Jan 2021 SM Tutorial Case & Answer PDF

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Summary

There is no simple answer to this question, but the question usually leads to an
interesting discussion. Some of the more likely motives as related to those discussed in this
chapter are:
a. New sources of demand—another theme park in the U.S. would have less potential, since U.S....

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UKMM3013 Strategic Management January 2021 Trimester

UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF ACCOUNTANCY AND MANAGEMENT ACADEMIC YEAR 2020/2021 TRIMESTER JANUARY 2021 BACHELOR OF ACCOUNTING (HONS) BACHELOR OF INTERNATIONAL BUSINESS (HONS) SUBJECT CODE: UKMM3013 SUBJECT TITLE: STRATEGIC MANAGEMENT TUTORIAL QUESTIONS & ANSWERS

Tutorial Week 1 Introduction • • • • • •

Tutor introduction to students. Tutor goes through Course Plan and explanation of course syllabus. Tutor explains the requirement for Group assignment and Individual assignment. Tutor clarifies any queries arise. Formation of group for Group assignment Group Discussion on the company selected for the group assignment

Tutorial Week 2: Case 1 (Hill, Schilling & Jones) Case Scenario: The Rise of Lululemon pp. 35-36 1. What opportunity did Chip Wilson see that lead to the establishment of Lululemon? Lululemon athletica inc. is an upstart company that provides premium quality athletic apparel at a premium price. While the worldwide economy has been in decline, lululemon has been producing financial gains in every major measure of performance. 2. Why are Lululemon’s sales per square foot so high? The case describes lululemon’s niche strategy, inimitable corporate culture, and leadership values, as well as conditions in the external environment. As details of economic, competitive, and stakeholder pressures unfold in the case, it is evident that the company is rapidly facing new challenges. Given the evolving situation, the question arises as to whether lululemon can maintain and nurture the effectiveness of community-centered and symbiotic relationships as it attempts to grow the business and expand globally.

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UKMM3013 Strategic Management January 2021 Trimester

3. How would you characterise Lululemon’s business level strategy? Lululemon engages in value-creating activities to execute an effective focused differentiation strategy. The support functions which contribute to producing customer value for the company are presented in the graphic on the following page. They include finance management, human resource management, knowledge information systems, strategic leadership, and marketdriven research and development. Lululemon’s primary functions which create value are also comprised in the graphic on the following page. They include supply chain management, marketing and sales, retail operations, and customer relationship management. To maintain success with its focused differentiation strategy, lululemon must continually strive to increase the value of the company’s sources of strategic competitiveness. 4. What must the company do to maintain its competitive advantages? Core competencies, and ultimately competitive advantages, derive from the organization’s tangible and intangible resources. When the firm formulates and implements a value-creating strategy based on its available resources, strategic competitiveness is achieved. At lululemon, strategic competitiveness results from a vision and focused differentiation (niche product market) strategy built upon brand equity and the power of the company’s culture. Virtually all of lululemon’s employees, ambassadors, and guests participate in yoga and/or running, and the company’s unique feedback collection methodologies ensure that the brand and culture are perpetuated. The experience and value lululemon creates for its dedicated customers cannot be replicate or “bought” by big corporate brand names like Nike and Adidas, which represent the antithesis of the company’s culture. Under Armour might attract serious practitioners with highperformance product features, but the company has a stronghold in other team-oriented sports and is unlikely to significantly increase its focus on yoga.

Tutorial Week 3: Case 2 (Hitt et al) Case scenario: Watch Out All Retailers, Here Comes Amazon; Watch Out Amazon, Here Comes Other Competitors pp. 67-68 1. Can any firm beat Amazon in the marketplace? If not, why not? If so, how can they best do so? Amazon has developed such strengths in terms of product offerings in virtually all market segments, systems, and customer service that it would be challenging for any other organization to overtake it. Amazon excels at strategically exploiting opportunities in the marketplace. For example, the firm recognized that to achieve its vision and growth objectives, it would have to move into clothing and food sales. A rival firm may be able to compete on price, but even there, Amazon is able to control costs and offer reasonable prices on its goods. 2. How formidable a competitor is Google for Amazon? Please explain. Currently, Google is not really a direct member of Amazon’s strategic group. Amazon is a NH

