Strategic Management

McCombs School of Business University of Texas at Austin STRATEGIC MANAGEMENT OPTION II MBA COURSE OVERVIEW Professor David B.Jemison CBA 3.232 Telephone 471-8757 [email protected] Texts: Professor Jemison Spring 2004 Hamel, Gary and C. K. Prahalad. Competing for the Future. (Boston: Harvard Business School Press, 1994). Porter, Michael E. Competitive Strategy. (New York: Free Press, l998). Course Description Perspective and Themes This course is about the creation and maintenance of a long-term vision for the organization. This means that it is concerned with both the determination of strategic direction and the management of the strategic process. As such, it deals with the analytical, behavioral, and creative aspects of business simultaneously. The course is organized around six themes in strategic management: the role of the general manager, the components of business strategy, corporate strategy development, divisional-level strategy development, managing strategic change, and the development of general managers. Our perspective in this course is that of the general manager whose responsibility is the longterm health of the entire firm or a major division. The key tasks involved in general management include the detection of and adaptation to environmental change; the procurement and allocation of resources; the integration of activities across subparts of the organizations; and, at the most senior levels, the determination of purpose and the setting of corporate direction. General managers, from our perspective, are managers who are in the position to make strategic decisions for the firm. Note that such managers are not “generalists” in the sense that they need to know a little bit of everything, but not very much of anything. To be effective, general managers need to have in-depth understanding of the generic problems in all the relevant functional areas. Furthermore, they must be able to deal with problems and issues at the level of the total enterprise and its relationships with relevant external environments. Functional specialists can benefit from the general management perspective even though they may not be general managers. Every function’s actions should be coordinated with the overall needs of the business. In fact, functional specialists are the people on whom general managers must rely to implement their strategies. Since such functional managers can be subject to suboptimizing pressure, they too need to understand the general manager’s perspective. 2 Components of the Course The pervasive concept in this course is that of strategy. We will start our study of strategy at the business level and examine the challenges of managing a firm competing in a single industry. An integral part of this study will be an exploration of the components of strategy and how they vary among various settings and situations. In most large and medium-sized firms, corporate strategy is different from business strategy because of the multiplicity of businesses in which the firm is involved. We will explore the differences in corporate and business-level (or divisional-level) strategies and the requirements each places on managers at different levels in the firm. At each level of strategy, competitive strategy considerations will be considered. Successful general managers are highly competent in problem identification and analysis and have a strong action orientation. One purpose of this course is to provide an environment that will allow you to hone these skills, while at the same time gain a conceptual understanding of the strategic manager’s task. Strategic management is more than analysis. To be sure, strategic analysis is a major part of this course, and we will explore and apply several analytical techniques for positioning a firm or a business unit within a competitive environment. But strategic analyses are complicated by the trade-offs inherent in any situation. These trade-offs reflect the fact that organizations consist of many players with multiple, competing objectives. When dealing with these trade-offs, general managers must confront the judgmental issues involved in establishing organizational purpose and balancing economic and noneconomic objectives. To the extent possible in each class, we will attempt to balance these trade-offs and to test our ideas about the appropriate relationships among them. Finally, strategic management requires moving beyond analysis and trade-offs into the realm of strategic action. Once the analytical problem of selecting a business or corporate strategy has been dealt with, we should know what to do. Knowing how to execute the selected strategy is essential to success. To the extent possible in each case, we will concern ourselves with the various combinations of systems (for example, information, control, reward, etc.), organization structures, and people necessary to execute a given strategy. We will test our ideas about the relationships between strategy and these other elements as we proceed through the course. General Flow of the Course The assignments are detailed in a later section. Please read through them to get an idea of the specific content of the course and each class meeting. In general, we will start with single-business or dominant-business companies and proceed to multiple-business companies. Similarly, we will begin with basic techniques of analysis and then expand and modify them to fit a range of situations. We will examine many sectors of the economy (for example basic industries, consumer products, service businesses, hybrids). As we proceed through the course, the classes and cases used in them will “build” on each other in such a way that the knowledge and skills gained in analyzing one session can be used in subsequent cases. Throughout the course we will maintain our concern with both analysis and implementation. 7. Thus. This in turn requires a deep understanding of the functional strategies associated with marketing. you will need to bring what you have learned in other courses and your career to bear in Strategic Management. Our challenge in this course will be to integrate these functional strategies into overall business. Familiarity with some of the practical realities of running different types of businesses. 