Competitive Strategy (02819880)
Instructor: Weiru Chen Program：MBA
Semester: Fall 2008 Time: Tue/Thurs evenings
Credit Hour：30 Credits：2
Prerequisite：Strategy Location: 120/219
Contact Information: firstname.lastname@example.org
Office Hours: please make appointment by email
Brief Course Description
This course is an advanced strategy course providing new and articulate strategy
concepts, analytical frameworks, and hands-on tools for participants to execute
industry analyses and develop competitive strategies in their long-term career.
Building on economics and strategy foundations, it helps analyze the competitive
behavior of firms (including pricing, market positioning, product development,
investment, expansion, entry and deterrence) under various economic conditions of
industry structure. We study pertinent issues in a broad range of industries (e.g.
airline, automobile, biotech, chemicals, consumer electronics, entertainment, internet,
luxury, music, photography and service...etc) and geographic areas (Europe, America,
and Asia) and emphasize on dynamic analysis (evolution, uncertainty, and
This course is recommended for participants pursuing careers requiring the analysis
and formulation of strategic directions for companies (strategy consulting, general
management, business development), or the assessment of long-term profit
opportunities across industries (investment banking, private equity, venture capital).
The first module (Constructing Sustaining Competitive Advantage) advances the
industry and competitive analysis with greater conceptual rigor and broader
applications. The emphasis throughout is on how firms create and appropriate value
through positioning, value innovation, and managing vertical chain players. We
examine how firms gain and sustain competitive advantages by building and
exploiting strategic positions and capabilities. We learn how to identify value
opportunities in the chain and design strategies to capture the value.
The second module (Creating and Exploiting Powerful Market Positions) studies the
creation and exploitation of powerful market positions and platform leadership.
Market power allows firms to shape market structure and to capture value from the
supply chain and customers. We will illustrate several approaches to gain and defend
dominant positions: analyzing competitive interactions, extending power to other
businesses, planning for market preemption, leveraging network externality effects,
and coordinating for platform adoption by complementors.
This whole course aims to provide participants a more forward-looking, action-
oriented, and dynamic view of competitive strategies.
Detailed course plan (Outline of Sessions)
Module I: Constructing Sustainable Competitive Advantages
October 21 Tuesday
Session 1: Understanding Industry Profitability
Read: “Economics of Strategy”: Chapter 10: Industry Analysis
Porter (1979) “How Competitive Forces Shape Strategy”, HBR
Case: The European Airline Industry on a Collision Course (INSEAD) 2005
China Hainan Airlines (Darden) 2005
Subjects: Airline industry, industry analysis, industry evolution
Synopsis: We introduce the frameworks in analyzing industry profitability. Using
airline industry as an example, we analyze the economics of an industry
with attention to other participants in the supply chain that capture value.
Then we discuss the competition among different business models, such as
network carriers (e.g. Lufthansa, British Airway, and Air France) and low-
cost carriers (e.g. Ryanair and EasyJet) and how they develop their own
competitive strategies. We will see such battles coming into Chinese
aviation market soon.
Why is airline industry unprofitable? How to improve?
October 23 Thursday
Session 2: Creating a Sustainable Business
Case: De Beers Consolidated Mines ltd. (A) (HBS) 1990, 1998
Subjects: Mining industry, market power, industry analysis, value
appropriation, value chain management
Synopsis: De Beers had, since its formation in 1888, exercised a large measure of
control over the world supply of diamonds. In 1983, the company itself
mined over 40% of the world's natural diamonds and, through marketing
arrangements with other producers, distributed over 70%. For 50 years up
to 1983 the company had never lowered its prices and, overall, had raised
them significantly ahead of the rate of inflation. However, in 1983 the
company was faced with a series of problems that threatened the structure
it had so carefully built. Should De Beers abandon the business strategy it
had pursued for nearly a century?
How does De Beers shape the diamond industry? Should De Beers stop the CSO’s
stockpiling strategy in facing the 1983 crisis?
October 28 Tuesday
Session 3: Managing Vertical Boundary
Read: “Economics of Strategy”: Chapter 3: The Vertical Boundaries of the Firm
Stuckey and White (1993) “When and When Not to Vertically Integrate”,
Sloan Management Review, pp. 71-83.
Lecture: Determining Vertical Integration-ETP framework
Case: Nucleon, Inc. (HBS) 1991, 1994
Subjects: Biotech industry, vertical integration, value proposition, growth strategy
Synopsis: We discuss the considerations in determining business scope in the
vertical chain configuration. Specifically we focus on a typical issue facing
by young R&D-intensive entrepreneurial ventures. Nucleon is a small
biotechnology company whose first potential product is about to enter
clinical testing. Before Nucleon can begin clinical trials, however, its
management must decide how and where to manufacture the product.
Three options are being contemplated: 1) build an in-house pilot plant, 2)
contract production to a third-party, 3) license the development,
manufacturing, and marketing rights to a corporate partner. Should it
consider building in-house manufacturing capabilities while its current
competence is on very distinctive and specialized R&D capabilities?
