www.freebookslides.com www.freebookslides.com Crafting and Executing Strategy THE QUEST FOR COMPETITIVE ADVANTAGE Concepts and Cases www.freebookslides.com www.freebookslides.com Crafting and Executing Strategy THE QUEST FOR COMPETITIVE ADVANTAGE Concepts and Cases | 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.freebookslides.com CRAFTING AND EXECUTING STRATEGY: THE QUEST FOR COMPETITIVE ADVANTAGE, CONCEPTS AND CASES, 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 2008 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 978-0-07-772059-9 MHID 0-07-772059-8 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 cases/ Arthur A Thompson, Margaret A Peteraf, John E Gamble, A J Strickland III Twentieth edition pages cm ISBN 978-0-07-772059-9 (alk paper) Strategic planning Strategic planning–Case studies I Title HD30.28.T53 2015 658.4’012–dc23 2014033211 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.freebookslides.com To our families and especially our spouses: Hasseline, Paul, and Kitty www.freebookslides.com 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 vi www.freebookslides.com 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 vii www.freebookslides.com PREFACE B y offering the most engaging, clearly articulated, and conceptually sound text on strategic management, Crafting and Executing Strategy has been able to maintain its position as the leading textbook in strategic management for 30 years With this latest edition, we build on this strong foundation, maintaining the attributes of the book that have long made it the most teachable text on the market, while updating the content, sharpening its presentation, and providing enlightening new illustrations and examples The distinguishing mark of the 20th edition is its enriched and enlivened presentation of the material in each of the 12 chapters, providing an as up-to-date and engrossing discussion of the core concepts and analytical tools as you will find anywhere As with each of our new editions, there is an accompanying lineup of exciting new cases that bring the content to life and are sure to provoke interesting classroom discussions, deepening students’ understanding of the material in the process While this 20th edition retains the 12-chapter structure of the prior edition, every chapter—indeed every paragraph and every line—has been reexamined, refined, and refreshed New content has been added to keep the material in line with the latest developments in the theory and practice of strategic management In other areas, coverage has been trimmed to keep the book at a more manageable size Scores of new examples have been added, along with 15 new Illustration Capsules, to enrich understanding of the content and to provide students with a ringside view of strategy in action The result is a text that cuts straight to the chase in terms of what students really need to know and gives instructors a leg up on teaching that material effectively It remains, as always, solidly mainstream and balanced, mirroring both the penetrating insight of academic thought and the pragmatism of real-world strategic management A standout feature of this text has always been the tight linkage between the content of the chapters and the cases The lineup of cases that accompany the 20th edition is outstanding in this respect—a truly appealing mix of strategically relevant and thoughtfully crafted cases, certain to engage students and sharpen their skills in applying the concepts and tools of strategic analysis Many involve high-profile companies that the students will immediately recognize and relate to; all are framed around key strategic issues and serve to add depth and context to the topical content of the chapters We are confident you will be impressed with how well these cases work in the classroom and the amount of student interest they will spark For some years now, growing numbers of strategy instructors at business schools worldwide have been transitioning from a purely text-case course structure to a more robust and energizing text-case-simulation course structure Incorporating a competition-based strategy simulation has the strong appeal of providing class members with an immediate and engaging opportunity to apply the concepts and analytical tools covered in the chapters and to become personally involved in crafting and executing a strategy for a virtual company that they have been assigned to manage and that competes head-to-head with companies run by other class members Two widely used and pedagogically effective online strategy simulations, The Business Strategy Game and GLO-BUS, are optional companions for this text Both simulations were created by Arthur Thompson, one of the text authors, and, like the cases, are closely linked to the content of each chapter in the text The Exercises for Simulation Participants, found at the end of each chapter, provide clear guidance to class members in viii www.freebookslides.com applying the concepts and analytical tools covered in the chapters to the issues and decisions that they have to wrestle with in managing their simulation company To assist instructors in assessing student achievement of program learning objectives, in line with AACSB requirements, the 20th edition includes a set of Assurance of Learning Exercises at the end of each chapter that link to the specific learning objectives appearing at the beginning of each chapter and highlighted throughout the text An important instructional feature of the 20th edition is its more closely integrated linkage of selected chapter-end Assurance of Learning Exercises and cases to the publisher’s web-based assignment and assessment platform called Connect™ Your students will be able to use the online Connect™ supplement to (1) complete two of the Assurance of Learning Exercises appearing at the end of each of the 12 chapters, (2) complete