STRATEGIC MANAGEMENT IN ACTION SIXTH EDITION II I ' STRATEGIC MANAGEMENT IN ACTION Mary Coulter Missouri State University PEARSON Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City Säo Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo RES HD Editor in Chief: Stephanie Wall Text Designer: LCI Design 30.28 Senior Acquisitions Editor: April Cole Cover Designer: LCI Design •C696 Editorial Project Manager: Cover Art: Svetoslav Iliev/Shutterstock.com 2013 Claudia Femandes Permission Specialist: Brooks Hill-Whilton Director of Marketing: Maggie Moylan Media Project Manager, Production: Senior Marketing Manager: Nikki Ayana Jones Lisa Rinaldi Marketing Assistant: Gianna Sandri Senior Media Project Manager, Senior Managing Editor: Judy Leale Editorial: Denise Vaughn Production Project Manager: Kelly Warsak Full-Service Project Management and Senior Operations Supervisor: Arnold Vila Composition: Integra Operations Specialist: Cathleen Petersen Printer/Binder: RRDAVillard Creative Director: Blair Brown Cover Printer: Lehigh-Phoenix Color Senior Art Director: Kenny Beck Text Font: 10/12, Times LT Std Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on appropriate page within text. 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Library of Congress Cataloging-in-Publication Data Coulter, Mary K. Strategie management in action/Mary Coulter.—6th ed. p. cm. Includes index. ISBN 978-0-13-262067-3 1. Strategic planning. 1. Title. HD30.28.C696 2010 658.4'012—dc23 2012021727 10 9 8 7 6 5 4 3 2 1 PEARSON ISBN 10: 0-13-262067-7 ISBN 13: 978-0-13-262067-3 To my husband, Ron! Brief Contents Preface xi Chapter 1 Introducing the Concepts 1 Chapter 2 The Context of Managing Strategically 27 Chapter 3 Assessing Opportunities and Threats: Doing an External Analysis 55 Chapter 4 Assessing Strengths and Weaknesses: Doing an Internal Analysis 91 Chapters Functional and Competitive Strategies 119 Chapters Corporate Strategies 157 Chapter 7 International Strategies 193 Module Special Topics in Strategy 215 Appendix 1 How to Do a Comprehensive Case Analysis 231 Appendix 2 Sample Case Analysis 237 Appendix 3 Comprehensive Cases for Analysis 245 Index 259 Contents Preface xi Chapter 1 Introducing the Concepts 1 CASE #1 : Virtual Worlds, Real Profits 1 Explain Why Strategic Management Is Important 2 Explain What Strategic Management Is 4 The Basics of Strategy and Strategic Management 4 The Strategic Management Process 5 Looking at Strategic Management's Past 9 Explain Who's Involved with Strategic Management 11 The Board of Directors 11 The Role of Top Management 12 Other Managers and Organizational Employees 13 Discuss Two Important Factors Impacting Strategic Management Today 14 The Global Economy and Globalization 14 Corporate Governance 16 Concluding Thought 17 The Bottom Line 18 YOU as Strategic Decision Maker: Building Your Skills 20 Strategic Management in Action Cases 21 CASE #2; Making Magic Happen 21 CASE #3: MTV's New Reality 22 CASE #4: Fighting Grime 23 Endnotes 25 Chapter 2 The Context of Managing Strategically 27 CASE #1 : Out of Focus 27 Describe the Different Perspectives on Competitive Advantage 28 The I/O View 30 Resource-Based View 30 Guerrilla View 33 Which View Is Best? 33 Explain the Driving Forces, Implications, and Criticai Success Factors of the Business Environment 34 Drivers of the Business Environment 34 Implications of These Driving Forces 38 Critical Success Factors 39 Discuss Two Organizational Elements That Guide Strategic Decision Makers in Managing Strategically in Today's Context 41 Organizational Vision and Mission 41 CSR and Ethics 43 The Bottom Line 46 YOU as Strategic Decision Maker: Building Your Skills 48 viii CONTENTS Strategic Management in Action Cases 49 CASE #2: Troubles in Toyiand? 49 CASE #3: Game Not Over, Not Yet 50 CASE #4: Bridging the Gap 50 Endnotes 52 Chapter 3 Assessing Opportunities and Threats: Doing an External Analysis 55 CASE #1: Not Sold Out 55 Describe an External Analysis 56 Organizations as Open Systems 57 Perspectives on Organizational Environments 57 Environmental Scanning and External Analysis 59 Explain How to Do an External Analysis of an Organization's Specific and General Environments 60 External Environmental Sectors 60 Finding Information on the External Environment and Evaluating It 76 Responsibilities for External Analysis at Different Managerial Levels 78 Discuss the Benefits and Challenges of Doing an External Analysis 79 Benefits of Doing an External Analysis 79 Challenges of Doing an External Analysis 80 The Bottom Line 82 YOU as Strategic Decision Maker: Building Your Skills 84 Strategic Management in Action Cases 85 CASE #2: Being the Best 85 CASE #3: Dressing Up 86 Endnotes 88 Chapter 4 Assessing Strengths and Weaknesses: Doing an internal Analysis 91 CASE #1 : Making Over Avon 91 Describe an Internal Analysis 92 A Quick Review of Organizational Resources 93 From Resources to Organizational Capabilities 93 From Capabilities to Core Competencies and Distinctive Capabilities 95 The Role of Strengths and Weaknesses 97 Explain How to Do an Internal Analysis 97 Value Chain Analysis 98 Using an Internal Audit 101 Capabilities Assessment Profile 104 Determining Strengths and Weaknesses 107 Discuss Why an Internal Analysis Is Important 109 The Bottom Line 110 YOU as Strategic Decision Maker: Building Your Skills 112 Strategic Management in Action Cases 113 CASE #2; Fizz Factor 113 CASE #3: Shooting for Success 114 CASE #4: New Recipe 115 Endnotes 117 CONTENTS Chapters Functional and Competitive Strategies 119 CASE #1: Driving for Success 119 Describe the Functional Strategies an Organization Needs, and Explain How Those Strategies Are Implemented and Evaluated 120 Strategic Management In Action: Process 120 What Happens After the SWOT Analysis? 