MGMT 321 Class 7 Management Clinic

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MGMT 321Class 7Management Clinic

• Agenda
• Current events
• Case Stick to the core or
• go for more?

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The Newest in Airline Creature Comforts
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Stick 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

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Stick to the core or go for more?

• Key issue
• Should Advaark stick to its core competence in
  advertising or diversify into marketing strategy
  consulting?

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Stick 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

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Stick 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

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Stick 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?

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SWOT Analysis of Advaarks Decision
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SWOT Analysis of Advaarks Decision
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Industry Analysis

• Conduct a five-forces analysis of the marketing
  strategy consulting industry
• How do you assess the attractiveness of the
  marketing strategy consulting industry?

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Five Forces Model
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Industry 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
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BCG Matrix

• High
• Market
• Growth
• Rate
• Low
• High Low
• Relative Market Share

Question marks
Stars
Cash cows
Dogs
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The Diversification Decision

• Should Advaark diversify into marketing strategy
  consulting?

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Implementing the Diversification Decision

• Assuming Advaark decides to pursue Raffertys
  idea, what is the best way to do so?
• What alternatives approaches exist?

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Alternative 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

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Alternative Approaches to Growing Advaark by
Diversification

• Grow Existing Business
• Market penetration (existing market)
• New markets
• Geographic expansion
• Strategic alliances and joint ventures

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Key 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

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Key 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

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Next Class

• Lecture on organizing
• Chapters 6 7