Exploring corporate strategy (8th edition) by Gerry Johnson, Kevan Scholes and Richard Whittington We are delighted to offer this eighth edition of Exploring Corporate Strategy. With sales of previous editions approaching 800,000, we know that we have many loyal readers. At the same time, the strategy field is constantly changing. For this edition, therefore, we have consulted our users to introduce several new features, while taking care to retain features that have been well proven with many students and tutors from all over the world. Here we will highlight the key innovations of this edition, and then recap some of the classic features of the book. The principal innovation of the eighth edition is to reorganise existing materials and introduce new materials to create four new chapters. These new chapters reflect advances in academic research, changes in practice and course developments in many universities around the world. These chapters are: ● Chapter 5 Culture and Strategy, incorporating a strong historical theme, with the growing appreciation of phenomena such as path dependency and institutionalised patterns of behaviour. ● Chapter 8 International Strategy, reflecting of course the growing internationalisation of business, but also the international ambitions of students in many universities. ● Chapter 9 Innovation and Entrepreneurship, responding to the increasing pace of innovation in many industries and the growing interest amongst many students in establishing their own enterprises. ● Chapter 15 The Practice of Strategy, emerging in part from a new research domain in which two of the authors are active, but also the need for students to have insight into the practical details of who gets involved in strategy, what they do and the methodologies they use.
EXPLORING CORPORATE STRATEGY JOHNSON SCHOLES WHITTINGTON 8 TH EDITION www.pearson-books.com An imprint of CORPORATE STRATEGY EXPLORING GERRY JOHNSON KEVAN SCHOLES RICHARD WHITTINGTON 8 TH EDITION Succeed in your studies, enhance your understanding and improve your grade. Use the unique access card provided with all new copies of this book to log on to www.pearsoned.co.uk/ecs and: • Explore key concepts using audio downloads, animated models and quick tests • Track your progress with self-assessment questions and a personal gradebook • Prepare for your exams with revision ‘fl ashcards’ and a multi-lingual mini-dictionary of strategy Over 750,000 students worldwide have used this best-selling book through their academic and professional careers. Join them today and stay at the top of the class with the 8 th edition of Exploring Corporate Strategy! ‘By far the best book in the fi eld I have ever read! [The authors] relate theory to real-life examples which are up to date with current business news. I would most certainly recommend this book to anyone! The on-line features are excellent as well.’ ‘I found this book to be invaluable during [my] Strategic Management module. During my written assignment (which I passed easily) I drew heavily on the concepts and ideas introduced in this publication.’ Customer reviews of 7th edition on amazon.co.uk Are small fi rms more innovative than large organisations? What impact do culture and history have on strategy? What does a strategist actually do? Explore key and contemporary questions such as these, as well as all the fundamental concepts and tools of strategy, plus: • Get the latest developments in this fast-moving fi eld: brand new chapters on innovation and entrepreneurship, international strategy and the practice of strategy keep you at the cutting edge • Read the most recent and intriguing strategy ‘stories’: case studies on familiar and headline-grabbing organisations, such as eBay, Skype, Virgin and many more • Develop your critical thinking skills, using key debates and critical commentaries throughout the text 9780273711919_COVER.indd 1 17/10/07 11:00:52 EXPLORING CORPORATE STRATEGY Visit the Exploring Corporate Strategy, eighth edition Companion Website at www.pearsoned.co.uk/ecs. Register to create your own personal account using the access code supplied with this book to find valuable student learning material including: ● Key concepts: audio downloads, video clips, animations and quick tests to reinforce your understanding ● Chapter audio summaries that you can download or listen to online ● Self assessment questions and a personal gradebook so you can test your learning and track your progress ● Revision flashcards to help you prepare for your exams ● A multi-lingual online