Advanced Competitive

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Advanced Competitive Analysis
CSIB 669, Sections 001, 002, 003 451 (3 credits)
Fall B 2005 / Winter A 2006


Professor Gautam Ahuja
Michigan Ross School of Business     Phone:     (734) 763-1591
701 Tappan Street, Room D5207     Fax:     (734) 936-8716
Ann Arbor, MI  48109-1234     E-mail:     gahuja@umich.edu


Course Description

This course seeks to deepen and broaden your understanding of competitive strategy.  As such, it is a natural follow up to the core strategy class that you have already taken.  The course deepens your understanding of several of the concepts that you were introduced to in the core class, such as industry analysis, by exploring their use, utility and limitations in different kinds of strategic environments.  The course also broadens your strategic analysis abilities by introducing you to new tools and frameworks, not covered earlier.  Additionally, a key instructional objective of the course is to help you develop a rigorous approach for addressing complex business problems.  Thus, the utility of this course should extend well beyond strategy.  This course should be of interest to all MBA’s; understanding and tackling complex problems and competition is the essence of business and this course focuses directly on improving your ability to do these two things.  Students focused on consulting or investment banking may well find it indispensable as it addresses issues that constitute an important part of those fields.


Required Materials:  You must purchase the course materials packet (all readings are included in packet).


The assignments for each class are detailed in the following pages.  Please read the relevant assignment before every class so that you are prepared appropriately for the class.


Performance Measures and Feedback

Your grade for the course will be based on the following components:

20%     Class participation
10%     Written group assignment (Airborne Express, due on November 28 by 5:00pm)
35%     Midterm – written group case analysis (handed out in class on December 5, 6 & 7 and due on December 19 by 5pm)
35%     Final - written group case analysis (To be handed out in class on February 6, 7 & 8 and due on February 24, 2006 by 5pm)



Class Participation















* Attending all classes is essential to your learning in this course.  If for some unavoidable reason you must miss a class, please let me know in advance so that your absence will not be unexplained.  While it is not possible to 'make up' for your absence, a brief analysis of the case to be discussed the day of your absence should be submitted (2 pages maximum).  This analysis will be regarded as class participation and would merit one or two points depending on the analysis.  This analysis would be due before the conclusion of the class for which you are absent.  You may not submit such 'analysis in lieu of presence' more than three times in the term.  Note that since quality class participation figures prominently in this course, the Honor Code mandates that you not rely on notes, handouts, or cases from students who have taken this course previously.  NOTE:  Submit your "brief analysis" for the class missed to C-tools.


Written Assignments

There will be two take-home exams and one take-home assignment.  Details on the take-home assignment are provided on the write-up for the relevant session (Airborne Express) – session 5.

The midterm and final examination will be a take-home case analysis, to be conducted by the students in five to six member groups.  In preparing this paper, you will be limited to four single-spaced pages of text (12 pitch font).  You may of course use exhibits to support your arguments or conclusions.  The results of the application of various analytical tools, for example, are appropriate for exhibits.  You may use as many exhibits as you deem necessary.  Be sure to refer to each exhibit in the relevant places in the paper.  Papers should be submitted without folders, coversheets or any other incidental pages.  Other requirements (specific issues to be addressed in the analysis, format) will be conveyed to you in class.

Important Note:  Once you have determined your group members, please pick a captain.  Submit the names, ID numbers, and section numbers of your group members to C-tools (https://ctool.umich.edu), under the Assignment feature.  This will be your group for the duration of the class.

When you submit your assignment and exams, please list on a separate sheet of paper, the assignment title, date, your names (captain’s name listed first), student ID numbers and sections.  This sheet should be included at the end as the last page of the assignment or exam.  All papers must be submitted via CTools at:  https://ctools.umich.edu.


Other Administrative Details

Since faculty members tend to have somewhat different expectations as to class behavior and course norms, I'd like to outline a few of our expectations concerning such matters.




1.     I plan to be prepared for every class and I expect you to do the same.  Since I frequently call on individuals whose hands are not raised, you should let me know before the start of the class if some emergency has made it impossible for you to be prepared adequately for that class.

2.     I consider attendance at every class to be very important.  Please schedule other activities (e.g., job interviews) at times other than those during which CSIB 669 meets.  In the event that you do have to miss a class during the semester, I would appreciate it if you would let me know in advance of that class.  Also, if you miss a class it is your responsibility to find out from your classmates what materials were covered, what additional assignments were made, and what items may have been distributed in class.

3.     I will be happy to discuss the course, your progress, or any other issues of interest to you on an individual basis.  Please see me in class or call to set up an appointment.

4.     Given the importance of this course, I will do everything that I can to use class time effectively and ask that you do the same.  This will include arriving, starting, and ending on time.

