Domande d'esame Markets and
Strategies
Marketing
Libera Università Internazionale degli Studi Sociali Guido Carli (LUISS)
25 pag.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
DOMANDE MARKETS AND STRATEGIES
MARIJUANA INDUSTRY
Question 1: For venture capital investors, how attractive is the Colorado marijuana industry as an
investment destination? Motivate your answer
Colorado has been the first state to legalize marijuana representing an enormous opportunity for
venture capital investors. In fact, it perfectly embodies the “high risk – high pay-out”, typical of the
venture capital and, due to low entry barriers, in the Colorado marijuana industry is easy to enter
and easy to grow. Entry barriers could be a problem once the market will become saturated.
Furthermore, a very important key factor is the involvement of the political aspect. Indeed, surveys
say that over 60% of Americans would be pro-legalization. Porter's five forces analysis measures the
potential profitability of the industry. Regarding internal competition, the industry is made up of
many small competitors who, due to the limited possibilities of differentiation, compete on price,
reducing profit margins. The bargaining power of suppliers is relatively low since the commodity is
not scarce, while the bargaining power of consumers is more to the fore since they can choose to
consume legal, illegal and home-grown marijuana. It is therefore evident that all these elements
make the Colorado marijuana industry a very attractive market for venture capital investors, as it is
also a sector in expansion, but, on the other side, there are also high risks due to the volatility of
making high profits. As far as the future is concerned, different scenarios could arise. One of them
turns out to be the possible legalization in all the US, which would become a problem for venture
capital who would have to deal with bank loans.
Question 2: how do you think the US marijuana industry will develop over the next ten years? What
will be the implications of this development for competition and profitability?
Marijuana will always be the same, since the market is stable and there is no room for technological
advantage. Companies have no opportunities in implementing a brand differentiation strategy.
Nowadays, 35 states in the USA have legalized marijuana for medicinal purposes, while 10 states
have legalized it for recreational use. In addition, surveys have shown that about 67% of Americans
believe marijuana should be legalized. There are therefore two possible development scenarios: full
legalization or not. In the event that marijuana is legalized in all 50 states of the USA, there will be
a strong increase in competition with venture capital investors entering the industry. The strong
increase in competition could lead to huge sums of capital (bank loans) for mergers and acquisitions
in both distribution and growing and the natural tendency to an oligopoly market (like tobacco).
Therefore, once competition is eliminated, profitability is very high. On the other hand, in the event
that marijuana is not legalized in all states, it would become difficult to have Federal companies for
problems such as fund raising or shipping through states.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
Question 3: which parts of the industry, according to the information you have, offer the best
prospects: growing, distribution, or infrastructure?
As far as growing is concerned, since it is a single product (raw material) high levels of efficiency can
be achieved. On the other hand, it must be considered that the growing face is similar to the
agricultural market, characterized by low entry barriers (just land and simple machines), little
possibility of differentiation and price competition that will drive prices and profits down. Other
risks inherent growing are the possibility of bacteria destroying the crop, the possibility of losing the
license if certain quality standards aren't met, as well as competition from home-grown marijuana.
With regard to distribution, a strategy of horizontal expansion can be adopted, making mergers and
acquisitions with the possibility of becoming big retailers. Other elements that make distribution
attractive are the possibility to sell marijuana derivatives (soaps, creams, etc.) and the presence of
institutional barriers to entry that allow distribution only with state licenses. Distribution is currently
fragmented into many small retail marijuana shops, each representing a small local monopoly.
Therefore, they can try to create a differentiation strategy based on quality, customer service and
product variety. However, it must also be taken into account that current legislation does not allow
for branding of products, making it impossible to create brand differentiation and there is also the
risk of illegal competition. All in all, the distribution face offers the best prospects in terms of profits
for the future, but in this market is very difficult to make predictions. In the long term we could see
the rise of big companies and giant corporation which can market and sell their own version of
marijuana products (like tobacco).
CIALIS
What are, according to you, the most relevant dimensions to segment (i.e., divide) the market of
potential customers of a treatment for ED?
First of all, it’s important to individualize which part of population is more affected by ED problems
according to the age. Among the over 60 1 in 2 are affected by this condition followed by 30-40% of
50-59 year-olds: this means they could be the best target customer compared to 40-49 year-olds
and 20-39 year-olds among which the percentages are respectively 10-20% and 10%. Then we
should circumscribe the geographical area for our trade: according to a recent research USA citizens
seem to be more confident and aware than Europeans when discussing about ED. This means that
USA are of course a better target customer, but if we are able to raise Europeans’ consciousness
and sensibilization, Europe could be a precious source of customers too. Last but not least we should
take into consideration the sentimental situation of affected people because it has been pointed
out that 80% of ED patients have a partner and, as reported in Lilly Icos’s interviews, they felt
embarrassed when having experienced ED for the first time. As a consequence, the advertising
campaign should emphasize Cialis’s benefits especially in a sentimental relationship.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
What could be the best differentiation strategy for CIALIS? What could make it different from
competitors?
Differentiation means that the product or service offered is perceived as different and unique
compared to that offered by competitors within the industry. The best differentiation strategy that
Cialis could implement to distinguish itself from competitors should focus on specific features that
could lead to the realization of a competitive advantage. The main ones concern: lasting
performance, diet and communication. Durability is definitely a key factor and the drug Cialis
provides a much longer effect, up to 36 hours, than its competitor Viagra which lasts only 4 hours
and, unlike the latter, Cialis is not sensitive to patients’ nutrition. As far as communication is
concerned, Cialis is engaged in a serious marketing campaign aimed at raising awareness and
resolving prejudices surrounding ED problems, which are a significant source of embarrassment for
patients. In addition, while Viagra focuses more on the purely sexual and erotic aspect, Cialis
concentrates more on the romantic side of the topic. Currently the highest market share inside ED
drugs sector is held by Viagra, but it is increasingly decreasing in favour of Cialis, whose market share
is rising.
Which should be the best messages to communicate to target patients? And to doctors? And to
partners?
In order to gain market share, it is essential to implement a strong communication strategy aimed
at highlighting the characteristics and performance that differentiate Cialis from its competitors. In
addition, since many patients feel disadvantaged and discouraged by erectile dysfunction issue, a
strong communication strategy is needed to raise awareness.
Message to patients:
Erectile dysfunction issue causes a lot of insecurity, which affects sentimental, working and
personal life. It has been shown that patients feel embarrassed and discouraged talking to doctors
about their sexual problems. It is therefore of paramount importance to implement a campaign to
make patients aware of Cialis as a drug to solve their needs and problems. Furthermore, it is
important to communicate its main strengths compared to competitors: durability up to 36 hours
(Viagra 4 hours) and compatibility with all types of diet.
Message to doctors:
Many doctors say they are concerned about prescribing Viagra. For this reason, Lilly ICOS LLC
should implement a communication campaign aimed at raising awareness of the safety and
efficacy of the drug Cialis, while also emphasizing the fact that it is constantly being monitored by
experts in the field of ED issues.
Message to partners:
ED issues also damage couple lives and relationships. This is why it is important to communicate
the effectiveness of the drug in resolving the dysfunction. Partners must be made aware of the
safety and effectiveness of the treatment, so that they can live a healthy life together.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
Which variables would you consider to decide the initial price of CIALIS?