9. Hamel and Prahalad’s Competing for the Future explores a set of ideas that encourage consideration of the “how” and “why” of industry transformation and strategic regeneration. 8. 3. government action. Integration of the knowledge gained in previous courses and understanding what part of that knowledge is useful to general managers. competitive analysis. and division-level strategies and to concern ourselves deeply with the implementation of the chosen strategies. . Development of an understanding of fundamental concepts in strategic management: the role of the general manager. Development and reinforcement of a general management point of view—the capacity to view the firm from an overall perspective in the context of its environment. the levels and components of strategy. and organizational evolution. Development of those skills and knowledge peculiar to general management and the general manager’s job that have not been covered in previous functional courses. 2. Course Objectives Our course objectives include: 1. corporate. 4. 6. technology. operations. Porter’s Competitive Strategy provides a framework for examining the ways in which industry choice and structure affect strategic decisions. and human resources. Development of habits of orderly. Practice in working out business strategies and implementation plans. In addition. Practice in distinguishing between basic causes of business problems and attendant symptoms. and other major contextual forces.3 Required Readings Two books are required reading for the course. 5. there are often articles that will be used to support conceptual development for a particular class. Development of an awareness of the various impacts of external environmental forces on business and corporate strategy. finance. Addressing the development of strategy requires understanding how firms evolve under the impetus of competition. analytical thinking and skill in reporting conclusions effectively in both written and oral form. Is the participant a good listener? 2. opinions. repetition of case facts without analysis and conclusions or a comment already made by a colleague.)? 6. Some of the factors that have an impact on effective class participation are the following: 1. The appendix to this course description provides additional information on my views of the case method and why it is used so extensively in Strategic Management. Is there a willingness to test new ideas. class participation will be a major portion of your grade in this course.4 COURSE PERFORMANCE MEASURES AND FEEDBACK Performance evaluation and feedback will be based on your performance in two different settings—class participation and written work. We will also spend time talking about the implementation of those recommendations and some of the complexities of effecting change in strategic management situations. As will be noted subsequently. The vast majority of their interactions with others are verbal. facts. Does the participant distinguish among different kinds of data (that is. concepts. we will then try to complete the analysis of the situation and address the problems and issues presented in the case. Class Participation In a typical class.) 8. Do the comments add to our understanding of the situation? 4. Preparation of the case (including the assignment questions) and associated readings should be sufficient to handle such a lead-off assignment. or are all comments “safe”? (For example. . The classroom should be considered a laboratory in which you can test your ability to convince your peers of the correctness of your approach to complex problems. For this reason. we will open the discussion to the rest of the class. beliefs. Most general managers spend very little time reading and even less time writing reports. Is the participant willing to interact with other class members? 9. Do the comments show evidence of analysis of the case? 5. As a group. Are the points that are made relevant to the discussion? Are they linked to the comments of others? 3. Do comments clarify and highlight the important aspects of earlier comments and lead to a clearer statement of the concepts being covered? The questions above deal with both the process of class participation and (of equal or greater concern) the content of what you say. Is there a willingness to share? 7. one or more students will be asked to start the class by answering a specific question or discussing a specific issue. the development of verbal skills is given a high priority in this course. etc. and of your ability to achieve the desired results through the use of that approach. After a few minutes of initial analysis. Do not put your name on the paper. The second part of the paper concerns the full analysis forming the basis for your evaluation. failing to examine the monetary (and other resource) implications. The executive summary is a memorandum that should indicate your overall evaluation and that should be developed with the tenets of logic. or use a cover sheet. and structure necessary for your paper. precision.) Make sure that the exhibits are immediately understandable for a busy executive and that they summarize the key conclusions which you will then use in the second part of the paper to build you complete analysis. each individually and independently written and described in detail below. and the course name should be on the top right corner of the first page only. Guard carefully against undocumented assertions. competitor and/or industry analysis. a bullet stating “increase sales” is unacceptable. The issue you choose to write about is up to you.) The executive summary should be constructed after you have completed your full analysis. and against a lack of consideration for the implementation issues.g. February 6. examples for any particular organization might include business strategy content. consider in depth. the assignment title. break-even analysis. It should be no longer than 1000 words. specificity. and how you will achieve the specific increase. corporate portfolio mix. The primary criterion for selecting it is that you believe it has the potential to materially affect the success and destiny of your organization. or changing workforce capabilities. Second Paper The second written assignment offers you