Bsg comprehensive exam answers chegg

Case Analysis

GREGORY G. DESS

University of Texas at Dallas

GERRY McNAMARA

Michigan State University

ALAN B. EISNER

Pace University

SEUNG-HYUN (SEAN) LEE

University of Texas at Dallas

text & cases

ninth edition

STRATEGIC MANAGEMENT

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STRATEGIC MANAGEMENT: TEXT AND CASES, NINTH EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2019 by McGraw- Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2016, 2014, and 2012. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

This book is printed on acid-free paper.

1 2 3 4 5 6 7 8 9 0 LWI 21 20 19 18

ISBN 978-1-259-81395-5 (bound edition) MHID 1-259-81395-9 (bound edition)

ISBN 978-1-259-89997-3 (loose-leaf edition) MHID 1-259-89997-7 (loose-leaf edition)

ISBN 978-1-259-89994-2 (instructor’s edition) MHID 1-259-89994-2 (instructor’s edition)

Portfolio Director: Michael Ablassmeir Lead Product Developer: Kelly Delso Product Developer: Anne Ehrenworth Executive Marketing Manager: Debbie Clare Content Project Managers: Harvey Yep (Core), Bruce Gin (Assessment) Buyer: Susan K. Culbertson Design: Matt Diamond Content Licensing Specialists: DeAnna Dausener (Image and Text) Cover Image: ©Anatoli Styf/Shutterstock Compositor: SPi Global

All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.

Library of Congress Cataloging-in-Publication Data

Names: Dess, Gregory G., author. | McNamara, Gerry, author. | Eisner, Alan B., author. Title: Strategic management : text and cases / Gregory G. Dess, University of Texas at Dallas, Gerry McNamara, Michigan State University, Alan B. Eisner, Pace University. Description: Ninth edition. | New York, NY : McGraw-Hill Education, [2019] Identifiers: LCCN 2017052281 | ISBN 9781259813955 (alk. paper) Subjects: LCSH: Strategic planning. Classification: LCC HD30.28 .D4746 2019 | DDC 658.4/012—dc23 LC record available at https://lccn.loc.gov/2017052281

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 my family, Margie and Taylor and my parents, the late Bill and Mary Dess; and Michael Wood

To my first two academic mentors—Charles Burden and Les Rue (of Georgia State University)

–Greg

To my wonderful wife, Gaelen, my children, Megan and AJ; and my parents, Gene and Jane

–Gerry

To my family, Helaine, Rachel, and Jacob

–Alan

To my family, Hannah, Paul and Stephen; and my parents, Kenny and Inkyung.

–Sean

DEDICATION

dedication

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Gregory G. Dess is the Andrew R. Cecil Endowed Chair in Management at the University of Texas at Dallas. His primary research interests are in strategic management, organization- environment relationships, and knowledge management. He has published numerous articles on these subjects in both academic and practitioner-oriented journals. He also serves on the editorial boards of a wide range of practitioner-oriented and academic journals. In August 2000, he was inducted into the Academy of Management Journal’s Hall of Fame as one of its charter members. Professor Dess has conducted executive programs in the United States, Europe, Africa, Hong Kong, and Australia. During 1994 he was a Fulbright Scholar in Oporto, Portugal. In 2009, he received an honorary doctorate from the University of Bern (Switzerland). He received his PhD in Business Administration from the University of Washington (Seattle) and a BIE degree from Georgia Tech.

Gerry McNamara is the Eli Broad Professor of Management at Michigan State University. His research draws on cognitive and behavioral theories to explain strategic phenomena, including strategic decision making, mergers and acquisitions, and environmental assessments. His research has been published in the Academy of Management Journal, the Strategic Management Journal, Organization Science, Organizational Behavior and Human Decision Processes, the Journal of Applied Psychology, the Journal of Management, and the Journal of International Business Studies. Gerry’s research has also been abstracted in the Wall Street Journal, Harvard Business Review, New York Times, Bloomberg Businessweek, the Economist, and Financial Week. He serves as an Associate Editor for the Strategic Management Journal and previously served as an Associate Editor for the Academy of Management Journal. He received his PhD from the University of Minnesota.

ABOUT THE AUTHORS

about the authors

©He GaoPhoto provided by the author

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Alan B. Eisner is Professor of Management and Department Chair, Management and Management Science Department, at the Lubin School of Business, Pace University. He received his PhD in management from the Stern School of Business, New York University. His primary research interests are in strategic management, technology management, organizational learning, and managerial decision making. He has published research articles and cases in journals such as Advances in Strategic Management, International Journal of Electronic Commerce, International Journal of Technology Management, American Business Review, Journal of Behavioral and Applied Management, and Journal of the International Academy for Case Studies. He is the former Associate Editor of the Case Association’s peer-reviewed journal, The CASE Journal.

Seung-Hyun Lee is a Professor of strategic management and international business and the Area Coordinator of the Organization, Strategy, and International Management area at the Jindal School of Business, University of Texas at Dallas. His primary research interests lie on the intersection between strategic management and international business spanning from foreign direct investment to issues of microfinance and corruption. He has published in numerous journals including Academy of Management Review, Journal of Business Ethics, Journal of International Business Studies, Journal of Business Venturing, and Strategic Management Journal. He received his MBA and PhD from the Ohio State University.

©Seung-Hyun Lee©Alan B. Eisner

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PREFACE

Welcome to the Ninth Edition of Strategic Management: Text and Cases! As noted on the cover, we are happy to introduce Seung- Hyun Lee to the author team. Greg has known Seung since we both joined the faculty at the University of Texas at Dallas in 2002. Seung has developed a very distinguished publication record in both strategic management and international business/international management and he has made many important contributions in these areas in the present edition. In particular, his international expertise has been particularly valuable in further “globalizing” our book.

We appreciate the constructive and positive feedback that we have received on our work. Here’s some of the encouraging feedback we have received from our reviewers:

The Dess book comprehensively covers the fundamentals of strategy and supports concepts with research and managerial insights.

Joshua J. Daspit, Mississippi State University

Very engaging. Students will want to read it and find it hard to put down.

Amy Grescock, University of Michigan, Flint

Very easy for students to understand. Great use of business examples throughout the text.

Debbie Gilliard, Metropolitan State University, Denver

I use Strategic Management in a capstone course required of all business majors, and students appreciate the book because it synergizes all their business education into a meaningful and understandable whole. My students enjoy the book’s readability and tight organization, as well as the contemporary examples, case studies, discussion questions, and exercises.

William Sannwald, San Diego State University

The Dess book overcomes many of the limitations of the last book I used in many ways: (a) presents content in a very interesting and engrossing manner without compromising the depth and comprehensiveness, (b) inclusion of timely and interesting illustrative examples, and (c) EOC exercises do an excellent job of complementing the chapter content.

Sucheta Nadkami, University of Cambridge

The content is current and my students would find the real-world examples to be extremely interesting. My colleagues would want to know about it and I would make extensive use of the following features: “Learning from Mistakes,” “Strategy Spotlights,” and “Issues for Debate.” I especially like the “Reflecting on Career Implications” feature. Bottom line: the authors do a great job of explaining complex material and at the same time their use of up-to-date examples promotes learning.

Jeffrey Richard Nystrom, University of Colorado at Denver

We always strive to improve our work and we are most appreciative of the extensive and thoughtful feedback that many strategy professionals have graciously given us. We endeavored to incorporate their ideas into the Ninth Edition—and we acknowledge them by name later in the Preface.

We believe we have made valuable improvements throughout our many revised editions of Strategic Management. At the same time, we strive to be consistent and “true” to our original overriding objective: a book that satisfies three R’s—rigor, relevance, and readable. And we are

preface

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pleased that we have received feedback (such as the comments on the previous page) that is consistent with what we are trying to accomplish.

What are some of the features in Strategic Management that reinforce the 3 R’s? First, we build in rigor by drawing on the latest research by management scholars and insights from management consultants to offer a current a current and comprehensive view of strategic issues. We reinforce this rigor with our “Issues for Debate” and “Reflecting on Career Implications. . .” that require students to develop insights on how to address complex issues and understand how strategy concepts can enhance their career success. Second, to enhance relevance, we provide numerous examples from management practice in the text and “Strategy Spotlights” (sidebars). We also increase relevance by relating course topic and examples to current business and societal themes, including environmental sustainability, ethics, globalization, entrepreneurship, and data analytics. Third, we stress readability with an engaging writing style with minimal jargon to ensure an effective learning experience. This is most clearly evident in the conversational presentations of chapter opening “Learning from Mistakes” and chapter ending “Issues for Debate.”

Unlike other strategy texts, we provide three separate chapters that address timely topics about which business students should have a solid understanding. These are the role of intellectual assets in value creation (Chapter 4), entrepreneurial strategy and competitive dynamics (Chapter 8), and fostering entrepreneurship in established organizations (Chapter 12). We also provide an excellent and thorough chapter on how to analyze strategic management cases.

In developing Strategic Management: Text and Cases, we certainly didn’t forget the instructors. As we all know, you have a most challenging (but rewarding) job. We did our best to help you. We provide a variety of supplementary materials that should help you in class preparation and delivery. For example, our chapter notes do not simply summarize the material in the text. Rather (and consistent with the concept of strategy), we ask ourselves: “How can we add value?” Thus, for each chapter, we provide numerous questions to pose to help guide class discussion, at least 12 boxed examples to supplement chapter material, and three detailed “teaching tips” to further engage students. For example, we provide several useful insights on strategic leadership from one of Greg’s colleagues, Charles Hazzard (formerly Executive Vice President, Occidental Chemical). Also, we completed the chapter notes—along with the entire test bank—ourselves. That is, unlike many of our rivals, we didn’t simply farm the work out to others. Instead, we felt that such efforts help to enhance quality and consistency—as well as demonstrate our personal commitment to provide a top-quality total package to strategy instructors. With the Ninth Edition, we also benefited from valued input by our strategy colleagues to further improve our work.

Let’s now address some of the key substantive changes in the Ninth Edition. Then we will cover some of the major features that we have had in previous editions.

WHAT’S NEW? HIGHLIGHTS OF THE NINTH EDITION We have endeavored to add new material to the chapters that reflects the feedback we have received from our reviewers as well as the challenges today’s managers face. Thus, we all invested an extensive amount of time carefully reviewing a wide variety of books, academic and practitioner journals, and the business press.

We also worked hard to develop more concise and tightly written chapters. Based on feedback from some of the reviewers, we have tightened our writing style, tried to eliminate redundant examples, and focused more directly on what we feel is the most important content in each chapter for our audience. The overall result is that we were able to update our material, add valuable new content, and—at the same time—shorten the length of the chapters.

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Here are some of the major changes and improvements in the Ninth Edition:

∙ Big Data/Data Analysis. A central theme of the Ninth Edition, it has become a leading and highly visible component of a broader technological phenomena—the emergence of digital technology. Such initiatives have the potential to enable firms to better customize their product and service offerings to customers while more efficiently and fully using the resources of the company. Throughout the text, we provide examples from a wide range of industries and government. This includes discussions of how Coca Cola uses data analytics to produce consistent orange juice, IBM’s leveraging of big data to become a healthcare solution firm, Caterpillar’s use of data analytics to improve machine reliability and to identify needed service before major machine failures, and Digital Reasoning’s efforts to use data analytics to enhance the ability of firms to control employees and avoid illegal and unethical behavior.

∙ Greater coverage of international business/international management (IB/IM from new co-author). As we noted at the beginning of the Preface, we have invited Seung-Hyun Lee, an outstanding IB/IM scholar, to join the author team and we are very pleased that he has accepted! Throughout the book we have included many concepts and examples of IB/IM that reflects the growing role of international operations for a wide range of industries and firms. We discuss how differences in national culture impact the negotiation of contracts and whether or not to adapt human resource practices when organizations cross national boundaries. We also include a discussion of how corporate governance practices differ across countries and discuss in depth how Japan is striving to develop balanced governance practices that incorporate elements of U.S. practices while retaining, at its core, elements of traditional Japanese practices. Additionally, we discuss why conglomerate firms thrive in Asian markets even as this form of organization has gone out of favor in the United States and Europe. Finally, we discuss research that suggests that firms in transition economies can improve their innovative performance by focusing on learning across boundaries within the firm compared to learning from outside partners.

∙ “Executive Insights: The Strategic Management Process.” Here, we introduce a nationally recognized leader and explore several key issues related to strategic management. The executive is William H. McRaven, a retired four-star admiral who leads the nation’s second largest system of higher education. As chief executive officer of the UT System, he oversees 14 institutions that educate 217,000 students and employ 20,000 faculty and more than 70,000 health care professionals, researchers, and staff. He is perhaps best known for his involvement in Operation Neptune Spear, in which he commanded the U.S. Navy Special Forces who located and killed al Qaeda leader Osama bin Laden. We are very grateful for his valuable contribution!

∙ Half of the 12 opening “Learning from Mistakes” vignettes that lead off each chapter are totally new. Unique to this text, they are all examples of what can go wrong, and they serve as an excellent vehicle for clarifying and reinforcing strategy concepts. After all, what can be learned if one simply admires perfection?

∙ Over half of our “Strategy Spotlights” (sidebar examples) are brand new, and many of the others have been thoroughly updated. Although we have reduced the number of Spotlights from the previous edition to conserve space, we still have a total of 64—by far the most in the strategy market. We focus on bringing the most important strategy concepts to life in a concise and highly readable manner. And we work hard to eliminate unnecessary detail that detracts from the main point we are trying to make. Also, consistent with our previous edition, many of the Spotlights focus on two

PREFACE

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“hot” issues that are critical in leading today’s organizations: ethics and environmental sustainability—as well as data analytics in this edition.

Key content changes for the chapters include:

∙ Chapter 1 addresses three challenges for executives who are often faced with similar sets of opposing goals which can polarize their organizations. These challenges, or paradoxes, are called (1) the innovation paradox, the tension between existing products and new ones—stability and change; (2) the globalization paradox, the tension between global connectedness and local needs; and, (3) the obligation paradox, the tension between maximizing shareholder returns and creating benefits for a wide range of stakeholders— employees, customers, society, etc. We also discuss three theaters of practice that managers need to recognize in order to optimize the positive impact of the corporate social responsibility (CSR) initiatives. These are (1) Focusing on philanthropy, (2) Improving operational effectiveness, and (3) Transforming the business model.

∙ Chapter 2 introduces the concept of big data/data analytics—a technology that affects multiple segments of the general environment. A highly visible component of the digital economy, such technologies are altering the way business is conducted in a wide variety of sectors—government, industry, and commerce. We provide a detailed example of how it has been used to monitor the expenditures of federal, state, and local governments.

∙ Chapter 3 includes a discussion on program hiring to build human capital. With program hiring, firms offer employment to promising graduates without knowing which specific job the employee will fill. Firms employing this tactic believe it allows them to meet changing market conditions by hiring flexible employees who desire a dynamic setting. We also include a discussion of how Coca Cola is leveraging data analytics to produce orange juice that is consistent over time and can be tailored to meet local market tastes.

∙ Chapter 4 discusses research that has found that millennials have a different definition of diversity and inclusion than prior generations. That is, millennials look upon diversity as the blending of different backgrounds, experiences, and perspectives within a team, i.e., cognitive diversity. Earlier generations—the X-Generation and the Boomer Generation— tended to view diversity as a representation of fairness and protection for all regardless of gender, race, religion, etc. An important implication is that while many millennials believe that differences of opinion enable teams to excel, relatively few of them feel that their leaders share this perspective. The chapter also provides a detailed example of how data analytics can increase employee retention.

∙ Chapter 5 examines how firms can create strong competitive positions in platform markets. In platform markets, firms act as intermediaries between buyers and sellers. Success is largely based on the ability of the firm to be the de facto provider of this matching process. We discuss several actions firms can take to stake out a leadership position in these markets. In addition, we include a discussion of research outlining how firms can develop organizational structures and policies to draw on customer interactions to improve their innovativeness. The key finding from this research is that it is critical for firms to empower and incent front line employees to look for and share innovative insights they take away from customer interactions.

∙ Chapter 6 includes a section on different forms of strategic alliances and when they are most appropriate. In discussing the differences between contractual alliances, equity alliances, and joint ventures, students can better understand the range of options they

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have to build cooperative arrangements with other firms and the factors that influence the choice among these options.

∙ Chapter 7 explains two important areas in which culture can play a key role in managing organizations across national boundaries. First, we discuss situations in which it is best to not adapt one’s company culture—even if it conflicts with the culture country in which the firm operates. We provide the example of Google’s human resource policy of providing employees with lots of positive feedback during performance reviews. Why? Google feels that this is a key reason for its outstanding success in product innovation. Second, we address some of the challenges that managers encounter when they negotiate contracts across national boundaries. We discuss research that identifies several elements of negotiating behaviors that help to identify cultural differences.

