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BU.912.610.XX – Competitive Strategy – Instructor’s Name – Page 1 of 10
Competitive Strategy
2 Credits
BU.912.610.XX
[NOTE: Each section must have a separate syllabus.]
[Day & Time / ex: Monday, 6pm-9pm]
[Start & End Dates / ex: 3/24/15-5/12/15]
[Semester / ex: Fall 2016]
[Location / ex: Washington, DC]
Instructor
[Full Name]
Contact Information
[Email Address]
[Phone Number, (###) ###-#### (Optional)]
Office Hours
[Please specify the day and time of the 2 hours that will be dedicated to office hours each week. For evening
classes, faculty may wish to hold their office hours by phone or email. While faculty are permitted to state “and
by appointment,” office hours should not be held exclusively by appointment.]
Required Text(s) & Learning Materials
Required Textbook:
 Besanko, D.; Dranove, D.; Shanley, M.; Schaefer, S. Economics of Strategy (6th Edition), John Wiley
& Sons, Inc., 2012. (EOS)
Note: The 5th Edition (2009) is also acceptable. Here are a few potentially useful links for this purpose:
Amazon; BookFinder.com; AbeBooks.com; Barnesandnoble.com; bestwebbuys.com. Which
alternative purchasing option to choose is entirely up to the student; they are all perfectly good for the
purposes of this course. I recommend you search for the book through a website that allows you to
price-compare.
Required Case Readings at HBS Publishing:
 Content for which Carey does not hold the copyright will be provided through Harvard Business
Publishing. Each student should purchase the course pack directly from the web-site:
https://cb.hbsp.harvard.edu/cbmp/access/30860797
 Cases: Airborne Express, The US Airline Industry in 1995, Arauco, Ryanair
Required Case Readings at Blackboard:
(Note: They will be used as case readings for discussion of Enterprise and American Airlines. No HBS cases
used for these two cases.)
 [Enterprise case]
o O'Reilly, Brian, The rent-a-car jocks who made Enterprise #1. Fortune, October 28, 1996, Vol.
134, Issue 8, p125
o Gianna Jacobson, Enterprise’s Unconventional Path, New York Times, Sec. D; p. 1; Column
2; Business/Financial Desk, January 23, 1997
 [American Airlines case]
o McDowell, Edwin, American Air Cuts Most Fares In Simplification of Rate System, New York
Times (Late edition- Final), Section A; Page 1; Column 1; Financial Desk, April 10, 1992,
o O Brian, Bridget, Travel: AMR's Bid for Simpler Fares Takes Off, Wall Street Journal (Eastern
edition), pg. B1, Apr 10, 1992.
o Salpukas, Agis, A Call for Discipline In the Airline Industry, New York Times (Late editionFinal), Section D; Page 1; Column 4; Financial Desk, April 10, 1992.
BU.912.610.XX – Competitive Strategy – Instructor’s Name – Page 2 of 10
Recommended Text(s)
Non-required Readings (will be available either at Blackboard or Harvard Business Publishing):
 Borenstein, S., Rapid Communication and Price Fixing: The Airline Tariff Publishing Company Case,"
in John E. Kwoka and Lawrence J. White eds., The Antitrust Revolution: The Role of Economics,
Oxford University Press, 4th Edition, 2004, pp. 233-251.
 Brandenburger, A. and B. Nalebuff, The Right Game: Use Game Theory to Shape Strategy, Harvard
Business Review, 1995, pp. 57-71.
 Garicano, L., and R. Gertner, The Dynamics of Price Competition, Financial Times, p.2, October 18,
1999
 Gertner, Robert and M. Knez, Vertical Integration: Make or Buy Decisions, Financial Times Mastering
Strategy Series, 1999.
