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Strategic Management

Sarah Easter

MGMT 439/Spring 2019

Abilene Christian University

Table of Contents

Introductory Note on the Case Method.............................................................................................5

Netflix Inc.: Streaming Away from DVDs........................................................................................11

Vietnam Handicraft Initiative: Moving Toward Sustainable Operations..........................................21

Art Feeds: Scaling a Non-profit Organization.................................................................................33

Namasté Solar................................................................................................................................45

Hong Kong Disneyland...................................................................................................................57

Apple and Its Suppliers: Corporate Social Responsibility...............................................................73

IMAX: Larger Than Life...................................................................................................................83

LEGO Group: Building Strategy....................................................................................................101

Homelessness in Harvard Square: Multi-Stakeholder Collaboration in Action.............................113

The U.S. Postal Service: A First Class Disruption........................................................................137

Burro: Tools for a Better Life in Ghana.........................................................................................149

Tim Hortons Inc............................................................................................................................155

Alice Saddy: Caring for the Community........................................................................................171

The Espresso Lane to Global Markets.........................................................................................181

Strategic Management MGMT 439/Spring 2019

Sarah Easter Abilene Christian University

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9B08M085

AN INTRODUCTORY NOTE ON THE CASE METHOD John Haywood-Farmer wrote this note solely to provide material for class discussion. The author does not intend to provide legal, tax, accounting or other professional advice. Such advice should be obtained from a qualified professional. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2008, John Haywood-Farmer Version: 2018-06-21 Much of the study of business administration is accomplished through the study of business cases, a method chosen for its effectiveness. This note’s goal is to help you learn how to deal with cases. WHAT IS A CASE? This note uses the term “case” to refer to a written description of a situation actually faced by a manager. Cases commonly involve a decision to be made, a problem to be solved or an issue to be settled. Although in some cases the authors might have disguised names, places, and other facts at the request of the organizations involved, most of the cases you will encounter are real situations that real people have faced. The objective of each case is to leave you at a point much like the one that the individual in the case actually confronted — you must make a decision. In each case situation, the decision maker is expected to determine what problems and opportunities existed, to analyze the situation, to generate and evaluate alternative courses of action, and to recommend and implement a plan of action. Except for the fact that you will not have the actual opportunity to implement the plan of action and see the results, you will be expected to go through this same process. As they grapple with problems, decision makers encounter a number of common frustrations: a shortage of good information on which to base decisions, a shortage of time in which to make decisions, uncertainty about how plans will work out, and a lack of opportunity to reduce this uncertainty at a reasonable cost. You will experience these same frustrations because the cases try to give you the same information, time pressures, and so on that the decision maker had. In short, you will simulate the experience of decision making. However, cases do simplify the task somewhat: someone has already collected and sorted all the available data for you and presented it in a reasonably neat package. In real life the decision maker also faces the task of collecting the data that might be relevant for making a decision. THE CASE METHOD The case method is not a single approach, but rather several variations. The general theme, however, is to learn by doing, rather than by listening. According to the Chinese scholar Confucius: “I hear and I forget. I see and I remember. I do and I understand.” This quotation illustrates the importance of hands-on

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experience in learning. Class sessions using cases are not lectures but discussions that emphasize the development of skills in problem solving and decision making. In a typical case discussion everyone in the room works toward a solution to the particular problem being addressed. Consequently, students will interact with one another as well as with the instructor. The student’s role, then, is one of participation and contribution — active listening and talking with others in the class. The instructor’s role is not to lecture the group but to guide the discussion by probing, questioning, and adding some input. Cases can be used in several ways. You will probably be asked to deal with them in some or all of the following ways: 1. a. Individual preparation for a class discussion, followed by

b. Small group discussion in preparation for a class discussion, followed by c. Class discussion.

