Strategic Issues and Applications
MBAC 411 / Accelerated MBA Program
Summer, 2003
Professor
Email
Office Hours
Assistant
David Deeds
dxd52@po.cwru.edu
Anytime by appointment
Teresa Kabat
Office
Phone
Fax
Teresa’s phone
PBL 238
368-6008
368-4785
368-2076
Reading packet
There is no textbook for the course. Instead there is a required CWRU-Note
available at the bookstore which includes all of the course readings, cases and
lecture notes for classroom discussion. This is copywritten material and each
student must purchase an individual copy of the CWRU note.
Course Overview
Strategic Issues and Applications (SIA) uses the case method to examine how general managers
create and maintain competitive advantage for organizations. SIA considers how managers
determine strategic direction and manage the strategy process. Recognizing that most general
management decisions are inherently multi-functional in nature, we employ explicit frameworks for
strategic action while also integrating lessons from functional area courses to explore and reconcile
the tensions that accompany decisions that involve the entire enterprise.
Course Objectives
1. Understand the nature of strategic competitiveness and develop the ability to analyze the
competitive environment facing a firm, assess the attractiveness of the industry and isolate
potential sources of competitive advantage and disadvantage.
2. Integrate knowledge and apply analytical techniques from various disciplines, including finance,
accounting, marketing, economics, operations, organization theory and organizational behavior.
The goal is to identify and analyze strategic issues and develop solutions in the form of
actionable plans with the purpose of developing and sustaining competitive advantage.
3. Discriminate among the types of data that general managers need to evaluate alternative
scenarios. Develop logical, coherent and persuasive analyses for a desired course of action.
Consider how to effectively implement plans within the constraints imposed by the complex
behavior of individuals within organizations. Each student should be able to effectively
communicate his or her conclusions in both oral and written form.
4. Develop the ability to view the corporation as a whole and to assess it in relation to business
unit goals and objectives.
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Class Format The Case Method: Why We Rely on Discussion Learning
Approximately three-fourths of our class time will be spent discussing business cases. Why do we
rely on the case method so extensively? The case-study method brings a “real world” approach to
business education in at least three important ways. First, case discussions generate a dynamic
process of vigorous questioning and responding, examination and debate among students and
discussion leader. Because strategy issues are often characterized by ambiguity, complexity or
uncertainty, this course is more about asking the right questions than it is about knowing the right
answers. Rather than simply lecture about the current state of “best practices,” we recognize that
theories change over time while reasoning skills survive. The case method helps students to refine
their skills as insightful questioners, rather than just good answer-finders. In this model of learning,
it is the journey more than the destination that matters. In addition, discussion learning requires all
students to participate actively in the learning experience. The MBA degree is about more than just
acquiring a tool box of analytical skills. It is also about developing the ability to contribute to the
group so that we expand the boundaries of everyone’s learning. Just as in management, there is no
formula that you can follow for every case. Nevertheless, over the course of the semester, students
gradually build on the combination of theory and analysis, judgment and experience to develop for
themselves the ideas that the teacher seeks to communicate. While the case method requires a high
level of student commitment, it also causes students to personally engage the problem and “own”
the solution, so that the case method is inherently a student-oriented process. Walter Wriston has
said, “Good judgment comes from experience. Experience comes from bad judgment.” As in the
“real world,” the case method replicates the trial-and-error experience of seasoned managers,
thereby deepening judgment. It also does so in the low risk environment of the classroom where
career casualties are not at stake.
Second, the case method trains students to think as administrators (rather than as scholars), so that
they: (1) see a problem looking for solutions rather than a concept looking for applications, (2)
focus on defining and prioritizing a maize of tangled problems and determining which one(s) to
attack with the limited time available, (3) appreciate differing agendas and points of view, and (4)
take action, not just report findings.
Third, by linking analysis with individual action taking, the case method encourages moral
awareness by requiring students to take a stand. The give-and-take of case discussion often brings
to the surface subtle ethical dilemmas that might otherwise be missed. The case method helps
students learn to assess and embrace the tradeoffs among different stakeholders’ interests. The case
method requires students to use all of their knowledge, skills and experience to respond in real time
to the questions raised in class and to effectively communicate their ideas to their classmates and
help to lead them to a greater shared understanding of the problem at hand. Thus, the students
become the teachers.
