Strategic Management and Policy

Management 5903 002 (20032) Strategic Management and Policy Spring 2013, 7:00 9:45 p.m., Wednesdays INSTRUCTOR: PHONE: OFFICE HOURS: Course Overview: This course is designed to help you review and apply management theories and principles to the real world cases. Strategic management is about the long-term success of the company. Cases provide you opportunities to make difficult decisions emphasizing the execution of the strategic planning. Strategic planning and execution have a multiplicative relationship. Even if you come up with a great strategy, if it is not well-implemented, the results will be disappointing. Each business situation is different. What is valid in IBM at one point in history may be neither applicable to Dell nor IBM at another point in history. In the real world, new issues and problems emerge every day. Answers may be obsolete very quickly, but thinking processes will not. Accordingly, this course expects you not to learn answers, but to learn how to ask the right questions, apply good decision making processes and use appropriate strategic models. To do so, this course extensively uses cases. The case method replicates the trial-and-error experience of seasoned managers, thereby helping you review key issues in decision-making and implementation processes. You may find yourself frustrated by the ambiguity and the difficult of assimilating conflicting points of view. You may also be frustrated by not finding one right answer." Just like real life! The success of a strategy depends on the strengths of the organization as well as commitment of employees. So is your personal success. Each of you has a different style, strengths, and weaknesses. Just mimicking a stereotype excellent leader or excellent company will not make you or your firm excellent. Instead, you should explore yourself, find your style, strengths and weaknesses, and learn how to develop your own competitive advantages. This is the nature of strategy and policy issues. MBA Learning Goals: The Learning Goals for the MBA academic program are for students to: 1) Be able to apply business concepts and principles to a broad range of organizational and corporate decision problems, both local and global. 2) Be able to apply business concepts and principles to assess the attractiveness of various industries, and identify the strengths and weaknesses of firms. 3) Be proficient at using quantitative methods and associated research techniques and information technologies to make business plans and solve business problems. 4) Be knowledgeable of the ethical and other leadership issues facing business organizations, and have an appreciation of the various leadership roles and social responsibilities of the players in a business environment. Mark W. Phillips, Ph.D. 913-8510 OFFICE: BB 4.03.10 EMAIL: [email protected] I don't use Blackboard email

6:00 7:00 p.m. Wednesdays, other times available by appointment, always best to call for an appointment

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Course Objectives: 1. Review the fundamental principles and theories of strategic management to understand the competitive forces facing a firm, assess the attractiveness of the industry and identify potential sources of competitive advantage and disadvantage of a firm (Goals 1 through 4). 2. Develop skills to apply course material/learning to improve thinking, problem solving, and decisions in the real world (Goals 1 through 4). 3. Upgrade key skills to critically analyze and evaluate ideas, arguments, and point of view for successful execution of strategy (Goals 1 through 4). Many cases are about large firms. However, the essences of the cases are also applicable to small firms and start-up firms. Again, the key is not to memorize the cases, but to think about the implications important to you and your situation. If you understand how to ask the right questions, you should use the skills in many different situations. At the end of the day, what is important is not remembering answers, but mastering and applying key basic ideas. Everyday Class: In general, a class is composed of three key components: 1. Review and discussion of the basic issues of the days topic. 2. In depth discussion of the case. 3. Application of the key ideas to other companies/situations, possibly using recent examples. For the class discussion, you are expected to be fully prepared for the class. Additionally, it is also very valuable if you can find relevant experiences (from your job) and share the experience with your classmates. Required Course Text/Materials (1) Customized case book (Southwest Airlines, Starbucks, Cyberplay), available University Bookstore (2) Harvard Business School Cases - purchase online (3) Harvard Business Review Articles through Library Database (ABI, Ebsco) (4) Good to Great (by Jim Collins) HarperCollins, ISBN: 0066620996 (5) Great by Choice (by Jim Collins) Harper Collins, ISBN: 9780062120991 This class frequently refers to real-world examples. Subscriptions to major business periodical such as Wall Street Journal or Fortune may help.

