San Diego EMBA Arvind Bhambri Theme 4 2014

Competitive Strategy

The purpose of this module in theme 4 is to lay the foundation for an integrative view of strategy analysis and development. The ultimate purpose of a strategist is to create and sustain competitive advantage to create and capture value. Towards this end, a strategist needs, at minimum, to do the following:

 Understand a company’s external environment with sufficient insight to identify valuable opportunities;  Configure the company’s activities to achieve a competitive advantage;  Sustain and renew the company’s competitive advantage in the face of competitive actions; and  Ensure that the company not only creates value but also captures it.

Our discussion of strategy will be spread over two themes: 4 and 8. In theme 4, we will begin with a basic overview of strategy, and introduce generic strategies, activity systems and business models. We will build on these basic concepts in theme 8 with a deeper discussion of industry mapping, competitive advantage, competitor dynamics, corporate scope, and renewal.

The strategy readings and cases in theme 4 are listed below.

Readings:

Can You Say What Your Strategy Is? D. Collis and M. Rukstad HBR R0804E What is Strategy? Michael Porter, Harvard Business Review (HBR 4134) Blue Ocean Strategy, W. Chan Kim and R. Mauborgne (HBR R0410D) Competitive Advantage: The Value Chain and your P&L, Joan Magretta (HBSP 8890BC) Strategic Intent, G. Hamel and C. K. Prahalad (HBR 6657) The Five Competitive Forces that Shape Strategy, Michael Porter, (HBR R0801E) Why the Lean Start-up Changes Everything, Steven Blank (HBR R1305C)

Cases:

Dogfight over Europe: RyanAir (A) (9-700-015) Teva Pharmaceutical Industries (9-707-441) Tesla Motors (9-714-413) Friday, April 25, 2014 8:50 am – 12:10 pm

Elements of Strategy

Competitive strategy is the set of goals, policies, and activities that position a company in its environment. By definition, strategy is not about doing what other companies are already doing. Instead, it is about being different in a way(s) that creates value for a significant group of customers and enables you to capture a fair share of the value that you create.

This case, set in 1986, is a business school classic. It describes Ryanair’s initial launch strategy. Ryanair must compete with established companies like Aer Lingus and British Airways that will likely retaliate against Ryanair. This case gives us a chance to explore Ryanair’s strategy, positioning, and sustainability through a series of cases that we will discuss over two days.

Discussion Questions

1. What is your assessment of Ryanair’s launch strategy? 2. How do you expect Aer Lingus and British Airways to respond? Why? 3. How costly would it be for Aer Lingus and British Airways to retaliate against Ryanair’s launch rather than to accommodate it? 4. Can the Ryan brothers make money at the fare they propose?

Readings:

Dogfight Over Europe: Ryanair (A) (9-700-015) What is Strategy? Michael Porter, Harvard Business Review (HBR 4134) Can You Say What Your Strategy Is? D. Collis and M. Rukstad HBR R0804E Saturday, April 26, 2014 8:50 am – 12:10 pm

Elements of Strategy (2)

RyanAir’s transformation from a company on the verge of bankruptcy to a thriving profitable airline offers a textbook case in strategy development. As you read about Ryanair’s transformation, ask whether the strategic planning process in your company would enable a transformation similar to what happened at Ryanair.

Discussion Questions

1. How did RyanAir go from the brink of bankruptcy to become one of the most profitable airlines in the world? (Try to use frameworks from the four assigned articles for this weekend to gain insights into RyanAir’s turnaround). 2. What are the most serious threats faced by RyanAir at the end of the case? 3. How serious is the threat posed by Go? 4. If you were in Michael O’Leary’s position, what would you do?

Readings:

Dogfight Over Europe: Ryanair (C) (9-700-017) (case will be distributed in class at the end of discussion on Friday) Blue Ocean Strategy, W. Chan Kim and R. Mauborgne (HBR R0410D) Competitive Advantage: The Value Chain and your P&L, Joan Magretta (HBSP 8890BC) Friday, May 9, 2014 1.10 pm – 4.30 pm

Industry Structure and Strategic Positioning (1)

Some of the earliest frameworks for systematic strategic analysis were introduced in 1980 by Michael Porter in the now classic Competitive Strategy: Techniques for Analyzing Companies and Industries. Central to Porter’s approach is the classic 5-Forces framework for assessing industry attractiveness by looking from the outside-in. A counterpoint to Porter’s framework is the inside-out approach made popular by Hamel and Prahalad. We will understand these two fundamental and complementary approaches to strategy by looking at Teva, an Israel based pharmaceutical company.

Key Topics

Industry Structure Competitive advantage

Case: Teva Pharmaceutical Industries, Ltd. 9-707-441

Questions:

1. Why was the pharmaceutical industry one of the most profitable industries in the world through the 1980s? 2. What have been the most important changes in the pharmaceutical industry’s structure during the past two decades? What do the changes imply for the strategy of a Big Pharma company?

3. How did Teva succeed in Israel? Why did such a company emerge in Israel? How did Teva set itself apart from its competitors in Israel?

4. As the CEO of Teva, which markets would you concentrate on developing going forward?

5. As an executive in “big pharma,” what approach would you take to deal with Teva? 6. Where is Teva vulnerable going forward?

Multiple choice closed notes quiz today

Readings: Teva Pharmaceutical Industries, Ltd. 9-707-441 The Five Competitive Forces that Shape Strategy, Michael Porter, HBR (R0801E) Strategic Intent, G. Hamel and C. K. Prahalad (HBR 6657) Saturday, May 10, 2014 1.10 pm – 4.30 pm

Industry Structure and Strategic Positioning (2)

When Tesla debuted its stock on NASDAQ in June 2010, it was the first initial public offering by an American automaker since Ford’s debut in 1956. Today, the stock is soaring at a price above $200 and Elon Musk, Tesla’s CEO, is a celebrity often called the “new Steve Jobs.” We will use the successes and challenges faced by Tesla to go deeper into the central task of a strategist, i.e., understand existing barriers to success and develop creative ways of surmounting them.

Key topics

Industry structure Competitive advantage Business canvas

Preparation questions:

1. What are the structural barriers that have prevented new entrants from succeeding in the automobile industry? 2. In what ways has Tesla overcome these barriers?

3. Do you think that Tesla has achieved a sustainable advantage that will enable it to succeed long term?

4. Would you recommend that Tesla be a niche company or a company with a broad product line attempting to serve multiple market segments?

Readings:

Tesla Motors (9-714-413) Why the Lean Start-up Changes Everything, Steven Blank (HBR R1305C)

Take home case exam will be distributed. Written analyses are to be submitted before 10 am, Monday, May 19, 2014.