INSTRUCTOR'S NOTES FOR VIDEO

EXERCISES

Title: Brazil
RT : 7:35
Topic Key: Strategic Competitiveness, Strategy, Hypercompetition, Global Economy,
Resources, Capabilities, Core Competencies, Stakeholders, Strategic Leaders

With stagnant economies across the world, Brazil’s economy is growing at 7%--3 times faster
than America. Brazil is a huge country being slightly larger than the continental US with vast
expanses of airable farmland, an abundance of natural resources, and 14% of the world’s fresh
water. With the world’s greenest economy, 80% of Brazil’s electricity comes from hydropower
and it has the most sophisticated biofuel industry in the world. Brazil is already the world’s
largest producer of iron ore and leading exporter of beef, chicken, orange juice, sugar, coffee,
and tobacco. China has replaced the US as Brazil’s leading trade partner. Brazilian’s contend that
their size can match China’s dragon-like appetite and they need Brazil to fulfill the Chinese
needs. Batista, with Chinese investment, with interests in mining, transportation, oil, and gas is
building a huge super port complex north of Rio that will accommodate the world’s largest
tankers and speed delivery of iron ore and other resources to Asia. Commodities are not all that’s
driving the Brazilian boom—Brazil has a substantial manufacturing base and a large auto
industry. The world’s third largest aircraft manufacturer also resides in Brazil. Batista says that
the one thing Brazil needs more of is skilled labor—more engineers to which he now must
import from America. He indicates that Brazil is walking into a phase of almost full employment
with the creation of 1.5 million jobs in one year.

Brazil has seen periods of prosperity before--only to have the bubbles burst. Brazil spent billions
in the 50s and 60s moving its capital to Savannah where it built the futuristic city Brazilia. Brazil
then borrowed billions more to develop the county’s interior. Corruption then led to a financial
collapse--2000 % inflation and the largest financial rescue package in the history of the
international monetary fund. Lula, as President of Brazil, a metal worker with a 4th grade
education, receives much credit for turning the country around. Lula, in an interview, indicates
that Brazil was a capitalist country without capital. He asserts that Brazil needed a metal worker
with socialist views to bring more money for banks, more sales for car companies, and more
money to the workers. When asked how? Lula says the success of an elected official is in the art
of doing what is obvious—what everyone knows needs to be done but some insist on doing
differently. Lula recognized the separation between the rich and poor of Brazil. He gave the poor
families a monthly stipend of $115 dollars just for sending their kids to school and taking them
to the doctors. Such an infusion of cash helped lift 21 million out of poverty and into the lower
middle class which created an untapped market of first time buyers for refrigerators and cars.
Lula also encouraged growth and development by businesses but created tight banking
regulations to maintain conservative fiscal policies.

Historically, Brazil had ignored the festering slums overlooking Rio which was a staging area for
street crimes, drug gangs, but now gets the attention of military police. Brazil has massive
problems with infrastructure—traffic and roads. Ninety percent of the roads remain unpaved and
little public transportation exists in the cities. Delays in building and renovation exist for the
upcoming 2014 World Cup. Lula, in the interview, indicates that Brazil will organize the most
extraordinary World Cup ever. He says that as he leaves office he told his people that they are
not second class citizens--we can get things done, and we can believe in ourselves. People have
started to believe—meaning that he expects his momentum to continue for the country.

Also check out http://www.cbsnews.com/stories/2011/07/31/60minutes/main20073776.shtml

Suggested Discussion Questions and Answers

 How is Brazil a strategic competitor?

o Text: Strategic competitiveness is achieved when a firm successfully formulates
and implements a value-creating strategy.
o Strategic competitor: Brazil, after virtual collapse, has become entrepreneurial,
market oriented, and used their competencies for innovation and service. Brazil
formulated and implemented a value-creating strategy consisting of: 1) utilizing
its natural resources to create hydropower and a biofuel industry, 2) increasing
production and exports of commodities and manufactured components such as
autos and aircrafts, 3) increasing trade opportunities through the building of port
complexes, and 4) using fused resources to raise the standard of living among the
country’s poor. Further, Brazil has built upon its external and internal resources,
created a mission, chosen a strategy, and implemented it through entrepreneurial
leadership which has produced above average returns of a growth of 7%.
 What is Brazil’s strategy?
o Text: A strategy is an integrated and coordinated set of commitments and actions
designed to exploit core competencies and gain a competitive advantage. A firm
has competitive advantage when it implements a strategy that creates superior
value for customers and competitors are unable to duplicate or find too costly to
try to imitate.
o Strategy: Growth and Development: Growing at 7%
 Is Brazil a hypercompetitor?
o Text: Hypercompetition results from the dynamics of strategic maneuvering
among global and innovative combatants. It is a condition of rapidly escalating
competition based on price-quality positioning, competition to create new know-
how and establish first-mover advantage, and competition to protect or invade
established product or geographic markets. The emergence of a global economy
and technology, specifically rapid technological change are two primary drivers
of hypercompetitive environments.
o Hypercompetitor: The world’s greenest economy, most sophisticated biofuel
industry in the world, largest producer of iron ore, leading exporter of beef,
chicken, orange juice, sugar, coffee, and tobacco, third largest aircraft
manufacturer, and world’s largest tankers and delivery speed of iron ore and other
resources to Asia
 What impact does Brazil have in the global economy?
o Impact in the global economy:
  The Brazil economy is growing at a rate of 7% with vast expanses of
farmland an abundance of natural resources, and 14% of the world’s fresh
water.
 As the world’s greenest economy, 80% of Brazil’s electricity comes from
hydropower and it has the most sophisticated biofuel industry in the world.
 Brazil is already the world’s largest producer of iron ore and leading
exporter of beef, chicken, orange juice, sugar, coffee, and tobacco. China
has replaced the US as Brazil’s leading trade partner.
 Batista, with Chinese investment, with interests in mining, transportation,
oil, and gas is building a huge super port complex north of Rio that will
accommodate the world’s largest tankers and speed delivery of iron ore
and other resources to Asia.
 Brazil has a substantial manufacturing base, a large auto industry, and the
world’s third largest aircraft manufacturer.
 What resources, capabilities, and core competencies does Brazil have?
o Text: Resources are inputs into a firm’s production process, such as capital
equipment, the skills of individual employees, patents, finances, and talented
managers. A capability is the capacity for a set of resources to perform a task or
an activity in an integrative manner. Core Competencies are resources and
capabilities that serve as a source of competitive advantage for a firm over its
rivals. When resources and capabilities become, rare, valuable, costly to imitate,
and non-substitutable they become core competencies.
o Resources: Abundance of natural resources including farmland, iron ore, and 14%
of the world’s fresh water. Some evidence exists of oil.
o Capabilities: Ability to produce hydropower and biofuels, Ability to export and
distribute resources to top trade partners, Ability to manufacture aircraft and
autos, and Ability to mine for iron ore
o Core competencies. Manufacturing/Production, Distribution/Transportation and
Trade, Research and Development through green technology, biofuel
development, and mining;
 Identify and explain the stakeholders associated with Brazil’s thriving economy?
o Text: Stakeholders are those who can affect, and are affected by, a firm’s strategic
outcomes
o Stakeholders:
 Brazilian populations: Will be affected by increases in standards of
living/changes in social class, increased goods produced and exported,
increased economic opportunities (employment)
 Global populations: Will be affected by quality of goods produced and
exported from Brazil
 Trading partners: Will received greater number of products and
opportunities for exchange and appropriate supply to meet population
satisfaction
 Brazilian government: Higher approval ratings
 Industry developers: Lucrative opportunities to reside and do business in
Brazil
  Brazilian industries: Increased demand for production and manufacturing
resources
 Describe Lula as a strategic leader? and What strategies do you think he should employ
to handle Brazil’s latest issues?
o Text: Strategic leaders are people located in different areas and levels of the firm
using the strategic management process to select strategic actions that help the
firm achieve its vision and fulfill its mission. Successful strategic leaders are
decisive, committed to nurturing those around them and are committed to helping
the firm create value for all stakeholder groups.
o Lula: With a 4th grade education and metal working expertise, he encouraged his
people beyond second class citizenship, providing a confidence, and belief of
accomplishment. He achieved his strategy of growth and development through
allowing all stakeholders to prosper in his administration. There is no evidence in
the video that he followed the Strategic Management Process.
o Strategies: These are just some examples. Instructor and student discussion can
expand the list.
 Lack of skilled labor: Build on the strategy used for raising the social class
by offering incentives for increased training.
 Slum violence: Offer incentives for slum building and home ownership
 Poor infrastructure: Infuse the trained into jobs that will build the
infrastructure. Provide opportunities for expanding resources to be
included in building infrastructure components. Use auto manufacturing
industry to improve public transportation.
 Delays in building and renovation: Infuse the trained into apprenticeships
to work on building and renovation.
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: Disaster in the Gulf: A Year Later