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Grading and Assignments: The final class grade will be computed in the following manner: Class contributions Quizzes Individual Case Analyses Group Project (Paper and Presentation) Comprehensive Exam * Total * see page 6. Class contribution (25%) [10% on class participation/contribution] You are responsible for attending the class and participating in discussion so that you can learn and contribute to the class. The contributions will be assessed by both quantity and quality. It is important to know that seemingly stupid questions are often related to taken-for-granted (but possibly obsolete) assumptions and stimulate important discussion. It is always good to ask why and share your concerns with class members. In each class, your contributions are graded as follows: Excellent contribution Good contribution Fair contribution Silent contribution Absence without advanced notice Absence with notice and legitimate reasons 10 9 8 7 6 or lower No court 25% 25% 20% 30% 100%

Those who were formerly or are currently working are encouraged to share your personal experiences with your classmates. Discussing hands-on experience is an important way to integrate the classroom learning with real world situations. Questions to me during office hours and with appointments are also encouraged. To facilitate your learning, you will submit a learning sheet, on which you reflect your learning experience so far and request anything you want to facilitate your learning such as ideas to improve the class experience and questions and topics that were not touched in the class, but you think important (note: I try, but not all requests can be met). Submission of the learning sheet is a part of class contribution. [15% on group participation/contribution] With a large class most of the participation/contribution will occur in small groups in which the course instructor is not able to see the participation/contribution. Three times during the course the course instructor will be asking for inputs from other students on the participation/contribution of their teammates in small group discussion. Course instructor will keep the class in similar groups for approximately 4 class sessions then switch group membership for another 4 class sessions, repeating the process once again for the remaining weeks.

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We will use similar factors as with the class factors: Excellent contribution Good contribution Fair contribution Silent contribution Distracting comments Quizzes (25%) There will be five (5) individual short quizzes in this course. The content of the quizzes will include the discussion of the past class or assignments and/or readings of the day. Individual Case Analysis (25%) There are two (2) case analyses that need to be submitted. The analysis should be maximum five (5) pages each, typed, double-spaced, on 8.5 by 11 inch paper with 1 inch margins on all sides with 12-point font size. Sometimes, individuals want more specific guidelines for case writing. However, the guidelines are exactly what you need to consider in these assignments. Remember that this class is to develop your skill to ask right questions. Analysis 1 February 27th, Progressive Analysis 2 March 27th, Lincoln Electric Group Project (30% - Presentation 10%, Paper 10%, Team Assessment 10%) You are to form a group (four to five people) and analyze one public US company using tools and learnings obtained from this and other classes. I expect you to form a group individually. However, if you have some difficulties in doing so, I will help. The analysis should include (1) industry analysis and its implications, (2) analysis of the current strategy, (3) strategic issues of the company, to include either important problems or potential opportunities, and (4) recommendations to the company to solve the major problem or realize the major opportunity. While you may be able to identify multiple problems or opportunities in (3) your recommendations in (4) should focus on one major problem or opportunity. In other words you have to prioritize the issues (by considering the strategic importance of the issues) and work on the most important issu3e. Make sure that you provide practical and effective recommendations. Abstract recommendations such as do more research, produce a better product, follow customers needs wont be called effective. You should also discuss the impact on the firm and any changes the firm might have if it follows your recommendations. The report, including figures and tables should not exceed eight (8) pages. You are also required to add one page reference at the end (thus, if you add a cover page, the total will be seven pages). The analysis should be typed, double-space, on 8.5 by 11-inch paper with 1 inch margins on all sides with 12-point font size. The group and its target company sign-up starts immediately after the first class on January 16th and should be finalized by January 23rd. 10 9 8 7 5

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Each group has two opportunities to present the idea: March 6th: from others (up to 5 minutes per group). the project. Apr 29th, May 1st and 8th: Please provide class a 1-page summary of Group project introduction explain why did you pick the company and what type of issue are you going to analyze and ask quick feedback and ideas

Final group presentation - group paper is due on April 29th for all the groups!

You will be given a team assessment to ask how much each group member did toward the final group project. Comprehensive Final Exam (This is only for individuals who have not earned at least a B in the course.) Since this exam serves to fulfill the comprehensive exam requirement for the masters degree, the exam includes all of the material covered during this course as well as all the materials covered in the courses that are prerequisites for MGT 5903. The essay questions require integration of concepts and application of a variety of analytic tools to a case situation. This exam will be given to any students who must meet this requirement during the final exam period scheduled for this course. The grade received on this exam will constitute 10 percent of the grade for the course and the grades previously earned will comprise the remaining 90 percent of the final grade. Any student who is required to take this exam will be notified by email on or before April 1st. Academic Honesty Scholastic dishonesty, including plagiarism, will be treated as a violation of University policies on academic honesty. Appropriate sanctions will be pursued vigorously.

