|U of California Regent Ward Connerly tries to speak his views over the shouts of protesters|
|Protesters, such as this unidentified BBA2, harassed Connerly all evening|
Nicholas Kirk, BBA1
On March 18, over 600 students filled the ballroom of the Michigan League (and almost 100 waited in an adjacent hall) to hear the views of one of the most controversial figures in America today: University of California Regent Ward Connerly. Connerly gained notoriety as the man who spearheaded the campaign to end racial preferences in the U of C admissions process. Security at the event was extensive, with four uniformed Department of Public Safety (DPS)) officers in the ballroom area, two plain clothes officers protecting the podium area, and another DPS officer manning an escape route in case Connerly had to be rushed out. The security was tight because of the violent demonstration that had taken place last fall at another discussion of affirmative action by BAMN, the Coalition to defend Affirmative Action By Any Means Necessary.
Connerly (a black man who does not refer to himself as an African-American because of his mixed heritage that is composed of Irish, Native American and other racial ancestry) immediately disregarded his prepared comments and gave an extemporaneous speech that reflected on his childhood and how he confronted racial troubles in Louisiana (the state of his childhood home). He then switched gears and moved on to a defense of his views of why racial preferences as a factor in the admission process are wrong. This discussion brought jeers from the crowd with such comments as "Sellout!", "Uncle Tom!" and "Oreo!" being shouted by black students who viewed Connerly as traitor to their race. Connerly paused and appeared pained by the shouting, but continued to lay out his views on racial preferences.
Connerly then delved briefly into an area of admissions practice that is lost in the debate: the policy of legacy admissions and benefactor admissions. Connerly stated that individuals who are given priority in admissions based on the fact that a member of their family attended a certain school is a bonus that the applicant does not deserve. "Legacy," Connerly stated, "is a trait that, like race, is uncontrollable and does not show individual achievement. And giving benefactors of universities the chance to (put in a good word) for certain students again shows no individual achievement, just the fact that the individual was lucky enough to know a wealthy individual." These comments surprised many of Connerly's protesters in the audience and his supporters, some of whom do support legacy and benefactor admission priorities.
After a twenty minute speech, Connerly moved into a lengthy Q & A period that quickly turned into a farce. Since the packed auditorium had only one microphone, there was an immediate surge by protesters towards that microphone. The questioners asked Connerly pointed questions about why he, as an African American man, is trying to do away with a system he obviously benefited from. Connerly acknowledged the he probably did at some point in time benefit from affirmative action but reiterated that his definition of affirmative action was different from the definition that the protesters were using. Connerly stated that he was still interested in preserving programs such as mentoring programs and outreach programs. However, this answer did not satisfy those in the crowd and new rounds of shouting by students in the ballroom erupted.
After three questions, it was obvious to the moderator that there was no balance in the questions being asked. He thus attempted to balance the debate by alternating between pro and con questions. This attempt to change the Q & A format upset the crowd and Connerly suggested to the crowd that in order to pacify them, he would continue with the current format of the Q & A session.
Connerly fielded questions for an hour, ending the presentation just one hour and ten minutes after it began. As he concluded, the podium area was rushed by students interested in a further discussion of the issues with Connerly. Connerly proceeded to stay an extra 45 minutes to talk with a group of 30 students who disagreed with his views on affirmative action.
By Bradley D Farnsworth, Director, Center for International Business Education
The University of Michigan Business School's Center for International Business Education (CIBE) received the #1 ranking from faculty reviewers in a recent Title VI funding competition sponsored by the US Department of Education. The Michigan CIBE has been approved to receive a total of $1.2 million in federal funding over the next four years. The applicant pool of twenty-six business schools included Duke, the University of Chicago, and UCLA.
The Center sponsors a wide range of activities related to international business, including foreign language training, faculty research, curriculum development, and linkages to business, government, and other academic institutions. The Center's new proposal places a strong emphasis on undergraduate training in international business at the University of Michigan and other institutions throughout the United States. Established in 1989, the Center has an annual budget of $1 million and receives funding from corporations, foreign governments, and the University of Michigan Business School in addition to its Title VI support.
For more information, contact Brad Farnsworth, CIBE director, at 936-3917 or email@example.com.
Congratulations to UMBS's own James Boyle, Ashesh Kamdar, Scott Hause and Chris Reid, pictured above after winning the Deloitte Case Competition in January, who recently won the Regional Competition in Chicago.