UKMM3013 Strategic Management January 2021 Trimester

retail giant, and many people turn to Amazon first when searching for product information. However, Google is still the dominant search engine for all types of information searches. 3. What are Amazon’s major strengths? Does it have any weaknesses? Please explain. Over the years, Amazon has mastered the art of online retail selling, and it now offers an almost limitless selection of reasonably priced products for its customers. Recently, the organization has started to revamp its delivery model, enabling the firm to deliver fresh food to many of its customers. With this kind of financial success, Amazon is now in a position to start developing its own proprietary products, such as media content. However, Amazon cannot offer the kind of personalized service or small niche products that some consumers want. 4. Is Jet.com a potential concern for Amazon? Why or why not? With an extensive online product offering and the backing of major investors, Jet.com may pose a threat to Amazon. By pricing its membership at nearly half that of Amazon, the new entrant may attract a significant number of customers—especially those who are budgetconscious—away from the online giant.

Tutorial Week 4 : Case 3 (Hitt, et al) Case Scenario: Is Strengthening the Superdry Brand a Foundation to Strategic Success? Pp. 97-98. 1. What influences from the external environment over the next several years do you think might affect Superdry’s ability to compete? Perhaps the most significant factor in Superdry’s external environment would be its chosen demographic (teens and 20-somethings) and their changing tastes and preferences. Superdry may also be affected by changes in its industry, such as new entrants offering product substitutes. 2. Does Superdry have one or more capabilities that are valuable, rare, costly to imitate, and no substitutable? If so, what are they? If not, on which criteria do they fall short? Superdry’s branded clothing has a unique look, style, and feel that consumers find valuable, rare, costly to imitate, and nonsubstitutable. As long as the brand’s designers continue to stay ahead of trends and create clothing that appeals to their demographic, the firm can sustain this capability. Superdry also sells its products through branded stores known for their “theater and personality,” which gives the brand another competitive advantage. However, these capabilities are relatively inexpensive to imitate and substitutes are readily available, so Superdry must guard these capabilities carefully while continuing to innovate and create new competencies. 3. Will the actions that Superdry is taking solve its problems? Why or why not? Comments from analysts suggest that the new executive team is already stabilizing the firm and running it in a more strategic way, rather than the “entrepreneurial” way of the original leadership team. The brand’s decision to attempt to recapture some of its original customers who have “grown up” with the brand is a smart decision, as it is probably easier to appeal to NH

UKMM3013 Strategic Management January 2021 Trimester

existing fans rather than convert an entirely new audience. It is also wise for the brand to capitalize on its international design influences by expanding into new international markets, such as China. 4. What value does Superdry create for its customers? Superdry gives its customers a totally unique line of clothing and an unusual shopping experience. Thanks to the logo-branded clothing, buyers can be part of the brand’s image. 5. What actions would you recommend the management of Superdry take to resolve its problems and turn around the performance of the firm? In addition to paying close attention to shifts in the firm’s external environment (demographic and economic factors, in particular), Superdry needs to conduct an internal analysis of its resources, capabilities, and core competencies in order to shore up its competitive advantages while looking to new core competencies it can create in the future. It could also conduct a value chain analysis to look for additional sources of value.

Tutorial Week 5: Case 4 (Hitt et al) Case Scenario: Hain Celestial Group: A Firm Focused on “Organic” Differentiation pp. 135-136 1. Hain Celestial is implementing the differentiation strategy. Provide some examples of the competitive dimensions on which this firm focuses while implementing its differentiation strategy. Perhaps the most important dimension in Hain Celestial’s differentiation strategy is the quality of its food products, which are all natural and organic. Another interesting dimension is its method of growth, which has focused on the acquisition of known brands as opposed to the internal development of products. Because of the perceived value of natural and organic foods among some consumers, Hain Celestial is also able to demand premium prices. 2. On what environmental trends did Hain Celestial base its business-level strategy? What environmental trends could have a negative effect on this firm’s strategy in the future? Why? Hain Celestial capitalized on many consumers’ emerging interest in living a healthier lifestyle, specifically through the consumption of natural and organic foods. Because these foods were not as readily available some years ago, the firm was able to demand premium prices for its products. However, as these products become more common and mainstream and are available from multiple producers, consumers may begin to view these products as average, instead of premium, which would drive down the prices they’re willing to pay for such products. 3. In years to come, should Hain try to grow primarily organically, through collaborative strategies such as joint ventures and strategic alliances, or through mergers and acquisitions? Explain your answer. Hain Celestial has been very successful in growing through acquisitions, which may prompt some students to recommend continuing with this approach. However, other students may NH

