978 1 259 73278 2

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Arthur A. Thompson The University of Alabama

Margaret A. Peteraf Dartmouth College

John E. Gamble Texas A&M University–Corpus Christi

A.J. Strickland III The University of Alabama

THE QUEST FOR COMPETITIVE ADVANTAGE:

Concepts and Cases | TWENTY-FIRST EDITION

Crafting and Executing Strategy

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CRAFTING & EXECUTING STRATEGY: THE QUEST FOR COMPETITIVE ADVANTAGE, CONCEPTS AND CASES, TWENTY-FIRST EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2018 by McGraw-Hill Education. All rights reserved.

ISBN 978-1-259-73278-2 MHID 1-259-73278-9

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Library of Congress Cataloging-in-Publication Data Names: Thompson, Arthur A., 1940- author. Title: Crafting and executing strategy : the quest for competitive advantage: concepts and

cases / Arthur A. Thompson, The University of Alabama, Margaret A. Peteraf, Dartmouth College, John E. Gamble, Texas A&M University-Corpus Christi, A.J. Strickland III, The University of Alabama.

Description: Twentyfirst edition. | New York, NY : McGraw-Hill Education, [2018] Identifiers: LCCN 2016038849 | ISBN 9781259732782 (alk. paper) Subjects: LCSH: Strategic planning. | Strategic planning—Case studies. Classification: LCC HD30.28 .T53 2018 | DDC 658.4/012—dc23 LC record available at https://lccn.loc.gov/2016038849

The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.

mheducation.com/highered

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To our families and especially our spouses: Hasseline, Paul, and Kitty.

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Arthur A. Thompson, Jr., earned his B.S. and Ph.D. degrees in economics from The University of Tennessee, spent three years on the economics faculty at Virginia Tech, and served on the faculty of The University of Alabama’s College of Commerce and Business Administration for 24 years. In 1974 and again in 1982, Dr. Thompson spent semester-long sabbaticals as a visiting scholar at the Harvard Business School.

His areas of specialization are business strategy, competition and market analysis, and the economics of business enterprises. In addition to publishing over 30 articles in some 25 different professional and trade publications, he has authored or co-authored five textbooks and six computer-based simulation exercises. His textbooks and strategy simulations have been used at well over 1,000 college and university campuses worldwide.

Dr. Thompson spends much of his off-campus time giving presentations, putting on management development programs, working with companies, and helping operate a busi- ness simulation enterprise in which he is a major partner.

Dr. Thompson and his wife of 56 years have two daughters, two grandchildren, and a Yorkshire Terrier.

Margaret A. Peteraf is the Leon E. Williams Professor of Management at the Tuck School of Business at Dartmouth College. She is an internationally recognized scholar of strategic management, with a long list of publications in top management journals. She has earned myriad honors and prizes for her contributions, including the 1999 Strategic Management Society Best Paper Award recognizing the deep influence of her work on the field of Strate- gic Management. Professor Peteraf is a fellow of the Strategic Management Society and the Academy of Management. She served previously as a member of the Board of Governors of both the Society and the Academy of Management and as Chair of the Business Policy and Strategy Division of the Academy. She has also served in various editorial roles and on numerous editorial boards, including the Strategic Management Journal, the Academy of Management Review, and Organization Science. She has taught in Executive Education programs in various programs around the world and has won teaching awards at the MBA and Executive level.

Professor Peteraf earned her Ph.D., M.A., and M.Phil. at Yale University and held previous faculty appointments at Northwestern University’s Kellogg Graduate School of Management and at the University of Minnesota’s Carlson School of Management.

ABOUT THE AUTHORS

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John E. Gamble is a Professor of Management and Dean of the College of Business at Texas A&M University–Corpus Christi. His teaching and research for nearly 20 years has focused on strategic management at the undergraduate and graduate levels. He has con- ducted courses in strategic management in Germany since 2001, which have been sponsored by the University of Applied Sciences in Worms.