the opportunity to identify. Make sure you refer to these exhibits in the appropriate places in the analysis part of the paper. or put case write-ups in folders. The first is an analysis of a case we’ll be studying in the course.. You may use as many exhibits as you deem necessary. major shift in customer needs or capabilities. NB: Your first written assignment is due Friday. the date. The second is a major paper about a strategic issue facing your organization. The third part of the paper concerns a number of exhibits in which you show the application of specific tools (e. (For instance. executive succession. please refer to the attached checklist which I will use as a general framework for providing feedback on all your written work. Although the definition of the strategic issue is up to you. parsimony. You will need more than one draft in order to achieve the clarity. you should state which products you want to increase the sales of. and address a fundamental strategic issue that you believe that your organization will face in the next five to ten years. globalization of the industry. how much the increase should be. responding to technological change. cash flow analysis. consistency. In such an instance. “Bullet sentences” are only acceptable if their meaning is unequivocal and specific. . First Paper The first written assignment is a paper consisting of three parts. Please note for case write-ups: your student number. strategic management processes. neglecting to consider trade-offs and priorities. and good grammar. etc. For matters of style. This definition is purposely open-ended to allow each person to consider a strategic issue most salient for their firm and in which they are vitally interested.5 Written Assignments for Strategic Management There will be two pieces of written work required for this course. It should be carefully constructed to show a logical flow and integrated set of thoughts about the case. I’m anxious for you to use this assignment to creatively explore an aspect of your organization that you find particularly important and interesting. be sure to put your name. utilize. “Armchaired” analyses and recommendations without conceptual backup aren’t very powerful. why you chose it. Also. Clearly. I expect your sources to be appropriately referenced in the paper. and recommendations to the theories and concepts you find appropriate from those we discuss in this class or in other classes. on this paper. (It’s OK to submit it anytime before then. Interviews where anonymity was promised can be referenced accordingly. and conclusions in your paper. I want you to make a reasoned. address ways in which it can be dealt with. recommendations. and address the implications for managers who choose to ignore it. The other (and more important) is to provide you with feedback on your ability to develop. In the event that proprietary information is necessary for your paper. Beyond this. The paper should include a one-page executive summary of the observations. and the plan of study you propose. field data from interviews and public and corporate documents will be important sources of information. One is to evaluate your performance for purposes of the academic system. 2004. Beyond that. They are neither analytically complete nor do they reflect an understanding of the subtleties that would increase the likelihood that your recommendations will address the issue you’ve identified. which I will use as a general framework for providing feedback on your written work. Don’t forget to reference your sources properly. identify the impact of those actions on the organization as well as the issue. and share your ideas and conclusions concerning the topics and situations covered in the course. not your student number. I am interested in how you identify and define the issue. I will return the prospectus with my comments by mail during the following week. . they do not reflect well on your capabilities as an effective manager. April 17. Grading Policies The purpose of grading in Strategic Management. in addition. is twofold. My belief is that you should choose an issue that is strategically salient and for which your analysis and study will make a material difference in the future of the firm. January 24.) The typed prospectus must present a clear statement of the strategic issue you chose. your paper should address extant theories that may prove useful to your organization in understanding the issue.6 In this assignment I expect you to be a problem finder as well as a problem solver. findings. I will gladly sign a nondisclosure agreement. addressing the issue. Any exhibits you find appropriate to include are in addition to this. To make sure that we stay on track. The final paper is due no later than the beginning of our final class session on Saturday.to two-page prospectus of your study no later than Saturday. I would like you to submit to me a one. Sources of data for this paper are at your discretion. well-argued prediction of the potential impact of the issue. or coping with the consequences of their actions. as in all courses. To help you do that more effectively. you might want to review the attached checklist. Beyond considering the strategic (and operating) implications of any issue you choose. I expect you to link your observations. Late papers will be accepted only in the event of personal emergency. Note that it is not necessary to write thirty pages. But. double-spaced with normal margins. The actual paper is limited to twenty-five pages of text. the individual written assignments must be solely your own work. you should let me know before the start of the class if some emergency has made it impossible for you to be prepared adequately for that class. NB: Written work is due no later than the beginning of the class session during which the case will be discussed. Late papers will be accepted only in the event of personal emergency. Group work is acceptable and encouraged for purposes of general case preparation. 2. To facilitate that. Given the importance of class participation. or any other issues of interest to you on an individual basis. 