Example Solution Manual: exploring strategy text & cases

A call out danger to spotlight is of dour lists of forces or influences that are too unwieldy for practical action. So the second incertitude challenges scholars to esteem which of the forces are believably to be of most signifi sternce in driving Indus attack change. Here students should justify their views In terms of the conclusion from the past and the likely Impact In the future of any accompaniment proposition Influence. The end-chapter case example on the European brew patience in like manner asks students to do a postage analysis. Illustration 2. Scenarios Scenarios help students think long term and actually broadly here(predicate) the World Economic assemblage and its members are looking a decade ahead, and thinking slightly gee- economic science in general as well as just the grocery store in a narrow sense. The question asks about whether companies project more(prenominal)(prenominal) influence e actuallywhere g everywherenment policy or gee- ec onomics. It then goes on to ask about how companies faculty influence g everywherenment. This alike obviously touches on issues of corporate social responsibility, pursued in Chapter 4.Companies probably do concord more influence on policy coordination, but the Issue Is which governments they should be talking to (the united States, China? ) and whether It Is sole(prenominal) governments that matter (United Nations, International m geniustary Fund, World Trade Organization? ). They should also consider how they goat beat Influence governments, Individually or collectively through, for example, the World Economic gathering or the Business Roundt adequate to(p), the group of Coos of leading Ameri basin corporations.To approximately point, the military force is likely to be exercised negatively through lobbying against and criticism of proposals for financial re-regulation. It is worthy also intercommunicate about the influence these corporations can squander themselves o n gee-economic shifts some Western company headquarters are shifting a path(predicate) from their home-countries, for example, the global headquarters of American civil engineering conglomerate delusion move to Dublin and Swiss/Swedish engineering company ABA moved its global robotics business headquarters to Shanghai. Illustration 2. The Steel Industry The leaf blade Industry provides a fairly easy-to- at a lower placestand case of rapid structural change, and cardinal led by effort actors. Understanding how the leading companies in separate words, a sense that structures are go againstn rather than changeable. The first question particularly invites a comparative analysis using the radar-plot introduced in butt on 2. 5. The radar-plot cleverness look roughly like the fol busteding, with the mutinous lines indicating rough positions in nearly 2000 (10 years earlier than the voice) and the dotted lines indicating positions in 2010.The comparative positions graduate(pren ominal)light the increasing index finger of suppliers much(prenominal) as the iron ore producers (negative) the high power of sophisticated buyers, somewhat mitigated by the declining power of the Big iii (mildly positive perhaps) and the beginning of decreased contender (positive) as the larger vane companies such as Imitate try to consolidate the constancy. It might be said that the newly first appearance threat has stabilized and even reduced, though continued investment by Chinese players viewthorn increase contestation especially if they turn to overseas markets.Overall, comparing the size of the two radar plots over clip offers only a marginal change in favor of the steel producers. With regard to the second question, the acquisition strategies have the appearance _or_ semblance set by the desire to reduce rivalry by decrease the twist of players and even capacity. You might ask students what is necessary to make this stimulate here you might highlight the im portance for reduced rivalry of both coincidental cuts in capacity investments by, for example, the Chinese and steadfast barriers to new entry. With Edgar to the third question, success in raising barriers to entry (e. . Through technological change) and in reducing rivalry (through continued consolidation) would make the application more cute. Vertical integration strategies into antecedents of supply (e. G. Iron ore) would help too. A potential negative is crucial progress with substitute materials. This depends on technological progress, hence providing a serviceable link between the Porter 5 Forces and mould. Illustration 2. 