Cambridge Judge Business School

Business and management

Anton Petrov

Videos: Strategy

Uber The Top: London cab drivers angered by taxi app

https://www.youtube.com/watch?v=-JyJ3c9XvUY

Bottle Works: Behind the Line

https://www.youtube.com/watch?v=yet4zA415B8

Cirque do Soleil

https://www.youtube.com/watch?v=ElUqBGGCZYM

https://www.youtube.com/watch?v=v_iOWRsw-jA

Videos: Marketing

Mercedes ads: 1. Child 2. Death 3. Animals

https://www.youtube.com/watch?v=zSlhbBBBi3A

https://www.youtube.com/watch?v=sFxcAHqnQDU

https://www.youtube.com/watch?v=_DrJiOjN7nE

Banned Pepsi commercial on street protests with Kendal Jenner

https://www.youtube.com/watch?v=73P9STckPLw

Berlitz language course ad

https://www.youtube.com/watch?v=yR0lWICH3rY

Videos: Operations

Tesla electric cars

https://www.youtube.com/watch?v=8_lfxPI5ObM&t=207s

Olive oil production

https://www.youtube.com/watch?v=aieNV3V4b_s

Pharmaceutical manufacturing

https://www.youtube.com/watch?v=1SWyd_kCehw

Zara logistics

https://www.youtube.com/watch?v=iKUmOsmh-Gs

Chipotle food infection case

https://www.youtube.com/watch?v=0oJ6cYyr1bQ

Videos: Leadership and Organisational Behaviour

Why good leaders make you feel safe

https://www.youtube.com/watch?v=lmyZMtPVodo

What is effective leadership

https://www.youtube.com/watch?v=VtKkTjtyYMw

Amazon culture

https://www.youtube.com/watch?v=BSoZw2BSxdg

Apple culture

https://www.youtube.com/watch?v=EcHpgsTg458

IKEA culture

https://www.youtube.com/watch?v=wNqq6FSQy70

Videos: Leadership and Organisational Behaviour

Mining tin in Indonesia

https://www.youtube.com/watch?v=u6KxzGMF4co

Coca-Cola anti-ad

https://www.youtube.com/watch?v=Q7Uxaw6YoRw

Palm oil and deforestation

https://www.youtube.com/watch?v=LSumTLrJzdU

A story of a former sea slave (inside the article)

https://www.nytimes.com/2015/07/27/world/outlaw-ocean-thailand-fishing-sea-slaves-pets.html?_r=4

‘True cost of fashion’ trailer

https://www.youtube.com/watch?v=NDx711ibD1M&list=PLIX_uc_VIWrb4T4WCaOOP1Pe3JTa0IeYh&index=2

Rana Plaza tragedy

https://www.youtube.com/watch?v=9Fkhzdc4ybw

Attention: sensitive material – skip between 1.00 and 1.40, stop at 4.00

Cambridge Judge Business School

Day 1. Strategy

What is business?

Business is an entity that is both commercial and social, which

provides the necessary structures to achieve the central

objective of trades in goods or service

Timms, 2011, p.17

External and internal environment of organisations

From L. Paolella lectures on Strategy, JBS, 2017

What is strategy?

The framework which guides those choices that

determine the nature and direction of an organization

Top Management Strategy (1980). Benjamin Tregoe and John Zimmerman. Simon and Schuster.

Strategy: An integrative model

Successful

strategy

Consistent long-term

objectiveUnderstanding competition

Know your resources and

capabilities

From Robert M. Grant, 2003

Effective implementation

Macro-environmental influences: PESTEL

Porter’s “Five Forces”: Industry Analysis Framework

From L. Paolella lectures on Strategy, JBS, 2017

Three key concepts

Organisational resources

from L. Paolella lectures on Strategy, JBS, 2017

Corporate strategy: diversification

Blue Ocean Strategy

CREATE UNCONTESTED

MARKET SPACE

& MAKE THE COMPETITION

IRRELEVANT

Blue Ocean vs Read Ocean

From L. Paolella lectures on Strategy, JBS, 2017

Value Innovation

From L. Paolella lectures on Strategy, JBS, 2017

How to raise value and decrease cost

From L. Paolella lectures on Strategy, JBS, 2017

Three tests for a good strategy

External consistency

Does the strategy address the external threat?

