Title: MGMT 321 Class 7 Management Clinic
1MGMT 321Class 7Management Clinic
- Agenda
- Current events
- Case Stick to the core or
- go for more?
2The Newest in Airline Creature Comforts
3Stick to the core or go for more?
- Company
- Advaark
- Seven year old advertising firm with 550 million
in billings and 400 employees - Best known for unforgettable ads
- Run by two partners, Ian Rafferty and George
Caldwell
4Stick to the core or go for more?
- Key issue
- Should Advaark stick to its core competence in
advertising or diversify into marketing strategy
consulting?
5Stick to the core or go for more?
- Core competence
- Resources and capabilities that serve as a source
of competitive advantage for a firm over its
rivals - Core competencies are resources and capabilities
that are - Valuable (allow firm to exploit opportunities or
neutralize threats) - Rare (possessed by few other firms)
- Costly to imitate (other firms cannot obtain them
or at a cost disadvantage to obtain them) - Nonsubstitutable
6Stick to the core or go for more?
- Break up into smaller groups for discussion
- Move around the room so you can more easily talk
face-to-face - Try joining a different group so you can meet new
class members
7Stick to the core or go for more?Group
Discussion Questions
- Conduct a SWOT analysis on Advaark related to its
decision to diversify into marketing strategy
consulting - How do you assess Advaarks strengths,
weaknesses, opportunities and threats relative to
the diversification decision?
8SWOT Analysis of Advaarks Decision
9SWOT Analysis of Advaarks Decision
10Industry Analysis
- Conduct a five-forces analysis of the marketing
strategy consulting industry - How do you assess the attractiveness of the
marketing strategy consulting industry?
11Five Forces Model
12Industry Analysis Strategy Consulting
Barriers to entry Low
Industry Competitors Diverse firms ranging
from business strategy to marketing research
to advertising
Power of Suppliers Low
Power of Buyers High
Substitutes In-house research
13BCG Matrix
- High
- Market
- Growth
- Rate
- Low
-
- High Low
- Relative Market Share
Question marks
Stars
Cash cows
Dogs
14The Diversification Decision
- Should Advaark diversify into marketing strategy
consulting?
15Implementing the Diversification Decision
- Assuming Advaark decides to pursue Raffertys
idea, what is the best way to do so? - What alternatives approaches exist?
16Alternative Approaches to Diversifying Advaark
- Make or buy
- Grow the existing business by hiring human
resources and investing in the resources needed
to support it - Acquire or merge with an existing marketing
strategy consulting firm - Internal or external
- Keep new business inside Advaark
- Spin-off a new business that will operate
independently of the advertising agency
17Alternative Approaches to Growing Advaark by
Diversification
- Grow Existing Business
- Market penetration (existing market)
- New markets
- Geographic expansion
- Strategic alliances and joint ventures
18Key Take Away
- Growth always involves taking calculated risks
and companies need to assess the risks and
potential outcomes of any new growth initiative
while also ensuring that excessive analysis
doesnt hinder the speed of decision making - Chris Zook
- Head of Worldwide Practice, Bain Company
19Key Take Aways
- The fundamental question managers must answer
What business are we in? - Many argue that businesses should not stray from
their core competencies - Makes it extremely important for firms to know
what their core competence is what they do
better than anybody else - Every business decision especially strategic
decisions involves risk - You cant eliminate risk but you can try to
reduce it by careful analysis and effective
implementation
20Next Class
- Lecture on organizing
- Chapters 6 7