MGT 380 Final: Midterm Study Gude for Final
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Department
Management
Course
Management MGT 380
Professor
Paik
Semester
Spring

Description
MGT 380 Midterm Study Guide Part 1: Theory and Concepts A. What is Strategy? 1. Big Picture Questions a. What determines the total profitability of an entire corporation? b. Why do some companies succeed while others fail? c. What – if anything – can managers do about it? 2. Internal Factors vs. External Factors a. Internal Factors • Resources controlled by the firm (reputation, proprietary tech), ability to innovate/change, incentives/control systems, leadership, organization, culture, systems/processes • What can firm do? Strengths and Weaknesses b. External Factors • Number and behavior of competitors, barriers to entry, industry-wide technology, macroeconomic cycles, social/regulatory/political environment, customers and suppliers, substitute products • What might the firm do? Opportunities and Threats c. Both internal and external factors equally important d. Successful strategy requires: • Attractive market opportunity (external) • Resources/capabilities to serve that market better than other competitors can (internal) • Execution/implementation: motivation, organization, leadership 3. Key Concepts a. Strategy = an integrated and coordinated set of commitments and activities designated (fit) to exploit core competencies and gain sustainable competitive advantage • Core competencies = unique bundle of resources and capabilities that serve as a source of competitive advantage for a firm over its rivals • Competitive advantage = when a firm implements a strategy that its competitors are unable to duplicate or find too costly to imitate, it achieves CA, and as a result earns above-average returns b. Market vs. Industry • Market = customer focus (demand side) • Industry = firms/supply side c. Shareholders vs. Stakeholders • Shareholders = firms exist to maximize shareholder value or profit (legal duty in US to maximize profit) • Stakeholders = anyone affected by firms activity, including employees, neighbors, customers, suppliers, etc to maximize the welfare of everyone d. Assume profit-maximizing firms • Profit (π) = revenue – cost = (Price-Cost)*Quantity • (P-C) is the profit margin • Everything a firm does effects P, C, or Q (or some combination thereof) to maximize profits B. Industry Analysis 1. Industrial Organization (I/O) Model of Above-Average Returns a. Dominance of the external environment: the industry in which a firm competes has a stronger influence on the firm’s performance than do the choices managers make inside their organizations b. Assumes that firms have similar capacities and resources • All look alike in time, can easily copy others c. External environment (imposes pressures and constraints that) determines a firm’s ability to generate above-average return • Thus, positioning a firm in an attractive industry is most important d. Underlying Assumptions • Most firms compete within a particular industry/segment (control similar strategically relevant resources, pursue similar strategies in light of those resources) • Resources for implementing strategies are highly mobile across firms and therefore, any resource differences between firms will be short lived • Organizational decision makers are rational and committed to acting in the firm’s best interests, as shown by their profit maximizing behaviors e. Porter’s 5 Forces Model • Suppliers, buyers, competitive rivalry, product substitutes, and potential entrants • Determines the nature/level of competition and profit potential in an industry • Suggests an industry’s profitability is an interaction between these 5 forces 2. Resource-Based View (RBV) of Above-Average Returns a. Assumes that each firm has unique resources and capabilities (costly to imitate) • Such unique resources and capabilities are the primary source of competitive advantage b. According to the resource-based model, differences in firms’ performances across time are due primarily to their unique resources and capabilities rather than to the industry’s structural characteristics • Thus, using resources appropriately is most important c. Not all of firm’s resources and capabilities have the potential to be the basis for CA d. Basis for CA: when resources are valuable (V), rare (R), costly to imitate (I), and the firm is organized (O) to exploit the resources/capability • VRIO framework for analyzing strengths and weaknesses • When these criteria are met, resources and capabilities become core competencies e. Firms can earn above-average returns by strategic positioning such as: • Cost leadership: producing standardized products or services at low cost • Differentiation: manufacturing differentiated products for which customers are willing to pay a price premium f. Strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company • It means performing different activities from rivals or performing similar activities differently g. Both models are over-simplified for understanding how a firm’s CA is formed • Best to understand these two opposite frameworks as extreme cases • Apply a combination of the two + judgment 3. External