The case chronicles the 200 year old legacy of the family business of the Rothschild
Assignment Solutions, Case study Answer sheets Project Report and Thesis contact aravind.banakar@gmail.com www.mbacasestudyanswers.com ARAVIND – 09901366442 – 09902787224 Principles and Practice of Management CASE STUDY (20 Marks) The case chronicles the 200 year old legacy of the family business of the Rothschild Family. Started by Mayer Amschel Rothschild in 1790, in Frankfurt, the banking business of the family ruled Europe for centuries (dominated financially). The 5 sons of Mayer strategically placed in different financial centers of Europe took advantage of International events, thus creating their initial wealth. The case focuses on the reasons for the success and failure of family business at different times. It explores the concepts of family values, Succession Planning, inheritance planning, growing entrepreneurs within the family, controlling ownership of business, and adapting to changing times. Mayer was born in 1744 in a ghetto of Frankfurt known as the Frankfurter Judengasse, which was home to the largest Jewish community in Germany. After losing his parents at the tender age of twelve, Mayer struggled to make his up to become a court Jew . He joined the banking firm of his father’s colleague, Jacob Wolf Oppenheimer, and later established himself as a rare coin trader. His clients included the prince of HesseKassel. The good connections that Mayer developed during this period earned him the title of court agent. By 1780, Mayer had become a well known trader of coins, medals, and antiques in Frankfurt . He made enough money to buy a new house in 1787. The growing circle of suppliers and customers in his existing business gave him the impetus to move into the banking business by the early 1790s. Over the next few years, Mayer’s banking business achieved remarkable growth and, by 1797, he was counted among the richest Jews in Frankfurt. Mayer had 5 sons and 5 daughters. By the end of the 18th century, his banking business had become too big for him to control alone. One of the majorreasons for the success of the Rothschild family was the individual success of the five sons of Mayer. According to Amschel, Nathan acted like the commanding general in London, and the four brothers were like his soldiers and everyone played a very important role in taking the family’s business forward. However, the individual success of the descendants was not under the control of any single person as the family got bigger from the third generation onward and the businesses grew more independent. To make every business of the family a success in the future would be tough without coordination of all the other family members. Every crisis in Europe opened up new opportunities for the Rothschild family; rather, they utilized the conditions to their benefit. When the ghetto of Frankfurt was bombed by the French army in 1796, it reduced the restrictions placed upon Jews in Germany. As a result, Mayer’s business flourished and his newly started banking business received a boost.. After the battle of Waterloo, Nathan and his brothers concentrated on expanding the business and increasing the wealth of the family primarily by giving loans to governments. The London House with the help of Paris, Frankfurt, Naples, and Vienna, between the years 1815 and 1859, issued a total of 50 loans worth 250 million sterling pounds, mainly to governments which were in need . The Rothschild family banks altogether became the most powerful bank in financial history and dominated bond issues. According to some industry experts, the principal contribution of the Rothschild family to nineteenth century capitalism was the development of the bond market. The early days of the 19th century saw the introduction of the taxation system and the Rothschild’s style of operating with a single commercial account couldn’t sustain itself. The different Houses continued with their separate businesses independently. The failure of the Rothschild’sAustrian bank in the 1930s, the Nazis seizing the family’s property in Austria, and the nationalization of the French Bank in the 1980s showed a breakdown in the power and control the Rothschild family had enjoyed for nearly 200 years... Answer the following question. Q1. Comment on the success of the family business of Rothschilds and their strategic moves. Q2. Explain how the family beliefs, culture, and faith in religion played an important role in decision • making of the owners. Assignment Solutions, Case study Answer sheets Project Report and Thesis contact aravind.banakar@gmail.com www.mbacasestudyanswers.com ARAVIND – 09901366442 – 09902787224
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