Contemporary strategy analysis robert grant

ROBERT M GRANT CONTEMPORARY STRATEGY ANALYSIS Te xt a Ed nd it io Cas n es N I N T H E d iti o n C o n te m po r a r y S t r ate gy A na lys i s T ex t a n d Ca s e s C o ntemporary Strategy An alysis T e xt a n d ca se s Ninth Edition Robert M Grant Copyright © 2016, 2013, 2010 Robert M Grant All effort has been made to trace and acknowledge ownership of copyright The publisher would be glad to hear from any copyright holders whom it has not been possible to contact Registered office John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com The right of Robert M Grant to be identified as the author of this work has been asserted in accordance with the UK 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, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher Wiley publishes in a variety of print and electronic formats and by print-on-demand Some material included with standard print versions of this book may not be included in e-books or in print-on-demand If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com For more information about Wiley products, visit www.wiley.com Designations used by companies to distinguish their products are often claimed as trademarks All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners The publisher is not associated with any product or vendor mentioned in this book This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold on the understanding that the publisher is not engaged in rendering professional services If professional advice or other expert assistance is required, the services of a competent professional should be sought ISBN 9781119120841 (pbk) ISBN 9781119126515 (ebk) A catalogue record for this book is available from the British Library Set in 10/12pt ITC Garamond Std by Aptara Inc., India Printed in Great Britain by TJ International, Padstow, Cornwall To Liam, Ava, Finn, Evie, Max, Lucy, and Bobby BRIEF CONTENTS Preface to Ninth Edition xv PART I  INTRODUCTION 1 The Concept of Strategy PART II  THE TOOLS OF STRATEGY ANALYSIS 33 Goals, Values, and Performance 35 Industry Analysis: The Fundamentals 63 Further Topics in Industry and Competitive Analysis 89 Analyzing Resources and Capabilities 113 Organization Structure and Management Systems: The Fundamentals of Strategy Implementation 139 PART III BUSINESS STRATEGY AND THE QUEST FOR COMPETITIVE ADVANTAGE 165 The Sources and Dimensions of Competitive Advantage 167 Industry Evolution and Strategic Change 205 Technology-based Industries and the Management of Innovation 241 10 Competitive Advantage in Mature Industries 273 PART IV  CORPORATE STRATEGY 289 11 Vertical Integration and the Scope of the Firm 291 12 Global Strategy and the Multinational Corporation 311 13 Diversification Strategy 341 viii  BRIEF CONTENTS 14 Implementing Corporate Strategy: Managing the Multibusiness Firm 361 15 External Growth Strategies: Mergers, Acquisitions, and Alliances 389 16 Current Trends in Strategic Management 409 Cases to Accompany Contemporary Strategy Analysis, Ninth Edition 427 Glossary Index 727 735 INDEX   745 resources and capabilities 117, 117 strategy making 22–23 Hood, C 60 Hood, N 340 Horlsey, A 272 Hoskisson, R E 358 hostile takeovers 382, 391, 398 how-to-rules 423 Howard, H Y 238 Hrebiniak, L 388 HSBC 280, 396 Huff, A S 112, 287 Hult, G T M 339 human resources 120, 122–123, 127 internal labor markets 352 managing creativity 262 Huston, L 267 hypercompetition 93–95, 173 Hyundai Motor 155, 181, 230, 230 IBM 98, 421, 423, 424 acquisitions 397, 399 brand value 121, 122 change within 379 competitive advantage 170 exploiting innovation 251, 252, 253 incubating innovation 420 industry life cycle 209 industry standards 260 “Innovation Jam” 420, 422 internationalization 331, 332, 336 open innovation 267 organizational capabilities 231 organizational change 223, 225, 377, 379 patent infringement 175 process re-engineering 184 product design 184 profitability of innovation 245 strategic alliances 401 valuation ratio 121 vertical integration 305 Icelandair 134, 134–135 ICI 331 identity, organizational 421, 423, 424 Iger, Robert 129, 400 IKEA 37, 79, 189, 277, 319, 326 image differentiation 189 Imai, K 272 IMAX Corporation 256 IMF 413 imitation, competitive 173–176, 247, 249 Immelt, Jeff 224 In-N-Out Burger 305 incentives see performance incentives incubating innovation 269, 420 Inditex 121, 277 Zara see Zara individualism 328 indivisibilities 179 Industrial & Commercial Bank of China, profitability 40 industrial espionage 101 industry analysis 64–66, 65 industry attractiveness 66–76, 118, 346–347, 365 industry environment change see change defining industry boundaries 80–82, 102–108 external 63–88 internal 113–138 options management 417 strategic fit 10, 417–419 industry life cycle 207–215, 208, 209, 212, 213, 215, 218–219 industry recipes 102, 280 industry structure company positioning 79–80 forecasting profitability 76–77 game theory 98–99 identifying 76 industry life cycle 212–214, 213 strategies to alter 78–79 inertia 216–218, 418–419 information and communication revolution 421 information and communication technology (ICT) current trends 410–411 networks of collaboration 422 vertical integration 305 see also Internet innovation 241–272, 424 competitive advantage 170–172, 243–250, 252–254 conditions for 262–269 exploiting 250–255 industry life cycle 209, 209–210, 214, 219 mature industries 277–280, 282 multibusiness firms 377 multinational corporations 333, 336–337 profitability 244–248 protecting 246, 