The University of South Carolina
Moore School of Business
Spring 2009
MGMT 478
Strategic Management
Curba Morris Lampert, Ph.D.
Office 757
(803) 777-5977
curba@moore.sc.edu
Text:
Grant, Robert M. Contemporary Strategy Analysis
(Blackwell Business, 2008) Sixth Edition
Available through the University Bookstore
Readings Packet:
Available through the University Bookstore and the South Carolina
Bookstore
Course Description
Perspective
We address the question: What makes a firm successful? We define success in terms of
creating shareholder value over the long term. The strategy of a firm is the set of decisions it
makes concerning how it will achieve superior performance, and hence create value for
shareholders. Managing the firm in a way that facilitates arriving at and implementing the best
decisions is referred to as strategic management.
This course presents a framework and a set of tools for formulating successful strategies.
The focus is on identifying and analyzing the sources of profitability available to the firm and on
developing strategies to access these sources of profitability. We view strategy as a link between
the firm and its business environment. This implies that there are two primary areas of analysis:
the external industry environment of the firm (its industry) and the internal environment of the
firm (in particular, the resources and capabilities that it possesses).
A central theme of the course is the analysis of competitive advantage. Superior
performance is primarily the result of building sustainable competitive advantage through
deploying internal resources and capabilities to exploit key success factors within the firm’s
industry environment. We will analyze the potential for competitive advantage and design
strategies that can build comparative advantage. Thus, the essence of the overall framework is to
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address the development and management of internal resources and capabilities in relation to the
external environment to achieve competitive advantage.
This course is concerned not just with analysis but also with decisions. In our case
discussions of individual companies, you will be taking the role of the general manager whose
responsibility is the long-term health of the entire firm or a multi-functional unit (e.g., a major
division of a corporation). The key tasks involved in general management include the detection
of and adaptation to environmental change; the procurement and allocation of resources; the
integration of activities across subparts of the organization; and, at the most senior levels, the
determination of purpose and the setting of corporate direction. Throughout this course, you will
be required to make decisions concerning key strategy issues and indicate how your decisions
will be implemented.
General managers, from our perspective, are managers who are not "generalists" in the
sense that they need to know a little bit of everything, but not very much of anything. To be
effective, general managers need to have in-depth understanding of the generic problems in all
the relevant functional areas. Furthermore, they must be able to deal with problems and issues at
the level of the total enterprise and its relationships with relevant external environments.
Functional specialists, such as brand managers and supply chain managers, can benefit
from the general management perspective even though they may not be general managers. Every
function's actions should be coordinated with the overall needs of the business. In fact,
functional specialists are the people on whom general managers must rely to implement their
strategies. Since such functional managers can be subject to suboptimizing pressure, they too
need to understand the general manager's perspective.
A key instructional objective of the course is to help you develop a rigorous approach for
addressing complex business problems. Thus, the utility of this course should extend well
beyond strategy. This course should be of interest to all Undergrads: understanding and
tackling complex problems and competition is the essence of business and this course
focuses directly on improving your ability to do these two things. Students focused on
consulting or investment banking may well find it indispensable as it addresses issues that
constitute an important part of those fields.
Components of the Course
The pervasive concept in this course is that of strategy. We will start our study of
strategy at the business level and examine the challenges of managing a firm competing in a
single industry. An integral part of this study will be an exploration of the components of
strategy and how they vary among settings and situations. In most large and medium-sized firms,
corporate strategy is different from business strategy because of the multiplicity of businesses in
which the firm is involved. We will explore the differences in corporate and business-level (or
divisional-level) strategies and the requirements each places on managers at different levels in
the firm. At each level, competitive strategy issues will be considered.
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Successful general managers are highly competent in problem identification and analysis
and have a strong action orientation. One purpose of this course is to provide an environment
that will allow you to hone these skills, while at the same time gain a conceptual understanding
of the strategic manager's task.
While few people start their careers as general managers, this course should benefit
virtually all students for several reasons. First, ongoing trends in the corporate world towards
“flatter”, less hierarchical organizations have resulted in strategic decisions being made at even
lower hierarchical levels, often by relatively junior people. Second, a number of factors,
including technological change and the shift to global markets, have forced established firms to
become increasingly innovative and entrepreneurial, and such initiatives often spring from lower
level organizational ranks. Third, functional specialists such as professionals in MSIS,
marketing, and finance are the people whom general managers rely both to implement a firm’s
existing strategy and collect the information needed to update and revise it. Since functional
managers are often under pressure to fix problems in their own areas without regard to the
overall business, it is critical that they develop a keen awareness and appreciation of the
challenges facing the firm as a whole.
