Strategic Management

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Strategic. Management. Planning for Domestic &. Thirteenth Edition ... CSR 's Effect on the Mission Statement 67 .... The Apollo Group, Inc. [University.
Strategic Management Planning for Domestic & Global Competition

Thirteenth Edition

John A. Pearce II Villanova School of Business Villanova University

Richard B. Robinson, Jr. Darla Moore School of Business University of South Carolina

Table of Contents Questions for Discussion 43 APPENDIX BB&T Vision, Mission, and Purpose 44

PART ONE OVERVIEW OF STRATEGIC MANAGEMENT 1

Chapter 3

Chapter 1

Strategic Management

Corporate Social Responsibility and Business Ethics 49

2

The Nature and Value of Strategic Management 3 Dimensions of Strategic Decisions 4 Formality in Strategic Management 8 Benefits of Strategic Management 10 The Strategic Management Process 10 Strategic Management as a Process 15 Summary 18 Key Terms 18 Questions for Discussion 18

PART TWO STRATEGY FORMULATION

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Chapter 2 Company Mission 22 What Is a Company Mission? 23 The Need for an Explicit Mission 23 Formulating a Mission 24 Basic Product or Service: Primary Market; Principal Technology 24 Company Goals: Survival: Growth; Profitability 26 Company Philosophy 27 Public Image 29 Company Self-Concept 31 Newest Trends in Mission Components 33 An Exemplary Mission Statement 35 Boards of Directors 36 Agency Theory 38 How Agency Problems Occur 38 Problems That Can Result from Agency 41 Solutions to the Agency Problem 42 Summary 42 Key Terms 43

The Stakeholder Approach to Social Responsibility 50 The Dynamics of Social Responsibility 52 Types of Social Responsibility 53 Corporate Social Responsibility and Profitability 5 7 Sarbanes-Oxley Act of 2002 62 The New Corporate Governance-Structure 65 CSR 's Effect on the Mission Statement 67 SocialAudit 67 Satisfying Corporate Social Responsibility 68 The Core of the CSR Debate 70 Mutual Advantages of Collaborative Social Initiatives 71 Five Principles of Successful Collaborative Social Initiatives 72 Assembling the Components 76 The Limits of CSR Strategies 76 The Future of CSR 78 Management Ethics 78 The Nature of Ethics in Business 78 Approaches to Questions of Ethics 81 Codes of Business Ethics 81 Major Trends in Codes of Ethics 83

Summary 84 Key Terms 84 Questions for Discussion

84

Chapter 4 The External Environment The Firm's External Environment Remote Environment 87 Economic Factors 87 Social Factors 89 Political Factors 90 Technological Factors 93

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Table of Contents

Summary 143 Key Terms 144 Questions for Discussion 144 APPENDIX Components of the Global Environment 145

Ecological Factors 93 International Environment 97

Industry Environment 97 How Competitive Forces Shape Strategy 97 Contending Forces 99 Threat of Entry 100 Powerful Suppliers 102 Powerful Buyers 103 Substitute Products 104 Jockeying for Position 104

Chapter 6 Internal Analysis 147

Industry Analysis and Competitive Analysis

105

Using SWOT Analysis in Strategic Analysis 152 Limitations of SWOT Analysis 154

Industry Boundaries 105 Power Curves 109 Competitive Analysis 110

Operating Environment

Value Chain Analysis

111

Competitive Position 111 Customer Profiles 112 Suppliers 113 Creditors 114 Human Resources: Nature of the Labor Market 114

Emphasis on Environmental Factors 115 Summary 118 Key Terms 118 Questions for Discussion 118 APPENDIX Sources for Environmental Forecasting 120

Chapter 5 The Global Environment

SWOT Analysis: A Traditional Approach to Internal Analysis 149

155

Conducting a Value Chain Analysis 157 Recognizing the Difficulty in Activity-Based Cost Accounting 159

Competitive Advantage via Customer Value: Three Circles Analysis 161 Resource-Based View of the Firm 163 Core Competencies 164 Three Basic Resources: Tangible Assets, Intangible Assets, and Organizational Capabilities 164 What Makes a Resource Valuable? 166 Using the Resource-Based View in Internal Analysis 169

Internal Analysis: Making Meaningful Comparisons 172

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Globalization 123 Development of a Global Corporation Why Firms Globalize 126

