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Barriers Entry

Economies of Scale :Loblaw has the economies of scale in food sourcing and distribution in Canada, though Wal-Mart can
rival it on non-food in many locations. Given Wal-Marts competencies in this area, this barrier to entry is not expected to be
lasting, but depends upon the scale of entry in any market location.
Product Differentiation : The movement of Loblaws control label brands across food, non-food, financial services, and
gasoline categories further solidifies this entry barrier, since all of these are tied together in Loblaws loyalty program.
Format differentiation is also an issue here Loblaw has multiple formats that compete in every existing niche in the food
business. Wal- Marts Supercenter is not a new concept to Canada, as it has been in other areas, but must compete with
existing entrenched Supercenter concept stores.
Capital RequirementsWhile large to achieve large-scale entry, these are not expected to be a barrier for Wal-Mart
Switching Costs Loblaws integrated loyalty program, which involves financial services including mortgages, insurance and
every-day banking, creates switching costs for customers since failing to shop at Loblaw reduces the benefits they get
through the integrated loyalty program once they are members of it.
Access to Distribution Channels :Loblaws ownership of its real estate assets can act as a barrier to entry in that Loblaw has
tied up many of the promising locations (often at lower costs due to lower historical prices). Wal-Mart must build or source
new stores with perhaps less than optimal locations, at higher real estate prices.
Cost Disadvantages Independent of Scale :While Wal-Mart may take some time to adapt to the Canadian food retailing scene,
this cost disadvantage is not expected to last long. Perishables comprise two-thirds of grocery sales in Canada. Wal-Mart has
only limited expertise in managing perishables, and thus may be expected to have some cost disadvantages as it moves along
the experience curve, but again, these are not expected to be long-lasting.
Expected Retaliation The likelihood of a retaliatory response to a competitive move depends on the respondents dependence
on or commitment to the market, the respondents resource availability, and the awareness of the competitive move by the
respondent. Wal-Mart can expect retaliation from Loblaw to be severe. Loblaw is completely dependent on the Canadian
food market and must retaliate to survive. Loblaw is in excellent cash and borrowing position, enabling it to retaliate, and it
has great leverage with existing industry players and customers. Since Wal-Mart is highly visible, Loblaw will definitely be
aware of any move it makes into the Canadian market. The Entry Deterring Price is that price at which the rewards of entry
just balance the costs of overcoming entry barriers and risking retaliation (Porter, 1980). In the case of the Canadian grocery
market, the rewards of entry are lower than in other locations because it has been a competitive grocery market for many
years. Retail prices are lower in Canada than in other locations, reducing the margins available. Furthermore, as a very strong
performer in terms of both cost and differentiation (through its control label and multi-format approaches), Loblaw will be a
difficult competitor for Wal-Mart to best, limiting its chances of performing very successfully, very quickly.
Strengthening Existing Entry Barriers Differentiation entry barriers are evident in two areas: formats and private label
products. Format The discount formats in groceries are well established in Canada, and Loblaw plays in each segment. The
room for price differentiation is thus limited for Wal-Mart. Yet Loblaws very successful Superstore concept (which is
directly comparable to a Wal-Marts Supercenter) is highly concentrated in the West, while Wal-Mart is likely to attempt
expansion in Ontario first. Therefore, Loblaw should expand its Superstore concept in Ontario and other parts of Canada as
quickly as possible to fill in the competitive landscape and obtain the best retail locations. Private Label ProductsThe
grocery private labels have wide consumer acceptance in Canada. Loblaws Presidents Choice, in particular, is a very strong
brand, and Loblaw gains flexibility, control and consumer loyalty through its control label products. Wal-Mart did not have a
grocery label of its own and has not been as successful in private labeling as Loblaw has. To build upon this advantage,
Loblaw should expand its control label program to more products and continue to build the brands. Furthermore, Loblaw
should extend its offerings of control label products in non-food areas to ensure that it has a strongly differentiated
competitive position in every-day non-food before Wal-Mart Supercenters arrive.
Switching Costs Loblaw established switching costs by tying consumers into multiple goods and services through its PC
Rewards program. In order to participate in the loyalty program, customers had to do some banking through PC Financial
Services, which offered low or non-existent service charges, rebates on groceries, good rates on mortgages. Home and auto
insurance were expected to follow. While loyalty programs in general offer only limited switching costs, those tied in with
financial services are more compelling. Switching banks, mortgages and insurance companies is more difficult than
switching grocery stores. Loblaw should continue to expand the reach of its loyalty program by offering better services and
more rewards. Its foray into gas bars and home and auto insurance are examples of how Loblaw is continuing to do this.
Expected Retaliation Loblaw should continue to build its retaliatory capacity by maintaining a strong cash and borrowing
position, tempered by its need to also expand its Superstore concept with some speed. Both signal expected retaliation to
Neutralize WN Comp Ad Price Reductions Loblaw and other Canadian grocers have been attracting traffic through weekly
flyers, in which they normally announce price reductions on 35 to 50 chosen items. Wal-Mart would be deploying its Every
Day Low Prices strategy as a means of attracting traffic to its stores. Its EDLP offer would be continuous and not limited by
time or product category.
There are two ways with which existing grocers, including Loblaw, could prevent Wal-Mart from gaining one-upmanship on
the price front. One is to extend the price reduction across all banners, beyond the existing discount banners. The second is to
align the existing prices with Wal-Marts EDLP. Together, it would blunt the edge of Wal-Marts EDLP approach and deprive
it of any advantage in launching Supercenters in Canada. It would mean that the flyer approach may have to be discarded.
There are thus two options for grocers like Loblaw, which could be pursued simultaneously: reduce prices on core grocery
items immediately; and use hybrid pricing on the rest as part of moving gradually towards reduced prices on a daily basis

on all store assortments. Loblaws Real Canadian Superstores take this approach.
Increasing the Store SizeHaving pioneered the concept of Supercenters in the United States, Wal-Mart has found it an
effective way of generating volumes. Loblaw has been progressively increasing store size and planning to introduce the
mammoth Real Canadian Superstore format in larger numbers.