chapter-end quizzes, and (3) enter their answers to a select number of the suggested assignment questions for of the 31 cases in this edition Many of the Connect™ exercises are automatically graded, thereby enabling you to easily assess the learning that has occurred In addition, both of the companion strategy simulations have a built-in Learning Assurance Report that quantifies how well each member of your class performed on nine skills/learning measures versus tens of thousands of other students worldwide who completed the simulation in the past 12 months We believe the chapter-end Assurance of Learning Exercises, the all-new online and automatically graded Connect™ exercises, and the Learning Assurance Report generated at the conclusion of The Business Strategy Game and GLO-BUS simulations provide you with easy-to-use, empirical measures of student learning in your course All can be used in conjunction with other instructor-developed or school-developed scoring rubrics and assessment tools to comprehensively evaluate course or program learning outcomes and measure compliance with AACSB accreditation standards Taken together, the various components of the 20th-edition package and the supporting set of instructor resources provide you with enormous course design flexibility and a powerful kit of teaching/learning tools We’ve done our very best to ensure that the elements constituting the 20th edition will work well for you in the classroom, help you economize on the time needed to be well prepared for each class, and cause students to conclude that your course is one of the very best they have ever taken—from the standpoint of both enjoyment and learning DIFFERENTIATING FEATURES OF THE 20TH EDITION Six standout features strongly differentiate this text and the accompanying instructional package from others in the field: Our integrated coverage of the two most popular perspectives on strategic management—positioning theory and resource-based theory—is unsurpassed by any other leading strategy text Principles and concepts from both the positioning perspective and the resource-based perspective are prominently and comprehensively integrated into our coverage of crafting both single-business and multibusiness strategies By highlighting the relationship between a firm’s resources and ix www.freebookslides.com I-36 SUBJECT INDEX Judaism, C-215 Just-in-time systems, 102 Just-in-time training, 299 K Key success factors in beer industry, 73 definition, 72 for low-cost providers, 124 questions for deducing, 72 Southwest Airlines, C-349 Kickbacks cases, 258–259 in developing countries, 258 and Foreign Corrupt Practices Act, 258 and integrative social contracts theory, 261 and Justice Department, 258–259 and multinational corporations, 258 and Organization for Economic Cooperation and Development, 258 religious condemnation, 261 and Securities and Exchange Commission, 258–259 Knowledge diffusion, 66 L Lagging indicators, 28 Large brewers, C-93 Late-mover advantage decision on, 154 potential for, 152–153 Leadership in making corrective adjustments, 361–362 in strategy execution celebrating successes, 361 employee empowerment, 360 employee training, 360 fostering esprit de corps, 360 management by walking around, 359–360 mobilizing for excellence, 361 motivational techniques, 361 requirements, 358–359 setting stretch objectives, 360 using benchmarking tools, 360 tests of, 362 Leadership skills of senior executives, 37 Leading by example, 357 Leading indicators, 28 Leapfrogging competitors, 146 Learning-curve effects, 120 in concentrated locations, 195 first-mover advantage, 152 Legal forces, 48 Legal hurdles, Southwest Airlines, C-343–C-344 Legal versus ethical strategy, 261–262 Leverage ratios debt-to-equity ratio, CA-6 long-term debt-to-capital ratio, CA-5 long-term debt-to-equity ratio, CA-6 times-interest-earned ratio, CA-6 total debt-to-assets ratio, CA-5 Licensing, by Under Armour, C-57 Licensing strategies, 185 Lifestyle changes, 66 Line-and-staff structure, 305 Liquidity ratios current ratio, CA-5 working capital, CA-5 Litigation against NCAA, C-414–C-415, C-422 Local and regional firms, 147 Local customer needs, 202–203 Local workforce, 202–203 Location athletic footwear manufacturing, 195 for competitive advantage concentrated, 195 dispersed, 196 Location-based advantages, 179–180 Location strategy Chipotle Mexican Grill, C-150 Cooper Tire & Rubber Company, C-109 Lululemon, C-82–C-83 Panera Bread Company, C-130–C-131, C-134–C-135 and pizza industry success, C-43 Qdoba Mexican Grill, C-155 Vera Bradley, C-194–C-195 Whole Foods Market, C-18–C-20 Logistics costs, 101 Long-term debt-to-capital ratio, 82, CA-5 Long-term debt-to-equity ratio, 82, CA-6 Long-term growth rate, changes in, 65 Long-term objectives, 27–28 Long-term performance, and executive compensation, 38 Louis Vuitton award, C-276 Low-cost leadership definition, 118–119 pitfalls to avoid, 125 at Walmart, 123 Low-cost production, Nucor Corporation, C-229–C-230 Low-cost provider strategy to achieve cost advantage, 118–119 achieving cost advantage cost-efficient value chain management, 119–121 value chain revamping, 121–124 based on location, 195 best times for common user requirements, 124 difficulty of differentiation, 124 compared to focused low-cost strategy, 132 for competitive advantage, definition, 117, 118 distinguishing features, 139 key success factors, 124 low switching costs, 124 essentially identical products, 124 vigorous price competition, 124 options, 119 pitfalls to avoid, 125 and well-conceived operating strategy, 329 Low-price strategy, in developing countries, 200–201 Low-wage countries, 179–180 M Macroeconomic conditions/trends agricultural equipment industry, C-286 in India, C-274, C-276–C-277 Macro-environment components of economic conditions, 48 environmental forces, 48 legal and regulatory factors, 48 political factors, 48 