249, 249–250, 252–253, 323 innovation ecosystem 252 innovative organizations 264 innovators 219 input costs, cost advantage 181, 185, 275 institutional isomorphism 216 intangible differentiation 189 intangible resources 120–122, 121, 122, 348 integration, vertical 291–309 Intel 71, 182, 220, 402 brand value 122 exploiting innovation 252 industry analysis 98 industry standards 256, 260 knowledge replication 247 organizational change 224, 381 profitability of innovation 247 intellectual property 71, 246 diversification 350 protecting 246, 249, 249–250, 252–253, 256 value of brand names 121 intelligence, competitive 100–102 intended strategy 22, 141 internal commercialization, innovations 251, 251 internal industry environment 113–138 internal markets, diversified firms 351–352 internalization, administrative costs 298–302 internalizing transactions 349–350 746 Index International Game Technology (IGT) 68 internationalization 311–340 comparative advantage 314–318 competition and 314–315 entry into foreign markets 322–324, 325 global strategies 324–331 industry life cycle 214 location of production 318–322 national differentiation 324–331 organizational structures 331–337 patterns of 313–314, 313 Internet differentiation advantage 195 industry standards 256 of things 410–411 see also e-commerce Intintoli, V 60 inventions 243, 262 commercialization see innovation Ioia, M 112 iron ore industry 78 isolating mechanism 173, 174 Itami, H 113, 239, 358 ITT 156, 374 J C Penny 277 J&P Coates 219 Jacobides, M G 79, 88, 107, 237, 309 Jacobson, R 110, 180, 202 Jaguar 181 Jansen, J 201 Jenkinson, T 387 Jensen, J B 339 Jensen, M C 39–40, 60, 395, 407 Jeppesen, L B 272 Jervis, V T 272 Jobs, Steve 21, 37, 141, 224, 251, 253, 372, 397 Johanson, J 339 John Lewis Partnership 414 Johnson, R A 287 Johnson & Johnson 37, 219 joint ventures 401 cooperation 96 to exploit innovation 251, 251 international 323 Jones, D T 202 Jones, T M 60 Jonsson, A 339 Jonsson, S 340 JPMorgan Chase, profitability 40 Kagono, T 358 Kahn, Herman 225, 239 Kale, P 405, 408 Kandemir, D 358 Kaplan, D A 238 Kaplan, R S 49, 60, 202, 373, 388 Kaplan, S N 387, 407 Karaevli, A 238 Kase, K 202 Kasparov, G 16 Katila, R 272 Kaufman, S A 419 Kawasaki Heavy Industries 406 Kay, J 60 Kaye, C 359 Kehoe, C 387 Keil, T 359 Kellner-Rogers, M 422, 425 Kelly, J 359 Kelly, T 88 Kennedy, J F 17 Kensinger, J W 408 Keown, A J 408 key success factors identifying 82–86, 106 industry life cycle 213, 214–215, 219 Khanna, T 358 Kik 56 Kim, C 172, 173, 202 Kim, D 358 Kim, L 230 Kim, S 295 Kim, W C 30, 106, 112 Kimberly-Clark 252 Klemperer, P 112 Klepper, S 237, 238 Klevorick, A K 271 know-how 232 knowledge 231–234, 233 codifiable 247 creation and diffusion 207–210, 244 global strategies 325 industry life cycle 207–210 management 424 organizational structure 420 knowledge conversion 234, 235 knowledge creation 234 knowledge identification 233 knowledge management systems 231–234 knowledge measurement 233 knowledge replication 234 knowledge retention 233 knowledge transfer and sharing 233 Kodak see Eastman Kodak Koehn, N 30 Kogut, B 61, 339 Kohlberg Kravis Roberts 343, 344–345, 352, 396 Kohli, A K 203 Koller, T 60, 287, 359, 371, 387 Kosonen, M 201 Kou, J 110 Kraft Foods 39, 350, 382 Kramer, M R 54–55, 60, 415, 425 Kroc, R 208, 234 Krugman, P 202, 339 Kulatilaka, N 61 Kullberg, Tommy 339 Kumar, R 163 Kumar, V 387 Kuppuswamy, V 358 labor comparative advantage 315, 318, 319 division of 145, 179, 280 INDEX   747 employment costs across countries 319, 319 internal markets 352 labor unions see unionization Lady Gaga 4–5, 8–9 Laeven, L 358 Lafley, A G 155 LaFollett, K 60 Lancaster, K 203 Land Rover 181, 395 Lapointe, F.-J 203 Lasseter, John 397 Laursen, K 425 Lawler, E 138, 139 Lazerson, M H 163 lead time advantages 247, 249, 251, 252 lead users 254–255 leaders, in innovation 252–254, 252 leadership 422–424 declining industries 284, 285 mature industries 281 product champions 267–269 lean manufacturing 418 lean production 210 learning economies of 181, 182 global strategies 326 organizational 228, 421 organizational structure for 156 Lee, E 30 Lee, J 30, 125, 163 Lee, L W 358 legal barriers to entry 71 legal developments, corporations 146 Legendre, P 203 legitimacy 413 Lego 23, 37, 421 Lehman Brothers 413 Leibenstein, H 202 Leica 208 Leinwand, P 138 lemons problem 138, 398 Lending Club 401 LensCrafters 396 Leonard, D 263, 272 Leonard-Barton, D 237, 239 Leontief, W W 339 Lepine, J A 91 Leslie, K J 57 Level Leadership 423 leveraged buyouts (LBOs) 396, 417 Levin, R C 271 Levine, D K 111 Levine, R A 111, 358 Levinthal, D A 238 Levitt, B 237 Levitt, T 237, 325, 339 Levy, H 358 Lewin, A Y 163, 339, 425 Lewis, M A 201 LG Electronics 318 Li, S 138 Liao, R C 407 licensing 250–251, 251, 323–324, 350 Lieberman, M B 60, 88, 138 Liebeskind, J P 359 Liebowitz, S J 272 life cycle, industry 207–215, 208, 209, 212, 213, 215, 218–219 lifestyle products 191, 194, 195 limit pricing theory 174 Limited Brands 277 line-and-staff organizational structure 146 Linux 248, 253, 256, 422 Lipparini, L 309 Lippman, S A 175, 202 Liz Claiborne 217 Lloyd, M 112 location see geographical location Lojacono, G 425 London, T 61 long-term contracts 302, 304 long-term (corporate) planning 13–14, 15 Lorenzoni, G 163, 309 Lorsch, J W 369, 387 Louis Vuitton 122 Lovallo, D 359, 388 Lowe, Bill 223 Lubatkin, M 358 Lucent 391 Luchs, K 358 Luffman, G A 359 Luxottica 396 LVMH 349, 355, 356, 368 Lycos 252 M-form theory 383–385 MacDuffie, J P 88 Macher, J T 308 machine bureaucracies 151, 