December 2011

Is Novartis situated to be on top of the pharmaceutical industry?

Dec 18, 2011

gap-china476 A corporate strategy article by Thunderbird students John Angstadt, Christa Gyori, Charbel Haber, Christopher Jones and Mike Zehender

On March 23, 2010, President Obama signed the Affordable Care Act. The law puts in place comprehensive health insurance reforms that will roll out over four years and threatens to have a major impact on the Pharmaceutical Industry. This is just one of a myriad of factors impacting the industry. The industry, once described as profitable by Porter due to the corresponding low structural forces, is facing significant changes to the competitive forces operating in its space. Many factors are threatening to change the industry structure; these included imminent expirations of major patents in 2011-2012 (coined as the “patent cliff”), pricing pressure due to cuts in reimbursement, and new regulations with stricter focus on drug safety. Novartis Pharma has made many smart moves, but is it fully prepared for the future?

1. Company background
Novartis Pharma: Founded in 1996, Novartis is one of the largest pharmaceutical companies in the world with a diversified portfolio of products that span across a number of categories including pharmaceuticals, generics, vaccines and diagnostics, and consumer health products. Novartis has more than 110,000 associates in more than 140 countries. Its headquarters is based in Basel, Switzerland and their net sales reached $50 Billion in 2010. Their Product Leadership business model is reflected in their Mission Statement, “We want to discover, develop and successfully market innovative products to prevent and cure diseases, to ease suffering and to enhance the quality of life.”

TTM Technologies Acquisition of Meadville – A Retrospective Strategic Analysis

Dec 18, 2011

A shift in the printed circuit board (PCB) industry has motivated leading US defense PCB manufacturers to collaborate with international businesses, particularly in China. In 2010, TTM Technologies became the largest US-owned printed circuit board manufacturer and the fifth largest worldwide by acquiring Hong Kong-based Meadville, a high volume PCB manufacturer. Leading into the 2010 decision, TTM was arguably the most prominent military and aerospace PCB provider in US and possibly the globe.

Since the mid-2000s, the PCB industry has had a new emphasis on less complex, high volume standard boards over the high complexity, lower volume PCBs required for the aerospace and defense industry – TTM’s core competency. In an effort to help diversify its manufacturing and lower costs, TTM acquired Meadville in April 2010, a somewhat controversial move that may well bring an end to TTM’s contracts with the US government.

Under Armour – Positioning Themselves For The Next Win

Dec 18, 2011

Under Armour global strategy A corporate strategy article by Thunderbird students Eric Chown, Veronica Yusz, David Prestin, Sarah Olsem and Rosemary Geelan

The Under Armour brand evokes an image of elite athleticism, almost at odds with the company’s humble beginnings in the home basement of the founder’s grandmother. A simple idea ultimately developed into one of the most prominent names in the industry. As the company evolved, the relative importance of the strategic challenges they faced changed as well. One shift has already occurred – from word of mouth advertising to promotion by professional athletes – and this will likely be insufficient to expand their market in the direction that they are focusing on with their newest production lines. Their marketing strategies and ability to maintain the share they have established will be tested as they move away from their traditional customer base and into new niche markets. The challenge to Under Armour is whether to change their strategy as they expand, or to apply their initial model in new, innovative ways. Both have risks if not executed properly.

The Importance of the Online Network: LinkedIn’s Strategic Position and Power

Dec 18, 2011

A corporate strategy article by Thunderbird students Leah Burdick, Ilan Fehler, Nicholas Kincaid, Peter Klein and David Ryan

More so than traditional businesses, online businesses have the distinct advantage of acquiring more information about their customers. The more that is known about online users’ habits, needs and preferences, the greater the value that is derived from that relationship, as the businesses are better able to cater to the needs of those online users. An online network, a system of users, is enhanced not only by the relationship the business has with the user but also by the relationships that the users have with one other. Take the telephone for example. If you were one of the first three people to own one, you could only call the other two. Fortunately, today millions of people have access to telephones and anyone of them could theoretically call any other one. Therefore, a network of users derives greater value through the network’s size and ubiquity -- the larger the network, the greater the value to both businesses and consumers.

A New Year Brings New Challenges: A strategic look at Costco in 2012

Dec 18, 2011

Costco Heading into 2012, Costco is well positioned not only to weather the storm of further economic downturns but also to consolidate its lead over other discount wholesalers like Wal-Mart and BJ’s Wholesale Club. Its intentionally low margin and exceptionally high inventory turnover, along with growing overseas sales and relatively low debt, are some of the main factors that point to Costco’s potential for continuing success.

The new year will also bring new challenges that the company must manage with careful strategy: increasing costs of products and labor; co-founder and CEO Jim Sinegal’s imminent retirement; and growing pressure to decide how and how quickly to expand both domestically and internationally. With its strengths and upcoming challenges in mind, we discuss a few of the key strategic decisions Costco must make, and explore how these choices might affect both its original business model and the changing retail industry in a volatile global economy.

Is Chipotle’s strategy enough to drive an Asian invasion of the fast-casual space?

Dec 18, 2011

gap-china476 A corporate strategy article by Thunderbird students Manya Andrews Dotson, Wes Herche, Brie Lam, William Randle and Jonathan Walters

Abstract: Can a cut and paste application of the Chipotle strategy lead to another runaway restaurant success in an industry rife with pressures on profitability? Was it the business model that fueled Chipotle’s meteoric rise? Or was it that CEO Steve Ells took a food we already knew and loved, the burrito, and made it taste even better? Or, are the two inseparable? Will replicating Chipotle’s strategy yield another blue ocean success story?

