BS Lectures Summary

Contents
BS Lectures Summary ........................................................................................................................................ 1
1.

Strategy: Introduction (March 12th lecture) ............................................................................................. 1

2.

Strategy: External Analysis (March 18th lecture) ...................................................................................... 4

3.

Strategy: Internal Analysis (March 19th lecture) ...................................................................................... 8

4.

Strategy: portfolio analysis (March 26th lecture) ................................................................................... 12

5.

Business Plan - Strategic Plan, BP Analysis (April 9th lecture) ................................................................ 16

6.

Financial notes - Please read before April 15th lecture .......................................................................... 23

7.

Value Based Management, EG Corporation case (April 15th-16th lectures) .......................................... 23

8.

Strategic Innovation & Creativity (April 29th lecture) ............................................................................. 27

9.

The strategic role of ICT and the digital convergence (April 30th lecture) ............................................. 31
HBR article - IT Doesn't matter (April 30th lecture) .................................................................................... 33
B2c eCommerce Market, Business models, Customer expectations and Purchasing process ................... 34
ICT Vertical Lecture: E-procurement ........................................................................................................... 35
ICT Vertical Lecture: Mobile Marketing....................................................................................................... 38

1. Strategy: Introduction (March 12th lecture)

The concept of strategic decision and strategy
Strategic decision: a decision that
has long term, significant and non-reversible effects on the final goal of the organization
requires large amount of resources
Strategy: an integrated, comprehensive plan which
identifies the scope and the direction of the organization
is aimed at obtaining long term performance superior to competitors
integrates a coherent set of strategic decisions
Mini Business Case Seta
Seta is a medium-sized privately held company that operates in the fashion textile industry. More
precisely Seta produces silk accessories (ties and foulards in particular) that are sold to distributors
and retailers. Seta is a B2b operator that has a good reputation in the trade but is unknown in the
consumer market. Its core products ties and foulard are considered by the trade of fairly good
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quality but too much expensive, also because Setas delivery service is rather poor, in terms of
both lead time and flexibility.
In the past two years Setas competitive and financial performance has suffered a dramatic
decrease: 25% less sales, 10% less margin, 40% less income. The entrepreneur who is also the
President and Ceo of the company - attributes this performance to the very difficult current
market and competitive scenario: a higher and higher attention of customers (trade) to cost,
quality, time and flexibility; a more and more aggressive competition due to both local companies
(operating in the same district as Seta) and low cost country companies.
Assuming you are a consultant called by the entrepreneur:
What ideas would you suggest to him?
What analysis would you carry out?
Mini Business Case Seta: examples of strategic options
Strategy 1
Differentiation-based strategy aimed at delivering a higher value to the upper level of the
market, through a sensible improvement of product quality and reputation.
Strategic decisions:
Long term agreement with new fashion designers
New distribution channels
End consumer oriented marketing actions
Investment in new sophisticated plants
Hiring more skilled manufacturing staff
Strategy 2
Cost-based strategy aimed at dramatically reducing products full cost in order to be able to reduce
price by at least 30%.
Strategic decisions
Increase production volume to gain scale advantages (e.g. M&A)
Open a new plant in a low cost country
Find new silk sources
Rationalize product portfolio: fewer designers, brands, items

Traditional approach
Considering the company as a portfolio of Strategic Business Units.
Strategic Business Unit (SBU): Part of the company which:

Carries out a defined group of products which satisfy certain requirements of a

homogeneous segment of clients
It confronts with an identifiable group of competitors (Business Area)
Basic assumption:
The overall performance of a company (in terms of economic value) can be maximized through
independent strategies at the business level and a coherent portfolio strategy
Two strategy levels:
1. Business strategy
2. Corporate strategy

Competence-based approach
Basic assumption: the overall performances of a company derive from the availability of core
competencies
Core competencies are usually transversal to SBU
Therefore:
Limits of considering the company as a portfolio of SBU
Strategic focus on core competencies
Considering the company as a group of core competencies

2. Strategy: External Analysis (March 18th lecture)

1. Introduction: BA and SBU
2. Business Unit strategy: External Analysis
3. Business Unit strategy: Internal Analysis
4. Corporate strategy: SBU portfolio matrixes
5. Value Based Management
6. Resource & Competence based theory
Introduction: BA and SBU
A Business Area (BA) is a specific competitive context identified by:
group of products/services which satisfy certain needs and requirements of a
homogeneous segment of customers
homogeneous set of competitors
A Single Business Unit (SBU) is part of a company that covers and operates in a given BA.

Business Unit strategy: External analysis

OBJECTIVES
Evaluation of the attractiveness of a business area and identification of the main threats and opportunities
METHODOLOGY
1. Porters Five Competitive Forces model
2. PEST model
Attractiveness of the Business Area: Average profitability and growth of the companies operating in the BA
(both present and future).
Porters 5 Competitive Forces Model
It is referred to a specific Business Area
Basic assumptions:
1. Competition is driven by industry structure
2. Business Areas attractiveness is inversely proportional to the level of competition of the
competitive environment
3. Competition in an industry goes well beyond established players: concept of extended rivalry

1. Intensity of internal rivalry Direct competition

Structural determinants:
1.
2.
3.
4.
5.