280 Machuca, J 201 Macintyre, B 99, 111 Macmillan, I C 339 Maddigan, R 308 Madhok, A 138 Madoff, B 194, 195 Madsen, T L 125 Magretta, J 171 Mahoney, J T 138, 163 Mainardi, C 138 Makadok, R 359 Malerba, F 272 Malone, T W 125, 163 management systems complexity theory 418–419 for creativity 262, 263 multibusiness firms 369–376 multinational firms 331–337 managers, changing role 422–424 mandatory standards 256 Manikandan, K S 353 Mankin, E 408 Mankins, M C 373, 388 Mann, H M 88 manufacture design for 183 industry life cycle 213 748 Index Marakon Associates 373 March, J G 202, 216, 237 Marchionne, Sergio 71 Marcus, M L 202 Margolis, S E 272 market economy 293 market for corporate control 39 market needs, creativity and 264 market research, product attributes 192 market share, profitability and 180 market volatility 412–413 marketing economies of scale 181 overseas markets 323, 325, 326 quality signaling 195 markets defining industry boundaries 80–82, 102–108 diversification 351–352 entry into foreign 322–324, 325 global strategies 326 transaction costs 293–294 uncertainty about 254 winner-takes-all 258 Markides, C 30, 138, 238, 254, 271, 279, 287, 359 Marks & Spencer 415 Marriott Hotels 280, 300 Marriott International 402 Mars Inc 174 Martin, I 138 Martin, J A 238, 425 Martin, J D 359 Martine, J D 408 Marx, Karl 128 masculinity 328 Maslow, A 191, 203 Mason, R H 358 Massa, L 171 Massini, S 339 Masson, R T 110 Masten, S 308 Mathur, S 203 matrix organizations 157–159, 158, 419–420 Matson, E 425 Matsushita 252, 332, 336 mature industries 273–287 Matz, M 359 Mauborgne, R 30, 106, 112, 172, 173, 202 Maynard Smith, J 111 Mayol, F 425 McAfee, R P 202 McDonald’s 19, 362 brand value 122 business model 171 competitive advantage 189, 199 franchising 305, 324, 330 industry life cycle 208 internationalization 324, 329, 330 knowledge creation 234 national differentiation 330 organizational structure 153, 280 as “penny profit” business 273 vertical integration 302 vision statement 342 McGahan, A M 91, 91, 111, 287 McGee, J 112 McGrath, J 41 McGrath, R G 61, 95, 111, 339, 416, 425 McGuire, S 425 McIntyre, D P 272 McKelvey, B 425 McKinsey & Company 42, 44, 54 corporate restructuring 370–371, 371 diversification 354 key success factors 82 organizational change 228 portfolio planning 364, 364, 365 McMillan, J 111, 202 McNamara, G 111 McNerney, Jim 225 mechanistic bureaucracies 151, 280 mechanistic organizational forms 153, 153 Media News Group 276 media sector, vertical integration 296 see also entertainment industry Medicast 411 Mendel, A 61 Mercedes-Benz 122 Merck 56 mergers and acquisitions 391–400, 392–393, 394 definitions 391 diversification 347, 352, 354 diversity of 394–395 hostile takeovers 382, 391, 398 lemons problem 398 motives for 395–397 post-merger integration 398–399 pre-merger planning 398 shareholders’ rights 382 success and failure 394, 392–395 Merrifield, R 202 Messier, Jean-Marie 395 metal container industry 198, 198, 297–298, 297 Metro 277 Meyer, C 60 MF Global 415 Michaels, M P 57 Michel, A 359 Micklethwait, J 147 Microsoft 72, 92–93, 424 acquisitions 397, 399 brand value 122 conditions for innovation 263 exploiting innovation 252, 253, 254, 255 industry analysis 103 industry standards 256, 257, 258, 260 internal environment 116 market capitalization 219 organizational change 224 organizational structure 152 profitability of innovation 245, 248 return on equity 66 Xbox 116, 397 milestones 373 Milgrom, P 111, 202, 237 Miller, C C 359 Miller, D 138 INDEX   749 Miller, L 111 Miller, M H 60 minimum efficient plant size (MEPS) 179, 182 Mintzberg, H 22–23, 31, 141, 144, 160, 163, 280, 287, 373, 388, 384 Mirabeau, L 425 Misangyi, V F 91 Mishel, L 388 mission statements 17, 18, 37, 342 Mitchell, M 407 Mitchell, W 404, 405, 408 Mitsui Group 218 Mittal Steel 391 Mobil Corporation 227, 391 see also Exxon Mobil mobile phone suppliers 78 see also network and communications equipment industry mobility, barriers to 106 Modigliani, F 60 modularity 151–152, 156–157 Moi, M J 340 Moizer, J 425 Mom, T 202 monopolies, vertical integration 298, 300 monopoly rents 118 monopoly theory 66 Monsanto 98, 99, 174, 175, 245, 247 Monteverde, K 308 Montgomery, C A 30, 37, 60, 359 Moore, G A 219, 238 Moran, P 425 Morrison, E 272 Morrow, J L., Jr 287 Motel 6, service design 183–184 motor industry see auto industry Motorola 78, 300, 315, 425 Mowery, D C 408 MP3 players 211, 243 Mueller, D C 110 multibusiness firms 361–388 change within 363, 376–381 corporate portfolio 363–366 evolution 146–147 external strategy 391–400 governance 381–385 individual businesses within 369–376 linkages between businesses 365, 366–369 structure 154–155, 156–157 multidexterity 419 multidimensional scaling (MDS) 190 multidimensional structures 419–420 multidomestic industries 313, 314 multinational firms see internationalization Munger, Charles T 63, 355 Murdoch, Rupert 53, 382, 413 Murrin, J 287, 371, 387 music industry 79–80, 119 see also entertainment industry Musters, R 388 Myers, S 358 national diamond framework 316–318, 317 national differentiation 324–331, 333–336 national resources 315–318 exploiting 325 foreign entry strategies 322–324 location of production 318–322 Navistar 219 NBC Universal 351 NEC 332 Nelson, R R 125, 237, 249–250, 271 Nestlé 155, 219 net margin 45 net present value (NPV) 41–42, 43, 55 Netscape 252, 254, 260 network analysis 424 network and communications equipment industry future profitability 78 industry standards 256–257 innovation 252, 256 platform-based competition 93, 94 