Is Porsche Killing the Golden Goose?

01. The MiniCase began with Aesop’s Fable of “The Goose That Laid the Golden Eggs.” What
is the take-away of this fable? Is Porsche killing its golden goose?

Ans: In the automotive industry, Posh brand of cars enjoys the maximum profit margins. The
customers of Posh are willing to pay a premium to enjoy the pride of owning it. In the case,
reference to Aesop’s fable ‘killing the golden goose’ is made to mean that, customers are willing
to pay premium because Posh (golden goose) is owned by a fewer customers across the world.
By setting a drive for selling more units of Posh, the company may be risking damage to the
brand i.e. killing the golden goose. Customers may not appreciate too many Posh cars running on
the road; they may look for other luxury brands.

02. For many decades, Porsche pursued a focused differentiation strategy. Using a clear strategic
profile as a focused differentiator, Porsche was very successful and very profitable. More
recently, the Porsche brand is repositioning itself from focused differentiation to broad
differentiation by changing its competitive scope. What are the risks inherent in such strategic
positioning? What are the benefits? Do you think Porsche will be successful in carving out a new
strategic position as a broad differentiator? Why or why not?

Ans:

Step 1
Differentiation requires a company to provide a unique product or service to a customer segment.
In focused differentiation, a company offers services to a narrow set of customers, but broad
differentiation is aimed to address wider set of customer base.

Step 2

Previously, Posh was providing sports car to the affluent customers, who were keen on driving
powerful vehicles. In less than a decade, Posh has introduced three distinct models of cars, which
includes a sedan. The launch of new models has changed the strategy of Posh from focused
differentiator to broad differentiator.
Step 3
Focused strategy may give a strong brand image and gain customer loyalty. It can also prevent
the competitors to enter the niche market. But, focused strategy for long time can blind the
company to the changes in the customer preferences and needs.

Step 4
In broad strategy the company has access to a wider set of customers, and can achieve economies
of scale. But some elite customers may become repulsive to the brand on introduction of lower
priced models, and this can damage the brand image.

In the current scenario, broad differentiation is beneficial to the company, because the number of
wealthy customers is on the rise, and there are unexplored pockets in the market where the Posh
brand may sell well.

03. Porsche is expanding rapidly through both related and geographic diversification. Do you
consider this business strategy to be successful? Why, or why not? If you consider Porsche’s
diversification to be successful, what is the source of Porsche’s success?

Ans:

step 1
It is apparent that Posh is diversifying to gain growth in multiple markets and achieve market
power. Limited diversification can lead to better business performance. But providing
differentiated products to more than six segments may affect the business significantly.

step 2
Geographical diversification can be beneficial to the company because it is right time to expand
in the globalised world. Also, many countries are economically maturing to absorb product
offerings such as Posh.

step 3
Strong brand image, support from the corporate office, and financial might helps the Posh to
venture into new markets.
04. Volkswagen ranks with GM and Toyota as one of the top-three carmakers in the world today
in terms of sales volume (in units). It uses its Volkswagen brand, as well as its entire portfolio of
other brands, including the luxury marques of Porsche, Audi, Bentley, Bugatti, and Lamborghini,
and at the lower end, the Seat, Skoda, and Scania. What type of diversification is Volkswagen
pursuing? What are the advantages and disadvantages in VW’s corporate strategy?

Ans:

step 1
Corporate-level strategy is a plan of action to gain a competitive advantage by acquiring different
businesses competing in different markets. From the case description, it is evident that VokWag
is not only owning Posh, but also several other automotive companies. It is apparent that the
principal aim of diversification by VokWag is to gain market power, and related diversification
strategy is obvious in the case.

step 2
They are following concentrated expansion. they are into just fragment of delivering vehicles
especially purchaser vehicles. be that as it may, in this portion, it is creating vehicles for a wide
range of clients like games people, family reason, extravagance reason, family reason, and an
average look et cetera. they are just in vehicle fabricating yet just in autos. they are not
investigating generation of expansive vehicles like trucks and a few more other options for their
customers.

step 3
Advantages and disadvantages of the company strategy are as follows:

VokWag has chosen concentric diversification strategy in the car industry. The concentric
strategy has enabled the company to gain access to different markets and offer products to
different customer segments. This strategy has positioned the company not only to gain higher
revenues, but also learn strategies from each other. But, along with increased sales and revenues,
the corporation is exposed to larger risks. It can provide key benefits for the company in its
growth and increase its customer base in the market.
Few entities may enjoy the profits by following the concentric diversification, but few entities
may suffer loss due to limited capital and lack of expertise in the field.

05. In the recent past, both GM and Toyota ran into problems as they chased the goal of
becoming the world’s leader in terms of unit sales. GM achieved this goal but lost billions of
dollars in the process and ended up in bankruptcy (in 2009). Toyota then pushed output and
briefly held the numberone spot in terms of unit sales, but found that the emphasis on increasing
output meant that quality issues arose, which then negatively affected its reputation. If you were
asked to advise VW, what pitfalls would you point to that may need to be considered when
attempting to be the world leader in unit output? How might VW avoid those pitfalls?

Ans:

step 1
Focusing on unit sales per se is not harmful, but many companies push revenue and sales growth
at all costs, which can be detrimental to the business. While driving sales growth, profitability of
the business needs to be checked. As the sales increases, enough profit margins must be earned
per unit of sale, or else, there are chances the business can go bankrupt.

LEGO’s Turnaround: Brick by Brick

01. Why did LEGO face bankruptcy in the early 2000s? In your reasoning, focus on both
external and internal factors.

Ans:

step 1
In the year 2000, the L-brik company was on the verge bankruptcy for various reasons. The main
external factor that derailed the growth of the company was the dip in sales due to the popularity
of electronic and computer games. Children had many alternatives or substitutes to L-briks toys
step 2
The internal factors include lack of appropriate business strategy, deviation from the core
competence, opening of too many innovative projects, careless diversifications, and absence of
strong leadership.

02. What is LEGO’s core competence? Explain.

Ans:

step 1
Core competence is a unique mixture of resources, abilities and skillful actions of a company that
gives an edge over competition.

step 2
L-briks core competencies include the following.

• Resources and ability to carefully design and manufacture plastic bricks and toy components

• Capable engineers, strategists and managers who has deep knowledge of child psychology,
market needs and business acumen

• Efficient procurement, manufacturing and supply chain systems and activities for delivering
plastic toy components

03. Apply the core competence–market matrix to show how LEGO leveraged its core
competence into existing and new markets under Jørgen Vig Knudstorp, who was appointed
CEO in late 2004.

Ans:

step 1
The core competence market matrix shows the interrelation between existing and new markets
with the existing and new products.
step 2
After the person JVK was appointed as the CEO, the company L underwent a series of changes
that were favorable for the company. Earlier the company faced heavier financial losses which
made the capital structure of the company very weak. However, the new changes were
beneficent for the company and helped it to grow as desired.

The changes were as follows:

1. Shift of focus on core business activities and improvement in capital structure.

2. Shifting focus to distribution

3. Focusing on the supply chain cost

4. Focusing on digital strategies.

This helped the company to leverage its competence to existing and new markets in more
efficient ways.

Core competence matrix has four relationships which are mentioned below:

Existing product-Existing markets: The opportunity to improve the firm’s position in existing
markets by leveraging the existing core competencies in better ways.

New product-Existing markets: The new core competencies required to build and extend the
business in current markets.

Existing product-New markets: Redeploying and recombining the current core competencies

to penetrate in new markets or to make new markets.