2. A written report or in-class presentation of a case. 3. A written examination of your ability to handle a case. Each of these methods is somewhat different and will require some variation in your approach. Also, your instructor will undoubtedly have his or her own comments to add to the following general remarks about approaches to cases. INDIVIDUAL PREPARATION FOR CLASS Cases can be complicated and controversial. In reality, they are unstructured problems. Watch out — the process of case preparation can be deceiving! Some students think they are on top of the situation without really having done much work. They read over cases casually once or twice, jot down a few ideas, go to class, and listen to the discussion. As points come up they think, “I touched on that,” or “I would have reached the same conclusion if I had pushed the data a little further.” However, when exam, report, or presentation time arrives and they must do a case thoroughly on their own, they find themselves in serious difficulty. These students spend all their time in the exam trying to learn how to deal with a case, rather than tackling the case issues on which they are being tested. Because this is the first case these students have really tried to do from beginning to end, this situation is not surprising. Their position is similar to that of someone who trained by watching others practise for a number of months and then entered a 100- metre race at an official track meet. To help provide you with some structure, your instructor might assign specific questions to be addressed as you work on a case. You should consider such assignment questions as a means to assist you in getting started on the case and not as the limit of your preparation. When your instructor assigns no questions, it is up to you to develop the structure. In class, your instructor will still expect you to be ready to give a supported decision concerning what you would do as the decision maker in the case. Accordingly, you should regard each case as a challenge to your ability to: 1. Define a problem; 2. Sort relevant from irrelevant information; 3. Separate fact from opinion; 4. Interpret and analyze information; 5. Come to a reasoned decision and course of action; and 6. Communicate your thoughts clearly and persuasively to others during class discussions.

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Cases also serve to communicate a good deal of descriptive information about a wide variety of institutions and business practices. Many cases are sufficiently complex to absorb all the preparation time you have — and then some! Therefore, it is extremely important that you develop skill in using your preparation time efficiently. Much of your preparation time should be spent analyzing and interpreting information. In effect, the case presents facts and opinions. Your job is to become acquainted with those facts and opinions and to know how they relate to the decision. The following steps will help you in your individual case preparation: 1. Read the case once quickly to get an overview. 2. Skim any exhibits in the case just to see what type of information is available. 3. Find out — frequently from the few paragraphs at the beginning and end of the case — who the

decision maker is (this will be your role); what his or her immediate concern, problem, or issue appears to be; why this concern has arisen; and when the decision must be made.

4. Read the case again, more carefully. This time highlight key information, make notes to yourself in the margin, and write down ideas as they occur to you. At this stage you are trying to familiarize yourself as thoroughly as possible with the case information. Having done so, you are ready to begin your analysis.

5. Try to answer at least the following questions: a. What business is the organization in? What are its objectives? What are its strengths and

weaknesses? What opportunities and threats exist? Who are its customers? What does it have to do well to satisfy customers? How do you know?

b. What is the decision to be made, problem to be solved, or issue to be resolved? How do you know — what is your evidence? (Let the case data guide you — most cases will have sufficient data for you to “solve” the problems and are unlikely to contain vast amounts of completely irrelevant data.)

c. What facts are relevant and key to a solution? Are they symptoms? Causes? What is your quantitative and qualitative evaluation of the organization’s strengths and weaknesses?

d. What do the facts mean for the problem? Here, learn to analyze — ask and answer lots of questions.

e. What are the decision criteria? f. What are the alternatives? Are they relevant to the problem at hand? Although it is usually

unwise to ignore the obvious solutions, most instructors appreciate creative solutions, provided they are sensible and supported by reasonable data.

g. What is your evaluation of the alternatives in view of the decision criteria? What are the pros and cons of each?

h. Which alternative or combination of alternatives would you choose? Why? i. What is your plan of action? Outline your plan by answering the questions who, when, what,

where, why, and how. j. What results do you expect? Why?

SMALL GROUP PREPARATION FOR CLASS If possible, prior to class you should informally discuss your preparation of each case with some of your classmates. Many students find such study group sessions to be the most rewarding part of case method learning. A good group session is a sharing experience in which you discover ideas you might have missed or to which you did not give enough weight. Your colleagues will also benefit from your input.

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The effectiveness of a small group case discussion can be increased substantially if you and the other members of the group adhere to the following guidelines: 1. Each student must come to the group meeting with a thorough knowledge of any assigned readings

and analysis of the case. The small group session is not the place to start case preparation. 2. Each group member is expected to participate actively in the discussion — it is an excellent place to

check your analysis before going into class. 3. It is not necessary to have a group leader. All members of the group are responsible for making their

own decisions based on what is said plus their own case analysis. 4. It is also not necessary to have a recording secretary. Participants are responsible for their own notes.

