2nd Term MBA-2016

COMPETITIVE STRATEGY

COURSE OUTLINE

1. Introduction
Senior leaders are responsible for the survival and success of their organization.
Formulating and implementing a successful strategy is, therefore, one of the most
important jobs of the executive team. In this course, we will focus on the
formulation of the strategy for the business of a firm. Competitive Strategy
formulation involves analyzing the industry you are in, determining how to position
your strategic unit within the competitive business environment, and developing
the capabilities to be successful.

Other important aspects of Strategic Management, such as Corporate Strategy

(how to successfully combine different businesses) and Strategy Process (the steps
to translate a formulated business strategy into action) are not covered in depth
by this class, but are rather offered as electives in the second year. Furthermore,
several other second year courses build on this capstone course in Competitive
Strategy such as courses on Competitive Dynamics, Strategy & Competitiveness,
Luxury Companies, Managing Corporate Growth, Globalization & Strategy, Strategy
& Sustainability, Strategy Implementation, Responsible Investment, The Day-to-
Day of a General Manager, the Management of Family Businesses, and Boards of
Directors.

2. Objectives
Thinking strategically is a skill difficult to master. The objective of the
Competitive Strategy course is to push the students to think strategically and
critically in different competitive situations. The course introduces the students to
a coherent framework of Value Creation, Value Capture and Sustainability, and,
develops related concepts and critical insights that are used to analyze the
competitive environment of a firm and its internal strengths and weaknesses.

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3. Learning Outcomes

1. Know and distinguish the different stages of the strategy process

2. Relate business strategy to functional strategies and corporate strategy
3. Evaluate the structural determinants of industry profitability and their
dynamics
4. Perform a comparative economic analysis across different industries
5. Understand what is competitive advantage
6. Perform value analysis
7. Project how changes in the external environment might affect the profitability
of a firm
8. Determine the optimal scope of a business
9. Analyze the drivers of value creation and value capture
10. Evaluate the sustainability of competitive advantage
11. Perform competitors’ analysis
12. Evaluate the external, internal and dynamic consistency of a firm

4. Competences

Gerneral competences

 Critical thinking
 Team work and communication
 Decision making
 Judgment under uncertainty
 Business planning

Specific competences

Develop strategic and tactical thinking skills for the general manager to:
 Formulate a strategy for a business to create and sustain profitability
 Decide the competitive position of the firm, in terms of its vertical and
horizontal integration, market segment in which it operates and the market
geographical scope
 Develop a successful plan to enter into a new market, or to understand when it
is optimal to exit
 Operate a business consistently with the external constraints imposed by the
industry, and shape the future environment of the firm
 Develop rational tactical plans to successfully operate in a competitive market
and overcome the competition
 Develop a plan to build and develop internal competences and a consistent
system of critical tasks to create sustainable competitive advantage
 Criticize and highlight the limitations of any given business strategy

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5. Content

The course consists of the following modules:

I. Introduction
The purpose is to become familiar with a number of strategy concepts.
II. Industry value system
We focus on how the industry and the environment affect the performance of
an individual business. The industry will shape the environment, and it
determines the initial conditions within which the business will compete.
Understanding the pressures of industry characteristics on the value of the
business is a first step in formulating a strategy that attempts to isolate the
business from these pressures in the future.
III. Competitive strategy: The building blocks
Here we take a closer look at the business itself. We define the competitive
position of a firm, analyze its activities and capabilities and determine which
combinations of positioning, activities and capabilities result in a sustainable
competitive advantage.
IV. Competitive dynamics
In this module, we turn our attention to the dynamic aspects of strategy
formulation and specifically competitive interaction. Understanding your
competitors’ moves and reacting appropriately is important. However, making
strategic decisions and anticipating competitors’ reactions is crucial for the
viability of your business.
V. Contemporary challenges in competitive strategy
Change and uncertainty are always present when formulating a business
strategy. In this module we explicitly discuss how some current challenges such
as being a global player, creating new market spaces and issues of sustainable
business affect the competitive strategy formulation today. We show that the
framework and tools provided throughout the course remain helpful for this
task.

6. Methodology

The course presents the framework and concepts through the discussion and
analysis of concrete business situations in recent cases (60%), interactive lectures
(10%), in-class exercises and presentations (15%) and a simulation exercise (10%).
The concepts are integrated into our conceptual framework and applied in a
course project. In addition, guest speakers will comment on their personal
experience in formulating and implementing a competitive strategy in their
businesses. Required readings (Technical notes, HBR, California Management
Review, etc.) are included in the course packet and detailed in the program
below.