glossary to explain key concepts ●l Guidance on how to analyse a case study ● Links to relevant sites on the web so you can explore more about the organisa- tions featured in the case examples and case studies ECS8_A01.qxd 22/10/2007 11:37 Page i Gerry Johnson BA, PhD (left) is The Professor Sir Roland Smith Chair of Strategic Management at Lancaster University School of Management and a Senior Fellow of the UK Advanced Institute of Management (AIM) Research. He is the author of numerous books, has published papers in many of the foremost management research journals in the world and is a regular speaker at the major academic conferences throughout the world. He also serves on the editorial boards of the Academy of Management Journal, the Strategic Management Journal and the Journal of Management Studies. His research is into strategic management practice, processes of strategy development and strategic change in organisations. As a consultant he works with senior management teams on issues of strategy development and strategic change where he applies many of the concepts from Exploring Corporate Strategy to help them challenge, question and develop the strategies of their organisations. Kevan Scholes MA, PhD, DMS, CIMgt, FRSA (centre) is Principal Partner of Scholes Associates – specialising in strategic management. He is also Visiting Professor of Strategic Management and formerly Director of the Sheffield Business School, UK. He has extensive experience of teaching strategy to both undergraduate and postgraduate students at several universities. In addition his corporate management development work includes organisations in manufacturing, many service sectors and a wide range of public service organisations. He has regular commitments outside the UK – including Ireland, Australia and New Zealand. He has also been an advisor on management development to a number of national bodies and is a Companion of The Chartered Management Institute. Richard Whittington MA, MBA, PhD (right) is Professor of Strategic Management at the Saïd Business School and Millman Fellow at New College, University of Oxford. He is author or co-author of eight books and has published many journal articles. He is a senior editor of Organization Studies and serves on the editorial boards of Organization Science, the Strategic Management Journal and Long Range Planning, amongst others. He has had full or visiting positions at the Harvard Business School, HEC Paris, Imperial College London, the University of Toulouse and the University of Warwick. He is active in executive education and consulting, working with organisations from across Europe, the USA and Asia. His current research is focused on strategy practice and international management. ECS8_A01.qxd 22/10/2007 11:37 Page ii EIGHTH EDITION EXPLORING CORPORATE STRATEGY Gerry Johnson University of Strathclyde Kevan Scholes Sheffield Hallam University Richard Whittington Saïd Business School, University of Oxford ECS8_A01.qxd 22/10/2007 11:37 Page iii Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk Fifth edition published under the Prentice Hall imprint 1998 Sixth edition published under the Financial Times Prentice Hall imprint 2002 Seventh edition 2005 Eighth edition published 2008 © Simon & Schuster Europe Limited 1998 © Pearson Education Limited 2002, 2008 The rights of Gerry Johnson, Kevan Scholes and Richard Whittington to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN: 978-0-273-71191-9 (text only) ISBN: 978-0-273-71192-6 (text and cases) British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10987654321 11 10 09 08 07 Typeset in 9.5/13pt Linoletter by 35 Printed and bound by Rotolito Lombarda, Italy The publisher’s policy is to use paper manufactured from sustainable forests. ECS8_A01.qxd 22/10/2007 11:37 Page iv Chapter 1 Introducing Strategy 1 Commentary The Strategy Lenses 29 Part I THE STRATEGIC POSITION 49 Introduction to Part I 51 Chapter 2 The Environment 53 Chapter 3 Strategic Capability 93 Chapter 4 Strategic Purpose 131 Chapter 5 Culture and Strategy 177 Commentary on Part I The Strategic Position 212 Part II STRATEGIC CHOICES 215 Introduction to Part II 217 Chapter 6 Business-Level Strategy 221 Chapter 7 Directions and Corporate-Level Strategy 255 Chapter 8 International Strategy 293 Chapter 9 Innovation and Entrepreneurship 323 Chapter 10 Strategy Methods and Evaluation 355 Commentary on Part II Strategic Choices 392 Part III STRATEGY IN ACTION 395 Introduction to Part III 397 Chapter 11 Strategy Development Processes 399 Chapter 12 Organising for Success 433 Chapter 13 Resourcing Strategies 473 Chapter 14 Managing Strategic Change 517 Chapter 15 The Practice of Strategy 557 Commentary on Part III Strategy in Action 594 Brief Contents ECS8_A01.qxd 22/10/2007 11:37 Page v ECS8_A01.qxd 22/10/2007 11:37 Page vi List of Illustrations xvii List of Exhibits xix Preface xxiii Getting the Most from Exploring Corporate Strategy xxvi Guided Tour xxx Acknowledgements xxxiv 1 Introducing Strategy 1 1.1 Introduction 2 1.2 What is strategy? 