Mays Impacts

Businesses competing with larger companies — particularly those that enter a market by acquiring an established business — will fare better if they differentiate themselves from the “behemoths” rather than imitate them or take them head-on, suggests research on the topic.

The researchers found that competitors who imitated the large newcomer had poorer performance, which was counter to prior research.

Sorescu

The phenomenon of acquiring a company to enter a marketplace — common in banking, pharmaceuticals and technology — hasn’t been studied as thoroughly as the path companies take to enter a market through other means, such as introducing a new product, says Alina Sorescu, an associate professor of marketing and Mays Research Fellow.

She and several other researchers tackled the topic in the paper “Behemoths at the Gate: How Incumbents Take On Acquisitive Entrants (And Why Some Do Better Than Others),” which has been accepted for publication in Journal of Marketing.

The research was centered on the banking industry because firms and the actions they take in this industry are well documented, Sorescu says. The researchers looked at 1995-2003 bank data from the FDIC, such as deposit summaries, and interviewed banking officials. The data covers 839 acquisitions in 583 Metropolitan Statistical Areas in the U.S. banking industry. The research specifically focuses on how banks modify their product mix when a large bank enters their market through an acquisition. In this context, the product mix of banks includes various types of loans such as, for instance, commercial and industrial loans and loans secured by real estate. Changes in product mix were assessed at the two-year and three-year marks after the acquisitions.

Results indicate that incumbents are more likely to align their product mix strategy with that of the behemoth if: (1) the incumbent is large; (2) the behemoth’s past performance has been strong; and (3) the market served by the incumbent is small. The size of the market tends to set the tone of the competition, Sorescu says. “The smaller the market, the more likely the incumbent is to imitate the acquirer,” she observes. “It’s like a big fish in a small pond making a big splash — they compete with the same small base of customers.”

Sorescu concludes it’s a bad idea to go head-on with the acquirer.

“It’s best to try to diverge from the acquiring company, even though it is a threatening presence and it is tempting to try to mimic what it is doing,” she says. “You assume the larger corporations have identified a strong path and an advisable product mix, but you must differentiate yourself from it in order to survive. The small firms that imitate the large firms may not be able to offer the same products and services as efficiently as large firms do, and they could suffer more harm than if they focused on what they already do well.”

For more information, contact Sorescu at asorescu@tamu.edu.

The research paper, “Behemoths at the Gate: How Incumbents Take On Acquisitive Entrants (And Why Some Do Better Than Others),” was in press in late 2011 at Journal of Marketing.

It is a collaboration among Alina Sorescu, Prokriti Mukherji, Jaideep Prabhu and Rajesh Chandy. Prokriti Mukherji is senior research associate at the Carlson School of Management, University of Minnesota. Jaideep Prabhu is Jawaharlal Nehru Professor of Indian Business at Judge Business School, University of Cambridge. Rajesh Chandy is Professor of Marketing and Tony and Maureen Wheeler Chair in Entrepreneurship at London Business School.

They came to Mays Business School to hear about “Business in a Turbulent Economy,” dozens of former and future business students, and they took away some lasting lessons — foremost, the importance of relationships with their fellow attendees and the presenters.

The inaugural Mays Business School Summer Learning Seminar could not have gone more smoothly, says David W. Blackwell, associate dean for graduate programs and event coordinator. “Feedback from the participants was outstanding, and the presenters felt heard and understood. There were a lot of great questions and comments from the audience,” Blackwell recalls.

Professor Asghar Zardkoohi talks about human resources to attendees at the 2011 Mays Summer Learning Seminar. (view more photos)

Keynote presentations included “The Economic Outlook for Investors and Business Decision Makers” by Mark Dotzour, chief economist and research director of the Real Estate Center, and “Domestic and Global Economies and the Implications for Human Resources” by Asghar Zardkoohi, the T.J. Barlow Professor of Management. Other presentations ranged from demystifying the Federal Reserve to props for PowerPoint.

Dotzour interpreted the economic outlook for consumers, business and government, and cited a federal debt of $43 trillion in unfunded liability for Social Security and Medicare. He said consumers are “cleaning up their balance sheets,” paying down debt and spending money again, and the business sector has “right-sized their balance sheet and is sitting on $2 trillion in cash.” The government sector, however, has postponed correction — at enormous expense to the American taxpayers, Dotzour explains. The 10-year U.S. Treasury is not signaling inflation, Dotzour says. Instead, he predicts, “the bigger threat to the U.S. economy is another wave of deflation.”

“This is not playing Barbies. It’s not fun or pleasant,” he said. “If you are not afraid of what’s going on in America right now, you are either not informed or you are pretending things aren’t the way they are.”