Internal consistency

Is it consistent with the rest the company does?

Dynamic consistency

Does the company’s past prepare it to carry out the strategy?

Build, Borrow or Buy. BUILD

From L. Paolella lectures on Strategy, JBS, 2017

Build, Borrow or Buy. BORROW via contract

From L. Paolella lectures on Strategy, JBS, 2017

Build, Borrow or Buy. BORROW via alliance

From L. Paolella lectures on Strategy, JBS, 2017

Build, Borrow or Buy. BUY.

From L. Paolella lectures on Strategy, JBS, 2017

Healthy easting trends impact fast food industry performance

Fast Food Still Major Part of U.S. Diet. (Source: GALLUP, 2013)

Change in eating habits, by age: 2016 vs 2015

Frequency of eating at fast food restaurants, 2003-13

Age

Healthy eating is increasingly on consumer’s age, with millennials leading the way (Source: PwC Report, 2013)

Fast casual segment outperforms traditional fast food

0

5

10

15

20

25Market share dynamics by key players

2012

2015

Traditional fast food Fast casual

-2.4pp

-0.5pp-0.4pp -0.3pp 0.2pp 0.3pp 0.1pp -0.5pp 0.6pp 0.2pp 0.5pp0.8pp

*fast casual restaurants offer the ease and convenience of fast food but with a more inviting sit-down atmosphere and better quality ingredients (www.thebalance.com, 2017)

pp = percentage point, unit for arithmetic difference of two percentages

McDonald’s performance: global revenues down, US sales growth below market

Global

• Scope: 119 countries, 420,000 employees, 82% of 36,525 restaurants are franchised

• Revenue and net income decline in 2014-16, return below fast food industry and S&P

• 2015 franchised sales are $66.2bn (-6% vs 2013), sales per store are $2.2m (-10% vs 2013)

US

• US bring a third of global revenue and a half of franchised sales

• Of 14,259 US restaurants, 90% are franchised

• 2015 revenues are $8.6bn -3%; franchised sales are $31.6bn +1% vs 2013, below 6% cumulative market growth over this period

24.1

27.0 27.6 28.1 27.425.4 24.6

4.9 5.5 5.5 5.6 4.8 4.5 4.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2010 2011 2012 2013 2014 2015 2016

McDonald's financials, 2010-16, $bn

Total revenues Net income

Source: performance.morningstar.com

Source: McDonalds annual report

Primary competitors are those that have differentiated themselves with healthier options and forward-thinking business models

Category Traditional Fast Food Fast Casual Fast Casual Traditional Fast Food Traditional Fast Food

Positioning “The Best Burgers” A casual dining

restaurant chain serving Mexican cuisine, made using

organic ingredients.

A fast-casual

restaurant chain serving fresh and good quality breads,

along with coffee and other bakery

products.

A healthier, fresher

alternative to conventional fast food.

A tasty burger

restaurant that makes burgers on order with fresh ingredients and

not frozen meat.

Reasons McDonalds

should pay attention

Considered the most

direct comparison

It’s simple setup has

become incredibly popular and has stolen significant

market share

The growing chain

has shown that a bakery business model can compete in

the same space

The largest chain in

the world has provided offerings that have been seen

as direct replacement to McDonald’s

Another burger option

that works to differentiate through the quality of

ingredients – a move McDonalds has

recently sought

Strategic Strength • Quality of food

• Simplicity

• Quality of food

• Investment in technology

McDonald’s vs Panera supply chain

Type of farm Location of

farm

Logistic Field to

Plate Time

Type of product

McDonald’s Centralized

large scale

farms

Remote Third party 3 – 5 days Standardized;

processed by food

processing plant

Panera Dispersed small

farms

Close to

consumers

Own fleet 2 – 3 days Less standardized

How should McDonald’s react to the rising trend of fast casual

Introduce healthy food in in its stores or in McCafe?

