BA 388T STRATEGIC MANAGEMENT

SPRING 2014

Professor Andrew D. Henderson

Office CBA 4.226

Office Hours By Appointment

E-Mail Andy.Henderson@Mccombs.utexas.edu

Course Web Page via Blackboard

Teaching assistant Seung Jeong [sjeong@utexas.edu]

REQUIRED READING MATERIALS

Textbook: Barney, J. B., & Hesterly, W. S. 2011. Strategic management and competitive advantage: Concepts (4th edition). Boston, MA: Pearson. ISBN-10: 0132546345. This book is widely available from on-line booksellers, and each student should order their own copy. Note: The 3rd edition (published in 2010) is essentially identical and can be used instead. You do not need to buy a version of this book that includes cases.

Reading packet: Available electronically from Harvard Business School Publishing at the following link: https://cb.hbsp.harvard.edu/cbmp/access/23386383 . Each student is required to purchase their own copy.

COURSE DESCRIPTION

This course enables students to analyze business situations from the point of view of practicing general managers, persons who have responsibility for making strategic decisions that affect the long-term health of entire organizations. The key tasks involved in strategic management include detecting and adapting to environmental changes, creating new opportunities, procuring and allocating critical resources, integrating activities across subparts of the organization, and shaping corporate purpose and direction.

To be effective, general managers need to have an in-depth understanding of the ongoing challenges in key functional areas such as marketing, finance, MIS, R&D, and operations. Consequently, this course builds on and makes use of the knowledge developed in earlier classes. General managers, however, cannot be superficial dabblers who know a little bit about everything but not much about anything. Instead, strategic management involves a distinct set of skills, perspectives, and insights about the business problems and opportunities confronting the total enterprise. Students are expected to combine knowledge from other courses with the new material presented here to develop sophisticated

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analyses and solutions to the large, multi-dimensional problems that pervade today’s fast-paced, global, and highly competitive business environment.

While not all students will become general managers, for several reasons this course should benefit virtually all who take it. First, ongoing trends in the corporate world towards flatter, less hierarchical organizations have resulted in strategic decisions being made at ever lower hierarchical levels, often by relatively inexperienced people. As a result, leadership responsibilities may be thrust upon you very early in your career. Second, a number of factors, including technological change and the continuing shift to global markets, have forced established firms to become increasingly innovative and entrepreneurial, and such initiatives are often led by people at lower organizational ranks. Third, functional specialists, including professionals in finance and marketing, are the people on whom general managers rely to implement a firm’s existing strategy and collect the data needed to update and revise it. Finally, while specialists are often under intense pressure to fix problems in their own areas, the seemingly isolated actions taken to fix such problems can have profound implications for the firm as a whole. As a result, all professionals need to have a solid understanding of strategy.

Verbal communication is both vital to and inseparable from strategic management. This has two critical implications for this class. First, there will be relatively few lectures. We will instead emphasize case discussion because strategy is best learned by immersion in actual business situations where one can fully appreciate the inherent conflicts, pressures, uncertainties, and risks that general management entails. Second, a case-based approach necessitates learning by doing, so your active contribution to class discussions is integral to your knowledge development.

PERFORMANCE MEASURES AND FEEDBACK

Components and Weighting

Your grade will be based on three components, weighted as follows:

Class contribution (individual) 30% Half (15%) assessed 1/14 – 2/27 Half (15%) assessed 3/18 – 5/1 Mid-term case analysis (4-5 person teams) 30%Final case analysis (2-person teams) 40%

100%

The distribution of grades will follow the core guidelines and be roughly as follows: 25% A, 20% A-, 15% B+, 35% B, 5% B- or below.

Class Contribution

Why is class contribution a major portion of the grade in every strategy course at top business schools? It’s simple. General managers are extremely busy. Getting things done requires both learning from and convincing others. As a result, general managers spend most of their time in verbal conversation.

Let me address those of you who find speaking in front of your peers (or me) to be stressful. I’m a bit of an introvert myself, so I empathize with you. The good news for folks like me (and possibly you)

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is that public speaking is a skill like any other – writing, doing NPV calculations, schmoozing people in bars – that improves with practice. This course is organized to help you practice speaking with others about matters of strategic importance.