New product-New markets: Looking into the future i.e. Strategizing for the market that would
be existing in near future.
step 3
The following table shows the steps taken by JVK to leverage the core competence of the
company within the existing and new markets:

04. In terms of revenue growth, LEGO experienced a competitive advantage over both Hasbro
and Mattel since 2007 because it grew much faster. What explains LEGO’s competitive
advantage?

Ans:

step 1
With respect to other toy companies, L-Briks have shown tremendous growth from the year 2007
to 2015. Only a dominant competitive advantage can give such a growth to a company. The
following factors have contributed to the competitive advantage of the company during this
period.

• Firm leadership with a vision

• Prudent divestments
• Focus on the core products

• Innovation of products through crowd sourcing

• Licensing agreements with popular brands

• Utilization of high quality materials and disciplined manufacturing process

• Globalised distribution of products

05. What must LEGO do to sustain its competitive advantage in the future? One avenue to tackle
this question is to think about diversification, both along products but also geography. Another
avenue is partnerships such as strategic alliances or even acquisitions. What lessons from
LEGO’s past should guide its future diversification?

Ans:

step 1
In order to maintain its competitive advantage the L-briks must continue the following practices.

• The company must focus on the construction toys for children, which has versatility

• Constantly update the product line with toy characters drawn from legendary, mythical,
historical and current movie themes

• Provide loyalty rewards to the repeat buyers

• Design products that trigger creativity and innovation among children, and create joyful
experience for them

• Use high quality plastic materials and manufacturing process

step 2
It is possible for the L-briks to focus and diversify their business at the same time. But, the
company must apply a balancing strategy. Related diversification may be recommended for the
toy company. Apart from geographic diversification the company can develop business through
educational activities for children; theme based amusement parks, virtual construction toys,
engaging movies for children, etc.

As in the past, the L-briks must avoid unrelated diversification such as getting into business of
apparels, clothing, TV show, etc.

From Good to Great to Gone: The Rise and Fall of Circuit City

01. Why was Circuit City so successful as featured in Good to Great? What was its strategic
position during its successful period? How did it contribute to competitive advantage?

Ans:

step 1
Company CC achieved huge success and got enlisted in “Good to Great” due to its core
competencies that enabled it to create higher economic value as compared to its rival firms.

Core competencies of the company included the following factors:

• Efficient point-of-sale, inventory tracking technology and huge IT investments has

enabled efficient flow of information throughout the firm. It provided huge flexibility to
Company CC for adapting as per the market demand.

• Highly motivated and well trained sales personnel of the company provided superior
service to its customers. It enhanced the satisfaction level and loyalty of customers.

Advanced technologies offered huge flexibility to Company CC; which in turn helped them to
address frequent changes in market demand. Competitors of the firm could not replicate their
core competitive model. Hence, Company CC enjoyed a competitive advantage at the
marketplace due to their unique and non-replicable business model.

02. Why did Circuit City lose its competitive advantage? What was Circuit City’s strategic
position during the time of competitive disadvantage?

Ans:
step 1
In 1990s, Company CC enjoyed a competitive advantage at the marketplace due to their unique
and non-replicable business model. However, after certain time period the company faces huge
losses and at the end of 2008 the company went bankrupt. The company lost its competitive
advantage in the marketplace because it did not upgraded and protected their business
procedures.

During the period of competitive disadvantage, the company used cost-competitive strategy. As

a part of this strategy, the company laid off its 3,000 highest paid sales personnel. Thus, the
company lost its best and loyal employees who had earlier helped it in offering superior
customer service.

03. What could Circuit City’s management have done differently?

Ans:

step 1
In 1990s, Company CC enjoyed a competitive advantage at the marketplace due to their unique
and non-replicable business model. However, after certain time period the company faces huge
losses and at the end of 2008 the company went bankrupt.

Company CC lost its competitive advantage due to the following reasons:

• Laying off its 3,000 highest paid sales personnel to gain cost competencies. Thus, the
company lost its best and loyal employees who had earlier helped it in offering superior
customer service.

• Diversification into non-core activities that distracted the focus of the managers from the core
activities of the firm.

Instead of above steps, Company CC should use the following steps to re-gain their
competitive advantage:

• The management should have focused on their core activities and try to add more value to
their existing services.
• Company could have used another ways to get competitive advantage rather than laying off the
employees. Cost advantage could be gained using inventory management or wastage
reduction strategies.

• The company should have started online business similar to its competitors.

• It should have frequently upgraded and protected their competitive strategy.

Hence, it is concluded that management of the Company should focus on improving their core
activities.

04. What is the future of Best Buy as the leader in big-box electronics retailing, especially in
light of tough competition by Amazon and other online retailers? What core competencies in big-
box retailing are critical to not only survive but also to gain and sustain a competitive advantage?

Ans:

step 1
Company BB needs to continuously upgrade and protect its core competencies in order to
maintain its top position in the online retailing market. Big box retailing is one of the highest
growing industries across the world.

Following core competencies are critical for the survival and growth of companies in big-box
retailing:

• Proper flow of information throughout its supply chain process using efficient point-of-
sale, inventory tracking technology and other data management tools. It would enable the firm
to track and capture the market demand in an effective way.

• Highly motivated and well trained sales personnel are important for a big box retailer as
they offer superior service to the customers. Furthermore, it would enhance the
customer satisfaction and loyalty.
• Big-box retailing is a dynamic industry as it involves intense competition between the rival
firms. Firms competing in this industry should frequently upgrade and protect their
competitive strategies to survive in the market.

Hence, it is concluded that big-box retailing firms need to continuously upgrade as per the
market dynamics for their survival and growth.

Cirque du Soleil: Searching for a New Blue Ocean

01. Cirque du Soleil was able to gain and sustain a competitive advantage for many years. Why
was Cirque du Soleil successful in the first place (while most other circuses barely survive)?

Ans:

step 1
The circus company CiduSo was able to make foray into the dying entertainment industry with a
blue ocean strategy. Blue ocean strategy is meant to create new value proposition in an
uncontested marker space. The key is to generate higher perceived value of the service for the
customer.

step 2
There are four principles to value innovation while applying Blue Ocean strategies i.e.,
eliminate, reduce, rise, and create. The new format of the circus followed these principles to
create outstanding experience to the customers. It eliminated the non value adding features and
hassles of the earlier formats, reduced the

For a thrilling and humorous experience created by the CiduSo, the customers were willing to
pay premium; the ticket prices ranged from $75 to $200 per person for a three hour show.

02. Which “industry” does Cirque du Soleil compete in? Who are its competitors?

Ans:

step 1
The business of CiduSo touches the elements of entertainment, performing arts and recreation
industry. The company employs performing and entertainment artists and the show carries the
elements of theatrical shows. Customers visit the show for various reasons which can include
entertainment, thrilling experience, chill out or recreation.

step 2
Since the company has followed the blue ocean strategy, it has made the competition irrelevant.
The company, its value proposition and performance are unique, and it is very difficult to find an
equivalent to its business. Still, the competitors of CiduSo may include Disney theme parks,
theatrical shows on the Broadway, operas and ballet programs across the world, movie houses,
etc.

03. Which factors contributed to Cirque du Soleil losing its competitive advantage, and as a
consequence led to a 50 percent drop in its valuation? Look at both external and internal factors.

Ans:

step 1
There are many reasons behind the dwindling business of CiduSo.

One of the approaches to analyze the business is to apply the life cycle paradigm. Every business
and product has a life cycle, which begins with introduction, growth, maturity and decline.
Probably the business has survived its life time, and now the customers do not find value in the
services.

step 2
Then, there are clear and crucial management mistakes and environmental conditions that pulled
down the CiduSo’s business. They include following points.