Buy a fast casual chain of restaurant (Panera)?

Continue to focus on its traditional business of fast food?

Strategy Option 1: Healthy food at McCafe and expand standalone McCafe

Strengths:

Utilize pre-existing McCafe’s products

Attraction to new customers without cannibalizing old

customer base

Description:

Due to McCafe’s better brand image, McCafe’ can be

suitable for selling healthy foods aiming at capturing new

market for the company. Furthermore, McCafe’ can be

separated from McDonald’s and can operate as standalone

coffee shops. Newly opened standalone McCafe’ can help

the healthy offering more accessible to new customers.

Core Component of Strategy:

Diversification – Brand extension to new market

Organic growth

Weakness:

Brand perception of McDonald’s as unhealthy restaurant has

negative impact on customer perception toward McCafe’

Strategy Option 2: Healthy food in McDonald’s flagship restaurants

Strengths:

Meets new customer needs, without developing completely

new stores

Can rely on same store network

Description:

In an effort to meet health trends, McDonald’s would expand

the menu with an enhanced healthy eats section in its

flagship restaurants. Building on the McDonald’s Next

concept in Hong Kong, where restaurants have salad bars

and a variety of healthy options, McDonald’s healthy food

expansion would require some store redesign and new

marketing.

Core Component of Strategy:

Diversification – Internal Menu; A new sub-brand

Weakness:

Potential confusion amongst customers as the healthy

options could be seen as conflicting from McDonald’s core

brand

Strategy Option 3: Acquire Panera

Strengths:

Meet customer needs without overlap

Description:

To compete within the fast casual dining space, McDonald’s

could acquire Panera. Panera would continue to operate

under it’s name and brand.

Core Component of Strategy:

Diversification – External; Acquisition

Weakness:

Potential Panera brand dilution, similar to the concerns

Chipotle’s had about McDonald’s

Marginal synergies as the business models are quite

different

Takeaways

A good strategy is built on understanding of

• the firm’s resources and capabilities,

• clear value proposition of its product

• current competition and future challenges

• firm’s long-term objective consistent with its strengths

Strategy is about what a firm does as much as what it doesn’t do

Cambridge Judge Business School

Day 2. Marketing

Two fundamental marketing questions

“People don’t really want a quarter-inch drill, they

want a quarter-inch hole.”

Theodore Levitt

From E. Yin and D.Lauga lectures on Marketing, JBS, 2017

Customers

From E. Yin and D.Lauga lectures on Marketing, JBS, 2017

Competitor Analysis

From E. Yin and D.Lauga lectures on Marketing, JBS, 2017

Consumer needs

Characteristic of consumer Needs:

▪ Have both rational and emotional needs

▪ Identifying latent needs is often the key to success

▪ Emotional need is often the point for break-through

Emotional needs

Understanding Emotional Needs

▪ Much more prominent than commonly believed

▪ Much more broad and diverse than rational needs

▪ All hinges on the brand/product level

▪ Demonstrate a hierarchical structure Intertwined with rational

needs

From E. Yin and D.Lauga lectures on Marketing, JBS, 2017

Consumer insight

▪ The capacity to gain an accurate and deep understanding of someone or something

▪ Penetrating discovery about consumer motivations and behaviour, applied to unlock

growth

▪ An instance of apprehending the true nature of a thing, especially through intuitive

understanding

From E. Yin and D.Lauga lectures on Marketing, JBS, 2017

Coffee holder example

Patients in hospital spent most of their day watching the ceiling

Redesigning ceiling radically radically transforms patient experience

Understanding consumer behaviour

Who buys our product or service?

Who makes the decision to buy the product?

Who influences the decision to buy the product?

How is the purchase decision made?