Strategic management is more than analysis. To be sure, strategic analysis is an
important part of this course, and we will explore and apply several analytical techniques for
positioning a firm or a business unit within a competitive environment. But, strategic analyses
are complicated by the trade-offs inherent in any situation. These trade-offs reflect the fact that
organizations consist of many players with multiple, competing objectives. When dealing with
these tradeoffs, general managers must confront the judgmental issues involved in establishing
organizational purpose and balancing economic and noneconomic objectives. To the extent
possible, in each class we will attempt to balance these tradeoffs and to test our ideas about the
appropriate relationships among them.
The use of extra or post-case data is not an effective way to learn about strategic
management. You are encouraged to deal with the case as it is presented. You should put
yourself in position of the general manager involved in the situation and look at the situation
through his or her eyes. As stated before, part of the unique job of being a general manager is
that many of your problems are dilemmas. There is no way to come out a winner on all
counts. Although additional data might be interesting or useful, the “Monday morning
quarterback” syndrome is not helpful. Therefore, you are strongly discouraged from acquiring or
using extra- or post-case data.
Finally, strategic management requires moving beyond analysis and trade-offs into the
realm of strategic action. Once the analytical problem of selecting a business or corporate
strategy has been dealt with, we should know what to do. Knowing how to execute the selected
strategy is essential to success. To the extent possible in each case, we will concern ourselves
with the various combinations of systems (for example, information, control, reward, etc.),
organization structures, and people necessary to execute a given strategy. We will test our ideas
about the relationships between strategy and these other elements as we proceed through the
course.
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General Flow of the Course
The assignments are detailed in a later section. Please read through them to get an idea of
the specific content of the course and each class meeting.
In general, we will start with single-business or dominant-business companies and
proceed to multiple-business companies. Similarly, we will begin with basic techniques of
analysis and then expand and modify them to fit a range of situations. We will examine many
sectors of the economy (for example basic industries, consumer products, service businesses, and
hybrids). As we proceed through the course, the classes and cases used in them will "build" on
each other in such a way that the knowledge and skills gained in analyzing one session can be
used in subsequent cases. Throughout the course we will maintain our concern with both
analysis and implementation.
Course Objectives
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1.
Development and reinforcement of a general management point of view -- the
capacity to view the firm from an overall perspective, in the context of its
environment.
2.
Development of an understanding of fundamental concepts in strategic
management: the role of the general manager, the levels and components of
strategy, competitive analysis, and organizational evolution.
3.
Development of those skills and knowledge peculiar to general management and the
general manager's job that have not been covered in previous functional courses.
4.
Synthesis of the knowledge gained in previous courses and understanding what part
of that knowledge is useful to general managers.
5.
Development of an awareness of the various impacts of external environmental
forces on business and corporate strategy.
6.
Practice in distinguishing between basic causes of business problems and attendant
symptoms.
7.
Practice in working out business strategies and implementation plans.
8.
Development of habits of orderly, analytical thinking and skill in reporting
conclusions effectively in both written and oral form.
9.
Familiarity with some of the practical realities of running different types of
businesses.
My Expectations of You
The focus of the course will be applying concepts and ideas to real-world examples,
primarily through case discussions. I intend to keep lecturing to a bare minimum. For the class
to work well, and for you to benefit from it, preparation for each class meeting is essential: All
students are expected to arrive at class having prepped the assigned case and prepared to
offer and defend their recommendations.
Since our class discussion forms the focus of the course, I shall be expecting you to attend
all the class sessions. Also, it is important that I get to know who you are as soon as possible.
Please display your name card and try to sit in the same seat every session.
An important feature of MGMT 478 is that it is an integrative class – I shall be expecting
you to draw on knowledge you have gained from your prior work (and lifetime) experiences and
from other courses in the Mays undergraduate program.
MGMT 478 is not just about reading and analysis, it is also about ideas. Outstanding
business leaders are innovators – they seek to identify and exploit new opportunities for profit.
In making recommendations I shall be expecting you to generate innovative yet feasible solutions
to complex business problems.
Performance Measures and Feedback
Performance evaluation and feedback will be based on your performance in two different
areas -- class participation and written work.
Class Participation
You are expected to analyze the articles and cases prior to class and come prepared to
discuss them. This will require that you first read the textbook reading(s) assigned for that day,
and then thoroughly prepare the case. If you are new to case-based learning, an overview of this
approach is offered in the Appendix. I expect you to go through this preparation process for each
case and come to class prepared to discuss your analysis. Specific questions for each case are
listed in the Course Overview. These questions – in addition to the general questions you should
ask yourself when preparing any case (see Appendix) – are designed to stimulate your thinking
and analysis as you prepare for class. You will write up answers to these questions and may be
asked to turn these in at the start of class; therefore, always make an extra copy of your write-up
so that you can refer to it during our class discussion. Your write up should generally be two
typed pages long, with two to three paragraphs directed at each question (more is fine if it helps
to organize your thoughts). Your write ups should show evidence of your analysis of the case,
application of the assigned readings, and your efforts to think through the relevant issues of the
case. On the very rare occasion that you miss a class session, you will turn in an extended, three
page typed write up of the case, due at the start of the next session.
