Management Question

‫المملكة العربية السعودية‬
‫وزارة التعليم‬
‫الجامعة السعودية اإللكترونية‬
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment 1
Strategic Management (MGT 401)
Due Date: 05/10/2024 @ 23:59
Course Name: Strategic Management
Student’s Name:
Course Code: MGT 401
Student’s ID Number:
Semester: First
CRN:
Academic Year:2024-25-1st
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
Marks Obtained/Out of 10
Level of Marks: High/Middle/Low
General Instructions – PLEASE READ THEM CAREFULLY
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The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be reduced
for poor presentation. This includes filling your information on the cover page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.
Learning Outcomes:
CLO1- Recognize the basic concepts and terminology used in Strategic Management.
CLO2-Describe the different issues related to environmental scanning, strategy formulation, and
strategy implementation in diversified organizations
CLO5-Demonstrate how executive leadership is an important part of strategic management .
Assignment Question(s): (2.5 marks for each question)
1. Why is strategic management important for a corporation’s competitive advantage?
2. How does strategic management typically evolve in a corporation? Give examples
3. Why does a corporation need a board of directors? What is the relationship between
corporate governance and social responsibility? Give examples from the actual
market.
4. Choose any corporation from the Saudi market and discuss the forces driving its
industry competition (review chapter 4-slide 18).
Notes:
– Your answers MUST include at least four scholarly peer-reviewed references, using a proper
referencing style (APA). Remember that these scholarly references can be found in the Saudi
Digital Library (SDL).
– Make sure to support your statements with logic and argument, citing all sources referenced.
Answers
1. Answer-
2. Answer-
3. Answer-
4. Answer-
CH A PTER 4   Environmental Scanning and Industry Analysis
139
teams work with key people from the sales and market research departments to
research and write a “competitive activity report” each quarter on each of the product categories in which P&G competes. People in purchasing also write similar
reports concerning new developments in the industries that supply P&G. These
and other reports are then summarized and transmitted up the corporate hierarchy
for top management to use in strategic decision making. If a new development
is reported regarding a particular product category, top management may then
send memos asking people throughout the organization to watch for and report on
developments in related product areas. The many reports resulting from these scanning efforts, when boiled down to their essentials, act as a detailed list of external
strategic factors.
Identifying External Strategic Factors
The origin of competitive advantage lies in the ability to identify and respond to environmental change well in advance of competition.52 Although this seems obvious,
why are some companies better able to adapt than others? One reason is because of
differences in the ability of managers to recognize and understand external strategic
issues and factors. Booz & Company found that companies that are most successful at
avoiding surprises had a well-defined system that integrated planning, budgeting, and
business reviews.53
No firm can successfully monitor all external factors. Choices must be made regarding which factors are important and which are not. Even though managers agree that
strategic importance determines what variables are consistently tracked, they sometimes
miss or choose to ignore crucial new developments.54 Personal values and functional
experiences of a corporation’s managers, as well as the success of current strategies,
are likely to bias both their perception of what is important to monitor in the external
environment and their interpretations of what they perceive.55
This willingness to reject unfamiliar as well as negative information is called ­strategic
myopia.56 If a firm needs to change its strategy, it might not be gathering the appropriate external information to change strategies successfully. For example, when Daniel
Hesse became CEO of Sprint Nextel in December 2007, he assumed that improving
customer service would be one of his biggest challenges. He quickly discovered that
none of the current Sprint Nextel executives were even thinking about the topic. “We
weren’t talking about the customer when I first joined,” said Hesse. “Now this is the
No. 1 priority of the company.”57
Hesse insists that “great customer service costs less—when we were last in the
industry, we were spending twice as much.” By 2012, Sprint had closed down 29 call
centers and was answering calls faster than ever. The second quarter of 2012 saw Sprint
receiving the fewest calls ever from customers.58
Industry Analysis: Analyzing the Task Environment
4-3. Conduct an industry analysis to explain
the competitive forces
that influence the
intensity of rivalry
within an industry
M04B_WHEE5488_15_GE_C04.indd 139
An industry is a group of firms that produces a similar product or service, such as soft
drinks or financial services. An examination of the important stakeholder groups, like
suppliers and customers, in a particular corporation’s task environment is a part of
industry analysis.
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140
PART 2    Scanning the Environment
Porter’s Approach to Industry Analysis
Michael Porter, an authority on competitive strategy, contends that a corporation is
most concerned with the intensity of competition within its industry. The level of this
intensity is determined by basic competitive forces, as depicted in Figure 4–2. “The
collective strength of these forces,” he contends, “determines the ultimate profit
potential in the industry, where profit potential is measured in terms of long-run
return on invested capital.”59 In carefully scanning its industry, a corporation must
assess the importance to its success of each of six forces: threat of new entrants,
rivalry among existing firms, threat of substitute products or services, bargaining
power of buyers, bargaining power of suppliers, and relative power of other stakeholders.60 The stronger each of these forces is, the more limited companies are in their
ability to raise prices and earn greater profits. Although Porter mentions only five
forces, a sixth—other stakeholders—is added here to reflect the power that governments, local communities, and other groups from the task environment wield over
industry activities.
Using the model in Figure 4–2, a high force can be regarded as a threat because
it is likely to reduce profits. A low force, in contrast, can be viewed as an opportunity
because it may allow the company to earn greater profits. In the short run, these forces
act as constraints on a company’s activities. In the long run, however, it may be possible
for a company, through its choice of strategy, to change the strength of one or more of
the forces to the company’s advantage. For example, Dell’s early use of the Internet to
market its computers was an effective way to negate the bargaining power of distributors in the PC industry.
A strategist can analyze any industry by rating each competitive force as high,
medium, or low in strength. For example, the global athletic shoe industry could be
rated as follows: rivalry is high (Nike, Reebok, New Balance, Converse, and Adidas
are strong competitors worldwide), threat of potential entrants is high (the industry has
seen clothing firms such as UnderArmour and Fila as well as specialty shoe brands like
the wildly popular Vibram Five Fingers shoes), threat of substitutes is low (other shoes
FIGURE 4–2
Forces ­Driving
Industry
Competition
3
2
1
M04B_WHEE5488_15_GE_C04.indd 140
Leverage
of
suppliers
Competition
among
existing
companies
Superior or
lower-cost
substitute
products
4
Openness to
new
competitors
5
Profit
Potential of
Industry
Buyers’
influence
6/20/17 8:39 AM
CH A PTER 4   Environmental Scanning and Industry Analysis
141
don’t provide support for sports activities), bargaining power of suppliers is medium
but rising (suppliers in Asian countries are increasing in size and ability), bargaining
power of buyers is medium but increasing (prices are falling as the low-priced shoe
market has grown to be half of the U.S.-branded athletic shoe market), and threat of
other stakeholders is medium to high (government regulations and human rights concerns are growing). Based on current trends in each of these competitive forces, the
industry’s level of competitive intensity will continue to be high—meaning that sales
increases and profit margins should continue to be modest for the industry as a whole.61
Threat of New Entrants
New entrants to an industry typically bring to it new capacity, a desire to gain market
share, and potentially substantial resources. They are, therefore, threats to an established corporation. The threat of entry depends on the presence of entry barriers and
the reaction that can be expected from existing competitors. An entry barrier is an
obstruction that makes it difficult for a company to enter an industry. For example, no
new, full-line domestic automobile companies have been successfully established in
the United States since the 1930s (although Tesla is now growing its line of vehicles)
because of the high capital requirements to build production facilities and to develop a
dealer distribution network. Some of the possible barriers to entry are:
Economies of scale: Scale economies in the production and sale of microprocessors,
for example, gave Intel a significant cost advantage over any new rival.
■■ Product differentiation: Corporations such as Procter & Gamble and General Mills,
which manufacture products such as Tide and Cheerios, create high entry barriers
through their high levels of advertising and promotion.
■■ Capital requirements: The need to invest huge financial resources in manufacturing
facilities in order to produce large commercial airplanes creates a significant barrier
to entry to any competitor for Boeing and Airbus.
■■ Switching costs: Once a software program such as Excel or Word becomes established in an office, office managers are very reluctant to switch to a new program
because of the high training costs.
■■ Access to distribution channels: Smaller new firms often have difficulty obtaining
supermarket shelf space for their goods because large retailers charge for space on
their shelves and give priority to the established firms who can pay for the advertising needed to generate high customer demand.
■■ Cost disadvantages independent of size: Once a new product earns sufficient market share to be accepted as the standard for that type of product, the maker has
a key advantage. Microsoft’s development of the first widely adopted operating
system (MS-DOS) for the IBM-type personal computer gave it a significant competitive advantage over potential competitors. Its introduction of Windows helped
to cement that advantage so that the Microsoft operating system is now on more
than 90% of personal computers worldwide.
■■ Government policy: Governments can limit entry into an industry through licensing requirements by restricting access to raw materials, such as oil-drilling sites in
protected areas.
■■
Rivalry among Existing Firms
In most industries, corporations are mutually dependent. A competitive move by
one firm can be expected to have a noticeable effect on its competitors and thus
M04B_WHEE5488_15_GE_C04.indd 141
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PART 2    Scanning the Environment
may cause retaliation. For example, the successful entry by companies such as Samsung and Amazon and unsuccessful entries by HP and RIM into a tablet industry
previously dominated by Apple changed the level of competitive activity to such an
extent that each new product change was quickly followed by similar moves from
other tablet makers. The same is true of prices in the United States airline industry.
According to Porter, intense rivalry is related to the presence of several factors,
including:
Number of competitors: When competitors are few and roughly equal in size, such
as in the auto and major home appliance industries, they watch each other carefully
to make sure they match any move by another firm with an equal countermove.
