BMGT 798: Special Topics in Industry and Competitor Analysis
Tuesday 4:00-6:40 p.m.
Professor Ken G. Smith
Classroom RM 1207, Van Munching Hall
Office: 3349 Van Munching Hall
Office Hours: one hour before class
Tel: x52250; e-mail: KGSmith@MBS.umd.edu
Overview
This industry and competitor analysis seminar provides students with the conceptual framework and analytical tools for understanding the dynamics of industry structure and how competitors actually interact in the marketplace. An understanding of the dynamics of competition and industry evolution is an important input in the development of an effective competitive strategy.
The fundamental assumption of the course is that the profit potential of any firm is a function of: (1) the industries it operates in; and (2) the competitors it opposes. Therefore to enhance profits, a general manager must understand industry structure and competition. The profits within an industry are affected by a wide range of influences, including the macroeconomic environment, cost and demand structures of the industry, technological change and government behavior. Competitive moves and responses of incumbents also affect firm profits. Actions taken by firms to improve competitive position engender responses by other firms, and the expected sequence of actions and responses must be understood to develop an effective strategy. Reactions of rivals will depend on their goals or intent, beliefs, relative resource positions and past actions. Thus, the approach to studying the dynamics of industry structure and competitors is to focus on the key characteristics of industry structure and the individual competitive moves and countermoves exchanged by various industry players.
The course examines such questions such as: How should one go about analyzing an industry and competitors? What models and frameworks are most applicable? What types of data does one look for and how can they be organized? Where does one look for these data?
The seminar has a strong research component: students will apply the concepts, analytical tools, and research methods learned in class to an intensive field project of an industry and competitors, along the lines of a professional consulting report. Thus, although the course may draw from such theories as industrial organizational economics, Schumpeterian economics, and game theory, the emphasis will be on the application and hands-on investigation to produce a consulting report.
Evaluation
Students will be evaluated based on class discussion, presentations, individual case write-ups, and a group written industry and competitor analyses. Approximately 2/3 of class time will be used for discussion and application of theory to actual cases and field research; the remaining class time will be used for team meetings with professor, field research and progress reports.
Forty percent of the grade will be a group project written in the form of a consulting report. The project will involve a major industry and competitor analysis. Specific details will be provided for this report but, in general, it will involve the following: First each group will select an industry to study and perform a structured industry analysis so as to answer the question: should a specific firm (your client) enter this industry? The industry analysis will involve library and field research.
The second component of the group project will involve the tracking and analysis of major competitive moves and countermoves by firms within the industry. The assignment will answer the question: Assuming entry, how will current rivals in the industry respond? This analysis will also be based on field and library research. The competitor analysis will identify those competitors who have most effectively seized opportunity and who can most effectively maintain that opportunity over time. Each group will present and submit the written results of their analyses at the conclusion of the semester (10 % of grade).
The remaining 50% of the grade will be based on individual work: there will be two-five page written case write ups (30% of grade) and in-class participation (20% of grade).
Group: Industry and Competitor 40% Presentation 10%
Individual: Case write-ups 30% Participation 20%
Attendance
Because the course emphasis on case analysis, the major and important part of your learning will take place in the classroom. Therefore, attending classes is essential. Please arrive in time for each class so that we may start promptly. If for some reason you must miss a class, please let me know in advance in writing so that your absence will not be unexplained.
Preparation and Participation
For the learning process to be really effective, it is necessary that you carefully prepare the cases/readings before class and actively participate in the case discussion during class. I expect you to be fully prepared for each class and may call upon you to start the discussion or answer a specific question during the class on any day.
If for some reason you are not fully prepared on a particular day, let me know before class so that I do not embarrass you inadvertently. I urge you to attend all classes, even if you have not adequately prepared. However, you will not pass the course by simply attending class, you must participate!
Ability to present one's ideas concisely and persuasively, and to respond effectively to those of others is a key success factor in any managerial position. One of the goals of this course is to help you sharpen that ability. Accordingly, I expect you to effectively participate in the class-analyze, comment, question, discuss. Participation enables you to learn from your colleagues and to help them learn from you - which is what the case method is all about. I value and reward effective participation. I also expect the class to help deal with people who monopolize the discussion without contributing to the learning process of others.
