IEF 245f Competitive Strategy

Course Syllabus

Fall 2001 First Half of Semester Tuesday and Thursday, 5:00 – 6:30

Room 128

William A. Sherden

Adjunct Professor

Brandeis University Graduate School of International Economics and Finance

Course Outline

Note: SBL stands for Pankaj Ghemawat, Strategy and the Business Landscape (Addison-Wesley, 1999). Date Topic Thurs. 8/30 Introduction and administration Thurs. 9/6 The Strategy Development Process Thurs. 9/13 Assessing Competitive Position, the Internal Perspective Mon. 9/17 Assessing Competitive Position, the External Perspective Thurs. 9/20 “Coke vs. Pepsi” (SBL, case 3) Mon. 9/24 “Crown Cork & Seal” (SBL, case 4) Mon. 10/1 Competitive Strategies and Business Designs Thurs. 10/4 “Adolph Coors” (SBL, case 2) Mon. 10/8 “Nucor” (SBL, case 10) Thurs. 10/11 “Wal-Mart Stores” (SBL, case 5)

Mon. 10/15 “Intel Corporation” (SBL, case 1) Thurs. 10/18 “Barnes & Noble vs. Amazon” (SBL, case 9) Fri. 10/19 Pick up exam case in Sachar 210, 12:00-4:00pm Mon. 10/22 Final exam (in class time) Thurs. 10/25 Closing discussion

Course Materials

Required book (available in the bookstore)

Pankaj Ghemawat, Strategy and the Business Landscape (Addison-Wesley, 1999).

Required Readings

Three Harvard Business Review articles (available in the bookstore)

Other articles handed out in class

Recommended book (available in the bookstore)

Ronald J. Ebert and Ricky W. Griffin, Business Essentials, 3rd Edition (Englewood Cliffs, NJ: Prentice Hall, 1999).

Course Description

Course objectives The performance of any firm -- international or domestic -- depends critically on the design and implementation of its competitive strategy. This strategy must take account of the industry environment facing the firm, the position and likely strategies of the firm's rivals, and the firm's own capabilities and goals. This course provides an intensive survey of the most important techniques and frameworks in the field of business strategy. We will discuss ideas from the theoretical, empirical, and normative research on the topic, and apply these ideas to managerial decisions using case studies.

Course content This course deals with issues of general management, not with technical economics or finance. Among the topics covered are the following:

• Analyzing industry structure and dynamics

• Analyzing competitors

• Designing functional, business-unit, and corporate strategies

• Exploiting firm capabilities and resources

• Building and sustaining competitive advantage

Course requirements: The workload will be heavy. Required readings will consist of Harvard Business School cases and selected articles and chapters, all of which will be available in the course packet. Chapters from Ebert and Griffin, Business Essentials will be recommended for students who lack background in business studies; this textbook will be available in the bookstore. Students will be expected to read and analyze a case for most classes and to participate actively in class discussions. Half the grade will be based on contributions to class discussions. The other half will be based on a final exam, which will consist of written analysis of a case.

Relationship to other courses: There are no prerequisites for this course, but it is assumed that students have a background in microeconomics and have the ability to analyze financial statements. The course is strongly recommended for all students concentrating in International Business and is a core course for the MBA degree. IEF 246f (Alliance Strategy) is a fitting follow-up to this course, as it covers the use of alliances in competitive strategy. This course also complements other international business courses, such as IEF 230a (Managing International Business), IEF 237b (Organizational Behavior), IEF 225b (Global Marketing Strategy), and IEF 236f (Transnational Negotiations).

Teaching method: This is primarily a case-based course that depends on active participation as a vehicle for learning and for showing mastery of the material. There are four lecture classes, which will also require active participation.

Course Requirements and Administration

Materials: The course will use Harvard Business School case studies and selected articles and chapters. This syllabus lists the key readings and cases for each class as well as detailed study assignments. You should use these to guide your reading and preparation.