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READINGS, ASSIGNMENTS AND PREPARATION QUESTIONS Wednesday, January 16th Topic: Readings: Introduction McDonalds Strikes Out with Grownups Fortune, 11/11/1996 McDonalds 24/7 BusinessWeek, 2/5/2007 http://www.businessweek.com/magazine/content/07_06/b4020001.htm Why McDonalds New Coffee Strategy Could Go Cold Harvard Business publishing. http://conversationstarter.hbsp.com/2008/01/why_mcdonalds_new_coffee_strat.html None

Case:

(General Questions) What are the five forces? What do we get by understanding the five forces? PREPARATION QUESTIONS Consider these questions based on the information as of 1996. 1. What problems is McDonalds faced with? 2. Why did it take McDonalds so long to identify the problem? 3. Do you like the new strategy? Why or why not? 4. What should McDonalds have done?

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Wednesday, January 23rd Topic: Readings: Foundations of Strategic Management (1) What is Strategy? (HBR, 1996) Good to Great, Chapter 1, Great by Choice, Chapter 1 Hard Ball: Five Killer Strategies (HBR, April 2004) Southwest Airlines: 2002

Case:

PREPARATION QUESTIONS: (Case) 1. Analyze the airline industry before Southwest Airlines entry? - Why do you think Herb Kelleher entered this business? 2. Analyze the strategy of Southwest Airlines. - What is the core competency of Southwest? - Why were many imitators unsuccessful? 3. Describe the strategic issues facing Southwest now 4. What is your answer/recommendation? What analysis/logic do you have to support your conclusion?

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Wednesday, January 30th Topic: Readings: Foundations of Strategic Management (2 & 3) Why Companies Fail? Fortune, 11/14/1994 Good to Great, Chapter 4, Great by Choice, Chapter 2 Why Smart Executives Fail? (Syd Finkelstein, 2003, Portfolio) Strategic Flexibility (by Shimizu & Hilt) Academy of Management Executive, 2004 (4): 44-59. Sears, Roebuck and Company (A)

Case:

PREPARATION QUESTIONS (Case) 1. Why did Sears, which once had been the greatest retailer, lose its competitiveness in 1990s? Try to elaborate as much as you can (ask Why repeatedly). 2. What was the process of change Martinez used? 3. Although the worst time may be over, Sears is far from successful as of 2005. Why do you think it is? Do you think the merger with K-Mart revitalizes Sears? What do you recommend to Sears now? (Article) 1. Why do many senior executives at large companies have no idea about the fundamentals of their business? 2. Why do many senior executives fail to see somewhat obvious changes in their environment? 3. What are management fads? What is wrong with them?

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Wednesdays, February 6th and 13th Topic: Readings: Industry Analysis and Growth Strategy (1 & 2) Creating New Market Space (HBR, 1999) Good to Great, Chapter 2, Great by Choice, Chapter 3 A Fresh Look at Industry and Market Analysis Business Horizons, 2002 Jan-Feb) Available at Library Database Starbucks Corporation

Case:

PREPARATION QUESTIONS (Case) 1. Using the five forces framework, analyze the industry before Schultz entered. How useful do you think the 5-force analysis was in making his decision to start the business? 2. Analyze the growth strategy of Starbucks in the US market. What are the sustainable competitive advantages of Starbucks (as a shop)? What are the sources of sustainable competitive advantages of Starbucks (as an organization)? 3. Evaluate (based on both pros and cons) Starbucks international strategy. For example: Market selection (why Japan? Why not other countries?) Mode of entry (why joint venture? Why not something else?)

4. What do you recommend to Mr. Schultz to maintain the Starbucks culture? Why? Compare and contrast with Southwest (and Kelleher). (Article) 1. Find and explain an example of a company that created new market space.