 Ghemawat, Pankaj and J.W. Rivkin, Creating Competitive Advantage, Harvard Business School
Publishing, 2006 (HBS 9-798-062)
 Goolsbee, A., and C. Syverson, How do Incumbents Respond to the Threat of Entry? Evidence from
the Major Airlines, Quarterly Journal of Economics, 2008, pp. 1611-1633
 Porter, Michael, Note on the Structural Analysis of Industries, Harvard Business School Publishing,
1983 (HBS 9-376-054)
 Porter, Michael, What is Strategy, Harvard Business Review, 1996
 Prahalad, C.K., and G. Hamel, The Core Competence of the Corporation, Harvard Business Review,
1990
Course Description
This module requires students to assume the role of a general manager. General managers have to cope with
tremendous complexity, uncertainty, and inadequate information. An important requirement of a general
manager's job is the ability to think in a cross-functional and holistic manner. Creativity and innovation are
critical to achieving success, and so is the ability to execute and manage day to day. The concepts and
frameworks to be covered in this course include Porter’s 5-forces Analysis, PEST Analysis, SWOT, emergent
versus deliberate strategy, McKinsey Matrix, GE Growth/Share Matrix, Resource-Based View of the Firm,
Core Competencies and Dynamic Capabilities, Cost Leadership Strategies, Differentiation Strategies, Vertical
Integration, Diversification, Life-Cycle Theory, Cost Accounting, Business Process Management, Inventory
Management, Newsvendor Problem, Value Chain Analysis, Activity-Based Accounting, and Queueing Theory.
Prerequisite(s)
None
Learning Objectives
By the end of this course, students will:
1. Be familiar with concepts in competitive strategy.
2. Be able to assess concepts against the problems to determine their applicability.
3. Understand how to conduct an analysis of a firm’s corporate, business, and functional strategies to
arrive at an understanding of its competitive (dis)advantage in the context of its broader economic and
social environment.
4. Succinctly and convincingly convey recommendations in the case studies to their peers and the
instructor in the class.
To view the complete list of Carey Business School’s general learning goals and objectives, visit the Carey
website.
Attendance
Attendance and class participation are part of each student’s course grade. Students are expected to attend all
scheduled class sessions. Each class will include opportunities for teams to work together. Failure to attend
class will result in an inability to achieve the objectives of the course. When you miss a class session, you are
responsible for obtaining class handouts and information given out during your absence. Even if you miss
class, you must turn in your assignments on time. Excessive absence will result in loss of points for team
participation. Regular attendance and active participation are required for students to successfully complete
the course. While in class, students should turn off their cell phones and be sure that all computer use is
course-related.
BU.912.610.XX – Competitive Strategy – Instructor’s Name – Page 3 of 10
Assignments
Assignment
Course Learning Objective(s) Weight
Class discussion (5%) and memoranda (10%)
1, 4
15%
Homework Problem (5%* 5)
1, 2, 3
25%
Case Presentation
1, 2, 3, 4
25%
Final Exam
1, 2, 3
35%
Total
100%
*We reserve the right to add bonus points for individual/group performance at in-class exercises.
Class Participation
Class participation is essential in order for you to get the maximum benefit from the course. Your grade will
be based on attendance and the quality, not quantity, of your contributions to class discussions.
Memorandum
You will prepare a 2-page memorandum related to the week’s cases. This memo is an individual
submission, except during week 4 (Shrimp game) and the week that your group is presenting (see
“exceptions” below). The page limit is for text only—you may attach as many graphs and numerical
calculations as you wish. We will not write comments on the memoranda, but will grade them as either
“check” or “check-minus.” These written responses will be due at the beginning of class during the week
that we are discussing the case. If you do not turn in the response on time, the work will be recorded as a
grade of zero. The memo should be typed with 11-point font.
Exceptions:
(1) You are not required to submit a memo in session 1 (profit calculator) and session 5 (Arauco; we
conduct online lecture).
(2) If you are presenting a case (either AA in week 6 or Ryanair in week 7), I just need one memo
(i.e., one submission) from your group assigned for case presentation. The format is the same.
(3) For the Shrimp game, I need just one memo from the group assigned for the shrimp game. The
format is the same, but 1 page is fine.
Each case listed includes a set of discussion questions about the case. For the discussion questions, see
the “Detailed Course Calendar” below. The memo should provide a solid answer to each of the discussion
questions. Please try to use the analytical tools introduced in the readings and/or developed in class to
address the case questions. Doing so will demonstrate that you understand the material (and prepare you
for the exam. Please do not introduce facts from outside of the cases as this will cause confusion in your
analyses.
Case Presentation
An effective way to accomplish this course's objectives is through a case presentation.
 Class will be divided into study teams of maximum of 4 students.
 The instructor will assign students to the teams.
