Assessment 1: Strategy Briefing

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Global Commerce
GC (Ba/Y4/IBM/IR/004/E2)
Fall Semester, 2019/20
Assessment 1: Strategy Briefing
Weighting: 100%
Date and method of submission: week 15
Word count or equivalent: 3000 words (+/-10%)
Formative Assessment 1: Outline of Strategy Briefing (week 11)
Assessment 1: Strategy Briefing (100% of final mark)
This strategy briefing will simulate the type of analysis undertaken in multinational
corporations’ strategy units. Such briefings use current case studies and established
economic or marketing theory/historical information to outline the situation of a market,
business or political environment or technological situation. The first section of your
briefing should thus examine what the situation is in your
market/environment/technological sphere as a means to work out where your business
is standing. In the second section, you will outline more proactive proposals regarding
what your company should be achieving and how it can do this.
Students will show evidence of good independent research and reading. A minimum of
10-15 relevant and reliable research sources should be used and correctly referenced
in the paper, and sources used should go beyond the reading provided in this Module
Study Guide. Sources should be correctly cited in consistency with Harvard referencing
style. You can use graphs and images to support your strategy outline.
Students can choose to analyze the following themes from the point of view of an
international corporation as outlined in the question:
Topic 1: Regulatory Environment
You are the head of a strategy unit for a major supermarket in the United
Kingdom. The past two years have seen unprecedented uncertainty regarding
the UK’s decision to leave the European Union (Brexit). Evidently, there is a
range of possible outcomes, each with a range of important regulatory impacts.
Your company needs to ensure the supply chain of fresh food from Europe
(Spain, France, Italy) and clothing and electronics goods from central and
Eastern Europe. Outline a strategy brief for your unit that examines a) the
context of the Brexit situation, how it developed and can affect British
supermarkets, b) the possible solutions for Brexit and their legal implications of
trading ranging from cancellation of Brexit up to a no-deal WTO-terms Brexit
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and c) assess the political risk for each of these possible solutions, concluding
with your opinion of what is the most desirable outcome for your company, and
what is the most likely outcome.
2. Topic 2: Political Risk
You are an international strategy consultant for a major firm. Your boss has
given you a dossier on a client worried about deteriorating trade conditions
between the United States, Europe, China and Latin America. Your client’s firm
is a large Spain-based corporation. It sells a range of goods in its retail stores,
from clothing, to small consumer electronics to household goods. The supply
chain and contractor agreements stretch from Brazil to Mexico, through Eastern
and Central Europe and on to South-East and East Asia. Provide a strategic
briefing outlining the international and regional trade conditions, existing and
proposed regulations, and political risk of more regulations affecting these
regions (North and South America, Europe and East Asia). Include both the
negative developments as well as positive ones.
3. Topic 3: Marketing, Brand & Emerging Markets
You work for a multinational marketing and branding firm. You have been
contracted by a major Sweden-based multinational home furniture company
that wants to expand from the European market to next door markets in the
Middle East and South East Asia. Before preparing a cost-benefit analysis, and
a branding and marketing campaign, your boss wants to find out what kind of
images, ideas, brands and thinking strikes a chord among the demographics in
these regions. Pick one region and pick two or three countries to examine.
Write a briefing that outlines a) existing competitor furniture companies (both
local and international) as part of a SWOT analysis, b) the core demographics,
including economic income and other core statistics, and c) the trends, ideas
and brands that are most appreciated in those countries that could fit with your
mission of selling Swedish furniture.
4. Topic 4: Innovation
Your company is being contracted by a government in Europe to examine the
impact of the 21st century digital revolution on it. You can pick whichever
country you wish within Europe. The Government needs to understand the
impact of technologies such as the Internet of Things, Artificial Intelligence,
Integrated Digital Supply Chains and Robotics. Explain the key latest
developments and how this will provide positive and negative outcomes for the
country’s trade and business environment, as well as employment and
governmental responsibilities toward social care, healthcare and citizens’
welfare.
Formative Assessment 1 Outline of Strategic Briefing:
This outline will present the way in which you will write and present the strategic
briefing which will be the final paper, due at the end of the module. This outline will not
be marked and will instead serve to help you organise your approach and get feedback
from the module leader ahead of writing the final report.
