Winter 2021 Cases
Case 1: The Coming Epidemic
A Health Department report at a large US city has the mayor and her staff worried. One homeless person has contracted plague!
Background
Staff employees who work at the mayor’s office building have noticed that the mayor and her senior associates are worried. There have been late meetings and the level of activity has increased. She has cancelled several scheduled events. No direct indication of a problem has been shared with the press. There are rumors that members of the press are calling “friends” in city government to find out what is happening.
You have just come from a meeting of your department, The City Department of Strategic Planning. Your job is to develop a comprehensive plan to handle a plague epidemic. So far only one person has contracted the deadly ailment. So, technically, no crisis has actually occurred yet. Here is a summary of what was discussed at the meeting:
· The homeless person who has plague has been in the city for about two weeks. He was living in the desert in New Mexico before he jumped on a freight train and wound up in your city.
· He was living in Skid Row with about fifty other people in a “flop house.”
· The flop house has been in legal trouble. This includes no exit lights, fire alarms not maintained, no sprinklers installed, complaints about mice, loud music, fights and garbage laying around the sidewalk. A recent police raid resulted in three arrests of residents for various crimes including outstanding warrants.
· No local hospitals have a record of treating a case of the plague.
· A small quantity of serum is stocked in a city storage facility, but it may have expired. Nobody in city government has ever seen the plague.
· The city hospitals owe a large sum to several pharmaceutical companies that manufacture plague medication.
· No one in city government has ever dealt with a major epidemic of any kind.
· This deals with the plague, not the corona virus.
The Task
Your boss – the head of this department – says he wants a complete plan that spells out:
· Specific steps to handle a possible epidemic
· Timeline to include deadlines
· Costs
· Manpower Needs: This should spell out number of people and types of skills
· A high quality plan that the city can be proud of
The plan must also identify where help may be available from. The meeting discussed,
· Local hospitals, city and private
· Pharmaceutical companies
· International doctors who have dealt with this disease
· Facilities for treating those who contract the plague
· Gloves and other protective equipment
· A plan for controlling information. “Avoiding panic” was mentioned.
· Your boss stressed that the solution must be internal, not simply from Washington.
You were selected for this job because you have an MBA. MBAs are supposed to know how to devise a plan. Even though you have an MBA, you have never held a position of management responsibility in which success or failure depend on you. Your boss added these instructions:
· Focus on solving the problem not describing it.
· We must look competent, able to handle a difficult, unexpected crisis.
· Do not cede control to federal authorities. Even if that happens, they will be using local hospitals, doctors and other resources.
· Don’t forget obvious issues, for example,
preventing current medical personnel from getting the plague;
avoiding strong police action, which might cause people who had contact with the plague sufferer to leave town.
causing panic by posting notices and discussing plague openly in the news or elsewhere.
Addition instructions:
· Focus on creating a good plan. Do not define the history of plague!
· A specific plan does not describe the city’s strengths and weaknesses. It does not dump SWOT analysis on a medical crisis. It uses their strengths and weaknesses to build a plan for the future.
· Once you get a clear sense of what has to be done, give specific actions they should take to prevent or lessen the crisis.
· Note that preventing a crisis calls for one type of action. Lessening the severity of the crisis calls for a different type of actions.
· Make sure the plan is actionable. That means it is laid out over a period of time with clear direction. For example, month 1, do such and such. Month two, follow with these specific actions.
· Apply concepts from the course and feedback from assignments.
· Do not give superficial advice they could find on an Internet blog such as “acquire serum.” This is too general to be helpful. Avoid soppy advice such as “work with the government.”
· Do not bore city management with plague history or Wikipedia drivel. You will lose credibility.
· Read the case five times to understand your job.