Dr. Gamble’s research has been published in various scholarly journals and he is the author or co-author of more than 75 case studies published in an assortment of strategic management and strategic marketing texts. He has done consulting on industry and market analysis for clients in a diverse mix of industries.

Professor Gamble received his Ph.D., Master of Arts, and Bachelor of Science degrees from The University of Alabama and was a faculty member in the Mitchell College of Busi- ness at the University of South Alabama before his appointment to the faculty at Texas A&M University–Corpus Christi.

Dr. A. J. (Lonnie) Strickland is the Thomas R. Miller Professor of Strategic Management at the Culverhouse School of Business at The University of Alabama. He is a native of north Georgia, and attended the University of Georgia, where he received a Bachelor of Science degree in math and physics; Georgia Institute of Technology, where he received a Master of Science in industrial management; and Georgia State University, where he received his Ph.D. in business administration.

Lonnie’s experience in consulting and executive development is in the strategic manage- ment arena, with a concentration in industry and competitive analysis. He has developed strategic planning systems for numerous firms all over the world. He served as Director of Marketing and Strategy at BellSouth, has taken two companies to the New York Stock Exchange, is one of the founders and directors of American Equity Investment Life Holding (AEL), and serves on numerous boards of directors. He is a very popular speaker in the area of strategic management.

Lonnie and his wife, Kitty, have been married for 49 years. They have two children and two grandchildren. Each summer, Lonnie and his wife live on their private game reserve in South Africa where they enjoy taking their friends on safaris.

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PREFACE

By offering the most engaging, clearly articulated, and conceptually sound text on strategic management, Crafting and Executing Strategy has been able to main-tain its position as the leading textbook in strategic management for over 30 years. With this latest edition, we build on this strong foundation, maintaining the attributes of the book that have long made it the most teachable text on the market, while updating the content, sharpening its presentation, and providing enlightening new illustrations and examples.

The distinguishing mark of the 21st edition is its enriched and enlivened presenta- tion of the material in each of the 12 chapters, providing an as up-to-date and engross- ing discussion of the core concepts and analytical tools as you will find anywhere. As with each of our new editions, there is an accompanying lineup of exciting new cases that bring the content to life and are sure to provoke interesting classroom discussions, deepening students’ understanding of the material in the process.

While this 21st edition retains the 12-chapter structure of the prior edition, every chapter—indeed every paragraph and every line—has been reexamined, refined, and refreshed. New content has been added to keep the material in line with the latest developments in the theory and practice of strategic management. In other areas, cov- erage has been trimmed to keep the book at a more manageable size. Scores of new examples have been added, along with 17 new Illustration Capsules, to enrich under- standing of the content and to provide students with a ringside view of strategy in action. The result is a text that cuts straight to the chase in terms of what students really need to know and gives instructors a leg up on teaching that material effectively. It remains, as always, solidly mainstream and balanced, mirroring both the penetrating insight of academic thought and the pragmatism of real-world strategic management.

A standout feature of this text has always been the tight linkage between the con- tent of the chapters and the cases. The lineup of cases that accompany the 21st edi- tion is outstanding in this respect—a truly appealing mix of strategically relevant and thoughtfully crafted cases, certain to engage students and sharpen their skills in apply- ing the concepts and tools of strategic analysis. Many involve high-profile companies that the students will immediately recognize and relate to; all are framed around key strategic issues and serve to add depth and context to the topical content of the chap- ters. We are confident you will be impressed with how well these cases work in the classroom and the amount of student interest they will spark.

For some years now, growing numbers of strategy instructors at business schools worldwide have been transitioning from a purely text-case course structure to a more robust and energizing text-case-simulation course structure. Incorporating a competi- tion-based strategy simulation has the strong appeal of providing class members with an immediate and engaging opportunity to apply the concepts and analytical tools covered in the chapters and to become personally involved in crafting and executing a strategy for a virtual company that they have been assigned to manage and that com- petes head-to-head with companies run by other class members. Two widely used and pedagogically effective online strategy simulations, The Business Strategy Game and GLO-BUS, are optional companions for this text. Both simulations were created by Arthur Thompson, one of the text authors, and, like the cases, are closely linked to the content of each chapter in the text. The Exercises for Simulation Participants, found at the end of each chapter, provide clear guidance to class members in applying the

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concepts and analytical tools covered in the chapters to the issues and decisions that they have to wrestle with in managing their simulation company.

