On Thursday, we discussed a case on McDonald’s. We learned about the evolution of the fast food restaurant under Ray Kroc, who promoted uniformity and simplicity in training and operational efficiency, to Fred Turner, who began advertising with Ronald McDonald and created a detailed training manual for employees, to Jack Greenberg, who has simply been known as a corporate mistake for his attempts at horizontal diversification. It was really interesting to learn more about the company’s history and growth under different leadership.
Today, McDonald’s is faced with a lot of problems in the wake of society’s rekindled interest in health and nutrition, as the restaurant has never been acclaimed for its healthy food options. Critics have also been very vocal about McDonald’s targeting advertising at young children and promoting unhealthy food options to children at a young age. What can McDonald’s do in the long-term to continue to sustain business and success? In class, we came up with 4 solutions: (1) Perform a stakeholder impact analysis and anticipate complaints, to proactively address them rather than passively react to them, (2) Develop nutritious food alternatives to satisfy critics, (3) Use their power and influence to educate people about the need to eat healthy, and (4) Hold meeting with critics.
I don’t know the future of the fast food industry, and I don’t know if McDonald’s will be able to ever overcome its reputation as THE fast food maverick, but it won’t hurt for them to take some proactive steps towards healthier food options, since that is where society is trending towards these days, as demonstrated by the popularity of organic food markets like Whole Foods and Trader Joe’s.
On Tuesday, we had our midterm exam for BUS 475. We were given a case study on microfinance lenders such as Banco Compartamos and the Grameen Bank, and asked to analyze: (1) their strategy, (2) their industry, and (3) the key resources and distinctive competencies necessary for a firm to be successful in the microfinance industry. Overall, I thought the exam was very fair and straightforward, because Professor Tuggle had warned us ahead of time that we would be given broad questions and asked to use the terms and definitions we had learned over the semester to analyze the case. The one thing that threw me off a little was the fact that microfinance lenders are quite a different industry from any of the cases we’ve analyzed in class. Microfinance lending is much more of a social cause. I’m not sure if it would exactly qualify as a non-profit, but the cases we had analyzed in class (Bally, Wynn, Apple, TiVo, etc.) were all clearly for-profit businesses. I was just a little thrown off by whether microfinance lenders would still be following the same general strategy, industry analysis and key resources and distinctive competencies that for-profit businesses follow (for example, cost leadership vs. differentiation?)
On Thursday, we learned about strategy in the global environment. When deciding to go global, companies have four basic global strategies to choose from:
Globalization standard – reaping cost reductions from economies of scale and location for standardized products & services.
Localization – customizing goods & services to provide good match to tastes and preferences in different national markets.
Transnational – a business model that simultaneously achieves low costs, differentiates across markets and fosters a flow of skills between subsidiaries.
International – multinational companies sell products & services serving universal needs and don’t face significant competitors.
Another concept that I found really interesting was the choice of entry modes available for companies who want to expand globally. The basic entry modes available are: exporting, licensing, franchising, joint ventures and wholly-owned subsidiaries.
In the case of Hasbro, the company has already expanded internationally. Since 2007, the company has opened offices in Brazil, Russia, the Czech Republic, Romania and China. In 2010, the company opened offices in Peru and Korea, and in 2011, they opened an office in Colombia. Hasbro has also been targeting the emerging markets through joint ventures in Chile, Turkey, Poland and India. One of the company’s long-term goals is to establish a global market presence by developing business in key emerging markets. So far, Hasbro seems to be doing well with their international expansion plan, although the main focus of their business is definitely still on domestic sales in the U.S.
On Tuesday, we reviewed the case on TiVo, Inc., the company that is largely known for its creation and innovation of DVR (digital video recording). However, this case was different from the other cases we’ve analyzed because it was an example of a company that was unable to leverage its innovative new technology into a successful and profitable business model. It is pretty unfortunate, but it was a surprise for me to learn that the company hasn’t been profitable. I had always been under the impression that because TiVo was so popular when it initially came onto the market, that it must have been successful. I guess it’s never safe to assume that popularity, or a large amount of word-of-mouth, always translates into success.
The lesson we learned from this case is that just because a company has invented a revolutionary new technology doesn’t mean that the company is always going to be successful. The company must decide what strategy they are going to pursue in order to capitalize on their technology and popularity. In the case of TiVo, the company chose to go at it alone, but failed to gain traction when competitors began copying their technology, developing new features and offering cheaper prices. In the case of TiVo, the company might have experienced more success had it pursued a joint venture, licensing or partnership strategy. Partnering with other companies might have saved the company from such fierce competition. I think this is a great case to keep in mind when considering the type of strategy a new company should pursue. You can never be certain of how something will turn out, but it is usually more risky to go at it alone.
