Southern Methodist University Edwin L. Cox School of Business Strategic Management - STRA 6201 Spring, 2010 Professor Gordon Walker 420B Fincher 214 768-2191 Office hours: by appointment email: gwalker@smu.edu Overview General Course Description. This course focuses on problems of strategic management in the modern corporation. Since the course is one module, we will deal primarily on problems of business strategy in the context of industry structure and evolution. We will discuss problems of corporate strategy in the last two sessions. Emphasis will be placed on cases of success and failure in formulating and implementing strategic decisions. Readings will be used to underline common dimensions of the cases and highlight current theoretical concepts, methods and frameworks. Case discussion will focus on the content and context of strategic decisions, issues in implementing the decisions, and problems of decision-making. In each case, we will identify generic problems as well as problems of practice unique to the case situation. We will often begin with policy recommendations and work back into the arguments that support them. Our goal is to arrive at a relatively complete depiction of the company or industry discussed. Learning Objectives. You will learn how to: 1. Identify the market position of a business and the extent to which it is protected from the encroachment of competitors. 2. Analyze competition for rents within an industry and how this competition affects each firm’s market position. 3. Identify the stages of an industry’s life cycle and their influence on a firm’s business strategy. 4. Analyze the components of a firm’s strategy execution. 5. Analyze the economic rationale behind a firm’s vertical integration and outsourcing decisions. 6. Analyze the logic behind a firm’s new businesses developement, both through internal development and acquisition. 7. Analyze the economic potential in horizontal acquisitions. Written Requirements and Grades. Each student – individually (no group work) - is required to write four case analyses. You can write up more if you want. I’ll give you the best four grades of the lot. Write-ups are to be no longer than two pages (double spaced) and should be handed in at or before the session when the case is taught. Send them to me at gwalker@smu.edu. The analyses should be in essay form (no bullets), and as comprehensive and comprehensible as possible given the page limit. They should be guided by questions for each case, as listed at the end of this syllabus. Your write-ups are worth 30 percent of your final grade. In every class but the first there will be a short quiz on the non-case reading for that day. The quizzes will be comprised of ten questions, none terribly difficult. Your four best quizzes will count for 20 percent of your overall grade. A take-home final exam will be handed out in the week of April 20 and is due on May 1. The exam will focus on the theoretical material used in the course and on application of theory. This material will be crucial background to our understanding of the cases and should be freely used in their analysis. The exam is worth 30 percent of the final grade. The last 20 percent of the grade is determined by participation in class discussion. I don’t cold call, so it is up to you to step forward with your best thoughts. I will assume you have read all the material for each class before it begins. Please let me know if you cannot attend class. Except for Fafco, which will be distributed in class, the cases for the course are available at www.study.net. The readings are chapters in Modern Competitive Strategy 3e (MCS), available online and at the SMU bookstore. Attendance Policy. You are expected to come to each class. The quizzes are a straightforward way to monitor attendance. If you are not going to attend a session for some reason, please let me know ahead of time so I won’t expect you to be there. Since we have only seven weeks and each class covers different material, missing even one session creates a hole in your learning that will be hard to remediate. To fill this hole a little, you should write up at least one of the cases for the day you miss. This case may be one of the four required for the course overall. See the University language for religious observance, extracurricular activities and student disabilities below: Religious Observance. Religiously observant students who wish to be absent on holidays that require missing class should notify me in writing at the beginning of the course and should discuss with me in advance acceptable ways of making up any work missed because of the absence. (See University Policy No. 19) Extracurricular Activities. Students participating in an officially sanctioned, scheduled University extracurricular activity should be given the opportunity to make up class or other graded assignments missed as a result of their participation. It is the responsibility of the student to make arrangements with me prior to any missed scheduled examination or other missed assignment for making up the work. Student Disability. Students who need academic accommodations for s disability must first contact Ms. Rebecca Marin, Coordinator, Services for Students with Disabilities (214-7684557) to verify the disability and establish eligibility for accommodations. These students should then schedule an appointment with me to make appropriate arrangements. (see University Policy No. 2-4.) Class Assignments Session 1 Competitive Advantage March 16 Cases: Google; Microsoft in 2002 Reading: MCS, chapter 3 Questions for Google: What are Google’s value and cost drivers? What are its isolating mechanisms? How sustainable is Google’s business strategy (offense and defense)? Why do you think so? Why is Google investing in its ecosystem? 