Assessment Criteria:
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Knowledge & Understanding (50%)
The student has a comprehensive knowledge of the history, practice and
approaches to international commerce covered in the module. The student
demonstrates in-depth engagement and breadth of coverage when discussing
these topics. Moreover, the student is able to demonstrate knowledge in a
coherent and appropriate structure and organization where the main points are
developed logically and where the relevance of the material to the theme is
made clear.
What this means: This means that a good Strategy Briefing will demonstrate
good engagement with the ideas relevant to the topic selected and good
absorption of knowledge available in a range of valid research resources. It will
be logically presented in such as way as to convince the reader (the markers)
that it is a good effort at being a real-world piece of commercial strategy writing.
Cognitive Skills (30%)
The student is able to demonstrate knowledge through the use of examples,
quotations and evidence. The student will demonstrate an ability to select
relevant information and to make insightful abstractions from a clearly outline
selection criteria. The student will demonstrate an ability to cope and digest
unfamiliar information.
What this means: This means that you will demonstrate an ability to collect
information about the topics you write about, some of which will be new and
unfamiliar to you, while condensing this information into clear and insightful
points that can convince the reader of your Strategy Briefing (the markers)
Practical & Professional Skills (10%)
The student is able to write the Strategy Briefing with evident independence of
work and intellect as well as measure writing ability that provides a concise
output while retaining information and presentation ability.
What this means: This means that your work will be written in short, to the point,
way that shows an ability to explain complex ideas in a clear way; as would be
expected of your in professional commercial work.
Transferrable & Key Skills (10%)
The student is able to communicate ideas fluently in written form and using an
appropriate style of writing. This written presentation element requires students
to be able to present an assignment that is correct in terms of spelling,
grammar, and paragraphing. The student is also able to consistently reference
in accordance to Harvard style, including in-text referencing and full list of
references. Moreover, the style of the entry is written in a convincing manner,
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demonstrating understanding of the professional standards used in the real
commercial world.
What this means: This means your Strategy Briefing will be written in such a
way as to look like a real strategic business document.
ANNEX: EXAMPLE STRATEGIC BRIEFING
Blockchain beyond the hype: What is the strategic
business value? By Brant Carson, Giulio Romanelli,
Patricia Walsh, and Askhat Zhumaev
Blockchain was a priority topic at Davos; a World
Economic Forum survey suggested that 10 percent of
global GDP will be stored on blockchain by
2027.2 Multiple governments have published reports on
the potential implications of blockchain, and the past two
years alone have seen more than half a million new
publications on and 3.7 million Google search results for
blockchain.
Most tellingly, large investments in blockchain are being
made. Venture-capital funding for blockchain start-ups
consistently grew and were up to $1 billion in 2017.3 The
blockchain-specific investment model of initial coin
offerings (ICOs), the sale of cryptocurrency tokens in a
new venture, has skyrocketed to $5 billion. Leading
technology players are also heavily investing in
blockchain: IBM has more than 1,000 staff and $200
million invested in the blockchain-powered Internet of
Things (IoT).4
Despite the hype, blockchain is still an immature
technology, with a market that is still nascent and a clear
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recipe for success that has not yet emerged. Unstructured
experimentation of blockchain solutions without strategic
evaluation of the value at stake or the feasibility of
capturing it means that many companies will not see a
return on their investments. With this in mind, how can
companies determine if there is strategic value in
blockchain that justifies major investments?
Our research seeks to answer this question by evaluating
not only the strategic importance of blockchain to major
industries but also who can capture what type of value
through what type of approach. In-depth, industry-byindustry analysis combined with expert and company
interviews revealed more than 90 discrete use cases of
varying maturity for blockchain across major industries
We evaluated and stress tested the impact and feasibility
of each of these use cases to understand better
blockchain’s overall strategic value and how to capture it.
Our analysis suggests the following three key insights on
the strategic value of blockchain:
• Blockchain does not have to be a disintermediator to
generate value, a fact that encourages permissioned
commercial applications.
• Blockchain’s short-term value will be predominantly in
reducing cost before creating transformative business
models.
• Blockchain is still three to five years away from
feasibility at scale, primarily because of the difficulty of
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resolving the “coopetition” paradox to establish common
standards.
