Crafting and executing strategy 17th edition test bank

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Crafting and Executing Strategy

Core Concepts Analytical Tools Cases

The Quest for Competitive Advantage

Instructor’s Manual to accompany

SEVENTEENTH EDITION

Arthur A. Thompson, Jr. The University of Alabama

A.J. Strickland The University of Alabama

John E. Gamble University of South Alabama

Table of Contents Section 1 The Seventeenth Edition: Instructor Resources, Chapter Features,

and Case Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Section 2 Using a Strategy Simulation in Your Course: The Compelling Benefi ts, What’s Involved, and How to Proceed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Section 3 Organizing Your Course, Developing a Syllabus, and Suggestions for Using the Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Section 4 Sample Syllabi and Daily Course Outlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Section 5 Test Bank for Chapters 1-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Chapter 1 What Is Strategy and Why Is It Important? . . . . . . . . . . . . . . . . . . . . . . . 99

Chapter 2 Leading the Process of Crafting and Executing Strategy . . . . . . . . . . . . 115

Chapter 3 Evaluating a Company’s External Environment . . . . . . . . . . . . . . . . . . . . 143

Chapter 4 Evaluating a Company’s Resources and Competitive Position . . . . . . . . 171

Chapter 5 The Five Generic Competitive Strategies—Which One to Employ? . . . . 199

Chapter 6 Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219

Chapter 7 Strategies for Competing in Foreign Markets . . . . . . . . . . . . . . . . . . . . . 243

Chapter 8 Diversifi cation—Strategies for Managing a Group of Businesses . . . . . . 269

Chapter 9 Ethical Business Strategies, Social Responsibility, and Environmental Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303

Chapter 10 Building an Organization Capable of Good Strategic Execution . . . . . . . 329

Chapter 11 Managing Internal Operations: Actions That Promote Good Strategy Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351

Chapter 12 Corporate Culture and Leadership: Keys to Good Strategy Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369

Section 6 Lecture Notes for Chapters 1-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393

Chapter 1 What Is Strategy and Why Is It Important? . . . . . . . . . . . . . . . . . . . . . . . 495

Chapter 2 Leading the Process of Crafting and Executing Strategy . . . . . . . . . . . . 401

Chapter 3 Evaluating a Company’s External Environment . . . . . . . . . . . . . . . . . . . . 413

Chapter 4 Evaluating a Company’s Resources and Competitive Position . . . . . . . . 429

Chapter 5 The Five Generic Competitive Strategies—Which One to Employ? . . . . 441

Chapter 6 Supplementing the Chosen Competitive Strategy—Other Important Strategy Choices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451

Chapter 7 Strategies for Competing in Foreign Markets . . . . . . . . . . . . . . . . . . . . . 465

Chapter 8 Diversifi cation—Strategies for Managing a Group of Businesses . . . . . . 475

Chapter 9 Ethical Business Strategies, Social Responsibility, and Environmental Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491

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4

Chapter 10 Building an Organization Capable of Good Strategic Execution . . . . . . . 501

Chapter 11 Managing Internal Operations: Actions That Promote Good Strategy Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511

Chapter 12 Corporate Culture and Leadership: Keys to Good Strategy Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519

Section 7 Teaching Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 529

Case 1 Whole Foods Market in 2008—Vision, Core Values, and Strategy . . . . . 530

Case 2 Costco Wholesale Corp. in 2008—Mission, Business Model, and Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549

Case 3 JetBlue Airways: A Cadre of New Managers Takes Control . . . . . . . . . . 567

Case 4 Competition in the Golf Equipment Industry in 2008 . . . . . . . . . . . . . . . . 579

Case 5 Competition in the Movie Rental Industry in 2008: Netfl ix and Blockbuster Battle for Market Leadership . . . . . . . . . . . . . . . 593

Case 6 Dell, Inc. in 2008—Can It Overtake Hewlett-Packard as the Worldwide Leader in Personal Computers? . . . . . . . . . . . . . . . . . . . 619

Case 7 Apple, Inc. in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639

Case 8 Panera Bread Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661

Case 9 Rogers’ Chocolates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673

Case 10 Nucor Corporation—Competing Against Low-Cost Foreign Imports. . . . 687

Case 11 Competition in Video Game Consoles: The State of the Battle for Supremacy in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705

Case 12 Nintendo’s Strategy for the Wii —Good Enough to Beat Xbox 360 and PlayStation 3? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717

Case 13 Corona Beer: From a Local Mexican Player to a Global Brand . . . . . . . . 729

Case 14 Google’s Strategy in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741

Case 15 The Challenges Facing eBay in 2008—Time for Changes in Strategy . . . 753

Case 16 Loblaw Companies Limited: Preparing for Wal-Mart Supercenters . . . . . 771

Case 17 Research in Motion: Managing Explosive Growth . . . . . . . . . . . . . . . . . . 783

Case 18 Adidas in 2008: Has Corporate Restructuring Increased Shareholder Value? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795

Case 19 PepsiCo’s Diversifi cation Strategy in 2008 . . . . . . . . . . . . . . . . . . . . . . . 805

Case 20 Robin Hood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819

Case 21 Dilemma at Devil’s Den . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827

Case 22 Wal-Mart Stores, Inc. in 2008—Management’s Initiatives to Transform the Company and Curtail Wal-Mart Bashing . . . . . . . . . . . . 833

Case 23 Southwest Airlines in 2008: Culture, Values, and Operating Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851

Case 24 Shangri-La Hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865

Case 25 E & J Gallo Winery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875

Case 26 Detecting Unethical Practices at Supplier Factories: The Monitoring and Compliance Challenges . . . . . . . . . . . . . . . . . . . . . . 883

1section Instructor Resources,

Chapter Features, and Case Overview

Section 1 Instructor Resources, Chapter Features and Case Overview6

INSTRUCTOR RESOURCES We strived to achieve four goals in preparing this package of Instructor Resources for the 17th Edition:

1. To equip you with all the resources and pedagogical tools you’ll need to design and deliver a course that is on the cutting-edge and solidly in the mainstream of what students need to know about crafting and executing winning strategies.

