CASE WESTERN RESERVE UNIVERSITY
The Weatherhead School of Management
Semester
Course :
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Class Time
Faculty
Office:
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Fall, 2001
PLCY 495 - Industry and Competitive Analysis for Strategic
Planning
8:15 - 10:15 p.m., Mondays
Sears 480
Vasu Ramanujam
510 Enterprise Hall
As needed, by appointment
368-5100 (Office, direct line)
368-2190 (Secretary, Janice Hughes-Hudson, for messages and information)
752-1257 (Home)
368-4785
Vasu Ramanujam: vxr@po.cwru.edu
Janice Hughes-Hudson: http://blackboard.cwru.edu
jxh20@po.cwru.edu
COURSE OUTLINE
Careful and thorough analysis of the competitive environment is a key prerequisite for effective development of strategies and competitive moves. This elective course will introduce a set of analytical techniques for performing such an analysis. Specifically, we will study frameworks for (a) defining an industry and categorizing its attractiveness or profit potential, (b) analyzing competitors and the nature of their interactions, (c) understanding the key success factors for competing in different types of industries and how they change over time, (d) understanding the sources of competitive advantage and how they erode or are preserved, and (e) selecting strategies of defense and offense.
Throughout, the emphasis will be on understanding how industries and competitors change over time.
TEACHING APPROACH
The course will be taught using a combination of lectures, case discussions and external readings. Team learning will be emphasized, and group study and preparation are involved in all aspects of the class, except for individual class participation and individual effort on an in-class examination or a take home case analysis write-up.
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COURSE OBJECTIVES
The following are the objectives of the course:
1. To introduce a variety of broad analytical frameworks, tools and techniques for comprehending, assessing, influencing and/or shaping an industry (or the competitive environment) and for dealing with competitive issues in rapidly changing industry environments.
2. To provide practice in the identification, analysis, and resolution of competitive issues facing a firm through case discussions, written analysis of cases, and a hands-on industry and competitive analysis project.
REQUIRED TEXT
Oster, Sharon M., Modern Competitive Analysis, Third Edition, Oxford, 1999 (hereafter abbreviated MCA.)
In addition to the above text, a small number of other outside readings will also be used.
CWRUNotes: CASES AND ADDITIONAL MATERIALS
Please pick up a CWRUNotes packet containing the cases and additional readings to be used in this course. Please note that cases may be substituted during the semester. If this happens, you will be notified at least one week in advance and provided copies of the substitute cases.
Additional readings touching upon related contemporary topics taken from such sources as The
Harvard Business Review , The Wall Street Journal , Business Week , Fortune , Forbes , etc. may also be assigned from time-to-time.
GRADING
First, some words on grading philosophy.
I view grades as a feedback mechanism, not a judgment of your worth. Grading is necessarily subjective in a policy course, because of the inherent ambiguity of the subject matter. However, subjectivity does not imply arbitrariness, and
I go to great lengths to ensure fairness in my assessments. For example, standard formats are used for evaluating presentations and so forth, so that every presentation is evaluated according to a consistent set of criteria. It has been very rare indeed that a student has not seen the grading in PLCY 495 as fair. Because of over a decade and half of observing students similar to yourself,
I ask that you allow that I may have a vantage point from which to consider your accomplishments that you may not be able to appreciate in the heat of the moment. Without exception, I try to err on your side, and exhaust consideration of why your grade should not be higher than it is before deciding what it is.
Beyond a point, it’s impossible to explain a grade, and I don’t use any grading formulas. I also feel I must advise you right off the bat that considerations such as your employer’s tuition reimbursement policies are not at all germane to
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my assessments. I welcome one-on-one discussions of performance throughout the semester, but will not entertain requests for grade revisions once the final grades are posted, except in cases of obvious error or overlooked assignments.
An A denotes excellence, and the willingness to go beyond merely meeting requirements. The commitment of an A student to the course, and her or his own development, is usually obvious to me within a few days of interaction. An A student does not require any prodding to learn. An A is not automatic on meeting the threshold requirements, so it doesn’t help to say, I submitted all the assignments, or I spoke in class, etc. The issue is how much stretch and reach did you exhibit and how visible you made your efforts.
A B denotes good work, and indicates someone who has met all requirements at an acceptable level. An A student occasionally ends up with a B because of unusual circumstances. The difference is in how the A student handles that kind of setback. Many people are happy to be rated a B, because they have other things going on in their lives besides this course, and they have consciously made the tradeoffs as to what’s important to them. That’s fine by me. What is not reasonable is for someone to have expended a B level of effort, and profess surprise at not having received an A.
