Strategic Management

SYLLABUS – Stream A

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Strategic ManagementMBA Programme, Summer Term 2001

Stream A: Thursdays 14.00 – 17.00, LT8

SYLLABUS

Instructor: Michael G. JacobidesOffice: S345Phone: 020 7706 6725 (direct) and 020 7262 5050 (extension 3172)E-mail: mjacobides@london.edu

Secretary: Suzanne ShapiroOffice: S346Phone: 020 7262 5050 (extension 3585)E-mail: sshapiro@london.edu

Dear MBA 2002,

In front of you lies the syllabus for your core course on Strategic Management. This course will take you on a journey where you will learn to analyse a company’s business environment, select a strategy, and construct the organisation necessary to put it into action. We will build on insights developed in other courses, such as Understanding General Management, Managerial Economics, Managing Organisational Behaviour, and Marketing Strategy. We will explore and apply tools developed by world-renowned scholars, that are taught at business schools all over the world, and add our own unique LBS flavour, to arrive at insights that are both applicable in the business world and deeply rooted in a thorough academic understanding.

For this, I and my colleagues who will be teaching Strategic Management to the other streams, have carefully selected a number of topics, tools, readings, and teaching materials that you will be introduced to over the next ten weeks or so. We greatly welcome feedback in, I guess, almost any form and are eager to kick-off the course with you. Please take a careful look at the case on Nespresso that you are expected to prepare for our first session. This just leaves me to say that I look forward to our journey and I hope that you will enjoy it too.

See you in class on the 19th of April!

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Course Objectives

This (newly redesigned) core course deals with the craft of strategy; that is, how to identify and choose a superior competitive position, how to analyse a strategic situation, and finally how to create the organisational context to make the chosen strategy work. As such, the objectives of this course are twofold: 1) to explore conceptual frameworks and models which will assist you to analyse competitive situation and strategic dilemmas and gain insight into strategic management; 2) to help you acquire practical experience in dealing with strategic issues.

To achieve this, we start from the analysis of the external competitive environment, looking at industry structure, value chain dynamics, and assess how a firm can select the best position within this environment. We then move to an analysis of firm resources and capabilities, and look at the firm’s resource system, and examine the challenge of coordinating the pieces of the puzzle that underpin corporate success. Tying these insights together, a two-session simulation gives you a hands-on feel of what strategy-making is about, and helps you think through the implications of your decisions. We then turn to implementation, and to the way in which the organizational context enables us to put this strategy into action. The course concludes with a session on the challenges of strategic management in a time of rapid technological change.

Throughout the course, we try to move beyond the necessary conceptual models and analytical techniques, and provide you with a hands-on experience. First, our objective is to help you assess and successfully analyse an ill-structured competitive situation, selecting and then effectively using the appropriate tools and frameworks. Second, we explicitly ask the question “and what do you do, at the end of the day?” Teaching materials deal with real life experiences and simulate situations where the student is the central actor confronting a strategic dilemma, faced with the task of providing a judgment call to an important strategic question.

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“Returning home after his first Strategic Management class, Stanley immediately started viewing things from a different perspective”

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Course Structure and Layout

Time schedule

This course consists of ten three-hour class meetings. We will meet at 14.15 and go until 17.15, with one recess, at LT8. Please note that we also have two back-to-back sessions on Saturday, May 19th, which will take place in a different location.

Class Date Topic Case Preparation1 April 19 What is strategy? Nespresso2 April 26 Analysing the industry Barnes & Noble vs. Amazon.com 3 May 3 Choosing a position Barnes & Noble vs. Amazon.com4 May 10 Firm resources Swatch5 May 17 Resource Dynamics McKinsey67

May 19 -morningMay 19 -afternoon

Facing a Strategic Challenge : A Multimedia Simulation

Acme BottlingAcme Bottling

8 May 24 Strategy in Context : The Organisational Side

Sabena

9 May 31 Strtategy-making in Times of Change & wrap-up

10 June 7 Final Exam

Preparation

Our class discussions will require advance case preparation. It is absolutely essential that you do this carefully. In addition, every class has required readings. Being adequately prepared for class discussion is a key part of this course. Some class discussions may be organized in adversarial format with groups of students assigned to support different points of view. Specific responsibilities for particular questions may be assigned, and students may be asked to participate if they don’t volunteer.

