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Check with your instructor about a custom option for your course > Buy directly from the source at http://shop.mheducation.com Crafting and Executing Strategy Concepts and Readings www.downloadslide.net Crafting and Executing Strategy Concepts and Readings | TWENTIETH EDITION Arthur A Thompson Margaret A Peteraf The University of Alabama Dartmouth College John E Gamble A J Strickland III Texas A&M University–Corpus Christi The University of Alabama www.downloadslide.net CRAFTING AND EXECUTING STRATEGY: THE QUEST FOR COMPETITIVE ADVANTAGE, CONCEPTS AND READINGS, TWENTIETH EDITION Published by McGraw-Hill Education, Penn Plaza, New York, NY 10121 Copyright © 2016 by McGraw-Hill Education All rights reserved Printed in the United States of America Previous editions © 2014, 2012, 2010 and 2007 No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning Some ancillaries, including electronic and print components, may not be available to customers outside the United States This book is printed on acid-free paper DOW/DOW ISBN 978-1-259-29707-6 MHID 1-259-29707-1 Senior Vice President, Products & Markets: Kurt L Strand Vice President, General Manager, Products & Markets: Michael Ryan Vice President, Content Design & Delivery: Kimberly Meriwether David Managing Director: Susan Gouijnstook Director: Michael Ablassmeir Director, Product Development: Meghan Campbell Product Developer: Trina Hauger Marketing Manager: Elizabeth Trepkowski Director, Content Design & Delivery: Terri Schiesl Program Manager: Mary Conzachi Content Project Managers: Mary E Powers, Daryl Bruflodt Buyer: Michael McCormick Design: Srdjan Savanovic Content Licensing Specialists: Keri Johnson Cover Image: © D-BASE/iStock, Getty Images Compositor: Laserwords Private Limited Printer: R R Donnelley All credits appearing on page or at the end of the book are considered to be an extension of the copyright page Library of Congress Cataloging-in-Publication Data Thompson, Arthur A., 1940Crafting and executing strategy : the quest for competitive advantage : concepts and readings/ Arthur A Thompson, Margaret A Peteraf, John E Gamble, A J Strickland III.— Twentieth edition pages cm ISBN 978-1-259-29707-6 (alk paper) Strategic planning Business planning I Title HD30.28.T525 2015 658.4’012 dc23 2014033214 The Internet addresses listed in the text were accurate at the time of publication The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGrawHill Education does not guarantee the accuracy of the information presented at these sites www.mhhe.com www.downloadslide.net To our families and especially our spouses: Hasseline, Paul, and Kitty www.downloadslide.net ABOUT THE AUTHORS Arthur A Thompson, Jr., earned his B.S and Ph.D degrees in economics from The University of Tennessee, spent three years on the economics faculty at Virginia Tech, and served on the faculty of The University of Alabama’s College of Commerce and Business Administration for 24 years In 1974 and again in 1982, Dr Thompson spent semester-long sabbaticals as a visiting scholar at the Harvard Business School His areas of specialization are business strategy, competition and market analysis, and the economics of business enterprises In addition to publishing over 30 articles in some 25 different professional and trade publications, he has authored or co-authored five textbooks and six computer-based simulation exercises His textbooks and strategy simulations have been used at well over 1,000 college and university campuses worldwide Dr Thompson spends much of his off-campus time giving presentations, putting on management development programs, working with companies, and helping operate a business simulation enterprise in which he is a major partner Dr Thompson and his wife of 53 years have two daughters, two grandchildren, and a Yorkshire Terrier Margaret A Peteraf is the Leon E Williams Professor of Management at the Tuck School of Business at Dartmouth College She is an internationally recognized scholar of strategic management, with a long list of publications in top management journals She has earned myriad honors and prizes for her contributions, including the 1999 Strategic Management Society Best Paper Award recognizing the deep influence of her work on the field of Strategic Management Professor Peteraf is a fellow of the Strategic Management Society and the Academy of Management She served previously as a member of the Board of Governors of both the Society and the Academy of Management and as Chair of the Business Policy and Strategy Division of the Academy She has also served in various editorial roles and on numerous editorial boards, including the Strategic Management Journal, the Academy of Management Review, and Organization Science She has taught in Executive Education programs in various programs around the world and has won teaching awards at the MBA and Executive level Professor Peteraf earned her Ph.D., M.A., and M.Phil at Yale University and held previous faculty appointments at Northwestern University’s Kellogg Graduate School of