IMD-1-0217 © 2006
Hamilton, Stewart; Micklethwait, Alicia
The case traces the history of Ahold, the world’s third largest food retailer, describing in detail the events in the 10 years leading up to its collapse. After Cees van der Hoeven, the brand new CEO, took over in 1993, Ahold embarked on a programme of rapid expansion with a target of 15 per cent growth in earnings per share each year. The strategy took the type of penetrating new geographical markets and diversification into related businesses. While van der Hoeven seemed to be attaining his objectives. The real causes were considerably more elaborate while the obvious reason for Ahold’s downfall was the discovery of fraud at one of its US subsidiaries. The firm itself survived, thanks in part to the presence of a poison pill that is, but was drastically restructured with many of van der Hoeven’s ventures being dismantled in the next two years. The case offers the chance to discuss many of the common causes of business failure: 1) inferior strategic decisions, 2) over-growth, especially through ill judged acquisitions, 3) a dominant CEO driven by greed and hubris, 4) poor internal controls, particularly in regard to remote operations, 5) unsuccessful boards. The case may also be utilized to remark on the existence and effect of “ corporate governance and other restrictions on common investor power; poison pills” and also the various reforms now in place or being proposed; and distant operations may be effectively controlled.
Subjects: Corporate collapse; Accounting fraud; Expansion; Acquisitions; Diversification; Restructuring; Recovery; Strategy;
Controls; Remote operation
Settings: The Netherlands; Global; Food retail; 278,000 employees; 9,000 stores; 1993-2005
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