RT : 2:32
Topic Key: The external environment, External environmental analysis, Five forces of
competition, Strategic groups, Competitor analysis

With oil and tar balls washing up on the Gulf Coast, weddings on the beach became a casualty.
The weddings on the beach business evaporated with cancelled orders and local flower shops
were on the brink. Lee Kitchens Taylor continues to be devastated from losing 85% of her
business and has given up her salary. Her business lost $90,000 dollars and had only received
emergency payments of $20,000 to date. She received checks as little as $12.31 for interest
payments not knowing where the principal was.

BP established a $20 billion fund to compensate victims of the oil spill but only $3.8 billion had
been paid out at present. Roughly 2 out of every 5 people who filed a claim had been reimbursed
which created confusion and anxiety. Individuals proclaim that BP has not fulfilled their
obligations.

Washington attorney, Kenneth Feinberg, was appointed by President Obama and BP to oversee
the claims fund that pays his firm $15 million a year. Fienberg proclaims the program is not
perfect but is working. He says that 200,000 claimants were paid in 9 months.

The beach wedding business of Jeff and Jennie Sherrill indicate they have had to live check by
check and day by day. Within three days of the oil spill they had lost 14 weddings at $10,000
each, had depleted their savings, and were on the verge of closing. Months later they received a
check that largely covered their 6 figure losses. However, many are still waiting and still losing
and speculate they will never recoup their true losses.

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Suggested Discussion Questions and Answers

 What external environment (general, industry, and competitive) segments do you think
BP considered or didn’t consider prior to their drilling off the Gulf Coast? What should
the wedding business owners, now, consider in their external environment?
o BP: Considered economic, political/legal, technological, and global segments in
the general environment. Appears to have considered all facets of the industry
environment and the competitive environment which may have been their primary
motivators for the Gulf offshore drilling
o BP: Didn’t consider the following:
 General: demographic, sociocultural, and physical environment fully
o Wedding business owners:
  Need to consider demographic changes for geographic migration,
economic segments particularly for rebuilding, the political/legal segment
regarding the impact on their business of additional oil company
regulation of oil drilling and operations, sociocultural preferences,
technology requirements to avoid future business loss, the global segment
regarding international company infiltration, and the physical environment
to react and overcome disasters in the future
 How should BP have handled an external environmental analysis and what environmental
changes and trends (opportunities and threats) might they have discovered?
o External environmental analysis should have included scanning, monitoring,
forecasting, and assessing (See Table 2.2)
o Opportunities: Other areas less socially affected by drilling, partnership
opportunities with wedding businesses, other areas for drilling having less natural
pressure, other areas will less oil drilling regulations, and more benefit in
alternative energy sources
o Threats: Possibilities of increased regulation of operations, increasing
environmentally conscious society, and increasing social responsibility
perceptions in society and how it impacts purchases
 A year later, analyze BP, using the five forces of competition model, to determine the
industry’s attractiveness in terms of profit potential.
o Threat of new entrants: Not likely, given the investments and control of the
controllers like BP, Exxon, and Shell—Good Profit Potential
o Bargaining power of suppliers: BP’s disasters have opened opportunities for
competition to be better suppliers---Poor Profit Potential
o Bargaining power of buyers---BP’s disasters have created more concerns from
society in their purchase behavior—Poor Profit Potential
o Rivalry among competing firms---Revenue losses by BP give greater way to
competition to compete---Poor Profit Potential
o Threat of substitute products---BP continues to be involved in alternative energy
sources and may have invested too much in the disaster than needed to be but they
are still attempting to produce substitutes themselves---Good Profit Potential
 Who might be in BP’s strategic group and why?
o Text: Strategic group is a set of firms that emphasize similar strategic dimensions
and use a similar strategy.
o BP’s strategic group: Exxon & Shell
 What would a competitor of BP, now, discover about them in a competitor analysis?
o BP, noted for its later joint ventures, is still driven to source, transport, refine, and
distribute oil in the future.
o BP, currently, is moving toward alternative energy sources to reduce emissions as
required by law. Additionally, BP will abide by U.S. regulated drilling permits
and regulation safety inspections and drilling operations. Within their joint
ventures, they will continue to pursue the oil to meet demand outside of heavy
regulation in the U.S. and perhaps less natural pressure for drilling.
o BP assumes liability under law and operates as the law being the ethical authority.
o BP’s capabilities are noted as follows:
 Strengths: Ability to source, transport, refine, and distribute oil.
 Weaknesses: Lack of awareness of public policies in other countries, lack
of knowledge of the physical environment except with regard to earning
revenue, and lack of genuine concern for demographic and sociocultural
impacts from their business operations
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: Zappos.com
RT : 7:06
Topic Key: Value, Resources, Capabilities, and Core Competencies, Sustainable Competitive
Advantage, Outsourcing

