COMPETITIVE STRATEGY

Instructor: Office: Office Hours: Telephone: E-mail: Jeffrey Macher 3.39 WWZ MON-WED 2:00-3:00PM 0041 61 267 23 96 jtm4@georgetown.edu

COURSE OVERVIEW Competitive Strategy is concerned with managing the competitive position and long-term development of the business enterprise in order to ensure its survival and success. Every firm must create and sustain a competitive advantage if it is to survive and prosper over the long-term. This course provides frameworks, tools and concepts to help students analyze and understand the creation of competitive advantage. Industries differ in the extent to which they provide opportunities for sustained profitability. Industries also evolve over time, providing firms with continuously changing opportunities and threats. Finally, firms in an industry jockey for position through their actions and interactions. Every firm seeks to obtain a competitive position in an industry through an appropriate configuration of its assets and products in order to generate superior value for its customers. The first section of the course takes us through the challenges of external analysis. While industry and competitor analysis provides firms insights into what they must do to succeed, it does not throw much light on what they can do. Resource and capability analysis (and the investigation of the firms core competence) provides an insight into firms strengths and weaknesses (as they relate to the external environment). An understanding of firms internal strengths enables them to fully exploit and build their capabilities to compete successfully. The second section of the course focuses on internal analysis. Finally, based on the results of the above external and internal analyses, firms must choose strategies that lead to value creation and value capture, as well as a sustained ability to compete. The final section of the course deals with strategies for sustaining competitive advantage. Students are placed in the position of key decision makers (or their advisors) and are asked to solve problems related to the development or maintenance of the competitive advantage of the firm. Readings and cases developed by leading

researchers and practitioners in the field are used to provide contextual familiarity and teach the tools and skills required for competitive analysis.

ADMINISTRATION Readings All readings are taken from the book, Contemporary Strategy Analysis (7TH Edition: Wiley Publishers), by Robert Grant. The course packet consists of eight cases. The reading list provides detailed information on the readings and cases to be prepared for each class session, as well as assignment questions for the cases. Internet We will make extensive use of the internet for e-mail communication. All of the material presented in class will be available in electronic Adobe Acrobat .pdf format. If you do not already have Adobe Reader, you can download it for free from www.adobe.com. COURSE SCHEDULING INFORMATION The class meets from 09.30h to 12.00h on JUL 19-23 and 26-28. The classroom building is WWZ S15. You are responsible for reading the book chapters and cases in advance of class each day, and coming to class prepared to discuss them. ATTENDANCE AND PREPARATION Regular attendance and good preparation are prerequisites for being a valuable participant in the class. If you will be unable to attend a class, please advise me as early as possible. The class will start promptly on time and will run for the entire session. Arriving late or leaving early disrupts the class and lessens your contribution; please do so only when absolutely necessary. If you come to class unprepared, please let us know before class starts. Preparation implies that you have completed the assignments, and that you have taken time to think about them, and that you are prepared to discuss them thoughtfully in class. EVALUATION Grading Grading will be based on your performance in class participation, five case short assignments, two case write-up submissions, and a final exam. The grading weights are as follows: Class Participation Case Short Assignments Case Write-ups (1) Final Examination Class Participation Class participation is graded every class session on a scale from 0 to 5. If you do not attend a class session, you get a 0. I do not understand the concept of how
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25% (2) 20% 45%

10%

someone can make up class participation if it was missed, so do not bother asking us how to do this. If you attend class, you start out at a 2.5. You earn (and lose) points based on your performance. We emphasize quality over quantity participation. Please recognize that we cold-calla lotfrom very basic and simple questions to more detailed and probing questions. Please be prepared. Your participation in class is expected to help both your own learning and that of your peers. Please come to class everyday, prepared with analysis, which at a minimum addresses the assignment questions. To participate effectively, offer focused comments which either show how a particular concept is illustrated in the case or how a substantive problem can be solved; avoid repeating case facts. Since the course uses cases extensively, class discussion is an important part of the course. In evaluating class participation, we will ask the following questions: Is the participant a good listener? Do the comments reflect careful analysis? Do the comments add to understanding of the situation? Is there a willingness to try new ideas or are all comments safe? Is the participant considerate of other class members?

Case Short Assignments Individuals or teams (of up to two students) must complete two case short assignments during the course, before the start of class on the day in which the case is discussed. Consider these assignments similar to problem sets. Note that this requirement is above and beyond your required case write-up submission discussed below. Each case short assignment should be no more than one page, and should be completed in exhibit form (e.g., figure, chart, table, etc.), where applicable. Two of the following five case short assignments must be completed: SESSION 1 DATE 07/19 CASE Airborne Express Rivalry in Home Video Games Eastman Kodak Wal-Mart Stores Inc. HarleyDavidson, Inc. SHORT ASSIGNMENT Quantify Airborne Express sources of advantage by determining the costs of an overnight letter shipped by Airborne Express to one shipped by Federal Express. Determine the key success factors for each console generation in the home video games industry. Compare and contrast the resources and capabilities of Eastman Kodak in traditional imaging and digital imaging. Using a value chain analysis, determine where Wal-Marts main competitive advantages lie. Compare and contrast the resources and capabilities of Harley-Davidson to Honda in the heavyweight segment of the motorcycle industry.