2. To give you wide fl exibility in putting together a course syllabus that you are comfortable with and proud of.

3. To give you a smorgasbord of options to draw from in keeping the nature of student assignments varied and interesting.

4. To help you deliver a course with upbeat tempo that wins enthusiastic applause from students.

We believe the contents of the package will be particularly informative and helpful to faculty members teaching the strategy course for the fi rst time but we have also tried to embellish the content with ideas and suggestions that will prove valuable to experienced faculty looking for ways to refurbish their course offering and/or to keep student assignments varied and interesting.

A QUICK OVERVIEW OF THE ENTIRE INSTRUCTOR RESOURCE PACKAGE The Instructor’s Manual for Crafting & Executing Strategy contains:

A quick look at the topical focus of the text’s 12 chapters (Section 1).

An overview of the 26 cases in the text, along with a grid profi ling the strategic issues that come into play in each case (Section 1 and Section 3).

A discussion of the reasons to use a strategy simulation as an integral part of your strategy course. The two web-based strategy simulations—The Business Strategy Game or GLO-BUS—that are companions to this text incorporate the very kinds of strategic thinking, strategic analysis, and strategic decision- making described in the text chapters and connect beautifully to the chapter content. The automated online nature of both simulations entails minimal administrative time and effort on the instructor’s part. You will be pleasantly shocked (and pleased!!) at the minimal time it will take you to incorporate use of GLO-BUS or The Business Strategy Game and the added degree of student excitement and energy that either of these competition-based strategy simulations brings to the course—see Section 2 for more details.

Tips and suggestions for effectively using either GLO-BUS or The Business Strategy Game in your course (covered in both Section 2 and Section 3).

The merits of encouraging your students to go to the Web site for the text and take the self-scoring chapter quizzes that measure their command of the concepts and analytical tools presented in the 12 chapters (covered in both Section 1 and Section 3).

Ideas and suggestions on course design and course organization (Section 3 and Section 4).

Recommendations for sequencing the case assignments and guidance about how to use the cases effectively (Section 3).

Our recommendations regarding which cases are particularly appropriate for written case assignments and oral team presentations (Section 3).

7Crafting & Executing Strategy 17th Edition

Two sample course syllabi (Section 4).

Five sample schedules of class activities and daily assignments for 15-week terms; 3 sample schedules of class activities for 10-week terms; and 3 sample daily course schedules for 5-week terms. (Section 4).

A Test Bank for the 12 chapters that consists of 1100+ questions (Section 5).

A set of Lecture Notes for each of the 12 chapters (Section 6).

A comprehensive teaching note for each of the 26 cases in Crafting & Executing Strategy (Section 7).

In addition to the Instructor’s Manual, the support package for adopters also includes:

An Online Learning Center (OLC) The instructor section of www.mhhe.com/thompson includes the Instructor’s Manual and other instructional resources. Your McGraw-Hill representative can arrange delivery of instructor support materials in a format-ready Standard Cartridge for Blackboard, WebCT and other web-based educational platforms.

PowerPoint Slides To facilitate delivery preparation of your lectures and to serve as chapter outlines, you’ll have access to comprehensive PowerPoint presentations for each of the 12 chapters. hat the authors have developed for their own classes. The collection includes 500+ professional-looking slides displaying core concepts, analytical procedures, key points, and all the fi gures in the text chapters.

Accompanying Case Videos Nine of the cases (Costco Wholesale, JetBlue Airways, Competition in the Movie Rental Industry, Dell, Panera Bread, Competition in Video Games, Google’s Strategy in 2008, Wal-Mart, and Southwest Airlines) have accompanying videotape segments that can be shown in conjunction with the case discussions. Suggestions for using each video are contained in the teaching note for that case.

Accompanying Chapter Videos There are accompanying videos for the chapters that you can show in conjunction with your lectures.

A Comprehensive Test Bank and EZ Test Software There is a 1100+-question test bank, consisting of both multiple choice questions and short answer/essay questions that you can use in conjunction with McGraw- Hill’s EZ Test electronic testing software to create tests from chapter- or topic-specifi c lists. The EZ Test software enables allows instructors to add their own questions to those that appear in the test bank. The EZ Test program gives you the capability to create and print multiple versions of the test and to administer the test via the Web at www.eztestonline.com. Tests can also be exported into a course management system such as WebCT, BlackBoard, PageOut, and Apple’s iQuiz.

Instructor’s Resource CD-ROM All instructor supplements are available to text adopters in this one-stop multimedia resource, including case and chapter videos, the complete Instructor’s Manual, EZ Test software, and PowerPoint slides.

All these Instructor Resources included in the Crafting & Executing Strategy package gives you the capability to custom-tailor your course using most any combination of the following powerful and proven teaching/learning techniques:

 Lectures (supported by Lecture Notes, PowerPoint slides, and chapter videos).

 Case discussions (supported by comprehensive teaching notes and the videos accompanying nine of the cases).

 Oral team presentations on one or more assigned cases.