Opening with a bald and blue day where employees, even the boss, can either shave their head or
dye it blue is just part of the wacky world of Zappos.com. As an online shoe retailer, where
business is unusual, is thriving among struggling retailers. Derived from the Spanish word for
shoes, Zapatos, Zappos is out in front with a unique company culture and their 36 year old CEO,
Tony Shay. Zappos believes that everyone is a little weird somehow. Shay says it’s a fun way to
say that we want people’s true personality to shine in the workplace. Shay believes he has
learned how to create both passion and profits which is outlined in the book, Delivering
Happiness. He insists, within the book, that it is possible to make employees happy, customers
happy, make investors happy, and still make profit. Zappos has been so successful that Amazon
was willing to purchase them for $1.2 billion. Never imagining himself in the shoe industry,
Tony Shay works out of a cubical and earns less than $37,000 dollars a year as CEO. He
recognized that selling shoes on the internet was a particular challenge—overcoming the need to
try on shoes before buying. With free shipping and free returns for up to a year, Zappos
overcame the challenge when other retailers were cutting costs and outsourcing call centers
overseas. The Zappos call center is located in Las Vegas where operators are members of the
customer loyalty team. Shay indicates that every phone call and the call center is a branding
opportunity with no planned scripts and no time limits to follow. Every operator is given
opportunity to do whatever it takes to make a customer happy which was indicated through mock
call ins, operator video tapes, and interviews with operators. While making customers happy,
Shay wants his 1400 employees to be happy as well. He wants employees to not think of their
job as work but a place they want to be for life. Zappos provides full medical insurance, free
meals, and opportunities for a variety of breaks throughout the company. Interviews with
warehouse shoe pickers indicate that working for Zappos is work but is more rewarding than just
a job. Zappos is so determined to keep dedicated workers that it tests their loyalty by offering
them money to quit. The sense of security and company benefits means more than the salaries
which are on par with Zappos competitors. The executive editor for Fortune Magazine believes
employees feel empowered at Zappos. Having been listed in Fortune Magazine’s 100 best
companies to work for over the past two years, the editor believes the employees feel respected
and have the ability to make decisions on their own. While successful, Fortune wonders if
Zappos is getting the full range of perspectives, particular from customers if everybody is so
cheerful. Tony Shay hopes that other companies can follow the Zappos example of making the
world a better place.

Also check out http://www.zappos.com/

Suggested Discussion Questions and Answers

 How is Zappos’ organizational culture creating value?

o Text: Value is measured by a product’s performance characteristics and by its
attributes for which customers are willing to pay. An organizational culture is a
source of advantage when employees are held together tightly by their belief in it.
The more intangible and hence invisible capabilities are, the more difficult it is for
firms to find substitutes and the greater the challenge is to competitors trying to
imitate a firm’s value-creating strategy.
o Zappos: Zappos’ customers are willing to pay for the weird yet unlimited service
they receive from Zappos employees. The Zappos culture provides an opportunity
for real personalities to shine in the workplace, unlimited employee dedication
and happiness within customer loyalty teams which is passed on to customer
happiness, and a sense of security, empowerment, and respect that is rewarding
beyond the salaries. The organizational culture is a source of advantage because
Zappos employees are held together by their loyalty which is tested through
payment to quit offers by the company.
 What resources and resulting capabilities and core competencies do you see within the
Zappos organization that gives it strategic competitiveness?
o Tangible Resources: Financial: No indication from the video but was certainly
viable given Amazon’s willingness to purchase; Organizational: No formal
reporting structure but the informality is productive; Physical: Domestic and non-
outsourced call centers and distribution centers; Technological: No specific
technological resources noted from the video but they do have to maintain some
online technology as an electronic retailer.
o Intangible Resources: Human: Due to the unorthodox culture, employees feel
secure and appear to collaborate well; Innovation: None noted within the video;
Reputational: Shay indicates that every phone call and call center is a branding
opportunity, unlimited happiness and devoted reputation with each customer.
o Capabilities: Motivating, empowering, and retaining employees, distribution,
management information systems, effective customer service; innovative
e-commerce activity, ability to maintain the culture
o Core Competencies: Distribution, Human Resources, Management Information
Systems, Marketing, and Management
 Will Zappos’ competitive advantage be sustainable?
o Text: A sustainable competitive advantage exists only when competitors cannot
duplicate the benefits of a firm’s strategy or when they lack the resources to
attempt imitation. The four criteria of sustainable competitive advantage include
valuable capabilities, rare capabilities, costly to imitate capabilities, and
nonsubstitutable capabilities.
o Zappos’ unique organizational culture is its competitive advantage and can be
sustainable as long as it continues to produce value, remains rare, unimitatable,
and nonsubstitutable. The Zappos culture is very intangible making it difficult for
firms to imitate or find substitutes.
 What value chain activities performed by Zappos help to create value for its customers?
o Support Activities: Technology and Human Resources
o Primary Activities: Distribution and Customer Service
 Why do you think Zappos is not outsourcing its call centers?
o Text: Firms must recognize that only activities where they cannot create value or
where they are at a substantial disadvantage compared to competitors should be
outsourced.
o Zappos believes they can still create value through its call centers and they have
the resources and capabilities required to achieve competitive superiority.
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: Howard Schultz

RT : 4:02
Topic Key: Business-level strategy, Managing relationship with customers, Market
segmentation, Differentiation strategy, Five forces of competition

The video opens with Howard Schultz, King of Coffee, CEO of Starbucks, working at a
Starbuck’s store. Overseeing more than 16,000 stores worldwide, creating a new coffee lingo, he
indicates that there are over 70,000 different ways to order a Starbuck’s coffee which makes up
the Starbucks experience. Now, seen as a symbol of grande indulgence, Starbuck’s is struggling.
The company has announced the closing of 600 underperforming stores in the U.S. and the need
to cut more than 1,000 jobs. Schultz admits that Starbucks may have grown too big too fast given
today’s economy and a business plan was not in place for the severity of the economic downturn.
Schultz recognizes that such a recession has created more discretionary coffee decision making
purchases. Dunkin Donuts, with its expansion, is providing some strong competition by offering
an upgraded coffee experience at a lesser consumer cost. When asked if he would bring the
Starbuck’s prices down, Schultz maintains that Starbuck’s will not cut corners but will reduce
waste to save the company more than $400 million and continue to sell more than a cup of
coffee. He says, post 911, that Starbuck’s traffic increased because of the need for a sense of
community and that they don’t want to do anything to fracture the community experience. He
also plans to continue to provide health insurance to all employees including part-time. When
asked if Starbucks can keep its mission statement in this economy, he says he is optimistic and
realistic and offers would be entrepreneurs this advice: Opportunities can be and have been
created during tough economic times. Starbucks was created by believing in big dreams so
dream big and dream bigger.

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Suggested Discussion Questions and Answers

 Describe Starbuck’s business-level strategy.

o Starbuck’s maintains a differentiation strategy by selling coffee in different
varieties and lingos but selling more than a cup of coffee by providing the sense
of community.
 How is Starbucks managing its relationship with customers?
o Text: Relationships with customers are characterized by three dimensions: reach,
richness, and affiliation.
o Starbuck’s manages reach by having over 16,000 stores worldwide. In terms of
richness, Starbucks may be a bit in default in that their products are so exquisite
(fancy names and orders) that some consumers are shunned away for lack of
knowledge. While many customers may want and like the sense of community
 that Starbuck’s offers, its differentiation strategy may alienate information flow to
potential customers. This, in turn, affects affiliation sense potential customers are
driven to the competition. Starbucks may need greater work in viewing their
business through the customer’s eyes—their desire to hang on to differentiation
drives this wedge.
 How would you describe the market segment(s) that Starbuck’s serves?
o Based on Table 4.1, Basis for Customer Segmentation and Consumer Markets:
o 20-40, male and female, middle to upper class, metropolitan areas, college
educated, $30,000 + income, light users (social), looking for status and social
discussions and networking
 Is the differentiation strategy appropriate for Starbucks? Why or why not? Now or in the
future?
o Providing more than a coffee experience is something that differentiates
Starbucks and they should keep. However, getting more in touch with their target
market would increase their ability to satisfy customers, produce appropriate
innovative products, and perhaps they may need focused differentiation. They
seem to serve a more narrow target market than they think and are certainly
distinctive in their pricing and coffee shoppe experience.
 Using the five forces model of competition, how should Starbuck’s plan to position itself
in these economic times?
o Rivalry with Existing Competitors: Don’t compete on price; Offer more value
(value chain) to the target market; Reduce rivalry through acquisition or joint
venture
o Bargaining Power of Suppliers: There many outlets that desire the coffee
association with Starbucks. Therefore, Starbucks should leverage their status with
other outlets of delivery—college campuses and grocery chains
o Bargaining Power of Buyers: Build quality and innovation with the true target
market; Starbucks true buyers are not looking for low cost but rather the
experience and status associated with Starbucks
o Substitutes: Continue to distinguish products and services to which there are no
substitutes for this target market. Attract customers away from cost leaders with a
better coffee drinking experience
o Barriers to New Entrants: New entrants will have low margins automatically,
therefore Starbucks should limit the low cost competition from selling more
volume. Again, joint ventures and acquisitions may be an opportunity to control
the market.
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: Hyundai South Korea

