Teaching Note: Case 2 Edward Marshall Boehm, Inc.

Teaching Note: Case 2 Edward Marshall Boehm, Inc. Case Objectives 1. To provide an introd ction to the concept al !ramewor" o! strategic management. 2. To introd ce st dents to the process o! pro#lem identi!ication and potential sol tion anal$sis that will #e sed in case disc ssions thro gho t the semester. %ee the ta#le #elow to determine where to se this case: Chapter Use 1: %trateg$ Concept 2: E)ternal Environment *: Internal +nal$sis /: Intellect al +ssets 0: B siness &evel %trateg$ 1: Corporate-&evel %trateg$ 3: Entreprene rial %trategies 5: %trategic Control 16: 4rgani7ational 2esign 11: %trategic &eadership 12: Managing Innovation Case ! nopsis Edward Marshall Boehm, Inc. is a small, high-8 alit$ porcelain art o#(ects compan$ that has #een ver$ s ccess! l, partic larl$ at prod cing images o! vanishing species o! #irds. These pieces are comple) sc lpt res selling !rom 9166 to over 926,666, and are so ght #$ some sophisticated collectors. The compan$ is r n #$ Mr. and Mrs. Boehm :prono nced ;#eam<=: he is the artist and master o! the comple) hard paste porcelain man !act ring process' she is in charge o! the mar"eting and !inancial aspects o! the # siness. +t the end o! the case, demand !or the artistic creations is growing, and man$ o! the compan$>s past policies no longer seemed appropriate. The Boehms wanted to position the compan$ !or the long r n. Their stated goals !or the compan$ were ;to ma"e the world aware o! Mr. Boehm>s artistic talent, to help world wildli!e ca ses #$ creating appreciation and protection !or threatened species, and to # ild a contin ing # siness that co ld ma"e them com!orta#l$ wealth$, perhaps millionaires.< ?ow sho ld the Boehms proceed@ Ke Concepts &eadership !or strategic management' s staina#le competitive advantage' vision, mission, strategic o#(ectives Ind str$ competition !ive !orces' general environmental !actors ,al e-chain anal$sis' reso rce-#ased view o! the !irm' ,.IN Intellect al and h man capital Competitive strateg$' generic strategies 2iversi!ication' s$nerg$ 4pport nit$ recognition In!ormational vs. #ehavioral control 4rgani7ational str ct re' ! nctional str ct re &eadership' learning organi7ation Innovation' scope o! innovation

Teaching Note: Case 2 Edward Marshall Boehm, Inc.

"eachin# $lan It>s possi#le to as" st dents to read this short case in class d ring the 2nd or *rd class meeting, a!ter the$>ve had a chance to read and disc ss Chapter 1. This case can #e sed to demonstrate how all the components o! strategic management are necessar$ in order to achieve a s staina#le competitive advantage. The Edward Marshall Boehm stor$ contains short e)amples o! almost all the ma(or concepts contained in the te)t#oo", so the instr ctor can se the case with Aig re 1.* to show how strategic anal$sis, !orm lation, and implementation are lin"ed. Either se the case BowerBoint slides or as" the disc ssion 8 estions directl$. +s st dents respond, either write answers on the #oard or re!er to the BowerBoint slide answers. +s $o #egin the disc ssion, it might #e interesting to st dents to view the Boehm we#site at http:CCwww.#oehmporcelain.comC . !%mmar o& 'isc%ssion (%estions ?ere is a list o! the s ggested disc ssion 8 estions. Do can decide which 8 estions to assign, and also which additional readings or e)ercises to incl de to a gment each disc ssion. .e!er #ac" to the Case 4#(ectives Ta#le to identi!$ an$ additional readings andCor e)ercises so the$ can #e assigned in advance. 1. Ehat sho ld the strateg$ o! Edward Marshall Boehm #e@ 2. Is there a certain se8 ence o! actions that wo ld #e #est to ta"e when developing these strategies@ *. Ehat roles do goals, and speci!ic policies, r les and limits to decision-ma"ing, pla$ in esta#lishing strateg$@ 'isc%ssion (%estions and )esponses )e&erencin# Chapter *+ Introd%ction and ,nal -in# .oals and Objectives 1. What should the strategy of Edward Marshall Boehm be? %ee Chapter 1, E)hi#it 61: Strategic management consists of the analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages: strateg$ directs the organi7ation toward overall goals and o#(ectives' incl des m ltiple sta"eholders in decision ma"ing' incorporates #oth short-term and long-term perspectives' recogni7es trade-o!!s #etween e!!icienc$ and e!!ectiveness. +n interesting 8 estion that the instr ctor can as" at this point is: what business is Edward Marshall Boehm in? %ome st dents might sa$ porcelain man !act ring, some might sa$ art. The answers to this 8 estion will help st dents nderstand the importance o! vision and mission: the leader m st have a clear idea o! the p rpose o! the # siness,