In sum, we teach with case studies because the method embodies important values of professional
education. The case method is not simply a technique; it is a rich philosophy about judgment,
analysis, action and learning. (Adapted from an article by Robert F. Bruner.)
While our applications will emphasize exercise of judgment, by no means is this course “theory
free.” We will learn to break down complex problems into manageable analytical issues to which
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we can apply a rigorous set of theoretical tools. The analytical approaches in our “strategy tool kit”
will be covered in the required readings prior to each case. These readings have been carefully
selected to convey often complex topics in a concise, understandable manner. In general, I have
emphasized managerially relevant readings and spared you the pain of reading pointy-headed,
scholarly-type articles. Since these readings articulate much of the theoretical content of the course,
they will be crucial to your comprehension of our course concepts. It is extremely important that
you read, study (and preferably discuss with each other) this material when assigned so that you will
be able to apply it to our case discussions.
The key requirement of this course is that you THINK. This course requires that you synthesize
material that you have learned in prior classes in your business education in conjunction with new
concepts we will introduce. I will ask that you add a dose of common sense and filter these ideas
through your own experiences and “world view.” We will reach consensus on some issues, yet
many among you will have differing interpretations as we proceed through the course. This is the
nature of strategy and policy issues. You may find yourself occasionally frustrated by the ambiguity
and the difficulty of assimilating conflicting points of view. Welcome to real life.
Our readings and case discussions are designed to help you understand how firms formulate and
implement strategies under the impetus of competition, technology, government action, and other
important contextual forces. This, in turn, requires a deep understanding of the functional strategies
associated with marketing, operations, finance and human resources. Our challenge in this course
will be to integrate your learning from other courses in a synthesis with new material introduced
here to see how general managers develop functional strategies into overall business and corporate
strategies and to see how their chosen strategies are implemented. While this may not happen
overnight, over the course of the semester, you can expect to begin to see how the “pieces fit
together.” You will be better prepared to enhance your careers with a more comprehensive vision
of the firm as a whole and your role in it.
Requirements and Evaluation Criteria
Class Contribution
Written assignments
Case Write-up & Presentation
40%
20%
40%
Total
100%
Class Contribution
Most of your learning will occur in preparation for and participating in the case discussions. To
enhance your preparation and learning, I strongly encourage you to form study groups to discuss
the cases prior to class. To guide you in your preparation, this syllabus includes discussion
questions for each case.
As noted earlier, the complexity of the course material relies heavily on discussion learning. This
process allows the cumulative insights of your colleagues to contribute to the evolution of the
class’s learning. Thus, the entire class learning experience relies on each of you taking
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responsibility for contributing to the discussion. In order to do so, it is imperative that each of
you be present and be fully prepared each day.
In order to emphasize the necessity to be prepared for and to contribute to each class, class
participation will comprise a significant portion of your grade. As is the case with real world work
environments, you are judged not by what you know but by what you contribute. Even if you feel
that you know the material, unless you share your insights with the class, I cannot adequately
evaluate your preparedness and contribution. Students are never penalized for making comments
which don’t appear to be the “right answer”. It is only through consideration of many diverse
opinions and viewpoints that we will move toward a greater shared understanding of the multidimensional material which this course entails.
Each day, I will ask one or more individuals to “open” the case with a summary of the key issues
along with his or her analysis of those issues. It is important that each of you be prepared to
respond to the invitation to open the discussion. In the unlikely event that you are not prepared for
class, then please let me know beforehand so that I might spare both of us the embarrassment of my
calling on you. You should be able to identify the key issues, problems and opportunities facing the
central case protagonists, to articulate and evaluate alternative approaches to problems, and to
describe the course of action that you recommend and the reasons for yours recommendations. I
may begin the discussion with one of the questions in the syllabus or with another question.