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Strategic Orientations of Global Firms 127

At the Start of Globalization 127 Complexity of the Global Environment 129 Control Problems of the Global Firm 131 Global Strategic Planning 131 Multidomestic Industries and Global Industries 133 The Global Challenge 134 Market Requirements and Product Characteristics 136

Competitive Strategies for Firms in Foreign Markets 137 Niche Market Exporting 137 Licensing and Contract Manufacturing 138 Franchising 139 Joint Ventures 139 Foreign Branching 140 Acquisition 140 Wholly Owned Subsidiaries 141

Comparison with Past Performance 172 Benchmarking: Comparison with Competitors 172 Comparison with Success Factors in the Industry 174 Product Life Cycle 176

Summary 178 Key Terms 178 Questions for Discussion 179 APPENDIX A Key Resources across Functional Areas 180 APPENDIX B Using Financial Analysis 181

Chapter 7 Long-Term Objectives and Strategies 190 Long-Term Objectives

191

Qualities of Long-Term Objectives 192 The Balanced Scorecard 194

Generic Strategies

195

Low-Cost Leadership 195 Differentiation 197 Focus 197

Table of Contents xix The Value Disciplines 197 Operational Excellence 198 Customer Intimacy 198 Product Leadersh ip 199 Grand Strategies 200 1. Concentrated Growth 200 2. Market Development 204 3. Product Development 206 4. Innovation 207 5. Horizontal Acquisition 207 6. Vertical Acquisition 210 7. Concentric Diversification 211 8. Conglomerate Diversification 212 9. Turnaround 213 10. Divestiture 216 11. Liquidation 217 12. Bankruptcy 218 13. Joint Ventures 221 14. Strategic Alliances 224 15. Consortia, Keiretsus, and Chaebols 224 Selection of Long-Term Objectives and Grand Strategy Sets 225 Sequence of Objectives and Strategy Selection 225 Designing a Profitable Business Model 226 Summary 228 Key Terms 228 Questions for Discussion 228

Chapter 8 Business Strategy 230 Evaluating and Choosing Business Strategies: Seeking Sustained Competitive Advantage 231 Evaluating Cost Leadership Opportunities 232 Evaluating Differentiation Opportunities 236 Evaluating Speed as a Competitive Advantage 238 Evaluating Market Focus as a Way to Competitive Advantage 241 Stages ofIndustry Evolution and Business Strategy Choices 243 Competitive Advantage in Fragmented Industries 248 Competitive Advantage in Global Industries 249 Dominant Product/Service Businesses: Evaluating and Choosing to Diversify to Build Value 251 Grand Strategy Selection Matrix 251 Model of Grand Strategy Clusters 253 Opportunities for Building Value as a Basis for Choosing Diversification or Acquisition 255

Summary 256 Key Terms 256 Questions for Discussion

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Chapter 9 Multibusiness Strategy 257 The Portfolio Approach: A Historical Starting Point 261 The BCG Growth-Share Matrix 261 The Industry Attractiveness-Business Strength Matrix 262 BCG s Strategic Environments Matrix 264 Limitations of Portfolio Approaches 265 The Synergy Approach: Leveraging Core Competencies 268 The Corporate Parent Role: Can It Add Tangible Value? 274 The Parenting Framework 2 74 The Patching Approach 277 Summary 280 Key Terms 281 Questions for Discussion 281

PART THREE STRATEGY IMPLEMENTATION, CONTROL, AND INNOVATION 283 Chapter 10 Implementation

285

Short-Term Objectives 288 Qualities of Effective Short-Term Objectives 289 Functional Tactics That Implement Business Strategies 291 Differences between Business Strategies and Functional Tactics 291 Outsourcing Functional Activities 294 Empowering Operating Personnel: The Role of Policies 296 Creating Policies That Empower 296 Bonus Compensation Plans 299 Major Plan Types 299 Matching Bonus Plans and Corporate Goals 305 Summary 308 Key Terms 308 Questions for Discussion 308 APPENDIX Functional Tactics 309