UKMM3013 Strategic Management January 2021 Trimester

acknowledge that ongoing shifts in consumer preferences, the entry of new competitors into the market, and other external and internal factors may lead the organization to form strategic alliances or joint ventures in order to gain access to resources and capabilities it doesn’t currently possess. 4. What are the most serious competitive challenges you anticipate Hain Celestial will face over the next ten years? How should the firm respond to these challenges? The organic and natural food market has already attracted a number of new competitors and has inspired several traditional food producers to modify their products to better meet the needs of health-conscious consumers. Increased competition and the greater availability of healthy products will most likely drive down prices. Hain Celestial must look for efficiencies in its own production and operations in order to guard itself on price, while also continuing to seek out innovative products that differentiate it from rivals.

Tutorial Week 6: Case 5 (Hitt et al) Case Scenario: The Ripple Effect of Supermarket Wars: Aldi Is Changing the Markets in Many Countries pp. 169-170 1. Describe how Aldi is creating competitive rivalry in the retail grocers’ industry. Students’ answers should include at least one reference to additional information obtained through an online search. Aldi is positioning itself as the low-cost leader by selling brandlabel products and perhaps one or two other brands in each product category in “no frills” stores that are similar to warehouse stores. Additionally, it keeps costs low through packaging, transportation, and employee expenses. In the United States, Aldi faces stiffer competition but is gaining on competitors in the discount food retail industry. 2. When Amazon purchased Whole Foods, how it will affect Aldi as it seeks to expand its presence in the United States? What competitive actions might Aldi take in response to Amazon’s purchase of Whole Foods? Amazon’s Whole Foods is focused on a very different part of the grocery market. Traditionally emphasizing higher-priced products, Whole Foods, as delivered through Amazon, is all about convenience, for which its customers are willing to pay extra. Aldi is focused on the opposite end of the market, appealing to consumers whose greatest concern is price. If it takes any action at all, it may simply be to more clearly differentiate itself in the marketplace, perhaps through advertising. 3. Decide if Aldi is more likely to respond to any strategic actions Amazon might initiate through Whole Foods or if Amazon through Whole Foods is more likely to respond to any strategic action Aldi takes. Be prepared to justify your decision. Students’ answers to this opinion-based question will vary but should demonstrate reasoned support for their opinions. Some students may believe that Amazon/Whole Foods may want to go after some of Aldi’s low-cost market share, and thus may choose to take such actions as lowering prices, offering lower-priced product lines, or creating some kind of cost-savings incentives, such as coupons or a loyalty rewards program. Other students may believe that Aldi should go after some of Amazon/Whole Foods’ market share by offering more products, NH

UKMM3013 Strategic Management January 2021 Trimester

some higher-priced luxury products, or perhaps somehow using technology to make the shopping experience more convenient for consumers. 4. In a competitive rivalry sense, explain the actions (strategic and/or tactical) you believe Walmart and Costco will take to respond to Aldi’s intentions to have 2,500 U.S. stores by 2020. Students will present several possible solutions to this question. Some may suggest that Walmart and Costco become more like Aldi by reducing their product offerings, emphasizing in-house brands, and reducing other costs. Other students may recommend that Walmart and Costco find more ways to differentiate themselves while still maintaining fairly low costs, such as through improving customer service. Ultimately, Walmart and Costco must attempt to dampen Aldi’s growth.

