OAM Final Key Question Answers PDF

Class 19 Blue Ocean Strategy What is blue ocean strategy? Ans. Blue Ocean Strategy involves creating new, uncontested market spaces that make competition irrelevant by focusing on both differentiation and low cost. It aims to create new demand rather than competing...

Class 19 Blue Ocean Strategy What is blue ocean strategy? Ans. Blue Ocean Strategy involves creating new, uncontested market spaces that make competition irrelevant by focusing on both differentiation and low cost. It aims to create new demand rather than competing over existing demand​. Never use competition as benchmark What are the prerequisites for blue ocean strategy? Ans. 1. Create a new marketplace which makes competition irrelevant 2. Strategic moves that eliminates, reduces, creates, or adds value 3. Strategic moves that redefines the buyer group with change in consumer trend 4. Create new demand Why is blue ocean strategic moves difficult? Ans.They require a significant shift in thinking which is why incumbents may struggle to innovate due to entrenched processes and mindsets. It is difficult to identify and address unmet customer demand What are two tools to use when considering blue ocean strategy? Ans. 1. ERRC Grid: Eliminate - Reduce - Raise 2. Identifying what customer want: Buyer Utility: Is there exceptional buyer utility? Price: Is the price accessible and scalable Cost: Can profits be attained Adopton: What hurdles are there What did Trader Joe’s eliminate or reduce (as strategic moves)? Ans. Eliminate: Non in-house brands. Large store format Reduce: Smaller selection of products. Reduces costs by removing the middle man. Reduces consumer decision time. What did IKEA create or increase (as strategic moves)? Ans. Create: Day care in furniture store. A self-service and flat-pack furniture model Increase: Accessibility and affordability of high end design furniture with lower costs. What is a strategy canvas, how do you use it? Ans. It compares different factors of different companies such as price, variety, service, quality, versatility, style. Helps to figure out what other people are doing and what opportunities are there. Why do blue ocean market spaces often turn red? Ans. Competitors eventually enter the market. And then the market becomes overcrowded Class 20 Disruptive Innovation, Technology Adoption What are 3 reasons that technology adoption is accelerating? Ans. Globalization and Free Trade: Increased wealth creation and reduced barriers facilitate faster adoption. Advancements in Technology: Semiconductor power (Moore's Law) halves computing costs every 18 months. Efficient Manufacturing Processes: Lean operations and Six Sigma reduce costs and improve distribution What are first-mover advantages? Disadvantages? Ans. Advantages: Economies of scale and learning curve benefits. Network effects and customer switching costs. Brand recognition and supplier lock-in​. Disadvantages: High R&D costs and risk of market education failure. Difficulty in setting distribution channels and market acceptance. Vulnerability to imitators with improved models​. Where do you think streaming (Netflx, Hulu) is on the industry lifecycle? Ans. They are in the maturity stage with intense competition, falling prices, and market consolidation. Oligopolies are emerging with major players like Netflix, Hulu, Disney+, and Amazon Prime competing for market share What is an industry lifecycle? Key dynamics at each stage? Ans. Introduction: High R&D costs, small market, and high prices. Growth: Increased competition, economies of scale, and market expansion. Shakeout: Reduced product innovation, price wars, and consolidation. Maturity: Market saturation, dominance by a few firms, and price competition. Decline: Shrinking demand, market exits, and consolidation Why does product innovation go down during the shakeout stage? Ans. As demand slows, companies focus on cost-cutting and market share rather than new product development. Inefficient firms fail, and mergers/acquisitions rise to achieve economies of scale Who do you see oligopolies during the maturity stage? Ans. Market saturation leads to consolidation where a few dominant firms control the majority of market share. For example, top companies in industries like wireless (80%+ market share) and airlines (70%+ market share) dominate​ How would you explain the technology adoption lifecycle to your cousin? Ans. Imagine it like a curve with five groups: Innovators (tech enthusiasts), Early Adopters (visionaries), Early Majority(pragmatists), Late Majority (conservatives), and Laggards (skeptics). Each group adopts technology at different rates, from the adventurous to the hesitant​ How can you “cross the chasm?” Ans. To transition from early adopters