Companies should take the following structured approach
in their blockchain strategies:
1. Identify value by pragmatically and skeptically assessing
impact and feasibility at a granular level and focusing on
addressing true pain points with specific use cases
within select industries.
2. Capture value by tailoring strategic approaches to
blockchain to their market position, with consideration
of measures such as ability to shape the ecosystem,
establish standards, and address regulatory barriers.
With the right strategic approach, companies can start
extracting value in the short term. Dominant players who
can establish their blockchains as the market solutions
should make big bets now.
The nuts and bolts of blockchain
With all the hype around blockchain, it can be hard to nail
down the facts (Exhibit 1). Blockchain is a distributed
ledger, or database, shared across a public or private
computing network. Each computer node in the network
holds a copy of the ledger, so there is no single point of
failure. Every piece of information is mathematically
encrypted and added as a new “block” to the chain of
historical records. Various consensus protocols are used to
validate a new block with other participants before it can
be added to the chain. This prevents fraud or double
spending without requiring a central authority. The ledger
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can also be programmed with “smart contracts,” a set of
conditions recorded on the blockchain, so that
transactions automatically trigger when the conditions are
met. For example, smart contracts could be used to
automate insurance-claim payouts.
Blockchain’s core advantages are decentralization,
cryptographic security, transparency, and immutability. It
allows information to be verified and value to be
exchanged without having to rely on a third-party
authority. Rather than there being a singular form of
blockchain, the technology can be configured in multiple
ways to meet the objectives and commercial requirements
of a particular use case.
To bring some clarity to the variety of blockchain
applications, we structured blockchain use cases into six
categories across its two fundamental functions—record
keeping and transacting (Exhibit 2). Some industries have
applications across multiple categories, while others are
concentrated on only one or two. This framework, along
with further industry and use-case level analysis, led to
our key insights on the nature and accessibility of the
strategic value of blockchain.
Three core insights about the strategic value
of blockchain
Our analysis revealed some key takeaways about
blockchain.
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Blockchain does not need to be a disintermediator to
generate value
Benefits from reductions in transaction complexity and
cost, as well as improvements in transparency and fraud
controls can be captured by existing institutions and
multiparty transactions using appropriate blockchain
architecture. The economic incentives to capture value
opportunities are driving incumbents to harness
blockchain rather than be overtaken by it. Therefore, the
commercial model that is most likely to succeed in the
short term is permissioned rather than public blockchain.
Public blockchains, like Bitcoin, have no central authority
and are regarded as enablers of total disruptive
disintermediation. Permissioned blockchains are hosted
on private computing networks, with controlled access
and editing rights
Private, permissioned blockchain allows businesses both
large and small to start extracting commercial value from
blockchain implementations. Dominant players can
maintain their positions as central authorities or join
forces with other industry players to capture and share
value. Participants can get the value of securely sharing
data while automating control of what is shared, with
whom, and when.
For all companies, permissioned blockchains enable
distinctive value propositions to be developed in
commercial confidence, with small-scale experimentation
before being scaled up. Current use cases include the
Australian Securities Exchange, for which a blockchain
system is being deployed for equities clearing to reduce
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back-office reconciliation work for its member
brokers.5
IBM and Maersk Line, the world’s largest
shipping company, are establishing a joint venture to
bring to market a blockchain trade platform. The
platform’s aim is to provide the users and actors involved
in global shipping transactions with a secure, real-time
exchange of supply-chain data and paperwork.6
The potential for blockchain to become a new openstandard protocol for trusted records, identity, and
transactions cannot be simply dismissed. Blockchain
technology can solve the need for an entity to be in charge
of managing, storing, and funding a database. True peerto-peer models can become commercially viable due to
blockchain’s ability to compensate participants for their
contributions with “tokens” (application-specific
cryptoassets) as well as give them a stake in any future
increases in the value. However, the mentality shift
required and the commercial disruption such a model
would entail are immense.
If industry players have already adapted their operating
models to extract much of the value from blockchain and,
crucially, passed on these benefits to their consumers,
then the aperture for radical new entrants will be small.
The degree to which incumbents adapt and integrate
blockchain technology will be the determining factor on
the scale of disintermediation in the long term.