 Use of either GLO-BUS or The Business Strategy Game to serve as an integrative, capstone exercise. Both simulations are a breeze to administer, are automatically graded, and provide detailed data in the form of a Learning Assurance Report showing how each student in your class performed vis-à-vis all students at all schools worldwide that have played the simulation over the last 12 months (a population of 20,000+ in the case of GLO-BUS and 40,000+ in the case of The Business Strategy Game).

Section 1 Instructor Resources, Chapter Features and Case Overview8

 Use of the chapter-end Assurance of Learning exercises that may be coupled with instructor-developed scoring rubrics to assess course or program learning objectives. The exercises may also be assigned for class discussion, oral team presentations, or written reports not linked to course embedded assessment.

 Each chapter also contains Exercises for Simulation Participants that tightly connect chapter concepts to the issues and decisions that students wrestle with when competing in either The Business Strategy Game or GLO-BUS; these exercises are also appropriate for use with other strategy simulations.

The ability to choose among the above options, backed by the array of support materials in the Instructor Resources package, give you enormous course design fl exibility and provides you with a powerful kit of teaching/learning tools. We’ve done our very best to ensure that the 17th Edition package will work especially well for you in the classroom, help you economize on the time needed to be well-prepared for each class, and cause students to conclude that your course is one of the very best they have ever taken—from the standpoint of both enjoyment and learning a lot.

What to Expect in the 17th Edition In preparing our revision of the text chapters for this 17th edition, we have strived to hit the bulls-eye with respect to both content and teaching/learning effectiveness. The overriding objective has been to do three things exceptionally well:

 Thoroughly explain core concepts and analytical tools in language that students can grasp. The discussions have been carefully crafted to maximize understanding and facilitate correct application.

 Provide fi rst-rate examples at every turn. Illustrating the connection and application of core concepts and analytical tools to real-world circumstances correctly is the only effective way to convince readers that the subject matter merits close attention and deals directly with what every student needs to know about crafting, implementing, and executing business strategies in today’s market environments.

 Incorporate well-settled strategic management principles, recent research fi ndings and contributions to the literature of strategic management, the latest thinking of prominent academics and practitioners in the fi eld, and the practices and behavior of real world companies—weaving these things into each chapter is essential to keep the content solidly in the mainstream of contemporary strategic thinking.

In addition, we have made a point of highlighting important strategy-related developments that permeate the world economy and many industries—the continuing march of industries and companies to wider globalization, the growing scope and strategic importance of collaborative alliances, the spread of high-velocity change to more industries and company environments, and how advancing Internet technology is driving fundamental changes in both strategy and internal operations in companies across the world. There is also coverage of corporate governance, the keys to successful diversifi cation, and how Six Sigma, best practices, benchmarking, proper workforce compensation, and a strategy-supportive corporate culture act to promote operating excellence and effective strategy execution.

We believe this 17th edition incorporates all of the necessary elements to support your delivery of a successful undergraduate or MBA strategic management course. Chapter discussions cut straight to the chase about what students really need to know. Our explanations of core concepts and analytical tools refl ect current research and are covered in enough depth to truly add value for the student--the rationale being that a shallow explanation carries almost no instructional value. All the chapters are fl ush with convincing examples that students can easily relate to. There’s a straightforward, integrated fl ow from one chapter to the next. We have deliberately adopted a pragmatic, down-to-earth writing style, not only to better communicate to an audience of students (who, for the most part, will soon be practicing managers) but also to convince readers that the subject matter deals directly what managers and companies do in the real world. All of the chapters have accompanying videos.

And, thanks to the excellent case research and case writing being done by colleagues in strategic management, this edition contains a set of high-interest cases with unusual ability to work magic in the classroom. Great cases make it far easier for you to drive home valuable lessons in the whys and hows of successfully crafting and executing strategy.

9Crafting & Executing Strategy 17th Edition

Organization, Content, and Features of the Text Chapters The 17th Edition has been reorganized to more closely link strategic leadership with the strategic management process discussed in Chapter 2 and to consolidate the discussion of strategies supporting a company’s competitive strategy that were previously included in Chapters 6 and 8 of the 16th edition into a single chapter. As with all prior revisions, we worked diligently to make sure that this edition delivers quantum improvements in overall content appeal and ease of student comprehension. As a consequence, we think you’ll be amply convinced that no other leading text does a better job of setting forth the principles of strategic management and linking these principles to both sound theory and best practices.

Furthermore, the refreshing facelift given to every chapter as concerns sharper defi nitions, more thorough explanations, and highly relevant current examples has made the chapter presentations easier for students to read and understand. Effective communication of core concepts and analytical tools in the chapters reduces the need for detailed lectures on your part and frees time for more in-class debate and discussion, coverage of late- breaking stories in the business press, and other means of driving home the principles of strategy.

No other leading strategy text comes close to matching our treatment of the resource-based theory of the fi rm. The relevance and role of company resources and competitive strengths is prominently and comprehensively integrated into our coverage of crafting both single-business and multi-business strategies. Chapters 3 through 8 make it crystal clear that a company’s strategy must be matched both to its external market circumstances and to its internal resources and competitive capabilities. Moreover, Chapters 10, 11, and 12 on various aspects of executing strategy have a strong resource-based perspective that also makes it crystal clear how and why the tasks of assembling intellectual capital and building core competencies and competitive capabilities are absolutely critical to successful strategy execution and operating excellence.