RT : 4:58
Topic Key: Competitive behavior, Competitive dynamics, Multimarket competition,
Competitive response, Strategic actions, Late movers

Video opens with a heavy traffic President’s Day sale at a Hyundai dealership in Long Island,
NY. Consumers were shown raving about the new Hyundai Sonata style and price. Hyundai’s
strategy is to sell more cars for less than the competition. With the rest of the auto industry in
free fall being off 21% from the previous year, Hyundai’s U.S. sales had increased 8%. Michael
Brown, Vice President of Atlantic Hyundai’s parent company, a dealership network, indicates
that Hyundai has the hot hand with an aim to dominate the marketplace. John Kraftchick,
President and CEO of Hyundai Motor American, is shown test driving one of the new Hyundais
and is interviewed saying that Hyundai’s chairman initiated the move to achieve the highest level
of quality in the industry in 5 years. With a quantum leap in quality, Hyundai has new models
that are, now, well-equipped, fuel efficient, and stylish. James Bell, analyst for the auto
industry’s Kelly Blue Book, reflects upon the first 1986 Hyundai to enter the marketplace. He
concludes that Hyundai retrenched and came back stronger by curing their reliability and
durability concerns with longer warranties and a blitz of ads that gained consumer public
attention. The Toyota downfall is an advantage for Hyundai but Hyundai, too, experienced its
own recalls. The Vice President for Hyundai Motor America concludes with their concerns that
Hyundai may experience the Toyota woes but it has been a wakeup call. John Kraftchick
provides a sneak peek of the newest Hyundai flagship automobile that will compete with the
BMW 7 Series, Mercedes Benz S Class, Lexus LS, and those cars that cost $70,000 to over
$100,000 dollars. He concurs that Hyundai stands for something different rather than price.
While Hyundai remains reactive, they are concerned about vehicles from India, Vietnam, China
and other upstarts just like Hyundai once was.

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Suggested Discussion Questions and Answers

 Describe Hyundai’s competitive behavior.

o Text: Competitive behavior is the set of competitive actions and responses the
firm takes to build or defend its competitive advantages and improve its market
position.
o Hyundai: Sell more cars for less than the competition; Improved quality and style;
Increased warranties; Advertising blitz
 What kind of competitive dynamics might you expect from Hyundai and other
automakers?
o The industry will use capabilities and core competencies to gain advantage in the
market; Hyundai along with other automakers will perform competitive analysis-
analyzing the market commonality and resource similarity, will look at their ability,
awareness, and motivation level to compete, look at each companies likelihood of
attack through mover incentives, organizational size, and quality, and look at the
likelihood of response including historical competitive actions, reputations, and
market dependence. Larger firms such as GM and Toyota are not likely to initiate
attacks but will respond aggressively when attacked by a company like Hyundai.
Again, firms are likely to respond by bringing new products to the market but they
do not use price a retaliatory weapon. Firms having resource similarities may
arrange a “coopetition” agreement. A firm may be more likely to attack the rival
with whom it has low market commonality than the one with whom it competes in
multiple markets. Hyundai is likely to refrain from all out attack due to few
resources than the larger and more established competitors.
 Is Hyundai involved in multimarket competition? Why or why not?
o Text: Firms competing against each other in several product or geographic
markets are engaged in multimarket competition
o Hyundai: Yes; making a blitz attempt to compete in geographic markets similar to
other like competitors and by offering a variety of products that compete in the
same product categories offered by the competition
 What impact will market commonality have on competitive responses in the auto
industry?
o Text: Market commonality: Competing in most of the same segments of the
market, from the luxury car to small fuel-efficient car, as well as hybrids, SUVs
and trucks. Market commonality is concerned with the number of markets with
which the firm and a competitor are jointly involved and the degree of importance
of the individual markets to each.
o Firms in the auto industry will be continually exploring knowledge in the same
general areas to advance their products and make them more desirable for
consumers. They will also be aware, motivated, and have the ability to compete
for market share in each segment and country they have entered. Firms with
market commonality are likely to compete on product rather than price, respond
aggressively, and seek high reward opportunities.
 What strategic actions may occur as a result of your answer to question #4?
o Text: Strategic action: a market-based move that involves a significant
commitment of organizational resources and is difficult to implement and reverse.
o The standards of quality by all firms will be raised to increase performance, the
number and appeal of features, flexibility, durability, serviceability, aesthetics,
and conformance. Service quality can also expect to play a key role which would
include increasing timeliness, courtesy, consistency, convenience, completeness,
and accuracy. Increase support for research and development and technology so
that processes may be quickly imitated and new product technical advances can
be made.
 Can Hyundai be identified as a late mover? If so, why? And what consequences should
they be knowledgeable of?
o Text: A late mover is a firm that responds to a competitive action a significant
amount of time after the first mover’s action and the second mover’s response.
Hyundai has traditionally been a second mover in the automobile industry.
o Hyundai: Yes; Top automakers such as GM and Toyota have been competing for
some time while Hyundai introduced a vehicle in 1986, long after their rival
began. Hyundai, too, hasn’t pushed into the market since that time---until now.
o Consequences: Success is likely to be less than the first and second movers; To be
successful, they must have a unique way to compete and enter the market which
means keeping a niche strategy with lower cost production and manufacturing.
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: Barry Diller

RT : 5:38
Topic Key: Corporate-level strategy, Levels of diversification, Value-creating diversification,
Operational and corporate relatedness, Related and unrelated diversification,
Motivations to over diversify

In an interview with Leslie Stahl, Barry Diller, once Paramount CEO, reflected upon seeing this
primitive interactivity of computers, televisions, and phones and how it seized his curiosity.
Diller saw a future where most shopping would be done by interacting with a screen. Even his
wife indicated they were intrigued by this entire new world. She said Barry Diller can see
something way before you can see anything. In the interview, Diller concurs that most of the
public considered him to be losing his mind with the purchase of QVC and trading the glamour
of Hollywood away. In Westchester, PA, Barry Diller made his first fortune as his own boss.
But, in a string of setbacks, he involved himself in a bidding war to buy Paramount only to make
a mistake by not making the last bid. Learning from his mistakes and making other deals, he
ended up losing QVC. Despite this, his gut feeling told him that interactive commerce would
catch on so he purchased QVC’s competitor HSN. In the interview, Diller confirms that the
public’s perception of his company is correct as a hodge podge but it’s an interactive
conglomerate operating in financial services and flirt services.