4. I plan to be prepared for every class and I hope you will do the same.7 Your grade for the course will be based on the following components: First Individual paper Second Individual paper Class participation 30% 40% 30% 100% Other Administrative Details Since faculty members tend to have somewhat different expectations as to class behavior and course norms. I ask you to use a name card for the first several weeks of the course and will circulate a seating chart during the second class session. However. Feel free to call me at home. Since I frequently call on individuals whose hands are not raised. your progress. I will seek to learn your names as quickly as possible. 3. I’d like to outline a few of my expectations concerning such matters. 5. Do not use study groups to discuss or prepare for the individual written assignments in any way. . 329-0340. My office number is on the front of the course description. Please see me in class or call to set up an appointment. 1. I will be happy to discuss the course. 78-90. “Generic Competitive Strategies” Courtney. and their careers.8 I. and Viguerie.. Case: Introductory Note to DAAG Europe (9-374-036) DAAG Europe (A) (9-374-037) Robert Pelz has spent several years translating the strategic vision he has for his firm into reality. Pelz as a Manager. Gilcrist must in rapid succession assess the situation and decide on specific actions in many areas of the firm...in the first three months ..” Harvard Business Review. Her actions will not only affect Yellowtail’s near-term survival and long-term strategy but her own career as well. Chapter 4 “Competing for Industry Foresight” Porter.. Pelz do? Appraise Dr. Mar-Apr 2000. Robyn Gilcrist. Preparation Questions: 1. 2. The Role of the General Manager Session 1. Gilcrist in her job at Yellowtail? 2. and subsidiary levels.. a recent MBA. ... Chapter 1.in the first three weeks . January 9. What is the situation facing Ms.. 4. “Leadership that Gets Results. We’ll focus on how general managers balance their situations as they simultaneously try to manage their strategy.. 2004 8:00-12:00 Reading: Goleman.” Harvard Business Review. SeptemberOctober 1996. Kirkland..” Harvard Business Review... 3... he encounters several problems at the corporate. Case: Yellowtail Marine We’ll begin our study of strategic management with a case that will highlight many of the concepts and issues I plan to focus on this semester. their part of the organization. pp......in the first three days . But as this evolves. 66-79. November-December 1997. “Strategy Under Uncertainty. divisional.. Friday. “The Structural Analysis of Industries” Chapter 2. Preparation Questions: 1. What should Gilcrist do: . pp. Readings: Hamel and Prahalad... Collins & Porras “Building Your Company’s Vision. How did DAAG Europe arrive at its present difficulties? What actions should corporate management take? What should Dr. has agreed to take a job as Chief Operating Executive of a pleasure boat firm in San Diego. You may want to compare Connelly with other general managers you will meet in the cases. a competitive strategy describes the amount and types of risk that a company is willing to take. 2. Connelly had turned a very sick company around. rev. What are the industry structure and dynamics of the metal container industry? What are the industry trends? Implications of these trends? What strategy does CC&S have for competing in this industry? What advantages does a firm the size of CC&S have for competing with American Can and Continental Can? How do you explain the comparison shown in Exhibit 5 of the case? In some sense. Why are some more successful than others? How can managers with such different styles be successful? Preparation Questions: 1. We will be concerned with both business strategy and industry dynamics in this case. Chapter 2. "Market Signals" Porter. 2004 1:00-5:00 Readings: Hamel and Prahalad. "A Framework for Competitor Analysis" Porter. Connelly's style is evident from the case. Continuing consolidation in the industry raises the question of whether CC&S should become a bidder in the apparent sale of Continental Can. One of the things that makes a general manager's job interesting is that the issue never goes away. Chapter 3. “Getting Off the Treadmill” Porter. Management style also becomes an issue in this case. "Generic Competitive Strategies" Porter. .9 II. The Concept of Business Strategy Session 2. The first covered the company up to 1964. Chapter 4. This case describes CC&S up through 1989. "Competitive Moves" Crown Cork & Seal in 1989 (9-793-035. A major issue for discussion was whether success would continue. Saturday. What is CC&S's "risk profile"? What are the major issues that William Avery faces in 1989? What advice would you offer him about these issues? 3. 2002) Case: This is the third update of the classic CC&S case. April 4. January 10. and the issue of continued success is still important. At that time. Chapter 1. 4. Chapter 5. Prior to the recent effots by competitors to match Dell (1997-98). 4. 53-58. “Value Innovation: The Strategic Logic of High Growth. 103-112. On its face the profitability of the circus industry seems to be unattractive.” Harvard Business Review. it has an unprofessional image and growing segments of the population are concerned about the exploitation of animals. Dell has developed an innovative strategy that has revolutionized the PC industry.” Harvard Business Review. “Why Hard Nosed Executives Should Care About Management Theory. When faced with this dilemma one approach to improving a firm’s strategic situation is that of value innovation. January 24. September. “What is Strategy?” Harvard Business Review. 2003. Beyond imitation. Drucker. calculate Dell’s advantage over Compaq in serving the corporate customer. Sept-Oct 1994. January-February 1997.10 Session 3. Ch. Rivals such as Gateway. November-December 1996. Preparation Questions: 1. Saturday. September-October 1986. 2004 8:00-12:00 Reading: Porter. Ghemewat.” Harvard Business Review. Compaq. “Structural Analysis Within Industries” Case: Matching Dell The Matching Dell case provides an interesting context for evaluating the sustainability or imitation of a competitive advantage. pp. Christensen and Raynor. Porter. P.” Harvard Business Review. 