Before setting the selling price, three main characteristics must be examined: the cost structure, the
competitors and the demand function (value perceived by consumers). The drug Cialis differentiates
itself from its competitors in terms of more effectiveness in performance and durability (longer
lasting effect, up to 36 hours), which is why Lilly ICOS LLC may charge a higher premium price than
its competitors. However, the pricing strategies implemented by the competitors as well as the
coverage and level of total costs (fixed costs + variable costs) must be also taken into account before
profits can be made. Given these variables, possible strategies implemented by Cialis could be:
-The focusing on a market niche willing to pay a premium price for the differentiated product (niche
strategy)
- The implementation of a pricing strategy very similar to that of its competitor Viagra (competition
strategy.
NEW YORK TIMES
Given the heritage of the New York Times, can it hope to compete with online news providers and,
if so, what further changes must the company make to its product, its resource base, and its
internal management structures and systems?
Clearly, online newspapers have minor costs than hybrid (both paper and online) newspaper such
as the NYT. Linked with the financial difficulties that NYT was facing it could have been a killer move
to decide focusing its resources on physical copies. The famous company decided in fact to switch
strategy to a digital all-in, cutting personnel costs and adding more and more resources in the digital
field. This led to a general increase in NYT shares value, and so in its profits. Although online
competition is getting tighter and tighter I definitely think that NYT stands more than a chance of
survival: thanks to its heritage, its quality press and the new online policy they have a good chance
of doing good in the online news industry. However, little changes has to be made if the goal wants
to be achieved: the product itself, the news, have the highest quality in the market and should not
be cut down for any reason; reliability is NYT’s competitive advantage. Prime Resources are, as I
have already said, know-how skills and reputation, but financial resources could be managed
differently: some cost cutting process could be made in the reduction of physical copies and so
cutting the royalties on them, even if this would mean to cut off the older tranche of regular
costumers used to buy physical copies REDUCING BRAND reputation. Big data could also be used in
order to customize the reader experience. Furthermore, online sponsorship could reveal a great
source of revenues for the company. Finally, NYT could create ad hoc teams built for boosting the
functionality and the promotion of the online news through direct connections with mobile
platforms. Bureaucracy too could be lowered: bureaucratic operations are more time consuming,
and in a online news provider timing is everything. HUGE ARCHIVES
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
What alternative strategies are available to the New York Times, and which of them might be
preferable to the strategy currently being pursued by the company?
Because of the digitalization of the news industry, the NYT faced a revenue crisis due to the sudden
increase in the market competition. Its main strategy nowadays resides still in a compromise
between paper and online news, a sort of hybrid model. Although the online field is taking the lead,
paper news is still present and very expensive but it can’t be totally cut off for reason of heritage
and because it would compromise all the customers used to read newspaper (generally old people
affectionate to their physical copies). An alternative strategy was presented as a back-up plan in
case the digital planning did not work: the strategy was focused on looking for a business model
which could be financially viable for the company. The costs that the company is facing in fact are
astonishing. One option was that NYT could become a social enterprise, enlisting charitable support
for its news providers for example. However, since the online industry is growing, it seems worth it
giving a shot to a digital strategy. For this reason, NYT best option would be going Digital all-in,
focusing all its resources in the online market trying to stop the increasing competition. Moreover,
though digital portal the Company would be able to diversify the content for every reader also with
personalised ads thanks to cookies, bumping revenues from sponsors. Additionally, reducing the
printed copies could be seen as a CSR management, which could boost NYT profitability.
HARLEY-DAVIDSON
What resources and capabilities are needed to compete within the motorcycle industry?
Surely intangible and physical resources ae the most important to consider in the motorcycle
industry. To compete in an industry with Harley Davidson, Ducati and Honda it is not easy if you
don’t have a strong brand image. The power of branding in this industry is limitless. Every rider feels
part of a big family under the name of his motorcycle. In Italy for example, since Harley is not as
developed as in the US, we have the big fame of the “Ducatisti” group. In order to be a Ducatista
you have to get your personal and fabulous ducati, and whenever you will catch another Ducati on
the streets his rider will always be happy to share with you a cup of coffee or have a talk about
mechanics. That is the power of brand. Another key feature for sure resides in design and power of
the motorcycle. You cannot compete in the market if you don’t have a fast, high revving engine,
beautiful motorcycle; that’s what every customer in the market wants. Design in this is the key,
especially for new generations. Innovation is a tricky one: depends the market. In the USA
innovation would not be that appreciated since 50% of the market is taken by vintage motorcycles,
meanwhile in Europe innovation is very important in order to compete with other brands such as
Honda and Yamaha. Even if some motorcycles have really fast engines, due to the poor branding
they really cannot expand. In this market reputation and culture is everything.






Financial services  loans in order to pay the motorcycle
Patents for innovations
Know-how (intellectual properties) from employees and the organizational culture
Plants and equipment necessary for production
CAPABILITIES: r&d with other segments (Harley cannot)
Differentiation and scale economies.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)


Distribution
Relationship with suppliers.
In relation to these resources and capabilities, how does Harley-Davidson compare with other
leading motorcycle companies?
Harley Davidson fame is mostly attributed to its capable management of resources. They give the
company the real competitive advantage. If Harley Davidson is the leader of the sector in the US
with more than a 50% share thanks to its branding, (key intangible resource of the company) the
same policies did not stick for the Europeans tastes. Its symbol meant to all Americans freedom,
will of discovery and adventure which does not exist with such intensity in the Old Continent. Even
if the concept of branding is well eradicated in the motorcycle market, Harley Davidson is the
perfect example for it. Its customers are loyal to the brand thanks to strategies of support after
selling, mechanics substitutes delivery and because they feel like part of a family. The product
itself is designed to be considered as a vintage item, and more and more young generations are
considering shifting to other brands such Honda or Yamaha just for the will of something new.


NO way of sharing R&D with other branches of the company (cars like Honda)
Customization for costumers.



Limited investing capacity and low production scale and low innovation (vintage) vs. honda
Specific manufactory capabilities and small dealer network (America Europe) unlike honda
High price vs Low price of Honda thanks to the economies of scale.
KODAK CASE
1. Why did Kodak's strategy fail? Explain in detail
Kodak, before declaring bankruptcy in 2012, was a large company with a strong brand that failed to
cope with a radical technological revolution that required computing rather than chemistry to
produce images. In fact, Kodak was one of the first to identify this change from analogue to digital
and therefore was not late in investing in new digital technologies, the problem was that it was
unable to anticipate and properly consider the speed of change which, in addition to the
technological side, required a radical change in its business model as well. Big mistakes were made
in implementing the new digital strategy. In fact, Kodak used new tools to support the old course of
action instead of adapting a completely new one. This hybrid approach, resulting from
organizational inertia and a misanalysis, had damaged its business. The strong belief that
digitalization would never overtake printed photography was one of the key elements of Kodak's
failure, leading the company to focus on its old resources and capabilities instead of outsourcing
them. As mentioned before, Kodak did not even consider the speed of this change, which turned
out to be much faster than the company's expectations, and vastly underestimated the disruptive
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
power of the new technology, so once they introduced their digital cameras they were already
obsolete. Kodak's short-sightedness also manifested itself in its misanalysis of its customers'
behavior and how this would change with the arrival of new digital devices. Indeed, the arrival of
smartphones was devastating for Kodak, limiting earnings even more. People now use mobile
phones to take photographs instead of cameras (except in the professional field) and, instead of
printing them, they store and view them on devices. If we look at the cost structure, we can see that
Kodak's sunk costs were high. The continuous investment in unprofitable projects that had absorbed
huge amounts of money over the years showed that Kodak was not ready for a digital revolution.