■■ Rate of industry growth: Any slowing in passenger traffic tends to set off price wars
in the airline industry because the only path to growth is to take sales away from
a competitor.
■■ Product or service characteristics: A product can be very unique, with many qualities differentiating it from others of its kind, or it may be a commodity, a product
whose characteristics are the same, regardless of who sells it. For example, most
people choose a gas station based on location and pricing because they view gasoline as a commodity.
■■ Amount of fixed costs: Because airlines must fly their planes on a schedule, regardless of the number of paying passengers for any one flight, some offer cheap standby
fares whenever a plane has empty seats.
■■ Capacity: If the only way a manufacturer can increase capacity is in a large increment by building a new plant (as in the paper industry), it will run that new plant at
full capacity to keep its unit costs as low as possible—thus producing so much that
the selling price falls throughout the industry.
■■ Height of exit barriers: Exit barriers keep a company from leaving an industry. The
brewing industry, for example, has a low percentage of companies that voluntarily
leave the industry because breweries are specialized assets with few uses except for
making beer.
■■ Diversity of rivals: Rivals that have very different ideas of how to compete are likely
to cross paths often and unknowingly challenge each other’s position. This happens
frequently in the retail clothing industry when a number of retailers open outlets
in the same location—thus taking sales away from each other. This is also likely to
happen in some countries or regions when multinational corporations compete in
an increasingly global economy.
■■
Threat of Substitute Products or Services
A substitute product is a product that appears to be different but can satisfy the same
need as another product. For example, texting is a substitute for e-mail, Stevia is a
substitute for sugar, the Internet is a substitute for video stores, and bottled water is a
substitute for a cola. Effective substitutes are a limiting factor for companies. To the
extent that switching costs are low, substitutes may have a strong effect on an industry. Tea can be considered a substitute for coffee. If the price of coffee goes up high
enough, coffee drinkers will slowly begin switching to tea. The price of tea thus puts a
price ceiling on the price of coffee. Sometimes a difficult task, the identification of possible substitute products or services means searching for products or services that can
perform the same function, even though they have a different appearance and may not
appear to be easily substitutable.
M04B_WHEE5488_15_GE_C04.indd 142
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CH A PTER 4   Environmental Scanning and Industry Analysis
143
The Bargaining Power of Buyers
Buyers affect an industry through their ability to force down prices, bargain for higher
quality or more services, and play competitors against each other. A buyer or a group
of buyers is powerful if some of the following factors hold true:
A buyer purchases a large proportion of the seller’s product or service (for example,
oil filters purchased by a major automaker).
■■ A buyer has the potential to integrate backward by producing the product itself (for
example, a newspaper chain could make its own paper).
■■ Alternative suppliers are plentiful because the product is standard or undifferentiated (for example, motorists can choose among many gas stations).
■■ Changing suppliers costs very little (for example, office supplies are easy to find).
■■ The purchased product represents a high percentage of a buyer’s costs, thus providing an incentive to shop around for a lower price (for example, gasoline purchased
for resale by convenience stores makes up half their total costs).
■■ A buyer earns low profits and is thus very sensitive to costs and service differences
(for example, grocery stores have very small margins).
■■ The purchased product is unimportant to the final quality or price of a buyer’s
products or services and thus can be easily substituted without affecting the final
product adversely (for example, electric wire bought for use in lamps).
■■
The Bargaining Power of Suppliers
Suppliers can affect an industry through their ability to raise prices or reduce the quality of purchased goods and services. A supplier or supplier group is powerful if some
of the following factors apply:
The supplier industry is dominated by a few companies, but it sells to many (for
example, the petroleum industry).
■■ Its product or service is unique and/or it has built up switching costs (for example,
word processing software).
■■ Substitutes are not readily available (for example, electricity).
■■ Suppliers are able to integrate forward and compete directly with their present
customers for example, a microprocessor producer such as Intel can make PCs).
■■ A purchasing industry buys only a small portion of the supplier group’s goods and
services and is thus unimportant to the supplier (for example, sales of lawn mower
tires are less important to the tire industry than are sales of auto tires).
■■
The Relative Power of Other Stakeholders
A sixth force should be added to Porter’s list to include a variety of stakeholder groups
from the task environment. Some of these groups are governments (if not explicitly
included elsewhere), local communities, creditors (if not included with suppliers), trade
associations, special-interest groups, unions (if not included with suppliers), shareholders, and complementors. According to Andy Grove, Chairman and past CEO of Intel, a
complementor is a company (e.g., Microsoft) or an industry whose product works well with
a firm’s (e.g., Intel’s) product and without which the product would lose much of its value.62
The importance of these stakeholders varies by industry. For example, environmental groups in Maine, Michigan, Oregon, and Iowa successfully fought to pass bills
outlawing disposable bottles and cans, and thus deposits for most drink containers are
M04B_WHEE5488_15_GE_C04.indd 143
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PART 2    Scanning the Environment
now required. This effectively raised costs across the board, with the most impact on
the marginal producers who could not internally absorb all these costs. The traditionally strong power of national unions in the United States’ auto and railroad industries
has effectively raised costs throughout these industries but is of little importance in
computer software.
Industry Evolution
4-4. Discuss how
industry maturity
affects industry
­competitive forces
Over time, most industries evolve through a series of stages from growth through maturity to eventual decline. The strength of each of the six forces mentioned earlier varies according to the stage of industry evolution. The industry life cycle is useful for
explaining and evaluating trends among the six forces that drive industry competition.
For example, when an industry is new, people might buy the product, regardless of
price, because it uniquely fulfills an existing need. This usually occurs in a fragmented
­industry—where no firm has a large market share, and each firm serves only a small
piece of the total market in competition with others (for example, cleaning services).63
As new competitors enter the industry, prices drop as a result of competition. Companies use the experience curve(discussed in Chapter 5) and economies of scale to reduce
costs faster than the competition. Companies integrate to reduce costs even further
sometimes by acquiring their suppliers and distributors. Competitors try to differentiate
their products from one another’s in order to avoid the fierce price competition common to a maturing industry.
By the time an industry enters maturity, products tend to become more like commodities. This is now a consolidated industry—dominated by a few large firms, each of
which struggles to differentiate its products from those of the competition. As buyers
become more sophisticated over time, purchasing decisions are based on better information. Price becomes a dominant concern, given a minimum level of quality and features, and profit margins decline. The automobile, petroleum, and major home appliance
industries are examples of mature, consolidated industries, each controlled by a few large
competitors. In the case of the United States’ major home appliance industry, the industry changed from being a fragmented industry (pure competition) composed of hundreds of appliance manufacturers in the industry’s early years to a consolidated industry
(mature oligopoly) composed of three companies controlling over 90% of U.S. appliance
sales. A similar consolidation is occurring now in European major home appliances.
As an industry moves through maturity toward possible decline, its products’ growth
rate of sales slows and may even begin to decrease. To the extent that exit barriers are
low, firms begin converting their facilities to alternate uses or sell them to other firms.
The industry tends to consolidate around fewer but larger competitors. The tobacco
industry is an example of an industry currently that appeared to be in decline just a few
years ago but has been re-born with the advent of e-cigarettes.
Categorizing International Industries
4-5. Categorize
international industries based on their
pressures for coordination and local
responsiveness
M04B_WHEE5488_15_GE_C04.indd 144
According to Porter, worldwide industries vary on a continuum from multidomestic
to global (see Figure 4–3).64 Multidomestic industries are specific to each country
or group of countries. This type of international industry is a collection of essentially domestic industries, such as retailing and insurance. The activities in a subsidiary of a multinational corporation (MNC) in this type of industry are essentially
6/20/17 8:39 AM
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Strategic
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FIFTEENTH EDITION
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GLOBALIZATION, INNOVATION,
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Thomas L. Wheelen
J. David Hunger
Alan N. Hoffman
Charles E. Bamford
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Dedicated to
TOM WHEELEN AND DAVID HUNGER
Tom originated this book in the late 1970s and with his friend David Hunger brought the first
edition to fruition in 1982. What a ride it was! We lost both of these extraordinary men in rapid
succession. After battling bone cancer, Tom died in Saint Petersburg, Florida, on December 24,
2011. David died in St. Joseph, Minnesota on April 10, 2014 after fighting cancer himself. It was
Tom’s idea from the very beginning to include the latest research and useful material written in
such a way that the typical student could read and understand the book without outside assistance.
That has been a key reason for the success of the book through its many editions. Tom and ­David
worked in adjoining offices at the McIntire School of Commerce at the University of Virginia
where their lifelong collaboration blossomed. Tom’s last months were spent working with the two
new co-authors to map out the direction for the 14th edition and we were fortunate to work with
David through the early part of the 14th edition update until his fight against his cancer took priority. We thank you both and bid you a fond farewell! This 15th edition is for you!
Alan N. Hoffman
Charles E. Bamford
SPECIAL DEDICATION TO DAVID HUNGER
A special dedication in honor of David Hunger to his colleagues, friends, and students—
It is our hope and prayer that you found, and continue to find, some joy in your study of S
­ trategic
Management and Business Policy and, perhaps, experience a sense of the passion behind the
subject matter presented in this textbook. It was originated by two men who were the best of
friends and colleagues, Dr. Tom Wheelen (May 30, 1935 – December 24, 2011) and our Dad,
Dr. J. ­David Hunger (May 17, 1941 – April 10, 2014). This will be the first edition we will see
­without a handwritten note in the front and a dedication to us all. Dad came alive discussing
­strategy, case management, theory, entrepreneurship, and the daily happenings in the field of
management. Even relaxing at the end of the day, he could be found thumbing through a Business
Week or ­journal. Colleagues always knew when he was in their presentations because he was fully
engaged, ­offering questions and happy to share in an animated dialogue. Students speak fondly
of ­being in his class. His dedication to the field never ended. Even up to a month before he died
(still ­undergoing ­chemotherapy) he insisted on travelling by train from Minnesota to Chicago for a
Case ­Research ­Conference to run a panel. We are so proud and thankful that Drs. Alan Hoffman
and Chuck Bamford knew Tom and Dad and are carrying the torch forward. As his 4 daughters
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4
Dedicated
and 6 grandchildren, we miss him daily. We lost him far too soon. Finally, our mom, Betty
­Hunger, who lived with the authorship of this textbook for three quarters of their 45 years together
and joked that it was their 5th child, wishes to express just how much she misses Dad and looks
­forward to seeing him again.
