BEM 106: Competitive Strategy

Professor R. Preston McAfee
California Institute of Technology
Winter 2009

Office: Baxter 100
Office Hours: By appt    
Phone: (818) 395-8869
Secretary: Barbara Estrada
Office: 331 Baxter
Phone: (626) 395-4083
TA: Tyler Hannasch
Office: ---
Phone: (626) 395-

TA: Christoph Brunner
Office: 136 Baxter
Phone: (626) 395-8772

Seeking a Group or Group members.
A summary of Recent Changes to this site.
Thought questions about the cases.
Old papers from past years.
How to write a business plan and some further study recommendations.
How to perform a SWOT analysis.
SEC Filings.
Competitive Strategy as you feared it could be.

This course introduces major concepts of business strategy. The main focus is on the interaction of firms and strategies aimed at sustainable profits. The major goal of the course is provide skills that would allow you to perform a strategic analysis, write it up for consideration, and defend it in a meeting.

The course uses a mix of lectures and case studies. Case studies are run in the socratic style, with the professor asking questions and trying his best not to blurt out the answer. As a consequence of this method, however, class participation is essential and graded. If you regularly miss a significant fraction of your classes, this isn't the course for you. Success in management requires expressing your ideas publically, and that necessity is reflected in this class. While most of the theory discussed in class has mathematical foundations, there is only a slight amount of mathematical analysis used in class, which makes it harder because the problems are amorphous and ill-defined.There is a significant writing component to the class. To survive in management, it is necessary to express your ideas coherently in writing. Finally, as a matter of style, I go on a lot of digressions. If you detest professors who don't proceed in a linear fashion to a well-defined goal, but instead spend half the lecture on asides, this isn't the course for you. (The goals, by the way, are well-defined below.)

I'm considering trying something new, in which I assign to each student the job of assessing the participation of two others on activity, insight, relevance and depth, and use that as the basis of my participation scores. I am happy to take comments on this plan.

Text: Competitive Solutions: The Strategist's Toolkit, by R. Preston McAfee, Princeton University Press, 2002. In addition, you must purchase a case packet, which includes the cases covered in class (which collect royalties around $2 each paid to owners of the cases) as well as some assigned reading. The packet is available from Barbara Estrada, Baxter 331. The case packet is the same as last year, so you may find a previous student to sell one.

I find a surprisingly useful business research website.

Handouts are in pdf format. The Foxit reader is free and much faster than Acrobat.

Please do not read case overheads in advance of the case discussion even if you find them! You must read the case itself, of course.