On Tuesday, we discussed the case of Intel Corporation. A significant portion of the case focused on Andy Grove, who began his career at Intel as the director of operations, and eventually was elevated to the position of CEO in 1987. Grove was regarded by many as one of the most effective managers of the late 20th century. He was very demanding, sometimes to the point of being autocratic, who set high expectations for everyone, including himself. He was detail oriented and was constantly looking for ways to drive down costs and speed up development processes. He was also known for a confrontational “in your face” management style and would frequently intimidate employees. He also demanded discipline and control. Despite all this, or perhaps as a result of this, he was admired and respected within the company for being a brilliant problem solver and a hard worker.
I thought it was interesting to learn about Grove’s management style and how he contributed to Intel’s success over the last few decades. Grove isn’t someone I’ve ever heard about before in any of my business or management classes, but that doesn’t mean he wasn’t as effective as someone much more prolific and well-knowns like Steve Jobs. I don’t know if I would necessarily subscribe to his aggressive style of management as my chosen management style, but it was certainly effective in motivating and inspiring his employees to work hard and seek creative solutions to problems. I think that my personal management style would be much more of a quiet leader who works behind the scenes to empower employees to reach their full potential. While I do think that being confrontational and demanding works quicker to intimidate employees into working hard, I don’t think I could personally do that just because it’s not my personality at all. I hope that if I end up going into management, I learn how to strike a balance between being too aggressive and too passive. Obviously, I wouldn’t want my employees to walk all over me and have zero respect for my leadership abilities, which is something I think many quiet leaders struggle with.
On Thursday, we discussed strategy and industry environment. The most interesting takeaway I got from the lecture was learning about the different types of industry environments – fragmented, embryonic, growth, shakeout, mature, or declining.
Fragmented – composed of a large number of small & medium-sized companies, with low barriers to entry permitting constant entry by new companies. For example, restaurants and law firms.
Embryonic – just beginning to develop when technological innovation creates new market or product opportunities. The objective is to share building. For example, solar power.
Growth – first-time demand is expanding rapidly as many new customers enter the market. The objective is to maintain competitive position. For example, CFLs and LEDs for lighting.
Shakeout – the objective is to survive when competition is the strongest.
Mature – dominated by a small number of large companies whose actions are so highly interdependent that success of any one company’s strategy depends on the response of its rivals. The objective is to defend the business model. For example, breakfast cereals.
To relate what we learned to Hasbro, I think that the games & toys industry exhibits characteristics of several of the different types of industry environments. If I had to categorize it into one, I would probably say it is in the shakeout or mature environment just because it is definitely not in the embryonic or growth stage, as the industry has been around for a very long time and hasn’t faced any significant technological innovations that would cause rapid growth. I think that it could be considered a fragmented industry because it has low barriers to entry. It isn’t difficult to create a new game or toy and enter the market.
On Tuesday, we discussed the case of Apple in 2008. It was pretty interesting to read about the firm’s history, because I had never really known that much about how the company started other than it was the brainchild of Steve Wozniack & Steve Jobs, and they created the first Apple computer out of their garage. I didn’t know about all of the changes in executive management the company had gone through and the different leadership styles and ideas each person brought to the table. When Steve Jobs rejoined Apple in 1997, the company was struggling to stay afloat and to stay competitive in the PC industry. His strategy to turn the company around was to form an alliance with Microsoft, cut product lines from 60 to 4, redesign products with elegance and style, establish physical retail locations, and to create innovative applications and products such as iTunes, the iPhone, and the App Store. It really is pretty remarkable how much Apple has been able to turnaround its business in the last decade.
Today, Apple products are so prevalent wherever I go. However, Professor Tuggle made a good point during our discussion when he said that Apple never pursued the business segment and could have established dominance in the market had they pursued it. This is true – even today, businesses and companies still use PC’s and Microsoft Operating Systems. Apple products are popular among the younger generation, and I see its dominance among my peers at school. But realistically, Apple still has a minority stake in the PC industry. They have a target niche that they dominate, but the company’s products are still not the industry standard.
On Thursday, we discussed business level strategies. Professor Tuggle tried something new with having the class break into groups and discuss amongst ourselves a company that embodies one of the four generic business-level strategies:
Cost Leadership – lowest cost structure vis-a-vis competitors allowing price flexibility and higher profitability – Class Example: Ikea
Focused Cost Leadership – cost leadership in selected market niches where it has a local or unique cost advantage – Class Example: Dollar Tree
Differentiation – features important to customers and distinct from competitors that allow premium pricing – Class Example: Toms
Focused Differentiation – distinctiveness in selected market niches where it better meets the needs of customers than the broad differentiators – Class Example: Tiffany’s
I thought it was a nice change to have the class get more involved in learning the important concepts. I think it would be good to occasionally switch up the typical lecture and have some class participation, but I don’t think the lectures/powerpoints should be completely eliminated. I would like to see a balance between lectures/powerpoints and class activities. Sometimes lecturing is more effective, especially when there is a lot of important information that needs to be covered. Class activities like the one we did on Thursday helped us gain a good understanding of the four business-level strategies, but we didn’t have time to learn any of the other terms or concepts in the chapter. So my overall opinion would be to keep the lectures and powerpoints, but occasionally throw in some class activities when an appropriate activity can be used to supplement the chapter.