Management and at the University of Minnesota’s Carlson School of Management viii www.downloadslide.net John E Gamble is a Professor of Management and Dean of the College of Business at Texas A&M University–Corpus Christi His teaching and research for nearly 20 years has focused on strategic management at the undergraduate and graduate levels He has conducted courses in strategic management in Germany since 2001, which have been sponsored by the University of Applied Sciences in Worms Dr Gamble’s research has been published in various scholarly journals and he is the author or co-author of more than 75 case studies published in an assortment of strategic management and strategic marketing texts He has done consulting on industry and market analysis for clients in a diverse mix of industries Professor Gamble received his Ph.D., Master of Arts, and Bachelor of Science degrees from The University of Alabama and was a faculty member in the Mitchell College of Business at the University of South Alabama before his appointment to the faculty at Texas A&M University–Corpus Christi Dr A J (Lonnie) Strickland is the Thomas R Miller Professor of Strategic Management at the Culverhouse School of Business at The University of Alabama He is a native of north Georgia, and attended the University of Georgia, where he received a Bachelor of Science degree in math and physics; Georgia Institute of Technology, where he received a Master of Science in industrial management; and Georgia State University, where he received his Ph.D in business administration Lonnie’s experience in consulting and executive development is in the strategic management arena, with a concentration in industry and competitive analysis He has developed strategic planning systems for numerous firms all over the world He served as Director of Marketing and Strategy at BellSouth, has taken two companies to the New York Stock Exchange, is one of the founders and directors of American Equity Investment Life Holding (AEL), and serves on numerous boards of directors He is a very popular speaker in the area of strategic management Lonnie and his wife, Kitty, have been married for 48 years They have two children and two grandchildren Each summer, Lonnie and his wife live on their private game reserve in South Africa where they enjoy taking their friends on safaris ix www.downloadslide.net I-30 SUBJECT INDEX P Parenting advantage, 228 Partial integration, 159 Partnerships; see Strategic alliances Patents, as barrier to entry, 54 Peer-based control, 330 Peer evaluation, 220 Peer pressure, culture-induced, 350 Peer-to-peer networks, R-32 People, performance metric, 272 Performance, 361 Performance bonuses, 335–336 Performance evaluation, 20 Performance gap, R-85–R-86 Performance indicators, 13 Performance measurement system, 29 Performance measures for diversified companies, R-109–R-110 return on capital employed, R-110 return on funds employed, R-110 return on total capital, R-110 Performance metrics people, 272 planet, 272–273 profit, 273 Performance targets, 336 Performance test, 12–13 Perks, 331 Personal gain, 262–263 PESTEL analysis, R-45, R-48 components of, 48 definition, 45–46 Philanthropic initiatives, 269–270 Physical resources, 85 Pioneering; see also First-mover advantages bases of success, R-70 to build reputation, 152 dependence on business model, R-76–R-77 high cost and benefits, 152 response to attackers low-cost differentiation, R-75–R-76 shift basis of competition, R-75–R-76 studies on, R-70–R-71 Planet, performance metric, 272 Plant managers, 32 Policy decisions, veto of, R-120 Political factors, 48 Political risks, 181 Politicized cultures, 353 Ponzi scheme, 267 Poor performance, negative consequences, 361 Portfolio approach, 240 Power from sharing, R-120 Power of Habit (Duhigg), R-130 Practices; see also Best practices in clashing subcultures, 354 in corporate culture, 344–345 Preemptive strike, 147 Preference gap, R-87 Premium price for acquisitions, 214 versus quantity sold, R-55 too high, 131 Price(s) kept low in developing countries, 200–201 lower for equal or better products, 146 low from low costs, R-72 Price competition, vigorous among rivals, 124 Price-to-earnings ratio, 83 Price wars, 51 Primary value chain activities and costs, 96 definition, 95 distribution, 96 and internal cost structure, 98 operations, 96 sales and marketing, 96 service, 96 supply chain management, 96 Privacy in social networks, R-32 Proactive strategy, 8–9 Problems, failure to face, R-3 Process design improving, 121 Process innovation as driving force, 65 Procurement, R-51–R-52 Product boycotts, 278–279 Product differentiation in beer industry, 73 difficult to achieve, 124 Product innovation as driving force, 65 Production, advanced technologies, 121 Production capacity in beer industry, 73 unused, 51 Productivity, increase from offshoring, R-80 Product life cycle, extending, 176 Product quality, in network markets, R-32–R-33 Product redesign, to reduce value chain costs, 102 Products in broad differentiation strategy, 126 complementary, R-30 effect of network effects, R-26 equal or