Session #3 Strategic Management Dr. Mark H. Mortensen

Session #3 Strategic Management Dr. Mark H. Mortensen

Session #3 Strategic Management Dr. Mark H. Mortensen Sessions 001 and 270 Thursdays 6:00PM to 9:00PM Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 1 Mortensen Consulting Group You Will be Prepared for Today Iff You: Have turned in Assignment #1 (Starbucks & Dunkin Donuts) Have read Chapter 3 Have read the Apple case study thoroughly (bonus: and determined the major problems and issues)

Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 2 Mortensen Consulting Group Today 6:00 Begin Errata from last week Discussion & summary of key points from last week Who are the groups? Discussion on Assignment #1 (DD & SB) Apple Computer Case Study 7:30 BREAK Apple Computer Case Study (cont.) Lecture & discussion of Chapter 3 8:50 End

Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 3 Mortensen Consulting Group Errata from Last Week We did not get to Chapter 3 last week Wrong title for Chapter 3 in the Syllabus new version 2.0 fixes that Quote Attribution "If I am to speak 10 minutes, I need a week for preparation; if 15 minutes, three days; if half an hour, two days; if an hour, I am ready now.

-- Woodrow Wilson It usually takes more than three weeks to prepare a g ood impromptu speech. -- Mark Twain Fall 2008 Assignment #0 all completed (c) Copyright 2008 Mortensen Consulting Group LLC 4 Mortensen Consulting Group Key Points from Last Week Chapter 2 Board of Directors purpose & responsibilities SOX effect on operations

Current trends in corporate governance Importance of Executive Leadership, even in a learning organization. Case Study Methodology Purpose of a Case Study Outline of a Case Study Procedure for Doing a Case Study Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 5 Mortensen Consulting Group Groups

Group A William Drayton Michael Merson Adam Siegel Group C Shahe Demirjian Edward Morgan Sasha Popovic Group B Brian Leosz Michelle Mace

Ben Rogan Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 6 Mortensen Consulting Group Discussion on Assignment #1 (Dunkin Donuts and Starbucks) Visit both a Starbucks and a Dunkin Donuts retail store Describe and contrast the atmospheres, types of menu items, service quality, and prices Describe and contrast the patrons and how they react to the above Talk to at least one person in the store about why they come there and relate their opinions Describe your own experiences at each of them, from this and other visits.

Visit the Starbucks and Dunkin Donuts web sites: Try to determine their target markets, mission statements, and anything else you can glean about their strategies write a paragraph or two on each Contrast the two web sites Contrast the apparent strategies of the two Discuss how the information on the web sites does or does not match the reality in each case. Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 7 Mortensen Consulting Group

Dunkin Donuts vs. Starbucks Starbucks Founded 1985 in Seattle, Wash. Publically owned (NASDAQ SBUX) FY07 $9.4B 15,011 company-owned and JV locations by EOFY07 in 37 countries Dunkin Donuts Founded 1950 in Quincy, Mass. Privately owned FY07 - $6.6B 7,988 franchised locations by EOFY07

72% US 28% International in 44 countries The objective of Dunkin Brands [DD and Baskin-Robbins] is to be the Quick Quality leader in its industry, offering a higher evolution of the standard quick dining experience, with innovative product choices at the right price, served fresh, meeting the needs of people who are busy living. Establish Starbucks as the premier purveyor of

the finest coffee in the world while maintaining our uncompromising principles as we grow. The following six guiding principles will help us measure the appropriateness of our decisions: Fall 2008 70% US 30% International in 37 countries Provide a great work environment and treat each other with respect and dignity. Embrace diversity as an essential component in the way we do business. Apply the highest standards of excellence to the

purchasing, roasting and fresh delivery of our coffee. Develop enthusiastically satisfied customers all of the time. Contribute positively to our communities and our environment. Recognize that profitability is essential to our future success. (c) Copyright 2008 Mortensen Consulting Group LLC 8 Mortensen Consulting Group Good Information Sources