All of the required cases and a few readings are in the textbook Pankaj Ghemawat, Strategy and the Business Landscape (Addison-Wesley, 1999). Most of the readings are contained in a separate packet available for purchase at the bookstore. The bookstore will also carry Ronald J. Ebert and Ricky W. Griffin, Business Essentials, 3rd Edition (Englewood Cliffs, NJ: Prentice Hall, 1999), which is recommended reading for anyone without a business education background.

The Case Method: Because this course is based on the case method of learning, class participation by all students is critical. This method of learning is based on three premises. First, we can all learn a great deal from each other's points of view and experience. Second, we often learn more by questioning each other and debating issues than by listening passively or by reading alone. Third, there is no "one best way" to manage complex business problems; rather, we must search for alternatives and weigh them critically.

In order for this method to work, we must all be prepared to go beyond case facts in the discussion. In other words, we must assume that everyone has prepared the case and readings thoroughly--there is simply no time to explain or reiterate case facts. Our discussions ought to be analytical, not descriptive. This does not mean that we will ignore the facts; to the contrary, students should strive to back up their arguments with the facts of the case.

In sum, I will expect three P's from students in every class:

• Presence--attendance is required.

• Preparation--readings and assignments are to be done on time.

• Participation--share your views and questions in class.

If you cannot make it to class or are unprepared for the discussion on any day, please let me know before that particular class.

Grading Students will be graded on a combination of the following:

• Team presentations and individual contributions to class discussions (50%). I will keep a record of class performance for each team and student and determine a grade based on the frequency and quality of in-class comments.

• A written final exam (50%). This will consist of analysis of a case. You will pick up the case at Sachar 210 on Monday October 22, between 12 noon and 4pm. (If for any reason you can't do this,

be sure to talk to me ahead of time!) The exam itself will take place during normal class hours on Tuesday, October 23. You will then be asked one or more questions about the issues in the case, which should be answered in writing during the 75-minute exam period. This will be an open-book exam. (Note that there is one more class session after the exam -- on October 25th.)

Appointments: I will be available for individual student meetings after each class. If you need to speak to me, call me at (617) 421 – 0299. If you do not reach me, please leave me a voice mail message indicating a time and number to call you back.

If you have a documented disability on record at Brandeis University and wish to have a reasonable accommodation made for you in this class, please see me immediately at the start of the course.

Study Assignments

Thursday 9/6

The Strategy Development Process

Required readings: • SBL pp. 1-18. • Michael Porter, “What Is Strategy.” • William Sherden, Market Ownership, pp. 37 –40. • Peter Drucker, Management, Chapter 7. • Theodore Levitt, The Marketing Imagination, Chapter 8. Recommended:

BE, 1-10 and 290-306.

Study questions:

1. Be prepared to discuss the meaning of “competitive strategy,” as suggested by the readings.

Thursday, 9/13

Assessing Competitive Position, the Internal Perspective

Required readings: • Michael Porter, Competitive Advantage, Chapter 2. • Prahalad & Hamel, “The Core Competence of the Corporation.” • James Womack, The Machine that Changed the World, Chapter 3 and pp. 93-98. Recommended:

BE, 262-283.

Study questions:

1. Analyze and critique each tool/concept. Can you identify limitations and/or missing elements?

Monday 9/17

Assessing Competitive Position, the External Perspective

Required readings: • SBL pp. 19 –42. • Adrian Slywotzky, Profit Patterns, pp. 327-333 and 375-381. • Adrian Slywotzky, Value Migration, Chapter 4. • Michael Porter, Competitive Strategy, pp. 152-155. • Michael Porter, Competitive Advantage, pp. 1- 11. Study questions:

1. Analyze and critique each tool/concept. Can you identify limitations and/or missing elements?

2. Critique Porter’s “strategy space.”

Thursday, 9/20

“Cola Wars Continued: Coke vs. Pepsi in the 1990s”

Required reading:

• SBL, case 3.