In the short term, blockchain’s strategic value is mainly in
cost reduction
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Blockchain might have the disruptive potential to be the
basis of new operating models, but its initial impact will be
to drive operational efficiencies. Cost can be taken out of
existing processes by removing intermediaries or the
administrative effort of record keeping and transaction
reconciliation. This can shift the flow of value by capturing
lost revenues and creating new revenues for blockchainservice providers. Based on our quantification of the
monetary impact of the more than 90 use cases we
analyzed, we estimate approximately 70 percent of the
value at stake in the short term is in cost reduction,
followed by revenue generation and capital relief (Exhibit
4).
Certain industries’ fundamental functions are inherently
more suited to blockchain solutions, with the following
sectors capturing the greatest value: financial services,
government, and healthcare. Financial services’ core
functions of verifying and transferring financial
information and assets very closely align with blockchain’s
core transformative impact. Major current pain points,
particularly in cross-border payments and trade finance,
can be solved by blockchain-based solutions, which reduce
the number of necessary intermediaries and are
geographically agnostic. Further savings can be realized in
capital markets post-trade settlement and in regulatory
reporting. These value opportunities are reflected in the
fact that approximately 90 percent of major Australian,
European, and North American banks are already
experimenting or investing in blockchain.
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As with banks, governments’ key record-keeping and
verifying functions can be enabled by blockchain
infrastructure to achieve large administrative
savings. Public data is often siloed as well as opaque
among government agencies and across businesses,
citizens, and watchdogs. In dealing with data from birth
certificates to taxes, blockchain-based records and smart
contracts can simplify interactions with citizens while
increasing data security. Many public-sector applications,
such as blockchain-based identity records, would serve as
key enabling solutions and standards for the wider
economy. More than 25 governments are actively running
blockchain pilots supported by start-ups.
Within healthcare, blockchain could be the key to
unlocking the value of data availability and exchange
across providers, patients, insurers, and researchers.
Blockchain-based healthcare records can not only
facilitate increased administrative efficiency, but also give
researchers access to the historical, non–patientidentifiable data sets crucial for advancements in medical
research. Smart contracts could give patients more control
over their data and even the ability to commercialize data
access. For example, patients could charge pharmaceutical
companies to access or use their data in drug research.
Blockchain is also being combined with IoT sensors to
ensure the integrity of the cold chain (logistics of storage
and distribution at low temperatures) for drugs, blood,
and organs.
Over time, the value of blockchain will shift from driving
cost reduction to enabling entirely new business models
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and revenue streams. One of the most promising and
transformative use cases is the creation of a distributed,
secure digital identity—for both consumer identity and the
commercial know-your-customer process—and the
services associated with it. However, the new business
models this would create are a longer-term possibility due
to current feasibility constraints.
Feasibility at scale is likely to be three to five years away
The strategic value of blockchain will only be realized if
commercially viable solutions can be deployed at scale.
Our analysis evaluated each of the more than 90 potential
use cases against the four key factors that determine a use
case’s feasibility in a given industry: standards and
regulations, technology, asset, and ecosystem (Exhibit 5).
While many companies are already experimenting,
meaningful scale remains three to five years away for
several key reasons.
Common standards are essential
The lack of common standards and clear regulations is a
major limitation on blockchain applications’ ability to
scale. However, where there is strong demand and
commitment, work is already under way to resolve this
issue. Standards can be established with relative ease if
there is a single dominant player or a government agency
that can mandate the legal standing. For example,
governments could make blockchain land registries legal
records.
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When cooperation between multiple players is necessary,
establishing such standards becomes more complex but
also more essential. Strong headway has already been
made by industry consortiums, as seen with the R3
consortium of more than 70 global banks that
collaborated to develop the financial-grade open-source
Corda blockchain platform. Such platforms could
establish the common standards needed for blockchain
systems.
Globally, regulators have taken varying positions, but
most are engaged rather than opposed. For example, the
US Securities and Exchange Commission’s recognition of
ICOs as securities brought ICOs under the agency’s
regulation and into the mainstream.7
In 2017, Standards
Australia took a leadership position in developing a road
map of priorities on behalf on the International
Organization for Standardization and helping establish
common terminology as a key first step.8 So far, many
governments are following a technologically neutral
regulatory approach—not promoting or banning specific
technologies like blockchain.
