Case Solutions

Book: Strategic Management - By Frank T. Rothaermel

5th Edition

Course: Strategic Management: Case & Practices

Course code: 505

 Michael Phelps: Strategy Formulation & Implementation

01. Olympians generally do not turn into global phenomena. One reason is that they are
highlighted only every four years; e.g., not too many people follow competitive
swimming or downhill skiing outside the Olympics. How did Michael Phelps (think
Lindsey Vonn) turn into a global brand?

Ans:

step 1
MP is an American swimmer who won 22 medals by way of participating in four Olympic
Games. He grew up by idolizing MJ and his aim is to change the public image and
marketing of swimming.

step 2
The below following aspects shows that how MP as turned into a global image:

MP successfully transformed his competitive advantage as an athlete into a “global

brand”. Firstly, MP was unlike other Olympians as he managed to break several world
records at a single event. He used to be efficient and performance personified. This
enhanced him as a successful positioning. On the other end, his manager Mr. exposed
him to China and Asia. MP presence in the virtual world was build and strengthened.
Thus, above all led to transformation of MP into a position of competitive advantage as
a global brand.

MP is an American swimmer who won 22 medals by way of participating in four Olympic

Games. He grew up by idolizing MJ and his aim is to change the public image and
marketing of swimming.

The below following aspects shows that how MP as turned into a global image:

MP successfully transformed his competitive advantage as an athlete into a “global

brand”. Firstly, MP was unlike other Olympians as he managed to break several world
records at a single event. He used to be efficient and performance personified. This
enhanced him as a successful positioning. On the other end, his manager Mr. exposed
him to China and Asia. MP presence in the virtual world was build and strengthened.
Thus, above all led to transformation of MP into a position of competitive advantage as
a global brand.
02. Which approach to the strategy process did Phelps, his coach, and manager use?
Why was this approach successful?

Ans:

step 1

Mr.MP is one of the finest swimmers in the world. He started to make unbreakable
records right from his age of 15. He won more than seven world records registered in
his name. He was extremely supported by his lifetime swimming coach and from his
manager, who worked relentlessly for his success. MP became an all-rounder, and
endorser of several big brands. Due to several mistakes made by him in the public, he
was arrested for months. MP struggled hard to gain his previous image.

step 2

The approach to the strategy process that was used by MP, his coach, and his manager
was to make use of natural physical features of the MP. The MP’s coach made an
effective use of the MP’s long torso, and his heightened foot to use as flippers for fast
swimming. MP’s long foot and arms made him to win all the medals throughout his
successful swimming journey. While his manager got him all the necessary contacts, and
built a network, which bagged him with endorsements, and promotional activities of big
brands.

step 3

The approach was very successful as MP’s natural physical features were used by his
coach at the fullest. In addition to his natural physic, MP worked hard to achieve his life
time goal. MP’s manager added an asset to build best contacts from all over the world.
Thus, the supportive efforts by MP’s coach and manager brought a tremendous success
to MP and made him one of the most popular swimmers in the world.
Mr.MP is one of the finest swimmers in the world. He started to make unbreakable
records right from his age of 15. He won more than seven world records registered in
his name. He was extremely supported by his lifetime swimming coach and from his
manager, who worked relentlessly for his success. MP became an all-rounder, and
endorser of several big brands. Due to several mistakes made by him in the public, he
was arrested for months. MP struggled hard to gain his previous image.

The approach to the strategy process that was used by MP, his coach, and his manager
was to make use of natural physical features of the MP. The MP’s coach made an
effective use of the MP’s long torso, and his heightened foot to use as flippers for fast
swimming. MP’s long foot and arms made him to win all the medals throughout his
successful swimming journey. While his manager got him all the necessary contacts, and
built a network, which bagged him with endorsements, and promotional activities of big
brands.

The approach was very successful as MP’s natural physical features were used by his
coach at the fullest. In addition to his natural physic, MP worked hard to achieve his life
time goal. MP’s manager added an asset to build best contacts from all over the world.
Thus, the supportive efforts by MP’s coach and manager brought a tremendous success
to MP and made him one of the most popular swimmers in the world.

03. Phelps was embroiled in a number of controversies outside the pool. What impact
did these shortcomings have on his brand value? What do these incidents tell you about
maintaining and increasing brand value over time?

Ans:

step 1
Mr.MP is one of the finest swimmers in the world. He started to make unbreakable
records right from his age of 15. He won more than seven world records registered in
his name. He was extremely supported by his lifetime swimming coach and from his
manager, who worked relentlessly for his success. MP became an all-rounder, and
endorser of several big brands. Due to several mistakes made by MP in the public, he
was arrested for months. MP struggled hard to gain his previous image.

step 2
MP was embroiled in a number of controversies outside the pool. He was caught
smoking marijuana pipe in a public place, and was published in all the leading
newspapers. This instantly created a negative impression on him. He was found driving
under the impression of DUI (driving under the influence), and was prisoned for a year.
Due to his bad habits, he was suspended from the sports.

The controversies have ruined the brand value of MP. He was warned by his sport’s
authorities, and was banned to involve in all his sports activities. As a result, he missed
all the big endorsements and promotions. Even the general public started to hate MP
for all his bad deeds and mistakes.

step 3
The incidents which took place in MP’s life tell us how hard it would be to gain success,
and what mistakes are to be avoided to maintain the gained success. Creation of brand
value and to sustain the brand value is a difficult task in one’s life. MP worked hard to
gain success and created a brand for himself. He failed in maintaining the success and
popularity by getting into several ill controversies and thus, created a bad image of
himself.

Mr.MP is one of the finest swimmers in the world. He started to make unbreakable
records right from his age of 15. He won more than seven world records registered in
his name. He was extremely supported by his lifetime swimming coach and from his
manager, who worked relentlessly for his success. MP became an all-rounder, and
endorser of several big brands. Due to several mistakes made by MP in the public, he
was arrested for months. MP struggled hard to gain his previous image.

MP was embroiled in a number of controversies outside the pool. He was caught

smoking marijuana pipe in a public place, and was published in all the leading
newspapers. This instantly created a negative impression on him. He was found driving
under the impression of DUI (driving under the influence), and was prisoned for a year.
Due to his bad habits, he was suspended from the sports.
The controversies have ruined the brand value of MP. He was warned by his sport’s
authorities, and was banned to involve in all his sports activities. As a result, he missed
all the big endorsements and promotions. Even the general public started to hate MP
for all his bad deeds and mistakes.

The incidents which took place in MP’s life tell us how hard it would be to gain success,
and what mistakes are to be avoided to maintain the gained success. Creation of brand
value and to sustain the brand value is a difficult task in one’s life. MP worked hard to
gain success and created a brand for himself. He failed in maintaining the success and
popularity by getting into several ill controversies and thus, created a bad image of
himself.

04. What does Phelps need to do if he wants to play a similar transformative role in the
marketing and sponsoring of swimming as Michael Jordan achieved in basketball?

Ans:

step 1
Mr.MP is one of the finest swimmers in the world. He started to make unbreakable
records right from his age of 15. He won more than seven world records registered in
his name. He was extremely supported by his lifetime swimming coach and from his
manager, who worked relentlessly for his success. MP became an all-rounder, and
endorser of several big brands. Due to several mistakes made by him in the public, he
was arrested for months. MP struggled hard to gain his previous image.

step 2
If MP wants to play a similar transformative role in the marketing and sponsoring in
swimming as MJ achieved in basketball then he has to recreate his image once again.
Firstly has to change his lifestyle, habits, and his behavior. He has to gain trust and
confidence in others who are capable of creating his brand value in the world of sports.

MP needs to regain brand value by working hard on his swimming, and show excellence
to the world. He can wish to be like MJ and can ask for a sponsorship. He has to strive
hard to make brands invest on him to regain his popularity.

step 3
In this way MP might be able to create an environment that is similar to what MJ did to
gain his basketball. MP has to make people turnaround to look at his transformed image
to get sponsorship of his own brand value.
Mr.MP is one of the finest swimmers in the world. He started to make unbreakable
records right from his age of 15. He won more than seven world records registered in
his name. He was extremely supported by his lifetime swimming coach and from his
manager, who worked relentlessly for his success. MP became an all-rounder, and
endorser of several big brands. Due to several mistakes made by him in the public, he
was arrested for months. MP struggled hard to gain his previous image.

If MP wants to play a similar transformative role in the marketing and sponsoring in

swimming as MJ achieved in basketball then he has to recreate his image once again.
Firstly has to change his lifestyle, habits, and his behavior. He has to gain trust and
confidence in others who are capable of creating his brand value in the world of sports.

MP needs to regain brand value by working hard on his swimming, and show excellence
to the world. He can wish to be like MJ and can ask for a sponsorship. He has to strive
hard to make brands invest on him to regain his popularity.

In this way MP might be able to create an environment that is similar to what MJ did to
gain his basketball. MP has to make people turnaround to look at his transformed image
to get sponsorship of his own brand value.

Teach for America: How to Inspire Future Leaders

01. How did an undergraduate student accomplish what the Department of Education,
state and local school boards, and the national Parent-Teacher Association could not
achieve despite trying for decades and spending billions of dollars in the process?

Ans:

step 1
TFA is a non-profit organization in US. This organization works to provide education for
underprivileged children in the rural and under developed areas in the country. This was
found by Ms. WK who thought that successful people at some point of time try to find
meaning to their lives by helpful contribution to the society, and for its development. As
a result today TFA has the list of teachers who are bigwig personalities. The teachers list
includes actors, writers, economists, chief justices, government authorities, etc. The
student who learns at TFA comes out to be achiever, especially in math and science.

step 2
An undergraduate student Ms. WK accomplished what the others in the field of
education could not by initiating TFA. Providing good and equal education to all the
children in the motive of any country, same is the case with the Country US where the
concerned authorities, state and local school boards, etc. failed in achieving equality in
education. But despite all the failures and struggles, WK was successful in coming up
with TFA and realized her dream of providing good education to the poor and
underprivileged children.

It is possible for WK as she was determined and had a dream which she wanted to
achieve at any cost. This gave her determination and passion to continue with her
persistent efforts and achieve quality education for poor children too. This is basically a
story of determination and passion towards the realization of one’s objective for the
welfare of poor and underprivileged.

TFA is a non-profit organization in US. This organization works to provide education for
underprivileged children in the rural and under developed areas in the country. This was
found by Ms. WK who thought that successful people at some point of time try to find
meaning to their lives by helpful contribution to the society, and for its development. As
a result today TFA has the list of teachers who are bigwig personalities. The teachers list
includes actors, writers, economists, chief justices, government authorities, etc. The
student who learns at TFA comes out to be achiever, especially in math and science.

An undergraduate student Ms. WK accomplished what the others in the field of

education could not by initiating TFA. Providing good and equal education to all the
children in the motive of any country, same is the case with the Country US where the
concerned authorities, state and local school boards, etc. failed in achieving equality in
education. But despite all the failures and struggles, WK was successful in coming up
with TFA and realized her dream of providing good education to the poor and
underprivileged children.

It is possible for WK as she was determined and had a dream which she wanted to
achieve at any cost. This gave her determination and passion to continue with her
persistent efforts and achieve quality education for poor children too. This is basically a
story of determination and passion towards the realization of one’s objective for the
welfare of poor and underprivileged.
02. Applying the Level-5 leadership pyramid, do you believe Wendy Kopp is an effective
leader? Why or why not?

Ans:

step 1
TFA is a non-profit organization in US. This organization works to provide education for
underprivileged children in the rural and under developed areas in the country. This was
found by Ms. WK who thought that successful people at some point of time try to find
meaning to their lives by helpful contribution to the society, and for its development. As
a result today TFA has the list of teachers who are bigwig personalities. The teachers list
includes actors, writers, economists, chief justices, government authorities, etc. The
student who learns at TFA comes out to be achiever, especially in math and science.

step 2
The approach was successful as on the following reasons:

• Level-5 leadership pyramid is all about the individuals, who possess professionalism
and humility

• These people are very humble in nature and are shy people and they just strive hard
every day to make their company more successful.

• These people are quiet and show extreme discipline in their personal and as well as in
their professional life.

• Level-5 leadership pyramid WK possess all the qualities of being an effective leader if
we apply over her work and personality traits

• This is because WK has always credited her company’s success to her employees

Hence, she has always taken responsibility towards the work and has worked harder
than anyone else in the organization. It could be regarded at the above mentioned
points it is surely to be stated that WK is an effective leader.

TFA is a non-profit organization in US. This organization works to provide education for
underprivileged children in the rural and under developed areas in the country. This was
found by Ms. WK who thought that successful people at some point of time try to find
meaning to their lives by helpful contribution to the society, and for its development. As
a result today TFA has the list of teachers who are bigwig personalities. The teachers list
includes actors, writers, economists, chief justices, government authorities, etc. The
student who learns at TFA comes out to be achiever, especially in math and science.

The approach was successful as on the following reasons:

• Level-5 leadership pyramid is all about the individuals, who possess professionalism
and humility

• These people are very humble in nature and are shy people and they just strive hard
every day to make their company more successful.

• These people are quiet and show extreme discipline in their personal and as well as in
their professional life.

• Level-5 leadership pyramid WK possess all the qualities of being an effective leader if
we apply over her work and personality traits

• This is because WK has always credited her company’s success to her employees

Hence, she has always taken responsibility towards the work and has worked harder
than anyone else in the organization. It could be regarded at the above mentioned
points it is surely to be stated that WK is an effective leader.

03. What are your personal leadership take-aways from Wendy Kopp and the TFA
MiniCase? Would you want to apply to be a TFA teaching fellow? Why or why not?

Ans:

step 1
TFA is a non-profit organization in US. This organization works to provide education for
underprivileged children in the rural and under developed areas in the country. This was
found by Ms. WK who thought that successful people at some point of time try to find
meaning to their lives by helpful contribution to the society, and for its development. As
a result today TFA has the list of teachers who are bigwig personalities. The teachers list
includes actors, writers, economists, chief justices, government authorities, etc. The
student who learns at TFA comes out to be achiever, especially in math and science.

step 2
Personal leadership takeaways from WK’s and the TFA Mini case are that nothing would
be impossible in this world if one has the passion to achieve something. A strong
determination would make unsolvable issue to solvable.

WK is determined towards her goals, her persistent efforts, passion for developing
education among poor children etc. She has represented that if one has the capability
and confidence, an impossible problem can be solved with positive results. She made
the government officials to notice her work, and the caused. She made her dreams
come true to develop the society.

TFA is a non-profit organization in US. This organization works to provide education for
underprivileged children in the rural and under developed areas in the country. This was
found by Ms. WK who thought that successful people at some point of time try to find
meaning to their lives by helpful contribution to the society, and for its development. As
a result today TFA has the list of teachers who are bigwig personalities. The teachers list
includes actors, writers, economists, chief justices, government authorities, etc. The
student who learns at TFA comes out to be achiever, especially in math and science.

Personal leadership takeaways from WK’s and the TFA Mini case are that nothing would
be impossible in this world if one has the passion to achieve something. A strong
determination would make unsolvable issue to solvable.

WK is determined towards her goals, her persistent efforts, passion for developing
education among poor children etc. She has represented that if one has the capability
and confidence, an impossible problem can be solved with positive results. She made
the government officials to notice her work, and the caused. She made her dreams
come true to develop the society.

04. How can the frameworks and concepts you studied in strategic management help
TFA achieve its mission “to enlist, develop, and mobilize as many as possible of our
nation’s most promising future leaders to grow and strengthen the movement for
educational equality and excellence”?

Ans:

step 1
TFA is a non-profit organization in US. This organization works to provide education for
underprivileged children in the rural and under developed areas in the country. This was
found by Ms. WK who thought that successful people at some point of time try to find
meaning to their lives by helpful contribution to the society, and for its development. As
a result today TFA has the list of teachers who are bigwig personalities. The teachers list
includes actors, writers, economists, chief justices, government authorities, etc. The
student who learns at TFA comes out to be achiever, especially in math and science.

step 2
Several framework and concepts of strategic management were used to develop and
mobilize our nation’s most promising future leaders to grow and strengthen the
movement for educational quality and excellence. WK was very confident, and clear in
her strategies that she used to achieve her goals in life. She prepared a roadmap to
implement her plans to come up with TFA. She has motivated professionals and college
professors to come, and contribute towards a social cause. This motivation enlightened
the inner wish in her to contribute towards the social.

Thus, WK was successful to avail good quality and proper education to poor children
which was not achieved by education ministry. The strategic management skills were
highly optimized by WK as she made a plan for every step she took towards the
initiation of TFA.

TFA is a non-profit organization in US. This organization works to provide education for
underprivileged children in the rural and under developed areas in the country. This was
found by Ms. WK who thought that successful people at some point of time try to find
meaning to their lives by helpful contribution to the society, and for its development. As
a result today TFA has the list of teachers who are bigwig personalities. The teachers list
includes actors, writers, economists, chief justices, government authorities, etc. The
student who learns at TFA comes out to be achiever, especially in math and science.

Several framework and concepts of strategic management were used to develop and
mobilize our nation’s most promising future leaders to grow and strengthen the
movement for educational quality and excellence. WK was very confident, and clear in
her strategies that she used to achieve her goals in life. She prepared a roadmap to
implement her plans to come up with TFA. She has motivated professionals and college
professors to come, and contribute towards a social cause. This motivation enlightened
the inner wish in her to contribute towards the social.
Thus, WK was successful to avail good quality and proper education to poor children
which was not achieved by education ministry. The strategic management skills were
highly optimized by WK as she made a plan for every step she took towards the
initiation of TFA.

05. Apply a triple-bottom-line assessment of TFA’s performance. How is TFA doing?

What are its strong areas, where could its performance be improved? See the TFA site
for more information at www.teachforamerica.org.

Ans:

step 1
TFA is a non-profit organization in US. This organization works to provide education for
underprivileged children in the rural and under developed areas in the country. This was
found by Ms. WK who thought that successful people at some point of time try to find
meaning to their lives by helpful contribution to the society, and for its development. As
a result today TFA has the list of teachers who are bigwig personalities. The teachers list
includes actors, writers, economists, chief justices, government authorities, etc. The
student who learns at TFA comes out to be achiever, especially in math and science.

step 2
Triple-bottom-line assessment:

Triple-bottom-line assessment is also known as TBL or 3BL, an accounting framework

that includes three parts: social, environmental (ecological) and financial. Many
organizations have adopted this TBL, which makes them to evaluate their business
performances to greater value.

step 3
Implementing TBL assessment to TFA would help to realize all the three parts of triple-
bottom-line approach. TFA is a non-profit organization that works for a social cause to
provide education to poor children. It is also contributing to the environment by
reducing the use of chalk, blackboard, and other study material. Teachers make
wholesome use of the books, and avoid wasting the usage of extra books. TFA is also
financially supporting the nation by managing their own funds through donations and
tax reliefs.

The strongest areas of TFA were the quality of the education, and expert teachers train
the students. As per my opinion, there are no major weak areas at TFA, which needs to
be improved. Overall, TFA is doing its best in contributing quality education to poor
children.
TFA is a non-profit organization in US. This organization works to provide education for
underprivileged children in the rural and under developed areas in the country. This was
found by Ms. WK who thought that successful people at some point of time try to find
meaning to their lives by helpful contribution to the society, and for its development. As
a result today TFA has the list of teachers who are bigwig personalities. The teachers list
includes actors, writers, economists, chief justices, government authorities, etc. The
student who learns at TFA comes out to be achiever, especially in math and science.

Triple-bottom-line assessment:

Triple-bottom-line assessment is also known as TBL or 3BL, an accounting framework

that includes three parts: social, environmental (ecological) and financial. Many
organizations have adopted this TBL, which makes them to evaluate their business
performances to greater value.

Implementing TBL assessment to TFA would help to realize all the three parts of triple-
bottom-line approach. TFA is a non-profit organization that works for a social cause to
provide education to poor children. It is also contributing to the environment by
reducing the use of chalk, blackboard, and other study material. Teachers make
wholesome use of the books, and avoid wasting the usage of extra books. TFA is also
financially supporting the nation by managing their own funds through donations and
tax reliefs.

The strongest areas of TFA were the quality of the education, and expert teachers train
the students. As per my opinion, there are no major weak areas at TFA, which needs to
be improved. Overall, TFA is doing its best in contributing quality education to poor
children.

PepsiCo’s Indra Nooyi: Performance with Purpose

01. What “grade” would you give PepsiCo CEO Indra Nooyi for her job performance as a strategic
leader? What are her strengths and weaknesses? Where would you place Nooyi on the Level-5
pyramid of strategic leadership (see Exhibit 2.4), and why? Support your answers.

Ans:
step 1
Pep is a company that is highly recognized for its beverages in the category of soft
drinks and also in the snack manufacturing industry. Some of its soft drinks and soda are
very popular and same is the case with its snacks. Ms. IN is the person behind the
success of Pep. Since she became CEO of the company in the year 2006, the company
has been growing manifold with every passing year. Pep has adopted three bottom line
approaches and the company works for the benefit of the environment, development of
the society and most importantly for its people (employees).

step 2
I would grade Ms. IN, the CEO of pep as number one for her job performance as a
strategic leader as on the following reasons:

• It is because she has realized the height of success at Pep which was untouched before
her taking the leadership position in the company

• The major strengths of IN is that she has all the necessary educational qualifications
that are needed to become an excellent leader and CEO of a company

• Her weakness could be that she has become habituated to success and this might
make her lose some or the other good business expansion opportunities

step 3
On Level-5 pyramid of strategic leadership, I would place Ms. IN at level 5 as on the
following reasons:

• It is because she has all those qualities, which make her deserving to take this top
position

• As level 5 people are very humble in nature as they are shy people and they just strive
hard every day to make their company more successful

• These people are quiet and show extreme discipline in their personal as well as
professional life

As per my opinion, Ms. IN too possesses all the qualities of being an effective leader if
we apply Level-5 leadership pyramid over her work and personality traits. This is
because IN has always credited her company’s success to her employees. She has always
taken responsibility towards the work and has worked harder than anyone else in the
organization.
Pep is a company that is highly recognized for its beverages in the category of soft
drinks and also in the snack manufacturing industry. Some of its soft drinks and soda are
very popular and same is the case with its snacks. Ms. IN is the person behind the
success of Pep. Since she became CEO of the company in the year 2006, the company
has been growing manifold with every passing year. Pep has adopted three bottom line
approaches and the company works for the benefit of the environment, development of
the society and most importantly for its people (employees).

I would grade Ms. IN, the CEO of pep as number one for her job performance as a
strategic leader as on the following reasons:

• It is because she has realized the height of success at Pep which was untouched before
her taking the leadership position in the company

• The major strengths of IN is that she has all the necessary educational qualifications
that are needed to become an excellent leader and CEO of a company

• Her weakness could be that she has become habituated to success and this might
make her lose some or the other good business expansion opportunities

On Level-5 pyramid of strategic leadership, I would place Ms. IN at level 5 as on the

following reasons:

• It is because she has all those qualities, which make her deserving to take this top
position

• As level 5 people are very humble in nature as they are shy people and they just strive
hard every day to make their company more successful

• These people are quiet and show extreme discipline in their personal as well as
professional life

As per my opinion, Ms. IN too possesses all the qualities of being an effective leader if
we apply Level-5 leadership pyramid over her work and personality traits. This is
because IN has always credited her company’s success to her employees. She has always
taken responsibility towards the work and has worked harder than anyone else in the
organization.
02. The first few years after Indra Nooyi took over as PepsiCo’s CEO and implemented Performance
with Purpose, the company underperformed its archrival Coca-Cola Co. by a wide margin. What
should a strategic leader do if his or her vision does not seem to lead to an immediate (financial)
competitive advantage? What would be your top three recommendations? Support your arguments.

Ans:

step 1
Pep is a company that is highly recognized for its beverages in the category of soft
drinks and also in the snack manufacturing industry. Some of its soft drinks and soda are
very popular and same is the case with its snacks. Ms. IN is the person behind the
success of Pep. Since she became CEO of the company in the year 2006, the company
has been growing manifold with every passing year. Pep has adopted three bottom line
approaches and the company works for the benefit of the environment, development of
the society and most importantly for its people (employees).

step 2
The first few years after IN took over as Pep’s CEO and came up with the policy of
“performance with purpose”, the company did not performed well and was far behind
from its competitors. In such situation, a strategic leader should keep his calm and
confidence even if the new policy is not paying immediate financial gains for the
organization. The leader should focus on the vision and should strive hard realizing that
vision even though it takes a lot of time and patience from his side.