At the start of a typical session, several students will be asked to open the class by answering a specific question. Case preparation, which includes careful attention to the focus questions and associated readings, should be sufficient to handle such lead-off responsibilities. After a few minutes of initial analysis, we will then open the discussion to the rest of the class. During our discussions, I always look for and appreciate volunteers, but please bear in mind that anyone can be cold called at any time. In your comments, you should have a “high contribution-to-words ratio”. Monopolizing air time is not valued.

Many of the questions we address in class will involve the assigned cases. However, other questions will involve the assigned readings (e.g., book chapters, HBR articles.) Regarding those readings, you should always be prepared to answer these questions: What was the author’s purpose? What were the reading’s strengths, weaknesses, and key assumptions? What were the author’s major points? And how do we apply those points to today’s case?

Finally, should you expect that high quality case discussion will come naturally and easily? No, especially at the start of the course. However, the key features of case discussion (incomplete information, uncertain outcomes, social pressures, competing solutions, and the need to persuade others with evidence) are the same ones that you will face in your career beyond McCombs.

In assessing your class contributions, I ask myself the following questions:

a. Is this person an excellent listener?

b. Are the points made relevant to the discussion and linked to the comments of others?

c. Does this person demonstrate an understanding of the case and associated reading materials?

d. Are comments and recommendations evidence-based ones backed by reliable data and/or course concepts?

e. Does the participant distinguish among different kinds of data – facts, opinions, personal beliefs, theoretical concepts, etc.?

f. Is there a willingness to test new ideas, or are all comments safe? Example of a safe comment: seconding or repeating earlier comments without elaboration or clarification.

g. Does this person raise interesting questions that appropriately expand the scope of our conversation or help us cut to the heart of the matter?

h. Can this person draw linkages – comparisons or contrasts – between today’s case and others that we have covered?

Note: Like most important things in life, assigning class discussion scores involves an element of subjective judgment. I can promise you, though, that if several experienced professors were to attend a class, their scoring of students’ contributions would be very highly correlated because those professors would be looking for the same indicators of deep and substantive understanding.

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Mid-Term Case Analysis

The mid-term involves a written case analysis that you will do as a member of a 4-5 person team. (You can form teams across my 8:00 and 9:30 cohorts.) A detailed assignment and the case itself will be distributed approximately one week before it is due. This assignment is open book, open note, and take home. You’ll be asked to answer 3-4 high-level questions of the type we consider in our class discussions. Your mid-term is due at noon on Feb. 27, 2014.

All case analyses are to be solely your team’s work. Let me state what this means. In completing the assignment, you may use the information in the case, the textbook, the readings, your heads, and nothing else. You are not permitted to gather any extra information regarding the case or the firm via the Internet or other means. If this is at all unclear, please see me. All case reports will be run through SafeAssign, a plagiarism detection program. This is to ensure that no team receives an unfair advantage. If you are unsure about what constitutes plagiarism, you should talk with me.

Note: If you are a second year student who is retaking BA 388T, then you must work by yourself on both the mid-term and final.

Final Case Analysis

The final involves a written case analysis that you will do with a partner. Your partner must not be someone who was on your mid-term team. A detailed assignment and the exam case itself will be distributed during the last week of class. Your write-up will be due during the final exam period. All of the material covered in the course is fair game.

Real-Time Events

You should make a habit of reading business periodicals such as Business Week, the Financial Times, and The Economist. Keeping abreast of current business developments will facilitate your participation in class discussions.

In addition, if you are interested in delving further into the topics that we discuss, I strongly recommend the following.

Ariely, D. 2009Predictably irrational: The hidden forces that shape our decisionsNew York: HarperCollins

Beinhocker, E. D. 2007The Origin of Wealth: Evolution, complexity and the radical remaking of economicsBoston, Massachusetts: Harvard Business School Press

Christensen, Clayton M. 2012How will you measure your life?New York: HarperCollins

Ghemawat, PankajRedefining Global StrategyHarvard Business School Press

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HBR’s 10 Must Reads, 2011On LeadershipBoston, Massachusetts: Harvard Business Review Press

Hoffman, Bryce G. 2012American Icon: Allan Mulally and the fight to save Ford Motor CompanyNew York: Crown Business

Kidder, T. 1981The soul of a new machineNew York: Avon

Lewis, M. 2003MoneyballNew York: Norton

Miller, D. and Le Breton-Miller, I. 2005Managing for the long runBoston, Massachusetts: Harvard Business School Press