∙ Chapter 8 identifies factors investors can examine when evaluating the risk of crowdfunded ventures. When firms raise funds through crowdfunding, they often have limited business and financial histories and haven’t yet built up a clear reputation. This raises the risks investors face. We identify some factors investors can look into to clarify the worthiness and risk of firms who are raising financial resources through crowdfunding.

∙ Chapter 9 discusses the increasingly important role that activist investors have in the corporate governance of publicly-traded firms. Activist investors are investors who take small but significant ownership stakes in large firms, typically 5 to 10 percent ownership, and push for major strategic changes in the firm. These activist investors are often successful, winning 70 percent of the shareholder votes they champion and have forced the exit of leaders of several large firms. Additionally, we discuss a corner of Wall Street where women dominate, as corporate governance heads at major institutional investors. These institutional investors hold large blocks of stock in all major corporations. As a result, these female leaders are in a position to push for governance changes in these corporations to make them more responsive to the concerns of investors, such as increasing opportunities for female corporate leaders.

∙ Chapter 10 discusses how firms can organize to improve their innovativeness. Often managers look to outside partners to learn new skills and access new knowledge to improve their innovative performance. We discuss research that suggests that efforts to look to create novel combinations of knowledge within the firm offer greater potential to generate stronger innovation performance. The key advantage of internal knowledge is that it is proprietary and potentially more applicable to the firm’s innovation efforts.

∙ Chapter 11 includes discussions of multiple firms that have changed their leadership and control systems to respond to challenges they’ve faced. This includes Marvin Ellison’s efforts to revive JC Penney after prior bad leadership, Target’s efforts to change its supply chain system to meet changing customer demands, and the decision procedures JC Johnson Inc. has put in place to improve its ability to lead its industry in sustainability efforts.

∙ Chapter 12 highlights the potential to learn from innovation failures. Too often, firms become risk averse in their behavior in order to avoid failure. We discuss how this can result in missing truly innovative opportunities. Drawing off research by Julian Birkinshaw, we discuss the need for firms to get their employees to take bold innovation actions and steps firms can take to learn from failed innovation efforts to be more effective in future innovation efforts. We also discuss research on the consequences of losing star innovation employees. Firms worry about the loss of key innovation personnel, but research shows that while there are costs associated with the loss of star

PREFACE

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innovators, there are also potential benefits. Firms that lose key innovators typically experience a loss in exploitation-oriented innovation, but they also often see an increase in exploration-oriented innovation.

∙ Chapter 13 provides an example of how the College of Business Administration at Towson University successfully introduced a “live” business case completion across all of it strategic management sections. The “description” and the “case completion checklist” includes many of the elements of the analysis-decision-action cycle in case analysis that we address in the chapter.

∙ Chapter 13 updates our Appendix: Sources of Company and Industry Information. Here, we owe a big debt to Ruthie Brock and Carol Byrne, library professionals at the University of Texas at Arlington. These ladies have provided us with comprehensive and updated information for the Ninth Edition that is organized in a range of issues. These include competitive intelligence, annual report collections, company rankings, business websites, and strategic and competitive analysis. Such information is invaluable in analyzing companies and industries. We are always amazed by the diligence, competence—and good cheer—that Ruthie and Carol demonstrate when we impose on them every two years!

∙ We have worked hard to further enhance our excellent case package with a major focus on fresh and current cases on familiar firms. ∙ More than half of our cases are author-written (much more than the competition). ∙ We have updated our users favorite cases, creating fresh stories about familiar

companies to minimize instructor preparation time and “maximize freshness” of he content.

∙ We have added several exciting new cases to the lineup including Blackberry and Ascena (the successor company to Ann Talyor).

∙ We have also extensively updated 28 familiar cases with the latest news. ∙ Our cases are familiar yet fresh with new data and problems to solve.

WHAT REMAINS THE SAME: KEY FEATURES OF EARLIER EDITIONS Let’s now briefly address some of the exciting features that remain from the earlier editions.

∙ Traditional organizing framework with three other chapters on timely topics. Crisply written chapters cover all of the strategy bases and address contemporary topics. First, the chapters are divided logically into the traditional sequence: strategy analysis, strategy formulation, and strategy implementation. Second, we include three chapters on such timely topics as intellectual capital/knowledge management, entrepreneurial strategy and competitive dynamics, and fostering corporate entrepreneurship and new ventures.

∙ “Learning from Mistakes” chapter-opening cases. To enhance student interest, we begin each chapter with a case that depicts an organization that has suffered a dramatic performance drop, or outright failure, by failing to adhere to sound strategic management concepts and principles. We believe that this feature serves to underpin the value of the concepts in the course and that it is a preferred teaching approach to merely providing examples of outstanding companies that always seem to get it right. After all, isn’t it better (and more challenging) to diagnose problems than admire perfection? As Dartmouth’s Sydney Finkelstein, author of Why Smart Executives Fail,

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PREFACE

notes: “We live in a world where success is revered, and failure is quickly pushed to the side. However, some of the greatest opportunities to learn—for both individuals and organizations—come from studying what goes wrong.”* We’ll see how, for example, why Frederica Marchionni, the CEO that Land’s End hired in 2015, failed to spearhead the revival of the brand. Her initiatives geared toward taking the brand upscale turned out to be too much of a shock to the firm’s customer base as well as the firm’s family culture and wholesome style. As noted by a former executive, “It doesn’t look like Land’s End anymore. There was never the implication that if you wore Lands’ End you’d be on the beach on Nantucket living the perfect life.” We’ll also explore the bankruptcy of storied law firm Dewey & LeBoeuf LLP. Their failure can be attributed to three major issues: a reliance on borrowed money, making large promises about compensation to incoming partners (which didn’t sit well with their existing partners!), and a lack of transparency about the firm’s financials.

∙ “Issue for Debate” at the end of each chapter. We find that students become very engaged (and often animated!) in discussing an issue that has viable alternate points of view. It is an exciting way to drive home key strategy concepts. For example, in Chapter 1, Seventh Generation is faced with a dilemma that confronts their values and they must decide whether or not to provide their products to some of their largest customers. At issue: While they sympathize (and their values are consistent) with the striking workers at the large grocery chains, should they cross the picket lines? In Chapter 4, we discuss an issue that can be quite controversial: Does offering financial incentives to employees to lose weight actually work? We will explain a study by professors and medical professionals who conducted a test to explore this issue. And, in Chapter 7, we address Medtronic’s decision to acquire Covidien, an Irish-based medical equipment manufacturer for $43 billion. Its primary motive: Lower its taxes by moving its legal home to Ireland—a country that has lower rates of taxation on corporations. Some critics may see such a move as unethical and unpatriotic. Others would argue that it will help the firm save on taxes and benefit their shareholders.

∙ “Insights from Research.” We include six of this feature in the Ninth Edition—and half of them are entirely new. Here, we summarize key research findings on a variety of issues and, more importantly, address their relevance for making organizations (and managers!) more effective. For example, in Chapter 2 we discuss findings from a meta- analysis (research combining many individual studies) to debunk several myths about older workers—a topic of increasing importance, given the changing demographics in many developed countries. In Chapter 4, we address a study that explored the viability of re-hiring employees who had previously left the organizations. Such employees, called “boomerangs” may leave an organization for several reasons and such reasons may strongly influence their willingness to return to the organization. In Chapter 5, we summarize a study that looked at how firms can improve their innovativeness by drawing on interactions with customers but only if the firm empowers front line employees to lead innovative efforts and provides incentives to motivate employees to do so. In Chapter 10, we discuss research on firms in transition economies that found firms which learn from both external partners and by spanning boundaries within the firm can improve their innovation. However, learning between units within the firm produced higher innovation performance.

*Personal Communication, June 20, 2005.

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∙ “Reflecting on Career Implications. . .” We provide insights that are closely aligned with and directed to three distinct issues faced by our readers: prepare them for a job interview (e.g., industry analysis), help them with current employers or their career in general, or help them find potential employers and decide where to work. We believe this will be very valuable to students’ professional development.

∙ Consistent chapter format and features to reinforce learning. We have included several features in each chapter to add value and create an enhanced learning experience. First, each chapter begins with an overview and a list of key learning objectives. Second, as previously noted, the opening case describes a situation in which a company’s performance eroded because of a lack of proper application of strategy concepts. Third, at the end of each chapter there are four different types of questions/exercises that should help students assess their understanding and application of material:

1. Summary review questions. 2. Experiential exercises. 3. Application questions and exercises. 4. Ethics questions.

Given the centrality of online systems to business today, each chapter contains at least one exercise that allows students to explore the use of the web in implementing a firm’s strategy.

∙ Key Terms. Approximately a dozen key terms for each chapter are identified in the margins of the pages. This addition was made in response to reviewer feedback and improves students’ understanding of core strategy concepts.

∙ Clear articulation and illustration of key concepts. Key strategy concepts are introduced in a clear and concise manner and are followed by timely and interesting examples from business practice. Such concepts include value-chain analysis, the resource- based view of the firm, Porter’s five-forces model, competitive advantage boundaryless organizational designs, digital strategies, corporate governance, ethics, data analytics, and entrepreneurship.

∙ Extensive use of sidebars. We include 64 sidebars (or about five per chapter) called “Strategy Spotlights.” The Strategy Spotlights not only illustrate key points but also increase the readability and excitement of new strategy concepts.

∙ Integrative themes. The text provides a solid grounding in ethics, globalization, environmental substainability, and technology. These topics are central themes throughout the book and form the basis for many of the Strategy Spotlights.

∙ Implications of concepts for small businesses. Many of the key concepts are applied to start-up firms and smaller businesses, which is particularly important since many students have professional plans to work in such firms.

∙ Not just a textbook but an entire package. Strategic Management features the best chapter teaching notes available today. Rather than merely summarizing the key points in each chapter, we focus on value-added material to enhance the teaching (and learning) experience. Each chapter includes dozens of questions to spur discussion, teaching tips, in-class group exercises, and about a dozen detailed examples from business practice to provide further illustrations of key concepts.

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PREFACE

TEACHING RESOURCES Instructor’s Manual (IM) Prepared by the textbook authors, along with valued input from our strategy colleagues, the accompanying IM contains summary/objectives, lecture/discussion outlines, discussion questions, extra examples not included in the text, teaching tips, reflecting on career implications, experiential exercises, and more.

Test Bank Revised by Christine Pence of the University of California-Riverside, the test bank contains more than 1,000 true/false, multiple-choice, and essay questions. It is tagged with learning objectives as well as Bloom’s Taxonomy and AACSB criteria.

∙ Assurance of Learning Ready. Assurance of Learning is an important element of many accreditation standards. Dess 9e is designed specifically to support your Assurance of Learning initiatives. Each chapter in the book begins with a list of numbered learning objectives that appear throughout the chapter. Every test bank question is also linked to one of these objectives, in addition to level of difficulty, topic area, Bloom’s Taxonomy level, and AACSB skill area. EZ Test, McGraw-Hill’s easy-to-use test bank software, can search the test bank by these and other categories, providing an engine for targeted Assurance of Learning analysis and assessment.

∙ AACSB Statement. The McGraw-Hill Companies is a proud corporate member of AACSB International. Understanding the importance and value of AACSB accreditation, Dess 9e has sought to recognize the curricula guidelines detailed in the AACSB standards for business accreditation by connecting selected questions in Dess 9e and the test bank to the general knowledge and skill guidelines found in the AACSB standards. The statements contained in Dess 9e are provided only as a guide for the users of this text. The AACSB leaves content coverage and assessment within the purview of individual schools, the mission of the school, and the faculty. While Dess 9e and the teaching package make no claim of any specific AACSB qualification or evaluation, we have labeled selected questions within Dess 9e according to the six general knowledge and skills areas.

∙ Computerized Test Bank Online. A comprehensive bank of test questions is provided within a computerized test bank powered by McGraw-Hill’s flexible electronic testing program, EZ Test Online (www.eztestonline.com). EZ Test Online allows you to create paper and online tests or quizzes in this easy-to-use program. Imagine being able to create and access your test or quiz anywhere, at any time, without installing the testing software! Now, with EZ Test Online, instructors can select questions from multiple McGraw-Hill test banks or author their own and then either print the test for paper distribution or give it online.

∙ Test Creation. ∙ Author/edit questions online using the 14 different question-type templates. ∙ Create printed tests or deliver online to get instant scoring and feedback. ∙ Create question pools to offer multiple versions online—great for practice. ∙ Export your tests for use in WebCT, Blackboard, and Apple’s iQuiz. ∙ Compatible with EZ Test Desktop tests you’ve already created. ∙ Sharing tests with colleagues, adjuncts, TAs is easy.

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∙ Online Test Management. ∙ Set availability dates and time limits for your quiz or test. ∙ Control how your test will be presented. ∙ Assign points by question or question type with drop-down menu. ∙ Provide immediate feedback to students or delay until all finish the test. ∙ Create practice tests online to enable student mastery. ∙ Your roster can be uploaded to enable student self-registration.

∙ Online Scoring and Reporting. ∙ Automated scoring for most of EZ Test’s numerous question types. ∙ Allows manual scoring for essay and other open response questions. ∙ Manual rescoring and feedback are also available. ∙ EZ Test’s grade book is designed to easily export to your grade book. ∙ View basic statistical reports.

∙ Support and Help. ∙ User’s guide and built-in page-specific help. ∙ Flash tutorials for getting started on the support site. ∙ Support website: www.mhhe.com/eztest. ∙ Product specialist available at 1-800-331-5094. ∙ Online training: http://auth.mhhe.com/mpss/workshops/.

PowerPoint Presentation Prepared by Pauline Assenza of Western Connecticut State University, it consists of more than 400 slides incorporating an outline for the chapters tied to learning objectives. Also included are instructor notes, multiple-choice questions that can be used as Classroom Performance System (CPS) questions, and additional examples outside the text to promote class discussion.

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Connect content is authored by the world’s best subject matter experts, and is available to your class through a simple and intuitive interface.

The Connect eBook makes it easy for students to access their reading material on smartphones and tablets. They can study on the go and don’t need internet access to use the eBook as a reference, with full functionality.

Multimedia content such as videos, simulations, and games drive student engagement and critical thinking skills.

©McGraw-Hill Education

Connect’s assignments help students contextualize what they’ve learned through application, so they can better understand the material and think critically.

Connect will create a personalized study path customized to individual student needs through SmartBook®.

SmartBook helps students study more efficiently by delivering an interactive reading experience through adaptive highlighting and review.

McGraw-Hill Connect® is a highly reliable, easy-to- use homework and learning management solution that utilizes learning science and award-winning adaptive tools to improve student results.

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Using Connect improves retention rates by 19.8 percentage points, passing rates by 12.7 percentage points, and exam

scores by 9.1 percentage points.

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www.mheducation.com/connect

©Hero Images/Getty Images

More students earn As and Bs when they

use Connect.

Connect Insight® generates easy-to-read reports on individual students, the class as a whole, and on specific assignments.

The Connect Insight dashboard delivers data on performance, study behavior, and effort. Instructors can quickly identify students who struggle and focus on material that the class has yet to master.

Connect automatically grades assignments and quizzes, providing easy-to-read reports on individual and class performance.

Connect integrates with your LMS to provide single sign-on and automatic syncing of grades. Integration with Blackboard®, D2L®, and Canvas also provides automatic syncing of the course calendar and assignment-level linking.

Connect offers comprehensive service, support, and training throughout every phase of your implementation.

If you’re looking for some guidance on how to use Connect, or want to learn tips and tricks from super users, you can find tutorials as you work. Our Digital Faculty Consultants and Student Ambassadors offer insight into how to achieve the results you want with Connect.

Trusted Service and Support

Robust Analytics and Reporting

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PREFACE

The Business Strategy Game and GLO-BUS Online Simulations Both allow teams of students to manage companies in a head-to-head contest for global market leadership. These simulations give students the immediate opportunity to experiment with various strategy options and to gain proficiency in applying the concepts and tools they have been reading about in the chapters. To find out more or to register, please visit www.mhhe.com/ thompsonsims.

ADDITIONAL RESOURCES FOR COURSE DESIGN AND DELIVERY Create Craft your teaching resources to match the way you teach! With McGraw-Hill Create, www.mcgrawhillcreate.com, you can easily rearrange chapters, combine material from other content sources, and quickly upload content you have written, like your course syllabus or teaching notes. Find the content you need in Create by searching through thousands of leading McGraw-Hill textbooks. Arrange your book to fit your teaching style. Create even allows you to personalize your book’s appearance by selecting the cover and adding your name, school, and course information. Order a Create book and you’ll receive a complimentary print review copy in three to five business days or a complimentary electronic review copy (eComp) via email in about one hour. Go to www.mcgrawhillcreate.com today and register. Experience how McGraw- Hill Create empowers you to teach your students your way.

E-Book Options E-books are an innovative way for students to save money and to “go green.” McGraw-Hill’s e-books are typically 40 percent of bookstore price. Students have the choice between an online and a downloadable CourseSmart e-book.