Concentration and balance

Diversity of competitors
Industry growth
Product differentiations
Switching costs
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6. Fixed costs impact

7. Storage costs
8. Exit barriers:
a. Specialized assets
b. Fixed costs of exit
c. Strategic interrelationships
d. Emotional barriers
e. Government and social restrictions

2. Threat of new entrants - Potential competition

Structural determinants:
Entry barriers
1. Economies of scale
2. Capital requirements
3. Brand identity
4. Switching costs
5. Access to distribution channel
6. Cost advantages independent of size:
a. Proprietary product technology
b. Favorable access to raw materials
c. Favourable location
d. Learning curve
e. Government subsidies
7. Legislation or government actions
Incumbents expected reactions (retaliation)
3. Threat of substitutes - Indirect competition
Substitutes = Products able to satisfy the same needs
The existence of substitutes sets some constraints to the behavior of firms belonging to a specific Business
Area. In particular, such constraints are referred to price definition: substitutes limit the potential returns of
a BA by placing a ceiling on the prices internal firms in the BA can set. The more attractive the
price/performance ratio of substitutes, the higher the risk to lose customers to the advantage of
substitutes.

4. Bargaining power of buyers - Downstream competition

It can derive from:
1. Relative concentration - The bargaining power of buyers is higher if their business area is more
concentrated than that of suppliers
2. Products features - The bargaining power of buyers increases if:
a. product differences are low
b. switching costs are low
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c. products impact on the final performance is weak (only for intermediate products)
3. Buyers characteristics - The bargaining power of buyers increases if:
a. they are not very profitable
b. they are able to integrate themselves backward
c. they have clear information about the product
d. the component or material cost is a high percentage of the total cost

5. Bargaining power of suppliers - Upstream competition

The structural determinants of bargaining power of suppliers are dual to those influencing the bargaining
power of buyers.

PEST Analysis - The results coming from the 5 Competitive Forces analysis can be integrated by studying
which macro-environmental factors can have a significant influence on the Business Area under scrutiny, so
to identify a more comprehensive set of external opportunities and threats.
In particular, Political, Economic, Social and Technological influences can be very important.
Hence, the PEST analysis aims at analyzing environmental influences trends
Political/legal
1. Monopolies legislation
2. Environmental protection laws
3. Taxation policy
4. Foreign trade regulations
5. Employment law
6. Government stability
Economic
1.
2.
3.
4.
5.
6.

Business cycles
GNP trends
Interest rates
Money supply and Inflation
Unemployment & av. income
Energy availability and cost

Socio-cultural
1. Population demographics
2. Income distribution
3. Social mobility
4. Lifestyle changes
5. Attitude to work and leisure
6. Levels of education
Technological
1.
2.
3.
4.
5.

Govn. spending on research

Govn./industry focus on technological effort
New findings/developments
Speed of technology transfer
Rates of obsolescence

Rockware Case (March 18th lecture)

3. Strategy: Internal Analysis (March 19th lecture)

OBJECTIVES
Assessment of the SBU competitive advantage both concerning cost and value (strengths and weaknesses)
METHODOLOGY
Porters Value Chain model
Competitive advantage at SBU level: It is not possible to analyze the SBUs competitive advantage
considering the SBU as a black box. Transforming inputs in outputs and separated from customers and
suppliers. The Value Chain model can be used to analyze the SBUs competitive advantage.
Porters Value Chain
A companys sources of cost/value competitive advantages depend on:
The overall system of activities (boundary)
The single significant activities
The links between activities
The Value Chain is referred to a specific SBU

Primary activities - They are directly responsible for value creation through the Value Chain.
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Support activities - They allow the continuative execution of primary activities

Focus: Cost competitive advantage
The sources of cost competitive advantages depend on:
Single activities
Links between activities
Overall system of activities
Cost competitive advantage: Analyzing specific activities
Competitive advantages may depend on the way the company runs the specific activity. Main steps of the
analysis:
1. Identification of the activities considered significant for what concerns costs in terms of:
a. High impact on the overall costs
b. Different causes
c. Different behavior of competitors
2. Evaluation of the specific activities costs. Benchmark to competitors: Relative positioning
Main problems:
Cost accounting registrations not consistent
Shared activities
3. Identification of the costs specific determinants - Each activity has a specific cost structure and
hence its costs determinants may be different
a. Economies of scale
b. Economies of learning
c. Degree of saturation of the production capacity
d. Localization
e. Preferential access to distribution
f. Institutional factors
g. Product/process design

Competitive advantages may depend on the way the company manages the links between:
its activities (internal links)
its activities and those of customers and suppliers (external links)
In the last years several techniques (as just in time, concurrent engineering and design for manufacturing)
have been introduced in order to optimize both the internal and external links.
Analyzing overall system of activities

- Competitive advantages may depend on Make or Buy choices

Make decision
Advantages
Less transactional costs
Gain of suppliers margin
Learning and controlling core competence
More independence from suppliers

Disadvantages
Less efficiency than suppliers
Low motivation
Less flexibility
More capital equipment
Co-ordination costs
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Focus: Value competitive advantage:

