COMPETITIVE STRATEGY
Instructor:
Jeffrey Macher
Office:
3.39 WWZ
Office Hours:
MON-WED 2:00-3:00PM
Telephone:
0041 61 267 23 96
E-mail:
jtm4@georgetown.edu
COURSE OVERVIEW
Competitive Strategy is concerned with managing the competitive position and long-term development
of the business enterprise in order to ensure its survival and success. Every firm must create and sustain a
competitive advantage if it is to survive and prosper over the long-term. This course provides
frameworks, tools and concepts to help students analyze and understand the creation of competitive
advantage.
Industries differ in the extent to which they provide opportunities for sustained profitability. Industries
also evolve over time, providing firms with continuously changing opportunities and threats. Finally, firms
in an industry jockey for position through their actions and interactions. Every firm seeks to obtain a
competitive position in an industry through an appropriate configuration of its assets and products in
order to generate superior value for its customers. The first section of the course takes us through the
challenges of external analysis.
While industry and competitor analysis provides firms insights into what they must do to succeed, it does
not throw much light on what they can do. Resource and capability analysis (and the investigation of the
firm’s ‘core competence’) provides an insight into firms’ strengths and weaknesses (as they relate to the
external environment). An understanding of firms’ internal strengths enables them to fully exploit and
build their capabilities to compete successfully. The second section of the course focuses on internal
analysis.
Finally, based on the results of the above external and internal analyses, firms must choose strategies
that lead to value creation and value capture, as well as a sustained ability to compete. The final section
of the course deals with strategies for sustaining competitive advantage.
Students are placed in the position of key decision makers (or their advisors) and are asked to solve
problems related to the development or maintenance of the competitive advantage of the firm. Readings
and cases developed by leading researchers and practitioners in the field are used to provide contextual
familiarity and teach the tools and skills required for competitive analysis.
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ADMINISTRATION
Readings
All readings are taken from the book, Contemporary Strategy Analysis (7TH Edition: Wiley Publishers), by
Robert Grant. The course packet consists of eight cases. The reading list provides detailed information on
the readings and cases to be prepared for each class session, as well as assignment questions for the
cases.
Internet
We will make extensive use of the internet for e-mail communication. All of the material presented in
class will be available in electronic Adobe Acrobat .pdf format. If you do not already have Adobe Reader,
you can download it for free from www.adobe.com.
COURSE SCHEDULING INFORMATION
The class meets from 09.30h to 12.00h on JUL 19-23 and 26-28. The classroom building is WWZ S15.
You are responsible for reading the book chapters and cases in advance of class each day, and coming to
class prepared to discuss them.
ATTENDANCE AND PREPARATION
Regular attendance and good preparation are prerequisites for being a valuable participant in the class. If
you will be unable to attend a class, please advise me as early as possible.
The class will start promptly on time and will run for the entire session. Arriving late or leaving early
disrupts the class and lessens your contribution; please do so only when absolutely necessary. If you
come to class unprepared, please let us know before class starts. Preparation implies that you have
completed the assignments, and that you have taken time to think about them, and that you are
prepared to discuss them thoughtfully in class.
EVALUATION
Grading
Grading will be based on your performance in class participation, five case short assignments, two case
write-up submissions, and a final exam. The grading weights are as follows:
Class Participation
Case Short Assignments (2)
Case Write-ups (1)
Final Examination
25%
10%
20%
45%
Class Participation
Class participation is graded every class session on a scale from 0 to 5. If you do not attend a class
session, you get a 0. I do not understand the concept of how someone can “make up class participation”
if it was missed, so do not bother asking us how to do this. If you attend class, you start out at a 2.5. You
earn (and lose) points based on your performance. We emphasize quality over quantity participation.
Please recognize that we cold-call—a lot—from very basic and simple questions to more detailed and
probing questions. Please be prepared.
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Your participation in class is expected to help both your own learning and that of your peers. Please
come to class everyday, prepared with analysis, which at a minimum addresses the assignment questions.
To participate effectively, offer focused comments which either show how a particular concept is
illustrated in the case or how a substantive problem can be solved; avoid repeating case facts.
Since the course uses cases extensively, class discussion is an important part of the course. In evaluating
class participation, we will ask the following questions:

Is the participant a good listener?

Do the comments reflect careful analysis?

Do the comments add to understanding of the situation?

Is there a willingness to try new ideas or are all comments “safe”?