The top three recommendations that could be given to a strategic leader if the vision
drafted by him is not paying immediate gains could be as follows:

• The umpteen confidence and trust over the vision or policy which he has drafted for
the company’s success and growth

• The leader has to undertake all his employees and subordinates into confidence and
make them believe in the vision drafted for the company’s success

• the strategic leader should strive very hard, leaving no stone untouched for the
realization of his growth vision to make company grow manifold

Thus, strategic leader helps in developing the plans for the purpose of maintaining the
immediate gains in relation to the employees.

Pep is a company that is highly recognized for its beverages in the category of soft
drinks and also in the snack manufacturing industry. Some of its soft drinks and soda are
very popular and same is the case with its snacks. Ms. IN is the person behind the
success of Pep. Since she became CEO of the company in the year 2006, the company
has been growing manifold with every passing year. Pep has adopted three bottom line
approaches and the company works for the benefit of the environment, development of
the society and most importantly for its people (employees).

The first few years after IN took over as Pep’s CEO and came up with the policy of
“performance with purpose”, the company did not performed well and was far behind
from its competitors. In such situation, a strategic leader should keep his calm and
confidence even if the new policy is not paying immediate financial gains for the
organization. The leader should focus on the vision and should strive hard realizing that
vision even though it takes a lot of time and patience from his side.

The top three recommendations that could be given to a strategic leader if the vision
drafted by him is not paying immediate gains could be as follows:

• The umpteen confidence and trust over the vision or policy which he has drafted for
the company’s success and growth

• The leader has to undertake all his employees and subordinates into confidence and
make them believe in the vision drafted for the company’s success

• the strategic leader should strive very hard, leaving no stone untouched for the
realization of his growth vision to make company grow manifold

Thus, strategic leader helps in developing the plans for the purpose of maintaining the
immediate gains in relation to the employees.

03. Do you agree with Indra Nooyi’s philosophy that “performance and purpose are intimately
linked and you can’t do one without the other”? Support your arguments.

Ans:

step 1
Pep is a company that is highly recognized for its beverages in the category of soft
drinks and also in the snack manufacturing industry. Some of its soft drinks and soda are
very popular and same is the case with its snacks. Ms. IN is the person behind the
success of Pep. Since she became CEO of the company in the year 2006, the company
has been growing manifold with every passing year. Pep has adopted three bottom line
approaches and the company works for the benefit of the environment, development of
the society and most importantly for its people (employees).

step 2
Ms. IN suggests a policy for Pep which states that performance and purpose are very
intimately linked with each other and one cannot be done without the other. I
completely agree with this statement as on the following reasons:

• The purpose and performance must go hand-in-hand for the accomplishment of any
task in a prospective way for productive ways

• It is because performance without a purpose is futile

• In other words, in the absence of a good purpose, performance given by an individual

goes nowhere

• One has to have a strong purpose to make his hard work go into that direction

• The intensity of the purpose drives in designing a strategic plan to execute it with
optimum output, which is performing with extreme excellence

Thus, if one has a purpose in life whether it is personal or professional purpose, then he
will be able to perform to the fuller extend and will realize the purpose surely. Thus it
could be stated that purpose in life is very vital in achieving fruitful performance.

Pep is a company that is highly recognized for its beverages in the category of soft
drinks and also in the snack manufacturing industry. Some of its soft drinks and soda are
very popular and same is the case with its snacks. Ms. IN is the person behind the
success of Pep. Since she became CEO of the company in the year 2006, the company
has been growing manifold with every passing year. Pep has adopted three bottom line
approaches and the company works for the benefit of the environment, development of
the society and most importantly for its people (employees).

Ms. IN suggests a policy for Pep which states that performance and purpose are very
intimately linked with each other and one cannot be done without the other. I
completely agree with this statement as on the following reasons:
• The purpose and performance must go hand-in-hand for the accomplishment of any
task in a prospective way for productive ways

• It is because performance without a purpose is futile

• In other words, in the absence of a good purpose, performance given by an individual

goes nowhere

• One has to have a strong purpose to make his hard work go into that direction

• The intensity of the purpose drives in designing a strategic plan to execute it with
optimum output, which is performing with extreme excellence

Thus, if one has a purpose in life whether it is personal or professional purpose, then he
will be able to perform to the fuller extend and will realize the purpose surely. Thus it
could be stated that purpose in life is very vital in achieving fruitful performance.

04. PepsiCo’s investors require the company to grow about 5 percent or $3.5 billion a year.
PepsiCo’s top line, however, remained flat for the last few years. Where would future growth for
PepsiCo come from?

Ans:

step 1
Pep is a company that is highly recognized for its beverages in the category of soft
drinks and also in the snack manufacturing industry. Some of its soft drinks and soda are
very popular and same is the case with its snacks. Ms. IN is the person behind the
success of Pep. Since she became CEO of the company in the year 2006, the company
has been growing manifold with every passing year. Pep has adopted three bottom line
approaches and the company works for the benefit of the environment, development of
the society and most importantly for its people (employees).

step 2
Pep’s investors require the company to grow about 5 percent or $3.5 billion a year.
Pep’s top line, however, remained flat for the last few years. In this case, the future
growth for Pep might be possible in the following ways:

• The existing product lines can be improved with sophistication of the technology and
resources, which enhances the growth progress and in turn revenue for the organization
• The company has to strategically plan to make sure that the existing products become
capable of deriving good level of business and profit generation for the company

• The company must focus on potential acquisition decisions and collaborate with other
brands to become most successful and to sustain its powerful brand name in the
country

• The future growth for Pep could also come from the expansion of business line by the
company through addition of different types of beverage and snack products

• It brings surplus profits for the company’s overall financial gains and this way the
company might be in a condition to provide its investors with 5 percent growth every
year

Thus, it is evident that the Pep co. is growing further in sustaining its potential presence
in the industry in the above discussed ways.

Pep is a company that is highly recognized for its beverages in the category of soft
drinks and also in the snack manufacturing industry. Some of its soft drinks and soda are
very popular and same is the case with its snacks. Ms. IN is the person behind the
success of Pep. Since she became CEO of the company in the year 2006, the company
has been growing manifold with every passing year. Pep has adopted three bottom line
approaches and the company works for the benefit of the environment, development of
the society and most importantly for its people (employees).

Pep’s investors require the company to grow about 5 percent or $3.5 billion a year.
Pep’s top line, however, remained flat for the last few years. In this case, the future
growth for Pep might be possible in the following ways:

• The existing product lines can be improved with sophistication of the technology and
resources, which enhances the growth progress and in turn revenue for the organization

• The company has to strategically plan to make sure that the existing products become
capable of deriving good level of business and profit generation for the company

• The company must focus on potential acquisition decisions and collaborate with other
brands to become most successful and to sustain its powerful brand name in the
country

• The future growth for Pep could also come from the expansion of business line by the
company through addition of different types of beverage and snack products
• It brings surplus profits for the company’s overall financial gains and this way the
company might be in a condition to provide its investors with 5 percent growth every
year

Thus, it is evident that the Pep co. is growing further in sustaining its potential presence
in the industry in the above discussed ways.

How the Strategy Process Kills Innovation at Microsoft

01. Describe the strategic management process at Microsoft under CEO Steve Ballmer (2000–2014).
How are strategic decisions made? What are the strengths and weaknesses of this approach? Explain
in detail.

Ans:

step 1
The case analysis indicates that the MS has been experiencing a sustained competitive
advantage, because of which the top management was following a top down strategic
planning for a long time. In spite of having various opportunities in the market to launch
innovative products, and the core capability to deploy differentiated products, the MS
leadership has rejected the proposals of the subordinate managers.

The strategic planning process i.e. analysis, formulation and implementation of the
business strategy at MS, was the responsibility of the top management led by the CEO.
The apex team in the organization felt that they understand the future of the business
better than any other managers in the organization, and can succeed in the market
based on the past wisdom of the apex management.

step 2
The tops down strategic planning are suitable for stable markets where there is little
change in the needs of the customers, and competitive activity is lesser among the
rivals. Companies that have monopoly status also can follow tops down management
process. However, in changing market situations the top management may be blinded
to the genuine indications by the lower mangers or customers.
Organizations that are overly dependent on the intelligence of the top management
alone, would fail to adapt to the changing market conditions. Change in customer
needs, entry of disruptive innovations, and changes in the regulations shall make it
difficult to respond appropriately for the companies such as MS.

The case analysis indicates that the MS has been experiencing a sustained competitive
advantage, because of which the top management was following a top down strategic
planning for a long time. In spite of having various opportunities in the market to launch
innovative products, and the core capability to deploy differentiated products, the MS
leadership has rejected the proposals of the subordinate managers.

The strategic planning process i.e. analysis, formulation and implementation of the
business strategy at MS, was the responsibility of the top management led by the CEO.
The apex team in the organization felt that they understand the future of the business
better than any other managers in the organization, and can succeed in the market
based on the past wisdom of the apex management.

The tops down strategic planning are suitable for stable markets where there is little
change in the needs of the customers, and competitive activity is lesser among the
rivals. Companies that have monopoly status also can follow tops down management
process. However, in changing market situations the top management may be blinded
to the genuine indications by the lower mangers or customers.

Organizations that are overly dependent on the intelligence of the top management
alone, would fail to adapt to the changing market conditions. Change in customer
needs, entry of disruptive innovations, and changes in the regulations shall make it
difficult to respond appropriately for the companies such as MS.

02. Although Microsoft invented some promising computing breakthroughs, and often before
competitors, why did Microsoft fail to successfully commercialize them?

Ans:

step 1
There are many reasons for squandering the opportunities to upgrade the competitive
advantage by the MS.

First of all, the strategic planning was conducted by the CEO’s team, and the lower
management did not have any opportunity to share their views about business.
step 2
The culture at the MS was not in favor of entrepreneurship within the organization. The
company focused on strengthening the existing products rather than on capturing the
emerging customer requirements. There will be no suitable organizational structure or
system to try new businesses.

There are many reasons for squandering the opportunities to upgrade the competitive
advantage by the MS.

First of all, the strategic planning was conducted by the CEO’s team, and the lower
management did not have any opportunity to share their views about business.

The culture at the MS was not in favor of entrepreneurship within the organization. The
company focused on strengthening the existing products rather than on capturing the
emerging customer requirements. There will be no suitable organizational structure or
system to try new businesses.

03. Why is it so difficult for CEOs of large and successful companies such as Microsoft to balance
exploitation—applying current knowledge to enhance firm performance in the short term—with
exploration—searching for new knowledge that may enhance a firm’s future performance? What are
the trade-offs? How could they be reconciled?

Ans:

step 1
There are many challenges to building new businesses in the established organizations,
especially the larger ones. The policies, organizational structure, systems and culture
required for exploitation and exploration are different. It is not easy for the human
resources within the organization to switch their performance to suit the exploration on
minute by minute basis.

Large companies will have difficulty in escaping from the exploitation loop, because they
are exposed to pressures from stakeholders to achieve short term financial goals. And
the large companies are likely to underestimate the importance of an exploration
strategy.

step 2
One of the measures the large companies can take to reap the benefits of exploitation
and exploration is to develop two separate teams to pursue the short term and long
term activities. A third team should integrate the works of the two teams to balance the
strategic inputs.

There are many challenges to building new businesses in the established organizations,
especially the larger ones. The policies, organizational structure, systems and culture
required for exploitation and exploration are different. It is not easy for the human
resources within the organization to switch their performance to suit the exploration on
minute by minute basis.

Large companies will have difficulty in escaping from the exploitation loop, because they
are exposed to pressures from stakeholders to achieve short term financial goals. And
the large companies are likely to underestimate the importance of an exploration
strategy.

One of the measures the large companies can take to reap the benefits of exploitation
and exploration is to develop two separate teams to pursue the short term and long
term activities. A third team should integrate the works of the two teams to balance the
strategic inputs.

04. What recommendations would you give Microsoft CEO Satya Nadella (since 2014) to redesign
Microsoft’s strategic management process in order to achieve more successful innovation?

Ans:

step 1
The new leader of MS, the SN can turn ideas within the organization into business
innovation that can generate revenue growth and shareholder confidence. The new CEO
can adapt management systems in the following ways to manage short-term
performance to achieve revenue growth and innovation.

step 2
• Promote active and frequent senior-junior level interactions: This practice shall
lead to clarity of strategy for emerging and established markets, and attainment of
organizational alignment.

• Establish dedicated innovation leadership: The younger and passionate managers

who are sensitive to the market needs and competition may be encouraged to network
within the organization to nurture embryonic business solutions.
• Ensure resources and monitoring to avoid premature stalls: Sufficient funds may
be allocated and business development pathways may be monitored.

• Develop principles for quick start and quick stop: Speed of winning is essential in
business. If an innovative isn’t achieving its expected results, it needs to be stopped, or
altered into something else. The principle to be followed is that get the idea quickly to
the market, meanwhile experiment with the idea, learn from experience, and either
iterate the process or stop the exploration.

By combining the activities for the short term and stable goals with the long term view
of the business, the CEO can make the MS a dynamic organization.

The new leader of MS, the SN can turn ideas within the organization into business
innovation that can generate revenue growth and shareholder confidence. The new CEO
can adapt management systems in the following ways to manage short-term
performance to achieve revenue growth and innovation.

• Promote active and frequent senior-junior level interactions: This practice shall
lead to clarity of strategy for emerging and established markets, and attainment of
organizational alignment.

• Establish dedicated innovation leadership: The younger and passionate managers

who are sensitive to the market needs and competition may be encouraged to network
within the organization to nurture embryonic business solutions.

• Ensure resources and monitoring to avoid premature stalls: Sufficient funds may
be allocated and business development pathways may be monitored.

• Develop principles for quick start and quick stop: Speed of winning is essential in
business. If an innovative isn’t achieving its expected results, it needs to be stopped, or
altered into something else. The principle to be followed is that get the idea quickly to
the market, meanwhile experiment with the idea, learn from experience, and either
iterate the process or stop the exploration.

By combining the activities for the short term and stable goals with the long term view
of the business, the CEO can make the MS a dynamic organization.
 Strategy and Serendipity: A Billion-Dollar Business

01. Do you think “serendipity is random,” as some say? Why or why not?

Ans:

step 1
Though the business strategies are well-planned and well-executed in many of the
companies, the top management of such companies have confessed that their success
are sometimes the result of unplanned happenings, meetings, encounters, and events.
The serendipity (unexpected happy discoveries) and sheer luck has some place in the
business.

Business strategies are formulated by predicting trends in the environment, and

analyzing business data using logical approach. But, serendipity brings a new dimension
to business, which is not planned or logical – but spontaneous. Serendipity cannot be
logically planned; it can only be allowed to happen automatically.

step 2
Planning and serendipity cannot go together. Strategic planning is based on the past
knowledge and experience, and the current available facts, but serendipity is
unprompted opening of new unexpected possibilities.

With respect to serendipity, all that managers can do is be open to surprises, and take
steps to increase the chances of happy discoveries. One single moment can change the
course of business, only if it is captured in right mindset and spirit.

Though the business strategies are well-planned and well-executed in many of the
companies, the top management of such companies have confessed that their success
are sometimes the result of unplanned happenings, meetings, encounters, and events.
The serendipity (unexpected happy discoveries) and sheer luck has some place in the
business.
Business strategies are formulated by predicting trends in the environment, and
analyzing business data using logical approach. But, serendipity brings a new dimension
to business, which is not planned or logical – but spontaneous. Serendipity cannot be
logically planned; it can only be allowed to happen automatically.

Planning and serendipity cannot go together. Strategic planning is based on the past
knowledge and experience, and the current available facts, but serendipity is
unprompted opening of new unexpected possibilities.

With respect to serendipity, all that managers can do is be open to surprises, and take
steps to increase the chances of happy discoveries. One single moment can change the
course of business, only if it is captured in right mindset and spirit.

02. What does the discovery of Viagra and Cialis tell us about the strategic management process?
About the role of strategic initiatives?

Ans:

step 1
Strategic initiatives are one of the roles of strategic management. They are the actions
taken to pursue development of new products, processes and new markets. The source
of strategic initiatives may be from any source such as middle management, workshop
floor, or top management. Any initiative within the organization becomes strategic only
when the total organization supports the initiative as harbinger of future business.

step 2
The discovery of Vgr and Cils as a therapy for male sexual dysfunction came out of the
strategic initiatives to manage blood flow and control hypertension. The discovery
occurred to the middle managers of the respective companies. The top management or
researchers were ready to listen to the middle managers who interacted with the
customers. The discovery of the middle managers became valuable to the business
strategy only when the top management listened and acknowledged the idea brought
by the lower ranked managers.

step 3
The roles of strategic initiatives are:

• Encourage and respect every independent initiatives within the organization

• Listen to the suggestions and ideas from every stakeholders

• Expect the unexpected, and try out the new ideas in safer situations

By promoting strategic initiatives every business can pursue blue ocean strategies.

Strategic initiatives are one of the roles of strategic management. They are the actions
taken to pursue development of new products, processes and new markets. The source
of strategic initiatives may be from any source such as middle management, workshop
floor, or top management. Any initiative within the organization becomes strategic only
when the total organization supports the initiative as harbinger of future business.

The discovery of Vgr and Cils as a therapy for male sexual dysfunction came out of the
strategic initiatives to manage blood flow and control hypertension. The discovery
occurred to the middle managers of the respective companies. The top management or
researchers were ready to listen to the middle managers who interacted with the
customers. The discovery of the middle managers became valuable to the business
strategy only when the top management listened and acknowledged the idea brought
by the lower ranked managers.

The roles of strategic initiatives are:

• Encourage and respect every independent initiatives within the organization

• Listen to the suggestions and ideas from every stakeholders

• Expect the unexpected, and try out the new ideas in safer situations

By promoting strategic initiatives every business can pursue blue ocean strategies.

03. Which model of the strategic management process best explains the Viagra/Cialis story? Why?
What is the role, if any, of the strategic leader in this process? Explain.

Ans:

step 1
The case of Vgr and Cls indicates ‘the strategy as planned emergence’ approach is
superior in achieving discontinuous strategic change. By engaging people at all levels,
the strategy can be formulated and implemented easily.

step 2
In order to survive and thrive in the market, the role of the strategic leader is to define
business of the organization, stay focused in the business, bring organizational
alignment to the business goals, keep an eye on the business initiatives by the
employees, capture good ideas and suggestions by the employees, try out in the
initiatives in the market and create sustainable competitive advantage for the company
through profitable ventures.

The case of Vgr and Cls indicates ‘the strategy as planned emergence’ approach is
superior in achieving discontinuous strategic change. By engaging people at all levels,
the strategy can be formulated and implemented easily.

In order to survive and thrive in the market, the role of the strategic leader is to define
business of the organization, stay focused in the business, bring organizational
alignment to the business goals, keep an eye on the business initiatives by the
employees, capture good ideas and suggestions by the employees, try out in the
initiatives in the market and create sustainable competitive advantage for the company
through profitable ventures.

04. If you were to design a strategic management process where “serendipity” is becoming less
random, what process would you put in place? Which type of companies could benefits from such a
process?

Ans:

step 1
There is a 21st century punch line ‘Chance is an event, serendipity is a learnable
capability’. There is a science developing around serendipity, which proposes that it is
no more random, rather it can be captured, channelized, coached or even created.
Several education and training, and initiatives are developed to promote serendipity in
the organizations.

step 2
Organizational leaders may design their organization in the following manner to
increase the chance of serendipity.

• First of all, people who have the qualities to capture serendipity need to be recruited
within the organization. People with openness, curiosity, preparedness and alertness are
found to be more serendipitous.
• Second, encourage the employees to perform well in their jobs with connectedness to
the business

• Third, allow and create various opportunities for the employees to network with
people in and out of the organization, and encourage them to carry out business
dialogues.

• Fourth, motivate them to take calculated risks, experiment with new ideas and share
their experience with others.

• Finally, train people to be rooted in common sense, and be realistic.

step 3
Companies that have dynamic environment and internal capability to create value for
the market are likely to be benefiting from the serendipitous discoveries. Serendipity is a
mindset, only those leaders who can appreciate the value of surprises shall be able to
capture the benefits of sudden breakthroughs.

There is a 21st century punch line ‘Chance is an event, serendipity is a learnable

capability’. There is a science developing around serendipity, which proposes that it is
no more random, rather it can be captured, channelized, coached or even created.
Several education and training, and initiatives are developed to promote serendipity in
the organizations.

Organizational leaders may design their organization in the following manner to

increase the chance of serendipity.

• First of all, people who have the qualities to capture serendipity need to be recruited
within the organization. People with openness, curiosity, preparedness and alertness are
found to be more serendipitous.

• Second, encourage the employees to perform well in their jobs with connectedness to
the business

• Third, allow and create various opportunities for the employees to network with
people in and out of the organization, and encourage them to carry out business
dialogues.

• Fourth, motivate them to take calculated risks, experiment with new ideas and share
their experience with others.
• Finally, train people to be rooted in common sense, and be realistic.

Companies that have dynamic environment and internal capability to create value for
the market are likely to be benefiting from the serendipitous discoveries. Serendipity is a
mindset, only those leaders who can appreciate the value of surprises shall be able to
capture the benefits of sudden breakthroughs.

05. Although Viagra is a multibillion-dollar business for Pfizer, what is your prediction concerning
Pfizer’s profits from Viagra when a generic version is available? What would be a way for Pfizer to
respond?

Ans:

step 1
The unexpected discovery of the patented drug Vgra has provided Pfz an opportunity to
create a sustainable competitive advantage. However, part of the competitive advantage
comes from the patent protection from the US regulations. By 2020 the patent
protection would expire and several drug companies can manufacture the drug in their
respective brand names. The Pfz is certain lose its current competitive advantage and
shall be forced to reduce the price of the product.

step 2
Until 2020, Pfz has the monopoly on the prescription drug Vgra as treatment for erectile
dysfunction (ED). After 2020, many manufacturers are likely to produce the drug, which
shall result in reduction of the product price. This can have adversarial effect on the
strategy of Pfz and reduced profits from the drug Vgra. In order to overcome the loss of
competitive advantage, the company may adopt the following strategy.

• After the expiry of the patent, the company may price the product higher than the
nearest competitor, because many of the customers are concerned about the quality of
the drug, and may not opt for the unpopular brands. Vgra is an established brand, and
customers would prefer it at a reasonable premium.

• Due to reduction in price, larger international markets such as China, India, Brazil, etc.
can afford to buy the Vgra. The company may start promotion of the product in those
countries at an adaptive pricing strategy.

By proactively taking steps through formulation and implementation of appropriate

business strategy, the Pfz can maintain its competitive advantage.
The unexpected discovery of the patented drug Vgra has provided Pfz an opportunity to
create a sustainable competitive advantage. However, part of the competitive advantage
comes from the patent protection from the US regulations. By 2020 the patent
protection would expire and several drug companies can manufacture the drug in their
respective brand names. The Pfz is certain lose its current competitive advantage and
shall be forced to reduce the price of the product.

Until 2020, Pfz has the monopoly on the prescription drug Vgra as treatment for erectile
dysfunction (ED). After 2020, many manufacturers are likely to produce the drug, which
shall result in reduction of the product price. This can have adversarial effect on the
strategy of Pfz and reduced profits from the drug Vgra. In order to overcome the loss of
competitive advantage, the company may adopt the following strategy.

• After the expiry of the patent, the company may price the product higher than the
nearest competitor, because many of the customers are concerned about the quality of
the drug, and may not opt for the unpopular brands. Vgra is an established brand, and
customers would prefer it at a reasonable premium.

• Due to reduction in price, larger international markets such as China, India, Brazil, etc.
can afford to buy the Vgra. The company may start promotion of the product in those
countries at an adaptive pricing strategy.

By proactively taking steps through formulation and implementation of appropriate

business strategy, the Pfz can maintain its competitive advantage.

06. Why would Lilly pursue an over-the-counter deal (with Sanofi) rather than a generic drug-
licensing deal as Pfizer (with Teva) did?

Ans:

step 1
The company E-Lil is bound to gain advantages through the alliance with Sfi. Their
decision to choose ‘borrow’ from the build-borrow-buy formula of alliance is
advantageous. The core competence of both the companies will help each other to gain
sustainable competitive advantage.

The E-Lil can focus on the research and development of the products, and the Sfi could
focus on the distribution and delivery of the over the counter drugs across the world.

step 2
E-Lil believes that by making their product Cls, an over the counter drug, the customers
can self mange their sexual problems without going through the lengthy process of
consulting a doctor. A large number of customers will have access to the product; they
can walk into any drug store and purchase the product without hassles.

