Tag Archives: Case

Flush with Cash…

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A recent Wall Street Journal article points to a resurgence of toilet manufacturing in the U.S. but it is mostly under foreign ownership (like the Japanese company, Toto). Mary Tripsas has a nice HBS case on Toto’s attempts at entering the U.S. market and the WSJ article seems a nice conclusion to the story. A broader question one might ask is why product innovation has not penetrated the U.S, market in this industry. In Japan, top end toilets are highly differentiated and even link to electronic devices like Android smartphones. As such, this might spur discussion of when innovations are likely to take hold as well as questions about entry into new markets. Nevertheless, this video reminds us that there may still be a need for low tech solutions in this market…

Contributed by Russ Coff

Apple’s Addiction to Samsung

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Apple is famous for being secretive about it’s proprietary knowledge. One would think that they would love to stop handing over their most strategic technical knowledge to Samsung, their biggest rival in smartphones. Nevertheless, all existing iOS core processors have been manufactured by Samsung. They just can’t stop themselves — the A7 chip continues the multi-year pattern of outsourcing production of the heart of the iPhone to their chief competitor. Rumors have been flying that Apple is going to switch to a new supplier, TSMC (Taiwan Semiconductor Manufacturing Co). That may still happen in the near future but the fact that Apple could not shake it’s dependence on Samsung quickly despite large investments in TSMC speaks to the extent of Samsung’s manufacturing advantage. This would seem to prompt a nice discussion of capabilities, rivalry, and alliances…

Contributed by Russ Coff

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

The Peter (not Paula) Principle

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The Peter Principle states that people will rise in an organization to their level of incompetence. A recent HBR blog by Tomas Chamorro-Premuzic explains why this might apply to men but not women. In essence, the attributes often associated with many high profile leaders (Steve Jobs, Richard Branson, etc.) are, much more frequently associated with failure than success but the failures are not as well publicized. In contrast, research suggests that women are more often linked to leadership styles that may be less flashy but are, on average more effective. However, in looking for the male archetypes, many incompetent men are promoted leaving few opportunities for effective women. This article would likely prime some rich class discussion on the topic. The following TED talk by Sheryl Sandberg will also spur discussion:

Contributed by Aya Chacar

Apple’s Rotten Core Competency?

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Apple’s board is growing impatient and is calling for increased innovation as they try to put the loss of Steve Jobs behind them. At the same time, projections indicate that their anticipated product changes will be incremental at best. A recent article coins the term “frosted glass effect” to describe the incremental innovations that signal a fast moving challenger will soon leapfrog over a stodgy slow moving incumbent (like Apple). Not to be left out, the Onion has entered the fray as well. In short, stakeholders are wondering how critical Jobs was to Apple’s “organizational” capabilities — Has the core competence really rotted away? Some discussions of dynamic capabilities place great emphasis on organizational routines as the key elements that drive the ability to acquire, integrate, recombine and release resources and capabilities (e.g., see Winter). The importance of Jobs, in this case, shifts our attention to key individuals who may be essential components in harnessing and directing routines. Without a rudder, the routines may lose much of their value. Of course, this steers us solidly into a micro-foundations perspective (e.g., see Barney and Felin or Foss)…

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

Google Graveyard: An optional story

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Google has brought many products and ideas to market that have been unsuccessful and ultimately pulled back.GoogleGraveyard Forbes recently published an infographic that illustrates many of these. This is valuable to point out the uncertainty surrounding new products and services and how a real option portfolio might be an appropriate tool for making investment decisions. Ultimately, the process may look a bit like a venture capital portfolio. Given Google’s successes, we may forget their many ideas that have not worked well in the marketplace. There are a number of other resources here that help to focus on real options as a strategic tool.