Study questions:

1. Why is the soft drink industry so profitable?

2. Why do concentrate producers want to integrate vertically into bottling?

3. How has the rivalry between Coke and Pepsi affected the industry's profitability?

Monday 9/24

“Crown Cork & Seal in 1989”

Required reading:

• SBL, Case 4.

Study questions:

1. What were the most important competitive challenges facing the companies competing in Crown's industry in the decades up to 1989?

2. Why did Crown perform so well during Connelly's tenure (1957-1989)?

3. What should Avery do now to respond to emerging threats and opportunities in the industry, and why? Please begin by analyzing the advantages and disadvantages of more than one option facing Avery, and then choose among these options, giving reasons for your preference.

Monday 10/1

Competitive Strategies and Business Designs

Required readings: • SBL pp. 49-60, exhibit on pp. 129. • Michael Porter, Competitive Advantage, pp. 11-30. • Adrian Slywotzky, Profit Patterns, Chapter 11. • Adrian Slywotzky, Value Migration, Chapter 2 and 14. • William Sherden, Market Ownership, Chapter 3. Study questions:

1. Compare and contrast the strategies in the Porter’s “What Is Strategy?

2. Be prepared to critique the various business designs in Porter’s article.

Thursday 10/4

“Adolph Coors in the Brewing Industry”

Required reading:

• SBL Case 2.

Study questions:

1. Coors was successful throughout the mid-1970s. What was its strategy historically?

2. How did Coors's operating performance change relative to its competitors between 1977 and 1985? Why?

3. What, if anything, might Coors have done differently to avoid its decline?

Monday, 10/8

“Nucor at a Crossroads”

Required reading:

SBL, Case 10.

Study questions:

1. Why has Nucor performed so well in the past?

2. How attractive do the economics of thin-slab casting look?

3. Is thin-slab casting likely to afford Nucor a sustainable competitive advantage in flat-rolled products?

4. How should Nucor think about the uncertainties surrounding thin-slab casting? What should it do?

Thursday, 10/11

“Wal-Mart Stores, Inc.”

Required reading:

• SBL, Case 5.

Study questions:

1. What are Wal-Mart’s sources of competitive advantage in discount retailing? How did Wal-Mart create these advantages?

2. How sustainable is Wal-Mart’s position in discount retailing? What risks does the company face?

3. How effective is Wal-Mart’s diversification into the food industry likely to be?

Monday 10/15

“Intel Corporation: 1968-1997”

Required reading:

• SBL, Case 1.

Study questions:

1. What was Intel’s strategy in DRAMs? What accounts for Intel’s dramatic decline in market share in the DRAM market between 1974-1984? To what extent was Intel’s failure a result of its strategy?

2. What strategy did Intel use to gain a competitive advantage in microprocessors? What threats has Intel faced in sustaining its competitive advantage in microprocessors and what strategies has it used to deal with each? Why has Intel been able to sustain its advantage in microprocessors, but not in DRAMs?

3. Assess the future prospects of Intel. What is the biggest threat it faces? Whom should it be most worried about? Put yourself in the position of Intel senior management and craft a strategy to deal with these threats.

Thursday, 10/18

“Leadership Online: Barnes & Noble vs. Amazon.com”

Required readings:

• SBL, Case 9. • Michael Porter, Strategy and the Internet. Study questions:

1. Compare traditional book selling with Internet book selling. If you can, pay a visit to the state-of-the-art Barnes & Noble outlet on Route 3 near the Burlington Mall, and also visit both www.amazon.com and www.barnesandnoble.com.

2. Will traditional concepts of business analysis (e.g. barriers to entry, economies of scale, resources) apply in the world of Internet commerce? If yes, show how they apply to Amazon.com. If no, show why they don't apply.

3. Who will be the online leader in books? Why?

4. Define the distinguishing features and the implications for strategy of the popular notion of "Internet Time."

Close

Friday 10/19

Pick Up Exam Case

• Pick up exam case in Sachar 210, between 12 noon and 4:00 PM. If for any reason you cannot come during this time, talk to me beforehand. You will need this case in order to do take the exam the following day. The exam itself is open-book; be sure to bring the case itself to the exam.