Group Work
Group work is very helpful for regular class preparation, and essential for the projects in this class. Select your own groups, preferably based on a common interest in a research project or complementary functional expertise. Ideal size for a group is four but as many as five and as few as one are possible. Pick the group configuration that will be most manageable and useful for your own development and for completing the research projects.
Required Text and Reading
(1) Grimm, C. & K. G. Smith, 1997. Strategy as Action, Austin, Texas: West Publishing. Available at bookstore
(2) Packet of Harvard Business School Cases and articles: Available at Campus Bookstore. Referred to as (HBS).
(3) Set of Articles available for purchase at Copy Center. Referred to as (CC).
Recommended
Porter, M. 1980. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: The Free Press. January 27 Week 1: Introduction: Overview of Course Industry Analysis.
Review: (1) Porter, Competitive Strategy. Chapters 1-8 (2) Porter, Industry Analysis Appendix B: How to conduct an Industry Analysis (CC)
February 3 Week 2: Industry Analysis: Industry Structure
Read: Note on Industry and Company Profitability (HBS) Prepare: Nucor at a crossroads (Handout)
Study Questions
1. Why has Nucor performed so well in the past?
2. How attractive do the economics of thin-slab casting look?
3. Is thin-slab casting likely to afford Nucor a sustainable competitive advantage in flat-rolled products?
4. How should Nucor think about the uncertainties surrounding the thin-slab casting?
February 10 Week 3: Industry Analysis: Scope of Business and Discussion of Selected Industries
Prepare: Novi Industri (HBS) A Note on the Geography of Competition and Strategy (CC)
Study Questions
1. Why has competition in the insulin industry been on a nation by nation basis? Will this change? Why?
2. Compare the strategies and resources of the leading insulin firms. Why has Novo been the leading international competitor to date?
3. What challenges and opportunities does Novo face in 1982?
4. What should Novo do?
February 17 Week 4: Industry Structure: Scope of Business Continued: Presentation of progress/problems. (2 page report of progress)
Read: Porter, Competitive Advantage of Nations (CC) Prepare: Japanese Facsimile Industry in 1990
Study Questions
1. Why have Japanese companies become the world leaders in the facsimile industry?
2. In 1990, how might an American firm successfully enter the industry? A European firm? Are Korean firms a threat to Japanese dominance?
3. What strategic issues face the Japanese facsimile firms in 1990?
4. Which segments of the facsimile industry are the most (least) attractive? How sustainable are the positions of NEC, Murata, and Ricoh? Against foreign rivals? Against other Japanese firms?
February 24 Week 5: Competitor Analysis: The Structure Content Analysis-Some Research Selection of Competitors: Pairs, segments, groups
Read: (1)-Grimm & Smith Chapters 1, 2 & 3. (2)-Ghoshal, & Westney, 1991. Organizing competitor analysis systems, SMJ, 12 (1) 17-32. (CC) (3)-Chen, M. 1996. Competitor analysis and interfirm rivalry: Toward a thoeretical integration. AMR, 21 (1), 100-134. (4)-Smith, Grimm, Gannon & Chen, 1991. Organizational information-processing, competitive responses and performance in the U.S. domestic Airline industry. AMJ, 34 (1) 60-85. (CC)
March 3 Week 6: Competitor Analysis
Read: Grimm & Smith Chapter 8: Using the action model: Assessing relative resources and competitors. Prepare:Hold or Fold?: The War of Attrition (HBS) Prisoner's Dilemma and Other Games (HBS) British Satellite Broadcasting vs. Sky Television (HBS) next page Written Report: Five page report: predict the likely future actions of British Satellite and Sky. What should these different players do?
