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concepts and cases
A Competitive AdvAntAge ApproACh
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concepts and cases
A Competitive AdvAntAge ApproACh
Fred r. David
Francis Marion University
Florence, South Carolina
Forest r. David
Strategic Planning Consultant
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Library of Congress Cataloging-in-Publication Data
David, Fred r.
Strategic management: concepts and cases—a competitive advantage approach / Fred r. David, Francis Marion
University, Florence, South carolina, Forest r. David, Strategic Planning consultant.—Sixteenth edition.
pages cm
iSBn 978-0-13-416784-8 (alk. paper) — iSBn 0-13-416784-8 (alk. paper)
1. Strategic planning. 2. Strategic planning—case studies. i. David, Forest r. ii. title.
HD30.28.D3785 2015
10 9 8 7 6 5 4 3 2 1
iSBn 10:
iSBn 13: 978-0-13-416784-8
Thank you to the following companies
that graciously provided the substance of the Cohesion Cases
over a 30-year span of 16 editions of this book.

1st edition, 1987: Ponderosa
2nd edition, 1989: Ponderosa
3rd edition, 1991: Hershey Company
4th edition, 1993: Hershey Company
5th edition, 1995: Hershey Company
6th edition, 1997: Hershey Company
7th edition, 1999: Hershey Company
8th edition, 2001: America Online (AOL)
9th edition, 2003: American Airlines
10th edition, 2005: Krispy Kreme Doughnuts, Inc.
11th edition, 2007: Google Inc.
12th edition, 2009: The Walt Disney Company
13th edition, 2011: Apple, Inc.
14th edition, 2013: McDonald’s Corporation
15th edition, 2015: PepsiCo, Inc.
16th edition, 2017: Hershey Company
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Brief Contents
Acknowledgments xxxi
About the Authors
Part 1 Overview of Strategic Management 2
Chapter 1
The Nature of Strategic Management
The Cohesion Case: The heRsheY CoMPanY, 2015 (hsY)
Part 2 Strategy Formulation 38
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
The Business Vision and Mission 39
The External Assessment 59
The Internal Assessment 89
Strategies in Action 129
Strategy Analysis and Choice 167
Part 3 Strategy Implementation 204
Chapter 7
Chapter 8
Implementing Strategies: Management, Operations, and Human Resource Issues 205
Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues 243
Part 4 Strategy Evaluation
Chapter 9
Strategy Review, Evaluation, and Control
Part 5 Key Strategic-Management topics
Chapter 10
Chapter 11
Business Ethics, Social Responsibility, and Environmental Sustainability
Global and International Issues 329
Part 6 Strategic-Management Case analysis
How to Prepare and Present a Case Analysis
Name Index
Subject Index 643
This page intentionally left blank
Assurance of Learning Exercise 1C: Update the Hershey Cohesion
Case 36
Assurance of Learning Exercise 1D: Strategic Planning for Your
University 36
Assurance of Learning Exercise 1E: Strategic Planning at a Local
Company 37
Assurance of Learning Exercise 1F: Get Familiar with the Strategy
Club Website 37
Assurance of Learning Exercise 1G: Game Plans vs. Strategic Plans:
Teams vs. Companies 37
Acknowledgments xxxi
About the Authors
Part 1 Overview of Strategic
Management 2
Chapter 1 the Nature of Strategic
Management 3
Part 2 Strategy Formulation 38
exeMPlaRY CoMPanY showCased: aPPle, inC. 4
what is strategic Management?
What Is a Cohesion Case? 5 •
Defining Strategic Management 5
stages of strategic Management 5
integrating intuition and analysis 6
Competitive Advantage 8 •
Vision Statement Analysis
aCadeMiC ReseaRCh CaPsule 1-1: when aRe Chief
sTRaTegY offiCeRs (Csos) hiRed/aPPoinTed? 9
Vision and Mission Statements 10 • External Opportunities
and Threats 10 • Internal Strengths and Weaknesses 11 •
Long-Term Objectives 12 • Strategies 12 • Annual
Objectives 12 • Policies 13
The strategic-Management Model 14
Benefits of engaging in strategic Management
Nonfinancial Benefits
aCadeMiC ReseaRCh CaPsule 2-1: The Mission sTaTeMenT/
fiRM PeRfoRManCe linKage 44
A Resolution of Divergent Views 45
Characteristics of a Mission statement 46
Two Mission Statements Critiqued 49 • Five Mission Statements
Revised 49 • Two Mission Statements Proposed 49
iMPliCaTions foR sTRaTegisTs 51
iMPliCaTions foR sTudenTs 52
Chapter summary 52
Key Terms and Concepts 53
Issues for Review and Discussion 53
iMPliCaTions foR sTRaTegisTs 20
iMPliCaTions foR sTudenTs 21
assuRanCe of leaRning exeRCises
Chapter summary 21
Key Terms and Concepts 22
Issues for Review and Discussion 22
Mini-Case on The KRogeR CoMPanY: whaT aMeRiCan
CoMPanY does The BesT JoB of sTRaTegiC
Planning? 24
The Cohesion Case: The heRsheY CoMPanY, 2015
assuRanCe of leaRning exeRCises 35
Mission statements: what is our Business? 42
The Process of developing vision and Mission
statements 43
The importance (Benefits) of vision and Mission
statements 44
Components of a Mission statement 47
evaluating and writing Mission statements 48
why some firms do no strategic Planning 17
Pitfalls in strategic Planning 18
Comparing Business and Military strategy 18
Current Readings
Endnotes 25`
A Customer Orientation 47
aCadeMiC ReseaRCh CaPsule 1-2: whaT aCTiviTY is
Most IMportant In the strategIc-ManageMent
PRoCess? 15
Financial Benefits 16 •
exeMPlaRY CoMPanY showCased: h&R BloCK
vision statements: what do we want to Become? 40
Adapting to Change 7
Key Terms in strategic Management
Chapter 2 the Business Vision and Mission
Assurance of Learning Exercise 1A: Compare Business Strategy with
Military Strategy 35
Assurance of Learning Exercise 1B: Gather Strategy Information
for the Hershey Company 35
Assurance of Learning Exercise 2A: Develop an Improved BB&T Mission
Statement 54
Assurance of Learning Exercise 2B: Evaluate Three Mission Statements 54
Assurance of Learning Exercise 2C: Write a Vision and Mission Statement
for the Hershey Company 55
Assurance of Learning Exercise 2D: Compare Your College or University’s
Vision and Mission Statements to That of a Leading
Rival Institution 55
Assurance of Learning Exercise 2E: Conduct Mission Statement
Research 55
Mini-Case on walT disneY CoMPanY: whaT is disneY’s
vision foR The fuTuRe and Mission foR The PResenT? 56
Current Readings 56
Endnotes 57
Chapter 3 the External assessment
exeMPlaRY CoMPanY showCased: ChiPoTle
MexiCan gRill 60
The Purpose and nature of an external audit 61
Key External Forces 61 • The Process of Performing an External
Audit 62 • The Industrial Organization (I/O) View 63
Ten external forces That affect organizations
Economic Forces 63 • Social, Cultural, Demographic, and
Natural Environment Forces 65 • Political, Governmental, and
Legal Forces 66 • Technological Forces 68 • Competitive
Forces 69
Porter’s five-forces Model 71
Rivalry among Competing Firms 72 • Potential Entry of New
Competitors 73 • Potential Development of Substitute
Products 73 • Bargaining Power of Suppliers 73
• Bargaining Power of Consumers 74
sources of external information 74
forecasting Tools and Techniques 74
Making Assumptions 75 •
iMPliCaTions foR sTRaTegisTs 81
iMPliCaTions foR sTudenTs 82
Chapter summary 82
Key Terms and Concepts 83
Issues for Review and Discussion
Customer Analysis 100 • Selling Products and Services 100
• Product and Service Planning 101 • Pricing 101
• Distribution 102 • Marketing Research 102 • Cost/Benefit
Analysis 102 • Marketing Audit Checklist of Questions 103
finance/accounting 103
Finance/Accounting Functions 103 • Financial Ratios 104
• Breakeven Analysis 107 • Finance/Accounting Audit
Checklist 109
Production/Operations Audit Checklist
Research and development 111
Internal and External Research and Development 111 •
and Development Audit 112
Management information systems
assuRanCe of leaRning exeRCises 84
Managing Voluminous Consumer Data
Management Information Systems Audit
value Chain analysis
The internal factor evaluation Matrix 116
iMPliCaTions foR sTRaTegisTs 118
iMPliCaTions foR sTudenTs 120
Chapter summary 121
Key Terms and Concepts 121
Issues for Review and Discussion
Assurance of Learning Exercise 3A: Competitive Intelligence (CI)
Certification 84
Assurance of Learning Exercise 3B: Develop an EFE Matrix for
Hershey Company 84
Assurance of Learning Exercise 3C: Perform an External
Assessment 85
Assurance of Learning Exercise 3D: Develop an EFE Matrix for Your
University 85
Assurance of Learning Exercise 3E: Comparing Chipotle Mexican
Grill to Panera Bread and Moe’s Southwest Grill 85
Assurance of Learning Exercise 3F: Develop a Competitive Profile
Matrix for Hershey Company 86
Assurance of Learning Exercise 3G: Develop a Competitive Profile
Matrix for Your University 86
assuRanCe of leaRning exeRCises
Mini-Case on CoaCh, inC.: whY aRe The ladies
shunning CoaCh? 86
Current Readings 126
Endnotes 126
Current Readings 87
Endnotes 87
exeMPlaRY CoMPanY showCased: neTflix, inC. 90
Mini-Case on Buffalo wild wings, inC.: whaT do
ouTsTanding ManageMenT, MaRKeTing, and finanCe
exeCuTives do TogeTheR? 125
long-Term objectives 130
Characteristics and Benefits of Objectives 131 • Financial versus
Strategic Objectives 131 • Avoid Not Managing by Objectives 132
Types of strategies
aCadeMiC ReseaRCh CaPsule 4-1: does RBv TheoRY
deTeRMine diveRsifiCaTion TaRgeTs? 93
integration strategies
Planning 96 • Organizing 97 • Motivating 98
• Staffing 98 • Controlling 99 • Management Audit
Checklist of Questions 99
exeMPlaRY CoMPanY showCased: signeT
JeweleRs liMiTed 130
Key Internal Forces 91 • The Process of Performing an Internal
Audit 92 • The Resource-Based View 93
integrating strategy and Culture
Management 96
Assurance of Learning Exercise 4A: Apply Breakeven Analysis 123
Assurance of Learning Exercise 4B: Compare Netflix with Redbox 123
Assurance of Learning Exercise 4C: Perform a Financial Ratio Analysis
for Hershey Company 124
Assurance of Learning Exercise 4D: Construct an IFE Matrix
for Hershey Company 124
Assurance of Learning Exercise 4E: Construct an IFE Matrix
for Your University 124
Assurance of Learning Exercise 4F: Applying Research-Based
View (RBV) Theory 125
Chapter 5 Strategies in action
Chapter 4 the Internal assessment 89
The nature of an internal audit
aCadeMiC ReseaRCh CaPsule 4-2: new TRends
in Managing Big daTa 113