To assist instructors in assessing student achievement of program learning objec- tives, in line with AACSB requirements, the 21st edition includes a set of Assurance of Learning Exercises at the end of each chapter that link to the specific learning objectives appearing at the beginning of each chapter and highlighted throughout the text. An important instructional feature of the 21st edition is its more closely inte- grated linkage of selected chapter-end Assurance of Learning Exercises and cases to the publisher’s web-based assignment and assessment platform called Connect™. Your students will be able to use the online Connect™ supplement to (1) complete two of the Assurance of Learning Exercises appearing at the end of each of the 12 chap- ters, (2) complete chapter-end quizzes, and (3) enter their answers to a select number of the suggested assignment questions for 7 of the 31 cases in this edition. Many of the Connect™ exercises are automatically graded, thereby enabling you to easily assess the learning that has occurred.

In addition, both of the companion strategy simulations have a built-in Learning Assurance Report that quantifies how well each member of your class performed on nine skills/learning measures versus tens of thousands of other students worldwide who completed the simulation in the past 12 months. We believe the chapter-end Assurance of Learning Exercises, the all-new online and automatically graded Con- nect™ exercises, and the Learning Assurance Report generated at the conclusion of The Business Strategy Game and GLO-BUS simulations provide you with easy-to-use, empirical measures of student learning in your course. All can be used in conjunction with other instructor-developed or school-developed scoring rubrics and assessment tools to comprehensively evaluate course or program learning outcomes and measure compliance with AACSB accreditation standards.

Taken together, the various components of the 20th-edition package and the sup- porting set of instructor resources provide you with enormous course design flexibility and a powerful kit of teaching/learning tools. We’ve done our very best to ensure that the elements constituting the 20th edition will work well for you in the classroom, help you economize on the time needed to be well prepared for each class, and cause stu- dents to conclude that your course is one of the very best they have ever taken—from the standpoint of both enjoyment and learning.

DIFFERENTIATING FEATURES OF THE 21ST EDITION Seven standout features strongly differentiate this text and the accompanying instruc- tional package from others in the field: 1. Our integrated coverage of the two most popular perspectives on strategic

management—positioning theory and resource-based theory—is unsurpassed by any other leading strategy text. Principles and concepts from both the positioning per- spective and the resource-based perspective are prominently and comprehensively integrated into our coverage of crafting both single-business and multibusiness strate- gies. By highlighting the relationship between a firm’s resources and capabilities to

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the activities it conducts along its value chain, we show explicitly how these two per- spectives relate to one another. Moreover, in Chapters 3 through 8 it is emphasized repeatedly that a company’s strategy must be matched not only to its external market circumstances but also to its internal resources and competitive capabilities.

2. Our coverage of cooperative strategies and the role that interorganizational activ- ity can play in the pursuit of competitive advantage, is similarly distinguished. The topics of the value net, ecosystems, strategic alliances, licensing, joint ven- tures, and other types of collaborative relationships are featured prominently in a number of chapters and are integrated into other material throughout the text. We show how strategies of this nature can contribute to the success of single-business companies as well as multibusiness enterprises, whether with respect to firms operating in domestic markets or those operating in the international realm.

3. The attention we give to international strategies, in all their dimensions, make this textbook an indispensable aid to understanding strategy formulation and execu- tion in an increasingly connected, global world. Our treatment of this topic as one of the most critical elements of the scope of a company’s activities brings home to students the connection between the topic of international strategy with other topics concerning firm scope, such as multibusiness (or corporate) strategy, out- sourcing, insourcing, and vertical integration.