Leonard N. Stern School of Business

essence of successful strategy – “fight fair, but avoid fair fights.” Adam Brandenburger argues
that potential cooperation...
This course builds on the above arguments, prepares students with theories, concepts and
tools useful in analyzing strateg...
This is a 3-week class. If you fall behind, you risk not being able to catch-up.

Other Points

1. When analyzing cases, w...
Schedule of Topics and Assignments

Session/Date               Topic                                      Readings
1. 8/17...
Case Preparation Note Assignments

                                         Intel vs. AMD

The purpose of this assignment...
1) What are the key elements of Wal-Mart’s competitive strategy? How has the firm
      differentiated itself?
   2) Does ...
Upcoming SlideShare
Loading in …5

Business Strategy Analysis - Summer, 2004


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Business Strategy Analysis - Summer, 2004

  1. 1. NEW YORK UNIVERSITY Leonard N. Stern School of Business Business Strategy Analysis B01.2103.U1 Summer, 2004 Prof. William D. Guth Classroom: KMEC 2-65 Room 8-90 KMEC Tel: 998-0214 Fax: 995-4234 Email: Course Description In this course we will develop theories, concepts and tools useful in ‘thinking strategically’ about businesses in competitive/cooperative interaction with other businesses. The goal of ‘thinking strategically’ is to devise strategies for businesses that enable them to create superior value for chosen customers and to capture a share of that value sufficient to generate above average returns on their capital compared to alternative investments at comparable risk. The course focuses on achieving above average performance at the product/market level of competition. We will look at a several theories of why some firms do better than others in competitive/cooperative interactions, and at many concepts and tools potentially useful in identifying opportunities to achieve superior performance. Our view is that there is neither one complete theory, nor one totally integrated set of concepts and tools that when applied together will always produce the most successful ‘strategic thinking.’ We will examine several frameworks for strategic thinking, each of which highlights different aspects of the strategic situations facing firms. A good strategist is careful not to have blindspots. Being sensitive to the danger of seeing things only one way, of working with only one framework for strategic thinking, is part of the overall perspective on strategy that we will promote in the course. The central challenge in this perspective is to be flexible in thinking while at the same time achieving rigor in analysis. Much has been written about strategic thinking. Each author of noted publications on strategic thinking argues from a particular perspective or point of view on the subject. As a quick preview of some of the perspectives we will discuss in the course, Andrew Grove (chairman of Intel), for example, argues that “only the paranoid survive,” i.e., only those managers who continuously are on the lookout for what is changing in their firm’s environment that could negatively impact a firm’s competitive performance have a chance to adapt, revise, or change their strategies in time to survive significant changes in industry structure and competitive dynamics. Michael Porter argues that strategy is about making choices that make the firm different from its competitors in ways that give it economic advantages in either lower costs or greater perceived value to customers. John Czepiel argues that seeking ‘unfair’ advantage in relation to competitors is the 1
  2. 2. essence of successful strategy – “fight fair, but avoid fair fights.” Adam Brandenburger argues that potential cooperation with other businesses is as important in strategic thinking as is competition with other businesses. Bill Guth argues that human beings and organizations do not “act in response to reality, but to an internal cognitive image of reality.” Thus, strategic thinking must pay explicit attention to the relationship between reality and the mental model of that reality held by the organization’s leaders, focusing on how signals from the outside world are filtered by the internal individual and ‘collective” minds. Frameworks for strategic thinking highlighted by these authors reflect the central arguments in their point of view on the subject. The central arguments on which this course is built 1. The first argument is based on the understanding of competitive strategy in games in which the outcome is valued versus the play of the game. The main point in this argument is that one does not play such a game unless one has reason to believe that there is a positive probability of winning, and that the gains from potentially winning versus the losses from potentially losing are attractive. 2. The second argument says that marketplace exchange creates value. In this context, the objective of business strategy is to be able to create and capture value through exchange sufficient to earn an above average return on invested capital, compared with investments with comparable levels of risk 3. The third argument says that in competitive markets, firms compete to create superior value for customers as that value is defined and perceived by those customers. 