BPL 5100:
BUSINESS
POLICY
1
Professor Xiaoli Yin
TIMING OF OUR CLASS



9:05-10:20am First Session
10:20-10:30am Break
10:30-11:45am Second Session
2
What is this course all about ?

Sustained Competitive Advantage
Occurs when a firm develops a strategy that
competitors are not simultaneously
implementing
Provides benefits which current and potential
competitors are unable to duplicate
3
CHALLENGE OF STRATEGIC MANAGEMENT



Only 16 of the 100 largest U.S. companies at the start
of the 20th century are still identifiable today!
In 2010, 58,322 businesses filed for bankruptcy and
many more U.S. businesses failed
Competitive success is transient...unless care is
taken to preserve competitive position
4
https://youtu.be/XUBeH7VQaFY
https://www.youtube.com/watch?v=wPxH2PQcLt4 (Starbucks in China)
https://www.youtube.com/watch?v=7qsDzBr1nEw (Pricing)
https://www.youtube.com/watch?v=_FGUkxn5kZQ (Starbucks in Australia)
Starbucks

1971 First store opened in Seattle

1992 Completes initial public offering (IPO)，$17/share



1996 Opens stores in Japan (first store outside of NA)
and Singapore
More than 30,000 retail stores in 80 countries
2020 Total revenue $26.58 Billion，with stock price of
$95.18（8/23/2023）
Which are the Top 10 countries with most
stores? (10/2022)
1
2
3
4
5
6
7
8
9
10
Country Name
United States
China
Canada
Korea, Republic of
Japan
United Kingdom
Mexico
Turkey
Taiwan, Province of China
Indonesia
Total
15873
6019
2101
1750
1546
1156
753
604
544
523
7
Source: Statista 2022.
Discussion Question

Does Starbucks have sustainable competitive
advantage?
8


If yes, where does its competitive advantage come
from?
If no, what’s causing the erosion of its
competitive advantage?
9
10
Coffee Historical Price（cents/lb）
11
－End of day Commodity Futures Price Quotes for Coffee at NASDAQ.com
The Evolution of Starbucks Logo
12
Starbucks Expansion into Consumer Packaged Goods
13
https://www.bevindustry.com/articles/85389-starbucks-brews-a-presence-anywhere--anytime
CHALLENGES FACING STARBUCKS

Overall Environment?
How is the food service industry evolving, both in terms of its customers,
competitors, etc.?

Specific Challenges?
What sorts of challenges do these changes present to Starbucks’ current
strategy? What are the strengths and weaknesses of Starbucks?

What to do?
What options does Starbucks have for dealing with these challenges?

How to implement?
What strategy should Starbucks employ to maintain its competitive
advantage, and how does the organization need to change to implement
this strategy?
14
OUR DEFINITION OF STRATEGY


Strategy consists of the analysis, decision, and
actions an organization undertakes in order to
create and sustain competitive advantage.
In this context, the objective of strategy is to
create and sustain competitive advantage for the
firm.
15
WHAT TOPICS WILL WE COVER THIS
TERM?
 External Environment
• Industry Analysis
 Firm Analysis
• Resources and
Capabilities
 Formulation
• Business Strategy
• Corporate Strategy
• International Strategy

Implementation

Strategic Control and Corporate Governance
16
IMPORTANT STUFF THIS WEEK


You’ll choose an assigned seat for the rest of the
semester. This helps me to learn your names. I
use that to keep track of your participation.
We’ll form into 10 teams with 5-6 students in
each team
17
REQUIRED MATERIALS


Dess, McNamara, Eisner, & Lee. Strategic
Management: Text and Cases, 10/E. (Referred to as
DMEL)
Supplemental materials as provided in class or on
Blackboard.
18
ASSIGNMENTS & GRADING
Individual Work

Contribution to Class Discussion
10 points

Individual Case Analysis (2)
20 points

Quizzes (3)
30 points
Group Work: Company Strategic Analysis

Progress Reports (5 – 2% each)
10 points

Company Analysis Oral Presentation
15 points

Final Report
15 points
Total points possible
100 points
19
Participation
Contribution to class discussion
 Individual case issue statements (2)


10
20
points
points
These are “easy points” that should boost your
overall grade.
20
Quizzes



Saturday, Oct. 7
DMEL chapters 1, 2, 3, and class lectures/discussions
Saturday, Nov. 4
DMEL chapters 5, 6, and class lectures/ discussions
Saturday, Dec. 9
DMEL chapters 7, 9, and class lectures/ discussions
Hint: It will be difficult to perform well on these
quizzes if you do not take notes in class.
21
INDIVIDUAL CASE ANALYSIS

S, September 9: The Global Casino Industry

S, September 23: McDonald’s

S, October 21: Alibaba Group

S, October 28: Johnson & Johnson

S, November 11: Heineken
22
INDIVIDUAL CASE ANALYSIS
Encourage application of course concepts

Respond to the set of questions on the case, as listed
in the syllabus


Guidelines




Up to 1 (single-spaced) page analysis
2 cases per student
Up to 10 points per case
Due at beginning of class
TEAM ASSIGNMENTS
A team is a group of individuals working toward a
common goal; a strategic alliance
 10 groups of 5-6 members
 I will form teams and post it on blackboard next
week


No team member has the right to hurt the
performance of other team members.
Company Project Report and Presentation

Progress Reports (5)


Presentation (20 minutes), followed by a 5-10
minutes Q&A


Slides due 24 hours before team’s presentation
Executive Summary Report


Each report contributes to 2% of final grade
Up to 5 pages, due during Finals Week
Contribution will count double for these days on
which Company Strategy Presentations will occur
Company Project Progress Report
Introduction and background information
 External Industry Analysis
 Internal Analysis
 Firm Strategy (Business, Corporate, International)
 Organizational design, strategic leadership and
governance
 Strategic issues and recommendations

