View
216
Download
2
Embed Size (px)
Citation preview
04/18/23 1
Business Strategy & Policy PSU MGMT #562
Dave [email protected]
DiversificationTacit Collusion, Government & Strategy
04/18/23 Dave Garten - Business Strategy 2
Boeing Case – Key Learnings
1. Risk can be financially evaluated2. Key risk factors and assumptions
can be used to focus decision-making
3. Key risk factors can be identified with specific actions, repentances or contingencies
4. Government can have a huge effect on Strategy.
A380 LaunchKey focal issue: should Airbus proceed?Critical uncertainties
EU Loans. Can we get low interest loans? Will the GATT affect this? Boeing. What will Boeing do with the 747? Update it? Drop price? Launch customers. Can we get enough launch customers to mitigates
risk? Fuel price. What if fuel prices go way up or way down? Technology. Will the cost be higher than planned? Will development
time be longer? Airport acceptance. Will enough airports make the changes to
accommodate the A380? Market for aircraft. How large will the market be?
Which will drive the scenarios?04/18/23 Dave Garten - Business Strategy 3
04/18/23 Dave Garten- Business Strategy 4
Core Competency and Growth
Core
Step 1 (38%)
Step 2 (26%)
Step 3 (7%)
Diversification (<1%)
Source: Bain, October 2003
Related
Unrelated
04/18/23 Dave Garten- Business Strategy 5
Adjacency and Success
New product & services
Steps from CoreStep 1 Step 2 Step 3 Step 4
New geography
New customer segment
New channel
Forward/backward integration
New business
30-50%
10-30%
<10%
04/18/23 Dave Garten- Business Strategy 6
Diversification
“Barneyspeak” (related) Concentric diversification = new but related
products (related) Horizontal integration = increased control over
competitors (related) Horizontal diversification = unrelated products,
related customers (unrelated) Conglomerate diversification
NPV (together) > NPV(A) + NPV(B).
04/18/23 Dave Garten- Business Strategy 7
Diversification (Related)Driven by operational economies Shared activities: sales/marketing/channels,
manufacturing, R&D, support functions Core competency Growth and/or consolidation
Driven by financial & mgt economies Risk management, capital allocation, tax Core competency to manage a business
Motivated by market power Market share (antitrust issues) Multipoint diversification (conglomerate)
04/18/23 Dave Garten- Business Strategy 8
Diversification - “Disagregation”
Harder to derive value from unrelated diversification or vertical integration
Presumption: focus -> improved competitive position -> improved profitability
Presumption: focus -> improved competitive position -> improved profitability
X
Innovation of IT, efficiency of information More specialization Deregulation, globalization of markets Efficiency of capital markets Increasing customer sophistication…
04/18/23 Dave Garten- Business Strategy 9
HPQ
Source: WSJ, 3/05 Source: UBS, 3/05
04/18/23 Dave Garten- Business Strategy 10
CollusionCollusion as a business strategy What is collusion? Why do companies collude? Why is tacit collusion? Why use
it? Under what conditions does
collusion tend to occur?Alliance vs. collusion
04/18/23 Dave Garten- Business Strategy 11
Collusion – Game TheoryStakes, positions & interests can be modeled
People (or organizations) have “stakes” in the game They will behave in their own self interest, i.e. their stake
Prediction requires thinking strategically about others’ problems/goals…however…don’t assume the competitor thinks the way you do (check your cognitive biases)There is ultimately a winner and a loserIn general, a good (but not perfect) predictor of a competitor’s future behavior is their past behavior, but…If the situation has changed materially, then follow the money (i.e., their self interest)
04/18/23 Dave Garten- Business Strategy 12
Collusion – Game TheoryWhat does signaling accomplish? Matching, threatening, non-threatening Examples
Matching - airlines Tough vs. soft – Nutrasweet/Hollander Top dog, Lean & hungry – DRAM Puppy Dog, Fat Cat – IKEA
04/18/23 Dave Garten- Business Strategy 13
Government & StrategyBig picture: Encourage change,
domestic rivalry, innovation. Tools:
X
04/18/23 Dave Garten- Business Strategy 14
Government & Strategy“Government's proper role is as a
catalyst and challenger; it is to encourage, promote even push companies to raise their aspirations and move to higher levels of competitive performance.”
Porter doesn’t like: Trade barriers, forced JV & tech transfer, subsidies, local content laws, spending
(defense & domestic)
Derived from Michael Porter, Competitive Advantage of Nations
04/18/23 Dave Garten- Business Strategy 15
Joint Venture: Int’l Entry
Volkswagen-Shanghai JV
04/18/23 Dave Garten- Business Strategy 16
AntitrustWhat is the goal of antitrust regulation?Laws-> Sherman (1890), Clayton (1914) Reliance on court system
“Per se” vs. “rule of reason” violationsCan DOJ reach across borders? When?Actions: Price, non-price and leveraging Predatory pricing, price fixing, dividing markets,
exclusive dealing (e.g., tying)
04/18/23 Dave Garten- Business Strategy 17
AntitrustAcquisitions Implications for managers Proposed actions legal? Will a lawsuit be brought? What are “costs” of a lawsuit?
Some antitrust examples DRAMs, Cingular/AT&T wireless Lysine cartel