Not meeting the stipulated requirements, or consistently failing to do so in a timely fashion raises the specter of a possible C or worse, although, this being an elective course, I usually don’t expect to see C level performance in this class. Punctuality, professionalism, and attention to detail are important to me. If they are grossly ignored, poor performance might result. Within limits, I believe in giving people second chances and the opportunity to improve, but it’s all up to them, for the most part. Being proactive is the key. If you find yourself falling behind, work with me to see to how you might improve your situation. Waiting till it is too late will reduce your options drastically, and mine as well. I want to be able to help, but you must be willing to help yourself first.
With those comments and caveats, the grading criteria used in PLCY 495 are as follows:
1.
2.
3.
Class participation
Competitive analysis (CAP) project
In-class examination or take home case analysis
20%
30%
50%
Class participation (20%) is the single most important evidence of preparation and motivation.
It’s one of the two components of individual performance used in this course.
Regularity of attendance is, of course, a precondition for effective class participation. Any occasional absence must be notified, preferably in advance, or immediately after, with appropriate explanation. Missing more than three classes will adversely impact your class participation grade.
Not participating at all will ensure that you will not earn an A in this class, no matter how well you do otherwise. In other words, you cannot expect to work your way to an
A in this class based on superior outcomes on group aspects of your performance. Participating minimally or not meaningfully may also pull you down. Participation cannot be graded
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mechanically or on a day-to-day basis; it will take me a good part of the semester to assess how much and how well each of you is contributing to the class discussions. Please feel free to seek some feedback after a few weeks, if you are unsure as to where you stand.
For each case class, bring with you a one or two page assessment of the case situation, with an indication of what you think the company should do next. These will not be formally graded, but regularity in submitting them will ensure that you receive some benefit-of-doubt in the assessment of your class participation. You should also consider preparing a 1-2 page summary of the key points from each week’s readings, and add some comments or questions of your own.
You are encouraged to post these to Blackboard (Blackboard is a technology enabled virtual space which provides opportunities for communication as well as sharing course related information and documentary materials. You will be given more information concerning
Blackboard access and use on the first day of class.) Please recognize, however, that posting to
Blackboard is a second-best way to earn credit for class participation. The best way is to participate actively in class discussions.
To prepare for case discussion, (a) study the case carefully and master the facts given (at least two passes through the case will be required for this), (b) think about the issues the case raises and summarize them in writing, (c) think about how any concepts or models introduced in the background reading/s apply to the case and apply the tools (acquiring mastery over the vocabulary of the course and trying to apply its analytical tools are very important), (d) go beyond the readings and integrate learning from previous cases as well as courses in analyzing the present case, and above all (e) take chances, be creative and innovative in looking at things
(even if at first it seems there’s no receptivity to your ideas from me or the rest of the class). Part of being a good manager is the need to develop self-confidence as well as a thick skin.
Posting regularly to the Discussion area on Blackboard is another way to contribute insights for the benefit of the whole class. Particularly useful are Blackboard discussions that look back on the class session and add new insights that may have been overlooked in the class discussion.
These could take the form of brief comments drawing on any personal experiences, articles read, or other information obtained from informal reading and browsing in the business media or the
Internet. 30% of your class participation grade (i.e., 6% of your course grade) will depend on the quality of your contributions to Blackboard discussions.
Attached to this course outline are discussion questions to guide your analysis of the cases. They are broad in tone and scope and are provided only for guidance. You don’t need to answer them in the exact sequence in your one or two page write-ups, but try to address the most important questions.
An in-class examination or a take home case analysis (30%, the second component of your course grade that’s based on individual performance ) will be given during the semester. The examination date or the due date for the case submission as well as details such as page limits, presentation guidelines, etc. will be negotiated during the semester. You will be notified of such requirements by E-mail.
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Late submissions are not acceptable and will be downgraded by one whole letter grade.
Discussion of the case in informal groups outside of class is encouraged, but all case write-ups must be independently completed. No exhibits, graphs, charts or other work should be shared.
All external sources of analytical data and financial information must be acknowledged in the paper and references provided suitably.
Competitive Analysis Project (CAP) (50%)
PLCY 495 is a technique-oriented course. You learn the techniques best by consciously applying them to specific situations. The purpose of the competition analysis project is to give you an opportunity to apply the techniques of analysis introduced in the course.