Tutorial Week 7: Case 6 (Hitt et al) Case Scenario: Walt Disney Company Corporate Strategy pp. 201-202 1. What corporate diversification strategy is being pursued by Disney? What evidence do you have that supports your position? Although the case does not provide an exact breakdown of Disney’s revenues, it appears that many of its businesses are performing extremely well. Thus, Disney probably fits the profile of a firm pursuing a related diversified strategy in which at least 30 percent of its revenues come from sources outside the dominant business. In fact, it would be difficult to say which of Disney’s businesses is the dominant one. Additionally, Disney’s business units share resources and possess many product, technological, and distribution linkages. 2. How does the corporate office create a parental advantage, which is difficult to duplicate by its more focused competitors? Disney’s knowledge of its customers, content creation, retail marketing power, and franchising abilities are unparalleled. Disney uses these capabilities across all business units, driving success in all of them by creating unmatched value for customers. None of Disney’s competitors has the same depth and breadth of resources and capabilities at this time, and they would be difficult to acquire quickly or easily. 3. What are synergies and economies of scope and how do they work at Disney to lower its overall costs? When a diversified organization has synergy or economies of scope across its business units, the sum total of what the units can accomplish together is greater than what those units could accomplish individually. At Disney, synergy comes from the way its business units feed into each other. For example, a successful film can be parlayed into consumer goods sales. It could also be leveraged into a theme park ride that attracts consumers to Disney theme parks or into a theater or cruise experience. Because the same content (characters, songs, etc.) is created once and then leveraged across multiple products, Disney’s costs are lower. Also, the momentum created by the success of the linked products lowers marketing costs. 4. Given the diversification approach that Disney uses, what are some things they can do to deal further with the trend toward cord-cutting and competition from large streaming and content NH

UKMM3013 Strategic Management January 2021 Trimester

producers such as Netflix, Amazon, and other content producers? Disney has both the resources and capabilities to compete directly with streaming content producers. It can also create yet another related business unit that is responsible for managing this new form of content delivery.

Tutorial Week 8: Case 7 (Hitt et al) Case Scenario: Cementing a Merger of Equals between Lafarge and Holcim Has Been Difficult pp. 231-232

1. What are the primary drivers of Lafarge-Holcim’s merger strategy? Leaders of both Lafarge and Holcim believed that the proposed merger would give the new firm increased market power in Europe. Specifically, they felt the firms could capitalize on economies of scale that would result in a $1.5 billion annual cost savings. Greater diversification and access to new knowledge and capabilities (Holcim’s marketing strengths and Lafarge’s innovations) were also key drivers behind the merger. 2. Given that there have been performance difficulties of this “merger of equals,” which of the “Problems in Achieving Acquisition Success” do you believe have most likely affected this deal? Initially, a lack of due diligence and an inadequate valuation of one of the two firms (Holcim) caused a breakdown in the negotiations, but this issue was eventually worked out and the deal went through. Since then, however, LafargeHolcim’s performance issues seem to stem from integration difficulties. The two organizations have very different management styles and corporate cultures. Furthermore, the two firms have not realized the economies of scale they had hoped for, which is an inability to achieve synergy. 3. The new CEO, Jan Jenisch, has undertaken a restructuring strategy. Why do you think the market reacted negatively to this plan? Jenisch’s decision to write off $4 billion in assets revealed to investors just how badly the firm was performing. In light of additional announcements to cut costs, sell other assets, and focus on fewer markets, investors lost confidence in the new firm and reacted negatively to his plan. 4. What would you suggest the firm do to improve its restructuring plan and ultimately its poor performance? In hindsight, the merged firm’s poor performance might have been avoided if the two firms had developed a better plan for integration. But now that the deal is done, LafargeHolcim needs to focus on achieving synergy. The new restructuring plan needs to seek out ways to create efficiencies, cut costs, and make better use of shared resources.

Tutorial Week 9: Case 8 (Hitt et al) NH

UKMM3013 Strategic Management January 2021 Trimester

Case Scenario: The Global Soccer Industry and the Effect of the FIFA Scandal pp. 268-269 1. How does the FIFA scandal represent a form of political risk for companies operating in foreign countries? Although FIFA is a not-for-p...