International Strategic Management. The examples of Ryanair, Walt Disney, IKEA and others

Table of Contents

Dogfight over Europe: Ryanair (A)
1.) Should Ryanair launch its strategy? Yes or No
2.) What will be Ryanair´s probability at I£ 98 in Irish pounds?

The Walt Disney Company and Pixar Inc.: To Acquire or Not to Acquire?
1.) Should Disney pursue the Pixar acquisition and should Pixar allow itself to be acquired?
2.) What alternative strategies could Pixar and Disney pursue to generate similar value?
3.) If Disney does acquire Pixar, what organizational challenges do you foresee for the combined entity, and how would you meet them?

TAV Airports Holding (A)
1.) How does TAV Airport Holding compare to other airport operators and what might be the reasoning behind the positioning?
2.) What could be a method/ process to come up with the last bid price offered during an auction?
3.) What should TAV Airports Holding do going forward?

Aldi: The Dark Horse Discounter
1.) What are Aldi’s competitive advantages? How did Aldi create its competitive advantages? What would you suggest Aldi should do to sustain its competitive advantages?
2.) How does Aldi's design for their business, not only externally, but operationally as well, fit with their competitive advantage (problem solved, opportunity created.)?
3) Should Wal-Mart be worried about Aldi? Should Aldi be worried about Wal-Mart? Do you believe Aldi to be at a competitive advantage of disadvantage relative to Wal-Mart?
4.) What aspects should Aldi consider before deciding on whether to include a single new item/ product in their supermarkets?
5.) Aldi’s current way of doing business slightly differs from the one described in the case. What differences to you see? What could be the reasoning behind the change?
6.) How has Aldi modified their business to different countries, why have they needed to do this?

Diageo: Innovating for Africa
1. ) What has been the biggest driver of Diageo’s global growth strategy since 2002? Is this global strategy likely to change over the next 5 to 10 years?
2.) How would you evaluate Diageo’s investments in Africa?
3.) How should Diageo respond to increasingly direct competition in the African market for alcoholic beverages?
4.) What further advice would you offer to Nick Blazquez?

The Weather Company
1.) What are the core assets of The Weather Company (TWC) when David Kenny joins in 2012?
2.) What are the challenges facing The Weather Company?
3.) What are the core assets of The Weather Company after almost two years of David Kenny’s leadership in early 2014?
4.) What skills did Kenny use to implement his vision? How would you assess his leadership skills?
5.) What are the results as of January 2014? Are the changes complete and sustainable or not? Going forward what should Kenny be most concerned about and what should he emphasize now?
6.) What can other companies learn from The Weather Channel case regarding the dealing with “big data”?

IKEA
1.) How would you assess IKEA Group’s People and Planet Positive sustainability plan? Is the plan likely to help the company transform its business? Are the plan’s targets too limited, appropriate, or too ambitious?
2.) How do you feel about the progress IKEA Group has made implementing this plan?
3.) How does IKEA’s sustainability strategy align with its business model?
4.) Which option(s) should IKEA Group pursue to address IKEA’s Wood Supply Chain sustainability? Which has the highest leverage for IKEA?

Dogfight over Europe: Ryanair (A)

1.) Should Ryanair launch its strategy? Yes or No

During the regeneration period of the oil crisis in 1985 the Ryan brothers` have launched in 1986 the airline company Ryanair and started operating the aviation service between Dublin and Luton. After receiving the licence for the more profitable route between Dublin and London, Ryanair became a direct competitor to the bigger airlines British Airways (BA) and Aer Lingus (AL). In order to succeed in the airline rivalry Ryanair differentiated itself with a low-cost strategy from its competitors in two main aspects. First of all, Ryanair set its focus on providing first-rate customer service as well as serving meals and offering other amenities like BA and AL. Secondly, Ryanair offered a flight ticket price of 98 Irish Pounds per flight with no restrictions, while BA and AL were charging their passengers with 208 Irish Pounds per flight. Those two main strategy aspects are creating a discrepancy and showing conflicting goal positions by trying to be a low-cost carrier as well as serving first-rate customer services like BA or AL.

In order to evaluate the strategic orientation of Ryanair other factors need to be considered. With the focus on the price strategy, Ryanair positioned itself between the more expensive airline companies and the cheaper alternatives, such as rail and ferry, which had considerably longer travel times. During these times, more travellers chose rail and ferry transportation because of the low-ticket price of only 55 Irish pounds. Based on these facts the threat of rivalry in the airline industry was low for Ryanair due to the differentiating low-cost strategy and thereby emerging unique selling point. In contrast to the major airline company’s BA and AL, Ryanair has provided smaller four round flights per day between Dublin and London with a 44-seat turboprop. Due to the strategy, the price segment and the flight behaviour, Ryanair differentiated itself from the established aviation industry and had so far no threat of substitutes. Assuming that AL and BA flights were usually only 60% to 70% full, Ryanair could expect fully booked flights. With the emphasis on the low-cost strategy Ryanair was focused on keeping the operational costs low. Ryanair chose to fly mainly to secondary airports in order to reduce the costs of landing and take-off charges as well as ground service costs of the airports. The target audience were travellers with a smaller budget who were looking for more affordable flight tickets. Therefore, the powers of consumers in this market segment were minimised due to the price strategy and the more expensive flight prices of the competitors. Compared to BA and AL, Ryanair had fewer aircrafts and less cost factors in matters of fuel and oil due to the smaller and standardised fleet. In comparison, the legacy carriers were more dependent on oil prices and the power of suppliers than Ryanair. The market entry in the aviation industry was not easy because of the high investment costs and the legal barriers. Facing these heavy market entry barriers, the threat of new entrants was very low. Fortunately, the father of the Ryan brothers had expert knowledge in the aviation industry and had the capital to invest a million Irish Pounds in order for his sons to start the business.