No other leading strategy text comes close to matching our coverage of business ethics, values, social responsibility, and environmental sustainability. We have embellished the highly important chapter on “Ethical Business Strategies, Social Responsibility, and Environmental Sustainability” with new discussions and material so that it can better fulfi ll the important functions of (1) alerting students to the role and importance of incorporating business ethics, social responsibility, and environmental sustainability into decision-making and (2) addressing the accreditation requirements of the AACSB that business ethics be visibly and thoroughly embedded in the core curriculum. Moreover, there are substantive discussions of the roles of values and ethics in Chapters 1, 2, 10, and 12, thus providing you with a very meaty and comprehensive treatment of business ethics and socially responsible behavior as it applies to crafting and executing company strategies.

The following rundown summarizes the topical focus of each of the 12 chapters in the 17th Edition of Crafting & Executing Strategy:

Chapter 1 is focused directly on “what is strategy and why is it important?” There are substantive discussions of what is meant by the term strategy, the different elements of a company’s strategy, and why management efforts to craft a company’s strategy tend to be squarely aimed at building sustainable competitive advantage. Considerable emphasis is given to how and why a company’s strategy is partly planned and partly reactive and why a company’s strategy tends to evolve over time. There’s an important section discussing what is meant by the term business model and how it relates to the concept of strategy. The thrust of this fi rst chapter is to convince students that good strategy + good strategy execution = good management. The chapter is a perfect accompaniment for your opening day lecture on what the course is all about and why it matters.

Chapter 2 concerns the managerial process of actually crafting and executing a strategy—it makes a great assignment for the second day of class and is a perfect follow-on to your fi rst day’s lecture. The focal point of the chapter is the fi ve-step managerial process of crafting and executing strategy: (1) forming a strategic vision of where the company is headed and why, (2) the managerial importance of developing a balanced scorecard of objectives and performance targets that measure the company’s progress, (3) crafting a strategy to achieve these targets and move the company toward its market destination, (4) implementing and executing the strategy, and (5) monitoring progress and making corrective adjustments as needed. Students are introduced to such core concepts as strategic visions, mission statements, strategic versus fi nancial objectives, and strategic intent. An all-new section underscores that this 5-step process requires

Section 1 Instructor Resources, Chapter Features and Case Overview10

strong strategic leadership. There’s a robust discussion of why all managers are on a company’s strategy- making, strategy-executing team and why a company’s strategic plan is a collection of strategies devised by different managers at different levels in the organizational hierarchy. The chapter winds up with a concise but meaty section on corporate governance.

Chapter 3 sets forth the now-familiar analytical tools and concepts of industry and competitive analysis and demonstrates the importance of tailoring strategy to fi t the circumstances of a company’s industry and competitive environment. The standout feature of this chapter is a presentation of Michael Porter’s “fi ve forces model of competition” that we think is the clearest, most straightforward discussion of any text in the fi eld. Globalization and Internet technology are treated as potent driving forces capable of reshaping industry competition—their roles as change agents have become factors that most companies in most industries must reckon with in forging winning strategies.

Chapter 4 presents the resource-based view of the fi rm and convincingly argues why a company’s strategy must be built around its resources, competencies, and competitive capabilities. The roles of core competencies and organizational resources and capabilities in creating customer value are center stage in the discussions of company resource strengths and weaknesses. SWOT analysis is cast as a simple, easy-to-use way to assess a company’s resources and overall situation. There is solid coverage of value chain analysis, benchmarking, and competitive strength assessments—standard tools for appraising a company’s relative cost position and market standing vis-à-vis rivals. An important feature of this chapter is a table showing how key fi nancial and operating ratios are calculated and how to interpret them; students will fi nd this table handy in doing the number-crunching needed to evaluate whether a company’s strategy is delivering good fi nancial performance.

Chapter 5 deals with a company’s quest for competitive advantage and is framed around the fi ve generic competitive strategies—low-cost leadership, differentiation, best-cost provider, focused differentiation, and focused low-cost.

A much revamped Chapter 6 extends the coverage of the previous chapter and deals with what other strategic actions a company can take to complement its choice of a basic competitive strategy and to employ a strategy that is wisely matched to both industry and competitive conditions and to company resources and capabilities. The chapter features sections on what use to make of strategic alliances and collaborative partnerships; merger and acquisition strategies; vertical integration strategies; outsourcing strategies; and the broad strategy options for companies competing in six representative industry and competitive situations: (1) emerging industries, (2) rapid growth industries; (3) mature, slow-growth industries, (4) stagnant or declining industries, (5) turbulent, high velocity industries, and (6) fragmented industries. The concluding section of this chapter covers fi rst-mover advantages and disadvantages, including the fi rst-mover benefi ts of pursuing a blue ocean strategy.

Chapter 7 explores the full range of strategy options for competing in foreign markets: export strategies, licensing, franchising, multicountry strategies, global strategies, and collaborative strategies involving heavy reliance on strategic alliances and joint ventures. The spotlight is trained on two strategic issues unique to competing multinationally: (1) whether to customize the company’s offerings in each different country market to better match the tastes and preferences of local buyers or whether to offer a mostly standardized product worldwide and (2) whether to employ essentially the same basic competitive strategy in the markets of all countries where it operates or whether to modify the company’s competitive approach country-by- country as may be needed to fi t the specifi c market conditions and competitive circumstances it encounters. There’s also coverage of the special issues of competing in the markets of emerging countries and the strategies that local companies in emerging countries can use to defend against global giants.