Betty, Kari and Jeff, Madison and Megan, Suzi and Nick, Summer and Kacey,
Lori and Derek, Merry and Dylan, and Edan and Greyson.
We love you David/Dad/GrandDad.
To Will Hoffman, the greatest son in the world…. and to our saint Wendy Appel.
…. and to Jodi L. Silton, thank you for your kindness and understanding.
Alan Hoffman
To Yvonne, for your support, advice, encouragement, love, and confidence. To my children Ada,
Rob, and Sean and my grandchildren Silas, Isaac, and Clara.
Chuck Bamford
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Brief Contents
part ONE Introduction to Strategic Management and Business Policy 33
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2
3
Basic Concepts of Strategic Management 34
Corporate Governance 72
Social Responsibility and Ethics in Strategic Management 102
part TWO Scanning the Environment 123
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Environmental Scanning and Industry Analysis 124
Organizational Analysis and Competitive Advantage 164
part THREE Strategy Formulation 199
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Strategy Formulation: Business Strategy 200
Strategy Formulation: Corporate Strategy 224
Strategy Formulation: Functional Strategy and Strategic Choice 250
part FOUR Strategy Implementation and Control 279
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Strategy Implementation: Global Strategy 280
Strategy Implementation: Organizing and Structure 294
Strategy Implementation: Staffing and Directing 324
Evaluation and Control 348
part FIVE Introduction to Case Analysis 377
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Suggestions for Case Analysis 378
Part Six Cases in Strategic Management 1-1
GLOSSARY G-1
NAME INDEX  I-1
SUBJECT INDEX  I-6
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Preface 21
About the Authors 29
PART ONE
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Introduction to Strategic Management and Business Policy 33
Basic Concepts of Strategic Management 34
The Study of Strategic Management
37
Phases of Strategic Management
37
Benefits of Strategic Management
38
Globalization, Innovation, and Sustainability: Challenges to Strategic
Management 39
Impact of Globalization
Impact of Innovation
40
41
Global Issue: ASEAN: REGIONAL TRADE ASSOCIATIONS 42
Impact of Sustainability
42
Theories of Organizational Adaptation
Creating a Learning Organization
44
Basic Model of Strategic Management
Environmental Scanning
Strategy Formulation
44
46
46
48
Strategy Implementation
52
Evaluation and Control
53
Feedback/Learning Process
54
Initiation of Strategy: Triggering Events
Strategic Decision Making
54
55
What Makes a Decision Strategic?
55
Mintzberg’s Modes of Strategic Decision Making
56
Strategic Decision-Making Process: Aid to Better Decisions
The Strategic Audit: Aid to Strategic Decision Making
End of Chapter Summary
57
58
59
Appendix 1.A Strategic Audit of a Corporation
64
6
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Corporate Governance 72
Role of the Board of Directors
75
Responsibilities of the Board
76
Board of Directors Composition
79
Innovation Issue: Jcpenney And Innovation  80
Strategy Highlight: Agency Theory Versus Stewardship Theory
In Corporate Governance  81
Nomination and Election of Board Members
Organization of the Board
85
86
Impact of Sarbanes–Oxley on U.S. Corporate Governance
87
Global Issue: Global Business Board Activism At Yahoo! 88
Improving Governance
89
Evaluating Governance
89
Avoiding Governance Improvements
Trends in Corporate Governance
The Role of Top Management
90
90
91
Responsibilities of Top Management
92
Sustainability Issue: Ceo Pay And Corporate Performance  92
End of Chapter Summary
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Social Responsibility and Ethics in Strategic Management
Social Responsibilities of Strategic Decision Makers
Responsibilities of a Business Firm
Sustainability
102
104
104
107
Sustainability Issue: Marks & Spencer Leads The Way  108
Corporate Stakeholders
Stakeholder Analysis
108
109
Strategy Highlight: Johnson & Johnson Credo  111
Ethical Decision Making
111
Some Reasons for Unethical Behavior
112
Global Issue: How Rule-Based And Relationship-Based Governance
Systems Affect Ethical Behavior  113
Innovation Issue: Turning A Need Into A Business To Solve The Need  115
Encouraging Ethical Behavior
Views on Ethical Behavior
117
End of Chapter Summary
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PART TWO Scanning the Environment 123
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Environmental Scanning and Industry Analysis
Aspects of Environmental Scanning
124
126
Identifying External Environmental Variables
127
Sustainability Issue: Green Supercars  128
Strategic Importance of the External Environment
129
Scanning the Societal Environment: Steep Analysis
129
Global Issue: Suvs Power On In China  137
Identifying External Strategic Factors
139
Industry Analysis: Analyzing the Task Environment
Porter’s Approach to Industry Analysis
Industry Evolution
139
140
144
Categorizing International Industries
144
Innovation Issue: Taking Stock Of An Obsession  145
International Risk Assessment
Strategic Groups
146
Strategic Types
147
Hypercompetition
146
148
Using Key Success Factors to Create an Industry Matrix
Competitive Intelligence
149
150
Sources of Competitive Intelligence
151
Strategy Highlight Evaluating Competitive Intelligence  152
Monitoring Competitors for Strategic Planning
Forecasting
153
154
Danger of Assumptions
154
Useful Forecasting Techniques
154
The Strategic Audit: A Checklist for Environmental Scanning
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Synthesis of External Factors
156
End of Chapter Summary
158
156
Organizational Analysis and Competitive Advantage 164
A Resource-Based Approach to Organizational Analysis—Vrio
Core and Distinctive Competencies
166
166
Using Resources/Capabilities to Gain Competitive Advantage
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Business Models
170
Value-Chain Analysis
172
Industry Value-Chain Analysis
172
Corporate Value-Chain Analysis
174
Scanning Functional Resources and Capabilities
Basic Organizational Structures
Culture
9
175
175
177
Global Issue: Managing Corporate Culture For Global Competitive
Advantage: Abb Vs. Panasonic  179
Strategic Marketing Issues
179
Innovation Issue: Docomo Moves Against The Grain  181
Strategic Financial Issues
182
Strategic Research and Development (R&D) Issues
Strategic Operations Issues
183
185
Strategic Human Resource Management (HRM) Issues
Strategic Information Systems/Technology Issues
187
189
Sustainability Issue: The Olympic Games—London 2012/Sochi 2014/Rio 2016 &
Tokyo 2020 190
The Strategic Audit: A Checklist for Organizational Analysis
Synthesis of Internal Factors (IFAS)
End of Chapter Summary
192
192
194
PART THREE Strategy Formulation 199
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Strategy Formulation: Business Strategy
200
A Framework for Examining Business Strategy
202
Generating a Strategic Factors Analysis Summary (Sfas) Matrix
203
Finding Market Niches 205
Mission and Objectives
Business Strategies
206
207
Porter’s Competitive Strategies
207
Global Issue: HAS EMIRATES REACHED THE LIMIT OF GLOBALIZATION? 209
Innovation Issue: Chegg And College Textbooks  212
Sustainability Issue: Strategic Sustainability—Espn  214
Cooperative Strategies
Strategic Alliances
215
216
End of Chapter Summary
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Strategy Formulation: Corporate Strategy
Corporate Strategy
224
226
Directional Strategy 226
Growth Strategies
227
Strategy Highlight: Transaction Cost Economics Analyzes Vertical
Growth Strategy
230
Global Issue: Global Expansion Is Not Always A Path To Growth  232
Controversies in Directional Growth Strategies
Stability Strategies
234
Retrenchment Strategies
Portfolio Analysis
233
235
237
BCG Growth-Share Matrix
238
Sustainability Issue: General Motors And The Electric Car  240
Advantages and Limitations of Portfolio Analysis
Managing a Strategic Alliance Portfolio
Corporate Parenting
241
241
242
Innovation Issue: To Red Hat Or Not? 243
Developing a Corporate Parenting Strategy
244
Horizontal Strategy and Multipoint Competition
End of Chapter Summary
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244
245
Strategy Formulation: Functional Strategy and Strategic Choice
250
Functional Strategy 252
Marketing Strategy
252
Financial Strategy
254
Research and Development (R&D) Strategy
Operations Strategy
255
256
Global Issue: Why Is Starbucks Afraid Of Italy? 257
Purchasing Strategy
258
Sustainability Issue: How Hot Is Hot? 259
Innovation Issue: When An Innovation Fails To Live Up To Expectations  260
Logistics Strategy
261
Human Resource Management (Hrm) Strategy
Information Technology Strategy
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The Sourcing Decision: Location of Functions
Strategies To Avoid
Constructing Corporate Scenarios
The Process of Strategic Choice
265
266
271
Using Policies to Guide Strategic Choices
End of Chapter Summary
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273
Strategy Implementation: Global Strategy
280
282
International Coordination
284
International Strategic Alliances
285
Stages of International Development
285
International Employment
10
273
Strategy Implementation and Control 279
International Entry
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265
Strategic Choice: Constructing Scenarios
PART FOUR
11
286
Measurement of Performance
288
End of Chapter Summary
290
Strategy Implementation: Organizing and Structure
Strategy Implementation
294
296
Who Implements Strategy?