• Economic slowdown in the years between 2008-2010

• The management offered too many shows without any differentiation among the shows

• Increased operational costs and reduced profits

• Customers may have exhausted watching the same show many times
• Damage to the reputation of the company due to a mishap during a show

• Litigation and penal actions from the safety authorities

All these factors put together has negatively affected the show business

04. A recent report by OSHA concludes that Cirque performers suffered a high number of
injuries that required medical attention. One investigation found that Cirque’s signature show
Ka` had 56 injuries per 100 workers, which is four times the injury rate for professional sports
teams, according to the Bureau of Labor Statistics. What can Cirque’s management do to address
the safety concerns of its performers? With more safety measures and less risky shows, do you
think Cirque du Soleil will lose its differentiated appeal to audiences? Why or why not?

Ans:

step 1
The top management must give priority to the safety of the performers, and take initiatives to
achieve zero injury standards. The following actions may initiated by the management.

• Design shows that are thrilling but avoid life threatening performances in them

• Appoint an independent body to review the trapeze and aerial acts

• Regularly, check the safety of the equipments and consumables used for the show

• Train the employees regarding the safety matters

• Always provide safety gadgets while performing the risky acts

• Follow and comply to the regulatory standards to achieve the zero injury status

• Provide sufficient insurance to the performers

step 2
Since the customers are expecting to watch the thrilling performance, it may not be possible to
completely avoid the risky performances. Probable number of items in the dangerous circle may
be reduced. The company may focus on its mission while selecting the components of the show.

CiduSo is intending to evoke imagination, invoke the senses, and provoke the emotions of the
visitors to the show. If the top management decides to go by the mission statement, they can
avoid the risky performances. Imagination senses and emotions may be provoked by many other
interesting ways and shows may be innovatively designed.

05. Cirque du Soleil’s new owner has retained you (or your study group) as consultants. Which
recommendations would you make to address some of the external threats and internal
weaknesses to once again gain and sustain a competitive advantage? How would you implement
your suggested changes?

Ans:

step 1
The new owner of the CiduSo must keep the company’s mission intact and develop new kind of
shows with least risk.

The new management may think of applying new technology to display thrilling shows. Instead
of humans, the shows may include robots and their performance. With the help of holography,
the high risky performances may be manipulated through digital and laser techniques. Instead of
risky perfumers, the company must employ imaginations who can develop new themes for the
shows, and implement them with the help of technology.

step 2
By following the above recommendations the new management could overcome the external
threats from the competitors, avoid the constraints from the regulatory authorities, and remove
safety issues. Through innovation of the show themes regularly, the customer fatigue may be
reduced and product life cycle paradigm also can be followed. Too much reliance on technology
can attract competitors and reduce the entry barriers to the business. Hence, the shows must be a
blend of human and technological performance.
 Competing on Business Models: Google vs. Microsoft

01. How is a strategy different from a business model? How is it similar?

Ans:

step 1
There are fine differences between a business model and the strategy.

Strategy is the sum total of goal directed actions taken by a firm to achieve superior performance
in comparison to the competitors. The presence of a competitive environment and the projected
behaviors of the customers are crucial to the business strategy. To achieve strategic goals, the
total organization and every employee need to take efforts.

step 2
Business model projects the fundamental structure of a given business. It is the rationale behind
the business. It is the core plan of business which represents the value creation, resource
management and value capture of the business. The business model depicts the key operations of
the business that generate income, provides value to the customer, and how the resources, assets
and activities are linked to business goals.

step 3
Both business models and strategy are closely linked. A business model is a rational oriented
component of the business, while the strategy focuses on the actions to be taken for the goal
achievement and their effectiveness.

02. Why are Microsoft and Google becoming increasingly direct competitors?

Ans:

step 1
In the last decade it has been observed that Gol and MS have been competing to dominate the
computing technology market. Both Gol and MS are vying for the customers from the same
market space, but the business model and the strategic approach are different for them.

step 2
Though, both companies have emerged from different circumstances and product offerings, the
unprecedented success in their domains made them to explore the adjacent market spaces. While
doing so, the companies have encroached into each other’s strongholds and emerged as the
competitors.

step 3
MS began its journey as an operating system provider and ended up as an online search service
provider. Similarly, Gol became the most preferred online search service provider, and then
began developing operating system tools for mobile computing.

03. Identify other examples of companies that were not competing in the past but are becoming
competitors. Why are we seeing such a trend?

Ans:

step 1
One of the prominent examples of emerging competition from different industry is the case of
W-mart and AMZ. Both companies have revolutionized the way we buy. W-mart owns brick and
mortar retail stores all over the world, and AMZ has prominent place in the online retail across
the world

step 2
There are many reasons for the emergence of competition from previously unconnected
industries.

• Tremendous success and saturation in the native market prompts the companies to move on to
adjacent market spaces
• Accessibility to key resources and confidence to acquire new learning make it easier for the
companies to shift to new markets

• The technological advances and creative imagination of the organization makes it easier to
establish presence in other markets

• The entry barriers to many markets or industry are not strong enough to prevent the entry of
new competition

In future the competitors are going to arise from unconnected industries.

04. What recommendations would you give to Satya Nadella, CEO of Microsoft, to compete
more effectively against Google? To engineer a turnaround at Microsoft?

Ans:

step 1
MS has been in existence for four decades with a sustained competitive advantage. More than
70% of the PCs around the world use the operating system developed by MS, and other
application software such as word processor, spreadsheets, presentation and publishing tools
developed by MS also are sold along with the operating system.

The company follows broad differentiation as its generic strategy for gaining market share and
competitive advantage. In broad differentiation strategy, unique products are sold to a diverse
group of customers. The products of MS can be used by household, Individuals and business
organizations.

step 2
The current challenge to the MS is that the use and population of PCs are shrinking giving way
to mobile electronic devices such as Smartphone, note books, etc. In the new generation
computing environment, Gol’s operating system is more popular. Now, MS finds it difficult to
penetrate into the mobile operating system market.

step 3
The CEO of MS, SNad need to develop a path breaking strategy to protect the competitive
advantage and grow the business. By applying blue ocean strategy, the company must identify an
unexplored market, and develop services for it. For example, robotics is an emerging industry,
where the MS can offer solutions and services. Providing operating system or embedded learning
systems to the various robot manufacturing companies, the company may continue to grow.

05. What recommendations would you give to Sundar Pichai, CEO of Google, to compete more
effectively against Microsoft? To continue to sustain its competitive advantage?

Ans:

step 1
Gol has experienced tremendous growth which no other company has seen in the history of
business. In less than a couple of decades, it has reached a revenue growth of $66 billion in a
year. With a unique business model and strategy it has occupied a large portion of the internet
and mobile computing world. With its resources and competitive advantage it is bound to grow
further.

step 2
Gol has been following differentiation strategy, for a broad market. The innovative products such
as search engine, cloud services, operating system for mobile devices, etc. are unique and most
preferred tools by the online customers. Still, the company can expect competition from
companies such as MS.

step 3
The new CEO of Gol, SPi requires to protect its competitive strategy through innovative
services. First of all the company must focus its efforts on product development that are likely to
bring profitable business. There are many initiatives by the company which are not profitable in
any ways. Second, all the innovative products and services developed by the company must be
integrated into a single entity. Too much of product innovation offered in unconnected ways can
confuse the customers and can affect the company negatively.
 Wikipedia: Disrupting the Encyclopedia Business

01. The MiniCase provides an example of how advancements in technology can render
traditional business models obsolete. With introduction of its CD-based Encarta, Microsoft
destroyed about half the value created by Britannica. In turn, Wikipedia moved away from
Britannica’s and Microsoft’s proprietary business models to an open-source model powered by
user-generated content and available to anyone on the Internet. In doing so, it destroyed
Encarta’s business, which Microsoft shut down in 2009. At the same time, Wikipedia created
substantial benefits for users by shifting to the open-source model for content. Because
Wikipedia was able to create value for consumers by driving the price for the end user to zero
and making the information instantly accessible on the Internet, there is no future for printed or
CD-based encyclopedias.

a. What are the general take-aways in regard to innovation as driver of competition?

b. How can existing firms respond to disruptions in their industry?