Case 2: Carnival
Carnival Cruise Lines: This company has had its image damaged severely by mishaps, bad publicity, angry customers, etc. Competition is stiff and in a shock to Carnival management, people have more money than they ever had before and demand better and better service. Customers are also smart! Slick advertisements are not going to convince them that a product has high quality. The Super Bowl ads may not have been effective. Revenue was strong, then the corona virus undercut the entire industry. Now, profits are tight and competition stiffer. The situation is very serious.
On the other hand, this is an opportunity to think strategically. Consider yourself an MBA working for the company. How could you propose a strategic solution to its challenging situation? Please consider the following:
· This is an opportunity to re-focus the company for the time – soon we hope – that the pandemic will recede and companies can get back to normal.
· Make sure you find out how Carnival is performing compared to the other major cruise lines. Look at Yahoo Finance and the Wall Street Journal. Be specific! There are plenty of expenses to cover.
· Make an overall assessment of the situation including the status of the cruise industry and the actions of competitors.
· How can Carnival improve its STRATEGIC situation by adopting or achieving an effective strategy? Strategy is not operations.
· Provide a general strategic assessment showing how the company can improve. Provide a specific plan with annual goals.
Things to keep in mind:
· This is a course in strategy. Apply strategic concepts from the course. Look at the textbook and follow your class notes/class discussion. Read about the topic as much as you can. Go immediately to The Wall Street Journal. If you miss a major development, your credibility will be shot.
· Do not roll out SWOT analysis of go to blogs that offer vague advice.
· Use Street Smarts. Think of Carnival management as smart. So, treat them as experienced and knowledgeable. Give advice based on careful analysis and your best thinking.
· Find out what the more successful cruise lines are doing and apply their ideas. But, use common sense. Carnival cannot sell its ships or copy unfeasible ideas from other cruise lines. Profits are tight.
· Produce a well-written paper of at least five pages that is suitable to show senior management.
· Make sure to apply concepts from the course: Product/Market Matrix, Driving Force, etc.
Things to avoid:
· Do not provide an operational solution. Do not propose a marketing plan. Do not tell them to repair their ships. Marketing and repair are operations. Your paper will not earn a grade.
· Do not tell them to create a strategic plan. That is your job!
· Do not fill your paper with useless information such as company history, material from blogs or other unfounded opinions. For example, Carnival does NOT compete with more expensive cruise lines.
· Open and end your paper with dramatic content. Busy executives do not want to read company history. They want NEW, EFFECTIVE ideas.
· This is the second paper in the course. Use your research skill and the full resources of the college. Do not copy from sources without showing that you copied. That is plagiarism, a serious offense.
Other Important Directives:
1. Read the case five times to understand your role. You must work hard on this problem.
2. Go to the Wall Street Journal and other credible business sources to learn about the industry. Do not use Wikipedia, Investopedia or blogs.
3. Find out strategic ideas that seem to work for others. Learn the problems your competitors face. Look for proposed solutions.
4. Do not use blogs or opinions. Get the facts.
5. Develop sound ideas for a detailed plan. The plan should spell out timing and cost.
6. Apply concepts from the course: Driving Force, real capabilities of the firm, etc.
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. Do not write a paper saying that you cannot choose a direction or otherwise failing to present a solution. Management looks at you as someone who has learned about corporate strategy and grappled with business problems.
8. Use all of the “street smarts” at your disposal. If you insult one of the top managers, you may get fired. You will also put your boss in a bad spot. The other senior managers will blame him or her for selecting you for the task.
A few tips for sharp MBAs:
1. Remember that you are working for company management. Do not set yourself up as smarter than they are. Do not fall into the trap of telling them to shift direction without solid evidence. This would not be smart or strategic. They do not have the money or skill for such a shift.
2. Avoid expressions such as “I think” and “I feel.” This is a Master’s level course in a business program. Personal feelings are less important than FACTS and the ability to protect the company.
3. Begin to work on your paper well before the deadline. It would not be a good idea to react to the case. Think about it; understand the issues involved.
4. It is strongly advised that students grasp the central problem in the case. This is the single most important issue the company is facing.
