What are the chief elements of Chipotle’s strategy?

  

A.Read Case #5 (in your textbook P 299), “Chipotle Mexican Grill in 2013:
can it hit a second home run?” andPerform the following analysis:
What are the chief elements of Chipotle’s strategy?
Perform a SWOT analysis for Chipotle. What does this analysis reveal about Chipotle’s situation and future prospect?
What is your assessment of the companys financial performance during 2007-2012 based on the data in Exhibit 1?
What are the major issues that Chipotlefaces? What are your recommendations toits top management?Do notuse outside sources for the analysis. There is enough information in the case to perform the required analysis.
Chapters 4 and 5 of your text provide detailed discussion of
topics/tools that you would need to know in order to complete this
assignment. Save your work in Word (.doc).B.Read Case #9 (in your textbook P 372), “The Walt Disney Company: Its
Diversification Strategy in 2012?” and perform the following analysis:
What is the Walt Disney Company’s corporate strategy?
What is your assessment of the long-term attractiveness of the
industries represented inWalt Disney Company’s business portfolio?
What is your assessment of the competitive strengths ofWalt Disney Company’s different business units?
What doesa Nine-cell Industry Attractiveness/Business Strength Matrix for Walt Disney Company look like?
Evaluate the financial and operating performance of the Walt Disney Company.Do notuse outside sources for the analysis. There is enough information in the case to perform the required analysis.
Chapters 6, 7, and 8 in your text provide detailed discussion of
topics/tools that you would need to know in order to complete this
assignment. Save your work in Word (.doc).There is one bad example for this kind of homework I uploaded in the bottom.Please check the last page of the MGT 495 case 1.
CONNECT FEATURES
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Case Exercises
The Connect platform also includes author-developed
case exercises for all 12 cases in this edition that require
students to work through answers to assignment questions
for each case. These exercises have multiple components
and can include: calculating assorted nancial ratios to
assess a companys nancial performance and balance
sheet strength, identifying a companys strategy, doing
ve-forces and driving-forces analysis, doing a SWOT
analysis, and recommending actions to improve company
performance. The content of these case exercises is
tailored to match the circumstances presented in each
case, calling upon students to do whatever strategic
thinking and strategic analysis is called for to arrive at a
pragmatic, analysis-based action recommendation for
improving company performance.
eBook
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Your students can insert and review their own notes,
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Essentials of
Strategic
Management
The Quest for Competitive Advantage
John E. Gamble
Texas A&M UniversityCorpus Christi
Margaret A. Peteraf
Dartmouth College
Arthur A. Thompson, Jr.
The University of Alabama
4e
ESSENTIALS OF STRATEGIC MANAGEMENT: THE QUEST FOR COMPETITIVE ADVANTAGE,
FOURTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright 2015 by
McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous
editions 2013, 2011, and 2009. No part of this publication may be reproduced or distributed in any
form or by any means, or stored in a database or retrieval system, without the prior written consent
of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage
or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers
outside the United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 DOW/DOW 1 0 9 8 7 6 5 4
ISBN 978-0-07-811289-8
MHID 0-07-811289-3
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All credits appearing on page or at the end of the book are considered to be an extension of the
copyright page.
Library of Congress Cataloging-in-Publication Data
Gamble, John (John E.)
Essentials of strategic management : the quest for competitive advantage/John E. Gamble,
Arthur A. Thompson, Jr., Margaret A. Peteraf.4e [edition].
pages cm
Includes bibliographical references and index.
ISBN 978-0-07-811289-8 (alk. paper)ISBN 0-07-811289-3 (alk. paper)
1. Strategic planning. 2. Business planning. 3. Competition. 4. Strategic planningCase studies.
I. Thompson, Arthur A., 1940- II. Peteraf, Margaret Ann. III. Title.
HD30.28.G353 2015
658.4012dc23
2013045409
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a
website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGrawHill Education does not guarantee the accuracy of the information presented at these sites.
www.mhhe.com
ABOUT THE AUTHORS
John E. Gamble is a Professor of Management and Dean of the College of Business at Texas A&M UniversityCorpus Christi. His teaching and research for nearly
20 years has focused on strategic management at the undergraduate and graduate
levels. He has conducted courses in strategic management in Germany since 2001,
which have been sponsored by the University of Applied Sciences in Worms.