Furthermore, the highly vertically integrated organizational structure, together with a corporate
culture unsuited to a fast-changing environment, contributed to Kodak's collapse and bankruptcy.
Others key factors of Kodak’s failure were:

Acquisitions bad-driven.

Decision of entering in the digital market as a leader without having the right knowledges
(Saturated, eg. Japanese cameras.)
Reactive company: respond to external inputs instead of having its own strategy.

2. What lessons might other companies facing disruptive change in their core business draw
from the experience of Eastman Kodak?
Kodak was an established company in the field of analogical photography with a strong set of
capabilities that slowed down its change. An important reason for Kodak's failure was its strong
corporate culture, which resulted in resistance to change and, as a consequence, the inability to
adapt to external conditions. The Kodak case study offers an important lesson in experience for
companies facing disruptive technology change in their core business. The first critical factor to
consider is time. Time is of primary importance in a rapidly changing environment. Anticipating the
competition and entering the market before competitors helps the company to position itself
better, to attract critical mass and spread the product. However, Kodak failed to be recognized as
a pioneer in the digital industry as its image was still too much associated with analogue cameras
and film rolls. Moreover, companies competing in a rapidly changing market must be prepared for
radical changes and, it’s important to underline, that change should not only be related to product
improvement but also to innovation in business model, technology and product mix. For these
reasons, a flexible structure, coordination between top and middle management, efficient
communication and a lack of inertia in the organization are essential for market success. Companies
must also take a long-term view and implement strategies focused on the long term. In fact,
adopting only short-term oriented actions creates barriers to change, preventing companies from
participating in the evolution of the industry and disruptive change. Another important lesson to be
learned from Kodak's experience is to be very careful when diversifying into unrelated businesses.
It is very important, before diversifying, to have the right knowledges, capabilities, resources and
KSF to face competition (e.g. Kodak vs Japanese digital cameras manufacturers). I’s also important
for the firms to understand the change in the interaction and enjoyment of the product and how it
can change the role of various company resources.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
TESLA CASE
What is the strategy of Tesla motors?
Tesla stands in the middle between car companies and electric companies. As a consequence, Tesla,
in order to compete successfully in a saturated market of cars, had to introduce something new: the
electric car. Electric cars already existed but were not able to be a mass product for some key
features such as the duration of the battery and the availability of charging station. However, Tesla
was excellent in solving these issues. They adapted a top-down approach choosing wealthy and
innovative customers as their target and developing expensive and luxury sports cars. Thanks to the
high profits gained, Tesla was able to build more affordable cars meeting mass market’s needs.
However, Elon Musk popularity lies in its inspiring speech focused on CSR issues and sustainability
transport which captured the attention of customers who are more and more concern about CO2
emissions. In addition, Tesla has less risk of malfunctioning because it has fewer mechanical parts.
Last but not least, Elon Musk decided to make his patents open to competitors both to implement
electrical innovation and to make Tesla's technology stand out from other companies. This was
considered a smart strategy. In Tesla's strategy, we can include its different design and its primary
focus on R&D through which the company strives to develop more and more innovative and
effective technologies increasing its customers' interest and trust in the company.
How does its business model differ from that of leading automakers?
Tesla was the first car company to bet on electric vehicles and sustainable transport. Its success lies
in the management of CSR, the reputation of the brand and the image of the CEO.
In fact Tesla does not spend on traditional advertising but its publicity is the reviews of its prestigious
customers, the social image of the brand and of course the popularity and extraordinary abilities of
its CEO. Elon Musk understood that sustainability, CO2 emissions and CSR could be a new frontier
for the car market, meeting the concerns of those customers who are concerned about pollution
and other environmental issues. Another point in TESLA's favour is the fact that it has no mechanical
parts, greatly reducing the risk of malfunctioning. However, the company has many other resources
and capabilities:
-better battery software to ensure longer battery life
-high-level engineers and IT specialists in the electrical and technological fields
-a high degree of vertical integration that is something new in the traditional automotive industry
-unique design to attract wealthy customers
-a direct distribution network
-focus on customer experience and direct interaction between customers and the company;
-primary focus on R&D
However, Tesla is a small company and this makes scale production difficult: for this reason it is
looking to open new offices abroad. Tesla is also trying to leverage related diversification by trying
to exploit its core competencies.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
In addition, the transition to a more electric technology, to date, isn’t so certain and immediate;
limitations remain due to:
-number of kilometres covered on a single charge
-ease of recharging as recharging stations are not yet so widespread
-accessibility
As long as the majority of innovators start adapting electric cars, the rest of the population will
imitate the critical mass.
GRAMEEN BANK
Is the Microcredit Business Model a threat to traditional bank loans?
The social business model is born with the idea of meeting social or environmental needs rather
than making profits. Consequently, since dividends will not be distributed but reinvested in the
company, investors will not be those who invest to make money, but those who want to perform
an altruistic action by contributing to a company interested in the new CSR issues. Banks, applying
this model, target poor customers or customers with a low credit rating who could not repay the
traditional bank according to a traditional model. These customers receive a small, unsecured loan
that they will pay back through frequent and convenient coupons for the borrower. Moreover, social
banks differ from charitable enterprises because they are self-sufficient (they have to repay their
own costs). However, this model has limitations and risks:
- the failure to cover all costs as there are not many investors interested in not getting a return on
their investment
- it has to be considered that it is a riskier business as loans are offered without asking for a
guarantee even if Grameen has recorded very good results as 98% of its clients have been able to
repay their debt.
This social business model applies very well in economically weaker and underdeveloped countries
and especially in small villages where peer pressure and strong ties between citizens can be
exploited. If someone receives a loan and spends it on securities other than those provided, it
creates a social stigma that affects other citizens who would also like to apply for a loan. Thus,
people are forced to comply with repayment. It goes without saying that this model is difficult to
implement in the West where traditional banks are well established, communities much larger and
peer pressure much harder to implement.
However, in spite of these difficulties, microcredit banks are growing more and more and perhaps
in the future they may take some customers away from the traditional banks.
How did the microcredit social business model transform the banking industry? Try to apply a SWOT
analysis on the Grameen Bank case
The social business model is born with the idea of meeting social or environmental needs rather
than making profits. Consequently, since dividends will not be distributed but reinvested in the
company, investors will not be those who invest to make money, but those who want to perform
an altruistic action by contributing to a company interested in the new CSR issues. Banks, applying
this model, target poor customers or customers with a low credit rating who could not repay the
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
traditional bank according to a traditional model. These customers receive a small, unsecured loan
that they will pay back through frequent and convenient coupons for the borrower. Moreover, social
banks differ from charitable enterprises because they are self-sufficient (they have to repay their
own costs). However, this model has limitations and risks:
- the failure to cover all costs as there are not many investors interested in not getting a return on
their investment
- it has to be considered that it is a riskier business as loans are offered without asking for a
guarantee even if Grameen has recorded very good results as 98% of its clients have been able to
repay their debt.