Through CourseSmart, students have the flexibility to access an exact replica of their textbook from any computer that has Internet service, without plug-ins or special software via the version, or create a library of books on their hard drive via the downloadable version. Access to CourseSmart e-books is one year.

Features: CourseSmart e-books allow students to highlight, take notes, organize notes, and share the notes with other CourseSmart users. Students can also search terms across all e-books in their purchased CourseSmart library. CourseSmart e-books can be printed (5 pages at a time).

More info and purchase: Please visit www.coursesmart.com for more information and to purchase access to our e-books. CourseSmart allows students to try one chapter of the e-book, free of charge, before purchase.

McGraw-Hill Higher Education and Blackboard McGraw-Hill Higher Education and Blackboard have teamed up. What does this mean for you?

1. Your life, simplified. Now you and your students can access McGraw-Hill’s Connect and Create right from within your Blackboard course—all with one single sign-on. Say goodbye to the days of logging in to multiple applications.

2. Deep integration of content and tools. Not only do you get single sign-on with Connect and Create, you also get deep integration of McGraw-Hill content and content engines

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right in Blackboard. Whether you’re choosing a book for your course or building Connect assignments, all the tools you need are right where you want them—inside Blackboard.

3. Seamless gradebooks. Are you tired of keeping multiple gradebooks and manually synchronizing grades into Blackboard? We thought so. When a student completes an integrated Connect assignment, the grade for that assignment automatically (and instantly) feeds into Blackboard grade center.

4. A solution for everyone. Whether your institution is already using Blackboard or you just want to try Blackboard on your own, we have a solution for you. McGraw-Hill and Blackboard can now offer you easy access to industry-leading technology and content, whether your campus hosts it or we do. Be sure to ask your local McGraw-Hill representative for details.

McGraw-Hill Customer Care Contact Information At McGraw-Hill, we understand that getting the most from new technology can be challenging. That’s why our services don’t stop after you purchase our products. You can email our product specialists 24 hours a day to get product training online. Or you can search our knowledge bank of Frequently Asked Questions on our support website. For customer support, call 800-331- 5094, email hmsupport@mcgraw-hill.com, or visit www.mhhe.com/support. One of our technical support analysts will be able to assist you in a timely fashion.

ACKNOWLEDGMENTS Strategic Management represents far more than just the joint efforts of the three co-authors. Rather, it is the product of the collaborative input of many people. Some of these individuals are academic colleagues, others are the outstanding team of professionals at McGraw-Hill, and still others are those who are closest to us—our families. It is time to express our sincere gratitude.

First, we’d like to acknowledge the dedicated instructors who have graciously provided their insights since the inception of the text. Their input has been very helpful in both pointing out errors in the manuscript and suggesting areas that needed further development as additional topics. We sincerely believe that the incorporation of their ideas has been critical to improving the final product. These professionals and their affiliations are:

The Reviewer Hall of Fame

Moses Acquaah, University of North Carolina-Greensboro

Todd Alessandri, Northeastern University

Larry Alexander, Virginia Polytechnic Institute

Thomas H. Allison, Washington State University

Brent B. Allred, College of William & Mary

Allen C. Amason, Georgia Southern University

Kathy Anders, Arizona State University

Jonathan Anderson, University of West Georgia

Peter H. Antoniou, California State University- San Marcos

Dave Arnott, Dallas Baptist University

Marne L. Arthaud-Day, Kansas State University

Dr. Bindu Arya, University of Missouri— St. Louis

Jay A. Azriel, York College of Pennsylvania

Jeffrey J. Bailey, University of Idaho

David L. Baker, PhD, John Carroll University

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PREFACE

Dennis R. Balch, University of North Alabama

Bruce Barringer, University of Central Florida

Barbara R. Bartkus, Old Dominion University

Barry Bayon, Bryant University

Brent D. Beal, Louisiana State University

Dr. Patricia Beckenholdt, Business and Professional Programs, University of Maryland, University College

Joyce Beggs, University of North Carolina-Charlotte

Michael Behnam, Suffolk University

Kristen Bell DeTienne, Brigham Young University

Eldon Bernstein, Lynn University

Lyda Bigelow, University of Utah

David Blair, University of Nebraska at Omaha

Daniela Blettner, Tilburg University

Dusty Bodie, Boise State University

William Bogner, Georgia State University

David S. Boss, PhD, Ohio University

Scott Browne, Chapman University

Jon Bryan, Bridgewater State College

Charles M. Byles, Virginia Commonwealth University

Mikelle A. Calhoun, Valparaiso University

Thomas J. Callahan, University of Michigan–Dearborn

Samuel D. Cappel, Southeastern Louisiana State University

Gary Carini, Baylor University

Shawn M. Carraher, University of Texas–Dallas

Tim Carroll, University of South Carolina

Don Caruth, Amberton University

Maureen Casile, Bowling Green State University

Gary J. Castrogiovanni, Florida Atlantic University

Radha Chaganti, Rider University

Erick PC Chang, Arkansas State University

Tuhin Chaturvedi, Joseph M. Katz Graduate School of Business, University of Pittsburgh

Jianhong Chen, University of New Hampshire

Tianxu Chen, Oakland University

Andy Y. Chiou, SUNY Farmingdale State College

Theresa Cho, Rutgers University

Timothy S. Clark, Northern Arizona University

Bruce Clemens, Western New England College

Betty S. Coffey, Appalachian State University

Wade Coggins, Webster University-Fort Smith Metro Campus

Susan Cohen, University of Pittsburgh

George S. Cole, Shippensburg University

Joseph Coombs, Virginia Commonwealth University

Christine Cope Pence, University of California-Riverside

James J. Cordeiro, SUNY Brockport

Stephen E. Courter, University of Texas at Austin

Jeffrey Covin, Indiana University

Keith Credo, Auburn University

Joshua J. Daspit, PhD, Mississippi State University

Deepak Datta, University of Texas at Arlington

James Davis, Utah State University

Justin L. Davis, University of West Florida

David Dawley, West Virginia University

Daniel DeGravel, California State University Northridge, David Nazarian College of Business and Economics

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Helen Deresky, State University of New York-Plattsburgh

Rocki-Lee DeWitt, University of Vermont

Jay Dial, Ohio State University

Michael E. Dobbs, Arkansas State University

Jonathan Doh, Villanova University

Dr. John Donnellan, NJCU School of Business

Tom Douglas, Clemson University

Jon Down, Oregon State University

Meredith Downes, Illinois State University

Alan E. Ellstrand, University of Arkansas

Dean S. Elmuti, Eastern Illinois University

Clare Engle, Concordia University

Mehmet Erdem Genc, Baruch College, CUNY

Tracy Ethridge, Tri-County Technical College

William A. Evans, Troy State University-Dothan

Frances H. Fabian, University of Memphis

Angelo Fanelli, Warrington College of Business

Michael Fathi, Georgia Southwestern University

Carolyn J. Fausnaugh, Florida Institute of Technology

Tamela D. Ferguson, University of Louisiana at Lafayette

David Flanagan, Western Michigan University

Kelly Flis, The Art Institutes

Karen Ford-Eickhoff, University of North Carolina Charlotte

Dave Foster, Montana State University

Isaac Fox, University of Minnesota

Charla S. Fraley, Columbus State Community College–Columbus, Ohio

Deborah Francis, Brevard College

Steven A. Frankforter, Winthrop University

Vance Fried, Oklahoma State University

Karen Froelich, North Dakota State University

Naomi A. Gardberg, Baruch College, CUNY

Joe Gerard, Western New England University

J. Michael Geringer, Ohio University

Diana L. Gilbertson, California State University–Fresno

Matt Gilley, St. Mary’s University

Debbie Gilliard, Metropolitan State College-Denver

Yezdi H. Godiwalla, University of Wisconsin–Whitewater

Sanjay Goel, University of Minnesota-Duluth

Sandy Gough, Boise State University

Amy Gresock, PhD The University of Michigan, Flint

Vishal K. Gupta, The University of Mississippi

Dr. Susan Hansen, University of Wisconsin–Platteville

Allen Harmon, University of Minnesota–Duluth

Niran Harrison, University of Oregon

Paula Harveston, Berry College

Ahmad Hassan, Morehead State University

Donald Hatfield, Virginia Polytechnic Institute

Kim Hester, Arkansas State University

Scott Hicks, Liberty University

John Hironaka, California State University–Sacramento

Anne Kelly Hoel, University of Wisconsin– Stout

Alan Hoffman, Bentley College

Gordon Holbein, University of Kentucky

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PREFACE

Stephen V. Horner, Pittsburg State University

Jill Hough, University of Tulsa

John Humphreys, Eastern New Mexico University

James G. Ibe, Morris College

Jay J. Janney, University of Dayton

Lawrence Jauch, University of Louisiana-Monroe

Dana M. Johnson, Michigan Technical University

Homer Johnson, Loyola University, Chicago

Marilyn R. Kaplan, Naveen Jindal School of Management, University of Texas–Dallas

James Katzenstein, California State University– Dominguez Hills

Joseph Kavanaugh, Sam Houston State University

Franz Kellermanns, University of Tennessee

Craig Kelley, California State University-Sacramento

Donna Kelley, Babson College

Dave Ketchen, Auburn University

John A. Kilpatrick, Idaho State University

Dr. Jaemin Kim, Stockton University

Brent H. Kinghorn, Emporia State University

Helaine J. Korn, Baruch College, CUNY

Stan Kowalczyk, San Francisco State University

Daniel Kraska, North Central State College

Donald E. Kreps, Kutztown University

Jim Kroeger, Cleveland State University

Subdoh P. Kulkarni, Howard University

Ron Lambert, Faulkner University

Theresa Lant, New York University

Jai Joon Lee, California State University Sacramento

Ted Legatski, Texas Christian University

David J. Lemak, Washington State University–Tri-Cities

Cynthia Lengnick-Hall, University of Texas at San Antonio

Donald L. Lester, Arkansas State University

Wanda Lester, North Carolina A&T State University

Krista B. Lewellyn, University of Wyoming

Benyamin Lichtenstein, University of Massachusetts at Boston

Jun Lin, SUNY at New Paltz

Zhiang (John) Lin, University of Texas at Dallas

Dan Lockhart, University of Kentucky

John Logan, University of South Carolina

Franz T. Lohrke, Samford University

Kevin B. Lowe, Graduate School of Management, University of Auckland

Leyland M. Lucas, Morgan State University

Doug Lyon, Fort Lewis College

Rickey Madden, PhD, Presbyterian College

James Maddox, Friends University

Ravi Madhavan, University of Pittsburgh

Paul Mallette, Colorado State University

Santo D. Marabella, Moravian College

Catherine Maritan, Syracuse University

Daniel Marrone, Farmingdale State College, SUNY

Sarah Marsh, Northern Illinois University

Jim Martin, Washburn University

John R. Massaua, University of Southern Maine

Hao Ma, Bryant College

Larry McDaniel, Alabama A&M University

Jean McGuire, Louisiana State University

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Abagail McWilliams, University of Illinois-Chicago

Ofer Meilich, California State University– San Marcos

John E. Merchant, California State University–Sacramento

John M. Mezias, University of Miami

Michael Michalisin, Southern Illinois University at Carbondale

Doug Moesel, University of Missouri-Columbia

Fatma Mohamed, Morehead State University

Mike Montalbano, Bentley University

Debra Moody, University of North Carolina–Charlotte

Gregory A. Moore, Middle Tennessee State University

James R. Morgan, Dominican University and UC Berkeley Extension

Ken Morlino, Wilmington University

Sara A. Morris, Old Dominion University

Todd W. Moss, PhD, Syracuse University

Carolyn Mu, Baylor University

Stephen Mueller, Northern Kentucky University

John Mullane, Middle Tennessee State University

Chandran Mylvaganam, Northwood University

Sucheta Nadkarni, Cambridge University

Anil Nair, Old Dominion University

V.K. Narayanan, Drexel University

Maria L. Nathan, Lynchburg College

Louise Nemanich, Arizona State University

Charles Newman, University of Maryland, University College

Stephanie Newport, Austin Peay State University

Gerry Nkombo Muuka, Murray State University

Bill Norton, University of Louisville

Dr. Jill E. Novak Texas A&M University

Roman Nowacki, Northern Illinois University

Yusuf A. Nur, SUNY Brockport

Jeffrey Richard Nystrom, University of Colorado– Denver

William Ross O’Brien, Dallas Baptist University

d.t. ogilvie, Rutgers University

Floyd Ormsbee, Clarkson University

Dr. Mine Ozer, SUNY-Oneonta

Dr. Eren Ozgen, Troy University-Dothan Campus

Karen L. Page, University of Wyoming

Jacquelyn W. Palmer, University of Cincinnati

Julie Palmer, University of Missouri–Columbia

Daewoo Park, Xavier University

Gerald Parker, Saint Louis University

Ralph Parrish, University of Central Oklahoma

Amy Patrick, Wilmington University

John Pepper, The University of Kansas

Douglas K. Peterson, Indiana State University

Edward Petkus, Mary Baldwin College

Michael C. Pickett, National University

Peter Ping Li, California State University-Stanislaus

Michael W. Pitts, Virginia Commonwealth University

Laura Poppo, Virginia Tech

Steve Porth, Saint Joseph’s University

Jodi A. Potter, Robert Morris University

Scott A. Quatro, Grand Canyon University

Nandini Rajagopalan, University of Southern California

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PREFACE

Annette L. Ranft, North Carolina State University

Abdul Rasheed, University of Texas at Arlington

Devaki Rau, Northern Illinois University

George Redmond, Franklin University

Kira Reed, Syracuse University

Clint Relyea, Arkansas State University

Barbara Ribbens, Western Illinois University

Maurice Rice, University of Washington

Violina P. Rindova, University of Texas–Austin

Ron Rivas, Canisius College

David Robinson, Indiana State University–Terre Haute

Kenneth Robinson, Kennesaw State University

Simon Rodan, San Jose State University

Patrick R. Rogers, North Carolina A&T State University

John K. Ross III, Texas State University–San Marcos

Robert Rottman, Kentucky State University

Matthew R. Rutherford, Gonzaga University

Carol M. Sanchez, Grand Valley State University

Doug Sanford, Towson University

William W. Sannwald, San Diego State University

Yolanda Sarason, Colorado State University

Marguerite Schneider, New Jersey Institute of Technology

Roger R. Schnorbus, University of Richmond

Terry Sebora, University of Nebraska–Lincoln

John Seeger, Bentley College

Jamal Shamsie, Michigan State University

Mark Shanley, University of Illinois at Chicago

Ali Shahzad, James Madison University

Lois Shelton, California State University–Northridge

Herbert Sherman, Long Island University

Weilei Shi, Baruch College, CUNY

Chris Shook, Auburn University

Jeremy Short, University of Oklahoma

Mark Simon, Oakland University– Michigan

Rob Singh, Morgan State University

Bruce Skaggs, University of Massachusetts

Lise Anne D. Slattern, University of Louisiana at Lafayette

Wayne Smeltz, Rider University

Anne Smith, University of Tennessee

Andrew Spicer, University of South Carolina

James D. Spina, University of Maryland

John Stanbury, George Mason University & Inter-University Institute of Macau, SAR China

Timothy Stearns, California State University–Fresno

Elton Stephen, Austin State University

Charles E. Stevens, University of Wyoming

Alice Stewart, Ohio State University

Mohan Subramaniam, Carroll School of Management Boston College

Ram Subramanian, Grand Valley State University

Roy Suddaby, University of Iowa

Michael Sullivan, UC Berkeley Extension

Marta Szabo White, Georgia State University

Stephen Takach, University of Texas at San Antonio

Justin Tan, York University, Canada

Qingjiu Tao, PhD, James Madison University

Renata A. Tarasievich, University of Illinois at Chicago

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Linda Teagarden, Virginia Tech

Bing-Sheng Teng, George Washington University

Alan Theriault, University of California–Riverside

Tracy Thompson, University of Washington–Tacoma

Karen Torres, Angelo State University

Mary Trottier, Associate Professor of Management, Nichols College

Robert Trumble, Virginia Commonwealth University

Francis D. (Doug) Tuggle, Chapman University

K.J. Tullis, University of Central Oklahoma

Craig A. Turner, PhD, East Tennessee State University

Beverly Tyler, North Carolina State University

Rajaram Veliyath, Kennesaw State University

S. Stephen Vitucci, Tarleton State University– Central Texas

Jay A. Vora, St. Cloud State University

Valerie Wallingford, Ph.D., Bemidji State University

Jorge Walter, Portland State University

Bruce Walters, Louisiana Tech University

Edward Ward, St. Cloud State University

N. Wasilewski, Pepperdine University

Andrew Watson, Northeastern University

Larry Watts, Stephen F. Austin University

Marlene E. Weaver, American Public University System

Paula S. Weber, St. Cloud State University

Kenneth E. A. Wendeln, Indiana University

Robert R. Wharton, Western Kentucky University

Laura Whitcomb, California State University-Los Angeles

Scott Williams, Wright State University

Ross A. Wirth, Franklin University

Gary Wishniewsky, California State University East Bay

Diana Wong, Bowling Green State University

Beth Woodard, Belmont University

John E. Wroblewski, State University of New York-Fredonia

Anne York, University of Nebraska- Omaha

Michael Zhang, Sacred Heart University

Monica Zimmerman, Temple University

Second, we would like to thank the people who have made our two important “features” possible. The information found in our six “Insights from Research” was provided courtesy of www.businessminded.com, an organization founded by K. Matthew Gilley, PhD (St. Mary’s University) that transforms empirical management research into actionable insights for business leaders. We appreciate Matt’s graciousness and kindness in helping us out. And, of course, our “Executive Insights: The Strategic Management Process” would not have been possible without the gracious participation of Admiral William H. McRaven, Retired who is presently Chancellor of the University of Texas System, and Jana Pankratz, Executive Director.