Wider Assortment of Categories Canadian grocers can pre-empt Wal-Mart Supercenters by establishing a wider presence in
non- food categories in their own stores. Loblaw has been doing this not only in its Real Canadian Superstore format but also
in its other stores. It has supported its move into non-food with an increasing array of non-food control label products.
Loblaw should continue in this direction.
Cost Efficiencies To ensure that Loblaw remains competitive in the longer term against Wal-Mart and other competitors, a
strong focus on maintaining cost efficiencies is essential. The use of technology to enhance efficiency is important, as is
increasing labor productivity. Loblaw has already initiated a companywide cost reduction program and has been negotiating
wage reductions with its unionized employees. It must continue to cut costs and exploit efficiencies through technology.
ndustry Attractiveness for Wal-Mart Supercenter Format
Power of Buyers: Low Individuals have limited power.
Power of Suppliers : Low to Mod. While large, nationally branded product suppliers have power, Wal- Mart has significant
countervailing power in non-food areas. It may take some time to build power with food suppliers.
Threat of Entry: High Note: Since Wal-Mart is considering entry, the threat against it is associated with existing entry
barriers. See discussion of entry barriers below.
Substitutes: Low- Mod. Busy lives = more restaurant/takeout meals, but Supercenters can also compete with these with
Home Meals Replacements and co- located fast-food outlets like McDonalds.The Supercenter format must also compete with
other discount formats specializing in either non-food or food, along with warehouse club formats and others.
Competitive Rivalry: High Loblaw will be an intense and difficult competitor that can effectively neutralize some of WalMarts competitive advantages.
Do you expect WM to introduce its Supercenters in CanadaYes: Pressures for growth due to growth expectations implicit
in the stock market. Significant planned expansion of the Supercenter concept. Expected doubling of international
operations from 2002-2005. Proximity of Canada both geographically and culturally; existing experience and assets in the
Canadian market. NO: Industry is not very attractive due to entry barriers and rivalry conditions. Depth in Canadian market:
existing availability of Supercenter competitors and other discount format stores. Lower margins in Canada than worldwide.
RIM is being outspent not only in terms of percentage of R&D/sales, but in absolute dollars as well= urgecy . 1. Do what
they are doing now, only more of it Pros: RIM is currently successful in its local recruiting strategy. They have the best
and brightest from the nearby University of Waterloo, many of whom come in as part of a co-op program. Organic
growth has contributed to RIMs young, entrepreneurial engineering culture Havent maxed out yet on recruitment
strategy: could expand to other universities, increase frequency and intensity of recruitment efforts, copy competitor
activities Could recruit at technical universities around the world; establish research network from which to draw new
talent Easiest option to implement Relatively low cost alternative Fits with existing mentality and culture at RIM
Maintains strong alignment with elements of RIMs existing strategy: value proposition and core activities Consistent
with an approach that is working Replicable Cons: Slow way to grow (one employee at a time); definitely will not
meet 1,400 new hires by end of year (implication: current and future new product introductions falter) Why hasnt RIM
done this at more universities already? Insular; recruiting only from University of Waterloo brings issues around having a
same source supplier Current software engineers already feeling the strain; need immediate solution Organizational
development department does not have in-house expertise; will have to ramp up to recruit from other universities and
geographies Local talent pool is running dry; competitors are sweeping in to snatch talent Relatively low cost of
recruitment efforts could be offset by need to bring new recruits to Waterloo and offer competitive perks Especially
complex if they are going to offer immigration services Does not align with RIMs stated goals of expanding consumer
base and global reach of BlackBerry platform or RIMs stated product/market focus 2. Grow and expand existing
geographies Pros: If they can grow in Waterloo, they can maintain their organizational culture Expanding in
Waterloo doesnt require a managerial mind-shift; expanding to other North American (NA) locations is culturally more
similar than going overseas Current NA locations are already in centers with lots of talent and technical universities; pool
of potential employees is more proximate Lower cost than setting up brand new research centers Slightly easier to
retain culture Cons: If they grow only in Waterloo, current facilities need to be expanded and upgraded (high
infrastructure costs) High resistance to change (managerial feeling that they should only be in Waterloo) Satellite
locations (e.g. Ottawa, California) are not fully integrated into RIM culture; communication patterns and practices would
need to be adjustedo Ifyouarenothere,youarenotvisiblementalityo Engineers in other locations also feel less important as
they are not working on the core product, but rather product enhancements or adaptations Trade-off in cost of engineering
talent in Waterloo vs. California or elsewhere in NA Need to ensure that they have an overarching strategic R&D plan
that divides what location will be responsible for what product or what process Keeping software developers all in one
location helps foster innovation and protect IP; decentralization contributes to bureaucracy, which is the antithesis of RIMs
successful start Not sure if RIM is following the talent are there smarter places to go? Other Waterloos out there? 3.
Increase acquisitions Pros: Faster way to acquire talent; if you buy the company, you buy its people (e.g. could be 200
to 2,000 people all in one shot) Can bring new technology and new ideas into the organization Depressed economic
climate in the United States has left several smaller firms and competitors vulnerable for takeover; could get bargain
May make some markets more open to RIM products/services (e.g. Europeans favor home-grown solutions. Establishing an
R&D location in Europe may help penetrate this market) Cons: Acquisitions take a long time to negotiate, often a year or

more: may not meet immediate need Great potential for a culture clash (e.g. if you buy ex-PALM employees, you also
buy their existing corporate culture, which is likely to clash with RIMs culture given their competitive start) Acquisitions
are very expensive both in terms of upfront capital, as well as training and on-boarding costs; most do not create value
RIM has no experience integrating large numbers of employees after an acquisition (consider using Exhibit TN-3 to
demonstrate the range of integration choices) Plus all of the cons of Option #2 4. Go global Pros: India, China and
other countries are an available and ready source of qualified, lower cost, highly skilled labor Proximity to market allows
for faster and easier adaptation of products to local market needs; gateway to markets with highest growth in smartphone
subscribers Foreign R&D labs can be a source of new ideas and innovations (e.g. Motorola & RAZR) Foreign
governments are offering incentives for investors to set up in R&D parks RIM has the available profits which could be
invested in going global Cons: US government laws against exporting encryption codes; U.S. government is RIMs
largest client RIM cannot afford to take any action that might endanger this relationship Intellectual property protection
concerns are a critical barrier: RIM cannot afford to lose its competitive advantage that comes from its proprietary source
code No first mover advantage; not in market leader position moving into emerging markets No infrastructure to
access foreign business customers High internal resistance to off-shoring No experience in managing global research
network; no internal infrastructure to do so, no internal expertise No plan for how to go global: What kind of R&D
site/network/structure should RIM set up? Large potential for culture clash at both national and organizational levels
Expensive both in terms of upfront capital, as well as training and onboarding costs both abroad and at home Wont
solve 2008 problem Plus all the cons of Options # 2 and 3.