Your assignment is to identify the evolutionary process of competition in an industry or market of interest to you with a particular emphasis on the nature of the rivalrous interaction among competitors. You will need to develop as much data as you can on the past, present, and future of the industry, tracking how competition has developed, and how initiative and advantage have shifted from player to player. Specifically, you will be expected to identify the major and minor competitors, their market shares, profitability, and individual strengths and weaknesses and how these have changed over time. Your final report should be a chronology of events and their significance. You will be expected to identify trends in the industry and issues facing the industry as a whole and to predict the possible responses of the different competitors to those trends and issues. You will be asked to identify the current strategies of the key players and to suggest any changes you feel they should make in their competitive strategies. The end result of your analysis should be an in-depth understanding of your chosen industry, its dynamics, economic characteristics, and key requirements for success.
As a result of this project you will gain familiarity with various data sources and their usefulness and limitations. A large portion of your research will involve the use of resources available on the Internet. You will apply competitive analysis techniques and develop insights on the competitive behavior of firms under particular market structures.
The final reports should be typewritten, double-spaced on standard letter-sized paper. They may be between 20 and 30 pages, excluding exhibits, tables, figures, etc. Use such exhibits judiciously and to make specific points in the text of the report. Neatness, professional appearance, and attention to detail (numbering pages, proofreading, etc.) will be given considerable weight in grading although they will be judged mainly on the basis of the flow, logic, and internal consistency of the arguments presented. Please keep the report simple, however. Please avoid fancy folders.
In addition to the formal submissions, I strongly encourage you to keep me posted informally as to your progress. E-mail is a good tool for this. I will be available to meet with each group as often as necessary during the semester, in addition of the formally scheduled meetings that will occur toward the middle of the semester to discuss progress and problems.
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Session 1
Topic:
Agenda:
Session 2
Topic:
Read:
Prepare:
Submit:
Session 3
Topic:
Read:
Prepare:
Session 4
Topic:
Read:
Prepare:
PLCY 495 - Industry and Competitive Analysis
For Strategic Planning
Schedule
August 27
Introductory lecture
Formation of project groups
September 10
Understanding industry structure
MCA, Chapters 1-4 (pp. 1-82)
Porter, The structural analysis of industries
Porter, Generic Strategies
Porter, The value chain and competitive advantage
E&J Gallo Winery
1. CAP Project proposal (one page identifying industry to be studied for group project; include names, home, work, and fax phone numbers as well as e-mail addresses of all group members on the proposal.)
September 17
Generic strategies
MCA, Chapters 5-7 (pp. 83-140)
Porter, A framework for competitor analysis
Sunrise Medical Inc.’s Wheelchair Products
September 24
Competitor analysis
MCA, Chapters 8-9 (pp. 141-182)
Porter, A framework for competitor analysis (Review)
Cat Fight in the Pet Food Industry (A)
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Session 6
Topics:
Read:
Prepare:
Session 7
Topics:
Read:
Prepare:
Submit:
Session 8
Topics:
Read:
Session 5
Topic:
Read:
Prepare:
Submit:
October 1
Scope of the Firm: Vertical Integration, Diversification, and Strategic
Alliances
MCA, Chapters 10-12 (pp. 183-242)
Merck-Medco: Vertical Integration in the Pharmaceutical Industry
(TBHO: To be handed out)
CAP interim report #1: In it include (a) industry profile (size, significance of the industry, why does it exist, imports, exports, sensitivity to economic cycles, labor issues, etc., i.e., cover the industry from the most macro angle possible), (b) five forces analysis of the industry, (c) SWOT analysis of major competitors, (d) resource analysis of competitors (use the
Framework for Competitor Analysis, see reading for session 3.)
October 8
Industry Structure, Industry Evolution, and Industry Profitability
MCA, Chapters 13-16 (pp. 243-325)
Fox Broadcasting Company (TBHO)
October 15
Rivalry
MCA, Chapter 13-16 (pp. 243-325)(Review)
British Stellite Broadcasting versus Sky Television (TBHO)
CAP interim report #2: In it try to include (a) a strategic groups analysis,
(b) SWOT and resource analysis of competitors in the industry chosen for study (use the Value Chain framework.)
October 22
No class. Project meetings all week by prior appointment.
MCA, Chapters 17-18 (pp.326-354)(Finish book)
Brandenburger and Nalebuff, The Right Game: Use Game Theory to
Shape Strategy
Collis and Montgomery, Competing on Resources: Strategy in the 1990's.
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Session 9
Topics:
Prepare:
Read:
Session 10
Topic:
Submit:
Session 11
Session 12
Session 13
October 29
Technological Change and Competition
BMG Entertainment (TBHO)
Hamel and Prahalad, Strategic Intent.
Hamel and Prahalad, Competing for the Future.
Prahalad and Hamel, Core Competence of the Corporation.
Eisenhardt and Brown, Time Pacing: Competing in Markets that won’t
Stand Still.
