Bertlesmann: Before, during and after Middelhoff|Business Strategy|Case Study|Case Studies

Bertlesmann: Before, during and after Middelhoff

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Case Details:

Case Code : BSTR061
Case Length : 18 Pages
Period : 1994 - 2003
Organization : Bertlesmann
Pub Date : 2003
Teaching Note :Not Available
Countries : Europe
Industry : Media and Entertainment

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Bertelsmann After Middelhoff - Back to Basics

In August 2002, Thielen announced that the Mohn family shares would not be floated in 2005 and that only GBL's share would be offered through the IPO. He said, "We do not necessarily need to bring our shares on to the bourse. We feel we can finance growth on our own." Thielen also announced that he would adopt a conservative approach to improve the company's financial situation, left in shambles by Middelhoff. He added that Bertelsmann had no plans to make any major acquisitions in the near future and that it would only focus on improving the efficiency of operations, cutting debts and increasing profitability. Thielen said that since Bertelsmann had exceeded a self-imposed debt limit, on account of Middelhoff's strategies, the company would work towards reducing that debt through a consolidation exercise...

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Moving Towards the Future

In the second quarter of 2003, Bertelsmann announced consolidated revenues of €18.31 billion and a profit of €928 million, which analysts regarded as a considerable achievement in light of the economic downturn across the world (Refer Exhibit III for Bertelsmann's financials).

The profit of €928 million was however, quite low compared to the €1.24 billion earned in fiscal 2001. Company sources attributed this fall in profits to the write-off of Internet investments by the company on account of the loss on those investments. In fiscal 2002, BMG successfully made a turnaround, registering a profit of €125 million, as against a loss of €79 million in fiscal 2001. Bertelsmann sources revealed that they expected DirectGroup also to turnaround in fiscal 2003. Commenting on Bertelsmann's progress post Middelhoff's resignation, the company's website stated, "Bertelsmann has focused its energy on the core businesses, cut its losses, and markedly increased its profitability...

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Exhibit I: Bertelsmann - Core Values of the Business Model
Exhibit II: Bertelsmann - Corporate Governance Information
Exhibit III: Bertelsmann - Total Revenues by Division (2001-2002)
Exhibit IV: Bertelsmann Financial Highlights

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