It aims at making the product/service unique for the customer.
Examples of value competitive advantages are:
Quality: products nominal performances, but also effective performances
Time: both for what concerns delivery time and time to market
Service: both incorporated with the product or complementary
Variety/customization: fullness of the array of products and level of personalization
Reputation: both of the firm and of the brand
The sources of value competitive advantages depend on:
Single activities
Links between activities
Overall system of activities

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Examples of value chains application:

Xerox, by developing the value chain analysis, has discovered that its service competitive disadvantages
were linked to the high complexity of its copy machines design that made difficult the ex-post
individuation of problems
Caterpillar, comparing its value chain with that of competitors has individuated a cost competitive
disadvantage. In order to reduce costs it has decided on the one hand to increase its array of products and
on the other hand to sell its diesel engines to competitors aiming at better exploiting economies of scale (in
production, but also in marketing, sales and service).
Volkswagen, analyzing the value chain of its Brazilian plant has verified how some activities could not be
managed effectively in-house. Hence it has involved more deeply its suppliers that now are responsible of
all logistics activities to the very installation of components on the assembly line.
Compaq has utilized the value chain analysis in order to understand why it was unable to provide the
desired value to customers. The results of the analysis have pushed Compaq towards the development of
different links with its customers.

Amstrad Case (March 19th lecture)

Starbucks Case (March 25th lecture)

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4. Strategy: portfolio analysis (March 26th lecture)

Corporate Strategy
The main goal of Corporate Strategy is to manage financial resources allocation to the portfolio of different
Strategic Business Units the overall company is made of.
The key issues to deal with are:
1. To analyze and compare the competitive positioning of each business, and of the overall business
portfolio
2. To suggest a generic strategic orientation to each business (that will be further specified at a Business
Strategy level)
3. To define criteria and priorities for financial resource allocation to each business (cash generating vs.
cash absorbing SBU), looking for an overall portfolios financial equilibrium
Corporate competitive advantage
Two main typologies of business portfolios exist:
a. Non correlated portfolios
ADVANTAGES
Bank effect
Better use of top human resources
Risk diversification
Sharing of infrastructural activities

DISADVANTAGES
Very complex organisation
Cultural heterogeneity
Few synergies

b. Correlated portfolios
ADVANTAGES
Sharing of resources (economies of
scale, of scope, critical mass, )
Sharing of competences
Similar markets

DISADVANTAGES
High risk
High managerial complexity

Usually real-world cases of business portfolios do not strictly belong to one of these categories
Real portfolios are a mix of the two extreme solutions.

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Key assumption - Long-term profitability of a SBU depends on:

1. Business Area attractiveness
2. SBU competitive positioning in the Business Area
Main objectives
1. To analyze the competitive advantage coming from the managing of a SBUs portfolio
2. To support the choice of a business portfolio (Corporate Strategy definition)
3. To provide some guidelines to SBUs for the definition of their own strategy
4. To analyze the strategies of competitors

Boston Consulting Group (BCG) Matrix

Main objectives:
1.
2.
3.
4.

To verify the bank effect

To shape a business portfolio that is well balanced from a financial point of view
To define a virtuous circle strategy
To analyze the strategies of competitors

Basic assumption
1. Business Area attractiveness can be measured through Market growth rate:
ess likely

2. SBU competitive positioning can be measured through Relative market share:

experience, production capacity saturation, etc.)

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14

GE-McKinsey Matrix
Main objectives:
1. To allocate resources correctly
2. To choose the businesses to invest in, to maintain and to divest
3. To analyze the strategies of competitors

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Business Area attractiveness attributes:

1.
2.
3.
4.
5.

Market size
Market growth rate (10 year basis)
Industry profitability (average Return-on-Sales of companies on a 3 years basis)
Reactivity to inflation
Foreign markets incidence (export)

SBU competitive positioning attributes:

1. Market positioning (Domestic/Global Market Share; relative Market share)
2. Competitive positioning (benchmark with competitors on: quality, technology, production,
distribution, marketing and cost incidence)
3. Return-on-Sales (company) vs. Return-on-Sales (competitors)

Virgin Case (April 8th lecture)

5. Business Plan - Strategic Plan, BP Analysis (April 9th lecture)

What is a business plan?
A group of activities/processes aimed at gathering information, analyzing and evaluating
A group of traditional methodologies developed in different disciplines (e.g. Strategy, Marketing,
Accounting, ) but used together
A document reporting the main results of the analyses and evaluations undertaken
When a Business Plan is needed?
Firms typology
1. Existing company - Strategic decisions which require an all-around analysis
2. Start-up
Business Plans objectives
1. Planning
1. To evaluate the feasibility/profitability
2. To find resources and competences
3. To analyse and face the major risks
4. To exploit possible synergies and to co-ordinate
2. Communication
1. External
2. Internal
3. Control
1. Evaluation/stimulation
2. Learning

