Project assignment (section c)

INSTITUTE OF MANAGEMENT TECHNOLOGY, NAGPUR
PGDM - III (2013-15) Term-IV: (Sections C & D) STRATEGY FORMULATION
Faculty: Dr. Vikramaditya Ekkirala
Group Project: Evaluation Component: 15% Weightage
Group Project assignment comprises of class presentation (8%) and written report (7%) on the topics/questions/analytical problems assigned to the respective teams.
A) Class Presentation by Student Teams (8% weightage):
1. Each team is required to make a class presentation for 30 minutes on the topics/questions/analytical problems allotted by the Faculty. The presentations shall be made in session numbers 18, 19 & 20 of Strategy Formulation course as per the sequence provided at the end of these instructions. All members of a team should be present for their respective team’s presentation. Team- wise list of topics is provided herewith along with questions to be addressed under each topic. Your presentation should address these issues, questions and data requirements as the case may be.
2. The first slide of your presentations should contain the Topic, Team No., and Names of team members contributing to this assignment along with their roll numbers.
3. All figures /diagrams appearing in the presentation should be appropriately captioned, numbered and the sources mentioned below each of tables/diagrams.
4. All the members of the team shall contribute to this project and those not making any/adequate contribution shall not be entitled for marks for this component.
5. Copying from any source /using directly downloaded material will attract zero marks for this component in addition to other penalties as per the Institute’s policy. In case any material submitted/presentation made by any team is identical to the material/ presentation of any other team in your section or in the other section of this course, both the teams shall be liable for actions under the anti-plagiarism clauses.
6. A soft copy of the presentation should be submitted to the Faculty by each team at any time before the commencement of session No. 17 of Strategy Formulation course during office hours. The soft copy of the presentation may be submitted by e-mail or in person. Attachments or supporting material for your presentation which cannot be sent by e-mail should be submitted on a CD or may be brought to the faculty on a portable device / pen drive for copying the same by the faculty. Presentations submitted after this deadline shall not be accepted or considered for presentation and evaluation. Presentations cannot be modified after the submission of soft copies (as above) and the same submitted PPTs should be used for presentation.
B) Written Report submission by Student Teams (7% weightage):
7. Each team is required to submit a report on the topics/questions/problems for analysis assigned by the faculty to respective teams duly complying with the following stipulations and specifications:

PGDM (2013-15) Term-IV: Sections C: Project Assignment 2
8. The report should be type written on A4 size paper in MS Word format with 1” margin on all sides. Uniform formatting pattern of page size and font size with 1.5 line spacing should be maintained. All pages (excluding the cover/Title page) should be serially numbered and the report should not contain any hand-written material. Contents should be provided at the beginning. Unnecessary blank spaces should NOT be left in any of the pages of the report.
9. The Title page of the report should contain the details of your section, team number and the names and roll numbers of team members contributing to this project assignment, in addition to other details as shown in the format given hereunder. The text of each question/topic/problem of analysis should be mentioned before the start of their respective solutions/answers. Appropriate sub-headings may be provided as needed.
10. Figures and/or diagrams given in the report should be captioned, numbered, indicating their respective source. A separate list of figures/diagrams should be provided in the contents page.
11. Zero marks will be awarded for the entire evaluation component to all members of teams indulging in plagiarism / academic dishonesty, in addition to other actions in accordance with Institute’s policy and examination guidelines.
12. The written report should be your original work and the sources of information should be given in the References at the end of the report. A hard copy of the report (along with a soft copy of the same) should be submitted to the Faculty by each team, during office hours on any date before the commencement of the session No. 17 of Strategy Formulation course without fail. Soft copies of reports may be sent by email to the Faculty. Reports submitted late will not be accepted and will not be considered for class presentation and evaluation. All the members of the team should contribute to the assignment and those not making any/adequate contribution shall not be entitled for marks for this assignment.
13. Presentation schedule:
Section
Team No.
Session No.
C
C-1
18
C-5
18
C-2
19
C-4
19
C-3
20
C-6
20
Dr. V. Ekkirala
Faculty – Strategy Formulation
Sections: C & D