It is important to be able to recognize a good idea when you hear one. 5. Consensus is normally not necessary. No one has to agree with anyone else. 6. If it is important to you, work at clarifying individual disagreements after the small group discussion,

especially if only one or two people are involved. 7. Set a time limit for discussion and stick to it. Effective small group case discussions can take less

than 30 minutes and, because of your workload, 30 minutes will have to be adequate for most cases. Remember, a group can be as small as two people. If you cannot get together in one place, spend some time on the phone with a classmate reviewing your respective case analyses. You will be more confident, feel better about your own preparation, and probably contribute more to the class discussion. CLASS DISCUSSION Cases are complex and there are never any completely right or wrong answers. Consequently, groups of managers who address the kinds of issues represented by cases nearly always express different views on how to interpret the data and what action could and should be taken. They see the world differently, and this diversity is one reason management is worth studying. You should expect something similar: during discussion of a case, your classmates will express several different views. The essence of the case method is the process of putting forward different points of view, defending your position, and listening actively to others in order to understand and constructively criticize others’ points of view. Only rarely will you leave the classroom with your position or perspective unchanged after discussing a case; indeed, if you do so, it was a waste of your time to go to class. However, despite the common interest of all class members in resolving the case issues, and regardless of guidance from the instructor, class discussions sometimes will seem repetitious and unorganized. This is unavoidable and natural, especially during the early stages of a course. Over time, as a group develops its group decision-making ability, case discussions will become more orderly, effective, efficient, rich, and satisfying to all. The need to be a skillful communicator arises repeatedly in management. The case method presents an ideal opportunity to practise communication skills — both talking and listening. Some people, because they find talking in a group difficult and threatening, avoid talking in class even though they might realize that by being silent they are not getting full value out of the experience. If you are one of these individuals, the only way to overcome this problem is to jump in and begin. Make a habit of participating regularly in class. Do not wait until you have a major presentation to make in which you will hold the floor for a lengthy period. You can add a key piece of information or question something in just a few sentences, and this might be the best way for you to begin active involvement. Your instructor and your classmates will support your efforts. Remember, the classroom is a place where we can learn from one another’s mistakes

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as much as, and often more than, from one another’s solutions. The cost of making a mistake in class is very small compared to making it in an actual situation. Other people have poorly developed listening skills. Some individuals do not listen: they simply wait for their turn to talk. The case method depends on the willing two-way interaction of the students. Without that essential ingredient, the cases become interesting stories rather than opportunities to develop the ability to make and argue for and against management decisions. Not surprisingly, students are interested in finding out what actually happened in a case or what the instructor would do. Only rarely will you be provided with this information. Learning comes from the process and habit of making decisions, not from reviewing what others decided to do. AFTER CLASS After class take a few minutes to assess your preparation by comparing it with what happened in class. Were you in the ball park or completely off base? Did you spend enough time preparing on your own? Was your small group session effective? What can you do better next time? What general lessons did you learn? For example, although you might not be interested in remembering how the market for athletic shoes can be segmented, you should want to remember how to segment a market. EVALUATING PERFORMANCE In a typical class discussion of a case, exactly what gets done depends not only on the work done by the students — what preparation they did, who actively participated in the discussion, how well people related their comments to previous discussion — but also on the instructor’s pedagogical objectives and performance as a moderator and discussion leader. Instructors view case courses as sequences of problems that gradually foster the development of decision-making skills. With this longer time horizon, instructors often find it advisable to emphasize a specific analytical technique on one occasion, stress problem identification on another, and so on. Thus, it is possible that many class sessions will seem to be incomplete, unbalanced developments of a case analysis and plan of action. Although this might frustrate you, have faith that your instructor is trying to develop your skills over one or more terms. How do instructors assess performance? The answer, of course, varies from one instructor to another. However, there are some common factors. Above all, instructors develop your ability to demonstrate that you can think logically and consistently by being able to: 1. Identify, prioritize, and deal with issues and problems; 2. Judge the quality and relevance of information — fact, opinion, hearsay, lies, and so on; 3. Make and assess necessary assumptions; 4. Relate the information to the issues, problems, and decisions in the case; 5. Resolve conflicting information; 6. Analyze by asking and answering the right questions and correctly using appropriate analytical tools; 7. Determine and rank appropriate criteria for making decisions; 8. Generate and evaluate alternative courses of action; 9. Make a decision (take a stand) and defend it with persuasive, well-ordered, convincing argument; 10. Develop a reasonably detailed action plan showing an awareness of what might happen; 11. Build on other students’ arguments to advance the discussion toward a coherent conclusion rather

than making unrelated points or repeating ones already made; and

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12. Generalize: in traditional lectures instructors expect students to take the general lessons from the lecture and apply them to specific problems; case method instructors expect students to go from the specific lessons in a case to more general lessons.

