LSM541: Competitive Advantage and Profitability

Samuel Curtis Johnson Graduate School of Management

Cornell University

Sasha Lall

Competitive Advantage and Profitability

Course Project

Instructions:

The course project is made up of three parts. As you complete each part, be sure to save your
work. At the end of the course, you will submit your completed project for evaluation by your
instructor.

Course Project, Part One

1. Consider the story of the emergence of satellite radio as it was presented in this course.
In what way is this a cautionary tale? Think about, for example, the question of “rivals.”
Do you think the story of satellite radio might have been different if it had been
launched in 1990 instead of 2001? Would satellite radio have been more successful?
Less successful? Would the two companies have merged? What dos and don’ts did you
learn from this case?

According to the case study, “ A Look at Satellite radio”, it was indeed a cautionary tale
as it required government approval which took five years to establish. Being stagnated
in a business for a period of five years can be costly as well as time consuming. In
regards to rivals, the barrier to entry to for this type of business is high, discouraging
room for rivals (as it took a period of five years to gain government approval), also it
requires a vast amount of resources. Although, the barrier to entry in this type of
business is high, there was a firm still able to enter the industry which any of the firms
expected.

I think if the satellite radio were launched in 1990 instead of 2001, it would have been
successful as it would be a newly form of industry which would of meant less
competition, they would have been able to control the market and able to be
profitable. With less competition the greater the market share, I think the companies
won’t of merged in 1991, as it would have been the only the two companies controlling
the market, however according to the case study they merged because a new

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 LSM541: Competitive Advantage and Profitability
Samuel Curtis Johnson Graduate School of Management
Cornell University

competitor came, and they were competing fiercely which resulted in lower profits.
Merging was there only way for both companies to survive against its’ new competitor.
Some do’s I learnt from this case study is from merging it reduces room for competition
as the companies that was once competing is now working together to execute
maximation of profits. However the disadvantages I derived from this particular case
are that Sirius Radio and XM Radio controlled resources not available to terrestrial
radio.

Another disadvantage was the type of business they were entering, “Satellite Radio” required
government approval which can be time consuming on any business, as they will be ‘stuck’ till
they gain approval.

2. Consider the story of Ticketmaster and Live Nation. What did you learn about the buyer-
supplier relationship from this case? What dos and don’ts did you take away?

In this case Ticketmaster, who was the reseller of ticketed services and was a
monopolist in the industry while Live nation were owners of venues. These two
companies worked together selling tickets. However, Live Nation wanted a better deal
that TicketMaster wasn’t ready to give which led Live nation to vertically integrate into
ticket resale the same line of business that TicketMaster was in.
In this case, the buyer(Live Nation) took the power away from the supplier
(TicketMaster). With Live Nation having resources decided to vertically integrate and
enter the ticketed services. This was seen as a competitive threat to TicketMaster
considering TicketMaster would lose the business with Live Nation which would result in
low profits. TicketMaster ended up merging with Live Nation, which allows them to
maintain market power in ticketing services. The don’ts I took from the case study, is
that TicketMaster wanted to control the ticketing industry which caused Live Nation to
take away TicketMaster supplying power and vertically integrate.The do’s I took away
from this case study is the merging of ticketmaster and live nation which meant for both
companies greater economies of scale and less competition.

Course Project, Part Two

Apply a Resource-based View to the Netflix case to answer the following questions:

1. What did Netflix do initially and why was it successful?

When Netflix initially started off, they started as a mail order service, it became successful as it
offered no late fees it was just one monthly fee and you were able to view as many movies you
want which encouraged and appealed to consumers. Also, Netflix offered a wider range of
movies than Blockbuster, it was able to do this by the First Sale Doctrine, making it easy to
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 LSM541: Competitive Advantage and Profitability
Samuel Curtis Johnson Graduate School of Management
Cornell University

update movies. Netflix’s website was a consumer favourite as it made searching for movies
easy and convenient. Netflix also had a sophisticated system that Blockbuster was not able to
compete with. Also Netflix offered a variety of films which ranged from independent and
international.