5.     Group work is acceptable and strongly encouraged for purposes of case preparation for classroom discussion and the final exam.  (I will say more about group composition on the first day of class.)


Preparing for Class

When you prepare for class, it is recommended that you plan on reading the case at least three times.  The first reading should be a quick run-through of the text in the case.  It should give you a feeling for what the case is about and the types of data that are contained in the case.  For example, you will want to differentiate between facts and opinions that may be expressed.  In every industry, there is a certain amount of "conventional wisdom" that may or may not reflect the truth.  On your second reading you should read in more depth.  Many people like to underline or otherwise mark up their cases to pick out important points that they know will be needed later.  Your major effort on a second reading should be to understand the business and the situation.  You should ask yourself questions like:  (1) Why has this company survived?  (2) How does this business work?  (3) What are the economics of this business?

On your second reading, you should carefully examine the exhibits in the case.  It is generally true that the case writer has put the exhibit there for a purpose.  It contains some information that will be useful to you in analyzing the situation.  Ask yourself what the information is when you study each exhibit.  You will often find that you will need to apply some analytical technique (for example, ratio analysis, growth rate analysis, etc.) to the exhibit in order to benefit from the information in the raw data.

On your third reading, you should have a good idea of the fundamentals of the case.  Now you will be searching to understand the specific situation.  You will want to get at the root causes of problems and gather data from the case that will allow you to make specific action recommendations.  Before the third reading, you may want to review the assignment questions in the course description.  It is during and after the third reading that you should be able to prepare your outlined answers to the assignment questions.

There is only one secret to good case teaching and that is good preparation on the part of the participants.  Since the course has been designed to "build" as it progresses, class attendance is also very important.






The Use of Extra or Post-Case Data

You are encouraged to deal with the case as it is presented.  You should put yourself in the position of the general manager involved in the situation and look at the situation through his or her eyes.  Part of the unique job of being a general manager is that many of your problems are dilemmas.  There is no way to come out a winner on all counts.  Although additional data might be interesting or useful, the "Monday morning quarterback" syndrome is not an effective way to learn about strategic management.  Therefore, you are strongly discouraged from acquiring or using extra- or post-case data.


All class sessions are held in room E1540.  Please be on time, prepared, and ready for class.


MODULE 1:  INDUSTRY ANALYSIS

PLEASE NOTE THAT THE FIRST SESSION OF CLASS IS A FULL WORKING SESSION.  Thus, please prepare the case and cover the assignment readings prior to the first class session.  After a brief introduction of the course we will have a full discussion of the crown cork and seal case.


CLASS SESSION 1

Monday, October 31     Section 001     7:00-10:00 pm
Tuesday, November 1     Section 002     2:10-5:10 pm
Wednesday, November 2     Sections 003/451     7:00-10:00 pm

This session will provide an overview of the processes of strategy identification, evaluation, and formulation in single business firms.  It will also serve to recapitulate the key elements of the ideas you learned in CSIB 502/CSIB 601.  Here, those ideas will serve as a base case from which we move further.  A critical task for any top executive is to develop a strategy for his or her organization to assure its survival in the face of a changing environment.  Critical steps in that process include identifying the firm's current strategy and its key components, evaluating that strategy in light of the need for change, and then making the necessary changes.  In addition, formulating a competitive strategy requires an analysis of industry structure, as well as actions that attempt to create a competitive advantage.  These and other issues will be addressed in our discussion of Crown, Cork & Seal by applying the concepts presented in the assigned readings.

Read:     Competitive Strategy by Porter, Chapters 1 & 2
Case:     Crown Cork & Seal

Preparation Questions:

1.     How attractive is the metal containers industry from the perspective of Porter’s Five Forces model?  What are the industry trends?  What are the implications of these trends?

1. What strategy does CC&S have for competing in this industry?  How effective has this strategy been?

3.     In some sense, a competitive strategy describes the amount and types of risk that a company is willing to take.  What is CC&S's "risk profile"?

4.     What are the major issues that William Avery faces in 1989?  What advice would you offer him about these issues?


CLASS SESSION 2

Monday, November 7     Section 001     7:00-10:00 pm
Tuesday, November 8     Section 002     2:10-5:10 pm
Wednesday, November 9     Sections 003/451     7:00-10:00 pm

Read:     (1) Forecasts of an E-book Era and (2) Electronic Books – A Major Publishing Revolution
Case:     Sierra Log Homes

Preparation Questions:

1.     What problems is the log home industry having?

2.     What is the structure of the log home industry?

3.     How is the industry likely to evolve?

4.     What are the implications for Sierra? What should Cameron Bach do?


CLASS SESSION 3

Monday, November 14     Section 001     7:00-10:00 pm
Tuesday, November 15     Section 002     2:10-5:10 pm
Wednesday, November 16     Sections 003/451     7:00-10:00 pm

Read:     (1) A Nascent Industry in the U.S. Looks to Blossom and (2) International IP Telephony
Case:     BMG Entertainment

Preparation Questions:

1. How does the advent of the Internet change the structure and economics of the music industry?

1. As President of BMG would you rush to embrace the Internet?

CLASS SESSION 4

Saturday, November 19     Sections 003/451     10:00am-1:00pm
Monday, November 21     Section 001     7:00-10:00 pm
Tuesday, November 22     Sections 002     2:10-5:10 pm

This session will be used as an explicit opportunity to discuss and clarify issues of business strategy that have arisen in the prior sessions, and as an opportunity to apply them to problems being experienced by contemporary companies.