Keep these ideas in mind for all papers in the course including the Integrative Project.
Case 3: A Strategy for Facebook
Overview:
Facebook (FB) has been rattled by bad news and poor decisions. Its market capitalization has alternately shrunk and risen while and its image has slumped. Despite its astounding profitability, the company shows massive weaknesses in management capability. While it grows and makes money, it lacks clear goals and direction. All across the country, MBA students want to delve into Facebook’s problems and propose solutions.
Your Task:
The goal is to devise a clear strategy for Facebook. Strategic concepts are needed, not marketing plans. SWOT analysis stinks! It uses superficial opinions and never provides a clear roadmap. We need to know what to do in each of the next three years and we need to know why. As a serious MBA candidate, you need to create a credible plan. Since this is the third case in the course, you should be able to apply concepts from class discussion and from previous cases. Facebook should know:
· Where is the revenue going to come from?
· What issues do we have to resolve?
· How much will that cost?
· Who are our competitors?
· The elements of a clear plan.
Plan of Attack:
· Read the case five times to understand your role.
· Go to the Wall Street Journal and other credible business sources to learn about Facebook.
· Find out its strategic direction – if any. Learn the problems it faces. Look for proposed solutions.
· Do not use blogs or opinions. Get the facts.
· Develop sound ideas for a detailed plan.
· Apply concepts from the course: Driving Force, real capabilities of the firm…
· Make a year-by-year plan with goals and milestones. For example, in year 1, the company will achieve xxxxxxx. (Be specific.)
Do not tell Facebook to develop a plan. That is your job! And use common sense. Do not tell them they are stupid. Provide a good plan without criticizing their mistakes.
Requirements for the Assignment:
· Write a carefully thought out paper of at least five pages defending the option you choose.
· Spend adequate time explaining why the other alternatives have merit but are not as strong as your choice
· Think about and address likely arguments you will receive. For example, to borrow money, the company will need assets. It is also difficult to borrow money while sales are declining. Also, an expensive Marketing Plan would have to be tied to an aggressive sales effort. If employees leave the company or do not get bonuses and pay increases, this may be difficult.
· Do not write a paper saying that you cannot choose a direction. Management looks at you as someone who has learned about corporate strategy and grappled with business problems.
· Use all of the “street smarts” at your disposal. If you insult one of the top managers, you may get fired. You will also put your boss in a bad spot. The other senior managers will blame him or her for selecting you for the task.
As background, the following article was written several years ago. It may not be up-to-date, but it gives an idea of how experts saw Facebook a few years ago. Remember that SWOT analysis is useless unless it is linked directly to a strategic plan.
SWOT Analysis of Facebook Inc.
Let’s do a basic SWOT analysis of the world’s largest social network.
Leo Sun
(TMFSunLion)
May 8, 2015 at 10:18AM
Facebook (
NASDAQ:FB
) stock has climbed 30% over the past year, handily outperforming the NASDAQ’s 22% gain. But after that big rally, does the stock still have room to run? To answer that question, let’s do a simple SWOT (strengths, weakness, opportunities, and threats) analysis of Facebook’s business.
Strengths
Facebook, the world’s largest social network, has 1.44 billion monthly active users (MAUs) worldwide. Unlike rivals Twitter (
NYSE:TWTR
) or LinkedIn (
NYSE:LNKD.DL
), Facebook is consistently profitable on a GAAP basis.
Last quarter, mobile advertising revenue accounted for 73% of Facebook’s advertising revenues, up from 59% in the prior year quarter. Total ad revenues rose 46% annually as its average revenue per user (ARPU) climbed 25% to $2.50. Unlike Google, Facebook limits the number of ads it displays every quarter. This strategy — which emphasizes quality over quantity — caused Facebook’s average price per ad to soar 285% annually last quarter as ad views fell 62%.