The foodie blogs are abuzz . . . a new naked light bulb has been lit in a stainless steel restaurant in Washington DC’s Dupont Circle. Firmly planted in a neighborhood where restaurants such as Panera Bread, Cosi and Starbucks dot the grid, it fights for purchase in a bloody — if tasty — battle for the upscale business lunch crowd fed up with traditional fa(s)t food (though, there’s some of that around there too). It boasts artisanal tofu, farm fresh ingredients, and free-range meats charred to medium-rare perfection right under the customer’s nose. It would be hard to believe that an Asian restaurant this good could be using the same playbook as the blazing burrito chain, Chipotle.

The Boston Beer Company: Can it live up to recent hype?

Dec 18, 2011

Boston Beer Company A corporate strategy article by Thunderbird students Andrea Bly, Jennifer Garcia, Liang-Kuan "Albert" Ho, Steve Juntunen and Kara Nguyen

Shares of The Boston Beer Company, Inc. (NYSE: SAM) closed Friday, December 16, 2011 at $103.05, up 40% since October. The company, who spearheaded the craft beer revolution in the US, has grown to produce over 32 varieties of beer under the company’s flagship brand, Samuel Adams Boston Lager and a variety of malt beverages and hard cider products under brand names Twisted Tea and HardCore Cider.

Under its Samuel Adams line, Boston Beer Company leads the craft brewery industry with annual revenues of $500 million in 2010. They have outperformed the uninspired beer market this year, reporting solid increases in sales and profits every month in 2011. This exploding success in the specialty market occurred against the backdrop of dismal growth in the mass market. But even within the specialty segment, Boston Beer has outperformed rivals with 6.6% volume growth in 2011, compared to 5% growth in the craft beer category.

This spectacular performance has attracted a lot of attention. Currently trading at 25 times the consensus earnings; should investors call it quits before a crash or will The Boston Beer Company be able to leverage recent success into sustainable growth?

Is RIM drowning in a red ocean?

Dec 18, 2011

Research In Motion Smartphone users are a notoriously fickle bunch. The slightest flaw in a phone sends users off to a new phone faster than you can say “service contract.” Research-In-Motion, or RIM, has remained relatively immune to all of this until recently.

More than a decade ago, RIM created its own competition-free market space when it introduced the Blackberry; the company created what industry specialists like to call a “blue ocean.” Nearly everyone in my salary-challenged office had to have one: a mobile device that offered email. By 2002, RIM added short messaging service (SMS) and Internet surfing, and then even the janitor had one (although it was only for a couple of weeks).

Times were good for RIM. By 2004, they had addicted more than a million subscribers, giving rise to the term “crackberry.” By 2009, even the drug cartels never had it so good—RIM had 41.6% of the U.S. Smartphone market. Mighty Apple stood in their shadow with only 26.5%, and little Google nipped at both their heels with just 5.2%. Even the President Obama was hooked on the Canadian marvel, as he became the first sitting president to have twiddled his (sore) thumbs in office while still being considered busy.

JetBlue redefines the “budget” airline

Dec 18, 2011

gap-china476 A corporate strategy article by Thunderbird students Amina Ahmed, Marquita Blanding, Benjamin Donner, Julia Glad and Carla Vila

Introduction

Positioned as a budget airline company with a tourism focus, JetBlue is synonymous with the keywords "quality" and "customer satisfaction." JetBlue offered many firsts in the airline industry, including: satellite TV, satellite access to e-mails, vacation packages on eBay, and a "customer bill of rights" — that enables customers to be compensated for their inconveniences. Today, JetBlue has expanded its operations to include partnerships with international airlines, with a fleet of more than 400 airplanes. Despite the fierce competition of the airline industry, JetBlue continues to rise in popularity and revenues. How does JetBlue manage to continue its growth, especially while competing with rival discount airline Southwest?

Fierce Competition – Jet Blue and the airline Industry

The airline industry has changed dramatically since the early 2000s, due, in part, to the volatile global economy. Many airlines, more so in the U.S., have had to alter their competitive plans in order to keep up with the changing dynamics of the industry. In order to stay afloat, many full-service airlines looked to cost-cutting options, while airlines like Jet Blue and Southwest focused on delivering services differently than their competitors. At the time, these services were either standard or unique to the industry. Ultimately, full-service airlines found it much harder to compete with low-cost, convenient service airlines. Some of those airlines either went out of business, or completely re-engineered their business plan, or merged with other airlines to be competitive. Some of the most noteworthy mergers and acquisitions are United and Continental, US Airways and American West, American Airlines and TWA, and Southwest and AirTran.

Redbox: Strategy in the Sunset of Physical Media

Dec 18, 2011

Redbox A corporate strategy article by Thunderbird students Cole Augustine, Cynthia Austin, Bradley Carson, and Jennifer Long

Redbox has seen a meteoric rise to the top of the movie rental business, despite their focus on a dying form of media. As the company's built in expiration date draws closer, Redbox must ask itself, "What Now?" This article will provide an overview of how Redbox got to the top, a preview into the future of the video rental industry, and suggestions for how Redbox can stay relevant in a changing industry.

In the midst of huge losses amongst video rental companies such as Blockbuster and Hollywood Video, Redbox emerged as an innovator by targeting a low price strategy and partnering with other companies known for value to increase volume. Originally a subsidiary of McDonald’s, Redbox entered the market with $1 DVD rental kiosks in many high traffic McDonald’s locations. The Redbox $1 DVD rental price point aligned well to the low income McDonald’s target market, and paying per DVD rental (transaction-based pricing) reinforced the low priced model, translating consumer spending directly to consumption (rather than a subscription-based pricing model where the consumer pays regardless of consumption).