Knowledge at Wharton

Amazon plans to sell computing power like a utility company sells electricity. Google is building a suite of productivity software programs connected to the web to take on Microsoft. And Yahoo has launched or acquired so many properties that they run the risk of competing with each other. Such efforts could represent new growth areas and smart diversification moves. Or they could prove to be costly distractions. The big question: Should a company stay focused on its core competencies or should it diversify to keep up with or attempt to surpass its peers?

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When it comes to price wars Wharton marketing professor Z. John Zhang can’t help but notice that companies in the West and companies in China are quite literally worlds apart. In the West Zhang says the outbreak of a price war is viewed as the failure of managerial rationality. In China the outbreak of a price war is considered a legitimate and effective business strategy. In a recent paper Zhang and Dongsheng Zhou a marketing professor at the China Europe International Business School in Shanghai analyze two price wars that took place in China in the mid-1990s.

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In 1998 Microsoft executive John Wood decided to take a rare and hard-won vacation. He started out trekking in Nepal and ended up establishing a foundation Room to Read that has created nearly 3 000 libraries in the developing world and stocked them with more than one million books. His experiences are chronicled in a recently-published book that offers his corporate-based perspective on how to raise money market the product leverage relationships and ultimately maximize results.

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Reliance Gateway Net VSNL Scandent and GHCL aren’t exactly household names in the U.S. but they may be signs of bigger things to come. These are only a few of the growing number of Indian businesses that have acquired U.S. firms in the past few years. And the U.S. merger-and-acquisition activity is just part of a bigger picture. Indian companies -- usually quietly but sometimes with media fanfare -- have been on a buying spree in continental Europe Great Britain and Asia in attempts to become key players in global markets.

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Although far from a done deal US Airways’ hostile bid to acquire bankrupt Delta Air Lines would result in a strong combined company and would be a feather in the cap of the chief executive of US Airways. But it would also be a mixed blessing for passengers resulting in more flight choices but most likely higher fares as well according to faculty members at Wharton and industry analysts who also note that the overture could lead to further consolidation in the industry.

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If a traveling salesman has to visit a set number of cities in a set number of days what is the shortest route he can take to cover all his stops and then return home?  And does the answer to this question relate in any way to the manner in which a shopper navigates her way through a grocery store? In a new paper Wharton marketing professors Peter S. Fader and Eric T. Bradlow and doctoral student Sam K. Hui use a concept known as the ”Traveling Salesman Problem” to study the efficiencies -- and inefficiencies -- of grocery shoppers.

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Wharton marketing professor Josh Eliashberg has a message for Hollywood: Get geeky. The use of statistical analysis and computer models he says can help managers in the movie industry understand why ratings on a given film will vary from country to country. Even more radically they can lead to the better evaluation of scripts. And using these sorts of techniques he insists won’t dim the magic of the silver screen. Eliashberg Wharton colleagues John Zhang and Sam Hui and Mark Leenders from the University of Amsterdam explore these topics in two research papers.

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Emerging real estate markets in India and China along with recovering property industries in Germany and Japan are among the top destinations for global real estate investors according to panelists at the Samuel Zell and Robert Lurie Real Estate Center’s fall meeting. During a session titled ”Global Hot Spots -- How to Think about Hot Foreign Markets ” Wharton real estate professor Peter Linneman called on each panelist to describe the markets they find most intriguing.

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Michael J. Critelli isn’t one of the business world’s high-profile CEOs. But his tenure at Pitney Bowes has lasted over 10 years more than twice the average survival rate for Fortune 500 company heads. And those two facts he noted during a recent Wharton Leadership Lecture are probably not unrelated. ”I have deliberately downplayed my role as a leader ” he said in describing how he helped take the firm from ”a hardware company” to a diversified technology company. ”I went the route of not being out front.”

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After conquering the advertising frontier in cyberspace Google Yahoo and eBay are now turning to traditional media for future growth by brokering ad sales for offline media like radio television and print. The Internet players’ foray into offline advertising could drive down rates but advertisers and media companies may not completely abandon the current system of relationship-based sales for Internet auctions according to Wharton faculty and industry executives.

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