Do you recommend Nucleon to build an in-house manufacturing plant,
subcontract or license its R&D output for Phase I and Phase II clinical trials?
October 30 Thursday
Session 4: Creating Customer Value
Read: “Economics of Strategy”: Chapter 11: Strategic Positioning for
Silverstein and Fiske (2003) “Luxury for the Masses” HBR
Case: Shanghai Tang: The First Global Chinese Luxury Brand? (HKU) 2007
Subjects: Luxury industry, value analysis, strategic positioning, sustainable
Synopsis: We discuss how competitive advantages come from through a lens of
value analysis. Specifically we focus on the creation of a luxury brand.
When David Tang created Shanghai Tang in 1994, he intended to launch
China’s first bona-fide luxury brand. The idea was to create the first global
Chinese lifestyle brand by revitalizing Chinese designs—interweaving
traditional Chinese culture with the dynamism of the 21st century. In the
beginning, the brand was unable to establish a core customer base outside
its home market of Hong Kong. In 2005, under new leadership and revised
creative direction, Shanghai Tang expanded into several regional markets
worldwide, with a particular focus on Asia. But was the company on track
to become the first global Chinese luxury brand? Would David Tang’s
vision be realized?
How is a luxury brand different from a regular mass-market brand? How should
Shanghai Tang position itself relative to other luxury brands?
November 4 Tuesday
Session 5: Blue Ocean Strategy
Case: The Circus is Coming (news article)
Subjects: Entertainment industry, value innovation
Synopsis: Conventional strategy offers little practical guidance on systematically
going about designing innovative strategies. In this session, we will
examine a set of recent tools and frameworks that help managers come up
with novel strategies for profitable growth, often even in seemingly mature
industries. During this session, we will draw upon examples from a range
of industries to motivate a new way of thinking about strategy (called
“Blue Ocean Strategy”), and a related set of tools (called “Value
Innovation”) that help implement blue ocean thinking.
How to create your Blue Ocean Strategy and uncontested market?
Module II: Creating and Sustaining Dominant Market Positions
November 6 Thursday
Session 6: Leveraging Market Power to Grow
Read: “Economics of Strategy”: Chapter 9: Entry and Exit
Case: Printer Wars: Dell and the Printer Business (INSEAD) 2005
Subjects: Imaging printing industry, PC industry, competitive entry strategies,
growth strategy, milti-market competition, analysis of value creation and
Synopsis: We discuss what expansion or diversification can lead to profitable
growth. We focus on the case that examines whether a firm with a
dominant position in an industry (Dell in PCs) can exploit its powerful
position to enter into complementary products (desktop printers). The
dominant incumbent in printers (HP) already competes with Dell in the PC
market and to will definitely defend in the printer business. The main
question is whether Dell can overcome the barriers in order to benefit from
this profitable business, or deflate a profit pool from its rival.
Should Dell enter into printer business? How should Dell position itself in printer
November 11 Tuesday
Session 7: Strategies for Winner-take-all Business
Read: Eisenmann, Parker, and Van Alstyne (2006), “Strategies for Two-sided
Case: Baidu.com vs. Google.cn: Battle for China’s Internet Market (INSEAD)
Subjects: Online search industry, winner-take-all, two-sided market, competitive
Synopsis: This class explores how to develop, compete, and envelop a platform
that appears winner-take-all effects when a consumer’s utility depends on
how many others are using the same platform. In particular, the case
describes the battle between world’s leading search engine Google and
China’s local entrepreneurial firm Baidu.com in the country with second
largest internet population in the world.
What are Baidu’s challenges ahead? How would Google.cn fight back?
November 13 Thursday
Session 8: Disruptive Strategy in Chinese Firms’ Internationalization
Read: “Economics of Strategy”: Chapter 6: Competitor and Competition
Case: Chery Automobile Company: Evolution of the Chinese Automobile
Industry (HKU) 2007
Subjects: Automobile industry, disruptive technology, competitive entry strategies,
Synopsis: The class discusses whether Chinese firms can develop disruptive
business model to enter into global markets when they are mostly
dominated by western multinationals. Specifically we discuss the
strategies Chery can play a role in the global automobile market.
How should Chery enter into the global automobile market?
November 18 Tuesday
Session 9: Multinationals’ Strategy in China
Case: McDonald’s and KFC in China (INSEAD) 2008
Subjects: fast food industry, presumptive adaptation, foreign entry, global strategy
Synopsis: McDonald’s and KFC are the two largest quick service restaurants in
the world, with 31,377 and 14,892 outlets respectively. Both chains have
rigid management and supply chain systems and are renowned for their
consistency in operation and attention to quality. McDonald’s appears to
be a clear winner in its international expansion. However, it is a totally
different picture in China. At the end of 2007, KFC has over 2000 outlets
in China, with an average of nearly 20.1% profit margin; On the other
hand, McDonald’s number of outlets in China is only at 800 outlets, with
an estimated profit margin significantly less than KFC. What leads to the
difference in expansion? How can McDonald’s, as a late comer and the
second largest QSR player in China, catch up with KFC with its
advantages from global leadership?
