Case Analysis
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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.
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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.
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Connect’s assignments help students contextualize what they’ve learned through application, so they can better understand the material and think critically.
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www.mheducation.com/connect
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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.
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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?
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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.
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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.