Strategic Management



Strategic Issues and Applications II

MBAC 421

Spring, 2001

Professor Jay Dial Office Enterprise 593

Email jhd3@po.cwru.edu Phone 368-3824

Office Hours Anytime by appointment Fax 368-4785

Assistant Teresa Kabat Teresa’s phone 368-2076

Classroom Enterprise 400

Section 4211 Tues / Thurs 1:00 pm – 2:30 pm

Section 4212 Tues / Thurs 8:30 am – 10:00 am

Section 4213 Tues / Thurs 10:15 am – 11:45 am

Reading packet There is no textbook for the course. Instead there is a required CWRU-Note available at the bookstore which includes all of the course readings, cases and lecture notes for classroom discussion. This is copywritten material and each student must purchase an individual copy of the CWRU note.

Course Overview

This course is about the creation and maintenance of a long term vision for the organization. It is concerned with both the determination of the strategic direction of the firm and the management of the strategic process. The course builds on your prior studies of functional areas while recognizing that most real business problems are inherently multi-functional in nature. Thus, this course employs an explicitly integrative approach in which we endeavor to explore and reconcile the tensions that accompany management decisions. In doing so, we will adopt the role of the general manager who has the responsibility for the long term health of the entire organization (or a sub-unit within the organization).

Course Objectives

1. Understand the nature of strategic competitiveness and develop the ability to analyze the competitive environment facing a firm, assess the attractiveness of the industry and isolate potential sources of competitive advantage and disadvantage.

2. Integrate knowledge and apply analytical techniques from various disciplines, including finance, accounting, marketing, economics, operations, organization theory and organizational behavior. The goal is to identify and analyze strategic issues and develop solutions in the form of actionable plans with the purpose of developing and sustaining competitive advantage.

3. Discriminate among the types of data that general managers need to evaluate alternative scenarios. Develop logical, coherent and persuasive analyses for a desired course of action. Consider how to effectively implement plans within the constraints imposed by the complex behavior of individuals within organizations. Each student should be able to effectively communicate his or her conclusions in both oral and written form.

4. Develop the ability to view the corporation as a whole and to assess it in relation to business unit goals and objectives.

Class Format -

The Case Method: Why We Rely on Discussion Learning

Most of our class time will be spent discussing business cases. Why do we rely on the case method so extensively and how do these discussions enhance our learning? The case-study method brings a “real world” approach to business education in at least three important ways. First, case discussions generate a dynamic process of vigorous questioning and responding, examination and debate among students and discussion leader. Because strategy issues are often characterized by ambiguity, complexity or uncertainty, this course is more about asking the right questions than it is about knowing the right answers. Rather than simply lecture about the current state of “best practices,” we recognize that theories change over time but reasoning skills survive. The case method helps students to refine their skills as insightful questioners, rather than just good answer-finders. In this model of learning, it is the journey more than the destination that matters. In addition, discussion learning requires all students to participate actively in the learning experience. The MBA degree is about more than just acquiring a tool box of analytical skills. It is also about developing the ability to contribute to the group so that we expand the boundaries of everyone’s learning. Just as in management, there is no formula that you can follow for every case. Nevertheless, over the course of the semester, students gradually build on the combination of theory and analysis, judgment and experience to acquire important skills that the general manager needs. While the case method requires a high level of student commitment, it also causes students to personally engage the problem and “own” the solution, so that the case method is inherently a student-oriented process. Walter Wriston has said, “Good judgment comes from experience. Experience comes from bad judgment.” As in the “real world,” the case method replicates the trial-and-error experience of seasoned managers, thereby deepening judgment. It also does so in the low risk environment of the classroom where career casualties are not at stake.

Second, the case method trains students to think as administrators (rather than as scholars), so that they:

(1) see a problem looking for solutions rather than a concept looking for applications, (2) focus on defining and prioritizing a maize of tangled problems and determining which one(s) to attack with the limited time and resources available, (3) appreciate differing agendas and points of view, and (4) take action, not just report findings.

Third, by linking analysis with individual action taking, the case method encourages moral awareness by requiring students to take a stand. The give-and-take of case discussion often brings to the surface subtle ethical dilemmas that might otherwise be missed. The case method helps students learn to assess and embrace the tradeoffs among different stakeholders’ interests. The case method requires students to use all of their knowledge, skills and experience to respond in real time to the questions raised in class and to effectively communicate their ideas to classmates and to create a greater shared understanding of the problem at hand. Thus, the students become the teachers.