In a typical class session, one or more students will be asked to start the class by
answering a specific question or discussing a specific issue. Preparation of the case (including
the assignment questions) and associated readings should be sufficient to handle such a lead-off
assignment. After a few minutes of initial analysis, we will open the discussion to the rest of the
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class. As a group, we will then try to complete the analysis of the situation and address the
problems and issues presented in the case. We will also spend time talking about the
implementation of those recommendations and some of the complexities of effecting change in
strategic management situations.
Most general managers spend little time reading and even less time writing reports. The
vast majority of their interactions with others are verbal. For this reason, the development of
verbal skills is given a high priority in this course. The classroom should be considered a
laboratory in which you can test your ability to convince your peers of the correctness of your
approach to complex problems, and of your ability to achieve the desired results through the use
of that approach. Some of the behaviors that contribute to effective class participation are
captured in the questions that follow:
1.
Is the participant a good listener?
2.
Are the points that are made relevant to the discussion? Are they linked to the
comments of others?
3.
Do the comments add to our understanding of the situation?
4.
Do the comments show evidence of analysis of the case?
5.
Does the participant distinguish among different kinds of data (that is, facts,
opinions, beliefs, concepts, etc.)?
6.
Is there a willingness to share?
7.
Is there a willingness to test new ideas, or are all comments "safe"? (For example,
repetition of case facts without analysis and conclusions or a comment already made
by a colleague.)
8.
Is the participant willing to interact with other class members?
9.
Do comments clarify and highlight the important aspects of earlier comments and
lead to a clearer statement of the concepts being covered?
10.
Does the student ask questions rather than limit participation to responding to
others’ questions?
The questions above deal with both the process of class participation and (of equal or
greater concern) the content of what you say (in terms of relevance, advancement, fact-based,
logical and originality). In this course participation is necessary but not sufficient.
Please note that I will make cold calls on a daily basis. If for some unavoidable reason
you are not prepared for a particular class session, please let me know before class. Additionally,
you can gracefully decline to answer if you are asked a question in class. Although obviously not
the preferred option, these are better than “winging it” without adequate preparation. I realize
that our class time is limited and valuable; “winging it” is a waste of this time and you will be
asked to leave the session immediately. As will be noted subsequently, class participation will be
a significant portion of your grade in this course.
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The University of South Carolina Class Attendance policy is stated below:
Class Attendance
Students are obligated to complete all assigned work promptly, to attend class
regularly, and to participate in whatever class discussion may occur.
Absence from more than 10 percent of the scheduled class sessions, whether
excused or unexcused, is excessive and the instructor may choose to exact a grade
penalty for such absences.
The instructor's attendance policy should be ascertained by the student at the
beginning of the semester. It is of particular importance that a student who
anticipates absences in excess of 10 percent of the scheduled class sessions
receive prior approval from the instructor before the last day to change schedule
as published in the Master Schedule of Classes.
It must be emphasized that the "10 percent rule" stated above applies to both
excused and unexcused absences. Faculty members should notify classes
specifically of the attendance policy which they intend to follow in each class.
Attendance is necessary for participation, and as noted above, participation is critical to
your learning in this course. I expect you to attend all class sessions. We will physically meet
twenty-eight (28) times in MGMT 478. Accordingly, the attendance policy for this course is as
follows:
1. Please note that absence from more than 10 percent of the scheduled class sessions
will result in a full letter grade penalty.
2. Each additional class absence beyond the 10 percent (two absences), will result in an
additional full letter grade penalty.
Furthermore, conduct that is unprofessional or otherwise detracts from the educational
goals of the course may be penalized at my discretion by reducing the offender's participation
grade. If the problem becomes acute, further disciplinary measures may be imposed consistent
with university policy.
Midterm Exam
This will be a take-home case analysis, completed in a group of 4 or 5 members. Only
the course text and other course reading materials should be used to prepare for the case analysis.
In preparing the exam, you may use exhibits to support your arguments or conclusions.
The results of the application of various analytical tools, for example, are appropriate for
exhibits. You may use as many exhibits as you deem necessary. Be sure to refer to each exhibit
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in the relevant places in the paper. Other requirements (e.g., maximum number of pages, format)
will be conveyed to you in class.
Please note: Do not put your name on the midterm exam. Instead, only your student
number, the date and your initials should be on the back of the last page. Papers should be
submitted without folders, cover sheets, or any other incidental pages.
Final Exam
This will be a take-home case analysis, completed in a group of 4 or 5 members. Only
the course text and other course reading materials should be used to prepare for the case analysis.