Format for Title Page of Project Report:
Institute of Management Technology.
Nagpur
PGDM (2013-15) Term-IV
STRATEGY FORMULATION
Project Assignment Report
Submitted to Course Instructor:
Dr. Vikramaditya Ekkirala
On: (Date) *
By Team No._____ (Mention the team number) Section: C
Members (Names):
Name – Roll No.*
Name – Roll No.*
Name – Roll No.*
Name – Roll No.*
Name – Roll No.*
* Please write actual date of submission and the names & roll nos. of team members, in the space earmarked.
(BLANK SPACE for evaluation notes)
Do not write anything here

TOPICS / QUESTIONS / ANALYSIS
Team No.1
1. From the table given below, select a high profit industry and a low profit industry. Given the structure of your selected industry, use the five forces framework (Porter) to explain why profitability has been either high or low.
Industry
Median ROE
1999-2007 (%)
Leading Companies
Household & personal products
26.0
P&G; Kimberley-Clark; Colgate-Palmolive;
Pharmaceuticals
21.0
Pfizer, Johnson & Johnson; Merck
Petroleum
20.1
ExxonMobil; Chevron, ConocoPhillips
Tobacco
19.7
Altria, Reynolds American, Universal
Food consumer products
19.5
PepsiCo; Sara Lee; Conagra
Securities & investment banking
18.4
Morgan Stanley; Merrill Lynch; Goldman Sachs
Mining, crude oil production
18.0
Occidental Petroleum; Devon Energy
Medical products and equipment
17.7
Medtronic; Baxter International
Beverages
17.2
Coca-Cola; Anheuser-Busch
Food services
16.6
McDonald’s; Yum Brands
Scientific, photographic, and control equipment
15.6
Eastman Kodak; Danaher; Aligent
Diversified financials
15.5
General Electric; American Express
Commercial Banks
14.8
Citigroup; Bank of America
Apparel
14.4
Nike; VF; Jones Apparel
Electronics, electrical equipment
14.3
Emerson Electric; Whirlpool
Oil & gas equipment and services
14.3
Halliburton; Baker Hughes
Computer software
14.0
Microsoft; Oracle; CA
Aerospace and defense
13.9
Boeing; Untied Technologies; Lockheed Martin
Specialty retailers
13.8
Home Depot; Costco; Lowe’s
Chemicals
13.8
Dow Chemical; DuPont
Computers, office equipment
13.5
IBM; HP; Dell Computer
Healthcare
13.1
United Health Group; WellPoint; HCA; Medco
Industrial & Farm equipment
13.1
Caterpillar; Deere; Illinois Tool Works

Hotels, casinos, resorts
12.7
Marriott International; Harrah’s Entertainment
Publishing, printing
12.5
R.R. Donnelley & Sons; Gannett
Engineering, construction
12.4
Flour; Jacob’s Engineering
IT services
12.4
EDS; Computer Sciences; Science Applications International
General merchandisers
12.3
Wal-Mart; Target; Sears Holdings
Trucking, truck leasing
12.2
YRC Worldwide; Ryder System
Metals
11.8
Alcoa, U.S. Steel; Nucor
Wholesalers; food and grocery
11.3
Sysco; Supervalu; CHS
Energy production
11.2
Constellation Energy; ONEOK
Pipelines
11.2
Plains All-American Pipeline; Enterprise Products
Packaging & containers
10.9
Smurfit-Stone Container; Owens-Illinois
Automotive retailing and services
10.7
AutoNation; United Auto Group
Utilities: gas & electric
10.6
DU.K.e Energy; Dominion Resources
Food and drug stores
10.6
Kroger; Walgreen; Albertson’s
Furniture
10.4
Leggett & Platt; Steelcase
Real estate
9.9
Cendant; Host Marriott; Simon Property Group
Building materials, glass
9.9
Owens Corning; USG; Armstrong Holdings
Insurance: property and casualty
9.5
American Intel. Group; Berkshire Hathaway
Motor vehicles and parts
9.3
GM; Ford; Johnson Controls
Insurance: life & health
9.1
MetLife; New York Life
Forest & paper products
7.3
International Paper; Weyerhaeuser
Food production
6.5
Archer Daniels Midland; Tyson Foods
Semiconductors and electronic components
6.2
Intel; Texas Instruments; Sanmina-SCI
Network and communications equipment
5.9
Motorola; Cisco Systems; Lucent
Telecommunications
5.8
Verizon; AT&T; Sprint-Nextel
Entertainment
2.7
Time Warner; Walt Disney; News Corp.
Airlines
(12.6)
AMR; UAL; Delta Airlines
Note: Median ROE for each industry averaged across the seven years. Industries with five or fewer firms were excluded. Also omitted were industries that were substantially redefined during 1999-2007.
Source: Data from Fortune 1000 by industry.