to the early majority, focus on a niche market (like bowling pins), gain 40%+ market share, and use word-of-mouth marketing. Once momentum builds, expand into the broader market​ What is disruptive innovation? Why is it difficult for incumbents to anticipate? Ans. Disruptive innovation introduces low-cost solutions for overlooked segments, often with inferior initial performance but faster improvement. Incumbents focus on serving high-end customers and miss these emerging threats, leading to the "Innovator’s Dilemma" where they risk losing markets by doing everything “right”​ Class 21 Corporate Strategy What is corporate strategy? What questions does it ask? Ans. Corporate Strategy determines where to compete by addressing: 1. Which industries or markets to enter 2. To diversify or integrate vertically 3. How to manage multiple business units As a leader, how can you decide which activities should be internal vs. external? Ans. Transaction costs should be considered to see if outsourcing is expensive then internalize. If it is a core competency then it should be internal. Outsourcing offers flexibility while internalization allows more control. Why did Coca-Cola enter a long-term alliance with Monster beverage? Ans. The soft drink market is dying and so Coca-Cola wants to diversify into energy drinks but also want Monster’s expertise in the market. Why do joint ventures (and many forms of partnership) not work well? Ans. There are lots of cultural clashes and misaligned goals. There is also difficulty in sharing resources and decision-making. Both parties also have conflicting operational processes. Class 22 Vertical Integration Pros and Cons of Vertical Integration Ans. Pros: Greater control over quality and supply chain. Lower transaction costs and better scheduling. Ability to invest in specialized assets. Cons: Reduced flexibility and increased risk exposure. High initial costs and potential core rigidity. Potential for new rivals from previous suppliers/customers​ When does vertical integration make sense Ans. It makes sense if: 1. You need control over critical supplies 2. Transaction costs are high 3. To secure distribution channels What was P&G diversification approach and why? Ans. Procter & Gamble reduced its portfolio from 170 brands to 65 to focus on “superbrands” with global appeal. They divested smaller, less profitable brands (e.g., Duracell, Pringles) to streamline their operations and enhance their core competencies What is the key takeaway from the BCG matrix? Ans. The BCG Matrix evaluates business units based on market growth and market share, helping firms decide where to invest, divest, or develop: Stars: High growth, high share – invest heavily. Cash Cows: Low growth, high share – generate steady cash. Question Marks: High growth, low share – decide whether to invest or divest. Dogs: Low growth, low share – divest or restructure  Class 23 Mergers and Acquisitions When should you build vs. borrow vs. buy? Ans. Build: If you have the resources (e.g., financial, technical), core competencies, and strategic advantage to execute in-house. Borrow: If the needed capability can be acquired through alliances, outsourcing, or contracts, and there’s market availability. Buy: When internal resources are insufficient, and the capability is non-tradable, requiring a tight integration (e.g., M&A). This approach is costly and hard to reverse​ Why do firms enter strategic alliances? Ans. Strengthen strategic position: By leveraging complementary assets and entering new markets. Hedge against uncertainty: Acting as a "call option" to mitigate risks in volatile industries. Access new capabilities: Learning and acquiring technology or skills from partners. Cost-sharing and faster market entry: Lower investment and operational costs compared to building from scratch What helps alliances work? (note: many, many, many don’t work) Ans. Partner Selection: Aligned objectives, cultural compatibility, and trust. Alliance Design and Governance: Clear contracts, defined roles, and effective governance structures. Alliance Management: Ongoing investment, trust-building, and knowledge-sharing mechanisms. Many alliances fail (50%+), often due to lack of trust, poor partner alignment, or weak governance What’s the difference between a merger and an acquisition? Ans. Merger: Two companies combine to form a new entity, often viewed as a partnership of equals. Acquisition: One company takes over another, with the acquirer absorbing the target company’s assets and operations What’s the pro/con of a horizontal integration (buying someone in the same business)? Ans. Pros: Reduces competitive intensity by removing rivals. Achieves economies of scale, spreading fixed costs over more units. Increases differentiation