Dr. Gambles research has been published in various scholarly journals and he
is the author or co-author of more than 75 case studies published in an assortment
of strategic management and strategic marketing texts. He has done consulting on
industry and market analysis for clients in a diverse mix of industries.
Professor Gamble received his Ph.D., Master of Arts, and Bachelor of Science
degrees from The University of Alabama and was a faculty member in the Mitchell
College of Business at the University of South Alabama before his appointment to
the faculty at Texas A&M UniversityCorpus Christi.
Margaret A. Peteraf is the Leon E. Williams Professor of Management at the Tuck
School of Business at Dartmouth College. She is an internationally recognized scholar
of strategic management, with a long list of publications in top management journals.
She has earned myriad honors and prizes for her contributions, including the 1999
Strategic Management Society Best Paper Award recognizing the deep influence of
her work on the field of strategic management. Professor Peteraf is on the Board of
Directors of the Strategic Management Society and has been elected as a Fellow of the
Society. She served previously as a member of the Academy of Managements Board
of Governors and as Chair of the Business Policy and Strategy Division of the Academy. She has also served in various editorial roles and is presently on nine editorial
boards, including the Strategic Management Journal, the Academy of Management Review,
and Organization Science. She has taught in Executive Education programs around the
world and has won teaching awards at the MBA and Executive level.
Professor Peteraf earned her Ph.D., M.A., and M.Phil. at Yale University and
held previous faculty appointments at Northwestern Universitys Kellogg Graduate School of Management and at the University of Minnesotas Carlson School of
Management.
Arthur A. Thompson, Jr., earned his B.S. and Ph.D. degrees in economics from
The University of Tennessee, spent three years on the economics faculty at Virginia
Tech, and served on the faculty of The University of Alabamas College of Commerce
and Business Administration for 25 years. In 1974 and again in 1982, Dr. Thompson
spent semester-long sabbaticals as a visiting scholar at the Harvard Business School.
His areas of specialization are business strategy, competition and market
analysis, and the economics of business enterprises. In addition to publishing
over 30 articles in some 25 different professional and trade publications, he has
authored or co-authored five textbooks and six computer-based simulation exercises that are used in colleges and universities worldwide.
Dr. Thompson spends much of his off-campus time giving presentations,
putting on management development programs, working with companies, and
helping operate a business simulation enterprise in which he is a major partner.
Dr. Thompson and his wife of 52 years have two daughters, two grandchildren,
and a Yorkshire terrier.
v
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BRIEF CONTENTS
PART ONE CONCEPTS AND
TECHNIQUES FOR CRAFTING
AND EXECUTING STRATEGY
PART TWO CASES IN CRAFTING
AND EXECUTING STRATEGY
Case 1
Mystic Monk Coffee 243
Section A: Introduction and Overview
Case 2
Under Armours Strategy in 2013Good
Enough to Win Market Share from Nike
and adidas? 248
Case 3
Lululemon Athletica, Inc. 271
Case 4
Coach Inc. in 2012: Its Strategy in the
Accessible Luxury Goods Market 287
Case 5
Chipotle Mexican Grill in 2013: Can It Hit
a Second Home Run? 299
Case 6
Googles Strategy in 2013 315
Case 7
Nucor Corporation in 2012: Using
Economic Downturns as an Opportunity
to Grow Stronger 330
Case 8
Tata Motors: Can It Become a Global
Contender in the Automobile
Industry? 360
1
Strategy, Business Models, and Competitive
Advantage 1
2
Charting a Companys Direction: Vision
and Mission, Objectives, and Strategy 13
Section B: Core Concepts and Analytical Tools
3
Evaluating a Companys External
Environment 37
4
Evaluating a Companys Resources, Capabilities,
and Competitiveness 68
Section C: Crafting a Strategy
5
6
The Five Generic Competitive Strategies 92
7
Strategies for Competing in International
Markets 137
Case 9
8
Corporate Strategy: Diversification and the
Multibusiness Company 159
The Walt Disney Company: Its
Diversification Strategy in 2012 372
Case 10
Robin Hood
9
Ethics, Corporate Social Responsibility,
Environmental Sustainability, andStrategy 189
Case 11
Herman Miller Inc.: Unrelenting Pursuit
of Reinvention and Renewal 390
Case 12
Frogs Leap Winery in 2011the
Sustainability Agenda 411
Strengthening a Companys Competitive
Position: Strategic Moves, Timing, and Scope
of Operations 115
Section D: Executing the Strategy
10