The analysis based on Porter´s 5 forces shows an advantageous differentiating strategy of Ryanair. The market entry through a new discovered market niche reveals promising prospects. The recommendation for the main strategy of Ryanair is to set the focus of being a low-cost carrier and not trying to compete in the first-rate customer service as BA or AL. Otherwise Ryanair must invest more in a first-class service and therefore can´t provide flight tickets for 98 Irish Pounds.

2.) What will be Ryanair´s probability at I£ 98 in Irish pounds?

The following figure shows the revenue, the operating expenses and the resulting operating profit per passenger of Ryanair. Derived from the exhibit 4 of the case study

it was tried to adapt the numbers of BA for Ryanair. Based on the case study the revenue per passenger was positioned by 98 Irish pounds. If BA has higher operational costs than Ryanair, the numbers of the BA chart have been reduced to create a comparison value. The operating expenses were divided into fixed and variable costs. The fixed costs for Ryanair were reduced to 65% of the BA expenses to create a comparable base. The variable costs were calculated with 56,5 %. Exhibit 2 of the case study shows the difference of US carriers and BA in matter of passenger per staff member, which can be implemented to the differentiation of BA and Ryanair.

The calculation shows a revenue of 98 Irish Pounds and an operating expense of 95,1 Irish Pounds per passenger. Based on this calculation the operating profit of Ryanair is 4,9 Irish pounds per passenger. Compared to the operational profit of BA with 11,4 Irish Pounds per passenger, the profit margin of Ryanair is much lower. This issue could be fixed by Ryanair by only concentrating on their low-cost strategy rather than providing first-rate customer service as BA and AL.

Literature:

Harvard Business School / 9-700-115 / November 21, 2007 /

Dogfight over Europe: Ryanair (A)

Harvard Business Review / January 2008 /

The five competitive forces that shape strategy by Michael E. Porter

The Walt Disney Company and Pixar Inc.: To Acquire or Not to Acquire?

1.) Should Disney pursue the Pixar acquisition and should Pixar allow itself to be acquired?

Since 1986 Disney and Pixar collaborated several years on different animation movie projects. The first feature film agreement in 1991 was in total favour for Disney. They agreed to produce three full-length 3D CG animation movies. Disney assumed the expenses of production and owned the movie rights, whereas Pixar received a participation fee of the revenue. At this time, Pixar was glad to participate in a partnership and called it going to Disney University. In 1997, the co-production agreement was a more mutual business partnership. Disney bought 5% of Pixar and thus tied Pixar to a 10-year business deal. Steve Jobs, CEO of Pixar, was eager to negotiate new conditions for Pixar in order to receive more favourable economic terms for Pixar. This led to conflicting goal positions of the two companies, which caused a breakdown of the partnership. Pixar had two options: compromising on the business conditions with Disney in order to keep the collaboration or trying to find another suitable business partner. On the contrary, Disney thought about acquiring the company Pixar.

Disney´s main strategy was to get into the animations business with the new CG technology. Therefore, the main reasons for an acquisition were the valuable assets of the innovative technology of Pixar. The unique selling point of Pixar, the own 3D computer-generated animation technology, positioned the company ahead of the competitors on the market. Furthermore, the three technologies RenderMan, Marionette and Ringmaster were the keys to Pixar´s success in the movie industry. Shown on the exhibit 1 of the case study, Pixar could gain more profit with only six movies, compared to Disney and the other competitors on the market. In comparison to Disney, Pixar´s average profit in 2005 was $242,9 in the U.S. market and $294,9 in the international market and hence much higher than Disney´s income. Therefore, Disney could also see Pixar as threat in the movie industry. Another interesting factor is the highly talented employee pool of Pixar, which is also a valuable soft asset to the success. The synergy effects of an acquisition are also beneficial for Pixar in matter of financial resources and human capital (reference: Handelsblatt, article: “Werben für die Börsenhochzeit). An ownership is necessary in order to combine the interest of both companies.

On one hand, the acquisition with Pixar would gain Disney a permanent access to the innovative technology. On the other hand, the merger would increase Disney´s market power and even position the company ahead of the other competitors as well as raising their profit tremendously (reference: Handelsblatt, article “Eine Million Zimmer”). Disney should pursue an acquisition with Pixar, whereat the price of $7 billions ($5,9 billion market capitalization) would be a fair value for such a successful company.

2.) What alternative strategies could Pixar and Disney pursue to generate similar value?

In the process of acquiring another firm different aspects need to be considered first. Primarily, uncertainties such as financial risks, the alleged advantages of the firms and the corporate culture of the companies must be exposed. Secondly, strategically alternatives need to be analysed before making a huge business step.

Alternative 1: Disney creates a strategic alliance with another competitor.

In favour for this option is the fact of building new collaboration with a partner, who might bring other input such as new business ideas or other innovative improvements to the partnership. As a strong alliance, the market share would rise and might bring Pixar in a difficult position. In contrast Disney and Pixar formed a solid cooperation through the years. The experience of the partnership with Pixar would be an advantage, because the process was adjusted during the corporate projects. Seeing Pixar as a competitor might also be a threat to business according to the technological lead.

Alternative 2: Disney and Pixar are renegotiating the contract.

As seen in the past, negotiating about a new contract can be very time consuming as well as frustrating due to different interest. Disney insists on keeping the concept of the former deal, while Pixar wants to reconsider certain points. Therefore, the potential of a conflict is high, which could lead into a dead end. Otherwise, trying to partner up again has an advantage against new collaborations in the matter of experience and knowledge about each other’s work effort.

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