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Table of Contents

Chapter 11 Organizational Structure 316 Traditional Organizational Structures and Their Strategy-Related Pros and Cons 321 Simple Organizational Structure 321 Functional Organizational Structure 322 Divisional Structure 322 Matrix Organizational Structure 325 Product-Team Structure 327 The New Millennium 328 Globalization 329 The Internet 331 Speed 331 Initial Efforts to Improve the Effectiveness of Traditional Organizational Structures 332 Redefine the Role of Corporate Headquarters from Control to Support and Coordination 332 Balance the Demands for Control/Differentiation with the Needfor Coordination/Integration 333 Restructure to Emphasize and Support Strategically Critical Activities 334 Creating Agile, Virtual Organizations 338 Outsourcing—Creating a Modular Organization 338 Strategic Alliances 343 Toward Boundaryless Structures 345 Ambidextrous Learning Organizations 348 Summary 349 Key Terms 351 Questions for Discussion 351

Chapter 12 Leadership and Culture 352 Strategic Leadership: Embracing Change 355 Clarifying Strategic Intent 355 Building an Organization 358 Shaping Organizational Culture 362 Recruiting and Developing Talented Operational Leadership 364 Organizational Culture 368 The Role of the Organizational Leader in Organizational Culture 369 Build Time in the Organization 369 Emphasize Key Themes or Dominant Values 3 72 Encourage Dissemination of Stories and Legends about Core Values 372 Institutionalize Practices That Systematically Reinforce Desired Beliefs and Values 3 73

Adapt Some Very Common Themes in Their Own Unique Ways 373 Manage Organizational Culture in a Global Organization 373 Manage the Strategy-Culture Relationship 3 74 Summary 379 Key Terms 380 Questions for Discussion 380

Chapter 13 Strategic Control 381 Strategic Control 382 Establishing Strategic Controls 383 Premise Control 383 Strategic Surveillance 386 Special Alert Control 387 The Balanced Scorecard Methodology Summary 396 Key Terms 397 Questions for Discussion 397

391

Chapter 14

Innovation and Entrepreneurship 398 What Is Innovation? 399 Incremental Innovation 400 Breakthrough Innovation 405 Risks Associated with Innovation 407 What Is Entrepreneurship? 414 Intrapreneurship 419 Summary 423 Key Terms 423 Questions for Discussion 423

PART FOUR CASES 425 Guide to Strategic Management Case Analysis

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Cases 1-1 1. American Public Education, Inc. 1-1 2. Ann Taylor: Survival in Specialty Retail 2-1 3. The Apollo Group, Inc. [University of Phoenix] 3-1 4. Apple Inc. in 2010 4-1 5. Best Buy Co., Inc.: Sustainable Customer Centricity Model? 5-1 6. Ceja Vineyards: Marketing to the Hispanic Wine Consumer? 6-1

Table of Contents

7. Chi Mei Optoelectronics 7-1 8. Competing for New York's Best Lobster Roll: Failed Trade Protection 8-1 9. Defender Direct, Inc.: A Business of Growing Leaders 9-1 10. Good Hotel: Doing Good, Doing Well? 10-1 11. InBev and Anheuser-Busch 11-1 12. LEGO Group: An Outsourcing Journey 12-1 13. Lennar Corporation's Joint Venture Investments 13-1 14. Louis Vuitton in Japan 14-1 15. Milagrol Ltda. 15-1 16. The Movie Exhibition Industry: 2011 16-1 17. Nil Holdings, Inc. 17-1 18. Philosopher's Wool Co.: SME Sustainable Supply Chain Management in the Global Economy 18-1 19. Salmones Puyuhuapi (A) 19-1 20. Smart Union Group (Holdings) Limited—A (Short) Toy Story 20-1 21. Teva Pharmaceutical Industries, Ltd 21-1 22. The Ultimate Fighting Championships (UFC): The Evolution of a Sport 22-1 23. The Untsiya Company: Business Development in Russia 23-1

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24. Tivo, Inc: Tivo vs. Cable and Satellite DVR; Can Tivo Survive? 24-1 25. TomTom: New Competition Everywhere! 25-1 26. Toyota: The Accelerator Crisis 26-1 27. Veja: Sneakers with a Conscience 27-1 28. Wells Fargo: The Future of a Community Bank 28-1 29. Whole Foods Market 2010: How to Grow in an Increasingly Competitive Market? 29-1 30. Wynn Resorts, Ltd. 30-1

GLOSSARY

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PHOTO CREDITS NAME INDEX

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SUBJECT INDEX CASE INDEX

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