Business Analytics 76
The external factor evaluation Matrix
The Competitive Profile Matrix 78
Marketing 100
Levels of Strategies 134
Forward Integration 135 •
Horizontal Integration 137
intensive strategies
Backward Integration
136 •
Market Penetration 138 • Market Development
• Product Development 139
diversification strategies 139
Related Diversification 140 •
defensive strategies
Unrelated Diversification 140
Retrenchment 141 •
142 •
Michael Porter’s five generic strategies
aCadeMiC ReseaRCh CaPsule 6-1: a new ie MaTRix
Cost Leadership Strategies (Type 1 and Type 2) 145 •
Differentiation Strategies (Type 3) 146 • Focus Strategies
(Type 4 and Type 5) 147
Positive Features and Limitations of the QSPM
Joint Venture
aCadeMiC ReseaRCh CaPsule 5-1: aRe inTeRnaTional
allianCes MoRe effeCTive wiTh CoMPeTiToRs oR
nonCoMPeTiToRs? 149
Merger/Acquisition 150 •
Private-Equity Acquisitions
Tactics to facilitate strategies
First Mover Advantages
152 •
Outsourcing and Reshoring
strategic Management in nonprofit, governmental,
and small firms 154
Educational Institutions 154 • Medical Organizations 155 •
Governmental Agencies and Departments 155 • Small Firms 155
aCadeMiC ReseaRCh CaPsule 5-2: whaT aTTRiBuTes do
gReaT enTRePReneuRs Possess? 156
iMPliCaTions foR sTRaTegisTs 156
iMPliCaTions foR sTudenTs 157
Chapter summary 157
Key Terms and Concepts 158
Issues for Review and Discussion 158
assuRanCe of leaRning exeRCises 159
Assurance of Learning Exercise 5A: Develop Hypothetical Hershey
Company Strategies 159
Assurance of Learning Exercise 5B: Horizontal Integration in
Practice 160
Assurance of Learning Exercise 5C: What Strategies Should Hershey
Pursue in 2017? 160
Assurance of Learning Exercise 5D: Examine Strategy
Articles 160
Assurance of Learning Exercise 5E: Classify Some Recent
Strategies 161
Assurance of Learning Exercise 5F: How Risky Are Various Alternative
Strategies? 162
Assurance of Learning Exercise 5G: Develop Alternative Strategies for
Your University 162
Mini-Case on linKedin CoRPoRaTion: should linKedin
CooPeRaTe wiTh faCeBooK? 163
Current Readings
Endnotes 164
Chapter 6 Strategy analysis and Choice 167
exeMPlaRY CoMPanY showCased: sMiTh & wesson
holding CoRPoRaTion 168
The strategy analysis and Choice Process
The Process of Generating and Selecting Strategies 168
The strategy-formulation analytical framework
The Input Stage 171 • The Matching Stage
The Decision Stage 171
171 •
The grand strategy Matrix 185
The decision stage: The Quantitative strategic Planning
Matrix (QsPM) 186
Means for achieving strategies 148
Cooperation among Competitors 148 •
and Partnering 148
The swoT Matrix 171
The strategic Position and action evaluation (sPaCe) Matrix 174
The Boston Consulting group (BCg) Matrix 178
The internal-external (ie) Matrix 181
Cultural aspects of strategy analysis and Choice 190
The Politics of strategy analysis and Choice 190
Boards of directors: governance issues 191
aCadeMiC ReseaRCh CaPsule 6-2: how ManY BoaRd
of diReCToRs MeMBeRs aRe ideal? 193
iMPliCaTions foR sTRaTegisTs 194
iMPliCaTions foR sTudenTs 194
Chapter summary 195
Key Terms and Concepts 196
Issues for Review and Discussion 196
assuRanCe of leaRning exeRCises
Assurance of Learning Exercise 6A: Perform a SWOT Analysis
for Hershey Company 198
Assurance of Learning Exercise 6B: Develop a SPACE Matrix
for Hershey 199
Assurance of Learning Exercise 6C: Develop a BCG Matrix for Hershey 199
Assurance of Learning Exercise 6D: Develop a QSPM for Hershey 199
Assurance of Learning Exercise 6E: Formulate Individual Strategies 200
Assurance of Learning Exercise 6F: Develop a BCG Matrix for Your
University 200
Assurance of Learning Exercise 6G: The Role of Boards of Directors 200
Assurance of Learning Exercise 6H: Locate Companies in a Grand
Strategy Matrix 201
Mini-Case on The sTaRBuCKs CoRPoRaTion: whaT
sTaRBuCKs sTRaTegies aRe BesT? 201
Current Readings 202
Endnotes 202
Part 3 Strategy Implementation 204
Chapter 7 Implementing Strategies: Management,
Operations, and Human resource
Issues 205
exeMPlaRY CoMPanY showCased: PaPa John’s
inTeRnaTional, inC. 206
Transitioning from formulating to implementing
strategies 206
The need for Clear annual objectives 208
The need for Clear Policies 211
allocate Resources and Manage Conflict 211
Allocate Resources 211 •
Manage Conflict
Match structure with strategy 213
Types of organizational structure 214
The Functional Structure 214 • The Divisional Structure 215 •
The Strategic Business Unit (SBU) Structure 217 • The Matrix
Structure 218
dos and don’ts in developing organizational Charts
aCadeMiC ReseaRCh CaPsule 7-1: whY is The Coo
PosiTion Being deleTed in ManY oRganizaTions?
strategic Production/operations issues 222
Restructuring and Reengineering 222 • Manage Resistance to
Change 223 • Decide Where and How to Produce Goods 223
• Employee Stock Ownership Plans (ESOPs) 224
strategic human Resource issues
Linking Performance and Pay to Strategy 225 • Balance Work Life
and Home Life 227 • Develop a Diverse Workforce 228
aCadeMiC ReseaRCh CaPsule 7-2: how do woMen vs. Men
Ceos PeRfoRM? 229
Use Caution in Hiring a Rival’s Employees 229 • Create a StrategySupportive Culture 232 • Use Caution in Monitoring Employees’
Social Media 233 • Develop a Corporate Wellness Program 233
iMPliCaTions foR sTRaTegisTs 235
iMPliCaTions foR sTudenTs 236
Chapter summary 237
Key Terms and Concepts 237
Issues for Review and Discussion
assuRanCe of leaRning exeRCises 239
Assurance of Learning Exercise 7A: Critique Corporate Organizational
Charts 239
Assurance of Learning Exercise 7B: Draw an Organizational Chart for
Hershey Company Using a Free, Online Template 239
Assurance of Learning Exercise 7C: Do Organizations Really Establish
Objectives? 239
Assurance of Learning Exercise 7D: Understanding Your University’s
Culture 240
Mini-Case on hilTon woRldwide holdings:
is The new hilTon PoliCY waRRanTed? 240
Mobile Tracking of Employees 270
iMPliCaTions foR sTRaTegisTs 270
iMPliCaTions foR sTudenTs 271
Mobile Apps for Customers
Chapter summary 271
Key Terms and Concepts 272
Issues for Review and Discussion
assuRanCe of leaRning exeRCises
Assurance of Learning Exercise 8A: Develop a Product-Positioning
Map for Hershey Company 274
Assurance of Learning Exercise 8B: Gain Practice Developing
Perceptual Maps 274
Assurance of Learning Exercise 8C: Perform an EPS/EBIT Analysis
for Hershey Company 274
Assurance of Learning Exercise 8D: Prepare Projected Financial
Statements for Hershey Company 275
Assurance of Learning Exercise 8E: Determine the Cash Value
of Hershey Company 275
Assurance of Learning Exercise 8F: Develop a Product-Positioning
Map for Your University 275
Assurance of Learning Exercise 8G: Do Banks Require Projected
Financial Statements? 276
Mini-Case on aliBaBa gRouP holding lTd.: is selling
sToCK oR Bonds BesT To Raise CaPiTal? 276
Current Readings 277
Endnotes 277
Part 4 Strategy Evaluation 278
Current Readings 241
Endnotes 241
Chapter 9 Strategy review, Evaluation,
and Control 279
Chapter 8 Implementing Strategies: Marketing,
Finance/accounting, r&D, and MIS
Issues 243
exeMPlaRY CoMPanY showCased: fooT
loCKeR, inC. 244
aCadeMiC ReseaRCh CaPsule 8-1: when should
we oveRPaY To aCQuiRe a fiRM? 264
Go Public With An IPO? 266
Keep Cash Offshore if Earned Offshore? 267
Issue Corporate Bonds for What Purpose? 267
The Process of Evaluating Strategies 283
Reviewing Bases of Strategy 284 • Measuring Organizational
Performance 286 • Taking Corrective Actions 287
Author Commentary 251
strategic finance/accounting issues 253
ePs/eBiT analysis: acquire needed Capital 254
Projected financial statements 258
Projected financial statement analysis for d. R. horton
Corporate valuation 262
iPos, Cash Management, and Corporate Bonds
exeMPlaRY CoMPanY showCased: niKe, inC. 280
The strategy-evaluation Process, Criteria,
and Methods 280
The Three strategy-evaluation activities 284
strategic Marketing issues 244
social Media Marketing 245
Market segmentation 247
Product Positioning and Perceptual Mapping 250
Corporate Valuation Methods
strategic Research and development (R&d) issues 267
strategic Management information systems (Mis) issues
The Balanced scorecard 289
Published sources of strategy-evaluation information 291
Characteristics of an effective strategy evaluation system 291
Contingency Planning 292
auditing 293
Twenty-first-Century Challenges in strategic
Management 294
The Art or Science Issue 294 • The Visible or Hidden
Issue 295 • The Top-Down or Bottom-Up Approach 296
guidelines for effective strategic Management
iMPliCaTions foR sTRaTegisTs 298
iMPliCaTions foR sTudenTs 298
Chapter summary 299
Key Terms and Concepts 299
Issues for Review and Discussion
assuRanCe of leaRning exeRCises
Assurance of Learning Exercise 9A: Examine 100 Balanced Scorecards 300
Assurance of Learning Exercise 9B: Prepare a Strategy-Evaluation Report
for Hershey Company 301
Assurance of Learning Exercise 9C: Evaluate Your University’s
Strategies 301
Mini-Case on TJx CoMPanies, inC.: is seCReT sTRaTegiC
Planning BesT foR TJx? 301
Current Readings
Endnotes 302
Part 5 Key Strategic-Management
topics 304
Chapter 10 Business Ethics, Social responsibility,
and Environmental Sustainability 305
exeMPlaRY CoMPanY showCased:
ChiCK-fil-a 306
How to Establish an Ethics Culture 309
whistle-Blowing, Bribery, and workplace Romance 310
310 • Avoid Bribery 311 • Workplace
aCadeMiC ReseaRCh CaPsule 10-3: does iT PaY To Be
soCiallY ResPonsiBle? 314
Design and Articulate a Social Policy 314 •
Retirement 314
Social Policies on
environmental sustainability 315
What Firms Are the Best Stewards? 316 • Sustainability
Reports 317 • The Office of Environmental Affairs 318 •
ISO 14000/14001 Certification 318
wildlife welfare 319
Food Suppliers and Animal Welfare
iMPliCaTions foR sTRaTegisTs 321
iMPliCaTions foR sTudenTs 322
Chapter summary 322
Key Terms and Concepts 322
Issues for Review and Discussion 322
assuRanCe of leaRning exeRCises 323
Assurance of Learning Exercise 10A: How Does Your Municipality
Compare to Others on Being Pollution-Safe? 323
Assurance of Learning Exercise 10B: Does Hershey Company or Mars, Inc.