2 3 4

07/20 07/21 07/23

07/26

Case Write-up Submissions Individuals or teams (of up to two students) must submit one case write-up during the course, before the start of class on the day in which the case is discussed. Each case write-up submission is up to three pages of text (1.5 line spacing, 12-point Times New Roman font) and up to one page of accompanying exhibits (figures, charts, tables, etc.) if appropriate. Do not include any other attachments. One of the following case write-ups must be completed. Address all of the questions listed. SESSION DATE CASE CASE WRITE-UP QUESTIONS How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors? How has Airborne Express survived, and recently prospered, in this industry? Quantify Airborne Express sources of advantage. What are Kodaks core competences? Does Kodak possess the resources and capabilities needed to be successful in the market for digital imaging products? What challenges does Kodak face and what are its prospects of becoming a leader in digital imaging? To what extent is Wal-Marts performance attributable to industry attractiveness and to what extent to competitive advantage? In which of Wal-Marts principal functions and activities (namely: purchasing, distribution and warehousing, in-store operations, marketing, IT, HRM, and organization and management systems/style) do WalMart's main competitive advantages lie? How can Wal-Mart sustain and enhance its competitive position? Compare Harley-Davidson's resources and capabilities to those of Honda. What does your analysis imply for Harleys potential to establish cost and differentiation advantage over Honda? How can Harley-Davidson sustain and enhance its competitive position?

07/19

Airborne Express

07/20

Eastman Kodak

07/23

Wal-Mart Stores Inc.

007/2 6

HarleyDavidson, Inc.

Final Exam

The final exam will be administered at the end of the course. The final examination is cumulative.

COURSE OUTLINE
DAY SESSIO N TOPICS READINGS CASE

INTRODUCTION / INDUSTRY ANALYSIS Introduction to Course 07/1 9 1 Industry Structure and Competitive Positioning Industry Structure and The Value Net BK Grant (CH 1) BK Grant (CH 3) BK Grant (CH 4; 12) CA Airborne Express CA Rivalry in Video Games

07/2 0

INTERNAL ANALYSIS: RESOURCES AND CAPABILITIES 07/2 1 07/2 2 Identifying Resources and Capabilities 3 Organizational Capability 4 Innovation Capability BK Grant (CH 6) BK Grant (CH 6) CA Eastman Kodak CA Merck BK Grant (CH 5)

NATURE AND SOURCES OF COMPETITIVE ADVANTAGE Nature/Sources of Competitive Advantage Cost Advantage 07/2 6 6 Differentiation Advantage BK Grant (CH 8) CA Walmart Stores BK Grant (CH 9) BK Grant (CH 10)

07/2 3

CA Harley-Davidson

SPECIAL TOPICS 07/2 7 07/2 8 7 Vertical Integration BK Grant (CH 14) BK Grant (CH 17) CA NYPRO-Vistakon

Managing Business Linkages

CA Marvel Enterprises

SESSION 1
07/19 Readings Introduction to Course Industry Structure and Competitive Positioning BK Grant The Concept of Strategy (CH 1) BK Grant Industry Analysis: The Fundamentals (CH 3) CA Airborne Express 1. Class administrative details. 2. What is strategy? A framework for strategic analysis. 3. How and why has the express mail industry structure evolved in recent years? How have the changes affected small competitors? 4. How has Airborne Express survived, and recently prospered, in this industry? 5. Quantify Airborne Express sources of advantage. HINT 1 It is often useful to analyze a companys cost position relative to its rivals and to examine the willingness to pay (WTP) of customers for the companys products relative to competitors products. The case allows you to analyze the relative costs of Airborne Express in detail. Compare the costs of an overnight letter shipped by Airborne Express to one shipped by Federal Express. HINT 2 To examine relative costs, start with the cost structure of a Federal Express overnight letter, given in Exhibit 3. Use information in the case and your understanding of what influences each cost item to estimate each of the items for Airborne Express. HINT 3 The case does not allow you to compare WTP across companies more than qualitatively, but it does permit you to examine relative prices. 6. What must Robert Brazier, Airborne Express President and COO, do in order to strengthen the companys position? HINT 4 In preparing your answers, the following table might be useful in keeping track of the differences among the competitors.

