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  • 1. UNIVERSITY OF LAUSANNE Faculty of Business and Economics (HEC) COURSE: COMPETITIVE STRATEGY Master in Management Fall 2008 Professor: Jean-Philippe Bonardi Assistant: Dominik Breitinger Email: Jean-Philippe.Bonardi@unil.ch Email: Dominik.Breitinger@unil.ch Tel: 021 692 3440 Tel: 021 692 34 30 Office: Internef 604 Office: Internef 541 Course on Fridays 8:30am-noon A website for the course with a description of the sessions and posted material is available at: https://www.hec.unil.ch/docs/bonardi/cours/119 Overview The focus of this course is on strategic management - the process of choosing and defining purposes and objectives, formulating a strategy and implementing it. The course aims to develop your ability to see an organization as a whole and to understand how and why the various functions of a business are interdependent and need to be coordinated. Hence, the thrust of the course is the organization in its totality - the environment in which it operates, its strategy and how this strategy builds on the firm’s internal administrative activities. The emphasis is on the kinds of problems and issues that affect the success of the entire organization. I will make a serious attempt to elaborate on the general applicability of the strategic management discipline to all types of firms, although in the end, the focus rests on profit- oriented enterprises operating in a competitive environment. Through readings, discussions and lectures, you will be exposed to a wide ranging, up-to-date synthesis of the huge literature on strategic management and to a systematic review of the prevailing views and ideas about the manager as an architect and implementor of a strategy. Terms and concepts will be thoroughly explored and applied on the kinds of problems and issues that bear directly on an organization's ultimate success. 1
  • 2. THIS COURSE HAS BEEN DESIGNED AS AN ADVANCED COURSE. I WILL ASSUME THAT ALL STUDENTS IN THE CLASS HAVE ATTENDED A BASIC STRATEGY OR BUSINESS POLICY CLASS. This means that I assume you will know some of the basic Strategy frameworks, such as key methods to analyze an industry profitability (especially Porter’s 5 forces framework) or when firms should adopt Generic strategies (such as Cost Strategies or Differentiation Strategies). The first two sessions will include and review some of these key notions. It will also be a way for you to become more familiar with my way of teaching. In fact, we will also use these key notions as starting points for many of the subsequent sessions in the course, even when we explore the more advanced topics. Even though I will bring up quite a bit of theory, the orientation of this course will be pragmatic and managerial. Through the use of the case method, you will be placed in simulated managerial roles where the concepts of strategy are applied in relevant management situations. General managers must apply judgment when formulating strategy and guiding its implementation, and answers that are clearly right or wrong are rare in strategic management. Nevertheless, remember that judgment without rigorous analysis is like shooting hoops in the dark! Besides learning about advanced competitive strategy concepts, this course will give you an opportunity to develop and demonstrate a number of capabilities in dealing with cases and using the research findings to: - size up, quickly and accurately, complex and unstructured situations by identifying the core problems and issues; - analyze quantitative and descriptive data to identify strategies which are appropriate to each situation, evaluate alternatives, and recommend specific courses of action for creative solutions to problems/issues; - link theory and practice, and develop understanding of when and how to use what "tools" in particular problem solving situations; - sharpen analytical skills acquired in functional areas Course Material Cases and additional readings (listed below) will be available either on the course website or at the library. My assistant, Dominik, will place a couple of case packets at the library (with all the cases used in the course) for your consultation. Please contact him if you have problems finding these case packets. Alternatively, cases that are not posted on the web will come from the Harvard Business School website and will be available for reading in the HEC library. Course Expectations and Organization All students are required to attend regular classes every Friday (8:30am to noon) for 14 weeks. In each of this session, we will have a case discussion that I will complement with lectures and comments. Sometimes, I will also assign compulsory or additional readings. These readings (both theory and case studies) are your responsibility and need to be prepared carefully every week if you want to learn and succeed in this course. Pedagogical Approach 2