Win on Sustainability? 324
Assurance of Learning Exercise 10C: The Ethics of Spying on
Competitors 324
Assurance of Learning Exercise 10D: Who Prepares a Sustainability
Report? 325
Mini-Case on avon PRoduCTs, inC.: would ClaiMs
of eThiCal wRongdoing BY a CoMPanY iMPaCT
YouR BuYing The fiRM’s PRoduCTs? 325
Current Readings
Endnotes 326
Multinational Firms 332 • Different Languages
Globally 333 • Labor Unions across Europe 333
aCadeMiC ReseaRCh CaPsule 11-1: how ManY
languages aRe TheRe gloBallY? 333
advantages and disadvantages of doing Business
globally 334
The global Challenge 335
aCadeMiC ReseaRCh CaPsule 11-2: how do fiRMs
deCide wheRe To exPand? 336
Tax Rates and Tax inversions
Tax Rates
336 • Tax Inversions
Business Culture across Countries
social Responsibility and Policy
exeMPlaRY CoMPanY showCased: alCoa, inC. 330
The nature of doing Business globally
Communication Differences across Countries 340
aCadeMiC ReseaRCh CaPsule 10-1: whaT Can we
leaRn fRoM high-PeRfoRManCe CoMPanies? 308
aCadeMiC ReseaRCh CaPsule 10-2: who is PRone
To Be uneThiCal in a Business? 309
Romance 312
Chapter 11 Global and International
Issues 329
american versus foreign Business Culture
why “good ethics is good Business” 306
Does It Pay to Be Ethical?
Mexico’s Business Culture 341 • Japan’s Business Culture 342 •
China’s Business Culture 343 • India’s Business Culture 344
Business Climate across Countries
Africa’s Business Climate 345 • China’s Business Climate 346 •
Brazil’s Business Climate 347 • Indonesia’s Business Climate 347 •
India’s Business Climate 347 • Japan’s Business Climate 348 •
Mexico’s Business Climate 348 • Vietnam’s Business Climate 349
iMPliCaTions foR sTRaTegisTs 350
iMPliCaTions foR sTudenTs 350
Chapter summary 351
Key Terms and Concepts 351
Issues for Review and Discussion 351
assuRanCe of leaRning exeRCises
Assurance of Learning Exercise 11A: Business Cultures across
Countries: A Hershey Company Analysis 352
Assurance of Learning Exercise 11B: Hershey Company Wants
to Enter Africa. Help Them 353
Assurance of Learning Exercise 11C: Does Your University Recruit
in Foreign Countries? 353
Assurance of Learning Exercise 11D: Assess Differences in Culture
across Countries 353
Assurance of Learning Exercise 11E: How Well Traveled Are Business
Students at Your University? 354
Mini-Case on doMino’s Pizza, inC.: To gRow gloBallY
The RighT waY = follow doMino’s? 354
Current Readings 355
Endnotes 355
Part 6 Strategic-Management Case
analysis 356
How to Prepare and Present a Case
analysis 357
what is a strategic-Management Case? 358
guidelines for Preparing Case analyses 358
The Need for Practicality 358 • The Need for Justification 358 •
The Need for Realism 358 • The Need for Specificity 358 •
The Need for Originality 359 • The Need to Contribute 359
The Case Method versus lecture approach
The Cross-Examination 359
Preparing a written Case analysis
The Executive Summary 360 • The Comprehensive Written
Analysis 360 • Steps in Preparing a Comprehensive Written
Analysis 360
Making an oral Presentation 361
Controlling Your Voice 361 • Managing Body Language 361
• Speaking from Notes 362 • Constructing Visual Aids 362
• Answering Questions 362
Tips for success in Case analysis
Sample Case Analysis Outline 363 • Recommended Time
Allocation for Presenting a Case Analysis 365
Assurance of Learning Exercise Strategic Planning for Gruma SAB 365
strategic-Management Cases
Name Index
Subject Index
USa-Headquartered Service Firms
1. Dunkin’ Brands Group, Inc. (DNKN) 370
2. Krispy Kreme Doughnuts, Inc. (KKD) 378
Lodging and Movies
3. Marriott International, Inc. (MAR) 385
4. Wynn Resorts Limited (WYNN) 396
5. Cinemark Holdings, Inc. (CNK) 404
Internet Based
6. Facebook, Inc. (FB) 412
7. Zynga, Inc. (ZNGA) 420
8. The Priceline Group, Inc. (PCLN)
Stores and Banks
9. The TJX Companies, Inc. (TJX) 437
10. Tiffany & Company (TIF) 446
11. Citigroup Inc. (C) 455
Airlines and Airfreight
12. JetBlue Airways Corporation (JBLU)
13. FedEx Corporation (FDX) 472
USa-Headquartered Manufacturing Firms
14. Tyson Foods, Inc. (TSN) 481
15. Constellation Brands Inc. (STZ)
Leisure Sports
16. GoPro, Inc. (GPRO) 500
17. Arctic Cat Inc. (ACAT) 508
Automobiles and Motorcycles
18. Tesla Motors, Inc. (TSLA) 516
19. Ford Motor Company (F) 522
20. Harley-Davidson, Inc. (HOG) 532
21. Apple Inc. (AAPL) 540
22. International Business Machines Corporation (IBM)
Personal Products
23. TASER International, Inc. (TASR)
24. Revlon, Inc. (REV) 566
Nonprofit Organizations
25. World Relief 574
26. World Wildlife Fund for Nature (WWF)
Outside-USA Headquartered Firms
Michael Kors Holdings Ltd. (KORS) 591
SABMiller plc (SAB) 599
Gruma S.A.B. de C.V. (GMK) 609
Restaurant Brands International, Inc. (QSR)
Why Adopt This Text?
this textbook is trusted across five continents to provide managers the latest skills and concepts needed to effectively formulate and efficiently implement a strategic plan—a game plan,
if you will—that can lead to sustainable competitive advantage for any type of business. the
association to advance collegiate Schools of Business (aacSB) international increasingly
advocates a more skills-oriented, practical approach in business books, which this text provides,
rather than a theory-based approach. Strategic Management Concepts and Cases: A Competitive
Advantage Approach meets all aacSB international guidelines for the strategic-management
course at both the graduate and undergraduate levels, and previous editions have been used at
more than 500 colleges and universities globally. We believe you will find this sixteenth edition
to be the best textbook available for communicating both the excitement and value of strategic
management. concise and exceptionally well organized, this text is now available in english,
chinese, Spanish, thai, german, Japanese, Farsi, indonesian, indian, Vietnamese, and arabic. a
version in russian is being negotiated. in addition to universities, hundreds of companies, organizations, and governmental bodies use this text as a management guide.
an MBa student using this text recently wrote the following:
Dear Dr. David: i am in the midst of my MBa at adams State University here in
colorado. i’m 7 of 12 classes in with a 4.0 average. as a result, i’ve been through about
14 textbooks (not to mention the 60 or so i went through for my BBa at the University
of california (Uc)-Berkeley. this is the first time i’ve written to the author of a textbook.
Why? Because the David book is by far the best textbook i have ever used. it’s clear. it’s
accurate. it’s not full of opinion masquerading as fact! You, sir, are to be commended.
Usually when i spend an insane amount of money on a text, i’m broke. But your text is
worth every cent, and i’ll keep it forever. Well done sir! respectively, eric Seiden, MBa
Student in Littleton, colorado (august 10, 2015)
eric n. Sims, a professor who has used this text for his classes at Sonoma State University in
california, says:
i have read many strategy books. i am going to use the David book. What i like—to steal
a line from alabama coach nick Saban—is your book teaches “a process.” i believe at
the end of your book, you can actually help a company do strategic planning. in contrast,
other books teach a number of near and far concepts related to strategy.
a recent reviewer of this textbook shares his opinion:
One thing i admire most about the David text is that it follows the fundamental sequence
of strategy formulation, implementation, and evaluation. there is a basic flow from
vision/mission to internal/external environmental scanning, to strategy development,
selection, implementation, and evaluation. this has been, and continues to be, a hallmark
of the David text. Many other strategy texts are more disjointed in their presentation, and
thus confusing to the student, especially at the undergraduate level.
New to This Edition
1. this 16th edition is 40 percent new and improved from the prior edition.