Technology must advance
The relative immaturity of blockchain technology is a
limitation to its current viability. The misconception that
blockchain is not viable at scale due to its energy
consumption and transaction speed is a conflation of
Bitcoin with blockchain. In reality, the technical
configurations are a series of design choices in which the
levers on speed (size of block), security (consensus
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protocol), and storage (number of notaries) can be
selected to make most use cases commercially viable. As
an example, health records in Estonia are still in databases
“off chain” (meaning not stored on blockchain), but
blockchain is used to identify, connect, and monitor these
health records as well as who can access and alter them.
These trade-offs mean blockchain performance might be
suboptimal to traditional databases at this stage, but the
constraints are diminishing as the technology rapidly
develops.
The immaturity of blockchain technology also increases
the switching costs, which are considerable given all the
other system components. Organizations need a trusted
enterprise solution, particularly because most cost
benefits will not be realized until old systems are
decommissioned. Currently, few start-ups have sufficient
credibility and technology stability for government or
industry deployment at scale. Major technology players
are strongly positioning themselves to address this gap
with their own blockchain as a service (BaaS) offerings in
a model similar to cloud-based storage.
Assets must be able to be digitized
Asset type determines the feasibility of improving record
keeping or transacting via blockchain and whether end-toend solutions require the integration of other
technologies. The key factor here is the digitization
potential of the asset; assets like equities, which are
digitally recorded and transacted, can be simply managed
end to end on a blockchain system or integrated through
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application programming interfaces (APIs) with existing
systems.
However, connecting and securing physical goods to a
blockchain requires enabling technologies like IoT and
biometrics. This connection can be a vulnerability in the
security of a blockchain ledger because while the
blockchain record might be immutable, the physical item
or IoT sensor can still be tampered with. For example,
certifying the chain of custody of commodities like grain
or milk would require a tagging system like radiofrequency identification that would increase the assurance
being provided but not deliver absolute provenance.
The coopetition paradox must be resolved
The nature of the ecosystem is the fourth key factor
because it defines the critical mass required for a use case
to be feasible. Blockchain’s major advantage is the
network effect, but while the potential benefits increase
with the size of the network, so does the coordination
complexity. For example, a blockchain solution for digital
media, licenses, and royalty payments would require a
massive amount of coordination across the various
producers and consumers of digital content.
Natural competitors need to cooperate, and it is resolving
this coopetition paradox that is proving the hardest
element to solve in the path to adoption at scale. The issue
is not identifying the network—or even getting initial buyin—but agreeing on the governance decisions around how
the system, data, and investment will be led and managed.
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Overcoming this issue often requires a sponsor, such as a
regulator or industry body, to take the lead. Furthermore,
it is essential that the strategic incentives of the players are
aligned, a task that can be particularly difficult in highly
fragmented markets. Critical mass is much lower in some
industries and applications than in others, while in some
cases, networks need to be established across industries to
achieve material benefits.
What strategic approach should companies
take?
Our research and emerging insights suggests following a
structured approach to answer the classic questions of
blockchain business strategy.
Where to compete: Focus on specific, promising use cases
There is a plethora of use cases for blockchain; companies
face a difficult task when deciding which opportunities to
pursue. However, they can narrow their options by taking
a structured approach through a lens of pragmatic
skepticism. The first step involves determining whether
there is sufficient accessible value at stake for a given use
case. Companies can only avoid the trap of developing a
solution without a problem by rigorously investigating
true pain points—the frictions for customers that
blockchain could eliminate.
Identification of specific pain points enables granular
analysis of the potential commercial value within the
constraints of the overall feasibility of the blockchain
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solution. Overall industry characteristics as well as a
company’s expertise and capabilities will further influence
this decision, as companies need to understand the
nuances of all these components to decide which use case
will generate a solid return on investment. If a use case
does not meet a minimum level of feasibility and potential
return, then companies do not even have to consider the
second step of which blockchain strategy to adopt.
How to compete: Optimize blockchain strategy based on
market position
Once companies have identified promising use cases, they
must develop their strategies based on consideration of
their market positions relative to their target use cases.
Many of the feasibility factors already discussed are within
a business’s sphere of influence; even technology and asset
constraints can be managed through trade-offs and a
series of design choices to shape a viable solution.
