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Chapter 1 What is Strategy and Why is It Important?
112
ASSURANCE OF LEARNING EXERCISES
1. Based on your experiences as a coffee consumer, does Starbucks’ strategy (as described in Illustration
Capsule 1.1) seem to set it apart from rivals? Does the strategy seem to be keyed to a cost-based advantage,
differentiatingfeatures,servingtheuniqueneedsofaniche,orsomecombinationofthese?Whatisthere
about Starbucks’ strategy that can lead to sustainable competitive advantage?
ACTIVITY
This Assurance of Learning exercise is available as a Connect Assignment. The assignment can be
graded and posted automatically.
Response:
Setting Itself Apart—The student should identify key elements in Starbucks’ strategy that set it apart from
rivals. These include their unique customer experience. This experience which includes the product, the
environment it is served in, and the service itself, is intended to create an emotional attachment with their
store operations.
matchandb)havingadistinctiveproductoffering.Further,theyshouldbeabletohighlightthatthetwo
areasdescribedabovearebothdistinctiveanddiculttomatch.
2. Elements of the Hershey Company’s strategy have evolved in meaningful ways since the company’s
founding as an American chocolate manufacturer in 1900. After reviewing the company’s history at www.
thehersheycompany.com/about-hershey/our-story/hersheys-history.aspx and the links at the company’s inves-
tor relations site (www.thehersheycompany.com/investors/company-profile.aspx), prepare a one- to two-page
reportthatdiscusseshowitsstrategyhasevolved.YourreportshouldalsoassesshowwellHershey’sstrategy
passes the three tests of a winning strategy.
Response:
Strategy Evolution—The student’s report should identify how the company’s strategy has evolved from a
being a local caramel retailer to a mult-brand confection supplier with six unique brands and a global reach.
Importantly, the student should note the recent change to a master-brand strategy. Historically, Hershey has
reliedonindependentmarketingeffortsforitsbrandssuchasHersheyBars,MilkDuds,Reese’sPeanut
consumers who make up a growing market segment.
Chapter 1 What is Strategy and Why is It Important?
113
Strategy Assessment—Thestudent’sreportshouldincludespecificindicationsthatthecompany’sstrategy
is a winner to as follows.
a. Does the strategy fit the company’s situation?Yes,thecompany’sstrategyfitstheevolvingworldof
foodindustryMNE’sandfitsthecompany’sinternalstructure.
3. Go to investor.siriusxm.comandcheckwhetherSiriusXM’srecentfinancialreportsindicatethatitsbusiness
model is working. Are its subscription fees increasing or declining? Are its revenue stream advertising and
equipmentsalesgrowingordeclining?Doesitscoststructureallowforacceptableprofitmargins?
ACTIVITY
This Assurance of Learning exercise is available as a Connect Assignment. The assignment can be
graded and posted automatically.
Response:
General—The responses developed by the students may include information such as the following.
SiriusXM is a leading satellite media company that provides commercial free music from numerous genres,
live play by play sports, news and talk shows, and other forms of audio entertainment streaming to the
consumer’s home, auto, business, or even boats within 200 miles of the coast.
Is the business model working—The student should note that the company’s annual revenue has increased
steadilyoverthelastthreereportingperiodsfrom$3.8Bin2013to$4.6Bin2015,whilenetincomehas
grownfrom$186Mto$500Moverthesameperiod.Thisisanincreaseinnetprofitfrom4.9%in2013to
Cost Structure and Profit Margins—The student should identify that the company had consistently growth
inOperatingProfitwith$1.04Bin2013and$1.18Bin2015,representing6%averageannualgrowth.This
demonstratesthatthecompany’scoststructureallowsforattractiveprofitmargins.