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7. Evaluation

Grading type Weight Evaluation elements and learning outcomes

- effectively communicate the analysis of the underling logic of value
capture/value creation observed in different companies object of the
analysis (LO 6, 9, 10)
- engage in an open constructive dialectic process to expose the interplay
Participation 25% between external and internal drivers of firms' performance (LO 3, 4,
12)
- offer real-time peer feedback on classmates’ strategic analyses utilizing
the frameworks and the concepts learned in class, thus showing
understanding and dominance of class content (LO 3, 8, 9)
- team-based strategic analysis of two real cases. The evaluation is based
on the ability of the team to highlight the criticalities of the case, and
Two team reports 20% to successfully apply the strategy tools and frameworks in a succinct
manner in the form of a short essay/executive summary (LO 1, 2, 5, 8,
11)
- individual evaluation of students’ ability to analyze a very recent
business case from a strategic point of view. The exam format is a three
hours open-internet case analysis in the form of a brief essay. Students
are required to collect, synthesize and highlight relevant information,
Midterm exam in-class 25% leverage and apply the value creation/value capture framework
developed in the course, analyze the level of attractiveness of an
industry and offer a precise strategic plan for the sustainable future of
the company (LO 2, 3, 6, 7, 8, 9, 10, 11, 12)
- team-based strategic analysis of a chosen business problem. The team is
required to effectively formulate a strategy (analysis &
recommendations) for a business that will shape the future environment
Final project 30% of the firm and will aid the firm with its ongoing challenges. The team is
asked to communicate their strategic plan effectively in a 15-minutes in
class PowerPoint presentation, thus not only evaluating the quality of
their analysis but also the ability to effectively communicate it (all LO).

Participation

Strategic thinking is best learned through practice and use of strategic concepts.
The cases we will study are about specific business situations; they are an
opportunity to both apply the concepts we discuss in class as well as further
develop our ability to think strategically about complex business problems.
Discussions are an important part of the course, which makes it imperative that
everyone attempts to regularly contribute to case discussions. Preparation for each
class should be thorough and consistent from class to class. This includes reviewing
the assigned readings and cases and answering all the discussion questions for each
case.

Because of the course emphasis on case analysis, the major and important part of
your learning in this course will take place in the classroom. Participation grades
are a function of your class contribution. Repeating comments that other students
have already made or missing class will obviously not add to your participation
grade. In class participation, I value quality above quantity. Comments should try
to aim at helping us understand the issues at hand while developing arguments in
more depth.

Team reports

During the course, each team will prepare two team reports on assigned cases and
one exercise on the Solar Power mini-case.

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The team case reports should not exceed 1,000 words or they won’t be graded.
This does not count supplementary exhibits, figures, or tables that can be
appended to the text. The discussion questions provided for each case should
provide the framework within which the case is analyzed. This does not preclude
the inclusion of additional issues that a group wishes to discuss, but the questions
provided should be answered. In your write-ups, be sure to combine your analysis
of the case with the conceptual material in the course. The write-up should be
based on quantitative and qualitative information from the case.

More information about the Solar Power mini-case will be provided before
February 9th.
The team reports and the Solar Power analysis should be posted as an assignment
on IESE’s Virtual Campus no later than 10PM on the evening before the class
session in which the case is to be discussed.

Midterm exam

There will be an in-class midterm examination on the concepts developed during

the first half of the course. The exam will consist of a short reading and related
questions to evaluate how you apply the developed framework. The midterm has
been scheduled by the MBA office for Friday Feb 13th 2015.

Final project

The course project replaces the final exam. The central theme of the course
project is the analysis of the competitive strategy of a specific business that you
select. The precise content of the project is up to you, although it is expected
that the conceptual material of the course will provide the structure for the
analysis. The greater part of the resulting output should consist of the analysis of
the situation, rather than a passive recounting of descriptive information. Class
cases are not a good model for projects because they are deliberately purged of
all the analysis.