297
What Must Be Done? 297
Developing Programs, Budgets, and Procedures
297
Sustainability Issue: A Better Bottle—Ecologic Brands  298
Achieving Synergy
302
How Is Strategy To Be Implemented? Organizing for Action
Structure Follows Strategy
303
303
Stages of Corporate Development
304
Innovation Issue: The P&G Innovation Machine Stumbles  305
Organizational Life Cycle
309
Flexible Types of Organizational Structure
The Matrix Structure
310
310
Network Structure—The Virtual Organization
312
Global Issue: Outsourcing Comes Full Circle  313
Cellular/Modular Organization: A New Type of Structure?
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Reengineering and Strategy Implementation
314
Six Sigma 315
Designing Jobs to Implement Strategy
316
Centralization Versus Decentralization
317
End of Chapter Summary
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318
Strategy Implementation: Staffing and Directing
324
Staffing 326
Staffing Follows Strategy 327
Selection and Management Development
329
Innovation Issue: How To Keep Apple “Cool” 329
Problems in Retrenchment
331
Leading 333
Managing Corporate Culture
333
Sustainability Issue: Panera And The “Panera Cares Community Café” 334
Action Planning 338
Management by Objectives
340
Total Quality Management
341
Global Issue: Cultural Differences Create Implementation Problems
in Merger
342
End of Chapter Summary
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342
Evaluation and Control 348
Measuring Performance
350
Appropriate Measures
Types of Controls
350
351
Innovation Issue: Solar Power And The Grid  352
Activity-Based Costing
353
Enterprise Risk Management
354
Primary Measures of Corporate Performance
354
Sustainability Issue: The End Of The Cash Register Receipt  357
Balanced Scorecard Approach: Using Key Performance Measures
358
Primary Measures of Divisional and Functional Performance
360
Responsibility Centers
360
Using Benchmarking To Evaluate Performance
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Global Issue: Counterfeit Goods And Pirated Software: A Global
Problem
363
Strategic Information Systems
363
Enterprise Resource Planning
364
Radio Frequency Identification and Near Field Communication
Divisional and Functional is Support
Problems in Measuring Performance
Short-Term Orientation
Goal Displacement
C h ap t e r
365
367
368
369
End of Chapter Summary
PART FIVE
365
366
Guidelines for Proper Control
Aligning Incentives
364
371
Introduction to Case Analysis 377
13
Suggestions for Case Analysis
The Case Method
378
380
Researching the Case Situation
380
Financial Analysis: A Place to Begin
381
Analyzing Financial Statements
381
Common-Size Statements
385
Z-Value and the Index of Sustainable Growth
Useful Economic Measures
386
Format for Case Analysis: The Strategic Audit
End of Chapter Summary
385
386
389
Appendix 13.A
Resources for Case Research
Appendix 13.B
Suggested Case Analysis Methodology Using the Strategic Audit
Appendix 13.C
Example of Student-Written Strategic Audit
PART SIX
Cases in Strategic Management
SE C TION A
391
393
396
1-1
Executive Leadership
CASE 1 The Recalcitrant Director at Byte Products, Inc.: Corporate Legality versus
Corporate Responsibility   1-7
(Contributors: Dan R. Dalton, Richard A. Cosier, and Cathy A. Enz)
A plant location decision forces a confrontation between the board of directors and the CEO
regarding an issue in social responsibility and ethics.
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CASE 2
The Wallace Group   2-1
(Contributor: Laurence J. Stybel)
Managers question the company’s strategic direction and how it is being managed by its founder and
CEO. Company growth has resulted not only in disorganization and confusion among employees,
but in poor overall performance. How should the board deal with the company’s founder?
S E C T I O N B Business Ethics
CASE 3
Everyone Does It   3-1
(Contributors: Steven M. Cox and Shawana P. Johnson)
When Jim Willis, Marketing VP, learns that the launch date for the company’s new satellite will be
late by at least a year, he is told by the company’s president to continue using the earlier published
date for the launch. When Jim protests that the use of an incorrect date to market contracts is
unethical, he is told that spacecraft are never launched on time and that it is common industry
practice to list unrealistic launch dates. If a realistic date was used, no one would contract with the
company.
CASE 4
The Audit   4-1
(Contributors: Gamewell D. Gantt, George A. Johnson, and John A. Kilpatrick)
A questionable accounting practice by the company being audited puts a new CPA in a difficult
position. Although the practice is clearly wrong, she is being pressured by her manager to ignore it
because it is common in the industry.
S E C T I O N C Corporate Governance and Social Responsibility
CASE 5
arly Warning or False Sense of Security? Concussion Risk and the Case of
E
the Impact-Sensing Football Chinstrap   5-1
(Contributors: Clifton D. Petty, and Michael R. Shirley)
In 2009, Battle Sports Science, headquartered in Omaha, Nebraska, was built with a focus on
“enhancing safety for athletes.” Specifically, the company wanted to protect young athletes who
might have suffered a concussion. Battle Sports Science attempted to gain market attention for
its US$149.99 impact indicator (chin strap) through endorsements, and had enlisted a number
of NFL players. The company hoped to sell the device to sports programs (schools) as well as to
individual players.
CASE 6
The Storm of Governance Reform at the American Red Cross   6-1
(Contributors: Jill A. Brown and Anne Anderson)
new
In early 2006, a U.S. Senate Finance Committee began investigating the American Red Cross
following substantial concerns over the governance effectiveness of the organization and its
Board of Governors. This investigation was prompted by concerns over Hurricane Katrina
relief efforts, as well as governance concerns regarding the structure and processes of the ARC
Board. Consequently, the Finance Committee appointed an Independent Governance Advisory
Panel to provide recommendations regarding how to overhaul the American Red Cross Board of
Governors.
CASE 7 Chipotle Mexican Grill, Inc.: Conscious Capitalism by Serving “Food With
Integrity” 7-1
(Contributor: Alan N. Hoffman)
new
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People loved Chipotle Mexican Grill because of the tasty and healthy food as well as its
edgy, trendy, cool brand image. Chipotle established itself as a successful company practicing
“conscious capitalism” by serving “food with integrity”—its supply chain and corporate culture
were closely integrated from the time that ingredients were farmed, raised, harvested, and shipped
to stores to the time the final product was placed on a customer’s serving tray. By 2014, the fast
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15
casual food market in the US became increasingly competitive and crowded with many new
entrants. Being a public listed company, Chipotle had to meet Wall Street’s high expectations of
growth and earnings. Living up to analysts’ expectations was becoming increasingly difficult for
Chiptole.
S E C T I O N D Privacy
CASE 8
Google and the Right to Be Forgotten   8-1
(Contributor: Cynthia E. Clark)
new
In 2009, Mario Costeja Gonzalez, a self-employed attorney casually “googled” himself and was
startled by what came up on his computer screen. Prominently displayed in the search results
was a brief legal notice that had appeared more than a decade earlier in a local newspaper, which
listed property seized and being auctioned by a government agency for nonpayments of debts.
Costeja immediately realized that this information could damage his reputation as an attorney and
decided to fight Google to request deletion of that data.
S E C T I O N E International Issues in Strategic Management
CASE 9
Harley Davidson: An Overreliance on Aging Baby Boomers   9-1
(Contributors: Alan N. Hoffman and Natalia Gold)
new
At Harley Davidson, customers not only purchased a motorcycle, they bought the “rebel” lifestyle
Harley signified. This rebel image took a long time to develop and constituted a major competitive
advantage for Harley. Nothing promised the same excitement as being on the open road on a
Harley, its engine roaring, the wind whipping, the great open spaces of America just down the
road. Harley Davidson specifically targeted a narrowly defined market of middle-aged males with
disposable income. However, as US baby boomers got older, the company recognized that it had
to look to new markets and demographics to expand sales.
CASE 10 Uber: Feeling the Heat from Competitors and Regulators Worldwide   10-1
(Contributors: Alan N. Hoffman and Natalia Gold)
new
Uber, originally known as “UberCab,” was started by Travis Kalanick and Garrett Camp in
San Francisco, California, in 2009. The company grew rapidly and by 2015 it was providing
carpooling services in 300 major cities in 58 countries around the world. As Uber moved forward
into new territories, however, it got entangled in many regulatory and legal hassles. The company
had to figure out how to sustain its lead in the heavily regulated, controversial, competitive, and
ever-changing taxi industry. Moreover, despite a landslide market share Uber was operating
at a loss. How to lower costs and become profitable was another challenge for this young and
aggressive company.
S E C T I O N F General Issues in Strategic Management
I N D U S T R Y O N E :   INTERNET COMPANIES
CASE 11 Pandora Internet Radio (2014): Just Press Play   11-1
(Contributors: Gary Stenftennagel and Joyce Vincelette)
new
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Pandora Media was built around the idea of providing listeners with only the music that they
love. To do so, Pandora fundamentally changed how people listened to music by allowing station
customization and the ability to listen to music over the Internet. As technology changed, Pandora
evolved from a Web site based radio provider and developed a mobile application where the
company could offer its services to customers whenever and wherever they wanted to listen to
music. Monetizing the mobile product proved to be difficult and Pandora had not yet attained
profitability.