(Industry attractiveness 60) Pros The cost of entering will be low. Could capitalize on Liuyangs name recognition,
in the domestic (but less so in the export) market. The market is becoming less brand-conscious, therefore, could compete
on price, if efficiently managed. Low switching cost for the customer, therefore, easy-to-win market shares, if marketing
is done well. As a village-owned business, no historical burdens like health care and retirement pay. Easily available
skilled and flexible laborers. No close substitutes. Growing domestic market Cons Low barriers to entry imply
high competition. Price competition will drive down the profit margin continuously. Regulations could get stricter
both at home and abroad, driving down the demand for consumer fireworks. Future technological advancement could
produce safer and cleaner substitutes for the functions now performed by fireworks. Working in the fireworks industry
always has an element of danger. Labor and material costs are increasing Governments are introducing more costly
safety standards
Buyer Power is very high. There is very little switching cost. The buyers are well informed and assisted with knowledgeable
local representatives. They can play one supplier against the other. The only switching cost exists in the case when the buyer
provides product design and outsources production. In that case, commercial secret can become a binding power.
Supplier Power is very low. Standard raw materials are used. However, long-term relationship provides extra stability in
quality and price.
Entry Barriers are very low. The capital cost is low. Labor force is easy to access, flexible and cheap. The fixed cost is low.
Technology requirement is low. Skilled workers may be a scarce resource elsewhere, yet abundant in Liuyang.
Competitive Rivalry is very intense because of the low entry barriers. It often boils down to cutthroat price competition.
Substitute threat is mixed. If fireworks are viewed as a special traditional way of celebrating national holidays, no close
substitutes are available. However, if fireworks are viewed as a promotional tool or entertaining amusement, then many
alternatives exist.
Cost Leadership Jerry could choose to become the low-cost manufacturer by organizing the production in a more efficient
way. For instance, he could improve the process technology, cutting down on scraps and improving the workers productivity.
However, the fact that fireworks-making is a low-technology, labor-intensive, and largely a manual process suggests that the
small workshops would probably win out in a cost war due to their low expenses in labor, administration and technology.
Differentiation Strategy Jerry could also go the differentiation route by establishing a reputation as a quality manufacturer.
In fact, a few factories in Dongguan had done that with reasonable success. This would imply more initial investment in
building up the research and development (R & D) and design facilities, management capabilities, marketing strength and
corporate culture that are required. The return probably will be slow in coming. Since quality and reputation will be more
salient purchase factors for display fireworks end users than the consumer fireworks market, differentiation will probably
work better in the display fireworks market.
AlcanCAControl over low-cost sources of electricity through long-term power contracts and water rights allowing it to
produce its own power; Cutting-edge technologies and modern plants; Access to international markets and its international
Threat of entrants: 1. Do large firms have a cost or performance advantage in your segment of the industry? [No economies
of scale in consumer fireworks. Some in the display fireworks.] 2. Are there any proprietary product differences in your
industry? [Liuyang fireworks used to have brand equity. However, price competition and imitations had eroded the brand
equity.] 3. Are there any established brand identities in your industry? [Yes. Red Lantern and other domestic and
international brands.] 4. Do your customers incur any significant costs in switching suppliers? [Switching is relatively easy
and costless.] 5. Is a lot of capital needed to enter your industry? 6. Is serviceable used equipment expensive? 7. Does the
newcomer to your industry face difficulty in accessing distribution channels? [Its hard to get into government- controlled
channels and export sales. Its easy to get to wholesaling centres.] 8. Does experience help you to continuously lower costs?
9. Does the newcomer have any problems in obtaining the necessary skilled people, materials or supplies? [Skilled workers
are scarce elsewhere, but abundant in Liuyang. However, labor costs are becoming an issue.]10
Doesyourproductorservicehave any proprietary features that give you lower costs? 11. Are there any licences, insurance or

qualifications that are difficult to obtain? 12. Can the newcomer expect strong retaliation on entering the market? [Retaliation
is not possible. ] High barriers to entry= Yes to Q (favorable to industry) Low barriers to entry=no to Q(unfavorable to
industry)Overall rating:strongly unfavorable for the incumbents(no to most Q)
Bargaining power of buyers:(to what extent are your cx locked into you?) 1. Are there a large number of buyers relative to
the number of firms in the business? [Buyers are numerous. Yet suppliers are numerous too.]2. Do you have a large number
of customers, each with relatively small purchases? [The customers are the wholesalers and importers. They are powerful. ]
3. Does the customer face any significant costs in switching suppliers? [No switching costs for wholesalers. For the importers
who outsource manufacturing, some commercial secrets may be involved. ] 4. Does the buyer need a lot of important
information? [ They have access to virtually all the information.] 5. Is the buyer aware of the need for additional information?