sociocultural forces, 48 technological factors, 48 definition, 45 PESTEL analysis, 45–46 Mainline Protestants, C-214 Malcolm Baldrige National Quality Award, C-319, C-392 Management as agent of shareholders, 37–38 Chipotle Mexican Grill, C-147–C-149 choices in competing, demands on, from unrelated diversification, 228–229 and good strategy, 13–14 Lululemon, C-75–C-78 Nucor Corporation, C-217–C-220 Qdoba Mexican Grill, C-155 Management by walking around definition, 359 examples, 359–360 Management changes Lululemon, C-78 Tesla Motors, C-247–C-250 Under Armour, C-53 Management development at Deloitte Touche Tohmatsu, 294–295 process, 293 Ritz-Carlton, C-393–C-395 Management information systems, Panera Bread Company, C-137–C-138 www.freebookslides.com SUBJECT INDEX Management philosophy, Nucor Corporation, C-235 Management style, Southwest Airlines, C-370–C-371 Management team assembling, 292–293 critical mass of talented managers, 293 Managerial motives for unrelated diversification, 229–230 Managers difficulty in changing problem culture, 354–355 leading strategy-execution process, 358–362 pressure for short-term earnings, 263–264 relationship, 311 strategic issues to be addressed, 107–108 strategy making for all, 30–31 Manufacturing Deere & Company domestic, C-291 international, C-291 Michael Kors, C-196 Nike, Inc., C-69 PepsiCo, C-316 in related diversification, 221 Tesla Motors, C-258–C-259 Under Armour, C-63 Manufacturing execution system software, 121 Market changes in developing countries, 201 Southwest’s struggle to gain, C-342 Market capitalization, Amazon.com, C-406 Market condition, foreign variations, 183–184 Marketing in broad differentiation strategy, 127 Chipotle Mexican Grill, C-149–C-150 community-based, C-85–C-86 Cooper Tire & Rubber Company, C-107–C-108 by Domino’s, C-48 Lagunitas Brewing Company, C-97–C-100 Nike, Inc., C-67–C-69 Panera Bread Company, C-131–C-132 in related diversification, 221 Sirius XM Satellite Radio, C-169–C-172 Southwest Airlines, C-363–C-365 Tesla Motors, C-263–C-264 value chain activity, 96 as value-driver, 127 by Under Armour, C-57–C-60 Vera Bradley, C-193 Whole Foods Market, C-26–C-27 Marketing collaborative arrangements, 298 Marketing strategy, 32 Market leader vulnerability, 147 Market niche strategies; see Focused differentiation strategy; Focused lowcost strategy Market opportunities identifying, 91–93 most relevant, 93 potential, 92 Market penetration curve, 154 Market position business strategy for, 32 Cooper Tire & Rubber Company, C-107 and scope of the firm, 154–155 strengthening, 244 Market segments Michael Kors, C-196 sports apparel, C-64–C-65 Market share Cooper Tire & Rubber Company, C-107 versus high profit, 125 low for electric cars, C-270 Papa John’s International, C-42 Southwest Airlines, C-340 Market size, in industry attractiveness, 232 Market space blue ocean strategy, 148 well-defined industry boundaries, 148 Market standing, 13 Mass-customization production, 121 Matrix structure advantages and disadvantages, 307 definition, 307 management of, 307 uses of, 307 Megachurches, C-214 Men’s Health, C-8 Merchandising Lululemon, C-82–C-83 Whole Foods Market, C-25 Merger definition, 155 failure for Cooper Tire & Rubber Company, C-104, C-117–C-119 satellite radio companies, C-161–C-163 Mergers and acquisitions to acquire capabilities, 298 advantages of strategic alliances over, 168 Bristol-Myers Squibb, 158 definition, 155–156 to expand horizontal scope, 155 objectives access to new technology, 156 cost efficiency, 156 expanding geographic coverage, 156 industry convergence, 156–157 new product categories, 156 reasons for failure, 157 ways of strengthening competitiveness, 157 Mexico, Walmart in, C-298–C-299 M-forms, 306 Middle East, PepsiCo in, C-317 I-37 Mission Chipotle Mexican Grill, C-145–C-146 Southwest Airlines, C-350 and strategic vision, 34–35 Under Armour, C-53 Mission statement compared to strategic vision, 24 definition, 24 for Lagunitas Brewing Company, C-97 Occupational Safety and Health Administration, 24 Patagonia, Inc., 26 and profit, 24–25 Trader Joe’s, 24 uninformative, 24 Whole Foods Market, C-14, C-16–C-17 YouTube, 24 Mobile World Congress, C-432 Modern Tire Dealer, C-118 Monitoring developments, 20 Moral case for corporate social responsibility, 278 for ethical strategies, 265 Mortgage lending scandal, 263 Motivation company examples, 333 from financial incentives, 331 nonmonetary approaches, 331–332 versus punishment, 332–334 Motivational techniques, 361 Motor Trend, C-255 Multibrand strategies, 134 Multidivisional structure advantage over functional structure, 306–307 companies appropriate for, 306 definition, 306 as problem for related diversification, 307 strategic business units, 306 Multidomestic strategies advantages and disadvantages, 193 definition, 190 think-local, act-local approach, 190–191 Multinational corporations interest in Africa, C-301 problem of ethical relativism, 259–260 Multiple cultures, 354 Music industry bankruptcies, C-179 copyright infringement, C-179 digital distribution, C-180–C-182 interactive streaming, C-181–C-182 Internet radio, C-181–C-182 piracy problem, C-179 publishing, C-179–C-180 release of MP3 algorithm, C-179 sales decline, C-179 self-publishing, C-180–C-181 and YouTube, C-182 Mutual restraint, 199–200 www.freebookslides.com I-38 SUBJECT INDEX N National College Players Association, C-416 National Football League drafts, C-421–C-422 National Highway Traffic Safety Administration, C-255, C-269 Nationalization of industry, 181 National Labor Relations Board, C-414, C-420–C-421 National Retail Federation Foundation/ American Express Customers’ Choice Awards, C-408 Natural and organic foods industry; see Organic foods industry Natural resources, 275 Net income, Chipotle Mexican Grill, C-142 Net profit margin, 81, CA-5 Net return on sales, 81, CA-5 Net return on total assets, CA-5 Network