MG 422- Management Policy - Boston University



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| |MG 422 – Strategy & Policy | |

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| |Fall 2004 | |

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| |Prof. Jeff Furman | |

| |Prof. Isin Guler | |

| |Prof. Samina Karim | |

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| |Syllabus Version: June-30-2004 | |

Course Overview:

This course introduces students to issues associates with formulating and implementing strategy in the global environment. It draws on findings from a number of academic disciplines, especially economics, organization theory, sociology, accounting, control, and management policy to build a fundamental understanding of how and why some firms achieve and sustain superior performance. Readings and cases are designed to lead towards understanding of the firm’s external environment and of its internal resources and capabilities. Global management is an important additional theme of the course and the conceptual frameworks will be extended to encompass global businesses and to apply course lessons learned to international contexts. Issues associated with professional ethics and corporate social responsibility are pervasive in the curriculum, and the course concludes with a module dedicated to examining these issues in the context of strategic management.

The course’s primary objectives are to enhance students’ abilities to:

• assess the structure of firms’ external environments understand how these affect expected long-run industry performance

• evaluate firm competitive positioning and interaction, and assess firm-level resources and capabilities

• develop appropriate and superior strategies at the business-unit and corporate levels

• assess the dynamics of competition and understand how economic, social, political, and technological forces can strategic re-positioning and affect long-term profitability

• understand and manage the complex ethical and social issues facing organizations as they develop and implement competitive agendas

The course places particular emphasis on students’ ability to think critically and to communicate both verbally and in writing. The course also requires students to apply concepts described in class to organizations with which students are familiar, thus challenging them to apply course frameworks to real-world phenomena.

Course Materials:

Required course materials include a Readings Packet and a Case Packet, each of which is available at the SMG Copy Center. There is no pre-assignment reading.

Course Architecture:

The course is organized into a number of modules, which are described below:

1. Introduction – This module will introduce the course structure, content, and requirements. The first sessions will emphasize the norms of class participation and active debate that are the cornerstones of learning in the course. The introduction will also examine fundamental facts about the variability of profits across and within industries and examine a general interest case study.

2. Industry Analysis – This module investigates the factors that affect industry average profitability and determine long-lived differences in profitability across industries. The module emphasizes a framework for thinking about differences in structural conditions across industries (Porter’s Five Forces Framework), and examine a case in which an industry experiences changes in structure over time.

3. Positioning & Competitive Advantage – This module examines the sources of differences in profitability within industries. We explore the ways in which some firms achieve competitive advantage, which is defined as performance above the industry average. To develop insights on a firm’s sources of competitive advantage, we will pay particular attention to the firm’s choice of strategic position and the fit between its strategy, its internal resources and capabilities, and its external environment.

4. Internal Analysis – In this module, we examine the particular sets of resources and investments that lead to intra-industry difference in positioning and profitability. Specifically, we review the Resource Based View of the firm and perspectives on firm competence and capabilities.

5. Corporate Strategy – In this module we shift the focus of the course away from business unit analysis and onto the decisions at the corporate level. In particular, we adopt the perspective of the corporate CEO. A CEO must make choices about both the breadth of firm activities and the governance structure of the firm. Decisions associated with firm breadth include choices about the set of industries in which a firm competes and the set of competitive positions that various business units take.

6. Strategy Implementation – After having adopted an analytic approach to strategy in the first five modules, we examine the practice considerations associated with implementing strategy in complex organizations.

7. Ethics & Social Responsibility – The penultimate module of the course examines issues associated with professional ethics and corporate social responsibility. We review a number of perspectives on ethics and social responsibility and consider the particular dilemmas faced by a number of organizations. We also examine the concept of strategy as it applies to nonprofit organizations, which are becoming increasingly prevalent in the U.S. economy.

8. Team Presentations, Course Review, & Wrap-Up – We conclude the course with a few sessions devoted to team final project presentations and a final session by that reinforces key concepts and discusses broader issues in Strategy & Policy.

