STRT 431: Business Strategy

Fall 2024
Monday and Thursday, 8:30am-10:00am or 10:30am-12:00pm

Professor
Amanda Starc
amanda.starc@kellogg.northwestern.edu

This is a distinctly “big picture” course. The goal is not to equip you with a lot of specific analytical tools.
Instead, the aim of the course is to provide a foundation for thinking about how a firm achieves its
fundamental goal of profitability. As you gather more tools in other classes, you will have a sense of how
they fit into understanding long-run profitability.

To be successful in this course, you must spend time actively thinking about the issues. There is no
module to download, no formula to memorize, and no answer to find in the book. Not preparing for class
or expecting to passively absorb the material will do you about as much good as watching an exercise
class. The course is designed as a cohesive whole and structured to help you building your reasoning
skills. With that in mind, the deliverables are: a student profile, 5 individual assignments, 3 quizzes, and
a final exam.

Assignment Due Date and Time

Fill out teachly profile Before the first session
Individual Reflection #1 October 7, by 8:30am
Individual Reflection #2 October 14, by 8:30am
Quiz #1 October 17, during class
Individual Reflection #3 October 28, by 8:30am
Individual Reflection #4 November 4, by 8:30am
Quiz #2 November 7, during class
Individual Reflection #5 November 21, by 8:30am
Quiz #3 December 2, during class
Final Kellogg Exam Period

The fundamental question of strategy is both simple and difficult: “How can a firm make long-run
profits?” Learning how to answer this question will be the primary aim of this course. “Raise revenues
and cut costs” is the glib answer; this would indeed raise profits, but it avoids the difficult part of the
question. Namely, given a firm’s location, products, financing, customers, and legal/regulatory
constraints, what can it do to raise revenues? And, given its products, technology, organization, and
processes, what can a firm do to cut costs? And finally, what can a firm do on either of these fronts that
will not be eroded by the actions of its competitors, imitation, or new entry? These are all difficult
questions, particularly when one asks them in the context of a specific company.

The concepts, skills, and analytical tools that you will learn in this course rest on economic principles
relating to firms’ underlying organizational objectives. In particular, a business exists to generate wealth
Business Strategy STRT 431 – Fall 2024

for its owners. To that end, a firm may need to consider the world of stakeholders beyond shareholders.
Although the primary focus of this class will be the creation and capture of economic wealth, a variety
of other objectives may apply to a certain firm in particular contexts. The concepts and tools discussed
in class can be used to formulate strategy with any objective in mind.

You will find that the primary emphasis of the course is not to understand conceptually difficult material.
Instead, the course will focus on learning how to apply simple—but powerful—ideas to specific
situations. This involves three primary skills:

• Diagnosis. Can you identify the salient details of a situation and understand the strategic significance
and implications presented? The goal is to pick out the salient points from the facts and to use
economic frameworks to understand the significance of those details.

• Creativity. One theme of the course is that you cannot outperform competitors by doing the same
things they are doing. Finding new approaches and new ways to approach a situation is often the
key to a successful, profitable strategy.

• Common sense. The frameworks and tools we develop in this course need to be applied intelligently.
This class teaches you to be a better (i.e., a more systematic, logical, complete, critical) thinker about
strategy. You should not expect to learn a body of business-related facts. Instead, the aim is to teach
you skills that will help you understand the significance of whatever set of facts you face.

Course Content
The course covers four major topics. These topics are intellectual tools and conceptual frameworks
that are useful for answering the question “How can a firm earn long-run profits?”

• Value Creation and Capture – How does a firm create value for customers, and how can it retain
some of that value as profit?
• Industry Profitability – What competitive pressures does a firm face in its industry?
• Competitive Advantage – What enables some firms to be more profitable than others, even
within the same industry? How can a firm maintain, over the long term, the profit arising from
its competitive advantage?
• Boundaries and Scope of the Firm – In which business opportunities and stages of production
should firms be involved, and which should they leave to other firms?