Photo by Menno Ellis
by Christine Parlamis, MBA1
While many of us spent our spring break pool-side with cocktails in hand, four of our UMBS classmates spent the earlier part of their break competing in the first annual Deloitte & Touche Regional Consulting Case Challenge. This case competition pitted the campus winners from University of Chicago, Northwestern, and the University of Michigan in a contest for honors and a $5,000 cash prize. As winners of UMBS' January on-campus Deloitte & Touche Challenge, James Boyle, Scott Hause, Ashesh Kamdar, and Chris Reid (a.k.a. Spice Guys Consulting) flew to Chicago for the February 27-28 event.
The three team competition was a two-day affair. Teams met Friday morning at 8:30 a.m. for breakfast, during which they met the other teams, listened to the competition rules, received the case materials, and were given a conference room in D&T's offices to work in for the day. The teams were to have just under 24 hours to prepare a one hour presentation of recommendations. The Michigan Team worked through the day at D&T's downtown offices, and then moved back to their hotel to work through the night on a case dealing with the profitability problems of the world's largest consumer electronics maker.
Saturday morning presentations were made to a panel of four Deloitte & Touche partners in a closed conference room. Teams were not allowed to watch each other present (in fact, no audience was allowed). Following each presentation, the judges grilled each team for twenty minutes on the details of their turnaround plans.
After each of the teams had presented, the judges entered the waiting room and announced the team from Michigan had won the title! The team believes that the timing of the Michigan curriculum played a key role in their victory.
Said James Boyle, "Our classes during the first seven weeks of winter term perfectly prepared us for the competition. The problems with the company in the case were primarily OM, Managerial Accounting, and OB issues. Its almost like we'd been preparing for this case for the last seven weeks!"
Chris Reid agreed, "The judges complemented us on the completeness of our presentation and our out-of-the-box thinking. We realigned incentive structures, outlined a change program, recommended JIT production methods, changed shipping methods, rationalized numbers and types of products, and advocated turning one of the divisions into a profit center. The seeds for many of our ideas were planted in our courses this past term."
The winning prizes included a team check for $5,000 and $100 gift certificate for each Spicy Guy. But the team believes it came away with something more important than just money. Said Scott Hause, "This was not only a tremendous learning experience, but it was also extremely satisfying to prove what everyone at the UMBS already knows--that Michigan students have what it takes to compete and win at the elite level."
By Michael J. Ferrante, MBA2
Spring Break. Beaches, beer, and babes, right? Not for some MBAs this year. As part of International Business 745, seventy MBA students departed Ann Arbor with a different agenda of gathering data and doing interviews as part of the Global Projects Course. This class, in its eighth year as part of the MBA curriculum, sent 15 project teams to 27 countries over the course of the ten-day spring break. The projects varied from developing a strategy for e-commerce in the Czech Republic to aiding the Croat ian government in setting up a technology incubator system.
Some projects were sponsored by major corporations, whereas others were sponsored by the various University departments. Students were matched with projects based on their industry background, language skills, and career interests.
The course, taught by Professor Andrew Lawlor, fits well into the portfolio of international programs at the University of Business School. Several project were follow-ons to projects initiated by student in Professor Lawlor's Corporate Strategy 515/517 Start-up Ventures course. Other projects were precursors to summer projects through the William Davidson Institute. Gene Rigoni, MBA2, adds how "this project was a great one-week introduction to the people and culture of Russia. Because of my first visit, I have aspirations of learning more about the culture when I return to Russia this summer with the William Davidson Institute."
Students were surprised at how much they learned over the course of a week. In addition to the valuable data for the project, they got a unique perspective of what it takes to do business in each county. "A major point about doing business in Russia," explains Rigoni, "is the barter system, where goods and receivables are traded to settle debts rather than cash. Some of the firms were insisting on cash payment to avoid the barter system." He adds, "we learned that relationships are very important to do business in Russia. Many deals begin very high up in the political system and flow down through the government ministries and business organizations."
But were the trips all work and no play? Of course not. During their jet-lag-adjusting days, several students managed to sneak in a scuba diving session in Hong Kong or a visit a local pub in Amsterdam. The Czech Republic team was invited by a new-found friend in Prague to attend the Sparta Praha ice hockey team, which featured two members of the Czech gold-medal Olympic team.
"This opportunity is exactly why I decided to attend the University of Michigan," added Richard Heald, MBA2. "The experience of doing business in Prague enabled us to apply our learnings in a real-world setting."
|Above: A chef in Taiwan demonstrates a KitchenAid project in his restaurant.||Above: Michele Wise and Catherine Crane enjoy the view in Hong Kong.|
By James Steele, MBA2
The Project: Our project focuses on developing a marketing entry strategy for KitchenAid portable appliances in selected markets in Asia. The strategy will include assessments of consumer food preparation and appliance usage and trends, market segmentation, potential sales channels, and brand message tailored for each country.