On the other hand, licensing of the generic drug might be inconvenient to the
customers. Also, the cost of the drug shall be higher for the prescription drugs. The
management of the alliance between the E-lil and Sfi would be challenging, because
managing business relationships for long time is difficult and crucial.

The company E-Lil is bound to gain advantages through the alliance with Sfi. Their
decision to choose ‘borrow’ from the build-borrow-buy formula of alliance is
advantageous. The core competence of both the companies will help each other to gain
sustainable competitive advantage.

The E-Lil can focus on the research and development of the products, and the Sfi could
focus on the distribution and delivery of the over the counter drugs across the world.

E-Lil believes that by making their product Cls, an over the counter drug, the customers
can self mange their sexual problems without going through the lengthy process of
consulting a doctor. A large number of customers will have access to the product; they
can walk into any drug store and purchase the product without hassles.

On the other hand, licensing of the generic drug might be inconvenient to the
customers. Also, the cost of the drug shall be higher for the prescription drugs. The
management of the alliance between the E-lil and Sfi would be challenging, because
managing business relationships for long time is difficult and crucial.

Apple: What’s Next?

01. Explain Apple’s success over the last decade. Think about which industries it has disrupted and
how. Also look at Apple’s main competitors.

Ans:

step 1
The major breakthrough in strategy after more than a decade of existence came to the
APL from careful crafting of business challenges. The CEO SJ analyzed the competitive
challenge aptly, developed an appropriate guiding policy and quickly implemented the
strategy with coherent actions.

The strategic breakthrough can be summarized in the following manner.

• Identification of Competitive challenge: A shift from overcrowded and highly

competitive personal computer market was required for the APL. The company began to
focus on innovative products that can fill the unexplored market spaces.

• Development of Guiding policy: The CEO SJ provided leadership to move from laptop /
desktop computing to useful mobile devices and applications

• Establishment of coherent actions: The Company launched innovative products

through innovative business models, i.e. mobile devices to dedicated retail stores, and
curtailed the product deployment in desktop computing.

step 2
The APL’s new strategy has disrupted many industries such as personal computing,
music and entertainment, telecommunication, etc. The products of APL had many
competitive advantages that the customers were eagerly waiting for each of their
product launches and upgrades. The computing giants such as MS, Google, AMZ, etc.
are still struggling to overcome the competitive advantage gained by APL.

The major breakthrough in strategy after more than a decade of existence came to the
APL from careful crafting of business challenges. The CEO SJ analyzed the competitive
challenge aptly, developed an appropriate guiding policy and quickly implemented the
strategy with coherent actions.

The strategic breakthrough can be summarized in the following manner.

• Identification of Competitive challenge: A shift from overcrowded and highly

competitive personal computer market was required for the APL. The company began to
focus on innovative products that can fill the unexplored market spaces.
• Development of Guiding policy: The CEO SJ provided leadership to move from laptop /
desktop computing to useful mobile devices and applications

• Establishment of coherent actions: The Company launched innovative products

through innovative business models, i.e. mobile devices to dedicated retail stores, and
curtailed the product deployment in desktop computing.

The APL’s new strategy has disrupted many industries such as personal computing,
music and entertainment, telecommunication, etc. The products of APL had many
competitive advantages that the customers were eagerly waiting for each of their
product launches and upgrades. The computing giants such as MS, Google, AMZ, etc.
are still struggling to overcome the competitive advantage gained by APL.

02. Is Apple’s success attributable to industry effects or firm effects, or a combination of both?
Explain.

Ans:

step 1
APL’s success in the market due to its sustained competitive advantage can be result of
emerging industry trends and gaps, as well as its internal capabilities and availability of
resources.

step 2
The need for mobile devices was on the rise, and most of the computer manufacturers
and operating system suppliers were focused on the desk top and lap top computing.
The internet based businesses, the need for an easy access to music and videos, and the
emergence of social networking platforms have indirectly affected the growth of Apl’s
business.

However, the CEO’s vision and formulation of effective competitive strategy was the key
reason to the success of Apl in the consumer electronic and computing industry. Apple
has the core competence to bring contemporary technology to homes, provide joyful
experience to the users, and present the products in stylish manner.

APL’s success in the market due to its sustained competitive advantage can be result of
emerging industry trends and gaps, as well as its internal capabilities and availability of
resources.

The need for mobile devices was on the rise, and most of the computer manufacturers
and operating system suppliers were focused on the desk top and lap top computing.
The internet based businesses, the need for an easy access to music and videos, and the
emergence of social networking platforms have indirectly affected the growth of Apl’s
business.

However, the CEO’s vision and formulation of effective competitive strategy was the key
reason to the success of Apl in the consumer electronic and computing industry. Apple
has the core competence to bring contemporary technology to homes, provide joyful
experience to the users, and present the products in stylish manner.

03. What are the greatest challenges Apple is facing? Detail them by internal weaknesses and
external threats. How can Apple transform internal weaknesses into strengths, and external threats
into opportunities?

Ans:

step 1
In the last five years APL has experienced its best revenue growth and market
capitalization. Its product, IPH has been bringing the maximum revenue. More than sixty
percent of the revenue comes to APL from the sale of IPH.

As we know that every product has a life cycle which starts with introduction of the
product and moves on to growth, peak, and decline. For almost one decade, IPH has
been the preferred product in the mobile devices market, and seem to have attained the
peak. One of the key internal challenges to APL is that it does not have a product to
replace IPH, nor are they developing any innovative device as good as IPH.

APL’s second best product IPD, is already experiencing dip in sales, which also need to
be addressed. Many users have expressed dissatisfaction with the downloading of
Operating system upgrades, and there are many hassles to this process.

step 2
Looking at the external issues of APL, the current low cost production systems are linked
to the pricing of the products. The company has been utilizing the low cost labor from
China, yet the price of the APL products is higher than that of the other mobile device
brands. An increase in labor costs in China can negatively affect the pricing of the
products.

Secondly, many independent mobile technologies and applications are launched in the
market, and some of them may have the potential to disrupt the business of APL.
step 3
The following steps may be taken by APL to overcome the challenges and treats from its
internal and external environment.

• Appoint a leader with vision as the CEO

• Continue developing innovative products vigorously

• Always be watchful in the market to identify the disrupting products and technologies.

• Acquire interesting products, technologies and companies

• Establish low cost production facilities in locations other than China

• Develop systems to manage large user base in terms of sales, services, software
upgrades, etc.

In the last five years APL has experienced its best revenue growth and market
capitalization. Its product, IPH has been bringing the maximum revenue. More than sixty
percent of the revenue comes to APL from the sale of IPH.

As we know that every product has a life cycle which starts with introduction of the
product and moves on to growth, peak, and decline. For almost one decade, IPH has
been the preferred product in the mobile devices market, and seem to have attained the
peak. One of the key internal challenges to APL is that it does not have a product to
replace IPH, nor are they developing any innovative device as good as IPH.

APL’s second best product IPD, is already experiencing dip in sales, which also need to
be addressed. Many users have expressed dissatisfaction with the downloading of
Operating system upgrades, and there are many hassles to this process.

Looking at the external issues of APL, the current low cost production systems are linked
to the pricing of the products. The company has been utilizing the low cost labor from
China, yet the price of the APL products is higher than that of the other mobile device
brands. An increase in labor costs in China can negatively affect the pricing of the
products.

Secondly, many independent mobile technologies and applications are launched in the
market, and some of them may have the potential to disrupt the business of APL.

The following steps may be taken by APL to overcome the challenges and treats from its
internal and external environment.
• Appoint a leader with vision as the CEO

• Continue developing innovative products vigorously

• Always be watchful in the market to identify the disrupting products and technologies.

• Acquire interesting products, technologies and companies

• Establish low cost production facilities in locations other than China

• Develop systems to manage large user base in terms of sales, services, software
upgrades, etc.

04. Apply the three-step process for developing a good strategy outlined above (diagnose the
competitive challenge, derive a guiding policy, and implement a set of coherent actions) to Apple’s
situation today. Which recommendations would you have for Apple to outperform its competitors in
the future? Be specific.

Ans:

step 1
A good strategy can be viewed as a three step process i.e. diagnosing the competitive
challenge, finding a guiding policy and implementing with coherent actions. The
company Apl may apply the three step process to find its way beyond the present
business strategy.

step 2
The three step recommendation for the Apl is as follows.

• Competitive challenge: It is very important that the Apl has to move from just a
hardware/device making company to something else, because the competing brands
such as S-sung, X-omi, etc are making cheaper mobile devices using Google’s android
operating system. Customers are able to get what Apl is providing at a lesser cost.

• Finding Guiding Policy: In order to achieve sustained competitive advantage through

innovative products, the Apl must open up its core competence. Rather than depending
solely on the internal resources, it must learn to accept outside ideas and share their
competence with others to leverage the brand value they have gained in last decade.

• Implementing through coherent actions: The Apl must form mutually beneficial
alliances with synergistic companies and individuals to sustain in the mobile-electronics
eco-system. By sharing resources and learning from others Apl can offer competitive
products and services to the customers.

A good strategy can be viewed as a three step process i.e. diagnosing the competitive
challenge, finding a guiding policy and implementing with coherent actions. The
company Apl may apply the three step process to find its way beyond the present
business strategy.

The three step recommendation for the Apl is as follows.

• Competitive challenge: It is very important that the Apl has to move from just a
hardware/device making company to something else, because the competing brands
such as S-sung, X-omi, etc are making cheaper mobile devices using Google’s android
operating system. Customers are able to get what Apl is providing at a lesser cost.

• Finding Guiding Policy: In order to achieve sustained competitive advantage through

innovative products, the Apl must open up its core competence. Rather than depending
solely on the internal resources, it must learn to accept outside ideas and share their
competence with others to leverage the brand value they have gained in last decade.

• Implementing through coherent actions: The Apl must form mutually beneficial
alliances with synergistic companies and individuals to sustain in the mobile-electronics
eco-system. By sharing resources and learning from others Apl can offer competitive
products and services to the customers.

Starbucks: Schultz Serves Up a Turnaround

01. What makes Schultz a great strategic leader?

Ans:
step 1
There are many instances and initiatives that indicate exemplary strategic leadership of
HowScz. The key indicators are listed below.

• The CEO of S-buks had the vision to provide memorable experiences to the customers

• The leader defined the business clearly that the company is in the business of
providing platform for human bonding and network building, not just provider of coffee

• In order to uphold the values of the organization the CEO organized training programs
to the baristas and the shop managers; which shows commitment to the customers

• For gaining competitive advantage, HowScz, organized appropriate resources and built
internal capabilities to deliver the pre-planned standard of services

• By providing experiential service, the leader attempted to increase the perceived value
of the coffee shops, and charged premium price for the coffee

HowScz performance signifies that leaders are crucial in implementing a good strategy.

There are many instances and initiatives that indicate exemplary strategic leadership of
HowScz. The key indicators are listed below.

• The CEO of S-buks had the vision to provide memorable experiences to the customers

• The leader defined the business clearly that the company is in the business of
providing platform for human bonding and network building, not just provider of coffee

• In order to uphold the values of the organization the CEO organized training programs
to the baristas and the shop managers; which shows commitment to the customers

• For gaining competitive advantage, HowScz, organized appropriate resources and built
internal capabilities to deliver the pre-planned standard of services

• By providing experiential service, the leader attempted to increase the perceived value
of the coffee shops, and charged premium price for the coffee

HowScz performance signifies that leaders are crucial in implementing a good strategy.
02. To be a source of competitive advantage over time, core competencies need to continuously be
honed and upgraded. Why and how did Starbucks lose its uniqueness and struggle in the mid-
2000s?

Ans:

step 1
When the number of S-buks locations grew inorganically, the company lost its
competitive advantage. Competitive advantage is like a golden goose; in the name of
revenue growth, many businesses kill its own competitive advantage. When S-buks
became a mass brand, it lost its position to command a premium price for a cup of
coffee. Customers visited the coffee shop for a special experience; instead people just
received coffee without the expected experience. The company forgot its competitive
advantage and core competence, and adopted practices that were contrary to its
business foundations.

step 2
Some of the deviations from core competence include, serving pre-brewed coffee,
inclusion of ice creams and desserts in the menu, aroma of coffee was missing in the
shop, reduction in interaction between the baristas and customers, etc. The total
experiences at the S-buks joints were not satisfactory to the customers.

When the number of S-buks locations grew inorganically, the company lost its
competitive advantage. Competitive advantage is like a golden goose; in the name of
revenue growth, many businesses kill its own competitive advantage. When S-buks
became a mass brand, it lost its position to command a premium price for a cup of
coffee. Customers visited the coffee shop for a special experience; instead people just
received coffee without the expected experience. The company forgot its competitive
advantage and core competence, and adopted practices that were contrary to its
business foundations.

Some of the deviations from core competence include, serving pre-brewed coffee,
inclusion of ice creams and desserts in the menu, aroma of coffee was missing in the
shop, reduction in interaction between the baristas and customers, etc. The total
experiences at the S-buks joints were not satisfactory to the customers.
03. What strategic initiatives did Howard Schultz put in place to re-create Starbucks’ uniqueness
after his return in 2008? Detail each strategic initiative, and explain why a specific strategic initiative
was successful, if so.

Ans:

step 1
In order to set right the derailed strategy, the company S-buks recalled the erstwhile
CEO HowStz in the year 2008. For regaining the position enjoyed by the company, the
CEO took several measures.

step 2
The following table lists out the major measures taken by the CEO and its significance to
the business strategy.

In order to set right the derailed strategy, the company S-buks recalled the erstwhile
CEO HowStz in the year 2008. For regaining the position enjoyed by the company, the
CEO took several measures.

The following table lists out the major measures taken by the CEO and its significance to
the business strategy.
04. What makes Schultz a great strategic leader?

Ans:

step 1
There are many instances and initiatives that indicate exemplary strategic leadership of
HowScz. The key indicators are listed below.

• The CEO of S-buks had the vision to provide memorable experiences to the customers

• The leader defined the business clearly that the company is in the business of
providing platform for human bonding and network building, not just provider of coffee

• In order to uphold the values of the organization the CEO organized training programs
to the baristas and the shop managers; which shows commitment to the customers

• For gaining competitive advantage, HowScz, organized appropriate resources and built
internal capabilities to deliver the pre-planned standard of services

• By providing experiential service, the leader attempted to increase the perceived value
of the coffee shops, and charged premium price for the coffee
HowScz performance signifies that leaders are crucial in implementing a good strategy.

There are many instances and initiatives that indicate exemplary strategic leadership of
HowScz. The key indicators are listed below.

• The CEO of S-buks had the vision to provide memorable experiences to the customers

• The leader defined the business clearly that the company is in the business of
providing platform for human bonding and network building, not just provider of coffee

• In order to uphold the values of the organization the CEO organized training programs
to the baristas and the shop managers; which shows commitment to the customers

• For gaining competitive advantage, HowScz, organized appropriate resources and built
internal capabilities to deliver the pre-planned standard of services

• By providing experiential service, the leader attempted to increase the perceived value
of the coffee shops, and charged premium price for the coffee

HowScz performance signifies that leaders are crucial in implementing a good strategy.

Nike’s Core Competency: The Risky Business of Fairy Tales

01. The MiniCase indicates that Nike’s core competency is to create heroes. What does this mean?
How did Nike build its core competency? Does it obey the VRIO attributes (valuable, rare, inimitable,
and organized to capture value based on the resource-based view of the firm)?

Ans:

step 1
Core competence is the deep skills, capabilities, and strengths that are embedded within
an organization. It is through core competence an organization gains competitive
advantage.

step 2
In the case of Nk brand of shoes, the core competence of the company is to create sport
heroes. The belief that sheer will, tenacity, hard work, discipline and focus can make any
person hero is ingrained in the activities of the company. Instead of spending budgets
on the advertisement of the sports shoes, the Nk search for the motivated athletes who
are likely to win against the odds, and then sponsor the sportspersons until he/she wins
in a significant sports event.

step 3
While formulating the strategy the company may not have consciously applied the VRIO
paradigm in assessing the competitive advantage. However on hindsight, the company
has followed the VRIO formula.

The core competence of identifying, sponsoring and promoting the athletes who are
likely to win against odds is valuable, rare, difficult to imitate and the company has
organized itself to capture the value through exclusive retail outlets and online
shopping sites.

Core competence is the deep skills, capabilities, and strengths that are embedded within
an organization. It is through core competence an organization gains competitive
advantage.

In the case of Nk brand of shoes, the core competence of the company is to create sport
heroes. The belief that sheer will, tenacity, hard work, discipline and focus can make any
person hero is ingrained in the activities of the company. Instead of spending budgets
on the advertisement of the sports shoes, the Nk search for the motivated athletes who
are likely to win against the odds, and then sponsor the sportspersons until he/she wins
in a significant sports event.

While formulating the strategy the company may not have consciously applied the VRIO
paradigm in assessing the competitive advantage. However on hindsight, the company
has followed the VRIO formula.

The core competence of identifying, sponsoring and promoting the athletes who are
likely to win against odds is valuable, rare, difficult to imitate and the company has
organized itself to capture the value through exclusive retail outlets and online
shopping sites.

02. What would it take for Nike’s approach to turn from a strength into a weakness? Did this tipping
point already occur? Why or why not?

Ans:
step 1
The brand value gained by Nk is based on the goodwill of converting ordinary
individuals to sporting heroes. If the sporting athletes are caught up in illegitimate
activities, the brand image of the Nk would be affected. The fame of the athlete can
bring business to the company, at the same time their ignominy can lead to disaster.

step 2
Nk has already experienced several instances where their integrity and reputation were
at stake. The market may allow a few such instances, but several scandals can ruin the
image of the Nk as a genuine company. Along with motivating the athletes the
company needs to inculcate strong value system in them.

The brand value gained by Nk is based on the goodwill of converting ordinary

individuals to sporting heroes. If the sporting athletes are caught up in illegitimate
activities, the brand image of the Nk would be affected. The fame of the athlete can
bring business to the company, at the same time their ignominy can lead to disaster.

Nk has already experienced several instances where their integrity and reputation were
at stake. The market may allow a few such instances, but several scandals can ruin the
image of the Nk as a genuine company. Along with motivating the athletes the
company needs to inculcate strong value system in them.

03. What recommendations would you have for Nike? Can you identify a way to reframe the
competency of creating heroes? Or a new way to think of heroes, teams, or sports that would
continue to build the brand?

Ans:

step 1
Nk is doing an excellent service to the upcoming athletes and thrilling sporting events.
Their core competency of inspiring the athletes is exceptional. Because the company has
experienced many serious allegations about their athletes engaging in illegitimate
activities, along with motivating the athletes the company needs to inculcate strong
value system in them.

step 2
While developing sporting talents, fair and honest behaviors also must be appreciated
among sporting circles. As part of the sponsorship, the company must consciously
expose both, the virtuous and vice behaviors of the athlete they have chosen. They may
engage a sports psychologist in controlling and managing the vices of the athletes.

The company must explicitly develop organizational value system and adhere to it
strictly. Customers value the efforts taken by the company to promote the athletes, but
they may turn hostile if the company is associated with unethical issues.

Nk is doing an excellent service to the upcoming athletes and thrilling sporting events.
Their core competency of inspiring the athletes is exceptional. Because the company has
experienced many serious allegations about their athletes engaging in illegitimate
activities, along with motivating the athletes the company needs to inculcate strong
value system in them.

While developing sporting talents, fair and honest behaviors also must be appreciated
among sporting circles. As part of the sponsorship, the company must consciously
expose both, the virtuous and vice behaviors of the athlete they have chosen. They may
engage a sports psychologist in controlling and managing the vices of the athletes.

The company must explicitly develop organizational value system and adhere to it
strictly. Customers value the efforts taken by the company to promote the athletes, but
they may turn hostile if the company is associated with unethical issues.

04. If you are a competitor of Nike (such as adidas, Under Armour, New Balance, or Li-Ning), how
could you exploit Nike’s apparent vulnerability? Provide a set of concrete recommendations

Ans:

step 1
The competitors of the Nk must get associated with ethics and morality in sports, and
must develop core competency in infusing values among athletes which is beyond
talent and skill. As in fashion contest, personality tests or depth interviews also need to
be incorporated into the sporting events.

step 2
A peep into the ‘off the field’ behaviors of the athlete may be documented as part of the
brand building activity. The companies competing with Nk may highlight their efforts to
sponsor genuine and ethical sportspersons. By highlighting the imbalance between the
talent and the ethical standards followed the Nk’s athletes; the competitors can achieve
ethical credibility of their business.
The competitors of the Nk must get associated with ethics and morality in sports, and
must develop core competency in infusing values among athletes which is beyond
talent and skill. As in fashion contest, personality tests or depth interviews also need to
be incorporated into the sporting events.

A peep into the ‘off the field’ behaviors of the athlete may be documented as part of the
brand building activity. The companies competing with Nk may highlight their efforts to
sponsor genuine and ethical sportspersons. By highlighting the imbalance between the
talent and the ethical standards followed the Nk’s athletes; the competitors can achieve
ethical credibility of their business.

When Will P&G Play to Win Again?

01. P&G differentiates itself from competitors by offering branded consumer product goods with
distinct features and attributes. This business strategy implies that P&G focuses on increasing the
perceived value created for customers, which allows it to charge a premium price. This approach
proved quite successful in the past, especially in rich countries such as the United States and many
European countries. What went wrong in the recent past? Detail P&G’s internal weaknesses and
external challenges. Derive recommendations on how to improve P&G’s strategic position going
forward. Be specific.

Ans:

step 1
The strategic approach taken by ProGa in increasing perceived value of the products
and capturing better value from the customers is still valid. But, the customer’s
favourable perception about the ProGa products has diminished recently.

step 2
There are reasons for the dip in the revenues and sales. It is due to the wrong
implementation of the strategy. From the case it is evident that two factors affected the
business significantly. They are as follows.

1. There have been too many leadership changes; three CEOs joined the company in a
span of three years. These changes in leadership disrupted the vision and the
competitive advantage of the company
2. The focus from consumer needs was shifted to promotional activities such as fashion
shows, award sponsorships, etc.

step 3
It is difficult to create perceived value for the low value consumer products or
commoditized goods. The company should focus on the consumer needs and develop
products and services to solve their problems.

The strategic approach taken by ProGa in increasing perceived value of the products
and capturing better value from the customers is still valid. But, the customer’s
favourable perception about the ProGa products has diminished recently.

There are reasons for the dip in the revenues and sales. It is due to the wrong
implementation of the strategy. From the case it is evident that two factors affected the
business significantly. They are as follows.

1. There have been too many leadership changes; three CEOs joined the company in a
span of three years. These changes in leadership disrupted the vision and the
competitive advantage of the company

2. The focus from consumer needs was shifted to promotional activities such as fashion
shows, award sponsorships, etc.

It is difficult to create perceived value for the low value consumer products or
commoditized goods. The company should focus on the consumer needs and develop
products and services to solve their problems.

02. Given the discussion in the MiniCase about P&G slashing its R&D spending and cutting costs
and jobs more generally, does the firm risk being “stuck in the middle”? Why or why not? If yes, why
would being “stuck in the middle” be a bad strategic position?

Ans:

step 1
Cost cutting is an approach that helps the company to improve its profitability and
pricing options. Also, it has some beneficial effect on the productivity. But the main
disadvantage of the cost cutting is its damaging effect on the innovative initiatives.

step 2
Cost cutting alone cannot help the company. The current challenges require deeper
understanding of the consumer needs and solutions to their problems. The company
must invest in research and development of the products. If research budgets are cut,
the company is likely to get stuck in the middle.

Cost cutting is an approach that helps the company to improve its profitability and
pricing options. Also, it has some beneficial effect on the productivity. But the main
disadvantage of the cost cutting is its damaging effect on the innovative initiatives.

Cost cutting alone cannot help the company. The current challenges require deeper
understanding of the consumer needs and solutions to their problems. The company
must invest in research and development of the products. If research budgets are cut,
the company is likely to get stuck in the middle.

03. Which strategic position should P&G pursue? Which value and/or cost drivers would you focus
on to improve P&G’s strategic profile? How would you go about implementing your recommended
changes? What results would you expect, and why?

Ans:

step 1
For a company like ProGa, cost cutting alone cannot help in improving the revenues and
sales. The key strategic activity should be to identify the consumer needs and develop
solutions to solve their problems. The company may reduce the promotional and other
expenses, but consumer research must be conducted vigorously with sufficient budgets.

Until a profitable business / product line is identified, the company must continue the
consumer research, and on the other hand cut costs on non-business activities.

