The Ten-Day MBA 4th Ed.

by Steven A. Silbiger

Intangible Linkages

  Shared Managerial Know-How: Experience with same type of buyer

  Similar configuration of the value chain

  Similar generic strategies used

  In November 1994, Quaker Oats thought it had the perfect match for its Gatorade sports drink: Snapple fruit juices and iced teas. The acquisition cost $1.7 billion. Already a leader in noncarbonated beverages with the Gatorade brand, Quaker vaulted to the position of being the third-largest beverage company behind Coke and Pepsi. Quaker’s analysts thought that its powerful distribution system, shared manufacturing, and economies of scale could vault this New Age beverage to new heights of sales and profitability. It had many linkages going for it. However, Coke and Pepsi both aggressively entered the market with lower-priced Lipton and Nestea tea drinks. Coke’s Fruitopia brand attacked Snapple at the high end as well. In the end, New Age became “old hat” by 1997 and Snapple’s sales collapsed. Taking a $1.4 billion loss, Quaker sold the company for $300 million to Triarc Companies, the maker of RC Cola and Mistic fruit juices. Despite the linkages, the trendy nature of the product itself overwhelmed any synergies that may have existed for the transaction. Triarc, on the other hand, found value by returning to the strategies that had built the brand and in 2000 sold Snapple for $1.5 billion to soda maker Cadbury Schweppes.

  Even when synergy does exist, there are often significant costs associated with making two organizations work together. Decision making may be hampered by lengthier processes of approval. Increased organizational inflexibility may be the by-product of a larger organization. In rapidly changing markets, this inflexibility could be a strategic disadvantage.

  STRATEGIC SKEPTICISM

  The preceding discussion may have given the impression that corporations are successful as a result of expert strategic planning. In the area that I call strategic skepticism, strategic planning is not quite the analytical process preached by academics.

  According to James Brian Quinn of MIT’s Sloan School, strategy is considered to be a process of logical incrementalism. In his view, strategy is the result of many smaller decisions taken over a long time. Other theorists also hold that strategy is not as formal a process as that presented in the preceding pages. Strategy can take five forms, all starting with P:

  Plan

  Ploy

  Pattern

  Process

  Perspective

  In one company, strategy is the result of a formal plan. General Electric buys and sells its divisions using McKinsey’s portfolio techniques. In another, strategy is the execution of a successful tactical ploy. Instead of marketing coffee only in grocery stores, Kraft Foods uses mail order to sell its Gevalia brand.

  Strategy can also be just a pattern, a process, or perspective of conducting business and making decisions. In my own experience in a small jewelry business, we followed a simple philosophy. We treated our customers well, gave them the best prices, and were completely honest about the merchandise. This consciously chosen way of conducting business was a successful strategy.

  Strategy can be the product of an entrepreneur’s insight as a result of being hit with the boom of his or her sailboat, or it can be a series of ad hoc plans that develop over time. Either way, the formal planning processes sold by consultants are not always the answer.

  History is often rewritten to suit the theories of strategic planners. One version of the success of Honda motorcycles described Sochiro Honda as a free spirit driven by will and a dream. He had no grand plan. The success of the company was the product of his burning desire to build a winning racing motorcycle and his slow, step-by-step introduction of his motorcycle into the U.S. market in 1958. Luckily for Sochiro, the United States placed few restrictions on his “inconsequential” Japanese import.

  Consultants at BCG told a much different story about Honda to their British motorcycle industry clients. In their view, Honda had calculated to go down the learning curve to achieve lower costs and build world market share through low pricing. The company’s dominant market share allowed for large investments in research and advanced manufacturing techniques. BCG reported that Honda’s market leadership also allowed the company to advertise and promote Honda at lower costs per bike. Which version of history is true? Personally, I gravitate toward the more colorful story, but the cost leadership principle obviously played a large role in Honda’s success, planned or not. In fact, if theory is used in conjunction with a manager’s own good judgment and common sense, strategy can be a winning mix of art and science.

  STRATEGY AND CHINESE WARFARE

  No lesson on strategy would be complete without mentioning Sun-tzu, a Chinese military strategist of the fourth century b.c. Somehow his maxims have entered into many an MBA conversation about strategy. I imagine the irascible Mr. Honda quoting him quite often. Sun-tzu’s book, The Art of War, even sat on my former boss’s desk. Quoting Sun-tzu is sure to make you either sound terribly smart or appear like the ruthless insider trader Gordon Gekko in the movie Wall Street. Here are a few choice quotes for your next business meeting, if you dare use them:

  All warfare is based on deception.

  Offer the enemy a bait to lure him; feign disorder and strike him.

  For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill.

  In war, numbers alone confer no advantage. Do not advance relying on sheer military power.

  Thus, what is of supreme importance in war is to attack the enemy’s strategy.