The strategy of microcredit banks is called the 'blue ocean strategy' because its target is a new
customer that traditional banks do not consider. But it must also be said that these banks are
growing more and more and even in the West there are increasing levels of poverty and poorer
social classes that would benefit from this new business model. In fact, if on the one hand we want
to avoid a financial crisis like the one in 2008, on the other hand there are already national
microcredit agencies such as the Italian one, which is experiencing increasing demand. Moreover,
the Italian industrial fabric lends itself well to this model because it is made up of small and mediumsized enterprises, but clashes with a different international reality made up of large enterprises and
economies of scale necessary for real economic development.
PIXAR CASE
How does Pixar fosters creativity? Is this model applicable to other industries and which ones?
Pixar believes in people more than ideas, that is why it looks for the best talents world-wide
creativity is by far the greatest source of competitive advantage that a company can have in the
movie industry, especially in the cartoons industry. Creativity and innovation are embodied in the
company, Pixar was the first company to release a computer-animated movie (toy story 1995). Art
and technology go hand to hand: they are the key in the cartoon market to always create new
unique contents. A great strength of Pixar lies in the CEOs and top management, which has to go
against its natural tendency to avoid/minimize risks. In fact, they focus on building the capabilities
needed to recover when failures occur rather than preventing risks. This is achieved through daily
meetings where people have the opportunity to give and receive constant feedback. Therefore, they
constantly challenge themselves by looking for flaws that could undermine or destroy their internal
culture (one of the sources of competitive advantage). One of their primary objectives is therefore
to create and protect a peer culture based on trust and respect for everyone in order to enhance
collective creativity. Taking risks and implementing innovative and unexpected ideas are an integral
part of Pixar's strategy as it operates in a fast-changing environment where customers expect to see
something new every time. As the movie industries, we can remember others which foster
creativity:
-Fashion design industry such as Gucci. Gucci supports diversity, inclusiveness and equality so that
people and employees can focus and express themselves in the best possible way. In this industry,
creativity can be achieved by valuing each employee. Moreover, luxury companies adopt a
sophisticated organisational model to be innovative and original compared to their peers.
-Technology industry such as Google (Learning organization). The role of managers is essential in
fostering creativity by: encouraging teamwork, creating bonds between employees, selecting ideas
that best fit the company's strategy and clearly communicating the company's vision.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
-The video streaming industry (e.g. Netflix) where the culture of freedom and responsibility is a key
success factor. Managers give their employees higher levels of trust and freedom in order to
encourage high performance, development, success and creativity.
Can you spot some limits and risks in the Pixar approach to innovation?
Pixar believes in people more than ideas, that is why it looks for the best talents world-wide
creativity is by far the greatest source of competitive advantage that a company can have in the
movie industry, especially in the cartoons industry. Creativity and innovation are embodied in the
company, Pixar was the first company to release a computer-animated movie (toy story 1995). Art
and technology go hand to hand: they are the key in the cartoon market to always create new
unique contents. A great strength of Pixar lies in the CEOs and top management, which has to go
against its natural tendency to avoid/minimize risks. In fact, they focus on building the capabilities
needed to recover when failures occur rather than preventing risks. The main limits and risks that
Pixar faces in its innovation strategy are:
-As mentioned before, people are more important than ideas because great people have astonishing
ideas. This leads to the need of employing the top-of-the-top in the field. Since ideas are not
outsource, if you don’t have the best in your company you risk to lose competitiveness.
-A limit resides in the slow decision-making process and in the rigidity of the production. Experience
has shown that Pixar can only afford one production at a time because they are unable to focus on
more than one project. This means that the company is really risky: if the movie is not liked by the
public, years of research and work will result useless.
- The volatility of consumer preferences is a great risk.
-No exploitation of economies of scale due to limited production.
-Liquidity problems due to the nature of the business: high costs of innovation require huge
investments and new technologies.
- Damage to the peer culture
Furthermore, one of the determining factors for Pixar's success is definitely the strong internal
culture. Therefore, a big risk could be that this could be damaged due to human psychology being a
limitation for the company. In fact, the flatter organizational structure, the presence of strong
horizontal communication and the group culture could lead to frustration of ambitious employees
for not being rewarded enough for their efforts and results. People's envy is also a potential risk
that could damage the team spirit.
LEGO CASE
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
What are the main risks and benefits of adopting an open innovation approach?
Lego is a world-renowned brand whose success is based on the huge community of fans who
contribute to the company's open innovation. In fact, the company's slogan is "you don't have to
work with us to work for us" so customers collaborate with the company's employees, provide ideas
and think of new projects because they are driven by an intrinsic motivation: seeing their idea
selected and considered by Lego managers is extremely rewarding. This is an extremely smart
strategy because in this way Lego is able to test its product on the fan community first, lowering the
risks of uncertainty and innovation in the market and reducing of course the costs.
The benefits of the open innovation business model are:
-free access to a huge database that allows the company to develop increasingly innovative
products that better meet consumer preferences
-low cost in diversifying products because fans provide the ideas for free
-increased brand loyalty and market share by increasing fans' involvement in the brand
-high brand loyalty: the many adult fans tend to buy Lego products for their children. As a result,
Lego is always able to gain market share in spite of its competitors.
-lower promotion costs since the product is already known in the fans' community
-a strategic factor, as it benefits customers, is the possibility to customise products.
However, this model has limitations. Consumers may provide ideas that are not easily
implementable, high cost or simply unsafe for children, and real R&D engineers and managers may
feel prevaricated because of this important involvement of fans in the development of new ideas.
There may be layoffs of employees, rivalry between employees and external users, as well as the
risk that by relying too much on customers, the company will no longer invest in R&D. Another
problem is time because the ideas are many and varied, but evaluating and selecting them
requires care, attention and therefore longer time to search for even those ideas that are really
viable. Moreover, there is also the risk that Lego loses its original identity by focusing on projects
that are far from its brand image.
Despite this, Lego's success is extremely interesting because its innovation comes from the
collaboration between external and internal resources: it is in fact the most extreme case of
customer-led innovation.
Is the successful model of open innovation adopted at Lego applicable to other industries?
Which ones?
Lego is a world-renowned brand whose success is based on the huge community of fans who
contribute to the company's open innovation. In fact, the company's slogan is "you don't have to
work with us to work for us" so customers collaborate with the company's employees, provide
ideas and think of new projects because they are driven by an intrinsic motivation: seeing their
idea selected and considered by Lego managers is extremely rewarding. This is an extremely smart
strategy because in this way Lego is able to test its product on the fan community first, lowering
the risks of uncertainty and innovation in the market and reducing of course the costs. This is
certainly a major advantage for Lego. Not only costumers but also employees are motivated by an
intimate satisfaction in performing their job. Lego, taking advantage of this shared enthusiasm,
collects thousands and thousands of potentially redundant ideas, also lowering the uncertainty
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
since they have already been "tested" by the community of fans, thus managing to lower the costs
and risks of innovation in an ever-changing market.
Other areas where the model may be applicable are those where R&D and innovation play a key
role for the survival of the company. Examples of sectors may be:
-The software industry has been revolutionized by the open-source model. Indeed, the adoption
of this model allows customers to exploit the software code or to make
improvements/modifications/enhancements to it. Since software involves many industries, the
open innovation business model can also be used in the smartphone and video game industries.
- The beauty industry can also benefit from this model by harnessing consumer experience and
enthusiasm to research and create better products.
