Page i Gregory G. Dess University of Texas at Dallas Gerry McNamara Michigan State University Alan B. Eisner Pace University eighth edition strategic management text & cases 2 STRATEGIC MANAGEMENT: TEXT AND CASES, EIGHTH EDITION Page ii Published by McGraw-Hill Education, 2 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, and 2010. 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. 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R. Donnelley Library of Congress Cataloging in Publication Data Dess, Gregory G. Strategic management : text and cases/Gregory G. Dess, University of Texas at Dallas, Gerry McNamara, Michigan State University, Alan B. Eisner, Pace University.—Eighth Edition. pages cm. Revised edition of Strategic management, 2014. ISBN 978-1-259-27821-1 (alk. paper) 1. Strategic planning. I. McNamara, Gerry. II. Eisner, Alan B. III. Title. HD30.28.D4746 2015 658.4’012—dc23 2015020479 The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website 3 does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites. mheducation.com/highered 4 DEDICATION Page iii dedication To my family, Margie and Taylor; my parents, Bill and Mary Dess; and Michael Wood –Greg To my wonderful wife, Gaelen; my children, Megan and AJ; and my parents, Gene and Jane –Gerry To my family, Helaine, Rachel, and Jacob –Alan We’d like to thank Tom Lumpkin for his many valuable contributions to previous editions of Strategic Management. We certainly wish him the best with his scholarship, work as Co-Editor of Strategic Entrepreneurship Journal, and other professional endeavors. 5 ABOUT THE AUTHORS Page iv about the authors Gregory G. Dess is the Andrew R. Cecil Endowed Chair in Management at the University of Texas at Dallas. His primary research interests are in strategic management, organization– environment relationships, and knowledge management. He has published numerous articles on these subjects in both academic and practitioner-oriented journals. He also serves on the editorial boards of a wide range of practitioner-oriented and academic journals. In August 2000, he was inducted into the Academy of Management Journal’s Hall of Fame as one of its charter members. Professor Dess has conducted executive programs in the United States, Europe, Africa, Hong Kong, and Australia. During 1994 he was a Fulbright Scholar in Oporto, Portugal. In 2009, he received an honorary doctorate from the University of Bern (Switzerland). He received his PhD in Business Administration from the University of Washington (Seattle) and a BIE degree from Georgia Tech. Gerry McNamara is a Professor of Management at Michigan State University. He received his PhD from the Carlson School of Management at the University of Minnesota. His research focuses on strategic decision making, organizational risk taking, and mergers and acquisitions. His research has been published in numerous journals, including the Academy of Management Journal, Strategic Management Journal, Organization Science, Organizational Behavior and Human Decision Processes, Journal of Management, and Journal of International Business Studies. Dr. McNamara’s research on mergers and acquisitions has been abstracted in The Wall Street Journal, Harvard Business Review, The New York Times, Bloomberg Businessweek, The Economist, and Financial Week. He served as an Associate Editor for the Academy of Management Journal and currently serves on the editorial boards of the Academy of Management Journal and the Strategic Management Journal. Alan B. Eisner is Professor of Management and Department Chair, Management and Management Science Department, at the Lubin School of Business, Pace University. He received his PhD in management from the Stern School of Business, New York University. His primary research interests are in strategic management, technology management, organizational learning, and managerial decision making. He has published research articles and cases in journals such as Advances in Strategic Management, International Journal of Electronic Commerce, International Journal of Technology Management, American Business Review, Journal of Behavioral and Applied Management, and Journal of the International Academy for Case Studies. He is the former Associate Editor of the Case Association’s peer- 6 reviewed journal, The CASE Journal. 7 strategic Page v management text & cases 8 PREFACE Page vi preface Welcome to the Eighth Edition of Strategic Management: Text and Cases! We are all very pleased with the constructive and positive feedback that we have received on our work. Here’s some of the encouraging feedback we have received from our reviewers: The content is current and my students would find the real-world examples to be extremely interesting. My colleagues would want to know about and I would make extensive use of the following features: “Learning from Mistakes,” “Strategy Spotlights,” “Issues for Debate,” and I especially like the “Reflecting on Career Implications” feature. Bottom line: The authors do a great job of explaining complex material and at the same time their use of up-to-date examples promotes learning. Jeffrey Richard Nystrom, University of Colorado at Denver The application of key strategic management concepts to real-world examples throughout the book is superb. They engage the students and provide a way for them to understand the relevance of what can sometimes be abstract and complicated. The cases are engaging and challenging, providing an excellent way for students to perform strategic analysis and gain confidence in doing so. Krista B. Lewellyn, University of Wyoming There are many strengths: (1) explanations of concepts are clear and concise, yet comprehensive, (2) covers new developments in the field when