Teaching approach
Because the aim of the course is building your own critical and analytical thinking abilities, you will
spend much of your time preparing for and engaging in class discussion. Many of our discussions will
be based on business cases. Cases tend not to have a single, tidy solution. However, there are always
better and worse answers, and valid and invalid inferences. Cases never contain all the information
you would like to have to make a decision—in this way, they are very much like real life. You may find
it frustrating to be pushed to make a decision or take a stand when you are not sure whether it is the
right one; this is the nature of real-world business decision-making. Cases often offer conflicting
information. They will require you to make judgment calls. This kind of ambiguity is also a feature of
real-world business decisions. Strategy is a field that asks a big question, and so necessarily draws on

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many of the other functional areas of business. This course aims to give you an overall vision of how
the different areas fit together in contributing to the success of the firm.

Preparation
Preparing for a case discussion means more than just reading the case. Each case assignment will include
several preparation questions. I suggest reviewing the questions before reading the case. There is no
explicit preparation task to do as you read the conceptual readings from the textbook or articles, but it
is a good idea always to be asking yourself, “Do I believe this argument? Where else does it apply? When
would this approach not be useful?”

If for some reason you are not prepared for class, I expect you to let me know before class. I know
that you are juggling work, other classes and other commitments; you don’t need to give me an
explanation. However, if you haven’t told me otherwise, then you have implicitly committed to be ready
to contribute to the class if I should call on you.

Flexibility
While I will stick as much as possible to the broad outlines on things like gradings and expectations, I
reserve the right to make change as circumstances merit. As we learn what works and what does not,
we will adjust! Indeed, a key theme of this course is that strategy is too complicated for there ever to
be a “complete plan” of how things will work. Instead, things are necessarily dynamic, unfolding with
circumstance. That couldn’t be more true than today.

Students are expected to respect Kellogg’s Code of Student Etiquette at all times.

Additional guidance will be provided during the quarter, as needed.

Readings
A course packet, which includes the cases on the syllabus, is required. This course packet is available
from the following link: https://new.study.net/. In addition to the study.net course packet, this course
also relies on a large number of readings from the popular press that are mandatory.

A recommended but optional textbook is The Economics of Strategy by David Besanko, David Dranove,
Mark Shanley and Scott Schaefer, Sixth Edition. I have also included the relevant page numbers for the
Fifth Edition in parentheses. This book is particularly useful for individuals who have little background
in economics or would like to refresh their knowledge in that area.

I may cold call you to discuss any of the required readings. There are also optional additional
readings linked in the slides: these may give further information about companies or issues we have
discussed in class. They also provide additional examples where the tools or frameworks discussed in
class would have useful application.

Diversity, Equity, and Inclusion

I strive to teach in a classroom in which everyone feels welcome to participate in class. To help me get
to know you better, keep track of classroom participation patterns and create an inclusive classroom

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environment, I will be using a tool developed by faculty and students at the Harvard Kennedy School
called Teachly. I will be asking you to enroll in the course and complete your Teachly student profile.
This is your assignment for the first day of class. A link is available in my welcome email, the syllabus,
or the slides for the first week of class.

Cold calling increases accountability and creates an inclusive classroom. I use cold calling to ensure
that each individual is prepared throughout the course and to foster the inclusion of all students and
their perspectives in the classroom discourse.

Cultivating an inclusive classroom environment enhances the educational experience for all Kellogg
students, creating opportunities to interact with peers from a variety of cultures, programs, and
professional backgrounds. One way to help to achieve inclusivity is by assigning students to groups,
rather than having them form their own groups. Another is assigning seats randomly rather than
having students choose a seat.

Electronics
Research is increasingly showing students who use devices such as laptops or tablets in class learn
less well. Specifically, students who take notes using these devices are able to recall less from class
than students who take notes by hand. I encourage you to take notes by hand. However, in addition,
electronic devices can be distracting to you and those around you. To minimize potential
distractions for other students, all electronics should be flat on your desk.

Contact Information and “Office Hours”

You can reach me by email at amanda.starc@kellogg.northwestern.edu. By far, the most effective way
to reach me is by email. If you would like to make an appointment to chat, please use the Calendly link
on Canvas. Please include a Zoom link. Additional times or modalities can be added to accommodate
student demand.

Assignments and Assessment

Individual reflection assignments (25%)
You are expected to turn in individual case assignments and respond to reflection questions.
Assignments will be posted on Canvas and collectively make up 25 percent of your grade.

Quizzes (18%)
During the quarter, there will be 3 quizzes that will take place during the first 20 minutes of class. For
in-person classes, you have to be in class to take the quiz. The quizzes will take place on October 17,
November 7, and December 2.

