STRATEGIC MANAGEMENT
Assistant Professor H. Blair Pomeroy
Week 4: Wednesday, 1 February 2023
0
Today
1
Today
• Last Class Review
15 mins
2
Today
• Last Class Review
15 mins
• Harlequin Case Study
25 mins
3
Today
• Last Class Review
15 mins
• Harlequin Case Study
25 mins
• 7-S Model Discussion
20 mins
4
Today
• Last Class Review
15 mins
• Harlequin Case Study
25 mins
• 7-S Model Discussion
20 mins
• Assignment 1 Refresh
15 mins
5
Today
• Last Class Review
15 mins
• Harlequin Case Study
25 mins
• 7-S Model
20 mins
• Assignment 1 Refresh
15 mins
6
Today
• Last Class Review
15 mins
• Harlequin Case Study
25 mins
• 7-S Model
20 mins
• Assignment 1 Refresh
15 mins
7
The Geographic Scope of Competition: More than just Sales
8
The Geographic Scope of Competition
Completely
Local
Regional
National
Partially Global
Fully
Global
(little/no home
market bias)
Strategy
9
The Geographic Scope of Competition: Functional Decisions
Completely
Local
Regional
National
Fully
Global
Partially Global
(little/no home
market bias)
Strategy
R & D/Design
Production
Sales & Marketing
Distribution
Finance
IT
Human Resources
10
Essential Vocabulary
•
Economies of Scale. Reducing unit cost through increased
volume. Normally this involves largely fixed costs (Large PPE,
R&D costs, etc.).
Companies can gain economies through volume growth in a core
company, within similar businesses (horizontal integration) or
within businesses that share common operational elements
11
Essential Vocabulary
•
Economies of Scale. Reducing unit cost through increased
volume. Normally this involves largely fixed costs (Large PPE,
R&D costs, etc.).
Companies can gain economies through volume growth in a core
company, within similar businesses (horizontal integration) or
within businesses that share common operational elements
•
Economies of Scope. Reduced costs and/or increased revenue
from leveraging resources and capabilities across different types
of business
12
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
• Political and Institutional Considerations
• Strategic Considerations
13
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
14
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
15
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, even learning)
16
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
17
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
• Financial incentives
18
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
• Financial incentives
− What factors favor more narrow economic reach?
19
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
• Financial incentives
− What factors favor more narrow economic reach?
• High delivery costs (including transportation and storage)
20
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
• Financial incentives
− What factors favor more narrow economic reach?
• High delivery costs (including transportation and storage)
• Perishability
21
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
• Financial incentives
− What factors favor more narrow economic reach?
• High delivery costs (including transportation and storage)
• Perishability
• Low/no economies of scale
22
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
• Financial incentives
− What factors favor more narrow economic reach?
• High delivery costs (including transportation and storage)
• Perishability
• Low/no economies of scale
• Distinctive local tastes
23
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
• Financial incentives
− What factors favor more narrow economic reach?
• High delivery costs (including transportation and storage)
• Perishability
• Low/no economies of scale
• Distinctive local tastes
− What factors encourage geographic clustering?
24
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
• Financial incentives
− What factors favor more narrow economic reach?
• High delivery costs (including transportation and storage)
• Perishability
• Low/no economies of scale
• Distinctive local tastes
− What factors encourage geographic clustering?
• Benefits of proximity to value chain partners
25
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
• Financial incentives
− What factors favor more narrow economic reach?
• High delivery costs (including transportation and storage)
• Perishability
• Low/no economies of scale
• Distinctive local tastes
− What factors encourage geographic clustering?
• Benefits of proximity to value chain partners
• Benefits of proximity to competitors
26
Making Geographic Decisions for your Business (Unit)
• Economic Considerations
– What factors favor broader economic reach?
• High economies of scale (Production, R & D, Marketing, even learning)
• High economies of scope
• Financial incentives
− What factors favor more narrow economic reach?
• High delivery costs (including transportation and storage)
• Perishability
• Low/no economies of scale
• Distinctive local tastes
− What factors encourage geographic clustering?