2. The leading companies in the online travel agency industry are Expedia, Travelocity (which owns lastminute.com), Orbitz, Priceline, Cheaptickets and a host of others. The online agents compete both with traditional travel agents (American Express, Thomas Cook, Carlson) and direct online sales by airlines, cruise lines and car rental companies. Their biggest business is selling airline tickets, where they employ the services of computerized airline reservation systems such as Sabre, Amadeus, Worldspan and Galileo. Use Porter’s five forces framework to predict the likely profitability of the online travel agency industry over the next ten years?
3. In recent years Google has expanded from internet search across a broad range of internet services, including email, photo management, satellite maps, digital book libraries, blogger services and telephony. To what extent has Google’s strategy been built upon a common set of resources and capabilities rather than specific customer needs? What are Google’s principal resources and capabilities?
4. When Porsche decided to enter the SUV market with its luxury Cayenne model, it surprised the auto industry by locating its new assembly plant in Leipzig in eastern Germany. Many observers believed that Porsche should have located the plant either in central or eastern Europe where labor costs were very low, or (like Mercedes and BMW) in the US where it would be close to its major market. Using the criteria outlined in the following figure, can you explain Porsche’s decision?

5. During 1984-88, Michael Eisner, the newly installed CEO of Walt Disney Company, successfully exploited Disney’s existing resources to boost profitability (see the information given below). During the last eight years of Eisner’s tenure (1998-2005), however, profitability stagnated and share price declined. To what extent did Eisner focus too much on exploiting existing resources and not enough on developing Disney’s capabilities to meet the entertainment needs of a changing world?
Resource utilization: Revival at Walt Disney
In 1984, Michael Eisner became CEO of the Walt Disney Company. Between 1984 and 1988, Disney’s sales revenue increased from $1.66 billion to 3.75 billion, net income from $98 million to $570 million and the stock market’s valuation of the company from $1.8 billion to $10.3 billion. The key to Disney’s turnaround was the mobilization of its considerable resource base. Prominent among Disney’s underutilized resources were 28000 acres of land in Florida. With the help of Arvida Corporation, a land development company acquired in 1984, Disney began hotel, resort, and residential development of these land holdings. New attractions were added to the Epcot Center, and a new theme park, the Disney-MGM Studio Tour, was built. Disney World expanded beyond theme parks into resort vacations, the convention business, and residential housing. To exploit its huge film library, Disney introduced videocassette sales of Disney movies and licensed packages of movies to TV networks. The huge investments in the Disney theme parks were more effectively exploited through heavier marketing effort and increased admission charges. Encouraged by the success of Tokyo Disneyland, Disney embarked on further international duplication of its US theme parks with Euro Disneyland just outside Paris, France. A chain of Disney Stores was established to push sales of Disney merchandise. The most ambitious feature of the turnaround was Disney’s regeneration as a movie studio. Eisner began a massive expansion of its Touchstone label, which had been established in 1983 with the objective of putting Disney’s film studios to fuller use and establishing the company in the teenager and adult markets. Disney studios doubled the number of movies in production. In 1988, it became America’s leading studio in terms of box office receipts. Studio production was further boosted by Disney’s increasing TV presence, both through the Disney Channel and programs for network TV. Above all, the new management team was exploiting Disney’s most powerful and enduring asset: the affection of millions of people of different nations and different generations for the Disney name and the Disney characters.