Environment a. Extended PEST analysis • Political/legal, demographic, economic, sociocultural, global, technological b. “Willie Sutton” Theory of Strategy: more profit with less effort/risk by anticipating the most profitable markets to compete in • Enter markets whose profitability will increase • Exit markets whose profitability will decline c. Econ Recap • Perfect competition: numerous firms, no market power, price-takers, identical products, free exit and entry in long run, cost efficiency, long run economic profits driven to zero, good for customers and society (bad for firms) • Oligopoly: a few firms, depends on how firms react to each other, Bertrand (firms compete on price, quantity adjusts for S = D), Cournot (firms compete on quantity, price adjusts so S = D, depends on # of firms), collusion (firms choose price cooperatively, is illegal in US) • Monopoly: one firm, market power (choose price to max profit subject to market demand), no entry or exit, long run positive economic profits, good for firm (bad for consumers and society) • General trend: increasing profits with decreasing number of firms • Industries are more profitable when there is less intense price competition • Intensity of price competition decreases as the market becomes more concentrated into fewer and larger competitors • Concentration is one factor affecting industry profitability d. Concentration is not the only factor for profitability (not a strictly positive linear relationship) • Different degrees of production differences, possible entry barriers, benefits of economies of scale may cause differences between expected and actual profitability of an industry • Market concentration may not be the only factor driving intensity of price competition • Intensity of price competition may not be the only driver of industry profitability C. Porter’s 5 Forces Model 1. Threat of New Entrants a. Highest threat (lowest entry barriers) when: • Economies of scale are low (ie restaurants vs. Boeing/Airbus) • Product is undifferentiated • Capital requirements are low • Customers have low switching costs and lack brand loyalty • Incumbents don’t control distribution channels or sources of supplies • Incumbents lack proprietary knowledge or technology • No “network externalities” or network effects • Government doesn’t protect incumbents through subsidies, or regulation of prices and entry b. 2 types of entry barriers: • 1. Structural entry barriers are inherent natural advantages that incumbents have simply by virtue of incumbency, and that do not require any ongoing action by incumbents • 2. Strategic entry barriers are active entry-deterring behavior by incumbents (ie “pre-emptive capacity expansion” or “limit-pricing” c. Opposite effects of industry profits • Structural barriers tend to increase industry profits because they keep out entrants at no additional cost (threat of entrants to industry profits is decreased by structural barriers) • Strategic barriers tend to reduce industry profits because they only keep entrants out by imposing additional costs on incumbents (ie reduced margins from limit pricing, or increased costs of excess capacity) 2. Power of Buyers a. Highest in the following cases: • Buyers are concentrated and buy in high volumes • Product is undifferentiated • Buyers can backward integrate (make at home) • Buyers know the cost structure, more information = more power • Product represents a large % of buyers’ total costs • Product has little impact on quality of the buyers’ final product 3. Power of Suppliers a. Highest in the following cases: • Suppliers are highly concentrated • Substitutes for their products are unavailable • Suppliers can forward integrate (just make the product themselves) • Focal industry is small % of suppliers’ business • Suppliers’ products are highly differentiated • Switching between suppliers is difficult or costly • Note: Labor is also a kind of “supplier,” ie more power with unions and specialized labor 4. Threat of Substitutes a. Highest in the following cases: • Substitute product/service is superior (or at least catching up) in its price/performance relationship • Customers are highly price sensitive (especially when your product represents a large % of buyers’ total costs) • Buyer switching costs are low 5. Rivalry a. Rivalry is fiercest when: (as you approach perfect competition) • Large number of competitors in industry • Market demand is stagnant or declining • Excess capacity available • Large % of costs are fixed • Exit barriers are high • High storage costs for product • Competitors costs differ greatly • Product is undifferentiated • Buyers have low switching costs b. Rivalry means intensity of price competition c. NOT non-price competition (which can help create product differentiation or help industry profitability) • Differentiation = products less perfect substitutes for each other, less direct competition (profit enhancing rivalry) • Undifferentiated commodities are perfect substitute, competition is more direct, based on price only (profit-destroying rivalry) 6. Application a. Use 5 forces model to assess current and future profitability of industries, market segments and locations on value chain b. Strategy formulation: regions, products, customer types, distribution channels • Enter industries that will become more profitable, exit those that will become less profitable c. Forecast future prices, costs, and profits when considering a market entry (or does not exist yet) or exit d. Positioning: find ways to mitigate the greatest threats among the 5 forces e. Industry evolution: anticipate and prepare for changes in the 5 forces • Can use as a dynamic framework to assess industry (ie changes in threats over time) f. Industry transformation: find ways to change the 5 forces to your advantage 7. Limitations a. Views other parties in firm’s environment only as potential threats, not as potential allies (may partner up etc. in reality) • Doesn’t include complements b. Incomplete: only for analyzing industries and markets • Tells almost nothing about specific firms within industry/market • Doesn’t explain the (often large) differences in profitability within an industry/market • Provides no guidance on relative weights of the various factors or interactions (may need sub-conclusions in each box) c. Excludes the role of government or social/political/economic climate D. Competitive Positioning and Competitive Advantage (CA) 1. CA Background a. CA foundation includes • Resources: bundles to create organizational capabilitiesm tangible and intangible • Capabilities: sources of a firm’s core competencies and basis for CA, purposely integrated to achieve a specific task (or set of tasks) • Core competencies/strengths: capabilities that serve as a source of CA for a firm over its rivals, distinguish a company from its competitors 2. Example: Xerox PARC (Palo Alto Research Center) and the Alto a. By mid-1970’s, Xerox created PC with all the features we take for granted today: • Graphical user interface (GUI) operating system • Coordinated set of office application programs • Mouse pointing device • Disk storage device • Ethernet local-area network (LAN) with e-mail • Object-oriented programming • Laser printing/WYSIWYG Desktop publishing b. However, they didn’t capitalize on this technology 3. Internal Analysis a. Industry analysis is incomplete since it only lets us understand external opportunities and threats (SWOT) • Doesn’t explain profit variation within a market, often bigger than variation across markets • Profit variation within a market can only be explained by differences between direct competitors • Direct competitors share same industry environment so differences are necessarily internal (ie different resources and capabilities of firms) b. Internal Analysis helps us understand strengths (S) and weaknesses (W) and CA of a firm • Remember, both internal and external factors are important c. Helps to use the VRIO framework from the resource-based view • Valuable, rare, costly to imitate, organized to exploit • Xerox had VRI, but did not O 4. Cost Leadership Strategy a. Provide low cost at an acceptable quality b. Continuously improving levels of efficiency and cost reduction is required • Can be difficult to replicate and serve as significant entry barriers to potential competitors c. Advantage over rivals to command high market share d. May have higher margin than direct competitors e. Cost cutting and cost elimination f. Ex: why was Dell so profitable in the 90s? • Utilized internet ordering (cut out middle man), right to door • Used generic components and customized computers • Streamlined production process (added value) g. Competitive risks: • Processes used by the cost leader could become obsolete because of competitors’ innovations • Innovations may allow competitors to produce at costs lower than those of the original cost leader, or to provide additional differentiated features without increasing the price • Too much focus on cost may come at the expense of trying to understand customer’s perceptions of competitive levels of quality • Risk of imitation by rivals (if easy to make or imitate) 5. Differentiation Strategy a. Value provided by unique features and value characteristics b. Command a price premium (increased willingness-to-pay, WTP) c. High customer service d. Superior quality (economic value) e. Prestige or exclusivity • Brand management is crucial for luxury products f. Rapid innovation (key for added value and features that increase customer WTP for such features) g. Competitive risks • Price differential might become too large • Firm’s means of differentiation may crease to provide value for which customers are WTP • Experience can narrow customers’ perceptions of the value of a product’s differentiated features (may be replaceable or just not special!) 