better at lower price, 146 identical among rivals, 124 intangible features, 129 interaction among users of, R-29 less differentiation, 51 next-generation, 146 signaling value of, 129 standardized, 124, 184 tangible features, 129 trivial differences in, 131 as value-driver, 126 Profit and buyer price sensitivity, 61 versus market share, 125 in mission statement, 24–25 performance metric, 273 versus unit sales, 125 in unrelated diversification, 225 Profitability, 13 eroded by overspending, 131 identifying threats to, 93 for industry attractiveness, 232 industry outlook for, 73–74 potential external threats, 92 in radio broadcasting, 12 from strategic fit, 223 and strength of five competitive forces, 62 Profitable growth, 229 Profit formula definition, 10 in radio broadcasting, 11–12 Profit margin, 95–97 Profit sanctuaries cross-market subsidization, 199 to defend against international rivals, 199–200 definition, 198 for strategic offensives, 198–199 Promotion from within, 331 Property rights protection, first-mover advantage, 152 Prudence, aspect of stewardship, R-117 Punishment, and reward systems, 332–334 Purchasing function corporate culture and, R-122 identifying and building capabilities, R-121–R-122 scaling up and institutionalizing, R-123–R-124 www.downloadslide.net SUBJECT INDEX training for, R-122–R-123 underinvestment in, R-121 Purchasing information program, R-123 Purchasing power, in foreign markets, 176 Purchasing team, R-121 Q Qiye jituan, in China, R-96 Quality, in core values, 26 Quantum gains, 325–326 R Radio broadcasting, 11–12 Radio frequency identification tags, R-52 Rapid growth, to defend against global giants, 203 Rare resources, 87 Raw materials, access to, in foreign markets, 176 Reactive strategy, 8–9 Realized strategy, Reallocation of cost activities, to reduce value chain costs, 102 Real-time data-generating, 329 Recognition, 331 Recruitment, 293–296 high-tech companies, 295 Regulatory forces description, 48 as driving force, 66 Regulatory gap, R-87 Regulatory policy restrictions, 54 Reinvention, R-65 Related and supporting industries, 179 Related businesses, 217 Related diversification identifying strategic fit customer service, 222 distribution, 221–222 manufacturing, 221 research and development, 220–221 sales and marketing, 221 supply chain activities, 220 technology, 220–221 at Microsoft, 234 multidivisional structure as problem for, 307 strategic fit, 223 based on value chain matchup, 218–219 common use of brand names, 218 for competitive advantage, 223 cost-sharing, 217 and economies of scope, 222–223 representative value chain activities, 220 sharing resources, 218 transfer of expertise, 217 Related-unrelated diversification, 230 Relationship managers, 311 Relationships, as resources, 85 Religions, condemnation of bribery, 261 Reputation, from corporate social responsibility, 278–279 Reputational assets, 85 Research and development in broad differentiation strategy, 126 cross-business strategic fit, 31––311 in related diversification, 220–221 value chain activity, 96 as value-driver, 126 Resource allocation in business groups, R-99–R-100 priority, 242 Resource and capability analysis assessing competitive power, 87–89 definition, 83–84 identifying capabilities, 85–87 types of resources, 84–85 Resource-based competitive strategies, 138–140 Resource-based view of the firm, and Meta-SWOT, R-43–R-45 Resource bundles, 86–87 Resource fit for diversified company definition, 238 financial fit, 239–241 nonfinancial fit, 241 Resources acquiring and developing, 291–292 approaches to building, 296–300 attracted, not collected, R-120 building blocks of strategy, 84 comparative value of, 84 as competitive assets, 83 competitively superior, 88 in concentrated locations, 195 cross-border transfer, 196–198 definition, 84 dynamically managed, 89 in foreign markets, 176 general, 218–219, 225 identifying, 84–85 in industry attractiveness, 232 I-31 intangible, 84–85 Meta-SWOT analysis, R-43–R-49 question for diversification, 216 related to value chain, 103–104 required for vertical integration, 161 shared in related diversification, 218–219 specialized, 218–219 steered to attractive business units, 212 tangible, 84–85 tests of competitive power inimitable resource, 87 nonsubstitutable resource, 88 rare resource, 87 valuable resource, 87 VRIN conditions, R-44–R-45, R-47–R-48 Restrictive regulatory policies, 54 Restrictive trade policies, 54–55 Restructuring of business lineup, 246 and erosion of financial performance, 246 examples, 246 guide for, 246 at Kraft Foods, 243 special circumstances for, 246 undervalued companies, 227 Retailers bargaining power, 60 bypassing, 160–161 coordinating with, 129 securing shelf space from, 54 and supplier bargaining power, 58 Retaliation fear of, 51 impelled by disruptive innovation, R-73 signaling, 151 Retrenching divestiture, 245–246 examples, 245 spin-offs, 245 Return on assets, 81 Return on capital employed, 81, R-110 Return on equity, 81 of diversified companies, R-107 Return on funds employed, R-110 Return on invested capital, 81 Return on investment and corporate culture, R-111 