Team No. 2
1. During 2007-09, the Nintendo Wii established leadership over Sony PS3 and Microsoft Xbox360 in the market for video game consoles. Unlike Sony and Microsoft, Nintendo is completely dependent upon video games industry for its revenues. How might Nintendo use the competitor analysis framework outlined in the following figure to predict the likely reactions of Sony and Microsoft to its market success?
2. The major forces shaping the business environment of the fixed-line telecom industry are technology and government policy. The industry has been impacted by fiber-optics (greatly increasing transmission capacity), new modes of telecommunication (wireless and internet telephony), deregulation, and privatization. Using the five forces of competition framework, show how each of these developments has influenced competition in the fixed-line telecom industry.
3. In 2006, Disney completed its acquisition of the film animation company Pixar for $7.4 billion. The high purchase price reflected Disney’s eagerness to gain Pixar’s animation capabilities, its talents (animators, technologists and storytellers) and its culture of creativity. What risks does Disney face in achieving the goal of this acquisition?

4. With reference to the following figure, identify a “sheltered industry” (i.e. one that has been subject to little penetration either by imports or foreign direct investment). Explain why the industry has escaped internationalization. Explore whether there are opportunities for profitable internationalization within the industry and, if so, the strategy that would offer the best chance of success.
5. The following figure implies that stable industries where firms have similar resources and capabilities, offer less opportunity for competitive advantage than industries where change is rapid and firms are heterogeneous. Think of an example of each of these two types of industry. Is there any evidence that inter-firm profit differences are wider in the more dynamic, heterogeneous industry than in the more stable, homogeneous industry?

Team No. 3
1. Given the following profile of Volkswagen’s resources and capabilities, what strategy recommendations would you offer to Volkswagen?
Note: a) Both scales range from 1 to 10 (1= very low, 10= very high). b) VW’s resources and capabilities are compared with those of GM, Ford, Toyota, DaimlerChrysler, Nissan, Honda, Fiat, and PSA, where 5 represents parity. The ratings are based on subjective judgment
Comments:
Resources:
R1-Fianance: Credit rating is above average for the industry but free cash flow remains negative
R2-Technology: Despite technological strengths, VW is not a leader in automotive technology
R3-Plant & equipment: Has invested heavily in upgrading plants
R4-Location: Plants in key low-cost, growth markets (China, Mexico, Brazil) but German manufacturing base is
very expensive
R-5-Distribution: Geographically extensive distribution with special strength in emerging markets. Historically
weak position within US.
R6-Brands: VW, Audi, Bentley and Bugatti are strong brands but, together with Skoda and Seat, VW’s brand
portfolio lacks coherence and clear market position.
Capabilities:
C-1: Product development: Traditionally weak. Despite a few big hits: Beetle (1938), Golf & Passat (1974),
Vanagon (1979), VW still not an industry leader in new product development.
C-2: Purchasing: Traditionally weak – strengthened by senior hires from Opel and elsewhere

C-3: Engineering: The core technical strength of VW
C-4: Manufacturing: A high cost producer, but struggles to attain above average quality
C-5: Financial management: Has traditionally lacked a strong financial orientation
C-6: R & D: Despite several technical strengths, VW is not a leader in automotive innovation
C-7: Marketing & Sales: Despite traditional weakness in recognizing and meeting customer needs in different
national markets, VW has increased its sensitivity to the market, improved brand management, and
managed its advertising and promotion with increasing dexterity.
C-8: Government relations: Important in emerging markets
Appraisal of Volkswagen’s Resources and Capabilities
2. In August 2006, Rupert Murdoch’s News International announced its intention of launching a free evening newspaper, The London Paper, to challenge Associated Newspapers’ London Evening Standard (daily sales 390000). Given that the Evening Standard was already believed to be loss making, the new competition could be fatal for the paper. What steps might Associated Newspapers take to deter News International from launching its new paper, and it it goes ahead with the launch, what would Associated Newspapers’ best response be?
3. Illy, the Italian-based supplier of quality coffee and coffee-making equipment, is launching an international chain of gourmet coffee shops. What advice would you offer Illy for how it can best build competitive advantage in the face of Starbucks’ market leadership?

