Yahoo is getting innovative - no more telecommuting

Melissa Mayer took over as CEO of Yahoo in July 2012. At the time, I was sceptical when the board picked the third new CEO in just two years. The fact that the previous two CEOs had been fired reflected badly on the board's ability to select a new CEO. However, the stock market has been quite positive concerning Mayer's ability to turn around Yahoo (share price up 23% more than index during her tenure).

The five forces framework

The most known framework in strategic management is the five forces framework. The five forces are: bargaining power of suppliers, bargaining power of buyers, industry rivalry, threat of entry, and threat of substitutes. I will discuss these forces in more detail in later postings. In the current posting I will provide a broader perspective. It is useful to consider the five forces as five evil forces that are after the profit generated in the industry. If all the five evil forces are strong then most of the profit generated in the industry will be taken away by these evil forces.

This is post four in a series on industry analysis.

Microsoft has a long way to go

Steve Ballmer, CEO of Microsoft, is being interviewed in MIT's Technology Review. The interviewer summarises his impression of Google's vision as "indexing the world's information" and Apple's as making "insanely great devices for consumers". Ballmer responded with Microsoft's vision:

We empower people and businesses to realize their potential. And to expand, I would simply say we’re about defining the future of productivity, entertainment, and communication.

I am reminded of an old, failed Sony vision about providing the networked home. Companies do not make money by formulating nice or catchy vision statements. Companies make money by having clear corporate and business-unit strategies and then executing well. However, Ballmer's statement is simply too general to be a good vision, and I hope Microsoft's strategies are much sharper.

In defence of planned strategy

A long-standing tension among academic management thinkers has been between proponents of planned strategy and proponents of emergent strategy. In the caricature version, the planned strategy is determined on the top executive floor by a cadre of analytical, numbers-driven, MBA-holding employees in their 30s. They produce fancy reports full of tables, graphs, boxes and arrows. In the caricature version, the emergent strategy just happens when middle managers in their 40s and 50s, with lots of practical experience in the industry, decide to do something novel. These middle managers are free from the shackles of analytical thinking, instead they succeed through honorable trial and error learning. Often the debate between the two perspectives is held on a sandbox level.

Industry vs industry segment

In an earlier posting I noted that "the industry definition should capture a set of related companies selling similar kind of products". In this posting I would like to develop the idea of an industry consisting of several industry segments. I would also like to describe how an industry segment is related to terminology used in marketing (e.g. product category, product type, product version).

This is post three in a series on industry analysis.

Book review: "The Value Imperative"

Taggart, Kontes & Mankins published The Value Imperative in 1994. Why am I recommending that you read a 19 year old book? Well, age should not be a major consideration in the first place, but here are my reasons.

Industry supply chains

The industry supply chain is a description of suppliers and buyers around your focal industry. It is important to spend some time identifying the structure as there often are stages in the industry supply chain that are less visible and often missed.

This is post two in a series on industry analysis.

Considerations before an industry analysis

Industry analysis is an important tool for the strategist. This post will explain the importance of conducting an industry analysis as well as considerations you have to deal with before you can start your detailed analysis.

Industry attractiveness

The standard reason given to conduct an industry analysis is to understand whether an industry is attractive or not. This is a rather silly reason. If all you are interested in is attractiveness, the best approach is to look at industry average profitability. Finance Professor Aswath Damodaran has a very nice website from which I extracted the following information. The table shows the ten most profitable and ten lest profitable industries in four geographic markets (return on invested capital, banking is excluded, data from financial year 2011, unweighted average). Ideally, I would like weighted ten year average, but that can be calculated relatively easy.

Grocery retailing in Singapore - an illustration of generic strategies

This post will use the grocery retailing industry in Singapore as an illustration of basic strategic management concepts; in particular the notion of generic strategies (Porter, 1980, chapter 2). First some background information on the market.

Book review: "Playing to Win" and "Competitive Strategy"

From time to time I will provide some book recommendations. I will rate the books using amazon's scale of one to five stars. I will mostly rate books four (very good) or five stars (masterpiece), because there is a selection bias; I will mainly highlight books that I think you should read. I am going to put links to amazon on my book recommendations.

Zynga's incredible mistakes

In March 2012,  a student group introduced me to the game developer Zynga. They presented some problems with the company's strategy. After the group presented their report, the share price went down 76%. At one point the company was down 87% from its all time high (basically valuing the company for its cash). Today the share price is up 52% from its all time low.

This note describes the strategy of Zynga one year ago and shows the importance of getting your strategy right. Rarely has a quoted company showed such disregard for strategy.

Business unit strategy. Zynga's business-unit strategy is as follows: Social games played on the Facebook platform. The gameplay involves competing with the player's friends, typically by building something in virtual space. Most of the games are using the same format, but vary in their details. The games are free to play, but the company sells points (Zynga dollars) to its users if they want to get ahead in the game. 94% of revenue is coming from customers and the reliance on advertising is minimal. Typically, a player would get ahead in the game by spending many hours with the game, but by buying points the player does not need to spend hours playing the game. The player will beat his friends without putting in the effort! Less than 5% of users are converted to customers. 

Will Blackberry come back?

What is to make of Blackberry's current strategy? Its share price went like a rocket from 2003 to 2007 (up 5,300%) and like a meteor from 2008 to 2012 (down 96% from peak to bottom). During the last couple of months it is up more than 100%.

The rise and fall has been well documented. A user-friendly smartphone that made messaging/push email very easy and cheap that was left in the backwaters by Apple and Google, which developed smartphones with an array of applications, not just messaging. This blog post will attempt to provide a forward looking view of the company.

Mobile phone market. The mobile phone market is currently being transformed by the smartphone. In 2007 the smartphone represented 11% of shipments and in the beginning of 2012 37% of shipments (data from www.asymco.com). The migration is occurring at a faster rate and, naturally, constitutes a great opportunity for gaining market share. Theoretically (but unlikely in practice), all smartphone platforms can gain market share in the mobile phone market.

Does Dell have a sound strategy?

A consortium headed my Michael Dell is trying to take Dell private. Before the recent surge in share price the company was down 64% (under-performing index with 57%) since Michael Dell took over as CEO in February 2007. Taking the recent bid from the consortium into account, the company is down 44% (under-performing index with 49%). A cynic would argue that Michael Dell ran the company into the ground, just to be able to buy it back at a cheaper price.

Corporate strategy. Dell has tried to develop its corporate strategy in the direction of becoming an information technology services company; gradually moving away from its focus on selling personal computers. However, to succeed Dell has to get each business unit strategy right. Dell's segment reporting is focused on customer groups and not products so it is not so easy to assess the quality of its business strategies.

First posting

I intend this blog to be a commentary on issues relating to business strategy. This being the first time I have started a blog, please do not expect much in the first month.

The name of the blog is Swedish for business strategy. However, the blog will be written in English.