CHAPTER 7 Basic Elements of Planning and Decision Making END OF CHAPTER Questions Questions for Review 1. Describe the nature of organizational goals. Be certain to include both the purposes and the kinds of goals. The four purposes of goals are to: (1) provide guidance and direction, (2) facilitate planning,
(3) serve as a source of motivation and inspiration, and (4) be used to evaluate and control. Businesses that move aimlessly cannot survive in today’s economy. Goal development is essential because it helps guide the planning process. When employees know and understand the direction
of the business, they are more motivated to accomplish the goals of the organization. Finally, the goals can be monitored as a control device. There are several kinds of goals: organizational goals, goals for different areas of the organization, and goals that span different time frames. 2. Describe the scope, responsible personnel, and time frames for each kind of organizational plan. How are plans of different kinds related? Strategic plans are long-range and broad plans that will impact the entire organization. They are typically made by the board of directors and top managers. Tactical plans are mid-range plans with somewhat less impact than strategic plans and are often made by upper and middle managers. Operations plans are short-range and limited in scope and are made by middle and lower-level managers. 3. Explain the various types of operational plans. Give a real or hypothetical business example for each type. Do not use examples from the text. A program is a single-use plan that directs a large set of activities, such as Wal-Mart’s acquisition and integration of the British grocer, ASDA. A project is a single-use plan that is more limited in scope than a program, such as GM’s project to update the design of its Saturn automobiles. A policy is a standing plan that is stated very generally. Most universities, for example, have a policy forbidding discrimination or harassment. A standard operating procedure is a standing plan that describes the tasks that must be done under certain circumstances. The U.S. Navy uses SOPs to tell its sailors how to maintain equipment, for example. Rules and regulations are the narrowest type of standing plans and can substitute for decision-making. Many airlines have a rule, for example, that a flight attendant must smile at each passenger who addresses him or her. 4. List the steps in the formal goal-setting process. What are some of the advantages for companies that use this approach? What are some of the problems that may arise from use of this approach? Formal goal setting can increase employee motivation towards the accomplishment of specific goals. It can also enhance communication and make decision making more objective. Formal goal setting facilitates control too. Problems of formal goal setting include poor implementation, lack of top management support, the burdensome paperwork that formal goal setting can encourage, and the rigidity that can result. Questions for Analysis 5. Managers are frequently criticized for focusing too much attention on the achievement of short-term goals. In your opinion, how much attention should be given to long-term versus short-term goals? In the event of a conflict, which should be given priority? Explain your answers. Clearly, managers must continually balance short-term and long-term interests. Too much attention to one or the other can result in ineffectiveness. Students’ opinions will, of course, vary. 6. What types of plans and decisions most likely require board of director involvement, and why? What types of decisions and plans are not appropriate for board involvement, and why? Board should oversee any important strategic decisions, and they should also carefully supervise financial and other types of reporting in order to assure ethical and legal behavior. They should make decisions related to the CEO’s compensation and activities. In short, they should make any decisions that the owners of the firm (the stockholders) feel needs oversight. Boards should not become overly involved in every management decision, which would create difficulties for managers. Nor should they counter-act every move by the CEO, but they should work to support and help the CEO grow in his or her management ability. 7. Standing plans help make an organization more effective. However, they may inhibit experimentation and organizational learning. Under what conditions, if any, should organizations ignore their own standing plans? In the area of planning, how can an organization balance the need for effectiveness against the need for creativity? Standing plans should be abandoned if circumstances change radically, forcing the alteration. Firms that are more interested in innovation than in efficiency should minimize their use of standing plans. Managers are constantly balancing the need for creativity with the need for efficiency. One approach that has met with success at many firms is the development of standing plans—but with a built-in trigger for re-examination of the plans if circumstances warrant. Questions for Application 8. Interview the head of the department in which your major exists. What kinds of goals exist for the department and for the members of the department? Share your findings with the rest of the class. The students of many departments will find that there are generally goals in three areas: teaching, research, and service. Discuss the three areas with the students and try to discover why one is given more importance than the other two by a given department. It may be interesting to discuss the inclusion of research because many students do not see the rationale for including or emphasizing research as a goal of an academic department. 9. Tell about a time when an organization was not able to fully achieve all of its goals simultaneously. Why did this occur? Is complete realization of all goals impossible for an organization? Why or