Porter, Strategy and the Internet (TBHO)
November 5
Reserved for in-class examination. In the event the in-class examination is substituted by a take-home case analysis, this session will be reassigned to either a review of the course up to this point or group meetings.
Take home case analysis write-up. The case will have been distributed approximately a week to ten days before the analysis is due. Papers must be 5-6 pages, max, double-spaced, or approximately 1250-1500 words in length. Text should be broken down into suitably titled sections, and pages and exhibits/tables/charts must be properly numbered. Exhibits and tables are in addition to the specified page limits. All submissions are due today, without fail.
Late submissions will be downgraded by a whole letter grade.
November 12
Time reserved for group meetings or guest lecture.
November 19
Presentation of competitive analysis projects
November 26
Presentation of competitive analysis projects
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Session 14
Submit:
Note:
December 3
Presentation of competitive analysis projects
CAP final report. In it, include a discussion of future issues facing the industry, possible competitor responses, and likely evolution of the industry in the future (say, over a five to ten year horizon. Use scenarios analysis methods.)
This schedule is subject to revision at any time during the semester. Revisions are especially possible within the first couple of weeks, as class size stabilizes. The number of class sessions needed for group presentations at the end will affect the use of the remaining class time, the number of cases discussed, the amount of class time devoted to lectures, etc. The updated syllabus, incorporating any changes made will be posted to http://blackboard.cwru.edu.
Please make sure that you have a current copy of the syllabus and schedule at all times.
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1.
2.
3.
4.
5.
6.
7.
PLCY 495 (Ramanujam)
Discussion Questions
E&J Gallo Winery (September 10)
1.
Assess the attractiveness of the wine industry using Porter’s five forces model. Examine each force systematically, using the template available from courseware. Assess the overall strength of each force.
2.
Describe how the Gallos have addressed each of the five forces.
3.
What are the opportunities and threats facing Gallo in the wine industry? What are the company’s strengths and weaknesses?
4.
What should Gallo do?
Sunrise Medical Inc.’s Wheelchair Products
(September 17)
1.
Calculate the average ROS (return on sales) in the U.S. Wheelchair industry in 1993.
How well does this compare with the average profitability of U.S. manufacturing in or around 1993 (outside library research is required to locate this data.)
2.
Utilizing the Porter model (5-forces model), identify and discuss the most important structural conditions that prevail in this industry? How are these conditions likely to change in the near term future?
3.
Utilize the value chain framework to highlight the key sources of value creation at
4.
Invacare and Sunrise. What are their generic strategies?
Does Sunrise’s Quickie division have a sustainable competitive advantage in
5. wheelchairs? What accounts for the differences among Quickie, Guardian, Invacare, and
Everest & Jennings in ROS?
Should Chandler allow Guardian to introduce a lightweight standard wheelchair? How
6. will Invacare react?
How will industry structure be affected if Sunrise introduces the lightweight standard wheelchair?
Cat Fight in the Pet Food Industry (A) (September 24)
(Ignore this if a different case is assigned. Separate discussion questions will be provided)
Who is best positioned in the pet food industry in 1986?
Who has staked out strongholds? Where? How?
What should Ralston-Purina do? Is it threatened?
Who do you predict will bid for Anderson-Clayton? Why?
Who is likely to attack whom? Where? How?
Why are the barriers around the various segments falling? (Did they ever really exist?)
Why are the barriers evaporating?
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Matching Dell and
The Power of Virtual Integration: An Interview with Dell Computer’s Michael Dell
(October 1)
1.
2.
What are its advantages and limitations?
Describe the essential features of Dell Computer’s business model.
3.
As a competitor of Dell, e.g. Gateway, or Compaq, how would you competitively position your firm against Dell Computer? (Feel free to perform some independent outside research.)
Bitter Competition: The Holland Sweetener Company versus NutraSweet (A) (October 8 and 15)
1.
How should Vermijs expect NutraSweet to respond to the Holland Sweetener Company’s entry into the European and Canadian aspartame markets? Formulate the responses of the competitors in a game theoretical model, and try to estimate the payoff matrix.
Specifically, how should Vermijs assess the relative likelihood of the two scenarios - price war and normal competition - he has in mind?
Intel Corporation: Leveraging Capabilities
For Strategic Renewal (October 29)
(Ignore this if a different case is assigned. Separate discussion questions will be provided)
1.
List the strategies and organizational characteristics that have allowed Intel to dominate and hold its position in a highly competitive and fast changing industry that has seen the demise of legions of companies. What lessons can be learned from the Intel case as to the requirements for competitive success in highly turbulent environments?
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