Ans:

step 1
a) The intricacies of the relationship between innovation and competition are numerous. There
are a large number of factors that influence any innovation. These factors depend on the
perception on intellectual property protection, the social attractiveness of the invention, the
purpose of innovation i.e. to reduce competition or beat competition, peer encouragement to
innovate, economic gains and achievement of market power, etc.
Previously, competition was driving innovation, but in the present scenario innovation is driving
competition. For example, the invention of iPd gave competition to the music industry.

step 2
b) When companies face or try to avoid disruptive innovation in their industry, they must
acknowledge the disruption and take three key steps to contain the disruption.

• Always innovate product, process or business model to remain ahead of competition

• Keep watch on the low end market and develop solutions for that segment

• Disrupt own business even before competition disrupts the current business

02. The founder of Wikipedia, Jimmy Wales, is a social entrepreneur. Raised in Alabama, Wales
was educated by his mother and grandmother who ran a nontraditional school. In 1994, he
dropped out of a doctoral program in economics at Indiana University to take a job at a stock
brokerage firm in Chicago. In the evenings he wrote computer code for fun and built a web
browser. During the late 1990s Internet boom, Wales was one of the first to grasp the power of
an open-source method to provide knowledge on a very large scale. What differentiates Wales
from other web entrepreneurs is his idealism: Wikipedia is free for the end user and supports
itself solely by donations. Wales’ idealism is a form of social entrepreneurship: His vision is to
make the entire repository of human knowledge available to anyone, anywhere for free.

a. If you were the founder of Wikipedia, would you want to monetize the business? Why or why
not?

b. What are the pros and cons of for-profit vs. nonprofit business? Where do you come down?

Ans:

step 1
a) Monetizing social services such as free online encyclopedia is a choice and privilege of the
social entrepreneur. The founder of the W-pedia decided to offer the information free and to
sustain the service by explicitly seeking fund from donors and users.
The student who follows the case of W-pedia may monetize the service using the Google’s
business model. ‘Give the service free and monetize through advertisement’ shall be the guiding
principle.

step 2
b) The decision to run for-profit or not-for-profit business depends on the purpose of the
business, and preference of the entrepreneur. The not-for profit businesses have lesser tax
liabilities, has the permission to accept private donations, are eligible to receive public grants,
provide protection from personal liability, and apparently has lesser competition.

There are disadvantages to not-for-profit organization. First of all, excess revenue or financial
gains cannot be taken out as profit. The entrepreneur is eligible to take salary for the services
provided, but the salary must be reasonable. The owners of not-for-profit business are liable to
provide regular reports to the authorities and need to operate the projects transparently.

03. How can Wikipedia maintain and grow its ability to harness the crowdsourcing of its
“Wikipedians” to maintain high-quality and quickly updated content?

Ans:

step 1
For maintaining the competitive advantage of the online encyclopedia the W-pedia must ensure
the following actions.

• The W-pedia must identify the experts, may be through media reports, LinkedIn, Facebook, etc
and invite them to write about their domain expertise in the online pages.

• Periodically, remind the experts who have posted content to review and update the pages.

• Those experts who provide content may be encouraged to undergo a training to write authentic,
factual and non-plagiarized matters.

• The company may engage other experts to review the published content and create a peer
review process
• Allow the users to rate the content and amend the information page to get higher ratings

04. As Wikipedia keeps growing, do you think it can continue to rely exclusively on donations in
time and money? Why or why not? What other “business models” could be considered? Would
any of those “violate the spirit of Wikipedia”? Why or why not?

Ans:

step 1
For the time being, the W-pedia must rely on the donations, because it is an established business
model for the company. However, the organization may develop other revenue models such as
providing contextual ads or sponsored ads on the landing pages of the encyclopedia.

step 2
The company also can think of value added services such as customized compilation of the
relevant information on a particular topic, and charge for the service. Monetizing after enabling
the higher perceived value, may not damage the spirit of W-pedia.

05. What, if anything, should Wikipedia do to ensure that its articles present a “neutral point of
view”? Shouldn’t the crowdsourcing approach ensure objectivity? Does a “neutral point of view”
matter to Wikipedia’s sustainability? Why or why not?

Ans:

step 1
The W-pedia must ensure objectivity, avoid hegemony, reduce rhetoric, and prevent
misrepresentations in the content published in the web site. For achieving a ‘neutral’ content
status, the content published may be reviewed periodically to remove objectionable content.
Guidelines to writing content and to meet the quality standards may be provided to the
contributors.

step 2
Presence of neutral points of view in the content is important to the W-pedia, because it has
emerged as a reference source to millions of people around the world. Customers around the
world prefer neutral content, and it is important for the credibility of the website. Emotive
expressions, favoritism, hegemonic stand points, etc. can damage the factual aspects the content.

Standards Battle: Which Automotive Technology Will Win?

01. Do you believe that the internal combustion engine will lose its dominant position in the
future? Why or why not? What time horizon are you looking at?

Ans:

step 1
The higher cost of fossil fuel, environmental concerns with regard to vehicular emissions and
economic pressures to achieve fuel efficiency have presented tremendous challenge to the
internal combustion engine makers. Though the car companies have identified alternate
propelling energy sources such as electric, fuel cells, etc., due to lack of sufficient infrastructure
to support these models, the growth is slow for these technologies.

step 2
The experts are of the opinion that the internal combustion engine will continue to be the major
driver of transportation needs for the foreseeable future. Probably, after the year 2020, there
could be multiple alternate technologies for propulsion, but internal combustion engines will lead
for at least another decade.

02. Which factors do you think will be most critical in setting the next industry standard for
technology in car propulsion?
Ans:

step 1
The factors that are critical for the next generation car propulsion technology are many.

• Environmental friendliness : vehicles and cars that run on environmental friendly fuel will be
preferred

• Availability of resources: The fuel used for driving vehicles must be abundantly available. For
example, solar, hydrogen fuel cells, etc.

• Establishment of infrastructure: Sufficient networks and support system are required before
people could move to new technologies

• Economic concerns: The cost of alternate fuel must be reasonably affordable to all sections of
the people

Only when above factors are addressed, alternates to present internal combustion engines will be
accepted by the transportation market.

03. Which companies do you think are currently best positioned to influence the next industry
standard in car-propulsion technology?

Ans:

tep 1
In the last decade, many car companies have invested in R&D for identifying environment
friendly fuel and propulsion systems. The companies that have achieved considerable knowledge
base in fuel technology are likely to lead the transition from fossil fuel. The prominent
automotive companies who have researched and developed technology and are looking forward
to launch eco-friendly vehicles are Nissan, Toyota, Honda, Tesla Motors, BYD Auto and BMW.

04. What would you recommend different competitors (e.g., GM, Toyota, Nissan, and Tesla
Motors) do to influence the emerging industry standard?

Ans:
step 1
Influencing the standards of an industry is aimed at creating favorable environment for the
company and thus gaining competitive advantage. Influencing the standards can help the
companies to build entry barriers to the new competitors.

step 2
The Nissan, Toyota, Tesla Motors and BYD Auto must jointly develop engineering standards for
the hybrid and electric cars, and negotiate with the regulators to implement the standards.

step 3
Honda and BMW may focus on the hydrogen fuel cell technology and patent the innovations for
the engines. They may influence the legislators to accept their standards as superior.
Competitions who wish to adopt the technology need to pay the patent owners the license fee and
also shall be required to follow the standards. These companies can earn revenues and compete
with the new entrants with an upper hand.