Third, the authors would like to thank several faculty colleagues who were particularly helpful in the review, critique, and development of the book and supplementary materials. Greg’s and Sean’s colleagues at the University of Texas at Dallas also have been helpful and supportive. These individuals include Mike Peng, Joe Picken, Kumar Nair, John Lin, Larry

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PREFACE

Chasteen, Tev Dalgic, and Livia Markoczy. His administrative assistant, Shalonda Hill, has been extremely helpful. Four doctoral students, Brian Pinkham, Steve Sauerwald, Kyun Kim, and Canan Mutlu, have provided many useful inputs and ideas. He also appreciates the support of his dean and associate dean, Hasan Pirkul and Varghese Jacob, respectively. Greg wishes to thank a special colleague, Abdul Rasheed at the University of Texas at Arlington, who certainly has been a valued source of friendship and ideas for us for many years. He provided many valuable contributions to the Ninth Edition. Gerry thanks all of his colleagues at Michigan State University for their help and support over the years. He also thanks his mentor, Phil Bromiley, as well as the students and former students he has had the pleasure of working with, including Cindy Devers, Federico Aime, Mike Mannor, Bernadine Dykes, Mathias Arrfelt, Kalin Kolev, Seungho Choi, Danny Gamache, and Adam Steinbach. Alan thanks his colleagues at Pace University and the Case Association for their support in developing these fine case selections. Special thanks go to Jamal Shamsie at Michigan State University for his support in developing the case selections for this edition.

Fourth, we would like to thank the team at McGraw-Hill for their outstanding support throughout the entire process. As we work on the book through the various editions, we always appreciate their hard work and recognize how so many people “add value” to our final package. This began with John Biernat, formerly publisher, who signed us to our original contract. He was always available to us and provided a great deal of support and valued input throughout several editions. Presently, in editorial, Susan Gouijnstook, managing director, director Mike Ablassmeir, senior product developers Anne Ehrenworth and Katharine Glynn (of Piper Editorial) kept things on track, responded quickly to our seemingly endless needs and requests, and offered insights and encouragement. We appreciate their expertise—as well as their patience! Once the manuscript was completed and revised, content project manager Harvey Yep expertly guided it through the content and assessment production process. Matt Diamond provided excellent design and artwork guidance. We also appreciate executive marketing manager Debbie Clare and marketing coordinator Brittany Berholdt for their energetic, competent, and thorough marketing efforts. Last, but certainly not least, we thank MHE’s 70-plus outstanding book reps—who serve on the “front lines”—as well as many in-house sales professionals based in Dubuque, Iowa. Clearly, they deserve a lot of credit (even though not mentioned by name) for our success.

Fifth, we acknowledge the valuable contributions of many of our strategy colleagues for their excellent contributions to our supplementary and digital materials. Such content really adds a lot of value to our entire package! We are grateful to Pauline Assenza at Western Connecticut State University for her superb work on case teaching notes as well as chapter and case PowerPoints. Justin Davis, University of West Florida, along with Noushi Rahman, Pace University, deserve our thanks for their hard work in developing excellent digital materials for Connect. Thanks also goes to Noushi Rahman for developing the Connect IM that accompanies this edition of the text. And, finally, we thank Christine Pence, University of California-Riverside, for her important contributions in revising our test bank and chapter quizzes, and Todd Moss, Oregon State University, for his hard work in putting together an excellent set of videos online, along with the video grid that links videos to chapter material.

Finally, we would like to thank our families. For Greg this includes his parents, William and Mary Dess, who have always been there for him. His wife, Margie, and daughter, Taylor, have been a constant source of love and companionship. His father, a career U. S. Air Force pilot took his “final flight” on May 22, 2015. Truly a member of Tom Brokaw’s “Greatest Generation,” he completed flight school before his 21st birthday and flew nearly 30 missions over Japan in World War II as a B-29 bomber pilot before he turned 23. His wife, five children, and several

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grandchildren truly miss him. Gerry thanks his wife, Gaelen, for her love, support, and friendship; and his children, Megan and AJ, for their love and the joy they bring to his life. He also thanks his current and former PhD students who regularly inspire and challenge him. Alan thanks his family—his wife, Helaine, and his children, Rachel and Jacob—for their love and support. He also thanks his parents, Gail Eisner and the late Marvin Eisner, for their support and encouragement. Sean thanks his wife, Hannah, and his two boys, Paul and Stephen, for their unceasing love and care. He also thanks his parents, Kenny and Inkyung Lee for being there whenever needed.

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A GUIDED TOUR

LEARNING OBJECTIVES Learning Objectives numbered L05.1, L05.2, L05.3, etc., with corresponding icons in the margins to indicate where learning objectives are covered in the text.

LEARNING FROM MISTAKES Learning from Mistakes vignettes are examples of where things went wrong. Failures are not only interesting but also sometimes easier to learn from. And students realize strategy is notjustabout “right or wrong” answers, but requires critical thinking.

STRATEGY SPOTLIGHT These boxes weave themes of ethics, globalization, and technology into every chapter of the text, providing students with a thorough grounding necessary for understanding strategic management. Select boxes incorporate crowdsourcing, environmental sustainability, and ethical themes.

a guided

tour

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chapter

After reading this chapter, you should have a good understanding of the following learning objectives:

1 LO1-1 The definition of strategic management and its four key attributes. LO1-2 The strategic management process and its three interrelated and principal

activities.

LO1-3 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.

LO1-4 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.

LO1-5 The need for greater empowerment throughout the organization.

LO1-6 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.

Strategic Management Creating Competitive Advantages

©Anatoli Styf/Getty Images

PART 1: STRATEGIC ANALYSIS

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What makes the study of strategic management so interesting? Things can change so rapidly! Some start-ups can disrupt industries and become globally recognized names in just a few years. The rankings of the world’s most valuable firms can dramatically change in a rather brief period of time. On the other hand, many impressive, high-flying firms can struggle to reclaim past glory or even fail. Recall just four that begin with the letter “b”—Blackberry, Blockbuster, Borders, and Barings. As colorfully (and ironically!) noted by Arthur Martinez, Sears’s former Chairman: “Today’s peacock is tomorrow’s feather duster.”1

Consider the following:2

• At the beginning of 2007, the three firms in the world with the highest market values were Exxon Mobil, General Electric, and Gazprom (a Russian natural gas firm). By early 2017, three high tech firms headed the list—Apple, Alphabet (parent of Google), and Microsoft.

• Only 74 of the original 500 companies in the S&P index were still around 40 years later. And McKinsey notes that the average company tenure on the S&P 500 list has fallen from 61 years in 1958 to about 20 in 2016.

• With the dramatic increase of the digital economy, new entrants are shaking up long-standing industries. Note that Alibaba is the world’s most valuable retailer—but holds no inventory; Airbnb is the world’s largest provider of accommodations—but owns no real estate; and Uber is the world’s largest car service but owns no cars.

• A quarter century ago, how many would have predicted that a South Korean firm would be a global car giant, than an Indian firm would be one of the world’s largest technology firms, and a huge Chinese Internet company would list on an American stock exchange?

• Fortune magazine’s annual list of the 500 biggest companies now features 156 emerging- market firms. This compares with only 18 in 1995!

To remain competitive, companies often must bring in “new blood” and make significant changes in their strategies. But sometimes a new CEO’s initiatives makes things worse. Let’s take a look at Lands’ End, an American clothing retailer.3

Lands’ End was founded in 1963 as a mail order supplier of sailboat equipment by Gary Comer. As business picked up, he expanded the business into clothing and home furnishings and moved the company to Dodgeville, Wisconsin, in 1978 where he was its CEO until he stepped down in 1990. The firm was acquired by Sears in 2002, but later spun off in 2013. A year later it commenced trading on the NASDAQ stock exchange.

Targeting Middle America, companies like Lands’ End, the GAP Inc., and J. C. Penney have had a hard time in recent years positioning themselves in the hotly contested clothing industry. They are squeezed on the high end by brands like Michael Kors Holdings Ltd. and Coach, Inc. On the lower end, fast-fashion retailers including H&M operator Hennes & Mauritz AB are applying pressure by churning out inexpensive, runway-inspired styles.

To spearhead a revival of the brand, Lands’ End hired a new CEO, Frederica Marchionni, in February 2015. However, since her arrival, the firm’s stock price has suffered, same store sales declined for all six quarters of her tenure, and the firm kept losing money. It reported a loss of $19.5 million for the year ending January 29, 2016—compared to a $73.8 million profit for the previous year. (And, things didn’t get better—it lost another $7.7 million in the first half of 2016.)

LEARNING FROM MISTAKES

PART 1: STRATEGIC ANALYSIS

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4.3 STRATEGY SPOTLIGHT MILLENNIALS HAVE A DIFFERENT DEFINITION OF DIVERSITY AND INCLUSION THAN PRIOR GENERATIONS A recent study by Deloitte and the Billie Jean King Leadership Initiative (BJKLI) shows that, in general, Millennials see the con- cepts of diversity and inclusion through a vastly different lens. The study analyzed the responses of 3,726 individuals who came from a wide variety of backgrounds with representation across gender, race/ethnicity, sexual orientation, national sta- tus, veteran status, disabilities, level within an organization, and tenure with an organization. The respondents were asked 62 questions about diversity and inclusion and the findings demon- strated a snapshot of shifting generational mindsets.

Millennials (born between 1977 to 1995) look upon diver- sity as the blending of different backgrounds, experiences, and perspectives within a team—which is known as cognitive diver- sity. They use this word to describe the mix of unique traits that help to overcome challenges and attain business objectives. For Millennials, inclusion is the support for a collaborative environ- ment, and leadership at such an organization must be transpar- ent, communicative, and engaging. According to the study, when defining diversity, Millennials are 35 percent more likely to focus on unique experiences, whereas 21 percent of non-Millennials are more likely to focus on representation.

The X-generation (born between 1965 and 1976) and Boomer generation (born between 1946 and 1964) have a different take.

These generations view diversity as a representation of fairness and protection for all—regardless of gender, race, religion, ethnic- ity, or sexual orientation. Here, inclusion is the integration of indi- viduals of all demographics into one workplace. It is the right thing to do, that is, a moral and legal imperative to achieve compliance and equality—regardless of whether it benefits the business. The study found that when asked about the business impact on diver- sity, Millennials are 71 percent more likely to focus on teamwork. In contrast, 28 percent of non-Millennials are more likely to focus on fairness of opportunity.

The study’s authors contend that the disconnect between the traditional definitions of diversity and inclusion and those of Millennials can create problems for businesses. For example, clashes may occur when managers do not permit Millennials to express themselves freely. The study found that while 86 percent of Millennials feel that differences of opinion allow teams to excel, only 59 percent believe that their leaders share this perspective.

The study suggests that a company with an inclusive culture promotes innovation. And it cites research by IBM and Morgan Stanley that shows that companies with high levels of innovation achieve the quickest growth in profits and that radical innova- tion outstrips incremental change by generating 10 times more shareholder value.

Sources: Dishman, L. 2015. Millennials have a different definition of diversity and inclusion. fastcompany.com, May 18: np; and Anonymous. 2015. For millennials inclusion goes beyond checking traditional boxes, according to a new Deloitte-- Billie Jean King Leadership Initiative Study. prnewswire.com, May 13: np.

THE VITAL ROLE OF SOCIAL CAPITAL Successful firms are well aware that the attraction, development, and retention of talent is a necessary but not sufficient condition for creating competitive advantages.80 In the knowledge economy, it is not the stock of human capital that is important, but the extent to which it is combined and leveraged.81 In a sense, developing and retaining human capital becomes less important as key players (talented professionals, in particular) take the role of “free agents” and bring with them the requisite skill in many cases. Rather, the development of social capital (that is, the friendships and working relationships among talented individuals) gains importance, because it helps tie knowledge workers to a given firm.82 Knowledge workers often exhibit greater loyalties to their colleagues and their profession than their employing organization, which may be “an amorphous, distant, and sometimes threatening entity.”83 Thus, a firm must find ways to create “ties” among its knowledge workers.

Let’s look at a hypothetical example. Two pharmaceutical firms are fortunate enough to hire Nobel Prize–winning scientists.84 In one case, the scientist is offered a very attrac- tive salary, outstanding facilities and equipment, and told to “go to it!” In the second case, the scientist is offered approximately the same salary, facilities, and equipment plus one additional ingredient: working in a laboratory with 10 highly skilled and enthusiastic scien- tists. Part of the job is to collaborate with these peers and jointly develop promising drug compounds. There is little doubt as to which scenario will lead to a higher probability of retaining the scientist. The interaction, sharing, and collaboration will create a situation in

LO 4-3 The key role of social capital in leveraging human capital within and across the firm.

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11.2 ENVIRONMENTAL SUSTAINABILITY, ETHICSSTRATEGY SPOTLIGHT FAMILY LEADERSHIP SUSTAINS THE CULTURE OF SC JOHNSON SC Johnson, the maker of Windex, Ziploc bags, and Glade Air Fresheners, is known as one of the most environmentally con- scious consumer products companies. The family-owned company is run by Fisk Johnson, the fifth generation of the family to serve as firm CEO. It is the 35th largest privately owned firm, with 13,000 employees and nearly $10 billion in sales. Over the decades, the firm has built and reinforced its reputation for environmental con- sciousness. Being privately owned by the Johnson family is part of it. Fisk Johnson put it this way, “Wall Street rewards that short- termism. . . . We are in a very fortunate situation to not have to worry about those things, and we’re very fortunate that we have a family that is principled and has been very principled.”

Fisk uses the benefits of dedicated family ownership to work in both substantive and symbolic ways. On the substantive side, he has implemented systems in place to improve its environ- mental performance. For example, with its Greenlist process, the firm rates the ingredients it uses or is considering using. It then rates each ingredient on several criteria, including biodegrad- ability and human toxicity, and gives the ingredient a score rang- ing from 0 to 3, with 3 being the most environmentally friendly. The goal is to increase the percentage of ingredients rated a 2 or a 3 and eliminate those with a score of 0. With this system, the firm has increased the percentage of ingredients rated as a 2 or

3 (better or best) from about 20 percent to over 50 percent from 2001 to 2016.

Fisk uses stories from decisions in the past as it acts to sustain its culture of environmental consciousness. In using stories to rein- force the environmental focus within the firm and to explain it to external stakeholders, Fisk Johnson draws on stories relating to decisions his father made as well as ones he’s made. Most promi- nently, he uses a story about a decision his father made to stop using chlorofluorocarbons in the firm’s aerosol products. “Our first decision to unilaterally remove a major chemical occurred in 1975, when research began suggesting that chlorofluorocar- bons (CFCs) in aerosols might harm Earth’s ozone layer. My father was CEO at the time, and he decided to ban them from all the company’s aerosol products worldwide. He did so several years before the government played catch-up and banned the use of CFCs from everyone’s products.” He goes on to say, “You look back on that decision today, in light of the strong laws that came in, and that was a very prescient decision.” This story is especially effective since it highlights his father’s willingness and ability to take actions that can lead both the government and industry rivals to change. A second story outlines the firm’s decision to remove chlorine as an ingredient in its Saran Wrap. In the late 1990s, regu- lators and environmentalists were raising concerns that chlorine used in plastic released toxic chemicals when the plastic was burned. As Fisk Johnson explains, this was a difficult situation for

the foundation for all future innovation. If you break the culture, you break the machine that creates your products.” He then went on to comment that they needed to uphold the firm’s values in all they do: who they hire, how they work on a project, how they treat other employees in the hallway, and what they write in emails. Chesky then laid out the power of firm culture in the following words:

The stronger the culture, the less corporate process a company needs. When the culture is strong, you can trust everyone to do the right thing. People can be independent and autonomous. They can be entrepreneurial. And if we have a company that is entrepreneurial in spirit, we will be able to take our next “(wo)man on the moon” leap. . . . In organizations (or even in a society) where the culture is weak, you need an abundance of heavy, precise rules, and processes.

