strategic management - · pdf filej ryanair: lower cost ... strategic management and the role...

Strategic Management
FRANK T. ROTHAERMELGeorgia Institute of Technology
MeGrawHill
McGraw-HillIrwin

CONTENTS
P A R T 1Strategy Analysis 1
CHAPTER 1What Is Strategy and Why Is It Important? 2
CHAPTERCASE 1 j
The Premature Death of a Google \Forerunner at Microsoft 3
What Strategy Is: Gaining and Sustaining CompetitiveAdvantage 4
What Is Competitive Advantage? 4What Is Strategy? 6Strategy as a Theory of How to Compete 7Industry vs. Firm Effects in Determining Performance 8What Strategy Is Not 9
Formulating Strategy Across Levels: Corporate,Business, and Functional Managers 10Business Models: Putting Strategy into Action 11
Strategy in the 21st Century 13Accelerating Technological Change 13A Truly Global World 14Future Industries 15
| JJteSggp^ IK19M5g|lnlS tlH | Threadless: Leveraging
Crowdsourcing to Design Cool T-Shirts 17
Gaining & Sustaining Competit ive Advantaged
Stakeholders 18
The AFI Strategy Framework 19
CHAPTERCASE 1 Consider This... 21
CHAPTER 2The Strategic Management Process 30
CHAPTERCASE 2Teach For America: Inspiring Future Leaders 31
Vision, Mission, and Values 32Visionary Organizations 32Forming Strategic Intent 33
Strategic Intent 34
Mission Statements 34
Gaining & Sustaining Competitive Advantage1^Mission Statements and Competitive Advantage 36
Living the Values 38
Strategizing for Competitive Advantage: How IsStrategy "Made"? 39
Strategic Planning 39
| j j&rgfe jy (H$(g)OaflflfMJJJT] Shell's Future
Scenarios 40Scenario Planning 40
Strategy as Planned Emergence: Top-Down and Bottom-Up 43
|fSiMlSigiy Irflljg)flaOflfOiftt] Starbucks's CEO: "It's
Not What We Do!" 44
Implications for the Strategist 46
CHAPTER 3External Analysis: Industry Structure, CompetitiveForces, and Strategic Groups 54
CHAPTIERCASE 3
Build Your Dreams (BYD) to Sidestep EntryBarriers 55
The PESTEL Framework 56
I UBS-Relents to
Pressure by U.S. Government 57
Political Factors 57Economic Factors 57Sociocultural Factors 59Technological Factors 60Ecological Factors 60Legal Factors 60
Understanding Differences in Industry Performance:The Structure-Conduct-Performance Model 61
Perfect Competition 62Monopolistic Competition 63Oligopoly 63Monopoly 64
Competitive Forces and Firm Strategy: The FiveForces Model 64
Threat of Entry 65The Power of Suppliers 66Power of Buyers 66Threat of Substitutes 67Bivalry among Existing Competitors 67
Gaining & Sustaining Competitive AdvantagedFive Forces in Airlines vs. Soft Drinks 68
xl

CONTENTS xli
Adding a Sixth Force: The Strategic Role ofComplements 70
Changes Over Time: Industry Dynamics J71
Attractive OS Software Business: How Much
Longer? 72
Explaining Performance Differences Within the SameIndustry: Strategic Groups 74
Mapping Strategic Groups 74Mobility Barriers 76
C H A P T E R C A S E 3 Consider This... 77
CHAPTER 4Internal Analysis: Resources, Capabilities,and Activities 84
CHAPTERCASE' 4 "\
From Good to Great to Gone: The Rise andFall of Circuit City 85
Internal Analysis: Looking Inside the Firm for CoreCompetencies 86
The Resource-based View 88Two Critical Assumptions 90The VRIO Framework 91
Ij^SMSSgffl trflO pQugjOoS4 .1) | How Nintendo Focused
on the Casual Gamer 95 /
The Value Chain and Activity Systems 95Primary and Support Activities 95Dynamic Strategic Activity Systems 97
The Dynamic Capabilities Perspective 99
Strategic Fit 100
Gaining & Sustaining Competitive AdvantagedHow to Protect a Competitive Advantage 102
Better Expectations of Future Resource Value 102
Gates 103
Path Dependence 103Causal Ambiguity 104Social Complexity 104
Putting Together Internal and External Analysis: TheSWOT Analysis 105
C H A P T E R 5Competitive Advantage and Firm Performance 112
CHAPTERCASE j fAssessing Competitive Advantage: Googlevs. Microsoft 113
Measuring Competitive Advantage 114Economic Value Creation 115Accounting Profitability 117Shareholder Value Creation 121
Gaining & Sustaining Competitive Advantage0^Assessing Competitive Advantage: Google vs.Microsoft, Continued 123
The Balanced Scorecard 124Advantages of the Balanced Scorecard 126Disadvantages of the Balanced Scorecard 127
The Triple Bottom Line 127
fjaf@6Sjy PS@y9)te^Jl Interface: The World's
First Sustainable Company 128
Implications for the Strategist 129
PART 2Strategy Formulation 137
C H A P T E R 6Business Strategy: Differentiation, Cost Leadership,and Integration 138
CHAPTERCASE 6_J
Trimming Fat at Whole Foods Market 139
Business-Level Strategy: How to Compete forAdvantage 140
Strategic Position 141Generic Business Strategies 142
Differentiation Strategy: Understanding ValueDrivers 143
Value Drivers 145
j Toyota: From "Perfect^
Recall" to "Recall Nightmare" 146
Cost-Leadership Strategy: Understanding CostDrivers 147
J Ryanair: Lower Cost
than the Low-Cost Leader! 148
Cost Drivers 148