Why do customers buy a particular brand?

Where do they go or look to buy the product or service?

When do they buy?

Any seasonality factors?

How is our product perceived by customers?

What are customers’ attitudes toward our product?

How do we make decisions

From E. Yin and D.Lauga lectures on Marketing, JBS, 2017

Cambridge Judge Business School

Day 3. Finance and Operations

Coca-Cola Profit and Loss account

Disney Profit and Loss account

Amazon Profit and Loss account

Amazon share price – latest month

Amazon share price – entire period

Share price performance

Amazon balance sheet

Two decisions

What to invest in How to pay for it

Task of the financial manager

Investment Decisions:• Buy real assets that are worth more than they cost

Financing Decisions:• Find financing instruments that are worth less than the cash raised

Time Value of Money

Money today is worth more than the same amount of

money in the future period.

Risk vs Return

The higher the risk, the higher the expected return

Calculating Future Value of Money

FV = PV*(1+r)t

FV = future value

PV = present value

r = expected rate of return (remember, it will always depend on the level of risk of your investment)

t = period of time (usually measured in years)

Example

If you invest 100 dollars in the shares at 10% return rate, the future value at the end of year 1 will be:

FV = 100*(1+0.1)1 = 100*1.1=110 dollars.

Compound interest rate

If you don’t spend the profit you have made, and keep your investment in shares, your profit at

the end of the second year will be:

FV = 100*(1+0.1)2 = 100*1.21=121 dollars.

The power of compound growth rate

1

3

5

7

9

11

13

15

17

19

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

At 10% rate, investment:

▪ doubles after 6 years

▪ grows 6x by Year 19

▪ Grows 17x by Year 30

Growth

multiple

Numbe

r of

years

Present Value

FV = PV*(1+r)t »» PV = FV/(1+r)t

Example

PV = 110/(1+0.1)1 = 110/1.1 = 100 dollars.

You open a coffee store and expect to earn 110 dollars next year

Net Present Value

NPV is the present value of your all future cashflows discounted by the

expected rate of return minus initial set up costs.

If NPV is >= 0, you can start the project, if <0, don’t start it and look for more

profitable alternatives.

Net Present Value formula

NPV = -C0 + PV1/(1+r)1 + PV2/(1+r)2 + … + PVt/(1+r)t

-C0 = initial costs (buying a share, opening a coffee shop etc.)

PV1 = present value of your future income in year 1;

PV2 = present value of your future income in year 2;

PVt = present value of your future income in the last year t.

Aligning Strategy, Marketing, and Operations

From L. Paolella lectures on Strategy, JBS, 2017

Measuring a process

From J.Dsvies lectures on Strategy, JBS, 2017

Measuring a process

From L. Paolella lectures on Strategy, JBS, 2017

What would a queue look like with one checkout counter

What it usually looks like

Quality

From L. Paolella lectures on Strategy, JBS, 2017

Cumulative capabilities

Ferdows, K. & De Meyer, A

ZARA case

Zara: vertical integration

Chipotle food infection case

Remember to ask “why”

1. What happened?

2. What factors could cause the infection?

3. What made it possible for these factors to emerge? (e.g. sick employees kept coming to

work as they did not want to lose money and

eventually transferred infection to food)

4. What can the company do to address the

underlying causes, not just mitigate the damage?

Cambridge Judge Business School

Day 4. Leadership and Organisational Behaviour

Who is a leader

The only definition of a leader is someone who has

followers

Peter Drucker

Who is a leader

“Leadership is a process of influence, but that influence must be acceptable”

Charles Handy

Who is a leader

“A leader is a dealer in hope”