Before each class, you will have to read the cases carefully, and do some back-of-the envelope calculations, as appearances are often misleading! You should also have at least taken a good look at the readings (either articles included in this course-book, or chapters from the book by our very own Costas Markides). These are the “mandatory” readings. In addition, you will be provided with some additional, “optional” readings in the beginning of the term, either through the Forum, or in class. A detailed list of question, which should guide your preparation of sessions 2-9, will be given out in the first class, and will also be available on the forum.

Please note that, as copies of the book are not included in this bulk-pack, you should buy Costas Markidis’s book - Constantinos C. Markides, “All the right moves: A guide to crafting breakthrough strategy”, 1999. Harvard Business School Press, which is available at the Waterstones in LBS, as well as in any other major bookstore. FYI, a good desk-top reference for strategic analysis is Robert Grant, Contemporary Strategy Analysis, 3rd Edition, Blackwell 1999. It’s got a good & well-articulated synopsis of a broad range of strategic concepts and frameworks.

Class Materials and Forum

The Forum will be actively used in the class. Administrative details, instructions for detailed class preparation, descriptions of assignments, etc. (as well as overheads shown in class and other material) will be made available. Additionally, the Forum will contain information about the class, the syllabus, other announcements, and links that could be of interest. So monitor it carefully!

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Student Assessment, Grading and Assignments

Strategy 1 has three major components to the grade, which cover different facets of your capabilities: In-class participation; group assignment; and individual final exam. The grade contribution break-down is as follows:

Individual participation 30% Throughout the course Of which: In-class participation 15% “Lessons learnt” write-up 15%Group assignment 30% Due date: May 31st

Written exam 40% 10th class: June 7th

Specifically, each component consists of the following:

Individual Participation

Since this course uses cases extensively, its success depends on effective student participation in class discussions. In evaluating class participation, I will ask myself, first of all, whether the student is well prepared and interested. Beyond that, however, I will be concerned with the questions such as: Is the student considerate of other class members? Is the student responsive to the contributions of other class members and to the general flow of the discussion? Do the student's comments reflect careful analysis of the case? Do the student's comments contribute to a clearer formulation of the issues in the case? Abusing “student airtime” is discouraged, and may count as a negative.

I will, on occasion, “cold call” students to broaden the distribution of class participation. If, for any reason, you find yourself unprepared for the session, please let me know by email before class starts, so that I know that you will not be contributing, and I will thus not call on you. Your contribution to the simulation (class 6&7) and Forum discussions will also count towards your “in-class” individual participation score. All these data-points, your participation in class discussion being the foremost, will add up to half of the total participation score, i.e. 15% of the total grade for the course.

While discussion during the sessions do provide us with some information on how engaged and apt you may be, it is a fact of life that students participate in class in different ways. Some students follow the readings and class discussion very closely, yet are not frequent contributors to the discussion itself (and vice versa). A way around this problem, is to have yet another vehicle to assess your application of the lessons learnt in class – our “lessons learnt” part of the course, which will be the other 50% of your participation grade, i.e. 15% of the total grade in the course. In the beginning of the class, you will be asked to come up with an interesting question, that strategy may help you better address – such as, “why did Ventra’s stock fall from $250 to $2?”. The “assignment” will consist of sending me an email after each class, explaining, in a few lines, how the lessons from each class help you better understand this puzzle / strategic question. We hope you’ll see that this is more than a tool to measure your participation, though – it’s an effort to put our frameworks into practice, to see how the constructs and concepts we talk about in class can be put in use to help you solve a problem that you have no ready answer for. (Or perhaps, help you critically revisit the answer you have so far). After all, a strategy class is no good if it can’t help you solve problems better, or if it doesn’t help you see the world in a different and more interesting light!