For a company like ProGa, cost cutting alone cannot help in improving the revenues and
sales. The key strategic activity should be to identify the consumer needs and develop
solutions to solve their problems. The company may reduce the promotional and other
expenses, but consumer research must be conducted vigorously with sufficient budgets.
Until a profitable business / product line is identified, the company must continue the
consumer research, and on the other hand cut costs on non-business activities.

04. Given the high turnover of CEOs in recent years as a result of the company’s inferior
performance and P&G’s continued practice to promote company veterans, some argue that P&G’s
leadership model is broken. Rather than promoting from within, they argue that an outsider might
be better positioned to make the necessary changes. Which arguments can be mustered to support
sticking with P&G’s model to continue promoting from within? Which arguments would support the
notion that appointing an outsider as CEO might be advantageous given that P&G has been in a
turnaround situation for a number of years now? Where do you come down in this argument?

Ans:

step 1
With the respect to the decision of hiring leadership for a company, there is no standard
approach. The decision must depend on the circumstances of the company.

In the case of ProGa, the company has experienced quick turnover of the leaderships in
three years, and still struggling to set right the business strategy. At this juncture a
turnaround and paradigm shift is needed for the company. Also, a new vision and
innovative strategy is welcome for the company. An out of the box strategic approach
that is valuable to the company can be expected from an outsider. Though there are
issues related to the incumbent’s fitness with the organizational culture of ProGa, an
outsider for the leadership position is recommended.

With the respect to the decision of hiring leadership for a company, there is no standard
approach. The decision must depend on the circumstances of the company.

In the case of ProGa, the company has experienced quick turnover of the leaderships in
three years, and still struggling to set right the business strategy. At this juncture a
turnaround and paradigm shift is needed for the company. Also, a new vision and
innovative strategy is welcome for the company. An out of the box strategic approach
that is valuable to the company can be expected from an outsider. Though there are
issues related to the incumbent’s fitness with the organizational culture of ProGa, an
outsider for the leadership position is recommended.

Trimming Fat at Whole Foods Market

01. Why was Whole Foods successful initially? Why has it lost its competitive advantage and is
underperforming its competitors?

Ans:

step 1
A couple of decade back, the sourcing of healthy organic and natural food was difficult.
W-foods developed core competence of sourcing safe to eat foods from suppliers and
farmers. The locally sourced food was sold in the company owned grocery stores at a
premium.

step 2
The company was able to create a sustainable competitive advantage through its unique
sourcing operations. The products sold through company stores were valuable to the
customers who preferred healthy food. The availability of the organic and natural was
rare in those days. The core competence of the W-foods in sourcing healthy food was
unique, and the prime grocery competitors did not care for the business of W-foods.
The company captured value for their efforts through the retail stores located in corners
of the city.

The company followed perfectly the VRIO formula in creating competitive advantage.

step 3
The company lost its competitive advantage for two reasons.

One, during the recession, the customers shifted to stores where less priced grocery is
sold. Second, many of the supermarkets have started organic and natural food offering
in their stores at a lesser price.

A couple of decade back, the sourcing of healthy organic and natural food was difficult.
W-foods developed core competence of sourcing safe to eat foods from suppliers and
farmers. The locally sourced food was sold in the company owned grocery stores at a
premium.

The company was able to create a sustainable competitive advantage through its unique
sourcing operations. The products sold through company stores were valuable to the
customers who preferred healthy food. The availability of the organic and natural was
rare in those days. The core competence of the W-foods in sourcing healthy food was
unique, and the prime grocery competitors did not care for the business of W-foods.
The company captured value for their efforts through the retail stores located in corners
of the city.

The company followed perfectly the VRIO formula in creating competitive advantage.

The company lost its competitive advantage for two reasons.

One, during the recession, the customers shifted to stores where less priced grocery is
sold. Second, many of the supermarkets have started organic and natural food offering
in their stores at a lesser price.

02. What value driver is Whole Foods using to remain differentiated in the face of competitors
selling organic foods?

Ans:

step 1
In order maintain its competitive advantage, and to compete with the stores which are
selling organic food, W-foods have taken three initiatives.

step 2
One, the retail stores of W-foods has established services to help its customers healthy.
The stores now has ‘Take action Centers’ where the experts would provide tips the
customers about staying healthy and educate them on topics ranging from organic
cultivation to preventing diabetes and heart diseases.

step 3
Second, the company has begun giving volume discounts to the families and resident
groups.

step 4
Third, the healthy food chain has developed another store format chain named 365 E V,
which is dedicated to offering lower priced foods to compete with the discount stores.

The strategic measures taken by the W-foods are fairly good, and are likely to maintain
the company’s market value.

In order maintain its competitive advantage, and to compete with the stores which are
selling organic food, W-foods have taken three initiatives.
One, the retail stores of W-foods has established services to help its customers healthy.
The stores now has ‘Take action Centers’ where the experts would provide tips the
customers about staying healthy and educate them on topics ranging from organic
cultivation to preventing diabetes and heart diseases.

Second, the company has begun giving volume discounts to the families and resident
groups.

Third, the healthy food chain has developed another store format chain named 365 E V,
which is dedicated to offering lower priced foods to compete with the discount stores.

The strategic measures taken by the W-foods are fairly good, and are likely to maintain
the company’s market value.

03. Given Whole Foods strategic initiatives to reduce its cost structure, does the firm risk being
“stuck in the middle”? Why or why not?

Ans:

step 1
The W-foods is applying cost cutting prudently. Though the company is taking efforts to
reduce cost in various operations, the passion and core competence of sourcing healthy
food is still considered as important and crucial by the top management. The company
is not willing to provide lesser cost merchandise with their premium offerings; instead it
has started another retail format specifically to provide low priced groceries to the cost-
conscious customers.

The company is likely to uphold its mission of providing healthy food to its customers,
and at the same time compete with the discount retailers.

The W-foods is applying cost cutting prudently. Though the company is taking efforts to
reduce cost in various operations, the passion and core competence of sourcing healthy
food is still considered as important and crucial by the top management. The company
is not willing to provide lesser cost merchandise with their premium offerings; instead it
has started another retail format specifically to provide low priced groceries to the cost-
conscious customers.

The company is likely to uphold its mission of providing healthy food to its customers,
and at the same time compete with the discount retailers.
04. What other strategic initiatives should/could Whole Foods launch to more successfully drive its
business strategy?

Ans:

step 1
As the competition in healthy food sector gets heated up, the W-foods have to change
its strategy. Some of the strategy recommendations for implementation are provided
below.

• Increased presence in the social media

• Introduction of value added services such as online ordering, home delivery, store
pick-ups, etc.

• Establishing long term contracts with the farmers and food suppliers and highlighting
their value additions to the customers

• Sponsor food and produce ratings by an independent body to indicate the value of
products sold in the stores

• A loyalty program and long term customer value proposition may be floated to retain
the customers

The vision and mission of providing healthy food to the customers, and the relationship
with the suppliers is critical for the success of W-foods. The company must maintain
their core competence, and try out various means of attracting and retaining the
customers.

As the competition in healthy food sector gets heated up, the W-foods have to change
its strategy. Some of the strategy recommendations for implementation are provided
below.

• Increased presence in the social media

• Introduction of value added services such as online ordering, home delivery, store
pick-ups, etc.
• Establishing long term contracts with the farmers and food suppliers and highlighting
their value additions to the customers

• Sponsor food and produce ratings by an independent body to indicate the value of
products sold in the stores

• A loyalty program and long term customer value proposition may be floated to retain
the customers

The vision and mission of providing healthy food to the customers, and the relationship
with the suppliers is critical for the success of W-foods. The company must maintain
their core competence, and try out various means of attracting and retaining the
customers.

Is Porsche Killing the Golden Goose?

01. The MiniCase began with Aesop’s Fable of “The Goose That Laid the Golden Eggs.” What is the
take-away of this fable? Is Porsche killing its golden goose?

Ans:

step 1
In the automotive industry, Posh brand of cars enjoys the maximum profit margins. The
customers of Posh are willing to pay a premium to enjoy the pride of owning it. In the
case, reference to Aesop’s fable ‘killing the golden goose’ is made to mean that,
customers are willing to pay premium because Posh (golden goose) is owned by a fewer
customers across the world. By setting a drive for selling more units of Posh, the
company may be risking damage to the brand i.e. killing the golden goose. Customers
may not appreciate too many Posh cars running on the road; they may look for other
luxury brands.

In the automotive industry, Posh brand of cars enjoys the maximum profit margins. The
customers of Posh are willing to pay a premium to enjoy the pride of owning it. In the
case, reference to Aesop’s fable ‘killing the golden goose’ is made to mean that,
customers are willing to pay premium because Posh (golden goose) is owned by a fewer
customers across the world. By setting a drive for selling more units of Posh, the
company may be risking damage to the brand i.e. killing the golden goose. Customers
may not appreciate too many Posh cars running on the road; they may look for other
luxury brands.

02. For many decades, Porsche pursued a focused differentiation strategy. Using a clear strategic
profile as a focused differentiator, Porsche was very successful and very profitable. More recently, the
Porsche brand is repositioning itself from focused differentiation to broad differentiation by
changing its competitive scope. What are the risks inherent in such strategic positioning? What are
the benefits? Do you think Porsche will be successful in carving out a new strategic position as a
broad differentiator? Why or why not?

Ans:

step 1
Differentiation requires a company to provide a unique product or service to a customer
segment. In focused differentiation, a company offers services to a narrow set of
customers, but broad differentiation is aimed to address wider set of customer base.

step 2
Previously, Posh was providing sports car to the affluent customers, who were keen on
driving powerful vehicles. In less than a decade, Posh has introduced three distinct
models of cars, which includes a sedan. The launch of new models has changed the
strategy of Posh from focused differentiator to broad differentiator.

step 3
Focused strategy may give a strong brand image and gain customer loyalty. It can also
prevent the competitors to enter the niche market. But, focused strategy for long time
can blind the company to the changes in the customer preferences and needs.

step 4
In broad strategy the company has access to a wider set of customers, and can achieve
economies of scale. But some elite customers may become repulsive to the brand on
introduction of lower priced models, and this can damage the brand image.

In the current scenario, broad differentiation is beneficial to the company, because the
number of wealthy customers is on the rise, and there are unexplored pockets in the
market where the Posh brand may sell well.

Differentiation requires a company to provide a unique product or service to a customer

segment. In focused differentiation, a company offers services to a narrow set of
customers, but broad differentiation is aimed to address wider set of customer base.
Previously, Posh was providing sports car to the affluent customers, who were keen on
driving powerful vehicles. In less than a decade, Posh has introduced three distinct
models of cars, which includes a sedan. The launch of new models has changed the
strategy of Posh from focused differentiator to broad differentiator.

Focused strategy may give a strong brand image and gain customer loyalty. It can also
prevent the competitors to enter the niche market. But, focused strategy for long time
can blind the company to the changes in the customer preferences and needs.

In broad strategy the company has access to a wider set of customers, and can achieve
economies of scale. But some elite customers may become repulsive to the brand on
introduction of lower priced models, and this can damage the brand image.

In the current scenario, broad differentiation is beneficial to the company, because the
number of wealthy customers is on the rise, and there are unexplored pockets in the
market where the Posh brand may sell well.

03. Porsche is expanding rapidly through both related and geographic diversification. Do you
consider this business strategy to be successful? Why, or why not? If you consider Porsche’s
diversification to be successful, what is the source of Porsche’s success?

Ans:

step 1
It is apparent that Posh is diversifying to gain growth in multiple markets and achieve
market power. Limited diversification can lead to better business performance. But
providing differentiated products to more than six segments may affect the business
significantly.

step 2
Geographical diversification can be beneficial to the company because it is right time to
expand in the globalised world. Also, many countries are economically maturing to
absorb product offerings such as Posh.

step 3
Strong brand image, support from the corporate office, and financial might helps the
Posh to venture into new markets.

It is apparent that Posh is diversifying to gain growth in multiple markets and achieve
market power. Limited diversification can lead to better business performance. But
providing differentiated products to more than six segments may affect the business
significantly.

Geographical diversification can be beneficial to the company because it is right time to

expand in the globalised world. Also, many countries are economically maturing to
absorb product offerings such as Posh.

Strong brand image, support from the corporate office, and financial might helps the
Posh to venture into new markets.

04. Volkswagen ranks with GM and Toyota as one of the top-three carmakers in the world today in
terms of sales volume (in units). It uses its Volkswagen brand, as well as its entire portfolio of other
brands, including the luxury marques of Porsche, Audi, Bentley, Bugatti, and Lamborghini, and at the
lower end, the Seat, Skoda, and Scania. What type of diversification is Volkswagen pursuing? What
are the advantages and disadvantages in VW’s corporate strategy?

Ans:

step 1
Corporate-level strategy is a plan of action to gain a competitive advantage by acquiring
different businesses competing in different markets. From the case description, it is
evident that VokWag is not only owning Posh, but also several other automotive
companies. It is apparent that the principal aim of diversification by VokWag is to gain
market power, and related diversification strategy is obvious in the case.

step 2
They are following concentrated expansion. they are into just fragment of delivering
vehicles especially purchaser vehicles. be that as it may, in this portion, it is creating
vehicles for a wide range of clients like games people, family reason, extravagance
reason, family reason, and an average look et cetera. they are just in vehicle fabricating
yet just in autos. they are not investigating generation of expansive vehicles like trucks
and a few more other options for their customers.

step 3
Advantages and disadvantages of the company strategy are as follows:

VokWag has chosen concentric diversification strategy in the car industry. The
concentric strategy has enabled the company to gain access to different markets and
offer products to different customer segments. This strategy has positioned the
company not only to gain higher revenues, but also learn strategies from each other.
But, along with increased sales and revenues, the corporation is exposed to larger risks.
It can provide key benefits for the company in its growth and increase its customer base
in the market.

Few entities may enjoy the profits by following the concentric diversification, but few
entities may suffer loss due to limited capital and lack of expertise in the field.

Corporate-level strategy is a plan of action to gain a competitive advantage by acquiring

different businesses competing in different markets. From the case description, it is
evident that VokWag is not only owning Posh, but also several other automotive
companies. It is apparent that the principal aim of diversification by VokWag is to gain
market power, and related diversification strategy is obvious in the case.

They are following concentrated expansion. they are into just fragment of delivering
vehicles especially purchaser vehicles. be that as it may, in this portion, it is creating
vehicles for a wide range of clients like games people, family reason, extravagance
reason, family reason, and an average look et cetera. they are just in vehicle fabricating
yet just in autos. they are not investigating generation of expansive vehicles like trucks
and a few more other options for their customers.

Advantages and disadvantages of the company strategy are as follows:

VokWag has chosen concentric diversification strategy in the car industry. The
concentric strategy has enabled the company to gain access to different markets and
offer products to different customer segments. This strategy has positioned the
company not only to gain higher revenues, but also learn strategies from each other.
But, along with increased sales and revenues, the corporation is exposed to larger risks.
It can provide key benefits for the company in its growth and increase its customer base
in the market.

Few entities may enjoy the profits by following the concentric diversification, but few
entities may suffer loss due to limited capital and lack of expertise in the field.

05. In the recent past, both GM and Toyota ran into problems as they chased the goal of becoming
the world’s leader in terms of unit sales. GM achieved this goal but lost billions of dollars in the
process and ended up in bankruptcy (in 2009). Toyota then pushed output and briefly held the
numberone spot in terms of unit sales, but found that the emphasis on increasing output meant that
quality issues arose, which then negatively affected its reputation. If you were asked to advise VW,
what pitfalls would you point to that may need to be considered when attempting to be the world
leader in unit output? How might VW avoid those pitfalls?

Ans:

step 1
Focusing on unit sales per se is not harmful, but many companies push revenue and
sales growth at all costs, which can be detrimental to the business. While driving sales
growth, profitability of the business needs to be checked. As the sales increases, enough
profit margins must be earned per unit of sale, or else, there are chances the business
can go bankrupt.

Focusing on unit sales per se is not harmful, but many companies push revenue and
sales growth at all costs, which can be detrimental to the business. While driving sales
growth, profitability of the business needs to be checked. As the sales increases, enough
profit margins must be earned per unit of sale, or else, there are chances the business
can go bankrupt.

LEGO’s Turnaround: Brick by Brick

01. Why did LEGO face bankruptcy in the early 2000s? In your reasoning, focus on both external and
internal factors.

Ans:

step 1
In the year 2000, the L-brik company was on the verge bankruptcy for various reasons.
The main external factor that derailed the growth of the company was the dip in sales
due to the popularity of electronic and computer games. Children had many alternatives
or substitutes to L-briks toys

step 2
The internal factors include lack of appropriate business strategy, deviation from the
core competence, opening of too many innovative projects, careless diversifications, and
absence of strong leadership.

In the year 2000, the L-brik company was on the verge bankruptcy for various reasons.
The main external factor that derailed the growth of the company was the dip in sales
due to the popularity of electronic and computer games. Children had many alternatives
or substitutes to L-briks toys

The internal factors include lack of appropriate business strategy, deviation from the
core competence, opening of too many innovative projects, careless diversifications, and
absence of strong leadership.

02. What is LEGO’s core competence? Explain.

Ans:

step 1
Core competence is a unique mixture of resources, abilities and skillful actions of a
company that gives an edge over competition.

step 2
L-briks core competencies include the following.

• Resources and ability to carefully design and manufacture plastic bricks and toy
components

• Capable engineers, strategists and managers who has deep knowledge of child
psychology, market needs and business acumen

• Efficient procurement, manufacturing and supply chain systems and activities for
delivering plastic toy components

Core competence is a unique mixture of resources, abilities and skillful actions of a

company that gives an edge over competition.
L-briks core competencies include the following.

• Resources and ability to carefully design and manufacture plastic bricks and toy
components

• Capable engineers, strategists and managers who has deep knowledge of child
psychology, market needs and business acumen

• Efficient procurement, manufacturing and supply chain systems and activities for
delivering plastic toy components

03. Apply the core competence–market matrix to show how LEGO leveraged its core competence
into existing and new markets under Jørgen Vig Knudstorp, who was appointed CEO in late 2004.

Ans:

step 1
The core competence market matrix shows the interrelation between existing and new
markets with the existing and new products.

step 2
After the person JVK was appointed as the CEO, the company L underwent a series of
changes that were favorable for the company. Earlier the company faced heavier
financial losses which made the capital structure of the company very weak. However,
the new changes were beneficent for the company and helped it to grow as desired.

The changes were as follows:

1. Shift of focus on core business activities and improvement in capital structure.

2. Shifting focus to distribution

3. Focusing on the supply chain cost

4. Focusing on digital strategies.

This helped the company to leverage its competence to existing and new markets in
more efficient ways.
Core competence matrix has four relationships which are mentioned below:

Existing product-Existing markets: The opportunity to improve the firm’s position in

existing markets by leveraging the existing core competencies in better ways.

New product-Existing markets: The new core competencies required to build and
extend the business in current markets.

Existing product-New markets: Redeploying and recombining the current core

competencies to penetrate in new markets or to make new markets.

New product-New markets: Looking into the future i.e. Strategizing for the market
that would be existing in near future.

step 3
The following table shows the steps taken by JVK to leverage the core competence
of the company within the existing and new markets:

The core competence market matrix shows the interrelation between existing and new
markets with the existing and new products.

After the person JVK was appointed as the CEO, the company L underwent a series of
changes that were favorable for the company. Earlier the company faced heavier
financial losses which made the capital structure of the company very weak. However,
the new changes were beneficent for the company and helped it to grow as desired.

The changes were as follows:

1. Shift of focus on core business activities and improvement in capital structure.

2. Shifting focus to distribution

3. Focusing on the supply chain cost

4. Focusing on digital strategies.

This helped the company to leverage its competence to existing and new markets in
more efficient ways.

Core competence matrix has four relationships which are mentioned below:

Existing product-Existing markets: The opportunity to improve the firm’s position in

existing markets by leveraging the existing core competencies in better ways.

New product-Existing markets: The new core competencies required to build and
extend the business in current markets.

Existing product-New markets: Redeploying and recombining the current core

competencies to penetrate in new markets or to make new markets.

New product-New markets: Looking into the future i.e. Strategizing for the market
that would be existing in near future.

The following table shows the steps taken by JVK to leverage the core competence
of the company within the existing and new markets:
04. In terms of revenue growth, LEGO experienced a competitive advantage over both Hasbro and
Mattel since 2007 because it grew much faster. What explains LEGO’s competitive advantage?

Ans:

step 1
With respect to other toy companies, L-Briks have shown tremendous growth from the
year 2007 to 2015. Only a dominant competitive advantage can give such a growth to a
company. The following factors have contributed to the competitive advantage of the
company during this period.

• Firm leadership with a vision

• Prudent divestments

• Focus on the core products

• Innovation of products through crowd sourcing

• Licensing agreements with popular brands

• Utilization of high quality materials and disciplined manufacturing process

• Globalised distribution of products

With respect to other toy companies, L-Briks have shown tremendous growth from the
year 2007 to 2015. Only a dominant competitive advantage can give such a growth to a
company. The following factors have contributed to the competitive advantage of the
company during this period.

• Firm leadership with a vision

• Prudent divestments

• Focus on the core products

• Innovation of products through crowd sourcing

• Licensing agreements with popular brands

• Utilization of high quality materials and disciplined manufacturing process

• Globalised distribution of products

05. What must LEGO do to sustain its competitive advantage in the future? One avenue to tackle
this question is to think about diversification, both along products but also geography. Another
avenue is partnerships such as strategic alliances or even acquisitions. What lessons from LEGO’s
past should guide its future diversification?

Ans:

step 1
In order to maintain its competitive advantage the L-briks must continue the following
practices.

• The company must focus on the construction toys for children, which has versatility

• Constantly update the product line with toy characters drawn from legendary,
mythical, historical and current movie themes
• Provide loyalty rewards to the repeat buyers

• Design products that trigger creativity and innovation among children, and create
joyful experience for them

• Use high quality plastic materials and manufacturing process

step 2
It is possible for the L-briks to focus and diversify their business at the same time. But,
the company must apply a balancing strategy. Related diversification may be
recommended for the toy company. Apart from geographic diversification the company
can develop business through educational activities for children; theme based
amusement parks, virtual construction toys, engaging movies for children, etc.

As in the past, the L-briks must avoid unrelated diversification such as getting into
business of apparels, clothing, TV show, etc.

In order to maintain its competitive advantage the L-briks must continue the following
practices.

• The company must focus on the construction toys for children, which has versatility

• Constantly update the product line with toy characters drawn from legendary,
mythical, historical and current movie themes

• Provide loyalty rewards to the repeat buyers

• Design products that trigger creativity and innovation among children, and create
joyful experience for them

• Use high quality plastic materials and manufacturing process

It is possible for the L-briks to focus and diversify their business at the same time. But,
the company must apply a balancing strategy. Related diversification may be
recommended for the toy company. Apart from geographic diversification the company
can develop business through educational activities for children; theme based
amusement parks, virtual construction toys, engaging movies for children, etc.

As in the past, the L-briks must avoid unrelated diversification such as getting into
business of apparels, clothing, TV show, etc.
 From Good to Great to Gone: The Rise and Fall of Circuit City

01. Why was Circuit City so successful as featured in Good to Great? What was its strategic position
during its successful period? How did it contribute to competitive advantage?

Ans:

step 1
Company CC achieved huge success and got enlisted in “Good to Great” due to its core
competencies that enabled it to create higher economic value as compared to its
rival firms.

Core competencies of the company included the following factors:

• Efficient point-of-sale, inventory tracking technology and huge IT investments has

enabled efficient flow of information throughout the firm. It provided huge
flexibility to Company CC for adapting as per the market demand.

• Highly motivated and well trained sales personnel of the company provided superior
service to its customers. It enhanced the satisfaction level and loyalty of customers.

Advanced technologies offered huge flexibility to Company CC; which in turn helped
them to address frequent changes in market demand. Competitors of the firm could
not replicate their core competitive model. Hence, Company CC enjoyed a
competitive advantage at the marketplace due to their unique and non-replicable
business model.

Company CC achieved huge success and got enlisted in “Good to Great” due to its core
competencies that enabled it to create higher economic value as compared to its
rival firms.

Core competencies of the company included the following factors:

• Efficient point-of-sale, inventory tracking technology and huge IT investments has
enabled efficient flow of information throughout the firm. It provided huge
flexibility to Company CC for adapting as per the market demand.

• Highly motivated and well trained sales personnel of the company provided superior
service to its customers. It enhanced the satisfaction level and loyalty of customers.

Advanced technologies offered huge flexibility to Company CC; which in turn helped
them to address frequent changes in market demand. Competitors of the firm could
not replicate their core competitive model. Hence, Company CC enjoyed a
competitive advantage at the marketplace due to their unique and non-replicable
business model.

