What applications of the Boids simulation might apply to management?
Thought questions: What are the sources of added value? Porter identifies two generic strategies, low cost and differentiation. What other approaches can you offer? What is the added value of added value?
Memorial Sloan Kettering Hospital in its mission statement the following: "The staff at Memorial Sloan-Kettering Cancer Center endeavors to care for the person -- not just the illness -- from the moment that someone arrives at the hospital until long after he or she has gone home…. Special services designed to ensure that patients get through their illness whole in mind and spirit are an integral part of Memorial Sloan-Kettering."
(ii) Write a similar statement for GM. Does GM appear to be living up to that statement?
Leaders and Challengers
At present, company A holds a process patent that gives it a monopoly in the manufacture of a certain product. A challenger, company B, hopes to enter the industry on the basis of a new, as yet unpatented, process.
Company A, aware of the threat of entry from B, could also decide to pursue a patent on the new process.
If B succeeds in patenting the new process, it will be able to enter the industry and compete with A. On the other hand, if A manages to obtain the new patent, company B will continue to be shut out.
The new patent will be secured by the company that outspends its rival.
How much should company A be prepared to spend to secure the patent? What about company B?
The Hospital Game
Consider the case where there are three buyers, each of whom is interested in purchasing one unit of a good. For concreteness, think of this as a hospital bed. Each buyer has a value of 100 for a bed, and this is known to all parties.
On the seller side, there are two sellers, each of whom has exactly two beds. The costs associated with filling the beds are zero.
What would supply and demand tell you about the likely price outcome in this game? Do you agree with this conclusion? How would you expect the bargaining to end up? How would things be different if the three buyers were jointly represented by a single HMO?
1. Is Southwest’s success
due to the attractiveness of the industry in which it competes?
2. What is Southwest’s
strategy and why is it a success?
3. What can go wrong
for Southwest?
Put yourself in the shoes of Michael Armstrong. The price of microprocessors/computing power has fallen by several orders of magnitude over the last decade. Imagine that the same thing will happen to the price of moving bits over phone lines. What should you do?
What could you do to make the value of a telephone service 15% better? What are some missing complements that would make the phone a 10x improvement.
Prepare the Cheap Complements case. The questions are in the case.
Lonely Planet
1. What are some of the things that Lonely Planet should be doing that it isn’t. Are there some complementary businesses that Lonely Planet might want to engage in? Publishing, travel agency, cable television, …?
2. What are some activities that it should not do (or continue not doing)?
In answering 1 and 2, is Tony Wheeler’s vision a constraint or a healthy vision?
3. Have a look at Lonely Planet’s website. (http://www.lonelyplanet.com) You will notice there are neither advertisements, nor anything for sale other than their guidebooks. What do you think about this? Have a look at Yahoo’s travel material. You can see that it’s a private label product supplied by Lonely Planet. Does this strategy make sense? Thinking big picture, what would your web strategy be?
http://travel.yahoo.com/Destinations/Oceania___South_Pacific/Countries/Australia//Cities/Melbourne/
4. What are some of the threats to Lonely Planet’s business caused by the Internet? How would you respond to those threats? What opportunities are created and how would you take advantage of these opportunities? Specifically, what might you do in the publishing arena? What new types of products could and would you offer?
5. As Lonely Planet’s loyal readers get older, wealthier, and softer, there is some question as to whether they outgrow Lonely Planet’s guide (which you might say are focussed on saving money, not time). Of course Lonely Planet can and will continue building relationships with each new generation of backpackers. But, how would you respond to the graying of their original audience?
6. What is Lonely Planet’s added value?
ASSIGNMENT TO TURN IN: Take one of the questions 1--5 (your choice) and write up ONE proposal. Just your one best idea. I want you to feel passionate about this proposal. (If you follow question 2, it would be a passionate proposal never to do something.) If you had Hibbard’s job, how would you go about implementing this idea? Come to class prepared to present your proposal in 3 minutes.
Thought questions: What is Go airlines trying to accomplish? What other airlines (or other prototypes) are it similar to? How is it different from those models?
Go back to Southwest for a moment. In twenty five years, Southwest has expanded service to cover roughly 50 cities, or two cities a year. Is this cautiousness appropriate or do you think it is excessive? How fast should Go go?