7. how big was Dell’s competitive advantage? Specifically. creating very different configurations of their value proposition. are there any other threats to Dell’s competitive advantage? Reading: Kim and Mauborgne. How and why did the personal computer industry come to have such low average profitability? 2. Overall attendance and audience growth is declining. Will they succeed? Preparation Questions 1. Why has Dell been so successful? What are its sources of competitive advantage? 3. pp. Case: The Evolution of the Circus Industry (Case A) Firms sometimes find themselves in situations where there seems to be little opportunity for developing incremental improvements in their value propositions because of the extant (or perceived) structure of the industry. Using the Industry Competitive Analysis framework assess the attractiveness of the circus industry as described in Case A? 2. “The Theory of the Business. The case allows to identify the sources of competitive advantage of Dell. 95-107. How effective have competitors been in responding to the challenge posed by Dell’s advantage? How big is Dell’s remaining advantage? 5. and HP stand eager to imitate Dell’s strategy. “Sustainable Advantage. On what factors did the traditional circus companies compete? What do you like or dislike about the traditional circus? PROSPECTUS FOR STRATEGIC ISSUE PAPER DUE TODAY . . pp.. While the case depicts a Japanese company in transition.. pp.. specifically. What competitive concepts. Ltd..11 Session 4. “Crafting Strategic Architecture” Porter. Preparation Questions: 1.” Harvard Business Review. February 6.. Higuchi... The case and associated assignment will be distributed on Saturday.. What was the role of the Corporate Identity and Total Quality Control programs in Asahi’s turnaround? 5. March-April 1997. January 24. Schaeffer.. “The Living Company. Chapter 5. 4347.. FIRST WRITTEN ASSIGNMENT DUE . and contributions? 4. key operating policies. and timed sequence of moves characterize the strategic logic of this enterprise? 2. “The Leadership Journey.. What. . October 2002.. 2004 1:30-5:30 Readings: Hamel and Prahalad. Ch. Case: The importance of general manager involvement in corporate renewal and strategic repositioning is an important issue for firms. 51-59. What were the key success factors in the Japanese beer industry? 3. did Messrs.. The Asahi case lets us focus on the role of a newly arrived general manager in revitalizing and repositioning a firm. 8.. behavior. economic and noneconomic objectives. Murai and Higuchi bring to Asahi? How would you characterize their policies.” Harvard Business Review... “Industry Evolution” DeGeus. Define the corporate strategy of Asahi Breweries... Friday. the issues that the company and its managers encounter are universal in nature. as of 1989. Ltd.... Asahi Breweries.. What unresolved policy choices and issues face Asahi and Mr. Martell take at this time? Please be as specific as possible. What are the important differences between these two forms of corporate organizations? 4. What is troubling George McElroy? 2. rev. “Strategy as a Portfolio of Real Options. “Strategy as Stretch. T.A. 3/11/92) Berkshire Partners (9-391-091) Preparation Questions: There are a variety of approaches to developing and implementing a “corporate strategy. R. Winter 1984.5 billion in 26 companies since its founding in 1984. 2004 8:00 – 12:00 Burgelman. March 2002. February 20. each of which contributes in different ways to the overall corporate strategy. Reading: Cases: Porter.12 III. A. 89-99. Friday. Luehrman. Prahalad and Hamel. “Making Sense of Corporate Venture Capital. Are these valid corporate strategies? . 33-48. This case introduces us to questions of managing this dynamic balance and how that relates to new ideas and internally developed diversification opportunities. What value do conglomerates and LBO partnerships contribute to their business units? 2. What actions should Mr. a celebrated conglomerate. Hanson is examined in light of its evolution and the possibility of further growth. “The Transition to Industry Maturity” Hanson Plc Note on Leveraged Buyouts (9-389-218. Chapter 6. Should Mr.” Case: M-Tronics (9-396-178) Many firms operate in a variety of different businesses. Corporate Strategic Management Session 5. an LBO partnership in the eighties. Chapter 11. How do they organize to realize that value? 3. and Berkshire Partners. pp. Berkshire Partners is examined in 1990 at the height of the LBO boom having invested about $1. Chesbrough. Martell be concerned about same issues? 3.” To gain some more insights into this issue we will begin to look at intangible skills as key resources by examining Hanson.” Harvard Business Review. 90-99. September-October 1998.” Harvard Business Review. 1. Preparation Questions: 1. As you read the cases pay close attention to the corporate systems. “Managing the Internal Corporate Venturing Process” Sloan Readings: Management Review. structures. pp. and procedures each firm uses. This case gives us the opportunity to explore these questions in a high tech start-up. Saturday. Preparation Questions: 1. Should Cisco accept this offer? Why? 4.13 Session 6. February 21. Chapter 9 (pp. evaluate the final offer. 202-212) Haspeslagh and Jemison. 3. should they meet with these people to explain their consideration of the Cisco offer before making a decision? If Grand Junction decides to be acquired. Spring 1987. . What do you think of Charney’s final offer? Is it a fair valuation for Grand Junction? Explain your reasoning. Given the representations that Charney and other senior managers had made to several newly hired key employees.” Sloan Management Review. Chapter 7. Should Grand Junction go public or be acquired? Why? Evaluate the issue from the perspective of each of the stakeholders in Grand Junction. how should Charney and his management team inform their employees? 2. 2004 1:00-5:00 Readings: Hamel and Prahalad. Case: Grand Junction The entrepreneur’s dream is often to develop a company to a point where one either takes it public or sells the firm to another company. From the perspective of the senior management and Board of Cisco Systems. “Acquisitions: Myths and Reality. “Strategy as Leverage” Hamel and Prahalad. Jemison and Sitkin.” Harvard Business Review. the CEO. would be the largest-ever takeover of a British company. we must first focus on the industry and Nestlé’s strategy. 