2 1.2.1 The characteristics of strategic decisions 2 1.2.2 Levels of strategy 7 1.2.3 The vocabulary of strategy 9 1.3 Strategic management 11 1.3.1 The strategic position 13 1.3.2 Strategic choices 14 1.3.3 Strategy in action 15 1.4 Strategy as a subject of study 16 1.5 Strategy as a job 18 1.6 The strategy lenses 19 Summary 22 Work assignments 23 Recommended key readings 23 References 24 Case example: Electrolux 25 Commentary The Strategy Lenses 29 Introduction to Part I 51 2 The Environment 53 2.1 Introduction 54 2.2 The macro-environment 55 2.2.1 The PESTEL framework 55 2.2.2 Building scenarios 57 Detailed Contents THE STRATEGIC POSITION Part I ECS8_A01.qxd 22/10/2007 11:37 Page vii DETAILED CONTENTS viii 2.3 Industries and sectors 59 2.3.1 Competitive forces – the five forces framework 59 2.3.2 The dynamics of industry structure 67 2.4 Competitors and markets 73 2.4.1 Strategic groups 73 2.4.2 Market segments 77 2.4.3 Identifying the strategic customer 78 2.4.4 Understanding what customers value – critical success factors 79 2.5 Opportunities and threats 81 Summary 83 Work assignments 85 Recommended key readings 86 References 86 Case example: Global forces and the European brewing industry 88 3 Strategic Capability 93 3.1 Introduction 94 3.2 Foundations of strategic capability 95 3.2.1 Resources and competences 95 3.2.2 Threshold capabilities 96 3.2.3 Unique resources and core competences 97 3.3 Cost efficiency 99 3.4 Capabilities for achieving and sustaining competitive advantage 101 3.4.1 Value of strategic capabilities 102 3.4.2 Rarity of strategic capabilities 102 3.4.3 Inimitable strategic capabilities 103 3.4.4 Non-substitutability of strategic capabilities 106 3.4.5 Dynamic capabilities 107 3.5 Organisational knowledge 107 3.6 Diagnosing strategic capability 109 3.6.1 The value chain and value network 110 3.6.2 Activity maps 114 3.6.3 Benchmarking 116 3.6.4 SWOT 119 3.7 Managing strategic capability 120 3.7.1 Limitations in managing strategic capabilities 120 3.7.2 Developing strategic capabilities 121 3.7.3 Managing people for capability development 121 Summary 123 Work assignments 125 Recommended key readings 125 References 126 Case example: Making eBay work 128 4 Strategic Purpose 131 4.1 Introduction 132 4.2 Corporate governance 133 ECS8_A01.qxd 22/10/2007 11:37 Page viii DETAILED CONTENTS ix 4.2.1 The governance chain 133 4.2.2 Corporate governance reforms 138 4.2.3 Different governance structures 138 4.2.4 How governing bodies influence strategy 143 4.2.5 Ownership choices 144 4.3 Business ethics and social responsibility 145 4.3.1 Corporate social responsibility 145 4.3.2 The role of individuals and managers 150 4.4 Stakeholder expectations 153 4.4.1 Stakeholder mapping 156 4.4.2 Power 160 4.5 Organisational purposes: values, mission, vision and objectives 163 4.5.1 Corporate values 163 4.5.2 Mission and vision statements 164 4.5.3 Objectives 164 Summary 167 Work assignments 169 Recommended key readings 170 References 170 Case example: Product Red and Gap 173 5 Culture and Strategy 177 5.1 Introduction 178 5.2 Strategic drift 179 5.2.1 Strategies change incrementally 179 5.2.2 The tendency towards strategic drift 180 5.2.3 A period of flux 183 5.2.4 Transformational change or death 183 5.3 Why is history important? 184 5.3.1 Path dependency 185 5.3.2 Historical analysis 188 5.4 What is culture and why is it important? 189 5.4.1 National and regional cultures 190 5.4.2 The organisational field 192 5.4.3 Organisational culture 194 5.4.4 Organisational subcultures 195 5.4.5 Culture’s influence on strategy 196 5.4.6 Analysing culture: the cultural web 197 5.4.7 Undertaking cultural analysis 201 5.5 Managing in an historic and cultural context 203 Summary 205 Work assignments 205 Recommended key readings 206 References 206 Case example: Marks & Spencer (A) 208 Commentary on Part I The Strategic Position 212 ECS8_A01.qxd 22/10/2007 11:37 Page ix [...]