4. The fourth argument says that competitive markets are efficient in the long run and that to create above average returns a firm must have an economic advantage versus competitors in creating that value. Competitive advantage, whatever its source in the firm’s value chain, must have its effect at the product/market level. 5. The fifth argument says that the firm has choices about 1) the exact value proposition to be offered, 2) the market segments and customer groupings it chooses to serve, 3) the position it will occupy in an industry value chain, 4) the way it configures its internal value chain, and 5) the ways in which it organizes its activities. 6. The sixth argument says that the argument outlined above is normative in nature: that successful strategies embody these ideas but the processes by which competitive advantage is achieved are varied and are often opportunistic, serendipitous, and ill-defined rather than formal and planned because of the limits to human comprehension of the outcomes of competitive actions and changes in the larger environment. 7. The seventh argument is that all the frameworks for and perspectives on strategic thinking that we will discuss in the course can contribute to the development of successful business strategies, but no one of these by itself can claim to be “the basis for successful strategic thinking.” 2
  3. 3. This course builds on the above arguments, prepares students with theories, concepts and tools useful in analyzing strategic situations and in making strategic recommendations, assumes that students learn about the organizational contexts within which such decisions are made in the Management of Organizations course, and lastly, assumes that the recommendations are executed as described. Text and Other Class Materials Langone Program, Strategy I, B01.2103 (at bookstore) All other materials such as lecture handouts will be posted on Blackboard. Teaching Assistant Janelle Evelyn, Office hours to be announced Grading Grading will be based on the following: 1) Final Exam (Individual) 50% 2) Intel/AMD Assignment (group) 20% 2) Barco Assignment (group) 30% 100% Class Participation and Preparation The following ideas guide my approach to class participation and preparation: 1. You prepare the class materials because you realize this is an essential part of the learning process for this class and because we focus on interesting and fundamentally important business issues. 2. Not everyone is able to speak and contribute concurrently during a class session. 3. Reflection is an important element associated with fully comprehending the material. As a result I will not grade class participation, per se. When I grade class participation, it is my experience that class participation grades are highly correlated with students’ scores on case analyses and exams. Students who tend to perform well in my classes prepare the assigned material before class, participate or actively follow class discussion, and follow-up any unanswered questions after class. (You all are enrolled in Blackboard where you will find all course materials, and easy access to communicating with me and/or the class as a whole and/or your particular group). If you need to miss a class, please send me an email (in advance, if at all possible) letting me know. 3
  4. 4. This is a 3-week class. If you fall behind, you risk not being able to catch-up. Other Points 1. When analyzing cases, we will want to apply the frameworks and perspectives of the course, but we will also want to let the cases ‘speak for themselves.’ Look at the history of the business and try to understand what were the key events that led to its success (or failure). Often, these key events can seem small, so we’ll have to look carefully. All this applies equally when we want to try to predict the future of a business. In sum, use the frameworks and perspectives of the course to analyze the cases, but use your judgment as well. Given a particular framework or perspective, there are analytically correct answers to questions raised in a case. Analytically correct answers from other frameworks or perspectives may differ, however, requiring the exercise of judgment in resolving conflicts. 2. Along these lines - it’s better to make analytical mistakes in class discussions than on the case analysis or exam. 3. I have provided questions in the syllabus to guide your preparation of cases for class discussion. 4. I reserve the right to “cold-call” during class. 5. If you are unclear about the stand I take on a case or issue raised in class, please ask me to clarify it. 6. It may occur that I do not directly discuss some of the assigned reading material. In these cases, I believe that this material is important but is easily understood from your reading of it. If you have questions about the reading materials per se, feel free to raise them in class if class discussion doesn’t address them. 7. A further description of class policies is handed out on the first day of class. Legal and Ethical Aspects Discussions of business strategy may touch on legal and ethical issues. In this course, we will note some of the legal issues that can arise in different strategy alternatives. Full development of those issues, however, is the domain of courses on law and business. Questions raised by the course on what is ethical behavior in business and what is the purpose of business are legitimate – indeed vital – matters for discussion. Honor Code You are aware of the Stern MBA Honor Code. This code upholds the integrity of your degree and of this academic institution. As a result, any violation of this code will be dealt with to the full extent of the code. 4