It is important to appreciate that every student is an important cog in the class discussion, and that it
is equally important that each of us listen carefully to one another and attempt to build on or
constructively critique prior comments. Please resist the temptation to jump to topics that are not
specifically open for discussion. Some of the specific things that will have an impact on effective
class participation and on which you will be evaluated include:
 Is the participant a good listener?
 Are the points made relevant to the discussion? Are they linked to the comments
of others and to the themes that the class is exploring together?
 Do the comments add to our understanding of the situation? Are they incisive?
Do they cut to the core of the problem?
 Is there a willingness to challenge the ideas that are being expressed?
 Is there a willingness to test new ideas, or are all comments “safe”? (For example,
repetition of case facts without analysis or conclusions, or repeating comments
already been made by someone else.)
 Does the participant integrate material from past classes or the readings where
appropriate? Do the comments reflect cumulative learning over the course and
the MBA curriculum, or does the participant merely consider each case in
isolation?
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SESSION 1
June 18, 2003
1:30 – 5:00 pm
TOPIC:
Overview of Strategic Issues and Application
READINGS:
Porter, Chapter 2, Competitive Advantage,
“The Value Chain and Competitive Advantage”
Barney, “Looking Inside for Competitive Advantage”,
Academy of Management Executive
Chatterjee, “Delivering Desired Outcomes Efficiently”,
California Management Review, Winter 1988
Review slide numbers 1-32 in the Course Notes included in CWRU note
CASES:
“Republic Gypsum”
“British Airways Sure Isn’t Coasting”, Business Week, September 30, 1996
==========================================================================
SESSION 2
June 19, 2003
1:30pm-5:00pm
TOPIC:
The Concept of Strategy
READINGS:
none
CASE:
Southwest and other airline cases.
GROUP ASSIGNMENT:
Construct a “value map” which describes the linkages among customer values, internal
objectives and activities.
This assignment will be performed in class with a discussion to follow.
PREPARATION QUESTIONS:
1.
What, if any, is the source of Southwest’s competitive advantage? Is it sustainable?
2.
What went wrong at Continental with Cal Lite?
3.
How likely is United to succeed with their short haul airline? Why?
==========================================================================
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SESSION 3
June 20, 2003
1:30pm-5:00pm
TOPIC:
Evolution of the Value Chain
READING:
Porter, “What Is Strategy?”
Harvard Business Review, Nov/Dec, 1996
Review slide numbers 1-32 in the Course Notes included in CWRU note
CASE:
Dell Computer Corporation
GROUP ASSIGNMENT:
Construct a “value map” for each of the three periods in the case which describes the
linkages among customer values, internal objectives and activities.
Answer in 2-3 pages: What are the critical activities in each period? What, if any, is the
source of Dell’s competitive advantage? Is it sustainable?
PREPARATION QUESTIONS:
1.
What were the reasons for Dell's initial success?
2.
How has this model evolved over time?
What was the basis for Dell’s strategic position in each of three periods discussed in the case?
3.
How well is Dell positioned today?
Is their current competitive position sustainable?
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SESSION 4
June 23, 2003
1:30pm-5:00pm
TOPIC:
Value Chain in the Context of the Industry Environment
Industry Analysis and Competitive Strategy
READINGS:
Review Porter, “How Competitive Forces Shape Strategy”,
Harvard Business Review, Mar/Apr, 1979
Review slide numbers 33-60 in the Course Notes included in CWRU note
CASE I:
Crown Cork and Seal in 1989
GROUP ASSIGNMENT:
Complete the matrix (included in your reading packet) which analyzes the industry
structure for the metal container industry. Use a highlighter to mark the two most critical
forces for determining a firm’s profitability. In 1 page briefly explain how CCS has used
strategic positioning to deal with these forces.
PREPARATION QUESTIONS:
1.
What are the key strategic issues that Avery needs to consider?
What strategic options are open to him?
2.
If we are going to analyze the industry that Crown Cork competes in, what is the appropriate
industry to analyze?
3.
How attractive has the metal container industry been over the years?
4.
How well did Crown Cork do under John Connelly?
5.
What significant changes are taking place in the industry?
How should the new CEO Bill Avery respond?