Study Questions

Airborne Express Product Line

Federal Express

UPS

Target Customer Segment Summary of Product Market Position Pickup and Delivery (inbound and outbound logistics) Air and Hub Operations Marketing and Sales Customer Service

Information Technology Firm Infrastructure and Human Resource Management Procurement

International Operations

SESSION 2
07/20 Readings Industry Structure and The Value Net BK Grant Further Topics in Industry and Competitive Analysis (CH 4) BK Grant Technology-based Industries and the Management of
Innovation (CH 12)

Study Questions

CA Rivalry in Video Games 1. What are the key success factors in the video games hardware industry? 2. In what sense and for what reasons is this a winner-takeall market? 3. What strategies and circumstances have allowed newcomers to unseat established market leaders and reshape the industry? 4. What does Sony need to do to regain market share? What should Microsoft do? What should Nintendo do?

SESSION 3
07/21 Readings Identifying Resource and Capabilities Organizational Capability BK Grant Analyzing Resources and Capabilities (CH 5) BK Grant Developing Resources and Capabilities (CH 6) CA Eastman Kodak: Meeting the Digital Challenge 1. What are resources? Capabilities? 2. What is Kodaks strategy for developing its digital imaging business? 3. What challenges does Kodak face and what are its prospects of becoming a leader in digital imaging? 4. Does Kodak possess the resources and capabilities needed to be successful in the market for digital imaging products? How is Kodak acquiring and building the capabilities it needs? 5. What advice would you offer Dan Carp?

Study Questions

SESSION 4
07/22 Readings Innovation Capability BK Grant Analyzing Resources and Capabilities (CH 5) BK Grant Technology-based Industries & the Management of Innovation (CH 11) CA Discovering the Future: R&D Strategy at Merck 1. Evaluate Mercks current strategy, and the resources and capabilities that underlie this strategy.

Study Questions

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2. Evaluate Mercks alliance strategy. What are the pros and cons associated with this strategy? 3. Why does Merck feel the need to change shift its strategy? What are the challenges facing Mercks R&D organization? 4. Do you think forming alliances will help overcome these challenges?

SESSION 5
07/23 Readings Nature and Sources of Competitive Advantage Cost Advantage BK Grant The Nature and Sources of Competitive Advantage (CH 8) BK Grant Cost Advantage (CH 9) CA Wal-Mart Stores Inc., 2007 1. How does competitive advantage emerge? How is competitive advantage sustained? 2. How does competitive advantage differ in emerging and technology-intensive industries? 3. Consider Porters generic strategies, in terms of cost and differentiation. What aspects of the value chain are most important? 4. To what extent is Wal-Marts performance attributable to industry attractiveness and to what extent to competitive advantage? 5. In which of Wal-Marts principal functions and activities (namely: purchasing, distribution and warehousing, in-store operations, marketing, IT, HRM, and organization and management systems/style) do WalMart's main competitive advantages lie? 6. How can Wal-Mart sustain and enhance its competitive position?

Study Questions

SESSION 6
07/26 Readings Study Questions Nature and Sources of Competitive Advantage Differentiation Advantage BK Grant DifferentiationAdvantage (CH 10) CA Harley-Davidson Inc., 2007 1. Identify Harley-Davidson's strategy and explain its rationale. 2. Compare Harley-Davidson's resources and capabilities to those of Honda. What does your analysis imply for Harleys potential to establish cost and differentiation advantage over Honda? 3. What threats does H-D face? 4. How can Harley-Davidson sustain and enhance its
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competitive position?

SESSION 7
07/27 Readings Special Topics Vertical Integration BK Grant Vertical Integration and the Scope of the Firm (CH 14) CA Molding the Impossible: The NYPRO/Vistakon Contact Lens Project 1. Using your regression analysis skills, are there any hypotheses you can develop from the data in Exhibits 8 & 9 about the problem that Nypro and Vistakon are facing? 2. Whose job should it be to guide the selection of customers in a manufacturing company like Nypro? 3. What has the Vistakon project done for Nypro? If you were Gordon Lankton, which of the capabilities of Jones team is developing would you consider the most valuable? How would you transfer this capability to other parts of the Nypro organization? 4. What could Dennis Jones do to create a more productive working relationship with the Vistakon team?

Study Questions

SESSION 8
07/28 Readings Special Topics Managing Business Linkages BK Implementing Corporate Strategy: Managing the Multibusiness
Corporation (CH 17)

Study Questions

CA Marvel Enterprises, Inc. 1. In your view, what strategic direction should Marvel Enterprises pursue? Why? How? 2. Why was Marvels turnaround so successful? Would you characterize that success as a fluke? Or do you view it as sustainable? Why? How? 3. How important are each of Marvels three divisionscomic books, toys and licensingto its past and future performance? 4. To what extent is Marvels success due to only one character, Spider-Man? How can Marvel develop its lesserknown characters?

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