Course project rules

1. The project is a group work with your assigned team.

2. Each team will post on Virtual Campus a 1-page proposal about the company
they would like to analyze by January 31th, 2015. In the proposal you should
explain why you think the company is interesting to analyze, how you will
develop your analysis, and what data you have available, including contacts to
interview if any.
3. The team work is handed in as a consulting presentation at the end of the
term. Please post the presentation on Virtual Campus. The maximum length is
15 slides. You can use a separate Word document to write explanatory notes
(maximum 1500 words, excluding exhibits). Remember that in your
explanations, quality counts and quantity does not.
4. All teams will present their work during the last two sessions of the course.
The presentations should last 12 minutes sharp. If you wish, in the
presentation you might use a subset of the 15 slides you have handed in.

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8. Course Outline

MODULE I: INTRODUCTION

Session 1
What is Strategy?

Strategy Capsule: Madonna

Reading: Porter M.E. 1996. What is Strategy? HBR (November-December): 61-78

MODULE II: INDUSTRY VALUE SYSTEM

Session 2
Building and Leveraging Market Power: Tools for Industry Analysis

Case: HBS-9-711-462 Cola Wars Continue: Coke and Pepsi in 2010

Assignment Questions:

1. Why is the soft drink industry so profitable?

2. Compare the economics of the concentrate business to the bottling
business: Why are they so different?
3. How has the competition between Coke and Pepsi affected the
industry's profits?
4. Can Coke and Pepsi sustain their profits in the wake of flattening
demand and the growing popularity of non-carbonated drinks?

Reading: Porter M.E. 2008. The Five Competitive Forces That Shape Industry
Competition HBR (January 2008): 78-93

Session 3
More Than a Product: Understanding the Industry Value System

Case: HBS-9-712-490 Apple Inc. in 2012

Assignment Questions:

1. Historically, what were Apple’s major competitive advantages?

2. Analyze the structure of the personal computer industry. Why did Apple
struggle historically in PCs?
3. Was Steve Jobs able to solve Apple’s long-standing problems? How
would you judge Apple’s competitive position in PCs, MP3 players,
smartphone and tablets?
4. What advice would you offer to the new CEO Tim Cook?

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MODULE III: COMPETITIVE STRATEGY: THE BUILDING BLOCKS

Session 4
Turnaround: Sustaining Value Creation (and Capture)

Case: DG-1507-E Ducati: In Pursuit of Magic (A)

Team Assignment (for all teams):

Be ready to present your proposal for the strategic options for Ducati along with an
action plan on how to implement it (question 3 below) in class. Be as specific as
possible. Prepare one slide with your preferred option, the rationale, and the
action plan and email it to me by 10PM the day before the class.

Assignment Questions:

1. In the last 10 years, how has Ducati created and captured value?
2. What should Minoli do to fix the immediate problems?
3. Think about possible strategic options for Ducati.

Reading: Grant (2010), Chapter 10, “Differentiation Advantage”

Session 5
Growth, Growth, Growth? Building a Sustainable Competitive
Advantage

Case: HBS 9-794-024 Wal-Mart Stores, Inc.

HBS 9-711-546 Wal-Mart update, 2011

Note: Read the case "Wal-Mart Stores, Inc." up to p. 11 (until the section on Sam’s
Clubs) and skim the pages from p.11 until p.14 so that you understand the
evolution of Wal-Mart and the different formats. Read the entire case "Wal-Mart
update, 2011".

Assignment Questions:

1. What are Wal-Mart's competitive advantages? What explains the

important differential between the income statement of Wal-Mart and
other firms in the industry? This requires looking at the numbers in
1993. Fill out the slide provided on Blackboard to help you focus on
the important differences.
2. How sustainable are those advantages?
3. How transferable are those advantages as Wal-Mart moves into new
formats and especially into new international locations?

Reading: Grant (2010), Chapter 9, “Cost Advantage”

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Session 6
Cost Advantage (I)

Case: HBS 9-700-115 Ryanair (A)

HBS 9-700-116 Ryanair (B) (distributed in class)

Individual Assignment:
You will receive a link to a web-based survey with the question below. Please
answer by and no later than 10PM the day before the class.

What is your best estimate of Ryan Air’s operating profit per passenger on the
London-Dublin route, with the proposed fare of 98 Irish Pounds?

Assignment 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 accommodate it?
4. Can the Ryan brothers make money at IPound 98 fare they propose?

Session 7
Cost Advantage (II)

Case: HBS 9-700-117 Ryanair (C) (distributed in class)

Assignment Questions:

1. How did Ryanair become one of the most profitable airlines in the world?
2. What are the most serious threats that Ryanair faces today?
3. What should Michael O’Leary do?