==========================================================================
TOPIC:
Industry Analysis and Sustainability of Strategic Position
READING:
none
CASE II:
Adolph Coors in the Brewing Industry
GROUP ASSIGNMENT:
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Using the figures from Exhibit 9 in the case, construct a simple income statement down to
the level of operating income on a per barrel basis for both Coors and Anheuser-Busch for
1977 and 1985. Consider price, COGS, advertising and SG&A expenses (all on a per
barrel basis for your comparison). Compare the two brewers in each period and look
carefully at the net changes from 1977 to 1985 for each brewer. In 1 page briefly explain
the reason for the changes.
PREPARATION QUESTIONS:
1.
What factors accounted for Coors’ competitive advantage in the mid-1970s?
2.
Why did the brewing industry consolidate?
3.
Why has Coors’ performance deteriorated?
======================================================================
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SESSION 5
June 24, 2003
1:30pm-5:00pm
TOPIC:
Industry Structure, Industry Attractiveness and Strategic Positioning
READING:
Review slide numbers 33-60 in the Course Notes included in CWRU note
CASE I:
The U.S. Toy Industry
INDIVIDUAL ASSIGNMENT:
1. Complete the matrix for the two segments in the U.S. Toy Industry and hand in a hard copy
with your assignment. Be sure that you briefly describe each factor that you consider relevant
within the box provided. Fill in each box as best you can with either a +, - or ? for each
important factor. There may be more than one than one factor affecting price, cost, quantity or
risk for each industry force, and they may be inconsistent so that opposing forces create
countervailing effects.
For example, under Buyer Power, you will list who the likely buyers are in each segment. In
other words, what distribution channel will the toy company use to distribute its products? How
powerful are those buyers? Why are they powerful (or not) in regard to the price? How might
each distribution channel affect the toy firm’s costs, quantities or sales volume? Each industry
force will not necessarily affect every driver (price, cost, quantity, risk).
2. Choose and clearly label the more attractive segment based on your analysis for Q. 1 and
develop a value map for that segment. Utilize the “outside-in” approach to define customer
values. Develop objectives which link the values with functional areas to create a system of
activities. Define multiple activities (by functional area, such as marketing/service, distribution,
research and development, or manufacturing) for your business plan to position the firm to
compete effectively. Be specific in defining the activities. Utilize the value chain to help your
thinking here. You will hand in a hard copy of the value map.
3. Finally (this is exciting, isn’t it?), develop a detailed business plan (3-4 pages of text) for the
toy company.
a) Develop a positioning strategy to deal with the industry structure.
b) Describe how your strategy responds to the opportunities and threats created by the
industry structure you analyzed for Q. 1. As you describe the activities in this system,
consider how each might either reduce power of industry forces or add value.
c) Look for opportunities to build a complex and self-reinforcing system that will be difficult
to imitate.
This assignment allows you build important skills that relate to strategy formulation and
implementation as we seek to merge key concepts developed in the SIA course. This represents
an important step in moving from retrospective analysis of actions taken (as we have seen in
prior cases) to developing your own sets of action moving forward. Moving from analysis to
action is a crucial element in building your general management skill set and developing your
ability to integrate key concepts in a realistic business setting.
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TOPIC:
Industry Structure, Industry Attractiveness and Strategic Positioning
READING:
Hamel & Prahalad, “Strategic Intent”, Harvard Business Review, May/June,
1989
CASE II:
Wal-Mart Stores, Inc.
PREPARATION QUESTIONS:
1.
What are the sources of Wal-Mart’s competitive advantage in discount retailing?
2.
How sustainable will their position in discount retailing be in the future?
3.
How successful will their diversification into the food industry be?
==========================================================================
SESSION 6
June 25, 2003
1:30pm-5:00pm
TOPIC:
Building Capabilities for Strategic Renewal
READING:
Prahalad & Hamel, “The Core Competence of the Corporation”, Harvard
Business Review, May/June 1990
CASE I:
Intel Corporation-Leveraging Capabilities for Strategic Renewal
PREPARATION QUESTIONS:
1.
How was Intel able to survive and prosper in an industry environment that squeezed out most of its
competitors? How would you describe its critical competitive advantage? What are the most important
capabilities which contributed to Intel’s competitive advantage?