In sharp contrast, leaders can also have a very detrimental effect on a firm’s culture and ethics. Imagine the negative impact that Todd Berman’s illegal activities have had on a firm that he cofounded—New York’s private equity firm Chartwell Investments.10 He stole more than $3.6 million from the firm and its investors. Berman pleaded guilty to fraud charges brought by the Justice Department. For 18 months he misled Chartwell’s investors concern- ing the financial condition of one of the firm’s portfolio companies by falsely claiming it needed to borrow funds to meet operating expenses. Instead, Berman transferred the money to his personal bank account, along with fees paid by portfolio companies.

Clearly, a leader’s behavior and values can make a strong impact on an organization—for good or for bad. Strategy Spotlight 11.2 provides a positive example, with H. Fisk Johnson carrying on a legacy of maintaining a strong ethical culture at his family’s firm.

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EXHIBITS Both new and improved exhibits in every chapter provide visual presentations of the most complex concepts covered to support student comprehension.

REFLECTING ON CAREER IMPLICATIONS This section before the summary of every chapter consists of examples on how understanding of key concepts helps business students early in their careers.

INSIGHTS The “Insights” feature is new to this edition. “Insights from Executives” spotlight interviews with executives from worldwide organizations about current issues salient to strategic management. “Insights from Research” summarize key research findings relevant to maintaining the effectiveness of an organization and its management.

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EXHIBIT 3.9 Historical Trends: Return on Sales (ROS) for a Hypothetical Company

20%

10%

20172008 2009 2010 2011 2012 2013 2014 2015 2016

Years 1, 2, 3 Yea rs 4

, 5, 6

Years 8 , 9, 10

Years 6, 7, 8, 9, 10

Year

Re tu

rn o

n Sa

le s

Years 6, 7, 8

Comparison with Industry Norms When you are evaluating a firm’s financial performance, remember also to compare it with industry norms. A firm’s current ratio or profitability may appear impressive at first glance. However, it may pale when compared with industry standards or norms.

Comparing your firm with all other firms in your industry assesses relative performance. Banks often use such comparisons when evaluating a firm’s creditworthiness. Exhibit 3.10 includes a variety of financial ratios for three industries: semiconductors, grocery stores, and skilled-nursing facilities. Why is there such variation among the financial ratios for these three industries? There are several reasons. With regard to the collection period, grocery stores operate mostly on a cash basis, hence a very short collection period. Semiconductor manu- facturers sell their output to other manufacturers (e.g., computer makers) on terms such as 2/15 net 45, which means they give a 2 percent discount on bills paid within 15 days and start charging interest after 45 days. Skilled-nursing facilities also have a longer collection period than grocery stores because they typically rely on payments from insurance companies.

The industry norms for return on sales also highlight differences among these industries. Grocers, with very slim margins, have a lower return on sales than either skilled-nursing facil- ities or semiconductor manufacturers. But how might we explain the differences between

Financial Ratio Semiconductors Grocery Stores Skilled-Nursing Facilities

Quick ratio (times) 1.9 0.6 1.3

Current ratio (times) 3.6 1.7 1.7

Total liabilities to net worth (%) 35.1 72.7 82.5

Collection period (days) 48.6 3.3 36.5

Assets to sales (%) 131.7 22.1 58.3

Return on sales (%) 24 1.1 3.1

Source: Dun & Bradstreet. Industry Norms and Key Business Ratios, 2010–2011. One Year Edition, SIC #3600–3699 (Semiconductors); SIC #5400–5499 (Grocery Stores); SIC #8000–8099 (Skilled-Nursing Facilities). New York: Dun & Bradstreet Credit Services.

EXHIBIT 3.10 How Financial Ratios Differ across Industries

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Admiral William H. McRaven, Retired Chancellor, University of Texas System

BIOSKETCH University of Texas Chancellor William H. McRaven, a retired four-star admiral, leads the nation’s second largest system of higher education. As chief executive officer of the UT System since January 2015, he oversees 14 institutions that educate 217,000 students and employ 20,000 faculty and more than 70,000 health care professionals, researchers, and staff.

Prior to becoming chancellor, McRaven, a Navy SEAL, was the commander of U.S. Special Operations Command during which time he led a force of 69,000 men and women and was responsible for conducting counter-terrorism operations world- wide. McRaven is also a recognized national authority on U.S. foreign policy and has advised presidents George W. Bush and Barack Obama and other U.S. leaders on defense issues. His acclaimed book, Spec. Ops: Case Studies in Special Operations Warfare: Theory and Practice, has been published in several lan- guages. He is noted for his involvement in Operation Neptune Spear, in which he commanded the U.S. Navy Special forces who located and killed al Qaeda leader Osama bin Laden.

McRaven has been recognized for his leadership numerous times by national and international publications and organizations. In 2011, he was the first runner-up for Time magazine’s Person of the Year. In 2012, Foreign Policy magazine named McRaven one of the nation’s Top 10 Foreign Policy Experts and one of the Top 100 Global Thinkers. And in 2014, Politico named McRaven one of the Politico 50, citing his leadership as instrumental in cutting through Washington bureaucracy.

McRaven graduated from the University of Texas at Austin in 1977 with a degree in journalism and received his master’s degree from the Naval Postgraduate School in Monterey in 1991. In 2012, the Texas Exes honored McRaven with a Distinguished Alumnus Award.

Source: www.utsystem.edu/chancellor/biography

Question 1. What leadership lessons did you take away from SEAL training and leadership of SEAL Team 3?

The foundation of effective leadership is being able to lead yourself. This may sound strange, but it is true. Most initial military training—perhaps no more note- worthy than in that training crucible to become a Navy

SEAL—helps young people move past self-imposed limits of physical and mental endurance and build confidence in themselves to lead others. The result is a person who is capable of leading in an environment of constant stress, chaos, failure and hardships. In fact, to me, basic SEAL training was a lifetime sampling of micro-challenges I would later face while leading people and organizations all crammed into six months.

Question 2. In leading Neptune Spear, what were the key leadership decisions you made to build an organization to accomplish this task?

The majority of the key leadership decisions that in past enabled us to accomplish this task began before I took command of the organization—but as a member of the

organization and its number 2 leader over a period of years, I had been an engaged student in the trial, error, and the ulti- mate development of what my old boss, General Stan McChrystal, called a “team of teams.” You see, our operational envi- ronment was changing at an incredibly rapid pace. Unlike any time in our history the rate of change was—and is—no longer linear, it is exponential.

The enemy I faced in Iraq, Afghanistan, Africa, Asia and across the world adapted quickly to our methods of warfare. Using technology, social media and global transportation, they presented tactical and operational problems that today’s special operations forces had never seen before. Consequently, our organizations

had to adapt to this rapidly changing threat. We had to build a flat chain of command that empowered the lead- ers below us. We had to reduce our own bureaucracy so we could make timely decisions. We had to constantly communicate so everyone understood the commander’s intent and the strategic direction in which we were head- ing. We had to collaborate in ways that had never been done in the history of special operations warfare. The team of teams we built enabled all of our organizations to derive strength from each other and work together to be successful. It required us to break away from the hierarchical structure—the command structure—that had defined the American military for hundreds of years.

We formed a formal and informal network of subject mat- ter experts bound together by a common mission, using technology to partner in new ways, brought together through operational incentives, and a bottom-up desire with top-down support to solve the most complex prob- lems facing our nation. Essentially, we structured our

INSIGHTS from executives1.1

THE STRATEGIC MANAGEMENT PROCESS

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Overview People often think that older workers are less motivated and less healthy, resist change and are less trusting, and have more trouble balancing work and family. It turns out these assumptions just aren’t true. By challenging these stereotypes in your organization, you can keep your employees working.

What the Research Shows In a 2012 paper published by Personnel Psychology, research- ers from the University of Hong Kong and the University of Georgia examined 418 studies of workers’ ages and stereotypes. A meta-analysis—a study of studies—was conducted to find out if any of the six following stereotypes about older workers—as compared with younger workers—was actually true:

• They are less motivated.

• They are less willing to participate in training and career development.

• They are more resistant to change.

• They are less trusting.

• They are less healthy.

• They are more vulnerable to work-family imbalance.

After an exhaustive search of studies dealing with these issues, the investigators’ meta-analytic techniques turned up some interesting results. Older workers’ motivation and job involvement are actually slightly higher than those of younger workers. Older workers are slightly more willing to implement organizational changes, are not less trusting, and are not less healthy than younger workers. Moreover, they’re not more likely to have issues with work-family imbalance. Of the six investigated, the only stereotype sup- ported was that older workers are less willing to participate in training and career development.

Why This Matters Business leaders must pay attention to the circumstances of older workers. According to the U.S. Bureau of Labor Statistics, 19.5 percent of American workers were 55 and older in 2010, but by 2020 25.2 percent will be 55 and older. Workers aged 25 to 44 should drop from 66.9 to 63.7 percent of the workforce during the same period. These statistics make clear that recruiting and training older workers remain critical.

When the findings of the meta-analysis are considered, the challenge of integrating older workers into the work- place becomes acute. The stereotypes held about older workers don’t hold water, but when older workers are sub- jected to them, they are more likely to retire and experi- ence a lower quality of life. Business leaders should attract,

retain, and encourage mature employees’ continued involve- ment in workplaces because they have much to offer in the ways of wisdom, experience, and institutional knowledge. The alternative is to miss out on a growing pool of valuable human capital.

How can you deal with age stereotypes to keep older workers engaged? The authors suggest three effective ways:

• Provide more opportunities for younger and older workers to work together.

• Promote positive attributes of older workers, like experience, carefulness, and punctuality.

• Engage employees in open discussions about stereotypes.

Adam Bradshaw of the DeGarmo Group Inc. has sum- marized research on addressing age stereotypes in the workplace and offers practical advice. For instance, make sure hiring practices identify factors important to the job other than age. Managers can be trained in how to spot age stereotypes and can point out to employees why the stereo- types are often untrue by using examples of effective older workers. Realize that older workers can offer a competitive advantage because of skills they possess that competitors may overlook.

Professor Tamara Erickson, who was named one of the top 50 global business thinkers in 2011, points out that mem- bers of different generations bring different experiences, assumptions, and benefits to the workforce. Companies can gain a great deal from creating a culture that welcomes workers of all ages and in which leaders address biases.

Key Takeaways

• The percentage of American workers 55 years old and older is expected to increase from 19.5 percent in 2010 to 25.2 percent in 2020.

• Many stereotypes exist about older workers. A review of 418 studies reveals these stereotypes are largely unfounded.

• Older workers subjected to negative stereotypes are more likely to retire and more likely to report lower quality of life and poorer health.

• When business leaders accept stereotypes about older workers, they lose out on these workers’ wisdom and experience. And by 2020 employers may have a smaller pool of younger workers than they do today.

• Solutions include creating opportunities for younger and older workers to work together and having frank, open discussions about stereotypes.

INSIGHTS from Research2.1

NEW TRICKS: RESEARCH DEBUNKS MYTHS ABOUT OLDER WORKERS

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Reflecting on Career Implications . . . This chapter discusses both the long-term focus of strategy and the need for coherence in strategic direction. The following questions extend these themes by asking students to consider their own strategic goals and how they fit with the goals of the firms in which they work or would seek employment.

Attributes of Strategic Management: The attributes of strategic management described in this chapter are applicable to your personal careers as well. What are your overall goals and objectives? Who are the stakeholders you have to consider in making your career decisions (family, community, etc.)? What trade- offs do you see between your long-term and short-term goals?

Intended versus Emergent Strategies: While you may have planned your career trajectory carefully, don’t be too tied to it. Strive to take advantage of new opportunities as they arise. Many promising career opportunities may “emerge” that were not part of your intended career strategy or your specific job assignment. Take initiative by pursuing opportunities to get additional training (e.g., learn a software or a statistical package), volunteering for a short-term overseas assignment, etc. You may be in a better position to take advantage of such emergent opportunities if you take the effort to prepare for

them. For example, learning a foreign language may position you better for an overseas opportunity.

Ambidexterity: In Strategy Spotlight 1.1, we discussed the four most important traits of ambidextrous individuals. These include looking for opportunities beyond the description of one’s job, seeking out opportunities to collaborate with others, building internal networks, and multitasking. Evaluate yourself along each of these criteria. If you score low, think of ways in which you can improve your ambidexterity.

Strategic Coherence: What is the mission of your organization? What are the strategic objectives of the department or unit you are working for? In what ways does your own role contribute to the mission and objectives? What can you do differently in order to help the organization attain its mission and strategic objectives?

Strategic Coherence: Setting strategic objectives is important in your personal career as well. Identify and write down three or four important strategic objectives you want to accomplish in the next few years (finish your degree, find a better-paying job, etc.). Are you allocating your resources (time, money, etc.) to enable you to achieve these objectives? Are your objectives measurable, timely, realistic, specific, and appropriate?

We began this introductory chapter by defining strategic management and articulating some of its key attributes. Strategic management is defined as “consisting of the analyses, decisions, and actions an organization undertakes

to create and sustain competitive advantages.” The issue of how and why some firms outperform others in the marketplace is central to the study of strategic management. Strategic management has four key attributes: It is directed at overall organizational goals, includes multiple stakeholders, incorporates both short-term and long-term perspectives, and incorporates trade-offs between efficiency and effectiveness.

The second section discussed the strategic management process. Here, we paralleled the above definition of strategic management and focused on three core activities in the strategic management process—strategy analysis, strategy formulation, and strategy implementation. We noted how each of these activities is highly interrelated to and interdependent on the others. We also discussed how each of the first 12 chapters in this text fits into the three core activities.

Next, we introduced two important concepts—corporate governance and stakeholder management—which must be taken into account throughout the strategic management process. Governance mechanisms can be broadly divided into two groups: internal and external. Internal governance mechanisms include shareholders (owners), management (led by the chief executive officer), and the board of directors. External control is exercised by auditors, banks,

analysts, and an active business press as well as the threat of takeovers. We identified five key stakeholders in all organizations: owners, customers, suppliers, employees, and society at large. Successful firms go beyond an overriding focus on satisfying solely the interests of owners. Rather, they recognize the inherent conflicts that arise among the demands of the various stakeholders as well as the need to endeavor to attain “symbiosis”—that is, interdependence and mutual benefit—among the various stakeholder groups. Managers must also recognize the need to act in a socially responsible manner which, if done effectively, can enhance a firm’s innovativeness. The “shared value” approach represents an innovative perspective on creating value for the firm and society at the same time. The managers also should recognize and incorporate issues related to environmental sustainability in their strategic actions.

In the fourth section, we discussed factors that have accelerated the rate of unpredictable change that managers face today. Such factors, and the combination of them, have increased the need for managers and employees throughout the organization to have a strategic management perspective and to become more empowered.

The final section addressed the need for consistency among a firm’s vision, mission, and strategic objectives. Collectively, they form an organization’s hierarchy of goals. Visions should evoke powerful and compelling mental images. However, they are not very specific. Strategic objectives, on the other hand, are much more specific and are vital to ensuring that the organization is striving toward fulfilling its vision and mission.

summary

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A GUIDED TOUR

Updated case lineup provides nine new cases. The majority of the remaining cases

have been revised to “maximize freshness” and minimize instructor preparation

time. New cases for this edition include well-known companies such as Tata

Starbucks, the Casino Industry, and General Motors.Cases

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C250 CASE 32 :: BLACKBERRY LIMITED: IS THERE A PATH TO RECOVERY?

In mid-2017, the once high-flying Blackberry stock was trad- ing for less than $7 a share. Remarkably, that was a drop of more than 94 percent from $139 in 2008.1 The competi- tive landscape had shifted in recent years, and BlackBerry had lost its strong position in the industry. The company faced a severe reduction in hardware revenues and mobile subscribers.2 BlackBerry Limited hired John Chen, a turn- around specialist, as its new CEO to get the former domi- nant smartphone producer back to profitability.3 Soon after joining the company, Chen formulated a turnaround plan that emphasized corporate and government enterprises. This new plan significantly reduced the company’s operat- ing costs.4 After Chen started turning the steering wheel, BlackBerry appeared to be stabilizing, but the sustain- ability of his strategy was still a big unknown. There have been rumors regarding a potential sale of the company to Samsung Group, privatization of operations to reduce the risk of shareholder activism, hostile takeovers, and a move to focus only on software and licensing agreements.5 Each of these would be a very different scenario from what the Canadian tech giant faced just a few years ago. Industry experts speculate on what lies ahead, but new CEO John Chen seems to be optimistic about the future of Blackberry.