2. a brand new COHESION CASE on the Hershey company (2015) is provided. Hershey
is one of the most successful, well-known, and best-managed global companies in the
world. Students apply strategy concepts to Hershey at the end of each chapter through new,
innovative assurance of Learning exercises.
3. Brand-new one-page MINI-CASES appear at the end of each chapter, complete with questions designed to apply chapter concepts. Provided for the first time ever in this text, the
mini-cases focus on the following companies:
chapter 1: Kroger company
chapter 2: Walt Disney company
chapter 3: coach
chapter 4: Buffalo Wild Wings
chapter 5: Linkedin
chapter 6: Starbucks
chapter 7: Hilton Worldwide
chapter 8: alibaba
chapter 9: tJX companies
chapter 10: avon Products
chapter 11: Domino’s Pizza
4. Original, half-page ACADEMIC RESEARCH CAPSULES are presented in each chapter
to showcase how new strategic-management research is impacting business practice. two
capsules per chapter are provided—for the first time ever in this text.
5. at the end of each chapter are new sections titled IMPLICATIONS FOR STRATEGISTS
and IMPLICATIONS FOR STUDENTS that highlight how companies can best gain and
sustain competitive advantages.
6. Brand new EXEMPLARY COMPANY CAPSULES appear at the beginning of each
chapter and showcase a company that is employing strategic management exceptionally
well. the capsules focus on the following companies:
chapter 1: apple
chapter 2: H&r Block
chapter 3: chipotle Mexican grill
chapter 4: netflix
chapter 5: Signet Jewelers Limited
chapter 6: Smith & Wesson Holding corp.
chapter 7: Papa John’s international
chapter 8: Foot Locker
chapter 9: nike
chapter 10: chick-fil-a
chapter 11: alcoa
7. chapter 2, the Business Vision and Mission, is 60 percent new, due to current research and
practice that reveals the need for “these statements to be more customer-oriented.”
8. chapter 11, global and international issues, is shortened by 30 percent but provides new
coverage of cultural and conceptual strategic-management differences across countries.
Doing business globally has become a necessity in most industries.
9. chapter 10, Business ethics, Social responsibility, and environmental Sustainability,
provides extensive new coverage of ethics, workplace romance, flirting, hiring away rival
firms’ employees, wildlife welfare, and sustainability. “good ethics is good business.”
Unique to strategic-management texts, the sustainability discussion is strengthened in
this edition to promote and encourage firms to conduct operations with respect for the
environment—an important concern for consumers, companies, society, and aacSB
10. Sixty-four unique ASSURANCE OF LEARNING EXERCISES appear at the end
of chapters to apply chapter concepts. the exercises prepare students for strategicmanagement case analysis. an additional excellent exercise for each chapter is provided in
the Chapter Instructor’s Resource Manual.
11. More than 200 new EXAMPLES bring the chapters to life.
12. at the end of chapters are 78 new (459 total) REVIEW QUESTIONS related to chapter
13. all the current readings at the end of the chapters are new, and up-to-date research and
theories of seminal thinkers are included. However, practical aspects of strategic management are center stage and the trademark of this text.
14. every sentence and paragraph has been scrutinized, modified, clarified, streamlined,
updated, and improved to enhance the content and caliber of presentation.
15. an enhanced, continually updated AUTHOR WEBSITE (www.strategyclub.com) provides new author videos, case and chapter updates, sample case analyses, and the popular,
Free eXceL StUDent teMPLate. the template enables students to more easily
develop strategic-planning matrices, tables, and analyses needed for case analysis.
New Case Features
1. all 30 cases have a 2015 time setting, offering students up-to-date issues to evaluate.
2. all 30 cases focus on exciting, well-known companies, effective for students to apply strategy concepts.
3. all 30 cases are undisguised, featuring real organizations in real industries using real
names (nothing is fictitious in any case).
4. all 30 cases feature an organization and industry undergoing strategic change.
5. all 30 cases provide ample, excellent quantitative information, so students can prepare a
defensible strategic plan.
6. all 30 cases are written in a lively, concise writing style that captures the reader’s interest.
7. all 30 cases are “comprehensive,” focusing on multiple business functions, rather than a
single problem or issue.
8. all 30 cases include current financial statements for the firm, so students can show the
impact of a proposed strategic plan.
9. all 30 cases provide an organizational chart and a vision and mission statement—
important strategy concepts.
10. all 30 cases are supported by an excellent teacher’s note, provided to professors in a new
Case Instructor’s Resource Manual.
11. all 30 cases are available for inclusion in a customized tailored text to meet the special
needs of some professors.
12. all 30 cases facilitate coverage of all strategy concepts, but as revealed in the new
concepts by cases Matrix, some cases especially exemplify some concepts, enabling professors to effectively use an assortment of cases with various chapters in the text.
13. all 30 cases have been class-tested to ensure that they are interesting, challenging, and
effective for illustrating strategy concepts.
14. all 30 cases appear in no other textbooks, thus offering a truly fresh, new, up-to-date learning platform.
15. the 30 cases represent an excellent mix of firms performing really well and some performing very poorly, including 14 U.S. service-based organizations, 10 U.S. manufacturingbased firms, and 2 nonprofit organizations (World relief and World Wildlife Fund for
nature). also included are 4 outside-U.S. headquartered firms (Michael Kors Holdings
Ltd., SaBMiller plc, gruma SaB de cV, and restaurant Brands international).
16. all 30 case companies have excellent websites in english that provide detailed financial
information, history, sustainability statements, ethics statements, and press releases, so students can easily access current information to apply strategy concepts.
Time-Tested Features
1. this text meets all aacSB international guidelines that support a practitioner orientation
rather than a theory/research approach. it offers a skills-oriented process for developing a
vision and mission statement; performing an external audit; conducting an internal assessment; and formulating, implementing, and evaluating strategies.
2. the author’s writing style is concise, conversational, interesting, logical, lively, and supported by numerous current examples.
3. a simple, integrative strategic-management model appears in all chapters and on the inside
back cover. the model is widely used by strategic-planning consultants and companies
4. an exciting, new cohesion case on Hershey company follows chapter 1 and is revisited
at the end of each chapter, allowing students to apply strategic-management concepts and
techniques to a real company as the text develops, thus preparing students for case analysis
as the course evolves.
5. end-of-chapter assurance of Learning exercises apply chapter concepts and techniques in a challenging, meaningful, and enjoyable manner. eighteen exercises apply
text material to the cohesion case; 11 exercises apply textual material to a college or
university; another 9 exercises send students into the business world to explore important
strategy topics.
6. there is excellent pedagogy, including Learning Objectives opening each chapter as
well as Key terms, current readings, Discussion Questions, and assurance of Learning
exercises ending each chapter.
7. the various strategy-formulation issues are outstanding, covering topics such as business
ethics, global versus domestic operations, vision and mission, matrix analysis, partnering,
joint venturing, competitive analysis, value chain analysis, governance, and matrices for
assimilating and evaluating information.
8. Strategy-implementation issues are covered thoroughly and include items such as corporate culture, organizational structure, outsourcing, marketing concepts, financial analysis,
business ethics, whistleblowing, bribery, pay and performance linkages, and workplace
9. a systematic, analytical “process” is presented that includes nine matrices: iFeM, eFeM,
cPM, SWOt, Bcg, ie, granD, SPace, and QSPM.
10. Both the chapter material and case material is published in color.
11. chapters-only and e-book versions of the text are available.
12. custom-case publishing is available whereby an instructor can combine chapters from
this text with cases from a variety of sources or select any number of the 30 cases
13. For the chapter material, an outstanding ancillary package includes a comprehensive
Chapter Instructor’s Resource Manual, Case Instructor’s Resource Manual, test Bank,
testgen, and chapter PowerPoints, and vastly improved chapter MyLab and case MyLab
products to promote assurance of learning.
Why Is This Text Different/Better Than Other
Strategic-Management Texts?
Strategic Management Concepts and Cases: A Competitive Advantage Approach is by far the
most practical, skills-oriented strategic management textbook on the market. this text is designed
to enable students to learn “how to do strategic planning,” rather than simply memorize seminal
theories in strategy. Students using this text follow an integrative model that appears in every
chapter as the “process” unfolds. Students learn how to construct strategic planning matrices, such
as the Strengths, Weaknesses, Opportunities, and threats (SWOt) and the Boston consulting
group (Bcg) matrices. readers also learn how to perform strategic-planning analyses, such as
earnings-per-share/earnings-before-interest-and-taxes (ePS/eBit) and corporate valuation. the
focus throughout this text is on “learning by doing.” this overarching, differentiating aspect has
been improved with every edition and has led to this text becoming perhaps the leading strategicmanagement text globally, now available in 10 languages. the practical, skills-oriented approach is
manifested through eight specific features:
1. a cohesion case that appears after chapter 1 with 64 end-of-chapter assurance of learning
exercises, many that apply concepts to the cohesion case, thus allowing students to gain
practice doing strategic planning by performing analysis. no other strategic-management
textbook provides a cohesion case or an array of end-of-chapter exercises.
2. a strategy formulation analytical framework in chapter 6 integrates nine widely used
planning matrices (iFeM, eFeM, cPM, SWOt, Bcg, ie, SPace, granD, and QSPM)
into three stages (input, Matching, and Decision), which guide the strategic-planning
process in all companies. Firms gather strategic information (input), array key external
with internal factors (Matching), and then make strategic decisions (Decision).
3. a far wider coverage of strategy topics than any other strategic-management textbook,
for two primary reasons: (a) as firms formulate and implement strategies, a wide variety
of functional business topics arise and (b) as the capstone, integrative course in nearly all
Schools of Business, strategic management entails students applying functional business
skills to case companies.
4. this text provides 30 comprehensive, exciting, exceptionally up-to-date cases designed
to apply chapter concepts as students develop a strategic plan for the case companies. For
example, every case includes (a) the company’s vision/mission statements (if the firm has
one); (b) the company’s by-segment revenue breakdown (since allocating resources divisions is perhaps the key strategy decision made by firms); (c) the company’s organizational
chart (since structure is a key strategy topic); and (d) the company’s financial statements
so students can show the impact of a proposed strategic plan on a firm’s financial statements. thus, the cases take a total-firm, multifunctional approach, which by definition is
the nature of strategic management. in addition, this text offers end-of-chapter mini-cases
to further apply chapter concepts.