[They know how and where to get the information.] 6. Is there anything that prevents your customer from taking your
function in- house? [Labor cost, regulation, skills.] 7. Your customers are not highly sensitive to price. 8. Your product is
unique to some degree or has accepted branding. 9. Your customers businesses are profitable. 10. You provide incentives to
the decision makers. [Commission to reps and agents.] Lower rivalry=yes toQ(favourable to industry) Higher Rivalry=no
to Q, mostly no unfavourable
Threat of substitutes: (some other product or service that performs the same job as yours)
1. Substitutes have performance limitations that do not completely offset their lowest price. Or, their performance is not
justified by their higher price. [Fireworks as traditional ways of celebrating are hard to replace. Fireworks as promotional
means have lots of substitutes]2. The customer will incur costs in switching to a substitute.[Not financially. Maybe
emotionally.3. Your customer has no real substitute.[People will come up with substitutes if forced to.]4. Your customer is not
likely to substitute.[If regulation requires, one has to] Low threat of substitution= yes to Q (favourable to industry)High
threat of substitution= no to Q (unfavourable to industry)
Bargaining power of suppliers:1. My inputs (materials, labor, supplies, services, etc.) are standard rather than unique or
differentiated.[Skilled workers are scarce elsewhere, but abundant in Liuyang. However, labor costs are becoming an
issue].2. I can switch between suppliers quickly and cheaply.[The only concern is the quality of the materials.]3. My
suppliers would find it difficult to enter my business or my customers would find it difficult to perform my function in-house.
[A supplier in Liuyang may start making fireworks themselves easily.4. I can substitute inputs readily.5. I have many
potential suppliers.6. My business is important to my suppliers.7. My cost of purchases has no significant influence on my
overall costs.[Variable costs are the major costs in fireworks. Yet, costs are low.] Low bargaining power of suppliers = yes
to Q (favorable to industry) High bargaining power of suppliers= no toQ (unfav to industry)
Determinants of rivalry among existing competitors1. The industry is growing rapidly. 2. The industry is not cyclical with
intermittent overcapacity.[The seasonality of the demand is somewhat evened out because of the diversity of the cultures.3.
The fixed costs of the business are a relatively low portion of total costs [The fixed costs are very low for small workshops.
Medium for large factories. 4. There are significant product differences and brand identities between the competitors.
[Liuyang fireworks used to enjoy strong name recognition, but price competition has become the game 5. The competitors
are diversified rather than specialized.[They tend to be specialized. 6. It would not be hard to get out of this business because
there are no specialized skills and facilities or long-term contract commitments, etc[Exit is hard for large SOE factories. Hard
for Liuyang because it is the pillar industry. Exit is easy for small workshops 7. My customers would incur significant costs
in switching to a competitor 8. My product is complex and requires a detailed understanding on the part of my customer.
[Everyone can find out about how to make fireworks.9. My competitors are all of approximately the same size as I am
Lower rivalry=Yes to Q (favorable to industry) Higher rivalry= No to Q (unfav to industry)
Expand Retail (90) Pros: Highest margin Access to much larger markets. Ability to choose site close to
consumers Cons: The local market is saturated a new shop would have to be opened elsewhere Prior attempts at retail
(i.e. Moncton, NB store) unsuccessful Greater number of competitors outside P.E.I.
Expand Mail OrderPros: Reasonable margin Moderate return on investment Increased sales in the offseason
Room to expand this with Canadian customersCons Difficult to manage with current regulations in the U.S. High
freight charges Limited market reached (mainly visitors to P.E.I.)
Expand WholesalePros Good margin Low freight charges High return on investmen Increase sales in the
offseasonCons: Requires managerial time to find buyers Demand currently unknown requires capital investment in
new manufacturing plant what capacity is needed?
Expand Japanese ExportsPros Low risk Potential scale economies No capital expenditure required for retail or
warehousinCOns: Low margin Uncertain supply of certified organics Total magnitude of demand not known All
prices must be maintained in Canadian dollars to avoid exchange rate risk
Organic vs. Established LinePros Interest in certified organic products growing Potential to become dominant buyer
of organic fruit Consistent with quality brand image Some people willing to pay very high prices for the best
qualityCons: Uncertain supply of certified organics Unknown demand North American consumers may be more price
sensitive than are Japanese consumers
VALUECHAINManufacturing was outsourced to China, and several different companies were used. Over the past three
years, production capacity was fully utilized during the months from March to July, often restricting the number of new
orders that could be accepted during this period. Through the remainder of the year, there were occasions when production
capacity was reached, but generally the factories were running well below capacity. The months of November through
January tended to be quite slow, with production at less than 30 per cent of capacity. As a result, Holey Soles planned to
focus production on non-shoe products and contract manufacturing during this period. As well, the sales team set out to train
customers to order ahead of the busy season. The company was also seeking new customers in the Southern Hemisphere to

even out the seasonal production demands. Online sales and expanded product lines also offered opportunities to offset the
seasonal fluctuations. Holey Soles had a strong and relationship with the manufacturers in China, which helped to maintain
close connections. Quality Control Management believed that Holey Soles would be able to maintain the highest quality
standards in the industry. Quality-related product return rates were below 0.5 per cent, which was well below the industrys
acceptable standards of three per cent to five per cent at the retail level. Holey Soles and LPI created a detailed quality
control checklist for each shoe style and reviewed it with senior management and line personnel in the Chinese production
facilities as well as with LPI quality control inspectors. The company also trained the packers in North American warehouses
to monitor shoe quality using the same checklist prior to packaging each pair of shoes for shipment to customers. Quality was
also carefully monitored both in China and in the North American warehouses through random sampling. When shoes did not
meet company standards, they were pulled from inventory, and a credit was provided by the relevant Chinese manufacturer.
As new quality issues surfaced through customer and employee feedback, the quality control checklists were updated and
staff in China and North America were retrained. Quality control for non-shoe lines was carried out by the Chinese
manufacturers. Incoming shipments went through a random check to verify both carton content and product quality. Quality
was also verified by the packers prior to being shipped to customers. There were no reported quality control issues related to
these products. Delivery The transit time from China to the warehouses in North America was quite long. Holey Soles was
looking for manufacturers in other part of the world, such as Mexico, to provide more prompt delivery. Hats, bags and
display racks were manufactured in factories in three other Chinese cities. The FOYO charms were also manufactured in
China. Shipping is an area that can be improved. Currently customers are charged with administration and shipping fees.
