STRT 6200: Strategic Decision-Making in a Changing Environment Note: This is the text -only version of this week’s lecture. All media (i.e. videos, flash presentations, and PowerPoints) and learning activities (i.e. assigned readings, assignments, and discussions) are accessible only through the online course. Week 4: Corporate Strategy Overview Log in to the course to view video and alternative version. Week Four Video Transcript Learning Objectives At the completion of this lesson, you should be able to        Explain how firms can position themselves for competitive advantage in an industry, using industry segmentation analysis Describe the role of hyper-competition, time, location and defensive tactics in strategic action Understand cooperative strategies and alliances, game theory Explain globalization and global strategy Describe the different strategies firms can adopt when competing globally and entering foreign markets Explain why certain industries are more competitive in specific nations than in others Evaluate the relationship between location and firm-level competitive advantage Learning Activities Learning Activity Week Four Video Lesson 1 Introduction Description Due Date Point Value Weight Overview Video Day 1 ~ ~ Competitive Positioning Day 1 ~ ~ 1 STRT 6200: Strategic Decision-Making in a Changing Environment Reading 1  T. Rothaermel. Strategic Management - Concepts. McGraw Hill-Irwin, 2016 o Chapter 9 Corporate Strategy: Corporate Strategy: Strategic Alliances, Mergers and Acquisitions o Chapter 10 - Global Strategy: Competing Around the World PowerPoint review of Rothaermel, Chapter 9 PowerPoint review of Rothaermel, Chapter 10 Hospitals Fear Competitive Threat From Potential Walmart-Humana Deal, Wall Street Journal, April 1, 2018 Cigna Deal Shows Being a Health Insurer Isn’t Enough Anymore, Wall Street Journal, March 8, 2018 The CVS-Aetna Gamble: A Health-Care Giant Not Built Around Doctors, Wall Street Journal, December 4, 2017 Day 3 ~ ~ The Role of the Industry in the Firm's Success Cooperative Strategies Day 4 ~ ~  Hospitals Fear Competitive Threat From Potential Walmart-Humana Deal 100 5%  Cigna Deal Shows Being a Health Insurer Isn’t Enough Anymore Initial Post Day 3; Response Day 5  The CVS-Aetna Gamble: A Health-Care Giant Not Built      Lesson 1 Lectures   Week 4 Discussion 1 2 STRT 6200: Strategic Decision-Making in a Changing Environment Around Doctors Lesson 1 Summary Summary Day 4 ~ ~ Lesson 2 Introduction Mergers: Motives and Outcomes Day 5 ~ ~ Reading 2 Li & Fung: Navigating through Disruptive Changes, Harvard Business Review, NTU127-PDFENG Day 5 ~ ~ Lesson 2 Lecture Mergers: Motives and Outcomes Day 5 ~ ~ Lesson 2 Summary Summary Day 5 ~ ~ Week 4 Assignment 1 Li & Fung: Navigating through Disruptive Changes, Harvard Business Review, NTU127-ENGPDF Day 6 100 15% Week 4 Discussion 2 Li & Fung: Navigating through Disruptive Changes, Harvard Business Review, NTU127-ENGPDF Initial Post Day 6; Response Day 7 100 15% Note: All assignments are to be submitted through the Assignments area of the course. Similarly, all discussions can be accessed in the Discussions area. 3 STRT 6200: Strategic Decision-Making in a Changing Environment Lesson 1: Introduction Competitive Positioning Log in to the course to view video and alternative version. Introduction Video Transcript In this lesson, we consider how firms can position themselves for competitive advantage in an industry, through a thorough understanding of industry structure and industry segments. We review the role of hyper-competition, time, location and defensive tactics in strategic action. We also assess the role of cooperative strategies and alliances in strategy formulation, and study some basic elements of game theory as a way of understanding dynamic strategy, in reaction to competitor moves. Learning Objectives At the completion of this lesson, you will be able to        Explain how firms can position themselves for competitive advantage in an industry, using industry segmentation analysis Describe the role of hyper-competition, time, location and defensive tactics in strategic action Understand Cooperative strategies and alliances, game theory Explain globalization and global strategy Describe the different strategies firms can adopt when competing globally and entering foreign markets Explain why certain industries are more competitive in specific nations than in others Evaluate the relationship between location and firm-level competitive advantage Readings (Complete by end of Day 3) Textbook readings:    T. Rothaermel. Strategic Management - Concepts. McGraw Hill-Irwin, 2016: o Chapter 9 - Corporate Strategy: Strategic Alliances, Mergers and Acquisitions o Chapter 10 - Global Strategy: Competing around