Assignment:     None


MODULE 2:  COMPETITIVE ANALYSIS

CLASS SESSION 5

Monday, November 28     Section 001     7:00-10:00 pm
Tuesday, November 29     Section 002     2:10-5:10 pm
Wednesday, November 30     Sections 003/451     7:00-10:00 pm

So far our focus was on the industry level of analysis.  Yet, as we saw in Crown Cork and Seal, and know from experience, firms can differ tremendously in their profitability within the same industry.  Thus, although the Five Forces beating down on an industry may be common for all the firms in the industry, some firms nevertheless carve out a distinct competitive advantage for themselves and obtain a superior return.  Our objective in this session will be to develop a generalizable conceptual framework that we can use to address the issue of competitive advantage in a wide variety of contexts.  Our focus will be on identifying and understanding both, the qualitative and the quantitative nature of competitive advantage.

Read:     Competitive Strategy by Porter, Chapters 2 & 7
Case:     Airborne Express

GENERAL PREPARATION FOR CLASS – NO WRITTEN RESPONSES REQUIRED FOR THIS PART (i.e., Questions 1 and 2)

Preparation Questions:

1. How and why has the express mail industry structure evolved in recent years?  How have the changes affected small competitors?

1. How has Airborne survived, and recently prospered, in this industry?

WRITTEN ASSIGNMENT FOR AIRBORNE EXPRESS – DUE ON NOVEMBER 28 BY 5PM – MUST BE SUBMITTED TO CTOOLS.

This assignment is worth 10% of your grade.  It is a GROUP ASSIGNMENT and only 1 response is to be submitted for each group.  If for any reason you or your group is unable to complete the assignment, please let me know right away.

1. Please provide a detailed estimate of Airborne’s cost advantage / disadvantage relative to Federal Express.  Specifically, compare the costs of an overnight letter shipped by Airborne Express to one shipped by Federal Express.  (Hint: To examine relative costs, start with the cost structure of a Federal Express Overnight Letter given in Exhibit 3 of the Case.  Using information in the case and your understanding of what influences each cost item, estimate each of these items for Airborne Express.)  SEE NOTE BELOW.

Note that the final deliverable is one sheet of paper (or rather, one CTools attachment) – Airborne’s estimated cost structure relative to Federal Express.  You may need to make some assumptions as you go along.  Make reasonable ones (i.e., assumptions that you could defend before your boss or client) and proceed.  PLEASE DOCUMENT THOSE ASSUMPTIONS IN YOUR ANALYSIS, PREFERABLY ALONG THE LINE ITEM THAT THEY ARE MADE ABOUT.

The exercise is meant to give you practice and the objective is learning rather than evaluation.  Please let me know if you have any questions.  It is also not meant to be particularly onerous – a good close reading of the case and the relevant parts should help you fill out the cost structure.


CLASS SESSION 6

Monday, December 5     Section 001     7:00-10:00 pm
Tuesday, December 6     Section 002     2:10-5:10 pm
Wednesday, December 7     Sections 003/451     7:00-10:00 pm

We will continue our exploration of firm level competitive advantage along the path initiated in the Airborne Express case.  However, we shall go even deeper into issues of competitive positioning.  This case will entail a deep examination of the quantitative nature of competitive advantage (along with its qualitative components). Further, it is important to recognize that such an advantage is even more valuable if it can be sustained over an extended period of time.  In this session we will discuss sustainable advantage using the context of the world's most successful PC Company.  You have already covered this case in the Core from one perspective.  We will do a 2nd take on the issue of competition in the PC industry.  Our focus will thus be on identifying and understanding the sustainability of the qualitative and quantitative competitive advantages we have discussed.

Read:     Sustainable Advantage by Ghemawat
Cases:     Matching Dell and Ducati

Preparation Questions:

1. How attractive is the Personal Computer industry?  Why has it evolved in the way it has?

2.     Why has Dell been so successful?  What, if any, is the nature of Dell’s advantage over firms like Compaq?


Preparation Questions (Ducati):

1. What is the essence of the turnaround at Ducati?  How has Minoli taken Ducati from below average to above average performance?