from employee recognition, R-128–R-129 Return on stockholder equity, 81 www.downloadslide.net I-32 SUBJECT INDEX Return on total capital, R-110 Revenue enhancement, 279 Reverse innovation as clean-slate innovation, R-88 as competitive threat, R-88 disrupting mainstream markets, R-89–R-90 entering marginalized markets, R-88–R-89 at General Electric, R-85 low price-point innovation, R-84 from studying gaps infrastructure gap, R-86 performance gap, R-85–R-86 preference gap, R-87 regulatory gap, R-87 sustainability gap, R-86–R-87 Reward systems for achieving right outcomes, 334 celebrating successes of employees, 361 communicated and explained, 336 company examples, 333 employee recognition, R-128–R-129 for executives, 334 financial incentives, 331 focus on accomplishment, 330–331 incentive compensation, 335–336 at Nucor Corporation, 335 powerful management tool, 330 and punishment, 332–334 Risk reduction, misguided motive for diversification, 229 Risks adverse exchange-rate shifts, 181–183 export strategies, 185 greenfield ventures, 186–187 of international strategies, 193 licensing strategies, 185 of offshoring, R-80, R-81 of strategic alliances with foreign partners, 187–189 Rivalry, evaluating strength of, 53 Rivalry among competing sellers choice of competitive weapons, 52, 53 diversity of competitors, 51–52 excess supply, 51 factors affecting, 50 increase from less differentiation, 51 increase from low switching costs, 51 increase in number of competitors, 51 slow or declining demand, 50–51 unused production capacity, 51 Rivals; see also Competitors chosen for attack local and regional firms, 148 market leaders, 148 runner-up firms, 148 struggling enterprises, 148 comparing value chains of, 97–98 in competitor analysis assumptions, 72 capabilities, 71 current strategy, 71 objectives, 71 differentiating by few, 130 essentially identical products, 124 set apart from, using profit sanctuaries against, 199–200 vigorous price competition, 124 Rival sellers, 49 Robotic production technology, 121 Routines, R-38–R-39 Routines for running a company, 319 Runner-up firms, 147 Russia, kickbacks in, 258 S Sales in related diversification, 221 value chain activity, 96 Sarbanes-Oxley Act, 261 Save the Children, 259 Scope decisions, 155 Scope of the firm and competitive position, 154–155 definition, 154 horizontal, 155 outsourcing decisions, 155 vertical, 155 Securities and Exchange Commission, 39, 261–262 and accounting fraud, 263 bribery cases, 258–259 Self-dealing, 262 Self-interest, 262–263 Service, value chain activity, 96 Shareholders benefits of corporate social responsibility, 280 effect of unethical conduct on, 267 management as agent of, 37–38 Shareholder value and business groups, R-105 from diversification, 213 from strategic fit, 223 from unrelated diversification, 225–228 Shelf space, 54 Short-term earnings targets, 263–264 Short-termism, 264 Short-term objectives, 27–28 Short-term performance, and executive compensation, 38 Showcasing successes, 331 Simple structure, 305 Single-business company strategy components, 80 strategy-making hierarchy, 33, 34 Six Sigma programs to achieve excellence, 360 and ambidextrous organizations, 325 blended approach to, 325 capturing benefits from, 327–328 compared to business process reengineering, 325–326 culture of operating excellence from, 327 definition, 324 to improve health care, 325 ongoing incremental process, 326 problems with, 325 statistical thinking underlying, 324 types, 324 users of, 324–325 at Whirlpool, 326 Skilled labor, in offshoring destinations, R-80 Slogan, vision expressed as, 22–23 Slotting fees, 60 Social complexity, 88 Social conscience, 268 Social contract, 260–261 implied, 278 Social environment, and social context of Web, R-119 Socially responsible funds, R-117–R-118 Social media marketing, R-125 Social networks high-stakes battle, R-26 privacy concerns, R-30 uncertainty for future, R-26 Societal concerns, changing, 66 Sociocultural forces, 48 Sourcing, R-51–R-52 South Korea, chaebol, R-96 Specialist, R-8 Specialized resources and capabilities, 218–219 www.downloadslide.net SUBJECT INDEX Speed, question for diversification, 216 Spin-offs, 245 Stabilization, misguided motive for diversification, 229 Staffing, 290 in high-tech companies, 295 recruiting, training, and retaining employees, 293–296 strong management team, 292–293 Stakeholders, and corporate culture, R-111 Standard and Poor’s Quality Rankings, R-106 Standardization economies of scale from, 184 learning-curve effects, 184 Star business units, 240 Startups, barriers to entry, 213 Static model, balanced scorecard as, R-18–R-19 Statistical information, 330 Stewardship qualities of, R-117 self-test, R-118 Stock price from short-term performance, 38 Storage costs, 51 Stories, role in corporate culture, 347–348 Strategic actions, 93–94 Strategic alliances, 155 advantages over arm’s-length transaction, 168 advantages over mergers and acquisitions, 168 advantages over vertical integration, 168 capturing benefits of decision-making process, 167 delivering on commitments, 167 managing learning process, 167 