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Wednesday, February 20th Topic: Readings: Case: Competitive strategy (1) Strategic Intent (HBR, 1989) Good to Great, Chapter 7 Airborne (A)

PREPARATION QUESTIONS (General questions) 1. What are two general business level strategies? What are the differences between them? 2. What is value chain analysis for? (Airborne) 1. How and why has the express mail industry structure evolved in recent years? 2. How has Airborne survived in this industry? 3. Quantify Airbornes sources of advantage (analyze relative costs of Airborne in comparison with FedEx, shown in Exhibit 3. Using the information in the case and your understanding of what influence each cost item, estimate each of the items for Airborne). 4. What must Robert Brazier, Airbornes President and COO, do in order to strengthen the companys position?

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Wednesday, February 27th Topic: Readings: Competitive Strategy (2) Will This Customer Sink Your Stock? Fortune, 9/30/2002 Good to Great, Chapter 6 Great by Choice, Chapter 4 Progressive Corporation, Progressive (C) Progressive (C)

Cases: Individual Assignment:

PREPARATION QUESTIONS (Progressive Corporation) 1. Analyze the auto-insurance industry. What can you learn from the analysis? 2. How does State Farm, Allstate, GEICO and Progressive differentiate themselves from each other? (Consider Value chain in Figure 7) 3. What is Progressives core competency? Why did Progressive fail in its diversification to long-haul truck insurance? 4. How do you think Progressive should respond to Allstates threat? (Progressive (C)) Individual Case writing assignment maximum five (5) pages - DUE February 27th Going Forward question on Progressive (C)

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Wednesday March 6th Topic: Readings: Corporate Level Strategy (Diversification) (1 & 2) To Diversify or Not to Diversity (HBR, 1997) Good to Great, Chapter 5 I Built This Company, I can Save It Fortune, 4/30/2001 Desperately seeking synergy (HBR, June-July 1998) Gateway: Moving Beyond the Box

Case:

PREPARATION QUESTIONS: (General questions) Why (or in which situation) do firms want to diversity? What are the benefits and risks of diversification? (Case) 1. Evaluate the initial sources of Gateways success. 2. Why did Gateway want to go beyond the box? What is the rationale behind the idea? 3. The case quotes Gateway EVPs comment: It seems every company in the world is trying to turn itself into a services provider these days, and everyone thinks they can do it because they believe theyre a relationship company. What makes Gateway think it will succeed where others have failed? 4. Do you think the strategy will succeed? Why? Group Project Introduction, March 6th Each group makes a short presentation (less than 5 minutes) to explain the major issue (of a focal company) what is examined in the group project. Inputs, questions, and advice should be provided from the classmates as well as me. Each group should also provide the class a one-page summary (word or power point). Wednesday, March 13th No Class, Spring Break

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Wednesday, March 20th Topic: Readings: International Strategy Dangerous Liaison Business Week, 3/29/1999 Saving the Business Without Losing the Company (HBR, 2002) Nissans Boss Business Week, 10/4/2004 Great by Choice, Chapter 5 Implementing the Nissans Renewal Plan

Case:

PREPARATION QUESTIONS: (General questions) In general, why do companies want to enter international markets? In international diversification, what are the benefits and risk of such inter-organizational agreements as alliances and joint-ventures (see also Starbucks case)? (Case) 1. Based on the information provided from the Business Week article, evaluate the alliance between Nissan and Renault. 2. Among his various initiatives, Mr. Ghosn used cross-functional teams (CFTs) to revitalize Nissan. While CFT is a very common approach, it is not always successful. Why do you think he was able to succeed? (disregard international issues from this question) Share your personal experiences. 3. Compare and contrast between Nissan-Renault and Sears. What do you think the former was successful and the latter was not? 4. Characterize the Mr. Ghosns leadership as an international manager. What can you learn from him? Why?

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Wednesday, March 27th Topic: Readings: Motivation and Control Keer, 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 Good to Great, Chapter 3 Lincoln Electric: Venturing Abroad

Case:

INDIVIDUAL ASSIGNMENT: Case writing Question 1 (maximum 5 pages) (DUE March 27th) PREPARATION QUESTIONS: (Case) 1. (Case writing question) How was Lincoln able to grow and prosper for so long in such a difficult commodity industry in the U.S.? What is the source of Lincolns outstanding and enduring success? Note: Dont worry too much about international issues, which we discuss in the following questions. 2. Given the outstanding success, why did the internationalization thrust of the late 1980s and early 1990s fail? 3. What is your valuation of the companys new internationalization strategy under Tony Massaros leadership? Is it likely to be more successful than the previous offshore initiatives? If so, why? Any risks? 4. Should Lincoln go ahead with its investment in Indonesia? If so, what should be its entry strategy be with respect to partnerships? Which compensation option would you recommend to Mike Gillespie as he considers the advisability of implementing the companys incentive management system? (Readings) From your experience and opinion, why do you think folly is so prevalent? Can you share any specific example? In particular, focus on why everybody knows it and yet cannot fix it?

