Weatherhead School of Management
PLCY 490
Pre-Requisite MGMT 499 or equivalent
Corporate Strategy
Fall 2006
Instructor: Sayan Chatterjee
Please Use the Hyperlinks in this Syllabus to Navigate E-College
Office Hours: By appointment
Please read this document carefully.
If two people agree 100% of the time then one of them is not necessary: Will Rogers
Topics
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Concepts that underlie corporate-wide success
Discerning the inimitable capabilities of your organization
Recognizing synergies across a firm’s multiple lines of business and leveraging
these capabilities in new businesses
Developing new markets
Identifying markets that have a high probability for success
o Learning to leverage your capabilities
o Driving innovation in order to enter and become profitable in “adjacent”
markets
How to choose between greenfield entries, joint ventures, and acquisitions
Techniques for managing acquisitions
Statement of Objectives
This course will help you understand the keys to successful corporate development competitive advantage in every business in which a firm is involved. In particular, the
course will help the participants to understand the following:
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Competitive advantage in the 21st century
o Conceptualizing sustainable competitive advantage as a system of
activities (capabilities) rather than size and scale economies.
 A firm needs to understand the few things that it does better than
its competitors. These are its critical capabilities that must match
the business logic.
 The firm must clearly understand the limits to growth of the core
business.
Corporate development strategy through capabilities and leveragable capabilities
o Before venturing into a new business, the firm has to have a clear
understanding of the critical capabilities required for success in the new
business.
o Firms can increase the odds of success if they can leverage (parts of)
existing capabilities to new businesses.
Corporate development strategies– adapting to a market
o
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Analyze the industry environment in order to select the competitive
battlefield to increase the odds of success by leveraging some of your
existing capabilities – sometimes also known as core competencies. This
is a relatively low risk strategy. We will develop methodologies that will
allow you to identify markets (segments) where your current capabilities
are leveragable.
Corporate development strategies– shaping a market
o Usually requires developing a completely new set of capabilities - very
risky. We will develop concepts to understand techniques to mitigate
these risks.
Acquisitions as one of the means for corporate development
o Approximately half of the class sessions will be devoted to the specific
case of acquisitions as a means to expand the boundaries of a firm. We
will explore both how acquisitions contribute to competitive advantage
and the selection process and integration of the acquired entity. Less
emphasis will be placed on strict financial valuations and negotiations.
This course should complement courses in competitive strategy, industry analysis, as well
as purely financial approaches to diversification and mergers and acquisitions.
Description of Instructional Methodologies and Teaching Materials
The primary learning tool is class discussion based on a combination of readings and
cases. A wide range of issues relating to effective management of corporate growth is
discussed. The readings are a mix of theoretical, conceptual and empirical articles drawn
from the academic and popular business press. The cases are based on corporate growth
and diversification issues faced by both domestic and international firms.
Use of frameworks: This course is built around a series of concepts/frameworks that
help us discuss issues of competitive advantage and how these competitive advantages
feed into corporate development. I have two basic premises behind this approach. First,
the use of a framework helps us approach the case material from a perspective that is
generalizable. Second, the use of a common framework makes the discussion process
more efficient. We can debate the assumptions and the logic that follow from the
common framework, instead of spending time deciding on a starting point. (I use the
same approach with my business clients and generally this is a process that works well.).
We will, therefore, try to consistently use the framework across all the sessions.
I have one caveat about frameworks. I use a framework. This framework works for me
because I have developed it on my own and refine it as need be. I always urge both my
students/ corporate clients to try to modify a framework that we develop in the
classroom/training to their own thinking style and/or one that will work best in their
organization. This may be something as simple as choosing different labels or could be
more complex, like constructing a new conceptual architecture. However, to ensure a
solid grounding in the framework that I use any modifications should be considered
outside the class. I will be happy to react to any ideas you may have.
Once we have developed the frameworks, the primary method of learning will be class
discussion and intra-group discussion and online inter-group discussion. The discussions
will be supplemented by short lectures and summaries given by me.
Note: It may be useful to consider the characteristics of a good framework. I like to think
about the good framework as ‘time to insight’ or a ‘structured approach to unstructured
problems’– how quickly you can get from a blank sheet of paper to some specific ideas as
to how to achieve your goals.
Background Knowledge before First Day of Class: I will expect all of you to be familiar with Porter’s 5
Forces framework. If you have not taken your core strategy course with me, I recommend that you review
my voice embedded power points on Industry Analysis –( Power Point presentation (and these short cases–
Streaming Video Industry Analysis Part 1a , Industry Analysis Part 1b, Industry Analysis Part 2a, Industry
Analysis Part 2b) especially Part 2. I may approach these frameworks slightly differently than what you
have seen so far. However, this has usually not posed any problems. However, I strongly recommend that
you review my article Core Objectives before classes start.