Fall 2008 Direct observation & discussion Company web sites Annual reports 10-K filings Wikipedia articles on company Stock analyst reports News articles, found thru Google, etc. Dunn & Bradstreet (D&B) reports LinkedIn descriptions of companies Resumes of former employees. (c) Copyright 2008 Mortensen Consulting Group LLC 9 Mortensen Consulting Group

Apple Case Study Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 10 Mortensen Consulting Group Apple Case Study: Outline Case Study Background The nature of competitive advantages over time in highly competitive, innovative industries. What should Apple do? Define the Central Issues

Define the firms goals Identify the constraints Identify the alternatives Select the best alternative Develop an implementation plan Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 11 Mortensen Consulting Group Apple: Case Study Background(1): Apple History Fall 2008

Competitive advantages in the 1980s made Apple the most profitable PC company in the world (What were they?) But on a glide path to history (What? Why?) Four successive CEOs (Sculley, Spindler, Amelio and Jobs) sought to reposition Apple in the PC Industry and to create a sustainable competitive advantage. (What did they try? What succeeded? What did they decide not to do?) (c) Copyright 2008 Mortensen Consulting Group LLC 12 Mortensen Consulting Group Competitive advantages in the 1980s that made Apple the most profitable PC company in the world Ease of use Dominance in creative industries (design, desktop publishing), as well as education

Buyer loyalty Proprietary operating system Strong branding Excellent industrial design Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 13 Mortensen Consulting Group Why was Apple on a glide path to history Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 14

Mortensen Consulting Group CEOs Strategies Fall 2008 Sculley low-cost producer; hit products every 6-12 months; Mac Classic vs. IBM clones; Powerbook laptop; Newton PDA; Taligent with IBM for new OS; PowerPC chips from IBM Spindler (1993-1996) reinvigorate core markets; killed Intel chip; licensed Mac OS to clone makers; killed Taligent; layoffs Amelio (1996-1997) servers & other high-margin

devices; cancelled nextgen Mac OS; ended licensing program; bought NeXT (Jobs) Jobs iMac; outsourced manufacturing; direct sales via website; image; industrial design (c) Copyright 2008 Mortensen Consulting Group LLC 15 Mortensen Consulting Group Apple: Case Study Background(2): The Mac Business in the 21st Century Technology & Innovation Cutting edge experience High-end Differentiated from Wintel machines Intel Chipset

Overhauled Mac OS X in 2001 (UNIX) Proprietary Apple-developed applications Distribution & Sales Retail Fall 2008 stores (c) Copyright 2008 Mortensen Consulting Group LLC 16 Mortensen Consulting Group Apple: Case Study Background(3): The Evolving PC Industry

Fall 2008 The dynamics of the PC industry have radically changed in the last 20 years. (How?) Buyers Rivalry among suppliers Barriers to entry Complements to the PC industry Supplier vs. Manufacturers balance of power Substitutes (c) Copyright 2008 Mortensen Consulting Group LLC 17 Mortensen Consulting Group

Apple: Case Study Background(4): Apple Beyond Macintosh iPod iTunes Apple TV iPhone Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 18 Mortensen Consulting Group Questions for Next Week Has Steve Jobs finally solved Apples long-standing problems a.

b. Fall 2008 With respect to the Macintosh business? With respect to its broader strategic position? Going forward, what should Steve Jobs do? (c) Copyright 2008 Mortensen Consulting Group LLC 19 Mortensen Consulting Group Apples Long-Standing Problems Fall 2008

(c) Copyright 2008 Mortensen Consulting Group LLC 20 Mortensen Consulting Group Apple SWOT(s) Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 21 Mortensen Consulting Group Apples Goals Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC

22 Mortensen Consulting Group Apples Constraints Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 23 Mortensen Consulting Group Apples Alternatives Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 24

Mortensen Consulting Group Apples Best Alternatives Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 25 Mortensen Consulting Group Apples Implementation Plan Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 26 Mortensen Consulting Group

Reminder for Next Week Read Chapter 12: Strategic Issues in Managing Technology and Innovation Re-read Apple Case Study and think about the questions we will be asking Study for Quiz on Chapters 1-3 Fall 2008 (c) Copyright 2008 Mortensen Consulting Group LLC 27

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