Options Pricing Strategy Break Even Analysis Excel Tools

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					Business Strategy MGMT562             Class Assignment

Class web page: http://www.sba.pdx.edu/faculty/daveg/course.html

Strategy-in-the-News: (assignment dates to be made in class)


Week #1 -Strategic Introduction - Set expectations for course. Go through class mechanics, etc.

Assignment for Class #1
   • Download syllabus and slides from class website
   • Purchase text, articles and cases (listed in syllabus)
   • Reading: Barney (Ch 1)
   • Handout: Gerstner, Steely-Eyed Strategies; Mission

Major Learning Points
   • Gain familiarity with strategy as a concept – what it is, and what it is not
   • Gain familiarity with business models.

Week #2 - Strategic Introduction & External Analysis

Major Learning Points
   • Discuss what is business strategy
   • Introduction to external analysis
   • Gain practice in case analysis

Reading
   • What is Strategy?
   • Barney, Chapter 3, 4 (Evaluating External Threats, Evaluating External Opportunities)
       Particularly important: Sections 3.2 (Five Force Model of Environmental threats), 4.1
       (Opportunities and Industry Structure)

Case Discussion (BMG) – prepare, but do not hand-in
1. During the last century, a handful of major record companies tended to dominate the music
   industry. Why is that? Use the Five-Forces framework to characterize the industry.
2. Will major record companies continue to dominate the business following the advent of the
   Internet? Make sure that you identify opportunities and threats when considering the
   analysis. Make sure that you identify opportunities and threats when considering the
   application of the Internet to the five forces analysis from Q1.
3. Evaluate BMG’s approach to the Internet. Does it make sense?
4. What would you recommend to Zelnick and Conroy? Specifically, what should the strategy
   and organizational structure of BMG’s digital operations be? Should BMG continue to work
   with a wide array of technology partners? Why or why not?


Week #3 – Internal Analysis

Major Learning Points
   • Understand notion of core competency, with associated strengths and weaknesses.
   • Gain more practice thinking about industry structure.

Reading


Dave Garten                                 2/3/2011                                           1
Business Strategy MGMT562             Class Assignment

    •   Barney, Chapter 5 (Evaluating Firm Strengths and Weaknesses) Particularly important:
        Sections 5.2 (Analyzing Organizational Strengths and Weaknesses), 5.3 (Applying the
        VRIO Framework), 5.4 (Implications of the Resource-based View)
    •   Core Competence of the Corporation

Case Discussion - Apple (group assignment, 3 people)
1. What do you think is BMG’s core competency in 40 words or less? Why? Does it pass the (3)
   part core competency test from Prahalad’s article?
2. Dissect and analyze the dynamics of the PC industry, comparing the early industry structure
   with the dynamics in a more current time frame. Are these dynamics favorable or problematic
   for Apple? Why?
3. Use the VRIO (value chain) framework to develop your analysis.
   • What do you think are some of Apple’s strengths?
   • What are Apple’s weaknesses?
   • Describe Apple’s core competency in 40 words or less.

This link is an interesting 1 hour video of the history of Apple. Purely optional.
http://www.bloomberg.com/video/63722844/

For this case, focus on the PC Industry (not the consumer electronics).

Week #4 - Business Strategies

Major Learning Points
   • Gain an understanding of core business strategies of cost leadership, vertical integration
       and differentiation.
   • Be able to develop strategies from a SWOT.
   • Be able to evaluate strategies.

Reading
   • Barney, Chapter 6 Vertical Integration. Read chapter except 6.4 Organizing to
       Implement Vertical Integration
   • Barney, Chapter 7 Cost Leadership
   • Barney, Chapter 8 Product Differentiation. Read chapter, except skim 8.4 Organizing to
       Implement Product Differentiation
   • Handout (to be emailed): Mondavi book excerpt

Case Discussion – Mondavi (individual, Mondavi or Apple #2 required to submit)
1. Evaluate the structure of the global wine industry? Why are large alcoholic beverage firms
   Diageo, Foster’s and Allied Dominique entering the premium wine business? Do their
   strategies make sense? What advantages or disadvantages does Mondavi have relative to
   these firms
2. What opportunities and threats exist for Robert Mondavi?
3. Evaluate the strength and weaknesses of Mondavi. What do you think is the core competence
   of Mondavi (in 25 words or less)?
4. Develop a Strategy SWOT to then articulate your recommended strategy options for
   Mondavi’s

Week #5 –Strategy & Uncertainty – focus on risk, flexibility



Dave Garten                                 2/3/2011                                              2
Business Strategy MGMT562              Class Assignment

Major Learning Points
   • Apply and practice strategy analysis (Apple case)
   • Expand thinking on differentiation through Blue Ocean Strategy
   • Introduce some tools and perspectives that can be used in conjunctions with strategies to
       manage risk and uncertainty (scenario planning in particular)

Reading
   • Blue Ocean Strategy
   • Barney, Chapter 9.2 (Defining Flexibility and Options)
   • Strategy under Uncertainty

Case Discussion – Apple #2 (individual, Mondavi or Apple #2 required to submit)
1. Evaluate Apple’s strategies since 1990 pursued by Sculley, Spindler, Amelio, and Jobs.
   What were the strategic initiatives? The logic behind the moves? Success or failure?
2. Has Steve Jobs finally solved Apple’s long-standing problems with respect to the MacIntosh
   business? You will need to state what you believe is the “long standing problem.”
3. How do you think the current iPOD/iPhone business strategies compare to Apple’s past?
   What’s the same and what’s different?