02. Why did Circuit City lose its competitive advantage? What was Circuit City’s strategic position
during the time of competitive disadvantage?

Ans:

step 1
In 1990s, Company CC enjoyed a competitive advantage at the marketplace due to
their unique and non-replicable business model. However, after certain time period
the company faces huge losses and at the end of 2008 the company went bankrupt. The
company lost its competitive advantage in the marketplace because it did
not upgraded and protected their business procedures.

During the period of competitive disadvantage, the company used cost-competitive

strategy. As a part of this strategy, the company laid off its 3,000 highest paid sales
personnel. Thus, the company lost its best and loyal employees who had earlier
helped it in offering superior customer service.

In 1990s, Company CC enjoyed a competitive advantage at the marketplace due to

their unique and non-replicable business model. However, after certain time period
the company faces huge losses and at the end of 2008 the company went bankrupt. The
company lost its competitive advantage in the marketplace because it did
not upgraded and protected their business procedures.

During the period of competitive disadvantage, the company used cost-competitive

strategy. As a part of this strategy, the company laid off its 3,000 highest paid sales
personnel. Thus, the company lost its best and loyal employees who had earlier
helped it in offering superior customer service.

03. What could Circuit City’s management have done differently?

Ans:

step 1
In 1990s, Company CC enjoyed a competitive advantage at the marketplace due to
their unique and non-replicable business model. However, after certain time period
the company faces huge losses and at the end of 2008 the company went bankrupt.

Company CC lost its competitive advantage due to the following reasons:

• Laying off its 3,000 highest paid sales personnel to gain cost competencies. Thus,
the company lost its best and loyal employees who had earlier helped it in offering
superior customer service.

• Diversification into non-core activities that distracted the focus of the managers from
the core activities of the firm.

Instead of above steps, Company CC should use the following steps to re-gain
their competitive advantage:

• The management should have focused on their core activities and try to add more
value to their existing services.

• Company could have used another ways to get competitive advantage rather than
laying off the employees. Cost advantage could be gained using inventory
management or wastage reduction strategies.

• The company should have started online business similar to its competitors.

• It should have frequently upgraded and protected their competitive strategy.

Hence, it is concluded that management of the Company should focus on improving

their core activities.
In 1990s, Company CC enjoyed a competitive advantage at the marketplace due to
their unique and non-replicable business model. However, after certain time period
the company faces huge losses and at the end of 2008 the company went bankrupt.

Company CC lost its competitive advantage due to the following reasons:

• Laying off its 3,000 highest paid sales personnel to gain cost competencies. Thus,
the company lost its best and loyal employees who had earlier helped it in offering
superior customer service.

• Diversification into non-core activities that distracted the focus of the managers from
the core activities of the firm.

Instead of above steps, Company CC should use the following steps to re-gain
their competitive advantage:

• The management should have focused on their core activities and try to add more
value to their existing services.

• Company could have used another ways to get competitive advantage rather than
laying off the employees. Cost advantage could be gained using inventory
management or wastage reduction strategies.

• The company should have started online business similar to its competitors.

• It should have frequently upgraded and protected their competitive strategy.

Hence, it is concluded that management of the Company should focus on improving

their core activities.

04. What is the future of Best Buy as the leader in big-box electronics retailing, especially in light of
tough competition by Amazon and other online retailers? What core competencies in big-box
retailing are critical to not only survive but also to gain and sustain a competitive advantage?

Ans:

step 1
Company BB needs to continuously upgrade and protect its core competencies in order
to maintain its top position in the online retailing market. Big box retailing is one of the
highest growing industries across the world.
Following core competencies are critical for the survival and growth of companies in
big-box retailing:

• Proper flow of information throughout its supply chain process using efficient
point-of-sale, inventory tracking technology and other data management tools. It would
enable the firm to track and capture the market demand in an effective way.

• Highly motivated and well trained sales personnel are important for a big box
retailer as they offer superior service to the customers. Furthermore, it would enhance
the customer satisfaction and loyalty.

• Big-box retailing is a dynamic industry as it involves intense competition between the

rival firms. Firms competing in this industry should frequently upgrade and
protect their competitive strategies to survive in the market.

Hence, it is concluded that big-box retailing firms need to continuously upgrade as per
the market dynamics for their survival and growth.

Company BB needs to continuously upgrade and protect its core competencies in order
to maintain its top position in the online retailing market. Big box retailing is one of the
highest growing industries across the world.

Following core competencies are critical for the survival and growth of companies in
big-box retailing:

• Proper flow of information throughout its supply chain process using efficient
point-of-sale, inventory tracking technology and other data management tools. It would
enable the firm to track and capture the market demand in an effective way.

• Highly motivated and well trained sales personnel are important for a big box
retailer as they offer superior service to the customers. Furthermore, it would enhance
the customer satisfaction and loyalty.

• Big-box retailing is a dynamic industry as it involves intense competition between the

rival firms. Firms competing in this industry should frequently upgrade and
protect their competitive strategies to survive in the market.

Hence, it is concluded that big-box retailing firms need to continuously upgrade as per
the market dynamics for their survival and growth.
 Cirque du Soleil: Searching for a New Blue Ocean

01. Cirque du Soleil was able to gain and sustain a competitive advantage for many years. Why was
Cirque du Soleil successful in the first place (while most other circuses barely survive)?

Ans:

step 1
The circus company CiduSo was able to make foray into the dying entertainment
industry with a blue ocean strategy. Blue ocean strategy is meant to create new value
proposition in an uncontested marker space. The key is to generate higher perceived
value of the service for the customer.

step 2
There are four principles to value innovation while applying Blue Ocean strategies i.e.,
eliminate, reduce, rise, and create. The new format of the circus followed these
principles to create outstanding experience to the customers. It eliminated the non
value adding features and hassles of the earlier formats, reduced the

For a thrilling and humorous experience created by the CiduSo, the customers were
willing to pay premium; the ticket prices ranged from $75 to $200 per person for a three
hour show.

The circus company CiduSo was able to make foray into the dying entertainment
industry with a blue ocean strategy. Blue ocean strategy is meant to create new value
proposition in an uncontested marker space. The key is to generate higher perceived
value of the service for the customer.

There are four principles to value innovation while applying Blue Ocean strategies i.e.,
eliminate, reduce, rise, and create. The new format of the circus followed these
principles to create outstanding experience to the customers. It eliminated the non
value adding features and hassles of the earlier formats, reduced the

For a thrilling and humorous experience created by the CiduSo, the customers were
willing to pay premium; the ticket prices ranged from $75 to $200 per person for a three
hour show.
02. Which “industry” does Cirque du Soleil compete in? Who are its competitors?

Ans:

step 1
The business of CiduSo touches the elements of entertainment, performing arts and
recreation industry. The company employs performing and entertainment artists and the
show carries the elements of theatrical shows. Customers visit the show for various
reasons which can include entertainment, thrilling experience, chill out or recreation.

step 2
Since the company has followed the blue ocean strategy, it has made the competition
irrelevant. The company, its value proposition and performance are unique, and it is very
difficult to find an equivalent to its business. Still, the competitors of CiduSo may include
Disney theme parks, theatrical shows on the Broadway, operas and ballet programs
across the world, movie houses, etc.

The business of CiduSo touches the elements of entertainment, performing arts and
recreation industry. The company employs performing and entertainment artists and the
show carries the elements of theatrical shows. Customers visit the show for various
reasons which can include entertainment, thrilling experience, chill out or recreation.

Since the company has followed the blue ocean strategy, it has made the competition
irrelevant. The company, its value proposition and performance are unique, and it is very
difficult to find an equivalent to its business. Still, the competitors of CiduSo may include
Disney theme parks, theatrical shows on the Broadway, operas and ballet programs
across the world, movie houses, etc.

03. Which factors contributed to Cirque du Soleil losing its competitive advantage, and as a
consequence led to a 50 percent drop in its valuation? Look at both external and internal factors.

Ans:

step 1
There are many reasons behind the dwindling business of CiduSo.

One of the approaches to analyze the business is to apply the life cycle paradigm. Every
business and product has a life cycle, which begins with introduction, growth, maturity
and decline. Probably the business has survived its life time, and now the customers do
not find value in the services.

step 2
Then, there are clear and crucial management mistakes and environmental conditions
that pulled down the CiduSo’s business. They include following points.

• Economic slowdown in the years between 2008-2010

• The management offered too many shows without any differentiation among the
shows

• Increased operational costs and reduced profits

• Customers may have exhausted watching the same show many times

• Damage to the reputation of the company due to a mishap during a show

• Litigation and penal actions from the safety authorities

All these factors put together has negatively affected the show business.

There are many reasons behind the dwindling business of CiduSo.

One of the approaches to analyze the business is to apply the life cycle paradigm. Every
business and product has a life cycle, which begins with introduction, growth, maturity
and decline. Probably the business has survived its life time, and now the customers do
not find value in the services.

Then, there are clear and crucial management mistakes and environmental conditions
that pulled down the CiduSo’s business. They include following points.

• Economic slowdown in the years between 2008-2010

• The management offered too many shows without any differentiation among the
shows

• Increased operational costs and reduced profits

• Customers may have exhausted watching the same show many times

• Damage to the reputation of the company due to a mishap during a show

• Litigation and penal actions from the safety authorities

All these factors put together has negatively affected the show business.

04. A recent report by OSHA concludes that Cirque performers suffered a high number of injuries
that required medical attention. One investigation found that Cirque’s signature show Ka` had 56
injuries per 100 workers, which is four times the injury rate for professional sports teams, according
to the Bureau of Labor Statistics. What can Cirque’s management do to address the safety concerns
of its performers? With more safety measures and less risky shows, do you think Cirque du Soleil will
lose its differentiated appeal to audiences? Why or why not?

Ans:

step 1
The top management must give priority to the safety of the performers, and take
initiatives to achieve zero injury standards. The following actions may initiated by the
management.

• Design shows that are thrilling but avoid life threatening performances in them

• Appoint an independent body to review the trapeze and aerial acts

• Regularly, check the safety of the equipments and consumables used for the show

• Train the employees regarding the safety matters

• Always provide safety gadgets while performing the risky acts

• Follow and comply to the regulatory standards to achieve the zero injury status

• Provide sufficient insurance to the performers

step 2
Since the customers are expecting to watch the thrilling performance, it may not be
possible to completely avoid the risky performances. Probable number of items in the
dangerous circle may be reduced. The company may focus on its mission while selecting
the components of the show.

CiduSo is intending to evoke imagination, invoke the senses, and provoke the emotions
of the visitors to the show. If the top management decides to go by the mission
statement, they can avoid the risky performances. Imagination senses and emotions
may be provoked by many other interesting ways and shows may be innovatively
designed.

The top management must give priority to the safety of the performers, and take
initiatives to achieve zero injury standards. The following actions may initiated by the
management.

• Design shows that are thrilling but avoid life threatening performances in them

• Appoint an independent body to review the trapeze and aerial acts

• Regularly, check the safety of the equipments and consumables used for the show

• Train the employees regarding the safety matters

• Always provide safety gadgets while performing the risky acts

• Follow and comply to the regulatory standards to achieve the zero injury status

• Provide sufficient insurance to the performers

Since the customers are expecting to watch the thrilling performance, it may not be
possible to completely avoid the risky performances. Probable number of items in the
dangerous circle may be reduced. The company may focus on its mission while selecting
the components of the show.

CiduSo is intending to evoke imagination, invoke the senses, and provoke the emotions
of the visitors to the show. If the top management decides to go by the mission
statement, they can avoid the risky performances. Imagination senses and emotions
may be provoked by many other interesting ways and shows may be innovatively
designed.

05. Cirque du Soleil’s new owner has retained you (or your study group) as consultants. Which
recommendations would you make to address some of the external threats and internal weaknesses
to once again gain and sustain a competitive advantage? How would you implement your suggested
changes?

Ans:
step 1
The new owner of the CiduSo must keep the company’s mission intact and develop new
kind of shows with least risk.

The new management may think of applying new technology to display thrilling shows.
Instead of humans, the shows may include robots and their performance. With the help
of holography, the high risky performances may be manipulated through digital and
laser techniques. Instead of risky perfumers, the company must employ imaginations
who can develop new themes for the shows, and implement them with the help of
technology.

step 2
By following the above recommendations the new management could overcome the
external threats from the competitors, avoid the constraints from the regulatory
authorities, and remove safety issues. Through innovation of the show themes regularly,
the customer fatigue may be reduced and product life cycle paradigm also can be
followed. Too much reliance on technology can attract competitors and reduce the
entry barriers to the business. Hence, the shows must be a blend of human and
technological performance.

The new owner of the CiduSo must keep the company’s mission intact and develop new
kind of shows with least risk.

The new management may think of applying new technology to display thrilling shows.
Instead of humans, the shows may include robots and their performance. With the help
of holography, the high risky performances may be manipulated through digital and
laser techniques. Instead of risky perfumers, the company must employ imaginations
who can develop new themes for the shows, and implement them with the help of
technology.

By following the above recommendations the new management could overcome the
external threats from the competitors, avoid the constraints from the regulatory
authorities, and remove safety issues. Through innovation of the show themes regularly,
the customer fatigue may be reduced and product life cycle paradigm also can be
followed. Too much reliance on technology can attract competitors and reduce the
entry barriers to the business. Hence, the shows must be a blend of human and
technological performance.
 Competing on Business Models: Google vs. Microsoft

01. How is a strategy different from a business model? How is it similar?

Ans:

step 1
There are fine differences between a business model and the strategy.

Strategy is the sum total of goal directed actions taken by a firm to achieve superior
performance in comparison to the competitors. The presence of a competitive
environment and the projected behaviors of the customers are crucial to the business
strategy. To achieve strategic goals, the total organization and every employee need to
take efforts.

step 2
Business model projects the fundamental structure of a given business. It is the rationale
behind the business. It is the core plan of business which represents the value creation,
resource management and value capture of the business. The business model depicts
the key operations of the business that generate income, provides value to the
customer, and how the resources, assets and activities are linked to business goals.

step 3
Both business models and strategy are closely linked. A business model is a rational
oriented component of the business, while the strategy focuses on the actions to be
taken for the goal achievement and their effectiveness.

There are fine differences between a business model and the strategy.

Strategy is the sum total of goal directed actions taken by a firm to achieve superior
performance in comparison to the competitors. The presence of a competitive
environment and the projected behaviors of the customers are crucial to the business
strategy. To achieve strategic goals, the total organization and every employee need to
take efforts.

Business model projects the fundamental structure of a given business. It is the rationale
behind the business. It is the core plan of business which represents the value creation,
resource management and value capture of the business. The business model depicts
the key operations of the business that generate income, provides value to the
customer, and how the resources, assets and activities are linked to business goals.

Both business models and strategy are closely linked. A business model is a rational
oriented component of the business, while the strategy focuses on the actions to be
taken for the goal achievement and their effectiveness.

02. Why are Microsoft and Google becoming increasingly direct competitors?

Ans:

step 1
In the last decade it has been observed that Gol and MS have been competing to
dominate the computing technology market. Both Gol and MS are vying for the
customers from the same market space, but the business model and the strategic
approach are different for them.

step 2
Though, both companies have emerged from different circumstances and product
offerings, the unprecedented success in their domains made them to explore the
adjacent market spaces. While doing so, the companies have encroached into each
other’s strongholds and emerged as the competitors.

step 3
MS began its journey as an operating system provider and ended up as an online search
service provider. Similarly, Gol became the most preferred online search service
provider, and then began developing operating system tools for mobile computing.

In the last decade it has been observed that Gol and MS have been competing to
dominate the computing technology market. Both Gol and MS are vying for the
customers from the same market space, but the business model and the strategic
approach are different for them.

Though, both companies have emerged from different circumstances and product
offerings, the unprecedented success in their domains made them to explore the
adjacent market spaces. While doing so, the companies have encroached into each
other’s strongholds and emerged as the competitors.
MS began its journey as an operating system provider and ended up as an online search
service provider. Similarly, Gol became the most preferred online search service
provider, and then began developing operating system tools for mobile computing.

03. Identify other examples of companies that were not competing in the past but are becoming
competitors. Why are we seeing such a trend?

Ans:

step 1
One of the prominent examples of emerging competition from different industry is the
case of W-mart and AMZ. Both companies have revolutionized the way we buy. W-mart
owns brick and mortar retail stores all over the world, and AMZ has prominent place in
the online retail across the world

step 2
There are many reasons for the emergence of competition from previously unconnected
industries.

• Tremendous success and saturation in the native market prompts the companies to
move on to adjacent market spaces

• Accessibility to key resources and confidence to acquire new learning make it easier
for the companies to shift to new markets

• The technological advances and creative imagination of the organization makes it

easier to establish presence in other markets

• The entry barriers to many markets or industry are not strong enough to prevent the
entry of new competition

In future the competitors are going to arise from unconnected industries.

One of the prominent examples of emerging competition from different industry is the
case of W-mart and AMZ. Both companies have revolutionized the way we buy. W-mart
owns brick and mortar retail stores all over the world, and AMZ has prominent place in
the online retail across the world
There are many reasons for the emergence of competition from previously unconnected
industries.

• Tremendous success and saturation in the native market prompts the companies to
move on to adjacent market spaces

• Accessibility to key resources and confidence to acquire new learning make it easier
for the companies to shift to new markets

• The technological advances and creative imagination of the organization makes it

easier to establish presence in other markets

• The entry barriers to many markets or industry are not strong enough to prevent the
entry of new competition

In future the competitors are going to arise from unconnected industries.

04. What recommendations would you give to Satya Nadella, CEO of Microsoft, to compete more
effectively against Google? To engineer a turnaround at Microsoft?

Ans:

step 1
MS has been in existence for four decades with a sustained competitive advantage.
More than 70% of the PCs around the world use the operating system developed by MS,
and other application software such as word processor, spreadsheets, presentation and
publishing tools developed by MS also are sold along with the operating system.

The company follows broad differentiation as its generic strategy for gaining market
share and competitive advantage. In broad differentiation strategy, unique products are
sold to a diverse group of customers. The products of MS can be used by household,
Individuals and business organizations.

step 2
The current challenge to the MS is that the use and population of PCs are shrinking
giving way to mobile electronic devices such as Smartphone, note books, etc. In the new
generation computing environment, Gol’s operating system is more popular. Now, MS
finds it difficult to penetrate into the mobile operating system market.

step 3
The CEO of MS, SNad need to develop a path breaking strategy to protect the
competitive advantage and grow the business. By applying blue ocean strategy, the
company must identify an unexplored market, and develop services for it. For example,
robotics is an emerging industry, where the MS can offer solutions and services.
Providing operating system or embedded learning systems to the various robot
manufacturing companies, the company may continue to grow.

MS has been in existence for four decades with a sustained competitive advantage.
More than 70% of the PCs around the world use the operating system developed by MS,
and other application software such as word processor, spreadsheets, presentation and
publishing tools developed by MS also are sold along with the operating system.

The company follows broad differentiation as its generic strategy for gaining market
share and competitive advantage. In broad differentiation strategy, unique products are
sold to a diverse group of customers. The products of MS can be used by household,
Individuals and business organizations.

The current challenge to the MS is that the use and population of PCs are shrinking
giving way to mobile electronic devices such as Smartphone, note books, etc. In the new
generation computing environment, Gol’s operating system is more popular. Now, MS
finds it difficult to penetrate into the mobile operating system market.

The CEO of MS, SNad need to develop a path breaking strategy to protect the
competitive advantage and grow the business. By applying blue ocean strategy, the
company must identify an unexplored market, and develop services for it. For example,
robotics is an emerging industry, where the MS can offer solutions and services.
Providing operating system or embedded learning systems to the various robot
manufacturing companies, the company may continue to grow.

05. What recommendations would you give to Sundar Pichai, CEO of Google, to compete more
effectively against Microsoft? To continue to sustain its competitive advantage?

Ans:

step 1
Gol has experienced tremendous growth which no other company has seen in the
history of business. In less than a couple of decades, it has reached a revenue growth of
$66 billion in a year. With a unique business model and strategy it has occupied a large
portion of the internet and mobile computing world. With its resources and competitive
advantage it is bound to grow further.

step 2
Gol has been following differentiation strategy, for a broad market. The innovative
products such as search engine, cloud services, operating system for mobile devices, etc.
are unique and most preferred tools by the online customers. Still, the company can
expect competition from companies such as MS.

step 3
The new CEO of Gol, SPi requires to protect its competitive strategy through innovative
services. First of all the company must focus its efforts on product development that are
likely to bring profitable business. There are many initiatives by the company which are
not profitable in any ways. Second, all the innovative products and services developed
by the company must be integrated into a single entity. Too much of product
innovation offered in unconnected ways can confuse the customers and can affect the
company negatively.

Gol has experienced tremendous growth which no other company has seen in the
history of business. In less than a couple of decades, it has reached a revenue growth of
$66 billion in a year. With a unique business model and strategy it has occupied a large
portion of the internet and mobile computing world. With its resources and competitive
advantage it is bound to grow further.

Gol has been following differentiation strategy, for a broad market. The innovative
products such as search engine, cloud services, operating system for mobile devices, etc.
are unique and most preferred tools by the online customers. Still, the company can
expect competition from companies such as MS.

The new CEO of Gol, SPi requires to protect its competitive strategy through innovative
services. First of all the company must focus its efforts on product development that are
likely to bring profitable business. There are many initiatives by the company which are
not profitable in any ways. Second, all the innovative products and services developed
by the company must be integrated into a single entity. Too much of product
innovation offered in unconnected ways can confuse the customers and can affect the
company negatively.

Assessing Competitive Advantage: Apple vs. BlackBerry

01. Calculate some key profitability, activity, leverage, liquidity, and market ratios for Apple and
BlackBerry over time.

Ans:

tep 1
Financial statement or Ratio analysis is considered to be a judgmental process. One of
the primary objectives of this analysis is to identify the major changes in movements,
and relationships and the investigation of the reasons underlying those changes. Ratios
can be calculated for different aspects of a company’s operations, and are categorized in
five categories, which are as mentioned below:

1. Profitability Ratios: These ratios measure the management's ability to control

expenses and to earn a return on the resources committed to the business. These ratios
include net profit margin, return on assets, operating income margin, and return on
equity.

2. Activity Ratios: These ratios provide information about management's ability to

control expenses and to earn a return on the resources committed to the business.
These ratios include inventory turnover ratio, fixed asset turnover ratio, net working
capital turnover ratio, etc.

3. Leverage Ratios: These ratios measure the degree of protection of suppliers of long-
term funds. It also aids in judging a firm's ability to raise additional debt and its capacity
to pay its liabilities on time. These ratios include debt to equity ratio, interest coverage
ratio, and total debt to asset ratio.

4. Liquidity Ratios: These ratios measure a firm's ability to meet its current obligations.
These ratios include current ratio, quick ratio, and working capital ratio.

5. Market Ratios: These ratios measure the current market price of a share of common
stock versus an indicator of the company's ability to generate profits or assets held by
the company. These ratios include earnings per share, market to book ratio, etc.

Here, in order to obtain the financial ratios of AL and BB, one may calculate at least one
ratio from all the categories mentioned above. Considering the key financial data for AL
and BB, the ratios are calculated below:

Profitability ratios
Here, the value of sales is not given; thus, obtain it by using the formula for calculating
gross profit, as shown below:

Gross Profit= Sales-Cost of Goods Sold

Using the formula as mentioned above, obtain the Gross profit margin of AL and BB, as
shown below:

AL

BB

Hence, the Gross profit margin of AL and BB are 0.418 and 0.381, respectively.

step 2
Activity Ratios

Using the formula as mentioned above, obtain the current ratio of AL and BB, as shown
below:

AL

BB
Hence, the Current Ratio of AL and BB are 1.65 and 2.06, respectively.

02. Conduct a dynamic firm profitability analysis over time (fiscal years 2008–2012) as shown in
Exhibit 5.1. Can you find signs of performance differentials between these two firms that may have
indicated problems at BlackBerry? When did BlackBerry’s performance problems become apparent?

Ans:

Step 1

Step 2
Step 3

Step 4

Step 5
03. Make a recommendation to Thorsten Heins, the CEO of BlackBerry, about actions he could take
to improve firm performance.

Ans:

step 1
The recent performances of BB Co. have driven the company into severe losses and lost
market share. Though the CEO of the firm, Mr. TH, has been a proactive leader, but he
still needs to devise new policies and strategies to keep the company staying afloat in
the market. One may give certain recommendations to Mr. TH, about the actions he
could take to improve the performance of the company. The recommendations would
be as follows:

• Stock recovery: Mr. TH should focus on the recovery of the stock value of the firm.
Because stock value is directly proportionate to the investor sentiment, and if an
investors trusts in the stocks of the company, the company will begin to pick pace.

