Phanish Puranam June 2005

Strategy for MiF’s

(Summer 2006)

Professor:Secretary:

Phanish Puranam Sharon Wilson

Room S317, Ext. 3020Room S339, Ext. 3264

What this course is about:

The course covers Business and Corporate strategy concepts that are relevant for finance professionals. While several sessions focus on companies in the financial services sector, this course is really about general principles of strategy that transcend industries. Examples of business strategy issues, which concern a particular line of business are competitive forces in the industry, business models, strategic positioning within the industry and resources and capabilities needed to compete. Corporate strategy issues typically matter for the corporate headquarters of a diversified firm - such as which businesses to be in, how to exploit synergies across businesses, reorganizations and how to expand and shrink corporate scope through M&A, alliances, joint ventures and divestitures. Uniquely, strategic analysis links internal processes within the firm and competition between firms.

This course relies heavily on the case discussion approach- I spend a substantial part of each class discussing a case; this means getting multiple viewpoints and perspectives on the table, debating the pros and cons of various alternatives and ideas- a very interactive process. All viewpoints and comments are welcome- as long as they can be defended through rigorous reasoning. I then lecture on the theoretical framework that is useful to analyse the general strategy issues underlying the case. Sometimes, I have guest speakers-managers and consultants to complement our discussions. It is also worth noting that in this course we do NOT spend a lot of time analysing financial statements and working with spreadsheets. Instead our focus is on logical reasoning, frameworks, formal models and simulations.

The unique perspective a strategy course offers:

Strategic analysis assumes that most resource and product markets are imperfect and are not in equilibrium. Opportunities constantly emerge as industry conditions change, or are changed by innovating firms. Firms create competitive advantage by understanding these opportunities, designing strategies and organizations that match their capabilities to available opportunities, and executing well. The course covers various analytical tools that help with this process.

At the end of this course, you will be able to:

  • Evaluate a business model from a strategic viewpoint
  • Assess a company’s resources and organizational capabilities for their ability to generate competitive advantage
  • Understand industry evolution and its impact on competitive advantage
  • Assess the organizational design of a company, and how it supports (or detracts) from its strategy
  • Understand reorganizations and how they work (or don’t).
  • Evaluate a company’s diversification strategy
  • Evaluate strategic partnerships – M&A’s, JV’s, Alliances

Course materials:

  1. Readings and cases in course-pack
  2. Electronic copies of slides are posted on Portal AFTER each class
  3. Class notes for each session, summarising main points from discussion are posted on Portal AFTER each class

Textbooks

Required/Optional / Title / Authors
Required / Contemporary Strategy Analysis: Concepts, techniques, applications.
(Blackwell Publishers) / Robert M. Grant
Optional / Economics of Strategy
(Wiley publishers) / David Besanko, David Dranove and Mark Shanley

Grading

Individual (%) / Group (%) / Total (%)
Class Participation / 20 / 20
Group project / 30 / 30
Exam / 50 / 50
Total / 70 / 30 / 100%

The final individual exam (50 points) will be in class and closed book. The MiF programme office will announce the date.

Class Schedule

Session 1:

Introduction: What is a business model?

Before class Preparation:

Case: Nespresso

1.Has Nespresso been a success so far? What should Gaillard do?

Reading: Grant, chapter 1

After class follow up:

“Evolution towards Fit” by Nicolaj Siggelkow, Administrative Science Quarterly

Session 2:

Competitive forces

Preparation:

Case: African Communications Group

1.What is ACG’s business model? Would you back this model as a VC?

Reading: Grant, chapter 3

After class follow up:

How much does industry matter, really? by Anita M. McGahan and Michael E. Porter. Strategic Management Journal

Session 3:
Industry evolution and strategic innovation

Preparation:

Case: Charles Schwab

  1. What are the strategic challenges posed to offline brokerage by online brokerage?
  2. How should discount and full service brokers respond to the online model?

Reading: Gulati. R. and J. Garino. 2001. Get the right mix of bricks and clicks. Harvard Business Review

After class follow up:

How to respond to disruptive strategic innovation by Costas Charitou and Costas Markides, Market Leader

Session 4:

Resource Analysis & Competitive Advantage

Preparation:

Newspaper clippings: Egg Bank

  1. What determines how fast Egg will be able to grow?

Reading: Asset Stock Accumulation and Sustainability of Competitive Advantage by Ingemar Dierickx, and Karel Cool, Management Science

After class follow up:

a. Grant, chapters 5 & 10

b. Cornerstones of Competitive Advantage by Margaret Peteraf, Strategic Management Journal

c. Individual assignment on Matching Dell (case in course pack)

Hand in individual assignment

Session 5:

Diversification strategies

Preparation:

Case: Monsanto’s March into Biotechnology (A)

  1. As an analyst, how would you react to Monsanto’s diversification from commodity chemicals to biotechnology?

Reading: Grant, chapters 15 and 16

After class follow up:

Does diversification cause the diversification discount? By Belen Villalonga, Financial Management.

Session 6:

Organizational issues in M&A

Preparation:

Case: Cisco Systems: The acquisition of technology is the acquisition of people

  1. Why does M&A in general have such low success rates? What accounted for Cisco’s successful acquisition strategy?

Reading: Choosing equity stakes in technology sourcing relationships by Prashant Kale and Phanish Puranam, California Management Review

After class follow up:

Bringing some discipline to M&A mania, P.Puranam, H.Singh and M Zollo, FT Mastering Management Series.

Session 7:

Outsourcing and Offshoring

Case: EvalueServe

1. What sort of clients would seek EvalueServe’s services? How does EvalueServe alleviate client concerns about doing business with them?

After class follow up:

The seven deadly superstitions of business process outsourcing by Phanish Puranam and Kannan Srikanth

Session 8:

Organization & Re-organizations

Preparation:

Case: Re-organization at Cisco Systems –(A)

1. Why did Cisco re-organize away from customer focused segments to technology focused segments?

Reading: Analyst reactions to Cisco’s reorganization

After class follow up:

Note on Inter-unit collaboration by Phanish Puranam and Tobias Kretschmer

Session 9:

Student Project presentations

Preparation: Presentation outlining project analysis to date. Some groups will be selected at random for presentations.

Session 10

Challenges of Strategy Implementation

Preparation:

Case: Sabena Belgian World Airlines: Weytjens’ First Assignment

1.How should Erik Weytjens plan to translate corporate level strategy into decisions and actions in his business unit?

After class follow up:

Best of luck preparing for the exam!