4. With reference to the following table, what characteristics of national resources explain the different patterns of competitive advantage for the U.S. and Japan?
Note: Revealed comparative advantage is measured as: (Exports less Imports)/ (Exports + Imports)
Source: OECD.
5. Trevor Baylis, a British inventor, submitted a patent application in November 1992 for a wind-up radio for use in Africa in areas where there was no electricity supply and people were too poor to afford batteries. He was excited by the prospects for radio broadcasts as a means of disseminating health education in areas of Africa devastated by AIDS. After appearances on British ad South African TV, Baylis attracted a number of entrepreneurs and companies interested in manufacturing and marketing his clockwork radio, however, Baylis was concerned by the fact that his patent provided only limited protection for his invention: most of the main components—a clockwork generator and transistor radio—were long established technologies. What advice would you offer Baylis as to how he can best protect and exploit his invention?
Team No. 4
1. To what extent are the seven cost drivers given below relevant in analyzing the costs per student at your business school? What recommendations would you make to your Dean for improving the cost efficiency?

2. What do you think are key success factors in:
i. Pizza delivery industry?
ii. The investment banking industry?
3. Apple has been successful in dominating the market for both MP3 players with its iPod and for music downloads with its iTunes service. Can Apple sustain its leadership in these markets? Why and how or why not?
4. The following table shows that:
a) Patents have been more effective in protecting product and process innovations in drugs and medical equipment than in food or electronic components
b) Patents are more effective in protecting product innovations than process innovations.
Can you suggest why? Can you offer any other analytical insights from the following table?

Source: Cohen, Nelson & Walsh, NBER working paper W7552,
5. Read the following perspectives. Steve Rosenbush argues that integration between media content and media distribution companies (and specifically between Disney and Comcast) is strategically advantageous. John Kay suggests that there is little need for common ownerships between distribution channels and the content that they carry. Explain the arguments of each. Who do you agree with? As more content is being viewed via the internet and on mobile devices, how does this affect the arguments?
Vertical Integration in the Media Sector:
Considerable vertical integration has occurred between content companies (film studios, music publishing, and newspapers) and distribution companies (TV broadcasting, cable, satellite TV, telecom providers). News Corp. has expanded from newspapers into movie production (Twentieth Century Fox), broadcast TV (Fox), satellite TV and other sectors of the media business; Disney acquired TV broadcaster ABC; Viacom, formerly a cable company, acquired Paramount and DreamWorks; GE’s NBC Universal combines studio production with cable and broadcast TV distribution; and AOL merged with Time Warner, a leading magazine, film, and music company. In 2004 Comcast, America’s biggest cable operator, made a $54 billion hostile bid for Walt Disney Company. Does vertical integration between media content and media distribution create or destroy value? Here are two contrasting views:

Steve Rosenbush, (Business Week, February 11, 2004): The economics of the TV-distribution may have been under siege for some time. That’s why many of the business’ smartest operators like Liberty media’s John Malone and Viacom’s Sumner Redstone, started shifting their investments into media years ago. Under Redstone, Viacom has been transformed from a cable operator into a media hothouse that includes everything from MTV to CBS. Buying Disney shouldn’t be a surprise. It’s the logical next step”. Contrast CEO Brian Roberts said at his February 11 press conference announcing his bid for the Mouse House. It isn’t enough to be just a media company, either. Most content providers benefit from having a certain amount of distribution, which helps lower their costs. That’s why, in the future, media and communications will be dominated by hybrids such as News Corp. which recently acquired satellite-TV operator DirecTV. Comcast’s Roberts has embraced this future. The question now is whether Disney CEO Michael Eisner – who spurned an offer for a friendly deal – can accept the same future. For decades Disney and other programmers have held the balance of power in distribution deals. That’s changing. The cable-TV business isn’t just a collection of small family companies running regional outfits anymore. Comcast, which began life in Tupelo, Mississippi, in 1963, now has national reach. It has greater market cap than Disney. And it’s competing with satellite-distribution companies like DirecTV also national in scope. Now that DirecTV is under Rupert Murdoch’s control, it would be folly for Disney to pretend that it can still compete without a distribution partner of comparable stature. Comcast fits the bill.
John Kay (Financial Times, March 3, 2004): Media content needs delivery, and vice versa. And the same channels can often be used to disseminate text, images and music. This discovery was made at least 1000 years ago by people who developed religious services, still among the most moving and spectacular multimedia displays. But this old idea is frequently rediscovered by visionary chief executives, excitable consultants, and greedy investment bankers: the people who proclaimed the AOL-Time Warner deal a marriage made in heaven. And it was revealed with Damascene force to Jean-Marie Messier, a humble French water carrier. But activists can converge without requiring that the companies that undertake them converge. The erstwhile maître du monde might have drawn a useful lesson from his experience at Compagnie Gènèrale des Eaux before his apotheosis as chief executive of Vivendi Universal: sewer and the stuff that goes down them do not need common ownership.
Team No. 5
1. Sony, which once dominated the market for portable music players with its Walkman products, has been the big loser to Apple in the market for MP3 music players. Using the