Our rather meaty treatment of diversifi cation strategies for multibusiness enterprises in Chapter 8 begins by laying out the various paths for becoming diversifi ed, explains how a company can use diversifi cation to create or compound competitive advantage for its business units, and examines the strategic options an already-diversifi ed company has to improve its overall performance. In the middle part of the chapter, the analytical spotlight is on the techniques and procedures for assessing the strategic attractiveness of a

11Crafting & Executing Strategy 17th Edition

diversifi ed company’s business portfolio—the relative attractiveness of the various businesses the company has diversifi ed into, a multi-industry company’s competitive strength in each of its lines of business, and the strategic fi ts and resource fi ts among a diversifi ed company’s different businesses. The chapter concludes with a brief survey of a company’s four main post-diversifi cation strategy alternatives: (1) broadening the diversifi cation base, (2) divesting some businesses and retrenching to a narrower diversifi cation base, (3) restructuring the makeup of the company’s business lineup, and (4) multinational diversifi cation.

Chapter 9 provides comprehensive coverage of some increasingly pertinent front-burner strategic issues: (1) whether and why a company has a duty to operate according to ethical standards and (2) whether and why a company has a duty or obligation to contribute to the betterment of society independent of the needs and preferences of the customers it serves. Is there a credible business case for operating ethically and/or operating in a socially responsible manner? Why should a company’s strategy measure up to the standards of being environmentally sustainable? The opening section of the chapter addresses whether ethical standards are universal (as maintained by the school of ethical universalism) or dependent on local norms and situational circumstances (as maintained by the school of ethical relativism) or a combination of both (as maintained by integrative social contracts theory). Following this are sections on the three categories of managerial morality (moral, immoral, and amoral), the drivers of unethical strategies and shady business behavior, the approaches to managing a company’s ethical conduct, the concept of a “social responsibility strategy”, the moral and business cases for both ethical strategies and socially responsible behavior, the concept of environmental sustainability, and why every company’s strategy should be crafted in an manner that promotes environmental sustainability. The contents of this chapter will defi nitely give students some things to ponder and, hopefully, will make them far more ethically-aware and conscious of why all companies should conduct their business in a socially responsible and sustainable manner. Chapter 9 has been written as a “stand-alone” chapter that can be assigned in the early, middle, or late part of the course.

The three-chapter module on executing strategy (Chapters 10-12) is anchored around a pragmatic, compelling conceptual framework: (1) building the resource strengths and organizational capabilities needed to execute the strategy in competent fashion; (2) allocating ample resources to strategy-critical activities; (3) ensuring that policies and procedures facilitate rather than impede strategy execution; (4) instituting best practices and pushing for continuous improvement in how value chain activities are performed; (5) installing information and operating systems that enable company personnel to better carry out their strategic roles profi ciently; (6) tying rewards and incentives directly to the achievement of performance targets and good strategy execution; (7) shaping the work environment and corporate culture to fi t the strategy; and (8) exerting the internal leadership needed to drive execution forward.

The recurring theme throughout these three chapters is that implementing and executing strategy entails fi guring out the specifi c actions, behaviors, and conditions that are needed for a smooth strategy-supportive operation and then following through to get things done and deliver results—the goal here is to ensure that students understand the strategy-implementing/strategy-executing phase is a make-things-happen and make- them-happen-right kind of managerial exercise that leads to operating excellence and good performance.

We have done our best to ensure that the 12 chapters hit the bulls-eye in covering the concepts, analytical tools, and approaches to strategic thinking that should comprise a senior/MBA course in strategy. There are new and updated “strategy in action” capsules in each chapter that tie core concepts to real-world management practice and that complement the fresh examples and illustrations in each chapter. There are accompanying videos for the chapters. We’ve provided a host of interesting chapter-end Assurance of Learning Exercises that you can use as a basis for class discussion or written assignments or team presentations used for assessment purposes. In the event you have opted to utilize a strategy simulation as part of your course offering, we have created chapter- end Exercises for Simulation Participants that provide a terrifi c way to tie the chapter coverage to the situational circumstances that confront students in running their simulation company. We are confi dent you’ll fi nd this 12-chapter presentation superior to our prior editions as concerns coverage, readability, and convincing examples. The ultimate test of this or any text, of course, is the positive pedagogical impact it has in the classroom. If this edition sets a more effective stage for your lectures and does a better job of helping you persuade students that the discipline of strategy merits their rapt attention, then it will have fulfi lled its purpose.

Section 1 Instructor Resources, Chapter Features and Case Overview12

THE CASE COLLECTION IN THE 17th EDITION The 26-case line-up in this edition is fl ush with interesting companies and valuable lessons for students in the art and science of crafting and executing strategy.

There’s a good blend of cases from a length perspective—close to a fi fth are under 15 pages, yet offer plenty for students to chew on; about a fourth are medium-length cases; and the remainder are detail-rich cases that call for more sweeping analysis.

At least 21 of the 26 cases involve companies, products, or people that students will have heard of, know about from personal experience, or can easily identify with.

The lineup includes at least 11 cases that will provide students with insight into the special demands of competing in industry environments where technological developments are an everyday event, product life cycles are short, and competitive maneuvering among rivals comes fast and furious.

18 of the cases involve situations where company resources and competitive capabilities play as large a role in the strategy-making, strategy-executing scheme of things as industry and competitive conditions do.

Scattered throughout the lineup are 9 cases concerning non-U.S. companies, globally competitive industries, and/or cross-cultural situations; these cases, in conjunction with the globalized content of the text chapters, provide abundant material for linking the study of strategic management tightly to the ongoing globalization of the world economy.

3 cases deal with the strategic problems of family-owned or relatively small entrepreneurial businesses.