In sum, we teach with case studies because the method embodies important values of professional education. The case method is not simply a technique; it is a rich philosophy about judgment, analysis, action and learning. (Adapted from an article by Robert F. Bruner)

While our applications will emphasize exercise of judgment, by no means is this course “theory free.” We will learn to break down complex problems into manageable analytical issues to which we can apply a rigorous set of theoretical tools. The analytical approaches in our “strategy tool kit” will be covered in the required readings prior to each case. These readings have been carefully selected to convey often complex topics in a concise, understandable manner. In general, I have emphasized managerially relevant readings and spared you the pain of reading pointy-headed, scholarly-type articles. Since these readings articulate much of the theoretical content of the course, they will be crucial to your comprehension of our course concepts. It is extremely important that you read, study and discuss with each other this material when assigned so that you will be able to apply it to our case discussions.

The key requirement of this course is that you THINK. This course requires that you synthesize material that you have learned in prior classes in your business education in conjunction with new concepts we will introduce. I will ask that you add a dose of common sense and filter these ideas through your own experiences and “world view.” We will reach consensus on some issues, yet many among you will have differing interpretations as we proceed through the course. This is the nature of strategy and policy issues. You may find yourself occasionally frustrated by the ambiguity and the difficulty of assimilating conflicting points of view. Welcome to real life.

Our readings and case discussions are designed to help you understand how firms formulate and implement strategies under the impetus of competition, technology, government action, and other important contextual forces. This, in turn, requires a deep understanding of the functional strategies associated with marketing, operations, finance and human resources. Our challenge in this course will be to integrate your learning from other courses in a synthesis with new material introduced here to see how general managers develop functional strategies into overall business and corporate strategies and to see how their chosen strategies are implemented. While this may not happen overnight, over the course of the semester, you can expect to begin to see how the “pieces fit together.” You will be better prepared to enhance your careers with a more comprehensive vision of the firm as a whole and your role in it.

Requirements and Evaluation Criteria

Class Contribution 50%

Written assignments 15%

Group Case Assignment 35%

Total 100%

Class Contribution

Most of your learning will occur in preparation for and participating in the case discussions. To enhance your preparation and learning, I strongly encourage you to form study groups to discuss the cases prior to class. To guide you in your preparation, this syllabus includes preparation questions for each case.

As noted earlier, the complexity of the course material relies heavily on discussion learning. This process allows the cumulative insights of your colleagues to contribute to the evolution of the class’s learning. Thus, the entire class learning experience relies on each of you taking responsibility for contributing to the discussion. In order to do so, it is imperative that each of you be present and be fully prepared each day.

In order to emphasize the necessity to be prepared for and to contribute to each class, class contribution will comprise a significant portion of your grade. As is the case with real world work environments, you are judged not by what you know but by what you contribute. Even if you feel that you know the material, unless you share your insights with the class, I cannot adequately evaluate your preparedness and contribution. Students are never penalized for making comments which don’t appear to be the “right answer.” It is only through consideration of many diverse opinions and viewpoints that we will move toward a greater shared understanding of the multi-dimensional material which this course entails.

Each day, I will ask one or more individuals to “open” the case with a summary of the key issues along with his or her analysis of those issues. It is important that each of you be prepared to respond to the invitation to open the discussion. In the unlikely event that you are not prepared for class, then please let me know beforehand so that I might spare both of us the embarrassment of my calling on you. You should be able to identify the key issues, problems and opportunities facing the central case protagonists, to articulate and evaluate alternative approaches to problems, and to describe the course of action that you recommend and the reasons for yours recommendations. I may begin the discussion with one of the questions in the syllabus or with another question.

It is important to appreciate that every student is an important cog in the class discussion, and that it is equally important that each of us listen carefully to one another and attempt to build on or constructively critique prior comments. Please resist the temptation to jump to topics that are not specifically open for discussion. Some of the specific things that will have an impact on effective class participation and on which you will be evaluated include:

← Is there a willingness to take intellectual risks and test new ideas, or are all comments “safe”? (For example, repetition of case facts without analysis or conclusions, or repeating comments already been made by someone else.)