effects, in customer demand, 54 Network structure, 311 New customers, in foreign markets, 175–176 New entrants, 49; see also Threat of new entrants competitive pressures from, 55–56 New Jersey Motor Vehicle Commission, C-261 New Jersey Supreme Court, C-346 New product categories, 156 New products, PepsiCo, C-306 New product technologies, Lululemon, C-75 New venture diversification, 214–215 New Yorker, C-216 New York Times, C-33–C-34 Next-generation products, 146 NFL Players Association, C-421 Nonfinancial resource fit adequacy of resources, 241 overtaxing resources, 241 Nonsubstitutable resources, 88 Northwestern University, C-414, C-420–C-421 O Objectives balanced scorecard approach, 29 broad approach for setting, 26–29 business-level, 32 characteristics challenging, 27 deadline for achievement, 27 specific and quantifiable, 27 yardstick for performance, 27 corporate-level, 32 definition, 27 for every organizational level, 30 financial, 27–28 long-term, 27–28 PepsiCo, 29 of rivals, 71 setting, 19 short-term, 27–28 strategic, 27–28 and strategic intent, 25 and strategic vision, 34–35 stretch, 25 Walgreens, 29 of well-crafted strategy, 3–4 Yum! Brands, 29 Occupational Safety and Health Administration, 24 Office of Federal Housing Enterprise Oversight, 39 Ohio Bureau of Motor Vehicles, C-261 Ohio Department of Public Safety, C-261 Ohio State University, C-420, C-421 OHSAS 18001 certification, C-437 Online bill payment, 212 Online sales Coach, Inc., C-195 Lululemon, C-75 Mystic Monk Coffee, C-5 at Nordstrom, C-388 Under Armour, C-60 Vera Bradley, C-193 Online systems, 121 Online training course, 299 Operating income Ann Inc., C-237 Ascena Retail Group, C-237 Cooper Tire & Rubber Company, C-119 Lululemon, C-77 Papa John’s International, C-40, C-46 Sony Corporation, C-185 Under Armour, C-52 Walmart, C-301 Operating profit, CA-5 Operating profit margin, 81 Operating strategy Cooper Tire & Rubber Company, C-106–C-107 definition, 32–34 Mystic Monk Coffee, C-4–C-5 Nucor Corporation low-cost production, C-229–C-230 new technologies, C-228–C-229 plant construction, C-228–C-229 raw-materials strategy, C-243–C-244 Robin Hood, case, C-335–C-336 Walt Disney Company, C-321–C-330 Operating systems company examples, 328–329 information systems for, 329–330 for strategy execution, 329 Operation Perfect Hedge, 262 Operations Chipotle Mexican Grill, C-143, C-147–C-149 full-capacity, 120 Panera Bread Company, C-135 Qdoba Mexican Grill, C-155 for Sirius Satellite Radio, C-172–C-173 Southwest Airlines, C-373–C-375 value chain activity, 96 Whole Foods Market, C-27–C-28 Opportunities; see also SWOT analysis definition, 89 for growth, 212 in industry attractiveness, 232 to leverage cross-business value chain activities, 212 market penetration curve, 154 Orange County, Calif., Fire Authority, C-268 Organic Food Production Act, C-12 Organic foods industry acres devoted to, C-13 costs, C-14 definition, C-11–C-12 farmer interest in, C-13 growth factors, C-13 legislation, C-12 major companies, C-13 production, C-12 retailing, C-13 Organizational buying, Whole Foods Market, C-30–C-31 Organizational learning, and strategy execution, 36 Organizational levels objectives for each, 30 strategy making for all, 30–31 Organizational resources, 85 Organizational structure, 291 benefits of decentralization, 310 collaboration with partners, 311 creating value, 304 decision making, 308–311 definition, 304 delegation of authority, 308–311 centralized vs decentralized decision making, 309–310 cross-business strategic fit with decentralization, 310 disadvantages of decentralization, 310 functional, 305–306 hierarchical command-and-control, 309 matched with strategy aligning strategy with structure, 304–307 value chain performance, 301–304 matrix, 307 multidivisional, 306–307 and network structure, 311 Nucor Corporation, C-235 simple, 305 strategy-critical activities, 304–305 well-designed, 304 and work effort, 311–312 www.freebookslides.com SUBJECT INDEX Organization for Economic Cooperation and Development, antibribery standards, 258 Orientation sessions, 299 Original-equipment market, C-114 Outside directors on audit committee, 37 on compensation committee, 38 Outsourcing, 121 by Adidas, C-71 collaboration in, 311 contract, 164 definition, 162 Lululemon, C-85 merits for value chain concentration on core business, 163 cost efficiency, 162 noncrucial activities, 162 organizational flexibility, 163 reduced exposure to buyer preference changes, 163–164 reduced exposure to technology changes, 163 time to market speed, 163 by Nike, Inc., C-69 to reduce value chain costs, 102 risks for value chain lack of control, 164 wrong activities farmed out, 164 TOMS Shoes, C-430 Under Armour, C-63 value chain activities, 301–304 at Apple Inc., 303 benefits, 302–303 not going overboard on, 303–304 Outsourcing decisions, 155 Overdifferentiating, 131 Overhead costs, 226 Overspending, 131 Ownership, Sirius XM Satellite Radio, C-158 P Parenting advantage, 228 Partial integration, 159 Partnerships; see Strategic alliances Patents, as barrier to entry, 54 Pay-for-performance, Nucor Corporation, C-238 Peer-based control, 330 Peer evaluation, 220 Peer pressure, culture-induced, 350 Pell Grants, C-416 People, performance metric, 272 Performance, 361 Performance bonuses, 335–336 Performance evaluation, 20 Performance indicators, 13 Performance measurement system, 29 Performance metrics people, 272 planet, 272–273 profit, 273 Performance sports apparel, C-50 Performance targets, 336 Performance test, 12–13 Perks, 331 Personal gain, 262–263 PESTEL analysis components of, 48 definition, 45–46 Philanthropic activities TOMS Shoes, C-427–C-428 Whole Foods Market, C-32–C-33 Philanthropic initiatives, 269–270 Physical resources, 85 Pickup trucks, C-270 Pioneering to build reputation, 152 high cost and benefits, 152 Piracy in music industry, C-179 Pizza restaurant industry consumer