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This Reading examines the challenge of achieving sustained, superior profitability. It begins by considering some trends in financial returns that raise the question of whether sustained profitability is feasible. The Reading then explores seven mechanisms that can lead to extraordinary long-term performance, including switching costs, network effects, and learning. Finally, the author considers forces outside the market that can undermine superstar firms. Overall, the author argues that a long-lasting advantage is difficult, but not impossible, to achieve.

The Hach subsidiary of global science and technology leader Danaher Corporation was about to introduce an innovative handheld water quality testing device: the SL1000 Portable Parallel Analyzer. There were, however, some critical decisions left regarding how best to bring it to market. Olaf Boettger, the Business Unit Director of Hach's Laboratory Solutions division, needed to decide on the exact timing of the launch and how the PPA would be priced and promoted. Boettger's decisions would impact a wide range of stakeholders inside and outside of the company, and he must carefully weigh a series of tradeoffs and concerns. Danaher's Business System, a culture emphasizing continuous improvement as well as a set of tools or structures that drive performance, provides him with the structure to frame these decisions. This case was used successfully as an introductory case at the start of the Darden Business School MBA program and would be useful in any class to emphasize the need for an "enterprise perspective."

Spreadsheet supplement for case UV7149.

Atera Restaurant, New York City, February 2015. Jodi Richard closed the door behind her with a ton of questions. She had just come out of the final meeting with Matthew Lightner, the executive chef of her two-Michelin-star restaurant in lower Manhattan. Matthew had just announced he was quitting to "pursue new opportunities." This was the final straw in a long string of events that had unfolded before her eyes. The departure of the multi-starred chef would leave a huge vacuum in the restaurant's organization. Worse, they has agreed that Matthew's departure would be effective very rapidly, by end of March. The situation was critical: finding a new star chef for a fashionable restaurant in the competitive lower-Manhattan food scene was going to be a huge challenge. Several other crucial questions preoccupied Jodi. Should she just close down the restaurant and rent the space out to somebody else? Should she change the restaurant concept completely, moving to something easier like a sushi restaurant? Was a trip to Japan to find a young ambitious chef an option in that respect? How would the staff feel about the chef's departure? Would they follow the exit sign as well? Learning objective: Hospitality management, culture, secure-based leadership, incentives, crisis management, entrepreneurship, restaurant management, service marketing, social networks, public relations.

Supplement to case IMD818. Atera Restaurant, New York City, February 2015. Jodi Richard closed the door behind her with a ton of questions. She had just come out of the final meeting with Matthew Lightner, the executive chef of her two-Michelin-star restaurant in lower Manhattan. Matthew had just announced he was quitting to "pursue new opportunities." This was the final straw in a long string of events that had unfolded before her eyes. The departure of the multi-starred chef would leave a huge vacuum in the restaurant's organization. Worse, they has agreed that Matthew's departure would be effective very rapidly, by end of March. The situation was critical: finding a new star chef for a fashionable restaurant in the competitive lower-Manhattan food scene was going to be a huge challenge. Several other crucial questions preoccupied Jodi. Should she just close down the restaurant and rent the space out to somebody else? Should she change the restaurant concept completely, moving to something easier like a sushi restaurant? Was a trip to Japan to find a young ambitious chef an option in that respect? How would the staff feel about the chef's departure? Would they follow the exit sign as well?

Supplement to case IMD818. Atera Restaurant, New York City, February 2015. Jodi Richard closed the door behind her with a ton of questions. She had just come out of the final meeting with Matthew Lightner, the executive chef of her two-Michelin-star restaurant in lower Manhattan. Matthew had just announced he was quitting to "pursue new opportunities." This was the final straw in a long string of events that had unfolded before her eyes. The departure of the multi-starred chef would leave a huge vacuum in the restaurant's organization. Worse, they has agreed that Matthew's departure would be effective very rapidly, by end of March. The situation was critical: finding a new star chef for a fashionable restaurant in the competitive lower-Manhattan food scene was going to be a huge challenge. Several other crucial questions preoccupied Jodi. Should she just close down the restaurant and rent the space out to somebody else? Should she change the restaurant concept completely, moving to something easier like a sushi restaurant? Was a trip to Japan to find a young ambitious chef an option in that respect? How would the staff feel about the chef's departure? Would they follow the exit sign as well?