why not? Here is one example: “At my workplace, we seek to hire experienced personnel who will be able to offer great customer service, but our budget is limited, so instead we usually hire entry-level workers, whose customer-service skills are weaker.” Other reasons for the inability to achieve goals simultaneously might be related to a constraint in other resources, such as insufficient labor, raw materials, or time. In theory, organizations should be able to find creative ways to satisfy many or all goals simultaneously. In practice, organizations with complex sets of stakeholders must try to assure that each group has at least some of its needs met but is unlikely to be able to fully satisfy all groups. 10. From your library or the Internet, find information about a company’s mission statement and goals. List its mission and some of its strategic, tactical, and operational goals. Explain the relationship you see among the goals at different levels. For example, if students investigated the mission statement of the IRS, they would find: “to provide America’s taxpayers with top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.” Among their strategic initiatives are the ability for all taxpayers to file their returns electronically. A tactical plan that builds on that strategy is the development of relationships with third-party providers of tax services, such as H&R Block. An operational plan that builds on that tactic is the development of an IRS web site, which offers specific help and instructions online for every tax form, to aid online filers. In general, students should find that the mission, strategy, tactics, and operations build on plans at the previous level. END OF CHAPTER EXERCISES Building Effective Decision-Making Skills I. Purpose This exercise allows students to apply their decision-making skills to a specific business situation. II. Format This exercise calls for reading the case scenario and dividing the class into groups of three or four. Each group will meet as a management team responsible for deciding the fate of the company’s Smallville plant. Teaching Tip: An optional approach would be to square off teams in a debate format with one team representing management and the other an affected stakeholder group. III. Follow-Up A. Your instructor will divide the class into groups of three or four people each. Each group will meet as a management team responsible for deciding the fate of the Smallville plant. B. The team may decide to close the plant or keep it open, but the goal of the decision-making process is twofold: (1) to keep the company viable and (2) to reflect the team’s individual and group values. C. If the team decides to close the plant, it must draw up a list of the factors on which it based its decision and be prepared to justify it. D. If the team decides to keep the plant open, it must draw up a plan explaining how the company can still remain competitive. The team has to keep cost as well as quality issues in mind. The Italian competitors are currently beating them on both fronts. E. Each member of each team should be prepared to explain the choices that he or she made in helping the group reach its decision. Building Effective Time Management Skills I. Purpose This exercise should aid students in learning about the complexity of priority setting within an organization. II. Format This time-management skills exercise includes both individual and group components, and should take about 15 minutes. III. Follow-Up A. Develop a schedule listing the sequence in which you need to meet with the eight parties that you’ve listed above. Do the best that you can to minimize backtracking (seeing one party and then having to see him or her again after seeing someone else). B. Compare your schedule with that of a classmate and discuss the differences. Students’ answers will vary for the above questions. C. Do you find that it’s possible to draw up different schedules which are nevertheless equally valid? If so, why? If not, why not? Yes, students will be able to develop different schedules that meet the requirements. Some of the steps are relatively independent of the others. For example, advertising design can begin without interacting with the others. Therefore, students are free to place this task wherever they feel it is most appropriate. Other tasks are interconnected. For example, the physical layout of the store cannot be planned until a space has been leased. management at work how to succeed in business Steve Jobs’s ongoing health problems has caused him to step down temporarily as the CEO of Apple twice in the last two years. In both cases, the company announced that Tim Cook, the company’s chief operating officer, would take over Jobs’s responsibilities. The vignette focuses on succession planning in general and suggests several best practices in this area. Management Update: In August 2011, Steve Jobs announced that he was resigning as Apple’s chief executive officer due to deteriorating health. The company’s board named Tim Cook Apple’s CEO. 1. Case Question 1: In what ways can succession planning be regarded as a type of contingency planning? Under what circumstances might it be necessary for a company to treat its succession-planning process as a crisis management process? The chapter defines contingency planning as the determination of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate. Succession planning can be regarded as a type of contingency planning because it prepares the organization for a situation in which its current CEO has to step down for whatever reason. It can regarded as a crisis management process if the stepping down of the current CEO is sudden, which may happen due to health or other reasons. 