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CASE 1 2 Amazon.com, Inc.: Retailing Giant to High-Tech Player?   12-1
(Contributor: Alan N. Hoffman)
In 2012, more than half of all Amazon sales came from computers, mobile devices including the
Kindle, Kindle Fire, and Kindle Touch, and other electronics, as well as general merchandise
from home and garden supplies to groceries, apparel, jewelry, health and beauty products,
sports and outdoor equipment, tools, and auto and industrial supplies. Amazon was at a
crossroads with regard to its push into technology versus its general merchandise. Amazon also
faced other challenges, including those from state governments that wanted it to collect sales
taxes so it would not adversely compete against local businesses.
CASE 1 3 Blue Nile, Inc.: “Stuck in the Middle” of the Diamond Engagement Ring
Market  13-1
(Contributor: Alan N. Hoffman)
Blue Nile Inc. has developed into the largest online retailer of diamond engagement rings. Unlike
traditional jewelry retailers, Blue Nile operates completely store-front-free, without in-person
consultation services. The business conducts all sales online or by phone, and sales include both
engagement (70%) and non-engagement (30%) categories. Blue Nile’s vision is to educate its
customer base so customers can make an informed, confident decision no matter what event they
are celebrating. It wants to make the entire diamond-buying process easy and hassle-free.
I N D U S T R Y T W O :    ENTERTAINMENT AND LEISURE
CASE 1 4 Groupon Inc.: Daily Deal or Lasting Success?   14-1
(Contributors: Nick Falcone, Eric Halbruner, Ellie A. Fogarty, and Joyce Vincelette)
Groupon began as a local Chicago discount service and became a global phenomenon seemingly
overnight. It was a great idea. The company was the first of its kind and changed the way
consumers spend, shop, and think about discounts. But how could Groupon, based on such
innovation and having experienced such exceptional growth, be in such a precarious position?
A wave of competition had swelled, including the likes of technology giants and both general
and niche daily deals services, all replicating Groupon’s business model. How could Groupon
compete against large companies and their expansive resources?
CASE 1 5 Netflix Inc.: The 2011 Rebranding/Price Increase Debacle   15-1
(Contributor: Alan N. Hoffman)
On September 18, 2011, Netflix CEO and co-founder Reed Hastings announced on the Netflix
blog that the company was splitting its DVD delivery service from its online streaming service,
rebranding its DVD delivery service, Qwikster, as a way to differentiate it from its online
streaming service, and creating a new Web site for it. Three weeks later, in response to customer
outrage and confusion, Hastings rescinded the decision to rebrand the DVD delivery service,
Qwikster, and reintegrated it into Netflix. Nevertheless, only five weeks after the initial split,
Netflix acknowledged that it had lost 800,000 U.S. subscribers and expected to lose many more,
thanks both to the Qwikster debacle and the price hike the company had decided was necessary
to cover increasing content costs.
CASE 1 6 Town Sports International Holdings, Inc.: Unsquashable   16-1
(Contributors: Sarah Stefanelli, Christina Marie Kopka, Jakub Libucha, and Joyce
Vincelette)
new
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Town Sports International decided to move forward with its expansion strategy in order to
become the most recognized health club network, through both designing and building clubs
and through selective acquisitions within its four major markets, Boston, New York, Washington
D.C., and Philadelphia. Town Sports Int’l set out to accomplish this efficiently and effectively by
living by its customer-centric mission, “Improving Lives Through Exercise.”
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CASE 1 7 Zynga, Inc. (2011): Whose Turn Is It?   17-1
(Contributors: Zachary Burkhalter, Daniel Zuller, Concetta Bagnato, Joyce Vincelette,
and Ellie A. Fogarty)
Zynga built its company around social gaming. This new type of gaming transformed the
gaming industry on multiple levels and across various platforms. Zynga originally built its games
using the Facebook platform and then capitalized on the company’s unique method of social
networking to capture audiences around the world. However, this strong reliance on Facebook
and changes in consumer gaming practices caused some concern among outside investors as to
the future of Zynga.
INDUSTRY THREE:   FOOD AND BEVERAGE
CASE 1 8 The Boston Beer Company: Brewers of Samuel Adams Boston Lager (Mini
Case)  18-1
(Contributor: Alan N. Hoffman)
The Boston Beer Company, founded in 1984 by Jim Koch, is viewed as a pioneer in the American
craft beer revolution. Brewing over one million barrels of 25 different styles of beer, Boston Beer
is the sixth-largest brewer in the United States. Even though overall domestic beer sales declined
1.2% in 2010, sales of craft beer have increased 20% since 2002, with Boston Beer’s increasing
22% from 2007 to 2009. How can the company continue its rapid growth in a mature industry?
CASE 1 9 Panera Bread Company (2010): Still Rising Fortunes?   19-1
(Contributors: Joyce P. Vincelette and Ellie A. Fogarty)
Panera Bread is a successful bakery-café known for its quality soups and sandwiches. Even
though Panera’s revenues and net earnings have been rising rapidly, new unit expansion
throughout North America has fueled this growth. Will revenue growth stop once expansion
slows? The retirement of CEO Ronald Shaich, the master baker who created the “starter” for the
company’s phenomenal growth, is an opportunity to rethink Panera’s growth strategy.
CASE 2 0 Whole Foods Market (2010): How to Grow in an Increasingly Competitive
Market? (Mini Case)   20-1
(Contributors: Patricia Harasta and Alan N. Hoffman)
Whole Foods Market is the world’s leading retailer of natural and organic foods. The company
differentiates itself from competitors by focusing on innovation, quality, and service excellence,
allowing it to charge premium prices. Although the company dominates the natural/organic
foods category in North America, it is facing increasing competition from larger food retailers
like Wal-Mart, who are adding natural/organic foods to their offerings.
CASE 2 1 Burger King (Mini Case)   21-1
(Contributor: J. David Hunger)
Founded in Florida in 1953, Burger King has always trailed behind McDonald’s as the secondlargest fast-food hamburger chain in the world. Although its total revenues dropped only slightly
from 2009, its 2010 profits dropped significantly, due to high expenses. Burger King’s purchase
by an investment group in 2010 was an opportunity to rethink the firm’s strategy.
CASE 2 2 Sonic Restaurants: Does Its Drive-In Business Model Limit Future Growth
Potential?  22-1
(Contributors: Alan N. Hoffman and Natalia Gold)
new
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Sonic is an iconic American drive-in fast-food chain with nearly thousands of franchises
established across the United States by 2014. As Sonic continued to expand, it ran into various
hurdles. The most daunting challenge was to enter urban environments where space was too
scarce to make drive-in possible. At the same time, while the drive-in model was highly effective
in the US, thanks to nostalgia, it did not have the same emotional appeal to international
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consumers. Should Sonic move away from the drive-in model and reinvent itself? If so, would it
become just another fast food burger joint with a customizable menu? And how could it compete
with larger players such as McDonald’s and Burger King that already had a substantial urban
and international presence?
CASE 2 3 “Breaking Up is Hard to Do”: PepsiCo in 2014   23-1
(Contributor: Ram Subramanian)
new
On April 17, 2014, Indra Nooyi, the Chief Executive Officer of the Purchase, New York-based
PepsiCo, a diversified beverage and snack foods company, met with Ian Cook, the Presiding
Director of the company’s Board, to discuss a response to Nelson Peltz’s (the head of Trian Fund
Management, an activist fund) latest call for breaking up the company into two independent
entities. Peltz had threatened to approach the company’s stockholders directly if the Board did
not accede to his demands.
INDUSTRY FOUR:  APPAREL
CASE 2 4 Under Armour   24-1
(Contributors: Ram Subramanian and Pradeep Gopalakrishna)
Under Armour’s footwear sales declined by 4.5% during the second quarter of 2009 and
showed a 16.6% decline in the first six months of 2010 compared to 2009. This was in contrast
to its performance apparel, the company’s core category, which saw a 32.2% uptick over
2009. Under Armour had tremendous growth opportunities in the apparel category in China.
However, CEO Kevin Plank wanted Under Armour to be a leading player in the field of
athletic footwear.
CASE 2 5 TOMS Shoes (Mini Case)   25-1
(Contributor: J. David Hunger)
Founded in 2006 by Blake Mycoskie, TOMS Shoes is an American footwear company based in
Santa Monica, California. Although TOMS Shoes is a for-profit business, its mission is more
like that of a not-for-profit organization. The firm’s reason for existence is to donate to children
in need one new pair of shoes for every pair of shoes sold. By 2010, the company had sold over
one million pairs of shoes. How should the company plan its future growth?
CASE 2 6 J.C. Penney Company, Inc.: Surviving the Ron Johnson (CEO) Era   26-1
(Contributor: Alan N. Hoffman)
new
Ron Johnson, the architect behind Apple’s wildly successful retail stores and 15-year Target
veteran, became American department store chain J.C. Penney’s new CEO in November 2011.
The owner of J.C. Penney had high hopes for Johnson, who proceeded to make drastic changes
to the company including a new logo and a new spokesperson (Ellen DeGeneres). His vision
included transforming 700 of the largest J.C. Penney stores into collections of some 100 branded
shops with a central ”town square” gathering area for services. J.C. Penney fired Ron Johnson
after just 17 months, following a disastrous decline in business directly attributable to the failure
of the new business plan.
INDUSTRY FIVE:  RETAILING
CASE 2 7 Best Buy Co. Inc. (2009): A Sustainable Customer-Centricity Model?   27-1
(Contributor: Alan N. Hoffman)
Best Buy, the largest consumer electronics retailer in the United States, operates 4000 stores
in North America, China, and Turkey. It distinguishes itself from competitors by deploying a
differentiation strategy based on superior service rather than low price. The recent recession has
stressed its finances and the quality of its customer service. How can Best Buy continue to have
innovative products, top-notch employees, and superior customer service while facing increased
competition, operational costs, and financial stress?