 The instructor will assign a case (either American Airlines or Ryanair) to the teams.
 Each team has 20 minutes for presentation including Q&As from the floor.
 Schedule: For G1, session 6: teams A, B, and C. Session 7: teams D, E, F, and G. For G2,
session 6: teams A, B, C, and D. Session 7: teams E, F, and G.
The presentation should provide a solid and detailed perspective for each of the discussion questions. The
presentation needs to include specific and practical recommended actions. Please do not introduce facts
from outside of the cases as this will cause confusion in your analyses. Again, if you are presenting the
case for that week, you need to submit the memo just from your group, not from each member.
Homework Problems
The course will include five sets of homework problems. These problems will help you review the formal
models developed in class. The assignments are due at the beginning of Sessions 2, 3, 4, 6, and 7.
BU.912.610.XX – Competitive Strategy – Instructor’s Name – Page 4 of 10
In-class Final Exam
This course will culminate in an in-class, 3-hour exam. The exam is cumulative; it will cover all topics
covered in class in the course. The exam will be multiple-choice questions. The format will be closed-book
and closed-note, and will be strictly an individual assignment. You will not be able to use your computer,
cell phone, or smart phone in the final exam. Calculators will be provided if necessary. A make-up exam
will be given only in case of valid and documented excuses. Test scripts must not be removed from the
classroom during the test.
Grading
The grade of A is reserved for those who demonstrate extraordinarily excellent performance. The grade of
A- is awarded only for excellent performance. The grade for good performance in this course is a B+/B. The
grades of D+, D, and D- are not awarded at the graduate level.
Please refer to the Carey Business School’s Student Handbook for grade appeal information.
Tentative Course Calendar*
*The instructors reserve the right to alter course content and/or adjust the pace to accommodate class
progress. Students are responsible for keeping up with all adjustments to the course calendar.
Note: (BB), (EOS), and (HBP) refer to Blackboard, Economics of Strategy textbook, and Harvard Business
Publishing, respectively.
Week
Strategy
Content
Microeconomics
1
Industry Analysis
2
Creating CA
3
Sustaining CA
4
Shrimp G
5
Basic concepts
Competitors &
Competition
Competitors &
Competition
Case
Homework
Due
Case memo
Profit calculator
Airborne
HW 1
Yes (2 pages)
Enterprise
HW 2
Yes (2 pages)
Game theory
Shrimp
HW 3
Yes (1 page,
shrimp group)
Firm boundaries
Contract theory
Arauco
6
Dynamic Price
Game theory
American
Airlines
HW 4
Yes (2 pages)
7
Entry deterrence
Game theory
Ryan Air
HW 5
Yes (2 pages)
8
Note
Adobe
online class
(final exam)
Note: Regarding memo, 1 submission from the group will suffice for the week you are presenting (either week 6
or 7) & shrimp game (week 4).
BU.912.610.XX – Competitive Strategy – Instructor’s Name – Page 5 of 10
Detailed Course Calendar*
*The instructors reserve the right to alter course content and/or adjust the pace to accommodate class
progress. Students are responsible for keeping up with all adjustments to the course calendar.
SESSION 1
INDUSTRY ANALYSIS/ COMPETITORS AND COMPETITION
This session focuses on structural features of an industry as drivers of economic profits. Several important
insights about competition can be explained as fundamental principles of microeconomics. It is important to
consider specific firms and industry settings. However, it is at least as valuable to appreciate the issues at a
more universal level. We first discuss how to identify the competitors and to define the market. We lay out the
key economic concept of industry analysis: pricing rivalry. We then introduce the industry analysis to examine
what factors create huge variations in firms’ long-run performance across industries. Finally, we introduce the
models of monopoly and perfect competition.
Readings (* Required)
1. (*) Introduction: Strategy and Economics: (EOS), Economic Costs and
Profitability, Demand and Revenues, Perfect Competition: (EOS pp. 9-31 in 6th
ed, pp. 11-17, 21-34 in 5th ed)
2. (*) Industry Analysis (EOS Ch.8 in 6th ed, Ch.12 in 5th ed)
3. Porter, Michael, Note on the Structural Analysis of Industries (HBP)
4. (*) Competitors and Competition (EOS pp. 165-177 in 6th ed, pp. 205-218 in
5th ed)
Case study
Profit Calculations (no articles to read): In-class exercise
This is not a case per se, but we will briefly discuss the accounting profits of five
small businesses in New York City. All have pretty simple product and very few
employees (mostly one). Guess the order of their accounting profits from highest
to lowest. Consider what assets those accounting profits are rents on.