22 cases involve public companies, thus allowing students to do further research on the Internet regarding recent developments at these companies.

9 of the 26 cases (Costco Wholesale, JetBlue Airways, Competition in the Movie Rental Industry, Dell, Panera Bread, Competition in Video Games, Google’s Strategy in 2008, Wal-Mart, and Southwest Airlines) have accompanying videotape segments that can be shown in conjunction with the case discussions.

A grid showing the issues that are prominent in each of the 26 cases in this edition is presented in Table 1.

Suggestions for sequencing the case assignments can be found in Section 3 of this IM. The 11 sample course outlines and daily schedules of class activities in Section 4 provide further suggestions about the sequencing of case assignments and how to integrate your coverage of the 12 chapters, the various case assignments, and use of a strategy simulation.

Specifi c details about how to utilize each case (including recommended assignment questions and recommended oral team presentation assignments are contained in the teaching notes for each of the cases (the TNs appear in Section 7).

Sample course syllabi displaying possible case sequencing and suggested case assignments are presented in Section 4 of this volume of the IM.

It is worth mentioning at this juncture that there is a comprehensive table of fi nancial ratios in Chapter 4 that provides the formulas and brief explanations of what each ratio reveals. Adopters of prior editions have told us that students fi nd this table extremely helpful in guiding their analyses of the fi nancial statements contained in the cases. You will probably want to call this table to the attention of class members and urge that they make full use of the information it contains.

We believe you will fi nd the collection of 26 cases quite appealing, eminently teachable, and very suitable for drilling students in the use of the concepts and analytical treatments in Chapters 1 through 12. With this case lineup, you should have no diffi culty whatsoever assigning cases that will capture the interest of students from start to fi nish.

13Crafting & Executing Strategy 17th Edition

Table 1 A Quick Profi le of the Cases in the 17th Edition of Crafting and Executing Strategy

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Case 1 Whole Foods Market in 2008– Vision, Core Values, and Strategy N M X X X X X X X X X X X X X X

Case 2 Costco Wholesale Corp. in 2008– Mission, Business Model, and Strategy Y L X X X X X X X X X X X X X X

Case 3 JetBlue Airways: A Cadre of New Managers Takes Control Y L X X X X X X X X X X

Case 4 Competition in the Golf Equipment Industry in 2008 N L X X X X X X

Case 5 Competition in the Movie Rental Industry in 2008: Netflix and Block- buster Battle for Market Leadership

Y L X X X X X X X

Case 6 Dell, Inc. in 2008–Can It Overtake Hewlett-Packard as the Worldwide Leader in Personal Computers?

Y L X X X X X X X X X X X X

Case 7 Apple, Inc. in 2008 N L X X X X X X X X X X X

Case 8 Panera Bread Company Y M X X X X X X X X

Case 9 Rogers’ Chocolates N S X X X X X X X X

Case 10 Nucor Corp.–Competing Against Low Cost Foreign Imports N L X X X X X X X X X X X X X X

Case 11 Competition in Video Game Consoles: The State of the Battle for Supremacy in 2008

Y L X X X X X X X

Case 12 Nintendo’s Strategy for the Wii–Good Enough to Beat Xbox 360 and PlayStation 3?

N L X X X X X X X X X

Case 13 Corona Beer N L X X X X X X X

Case 14 Google’s Strategy in 2008 Y L X X X X X X X X X X X

Case 15 The Challenges Facing eBay in 2008–Time for Changes in Strategy? N L X X X X X X X X X X X

Case 16 Loblaw Companies Limited: Preparing for Wal-Mart Supercenters N L X X X X X X X X X X

Case 17 Research in Motion: Managing Explosive Growth N L X X X X X X X

Case 18 Adidas in 2008: Has Corporate Restruc- turing Increased Shareholder Value? N L X X X X X X

Case 19 PepsiCo’s Diversification Strategy in 2008 N L X X X X X X

Case 20 Robin Hood N X X X X X X X X X

Case 21 Dilemma at Devil’s Den N S X X X X X X

Case 22 Wal-Mart Stores, Inc. in 2008– Manage- ment’s Initiatives to Transform the Company and Curtail Wal-Mart Bashing

Y L X X X X X X X X X X X X X X X X

Case 23 Southwest Airlines in 2008: Culture, Values, and Operating Practices Y L X X X X X X X X X X X X X X

Case 24 Shangri-La Hotels N L X X X X X X X X X X X

Case 25 E & J Gallo N L X X X X X X X

Case 26 Detecting Unethical Practices at Supplier Factories: The Monitoring and Remediation Challenges

N X X X X X X

Section 1 Instructor Resources, Chapter Features and Case Overview14

VALUE-ADDING STUDENT SUPPORT MATERIALS FOR THE 17th EDITION OF CRAFTING & EXECUTING STRATEGY The text and text website include several kinds of support materials to help students grasp the material.

Key Points Summaries At the end of each chapter is a synopsis of the core concepts, analytical tools and other key points discussed in the chapter. These chapter-end synopses help students focus on basic strategy principles, digest the messages of each chapter, and prepare for tests.

Online Learning Center (OLC) The following helpful aids are available to students via the publisher’s OLC at www.mhhe.com/thompson:

 Self-Graded Chapter Quizzes The OLC contains 20-question quizzes for each chapter to allow students to measure their grasp of the material presented in each of the 12 chapters.

Guide to Case Analysis This brief guide—designed especially for students unfamiliar with the case method of teaching/learning—explains what a case is, why cases are a standard part of courses in strategy, how to prepare for a class discussion of a case, how to prepare a written case analysis, what is expected in an oral presentation, and the fi nancial ratio calculations that are used to assess a company’s fi nancial condition. We suggest having students read this Guide prior to the fi rst class discussion of a case.