Preparation for class and participation: This is a hybrid class consisting of both face to
face (f2f) sessions and remote (online) sessions. Most of the situations that we will
encounter during the course cannot be solved using structured techniques. These
situations will have to be approached from many sides and with an open mind. It is,
therefore, imperative that each of us thinks about the situation at hand and shares the
logic of our opinion as clearly as we can. At the same time we have to listen to others
and use their logic to shape our own thinking. To effectively participate in class, your
preparation should have a plan. When I read a case, I am always trying to see how I can
hang the case facts on conceptual hooks, or a framework. However, if I simply read the
case/article, without thinking how I may apply it, then chances are, at best, I can repeat
the facts and not provide any insight.
Online (Remote) Sessions: Roughly half of the learning would take place online. Most of the conceptual lectures
will be online. You will have an opportunity to ask me clarifying questions through a discussion board. There will
be discussion boards that will explore the cases discussed in class as well as cases that will be discussed strictly
online. To keep the discussion board manageable a representative from each group will share the group’s view to
the rest of the class – including dissents within a group. This implies that the group has to meet to discuss these
issues. Next each of the other groups will have to respond to THE COMMENTS MADE BY ANOTHER GROUP
FOR AT LEAST ONE TOPIC. Online sessions are shaded light blue in the schedule. They are also in a blue font in
Course Document
You are not required to submit a write-up for each case. However, you can expect to be
called upon at any time during the class. Therefore, you should do whatever you feel is
necessary in order to be prepared -- this may include (but is not limited to) making a case
outline or discussing the case with classmates prior to coming to class.
Workload: The workload in this class is going to be very heavy. It will not include
busywork but work targeted for you to get the most out of the class. The cases have
varying demands. Some are short cases while others are quite lengthy. However, all the
cases will require you to spend a fair amount of time thinking about the issues.
Case Assignments: For some cases, there will be specific assignments to make sure you
have thought through complex issues. These are the highlighted preparation questions in
the syllabus. Assignments will not be graded but given a check or check plus. All case
related assignments should be limited to one typewritten page. Assignments are group
assignments and should be emailed to me. See the Assignment Folder for the
assignments.
Exams: Will most likely be a case analysis.
Term Project: The term project involves applying the concepts developed in class to
write a case for analyzing the diversification strategy of a firm, acquisition program of a
firm or analysis of a single acquisition or merger. The term project should be done in a
small group of 4 to 5 students (choose your own). Given the time constraints of the
semester, you should choose a project topic where enough information is available from
publicly published sources. I will post a sample project in Blackboard. Please refer to
the document entitled “Description of Term Project” for further details.
Anticipated Grading Approach and Student-Performance Standards
Evaluation will be based on the following distribution: Please let me know ahead of time
if you will miss a class. More than two absences during the semester will be detrimental
to your class participation grade.
Class participation:
Mid-Term Exam:
Case Assignments:
Project:
25%
25%
25%
25%
In grading class participation, I tend to give extra weight to comments that are building
on others’ comments. This is not an exact science, and you are welcome to discuss your
participation grades with me at discrete intervals during the course.
An Overview of the Course Material
The cases and supplemental materials have been chosen with one simple objective: They
are the best materials that I know for internalizing concept(s). The only criterion that I
use for choosing cases is that the basic takeaway is applicable to current business
environment and not because the case itself is current. The readings are chosen with the
same objectives. Some are simply articles from the business press. Some of my own
frameworks are not yet published and I will make these available as power point
presentations or a working paper. Some material is still being developed and will be
distributed later. I may use cases that have been developed by organizations for internal
decision-making. Some of these cases have confidential material and will be so marked.
In these instances, the organizations have given me permission to use these in classroom
settings with the caveat that they should not be disseminated beyond the class.
Course material: Much of the required material will be available online in Blackboard.
There will be a few hard copies of cases that you need to purchase in a CWRU note.
These are highlighted in green in the syllabus. Some readings are available online from
KSL. (These links will work only from school or with a VPN connection). Additionally,
I mildly recommend that you read assigned chapters from the following book. Failsafe
Strategies by Sayan Chatterjee. Wharton School Publishing, 2004. These chapters will
NOT be included in the CWRU notes. I will cover the content in my lectures but some
students have found it to be helpful to have the book.
