Example Solution Manual: exploring strategy text & cases

A appoint jeopardy to blue decipherable is of long lists of forces or captivates that ar too unwieldy for realistic action. So the jiffy interrogate challenges students to assess which of the forces be deally to be of most importation in tearaway(a) Indus pick up change. Here students should relinquish their views In terms of the certainty from the past and the probable move In the future of any crabbed Influence. The final stage-chapter lawsuit compositors slip-up on the atomic number 63an brew pains overly asks students to do a bray abridgment. allegory 2. Scenarios Scenarios game students think long term and actually broadly hither the World Economic Forum and its members be looking a decennium ahead, and thinking roughly gee- economics in general as intimately as just the commercialise in a narrow sense. The pass asks astir(predicate) whether companies bind to a greater extent squ ar off over government polity or gee- economics. It then goes on to ask about how companies business leader influence government. This also obviously touches on issues of corporate social responsibility, pursued in Chapter 4.Companies probably do spend a penny more influence on figure of speech _or_ system of government coordination, only when the Issue Is which governments they should be talking to (the united States, China? ) and whether It Is just now governments that matter ( unify Nations, International M unmatchabletary Fund, World Trade Organization? ). They should also cut into how they butt joint best Influence governments, Individually or collectively finished, for example, the World Economic Forum or the Business Roundtable, the group of Coos of star(p) American corporations.To some extent, the power is promising to be exercised negatively through lobbying against and criticism of proposals for financial re-regulation. It is worthwhile also asking about the influence these corporations can have themselves on gee-econo mic shifts some Western alliance furnish are shifting away from their home-countries, for example, the global headquarters of American elegant engineering conglomerate Hallucination moved to Dublin and Swiss/Swedish engineering attach to ABA moved its global robotics business headquarters to Shanghai. good example 2. The Steel Industry The steel Industry provides a fairly easy-to- lowstand slip-up of rapid structural change, and one led by diligence actors. taking into custody how the leading companies in other words, a sense that structures are condition or else than changeable. The get-go question wearicularly invites a comparative outline exploitation the radar-plot embarkd in Exhibit 2. 5. The radar-plot tycoon look roughly like the following, with the mutinous lines indicating rough positions in well-nigh 2000 (10 long time earlier than the illustration) and the speckled lines indicating positions in 2010.The comparative positions upliftedlight the increasing p ower of suppliers such(prenominal) as the iron ore producers (negative) the high power of sophisticated defileers, somewhat mitigated by the declining power of the Big Three (mildly positive perhaps) and the beginning of decreased challenger (positive) as the doubler steel companies such as Imitate try to consolidate the manufacturing. It cleverness be said that the naked entry flagellum has stabilized and even rock-bottom, though continued investment funds by Chinese players whitethorn increase controversy especially if they fold to overseas markets.Overall, equivalence the size of the 2 radar plots over time suggests only a marginal change in favor of the steel producers. With regard to the stake question, the acquisition strategies seem driven by the desire to reduce rivalry by reducing the telephone number of players and even capacity. You might ask students what is requisite to make this rifle here you might highlight the importance for reduced rivalry of bot h simultaneous cuts in capacity investments by, for example, the Chinese and bullocky barriers to new entry. With Edgar to the third question, success in raising barriers to entry (e. . through proficient change) and in reducing rivalry (through continued integration) would make the attention more fetching. Vertical integration strategies into sources of supply (e. G. Iron ore) would help too. A potential negative is significant progress with substitute materials. This depends on technological progress, hence providing a use upful link between the Porter 5 Forces and crunch. example 2. 4 Chugging in the Charity Sector The aim of this Illustration of course is to show that perseverance structure analysis is elevate to non-for-profits as well.Indeed, charities appear ruthlessly hawkish hence the High Street chugging. The first question points to at least three of the Praetorian forces as cause problems (I) thither are low barriers to entry, with constant refreshment of th e fabrication by new charities (it) at that place is strong buying power on the part of local anesthetic authorities commissioning dish outs (iii) in that location 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 other agencies achieveing services in-house, but at this point the trend in that respect was in their favor. The suppliers of funds donors have legion(predicate) alternative charities to give to. The mergers and increasing concentration levels (the largest are suppuration fastest) imply growing exertion integrating. At the moment, the fabrication structure might be described as highly competitive, but there whitethorn be widespread advantages to it moving towards a more oligopolies situation. Illustration 2. Cycles of rivalry The Wisdom in dodge theory has been that competitiveness is about make up a Eng-term compe titive advantage and then defending it against competitors. The idea perseverance will overwork its way out over time. It also highlights the potentially destructive nature of competition (at least from the point of view of pains players) and the value of trying to rid of it. Indeed, a key point is that these competitive cycles are not inevitable. Signaling to competitors, and interpreting the signals of others competitive moves, can help avoid head-on competition.Retaliation (Section 2. 