Pfeffer, J. and Sutton, R. 2006Hard facts, dangerous half truths & total nonsenseBoston, Massachusetts: Harvard Business School Press

Schroeder, A. 2008The snowballNew York: Bantam-Dell

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Other Points

Please note the following:

a. You must always have your name tag in front of you. This is as true on the last day of the course as the first. If you forget your name tag, make one.

b. By the start of our second session (Thursday, January 16), please find a seat that you like. This will be your seat for the remainder of the course. My TA will be checking attendance using a seating chart, so do not change seats.

c. I expect you to attend every class. Attendance means being on time, in your seat, ready to start, with your name tag displayed. This is a professional program, and being a professional means being accountable every day for performing at a high level.

d. If you miss class, you are responsible for (i) informing my TA and I beforehand, and (ii) obtaining from your classmates any notes, handouts, additional reading materials, or assignment changes.

e. Each student is responsible for any assignment changes that arise throughout the semester. This includes understanding that if one class session runs long, we will conclude that discussion in the following class and then begin our discussion of the next case. I will not post such changes on Blackboard, so you are responsible for knowing where we are in the course.

f. In determining final grades, class contribution is given particular emphasis in settling borderline cases.

g. You are strongly encouraged to form study groups and brain-storm about cases and reading assignments.

h. Learning by doing is a critical feature of this course, and you deprive yourself and others of that opportunity if you discuss cases with students who have taken BA 388T in the past or in another section during the current semester. Therefore, it is an honor code violation to send or receive any communications about what happened in another section prior to our discussion of a particular case. No talking (verbal, electronic or otherwise) or sharing notes across sections until after a focal case is finished in all sections.

i. Per Management Department policy, laptop computers and phones are not allowed. They must be turned off and closed when class begins, as must all other electronic devices. (Accommodations will be made for students with disabilities -- see below.) The only exception involves tablets: You may use a tablet during class if and only if (a) it is laid flat on your desk, and (b) your name tag is in place, and (c) the only thing you view are pdf files of course readings, and (d) you spend very little time looking at your tablet.

j. The University of Texas at Austin provides upon request appropriate academic accommodations for qualified students with disabilities. For more information, contact the Office of the Dean of Students at 471-6259, 471-6441 TTY.

k. All students must have access to Blackboard and have their e-mail properly registered there.

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Course Topic Overview

Class Date Module Case Topics/Tools1 Jan 14 Intro2 Jan 16

Business-Level Strategy

Cola wars(cont.) Industry structure3 Jan 21

4 Jan 23 Zara5 Jan 28 Edward Jones Strategy diamond6 Jan 30 Tesla

(cont.)Technological change and industry evolution7 Feb 4

8 Feb 6 eHarmony(cont.)

Resource-Based View (RBV)9 Feb 11

10 Feb 13 Gillette(cont.)

C3E framework11 Feb 1812 Feb 20 Ducati Differentiation13 Feb 25 Review14 Feb 27 Turn in mid-term15 Mar 4

Global trips / spring break

Global trips16 Mar 6Mar 11 Spring breakMar 13

17 Mar 18

Corporate-level strategy

Danaher Acquisitions18 Mar 2019 Mar 25 Vivendi Diversification and managing

synergies20 Mar 2721 Apr 1 Stone Finch Corporate renewal22 Apr 3 GE Executive compensation23 Apr 8

Strategy implementation

Southwest Strategic types and executive levers framework24 Apr 10

25 Apr 15 1366 Tech. Product innovation strategy26 Apr 17 Ritz Carlton Image & prestige strategy27 Apr 22 EU Design Tailored service strategy28 Apr 24 Caijing; Rospil Dealing with official corruption29 Apr 29 CTP Strategic choice30 May 1 Review

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COURSE TOPICS AND ASSIGNMENTS

MODULE 1: BUSINESS-LEVEL STRATEGY

Session 1 Tuesday, Jan. 14

Objective: Course introduction; overview of how we’ll manage class sessions

Reading: Mintzberg, H. “The manager’s job: Folklore and fact”. Harvard Business Review, [90210]

Reading: Venita Fields: What private equity professionals really do. [KEL500]

Reading: Barney & Hesterly, Chapter 1, “What is strategy and the strategic management process?”