profitability of innovation 245 see also Cisco Systems; Motorola; Nokia; Qualcomm; Sony network effects, technical standards 209 network externalities 93, 94, 257–258 network structures 160 networked organization 424 new entrants, threat of 70–72 see also emerging industries new game strategies 202 News Corporation 53, 413 News International 382 Nexans 336 niche markets 68 niches, declining industries 284–285, 285 Nicholas, N 138 Nichols, N 61 Nicholson, S 272 Nickerson, J A 163, 238, 425 Nicolaides, P 203 Nieman, G 287 Nike 121, 132, 199, 254–255, 325, 402 Nintendo 10, 92, 99, 103, 252, 260, 261, 278 Nissan 71, 185, 405 NK model 419 Nobeoka, K 309, 408 Nohria, N 239, 272 Nokia 10, 78, 245, 315 Nomura 332 Nonaka, I 234, 235, 272 Nooyi, I 374 Norman, P M 271 norms, national differences 328 Northwest 396 Norton, D P 49, 60, 373, 388 not-for-profit organizations 25–28, 26 Novartis 219 NTT DOCOMO 256 Nucor 282 NUMMI 402 NutraSweet 174, 175, 245, 247 Nalebuff, B J 30, 96, 110, 111, 202 nanotechnology 417 O’Dell, C S 387 O’Reilly, C A 222, 238, 379 750 Index Oakley 396 Occupy Wall Street 413 OECD 413 Office Depot 396 OfficeMax 396 offices of strategy management 373 Ohmae, K 82, 83, 191 oil and petroleum industry capabilities 227, 227 competitive advantage 71, 185, 200, 275–276 competitor diversity 73 cost advantages 71, 185, 275–276 excess capacity 283, 284 exploration capability 124, 126 location of production 319 mature industries 275–276 organizational change 223 strategic group analysis 108 structure 79 vertical integration 297, 305–306 see also British Petroleum; Eni; Exxon Mobil; Royal Dutch Shell Old Mutual 231 oligopolies 66, 72 Olivetti 116 open innovation 264–265, 266, 267, 422 open (public) standards 255–256 operating budgets 143–144 operating margin 45 operating organizations 264 operational relatedness 355 opportunism 298, 304, 306 options 55–58, 416–417 Oracle 122, 256 Orange 403 organic organizational forms 153, 153 organizational alignment 228–229 organizational ambidexterity 222–223 organizational capabilities see capabilities, organizational organizational change 216–218, 376–381 organizational complexity, coping with 420–422 corporate boundaries, breaking 422 informal organization 420–421 self-organization 421–422 identity 421 information 421 relationships 422 organizational culture as control mechanism 148 human resources 122 as integrating device 149 resource–capability integration 228 values 52 organizational design 144–161 organizational development (OD) 222 organizational ecology 212–213, 218 organizational identity 421, 423, 424 organizational inertia 216–218 organizational learning 228, 421 organizational processes 125 inertia and 216–218 product champions 267–269 organizational routinization 182, 216, 228 organizational slack 185 organizational structure for adaptability 421 complexity theory 418–419 cooperation problem 145–148 coordination 145, 148–150 cost reduction 276 employee grouping principles 154–155 evolution of the corporation 146–147 functional 146, 156 hierarchical decomposition principle 152 hierarchies 150–152, 152, 153–154, 159, 378, 420, 421, 423 for innovation 265–269 matrix 157–159, 158, 419–420 mature industries 280–282, 281 multibusiness firms 154–155, 156–157, 370–372, 371, 378 multidivisional 156–157 multinational strategies 331–337 non-hierarchical 161 specialization 280 Orlitzky, M 60 Orlowski, A 110 Orton, J D 163 Oticon 223 outsourcing 132 to exploit innovation 251, 251 or vertical integration 301, 303, 305–307 see also internationalization Overdorf, M 223, 238 overhead costs, mature industries 275–276 ownership, resources and capabilities 128 see also property rights Oxley, J E 408, 424 Oztas, N 425 Paccar 80 Palepu, K 358 Palich, L E 359 Palmisano, Sam 231, 379, 423 Panasonic 229, 332 Pandian, J R 138 Pandora’s Box Problem 111 Pant, A 353 Panzar, J C 87, 358 Papa John’s 70 paradox of replication 232–233 parenting 377 parenting advantage 350–351, 363, 365–366 particularism 328 Pascale, R T 31, 388 Pasmore, W A 238 patents 71, 174, 175, 246, 247, 249, 249–250, 253, 323 path dependency 225–227 Pautler, P A 407 Pavitt, K 309 Payne, B 30 Peck, S I 425 Peeters, C 339 pentagon framework, restructuring 370–371, 371 Pentland, B 125, 163 Pepsi-Cola 96, 97, 121, 350, 367, 374 INDEX   751 Peretti, J 203 perfect competition 66 performance analysis 43–51 appraising current and past performance 43–45 balanced scorecard 49, 50, 282, 373 diversified firms 352–355 multibusiness firms 374–376 performance incentives 148, 263, 281 CEO compensation systems 383, 384 multibusiness firms 374 vertical integration 300, 306 performance targets see goals Perlstein, R 50 permeable organizational boundaries 160–161 Pernsteiner, T 387 personal computer industry see computer industry (hardware); computer industry (software) personality, leaders’ 423 PEST analysis 64–65 Peterlaf, M A 138 Peters, T 141, 163, 186–188, 203, 291, 354, 359 Petersen, K J 339 petroleum industry see oil and petroleum industry Pettifer, D 387 Pettigrew, A 425 Pfizer 245, 369 pharmaceutical industry 250, 265, 323, 347 see also Johnson & Johnson; Merck; Pfizer Philip Morris Companies Inc see Altria Philips 252, 256, 331, 332, 336, 342 Phillips, R L 91 photographic sector 317, 283 see also Eastman Kodak; Polaroid Piketty, T 413, 425 Pilkington 182–183, 246, 252 PIMS (Profit Impact of Market Strategy) 30 Pindyck, R 57 Pine, B J 287 Pinkus, G 387 Pioneer 252 Pirelli 103 Pisano, G P 138, 238 Piskorski, M J 308 Pixar 397, 399, 400 planning, corporate (long-term) 13–14, 