  • 3. This course is committed to the case method of teaching. Every session must be considered, to some extent, as a business meeting where students are asked to put their collective knowledge, experience and brain-power together to analyze and solve complex business problems. Class discussions, role plays, and presentations will be used to help you analyze authentic business situations, evaluate alternative courses of action, and produce concrete action plans. This means you cannot remain a passive observer. The case method forces you to be decisive and action- oriented. “If you were the decision-maker, what would you do and how would you do it?” Answering these questions requires the active participation and co-operation of all people in the classroom, meaning you have to come to each class prepared to present arguments on what to do and how to do it. Don’t come to class to sit back and hear intellectually pleasing theories of the world. Business is real world stuff. Come to class to analyze and act in genuine managerial situations. Give yourself the opportunity to think for yourself and to learn from the contributions of others. Naturally, such a method places heavy demands on you. Being actively engaged in the learning process means you have to devote time and energy to preparation before class and then, during class, listening to others and being willing to put forward and explain your points of view. If you think you know the answer to a case before carefully analyzing it, chances are that you are either naïve or simply too subjective. Use the study questions provided with each case to guide your analysis, and stimulate your preparation. Keep asking yourself: “What is really problematic here? How can I best solve this situation? What are the implications of my decisions?” Study questions are suggestions, not “assignments” to be handed in. The readings assigned for each class are your responsibility. In each session, you are expected to bring forth questions that arise from the readings for class discussion. Evaluation of Students’ Learning Students' progress will be evaluated on performance in class discussions, one group written assignment and final examination. I will apply the following calculation to get your final grade: Classroom Performance 20% Group assignment 30% Final Examination 50% FINAL GRADE 100% Below is a more detailed account of what I expect from you in this class. A. Class Participation and Classroom Performance 20% Class participation is an important element of learning progress. You should be present (on time) and prepared for every class, and ready to share your views in the classroom discussion. In fact, you have an obligation not only to study the material, but in addition, to assist in the learning of your classmates. To do so, you must make a meaningful contribution to the discussion in class. Summarizing case facts, repeating points already made, or simply agreeing with your classmates’ arguments does not constitute a meaningful contribution. There is no need to participate for the sake of participating. You will only get a good participation grade if your comments are seen to provide insights that pass the “so-what” test. Those can take the form of helping to sort out the key facts in a complex case or developing an analysis that builds on prior 3
  • 4. comments, thereby moving the class discussion forward. Your contribution mark, therefore, will be primarily a function of the quality of your comments. B. Group Assignments 30% As part of your grade, you will be asked to form a group (max 5 students) to provide an analysis of one of the cases we will discuss in class. The analysis should be prepared like a presentation with a set of slides (maximum 10 Powerpoint slides). You will not be asked to present your slides in class, but I use here the presentation format because it is a critical way of communicating for anybody involved in strategic management, whether as an entrepreneur, in a firm, or as a consultant. This is a tough exercise because you need to find an effective way to communicate your analysis in a limited space, and using figures and graphs but without losing the logic of your argument. You’ll see, it’s difficult but also a lot of fun! Regarding the organization of your slide deck, you can choose to follow the assignment questions posted for the case (assignment questions are here to guide you), but you DO NOT HAVE TO. Please feel free to adopt the structure you feel is the most effective to convey your ideas. For your assignment, you are free to choose one among all of the cases listed on the schedule. Assignments are due at the beginning of the session, in hard copy or by email, before the case is taught. Students will lose grades for submitting their assignment late. C. Final Examination 50% The format of the final exam is a open book, in class, 4 hour examination that seeks to assess your comprehension of the theory covered in the readings and lectures, as well as your problem- solving/decision-making