Welcome to

RSM 392 Introduction to Strategic Management

Professor Christopher Liu

Introduction and Course Overview

Who am I? (I)

Born in NYC. Wife is Dutch, children speak French. Undergraduate studies

Molecular Microbiology

Washington University in St. Louis (B.A., Biology)

Graduate School

Biology (Ph. D., MIT)

Business Administration (DBA, Harvard Business School)
Networks and Knowledge Production.
Biochemistry, ranging from biophysics to cell biol.

Who am I? (II)

Rotman-University of Toronto
Assistant Professor-Strategy (2010present)

Research on innovation & strategy

How do networks form and evolve?
how the seats you choose will affect your futures

How do networks affect productivity? I collaborate with co-authors at Harvard, MIT-Sloan, NYU, Berkeley, and Dartmouth-Tuck.

Goals of this course:

To think critically and hone decisionmaking skills about strategy To internalize the important, proven strategy tools To develop an appreciation of the strategy process To discuss and debate strategy problems
To give you the TOOLS and frameworks to make insightful recommendations to firms to address the challenges of their industry & competitive environments
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What is strategy?

NOT Operational effectiveness: running the business efficiently and effectively (in a basic way)
This is basic competence.

Strategic positioning: doing different things than your rivals (or doing the same things differently)
How can I be distinctive? Requires specificity: what you do, who your customers are, and how you reach them.

An Illustration: Amazon Kindle (circa 2010)

Lets roll back the clock to 2010

and think about what decisions Amazon made.

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An Illustration: Amazon Kindle (circa 2010)

Kindle 1: Introduced November, 2007

Black and White Screen Download books in 60 seconds. 200 book capacity (250 MB) Sold out in 5.5 hours.
Smaller 1500 book capacity Text-to-speech option. $359 (in Feb09) to $189 in (June10)
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Kindle 2: Introduced February, 2009

Setting the stage: vs. Apple iPad

Introduced Jan. 2010. Tablet PC similar to a BIG iPhone.

vs. Apple iPad

Introduced Jan 10. Tablet PC similar to a BIG iPhone. iBooks application for eBooks, as well as newspaper apps.

Full-color, animated eBook reader

Downloadable Kindle app (for iPad)

Can use the iPad to buy books from the Amazon Kindle store. Access to all volumes available for the Kindle.
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Is Amazon Kindle in trouble (circa 2010)?

To say Apple is about to put a major dent in Kindleworld is an understatement... -EnGadget Apple is taking solid aim at the burgeoning electronic-reader market dominated by the Kindle. Judged solely from a sizzle standpoint: theres no contest. -USA Today For the Kindle, with its six-inch monochrome nontouch screen, the iPad was your basic (full-color) nightmare NYTimes
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What should Amazon do?

This is a real-world scenario.

You need to do something. You need to do something fast. You cant do everything.
(i.e., you need to choose).

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Amazon Response: Kindle 3

Introduced July 10. Pre-orders were completely sold out

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Amazon Kindle Response

The Kindle 3 is ingeniously designed to be everything the iPad will never be: small, light and inexpensive

The Kindles real [vs. iPad] competition is the gaggle of extremely similar, rival e-book readers, all of which use the same E Ink screen technology. certain facts are unassailable: that the new Kindle offers the best E Ink screen, the fastest page turns, the smallest, lightest, thinnest body and the lowest price tag of any e-reader

David Pogue, NYTimes, Aug 26, 2010

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Enter the B&N Nook (June 2011)

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Nook has a touchscreen, but otherwise identical

Same price... Same screen

Size Resolution Speed

Same weight Long battery life Kindle (67%) vs. Nook (22%) mkt share New Kindle is imminent
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What next for Kindle (~2011)?

There are already ~ 8 million Kindles sold. Rumors:

10 inch color screen $200-250 Competing with Nook Color vs. Simple Touch.

What would you do if you managed Kindle?

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Amazon Kindle 2012

Amazons approach to selling the devices is quite different from Apples. Amazon, an online retailer, still makes its money selling the content; Apple profits on its devices. Amazons services are the core of its devices, and the devices enhance Amazons service: a virtuous cycle where Amazon gains an increasing share of consumers wallets, wrote Sarah Rotman Epps, a Forrester Research analyst who specializes in tablets, in a company blog post on Thursday.
NYTimes (September 7, 2012) 19

Amazon Kindle
To identify a strategy, you need to think about who the customer is, what the product is, and what choices the firm is making that support that strategy. (Be really specific!) When making recommendations, you want to take into account the strategy and the choices. Firm informationnot enough! Also need to understand the industry environment.