Teaching Note: Case 2 Edward Marshall Boehm, Inc.

and who it competes with, in order to cra!t strateg$. I! the # siness is porcelain man !act ring, the !oc s might #e on improving the man !act ring process' i! the # siness is selling collecti#le art o#(ects, the !oc s might #e on art design capa#ilities and mar"eting. %ee Chapter 1, E)hi#it 61: he primary role of the organizational leader is to articulate vision, mission and strategic ob!ectives. &eaders m st also #e proactive, anticipate change and contin all$ re!ine changes to their strategies. &eaders m st comm nicate their initial vision o! the organi7ation>s p rpose: what was the original goal that was "massively inspiring, overarching, and long#term$, that represented a destination that is driven by and evokes passion? ?ow well did Mr. Boehm seem to do this@ It appears !rom the case that his passion, his love, was !or nat re and wildli!e ca ses, especiall$ tr$ing to preserve the images o! vanishing species o! #irds. This passion appeared to inspire his designers and artists to do their ver$ #est wor". + mission encompasses #oth the purpose of the company as well as the basis for competition and competitive advantages% 4rgani7ations m st respond to m ltiple constit encies i! the$ are to s rvive and prosper, and the mission provides a means o! comm nicating to diverse organi7ational sta"eholders. The mission o! Edward Marshall Boehm is clearl$ stated. The Boehms were interested in: :1= having Mr. Boehm>s art recogni7ed and honored in the art world, :2= s pporting nat re and wildli!e ca ses in a signi!icant wa$, :*= and #eing ver$ wealth$ as a res lt o! their compan$>s s ccess. This tells #oth their emplo$ees and their c stomers what the compan$ stands !or, and the "ind o! prod ct that the compan$ will prod ce: high-end 8 alit$ pieces depicting vario s wildli!e, especiall$ #irds. +nticipating that things might change, the leader m st esta#lish strategic ob!ectives to operationali7e the mission statement. That is, o#(ectives help to provide guidance on how the organization can fulfill or move toward the "higher goals$ in the goal hierarchyF the mission and vision. +t least one o! the o#(ectives esta#lished in the case was to ! rther develop the techni8 es o! high 8 alit$ porcelain man !act ring. This o#(ective has implications !or how to ac8 ire #oth tangi#le and intangi#le reso rces, how to monitor and control per!ormance, how to anal$7e opport nities, manage innovation, and create an e!!ective str ct re to handle growth. It re8 ires doing an anal$sis o! the e)ternal environment, #oth relative to general !actors that might a!!ect how the prod ct is positioned in the mar"et, and also who the compan$ is competing against !or that mar"et. It re8 ires also doing an assessment o! internal reso rces and capa#ilities !or prod ction o! the high 8 alit$ prod cts. 2. s there a certain se!uence of actions that would be best to ta"e when de#elo$ing these strategies?

2 ring strategic anal$sis, the leader does ;advance wor"< to anticipate n!oreseen environmental developments, identi!$ nanticipated reso rce constraints, assess changes in his or her pre!erences !or how to manage. 2 ring strateg$ !ormation, depending on the t$pe o! organi7ation str ct re, the leader might incl de "e$ individ als in a disc ssion

Teaching Note: Case 2 Edward Marshall Boehm, Inc.

