McCombs School in the News
June 2004

Sometimes It's Better to Reduce Size, Not Increase Price
HBS Working Knowledge, June 28, 2004
Consumers hate price increases, but what is a company to do when material costs skyrocket? One answer: Think small. For many products, it's better to reduce quantity than raise prices, conclude Harvard Business School marketing professor John Gourville and McCombs School of Business professor Jonathan Koehler. They recently published their findings in a working paper, "Downsizing Price Increases: A Greater Sensitivity to Price than Quantity in Consumer Markets," that the Harvard Business School's Working Knowledge e-research site discussed in a Q&A with Gourville.
Read the HBS Working Knowledge Q&A (requires free registration).

Is Medicare Offering Seniors Too Many Choices?
The Baltimore Sun, June 27, 2004
Are the new medicare drug discount cards, created as part of this year's sweeping Medicare reform law, a boon to seniors or just another source of confusion? Seniors using the cards face a plethora of product choices. A proliferation of product choices can sometimes expand a market, said Susan Broniarczyk, a professor of marketing at the McCombs School, but just as often, having too many choices causes "consumer overload," freezing customers like deer in the headlights of the modern marketing machine. A field study by Broniarczyk shows for example that convenience stores might increase sales by cutting in half the number of products they offer. Some lawmkers, including Sen. John B. Breaux (D—LA), a key architect of this year's Medicare bill, are coming to the same conclusion. "Choices are important," Breaux said of the drug cards, "but we may now have too many choices."
Read the Baltimore Sun story.

Credit Scoring Study Bolsters Industry Claims
The Kansas City Star, June 27, 2004
As insurance companies expand the use of credit scores to set auto and homeowner insurance rates, many consumers are feeling the consequences. While the practice of “credit scoring” remains controversial—and against the law in several states—insurance officials in states that permit the use of credit scores to assess insurance rates cite their own studies to support the validity of the practice. “For instance, a study by the Bureau of Business Research at the McCombs School of Business at the University of Texas at Austin agreed with the industry that ‘in general, lower credit scores were associated with larger incurred losses.’”
Read the Kansas City Star story (requires free registration).

Obituary: Houston Grocery Wholesaler Milton Harris Levit, BBA '46
The Houston Chronicle, June 26, 2004
Milton Harris Levit, BBA '46, whose family owned a longstanding grocery wholesaler enterprise in Houston, died June 25 after suffering a heart attack. He was 80. With his brother, Max Levit, he co-managed Grocer's Supply, which Forbes magazine listed in 1990 as one of the nation's 400 largest private companies, with 1,100 employees and estimated revenues of $1 billion. The company now supplies 400 supermarkets and thousands of convenience stores in five states. After World War II, Levit graduated from The University of Texas at Austin with a bachelor's degree in business administration. According to the Chronicle, the stalwart supporter of his alma mater drove a burnt orange Chevy with a "HOOK MM" license plate. Committed to religion and the advancement of medical care and charities, he served on the boards of M.D. Anderson, the Jewish Community Center and the Bank of Houston.
Read the Houston Chronicle obituary.

Konana Points to Offshoring's Mixed Benefits for India
Fort Worth Star-Telegram, June 23, 2004
In the conclusion to the Star-Telegram's special report on offshoring, Mark Horvit and Barry Shlachter explore the reality that while multinational corporations create needed work in foreign countries, the benefits are often limited to those who get the jobs. Considering India, for example, Prabhudev Konana, a Bangalore native and business professor at The University of Texas at Austin, pointed out that software and information technology-related services are responsible for just 3.2 percent of India's $2.7 trillion gross domestic product. The information-technology sector contributed a small fraction of the 10.4 percent growth in India's GDP for the quarter ending Dec. 31, Konana said. "The rest came from traditional agriculture, manufacturing and the service sector."
Read the Star-Telegram story (requires free registration).

McCombs Hires New MBA Program and MBA Placement Directors
Austin American-Statesman, June 22, 2004
The week of June 17, the McCombs School welcomed two new members to its MBA leadership team. Stacey Rudnick began duties that week as director of MBA career services. Rudnick had been the senior associate director of the MBA Career Management Center at Goizueta Business School at Emory University in Atlanta. The school also announced that effective July 1, Daniel Garza will be the new MBA program director and assistant dean at the McCombs School. Garza was serving as director of MBA admissions and has held several roles at the school since 2001.
Read the McCombs School press release.

