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The Escalation Trap: How to Manage the Escalating Momentum of One-upsmanship-Escape the Competitive Cycleby Richard A. D'Aveni
Have you and your rivals become locked into a game of one-upmanship-each trying to outdo the other by offering the customer more benefits at the same or a lower price? Customers get more and more for their money. You lose out. If so, you've fallen into what Richard A. D'Aveni calls the escalation commodity trap. In this chapter, D'Aveni diagnoses the characteristics and causes of the escalation trap and offers strategies to help companies climb back out. He provides concrete advice on how to escape the trap by restarting the momentum, destroy the trap by reversing the momentum, or turn the trap to your advantage by harnessing the momentum. Vivid company examples show both the dilemmas of the escalation trap and strategies that solve them in action. This chapter was originally published as Chapter 4 of Beating the Commodity Trap: How to Maximize Your Competitive Position and Increase Your Pricing Power.
Examines the career of Ernesto Tornquist, a cosmopolitan financier considered to be the most significant entrepreneur in Argentina at the end of the 19th century. Tornquist created a diversified business group, linked to the political elite, which integrated Argentina into the trading and financial networks of the first global economy. Provides an opportunity to understand why Argentina was such a successful economy at this time, and to debate whether its very success laid the basis for the country's subsequent poor economic performance.
Presents the final outcome of the events. The William Jurgens case presents a description from the corporation president's point of view of the series of events (as reported in the Erik Peterson (A), (B), (C), and (D) cases). The Jurgens case can be assigned with Erik Peterson (E) to give a broader perspective on Olafson's behavior and problems. This case can be handed out during class discussion of the (D) case. A redisguised version of an earlier case.
Implicitly raises the question of what Peterson should do to extricate himself from his difficulties. Should he consider resignation, go directly to the company's president to seek relief, or clarify the situation within the company? A redisguised version of an earlier case.
Describes the outcome of Erik Peterson's one-day meeting with his superior and the events of the subsequent day's meeting with the president and vice president of operations of the parent company. Students should have read the (A) and (B) cases. The (C) case may be assigned with the (D) case. A redisguised version of an earlier case.
This one-paragraph case adds to the data presented in the (A) case. A redisguised version of an earlier case.
Presents the final outcome of the events. The Richard Jenkins at SciMat case presents a description from the executive vice-president's point of view of the series of events as reported in the Erik Peterson at Biometra (A), (B), (C), and (D) cases. The Jenkins at SciMat case can be assigned with Erik Peterson at Biometra (E) to give a broader perspective on Peterson's behavior and problems. This case can be handed out during class discussion of the (D) case. A redisguised and updated version of earlier case 494-009.
Implicitly raises the question of what Peterson should do to extricate himself from his difficulties. Should he resign, go directly to his division's executive vice-president to seek relief, or attempt to clarify the situation within the company? A redisguised and updated version of earlier case 494-008.
Describes the outcome of Erik Peterson's meetings over the course of two days with a number of senior executives from the parent company. Students should have read the (A) and (B) cases. The (C) case may be assigned with the (D) case. A redisguised and updated version of earlier case 494-007.
This one-paragraph case adds to the data presented in the (A) case. A redisguised and updated version of earlier case 494-006.
This case describes the problems facing a recent MBA graduate in his job as general manager of a medical device company owned by a parent corporation. It raises issues of corporate divisional relationships and the difficulties facing an inexperienced manager who seems to be receiving little support. This case is a redisguised and updated version of earlier case 494-005, reflecting the challenges of managing in innovation-/R&D-driven industries and across multiple international sites.
Describes the problems facing a recent MBA graduate in his job as general manager of a mobile cellular company owned by a parent corporation. Raises issues of corporate divisional relationships and the difficulties facing an inexperienced manager who seems to be receiving little support. A redisguised version of an earlier case.
When it comes to fencing, be it with words or weapons, Dulci Wycroft considers herself more than the equal of any man. Only once has she ever met her match....Jack, Viscount Wainsbridge, is all charm and quick wit in the ballroom, but his impenetrable green eyes hint at darkness underneath. His dangerous work leaves no space for love-yet Dulci's voluptuous figure is impossibly tempting.He's sure it won't take him long to discover if her sharp tongue can have other, more pleasurable, uses!
