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Section 3: Writing a Good Case Analysis; CSG Round 6

MBA 299: Strategy

Rob Seamans & Richard Wang

4-11-2008

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Agenda for today

Case write-ups

More strategy frameworks

Preparing for CSG Round 6

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Goals for the case write-upsGive you the chance to apply the tools you’re learning in class

Let you get creative in shaping the analysis (strategy is an art……)

Prep you for the mid-term & final exam

*Reminder: take home mid-term April 14th

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Game plan for successful case write-ups Develop a thesis

Focus on and prioritize core issues Be insightful

Use a framework Strategy theories we learn in class

Implement well Bring in case data to support key points and assumptions Use quantitative analysis if possible Organize your write-up and tell coherent story

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Have a thesis A thesis is not a statement of facts, but rather a

statement about ideas Statements of facts: Who, what, and where Statements of ideas: How and why, with supporting facts

Which of the following is more interesting? For the past twenty years Coke and Pepsi have dominated

the carbonated drinks market Coke’s aggressive branding strategy has been a

fundamental strategy leading to competitive advantage Your paper should consistently focus on your thesis

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Use an analytical framework Examples of standard frameworks

Cost leadership vs. differentiation Porter’s 5 forces Internal/external Game theory

Don’t apply frameworks mechanically Pick and choose the most appropriate parts of each to

create a customized framework

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Use an analytical frameworkCoors

Strategies are about commitments. Thinking ahead distinguishes the lucky from the good.

Cola Wars Industry analysis tells us a lot – Porter’s 5 forces is the bedrock analysis Differentiation strategy blunts incentives for price war

Matching Dell Cost leadership strategy possible, especially when it takes advantage of

constraints of existing competitors

Ryanair Need to consider competitive reactions when formulating strategy

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Use quantitative analysis Basics of quantitative analysis covered in section

last week.

Use quantitative analysis to support your thesis Sometimes will need to do some calculations to build a

basic understanding and build a factual foundation. Caution: In making business decisions, the scarce resource

is usually not data, but insight. Good case understanding helps one to identify the critical

analysis.

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Top 10 List1. Do have a thesis2. Do use a customized analytical framework 3. Don’t advance arguments without support4. Let your thesis/ideas drive your analysis.5. Don’t force quantitative analysis – if nothing jumps out at you,

support your point another way (qualitative logic, statement of fact, quotes from key players)

6. Do present a balanced argument, but don’t be indecisive. CYA is not a decision.

7. Don’t give extraneous recommendations8. Don’t turn in a laundry list of bullet points (like this)9. Don’t pull in lots of outside material10. Don’t get the facts wrong

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Agenda for today

Case write-ups

More strategy frameworks

Preparing for CSG Round 6

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Going beyond Porter’s Five Forces This week:

Cost/differentiation Core competencies

Next week: Game theory Value net Transaction cost economics

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Cost vs. differentiation

Low cost – focus on operations Essential in a commodity business but can work in almost

every business Ruthlessly efficient/lean – Dell, Ryanair (after initial

strategy failed) High scale/utilization – Beer giants

Highly differentiated – focus on unique quality Strong brand – Coke Target profitable niche with very high quality product IP protected product - Pharmaceuticals

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Risks to cost/differentiation strategies Can you defend your low cost position?

Technological or preference changes can erase scale advantages

Hard to be lean and mean forever Often advantage lies in one stage in the value chain (more on

this later) – is it vulnerable?

Can you defend your highly differentiated position? Brand is not always a sufficient BTE – imitators can get close Preferences change, new brands can outflank old tired ones

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Core competencies

Core competencies lie at the heart of a firm’s source of competitive advantage

Some special ability to control costs or produce differentiated products Dell’s supply chain management

Effective as a combination of hard to imitate processes and knowledge

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Sales Mark eting

Identifying core competencies Value chains are a good place to start

Then benchmark cost and capabilities against competitors If you are the “best” in a segment of the value chain you probably

have a core competency in that activity The deeper/more specific you can be the better

Manu facturing

Develop-ment

Research

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Core competencies often take advantage of competitors’ weaknesses What is Dell’s core competency?

Why did it work? Why couldn’t IBM/HP replicate it?

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Core competencies and corporate strategy Can be a very useful tool for thinking about the

boundary of the firm At the business unit level think about what activities in the

value chain are best performed internally and which can be outsourced

At the corporate level think about which business units are central to the firm and which can be spun off

Note the close relationship between synergies and core competencies in this set-up

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Core competencies as a model Very intuitive mental model of a firm

Create profit by focusing on what you are good at

Not always clear what is a core competency and/or how the concept differs from sources of competitive advantage

Can be tautological (we’re good at what we’re good at)

Not a dynamic model Sony was supposed to have a core competency in

miniaturization but they missed the iPod market

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Agenda for today

Case write-ups

More strategy frameworks

Preparing for CSG Round 6

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Am I on a path to make money? If you had done nothing, by end of Round 6 you

would have had in the bank $1,000,000*(1.02)^6= $1,126,000

Capacity depreciates. Once your capacity is scrapped, you’ll have to reinvest in capacity to “play” in the remaining rounds.

Opportunities for strategic moves? What ties firms to markets?

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You should do better in Rounds 7-10 Some teams may have less than the “break even”

amount of money in the bank at the end of Round 6.

Rounds 7-10 are the chance to take advantage of what you gained in the earlier rounds: Better information Sent signals to competitors Both you and your rivals have a better understanding

of strategy than when you started. More sophisticated in anticipating, making, and

responding to signals, entry, capacity, and pricing moves.

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Thinking about remaining round strategy If you DIDN’T make money in a market, why would you choose to rebuild your factory?

You expect fewer entrants in Round 7 (Why?) You expect better pricing in Rounds 7-10, even

with the same number of entrants (Why?) You expect the Magic CSG Fairy to bless your

team

Should you stay in a market because you’re “committed” to it?

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Thinking about remaining round strategy Should you enter other markets?

You should consider whether there are any profitable markets for you to enter in the second half of the game.

Don’t be too constrained by previous decisions!

Which other markets will your competitors enter?

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Feedback on CSG Strategy Journal 1 Most of the CSG strategy journals look good Some typical problems:

Over-use of bullet points (these are meant to be memos, not power point presentations)

Overly descriptive, without talking about expected market/competitive dynamics

Little if any discussion of alternative scenarios or contingency plans if game doesn’t develop as expected

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Thinking about Strategy Journal 2 Strategy Journal 2 should cover what your initial

strategy was (very brief), what you learned in rounds 1-6, what (and why) your strategy is going forward, along with how you expect the game to play out . If you think you may have been mistaken in your initial strategic thinking, it helps a lot to explain that now.

Assuming you lost money in your initial market(s) in Rounds 1-6, a big part of your CSG memo needs to be why you did (or didn’t) choose to rebuild capacity for Rounds 7-10

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Next Time

More Strategy Frameworks Game Theory

Sequential Moves Repeated Game Signaling Game

Value net Transaction cost economics