Monday 10/22

Final exam (in normal class time)

Thursday, 10/25

Conclusions

Required reading:

• Review all readings, cases, and class notes.

Study assignment:

1. Imagine that you were hired as a consultant to give an executive education seminar at a large, diversified U.S.-based firm to train new staff in the company’s Strategic Planning Department. What key lessons will you teach them? (Note that they do not have the patience or the inclination to sit through any lectures about "academic" frameworks and theories. You need to interpret and synthesize these concepts for them and present them with practical conclusions, not "the literature." They also value real-world examples to illustrate your lessons.

Note: Even though this class is after the final exam, you are required to attend. This is our concluding class discussion.

* * * * *

Selected Bibliography

Strategy and General Management

Amram, Martha and Nalin Kulatilaka. Real Options: Managing Strategic Investment in an Uncertain World. HBS Press, 1999.

Andrews, K. A. The Concept of Corporate Strategy. Irwin, 1987.

Barnard, Chester I. The Functions of the Executive, 30th edition. Cambridge, MA: Harvard University Press, 1968.

Barney, Jay B.. Gaining and Sustaining Competitive Advantage. Addison Wesley, 1996.

Brandenburger, Adam and Barry J. Nalebuff, "The Right Game: Use Game Theory to Shape Strategy," Harvard Business Review, July-August, 1995, pp. 57-71.

Brandenburger, Adam and Barry Nalebuff. Co-opetition. Currency/Doubleday, 1996.

Brown, Shona L. and Kathleen M. Eisenardt. Competing on the Edge. HBS Press,1998.

Collis, David and Cynthia Montgomery, "Competing on Resources: Strategies for the 1990s," Harvard Business Review, July/August 1995.

Cusumano, Michael A. and David B. Yoffie. Competing on Internet Time. Free Press, 1998.

Fahey, Liam. Competitors. John Wiley, 1999.

Ghemawat, P. Commitment. Free Press, 1991.

Ghemawat, Pankaj, "Sustainable Advantage," Harvard Business Review, September-October, 1986, pp. 53-58.

Hax, Arnoldo C. and Nicolas S. Majluf. The Strategy Concept and Process. Prentice Hall, 1991.

Lax, David A. and James K. Sebenius. The Manager as Negotiator. New York: The Free Press, 1986.

Minzberg, Henry and James Brian Quinn. The Strategy Process. 2nd Edition, Prentice Hall, 1991.

Nalebuff, Barry and Avinash Dixit. Thinking Strategically. Norton Press, 1991.

Oster, Sharon. Modern Competitive Analysis. Oxford University Press, 1990.

Porter, M. E., "From Competitive Advantage to Corporate Strategy," Harvard Business Review, May-June 1987, pp. 43-59.

Firm Strategy and Industry Structure

Caves, R. E., "Industrial Organization, Corporate Strategy, and Structure," Journal of Economic Literature, March 1980, pp. 64-92.

Chandler, A. D. The Visible Hand. Belknap Press, Harvard University Press, 1977.

Chandler, A. D. Strategy and Structure. MIT Press, 1962.

Chandler, Alfred D., Jr., "The Enduring Logic of Industrial Success," Harvard Business Review, March-April, 1990, pp. 130-140.

Christensen, Clayton. The Innovator's Dilemma. HBS Press, 1997.

Fine, Charles. Clockspeed: Winning Industry Control in the Age of Temporary Advantage. Perseus Books, 1998.

Porter, M. E. Competitive Advantage. Free Press, 1985.

Porter, M. E. Competitive Strategy. Free Press, 1980.

Porter, M. E. "How Competitive Forces Shape Strategy," Harvard Business Review, March/April 1979.

Tirole, Jean. The Theory of Industrial Organization. MIT Press, 1988.

Shapiro, Carl and Hal R. Varian. Information Rules. HBS Press, 1998.