Contributed by Russ Coff

You’re Gonna Like My Company

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After firing the founder and CEO (George Zimmer), the board has now released the reason: the CEO wanted to sell to a group of private equity investors. Here the board didn’t want to take the company private “for the sake of the employees.” While the CEO was fired, the news has apparently fired up investors who may be interested in buying the company — now it may be in play regardless of what the board wanted.This seems like it might be helpful to drive home the different goals and objectives for different stakeholders, While the board accused Zimmer of being opportunistic, he made the case for his actions in an open letter. This should make for enough drama to dress up your class…This video may lighten the discussion. At the same time, It highlights the company’s biggest strategic challenge: appealing to a younger audience…

Contributed by Russ Coff

Developer Releases Pirated Game

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Greenheart Games developed a game (Game Dev Tycoon) where the objective is to manage a video game company. However, they did something a little different. They simultaneously released a “cracked” version of the game that was identical except that player’s new products would be pirated. Eventually, the player’s company goes broke since they can’t make any money. Here is their blog post (or pdf in case the site goes dark) describing what happened (e.g., how users of the cracked version complained that they couldn’t win). This is a great vehicle for discussions of ethics, intellectual property, and even game theory. This short video report describes the ploy:

Contributed by Rich Makadok

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 →

M&A: Resistance is Futile

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The Star Trek reference to the Borg may be lost on most of today’s students. However, their method of absorbing all life forms with which they come in contact is similar to how some firms integrate targets. I recently taught the GSK/Sirtris case in which there is a debate on how much to integrate a target that has a culture of innovation. Ultimately, Sirtris was fully integrated and the original research capabilities were lost. The final decision to shutter Sirtris came just as one of the original co-founders published promising new findings.

Contributed by Russ Coff

Do We Need Managers? Valve doesn’t…

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Valve Corporation is a game developer that has 400 employees, no bosses, and is very successful. How can you have a structure that flat? The company, a spawn from Microsoft, seems to be doing just fine thank you. The information at the following seven web links (including a podcast and the employee handbook) contain all of the raw material required for a live case:

I think you could probably just give these seven web links to students, say “discuss,” and get out of the way.

Contributed by Rich Makadok

Valentine’s Day: A Formula for Love

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You may have heard Jay Barney say there cannot be a rule for riches (or the rents will be competed away). However, Harlequin romances has been using a formulaic approach to developing romance novels for years. This HBS case on Harlequin explores their resources and capabilities in this area in the context of a strategic decision. Is the formula a source of advantage? If not, what is? To go with this case, you might consider using:

  • This Pandora radio post on the formula for a love song.
  • This video of Kurt Vonnegut describing the formulaic approach to telling stories (such as Cinderella).

Contributed by Aya Chacar

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

Quiznos Business Model: Exploit?

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This video describes the business model (musically) by which franchise owners were encouraged to open stores that they knew would be unprofitable. The business model was more about selling franchises than selling sub sandwiches. Very profitable for Quiznos but not so much for their partners. Here is a CBS news story on the resulting class action lawsuit.

Contributed by Aya Chacar

A Cost Advantage From High Wages?

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Many students assume that low wages are a necessary component of a low cost strategy. However, the many of our best examples of cost advantages pay their employers higher wages. In groceries, Aldi comes to mind – they chased Wal-Mart out of Germany because Wal-Mart couldn’t match their prices. Wayne Cascio writes about Costco’s advantage over Sam’s Club. Samsung is another very nice case of this as their low cost advantage is linked to higher productivity obtained from high wage workers. This insulates them for a time from the threat of Chinese competition which relies initially on low wage workers. The only way for them to catch up was to invest in human capital (see the Samsung Electronics case).

Contributed by Aya Chacar

Groupon Follies: Get a Brazilian…

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This Groupon Superbowl commercial is quite funny (even if it is in bad taste). However, the company has struggled and one year after its IPO the price was 81% below the initial price. A recent spike when a hedge fund took a toehold position only underscores the company’s troubles as investors hope for better management. Before the IPO, Groupon turned down a $6B offer from Google — something that Google should appreciate since the company is worth less than half that amount a year after the IPO. One reason for the bearish response is that the entry barriers are fairly low and the competition is significant (e.g., Living Social and even a new eBay venture along these lines). Why was this so hot anyway?

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