6. Porter’s Generic Strategies a. Find a niche, certain people have different WTP and perceptions of value, must exploit this fact b. Focus business-level strategies • May lack resources to compete in the broader market • Isolating a particular buyer group • Isolating a unique segment of a product line • Concentrating on a particular geographic market • Finding their niche (large firms may overlook small niches) 7. Focused Strategies a. Focused Cost Leadership: CA = low cost, competitive scope = focused industry segment • Ex: IKEA provides good design furniture at low prices b. Focused Differentiation Strategy: CA = differentiation, competitive scope = focused industry segment • Ex: Harley-Davidson motorcycles target fanatics, involves culture not just transportation c. Competitive Risks of Focus Strategies • A competitor may be able to focus on a more narrowly defined competitive segment and “out-focus” the focuser (ie super crazy motorcycles) • A company competing on an industry-wide basis may decide that the market segment served by the focus strategy firm is attractive and worthy of competitive pursuit • Customer needs within a narrow competitive segment may become more similar to those of industry-wide customers as a whole 8. Integrated Cost Leadership/Differentiation Strategy a. Efficiently produce products with differentiated attributes (dual advantage) • Efficiency = sources of low cost • Differentiation = source of unique value • Difficult because it depends on perfect communication/harmony, implementation can go very wrong b. Serve a wide range of customers c. Simultaneously concentrate on TWO sources of CA • Cost and differentiation, consequently must be competent in many of the primary and support activities d. Risks • Although becoming more popular, the risk is getting stuck in the middle • Cost structure is not low enough for attractive pricing of products and products not sufficiently differentiated to create value for target customer (fails to successfully implement both low cost or differentiation) • Result: not able to earn above average returns if execution is bad 9. CA Then and Now a. Old view: cost/differentiation trade-off seen as an either/or • Delivering higher value to customers costs more, so it is impossible for company to deliver superior value to customers and be low-cost leader • Companies that don’t want to commit to being one or the other wind up being neither (not differentiated enough to avoid price war, not cost-efficient enough to win price war)  stuck in the middle b. New view: either/or cost/differentiation trade-off only if you do same set of activities as competitors • If you do same set of activities as rivals, then being better at those activities costs money and precludes being cheaper • But if you fulfill the same customers’ needs by doing fundamentally different activities than rivals, then you can be better and cheaper simultaneously • Revolutionary business models offer customers superior “value proposition” by using different “value chain” than competitors, beating the trade-off 10. Sources of CA – Resource Based View a. Companies are unique combinations of tangible & intangible resources • Managed properly, resources combine to create “capabilities” • Characteristics of resources & capabilities determine who has competitive advantage & how sustainable it is • Use VRIO framework to check! b. Success of competitive positioning is determined by “fit”: Matching internal resources & capabilities to external market needs • Building the best resources & capabilities to serve the firm’s existing market, or Choosing the market that makes the best use of the firm’s existing resources & capabilities c. Dynamic Capabilities: firm’s capability to change and adapt d. Resources can be tangible or intangible • Tangible examples: mine, quarry, farm, ranch, orchard, vineyard, factory, hotel, store, distribution system, information system, financial resources, etc • Intangible examples: reputation, branding, technology, workforce skills, company culture, relationships with community/gov’t, motivational leadership e. Compared with I/O View for Perspectives on Strategy 11. Key Takeaways a. Superior performance requires BOTH attractive market opportunity AND capabilities needed to best serve that market b. Even the most attractive market can be lost to competitors • But… developing great capabilities to serve an unattractive market can be a big waste of money too (doing the wrong thing perfectly!) Part 2: Cases Walmart A. Competitive Advantage 1. Market Opportunities a. Low pricing, good quality branded merchandise, broad variety of merchandise b. Geographic Location, open stores in rural areas without nearby competitors 2. Resources and Capabilities a. Inventory “spoke” model (own distribution centers) for increased distribution efficiency and working better with suppliers b. Information Systems: invested early on, wasn’t typical at time, electronic data interchange (EDI), shared data with suppliers c. Cheap labor and real estate, minimal advertising 3. Execution a. Corporate culture and leadership (Sam Walton, hard to replicate) b. Shared learning across locations via information exchanges between store managers, incentive alignment via performance-based compensation, training 4. Walmart does a lot of things extremely well and they all add up to a tremendous cost advantage  1% savings ~ $700 million to Walmart 5. How sustainable is their CA? a. Model works in rural areas, maybe CA or market strategy won’t work as well in urban areas, Low cost/efficient operation (maintain efficiency?) b. Human resource/culture – how to keep employee loyalty and maintain culture? How can they remain successful after death of leader? 