demographic, C-43 costs of ingredients, C-44–C-45 delivery driver safety, C-44 distribution channels, C-42–C-43 expanded menu options, C-44 health concerns of public, C-43 location strategy, C-43 Papa John’s International, C-40–C-49 and social media, C-44 Planet, performance metric, 272 Plant capacity, Cooper Tire & Rubber Company, C-106 Plant managers, 32 Political factors, 48 Political risks, 181 Politicized cultures, 353 Ponzi scheme, 267 Poor performance, negative consequences, 361 Portfolio approach, 240 Practices; see also Best practices in clashing subcultures, 354 in corporate culture, 344–345 Preemptive strike, 147 Premium price for acquisitions, 214 too high, 131 Price(s) kept low in developing countries, 200–201 lower for equal or better products, 146 Price competition, vigorous among rivals, 124 Price-to-earnings ratio, 83, CA-6 Price wars, 51 Pricing strategy Lagunitas Brewing Company, C-97–C-100 I-39 Mystic Monk Coffee, C-4 Nucor Corporation, C-223–C-235 Whole Foods Market, C-22–C-25 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 Private label brands, Cooper Tire & Rubber Company, C-107–C-108 Proactive strategy, 8–9 Process design, improving, 121 Process innovation, as driving force, 65 Product boycotts, 278–279 Product design Lululemon, C-84–C-85 Michael Kors, C-196 Tesla Motors, C-258 Under Armour, C-62–C-63 Product development Lululemon, C-84–C-85 Tesla Motors, C-256–C-258 Under Armour, C-62–C-63 Vera Bradley, C-194 Product differentiation in beer industry, 73 difficult to achieve, 124 Product innovation Deere & Company, C-290–C–291 as driving force, 65 Production advanced technologies, 121 Mystic Monk Coffee, C-4–C-5 TOMS Shoes, C-430 Production capacity in beer industry, 73 unused, 51 Production incentive plan, Nucor Corporation, C-235–C-236 Productivity, Southwest Airlines, C-373 Product launch, Vera Bradley, C-194 Product licensing, Under Armour, C-60–C-61 Product life cycle, extending, 176 Product line Chipotle Mexican Grill, C-142–C-146 Coach, Inc., C-195 J.Crew, C-205 Kate Spade & Company, C-198 Mystic Monk Coffee, C-4 Nike, Inc., C-66–C-67 Nucor Corporation finished steel products, C-220–C-221 steelmaking, C-221–C-223 Panera Bread Company, C-125, C-128–C-130 www.freebookslides.com I-40 SUBJECT INDEX Product line—Cont PepsiCo, C-313–C-314 Qdoba Mexican Grill, C-155 strategy at Lululemon, C-80 strategy at Under Armour, C-54–C-57 Tesla Motors Model S, C-254–C-256 Model 3, C-256 Model X, C-256 Tesla Roadster, C-252–C-254 Under Armour, C-52 Whole Foods Market, C-20–C-22 Product presentation, by Under Armour, C-59 Product redesign, to reduce value chain costs, 102 Products in broad differentiation strategy, 126 equal or better at lower price, 146 identical among rivals, 124 intangible features, 129 less differentiation, 51 next-generation, 146 range of, at Nordstrom, C-381 signaling value of, 129 standardized, 124, 184 strategy of Vera Bradley, C-192 tangible features, 129 trivial differences in, 131 as value-driver, 126 Product segmentation, agricultural equipment, C-289 Profit and buyer price sensitivity, 61 Cooper Tire & Rubber Company, C-101, C-119 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 Profitability ratios earnings per share, CA-5 gross profit margin, CA-5 net profit margin, CA-5 net return on total assets, CA-5 operating profit margin, CA-5 return on invested capital, CA-5 return on stockholder’s equity, CA-5 Profitable growth, 229 Profit formula definition, 10 in radio broadcasting, 11–12 Profit margin, and value chain, 95–97 Profit sanctuaries cross-market subsidization, 199 to defend against international rivals, 199–200 definition, 198 for strategic offensives, 198–199 Profit sharing at Nordstrom, C-386 Nucor Corporation, C-237 Prohibition, repeal of, C-92 Prohibition movements, C-91–C-92 Promotion Mystic Monk Coffee, C-5 Nike, Inc., C-67–C-69 Qdoba Mexican Grill, C-156 Southwest Airlines, C-363–C-365 by Under Armour, C-57–C-60 Promotion from within, 331 Chipotle Mexican Grill, C-148 Whole Foods Market, C-28 Property rights protection, first-mover advantage, 152 Protect IP Act, C-179 Protestantism evangelical, C-214 mainline, C-214 recent decline, C-211 Psychology of Achievement (Tracy), C-86 Publicity, for BillCutterz.com, C-6, C-8 Punishment, and reward systems, 332–334 Purchasing Qdoba Mexican Grill, C-155 Whole Foods Market, C-30–C-31 Purchasing power, in foreign markets, 176 Q Quality, in core values, 26 Quality assurance Chipotle Mexican Grill, C-147 Under Armour, C-63 Quality control Cooper Tire & Rubber Company, C-107 Lululemon, C-85 Papa John’s International, C-45 Quality standards, Whole Foods Market, C-22, C-25 Quantum gains, 325–326 Quick Service Restaurant, C-45 R Radio broadcasting, 11–12 Rapid growth, to defend against global giants, 203 Rare resources, 87 Raw materials, access to, in foreign markets, 176 Raw-materials strategy Cooper Tire & Rubber Company, C-109–C-110 Nucor Corporation, C-232–C-234 Reactive strategy, 8–9 Realized strategy, Reallocation of cost activities, to reduce value chain costs, 102 Real-time data-generating, 329 Recapped or retreaded tires, C-116 Recognition, 331 Recruitment, 293–296 BillCutterz.com, C-6 Cooper Tire & Rubber Company, C-111 high-tech companies, 295 at Nordstrom, C-384 Ritz-Carlton, C-395 Regional brewers, C-93 Regional craft brewers, C-93 Regulatory factors, as driving force, 66 Regulatory forces, description, 48 Regulatory hurdles, Southwest Airlines, C-343–C-344 Regulatory policy restrictions, 54 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 in United States, C-214–C-215 Replacement tire market, C-114–C-115 www.freebookslides.com SUBJECT INDEX Reputation blemish at Southwest Airlines, C-374–C-375 from corporate social responsibility, 278–279 Reputational assets, 85 Resale guarantee program, C-264–C-265 Research and development by Adidas, C-71 in broad differentiation strategy, 126 Cooper Tire & Rubber Company, C-108–C-109 cross-business strategic fit, 310–311 by Nike, Inc., C-69 in related diversification, 220–221 value chain activity, 96 as value-driver, 126 Resource allocation 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 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 at BillCutterz.com, C-9–C-10 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 intangible, 84–85 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 Vera Bradley, C-194–C-195 Restaurant industry Chipotle Mexican Grill, C-140–C-156 employment in, C-138 fast-casual segment, C-121, C-126–C-128, C-156 fast-food segment, C-121–C-122, C-126–C-128, C-156 Panera Bread Company, C-121–C-139 statistics on, C-156 in United States, C-138–C-139 Restaurant Industry Forecast, C-156 Restriction of Hazardous Substances regulation, C-438 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 fashion, C-377 securing shelf space from, 54 and supplier bargaining power, 58 for Under Armour, C-60 Retailing Lululemon, C-80–C-82 Michael Kors, C-196 Nike, Inc., C-66 by Under Armour, C-59 Vera Bradley, C-189 Retaliation fear of, 51 signaling, 151 Retirement plan, at Nordstrom, C-386 Retrenching divestiture, 245–246 examples, 245 spin-offs, 245 Return on assets, 81, CA-5 Return on capital employed, 81, CA-5 Return on equity, 81 Return on invested capital, 81, CA-5 Return on stockholder’s equity, 81, CA-5 Revenue enhancement, benefits of corporate social responsibility, 279 Revenues Ann Inc., C-237 Ascena Retail Group, C-237 Chipotle Mexican Grill, C-142 footwear industry, C-430 J.Crew, C-205, C-206 Kate Spade & Company, C-198 Lululemon, C-75, C-77 I-41 Panera Bread Company, C-121 Papa John’s International, C-40, C-46 slow growth at Lululemon, C-73 Sony Corporation, C-185 Tata Group, C-274 TOMS Shoes, C-423, C-430 Under Armour, C-50, C-55 Vera Bradley, C-193 Walt Disney Company, C-319 Whole Foods Market, C-11 Reward systems for achieving right outcomes, 334 celebrating successes of employees, 361 communicated and explained, 336 company examples, 333 Cooper Tire & Rubber Company, C-111 for executives, 334 financial incentives, 331 focus on accomplishment, 330–331 incentive compensation, 335–336 Nucor Corporation, 335, C-235–C-237, C-238 powerful management tool, 330 and punishment, 332–334 Southwest Airlines, C-368–C-369 Whole Foods Market, C-28–C-30 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 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 www.freebookslides.com I-42 SUBJECT INDEX Rivals; see also Competitors—Cont essentially identical products, 124 set apart from, using profit sanctuaries against, 199–200 vigorous price competition, 124 Rival sellers, 49 Robotic production technology, 121 Roman Catholic Church Carmelite monks of Wyoming, C-2–C-3 growth, C-212 number of followers, C-214 Routines for running a company, 319 Runner-up firms, 147 Russia kickbacks in, 258 steel production, C-239 S Safety questions for Tesla Motors, C-267–C-269 Sales Adidas Group, C-50 Chipotle Mexican Grill, C-142 decline at J.Crew, C-200 of electric vehicles, C-270 lost at Lululemon, C-73 Nike, Inc., C-50 of Nike by region, C-67 at Nordstrom 2012–2013, C-388 Nucor Corporation, C-223–C-235 in related diversification, 221 value chain activity, 96 Whole Foods Market, C-11 Sales strategy Lululemon direct-to-customer, C-83–C-84 wholesale, C-83 Sirius XM Satellite Radio, C-169–C-172 Same-sex marriage, C-215 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 Screening employees Ritz-Carlton, C-395 Southwest Airlines, C-366–C-367 Secret, The (Byrne), C-86 Securities and Exchange Commission, 39, 261–262 and accounting fraud, 263 bribery cases, 258–259 and Whole Foods Market, C-34 Self-dealing, 262 Self-interest, 262–263 Self-publishing in music industry, C-180–C-181 Senior officers incentive plan, Nucor Corporation, C-236 Service, value chain activity, 96 Seven Habits of Highly Effective People (Covey), C-86 Shareholders benefits of corporate social responsibility, 280 effect of unethical conduct on, 267 management as agent of, 37–38 Shareholder value from diversification, 213 PepsiCo, C-309–C-312 from strategic fit, 223 from unrelated diversification, 225–228 Shelf space, 54 Sherman Antitrust Act, C-43 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 Cooper Tire & Rubber Company, C-104, C-105 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 Slogan, vision expressed as, 22–23 Slotting fees, 60 Small and medium-sized businesses, big data, C-410–C-411 Social complexity, 88 Social conscience, 268 Social contract, 260–261 implied, 278 Social media use by TOMS Shoes, C-425 used by Whole Foods Market, C-27 Social responsibility Papa John’s International, C-45–C-46 Whole Foods Market, C-31–C-33 Societal concerns, changing, 66 Sociocultural forces, 48 South Africa problems for Walmart, C-302–C-304 Walmart’s entry into, C-301–C-302 Walmart’s prospects for success, C-304–C-305 South Africa Competition Tribunal, C-285, C-302, C-303 South African Commercial and Catering and Allied Workers Union, C-303 Southern Methodist University, C-419–C-420 South Korea, C-61 steel production, C-239 Walmart’s failure in, C-300 Specialized resources and capabilities, 218–219 Speed, question for diversification, 216 Spin-offs, 245 Sponsorships by Adidas, C-71 Under Armour, C-58 Sports marketing, by Under Armour, C-57–C-59 Stabilization, misguided motive for diversification, 229 Staffing, 290 Chipotle Mexican Grill, C-147–C-148 in high-tech companies, 295 Nordstrom, C-384–C-386 recruiting, training, and retaining employees, 293–296 strong management team, 292–293 Standard and Poor’s, C-226 Standard and Poor’s 500 Index, C-308, C-319, C-323 Standardization economies of scale from, 184 learning-curve effects, 184 Star business units, 240 Startups, barriers to entry for, 213 Statement of earnings, Nordstrom, C-379 State of the Church Report 2012, C-210 Statistical