121 What Functional Strategies Does an Organization Need? 122 Explain What Competitive Advantage Is and What It Implies 126 Understanding the Competitive Environment 127 The Role of Resources and Distinctive Capabilities In Gaining Competitive Advantage 129 From Competitive Advantage to Competitive Strategies 129 Describe the Different Competitive Strategies 130 Traditional Approaches to Defining Competitive Strategy 130 Contemporary Views on Competitive Strategy 137 Discuss How Competitive Strategies Are Implemented and Evaluated 139 Implementing Competitive Strategy 140 Evaluating and Changing Competitive Strategy 143 The Bottom Line 146 YOU as Strategic Decision Maker: Building Your Skills 148 Strategic Management in Action Cases 150 CASE #2: They've Got Game 150 CASE #3: Rewind and Replay 151 CASE #4: Casting a Wider Net 152 Endnotes 153 Chapters Corporate Strategies 157 CASE #1: Growing Up 157 Define Corporate Strategy 158 Single- and Multiple-Business Organizations 158 Relating Corporate Strategy to Other Organizational Strategies 159 What Are the Corporate Strategic Directions? 160 Discuss Organizational Growth Strategies 160 Types of Growth Strategies 160 Implementing the Growth Strategies 166 Describe the Organizational Stability Strategy 170 When Is Stability an Appropriate Strategic Choice? 170 Implementing the Stability Strategy 171 Describe Organizational Renewal Strategies 171 What Leads to Performance Declines? 172 RenewaI StrategI e s 173 Implementing Renewal Strategies 174 Discuss How Corporate Strategy Is Evaluated and Changed 176 Evaluating Corporate Strategies 177 Changing Corporate Strategies 182 The Bottom Line 184 YOU as Strategic Decision Maker: Building Your Skills 186 Strategie Management in Action Cases 187 CASE #2: Time for Bread 187 CASE #3: Speed Bump 188 CASE #4: Changing the Menu 189 Endnotes 190 Chapter 7 International Strategies 193 CASE #1: Fast Fashion 193 Describe International Strategy, and Explain Why It's Important 194 The International Environment 194 Importance of International Strategies 198 Explain the Issues That Arise as Organizations Go International 199 The Legal-Political Environment 199 The Economic Environment 199 The Cultural Environment 201 Describe the Important International Strategy Alternatives and Explain How They Are Implemented and Evaluated 202 Multlcountry Approach versus Global Approach 202 International Strategy Alternatives 204 Implementing and Evaluating International Strategies 205 The Bottom Line 208 YOU as Strategic Decision Maker: Building Your Skills 209 Strategic Management in Action Cases 210 CASE #2: Missed Call 210 CASE #3: Tata's Time 211 CASE #4: Global Stumble 212 Endnotes 214 Module Special Topics in Strategy 215 Strategies for Entrepreneurial Ventures and Small Businesses 215 What Is an Entrepreneurial Venture, and What Is a Small Business? 215 Why Are These Types of Organizations Important? 215 The Strategic Management Process In Entrepreneurial Ventures and Small Businesses Specific Strategic Issues Facing Entrepreneurial Ventures and Small Businesses 219 Strategies for Not-for-Profit and Public Sector Organizations 221 What Are Not-for-ProfIt Organizations? 221 The Strategic Management Process In NFPs 223 Specific Strategic Issues Facing NFPs 225 Endnotes 228 Appendix 1 How to Do a Comprehensive Case Analysis 231 Appendix 2 Sample Case Analysis 237 Appendix 3 Comprehensive Cases for Analysis 245 Index 259 Preface Strategy Theory + Strategy Practice = Strategic Management in Action, Sixth Edition Competitive advantage. It's a concept that's fundamental to the study of strategic management— and one you'll be quite familiar with after reading this text. What is competitive advantage? It refers to what sets something (an organization, a team, a job applicant, a book, etc.) apart. And what sets this text apart? What is its competitive advantage? This is a strategie management text that effectively integrates strategy theory and strategy practice. As one professor who uses the text so clearly said, "It's the right stuff compactly and clearly presented." The sixth edition of Strategic Management in Action continues to do what it does best—presenting current strategic management theories and practices in an interesting, engaging, and easy-to-read format. And now, we've added color and photos—making it even more fun to read! New to the Sixth Edition Here is a chapter-by-chapter list of the changes in the sixth edition. Chapter 1 • New opening case on Zynga • Today's economic climate • Boxed material includes Think About or To Do assignments • Updated and new boxes, examples, and cases Chapter 2 • New opening case on Kodak • New case on Gap • Boxed material includes Think About or To Do assignments • Updated and new boxes, examples, and cases Chapter 3 • Boxed material includes Think About or To Do assignments • Updated and new boxes, examples, and cases Chapter 4 • New opening case on Avon • Boxed material includes Think About or To Do assignments • New case on Coca-Cola • Updated and new boxes, examples, and cases Chapter 5 • Condensed material on functional strategies combined with competitive strategies • Boxed material includes Think About or To Do assignments • Updated and new boxes, examples, and cases xi