2. Case Question 2: How might a company use the process of goal setting to help it implement its succession plan? Be sure to consider the barriers to successful implementation that it might encounter. The company can frame its long-term goals and find a person whose skills are best suited to lead the organization toward those goals. Of course, such a process may be difficult to implement because the goals may not be agreed upon and the suitability of various candidates may be debated. 3. Case Question 3: When asked if Apple would provide more details about Jobs’s second leave of absence, a company spokeswoman responded ‘we’ve said all we’re going to say.” Is Apple obligated to offer any more details, particularly about the health of its CEO? One lawyer who advises corporate boards on such questions says that such details are material to investment decisions only “if you’re asking shareholders to make decision based on [that] information …. You can’t expect the company,” he adds, “to give a blow-by-blow account of Steve Jobs’s health.” What do you think? If you were an Apple investor, what information would you regard as “material” to your decisions? What would you want to know in deciding whether to keep or sell your shares of Apple? Not all companies are like Apple in that Steve Jobs is so closely identified with the company’s amazing success that there is palpable fear that without him the company’s stream of innovative hit products could very well come to an end. In fact, much like in the case of Peyton Manning and the Indianapolis Colts (where most do not know who the back-up quarterback is), the public is unaware of the other top managers at Apple, such is Jobs’s “larger-than-life” persona. Therefore, it is important for Apple to keep the investment company appraised of Steve Jobs’s health. Of course, student opinions may vary on this topic. CHAPTER 8 Managing Strategy and Strategic Planning END OF CHAPTER QUESTIONS Questions for Review 1. Define the four parts of a SWOT analysis. A SWOT analysis consists of an analysis of the internal strengths and weaknesses of a firm, and of the external opportunities and threats for the firm. 2. Describe the relationship between a distinctive competency, a competitive advantage, and a sustained competitive advantage. A distinctive competency is an internal strength or capability that is possessed by only a few firms. When a firm is able to successfully exploit a distinctive competency, it may obtain a competitive advantage over its rivals. When the firm is able to maintain a competitive advantage over its rivals for an extended period of time, it becomes a sustained competitive advantage. 3. List and describe Porter’s generic strategies and the Miles and Snow typology of strategies. Porter’s generic strategies include: (1) differentiation—the firm seeks to distinguish itself from competitors through the quality of its products or services; (2) overall cost leadership—the firm attempts to gain a competitive advantage by reducing its costs below the costs of competing firms; (3) focus—the firm concentrates on a specific market, product line, or group of buyers. Miles and Snow’s typology includes: (1) prospector—a highly innovative firm that is constantly seeking out new markets and new opportunities and is oriented toward growth and risk taking;
(2) defender—concentrates on protecting current markets, maintaining stable growth, and serving current customers; (3) analyzer—combines elements of prospectors and defenders; (4) reactor—has no consistent strategic approach, drifts with events, reacting to but failing to anticipate or influence these events. 4. What are the characteristics of businesses in each of the four cells of the BCG matrix? A Star is a business with a large market share that competes in a rapidly growing industry. A Cash Cow also has a large market share but in an industry with a slow growth rate. A Question Mark business has only a small market share in a rapidly growing industry, while a Dog has a small market share of a slow-growth industry. Questions for Analysis 5. Describe the process that an organization follows when using a deliberate strategy. How does this process differ when an organization implements an emergent strategy? A firm using a deliberate strategy will identify problems, gather and analyze information, formulate alternative courses of action, choose the best alternative, and then work to implement the chosen strategy. The process will be rational and systematic. On the other hand, an emergent strategy is one that is not planned in a formal or rational way, but rather it just emerges as a pattern in a series of actions. Actions are not pre-planned. When a firm notices that certain actions lead to desirable outcomes, those actions are repeated. 