aro nd selecting which strategies might #e #est to implement at which level within the organi7ation. In strateg$ implementation, the leader m st ens re proper strategic controls and organi7ational design, and esta#lish e!!ective means to coordinate and integrate activities within the !irm as well as with s ppliers, c stomers and possi#le alliance partners. The #asic 8 estion strategic management tries to answer is: &ow can we create competitive advantages in the marketplace that are not only uni'ue and valuable but also difficult for competitors to copy or substitute? The Boehms m st assess how ! nctional areas and activities ;!it together< to achieve goals and o#(ectives, and whether past policies are still appropriate. ?ere is where the other chapters in the #oo" are applica#le. %ee E)hi#it 1.*: )e&erencin# Chapter 2+ ,nal -in# the E/ternal Environment 0 %ee the segments o! the e)ternal competitive environment that incl de competitors, c stomers, and s ppliers. (orter)s five forces model allows strategists to anticipate where the ind str$ might #e most v lnera#le. %ee E)hi#it 2.G. I! the Boehms are considered to #e in the # siness o! selling collecti#le art o#(ects, there is not a lot o! competition, nor man$ threats !rom s ppliers, c stomers, or new entrants into the ind str$. .egarding the general e*ternal environment, Boehm m st consider the politicalClegal, economic and glo#al, socioc lt ral and demographic, and technological !orces that might a!!ect the a#ilit$ o! the !irm to get its prod ct to mar"et and s stain sales. The socioc lt ral and demographic !orces seem to #e the most important ones !or Boehm to consider. )e&erencin# Chapter 1+ ,nal -in# the Internal Environment 0 %ee the concept o! the resource#based view of the firm, and the three "e$ t$pes o! reso rces: tangi#le reso rces, intangi#le reso rces, and organi7ational capa#ilities. 2etermining whether the internal reso rces are val a#le, rare, di!!ic lt to imitate, or di!!ic lt to s #stit te :+,-.= can help a !irm s stain a competitive advantage. %ee E)hi#it *.1. It>s possi#le that Boehm has all these attri# tes, #ased on the val a#le, rare, and ni8 e porcelain process Edward Boehm developed, and on the art design capa#ilities that are di!!ic lt !or a competitor to !ind a s #stit te !or. In addition, Boehm m st assess the relationships #etween the elements in its value chain. Ever$ activit$ sho ld add val e. Ta"e a loo" at E)hi#it *.1 to see the val e chain activities. It ma"es sense !or Boehm to !oc s attention on technolog$ development o! the porcelain process, man !act ring operations, and mar"eting and sales. ?ere is where Boehm can add val e.

Teaching Note: Case 2 Edward Marshall Boehm, Inc.

)e&erencin# Chapter 2+ ,ssessin# Intellect%al Capital 0 %ee the concepts o! intellectual capital and human capital, #oth o! which are intangi#le assets that a compan$ s ch as Boehm needs to have in order to compete s ccess! ll$. Intellect al capital is a meas re o! the val e o! a !irm>s intangi#le assets, its rep tation, emplo$ee lo$alt$ and commitment, c stomer relationships, compan$ val es, #rand names, and the e)perience and s"ills o! emplo$ees. ? man capital involves the individ al capa#ilities, "nowledge, s"ills, and e)perience o! the compan$>s emplo$ees and managers. )e&erencin# Chapter 3+ 4orm%latin# B%siness05evel !trate#ies 0 %ee the t$pes o! competitive strategies, incl ding the three generic strategies that are sed to overcome the !ive !orces and achieve a competitive advantage: 4verall cost leadership o &ow-cost-position relative to a !irm>s peers o Manage relationships thro gho t the entire val e chain 2i!!erentiation o Create prod cts andCor services that are ni8 e and val ed o Non-price attri# tes !or which c stomers will pa$ a premi m Aoc s strateg$ o Narrow prod ct lines, # $er segments, or targeted geographic mar"ets o +ttain advantages either thro gh di!!erentiation or cost leadership Hiven Boehm>s goals, low-cost leadership is not an option. It>s more li"el$ that a !oc sed di!!erentiated strateg$ wo ld wor" #est. )e&erencin# Chapter 6+ 4orm%latin# Corporate05evel !trate#ies 0 %ee the concept o! diversification. I! Boehm wants to grow, this might #e an option. %ome possi#ilities incl de: Mergers and ac8 isitions %trategic alliances Ioint vent res Internal development Ehatever the choice, it sho ld create val e !or all sta"eholders emplo$ees, s ppliers, distri# tors, and the Boehms themselves. The choice o! diversi!ication strateg$ sho ld create synergy so that all parties gain something the$ wo ld not have had on their own. Boehm might want to ac8 ire another porcelain man !act rer, sa$ !rom Britain where the cra!t has #een practiced !or a long time. )e&erencin# Chapter 7+ Entreprene%rial !trate# 8 Competitive ' namics 0 %ee the concept o! opportunity recognition, the process o! discovering and eval ating changes in the # siness environment, s ch as a new technolog$, socio-c lt ral trends, or