mutual benefits, 167 picking good partners, 167 sensitivity to cultural differences, 167 collaboration in, 311 definition, 165 drawbacks, 168–169 to enter foreign markets examples, 187 reasons for, and benefits, 187 risks, 187–189 Solazyme, 188 examples, 165, 166 to extend scope of operations, 164–165 joint ventures, 165 longer-lasting, 167–168 and new technologies, 166 versus outsourcing, 165 purposes, 165–166 reasons for effectiveness, 169–170 with suppliers and producers, R-72 termination of, 167 transaction costs, 187–188 Strategic ambidexterity, R-65 Strategic analysis, for diversified company business unit competitiveness, 234–238 competitive value of strategic fit, 238 industry attractiveness, 231–234 new strategic moves, 242–246 ranking business units, 242 resource allocation priority, 324 resource fit, 238–241 steps, 230–231 Strategic balance sheet, 91 Strategic business units, 306 Strategic control bias, R-18 Strategic fit, R-45 capturing benefits of, 223 for competitive advantage, 223 competitive advantage from crossbusiness, 239 cross-business customer service, 222 distribution-related, 221–222 manufacturing-related, 221 research and development, 220 sales and marketing, 221 supply chain activities, 220 technology-related, 220 in decentralized structures, 310–311 determinants for diversified company, 238 and economies of scope, 222–223 examples brand-name use, 218 cost-sharing, 217 resource sharing, 218–219 transfer of expertise, 217 in industry attractiveness, 232 at Microsoft, 224 not involved in unrelated diversification, 224 Strategic group, 68 Strategic group mapping constructing, 68 definition, 67–68 example, 69 I-33 guidelines, 68 strategic groups, 68 value of effect of driving forces, 70 identifying close vs distant rivals, 69 profit prospect, 70 variables, 68 Strategic innovation, archetypes maximizing economies of scale, R-68 maximizing economies of scope, R-68 new business model design, R-68–R-69 new value configuration, R-67–R-68 pursue unserved, underserved, nontraditional customers, R-68–R-69 Strategic intent, 27 Strategic objectives and balanced scorecard, 29 common, 28 definition, 27–28 Strategic offensives blocking avenues open to challengers, 149–150 blue ocean strategy, 148–149 choosing basis for attack, 146–148 choosing rivals to attack, 148 to defend against global giants, 202–204 definition, 145 examples, 145–146 first-mover decision, 153 principles of, 146 signaling retaliation, 151 from strongest competitive assets, 146 timing potential for first movers, 152–153 potential for late movers, 152–153 using profit sanctuaries, 198–199 Strategic options to improve performance, 242–246 broadening business base, 243–245 restructuring, 246 retrenching, 245–246 sticking with business lineup, 243 Strategic performance, 28 Strategic plan, 20 Strategic planning models, R-43 quality standards, R-45 www.downloadslide.net I-34 SUBJECT INDEX Strategic vision, 19 Coca-Cola Company, 23 communicating, 21–24 compared to mission statement, 24 definition, 21 developing, 21 distinctive and specific, 21 dos and don’ts of vision statement, 22 expressed as slogan, 22–23 H J Heinz, 23 linked to mission and objectives, 34–35 motivational value, 22 Procter & Gamble, 23 reference point for decisions, 21 shortcomings, 23 significance of, 24 stated to employees, 332 in template-style strategy, R-5 winning support for, 21–22 Strategist as meaning-maker for companies, R-136–R-127 as operator, R-137–R-138 role of, R-136 understanding competitive force, R-137 as voice of reason, R-137 Strategy-critical activities, 304–305 Strategy execution action agenda, 35, 289 adopting best practices business process reengineering, 322–323 capturing benefits, 327–328 differences between practices, 324–326 identifying, 321–322 Six Sigma programs, 324–325 total quality management, 323–324 allocating resources in fast-market development, 318 and new organizational units, 318 and strategy change, 318 too little or too much funding, 317–318 basic tasks, 287, 290 capabilities at Zara, 300 competitive advantage from, 299–300 in competitive environment, R-69 components of process, 288–289 corrective adjustments, 36 impact of ethical standards, 261–262 information systems, 328–330 interrelated and linked stages, 362 interrelated stages, 19–20 leadership in making corrective adjustments, 361–362 management by walking around, 359–360 mobilizing for excellence, 360–361 requirements, 358–359 matching organizational structure to, 301–312 more difficult than strategy making, 287–288 operating systems, 328–330 organizational-building for critical resources and capabilities for, 296–300 staffing, 290, 292–296 structuring work effort, 391–398 and organizational learning, 36 performance evaluation, 36 policies and procedures ensuring consistency, 320 examples, 320 strictly prescribed vs independent action, 320–231 top-down guidance, 319–320 work climate, 320 principal aspects, 35 pursuit of operating excellence, 36 rewards and incentives for, 330–336 significance of corporate culture for, 349–350 and size of organization, 289 and type of organizational