READ THE FOLLOWING CASE STUDY AND ANSWER THE QUESTION GIVEN IN THE END:

It is commonly believed that multinational corporations have to be very large. Indeed, a fairly popular criterion defines multinationals

as companies that have at least $200 million in sales. But actually, there are a great many small companies that have been outstandingly successful, if only because they are politically so much less visible.

A good example of a small and highly successful multinational company is a small Swiss company, Urania A.G., located in the small

townhardly more than a villageof Glarus in eastern Switzerland. The company's history is a very peculiar one: in the late 1960s, Urania was on the point of liquidation, totally unsuccessful and, indeed, practically bankrupt.

The story actually begins with a man, Chris tian Bluntschli, now in his nineties. Bluntschli, who had been educated as an engineer in

Zurich, came in the early 1930s to Philadelphia's Wharton School as an exchange student. He stayed long enough to get a master's degree and then a doctorate. When he went back to Switzerland, he was promptly hired by that country's first business school, the Commercial University in St. Gallen. He became a very successful and popular professor of finance and stayed until the late 1960s. Then he went to one of the big Swiss banks as an economist. But he found himself rather bored by the work. When the Wharton School approached him with the suggestion that he come to Philadelphia and join the faculty, he was on the point of accepting.

But before he could resign, the bank's president called him in and said, "I wonder, Bluntschli, whether you would take on a special assignment? We have lent a lot of money to a small company which makes precision gears in Glarus, Urania A.G. We now own about 35 percent of the stock. The company seems to be in terrible trouble; in fact, I strongly suspect that it is completely bankrupt. It seems we should liquidate, but the company is the largest employer in a poor rural area, and we are rather worried about the public relations aspect of letting it go out of business. Could you go down to Glarus and look into the affairs of the company and tell us whether you think that salvage is worth trying?"

When Bluntschli went to Glarus, he found the situation much worse than anything he had been prepared for. Early in the twentieth

century, the company had been the world's leading supplier of gears for the then-fashionable cog railways. But cog railways had gone out of fashion, replaced by cable cars and rope tows. And although the company had the right products needed for the manufacture of these replacements, it had never tried to sell them. Instead, it had built tremendous service staffs and spare-part inventories to service old cog-railway customers everywhere. In Japan alone it had twenty-eight trained people on its payroll to supply spare parts and service to only twelve customersall of them themselves losing money and going out of business. The people who ran the company had spent all of their time and the company's money on a wide variety of fields. However, they had never done anything with their patents. Their policy was not to license but to manufacture. Where they could not manufactureand in few of the areas in which they had taken out patents did they have any manufacturing capabilitythey simply did

nothing.

The more Bluntschli saw, the more depressed he became. But also he was excited by the worldwide service capability the company had built up. Finallyhe himself says, "in a fit of temporary insanity"he decided that managing Urania was what he wanted to do. He went to his associates in the bank and said, "The company is hopeless. How much do I have to pay you for its ownership?" And before he could recover from his temporary insanity, he owned 100 percent of a bankrupt company with no business, no working capital, and no assets, except for an excellent worldwide service staff.

That was in the 1960s. Today, Urania is one of the most profitable small businesses in the world. It still employs only about nine hundred people. But it is the leader in precision gearingin specialized transportation such as cable cars, ski tows, mining gondolas, and in the special gearing needed for the equipment to put containers on ships and so on. It actually has manufacturing facilities in about thirty countries, but it makes only one or two parts of each of the patented pieces of equipment it sells. Whatever is standard is contracted out to be made on the spot. It still focuses on service, and especially on design service. But it now charges for service and makes enough profit on service to cover its entire worldwide payroll. Whatever it gets for selling equipment, minus what it has to pay to its own suppliers,

is, in effect, net profit.

When you ask Bluntschli how he got there, he smiles and says, "I did only the obvious things, the things you find in each textbook."

QUESTION

What do you think Bluntschli did that neither his predecessors in the ownership and management of Urania nor his associates in the bank did?

Hint: Answer according to the principles of management discussed in the class.