4 Chugging in the Charity Sector The aim of this Illustration of course is to show that manufacture structure analysis is elevate to not-for-profits as well.Indeed, charities appear ruthlessly warlike hence the High Street chugging. The first question points to at to the lowest degree three of the Praetorian forces as causing problems (I) There are low barriers to entry, with constant refreshment of the industriousness by new charities (it) thither is strong get power on the part of local authorities commissioning service (iii) there is intense rivalry because of the number of competitors and tendency towards overlap and duplication of charitable services.In addition, they face substitutes in the form of coal authorities and new(prenominal) agencies performing services in-house, but at this point the trend in that respect was in their favor. The suppliers of funds donors have many alternative charities to give to. The mergers and increasing concentration levels (the largest are growing fastest) imply growing industry consolidation. At the moment, the industry structure might be described as highly competitory, but there whitethorn be capaciousspread proceedss to it base towards a more oligopolies situation. Illustration 2. Cycles of Competition The Wisdom in strategy hypothesis has been that competitiveness is about building up a Eng-term competitive advantage and then defending it against competitors. The idea industry go forth work its way out over time. It also highlights the potentially destructive nature of tilt (at least from the point of view of industry players) and the value of trying to neutralize it. Indeed, a key point is that these competitive cycles are not inevitable. foretoken to competitors, and interpreting the signals of others competitive moves, can help avoid head-on contention.Retaliation (Section 2. 3 under barriers to entry) is a key principle here, as are the basics of game theory (Chapter 3). With regard to question 1, Francesco might have slowed slash or rebuffed entirely Deceptivenesss invasion of the French market by retaliating straining against its initial move even though the youth recess was not so grand to Francesco, a determined response there would have signaled the likelihood that attacking the core French market would be so fiercely opposed t hat it might not be worth Deceptivenesss date even to try.With regard to question 2, Francesco would have been hard- counted to avoid escalating competition in the business market. However, genius possibility might have been for Francesco to think on a particular selected niche (say the low-pitched firms segment). By preindication clearly through advertising or similar that this niche was the result of their ambitions, Francesco might have encouraged Descriptive to concentrate on its outgo opportunities, leaving the French get on with their specializer in peace.Illustration 2. 6 Key Debate How Much Does Industry Matter? This debate addresses an stable source of controversy in strategy query, and allows students to review the importance of the content of Chapter 2 (particularly the quintet forces), at the akin time as introducing the more internally foc apply issues of Chapter 3 that follows. For Porter, industry matters a lot. The aseptic might argue he would say that, wouldnt he?After all, this is exactly what his training in industrial economics and the standard products of his consulting firm would favor. However, the all-important(a) thing here is to recognize the extent of the research he (and collaborators such as Anita McGowan) turn tail upon to make their case. It is worth pointing out to students that strategy theories are more than near theories there is solid empirical research involved too. When meeting a new theory, students should et used to asking where is the research evidence?What the research seems to suggest is that an industry is not the be-all and end-all, but that choosing an attractive industry is a very good starting point in strategy industry accounts for about two- fifths of the explained variance in the Porter and McGowan take aim (leaving aside control variables and so on ). Turning to the precise question, the kinds of industries that influence members profit kings more than others seem generally to be service ind ustries (explaining the greater industry effects in the Porter and McGowan study than in Runlets).But to go on from here, industry influences are most likely to be strongest in highly competitive and mature industries. In such industries, sources of firm-specific differentiation are likely to be a couple of(prenominal), easily imitated and easily competed away, so making it hard to earn to a higher place- normal profits. At the same time, standard recipes for competing would have been established, so only the incompetent would perform substantially below the norm (and competition should have eliminated most such incompetents by the industry maturity date stage).These conditions would probably prevail in service industries such as hotels, restaurants and retail. Newer industries commodity competitors and suppliers, so allowing persistent variability in profitability. Video Questions Hoicks Hoicks is a medical specialist insurer in the Lloyd of London amends market. The company specializes in niche areas such as property and casualty insurance for high loot worth individuals and companies, as well as cover against such risks as hacking, kidnapping and satellite damage. The video case is quite complicated, so surmount viewed after a thorough working through of the chapter material. . The industry is facing more buyer power, with the resurrect of online price comparison sites. On the other hand, there is a process of consolidation with the rise of consolidators (companies such as resolution), who are acquiring weaker companies in direct to build position. This is likely in the long term to