-Finally, the fashion industry could rely on this model. Requiring no special skills, customers can
also help develop innovative designs for clothes.
However, there are some prerequisites for the success of the open-source model. Among these,
brand loyalty is certainly essential. In fact, you need to have a community of loyal customers who
are willing to interact with the company to create new ideas. A strong sense of community is
needed.
NETFLIX CASE
1. What is the main competitive advantage of Netflix? Is it sustainable?
Netflix has over the years configured itself as one of the biggest players in the streaming platform
industry that has managed to survive in a highly competitive market characterized by a rapidly
changing environment and disruptive technology (e.g. in a few years it has gone from VHS to DVD
and finally to streaming) Netflix's success and the source of its competitive advantage within the
market is due to a number of success factors including: the strongly customer-oriented value
proposition; the presence of film production agreements for the development of original "Netflix"
content, films and documentaries; the wide catalogue of content choice; the affordable pricing
plans; the personalized algorithm that focuses on the customer's preferences by proposing content
similar to what they previously liked/seen. Netflix's primary objective is therefore clear: to provide
high-quality products that can be watched, even without a connection, from any device. As we
studied, a successful firm is one that has a sustainable competitive advantage in the market in which
it competes and therefore, in order to be successful, is Netflix's competitive advantage sustainable?
Netflix's sustainable competitive advantage resides in its brand equity, artistic and original contents
and the recommendation algorithm (highly personalized content). Although there is a strong
bargaining power of customers in the market who can choose between many competitors, the
elements described above have allowed the company to be increasingly successful over the years,
a success that exploded even more during the Covid-19 pandemic. However, as this is a very
uncertain market characterized by rapid changes, it is difficult to predict future developments and
successes. It will be vital to strengthen one's business model and be ready for sudden changes that
will dominate the market, changes that are due to both volatile consumer preferences and
technological changes. Furthermore, it is important to highlight how the TV streaming industry
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
exploits network externalities (e.g. number of users, complementary products), and this could lead
to the WTA market. However, the heterogeneity of customer preferences allows several players to
coexist (e.g. Apple, Android) in the market. We are probably going to have a heterogeneous
ecosystem leading to a segmented market.
Try to identify Netflix’s main competitors and compare Netflix’s value proposition with that of
the others. What can you forecast about competition in this sector in the future?
Netflix is one of the largest companies operating in the streaming platform sector. It is an extremely
competitive market characterised by advanced technology (from VHS to DVD to streaming) in which
Netflix has managed to emerge by offering high quality products (films, TV series, documentaries,
etc.) that can be watched from any device such as a TV or smartphone and whenever you want
benefiting from the fact that no Internet connection is required.
The strength of this company is based on several points that make it a leader despite the many
competitors among which customers could choose:
-the price is accessible
-It offers a wide range of products and content, especially original content, thanks to exclusive
contracts with film studios.
-it has a personalised algorithm that recommends to the customer the products that would meet
his or her preferences.
-brand equity
The main direct and indirect competitors are:
-Amazon Prime Video: it is a direct competitor as the products it offers are similar (movies, series
and original series) to Netflix but has the advantage in the fact that Amazon Prime subscribers
constitute an important critical mass that has the possibility to access most of the streaming content
for free. In fact they only have to pay extra fees for the latest films.
-Disney+: is an indirect co-petitioner as it focuses on a different customer, namely children and
families. However, it offers products that can't be found on other platforms belonging to the Disney,
Pixar, Star Wars and Marvel brands.
-YouTube: its advantage lies in the very wide range of content (tutorials, explanations, lessons,
songs,...) offered to watch for free with short advertisements. In addition, there is the possibility to
subscribe to channels at no cost.
-Google movies: it is extremely convenient for those who prefer movies to TV series as it allows
them to pay for a single movie by choosing it from a log catalogue.
However, uncertainty in this market is high and it is not possible to know in advance who will be the
most successful. In the future, companies will have to be ready to adapt to changes in the market,
dependent on customer preferences that we can't predict, and they will have to strengthen their
business model. Furthermore, as the TV streaming industry is based on network externalities, a new
frontier will be the WTA market.
The last point to be addressed is the heterogeneity of preferences that makes the market very
differentiated, which means that different companies will coexist, but all of them will satisfy the
consumers' needs, making the market very segmented.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
SPOTIFY CASE
What is Spotify’s business model?
Try to apply Porter’s five forces model to analyze the competition in the music streaming
industry and Spotify’s competitive advantage
Spotify is an online music streaming platform who has managed to survive in a fast-changing
industry disrupted by the digital revolution. Porter's five forces analysis allows to better analyse the
competitiveness within the sector through the analysis of the external environment. Application of
porter's model:
-Industry rivalry is high as there are many competitors offering similar services. For example there
is Apple Music, Tidal, Deezer, KKB. Spotify's uniqueness and success factor lies not only in its unique
way of advertising, but also in its high quality customer experience. In fact, Spotify, through the
combined exploitation of user data and artificial intelligence, offers customers personalized playlists
based on their latest listens/preferences. One of the main threats Netflix faces is the presence of a
large illegal music streaming market that affects consumers' willingness to pay as their interest is to
listen to high quality music at a low price.
The vertical type forces introduced by Porter in his model of the 5 competitive forces are: the
bargaining power of suppliers and the bargaining power of customers.
-Bargaining power of suppliers (e.g. artists/musicians) is moderate. The willingness of suppliers to
maximize revenue is closely linked to the number of users using one music platform rather than
another (network externalities). Indeed, although they can choose from a wide range of streaming
platforms, the most likely choice will be the one with the most users (Spotify has more than 75
million active users in 58 countries).
-Customer bargaining power is high given the heterogeneity of preferences and the presence of
many music streaming platforms such as Apple Music, Tidal etc. offering similar products.
Companies also know that if they increase the price, most users will exploit the illegal market.
-Threat of potential new entrants in the sector is low. The market is saturated and the brand too
much to be resisted. New entrants can only compete successfully by exploiting large size and
economies of scale. However, since we know that this is difficult to achieve especially at the
beginning, the threats of new entrants are low. In addition, there are also legal barriers to entry
such as the need to possess legal licences/requirements.
-The threat of substitute products
-The threat of substitute products is low given the difficulty of replicating/replacing the product mix
offered by the US-Swedish company.
In addition, the music industry has to pay various actors such as artists, musicians and all those with
legal rights. Despite its 75 million online music consumers and its operations in 58 countries, Spotify
is still not profitable because its costs are higher than its revenues.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
WALMART-AMAZON CASE
Describe Amazon and Walmart's value proposition and respective business models
Evaluate the initiatives taken by Walmart to meet the omni-channel challenge. How should it
evolve in the future?