Several people from throughout the surrounding community attended the seminar. Sallye Lucas, who makes investments for the city of Bryan, said she came mainly to hear Dotzour speak. “He always has the latest information, and he presents it in a way anyone can understand,” she said.

Jackson Lane ’13, a finance major, says the program will be “an integral part of my future success,” and solidified his desire to be part of MBA/EMBA events. “It was a great opportunity for industry professionals, undergraduate and graduate students to see the best of what Mays has to offer,” he explains.

Craig Hooker, a prospective MBA student who attended the lunch and afternoon session, says he appreciated being involved in the Summer Learning Seminar while he was on campus for the MBA program’s Super Saturday event, an orientation for accepted MBA students that allowed them to meet their prospective professors. “I was able to make several deeper connections with former, future and current students I had met during the day,” he says

Liping Chen, an engineer with the Integrated Ocean Drilling Program at Texas A&M who has helped judge the MBA technology transfer program, considers the program a “great learning opportunity – not only learning from the informative seminars by well-known professors, but also learning from participants networking.”

“The seminars covered a broad business aspects, from practical – using Power Point in business – to a global perspective of business environment, provided a vision that any successful business should possess, pointed out the challenges and chances we are all facing,” Chen says. “I also learned from my fellow participants during breaks and the reception, and it was valuable to listen to the experience from a diverse group. I especially enjoyed the brief visit with some of the distinguished alumni.”

Bob Hancock ’82, a CPA at a Houston bank who got his bachelor’s degree from the business school, said he welcomed the opportunity to stay connected and to continue his personal education. “I couldn’t pass up the opportunity to network and to hear about the current news in the business world,” he said. “It’s important to stay connected.”

Notes from the program are posted at mays.tamu.edu/sls2011 and photos from the event are available on the Mays Flickr site.

Though he is a newcomer to social media, an executive for retailing giant Walmart has a leading role in setting social media marketing trends. Eduardo Castro-Wright “75’s lack of experience in that arena is no hindrance, he says, because the basic philosophies of doing business still apply: “The fundamentals of retailing and what the customers want, that’s not changing.”

Castro-Wright, vice chairman of Walmart Stores, was appointed the company’s president and CEO of Global ecommerce and Global Sourcing in June 2010. As such, he leads Walmart’s global e-commerce and multi-channel retailing business, and oversees the company’s global sourcing group.

Walmart Stores vice chairman Castro-Wright ’75 (right) accepts the 2011 M.B. Zale Visionary Merchant Award from Donald Zale ’55.

Castro-Wright was previously president and CEO of Walmart U.S., where he led the transformation of stores, improvements in the customer experience, and the development of a strong leadership team. He is credited with having successfully changed many of the ways Walmart serves its customers in the United States and with positioning the company well for the future.

Aggieland made an imprint on Castro-Wright, he says. Castro-Wright shared with the top students in the Mays retailing program, during a private round-table session, that his time at Texas A&M prepared him for his career and positively shaped his character. He said the same thing to a crowd gathered in Ray Auditorium in early April, when he received his award: “The years I spent here at Texas A&M have made me the person that you see in front of you today.”

The occasion for the gathering was the 2011 Visionary Merchant Award given to Castro-Wright. He delivered the annual M.B. Zale Visionary Merchant Lecture, titled “The Future of Retailing.”

Walmart’s customers are increasingly accessing merchandise online; more than 10 percent of last year’s contacts (about 1.2 billion of more than 10 billion) were made online, Castro-Wright explained.

The Internet and social media have changed advertising, making it more transparent and competitive through more personal avenues, he said. “It is changing the way we as advertisers think about how we actually capture the attention of customers,” Castro-Wright said. “The 30-second commercial is being replaced by the 30-second upload, or 30-second recommendation, or 30-second comment.”

2011 honoree Eduardo Castro-Wright ’75 (left), Donald Zale ’55 (center), Gerald Ray ’54 (right) and the Zale Scholars

The Zale lecture series was established in 1998 to honor Zale’s achievements in merchandising by recognizing the best in today’s practicing retailers.

Prior to the series, the Center for Retailing Studies held its CRS Sponsor Forum, which featured several Mays faculty members speaking to representatives from numerous companies that partner with the center.

Leonard Berry, distinguished professor of marketing and founder of the Center for Retailing Studies, spoke on “Investing in Employee Health in the Workplace.” Berry and a colleague studied 10 companies known for comprehensive workplace wellness programs. That research indicated offering health benefits in-house or making them easily accessible boosted the companies’ bottom lines and improved employees’ health and morale.