reduce rivalry. Major failures such as that of the American giant Alga (American Investment Group) are likely to reduce rivalry too. It is clear that general recessionary pressures are also influencing the market at the time of the video, reducing demand and likely to make it more price-sensitive. . Hoicks has a specialist position, aside from companies like Alga or the general insurers that Resolution is trying to buy, and its power in its niche is reinforced by its blemish (well known in the United Kingdom). It also has the advantage of having both an underwriting (issue of insurance policies) and investment business, which mean that Hoicks is saved from short-term cycles or crises in one part of the business, probably helping to buffer it from price competition in the short term too. engagement 2. PESTLE Analysts PESTLE analysis is a recyclable starting point for environmental analysis. Illustration 2. 1 provides a model. A blank of the basic template of illustration 2. 1 can be provided to dents who can then be asked to complete it for the forces at work in a particular industry. The danger is that long lists of forces or influences can be generated by this device. So the second question challenges students to prise which of the forces are likely to be of most significance in driving industry change.Here students should justify their vi ews in terms of the evidence from the past and the likely jolt in the future of any particular influence. See the discussion of the PESTLE for the end- chapter case on the European brewing industry for an example. denomination 2. 2 Building Scenarios appointee 2. Requires students to focus on change in industry characteristics and competitive forces through the ramp upion of scenarios. Guidelines for the construction of scenarios are given in Section 2. 2. 2 it is recommended that students follow these, building either two or four scenarios for a given industry.The work done in appointment 2. 1 should provide the bases of severalizeing the key industry forces or influences which will enable them to do this. Some of the problems of scenario building should be emphasized to students Students may try to build in too many factors and, therefore, not be able to limit the number of scenarios. They may find difficulty in generating scenarios with a coherent and compatible set of facto rs. Some may be watchful of having to exercise Judgment and others will confuse Judgment with hunch.Try to encourage a realistic debate that tests out assumptions and students to build scenarios for an industry for which there is a company case (or for their own industry/company if possible) and then to assess the companys strategical position in the light of the different scenarios (e. G. See the notes above on the brewing industry). One of the issues that might surface is the ease or difficulty with which scenarios can be constructed. It usually emerges that scenarios are much easier to construct where the number of key forces at work in an industry is relatively a couple of(prenominal).They are less easy to construct if the number of important forces is high because the number of variables the student is trying to handle becomes too great. This, in turn, raises some other issue. Scenarios are of particular use in uncertain environments as a means of helping managers to think through possible futures. However, dubiousness may arise for a number of reasons. If uncertainty arises because of the unpredictability of a few forces, then arguably scenarios may be very lawful, but what if uncertainty arises primarily because there are a large number of forces at work to what extent are scenarios of use in such destiny?There are a limited number of very important forces at work in the brewing industry but what of fast-moving hi-tech industries where there are many different forces at work? Assignment 2. 3 Five Competitive Forces Five forces analysis is an absolutely central technique in strategy. Section 2. 3 should give students the ability to hunt out a basic five forces analysis of any industry. They should be encouraged to consider all of the elements of each of the vive forces so for example, under barriers to entry, case and experience effects, channels, retaliation and so on.The radar-plot technique of Exhibit 2. 5 should only be used as a thickset once the complete analysis is complete the danger is of it being used to short-circuit the analysis. Students should be expected to do more than simply list elements they should clearly identify the implications (positive or negative) of each. The second question about conclusions for industry attractiveness should emphasize the importance of take a leaking out implications, rather than Just listing. Assignment 2. 4 Comparisons between Industries and Over Time This engagement allows students to build on Assignment 2. In order to consider the investment implications of differences between industries and change over time. The denomination is a substantial one if relying on students own research. However, time can be saved if two case studies are used (e. G. create from raw material, pharmaceutics or hi-if, perhaps looking backwards at change over the past three to five years, rather than change in the future). Similarly, students may save time by using the radar-plot technique ( Exhibit 2. 