Delivery time is also quite protracted, in some cases more than one month. Holey Soles should seek out more efficient
arrangements, possibly using carriers such as UPS in order to achieve better customer service. Sales channels included retail
stores in North America and international distributors. Consumers could also buy products online in North America. In each
channel, Holey Soles endeavored to maintain good relationships with clients. The companys formalized approach to
distributor selection helped secure strong distributors. Inventory Management By July 2007, Holey Soles had leased an
85,000-square-foot office and warehouse space in Vancouver. Additionally, a 55,000-square-foot U.S. warehousing operation
had been contracted for pick-pack-ship operations in the United States. In order to ensure that the full range of stock-keeping
units (SKUs) (approximately 1,300 individual items) were constantly available in both of the companys North American
warehouses, monthly sales analyses were conducted in order to determine which were the fastest moving SKUs and to
observe any buying trends in styles, colors or sizes that may be occurring, and new production orders to China were
developed that reflected these trends. During the spring and summer, these analyses were done more frequently, often
weekly, which helped to identify any slow-moving SKUs that could in turn be eliminated from inventory. Analyses were
performed separately for the Canadian and the U.S. warehouse operations because of differences in sizing and color
preferences. Several factors increased the challenge of maintaining sufficient inventory: an increasing number of large
customers had begun to place large orders; chain stores preferred to select a narrow range of colors and sizes; and the cost to
maintain large inventories was high. As a partial solution, an agreement was struck with Chinas DK manufacturing facility
in June 2007 that would enable the production and storage of inventory in China as a safety net for periods of extreme
demand. Product development was conducted at a senior level, requiring part-time resources from the president, the vicepresident of sales and marketing, the vice-president of operations and a full-time person to deal with day-to-day requirements
and communication with China. LPI was responsible for new product development but contracted that activity to Holey
Soles in Canada. Senior level resources were engaged at the outset to ensure that the translation of use of SmartCel foam and
SoleTek was developed in line with the companys vision. The contract between LPI and Holey Soles specified the amount to
be invested for product development. A Product Development Committee under LPI had been formed to select the most
promising new products, and professional designers were contracted to aid in their development. Ideas for new products
came from feedback from the sales force, distributors, retailers, customers and from every staff member at Holey Soles.
Product diversif. only (A) STRENGHTS1. Stable profit: Product diversification can help stabilize the stream of profit.
Profit decline in one product can be offset by profit in other
products.2. Stable Growth: A companys old products may reach
Business Product/Service
maturity as product life cycle theory indicates. By diversifying into
other products the company can renew the product life cycle to
maintain stable growth.3. Economies of scope and/or economies of
Mkt Development
scale: Diversification can create value when the products share
Mkt Penetration
value chain activities.4. The leveraging of brand or other core
competences: Intangible competitive advantages can create value if
Modified or improved
Product Development
they can be applied to other products.WEAKNESSES1. Added
corporate overhead costs: Product diversification results in the
Completely new and different
Related Horizontal Diversification
added costs of a corporate overhead structure that must be added to
but associated or related
the businesses.2. Integration costs: The integration of any shared
activities lead to added management costs.3. Lack of understanding
of too many businesses: There is a cost associated with diversifying
Completely new, different and Unrelated
to the point of not understanding the many businesses that a firm
unassociated or unrelated
owns, or having too many complex value chain activities.
Ultimately, this level of activity could lead to deteriorating
performance.Market diversif. only (B)STREGNTHS1. Stable
profit: Geographic diversification across national boundaries helps
stabilize the stream of profit because a demand decline in one area can be offset by a demand increase in other areas.2. Ease

of replication: A mature product can be easily brought to another geographic market to extend the product life cycle.3.
Growth opportunity: A firms growth can be limited by its home countrys low market potential. Geographic diversification
can help a firm catch new growth opportunities, especially when the firm has a competitive advantage in a product in
overseas markets.4. Economy of scale / use of overcapacity: Excess capacity with the maturing of the product can be put to
good use without incurring additional costs.WEAKNESSES1. Entry barrier: A firm may face entry barriers in terms of
liability of newness, cultural distance and regulatory constraints.2. Added costs: Similar to product diversification.3.
Resource strain: A firm needs to have the international experience and capital and human resources to manage expanded
operations.4. Need for reliable distribution channels: New channels of distribution need to be available or developed.5. High
risk: Market diversification has higher risk than product diversification.BOTH PROSThis option shares the strengths of
Option A and Option B. If this option is chosen and subsequently proven successful, more benefits can be reaped than by
simply choosing one of the options.CONSThis option shares the weaknesses of (A) and (B). It also strains a firms resources
more seriously. If more options are pursued, the pace of diversification is a concern.

Causes of Groupthink High stress from external sources, especially when the group is insulated from outside sources of
info Extreme group cohesiveness, especially when the group members are homogeneous in their social background and
ideology Strong and persuasive group leader, especially an authoritarian leaderSymptoms of Groupthink A belief of
invulnerability Rationalization of decisions by group members Shared values and stereotypes A lack of decision
critiques from outside sources Pressure to conform Unquestioned belief of the morality of the group Results of
Groupthink Incomplete and / or poor information search Perception and stereotype errors Incomplete generation of
alternatives (satisficing Inadequate evaluation of alternatives Unexplored decision risks Previously rejected
alternatives that go ignored A need to save facePrevention of Groupthink Assigning ultimate responsibility to one person
who seeks the advice of other group members Encouraging anonymous evaluations (e.g. suggestion boxes) Assigning
group members (either openly or anonymously) to play devils advocate Employing audits of the groups decisions by an
outside, objective person
GROW internationally: Learn the technical subtleties of the chosen markets Decide how to enter different markets.