Allan Chen, associate professor of marketing, spoke on “Price Point and Price Rigidity.”

Abbie Shipp, assistant professor of management, addressed “Boomerang Employees: Letting Them Go & Getting Them Back.”

Michael Wesson, associate professor of management, addressed the topic of “Leadership: Where we’ve been and where we’re going.”

Sirmon

David Sirmon, professor of management, received the Strategic Management Society’s 2011 Emerging Scholar Award.

The SMS describes the prize as “awarded annually to a relatively young or new scholar, who displays exemplary scholarship that promises to have an impact on future strategic management practice.” The award recognizes a portfolio of work “that suggests the candidate will make fundamental contributions to the way we think about knowledge essential to achieving durable organizational success.”

I have a high school friend who told me the other day that she could guess what I was going to write about this week. I am quite confident that more than necessary has already been written about the latest New York politician to implode. I watched a brief press conference today in which the moral high ground was held by a celebrity lawyer who specializes in taking high profile clients and ratcheting up the public embarrassment to squeeze additional dollars out of people who have morally compromised themselves. At least I think she held the moral high ground. It might have been the dancer next to her who just wanted her life back.

Anthony Weiner seems oblivious to the damage he is doing to his reputation, to his party, to his marriage, and to his causes. It is clearly all about him, with his life meaning inextricably tied to his ability to retain power and the benefits that go with it. He is what he does. It is hard not to wince.

But he is not the only one. West Virginia University head football coach Bill Stewart recently resigned under pressure after being accused by a former Pittsburgh Post-Gazette reporter of asking the reporter to dig up dirt on head-coach-in-waiting Dana Holgorsen. Holgorsen, who is now the head coach, made the job somewhat easier a few weeks ago by allegedly being escorted from a casino at 3 a.m. by security personnel, leading to other rumors. WVU athletic director Oliver Luck thought that it was a good idea to hire Holgorsen while telling Stewart he would be gone in a year. This was despite the fact that Stewart had been hired after being the interim coach for a huge upset of Oklahoma in the Fiesta Bowl, and followed that up with three nine-win seasons. This is roughly equivalent to being asked to wash the socks of your girlfriend’s new boyfriend (only you get paid seven figures to do it). I think it is safe to say that we will not see any more head-coaches-in-waiting.

Stewart was understandably upset at being dumped. But he managed to take a bad situation that elicited sympathy even from people who thought he should be fired, and turn it into a permanent divorce from the university. He could not accept that it was time to move on.

Last year’s news was dominated by this same story involving Brett Favre, whose closing chapter of his career managed to combine both football and sexual harassment. As his body and his season fell apart, he finally found it in himself to say that it was over.

UPDATE: Shortly following the publication of this column, Rep. Anthony Weiner held a press conference announcing his immediate resignation from his seat in the U.S. House of Representatives.

Or did he? Few believe that John Edwards can ever be a viable presidential candidate again after his scandal. But apparently the taste of power, and fame, and money can make men do strange things. Some things are apparently so precious that they must be secured at any cost, regardless of the damage to others.

Maybe we can think of Weiner, Stewart and Favre as the Fellowship of the Ring. But what they bring to mind for me is a song from the early 70’s that the Jackson Five made famous—”Never Can Say Goodbye.”

One day they will ask me to walk away from the classroom and not come back. My name won’t be on any statues or doors on the campus. My day will have passed. And that day will be here before I know it.

I only hope, when it comes, that I have what it takes to say thanks and walk away. Because, if what you do is who you are, you never can say goodbye.

The Full-time MBA and Executive MBA programs provide experiential learning opportunities, including Washington Campus, a four-day consortium that provides residential seminars on the business-government interface. Through an inside-the-beltway interface with political leaders and policy experts, participants begin to understand the dynamics between business and public policy.

During a recent course in Washington, D.C., themed “Business and the Public Policy Process: How Washington Works,” members of Mays Executive MBA Class XII heard from U.S. Rep. Bill Flores ’76, who represents the area where Texas A&M is located.

Texas A&M Global Business Brigades just arrived back in the United States after an amazing week in Tortí Abajo, Panama. The mission of Global Business Brigades is to create sustainable change by empowering students and communities. Our organization provides a hands-on international business experience by taking a group of Texas A&M students on a week-long brigade to Central America to help micro-entrepreneurs realize their dream of escaping poverty and experiencing true economic development. With this organization, we traveled down to Panama and used our business knowledge to consult with various families and communities that need assistance. However, instead of simply giving them a material solution, such as money or some kind of donation, we instead impart knowledge. Our Texas A&M chapter uses the motto, “Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime.”

