Question

When Walmart decided to incorporate grocery stores into some locations to create “supercenters,” was this a business-level strategy of differentiation or a corporate-level strategy of diversification? Why? Explain your answer

Franchising is widely used in the casual dining and fast food industry, yet Starbucks is quite successful with a large number of company-owned stores. For example, while McDonald’s is moving towards a 95% franchised model, 50% of Starbucks' restaurants are still company owned. How do you explain this difference? Is Starbucks bucking the trend of other food-service stores, or is something else going on?

What is going on in the world? Find a current event that is relevant to this class. Please include a link to the article and brief explanation of why it is relevant, what business concepts it is demonstrates, the significance of the news, etc. This is NOT a summary of the news; this is where you practice and demonstrate critical thinking (a key learning objective of the class).

Answer 1

Q 1) When Walmart decided to incorporate grocery stores into some locations to create “supercenters,” was this a business-level strategy of differentiation or a corporate-level strategy of diversification? Why? Explain your answer

The business-level strategy of differentiation is used to gain and sustain edge in single product market. A corporate-level strategy refers to the decisions that senior management makes and the actions it takes in the quest for competitive advantage in several industries and markets simultaneously. The decision for Walmart to incorporate grocery stores into some locations and create “supercenters” more specifically addresses where the company chose to compete, and therefore, it is a corporate-level strategy of diversification.

Q 2) Franchising is widely used in the casual dining and fast food industry, yet Starbucks is quite successful with a large number of company-owned stores. For example, while McDonald’s is moving towards a 95% franchised model, 50% of Starbucks' restaurants are still company owned. How do you explain this difference? Is Starbucks bucking the trend of other food-service stores, or is something else going on?

Higher operating expenses for company-owned restaurants, higher capital spend, and the ease in expansion through a franchisee model has encouraged other restaurant companies to shift towards a fully franchised model. As McDonald’s works on this transition, the company has been witnessing growth in operating profits. However, a franchise-based model can lead to less control of day-to-day operations, and Starbucks’ management wants to maintain a certain level of control over its stores and therefore still favors company-owned restaurants. The company wants its baristas to understand its culture, vision, and value statement, and believes that this is easier if more restaurants are company-owned. Starbucks has been able to scale up its restaurants without compromising significantly on margins.

Q) What is going on in the world? Find a current event that is relevant to this class. Please include a link to the article and brief explanation of why it is relevant, what business concepts it is demonstrates, the significance of the news, etc. This is NOT a summary of the news; this is where you practice and demonstrate critical thinking (a key learning objective of the class).

Even as the spread of COVID-19 in to China has moderated, the intensification of the spread of the virus in to the US and European region will result in a full-blown global recession. Global output could contract by a much higher quantum than what was witnessed during the global financial crisis period of 2008-09. The only uncertainty pertains to the magnitude of contraction in output that will remain contingent on the duration of COVID-19. Global policymakers have thrown the kitchen sink at it by announcing a slew of monetary easing, credit easing, re-opening up of USD swap lines and fiscal easing measures. Front-loaded policy stimulus is unlikely to avert a recession but instead work to support the recovery once COVID-19 fears fade. Over the last week, risk sentiment has improved responding to policy stimulus but we view this rally as a ‘bear market pull-back’. Hence risk aversion will likely return in Q22020 that could persist in to Q32020. A reversal is possible in Q42020 once the full-effect of COVID-19 is priced-in.

(Can't share link as per Chegg policy but picked a fairly general topic so that you can easily find articles)