Guideline 1

The grades for the individual assignment for Alphabet are released. Here is a brief grading
guideline. As I noted in class, the session on the diversification of tech giants is the least
quantitative because tech giants usually acquire an entrepreneurial company in the fledgling
industry. Also, tech giants typically do not reveal their performance by their products. So it is
rather hard to use the numbers. But I saw that many of you tried to utilize the numbers in the
case. I appreciate those trials and efforts.

The first question is about the benefits and costs of having unrelated businesses. The second
question is about why Google structured those businesses in a certain way (decentralized). So the
second question is about the governance issue.

For the first question, good answers analyzed not only the benefits but also the costs of Google's
diversification. Applying the ABC toolkit for each deal was a plus.
(1) Benefits: Leverage its competitive advantage, the internal financial market (corporate
venture capital), the internal labor market (shared talent pool), and risk diversification.
(2) Costs: Loss from cross-subsidization, lack of strategic fit, lack of transparency.

For the second question, good answers analyzed the following benefits and costs of changing
into a decentralized structure for Google's core business as well as moonshots.
(1) Core Google: Pros (Increase transparency) - Cons (transfer potentially good idea to core
google may be weakened)
(2) Moonshots: Pros (Decentralized decision-making -> better decision making, maintain the
entrepreneurial culture, key personnel is less likely to leave from Google.) Cons (decrease in
support from core Google businesses, short-termism from transparency -> shareholders tend to
be shortsighted,
(3) Shareholders: the increase in transparency (stock market value increase right after the
announcement of restructuring) - It increases transparency and signals that Google will care
about the interest of the shareholder.

Guideline 2

Q1. How has CEMEX benefited from international expansion?

(1) Significant benefits from: Growth opportunity, Saturated Mexican market, Risk
Diversification, Access to financial resources in other countries, etc.
(2) Marginal or no benefits from: Economies of scale (because MES is small), economies of scope
(CEMEX is a specialized company), increase plant efficiency or capacity utilization (capacity
utilization of CEMEX is the lowest among the cement MNCs), decrease cement export (less than
3% is export in the cement industry).

Q2. How should CEMEX pick its next target? What criteria should it use?
(1) and (2) are the critical part of their criteria and (3 - host country opportunities) should be
considered. (1) and (2) are more important than factors in (3).

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(1) "Monopolize the host country market" has been the main strategy and explains the price
advantage of CEMEX. Thus, choosing host countries that recently experienced weak economic
activities with a fragmented market, without strong competitors, by targeting at least 25% of the
market share of the host country should be the criteria for CEMEX.
(2) Choosing the right acquisition target (undervalued)
(3) Host country opportunities: Geography, Growing market, Culture, etc. - Other companies will
also leverage these host country opportunities; thus the profitability would not be good.

Guideline 3

Q1. How do you evaluate Spotify’s business model? Is it beneficial for artists, labels, consumers,
and advertisers?

(1) Evaluation of Spotify's business model: Highlighting the role of two-tier nature (so-called
"Freemium" model), Applying the Who-What-How framework received an extra score (especially,
analyzing "who" part - both 1) customers who used to use piracy services and 2) customers who
used other music services like iTunes Music Stores.

(2) Benefits and costs to artists, labels, consumers, and advertisers: some of you just focused on
the benefits of Spotify's business model. Highlighting the potential costs of the Spotify business
model received good scores.

Q2. Should Intel outsource the manufacturing of chips to resolve Intel's manufacturing crisis?

(1) What is the upside?

Matching productivity with AMD (competitor) which already abandoned its manufacturing
No need for a large-scale capital investment (which is hated by US stock market investors)

(2) What is the downside?

Standardization -> leading Intel to have no edge on technological alignment between design
and manufacturing
Geopolitical situation – uncertainty on the relationship between China and US

Guideline 4

Q1. How critical is the environmental position to Patagonia’s business strategy?

(1) Evaluation of Patagonia's business strategy and business model: Highlighting the role of CSR
strategy in the positioning of the firm, applying the Who-What-How framework received an extra
score:

(Who) Target customers and profitability

(What and How) Analyzing product categories, supply chain, R&D, and marketing expenses.
(2) Benefits and costs of Patagonia's CSR position to stakeholders (customers, employees,
owners, investors, and society). Highlighting the potential costs of Patagonia's business model
received good scores.

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Q2. Evaluate the Product Lifecycle Initiative. How does it fit with Patagonia’s business model to
create and capture value?

(1) Analyzing the impact of the new initiative (4 elements; Recycle – Reduce – Repair – Reuse) on
its business model (who-what-how perspective)

Impact on target customers (sales and profitability)

Impact on product categories Patagonia offers
Impact of how Patagonia produces and sells in the market
(2) Balancing the pros and cons (from the value creation and capture perspective) received good
scores.

Q1. Patagonia 的环境立场对其业务战略有多重要？ （1）评估 Patagonia 的业务战略和业务

模型：突出企业社会责任战略在公司定位中的作用，应用 Who-What-How 框架可以获得额
外的分数： （谁）目标客户和盈利能力 （什么和如何）分析产品类别、供应链、研发和
营销支出。 （2）突出 Patagonia 的 CSR 立场对利益相关者（客户、员工、业主、投资者和
社会）的影响，突出 Patagonia 业务模型的潜在成本得到高分。

Q2. 评估 Patagonia 的产品生命周期倡议。它如何配合 Patagonia 的商业模式来创造和捕获价

值？ （1）分析新倡议（四个要素;回收-减少-修复-重复使用）对其商业模式（谁-什么-如
何）的影响 对目标客户的影响（销售和盈利能力） 对 Patagonia 提供的产品类别的影响
Patagonia 在市场上生产和销售的方式的影响 （2）从价值创造和捕获的角度平衡利弊得到
高分。

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窗体底端

Industry structure (19%):

- Industry profitability
o ROS (Return On Sales) = Net profit / Sales - operating
o ROE (Return On Equity) = Net profit / Equity - financing
- 5 forces framework
o Threat of new entrants: Entry barriers
o Threat of substitute products and service
o Bargaining power of buyers
o Bargaining power of suppliers
o Rivalry among existing competitors
How intensely do firms compete?
Aggressive vs. Muted competitive responses
Coordinated vs. Independent pricing
What is the basis of competition?
Price competition vs. Other dimensions?
Business strategy (32%):
- Strategic positioning: competitive advantage

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 o Differentiation: heterogeneous preferences / less price sensitive / experience
goods / credence goods
Vertical (higher benefit higher price)
Horizontal (different benefits same price)
o Lost cost strategy: Homogenous preferences / price sensitive / limited increase in benefits
Low benefit lower cost
Same benefit lower cost
- Business model: how a firm plans to make profits
o Who: is our customer / stakeholder?
o What: do we sell / provide to our customers / stakeholders?
o How: do we make, market, and distribute products to customers / stakeholders?
Strategic innovation:
- Value curve
o Reduce / Eliminate / Raise / Create
o Y-axis: perceived performance from perspective of potential customers