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Underlying Premise: Financial Performance is driven by macroeconomic conditions, industry structure, and competitive position

Return on assets

6%

-2% 9%

5%

Economic Average

Industry Structure

Competitive Position

Profitability
(data from Anita McGahan) 21

Curriculum
Part 1 Industry Analysis: Porter Five Forces (2), Cola Wars (3)

Economic Average

Industry Structure

Competitive Position

Profitability

Is the Ebook industry attractive?

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Part 2

Competitive Positioning: Airborne Express (4), Ducati (5)

Economic Average

Industry Structure

Competitive Position

Profitability

Within the Ebook industry, how do you compete?

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Part 3

Industry Change: Industry Change (7), Intel (8), Kodak (9)

Economic Average

Industry Structure

Competitive Position

Profitability

For the Ebook industry, how do you adapt to change?

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Part 4

Corporate Strategy: Walt Disney & Pixar (10)

How does the Ebook industry fit into the larger ecosystem?
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Our Goal:
To improve our decision-making skills through careful analysis and active discussion and debate with our peers

Strategy is not easy. Strategy requires understanding abstract concept (in a very precise way) & applying them to practical situations.
It is about making choices based on sound logic. Based on real data and economic reasoning But it is NOT a science.
Involves uncertainty, complexity, data limitations and differences in assumptions.

Therefore, the emphasis of the course, and particularly of class discussion, is on rigorous thinking and learning rather than finding the right answer. Avoid pop strategy

Which sounds good but is not based on sound analysis

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How will this class work?

RSM392 is like an MBA class

In fact, it mirrors core MBA Strategy classes taught at top business schools (i.e., Boston). Class requires lots of work and reading, but emphasizes insightful thought & analysis be prepared EVERY day (let me know if you are not).

You should have seen some of this material before!

But not at this level of sophistication & depth! Unifying and deepen material from disparate subjects is a key goal of the course.
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Expectations(I) What to expect of this class

Goal of course = help you to analyze industry & competitive environments

To explain why some industries yield above average profits. To explain why some firms yield above industry profits.

These tools and frameworks should give you the ability

To make insightful recommendations to firms to address the challenges of their industry & competitive environments.
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Expectations (II) What to expect of me

This is a Discussion-based class!!! I would like to get to know each of you

I am serious about trying to do this You are interesting, talented, and may be able to offer me a job someday* I have ~150 students to get to know this semester

I will try to respond to emails within 48 hours I will try to make this class as interesting and relevant as possible (feel free to help)

I will work very hard to do this (I love Strategy) I also have to do research (or I will get fired*)
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Expectations (III): What to expect of yourselves

I

understand that you are busy & lead complex and interesting lives.
sadly, I cannot make exceptions b/c of this, but I do understand it.

Be

this is a DISCUSSION-BASED class think hard about what you read figure out the essence of what the authors are trying to say think about whether it applies to the real world if you are uncomfortable talking in class, let me know as soon as you can and we will come up with a plan!!
20% of grade depends on in-class contributions! it is essential that you participate
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prepared to contribute in class!

Reiterating my hopes & dreams for class contribution

In each class, I would love to hear from everyone

at least ONE time every class but not more than 3-4 times (special circumstances excepted) because you are interesting! (I am comparatively dull) b/c we try to emulate an MBA-experience b/c the confidence to speak in group situations is very helpful in entry-level jobs b/c incorrect comments have no consequences
unlike entry-level jobs
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Why?

Class Contribution

You will be graded on in-class contributions every day

Our class is about improving your decision-making skills. One of the best ways to do this is by talking about decisions in class.

Good comments count

there is NO PENALTY for comments that do not*

* as long as they are not disruptive

Attendance is essential
zero points for absence absences after 3rd minus points lateness = absence

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Classroom Etiquette

Bring your name card to EVERY class!

This is a discussion-based class. Learn everyones name.

There are NO ELECTRONICS in the classroom

No laptops, smartphones, et cetera. We do not need external information for the discussion. We are simulating a business meeting.
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Expectations (IV): Some expectations of you

All assignments are due at the beginning of class There are no make-ups*
* sorry about this

Cheating/plagiarism is a serious offense! Attendance is essential Seating

please sit close together (to improve quality of discussion) Please do NOT change seats after Class 2

Class participation counts (let me know if you need help!)

respect each other !!!

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Course Administration (I)

Required Materials:
Links to articles & cases are posted on Blackboard Thats all. (no book) There is no readings package.