← Is the participant a good listener?

μ Are the points made relevant to the discussion? Are they linked to the comments of others and to the themes that the class is exploring together?

μ Do the comments add to our understanding of the situation? Are they incisive? Do they cut to the core of the problem?

μ Is there a willingness to challenge the ideas that are being expressed?

μ Does the participant integrate material from past classes or the readings where appropriate? Do the comments reflect cumulative learning over the course and the MBA curriculum, or does the participant merely consider each case in isolation?

Finally, I understand that participating in class can be an intimidating experience initially, and I will try to help you in any way that I can.

I will evaluate each person’s contribution for each and every class and keep a running score on class contribution. In addition, I will assign a different class member to be a peer evaluator for each class period. That student will offer a confidential interpretation of the quality of class contribution that I will use to supplement to my own evaluation.

Written Assignments

Three will be several written assignments, generally performed in your EAT groups, which will be due throughout the semester. They are listed in the syllabus. In addition, I reserve the right to add additional written assignments during the semester, particularly if I feel that the class is failing to prepare adequately for case discussions.

Group Case Assignment

There will be group case writing assignment, using the current EATs for the assignment. By the end of the second week of class, each group will choose a company (subject to my approval) on which to write a business case of your own. The case will identify current issues which the company is facing and the case will allow the reader to identify those issues and formulate an action plan. In addition, each group will also present your recommendations in an oral presentation to the class and will respond to questions raised by your classmates. The presentation should focus exclusively on recommending actions rather than rehashing the case. Finally, in addition to the written case (which will be distributed to your classmates), you will write an additional “theory note” which explicitly articulates the theoretical models which you used to develop your recommendations for management action for the issues developed in the case.

As indicated above, this entire group assignment will account for 35% of your total course grade. The three parts of the assignment will contribute toward the total project grade in the following manner:

Written Case 40%

Written “Theory Note” 20%

Oral Presentation 40%

Case Project Total 100%

The written case reports should be double spaced on 8.5 by 11 inch paper with one inch margins and twelve characters per inch type. Cases will generally be between fifteen and twenty-five double-spaced pages, not including the cover page, figures, graphs, references, and other supplementary materials. Appropriate references must be included in the form of footnotes and a bibliography. Cases are due without exception on the date scheduled. Late assignments will not be accepted. I will request a draft of the group reports well in advance of the final due date and I will provide detailed feedback on your progress to that date. Drafts should also include appropriate footnotes and references. Instances of plagiarism are taken extremely seriously and will be dealt with within the University’s prescribed methods to handle honor violations.

Written case grading criteria are as follows:

μ Relevant information presented in a comprehensive and unbiased fashion

μ Accurate information

μ Appropriate sources/citations

μ Well-written

μ Appropriate structure and flow

μ Selected appropriate scope for firm issues

μ Present competitive data, company history and/or additional data and supporting documentation where needed

μ Relevant data and issues clearly identified (or embedded in the case) for the reader to identify

Theory Note grading criteria are as follows:

μ Have you clearly identified and articulated the relevant theoretical underpinnings for your oral case analysis and recommendations?

μ Have you clearly articulated the teaching purpose of your case?

μ Can the reader draw the key learnings out of the case?

μ Can the reader also identify the relevant theoretical points from the material presented in the case?

Oral Presentation grading criteria are as follows:

μ Have you presented a clear, concise, specific, complete and realistic plan of action?

μ Have you taken important contingencies into account?

μ Have you considered the viewpoints of multiple constituencies where they are relevant?

μ Have you incorporated your best strategic thinking to deal with complex issues?

μ Have you considered the potential range of environmental uncertainty?

μ Have you included comprehensive strategic as well as financial analyses?

Three oral case presentations will be given per day at the end of the course sessions. We will extend the length of our class sessions on presentation days from 90 minutes to two hours. The first section will start 30 earlier and the second and third sessions will finish 30 minutes later. While we can discuss this plan in class, I find that most students prefer this arrangement in order to have an additional 10 minutes per presentation. Thus, the presentations should be approximately 35-40 minutes in length, including interaction with the class. This can be a 20-25 minute presentation followed by questions or a fully interactive discussion of 35-40 minutes. The method of presentation is at the group’s discretion as long as it covers the relevant material and conveys the group’s findings in a logical and coherent manner. Groups are encouraged to be creative in their approach to presentation and may employ visual aids or other teaching tools which enhance the clarity of the presentation and make it more informative and interesting. In the past, student groups have utilized skits, videos and other creative approaches. We have to watch a bunch of these, so creativity really helps.