through a broader product portfolio. Strengthens bargaining power with suppliers and distributors. Cons: Can lead to regulatory scrutiny and anti-trust issues. Integration challenges, cultural clashes, and potential redundancies. Overpayment or underestimated integration costs may lead to failure Class 24 Organizational Design How would you describe the Alphabet (Google parent) organizational structure? Ans. Alphabet uses a multi-divisional structure (M-form), where each business unit operates independently with its own CEO (e.g., YouTube and Google have separate CEOs). This structure allows for high autonomy while still being under the Alphabet umbrella. The structure is modeled after Berkshire Hathaway, focusing on high-risk, high-reward projects How are strategy and organizational structure related? Ans. Organizational structure supports strategy by defining decision-making authority, specialization, and control mechanisms. A well-aligned structure ensures that the company can execute its strategy efficiently, whether through centralization for cost leadership or decentralization for differentiation. However, companies often face inertia where organizational boundaries can slow down strategic shifts What are the pro / con of the following: 1. Specialization, formalization, centralization, hierarchy: Specialization Pro: Increases efficiency and expertise in specific tasks. Con: Limits broader thinking and innovation due to siloed knowledge. Formalization Pro: Ensures consistency and reliability through standard procedures (e.g., McDonald's). Con: Can stifle creativity and flexibility, leading to rigid customer service. Centralization Pro: Ensures uniform decision-making and control. Con: Slows down responsiveness in dynamic environments. Hierarchy Pro: Clarifies reporting relationships and authority. Con: Excessive layers can reduce communication speed and employee empowerment​ 2. Product-based vs. market-based organization: Product-Based Organization: Pro: Allows deep focus on product innovation and development. Con: Can lead to duplication of efforts in different market regions. Market-Based Organization: Pro: Focuses on meeting the specific needs of different customer segments or geographic regions. Con: May reduce product consistency and lead to inefficiencies in product development​ What is a matrix reporting structure? Good, bad, ugly? Ans. A matrix structure involves employees reporting to both functional and project managers, promoting cross-functional collaboration. Good: Enhances resource sharing and coordination across departments. Bad: Creates confusion and tension due to dual reporting lines. Ugly: Leads to slower decision-making and potential conflicts between managers What are 3 ways that a company’s culture might manifest itself? Ans. Hiring and Promotion Practices: Reflects what traits and behaviors are valued. Celebration of Events: Shows whether the company values only success or also lessons from failures. Values and Norms: Demonstrated through day-to-day employee behavior, attitudes, and company rituals​ Class 26 Culture, Founder’s Mentality What do you think of the phrase “culture eats strategy for breakfast?” Ans. This phrase, attributed to Peter Drucker, emphasizes that a company's culture—the shared values, norms, and behaviors—often plays a more crucial role in achieving success than strategy alone. A strong culture ensures that employees are aligned, motivated, and resilient, which can either amplify or undermine a well-crafted strategy. If a strategy is not supported by the culture, it is unlikely to succeed, as behaviors and attitudes drive execution How would you describe the culture of SUPERCELL, gaming company? Ans. Empowerment and Independence: Teams, called "cells," operate independently, making their own decisions about game development, including whether to "kill" a game. Risk-Taking and Learning from Failure: The company celebrates lessons from failure, symbolized by drinking champagne when they "screw up," reflecting a culture that encourages risk-taking and continuous improvement. Focus on Teamwork: They prioritize building the best teams rather than just hiring the best individuals, with an emphasis on collaboration over hierarchy What is the “founder’s mentality"? Ans. The founder’s mentality refers to a mindset where founders act like insurgents, driven by a personal commitment to their mission and customers. Key traits include: Customer-Centric Passion: Founders are obsessed with frontline feedback, always asking, "What did the customer say?" Ownership Mentality: They take personal risks, investing their time and resources fully. Entrepreneurial Spirit: Founders often go "all in" on good ideas, with a willingness to challenge incumbents and status quo