Walmart is the world's largest offline retailer, competitive on cost and price, but opening up to a
mixed offline and online sales model. Its strength lies in its extensive local presence combined with
digitalisation. Customers can make a curbside pickup, i.e order online via app or website and
determine what time to pick up the product by having it loaded directly into the car. This system
has since evolved with 'pickup today', which allows same-day collection within 4 hours, enabling the
purchase of fresh products such as fruit and vegetables. In addition, to cut costs, optimise the supply
chain and initiate a digital customer relationship, the company introduced the "pickup tower" which
is based on the omni channel in-store. This means that the customer scans the barcode at the tower
and picks up the product. Another innovation introduced is 'self-checkout' which allows shoppers
to scan their purchases themselves and pay directly online in the app. A final innovation introduced
is "Walmart Pay" which is a digital wallet on the app that allows shoppers to scan product barcodes
and then pay online from the app. Thanks to this extensive use of technology, Walmart has managed
to cut waiting times at checkouts, speeding up purchases and learning about its customers'
preferences in order to offer targeted discounts. On top of this, Walmart also offers a 100% refund
if customer is not satisfied with the product. One problem Walmart faces is the presence of strong
competitors, such as Amazon, in the online retail market. The company has to find innovative ways
to retain and expand its customer base, but it also has to open up to other international markets in
countries such as Latin America, India, China and Europe where it does not have a strong presence.
AIRBNB, ETSY, UBER
Try to identify the main commonalities in Airbnb, Etsy, Uber’s approaches
The success of Airbnb, Etsy and Uber is based on the sharing economy, which, thanks to the Internet
and digitalisation, enables direct connections between sellers and buyers. Uber, for example,
connects drivers with riders; Airbnb connects home or room seekers with owners; Etsy connects
sellers of antiques, vintage and handmade items with buyers of these types of items. The secret of
their success lies in the fact that they exploit the network externality. They focused first on the
demand by putting themselves in the customer's shoes and trying to understand what they were
actually looking for, and only then on the offer. For example, Airbnb, in order to be more successful
and attract more customers, hired professional photographers to take pictures of houses and
rooms; Uber hired professional drivers adapting its service to the local market, size and climate;
Etsy, on the other hand, created a niche market where sellers can make money while buyers can
find unique pieces of craftsmanship. Etsy and Airbnb also greatly exploit the sense of community,
organic marketing and word of mouth as well as reviews from their customers. In addition, Airbnb
has offered the possibility to personalise one's holiday by introducing a unique feature: sharing a
room with people who have common interests or values! All this is made possible by the relationship
of trust between buyer and seller/supplier. These three companies represent the classic blue ocean
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
strategy: they differ from their competitors because they offer not only goods and services but also
emotions and unique experiences.
Could any of these approaches be useful for other two-sided platforms or markets in very
different industries? Explain why and at what conditions
The sharing economy, the power of the internet and digitalisation have been the pillars of the
success of two-sided platforms. This approach can also be adapted to other markets such as:
-The food delivery industry. The two-sided platform can be exploited to connect customers to their
favourite restaurants, thus allowing restaurants to earn more money and customers to have their
favourite, special food ready at home. This is what happened for example with Deliveroo.
-Medical industry. Doctolib, for example, connects doctors who want to give general health advice
with patients who ask for it.
-Fashion and second-hand clothing industry. This has been one of the most flourishing and profitable
sectors of the bilateral platform as it caters for a type of clientele that is increasingly concerned
about environmental issues and willing to buy second-hand products such as clothes. Vinted is an
example where people can both become entrepreneurs themselves by selling their clothes and
accessories and be the buyers.
-Tourism industry. The two-sided platform could connect tour entrepreneurs, art history graduates
or people with some qualification in art and history with tourists.
The problem these platforms face is that they are intermediaries. If, in the future, there were to be
a direct connection between supplier and buyer, these platforms would no longer have any reason
to exist.
EURODISNEY
Using data from the Internet, assess the situation of Eurodisney (now Disneyland Paris) in 2019.
Has its economic performance improved?
Have the changes introduced been in the direction of higher standardization (i.e. similarity to the
original, US model) or adaption to local French-European culture?
One of the most critical aspects that EuroDisney has to face is the internalization strategy, i.e.
deciding whether to standardize or adapt the product offered to the national culture, even if the
final result is always a mixture of the two. Therefore, it is essential to know a population, its values,
traditions, lifestyles, habits in order to understand whether to lean more towards standardization
or adaptation. When the time came to build the Eurodisney theme park, the main criticism came
from French intellectuals who were against American culture and the English language. The main
points to be adapted to the new culture were:
-Europeans were not used to standing in long queues and considered long queues as a bad
management. People had to be entertained with video screens, films or other means.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
-In the United States, alcohol could only be bought by showing your identity card, in Europe there
was no such restriction, which had to be changed, otherwise it would be seen as a homogenization
process.
-in the north of France it was cold in winter and this obviously did not attract tourists, which is why
there were discounts in this season.
-American employees also had to respect rules such as the number of rings, the length of earrings,
the length of hair, which were seen as a violation of individual freedoms by the French trade unions.
-another delicate problem concerned hotels in theme parks. Europeans were much more attentive
to details and decorations but were not willing to pay more. The right compromise had to be found
between the price and the offered design.
- Another issue was food. Tourists from another continent were eager to eat European or French
food, and the Europeans themselves were not so interested in trying American fast food.
As a result, the park's designers had to adapt some situations such as Cinderella living in a French
inn and Snow White's house being in a Bavarian village, but standardized others such as the
WildWest attractions which were extraordinarily well received.
AMAZON GO
Can Amazon reproduce its online retail success in offline retail segments? Will it be able to
become one of the biggest offline retail players?
Amazon is also expanding into offline retailing, but the fact that it is extraordinarily successful in
offline retailing does not mean that it is also successful in the online retail market, as this sector
requires completely different KSFs. For this reason the company has tried to be as innovative and
cutting edge as possible by creating a unique customer experience. Amazon go decided to use
artificial intelligence, computer science and a complex algorithm to recognise the buyer and
directly charge the costs on his personal page. This avoided long queues and speeded up the
shopping time. Of course, even this type of technology has its limits. First of all, it has to be taken
into account that shops using artificial intelligence and such complex algorithms have a high cost
that can only lead to a huge gain in the long term and then the technology can run into problems.
For example, it has been noted that when the shop is overcrowded, the system starts to have
deficits and this would make the customer experience worse than at normal checkouts. Moreover,
Amazon is a first mover in this new type of sale, so it is the first to have to face this kind of
investment with all the risks involved, also because it cannot count on the presence of physical
shops. Walmart, its main competitor, on the other hand, already has a network of physical shops
and could wait to apply this new sales method by observing how technology evolves and how easy
it is to insert it in a new sales strategy. Amazon, on the other hand, cannot count on this and this
competition could be a big problem considering the fact that technology is so expensive, saving
money is difficult and Amazon would be forced to supply products at a higher price. To overcome
this difficulty, the company could target a niche customer base, i.e. create luxury shops, offer high
quality products and thus target a type of buyer who does not care about price. In this way
Amazon and Walmart would co-exist in the market and to avoid competition they could apply a
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
strategy of differentiation by locating shops in different neighbourhoods and thus targeting a
different type of population.
Could Amazon's offline retail marketing concept be developed globally?
Amazon, through Amazon Go, is trying to enter the offline market not as an ordinary player but as
a first mover by making the shopping experience unique and fast through the use of artificial
intelligence. In order to gain more profits the company could expand to new geographical markets
but this requires some major changes and to consider some points. Before entering new
geographical market it is essential to know people and their habits, in this case the frequency of
purchase which varies from country to country. Secondly, this new experience of shopping limits
the possibility of human interaction. As everything is autonomised and subject to artificial
intelligence, many jobs will disappear but maintenance workers or security guards, who are
increasingly in demand, will remain. Another element to consider is that not all countries have the
same degree of digitalisation.