structure divisional structure, 306–307 functional structure, 305–306 matrix, 307 simple structure, 305 by whole management team, 288 Strategy making adjustments to prepare for driving forces, 67 at all organizational levels, 30–31 based on Meta-SWOT, R-43–R-49 based on SWOT, R-42 in competitive environment, R-69 for diversified company, 211 easier than execution, 287–288 focus of, 287 forecasting and budgeting for, R-15 for foreign markets complexity of, 177 cross-country differences, 183–184 home-country advantages, 177–179 impact of economic conditions, 180–181 impact of government policies, 180–181 location-based activities, 179–180 risk of exchange-rate shifts, 181–183 at General Electric, 31 impact of ethical standards, 261–262 interrelated and linked stages, 362 interrelated stages, 19–20 from key success factors, 73 linking vision and mission to values, 25–26 mission statement, 24–25 moving to execution development and selection, R-14 execution and refinement, R-14 idea generation, R-14 for offshoring adapt to new reality, R-83 big-picture thinking, R-83 decisions on activities to outsource, R-83 develop local talent, R-83 examine destinations, R-83 governance, R-83 setting objectives, 27–30 strategic plan, 20, 34–35 strategic vision, 21–24 underlying structure coherent actions, R-6 diagnosis, R-6 guiding policy, R-6 Strategy-making hierarchy business strategy, 32, 33 cohesive and reinforcing, 34 corporate strategy, 32, 33 functional-area strategies, 32, 33 operating strategies, 32–34 Strategy/Strategies; see also Bad strategy; Good strategy actions to identify, aligned with organizational structure, 304–307 alternatives for diversified company, 244 annual planning process, R-11 as bridge, R-137–R-138 and business model, 9–12 and company success, www.downloadslide.net SUBJECT INDEX for competing differently, in conflict with culture, 350 converted into actions, 287 converted into reality, R-13–R-15 definition, 3–4 deliberate, 8–9 determinants for winning competitive advantage test, 12 fit test, 12 performance test, 12–13 for developing countries avoid if impractical, 201–202 business plan modification, 201 change local markets, 201 low-price basis, 200–201 devoting regular attention to, R-10–R-11 as direction and guidance, for diversification, 211–212 drivers of unethical, 262–265 emergent, evolution over time, financial ratios for, 81–83 and focus, R-66 frequent dialogue on, R-10 importance of crafting and execution, 13–14 indicators, 80–81 matched to corporate culture, 350 merits of current, 79–83 in network markets, R-26–R-27 in offshoring adaptation, R-82 aggregation, R-82 arbitrage, R-82 wise choices of, R-82 ongoing process, R-12–R-13 options for entering foreign markets exporting, 184–185 foreign subsidiaries, 186–187 franchising, 185–186 licensing, 185 strategic alliances, 187–189 overhauling, R-139 proactive and reactive, 8–9 quest for competitive advantage, 4–8 realized, reasons for ethics in, 265–268 of rivals, 71 role of chief strategy officer change agent, R-8–R-9 coach, R-8 to fit organizational needs, R-9 internal consultant, R-7–R-8 specialist, R-8 as science, R-137 setting aspirations and direction, R-11–R-12 single-business company, 80 at Starbucks, strategic tests, R-10 template-style, R-5–R-6 in uncertain times, R-10 Strategy work of group centers, R-100–R-102 Strengths, 90; see also SWOT analysis definition, 89 Stretch objectives to achieve excellence, 360 definition, 27 Strictly enforced cultural norms, 347 Strong-culture companies contributing factors, 348 definition, 348 ingrained values and norms, 349 Struggling enterprises, 147 Subcultures, 354 Subprime mortgage crisis, 38, 263 Substantive culture-changing actions, 355–356 Substitute products, 49 competitive pressures from availability of good substitutes, 56 comparable quality, 56 low switching costs, 56 factors affecting competition from, 57 identifying, 56–57 Substitutes, supplier bargaining power and availability of, 59 Sudden-death threat, 93 Superior value, 4–5 Supermarkets, slotting fees, 60 Supplier bargaining power, 49 competitive pressures from, 57–59 determining factors component costs, 59 differentiated inputs, 58 high demand and short supply, 58 inability to integrate backward, 58 industry concentration, 58 lack of good substitutes, 59 not bargaining with major customers, 59 switching costs, 58 at Microsoft and Intel, 58 pricing power, 58 and unions, 58 Suppliers coordinating with, 128 improving value chain activities, 102 I-35 international expansion by, 175–176 located near plants, 122 value chain, 98 Supply chain reducing costs of, 156 in related diversification, 220 Supply chain efficiency, 120 Supply chain management crucial activity, 95 definition, 96 with digital value chain, R-52 Support value chain activities and costs, 96 definition, 95 general administration, 96 human resource management, 96 and internal cost structure, 98 research and development, 96 Sustainability, 275–276 Sustainability gap, R-86–R-87 Sustainability strategies business case for, 278–280 and corporate social responsibility, 276–278 environmental, 275–276 