5. More coverage of business ethics, social responsibility, and sustainability is provided in
this text than in any other strategic-management textbook, including topics such as bribery,
workplace romance, devising codes of ethics, taking a position (or not) on social issues,
and wildlife welfare—topics that other textbooks do not mention, even though companies
continually face strategic decisions in these areas.
6. this text offers more coverage of global/international issues than any other strategicmanagement textbook, including topics such as how business culture and practice vary
across countries, as well as how taxes, tariffs, political stability, and economic conditions
vary across countries—all framed from a strategic planning perspective.
7. the conversational, concise writing style is supported by hundreds of current examples,
all aimed at arousing and maintaining the reader’s interest as the “process” unfolds from
start to finish. the unique writing style is in stark contrast to some strategic-management
books that seem to randomly present theory and research for the sake of discussion, rather
than material being presented in a logical flow that emulates the actual practice of strategic
planning among companies and organizations.
8. this text is supported by outstanding ancillaries, including author-developed manuals, and
an author website at www.strategyclub.com that offers practical author-developed videos,
templates, sample case analyses, special resources, and even a Facebook page for the text.
Pearson education also offers outstanding support materials for instructors and students.
For more information, visit www.pearsonhighered.com.
Instructor Resources
at the instructor resource center, www.pearsonhighered.com/irc, instructors can easily register to gain access to a variety of instructor resources available with this text in downloadable
format. if assistance is needed, our dedicated technical support team is ready to help with the
media supplements that accompany this text. Visit http://247.pearsoned.com for answers to
frequently asked questions and toll-free user support phone numbers.
the following supplements are available with this text:

Case Instructor’s Resource Manual
Chapter Instructor’s Resource Manual
Test Bank
TestGen® Computerized Test Bank
PowerPoint Presentation
Sample of Universities Recently Using This Textbook
abraham Baldwin agricultural college
adelphi University
akron institute
albany State University
albertus Magnus college
albright college
alcorn State University
alvernia University
ambassador college
amberton University
american intercontinental
american international college
american international continental (aiU)
american international University
american University
anderson University

angelo State University
aquinas college
arizona State University—Polytechnic
art institute of california
averett University
avila University
azusa Pacific University
Baker college—Flint
Baldwin Wallace college
Barry University
Belhaven University—Jackson
Bellevue University
Belmont abbey college
Benedictine University
Black Hills State University
Bloomsburg University
Briar cliff University
Brooklyn college
Broward college—central
Broward college—north
Broward college—South
Bryant & Stratton—Orchard Park
Buena Vista University—Storm Lake
caldwell college
california Polytechnic State University
california State University—Sacramento
california State University—San
california University of Pa
calumet college
capella University
carlow University
carson-newman college
catawba college
catholic University of america
cedar crest college
central connecticut State University
central Michigan University
central new Mexico community college
central Washington University
chatham University
chestnut Hill college
chicago State University
christian Brothers University
claflin University
clarion University of Pennsylvania
clarkson college
clatsop community college
cleveland State University
college of William & Mary
colorado State University—Pueblo
columbia college
columbia Southern University—Online
concordia University
concordia University Wisconsin
curry college
cuyahoga community college
Daniel Webster college
Davis & elkins college
Delaware State University
Delaware technology & community
Delaware technology & community
DePaul University—Loop campus
east Stroudsburg University
eastern Michigan University
eastern Oregon University
eastern Washington University
ecPi college of technology—charleston
ecPi computer institute
elmhurst college
embry-riddle aero University—Prescott
Ferrum college
Florida agricultural & Mechanical
Florida Southern college
Florida State University
Florida technical college—Deland
Florida technical college—Kissimmee
Florida technical college—Orlando
Fort Valley State college
Francis Marion University
Fresno Pacific University
Frostburg State University
george Fox University
georgetown college
georgia Southern University
georgia Southwestern State University
Hampton University
Harding University
Harris Stowe State University
Herzing college—Madison
Herzing college—new Orleans
Herzing college—Winter Park
Herzing University—atlanta
High Point University
Highline community college
Hofstra University
Hood college
Hope international University
Houghton college
Huntingdon college
indiana University Bloomington
indiana Wesleyan caPS
iona college
iowa Lakes community college—
Jackson community college
Jackson State University
John Brown University
Johnson & Wales—charlotte
Johnson & Wales—colorado
Johnson & Wales—Miami
Johnson & Wales—rhode island
Johnson c. Smith University
Kalamazoo college
Kansas State University
Keene State college
Kellogg community college
La Salle University
Lake Michigan college
Lebanon Valley college
Lee University
Lehman college of cUnY
Liberty University
Limestone college—gaffney
Lincoln Memorial University
Loyola college Business center
Loyola college—chennai
Loyola University—Maryland
Lyndon State college
Madonna University
Manhattan college
Manhattanville college
Marian University—indiana
Marshall University
Marshall University graduate college
Marymount University—arlington
Medgar evers college
Medical careers institute/newport news
Mercer University—atlanta
Mercer University—Macon
Miami-Dade college—Homestead
Miami-Dade college—Kendal
Miami-Dade college—north
Miami-Dade college—Wolfson
Michigan State University
Mid-america christian
Millersville University
Mississippi University for Women
Morgan State University
Morrison college of reno
Mount Marty college—South Dakota
Mount Mercy University
Mount Wachusett community college
Mt. Hood community college
Mt. Vernon nazarene
Mti Western Business college
Muhlenberg college
Murray State University
new england college
new Mexico State University
new York University
north carolina Wesleyan college
north central college
north central State college
northwest arkansas community college
northwestern college
northwood University—cedar Hill
notre Dame of Maryland University
nyack college
Oakland University
Ohio Dominican University
Oklahoma christian University
Oklahoma State University
Olivet college
Oral roberts University
Pace University—Pleasantville
Park University
Penn State University—abington
Penn State University—Hazleton
Pensacola State college
Philadelphia University
Point Park University
Prince george’s community college
Queens college of cUnY
richard Stockton University
rider University
roger Williams University
Saint edwards University
Saint Leo University
Saint Mary’s college
Saint Mary’s college—indiana
Saint Xavier University
San antonio college
Santa Fe college
Savannah State University
Shippensburg University
Siena Heights University
Southern nazarene University
Southern new Hampshire University
Southern Oregon University
Southern University—Baton rouge
Southern Wesleyan University
Southwest Baptist University
Southwest University
St. Bonaventure University
St. Francis University
St. Louis University
St. Martins University
Sterling college
Stevenson University
Strayer University—Dc
texas a&M University—commerce
texas a&M University—texarkana
texas a&M—San antonio
texas tech University
the college of St. rose
the Masters college
tri-county technical college
trinity christian college
troy State University
troy University—Dothan
troy University—Main campus
troy University—Montgomery
University of alabama—Birmingham
University of arkansas—Fayetteville
University of Findlay
University of Houston—clearlake
University of Louisiana at Monroe
University of Maine at augusta
University of Maine—Fort Kent
University of Maryland
University of Maryland—college Park
University of Massachusetts—Boston
University of Massachusetts—Dartmouth
University of Miami
University of Michigan—Flint
University of Minnesota—crookston
University of Mobile
University of Montevallo
University of nebraska—Omaha
University of nevada Las Vegas
University of new Orleans
University of north texas
University of north texas—Dallas
University of Pikeville
University of Sioux Falls
University of South Florida
University of St. Joseph
University of tampa
University of texas—Pan american
University of the incarnate Word
University of toledo
Upper iowa University
Valley city State University
Virginia community college System
Virginia State University
Virginia tech
Wagner college
Wake Forest University
Washington University
Webber international University
Webster University
West chester University
West Liberty University
West Valley college
West Virginia Wesleyan college
Western connecticut State University
Western Kentucky University
Western Michigan University
Western Washington University
William Jewell college
Williams Baptist college
Winona State University
Winston-Salem State University
WSU Vancouver
Sample of Countries Outside the United States
Where This Textbook Is Widely Used
Mexico, china, Japan, australia, Singapore, canada, indonesia, Pakistan, iran, Kenya, congo,
Hong Kong, india, england, argentina, equador, Zambia, guam, italy, cyprus, colombia,
Philippines, South africa, Peru, turkey, Malaysia, and egypt
the Case rationale
case analysis remains the primary learning vehicle used in most strategic-management classes,
for five important reasons:
1. analyzing cases gives students the opportunity to work in teams to evaluate the internal
operations and external issues facing various organizations and to craft strategies that can
lead these firms to success. Working in teams gives students practical experience in solving
problems as part of a group. in the business world, important decisions are generally made
within groups; strategic-management students learn to deal with overly aggressive group
members as well as timid, noncontributing group members. this experience is valuable
because strategic-management students are near graduation and soon enter the working
world full time.
2. analyzing cases enables students to improve their oral and written communication skills
as well as their analytical and interpersonal skills by proposing and defending particular
courses of action for the case companies.
3. analyzing cases allows students to view a company, its competitors, and its industry concurrently, thus simulating the complex business world. through case analysis, students
learn how to apply concepts, evaluate situations, formulate strategies, and resolve implementation problems.
4. analyzing cases allows students to apply concepts learned in many business courses.
Students gain experience dealing with a wide range of organizational problems that impact
all the business functions.
5. analyzing cases gives students practice in applying concepts, evaluating situations, formulating a “game plan,” and resolving implementation problems in a variety of business and
industry settings.
the Case MyLab testing Feature
as revealed in the concepts by cases matrix, student learning of 30 key strategic-management
concepts can easily be tested by using the 30 cases. the new case MyLab testing feature
assures that the cases are excellent for testing student learning of the key strategic-management
concepts, thus serving as a great mechanism for professors to achieve aacSB’s assurance of
Learning Objectives. this new testing feature simplifies grading for professors in both traditional and online class settings.
the case MyLab testing feature includes 25 multiple-choice questions for each case, comprised of 10 Basic questions that simply test whether the student read the case before class, and
15 Applied questions that test the student’s ability to apply various strategic-management concepts. in addition, there are 2 Discussion questions per case. this testing feature enables professors to determine, before class if desired, whether students (1) read the case in Basic terms, and/
or (2) are able to Apply strategy concepts to resolve issues in the case. For example, the MyLab
case Basic question may be: in what country is SaBMiller headquartered? Whereas a MyLab
case Applied question may be: What are three aspects of the organizational chart given in the
SaBMiller case that violate strategic-management guidelines?
the New Concepts by Cases Matrix
all 30 cases facilitate coverage of all strategy concepts, but as revealed by purple cells, some
cases especially exemplify some key strategy concepts. the purple cells reveal which concepts
are tested with multiple-choice questions in the MyLab. the concepts by cases matrix enables
professors to effectively utilize different cases to assure student learning of various chapter
concepts. note from the purple boxes that two, three, or four cases are used to test each strategic-management concept. this new, innovative ancillary promises to elevate the case learning
method to new heights in teaching strategic management.
