Industrial Organization & Business Strategy Corporate Design January 14, 2019

1. Could you think of any link between a firm's diversification strategy and its corporate design?

2. How does the choice of corporate structure (divisional versus functional structures) evolve over time as a firm grows out of its start-up format and turn into a bigger mature firm? Recall Caterpillar reorganized itself from a functional structure, adopted in its early days, into a divisional / product structure.

3. As other modern machineries, robots are becoming increasingly flexible and capable of being adapted to a rich variety of products quickly. Using the concept of complementarity, explore the consequences of such technological changes on optimal corporate organizational design.

4. Reflect on Apple's corporate structure to explain how it is conducive to generating star- products? Further explore possible trade-offs implicit in the existing design. How might the extremely functional structure of Apple have shaped the firm's growth strategies over the recent years? Why might Apple's extremely functional structure have made the Chinese market more critical for the firm? Is there any link between a firm's functional structure and its internationalization strategy?

5. 3M is a multinational conglomerate that produces more than 55,000 products. The firm has recently seen its market share shrinking and stock prices declining. A new CEO has been brought in to reinvigorate the firm. To encourage innovation, the CEO has instated the rule that 30 per cent of the products from each division should be new each year. The rule will be used to reward divisional managers. Carefully analyse the likely impact of the rule on the future performance of the firm.

6. Empirical evidence from franchise retailing suggests that, even when stores have similar characteristics, the mother company resorts to a mix between company-owned stores and franchised ones. How can this be justified?

7. A firm has been traditionally holding high inventories through the ups and downs of the economy. It has also been rewarding its employees using a piece rate incentive system. Keeping high levels of inventory is costly. And the firm is seeking to introduce a cap on its inventory level. Does the move sound optimal? Think of complementarity.

8. Use the ideas of multi-tasking, incentives and efficiency to justify why Alphabet has set up Google X. What lessons have Google learnt from the commercial failures of the Bell lab and Xerox's PARC?

9. A critique of Google's X has been that the complex has entirely focused on radical inventions at the cost of incremental innovations. In a competitive market, incremental innovation is primarily the source of competitive advantage. And if the enterprise is going to survive, it should at least equally aims at incremental innovations. Could Google's X successfully pursue both radical inventions and incremental innovations? Hint: Think of complementarity!

10. Why did Blockbuster fail to respond to the rise of Netflix? Any lessons from the complementarity theory?