Should it enter different markets using one or multipleapproaches? Should it offer similar services across countries or
customize for individual countries? Should it work with similar partners? Guest-Tek will need to decide how flexible it will
be in meeting unique customer expectations Restructure or build the sales and marketing divisions Address operating
concerns (e.g. need for more language coverage for support) Examine the skills and staff required for the head office and
for each market, and determinehow to recruit and retain them
TENSIONS: Simultaneously taking risks and attempting to mitigate them Sending good staff to different countries to
develop partnerships Protecting the companys reputation while working within local conditions Developing the companys
reputation for technical sophistication and adjusting to nuances in local market Matching core competencieS Operating in
a hotel environment and offering turnkey solutions Using the companys expertise in IP networking and simultaneously
acquiring the new competencies needed to function in different markets

COST LEADERSHIP YES Environment: Industry trend Competitors have done so Low labor costs Comparable
qualitY Clustering effects, economies of scale Firm resources: Asian presences China experiments Managerial attention
International investment experience: Large-scale investment in Mexico
NO PRODUCT DIFFENTIATIOEnvironment: High transportation costs Longer delivery times Uncertainties
Hard to find partnersFirm resources: Already in Mexico, further investment in China may impose organizational challenges
conditions global marketplace (219): High relative R&D to sales (more for PV cells than modules) High relative marketing
expense-to-sales ratio (not applicable to PV cells or modules) High value-to-weight ratio (both cells and modules have high
value-to-weight ratios) Standardized product (both cells and modules are fairly standardized)
Buyers (high): Buyers are developers, utilities or large-scale financiers who are able to demand low prices and high-volume
discounts; 2. Suppliers (medium-low): Suppliers were ostensibly gaining power when silicon prices were increasing. However, it
seems that many suppliers of silicon and raw materials are losing their bargaining power as cell and module producers become
larger and look for new ways to innovate such as using lower grades of silicon from the metallurgical industry 3. Substitutes (very
high): Substitutes are very strong since solar PV is the alternative itself. Even within the world of renewables, solar PV competes
against wind, geothermal, biomass and hydro electricity for investment 4. Barriers to entry (medium-low): Barriers to entry are
likely on the rise as cell and module producers become larger. However, historically, the technology and initial capital have not been
major barriers to entry; 5. Degree of rivalry (high): Upon looking at market shares, no one competitor has an overwhelming share.
Furthermore, there is tremendous diversity of the competitive set both in the technologies (i.e. First Solars thin-film vs. Canadian
Solars poly/mono), geographies (i.e. China, Japan, the United States and Germany) and the structural features (i.e. Sharp and
Sanyo are part of major consumer electronics giants while many competitors focus solely on solar). As players become larger and
gain access to more capital, it is likely that some consolidation will occur.
Reasons for globalizing: industries that lend themselves well to being global are those where products have a high value-to-weight
ratio and/or products which are standardized. Furthermore, industries where R&D and/or marketing spends represent a high
percentage of sales also tend to pull companies to global markets;Choosing where to expand: often, students think of unilateral
measures such as market size or country growth when choosing expansion targets. By thinking about cultural, administrative,
geographic and economic similarities and differences, managers can analyze expansion decisions along bilateral criteria; Choosing
a global strategy: it is important to try to establish one A advantage (adaptation, aggregation or arbitrage) before pursuing
another. By mixing all three, a company may risk creating a particular advantage.
YES INVEST CDNSLR: Industry: High-growth industry, Opportunity to build scale quickly and increase the minimum efficient
scale to prevent new entrants Most sales are guaranteed by government incentives (making it easier to get financing) Canadian

Solar Strong growth trajectory Unique cost advantage Proven ability to compete against multinationals Ability to shift focus to
other areas (e.g.consumer products, rural electrification)One of the few Canadian solar companies, which might mean that the
Canadian/Ontario government provides additional incentives DONT INVESTIndustry The industry is not self-sustainable without
government subsidies Government involvement is too high (i.e. this could become like aircraft manufacturing Traditional
energy sources are much more cost effectiveCanadian SolarRevenues are too sensitive to fickle policieS Competition from
multinationals will become more intense Solar modules will continue to become more commodity-like Canadian Solar might lose
the technologica battle (e.g. thin-film vs. poly/mono)
Competitive advantage: Why globalize at all?
Adaptation: To achieve local relevance through national focus (while exploiting some scale) Aggregation: To achieve scale and
scope economies through international standardization Arbitrage: To achieve absolute economies through international
Coordination: How to organize across borders?
Adaptation: By country; emphasis on adjustments to achieve a local face within borders Aggregation: By business, region or
customer; emphasis on horizontal relationships for cross-border economies of scale Arbitrage: By function; emphasis on vertical
relationships, including across organizational boundaries
Configuration: Where to locate overseas?
Adaptation/Aggregation: To limit the effects of cultural, administrative, geographic or economic distance by concentrating on
foreign countries that are similar to the home base Arbitrage: To exploit some elements of distance by operating in a more diverse
set of countries
Controls: What to watch out for? Adaptation: Excessive variety or complexity Aggregation: Excessive standardization or
emphasis on scale Arbitrage: Narrowing spreads
Change blockers: Who to watch out for internally? Adaptation: Entrenched country chiefs Aggregation: All-powerful
headquarters, business, regional or account heads Arbitrage: Key functions or vertical interfaces
Corporate diplomacy: Which external issues might arise? Adaptation: Relatively discreet and robust, given emphasis on
cultivation of a local face Aggregation: Appearance of, and backlash against, homogenization or hegemony (especially for U.S.
companies) Arbitrage The exploitation or displacement of suppliers, channels or intermediaries; potentially most prone to political
Adaptation: Possibility of developing local products and services which could be passed to other nations
Strong ties to local governments for involvement in policy decision making CONS: Danger of creating too many niche
products and services which remove scale efficiencies Spend too much time and money trying to adapt in an industry that is
fairly commoditized
Aggregation Continually drive down the cost of standardized modulesCONS: Difficulty in managing diverse market
conditions and governments from China May not be able to meet local content rules in all jurisdictions
Arbitrage Can pass learning from nation to nation (e.g. selling techniques from Germany to the Czech Republic or development
projects from China to South Korea) Could take R&D breakthroughs from Germany, Canada and the United States CONS:
Already playing arbitrage with labour differential in China other arbitrage opportunities may not be worthwhile

EXPAND INTL (242)Traditional motivations: To secure key supplies: Chabros expanded into Serbia (i.e. acquired the
Serbian sawmill and established Chabros Serbia) to secure lumber supplies to meet its growing sales demand at the time.