• Benefits of proximity to value chain partners
• Benefits of proximity to competitors
27
Making Geographic Decisions for your Business (Unit)
• Political and Institutional Considerations
28
Making Geographic Decisions for your Business (Unit)
• Political and Institutional Considerations
– What factors favor broader economic reach?
29
Making Geographic Decisions for your Business (Unit)
• Political and Institutional Considerations
– What factors favor broader economic reach?
• Trade pacts
30
Making Geographic Decisions for your Business (Unit)
• Political and Institutional Considerations
– What factors favor broader economic reach?
• Trade pacts
− What factors favor more narrow economic reach?
31
Making Geographic Decisions for your Business (Unit)
• Political and Institutional Considerations
– What factors favor broader economic reach?
• Trade pacts
− What factors favor more narrow economic reach?
• Trade restrictions
32
Making Geographic Decisions for your Business (Unit)
• Political and Institutional Considerations
– What factors favor broader economic reach?
• Trade pacts
− What factors favor more narrow economic reach?
• Trade restrictions
• Highly-specific product regulations
33
Making Geographic Decisions for your Business (Unit)
• Political and Institutional Considerations
– What factors favor broader economic reach?
• Trade pacts
− What factors favor more narrow economic reach?
• Trade restrictions
• Highly-specific product regulations
• Government corruption or onerous mandates
34
Making Geographic Decisions for your Business (Unit)
• Political and Institutional Considerations
– What factors favor broader economic reach?
• Trade pacts
− What factors favor more narrow economic reach?
• Trade restrictions
• Highly-specific product regulations
• Government corruption or onerous mandates
35
Making Geographic Decisions for your Business (Unit)
• Strategic Considerations
36
Making Geographic Decisions for your Business (Unit)
• Strategic Considerations
– Internal considerations
37
Making Geographic Decisions for your Business (Unit)
• Strategic Considerations
– Internal considerations
– Competitive response
38
Making Geographic Decisions for your Business (Unit)
• Strategic Considerations
– Internal considerations
– Competitive response
39
Making Geographic Decisions for your Business (Unit)
Economic Considerations
Political and Institutional Considerations
Strategic Considerations
Just like with everything in Strategic Management, external and
internal factors will CONSTANTLY change and migrate the “best
choice” geographic decision to a different place
40
Today
• Last Class Review
15 mins
• Harlequin Case Study
25 mins
• 7-S Model Discussion
20 mins
• Assignment 1 Refresh
15 mins
41
Harlequin Case: What is the Company Considering?
42
Harlequin Case: Why?
48%
40%
7%
7%
45%
53%
43
Harlequin Case: Compare the Business Models
Harlequin
Traditional Publisher (single title)
Consistency Romance; heavy
editorial control;
content guidelines
Focused around
individual author’s
creative output, which
can be any subject
Author Management
Less dependent on
authors; authors
receive lower
compensation
Authors have more
power and claim more
economic value in the
value chain
Sales, Marketing &
Distribution
Cheaper price; ease and
predictability focus;
convenience purchases
in supermarkets/drug
stores; large book club
volume/direct mail; set
systems for unsold
returns
Content Focus
Emphasise product
over price; expensive
distribution through
bookstores; return
processes complex
due to sales variability
44
Harlequin Case: Compare the Business Models
Harlequin
Traditional Publisher (single title)
Consistency Romance; heavy
editorial control;
content guidelines
Focused around
individual author’s
creative output, which
can be any subject
Author Management
Less dependent on
authors; authors
receive lower
compensation
Authors have more
power and claim more
economic value in the
value chain
Sales, Marketing &
Distribution
Cheaper price; ease and
predictability focus;
convenience purchases
in supermarkets/drug
stores; large book club
volume/direct mail; set
systems for unsold
returns
Content Focus
Emphasise product
over price; expensive
distribution through
bookstores; return
processes complex
due to sales variability
45
Harlequin Case: Compare the Business Models
Harlequin
Traditional Publisher (single title)
Content Focus
Author Management
Sales, Marketing &
Distribution
Template
Management
Talent
Management
46
Harlequin Case: Compare Strategies?
Harlequin
Traditional Publisher (single title)
Content Focus
Author Management
Sales & Marketing
Differentiation or
Low-Cost?