Diller says that the development of his company has been a journey and they are figuring it out
along the way. He says he knows now that many of his business related to one another and has
united all his brands under one new corporate headquarters. He wanted to give his company,
IAC, the same cache as other big internet companies. In comparison to Google, Barry Diller,
says that IAC is an endless multiproduct company and his desire would be like Proctor and
Gamble one day. With a personal fortune of well over a billion, Diller’s wife says he is driven by
the vision. Shown in business meetings, Diller makes decisions quickly and his employees say
that his ability to grasp new and difficult concepts is uncanny. With 20,000 employees, Diller
runs intense meetings and he is the ultimate decider who controls the votes in the company.

Also check out http://www.fastcompany.com/1767926/barry-diller-iac-launch-social-network-

for-nostalgic-seniors

Suggested Discussion Questions and Answers

 Describe Diller’s corporate-level strategy.

o Text: A corporate-level strategy specifies actions a firm takes to gain a competitive
 advantage by selecting and managing a group of different businesses competing in
different product markets.
o Diller’s: To be an endless interactive conglomerate of multiproducts similar to
Proctor and Gamble—presently all activities for creating financial to flirt services.

 Describe IAC’s level of diversification.

o IAC is considered related linked diversification signifying a moderate to high level of
diversification. IAC appears to share resources and products and services,
technologies, and distribution channels.
 What do you think was Diller’s reason to diversify?
o Reduce managerial risk would be an estimate but really he appears to be diversifying
based on what he sees and likes.
 Is Diller’s approach value-creating diversification? Why or Why not?
o Yes, the expansion of IAC has brought economies of scope, sharing of some activities
with the interactive nature of many of the businesses, core competencies can be
transferred into other ventures, and overall market power has increased. At some
point, it appears that Diller was attempting to block competitors through multipoint
competition especially when he lost QVC.
 Explain how IAC businesses and brands are related? Related diversification?
o All IAC businesses and brands use an interactive computer component. Corporate
relatedness is high while operational relatedness is low
 Is Diller in a position to over diversify?
o Diller is likely to over diversify due his consideration that IAC is just “figuring it
out”. In other words, he appears to have no real plan for businesses to add and
chooses fresh and new ideas because he likes them which could produce a lot of
different and related companies with each failing to impact overall market share. His
vision without a plan may only result in too many companies.
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: Southwest Merger

RT : 2:01
Topic Key: Mergers, Acquisitions, Restructuring

The video opens with a typical price conscious consumer who is the target of the merger between
Southwest and AirTran. AirTran executives assert that with the merger, the potential exists to
spread discount airfares farther is even greater. Discount carriers are known for stimulating
competition and helping to lower airfares. Consolidation of major carriers such as United and
Continental airlines brings the number of major carriers in the U.S. to only four.

In general the average consumer is finding fewer seats and higher prices and feels the airlines
have worked hard to make flying not fun. Despite not pleasing to the customer, the industry is
making money again with critical profit centers known as add-on fees. With $25 for a checked
bag, $35 for phone reservations, and up to $300 to change a reservation, major airlines have
made $2.4 billion in profits with $1.3 billion coming from add-on fees with $745 million from
checked bags alone.

Southwest charges no fees for changing flights or for the first two checked bags and the merger
with AirTran may help to lower ticked prices in the industry. Individuals say that wherever
Southwest goes, they will pressure their competitors to refrain from excessive fees in the long
haul.

Also check out http://www.southwest.com

Suggested Discussion Questions and Answers

 What would make the arrangement between Southwest and AirTran a merger and not an
acquisition?
o Text: A merger is a strategy through which two firms agree to integrate their
operations on a relatively coequal basis. An acquisition is a strategy though which
one firm buys a controlling, or 100 percent, interest in another firm with the intent
of making the acquired firm a subsidiary business within its portfolio.
o Merger: Southwest and AirTran are integrating operations to spread low cost air
fare around but each business operates independently.
 What reasons do you think Southwest and AirTran had for merging? and What
approach(es) did they use?
o Reasons: Increased low cost air fare market power and overcoming entry by other
 low cost carriers
o Approaches: Keeping value chain activities cost below the competition, maintain
economies of scale in low cost air fare, increased speed to the market, and
broadened the cost of acquisition by other firms

 Why would the Southwest/AirTran merger not be successful?

o While integration difficulties, inadequate evaluation of target, inability to achieve
synergy, too much diversification, overfocus on acquisitions, being too large, and
large debt may be reasons that all mergers and acquisitions may not be successful,
the only reason that Southwest and AirTran may not be successful is that they
may not achieve synergy. The other reasons don’t apply to this merger.
 What strategies would you recommend to Southwest should they need to restructure?
o Text: Restructuring is a strategy through which a firm changes its set of
businesses or its financial structure.
o Strategies for Restructuring: Downsize, Downscope, a Leverage Buyout, or
simple focus on the core business are all options
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: Emerging Markets in India Brings Westerners and Trade

RT : 3:19
Topic Key: International strategy, Business-level strategy, Corporate-level strategy, National
advantage

The country of India doesn’t look like the new frontier in the high tech revolution but in the
ancient rural villages of southern India, amidst the chaos of crowded streets, is a bold new world.
India has turned into a technology mecca by being able to draw big name international
companies and by creating a few of their own. Mohandas Pai, CEO of InfoSys, provides a tour of
its facilities and explains the company’s extraordinary growth by growing from 500 to 50,000
employees in 12 years. He says it’s time to go East young man. InfoSys believes the key to
luring foreign investors and workers is to create companies on par with any in the West. Pai
showcases the InfoSys conference room which is noted as similar to the United Nations. With
over 40 office buildings, 2 gyms, basketball courts, a supermarket, a golf course, and its own
bank, InfoSys looks more like a resort spa than a company headquarters.

Along with Indians who have traded jobs overseas to come home, increasing numbers of young
Americans from elite U.S. colleges are coming to work for companies like InfoSys in India
which has the second largest software industry. Many feel they can get more experience and
opportunities they could not get in the U.S. Graduates of U.S. colleges are interviewed for their
perspectives on the opportunities to contribute to organizations and the lures that are available in
India. Americans are working hard and living well with lower salaries and lower cost of living
with minimum standards of 3 meals a day for a $1. Mohandas Pai says that young Americans
should come to India for the future is here.

Also check out http://www.indianeconomics.org/

Suggested Discussion Questions and Answers

 What international strategy incentives does India offer to a foreign investor? What
limitations exist in India for companies desiring international expansion?
o Incentives: 1) Opportunities to integrate operations on a global scale particularly
with on par business facilities, Americans coming to India to work and the
technology foundation already existing in India, 2) Opportunities to better use
rapidly developing technologies with existing companies such as Infosys, 3) Gain
access to consumers in emerging markets with low cost standard of living and
good working job available in India
 o Limitations: Crowded streets and rural villages which paint a less than positive
picture of India’s infrastructure
 What benefits does InfoSys receive from its international strategy?
o Increased market size and economies of scale and learning
 How does India’s national advantage(s) influence its business-level strategy?
o India’s specialized and advances national advantage factors allow it to develop a
business-level strategy that can build strong home competitors that can make
strong and successful global competitors.
 What corporate-level strategy is used by InfoSys and why?
o Transnational Strategy: InfoSys is looking for global efficiency and local
responsiveness. They attempt to maintain control in India but do so with local and
international employees which provide “flexible coordination.”
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: Yahoo/Microsoft Partnership

RT : 1:57
Topic Key: Cooperative strategy, Strategic alliance, Business-level cooperative strategies,
Corporate-level cooperative strategies

The Yahoo/Microsoft partnership, while the Silicon Valley talk, has employees concerned at
Yahoo about more layoffs in the Yahoo search department. The deal teams of two of the biggest
technology companies against Google for the lucrative control of the internet search market.
Analyst believe that, in the short term, Google would has little to worry about but in the long
term they may depending on how advertisers respond to the idea of a larger #2 in the search
advertising market.