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Contents
19
CASE 2 8 Target Corp’s Tarnished Reputation: Failure in Canada and a Massive Data
Breach  28-1
(Contributors: Alan N. Hoffman and Natalia Gold)
new
Target is a US mass-market discount store catering to shoppers seeking high quality products. In
a crowded market, Target was eager to grow its business outside the US and online. It expanded
to Canada in 2011 by acquiring a failed retailer. A move that seemed prudent actually saddled
Target with inconveniently located stores and strained its logistics infrastructure. Closing down
its Canadian stores, Target focused on strengthening its online presence. But two massive data
breach incidents in 2013 and 2014 affected over 100 million of its customers and weakened
Target’s sales significantly. In order to keep its market share on a par with competitors such as
Walmart and Amazon, Target clearly has challenges to be met.
CASE 2 9 Staples: The Fierce Battle Between Brick and Mortar vs. Online Sales   29-1
(Contributors: Alan N. Hoffman and Natalia Gold)
new
With a focus on convenience and a wide range of product offerings, Staples was the world’s
largest office supplies retailer. The office supply sector had almost no barriers to entry as capital
costs were low compared to other retail industries. No licensing requirements were necessary,
easing the burden on new entrants. The low level of differentiation of goods between one office
supply store and the next, forced new entrants to provide either niche or specialty products
to compete and often in the online realm. As the retail industry had been trending towards
e-commerce, Staples’ traditional brick and mortar stores were costing it dearly. The global office
supplies leader found it increasingly difficult to compete on the Internet.
INDUSTRY SIX:  TRANSPORTATION
CASE 3 0 Tesla Motors, Inc.: The First U.S. Car Company IPO Since 1956   30-1
(Contributor: Alan N. Hoffman)
Tesla Motors was founded in 2004 to produce electric automobiles. Its first car, the Tesla
Roadster, sold for US$101,000. It could accelerate from 0 to 60 mph in 3.9 seconds, and cruise
for 236 miles on a single charge. In contrast to existing automakers, Tesla sold and serviced its
cars through the Internet and its own Tesla stores. With the goal of building a full line of electric
vehicles, Tesla Motors faces increasing competition from established automakers. How can Tesla
Motors succeed in an industry dominated by giant global competitors?
CASE 3 1 TomTom: New Competition Everywhere!   31-1
(Contributor: Alan N. Hoffman)
TomTom, an Amsterdam-based company that provides navigation services and devices, led the
navigation systems market in Europe and is second in popularity in the United States. However,
the company is facing increasing competition from other platforms using GPS technology, like
cell phones and Smartphones with built-in navigation functions. As its primary markets in the
United States and Europe mature, how can the company ensure its future growth and success?
INDUSTRY SEVEN:  MANUFACTURING
CASE 3 2 General Electric, GE Capital, and the Financial Crisis of 2008: The Best of the
Worst in the Financial Sector?   32-1
(Contributor: Alan N. Hoffman)
The financial services industry was, by definition, volatile, and GE Capital was particularly hard
hit by the economic recession of 2008. With the credit markets illiquid and financial markets
falling, GE Capital found it was overexposed to commercial real estate and foreign residential
mortgages. At this point, GE’s parent corporation stepped in, began reorganizing GE Capital,
and significantly downsized the unit. GE Capital hoped to see continued sustainable earnings
growth with growing margins and lower portfolio risk, and to return money to investors and
resume paying dividends to its parent company.
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20
Contents
CASE 3 3 Snap-on Tools: A Victim of Its Own Success   33-1
(Contributor: Alan N. Hoffman)
new
For 93 years, Snap-on Tools had firmly established itself as an innovative premium tool
manufacturer serving the automotive industry. In recent years, Snap-on Tools started to expand
its product lines to engineering industries including aerospace, aviation, and oil and gas. It also
began to give technical education to build the skilled labor base in the US—its largest market that
constituted 65% of all revenue. Snap-on feared that its overdependence on the US market could
make its business and operations vulnerable to country-specific trends as well as increase the
company’s exposure to local factors such as severe weather conditions, labor strikes, or changes
in regulations.
GLOSSARY    G-1
NAME INDEX    I-1
SUBJECT INDEX    I-6
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Preface
Welcome to the 15th edition of Strategic Management and Business Policy! All of the
chapters have been updated and we have added one new chapter on Global Strategy.
In addition, we have added 13 brand-new cases (Target, American Red Cross, Sonic
Restaurants, Harley Davidson, Staples, Chipotle, Uber, Pandora Internet ­
Radio,
Snap-on Tools, Google, Pepsi, Town Sports International, and JC Penney). Many of
the cases are exclusive to this edition! Although we still make a distinction between
full-length and mini cases, we have interwoven them throughout the book to better
identify them with their industries.
The theme that runs throughout all 13 chapters of this edition continues our view
from the 14th edition that there are three strategic issues that comprise the cornerstone all organizations must build upon to push their businesses forward. Those are
globalization, innovation, and sustainability. Each chapter incorporates specific
­vignettes about these three themes. We strive to be the most comprehensive and practical strategy book on the market, with chapters ranging from corporate governance
and social responsibility to competitive strategy, functional strategy, and strategic
alliances.
FEATURES NEW TO THIS 15TH EDITION
This edition of the text has:
A completely new Chapter (9) on Global Strategy. While we discuss globalization
in every chapter of the book, including a Global Issues section in each chapter,
we have called out a stand-alone chapter to address the key issues of entry, international coordination, stages of international development, international employment, and measurement of performance.
■■ New and updated vignettes on sustainability (which is widely defined as business
sustainability), globalization (which we view as an expectation of business), and
innovation (which is the single most important element in achieving competitive
advantage) appear in every chapter of the text.
■■ Every example, chapter opening, and story has been updated. This includes chapter opening vignettes examining companies such as: Tesla, Pizza Hut, UNIQLO,
Kärcher, Purbani Group, and United Airlines among many others.
■■ Resource-based analysis and more specifically the VRIO framework (Chapter 5)
has been added to the toolbox of students’ understanding of core competencies
and competitive advantage with a significant addition of material and a practical
example.
■■
21
A01_WHEE5488_15_GE_FM.indd 21
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22
Preface
Extensive additions have been made to the text from both strategy research and
practical experience.
■■ Thirteen new comprehensive cases have been added to support the 14 popular fulllength cases and 6 mini-cases carried forward from past editions. Of the 33 cases
appearing in this book, 19 are exclusive and do not appear in other books.
■■ One of the new cases deals with privacy (Google and the Right to Be Forgotten).
■■ One of the new cases deals with governance (American Red Cross).
■■ One of the new cases deals with conscious capitalism (Chipotle).
■■ Two of the new cases deal with international issues (Uber, Harley Davidson).
■■ One of the new cases involves Internet companies (Pandora Internet Radio).
■■ One of the new cases deals with Sports and Leisure (Town Sports Int’l).
■■ One of the new cases deals with Apparel (J.C. Penney).
■■ Three of the new cases deal with Food and Beverages (Pepsi, Sonic Restaurants).
■■ Two of the new cases deal with Retailing (Target, Staples).
■■ One of the new cases deals with Manufacturing (Snap-on Tools).
■■
HOW THIS BOOK IS DIFFERENT FROM OTHER STRATEGY
TEXTBOOKS
This book contains a Strategic Management Model that runs through the first 12 chapters and is made operational through the Strategic Audit, a complete case analysis
methodology. The Strategic Audit provides a professional framework for case analysis
in terms of external and internal factors and takes the student through the generation
of strategic alternatives and implementation programs.
To help the student synthesize the many factors in a complex strategy case, we
developed three useful techniques:
The External Factor Analysis (EFAS) Table in Chapter 4
This reduces the external opportunities and threats to the 8 to 10 most important
external factors facing management.
■■ The Internal Factor Analysis (IFAS) Table in Chapter 5
■■ This reduces the internal strengths and weaknesses to the 8 to 10 most important
internal factors facing management.
■■ The Strategic Factor Analysis Summary (SFAS) Matrix in Chapter 6
This condenses the 16 to 20 factors generated in the EFAS and IFAS tables into
the 8 to 10 most important (strategic) factors facing the company. These strategic
factors become the basis for generating alternatives and act as a recommendation
for the company’s future direction.
■■
■■
Suggestions for case analysis are provided in Appendix 13.B (end of Chapter 13)
and contain step-by-step procedures on how to use a strategic audit in analyzing a case.
This appendix includes an example of a student-written strategic audit. Thousands of
students around the world have applied this methodology to case analysis with great
success. The Case Instructor’s Manual contains examples of student-written strategic
audits for each of the full-length comprehensive strategy cases.
A01_WHEE5488_15_GE_FM.indd 22
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Preface
23
FEATURES
This edition contains many of the same features and content that helped make previous editions successful. Some of the features include the following:
Chapter
■■
1
Basic Concepts of
Strategic
Management
Learning Objectives
After reading this chapter, you should be able to:
1-1. Discuss the benefits of strategic
management
1-5. Describe the basic model of strategic management and its components
1-2. Explain how globalization, innovation,
and environmental sustainability influence
strategic management
1-6. Identify some common triggering events
that act as stimuli for strategic change
1-3. Discuss the differences between the theories of organizations
1-8. Use the strategic audit as a method
of analyzing corporate functions and
activities
1-4. Discuss the Activities where learning organizations excel
1-7. Explain strategic decision-making modes
A strategic management
model runs throughout the
first 12 chapters as a unifying concept. (Explained in
Chapter 1)
Toyota Motors Co.