  STRATEGIC IMPLEMENTATION

  As I indicated at the beginning of this chapter, strategy development without an eye toward implementation is a waste of time. Strategic changes are an easy topic for MBAs to talk about, but are not easy to accomplish. A clever quote won’t cut it. I cannot possibly tell you how to turn around a failing business in a chapter, but I can put strategic thinking into perspective. Contrary to what some academics would lead you to believe, no one tactic or trick constitutes strategy; rather, strategy is how the “totality” of a company works together to achieve goals.

  Executives do not think up or implement strategy in one day.

  Leaders have to discern which factors are within their control and which are not. MBAs call those factors within their control the action levers. Strategists must also deal with the reality of human resistance to change. They must set tangible goals, formulate their action plan, and develop contingency plans if things do not go as intended. This is the same action-planning sequence outlined in the organizational behavior chapter.

  Strategy is dynamic. Executives must review their strategy continuously to ensure that it reflects the changes in the business environment, the company, and its goals. The source of competitive advantage is the pursuit of an evolving strategy that cannot easily be duplicated by competitors.

  KEY STRATEGY TAKEAWAYS

  The Seven S model—Strategy is how all of a company’s S’s work together.

  The Value Chain—The process of producing and delivering goods and services

  Integration—Ways to expand a business: backward, forward, vertically, horizontally

  Ansoff Matrix—Four strategies for business expansion

  Porter’s Five Forces Theory—Five forces that determine the competitive intensity of an industry

  The Learning Curve—The more units produced, the lower the cost per unit falls due to production efficiencies.

  Signaling—Indirectly communicating with competitors

  The Prisoner’s Dilemma—The captive nature of competitive relationships within an industry

  Portfolio Strategies—The theories large multibusiness corporations use to decide which companies they should buy, sell, or hold

  Globalization—The worldwide competition inherent in certain industries due to a variety of globalizing factors

  Synergy—The incremental profits generated by the combination of two companies that share resources

  Incrementalism—
The concept that strategy is not a grand scheme but is developed over time, step-by-step

  Day 10

  MBA MINICOURSES

  RESEARCH AND COMPETITIVE INTELLIGENCE GATHERING

  PUBLIC SPEAKING

  NEGOTIATING

  INTERNATIONAL BUSINESS

  BUSINESS LAW

  BUSINESS WRITING

  REAL ESTATE INVESTING

  LEADERSHIP COACH

  FINANCIAL PLANNER

  THE TEN-MINUTE MINICOURSE ON RESEARCH AND COMPETITIVE INTELLIGENCE GATHERING

  It is said that information is power. That is why MBA schools teach students research skills. The key to efficient and productive research is to know where to seek information. By putting a little more effort into your job, you as a Ten-Day MBA may get that brilliant insight or fact that may elude your less industrious colleagues. Of all the sections in this book, this one may be the most valuable to you, so I finish with it. Suppose you need facts about a competitor, a person, or an industry; the following are some of the right places to look.

  THE INTERNET

  What used to be available only at a university library is now available to anyone who can access the Internet. The sheer volume of product, business, and industry information that can be tapped is enormous. Searching the Internet does require patience because it is not neatly organized to answer your questions. You should visit several sites to perform a good search. Here are several:

  Google.com

  Yahoo.com

  Bing.com

  Wikipedia.com

  Realtime.com

  BlogSearch.com

  When you log on to each of these sites, review the optimal syntax for searches so that you can keep searches with a thousand responses to a minimum. By limiting your search terms with the correct syntax, you will save a great deal of time.

  The other avenue for gathering information electronically is special-interest-group forums and blogs. There, you can easily ask questions of others who are interested in the subject you are researching, or you can read messages members have posted. Amazon has a “search inside this book” feature that is helpful and free.

  A great affordable service for researching business subjects is Factiva at WSJ.com. The database includes thousands of sources from the Dow Jones and Reuters databases that are mostly not available on the free Web.

  You can search existing trademarks and patents at www.uspto.gov. It is a great source of competitive information and can aid you in your product-naming and development activities.

  BOOKS AND ONLINE DATABASES

  Standard & Poor’s Industry Surveys—This multivolume set provides excellent, timely, in-depth research of twenty major industries.

  Value Line Investment Surveys—This source provides detailed, up-to-date company information for investors in seventy-six industries.

  Plunkett’s Industry Almanacs—This multivolume set describes industries and companies (www.plunketresearch.com)

  Gale Research—Gale Research publishes a series of books that are the cornerstones of all good business libraries:

  Market Share Reporter—This book presents market share data that appear in public sources. It’s a timesaver!

  Business Rankings Annual—This book gives business ranking data that appear in public sources. It is a good industry source.

  Encyclopedia of Associations—Most industries and products have associations, trade groups, and clubs. These organizations are happy to assist people to learn about them, their membership, or their interests. Many publish research studies, membership directories, and newsletters. Their people can also lead you to other sources of information. Do not overlook the Encyclopedia of Associations.

  Encyclopedias—Probably the most overlooked source of quick, predigested information. You’re never too old to look at the Encyclopedia Britannica or Wikipedia.

  The Lifestyle Market Analyst—This annual study published by National Demographics and Lifestyles is one of the best sources of marketing information. It combines demographics, lifestyles, and media habits. They also publish the Zip Code Analyst.