Study Questions
1. Describe the launch strategies of BSB and Sky?
2. Why did BSB and Sky pay two or three times more than U.S. cable companies for Hollywood films?
3. What will BSB and Sky do in the next round?
4. What should they do in the next round? How long should they continue to play this game?
March 10 Week 7: Exploitation of Blindspots and Uncertainty: Entrepreneurial Actions
Read: (1) Grimm & Smith Chapter 4-Avoiding rivals with entrepreneurial actions: Exploiting competitive uncertainty and blind spots. (2) Ferrier, W., Smith, K.G., & Grimm, C. Entrepreneurial Actions, market share erosion, and industry dethronement: A study of industry leaders and challengers. (3) Lieberman, M. & Montgomery C. 1988. First-mover advantages. SMJ (9) 41-58. (CC) (3) Zajac, E.J. and Bazerman, M.H. 1991, Blind spots in industry and competitor Analysis. AMR 16(1) 37-56. Prepare: Apple Computer--1992 (HBS) Apple Computer--1995(B): Competitor updates.
Study Questions
1. Does Apple need to change the structure of the personal computer industry in 1992 to retain its competitive advantage? Why/ Why not?
2. Evaluate Apple's Strategy since 1990: how will it affect Apple's competitive position and the structure of the industry?
3. What should Apple do in 1992?
March 17 Week 8: Exploitation of Scarce Resources: Differentiation Ricardian Actions
Read: (1) Grimm & Smith Chapter 5 Engaging rivals with Ricardian actions: Exploiting ownership of superior resources. (2) Grant: Analyzing resources and capabilities. Chapter 5 pages 113-147 (CC) Prepare: Polaroid & Kodak (HBS)
Written Report: Five page report: predict the likely future actions of Kodak and Polaroid. What should these different players do?
Study Questions
1. What strategies were followed by Polaroid and Kodak during the 1960s?
2. Have these strategies changed during the 1970s? If so, why?
3. Was it inevitable that Polaroid and Kodak would engage in head-on competition?
4. What is you evaluation of the resource positions of Polaroid and Kodak as they prepare to do battle in April 1976?
5. What actions will each player make in the next round? What actions should they take?
Spring Break (March 23-27) Week 9:
March 31 Week 10: Exploitation of Scarce Resources: Low Cost Ricardian Actions
Read: (1) Grimm & Smith pages 110-114. (2) Grant: the Cost Advantage. Chapter 7, pages 173-202 (CC). Prepare: The ready-to-eat Breakfast Cereal Industry in 1994 (HBS).
Study Questions
1. Why has RTE cereal been such a profitable business? What changes have led tot he current industry crisis?
2. Why have private labels been able to enter this industry successfully? How do the cost structures of private label and branded cereal manufacturers differ?
3. What does General Mills hope to accomplish with its April 1994 reduction in trade promotions and prices?
4. What are the risks associated with these actions? How do you expect General Mills' competitors to respond?
5. What should General Mills do?
April 7 Week 11: Exploitation of Monopoly Position: Changing the rules of the game.
Read: Grimm & Smith Chapter 6: Defending against rivals as a dominant firm: The role of Deterrent Actions. Prepare: Power Play (A): Nintendo in 8-bit Video games (HBS)
Study Questions
1. Nintendo successfully recreated the home video game business following the Atari-era boom and bust. How did it do so?
2. How was Nintendo able to capture value from the home video game business?
April 14 Week 12: Exploitation of Market Power: Playing the post patent game.
Read and review: Grimm & Smith Chapter 6 Prepare: Bitter Competition: The Holland Sweetener Co. Vs. Nutra Sweet (A) (HBS)
Study Questions
1. How should Vermijs expect NutraSweet to respond to the Holland Sweetener Company's entry into the European and Canadian aspartame markets?
2. Specifically, how should Vermijs assess the relative likelihood of the two scenarios--price war and normal competition--he has in mind?
April 21 Week 13: Exploitation of Market Power: Predicting positions with preemption.
Prepare: Du Pont's Titanium Dioxide Business (A) (HBS)
Study Questions
1. What is Du Pont's competitive position in the titanium dioxide industry in 1972?
2. As chairman of Du Pont's Executive Committee, would you vote in favor of preemption?
3. What does Du Pont have to do in order to preempt?
April 28 Week 14: Winning by Cooperation.
Read: Grimm & Smith, Chapter 7 Winning the Peace: Taking "co-optive' Actions in the absence of advantage.
Prepare: Case to be assigned (handout).
May 5 Week 15: Class Presentations
May 12 Week 16: Class Presentations
May 19 Week 17: Class Presentations