Reading: "Why We Use the Case Method," Appendix, Course Syllabus

Focus questions:

What is strategy?

Why did Mintzberg write this article, and why has it been so influential?

In what ways does an understanding of strategy matter if you’re going into private equity or a similar profession?

Session 2 Thursday, Jan 16

Objective: An introduction to the effects of industry structure on segmentation, profit potential, and competitive behavior

Case: Cola Wars Continue: Coke and Pepsi in 2010 [9-711-462]

Reading: Barney & Hesterly, Chapter 2, “Evaluating a Firm’s External Environment”.

Focus questions:

Why is the soft drink industry so profitable?

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

Why is the profitability so different between the concentrate business and the bottling business?

Can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non-carbonated soft drinks?

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Session 3 Tuesday, Jan 21

Case: Cola Wars Continue (cont.)

Readings: Barney & Hesterly, Chapter 5, “Product Differentiation”

http://www.businessweek.com/magazine/indra-nooyi-rediscovers-the-joy-of-pepsi-02022012.html

Today, we’ll continue our discussion of industry structure and competition.

Session 4 Thursday, Jan. 23

Objective: An extension of ideas about industry structure from the national to global context; consideration of the pros and cons of vertical integration

Case: Zara: Fast fashion [9-703-497]

Readings: Barney & Hesterly, Chapter 4, “Cost Leadership” Barney & Hesterly, Chapter 6, “Vertical Integration”

Focus questions:

What are the sources of Zara’s advantage?

How do the distinctive features of Zara’s business model affect its operating economics? Specifically, compare Zara with an average retailer with similar posted prices. (You may find it convenient to assume that, on average, retail selling prices are about twice as high as manufacturers’ selling prices.)

How well does Zara’s advantage travel globally?

What is the best way to grow the Zara chain? What do you think about the strategy of focusing on Europe versus making a major commitment to a second region?

What other strategic recommendations would you make to Inditex CEO Jose Maria Castellano?

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Session 5 Tuesday, Jan. 28

Objective: A consideration of internal and external strategic alignment and the use of the Hambrick-Fredrickson strategy diamond to assess such alignment

Case: Edward Jones in 2006: Confronting success. [9-707-497]

Reading: Hambrick, D. C. and Fredrickson, J. “Are You Sure You Have a Strategy?” Academy of Management Executive, November, 2001. Note: Located in the “Non-HBS readings” file under “Course Documents” in Blackboard.

Focus questions:

Using Hambrick and Fredrickson’s Strategy Diamond framework, what is Edward Jones’ strategy as of 2006? Which elements of the strategy represent recent changes? In what ways to various elements of the strategy fit or contradict one another?

Pay particular attention to the Economic Logic of the strategy. Why does the company have such a high return on equity (ROE)? Can you think of other instances in which a relatively low-share player in an industry is significantly more profitable than some or all of the higher-share players?

What recommendations would you make to Mr. Weddle?

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Session 6 Thursday, Jan. 30

Objective: To better understand the effects of innovation and competitive dynamics on industry structure

Case: Why everyone loves Tesla (and supporting material). This is available on-line from Bloomberg Business Week at the links below.

cont. http://www.businessweek.com/articles/2013-07-18/the-tesla-electric-cars-creators-chase-their-iphone-moment . (As part of this, also watch the embedded video: “Inside Tesla: A massive factory pumping out Model S”.)

cont. http://www.businessweek.com/articles/2013-07-12/beyond-tesla-rival-electric-car-makers-shred-sticker-prices

cont. http://www.businessweek.com/articles/2013-05-22/tesla-pays-off-its-465-million-loser-loan

cont. http://www.businessweek.com/articles/2013-05-17/why-grumpy-car-dealers-are-helping-tesla

cont. http://www.businessweek.com/news/2013-11-21/musk-claim-of-fewer-tesla-fires-questioned-in-early-mit-research

Reading: Bower, J. L., & Christensen, C. M. Disruptive technologies: Catching the wave. Harvard Business Review, [95103]

Focus questions:

Why is Tesla’s entry into the automobile industry noteworthy? Has Tesla’s entry been a success or failure? How do you judge that?

What roles does innovation play in Tesla’s performance to date?

How will Tesla’s entry affect the broader automobile industry?

What threats does Tesla face in the future, and what should it do to mitigate those threats?