How should McDonald’s catch up with KFC in China’s fast food industry?
November 20 Thursday
Session 10: Student Group Project Presentations and Final Recap
Recap: Integrating theories, frameworks, tools for competitive analysis
This course honors an active and collective learning approach. It consists of a brief
summary of theories and frameworks, thorough discussion of a representative case,
and learning-by-doing applications in the classroom. Instructor facilitates class
discussion to help students learn from others. Outside the classroom, students are
expected to work as a group to share diverse views and brainstorm solutions for a case
and project and then share their findings to fellow classmates.
The recommended textbook for the course is:
David Besanko, David Dranove, Mark Shanley, and Scott Schaefer. Economics of
Strategy, Wiley, 4rd edition, 2007.
Readings from the textbook and other articles assigned for the sessions give
complementary perspectives and references to the relevant concepts. The textbook
provides neat framework for analysis and the articles provide applications.
Rules students must follow
Rule of Three:
1. Be prepared before the class. This is a highly interactive discussion course.
Active preparation and participation is the key to the amount of take-away for
everybody in the classroom.
2. Be on time for the class and respect your fellow classmate during class
discussion. Please listen to other’s talking, switch off your mobile phones and
do not chat online, surf web or send emails during class.
3. Maintain academic honesty at all times. The penalties for plagiarism are
Course requirements include active class participation, a case write-up, and a more
substantial group project.
Grading: Class participation: 40%
Case write-up: 20%
Final project: 40%
Class Participation: Class participation refers to the quality and quantity of your
contributions to classroom discussion, particularly by applying concepts, frameworks
and tools and providing insights for the case analysis. Class attendance is expected.
Truly exceptional situations requiring that you miss class will be accepted provided
that you send me notification by email prior to the absence.
Case Write-up: Case analysis write-up gives you an opportunity to apply strategy
concepts and frameworks to a real situation and provide recommendations. You will
need to put together a team of 3-5 people to conduct one case write-up. The case
analysis write-up is expected to be 3 pages. Write-ups are due at 10 pm the day
BEFORE class starts, and should be submitted by email to email@example.com.
Note also that your group might expect to present your analysis and recommendations
in your case write-up for 5-10 minutes in the class. The group is encouraged to
discuss with the instructor on the direction and approach to analyze your case. The
group should send the instructor the slides (no more than 2 slides) by 10 pm the day
BEFORE the class.
Final Project: The final project allows you to do a more thorough strategic analysis
of an industry or a company of your choice. An in-depth analysis plus
recommendations is required. The length is expected around 15 pages, excluding
exhibits. Your group will present the project in the last class. I’d like to work with
you through the learning process: please submit by email a one-page abstract/proposal
of your group project by Oct 23, a working-in-process draft of your group project by
Nov 10, and the presentation slides (no more than 5 pages) before Nov 18. Please
incorporate feedback obtained from the instructor and peer participants during your
presentation into your final draft of the project. The deadline for final group project is
10 pm on Nov 25. Both the presentation and the written report will contribute to the
grade. Below are some samples of titles:
Battle for the Living Room: Digital Convergence
Luxury for the Masses: Lego and the toy industry
Analysis of Low-cost Carriers in China
Cola Wars to Water Wars - The Evolution of Bottled Water Industry
Vertical Integration in the Russia Oil Industry
About the Instructor
I am an Assistant Professor of Strategy at INSEAD, the world’s top
executive education provider. I got my Ph.D. in strategic
management at Purdue University in the U.S.—the first school to
offer a PhD program in strategic management. I’ve been at
INSEAD since 2003, where I teach industry and competitive
analysis (ICA) and innovation and technology strategy (ITS) to
MBAs and PhDs. I was selected as the Outstanding Teacher of
Elective Courses in the Academic Year of 2005 by MBA students in INSEAD’s Asia
campus. At Purdue University, I was also elected the Best Teaching Award by
undergraduate students in the Krannert School of Management when I taught the
strategy core course in 2002. I assisted Purdue’s Executive MBA programs in
Germany and advised some Asian multinational companies’ strategic planning in their
early internationalization stages.
My research interests include firms' technological search behaviors, risk management,
and strategy dynamics. My work has been published on the world’s leading academic
journals, such as Academy of Management Journal, Organization Science, Strategic
Management Journal, and Strategic Organization. My dissertation on firm search
behavior received the Best Dissertation Runner-up Award in technology and
innovation management in its year. My research on firms' forward-looking and
backward-looking search behavior has been selected in the Best Paper Proceeding of
the Academy of Management Conference. Another paper on firms’ decision making
under uncertainty was awarded the Best SMS Conference Paper (Honorable Mention)
in the Annual International Conference of Strategic Management Society. I am
currently studying search behavior of Indian business groups and presumptive
adaptation of foreign franchises in China.
I am married with two babies. In leisure, I like travel, photography, and swimming.
Look forward to having intellectual discussion with you in the class.