Dates are tentative; check back frequently. You should read the listed sections prior to the class.
 Topic 1: Industry Analysis
GoalUnderstand "six forces" industry analysis, and major concepts of market evaluation
ReadingMcAfee, Chapters 1 and 2
CaseFox Broadcasting (No case writeup handed in)
ReadingPorter, Michael, "What is Strategy?," Harvard Business Review, November 1996.
Jan 7aIntroduction, 5 forces analysis
Jan 7bIntroduction, 5 forces analysis, continued
Jan 14aCase: Fox
  Topic 2: Differentiation I
GoalIntroduce differentiation theory and apply to Enterprise; integrate complements force with differentiation.
ReadingMcAfee, Chapter 4
ReadingJudith Chevalier, "The Pros and Cons of Entering a Market," Financial Times Mastering Strategy
Jan 14bDifferentiation (started)
Jan 21aCase: Enterprise Rent-a-Car
  Case writeup question: What positioning strategy does Enterprise employ which reduces the threat of entry and competition?
Jan 21One page (2 max) project summary due by email
Jan 21Presentation Sign-Up Form due, in class or by email
  Topic 3: Bargaining and The War of Attrition
GoalUnderstanding of strategy for winner-take-all contests.
ReadingMcAfee, Chapter 14
Jan 21bWar of Attrition
  Topic 4: Differentiation II: Sources of Competitive Advantage
GoalJudo Entry: Product positioning as a means of hobbling a superior force.
ReadingMcAfee, Chapter 3
Jan 28aCase: Feature Animation Industry in 1995: Challenging Disney's Supremacy
  Case writeup question: Did the design of the film "The Prince of Egypt" reduce the incentive of Disney to respond to the entry of Dreamworks into animated films?
Jan 28bProduct Life Cycle
  Topic 5: The Product Life Cycle
GoalUnderstanding the product life cycle theory and its application in the EMI case.
ReadingMcAfee, Chapter 5
ReadingFarrell and Saloner, "Competition, Compatibility, and Standards: The Economics of Horses, Penguins, and Lemmings," in Gabel, Product Standardization and Competitive Strategy, Elsevier, 1987, 1-21.
Feb 4aCase: EMI and the CT Scanner (A), (B)
  Case writeup question: Should EMI have made the original CT scanner, or licensed the rights?
Feb 4bProduct Life Cycle
  Topic 6: Organizational Design and Industry Structure
GoalUnderstanding how the structure of the organization should fit the product and six forces environment in which the firm operates, along with the determinants of fragmented industries.
ReadingMcAfee, Chapters 7 and 8
Feb 11First Draft Due
Feb 11aCases: The Household Furniture Industry in 1986, Masco (A), (B)
  Case writeup question: What are the major elements of Masco's strategy and does the furniture industry fit with these elements?
Feb 11bOrganizations and Incentives
  Topic 7: Cooperation
GoalUnderstanding the circumstances in which cooperation succeeds and when it will fail; along with means of establishing cooperation.
ReadingMcAfee, Chapter 6
ReadingBrandenberger and Nalebuff, "The Right Game: Use Game Theory to Shape Strategy," Harvard Business Review, 7-8/95, 57-71.
Feb 18aCooperation
Feb 18bCase: General Electric vs. Westinghouse in Large Turbine Generators (A)
  Case writeup question: GE proposes a "Most Favored Customer Clause," wherein it guarantees all customers the best prices for the past six months, audited by an accounting firm. Should Westinghouse adopt a similar clause? Why or why not?
  Topic 8: Antitrust and Signaling
GoalUnderstanding basic antitrust constraints on strategy and the strategic use of antitrust against competitors
GoalUnderstanding signaling and the strategic use of signals
ReadingMcAfee, Chapter 9, 13
Feb 25aAntitrust
Feb 25bOrganizations Continued
Mar 4Mystery Case
Mar 11Final Paper Due by 9 AM! (Paper submitted in Word or PDF to me by email, no paper copy necessary)
Mar 11Signaling

Presentation Schedule
  Friday, Mar 13, 2009
1PM-5PMAfternoon Session, Baxter 125
Circuit City
      Authors: Flora, Benjamin Jack; Petersen, Sierra Victoria; Robertson, Nicholas Anthony; Tan, Meng Zhou; de Alwis, Thimal Suranga
      Authors: Choi, Sean Seol Woong; Do, Hyung Wan; Shin, Sang Ha
      Authors: Lester, Brian James; Peters, Kathryn A; Szalay, Tamas; Tanabe, Noah
Frozen Yogurt
      Authors: Chen, Bettina Jade-ming; Familier, Eythan; Paolini, Robert Eugene; Yee, Lisa
  Saturday, Mar 14, 2009
1PM-5PMAfternoon Session, Baxter 125
      Authors: Leighton, Daniel; Littler, Kyle Richard
      Authors: Feldman, Matthew Solomon; Leszczynski, Philip Mark; Pulst-Korenberg, Johannes Benjamin
      Authors: Chang, Arthur Hsu Chen; Huang, Fan; Wang, Esther
      Authors: Coleman, Daryl Bennett; Gao, Connie Wu; Kim, Heejae
  Sunday, Mar 15, 2009
1PM-5PMAfternoon Session, Baxter 125
      Authors: Dogiamis, Georgios Christos; Vijayashanker, Narain Kumar
Google Phone
      Authors: Ko, Albert; Ng, Justin K; Rukavina, Dane Nenad
      Authors: Chen, Jeddy Chang; Li, Christopher Qijin; Morabito, Gerardo Antonio; Rosi, Tommaso
  Sunday, Mar 15, 2009
7PM-10PMEvening Session, Baxter 125
Smart Phones
      Authors: Lu, Dingchao; Moore, Joseph Ellis; Raythattha, Mahipal Dilip;
Ultimate Fighting
      Authors: Kandasamy, Ram; Li, Victor; Ye, David Dawei

Presentation notes

Assume that others have read your paper. The goal is to lead a discussion of your paper as a case, so be prepared to ask questions and generally provoke discussion. For class participants, you may want to challenge the paper's conclusion. A professional approach is expected of all participants.

Changes to this website since Jan 2, 2009