2.
What role has Andy Grove played in Intel’s overall success? How would you describe his major
contributions to date? What issues are implicit in his plans to hand over leadership to Craig Barrett?
3.
At the end of the case, Andy Grove is facing some new challenges. What advice would you give
him as he considers what to do with the company’s remaining memory products business and
whether to move further downstream by expanding its systems business?
==========================================================================
TOPIC:
Competitive Dynamics
READING:
none
CASE II:
The Ready-to-Eat Breakfast Cereal Industry in 1994
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GROUP ASSIGNMENT:
1.
How significant have the barriers to entry been in the RTE cereal industry? Calculate
what the cost of entry would be for a major branded cereal entrant and for a private
label entrant. Assume that each new product introduced attains an average market share
of 0.2%. Show the total cost of entry for both types of entrants.
2.
How do the cost structures of private label and branded cereal manufacturers differ?
Complete the value chains included in your CWRU note to estimate the margins for the
branded versus the private label competitors.
3.
Calculate on a per pound basis what the operating profit impact will be for General Mills’
reduction in trade promotions. How will total operating profit be impacted? Assume
that market shares remain unchanged for the major players. What will the impact be for
the other players?
PREPARATION QUESTIONS:
1.
Why has RTE cereal been such a profitable business? What changes have led 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 does General Mills hope to accomplish with its April 1994 reduction in trade promotions
and prices?
What are the risks associated with these actions? How do you expect General Mills’
competitors to respond? What should General Mills do?
=====================================================================
4.
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Session 7
June 26, 2003
TOPIC:
1:30pm-5:00pm
Building Capabilities for Sustainable Advantage, Competitive Dynamics
READING:
none
CASE I:
Matching Dell
INDIVIDUAL ASSIGNMENT (although you may discuss it in groups):
Respond in about 1-2 pages to the following: What is your assessment of the industry
attractiveness of the personal computer industry (focusing on the manufacturers of personal
computers)? Discuss the key forces which create this situation.
Respond in about 1-2 additional pages to the following: What are the key activities Dell
pursues? Why is each of these activities advantageous for Dell? How do these activities fit with
the rest of what Dell does? How do these activities respond to the PC industry’s structural
characteristics you identified above?
Respond in about 1-2 additional pages to the following: Perform the analysis on Dell’s and
competitors’ cost structures which is indicated in the one page handout in your CWRU note (use
Compaq for the comparison). Using this information and the average price per quarter data on
PC prices (Exhibit 10b), what does this tell you about the nature of Dell’s competitive strategy
and importantly, the decisions they have made about how to compete in the industry? Focus on
Dell and Compaq for your explanation of cost and pricing decisions. (Also hand in your cost
structure analysis with your answer.)
PREPARATION QUESTIONS:
1.
How and why did the personal computer industry evolve into this situation?
2.
Why has Dell been so successful?
3.
Prior to the recent efforts by competitors to match Dell (1997-1998), how big was Dell’s
competitive advantage?
4.
How effective have competitors been in responding to the challenge posed by Dell’s
advantage? Who has done the worst job of responding to Dell?
5.
What roles do HP and Gateway play in these dynamics?
6.
How effective have various attempts to catch Dell been so far?
==========================================================================
TOPIC:
Vertical Integration
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READING:
Stuckey & White, “When and When Not to Vertically Integrate”, Sloan
Management Review, Spring 1993
CASE:
Benetton S.p.A
PREPARATION QUESTIONS:
1.
The case notes that Benetton uses a combination of vertical integration and sub-contracting in
managing a number of different functions, including product styling and design, manufacturing,
logistics and distribution, sales, purchasing, technical support, retailing, etc. How should they
decide which functions should be owned by Benetton and which can be sub-contracted?
Among functions which use both approaches, how should they decide the mix of inside and
outside usage? (Note that the Stuckey & White article is particularly salient to this issue.)
7. What are the key issues that Benetton must address in dealing with its many sub-contractors?
8. What are the risks inherent in Benetton’s use of (or lack of) vertical integration? In particular,
what are the risks associated with its strategy for managing the Benetton retail operations
and the licensing of the Benetton name?