skills, as they were developed through the case discussions in class. Re-examination procedure Students who fail the course must redo only the final examination, which means that the student keeps its classroom performance & group assignments grades. If a student is required to redo the exam, he or she will do so during the official re-examination period. Examination and re-examination will have a similar shape. Supplementary Bibliography From time to time, I will post optional readings on the course website. Up to you to read them or not (or also to keep them for later!). There also exists an extensive and growing literature on strategic management. Students should consult the following journals for additional or specialized materials: The Economist, Harvard Business Review, Sloan Management Review, California Management Review, Long Range Planning, The McKinsey Quarterly. Pure academic outlets, such as the Strategic Management Journal, the Academy of Management Journal, and the Academy of Management Review, Management Science, Organization Science, Journal of Management, Journal of Business Venturing, also constitute valuable sources of insights although more technical in nature. Please feel free to contact me if you wish to read more on one of the topics we discuss/present in class. 4
  • 5. Course Structure and Flow The course consists of three modules: 1. The first module is on ‘Competitive advantage’. Where does it come from, and why does it differ from one type of industry to another. 2. The second module will look into ‘Competitive Dynamics’: how firms’actions create reactions from their competitors and how these types of games play out. 3. The third module will be about ‘Competitive Strategy Implementation’. Too often, implementation considerations are forgotten, whereas they also play a key role. Formulating the strategy is one thing, implementing it is another. We will look into this as well to finish off the course. SCHEDULE NOTE: The session on September 19 is cancelled. It will take place at a later date. This date is still to be determined. MODULE 1: COMPETITIVE ADVANTAGE Session 1: Industry structure analysis September 26, 2008 Case: Ice-Fili and the Ice cream industry in Russia Study questions: 1. How attractive is the Russian ice cream market? How is it likely to evolve? 2. How well is Ice-Fili relative to its key competitors? 3. What are Ice-Fili’s strategic options? What do you recommend they should do? This session introduces the fundamental tools of industry analysis, including Porter’s five forces framework. The purpose is to develop an understanding of how industry structure (which as we will see is not set in stone) determines industry profitability and the range of actions that can be source of success for the firm. Additional Reading: Porter, M., “How competitive forces shape strategy,” Harvard Business Review, 1997. Session 2: Differentiation and strategic repositioning October 3, 2008 Case: Ducati Study questions: 1. How did Ducati become the second most profitable motorcycle maker in the world despite its small scale? How did they turn things around? 2. Can Ducati sustain its position in the sport segment? 3. Should they enter Harley-Davidson’s segment? If not, what else can they do? 5
  • 6. Optional Readings: Strategic positioning, by P. Ghemawat Session 3: Cost advantage and differentiation: Is it possible to generate a dual advantage? October 10, 2008 Case: Samsung Study Questions: 1. What recommendation would you make to Chairman Lee regarding Samsung’s response to the threat of large-scale Chinese entry? 2. What were the sources of Samsung’s cost advantage in DRAM in 2003? (tip: you might want to run some numbers there to support your analysis) 3. What were the sources of Samsung’s price premium in DRAM in 2003? Session 4: Competitive advantage and internal resources/capabilities October 17, 2008 Case: Harlequin: The Mira decision Study Questions: 1. What is the basis of Harlequin’s competitive advantage? Where in its value chain does it create unique value? 2. Should Harlequin re-enter the single-title business? Optional Readings: Collis, David, and Cynthia Montgomery, “Competing on resources: Strategy in the 1990s,” Harvard Business Review, 1995. Session 5: Competitive advantage in services October 24, 2008 Case: Cirque du soleil Study Questions: 1. What is Cirque’s product and strategy? 2. How has Cirque structured and supported its cast to deliver superior performance? 3. What are the challenges to Cirque’s continued growth and/or diversification? Session 6: Competitive advantage and technology with network effects October 31, 2008 Case: Apple Computer Study Questions: 1. Historically, what were Apple’s major competitive advantages? 2. Analyze the structure of the personal computer industry over the last 15 years. How have the dynamics of the PC industry changed? 3. Evaluate Apple’s strategy since 1990. 6