Texas Women Ventures Fund LP Benefits from Sullivan and Others’ Investments
Austin Bizwomen.com, June 21, 2004
Thanks to Lenore Sullivan, associate director of the Center for Real Estate Finance at the McCombs School, and other investors, the Texas Women Ventures Fund LP has raised more than $5 million, allowing the fund to apply for a Small Business Investment Company license from the U.S. Small Business Administration. The license will allow the fund to use its money and borrowed funds backed by an SBA guarantee for its investments. Fund executives say they have received promising signals from the SBA so far.
Read the Bizwomen story (requires free registration).

Boons of India's Outsourcing Sector Have Not Reached the Masses
Fort Worth Star-Telegram, June 20, 2004
While a convergence of factors has made India the world's white-collar outsourcing leader, outsourcing has not impacted the country's economy to the extent that many outsiders might believe, said Prabhudev Konana, a professor of management science and information systems at The University of Texas at Austin. Konana, who originally hails from India's Silicon Valley, Bangalore, noted that the nation's villages, where the majority of the population resides, have not enjoyed any new affluence from outsourcing. While the country's population tops 1 billion, fewer than 1 million Indians are employed in call centers and the information technology sector.
Read the Star-Telegram story (requires free registration).

Prentice: Public Expects Companies Like Halliburton to Clean House
Bloomberg.com, Bloomberg Radio, June 18, 2004
As widely reported by Bloomberg and other wire services, Halliburton Co., the world's largest oilfield-services contractor, severed ties with the former chairman of its KBR unit after a probe of $180 million in possible bribes in Nigeria showed that he received "improper personal benefits." A. Jack Stanley, who retired as chairman of the unit in December, and another ex-employee were fired as consultants for violating the company's conduct code, Houston-based Halliburton said in a statement. "It's very tough for companies to stay loyal to wrong-doing employees because companies are rewarded for cleaning up their own messes, and they are punished for not doing that," Robert Prentice, a professor of business law at the University of Texas at Austin, told reporters at Bloomberg and audiences tuning into the financial media company's radio network.
Read Bloomberg.com story.

Schlotzsky's Ousts Top Management, Appoints Cadenhead
Associated Press, Reuters, Dow Jones, et al., June 17, 2004
The board of restaurant franchisor Schlotzsky's Inc. decided in a special meeting June 16 to remove the company's senior management, elect an interim chief executive, and appoint new board leadership. President and chief executive John Wooley was replaced on an interim basis with Dallas lawyer David Samuel Coats, and the board replaced its chairman, Floor Mouthaan, with director Gary M. Cadenhead, a senior lecturer in entrepreneurship at the McCombs School of Business and the director of the school's MOOT CORP® new venture competition. Former Texas public accounts comptroller John Sharp was elected vice chairman.
Read SmartMoney.com story (requires registration).

Just What Does LLC Mean Anyway?
Austin American-Statesman, June 14, 2004
If you've ever wondered what the corporate initials LLC (limited liability company) really mean, you're not alone. Jane Grieg of the American-Statesman turned to Robert Prentice, a professor of business law at the McCombs School, for some clarity on the subject. LLC, LLP (limited liability partnership) and, the newest to join that group, LLLP (limited liability limited partnership) are all state designations, said Prentice, describing forms of business organizations that restrict liability. All three designations are suprisingly young. "The reason you see all these initials (LLC, LLP, LLLP) now and didn't earlier is that these three new forms did not exist before about 1990," said Prentice.

SEC Finds High-Profile Example in Halliburton
Bloomberg, June 11, 2004
The SEC investigation into Halliburton Co.'s activities in Nigeria is just one of several probes of possible violations of the Foreign Corrupt Practices Act by companies seeking to win work in oil-rich, developing nations. Regulators may be trying to demonstrate to other nations that the U.S. is vigorously enforcing its anti-bribery law after getting 33 other countries to agree to common standards in 1997, said Robert A. Prentice, a professor of business law at The University of Texas in Austin. "We're saying, 'We're really working hard here, we'd like you to get in line here too,'" Prentice said. "It doesn't hurt to make examples out of Halliburton and Exxon."
Read Bloomberg story.

Class of 1960 Accounting BBA Built $137 Million Company
Washington Post, June 7, 2004
When William Soza, BBA ’60, retired in 2002, he had built a $137 million information technology consultancy from the ground up. After moving from Presidio, Texas, to the Washington, D.C. area in 1969, he started an accounting firm, Soza & Co., which grew tremendously and branched out into many different pursuits. Throughout his career, Soza prioritized civic involvement, and was active in a number of community groups, paying particular attention to issues facing the Hispanic business community. “In many organizations, I may be the only Hispanic on the board or on the committee, so I think I provide that kind of a perspective on certain issues,” he said in a recent Washington Post profile of his career and community involvement. “I think it’s necessary not only for our community in the metro area but the population as a whole.”
Read Washington Post story (requires free registration).

 

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