the World PowerPoint review of Rothaermel Chapter 9 PowerPoint review of Rothaermel Chapter 10 Read:   Hospitals Fear Competitive Threat From Potential Walmart-Humana Deal, Wall Street Journal, April 1, 2018. Cigna Deal Shows Being a Health Insurer Isn’t Enough Anymore, Wall Street Journal, 4 STRT 6200: Strategic Decision-Making in a Changing Environment  March 8, 2018. The CVS-Aetna Gamble: A Health-Care Giant Not Built Around Doctors, Wall Street Journal, December 4, 2017. The Role of the Industry in the Firm's Success We first consider how much an attractive industry influences a firm's success, and how much of the success can be traced to the firm's own strategic choices and actions. Various studies suggest that only about 20% of a firm's performance can be traced to industry conditions, with somewhere between 30 and 45% attributable to the results of a firm's actions. Fragmented industries invite consolidation, with the more powerful and successful firms increasing market power, sometimes through buyouts and mergers. Such consolidation can also occur under conditions of hyper-competition. One strategic approach is to consider industry segmentation and develop a segmentation strategy in which the firm attempts to occupy and dominate segments that are faster growing and less subject to intense competition. Industries can be segmented in a variety of ways: by product, customer and geography. Time and location are also relevant to strategy, with defensive tactics sometimes necessary, in response to competitor actions and changing industry conditions. Log in to the course to access interactive course content and alternative version. The Role of the Industry in the Firm's Success Alternate Version Cooperative Strategies Strategy does not always require competing with competitors. Sometimes, firms may form alliances and joint ventures, which are forms of cooperative strategies. Alliances can be fragile, and a successful alliance requires that both parties share goals, generate trust and create a common corporate culture. Strategy is not static, in the sense that competitors continually respond to a firm's actions and to industry change. Hence, game theory can be useful in modeling competitors' responses, especially over multiple periods. However, game theory does have limitations, and is best used as an analytical tool under certain conditions. The example of Boeing and Airbus shows how game theory can be useful. Log in to the course to access interactive course content and alternative version. Cooperative Strategies Alternate Version 5 STRT 6200: Strategic Decision-Making in a Changing Environment Summary While the specific industry does affect firm success, more of its success can be laid at the door of its own strategic actions. Its positioning, relative to competitors and to customers, is affected by its analysis of industry structure and industry segments. One possibility is to collaborate with competitors, through alliances and joint ventures. However, such alliances can be fragile and require trust and agreement of goals, if the alliance is to be longer-lasting. Since competitors do not sit still but respond to the firm's own actions, game theoretic analysis can be helpful in modeling multi-period moves by competitors and determining what course of strategic action might be best, while being aware of the limiting assumptions of game theory. You have now completed Week 4 Lesson 1. Lesson 1 Summary End of Lesson 1 Week 4 Discussion 1 Week 4 Discussion 1 (Post by end of Day 3; Respond by end of Day 5) Value: 100 points Read:    Hospitals Fear Competitive Threat From Potential Walmart-Humana Deal, Wall Street Journal, April 1, 2018. Cigna Deal Shows Being a Health Insurer Isn’t Enough Anymore, Wall Street Journal, March 8, 2018. The CVS-Aetna Gamble: A Health-Care Giant Not Built Around Doctors, Wall Street Journal, December 4, 2017. Discussion Question   Discuss why Cigna is acquiring Express Scripts, and why CVS and Aetna are merging, and why Walmart is interested in acquiring Humana; how are changes in the healthcare industry, technology, and cost considerations, motivating these deals? What can we learn from these acquisitions about the strategic reasons for choosing mergers as a growth strategy, and about the impact of a merger on other competitors and the industry as a whole? Note: Your posts on the articles should be between 300 to 500 words. Post your answers to the thread by no later than end of Day 3. Respond substantially to one classmate's initial post by end of Day 5. 