Exam 2 (40%)
The second exam will be during the Kellogg-specified exam period.

Class participation (17%)

This course is designed as an integrated whole. Later material builds on earlier material, and the
whole picture will not be properly understood if you miss the parts. In addition, learning to articulate

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strategic arguments and to evaluate and respond to the arguments of others is an important part of
what you will learn in this class. If you miss class, you will miss this, and there isn’t a way to “make it
up.” Arriving late to class is also strongly discouraged because it is disruptive and discourteous. Class
will start on time. If you need to be absent, please fill out the absence form on Canvas. Excessive
absences will affect your final grade.

The class participation grade provides you with an added incentive to prepare for class—the value of
your own learning should be the primary incentive. Case discussions work well as learning tools when
everyone participates. Discussion constitutes a large portion of our class time; you will have ample
opportunity to participate. I will cold call in class, both to give you an incentive to prepare for class,
and to make sure the class discussion does not collapse to a handful of students.

Extra Credit (1%)

A key component of this course is learning to apply the frameworks to new situations and to your own
lives. As such, I offer one point of extra credit to students who find an example of phenomena
discussed in class and send me a 1-page write up describing how to apply one of our frameworks.

How to study for this course

The aim of this course is to make you more rigorous, critical, precise, and thorough in your analysis of
strategy issues. In short, to change the way you think. The only way to do this is to practice it steadily
throughout the quarter. You can’t learn it by “cramming” it all just before the exam. You should think
of this course like sports, or exercise, or learning a musical instrument: you can’t really learn anything,
and you certainly can’t get better at it, by just watching from the sidelines. Practically, here are the
most important steps to doing this.

1. Come to class prepared. There is no substitute for this. If you haven’t read and thought about the
material, you won’t get very much out of what is going on.

2. Engage in class discussion. Class time is not entertainment, and you shouldn’t expect to just sit
back and listen. Engaging means both listening critically to what other people are saying, evaluating
their arguments are right, and speaking up when you think you have something to contribute.

3. Summarize and synthesize. After every class session, write yourself a one-page summary of what
was covered in class: what did we talk about, and what lessons were you supposed to take away. Note
that the purpose of this is to do it yourself. Forcing yourself to summarize and synthesize this way is
how you internalize and obtain ownership of the material. If your study group splits this up and each
does a day, you’ve missed the point; it’s not about having the one-page write-up, it’s about creating it.

4. Practice. The only way to get good at thinking in a new way is to practice it. When you meet a
strategy issue somewhere else (in the news, talking with someone, in another course, out shopping),
use the tools and frameworks of the course to understand it.

5. Consider studying with a group. Some people find it helpful to study and discuss things with a
group, some don’t. You are looking for a group that discusses carefully and thoroughly, but doesn’t
descend into protracted arguments. Once you’ve discussed as much as you productively can, drop it
and pick up the discussion in class!
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Academic Integrity
Students are expected to respect Kellogg’s Honor Code at all times. The first point of the Kellogg Honor
Code is “not to seek an unfair advantage over other students, including but not limited to giving or
receiving unauthorized aid during completion of academic requirements.” The consequences of
cheating can be failing an assignment or the course, or suspension or dismissal from the university.

You are prohibited from using generative artificial intelligence (AI) to produce any materials or content
related to this assignment. Any use of generative AI will be viewed as a potential honor code violation.
Before contemplating using generative AI for any assignment in this course, please recall following
policy for Kellogg students: “In the absence of explicit instructions from a faculty member, use of any
generative AI model for an exam or assignment is not permitted. When permitted, unless otherwise
specified by the faculty member, any use of generative AI should be accompanied by a disclosure at the
end explaining (1) what you used AI for; (2) the specific tool you used; and (3) what prompts you used
to get the results. Failure to disclose your use of AI tools is a violation of academic honesty policies.”

The members of any academic community are expected not to present as their own ideas or material
from other sources. Northwestern’s academic integrity guidelines state: “A conscientious writer
always distinguishes clearly between what has been learned from others and what he or she is
personally contributing to the reader's understanding.” See
http://www.northwestern.edu/uacc/plagiar.html for more information.

If you use text that is exactly, mostly, or even partially someone else’s words, it needs to be
attributed to that source and the quoted portion needs to be in quotation marks. If you use text that is
paraphrased from another source, it needs to be attributed. This applies even if it is something you
yourself wrote that was handed in as an assignment or published elsewhere.