Teaching Note: Case 2 Edward Marshall Boehm, Inc.

shi!ts in cons mer demand, that can #e e)ploited. %ee the relationship #etween an entreprene r, the !irm>s reso rces, and the opport nities availa#le in the !irm>s

Teaching Note: Case 2 Edward Marshall Boehm, Inc.

environment. Edward and especiall$ ?elen Boehm seemed ver$ aware o! the possi#ilities here. )e&erencin# Chapter 9+ !trate#ic Control 8 Corporate .overnance 0 %ee the concept o! strategic control, especiall$ the roles o! in!ormational and #ehavioral control in the !orm lation and implementation o! strategies. %ee E)hi#it 5.2. -nformational control is concerned with whether or not the organi7ation is ;doing the right things<, while Behavioral control is concerned with whether or not the organi7ation is ;doing things right< in the implementation o! its strateg$. Boehm needs to ma"e s re eno gh in!ormation o! the right "ind is availa#le to monitor activities this is where things s ch as !inancial, 8 alit$ control, and c stomer !eed#ac" is essential' and that the appropriate role models and rewards are availa#le to "eep emplo$ees motivated. 4nce again, Edward appeared to #e the role model while ?elen "ept trac" o! important data. )e&erencin# Chapter *:+ Creatin# E&&ective Or#ani-ational 'esi#ns 0 %ee the concept o! organizational structure, re!erring to the !ormali7ed patterns o! interactions that lin" a !irm>s tas"s, technologies, and people. %tr ct re provides a means o! #alancing two con!licting !orces: the need !or the division o! tas"s into meaning! l gro pings, and the need to integrate the gro pings !or e!!icienc$ and e!!ectiveness. +s a small !irm, Boehm appears to #e #est s ited !or a functional structure, an organi7ational !orm in which the ma(or ! nctions o! the !irm, s ch as prod ction, mar"eting, .J2, and acco nting, are gro ped internall$. +ltho gh this is the most common !orm !or s ch # sinesses, there are advantages and disadvantages. The advantages o! a ! nctional str ct re incl de: Enhanced coordination and control Centrali7ed decision ma"ing Enhanced organi7ational-level perspective More e!!icient se o! managerial and technical talent Aacilitated career paths and development in speciali7ed areas The disadvantages incl de: Impeded comm nication and coordination d e to di!!erences in val es and orientations Ma$ lead to short-term thin"ing :! nctions vs. organi7ation as a whole= 2i!!ic lt to esta#lish ni!orm per!ormance standards )e&erencin# Chapter **+ !trate#ic 5eadership+ E/cellence, Ethics 8 Chan#e %ee the concept o! leadership, the process o! trans!orming organi7ations !rom what the$ are to what the leader wo ld have them #ecome. This involves: %etting a direction 2esigning the organi7ation N rt ring a c lt re dedicated to e)cellence and ethical #ehavior Thro gh Edward Boehm>s vision and the e)ample he set !or his !irm, it seems li"el$ he was a#le to n rt re this c lt re. ?e might have also gone ! rther to create a learning

Teaching Note: Case 2 Edward Marshall Boehm, Inc.