26
Executive Summary Report
Identify
one key issue/problem faced by the
company
Provide one recommendation to address the problem
Provide at least two related actions to implement
the recommendation
27
PEER APPRAISAL
Evaluation of team members’ efforts
 Appraisal forms will be filled out at end of class
 Due at final’s week

Review the schedule carefully.
Late assignments are not accepted.
CLASS DECORUM
Avoid
No
arriving late or leaving early
reading of non-class related materials during class
Turn
off cell phones or other communication devices
Remain
attentive and do not indulge in activities unrelated to class
Maintain
a healthy attitude toward colleagues. Avoid biased
statement or related behaviors that are associated with race, gender,
religion, national origin or sexual orientation
Mute
yourself when not participating
Appropriate
class conduct
Email Protocol


Include your name and course section or meeting
time
For group project, include team name in file
name
30
CONCEPT OF STRATEGY
31
Professor Xiaoli Yin
Porter’s “What is strategy?”

Operational Effectiveness
Performing similar activities better than rivals
perform them (charge higher price or reduce cost)
 Possibility of diffusion


Strategic Positioning
Performing different activities from rivals or
performing similar activities in different ways
 Unique activities

32
THE FIRST RULE OF STRATEGY

A Good Strategy Is “Coherent.”
Functional pieces of strategy support the whole
 Southwest Airlines, American, & Continental
Airlines

Finance
Mktg.
Acctg.
Strategy
Oper
.
H.R.
33
COHERENCE

The idea that that the firm coordinates its
activities such that they complement and
reinforce each other.
34
COHERENCE AND SUSTAINABLE
COMPETITIVE ADVANTAGE

Strategic positions built on a coherent systems of
activities are far more sustainable than those
built on individual activities.
Unique
Activities
Sustainable
Competitive
Advantage
Fit or
Coherence
35
Southwest Airlines






Stocks take a plunge late last year, standing at $35.7 as of
1/26/23.
https://youtu.be/i1qRX9_tISA
36

The largest and most consistently profitable discount carrier in
the United States.
Founded in 1971 out of Dallas Love Field.
Herb Kelleher had been the CEO between 1982 and 2001.
Crossed $1 billion revenue mark in 1990, becoming a major
airline.
Acquired AirTran Airways in 2010.
Announced record earning of $1.1 billion in 2014, profitable
throughout its history for 45 consecutive years.
DISCUSSION QUESTIONS



How does only flying 737s lower Southwest’s
costs?
Why Can’t Continental Imitate Southwest?
What does Southwest miss? In other words, how
is Southwest limited by its own strategy?
37
HOW DOES ONLY FLYING 737S
LOWER SOUTHWEST’S COSTS?
38
WHY CAN’T CONTINENTAL
IMITATE SOUTHWEST?
39
STRATEGIC COHERENCE - THE LOGIC OF
HOW THE BUSINESS FITS TOGETHER
Southwest Airlines
Continental Airlines
Low Price
 Short Routes
 No Frills
Premium Priced
 Short, Long, & Int’l
 Variety







Point-to-Point
One Aircraft - Boeing
737
High Aircraft per Route
No Meals
Flexible/ Lower Staffing
Price-sensitive
customers







Hub & Spoke
Multiple Aircraft
Low Aircraft per Route
Meals & Service
Higher Staffing (Unions)
Comfort-sensitive
customers
40
41
42
WHY DOES SOUTHWEST SUCCEED?
THIS IS PORTER’S POINT

Southwest succeeds because it does not try to
become United Airlines.


It will never be a “luxury leader”; Southwest leaves that
to others.
Southwest succeeds because its strategy is
coherent and thus hard to imitate.
43
WHAT DOES SOUTHWEST MISS?
44
Strategy formulation: The Pizza Store Game
Open a new pizza restaurant in New York City
Design a strategy
Product, location, customer, price, marketing



1 – Define scope 1
2 – Define customer value proposition
3 – Define activity system
3
2
Sears
Mom@Pop
Stores
Wal-Mart
Customer purchase
criteria
Low Price
Selection across
Categories
CUSTOMER VALUE
PROPOSITION
Rural Convenience
Reliable Price


In-stock Merchandise
Suburban Convenience
Selection within Categories
• Simple consistency
• Reinforcement
• Optimalization
Sales Help
Ambience
Delivery on criteria
Trade-off
Define activities system
to realize value
proposition
Poor
Excellent
47
http://corporate.walmart.com/our-story/our-locations
HIERARCHY OF GOALS

Organizational Vision
A destination that is driven by and evokes passion.
 “To be the happiest place on earth.” (Disneyland)


Mission Statements
It encompasses both the purpose of the company as
well as the basis of competition and competitive
advantage.
 To produce superior financial returns for our
shareholders as we serve our customers with the
highest quality transportation, logistics, and ecommerce. (Federal Express)
 To inspire and nurture the human spirit – one person,
one cup and one neighborhood at a time (Starbucks)

48
HIERARCHY OF GOALS, CONTINUED

Strategic Objectives

Strategic objectives are used to operationalize the
mission statement, to provide guidance on how the
organization can fulfill or move toward the “higher
goals” in the goal hierarchy – the mission and vision.
It is a yardstick to measure the fulfillment of the
objectives.

Specific
Measurable
Appropriate
Realistic
Timely




49
NEXT TIME: EXTERNAL ENVIRONMENT
OF THE FIRM


Read DMEL Chapter 2
Submit Company Name Chosen for Company
Analysis Projects
50