I strongly recommend against the practice of cutting and pasting from a source into a “working
document” that will eventually become the final document handed in, unless you insert the
appropriate quotation marks and citations at the same time. In the context of this course, it is
acceptable to refer to concepts, frameworks, and analytical tools from the readings or class lectures
without citation. You may also refer to the material in cases without citations. However, do not quote
or paraphrase analysis from another source and present it as your own. No credit will be given for
any assignment in which there is any evidence of plagiarism. Repeated offenses will be referred
to the Honor Code Committee.

Written case assignments are expected to be the efforts solely of the individual or group turning them
in. For individual assignments, you may use discussion with classmates to brainstorm issues, evaluate
alternative approaches, and consider the merits of recommendations. Use your own judgment to
identify the important issues, to construct arguments and to develop correct conclusions. The same
rules apply to groups for group case assignments. The group should not consult the Internet, friends at
other business schools, or people who have taken the course already.

You may study for exams with others. However, once the exam has begun, you should have absolutely
no communication about the exam with anyone inside or outside the class.
Schedule of Course Readings
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Value Creation and Capture

Economics Review pre-reading

• “Note on Benefits and Costs,” Kellogg Technical Note
• “Note on Market Equilibrium,” Kellogg Technical Note

Class 1: September 23, 2024

• Course Syllabus
• “Africa’s Tech Edge,” AND “The Cashless Society Has Arrived – Only it’s in China”
• “Our Menu Is Very Darwinian.’ Leading McDonald’s in 2024,”
• “How the World Ran Out of Everything.”

Class 2: September 26, 2024

• “On the Hook: The Ill-Fated Union of an Insurance Giant and a Bail Bondsman,”
• “EVs Won Over Early Adopters, but Mainstream Buyers aren't Along for the Ride Yet.”

Class 3: September 30, 2024

• CF INDUSTRIES (Study.net packet)
• MoviePass: Unhappy Ending or Reboot? OR The Journal: “The Former MoviePass CEO on What Went
Wrong” (available wherever you access podcasts)

Optional Additional Reading:

• PRICING AND PROFIT AT CLASSPASS
• CONCEPTUAL: M. Porter, “What is Strategy?” Harvard Business Review, Vol. 74, Nov/Dec 1996, pp. 39-73.
• CONCEPTUAL: Besanko, Dranove, Shanley, and Schaefer, pp. 1-8, 10-32, 291-302 (5th: 1-7; 11-34; 362-
373).

Added Value and Irreplaceability

Class 4: October 3, 2024

• “DoorDash Allows Restaurants to Choose Commissions in Post-Pandemic Future,” OR Land of the Giants
Podcast, Season 4, Episode 1: “The Costs of Convenience” (available wherever you access podcasts)
• “Lumber Prices are Soaring. Why Are Tree Growers Miserable?”
• “The Grapelord of Napa Faces a Threat Worse Than Plague,”
• “Fortnite Creator Sues Apple and Google After Ban From App Stores.”

Class 5: October 7, 2024

• OVER THE TOP (Study.net packet)
• INDIVIDUAL REFLECTION #1 DUE

Optional Additional Reading:

• CONCEPTUAL: L. Cabral, “TV Power Games: Friends and Law & Order,” April, 2010.
• CONCEPTUAL: Besanko, Dranove, Shanley, and Schaefer, pp. 77-82, 264-266 (5th: 333-335).

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Industry Profitability

Class 6: October 10, 2024

• “How a deluge of money nearly broke the Premier League,” OR listen to The Daily: “The Super League
that Wasn’t,” (available wherever you access podcasts) which provides a lot more background on the
history of the sport. This is not necessary for class, but is interesting.
• “T-Mobile, Sprint Deal Wins Approval, Reshaping Industry,”
• “Slagel Family Farm.”

Class 7: October 14, 2024

• “Dogfight: In the Secret World of Airplane Deals, One Battle Up Close.”
• INDIVIDUAL REFLECTION #2 DUE

Class 8: October 17, 2024

• THE GLOBAL AIRCRAFT MANUFACTURING INDUSTRY (Kellogg 5-312-505) (study.net packet)
• QUIZ #1 IN CLASS

Optional Additional Reading:

• CONCEPTUAL: M. Porter, “The Five Competitive Forces that Shape Strategy,” Harvard Business Review,
Reprint #R0801E.
• CONCEPTUAL: Besanko, Dranove, Shanley, and Schaefer, pp. 236-248, 258-284 (5th: 327-333; 336-340;
344-350).