All discussion board comments are the responsibility of the groups except
those that explicitly say that the responsibilities for comments are from
Sayan
Preparation
Assignments and
Deliverables
Remote
Topic
Session 1
Corp Development Course
Overview
There are cases to prepare for first face-to-face
(f2f) day of class
Corporate Development Intro
Lecture
Discussion Board: Course Intro
Please post any questions or comments. Primary
responsibility for answers – Sayan
We will not discuss the Gypsum case but think about
the core objectives of Gypsum and then read my
article where the case is discussed in detail
Case
Republic Gypsum
Readings
Core Objectives: Clarity in
Designing Strategy
Background Readings
RUN YOUR VPN FOR CWRU LIB Materials
Competitive Strategy
Fundamentals: HBS Publishing
This is a collection of core material
used in Harvard Business School
courses in competitive strategy that
you can read at your leisure.
Recommended reading
Failsafe strategies, Section 2
Introduction
COMPETITIVE STRATEGY: REVIEW
Sat,
Topic
Preparation Questions
Sep 9,
2006
Restructuring
1.
Using the Growth, Size and Profit Margin
framework developed in Competitive Strategy,
analyze the attractiveness of the PUV, CUV and the
Accessories segment
10 am 12:30
Case
Alcoa Forge and the PUV
diversification
Readings
Porter, M. 1987. “From
competitive advantage to
corporate strategy”, HBR
1987 May/June Vol. 65, Iss.
3; pg. 43 Reprint, 87307.
2.
Do you agree with Alcoa’s decision to enter the
PUV segment?
4.
What do you recommend that Alcoa Forge do
with the PUV business at the time of the case?
5.
How do you apply Porter’s model to
diversification decisions? Do you agree with his
three tests?
6.
How does Porter’s article relate to the concepts
of capabilities and leveragable
capabilities/competencies?
Comments
Sessions
and
Topic
Due Date
All discussion board comments are the responsibility of the groups except those
that explicitly say that the responsibilities for comments are from Sayan
Remote
Readings
Discussion Board: Core Articles
Session 2
Stalk, G, P. Evans and L. E.
Shulman. 1992. “Competing
on capabilities: The new
rules of corporate strategy”,
HBR Mar/Apr 1992. Vol. 70,
Iss. 2; Reprint 92209.
Topic 1.
Refer to the Wal-Mart discussion in the
Stalk et al article. How do the diagram describing
Wal-Mart’s strategy relate to the notion of core
objectives and capabilities?
Prahalad and Hamel: The
Core Competence of the
Corporation
Topic 3.
Refer to the sidebar in the Stalk et al
article (the case of Honda – this is the missing page)
the specially the last two paragraphs. How are the
authors distinguishing between capabilities and
competencies?
9/17
The Stalk et al article on the KSL
is missing one page attached here.
Topic 2. What is the notion of Core Competence?
Is it useful for competitive strategy or corporate
strategy?
Power point presentations posted
in online.
Background Reading
Project Proposal Due – E-mail Sub: Exam
Sep 18,
2006
6-9:30
pm
Topic
Preparation Questions
Review of Competitive Strategy
1.
What are Dell computer’s leveragable
capabilities?
The Core Framework for
Corporate Development
Dell Computer
2.
Critically evaluate Dell Computer’s
diversification strategy. In particular, be prepared to
discuss the segments that Dell chose to compete in
and the timing of entry in different markets/segments
Case
Group Assignment:
Dell’s Diversification
Please retrieve Dell HP assignment from 490
Blackboard
Case
For Dell, Success In China Tells
Tale Of Maturing Market WSJ
07/05/2005
8
9/10
Riding the Tiger This is an
interesting article that challenges
many of the common concepts of
strategy
Remote
Topic
Discussion Board: Microsoft
Session 3
The Role of Leveragable
Capabilities in Adapting to and
Shaping Markets
Topic 1 What are Microsoft’s Corporate
Development objectives? Early 1980s, With
Windows and IE intro.
Topic
Topic 2 Was Windows a leveragable capability in
the application business.
Driving innovation in order to
enter and become profitable in
“adjacent” markets
Case
·
Dell Continued if needed
Topic 3 Was the developer tools a leveragable
capability in the establishing Windows?
Group Assignment:
Please retrieve Microsoft assignment from 490
Blackboard
· Microsoft 1980s, 90s, 21st.
Century (check blackboard for
updated case)
·
Microsoft vs. Google
Recommended reading
Failsafe strategies, Chapters 9 and
10
Oct 2,
2006
6-9:30
pm
Topic
Preparation Questions
Mode of entry
As a board member of EMI, are you convinced of the
company’s need to diversify away from the
entertainment business?
Case
EMI and the CT Scanner (A) HBS
(9-383-194) in CWRU notes
Phillips Expansion into Medical
Business. WSJ January 4, 2005;
Page C1
1.
As of 1972, will you vote for the six million
capital requests to enter the scanner/medical
electronic business?
2.
If you decide to enter the business:
a.