Each group’s work should be conducted specifically for this course. For example, groups should not use case analyses prepared for other classes as the basis of this assignment. I also expect every item to be well documented with appropriate footnote form.

Individuals are expected to participate equally in terms of their effort to the group projects. The grades will reflect the group’s efforts and will be assigned equally except in instances where your group members judge your effort to be deficient. Each member will be asked to rate their fellow group members by way of a confidential peer evaluation form. Only the individual member and I will know the contents of each evaluation. Where a group member is judged to be substantially deficient relative to his or her teammates, a grade reduction will be incurred. Likewise, if a group member or members are singled out for outstanding contribution by teammates, that person’s grade may be raised accordingly.

=============================================================================

|TOPIC | |COURSE CALENDAR |

|1 |Industry Structure/ Dynamic | |Mon 1/15 |

| |Strategic Positioning | | |

10 |

Leadership and Transformation | |Mon 3/19 |Tues 3/20 |Wed 3/21 |Thurs 3/22 |Fri 3/23 | | | | | |GE’s Two Decade Transformation:

Jack Welch’s Leadership | |Asahi Breweries, Ltd. | | |11 | | |Mon 3/26 |Tues 3/27 |Wed 3/28 |Thurs 3/29 |Fri 3/30 | | | | |Case due

Sun 3/25 |Case Presentations 1-3 | |Case Presentations

4-6 | | |12 | | |Mon 4/2 |Tues 4/3 |Wed 4/4 |Thurs 4/5 |Fri 4/6 | | | | | |Case Presentations 7-8 | |Course Wrap-up

and Evaluations | | |

READINGS ASSIGNMENTS AND PREPARATION QUESTIONS

Week 1, Session 1

Tuesday, January 16, 2001

Subject: Review of MBAC 411, Preview of MBAC 421 and Communication of Expectations

Readings: Review the following articles from MBAC 411 Fall course pack

Porter, “What Is Strategy?” Harvard Business Review, Nov/Dec, 1996

Barney, “Looking Inside for Competitive Advantage,” Academy of Management Executive

Chatterjee, “Delivering Desired Outcomes Efficiently,” California Management Review,1988

Lecture Notes: Review pp. 1-60

Case: none

=============================================================================

Week 1, Session 2

Thursday, January 18, 2001

Subject: Industry Structure and Dynamic Strategic Positioning

Readings: Hamel & Prahalad, “Strategic Intent,” Harvard Business Review, May/June 1989

Review from MBAC 411 Fall course pack:

Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review, Mar/Apr, 1979

Case: The Evolution of the Air Express Industry, 1973-1991

“Why Federal Express Has Overnight Anxiety”, Business Week article

GROUP ASSIGNMENT:

Complete the matrix included in your CWRU note. Fill in the key structural forces (five forces) that shape competition in each period and the critical activities for Fedex for each period. Write a 2-3 page paper describing Fedex’ positioning strategy during each period. Show how the evolution of the critical activities for each period responds to the changing industry structure.

PREPARATION QUESTIONS:

1. What are some of the important changes that took place in the air-express industry? How did the industry structure/attractiveness evolve as a result of these changes?

(Construct a timeline as a way of tracking these changes).

2. Critique Fed X's entry into zap mail.

3. How should Fed Ex respond to the entry of new competitors?

Week 2, Session 3

Tuesday, January 23, 2001

Subject: Industry Analysis and Sustainability of Strategic Position

Readings: Coyne, “Sustainable Competitive Advantage: What It Is, What It Isn’t,” Business Horizons, Jan/Feb 1986

Case: Adolph Coors in the Brewing Industry

ASSIGNMENT:

Using the figures from Exhibit 9 in the case, construct a simple income statement on a per barrel basis for both Coors and Anheuser-Busch for 1977 and 1985. Compare the two brewers in each period and look carefully at the net differences from 1977 to 1985. Answer the following in 2-3 pages: How did the dynamics of industry competition change over the time period you examined? Do you support Coors decision to expand distribution to the Eastern US? Why or why not? If yes, how should they proceed? (Hand in your income statement also.)