Superior Strategy ExecutionAnother Path to
Competitive Advantage 207
Appendix
Key Financial Ratios 240
388
Photo Credits 427
Indexes 428
vii
PREFACE
T
he standout features of this fourth edition of Essentials of Strategic Management are its concisely written and robust coverage of strategic management concepts and its compelling collection of cases. The text presents a
conceptually strong treatment of strategic management principles and analytic approaches that features straight-to-the-point discussions, timely examples, and a writing style that captures the interest of students. While this
edition retains the 10-chapter structure of the prior edition, every chapter has
been reexamined, refined, and refreshed. New content has been added to keep
the material in line with the latest developments in the theory and practice of
strategic management. Also, scores of new examples have been added, along
with fresh Concepts & Connections illustrations, to make the content come
alive and to provide students with a ringside view of strategy in action. The
fundamental character of the fourth edition of Essentials of Strategic Management is very much in step with the best academic thinking and contemporary
management practice. The chapter content continues to be solidly mainstream
and balanced, mirroring both the penetrating insight of academic thought and
the pragmatism of real-world strategic management.
Complementing the text presentation is a truly appealing lineup of 12
diverse, timely, and thoughtfully crafted cases. All of the cases are tightly
linked to the content of the 10 chapters, thus pushing students to apply the
concepts and analytical tools they have read about. Eight of the 12 cases were
written by the coauthors to illustrate specific tools of analysis or distinct strategic management theories. The four cases not written by the coauthors were
chosen because of their exceptional linkage to strategic management concepts
presented in the text. We are confident you will be impressed with how well
each of the 12 cases in the collection will work in the classroom and the amount
of student interest they will spark.
For some years now, growing numbers of strategy instructors at business
schools worldwide have been transitioning from a purely text-cases course
structure to a more robust and energizing text-cases-simulation course structure. Incorporating a competition-based strategy simulation has the strong
appeal of providing class members with an immediate and engaging opportunity
to apply the concepts and analytical tools covered in the chapters in a head-to-head
competition with companies run by other class members. Two widely used and
pedagogically effective online strategy simulations, The Business Strategy Game
and GLO-BUS, are optional companions for this text. Both simulations, like
the cases, are closely linked to the content of each chapter in the text. The Exercises for Simulation Participants, found at the end of each chapter, provide
clear guidance to class members in applying the concepts and analytical tools
covered in the chapters to the issues and decisions that they have to wrestle
with in managing their simulation company.
viii
Preface
Through our experiences as business school faculty members, we also fully
understand the assessment demands on faculty teaching strategic management and business policy courses. In many institutions, capstone courses have
emerged as the logical home for assessing student achievement of program learning objectives. The fourth edition includes Assurance of Learning Exercises at
the end of each chapter that link to the specific Learning Objectives appearing at
the beginning of each chapter and highlighted throughout the text. An important
instructional feature of this edition is the linkage of selected chapter-end Assurance of
Learning Exercises and cases to the publishers Connect Management web-based assignment and assessment platform. Your students will be able to use the online Connect
supplement to (1) complete two of the Assurance of Learning Exercises appearing at the end of each of the 10 chapters, (2) complete chapter-end quizzes, and
(3) complete case tutorials based upon the suggested assignment questions for
all 12 cases in this edition. With the exception of some of the chapter-end Assurance of Learning exercises, all of the Connect exercises are automatically graded,
thereby enabling you to easily assess the learning that has occurred.
In addition, both of the companion strategy simulations have a built-in
Learning Assurance Report that quantifies how well each member of your
class performed on nine skills/learning measures versus tens of thousands of
other students worldwide who completed the simulation in the past 12 months.