 Study Questions for Assigned Cases A set of PDF fi les containing study questions for each of the 26 cases in this edition are posted; the ready accessibility of these fi les to class members eliminates the need for you to provide study questions for assigned cases. The study questions provided to students match those appearing in the teaching notes for these cases.

Accompanying Case Videos Some of the brief video segments that accompany cases are available on the student portion of the textbook website.

 PowerPoint Slides There is a selection of PowerPoint slides for each of the 12 chapters.

The Business Strategy Game and GLO-BUS Online Simulations Using one of the two companion strategy simulations is a powerful and constructive way of emotionally connecting students to the subject matter of the course. We know of no more effective and interesting way to stimulate the competitive energy of students and prepare them for the rigors of real-world business decision-making than to have them match strategic wits with classmates in running a company in head-to-head competition for global market leadership.

In Section 2 of this IM, we outline why using a competition-based strategy simulation as a course centerpiece makes great sense and provide you with detailed suggestions for successfully incorporating either The Business Strategy Game or GLO-BUS in your strategic management course.

Should you decide to incorporate use one of the two simulations in your course, the simplest (and usually the cheapest) way for students to obtain the simulation is via a credit card purchase at www.bsg-online.com (if you opt to use The Business Strategy Game) or at www.glo-bus.com (if you opt to use GLO-BUS). Purchasing the simulation direct at the web site allows students to bypass paying sometimes hefty bookstore markups (a savings that can amount to $10-$15). The second way for students to register for the simulation is by using a pre-paid access code that comes bundled with the 16th Edition when you order the text-simulation package through your bookstore—this requires use of a separate ISBN (the 17th Edition bundled with either simulation has a different ISBN number than just the 17th Edition ordered alone. Your McGraw-Hill rep can provide you with the correct ISBN for ordering the combination text-simulation package through your bookstore(s).

2section Using a Strategy

Simulation in Your Course: The Compelling

Benefi ts, What’s Involved, and

How to Proceed

Section 2 Using a Strategy Simulation in Your Course16

The Business Strategy Game and GLO-BUS: Developing Winning Competitive Strategies—two competition- based strategy simulations that are delivered online and that feature automated processing of decisions and grading of performance—are being marketed by the publisher as companion supplements for use with the 17th edition of Crafting and Executing Strategy. The Business Strategy Game is the world’s all-time leading strategy simulation, having been played by 500,000+ undergraduate and MBA students at 600+ universities across the world. GLO-BUS, introduced in 2004, has been used at more than 150 universities worldwide in courses involving over 50,000 students.

Both simulations are very tightly linked to the material that your class members will be reading about in the text chapters—the senior author of this text is a co-author of both The Business Strategy Game and GLO-BUS and deliberately designed both simulations as a means for giving class members an immediate opportunity to apply the chapter content to a company they are running and a market environment where their company is competing. Furthermore, there are “Exercises for Simulation Participants” at the end of each text chapter that give you an additional way for class members to practice using specifi c concepts and tools of strategic analysis to assess their company’s situation and demonstrate the practical relevance of the chapter content.

Moreover, both simulations were painstakingly developed with an eye towards economizing on instructor course preparation time and grading. You’ll be pleasantly surprised—and we think quite pleased—at how little time it takes to gear up for and to administer a fully automated online simulation like The Business Strategy Game or GLO-BUS.

In both The Business Strategy Game (BSG) and GLO-BUS, class members are divided into management teams of 1 to 5 persons and assigned to run a company in head-to-head competition against companies run by other class members. In BSG, the co-managers of each team run an athletic footwear company, producing and marketing both branded and private-label footwear. In GLO-BUS, the co-managers of each team operate a digital camera company that designs, assembles, and markets entry-level digital cameras and upscale, multi-featured cameras. In both simulations, companies compete in a global market arena, selling their products in four geographic regions—Europe-Africa, North America, Asia-Pacifi c, and Latin America. There are decisions relating to plant operations, workforce compensation, pricing and marketing, social responsibility/citizenship, and fi nance.

You can schedule 1 or 2 practice rounds and 4 to 10 regular (scored) decision rounds; each decision round represents a year of company operations. When the instructor-specifi ed deadline for a decision round arrives, the algorithms built into the simulation award sales and market shares to the competing companies, region by region. Each company’s sales are totally governed by how its prices compare against the prices of rival brands, how its product quality compares against the quality of rival brands, how its product line breadth and selection compares, how its advertising effort compares, and so on for a total of 11 competitive factors that determine unit sales and market shares. The competitiveness of each company’s product offering relative to rivals is all- decisive—this is what makes them “competition-based” strategy simulations. Once sales and market shares are awarded, the company and industry reports are then generated and all the results made available 15-20 minutes after the decision deadline.