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Group Assignment

Another 30% of your grade will consist of the group assignment. This assignment will consist of a focused research around a specific industry, where your team will address the strategic problems of a real, existing player. A full information pack on this group assignment will be provided at the beginning of classes, and the information will also be posted in the Forum. The deadline for handing the group assignment in, is the week of class 8, i.e., May 25 th – and it has to be turned in to my secretary, Suzanne Shapiro, by 5pm that day – a deadline which will be strictly enforced! Note that classes 6-8 do not require much pre-class preparation, so this should give you the necessary time to prepare and wrap up your group project without too much pressure.

Written exam

The individual, in-class exam will be held during the 10th class meeting, i.e. June 7th. The purpose of this exam is to see how well you have mastered the concepts taught in the class, and also see how you can apply them in a real-world (albeit “artificial”) situation, much like you will be called to analyse a problem in the context of a consulting interview.

“Of course, going on and on about Strategy can’t compare to actual Strategy itself”.

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Class Schedule and Topics

April 19th - Session 1: What is Strategy?

What is strategy, really? This deceptively simple question will be explored through the analysis of the Nespresso case, so we need you all to spend the requisite amount of time going over the case details, and considering what Nespresso’s strategy is, as well as what it should be. Through the resulting class discussion, we should get to some basic conclusions about what is strategy, and what we can do with a course such as this to help you be better contributors to the strategy making process of the companies you’ll be working for- or their clients!

Case Nespresso - to be read before class!

Please be prepared to discuss the following questions in the first class: 1. What was Nespresso’s strategy? 2. What should Nespresso’s strategy be? Why?

Readings “Business strategy: Eenie, meenie, minie, mo...” The Economist. March 20, 1993, p. 76 Markides, Chapter 7

Optional Reading: Henry Mintzberg, Richard T. Pascale, Michael Goold, and Richard P. Rumelt. “The ‘Honda

effect’ revisited”. California Management Review. 1996. (yup, the same ol’ UGM article)

April 26th - Session 2: Analysing the Industry

In this session we revisit and expand upon a tool you have seen in other courses – the five forces. We’ll touch upon the basics of the strategic analysis of an industry, and briefly discuss the value chain structure. We’ll then examine how profitability can be determined by the forces operating in the industry, even in a setting as e-sexy (?) as that of the New Economy poster-child, Amazon.com. This will help us evaluate the forces that operate, in e-business and traditional business alike, to shape the ability of firms to sustain competitive advantage (and ultimately, one would hope, profitability). We’ll then consider how industry definitions change in today’s quickly evolving world.

Case “Leadership online: Barnes & Noble vs. Amazon.com ”

Readings Robert E. Grant. “Analyzing the Industry Environment”, Chapter 3 (excerpts) from

Contemporary Strategy Analysis, Blackwell, 1999 Michael E. Porter. “From strategy to advantage: The evolving competitive paradigm”. 1994.

(skim- focus on pp. 250-275) Markides, Chapter 2

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May 3rd - Session 3: Choosing a Strategic Position

Understanding the industry environment, and its implications for firm profitability is a first step. Moving beyond that, though, we need to understand what exactly a firm does- and how it makes money. Positioning is more than the selection of an industry – it’s the selection of a business model, of the way in which a firm can ensure competitive advantage. With this perspective, we’ll revisit Amazon, and see the factors that matter in the selection of a strategic position, especially in the context of a shifting industry structure. Add to this the need of any business to position vis-à-vis its competitors (as Amazon needs to position when it competes against Barnes & Noble) and you get a pretty good idea of how successful positioning affects strategic prospects.

Case “Leadership online: Barnes & Noble vs. Amazon.com ”

Readings W. Chan Kim and Renee Mauborgne. “Creating New Market Space”. Harvard Business

Review. 1999. Markides, Chapter 1

May 10th - Session 4: Analysing the Firm’s Resources

In the previous session, we started looking into the firm’s own resources and capabilities, and saw how the positioning of the firm needs to map on to its own strengths. In this session, we will delve deeper into the role of resources and capabilities, and their impact on competitive advantage. How is it that unknown entrants, such as Canon, manage to shake the reportedly unbeatable and entrenched Xerox in copiers? And what is the logic with which firms such as Sony or Matsushita manage their capabilities, in order to build their competitive advantage? What are the principles on which we can base a resource- and capability- based advantage? And how do the components of the “firm-based recipe” fit together?

