Corporate Strategy Session 2024-02 PDF

Corporate Strategy Session 2024-02: How to make an argument II 11:00-12:30 1 Agenda Admin Recap & continue: How to make an argument Inclass Exercise First Group Assignment (not graded)...

Corporate Strategy Session 2024-02: How to make an argument II 11:00-12:30 1 Agenda Admin Recap & continue: How to make an argument Inclass Exercise First Group Assignment (not graded) 8 The next three weeks….. THUR FR THUR FR THUR THUR THUR 19.9 20.9 26.9 27.9 3.10 4.10 10.10 No Session Recap How to How to session: AI Literacy AI Literacy First make an make an argument argument Basics Assignment 9 Admin Did you join a group? Next three sessions : ○ All admin questions etc → Dirk 12 Recap 14 Focus of the first part of this course We want to understand why some companies are (way) more successful than others! ○ Starbucks one example. Others: Google, Apple, Tesla, Nestle, Novartis… ○ Flip side: Why do companies fail? Other disciplines: ○ For example. Psychology: Why are some people more successful than others? 15 Two firms, same business/industry, sell coffee/pastries but vastly different outcomes 150.000x Profits $0.01m Profits $1500m How is this possible? What makes the difference? What is Starbucks’ competitive advantage? 16 Learning Objective: How to make an argument Rather than just speculating → making a solid and convincing argument. This is not about Corporate Strategy, this is true for all questions/contexts/situations in your life. 17 Learning Objective: How to make an argument What is your Misconception: Your boss is not opinion on XXX asking you to brainstorm/ speculate. He needs some arguments to convince his/her superiors. 18 In general: How to approach exam/assignment/tasks? Strategy A (90% of all submissions) “It is safe to ignore this part of the question” “This is just here by accident” Strategy B (10% of all submissions) “Maybe this is important” “I do not know what it means but I will ask for clarification” “Is our answer addressing the how/why thingy?” 19 Speculative.. But No Explanations.. Starbucks' success is due to its shops where Starbucks is so successful because you can eat, drink, have wifi, study, relax, Offer food and drinks and spend some time there with friends or You can study and relax working alone. The cups with the You can work and meet friends characteristic logo show status, as the brand Of the logo is a bit on the expensive side. Another Adding name on cup peculiarity is adding the customers' names Customised item on the cups which gives a sense of having a Globally operating customized item. Starbucks can be found All shops look the same worldwide, all the shops look the same, US style coffee shop following the US style. 20 Answers: Is there anything missing? There are multiple reasons why Starbucks is successful (see previous slide). One of them: “Starbucks' success is due to its shops where you can…. spend some time…” ⇒ This is just a claim! The explanation is missing. You have to explain how you spending more time at Starbucks makes Starbucks more profitable. Explanations were missing with 90% of all submissions. 23 Pure Speculation/Unsupported claims For example, “Starbucks is so successful because Claim people can spend some time there” No explanation Explanation Independent of CS: “More violent crime because of video games” 24 Explanation to support your claim For example, “Starbucks is so successful because Claim people can spend some time there” You have to explain how Starbucks profits Explanation from people spending time at their shops. What are possible explanations? How does Starbucks become more successful/profitable if customers spend more time there? 25  Explanation is the thing in between! People can Starbucks’ spend time HOW can Starbucks Success benefit from that there (=Profits) We need a causal explanation here… How does you spending more time at Starbucks creates more profits for Starbucks? 26 Starbucks' success is due to its shops where you can…. spend some time! How does you/these students spending time at Starbucks increase Starbucks profits? 27 If you spend more time there, you may consume more (drinks and food) 30 One Possible Explanations Spending time at a coffee shop may imply that you 1. Consume more (drinks and foods) → Starbucks’ sales increase → Profits increase (a simple causal chain) 31 “If people can stay there, it looks more busy, and a busy coffee shop make potential customers think that the coffee is very good ” 34 Possible Explanations Spending time at a coffee shop may imply: 1. You consume more → More sales for Starbucks to existing customers 2. Customers stay longer → coffee shop looks busy → signal of quality → attracts new customers → Increases sales by attracting new Starbucks 35 “I do not like their coffee but it is a good place to work” 36 Possible Explanations Spending time at a coffee shop may imply: 1. You consume more → More sales for Starbucks to existing customers 2. Signal of quality → busy coffee shop → attracts new customers → Increases sales for Starbucks 3. People go there to meet rather than drink coffee → customers who would never would come for coffee → attracts new customers → increases sales for Starbucks 37 Adding depth to your argument People go there to meet rather than drink coffee → customers who would never would come for coffee → attracts new customers → increases sales for Starbucks Today, you can work/stay at many coffee places (and these other coffee places are way less successful). Starbucks is not unique in offering a place to stay/work Temporal argument: In the past, 1990s, when Starbucks entered the market, it was different There might many other options but customers do not know about them (including quality of Wifi etc) 39 Exercise: Come up with an explanation… Another claim: “Starbucks is so successful because of the high quality of its coffee beans” This or a variant of this claim has been made by many groups in our last session. More or less explicitly, Starbucks is also making such a claim 49 Starbucks: 50 What is happening here? ? 