15 plant biotechnology 219 platform-based markets 258–262 platform investments, as growth options 58 play 262–263 Pocock, M 226 poison pill defenses 382 Polaroid 223, 252 political distance 327, 327 political factors, diversification 351 Polman, Paul 54 Polos, L 237 pooled interdependence 155 Porras, J 17, 31, 53, 60, 224, 423, 425 Porter, M E 10–11, 13, 30, 60, 68, 80, 87, 88, 106, 110, 112, 138, 358, 370, 415, 425 competitive advantage 176, 178, 179, 186, 192, 196, 199, 202, 203, 237 competitor analysis 101 corporate social responsibility 54–55 corporate strategy types 368–369, 387 declining industries 284–285, 287 diversification 346–348, 351 leadership and differentiation 199 national diamond 316–318, 317, 338, 339 profitability 91 value chain 123, 124, 196, 339 see also five forces of competition portfolio management 368 portfolio planning models 363–366 positive feedback 258 Postrel, S 111, 272 Powell, W 237 power distance 328 Prahalad, C K 17, 31, 60, 116, 123, 138, 269, 272, 339, 355, 359 Prato 401 predatory pricing 326 preemption, competitive advantage 174–175 Prencipe, A 309, 408 Preston, L E 60 price analysis, hedonic 190 price competition 72–74 game theory 98, 194–195 global strategies 326 industry life cycle 214 key success factors 82, 85, 106 mature industries 277 substitutability 81 price sensitivity, buyers’ 74–75 price setting, limit pricing theory 174 Priem, R L 138, 359 principles 52–53 see also values (beliefs) prisoners’ dilemma game 97, 194–195 private equity firms 352, 371–372, 396 private (proprietary) standards 256 process innovation 209, 209–210 process technologies 182–183 dominant designs 209 Procter & Gamble 424 business linkages 367 competitive advantage 172 “Connect & Develop” approach 422 exploiting innovation 252 internationalization 331, 332, 333, 337 national differentiation 327–328 open innovation 266, 267, 422 organizational structure 152, 155 reputation 99 producer surplus 66 product champions 267–269 product design, cost advantage 183–184 product development costs 325 product development teams 266–267 product differentiation 71, 73 product innovation, industry life cycle 209, 209–210, 213, 219 product integrity 193–194 product scope 292, 293 see also diversification 752 Index production design for 183–184 for value creation 37 production drivers, cost advantage 181, 183–185 profit pools 107 profit/profitability basic analytic framework 37 capabilities as source of 116–118 competitive advantage 169–170, 275 corporate social responsibility 53 definition 40 diversification 347, 354 forecasting 76–77 foreign markets 322 impact of growth on 73, 74 industry analysis 65–76 competitor analysis 102 game theory 98 internationalization 314 segmentation analysis 106, 107 strategic group analysis 107 innovation 244–248 key drivers of firm-level 82–86 market share 180 mature industries 275 measures of 40, 40 mergers and acquisitions 393–394 multibusiness firms 374 obscuring 174 resources as source of 116–118 stock market value and 43, 415 US industries 67 profitability ratios 44–45, 45 see also return on invested capital project-based organizations 160, 420–421 property rights in innovation 246, 249, 249–250, 252–253 overseas markets 323 resources and capabilities 128 see also intellectual property proprietary (private) standards 256 Provera, B 138 psychological factors, product differentiation 190–192 public (open) standards 255–256 Pullman 219 punctuated equilibrium 218, 223 purpose, sense of 52 Quaker Oats 399 Qualcomm 121, 256 quality signaling 194–195 Quarls, H 387 Radio Shack 277, 410, 415 Ramachandran, J 353 Rand Corporation 225 Rangan, K 387 Rapping, L 202 Raubitschek, R S 239 Ravasi, D 238, 425 Ray-Ban 396 Raytheon 252 real option analysis 55, 424 real options 55–58, 417 realized strategy 22 reciprocal interdependence 155 Reckitt Benckiser 397 Reed, R 202, 359 regime of appropriability 245–248 Reich, R 408 relatedness, in diversification 354–356, 356 relational capability 403 relational contracts 304 relative efficiency 351 Reliance 345 Renault 405 Rensi, E H 273, 287 rent see economic profit replication, paradox of 232–233 reputation brand value 324 competitive advantage 175, 194–195 threat to credibility 99, 174 research and development (R&D) 262–269 residual efficiency 181, 185 resource allocation 384 resource-based view of firms 14, 114–118 resources 114–118, 115 acquiring 176 appraising 122–123, 126–130, 127, 131, 133 comparative advantage 315–318 complementary 128, 247–248, 248, 252 diversification 348, 350 exploiting innovation 251–252, 253 human see human resources identifying 120–123 intangible 120–122, 121, 122, 348 internationalization 315–318 link with capabilities 119, 228–229 options approach 417 organizational change 219–220 sharing in multibusiness firms 368–369 sources of profit 116–118 strategic intent 17 strength of 128–130 tangible 120, 348, 350 restructuring, corporate 276, 370–372, 371 retail sector competitive advantage 170–171, 175, 185 differentiation strategies 277 diversification 349 industry life cycle 212 internationalization 328 key success factors 84, 86 resources and capabilities 128 strategic innovation 170–171 see also IKEA; Wal-Mart Inc.; Zara retaliation, as barrier to entry 72 return on assets (ROA) 44, 45, 45 return on capital employed (ROCE) see return on invested capital return on equity (ROE) 44, 45, 45 return on invested capital (ROIC, return on capital employed (ROCE)) 42, 44, 45, 45 INDEX   753 key success factors 85 performance diagnosis 47, 47 performance target setting 