PREPARATION QUESTIONS:

1. What factors accounted for Coors’ competitive advantage in the mid-1970s?

2. Why did the brewing industry consolidate?

3. Why has Coors’ performance deteriorated?

=============================================================================

Week 2, Session 4

Thursday, January 25, 2001

Subject: Building Capabilities for Strategic Renewal

Readings: Prahalad & Hamel, “The Core Competence of the Corporation,” Harvard Business Review, May/June 1990

Case: Intel Corporation-Leveraging Capabilities for Strategic Renewal

PREPARATION QUESTIONS:

1. How was Intel able to survive and prosper in an industry environment that squeezed out most of its competitors? How would you describe its critical competitive advantage? What are the most important capabilities which contributed to Intel’s competitive advantage?

2. What role has Andy Grove played in Intel’s overall success? How would you describe his major contributions to date? What issues are implicit in his plans to hand over leadership to Craig Barrett?

3. At the end of the case, Andy Grove is facing some new challenges. What advice would you give him as he considers what to do with the company’s remaining memory products business and whether to move further downstream by expanding its systems business?

Week 3, Session 5

Tuesday, January 30, 2001 CASE PROJECT CHOICE DUE!!

Subject: Competitive Dynamics

Readings: Brandenburger & Nalebuff, “The Right Game: Use Game Theory to Shape Strategy,” Harvard Business Review, July/Aug 1995

Case: The Ready-to-Eat Breakfast Cereal Industry in 1994 (A)

GROUP ASSIGNMENT:

How do the cost structures of private label and branded cereal manufacturers differ? Complete the value chains included in your CWRU note to estimate the margins for the branded versus the private label competitors.

Respond in 2 pages or less to the following questions. State your rationale for your answers.

What does General Mills hope to accomplish with its April 1994 reduction in trade promotions and prices? What are the risks associated with these actions? How do you expect General Mills’ competitors to respond? (Focus on the other of the Big Four branded cereal manufacturers.)

Be specific about each of the major players and explain your rationale.

Look forward and reason back.

PREPARATION QUESTIONS:

1. Why has RTE cereal been such a profitable business? What changes have led to the current industry crisis?

2. Why have private labels been able to enter this industry successfully? How do the cost structures of private label and branded cereal manufacturers differ?

3. What does General Mills hope to accomplish with its April 1994 reduction in trade promotions and prices?

4. What are the risks associated with these actions? How do you expect General Mills’ competitors to respond?

5. What should General Mills do?

=============================================================================

Week 3, Session 6

Thursday, February 1, 2001

Subject: Competitive Dynamics

Readings: Rayport and Sviokla, “Managing in the Marketspace,” Harvard Business Review, Nov-Dec, 94

“Amazon vs. Everybody,” Fortune, November 8, 1999

“The Baron of Books,” Business Week, June 28, 1998

Case: Leadership Online: Barnes & Noble vs. (A)

PREPARATION QUESTIONS:

1. Based on your own experience of traditional bookselling and your exploration of online bookselling, compare willingness-to-pay for books supplied by these two business models.

2. Also compare the forecast long-run cost position of a successful online bookseller to Barnes & Noble’s traditional business model. (Assume that Exhibits 4 and 7 in the case reflect average discounts of 10% off list price for Barnes & Noble’s traditional bookstores and 25% off list for the online bookseller.)

3. Assess Barnes & Noble’s response to the substitution threat from Amazon. How did Amazon respond in turn, and to what net effect?

4. Who will be the online leader? Will it ever make much money selling books (as opposed to selling stock)?

=============================================================================

Week 4, Session 7

Tuesday, February 6, 2001

Subject: E-commerce- Establishing Standards

Readings: Yoffie & Cusamano, “Judo Strategy,” Harvard Business Review, Jan-Feb, 1999

Ghosh, “Making Business Sense of the Internet,” Harvard Business Review, Mar-Apr, 1998

Case: Browser Wars, 1994-1998

PREPARATION QUESTIONS:

1. What were the critical drivers of Netscape’s early success?

2. Evaluate the strategies of Netscape and Microsoft after the browser wars begin in 1995. Cite specific examples of Judo Strategy utilized by each player.

