Category Archives: External analysis (5 forces…)

Adaptation on Rugged Seascapes?

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We teach strategy formulation in a dynamic world and yet many of our analytic tools may seem more static if we aren’t careful. For example, 5 forces offers an industry snapshot unless students know to explore how the forces evolve. I tend to introduce scenario planning, decision trees, and monte carlo simulations to incorporate the qualitative and quantitative dimensions of strategy formulation under uncertainty. This brief video provides a fairly graphic view of how it feels to managers. Of course, the seascape metaphor is a play on Levinthal’s classic article (adaptation on rugged landscapes)…

Contributed by Russ Coff

BIC Pens “For Her”

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This is an actual product. However, customers have thought it rather odd to market a pen specifically for women. This has led to an array of hilarious product reviews. Here is an article about the reviews (try not to fall off your chair while reading). It is an interesting case of differentiation and segmentation gone awry — definitely worthy of class discussion. Below is a segment that Ellen Degeneres did on the product (including her proposed commercial). In the end, I’m guessing that the publicity has led to some unanticipated sales…

Contributed by Phil Bromiley

A Modular Smartphone?

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There has recently been some buzz about the possibility of making modular smartphones — hopefully to reduce waste as people upgrade modules instead of the whole phone. Now Motorola has joined the movement with Project Ara. This poses many interesting issues for discussion. As suggested in the WSJ, might Google really be interested in destroying profitability in smartphones to grow the market and enhance ad revenue? For that matter, is this technologically feasible? It implies that components are not strongly co-specialized and can be swapped out easily. Even if so, would the compromises to achieve modularity be acceptable? Articles by Melissa Schilling and Etheraj & Levinthal paper adds an interesting theoretical perspective. Lots to talk about in class…

Contributed by Russ Coff

Oligopoly in the Classroom

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Another 3-E Learning exercise explores market structure through an extra credit scheme. Michael Ryan’s Oligopoly Classroom Experiment allows students to get extra credit for suggesting questions for the next test based on how many questions are submitted. Each student must choose to whether to submit a question related to the topics covered. At the beginning of each class, the instructor informs the students how many total questions have been submitted but does not mention who submitted them. Here is the schedule for extra credit points:

  • If one student submits a question before the deadline, he/she gets 10 points. If two students submit, both get 9 points. If three students submit questions, each get 8 points and so on.
  • If 11 or more students submit questions, none of them receive points.
  • However, if no students submit questions, then every student in the class receives five bonus points.
  • The instructor may also add conditions to this exercise which make collusion more likely or less likely by simulating an increased number of ‘firms’ and an inability to detect when other ‘firms’ change their strategy.

Here is a more detailed writeup from Classroom Expernomics.

Contributed by Michael Ryan

A 5 Forces Happy Meal

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Fast food workers all over the U.S. are striking in hopes of doubling the minimum wage (from $7.25 to $15 per hour). However, a a recent AP news story states: “No group along the food chain, from the customers to the companies, wants to foot the bill for higher wages for workers.” The tactic is a classic move to change the structure of the 5 forces to grant more bargaining power to the workers. However, overwhelmingly, these workers are not unionized so the prospects of sustaining a prolonged, organized strike are quite limited. Furthermore, there are many unemployed workers who might step into their jobs if given the opportunity. All of this suggests that the structure of the industry will hinder their attempt to garner bargaining power. This seems like a good “ripped from the headlines” case to discuss with students to drive home the application of 5 forces analysis.

Contributed by Russ Coff

Switching Costs and Apple’s Pie

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Of course firms  try to do what they can to increase the switching costs for customers who might consider rivals’ products. Apple has been a master of this — all in the name of customer service. A recent article by Geoffrey Goetz describes why the Apple “ecosystem” is so hard to move away from. While this analysis suggests that the cost of switching isn’t nearly what people might imagine (less than $10), if people perceive the costs to be high, that may be all that matters. A recent study indicated that Apple has taken three times as many customers from Samsung as Samsung has taken from Apple. In this sense, the perceived switching costs would seem to run in Apple’s favor. While this analysis can be done on any industry, asking people in the classroom about switching smartphones is likely to unearth a rich discussion. This can be used to introduce five forces analysis and also illustrate how switching costs can be asymmetric in an industry and contribute to a favorable position for a given firm.

Contributed by Russ Coff

Samsung owns the Android ecosystem?

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Google may have its back against the wall and needs the new Moto X phone to be a big success. They are planning to invest $500M just in marketing the new phone (more than Apple or Samsung). This may be motivated by the fact that Samsung is capturing up to 95% of the profits from the Android ecosystem since it owns the “last mile” where consumers lay down cash for devices. Samsung has recently invested further in their Tizen mobile operating system to keep their options open and solidify their bargaining power against Google (a nice 5 forces example of tapered integration). Google’s battle to remain relevant in the Android ecosystem is a nice update to the mini case posted earlier here on Google’s $12.5B acquisition of Motorola Mobility. Also, based on this review, it appears that they may have created some of the vertical integration value. Here is a demo video for the Moto X.

Contributed by Russ Coff

A Drinking Problem: Pepsi Challenge

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The 3E Learning site discussed in another post includes a nice writeup on using the classic Pepsi challenge but including generic soda. Here is an excerpt: “In this exercise, student volunteers blindly taste three different soft drinks: Coke, Pepsi, and a store brand. The student then tries to assess which one each drink is. Across several years of performing this, in every semester a majority cannot identify their preferred drink, nor can many identify any of them correctly. After several volunteers make the attempt, the class engages in meaningful conversation about how and why Coke and Pepsi capture so much market share, when their products cost 50% more than store brands.” What, then, is the basis for competitive advantage when imitation is so evident? It’s worth noting that Pepsi did not include generics in the original challenge — why might that be?

