SUBJECT TITLE: STRATEGIC MANAGEMENT

TUTORIAL QUESTIONS
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Tutorial 1 (Chapter 1 Hitt et al)

1. What are strategic competitiveness, strategy, competitive advantage, above-average returns,

and the strategic management process?

2. Hyper-competition is a characteristic of the current competitive landscape. Define hyper-

competition and identify its primary drivers. How can organizations survive in a hyper-
competitive environment?

Case Scenario: Palmetto.

Palmetto was an early pioneer of personal data assistants (PDAs) and dominates that market
space (in terms of market share) with its core product, the Palmetto Pidgy. Because this product
category was entirely new to the market, Palmetto had to internally develop the hardware and
software sides of the business, and today is both a manufacturer of PDAs and a programmer
and licensor of its PDA operating system software. Recently, however, the hand-held device
maker’s performance has taken a dive as a result of slumping sales and costly inventory
problems. New large entrants are entering both the equipment and software sides of its
business, putting further pressure on margins. Management is currently considering its options,
including the break up of Palmetto into two separate, independent public companies - one
devoted to hardware, the other software.

3. What primary business strategy issues does Palmetto face?

4. What primary corporate strategy issues does Palmetto face?

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Tutorial 2 (Chapter 2 Hitt et al)

1. Identify the five forces that underlie the five forces model of competition. Explain briefly
how they affect industry profit potential.

Case Scenario: Barracuda Inc.

Barracuda Inc. is a lamp fixture manufacturer that is considering an entry strategy into the
U.S. home furnishings manufacturing industry. The existing landscape consists of many
players but none with a controlling share. There are presently 2500 home furnishings firms,
and only 600 of those have over 15 employees. Average net profit after tax is between 4 and 5%.
While the industry is still primarily comprised of single-business family-run firms that
manufacture furniture domestically, imports are increasing at a fairly rapid rate. Some of the
European imports are leaders in contemporary design. Relatively large established firms are
also diversifying into the home furnishings industry via acquisition. Supplier firms to the home
furnishings industry are in relatively concentrated industries (like lumber, steel, and textiles).
Retailers, the intermediate customer of the home furnishings industry, have been traditionally
very fragmented. Customers have many products to choose from, at many different price points,
and few home furnishing products have strong brands. Also, customers can switch easily
among high and low-priced furniture and other discretionary expenditures (spanning big
screen TVs to the choice of postponing any furniture purchase entirely).

2. Using the five-forces framework, summarize the opportunities and threats facing
Barracuda as it considers entry into the home furnishings manufacturing industry. Which
threats are greatest to current incumbents?

1. Is the furniture industry described above attractive?

2. What is value? Why is it critical for the firm to create value? How does it do so?

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Tutorial 3 (Chapter 3 Ireland et al)

Case Scenario: ERP Inc.

ERPI is a leading provider of enterprise integration software (EIS). EIS allows a firm to
connect and integrate processes across all aspects of its business, regardless of where they are
located around the world. ERPI is a product-focused company, whereas most competitors in its
market space, like Oracle, operate as “solutions companies.” Oracle and Microsoft have begun
to devote considerable resources to the development of and acquisition of products to compete
in the EIS space. Despite these recent threats, one benefit of its product-focused strategy is that
ERPI’s proprietary product is generally recognized as being 200% to 300% better than
competitors’ software. ERPI estimates it will take 2 to 3 years for competitors to develop the
capabilities needed to bring a competing product to market. ERPI invests a considerable
percentage of its profits in basic R&D to support its core products. As evidence of this, among
its competitors the firm maintains the largest in-house programming staff dedicated solely to
the development of advanced enterprise integration software. Installation and related
consulting for EIS typically cost between $100 and $200 million, with the ERPI software
component accounting for about 20% of the installed cost (the remaining 80% is spent on the
actual installation, not counting the value of the customer’s time). ERPI’s target market
consists of the world’s largest manufacturing and industrial firms and it currently enjoys a 60
percent market share.

1. How valuable, rare, costly to imitate, and non-substitutable are ERPI’s capabilities?

2. How sustainable is ERPI’s competitive advantage?

3. Imagine that ERPI’s historic growth strategy has focused on making one sale and then
moving on to the next target company. After several years of building market share using
this approach, what new resources has ERPI developed?

4. What are the specific risks associated with using each business-level strategy?

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Tutorial 4 (Chapter 4 Hitt et al)

Case Scenario: Walt Disney Company.

Walt Disney Company is famed for its creativity, strong global brand, and uncanny ability to
take service and experience businesses to higher levels. In the early 1990s, then-CEO Michael
Eisner looked to the fast-food industry as a way to draw additional attention to the Disney
presence outside of its theme parks - its retail chain was highly successful and growing rapidly.
A fast-food restaurant made sense from Eisner’s perspective since Disney’s theme parks had
already mastered rapid, high-volume food preparation, and, despite somewhat undistinguished
food and high prices (or perhaps because of), all its in-park restaurants were extremely
profitable. From this inspiration, Mickey’s Kitchen was launched. The first two locations were
opened in California and in a suburb of Chicago, adjacent to existing Disney stores. Menu
items included healthy, child-oriented fare like Jumbo Dumbo burgers and even a meatless
Mickey Burger. Eisner thought that locating each restaurant next to existing Disney stores was
sure to increase foot traffic through both venues. Less than two years later Disney closed down
the California and Chicago stores and shuttered further expansion plans. Eisner cited
overwhelming competition from McDonalds and general oversaturation in the fast-food
industry as the primary reasons for closing down the failing Mickey’s Kitchen.

1. Based on your own knowledge of Disney and the information provided in the scenario, does
Disney appear to create value in its businesses primarily through a cost-leadership or
through a differentiation strategy?

2. What resources and value-chain activities did Disney try to leverage through the opening of
Mickey’s Kitchen?

3. Why do you think that Mickey’s Kitchen failed?

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Tutorial 5 (Chapter 5 Hitt et al)

1. Define slow-cycle, fast-cycle and standard cycle markets.

2. What are the advantages and disadvantages of being a first mover, second mover, and late
mover?

3. What is market commonality? What is resource similarity? How are these concepts
combined to identify the level of competition between two firms?

4. What are three reasons firms choose to diversify their operations?

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