Banking Investigate

Better Results Start With A Reality Check

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Executive Summary

When a barrel of oil reached a record $145 in July 2008, oil companies were going "wild and crazy," says John Percival, Wharton adjunct professor of finance. "It was halcyon days for them. But not long after those record prices were reached, they dropped. And no one seemed more surprised than the oil companies. They were operating under the assumption that prices only go one way - up. But prices weren't the only thing they didn't get. The oil companies failed to recognize that consumers changed. High prices caused people to find ways to conserve and to better manage their energy use. Prices dropped as a result." Percival, who teaches a session of the Advanced Management Program, concludes, "Doing business with such a disconnect means you can't plan. Your responses are always reactions to crises."

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