2004 8:00-12:00 Readings: Bower. What are the potential strategic benefits of Rountree for Nestlé? What are the potential strategic benefits of Rountree for Suchard? 4. Koza “Information Asymmetries: How Not to ‘Buy a Lemon’ in Negotiating Mergers and Acquisitions. The preparation questions above should help you prepare for both roles. the CEO) and make a presentation to the Nestlé Comité du Conseil (Board of Directors) to recommend a decision on Rowntree plc. July-August 1979. “Acquisitions: The Process Can Be a Problem. As Nestlé. Rappaport “Strategic Analysis for More Profitable Acquisitions. Our case today is set in April 1988. “Not all M&As are Alike – and That Matters. Preparation Questions: 1.14 Session 7. 1986.” Harvard Business Review. 9. No. Haspeslagh & Jemison: “A Framework for Assessing an Acquisition’s Attractiveness. March 6.) Nestlé Rountree (A) Case: Nestlé is the world’s largest food company and in 1988 it was considering acquiring Rountree which. immediately after Jacob Suchard has acquired 15% of Rountree’s stores in a “dawn raid. Note that during our class today you will be asked to be a member of both the Nestlé Comité du Conseil as well as a member of a Nestlé Acquisition Task Force headed by Helmut Maucher. Team assignments and instructions will be distributed at the beginning of class. How attractive is the chocolate industry for further investment? Are the reasons which led Helmut Maucher in the early 1980s to define confectionery as a strategic priority still valid? 2. 229-234. do you want to purchase Rountree shares? What price are you willing to pay? Our class format today will be different from earlier in the semester.” (Choose relevant parts of the Appendix as you consider Nestlé and Rountree.” Our primary focus in class will be to think through how Nestlé should respond to this move by Suchard. March-April 2001. March-April. pp. and M. 3. September 1991. You'll be a member of a team that will assume the roles of a Nestlé Acquisition Task Force (headed by Helmut Maucher. . Saturday.” Harvard Business Review. To do that adequately. Why has Rountree emerged as a takeover target? 3. if consummated.” European Management Journal. I. Vol. Dierickx. evolution. 2004 1:30-5:30 Case: ENRON. Firm strategy stems from leadership. They have developed case material that will allow us to start at the beginning and explore the evolution of the firm from its transformation from zenith to bankruptcy. Then click on “Run. followed by “:\setup. Each of us has followed the Enron saga as it has unfolded. in CD/ROM format. values. To view the case. The case. written by two professors at the Darden School.2001 (MEDIA) UVA-G-0563M Reading: Handy. Then right click on the CD icon on your desktop (or “My Computer”) and click on “Open.” This will take a moment to install the viewing program on your computer. . and corporate transformation may not be the mainstay of most journalistic sources we find time to use. please explore these questions: 1. What elements of Enron’s strategy led to its downfall? 5. ascension.” Alternatively you can double click on your CD icon. “What’s a Business For?” Harvard Business Review. offers a myriad of opportunities to explore Enron’s situation. How and why did Enron transform itself between 1986 and 2000? Was Enron really an innovative company? Why or why not? 2.” At the request for program location enter the letter of your CD drive. Another option in Windows is to click on the “Start” button at the lower lefthand corner of your screen. please insert the CD/ROM in the CD drive of your computer. 1986 . The case writers had unparalleled access to Enron before their fall. To facilitate our study of Enron we’ll use a very recent case. competitive positioning. In preparing for our class. Our class today will be devoted to an in-depth study of the history. What are the lessons for other corporations from the rise and fall of Enron – especially regarding corporate transformation and a strategy based on innovation? 4. leadership. and development of capabilities? Why was there a dramatic breakdown for Enron in 2001? Be sure to read and reflect on the document “Critical Thinking About the Enron Story” that is found in the Analysis Guide Tab. Evaluate Enron’s two strategies in the 1990’s to develop “asset-light” businesses in the US and “asset-intensive” businesses internationally. March 19. December 2002. critical thinking about the range of issues associated with strategy. But careful.15 Session 8. Friday. What resources and capabilities are essential for each of these strategies to be successful? 3. and fall of Enron. competitive advantage.exe. vision. You may then open the case. 4. This case will give us some insights on how this happened. March 2002. eBay is arguably one of the successful firms of the last ten years and may be the most successful internet-based firm to date. Coutu. what may lay in store for eBay. It grew from an idea of online collaboration to the world's largest and most successful online auction house. 1:30-2:45 Readings: Bennis and O’Toole. and more importantly how some of these ideas may apply to your firms. Meg Whitman at eBay Inc. Gabarro. Harvard Business Review.” Harvard Business Review.” Harvard Business Review. “Don’t Hire the Wrong CEO.” Harvard Business Review. Cross and Prusak. John. Preparation Questions: 1. June 2002. “The Anxiety of Learning”.16 IV. April 2. But for a few firms the fun continues. Friday. Managing Strategy Implementation and Strategic Change Sessions 9 & 10. pp 171-176. 105-112. Why is eBay successful? What are the growth pressures that Meg Whitman is facing? How do you assess Meg Whitman as a CEO? What should eBay do about Kruse? . 3. pp. 2004 8:00-12:00. MayJun 1989. “The People Who Make Organizations Go – or Stop. MayJune 2000. 100-106. 2. “When a New Manager Takes Charge. (A) 9-401-024 Case During the past ten years we all watched as the internet was hyped and rehyped—then alas. the bubble burst. many large pharmaceutical companies are seeing substantial competition from smaller. In addition. and developing and keeping the talent necessary for competitive success. The Millennium Pharmaceuticals case gives us the opportunity to explore the issues of using alliances to grow a firm. “Competing to Shape the Future” Hamel and Prahalad. On what basis has Millennium historically competed? 