Which mode of entry would you choose?
b.
Which market or markets (U.S., Europe, Rest
of the World) would you choose?
3.
Prepare a five-year plan post-entry laying out
what contingencies may arise and how you wish to
tackle them.
4.
If EMI enters this market can it develop some
leverageable capabilities that may allow it to enter
other markets?
5.
Now repeat the first two questions for Phillips
9
9/25
Corporate Development Programs
Topic
Discussion Board: CTSK
Session 4
Consolidating an new entry
Topic 1. What are the critical forces in each
segment (threat and opportunity).
Case
CTS Knights Watch Crystal
Diversification
XY
TF
Grth
Topic 2.
Consider the competitive advantage of
CTSK in the Tuning Fork and XY segments using
the Capability (new-existing) matrix. You have to
not only deliver value to the customer but also
mitigate or take advantage of the critical forces.
Topic 3.
Size
Which segment do you want to play in?
Due 10/9
Remote
BP
SP
Riv
TOE
Sub
High
Remote
Topic
Group Assignment:
Session 4
Escalating Commitment in a new
market
Please retrieve CTSK assignment from 490
Blackboard
Readings
Spreadsheet for computing
projected experience curve profits
for CTS Knights
Background Readings
Read up on experience curve and
pricing strategies if not familiar.
Oct 16,
2006
6-9:30
pm
Topic
Preparation Questions
Acquisitions as a means of
Corporate Development
1.
Does Newell have a successful corporate-level
strategy? Does the company add value to the
businesses in its portfolio?
Case
2.
What are Newell’s core
competencies/leveragable capabilities?
Newell Corporation
3.
What challenges faced the company in the late
1990’s? In this context, does the acquisition of
Calphalon make sense? Rubbermaid?
Session 5
Oct 30,
2006
6-9:30 pm
Project First Draft Due – E-mail Sub: Exam
Exam case will be available on
Friday in your folders
Mid-Term Exam
10
10/23
Remote
Session 6
Framework for Acquisition
Success
Topic 1
Case
1a, How can Banc One help the acquired banks
increase revenue?
Banc One Corporation: The
Evolution of Partnership (UVABP-0335) in CWRU notes
Readings
1b. Decrease costs?
“A framework for
acquisitions” Working
Paper. Sayan Chatterjee
Topic 2
1c. How do they integrate acquisitions? Who to fire
and who to support?
2.
How does Banc One develop an information
advantage over other acquiring banks?
Topic 3
3.
What are the key features of a Banc One’s
replicable acquisition process?
Nov 13,
2006
6-9:30
pm
Topic
Preparation Questions
Growth thru acquisitions
1.
How has RPM added value in its acquisitions?
Case:
2.
What is the limit to RPM’s strategy?
RPM
3.
What are the objectives of a roll-up program?
Topic
4.
What industries are suitable for these kinds of
programs?
Roll-Ups
Case
Hurricane Huizenga - Used car
superstore, Business Week
Readings
“Meet the King of the Garbage
Heap” Business Week.
5.
What capabilities are needed to succeed in a
roll-up?.
6.
If you apply these general concepts to
Automation (focus on the used car segment) what
does Huizenga have to do to make a success of this
acquisition program?
Strategic Rollups: Overhauling the
Multi-Merger Machine
strategy+business web site
(registration required) Reprint No.
00205
11
Read my responses to Topic 1 before Topic 23
Discussion board on Banc One
Topic 2-3 by Nov 10
Topic
Topic 1 by Nov 6,
Remote
Remote
Topic
Discussion board on Merger Integration
Session 7
A framework for managing merger
integration
Topic 1
What were the key objectives in the Novartis
merger?
Post-Merger Integration: How
Novartis Became No. 1
strategy+business web site
(registration required) Reprint
No. 98207
Topic 2
Readings
Evaluate the integration strategies of all the
acquisitions we have seen so far.
Power Point on Merger Integration
(will be distributed later)
Do you feel that the integration strategy matched
these objectives?
Topic 3
How GE integrates acquisitions
Havard Business Review, Reprint
#98101
“Acquisitions: the process can be a
problem,” Jemison and Sitkin,
1986. Harvard Business Review,
86203.
Nov 27,
2006
6-9:30
pm
Topic
Preparation Questions
Applying the course concepts
1.
Why did Kellogg acquire Worthington Foods?
What are the potential benefits?
Case
Kellogg-Worthington Merger
(UVA-BP-0426)
Readings
2.
How will Kellogg recover the premium paid
for Worthington?
3.
What are the risks in this acquisition?
Note: Mr. Steve Benoit former VP of
Kellogg will join us in class.
Final Project Due Dec 4
12
11/20
Case
13