• Freemium model: The Company may consider the “Freemium (=free+ premium)”
business model in order to re-gain the lost market share. In this model the basic
features of a product or service are provided free of charge, but the user must pay for
premium services, like add-ons.

• Cost-Cutting: Though, the company should refrain from mass layoffs, but for reducing
the input costs, the company should adhere to cost-cutting measures. The measures
may include necessary layoffs and outsourcing of its smartphone manufacturing
business to reduce the inventory risks involved.

If the firm pertains to these recommendations, it is highly likely that it would be able to
improve its performance in the market.

The recent performances of BB Co. have driven the company into severe losses and lost
market share. Though the CEO of the firm, Mr. TH, has been a proactive leader, but he
still needs to devise new policies and strategies to keep the company staying afloat in
the market. One may give certain recommendations to Mr. TH, about the actions he
could take to improve the performance of the company. The recommendations would
be as follows:

• Stock recovery: Mr. TH should focus on the recovery of the stock value of the firm.
Because stock value is directly proportionate to the investor sentiment, and if an
investors trusts in the stocks of the company, the company will begin to pick pace.
• Freemium model: The Company may consider the “Freemium (=free+ premium)”
business model in order to re-gain the lost market share. In this model the basic
features of a product or service are provided free of charge, but the user must pay for
premium services, like add-ons.

• Cost-Cutting: Though, the company should refrain from mass layoffs, but for reducing
the input costs, the company should adhere to cost-cutting measures. The measures
may include necessary layoffs and outsourcing of its smartphone manufacturing
business to reduce the inventory risks involved.

If the firm pertains to these recommendations, it is highly likely that it would be able to
improve its performance in the market.

Wikipedia: Disrupting the Encyclopedia Business

01. The MiniCase provides an example of how advancements in technology can render
traditional business models obsolete. With introduction of its CD-based Encarta,
Microsoft destroyed about half the value created by Britannica. In turn, Wikipedia
moved away from Britannica’s and Microsoft’s proprietary business models to an open-
source model powered by user-generated content and available to anyone on the
Internet. In doing so, it destroyed Encarta’s business, which Microsoft shut down in
2009. At the same time, Wikipedia created substantial benefits for users by shifting to
the open-source model for content. Because Wikipedia was able to create value for
consumers by driving the price for the end user to zero and making the information
instantly accessible on the Internet, there is no future for printed or CD-based
encyclopedias.

a. What are the general take-aways in regard to innovation as driver of competition?

b. How can existing firms respond to disruptions in their industry?

Ans:

step 1
a) The intricacies of the relationship between innovation and competition are numerous.
There are a large number of factors that influence any innovation. These factors depend
on the perception on intellectual property protection, the social attractiveness of the
invention, the purpose of innovation i.e. to reduce competition or beat competition,
peer encouragement to innovate, economic gains and achievement of market power,
etc.

Previously, competition was driving innovation, but in the present scenario innovation is
driving competition. For example, the invention of iPd gave competition to the music
industry.

step 2
b) When companies face or try to avoid disruptive innovation in their industry, they
must acknowledge the disruption and take three key steps to contain the disruption.

• Always innovate product, process or business model to remain ahead of competition

• Keep watch on the low end market and develop solutions for that segment

• Disrupt own business even before competition disrupts the current business

a) The intricacies of the relationship between innovation and competition are numerous.
There are a large number of factors that influence any innovation. These factors depend
on the perception on intellectual property protection, the social attractiveness of the
invention, the purpose of innovation i.e. to reduce competition or beat competition,
peer encouragement to innovate, economic gains and achievement of market power,
etc.

Previously, competition was driving innovation, but in the present scenario innovation is
driving competition. For example, the invention of iPd gave competition to the music
industry.

b) When companies face or try to avoid disruptive innovation in their industry, they
must acknowledge the disruption and take three key steps to contain the disruption.

• Always innovate product, process or business model to remain ahead of competition

• Keep watch on the low end market and develop solutions for that segment

• Disrupt own business even before competition disrupts the current business

02. The founder of Wikipedia, Jimmy Wales, is a social entrepreneur. Raised in Alabama,
Wales was educated by his mother and grandmother who ran a nontraditional school. In
1994, he dropped out of a doctoral program in economics at Indiana University to take
a job at a stock brokerage firm in Chicago. In the evenings he wrote computer code for
fun and built a web browser. During the late 1990s Internet boom, Wales was one of the
first to grasp the power of an open-source method to provide knowledge on a very
large scale. What differentiates Wales from other web entrepreneurs is his idealism:
Wikipedia is free for the end user and supports itself solely by donations. Wales’
idealism is a form of social entrepreneurship: His vision is to make the entire repository
of human knowledge available to anyone, anywhere for free.

a. If you were the founder of Wikipedia, would you want to monetize the business? Why
or why not?

b. What are the pros and cons of for-profit vs. nonprofit business? Where do you come
down?

Ans:

step 1
a) Monetizing social services such as free online encyclopedia is a choice and privilege
of the social entrepreneur. The founder of the W-pedia decided to offer the information
free and to sustain the service by explicitly seeking fund from donors and users.

The student who follows the case of W-pedia may monetize the service using the
Google’s business model. ‘Give the service free and monetize through advertisement’
shall be the guiding principle.

step 2
b) The decision to run for-profit or not-for-profit business depends on the purpose of
the business, and preference of the entrepreneur. The not-for profit businesses have
lesser tax liabilities, has the permission to accept private donations, are eligible to
receive public grants, provide protection from personal liability, and apparently has
lesser competition.

There are disadvantages to not-for-profit organization. First of all, excess revenue or

financial gains cannot be taken out as profit. The entrepreneur is eligible to take salary
for the services provided, but the salary must be reasonable. The owners of not-for-
profit business are liable to provide regular reports to the authorities and need to
operate the projects transparently.
a) Monetizing social services such as free online encyclopedia is a choice and privilege
of the social entrepreneur. The founder of the W-pedia decided to offer the information
free and to sustain the service by explicitly seeking fund from donors and users.

The student who follows the case of W-pedia may monetize the service using the
Google’s business model. ‘Give the service free and monetize through advertisement’
shall be the guiding principle.

b) The decision to run for-profit or not-for-profit business depends on the purpose of

the business, and preference of the entrepreneur. The not-for profit businesses have
lesser tax liabilities, has the permission to accept private donations, are eligible to
receive public grants, provide protection from personal liability, and apparently has
lesser competition.

There are disadvantages to not-for-profit organization. First of all, excess revenue or

financial gains cannot be taken out as profit. The entrepreneur is eligible to take salary
for the services provided, but the salary must be reasonable. The owners of not-for-
profit business are liable to provide regular reports to the authorities and need to
operate the projects transparently.

03. How can Wikipedia maintain and grow its ability to harness the crowdsourcing of its
“Wikipedians” to maintain high-quality and quickly updated content?

Ans:

step 1
For maintaining the competitive advantage of the online encyclopedia the W-pedia
must ensure the following actions.

• The W-pedia must identify the experts, may be through media reports, LinkedIn,
Facebook, etc and invite them to write about their domain expertise in the online pages.

• Periodically, remind the experts who have posted content to review and update the
pages.

• Those experts who provide content may be encouraged to undergo a training to write
authentic, factual and non-plagiarized matters.

• The company may engage other experts to review the published content and create a
peer review process
• Allow the users to rate the content and amend the information page to get higher
ratings

For maintaining the competitive advantage of the online encyclopedia the W-pedia
must ensure the following actions.

• The W-pedia must identify the experts, may be through media reports, LinkedIn,
Facebook, etc and invite them to write about their domain expertise in the online pages.

• Periodically, remind the experts who have posted content to review and update the
pages.

• Those experts who provide content may be encouraged to undergo a training to write
authentic, factual and non-plagiarized matters.

• The company may engage other experts to review the published content and create a
peer review process

• Allow the users to rate the content and amend the information page to get higher
ratings

04. As Wikipedia keeps growing, do you think it can continue to rely exclusively on donations in
time and money? Why or why not? What other “business models” could be considered? Would any
of those “violate the spirit of Wikipedia”? Why or why not?

Ans:

step 1
For the time being, the W-pedia must rely on the donations, because it is an established
business model for the company. However, the organization may develop other revenue
models such as providing contextual ads or sponsored ads on the landing pages of the
encyclopedia.

step 2
The company also can think of value added services such as customized compilation of
the relevant information on a particular topic, and charge for the service. Monetizing
after enabling the higher perceived value, may not damage the spirit of W-pedia.

For the time being, the W-pedia must rely on the donations, because it is an established
business model for the company. However, the organization may develop other revenue
models such as providing contextual ads or sponsored ads on the landing pages of the
encyclopedia.

The company also can think of value added services such as customized compilation of
the relevant information on a particular topic, and charge for the service. Monetizing
after enabling the higher perceived value, may not damage the spirit of W-pedia.

05. What, if anything, should Wikipedia do to ensure that its articles present a “neutral point of
view”? Shouldn’t the crowdsourcing approach ensure objectivity? Does a “neutral point of view”
matter to Wikipedia’s sustainability? Why or why not?

Ans:

step 1
The W-pedia must ensure objectivity, avoid hegemony, reduce rhetoric, and prevent
misrepresentations in the content published in the web site. For achieving a ‘neutral’
content status, the content published may be reviewed periodically to remove
objectionable content. Guidelines to writing content and to meet the quality standards
may be provided to the contributors.

step 2
Presence of neutral points of view in the content is important to the W-pedia, because it
has emerged as a reference source to millions of people around the world. Customers
around the world prefer neutral content, and it is important for the credibility of the
website. Emotive expressions, favoritism, hegemonic stand points, etc. can damage the
factual aspects the content.

The W-pedia must ensure objectivity, avoid hegemony, reduce rhetoric, and prevent
misrepresentations in the content published in the web site. For achieving a ‘neutral’
content status, the content published may be reviewed periodically to remove
objectionable content. Guidelines to writing content and to meet the quality standards
may be provided to the contributors.

Presence of neutral points of view in the content is important to the W-pedia, because it
has emerged as a reference source to millions of people around the world. Customers
around the world prefer neutral content, and it is important for the credibility of the
website. Emotive expressions, favoritism, hegemonic stand points, etc. can damage the
factual aspects the content.
 Standards Battle: Which Automotive Technology Will Win?

01. Do you believe that the internal combustion engine will lose its dominant position in the future?
Why or why not? What time horizon are you looking at?

Ans:

step 1
The higher cost of fossil fuel, environmental concerns with regard to vehicular emissions
and economic pressures to achieve fuel efficiency have presented tremendous challenge
to the internal combustion engine makers. Though the car companies have identified
alternate propelling energy sources such as electric, fuel cells, etc., due to lack of
sufficient infrastructure to support these models, the growth is slow for these
technologies.

step 2
The experts are of the opinion that the internal combustion engine will continue to be
the major driver of transportation needs for the foreseeable future. Probably, after the
year 2020, there could be multiple alternate technologies for propulsion, but internal
combustion engines will lead for at least another decade.

The higher cost of fossil fuel, environmental concerns with regard to vehicular emissions
and economic pressures to achieve fuel efficiency have presented tremendous challenge
to the internal combustion engine makers. Though the car companies have identified
alternate propelling energy sources such as electric, fuel cells, etc., due to lack of
sufficient infrastructure to support these models, the growth is slow for these
technologies.

The experts are of the opinion that the internal combustion engine will continue to be
the major driver of transportation needs for the foreseeable future. Probably, after the
year 2020, there could be multiple alternate technologies for propulsion, but internal
combustion engines will lead for at least another decade.
02. Which factors do you think will be most critical in setting the next industry standard for
technology in car propulsion?

Ans:

step 1
The factors that are critical for the next generation car propulsion technology are many.

• Environmental friendliness : vehicles and cars that run on environmental friendly fuel
will be preferred

• Availability of resources: The fuel used for driving vehicles must be abundantly
available. For example, solar, hydrogen fuel cells, etc.

• Establishment of infrastructure: Sufficient networks and support system are required

before people could move to new technologies

• Economic concerns: The cost of alternate fuel must be reasonably affordable to all
sections of the people

Only when above factors are addressed, alternates to present internal combustion
engines will be accepted by the transportation market.

The factors that are critical for the next generation car propulsion technology are many.

• Environmental friendliness : vehicles and cars that run on environmental friendly fuel
will be preferred

• Availability of resources: The fuel used for driving vehicles must be abundantly
available. For example, solar, hydrogen fuel cells, etc.

• Establishment of infrastructure: Sufficient networks and support system are required

before people could move to new technologies

• Economic concerns: The cost of alternate fuel must be reasonably affordable to all
sections of the people

Only when above factors are addressed, alternates to present internal combustion
engines will be accepted by the transportation market.
03. Which companies do you think are currently best positioned to influence the next industry
standard in car-propulsion technology?

Ans:

tep 1
In the last decade, many car companies have invested in R&D for identifying
environment friendly fuel and propulsion systems. The companies that have achieved
considerable knowledge base in fuel technology are likely to lead the transition from
fossil fuel. The prominent automotive companies who have researched and developed
technology and are looking forward to launch eco-friendly vehicles are Nissan, Toyota,
Honda, Tesla Motors, BYD Auto and BMW.

In the last decade, many car companies have invested in R&D for identifying
environment friendly fuel and propulsion systems. The companies that have achieved
considerable knowledge base in fuel technology are likely to lead the transition from
fossil fuel. The prominent automotive companies who have researched and developed
technology and are looking forward to launch eco-friendly vehicles are Nissan, Toyota,
Honda, Tesla Motors, BYD Auto and BMW.

04. What would you recommend different competitors (e.g., GM, Toyota, Nissan, and Tesla Motors)
do to influence the emerging industry standard?

Ans:

step 1
Influencing the standards of an industry is aimed at creating favorable environment for
the company and thus gaining competitive advantage. Influencing the standards can
help the companies to build entry barriers to the new competitors.

step 2
The Nissan, Toyota, Tesla Motors and BYD Auto must jointly develop engineering
standards for the hybrid and electric cars, and negotiate with the regulators to
implement the standards.

step 3
Honda and BMW may focus on the hydrogen fuel cell technology and patent the
innovations for the engines. They may influence the legislators to accept their standards
as superior. Competitions who wish to adopt the technology need to pay the patent
owners the license fee and also shall be required to follow the standards. These
companies can earn revenues and compete with the new entrants with an upper hand.

Influencing the standards of an industry is aimed at creating favorable environment for

the company and thus gaining competitive advantage. Influencing the standards can
help the companies to build entry barriers to the new competitors.

The Nissan, Toyota, Tesla Motors and BYD Auto must jointly develop engineering
standards for the hybrid and electric cars, and negotiate with the regulators to
implement the standards.

Honda and BMW may focus on the hydrogen fuel cell technology and patent the
innovations for the engines. They may influence the legislators to accept their standards
as superior. Competitions who wish to adopt the technology need to pay the patent
owners the license fee and also shall be required to follow the standards. These
companies can earn revenues and compete with the new entrants with an upper hand.

“A” Is for Alphabet and “G” Is for Google: Alphabet’s

Corporate Strategy and Google’s Strategy Process

01. Why did Google restructure itself and create Alphabet? What is it hoping to accomplish? For
additional insights, see Larry Page’s blog post announcing the restructuring at
http://googleblog.blogspot.com/ 2015/08/google-alphabet.html.

Ans:

step 1
Apart from providing search engine, data analytics, operating system and browsing tool,
Gol has been engaging in many other unrelated business activities such as research in
longevity, development of contact lens, designing driverless car, etc. In order to
streamline such business initiatives and provide independent responsibilities to the
business units, the founders of Gol created the Alphabet and its sub units.
Now, the distinctly created business units independently and with focus can pursue their
respective business goals. Alphabet, the apex body of the Gol, will act as a guiding unit
to the independent business units.

Apart from providing search engine, data analytics, operating system and browsing tool,
Gol has been engaging in many other unrelated business activities such as research in
longevity, development of contact lens, designing driverless car, etc. In order to
streamline such business initiatives and provide independent responsibilities to the
business units, the founders of Gol created the Alphabet and its sub units.

Now, the distinctly created business units independently and with focus can pursue their
respective business goals. Alphabet, the apex body of the Gol, will act as a guiding unit
to the independent business units.

02. Do you think the reorganization is beneficial for Alphabet’s “moonshots,” now housed in their
own business unit with profit-and-loss responsibility?

Ans:

step 1
By organizing the business activities that are similar into one unit, the Gol has structured
their organization into a conglomerate with a guiding apex called Alpahbet. Each
business unit is a profit center, and is responsible for the profit and loss of its respective
business activities.

step 2
There are two benefits for this corporate structuring scheme.

1. The Gol is not required to be responsible to its shareholders, because the ‘moonshots’
of other business units are funded from the stock returns of the Gol’s founders.

2. The burden of running the business profitably and responsibly lies with CEO’s of the
respective business units. Also, the risks of one unit do not affect the business of the
other.

The restructuring of the Gol’s business is appropriate.

By organizing the business activities that are similar into one unit, the Gol has structured
their organization into a conglomerate with a guiding apex called Alpahbet. Each
business unit is a profit center, and is responsible for the profit and loss of its respective
business activities.

There are two benefits for this corporate structuring scheme.

1. The Gol is not required to be responsible to its shareholders, because the ‘moonshots’
of other business units are funded from the stock returns of the Gol’s founders.

2. The burden of running the business profitably and responsibly lies with CEO’s of the
respective business units. Also, the risks of one unit do not affect the business of the
other.

The restructuring of the Gol’s business is appropriate.

03. As of the fall of 2015, Alphabet is a “one-trick pony,” with Google’s online search and advertising
business bringing in basically all the profits. Why has Google “failed” to develop other profitable
businesses? Is Google’s strategy process of planned emergence to blame? Why or why not.

Ans:

step 1
The Gol is relatively a new business organization with tremendous success, but aspiring
to spread into ventures other than the search engine and operating system business. In
the past decade the company has experienced the pitfalls by taking unrelated business
initiatives. In order to structure the unique business initiatives (moonshots), it has
developed a conglomerate organizational architecture.

step 2
It is true that the largest revenue comes from the Gol’s internet search engine business,
but it consumes time to shape innovative business ventures. The time to mature an idea
into a commercial activity takes time. The conglomerate is just formed a year back, and
it cannot be expected to bring the results so quickly. The planned emergence is what
every rational strategist can expect, and work for. However, serendipity can appear
midway. An evaluation of the conglomerate is appropriate only after a few years.

The Gol is relatively a new business organization with tremendous success, but aspiring
to spread into ventures other than the search engine and operating system business. In
the past decade the company has experienced the pitfalls by taking unrelated business
initiatives. In order to structure the unique business initiatives (moonshots), it has
developed a conglomerate organizational architecture.

It is true that the largest revenue comes from the Gol’s internet search engine business,
but it consumes time to shape innovative business ventures. The time to mature an idea
into a commercial activity takes time. The conglomerate is just formed a year back, and
it cannot be expected to bring the results so quickly. The planned emergence is what
every rational strategist can expect, and work for. However, serendipity can appear
midway. An evaluation of the conglomerate is appropriate only after a few years.

04. Given that Google is now a standalone business run by Sundar Pichai, do you expect that its
strategy process will change? Why or why not? If so, how?

Ans:

step 1
Business focus, leadership with visionary, deep knowledge of the market and customers,
well organized resources and activities, and ability to increase the perceived value are
the components of successful business. The corporate structure of the Gol now enables
each of its business units to construct the business assets independently.

step 2
By cutting off the unrelated business initiatives and bringing focus to the core activities,
it has helped the CEO SPi of Gol to focus on the crucial core business of the company
i.e. search engine, online ad solutions, operating system and internet browser. Now, the
Gol and the CEO can respond to the market needs and the competition with edge and
quickness.

Business focus, leadership with visionary, deep knowledge of the market and customers,
well organized resources and activities, and ability to increase the perceived value are
the components of successful business. The corporate structure of the Gol now enables
each of its business units to construct the business assets independently.

By cutting off the unrelated business initiatives and bringing focus to the core activities,
it has helped the CEO SPi of Gol to focus on the crucial core business of the company
i.e. search engine, online ad solutions, operating system and internet browser. Now, the
Gol and the CEO can respond to the market needs and the competition with edge and
quickness.
 HP’s Boardroom Drama and Divorce

01. Who is to blame for HP’s shareholder-value destruction—the CEO, the board of directors, or
both? What recourse, if any, do shareholders have?

Ans:

step 1
The primary aim of any corporation is to provide sufficient return on capital to the
shareholders. But, the shareholders and stakeholders also expect the company to create
social values and be ethical in its functioning.

step 2
Both, the CEO and the board of directors, are responsible for the value degradation of
the HuPack. Board of directors should have corrected the CEO’s actions and stand point,
at the same time the CEO should have followed the HuPack’s values explicitly published
in its corporate documents.

step 3
The shareholders can take any of the following actions.

• Notify the malfunctioning of the business to the SEC (Securities and Exchange
Commission)

• Appoint appropriate Board of directors during the annual general meeting

• Transfer the shares to the buyers who are willing to invest and have interest in the
company

The primary aim of any corporation is to provide sufficient return on capital to the
shareholders. But, the shareholders and stakeholders also expect the company to create
social values and be ethical in its functioning.
Both, the CEO and the board of directors, are responsible for the value degradation of
the HuPack. Board of directors should have corrected the CEO’s actions and stand point,
at the same time the CEO should have followed the HuPack’s values explicitly published
in its corporate documents.

The shareholders can take any of the following actions.

• Notify the malfunctioning of the business to the SEC (Securities and Exchange
Commission)

• Appoint appropriate Board of directors during the annual general meeting

• Transfer the shares to the buyers who are willing to invest and have interest in the
company

02. You are brought in as (a) a corporate governance consultant or (b) a business ethics consultant
by HP’s CEO. What recommendations would you give the CEO, Meg Whitman? How would you go
about implementing them? Be specific.

Ans:

step 1
The MWhit of the HuPak must follow these steps to regain the shareholder and
stakeholder confidence, and carry forward the governance of the company ethically.

• The ‘HuPk way’ values must be emphasized and re-emphasized in every meeting of
the company. For example, “We conduct our business with uncompromising integrity”
shall be highlighted, promoted and encouraged to follow by all in the organization

• The current CEO should apologize for what has happened in the past and reassure the
stakeholders that ethical issues will not be compromised in future

• Provide awareness programs and value education to the employees based on the
‘HuPak Way’ policies

• Establish awards and recognition system within the organization to appreciate and
inculcate the HuPak way

• Create a social environment where the board members and employees can present
viewpoints openly and honestly
• Develop induction program specifically to highlight the ethics and values of the
organization

• Establish a Public relations division to give publicity to the companies initiatives to

create social benefits within and outside the organization

The MWhit of the HuPak must follow these steps to regain the shareholder and
stakeholder confidence, and carry forward the governance of the company ethically.

• The ‘HuPk way’ values must be emphasized and re-emphasized in every meeting of
the company. For example, “We conduct our business with uncompromising integrity”
shall be highlighted, promoted and encouraged to follow by all in the organization

• The current CEO should apologize for what has happened in the past and reassure the
stakeholders that ethical issues will not be compromised in future

• Provide awareness programs and value education to the employees based on the
‘HuPak Way’ policies

• Establish awards and recognition system within the organization to appreciate and
inculcate the HuPak way

• Create a social environment where the board members and employees can present
viewpoints openly and honestly

• Develop induction program specifically to highlight the ethics and values of the
organization

• Establish a Public relations division to give publicity to the companies initiatives to

create social benefits within and outside the organization

03. Why is HP splitting itself into two firms, a move that was rejected just three years earlier? Do you
think the corporate strategy move of splitting the “old” HP into two companies (HP Inc. and Hewlett
Packard Enterprise) will create shareholder value? Why or why not? Which of the two companies
would you expect to be the higher performer? Why?

Ans:

step 1
Splitting the HuPk into two businesses is a good business strategy that would help the
organization to achieve focused effort. But, it may not be certain to create shareholder
value right away. The company has two important tasks to be completed before they
could grow the revenues. One, the company has to regain its reputation as an ethical
company. Second, it must consolidate its competitive advantage in its core business.
Both these activities are going to take time to produce results.

step 2
It is difficult to predict which of the businesses of HuPak is going to be a high performer.
It depends on the strategic efforts of the business units. If appropriate strategic
implementation is adopted, both the companies can perform at higher levels.