5), as in the discussion of Illustration 2. 3. It is important to note the two follow-up questions.Explicitly asking for Justification helps students avoid the superficial analysis which is easy to do with five forces. Asking the question about investment helps students think about concrete implications, again something that five forces analyses often neglect. By looking over time, students will learn to be cautious about investing in industries with declining attractiveness. By comparing industries, students can also consider industry attractiveness in their diversification decisions, an issue picked up in Chapter 7.At the same time, it is worth countering attractive are likely to have high barriers to entry, so the costs of entry may outweigh the benefits of entering. An industry that is sightly relatively unattractive may be neglected by competitors, and, if you enjoy a strong competitive advantage in that industry, it may still be a source of profit to you. Assignmen t 2. 5 Strategic Groups This assignment builds on the plan of strategic groups and strategic space outlined in Section 2. 4. 1 in the text. Figure 2. 8 provides an example of how the exercise could be carried out.This could, for example, be applied to the European brewing industry Key strategic dimensions might come under either of the scope or resource loading characteristics in Section 2. 4. 1 for example, product range or extent of vertical integration. Possible key strategic dimensions in the European brewing industry might include geographical coverage, strength of brands, diversification, size of firm, suit of distribution, and so on. Students are encouraged to draw more than one strategic group map if they believe that more than two dimensions are important.It is useful to ask them to consider the extent to which different bases of such maps give rise to similar or different configurations. They might find, for example, that however the maps are move up, some companies a lways tend to end up in the same groups. In other words, some companies may have a very similar set of strategic characteristics along many dimensions. Students are asked to reckon the strategic group maps to see if there are any under-populated sporting spaces in the industry.For example, in brewing, is there an opportunity for a giant specialist in making own brand beer for the large retailers? However, students should assess carefully why there are few competitors in any such white spaces. White spaces can often turn out to be dicey black holes rather than attractive opportunities. Assignment 2. 6 Critical mastery Factors and the Strategy Canvas It is very likely that students will concentrate on success factors that are salient to them as consumers for example, the product ranges of a fit out retailer.Less visible elements, such as ownership by a modify parent company, may be neglected. However, for a short assignment, this need not matter too much the essence is comparis on in order to identify areas of (potential) competitive advantage. The key insight of a strategy solicit is to encourage competitors to compete where it s relatively easy to secure a probative advantage (Blue Ocean), and not necessarily to compete fiercely over the top-rated success factors if advantage can only be obtained at very considerable cost (Red Ocean).You can introduce less visible, but strategically significant elements after they have done their basic analysis. Integrative Assignment Full Analysis of an Industry or a Sector This assignment would be a demanding research project over a significant part of the course. It is however a very good test of students ability to apply tools to real selective information appropriately, as well as growing their research skills. Students will see it as practical and, if allowed a pick of sectors, relevant to their own interests. Good research resources are essential.As well as free web-based resources such as company reports, tra de association statistics and some government or supra- access resources such as the business press and Journals available through Businessperson Premier, Fictive or Prosiest, and reports from organizations such as Remuneration, Key Notes and Minute. Your institutions librarian will advise you on what is available to students and how full they are likely to be in using such resources. You would also want to guide students on which industries or sectors to choose.Very broad industries for example, the world air duct industry are likely to overwhelm students with data. It might be instrumental to encourage focus for example, the airline industry in India, or similar. Industry focus also reduces the risk of plagiarism. There are many student assignments of a similar nature available for a fee on the web, and it would definitely be wise to avoid allowing students to research the same industries in successive years. Requiring a specific focus on particular homes (e. G. internationa lization) or some less common concepts (e. . The strategy canvas, cycles of competition etc. ) can also reduce plagiarism. Insisting on precisely citing sources for key data and points (through an end-note system or similar) makes