organization, one a#le to contin e his ideas and ideals #$ enco raging all emplo$ees to se their intelligence and appl$ their imagination. %ee E)hi#it 11.0. )e&erencin# Chapter *2+ 4osterin# Corporate Entreprene%rship %ee the concept o! innovation, the a#ilit$ to se new "nowledge to trans!orm organi7ational processes or create commerciall$ via#le prod cts and services sing the latest technolog$, e)perimentation, creative insights, and in!ormation !rom competitors. Be!ore proceeding, !irms m st !irst de!ine the scope of the innovation e!!orts, and m st ens re that their innovation e!!orts are not wasted on pro(ects that are o tside the !irm>s domain o! interest. In de!ining the innovation scope, a !irm sho ld answer several 8 estions: ?ow m ch will the innovation cost@ ?ow li"el$ is it to act all$ #ecome commerciall$ via#le@ ?ow m ch val e will it add' that is, what will it #e worth i! it wor"s@ Ehat will #e learned i! it does not pan o t@ Edward Boehm seemed to have #een an innovator all his li!e. Now that the !irm is possi#l$ growing, he needs to ma"e s re the a#ove 8 estions are answered #e!ore committing the organi7ation>s reso rces. +s e)plained a#ove, it>s important to consider all the !actors that go into strategic management, and decide the se8 ence o! strategic actions in order to conserve reso rces and gain !oc s. ?ere are some s ggestions !or how the Boehms sho ld proceed: Airst, gather mar"et in!ormation' %econd, # ild the name o! the compan$' Third, develop a s"illed artist as a replacement !or Mr. Boehm' 2evelop s perior prod ction techni8 es, 8 alit$ and cost controls' 2iversi!$ the prod ct line, diversi!$ internationall$. %. What roles do goals& and s$ecific $olicies& rules and limits to decision'ma"ing& $lay in establishing strategy? The choices disc ssed a#ove and in the previo s section have implications !or strategic decision-ma"ing. .egarding personal goals and values: the Boehms val ed high 8 alit$ art, s pporting wildli!e ca ses, #eing recogni7ed and honored !or their art, and #ecoming ver$ wealth$. Bro!it ma)imi7ation alone wo ld there!ore not #e appropriate. .egarding the choice o! competitive strategy: a niche or !oc s strateg$ wo ld concentrate compan$ e!!orts and there!ore dominate a single segment, prod cing higher margins thro gh relative scale economies. This wo ld then allow Boehm to p rs e more !inancial reinvestment than its competitors. .egarding functional policies, distri# tion o! prod ct sho ld #e limited to high 8 alit$ locations. Media o tlets sho ld #e selected care! ll$, and strict pricing r les sho ld #e set to signal the e)cl sivit$ o! the prod ct. Internall$, clear prod ction and 8 alit$ control proced res sho ld #e esta#lished, and onl$ 8 ali!ied

Teaching Note: Case 2 Edward Marshall Boehm, Inc.

personnel who shared the !o nders> val es sho ld #e hired. The a#ove policies m st contin e to #e consistent with val es and goals as the$ evolve.

Teaching Note: Case 2 Edward Marshall Boehm, Inc.