SESSION 2
COMPETITORS AND COMPETITION (CONT'D) /COMPETITIVE ADVANTAGE: INTRODUCTION
This session continues the discussion of market structure by introducing the models of oligopoly and
monopolistic competition. We then develop a conceptual framework to explain why some firms are more
successful than others, focusing on one of the most enduring concepts in business strategy: competitive
advantage. We introduce analytical tools, such as value creation, cost advantage, benefit advantage, and
broad coverage versus focus strategies, and show how to put these concepts into operation when looking at
actual firms.
Readings (* Required)
1. (*) Competitors and Competition (cont'd), (EOS pp. 177-191 in 6th ed, pp. 219234 in 5th ed)
2. (*) Strategic Positioning for Competitive Advantage (EOS Ch.9 in 6th ed, Ch.13
in 5th ed)
3. Ghemawat, Pankaj and Rivkin, Jan W., Creating Competitive Advantage
(HBP)
Case study
Airborne Express (A) (HBP)
The Airborne Express case illustrates how a company can carve out a distinctive
and long-viable position in a highly competitive industry. The case provides
detailed data on costs, allowing us to compare the Airborne's cost structure with
Fed Ex’s, and pinpoint the sources of Airborne's cost advantage.
BU.912.610.XX – Competitive Strategy – Instructor’s Name – Page 6 of 10
Discussion questions
1. What is the five-forces analysis of the express mail industry?
2. Analyze Airborne Express’ cost advantage
a. Activity analysis. For each specific activity, discuss how Airborne Express
performs differently/more effectively than its competitors. What is the
Airborne’s position regarding its scope of business, such as product focus
and customers?
b. Cost analysis. To what extent do these activities allow Airborne express
to produce relatively more value, in terms of either greater benefits to
consumers or lower costs?
c. Specifically: How much does it cost FedEx to ship an overnight letter?
How much does it cost Airborne?
3. How sustainable is the Airborne’s strategy? Can an entrant or incumbent
mimic Airborne’s strategy?
4. Recommendation: what could Robert Brazier, Airborne's President and COO,
do to strengthen the company’s position?
SESSION 3
COMPETITIVE ADVANTAGE: SUSTAINABILITY
What makes a competitive advantage sustainable, and why? In this session, we develop the resource-based
theory to analyze asymmetries in the resources and capabilities of firms as the basis for sustainability. Two
major classes of isolating mechanisms are introduced: barriers to imitation and first-mover & late advantages.
We discuss some specific factors that reinforce sustainability.
Readings (* Required)
1. Porter, Michael, What is Strategy (BB)
2. Prahalad, C.K., and Hamel, Gary, The Core Competence of the Corporation
(BB)
3. (*) Sustaining Competitive Advantage (EOS Ch.11 in 6th ed, Ch.14 in 5th ed)
Case study
Enterprise Rent-a-Car (Not HBS’s case. Two articles posted in BB's ereserve: O'Reilly and Jacobson)
This case focuses on competitive advantage in a retail market where proliferation
of locations becomes crucially important (a la Starbucks). This allows a
discussion of first mover advantage. It also provides a different look at customer
focus-based strategies similar to the Airborne case. Finally, it provides a first look
at some interesting vertical integration issues.
Discussion questions
1. Perform a five-forces analysis of Enterprise’s industry
2. Creating competitive advantage
 What does Enterprise do differently than its rivals?
 What other markets do we expect to see one company offering gifts to
another?
 Why would Enterprise invest more in computer tracking than Hertz/Avis?
 How does Enterprise perform compared with its rivals? (in terms of benefits
for consumers and costs of operations)
3. Sustaining Competitive Advantage
 How does Enterprise sustain their competitive advantage?
 Do they have a first-mover advantage?