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Sources of financing:
1. Debts
1. Financial Institutions
Financial Institutions evaluate the possibility of providing capital to firms through the 4Cs Model:
Characteristics
Cash flow
Contribution
Collateral
2. Government Agencies
Typologies of financing
Government grants
Interest-free loans or subsidised rate loans
Bank guarantees
Participation to the firms activities
Monitoring
Evaluation criteria
Business Plan
Specifications of financing laws
2. Services
1. Venture leasing - venture capitalists or investment companies providing machines and tools in
leasing to start-ups in exchange for small equity stakes
2. Incubators - help start-ups during the first months/years. They can be both private or related to
government agencies, both non-profit and for-profit
3. Science & Technology Parks - they are geographical areas characterised by a cluster of firms in the
same industry capable to exploit a competitive advantage based on a common localisation
3. Equity
1. Venture capitalists
a. Participation to the firms activities
i. Equity investors
ii. Stock options
iii. They require board seats
b. Evaluation criteria
i. Entrepreneurs and management team
ii. Business Plan
iii. Available assets
c. Business angels - They are high net-worth individuals (liquid assets 1.000.000 $ or
earnings 200.000 $/year) Usually they invest between 25.000 $ and 100.000 $ each time
and often they finance several firms at the same time
There are two typologies of BA:
1. 3Fs (friends, family and fools)
2. Experts
They can be important when firms require less than 500.000 $
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2. Big corporations - They are similar to Venture Capitalists. Often big corporations create their own
venture capitalist firms (Corporate venturing)
Objectives
1. To control specific research and technology areas
2. Research outsourcing
3. To maintain a window on products and technologies

Participation to the firms activities - Financial partners

Evaluation criteria:
1. Entrepreneurs and management team
2. Business Plan
3. Available assets

Business Plans contents

1. Table of contents
2. Executive summary:
a. Business Idea
b. Business Area attractiveness
c. Resources/competences
d. Expected results
e. Business Plans objectives
3. General description of the firm:
a. Competitive positioning (Abels model)
i. Product/service
ii. Needs
iii. Customers/buyers
b. Value chain definition: Suppliers, Buyers, Business partners, Internal activities versus
Outsourcing
c. Entrepreneurial team
4. General description of products/services: Physical description of products/services, Stage of
development, Uses, cost, quality , service
5. Strategic plan:
a. The SWOT analysis: Generation and evaluation of strategic options
i. External analysis: PEST analysis, 5 forces analysis
ii. Internal analysis: Resources/competences, Value chain
b. Vision and mission:
i. Vision (industry foresight): it is the best hypothesis about the future for what
concerns: needs, technological trends, Having a Vision requires creativity and
imagination (Prahland e Hamel, 1994)
ii. Mission (strategic intent): it has to be an ambitious and motivating way to the
future (Prahland and Hamel, 1994)
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iii. Vision and mission statements allow the management to: provide a sense of
direction to the firm, transmit an idea of discovery and challenge, motivate
people, and create the firms culture.
iv. Strategic objectives Measurable, Linked to the Economic Value, Credible and
attainable but ambitious (they have to lead to attractive financial results)
c. Objectives and economic value - Economic value:
i. Net Cash Flow Volume (critical mass, growth rates), Economic profitability
(margin, gross margin, EBITDA).
ii. Terminal value - Financial profitability (IRR, PBT (payback time)), Intangible R/C
(brand reputation & awareness, know how, skills)
iii.
Time critical objectives (i.e. 1st mover)
d. External analysis
i. Environmental macro-variables
1. Identification of key variables
2. Evaluation of their impact
ii. Enlarged competition
1. Identification of industrys boundaries and segmentation
2. Enlarged competitive analysis through five competitive forces model
e. Strategic segmentation
i. Generation of relevant segmentation variables - Features of products/services
portfolio , Reference geographical market , Degree of vertical integration
ii. Mapping of companies toward segmentation variables
f. Business area attractiveness 5 forces
g. Internal analysis
i. Start-up - Definition and evaluation of core resources and competences: resources
and competences to exploit and resources and competences to develop
ii. Existing company - Definition of sustainable competitive advantage through the
Value Chain approach
6. Marketing plan

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a. Market analysis
i. General outlines of reference market - actual dimensions, demands sources,
estimated growths rate.
ii. Market segmentation - wanted product attributes, demographic variables,
psychological variables, methods of purchase Generation of segments toward
company wants to focus
Market analysis: sources of information:
i. Primary
1. market researches companies
2. in house
a. statistics
b. Desk researches
c. experts opinions
d. Others
ii. secondary
1. Internet
2. Magazines, publications
3. Research companies
4. Institutional organizations
b. Forecast of companys demand - q = k*Q
q = companys demand, k = companys
market share
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c. Marketing mix strategy

i. Product (formerly discussed in Description of product/service)Product/service
ii. Price
1. Level (high, medium, low band)
a. Motivations of price policy (cost, market characteristics, strategy,
competitors, etc.)
b. Future dynamic
2. Discount policy and/or seasonality
iii. Place
1. Choice of points of sales - direct interface with market, franchising, points
of sales managed by other companies
2. Choice of commercial channels - Use of internal sales force, Use of
commercial agents (they are paid as a percentage on sales volume ), Use of
wholesalers (they buy and re-sell products assuming entrepreneurial risk)
3. Size of distribution network - how many sellers, compensation policy,
organization
iv. Promotion: continuous monitoring and learning
1. Objectives and target
2. Definition ofpromotional channels
3. Evaluation of efficiency and effectiveness
4. Definition of marketing strategy and budget
5.
distribution among channels
Advertising - presentation of the commercial offer BY: television/radio, press,
billposting / leafleting, internet
Promotion - incentives for consumers and/or intermediaries BY: offers/special
sales, free samples, discount/premium coupons, demonstrations
i.
ii.