The return to success of Blackberry in the smartphone industry might sound farfetched but it was not impossible. Once Blackberry had held significant market share in the smartphone space. It remained a question of what strategy the company should adopt to revive the admiration it once enjoyed and re-boot demand for Blackberry smartphones. The smartphone industry had become immensely competi- tive with giants Apple Inc. and Samsung Group the two companies that held most of the market share in the indus- try. With Blackberry’s specialization in data and mobile security there seemed to be potential in Blackberry’s soft- ware security enterprise division, which had not received as much attention and resources as the smartphone division.

Research in Motion Milhal “Mike” Lazaridis and his childhood friend Doug Freign founded Research in Motion (RIM) in 1984. Lazaridis was born in Istanbul in 1960 and came from a

Greek working-class family. His father’s aspirations to become a tool-and-die maker led the family to relocate to Ontario, Canada. Lazaridis displayed remarkable intel- ligence at an early age and excelled in both reading and science. Lazaridis was frequently exposed to electrical engineering and sharpened his intuitive understanding of the basic science behind every electrical innovation.3 After graduating from high school, Lazaridis attended the University of Waterloo. However, he dropped out before graduation and decided to try his luck in business at the age of 23. The Canadian government enabled the formation of RIM by granting Lazaridis and Freign a $15,000 loan. The duo set up RIM headquarters in Waterloo, Canada, as an electronics and computer science consulting company. According to Lazaridis, the name Research in Motion meant, “we never stop, we never end,”3 signaling innovation that would drive RIM forward.

During the company’s early years, Lazaridis accepted all sorts of contracts, most of which entailed writing code or making small insignificant technological gadgets. None of the early projects proved to be a commercial success, but they generated enough revenue to keep the company viable for more than a decade.

The company’s game changer was introduction of e-mail and data devices. Lazaridis had been exposed to e-mail while in college, at a time when only professors and scien- tists were using the service. Lazaridis was convinced that data would become extremely important in the near future, but it was hard to find the funding for a project involving e-mail, because the early 1990s was a time when major mobile carriers were interested in devices with voice capa- bilities and in selling as much as possible until the market became saturated. Reading e-mails on a handheld device was unheard of. A nonexistent demand for devices with e-mail support did not weaken Lazaridis’s determination; he developed initial prototypes by writing gateway codes hooked up to an HP Palmtop, the company’s first device with “e-mail on a belt.” Although the device was not com- mercially applicable, it became extremely popular with RIM employees. Lazaridis recalls that “employees started taking these things home, and they wouldn’t return them.”3 What he then understood was that the idea of “e-mail on a belt” had the potential to generate high demand, but the challenge lay in making such a product practical enough for consumers to use on a daily basis.

The business aspect of RIM was made easier by the emergence of Harvard graduate Jim Balsillie. In the 1990s, Balsillie was an employee of a small technology company

CASES

CASE 32 BLACKBERRY LIMITED: IS THERE A PATH TO RECOVERY?

* This case was prepared by Professor Alan B. Eisner and graduate student Saad Nazir of Pace University, and Professor Helaine J. Korn of Baruch College, City University of New York. This case was solely based on library research and was developed for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2017 Alan B. Eisner.

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C128 CASE 19 :: JOHNSON & JOHNSON

CASES

On January 26, 2017, Johnson & Johnson, the world’s larg- est health care company, bolstered its roster of treatments for rare diseases by announcing a $30 billion deal to acquire Actelion, a Swiss biotechnology firm. The deal expanded its portfolio of leading medicines and promising late stage products. “We believe this transaction offers compelling value to both Johnson & Johnson and Actelion sharehold- ers” Alex Gorsky, the chairman and chief executive of J&J, stated in a news release.1

With 250 companies in virtually every country, J&J has under its banner the world’s largest medical device busi- ness, an even bigger pharmaceutical business, and a con- sumer products division with a dozen megabrands, from Neutrogena to Tylenol. Although the firm is best known for its common consumer products, its biggest recent growth has come from its vast range of pharmaceuticals. J&J has advantages from its diversified businesses such as greater financial stability, a wider range of expertise, and a customer base that spans consumers to hospitals to governments.

Financial stability has been J&J’s calling card for decades. Its sales have risen on a regular basis, with profits showing an annualized growth rate of over 12 percent over the three years 2014–2016 (see Exhibits 1 and 2). The firm has consistently raised its dividend for well over 50 years and it remains one of only two U.S. companies with an AAA credit rating from Standard and Poor. “They’re in a great position,” said Kristen Stewart, an analyst at Deutsche Bank. “They have the luxury of time and the ability to look at different opportunities across different business units. That is what a diversified business platform affords them.”2

However, even as it has grown and become more diversi- fied, J&J has struggled to extract the greatest value from its vast portfolio of diversified businesses. Much of its growth has come from acquisitions, and it has developed a culture of granting considerable autonomy to each of the firms that it has absorbed. Although this was intended to cultivate an entrepreneurial attitude among each of its units, it has prob- ably prevented the firm from pursuing opportunities that would result from closer collaboration among the units. Because the units fiercely guard their independence, they have rarely searched for opportunities on which they could combine their different areas of expertise.

William C. Weldon, who spearheaded a period of dramatic growth at J&J, began to direct efforts at trying to get the busi- ness units to work with each other on a more regular basis. After Gorsky took over as CEO in 2012, he pushed harder to weave together the operations of the different units. The need for greater oversight became more urgent after the firm ran into quality issues in two of its three divisions, with some consumer products being recalled. At the same time, Gorsky realized that J&J must preserve its entrepreneurial culture.

Cultivating Entrepreneurship Johnson & Johnson was founded in 1886 by three Johnson brothers. The company grew slowly for a generation before Robert Wood Johnson II decided reluctantly to take the fam- ily business public. He fretted about the effects that market pressures would have on the company’s practices and values, which led him to write a 307-word statement of corporate principles. This spelled out that J&J’s primary responsibility was to patients and physicians, followed by employees, and then by communities. Shareholders were placed last on the list. This credo is inscribed in stone at the entrance of the firm’s headquarters and is routinely invoked at the company.

CASE 19 JOHNSON & JOHNSON

* Case prepared by Jamal Shamsie, Michigan State University, with the assistance of Professor Alan B. Eisner, Pace University. Material has been drawn from published sources to be used for purposes of class discussion. Copyright © 2017 Jamal Shamsie and Alan B. Eisner.

EXHIBIT 1 Income Statement (in $ millions)

Year Ending

2016 2015 2014

Total Revenue $71,890 $70,074 $74,331

Gross Profit 21,685 21,536 51,585

Operating Income 20,645 17,556 20,959

Net Income 16,540 15,409 16,323

Source: Johnson & Johnson.

EXHIBIT 2 Balance Sheet (in $ millions)

Year Ending

2016 2015 2014

Current Assets $ 65,032 $ 60,210 $ 55,744

Total Assets 141,208 133,411 130,358

Current Liabilities 26,287 27,747 25,031

Total Liabilities 70,790 62,261 60,606

Stockholder Equity 70,418 71,150 69,752

Source: Johnson & Johnson.

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CASE 12 :: EMIRATES AIRLINE IN 2017 C75

Within three decades, Emirates Airline went from a small start-up to one of the world’s biggest carriers measured by international passenger mileage. Started in 1985, the airline deviated from the strategy of most other airlines to use its position between the U.S., Europe, Africa, and Asia to con- nect flights between distant pairs of cities such as New York and Shanghai or London and Nairobi. Tim Clark, the firm’s president, referred to these as “strange city pairs.” No air- line has grown like Emirates, whose expansion qualifies it to claim the crown of the freewheeling sultan of the skies.

Its strategy of flying large number of passengers all around the world would have been difficult without the

introduction of Boeing 777 long-range planes and Airbus 380 superjumbos. In particular, Emirates has managed over the years to radically redraw the map of the world, trans- ferring the hub of international travel from Europe to the Middle East. Dubai, the hub of Emirates, which currently handles over 80 million passengers each year, has become the world’s busiest airport for international passengers. A new terminal, the largest in the world, was recently built at a cost of $4.5 billion just to accommodate the almost 240 Emirates aircraft that fly out to 145 destinations around the world (see Exhibit 1).

Recent developments, however, such as the drop in oil prices and the growth in terrorist attacks have led to a decline in demand. Many companies, particularly in the Middle East, have been cutting back on travel for their employees, reducing the premium revenue that Emirates has been generating from first and business

CASES

CASE 12 EMIRATES AIRLINE IN 2017*

EXHIBIT 1 Top Global Airlines

There are several rankings of the world’s airlines, but a few have consistently been rated highest in service over the last five years. These are listed below in no particular order.

Started Main Hub Fleet Destinations

SINGAPORE 1972 Singapore 108 63

CATHAY PACIFIC 1946 Hongkong 161 102

EMIRATES 1985 Dubai 221 142

THAI 1960 Bangkok 91 78

ASIANA 1988 Seoul 85 108

ETIHAD 2003 Abu Dhabi 102 109

EVA 1989 Taipei 68 73

AIR NEW ZEALAND 1940 Auckland 106 58

GARUDA 1949 Jakarta 119 102

QATAR 1994 Doha 146 146

ANA 1952 Tokyo 211 73

SOUTH AFRICAN 1934 Johannesburg 60 42

VIRGIN ATLANTIC 1984 London 40 30

QANTAS 1920 Sydney 118 42

LUFTHANSA 1953 Frankfurt 273 190

Source: Skytrax.

* Case prepared by Jamal Shamsie, Michigan State University, with the assistance of Professor Alan B. Eisner, Pace University. Material has been drawn from published sources to be used for purposes of class discussion. Copyright © 2017 Jamal Shamsie and Alan B. Eisner.

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PART 1 STRATEGIC ANALYSIS 1 Strategic Management: Creating Competitive Advantages 2

2 Analyzing the External Environment of the Firm: Creating Competitive Advantages 34

3 Assessing the Internal Environment of the Firm 70

4 Recognizing a Firm’s Intellectual Assets: Moving beyond a Firm’s Tangible Resources 102

PART 2 STRATEGIC FORMULATION 5 Business-Level Strategy: Creating and Sustaining Competitive

Advantages 138

6 Corporate-Level Strategy: Creating Value through Diversification 172

7 International Strategy: Creating Value in Global Markets 202

8 Entrepreneurial Strategy and Competitive Dynamics 236

PART 3 STRATEGIC IMPLEMENTATION 9 Strategic Control and Corporate Governance 266

10 Creating Effective Organizational Designs 300

11 Strategic Leadership: Creating a Learning Organization and an Ethical Organization 332

12 Managing Innovation and Fostering Corporate Entrepreneurship 360

PART 4 CASE ANALYSIS 13 Analyzing Strategic Management Cases 392

Cases C-1

Indexes I-1

BRIEF CONTENTS

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PART 1 STRATEGIC ANALYSIS

CHAPTER 1 Strategic Management: Creating Competitive Advantages � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �2

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

What Is Strategic Management? � � � � � � � � � � � � � � � � � 6 Defining Strategic Management . . . . . . . . . . . . . . . . . . . . . . 6

The Four Key Attributes of Strategic Management . . . . . . . 7

1.1 STRATEGY SPOTLIGHT

Ambidextrous Behaviors: Combining Alignment and Adaptability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

The Strategic Management Process � � � � � � � � � � � � � � 9 Intended versus Realized Strategies . . . . . . . . . . . . . . . . . . . 10

Strategy Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Strategy Formulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Strategy Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1.1 INSIGHTS FROM EXECUTIVES

The Strategic Management Process . . . . . . . . . . . . . . . . . . . . .14

The Role of Corporate Governance and Stakeholder Management � � � � � � � � � � � � � � � � � � 16 Alternative Perspectives of Stakeholder Management . . . . .17

Social Responsibility and Environmental Sustainability: Moving beyond the Immediate Stakeholders . . . . . . . . . 18

1.2 STRATEGY SPOTLIGHT

How Walmart Deploys Green Energy on an Industrial Scale—And Makes Money at It . . . . . . . . . . . . . . . . . . . . . .21

The Strategic Management Perspective: An Imperative Throughout the Organization � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 22

1.3 STRATEGY SPOTLIGHT

Strategy and the Value of Inexperience . . . . . . . . . . . . . . . . . 23

Ensuring Coherence in Strategic Direction � � � � � � � � 23 Organizational Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Mission Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Strategic Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

1.4 STRATEGY SPOTLIGHT

How Perceptual Limited Succeeded by Rallying Around the Founder’s Original Mission . . . . . . . . . . . . . . . . . . . . 27

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . . 29

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . . 30

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

CHAPTER 2 Analyzing the External Environment of the Firm: Creating Competitive Advantages � � � � � � � � � � � � �34

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Enhancing Awareness of the External Environment � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 36 The Role of Scanning, Monitoring, Competitive

Intelligence, and Forecasting . . . . . . . . . . . . . . . . . . . . . 37

2.1 STRATEGY SPOTLIGHT Ethics

Ethical Guidelines on Competitive Intelligence: United Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

SWOT Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

The General Environment � � � � � � � � � � � � � � � � � � � � � � 41 The Demographic Segment . . . . . . . . . . . . . . . . . . . . . . . . . 43

The Sociocultural Segment . . . . . . . . . . . . . . . . . . . . . . . . . 43

The Political/Legal Segment . . . . . . . . . . . . . . . . . . . . . . . . 43

2.1 INSIGHTS FROM RESEARCH

New Tricks: Research Debunks Myths about Older Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

The Technological Segment . . . . . . . . . . . . . . . . . . . . . . . . . 45

2.2 STRATEGY SPOTLIGHT Ethics

The Conflict Minerals Legislation: Implications for Supply Chain Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

The Economic Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

The Global Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

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Relationships among Elements of the General Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Data Analytics: A Technology That Affects Multiple Segments of the General Environment . . . . . . . . . . . . . 47

2.3 STRATEGY SPOTLIGHT Data Analytics

How Big Data Can Monitor Federal, State, and Local Government Expenditures . . . . . . . . . . . . . . . . . . . . . . . . 49

The Competitive Environment � � � � � � � � � � � � � � � � � � 50 Porter’s Five Forces Model of Industry Competition . . . . . 50

2.4 STRATEGY SPOTLIGHT

Apple Flexes Its Muscle When It Comes to Negotiating Rental Rates for Its Stores in Malls . . . . . . . . . . . . . . . . . . .53

How the Internet and Digital Technologies Are Affecting the Five Competitive Forces . . . . . . . . . . . . . . . . . . . . . . 55

2.5 STRATEGY SPOTLIGHT

Buyer Power in Legal Services: The Role of the Internet . . . . 58

Using Industry Analysis: A Few Caveats . . . . . . . . . . . . . . . 59

Strategic Groups within Industries . . . . . . . . . . . . . . . . . . . .61

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . . 64

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . . 66

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

CHAPTER 3 Assessing the Internal Environment of the Firm � � �70

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71

Value-Chain Analysis � � � � � � � � � � � � � � � � � � � � � � � � � � 72 Primary Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

3.1 STRATEGY SPOTLIGHT

Chipotle’s Efficient Operations . . . . . . . . . . . . . . . . . . . . . . . . .74

Support Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

3.2 STRATEGY SPOTLIGHT Data

The Algorithm for Orange Juice . . . . . . . . . . . . . . . . . . . . . . . 77

3.3 STRATEGY SPOTLIGHT

Schmitz Cargobull: Adding Value to Customers via IT . . . . . . 78

Interrelationships among Value-Chain Activities within and across Organizations . . . . . . . . . . . . . . . . . . . . . . . . 78

Integrating Customers into the Value Chain . . . . . . . . . . . . 78

Applying the Value Chain to Service Organizations . . . . . . 80

Resource-Based View of the Firm � � � � � � � � � � � � � � � 81 Types of Firm Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . .81

Firm Resources and Sustainable Competitive Advantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

3.4 STRATEGY SPOTLIGHT

Printed in Taiwan: Path Dependence in 3D Printing . . . . . . . 85

3.5 STRATEGY SPOTLIGHT

Amazon Prime: Very Difficult for Rivals to Copy . . . . . . . . . . 86

The Generation and Distribution of a Firm’s Profits: Extending the Resource-Based View of the Firm . . . . . 88

Evaluating Firm Performance: Two Approaches � � � 90 Financial Ratio Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

Integrating Financial Analysis and Stakeholder Perspectives: The Balanced Scorecard . . . . . . . . . . . . . . 93

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . . 96

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97

Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . . 98

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

CHAPTER 4 Recognizing a Firm’s Intellectual Assets: Moving beyond a Firm’s Tangible Resources � � � �102

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103

The Central Role of Knowledge in Today’s Economy � � � � � � � � � � � � � � � � � � � � � � � � � � 104 Human Capital: The Foundation of Intellectual Capital � � � � � � � � � � � � � � � � � � � � � � � � � � 107