The Team: James Steele, Larry Lein, Catherine Crane, Will Johnson, Michele Wise, Leslie Chow
The Sponsor: KitchenAid Portable Appliances
Countries visited: Thailand, Hong Kong, Taiwan ROC
Key Learning: One of the biggest things that I learned was that in order to do business effectively in another country one must really get out and experience the culture firsthand. Risking your life in crazy taxi rides, eating street food, and stumbling with the language are all part of experiencing the culture. By going through this trial by fire you get a better appreciation of the country and feel more a part of it. With only a little more than a week in-country for our research, this process was a bit exhausting at times, but that was half the fun.
By Donald Houston, MBA2
The Project: Examining what makes guarantee funds and micro-lending effective in emerging markets.
The Team: Donald Houston, Daniel Osafo, Darin Hickman
The Sponsor: University of Michigan; research objectives tied to objectives of the African Business Development Corps
Countries Visited: South Africa, Namibia, Switzerland
Key Learnings: It is critical to be face to face when doing international transactions. This at least minimizes communication difficulties. If there are cultural differences compounded by time and distance, any attempt at information exchange will have limited success.
You have to constantly marry the advantages or disadvantages of the non-business international exchange with the primary business purposes of your journey. For example - if a person has a positive feeling towards the U.S. and Americans it can help to spend some time sharing some of these experiences. On the other hand, if there is a negative perception, it might not be time well spent to try to counter these perceptions. Try to focus on non-business issues in the host country and concentrate on the business issues.
|John Lydick, Ryan Nordberg, Mike Ferrante, Richard Heald, and Ty Wang pause on the Charles Bridge in Prague.|
By Ty Wang, MBA2
The Project: To determine the market size and drivers for e-commerce for SPT Telecom, AT&T's knowledge partner in the Czech Republic. They lose their monopoly status in 2000 as the Czech Republic prepares to enter the European Union.
The Team: Michael Ferrante, Ty Wang, Richard Heald, John Lydick, Ryan Nordberg
The Sponsor: AT&T and SPT Telecom
Cities visited in Czech Republic: Prague and Brno
Key Learnings: You can read about a country all you want, but you will never really have a full appreciation until you jump in and make it happen. Our team left Prague with a profound respect for the Czech people as they try and bootstrap their economy and prepare for entry into the EU.
By Dina Denham, MBA2
The Project: Cell Stain Technologies. CST is an incubator company in the Weizmann Institute in Rehovot, Israel. CST is developing an immunohistochemical stain that differentiates between malignant and non-cancerous cells in cell samples. We are focusing on familiarizing CST with external market conditions, patenting issues, regulation in the US and EU, and potential models ofm strategic partnership. Our recommendations will center on how CST should proceed with these issues over the next 12 to 18 months.
The Team: Dina Denham, Stephanie Leifer, Erin Markey, Kata Szasz (from law school)
The Sponsor: University of Michigan Venture Fund
Countries Visited: the Netherlands, Israel, Belgium, England, and France
Visiting so many countries within a twelve-day period. It was interesting to experience the different cultures and business styles rapid-fire. It definitely kept me on my toes.
By Raji Sen, MBA2
The Project: To determine market potential for managed care services (as delivered by Lillyís MediKredit and PCS organizations) in Africa/Middle East and with Pan-African/Arabian multinationals.
The Team: Marco Casile, Wolfram Hedrich, Alisa Lask, Goran Lindqvist, Demille Richardson, Lisa Rubens, Raji Sen
The Sponsor: Eli Lilly
Countries Visited: South Africa, Ivory Coast, Kenya, Saudi Arabia
Even in countries where there are separate government and "private" healthcare sectors, the government can have a major influence on how the private healthcare sector functions.
-AIDS is becoming a huge factor in how healthcare policy is determined in Africa.
If you are planning a business trip to another country, it is critical to learn something about the culture and business practices of that country, because this information will be invaluable to your business dealings and help you avoid making cultural mistakes.
|Three members of the Croatia incubator team pose with representatives of the Koncar incubation project.|
By Robert Anderson, MBA2
The Project: BICRO Business Incubators in Croatia
The Team: Rob Anderson, Melissa Ferguson, Kelly Hutchison, Adam Meron, Dan Muzich
The Sponsor: Republic of Croatia Ministry of Science and Technology and William Davidson Institute
Countries visited: Croatia, Sweden, Finland, Austria, Italy, Denmark
Key Learning: Several "Key Success Factors" for European business Incubators include:
- The development of a National Incubator System needs to be from the "bottom up" and to be "organic".
- Small-country hi-tech incubators must have international market access and their products must be designed and marketed with an export orientation from day one.
- The development of easy access to capital for entrepreneurs is a crucial first step.
- Community acceptance and support for entrepreneurship still needs time to develop in certain countries.
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