1.
What would you advise Luciano Benetton regarding the company’s diversification plans,
particularly in regard to its expansion into financial services?
==========================================================================
Session 8
June 27, 2003
1:30pm-5:00pm
TOPIC:
Incentives & Motivation
READINGS:
Kerr, “On the Folly of Rewarding A, while Hoping for B”, Academy of
Management Executive, Feb 1995
“More on the Folly- Executive Fax Poll Results”, AME, Feb 1995
CASE I:
Lincoln Electric
PREPARATION QUESTIONS:
1. How would you describe Lincoln Electric’s approach to the organization and motivation of
their employees?
2. What role do you think this approach has played in Lincoln’s performance over the last 25
years? Have any other factors been more important?
3. What factors will be critical to Lincoln’s continued success? What recommendations would
you make to Mr. Willis?
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4. What is the applicability of Lincoln’s approach to motivation to other companies and
situations? Why don’t more companies operate like Lincoln?
==========================================================================
TOPIC:
Incentives & Motivation
CASE II:
Lincoln Electric: Venturing Abroad
PREPARATION QUESTIONS:
2. Given Lincoln’s success in the US market, why did their internationalization thrust of the late
1980s and early 1990s fail? What is the root cause of Lincoln’s failures to turn a profit on so
many of the operations it acquired in other countries? Could its vaunted compensation and
management system have worked in some of those countries?
3. What is your evaluation of the company’s new internationalization strategy under Tony
Massaro’s leadership? Is it likely to be more successful than the previous offshore initiatives?
If so, why?
4. Should Lincoln go ahead with its investment in Indonesia? If so, what should be its entry
strategy with respect to partnerships? Which compensation option would you recommend to
Mike Gillespie as he considers the advisability of implementing the company’s incentive
management system?
==========================================================================
TOPIC:
Appropriation of Value
READINGS:
none
CASE III:
Ecolab
PREPARATION QUESTIONS:
1.
What are the principal reasons for Ecolab’s leadership position in the institutional cleaning
business?
2.
In what ways could Diversey challenge Ecolab’s industry leadership? What should Schuman
do to ensure that Ecolab faces such challenges forcefully?
3.
How should Schuman manage the emerging tumult within the Institutional Division?
==========================================================================
Session 9
July 17, 2003
TOPIC:
1:30pm-5:00pm
Leadership and Transformation
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READING:
Kotter, “What Leaders Really Do”, Harvard Business Review, May/June 1990
CASE:
GE’s Two Decade Transformation: Jack Welch’s Leadership
PREPARATION QUESTIONS:
1.
How difficult a challenge did Welch face in 1981? How effectively did he take charge?
2.
What is Welch’s objective in the series of initiatives he launched in the late 1980s and 1990?
3.
How does such a large, complex diversified conglomerate defy the critics and continue grow so
profitably?
5.
What is your evaluation of Welch’s management approach? How important is he to GE’s
success? What implications are there for his replacement?
6.
GE has been a source of management innovation for decades. What is it that you learned, if
anything, from the experience of Jack Welch?
==========================================================================
TOPIC:
Leadership and Transformation, Competitive Dynamics
Putting it all together
READINGS:
none
CASE:
Asahi Breweries, Ltd.
PREPARATION QUESTIONS:
1.
Is Asahi a successful enterprise? By what standard?
2.
Define the corporate strategy of Asahi Breweries, Ltd. as of 1989. What competitive concepts,
economic and non-economic objectives, key operating policies, and timed sequence of moves
characterize the strategic logic of this enterprise?
3.
What specifically did Messrs. Murai and Higuchi bring to Asahi? How would you characterize
their policies, behavior and contributions?
4.
What is your assessment of Asahi’s investment and profit plan presented in Exhibit 1?
==========================================================================
Session 10
July 21, 2003
1:30pm-5:00pm
15
TOPIC:
Applying the tools
READINGS:
none
CASE:
Student Group Cases
Session 10
July 23, 2003
1:30pm-5:00pm
TOPIC:
Applying the tools
READINGS:
none
CASE:
Student Group Cases
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