Environmental
Scanning:
Strategy
Formulation:
Strategy
Implementation:
Evaluation
and Control:
Gathering
Information
Developing
Long-range Plans
Putting Strategy
into Action
Monitoring
Performance
In 1937, Kiichiro Toyoda founded the Toyota Motor Corporation, headquartered in Aichi Prefecture, Japan. The company, now headed by Akio
Toyoda, the President and Representative Director, has a capital of around
$179,399 million. Its primary business activities involve automotive manu-
External
Mission
Natural
Environment:
Reason for
existence
Resources and
climate
facturing. As of March 2016, the company employs around 348,977 people.
Objectives
What
results to
accomplish
by when
Societal
Environment:
General forces
Task
Environment:
Industry analysis
Sakichi Toyoda, the founder of Toyota Industries, set certain Guiding
Principles that reflect Toyota’s organizational culture and values, and are the
Strategies
Plan to
achieve the
mission &
objectives
basis for the corporate management philosophy. These were first revised in
Policies
Broad
guidelines
for decision
making
Internal
1992, and again in 1997, to support its operations in a multicultural environment.
Programs
and Tactics
Activities
needed to
accomplish
a plan
They were modified in response to the societal changes and the company’s business
structure, which support its global vision, strategies, and operations worldwide. An example of its strategy to
Budgets
Cost of the
programs
Chain of command
Culture:
keep with the changing times is the Toyota Way 2001, which focuses on CSR and customer orientation, innovative
Procedures
Sequence
of steps
needed to
do the job
Structure:
management, and the nurturing of its employees’ creativity and teamwork, mutual trust, and respect between
Performance
labor and management. At the heart of the Toyota Way are two pillars—continuous improvement and respect
Actual results
for people. These are supported by five values: challenge, continuous improvement (kaizen), seeing for yourself
Beliefs, expectations,
values
(genchi genbutsu), respect, and teamwork.
Resources:
Assets, skills,
competencies,
knowledge
PA R T
In 1997, Thailand, a regional hub of Toyota’s auto manufacturing industry in ASEAN, faced an economic crisis
resulting from over-investment in real estate and a liberal financing policy. Toyota Motor Thailand Co., Ltd. (TMT)
subsequently encountered huge losses. To overcome the crisis various actions were taken—the TMT first requested
and received two capital injections, totaling US$200 million, from Toyota Motor Corporation in Japan. However, since
1
the automotive market was down by about 75%, the TMT had to use a job-sharing approach to retain its skilled, but
Feedback/Learning: Make corrections as needed
redundant, workforce. Together with this measure, the company observed it’s “no lay-off” policy by sending about
Pearson MyLab Management®
200 idle associates to Japan for training, while others assisted their local dealers. To avoid further losses, TMT focused
on 100% localization of parts and took advantage of export opportunities. Undertaking new business reforms, such
Improve Your Grade!
as online management of vehicle supply and demand and the formation of project teams in finance and marketing,
Over 10 million students improved their results using the Pearson MyLabs. Visit mymanagementlab.com
for simulations, tutorials, and end-of-chapter problems.
helped boost new vehicle sales. For dealers and suppliers, TMT granted credit lines and short-term loans.
34
35
M01B_WHEE5488_15_GE_C01.indd 34-35
Introduction to
Strategic
Management
The strategic audit, a way to opera­
tionalize the strategic decision-­ and Business
making process, serves as a checklist
Policy
in case analysis. (Chapter 1)
7/13/17 3:55 PM
CH A P T E R 3
■■
Social Responsibility and Ethics in Strategic Management
73
a business corporation need profits to survive and grow. “Maximizing profits is like
maximizing food.” Thus, contends Byron, maximization of profits cannot be the primary
obligation of business.2
As shown in Figure 3–1, Archie Carroll proposed that the managers of business
organizations have four responsibilities: economic, legal, ethical, and discretionary.3
46
1. Economic responsibilities of a business organization’s management are to produce
goods and services of value to society so that the firm may repay its creditors and
increase the wealth of its shareholders.
2. Legal responsibilities are defined by governments in laws that management is
expected to obey.
For example,
PART 1 Introduction to Strategic Management
and Business
Policy U.S. business firms are required to hire and promote
people based on their credentials rather than to discriminate on non-job-related
characteristics such as race, gender, or religion.
FIGURE 2–1 Board of Directors’ Continuum
3. Ethical responsibilities of an organization’s management are to follow the generally
held beliefs about behavior in a society. For example, society generally expects firms
DEGREE OF INVOLVEMENT IN STRATEGIC MANAGEMENT
to work with the employees and the community in planning for layoffs, even though
Low
High
no law may require this. The affected people can get very upset
if an organization’s
(Passive)
(Active)
management fails to act according to generally prevailing ethical values.
Rubber
Minimal responsibilities
Nominal
Active
4. Discretionary
are the
purely voluntary obligations a corporaPhantom
Catalyst
Stamp
Review
Participation
Participation
tion assumes. Examples are philanthropic contributions, training the hard-core
unemployed,
providing
centers. The difference
between ethical and
Never knows
Permits officers
Formally and
reviews
Involved day-care
to a
Approves,
Takes the
what to do, if
to make alldiscretionary
selected issues
limited degree
and expect
leadingan
roleorganization
in
responsibilities
is thatquestions,
few people
to fulfill
anything; no
decisions. It
that officers
in the performakes final deestablishing
discretionary
responsibilities,
whereas
many
expectand
an modifying
organization to fulfill ethidegree of
votes as the
bring to its
mance or review
cisions
on mis4
cal ones.
involvement.
officers recomattention.
of selected key
sion, strategy,
the mission,
■■
Corporate governance is examined in
terms of the roles, responsibilities, and
interactions of top management and the
board of directors. (Chapter 2)
M01A_WHEE2050_15_SE_P01.indd 1
9/9/16 1:06 PM
mend on action
decisions,
policies, and
objectives,
Carroll lists these four responsibilities
inobjectives.
order of
A business
firm must first
issues.
indicators, or
Haspriority.
strategy,
and
of responsibilities.
active board
It has
make a profit to satisfy its programs
economic
To policies.
continue
in existence, the firm
management.
committees.
a very active
must follow the laws, thus fulfilling its legal
responsibilities.
There is evidence that comPerforms
fiscal
strategy
panies found guilty of violating laws have
profits committee.
and sales growth after convicandlower
management are
audits.
tion.5 On this point, Carroll and Friedman
in agreement. Carroll, however, goes
further by arguing that business managers have responsibilities beyond economic and
SOURCE: T. L. Wheelen and J. D. Hunger, “Board of Directors’ Continuum,” Copyright © 1994 by Wheelen and
legalbyones.
Hunger Associates. Reprinted
permission.
Having satisfied the two basic responsibilities, according to Carroll, a firm should
look to fulfilling its social responsibilities. Social responsibility, therefore, includes both
ethical and discretionary, but not economic and legal, responsibilities. A firm can fulfill
Highly involved boards tend to be very active. They take their tasks of moniits ethical responsibilities by taking actions that society tends to value but has not yet
toring, evaluating and influencing, and initiating and determining very seriously;
put into law. When ethical responsibilities are satisfied, a firm can focus on discretionthey provide advice when necessary and keep management alert. As depicted in
ary responsibilities—purely voluntary actions that society has not yet decided to expect
Figure 2–1, their heavy involvement in the strategic management process places them
in the active participation or even catalyst positions. Although 74% of public corporations
have periodic board meetings devoted primarily to the review of overall
FIGURE 3–1
Discretionary
Responsibilities
of
company strategy,
the boards may not have had
much influence in generating the
Social
planBusiness
itself.11 The same global survey of directors by McKinsey & Company found that
Responsibilities
directors devote more time to strategy than any other
Ethical area. Those boards reporting
high influence typically shared a common plan for creating value and had healthy
debate about what actions the company should take to create value. Together with
Economic
Legal trends and future
top management, these high-influence boards considered global
scenarios and developed plans. In contrast, those boards with low influence tended
Suggested
12 by Archie Carroll in A. B. Carroll, “A Three Dimensional Conceptual Model of Corponot to do any ofSOURCE:
these
things.
Nevertheless,
studies
indicate
that
boards are becomrate Performance,” Academy of Management Review (October 1979), pp. 497–505; A. B. Carroll, “Managing
ing increasingly-Ethically
active.with Global Stakeholders: A Present and Future Challenge,” Academy of Management Executive
pp. 114–120;
B. Carroll,
Pyramid
of Corporate
Social Responsibility:
Toward the
These and (May
other2004),
studies
suggestand
thatA.most
large“The
publicly
owned
corporations
have
Moral Management of Organizational Stakeholders,” Business Horizons (July–August 1991), pp. 39–48.
boards that operate at some point between nominal and active participation. As a board
becomes less involved in the affairs of the corporation, it moves farther to the left
on the continuum (see Figure 2–1). On the far left are passive phantom or rubberstamp boards that typically never initiate or determine strategy unless a crisis occurs. In
these situations, the CEO who also usually serves as Chairman of the Board (although
we see the same situation in active boards), personally nominates all directors and
works to keep board members under his or her control by giving them the “mushroom
M03_WHEE2050_15_SE_C03.indd
73
9/9/16 12:17 PM
treatment”—throw
manure on them and keep them in the dark!
Generally, the smaller the corporation, the less active is its board of directors in
strategic management.13 In an entrepreneurial venture, for example, the privately held
corporation may be 100% owned by the founders—who also manage the company.
In this case, there is no need for an active board to protect the interests of the ownermanager shareholders—the interests of the owners and the managers are identical.