Is Southwest’s success reliant on its point-to-point short-haul service?
If Southwest were to move to long-haul flights, how would you take advantage
of its strengths? Would you recommend adding long-hauls? What does this
imply for Go? Can Go pursue a short-haul strategy?
Is Go an "attacking brand"? Do you expect it to make money? What are some of the other ways it can make money besides air transportation?
Thought questions: Imagine that you could charge a different price to your customers and to your competitor’s customers. To whom would you charge a lower price?
What do you think of the Fly Buys program? What are some simple examples of how you might use this database? What are some more complex ways to use this data? Why do you think the program is run out of Hong Kong? Going forward, what are some problems you see with this program.
What are some of the problems with reward programs? (E.g. the Citibank/Ford card and Citibank/Apple card have been discontinued. Airline frequent flyer programs are far from perfect.) How would you design a new type of loyalty program?
Regarding the LA Times article:
1. How do frequent flyer coupons differ from offering repeat-purchase discounts.
2. Is the customer loyalty built by frequent-flyer coupons artificial? Does it provide enhanced satisfaction of consumer wants?
3. How much store do you put in the view that frequent-flyer program are just kickbacks to business travelers?
4. Is it important that the coupons may not be sold?
5. What are some of the problems with the programs as they stand?
Wal*Mart Stores, Inc.
1. Historically, what
have been Wal-Mart’s key sources of competitive advantage in discount
retailing?
2. Specifically, how
large are those advantages in 1994?
3. How sustainable is
Wal-Mart’s competitive advantage in discount retailing?
4. Will Wal-Mart’s diversifications
overseas and its supercenters be a success?
11. Oct.
7
Thought questions: Incentives,
control, double marginalization, ownership of IT assets (spillover).
12.
Oct. 12
Case: Merck – Medco: Vertical
Integration in the Pharmaceutical Industry
1. What does Merck gain from its acquisition of Medco?
2. Does Medco fit with Merck's strategy? Should
Merck have acquired Medco?
3. Is vertical integration necessary in order to
realize these advantages?
October
13:
Special session: Boeing
Location: GM Room, Horchow Hall, 55 Hillhouse Avenue
Time: 2:30 - 5:00p.m.
1. Why has Disney
been successful for so long?
2. How does Disney
create value across its various businesses?
3. How did Eisner
rejuvenate Disney? Specifically, what accounted for the increase in profits
from
1984 to 1987?
4. How has Disney
maintained growth over the past decade?
5. Can it continue
to grow? Has it already grown too far?
EPE (Elvis Presley Enterprises
http://www.virgin.com
15.
Oct. 26
The USA Today Decision: Making Headlines Across the Nation
1. What is Gannett’s proposed strategy for creating
value through USA Today?
2. Does Gannett have the necessary resources and
capabilities to create a successful national
newspaper?
3 Should the Board approve the proposal?
Put yourself in the position of Murdoch’s Sky Television. Why would you enter the market? What is your added value? Why shouldn’t you enter the market? Where do you come out?
yourself in the position of BSB. Will you concede the market to Murdoch? Is this position a surprise to Murdoch? Why would it be hard for the two sides to reach some type of an agreement? Having taking these answers into consideration, does this change any of your recommendation regarding Murdoch’s strategy.
Hold or Fold Exercise:
For how long would you advise player A to fight? What advice would you give player A on how to play this game? What if you fight for one quarter and discover that B, too, decided to fight in the first quarter?
Shouldn’t A form a probability assessment over how long B will fight for, and then optimize given this assessment? Are there any unreasonable assessments? So, for how long should A fight?
But let’s pursue the idea of budget constraints for a moment. If, as A, we somehow actually knew that B could not last beyond 8 quarters, then certainly we should start fighting. We’d be secure in the knowledge that we would have to ante up the $10 million for at most 9 quarters. What if we knew that B could last for 20 quarters?
Fog of Business Assignment:
Should player E1 enter market 1?
In answering the above, what assumptions are you making as to what E1 believes—about the players’ rationality, about what the players believe about one another’s rationality, and so on?
What would it take for E1 to decide not to enter?
17. Nov.
2
De Beers Consolidated Mines Ltd.
(A)
18. Nov.
4
1. Arthur's Ball game
If you follow this model along, where do you expect the process to end up? Will it converge to all red or all blue? One way of finding out is to build an excel spreadsheet and do a simulation.