Reading: “Sustaining competitive advantage”, Technical Note

PROJECT PROPOSAL DEADLINE

Session 8
Dual Advantage: Low Cost and Differentiation?

Case: HBS 9-705-708 Samsung Electronics.

Assignment Questions:

1. What recommendation would you make to Chairman Lee regarding

Samsung’s response to the threat of large-scale Chinese entry?

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2. What were the sources of Samsung’s cost advantage in DRAMs in 2003?

3. What were the sources of Samsung’s price premium in DRAMs in 2003?

Reading: “Value creation and value capture”, Technical Note

Session 9
Team Exercise: Solar Power

Case: Solar Power mini-case (to be distributed)

Session 10
Competitive Strategy: Synthesis and Discussion

In case there is a specific topic you want to hear more about in the review
session, please send me an email, I will do my best to accommodate your
requests

February 13th MIDTERM EXAM (Rooms TBA)

MODULE IV: COMPETITIVE DYNAMICS

Session 11
Guest Speaker: Mr. Andrea Cuomo of STMicroelectronics & 3Sun

Session 12
Coordination and Competition

Wintel Simulation

Session 13
Coordination and Competition

Wintel Simulation debriefing

Session 14
Entry Strategies: Playing the Game of Value

Case: HBS 9-794-079 Bitter Competition: The Holland Sweetener Co. vs.
NutraSweet

Individual Assignment:
You will receive a link to a web-based survey with the questions below. Please
answer by and no later than 10PM the day before the class.

“What price (X$/lb) do you expect NutraSweet to set as a reaction to the entry into
this market by HSC? Do you consider this an accommodating price, or an aggressive
price?”

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Assignment Questions:

1. What do you think about HSC entry in the aspartame business in

Europe and Canada? Is it attractive for HSC?
2. How do you expect NutraSweet to react?

Reading: “Competitive Dynamics”, technical note

MODULE V: CONTEMPORARY CHALLENGES IN COMPETITIVE STRATEGY

Session 15
Global Competition

Case: HBS 9-706-488 Philips Medical Systems in 2005

Assignment Questions:

1. How strategically necessary were the acquisitions Philips Medical

Systems made between 1998 and 2001? How well has Philips performed
since then?
2. Compare Philips Medical Systems strategy with the strategy of GE
Healthcare and Siemens Medical Solutions.
3. How might Philips Medical Systems significantly improve its position?

Session 16
Strategy and Social Responsibility

Case: HBS 9-711-020 Patagonia

Assignment Questions:

1. Evaluate Patagonia’s strategy.

2. How important to Patagonia’s strategy is its environmental position?
3. How fast can Patagonia grow? How fast should it grow?
4. How would Patagonia’s strategy differ if the company were publicly
held?

Reading: “The social responsibility of business is to increase its profits”, Milton

Friedman,
The New York Times Magazine, September 13, 1970

Session 17
Creating New Market Spaces: Blue Ocean Strategy

Case: Cirque du Soleil (video case to be shown in class – i.e. nothing to prepare
ahead of time)

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Reading: “Blue Ocean Strategy: from theory to practice”, Chan Kim & Renee
Mauborgne,
California Management Review, (Winter 1999): 8-32

Session 18
Closing discussion

Session 19
Course project presentations I

Session 20
Course project presentations II

9. Bibliography

For students who wish to expand their background in strategy, I recommend the
following books as a secondary source:

 Strategy and the Business Landscape, by Pankaj Ghemawat, 3rd Edition,

Prentice Hall, 2009.

The book introduces students to the fundamental concepts and principles of

strategy. The text reflects current academic thinking and management
practice, and gives students the tools they need to formulate and implement
strategies in order to enhance the performance of their organizations.

 Contemporary Strategy Analysis, by R. M. Grant, 7th Edition, Blackwell

Publishing, 2010.

 Foundations of Strategy, by R.M Grant and J. Jordan, Wiley Publishing, 2012

These books offer a contemporary yet historically grounded perspective on the

field of strategy, combining up-to-date academic thinking with examples and
insights drawn from consulting.

If you wish to have additional readings, of general interest or related to specific

strategy topics of your interest, don’t hesitate to check with me and I will be
happy to recommend additional sources to you.

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