Google, currently, has 65% of the market while Yahoo has almost 20% and Microsoft at a distant
third with less than 10%. The managing editor for CRN Magazine considers this absolute steal
for Microsoft in that Yahoo wins the ability to stay an independent company with a huge new
friend. Reporters say consumers won’t notice changes right away but the partnership will benefit
consumers over the long run because it doesn’t hurt to have a very strong #2 in search. With
consumers receptive to the move, analysts believe that it will boost Bing’s exposure to Yahoo’s
audience giving Microsoft its desire for a greater share of Internet advertising. Yahoo is
reserving the right to retain control of the user interface which will control the look and feel of
how the search results will be presented but the technology is all done by Microsoft. Analysts
predict a tie in to remind people that Bing is what’s providing the results which is key to
branding for Microsoft.

Also check out http://www.microsoft.com/en-us/default.aspx and http://www.yahoo.com/

Suggested Discussion Questions and Answers

 What kind of competitive advantage is created through the Microsoft/Yahoo cooperative

strategy? Explain.
o Microsoft and Yahoo have created a collaborative or relational advantage.
Through the partnership, each company is able to take their areas of expertise to
help each build a greater place in the market.
 What kind of strategic alliance has occurred with Microsoft and Yahoo? Explain your
answer. For what reasons do you think they developed such an alliance?
 o Based upon video information, discussion and cases can be made for various
types of strategic alliances. However, because Microsoft and Yahoo did not
establish a separate independent company, it appears they have taken the Yahoo
look and the Microsoft technology and created a nonequity strategic alliance for
the purpose of becoming #2 in the search market. Text: A nonequity strategic
alliance is an alliance in which two or more firms develop a contractual
relationship to share some of their resources and capabilities for the purpose of
creating a competitive advantage. Reasons: Innovation, Growth, Increased
Revenue, Increased advertising exposure for Microsoft, Expanded resources and
capabilities needed to reach objectives for both Microsoft and Yahoo
 Now that Microsoft and Yahoo have partnered, what business-level cooperative strategies
do you think we can expect from them? Why?
o Text: A business-level cooperative strategy is a strategy through which firms
combine their resources and capabilities for the purpose of creating a competitive
advantage by competing in one or more product markets.
o We should be able to expect complementary strategic alliances from Microsoft
and Yahoo because of a continued need to utilize one another’s resources and
capabilities to bid for the search market. They will need to have a competitive
response strategy because the partnership will initiate concerns from Google to
fight back. Also, Microsoft and Yahoo will need competition reducing strategies
to continue to make gains in the search market. Even after the partnership, they
still remain significantly behind in the search market share. While each may not
want to enter into illegal collusion efforts, they made need to resort to further
partnerships to make such impact on competition.
 What corporate-level cooperative strategies do you think we can expect? Why?
o Text: A corporate-level cooperative strategy is a strategy through which a firm
collaborates with one or more companies for the purpose of expanding its
operations.
o We can expect diversifying alliances and synergistic alliance strategies from
Microsoft and Yahoo. Diversifying alliances will used to continue to share resources
and capabilities for product expansion and geographic diversification. With more
strategic alliances possible, both companies will entertain synergistic alliances to
create economies of scope so that synergy can be created across multiple functions
and partner alliances. As this partnership and others result in testing of relationships,
both companies may consider a united independent company in the long run in order
to better compete.
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: Whistleblowing
RT : 6:00
Topic Key: Corporate governance, Agency relationship, Market for corporate control,
International corporate governance, Global corporate governance

When hospital staff failed to speak out about poor care, the challenge began to fall on relatives.
Julie Bailey began to take on Stafford General Hospital. Believing that it would never happen to
her, it happened at Stafford where she took her mom. Julie Bailey’s mother, Bella, had been
taken to Stafford General Hospital in September 2007. But, from her first impressions, she
believed something was wrong. She recognized that the patients in her mom’s ward couldn’t
speak for themselves and the relatives were visiting them oblivious to what was going on. For 8
weeks, Bella’s family members maintained a 24-hour watch at her bedside keeping a record of
what they saw. Julie Bailey reads the records made and indicated the fear they had for being
branded troublemakers. Bella Bailey died in the hospital in November 2007. Julie Bailey created
a determined campaign, in her café, to make people aware of what she had seen but struggled
make her voice heard. In an interview, Julie listed all the people she tried to speak to with the
intent to try and tell as many people as possible.

At that time she was unaware that the primary investigator of the Health Care Commission was
planning to investigate high death rates at the hospital between 2005 and 2008. The report, when
made public, showed managers putting targets ahead of patient care. With the mortality rates
being further investigated, the report agreed there were serious concerns about patient care. It
appeared that some doctors were even, privately, aware of the problems. The Commission report
also said that of the majority of doctors interviewed said they would not have been happy for a
relative to have been treated there. Julie Bailey expressed her concern that it wasn’t good enough
for their relatives but it was good enough for ours. She says if they had known or the doctors had
spoken out none of their relatives would have been put there. A Staffordshire MP, Tony Wright
—Labour, Cannock Chase, could not believe that doctors would be happy delivering that level of
care and that nurses must have been unhappy working in that situation. He had helped introduce
legislation to encourage employees to speak up—The Public Interest Disclosure Act of 1998 was
intended to give whistleblowers legal protection from dismissal or victimization. Mr. Wright
indicates that the whole point of these provisions was so that individuals could raise their
concerns properly without threatening their job, without damaging their career, and without
having to go to the media. However, in Staffordshire, there was a whole culture that discouraged
complaints. The investigation indicated that nurses felt poorly supported as a profession and
consultants appeared to have given up expressing their views since managers were said to dislike
critical comments and ignored them. Mr. Wright says that the governments should revisit what it
said to health organizations in the past—the good things such as the need to get whistleblower
protection in place. The new leadership at Mid Staffordshire NHS Foundation Trust has now
made it known that quality of care is now its primary concern. To this end, it is investing 12
million pounds in frontline clinical staff, improved training and facilities, and has published a
new “no blame whistleblowing policy” aimed to bring poor practice out in the open.