Differentiation or
Low-Cost?
47
Harlequin Case: Romance Series - ILLUSTRATIVE
Firm
Infrastructure
Human
Resource
Management
Technology
Development
Procurement
Price:
Costs:
Inbound:
18%
$0.85
Margin:
~14%
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
& Sales
Service
48
Harlequin Case: Traditional Publishers (paperback)
Firm
Infrastructure
Indirect overhead $0.14 per book 2%
Human
Resource
Management
Technology
Development
Price: $ 7.00
Costs: $6.41
Procurement
Margin: $0.59
Royalty:
12%
$0.84
Inbound
Logistics
Printing Distribution Advertising
12%
4%
6%
$0.84
$0.28
$0.42
Retailers
Selling
50%
5.5%
$3.50
$0.39
Operations
Outbound
Logistics
Marketing
& Sales
~ 8.4%
Service
49
Harlequin Case: Romance Series
Firm
Infrastructure
Indirect overhead $0.09 per book 2%
Human
Resource
Management
Technology
Development
Price: $ 4.40
Costs: $3.79
Procurement
Margin: $0.61
Royalty:
13%
$0.57
Inbound
Logistics
Printing Distribution Advertising
10%
4%
5%
$0.44
$0.18
$0.22
Retailers
Selling
50%
2%
$2.20
$0.09
Operations
Outbound
Logistics
Marketing
& Sales
~ 13.8%
Service
50
Harlequin Case: Traditional Publishers (paperback)
Firm
Infrastructure
Indirect overhead $0.14 per book 2%
Human
Resource
Management
Technology
Development
Price: $ 7.00
Costs: $6.41
Procurement
Margin: $0.59
Royalty:
12%
$0.84
Inbound
Logistics
Printing Distribution Advertising
12%
4%
6%
$0.84
$0.28
$0.42
Retailers
Selling
50%
5.5%
$3.50
$0.39
Operations
Outbound
Logistics
Marketing
& Sales
~ 8.4%
Service
51
Harlequin Case: Romance Series
Firm
Infrastructure
Indirect overhead $0.09 per book 2%
Human
Resource
Management
Technology
Development
Price: $ 4.40
Costs: $3.79
Procurement
Margin: $0.61
Royalty:
13%
$0.57
Inbound
Logistics
Printing Distribution Advertising
10%
4%
5%
$0.44
$0.18
$0.22
Retailers
Selling
50%
2%
$2.20
$0.09
Operations
Outbound
Logistics
Marketing
& Sales
~ 13.8%
Service
52
Harlequin Case: MIRA Proposal
Firm
Infrastructure
Indirect overhead $0.00 per book 0%
Human
Resource
Management
Technology
Development
Price: $6.75
Costs: $6.18
Procurement
Margin: $0.58
Royalty:
13%
$0.88
Inbound
Logistics
~ 9.2%
Printing Distribution Advertising
10.5%
4%
6%
$0.71
$0.27
$0.40
Warehousing Retailers
Selling
4%
50%
4%
$0.27
$3.38
$0.27
Operations
Outbound
Logistics
Marketing
& Sales
Service
53
Harlequin Case: Compare the Two Value Chains?
• How do their value propositions differ?
• What are the significant differences in their value
chains?
54
Harlequin Case: Your Prediction
• Would you predict their entry into the single title market?
• Why and if no, why not, if yes, how?
55
Harlequin Case: Their Decision and Outcome
• Harlequin entered the single-title business
• It began by publishing backlisted titles by well-known
authors. Why?
• Earning increased by 50% between ‘94 – 2001 with most
of the growth in single-title business
56
Harlequin Case: Good vs Bad Diversification
Linkages!
Economies of Scale
Economies of Scope
57
Harlequin Case: Economies of Scale … Where?
58
Harlequin Case: Economies of Scope … Where?