4. What should Enterprise do next in order to strengthen its position?
BU.912.610.XX – Competitive Strategy – Instructor’s Name – Page 7 of 10
SESSION 4
STRATEGIC INTERACTION AMONG FIRMS I: INTRODUCTION TO GAME THEORY
This session introduces tools from game theory that will be applied to business strategy. Firms often make
pricing or entry decisions expecting the responses of rivals. Game theory provides a framework for thinking
about such strategic behaviors of small number of players and a way to understand phenomena that are
harder to capture in classical microeconomics. The session covers Nash Equilibrium, sequential-move games,
and simultaneous-move games. Also, we will discuss value of commitment and dynamics of cooperation.
Readings (* Required)
1. Description of Shrimp Game (BB)
2. Brandenburger and Nalebuff, The Right Game: Use Game Theory to Shape
Strategy, 1995 (BB)
3. (*) Game theory: (EOS pp. 31-35 in 6th ed, pp. 34-38 in 5th ed)
4. (*) Strategic Positioning for Competitive Advantage (EOS Ch.9 in 6th and 5th
ed)
Case study
Shrimp Game (BB): In-class exercise
This is not a case per se, but a description of a game that we will play in class.
You should analyze the game carefully prior to attending the class: (i) what
strategy would you pursue? (ii) what do you think will be the quantities, prices,
and profits when three teams each operate as shrimpers in the same market?
SESSION 5
HORIZONTAL AND VERTICAL BOUNDARIES OF THE FIRM [ONLINE LECTURE VIA ADOBE CONNECT]
What activities should a firm engage in? This session examines several factors that influence a firm’s
boundaries and horizontal/vertical integration decisions of a firm. A firm’s horizontal boundaries identify the
quantities and variety of products and services that it produces. A firm’s vertical boundaries identify the makevs-buy decision and a plethora of hybrid strategies that exist along a continuum, which allows the firm to adjust
its approach to the setting at hand.
Readings (* Required)
1. Gertner, Robert; Knez, Marc, Vertical Integration: Make or Buy Decisions,
Financial Times Mastering Strategy Series (BB)
2. (*) Economies of Scale and Scope (EOS pp. 61-83 in 6th ed, Ch. 2 in 5th ed)
3. (*) The Vertical Boundaries of the Firm (EOS Ch.3 in 6th ed, Ch.5 in 5th ed)
4. (*) Integration and Its Alternatives (EOS Ch.4 in 6th ed, Ch.6 in 5th ed)
Case study
Arauco (A): Forward Integration or Horizontal Expansions? (HBP)
This case describes the economics behind the vertical integration decision in
terms of economies of scale and economies of scope. Arauco is a major Chilean
producer of market pulp and wood products. As of early 2004, Arauco is
considering increasing its capacity to over 3.0 million tons, which would place its
capacity as the world’s largest producer. After the first phase of the project, called
Nueva Aldea, Alejandro Pérez, Arauco’s president and CEO, is planning the
second phase of the project, which would include the company’s sixth market
pulp plant. The case focus on Pérez’s question whether the company and its
shareholders would be better served through a forward integration into the paper
business instead of pursuing the option to increase the company’s capacity in
market pulp.
BU.912.610.XX – Competitive Strategy – Instructor’s Name – Page 8 of 10
Discussion questions
SESSION 6
1. Should Arauco build the Nueva Aldea project? Is it profitable?
2. What is the competitive advantage for Arauco? Discuss its source(s) and its
sustainability.
3. What would be the optimal degree of vertical integration for Arauco? Discuss
each business (forests, R&D, sawmills, shipping, etc.) separately.
4. RE: Alto Parana project, what would be the minimum price of wood per ton
foresters would accept? What would be the maximum willings to pay for wood
per ton for Arauco?
5. Do you think forward integration to paper is a good business plan for Arauco?
Why or why not?
STRATEGIC INTERACTIONS AMONG FIRMS II: DYNAMIC PRICING
Why do we focus on price competition? Is cooperative pricing achievable when firms make pricing decisions
non-cooperatively in multiple periods? Understanding the dynamics of price competition and how to shape
competition to your advantage is an important part of strategy. We will discuss two types of price competition
restraints: (1) Cartel/collusion and (2) Tacit collusion. This session covers industry conditions and practices
that sustain and facilitate cooperative pricing.
