Page 138 - MS Year in Review 2020

and John were each putting in twelve to sixteen hours a day. … Every detail about

every development was decided by them; everyone reported to them. 122

In 1971, its eleventh year as a public company, Westfield announced its eleventh

consecutive profit increase and announced a name change to Westfield Ltd. Further
recognition of the business’ attractiveness came in the form of an investment in two

new Westfield shopping centers by the European company General Shopping SA, a
Luxembourg-based investment company and an associate of Credit Suisse.

Westfield’s Situation and Factors that Led to the Crisis

By 1972, Frank Lowy and John Saunders realized that the shopping center market
was reaching a saturation point and they began looking for opportunities to
diversify. In 1986, Westfield Capital was created as a vehicle for long-term equity

investments in companies outside of the shopping center industry. Consistent with
the incremental approach used at the company – which served it well as a leader in

the shopping center business – this process was the results of many individual
decisions, versus having a “grand design.”

Westfield’s expansion and diversification took place in two phases: Phase 1 – Entry
into the U.S. market and continued expansion in Australia, 1972-1984; and Phase 2

– Diversification outside of the real estate industry, 1985-1989. Although Phase 1
was well thought out and executed, a “crisis” emerged in Phase 2 brought about by
the diversification into the Media business and the acquisition of Channel Ten in

Australia.

In retrospect it seems that Westfield did little due dalliance to understand the
nature of the media business in general or the situation at Channel Ten in
particular. In addition, Westfield had evolved an approach to planning that was

based upon a series of the incremental decisions rather than compressive strategic
planning. This incremental approach, which served it well as a leader in the
shopping center business (probably because they knew that business well), was

clearly not sufficient for entry into a new business. The acquisition of Channel Ten
was characterized by inadequate due diligence, lack of in-depth analysis, and

122 Margo, p. 102

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