3. What should Netscape and Microsoft do today?

Week 5, Session 8

Tuesday, February 13, 2001

Subject: Industry Structural and Positioning, Building Capabilities for Competitive Dynamics

Readings: none

Case: Matching Dell

GROUP ASSIGNMENT:

Respond in about 1-2 pages to the following: What is your assessment of the industry attractiveness of the personal computer industry (focusing on the manufacturers of personal computers)? Discuss the key forces which create this situation.

Respond in about 1-2 additional pages to the following: What are the key activities Dell pursues? Why is each of these activities advantageous for Dell? How do these activities fit with the rest of what Dell does? How do these activities respond to the PC industry’s structural characteristics you identified above?

Respond in about 1-2 additional pages to the following: Perform the analysis on Dell’s and competitors’ cost structures which is indicated in the one page handout in your CWRU note. Using this information and the average price per quarter data on PC prices (Exhibit 10b), what does this tell you about the nature of Dell’s competitive strategy and importantly, the decisions they have made about how to compete in the industry? For example, you may want to focus on Dell and Compaq for your explanation of cost and pricing decisions. (Also hand in your cost structure analysis with your answer.)

PREPARATION QUESTIONS:

1. How and why did the personal computer industry evolve into this situation?

2. Why has Dell been so successful?

3. Prior to the recent efforts by competitors to match Dell (1997-1998), how big was Dell’s competitive advantage?

=============================================================================

Week 5, Session 9

Thursday, February 15, 2001

Case: Matching Dell (continued)

PREPARATION QUESTIONS:

1. How effective have competitors been in responding to the challenge posed by Dell’s advantage? Who has done the worst job of responding to Dell?

2. What roles do HP and Gateway play in these dynamics?

3. How effective have various attempts to catch Dell been so far?

Week 6, Session 10

Tuesday, February 20, 2001

Subject: Defending against Appropriation of value

Readings: none

Case: Ecolab

PREPARATION QUESTIONS:

1. What are the principal reasons for Ecolab’s leadership position in the institutional cleaning business? Which are the key resources and activities that have contributed to Ecolab’s competitive advantage?

2. In what ways could Diversey challenge Ecolab’s industry leadership? What should Schuman do to ensure that Ecolab faces such challenges forcefully?

3. How should Schuman manage the emerging tumult within the Institutional Division?

==========================================================================

Week 6, Session 11

Thursday, February 22, 2001

Subject: Defending against Appropriation of Value

Readings: none

Case: Ecolab (continued)

Assignment given out in class on Tuesday.

==========================================================================

Week 7, Session 12

Tuesday, February 27, 2001 CASE PROJECT DRAFT DUE!!

Subject: Incentives and Motivation

Readings: Kerr, “On the Folly of Rewarding A, while Hoping for B,” Academy of Management Executive, Feb 1995

“More on the Folly- Executive Fax Poll Results,” AME, Feb 1995

Herzberg, “One More Time, How Do You Motivate Employees?” Harvard Business Review, Sept-Oct, 1987

Case: Lincoln Electric

PREPARATION QUESTIONS:

1. How would you describe Lincoln Electric’s approach to the organization and motivation of their employees? What role do you think this approach has played in Lincoln’s performance over the last 25 years? Have any other factors been more important?

2. What factors will be critical to Lincoln’s continued success? What recommendations would you make to Mr. Willis?

4. What is the applicability of Lincoln’s approach to motivation to other companies and situations? Why don’t more companies operate like Lincoln?

=============================================================================

Week 7, Session 13

Thursday, March 1, 2001

Subject: Incentives and Motivation

Readings: No additional readings, review the readings for Tuesday’s Lincoln Electric case

Case: Lincoln Electric: Venturing Abroad

PREPARATION QUESTIONS:

1. Given Lincoln’s success in the US market, why did their internationalization thrust of the late 1980s and early 1990s fail? What is the root cause of Lincoln’s failures to turn a profit on so many of the operations it acquired in other countries? Could its vaunted compensation and management system have worked in some of those countries?

2. What is your evaluation of the company’s new internationalization strategy under Tony Massaro’s leadership? Is it likely to be more successful than the previous offshore initiatives? If so, why?

3. Should Lincoln go ahead with its investment in Indonesia? If so, what should be its entry strategy with respect to partnerships? Which compensation option would you recommend to Mike Gillespie as he considers the advisability of implementing the company’s incentive management system?