USA-Based Service Companies
case 1
Dunkin’ Brands group, inc.
case 2
Krispy Kreme Doughnuts, inc.
case 3
Marriott international, inc.
case 4
Wynn resorts Limited
case 5
cinemark Holdings, inc.
case 6
Facebook, inc.
case 7
Zynga, inc.
case 8
the Priceline group, inc.
case 9
the tJX companies, inc.
case 10
tiffany & company
case 11
citigroup inc.
case 12
JetBlue airways corporation
case 13
Fedex corporation
USA-Based Manufacturing Companies
case 14
tyson Foods, inc.
case 15
constellation Brands inc.
case 16
goPro, inc.
case 17
artic cat, inc.
case 18
tesla Motors, inc.
case 19
Ford Motor company
case 20
Harely-Davidson, inc.
case 21
apple inc.
case 22
international Business Machines corp.
case 23
taser international, inc.
case 24
revlon, inc.
case 25
World relief
Outside-USA Headquartered
case 26
World Wildlife Fund
case 27
Michael Kors Holdings Limited
case 28
SaBMiller plc
case 29
gruma, S.a.B. de c.V.
case 30
restaurant Brands international, inc.
Competitive Profile Matrix
Porter’s Five Forces
EFE Matrix
Resource Based View
Financial Ratios &
Value Chain Analysis
IFE Matrix
Strategy Types
Porter’s Five Generic
USA Headquartered
Vision/Mission Statements
Case Number
Strategy Model/Process
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Key StrategicManagement Concepts
First Mover Advantages
SWOT Matrix
SPACE Matrix
BCG & IE Matrices
Grand Strategy & QSPM
Organizational Structure
Organizational Culture
Product Positioning
EPS-EBIT Analysis
Projected Financial
Company Valuation
Balanced Scorecard
Business Ethics
Environmental Sustainability
Foreign Business Culture
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The Case Synopses
USA-Headquartered Service Firms
1. Dunkin’ Brands group, inc. (DnKn) — Headquartered in canton, Massachusetts, Dunkin’
Brands owns, operates, and franchises quick-service restaurants under the Dunkin’ Donuts
and Baskin-robbins brands worldwide.
2. Krispy Kreme Doughnuts, inc. (KKD) — Headquartered in Winston-Salem, north
carolina, KKD operates about 750 doughnut locations, of which about 650 are franchise
owned. Most KKD locations (515) are outside the United States. the company plans to
reach 900 stores internationally by 2017. Most restaurants “produce” their own doughnuts.
LODging anD MOVieS
3. Marriott international, inc. (Mar) — Headquartered in Bethesda, Maryland, and having
127,000 employees worldwide, Marriott owns and manages a broad range of hotels and
lodging facilities. Marriott’s ceO, anne Sorenson, is leading the firm’s expansion throughout africa. the ritz-carlton is a subsidiary of Marriott.
4. Wynn resorts Limited (WYnn) — Headquartered in Paradise, nevada, Wynn resorts is a
global developer and operator of high-end casinos and hotels, especially in Las Vegas and
Macau. Wynn cotai opened in Macau in 2014 amidst overall Macau gambling revenues
5. cinemark Holdings, inc. (cnK) — Headquartered in Plano, texas, cinemark is a chain
of movie theaters operating in north and South america and taiwan. cinemark has over
300 theaters in the United States, is the largest movie theater firm in Brazil, the fourth
largest in Mexico, and the second largest globally.
internet BaSeD
6. Facebook, inc. (FB) — Headquartered in Menlo Park, california, Facebook is the largest
online social networking website with over 1.3 billion users (but reportedly more than 10
percent are fake). Facebook charges for placing advertisements; its vision is “to connect the
7. Zynga, inc. (Znga) — Headquartered in San Francisco, california, Zynga develops, markets, and operates online social media games primarily under the FarmVille, Words With
Friends, and Zynga Poker franchises. Founded in 2007, Zynga’s games are accessible on
Facebook and Zynga.com.
8. the Priceline group, inc. (PcLn) — Headquartered in norwalk, connecticut, Priceline
is an online travel, car rental, and hotel reservation company with products that include
Booking.com and, in asia, agoda.com.
StOreS anD BanKS
9. the tJX companies, inc. (tJX) — Headquartered in Framingham, Massachusetts, tJX
operates off-price apparel and home fashion retail stores in the United States and globally
under the names t. J. Maxx, Marshalls, Homegoods, Winners, HomeSense, and Sierra
trading Post.
10. tiffany & company (tiF) — Headquartered in new York city, tiffany designs, produces,
and sells jewelry, as well as watches, china, crystal, stationery, and fragrances worldwide.
the company owns and operates 275 stores in 24 countries.
11. citigroup inc. (c) — Headquartered in new York city, citigroup is one of the world’s largest bank holding companies with more than 16,000 offices and 255,000 employees worldwide. citi operates through two segments: citicorp (primarily banking) and city Holdings
(primarily brokerage).
airLineS anD airFreigHt
12. JetBlue airways corporation (JBLU) — Headquartered in Long island city, new York,
JetBlue is a passenger airline company that serves the United States, the caribbean, and Latin
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13. Fedex corporation (FDX) — Headquartered in Memphis, tennessee, Fedex is a global
delivery services company with over 300,000 employees competing daily with UPS, DHL,
USPS, and online emailing.
USA-Headquartered Manufacturing Firms
14. tyson Foods, inc. (tSn) — Headquartered in Springdale, arkansas, tyson Foods is the
world’s second-largest processor and marketer of chicken, beef, and pork. With 115,000
employees, tyson is the largest meat producer in the world.
15. constellation Brands inc. (StZ) — Headquartered in Victor, new York, constellation Brands
is the largest wine producer in the world and has more than 100 wine, beer, and spirits brands,
including robert Mondavi, corona, Paul Masson, and Black Velvet canadian Whisky.
LeiSUre SPOrtS
16. goPro, inc. (gPrO) — Headquartered in San Mateo, california, goPro develops and
produces sportswear, sports cameras, and accessories widely used by surfers, divers, and
sports enthusiasts. the company has about 700 employees.
17. arctic cat inc. (acat) — Headquartered in Plymouth, Minnesota, arctic cat designs, produces, and, through independent dealers, markets snowmobiles and all-terrain vehicles (atVs),
and accessory parts, including lights, racks, snow plows, wheels, and a full garment portfolio.
18. tesla Motors, inc. (tSLa) — Headquartered in Palo alto, california, tesla designs, manufactures, and markets all-electric cars and lithium batteries. after 10 years being in business, tesla turned its first profit ever in Q1 2013. tesla’s sports car, the roadster, and its
Model S are especially popular.
19. Ford Motor company (F) — Headquartered in Dearborn, Michigan, Ford develops, produces, and markets automobiles, trucks, and accessories globally. the company also has a
large financial services segment.
20. Harley-Davidson, inc. (HOg) — Headquartered in Milwaukee, Wisconsin, Harley develops, produces, and markets motorcycles and related parts and accessories through independent dealers globally. the company also has a large financial services segment.
21. apple inc. (aaPL) — Headquartered in cupertino, california, apple designs, produces,
and markets laptop computers, tablets, smartphones, watches, portable digital music players, and accessories globally.
22. international Business Machines corporation (iBM) — Headquartered in armonk, new
York, iBM is a large technology and consulting company with about 100,000 employees in
the United States and more than 330,000 outside the United States. the iBM’s chairman,
president, and ceO is ginni rometty.
23. taSer international, inc. (taSr) — Headquartered in Scottsdale, arizona, taSer develops, produces, and markets conducted electrical weapons (ceWs) for use in law enforcement, federal, military, security, and personal defense markets globally. the company also
offers aXOn body cameras.
24. revlon, inc. (reV) — Headquartered in new York city, revlon develops, manufactures,
and markets cosmetics, fragrances, and personal care products globally. revlon competes
with L’Oreal, avon, estee Lauder, and Mary Kay cosmetics.
Nonprofit Organizations
25. World relief — Headquartered in Baltimore, Maryland, World relief is a nonprofit, international relief and development agency that offers assistance globally to victims of poverty,
disease, hunger, war, disasters, and persecution. With over 100,000 volunteers, World
relief serves over four million vulnerable people annually.
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26. World Wildlife Fund for nature (WWF) — Headquartered in gland, Vaud, Switzerland,
WWF is the world’s largest nonprofit conservation organization working on more than
1,300 wildlife projects. its mission is “to stop the degradation of the planet’s natural environment and to build a future in which humans live in harmony with nature.”
Outside-USA Headquartered Firms
27. Michael Kors Holdings Ltd. (KOrS) — Headquartered in Hong Kong, Michael Kors
designs, produces, and markets luxury apparel and accessories for men and women,
through about 250 stores in north america and 80 stores in europe and Japan. the firm
also licenses its trademarks and products to third parties globally.
28. SaBMiller plc (SaB) — Headquartered in London, SaBMiller is the world’s secondlargest beer brewer behind anheuser-Busch inBev. With operations in over 75 countries,
some popular SaBMiller brands include Miller, Fosters, castle, eagle, and Pilsner. SaB is
short for South african Brewery.
29. gruma, S.a.B. de c.V. (gMK) — Headquartered in Monterrey, Mexico, gruma is the
world’s largest producer of corn flour and tortillas. Brand names include Mission, Meseca,
and guerrero. the company’s USa headquarters is in irving, texas.
30. restaurant Brands international, inc. (QSr) — Headquartered in Oakville, Ontario, outside of toronto, canada, QSr consists of Burger King and tim Hortons. Burger King is
the world’s second-largest hamburger chain (behind McDonald’s), with13,000+ restaurants
in the United States and 85 other countries. Burger King acquired the canadian donut
company tim Hortons in December 2014 as an inversion, moving their headquarters from
Many persons have contributed time, energy, ideas, and suggestions for improving this text over
many editions. the strength of this text is largely attributed to the collective wisdom, work,
and experiences of strategic-management professors, researchers, students, and practitioners.
names of particular individuals whose published research is referenced in this edition are listed
alphabetically in the name index. to all individuals involved in making this text so popular and
successful, we are indebted and thankful.