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Session 7 Tuesday, Feb. 4

Topic: Innovation and competitive dynamics (cont.)

Case: Tesla (cont.)

Reading: Fleming, L. “Breakthroughs and the ‘Long Tail’ of Innovation”, Sloan Management Review [SMR 265]

Reading: Tushman, M. L., & O’Reilly, C. A. O. “The tyranny of success: Managing for today and tomorrow”. [2427BC]

In this session, we will continue our discussion of Tesla and address some broader effects of innovation and technological change.

Focus questions:

How do established firms typically respond when confronted with new technologies?

Thinking beyond the Tesla case, what are three firms that have dealt successfully with technological change? What are three firms that have not dealt successfully with such change? What are the reasons for their differing outcomes?

What advice would you give Elon Musk?

Session 8 Thursday, Feb. 6

Objective: An introduction to the Resource-Based View of the firm; consideration of firm-level factors leading to sustained competitive advantage

Case: eHarmony. [9-709-424]

Focus questions:

How structurally attractive is the on-line personals market?

Does eHarmony have a competitive advantage? If so, where does it come from?

How serious is the competitive threat to eHarmony?

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Session 9 Tuesday, Feb. 11

Case: eHarmony (cont.)

Reading: Prahalad, C. K., and Hamel, G. “The Core Competence of the Corporation”, Harvard Business Review. [90311]

Reading: Barney & Hesterly, Chapter 3, “Evaluating a Firm’s Internal Capabilities”

Focus questions:

Which of the four options should Waldorf pursue? Why?

What are the major differences between the Resource-Based View and Porter’s five forces model? What are the strengths and weaknesses of each model?

Session 10 Thursday, Feb. 13

Objective: Application of the C3E framework to integrate ideas covered to date. The Gillette case is an older one, but its lessons are timeless, and it provides a perfect vehicle to learn how to apply the C3E framework to a very broad variety of companies.

Case: Gillette’s Launch of Sensor. [9-792-028]

Reading: Reread Barney & Hesterly, Chapter 2, “Evaluating a Firm’s External Environment”, with particular emphasis on ideas about competitive dynamics.

Focus questions:

Should Sensor be launched as a cartridge or disposable razor? How do industry trends affect this decision?

How much advertising should be used to launch Sensor? $10 million? $20 million?

What should be the schedule for launching Sensor? How should schedules vary around the world (Europe, U.S., Japan, etc.)?

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Session 11 Tuesday, Feb. 18

Case: Gillette’s Launch of Sensor. (cont.)

Reading: http://online.wsj.com/article/SB10001424052702303624004577338103789934144.html

Today, we will continue our discussion of Gillette’s launch of the Sensor product.

Session 12 Thursday, Feb. 20

Objective: Apply concepts covered to date to a classic differentiation strategist

Case: Ducati [9-701-132]

Reading: Ghemawat, P., & Rivkin, J. W. “Creating Competitive Advantage”, Harvard Business School note [9-798-062]

Focus questions:

How did Ducati become the second most profitable motorcycle maker in the world despite its small scale?

Can Ducati sustain its position in the sport segment? Can Honda and the other Japanese manufacturers stop its growth in this segment?

What strategic alternatives are available to Minoli?

Which alternatives would you recommend? Why?

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Session 13 Tuesday, Feb. 25

We will use this day to catch up, as needed, and address any questions that you might have about the mid-term.

Session 14 Thursday, Feb. 27

No class today. Your mid-term write up is due at noon. Please place your write up in the “Henderson” in-box on the bookcase outside the Management Department office, CBA 4.202.

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Session 15 Tuesday, Mar. 4 (Global Trip Period)

Readings: No class

Session 16 Thursday, Mar. 6 (Global Trip Period)

Readings: No class

**** Spring Break: Mar. 10 – Mar. 16 … Enjoy! ****

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MODULE 3: CORPORATE-LEVEL STRATEGY

Session 17 Tuesday, Mar. 18

Objective: To consider the pros and cons of diversifying through acquisitions; to identify several key practices of successful acquirers

Case: Danaher Corporation. [9-708-445]

Reading: Kale, P., Singh, H., & Raman, A. P. Don’t integrate your acquisitions, partner with them. Harvard Business Review. [R0912M]

Focus questions:

What role do acquisitions play at Danaher?