simple plagiarism harder too, as well as being good practice. If allowed, students will find very helpful a couple of example assignments from previous years to guide them roughly on what they are supposed to do. A report length limit of around 2000-2500 words would encourage students to focus on what is really important.Requiring an executive summary would also force students to consider what is really important and what are the key implications. Over a two semester course, this assignment could be stage one of a two-part assessment regime the second semester could have as an assignment asking students to consider implications of the first part for the strategy of a particular company in the original industry or sector. Case interpreter The European Brew ing Industry This case focuses on the key techniques of PESTLE and five forces analysis that are central to this chapter.Full cases such as the pharmaceutical industry can be used evolve students skills in visual perception trends in industry data and drawing conclusions as to the likely collision of those trends on particular companies in an industry. PESTLE Here it would be helpful to ask the students to draw on wider knowledge or research (you may have beer drinkers from many countries in your class). Depending on how extensive students additional research and thinking are, a wide-range of issues may be raised. To highlight some for the purposes of illustration Political government campaigns against drink driving Economic the rise of the Asiatic economiesSocial rise of beer consumption in southern Europe Technological few clear in the case, but innovations around products such as ice- cold lager might be raised Environmental few clear in the case, but packaging issues are like ly to be important Legal few clear in the case, but changes in licensing laws and permitted inebriant limits for driving are relevant. Pestles can often seem somewhat inconclusive, so it is important to pull out key issues and conclusions. The increasing hostility to drunkenness (under P and L) and the rise of Asian economies and southern Europe (under E & S) seem particularly important trends.One way of drawing some simple conclusions is to assess the overall balance (positive or negative) under each of the PESTLE headings in the case of the European brewing There has traditionally been a wide variation of industry structures across Europe. The United Kingdom is fairly competitive. Denmark, Holland, Italy, Belgium and France, on the other hand, have been in near monopoly situations. However, with increasing exports and imports and cross-border acquisitions, national markets are becoming less protected. An interesting issue, then, is at what level to conduct industry structure ana lysis.If at a European level, the broad issues to consider under each of the five forces are as follows Buyers With more than one fifth of beer sold through supermarkets, and increasing resort to own-label, these buyers are increasingly sizable (underline that buyers are not the ultimate consumers). Suppliers The high concentration of the packagers suggests that these are becoming increasingly powerful. Substitutes Wine is clearly a dangerous substitute. New entrants Internationalization through M and increased trade is introducing new entrants into previously protected markets most countries see increasing imports (Table 2).Enhances-Busch and Gabrielle are two obvious new entrants into Europe. Students might be alerted to the potential threat of Toasting and the other Chinese brewers. Although not prominent in the case, there is still the potential of small new brewers entering using micro-breweries or contract brewers (e. G. Cobra). Rivalry falling demand, international entrants and over-capacity obviously increase the scope for rivalry. However, note that sales determine are rising, that innovation and branding can mitigate price-competition, that there has been a history of price-fixing cartels, and that leading players are attempting consolidation through M.It might be useful to ask the students to compare industry concentration ratios in 2000 and 2009 that is, the grapple accounted for the top three or five players (Table 3). As ever, it is important to draw conclusions. On balance, the European brewing industry does not seem attractive, and improbable to become more so until the current round of consolidation is accurate and brewers achieve greater leverage against their buyers and suppliers. Impact on Particular Brewing Companies The three companies are chosen to represent different types of player. A-B Ellen is the largest player, after a succession of spectacular mergers.It is remarkable how the company is withdrawing from fast-growing China an d eastern Europe, however. Greene King is tiny in comparison to A-B Ellen, with Just one key domestic market, the United Kingdom. However, domestic focus and its own pubs may be giving it a strongly defended local position. You might ask whether there are competitors who might be tempted to buy such a company. Tossing Tao is the wild-card here. It is strong in its booming home market, but it is also interested in moving overseas. But would it make Europe a priority field for expansion, or choose another market?