The questions in Part A refer to the material discussed in Lesson 1 of this course. Respond to the following.
As the world’s largest beauty products company, L’Oréal SA creates cosmetics, perfume, and hair and skin care items. However, as the global economy continued down a fluctuating and uncertain path, the French company found itself with stagnating sales. According to company officials, one contributing factor was higher raw materials costs that have hit many companies, including L’Oréal, which uses oil in its products and packaging. However, weak consumer demand and currency fluctuations played a major role in the sales slowdown. In an effort to reduce its dependence on mature consumer markets such as Europe and the United States, L’Oréal’s strategy is to recruit millions of new consumers in emerging markets from Africa to Asia.
Sources: Based on C. Passariello, “Heiress Loses L’Oréal Family Fight,” Wall Street Journal, October 18, 2011, p. B8; C. Passariello and NoémieBisserbe, “Uncertainty Colors L’Oréal,” Wall Street Journal, August 31, 2011, p. B4; and C. Passariello, “Sales Stagnate at L’Oréal,” Wall Street Journal, July 13, 2011, p. B4.
a. What do you think of L’Oréal’s strategies in light of today’s environment?
b. How might strategic management be useful?
The questions in Part B refer to the material discussed in Lesson 2 of this course. Respond to the following.
1. Describe the three major driving forces of the business environment.
2. Explain the four major implications of these driving forces.
3. Discuss the three critical factors for succeeding in the business environment.
4. Apply what you have learned in this lesson by reading the brief below and answer the questions that follow.
As a pioneer of Internet TV, Hulu is one of the most-watched online video properties in the United States. Hulu operates a Web site that features video from more than 225 content providers. Offerings include TV shows from ABC, Fox, and NBC as well as from cable channels and films from studios including Sony and MGM. Most of the content is streamed free eight days after its broadcast debut. Viewers can watch shows earlier through a premium subscription service called Hulu Plus. Hulu.com attracts some 26 million visitors a month. Hulu is owned by entertainment and broadcasting powerhouses, including NBC Universal, Comcast, News Corp., and Walt Disney Co., and by a private equity firm. However, it now faces a challenging environment in which consumers have a growing number of options on where and how to access content. Hulu’s owners had been exploring a sale of the online video venture but decided in late 2011 not to sell the company. Now they have to figure out what to do with it.
Sources: Based on S. Schechner, “Hulu Puts Owners in New Quandary,” Wall Street Journal, October 17, 2011, p. B1; S. Schechner, “Hulu’s Owners End Efforts to Sell Streaming-TV Website,” Wall Street Journal, October 14, 2011, p. B3; S. Schechner and J. E. Vascellaro, “Hulu Reworks Its Script As Digital Change Hits TV,” Wall Street Journal, January 27, 2011, pp. A1+; and A. Palazzo, “Hulu Says It Will Reach 1 Million Paid-User Goal in 3 Months,” Bloomberg BusinessWeek Online, July 6, 2011.
a. What do you think Hulu’s owners should do now?
b. What is it about this situation context that’s so challenging?
c. What type of resource(s) does Hulu have? Would you call it unique? Explain.
The questions in Part C refer to the material discussed in Lesson 3 of this course.
In Lesson 2 you discussed the industrial organization (I/O) and resource-based views (RBV) on competitive advantage. You now know that competition and competencies are both major organizational concerns. In Lesson 3 we take a closer look at how to conduct an external analysis of an organization’s specific and general environments.
To demonstrate your understanding of external analysis, respond to the following.
1. Describe an external analysis.
2. Assess the benefits and challenges of doing an external analysis.
3. Apply what you have learned in this lesson by reading the brief below and answer the questions that follow.
Digital technology has disrupted all types of industries—from financial services to recorded music. One industry that’s seen a significant impact is the publishing industry. E-book sales have skyrocketed, and one publisher went so far as to predict that e-books could account for as much as 40 percent of total revenue by the end of 2012. Reading those e-books requires a device and the competition in the e-book device industry is fierce.
Amazon fired the first volley when it introduced the Kindle in November 2007. As with any new product, customers had to get used to the new technology, but once they did, the Kindles were on fire! Two years later, retailer Barnes & Noble introduced the Nook, a cheaper e-book device. Amazon responded by cutting the price of its cheapest Kindle. Three months later in January 2010, Apple introduced its iPad. Although it was a more expensive tablet, its functionality and options attracted a lot of attention and sales. In response, Barnes & Noble cut the price of its Nook, and Amazon again cut the price of the Kindle.
By September 2011, Amazon dropped Kindle’s starting price to $79 and launched Kindle Fire. Then in November 2011, Barnes & Noble joined the tablet battle with its $249 Nook Tablet. And these are just the top three competitors. Other industry competitors include the Sony Reader and Endless Ideas’ Be Book Neo. As the popularity of e-books continues to grow, the “reader wars” are likely to continue.
Sources: Based on J. A. Trachtenberg and M. Peers, “Barnes & Noble Seeks Next Chapter,” Wall Street Journal, January 6, 2012, pp. A1+; J. Bosman and M. J. De La Merced, “Barnes & Noble Considers Spinning Off Its Nook Unit,” IPO Offerings.com, January 5, 2012; M. Maxwell, “Barnes & Noble’s Digital Strategy Gaining Traction,” Wall Street Journal, August 31, 2011, p. B3; J. A. Trachtenberg, S. Schechner, and G. Chon, “B&N Vulnerable to Rivals: Amazon, Apple Loom as Bookseller’s Takeover Offer Dies,” Wall Street Journal Online, August 20, 2011; A. Flood, “Hardback Sales Plummeting in Age of the ebook,” The Guardian, [guardian.co.uk], August 12, 2011; and J. Bosman, “Publishing Gives Hints of Revival, Data Show,” New York Times Online, August 9, 2011.
a. What affects the level of rivalry? Porter listed eight conditions that contribute to intense rivalry among existing competitors. Using the eight conditions, assess the level of current rivalry in this industry.
b. Which of these eight conditions do you think are the most important to the level of current rivalry in this industry? Why?
c. As the industry matures, do you think the intensity of rivalry will change? Explain.
The questions in Part D refer to the material discussed in Lesson 4 of this course.
As you learned in Lesson 3, performing an external analysis can provide information to be used in planning, decision making, and strategy formulation. Organizations that conduct external analysis are most successful when they combine this knowledge with a solid understanding of their internal strengths and weaknesses.
To demonstrate your understanding of internal analysis, respond to the following.
The clothing industry isn’t an easy one to compete and be successful in. However, VF Corporation has become one of the world’s largest, most profitable clothing conglomerates by doing many things well. One thing the CEO did was buy languishing fashion brands and turn them into winners. How? By using VF’s capabilities: state-of-the-art distribution, global buying power, and keen merchandising instincts. For instance, VF bought the North Face brand for a bargain price of $135 million, revamped its sourcing, distribution, and financial operations, and was able to nearly double sales over a five-year period. As one analyst said, “The North Face is a great example of what VF can do. For VF it was easy, and it’s not easy for everybody.”
Source: Based on, “VF Corporation: Company Profile,” Datamonitor, December 30, 2011; A. J. Karr, “Global Growth Boosts VF Net,” Women’s Wear Daily, July 22, 2011, p. 2-1; R. Dodes, “VF Dresses Up Its Operations, Bucking Recession,” Wall Street Journal, March 30, 2009, p. B3; and M. V. Copeland, “Stitching Together an Apparel Powerhouse,” Business 2.0, April 2005, pp. 52–54.
a. Which characteristics of distinctive capabilities does this illustrate? Explain.
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