Chapter 11 – Management Decision and Control
2. What competitive threats does Sony face? From which companies and geographic
regions? How does Sony stack up against these competitors?
Answer: Samsung Electronics and LG Electronics are putting pressure on Sony
with the release of their OLED televisions. Sharp, on the other hand, is focusing on
3. Is it possible for a diversified company like Sony to be an innovation leader and
stay profitable? What does its recent company performance suggest?
Answer: Sony’s struggles to be profitable have caused some analysts to question is
level of diversification. In 2009, the company lost money in most of its core areas,
profitable only in its music and film divisions. After a small profit in 2010, Sony
again lost money in 2011. By 2012, the company’s CFO called the situation critical.
4. Should Sony’s R&D efforts be focused on a limited number of “core” products, or
should it aim to be an innovation leader in each single business subsegment that it
has? Do you think Sony should subsidize the unsuccessful R&D efforts that
produce products which do not turn profits?
Answer: This is a difficult question to answer. It is important for companies,
especially those in industries like electronics where innovation is essential, to create
an environment that encourages people to think outside the box, be creative, and try
new things. If Sony chooses too narrow of a focus, the ability of its R&D teams to
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Chapter 11 – Management Decision and Control
5. Do you think excessive diversification is Sony’s problem? Do you think the
problem is that Sony’s products are targeting the upscale high-income consumer
group, when most consumers are looking for cheap affordable goods? Why or why
not?
Answer: Over the years, Sony has diversified into several new areas. However,
many students will probably agree that over-diversification is not Sony’s real
problem. Instead, students are likely to suggest that Sony’s difficulties lie with its
lack of innovation and complacent attitude. In its heyday, Sony was renowned for
In-Depth Integrative Case 3.1: The Tata “Nano”: The People’s Car
1. What inspired Tata Motors to build the Nano? Why was there a need for an
inexpensive car in India?
Answer: For over a half century, Tata’s strategy has revolved around a deep
understanding of the implications of economic factors and how that can be
translated into desirable customer products. To achieve this, Tata relies on cutting
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Chapter 11 – Management Decision and Control
2. What innovative steps did Tata undertake to design the Nano in a way that would
meet the $2,500 price tag? Do you think the low price automatically means poor
quality? How did Tata Motors address the quality issue while developing its budget
car?
Answer: Tata began its design process for the Nano by first figuring out what its
target customers could pay for a car and then working backward from that price.
The company’s innovative approach required the ability to “think outside the box”
and challenge many more traditional approaches to design and manufacturing. Tata
3. What caused delay in Nano’s launch? What important features of the Indian
economic environment were key factors that caused the problem? What does this
story teach about the risks of doing business in India?
Answer: Tata had initially planned to manufacture the Nano at a newly built plant
in Singur, West Bengal, India. However, after purchasing what it had thought was
government-owned land, Tata discovered that the West Bengal government, in an
effort to attract Tata, had actually acquired the land from local farmers by imposing
4. Would you agree that introduction of the Nano to the world auto market will be
setting new trends in the auto industry, and possibly reshaping the industry? What
did Tata Motors teach other automakers in terms of leadership and innovation?
Answer: Many students will probably agree that the Nano has changed the world
auto industry. In a manner similar to Volkswagen, Tata has shown the industry that
a market exists for basic transportation at a low cost, especially in the emerging
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5. Do you agree that there is a future for low budget cars like Nano in other markets
besides India? Do you think Tata Motors is going in the right direction by trying to
develop its low cost Nano models adapted to European and U.S. markets? How
would you evaluate a likelihood of success of the Nano in the U.S. market? What
should Tata Motors do to win American consumers?
Answer: Students may be divided on this issue. Most will agree that the Nano could
be a big seller in other emerging markets, but perhaps not in the developed
countries. Some students, for example, may suggest that the small size of the car
and its lack of comfort features will make it less attractive to U.S. consumers;
however, others may argue that U.S. consumers have shown a willingness to try
In-Depth Integrative Case 3.2: The Ascendance of AirAsia: Building
a Successful Budget Airline in Asia
1. What is the macro and industry environment in the Southeast Asian region for the
entrance of new budget airlines? What opportunities and challenges are associated
with this environment?
Answer: Competition for the Southeast Asian budget traveler has increased
significantly in recent years as more carriers have entered the market. These new
entrants are attracted by the large number of potential travelers, and the fact that
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2. How might demand for low-fare service differ in the Asia-Pacific region from
North America and Europe?
Answer: Substantial opportunities have been created for low-fare airlines in Asia by
the relatively low income levels in most Asian countries, the availability of
alternative modes of transportation, and the low percentage of the population that
the same customers and are more likely to target individuals who would otherwise
not travel by air. This is also in line with the socially stratified nature of these
cultures, which is not the case, for example, in the U.S.
3. Compare AirAsia’s generic strategy (cost leadership, differentiation, focus) with the
strategies of other incumbent carriers and with Southwest and Ryanair. How is it
similar to and different from the strategies of those carriers?
Answer: AirAsia is trying to imitate Southwest’s successful people-oriented
strategies and Ryanair’s efficient operational strategies. However, Southwest and
Ryanair emphasize those strategies in order to differentiate themselves from a large
number of low-cost providers in their highly competitive and relatively saturated
American and European markets, respectively. On the other hand, AirAsia is an
imitator in a market with limited competition and growing demand from a
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4. Did Fernandes weigh the range of political, economic, and operational uncertainties
and risks when he took over AirAsia? What risks might he have overlooked?
Answer: The case indicates that Fernandes was well-aware of most of these risks,
especially having worked in a decision-making capacity in the same geographic
region. He seems to have also taken appropriate steps in seeking professional
advice in the low-fare airline industry from Conor McCarthy of Ryanair and others.
5. How would you describe Fernandes’s entrepreneurial strategy?
Answer: Most students will probably agree that Fernandes possesses a strong
entrepreneurial spirit and the determination necessary to make his dreams come
6. How should AirAsia respond to the challenges posed by (a) new low-fare carriers
entering the Asian marketplace and (b) low-fare strategies pursued by incumbent
carriers? How would you characterize the competitive dynamics in this market?
Answer: AirAsia has the advantage of being first-to-market, which gives it an edge
over competition in terms of brand image, customer loyalty, and government
support. Moreover, AirAsia has an advantage over potential multinational
competitors due to its established knowledge of the Asian culture. AirAsia also
seems to have the resources, credibility, and planning capacity necessary for
expansion into international markets and/or going public before many of its
maintain positive relations to rally the support of the government. This can be
accomplished through finding mutually motivating goals so that AirAsia can be
perceived as a contributor to the national economy, rather than a destroyer of the
established carriers.
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7. How do you think the Asian passenger air transport marketplace will shake out?
What lessons can be drawn from the North American and European experience?
Answer: It is likely that the Asian market will eventually be very similar to the
North American and European markets. As more low-fare airlines enter this
promising market, it will become more competitive, with price dominating all other
criteria in consumer decisions and choices. Other promotional tools will be
necessary to create and maintain customer loyalty, including mileage accumulation,
8. What is your assessment of AirAsia moving beyond its historic strength in
Southeast Asia to Australia, China, India, and Europe?
Answer: Students may be divided on this question. Some will suggest that Air Asia
has a proven ability to successfully operate a budget airline and should capitalize on
that ability by expanding into similar markets such as China and India. Students
taking this point of view will probably suggest that expanding into the new markets
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