6. Possible Threats a. Competitor response and imitation, loss of leadership b. Growth limit approaching with maturing markets c. Diseconomies of scale, centralized operation may not be possible as they grow d. Culture differences with geographic expansion e. Low cost, move into urban areas may decrease cost advantages f. Threat of new formats (warehouse clubs, supercenters, etc) B. Updates 1. Still amazing performance and wild success of supercenters 2. Lagging e-commerce (inefficient online operation) and mixed results on global expansion – increasing competition with online retail (ie Amazon) 3. Problems with Sam’s Club 4. Supercenters (discount retailer + supermarket) a. Main vehicle for domestic growth b. Boost to sales productivity (supermarket and food brings in more traffic) more than offsets higher operating cost, brought Walmart into higher-margin supermarket items (but were learning costs at first with food distribution) 5. International Expansion (slow) C. Main Takeaway 1. Walmart revolutionized its industry, became number one and continues to grow today 2. Strategy of low prices and low margins, but massive volume makes it so profitable Cola Wars A. Key Facts/Summary 1. Coca-Cola and Pepsi are both concentrate producers! 2. Industry Challenges a. Globalization and advertising restrictions outside the US b. Flattening demand and bad press over coke sourcing or health trends c. Popularity of Non-CSD beverages d. Changing CP and bottler relations, industry consolidation is common B. Soft Drink Value Chain (upstream to inputs, downstream to sold goods) 1. Concentrate Producers (CP) a. CPs have sold syrup and concentrate to franchised or company owned bottlers and made operating profits margins of 32% b. CPs invested heavily in advertising and marketing 2. Bottlers 3. Distribution (Fountain, Vending, Supermarkets) C. Main Takeaways 1. Concentrate Industry – in sum a great business a. Low supplier power: Secret Ingredients (low cost, hard to imitate) b. Low buyer power: locked in Buyers c. Low threats to entry: high Barriers to Entry d. Low/medium Substitutes: lots of substitutes, but advertising and widespread distribution limit their impact e. Limited rivalry: constrained Competition 2. Bottler Industry – lower profitability than CP, but still decent a. High barriers to entry (low entry threat) b. Low substitutes: not many, except direct delivery to the fountain by the CP c. Relatively high buyer power: vary with distribution channel d. Huge Supplier Power: Coke and Pepsi appropriate most of the returns e. Controlled rivalry: can be fierce where Coke and Pepsi are fighting 3. Must look at underlying economics of the firm and industry and its related upstream and downstream parts (VALUE CHAIN) 4. Coke and Pepsi create and exercise a strategy using market power, both competitors win and others lose a. They created this business and have been able to structure the industry b. “Smart competitors” go to war and kill bystanders, not themselves RTE Breakfast Cereal A. Key Facts/Summary 1. Big 3 at time of case = GM, Phillip Morris, Kellogg a. In 2014: GM, Post, and Kellogg 2. GM in 1994: eliminated coupons, decreased prices to reduce price gap with private labels, shift trade promos to consumer promos, stop mutually destructive escalation of trade promos a. If all firms followed suit, a lot could be saved (net benefit), but this assumes that everyone does this (to get everyone a larger pie) 3. In response to GM price decrease and change in 1994: a. Kellogg followed GM after announcement (huge focus in cereal) b. Phillip Morris and Quaker didn’t follow, took advantage of situation and increased spending on promotion and stole more market share c. Retaliatory action by Kellogg and GM in following year, then prices back to original point  Reduced the profitability of the RTE market B. RTE Cereal Industry 1. Oligopoly, dominated by a few big players a. Product proliferation = variety of products b. Highly profitable (overall ROA 15-30% for RTE divisions) • Historically a fantastic industry, but faced challenges in 1994 2. Moderate Buyer Power: allowance fees, shelf space, new discount outlet lesser power 3. Low Supplier Power: Cheap agricultural goods used to produce cereal 4. Low/medium Substitutes: little effect of substitutes on price 5. High Entry Barriers (low entry threat): Brand equity, huge advertising expenses, access to distribution and retailers (slot allowance), economies of scale/scope, R&D expertise, brand proliferation of new products 6. Rivalry – Collusion a. Collusion and cooperation, no price competition (advertising ≠ price competition) b. Tacit collusion decreased price competition, helped market, more people bought cereals, but drove prices up collectively C. **Quantified Entry Barriers 1. To find how much capital should be spent to achieve X % market share (minimum efficient scale, MES) with new brands (as if a new entrant): a. MES around X% of market b. Plants and fixed costs of around $Y c. (Market share of established company) * (% sales from new brands) = % of market from new brands d. % market from new brands / # new brands launched in a year = market per new brand on average e. MES % / market per new brand on average = number of brands to release to gain this level of MES/success for this company 2. Process: a. 1. Market share * new brand sales b. 2. (1) / # of new brands in period = % market per brand c. 3. MES / (2) = # of brands to compete 3. To estimate for a new company a. Total Estimated Cost = $Y + # new brands (R&D per brand + advertising costs per brand + slotting allowance per brand) 4. Result: behavior of companies has endogenously raised entry barriers by fragmenting the market, making more (expensive) product intros necessary to get a plant up to capacity and increasing the riskiness of new entry a. ** Primary strategy for maintaining industry profitability = pre-emptive brand proliferation and pre-occupying all space and niches to limit niche-market availability D. Private Label Challenges 1. Excess price increases and coupons of Big 3, cereal no longer perceived as a good value (especially without coupons): Coupons diminished brand loyalty 2. Diversified outlets and shift towards non-food stores 3. Free-riding on existing brands, cheap version of known commodity 4. By a conservative assumption, there is an absolute cost advantage that private labels have over the Big 3 (mainly no advertising or distribution costs a. Response to private labels: maybe nothing to worry about since different value chain E. Main Takeaways 1. Key Concepts a. Economies of Scale = the increase in efficiency of production as the number of goods being produced increases, lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods b. Economies of Scope = average cost of production decreases as a result of increasing the number of different (variety of) goods produced c. Minimum Efficient Scale (MES) = the smallest amount of production a firm can achieve while still take full advantage of economies of scale with regards to supplies and costs (and thus, stay competitive) 2. Changing an industry’s competitive norms can be worth a lot of money – hundreds of million dollars in this case a. However, the profitability of some actions depends on rivals’ responses – should examine rival’s incentives and predispositions 3. It is difficult to bring about change in industry behavior because unilateral steps towards less aggressive competitive behavior may make the leader vulnerable to opportunistic attacks from competitors Apple A. Key Facts/Summary 1. Apple Computer  Apple Inc (since 2007) and shift away from just computers B. Traditional Era (80s – Early 90s) + Early Competitive Advantages 1. 1984 Super Bowl ad only aired once, but gained huge extra (free) air time via reporting, was wildly successful 2. Ease of use (user-friendly graphical interface, plug-and-play peripherals) 3. Dominance in creative industries (design, desktop publishing), as well as education 4. Buyer loyalty (loyal customer base), especially in desktop publishing and education a. Education especially important because then younger people form habits and are more likely to purchase later on 5. Proprietary software/hardware: supports higher margin, creates barriers to entry, and limits direct imitation 6. Strong branding and reputation for constant innovation 7. Overall strategy: niche-focused, differentiation strategy (price premium) C. PC Industry Analysis 1. Buyers in the 1980s: Weak (unsophisticated, fragmented, WTP high price) 2. Buyers Today: Strong (corporate buyers, sophisticated, more info, difficult) 3. Rivalry – Very tough (ASP declining steadily 1999-2005, rapid obsolescence) 4. Barriers to Entry – Very Low (easy to access parts/components, “white boxes”) 5. Substitutes – Medium (smartphones and other tech, can push PC prices down) a. But lots of complements exist that enhance the value of PC: applications, software, peripherals, the internet b. Complements have been the only bright spot in the PC industry picture (but possible changes and going mobile could exist as threats) 6. Suppliers – High Power (low commodity suppliers, Intel and Microsoft high power) a. Intel and Microsoft had great market power: high barriers to entry, established brands, restrictive with their technologies, extract profit from PC industry 7. Conclusions on the PC Industry  terrible, commoditized business a. Sophisticated, powerful buyers, vicious rivalry, low barriers to entry, lots of potential substitutes, complements (help fuel industry, only bright side), suppliers that appropriate most of industry’s residual profits (Intel and MS) 8. Economics of Software OS a. Microsoft charges $45-60 per Windows XP, $1 billion in development costs, so it must sell 20 million copies to break even (takes about 1 month) b. Apple sells about 10M units a year, takes 2 years to break even, and so they must charge a substantial premium to make up for this D. Troubled Era (Mid 90s – Early 00s) 1. Lack of compatibility with Apple computers/software b/c of the white box standard with open source IBM clones (mass market) a. Slower CPU, less efficient compared to Intel chips, vertically integrated b. Licensing cannibalized Apple profits 2. Sculley’s Strategy a. High volume/low costs to create a larger install base (mass-market appeal) b. “Hit” products every 6-12 months to increase differentiation requires high R&D and marketing costs c. Joint Ventures (IBM Taligent) to create a new standard to compete with
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