Feedback about the exercise (from 3E-Learning)
  • “The soda taste test definitely opened my eyes to realize the importance of branding, marketing, and customer brand loyalty in a business.” Continue reading →

Starbucks’ Dual Advantage

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BusinessWeek offers a nice analysis of Starbucks’ decision to lower prices on its premium coffee. Rita McGrath describes the “hourglass economy” as thick markets for low cost and highly differentiated products. Accordingly, Starbucks is keeping prices high for premium drinks in its stores but dropping the price of coffee by 10% to draw in more price conscious consumers. This strategy leverages Starbucks’ lean supply chain operations that give it a very low cost structure despite offering premium products. Ultimately, this puts higher cost rivals at a disadvantage because Starbucks can offer a better value proposition.

Contributed by Russ Coff

Chinese Dilemma: 170 Auto Makers

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Rose Yu of the WSJ has a nice recent article on the fragmented nature of the Chinese auto market and how this is leading to over capacity in the industry.electriccarconcept[1] Mark Lehrer identifies some nice classroom uses for this article in the WSJ WeeklyReview service. Here is what he suggests:

  • SUMMARY: The US auto industry has long had three big domestic car makers. China has more than 170. Optimistic Chinese auto executives send shudders through the rest of the global auto sector. Industry watchers worry that the world’s No. 1 auto market could soon be awash in overcapacity. That would rev up competition in China and pressure companies here to export more of their cars.
  • CLASSROOM APPLICATION: As a case in industry analysis, excess capacity seems to be an endemic feature of the car industry (related article). As a study in foresight, the question for class discussion is, first, how to deal with the problem in the US, and second, how to brace for the problem furling over from China in a few years.

QUESTIONS: Continue reading →

Groupon: The Next MySpace?

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You could easily fill an hour by just playing the videos below, saying “discuss,” and then stepping out of the way. I use the videos (all 3) along with the available case study — Ivey case W12674, which already has its own teaching note. As preparation for the Groupon discussion, you could also ask students to explore the web site where Groupon makes its sales pitch to merchants, at https://www.grouponworks.com/. Here are the videos:

Groupon would fit best as a closing exercise at the end of a module on sustainability of competitive advantage. To add a humorous interlude to your discussion, you might include this Brazilian video or this ONN TED talk on Social Media.

Contributed by Rich Makadok

Ryanair: New heights from low costs

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In this interview (9:44), Deputy CEO, Michael Cawley, explains Ryanair’s relentless pursuit of cost reduction and the resulting value created. High demand elasticity contributes to their advantage since the increase in total demand arising from lower prices gives them added volume on routes that might not be profitable for other carriers. The interview is conducted by Juan Jose Guemes from IE Business School. Of course, there are several nice cases written about the company that go well with this.

Contributed by Birgul Arslan

Situation in Nigeria is … Complex

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This ONN report features a news panel that has literally nothing to add. How do firms deal with information challenges when they enter new markets?

Contributed by Russ Coff

Alaska Gold Mine Exercise

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The Alaska Gold Mine case is my (Mason’s) favorite starter case for undergraduate, MBA, and executive MBA strategy courses. Reprinted here with permission of author Jeffrey Barach along with my PointPoint slides I use to administer the case.

Click to get the:

The video below provides a lot of good fodder to reference back to when doing the exercise. Start the class session by showing the video before doing anything else. Continue reading →

Wal-Mart as a Partner for Sustainability

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Yvon Chouinard, the enterprising founder of Patagonia explains why Wal-Mart is his biggest and unlikeliest ally.


Contributed by Sharon Livesey

Paul Friga’s Video Library

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Paul Friga is kind enough to maintain a library of videos for teaching various strategy topics. You can find it on his web page here (or click on he picture). Resources are arranged by topic so they are easy to find.

Case Libraries

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2e1e41_ff04ac9674ba4be1848f097fee5bd061Here are some popular case repositories:

iPhone 5 as an Incremental Innovation

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There is much hoopla about the release of each new iPhone but the innovations are, as one would predict, more incremental with each new release. The WSJ recently suggested that this is a good time to sell Apple stock because these incremental changes will allow rivals to catch up. Jimmy Kimmel offers a funny take on it when people perceive greater value added than there really is (he shows them an old iPhone, tells them its the new model, and they coo about how much better it is)…

Contributed by Russ Coff

Airlines Try to Cut out Middlemen

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This article in the economist explores the strategic moves airlines made as they entered the internet era (online reservations, etc.). Thinking that travel agents would go the way of the dinosaur, the stopped paying commissions and built their reservation web pages. However, this ultimately created powerful online reservation systems that the airlines now must pay commissions to. The article provides a road map on how NOT to use the 5 forces in developing a strategy…

Sumo Strategy: Size matters…

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This video is certainly of questionable taste but that hasn’t stopped me from using it in class. It depicts a battle between a sumo wrestler and a much larger sumo wrestler (the conclusion is not pretty). It can be used to discuss the point of inimitable resources (of course size but also brand or anything else). I have also used it in discussing Yoffie’s Judo Strategy in class.

Contributed by Russ Coff