... Page xxviii GETTING THE MOST FROM EXPLORING CORPORATE STRATEGY ● PowerPoint slides ● Secure test bank of assessment questions Exploring Corporate Strategy – video resources DVD The DVD contains mini briefings on selected topics from the authors and material to support some of the case studies 1 With the Experts (the authors explain key concepts for use in class): ● Strategy in different contexts ● Porter’s... vocabulary of strategy The Exploring Corporate Strategy model Design lens Experience lens Adaptive tensions Ideas lens Discourse lens A summary of the strategy lenses Layers of the business environment The five forces framework The industry life cycle Cycles of competition Comparative industry structure analysis Some characteristics for identifying strategic groups Some bases of market segmentation A strategy. .. Strathclyde and Kate Goodman at Oxford Gerry Johnson Kevan Scholes Richard Whittington November 2007 xxv ECS8_A01.qxd 22/10/2007 11:37 Page xxvi Getting the Most from Exploring Corporate Strategy Through the various editions of Exploring Corporate Strategy we have tried to respond to the continuing demand for more material whilst keeping the size of the text manageable for readers These demands have included... and students was considerably extended This note gives some practical advice on how you might gain most advantage from this wide and varied range of materials Using Exploring Corporate Strategy To get the most from Exploring Corporate Strategy and related materials the broad advice to students and managers is to ensure that you have achieved three things: ● you understand the concepts; ● you can apply... 368 380 382 383 385 386 386 389 392 Part III STRATEGY IN ACTION Introduction to Part III 397 11 Strategy Development Processes 399 11.1 Introduction 11.2 Intended strategy development 11.2.1 Strategy development through strategic leadership: the role of vision and command 11.2.2 Strategic planning systems 11.2.3 Externally imposed strategy 11.3 Emergent strategy development 11.3.1 Logical incrementalism... sustainability) ● Amazon.com (business-level strategy) ● Eurotunnel (a clash of national cultures) ● Manchester United (football club or business?) ● easyJet (competitive strategy) ● Marks & Spencer (two CEOs on managing turnaround) The Exploring Strategic Management series This series from FT/Prentice Hall builds on readers’ knowledge of Exploring Corporate Strategy and provides more depth by topic or... decision making 15.3.4 Communicating the strategy 15.4 Strategy methodologies 15.4.1 Strategy workshops 15.4.2 Strategy projects 15.4.3 Hypothesis testing 15.4.4 Business cases and strategic plans Summary Work assignments Recommended key readings References Case example: Ray Ozzie, software strategist 572 574 575 576 578 579 581 585 585 586 586 589 Commentary on Part III Strategy in Action 594 Glossary Index... position, strategic choices and strategy in action – challenges a simple linear, sequential view of the strategy process ● Range of examples This edition maintains the wide range of examples used in the text, illustrations and cases We draw from all over the world, and from a wide range of type and size of organisation An important distinctive feature of Exploring Corporate Strategy is the use of examples... Scholes, Exploring Techniques of Analysis and Evaluation in Strategic Management, 1998; ISBN: 0-13-570680-7 ● T Grundy with G Johnson and K Scholes, Exploring Strategic Financial Management, 1998; ISBN: 0-13-570102-3 ● J Balogun and V Hope-Hailey with G Johnson and K Scholes, Exploring Strategic Change, 3rd edition, 2008; ISBN: 0-273-70802-3 ● G Johnson and K Scholes (editors), Exploring Public Sector Strategy, ... audio summaries, weblinks to organisations featured in the text, definitions of key concepts and self-assessment questions, can be found on the Exploring Corporate Strategy Companion Website at www.pearsoned.co.uk/ecs Notes 1 E.H Bowman and C.E Helfat, ‘Does corporate strategy matter?’, Strategic Management Journal, vol 22, no 1 (2001), pp 1–14 2 R.P Rumelt, ‘How much does industry matter?’, Strategic Management . EXPLORING CORPORATE STRATEGY JOHNSON SCHOLES WHITTINGTON 8 TH EDITION www.pearson-books.com An imprint of CORPORATE STRATEGY EXPLORING GERRY JOHNSON KEVAN SCHOLES RICHARD WHITTINGTON 8 TH . teams on issues of strategy development and strategic change where he applies many of the concepts from Exploring Corporate Strategy to help them challenge, question and develop the strategies. of strategy, plus: • Get the latest developments in this fast-moving fi eld: brand new chapters on innovation and entrepreneurship, international strategy and the practice of strategy keep you