Like the midterm, exhibits are accepted and please do not put your name on your exam - only
your student numbers, the date and initials should be on the back of the last page.
Grading Policies
The purpose of grading in Strategic Management, as in all courses, is twofold. One is to
evaluate your performance for purposes of the academic system. The other (and more important)
is to provide you with feedback on your ability to develop, utilize, and share your ideas and
conclusions concerning the topics and situations covered in the course. To help you do that more
effectively, you will be provided with a criterion sheet prior to the submission of both your midterm case and final case which we will use as a general framework for providing feedback on
your written work. Please note that I only assign whole letter grades in this course; therefore, I
eliminate the use of both minuses and pluses when determining overall course grades.
Your grade for the course will be based on the following components:
Assessment & Assignments
Class Participation
Midterm examination
Final examination
35%
35%
30%
Other Administrative Details
Since faculty members tend to have somewhat different expectations as to class behavior
and course norms, I'd like to outline a few of our expectations concerning such matters.
1.
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I plan to be prepared for every class and I expect you to do the same. Since I
frequently call on individuals whose hands are not raised, you should let me know
before the start of the class if some emergency has made it impossible for you to be
prepared adequately for that class.
2.
I consider attendance at every class to be very important. Please schedule other
activities (e.g., job interviews) at times other than those during which MGMT 478
meets. In the event that you do have to miss a class during the semester, I would
appreciate it if you would let me know in advance of that class. Also, if you miss a
class it is your responsibility to find out from your classmates what materials were
covered, what additional assignments were made, and what items may have been
distributed in class.
3.
I will be happy to discuss the course, your progress, or any other issues of interest to
you on an individual basis. If my office hours conflict with your other classes,
please e-mail or call to set up an appointment at a different time with me.
4.
Given the importance of this course, I will do everything that I can to use class time
effectively and ask that you do the same. This will include arriving, starting, and
ending on time.
5.
Group work is acceptable and strongly encouraged for purposes of case preparation
for classroom discussion. However, if an assignment is to be completed
individually, such as the midterm exam, discussion with others is not permitted.
6.
Written work is due no later than the beginning of the class session. Points will be
deducted from work that is handed in late.
7.
The University of South Carolina provides upon request appropriate academic
accommodations for qualified students with disabilities. For more information,
please contact the Office of the Dean of Students.
8.
In overall course grade determination, I reserve the right reassign a grade if
extraordinary circumstances of achievement have been demonstrated. In the
extremely rare circumstances which this has happened, the individual attained truly
exceptional thresholds in both verbal and written strategy skill development and
accomplishment, as well as making an astounding contribution to their fellow
classmates’ strategy education.
Office Hours
I will hold office hours on Tuesdays and Thursdays from 1:00pm to 2:00pm. We will
start off the semester by meeting in my office, but due to the high demand, we will most likely
have to move to the coffee bar in the basement of the b-school to accommodate everyone with a
seat. You can also make an appointment to see me at other times during the week by contacting
me directly via e-mail, phone or at the end of class. If you would like to stop by at other times
without an appointment, afternoons are usually best. You can also send me an e-mail message if
you have a quick question. In an emergency, you may call me on my cell: (803) 261-2214.
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Academic Dishonesty
I will not tolerate any form of scholastic dishonesty and will deal with it swiftly and
decisively. It is best to avoid any behavior that could be perceived as dishonest. This course will
follow the principles stated in The Carolinian Creed:
“The community of scholars at the University of South Carolina is
dedicated to personal and academic excellence. Choosing to join the
community obligates each member to a code of civilized behavior. As a
Carolinian… I will practice personal and academic integrity…”
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COURSE OVERVIEW
Topic 1
Role of the General Manager
This topic provides an opportunity to start developing an appreciation for the role of the
general manager. In particular, we will emphasize the unique characteristics and challenges
faced by general managers, as well as the variety of roles that they typically play. In doing so we
will come to understand how such positions differ from those of functional managers, and the
responsibilities and rewards associated with general management positions. We will also come
to recognize the interdependence of a broad array of strategic, operating, and administrative
issues that general managers face.
Our first case will be used as a vehicle to discuss the issues referred to above, and will
also highlight many of the concepts and issues we plan to focus on this semester. Robyn Gilcrist,
who received her MBA several years earlier, agrees to become the CEO of a small boat
manufacturer. The original plan is for the owner/founder to stay with the business for a year, and
for Robyn to have the benefit of his presence. However, when the founder dies unexpectedly,
Robyn, agrees to move into the CEO position earlier than planned. Our goal is to use the
situation Robyn finds herself in to start developing and understanding of the general manager's
job. In doing this, we will focus on how Robyn should spend her time.
Case:
Yellowtail Marine
Preparation Questions:
1.