not expensive editorial/journalistic spaces: press releases, conferences,

seminars, congress , sponsoring and public relations
Direct communication to consumer or sales force : Direct marketing:
telemarketing, call center, internet

7. Operating plan
a. Headquarters
b. Key processes
i. Identification of the key processes
ii. Boundaries of the value chain (make or buy)
iii. Coherence of market and output
iv. Managerial logic
v. Mapping of the processes (ex. PERT, CPM, )
c. Main resources and inputs
i. Resources:
1. Tangible assets (plants, machineries, computers, )
2. Intangible assets (patents, brands, databases, )
3. Key human resources (skills, competences)
ii. Input: Raw materials, components, services
iii. Key suppliers and possible partnerships
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iv. First-cut evaluation of costs and required investments

8. Human resources and organisation plan
a. Core human resources
b. Organization
c. Human resource management systems
9. Financial plan - Objective: to synthesize and translate all the planning choices made in the previous
plans in economic values.
Revenues and promotional budget come from marketing plan
Staff cost and technological investment come from operating plan
Also it needs to esteem reference time horizon which economic and financial forecasts are
base on (3-10 years)

a. Basic hypotheses
b. Projected income statement balance sheet
i. Projected Profit and Loss (Income Statement)
ii. Activities and Liabilities (Balance Sheet) (at least a draft)
iii. Net cash flow(t) = NI(net income t ) + A(amortizations and depreciation t ) + D(OWC
- change of Net Operating Working Capital (account receivable, inventories,
account payable)) + D(IC - change of Invested capital (total asset))
c. Profitability ratios - Final profitability ratios, or anyway after the launch transitory (e.g
ROE, ROI, ROS, RA, breakeven point, etc...)
d. Liquidity ratios - Liquidity ratios (Current ratio, Quick ratio, Cash Flow/Debts)
e. Projected cash flow statement
f. Capital budgeting indicators: NPV and IRR (Interest when NPV = 0)

g. Sensitivity analyses

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2. Economic and financial projections

Financial needs - Net Cash flow scheme on a yearly base
Calculation of cumulated net cash flow

Cash flow scheme on a monthly base

Financial need = lowest value of cumulated net cash flow

6. Financial notes - Please read before April 15th lecture

See 3articles
7. Value Based Management, EG Corporation case (April 15th-16th
lectures)
Value based strategic management: the EG Corporation business case:
Objectives:
1. To show the link between strategic analysis and company valuation
2. To show a methodology of strategic audit based on company value (the Restructuring Pentagon
Framework)

23

The new CEO starts a project to assess restructuring opportunities for EG, simulating the assessments and
the actions of a raider. The goal is to investigate the value of EGs existing businesses and to understand
how to increase it.

24

STEP 1: Analyzing shareholder performance and cash flows

Assess returns to shareholders compared with other investments
Understand corporate cash flow, i.e. where the corporation has been generating and investing
cash
STEP 2: assessing Companys as is value
Determine the value of each business on the basis of projected future cash flows (business plan).
For each business the current strategy is considered
Assess the perceptions gap: the difference between the as is value and the current stock market
value
STEP 3: Assessing the potential internal value
For each business:
1. Carry out strategic analysis

2.

Generate new strategic options using value drivers

o For each business, strategic options are generated and evaluated on the basis of their
impact on shareholder value, using value drivers
sales growth
operating margin
fixed and working capital intensity

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STEPs 4 & 5: Assessing potential external value

Business portfolio strategy is revised
o entry into new businesses (e.g. M&A)
o disposal of current business units
The raider-like approach makes looking at the value of the corporation as a breakup candidate
particularly urgent
Each business is assessed under 4 different scenarios:
o sale to a strategic buyer
o spin-off and flotation
o leveraged buyout
o liquidation
Such business portfolio decisions have to be assessed considering the synergies among businesses
(if present)
STEP 5: Assessing the value with new growth opportunities
Opportunity to incubate new businesses specifically linked to Consumerco (e.g. new services for
retail customers)
Acquisitions of companies that generated $500 million to 1$ billion in sales
Market value of Consumerco could be increased by $800 million or more
STEP 6: Assessing the restructured value
Calculate the overall value potentially created through restructuring, considering
o internal restructuring
o external restructuring (disposal and new growth opportunities)
o corporate centre restructuring
o financial restructuring
Ralphs restructuring plan:
o external restructuring
selling the newspaper and property development companies
stopping further expansion in Foodco and putting the company up for sale
liquidating the finance company
o internal restructuring
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leveraging Consumerco assets by: increasing prices, investing more in advertising

and R&D, rationalizing the direct sales force, etc.
accelerating the consolidation of the Woodco companies and focusing on basic
furniture markets
o growth opportunities
acquisitions of companies specifically linked to Consumerco
o corporate centre restructuring
cut corporate overhead by 50%
o financial restructuring
recapitalizing the company by borrowing $500 million
resulting Tax benefit = 200 mln $
Finally: developing a strategy for communicating with the investment markets and financial
analysts