Like several other nonprofit and for-profit industries, the higher education sector has been subject to a series of fundamental challenges in the past decade. Education used to be considered a public good, provided by nonprofit organizations that were unexposed to market pressure and had clear societal missions. Now, education is becoming a global service delivered by quasi-companies in an ever-more complex and competitive knowledge marketplace. To cope with these challenges, higher education institutions need an appropriate strategy, a necessity reflected in numerous calls for research on strategy in the higher education sector. This article's purpose is to contribute to this discussion by providing prescriptive guidance to higher education managers and policy makers. To this end, it proposes a SWOT (strengths, weaknesses, opportunities, threats) analysis illustrating eight key trends that will impact higher education and academia in the short-to-medium term. Drawing from these trends, three core challenges are identified that higher education institutions will face and that have fundamental implications for research and practice: (1) the need to enhance prestige and market share; (2) the need to embrace an entrepreneurial mindset; and (3) the need to expand interactions and value co-creation with key stakeholders.

The emergence of new technologies has revolutionized the way companies interact and build relationships with customers. The channel-customer relationship has traditionally been managed via a push approach in communication ("What can we sell customers?") with the hope of cultivating customer loyalty. However, emotional understandings of customers and how they feel about a product, service, or business can drastically alter consumers' engagement, behavior, and purchasing preferences. This rapidly evolving landscape has left managers at a loss, and what they are experiencing is likely the beginning of a tectonic shift in the way digital channels are designed, monitored, and managed. In this article, digital channel relationships are examined, and useful concepts for clarifying and refining the emotional meaning behind company strategy and their relationship to corresponding digital channels are detailed. Using three case study examples, we discuss the process and impact of such emotionally aware digital channel designs. Recommendations are made regarding how companies can select, design, and maintain digital engagements based on their strategy and industry needs.

In October 2015, Walmart surprised investors by announcing that it expected flat sales growth for 2015 and growth of only 3% to 4% over the coming three years. Profits would also fall due to significant investments in people and technology. The company's stock price dropped 10% on the news, the largest one-day decline since 1998. In February 2016, Walmart reported that revenues for 2015 had dropped 0.7% to $482.1 billion, the first decline in Walmart's history. The company also downgraded its sales forecast for the coming year, suggesting sales would now be flat. Meanwhile, online retailer Amazon was growing rapidly and, despite being less than one-quarter of the size of Walmart, now boasted a higher market capitalization. Moreover, in April 2016, Alibaba of China announced that it had passed Walmart in global sales to become the biggest retail platform in the world. To add to Walmart's woes, in the United States traditional dollar discount stores and convenience outlets were gaining ground, and wage rises were putting pressure on profits. Meanwhile, international markets continued to underperform. Indeed, some analysts had suggested that Walmart retreat to its U.S. home base to improve performance. Many feared that this was the end of the 50+ year inexorable rise of Walmart. However, CEO Doug McMillon remained determined to get the company back on track and vowed to eschew short-term profits and invest in the future. Investors were not impressed. They had waited a long time for improvements; in 2015, Walmart generated three times the sales and profits it had achieved in 1999, and yet the stock price had barely changed. Patience was running out.

Competitive retaliation is a significant constraint to merger and acquisition performance that has largely been overlooked by management research. This article employs competitive dynamics theory to explore how acquisition characteristics impact the risk of competitor retaliation. It then outlines different tactics that acquiring firms can use to reduce competitor awareness, motivation, and capability associated with retaliation. It provides managers with a path to improving acquisition performance and also opens new avenues for research.

In October 2013 GT Advanced Technology closed a deal to supply industrial-sapphire material to Apple; the material was to be used to improve the quality of iPhone screens. Prior to this deal, GTAT had been a leading supplier of equipment used to create industrial-sapphire, not a producer of the material itself. Apple helped to finance the scaling up of GTAT's industrial-sapphire manufacturing facilities by providing GTAT with a prepayment that was secured by an equipment lien; however, their agreement did not stipulate that Apple had an obligation to purchase any of GTAT's industrial-sapphire output. In September 2014 Apple announced that its production plans had changed and its new iPhone would not have a sapphire crystal screen. Soon thereafter, GTAT filed for bankruptcy. This case asks students to consider why GTAT took on the terms of such a risky deal, how their risk might have been mitigated, and what options were open to both GTAT and Apple in the aftermath of the deal.

The case on JOSEPHS® intends to highlight the various network effects in the architecture and operations of a Service Manufactory. Uniquely positioned as an open innovation laboratory in the Nuremberg city center, JOSEPHS® attracted a wide range of walk-in customers, who could be "prosumers", adding significant value to the tenant/firms, the university partner (FAU Wi1), Fraunhofer IIS, as well as the consumers themselves as they engage in the open innovation process. The case is positioned around the time when JOSEPHS® has completed one year of operations. This case articulates the architecture and design of JOSEPHS® as a platform, elucidates the network effects and complementarities, and pushes the students to analyze the various parameters of performance in a multi-sided platform such as JOSEPHS®.