  5. 5. Schedule of Topics and Assignments Session/Date Topic Readings 1. 8/17 Course Introduction Langone Program, Strategy I, B01.2103 Frameworks and Perspectives 2. 8/17 (LPSI) Readings 1 and 9 , and Chapter on Strategic Thinking One Value Creation, The Value LPSI , Chapter Two, and Readings 2,7 and 3. 8/18 Net, The Five Forces 8 Defining the Competitive 4. 8/18 Case: Intel (Discuss) Situation Strategic Positioning: Generic Case: Intel/AMD (Submitted/Discuss) 5. 8/23 Strategies LPSI, Chapter Three; and Reading 3 Strategic Positioning: Added 6. 8/23 LPSI, Chapter Three Contd. Value Competing on Cost: LPSI, Reading 4 7. 8/25 Experience, Scale and Scope INTEL/AMD Returned Competing on Cost: 8. 8/25 Superior Value through Case: WAL-MART (Discussed) Operations Technology as a Source of 9. 8/30 LPSI, Reading 5 Value Competing on Technology 10. 8/30 Case: Barco (Discuss/Submitted) and Operations Anticipating Competitive 11. 9/01 LPSI, Chapters 4 and 5, and Reading 6 Dynamics Using Competitive Advantage 12. 9/01 Case: Dell-New Horizons Course Summary Final Exam, Due Sept. 3 Take-home Exam by 5:00 pm 5
  6. 6. Case Preparation Note Assignments Intel vs. AMD The purpose of this assignment is: 1) to give you practice in applying the concepts and tools from the lectures and readings to- date to a very “live” case with 2) the end result being a definition of the strategic situation in which AMD finds itself in the microprocessor industry. Instructions The case you have received in the case packet, Intel Corp., 1968-97 tells primarily the Intel side of the case. To complete the case, you will need to research, in the popular business press, 1) the Advanced Micro Devices side and, also, 2) the actions that Intel has taken since 1997. To keep this assignment do-able, the course webpage contains a list of required and optional links (the URL for the AMD/Intel web page will be given the first night of class). A must read is Jerry Sander's 1998 talk "Competing with an 800-Pound Gorilla." Assignment The case preparation note you are to submit, as a team, is to contain the following sections, in the order listed, and in no more than 3pp double-spaced, 12 pt. type with normal margins: • The generic strategies being pursued by each competitor together with the reasoning you used to determine that conclusion. Hint: Compare the COGS and R&D expenses of both firms as a percentage of their sales. • A SWOT analysis for AMD. • Your definition of the strategic situation AMD faces (how would Hannibal have defined the situation?). Wal-Mart The purpose of this case is: 1) to allow you to identify and quantify the sources of Wal-Mart’s competitive advantage in discount retailing, 2) to assess how sustainable their position in discount retailing will be in the future, and 3) to address the prospects for their diversification moves. Discussion Questions 6
  7. 7. 1) What are the key elements of Wal-Mart’s competitive strategy? How has the firm differentiated itself? 2) Does Wal-Mart have a competitive advantage over its competitors? 3) Identify the sources of that advantage and quantify each in financial terms. 4) How well are the functions aligned with Wal-Mart’s overall competitive strategy? 5) What criteria should be used to judge the different options for diversification? Which one(s) would you choose and why? Barco Projection Systems (A) The purpose of this assignment is: 1. To give you practice in comparing two different business strategies in the same marketplace, 2. To help you to understand how operations and technology contributes to creating superior value, and 3. To be able to define and evaluate a firm’s strategic options in response to a competitor’s action. Assignment The case preparation note you are to submit, as a team, is to contain the following sections, in the order listed, and in no more than two pages double-spaced, 12 point type with normal margins plus a one page appendix as described below • Describe (a) the key elements that define the competitive strategies of both Sony and Barco in the projection systems market; (b) How does each define creating superior value; and(c) how did they arrange their business functions to support that definition? • Prepare, in an appendix, the value map of the offerings in the projection systems marketplace (including Barco’s options). Dell – New Horizons The purpose of this assignment is: 1. To help you to gain a historical perspective on the evolution of an industry and forecast its future 2. To identify and quantify the sources of competitive advantage 3. To integrate the learnings from the entire course Study Questions: TBA 7
  8. 8. 8