Research firm eMarketer estimates that Facebook generated $3.54 billion in mobile display ad revenues in the U.S. last year, more than triple Google’s $1.13 billion. Unlike Google’s scattered network of display ads, most Facebook ads are displayed within its News Feed.
Last year, Facebook beefed up its
video delivery platform
for video ads, and launched its own embedded video system to challenge Google’s YouTube. Facebook uses single-sign ons (SSOs) in third-party apps and sites to tether users to its News Feed, which gathers data for marketers. Thanks to its strength in social, users are often more inclined to use Facebook’s SSOs instead of Google’s.
Weaknesses
Despite those strengths, critics have questioned Facebook’s “conversion rate,” which measures whether or not purchases or marketer-specified actions occur after an ad is clicked.
Research firm Marin Software reported that 63% of clicks on Facebook ads came from mobile devices during the fourth quarter of 2014, but only 34% of conversions occurred on smartphones and tablets. Meanwhile, the click through rate (CTR) of Facebook ads is consistently lower than the CTR for Google AdWords. Those two weaknesses, combined with soaring ad prices, have caused smaller businesses to question the
price effectiveness
of Facebook ads.
Another key question is whether or not Facebook can keep growing. Last quarter, MAUs rose 13% annually, but that figure has ticked lower every quarter. If MAU growth hits single digits, Facebook will need to rely more heavily on ARPU growth instead. Facebook’s heavy investments into expanding its ecosystem have also eaten into its bottom line. Last quarter, costs and expenses soared 83% year-over-year to $2.6 billion, causing its net income to slip 20% to $512 million.
Opportunities
However, investors should remember that Facebook’s ecosystem already extends far beyond its News Feed. Facebook also owns WhatsApp, which has 800 million MAUs, and Instagram, which had 300 million MAUs at the end of 2014. WhatsApp relies on nominal $1 annual fees, but unlike Facebook or Instagram, it isn’t banned in China. This gives it a possible backdoor into the massive Chinese market.
Citigroup analysts estimate that Instagram, which Facebook bought for $1 billion in 2012, could generate $2 billion in “high-margin” revenue annually after it is fully monetized with ads. That would equal nearly 12% of Facebook’s projected 2015 revenues.
Facebook is also evolving its stand-alone Messenger app, which can already be used for
peer-to-peer payments
, into a mobile platform of its own. This could eventually generate additional revenue from sponsored accounts, sticker sales, and e-commerce integration with third-party sites.
Facebook also recently expanded into LinkedIn’s backyard with “Facebook at Work,” which lets businesses create their own social networks. Facebook’s Oculus VR could also launch its long-awaited Rift VR headset later this year, and the company is
launching Internet.org
in new markets to tether more developing market users to its ecosystem.
Threats
Those are all lucrative long-term opportunities, but Facebook also faces four near-term threats. First, a strong dollar could weigh down Facebook’s top and bottom line over the next few quarters. Second, Facebook faces ongoing questions about privacy in the EU, which could lead to a damaging probe of its business strategies.
Third, data breaches could eventually turn hacked Facebook accounts into “skeleton keys” for SSO connected apps and websites. Lastly, the rise of ad-blocking extensions like Facebook AdBlock could reduce the profitability of Facebook ads. According to research firm PageFair, a similar extension, AdBlock Plus, cost Google $887 million in potential ad revenues in 2012.
The verdict
In my opinion, Facebook’s strengths and opportunities outweigh its weaknesses and threats. It’s the world’s largest social network, it’s profitable, and its ecosystem is growing in multiple directions. Facebook stock isn’t fundamentally cheap at 30 times forward earnings, but it’s still cheaper than shares of LinkedIn and Twitter, which have respective forward P/E ratios of 59 and 55.
Leo Sun
owns shares of Apple and Facebook. The Motley Fool recommends Apple, Facebook, LinkedIn, and Twitter. The Motley Fool owns shares of Apple, Facebook, LinkedIn, and Twitter. Try any of our Foolish newsletter services
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