1. 2. 3. Questions for Microsoft in 2002: 1. 2. 3. Why has Microsoft been successful? What is more important for Microsoft’s profitability, its market position or its ability to defend it? What challenges does Microsoft face and how should it deal with them? Session 2 Industry Analysis March 23 Cases: Chain Saw 1974, 1978 Reading: MCS, chapter 4 Questions for Chain Saw 1974, 1978: 1. 2. Which of the five forces are important in the chain saw industry? Why? What are the important strategic groups in the chain saw industry? Which firms are the winners in 1978? Which are the losers? Why? What should these firms do after 1978? 3. Session 3 Competing Over Time March 30 Cases: Tivo 2007; Blockbuster (all) Reading: MCS, Chapter 5 Questions for Tivo: 1. 2. 3. What is TiVo’s business strategy? (How does it make money?) Is this strategy sustainable? What stage(s) in the industry life cycle is TiVo in over the course of this case? What strategic challenges does this (these) stages impose on TiVo? What are TiVo’s options in 2007? How should it address them? Questions for Blockbuster: 1. Why has Blockbuster become the dominant movie rental firm? What do you think are its value and cost drivers? How does it defend against competitors? What technological substitutes for Blockbuster’s services has the firm encountered? How has the firm dealt with these substitutes? What emerging substitutes is the firm encountering now? Can it deal with them effectively? If so, how? What should Blockbuster do? 2. 3. 4. Session 4 Strategy Execution April 6 Cases: Nypro; Siemens Reading: MCS, chapters 6 and 2 (skim) Questions for Nypro: 1. 2. 3. What is Nypro’s business strategy? Value and cost drivers? Isolating mechanisms? How does Nypro execute this strategy? What ongoing strategic challenges does Nypro face and how does it deal with them? Questions for Siemens: 1. 2. 3. Why was the turnaround at Siemens Medical Systems successful? How important was planning for the success of the turnaround? Why? What parts of its turnaround strategy can MED use in developing the next steps for the business? Why and how? Session 5 Vertical Integration and Outsourcing April 13 Cases: Fafco; Zara Reading: MCS, chapter 7 Questions for Fafco: 1. 2. 3. What should Fafco do regarding the production of the plastic panels? Why? What should it do regarding the distribution and sales activity? Why? How is the logic behind the decisions for the panels and distribution similar? How are these decisions different? Questions for Zara: 1. 2. 3. 4. Why has Zara been successful? What are its value and cost drivers? How does it protect them? How well does it grow and innovate over time? In what activities? Why? How have Zara’s practices and policies regarding its boundaries contributed to its growth and performance? (Mention the combination of both vertical integration and outsourcing in making clothes.) What are the key value drivers that determine Zara’s control needs in its transactions? What are the key drivers (value and cost) that determine Zara’s assessment of competence in an activity (in-house or in the market)? Does the way Zara manages its boundaries in its activities constrain its growth? If so, how? If not, why not? Session 6 Business Diversification April 20 Cases: Head Ski; Newell Readings: MCS, chapters 10 and 11 Questions for Head Ski: 1. 2. 3. Why has Head been successful in the ski industry? What are the growth trends for the industry? What is Head’s rationale for diversification? What are its criteria for choosing acquisition targets? Evaluate Head’s diversification rationale. Does Head have the management capabilities to succeed as a multi-business firm? Why or why not? Questions for Newell: 1. 2. 3. What kind of businesses did Newell acquire? Why? What was Newell’s strategic rationale in managing its portfolio of businesses (e.g., serving mass retailers)? Is this rationale sustainable? What did Newell contribute to its businesses post-acquisition to improve their performance? Session 7 Horizontal M & A April 27 Cases: HP-Compaq; Mellon Financial and the Bank of New York Readings: MCS, chapters 10 and 11 Questions for HP-Compaq: 1. 2. 3. What was the strategic rationale behind HP’s acquisition of Compaq? What were the arguments against it? Line the two sides up and compare them. Which is more compelling to you? Why? Questions for Mellon – B of NY: 1. 2. 3. What was the strategic rationale behind the merger of Mellon and Bank of New York? What are the impediments to the deal? Is the deal worth doing given these barriers? If so, why?