new editions are published, and (3) covers the strategic analysis concepts (e.g., industry analysis, resources and capabilities, etc.) very well. Great textbook. I think it is the best in the market, and that is why I have used it for over seven years. Moses Acquaah, University of North Carolina at Greensboro The text is thorough and all-inclusive. I don’t need to refer to another book as a backup. It addresses all aspects of strategic management from the initial inspiration of a vision to the nuts and bolts of putting the plan to work. It is well structured; it is clear not only how each chapter builds on the previous ones but also how analysis, formulation, and implementation are interrelated. Lois Shelton, California State University, Northridge I use Strategic Management in a capstone course required of all business majors, and students appreciate the book because it synergizes all their business education into a meaningful and understandable whole. My students enjoy the book’s readability and tight organization, as well as the contemporary examples, case studies, discussion questions, and exercises. William Sannwald, San Diego State University 9 It is the best-written textbook for the undergraduate course that I have come across. Application materials tie concepts to real-world practice. Justin L. Davis, Ohio University The Dess book overcomes many of the limitations of the last book I used in many ways: (a) presents content in a very interesting and engrossing manner without compromising the depth and comprehensiveness, (b) inclusion of timely and interesting illustrative examples, (c) includes an excellent array of long, medium, and short cases that can be used to balance depth and variety, and (d) EOC exercises do an excellent job of complementing the chapter content. Sucheta Nadkami, University of Cambridge We work hard to improve our work and we are most appreciative of the extensive and Page vii constructive feedback that many strategy professionals have graciously given us. We strive to incorporate their ideas into the Eighth Edition—and we acknowledge them by name later in the Preface. We believe we have made valuable improvements throughout our many revised editions of Strategic Management. At the same time, we strive to be consistent and “true” to our original overriding objective: a book that satisfies three R’s: relevant, rigorous, and readable. That is, our tagline (paraphrasing the well- known Secret deodorant commercial) is “Strong enough for the professor; made for the student.” And we are pleased that we have received feedback (such as the comments on the previous page) that is consistent with what we are trying to accomplish. To continue to earn the support of strategy instructors (and students!), we try to use an engaging writing style that minimizes unnecessary jargon and covers all of the traditional bases. We also integrate some central themes throughout the book—such as globalization, technology, ethics, environmental sustainability, and entrepreneurship—that are vital in understanding strategic management in today’s global economy. We draw on short examples from business practice to bring concepts to life by providing 72 Strategy Spotlights (more detailed examples in sidebars). Unlike other strategy texts, we provide three separate chapters that address timely topics about which business students should have a solid understanding. These are the role of intellectual assets in value creation (Chapter 4), entrepreneurial strategy and competitive dynamics (Chapter 8), and fostering entrepreneurship in established organizations (Chapter 12). We also provide an excellent and thorough chapter on how to analyze strategic management cases. In developing Strategic Management: Text and Cases, we certainly didn’t forget the instructors. As we all know, you have a most challenging (but rewarding) job. We did our best to help you. We provide a variety of supplementary materials that should help you in class preparation and delivery. For example, our chapter notes do not simply summarize the material in the text. Rather (and consistent with the concept of strategy), we ask ourselves: “How can we add value?” Thus, for each chapter, we provide numerous questions to pose to help guide class discussion, at least 12 boxed examples to supplement chapter material, and three detailed “teaching tips” to further engage students. For example, we provide several useful insights on strategic leadership from one of Greg’s colleagues, Charles Hazzard (formerly Executive Vice President, Occidental Chemical). Also, we completed the chapter notes—along with the entire test bank—ourselves. That is, unlike many of our rivals, we didn’t simply farm the work out to others. Instead, we felt that such efforts help to enhance quality and consistency—as well as demonstrate our personal commitment to provide a top-quality total package to strategy instructors. With the Eighth Edition, we also benefited from valued input by our strategy colleagues to further improve our work. Let’s now address some of the key substantive changes in the Eighth Edition. Then we will cover some of the major features that we have had in previous editions. What’s New? Highlights of the Eighth Edition We have endeavored to add new material to the chapters that reflects the feedback we have received from our reviewers as well as the challenges today’s managers face. Thus, we all invested an extensive amount of time carefully reviewing a wide variety of books, academic and practitioner journals, and the business press. We also worked hard to develop more concise and tightly written chapters. Based on Page viii feedback from some of the reviewers, we have tightened our writing style, tried to eliminate 10