Course Expectations – Preparation, Participation, & Attendance:

Preparation & Participation: The Course Schedule towards the end of this syllabus lists all required readings and particular questions for each class – you can ensure your readiness for each class by completing these readings and preparing written answers to those questions. It is essential that you read the assigned material and that you prepare the Class Preparation Questions before coming to class. (Being unprepared would reflect negatively on your class participation.) Faculty will assume that you are prepared for every class unless you inform them prior to class that you are unprepared.

We plan on incorporating “cold calling” into every class. The purpose of cold calling is not to create anxiety but to ensure that participation is equitable, that all class members participate in class, and that all members are prepared for class. (The requirement to participate is universal and applies even if you are extremely shy or sleepy during scheduled class times. If you are particularly worried about your participation, please check in with us and we can work with you to help your participation. For example, could plan with you in advance call on you during a particular part of a particular class.)

Assessment of participation is based primarily on your active involvement in discussion of cases and , and reflects the extent of your contributions to the classroom environment and to the learning of all participants. Positive participation may include contributions such as: providing germane illustrations; motivating the use of a particular tool or technique; helpful recapitulation or summarizing; making observations that link or integrate concepts or discussion; responding effectively to questions; asking perceptive questions; illustrating specific points by appealing to your own experiences; quoting movies that neatly illustrate important elements of readings or cases; as well as presenting or supporting alternative, or unpopular, positions. Being “wrong” will not count against you, but it will also not help out.

Students who dominate discussions, discourage, intimidate, or show a lack of respect for other participants, or diminish the value of the class in any way, will be penalized. In particular you are expected to treat colleagues with respect: to disagree with an idea without discrediting the speaker; to helping others to articulate their points of view; and to use airtime judiciously.

Class discussions will be conducted by the norms of a professional business meeting. Arriving for class after the session has begun, causing disruptions (including via ringing cell phones), and unnecessarily leaving class will count against your class participation.

Attendance: Satisfactory class participation entails attendance at every session of the course; preparation of all materials for every session; and active participation in class discussions. Recognizing that senior year is a complex time, we can excuse three absences during the term. All subsequent absences will materially affect your final grade for the course. If you anticipate that you will need to miss more than sessions, then you should take MG422 in another term. While we can excuse up to three absences during the term, assignments are always due at the beginning of class on the day on which they are due. Absences are never an excuse to miss an assignment or to hand it in after the due date. Assignments submitted after the beginning of class on the day on which they are due will not be accepted.

Lastly, note that there is class on the day before Thanksgiving. Please plan to be here. We will do important things. Maybe we’ll also have Dunkin Donuts or Krispy Kremes. Mmmm.

Assignments:

The course deliverables include a set of individual assignments, a semester-long team project, and an individual, in-class midterm. Assignments are always due at the beginning of class on their due dates. Just to reiterate: excused absences are not excuses to turn assignments in late. Assignments will not be accepted if they are submitted after the beginning of class on the day on which they are due. The midterm will be offered on a Thursday evening.

Individual Assignments (Memos): Over the course of the semester a number of individual memos will be assigned. These memos will ask you to apply concepts and frameworks from the course to organizations either of which you are a part, with which you are familiar, to which you may wish you apply for a job, or that are featured in the popular business press. The general nature of the memos will be outlined in the detailed Course Schedule, and your faculty member will hand out complete memo assignments in class and post them on the website.

You will be expected to complete FOUR of the five memo assignments – i.e., your grade will be based on the best four memos that you complete. If you only hand in four memos, your grade will be depend on those alone. You must hand in a minimum of four memos.

Note that these are to be individual (not collaborative) efforts. You may discuss ideas with other class members, but the writing in these memos must be your own. If you do build on outside sources (including newspaper or journal articles or conversations with your classmates, advisors, or friends) or if you paraphrase or quote external sources, you are expected to cite them appropriately. Plagiarism (passing someone else’s work off as your own) is an extremely serious academic and ethical violation and will result in academic charges – ignorance or oversight does not excuse borrowing ideas or words without attribution. If you are unsure, err on the side of caution by citing your sources.

We will dedicate attention to the quality of your writing in all written assignments, including clarity, grammar, usage, and appropriateness. Note that you should write all individual assignments as if they were business correspondence. We will make available some helpful guides on business communication (including helpful tips such as “avoid contractions,” “avoid the passive voice,” and “know the difference between ‘their’ & ‘there’ and ‘its’ & ‘it’s’).