48 returns on innovation 245 revolutionary strategies 260 Rey, R 309 Reynolds, M 203 Reynolds American, Inc 343 Riboud, Franck 421 Ricardian rents 118 Ricardo, David 118 Richemont 285 Richman, B D 308 rigidity, organizational 227 RIM 249 Riquelme, H 202 Rising, C 408 risk diversification 346, 354 emerging industries 252–255 vertical integration 251, 305–306 rivalry, competitors’ 69, 72–74 internationalization 314 Rivkin, J W 31, 202, 237, 239 RJR Nabisco 343, 344–345 Roberts, J 111, 202, 237 Roberts, M J 237, 339 Roberts, P C 60 Robertson, A B 272 Robertson, T S 111 Robins, J 359 Roche 121 Rockefeller, John D 391 Roll, R 407 roll-ups in declining industries 284 Romanelli, E 237 Rometty, Ginni 231 Ronfelt, D 111 Roquebert, J A 91 Rose, G F 112 Rothermael, F T 271 Rothwell, R 272 routinization 125, 228 for coordination 150 economies of learning 182 organizational inertia 216 Rover 398 Rowe, G 271 Rowling, J K 296 Royal Bank of Scotland 129, 395, 424 Royal Dutch Shell 362, 403 internationalization 331, 332 joint ventures 58, 96 market capitalization 219 objective 342 option value 55–56 organizational adaptation 218 organizational capabilities 227, 227, 228 organizational change 223 organizational structure 158–159, 158 scenario analysis 226 Ruefli, T W 111, 202 Ruimin, Zhang 224 Rukstad, M G 17, 31 rules complexity theory 423 for coordination 150 Rumaila Field Operating Organization 401 Rumelt, R P 16, 17, 21, 25, 31, 91, 173, 175, 201, 202, 354, 358, 359, 416, 425 Ryanair 11, 12, 185, 282 Rynes, S L 60 Saebi, T 425 Saez, F J 202 SAIC Motor 401 Sakkab, N 267 Sakuma, S 358 Salmon, F 284, 287 Salomon Brothers 149 Samsung 144, 249, 318, 362, 377, 379–381, 416, 424 brand value 122 business linkages 368 exploiting innovation 252 internationalization 315 strategic alliances 402 Samuelson, L 237 Sanchez, R 163 Santal, J 261 Santalo, J 94 Santamaria, J 30 Sarnat, M 358 Sasol Chevron Holdings 402 sat-nav systems 244 satisficing 216 Saudi Aramco 71 Sauer, C 309 Sayrak, A 359 scalability 56 scale economies see economies of scale scandals 413 see also Enron; WorldCom scenario analysis 225, 226 Schaefer, S 202 Scharfstein, D 359 Schecter, S M 287 Schein, E H 149 Scheinkman, J 388 Schelling, T C 202 Schendel, Dan 88 Schiffman, S 203 Schmalensee, R 88, 91, 202 Schmidt, F L 60 Schmidt, J 359 Schoemacher, P 226 Schoenherr, T 339 Scholes, M 57 Schön, D A 272 Schott, P 339 Schultz, Howard 194 Schultz, M 425 Schumpeter, J A 37, 60, 89, 93, 110, 202 scope, economies of see economies of scope 754 Index scope of the firm 293–296 see also diversification; internationalization; vertical integration Scotchlite 268 Scott Morton, F 111 Scully, J 156 search goods 194 Searle, G D., & Co 244, 245, 247 Sears Holdings 176 segment selection, mature industries 276 segmentation 102–108, 189 Seidel, M.-D 237 self-awareness 423 self-management 423 self-organization 418, 424 seller concentration 72–73, 314 Selznick, P 138 Sephora 277 September 11, 2001 412 sequential interdependence 155 service design 183–184 services, shared 348, 368–369 Shaanan, J 110 Shah, D 387 Shaked, I 359 Shane, S 272 Shanley, M 202 Shapiro, C 30, 259, 260, 272 share value see stock market value shared corporate services 368–369 shared service organizations 348, 367–368 shared value concept 415 shared values 148 shareholder returns, mergers and acquisitions 393–394 shareholder value 38–40 diversification and 343, 346, 352 maximization as dominant goal 42–43, 415–416 multibusiness firms 377, 377 options management 416–417 pitfalls of pursuing 50 shareholders’ rights 382 Sharp Corporation 349 Shell see Royal Dutch Shell sheltered industries 313, 313 Shockley Semiconductor Laboratories 220 Shrieves, R E 358 Shuen, A 138, 238 Shulman, S 271 Siegfried, J L 88 Siemens 251, 315, 336, 406 Siggelkow, N 176, 202, 217, 237, 238, 425 signaling 99 differentiation advantage 194–195 game theory 99, 194–195 Silverman, B S 287, 408 Sime Darby 345 Simon, Herbert A 30, 163, 216 Simons, K L 237, 238 simple rules 418, 423 Singapore Airlines 128 Singer 171, 219 Singh, H 405, 408 Singleton, Dean 276 six-sigma program 418, 425 SixDegrees.com 252 Skandia 231 skill transfers 368–369 SkyTeam 402 slack, organizational 185 Sloan, A P., Jr 35, 60, 147, 205, 407 Slywotzky, A J 264, 272 Smith, A 51, 53, 60, 145, 163, 293 Smith, K G 110, 111, 112, 358 Smith Corona 116 Snapple 399 Snecma 401 Snyder, N T 238, 239 social awareness 423 social enterprises 414 social factors current trends 413–415 organizational change 216 product differentiation 190–192 social pressures 413–415 social responsibility 51, 53 social skills 423 social systems, self-organization 418 Song, J 339 Sony competitive advantage 175 diversification 347–348 industry analysis 103 industry standards 256, 259, 260 innovation 252, 254, 260 internationalization 332 vertical integration 299 South Oil Company 401 Southwest Airlines 23, 72, 171, 199 Spaeth, S 272 specialization cost advantage 179 diversification compared 353–354 organizational structure 280 scope of the firm 294, 294 see also diversification; internationalization; vertical integration specialized complementary resources 248 Spence, M 87 Spencer, L 138 Spencer, S 138 Spender, J.