4.1 STRATEGY SPOTLIGHT Environmental Sustainability

Can Green Strategies Attract and Retain Talent? . . . . . . . . . . 108

Attracting Human Capital . . . . . . . . . . . . . . . . . . . . . . . . . 108

Developing Human Capital . . . . . . . . . . . . . . . . . . . . . . . . .110

4.1 INSIGHTS FROM RESEARCH

Welcome Back! Recruiting Boomerang Employees . . . . . . . . .111

Retaining Human Capital . . . . . . . . . . . . . . . . . . . . . . . . . .114

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CONTENTS

Enhancing Human Capital: Redefining Jobs and Managing Diversity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115

4.2 STRATEGY SPOTLIGHT

Want to Increase Employee Retention? Try Data Analytics . .116

4.3 STRATEGY SPOTLIGHT

Millennials Have a Different Definition of Diversity and Inclusion than Prior Generations . . . . . . . . . . . . . . . . . . . 118

The Vital Role of Social Capital � � � � � � � � � � � � � � � � 118 How Social Capital Helps Attract and Retain Talent . . . . .119

Social Networks: Implications for Knowledge Management and Career Success . . . . . . . . . . . . . . . . . .119

4.4 STRATEGY SPOTLIGHT

Picasso versus Van Gogh: Who Was More Successful and Why? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122

The Potential Downside of Social Capital . . . . . . . . . . . . . 123

Using Technology to Leverage Human Capital and Knowledge � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 124 Using Networks to Share Information . . . . . . . . . . . . . . . . 124

Electronic Teams: Using Technology to Enhance Collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

Codifying Knowledge for Competitive Advantage . . . . . . 126

4.5 STRATEGY SPOTLIGHT

How SAP Taps Knowledge Well Beyond Its Boundaries . . . . .127

Protecting the Intellectual Assets of the Organization: Intellectual Property and Dynamic Capabilities � � � 128 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . 129

Dynamic Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . .131

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .131

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132

Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . .132

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .133

PART 2 STRATEGIC FORMULATION

CHAPTER 5 Business-Level Strategy: Creating and Sustaining Competitive Advantages � � � � � � � � � � 138

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .139

Types of Competitive Advantage and Sustainability � � � � � � � � � � � � � � � � � � � � � � � � � � � 140 Overall Cost Leadership. . . . . . . . . . . . . . . . . . . . . . . . . . . .141

5.1 STRATEGY SPOTLIGHT Environmental Sustainability

Primark Strives to Balance Low Costs with Environmental Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .143

Differentiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 5.1 INSIGHTS FROM RESEARCH

Linking Customer Interactions to Innovation: The Role of the Organizational Practices. . . . . . . . . . . . . . . . . . . . .147

5.2 STRATEGY SPOTLIGHT Data Analytics

Caterpillar Digs into the Data to Differentiate Itself . . . . . . . .148

Focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 5.3 STRATEGY SPOTLIGHT Data Analytics

Luxury in the E-Commerce World . . . . . . . . . . . . . . . . . . . . .151

Combination Strategies: Integrating Overall Low Cost and Differentiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 5.4 STRATEGY SPOTLIGHT

Expanding the Profit Pool in the Sky . . . . . . . . . . . . . . . . . . .153

Can Competitive Strategies Be Sustained? Integrating and Applying Strategic Management Concepts � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 155 Atlas Door: A Case Example . . . . . . . . . . . . . . . . . . . . . . . 155 Are Atlas Door’s Competitive Advantages Sustainable? . . .156 Strategies for Platform Markets . . . . . . . . . . . . . . . . . . . . . 158

Industry Life-Cycle Stages: Strategic Implications � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 159 Strategies in the Introduction Stage . . . . . . . . . . . . . . . . . . .161 Strategies in the Growth Stage . . . . . . . . . . . . . . . . . . . . . . .161 Strategies in the Maturity Stage . . . . . . . . . . . . . . . . . . . . . 162 Strategies in the Decline Stage. . . . . . . . . . . . . . . . . . . . . . 163 Turnaround Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164

5.5 STRATEGY SPOTLIGHT

How Mindy Grossman Led HSN’s Remarkable Turnaround . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .166 Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . .166 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .167 Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .167 Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .167 Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . .168 Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .168 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .168

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CHAPTER 6 Corporate-Level Strategy: Creating Value through Diversification � � � � � � � � � � � � � � � � � � � � 172

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .173

Making Diversification Work: An Overview � � � � � � � 174 Related Diversification: Economies of Scope and Revenue Enhancement � � � � � � � � � � � � � � � � � � � � � � � 175 Leveraging Core Competencies . . . . . . . . . . . . . . . . . . . . . .175

6.1 STRATEGY SPOTLIGHT Data Analytics

IBM: The New Health Care Expert . . . . . . . . . . . . . . . . . . . .177

Sharing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .178

Enhancing Revenue and Differentiation � � � � � � � � � 178 Related Diversification: Market Power � � � � � � � � � � 179 Pooled Negotiating Power . . . . . . . . . . . . . . . . . . . . . . . . . 179 Vertical Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179

6.2 STRATEGY SPOTLIGHT Environmental Sustainability

Tesla Breaks Industry Norms by Vertically Integrating . . . . .180

Unrelated Diversification: Financial Synergies and Parenting � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 182 Corporate Parenting and Restructuring . . . . . . . . . . . . . . 182 Portfolio Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Caveat: Is Risk Reduction a Viable Goal of

Diversification? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

The Means to Achieve Diversification � � � � � � � � � � � 186 Mergers and Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . 186

6.3 STRATEGY SPOTLIGHT Ethics

Valeant Pharmaceuticals Jacks Up Prices after Acquisitions but Loses in the End. . . . . . . . . . . . . . . . . . . . . . . . . . . . .189

6.4 STRATEGY SPOTLIGHT

The Wisdom of Crowds: When Do Investors See Value in Acquisitions?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .190

Strategic Alliances and Joint Ventures . . . . . . . . . . . . . . . 192 6.5 STRATEGY SPOTLIGHT

Ericsson and Cisco Join Forces to Respond to the Changing Telecommunications Market . . . . . . . . . . . . . . . . . . . . . . . 193

Internal Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193

How Managerial Motives Can Erode Value Creation � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 194 Growth for Growth’s Sake . . . . . . . . . . . . . . . . . . . . . . . . . 194 Egotism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Antitakeover Tactics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .196

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . .197

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .197

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .198

Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .198

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . .198

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .198

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .198

CHAPTER 7 International Strategy: Creating Value in Global Markets � � � � � � � � � � � � � � � � � � � � � � � � � � � 202

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203

The Global Economy: A Brief Overview � � � � � � � � � � 204 Factors Affecting a Nation’s Competitiveness � � � � � � � � � � � � � � � � � � � � � � � � � � � � 205 Factor Endowments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

Demand Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

Related and Supporting Industries . . . . . . . . . . . . . . . . . . 206

Firm Strategy, Structure, and Rivalry . . . . . . . . . . . . . . . . 206

Concluding Comment on Factors Affecting a Nation’s Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206

7.1 STRATEGY SPOTLIGHT

India and the Diamond of National Advantage . . . . . . . . . . 207

International Expansion: A Company’s Motivations and Risks � � � � � � � � � � � � � � � � � � � � � � � � 208 Motivations for International Expansion . . . . . . . . . . . . . 208

Potential Risks of International Expansion . . . . . . . . . . . . .210

7.2 STRATEGY SPOTLIGHT Ethics

Counterfeit Drugs: A Dangerous and Growing Problem . . . . 213

7.3 STRATEGY SPOTLIGHT

When to Not Adapt Your Company’s Culture—Even If It Conflicts with the Local Culture . . . . . . . . . . . . . . . . . . . .214

Global Dispersion of Value Chains: Outsourcing and Offshoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .214

Achieving Competitive Advantage in Global Markets � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 216 Two Opposing Pressures: Reducing Costs and Adapting

to Local Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .216

International Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .217

Global Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .219

Multidomestic Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

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7.4 STRATEGY SPOTLIGHT

Challenges Involving Cultural Differences That Managers May Encounter When Negotiating Contracts across National Boundaries . . . . . . . . . . . . . . . . . . . . . . . . . . . .221

Transnational Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222

7.5 STRATEGY SPOTLIGHT

Panasonic’s China Experience Shows the Benefits of Being a Transnational . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224

Global or Regional? A Second Look at Globalization . . . 224

Entry Modes of International Expansion � � � � � � � � � 226 Exporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226

Licensing and Franchising . . . . . . . . . . . . . . . . . . . . . . . . . 227

Strategic Alliances and Joint Ventures . . . . . . . . . . . . . . . 228

Wholly Owned Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 229

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . .231

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .231

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232

Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . 232

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233

CHAPTER 8 Entrepreneurial Strategy and Competitive Dynamics � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 236

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237

Recognizing Entrepreneurial Opportunities � � � � � � 238 Entrepreneurial Opportunities . . . . . . . . . . . . . . . . . . . . . . 239

8.1 STRATEGY SPOTLIGHT

Seeing Opportunity in the Bright Side . . . . . . . . . . . . . . . . . 240

8.2 STRATEGY SPOTLIGHT Environmental Sustainability

mOasis Leverages Technology to Improve Water Efficiency for Farmers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .241

Entrepreneurial Resources . . . . . . . . . . . . . . . . . . . . . . . . . 242

Entrepreneurial Leadership . . . . . . . . . . . . . . . . . . . . . . . . 246

Entrepreneurial Strategy � � � � � � � � � � � � � � � � � � � � � 247 Entry Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247

8.3 STRATEGY SPOTLIGHT

Casper Sleep Aims to Be the Warby Parker of Mattresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249

Generic Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250

8.4 STRATEGY SPOTLIGHT

Shakespeare & Co.: Using Technology to Create a New Local Bookstore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252

Combination Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . 252

Competitive Dynamics � � � � � � � � � � � � � � � � � � � � � � � 253 New Competitive Action . . . . . . . . . . . . . . . . . . . . . . . . . . 253

Threat Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254

Motivation and Capability to Respond . . . . . . . . . . . . . . . 256

Types of Competitive Actions . . . . . . . . . . . . . . . . . . . . . . 256

Likelihood of Competitive Reaction . . . . . . . . . . . . . . . . . 258

8.5 STRATEGY SPOTLIGHT Ethics

Cleaning Up in the Soap Business . . . . . . . . . . . . . . . . . . . . 259

Choosing Not to React: Forbearance and Co-opetition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . .261

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .261

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . 262

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263

PART 3 STRATEGIC IMPLEMENTATION CHAPTER 9 Strategic Control and Corporate Governance � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 266

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .267

Ensuring Informational Control: Responding Effectively to Environmental Change � � � � � � � � � � � 268 A Traditional Approach to Strategic Control . . . . . . . . . . 268

A Contemporary Approach to Strategic Control . . . . . . . 269

Attaining Behavioral Control: Balancing Culture, Rewards, and Boundaries � � � � � � � � � � � � � � � � � � � � � 270 Building a Strong and Effective Culture . . . . . . . . . . . . . . 270

Motivating with Rewards and Incentives . . . . . . . . . . . . . . .271

9.1 STRATEGY SPOTLIGHT

Using Pictures and Stories to Build a Customer-Oriented Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .272

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9.1 INSIGHTS FROM RESEARCH

Inspire Passion—Motivate Top Performance . . . . . . . . . . . . . .274

Setting Boundaries and Constraints . . . . . . . . . . . . . . . . . .275

Behavioral Control in Organizations: Situational Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276

9.2 STRATEGY SPOTLIGHT Data Analytics

Using Data Analytics to Enhance Organizational Control . . .277

Evolving from Boundaries to Rewards and Culture . . . . . 277

The Role of Corporate Governance � � � � � � � � � � � � � 278 The Modern Corporation: The Separation of Owners

(Shareholders) and Management . . . . . . . . . . . . . . . . . 279

Governance Mechanisms: Aligning the Interests of Owners and Managers . . . . . . . . . . . . . . . . . . . . . . . . . 280

9.3 STRATEGY SPOTLIGHT Ethics

How Women Have Come to Dominate a Corner of Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284

CEO Duality: Is It Good or Bad? . . . . . . . . . . . . . . . . . . . 285

External Governance Control Mechanisms . . . . . . . . . . . 286

9.4 STRATEGY SPOTLIGHT

The Rise of the Privately Owned Firm . . . . . . . . . . . . . . . . . 288

9.5 STRATEGY SPOTLIGHT Ethics

Japanese Government Pushes for Governance Reform . . . . . 289

Corporate Governance: An International Perspective . . . 290

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . 293

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294

Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . 294

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295

CHAPTER 10 Creating Effective Organizational Designs � � � � � 300

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .301

Traditional Forms of Organizational Structure � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 302 Patterns of Growth of Large Corporations: Strategy-

Structure Relationships . . . . . . . . . . . . . . . . . . . . . . . . 302

Simple Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304

Functional Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304

Divisional Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306

10.1 STRATEGY SPOTLIGHT

Whole Foods Centralizes to Improve Efficiency . . . . . . . . . . 307

Matrix Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308

10.2 STRATEGY SPOTLIGHT

Where Conglomerates Prosper . . . . . . . . . . . . . . . . . . . . . . . 309

International Operations: Implications for Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . .310

Global Start-Ups: A Recent Phenomenon . . . . . . . . . . . . .312

10.3 STRATEGY SPOTLIGHT

Global Start-Up, BRCK, Works to Bring Reliable Internet Connectivity to the World . . . . . . . . . . . . . . . . . . . . . . . . .313

How an Organization’s Structure Can Influence Strategy Formulation . . . . . . . . . . . . . . . . . . . . . . . . . . .313

Boundaryless Organizational Designs � � � � � � � � � � 314 The Barrier-Free Organization . . . . . . . . . . . . . . . . . . . . . . .314

10.4 STRATEGY SPOTLIGHT Environmental Sustainability

The Business Roundtable: A Forum for Sharing Best Environmental Sustainability Practices . . . . . . . . . . . . . .316

10.1 INSIGHTS FROM RESEARCH

Where Employees Learn Affects Financial Performance . . . .317

10.5 STRATEGY SPOTLIGHT

Cloudflare Sees the Need for Structure . . . . . . . . . . . . . . . . .318

The Modular Organization . . . . . . . . . . . . . . . . . . . . . . . . .318

The Virtual Organization . . . . . . . . . . . . . . . . . . . . . . . . . . 320

Boundaryless Organizations: Making Them Work . . . . . . 321

Creating Ambidextrous Organizational Designs � � 324 Ambidextrous Organizations: Key Design Attributes . . . . 325

Why Was the Ambidextrous Organization the Most Effective Structure? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . .327

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .327

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328

Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . 328

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329

CHAPTER 11 Strategic Leadership: Creating a Learning Organization and an Ethical Organization � � � � � 332

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 333

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CONTENTS

Leadership: Three Interdependent Activities � � � � � 334 Setting a Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335

Designing the Organization . . . . . . . . . . . . . . . . . . . . . . . . 335

11.1 STRATEGY SPOTLIGHT

Marvin Ellison Attempts to Turn JC Penney Co. Inc. Around . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336

Nurturing a Culture Committed to Excellence and Ethical Behavior . . . . . . . . . . . . . . . . . . . . . . . . . . 336

11.2 STRATEGY SPOTLIGHT Environmental Sustainability, Ethics

Family Leadership Sustains the Culture of SC Johnson . . . . 337

Getting Things Done: Overcoming Barriers and Using Power � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 338 Overcoming Barriers to Change . . . . . . . . . . . . . . . . . . . . 338

11.3 STRATEGY SPOTLIGHT

Overcoming Supply Chain Limitations at Target . . . . . . . . . 339

Using Power Effectively . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

11.4 STRATEGY SPOTLIGHT

The Use of “Soft” Power at Siemens . . . . . . . . . . . . . . . . . . . .341

Emotional Intelligence: A Key Leadership Trait � � � 341 Self-Awareness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342

Self-Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342

Motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343

Empathy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343

Social Skill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343

Emotional Intelligence: Some Potential Drawbacks and Cautionary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344

Creating a Learning Organization � � � � � � � � � � � � � � 344 Inspiring and Motivating People with a Mission

or Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345

Empowering Employees at All Levels . . . . . . . . . . . . . . . . 345

Accumulating and Sharing Internal Knowledge . . . . . . . . 346

Gathering and Integrating External Information . . . . . . . 346

Challenging the Status Quo and Enabling Creativity . . . . 347

Creating an Ethical Organization � � � � � � � � � � � � � � � 348 Individual Ethics versus Organizational Ethics . . . . . . . . . 348

11.5 STRATEGY SPOTLIGHT Environmental Sustainability, Ethics

Green Energy: Real or Just a Marketing Ploy? . . . . . . . . . . . 349

Integrity-Based versus Compliance-Based Approaches to Organizational Ethics . . . . . . . . . . . . . . . . . . . . . . . . 350

Role Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351

Corporate Credos and Codes of Conduct . . . . . . . . . . . . . 352

Reward and Evaluation Systems . . . . . . . . . . . . . . . . . . . . 352

Policies and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . 353

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . 354

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 355

Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . 356

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356

CHAPTER 12 Managing Innovation and Fostering Corporate Entrepreneurship � � � � � � � � � � � � � � � � � � � � � � � � � 360