3. EG Corporation case (April 15th-16th lectures)

4. Business Plan - Coccolandia Case (April 22nd lecture)

8. Strategic Innovation & Creativity (April 29th lecture)

Competing for the future Hamell, Prahallad, 1994

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Blue Ocean Strategy W..C.. Kiim,, R.. Mauborgne,, 2004

Red Ocean vs. Blue Ocean
Red oceans represent all the industries in existence today - the known market space. In red ocean
industry boundaries are defined and accepted, and the competitive rules of the game are well understood.
Here, companies try to outperform their rivals in order to grab a greater share of existing demand.
Blue oceans denote all the industries not in existence today - the unknown market space, untainted by
competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for
growth that is both profitable and rapid.
There are two ways to create a blue ocean:
In a few cases, companies can give rise to completely new industries (as eBay did with the online auction
industry).
But in most cases, a blue ocean is created from within a red ocean when a company alters the
boundaries of an existing industry (as Cirque du Soleil did with the circus industry).
The logic behind blue ocean strategy is counterintuitive:
It is not about technology innovation. Blue oceans seldom result from technological innovation. Often,
the underlying technology already exists - and blue ocean creators link it to what buyers value.
You do not have to venture into distant waters to create blue oceans. Most blue oceans are created
from within, not beyond, the red oceans of existing industries.
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Value Innovation - Value innovation is created in the region where a companys actions favorably affect
both its cost structure and its value proposition to buyers. Cost savings are made by eliminating and
29

reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the
industry has never offered.

30

Blackberry Case (April 29th lecture)

Acer Case (April 29th lecture)

9. The strategic role of ICT and the digital convergence (April 30th
lecture)
The strategic role of ICT according to the strategic models:
1. Internal Perspective - ICT can create new sources of competitive advantage both in terms of cost
and differentiation by impacting on the companys Value Chain
Examples of internal perspective:
1. Internet B2C:
Corporate Web site (for communication), e.g. Zegna
Pre and after sale services, e.g Costa Cruises
Online sale, e.g. Dell, MediaMarket, Trenitalia, Esselunga
Mobile Advertising through SMS, e.g. Alpitour, Bravofly (Volagratis)
Mobile Advertising through Mobile site, e.g. Dolce e Gabbana, Monster
Mobile Services, e.g. Alitalia, Lufthansa, Cartas
Mobile Commerce, e.g. Mediamarket
2. Internet B2C:
eSupply Chain Execution, e.g. Comifar, Esprinet
31

eSupply Cahin Collaboration, e.g. Heineken, HP Key Chain, Ferragamo

eProcurement, e.g. Enel, Vodafone, Novartis
Post sale services, e.g. Ducati
RFId, e.g. Wal Mart, Metro
3. Intranet B2E:
Knowledge Management, e.g. Accenture
Intranet to support sales employees, e.g. Bticino
Wiki, e.g. Intesa Sanpaolo
Mobile Sales Force and Mobile Field Force Automation, e.g.Coca Cola HBC, Merz,
Galbani
Fleet Management, e.g. DHL Express
Warehouse Stock Management, e.g. Conad
Mobile &Wireless Office, e.g. P&G
2. External Perspective - ICT can drive transformations in the competitive landscape, changing the
role and the intensity of each competitive force (internal rivalry, potential entries, substitute
products, suppliers and customers bargaining power)
but the real business role of ICT depends on the specific business context ..
External perspective example: TV Industry

32

How to really exploit ICT to create business value (and in particular strategic value)?
The cultural barriers
the CEO above all
You can learn finance and marketing, but not technology. ICT is not sexy enough for a top
manager to take the time to understand and learn (Luca Majocchi, CEO, Seat Pagine Gialle)
Top managements ability to really worry about ICT? It is a cultural problem. ICT is like
mathematics : either someone was able to teach it well, help you to understand and appreciate, or
you are put off for life (Massimo Capuano, CEO, Milan Stock Exchange)
leadership, business acumen,
organizational competence, communicational skills, etc.)
ICT people must be able to play their game: to speak the language of business, to demonstrate
concrete results, earning credibility "
ICT people speak a language different from ours: I dont want technical terms or acronyms, I want
logical reasoning!"
The CIO must have a good mix of technical, organizational, communication and relationship skills"
Too often CIOs focus only on their projects, paying no attention to their actual impact on the
business"
It would be useful for the key people in the IT Department to have an MBA
-mindedness and sensitivity to ICT
Business Managers: the different approaches to ICT:
Pro-active
Re-active
Eternal skeptic
Procrastinator
Unwitting

HBR article - IT Doesn't matter (April 30th lecture)