Slywotzky, Adrian. Value Migration. HBS Press, 1996.

Vietor, Richard H. K. Contrived Competition. Harvard University Press, 1994.

Yoffie, David B. Competing in the Age of Digital Convergence. HBS Press, 1997.

Scope of the Firm and Firm Capabilities

Chandler, Alfred D., Jr. Scale and Scope: The Dynamics of Industrial Capitalism. Cambridge, MA: Harvard University Press, 1990.

Gomes-Casseres, Benjamin. The Alliance Revolution: The New Shape of Business Rivalry. Cambridge, MA: Harvard University Press, 1996.

Hamel, Gary and C. K. Prahalad, "Core Competence of the Corporation," Harvard Business Review, May/June 1990.

Jensen, Michael C. Foundations of Organizational Strategy. Harvard University Press, 1998.

Milgrom, Paul and John Roberts. Economics, Organization, and Management. Englewood Cliffs, NJ: Prentice Hall, 1992.

Penrose, Edith. The Theory of the Growth of the Firm. Basil Blackwell, 1968.

Teece, D., "Economies of Scope and Scope of the Enterprise," Journal of Economic Behavior and Organization, June 1980, pp. 223-247.

Teece, D., "Toward an Economic Theory of the Multi-Product Firm," Journal of Economic Behavior and Organization, March 1982, pp. 39-63.

Willamson, O. E. Markets and Hierarchies. Free Press, 1975.

Williamson, O. E. The Economic Institutions of Capitalism. Free Press, 1985.

International Strategy and Management

Austin, James E. Managing in Developing Countries: Strategic Analysis and Operating Techniques. New York, NY: Free Press, 1990.

Bartlett, Christopher, Yves Doz, and G. Hedlund, eds. Managing the Global Firm. New York, NY: Routledge, 1990.

Bartlett, Christopher A. and Sumantra Ghoshal. Managing Across Borders: The Transnational Solution. Boston: Harvard Business School Press, 1989.

Caves, Richard E. Multinational Enterprise and Economic Analysis. 2nd Editon. Cambridge University Press, 1996.

Davidson, William H. Global Strategic Management. New York, NY: John Wiley, 1982.

Dunning, John H. Multinational Enterprises and the Global Economy. Addison-Wesley, 1993.

Hamel, Gary and C.K. Prahalad, "Do You Really Have a Global Strategy?" Harvard Business Review, vol. 63, no. 4, July-August 1985, pp. 139-148.

Hout, Thomas, Michael E. Porter, and Eileen Rudden, "How Global Companies Win Out," Harvard Business Review, September-October, 1982, pp. 98-108.

Kester, Carl W. Japanese Takeovers: The Global Contest for Corporate Control. Boston, MA: Harvard Business School, 1991.

Levitt, Theodore, "The Globalization of Markets," Harvard Business Review, vol. 61, no. 3, May-June 1983, pp. 92-102.

Porter, Michael E., ed. Competition in Global Industries. Boston, MA: Harvard Business School Press, 1986.

Prahalad, C.K. and Yves L. Doz. The Multinational Mission: Balancing Local Demands and Global Vision. New York, NY: Free Press, 1987.

Vernon, Raymond, and Louis T. Wells, Jr. Manager in the International Economy. Englewood Cliffs: Prentice Hall, 1986. Fifth edition.

Vernon, Raymond. Sovereignty At Bay: The Multinational Spread of U.S. Enterprises. New York, NY: Basic Books, 1971.

Wells, Louis T. Jr. Third World Multinationals: The Rise of Foreign Investment from Developing Countries. Cambridge, MA: MIT Press, 1983.

Yip, George S. Total Global Strategy: Managing for Worldwide Competitive Advantage. Englewood Cliffs, NJ: Prentice Hall, 1992.

Yoffie, David B., ed. Beyond Free Trade: Firms, Governments, and Global Competition. Boston, MA: Harvard Business School Press, 1993.

This syllabus was last updated on: August 1, 2001by William A. Sherden.