Final Section: Attacking the Final Exam

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Final Section Attacking the Final Exam

• MBA 299 Strategy
• Rob Seamans Richard Wang
• 5-2-2008

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Agenda

• Review
• BSB vs. Sky

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Game plan for successful case write-ups

• Developing a thesis
• Focus on and prioritize core issues
• Be insightful
• Framework
• Strategy theories we learned in class
• Implementation
• Bring in case data to support key points
• Organize your write-up and tell coherent story

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Use an analytical framework

• Examples of standard frameworks
• Cost leadership vs. differentiation. Coors,
  Dell, Cola.
• Looking for Leverage Porters 5 forces. Cola.
  Nintendo.
• Game theory (competitive response). RyanAir vs
  BA/AL. Amgen vs. JJ. HSC vs. NS. RTE Cereal.
• Coopetition Complements and the Value net.
  Apple.
• Persistent Competitive Advantage and Positive
  Feedback Loops Wintel.
• Dont apply frameworks mechanically
• Pick and choose the most appropriate parts of
  each to create a customized framework

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Mid-Term Lessons (from last time)

• Have an organized answer don't just start
  writing.  Use a framework to help organize your
  answer.  Describe your recommendation up front
  and then build support for the recommendation in
  the body of your paper.
• Don't recap what we already know from the case
  (waste of space)
• Don't spend too much time on industry analysis
  move quickly to strategic recommendations. Dont
  spend time checking the boxes on the parts of
  industry analysis that will not drive your
  strategy.
• Don't make sweeping or categorical statements
  about what the strategy should be (e.g. "invest
  heavily in RD" or "optimize their strategy")
  instead, focus on how the strategy should be
  implemented, and why. Justify your
  recommendations
• Use quantitative analysis, when possible, to
  support your argument. but don't insert tables
  from the case just for the sake of having tables
  without using them in an analysis.
• Make sure to support the assumptions you make.
• Consider sensitivity analyses to see how your
  assumptions affect outcomes.
• Give the pros of your recommended strategy, but
  show that you also understand the drawbacks.
  What would you suggest to alleviate the
  drawbacks? If you are unable to reach a decision,
  your suggestions are not of much use.
• Why is your recommended strategy better than the
  next best alternative?

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Agenda

• Review
• BSB vs. Sky

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BSB vs. Sky

• Assume you are a consultant to BSB
• Characterize the strategic environment
• What is the central issue in this case?
• Analyze the economics of the satellite industry
  and your client
• What course of action do you recommend to BSB?

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BSB vs. Sky - Approach

• Central Issue
• Sky has entered should BSB fight or exit?
• Yes. You have seen this type of problem before,
  and you do know how to approach this.
• Framework
• Competitive response (game theory) approach
• Data
• Need to estimate profits under different scenarios

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Use data to estimate profits

• Economics of the satellite industry
• Revenues
• Subscription revenue fees subscribers
• Advertising revenue
• - Costs
• One-time costs (CAPEX and start-up)
• Annual costs (programming, marketing, etc.)
• Cost per subscriber

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Economics of the satellite industry
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What does economic analysis tell us?

• BSB has much higher costs
• 400M start-up
• 112M per year
• Does it matter?

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What does economic analysis tell us?

• Break-even point
• What do we need to believe about subscribers to
  reach break-even within x years?

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Calculation of Break Even Point
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Number of Subscribers Realistic Target?

• How fast will subscribers grow?
• What do we think about hockey stick projections
  (see exhibit 2 for VCR penetration)? Is this the
  norm?

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Number of Subscribers Realistic Target?

• How fast will subscribers grow?
• Plot exhibit 3

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Economics of the satellite industry in 10 years
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Alternative Method Game Theory Approach
BSB vs. Sky modeled as a 1-shot game as of 1989
Sky
Fight
Exit
Fight
___ , ___
___ , ___
BSB
Exit
___ , ___
___ , ___
We need to compute payoffs for each scenario.
Make sure to detail your assumptions.
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Alternative Method Game Theory Approach
BSB vs. Sky modeled as a 1-shot game as of 1989
Sky
Fight
Exit
-591,235
1190,-75
Fight
BSB
-100,2765
-100, -75
Exit
Assumptions Data from Exhibits 78, calculate
cash flow for 10 years, assuming 5 discount
rate, no other entrants (make sure to show your
work).
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Good Luck On The Exam!

• Just Remember..
• Develop a thesis
• Focus on and prioritize core issues
• Insight not Spaghetti
• Use a Framework
• Strategy theories we learned in class
• Implement well
• Bring in case data to support key points
• Organize your write-up to build a coherent story