Team Project: The Final Team Project will require your group to conduct a strategic assessment for a particular firm in a particular industry. Over the course of the semester, your team will be responsible for evaluating the quality of the firm’s industry environment, assessing the extent (and sources) of its competitive advantage (or disadvantage), and formulating a plan to ensure its positive performance. Faculty will assign students to teams and we will distribute a separate handout explaining the Final Team Project in greater detail. As always, teams are asked to adhere to academic standards for citing others’ work. Students will receive a grade for their team project that consists of a team-wide component and an individual-specific component based on feedback from their team members.

Grading:

The relative weighting of assignments in the course is as follows:

Assignment Fraction of Course Grade

Individual Assignments (Memos) 25%

Mid-Term Exam 25%

Final Team Project 25%

Class Participation 25%

TOTAL 100%

Course Schedule:

Module 1: Introduction

Session 1: WHAT IS STRATEGY? COURSE OVERVIEW

Reading: Read the Syllabus carefully before the first class! Bring a copy to class. (No joke.)

In-class exercise

Class Preparation Questions

1. What have your previous courses taught you about strategy?

2. Think of a successful firm: How do you know it is successful? In your view, what factors have led to its success?

Session 2: WHAT IS STRATEGY? STRATEGY IN ACTION

Reading: Selected Profitability Data on US Industries & Firms (9-792-066) [Class1 handout]

Case: Starbucks (BU case #97-26; Nehal, Aliyla, 1997)

Class Preparation Questions

1. What is Starbucks' strategy? What tradeoffs has it made compared to rivals?

2. What are the strategic issues facing Starbucks in 2000? How well positioned is it for the future?

3. What should Howard Schultz do?

Module 2: Industry Analysis

Session 3: INDUSTRY ANALYSIS (I): UNDERSTANDING THE FIVE FORCES

Memo #1 (Partial Industry Analysis Memo) is due today

Reading: Michael E. Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review 1979, Reprint #79208

Class Preparation Questions

1. What is the main purpose of the Five Forces framework?

2. To which level of analysis does the Five Forces framework apply – the firm, the industry, or the country?

3. How can we draw industry boundaries?

4. In practice, how can we tell the difference between Rivals and Substitutes?

Session 4: INDUSTRY ANALYSIS (II): APPLYING THE FIVE FORCES

Case: Cola Wars Continued: Coke vs. Pepsi in the 21st Century (9-702-442)

Class Preparation Questions

1. Why is the soft-drink industry so profitable?

2. How has the competition between Coke and Pepsi affected the industry’s profits?

3. Compare the economics of the concentrate business to the bottling business. Why are the differences in profitability so stark? What is causing concentrate producers to integrate vertically into bottling?

4. Will Coke and Pepsi sustain their profits? What would you recommend to Coke to ensure success in the future? To Pepsi?

Module 3: Positioning & Competitive Advantage

Session 5: COMPETITIVE POSITIONING – ADVANTAGE VIA COST LEADERSHIP

Memo #2 (Completed Industry Analysis Memo) is due today

Reading: Note on Competitive Positioning (9-794-108)

Case: Matching Dell (9-799-158)

Class Preparation Questions

1. How and why did the personal computer industry come to have such low average profitability?

2. Why has Dell been so successful?

3. Prior to recent efforts by competitors to match Dell in the 97-98 period, how big was Dell’s competitive advantage? As an example, specifically calculate Dell’s advantage over Compaq in serving a corporate customer.

4. How effective have competitors been in responding to the challenge posed by Dell’s advantage? How big is Dell's remaining advantage?

Session 6: COMPETITIVE POSITIONING – ADVANTAGE VIA DIFFERENTIATION

Case: Ducati (9-701-132)

Class Preparation Questions

1. What makes the motorcycle manufacturing industry so attractive?

2. How did Ducati turnaround from the brink of bankruptcy to become one of the most profitable motorcycle manufacturer in the world? Why are buyers willing to pay such a premium for Ducati motorcycles?