In addition to assessing performance in class on a daily basis, most instructors will provide some opportunities for more complete, balanced treatment of cases. Sometimes instructors allow extra preparation time and ask for an oral presentation of a case by an individual or group. Sometimes instructors require students to prepare a written report on how they would handle a particular situation and why. Frequently, case method courses have cases as examinations: students are given a case and asked to do whatever analysis and make whatever recommendations they deem appropriate. In reports, presentations, and examinations, instructors expect a more complete, balanced argument for a particular course of action. Such exercises are not usually intended to result in a diary of how a student or group looked at a case or in a rewritten version of the case. A report, presentation, or examination is supposed to be a concise, coherent exposition of what to do and why — it usually starts where most students leave off in their regular individual preparation for a case class. Think of a report, a presentation, or an examination as an organized, more fully developed (and perhaps rewritten) version of your regular class preparation notes. You will find that your audience — instructor, business executive, or whoever — has particular ideas about how a report, presentation, or examination should be organized. Try to find out as much as you can about format expectations before embarking on your task. You might use the following general outline: 1. Executive summary (written last but appearing first); 2. Statement of problem, opportunity, and objectives; 3. Analysis of the situation; 4. Identification and evaluation of alternatives; and 5. Decision, course of action, and implementation. CONCLUDING REMARKS Case teachers are less interested in the relatively straightforward problems typically found at the ends of chapters in most texts than in the unstructured problems more typical of real situations and exemplified by cases. The key to dealing with unstructured problems is to learn what questions to ask. Ironically, answering the questions is usually easier than asking them because the questions focus thinking. It is like trying to find your way in the wilderness. Almost anyone can follow a trail; the key skill is knowing which trail to follow. Like many generations of business students, you will probably find case study a very rewarding way to learn. Good luck with it!

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9B12M040 NETFLIX INC.: STREAMING AWAY FROM DVDS1

David Wesley wrote this case under the supervision of Professor Luis Alfonso Dau solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation is the exclusive representative of the copyright holder and prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2012, Northeastern University, College of Business Administration Version: 2012-04-05

The very concept of physical media is racing toward obsolescence. – Steven Levy, author of The Perfect Thing: How the iPod Shuffles

Commerce, Culture, and Coolness2 On a clear summer evening in 2011, Reed Hastings, founder and chief executive officer (CEO) of Netflix Inc. (Netflix), decided to visit a friend near his home in Santa Cruz, California. During this visit, Hastings shared an idea that he had been considering for some time — splitting his company’s DVD rental business from the online streaming business. “That is awful, I don’t want to deal with two accounts,” replied the friend, who was also a Netflix subscriber.3 Unconvinced by his friend’s objections, on July 12, Hastings publicly announced his plan and a corresponding increase in fees (see Exhibit 1), both changes to take effect on September 1. The reaction was swift and brutal. Over the next quarter, Netflix lost 805,000 subscribers, its first decline in membership in more than a decade. At the same time, the company’s stock dropped by more than 50 per cent from a high of $300 per share prior to the announcement.4 In an apologetic letter to subscribers, Hastings admitted that he had “messed up.” “I owe you an explanation,” he wrote (see Exhibit 2).

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology.

1 This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives presented in this case are not necessarily those of Netflix Inc. or of any of its employees. 2 Steven Levy, “Young’s Frankenstein,” Wired, July 2009, p. 54. 3 Nick Wingfield, “A Juggernaut Stumbles,” The New York Times, October 25, 2011, p. B1. 4 Todd Wasserman, “Netflix Loses 800,000 Customers in Quarter,” Mashable Business, October 24, 2011, http://mashable.com/2011/10/24/netflix-loses-800000-customers-in-quarter/#314677-Netflix-Stock-Plummets-27-Following- Earnings-Report, accessed January 11, 2012.