University of California at BerkeleyNIVERSITY OF CALIFORNIA – BERKELEY
                                        Haas School...
MBA 299                                                  Professor Jonathan S. s Leonard & de Figueiredo



Strategy      ...
MBA 299                                             Professor Jonathan S. s Leonard & de Figueiredo



Strategy           ...
MBA 299                                                    Professor Jonathan S. s Leonard & de Figueiredo



Strategy    ...
MBA 299                                              Professor Jonathan S. s Leonard & de Figueiredo



Strategy          ...
MBA 299                                                   Professor Jonathan S. s Leonard & de Figueiredo



Strategy     ...
MBA 299                                                Professor Jonathan S. s Leonard & de Figueiredo



Strategy        ...
MBA 299                                                      Professor Jonathan S. s Leonard & de Figueiredo



Strategy  ...
MBA 299                                                    Professor Jonathan S. s Leonard & de Figueiredo



Strategy    ...
MBA 299                                                     Professor Jonathan S. s Leonard & de Figueiredo



Strategy   ...
MBA 299                                                      Professor Jonathan S. s Leonard & de Figueiredo



Strategy  ...
MBA 299                                                     Professor Jonathan S. s Leonard & de Figueiredo



Strategy   ...
MBA 299                             Professor Jonathan S. s Leonard & de Figueiredo



Strategy                           ...
MBA 299                                                       Professor Jonathan S. s Leonard & de Figueiredo



Strategy ...
MBA 299                                                     Professor Jonathan S. s Leonard & de Figueiredo



Strategy   ...
MBA 299                                                      Professor Jonathan S. s Leonard & de Figueiredo



Strategy  ...
MBA 299                                                  Professor Jonathan S. s Leonard & de Figueiredo



Strategy      ...
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UNIVERSITY OF CALIFORNIA – BERKELEY