What allows Danaher to be successful in its strategy? Does it create value through its acquisitions?

What assumptions are built into Danaher’s strategy that are at risk of not holding in the future?

What are the limitations of Danaher’s strategy?

Session 18 Thursday, Mar. 20

Case: Danaher Corp. (cont.)

Reading: Barney & Hesterly, Chapter 10, “Mergers and Acquisitions”

Today, we will continue our discussion of Danaher and acquisitions as a means of diversifying.

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Session 19 Tuesday, Mar. 25

Objective: To explore some drivers and consequences of corporate diversification.

Case: Vivendi: Revitalizing a French Conglomerate [9-799-019]

Reading: Goold, M. and Campbell, A. “Desperately Seeking Synergy”, Harvard Business Review. [98504]

Focus questions:

What is Vivendi’s corporate vision? How does the firm intend to create value?

Is this a good approach for the company? Is this a good approach for the investor?

How does the business environment in France affect Messier’s plans and his ability to carry them out?

Session 20 Thursday, Mar. 27

Case: Vivendi (cont.)

Reading: Barney & Hesterly, Chapter 7, “Corporate Diversification”.

Today, we will continue our discussion of Vivendi and of corporate diversification more broadly.

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Session 21 Tuesday, Apr. 1

Objective: To better understand issues associated with strategic renewal via diversification.

Case: Stone Finch, Inc.: Young Division, Old Division [3214]

Reading: O’Reilly, C., and Tushman, M. “The Ambidextrous Organization”, Harvard Business Review. [6581]

Focus questions:

What is your assessment of Jim Billings’ performance as president of Stone Finch? What do you think of his leadership style?

What is your assessment of the entrepreneurial subsidiary concept?

What should Jim Billings do?

Session 22 Thursday, Apr. 3

Objective: To gain a better understanding of some of the issues surrounding executive compensation in diversified firms.

Case: Executive compensation at General Electric (A) [9-105-072]

Reading: Devers, C. E., McNamara, G., Wiseman, R. M., & Arrfelt, M. 2008. Moving closer to the action: Examining compensation design effects on firm risk. Organization Science, 19: 548-566. Note: Located in the “Non-HBS readings” file under “Course Documents” in Blackboard.

Focus questions:

What does GE’s compensation plan do to encourage executives to manage for long-term results? How is the “long-term” defined in the GE compensation scheme?

Focusing on the changes made to the plan since 2002, why did the compensation committee at GE decide to replace the stock options in Immelt’s pay package with performance share units and replace 40% of stock options for other executives with restricted stock units? Do you accept GE’s rationale for the change?

Looking at Immelt’s compensation plan, what are the pros and cons that you see?

What modifications would you propose to GE’s executive compensation plan?

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MODULE 4: STRATEGY IMPLEMENTATION

Session 23 Tuesday, Apr. 8

Objectives: To develop an understanding of major tools that leaders use to implement strategy; implementation in an Efficient-Reliability strategist

Case: Southwest Airlines – 2002: An Industry Under Siege [9-803-133] (skim for background)

Case: Southwest Airlines: In a different world [9-910-419]

Focus questions:

During the 1990s, none of the five largest air carriers in the U.S. earned its cost of capital. Yet despite the industry’s challenges, airlines like Southwest and Jet Blue earn enviable returns. What explains this?

How vulnerable is Southwest to imitation?

In the next 5-10 years, what kinds of things – those over which Southwest’s leadership has some control – could go wrong? What should be done to make sure these things don’t happen?

Would you recommend that Southwest acquire the gates and slots available at LaGuardia? Why?

Session 24 Thursday, Apr. 10

Reading: Pfeffer, J. Producing sustainable competitive advantage through the effective management of people. Academy of Management Executive, 19(4): 95-106. Note: Located in the “Non-HBS readings” file under “Course Documents” in Blackboard.

Reading: http://www.businessweek.com/magazine/united-continental-making-the-worlds-largest-airline-fly-02022012.html

Today, we’ll continue our discussion of Southwest and strategy implementation.

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Session 25 Tuesday, Apr. 15

Objective: To better understand strategy implementation in a Product Innovation strategist

Case: 1366 Technologies [9-810-005]

Reading: Barthelemy, J. The experimental roots of revolutionary vision. Sloan Management Review. [SMR229]

Focus Questions:

What are the tradeoffs between 1366’s options: (a) selling equipment to incumbent solar cell manufactures, and (b) building their own high-volume solar cell plant?