-C 102, 112, 148, 163, 237, 280, 287 Spiller, P 88 spot contracts 302, 304, 305 Srinivasan, R 425 ST Microelectronics 318 Stafford, E 407 stakeholder approach to the firm 38–40 Stalk, G., Jr 174, 201, 202 Stalker, G M 163, 163, 287 stand-alone influence 370 Standard Oil 325, 391 standardization divisional management 384 mature industries 277 INDEX   755 multinational firms 329, 333 standards (technical) 255, 256, 257 exploiting innovation 253 industry life cycle 208–209 Staples 396 Star Alliance 401, 402 Starbucks differentiation advantage 189, 194 diversification 348, 350 internationalization 324 valuation ratio 121 Stark, R 147 state capitalism 414 static dimension of strategy 21 stealth marketing 196 steel cans see metal container industry steel industry 14, 84 Steele, R 373, 388 Stein, J 359 Stelzer, Irwin 389 Stern Stewart & Co 41 Stevens, D 202 stewardship 372 ‘stick to the knitting’ 354 Stimpert, J L 287 stock market value as performance indicator 43–44, 44 shareholder value maximization 415–416 Stokes, D 271 Stopford, J 279, 287, 340 strategic alliances 401–406, 417 to exploit innovation 251, 255 international alliances 403–406 managing 403–406 motives for 402–403 strategic corporate social responsibility 55 strategic fit 10–12, 417–419 strategic group analysis 106–108, 108 strategic inflection points 381 strategic innovation 170–172 mature industries 277–280 strategic intent 17, 224, 380 strategic management capabilities 349 complexity theory 418–419, 423–424 design vs emergent strategy 22–23 evolution 13–14, 15 of innovation 262–269 multibusiness firms 361–388 organizational change 221–234, 376–381 strategic planning systems 141–144, 142 annual cycle 142–144, 142 multibusiness firms 372–373, 376 strategic relatedness 355, 356 strategic windows 253 strategy, concept of 3–31 analytical framework 9–12, 10 see also strategy analysis corporate–business strategy distinction 18–20 see also corporate strategy definitions 15–16, 16 describing 21, 21 game theory as general theory of 13, 99 history 12–15 identifying a company’s 17–18 process 21–24 statements of 18 success and 4–9, 8, 20 strategy analysis 9–12, 10, 25 change 205–239 competitive advantage see competitive advantage corporate strategy see corporate strategy external environment 63–88 firm elements 9–10 goals, values, and performance 35–61 resources and capabilities 113–138 mature industries 273–287 technology-based industries 241–272 strategy formulation 23–24, 417 strategic planning systems 141–144, 142 strategy implementation 139–163 mature industries 280–282, 281 multibusiness firms 361–388 strategy maps 373 Straus, S 272 strengths assessing 128–130 exploiting key 131 superfluous 132–133 SWOT framework 11 structural ambidexterity 222–223 structural modulation 163 structure see industry structure; organizational structure structured network 160 Suárez, F F 237 Subramaniam, M 272 Subramanian, V 91 substitutability 81–82, 86 substitutes competition from 68–70, 76, 79, 91–92, 106 in demand and supply 81–82 segmentation analysis 106 success identifying key factors 82–86 strategy and 4–9, 8, 20 Sull, D N 31, 111, 254, 271, 272, 425 Sun Tzu 3, 12, 30 Sunglass Hut 396 sunk costs 70 supermarkets, key success factors 84 see also retail sector suppliers industry analysis 10, 65, 66, 68, 71, 74–76 concentration 72–73 internationalization 314 vertical relationships 306 supply, substitution in 81–82 supply-side differentiation 192–196 supply-side substitutability 81 supply sources, ownership 185 Surowiecki, J 60 Suzuki, competitor analysis 103 Swaminathan, A 237, 287 Swap, P 272 756 Index Swatch Group 416 Swissair 405 switching costs 258 SWOT framework 10, 11 Symbian 252 systematic risk 346 systems integrators 306–307 systems see management systems Szulanski, G 339 T-Mobile 403 tacit knowledge 232, 247 Takacs, C H 272 Takahashi, A 239 takeovers see mergers and acquisitions Takeuchi, H 272 Taleb, N N 425 tangible differentiation 189 tangible resources 120, 348, 350 targets see goals Tata Consultancy Services 121 Tata Group 159–160, 345, 385, 395 Tate, W L 339 team-based organizations 160, 421 team leadership 423 technical economies 297 technical standards 208–209, 253, 254, 255–262 technology 410–412 as competitive strategy tool see technology-based industries driving change 208, 213, 220–221 history of strategy 14 uncertainty about 294 technology-based industries 241–272 comparative advantage 316 competitive advantage 243–250, 252–254 conditions for innovation 262–269 exploiting innovation 250–255 overseas markets 323 profitability of innovation 244–248 protecting innovation 246, 249, 249–250, 324 standards 253, 254, 255–262 Teece, D J 138, 229–230, 238, 252, 271, 308, 309, 339, 359 telecommunications industry 78 see also network and communications equipment industry Telefonica 403 television broadcasting 76 television manufacture 211, 252 tension, adaptive 424 Terjesen, S 340 terrorist attacks 412 Tesla Motors 253 Texas Instruments, patent portfolio 246 textile industry 320 Thomas, H 112 Thomas, L G 111 Thomke, S 272 Thompson, J D 155, 163 Thomsen, J 359 threat credibility 99, 174 threat of entry 70–72 Tierney, T 239 TIM 403 Tim Hortons 336, 396 time compression diseconomies 138 Time Warner 296, 391, 395 Tinsley, C F 358 tipping points 258 tire industry 213 Tirole, J 309 TJX 277 tobacco industry 68 see also Altria TomTom 244 Toshiba 245, 252, 259 total quality movement 420 Townsend, J M 272, 395, 407 Toyota 401, 402 brand value 122 competitive advantage 172, 181, 183, 199, 416 dispersed innovation 282 industry analysis 71 industry life cycle 210 internationalization 319, 322–323, 332, 336 lean production 124, 172, 183, 229 organizational structure 280 resources and capabilities 229 vertical integration 306 Toys “R” Us 277, 416 Tracey, P 425 trade comparative advantage 316 industry life cycle 213, 214 internationalization 313–314, 316, 319 for value