Splitting the HuPk into two businesses is a good business strategy that would help the
organization to achieve focused effort. But, it may not be certain to create shareholder
value right away. The company has two important tasks to be completed before they
could grow the revenues. One, the company has to regain its reputation as an ethical
company. Second, it must consolidate its competitive advantage in its core business.
Both these activities are going to take time to produce results.

It is difficult to predict which of the businesses of HuPak is going to be a high performer.

It depends on the strategic efforts of the business units. If appropriate strategic
implementation is adopted, both the companies can perform at higher levels.

04. Discuss the general lessons in terms of corporate governance and business ethics that can be
drawn from this MiniCase.

Ans:

step 1
Corporate governance

A corporate is the result of combined efforts of different resources be it financial or non-

financial. Profitable and ethical functioning of corporates thus becomes necessary and
essential part of its operations. Stakeholders interests and responsibility towards the
society in which it flourishes, thus becomes important. Thus, corporate governance is
one of such term that came into existence to ensure ethical controlling and monitoring
of the corporate to avoid any form of scandals or effect of any ethical practices.

Business ethics
Business ethics can be explained as the study of business procedures and policies to
ensure that these are ethically and legally followed in an organization. Business ethics
also deals with the most common ethical issues that may arise in the business
organization. In other words, business ethics are also called as applied professional
ethics.

step 2
General lessons in terms of corporate governance and business ethics

This Mini case is mainly focused on the internal instability of, one of the largest
technological company, named H. This case summarized major issues that company H
faced, in terms of financial losses when its share price faced a low-down, or the
inadequacies that company H faced due to its appointment of CEOs.

Present case explained about the good times that company H faced and set a
benchmark for other companies in the industry. However, after the passing away of Mr.
H, the co-founder, company H faced a great decline as it loses its market share value by
almost 80%. Due to inharmonious relationship among its board of directors and its
declining image in the industry, company H lose on its core values of “uncompromising
integrity” and “trust and respect for individuals”. Covert investigations taken by
company H against its directors of board, employees, and some other related people.

One of the main lessons that can be learned from these different phases of company H
is how important it is to maintain and follow ethical practices and establishing good
corporate governance at organizational level. Company H failed to be on its core values,
complying to which it succeeded in the past. An organization must work on maintaining
the core strength of the organization to avoid competitive disadvantage. Company H’s
BOD failed to realize that company is declining not because of the outer forces as such
but, because of poor corporate governance. Company H’s people failed to follow the
ethical practices at workplace. Finding Mr. GK, one of the board members at H, as the
source of leak of sensitive information, proved that top management itself failed and did
not pay heed to concepts like corporate governance and applying professional ethics at
workplace.

Corporate governance

A corporate is the result of combined efforts of different resources be it financial or non-

financial. Profitable and ethical functioning of corporates thus becomes necessary and
essential part of its operations. Stakeholders interests and responsibility towards the
society in which it flourishes, thus becomes important. Thus, corporate governance is
one of such term that came into existence to ensure ethical controlling and monitoring
of the corporate to avoid any form of scandals or effect of any ethical practices.

Business ethics

Business ethics can be explained as the study of business procedures and policies to
ensure that these are ethically and legally followed in an organization. Business ethics
also deals with the most common ethical issues that may arise in the business
organization. In other words, business ethics are also called as applied professional
ethics.

General lessons in terms of corporate governance and business ethics

This Mini case is mainly focused on the internal instability of, one of the largest
technological company, named H. This case summarized major issues that company H
faced, in terms of financial losses when its share price faced a low-down, or the
inadequacies that company H faced due to its appointment of CEOs.

Present case explained about the good times that company H faced and set a
benchmark for other companies in the industry. However, after the passing away of Mr.
H, the co-founder, company H faced a great decline as it loses its market share value by
almost 80%. Due to inharmonious relationship among its board of directors and its
declining image in the industry, company H lose on its core values of “uncompromising
integrity” and “trust and respect for individuals”. Covert investigations taken by
company H against its directors of board, employees, and some other related people.

One of the main lessons that can be learned from these different phases of company H
is how important it is to maintain and follow ethical practices and establishing good
corporate governance at organizational level. Company H failed to be on its core values,
complying to which it succeeded in the past. An organization must work on maintaining
the core strength of the organization to avoid competitive disadvantage. Company H’s
BOD failed to realize that company is declining not because of the outer forces as such
but, because of poor corporate governance. Company H’s people failed to follow the
ethical practices at workplace. Finding Mr. GK, one of the board members at H, as the
source of leak of sensitive information, proved that top management itself failed and did
not pay heed to concepts like corporate governance and applying professional ethics at
workplace.
 Hollywood Goes Global

01. Given the economics of the now global movie industry, what are the strategic implications for
Hollywood studios? What are some opportunities, and what are some threats? How should
Hollywood movie studies take advantage of these opportunities, while mitigating the threats?

Ans:

step 1
Globalization has helped the HWood (a movie making company) to go beyond the US,
and earn substantial revenues from international market, but it has begun to experience
the constraints too.

step 2
The HWood movies are well accepted in Europe, Asia and Latin America. Many movies
produced in its studio have generated more revenues from outside than from the US.
For example, Avatar and Transformers: Age of extinction are the two movies which have
sold most outside the US.

The successes give great opportunities for the HWood movie makers to adapt their
product to suit an international audience through the inclusion of local themes, current
happenings in other countries, providing roles to international actors, dubbing the track
with native language, establishing overseas joint ventures, etc.

step 3
There are threats to HWood movies while breaking out in international market.

• Some themes may antagonize the natives of the other country and even end up in
banning of the movie

• Larger exposure to infringement on intellectual property rights and piracy

• May trigger competition from other countries such as China, India, etc., which can
produce movies at lesser cost

Globalization has helped the HWood (a movie making company) to go beyond the US,
and earn substantial revenues from international market, but it has begun to experience
the constraints too.

The HWood movies are well accepted in Europe, Asia and Latin America. Many movies
produced in its studio have generated more revenues from outside than from the US.
For example, Avatar and Transformers: Age of extinction are the two movies which have
sold most outside the US.

The successes give great opportunities for the HWood movie makers to adapt their
product to suit an international audience through the inclusion of local themes, current
happenings in other countries, providing roles to international actors, dubbing the track
with native language, establishing overseas joint ventures, etc.

There are threats to HWood movies while breaking out in international market.

• Some themes may antagonize the natives of the other country and even end up in
banning of the movie

• Larger exposure to infringement on intellectual property rights and piracy

• May trigger competition from other countries such as China, India, etc., which can
produce movies at lesser cost

02. How would you prioritize which nations to expand distribution into if you were working for a
major Hollywood movie studio?

Ans:

step 1
While planning for distribution of a movie made in HWood at a different country, India
would be the ideal choice. The reasons are many and listed below.

• The country is politically stable and is not hostile to US movies

• There is a huge English speaking population

• The GDP growth rate there is higher than most other countries
• People are accustomed to watching trendy movies, and willing to spend on the
entertainment

• There are stunning locations in India, which can be utilized by the HWood movies at a
lesser cost

• The studios and movie talent available in India are of International standard, that can
adopted in the movie making

• The distributors shall promote movie in the country at lesser margins or royalty

While planning for distribution of a movie made in HWood at a different country, India
would be the ideal choice. The reasons are many and listed below.

• The country is politically stable and is not hostile to US movies

• There is a huge English speaking population

• The GDP growth rate there is higher than most other countries

• People are accustomed to watching trendy movies, and willing to spend on the
entertainment

• There are stunning locations in India, which can be utilized by the HWood movies at a
lesser cost

• The studios and movie talent available in India are of International standard, that can
adopted in the movie making

• The distributors shall promote movie in the country at lesser margins or royalty

03. What alternatives could movie producers develop to help combat the piracy of first-run movies
and follow-on DVD and Internet releases?

Ans:

step 1
At the moment, it is difficult to prevent piracy completely. Piracy happens through leak
from many quarters. When DVDs of the movie are circulated among the artists related
to the movie, somehow it gets leaked into the hands of the movie pirates. Also, some
people record the movie using a camcorder while watching the movie in a theatre.

step 2
Some of the steps the movie producers can take to prevent piracy include the following.

• Make the artists to sign a non-disclosure agreement, and include a clause that can
prevent piracy

• Instead of circulating the DVD, the movie can be screened in a safe location for the
review and amendments.

• After-release piracy may be prevented using technologies such as anti-piracy system,

inserting extra frames in the theatre copies that are imperceptible to the human eye.

• Theatre visits and purchase of genuine media may be reinforced using attractive
incentive techniques

• Influence the law makers to legislate stringently against the piracy and alert the police
regarding probable piracy sources

At the moment, it is difficult to prevent piracy completely. Piracy happens through leak
from many quarters. When DVDs of the movie are circulated among the artists related
to the movie, somehow it gets leaked into the hands of the movie pirates. Also, some
people record the movie using a camcorder while watching the movie in a theatre.

Some of the steps the movie producers can take to prevent piracy include the following.

• Make the artists to sign a non-disclosure agreement, and include a clause that can
prevent piracy

• Instead of circulating the DVD, the movie can be screened in a safe location for the
review and amendments.

• After-release piracy may be prevented using technologies such as anti-piracy system,

inserting extra frames in the theatre copies that are imperceptible to the human eye.

• Theatre visits and purchase of genuine media may be reinforced using attractive
incentive techniques

• Influence the law makers to legislate stringently against the piracy and alert the police
regarding probable piracy sources
 Does GM’s Future Lie in China?

01. What explains the resurgence of the “new” GM in the United States? Do you think GM can
sustain its competitive advantage in the United States? Why or why not? Buttress your arguments.

Ans:

step 1
In the recent months, the demand for the passenger cars has increased, especially for
the Sports utility vehicles (SUV). One of the reasons for the higher demand for the cars is
the decrease in fuel price. Second, the US consumers have come out of the economic
downturn. The experts are predicting that automotive industry will be continuing its
growth.

step 2
The US has a saturated market for the cars; for every 100 people, there are 85 cars. But,
the present economic scenario offers the GM an opportunity to pick up sales there in
the near future, because the car maker specializes in the SUVs, has a legacy of offering
quality cars and has a brand image in the US. But, to maintain the competitive
advantage in the US, the company needs to move to environmental friendly car making
or an attractive car design.

In the recent months, the demand for the passenger cars has increased, especially for
the Sports utility vehicles (SUV). One of the reasons for the higher demand for the cars is
the decrease in fuel price. Second, the US consumers have come out of the economic
downturn. The experts are predicting that automotive industry will be continuing its
growth.

The US has a saturated market for the cars; for every 100 people, there are 85 cars. But,
the present economic scenario offers the GM an opportunity to pick up sales there in
the near future, because the car maker specializes in the SUVs, has a legacy of offering
quality cars and has a brand image in the US. But, to maintain the competitive
advantage in the US, the company needs to move to environmental friendly car making
or an attractive car design.

02. How important are non-U.S. sales to GM? What implications does this have for GM’s global and
business strategy? Think about the integration response framework to inform global strategy and
different strategic positions to inform business strategy.

Ans:

step 1
For GM, sales of cars outside the US are very important, because seventy percent of the
revenues for the company come from foreign countries. Also, the US has saturated
market for cars, while countries such as China, which are emerging economically, can
accommodate huge car sales in the near future. Second, the GM can manufacture cars in
other countries at a lesser cost than in the US.

In the current scenario, GM has a promising future in countries such as China, which has
demand for luxury cars and SUVs. The company must think of offering passenger cars
suitable to each country’s needs.

step 2
As per the integration-responsiveness framework for determining the global strategy,
the global standardization strategy would suit the GM’s strategy. Because there is
pressure to reduce price of the cars made by GM in China, in response to the domestic
car manufacturers there, global standardization approach is ideal. The scenario that the
pressure to reduce cost is high, and pressure to respond to the local needs is low makes
the GM to go for standardization of its product offering.

step 3
Based on the above global strategy, the GM can formulate its business strategy as cost
leadership. The company may standardize its product across the world, manufacture the
cars at the least cost from countries like china, and offer the car at lesser price in the US.
Through global strategy, the company can leverage its business strategy.

For GM, sales of cars outside the US are very important, because seventy percent of the
revenues for the company come from foreign countries. Also, the US has saturated
market for cars, while countries such as China, which are emerging economically, can
accommodate huge car sales in the near future. Second, the GM can manufacture cars in
other countries at a lesser cost than in the US.
In the current scenario, GM has a promising future in countries such as China, which has
demand for luxury cars and SUVs. The company must think of offering passenger cars
suitable to each country’s needs.

As per the integration-responsiveness framework for determining the global strategy,

the global standardization strategy would suit the GM’s strategy. Because there is
pressure to reduce price of the cars made by GM in China, in response to the domestic
car manufacturers there, global standardization approach is ideal. The scenario that the
pressure to reduce cost is high, and pressure to respond to the local needs is low makes
the GM to go for standardization of its product offering.

Based on the above global strategy, the GM can formulate its business strategy as cost
leadership. The company may standardize its product across the world, manufacture the
cars at the least cost from countries like china, and offer the car at lesser price in the US.
Through global strategy, the company can leverage its business strategy.

03. In 2014, GM held almost 15 percent market share in China, while Ford held only 3 percent. Why
was GM so successful in China, while some of its rivals, including Ford, struggle to gain a stronger
position in the world’s largest automobile market?

Ans:

step 1
The GM is able to garner higher market share in China than its rival for three important
reasons.

1. The company began its operation way back in 1997, which gave them first mover
advantage

2. A joint venture with a strong partner was established very early, and it still goes
robustly

3. In two decades the company was able to develop social, cultural and administrative
intimacy with the people of China,

The above factors put together define the competitive advantage of the GM in China.
The GM is able to garner higher market share in China than its rival for three important
reasons.

1. The company began its operation way back in 1997, which gave them first mover
advantage

2. A joint venture with a strong partner was established very early, and it still goes
robustly

3. In two decades the company was able to develop social, cultural and administrative
intimacy with the people of China,

The above factors put together define the competitive advantage of the GM in China.

04. What are the challenges GM is currently facing in the Chinese automobile market? How should
GM’s CEO address them? Be specific

Ans:

step 1
Though the GM has edge over other automobile manufacturers, it has to address the
challenges posed by the market. The key challenges in the current scenario are as
follows.

• There is economic slowdown in China

• Materials that need to be imported for manufacturing in China are costlier due to
devaluation of Yuan

• Government controlled auto companies are placing tough completion to the GM

• The US is showing signs of recovery and the auto sale is expected to grow there,
especially in SUV (Sports Utility Vehicle) sector. GM will have resource constraints if the
company decides to sharply compete in both the markets.

step 2
The GM is required to overcome the above challenges with appropriate strategy.

• The company must pursue product development during the downturn, so that it can
offer a competitive product during the boom period.
• Manufacture cars in China, and export them to other countries, even to the US

• The company must move from cost leadership to differentiator to meet the
competition from low priced car manufacturers

• Utilize the opportunities emerging in the US and China in a balanced way

Though the GM has edge over other automobile manufacturers, it has to address the
challenges posed by the market. The key challenges in the current scenario are as
follows.

• There is economic slowdown in China

• Materials that need to be imported for manufacturing in China are costlier due to
devaluation of Yuan

• Government controlled auto companies are placing tough completion to the GM

• The US is showing signs of recovery and the auto sale is expected to grow there,
especially in SUV (Sports Utility Vehicle) sector. GM will have resource constraints if the
company decides to sharply compete in both the markets.

The GM is required to overcome the above challenges with appropriate strategy.

• The company must pursue product development during the downturn, so that it can
offer a competitive product during the boom period.

• Manufacture cars in China, and export them to other countries, even to the US

• The company must move from cost leadership to differentiator to meet the
competition from low priced car manufacturers

• Utilize the opportunities emerging in the US and China in a balanced way

 Flipkart Is Fulfilling Its Wish and Beating Amazon.com

01. Why was Flipkart successful in India? What is the basis of Flipkart’s competitive advantage?

Ans:

tep 1
The new generation business startup FCart, with more than one billion dollar in revenue
per year, is the most popular e-commerce site in India. It has achieved this status
through carving the business in unique ways.

step 2
There are both external and internal factors that led to the success of FCart.

• India has a huge younger population who prefers to shop online

• FCart has a first mover advantage in the online business

• The company could gain the trust of the online customers quickly

• The site provides a system for the customers to choose payment terms as ‘cash on
delivery’. This facility allows the customers, who do not have credit / debit card, to buy
online.

• The company established a hassle free system to carry out physical inspection before
confirming the purchase. The customers can return the goods in a hassle free manner if
they do not like the product.

• In association with the financial institutions, the company offers a facility to the
customers to pay in monthly installments.

• The site provides a facility for the local merchants to offer their products

The above features of the FCart’s business are the source of its competitive advantage.
The new generation business startup FCart, with more than one billion dollar in revenue
per year, is the most popular e-commerce site in India. It has achieved this status
through carving the business in unique ways.

There are both external and internal factors that led to the success of FCart.

• India has a huge younger population who prefers to shop online

• FCart has a first mover advantage in the online business

• The company could gain the trust of the online customers quickly

• The site provides a system for the customers to choose payment terms as ‘cash on
delivery’. This facility allows the customers, who do not have credit / debit card, to buy
online.

• The company established a hassle free system to carry out physical inspection before
confirming the purchase. The customers can return the goods in a hassle free manner if
they do not like the product.

• In association with the financial institutions, the company offers a facility to the
customers to pay in monthly installments.

• The site provides a facility for the local merchants to offer their products

The above features of the FCart’s business are the source of its competitive advantage.

02. Will Flipkart be able to sustain its early lead over Amazon, given the deep pockets of the
American e-commerce giant and its intentions to invest further in India? What are some of the key
advantages that Flipkart has over Amazon? What are some of Flipkart’s disadvantages? What would
Flipkart need to do to sustain its competitive advantage?

Ans:

step 1
The presence of the international online giant AMZ is a threat to the competitive
advantage of the FCart. The financial might of the AMZ can tilt the position of the FCart
adversely. However, the deep knowledge of the Indian consumer psyche and the ability
to provide solutions to the Indian consumers are the key competence of the company to
come up with innovative online strategies.
step 2
One of the disadvantages of the current FCart model is that the merchants who are
offering products on its site are not completely reliable, and this can damage the
reputation of the company. The price advantage of the company may be taken away by
AMZ through its financial prowess.

step 3
In order to maintain its competitive advantage, the company must focus on the needs of
the online customers and innovate the services for them. The COD (cash on delivery)
facility and the hassle free return procedure are two examples of innovative services to
the Indian online customers.

The presence of the international online giant AMZ is a threat to the competitive
advantage of the FCart. The financial might of the AMZ can tilt the position of the FCart
adversely. However, the deep knowledge of the Indian consumer psyche and the ability
to provide solutions to the Indian consumers are the key competence of the company to
come up with innovative online strategies.

One of the disadvantages of the current FCart model is that the merchants who are
offering products on its site are not completely reliable, and this can damage the
reputation of the company. The price advantage of the company may be taken away by
AMZ through its financial prowess.

In order to maintain its competitive advantage, the company must focus on the needs of
the online customers and innovate the services for them. The COD (cash on delivery)
facility and the hassle free return procedure are two examples of innovative services to
the Indian online customers.

03. Should Flipkart leverage its core competencies outside India to “go global”? If so, which
countries do you think would provide the best opportunities for Flipkart, and why?

Ans:

step 1
The core competence of understanding the Indian consumer and developing
appropriate systems to serve them are key competitive advantages of FCart. Utilizing
these features, the company can leverage its core competencies to capture market in
other countries.
step 2
The SAARC countries, such as Nepal, Srilanka, Maldives, etc., and Gulf countries such as
UAE, Oman, Kuwait, Saudi Arabia, etc. are ideal for the FKart to expand its global
presence. The unique services provided by the company are suitable to these countries,
as there is large Indian Diaspora in these countries, and also, the natives of these
countries share similar customer profile as that of India.

The core competence of understanding the Indian consumer and developing

appropriate systems to serve them are key competitive advantages of FCart. Utilizing
these features, the company can leverage its core competencies to capture market in
other countries.

The SAARC countries, such as Nepal, Srilanka, Maldives, etc., and Gulf countries such as
UAE, Oman, Kuwait, Saudi Arabia, etc. are ideal for the FKart to expand its global
presence. The unique services provided by the company are suitable to these countries,
as there is large Indian Diaspora in these countries, and also, the natives of these
countries share similar customer profile as that of India.

04. With a valuation of $15 billion, Flipkart is now one of the most valuable privately owned startups
in the world. Flipkart’s investors hail from the United States, United Kingdom, Russia, and Singapore.
Venture capitalists (VCs) expect new ventures to file for an initial public offering (IPO) at some point.
This event allows the VCs to capture the financial returns to their early-stage and highly risky
investments. Do you think Flipkart’s business model and strategy would change if it were a publicly
traded company? And if so, how? Hint: Look at the Chinese ecommerce firm Alibaba’s record IPO in
2014, and see how this has changed the company’s strategy.

Ans:

step 1
The transition from venture capital ownership to public limited company may not affect
the business strategy of the FCart. Business strategy of an organization is carved based
on its external conditions and the internal capabilities, and is not directly connected to
the corporate constitution. The constitution of the corporation has little effect on the
business strategy. However, by transferring the ownership of the company, the
corporate strategy of the company may change.

step 2
The Chinese online retailer, Ababa has suffered recent setbacks not because of the Initial
Public Offer, but because of the influence of environmental forces and the industry
structure. It is the role of the business strategist to consider the business environment
and industry structure while formulating business strategy.

The transition from venture capital ownership to public limited company may not affect
the business strategy of the FCart. Business strategy of an organization is carved based
on its external conditions and the internal capabilities, and is not directly connected to
the corporate constitution. The constitution of the corporation has little effect on the
business strategy. However, by transferring the ownership of the company, the
corporate strategy of the company may change.

The Chinese online retailer, Ababa has suffered recent setbacks not because of the Initial
Public Offer, but because of the influence of environmental forces and the industry
structure. It is the role of the business strategist to consider the business environment
and industry structure while formulating business strategy.

LVMH in China: Cracks Its Empire of Desire?

01. Why has LVMH been so successful in China? With the Chinese economic slowdown, do you think
there are risks to LVMH growing aggressively in China? What do you think should be its strategy in
China going forward?

Ans:

step 1
The luxury brand LoVut has been not only successful in China, but also is in existence
there for long time without contest. Many factors have contributed to the invincible
position of the LoVut.

• The company has established its first presence thirty years back and has been doing
promotions to position itself as a luxury brand

• The products of LoVut appealed to the wealthy Chinese intensely

• The LoVut brand enhances the prestige of the Chinese, and even middle class Chinese
aspire to own this brand

step 2
Definitely, the economic slowdown is going to affect the sales of LoVut products. The
reason for low sales is not because the affluent customers cannot afford it. Only they are
moving away from the brand, because during the boom time, the brand has crept into
the middle class segment, and the affluent lot lost the identity of being elite.

The LoVut should slow down their sales in China, and attempt to regain the image as
the retailer of the elite.

The luxury brand LoVut has been not only successful in China, but also is in existence
there for long time without contest. Many factors have contributed to the invincible
position of the LoVut.

• The company has established its first presence thirty years back and has been doing
promotions to position itself as a luxury brand

• The products of LoVut appealed to the wealthy Chinese intensely

• The LoVut brand enhances the prestige of the Chinese, and even middle class Chinese
aspire to own this brand

Definitely, the economic slowdown is going to affect the sales of LoVut products. The
reason for low sales is not because the affluent customers cannot afford it. Only they are
moving away from the brand, because during the boom time, the brand has crept into
the middle class segment, and the affluent lot lost the identity of being elite.

The LoVut should slow down their sales in China, and attempt to regain the image as
the retailer of the elite.

02. Which strategic initiatives does LVMH pursue to strengthen its position in China? In particular,
how does LVMH encourage Chinese customers to purchase LVMH products in China rather than
abroad? Do you think these strategic initiatives will be successful? Why or why not? What other ideas
do you think LVMH should pursue to encourage Chinese customers to purchase LVMH products in
China?

Ans:

step 1
In order to pick up sales and to woo the extremely rich customers in China, the company
must take the following strategic steps.