information, 330 Steel industry ArcelorMittal USA, C-243–C-244 biggest exporting countries, C-241 foreign producers, C-239 industry consolidation, C-242 integrated facilities, C-239, C-240–C-241 mini-mills, C-239–C-240 Nucor Corporation, C-216–C-244 technologies, C-239–C-241 top producers of crude steel, C-241 United States Steel, C-244 U.S consumption 2000–2013, C-243 worldwide production 1975–2013, C-240 worldwide production 2012–2013, C-239 www.freebookslides.com SUBJECT INDEX Steel tariff, C-226 Stock option plan Cooper Tire & Rubber Company, C-111 Whole Foods Market, C-29 Stock price, from short-term performance, 38 Stock price performance Chipotle Mexican Grill, C-140 decline at Sirius Satellite Radio, C-175 PepsiCo, C-308 Under Armour, C-52–C-53 Walt Disney Company, C-319, C-323 Stock purchase plan, Whole Foods Market, C-29 Stop Online Piracy Act, C-179 Storage costs, high, 51 Store expansion, Lululemon, C-80–C-82 Store layout Lululemon, C-82–C-83 Nordstrom, C-380–C-381 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 Chipotle Mexican Grill, C-141 collaboration in, 311 Cooper Tire & Rubber Company, C-102 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 satellite radio, C-160 termination of, 167 Tesla Motors Daimler AG, C-265–C-266 Panasonic, C-265, C-266 Toyota, C-266 transaction costs, 187–188 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 fit 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 at PepsiCo, C-317 Strategic group, 68 Strategic group mapping constructing, 68 definition, 67–68 example, 69 guidelines, 68 strategic groups, 68 value of effect of driving forces, 70 identifying close vs distant rivals, 69 profit prospect, 70 variables, 68 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 I-43 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 Cooper Tire & Rubber Company, C-103–C-105 definition, 20 PepsiCo, C-306 Southwest Airlines, C-349–C-350 frequent-flyer program, C-362–C-363 integrating AirTran, C-360–C-361 international service, C-362 larger aircraft, C-361–C-362 modernization, C-361 new reservation system, C-362 Vera Bradley, C-188 Strategic vision, 19 BillCutterz.com, C-10 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 plan at Mystic Monk Coffee, C-4, C-5 Procter & Gamble, 23 reference point for decisions, 21 shortcomings, 23 significance of, 24 Southwest Airlines, C-350 stated to employees, 332 Whole Foods Market, C-11 winning support for, 21–22 Strategy-critical activities, 304–305 Strategy execution action agenda, 35, 289 adopting best practices business process reengineering, 322–323 capturing benefits, 327–328 www.freebookslides.com I-44 SUBJECT INDEX Strategy execution—Cont 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 components of process, 288–289 Cooper Tire & Rubber Company, C-110–C-111 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 plan at Mystic Monk Coffee, C-5 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 for diversified company, 211 easier than execution, 287–288 focus of, 287 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 setting objectives, 27–30 strategic plan, 20, 34–35 strategic vision, 21–24 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 actions to identify, aligned with organizational structure, 304–307 alternatives for diversified company, 244 for big data at Amazon, C-403–C-404, C-406–C-412 BillCutterz.com, C-7–C-8 and business model, 9–12 and company success, for competing differently, in conflict with culture, 350 converted into actions, 287 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 as direction and guidance, for diversification, 211–212 drivers of unethical, 262–265 emergent, evolution over time, financial ratios for, 81–83 importance of crafting and execution, 13–14 indicators, 80–81 matched to corporate culture, 350 merits of current, 79–83 new objectives for J.Crew, C-200 options for entering foreign markets exporting, 184–185 foreign subsidiaries, 186–187 franchising, 185–186 licensing, 185 strategic alliances, 187–189 Panera Bread Company, C-124–C-125 Papa John’s International brand loyalty goal, C-45 community service, C-45–C-46 expansion, C-45 franchise requirements, C-45 marketing program, C-45 proactive and reactive, 8–9 quest for competitive advantage, 4–8 realized, reasons for ethics in, 265–268 of rivals, 71 shift at Whole Foods Market, C-24 single-business company, 80 at Starbucks, Vera Bradley, C-188 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 Subsidiaries, Tata Motors, C-277 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 www.freebookslides.com SUBJECT INDEX 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 Supplier Code of Conduct, TOMS Shoes, C-428 Suppliers coordinating with, 128 improving value chain activities, 102 international expansion by, 175–176 located near plants, 122 value chain, 98 Supply chain Chipotle Mexican Grill, C-145–C-146 Panera Bread Company, C-135–C-137 reducing costs of, 156 in related diversification, 220 Supply chain efficiency, 120 Supply chain management Chipotle Mexican Grill, C-146–C-147 crucial activity, 95 definition, 96 Lululemon, C-85 Nucor Corporation, C-232–C-234 Tesla Motors, C-259–C-260 Under Armour, C-63 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 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 definition, 89–90 identifying market opportunities, 91–93 identifying strengths, 90–91 identifying threats, 93 identifying weaknesses, 91 steps leading to strategic actions, 94 Symbolic culture-changing actions ceremonial events, 357 lead by example, 357 Synergy, 213 T Tangible features, 129 Tangible resources, 84, 85 Tapered integration, 159 Target market best-cost providers, 136 BillCutterz.com, C-8 Mystic Monk Coffee, C-4 Tariffs on steel imports, C-226 Task specialization, 305 Team-based management, Whole Foods Market, C-27–C-28 Teamsters Union, C-369 Technological advances, 126 digital