  1. 1. University of California at BerkeleyNIVERSITY OF CALIFORNIA – BERKELEY Haas School of Business MBA 299: Strategy Jonathan S. Leonard Spring, 20087 Instructor Professor Jonathan S. Leonard leonard@haas.berkeley.edu Office hours: F-689 Monday 11:15-12:30 and by appointment Class Meetings: Section 1: Monday and Wednesday, 9AM-11AM in C125 Section 2: Monday and Wednesday, 2PM-4PM in C125 Section 3: Tuesday and Thursday, 2PM-4PM in C210 Section 4: Tuesday and Thursday, 4PM-6PM in C210 Midterm Exam: Take Home Exam Distributed April 14. Final Exam: Tuesday, May 13 9AM-12PM. Cohort 1 – C125 Cohort 2 – C210 Cohort 3 – C135 Cohort 4 – C220 Course Web Page: http://faculty.haas.berkeley.edu/rwang/strategy/mba299.htm Copyright © 20087 Jonathan S. Leonard &Rui de Figueiredo. All rights reserved.
  2. 2. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 Introduction Leaders shape the future to their advantage. We take the CEO’s perspective. This course will teach you how to recognize and capitalize on opportunities in business. Strategy is inherently dynamic. Success depends crucially on anticipating reactions both horizontally (by rivals and partners) and vertically (upstream and downstream). To address these dynamic issues, we will use game theory as an organizing framework for making strategic choices. You will learn specific analytical techniques to diagnose the competitive position of a business and evaluate business strategies. At the end of the course, you will have the analytic tools to assess the following key strategic questions: • How can a firm generate and capture value? • How do the fundamental economic forces in an industry affect the firm’s ability to make profits? • How can a firm position itself within an industry to obtain a sustainable competitive advantage? • How is a firm’s choice of strategies affected by the strategies of other firms— rivals , partners, and others up and down the value chain? Strategy without economics is like swimming without water: lots of hand waving, little forward motion, and yet still somehow a gurgling sound at the end. Clear strategic thinking relies heavily on frameworks previously taught in microeconomics. We will also build on some concepts from other core courses, marketing in particular. Professor for Sections 1 & 2 (M,W sections) Professor Rui de Figueiredo rui@haas.berkeley.edu 588 Faculty Building 510.642.6452 (email strongly preferred) Office hours: Thursday 3:00-4:00 Professor for Sections 3 & 4 (T,Th sections) Professor Jonathan Leonard leonard@haas.berkeley.edu 510.642.7048 (email strongly preferred) Office hours: F-689 Monday 12:40-1:45 and by appointment Schedule: Section 1: Monday and Wednesday, 10:30AM-12:30PM in C210 with Rui de Figueiredo Section 2: Monday and Wednesday, 2PM-4PM in C210 with Rui de Figueiredo Section 3: Tuesday and Thursday, 2PM-4PM in C125 with Jonathan Leonard 2
  3. 3. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 Section 4: Tuesday and Thursday, 4PM-6PM in C125 with Jonathan Leonard Course Web Page: http://faculty.haas.berkeley.edu/rwang/strategy/mba299.htm Midterm Exam: Take Home Exam Distributed April 9. Final Exam: Wednesday, May 9, 9-12PM Section 1 in C210 Section 2 in C125 Section 3 in C220 Section 4 in C135 3
  4. 4. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 Overview This class takes the perspective of the executive leading the firm and responsible for developing its strategy. The strategic view asks how the future can be shaped to one’s advantage. The purpose of this course is to enable students to analyze and design strategies to achieve a sustainable competitive advantage. Effective strategies fit both the external economic environment in which the firm is operating, and the internal core competencies of the firm itself. Strategic analysis is inherently dynamic. Strategic success depends crucially on anticipating reactions both horizontally (rivals and partners) and vertically (upstream and downstream). To address these dynamic issues, the course will use game theory analysis as an organizing framework for making strategic choices. You will develop skills for identifying managerial issues, finding alternative ways to deal with those issues, and evaluating alternative plans of action. You will learn specific analytical techniques for diagnosing the competitive position of a business, evaluating business strategies, and identifying and analyzing specific business options. At the end of the course, students will have analytic tools for assessing the following key strategic questions: • How can a firm generate value and how can it capture this value in the form of economic profit? • How do the fundamental economic forces in an industry affect the firm’s ability to make profits? • How can a firm position itself within an industry to obtain a sustainable competitive advantage? • How is a firm’s choice of strategies affected by the strategies of other firms—both rivals and others up and down the value chain? • How should a company choose the scope of its activities? While the course will draw heavily on concepts and frameworks previously learned in microeconomics and, to a lesser extent on other core courses, it is important to recognize that this course is not a capstone course, but rather an introduction to making business choices in a competitive context. Class Participation / Attendance: You are responsible for the material in each case. Come to class prepared to actively discuss your analysis of the business decisions in each case. Cases often have supporting data to help you understand the business situation. Thus, where appropriate, you should prepare quantitative as well as qualitative analysis to support your assessments and recommendations. Class participation counts for a significant fraction of your grade. IWe will both cold call students to start the discussion, and seek volunteers to speak in class. Quality of class participation is more important than quantity. Trying to maximize “air-time” is counter- productivenot effective. If your name card is not up or you do not attend class, Iwe will assume that you are unprepared and adjust your class participation grade accordingly. Before each case discussion, you should to identify the key issues and opportunities facing the firm, evaluate alternative approaches to the problems, describe the course of action that you recommend, and explain the reasons for your recommendations. Be prepared to try to convince your classmates of the merits of your proposal. Keep in mind the following characteristics of valuable class discussion: 4
