Page 139 - MS Year in Review 2020

limited preparation for this diversification initiative. Since the nature of its planning

for entry into the media business was not comprehensive or sufficient, not
surprisingly Westfield soon found itself enmeshed in a crisis.

Key aspects of the crisis can be summarized as follows:

 Soon after the acquisition was completed, Westfield and its partner Northern
Star began to experience a variety of acquisition-related problems.

 Channel Ten quickly became a financial drain on Westfield Capital.
 The global stock market crash in October 1987 caused a sharp drop in the
market capitalization of Westfield Capital, as well as a collapse of media share

prices in Australia, which, in turn, put additional financial stress on Westfield.
 Both factors combined to put Westfield at risk.

Lowy’s Leadership Initiatives to Manage the Crisis

Even though, at some level, Frank Lowy wanted to “stick with the deal,” he made
the decision to exit the media business and take his losses. He authorized the head

of Westfield Capital to work out a plan for exiting the business and gave him a
budget of $200 million to accomplish this.

On September 1, 1989, the exit was completed. The core Westfield business
remained intact and was now protected from the financial albatross that Channel
Ten represented.

LESSONS FROM THE LEADERSHIP OF WESTFIELD

DURING THE CRISIS

The first lesson is that adequate planning – especially when diversifying away from
a company’s core business – is important. Stated in a different way, ineffective

planning can actually lead to a crisis. In Westfield’s case, there seems to have been
a relatively superficial analysis of and plan for purchasing and then managing

Channel Ten in Australia. Westfield leadership never addressed some fundamental

138
© Management Systems Consulting Corporation, 2020. All rights reserved