“A” Is for Alphabet and “G” Is for Google: Alphabet’s Corporate Strategy and Google’s
Strategy Process

01. Why did Google restructure itself and create Alphabet? What is it hoping to accomplish? For
additional insights, see Larry Page’s blog post announcing the restructuring at
http://googleblog.blogspot.com/ 2015/08/google-alphabet.html.

Ans:

step 1
Apart from providing search engine, data analytics, operating system and browsing tool, Gol has
been engaging in many other unrelated business activities such as research in longevity,
development of contact lens, designing driverless car, etc. In order to streamline such business
initiatives and provide independent responsibilities to the business units, the founders of Gol
created the Alphabet and its sub units.
Now, the distinctly created business units independently and with focus can pursue their
respective business goals. Alphabet, the apex body of the Gol, will act as a guiding unit to the
independent business units.

02. Do you think the reorganization is beneficial for Alphabet’s “moonshots,” now housed in
their own business unit with profit-and-loss responsibility?

Ans:

step 1
By organizing the business activities that are similar into one unit, the Gol has structured their
organization into a conglomerate with a guiding apex called Alpahbet. Each business unit is a
profit center, and is responsible for the profit and loss of its respective business activities.

step 2
There are two benefits for this corporate structuring scheme.

1. The Gol is not required to be responsible to its shareholders, because the ‘moonshots’ of other
business units are funded from the stock returns of the Gol’s founders.

2. The burden of running the business profitably and responsibly lies with CEO’s of the
respective business units. Also, the risks of one unit do not affect the business of the other.

The restructuring of the Gol’s business is appropriate.

03. As of the fall of 2015, Alphabet is a “one-trick pony,” with Google’s online search and
advertising business bringing in basically all the profits. Why has Google “failed” to develop
other profitable businesses? Is Google’s strategy process of planned emergence to blame? Why
or why not.

Ans:

step 1
The Gol is relatively a new business organization with tremendous success, but aspiring to
spread into ventures other than the search engine and operating system business. In the past
decade the company has experienced the pitfalls by taking unrelated business initiatives. In order
to structure the unique business initiatives (moonshots), it has developed a conglomerate
organizational architecture.

step 2
It is true that the largest revenue comes from the Gol’s internet search engine business, but it
consumes time to shape innovative business ventures. The time to mature an idea into a
commercial activity takes time. The conglomerate is just formed a year back, and it cannot be
expected to bring the results so quickly. The planned emergence is what every rational strategist
can expect, and work for. However, serendipity can appear midway. An evaluation of the
conglomerate is appropriate only after a few years.

04. Given that Google is now a standalone business run by Sundar Pichai, do you expect that its
strategy process will change? Why or why not? If so, how?

Ans:

step 1
Business focus, leadership with visionary, deep knowledge of the market and customers, well
organized resources and activities, and ability to increase the perceived value are the components
of successful business. The corporate structure of the Gol now enables each of its business units
to construct the business assets independently.

step 2
By cutting off the unrelated business initiatives and bringing focus to the core activities, it has
helped the CEO SPi of Gol to focus on the crucial core business of the company i.e. search
engine, online ad solutions, operating system and internet browser. Now, the Gol and the CEO
can respond to the market needs and the competition with edge and quickness.

HP’s Boardroom Drama and Divorce

01. Who is to blame for HP’s shareholder-value destruction—the CEO, the board of directors, or
both? What recourse, if any, do shareholders have?

Ans:

step 1
The primary aim of any corporation is to provide sufficient return on capital to the shareholders.
But, the shareholders and stakeholders also expect the company to create social values and be
ethical in its functioning.

step 2
Both, the CEO and the board of directors, are responsible for the value degradation of the
HuPack. Board of directors should have corrected the CEO’s actions and stand point, at the same
time the CEO should have followed the HuPack’s values explicitly published in its corporate
documents.

step 3
The shareholders can take any of the following actions.

• Notify the malfunctioning of the business to the SEC (Securities and Exchange Commission)

• Appoint appropriate Board of directors during the annual general meeting

• Transfer the shares to the buyers who are willing to invest and have interest in the company

02. You are brought in as (a) a corporate governance consultant or (b) a business ethics
consultant by HP’s CEO. What recommendations would you give the CEO, Meg Whitman?
How would you go about implementing them? Be specific.

Ans:

step 1
The MWhit of the HuPak must follow these steps to regain the shareholder and stakeholder
confidence, and carry forward the governance of the company ethically.

• The ‘HuPk way’ values must be emphasized and re-emphasized in every meeting of the
company. For example, “We conduct our business with uncompromising integrity” shall be
highlighted, promoted and encouraged to follow by all in the organization

• The current CEO should apologize for what has happened in the past and reassure the
stakeholders that ethical issues will not be compromised in future
• Provide awareness programs and value education to the employees based on the ‘HuPak Way’
policies

• Establish awards and recognition system within the organization to appreciate and inculcate the
HuPak way

• Create a social environment where the board members and employees can present viewpoints
openly and honestly

• Develop induction program specifically to highlight the ethics and values of the organization

• Establish a Public relations division to give publicity to the companies initiatives to create
social benefits within and outside the organization

03. Why is HP splitting itself into two firms, a move that was rejected just three years earlier? Do
you think the corporate strategy move of splitting the “old” HP into two companies (HP Inc. and
Hewlett Packard Enterprise) will create shareholder value? Why or why not? Which of the two
companies would you expect to be the higher performer? Why?

Ans:

step 1
Splitting the HuPk into two businesses is a good business strategy that would help the
organization to achieve focused effort. But, it may not be certain to create shareholder value right
away. The company has two important tasks to be completed before they could grow the
revenues. One, the company has to regain its reputation as an ethical company. Second, it must
consolidate its competitive advantage in its core business. Both these activities are going to take
time to produce results.

step 2
It is difficult to predict which of the businesses of HuPak is going to be a high performer. It
depends on the strategic efforts of the business units. If appropriate strategic implementation is
adopted, both the companies can perform at higher levels.
04. Discuss the general lessons in terms of corporate governance and business ethics that can be
drawn from this MiniCase.

Ans:

step 1
Corporate governance

A corporate is the result of combined efforts of different resources be it financial or non-

financial. Profitable and ethical functioning of corporates thus becomes necessary and essential
part of its operations. Stakeholders interests and responsibility towards the society in which it
flourishes, thus becomes important. Thus, corporate governance is one of such term that came
into existence to ensure ethical controlling and monitoring of the corporate to avoid any form of
scandals or effect of any ethical practices.

Business ethics

Business ethics can be explained as the study of business procedures and policies to ensure that
these are ethically and legally followed in an organization. Business ethics also deals with the
most common ethical issues that may arise in the business organization. In other words, business
ethics are also called as applied professional ethics.

step 2
General lessons in terms of corporate governance and business ethics

This Mini case is mainly focused on the internal instability of, one of the largest technological
company, named H. This case summarized major issues that company H faced, in terms of
financial losses when its share price faced a low-down, or the inadequacies that company H
faced due to its appointment of CEOs.

Present case explained about the good times that company H faced and set a benchmark for other
companies in the industry. However, after the passing away of Mr. H, the co-founder, company
H faced a great decline as it loses its market share value by almost 80%. Due to inharmonious
relationship among its board of directors and its declining image in the industry, company H lose
on its core values of “uncompromising integrity” and “trust and respect for individuals”. Covert
investigations taken by company H against its directors of board, employees, and some other
related people.