To seek new markets: Given that Lebanon, Chabross country of origin, was a small market, Chabros expanded into the
MENA (Middle East and North Africa) countries to seek new and larger markets. Moreover, Chamis valuable, rare, and
hard-to-imitate expertise in evaluating, selecting, purchasing, and selling veneer gave him an intrinsic competitive advantage
over rivals in the MENA markets, thus motivating Chabros to seek expansion into these markets. Although Chamis moves to
some of the MENA countries were opportunistic, several originated from unsolicited export orders (such as the case of
Dubai). In addition, Chabros sought to expand into more MENA markets to exploit economies of scale and scope. To
access low-cost factors of production: Chabros expanded into Serbia to access low-cost production labour. Compared to
countries in Western Europe, countries in Central and Eastern Europe such as Serbia have lower cost labour. Chabross
motivations for internationalization changed with its internationalization stage. At the beginning stages of
internationalization, more traditional motivations drove its internationalization decisions. However, other motivations
emerged at later stages of its internationalization. Initially, Chabros Lebanon viewed its MENA subsidiaries (e.g. Chabros
Dubai) as its strategic and organizational appendages and might have managed them opportunistically. Gradually, however,

especially after acquiring the Serbian sawmill and establishing Chabros Serbia, Chabros International Groups main lumber
supplier, it started seeing all its operations and strategy in a more integrative and global way.
Emerging motivations: capture production scale economies: Chabros expanded into Serbia and the MENA countries to
capture production scale economies. By expanding its sawmills production capacity and by finding more MENA markets for
its wood supply, Chabros captured production scale economies. These production economies were generally driven by a
combination of increasingly cheap and abundant energy, more efficient transportation networks, and new production
technologies. To develop global scanning and learning capability: One reason Chabros was drawn offshore was because it
wanted to secure supplies of lumber and veneer to meet its MENA subsidiaries growing demand for wood. It quickly
became aware of alternative, low-cost production sources around the world, such as in Serbia. Moreover, despite the fact that
Chabros was tempted abroad by market opportunities, it rapidly learned that different national markets demanded different
wood qualities, some higher, some lower. Buying the different wood qualities from the same supplier and selling them in
different national markets allowed both the supplier and Chabros to make greater profits. Thus, although Chabross
international strategy was initially triggered by supply-seeking and market-seeking motivations, the motivation to develop
global scanning and learning capability later emerged as a key driver of Chabros International Groups competitive
advantage. To benefit from competitive positioning: Chabros sought to become an MNE because being a multi- national
rather than a national company brought important advantages of competitive positioning. As an MNE, Chabros could crosssubsidize its markets. For example, Chabros could compete with a national company in Saudi Arabia by subsidizing its losses
there with funds from its profitable U.A.E. or Serbian operations. Since transnational companies are capable of crosssubsidizing markets more than their international, multinational, and global counterparts, not to mention their national
counterparts, Chabros evolved to become a small transnational company. It achieved this through three stages: First it
followed an international strategy, then a multinational strategy, and later a transnational strategy. At the beginning, when
Chami started exporting wood to Dubai, he only exported the kinds and qualities of wood that he sold in Lebanon (e.g.
AB-quality wood), which he did not even produce in Lebanon. Then he started responding to national needs and demands.
So he started buying different qualities of wood and selling A-quality wood to Dubai (instead of the AB-quality wood),
AB-quality wood to Saudi Arabia and Lebanon, and B-quality wood to Egypt. Later, he kept on responding to local
market/country needs while simultaneously responding to pressures to develop global-scale competitive efficiency by
initially starting to manufacture lumber at his newly acquired Serbian sawmill and later by greatly expanding Chabros Serbia
sawmills production capacity.
1Do nothing, wait and see. 2 Follow a downsizing strategy by closing parts of Chabross Serbian sawmill. 3 Follow a growth
strategy by: (i) further penetrating one or more countries where Chabros is already present, (ii) exporting to one or more new
countries, and/or (iii) expanding (i.e. via FDI) into one or more new countries.

DELL external threats (258): imitation, subsititution, holdup internal: slack (vs. flexibilyt), strategiv misstep (retail)
Barriers to response: Perception, Motivaion, Inspiration, Coordination External Factors (based on industry framework
(268) Customers: Changing demographics in customer base.: Average age of population getting older/Average age of new
diver is 36/Almost half of all divers are married/Many 36-year-olds have children Diving is becoming a popular sport.
Thrill sports (extreme sports) are increasing in popularity. All Opportunities Competitors: Low entry barriers for the
industry (easy entry). Fierce competition in the Bahamas, especially on NewProvidence Island. Segmentation is
occurring: Adventure diving (Also opportunity)/Family diving/Resort sites/ Live-aboard operators All Threats
Suppliers: Technology and equipment are available to anyone with money (Threat) Technology changes will be
evolutionary, not revolutionary.(Opp) Labor pool for technical and administrative workers is intl and quite adequate.(Opp)
R&C All Strengths Tangible resources: Three boats, adequate and in good condition, Diving equipment and facilities
Villas and rooms Unused kitchen and dining room Quiet beachfront location Financial condition (Weakness) Intangible
resources: Reputation (knowledgeable and safe)Returning customer base Technology is up-to-date Human resources:
Knowledgeable staff Greywells knowledge and experienceOrganizational capabilities Successfully built resort business
Attention to guests Provides safe and enjoyable scuba diving
Tangible resources Physical: OE- Some facilities may need renovation Fam Diving Resort- More pieces of equipment
More sizes of equipment More comfortable accommodations Playroom (indoor/outdoor) Dining room plan Sheltered
beach Adv Diving Resort-Specialized technical equipment Newer equipment Some accommodation upgrades possible
Location is good & Financal
Intangible Resources-> Reputation (safe, education, macho)/Culture(helpful/tolerance/skills)/Technology (safe/up to date)
HR: Skills&Knowledges, Communocation, Motivation
(279) Pros:To enter a new market the company needs to import nuts and dried fruits in bulk to achieve economies of scale.