6. Which strategy should a firm develop first—its business- level or its corporate-level strategy? Describe the relationship between a firm’s business- and corporatelevel strategies. Both must be developed together, at the same time. Decisions made at the corporate level, such as to increase or decrease diversification, will then require changes in the firm’s business-level strategy. Decisions made at the business level, for example to pursue a differentiation strategy, will require changes at the corporate-level also. Most firms that are just being founded have only a single business, and in those firms, the business-level strategy will be developed first. However, for a diversified firm, corporate and business strategies are formulated and implemented simultaneously. 7. Volkswagen sold its original Beetle automobile in the United States until the 1970s. The original Beetle was made of inexpensive materials, was built using an efficient mass production technology, and offered few options. Then, in the 1990s, Volkswagen introduced its new Beetle, which has a distinctive style, provides more optional features, and is priced for upscale buyers. What was Volkswagen’s strategy with the original Beetle—product differentiation, low cost, or focus? Which strategy did Volkswagen implement with its new Beetle? Explain your answers. The original Beetle was clearly part of a low cost strategy with its emphasis on efficiency, inexpensive components, lack of distinguishing features, and low price. The new Beetle signals a switch to a differentiation strategy because of its style, customization, up-scale target market, and higher price. Questions for Application 8. Assume that you are the owner and manager of a small business. Write a strategy for your business. Be sure to include each of the three primary strategic components. Business Name: Bright Ideas Consulting Mission Statement: Bright Ideas Consulting is dedicated to providing innovative and customized solutions to help businesses achieve their goals and thrive in an ever-changing market landscape. We are committed to excellence, integrity, and client satisfaction. 1. Strategic Analysis: • Market Research: Conduct comprehensive market research to identify emerging trends, customer needs, and competitive landscape. • SWOT Analysis: Evaluate internal strengths and weaknesses, as well as external opportunities and threats, to inform strategic decision-making. • Industry Analysis: Assess industry dynamics, regulatory environment, and technological advancements to anticipate future challenges and opportunities. 2. Strategic Formulation: • Differentiation Strategy: Position BrightIdeas Consulting as a provider of unique and innovative solutions tailored to each client's specific needs. • Target Market Segmentation: Identify target market segments based on industry, company size, and geographic location to tailor marketing efforts and service offerings. • Value Proposition: Develop a compelling value proposition that emphasizes our expertise, creativity, and commitment to delivering tangible results for our clients. • Competitive Advantage: Leverage our team's expertise, creativity, and client-centric approach to differentiate ourselves from competitors and establish a competitive advantage. 3. Strategic Implementation: • Marketing and Branding: Develop a comprehensive marketing strategy to raise awareness of BrightIdeas Consulting's services and establish our brand as a trusted partner in business innovation. • Talent Acquisition and Development: Recruit and retain top talent with diverse skill sets and industry experience to ensure we can meet the needs of our clients and deliver high-quality solutions. • Client Relationship Management: Cultivate strong relationships with clients through effective communication, personalized service, and ongoing support to foster long-term partnerships and client loyalty. • Continuous Improvement: Regularly evaluate and refine our business processes, service offerings, and strategic initiatives based on feedback from clients, market trends, and internal assessments to maintain our competitive edge and drive business growth. By focusing on strategic analysis, formulation, and implementation, Bright Ideas Consulting aims to position itself as a leader in providing innovative solutions that help businesses adapt, thrive, and succeed in today's dynamic and competitive marketplace. 9. Interview a manager and categorize the business- and corporate-level strategies of his or her organization according to Porter’s generic strategies, the Miles and Snow typology, and extent of diversification. Students who interview a manager of a smaller firm will not likely find a firm that seems to be a prospector, however, or one that is very diversified because such firms tend to be larger businesses. It is also unlikely, of course, that any manager will categorize his or her business as a reactor. Interview with Manager at XYZ Corporation: Me: Thank you for taking the time to meet with me. Could you provide some insights into the business• and corporate-level strategies of XYZ Corporation? Manager: Of course, I'm happy to discuss our strategies. At XYZ Corporation, we operate in the retail industry, specializing in electronics and consumer goods. 1. Porter's Generic Strategies: • Cost Leadership: One of our primary business-level strategies is cost leadership. We aim to offer competitive prices to our customers by optimizing our supply chain, reducing operational costs, and negotiating favorable deals with suppliers. • Differentiation: In addition to cost leadership, we differentiate ourselves through product innovation, quality, and customer service. We invest in research and development to introduce new and innovative products that meet the evolving needs and preferences of our customers. 