One of the main lessons that can be learned from these different phases of company H is how
important it is to maintain and follow ethical practices and establishing good corporate
governance at organizational level. Company H failed to be on its core values, complying to
which it succeeded in the past. An organization must work on maintaining the core strength of
the organization to avoid competitive disadvantage. Company H’s BOD failed to realize that
company is declining not because of the outer forces as such but, because of poor corporate
governance. Company H’s people failed to follow the ethical practices at workplace. Finding Mr.
GK, one of the board members at H, as the source of leak of sensitive information, proved that
top management itself failed and did not pay heed to concepts like corporate governance and
applying professional ethics at workplace.

Hollywood Goes Global

01. Given the economics of the now global movie industry, what are the strategic implications
for Hollywood studios? What are some opportunities, and what are some threats? How should
Hollywood movie studies take advantage of these opportunities, while mitigating the threats?

Ans:

step 1
Globalization has helped the HWood (a movie making company) to go beyond the US, and earn
substantial revenues from international market, but it has begun to experience the constraints too.

step 2
The HWood movies are well accepted in Europe, Asia and Latin America. Many movies
produced in its studio have generated more revenues from outside than from the US. For
example, Avatar and Transformers: Age of extinction are the two movies which have sold most
outside the US.
The successes give great opportunities for the HWood movie makers to adapt their product to
suit an international audience through the inclusion of local themes, current happenings in other
countries, providing roles to international actors, dubbing the track with native language,
establishing overseas joint ventures, etc.

step 3
There are threats to HWood movies while breaking out in international market.

• Some themes may antagonize the natives of the other country and even end up in banning of
the movie

• Larger exposure to infringement on intellectual property rights and piracy

• May trigger competition from other countries such as China, India, etc., which can produce
movies at lesser cost

02. How would you prioritize which nations to expand distribution into if you were working for
a major Hollywood movie studio?

Ans:

step 1
While planning for distribution of a movie made in HWood at a different country, India would
be the ideal choice. The reasons are many and listed below.

• The country is politically stable and is not hostile to US movies

• There is a huge English speaking population

• The GDP growth rate there is higher than most other countries

• People are accustomed to watching trendy movies, and willing to spend on the entertainment

• There are stunning locations in India, which can be utilized by the HWood movies at a lesser
cost
• The studios and movie talent available in India are of International standard, that can adopted in
the movie making

• The distributors shall promote movie in the country at lesser margins or royalty

03. What alternatives could movie producers develop to help combat the piracy of first-run
movies and follow-on DVD and Internet releases?

Ans:

step 1
At the moment, it is difficult to prevent piracy completely. Piracy happens through leak from
many quarters. When DVDs of the movie are circulated among the artists related to the movie,
somehow it gets leaked into the hands of the movie pirates. Also, some people record the movie
using a camcorder while watching the movie in a theatre.

step 2
Some of the steps the movie producers can take to prevent piracy include the following.

• Make the artists to sign a non-disclosure agreement, and include a clause that can prevent
piracy

• Instead of circulating the DVD, the movie can be screened in a safe location for the review and
amendments.

• After-release piracy may be prevented using technologies such as anti-piracy system, inserting
extra frames in the theatre copies that are imperceptible to the human eye.

• Theatre visits and purchase of genuine media may be reinforced using attractive incentive
techniques

• Influence the law makers to legislate stringently against the piracy and alert the police
regarding probable piracy sources

Does GM’s Future Lie in China?

01. What explains the resurgence of the “new” GM in the United States? Do you think GM can
sustain its competitive advantage in the United States? Why or why not? Buttress your
arguments.

Ans:

step 1
In the recent months, the demand for the passenger cars has increased, especially for the Sports
utility vehicles (SUV). One of the reasons for the higher demand for the cars is the decrease in
fuel price. Second, the US consumers have come out of the economic downturn. The experts are
predicting that automotive industry will be continuing its growth.

step 2
The US has a saturated market for the cars; for every 100 people, there are 85 cars. But, the
present economic scenario offers the GM an opportunity to pick up sales there in the near future,
because the car maker specializes in the SUVs, has a legacy of offering quality cars and has a
brand image in the US. But, to maintain the competitive advantage in the US, the company needs
to move to environmental friendly car making or an attractive car design.

02. How important are non-U.S. sales to GM? What implications does this have for GM’s global
and business strategy? Think about the integration response framework to inform global strategy
and different strategic positions to inform business strategy.

Ans:

step 1
For GM, sales of cars outside the US are very important, because seventy percent of the revenues
for the company come from foreign countries. Also, the US has saturated market for cars, while
countries such as China, which are emerging economically, can accommodate huge car sales in
the near future. Second, the GM can manufacture cars in other countries at a lesser cost than in
the US.
In the current scenario, GM has a promising future in countries such as China, which has demand
for luxury cars and SUVs. The company must think of offering passenger cars suitable to each
country’s needs.

step 2
As per the integration-responsiveness framework for determining the global strategy, the global
standardization strategy would suit the GM’s strategy. Because there is pressure to reduce price
of the cars made by GM in China, in response to the domestic car manufacturers there, global
standardization approach is ideal. The scenario that the pressure to reduce cost is high, and
pressure to respond to the local needs is low makes the GM to go for standardization of its
product offering.

step 3
Based on the above global strategy, the GM can formulate its business strategy as cost
leadership. The company may standardize its product across the world, manufacture the cars at
the least cost from countries like china, and offer the car at lesser price in the US. Through global
strategy, the company can leverage its business strategy.

03. In 2014, GM held almost 15 percent market share in China, while Ford held only 3 percent.
Why was GM so successful in China, while some of its rivals, including Ford, struggle to gain a
stronger position in the world’s largest automobile market?

Ans:

step 1
The GM is able to garner higher market share in China than its rival for three important reasons.

1. The company began its operation way back in 1997, which gave them first mover advantage

2. A joint venture with a strong partner was established very early, and it still goes robustly

3. In two decades the company was able to develop social, cultural and administrative intimacy
with the people of China,

The above factors put together define the competitive advantage of the GM in China.
04. What are the challenges GM is currently facing in the Chinese automobile market? How
should GM’s CEO address them? Be specific

Ans:

step 1
Though the GM has edge over other automobile manufacturers, it has to address the challenges
posed by the market. The key challenges in the current scenario are as follows.

• There is economic slowdown in China

• Materials that need to be imported for manufacturing in China are costlier due to devaluation of
Yuan

• Government controlled auto companies are placing tough completion to the GM

• The US is showing signs of recovery and the auto sale is expected to grow there, especially in
SUV (Sports Utility Vehicle) sector. GM will have resource constraints if the company decides
to sharply compete in both the markets.

step 2
The GM is required to overcome the above challenges with appropriate strategy.

• The company must pursue product development during the downturn, so that it can offer a
competitive product during the boom period.

• Manufacture cars in China, and export them to other countries, even to the US

• The company must move from cost leadership to differentiator to meet the competition from
low priced car manufacturers

• Utilize the opportunities emerging in the US and China in a balanced way

Flipkart Is Fulfilling Its Wish and Beating Amazon.com

01. Why was Flipkart successful in India? What is the basis of Flipkart’s competitive advantage?
Ans:

tep 1
The new generation business startup FCart, with more than one billion dollar in revenue per year,
is the most popular e-commerce site in India. It has achieved this status through carving the
business in unique ways.

step 2
There are both external and internal factors that led to the success of FCart.

• India has a huge younger population who prefers to shop online

• FCart has a first mover advantage in the online business

• The company could gain the trust of the online customers quickly

• The site provides a system for the customers to choose payment terms as ‘cash on delivery’.
This facility allows the customers, who do not have credit / debit card, to buy online.

