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Chapter 6 Strengthening a Company’s Competitive Position: Strategic Moves, Timing, and Scope of Operations
182
ASSURANCE OF LEARNING EXERCISES
1. Live Nation operates music venues, provides management services to music artists, and promotes more
than 22,000 live music events annually. The company merged with Ticketmaster and acquired concert and
festival promoters in the United States, Australia, and Great Britain. How has the company used horizontal
mergers and acquisitions to strengthen its competitive position?Are these moves primarily oensive or
defensive? Has either Live Nation or Ticketmaster achieved any type of advantage based on the timing of its
strategic moves?
ACTIVITY
This Assurance of Learning exercise is available as a Connect Assignment. The assignment can be
graded and posted automatically.
Response:
The student should identify that combining the operations of two companies within the same industry, via
merger or acquisition, is an attractive strategic option for achieving operating economies, strengthening the
resulting company’s competencies and competitiveness, and opening up avenues of new market opportunity.
In particular, Live Nation appears to be leading the convergence of industries whose boundaries are being
blurred by changing technologies and new market opportunities.
The overall merger and acquisition strategy has resulted in Live Nation becoming the largest producer of
live music concerts in the world, based on total attendance at Live Nation events as compared to events of
other promoters, connecting nearly 60 million fans to 23,000 events for over 3,000 artists in 2013. In 2010,
Thestudentshouldalsonotethatthesemovesappeartobeoensiveasthecompanyistakingaproactive
position in a converging entertainment industry. The resulting company is much stronger than the individual
companies and now has a broader global scope.
Thestudentshouldidentifythatindustryconvergenceresultsinasignicantlysmallernumberofcompetitors
withlargermarketshares.LiveNation,throughitsmergerandacquisitionstrategyhasquicklysolidieda
dominant market share by making timely strategic moves.
The company’s 2013 Annual Report highlights the results of their strategy as follows: Live Nation is now
the largest live entertainment company in the world, connecting more than 400 million fans across all of
Chapter 6 Strengthening a Company’s Competitive Position: Strategic Moves, Timing, and Scope of Operations
183
2. Kaiser Permanente, a standout among managed health care systems, has become a model of how to deliver
good health care cost-eectively. Illustration Capsule 6.4 describes how Kaiser Permanente has made
vertical integration a central part of its strategy. What value chain segments has Kaiser Permanente chosen
to enter and perform internally? How has vertical integration aided the organization in building competitive
advantage? Has vertical integration strengthened its market position? Explain why or why not.
ACTIVITY
This Assurance of Learning exercise is available as a Connect Assignment. The assignment can be
graded and posted automatically.
Response:
KaiserPermanentehasengagedinverticalintegrationintwospecicareas.First,ratherthantreatingits
physicians as independent contractors and paying them on a per-service or per-procedure basis, it has
integrated them into the company through an attractive wage package. The net result of this is a shift in
focus from procedures and services to preventative healthcare which in turn has resulted in lower overall
3. PerformanInternetsearchtoidentifyatleasttwocompaniesindierentindustriesthathaveenteredinto
outsourcingagreementswithrmswithspecializedservices.Inaddition,describewhatvaluechainactivities
the companies have chosen to outsource. Do any of these outsourcing agreements seem likely to threaten
any of the companies’ competitive capabilities?
Response:
There are numerous choices that should allow students to provide extensive, well-developed answers to this
question. Suggested student responses may identify the following examples.
Therst exampleis IBMand GrupoGigante, oneof Mexico’sleadingbusinessgroups.Thecompanies
haveextendedtheirbusinesscontractforveadditionalyearsthroughaseriesofoutsourcingagreements.
IBM will be responsible for fully managing and monitoring the information technology (IT) infrastructure
under two managed service modes, applications and infrastructure. IBM’s outsourcing solution for Grupo
Gigante includes infrastructure services components for equipment and server hosting, help desk activation,
Chapter 6 Strengthening a Company’s Competitive Position: Strategic Moves, Timing, and Scope of Operations
184
4. Perform a thought experiment whereby two popular specialty food stores, Trader Joe’s and Whole Foods, join
forces in a strategic alliance in the near future. Conduct some research on the market niches that these food
stores operate in to determine whether there might be an opportunity for some kind of fruitful partnership.
Explain the nature of the proposed partnership, along with its potential advantages and disadvantages and
whathurdlesthetwocompaniesmightneedtoovercomeinordertobenetfromthestrategicalliance.
Response:
The student should begin by researching characteristics and strategies of both companies. Numerous excellent
sources exist to include: www.wholefoodsmarket.com, www.traderjoes.com, and www.foodnavigator-usa.
com. The student should prepare a list for comparison such as the one below which was drawn from the
sources listed:
Trader Joe’s Whole Foods
Products:
Lower prices, Private labels, Gourmet and Organic/Natural
Target Market:
Singles, Couples, and Small Families
Located in older strip centers, often outside city hub
No inside seating
Specialty grocer
Value pricing
Growth strategy:
Products:
Premium quality, Limited Private Labels,
Target Market:
Singles, Couples, and Families
Located in high traffic premium space, often in
urban centers
Store type:
Full service supermarket
With this information, the student should be able to draw some conclusions such as 1) both companies
are targeting the same general market demographic, 2) each company is targeting this demographic with a
unique product mix, typical store location, store size, and store atmosphere.
Given the complementary nature of the two stores, the student might identify a merger as a viable partnership
option. A merger would allow the new parent company to operate Trader Joe’s and Whole Foods as separate
brands maintaining their independent market strategies, product strategies, and revenue streams while