What are the unique financing challenges faced by startups such as 1366 that operate in capital intensive businesses? How do you address those challenges?

What should van Mierlo and Sachs do, including plans for strategy implementation?

Session 26 Thursday, Apr. 17

Objective: To better understand strategy implementation in an Image & Prestige strategist

Case: The Ritz-Carlton Hotel Company [9-601-163]

Reading: My week as a room-service waiter at the Ritz. Harvard Business Review [R0206B]

Focus questions:

“Service” can be an elusive concept. What is Ritz-Carlton selling?

How does the Ritz-Carlton create “Ladies and Gentlemen” in only seven days?

Is it time for James McBride to consider a total overhaul of the hotel opening process? If so, what should he change, and how should he go about doing it?

How does innovation differ between service and manufacturing businesses?

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Session 27 Tuesday, Apr. 22

Objective: To better understand strategy implementation in a Tailored Service strategist

Case: EU Design’s rise in the apparel and fashion industry: Formalizing management and incentive systems [HKU880]

Focus questions:

How might small, growing companies in creative industries get into trouble if they depend too heavily on informal management styles?

What are the implications of moving from an informal management style to a more professional style that includes structured management tools?

How should EU Design change its organizational structure to improve communication between its New York and Hong Kong offices? With its suppliers and customers?

What incentive system should EU Design implement as it grows from small to medium-sized?

In what order should EU Design implement more formal management controls, considering that funds are limited?

Session 28 Thursday, Apr. 24

Objective: To better understand strategy implementation in an economy in which official corruption creates significant challenges

Case: Caijing Magazine (A) [9-112-028]

Case: Rospil.info [9-112-033]

(You’ll need to read both cases carefully because we’ll be drawing comparisons between the two.)

Focus questions:

In 2009, Caijing Magazine was regarded as one of the most hard-hitting in China. What has driven Caijing’s success over the years?

If you were Wang Boming, what would you write in the editorial references on p. 11 of the case?

What has contributed to the success of Rospil.info in exposing corruption in Russia? If you were one of the HBS alums referenced in the introduction and conclusion of the case, how would you support Rospil’s efforts, if at all?

On p. 8 of the Caijing case, Boming calls the magazine a “unique and precious resource,” adding that “in a normal society, you don’t have a need for this kind of thing – you won’t find the equivalent of Caijing in the U.S.” Do you agree? Are Caijing and Rospil unique to their respective environments?

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Session 29 Tuesday, Apr. 29

Objective: To apply ideas covered so far to recommend specific changes in an organization facing a major inflection point that has resulted from the firm’s rapid growth.

Case: Cambridge Technology Partners [9-496-005]

Reading: Kerr, J., & Slocum Jr., J. W. 2005. “Managing corporate culture through reward systems.” Academy of Management Executive, 19(4): 130-138. Note: Located in the “Non-HBS readings” file under “Course Documents” in Blackboard.

Focus questions:

How fast should CTP try to grow? What are the key constraints on its growth?

What steps should CTP take to sustain its advantages?

What decision processes should CTP use to decide whether to accept a potential client?

What organizational structure should the company put in place to support its decision making?

Session 30 Thursday, May 1

This session will be devoted to review and discussion of the key concepts covered to date in the course.

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APPENDIX

Why We Use the Case Method1

The case method is one of the most effective means of management education. It is widely used in schools of business throughout the world, and this use is predicated upon the belief that tackling real business problems is the best way to develop practitioners. Real problems are messy, complex, and very interesting.

Unlike other pedagogical techniques, many of which make you the recipient of large amounts of information but do not require its use, the case method requires you to be an active participant in the closest thing to the real situation. It is a way of gaining a great deal of experience without spending a lot of time. It is also a way to learn a great deal about how certain businesses operate, and how managers manage. There are few programmable, textbook solutions to the kinds of problems faced by real general managers. When a problem becomes programmable, the general manager gives it to someone else to solve on a repeated basis using the guidelines he or she has set down. Thus the case situations that we will face will require the use of analytical tools and the application of your personal judgment.