Readings (* Required)
1. (*) Dynamics: Competing Across Time (EOS Ch.7 in 6th ed, Ch.10 in 5th ed)
2. Garicano and Gertner, 1999 (BB)
3. Borenstein, 2004 (BB)
Case study
American Airlines (Not HBS’s case. Three articles posted in BB's e-reserve:
McDowell, O Brian, and Salpukas)
Many factors have historically made pricing rivalry intense in the US airline
industry. This case provides an opportunity to examine key factors that have led
to low profitability in the past. We will focus on the logic of American’s new fare
restructuring announced in 1992.
The US Airline Industry in 1995 (HBP)
Note: we won't discuss this case in detail, but it is very useful as background for
the American Airlines pricing articles. Focus especially on the section "Marketing
Innovations." Also consider the nature of entry barriers and pricing rivalry in the
industry.
Discussion questions
SESSION 7
1. Perform a five-forces analysis of the US airline industry after 1979 focusing on
entry barriers and pricing rivalry.
2. What do you see as the main pros and cons of hub & spoke system? In what
markets do you think hub & spoke has the biggest advantage?
3. Evaluate American’s announcement of a new rate structure:
 What changes did American make?
 Which customers benefited most? Were any customers made worse off?
 Why did each of American’s competitors react to the change the way they
did?
 What were American’s goals in making this move? Is every airline better off
with the proposed situation?
 Can an airline detect deviations and enforce the rule?
STRATEGIC INTERACTION III: ENTRY AND ENTRY DETERRENCE
We continue the discussions of strategic interaction in the context of firm entry and exit decisions. Strategic
entry deterrence plays a major role in firm strategy in the real world, and we use the game-theoretic framework
to answer these following questions: When does it make sense for the incumbent to fight post-entry? How
BU.912.610.XX – Competitive Strategy – Instructor’s Name – Page 9 of 10
should an entrant predict the profits it is likely to earn? This session covers credible commitments, signaling,
and predatory pricing.
Readings (* Required)
1. (*) Entry and Exit (EOS Ch.6 in 6th ed, Ch.11 in 5th ed)
2. Goolsbee and Syverson, 2008 (BB)
Case Study
Dogfight over Europe: Ryanair (A) (HBP)
This case describes the beginning of the roller coaster ride of Ryanair, an upstart
Irish airline. The case asks to assess Ryanair (RA)'s initial launch strategy. This
case provides an opportunity to evaluate strategic interactions among players,
such as the response of Aer Lingus (AL) and British Airways (BA) to Ryanair's
entry.
Discussion Questions
1. What is Ryanair’s key competitive advantage in entering Dublin - London
route? Is it sustainable in the long run? How does the fact that both BA&AL are
government carriers help or does not help RA to achieve the intended
competitive advantage?
2. Estimate Ryanair’s revenue on the Dublin-London route if Ryanair enters with
the proposed I£98 price. For simplicity, we assume no incumbents react for
this question—i.e., BA & AL keep price and service levels constant. Would RA
be able to fill out their planes?
3. Estimate Ryanair’ cost per passenger and discuss whether the predicted
operating margin for RA is tight. What is the estimated total profit for RA?
Again, we assume BA & AL do not react.
4. Taking account these answers and any other relevant factors, how do you
expect British Airways and Aer Lingus to react?
5. What is your overall assessment of Ryanair’s launch strategy?
BU.912.610.XX – Competitive Strategy – Instructor’s Name – Page 10 of 10
Carey Business School
Policies and General Information
Blackboard Site
A Blackboard course site is set up for this course. Each student is expected to check the site throughout the
semester as Blackboard will be the primary venue for outside classroom communications between the
instructors and the students. Students can access the course site at https://blackboard.jhu.edu. Support for
Blackboard is available at 1-866-669-6138.
Course Evaluation
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The faculty strongly encourages students to provide complete and honest feedback for this course. Please
take this activity seriously; we depend on your feedback to help us improve. Information on how to complete
the evaluation will be provided toward the end of the course.
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Students are not allowed to use any electronic devices during in-class tests. Calculators will be provided if the
instructor requires them for test taking. Students must seek permission from the instructor to leave the
classroom during an in-class test. Test scripts must not be removed from the classroom during the test.
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information or to book an appointment, please visit the Student Success Center website.
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Students are strongly encouraged to consult the Carey Business School’s Student Handbook and Academic
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