Our most recent brigade took place in Panama just a few weeks ago.

Our most recent brigade was during May of 2011, about a week after finals ended for the spring semester. While in Panama we learned a new dance move called “el choque.” If interested, you can learn this move on your own time. However, choque can have several meanings in Spanish, and one of the most literal translations is “shock.” This trip has definitely shocked me in many ways, both good and bad, on which I will elaborate.

I was shocked at the amazing bond 31 people were able to form. Our brigades in the past have been 18 and 11 students, respectively, and both times we had two brigade leaders from Global Brigades. This trip consisted of 25 Aggies, one professional from Apple, and 5 Global Brigades staff members! And yet, there is not a single person I did not get to know about. I truly feel I learned as much from interacting with these different individuals as I have through my college classes.

I was shocked at the success of Global Brigades newest model. It’s not often that an organization can completely reinvent itself, and do so successfully. However, Global Business Brigades has done just that. With an emphasis on the community and individual family goals/needs, GB has truly implemented a model that defines sustainable development. Instead of allowing the simple act of giving a physical object define our work, we learned to focus on the intangibles such as education on savings, budgets, loans, project planning, business organization, and co-operative assistance. In the long run, this knowledge is what can bring this community economic growth and can create an independence that will benefit its members in the long run.

I was shocked that I now see a long-term relationship for Global Brigades and myself. After my third brigade this past week, I truly thought this would end my time with Texas A&M GBB and Global Brigades at large. It was just an organization that I participated in during college, and amazing as it was, nothing more. However, this trip has opened up a truly remarkable plan for my life that I cannot wait to embark upon. I was taken aside by the GB staff members on the trip and literally told that this cannot be the end of my relationship with GB. Whether I come back on another brigade, come back as a translator for a summer, or as a member of the GB staff, I want to remain involved. I would take a job with GB in a heartbeat! Although, logistically there are some things to work out, it is amazing to know what kind of career opportunity could await for me with such a worthwhile organization.

Business knowledge can bring communities like this economic growth and create an independence that will benefit its members in the long run.

I was shocked at the parallels I drew between my future internship and the work in Panama. This summer I will be interning with Bain & Company. I remember preparing for the case interviews and spending countless hours addressing business problems and strategic plans and assessing issues, etc. Case interviews I was presented with included anything from qualitative marketing issues to quantitative mergers & acquisitions. For example, I had one case that was about how to open up a car rental business. In the interview, I looked at potential revenue streams, the market available for such a venture, the various fixed and variable costs associated with this project, and came to a conclusion on the reasonableness of this idea. WE DID THE EXACT SAME THING IN PANAMA! However, instead of looking at things on a corporate level, we addressed issues on an entrepreneurial level. For example, one of our families wanted to start a chicken business, and we helped him assess all the startup costs and continuation costs, his potential sales, and devised a plan for him to take out a micro-loan with the upcoming cooperative. Truly astounding, the parallels that can be found.

I was shocked at the amount of stuff I personally learned. Ask me about chicken farming, planting yucca, or Coca-Cola distribution in Panama and I can tell you almost everything you need to know!

I was shocked to realize that my love of international development work and my awesome opportunity with Bain & Company at the corporate level can actually go hand in hand. With the newly implemented idea of Professional Brigades, I can actually taken my passion for Global Brigades with me to Bain and hopefully implement some kind of partnership. In the long run, I would love to have Bain become a major partner in Global Brigades work, where each time a university across the nation goes abroad on a brigade, we send any willing Bain employee with them to give more business expertise to the work being done. I was skeptical at the thought of mixing professionals with students’ brigades at first, but after having an employee of Apple from California assist us on this past brigade, I have nothing but high hopes for this idea!

Our Texas A&M chapter uses the motto, “Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime.”

This information does not even begin to cover all the small and minor details and stories that made this trip unbelievably amazing!

• Chasing frogs around at 4 AM
• Late night sessions crunching numbers for a community member
• Dancing to Spanish music and learning moves I didn’t know were possible
• Learning that every single member in the community is probably related to each other
• Experiencing the joy of seeing the excitement of a community member when they finalized realized the benefits of the information we taught them
• Volleyball in the rain in Panama with indigenous Embera
• Attempting to learn the nasally indigenous Embera language
• Eating a freshly killed and cooked deer at the urging of one of our families
• Softball game with the community
• Late night conversations about life, our future, and our pasts
• Haircuts from the future community salon owner
• and much, Much, MUCH more!

To learn more, please visit globalbrigades.org or gbb.tamu.edu.