Many special persons and reviewers contributed valuable material and suggestions for this
edition. We would like to thank our colleagues and friends at auburn University, Mississippi
State University, east carolina University, the University of South carolina, campbell
University, the University of north carolina at Pembroke, and Francis Marion University. We
have taught strategic management at all these universities. Scores of students and professors at
these schools helped shape the development of this text.
We thank the following guest writers who contributed a case(s) to this sixteenth edition:
Meredith e. David, Baylor University
Mark L. Frigo, DePaul University
Debora J. gilliard, Metropolitan State University of Denver
David Lynn Hoffman, Metropolitan State University of Denver
edward Moore, Liberty University
alvaro Polanco, Baylor University
Lori radulovich, Baldwin Wallace University
raj Selladurai, indiana University northwest
Diana tsaw, california Lutheran University
John D. Varlaro, Johnson & Wales University
Jason Willoughby, elizabethtown community college
We thank you, the reader, for investing the time and effort to read and study this text. it
will help you formulate, implement, and evaluate strategies for any organization with which
you become associated. We hope you come to share our enthusiasm for the rich subject area of
strategic management and for the systematic learning approach taken in this text. We welcome
and invite your suggestions, ideas, thoughts, comments, and questions regarding any part of
this text or the ancillary materials. Please contact Dr. Fred r. David at the following e-mail:
freddavid9@gmail.com, or write him at the School of Business, Francis Marion University,
Florence, Sc 29501. We sincerely appreciate and need your input to continually improve this
text in future editions. Your willingness to draw our attention to specific errors or deficiencies
in coverage or exposition will especially be appreciated.
thank you for using this text.
Fred r. David and Forest r. David
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About the Authors
Fred r. and Forest r. David, a father–son team, have published more than
50 articles in journals such as Academy of Management Review, Academy
of Management Executive, Journal of Applied Psychology, Long Range
Planning, International Journal of Management, Journal of Business Strategy,
and Advanced Management Journal. Fred and Forest’s recent article titled
“Mission Statement theory and Practice: a content analysis and new
Direction,” published in the International Journal of Business, Marketing, and
Decision Sciences, is changing the way organizations devise and use vision
and mission statements.
Fred and Forest are coauthors of Strategic Management: Concepts and
Cases—A Competitive Advantage Approach that has been on a two-year
revision cycle since 1987, when the first edition was published. this text has
been a leader in the field of strategic management for almost three decades,
providing an applications, practitioner-approach to the discipline. More than
500 colleges and universities have used this textbook over the years. For seven
editions of this book, Forest has been sole author of the Case Instructor’s
Resource Manual, having developed extensive teachers’ notes (solutions) for
all the cases. Forest is author of the case MyLab and chapter MyLab ancillaries, as well as the free excel Student template found on the author website
the authors actively assist businesses globally in doing strategic planning.
they have written and published more than 100 strategic-management cases.
they were keynote speakers in September 2015 in Monterrey, Mexico, at the
“XXii congreso industrial,” the largest congress of industrial engineering
in Latin america. they were also invited keynote speakers at the Pearson
international Forum in Monterrey, Mexico, delivering a one-hour presentation
to 80 Spanish-speaking management professors.
With a Ph.D. in Management from the University of South carolina, Fred
is the tranSouth Professor of Strategic Planning at Francis Marion University
in Florence, South carolina. Forest has taught strategic-management courses
at Mississippi State University, campbell University, and Francis Marion
Fred r. David
Forest r. David
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concepts and cases
A Competitive AdvAntAge ApproACh
Part 1
Source: Odua Images/Fotolia
Overview Of Strategic ManageMent
the nature of Strategic
learning Objectives
After studying this chapter, you should be able to do the following:
1-1. Describe the strategic-management process.
1-2. Discuss the three stages of strategy formulation, implementation, and evaluation
1-3. Explain the need for integrating analysis and intuition in strategic management.
1-4. Define and give examples of key terms in strategic management.
1-5. Illustrate the comprehensive strategic-management model.
1-6. Describe the benefits of engaging in strategic management.
1-7. Explain why some firms do no strategic planning.
1-8. Describe the pitfalls in actually doing strategic planning.
1-9. Discuss the connection between business and military strategy.
assurance Of learning exercises
The following exercises are found at the end of this chapter:
exercise 1a
exercise 1b
exercise 1c
exercise 1D
exercise 1e
exercise 1f
exercise 1g
compare Business Strategy with Military Strategy
gather Strategy information for the Hershey company
Update the Hershey cohesion case
Strategic Planning for Your University
Strategic Planning at a Local company
get familiar with the Strategy club website
game Plans vs. Strategic Plans: teams vs. companies
Part 1 • Overview Of Strategic ManageMent
hen ceOs from the big three U.S. automakers—ford, general Motors (gM), and
chrysler—showed up several years ago without a clear strategic plan to ask congressional leaders for bailout monies, they were sent home with instructions to develop
a clear strategic plan for the future. austan goolsbee, one of President Barack Obama’s top
economic advisers, said, “asking for a bailout without a convincing business plan was crazy.”
goolsbee also said, “if the three auto ceOs need a bridge, it’s got to be a bridge to somewhere,
not a bridge to nowhere.”1 this text gives the instructions on how to develop a clear strategic
plan—a bridge to somewhere rather than nowhere.
the chapter provides an overview of strategic management. it introduces a practical, integrative model of the strategic-management process, and it defines basic activities and terms in
strategic management.
at the beginning of each chapter, a different company is showcased doing an exemplary
job applying strategic-planning concepts, tools, and techniques. the first company featured for
excellent strategic management practices is apple, inc., one of the best-managed companies
ever, and currently led by one of the best strategists in the world, Mr. tim cook, who followed
a legendary strategist, Mr. Steve Jobs. at the end of each chapter, a new, one-page, mini-case
on a company is provided with respective questions that examine various concepts, tools, and
techniques presented.
what is Strategic Management?
Once there were two company presidents who competed in the same industry. these two
presidents decided to go on a camping trip to discuss a possible merger. they hiked deep into
the woods. Suddenly, they came upon a grizzly bear that rose up on its hind legs and snarled.
instantly, the first president took off his knapsack and got out a pair of jogging shoes. the second
president said, “Hey, you can’t outrun that bear.” the first president responded, “Maybe i can’t
exemPlary cOmPany shOwcaseD
apple, inc. (aaPL)
Headquartered in Cupertino, California, Apple, Inc. designs, produces,
and markets smartphones, watches, personal computers, digital music
players, and much more worldwide. Apple is arguably the most successful company in modern times. The company was founded in 1977 by a
great strategist, an American legend, the late Mr. Steve Jobs. According
to Financial Times, the best corporate strategist in 2014 was Apple CEO
Tim Cook, who led Apple to a record $700 billion market capitalization, with booming iPhone and personal computer sales, and handed
billions of dollars back to shareholders. Financial Times named CEO
Cook as “Person of the Year” for Apple’s huge achievements as well as
Cook’s courage. Cook came forward as the Fortune 500’s first openly
gay CEO when he published an essay in October 2014 in Bloomberg
Businessweek saying he was “proud to be gay.” Cook was courageous
in other ways too. For example, at an Apple’s shareholder meeting,
when someone questioned the profitability of Apple’s environmental
initiatives, Cook responded, “We do things for other reasons than a
profit motive; we do things because they are right and just. If that’s a
hard line for you . . . then you should get out of the stock.”
Amidst tremendous fanfare, Apple recently released its iWatch and
is poised to introduce iTV, along with an electric car. Apple and IBM have
released the first apps to emerge from their collaboration—a collection
that CEO Cook
says is “the
most enterprising apps ever.”
recently entered
business as well
as the banking business with its Apple Pay system, whereby customers
use their iPhone to pay for merchandise at hundreds of retail checkout
counters. In addition, Apple recently acquired Metaio, a company that
makes augmented-reality (AR) technologies, a concept that allows developers to overlay digital information on top of the real world. A number
of companies are working on AR, including Microsoft and Google with
their HoloLens and Magic Leap projects, respectively. Many scientists
expect AR and virtual reality (VR) to be the next major computing platform after mobile devices such as smartphones and tablets. For the
eighth year in a row, Fortune recently named Apple the world’s most
admired company.
Source: company documents and a variety of sources.
cHaPter 1 • tHe nature Of Strategic ManageMent
outrun that bear, but i surely can outrun you!” this story captures the notion of strategic management, which is to gain and sustain competitive advantage.
What Is a Cohesion Case?
a distinguishing, popular feature of this text is the cohesion case, named so because a
written case on a company appears at the end of this chapter, and then all other chapters
feature end-of-chapter assurance of Learning exercises to apply strategic-planning concepts,
tools, and techniques to the cohesion case company. the Hershey company is featured as
the new cohesion case in this edition, because Hershey is a well-known, well-managed
global firm undergoing strategic change. By working through the Hershey-related exercises
at the end of each chapter, students become well prepared to develop an effective strategic
plan for any company assigned to them (or their team) to perform a strategic-management
case analysis. case analysis is a core part of almost every strategic-management course
Defining Strategic Management
Strategic management is the art and science of formulating, implementing, and evaluating
cross-functional decisions that enable an organization to achieve its objectives. as this definition implies, strategic management focuses on integrating management, marketing, finance
and accounting, production and operations, research and development (r&D), and information systems to achieve organizational success. the term strategic management in this text is
used synonymously with the term strategic planning. the latter term is more often used in
the business world, whereas the former is often used in academia. Sometimes the term strategic management is used to refer to strategy formulation, implementation, and evaluation, with
strategic planning referring only to strategy formulation. the purpose of strategic management
is to exploit and create new and different opportunities for tomorrow; long-range planning, in
contrast, tries to optimize for tomorrow the trends of today.
the term strategic planning originated in the 1950s and was popular between the mid-1960s
and the mid-1970s. During these years, strategic planning was widely believed to be the answer
for all problems. at the time, much of corporate america was “obsessed” with strategic planning.
following that boom, however, strategic planning was cast aside during the 1980s as various
planning models did not yield higher returns. the 1990s, however, brought the revival of strategic planning, and the process is widely practiced today in the business world. Many companies
today have a chief strategy officer (CSO). McDonald’s hired a new cSO in October 2015.
a strategic plan is, in essence, a company’s game plan. Just as a football team needs a good
game plan to have a chance for success, a company must have a good strategic plan to compete
successfully. Profit margins among firms in most industries are so slim that there is little room
for error in the overall strategic plan. a strategic plan results from tough managerial choices
among numerous good alternatives, and it signals commitment to specific markets, policies, procedures, and operations in lieu of other, “less desirable” courses of action.
the term strategic management is used at many colleges and universities as the title for the
capstone course in business administration. this course integrates material from all business
courses, and, in addition, introduces new strategic-management concepts and techniques being
widely used by firms in strategic planning.