creation 37–38 trade secrets 246, 247, 249 see also intellectual property trade unions see unionization trademarks 246, 323, 324, 350 see also brands and brand names trading industries 313, 313 transaction costs 293–294 diversification 346, 350 internationalization 324 vertical integration 297–298, 305 transaction-specific investments 298, 305 transactions, foreign market entry 322, 323 transnational corporations 333–336, 334 Traven, B 202 Trinity Ltd 128 Tripsas, M 138, 238 Trist, E 237 Trompenaars, F 328 Tsai, B 237 Tufano, P 57 Tuli, K R 203 Tushman, M L 220, 222, 237, 238, 272, 379 Twitter 19, 421 Tyco International 341 Uber 220, 311, 411 UBS 129 uncertain imitability 175–176 uncertainty avoidance 328 INDEX   757 Underwood 208 Underwood, J D 112 Unilever 54, 121, 331, 336, 350 unionization 76, 185 uniqueness 192–193, 196 United 396, 401 Universal Studios 400 universalism 328 UPS 44, 44, 45, 47, 47, 48, 282, 299 Urban Outfitters Inc 175, 176 Urcan, O 357 US Airways 396 US economy, shifting roles of firms and markets in the 295 US industries 67 US Smokeless Tobacco Company (USSTC) 68 US State Department 27 US Steel 219, 315 Utterback, J M 237 Vaaler, P M 111 Vahlne, J.-E 339 Valentini, G 272 Valero Energy Corporation 275 value, strategy as quest for 37–43, 415–416 see also profit/profitability value added 38–40 definition 38 parenting 350–351, 363, 365–366 value chain cost analysis 185–186, 187 differentiation analysis 196–198, 197 international location 319–322, 320, 321, 322 new game strategies 171 organizational capabilities 123, 124 vertical exchanges 297, 297, 306 value net 110 values (beliefs) 52–53 corporate social responsibility 54 national 328 shared 148 van Bever, D 424 Van Biljon, P 340 Van de Ven, A H 30 van der Heijden, K 239 van der Veer, J 226 Van Reenen, J 138 van Ritten, A 339 van Witteloostuijn, A 287 variable costs 73–74 fixed:variable cost ratio 73–74 Varian, H R 30, 259, 260, 272 Vassolo, R S 408 Vasvari, F P 358 vendor partnerships 304, 305 Venzin, M 202, 340 Verdin, P 91 Verona, G 138, 238 vertical integration 291–309 administrative costs 298–302 choice of 305–306 recent trends 306–307 transaction costs 297–298 types of vertical relationships 304, 304–305 vertical scope 292, 293 see also vertical integration Viacom 296, 400 Viguerie, S P 359 Villalonga, B 358 viral marketing 196 Virgin Group 58, 102, 172, 347, 355, 369 virtual corporation 306 vision statements 18 business identity in 342 sense of purpose 52 Vivendi 231, 296, 395 Vodafone 403 volatility, market 412–413 Volkswagen AG 40, 183, 199, 210, 401 Volvo 128 Von Hippel, E 254, 264, 271, 272 von Krogh, G 272 VRIO framework 130 W L Gore & Associates 121, 263, 421, 424 Wahaha 405 Wal-Mart Inc capabilities 226–227 competitive advantage 125, 175, 176, 185, 415, 416 internationalization 319 management system 282 market capitalization 219 organizational structure 280 overheads 275 profitability 40 segment selection 276 vertical integration 299 Waldeck, A 408 Wallin, M W 272 Wally, S 112 Walsh, J P 249–250 Walt Disney 129, 421 acquisitions 397, 399, 400 brand value 122 diversification 350 global strategies 325 key strengths 131 resource utilization 120 values 415 vertical integration 292, 296, 302 Walton, Sam 282, 415 Wang, D 424 Warusawitharana, M 271 Washington Consensus 413 watch industry 317 Waterman, R 163, 354, 359 Watts, D J 203 weaknesses, key 131–132 Web-based technologies 422 see also Internet Weber, M 151, 163 Weeks, J 149 Weichai Group 128 Weick, K E 163 Weigelt, C B 425 758 Index Weigelt, K 111 weighted average cost of capital (WACC) 42, 45 Weisbach, M S 407 Weiss, L M 425 Welch, J 224, 361, 377, 378, 415 Wells Fargo 219 Wensley, R 180 Wernerfelt, B 239 Wesfarmers 372 Wessels, D 60 Westfall, P A 91 Weston, J F 358 Wheatley, M J 422, 425 Whinston, M D 308 Whirlpool 223, 228, 282, 327, 420 White, L J 295 Whitehead, J 359, 387 Whittington, R 425 Whittle, Frank 243 Wholefoods 277 Wiersema, M F 359 Wiggins, R R 111, 202 Wikipedia 422 Willcocks, L 309 Williams, B 425 Williams, J 340 Williamson, O E 308, 383–384, 388 Williamson, P J 30, 359 Willig, R D 87, 358 winner-takes-all markets 258 Winter, S G 125, 202, 238, 271, 339 Wittink, D R 203 Womack, J 202 Wooldridge, A 147 World Bank 413 World Trade Organization 405 WorldCom 395, 424 Wozniak, Steve 141, 251, 253 Wright, A 425 Wright, G 271 Wright, O 142 X-inefficiency 185 Xerox Corporation 129–130, 175, 186, 223, 252, 405 innovation 243, 245, 254, 263–264 Xiong, W 388 Xstrata 397 Yahoo! 382 Yamaha 103, 132 Ye, G 359 YGM 128 Yip, G S 88, 339, 425 YKK 332 Yoffie, D B 237 Yoon, J 339 Yoshihara, H 358 Young, D 387 Young, F 203 Young, G 110 Yunus, Muhammad 414 Yuwono, J 359 Zadek, S 203 Zajac, E 238 Zara 170, 299, 305, 401 Zelikow, P 111 Zenger, T R 163, 238, 425 Zhang, A 60 Zhou, Y M 359 Zollo, M 202, 408 Zott, C 171 Zuckerberg, Mark 254, 382 WILEY END USER LICENSE AGREEMENT Go to www.wiley.com/go/eula to access Wiley’s ebook EULA ... for strategy analysis that underlies this book I will introduce the two basic components of strategy analysis: analysis of the external environment of the firm (mainly industry analysis) and analysis. .. and Business Strategy ◆◆ The Role of Strategy in Success ●● Describing Strategy ◆◆ The Basic Framework for Strategy Analysis ●● ◆◆ ◆◆ ◆◆ Strategic Fit A Brief History of Business Strategy ●● Origins... to Strategic Management How Is Strategy Made? The Strategy Process ●● Design versus Emergence ●● The Role of Analysis in Strategy Formulation ●● Applying Strategy Analysis ◆◆ Strategic Management