How should Robyn spend her first three days on the job? (Prepare a calendar for
the morning, afternoon, and evening of each of those days).
2.
Which issue should Robyn prioritize for attention in the next month? Why?
3.
What goals should Robyn set for the next year? For the next five (5) years?
Topic 2
The Concept of Business Strategy
This topic will provide an overview of the processes of strategy identification, evaluation,
and formulation in single business firms. A critical task for any top executive is to develop a
strategy for his or her organization to assure its survival in the face of a changing environment.
Critical steps in that process include identifying the firm's current strategy and its key
components, evaluating that strategy in light of the need for change, and then making the
necessary changes. In addition, formulating a competitive strategy requires an analysis of
industry structure, as well as actions that attempt to create a competitive advantage. These and
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other issues will be addressed in our discussion of Crown, Cork & Seal by applying the concepts
presented in the assigned readings.
This is the third update of the classic CC&S case. The first covered the company up to
1964. At that time, Connelly had turned a very sick company around. A major issue for
discussion was whether success would continue. This case describes CC&S up through 1989,
and the issue of continued success is still important. One of the things that makes a general
manager's job interesting is that the issue never goes away. We will be concerned with both
business strategy and industry dynamics in this case. Continuing consolidation in the industry
raises the question of whether CC&S should become a bidder in the apparent sale of Continental
Can. Management style also becomes an issue in this case. Connelly's style is evident from the
case. You may want to compare Connelly with other general managers you will meet in the
cases. Why are some more successful than others? How can managers with such different styles
be successful?
Case:
Crown Cork & Seal in 1989
Preparation Questions:
1.
What are the industry structure and dynamics of the metal container industry? What
are the industry trends? Implications of these trends?
2.
What strategy does CC&S have for competing in this industry? What advantages
does a firm the size of CC&S have for competing with American Can and
Continental Can?
3.
What are the major issues that William Avery faces in 1989? What advice would
you offer him about these issues?
We will continue to study the concept of business strategy with an investigation into the
health club and soft drink industry. These cases will serve as additional examples to use our
recently learned techniques for the diagnosis of industry structure.
Case:
Bally Total Fitness
Preparation Questions:
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1.
What are the basic economics of health clubs?
2.
How structurally attractive was the health club industry in 2004? What average
level of returns would you expect it to support?
3.
What do you see as the key trends in the industry in 2004? How do you think these
trends will affect profitability, and evolve over time?
4.
Case:
What advantages did Bally’s scale bring? What challenges did Bally face? Evaluate
Bally’s response. What else might Bally do?
Coca-Cola Versus Pepsi-Cola and the Soft Drink Industry
Preparation Questions:
1.
Why is the soft drink industry so profitable?
2.
If concentrate manufacturing is so profitable, why have so few firms successfully
entered this business over the last century?
3.
How has the competition between Coke and Pepsi affected the industry’s profits?
4.
Will Coke and Pepsi sustain their profits through the 1990’s and beyond? What
would you recommend to Coke to insure its success? To Pepsi?
Topic 3
Organizational Resources and Capabilities
Innovation often allows challengers to enter an industry and take market share from
former incumbents. Staying on the cutting edge is not easy if a company is not clear about
identifying their unique capabilities and nurturing them. In this session, we will discuss how
Southwest Airlines created a window of opportunity in which to capture value in a highly
competitive industry that readily imitated innovation.
Case:
Southwest Airlines: 1993 (A)
Preparation Questions:
1.
What was Southwest’s initial strategy?
2.
What are Southwest’s unique capabilities? What resources support these
capabilities?
3.
What is Southwest’s competitive advantage?
4.
How would you improve Southwest’s overall strategy?
We will continue this discussion with an investigation into Apple Computer. Apple is a
classic business case that deals with a broad range of strategic issues concerning the exploitation
of exceptionally promising innovations while trying to be more efficient in general operations.
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Case:
Apple Computer 2002
Preparation Questions:
1.
Historically, what were Apple’s major competitive advantages?
2.
Analyze the structure of the personal computer industry over the last 10 years.
How have the dynamics of the PC industry changed?
3.
Evaluate Apple’s strategies since 1990.
4.
Has Steve Jobs solved the “problem”? What should Steve Jobs do today?
Topic 4
Competitive Dynamics
We will now explore the issue of competitive dynamics, a type of analysis that reminds us
that a firm’s strategic actions are dynamic in nature. Firms to do not act in a vacuum, rather,
actions taken by one firm often elicit responses from competitors, and this may then result in the
original firm taking yet another action. The series of competitive actions and competitive
responses among firms competing within a particular industry create competitive dynamics. We
will investigate the nature of the competitive rivalry and look at the importance of size, speed,
innovation, and quality in competitive actions and responses.
Case:
Cat Fight in the Pet Food Industry (A)
Preparation Questions:
1.