Napoleon Bonaparte

Leader vs Manager

Managers Leaders

Attitudes to goals impersonal outlook, goals arise from

necessity

personal outlook, shape ideas, not

respond to them

Conceptions of work negotiate, coerce, balance opposing

views, design compromise, avoid

risk

develop fresh approaches to

problems, increase options, seek

promising risk

Relations with others minimal emotional involvement,

focus on how decisions are made

relate to others empathetically,

focus on what decisions to make

Sense of self comes from perpetuating &

strengthening institutions

comes from struggles to alter

human and economic relations

A. Zaleznik ‘Managers and Leaders: are they different?’‘ Harvard Business Review March-April 1992.

Leader vs Manager

Managers

• Focus on things

• Do things right

• Plan

• Organize

• Direct

• Control

• Follows the rules

Leaders

• Focus on people

• Do the right things

• Inspire

• Influence

• Motivate

• Build

• Shape entities

From P.Stiles lectures on Strategy, JBS, 2017

Goleman leadership styles

Emotional intelligence

Situational leadership

People & Organisations: Guiding Framework

From P.Stiles lectures on Strategy, JBS, 2017

Organisational culture

What do we mean by culture?

A collection of values, norms, beliefs, practices, artefacts which characterise social groups:

‘the way things are done around here’

Organisational culture refers to a system of shared meaning held by

members that distinguishes the organisation from other organisations’

Jones and George 2015

Employee Retention Drivers

The iceberg – behavioural attitudes

S

Attitudes

Behaviour

Emotions Feelings

BeliefsValuesExperiences

Three levels of culture.

Artefacts

Espoused values

Basic underlying

assumptions

Edgar Schein 1985

Degree of

difficulty of

change

You can change artefacts (setting up

open space office) and espoused

values (proclaiming open

collaboration as a company priority) –

but unless you also change basic

assumptions (e.g. how my boss and

other company managers actually

behave when I ask for help), no

positive cultural change will happen.

Case scenario

Two individuals work for the same boss and have the roughly the same role. They have the

same background and the same educational attainment and very similar skills. Yet one

employee clearly outperforms the other.

Why do you think this might be and what could be done about it?

Taking charge at a hotel

Cambridge Judge Business School

Day 5. Business ethics and sustainability

Tin is one of smartphone components

Mining of tin in Bangka, Indonesian destroys forests and marine wealth

Coca Cola produces 100 000 000 000 plastic bottles per year

Till February 2017, the company opposed deposit return schemes

Nestle sourced palm oil for its chocolate from unsustainable sources

Massive deforestation as a result of unsustainable practices

Nestle made a no-deforestation commitment in 2010

Unilever is trying to integrate corporate and environmental strategies

Unilever sustainability strategy

IKEA used to cut ancient woods from Karelia (Russia) before changing policy

Animal food industry sources fish from regions where workers are illegally kept at sea for years

Green Supply Chain Practices

• No one universally acknowledged path to sustainability

• Main practices are:

• Total Cost of Ownership

• Life-cycle assessment

• Ecological footprint

• Carbon footprint

• Reverse logistics

• Design for the environment

From B.Lawson lectures on Strategy, JBS, 2017

Life cycle assessment

• An analysis of the environmental aspects and potential impacts associated

with a product, process, or service

• No single universal standard for impact categories, but typically include:

• Global warming, acidification, smog, ozone layer depletion,

eutrophication, toxin release, habitat destruction, desertification, land

use issues, resource depletion

• Occasionally has a social component

• Emphasis on the product design phase, as 80% of the environmental

burden fixed here

From B.Lawson lectures on Strategy, JBS, 2017

Complexity of global supply chains

• Strong consensus on what

should be done, but

practical implementation of

sustainability standards is

the key challenge

• One third of companies

actively seeking

transparency below tier 1 in

their supply chain, at scale

(PwC and MIT study,

2013). Yet this is where the

greatest and most critical

risks are often found!

From B.Lawson lectures on Strategy, JBS, 2017

Corporations are responsible not just for their working conditions but those of suppliers

From B.Lawson lectures on Strategy, JBS, 2017

Rana Plaza 2013 tragedy: the collapse of the building previously audited by corporations

Components of a Supplier Audit: it shouldn’t be a formality

Takeaway

Doing well and doing good is not just possible – but

necessary