Series
Romance
Capabilities unique to
“Series Romance”
MIRA
Capabilities shared across the
two Businesses
Capabilities unique to “MIRA”
59
Today
• Last Class Review
15 mins
• Harlequin Case Study
25 mins
• 7-S Model Discussion
20 mins
• Assignment 1 Refresh
15 mins
60
Internal Analysis
The Strategic Management Process
Strategy
|
Resources & Capabilities
Corporate Structure
Geographic Scope
Internal
Analysis
Mission
&
Objectives
Opportunities
& Threats
Strategic
Options
Strategic
Choice
Implementation
Planning
Execution
Enhanced
Competitive
Position
External
Analysis
61
Internal Analysis
The Strategic Management Process
Strategy
|
Resources & Capabilities
Corporate Structure
Geographic Scope
Organisational Alignment
Internal
Analysis
Mission
&
Objectives
Opportunities
& Threats
Strategic
Options
Strategic
Choice
Implementation
Planning
Execution
Enhanced
Competitive
Position
External
Analysis
62
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
63
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Strategy: Approach to
competitive dynamics
and priorities
64
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Structure: How tasks
are organized and
authority distributed
65
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Systems:
Processes
and
procedures
- routines
66
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Style: Mgt style –
how they interact w/
org., make decisions,
spend time
67
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Staff: People development - recruitment,
selection, socialization,
development
68
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Skills:
Capabilities
69
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Shared Values:
Collective view of
what’s important
Skills:
Capabilities
70
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Shared Values:
Collective view of
what’s important
No particular configuration of the 7-S model has been show to
71
be superior (based on financial performance)
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Shared Values:
Collective view of
what’s important
The Key Consideration: Alignment between
them. They need to FIT together nicely
72
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Shared Values:
Collective view of
what’s important
Migrating them to a new space is always
difficult (We’ll see this in the Marvel case)
73
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
74
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
75
Organisational Alignment: 7-S Framework
HBS- McKinsey 7-S Framework
Complicating things – they can’t be moved
all at once
76
Atchinson Case: What are its Starting 7-S’s?
HBS- McKinsey 7-S Framework
Functional
77
Today
• Last Class Review
15 mins
• Harlequin Case Study
25 mins
• 7-S Model Discussion
20 mins
• Assignment 1 Refresh
15 mins
78
The Project: Assignment 1
79
Building the Report From the Ground Up
Gather Insight
80
Building the Report From the Ground Up
Analyse
Gather Insight
81
Building the Report From the Ground Up
Assess
Analyse
Gather Insight
82
Building the Report From the Ground Up
Formulate
Assess
Analyse
Gather Insight
83
Assignment 1
Formulate
Assess
Analyse
Gather Insight
84
The Project: Company & Industry Data Analysis (1 of 5)
Spring 2023
Noon, Friday, 24 Feb
85
The Project: Company & Industry Data Analysis (2 of 5)
86
The Project: Company & Industry Data Analysis (3 of 5)
87
The Project: Company & Industry Data Analysis (4 of 5)
88
The Project: Company & Industry Data Analysis (5 of 5)
Where is value moving and why?
89
Young Analysts Invest 90%+ of Their Time on …?
Content
or
“Substance”
90
There is Enormous Synergy (with any audience) between …
Content
or
“Substance”
Packaging
or
“Form”
+
1 Unit of Reward
SYNERGY
1 Unit of Reward
= 5 Units of Reward
91
Packaging: Everything Starts with the…
Executive Communication Framework
Written or oral
communication
Formal or
informal settings
Clarity
Audience's
Needs and
Desires
Economy
Personality
92
The Executive Communication Framework
Written or oral
communication
Formal or
informal settings
Clarity
Audience's
Needs and
Desires
Economy
Personality
93
The Executive Communication Framework
Explain complex material as
clearly as possible …
Clarity
Audience's
Needs and
Desires
Economy
Personality
94
The Executive Communication Framework
Clarity
… in the smallest
space possible ...
Audience's
Needs and
Desires
Economy
Personality
95
The Executive Communication Framework
Clarity
… in as memorable
and engaging a
manner as possible
Audience's
Needs and
Desires
Economy
Personality
96
The Executive Communication Framework
Clarity
Audience's
Needs and
Desires
(immediate and
long term)
Economy
Personality
Ensuring every communication is tailored to the specific audience
97
The Executive Communication Framework (ECF)
Clarity
Written or oral
communication
Formal or
informal settings
Audience's
Needs and
Desires
Economy
Personality
98
Thank You
99