M02_WHEE2050_15_SE_C02.indd 46
A01_WHEE5488_15_GE_FM.indd 23
■■
Social responsibility and managerial ethics are
examined in detail in terms of how they affect
strategic decision making. They include the process of stakeholder analysis and the concept of
social capital. (Chapter 3)
9/9/16 12:16 PM
7/13/17 4:01 PM
24
Preface
134
Equal emphasis is placed on environmental
scanning of the societal environment as well as
on the task environment. Topics include forecasting and Miles and Snow’s typology in addition to competitive intelligence techniques and
Porter’s industry analysis. (Chapter 4)
■■ Core and distinctive competencies are examined within the framework of the resourcebased view of the firm and utilizing the VRIO
framework. (Chapter 5)
■■ Organizational analysis includes material on
business models, supply chain management, and
corporate reputation. (Chapter 5)
■■ Internal and external strategic factors are emphasized through the use of specially designed
EFAS, IFAS, and SFAS tables. (Chapters 4, 5,
and 6)
■■ Functional strategies are examined in light of
outsourcing. (Chapter 8)
PA RT 2
Scanning the Environment
■■
CHAPTER
Strategy
Implementation:
Global Strategy
Environmental
Scanning:
Gathering
Information
Mission
Natural
N
aturall
Environment:
Reason
R
eason for
for
existence
Resources and
climate
Societal
Environment:
than 250 planes (and none in the past 1½ years) as of 12/31/15 compared to 3,072 orders
for Boeing’s 737 and 4,471 for Airbus’s 320. As the investment of billions in the program
was underway, the company decided to launch two new business jets further stretching
resources.
The company has invested over $5 billion in the C-Series alone and has had a net negative
cash burn for the past five years. The stock is now worth one-tenth of what it was in 2011
and the company is asking for a bailout from the Canadian government as they lay off nearly
10% of their workforce.
SOURCES: S. Deveau & F. Tomesco, “Why Bombardier Is Struggling to Build Bigger Planes,” Bloomberg
Business, February 4, 2016; A. Petroff, “Bombardier cutting 7,000 jobs,” CNN Money; February 17, 2016
(money.cnn.com/2016/02/17/news/companies/bombardier-job-cuts-canada-europe/index.html);
F. Tomesco, “Quebec eyes fresh Bombardier aid
absent federal investment,” The Globe and Mail, February 10, 2016,
/report-on-business/quebec-eyes-fresh-bombardier-aid-absent-federal-investment/article28701038/
A Resource-Based Approach to Organizational
analysis—Vrio
5-1. Apply the
resource-based view
of the firm and the
VRIO framework
to determine core
and distinctive
competencies
Resources are an organization’s assets and are thus the basic building blocks of the
organization. They include tangible assets (such as its plant, equipment, finances, and
location), human assets (the number of employees, their skills, and motivation), and
intangible assets (such as its technology [patents and copyrights], culture, and reputation).1 Capabilities refer to a corporation’s ability to exploit its resources. They consist
of business processes and routines that manage the interaction among resources to turn
inputs into outputs. For example, a company’s marketing capability can be based on
the interaction among its marketing specialists, distribution channels, and salespeople.
A capability is functionally based and is resident in a particular function. Thus, there
are marketing capabilities, manufacturing capabilities, and human resource management capabilities. When these capabilities are constantly being changed and reconfigured to make them more adaptive to an uncertain environment, they are called
dynamic capabilities.2 A competency is a cross-functional integration and coordination
Learning Objectives
After reading this chapter, you should be able to:
9-1. Describe the means of entry by which an
organization can do business in another
country
9-2. Explain the elements of International Strategic Alliances that lead to success
9-3. Discuss the stages of International
Development
Strategy
Formulation:
Strategy
Implementation:
Evaluation
and Control:
Developing
Long-range Plans
Putting Strategy
into Action
Monitoring
Performance
9-4. Explain how companies can improve their
staffing efforts as they expand beyond
their home country
9-5. Discuss the unique issues related to Measuring Organizational performance that
are presented with the administration of
atruly international company
U.S. Immigration Policy and Founders of Entrepreneurial Startups
Few issues are as contentious around the world as is immigration and
foreign-born workers. The whole conversation gets more confused in
the United States when foreign-born students of U.S. colleges and uni-
Objectives
Wh t
What
results
l to
accomplish
h
by when
General forces
Task
Environment:
Industry analysis
versities start-up new companies. There are no visas specifically designed
Strategies
Pl to
Plan
achieve
the
hi
mission &
objectives
for foreign-born students who start up their own companies. The focus
of most visa efforts revolves around the H-1B for ‘skilled’ foreign workers.
Policies
Broad
Bro
B
add
guidelines
id li
for decision
making
Internal
There is a lottery each year for the 65,000 slots and the additional 20,000 slots for
Programs
and Tactics
Activities
A tiviti
Acti
ities
needed
d d to
accomplishh
a plan
graduates with advanced degrees. All of these slots presume that the person receiving
Budgets
Cost
Costt off tthe
thhe
programs
the visa is an employee who works for an established U.S. company. The founder of a new firm might not be
Procedures
Sequence
Sequen
Seq
uence
ce
off steps
needed to
do the job
Structure:
Chain of command
Culture:
receiving compensation early on and even if he or she is paid, they are not employees but owners.
Performance
According to the Kauffman Foundation while 13% of U.S. population is foreign-born, they make up 24%
Actual results
of the tech and engineering companies formed and a whopping 44% of those formed in the Silicon Valley.
Beliefs, expectations,
values
These entrepreneurs have a long visa battle ahead of them to be able to stay in the United States with their
Resources:
new companies. They generally apply for a so-called ‘rock star’ visa (Justin Beiberand other artists have one).
Assets, skills,
competencies,
knowledge
Among the founders that failed to secure this visa and left the country was WhatsApp CEO Jan Koum, Snapdeal
founder Kunal Bahl, and Instagram’s technical lead Mike Krieger. Bahl graduated from Wharton and has now
CHAPTER
Feedback/Learning: Make corrections as needed
11
built a business valued at over US$5 Billion with more than 4,000 employees in India.
Addressing how to operate a global company involves a number of difficult operating decisions that
includes the staffing of the company and how foreign-born workers are treated.
Strategy
Implementation:
Staffing and Directing
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Environmental
Scanning:
Strategy
Formulation:
Strategy
Implementation:
Evaluation
and Control:
Gathering
Information
Developing
Long-range Plans
Putting Strategy
into Action
Monitoring
Performance
External
Mission
Natural
N
aturall
Environment:
Reason
R
eason ffor
or
existence
Resources and
climate
staffing decisions
11-2. Discuss how leaders manage corporate
281
culture
Three chapters deal with issues
in strategy implementation, such
as organizational and job design,
as well as strategy-manager fit,
action planning, and corporate
culture. In addition we address
Global Strategy as a unique implementation issue. (Chapters 9,
10 and 11)
■■ A separate chapter on evaluation
and control explains the importance of measurement and incentives
to
organizational
performance.
(Chapter 12)
■■
9/9/16 12:50 PM
Utilize an action planning framework to
implement an organization’s MBO and
TQM initiatives
Workplace Discrimination and Public Image
While the legal context of what constitutes workplace discrimination
is constantly evolving, public perception can impact companies in virtually any industry. In 2015, the U.S. Equal Employment Opportunity
Commission (EEOC) received almost 90,000 charges of workplace dis-
Objectives
Wh t
What
results
l to
accomplish
h
by when
Societal
Environment:
Learning Objectives
SOURCES: “No Country for Startup Founders,” Bloomberg BusinessWeek, February 15–21, 2016, pp. 27–28 D. Stangler&
J. Wiens, “The Economic Case for Welcoming Immigrant Entrepreneurs,” Ewing Marion Kauffman Foundation, September 8,
2015 (
After reading this chapter, you should be able to:
-immigrant-entrepreneurs); L. Robbins, “New U.S. Rule Extends Stay for Some Foreign Graduates,” New York Times,
March 9, 2016 (
.html?_r=0).
11-1. Explain the link between strategy and
11-3.
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Scanning and analyzing the external environment for opportunities and threats is necessary for the firm to be able to understand its competitive environment and its place
in that environment. It is the absolute starting place for strategic analysis. However, in
order for the organization to thrive, the senior leadership team must look within the
corporation itself to identify internal strategic factors—critical strengths and weaknesses
that are likely to determine whether a firm will be able to take advantage of opportunities while avoiding threats. This internal scanning, often referred to as organizational
analysis, is concerned with identifying, developing, and taking advantage of an organization’s resources and competencies.
CORE AND DISTINCTIVE COMPETENCIES
M05_WHEE2050_15_SE_C05.indd 134
9
External
Pierre Beaudoin stepped down in 2015 as the company continued to spiral downward. The C-Series has yet to make any real penetration in the market with orders of less
General forces
Task
Environment:
Industry analysis
crimination. These included discrimination complaints related to race,
Strategies
Pl to
Plan
achieve
hi
the
mission &
objectives
color, sex, age, religion, pregnancy, disability, genetic information, and
national origin.
Policies
Broad
Bro
B
add
guidelines
id li
for decision
making
Internal
One of the more contentious issues has developed around the Affordable
Programs
and Tactics
Activities
A tiviti
Acti
ities
needed
d d to
accomplishh
a plan
Care Act (ACA), a movement nationwide to recognize same-sex marriages, and theŽLGBT
Budgets
Cost
Costt off tthe
thhe
programs
community. Companies including Wal*Mart, BNSF Railroad, Saks Fifth Avenue, SkyWest Airlines, and Pepperdine
Procedures
Sequence
Sequen
Seq
uence
ce
off steps
Structure:
Chain of command
needed to
do the job
Culture:
University have cases pending against them in the federal court system. These plaintiffs argue that they are
Performance
Actual results
being discriminated against because of their sex.
Wal*Mart extended spousal health coverage to same-sex marriages (where legal) in January 2014, however
Beliefs, expectations,
val…
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