Competitive Advantage: Sources

Class 9: October 21, 2024

• “Alternative Medicine: A Big Drug Maker Moves to Play Down Mass-Market Pills,”
• “How Planet Fitness founder Chris Rondeau created the fastest growing gym chain in the US.”

Class 10: October 24, 2024

• “Choice, Happiness, and Spaghetti Sauce,” AND “Why the American Consumer Has Fewer Choices –
Maybe for Good,”
• “For AI Giants, Smaller Is Sometimes Better,”
• “The Miracle Apple.”

Class 11: October 28, 2024

• ENTERPRISE RENT-A-CAR in the US
• INDIVIDUAL REFLECTION #3 DUE

Optional Additional Reading:

• CONCEPTUAL: Besanko, Dranove, Shanley, and Schaefer, pp. 177-180, 302-327 (5th: 218-221, 373-397;
400-407).

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Competitive Advantage: Sustainability and Change

Class 12: October 31, 2024

• “Loud Hogs for Easy Riders,” AND “Harley’s New CEO Bets on Leaner Operations to Restore Hogs’
Luster,”
• “Why a Zara Store Bet Big on the Maxi Dress This Summer,”
• “What BP’s New Oil Strike Means,”
• “What Went Wrong With Zillow? A Real-Estate Algorithm Derailed Its Big Bet.”

Class 13: November 4, 2024

• NUCOR AT A CROSSROADS (HBS 9-793-039) (Study.net packet).
• “Why Netflix Is Actually Aiming for More Cancellations,” OR listen to “Netflix vs. Hollywood, Parts 1 and
2,” of Land of the Giants.
• INDIVIDUAL REFLECTION #4 DUE

Class 14: November 7, 2024

• AMAZON (A): BUILDING A RETAIL GIANT ON A PILE OF BOOKS (Study.net packet)
• “That Cool New Bookstore? It’s a Barnes & Noble” OR “Balancing the Books: How Waterstones Came
Back from the Dead,” OR “The Bookstore Strikes Back,” (The last article is much longer but has the
benefit of being written by Ann Patchett.)
• QUIZ #2 IN CLASS

Optional Additional Reading:

• CONCEPTUAL: Besanko, Dranove, Shanley, and Schaefer, pp. 77-81, 363-394 (5th: 61-67, 410-434).

Boundaries of the Firm

Class 15: November 11, 2024

• “Goose Island sale 10 years later,”
• “This Deal Helped Turn Google Into an Ad Powerhouse. Is That a Problem?,"

Class 16: November 14, 2024

• DISNEY AND THE BIG BUSINESS OF MAKE BELIEVE: FROM SILENT MOVIES TO THE STREAMING WARS
(Study.net packet)

Class 17: November 18, 2024

• “Growing Pains: To Bag China’s Snack Market, Pepsi Takes Up Potato Farming.”
• “Will Amazon Kill FedEx?” AND “How Amazon’s Shipping Empire Is Challenging UPS and FedEx,”
• “Delta Air Lines Bought an Oil Refinery. It Didn’t Go as Planned,”
• “GM, Ford Need Electric-Car Batteries, but Take Different Paths to Get Them.”

Class 18: November 21, 2024

• EVALUATING VERTICAL INTEGRATION AT AB INBEV ACROSS THE GLOBE (Study.net packet)
• INDIVIDUAL REFLECTION #5 DUE

Optional Additional Reading:

• CONCEPTUAL: Besanko, Dranove, Shanley, and Schaefer, pp. 61-76, 83-92 (5th: 41-61; 175-197).

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Capstone: Strategy and Growth

Class 19: December 2, 2024

• “In the Streaming Wars, Sony Stands on the Sidelines” AND review pages 7-13 of OVER THE TOP
• CREATING AND SUSTAINING SUCCESS AT WALMART (Available via Canvas)
• QUIZ #3 IN CLASS

Class 20: December 5, 2024

• STARBUCKS AND THE CHALLENGE OF GROWTH (Kellogg 5-211-259) (Study.net packet)

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