Does IT (ICT) matter?
Carrs Article: IT doesnt matter Harvard Business Review (May 2003)

and more
Standard
Cheap
Available to all
Outsourcable
33

in a word a commodity
IT (ICT) is more and more essential to operations but it is insignificant to strategy
1. Technological perspective - ICT Competence is seen as a bundle of software & hardware assets and
technical skills that are fully available on the market
2. Infrastructure perspective - The focus is mainly on Infrastructure(hardware and network) that is
becoming more and more a commodity
3. Single ICT Project perspective - The focus is on the single ICT Project, that may or may not be the
driver of competitive advantages
Vs.
1. Organizational & Business Perspective - ICT Competence is the ability of a company to
exploit/leverage ICT to pursue business innovations, to change business practices, to improve
business performance . This is in short supply!
2. Application perspective - Business Applications are extremely customized built on the specific
business logic of the company embedded in the organizational routine of the company. They Can
create strategic differentiation
3. Learning Process perspective - This capability is the result of a complex and long cumulative (path
dependent) and collective (organizational) learning process. This can lead to durable and
defendable competitive advantages

ICT Vertical Lecture: Business to Consumer

B2c eCommerce Market, Business models, Customer expectations and

Purchasing process
The main performances in the B2c eCommerce:
Order cycle time
Punctuality
Accuracy
Available information about
the items in the catalogue
the delivery times
Order tracking
Post-transaction process (after sale support, return management, etc.)
1.
2.
3.
4.
5.
6.

Effective use of the search engines to boost the traffic

A partnership (both with other e-tailers and offline players) can be very important to increase the
Clear and complete presentation of the products
Clusterization of the products according to the customer needs
New tools to support the customer care
Web 2.0 tools to provide additional information and increase the customer trust ((community,
reviews, blogs, etc.).
7. Agile purchasing process
34

8. Cross and up selling to increase the order value

4.
5.

BuyVip
ICT Vertical Lecture: Mobile Content & Internet

ICT Vertical Lecture: E-procurement

Business to business (B2b): Solutions aiming to automate the management of the supply (or value) chain
enabled by Information & Communication Technologies (including Internet technologies). Two elements
identify the business model of B2b projects:
i.
ii.

key processes
technology (EDI, Extranet, eMarketplace, etc.)

a. Processes and Technologies

b. eProcurement - the business models

External Solutions, 2 business models:
Service Providers: the technological platform is offered in ASP. The offer is addressed to
the company buyers that want to use the new Internet technologies independently and
without developing the technology internally. Other Value-added services, related to the
35

usage of the platform (training for the buyer and seller, help desk, document management,
etc.) complete the business model offer.
Process Outsourcers: they offer professional services such as: the consultancy for
improving the purchase of the company user; the support to create the specification for a
negotiation event; the search of new suppliers Technology represents just a tool for
pursuing the purchasing objectives in a better way

i. eSourcing

Advantages

Liabilities

Price savings:

Selection of categories of goods/services to be

negotiated online

suppliers since
the very first phases of the process
time online negotiation tools
contingencies found on the market
Increase in process efficiency

Number and kind of suppliers to invite

communication/interaction with suppliers

Increase in process effectiveness
disputes

Definition of specifications (to be communicated to

suppliers)

Better spend-transparency, -traceability

and -control (automated and up-to-date
reports, etc.)

Users' inertia to change management

36

Advantages

Liabilities
(in some industries/sectors) need to use tools
compliant with currentlegislation

ii. eCatalog

Advantages

Liabilities
purchasing authorization
workflow
goods in the
catalo
convenience/simplicity

catalog management

ia,
resistance to change management
Reduction of order-to-delivery time
Especially referring to eMarketplaces

Especially referring to eMarketplaces

enabled/qualified suppliers
(products and prices) of several
different suppliers (benchmarking)
In order to sustain a growth on the correct path, the organizational approach must be characterized by:
Defined objectives
Strong commitment in all relevant levels
37

Great effort towards Change Management

The increasing use of eProcurement tools is changing the role of buyers:
automating routine activities
allowing to focus on more relevant (strategical, value added) activities, such as vendor analisys,
strategic sourcing, collaboration, etc.

ICT Vertical Lecture: Mobile Marketing

New Media and traditional media are in competition in the sense that they using the same
companies resources
share of advertising
share of audience but also of The user!
share of time
share of wallet
Fewer consumers exclude Internet and new media as interaction tools with companies.
More consumers use New Media managing their buying process In fact; the consumer uses a multichannel
approach in all the buying process phases.
Web 2.0: Myriad of interactive online applications that support and facilitate collaboration, community
formation, content production and sharing by users, and social interaction. Examples include blogs,
forums, content aggregators, social networks, and content communities.
User Generated Content become important in the buying process
Consumer behavior is unpredictable
Open Marketing actions in buying process:

1. Listen & Learn

Passive - Conversation Analysis on the blogosphere
Active - Create a virtual space managed by the company; Stimulate ideas generation
about the different phases of value creation (new products, brand, advertising
campaigns, etc.)
2. Awareness building
TV makes awareness but does not involve the creators !
Internetbut with engaging and socials (social network, blogosphere, comuniton-line)
dynamics.
Word of Mouth on and off-line
Message: Interactive; Bidirectional High involvement
3. Participation Support - Develop a deep relationship:
Competence
Sociability
Cultural Change
Celebrity
o Example: Alfa Mito
4. Buying Support - To provide easily access to the product through all the channels
Point of Sales: Ikea, Record Cucine
On-line channels: Mydeco
5. ENGAGEMENT (ITunes)
38

Highlights:
Mobile is the most penetrated media in the world!
Mobile Marketing is not only Sms push!
Mobile Marketing will be more and more linked with engagement and customer experience
Mobile as a marketing channel must be integrated into a wider multichannel marketing strategy
Need for strong educational activity for advertising investors and all the players in communication
supply chain

39

6.