1. What course would you recommend for Ducati now?

CLASS SESSION 7

Monday, January 9     Section 001     7:00-10:00 pm
Tuesday, January 10     Section 002     2:10-5:10 pm
Wednesday, January 11     Sections 003/451     7:00-10:00 pm

Part A of session:  Lecture

Part B of session:  Start Module 3


MODULE 3:  COMPETITIVE DYNAMICS

Case:      Bitter Competition: The Holland Sweetener Company versus NutraSweet (A)
     [Cases (B) and (C) will be handed out in class.]

Preparation Questions:

1.     How, as HSC, do you expect NutraSweet to respond to your entering the European and Canadian markets?

2.     What can you do, as HSC to maximize your likelihood of success?


CLASS SESSION 8

Saturday, January 14     Section 001     10:00am-1:00pm
Tuesday, January 17     Section 002     2:10-5:10 pm
Wednesday, January 18     Sections 003/451     7:00-10:00 pm

Part A of session:

Read:     The Right Game: Using Game Theory to Shape Strategy by Brandenburger/Nalefuff
Case:      Airbus 3XXX (A):  Developing the World’s Largest Commercial Jet

Preparation Questions:  

1.     Should Airbus have committed to the development of a super-jumbo?

2.      How, as Airbus, do you expect Boeing to respond to your threat of developing a super-jumbo?

Part B of session:

MODULE 4:  THE CORPORATE STRUCTURE AND STRATEGY IMPLEMENTATION

Lecture, Introduction to the Corporate Structure


CLASS SESSION 9

Monday, January 23     Section 001     7:00-10:00 pm
Tuesday, January 24     Section 002     2:10-5:10 pm
Wednesday, January 25     Sections 003/451     7:00-10:00 pm

Part A of session:

Case:     Celulosa Arauca

Preparation Questions:

1. Should Arauco build the ITATA project?

1. What are the sources of competitive advantage for Arauca?

1. How would you assess the degree of integration in the company?

Part B of Session:

Case:     (1) Norton Company

Preparation Questions:
     

1. Put yourself in Midghall's position.  What recommendation would you make to the Strategy Guidance Committee?

1. As a member of the Strategy Guidance Committee (for example, Cushman), how will you evaluate Midghall?  What do you think Norton should do with CAD?

3.     Evaluate the BCG and PIMS approaches shown in the Appendix.  What are their analytical limitations?  What is the underlying "strategic logic" of the BCG approach to managing a diversified firm?

• What practical management difficulties would you expect if you tried to run a company using the BCG and/or PIMS approaches?

Follow-up Reading (after the case):  Ciba Geigy





CLASS SESSION 10

Monday, January 30     Section 001     7:00-10:00 pm
Tuesday, January 31     Section 002     2:10-5:10 pm
Wednesday, February 1     Sections 003/451     7:00-10:00 pm

Part A of session:

Case:     (1) Norton Company (cont).

Part B of session:

Read:     Leading change:  Why transformation efforts fail by J. P. Kotter
Case:     Cleveland Twist Drill (A)

Preparation Questions:

1. What are the major problems facing Jim Bartlett at Cleveland Twist Drill?  How serious is the situation?

1. As Bartlett, what is your detailed plan of action for accomplishing the objectives that you and Ames have for the business?

1. Which of the three options that Bartlett was considering in April 1982 would you pursue?  Why?  Are there others that make more sense given his objectives?

CLASS SESSION 11

Monday, February 6     Section 001     7:00-10:00 pm
Tuesday, February 7     Section 002     2:10-5:10 pm
Wednesday, February 8     Sections 003/451     7:00-10:00 pm

Part A of session:     

In this session we will continue our discussion of strategy implementation by considering the events subsequent to those discussed in the prior session, with the intent of bringing additional clarification and understanding to the issues summarized there.

Case:     Cleveland Twist Drill (B) [Will be handed out in class.]
Read:     Structure is not Organization


Part B of session:     General discussion and lecture





CLASS SESSION 12

Monday, February 13     Section 001     7:00-10:00 pm
Tuesday, February 14     Section 002     2:10-5:10 pm
Wednesday, February 15     Sections 003/451     7:00-10:00 pm

Part A of session:

Read:     Competing for the Future, Hamel/Prahalad
Case:     Corning Glass Works International (A)

Preparation Questions:

1.     What are the problems facing Forrest Behm and Corning International?  How serious are they?  Why are they emerging now?

2.     What do you think of the organizational changes' Behm made in response to these problems?  Why have they failed? What should Forrest Behm do now?

Part B of session:

Case:          Corning Glass Works International (B1 & B2) [Will be handed out in class.]
     Corning:  Transition at the Top 1983-1996 – assigned reading for AFTER class

Focus Questions:          To be handed out in class.


CONCLUDING REVIEW

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