Sustainable business practices, 275–276 Sustainable competitive advantage definition, from resources and capabilities, 87–88 from valuable expertise and capabilities, VRIN tests for, 87–89 Sustainable responsible business, 272 Switching costs and buyer bargaining power, 60 composition of, 51 created by first movers, 152 and customer loyalty, 127 less costly, 51 low for buyers, 124 supplier bargaining power and, 58 SWOT analysis conclusions from, 93 criticisms of, R-42 as decision support tool, R-42–R-43 definition, 89–90 identifying market opportunities, 91–93 identifying strengths, 90–91 identifying threats, 93 identifying weaknesses, 91 reactions to limitations of, R-42 reinventing, R-48–R-49 sound intuition behind, R-42 steps leading to strategic actions, 94 www.downloadslide.net I-36 SUBJECT INDEX Symbolic culture-changing actions ceremonial events, 357 lead by example, 357 Synergy/Synergies definition, 213 from digital value chain, R-51 T Talent, critical factor in offshoring, R-80 Tangible asset, R-43 Tangible features, 129 Tangible resources, 84, 85 Tapered integration, 159 Target market, best-cost providers, 136 Tasks, chosen, not assigned, R-119–R-120 Task specialization, 305 Technological advances, 126 vertical integration disadvantage, 161 Technological assets, 85 Technological change as driving force, 65 fast-paced, 130 reduced risk exposure, 163–164 Technological control, R-66 Technological factors, 48 Technological know-how transfer of, 198–199 Technological know-how, transferred in related diversification, 217 Technologies, collaboration, R-125–R-127 Technology access to new, 156 in related diversification, 220–221 Telecommunications, in developing countries, R-86 Template-style strategy, R-5–R-6 Temporal inconsistency, R-56–R-57 Tests of corporate advantage better-off test, 213, 225 cost of entry test, 213 industry attractiveness test, 213 for unrelated diversification, 227–228 Think-global, act-local strategy, advantages and disadvantages, 193 Think-global, act-global strategy, advantages and disadvantages, 193 Think-local, act-local strategy advantages and disadvantages, 193 centralized decision-making, 191 definition, 191 drawbacks, 191 Threat of new entrants and barriers to entry, 52–54 changes over time, 56 competitive pressures from, 52–56 factors affecting, 55 overcoming, 55–56 Threats; see also SWOT analysis definition, 89 external, 92–93 in industry attractiveness, 232 sudden-death, 93 Times-interest-earned ratio, 82 Time to market, 160 Top-down guidance, 319–320 Top-level executives creating fully-engaged organization, 360 leading by example, 357 Total debt-to-capital ratio, 82 Total quality management, 121 to achieve excellence, 360 capturing benefits from, 327–328 culture of operating excellence from, 327 definition, 323 extended to all departments, 323 reforming corporate culture, 323–324 time for results, 324 Total return on assets, 81 Trade restrictions, 54–55 Trafalgar, battle of, R-2 Training strategic role of, 299 to use balanced scorecard, R-24 using adult-learning principles, R-122–R-123 value of, 360 Transaction costs definition, 216 in diversification, 216–217 in strategic alliances, 187–188 Transformational leader, R-5 Transnational strategies advantages and disadvantages, 192 definition, 192 drawbacks, 192 examples, 192–193 Four Seasons Hotels, 194 think-global, act-local approach, 192–193 Triple bottom line companies recognized for, 274–275 and corporate social responsibility, 272–275 definition, 272 at TOMS Shoes, 273 Turkey, holdings, R-96 U U-forms, 305 Umbrella brands, 226 Uncertainty, reduction in, 66 Underage labor countries using, 257 IKEA’s opposition to, 259 in underground economy, 257–258 Underground economy, 258 Underserved consumers, R-68–R-69 Unethical and greed-driven cultures, 353–354 Unethical behavior, rationalizing, R-115–R-116 Unethical business strategy; see also Ethical misconduct drivers of company culture, 264–265 faulty oversight, 262–263 pressure for short-term earnings, 263–264 examples, 261–262 UNICEF, 259 Unions, bargaining power, 58 United Arab Emirates, R-82 United States, weak dollar and trade, 182 Unit sales, 125 Unrelated businesses, 217 Unrelated diversification acquisition criteria, 225 better-off test, 225 building shareholder value allocation of financial resources, 227 by astute corporate parenting, 225–226 by restructuring, 227 conglomerates, 224–225 drawbacks demands on management, 228–229 limited competitive advantage potential, 229 misguided reasons for growth, 229 managerial motives, 229–230 www.downloadslide.net SUBJECT INDEX risk reduction, 229 stabilization, 229 parenting advantage, 228 passing the tests of corporate advantage, 227–228 strategic fit not involved, 224 tests of corporate advantage for, 227–228 Unserved consumers, R-68–R-69 User requirements, common, 124 V Valuable resources, 87 Value from differentiation, 130 signaling, 129 superior, 4–5 Value bundling, R-68 Value chain, 94–104 at American Giant, 97 for analysis of buyer bargaining power, 62 and benchmarking, 99–100 business model analysis, 95–97 cost drivers, 119 cross-business