Week #6, Diversification; Collusion & Government Effects on Strategy

Major Learning Points

    •   Gain practice analyzing uncertainty/risk in a large strategic project decision (A380 case)
    •   Introduce some concepts of corporate strategy (vs. business strategy).
    •   To learn about how government agendas exert policy and influence a firm’s strategy
    •   To learn about antitrust policy, and its effects on strategy

Reading
   • Barney, Ch 12.1-12.2 (Corporate Diversification), Ch10.1 to 10.3 (Tacit Collusion).
        o Note: not the chapter on “Organizing to Implement Corporate Diversification”
   • Antitrust and the Consumer (I will email this to you)
   • The Fly on the Wall has Been Bugged (I will email this to you)

Assignment (group, required): Should Airbus make the “big bet” to develop the A380?

This includes a quantitative analysis (excel) and write up. The financial analysis should include
an NPV and break even analysis including a sensitivity analysis around your key assumptions
(like sales). You can assume that the development time for the A380 takes about 6 years, and that
Airbus will spend $10-12B during this time. The market demand and the pricing can be derived
from the excel file that I send. You can get more detailed data from the Airbus and Boeing web
sites if you wish (though you do not need to). Make other assumptions as necessary. You can
assume after tax net income represents cash flow if you wish.

The 2 page write up should include (a) your recommendation, (b) an explanation of key
assumptions, (c) key risks and mitigation, (c) financial findings of break-even time frame,
sensitivities (d) your results of scenario analysis and a description of your key learnings (with
respect to strategy).



Dave Garten                                  2/3/2011                                                3
Business Strategy MGMT562            Class Assignment

Week #7 - Topic – International

Major Learning Points
1. Apply value chain analysis, antitrust/collusion & government involvement to strategy (De
   Beers)
2. Gain familiarity with the different opportunities, barriers and entry options to create
   economic value through International strategies.
3. Gain familiarity with organizational roles in International Strategies

Reading
   • Case: De Beers
   • Barney, Chapter 15 (International Strategy)
   • HBR Article: Strategies that Fit Emerging Markets

Case Discussion - DeBeers – (individual, DeBeers or Daewoo required to submit)
1. Who writes the rules for the International diamond market? How are they enforced? Hint:
   look at the value chain
2. What is De Beers core competency in 40 words or less?
3. How has DeBeers structured its relationship with US diamond dealers and the US
   government? Why might this be a problem looking forward? Hint: understand the
   financials and trends in the exhibits.
4. Should the US government spend a lot of time dealing with antitrust enforcement against
   DeBeers? Why or why not?
5. Recommendations: What should Nicky Oppenheimer do? Why?

Week #8 - Collaboration - Alliances and M&A

Major Learning Points
• Develop a working knowledge of the various forms of alliances and M&A
• Understand and differentiate between alliance “tools” and their advantages/disadvantages
• Apply alliance and strategy concepts in an emerging market setting (Daewoo)

Reading
• Barney, Chapter 11, 14.1 (Strategic Alliances, and Mergers and Acquisitions)
• Strategy as Ecology; When to Ally and When to Acquire

Case Discussion – Daewoo (individual, DeBeers or Daewoo required submit)
1 How did Daewoo’s strategic alliance with General Motors end in 1992? How did Daewoo’s
   globalization strategy in the automobile sector evolve from this experience? What was that
   strategy?
2 What seems to be the strengths driving Daewoo’s success to date? What is Daewoo’s core
   competency in 40 words or less?
3 Why are emerging markets so important to Daewoo’s strategy? What is attractive (and
   unattractive) to Daewoo about entry into Uzbekistan? Hint: look at the entry into Uz and
   prior class on international strategy
4 With respect to the Daewoo-Uz alliance, what does Daewoo get out of it? What does the Uz
   government get out of it? In other words, what are the “value drivers” for each?
5 Evaluate how the venture is performing? This should link back to criteria and goals. What
   would you recommend to the management in Uzbekistan? Hint: look at actual operating
   results versus goals in questions 3/4.



Dave Garten                               2/3/2011                                            4
Business Strategy MGMT562             Class Assignment



Week 9 – Sustainability and Strategic Management

Major Learning Points
• To think about how sustainability is connected to strategy (developing field)
• Gain a better understanding of strategy via guest speaker

Reading
• Strategy and Society

Case Discussion – Patagonia
1. What is Patagonia’s strategy? What specific activities does Patagonia employ that
   support the customers’ WTP (“willingness to pay”).
2. Complete a financial analysis to indicate whether or not you believe Patagonia’s
   strategy is working. Can the “extra” costs be justified and what are they? This
   analysis should be related to question #1 and should use data from the financial
   statements, as well as more detailed case data on Patagonia’s unique activities.
3. Develop a Strategy SWOT.
4. What strategies should Patagonia pursue. “Best practices” include some kind of
   prioritization.

Class discussion (do not write-up) - how does Patagonia’s view success compare with
that of a traditional public company? Could Patagonia be a public company and maintain
the unique attributes? Why?

Week 10 – Course Wrap-up
• To wrap-up the key points of the course
• Connect the various elements of strategy discussed into a context of strategic management
• Gain a better understanding of strategy via guest speakers
• To help improve the course via a course critique discussion

Final exam (90 minutes)
• In class, you will get 2-3 questions on the Boeing case. The topics will be similar to typical
   case questions that you have gotten throughout the semester.
• You can bring in any class materials, or any prepared material/analysis.
• This is an individual assignment, to be done in Word (like the case assignments).
• Like the cases, I strongly encourage you to use business writing tools such as bullets, tables
   and drawings. Be concise.
• This will be done on a computer – either in the classroom, or anywhere on campus.
• You must email me the exam document by the end time. Late submittals will not be
   accepted.




Dave Garten                                 2/3/2011                                               5

				
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