Campbell and Bailyns Boston Office Managing the Reorganization Case Solution

1. What changes in its industry and customers were affecting Campbell & Bailyn in 2007?

The industry faced considerable changes in the past 10 years, which were quite relevant to the company in 2007 as well. These changes included the entrance of new products and competitors into the market. For instance, low-priced and low-service brokers entered the market and captured a significant chunk of customers which resulted in profit reduction for many segments of the fixed-income brokerage industry. While the client companies were accumulating more assets to manage as baby boomers saved more, brokerage firms still faced flattened commissions due to increased competition from new entrants in the market. Although new product offerings like futures and options had considerable profit margins, they required more expertise to market and sell. This was because a lot of customers (investment firms) had in-house analysts who tracked these complicated bonds and securities and offered expert advice to the portfolio manager, so companies like Campbell & Bailyn needed expertise greater than these analysts to gain customers. Apart from this, the company was also struggling to help customers minimize losses on their bond portfolios due to disruptions in the financial industry as a result of a worldwide collapse in billions of dollars worth of mortgage-backed securities. Moreover, as synthetic debt instruments entered the market, they introduced new complexities and risks, making it increasingly difficult for Campbell & Bailyn’s clients to keep pace and effectively manage their portfolios. They needed urgent assistance from specialists who could give reliable advice. Hence, reorganization became necessary for the company to deal with the changes in the industry as well as consumer demand while maintaining its place in the market. 

2. In the light of the changes in the marketplace, was creating KAT a good idea? If not, what should Ken Winston have done?

With an increase in competition and a reduction in the margins of the fixed-income brokerage industry, creating KAT seemed like a good idea as the newer products in the market required more expertise to market and sell; hence, assigning each product to a specialist was necessary to remain competitive in the market and retain company's market share.