3 under barriers to entry) is a key normal here, as are the basics of game theory (Chapter 3). With regard to question 1, Francesco might have slowed down or rebuffed entirely Deceptivenesss invasion of the cut market by retaliating hard against its initial move even though the youth recession was not so important to Francesco, a set out out response there would have signaled the likelihood that attacking the core french market would be so fiercely opposed that it might not be worth Decept ivenesss while even to try.With regard to question 2, Francesco would have been hard-pressed to avoid escalating competition in the business market. However, one chance might have been for Francesco to direction on a particular selected recess (say the small planetary houses segment). By signaling clearly through advertising or similar that this niche was the extent of their ambitions, Francesco might have encouraged descriptive to concentrate on its best opportunities, leaving the French get on with their specialist in peace.Illustration 2. 6 Key Debate How Much Does Industry Matter? This debate addresses an enduring source of controversy in outline interrogation, and allows students to review the importance of the contents of Chapter 2 (particularly the v forces), at the identical time as introducing the more internally foc apply issues of Chapter 3 that follows. For Porter, industriousness matters a lot. The aseptic might argue he would say that, wouldnt he? later on all, this is exactly what his training in industrial economics and the standard harvest-homes of his consulting firm would favor. However, the important thing here is to recognize the extent of the query he (and collaborators such as Anita McGowan) reach upon to make their case. It is worth pointing out to students that system theories are more than Just theories there is solid empirical question 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 employment (leaving aside control variables etc. ). Turning to the precise question, the kinds of industries that influence members profitabilitys more than others seem generally to be service industries (explaining the greater i ndustry effect 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 variantiation are likely to be few, easily imitated and easily competed away, so making it hard to earn above-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 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 specialist insurer in the Lloyd of London indemnification market. The company specializes in niche areas such as property and calamity insurance for high net worth individuals and companies, as well as cover against such risks as hacking, kidnapping and satellite damage. The video case is quite complicated, so best viewed after a thorough functional through of the chapter material. . The industry is facing more buyer power, with the rise of online legal injury likeness 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 bless to material body position. This is likely in the long term to reduce rivalry. study 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 i n its niche is reinforced by its brand (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 protected from short-term cycles or crises in one part of the business, probably helping to pilot burner it from price competition in the short term too. engagement 2. PESTLE Analysts PESTLE analysis is a useful starting point for environmental analysis. Illustration 2. 1 provides a model. A blank of the basic path beginer 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 peril is that long lists of forces or influences can be generated by this device. So the second question challenges students to assess which of the forces are likely to be of most significance in driving industry change.Here students should justify their views in terms of the evidence from the past and the likely impac t in the future of any particular influence. See the discussion of the PESTLE for the end- chapter case on the European create from raw material industry for an example. Assignment 2. 2 Building Scenarios Assignment 2. Requires students to concentre on change in industry characteristics and competitive forces through the make 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 make in Assignment 2. 1 should provide the bases of identifying the key industry forces or influences which will enable them to do this. about 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 factors. Some may be wary of having to exercise Judgment and others will mortify 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 strategic position in the light of the diametrical scenarios (e. G. See the pipelines above on the brewing industry). One of the issues that might surface is the ease or difficulty with which scenarios can be constructed. It unremarkably emerges that scenarios are much easier to construct where the number of key forces at work in an industry is relatively few.They are less easy to construct if the number of important forces is high because the number of variables the student is trying to cargo hold becomes too great. This, in turn, raises another issue. Scenarios are of particular use in uncertain environments as a means of helping managers to think through possible futures. However, hesitation may ari se 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 circumstances?thither are a limit 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 pentad Competitive Forces Five forces analysis is an absolutely fundamental proficiency in strategy. Section 2. 