Case Swatch

Readings C.K. Prahalad and Gary Hamel. “The core competence of the corporation”. Harvard Business

Review. 1990. Cynthia Montgomery: Note on the Analysis of Resources (HBS Note) Markides, Chapter 5 (read); Chapter 4 (skim)

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May 17th - Session 5: Resource Dynamics

Resources, as we saw, are important. But how can you manage them? In a world where the resource’s adherence to the firm is as flimsy as the next best offer, how can you manage to extract some value from them? How does a firm like McKinsey manage the system of its valuable consultants? How does it cope with the challenge of retaining the value that the resources create, and how does it manage the competing demands of creating and appropriating value? Finally, how can you foster a dynamic capability such as knowledge creation?

Case “McKinsey & Company: Managing knowledge and learning”

Readings George Stalk, Philip Evans, and Lawrence E. Shulman. “Competing on capabilities: The new

rules of corporate strategy”. Harvard Business Review. 1992. Michael E. Porter, “What is Strategy?” Harvard Business Review, 1996.

May 19th - Session 6 & 7: Facing a Strategic Challenge: A Multi-media Simulation

(NB: This is a Saturday session, which runs from 10:00 to 17:00, including a 1 hour lunch break)

Acme Bottling, a company on the leading edge of technology, has been badly hit in the marketplace. What’s wrong, and what can you do as a strategist to take them out of the pits and back to the profitability as well as long-term strategic success? A new release of a multimedia simulation will let you apply the tools and frameworks you have seen so far, identify the major strategic issues, propose solutions to the problem, and see the impacts of your recommendations. So get ready to practice your strategic thinking and get feedback on how well you can diagnose a problem, find a solution, and consider the interdependence of strategic recommendations.

Simulation – Material and instructions to be distributed in class and via the Forum

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May 24th - Session 8: Organisational Context

By now, we should know how to analyse the competitive environment, appraise and develop our resources, successfully formulate strategy, and understand the interdependence of strategic choices. What’s next? Well, strategy is all about putting our ideas into practice. In this session, we will follow the efforts of an up-and-coming Sabena employee, Erik Weytjens, as he tries to implement a new strategy. This context will help us think through the challenges of putting strategy into practice in the real-world, and consider how context matters in our effort to bring about strategic change or translate our strategic vision into practice.

Case “Sabena Belgian world airlines: Weytjens’ first assignment” and “Sabena A”

Readings Markides, Chapter 6

May 31st - Session 9: Strategy-Making in Times of Change

Like the Red Queen’s soldiers in Lewis Carroll’s Alice in Wonderland, to survive in relentlessly changing competitive environments, many firms have to continuously change. Yet, beyond the fluff & puff of the change rhetoric, what are the drivers of discontinuous strategic change, and what can we do, concretely, to update our strategy in our never-ending quest for competitive advantage? In this final session, we’ll look at how technological evolution changes the role of strategy, and see what drives companies like IBM to miss the boat, and be left out of the Next Big Thing. We’ll then turn to our favourite “so what do we do about it?” question. We’ll look at strategy process, and examine how we can develop the mechanisms and the context to ensure that we won’t suffer the incumbent’s curse, and how we can avoid being washed away from the next wave of creative destruction.

Finally, we’ll also make one last reprise and review of the themes we saw in the course, and see how they all fit together and what they mean for practice.

Readings Joseph L Bower and Clayton M. Christensen, Disruptive Technology: Catching the Wave,

Harvard Business Review, January-February 1995. Adrian J. Slywotzky, The Profit Zone, HBS Press 1995, Chapter 1. Markides, Chapter 4 (reprise)

June 7th - Session 10: Final Exam

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