Imagine that when an economy is small, say less than $1 billion in production that is all exported (outside the local economy), there are not enough things to buy locally, so that consumption in the local economy is all made up of imports.
When the economy hits the $1 billion threshold, people are able to buy 10% of their consumption needs from local businesses. (Obviously, this discrete jump in unrealistic, but it makes the model much easier to solve and doesn't change the conclusions.) This consumption of local goods further stimulates the economy as it is itself additional demand. Thus, the $1 billion (export) sales leads to $100 million of local purchases which, in turn, leads to $10 million more purchases, which leads to $1 million more, .... and the end result is a local economy with $1.111 billion in sales.
Similarly, when the economy has grown to $2 billion in export sales, there will be even more goods available for people to buy and we now imagine that 20% of their consumption needs can be filled locally. This has an even bigger impact on the local economy. The $2 billion in sales leads to a local demand of $400 million which, in turn, generates another $80 million, which generates $16 million, and so on ... leading to a total of $2.5 billion.
Assume that $3 billion in export sales leads to the local economy buying 30% of its goods locally. And a $4 billion economy can provide 40% of its goods locally. A $5 billion economy can provide 50% of its goods locally. A $6 billion economy can provide 60% of its goods locally. A $7 billion economy can provide 70% of its goods locally. An $8 billion economy can provide 80% of its goods locally. And even if the economy gets bigger than $8 billion, for simplicity, we'll assume that no more than 80% of the local consumption can be filled by the local economy.
Barnes & Noble versus Amazon
19.
Nov. 9
Bundling Assignment
1. Evaluate the consequences of offering a single ticket for the concert series either in place of, or in addition to, offering tickets for each concert separately.
2. Evaluate the consequences if the multi-product company described in the case sells the two products only as a bundle.
3. Evaluate the consequences if the company offers coupons, entitling a purchaser of product A to a certain amount ($10, say) off the price of product B.
Now let’s go beyond the case study. Consider first the case of a monopolist selling two goods, A and B. Imagine that there is no threat of entry. Why might this monopolist prefer to sell the goods as a bundle rather than sell them individually? What types of goods should be bundled together? What are some reasons not to bundle goods together?
Next consider a firm with market power selling goods A and B who is concerned with the threat of a possible entrant. How does selling the goods as a bundle effect the threat from entry? What types of goods are best to sell together?
Finally, in spite of the firm’s efforts, an entrant does come into the market with one product, say A. Is bundling an attractive strategy now?
In all of these questions we can keep things simple by assuming that the firm either sells A and B separately or as a bundle but not as a mixed bundle (buy A, B, or and A-B bundle).
20.
Nov. 11
Contracts and customs
21.
Nov. 16
Ready-to-eat Breakfast Cereal
Industry in 1994 (A)
22.
Nov. 18
Westinghouse Uranium
23.
Nov. 30
Car Leasing / Auto-by-Tel
A New Lease on Life
1. Why did the
Big Three increase warranty terms in the mid-1980s rather than simply decrease
the price of their vehicles?
2. Why didn’t
the Japanese manufacturers follow suit when the Big Three doubled their
powertrain warranties?
3. In what ways
might warranties create value?
4. In what way
might warranties destroy value?
5. It’s clear
that improved quality decreases the cost of providing a warranty. What
effect does
providing a warranty have on quality?
6. How did warranties
and improved car quality change the relationship between the new and
used car industries?
7. What is the
optimal life of a car from the collective perspective of all firms in the
automotive
industry? Does competition result in an average car life different from
this optimal life?
8. What made leasing
popular for consumers in the 1990s? What made leasing so attractive to
dealers and manufacturers?
24.
Dec. 2
The Competitive Advantage of
Nations
What do you think about creating a brand name outside of India? What brand name would you use? How might Tata tea use its relationship with Snapple to create a brand name?
What strategy would you take regarding Darjeeling? Would you be willing to make incremental purchases, or would you only be willing to proceed if you could get a critical mass all at once?
What strategy would you pursue regarding the purchase of other tea plantations inside India? What part of the value chain would you like to be in?
As a member of the board of Tata Tea, what would your position on the Tata Brand Equity Scheme be?
What would you do to expand the tea
business? In India? Outside India?