following figure, suggest opportunities for how Sony might differentiate its MP3 Walkman to increase its customer appeal?
2. Microsoft’s main capabilities relate to the development and marketing of complex computer software and its greatest resource is its huge installed base of its Windows operating system. Does Microsoft’s entry into video game consoles indicate that its strategy is becoming divorced from its principal resources and capabilities?
3. Target (the US discount retailer), H&M (the Swedish fashion clothing chain) and Primark (the UK discount clothing chain) have pioneered “cheap chic” – clothing discount store prices with fashion appeal. What are the principal challenges of designing and implementing a “cheap chic” strategy for a company entering another market, e.g. restaurants, sports shoes, cosmetics, or office furniture.
4. According to Michael Porter’s Competitive Advantage of Nations, some of the industries where British companies have an international advantage are: advertising, auctioneering of antiques and artwork, distilled alcoholic beverages, hand tools and chemical preparations for gardening and horticulture. Some of the industries where US companies have an international competitive advantage are: photo film, aircraft and helicopters, computer hardware and software, oilfield services, management consulting, cinema films and TV programs, healthcare products and services, and financial services. For either the UK or the

US, use Porter’s national diamond framework given below to explain the observed pattern of international competitive advantage.
1. FACTOR CONDITIONS—“Home grown” resources/capabilities more important than natural endowments.
2. RELATED AND SUPPORTING INDUSTRIES—Key role of “industry clusters”
3. DEMAND CONDITIONS—Discerning domestic customers drive quality & innovation
4. STRATEGY, STRUCTURE, RIVALRY. E.g. domestic rivalry drives upgrading.
5. Has McDonald’s got the balance right between global standardization and national differentiation (see the following write-up)? Should it offer its franchisees in overseas countries greater initiative in introducing products that meet national preferences? Should it also allow greater flexibility for its overseas franchisees to adapt store layout, operating practices, and marketing? What aspects of the McDonald’s system should its top management insist on keeping globally standardized? How the different countries can address the concerns and interests of their stakeholders with regard to the impact of McDonald’s position on their economies?
McDonald’s
For anti-globalization activists, McDonald’s is a demon of globalization: it crushes national cuisines and small, traditional family businesses with the juggernaut of US fast-food corporate imperialism. In reality, its global strategy is a careful blend of global standardization and local adaptation. McDonald’s menus include a number of globally standardized items – the Big Mac and potato fries are international features – however, in most countries McDonald’s menus feature an increasing number of locally developed items. These include:
 Australia: a range of wraps including Seared Chicken, Tandoori Chicken and Crispy Sweet
Chili Chicken;
 France: Croque McDo (a toasted ham and cheese sandwich);
 Hong Kong; Grilled Pork Twisty Pasta and Fresh Corn Soup;
 India: Shahi Paneer McCurry Pan, McAloo Tikki, Veg Pizza McPuff;