Sources of Cases

All the cases in this course are about real companies. You will recognize many of the names of the companies, although some of them may be new to you. These cases were developed in several different ways. Occasionally, a company will come to a business school professor and request that a case be written on that company. In other situations, a professor will seek out a company because he or she knows that the company is in an interesting or difficult situation. Often, the company will agree to allow a case to be written.

Occasionally, cases will be written solely from public sources. This is perhaps the most difficult type of case writing because of the lack of primary data sources.

In those situations where a company has agreed to have a case written, the company must "release" the case. This means that they have final approval of the content of a given case. The company and the case writer are thus protected from any possibility of releasing data that might be competitively or personally sensitive. Public source cases, obviously, do not need a release. Given the requirement for release, however, it is amazing the amount of information that companies will allow to be placed in a case. Many companies do this because of their belief in the effectiveness of the case method.

Preparing for Class

When you prepare for class, it is recommended that you plan on reading the case at least three times. The first reading should be a quick run-through of the text in the case. It should give you a feeling for what the case is about and the types of data that are contained in the case. For example, you will want to differentiate between facts and opinions that may be expressed. In every industry, there is a

1 This note was prepared by Dan R.E. Thomas. It is intended solely as an aid to class preparation.

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certain amount of "conventional wisdom" that may or may not reflect the truth. On your second reading you should read in more depth. Many people like to underline or otherwise mark up their cases to pick out important points that they know will be needed later. Your major effort on a second reading should be to understand the business and the situation. You should ask yourself questions like: (1) Why has this company survived? (2) How does this business work? (3) What are the economics of this business?

On your second reading, you should carefully examine the exhibits in the case. It is generally true that the case writer has put the exhibit there for a purpose. It contains some information that will be useful to you in analyzing the situation. Ask yourself what the information is when you study each exhibit. You will often find that you will need to apply some analytical technique (for example, ratio analysis, growth rate analysis, etc.) to the exhibit in order to benefit from the information in the raw data.

On your third reading, you should have a good idea of the fundamentals of the case. Now you will be searching to understand the specific situation. You will want to get at the root causes of problems and gather data from the case that will allow you to make specific action recommendations. Before the third reading, you may want to review the assignment questions in the course description. It is during and after the third reading that you should be able to prepare your outlined answers to the assignment questions.

There is only one secret to good case teaching and that is good preparation on the part of the participants. Since the course has been designed to "build" as it progresses, class attendance is also very important.

Class Discussions

In each class, we will ask one or several people to lead off the discussion. If you have prepared the case, and are capable of answering the assignment question, you should have no difficulty with this lead-off assignment. An effective lead-off can do a great deal to enhance a class discussion. It sets a tone for the class that allows that class to probe more deeply into the issues of the case.

The instructor's role in the class discussion is to help, through intensive questioning, to develop your ideas. This use of the Socratic method has proved to be an effective way to develop thinking capability in individuals. The instructor's primary role is to manage the class process and to insure that the class achieves an understanding of the case situation. There is no single correct solution to any of these problems. There are, however, a lot of wrong solutions. Therefore, we will try to come up with a solution that will enable us to deal effectively with the problems presented in the case.

After the individual lead-off presentation, the discussion will be opened to the remainder of the group. It is during this time that you will have an opportunity to present and develop your ideas about the way the situation should be handled. It will be important for you to relate your ideas to the case situation and to the ideas of others as they are presented in the class. The instructor's role is to help you do this.

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The Use of Extra or Post-Case Data

You are encouraged to deal with the case as it is presented. You should put yourself in the position of the general manager involved in the situation and look at the situation through his or her eyes. Part of the unique job of being a general manager is that many of your problems are dilemmas. There is no way to come out a winner on all counts. Although additional data might be interesting or useful, the "Monday morning quarterback" syndrome is not an effective way to learn about strategic management. Therefore, you are strongly discouraged from acquiring or using extra- or post-case data.

Some case method purists argue that a class should never be told what actually happened in a situation. Each person should leave the classroom situation with his or her plan for solving the problem, and none should be falsely legitimized. The outcome of a situation may not reflect what is, or is not, a good solution. You must remember that because a company did something different from your recommendations and was successful or unsuccessful, this is not an indication of the value of your approach. It is, however, interesting and occasionally useful to know what actually occurred. Therefore, whenever possible, we will tell you what happened to a company since the time of the case, but you should draw your own conclusions from that.

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