After its dramatic corporate turnaround, the Swedish telecom infrastructure company Ericsson hires a new CEO to bring the former Swedish flagship company back on track. Puts students in the shoes of Carl-Henric Svanberg, an industry outsider and CEO of locks group Assy Abloy, who does not hesitate a moment when he gets the call in early 2003. Looks back on the reasons for Ericsson's current situation and the recent restructuring programs that cut the company's staff and operating expenses in half. Presents Svanberg's vision for how to re-energize the ailing company and reach profitability once again, and gives students the opportunity to debate these issues.
Eric Weiss, Harvard MBA '77, was fired only three months after joining the company. To be used with Eric Weiss (B).
In November 2007, Amazon introduced the Kindle, the first electronic reader with wireless functionality. The case describes the launch of the Kindle and provides information on representative players in the industry (or broader ecosystem) who are likely to be affected, and react: including Penguin (the leading educational publisher), Barnes & Noble (the largest bricks-&-mortar retailer), Apple and Sony (as manufacturers of competing devices), Google (as a major provider of free e-content) and Adobe (as a competitor in creating an e-book standard).
Thomas McDonald, senior vice president of Equity International, is weighing an investment in the Brazilian homebuilder Gafisa. Was this the right country? The right company? The right co-investor? The right time? McDonald would be investing alongside a Brazilian private equity firm, GP Investments, and must decide how to structure the investment. Especially, he must decide how to align his interests with those of GP. GP has recruited EI due to its prior experience with the Mexican homebuilder Homex. McDonald must also consider: Is that experience transferable to this investment?
Setting equitable and "market" level compensation for founders and early employees of startups is one of the most important elements of a new venture. It is not only central to attract and retain the best human capital for the startup, but is critical to align incentives between investors and management. This note provides a framework to think about compensation in startup ventures and is intended for entrepreneurs thinking about starting a venture, as well as for employees looking to join a young high-potential startup.
In June 2003, 10 leading international banks adopted new voluntary guidelines, called the Equator Principles, to promote sustainable development in project finance. In recent years, nongovernmental organizations (NGOs) had raised issues about the lenders' responsibilities in projects that could harm the environment and/or society. Although many banks had environmental policies in place, a uniform industry standard did not exist. The principles, borrowed from and with the active support of the World Bank's International Finance Corp. (IFC), established guidelines to ensure that banks financed only projects that were "socially responsible and reflected sound environmental management practices." Some NGOs applauded the banks' efforts, others criticized the principles for reasons related to their scope, implementation procedures, and enforcement mechanisms. The Equator banks had to decide what to do next. They could try to recruit more banks (and export credit agencies), develop implementation procedures, or respond to the criticism directly.
Equality of opportunity is endorsed universally even though, or more likely because, it can mean such different things to different people. What definition of equality of opportunity ought to figure into policy decisions? How close, or far, is the United States from providing equal opportunity? Instructors may also obtain a Teaching Note, written by this case's author, that provides suggestions for using this case effectively in the classroom.
It took BJ Lee many years to learn how to navigate the patent minefield that was the global LED industry. When his company was first spun off from the Industrial Technology Research Institute in Taiwan, he thought the essence of a good IP strategy was to develop a technology portfolio that was different from everybody else. But in the ensuing two decades of competition and litigation, he came to appreciate some of the nuances that enabled his company to have freedom to practice. This case exposes that journey and some of the learnings.
Epilogue: Creating a Culture of Leadership and Learning: What Organizations Can Do to Help Managers--and Build Competitive Advantage in the Processby Linda A. Hill
Management development has become an increasingly hot topic as organizations have come to realize that talent is an important driver of competitive advantage in the twenty-first century. Many have begun to take seriously the financial and human costs of even one failed manager and the growing body of evidence that points to the value produced by exceptional managers compared to their average counterparts. Making the business case for attracting, developing, and retaining talent is easy. Making it happen from day to day is another matter altogether. In this insightful epilogue to the second edition of her classic book, Becoming a Manager, Linda A. Hill explores what organizations can do to help managers in their journey to lead and learn. This chapter was originally published as the Epilogue of "Becoming a Manager: How New Managers Master the Challenges of Leadership."