Stages of Strategic Management
the strategic-management process consists of three stages: strategy formulation, strategy
implementation, and strategy evaluation. Strategy formulation includes developing a vision and
a mission, identifying an organization’s external opportunities and threats, determining internal
strengths and weaknesses, establishing long-term objectives, generating alternative strategies,
and choosing particular strategies to pursue. Strategy-formulation issues include deciding what
new businesses to enter, what businesses to abandon, whether to expand operations or diversify,
whether to enter international markets, whether to merge or form a joint venture, and how to
avoid a hostile takeover.
Part 1 • Overview Of Strategic ManageMent
Because no organization has unlimited resources, strategists must decide which alternative strategies will benefit the firm most. Strategy-formulation decisions commit an organization to specific products, markets, resources, and technologies over an extended period of time.
Strategies determine long-term competitive advantages. for better or worse, strategic decisions
have major multifunctional consequences and enduring effects on an organization. top managers
have the best perspective to understand fully the ramifications of strategy-formulation decisions;
they have the authority to commit the resources necessary for implementation.
Strategy implementation requires a firm to establish annual objectives, devise policies,
motivate employees, and allocate resources so that formulated strategies can be executed.
Strategy implementation includes developing a strategy-supportive culture, creating an effective
organizational structure, redirecting marketing efforts, preparing budgets, developing and using
information systems, and linking employee compensation to organizational performance.
Strategy implementation often is called the “action stage” of strategic management.
implementing strategy means mobilizing employees and managers to put formulated strategies
into action. Often considered to be the most difficult stage in strategic management, strategy
implementation requires personal discipline, commitment, and sacrifice. Successful strategy
implementation hinges on managers’ ability to motivate employees, which is more an art than a
science. Strategies formulated but not implemented serve no useful purpose.
interpersonal skills are especially critical for successful strategy implementation. Strategyimplementation activities affect all employees and managers in an organization. every division
and department must decide on answers to questions such as “what must we do to implement
our part of the organization’s strategy?” and “How best can we get the job done?” the challenge
of implementation is to stimulate managers and employees throughout an organization to work
with pride and enthusiasm toward achieving stated objectives.
Strategy evaluation is the final stage in strategic management. Managers desperately need
to know when particular strategies are not working well; strategy evaluation is the primary means
for obtaining this information. all strategies are subject to future modification because external and internal factors constantly change. three fundamental strategy-evaluation activities are
(1) reviewing external and internal factors that are the bases for current strategies, (2) measuring
performance, and (3) taking corrective actions. Strategy evaluation is needed because success
today is no guarantee of success tomorrow! Success always creates new and different problems;
complacent organizations experience demise.
formulation, implementation, and evaluation of strategy activities occur at three hierarchical levels in a large organization: corporate, divisional or strategic business unit, and functional.
By fostering communication and interaction among managers and employees across hierarchical
levels, strategic management helps a firm function as a competitive team. Most small businesses
and some large businesses do not have divisions or strategic business units; they have only the
corporate and functional levels. nevertheless, managers and employees at these two levels should
be actively involved in strategic-management activities.
Peter Drucker says the prime task of strategic management is thinking through the overall
mission of a business—
that is, of asking the question, “what is our business?” this leads to the setting of objectives, the development of strategies, and the making of today’s decisions for tomorrow’s
results. this clearly must be done by a part of the organization that can see the entire business; that can balance objectives and the needs of today against the needs of tomorrow; and
that can allocate resources of men and money to key results.2
integrating intuition and analysis
edward Deming once said, “in god we trust. all others bring data.” the strategic-management
process can be described as an objective, logical, systematic approach for making major decisions
in an organization. it attempts to organize qualitative and quantitative information in a way that
allows effective decisions to be made under conditions of uncertainty. Yet strategic management
is not a pure science that lends itself to a nice, neat, one-two-three approach.
Based on past experiences, judgment, and feelings, most people recognize that intuition is
essential to making good strategic decisions. intuition is particularly useful for making decisions
cHaPter 1 • tHe nature Of Strategic ManageMent
in situations of great uncertainty or little precedent. it is also helpful when highly interrelated
variables exist or when it is necessary to choose from several plausible alternatives. Some managers and owners of businesses profess to have extraordinary abilities for using intuition alone
in devising brilliant strategies. for example, will Durant, who organized gM, was described by
alfred Sloan as “a man who would proceed on a course of action guided solely, as far as i could
tell, by some intuitive flash of brilliance. He never felt obliged to make an engineering hunt for
the facts. Yet at times, he was astoundingly correct in his judgment.”3 albert einstein acknowledged the importance of intuition when he said, “i believe in intuition and inspiration. at times
i feel certain that i am right while not knowing the reason. imagination is more important than
knowledge, because knowledge is limited, whereas imagination embraces the entire world.”4
although some organizations today may survive and prosper because they have intuitive
geniuses managing them, many are not so fortunate. Most organizations can benefit from strategic management, which is based on integrating intuition and analysis in decision making.
choosing an intuitive or analytic approach to decision making is not an either-or proposition.
Managers at all levels in an organization inject their intuition and judgment into strategicmanagement analyses. analytical thinking and intuitive thinking complement each other.
Operating from the i’ve-already-made-up-my-mind-don’t-bother-me-with-the-facts mode
is not management by intuition; it is management by ignorance.5 Drucker says, “i believe in
intuition only if you discipline it. ‘Hunch’ artists, who make a diagnosis but don’t check it out
with the facts, are the ones in medicine who kill people, and in management kill businesses.”6
as Henderson notes:
the accelerating rate of change today is producing a business world in which customary
managerial habits in organizations are increasingly inadequate. experience alone was an
adequate guide when changes could be made in small increments. But intuitive and experience-based management philosophies are grossly inadequate when decisions are strategic
and have major, irreversible consequences.7
in a sense, the strategic-management process is an attempt to duplicate what goes on in the mind
of a brilliant, intuitive person who knows the business and assimilates and integrates that knowledge using analysis to formulate effective strategies.
Adapting to Change
the strategic-management process is based on the belief that organizations should continually
monitor internal and external events and trends so that timely changes can be made as needed.
the rate and magnitude of changes that affect organizations are increasing dramatically, as
evidenced by how the drop in oil prices caught so many firms by surprise. firms, like organisms,
must be “adept at adapting” or they will not survive. to survive, all organizations must astutely
identify and adapt to change. the strategic-management process is aimed at allowing organizations to adapt effectively to change over the long run. waterman noted:
in today’s business environment, more than in any preceding era, the only constant is
change. Successful organizations effectively manage change, continuously adapting their
bureaucracies, strategies, systems, products, and cultures to survive the shocks and prosper
from the forces that decimate the competition.8
On a political map, the boundaries between countries may be clear, but on a competitive
map showing the real flow of financial and industrial activity, the boundaries have largely
disappeared. the speedy flow of information has eaten away at national boundaries so that
people worldwide readily see for themselves how other people live and work. we have become
a borderless world with global citizens, global competitors, global customers, global suppliers,
and global distributors! Many firms headquartered in the United States are challenged by outside-U.S.–based companies in many industries. for example, toyota, Honda, Yamaha, Suzuki,
volkswagen, Samsung, and Kia have huge market shares in the United States.
the need to adapt to change leads organizations to key strategic-management questions,
such as “what kind of business should we become?” “are we in the right field(s)?” “Should
we reshape our business?” “what new competitors are entering our industry?” “what strategies
Part 1 • Overview Of Strategic ManageMent
should we pursue?” “How are our customers changing?” “are new technologies being developed
that could put us out of business?”
the internet promotes endless comparison shopping, enabling consumers worldwide to
band together to demand discounts. the internet has transferred power from businesses to individuals. Buyers used to face big obstacles when attempting to get the best price and service, such
as limited time and data to compare, but now consumers can quickly scan hundreds of vendor
offerings. Both the number of people shopping online and the average amount they spend is
increasing dramatically. Digital communication has become the name of the game in marketing. consumers today are flocking to blogs, sending tweets, watching and posting videos on
Youtube, and spending hours on tumbler, facebook, reddit, instagram, and Linkedin, instead
of watching television, listening to the radio, or reading newspapers and magazines. facebook
recently unveiled features that further marry these social sites to the wider internet. facebook
users can now log onto various business shopping sites from their social site, so their friends can
see what items they have purchased from what companies. facebook wants their members to use
their identities to manage all their online identities. Most traditional retailers boost in-store sales
using their websites to promote in-store promotions.
Key terms in Strategic Management
Before we further discuss strategic management, we should define nine key terms: competitive
advantage, strategists, vision and mission statements, external opportunities and threats, internal strengths and weaknesses, long-term objectives, strategies, annual objectives, and policies.
Competitive Advantage
Strategic management is all about gaining and maintaining competitive advantage. this term
can be defined as any activity a firm does especially well compared to activities done by rival
firms, or any resource a firm possesses that rival firms desire.
Having fewer fixed assets than rival firms can provide major competitive advantages. for
example, apple has virtually no manufacturing facilities of its own, and rival Sony has 57 electronics factories. apple relies almost entirely on contract manufacturers for production of all its
products, whereas Sony owns its own plants. Having fewer fixed assets has enabled apple to
remain financially lean.
according to ceO Paco Underhill of envirosell, “where it used to be a polite war, it’s now
a 21st-century bar fight, where everybody is competing with everyone else for the customers’
money.” Shoppers are “trading down: nordstrom is taking customers from neiman Marcus and
Saks fifth avenue, t.J. Maxx and Marshalls are taking customers from most other stores in the
mall, and family Dollar is taking revenues from walmart.9 getting and keeping competitive
advantage is essential for long-term success …
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