Learning from Mistakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .361

Managing Innovation � � � � � � � � � � � � � � � � � � � � � � � � 362 Types of Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362

12.1 STRATEGY SPOTLIGHT

MiO Drops Change the Beverage Game . . . . . . . . . . . . . . . . 363

Challenges of Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . 364

Cultivating Innovation Skills . . . . . . . . . . . . . . . . . . . . . . . 365

12.2 STRATEGY SPOTLIGHT

Procter & Gamble Strives to Remain Innovative. . . . . . . . . . 366

12.3 STRATEGY SPOTLIGHT Environmental Sustainability

Fair Oaks Farms Sees the Power of Waste . . . . . . . . . . . . . . 368

Defining the Scope of Innovation . . . . . . . . . . . . . . . . . . . 368

Managing the Pace of Innovation . . . . . . . . . . . . . . . . . . . 369

Staffing to Capture Value from Innovation . . . . . . . . . . . . 369

Collaborating with Innovation Partners . . . . . . . . . . . . . . 370

The Value of Unsuccessful Innovation . . . . . . . . . . . . . . . 370

12.1 INSIGHTS FROM RESEARCH

You Can Adapt to the Loss of a Star Employee . . . . . . . . . . .371

Corporate Entrepreneurship � � � � � � � � � � � � � � � � � � � 373 Focused Approaches to Corporate Entrepreneurship . . . .374

12.4 STRATEGY SPOTLIGHT

Big Firms Use NVGs and Business Incubators to Trigger Creativity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .375

Dispersed Approaches to Corporate Entrepreneurship . . .375

Measuring the Success of Corporate Entrepreneurship Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377

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Real Options Analysis: A Useful Tool � � � � � � � � � � � � 378 Applications of Real Options Analysis to Strategic

Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379

12.5 STRATEGY SPOTLIGHT

Saving Millions with Real Options at Intel . . . . . . . . . . . . . . 380

Potential Pitfalls of Real Options Analysis . . . . . . . . . . . . 380

Entrepreneurial Orientation � � � � � � � � � � � � � � � � � � � 381 Autonomy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381

Innovativeness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382

Proactiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383

Competitive Aggressiveness . . . . . . . . . . . . . . . . . . . . . . . . 384

Risk Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384

Issue for Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385

Reflecting on Career Implications . . . . . . . . . . . . . . . . . . . . 386

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387

Experiential Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387

Application Questions & Exercises . . . . . . . . . . . . . . . . . . . . 387

Ethics Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388

PART 4 Case Analysis CHAPTER 13 Analyzing Strategic Management Cases � � � � � � 392

Why Analyze Strategic Management Cases? . . . . . . . . . . . . 393

13.1 STRATEGY SPOTLIGHT

Analysis, Decision Making, and Change at Sapient Health Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395

How to Conduct a Case Analysis � � � � � � � � � � � � � � � 395 Become Familiar with the Material . . . . . . . . . . . . . . . . . . 396

13.2 STRATEGY SPOTLIGHT

Using a Business Plan Framework to Analyze Strategic Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397

Identify Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397

Conduct Strategic Analyses . . . . . . . . . . . . . . . . . . . . . . . . 398

Propose Alternative Solutions . . . . . . . . . . . . . . . . . . . . . . 400

Make Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . 400

How to Get the Most from Case Analysis � � � � � � � � 401 Useful Decision-Making Techniques in Case Analysis � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 404 Integrative Thinking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404

Asking Heretical Questions . . . . . . . . . . . . . . . . . . . . . . . . 406

13.3 STRATEGY SPOTLIGHT

Integrative Thinking at Red Hat, Inc. . . . . . . . . . . . . . . . . . 406

Conflict-Inducing Techniques . . . . . . . . . . . . . . . . . . . . . . 407

13.4 STRATEGY SPOTLIGHT

Making Case Analysis Teams More Effective . . . . . . . . . . . . 408

Following the Analysis-Decision-Action Cycle in Case Analysis � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 411

13.5 STRATEGY SPOTLIGHT

Case Competition Assignment . . . . . . . . . . . . . . . . . . . . . . . .416

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .417

Key Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .417

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .417

Appendix 1 to Chapter 13: Financial Ratio Analysis . . . . . . .418

Appendix 2 to Chapter 13: Sources of Company and Industry Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .427

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CASES

1 ROBIN HOOD Hypothetical/Classic Robin Hood and his Merrymen are in trouble, as wealthy travelers are avoiding Sherwood Forest. This classic case is an excellent introduction to strategic management using a nonbusiness context. . . . . . . . . . C2

2 THE GLOBAL CASINO INDUSTRY IN 2017 Casino Industry The dominance of Las Vegas and Atlantic City in the global market has been challenged by the development of several casinos along a strip in the former Portuguese colony of Macau. More recently, this growth of casinos has spread to other locations across Asia-Pacific. All of these new locations are hoping to grab a share of the gambling revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . C3

3 MCDONALD’S IN 2017 Restaurant Change is in the air at the world’s largest burger chain. Only 20% of millennials have even tried a Big Mac and McDonald’s is worried. It has removed high fructose corn syrup from its buns, changed from the use of liquid margarine to real butter, decided to use chicken that has been raised without antibiotics, and switched to cage- free eggs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C7

4 ZYNGA: IS THE GAME OVER? Mutimedia & Online Games Zynga not only struggled to remain relevant in the gaming industry but also fought to seem attractive to investors. During the past four years, the company had a new CEO almost every year. . . . . . . . . . . . . . . . . . . . C13

5 QVC Retail QVC is finally beginning to see cracks emerge in a business model that has relied on impulsive purchases

by television viewers. The home shopping channel’s U.S. sales fell 6% during the last part of 2016, the first drop in seven years on its home turf. It was especially troubling that this decline extended into the crucial year-end holiday period. . . . . . . . . . . . . . . . . . . . . . . . C19

6 MICROFINANCE: GOING GLOBAL � � � AND GOING PUBLIC?

Finance With the global success of the microfinance concept, the number of private microfinance institutions exploded and the initial public offerings for these institutions was on the rise. This transfer of control to public buyers creates a fiduciary duty of the bank’s management to maximize shareholder value. Will this be a good thing for these typically “do good” banks? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C24

7 WORLD WRESTLING ENTERTAINMENT Entertainment 2017 offered new challenges for WWE’s potent mix of shaved, pierced, and pumped-up muscled hunks; buxom, scantily clad, and sometimes cosmetically enhanced beauties; and body-bashing clashes of good versus evil that had resulted in an empire that claimed over 35 million fans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C27

8 GREENWOOD RESOURCES: A GLOBAL SUSTAINABLE VENTURE IN THE MAKING

Natural Resources GreenWood manager Jeff Nuss narrowed the field from 20 possible investment sites to two strategic alternatives. Which tree plantation investment in rural China should Jeff proceed with? . . . . . . . . . . . . . . . . . . . . . . . . . . . C32

9 FRESHDIRECT: HOW FRESH IS IT? Grocery FreshDirect, a New York City–based online grocer, claimed, “Our food is fresh, our customers are spoiled.” Recently, however, many consumers questioned the freshness of the food delivered. . . . . . . . . . . . . . . . . . C46

10 DIPPIN’ DOTS: IS THE FUTURE FROZEN? Ice Cream Dippin’ Dots Ice Cream is faced with mounting competition for its flagship tiny beads of ice cream that are made and served at super-cold temperatures. Will their new distribution partners bring them in from the cold?. . . . C58

cases

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11 KICKSTARTER AND CROWDFUNDING Crowdfunding Crowdfunding allows ventures to draw on relatively small contributions from a relatively large number of individuals using the Internet, without standard financial intermediaries. KickStarter offers a platform for crowdfunding of new ventures, but the field is crowded. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C68

12 EMIRATES AIRLINE IN 2017 Airlines Emirates faced its biggest challenge from the drop in oil prices and the growth in terrorist attacks that have led to a decline in demand. Many companies, particularly in the Middle East, have been cutting back on travel for their employees, reducing the premium revenue that Emirates has been generating from first and business class passengers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C75

13 CIRQUE DU SOLEIL Entertainment Cirque du Soleil’s business triumphs mirrored its high- flying aerial stunts, but poorly received shows over the last few years and a decline in profits have caused executives at Cirque to announce restructuring and refocusing efforts—shifting some of the attention away from their string of successful shows toward several other potential business ventures. . . . . . . . . . . . . . . . C82

14 PIXAR Movies Disney CEO Bob Iger worked hard to clinch the deal to acquire Pixar, whose track record has made it one of the world’s most successful animation companies. Iger realized, however, that he must try to protect Pixar’s creative culture while also trying to carry that culture over to some of Disney’s animation efforts. . . . . . . . C86

15 CAMPBELL: HOW TO KEEP THE SOUP SIMMERING

Processed and Packaged Goods In 2017, Campbell Soup neared the boiling point with numerous challenges, the most important to remain attractive to health-conscious consumers. CEO Denise Morrison tried to turn the company focus toward fresh food categories, with its fresh food division called “Campbell Fresh.” However, the company still failed to accomplish an impressive comeback. . . . . . . . . . . . . C91

16 HEINEKEN Beer Heineken can lay claim to a brand that may be the closest thing to a global beer brand. But in the United States and Europe sales are relatively flat. Heineken owns more than 175 smaller or regional brands of beer. Would the move to launch Bintang, which is its biggest selling beer brand in Indonesia, into the UK and select European markets be successful? . . . . . . . . . . . . . . C102

17 FORD: NO LONGER JUST AN AUTO COMPANY?

Automotive Ford’s new CEO Mark Fields announced that Ford would focus not only on advanced new vehicles but on changing the way the world moves by solving today’s growing global transportation challenges. Are Fields and Ford up to the challenge? . . . . . . . . . . . . . . . . . C107

18 GENERAL MOTORS IN 2017 Automotive GM has fallen from its dominant position in the domestic auto business, is dismantling operations in Russia, and is selling off its Opel unit in Europe to Peugeot. Will CEO Mary Barra be able to bring back the glory with a series of new investments such as in electric vehicles, ride sharing fleets, and driverless cars? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C120

19 JOHNSON & JOHNSON Pharmaceuticals, Personal Care Products, Medical Devices CEO Alex Gorsky has been growing J&J by acquisition, while granting autonomy to the firms that it absorbs. While independence cultivates an entrepreneurial attitude, the units are not pursuing collaborative opportunities across units. How can J&J combine collaboration and autonomy without unraveling the J&J entrepreneurial spirit? . . . . . . . . . . . . . . . . . . . . C128

20 AVON: A NEW ERA? Cosmetics Rookie CEO Shari McCoy spun off 80% of Avon’s domestic business in an attempt save the firm. Can McCoy save the remaining business and return the iconic, direct selling company to profitable growth?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C133

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CASES

21 THE BOSTON BEER COMPANY: POISED FOR GROWTH

Beer The Boston Beer Company was facing a difficult competitive environment with direct competition from both larger and smaller breweries and from premium imported beers. While further growth would be beneficial in terms of revenue, growing too large could negatively affect the company’s status as a craft brewery and the perceptions of its customers. . . . . . . . . . . . C144

22 NINTENDO’S SWITCH Video Games In 2017 Nintendo launched a new gaming console system named Nintendo Switch. Would the new Joy- Con Controllers and flexible play features be enough to boost consumer numbers and investors’ confidence? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C154

23 TATA STARBUCKS: HOW TO BREW A SUSTAINABLE BLEND FOR INDIA

Coffee Would Starbucks and Tata under new CEO Sumi Ghosh’s leadership finally be able to brew a new blend of success in the competitive and complex Indian café market? While management appeared proud of the joint venture’s early performance, some critical strategic choices would need to be made to ensure the long-term success of Starbucks in India. . . . . . . . . . . . . . . . . . C165

24 WEIGHT WATCHERS INTERNATIONAL INC� Weight Loss Weight Watchers was reinventing weight loss for a new generation and hoping profits would jump off the scale. A new “Beyond the Scale” advertising campaign that featured the entrepreneur and talk show host, Oprah Winfrey, claiming that she had lost 40 pounds by using Weight Watchers program. . . . . . . . . . . . . . . . . . . . C173

25 SAMSUNG ELECTRONICS 2017 Consumer Electronics Samsung rushed the Note 7 to market ahead of Apple’s anticipated iPhone 7. The tendency of the Note 7 to burst into flames from a poor battery design subsequently led Samsung to engage in one of its most extensive and costly recalls and to eventually kill the new product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C184

26 PROCTER & GAMBLE Consumer Products Procter & Gamble was the world’s largest consumer products conglomerate, with billion-dollar brands such as Tide, Crest, Pampers, Gillette, Right Guard, and Duracell. However, sales were down as consumers were coping with the economic downturn by switching to P&G’s lower-priced brands. . . . . . . . . . . . . . . . . . . . C189

27 APPLE INC�: IS THE INNOVATION OVER? Computers, Consumer Electronics CEO Tim Cook had driven the stock price up 175% since the death of founder Steve Jobs. Yet Cook was criticized for being too cautious about entering new product categories, pursuing acquisitions, and driving employees to achieve stretch goals. Would Apple be able to innovative without Jobs? . . . . . . . . . . . . . . . . . . . C195

28 JETBLUE AIRLINES: GETTING OVER THE “BLUES”?

Airline This airline’s start-up success story is facing new challenges as operational problems have surfaced and another new pilot is in the CEO’s seat. . . . . . . . . . . C208

29 UNITED WAY WORLDWIDE Nonprofit As a nonprofit organization, it was imperative for United Way Worldwide to get the necessary support at the local level in order to achieve its stated organizational goals. Would Gallagher’s various strategies be successfully implemented, or was the nonprofit’s very mission perhaps no longer relevant? . . . . . . . . . . . . . . . . . . . .C218

30 EBAY Internet The online auction pioneer was entering a critical period. There were questions of what was right for the company to increase shareholder value over the long term, as well as operational issues related to search engine optimization and online security. . . . . . . . . C227

31 JAMBA JUICE: MIXING IT UP & STARTING AFRESH

Smoothies/QSR After years of same-store declines, activist investors were pressuring CEO Dave Pace for a turnaround.

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Jamba has gradually expanded its product line over the past several years to appeal to a broader palate, but was the company biting off more than it could chew? . . C241

32 BLACKBERRY LIMITED: IS THERE A PATH TO RECOVERY?

Mobile Phones, Software Blackberry CEO John Chen was hired to get the former dominating smartphone producer back to profitability. However, Blackberry stock was trading for less than $7 a share, that is, only a fraction of the $139 price in 2008. Chen has to navigate the rumors of a sale to Samsung and hostile takeovers, while refocusing the firm. Will Chen and Blackberry survive? . . . . . . . . C250

33 ASCENA: ODDS OF SURVIVAL IN SPECIALTY RETAIL?

Retail, Women’s Fashion Ascena was just starting to digest Ann Taylor, its most recent acquisition in women’s apparel. However, 2017

was shaping up to be the worst year in apparel retail in a decade as ten major apparel retailers filed for bankruptcy and many others teetered on the brink. Could Ascena transcend the industry and drive sales forward or was this one acquisition too many? . . . . C263

Indexes

Company I-1

Name I-11

Subject I-27

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des13959_ch01_001-033.indd 1 01/04/18 10:03 AM

Chapter 1 Introduction

and Analyzing Goals and Objectives

Chapter 4

Assessing Intellectual

Capital

Chapter 2

Analyzing the External Environment

Chapter 3

Analyzing the Internal Environment

Chapter 13

Case Analysis

Case Analysis

Strategy Formulation Strategy Implementation

Strategy Analysis

Chapter 5

Formulating Business-Level

Strategies

Chapter 8

Entrepreneurial Strategy and Competitive

Dynamics

Chapter 6

Formulating Corporate-

Level Strategies

Chapter 7

Formulating International

Strategies

Chapter 9

Strategic Control and Corporate

Governance

Chapter 12

Fostering Corporate

Entrepreneur- ship

Chapter 10

Creating E�ective

Organizational Designs

Chapter 11

Strategic Lead- ership Excel- lence, Ethics, and Change

The Strategic Management Process

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chapter

After reading this chapter, you should have a good understanding of the following learning objectives:

1 LO1-1 The definition of strategic management and its four key attributes. LO1-2 The strategic management process and its three interrelated and principal

activities.

LO1-3 The vital role of corporate governance and stakeholder management, as well as how “symbiosis” can be achieved among an organization’s stakeholders.

LO1-4 The importance of social responsibility, including environmental sustainability, and how it can enhance a corporation’s innovation strategy.

LO1-5 The need for greater empowerment throughout the organization.

LO1-6 How an awareness of a hierarchy of strategic goals can help an organization achieve coherence in its strategic direction.

Strategic Management Creating Competitive Advantages

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