2. What was Blockbuster doing?

Blockbuster was a brick and mortar store that consumers physically go and rent movies.
Blockbuster began to compete by using their own mail order dvd service, like its competitor
but unfortunately failed. The reason Blockbuster failed its mail order dvd service was
because it undercut the sales it had at its stores. Blockbuster charged late fees unlike its
rival Netflix who charged no late fees, this was discouraging for consumers as well as
blockbuster failed to provide recommendations which was detrimental to the survival of the
firm which led the firm to become bankrupt.

3. What should Blockbuster have done differently? Why do you think Blockbuster failed to
respond adequately to Netflix as a threat?

Blockbuster should have entered mail order dvd services earlier, but they had
underestimated Netflix impact on consumers. As well as Blockbuster too, should have
developed a more sophisticated computer program just to try to compete with Netflix, they
charged late fees on rentals which discouraged consumers. , this option should come off as
well as to compete fiercely with Netlfix who had no late fees.To add, blockbuster facility
was a space in which consumers would come and rent movies , that space could not contain
all movies created so this was a huge negative on Blockbuster but it turned out to be a
positive as Netflix had a warehouse where it was housing DVDs. Netflix benefitted from the
First Sale Doctrine which enabled them to obtain more resources, DVDs. Netflix had a
broad scope of films, which ranged from independent to international films which
Blockbuster did not have making it hard to compete.
I think Blockbuster failed to respond adequately as they were relying soley on the custom
of customers physically going into a store which they had, and unlike their counterpart who
was operating in a warehouse which only did mail order. Blockbuster failed to realize the
power of the digital age which Netflix took advantage of and is now one of the most
streamed websites in the world.

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 LSM541: Competitive Advantage and Profitability
Samuel Curtis Johnson Graduate School of Management
Cornell University

Course Project, Part Three

1. Consider the LTL trucking case study. What did this case demonstrate about entry barriers?
Can you use the Five Forces to see who the potential entrants might be?

Considering the Less Than Load trucking case study in which the entry barriers for this type of
business may be a bit more complicated when compared to the Full Load Trucking as all you
may need is a truck and a driver, so typically the barrier to entry for this is low whereas for the
Less Than Load trucking you need those as well as you may need a sophisticated software,
network of warehouses, computers, expertise which makes the barrier to entry high for this
business.
Also, the buyer power in the Less than load industry doesn’t provide options for LTL customers
whereas in the Full Load Trucking provides options as their customer rents their entire truck.
Yes, you can use Five Forces to see the potential entrants for this business as the entry barrier
for this industry requires network and logistics expertise,trucks,drivers,warehouses. Most firms
build their strategies based on the number of resources they have, in this case companies like
UPS were able to petrude the market as they have all the resources required.

2. Look at your own company or one you know well and consider entry threats. If this
company were thinking about entering a new market, what market would make the most
sense, given its resources?

At my company, Hyde Park Sanctuary and Tropical Gardens, we dealt with threats, I will discuss
the threats my company faces using the Five Forces Analysis- the barrier to entry for my type
of business was high as it required a permit and quarantine station, you also needed to network
in order to be successful, you also had regular visits from vets and inspectors ensuring you were
up to conduct. Maintenance requires capital that not all people possess and the maintenance
for this type of business is high.
Given its resources the market our firm should enter is housing schemes, as we required land
as well as capital assests such as machinery such as bobcat, we even became experts in
construction, we overlooked the construction of our asphalt road and most enclosures for the
animals exhibits are on islands, which we dug up using excavators, we provide no cages so our
exhibits are definitely one of a kind. WE constructed the road for the entire 40 acre project and
with that we had more resources such as sand disposing trucks, concrete mixers, skidder
(machinery) . All these resources can aid in the construction for a housing scheme.

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 LSM541: Competitive Advantage and Profitability
Samuel Curtis Johnson Graduate School of Management
Cornell University

To submit this assignment, please refer to the instructions in the course.

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