Who is best positioned in the pet food industry in 1986?
2.
Who has staked out strongholds? Where? How?
3.
What should Ralston Purina do? Is it threatened?
4.
Who do you predict will bid for Anderson-Clayton? Why?
5.
Who is likely to attack whom? Where? How?
We will continue to analyze the issue of competitive dynamics within the gift soap and
novelty toiletries markets with the Minnetonka case.
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Case:
Minnetonka Corporation: From Softsoap to Eternity
Preparation Questions:
1.
What was Minnetonka's strategy prior to the launch of Softsoap?
2.
Compare Minnetonka's experiences in the soap business and in the toothpaste
business. How do you explain the difference?
3.
Why did Minnetonka shift from "mass to class" in the mid-1980s?
Topic 5
Sustainability of Competitive Advantages
In this session we will address the sustainability of competitive advantage. We will
emphasize that any such advantage is likely to be sustained only if management recognizes its
core competencies, and works consciously to defend them. We will come to understand the
critical features of sustainable advantages, discuss the contestability of such advantages, the
effect of historical resource allocation decisions on subsequent choices, and solutions to
management myopia.
We will discuss sustainable advantage within the ready-to-eat breakfast cereal industry,
the wine industry, and the global music industry. Competitive advantages can be built on a
variety of factors, but those that are sustainable are typically built on some distinctive
competence possessed by a firm and which are difficult for others to copy, or some first-mover
advantage that can not again be replicated. Among the issues we will discuss are the multiple
sources of sustainable advantages -- those that are highly tangible and those that are less so -- and
the risks inherent in entering business that may not offer the same advantages.
Case:
The Ready-to-Eat Breakfast Cereal Industry in 1994
Preparation Questions:
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1.
Analyze the RTE breakfast cereal industry. Why has it been such a profitable
business? What changes have lead to the current industry ‘crisis’?
2.
Why have private labels been able to enter this industry successfully? How do the
cost structures of private label and branded cereal manufacturers differ?
3.
What are the key core competencies and success factors needed in this industry?
Make sure you include your assessment of General Mills’ resources, capabilities
and competencies. How do you see the private label cereal manufacturers with
respect to the key success factors in this industry?
4.
What does General Mills hope to accomplish with its April 1994 reduction in
trade promotions and prices?
5.
What are the risks associated with these actions? How do you expect General
Mills’ competitors to respond? How then should General Mills proceed?
Case:
Robert Mondavi and the Wine Industry
Preparation Questions:
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1.
Evaluate the global wine industry. What are the key differences between the
industry structure in the Old World and the New World? Why do these structural
differences exist? Do they impact your assessment of industry attractiveness? If
so, how and why? Have firms simply been bystanders as external forces have
shaped the structure of the wine industry? What are the industry key success
factors?
2.
What is your assessment of Mondavi’s resources, capabilities and competencies?
Identify the threats to Mondavi’s competitive position and, more specifically, to
its ability to maintain a sustainable competitive advantage.
3.
How attractive are the economics of owning an independent ultra premium winery
on a 100-acre vineyard in Napa Valley? Would you invest in such a venture?
What advantages and/or disadvantages does Mondavi have relative to small
independent wineries such as this one?
4.
Why are large alcoholic beverage firms such as Foster’s Group, Diageo and Allied
Domecq entering the premium wine business? Do their strategies make sense?
What advantages or disadvantages does Mondavi have relative to these firms?
5.
What is Mondavi trying to accomplish with its international joint venture
strategy? How does this approach differ from the global strategies pursued by its
rivals?
6.
Do you agree with Mondavi’s decision to focus on organic growth rather than
acquisitions? What actions would you take to sustain or enhance Mondavi’s
competitive position?
Case:
BMG Entertainment
Preparation Questions:
17
1.
Evaluate this industry. Why have only a handful of major record companies
dominated this industry through most of the last century? What are the industry key
success factors? Consider the advent of the Berliner disk, radio, electrical
recording, the Depression, rock & roll, the LP, the CD and MTV - how would you
characterize the reaction of the industry to typical change?
2.
How does the advent of the Internet change the structure and economics of this
industry? Will major record companies continue to dominate this business? Chuck
D predicts that soon there will be half a million independent labels (p.1) – does this
prediction make sense to you? Does the new technology raise any new threat of
end-customer power? Piracy has been a problem in this industry since the invention
of the cassette tape. Why is it making headlines now? What portion of industry
output does Internet piracy constitute? How much operating income does the
industry lose due to piracy? How does the Internet and downloadable music affect
the balance of power between record companies and their artists? Is this situation
different between established artists and new artists? Will the internet bring on
vicious competition? To what extent is downloading likely to displace traditional
storefront sales?
3.
Will today’s majors be tomorrow’s? Put differently, is today’s new technology
more like the CD (which sustained industry leaders) or rock and roll (which led to a
shakeup of intra-industry positions)?