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Course Administration (II)

Evaluation: Class Contribution* Case Question Hand-in (2) In-class Midterm Exam Final Exam

20% 15% 25% 40%

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Class Structure

We will analyze a new case almost every week. In general, we will start the class with the case discussion which will be ~80-90 minutes

Case discussions will be documented on the board

Then we will debrief the case There may be a closing lecture
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Class Contribution (20%)

Your participation grade is based on: Quality (what you say)
Depth of insight Support (using specific case data, readings, personal experience)

Presentation (how & when you say it)

Relevance Listening Clarity

Frequency (you need to speak up)

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Case Preparation (suggestions)

Read the assigned reading Read the assignment questions for the case. Think about the links between the readings and the case questions. Prepare the case.

Read the exhibits first. Carefully read the case. Understand the basic economics of the firm and its industry. (Whats the transaction?) Take notes as you read and highlight/underline important pieces of information Identify the challenge(s) facing the case protagonist Identify information that you think is relevant to particular assignment questions Assess the situation and formulate a course of action
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Case Preparation (cont.)

Go back to the theoretical reading. How does it apply to the case? If there are any frameworks, use them. Summarize your notes for the case on page 1. Answer the assignment questions. Your answers should be clear, persuasive, and supported by the facts of the case. Be sure to build on whatever frameworks are covered in the theoretical reading. You may want to include frameworks covered in prior sessions.

You will know that you are ready when you would feel comfortable giving the answer to the question out loud in class.
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Case Question Hand-in (15%)

Two individual assignments

One before the mid-term. One after the midterm.

Write up & hand in your answers to the assignment questions for your assigned days case (Due at beginning of class)
Possible cases: Well assign cases in the next class
Coke vs. Pepsi Airborne Express Ducati

1-2 Pages (MAX!), typed, double-spaced, in sentence form.

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Midterm (25%)
In class on October 22 Short answer, multiple choice, truefalse based on cases and course concepts covered as of October 15 (Ducati) More details as we get closer

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Final Exam (40%)

During final exam period (Dec 10-21) Will draw from BOTH case- and noncase based material.

Requires an understanding of the frameworks discussed over the semester.

More details as we get closer.

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First Individual Assignment: due September 17

Write your name. Assume Im a poor reader and include a pronunciation guide. Write the name of one organization you have been a part of. List 3 interesting facts about yourself. Bring a paper copy of this to class.

Read Porter Five Forces (Blackboard)

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Key Dates:

September 17
Choose PERMANENT seats for the semester

Sep 24, Oct 1, or Oct 15

Assignment Question hand-in due

October 22: Midterm

November 4: Final Drop Date

Final Exam Period: Final Exam

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Professor information

Contact Information
Name: Christopher Liu Office: Rotman Central/95 St. George Room 7078 Email: chris.liu@rotman.utoronto.ca Phone: 416-978-5268 URL: http://www.rotman.utoronto.ca/facbios/viewFac.asp?facultyI D=Chris.Liu

Office Hours
Tuesdays 10-12am and by appointment

My teaching schedule
Mon 9-11am Mon 1-3 pm Mon 3-5 pm

Course TAs:
Mohit Gupta; Mohit.Gupta13@Rotman.Utoronto.Ca Bob Wang; Bob.Wang13@Rotman.Utoronto.Ca
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Our Plan
Unit
Introduction Industry Structure Industry Structure Competitive Advantage [Mid-Term] Sustainability & Change Innovation and Entrepreneurship Kindle Porter Five Forces (Lecture) Coke & Pepsi Airborne Express Ducati

Cases

Intel Kodak
Corporate Strategy Conclusion Walt Disney & Pixar Analogies

Next Class

Choose where you want to sit for the remainder of the term. Industry Structure Lecture (read Porter 5 forces article) More details on individual write-ups Dont Forget: Bring your information sheet to turn in at the beginning of class
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End

Thank you and see you next week!

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References

Pankaj Ghemawat & Jan Rivkin, Creating Competitive Advantage Harvard Business School 1998 Pankaj Ghemawat Strategy and the Business Landscape Anita McGahan, Notes on Preparing a Case in press Anita McGahan & Michael Porter, How Much Does Industry Matter, Really? Strategic Management Journal 1998 Michael Porter, What is Strategy? Harvard Business Review, 1996 Brian Silverman (slides 2004) Donald C. Hambrick & James W. Fredrickson, Are you sure you have a strategy? Academy of Management Executive 2005, Vol 19, No 4

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