For example, China is the first country for digital transaction followed by Japan, the UK and South
Korea. In the EU there is Denmark, Sweden and the Netherlands. Another relevant factor in choosing
which geographic market to enter is the degree of import regulations and taxes, as well as the issue
of privacy and the number of core subscribers. To attract more and more customers Amazon Go is
applying an omni-channel strategy that allows it to increase its database, collect more data and use
it for an increasingly unique and personalised shopping experience both online and offline. The
pandemic has obviously changed interests by making the online market even more important, but
this does not mean that the offline market will disappear so it would still be a new frontier for
Amazon.
The brand is still much more relevant online than offline because customers rely on the reputation
of the brand when buying online, as they do not have the product physically in front of them before
buying.
Another advantage of buying online is the possibility to return the product, which in physical shops
has not been a great success as the automatic machines have a cost and are only advantageous for
those companies that have lowered their labour costs.
However, the most important KSFs in the offline grocery market are:
-price
-quality because it is possible to find particular brands or organic food
-a layout that makes it easy to find what you are looking for
-location as it is natural to want a supermarket close to home. This is not a problem with offline
market
-a mix of products and a variety of products have a greater supply chain and logistics even if the
logistics needed in online is different from offline retail.
TATA NANO
1. Can Tata Nano's strategy be defined as a Blue Ocean strategy? Motivate your answer
2. In your opinion, what was the main problem in Tata Nano strategy creation and
execution?
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
GOOGLE ALPHABET
What threats does Alphabet face?
Thanks to network externalities (e.g. number of users, complementary products), Google has
focused on gaining a huge critical mass, which has consequently led to a larger number of customers
and to the conquest of all market shares.
This has advantages but also disadvantages.
Google's strategy is based on unrelated diversification, which means that the company, in order to
maintain its leading role in the search engine business, is expanding into other sectors, which also
allows it to collect an increasing amount of data to be exploited in new ideas and new services to
be offered. However, due to diversification, a large company would be perceived as non-specialized
and this would lead to a loss of brand identity. In addition, Google has always been involved in highrisk and related businesses, which means that the company has to take into account the possibility
of failure, losing what was invested and damaging the brand identity (Google Plus).
Other issues arise from the fact that we cannot predict consumer preferences, how technology will
develop and what the new frontiers will be. To all this, we must also add the strict laws to which the
company is subjected, such as the data privacy law, which is a fundamental objective for Alphabet,
or the antitrust law, created to prevent monopolies and damage competition, which could prevent
Alphabet from expanding as much as it would like. However, the more a company grows, the more
costs it will face related to coordination and communication. This is one of the problems Alphabet
is facing that eliminates the benefits of economies of scale and economies of scope. Another risk is
represented by market convergence: whereas previously markets were separate, now due to
diversification they tend to be more similar and this means that Alphabet will increasingly face
competition from companies coming from different sectors.
We can therefore say that although the company is a successful company, this does not guarantee
that it will remain a dominant player in the future given the uncertainty that exists.
What is Google’s corporate strategy? Does Google have a clear vision of what it wants to become?
Alphabet's main business strategy is based on diversification. In fact, in order to protect its main
business, consisting of the search engine, Google started to expand into related activities. However,
these businesses are extremely diversified and, in order to maintain its dominant position, Alphabet
started to place its search engine everywhere. For instance, in an Android smartphone, the default
search engine is Google. However, the more a company grows, the more costs it will face related to
coordination and communication. This is one of the problems Alphabet is facing that eliminates the
benefits of economies of scale and economies of scope. Another risk is represented by market
convergence: whereas previously markets were separate, now due to diversification they tend to
be more similar and this means that Alphabet will increasingly face competition from companies
coming from different sectors.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
Thanks to network externalities (e.g. number of users, complementary products), Google has
focused on gaining a huge critical mass, which has consequently led to a larger number of customers
and to the conquest of all market shares. Being a data company, Google is able to collect, store and
exploit data in the development of increasingly advanced and cutting-edge products and
technologies.
Alphabet's success lies in its risk-taking attitude and in its organisation made up of small teams and
no hierarchy. This allows the company to explore new opportunities, to focus on new technologies
such as AI and to maintain a dominant position in the market. Of course, this also has disadvantages:
taking a risk also means failing and losing everything invested (Google Plus). Another strong point
for the company is represented by its employees, whom Alphabet chooses extremely carefully as it
looks for people with increasing, cutting-edge and creative skills.
Strengths:
-search engine
-the ability to store a large amount of data, which is also made possible by the synchronisation
between all devices, which is an advantage for both the company and its customers
-free updating and the ad-focus business model, which is, however, also a disadvantage as Google's
main revenue comes from advertising and competition in this field is increasing, given the entry of
Facebook and Amazon who are trying to steal market share
-excellent acquisition capacity
-branding through which the company is able to successfully enter the unrelated business.
Weaknesses:
-lack of transparency about the ranking algorithm.
-privacy concerns on which Europe stresses more than the US or Asia.
-new technology and trends are both a plus and a minus as Google is forced to continuously invest
in these new frontiers to maintain its leading position by preventing other companies from gaining
market share.
VIRGIN CASE
What common resources and capabilities link the separate Virgin companies?
Virgin is a world-renowned company with more than 300 'daughters' that are linked to the holding
by subsidiary/parent relations. The main resource that all the three hundred Virgin companies share
are its brand and reputation. The brand of the companies is known all-over the world and means
safety and reliability. This is for sure the bigger value that the group has and shares between its
“daughters”. Although at first glance the group appears to be a huge conglomerate operating in a
wide variety of sectors, because of the company implements unrelated diversification as its main
strategy, there are some common resources and capabilities among all of them. Indeed, the choice
of a new market is strategic for Virgin. Branson said he choose new markets where all customers
have been underserved or where competition is not a problem. In this manner virgin manages to be
the people’s champion delivering the brand values: innovation, quality, money value. In order to
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
succeed in this, Virgin relies on two main intangible assets: the reputation of the CEO and the brand
image. The capabilities of the group reflect the personality and aptitudes of Branson (as well as Elon
Musk) himself: a risk taker, a disruptor, a self-publicist, an entrepreneur, and an anti-establishment
provocateur. Secondly, we have the brand, which is the group's great single resource and acts as a
glue between the diverse sectors. It conveys what Virgin's values are: safety, reliability, value for
money, quality, trust, customer satisfaction, innovative approach, entertainment etc. Another
intangible resource is the innovation in customer experience (also a capability, customer
relationship): e.g. for Virgin Atlantic for example inflight massages and limousine services for the
airports. Finally, we can also mention the high quality of human resources. The excellent treatment
of employees is a key element if you want to provide excellent customer service. Relational network
is common in every Virgin company. In fact, they benefit from the positive results of other “sisters”,
reflecting in an increase in reputation and a rise of revenues. Virgin, therefore, implements a brand
extension strategy on several businesses. This, if on the one hand allows the strategic exploitation
of the synergies that are created between the different businesses, on the other hand the failure of
one business could contaminate the image of the brand with the consequent damage to the other
businesses.
What criteria should Branson apply in deciding what new diversification to pursue?