 Saudi Arabia: McArabia kofta, McArabia Chicken;
 Switzerland: Shrimp Cocktal, Chickenburger Curry;
 U.K.: A range of deli sandwiches including “Spicy Veggie Deli” (chickpea patty with
coriander and cmin) and “Sweet Chili Chicken Deli”;
 USA: Premium Grilled Chicken Ranch BLT Sandwich.
There are differences too in restaurant décor, service offerings 9internet access in the UK; home delivery in India), and market positioning (tends to have more up-market positioning outside the US). In Israel many McDonald’s are kosher – they do not offer dairy products and are closed on Saturdays. In India neither beef not pork is served. A key reason that almost all of McDonald’s non- US outlets are franchised is to facilitate adaptation to national environments and access to local knowhow. Yet the principle features of the McDonald’s business system are identical throughout. McDonald’s values and business principles are seen as universal and invariant. Its emphasis on families and children is intended to identify McDonald’s with fun and family life wherever it does business. Community involvement and the Ronald McDonald children’s charity are also worldwide. Corporate trademarks and brands are mostly globally uniform – including the golden arches logo and “I’m lovin’ it” tag line. The business sytem itself – the franchising, the training of managers and franchisees through Hamburger University, restaurant operations, and supplier relations – is also highly standardized. Traditionally McDonald’s international strategy was about adapting its US model to local conditions. Increasingly McDonald’s is using local differentiation as a basis for worldwide adaptation and innovation through transferring new menu items and business concepts from one country to another. For example, the McCafe gourmet coffeehouses within McDonald’s restaurants were first developed in Australia. By 2003, McCafes had become established in 30 countries, including the US. In responding to the growing tide of concern over nutrition and obesity in the developed world, McDonald’s has drawn upon country initiatives with regard to sandwiches, salads, and information labeling as a basis for global learning. Whether or not McDonald’s has the balance right from global standardization and local adaptation is open to debate. Simon Anholt, a British marketing expert, argues: “By putting local food on the menu, all you are doing is removing the logic of the brand, because this is an American brand. If McDonald’s serves what you think is poor imitation of your local cuisine, it’s going to be an insult”. But according to McDonald’s CEO Jim Skinner: “We don’t run our business from Oak Brook. We are a local business with a local face in each country we operate in”. His chief marketing manager, Mary Dillon adds, “McDonald’s is much more about local relevance than a global archetype. Globally we think of ourselves as a custodian of the brand, but it’s all about local relevance.”

Team No. 6
1. Advise a chain of movie theaters on a differentiation strategy to restore its flagging profitability. Use the following value chain framework of a Can manufacturer to identify potential linkages between the company’s value chain and that of its customers in order to identify differentiation opportunities.
Stage-1: Construct a value chain for firm and customer
Stage-2: Identify the drivers of uniqueness. For each of the activities it is possible to suggest several possible differentiation variables.
Stage-3: Select key variables considering the company’s internal strengths
Stage-4: Identify linkages between the company’s potential for differentiation and the potential for reducing cost or enhancing differentiation
2. Wal-Mart (like Carrefour, Ahold and Metro) competes in several countries of the world, yet most shoppers choose between retailers within a radius of a few miles. For the purpose of analyzing profitability and competitive strategy, should Wal-Mart consider the discount retailing to be global, national, or local?
3. A number of industries have experienced rapidly increasing global concentration in recent years: commercial aircraft (led by Boeing and Airbus), steel (led by Mittal steel), beer (led by SAB-Miller, Anheuser-Busch-Inbev, and Heineken), commercial banking (led by Citigroup,

HSBC, Bank of America, Royal Bank of Scotland, and Banco Santander), defense equipment (led by Lockheed Martin, Northrop Grumman and EADS) and delivery services (led by UPS, FedEx, and Deutsche Post/DHL). For each industry, are economies of scale the major reason for increasing concentration? If so, identify the sources of economies of scale. If not, how can increase in global concentration be explained?
4. From the evidence presented in the following table, what conclusions can you draw regarding the factors that determine whether leaders are followers win out in the markets for new products?
5. IKEA furnishings, Honda cars, Amazon, and Starbucks have achieved differentiation while maintaining a broad market appeal. How do companies achieve differentiation of their products without limiting their appeal to certain market segments? If The Gap Inc. wishes to develop differentiation advantage while still appealing to customers across a broad demographic and socio-economic range, what advice would you offer it?

6. Consider the changes that have occurred in a comparatively new industry (e.g. wireless communications, video game consoles, medical diagnostic imaging, PDAs, on-line auctions, bottled water, courier delivery services). To what extent has the evolution of the industry followed the pattern predicted by the industry life cycle model? At what stage of development is the industry today? How is the industry likely to evolve in the future?

Project assignment (section c)

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