2. Miles and Snow Typology: • Prospector Strategy: XYZ Corporation adopts a prospector strategy, characterized by a focus on innovation, flexibility, and market expansion. We are constantly exploring new market opportunities, experimenting with new products and services, and adapting to changing consumer trends. • Defender Strategy: While we primarily align with a prospector strategy, we also exhibit elements of a defender strategy in certain market segments where we have established a strong foothold. In these segments, we focus on maintaining market share, defending our position against competitors, and optimizing operational efficiency. 3. Extent of Diversification: • Related Diversification: XYZ Corporation pursues related diversification by expanding our product offerings within the electronics and consumer goods sector. For example, in addition to selling electronics, we also offer related accessories, warranties, and technical support services to enhance the overall customer experience. • Limited Diversification: While we focus primarily on related diversification within our core industry, we also engage in limited diversification by exploring adjacent markets or complementary industries that align with our strategic objectives. However, we prioritize opportunities that leverage our existing capabilities and resources to minimize risk and maximize synergy. Overall, our business• and corporate-level strategies at XYZ Corporation are aligned with Porter's generic strategies, the Miles and Snow typology, and a moderate extent of diversification, enabling us to maintain a competitive edge in the retail industry while pursuing growth and innovation opportunities. 10. Give an example of a corporation following a single-product strategy, a related diversification strategy, and an unrelated diversification strategy. What level of performance would you expect from each firm, based on its strategy? Examine the firm’s profitability to see whether your expectations were accurate. Here is an example: “Toys 'R' Us is following a single-product strategy because their only business unit is focused solely on the retail sale of toys and other items for children. That strategy allows them to dominate that market, and the firm has done so. However, it also makes them vulnerable if that particular market changes, which is happening at this time as discount stores and online retailers are taking over the industry. Yum! Brands, the owner of Pizza Hut, Long John Silver’s, Kentucky Fried Chicken, Taco Bell, and A&W, is following a related diversification strategy focused on the fast-food industry. This strategy allows the development of shared competencies and synergies, while spreading overhead costs across all the businesses. This strategy is expected to have the highest returns, and Yum! Brands is in fact highly profitable due to synergies and shared competencies. Sara Lee Corporation is pursuing unrelated diversification with products such as Jimmy Dean sausage, Playtex underwear, Hanes hosiery, Kiwi shoe polish, Earth Grains bread, and Ambi Pur air fresheners. This strategy should provide stable performance over time and allow the sharing of resources. However, the strategy also runs the risk of spreading management talent too thin so that none of the businesses receives enough attention to really thrive. Sara Lee is, in fact, experiencing low performance at this time in its businesses, compared to less diversified firms competing in the same industries.” END OF CHAPTER EXERCISES Building Effective Decision-Making Skills I. Purpose This exercise will encourage students to consider how a SWOT analysis would be performed in a real organization, including which sources should be used, and the validity of the information at those sources. II. Format This decision-making exercise can be performed by individuals or groups. It should take about 30 minutes to complete. III. Follow-Up A. List the sources you will use to obtain information about the firm’s strengths, weaknesses, opportunities, and threats. B. Then ask yourself: For what types of information are data readily available on the Internet? What categories of data are difficult or impossible to find on the Internet? (Note: When using the Internet, be sure to provide specific websites or URLs.) C. Next, rate each source in terms of its probable reliability. There will be considerable variation in students’ answers to these three questions. Students should notice that there are a variety of likely sources, and that the sources differ a great deal in their reliability. Students should recognize that information about forces in the external environment is easier to obtain than information about the internal environment. In addition, companies don’t typically publish information that might cast the firm in a negative light, such as information about weaknesses. The Internet provides easy access to many diverse types of information. However, the reliability of the information is often questionable, and students should be careful about relying on web-based data, unless they can verify the source’s credentials. D. Finally, ask yourself how confident you’d be in basing decisions on the information that you’ve obtained? Again, students will recognize that it is difficult to get reliable information about some issues. When that is true, decision makers will make choices based on the information they have, but they should be aware of times when their choices may be based on faulty information. This awareness may lead them to compensate for their lack of confidence, for example, by developing multiple contingency plans or performing statistical sensitivity analyses to check the robustness of their