music, C-180–C-182 tire manufacturing, C-115–C-116 vertical integration disadvantage, 161 Technological assets, 85 Technological change as driving force, 65 fast-paced, 130 reduced risk exposure, 163–164 Technological factors, 48 Technological know-how transfer of, 198–199 transferred in related diversification, 217 Technology access to new, 156 in related diversification, 220–221 Tesla Motors, C-256–C-258 Tests of corporate advantage better-off test, 213, 225 cost of entry test, 213 industry attractiveness test, 213 for unrelated diversification, 227–228 Texas Supreme Court, C-340 Theft prevention, C-408 Think-global, act-local strategy, 193 Think-global, act-global strategy, 193 Think-local, act-local strategy advantages and disadvantages, 193 I-45 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, CA-6 Time to market, 160 Tire manufacturing Cooper Tire, C-101–C-119 global light vehicle production, C-113 imports from China, C-117 industry consolidation, C-113 leading sellers, C-112 market shares, C-107 plant capacity in North America, C-106 rubber chemistry, C-113 shipments 2009–2013, C-115 U.S retail market share, C-113 Title IX of Education Amendments Act of 1972, C-416 Top-down guidance, 319–320 Top-level executives creating fully-engaged organization, 360 leading by example, 357 Total debt-to-assets ratio, CA-5 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, CA-5 Trade restrictions, 54–55 Training strategic role of, 299 value of, 360 Training magazine, C-390 Transaction costs definition, 216 in diversification, 216–217 in strategic alliances, 187–188 Transnational strategies advantages and disadvantages, 192 definition, 192 drawbacks, 192 examples, 192–193 Four Seasons Hotels, 194 think-global, act-local approach, 192–193 www.freebookslides.com I-46 SUBJECT INDEX Transportation Workers of America, C-369 Triple bottom line companies recognized for, 274–275 and corporate social responsibility, 272–275 definition, 272 Southwest Airlines, C-350 at TOMS Shoes, 273 Turnaround strategy J.Crew, C-208 Tata Motors, C-284 Twenty-First Amendment, C-92 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 Unethical and greed-driven cultures, 353–354 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 Unionization of college athletes, C-414 Unions, bargaining power, 58 United Kingdom Walmart in, C-299–C-300 Whole Foods Market in, C-11, C-14 United Nations Conference on Trade and Development, C-302 United States apparel industry, C-201 bill negotiation industry, C-8–C-9 coffee industry, C-3–C-4 organic foods industry, C-11–C-13 religious groups, C-214–C-215 steel production, C-239 weak dollar and trade, 182 United States International Trade Commission, C-113, C-226 United States Supreme Court, C-340 United Steelworkers, C-113, C-118 Unit sales, 125 University of Nebraska, C-414 University of Southern California, C-420 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 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 User requirements, common, 124 V Valuable resources, 87 Value from differentiation, 130 signaling, 129 superior, 4–5 Value-added production, Nucor Corporation, C-230–C-231 Value chain, 94–104 alignment at PepsiCo, C-317 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 and internal cost structure, 98 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 Lululemon, C-85 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-creating activities, 104 Value drivers brand-building, 127 continuous quality improvement, 126–127 customer service, 126 definition, 126 high-quality inputs, 127 human resource management, 127 innovation, 127 marketing, 127 product features, 126 research and development, 126 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 Value statement, 26 www.freebookslides.com SUBJECT INDEX Variable costs cement industry, 101 in radio broadcasting, 12 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 Vertically integrated firms, 157–158 Vision statement, dos and don’ts, 22 Voice over Internet Protocol, 212, 221 VRIN tests for sustainable competitive advantage, 87–89, 90 inimitable resources, 87 nonsubstitutable resources, 88 rare resources, 87 valuable resources, 87 W Wages, developing vs developed nations, 179–180 Wall Street Journal, C-33, C-118, C-417 Warehouse thefts, C-408 Water management activities, C-438 Weak-culture companies, 349 Weakness, 91; see also SWOT analysis definition, 89 Webb-Kenyon Act of 1914, C-92 Wholesale distributors, in beer industry, 73 Wholesalers, bypassing, 160–161 Wholesale sales Lululemon, C-83 Under Armour, C-60 Vera Bradley, C-189 Winning strategy definition, 12 tests for competitive advantage test, 12 fit test, 12 performance test, 12–13 Winter Olympics of 2014, C-58 Work atmosphere, 332 Work climate, for good strategy execution, 320 Work effort, 291 strategy, 311–312 Work environment, 270 attractive, 332 Whole Foods Market, C-27–C-28 Work ethic, 85 Workforce empowerment, 360 local, 202–203 TOMS Shoes, C-429 work ethic and drive, 85 Workforce retention, 279, 293–296 Cooper Tire & Rubber Company, C-111 Nucor Corporation, C-237 Working capital, 82, CA-5 Workplace diversity, 270 World Fair Trade Organization, C-4 World Trade Organization, 199, C-113 “Worry list” of issues, 107–108 Wright Amendment, C-343–C-344 Y Yoga Journal, C-78 Yoga marketplace, C-78–C-79 Z Zero emission vehicle credits, C-265 I-47 www.freebookslides.com www.freebookslides.com www.freebookslides.com ...www.freebookslides.com Crafting and Executing Strategy THE QUEST FOR COMPETITIVE ADVANTAGE Concepts and Cases www.freebookslides.com www.freebookslides.com Crafting and Executing Strategy THE QUEST FOR COMPETITIVE... John E Gamble A J Strickland www.freebookslides.com Crafting and Executing Strategy THE QUEST FOR COMPETITIVE ADVANTAGE Concepts and Cases www.freebookslides.com GUIDED TOUR Chapter Structure and. .. 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