  5. 5. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 Relevance: Are your comments clearly related to the case and to the comments of others? Advancement: Do your comments move the class discussion forward? Do your comments take the discussion farther or deeper than what has already been said up until now? Fact-based: Have you used specific facts from the case, from readings, or from personal experience to support the assertions that you are making? Logical: Is your reasoning consistent and logical? Are you using the concepts and frameworks from class to organize your comments? Originality: Do your comments bring fresh analytical perspectives to bear on the discussion? Where appropriate, you should prepare quantitative as well as qualitative analysis to support your assessments and recommendations. Data from case exhibits has been preloaded for most of the cases we will discuss, so you can move quickly to analysis. 5
  6. 6. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 Case Memos Each student team will be required to submit 5 4 case memoranda (up to two pages, double-spaced) of analysis and recommendations before the case is discussed in class. Each memorandum should focus on one of the questions that appear in the Case Questions. Write these as if you were writing a recommendation to the major decision-maker in the case. The two-page limit is for text only. You may attach onean additional page of numerical calculations. These memoranda will be graded on a pass/fail basis. IHowever, if a student is on the borderline for a grade in the course, the memoranda will be reviewed to see if the student receives the higher or lower overall grade in the course. Memoranda should be emailed to your GSI by 11:00 p.m. of the calendar day that immediately precedes the day of the class session. From each set of 2 or 3 cases below, pick one case and submit one memorandum. Total: 45 memos. 1. Cola Wars or Dell or Ryan Air 2. Sunrise Medical or Ryan Air 23. Biotech or RTE CerealBarnes & Noble 34. Apple or WintelNintendo 45. NintendoWinTel or IMG Grading Grades are based on the following elements: 1. 20% Class participation and Case memos. 2. 20% Performance in the competitive strategy game (CSG). Your performance in the CSG includes submitting preparing a “CSG Journal” at intervals throughout the course. Details will be explained by GSIs. 3. 30% Mid-term exam. 4. 30% Final exam. The final will consist of your an analysis of a case. Required Texts Required: Readings available on Study.net. A. Brandenburger and B. Nalebuff, Co-opetition A Note on Readings: It is expected that you will have rRead and analyze the listed readings prior to the class for which they are assigned. This is especially important 6
  7. 7. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 for cases. For each case, think out a reasoned plan of action for how (and why) you would proceed. 7
  8. 8. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 1. Introduction to Strategy • Ghemawat: “Competition and Strategy in Historical Perspective” • • Adolph Coors and the Brewing Industry Why did the US brewing industry consolidate? Coors was quite successful through the mid-1970s. What was its strategy historically? How valuable to Coors was “Unpasturized Pure Rocky Mountain Spring Water” How important was vertical integration to Ccoors? How did Coors’ performance change relative to its competitors in the period from 1977 to 1985? Why? Which options did Coor’s strategy create? Which did it eliminate? Should Coors build a brewery in Virginia? Will it be able to improve it position significantly? What, if anything, might Coors have done differently earlier on? 2. Industry Analysis • Porter, “What is Strategy?” • Brandenburger & Nalebuff, Ch. 1 • • Cola Wars Why is the soft drink concentrate industry so profitable? Why is the Compare the economics of the concentrate business to the bottling business so unprofitable: Why is profitability so different? What creates power in this vertical chain? How has the competition between Coke and Pepsi affected the industry's profits? Can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non- carbonated drinks? 33. Competitive Advantage- Cost • Hamel and Prahalad, “Core competence of the corporation” • • Matching Dell How did the personal computer business become so unprofitable? Why has Dell been successful in this industry? How large was Dell’s competitive advantage prior to the decision of competitors to “match” Dell? Using a spreadsheet, calculate Specifically, quantify Dell’s cost advantage over the team of Compaq and a reseller selling a high-end machine toin serving a corporate customer in 1996. Bring this to class. What impact does the Value-Added Reseller channel have on IBM and Compaq? How big is Dell’s remaining advantage? What should Dell and its rivals do now? 8
  9. 9. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 44. Competitive Advantage- Differentiation • Sunrise Medical Is the US wheelchair industry unattractive in 1993? Why? Are these conditions changing? Does Sunrise Medical’s Quickie Division have a competitive advantage? Should Chandler allow Guardian to enter the lightweight standard wheelchair market? 9