4.
What is your assessment of BMG Entertainment’s resources, capabilities and
competencies? How well has BMG dealt with the Internet and downloadable music
so far? Is downloading an economically superior way to deliver a CD? Answering
this question requires an analysis of relative costs and relative willingness to pay.
5.
What should Zelnick and Conroy do? Specifically, what should the strategy and
structure of BMG’s digital organization be? Do you suggest within the current
distribution organization or in a separate entity? How will retail customers and and
competitors interpret BMG’s organizational decision? To whom should BMG
market its downloadable products? Should BMG continue to work with a wide
array of technology partners? How can they maintain a sustainable competitive
advantage?
Topic 6
The Value Chain
We will continue to study competitive advantage by applying value chain analysis. The
value chain is a useful tool to help us to understand how a firm can both gain and sustain a
competitive advantage.
Case:
Wal-Mart Stores' Discount Operations
Preparation Questions:
1.
Conduct a detailed value chain analysis of Wal-Mart’s business (assess WalMart’s primary and support activities). Based on this analysis, where do you think
Wal-Mart creates value?
2.
What, historically, has been Wal-Mart's key source of competitive advantage in
discount retailing? How sustainable is Wal-Mart's competitive advantage in
discount retailing in 1986?
3.
Will Sam's Wholesale Clubs prove as big a success for Wal-Mart as its discount
stores?
Topic 7
Cost and Differentiation Advantages
In this topic we will continue our discussion of the sustainability of competitive
advantage but focus it more specifically to particular strategic positions. The Coors Brewing
case provides an ideal context for discussing the above issues. The brewing industry
experienced tremendous consolidation through that late 1970s, and at that time Coors was the
lone highly successful regional brewer in an industry dominated by national firms. Our
discussion will focus on the source of Coors' advantage and success, and pose the question of
whether it is sustainable.
Case:
Adolph Coors in the Brewing Industry
Preparation Questions:
18
1.
Coors was very successful through the mid-1970s. What was its strategy
historically?
2.
How did Coors’ operating performance change relative to its competitors’
between 1977 and 1985? Why?
3.
Given the situation at the end of the case, what actions should Coors management
take?
4.
Is this a story of cost or differentiation?
Topic 8
Innovation and Industry Evolution
Innovation and managing the development and introduction of new products is central to
a competitive advantage in many industries. Gillette is a classic business case that deals with a
broad range of strategic issues concerning the exploitation of exceptionally promising
innovations while trying to be more efficient in general operations. We will continue our
innovation discussion with an investigation of 3M.
Gillette’s Launch of Sensor
Case:
Preparation Questions:
1.
Compare the big three (Gillette, BIC, and Schick) at each stage of the value chain.
2.
How does the Sensor disrupt the competitors and who can respond most quickly?
3.
Is this a story of cost or differentiation?
Case:
Innovation at 3M Corporation (A)
Preparation Questions:
19
1.
How has 3M’s innovation process evolved since the company was founded? Why,
if at all, does 3M, known as a “hothouse” of innovation, need to regain its historic
closeness to the customer?
2.
How does the Lead User research process differ from and complement other
traditional market research methods?
3.
Has the Medical-Surgical team applied the Lead User research process
successfully? Why or why not?
4.
What should the Medical-Surgical Lead User team recommend to Dunlop: the
three new product concepts or a new business strategy? What are the risks to the
new Lead User process at 3M? What are the risks to the Medical-Surgical
business unit?
Topic 9
Competing in a Mature Industry
Now we will take a look at competing in mature industries, the backbone of many
countries’ economies. By taking a second look, we’ll find that maturity isn’t always what you
first think (e.g. stable structure, low differentiation, slow growth and snail pace rate of
innovation). Thus, maturity can equate to opportunity.
Case:
Nucor at a Crossroads
Preparation Questions:
20
1.
Why has Nucor performed so well in the past?
2.
How attractive do the economies of thin-slab casting look?
3.
Is thin-slab casting likely to afford Nucor a sustainable competitive advantage in
flat-rolled products?
4.
How should Nucor think about the uncertainties surrounding thin-slab casting?
What should it do?
APPENDIX
Why We Use the Case Method1
The case method is one of the most effective means of management education. It is
widely used in schools of business throughout the world, and this use is predicated upon the
belief that tackling real business problems is the best way to develop practitioners. Real
problems are messy, complex, and very interesting.
Unlike other pedagogical techniques, many of which make you the recipient of large
amounts of information but do not require its use, the case method requires you to be an active
participant in the closest thing to the real situation. It is a way of gaining a great deal of
experience without spending a lot of time. It is also a way to learn a great deal about how certain
businesses operate, and how managers manage. There are few programmable, textbook solutions
to the kinds of problems faced by real general managers. When a problem becomes
programmable, the general manager gives it to someone else to solve on a repeated basis using
the guidelines he or she has set down. Thus the case situations that we will face will require the
use of analytical tools and the application of your personal judgment.