  Congressional Quarterly’s Washington Information Directory—This book puts all the resources of the Washington bureaucracy at your fingertips. The entries about the Commerce Department are helpful for international trade. If you pay your income taxes, you have paid for this service. Why not use it?

  Google Scholar—A database of university research papers.

  INTERNATIONAL BUSINESS

  Doing Business in . . . This series published by PricewaterhouseCoopers and Ernst & Young is an excellent source of information for the international businessperson. It discusses the customs and a variety of the finer points of international business.

  EXPENSIVE RESEARCH

  The Nexis Research Database—This expensive online computer service is available at some libraries and businesses. It allows access to whole libraries of news, financial, and marketing data. Keyword searches must carefully be defined because so much data is available. Seek free sources of information first if you are cost-conscious. If not, this is one of the most powerful databases that exists. It will save you a lot of time.

  Find/SVP—Provides off-the-shelf studies of most product categories. Their well-written reports range in price from a few hundred to several thousand dollars. Their studies contain much of the information that is available for free from other sources, as well as some proprietary research.

  Financial Databases—Factset, Capital IQ, Factiva, Bloomberg, Investex, and SDC are expensive financial databases available at corporate and library institutions.

  INTERVIEWS

  Information can always be gathered by talking to people. The biggest mistake is to finish an interview and neglect to ask for referrals to other sources. After networking with several company or industry insiders, you can name-drop your way to other people. By mentioning the name of someone they already know, you make interviewees feel more at ease, and they become more generous with their information.

  TRADE SHOWS

  If you really want to know about an industry, attend its annual trade show. In one location you will get to see all the major players and new products. The show directory serves as an encyclopedia of industry contacts. There are several online sources for domestic and international trade shows. I have regularly attended the hardware, housewares, toy, gift, and automotive trade shows.

  KEEPING CURRENT

  There are a few newspapers and magazines that MBAs must make time for. MBAs must be informed, and these publications give them the information edge. How can they expect to talk and think intelligently if they do not know what is going on in the world? To succeed, you must read.

  The Wall Street Journal—If you don’t have time to read more, just read the front page. It gives you the business news that you need to know.

  Forbes, Bloomberg Businessweek, and Barron’s—These are the best business magazines. For news, there is the Journal, but these magazines give you the trends and the types of stories and analyses that are written for the intelligent business reader.

  Advertising Age—Most business magazines have a financial bent, but Advertising Age comes at business from a pure marketing perspective. It is the trade magazine of the advertising world. It gives a person a well-rounded business outlook. Since most products are advertised, it is a good source of competitive information.

  Local Paper/Local Business Journals—If you don’t know the business players in your community, they will probably never know you.

  THE TEN-SECOND MINICOURSE ON PUBLIC SPEAKING

  1. Know your audience.

  Their interests, attention span

  2. Know your own capabilities.

  Can you deliver a joke?

  3. Keep it simple.

  Detailed information is best delivered in print.

  Speeches should deliver a concept and motivate.

  KISS—Keep It Short and Simple.

  THE ONE-MINUTE MINICOURSE ON NEGOTIATING

 
1. Know your opponent.

  Temperament, history, capabilities, resources

  2. Know yourself.

  Temperament, history, capabilities, resources

  When the desires of two individuals clash, there is a tension that some people handle better than others. It’s best not to fool yourself about your own temperament. Try to work either to improve your ability to handle conflict, or to learn to compensate for it.

  3. Do your homework.

  Understand the impact of possible settlement scenarios.

  4. Determine your strategy and limits ahead of time.

  Do not get caught up in the “need to win” at all costs.

  5. Review each negotiation afterward to gain knowledge for the next negotiation.

  What can I improve on? What can I learn from my opponent?

  THE ONE-MINUTE MINICOURSE ON CONDUCTING INTERNATIONAL BUSINESS* (AND FOREIGN POLICY)

  1. Understand the host’s culture, values, customs, and beliefs. Don’t assume that your values are shared.

  2. When you are in a foreign country, you are a guest. They are the host and they have the power.

  3. You are a foreigner and you will never really understand them.

  4. Multinational corporations get their competitive advantage from their ability to transfer their experience across borders and avoid mistakes.

  5. International investment is a long-term investment. The measure of its return should also be a long-term one.

  6. You will have little success without true respect for the host country and its people. If you do not respect them, they’ll know it.

  7. In international business there is a lot of room for ethical decision making. Act as your own policeman.

  THE TWENTY-MINUTE MINICOURSE ON BUSINESS LAW(THE TWENTY-MINUTE LAWYER)

  You could call it “The Twenty-Minute Lawyer,” but this section is really a review of the most basic concepts of business law. No divorce law here. As the law is open to many interpretations, a strict interpretation of any of these concepts or related wording could fill a book and could be debated by legal scholars, but in the spirit of The Ten-Day MBA, they are outlined here in quick order. Discussions about business structures such as partnerships and corporations have already been discussed in the finance chapter.