  • 7. 4. Has Steve Job solved the “problem”? What should he do now? Session 7: Network effect industries, late movers and the Internet world November 7, 2008 Case: Google Inc. Study Questions: 1. What were the key factors behind Google’s early success? 2. Do you expect the search business to become more concentrated? Is it a winner-take-all business? 3. In renewing its deal with AOL, could Google afford to pay AOL more than 100% of the revenue generated from AOL searches? How did Microsoft’s maximum affordable bid for AOL’s search traffic compare to Google’s? 4. In addition to enhancing its core search businesses, should Google also branch out into new arenas? Which of the following do you recommend: (1) building full-fledged portal like Yahoo!’s; (2) targeting Microsoft’s desktop software hegemony; (3) becoming an e- commerce intermediary like E-bay? Session 8: How far does competitive advantage travel? November 14, 2008 Case: HSBC Holdings Study Questions: 1. Should Sir John Bond have bought Household? Yes or no? 2. What can HSBC bring to a leading North American consumer finance company such as Household? 3. Is HSBC organizationally ready to take on consumer finance? MODULE 2: COMPETITIVE DYNAMICS Session 9: Competitive dynamics and market entry November 21, 2008 Case: Dog Fight Over Europe: Ryanair Study questions: 1. What is your assessment of Ryanair’s launch strategy? 2. How do you expect Aer Lingus and British Airways to respond? Why? 3. Do you expect this entry strategy to succeed or not? Optional Readings: Game theory and Business Strategy 7
  • 8. Session 10: Competitive dynamics and oligopolistic markets November 28, 2008 Case: Sticky business: Rivalry in the U.S. labelstock industry Study questions: 1. What is your overall assessment of the attractiveness of the labelstock industry? 2. How would the acquisition by UPM of MACtac change the profitability potential of the industry? Why? 3. Assuming the acquisition is approved in the U.S., what is your assessment of UPM’s decision to acquire MACtac? 4. Now take Avery Dennison’s position: Is this merger a good thing or a bad thing for Avery? Session 11: When small emerging market firms compete against multinational giants December 5, 2008 Case: Lamoiyan Corporation of the Philippines: Challenging Multinational Giants Study questions: 1. How do you evaluate Lamoiyan’s entry strategy in the Philippine toothpaste market? 2. Why didn’t Colgate and Unilever crush Lamoiyan earlier? What factor or factors do you think were the most important in driving the hesitancy to respond? (Hint: try to think about what price a firm like Colgate would have to charge to ‘kill’ Hapee) 3. Is Lamoiyan’s success attributable to good strategy by Lamoiyan or bad strategy by Colgate and Unilever? What aspects of Cecilio Pedro’s strategy were most important in allowing Lamoiyan to survive and thrive? 4. How do you evaluate each of the avenues of growth that Lamoiyan is pursuing (increased market penetration, expanding product offerings, international expansion)? Which option shows the most promise? Which option most concerns you? Session 12: Competitive dynamics, entry and nonmarket strategies December 12, 2008 Case: Porter Airlines Study questions: 1. Politics aside, does an investment in a new airline at TCCA represent a sound business opportunity? Can a new airline compete with an incumbent like Air Canada and survive in the long run? 2. How important was it for the company to gain political or public support for its proposal? What should its 'non-market' (political or lobbying) strategy be to achieve support? Whom did it need to influence? By what means? MODULE 3: STRATEGY IMPLEMENTATION 8
  • 9. Session 13: Strategy implementation I December 12, 2008 – 12.30 – 14.00 This session attempts to demonstrate how strategy applies at the level of the CEO and at all levels of the organization. This view presents a more challenging perspective on strategy as it co- mingles the day-to-day operating issues with strategic issues. Case: AES in Georgia Study Questions: 1. Does entering Georgia sound like a good idea for AES? 2. What are the things that you think they should keep in mind when evaluating this investment? Session 14: Strategy implementation II + Wrap up session / Exam preparation December 19, 2007 In this session, we finish this course by looking at strategy implementation from the perspective a recent business school graduate (it could be you) as he attempts to act as an intrapreneur in a large multinational corporation. Case: GE Energy Study Questions: 1. Review your assessment of the attractiveness of the energy management industry and the key success factors for operating in it. 2. How does the GE management system work? How does GE Canada fit into this picture? What are the implications of these observations for the development of the energy management business? 3. At the end of the meeting with GE Supply executives, what are your options for proceeding and what do you intend to do? 9