Sources of Cases
All the cases in this course are about real companies. You will recognize many of the
names of the companies, although some of them may be new to you. These cases were
developed in several different ways. Occasionally, a company will come to a business school
professor and request that a case be written on that company. In other situations, a professor will
seek out a company because he or she knows that the company is in an interesting or difficult
situation. Often, the company will agree to allow a case to be written.
Occasionally, cases will be written solely from public sources. This is perhaps the most
difficult type of case writing because of the lack of primary data sources.
In those situations where a company has agreed to have a case written, the company
must "release" the case. This means that they have final approval of the content of a given case.
The company and the case writer are thus protected from any possibility of releasing data that
might be competitively or personally sensitive. Public source cases, obviously, do not need a
release. Given the requirement for release, however, it is amazing the amount of information that
companies will allow to be placed in a case. Many companies do this because of their belief in
the effectiveness of the case method.
Preparing for Class
When you prepare for class, it is recommended that you plan on reading the case at least
three times. The first reading should be a quick run-through of the text in the case. It should
give you a feeling for what the case is about and the types of data that are contained in the case.
This note was prepared by Dan R.E. Thomas. It is intended solely as an aid to class
preparation.
1
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For example, you will want to differentiate between facts and opinions that may be expressed. In
every industry, there is a certain amount of "conventional wisdom" that may or may not reflect
the truth. On your second reading you should read in more depth. Many people like to underline
or otherwise mark up their cases to pick out important points that they know will be needed later.
Your major effort on a second reading should be to understand the business and the situation.
You should ask yourself questions like: (1) Why has this company survived? (2) How does this
business work? (3) What are the economics of this business?
On your second reading, you should carefully examine the exhibits in the case. It is
generally true that the case writer has put the exhibit there for a purpose. It contains some
information that will be useful to you in analyzing the situation. Ask yourself what the
information is when you study each exhibit. You will often find that you will need to apply some
analytical technique (for example, ratio analysis, growth rate analysis, etc.) to the exhibit in order
to benefit from the information in the raw data.
On your third reading, you should have a good idea of the fundamentals of the case.
Now you will be searching to understand the specific situation. You will want to get at the root
causes of problems and gather data from the case that will allow you to make specific action
recommendations. Before the third reading, you may want to review the assignment questions in
the course description. It is during and after the third reading that you should be able to prepare
your outlined answers to the assignment questions.
There is only one secret to good case teaching and that is good preparation on the part of
the participants. Since the course has been designed to "build" as it progresses, class attendance
is also very important.
Class Discussions
In each class, we will ask one or several people to lead off the discussion. If you have
prepared the case, and are capable of answering the assignment question, you should have no
difficulty with this lead-off assignment. An effective lead-off can do a great deal to enhance a
class discussion. It sets a tone for the class that allows that class to probe more deeply into the
issues of the case.
The instructor's role in the class discussion is to help, through intensive questioning, to
develop your ideas. This use of the Socratic method has proved to be an effective way to develop
thinking capability in individuals. The instructor's primary role is to manage the class process
and to insure that the class achieves an understanding of the case situation. There is no single
correct solution to any of these problems. There are, however, a lot of wrong solutions.
Therefore, we will try to come up with a solution that will enable us to deal effectively with the
problems presented in the case.
After the individual lead-off presentation, the discussion will be opened to the remainder
of the group. It is during this time that you will have an opportunity to present and develop your
ideas about the way the situation should be handled. It will be important for you to relate your
ideas to the case situation and to the ideas of others as they are presented in the class. The
instructor's role is to help you do this.
The Use of Extra or Post-Case Data
You are encouraged to deal with the case as it is presented. You should put yourself in
the position of the general manager involved in the situation and look at the situation through his
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or her eyes. Part of the unique job of being a general manager is that many of your problems are
dilemmas. There is no way to come out a winner on all counts. Although additional data might
be interesting or useful, the "Monday morning quarterback" syndrome is not an effective way to
learn about strategic management. Therefore, you are strongly discouraged from acquiring or
using extra- or post-case data.
Some case method purists argue that a class should never be told what actually happened
in a situation. Each person should leave the classroom situation with his or her plan for solving
the problem, and none should be falsely legitimized. The outcome of a situation may not reflect
what is, or is not, a good solution. You must remember that because a company did something
different from your recommendations and was successful or unsuccessful, this is not an
indication of the value of your approach. It is, however, interesting and occasionally useful to
know what actually occurred. Therefore, whenever possible, we will tell you what happened to a
company since the time of the case, but you should draw your own conclusions from that.
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