The case traces the evolution of the advertising firm DDB Mudra from its founding as an independent "Indian" agency to its current position of being the Indian affiliate of the global advertising major, DDB Worldwide that is going to be overseen directly by the CEO of DDB worldwide. Set in the backdrop of the changes in both the global and Indian advertising industry, this two-part case invites students to consider the strategic choices made by the two leaders who shaped its growth and evolution - the founder CEO, AG Krishnamurthy (AGK) and the current CEO, Madhukar Kamath. The first case - titled DDB Mudra: Transformative Growth captures the company's history from its inception in 1985 until its acquisition by the Omnicom group in 2011, the second case, an update titled DDB Mudra: Profitable Growth focuses on the challenges that Madhukar Kamath faces in 2015, 4 years after the acquisition.

The case traces the evolution of the advertising firm DDB Mudra from its founding as an independent "Indian" agency to its current position of being the Indian affiliate of the global advertising major, DDB Worldwide that is going to be overseen directly by the CEO of DDB worldwide. Set in the backdrop of the changes in both the global and Indian advertising industry, this two-part case invites students to consider the strategic choices made by the two leaders who shaped its growth and evolution - the founder CEO, AG Krishnamurthy (AGK) and the current CEO, Madhukar Kamath. The first case - titled DDB Mudra: Transformative Growth captures the company's history from its inception in 1985 until its acquisition by the Omnicom group in 2011, the second case, an update titled DDB Mudra: Profitable Growth focuses on the challenges that Madhukar Kamath faces in 2015, 4 years after the acquisition.

Three current and former C-suite executives of thriving global companies (Magna International, Research in Motion and Manulife Financial) discuss the challenges faced by their companies in establishing global operations and key lessons learned. They also discuss current opportunities, and look to what lies around the corner for companies seeking to expand beyond their national boundaries. In the end, they agree that the biggest risk of globalization is simple: not doing it.

If your company is considering entering a new global market, why not target a wide range of consumers-from the wealthy, to the middle class all the way down to the poorest of the poor? The authors show how a wide range of for-profit healthcare organizations are experimenting with different types of smartphone-enabled services for low-income consumers. They provide several examples of how these business models work, and describe three approaches that for-profit organizations can use to serve the poor-in the realm of healthcare and beyond.

Most business leaders speak optimistically about the prospects of globalization, and for good reason. Globalization has fostered an increasingly interconnected world, with nearly $30 trillion in goods and services traded in 2013 alone. So, why do so many well-run companies fail in global markets? The author, an NYU Professor, says it's because executives fail to account for important differences between nations and to consider how those differences will generate operational risks. Using the 'cautionary tales' of IKEA in Russia, Walmart in China and Tesco in the U.S., he shows the importance of understanding the impact of 'institutional distance' when taking a business global.

"Planned opportunism" is the author's term for responding to an unpredictable future by paying attention to weak signals--early evidence of emerging trends from which it is possible to deduce important changes in demography, technology, customer tastes and needs, and economic, environmental, regulatory, and political forces. That attention gives rise to fresh perspectives and nonlinear thinking, which help an organization imagine and plan for various plausible futures. Planned opportunism is a discipline that creates a "circulatory system" for new ideas; develops the capacity to prioritize, investigate, and act on those ideas; and builds an adaptive culture that embraces continual change. Govindarajan illustrates his thesis with several compelling company stories. For example, Tata Consultancy Services decided to divest its fast-growing call-center operations at the height of the boom in that business, because its leaders could see that technologies were moving to the cloud and that global enterprises would eventually demand higher-level, more strategic outsourced services. Call centers would just get in the way of that future. And Hasbro, the toy and game maker, acted on numerous technological and demographic shifts in the 1990s to significantly outpace its leading competitor, Mattel.

Today companies grapple constantly with the unexpected: disruptive advances in technology, the rise of new markets, sudden swings in demand, surprise moves by competitors. To cope, firms try to improve their forecasting and their agility, but those efforts take them only so far. A complementary--and perhaps more effective--approach is to use "strategic options." These are small bets that allow businesses to test the waters and build their experience. If they fail, they're easy to unwind, but if they succeed, they position organizations to capitalize on valuable opportunities. In this article, two BCG consultants detail three kinds of strategic options: "Temporary organizations," which are staffed by consultants and contractors, help firms ramp up operations quickly and yet avoid massive layoffs if an initiative fails. Small "exploratory acquisitions" allow firms to get a foothold in a new business--without the costs and headaches of large-scale deals. "Disposable factories" are a good solution to uncertain demand; they can be set up (and taken down) quickly, be sited closer to demand, and provide early data on costs and capacity that informs the construction of permanent facilities. Executives often resist strategic options because they seem expensive in the near term. But when a payoff is far in the future and risk is high, they may be the best way to go.

This is an MIT Sloan Management Review article. Investors see a strong link between corporate sustainability performance and financial performance -so they're using sustainability-related data as a rationale for investment decisions like never before.