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Wednesday, April 3rd Topic: Readings: Leadership, Transformation, Competitive Dynamics Judo Strategy (HBR, 1999) Seven Surprises for New CEOs HBR, October, 2004 Great by Choice, Chapter 6 Asahi Breweries, Ltd.

Case:

PREPARATION QUESTIONS: 1. Analyze the beer industry in Japan (5 Fs). What were key success factors (KSFs)? 2. What specifically did Mesrs. Murai and Higuchi bring to Asahi? Why do you think each of the new CEOs did so? How would you characterize their policies, behavior and contributions? 3. In your opinion, which leader is more valuable to Asahi? Why? 4. What is your assessment of Asahis investment and profit plan presented in Exhibit 1? 5. From your evaluation of Asahis opportunities and risks, what do you think Asahis future strategy should be? How would you explain your views to Mr. Higuchi?

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Wednesday, April 10th Topic: Readings: Case: Entrepreneurship None Cyberplay

PREPARATION QUESTIONS: (Case) 1. What was the initial business model of Cyberplay? 2. What other unexpected events happened to Cyberplay? How did Cyberplay respond to them? Do you think their responses were appropriate? 3. What do you think is the key problems(s) of Cyberplay now? Try to visualize causal relationships among problems/factors (see an example below) and identify key, attackable problems Factor C Factor D Factor E Factor F relates to Factor A Factor A relates to current problem relates to Factor A relates to Factor A & Factor B relates to Factor B Factor B relates to current problem

4. What is your recommendation to Shamrock for the future strategy of Cyberplay? Particularly consider questions (2), (3), (5) on page 19 (note: assume that operating margin = operating profit). (Readings) 1. From the Fortune article, discuss the risks of a start-up company that seems to find a nice business opportunity. What can you learn? 2. Why this is the one industry in the world whose market leader are begging for more regulation? What is the implication? 3. What do you think such start-up companies as Custer Battlers should do next?

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Wednesday, April 17th Topic: Readings: Wrap-up Why its Hard to do Whats Right Fortune, 9/29/2003 Good to Great, Chapters 8 and 9, Great by Choice, Chapter 7 and Epilogue The Five Minds of a Manager HBR, November 2003 Managing oneself HBR, January 2005 The Nine Dilemmas Leaders Face Fortune, 3/18/1996

Case:

PREPARATION QUESTIONS: 1. Out of the nine dilemmas, which are (personally) most important and relevant to you? Why? 2. What have you learned or discovered in this course? 3. What questions/issues remain to make your future successful? Wednesdays, April 24th, May 1st and May 8th May 8th Class is 8:00 - 10:00 pm Topic: Group Presentations

Group Assignment: Group Project Papers Due on April 24th

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3 of 3 Group Evaluation:

Your Name: ___________________

You can only use 10 once, and 9 twice per dateExcellent contribution Good contribution Fair contribution Silent contribution Distracting comments 10 9 8 7 5March 27th April 3rd April 10th April 17th Ave

Name _____________________ _____________________ _____________________ _____________________ _____________________ _____________________ _____________________

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2 of 3 Group Evaluation:

Your Name: ___________________

You can only use 10 once, and 9 twice per dateExcellent contribution Good contribution Fair contribution Silent contribution Distracting comments 10 9 8 7 5February 20th February 27th March 6th March 20th Avg

Name _____________________ _____________________ _____________________ _____________________ _____________________ _____________________ _____________________

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1 of 3 Group Evaluation:

Your Name: ___________________

You can only use 10 once, and 9 twice per dateExcellent contribution Good contribution Fair contribution Silent contribution Distracting comments 10 9 8 7 5January 23rd January 30th Feb 6 Feb 13th Ave

Name _____________________ _____________________ _____________________ _____________________ _____________________ _____________________ _____________________

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