xlii CONTENTS
Business-Level Strategy and the Five Forces: Benefitsand Risks 153
Benefits and Risks of the Cost-Leadership Strategy 154Benefits and Risks of the Differentiation Strategy 154
Integration Strategy: Combining Cost Leadershipand Differentiation 155
Integration Strategy at the Business Level 155Value and Cost Drivers of Integration Strategy 157Integration Strategy at the Corporate Level 160
Gaining & Sustaining Competitive AdvantagedThe Dynamics of Competitive Positioning 161
CHAPTER 7Business Strategy: Innovation and StrategicEntrepreneurship 170
CHAPTERCASE 7
From Encyclopedia Britannica to EncartatoWikipedia 171
Competition Driven by Innovation 172
Innovation and the Industry Life Cycle 173Introduction Stage 174
Network Effects to Propel Growth 175
Growth Stage 175
IJfeiitgjsiy [HlBg)toD6]|}DST3L [ Some Standards Die
Hard: QWERTY vs. DSK 177
Maturity Stage 178Decline Stage 179
Strategic Entrepreneurship 180
Types of Innovation 182Incremental and Radical Innovations 182
King of Incremental Innovation 183
Architectural and Disruptive Innovations 184
Innovation: Disrupt Yourself! 186
The Internet as Disruptive Force: The Long Tail 187
Discontinuities: Periods of Paradigm Change 189
Gaining & Sustaining Competitive AdvantagedHypercompetition 191
CHAPTER 8Corporate Strategy: Vertical Integrationand Diversification 200
C H A P T E R C A S E 8 jRefocusing GE: A Future of Clean-Techand Health Care? 201
What Is Corporate-Level Strategy? 202Transaction Cost Economics and the Scope of theFirm 204
Firms vs. Markets: Make or Buy? 204Alternatives on the Make-or-Buy Continuum 207
|@SJgfSg)iy OffijgyfijsflfaS Ht) | Toyota Locks Up
Lithium for Car Batteries 208
Vertical Integration along the Industry Value Chain 209Types of Vertical Integration 210
Benefits and Risks of Vertical Integration 212
| JJOEHSggiy (rOB;|}DD5g](}gS{HI |Back to the Future:
PepsiCo's Forward Integration 213 -
Alternatives to Vertical Integration 214
Corporate Diversification: Expanding Beyond a SingleMarket 216
Types of Corporate Diversification 216
Leveraging Core Competencies for Corporate Diversification 218
&$?S$3$ [rflBg]ljD08gj|}pS @L [ ExxonMobil Diversifies
into Natural Gas 218
Gaining & Sustaining Competitive AdvantagedCorporate Diversification 221
Corporate Strategy: Combining Vertical Integrationand Diversification 225
CHAPTER 9Corporate Strategy: Acquisitions, Alliances,and Networks 236
CHAJPTERCASE 9
Facebook: From Dorm Room to DominantSocial Network 237
Integrating Companies: Mergers and Acquisitions 238' Horizontal Integration: Merging with Competitors 239
Gaining & Sustaining Competitive AdvantagedMergers and Acquisitions 241
Food Fight: Kraft's
Hostile Takeover of Cadbury 241

CONTENTS xliii
Strategic Alliances: Causes and Consequences ofPartnering 244
Challenge Amazon 245
Why Do Firms Enter Strategic Alliances? 245
Alliance to Acquisition 247
Governing Strategic Alliances 248Alliance Management Capability 251
Strategic Networks 254Analyzing Strategic Networks 254
i/hen Strategic
Networks Become Dysfunctional 255
CHAPTER 10Global Strategy: Competing Around the World 268
CHAPTERCASE7IO_"Hollywood Goes Global 269
What Is Globalization? 271Going Global: Why? 272
Advantages of Expanding Internationally 272
I Stages of
Globalization 273
Does GM's Future Lie
in China? 275
Disadvantages of Expanding Internationally 276
Going Global: Where and How? 277Which Countries Do MNEs Enter? 277How Do MNEs Enter Foreign Markets? 280
Strategy Around the World: Cost Reductions vs. LocalResponsiveness 281
International Strategy 282Localization Strategy 283Global-Standardization Strategy 284Transnational Strategy 284
) n Retreats
from Germany 285
National Competitive Advantage: World Leadership inSpecific Industries 287
Porter's National Competitive Advantage Framework 287
Gaining & Sustaining Competitive Adva

strategic management - · pdf filej ryanair: lower cost ... strategic management and the role...

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