Is the participant considerate of other class members?
Case Short Assignments
Individuals or teams (of up to two students) must complete two case short assignments during the
course, before the start of class on the day in which the case is discussed. Consider these assignments
similar to problem sets. Note that this requirement is above and beyond your required case write-up
submission discussed below. Each case short assignment should be no more than one page, and should
be completed in exhibit form (e.g., figure, chart, table, etc.), where applicable. Two of the following five
case short assignments must be completed:
SESSION
DATE
CASE
1
07/19
Airborne Express
2
07/20
Rivalry in Home Video
Games
3
07/21
Eastman Kodak
4
07/23
Wal-Mart Stores Inc.
5
07/26
Harley-Davidson, Inc.
SHORT ASSIGNMENT
 Quantify Airborne Express’ sources of advantage by
determining the costs of an overnight letter
shipped by Airborne Express to one shipped by
Federal Express.
 Determine the key success factors for each console
generation in the home video games industry.
 Compare and contrast the resources and
capabilities of Eastman Kodak in traditional imaging
and digital imaging.
 Using a value chain analysis, determine where WalMart’s main competitive advantages lie.
 Compare and contrast the resources and
capabilities of Harley-Davidson to Honda in the
heavyweight segment of the motorcycle industry.
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Case Write-up Submissions
Individuals or teams (of up to two students) must submit one case write-up during the course, before the
start of class on the day in which the case is discussed. Each case write-up submission is up to three pages
of text (1.5 line spacing, 12-point Times New Roman font) and up to one page of accompanying exhibits
(figures, charts, tables, etc.) if appropriate. Do not include any other attachments. One of the following
case write-ups must be completed. Address all of the questions listed.
SESSION
DATE
CASE
1
07/19
Airborne Express
2
07/20
Eastman Kodak
5
07/23
Wal-Mart Stores Inc.
6
007/26
Harley-Davidson, Inc.
CASE WRITE-UP QUESTIONS
 How and why has the express mail industry
structure evolved in recent years?
 How have the changes affected small
competitors?
 How has Airborne Express survived, and recently
prospered, in this industry?
 Quantify Airborne Express’ sources of advantage.
 What are Kodak’s core competences?
 Does Kodak possess the resources and
capabilities needed to be successful in the market
for digital imaging products?
 What challenges does Kodak face and what are its
prospects of becoming a leader in digital imaging?
 To what extent is Wal-Mart’s performance
attributable to industry attractiveness and to
what extent to competitive advantage?
 In which of Wal-Mart’s principal functions and
activities (namely: purchasing, distribution and
warehousing, in-store operations, marketing, IT,
HRM, and organization and management
systems/style) do WalMart's main competitive
advantages lie?
 How can Wal-Mart sustain and enhance its
competitive position?
 Compare Harley-Davidson's resources and
capabilities to those of Honda.
 What does your analysis imply for Harley’s
potential to establish cost and differentiation
advantage over Honda?
 How can Harley-Davidson sustain and enhance its
competitive position?
Final Exam
The final exam will be administered at the end of the course. The final examination is cumulative.
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COURSE OUTLINE
DAY
SESSION
TOPICS
READINGS
CASE
INTRODUCTION / INDUSTRY ANALYSIS
07/19
07/20
Introduction to Course
BK Grant (CH 1)
Industry Structure and Competitive Positioning
BK Grant (CH 3)
CA Airborne Express
Industry Structure and The Value Net
BK Grant (CH 4; 12)
CA Rivalry in Video Games
1
2
INTERNAL ANALYSIS: RESOURCES AND CAPABILITIES
07/21
07/22
Identifying Resources and Capabilities
BK Grant (CH 5)
Organizational Capability
BK Grant (CH 6)
CA Eastman Kodak
Innovation Capability
BK Grant (CH 6)
CA Merck
3
4
NATURE AND SOURCES OF COMPETITIVE ADVANTAGE
07/23
07/26
Nature/Sources of Competitive Advantage
BK Grant (CH 8)
Cost Advantage
BK Grant (CH 9)
Differentiation Advantage
BK Grant (CH 10)
CA Harley-Davidson
5
6
CA Walmart Stores
SPECIAL TOPICS
07/27
7
Vertical Integration
BK Grant (CH 14)
CA NYPRO-Vistakon
07/28
8
Managing Business Linkages
BK Grant (CH 17)
CA Marvel Enterprises
5
SESSION 1
07/19
Introduction to Course
Industry Structure and Competitive Positioning
Readings
Study Questions
BK Grant “The Concept of Strategy” (CH 1)
BK Grant “Industry Analysis: The Fundamentals” (CH 3)
CA Airborne Express
1. Class administrative details.
2. What is strategy? A framework for strategic analysis.
3. How and why has the express mail industry structure evolved in recent years?
How have the changes affected small competitors?
4. How has Airborne Express survived, and recently prospered, in this industry?
5. Quantify Airborne Express’ sources of advantage.
HINT 1 – It is often useful to analyze a company’s cost position relative to its
rivals and to examine the willingness to pay (WTP) of customers for the
company’s products relative to competitors’ products. The case allows you to
analyze the relative costs of Airborne Express in detail. Compare the costs of an
overnight letter shipped by Airborne Express to one shipped by Federal Express.
HINT 2 – To examine relative costs, start with the cost structure of a Federal
Express overnight letter, given in Exhibit 3. Use information in the case and
your understanding of what influences each cost item to estimate each of the
items for Airborne Express.
HINT 3 – The case does not allow you to compare WTP across companies more
than qualitatively, but it does permit you to examine relative prices.