;<," <,$$E=E'+ The Boehms were !aced with some decisions a#o t how to proceed. ?ere>s what happened :this is not part o! the case in the te)t#oo", so sho ld #e shared with the class see the !inal powerpoint slides=: Mr. Boehm died shortl$ a!ter the date o! the case. Aort natel$, an e)tremel$ talented $o nger artist had #een wor"ing with him !or some time. This man had #eg n to share some o! Mr. Boehm>s own personal val es concerning wildli!e art and had developed s #stantial s"ills in the design o! porcelain art o#(ects. Mrs. Boehm, however, was the driving entreprene r #ehind the ! t re histor$ o! the compan$. 4ver a period o! time, she did the !ollowing things. %he !irst concentrated on developing a !irm rep tation !or a limited line o! collectors> porcelain art o#(ects. The ma(or art o#(ects were largel$ sed as promotional pieces to e)tend the rep tation o! the Boehm line. The mid-si7ed #irds were sed as the ma(or cash generator o! the # siness. The !ledglings were "ept to sell to $o nger people, to e)tend the rep tation o! Boehm to a wider mar"etplace, and to train artisans !or the compan$. To esta#lish the name o! the compan$ on a permanent #asis, Mrs. Boehm called it ;The %t dio o! Edward Marshall Boehm< ( st as there was a %t dio o! . #ens, etc. in the past. %he then got .ichard Ni)on, who was then Bresident o! the Knited %tates, to let the compan$ design a Boehm stat e as a gi!t o! state !or a signi!icant occasion. Mr. Ni)on chose a Boehm m te swan as a s$m#ol o! peace !or his impending visit to China with Mao Tse-t ng. This e)traordinar$ piece #egan to s$m#oli7e the contin ing capa#ilities i! the %t dio o! Edward Marshall Boehm. Mrs. Boehm in earlier $ears had sed as promotions sales o! Boehm prod cts to ma(or m se ms. %he had arranged a gi!t o! Boehm porcelain !rom Bresident Eisenhower to Brince Bhillip and !rom Bresident Eisenhower to Brime Minister 2ie!en#a"er o! Canada. %he was also ver$ talented in placing articles in ma(or art and ;living< maga7ines a#o t the Boehm prod ct and compan$. %he also had o#tained interviews on the ma(or television tal" shows, as well as other media o tlets. +long with Mr. Boehm, she had developed near the Trenton Boehm !actor$ one o! the world>s !inest private aviaries. %he created a m se m o! Boehm art ne)t to the !actor$. The !actor$ itsel! is a showpiece to help interest people in Boehm porcelain. Ehen the name Boehm was s !!icientl$ esta#lished, she c t the distri# tion o! Boehm prod cts to appro)imatel$ 06 retail o tlets. These were ver$ care! ll$ selected to #e the premier department stores in their areas. The compan$ ver$ care! ll$ controlled the wa$ in which the prod ct was displa$ed, sales cler"s were trained, compensated, etc. Boehm maintained a care! l control list o! those who owned ma(or Boehm prod cts in order to ens re that no one cornered the mar"et. The prod ct was priced well a#ove its competition. Nevertheless, Mrs. Boehm saw to it that p rchasers o#tained the ma(or #ene!it o! an$ appreciation in val e on the prod cts. This s pported their positioning as collectors> items in the art mar"et.

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Teaching Note: Case 2 Edward Marshall Boehm, Inc.

The Boehm>s did not want to lose control over their prod ct or concept. Conse8 entl$, with some minor e)ceptions, the$ !inanced the operation internall$. +s the compan$>s pro!ita#ilit$ grew, its capacities to #orrow grew. +t "e$ ( nct res, the compan$ also !inanced itsel! #$ enco raging its large, well-"nown c stomers to pa$ on relativel$ short terms to maintain cash !lows !or the compan$. In its technological strateg$, Boehm tried to avoid disclosing its process or !orm las !or porcelain thro gh patent p #lications. It tended to practice its porcelain art 8 ietl$ to avoid competitive inc rsions. +s the Boehm #irds #ecame more s ccess! l, the compan$ diversi!ied its prod ct line into other art o#(ects s ch as !lowers, special art displa$s having to do with a geographical area :s ch as Eg$pt or China=, and into thin porcelain pict res. The latter prod ct represents perhaps the most di!!ic lt o! all porcelain arts. Casting a thin porcelain pict re with s8 are edges, and maintaining "e$ dimensions d ring !iring, is most di!!ic lt. The compan$ has done ver$ well. Boehm ! rther diversi!ied #$ an ac8 isition o! a #one china compan$ :Malvern= in England. +nd its prod cts are now recogni7ed worldwide. C,!E U$',"E: +ltho gh ?elen Boehm died in 2616 at the age o! 35, the compan$ still appears to #e prod cing e)traordinar$ wor". There>s an pdate at http:CCwww.n$times.comC2616C11C26C# sinessC26#oehm.html +ccording to a news report, ?elen sold the # siness in 266* to Te)as-#ased ?ome Interiors J Hi!ts. In 2663, the # siness was ac8 ired #$ +pple(ac" +rt Bartners an art licensing and p #lishing compan$. B$ 2ecem#er 2663, the # siness was in danger o! closing, # t was p rchased in Ma$ 2665 #$ a partnership incl ding &ee Bar"er, a close !riend o! ?elen Boehm. %ee http:CCwww.n(.comCnewsCtimesCregionalCinde).ss!@C#aseCnews11C12/12*G125205256.)mlJcollL0 More histor$ and commentar$ on the compan$ can #e !o nd at http:CCwww.modelhorsegaller$.in!oCBCBoehmCBoehm?istor$.html

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