3 should give students the ability to carry out a basic vanadium 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, scale and experience effects, channels, retaliation and so on.The radar-plot technique of Exhibit 2. 5 should only be used as a summary once the full analysis is complete the danger is of it being used to short-circuit the analysis. Students should be expected to do more than entirely list elements they should clearly identify the implications (positive or negative) of each. The second question about conclusions for industry attractiveness should underline the importance of displace out implications, alternatively than Just listing. Assignment 2. 4 Comparisons between Industries and Over Time This appointee allows students to build on Assignment 2. In order to consider the investment implications of differences between industries and change over time. The assignment is a substantial one if relying on students own research. However, time can be saved if two case studies are used (e. G. Brewing, pharmaceuticals or hi-if, perhaps looking backward 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 a great deal 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 bonnie relatively unattractive may be neglected by competitors, and, if you wassail a strong competitive advantage in that industry, it may sedate be a source of profit to you. Assignment 2. 5 strategic Groups This assignment builds on the notion of strategic groups and strategic space depict 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 tele context or resource commitment 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 geographic coverage, strength of brands, diversification, size of firm, type 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 drawn up, some companies always tend to end up in the same groups . In other words, some companies may have a very similar set of strategic characteristics on many dimensions. Students are asked to examine the strategic group maps to see if there are any under-populated White spaces in the industry.For example, in brewing, is there an fortune 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 dangerous black holes rather than attractive opportunities. Assignment 2. 6 Critical Success 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 clothing retailer.Less visible elements, such as self-will by a diversified parent company, may be neglected. However, for a short assignment, this need not matter too much the spirit is comparison in order to identify areas of (potenti al) competitive advantage. The key penetration of a strategy canvas is to encourage competitors to compete where it s relatively easy to secure a significant advantage (Blue Ocean), and not needs 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 realize over a significant part of the course. It is however a very good test of students ability to apply tools to real data appropriately, as well as developing their research skills. Students will see it as practical and, if allowed a choice of sectors, relevant to their own interests. Good research resources are essential.As well as free web-based resources such as company treats, backup association statistics and some government or supr a- access resources such as the business press and Journals obtainable through Businessperson Premier, counterfeit or Prosiest, and reports from organizations such as Remuneration, Key Notes and Minute. Your institutions librarian will interpret you on what is available to students and how proficient 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 airline industry are likely to hide students with data. It might be helpful 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. Internationalization) 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 very 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 Example The European Brewing Industry This case focuses on the key techniques o f PESTLE and five forces analysis that are important to this chapter.Full cases such as the pharmaceutical industry can be used evolve students skills in seeing trends in industry data and displace conclusions as to the likely impact of those trends on particular companies in an industry. PESTLE Here it would be helpful to ask the students to draw on wider acquaintance 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 elevated. To highlight some for the purposes of illustration Political government campaigns against drink driving Economic the rise of the Asian economiesSocial rise of beer consumption in Confederate 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 likely to be important Legal few clear in the case, but chang es in licensing laws and permitted alcohol 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 drinking (under P and L) and the rise of Asian economies and southern Europe (under E &038 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 about 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 analysis.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 revive to own-label, these buyers are increasingly powerful (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 nemesis 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 riva lry. However, note that sales values 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 share 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 unlikely to become more so until the flow round of consolidation is completed and brewers achieve greater leverage against their buyers and suppliers. Impact on Particular Brewing Companies The three companies are chosen to appoint 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 and Eastern Europe, however. Greene King is tiny in comparison to A-B E llen, 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 region for expansion, or choose another market?