3. Is growth critical for Ducati? Why or why not?

Module 4: Internal Analysis

Session 7: INTERNAL ANALYSIS (I) – CONCEPTS & FRAMEWORKS

Reading: Dess & Lumpkin Chapter 3 (Assessing the Internal Environment of the Firm, pp. 68-72 & 81-89)

In-class exercise

Class Preparation Questions

1. In what ways is SWOT limited as a tool for strategy? What key questions does it not answer?

2. What characteristics must a resource possess in order for it to contribute to competitive advantage?

3. Can you think of any resources that confer competitive advantages to particular firms?

Session 8: INTERNAL ANALYSIS (II)

Memo #3 (Positioning) due today

Case: The Swatch Group: On Internet Time (9-500-014)

Class Preparation Questions

1. What are Swatch’s key resources?

2. Do these provide it with sources of sustainable competitive advantage?

3. Does Swatch Internet Time fit with the firm’s current brand appeal?

Pause for Reflection

Session 9: WHAT IS STRATEGY? (REVISITED)

Reading Michael E. Porter, "What is Strategy?," Harvard Business Review, November-December 1996, Reprint #96608:

Case: Wal-Mart Stores Inc. (9-794-024)

Class Preparation Questions

1. What are the sources of competitive advantage in discount retailing?

2. How sustainable is Wal-Mart’s competitive advantage in discount retailing?

3. How transferable are the sources of advantage as Wal-Mart moves into new formats and especially into new international locations?

Session 10: TEAM MINI PRESENTATIONS

Team Mini Presentations in class today

Module 5: Corporate Strategy

Session 11: CORPORATE STRATEGY (I): OVERVIEW

Reading: Dess & Lumpkin, Chapter 6 (Corporate-Level Strategy, pp. 188-209)

Case: Vivendi (SM-96)

Class Preparation Questions

1. What is Messier’s plan for Vivendi? On what logic has he based his plan? Do you agree with his thinking?

2. What challenges does Messier face in integrating these companies? Why might the plan work well? Why not?

3. Do you agree with the investments he makes? Do you think that the acquisitions will prove to be good choices in the long-run?

4. If you were a major shareholder in Vivendi, are there any specific actions you would take in response to Messier’s purchases?

Session 12: CORPORATE STRATEGY (II): INTERORGANIZATIONAL RELATIONSHIPS

Reading: Dess & Lumpkin, Chapter 6 (Corporate Level Strategy, pp. 210-224)

Case: Telepizza (9-899-080)

Class Preparation Questions

1. How does franchising work?

2. How should Leopoldo achieve his growth goals?

3. How does Telepizza decide to obtain cheese and trucking services? Do you agree with these decisions? Why/Why not?

4. Do you agree with Telepizza’s acquisition of Pizza World?

Module 6: Strategy Implementation

Session 13: STRATEGY & STRUCTURE

Reading: Dess & Lumpkin Chapter 10 (Implementing Strategy, pp. 319-331; skim 332-349)

Case: Jacobs Suchard (9-489-106)

Class Preparation Questions

1. Why is there a need for change?

2. What are the costs/benefits of the new structure?

3. What structure fits best with the company’s new strategic vision?

Session 14: CORPORATE STRATEGY (IV): GOVERNANCE

Memo #4 (Corporate Strategy Memo) due today!!!

Reading: Walker, Chapter 11 (Corporate Governance, 233-250)

Case: The Enron Collapse (IMD 164)

Optional Reading (I): “How to Restore the Fiduciary Relationship: A Conversation with Eliot Spitzer,” Harvard Business School May 2004, reprint R0405D [not in reading packet]

Optional Reading (II): James Brickley, Clifford Smith and Jerold Zimmerman, "Decision Rights: The Level of Empowerment," chapter 9 in Managerial Economics and Organizational Architecture, 1997 [not in reading packet]

In-class Handout: Dess & Lumpkin – Managing Incentives (pp. 302-304)

Class Preparation Questions

1. How responsible were each of the following parties at Enron for the firm’s failure of governance. Please allocate percentages of culpability:

a. The Executive Team

b. The Board of Directors

c. Shareholders

d. Arthur Anderson

2. Which of Enron’s actions violated the law?

3. How could the failure of Enron have been prevented?

4. What are the key institutions involved in corporate governance? How do they work?

5. Is it generally a good idea for the company president to also be the CEO?

Session 15: PAUSE FOR REFLECTION

Review: Enron Case, Spitzer Interview, & Optional Readings

Class Preparation Questions

Midterm

Session 16: MIDTERM

Time: 6-8pm SMG Auditorium

No electronic (communication) devices will be allowed (e.g., cell phones papers, etc…)!!!

