Category Archives: Multi-business/Diversification

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 Cut at Vertical Integration

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Firms have sometimes had a tendency to vertically integrate tasks that can be more efficiently outsourced. This humorous video examines the problem in the context a haircut that ultimately costs twice as much (because they tried to do it themselves).

Contributed by Russ Coff

ONN: Outsource Your Own Job

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ONN (Onion News Network) spoof on outsourcing — in the end all work is outsourced to one person. Very funny and explores the limits of outsourcing.

Sometimes the truth is stranger than fiction. Here is a real news story about a programmer who outsourced his own job to a developer in China. He continued to get great performance reviews while he watched cat videos on YouTube.

Contributed by Aya Chacar

One Man Band Gets a Poor Score…

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This Pixar short features a battle of two one man bands. They each do things fairly well but profit is limited. Then a talented violinist “makes a new market” and they are left out. The one man bands are a bit like diversified companies – competent but not excelling at any task. A rival with superior but focused capabilities might win over “jack of all trades/master of none” competitor.

Contributed by Elisa Alt

Winner’s curse at Gourmet Adventures

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Often in M&A, there is a concern that the buyer has overbid – especially when there is competition for the target and the risk of winner’s curse is heightened. In essence, if firms bid based on their “unbiased estimates” of the target’s value, the bids may be normally distributed around the true value and the winner is especially likely to have overbid (cursed). The task then, is to shade one’s bid to avoid overbidding. A standard exercise to demonstrate this phenomenon is to have the students bid on a jar of coins (which I describe as a restaurant chain). This is of special interest in a strategy course since the risk of being cursed is driven by the variance around the valuation (not the mean). Variance, it turns out, is driven by aspects of the target that are hard to value. These include strategic resources, human capital, complementarities, cross business synergies (e.g., layers of coins to reflect different target business units), or any other source of uncertainty. As such, even if the winner’s curse is covered in another course, these elements will be specific to a strategy course. Here are materials needed to run the exercise:

  • Instruction sheet describing the bidding/valuation task (and to submit bids)
  • Spreadsheet to record the results and show a simple estimation method
  • PowerPoint slides to lead discussion
  • 500ml jar with quarters, pennies, and nickels (as shown)

If you teach an online course, there is also a nice online simulation of this at GameTheory.net.

Contributed by Russ Coff

Core Competence Follies at 3M

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This is an old video depicting the process for a $20M investment in the laserdisk division. It has two uses in class. First it illustrates some limits of “core competence” (as the term is usually used) as a guiding principle for analyzing whether business units will add value — the clip describes 3M’s competence, with a straight face, as “two dimensional products.” Second, the video might be described as depicting an exercise decision for a real option that was acquired earlier. One can explore the role of core competence and other organizational factors in making such exercise decisions.

3M, of course, is extremely sophisticated in it’s management of core competencies — maintaining deep expertise in a well-defined set of technologies. The only one with the wool pulled over their eyes was the filmmaker who really did believe that 3M’s core competence was 2 dimensional products…

Contributed by Russ Coff

Governance Under Fire at Tyco

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This is an INSEAD video examining the unfolding scandal at Tyco. “Shareholders are screaming. The stock price has dropped from $60 to $7 a share. The press is hitting you every day with requests for info on the turnaround of the company. The prior management is still there, wondering about their futures. The prior board is there, wondering about their futures. And you’re there, trying to bring some order to this chaos.” That’s how Eric Pillmore describes a typical day at the office when he stepped into the corporate governance role at Tyco early in August of 2002.

Contributed by Joan Allatta

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:

Outsourcing Childcare to India

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This is an ONN (Onion News Network) report on U.S. parents outsourcing childcare to India by boxing up their kids and sending them via FedEx. Very funny but might be useful in spurring a discussion of what can be outsourced overseas.

 

Contributed by Russ Coff

Google’s $12.5B Acquisition of Motorola

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Google’s recent $12.5B acquisition of Motorola mobility is a great “ripped from the headlines” case. Here are a series of news articles that one can distribute (not all are really needed). In order to assess Google’s prospects for creating value, one must evaluate the following key sources of uncertainty:

  • Intellectual property as a resource. Will the patents help Google beat Apple in court (or reach a favorable settlement)? The litigation is a critical part of Apple’s global strategy to limit the threat that Android poses to the iPhone.
  • Vertical integration. Apple has created a great product that works very well. Part of the reason may be that the operating system and hardware are better integrated. Can Google produce a better product that commands a higher willingness to pay?
  • Alliance partners. Will Google lose partners who are now direct rivals (to Windows or new operating systems)? Continue reading →

Complementarities: Inventing a mouse

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This is a very funny video depicting the invention of a mouse before there were computers or any other complementary assets. Very silly but it makes an important point linked to any discussion of complementarities (e.g., M&A, multi-business strategies, alliances, new technologies, etc.).

Contributed by Russ Coff

Outsourcing Human Capital

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Increasingly suppliers of staffing services make specific investments in their clients. What, then, is the role of firm-specificity in determining firm boundaries? This video pushes us to ask these questions with a humorous twist.

Contributed by Russ Coff

Delta Dental – A funny take on diversification

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Here are 3 classic Delta Dental commercials that illustrate inefficient diversification (in a funny way)!

See the other two if you click here: Continue reading →

Short Compilation of Experiential Exercises

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Click here to download this collection of exercises. This was assembled as part of an AoM session by Russ Coff and Don Hatfield

Contributed by Russ Coff

Acquire Box Game

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“Acquire is a box game that is easy to learn and can be played in about an hour by four players.  I bought a dozen games and break the class up into teams and link the game to cases on rivalry, competition, and acquisitions.  It does a great job of putting students in the position to see how serendipity and strategy interact, and how your wins are a function of others’ actions, intentions and hubris.  The first site below actually has a couple of free and simple DOS versions of the game that students can use for practice and familiarization.” Click Here to Access

Contributed by Mason CarpenterMason Carpenter

 

Quarter-length and Semester-length Simulations

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Attention simulation users: It would be great to have a separate page for each simulation below. If you have used it and can summarize strengths, limitations, and some tips for implementing, please submit a full entry on the simulation.

Click the links below to access quarter and semester length simulations

Contributed by Mason CarpenterMason Carpenter

Mini Cases

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I developed a number (39!) of mini-cases to demonstrate a range of strategy topics.  I usually use the cases and their attached questions at the beginning of a lecture or part way through to break up the pace.  I find that they provide a strong, shared basis for talking about particular subjects in strategy, and can be used to promote debate and discussion.  These are found in the Test Bank accompanying the Hitt, Ireland, Hoskisson Strategic Management textbook, Fifth Edition (2003).

Contributed by Mason CarpenterMason Carpenter

Teaching extended (multi-part) cases

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At the 2003 SMS Conference, Mason Carpenter (me), Amy Hillman, W. Gerry Sanders, & Gerry Keim presented a program on challenges and opportunities of teaching extended session strategy classes.  The hand-out with several of the pertinent suggestions are provided in the attached handout.

Click Here to Download PDF

Contributed by Mason CarpenterMason Carpenter

Value Appropriation with a Midas Touch

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This story on “A Current Affair” depicts the tremendous negative impact of Midas’ corporate troubles on the lives of its franchisees. It explores value appropriation between a franchisee/franchiser. This illustrates how extreme value appropriation efforts can lead to value destruction. Once the company was in trouble, the CEO was forced out and the stakeholders vied for whatever value they could gain from the pieces.Here is an article on the sale of the Australian operations.

Contributed by Aya Chacar