Therefore, a company’s optimal strategic approach to
blockchain will fundamentally be defined by the following
two market factors, which are those they can least affect:
• market dominance—the ability of a player to influence
the key parties of a use case
• standardization and regulatory barriers—the
requirement for regulatory approvals or coordination on
standards
These two factors are critical in determining a company’s
optimal strategic approach because they are integral to
achieving the coordination required (Exhibit 6).
Blockchain’s value comes from its network effects and
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interoperability, and all parties need to agree on a
common standard to realize this value—multiple siloed
blockchains provide little advantage over multiple siloed
databases. As the technology develops, a market standard
will emerge, and investments into the nondominant
standard will be wasted.
This consideration of a company’s market position will
inform which of four distinct strategic approaches to
blockchain should be deployed and, in fact, further refine
which type of use cases to focus on first.
Leaders
Leaders should act now to maintain their market positions
and take advantage of the opportunity to set industry
standards. As dominant players pursuing use cases with
fewer requirements for coordination and regulatory
approval, they can establish market solutions.
The greatest risk for these companies is inaction, which
would cause them to lose the opportunity to strengthen
their competitive advantages compared to competitors. An
example of a leader following this strategy is Change
Healthcare, one of the largest independent healthcare IT
companies in the United States, when it launched an
enterprise-scale healthcare blockchain for claims
processing and payment.9
Conveners
Conveners need to be driving the conversations and
consortiums that are shaping the new standards that will
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disrupt their current businesses. Despite being dominant
players, they cannot single handedly direct blockchain
adoption as they face greater regulatory and
standardization barriers. Instead, they can position
themselves to shape and capture the value of new
blockchain standards.
Convening tactics should be deployed for high-value use
cases—like trade finance—that cannot be realized without
a broadly shared set of standards. An example of a
convener following this strategy is Toyota, whose
Research Institute set up the Blockchain Mobility
Consortium with four global partners to focus on
blockchain solutions for critical accelerators of
autonomous vehicles: data sharing, peer-to-peer
transaction, and usage-based insurance.10
Followers
Followers should also carefully consider and implement
an appropriate blockchain strategy. Most companies do
not have the capability to influence all necessary parties,
especially when applications of blockchain require high
standardization or regulatory approval. Such companies
cannot be unaware of market innovations—they should
keep a watching brief on blockchain developments and be
prepared to move fast to adopt emerging standards. Just
as businesses have developed risk and legal frameworks
for adopting cloud-based services, they should focus on
developing a strategy for how they will implement and
deploy blockchain technology.
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Followership is a particularly risky strategy for blockchain,
given the likelihood of select players in an industry
establishing private-permissioned networks, as in freight,
for example. A follower, no matter how fast, might already
be locked out of the exclusive club that established the
initial proof of concept. Companies can mitigate this risk
by joining select existing and emerging consortia early,
when the short-term investment costs of membership are
outweighed by the long-term costs of getting left behind.
Attackers
Attackers are often new market entrants without an
existing market share to protect, so they need to seek
disruptive or transformative business models and
blockchain solutions. Attacker approaches are suited to
use cases with the highest disruptive potential through
offering a service to the market that would
disintermediate existing players. Most peer-to-peer
applications, from finance to insurance to property, fall
into this category. An example of an attacker following this
strategy is Australian start-up PowerLedger, a peer-topeer marketplace for renewable energy that raised 34
million Australian dollars through its ICO.11
Incumbents should deploy an attacker blockchain strategy
in a separate noncore digital business. Blockchain as a
service (BaaS) providers often adopt an attack strategy
because they are selling the services into—and
disrupting—industries in which they are not currently
participants. Companies pursuing an attacker strategy
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often seek partnership with a dominant company in the
market to leverage their leadership influence.
The insights from our analysis suggest that, beyond the
hype, blockchain has strategic value for companies by
enabling both cost reduction without disintermediation as
well as, in the longer term, the creation of new business
models. Existing digital infrastructure and the growth of
blockchain as a service (BaaS) offerings have lowered the
costs of experimentation, and many companies are testing
the waters. However, fundamental feasibility factors
delimit what can be scaled and when as well as the
realistic time scales for return on investment on proof of
concepts.
Assessing these factors with pragmatic skepticism about
the scale of impact and speed to market will reveal the
correct strategic approach on where and how to compete
to enable companies to start extracting value in the short
term. Indeed, those dominant players who can establish
their blockchain as the market solution should be making
the moves—and making them now.