2. What are the major problems facing Jim Bartlett at Cleveland Twist Drill? How serious is the situation? 2.” Harvard Business Review. Preparation Questions: 1. How does Millennium plan to compete going forward? 3. what is your detailed plan of action for accomplishing the objectives that you and Ames have for the business? 3. the new president of CTD as he tries to decide how to bring about the broad changes required to make his firm competitive again. As CEO Marc Levin. would you pursue the Lundberg alliance? Case: Cleveland Twist Drill (A) (4-384-083) Declining industries provide one of the most basic challenges for general managers trying to introduce strategic change. Preparation Questions: 1. Which of the three options that Bartlett was considering in April 1982 would you pursue? Why? Are there others that make more sense given his objectives? . January-February 2000. “Coevolving: At last a way to make synergies work. We’ll begin our study of managing strategic change by focusing on Jim Bartlett. Chapter 9. managing when an industry paradigm changes rapidly.17 Sessions 9&10 (continued) Readings: Eisenhardt and Galunic. As Bartlett. 91-101. Chapter 8. more focused firms. “Building Gateways to the Future” Millennium Pharmaceuticals (A) 9-600-038 Case: The pharmaceutical industry has been turned on its head in the past several years. Hamel and Prahalad. The primary science base has evolved from organic chemistry to genomics. ” Just what is the J&J culture and what difference does it really make for the company? 2. 79-88.” Harvard Business Review. “Managing in the Whitespace. as he discusses the company’s philosophy and culture with a Harvard AMP class. 2004 10:30-12:30 Readings: Hagel and Singer. J&J’s Chairman. Hamel and Prahalad. What problems does Pete Ventrella face? 4. Maletz & Nohria. Saturday April 17. pp.103-111. “Changing the Role of Top Management: Beyond Strategy to Purpose. March-April 1999. These two factors in the firm’s past success play an important role in the options Pete Ventrella has as he is charged with creating a new unit in the firm more responsive to the changing competitive environment. “Entry into New Businesses” Uyterhoeven. What do you think about the way in which Burke and Clare have brought about the creation of the Hospital Services Group? 3. We’ll also see a short videotape of James Burke.” Harvard Business Review. Sept-Oct 1989.” Harvard Business Review. “Unbundling the Corporation. Preparation Questions 1.” Harvard Business Review. “General Managers in the Middle. November-December 1994. “Thinking Differently” Recommended Readings: Bartlett and Ghoshal. pp. What should Ventrella do about hospital services as a cost or profit center? About the differences with Ethicon over inventory placements? . James Burke is quoted. Chapter 16. Chapter 12. “Our culture is really it. Porter. Cases: Johnson & Johnson (A) Johnson & Johnson (B) 9-384-053 9-384-054 Johnson & Johnson is a very successful company that seems to have instilled a strong belief in decentralization and to have created a strong management culture. H.18 Sessions 11 & 12. February 2001. Thomas. You will recognize many of the names of the companies although some of them may be new to you. In every industry. Given the requirement for release. On your second reading you should read in more depth. the company must “release” the case. the case method requires you to be an active participant in the closest thing to the real situation. Preparing for Class When you prepare for class. . however. It is intended solely as an aid to class preparation. do not need a release.E. It should give you a feeling for what the case is about and the types of data that are contained in the case. it is recommended that you plan on reading the case at least three times. Public source cases. It is also a way to learn a great deal about how certain businesses operate. Many companies do this because of their belief in the effectiveness of the case method. Thus the case situations that you will face will require the use of analytical tools and the application of your personal judgment. Your major effort on a second reading should be to understand the business and the situation. When a problem becomes programmable. This means that they have final approval of the content of a given case. a professor will seek out a company because he or she knows that the company is in an interesting or difficult situation. You should ask yourself questions like: (1) Why has this company survived? (2) How does this business work? (3) What are the economics of this business? 1 This note was prepared by Associate Professor Dan R. cases will be written solely from public sources. It is widely used in schools of business throughout the world.19 APPENDIX: THE USE OF CASES IN STRATEGIC MANAGEMENT WHY WE USE THE CASE METHOD1 The case method is one of the most effective means of management education. Sources of Cases All the cases in this course are about real companies. Real problems are messy. It is a way of gaining a great deal of experience without spending a lot of time. Unlike other pedagogical techniques. There are few programmable. obviously. complex. The first reading should be a quick run-through of the text in the case. textbook solutions to the kinds of problems faced by real general managers. the company will agree to allow a case to be written. you will want to differentiate between facts and opinions that may be expressed. Occasionally. a company will come to a business school professor and request that a case be written on that company. In those situations where a company has agreed to have a case written. Often. Many people like to underline or otherwise mark up their cases to pick out important points that they know will be needed later. and how managers manage. The company and the case writer are thus protected from any possibility of releasing data that might be competitively or personally sensitive. it is amazing the amount of information that companies will allow to be placed in a case. there is a certain amount of “conventional wisdom” that may or may not reflect the truth. the general manager gives it to someone else to solve on a repeated basis using the guidelines he or she