• The company established a hassle free system to carry out physical inspection before
confirming the purchase. The customers can return the goods in a hassle free manner if they do
not like the product.

• In association with the financial institutions, the company offers a facility to the customers to
pay in monthly installments.

• The site provides a facility for the local merchants to offer their products

The above features of the FCart’s business are the source of its competitive advantage.

02. Will Flipkart be able to sustain its early lead over Amazon, given the deep pockets of the
American e-commerce giant and its intentions to invest further in India? What are some of the
key advantages that Flipkart has over Amazon? What are some of Flipkart’s disadvantages?
What would Flipkart need to do to sustain its competitive advantage?

Ans:
step 1
The presence of the international online giant AMZ is a threat to the competitive advantage of
the FCart. The financial might of the AMZ can tilt the position of the FCart adversely. However,
the deep knowledge of the Indian consumer psyche and the ability to provide solutions to the
Indian consumers are the key competence of the company to come up with innovative online
strategies.

step 2
One of the disadvantages of the current FCart model is that the merchants who are offering
products on its site are not completely reliable, and this can damage the reputation of the
company. The price advantage of the company may be taken away by AMZ through its financial
prowess.

step 3
In order to maintain its competitive advantage, the company must focus on the needs of the
online customers and innovate the services for them. The COD (cash on delivery) facility and the
hassle free return procedure are two examples of innovative services to the Indian online
customers.

03. Should Flipkart leverage its core competencies outside India to “go global”? If so, which
countries do you think would provide the best opportunities for Flipkart, and why?

Ans:

step 1
The core competence of understanding the Indian consumer and developing appropriate systems
to serve them are key competitive advantages of FCart. Utilizing these features, the company can
leverage its core competencies to capture market in other countries.

step 2
The SAARC countries, such as Nepal, Srilanka, Maldives, etc., and Gulf countries such as UAE,
Oman, Kuwait, Saudi Arabia, etc. are ideal for the FKart to expand its global presence. The
unique services provided by the company are suitable to these countries, as there is large Indian
Diaspora in these countries, and also, the natives of these countries share similar customer profile
as that of India.

04. With a valuation of $15 billion, Flipkart is now one of the most valuable privately owned
startups in the world. Flipkart’s investors hail from the United States, United Kingdom, Russia,
and Singapore. Venture capitalists (VCs) expect new ventures to file for an initial public offering
(IPO) at some point. This event allows the VCs to capture the financial returns to their early-
stage and highly risky investments. Do you think Flipkart’s business model and strategy would
change if it were a publicly traded company? And if so, how? Hint: Look at the Chinese
ecommerce firm Alibaba’s record IPO in 2014, and see how this has changed the company’s
strategy.

Ans:

step 1
The transition from venture capital ownership to public limited company may not affect the
business strategy of the FCart. Business strategy of an organization is carved based on its
external conditions and the internal capabilities, and is not directly connected to the corporate
constitution. The constitution of the corporation has little effect on the business strategy.
However, by transferring the ownership of the company, the corporate strategy of the company
may change.

step 2
The Chinese online retailer, Ababa has suffered recent setbacks not because of the Initial Public
Offer, but because of the influence of environmental forces and the industry structure. It is the
role of the business strategist to consider the business environment and industry structure while
formulating business strategy.

LVMH in China: Cracks Its Empire of Desire?

01. Why has LVMH been so successful in China? With the Chinese economic slowdown, do you
think there are risks to LVMH growing aggressively in China? What do you think should be its
strategy in China going forward?

Ans:
step 1
The luxury brand LoVut has been not only successful in China, but also is in existence there for
long time without contest. Many factors have contributed to the invincible position of the LoVut.

• The company has established its first presence thirty years back and has been doing promotions
to position itself as a luxury brand

• The products of LoVut appealed to the wealthy Chinese intensely

• The LoVut brand enhances the prestige of the Chinese, and even middle class Chinese aspire to
own this brand

step 2
Definitely, the economic slowdown is going to affect the sales of LoVut products. The reason for
low sales is not because the affluent customers cannot afford it. Only they are moving away from
the brand, because during the boom time, the brand has crept into the middle class segment, and
the affluent lot lost the identity of being elite.

The LoVut should slow down their sales in China, and attempt to regain the image as the retailer
of the elite.

02. Which strategic initiatives does LVMH pursue to strengthen its position in China? In
particular, how does LVMH encourage Chinese customers to purchase LVMH products in China
rather than abroad? Do you think these strategic initiatives will be successful? Why or why not?
What other ideas do you think LVMH should pursue to encourage Chinese customers to
purchase LVMH products in China?

Ans:

step 1
In order to pick up sales and to woo the extremely rich customers in China, the company must
take the following strategic steps.
• Carry the prominent international collection merchandise in the Chinese stores also, and design
products specifically for the Chinese community. The Chinese designs must be sold only in
China

• Control the free walk of the buyers into the stores, and make the stores open to the customers
only by invitation

• Produce only limited editions of products for each design

• Develop a customer referral system, in which the known customer introduces other aspiring
customer. The company creates the profile of the new customer and then invites them to present
the exotic collections

• The price of the products may be increased and discounts may be offered to the customers
based on the purchase history and the quality of the referrals.

step 2
Since the Chinese customers buy the LoVut products to enhance their prestige, the company
must help the customers to make them feel unique. The above suggestions are intended to make
the customers stand out in the crowd, and are likely to be successful.

03. Louis Vuitton is LVMH’s flagship brand. Much of Louis Vuitton’s appeal is that it bestows
exclusivity on its owners. In the last few years, however, the Louis Vuitton logo has been applied
widely with handbags and accessories proliferating at an unprecedented speed. In addition,
counterfeiting further leads to a proliferation of the “Louis Vuitton brand.” One analyst
concluded that LVMH is “way overexposed in China, with too many stores and too much in
fixed costs.”4 Is LVMH changing its strategic position of Louis Vuitton from a focused
differentiator to a broad differentiator the brand losing its appeal? Does Louis Vuitton risk being
“stuck in the middle”? Why or why not?

Ans:

step 1
The analyst is right; LuVot lost its appeal to the core customers because of it’s over exposure to
the market. The core customers of the company are the rich and affluent segment of China, who
wishes to stand out in the crowd.

step 2
Too many stores in the country and accessibility of the products to the middle class, made the
core customers move away from the brand. The rich class began to shop for LoVut products in
foreign countries or looked for other luxury brands.

step 3
The company is inadvertently losing its competitive advantage by practicing broad
differentiation rather than focused differentiation. LoVut should come back to its original
position as a provider of luxury goods for the elite. Focused differentiation and the niche
segmentation are the solution for this predicament.

04. Given the backlash in China against corruption and conspicuous consumption, what
recommendations would you give LVMH?

Ans:

step 1
It is really a devastating revelation that the LoVut’s products have been used for corrupting the
officials. Every company expects to acquire genuine customers, but using the products for
illegitimate purposes by the pseudo customers drains the brand value of the business. The
company may be able to fight low sales volume, but the products getting associated with
scandalous issues is a misfortune.

step 2
The company may adopt the following approach to overcome the negative image.

• Close down the stores where there is apparent incidences of illegitimate purchases, and
overexposure to the real customers
• Without reducing the price add real value to the products, and do a campaign to increase the
perceived value among the customers.