Back to Module 6: Strategy Implementation

Session 17: STRATEGY IMPLEMENTATION IN ACTION

Case: Honda (9-384-049)

Class Preparation Questions

1. How had Honda formulated and implemented its strategy for start-up, growth and entry into the US?

2. What is the role of learning and experience in Honda’s success?

3. Seen through the lens of Porter’s What is Strategy article, would you view Honda’s success as a product Strategy or Operational Effectiveness?

Session 18: TIME FOR TEAMS

Reading: none

Team Project Preparation Questions

1. What are the key advantages/disadvantages of the industry in which your firm competes?

2. How is your firm positioned within its industry? Does it possess resources that allow it to attain competitive advantage?

3. Are there particular recommendations that you can make at either the business unit or corporate strategy level that may aid your firm in achieving profits above its industry average?

4. Which ethical issues are facing the managers of your firm? With which logic is your firm addressing these issues?

Module 7: Ethics & Corporate Social Responsibility

Session 19: ETHICAL DECISION MAKING

Reading: Lawrence et al., Chapter 6, Ethical Reasoning & Corporate Programs, pp. 102-124.

In-class Video: DeBeers – The Diamond Empire (PBS Frontline, 1994)

Class Preparation Questions

1. What are the key differences between Utilitarian, Deontological, and Justice-oriented reasoning? (review question)

2. What are Whistleblowers?

3. What are the key differences between Utilitarian, Deontological, and Justice-oriented reasoning?

Session 20: CORPORATE SOCIAL RESPONSIBILITY

Memo #5 (Ethics/Social Responsibility Memo) due today!!!

Reading #1: Milton Friedman, “The Social Responsibility of Business is to Increase its Profits

Reading #2: Edward Freeman, “A Stakeholder Theory of the Modern Corporation” (p. 66-76)

Case: Nike, Inc. Developing an Effective PR Strategy (Ivey School of Business, 9A99C034)

Class Preparation Questions

1. Which of the authors, Milton Friedman and Edward Freeman, has, in your view, a stronger case?

2. What are the key stakeholders in the Nike case? To what degree does Nike bear a responsibility to them?

3. Do you agree with Nike’s response to criticism? What were, in your view, the motivating factors behind Nike’s decision?

Session 21: STRATEGY & NONPROFIT ORGANIZATIONS

Case: Environmental Defense (9-703-029) [formerly the Environmental Defense Fund]

Class Preparation Questions

[Note that Environmental Defense used to be called the Environmental Defense Fund.]

1. Do the frameworks and concepts associated with Strategy matter for the Environmental Defense organizations?

2. Does Environmental Defense compete in an industry? Does it have rivals? If so, in what ways does Environmental Defense compete with these organizations?

3. What are the chief goals of Environmental Defense? Considering these goals, do you agree with the “product portfolio”?

Session 22: WINNING WITH A SOCIALLY RESPONSIBLE STRATEGY?

[CORPORATE SOCIAL RESPONSIBILITY + COURSE WRAP-UP CASE]

Case: The Body Shop (9-392-032)

Class Preparation Questions

1. In which industry does The Body Shop compete? Is this a good or a bad industry? How did The Body Shop enter the industry and how is it positioned relative to rivals?

2. What are the key resources of The Body Shop? Might they lead to sustainable competitive advantage?

3. In what ways does The Body Shop’s social consciousness and environment-friendly help the company limit the strength of buyers and suppliers? Does it help prevent entry into its market niche?

4. Do you think that their socially conscious positioning represents a deep commitment to these values or is this approach simply good business sense?

Module 8: Team Presentations & Course Wrap-Up

Session 23: TEAM PRESENTATIONS – DAY #1

Session 24: TEAM PRESENTATIONS – DAY #2

Session 25: TEAM PRESENTATIONS – DAY #3

Session 26: SUMMARY & COURSE WRAP-UP

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