has set down. and very interesting. Occasionally. These cases were developed in several different ways. For example. This is perhaps the most difficult type of case writing because of the lack of primary data sources. many of which make you the recipient of large amounts of information but do not require its use. and this use is predicated upon the belief that tackling real business problems is the best way to develop practitioners. In other situations. growth rate analysis. You should put yourself in the position of the general manager involved in the situation and look at the situation through his or her eyes. Therefore. It is generally true that the case writer has put the exhibit there for a purpose. or is not. On your third reading. you should have no difficulty with this lead-off assignment. There is no single correct solution to any of these problems. however.20 On your second reading. It is during this time that you will have an opportunity to present and develop your ideas about the way the situation should be handled. It will be important for you to relate your ideas to the case situation and to the ideas of others as they are presented in the class.or post-case data. An effective lead-off can do a great deal to enhance a class discussion. There are. class attendance is also very important.or Post-Case Data You are encouraged to deal with the case as it is presented. you may want to review the assignment questions in the course description. There is no way to come out a winner on all counts. a good solution. you should have a good idea of the fundamentals of the case. but you should draw your own conclusions from that. to develop your ideas.) to the exhibit in order to benefit from the information in the raw data. I will tell you what happened to a company since the time of the case. It is during and after the third reading that you should be able to prepare your outlined answers to the assignment questions. You must remember that because a company did something different from your recommendations and was successful or unsuccessful. and none should be falsely legitimized. Before the third reading. Therefore. Ask yourself what the information is when you study each exhibit. interesting and occasionally useful to know what actually occurred. a lot of wrong solutions. You will often find that you will need to apply some analytical technique (for example. Class Discussions In each class. ratio analysis. Therefore. The instructor’s role is to help you do this. I will try to come up with a solution that will enable us to deal effectively with the problems presented in the case. Some case method purists argue that a class should never be told what actually happened in a situation. Part of the unique job of being a general manager is that many of your problems are dilemmas. this is not an indication of the value of your approach. You will want to get at the root causes of problems and gather data from the case that will allow you to make specific action recommendations. The instructor’s primary role is to manage the class process and to insure that the class achieves an understanding of the case situation. Each person should leave the classroom situation with his or her plan for solving the problem. This use of the Socratic method has proved to be an effective way to develop thinking capability in individuals. There is only one secret to good case teaching and that is good preparation on the part of the participants. through intensive questioning. I will ask one or several people to lead off the discussion. It contains some information that will be useful to you in analyzing the situation. the “Monday morning quarterback” syndrome is not an effective way to learn about strategic management. The Use of Extra. The outcome of a situation may not reflect what is. It sets a tone for the class that allows that class to probe more deeply into the issues of the case. etc. After the individual lead-off presentation. however. . It is. the discussion will be opened to the remainder of the group. you are strongly discouraged from acquiring or using extra. Now you will be searching to understand the specific situation. and are capable of answering the assignment question. Since the course has been designed to “build” as it progresses. Although additional data might be interesting or useful. you should carefully examine the exhibits in the case. whenever possible. The instructor’s role in the class discussion is to help. If you have prepared the case. The Functions of the Executive. Martha and Nalin Kulatilaka. Sayles. Christopher A. Performance. NJ: Prentice-Hall. Paul W. Chester I. Arie P. Living Company.) Bartlett. Hypercompetition: Managing the Dynamics of Strategic Maneuvering. 1966. Graham T. and Mark Shanley. Free Press: New York. Boston: Harvard Business School Press. 2000. The Economics of Strategy. (Homewood. Books: Allison. Jr.. Christensen. (Englewood Cliffs. Caves. Scale and Scope. 1994). and Kathleen M. Kenneth R. the following books and articles are listed here to supplement your readings on the concepts and problems I explore in the course. Real Options: Managing Strategic Investment in an Uncertain World. Cheltenham: Elgar Publishing.) Chandler. IL: Dow Jones-Irwin. 1986. (New York: Doubleday. W. Brown. Cyert. Adam and Barry Nalebuff. and L. Essence of Decision. 1998. Harper & Row: New York. 1998). Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. (Englewood Cliffs. NJ: Prentice-Hall. Clayton M. 1997..) Amram. David. The Concept of Corporate Strategy. 1998. 1971. Richard M. Boston: Harvard Business School Press. Inside Corporate Innovation. Cambridge: Harvard Business School Press. D’Aveni. March. l985. 1971. Shona L. Richard.21 STRATEGIC MANAGEMENT References In addition to the course readings. Brandenburger. 1998. Leaders: The Strategies for Taking Charge. and James G. 1972. (Boston: HBS Press. Burgelman. Brown. Strategic Alliances. Competing on the Edge. and B. American Industry: Structure. The Social Life of Information. De Geus.) Chandler. Doubleday. Jr. Boston: Harvard Business School Publishing. Alfred D. New York. . David Dranove. 1963). MacMillan. 1938. Zanas and Ian C. Cambridge: Harvard University Press). 2nd edition. 1993. 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