Week 8, Session 14

Tuesday, March 6, 2000

Subject: Vertical Integration

Readings: Stuckey & White, “When and When Not to Vertically Integrate,” Sloan Management Review, Spring 1993

Case: Benetton S.p.A.

PREPARATION QUESTIONS:

1. The case notes that Benetton uses a combination of vertical integration and sub-contracting in managing a number of different functions, including product styling and design, manufacturing, logistics and distribution, sales, purchasing, technical support, retailing, etc. How should they decide which functions should be owned by Benetton and which can be sub-contracted? Among functions which use both approaches, how should they decide the mix of inside and outside usage? (Note that the Stuckey & White article is particularly salient to this issue.)

2. What are the key issues that Benetton must address in dealing with its many sub-contractors?

3. What are the risks inherent in Benetton’s use of (or lack of) vertical integration? In particular, what are the risks associated with its strategy for managing the Benetton retail operations and the licensing of the Benetton name?

4. What would you advise Luciano Benetton regarding the company’s diversification plans, particularly in regard to its expansion into financial services?

=============================================================================

Week 8, Session 15

Thursday, March 8, 2001

Subject: Downsizing

Readings: Jensen & Murphy, “CEO Incentives: It’s Not How Much You Pay Them, But How,” Harvard Business Review, May/June 1990

Case: General Dynamics: Compensation and Strategy (A)

PREPARATION QUESTIONS:

1. How would you evaluate GD’s strategic position at the time Anders took over as CEO?

2. Why did GD exchange the stock options for its top managers? Do you think that the option exchange program was an appropriate move?

3. Anders exchanged 103,746 options with an exercise price of $44.94 for 51,479 options with an exercise price of $25.56. What does this suggest to you that Anders thought the ceiling on the eventual price of the stock might be? In other words, what price does the stock have to reach for him to have been better off under the “old” option program? (You can calculate the answer with only the data given in this question.) More questions follow on the next page

4. What do think of the Gain/Sharing program? Was it appropriate for the Board to concentrate the incentives from the Gain/Sharing program among such a small number of top executives?

5. What should the Board do about the Gain/Sharing program? Continue it? Get rid of it? Or convert it to some other program?

=============================================================================

Week 10, Session 16

Tuesday, March 20, 2001

Subject: Leadership and Transformation

Readings: Kotter, “What Leaders Really Do,” Harvard Business Review, May/June

Case: GE’s Two Decade Transformation/ Jack Welch’s Leadership

PREPARATION QUESTIONS:

1. How difficult a challenge did Welch face in 1981? How effectively did he take charge?

2. What is Welch’s objective in the series of initiatives he launched in the late 1980s and 1990?

3. How does such a large, complex diversified conglomerate defy the critics and continue grow so profitably?

4. What is your evaluation of Welch’s management approach? How important is he to GE’s success? What implications are there for his replacement?

5. GE has been a source of management innovation for decades. What is it that you learned, if anything, from the experience of Jack Welch?

==========================================================================

Week 10, Session 17

Thursday, March 22, 2001

Subject: Leadership and Transformation, Competitive Dynamics

Readings: none

Case: Asahi Breweries, Ltd.

PREPARATION QUESTIONS

1. Is Asahi a successful enterprise? By what standard?

2. Define the corporate strategy of Asahi Breweries, Ltd. as of 1989. What competitive concepts, economic and non-economic objectives, key operating policies, and timed sequence of moves characterize the strategic logic of this enterprise?

3. What specifically did Messrs. Murai and Higuchi bring to Asahi? How would you characterize their policies, behavior and contributions?

4. What is your assessment of Asahi’s investment and profit plan presented in Exhibit 1?

=============================================================================

Week 11, Session 18

Tuesday, March 27, 2001

Case: Group Presentations 1-3 / Cases to be distributed via email

=============================================================================

Week 11, Session 19

Thursday, March 29, 2001

Case: Group Presentations 4-6 / Cases to be distributed via email

=============================================================================

Week 12, Session 20

Tuesday, April 3, 2001

Case: Group Presentations 7-8 / Cases to be distributed via email

=============================================================================

Week 12, Session 21

Thursday, April 5, 2001

Wrap Up Lecture

Course Evaluations

=============================================================================

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download