6. What must Robert Brazier, Airborne Express’ President and COO, do in order to
strengthen the company’s position?
HINT 4 – In preparing your answers, the following table might be useful in
keeping track of the differences among the competitors.
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Airborne Express
Federal Express
Product Line
Target Customer
Segment
Summary of Product
Market Position
Pickup and Delivery
(inbound and outbound
logistics)
Air and Hub Operations
Marketing and Sales
Customer Service
Information Technology
Firm Infrastructure and
Human Resource
Management
Procurement
International
Operations
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UPS
SESSION 2
07/20
Industry Structure and The Value Net
Readings
BK Grant “Further Topics in Industry and Competitive Analysis” (CH 4)
Study Questions
BK Grant “Technology-based Industries and the Management of Innovation” (CH 12)
CA Rivalry in Video Games
1. What are the key success factors in the video games hardware industry?
2. In what sense and for what reasons is this a “winner-take-all” market?
3. What strategies and circumstances have allowed newcomers to unseat
established market leaders and reshape the industry?
4. What does Sony need to do to regain market share? What should Microsoft do?
What should Nintendo do?
SESSION 3
07/21
Readings
Study Questions
Identifying Resource and Capabilities
Organizational Capability
BK Grant “Analyzing Resources and Capabilities” (CH 5)
BK Grant “Developing Resources and Capabilities” (CH 6)
CA Eastman Kodak: Meeting the Digital Challenge
1. What are resources? Capabilities?
2. What is Kodak’s strategy for developing its digital imaging business?
3. What challenges does Kodak face and what are its prospects of becoming a
leader in digital imaging?
4. Does Kodak possess the resources and capabilities needed to be successful in
the market for digital imaging products? How is Kodak acquiring and building the
capabilities it needs?
5. What advice would you offer Dan Carp?
SESSION 4
07/22
Readings
Innovation Capability
BK Grant “Analyzing Resources and Capabilities” (CH 5)
BK Grant “Technology-based Industries & the Management of Innovation” (CH 11)
CA Discovering the Future: R&D Strategy at Merck
Study Questions
1. Evaluate Merck’s current strategy, and the resources and capabilities that
underlie this strategy.
2. Evaluate Merck’s alliance strategy. What are the pros and cons associated with
this strategy?
3. Why does Merck feel the need to change shift its strategy? What are the
challenges facing Merck’s R&D organization?
4. Do you think forming alliances will help overcome these challenges?
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SESSION 5
07/23
Nature and Sources of Competitive Advantage
Cost Advantage
Readings
Study Questions
BK Grant “The Nature and Sources of Competitive Advantage” (CH 8)
BK Grant “Cost Advantage” (CH 9)
CA “Wal-Mart Stores Inc., 2007
1. How does competitive advantage emerge? How is competitive advantage
sustained?
2. How does competitive advantage differ in emerging and technology-intensive
industries?
3.
Consider Porter’s “generic strategies,” in terms of cost and differentiation.
What aspects of the value chain are most important?
4. To what extent is Wal-Mart’s performance attributable to industry
attractiveness and to what extent to competitive advantage?
5. In which of Wal-Mart’s principal functions and activities (namely: purchasing,
distribution and warehousing, in-store operations, marketing, IT, HRM, and
organization and management systems/style) do WalMart's main competitive
advantages lie?
6. How can Wal-Mart sustain and enhance its competitive position?
SESSION 6
07/26
Readings
Study Questions
Nature and Sources of Competitive Advantage
Differentiation Advantage
BK Grant “DifferentiationAdvantage” (CH 10)
CA Harley-Davidson Inc., 2007
1. Identify Harley-Davidson's strategy and explain its rationale.
2. Compare Harley-Davidson's resources and capabilities to those of Honda. What
does your analysis imply for Harley’s potential to establish cost and
differentiation advantage over Honda?
3. What threats does H-D face?
4. How can Harley-Davidson sustain and enhance its competitive position?
SESSION 7
07/27
Readings
Special Topics – Vertical Integration
BK Grant “Vertical Integration and the Scope of the Firm” (CH 14)
Study Questions
CA Molding the Impossible: The NYPRO/Vistakon Contact Lens Project
1. Using your regression analysis skills, are there any hypotheses you can develop
from the data in Exhibits 8 & 9 about the problem that Nypro and Vistakon are
facing?
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2. Whose job should it be to guide the selection of customers in a manufacturing
company like Nypro?
3. What has the Vistakon project done for Nypro? If you were Gordon Lankton,
which of the capabilities of Jones’ team is developing would you consider the
most valuable? How would you transfer this capability to other parts of the
Nypro organization?
4. What could Dennis Jones do to create a more productive working relationship
with the Vistakon team?
SESSION 8
07/28
Special Topics – Managing Business Linkages
Readings
BK “Implementing Corporate Strategy: Managing the Multibusiness Corporation” (CH 17)
Study Questions
CA Marvel Enterprises, Inc.
1. In your view, what strategic direction should Marvel Enterprises pursue? Why?
How?
2. Why was Marvel’s turnaround so successful? Would you characterize that
success as a fluke? Or do you view it as sustainable? Why? How?
3. How important are each of Marvel’s three divisions—comic books, toys and
licensing—to its past and future performance?
4. To what extent is Marvel’s success due to only one character, Spider-Man? How
can Marvel develop its lesser-known characters?
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