This remainder of this section provides you with information about the two strategy simulation supplements for your course and suggestions for using them successfully. Here is a quick reference guide to the contents of this section:

Page The Compelling Case for Using a Strategy Simulation in Your Course . . . . . . . . . . . . . . . . . . . . . 17 How Much Time Will It Take for You to Learn About and Conduct a Simulation . . . . . . . . . . . 19 A Birdseye View of The Business Strategy Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 A Birdseye View of GLO-BUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Special Features and Extras of Both Strategy Simulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Which Simulation Makes the Most Sense for Your Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Course Setup: A Quick, 5-Step Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 How Do Class Members Register and Gain Full Access to the Simulation Website? . . . . . . . . . . 31 How Much Should a Simulation Exercise Count in the Total Course Grade?. . . . . . . . . . . . . . . . 33 How Company Performances Are Scored: A Balanced Scorecard Approach . . . . . . . . . . . . . . . . 33 What to Do If You Opt to Use Either of the Companion Simulations . . . . . . . . . . . . . . . . . . . . . . . 35

17Crafting & Executing Strategy 17th Edition

THE COMPELLING CASE FOR USING A STRATEGY SIMULATION IN YOUR COURSE

There are four exceptionally important benefi ts associated with using a competition-based simulation in strategy courses taken by seniors and MBA students:

1. Having class members run a company in head-to-head competition against companies managed by other class members results in a truly powerful learning experience that engages students in the subject matter of the course and helps achieve course learning objectives. (The Learning Assurance Report accompanying The Business Strategy Game and GLO-BUS quantifi es how well each class member performs on 9 skills/ learning measures versus tens of thousands of students worldwide that have completed the simulation in the past 12 months.)

 Using both case analysis and a competition-based strategy simulation to drive home the lessons that class members are expected to learn is far more pedagogically powerful and lasting than case analysis alone. Both cases and strategy simulations drill students in thinking strategically and applying what they read in your text, thus helping them connect theory with practice and gradually building better business judgment. What cases do that a simulation cannot is give class members broad exposure to a variety of companies and industry situations and insight into the kinds of strategy-related problems managers face. But what a competition-based strategy simulation does far better than case analysis is thrust class members squarely into an active managerial role where they have to take the analysis of market conditions, the actions of competitors, and their company’s situation seriously. Because they are held fully accountable for their decisions and their company’s performance, co-managers are strongly motivated to dig deeply into company operations, probe for ways to be more cost-effi cient, and ferret out strategic moves and decisions calculated to boost company performance. Such diligent and purposeful actions on the part of company co-managers translate into a productive experience with strong retention of the lessons learned.

 The achievement of course learning objectives is further enhanced because of the extremely tight connection between The Business Strategy Game or GLO-BUS and the most popular strategic management texts. The issues and decisions that co-managers face in running their simulation company embrace the very concepts, analytical tools, and strategy options they encounter in the text chapters; moreover, you will fi nd that the “Exercises for Simulation Participants” that appear at the end of each of the 12 text chapters in the 17th edition are exceptionally appropriate and effective for having class members apply the content of the chapters to the circumstances of running their simulation company. Giving class members immediate “learn-by-doing” opportunity to apply and experiment with the material covered in their text, while at the same time honing their business and decision-making skills, generates solid learning results.

 Since it doesn’t take long for a spirited rivalry to emerge among the management teams of competing companies and for co-managers to become emotionally invested in fi guring out what strategic moves to make to out-compete rivals, class members become more receptive to reading the text chapters, listening to your lectures, and wrestling with assigned cases—partly in the hope they will come across ideas and approaches that will help their company outperform rivals and partly because they begin to see the practical relevance of the subject matter and the value of taking the course. As a consequence, the three- pronged text-case-simulation course model delivers signifi cantly more teaching-learning power than the traditional text-case model.

2. The competitive nature of a strategy simulation arouses positive energy and classroom excitement and steps up the whole tempo of the course by a notch or two.

 The healthy rivalry that emerges among the management teams of competing companies stirs competitive juices and spurs class members to fully exercise their strategic wits, analytical skills, and decision-making prowess—much more so than occurs with case assignments. Nothing energizes a class quicker or better

Section 2 Using a Strategy Simulation in Your Course18

than concerted efforts on the part of class members to gain a high industry ranking and avoid the perilous consequences of falling too far behind the best-performing companies. It is hard to duplicate the steady interest and excitement that occurs when the results of the latest decision round become available and co-managers renew their quest for strategic moves and actions that will strengthen company performance.

 Participating in a competition-based strategy simulation is a stimulating and enjoyable way to learn. As soon as your students start to say “Wow! Not only is this fun but I am learning a lot”, which they will, you have won the battle of engaging students in the subject matter and moved the value of taking your course to a much higher plateau in the business school curriculum. This translates into a livelier, richer learning experience from a student perspective and better instructor-course evaluations.

3. Use of a fully automated online simulation reduces the time instructors spend on course preparation and course administration.

 Since the simulation exercise involves a 20 to 30-hour workload for student-teams (roughly 2 hours per decision round times 10-12 rounds, plus optional assignments), simulation adopters often compensate by trimming the number of assigned cases from, say, 10 to 12 to perhaps 4 to 6, which signifi cantly reduces the time instructors spend reading cases, studying teaching notes, and otherwise getting ready to lead class discussion of a case or grade oral team presentations. The cases-for-simulation tradeoff is a sound one because class members will learn as much or more from their experience managing their simulation company and retain it longer, as compared to the learning gleaned from covering 4 to 6 more cases.

 Course preparation time is further cut because you can use several class days to have students meet in the computer lab to work on upcoming decisions or a 3-year strategic plan (in lieu of lecturing on a chapter or covering an additional assigned case). Lab sessions provide a splendid opportunity for you to visit with teams, observe the interplay among co-managers, and view the caliber of the learning experience that is going on.

 The speed and ease with which you can conduct a fully-automated strategy simulation for your course frees time for other activities. Plus, every task can be performed from an offi ce or home PC that has an Internet connection and an Internet browser and is loaded with Microsoft Excel (versions 2000, XP, 2003, 2007, or 2009).