Virgin is a world-renowned company with more than 300 'daughters' that are linked to the holding
by subsidiary/parent relations. The main resource that all the three hundred Virgin companies share
are its brand and reputation (also Branson’s one). The brand of the companies is known all-over the
world and means safety and reliability. This is for sure the bigger value that the group has and shares
between its “daughters”. There are some main criteria that Branson should take into consideration
in order to diversify into other new sectors and be successful. Firstly, as it is difficult to have the
resources and capabilities to operate in so many different sectors, it is good to invest in those sectors
where profitable partnerships can be formed. Virgin could also move into businesses that are
performing badly where there's the potential to create a competitive advantage thanks to its
innovations and resources, attraction the critical mass and gaining market share. Other criteria
could be:
-choose a business that can be integrated with Virgin's values/message.
-investing in start-up businesses: Branson’s skills are in building businesses from scratch, not
acquiring established businesses
-diversification in substitute goods/service in order to limit threats and competition. (e. g. airplane
-train)
-entering in businesses that have the structural characteristics conducive to good profit margins.
-investing in an industry where there is a dominant, but preferably staid and sleepy, established
player against which Virgin can position itself as the innovative start-up (the “David and Goliath”
scenario).
-consider Value creation with porter test: Attractiveness test, cost-of-entry test, best-off test.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
Last but not least, Virgin should diversify towards those businesses where innovative approaches to
customer service can be exploited (e.g. Virgin Atlantic: increasing the customer satisfaction through
an innovative and extraordinary customer experience).
AMAZON FRESH CASE
What is your assessment of the online grocery market opportunity? What explains prior failures
in this market?
The online grocery market is growing more and more especially since it mainly targets young people
eager to save time. However, being in this market does not exempt Amazon Fresh from facing some
problems. First of all, you need to be able to capture the attention and interest of customers by
leveraging the advantages of shopping online such as the absence of queues at the checkout or
stress in searching for various products. In order to do this, it is essential to have a filter in the search
engine that allows you to select products that meet the customer's preferences by accurately
providing the characteristics and, keeping in mind the customer's preferences Amazon is able to
customize recommendations and discounts to offer the buyer by leveraging its artificial intelligence
and the large amount of data collected. Another advantage lies in the fact that Amazon is very
successful in retail which can be used in synergy with economy of scale and cost reduction.
However, the company faces difficulties:
- it does not give the possibility to check products before purchase as if we were at a supermarket
- if the frequency of purchase is high but the quantity of products purchased is low, delivery costs
rise
-the sale is not immediate so some people may prefer the physical store. This means that if I need
an urgent product I don't turn to an online channel.
- the low customer loyalty causes that they continue to have as their first choice the offline channel
turning to the online one only in certain contexts such as in the presence of a discount but
determining in this way an increase in costs for Amazon Fresh and other online channels.
To be successful in this market it is therefore necessary to anticipate threats, analyzing the
competitive environment and focusing increasingly on people's lifestyles.
Using theory, carefully examine the approach to setting up AmazonFresh as a new business
venture. What do you like/not like about what Bezos has done?
Before launching Amazon Fresh in 2007, Bezos had to carefully study the food market as it is a
complicated sector to enter, with high competition and constant new challenges. Due to the fact
that in the US food is sold in a vast network of channels (supermarkets, malls, warehouses), where
it is possible to sell a lot thanks to promotions, entering this market would have been complicated.
So Bezos relied on the world of the web to attract mainly young consumers eager to reduce the
problems of wasting time and to avoid competition as online food sales were not well developed
yet. To be sure of the efficiency and effectiveness of his system Bezos decided to start in Seattle
limiting himself to this city and relying on his resources and expertise in online retailing and logistics.
Thanks to fast delivery times, high-quality product recommendations and personalised discounts,
Amazon Fresh has managed to become increasingly successful and to expand its customer base,
now aiming to increase its profits. This could be achieved with a strategy of geographic
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
diversification by expanding into new cities and markets by selling new products with the possibility
of adapting them to the target population or standardising them. This approach may seem slow, but
in the long run it will lead to higher profits.
PRET A MANGER
What were the industry structure and strategic choices that had enabled Pret a Manger to succeed?
Industry structure
Following the damage caused by the pandemic, this well-established fast food brand had to apply
some changes to its strategy, business model and customer value proposition.
To study the identification of the industry structure we consider Porter's 5 Forces Model.
Bargaining power of suppliers: location is a KSF in this industry and the best location is close to
offices and wealthy workers who are not interested in price but in quality food and nice atmosphere
for which they would pay even more. Therefore, the restaurant owners have enormous bargaining
power which leads them to increase the price.
Internal competition: as more and more companies are involved in premium fast food in recent
years and interest in healthy and fresh food is growing, competition is increasing.
Bargaining power of customers: Pret a Manger customers are workers who stop for a lunch break
so they tend to go to the same place all the time. This means that bargaining power is not high.
Threats of new entrants: localization has already a high cost so the possibility of other companies
making higher profits is low.
Threats of substitution: as people have a wide range of choice (supermarkets that cook for lunch,
local bakeries, low quality fast food), this threat is high.
Strategic nails
Pret a manger focuses on the differentiation strategy because its customer is a wealthy person, such
as a businessman or high earner, and on healthy food, friendly employees and a nice atmosphere.
These are the key points of its success, but they proved to be very weak in dealing with the Covid19 pandemic. The company had, therefore, to apply important changes to its strategy and business
model taking into account two points in particular:
1) people would have been staying at home and cooking by themselves for a long time yet
2) the company wasn't so technologically developed as its competitors and this prevented it from
dealing with the pandemic promptly.
Pret a Manger's KSF was no longer so successful because the atmosphere and the kindness of the
employees were not relevant to overcoming a pandemic. The company therefore decided to change
the menu by introducing 'warm me at home' foods to replace those items not suited to withstand
the long delivery times and by creating partnerships with Deliveroo and UberEATS and setting up its
own delivery system and also had to sacrifice its elite customer by embracing a less wealthy one. To
do this, the company started to sell on Amazon, to enter supermarkets and suburbs, to create
contactless delivery points to reach as many people as possible.
Although the company managed to limit the damage, it failed to match its competitors.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)
How did Covid-19 impact Pret a Manger's business model?
Before the pandemic, the key points of Pret a manger's success layed in the atmosphere of the
restaurant with its upper-class customer and in the kindness of its workers, which with the closure
of the restaurants could no longer be offered.
The company had, therefore, to apply important changes to its strategy and business model taking
into account two points in particular:
1) people would have been staying at home and cooking by themselves for a long time yet
2) the company wasn’t so technologically developed as its competitors and this prevented it from
dealing with the pandemic promptly.
For these reasons Pret a manger applied a more flexible strategy which also had some limitations.
On the one hand, the company decided to sell on Amazon, to enter supermarkets and suburbs, to
create delivery points to reach as many people as possible, but on the other hand, it lowered its
customer standards and negatively affected the image of premium fast food. On the other hand, it
had to change its menu from hot and tasty, good quality food to "warm me up at home" to avoid
delivering cold food. On top of that, employee kindness, which the company had focused on, was
no longer relevant and the company was forced to replace it by simply creating its own delivery
service and partnerships with Deliveroo and UberEATS.
All of these decisions and actions helped Pret a manger to stem the damage but competitors had,
however, better results.
Document shared on https://www.docsity.com/it/domande-d-esame-markets-and-strategies/8341975/
Downloaded by: riccardo-ruscelloni (riccardo.ruscelloni@gmail.com)