6 STRT 6200: Strategic Decision-Making in a Changing Environment Lesson 2: Introduction Mergers: Motives and Outcomes We now consider mergers as an aspect of strategic decision-making. We review why mergers happen, analyzing how mergers can be a response to environmental changes. Mergers can occur for a variety of rational reasons such as better profits, greater efficiency and technology acquisition. Mergers can also increase the market power of the acquiring company. Mergers can be analyzed in terms of strategic fit, with mergers being more risky when the acquisition is new businesses as well as new customers. We also discuss factors used in screening for target companies, and the variables pertinent to setting in place a merger strategy. Learning Objectives At the completion of this lesson, you will be able to           Understand why mergers happen Understand how environmental change can motivate mergers Appreciate the various rational reasons that lead companies to acquire other companies Recognize the role of financial considerations in affecting merger decisions Be familiar with the link between mergers and potential increased market power of the acquiring companies Understand the role that technology can play in merger activity Be aware of how managers can gain from mergers Analyze whether a merger is consistent with the idea of strategic fit Screen for target companies Recognize the issues inherent in implementing a merger strategy Reading 2 (Complete by end of Day 3) Read the following:  Li & Fung: Navigating through Disruptive Changes, Harvard Business Review, NTU127PDF-ENG Mergers: Motives and Outcomes Log in to the course to access interactive course content and alternative version. Mergers: Motives and Outcomes Alternate Version 7 STRT 6200: Strategic Decision-Making in a Changing Environment Summary Mergers should be consistent with the firm's existing strategy. Strategic fit consists of analyzing how the firm that is being acquired fits into existing business: whether it provides extensions of current lines of business or customers, or whether it takes the firm into entirely new businesses and serves entirely new customers. The latter are likely to be more risky as the acquiring firm does not have any specific skills or capabilities, competitive advantages, in such new businesses. You have now completed Week 4 Lesson 2. Lesson 2 Summary End of Week 4 Week 4 Assignment 1 Week 4 Assignment 1 (Submit by end of Day 6) Value: 100 points Li & Fung: Navigating through Disruptive Changes, Harvard Business Review, NTU127ENG-PDF After reading the case, answer thses questions in your case write-up: 1. How is Li & Fung’s industry and competitive environment changing? What factors might derail Li & Fung’s future? 2. How is the Li & Fung 2017-2019 plan a departure from its previous strategic focus on growth through acquisitions? How is this new plan adapting to the changing environment? 3. How should Spencer Fung, CEO, catalyze internal change at Li & Fung to compete in the changing environment? Case Write-ups should be around 5 pages (1000-1200 words) maximum, 10 point font, double-spaced. Please also use exhibits and charts as necessary to support your text answers. Submit your write-up through the Turnitin drop box found within the Assignments area by no later than end of Day 6. After you have submitted your write-up, post a copy of your answers to the Week 4 Discussion 2 forum by no later than end of Day 6. Respond substantially to one classmate's initial posts by end of Day 7. Your comments on the answers of colleagues can be short, up to 200 words. 8 STRT 6200: Strategic Decision-Making in a Changing Environment Accessing Grademark Commentary for Individual Turnitin Assignments     Select the View/Complete link in the assignment drop box, or select your grade in the My Grades area. Next, select the View button associated with the assignment you wish to review or click on the title of the assignment. Once the document view loads, select the GradeMark button, located at the top left of the screen. To view individual comments, hover the mouse over the blue comment bubbles. Week 4 Discussion 2 Week 4 Discussion 2 (Post by end of Day 6; Respond by end of Day 7) From Week 4: Assignment 1: Li & Fung: Navigating through Disruptive Changes NTU 127    How is Li & Fung’s industry and competitive environment changing? What factors might derail Li & Fung’s future? How is the Li & Fung 2017-2019 plan a departure from its previous strategic focus on growth through acquisitions? How is this new plan adapting to the changing environment? How should Spencer Fung, CEO, catalyze internal change at Li & Fung to compete in the changing environment? Attach a copy of your write-up within the Week 4 Discussion 2 thread by no later than end of Day 6.Respond substantially to one classmate's initial post by end of Day 7. Your responses can be short, up to 200 words. 9 
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