Also check out http://news.bbc.co.uk/2/hi/uk_news/england/staffordshire/7948293.stm

Suggested Discussion Questions and Answers

 What corporate governance mechanisms failed at Stafford General Hospital?

o Text: Corporate governance is the set of mechanisms used to manage the
relationship among stakeholders and to determine and control the strategic
direction and performance of organizations.
o Stafford General Hospital Failures: 1) Ownership concentration—Managers, at
the hospital, were putting targets ahead of patient care. In other words, there must
have been some incorrect directive and incentive given to managers to be more
concerned for meeting the numbers rather than concerning themselves with the
patient care required by stakeholders. 2) With a hospital culture that discouraged
complaints and a new leadership after the report, perhaps the oversight board of
directors/leadership either instilled the culture to managers or they failed to have
appropriate oversight of managers to ensure stakeholder satisfaction. 3) The last
possible governance failure may have been in executive compensation in that
Stafford leadership may have been compensated for the targets rather than
stakeholder return.
 Were there possibilities of agency problems within Stafford? Why or why not? Could
managerial opportunism be an issue?
o Text: Agency relationship exists when one or more person (the principal or
principals) hire another person or persons (the agent or agents) as decision-
making specialists to perform a service.
o Agency Problems at Stafford: Absolutely. It is very possible that overall
leadership hired managers who had different interest and goals. Thus, managers
pursued targets ahead of patient care. Also, due to expanded services of the
hospital, managers could have become overloaded in responsibility and resorted
to what was most important—managing the numbers.
o Text: Managerial Opportunism is the seeking of self-interest with guile.
o Stafford Managerial Opportunism: Stafford managers may have seen ways to earn
extra compensation incentives by being more concerned for targets than patient
care.
 Can the Trust Foundation for Stafford be effective as a market for corporate control?
o Text: The market for corporate control is an external governance mechanism that
becomes active when a firm’s internal controls fail.
o Trust Foundation: The Trust Foundation, while its intent may not be to diversify
 or merge hospitals, has taken over a very undervalued hospital to form one that
takes necessary steps to improve patient care. Can it be effective? It must be.
Investing 12 million pounds in frontline clinical staff, improved training and
facilities and publishing a new “no blame whistleblowing policy” aimed to bring
poor practice out in the open are appropriate steps in corporate control.
 What role do you think the corporate governance structure of the United Kingdom played
in the problems at Stafford?
o Text: Effective corporate governance is also of interest to nations. Although
corporate governance reflects company standards, it also collectively reflects
country societal standards
o United Kingdom: In the United Kingdom, the fundamental goal of business
organizations is to maximize shareholder value. Therefore, this mentality became
prevalent at Stafford and agents and principals operated the hospital in that
manner.
 How do you think the situation at Stafford will impact global corporate governance?
o As countries and companies seek to attract foreign investments and awareness of
global happenings become much quicker, the situation at Stafford can easily
detract interest in foreign investment in United Kingdom hospital facilities,
pronounce lack of global confidence in United Kingdom hospital facilities, and
raise the global bar in hospital care and corporate governance due to concerns of
repeating the Stafford situation across the world.
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: GM Bankruptcy
RT : 00:59
Topic Key: Organizational structure, Organizational controls, Strategic controls, Strategy and
structure relationships

As it emerges from bankruptcy, the mighty General Motors (GM) Corporation will become the
smaller GM company. Half its brands are being sold off or phased out leaving only Chevy,
Buick, GMC, and Cadillac. The new GM is reportedly changing its logo background to green to
emphasize its commitment to smaller more fuel efficient cars.

The United States Treasury will be the company’s biggest stockholder and the American
taxpayer will own more than 60% of the new GM. The Obama administration has picked a new
management team—Fritz Henderson as GM’s interim CEO, Ed Whitacre as GM’s chairman, and
design guru, Robert Lutz has been asked to stay on. However, the government wants new blood
throughout the company. Edmunds.com representatives says that how the GM organization
unfolds is going to determine a new GM or just a smaller same old GM.

Also check out http://www.gm.com/

Suggested Discussion Questions and Answers

 Is GM’s organizational structure aligned with its strategies? If so, why? If not, what is
needed?
o Text: Organizational structure specifies the firm’s formal reporting relationships,
procedures, controls, and authority and decision-making processes.
o From the video, the government has emphasized the need for new designs among
the GM brands and has maintained a design guru for the GM staff and the attempt
to change their logo to green in accord with the design of more efficient cars are
both indicators of attempts to align structure and strategy. However, the
government weave into the business also presents volatility in structural stability
for GM. Flexibility and stability are much needed components of the GM
structure. Because of GM’s historic strategic inertia, the government now has had
to induce change upon the company. It will be very difficult for GM to return to a
 simple structure but must rather provide a functional and efficient one. This will
provide for greater functional specialization particularly in areas of design and
other knowledges that fuel innovation rather than stagnation. Upon efficiency, a
multidivisional structure may have opportunity for development.
o Instructor may consider more update structural changes for discussion.
 What specific strategic controls do you believe are key to GM’s future success? Should
GM’s value chain change?
o Text: Organizational controls guide the use of strategy, indicate how to compare
actual results with expected results, and suggest corrective actions to take when
the difference is unacceptable.
o Strategic Controls: GM must concern itself with what it might do and can do
regarding information from the external environment and what it has to be
competitive.
o Financial Controls: Obvious need to measure performance against standards.
o Value Chain: Yes, changes must be made to the value chain particularly in areas
of primary activities. Support activities are available but the primary activities
have been inefficient i.e. speed of production and production adaptability to the
market.
 Recognizing GM’s current state, how do you see the new GM strategy and structure
relationship? How do you see it evolving?
o Due to continued governmental intervention, the GM strategy and structure
remain less than a fit. According to the video, the realignment began with
structure rather than strategy first. The government put the people in place and
then said revamp your strategy. The strategy should be GM’s rather than the
government’s which according to the video is not the case. While GM had smaller
fuel-efficient cars in the pipeline before the bankruptcy they simply were not
efficient in their production efforts which brought them to a government bailout.
To this end, GM has a government structure driving to achieve a government
strategy to stay afloat. Meeting targeted goals dictated by the government does
not necessarily produce a long term strategy.
o The Evolution: It appears that government’s desire is to return GM to a functional
structure with a limited staff with a focus on design that supports a strategy of
differentiation. Text: Firms using the differentiation strategy produce products
that customers hopefully perceive as being different in ways that create value for
them. Such an approach can develop into continuous product innovation. Sales
growth could evolve GM back into a multidivisional structure but still with no
clear strategy. Ideally, GM needs to set its differentiation strategy with a
functional structure and allow the differentiation to create or expand growth
toward the multidivisional structure. At which time, GM may then need to look at
changing strategies.
INSTRUCTOR'S NOTES FOR VIDEO
EXERCISES

Title: Meg Whitman Profile

RT : 4:20
Topic Key: Strategic leadership, Top management team, Human Capital, Social Capital,
Organizational culture

In an interview, Meg Whitman describes the company and site, Auction Classifieds, when she
went to interview for the job of CEO. Today, Ebay is one of the great success stories of internet
commerce with over 10 million registered users, 224 million in revenue, and most important for
an e-business an actual income of 10.8 million.

Meg Whitman indicates that leaving the land-based economy for the internet has meant being a
pioneer by creating an entirely new global marketplace at the beginning of an internet revolution.
Whitman attributes the womanly aspect of being a consensus oriented manager--being raised to
build consensus, be a team player, not be ego driven, and happy to have other people take credit
for things has proven to be effective in the Ebay environment. Whitman is noted for living a
simple life such as driving a Jeep and living in a simple house with a couple of kids. She says
that what drives her to keep working is that she loves what she does in helping to build Ebay into
a company she thinks it can be or the next chapter in the Ebay story.