• Get associated with anti-corruption movement and educate the customers about the real value
of the LoVut products

• Highlight the impact of purchases on the artists who create the products

05. LVMH is a diversified conglomerate owning a number of luxury brands including Louis
Vuitton (fashion and leather goods), Bulgari and Tag Heuer (watches and jewelry), Moe¨t et
Chandon and Dom Pe´rignon (wines and spirits), and Dior (fashion, perfumes, and cosmetics).
Identify core competencies, economies of scale, and economies of scope that would allow
LVMH to create value as a diversified conglomerate (“diversification premium”). What factors
could lead LVMH to destroy value as a diversified conglomerate (“diversification premium”)?
Explain

Ans:

step 1
For a company to enter the luxury goods market, it must have four competencies: economies of
scale, product differentiation, ability to spend on unrecoverable costs, and high degree of
innovation. Of course, other minor assets required for the business include design patents,
financial resources and experience in the market. The parent company of LoVut has all these
qualifications.

step 2
LoVut, parent company’s corporate strategy is a conglomerate diversification with interests in
fashion, watches, leather goods, jewelry, fine wines, perfumes, retail stores, etc. Generally
conglomerates are not successful in managing diverse business interests, but LoVut’s parent
company is successful because of its strong brand names, international reputation, and ability to
market luxury goods. The conglomerate is able to keep away competition through niche value
creation and focused differentiation strategy. The value capture system is very intricate and the
company extracts premium price from the customers.
step 3
Moving away from niche, focused differentiation, high pricing, and innovation, the conglomerate
is likely to destroy its competitive advantage.

Sony vs. Apple: Whatever Happened to Sony?

01. Why had Sony been successful in the past (e.g., with the introduction of the Walkman, Play
Station, the CD, and the VAIO computer line)?

Ans:

step 1
It is apparent that Sny was successful in bringing out path breaking products such as portable
music player, gaming device, Compact disc, Life style lap top computer, etc. in the past because
of the close interaction among the diversified business unit.

02. What was Idei’s assessment of strategic alliances vs. M&As? Do you agree or disagree?
Support your assessment.

Ans:

step 1
The Sny’s former CEO’s view point about strategic alliances, and Mergers and Acquisitions
(MAA) are true to some extent. The decision to go for soft alliances or the MAA depends on the
situations of the company. MAA usually poses a challenge with regard to organizational
structure and cultural fit between the merging companies. It takes longer time for both
companies to get adjusted to each other, by that time the company would have lost valuable time
needed for innovation.

03. Why do you think Apple succeeded in the digital portable music industry, while Sony failed?

Ans:

step 1
It is not just enough to have a good business strategy and model; it has to be implemented with
agility. Though Sny had good strategy and innovation, it failed to implement it. On the other
hand Apl, implemented the business strategy with sense of urgency and right organizational
structure.

step 2
The Apl utilized a core cross-functional team that interacted and collaborated with the
outsourced organizations in an integrated manner. The company could launch a portable music
device in lesser time and achieved fast growth even before the competitors could enter the music
market space.

04. What could Sony have done differently to avoid failure in the digital portable music
industry? What lessons need to be learned?

Ans:

step 1
Though, Sny had all the resources and experience to succeed in the digital portable music sector,
it failed because of the faulty organizational design and process. The company should have
organized its resources in a more coordinated way.

step 2
Since the company had facilities and independent business units spread across the globe, it
should have reached a balance of centralized and decentralized decision making culture (each of
the business units acted independently and rarely interacted with each other).

Second, Sny should have established a level in the organizational structure to coordinate the
geographic and product organizations.

05. Activist investors argue that Sony is spread too thin over too many businesses, and that its
corporate strategy needs a major refocus. These activist investors request that Sony should
combine its music and movie businesses into one entertainment unit, and spin it off as a
standalone company. Sony Pictures Entertainment has music artists such as Snoop Dogg, Kelly
Clarkson, Justin Timberlake, and Pink under contract. The movie Skyfall, Sony’s 2012
installment in the James Bond saga, topped the rankings and grossed over $1 billion since its
release. This corporate restructuring would allow Sony to focus on its core business in
electronics, while unlocking hidden valuecreating potential in its entertainment unit, activists
investors argue.
a. What is Sony’s organizational structure? Do you agree with the assessment that “Sony is
spread too thin over too many businesses”? Why or why not? Explain.
b. What would be the benefits of splitting Sony as proposed? What would be its drawbacks?
c. Which recommendations do you have to restructure Sony? Explain
Ans:

step 1
Case summary:

Company S led behind as company A had launched new division of gadgets in music such as i-
pod, i-pad etc. Though company A took over the market, Company s was successful in bringing
out products such as portable music player, gaming device, compact disc, laptop computer and
many more due to close interaction among the diversified units.

step 2
The corporate structure of S is a conglomerate with distinct and unrelated businesses. There are
about eight major business divisions spread across the globe with one CEO for entire
organization. But, the profit and loss of the separate businesses are consolidated at the top S
management.

The S, at present seem to have lesser resources to drive all the business units, because most of
the business units are not growing as much as other companies in the respective industries. The
company is lacking sharp business focus, integrating leadership, coordinated organizational
structure and sufficient resources to drive the business growth

step 3
The benefits of splitting Sony as proposed can gain the lost business focus, can hire responsible
and well-coordinated organization, innovation of new products, and sharper marketing efforts.
However, the division of the company shall put complex challenges on the employees of the
organization, because they are not exposed to cross functional and collectively responding
operations.

step 4
Company S should incorporate independent CEOs for each division in the business units as due
to lack of higher management, the company is facing problem. The apex management can act as
a coordinating and guiding mechanism to these business units to bring focus to the business
activities and respond to the market needs quickly.

Struggling Samsung Electronics

01. Lee Jae-yong, the 46-year-old grandson of the Samsung founder and heir apparent, was
educated at Seoul National University, Keio University (in Japan), and Harvard Business School.
He wrote a master’s thesis at Keio University on Japan’s struggle to retain its world leadership in
manufacturing in the mid-1990s when the country’s fast-growing period was ending. He
concluded, “Japan’s troubles were worsened by its manufacturers’ pursuit of scale and market
share.”2 Is Samsung Electronics’ pursuit of scale and market share to blame for its losing its
competitive advantage?

Ans:

step 1
The third generation leader of the SSung conglomerate made a statement about Japan and its
business organizations, which came true for the company itself after 25 years. The statement was
‘…… in the pursuit of scale and market share the companies squander their competitive
advantage”. This is what the SSung did and lost its competitive advantage.

The company followed broad differentiation strategy, copied the looks and external designs of
the Apl phones and did not made any strategic changes with respect to the customer segments
such as bottom of the pyramid, high end customers, etc.
02. Why is Samsung Electronics encountering problems selling its flagship line of smartphones,
the Galaxy? How should it compete against premium phone makers such as Apple and low-cost
leaders such as Xiaomi and Micromax?

Ans:

step 1
SSung has been following its one sentence strategy, ‘follow first, innovate second’. Because of
this strategy, the company has been copying best features of the competitive products into their
products. Galaxy series was one such product. Though, customers preferred the SSung’s
Smartphone initially, innovative and low cost products from Apl, Micmax, Xiami, etc. appealed
to the customers more.

step 2
SSung must abandon the strategy ‘one size fits all’ i.e. offering Galaxy for all segments of the
mobile market. The company may launch a range of Smartphone that has distinct value
proposition for each segment of the market. With this approach the company can compete with
Apl for high end product market share, and with Xiami, Micmax, etc for low cost handset market
share.

03. What would you recommend Samsung Electronics would need to do to revive and turn
around its fledgling mobile division?

Ans:

step 1
Since, 75% of the revenues of SSung’s come from the Smartphone sales, the company must give
priority to this sector. In order to revive the top level sales, next time, SSung must launch a
flagship product i.e. Smartphone, that is distinctive, disruptive and innovative. The company
must change its image as a copy-cat, and must stop following the competition per se.