strategic fit along customer service, 222 distribution-related, 221–222 manufacturing-related, 221 research and development, 220–221 sales and marketing, 221 supply chain activities, 220 technology, 220–221 and customer value proposition, 95–97 definition, 95 of distribution channel partners, 98–99 example, 99 examples of digitization across, R-51 and internal cost structure, 98 least expensive, R-68 options for remedying disadvantages, 100–101 profit margin component, 95–97 of rival companies, 97–98 of suppliers, 98 Value chain activities best practices across, 322 in broad differentiation strategy, 126–127 and business process reengineering, 323 competitive advantage from cost-based, 103 differentiation-based, 103 in economies of scope, 222–223 from environmental sustainability strategies, 276–277 in foreign markets, 179–180 improving with distribution partners, 102–103 with supplier relationships, 102 in low-cost provider strategy, 119–121 outsourcing vs internal performance, 301–304 primary, 95, 96 reducing costs of, 102 related to resources and capabilities, 103–104 in Six Sigma programs, 325 strategic fit in related diversification, 217–219 support, 95, 96 and vertically integrated firms, 157–158 at Walmart, 123 Value chain revamping to increase differentiation address customer needs, 128 channel allies, 128 enhance customer value, 128 suppliers, 128 at Nucor, 123 relocating suppliers, 122 selling direct to consumers, 121 at Southwest Airlines, 123–125 streamlining operations, 122 Value chain system, 98–99 Value configuration, new, R-67–R-68 Value-creating activities, 104 Value creation, decision process, R-138 Value drivers brand-building, 127 continuous quality improvement, 126–127 customer service, 126 definition, 126 definition and decomposition of dominant, R-63 high-quality inputs, 127 human resource management, 127 innovation, 127 limits of adding to, R-60–R-61 I-37 marketing, 127 overdependence on, R-62 product features, 126 reliance on dominant, R-58 research and development, 126 Value engineering, R-54 crucial for companies, R-63 Value engineering team, R-63 Value net compared to five forces model, 63 diagram of, 64 Value-price-cost framework, 10 Values, 25; see also Core values in clashing subcultures, 354 in corporate culture, 344–345 safeguarding, R-103 in template-style strategy, R-6 Values revolution, R-117–R-118 Value statement, 26 Variable costs cement industry, 101 in radio broadcasting, 12 Venture capitalist, group center, R-101, R-104 Vertical integration, 122 advantages backward for greater competitiveness, 159–160 forward to enhance competitiveness, 160–161 advantages of strategic alliances over, 168 backward or forward, 158–159 disadvantages business risk, 161 capacity-matching, 161 new resources and capabilities, 161 shifting buyer preferences, 161 slow to embrace new technology, 161 unrealized economies of scale, 161 full, 159 at Kaiser Permanente, 163 multidivisional structures, 306 partial, 159 pros and cons, 162 tapered integration, 159 vertically integrated firms, 157–158 virtual, R-68 Vertically integrated firms, 157–158 Virtual vertical integration, R-68 Vision mission strategies, R-5–R-6 Vision statement dos and don’ts, 22 Voice over Internet Protocol, 212, 221, R-79 www.downloadslide.net I-38 SUBJECT INDEX VRIN tests for sustainable competitive advantage, 87–89, 90 inimitable resources, 87 nonsubstitutable resources, 88 rare resources, 87 valuable resources, 87 VRIO conditions for resources and capabilities, R-44–R-45, R-47–R-48 W Wages, developing vs developed nations, 179–180 Weak-culture companies, 349 Weakness, 91; see also SWOT analysis definition, 89 White-space opportunities, R-68–R-69 Wholesale distributors, in beer industry, 73 Wholesalers, bypassing, 160–161 Winning strategy definition, 12 tests for competitive advantage test, 12 fit test, 12 performance test, 12–13 Work atmosphere, 332 Work climate, for good strategy execution, 320 Work effort, 291 strategy, 311–312 Work environment, 270 attractive, 332 Work ethic, 85 Workforce empowerment, 360 local, 202–203 work ethic and drive, 85 Workforce retention, 279, 293–296 Working capital, 82 Workplace diversity, 270 Worksheet strategy development, R-48 Worksheet strategy map, R-48–R-49 World Trade Organization, 199 World Wide Web, ubiquitous operating system, R-119 “Worry list” of issues, 107–108 www.downloadslide.net www.downloadslide.net www.downloadslide.net www.downloadslide.net www.downloadslide.net www.downloadslide.net ... Chosen Strategy Chapters 10, 11, and 12 Part II: Readings in Crafting and Executing Strategy Section A: What Is Strategy and How Is the Process of Crafting and Executing Strategy Managed? (4 readings) ... Part I: Concepts and Techniques for Crafting and Executing Strategy Section A: Introduction and Overview What Is Strategy and Why Does It Matter? The Managerial Process of Crafting and Executing. .. option for your course > Buy directly from the source at http://shop.mheducation.com Crafting and Executing Strategy Concepts and Readings www.downloadslide.net Crafting and Executing Strategy Concepts