As voted on by the class, the exam is untimed and there are no word count limits. Certainly,
the more thorough and complete your answer, the more points you will accrue. Each set of
questions is worth 70 points.
SeeLess Semiconductors is a major global player in the semiconductor and microchip industry.
In the space that they compete in, there is tremendous technological uncertainty as disruptive
innovations seemingly come out of nowhere to upend well-entrenched incumbents. These
disruptions are often fast and are increasingly by companies that do not compete head-to-head
with SeeLess Semiconductors. In addition, market tastes for the end products that feature
SeeLess Semiconductors' components also change rapidly. The company was hurt financially
when the market shifted away from personal computers (that accounted for a significant
portion of SeeLess Semiconductors' revenues), first to tablets, and then to other mobile
devices. The company's new CEO, Lisa Monroe, has decided that the company's basic approach
to strategy should change. Toward this, she has mandated that, at any point in time, SeeLess
Semiconductors should be able to choose from several different strategic options instead of a
fixed and planned course of action that the company has pursued since it beginning. One of her
mandates called for the company's future manufacturing plants to be built with the ability to
add capacity at low cost. In addition, she wants to lay off 1,000 of the company's employees
and hire contract and temporary workers in their stead. Finally, Monroe wants the company to
use the real options approach to manage the combination of technological and market
uncertainties.
1a. List all the different real options SeeLess Semiconductors has.
1b. Recommend the ones you think are most advantageous:
BetaZeta Food Products competes in the "center-of-the-aisle" packaged foods business. Ever
since its founding and membership in the industry, the company has focused on gaining market
share. In 2017, it had, by far, the largest market share in the industry and used this advantage
to create order and discipline in the industry, particularly in terms of prices. Starting in late
2016, BetaZeta Food Products' VP of Marketing, Polly Wogg noticed the heads of BetaZeta's
four largest competitors were meeting often surreptitiously, particularly at trade shows.
Parallelly, Wogg also noticed that the four firms were pricing their products at around the same
level and distinct from the prices of others, including BetaZeta. In addition, when one of the
four made a move in pricing or capacity planning, the others made quick responses.
2a. What is going on with the competitors and how are they doing it (be specific and use
terms from Chapter 7).
2b. What is the biggest threat to what they are doing?
2c. If Polly Wogg decides against head-to-head competition, what strategy is she using?
FirmaSafe competes in the market for global positioning devices and services. The company
manufactures its own GPS units, which are smaller than those of any other competitor and
include a proprietary battery that lasts 200% longer than any other competitor's battery and
that FirmaSafe manufacturers on-site. FirmaSafe also has developed proprietary software that
is much faster and more precise than that of any competitor. When developing the proprietary
battery, FirmaSafe decided to manufacturer the battery in-house to reduce the possibility that
the company it outsourced the battery manufacturing to might reverse engineer the battery
and sell a similar product to competitors. This possibility was especially troubling given that the
company expected a significant increase in demand due to the improved battery life.
Additionally, FirmaSafe sells its products and services through its own direct sales force to
ensure that its representatives highlight the longer battery life of FirmaSafe's units.
3a. Tell me how FirmaSafe could use a vertical integration strategy.
3b. In what way are they leveraging value chain economies?
3c. What is the drawback to this strategy?
3d. Give me one example of a transaction-specific investment they need to make.
At the beginning of 2001, Avocado Computers competed exclusively in the computer industry
and generated approximately 96% of its revenue from the sales of computers and computerrelated software and approximately 4% of its revenues were generated from sales of other
peripherals. Further, of these revenues, 60% was from sales in the U.S., 30% was from sales in
Europe, 7% was from sales in Asia and 3% was from other areas. In October 2001, Avocado
entered the personal electronics industry by introducing a new MP3 player known as the
AvocadoPit. In developing and selling the AvocadoPit, Avocado Computers was able to use
many of the same R&D facilities, suppliers, production facilities, and distribution and sales
outlets as the computers and software Avocado Computers traditionally sold. By 2003, the
AvocadoPit MP3 Player, accessories for the unit, and sales of songs on Avocado Computers'
NectarTunes website accounted for 35% of Avocado Computers' revenues.
4a. Tell me how Avocado’s corporate-level strategy changed from 2001 to 2003.
4b. Which economies of scope do you see and why (remember, we covered 8
Economies of Scope in chapter 9)?
BadBuy, the online auction company, has an impressive portfolio of cooperative agreements. It
includes an agreement with the U.S. Postal Service to facilitate the shipping of goods purchased
through BadBuy auctions, an agreement to allow MBNA to use BadBuy's name on a credit card,
and an agreement in an online auction company in Korea supplemented with a financial
investment by BadBuy in the Korean partner. At one time BadBuy had formed an independent
firm, called BadBuy Australia/New Zealand, with ecorp - an Australian company.
5a. identity 3 different relationships BadBuy has or has had.
5b. What are the reasons for these relationships?
5c. What types of risk are present?
Redacted is a leading consumer goods company in the United States that has grown its business
through a combination of international growth, alliances, acquisitions and mergers. In 2003,
Redacted acquired the beauty care company Hella to acquire products that would complement
its current product. In 2004, Redacted acquired AG-Hutchison Ltd to establish a stronger
presence in the Chinese consumer goods products market. In 2005, Redacted acquired
Guyllette, another consumer goods company, in a deal worth approximately $57 billion dollars.
6a. Identify how Redacted is using M&A strategies.
6b. Describe as friendly/hostile, merger/acquisition, the type of expansion, and
how you know this from the story.
6c. What are the main challenges for M&A strategies?
Sample Solution