  10. 10. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 5. Entry and Competitive Analysis • Coughlan, “Anticipating competitor actions” • Brandenburger & Nalebuff, Ch. 2 • • Xenon Marketing Services What determines the value to XMS of its Charter contracts? Why didn’t XMS take any action to enforce their contracts? • Ryan Air: Dogfight Over Europe What is your assessment of Ryanair’s launch strategy? How do you expect Aer Lingus and BA to respond? Why? Using a spreadsheet, quantifyWhat are the costs and benefits benefits to BA and to Aer Lingus of the decision to retaliate or accommodate Ryan’s entry. of the retaliate versus accommodate strategies for BA? Aer Lingus? Can the Ryan brothers make any money at their proposed price point? 56. Innovation Strategy and Contracting • Better Living Through Biotech How should George Rathmann decide where to invest his company’s scarce resources? Should he bet the company’s future on EPO? Compare the entry barriers across the markets being considered. How do these change the attractiveness of entering these markets? For EPO, what are the expected costs at project inception up to the point of FDA approval? What additional costs would you expect to incur to bring the drug to market? What are your expected revenues from the US ESRD market? If twenty years of patent protection are not sufficient to attract investment in a new drug, how could an overlapping 7 year period of exclusivity under the Orphan Drug Act change the attractiveness of entry? How would you leverage the ODA in medical indication markets with target populations of 30,000? 300,000? 30 million? 67. Innovation Strategy and Contracting II • Better Living Through Biotech 7 Competitive Dynamics • Brandenburger & Nalebuff, Chs. 3 & 4 • • Bitter Competition: Holland Sweetener Why should NutraSweet accommodate HSC’s entry into the aspartame market? Why should NutraSweet not accommodate HSC’s entry into the aspartame market? Evaluate the two sets of rationales. On balance, what should HSC expect of NutraSweet’s reaction? In light of this, what strategy would you recommend to HSC? 10
  11. 11. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 8. Competitive Dynamics II Bitter Competition: Holland Sweetener 9. Multi-Player Dynamics • The Ready to Eat Breakfast Cereal Industry Why has RTE cereal been so profitable? What changes created the current crisis? Using a spreadsheet, calculate the cost of entering and reaching MES. Why have private labels been able to enter successfully? How do the cost structures of private label and branded manufacturers differ? What does General Mills hope to accomplish with its April 1994 reduction in trade promotions and prices? What are the risks associated with these activities? How do you expect General Mills competitors to respond? How symmetrical are their positions? What should General Mills do? 9. Sustainability and Substitution • Porter, “Strategy and the Internet” • Ghemawat, “Sustaining Superior Performance” • Leadership Online: Barnes & Noble vs. Amazon Compare the willingness to pay of online compared to traditional bookselling. Compare the forecast long-run cost position of a successful online bookseller to B&N’s traditional business model. (Assume that exhibits 4 and 7 in the case reflect average discounts of 10% off list for B&N’s brick and mortar stores and 25% off online.) Assess B&N’s substitution threat from Amazon. How did Amazon respond and to what net effect? Who will be the online leader? Is this a good business to be in in the long run? 10. Complements • Apple Historically, what were Apple’s major competitive advantages? As an Independent Software vendor (ISV) in 1985, would you write for Apple or Microsoft? Evaluate Apple’s strategies in the 1990s. What accounts for the success of Microsoft relative to Apple? What are Apple’s current competitive advantages? Are these sustainable? How does Apple’s IPOD strategy differ from its earlier strategy with PCs? 11. Network Effects: Complementor dynamics and technology strategy • Wintel 11
  12. 12. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 What accounts for the winner-take-all dynamics leading to Microsoft and Intel’s dominance? What are the key drivers of profitability for Microsoft? Intel? Do you expect conflict or cooperation between the two? If you are Andy Grove making a decision on NSP, should you concede to Bill Gates? Hold your ground? Or, negotiate a compromise? If you are Andy Grove, which of the above three approaches do you think Bill Gates will pursue? 121. Vertical Strategy: Controlling the Value Chain • Brandenburger & Nalebuff, Ch. 5 • • Power Play: Nintendo in 8-bit Video Games How did Nintendo successfully revitalize the video game business following Atari’s boom and bust cycle? How was Nintendo able to capture the value it created in this business? • The Semtel-PT Development Agreement What is PT’s vertical strategy? Why doesn’t PT encourage the silicon experts, such as Semtel, to use their expertise to customize the chip specifications? Why does PT pay part of the NRE costs? Why does the contract specify an initial 50% share of procurement? Why does PT specify the price-quantity schedule in the contract? Why should PT both make and buy the office-machine chip? 12. Network Effects: Complementor dynamics and technology strategy • Wintel What accounts for the winner-take-all dynamics leading to Microsoft and Intel’s dominance? What are the key drivers of profitability for Microsoft? Intel? Do you expect conflict or cooperation between the two? If you are Andy Grove making a decision on NSP, should you concede to Bill Gates? Hold your ground? Or, negotiate a compromise? If you are Andy Grove, which of the above three approaches do you think Bill Gates will pursue? 13. Shaping the Future: Creating value in the absence of property rights • IMG What keeps clients from leaving IMG for rival agents? Where does the value in the relationship between clients and IMG reside? Is it with the clients? Agents? IMG? Elsewhere? Which areas of expansion for IMG are most sensible? Which are less compelling? What are the biggest challenges in structuring an organization like IMG? How may these be overcome? If you were a competitor to IMG, what would be your strategy to compete against it? Where is IMG most vulnerable? 12