• Carry the prominent international collection merchandise in the Chinese stores also,
and design products specifically for the Chinese community. The Chinese designs must
be sold only in China

• Control the free walk of the buyers into the stores, and make the stores open to the
customers only by invitation

• Produce only limited editions of products for each design

• Develop a customer referral system, in which the known customer introduces other
aspiring customer. The company creates the profile of the new customer and then
invites them to present the exotic collections

• The price of the products may be increased and discounts may be offered to the
customers based on the purchase history and the quality of the referrals.

step 2
Since the Chinese customers buy the LoVut products to enhance their prestige, the
company must help the customers to make them feel unique. The above suggestions
are intended to make the customers stand out in the crowd, and are likely to be
successful.

In order to pick up sales and to woo the extremely rich customers in China, the company
must take the following strategic steps.

• Carry the prominent international collection merchandise in the Chinese stores also,
and design products specifically for the Chinese community. The Chinese designs must
be sold only in China

• Control the free walk of the buyers into the stores, and make the stores open to the
customers only by invitation

• Produce only limited editions of products for each design

• Develop a customer referral system, in which the known customer introduces other
aspiring customer. The company creates the profile of the new customer and then
invites them to present the exotic collections
• The price of the products may be increased and discounts may be offered to the
customers based on the purchase history and the quality of the referrals.

Since the Chinese customers buy the LoVut products to enhance their prestige, the
company must help the customers to make them feel unique. The above suggestions
are intended to make the customers stand out in the crowd, and are likely to be
successful.

03. Louis Vuitton is LVMH’s flagship brand. Much of Louis Vuitton’s appeal is that it bestows
exclusivity on its owners. In the last few years, however, the Louis Vuitton logo has been applied
widely with handbags and accessories proliferating at an unprecedented speed. In addition,
counterfeiting further leads to a proliferation of the “Louis Vuitton brand.” One analyst concluded
that LVMH is “way overexposed in China, with too many stores and too much in fixed costs.”4 Is
LVMH changing its strategic position of Louis Vuitton from a focused differentiator to a broad
differentiator the brand losing its appeal? Does Louis Vuitton risk being “stuck in the middle”? Why
or why not?

Ans:

step 1
The analyst is right; LuVot lost its appeal to the core customers because of it’s over
exposure to the market. The core customers of the company are the rich and affluent
segment of China, who wishes to stand out in the crowd.

step 2
Too many stores in the country and accessibility of the products to the middle class,
made the core customers move away from the brand. The rich class began to shop for
LoVut products in foreign countries or looked for other luxury brands.

step 3
The company is inadvertently losing its competitive advantage by practicing broad
differentiation rather than focused differentiation. LoVut should come back to its
original position as a provider of luxury goods for the elite. Focused differentiation and
the niche segmentation are the solution for this predicament.
The analyst is right; LuVot lost its appeal to the core customers because of it’s over
exposure to the market. The core customers of the company are the rich and affluent
segment of China, who wishes to stand out in the crowd.

Too many stores in the country and accessibility of the products to the middle class,
made the core customers move away from the brand. The rich class began to shop for
LoVut products in foreign countries or looked for other luxury brands.

The company is inadvertently losing its competitive advantage by practicing broad

differentiation rather than focused differentiation. LoVut should come back to its
original position as a provider of luxury goods for the elite. Focused differentiation and
the niche segmentation are the solution for this predicament.

04. Given the backlash in China against corruption and conspicuous consumption, what
recommendations would you give LVMH?

Ans:

step 1
It is really a devastating revelation that the LoVut’s products have been used for
corrupting the officials. Every company expects to acquire genuine customers, but using
the products for illegitimate purposes by the pseudo customers drains the brand value
of the business. The company may be able to fight low sales volume, but the products
getting associated with scandalous issues is a misfortune.

step 2
The company may adopt the following approach to overcome the negative image.

• Close down the stores where there is apparent incidences of illegitimate purchases,
and overexposure to the real customers

• Without reducing the price add real value to the products, and do a campaign to
increase the perceived value among the customers.

• Get associated with anti-corruption movement and educate the customers about the
real value of the LoVut products

• Highlight the impact of purchases on the artists who create the products
It is really a devastating revelation that the LoVut’s products have been used for
corrupting the officials. Every company expects to acquire genuine customers, but using
the products for illegitimate purposes by the pseudo customers drains the brand value
of the business. The company may be able to fight low sales volume, but the products
getting associated with scandalous issues is a misfortune.

The company may adopt the following approach to overcome the negative image.

• Close down the stores where there is apparent incidences of illegitimate purchases,
and overexposure to the real customers

• Without reducing the price add real value to the products, and do a campaign to
increase the perceived value among the customers.

• Get associated with anti-corruption movement and educate the customers about the
real value of the LoVut products

• Highlight the impact of purchases on the artists who create the products

05. LVMH is a diversified conglomerate owning a number of luxury brands including Louis Vuitton
(fashion and leather goods), Bulgari and Tag Heuer (watches and jewelry), Moe¨t et Chandon and
Dom Pe´rignon (wines and spirits), and Dior (fashion, perfumes, and cosmetics). Identify core
competencies, economies of scale, and economies of scope that would allow LVMH to create value
as a diversified conglomerate (“diversification premium”). What factors could lead LVMH to destroy
value as a diversified conglomerate (“diversification premium”)? Explain

Ans:

step 1
For a company to enter the luxury goods market, it must have four competencies:
economies of scale, product differentiation, ability to spend on unrecoverable costs, and
high degree of innovation. Of course, other minor assets required for the business
include design patents, financial resources and experience in the market. The parent
company of LoVut has all these qualifications.

step 2
LoVut, parent company’s corporate strategy is a conglomerate diversification with
interests in fashion, watches, leather goods, jewelry, fine wines, perfumes, retail stores,
etc. Generally conglomerates are not successful in managing diverse business interests,
but LoVut’s parent company is successful because of its strong brand names,
international reputation, and ability to market luxury goods. The conglomerate is able to
keep away competition through niche value creation and focused differentiation
strategy. The value capture system is very intricate and the company extracts premium
price from the customers.

step 3
Moving away from niche, focused differentiation, high pricing, and innovation, the
conglomerate is likely to destroy its competitive advantage.

For a company to enter the luxury goods market, it must have four competencies:
economies of scale, product differentiation, ability to spend on unrecoverable costs, and
high degree of innovation. Of course, other minor assets required for the business
include design patents, financial resources and experience in the market. The parent
company of LoVut has all these qualifications.

LoVut, parent company’s corporate strategy is a conglomerate diversification with

interests in fashion, watches, leather goods, jewelry, fine wines, perfumes, retail stores,
etc. Generally conglomerates are not successful in managing diverse business interests,
but LoVut’s parent company is successful because of its strong brand names,
international reputation, and ability to market luxury goods. The conglomerate is able to
keep away competition through niche value creation and focused differentiation
strategy. The value capture system is very intricate and the company extracts premium
price from the customers.

Moving away from niche, focused differentiation, high pricing, and innovation, the
conglomerate is likely to destroy its competitive advantage.

Sony vs. Apple: Whatever Happened to Sony?

01. Why had Sony been successful in the past (e.g., with the introduction of the Walkman, Play
Station, the CD, and the VAIO computer line)?

Ans:

step 1
It is apparent that Sny was successful in bringing out path breaking products such as
portable music player, gaming device, Compact disc, Life style lap top computer, etc. in
the past because of the close interaction among the diversified business unit.

It is apparent that Sny was successful in bringing out path breaking products such as
portable music player, gaming device, Compact disc, Life style lap top computer, etc. in
the past because of the close interaction among the diversified business unit.

02. What was Idei’s assessment of strategic alliances vs. M&As? Do you agree or disagree? Support
your assessment.

Ans:

step 1
The Sny’s former CEO’s view point about strategic alliances, and Mergers and
Acquisitions (MAA) are true to some extent. The decision to go for soft alliances or the
MAA depends on the situations of the company. MAA usually poses a challenge with
regard to organizational structure and cultural fit between the merging companies. It
takes longer time for both companies to get adjusted to each other, by that time the
company would have lost valuable time needed for innovation.

The Sny’s former CEO’s view point about strategic alliances, and Mergers and
Acquisitions (MAA) are true to some extent. The decision to go for soft alliances or the
MAA depends on the situations of the company. MAA usually poses a challenge with
regard to organizational structure and cultural fit between the merging companies. It
takes longer time for both companies to get adjusted to each other, by that time the
company would have lost valuable time needed for innovation.

03. Why do you think Apple succeeded in the digital portable music industry, while Sony failed?

Ans:

step 1
It is not just enough to have a good business strategy and model; it has to be
implemented with agility. Though Sny had good strategy and innovation, it failed to
implement it. On the other hand Apl, implemented the business strategy with sense of
urgency and right organizational structure.

step 2
The Apl utilized a core cross-functional team that interacted and collaborated with the
outsourced organizations in an integrated manner. The company could launch a
portable music device in lesser time and achieved fast growth even before the
competitors could enter the music market space.

It is not just enough to have a good business strategy and model; it has to be
implemented with agility. Though Sny had good strategy and innovation, it failed to
implement it. On the other hand Apl, implemented the business strategy with sense of
urgency and right organizational structure.

The Apl utilized a core cross-functional team that interacted and collaborated with the
outsourced organizations in an integrated manner. The company could launch a
portable music device in lesser time and achieved fast growth even before the
competitors could enter the music market space.

04. What could Sony have done differently to avoid failure in the digital portable music industry?
What lessons need to be learned?

Ans:

step 1
Though, Sny had all the resources and experience to succeed in the digital portable
music sector, it failed because of the faulty organizational design and process. The
company should have organized its resources in a more coordinated way.

step 2
Since the company had facilities and independent business units spread across the
globe, it should have reached a balance of centralized and decentralized decision
making culture (each of the business units acted independently and rarely interacted
with each other).

Second, Sny should have established a level in the organizational structure to coordinate
the geographic and product organizations.

Though, Sny had all the resources and experience to succeed in the digital portable
music sector, it failed because of the faulty organizational design and process. The
company should have organized its resources in a more coordinated way.
Since the company had facilities and independent business units spread across the
globe, it should have reached a balance of centralized and decentralized decision
making culture (each of the business units acted independently and rarely interacted
with each other).

Second, Sny should have established a level in the organizational structure to coordinate
the geographic and product organizations.

05. Activist investors argue that Sony is spread too thin over too many businesses, and
that its corporate strategy needs a major refocus. These activist investors request that
Sony should combine its music and movie businesses into one entertainment unit, and
spin it off as a standalone company. Sony Pictures Entertainment has music artists such
as Snoop Dogg, Kelly Clarkson, Justin Timberlake, and Pink under contract. The movie
Skyfall, Sony’s 2012 installment in the James Bond saga, topped the rankings and
grossed over $1 billion since its release. This corporate restructuring would allow Sony
to focus on its core business in electronics, while unlocking hidden valuecreating
potential in its entertainment unit, activists investors argue.
a. What is Sony’s organizational structure? Do you agree with the assessment that “Sony
is spread too thin over too many businesses”? Why or why not? Explain.
b. What would be the benefits of splitting Sony as proposed? What would be its
drawbacks?
c. Which recommendations do you have to restructure Sony? Explain

Ans:

step 1
Case summary:

Company S led behind as company A had launched new division of gadgets in music
such as i-pod, i-pad etc. Though company A took over the market, Company s was
successful in bringing out products such as portable music player, gaming device,
compact disc, laptop computer and many more due to close interaction among the
diversified units.

step 2
The corporate structure of S is a conglomerate with distinct and unrelated businesses.
There are about eight major business divisions spread across the globe with one CEO
for entire organization. But, the profit and loss of the separate businesses are
consolidated at the top S management.

The S, at present seem to have lesser resources to drive all the business units, because
most of the business units are not growing as much as other companies in the
respective industries. The company is lacking sharp business focus, integrating
leadership, coordinated organizational structure and sufficient resources to drive the
business growth

step 3
The benefits of splitting Sony as proposed can gain the lost business focus, can hire
responsible and well-coordinated organization, innovation of new products, and sharper
marketing efforts.

However, the division of the company shall put complex challenges on the employees of
the organization, because they are not exposed to cross functional and collectively
responding operations.

step 4
Company S should incorporate independent CEOs for each division in the business units
as due to lack of higher management, the company is facing problem. The apex
management can act as a coordinating and guiding mechanism to these business units
to bring focus to the business activities and respond to the market needs quickly.

Case summary:

Company S led behind as company A had launched new division of gadgets in music
such as i-pod, i-pad etc. Though company A took over the market, Company s was
successful in bringing out products such as portable music player, gaming device,
compact disc, laptop computer and many more due to close interaction among the
diversified units.

The corporate structure of S is a conglomerate with distinct and unrelated businesses.

There are about eight major business divisions spread across the globe with one CEO
for entire organization. But, the profit and loss of the separate businesses are
consolidated at the top S management.

The S, at present seem to have lesser resources to drive all the business units, because
most of the business units are not growing as much as other companies in the
respective industries. The company is lacking sharp business focus, integrating
leadership, coordinated organizational structure and sufficient resources to drive the
business growth

The benefits of splitting Sony as proposed can gain the lost business focus, can hire
responsible and well-coordinated organization, innovation of new products, and sharper
marketing efforts.

However, the division of the company shall put complex challenges on the employees of
the organization, because they are not exposed to cross functional and collectively
responding operations.

Company S should incorporate independent CEOs for each division in the business units
as due to lack of higher management, the company is facing problem. The apex
management can act as a coordinating and guiding mechanism to these business units
to bring focus to the business activities and respond to the market needs quickly.

Struggling Samsung Electronics

01. Lee Jae-yong, the 46-year-old grandson of the Samsung founder and heir apparent, was
educated at Seoul National University, Keio University (in Japan), and Harvard Business School. He
wrote a master’s thesis at Keio University on Japan’s struggle to retain its world leadership in
manufacturing in the mid-1990s when the country’s fast-growing period was ending. He concluded,
“Japan’s troubles were worsened by its manufacturers’ pursuit of scale and market share.” 2 Is
Samsung Electronics’ pursuit of scale and market share to blame for its losing its competitive
advantage?

Ans:

step 1
The third generation leader of the SSung conglomerate made a statement about Japan
and its business organizations, which came true for the company itself after 25 years.
The statement was ‘…… in the pursuit of scale and market share the companies
squander their competitive advantage”. This is what the SSung did and lost its
competitive advantage.

The company followed broad differentiation strategy, copied the looks and external
designs of the Apl phones and did not made any strategic changes with respect to the
customer segments such as bottom of the pyramid, high end customers, etc.
The third generation leader of the SSung conglomerate made a statement about Japan
and its business organizations, which came true for the company itself after 25 years.
The statement was ‘…… in the pursuit of scale and market share the companies
squander their competitive advantage”. This is what the SSung did and lost its
competitive advantage.

The company followed broad differentiation strategy, copied the looks and external
designs of the Apl phones and did not made any strategic changes with respect to the
customer segments such as bottom of the pyramid, high end customers, etc.

02. Why is Samsung Electronics encountering problems selling its flagship line of smartphones, the
Galaxy? How should it compete against premium phone makers such as Apple and low-cost leaders
such as Xiaomi and Micromax?

Ans:

step 1
SSung has been following its one sentence strategy, ‘follow first, innovate second’.
Because of this strategy, the company has been copying best features of the
competitive products into their products. Galaxy series was one such product. Though,
customers preferred the SSung’s Smartphone initially, innovative and low cost products
from Apl, Micmax, Xiami, etc. appealed to the customers more.

step 2
SSung must abandon the strategy ‘one size fits all’ i.e. offering Galaxy for all segments
of the mobile market. The company may launch a range of Smartphone that has distinct
value proposition for each segment of the market. With this approach the company can
compete with Apl for high end product market share, and with Xiami, Micmax, etc for
low cost handset market share.

SSung has been following its one sentence strategy, ‘follow first, innovate second’.
Because of this strategy, the company has been copying best features of the
competitive products into their products. Galaxy series was one such product. Though,
customers preferred the SSung’s Smartphone initially, innovative and low cost products
from Apl, Micmax, Xiami, etc. appealed to the customers more.
SSung must abandon the strategy ‘one size fits all’ i.e. offering Galaxy for all segments
of the mobile market. The company may launch a range of Smartphone that has distinct
value proposition for each segment of the market. With this approach the company can
compete with Apl for high end product market share, and with Xiami, Micmax, etc for
low cost handset market share.

03. What would you recommend Samsung Electronics would need to do to revive and turn around
its fledgling mobile division?

Ans:

step 1
Since, 75% of the revenues of SSung’s come from the Smartphone sales, the company
must give priority to this sector. In order to revive the top level sales, next time, SSung
must launch a flagship product i.e. Smartphone, that is distinctive, disruptive and
innovative. The company must change its image as a copy-cat, and must stop following
the competition per se.

Since, 75% of the revenues of SSung’s come from the Smartphone sales, the company
must give priority to this sector. In order to revive the top level sales, next time, SSung
must launch a flagship product i.e. Smartphone, that is distinctive, disruptive and
innovative. The company must change its image as a copy-cat, and must stop following
the competition per se.

Alibaba and China’s ECommerce: Reality Bites

01. Why did eBay lose out to Alibaba in China? What lessons can be learned for non-Chinese
ecommerce companies such as Amazon?

Ans:

step 1
For sustaining superior competitive position, good strategy formulation and
implementation alone will not help; companies need to protect their core assets and
competitive advantages. The business managers must design and shape organizational
structure, culture and control mechanisms to protect the competitive advantages.

step 2
The Chinese arm of E-bey, the Echnet was doing well in the C2C online business. But, the
decision of E-bay on restructuring the online asset of Echnet damaged its competitive
advantage. By migrating the customers of Echnet platform to E-bey site, the company
has deprived the Chinese customers off their comfort of doing business in their cultural
settings. The Echnet customers moved to A-baba site which provided online facilities to
match their expectations.

step 3
The online companies such as AMZ must respect customer preferences in each country,
and develop adaptive solutions to each geographical market.

For sustaining superior competitive position, good strategy formulation and

implementation alone will not help; companies need to protect their core assets and
competitive advantages. The business managers must design and shape organizational
structure, culture and control mechanisms to protect the competitive advantages.

The Chinese arm of E-bey, the Echnet was doing well in the C2C online business. But, the
decision of E-bay on restructuring the online asset of Echnet damaged its competitive
advantage. By migrating the customers of Echnet platform to E-bey site, the company
has deprived the Chinese customers off their comfort of doing business in their cultural
settings. The Echnet customers moved to A-baba site which provided online facilities to
match their expectations.

The online companies such as AMZ must respect customer preferences in each country,
and develop adaptive solutions to each geographical market.

02. How was Alibaba able to become the most successful ecommerce company in China? Think
about standards, network effects, and the crossing the- chasm framework to inform your reasoning.

Ans:

step 1
The A-baba came into existence when the Chinese internet users were smaller in size,
and the company provided a platform for the local vendors to showcase their products
to buyers across China and elsewhere. As the number users of the site grew, the
company developed certain standards for the sites such as appearance, sign-in
procedures, terms and conditions, etc. which became a source of competitive advantage
and factor for growth.

step 2
The network effects also contributed to the success for the A-baba portal. The users of
the site influenced the decisions of other users in favor of the company. Businesses that
received good deals through the A-baba portal encouraged other users to opt for the
site. The network effect not only helped the company to grow, but also prevented the
new competitors to enter the market.

step 3
As per the paradigm of ‘crossing the chasm’, the A-baba was able to manage the
industry life cycle, which begins with introduction of the service, growth stage, reaching
maturity and then decline. As the company moves from one stage to other, the
customer expectations and responses differ. The company was able to offer solutions
appropriately at each stage of the life cycle. For example, the company differentiated the
sites for B2B, C2C and online retailing as t grew from one stage to another.

The A-baba came into existence when the Chinese internet users were smaller in size,
and the company provided a platform for the local vendors to showcase their products
to buyers across China and elsewhere. As the number users of the site grew, the
company developed certain standards for the sites such as appearance, sign-in
procedures, terms and conditions, etc. which became a source of competitive advantage
and factor for growth.

The network effects also contributed to the success for the A-baba portal. The users of
the site influenced the decisions of other users in favor of the company. Businesses that
received good deals through the A-baba portal encouraged other users to opt for the
site. The network effect not only helped the company to grow, but also prevented the
new competitors to enter the market.

As per the paradigm of ‘crossing the chasm’, the A-baba was able to manage the
industry life cycle, which begins with introduction of the service, growth stage, reaching
maturity and then decline. As the company moves from one stage to other, the
customer expectations and responses differ. The company was able to offer solutions
appropriately at each stage of the life cycle. For example, the company differentiated the
sites for B2B, C2C and online retailing as t grew from one stage to another.
03. What factors contributed to Alibaba’s loss in performance? Detail internal weaknesses and
external threats

Ans:

step 1
In less than one year after the Initial Public Offer, the A-baba began to lose its
competitive advantage. There are both internal and external factors contributed to this
condition.

step 2
Internal factors: This is again an example of destroying competitive advantage by
faulty management decision. A-baba was performing at its peak when the top
management decided to merge the B2B, B2C and group buying sites into one entity. By
doing so, the customers lost their accustomed options of interacting with the site.
Second, the companies focus shifted from customer service to up gradation of the
technology; A-baba is investing heavily in cloud computing to take on AMZ.

step 3
External factors: The devaluation of the Chinese currency has affected the buying
patterns of the customers. The online purchases have declined after the changes in
foreign exchange rates. Second, more competitors have entered the market, at least
there as six competitors operating in the online space.

In less than one year after the Initial Public Offer, the A-baba began to lose its
competitive advantage. There are both internal and external factors contributed to this
condition.

Internal factors: This is again an example of destroying competitive advantage by

faulty management decision. A-baba was performing at its peak when the top
management decided to merge the B2B, B2C and group buying sites into one entity. By
doing so, the customers lost their accustomed options of interacting with the site.
Second, the companies focus shifted from customer service to up gradation of the
technology; A-baba is investing heavily in cloud computing to take on AMZ.

External factors: The devaluation of the Chinese currency has affected the buying
patterns of the customers. The online purchases have declined after the changes in
foreign exchange rates. Second, more competitors have entered the market, at least
there as six competitors operating in the online space.
04. How can Alibaba mitigate some of the external threats? Make some recommendations to
Alibaba’s CEO.

Ans:

step 1
Competing with online giant such as AMZ is a real challenge. By focusing on the
customer’s needs, their expectations and feedback on the service, the company must
develop attractive value proposition to the customers.

step 2
One of the important assets of the A-baba is having its online paying system called A-
pay. Probably, the company must provide lower interest rate options, longer term loans,
product discounts, etc to the customers if they use A-pay option or apply consumer
loans through the site.

Competing with online giant such as AMZ is a real challenge. By focusing on the
customer’s needs, their expectations and feedback on the service, the company must
develop attractive value proposition to the customers.

One of the important assets of the A-baba is having its online paying system called A-
pay. Probably, the company must provide lower interest rate options, longer term loans,
product discounts, etc to the customers if they use A-pay option or apply consumer
loans through the site.

05. Apply the integration-responsiveness framework to determine:

a. Which global strategy position would you recommend Alibaba should pursue when
attempting to create a stronger foothold in the United States, and why?
b. Which global strategy positions would you recommend U.S. ecommerce companies
such as eBay, Amazon, and others should pursue when competing in China, and why?

Ans:

step 1
By following the integration-responsiveness framework, the A-baba should formulate its
global strategy for the US in the following manner.
Since the US is a matured market of online users, and because the usage of internet has
penetrated to 85% of the population, the company may adopt global standardization
strategy. In this approach the company is required to offer low cost solutions with high
degree f local responsiveness. The company may observe how the US online portals
offering their service and adopt them to offer lower cost solutions, but the solutions
must address the local need of the customers.

step 2
The online companies that are willing to enter the Chinese market should follow the
transnational strategy; where there is high pressure to provide local responses and to
reduce the costs. The Chinese customers have peculiar needs, which are to be addressed
by focused strategy. The Chinese economy is not only sluggish but also has significantly
devalued currency. The overseas competitors have pressure to reduce the costs also.

By following the integration-responsiveness framework, the A-baba should formulate its

global strategy for the US in the following manner.

Since the US is a matured market of online users, and because the usage of internet has
penetrated to 85% of the population, the company may adopt global standardization
strategy. In this approach the company is required to offer low cost solutions with high
degree f local responsiveness. The company may observe how the US online portals
offering their service and adopt them to offer lower cost solutions, but the solutions
must address the local need of the customers.

The online companies that are willing to enter the Chinese market should follow the
transnational strategy; where there is high pressure to provide local responses and to
reduce the costs. The Chinese customers have peculiar needs, which are to be addressed
by focused strategy. The Chinese economy is not only sluggish but also has significantly
devalued currency. The overseas competitors have pressure to reduce the costs also.

The End