Instructors Manual

CASE TEACHING NOTES

Ministry of Sound
Richard Whittington

1. Introduction
This case considers success and crisis for a fast growing player in the international dance-club and music industry. The case can be used to introduce fundamental concepts in strategy. Because the case is short and relates closely to their experience, students can reasonably be expected to read it before the class even in the busy period at the start of courses. Although short, the Ministry does gives a sense of the scope of strategy as a subject area, touching on changing environments, distinctive capabilities, purposes and governance, business-level strategy, diversification, internationalisation, change and organisation. One potentially attractive feature of the case is that the strategists (Palumbo and Rodol) are relatively young.

2. Position of the case

The case study has been written for use as an introductory case to allow students to identify the reasons why and how organisations change over time. Touching on many dimensions of the book, it should help whet the appetites of students for what follows in the course. It is a core case study for chapter 1 of Exploring Corporate Strategy.

3. Learning objectives
The case is primarily designed to help students understand key concepts and frameworks in chapter 1 rather than any in-depth analysis. In addition it should flag up issues that will be discussed more fully in later chapters. In particular it can be used to illustrate the following issues from the text: (a) the characteristics of strategic decisions (section 1.1 and Exhibit 1.1). The case covers the long-term, scope, advantage, changing environments, capabilities and stakeholder values and expectations. (b) levels of strategy (section 1.2.2). There are both business-level issues concerning how the Ministry competes in the dance-club business, but also corporate-level issues about the degree of diversification and internationalisation (scope) (c) the three elements of the strategic management model (section 1.2 and Exhibit 1.3), comprising strategic position (fading advantages in a declining market, with increased stakeholder pressures), strategic choices (how far to diversify and how far to internationalise), and strategy into action (how to manage change and reorganise).
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4. Teaching scheme
As an introductory case, the Ministry lends itself to various treatments. Its length means it would be a good vehicle for plenary discussion because everybody would quickly share the same knowledge. As stated earlier, it would be reasonable to expect students to read it beforehand, but it is also short enough to ask students to read it individually in class immediately before a plenary discussion, or to take it out into small groups for group work on a specified set of questions as a break before plenary discussion. It is not long enough to support substantial group discussion or project work.

5. Questions for discussion

The following questions should prove useful in unearthing some of the issues outlined in section 3 above: 1. What were the most important issues in the Ministrys environment that shaped the companys development both in the early years of the companys growth and in the latest period? List the major opportunities and threats in 2004. 2. What capabilities had the company developed over its decade or so of existence (19912004)? How relevant were they still in 2004? List the strengths and weaknesses of the Ministry in 2004. 3. Who are the major stakeholders in the Ministry? In which direction would they want to push the company? 4. List the strategic choices open to the Ministry for its future development in terms of the basis on which it could compete, the development directions and development methods. What would you advise the company to do? 5. In translating strategies into action, what might have been the significance of the reorganisation described at the end of the case?

6. Case analysis
6.1 Environment and capabilities A very useful way to address the above questions, particularly the first two, is to build up a SWOT analysis with students (see section 2.5.2). It might be useful to cultivate a critical approach from the first to point out some pitfalls with SWOT and show how they can be avoided. One critical issue in SWOT analysis is relative strength and weakness. Early on it is clear that the Ministry had an advantage over the smaller, edgier clubs in being more professional and offering a safer environment. This ceased to become a relative
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strength, and thereby source of advantage, as the whole industry matured with the general rise of superclubs. The case does not say much about the Ministrys dance and club competitors by the end of the period, and you might want to point this out (students are likely to be quite well informed themselves). However, it is clear that its diversification initiatives into games, radio, magazines and music channels would be taking them head-to-head against some formidable established players, and you might ask students to list them. Another issue in SWOT analysis is that what constitutes a strength or a weakness depends on what strategies are to be followed. The Ministrys small size and lack of ready access to capital beyond 3i only becomes a pressing weakness if the Ministry remains committed to ambitious diversification and internationalisation strategies, for example. The brand may be a greater strength in clubs than more widely applied in merchandising, leisure and entertainment markets, where it may be relatively weak. Categorising opportunities and threats is also strategy dependent. For example, restrictions directed against what might be seen as an alien Western and degenerate leisure-style in Thailand, and possibly other Muslim and Asian countries, are only a threat if the Ministry remains committed to global expansion. 6.2 Stakeholder issues The Ministry raises interesting stakeholder issues. There is the obvious potential clash between the dominant shareholder and founder Palumbo and the incoming venture capitalists 3i. However, there are also important stakeholders within the managerial and creative ranks of the Ministry, who would be difficult to replace and without whom the company could not operate. You might ask students to list the likely wants of each of these stakeholders and assess their relative power. As to the rumours that 3i forced Palumbo to step down as chief executive, the saying theres no smoke without fire is likely relevant. 6.3 Strategic choices The fundamental issue seems to be around how to respond to the challenge of the maturing of the core business, the dance-clubs. One way forward is to internationalise the phenomenon while it still has an edge in less mature markets. Another way forward is to exploit the brand and any relevant capabilities through diversification beyond the core. Finally, there may be scope to address the problems of the core business more rigorously, by reinvention or, possibly, simply adapting to maturity. There are no right answers here, but students should consider two issues that go beyond the simple criterion of suitability (see section 7.4.1). First, there is a question of what will be acceptable to stakeholders (see section 7.4.2). The venture capitalists will be impatient to realise their investment, and if flotation does not look imminent, they might well press for a trade sale to a larger leisure/entertainment group. Sale would likely not be attractive to key Ministry managers, for career reasons; it might not be acceptable to Palumbo, for sentimental reasons. Second, there is a question of what is feasible
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(section 7.4.3). Given the resource constraints, particularly of capital and managerial capabilities, pursuing every arguably suitable initiative from diversification to internationalisation may not be feasible. There are signs in the last part of the case that the Ministry has been badly overstretched. Even Rodols downscoping may not be enough. 6.4 The reorganisation The reorganisation is important to translating the Ministrys increasingly focused strategy into action. Clearly, it did help with costs. However, like many reorganisations, it also appears to have been a useful opportunity to sweep out some managers who might have been resistant to Rodols new regime. In addition, the three new divisions appear to be collecting together previously uncoordinated initiatives within clear organisation structures. This reorganisation should help Rodol delegate to divisional heads, at the same time as allowing him to hold them accountable as they impose some discipline on their various businesses.

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