51 We need an explanation!!! How do H-Q-Bs Starbucks’ High Quality translate into more Success Beans! profits (=Profits) What is the causal chain? 53 DOs 1. There might be several explanations (as in the example before). 2. You have to link H-Q-Bs to success (more sales, higher profit margins, lower costs). 56 DON’Ts 1. Disagree and then discuss other factors: “We think other things are more important. We think personalisation is more important” 2. Do not explain success, no link to success (lower costs, more sales, higher profit margins) 3. Provide only one possible explanation (in most cases, there are multiple ways through which something affects success) 57 What if you disagree? Claim: “One reason why Starbucks is so successful is high quality of its coffee beans” Let us assume that you think that the most important factor is Starbucks’ branding. How do you answer to this exercise? “We disagree, we think Starbucks is so successful because of its brilliant branding strategy…” Fair enough, there might be additional reasons but the question was “ONE important reason” , it was not “THE MOST IMPORTANT REASON” Read the question carefully (--> exam other classes). If you have any doubts, ask for clarification 59 What if you disagree? Claim: “One reason why Starbucks is so successful is high quality of its coffee beans” Disagreeing implies that you think that HQB (1) has no effect on its success or (2) has a negative impact on success? What does a negative impact on success imply? How do we understand success in the context of this course? Can HQBs have a negative impact on success? 60 Supporting Evidence “Starbucks relies on HQBs”: Do we have any evidence for that? For example, do they use more expensive arabica beans? “HQBs/Starbucks beans are more costly”: What is the price diff between low and high quality coffee beans? “Starbucks to charge more for their coffee”. Do we have any evidence supporting this claim, price comparison with other coffee shops etc ….. 91 Supporting Evidence: Are Starbucks Coffee Beans High Quality? At least they are 100% arabica 92 Supporting Evidence: More Costly - Price Difference Coffee Beans Arabica is ca. 30% more expensive than robusta 94 Supporting Evidence: Are Starbucks Coffee Beans High Quality/More Costly ? 96 Supporting Evidence: Starbucks can charge more than its competitors… For some claims, we will find information, for others, not. Whenever possible, provide supporting evidence (=numbers) 98 Your responses….. Coffee in Italy in any bar is better than the Starbucks one 90% italy coffee shops Every coffee shop in italy Literally every little coffee shop in Italy Any bar in the streets, especially in cities of Southern Italy. Autogrill, any bar in Italy …. 99 Starbucks has the best coffee? 100 First Group Assignment Claim: “One reason why Starbucks is so successful is because of its Mermaid logo!” Provide an explanation that is supported by evidence 1:1 what we did today/last time in class 111 First Group Assignment (not yet online) “One reason why Starbucks is so successful is because of its Mermaid logo!” But: We our group disagrees with this claim.. Then, explain why you disagree & supporting evidence 112 First Group Assignment 113 Any questions? Questions after class: Only Q&A forum on iCorsi Why? To avoid information asymmetries, some groups may have more information than others etc 114 First Group Assignment: Questions After class: only Q&A on iCorsi, no email (no information asymmetries) 115 Discussion/Feedback Assignment We will discuss the First Group Assignment in the session on XXX It is a class discussion, no presentation I may have some questions regarding your submission ○ If you none of your group is around, no opportunity to clarify ○ If you want your submission to be discussed, please let me know in class. I will only grade your submissions after we have discussed the assignments (weekend of 7.10/8.10) → take into account the in class discussion 118 Recall 50% of your course grade are groupworks and there are 2 group assignments ⇒ each assignment counts 25% towards your overall grade. This is a 6 ECTS course and you are working in teams. ⇒ I am expecting to see this reflected in your submissions. 119 Don’ts Waste space on recounting the history of Starbucks, telling us what Starbucks is (=my best guess is that we all know it) etc ○ This not the question of the assignment. Buy (=lack of critical thinking) into the marketing claims of Starbucks Make unsupported claims Provide no explanation; do not make the link to company success/profits. Only specify one mechanism.. 120 Again, this is not about Corporate Strategy Why do we see an increase in loneliness in our society? Why do we see a polarisation (in opinions) in our society? Why is trust in the media eroding? … ⇒ We can always speculate or instead, try to make a convincing argument supported by evidence 121 It is rather an art than a science Ideally, you would support all your claims with (empirical) evidence Unfortunately, such evidence is not available for all claims Logic, Educated Guesses, Evidence from similar contexts etc There are “iron rules” of how to make a convincing argument But obviously, if you just speculate and provide no evidence and explanation, this is a very weak argument 122