  13. 13. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 14. CSG De-Brief & Course Summary 13
  14. 14. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 Section Sections are an integral part of this course and will introduce some material not presented in class. Weekly sections will complement the lectures. Topics addressed in the sections will include the rules and details of the competitive strategy game; how to analyze a case to prepare a discussion, write-up, or final exam; and additional themes in the field of strategy. GSI for Sections 1&2: GSI for Sections 3&4: Rob Seamans, seamans@haas.berkeley.edu Richard Wang, rwang@haas.berkeley.edu Section meetings: Section meetings: 101: F 10:00am-11:30am in C220 301: F 1:00pm-2:30pm in C220 201: F 11:30am-1:00pm in C220 401: F 2:30pm-4:00pm in C220 Office hours: M 1:00pm-2:00pm, F 1:30pm-2:30pm and Office hours: W 2:00pm-3:00pm, F 10:30am-11:30am by appointment, location F535 and by appointment, location F535 Section syllabus Week 1 (3/16) • Introduction to the competitive strategy game (CSG)/monopoly benchmark exercise Week 2 (3/23) • No section. GSI’s will have extra office hours during Week 2 (times to be announced). Have a great spring break! Week 3 (4/6): • How to write a good case study • Strategic frameworks: Porter’s 5 forces and industry analysis • Using numbers to effectively support analysis and strategic recommendations Week 4 (4/13): • Strategic frameworks: core competencies and technological frameworks • Preparing for round 5 of CSG Week 5 (4/20): • Strategic frameworks: game theory Week 6 (4/27): • Strategic frameworks: putting frameworks together and prioritizing analyses. Week 7 (5/4): • Mock final 14
  15. 15. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 Competitive Strategy Game The competitive strategy game is an integral part of the course. In this game teams design strategies to compete against each other in four markets with different characteristics. . The CSG starts with The CSG builds upon and reinforces concepts that you have learned in your core microeconomics course, such as demand elasticity, marginal vs. average costs, and fixed vs. sunk costs, and and extends them to by emphasizeing the competitive interactions that characterize real marketplaces (which are the key focus of MBA299). In each class, there will be 16 teams competing in ttwo separate concurrent games of eight teams apiece. The first strategies for each team will be due on April 3, with public announcements due March 31.March 22. The game proceeds through nine rounds of investment and concludes on AprilMay 1 30. Your team will submit its strategy via the CSG website (http://csg.haas.berkeley.edu) by 12 noon on the due date for that particular round. (See A full schedule belowof the 9 rounds will be released separately.) AtFollowing rounds 21, 65, and 98, each team iswill be required to submit a 1 or 2 page memo explaining the rationale for the strategies it pursued as well as its assessment of how these strategies will lead to competitive advantage. Please note: Each of these memos can be no more than twoone pages.; however, supporting exhibits such as graphs, tables, and the like will be permitted as appendices to the memo. Each memo should include a header with team #, journal #, and the names of team members. Grading of the CSG will be based on a combination of objective and subjective measures of team performance and the strategy memos. Detailed instructions for the competitive strategy game will be distributed and discussed in section.separately. CSG Schedule Submit all moves by 12 Noon on date indicated. March 21 Introduction to CSG- in Section • Teams are sent logon, password and firm profile March 31 Round 1 Public Announcement Submission due April 3 Strategies for Round 2 due (Strategy Journal 1 due April 3 ) April 7 Strategies for Round 3 due April 10 Strategies for Round 4 due April 14 Strategies for Round 5 due April 17 Strategies for Round 6 due (Strategy Journal 2 due April 17) April 21 Strategies for Round 7 due April 24 Strategies for Round 8 due April 28 Strategies for Round 9 due (Strategy Journal 3 due April 28) 15
  16. 16. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 May 1 Strategies for Round 10 due Strategy Journals should be submitted to your GSI via e-mail by noon on the indicated date. Hardcopies should be delivered to your GSI at the next Section meeting. 16
  17. 17. MBA 299 Professor Jonathan S. s Leonard & de Figueiredo Strategy Spring, 2007 Section Sections are an integral part of this course and will introduce some material not presented in class. Weekly sections will complement the lectures. Topics addressed in the sections will include the rules and details of the competitive strategy game; how to analyze a case to prepare a discussion, write-up, or final exam; and additional themes in the field of strategy. GSI for Sections 1&2: GSI for Sections 3&4: Rob Seamans Richard Wang seamans@haas.berkeley.edu rwang@haas.berkeley.edu Section meetings: Section meetings: 101: F 10:00am-11:30am in C220 301: F 1:00pm-2:30pm in C220 201: F 11:30am-1:00pm in C220 401: F 2:30pm-4:00pm in C220 Office hours: M 1:00pm-2:00pm, Office hours: W 2:00pm-3:00pm, F 1:30pm-2:30pm and by appointment F 10:30am-11:30am and by appointment location F535 location F535 Section Schedule Week 1 (3/21) • Introduction to the competitive strategy game (CSG) • Review of Bertrand and Cournot competition Week 2 (4/4): • How to crack a case. o Strategic frameworks: Porter’s 5 forces and industry analysis o Using numbers to effectively support analysis and strategic recommendations Week 3 (4/11): • Strategic frameworks: technology and advantage • Preparing for round 65 of CSG Week 4 (4/18): • Strategic frameworks: game theory Week 5 (4/25): • Strategic frameworks: putting frameworks together and prioritizing analyses. Week 6 (5/2): • Mock final 17

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