choices. Building Effective Conceptual Skills I. Purpose This in-class game demonstrates concepts about competition and cooperation through the use of a prisoner’s dilemma situation. II. Format This game will take about 20 minutes to play through once. It can also effectively be played twice. Follow-up and discussion time will vary. III. Follow-Up Before playing this game in class, discuss the concepts of game theory and especially the prisoner’s dilemma situation. Explain how competition gives the best results in some circumstances, while cooperation gives better results in other circumstances. This concept may be difficult for students to grasp, given the way that American business education focuses almost exclusively on competition. The main message of this game is: “It’s nice to be nice, to the nice.” Students will find that competition is the preferred mode when rivals are behaving competitively, and cooperation is preferred in situations where rivals are willing to be cooperative. In a mixed case, faced with some rivals that are cooperative and some that are competitive, the cooperative firms can band together and effectively compete against the competitive firms by using their combined power. You will need at least one board game of Trouble, by Milton Bradley, or a generic equivalent of that game. In the game, four players move pieces around a board in an attempt to complete the course first. When players land on an occupied space, they send their opponent’s piece back to the start. It’s best to have one game for each four students. If you cannot do that, it’s best to have at least four games so that students can watch each strategy being played out. However, it’s possible to play the game with just one set if volunteers come forward to play the game in front of the entire class. There are four different rule sets, which can be played simultaneously, and then the results reported to the class. Alternatively, the rule sets can be played sequentially. For all rules sets: Four players per game. Each player uses only 2 pieces, not 4 (in order to make the game play faster). Players start moving pieces on their first roll of the dice, rather than waiting for a specific number (again, for speed). Rule Set 1: This is the cooperative game. Players should try not to land on an occupied space, and they may never send any of their opponent’s pieces back to the start. If they must land on an occupied space, the player should put their piece in the next free spot, not displacing his or her opponent. Rule Set 2: This is the competitive game. Players must land on occupied spaces if possible, and they must always send their opponent’s piece back to the start when they do. Rule Set 3: This is the mixed case, “wolf among the sheep” game. One player is chosen at the start to be the competitive one, and the group is informed. During play, the competitive player plays by Rule Set 2, sending his or her opponent’s pieces back to the start whenever possible. The three cooperative players play by Rule Set 1. That is, they may never send opponent’s pieces back to the start. Rule Set 4: This is the mixed case, “retaliation” game. One player is chosen at the start to be the competitive one, and the group is informed. During play, the competitive player plays by Rule Set 2, sending his or her opponent’s pieces back to the start whenever possible. The three cooperative players play by Rule Set 1, when they are facing another cooperative player. That is, they should not send a cooperative player’s pieces back to the start. However, the three cooperative players play by Rule Set 2, when they are facing the competitive player. That is, they should try to send the competitive player’s pieces back to the start whenever possible. Students will find that the cooperative game (#1) goes quickly and smoothly. All players do about equally well, except for the random nature of the dice roll. Students sometimes say this game is “boring.” However, remind them that boring is undesirable in a board game, but might be very desirable in industries where “excitement” might mean loss of jobs or bankruptcy. Students will find that the competitive game (#2) takes the longest, as players must constantly start over. All players do about equally poorly. This game may be more fun than Game 1, but again, remind students that in real life, intense competition can be damaging and expensive. Students will find that the wolf-among-the-sheep game (#3) seems very unfair, as the competitive student has a strong advantage. Explain to students that this is the case that prevails when some competitors compete strongly and others do not. It’s also analogous to situations such as one student cheating on an exam while all the others are honest. Students will find that retaliation game (#4) seems to be fair, because the competitive student often does not win. This is the situation in which some rivals cooperate for mutual benefit with other trusted rivals, while competitive rivals find that the others “gang up” and use their combined power to squash any competitive tactics. This is analogous to the situation where the honest students study together to help each other, excluding the cheating student from the study group. A. Break into small groups and play the board game according to the instructions you receive from your professor. B. Present your group’s results to the class. C. Analyze the results reported by every group and be prepared to share your thoughts about the outcomes. Although there is a random element in this game, results are likely to be as reported above. Explain the outcomes, and