The wholesale scale matches best to this requirement.The international popularity of Iranian nuts creates a potential market
that, given the limited resources of Tavazo, can best be exploited through wholesale. Cons:An important asset for Tavazo is
its brand, which is associated more with its retail stores rather than wholesale.A successful wholesaler will have an advantage
if it either owns a distribution channel or has significant control over one, which is not the case for Tavazo. The unsuccessful
experience of wholesale in Canada was a result of this weakness.It is inconsistent with the current focus of the company (80
per cent retail and 12 per cent wholesale).
Existing- Canada Pros: high income pop, large # Persians, high Q life Cons: far source supply, low pop, currency

fluctuation Iran Pros: lack exposure currency fluctions, large # Iranians, close source, brand rec Cons: Q life, low income
KSF in each region and service focus are (320) : raw material supply (i.e., asphalt, gravel, aggregate, new versus recycled),
equipment supply (i.e., earth moving vs grinders) and utilization (seasonal considerations), management (i.e., experience,
focus, depth) , financial (i.e. tight margins versus goldmines, period of extensive government expenditures designed to
stimulate economic recovery in both the U.S. and Canada?) , environment (level of competition, existence of Old Boy
Network) , role of government (engineering requirements; extensive funding available for road construction and maintenance
BC- Road Construciton: small margins, lot of competition , need for asphalt supply , emphasis on earth moving Road
Maintenance: emphasis on grinding and recycling suggests different equipment dedicated, experienced employees who
know the costs ,61 per cent of existing system needs work in next five years consistent with corporate shift away from
new construction Houston RC- less ST comp, use gove mney
prime contractor (GE- 371) capabilities: Customer credibility, including local roots for government contracts. Energy audit
and energy management prescription skills. Equipment specification and supply (motors, lighting, controls) and installation
capabilities. Financial and risk-carrying capacity. Project management and, subsequently, contract management and
maintenance abilities.
General Environmen (387) Demographic: Audience characteristics: 70 per cent of IMAX viewers are between 19 and 65
years of age. Majority are college- or university-educated, with an average household income of more than $70,000, and
with 33 per cent earning more than $100,000. IMAX movies are also attractive to kids/school groups. Needs to attract 12-24
and 25-39 demographics. Socio-cultural : Edutainment trend: parents interested in kids education, entertainment.
- Partly because of emergence of knowledge economy? Dual-income parents have resources to support kids
entertainment. Economic Movie-going is a discretionary expenditure. However, based on the data in case Exhibit 10 on
attendance and GDP growth, the correlation between economic growth and attendance is very low (only 0.13).
Political/Legal Piracy (and copyright laws) is of concern to the entire film industry. Technology: Innovations make piracy
easier. Possibility of cheaper production, storage and distribution may reduce costs and make small firms such as IMAX
viable. May make substitutes attractive as the quality and size of home video systems increase.Could IMAX produce
movies that are tailored to international audiences? Industry Environment Substitutes HD-DVD, cable/satellite, HDTV,
the nternet and other entertainment sources. Threat of substitutes increasing. Entry High capital requirements to produce
movies with stars. Distribution is difficult. Small-scale production possible and availability of multiple cable channels (and
Internet outlets such as YouTube) that serve various niches, allows easier access to distribution and therefore easier entry.
Rivalry Who are IMAXs rivals? Studios such as Regal or film studios such as Sony and Disney. Competition among movies
is not necessarily a zero sum game this is based on the observation that simultaneously released good movies do well in
the box office. Moreover, studios reduce rivalry (especially for big-budget, high risk) between movies by releasing them on
dates/weeks where they do not have competition from other movies in the same genre. Buyers Low switching costs give
buyers considerable power on where to spend their entertainment money. Suppliers While star directors, actors and
producers may have tremendous power, other inputs into film production and distribution do not have as much power.
Buyer (97): ow threat at retail level; low to moderate threat at wholesale level and via corporate gift channels SupplierLow
to moderate threat. Although Rogers is too small to command change from its supplier, Rogers can change suppliers.
RivalryModerate and increasing threat. Differentiation and Rogers strong brand presence in Victoria has historically limited
rivalry there; however, Bernard Callebaut has entered that market, and large players, such as Godiva and Lindt, are
increasingly moving into the segment drawn by the attractive growth and margins in premium chocolate. New Entrants igh
threat; few barriers to entry, although the Rogers brand is strong in Victoria Sub Moderate threat. Although chocolate is a
suitable gift for someone you dont know very well, and most people like chocolate, other products (e.g. wine) also fit the bill
very well. As health and social concerns increase, some substitution away from chocolate will occur, particularly as baby
boomers age and are challenged to maintain a healthy weight. The premium chocolate segment is likely to suffer less han
other segments, however, because volume chocolate buyers may move up to affordable luxury chocolate if they are
decreasing their overall consumption KSF: Luxury packaging and superior in-store displays. Extensive distribution. Known
brand name. Seasonal variations. Tradition seems to be a factor, evidenced by the longevity of most chocolate companies.
External Environment (PEST)Political(Legislation, govt involvement)Economic future( GDP, Interest rate, Currency
fluctuations) Socio-cultural future( Shifts in social valuesDemographic change) Technological future( Rate of new
technology adoption R&D expenditure by rivals) 1. Define the industry boundary2.Identify the players in each force
3.Implications( Implication for the firm-level action/performance)
RBV/ VRIO Model Is the resource Valuable?Enable a firm to formulate and implement strategies that improve its efficiency
or effectiveness Rare?Organizational resources also possessed by competitors are not sources of competitiveadvantage
Common strategies based on similar resources give no one firm an advantage Competitive advantages are gained only from
uncommon resources, resources hat are rare to other competitors Can the resource be Imitated Difficulty in imitating
resources is key to value creation because it constrains competition Profits generated from inimitable resources are more
likely to be sustainable Can organization foster efficiency of resource usage? Coordination between different kinds of small
activities within a firm Coordination refers to both formal and informal mechanismsFormal: org. structure, operating
proceduresInformal: org. culture Today (Awareness) 3 months (Build capability) 6 months (Commit) 12 months (Adoption)
2 years (Reinforce) 5 years (Recycle)