As mom, Meg Whitman, says that her success has meant making some real and difficult
sacrifices. She says her biggest regret is not spending as much time with the kids. She admits she
missed certain parts of their development and wasn’t there to see some of the really fun things
they did. She concurs that such time can never be gotten back and that those tradeoffs are there
for people like her. She says when children are at the ages of 1 and 3 or 2 and 5 there is a lot of
guilt for not being there so you have to love what you do. Her first advice to young women
coming out of college or business school is that you find something that you love because you
will do better at it and it will make making those tradeoffs a bit easier. She doesn’t believe that
men worry about such issues as much because they may have stay at home wives which is an
incredible support system allowing them to focus perhaps 100% of their efforts on their career.
She believes that, as a women, you can have a wonderful life but you must decide what tradeoffs
you are willing to make which is different for every single person. She firmly says she would do
it over again.
Also check out http://blogs.forbes.com/clareoconnor/2011/07/29/ebay-billionaire-meg-
whitman-eyeing-vp-role-under-romney/

Suggested Discussion Questions and Answers

 In what ways has Meg Whitman’s characteristics provided strategic leadership at Ebay?
o Text: Strategic leadership is the ability to anticipate, envision, maintain flexibility,
and empower others to create strategic change as necessary. Strategic leadership
involves managing through others, managing an entire enterprise rather than a
functional subunit, and coping with change that continues to increase in the global
economy.
o Meg Whitman characteristics: Consensus oriented manager, Being able to build
consensus, Being a team player, Flexibility experience in making tradeoffs with
children and work, and Allowing others to take credit and have a role in decision
making
 How is Meg Whitman appropriate for a top management team?
o Text: Top executives need to have self-confidence but must guard against
allowing it to become arrogance and a false belief in their own invincibility.
o Meg Whitman: She is a consensus builder, not ego driven, and allows others a
role in determining strategic opportunities and handling problems. Being a
female, she also brings a heterogeneous perspective to top management.
 What do you think would be Whitman’s approach to human capital?
o Human Capital Approach: Meg’s approach, due to her know characteristics,
would include development and retaining of human capital. She would consider
employees as a capital resource which requires continuous investment in training
and development programs.
 How important is social capital to the success of Ebay?
o Text: Social capital involves relationships inside and outside the firm that help the
firm accomplish tasks and create value for customers and shareholders.
o Ebay: Internally, employees must cooperate to get the work done. Externally,
Ebay must be able to obtain resources needed to compete such as in strategic
alliances that would provide multiple capabilities for future opportunities.
 With Meg Whitman at the helm, describe Ebay’s organizational culture. Is there evidence
of an entrepreneurial mind-set?
o Text: Organizational culture is a complex set of ideologies, symbols, and core
values that are shared throughout the firm and influence the way business is
conducted.
o Ebay’s culture: Supportive, Innovative, Caring, Challenging, Decisive
o Entrepreneurial Mind-Set:
o Text: In firms of all sizes, strategic entrepreneurship is more successful when
employees have an entrepreneurial mind-set. Five dimensions characterize a
firm’s entrepreneurial mind-set: autonomy, innovativeness, risk taking,
proactiveness, and competitive aggressiveness.
o Ebay: Meg’ characteristics such as being able to make trade-offs, allowing for
 consensus decision making, being a team player, and happy to have other people
take credit for things apparently have been instrumental in bringing Ebay from
Auction Classifieds. Given the success of Ebay, it can be concluded that she
encourages and promotes innovation from her people which coincide with the
characteristics of a firm with an entrepreneurial mind-set.

INSTRUCTOR'S NOTES FOR VIDEO

EXERCISES

Title: SPANX Profile

RT : 3:03
Topic Key: Strategic entrepreneurship, Corporate entrepreneurship, Entrepreneurial
opportunities, Innovation, Entrepreneurial mind-set, International
entrepreneurship

SPANX is Sara Blakely’s million dollar baby. She is a 30-something undergarment entrepreneur
offering females something to help them look better in their clothes. Ten years ago, Blakely
struck her first blow in the battle of the bulge by simply cutting the feet off a pair of pantyhose
and created a comfortable, slimming underlayer which was all but invisible. Now, bringing in
almost $150 million a year, Blakely began with $5,000 in the bank and had pursued standup
comedy instead of an MBA. Blakely’s success, while seen in hindsight, received much resistance
for two years because of the male dominated manufacturing of women’s shapewear who didn’t
understand the concept. Blakely understood than every woman wants to straighten out some kind
of figure flaw without suffering for it which has been known down through 100 years of history.
With the support of a celebrity stylist, Blakely’s invention works painlessly. But, competing
brands such as Body Wrap and Flexies are now squeezing into the marketplace with sales of
traditional hosiery shrinking as a victim of the casual workplace. However, so-called shapewear
is an expanding segment of the more than $2.5 billion undergarment business. With the support
of Oprah Winfrey, Blakely is not resting. As her own best customer, Blakely is designing a wide
range of SPANX products with names that reflect her sense of humor.

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Suggested Discussion Questions and Answers

 Is there evidence, on the part of Sara Blakely, that strategic entrepreneurship exists?
o Text: Strategic entrepreneurship is taking entrepreneurial actions using a strategic
perspective. In this process, the firm tries to find opportunities in its external
 environment that it can try to exploit through innovation.
o Sara Blakely: The fact that Sara Blakely looked at how women wanted to cover
up figure flaws as a means for developing SPANX coincides with strategic
entrepreneurship. Also, Her pursuit of additional SPANX designs furthers her
entrepreneurial spirit.
 Does Sara Blakely set the stage for corporate entrepreneurship?
o Text: Corporate entrepreneurship is the use or application of entrepreneurship
within an established firm.
o Sara Blakely: Yes; Sara Blakely continues to recognize that the market for
shapewear is indeed expanding and acts as her own best customer to make future
SPANX designs.

 What entrepreneurial opportunities do you see ahead for Sara Blakely

o Text: Entrepreneurial opportunities are conditions in which new goods or services
can satisfy a need in the market.
o Blakely opportunities: Examples: Combined clothing and SPANX products,
Other underlayers for both men and women, athletic apparel with SPANX
capability.
 How would you classify the SPANX innovation? What advantages and risks are
associated with the SPANX innovation?
o Text: Innovation is the process of creating a commercial product from an
invention.
o SPANX: SPANX is an innovation. The invention of undergarments and shape
garments were already available. Blakely simply brought something new into use.
o Advantages: Growing market, Non-standard product, and Quick Return on
Investments
o Risks: Competitors, Inability to continue needed research and development,
Inability to continue commercialization
 Is Sara Blakely an entrepreneur with an entrepreneurial mind-set?
o Text: Entrepreneurs are individuals, acting independently or as part of an
organization, who perceive an entrepreneurial opportunity and then take risks to
develop an innovation to pursue it. The person with an entrepreneurial mind-set
values uncertainty in the marketplace and seeks to continuously identify
opportunities with the potential to lead to important innovations.
o Sara Blakely: Yes, she continues to be her own best customer and with knowledge
of competition looks for new design opportunities.
 Should Sara Blakely pursue international entrepreneurship? Why or why not? What
concerns might she have?
o Text: International entrepreneurship is a process in which firms creatively
discover and exploit opportunities that are outside their domestic markets in order
to develop a competitive advantage.
o Sara Blakely: Yes, it would be a good idea for SPANX to move internationally
given its early position in the life cycle and the opportunities available for market
competitive advantage. However, she must consider what approach to use in
placing SPANX in international markets, e.g. exporting, etc., investment
requirements, unstable foreign currencies, problems with market efficiencies,
insufficient infrastructures to support the business, culture differences, necessary
international teams, and limitations on market size.