ICT Vertical Lecture: B2E Business Models and Web 2.0

1. ICT as an organizational variable (B2e)
In the knowledge society ICT can play a key role as an organizational variable as it may:
Make decision-making processes more agile and effective
Promote more sustainable and new forms of work organization
Foster innovation and change

2. Intranet
What is an Intranet?
A set composed by a company network (private computer network), protected from external world with
devices called firewalls, and a group of applications provided using typical technologies of
Internetworking (based on Internet communication standards). William Safire, 1994
In other words, an Intranet is a way of thinking and organizing people, work and interaction.
3. Web 2.0
Web 2.0 is the business revolution in the computer industry caused by the move to the internet as
platform, and an attempt to understand the rules for success on that new platform. Chief among those
rules is this: build applications that harness network effects to get better the more people use them.
Openness (Google), Decentralization of authority (Wikipedia), Freedom to share and re-use (youtube)
Within a social network, weak ties are more powerful than strong ties. They are indispensable to
individuals opportunities and to their incorporation into communities while strong ties breed local
cohesion.
The central idea of Open Innovation is that when companies look outside their own boundaries, they can
gain better access to ideas, knowledge, and technology than they would have if they relied solely on their
own resources.
User generated content (UGC) refers to various kinds of media content that are produced by end-users
The Long Tail is the realization that the sum of many small markets is worth as much, if not more, than a
few large markets

4. Enterprise 2.0 - Enterprise 2.0 is the natural evolution of the Enterprise Case study: IBM
E2.0 is a set of organizational and technological approaches steered to enable new
organization models, based on open involvement, emergent collaboration, knowledge
sharing, internal/external social network development and exploitation.

40

1.
2.
3.
4.
5.
6.

Open Belonging
Social Networking
Knowledge networks
Emergent Collaboration
Adaptive Reconfigurability
Global Mobility

Main barriers
Little comprehension of the benefits
Difficulty in identifying the economical returns
Organizational changes

7.
8.

ICT Vertical Lecture: New Media

ICT Vertical Lecture: Mobile Business
a. Applications and impacts on value chain

41

b. Mobile & Wireless Business Solutions

Examples:
1. Sales Force Automation (SFA)
Coca-Cola HBC Italia
1. Solution: salesmen can gather orders and access information in real time (bills payed,
warehouse status, ecc.)
2. Technology: portable devices connected via Cellular Network with company ERP
3. Benefits: increase in productivity of salesmen, backoffice and customer care operators;
increase in sales efficiency
2. Field Force Automation (FFA)
o Italgas
o Solution: maintenance operators can access a web pages in order to receive work
orders and consuntivate activities
o Technology: portable devices connected via Cellular Network with central ERP
o Benefits: higher efficiency during activities carried out at customers houses, since
operators can access work orders directly wherever they are
3. Warehouse & Stock Management (WSM)
Conad Adriatico
o Solution: it allows dynamic allocation of pallets in central Warehouse
o Technology: application based on rugged devices connected in real time to central
ERP via WiFi
o Benefits: increase in productivity (up to 100%), error decrease in preparation and
shipments (up to 75%), welltiming and increase in delivery accuracy
4. Asset Management (AM)
Istituto Ortopedico Rizzoli
o Solution: traceability of bones and blood
o Technology: application based on RFId tags
o Benefits: highest security in matching phase, reduced time in access information
5. Fleet Management (FM)
Sada Group
o
o

Solution: it allows the control and traceability of company fleet in real time
Technology: box GPS (with GPRS module in order to transmit information) installed
on vehicles
o Benefits: higher quality in transport process, better monitoring, higher quantity of
information, decrease probability of theft
6. Wireless Operations (WO)
Ausl di Forl
o

Solution: doctors prescribe therapies and medical attendants administer it,

matching patients and medicines
o Technology: Tablet & Pda (with barcode reader) connected over WiFi network
o Benefits: decrease in errors, better management of stocks
7. Customer Relationship (CR)
ATM Milano
o
o

Solution:it allows real time communications with Public Transport users, giving
information about delay etc.
Technology:displays connected via Cellular Network
42

Benefits:mainly intangibles and linked to an increase of the service to the

customer
8. Mobile e Wireless Office (MWO)
Procter & Gamble
o
o
o

Solution: it gives the opportunity to Top and Middle Management to access mail
and intranet everywhere
Technology: solution based on Smartphone (but also Notebook) connected via
Cellular or WiFi Network
Benefits: increase in productivity and efficiency, reduction in non-value added
time

c. Principal benefits
i. SFA for order gather:
-85% salesmen activities
-60% call center activities

ii. FFA:
-67% call center cost
-50% back office cost

d. Organizational impact
e. Case Studies

43