then ask the students, “What do you learn about business competition and cooperation from this game?” Another good approach is to ask students to name business situations in which this type of thinking about cooperation and competition could be useful. Students will be able to think of examples such as in managing their careers and relationships at work, industry competition, and so on. management at work acting on a strategic vision The case contrasts the strategies of two video game competitors – Electronic Arts (EA) and Activision. EA was on a high growth path till the last few years. It acquired video game companies, centralized production, and churned out sequels. In contrast, Activision, under new leader, Robert Kotick, kept its acquired studios independent and encouraged its own developers to become independent developers. By 2007, Activision had surpassed EA in revenues and in market capitalization. Company Update: Activision is now called “Activision Blizzard.” In fiscal 2010, it reported revenues of $4.4 billion and profits of $418 million. Its “Call of Duty” became the number one video game franchise of all times. 1. Case Question 1: How might a SWOT analysis have helped Electronic Arts assess its slippage in the videogame market? SWOT is the acronym for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis would have revealed to EA that a key weaknesses was employee unhappiness at lack of independence. Similarly, a key threat would have been the growth and success of Activision, which used a different strategy. 2. Case Question 2: How might Porter’s generic strategies theory help to explain why Electronic Arts lost its leadership in the videogame market to Activision Blizzard? Electronic Arts used the strategy of differentiation to succeed in the video game industry. It differentiated by creating a high value for its brand name games such as Madden NFL and used this to achieve market success. It probably overdid the franchise approach in launching many editions of its popular games, so much so that it lost its differentiation edge. Students are likely to discuss this enthusiastically because they would used both companies’ games and are likely to be quite discerning when it comes to the differences among these two players. 3. Case Question 3: How would you use Miles and Snow typology theory to advise Activision Blizzard on the best way to maintain its leadership in the videogame market? Activision Blizzard is likely to be the “new” prospector in the industry, having usurped this position from Electronic Arts. Electronic Arts has likely become the reactor. Activision Blizzard has to consolidate its prospector position by continuously launching new products and create the perception of being on the cutting edge. 4. Case Question 4: If you ran a small video game startup, what would be your strategy for competing with EA and Activision Blizzard? Using Porter’s generic strategy theory, the best bet for a start up would be as a niche player, since competing as a broad-based player such as EA and Activision would require a lot of resources and could also be risky. As a niche player, the startup should focus either on a demographic category or a category of games. 5. Case Question 5: If you’re a videogame player, what aspects of Activision’s strategy have led to your playing more (or fewer) of its games? If you’re not a videogame player, what aspects of Activision Blizzard’s strategy might induce you to try a few of its games? As a non-player, several aspects of Activision Blizzard's strategy could entice me to try their games: 1. Quality of Gameplay: Hearing positive reviews about the quality and immersive gameplay experience of Activision Blizzard's titles would intrigue me. If their games are known for engaging storylines, captivating graphics, and smooth gameplay mechanics, I would be more inclined to give them a try. 2. Innovative Features: Learning about innovative features or gameplay mechanics unique to Activision Blizzard's games could spark my interest. Whether it's groundbreaking multiplayer modes, innovative storytelling techniques, or cutting-edge virtual reality integration, I'm drawn to games that push the boundaries of what's possible in gaming. 3. Strong Intellectual Properties: If Activision Blizzard's portfolio includes games based on beloved franchises or intellectual properties that I already enjoy from other media (such as movies, books, or comics), I may be more likely to give their games a chance. Recognizable characters and storylines can serve as a familiar entry point into the gaming world. 4. Community Engagement: Knowing that Activision Blizzard fosters a vibrant and supportive gaming community could make me feel more comfortable trying their games. Positive interactions with other players, active forums or social media channels, and opportunities for player feedback and involvement can enhance the overall gaming experience. 5. Accessible Entry Points: If Activision Blizzard offers free-to-play or demo versions of their games, I might be more willing to try them out without committing to a full purchase upfront. Accessible entry points allow me to test the waters and determine if a particular game resonates with my interests and preferences before investing further. Overall, a combination of compelling gameplay, innovative features, strong intellectual properties, community engagement, and accessible entry points would likely influence my decision to try Activision Blizzard's games. Solution Manual for Management Ricky W. Griffin, 9781111969714
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