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EBX The Rise And Fall Of A Billionaire Eike Batista Case Solution

Solution Id Length Case Author Case Publisher
2062 1017 Words (6 Pages) Luiz Felipe Monteiro, Anne-Marie Carrick INSEAD : IN1391
This solution includes: A Word File A Word File

One of the main issues, in this case, is a lot of diversification of the company. This resulted in Batista’s lack of focus on things that could be problematic for the future. Furthermore, there was no allotment of time for strategic planning. As a result, there was no analysis of the business units, their profitability, viability analysis, and growth planning. 

The companies were inter-related and once the OGX toppled down, the other companies were also impacted. This showed that Batista was quick at grabbing opportunities and exploring them, strategizing was something that lacked in all companies resulting in a domino effect fall. Companies were established in the group to tackle the issues and challenges faced by existing companies. For example, in 1986 the TVX started developing the La Coipa mine located in the middle of a desert in Chile. To overcome the water shortage, in 1998, the AMX was launched after the acquisition of a Brazilian company to cater to the water resource issue in the Atacama Desert. 

Following questions are answered in this case study solution

  1. Problem Statement

  2. Case Analysis

  3. Strategic Alternatives

  4. Recommendations

Case Analysis for EBX The Rise And Fall Of A Billionaire Eike Batista Case Solution

2. Case Analysis

One of the staggering points from the case was the foundation of new start-ups spinning off from EBX. However, it was important to operationally stabilize these start-ups before pursuing the next opportunity. As a result, even the industry analysts were concerned about the operating capability of these start-ups by the end of 2011. 

Furthermore, the major chunk of opportunities that Batista got was during the boom of the Brazilian economy. As a result, he invested in Brazil’s infrastructure including the development of many ports that mobilized the country’s import and export market. It helped the MMX, the iron ore subsidiary of EBX to form strategic relations with international companies in China and South Korea. MPX, the power generation subsidiary was created after the 2001 blackouts in the country. Therefore, this opportunity of power shortage was well played by EBX. 

The downfall of EBX included a loss of $95 million because of a delay in the completion of electric power plants. The failure of OGX, the oil and gas subsidiary was because of a lack of planning and resource allocation. This is because the company lost $5 billion by drilling oil wells without any viability studies conducted. Furthermore, the EBX was a resource drain proving finances for activities such as airplanes for the executives of the company and remodelling a rented office space. This reflects a lack of identification of issues and lack of strategic planning on Batista’s side.

Also, in 2009, the Brazilian economy had seen a dip. The companies in EBX overcame this financial crisis and were undergoing change. Several internal systems were created which reflected that the company was set on its way towards a culture that facilitated communication and implemented the best practices. The emergence of new companies during this phase indicated that the entrepreneur’s focus was divided. Also, Batista’s take on not selling any part of his company and then putting up part of its exploratory fields for sale indicated that something was wrong. This resulted in a loss of trust of the investors which is one issue which is not identified in this case. Bottazzi, et al., (2016), state that trust is the key to getting good investment for the company. 

Additionally, Batista was accused of using the information to manipulate the investors to increase the investment in EBX. Also, guaranteeing some loans personally piled Batista’s debt, impacting his personal value. 

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