We believe the chapter-end Assurance of Learning Exercises, the all-new
online and automatically graded Connect exercises, and the Learning Assurance Report generated at the conclusion of The Business Strategy Game and
GLO-BUS simulations provide you with easy-to-use, empirical measures of
student learning in your course. All can be used in conjunction with other
instructor-developed or school-developed scoring rubrics and assessment
tools to comprehensively evaluate course or program learning outcomes and
measure compliance with AACSB accreditation standards.
Taken together, the various components of the fourth edition package and
the supporting set of Instructor Resources provide you with enormous course
design flexibility and a powerful kit of teaching/learning tools. Weve done
our very best to ensure that the elements comprising this edition will work
well for you in the classroom, help you economize on the time needed to be
well prepared for each class, and cause students to conclude that your course
is one of the very best they have ever takenfrom the standpoint of both
enjoyment and learning.
Differentiation from Other Texts
Five noteworthy traits strongly differentiate this text and the accompanying
instructional package from others in the field:
1. Our integrated coverage of the two most popular perspectives on strategic management positioning theory and resource-based theory is unsurpassed by any other
leading strategy text. Principles and concepts from both the positioning perspective and the resource-based perspective are prominently and comprehensively integrated into our coverage of crafting both single-business and
multibusiness strategies. By highlighting the relationship between a firms
ix
x
Preface
resources and capabilities to the activities it conducts along its value chain,
we show explicitly how these two perspectives relate to one another. Moreover, in Chapters 3 through 8 it is emphasized repeatedly that a companys
strategy must be matched not only to its external market circumstances but
also to its internal resources and competitive capabilities.
2. Our coverage of business ethics, core values, social responsibility, and environmental
sustainability is unsurpassed by any other leading strategy text. Chapter 9, Ethics,
Corporate Social Responsibility, Environmental Sustainability, and Strategy,
is embellished with fresh content so that it can better fulfill the important
functions of (1) alerting students to the role and importance of ethical and
socially responsible decision making and (2) addressing the accreditation
requirements that business ethics be visibly and thoroughly embedded in the
core curriculum. Moreover, discussions of the roles of values and ethics are
integrated into portions of other chapters to further reinforce why and how
considerations relating to ethics, values, social responsibility, and sustainability should figure prominently into the managerial task of crafting and
executing company strategies.
3. The caliber of the case collection in the fourth edition is truly unrivaled from the
standpoints of student appeal, teachability, and suitability for drilling students in the use of the concepts and analytical treatments in Chapters 1
through 10. The 12 cases included in this edition are the very latest, the best,
and the most on-target that we could find. The ample information about the
cases in the Instructors Manual makes it effortless to select a set of cases
each term that will capture the interest of students from start to finish.
4. The publishers Connect Management assignment and assessment platform is
tightly linked to the text chapters and case lineup. The Connect package for the
fourth edition allows professors to assign autograded quizzes and select
chapter-end Assurance of Learning Exercises to assess class members
understanding of chapter concepts. In addition, our texts have pioneered
the extension of the Connect Management platform to case analysis. The
autograded case exercises for each of the 12 cases in this edition are robust
and extensive and will better enable students to make meaningful contributions to class discussions. The autograded Connect case exercises may also
be used as graded assignments in the course.
5. The two cutting-edge and widely used strategy simulationsThe Business
Strategy Game and GLO-BUSthat are optional companions to the fourth
edition give you unmatched capability to employ a text-case-simulation
model of course delivery.
Organization, Content, and Features
of the Fourth Edition Text Chapters
The following rundown summarizes the noteworthy features and topical
emphasis in this new edition:
Chapter 1 focuses on the importance of developing a clear understanding of
why a company exists and why it matters in the marketplace. In developing
Preface
such an understanding, management must define its approach to creating
superior value for customers and how capabilities and resources will be
employed to deliver the desired value to customers. We introduce students
to the primary approaches to building competitive advantage and the key
elements of business-level strategy. Following Henry Mintzbergs pioneering research, we also stress why a companys strategy is partly planned and
partly reactive and why this strategy tends to evolve. The chapter also discusses why it is important for a company to have a viable business model that
outlines the companys customer value proposition and its profit formula.
This brief chapter is the perfect accompaniment to your opening-day lecture
on what the course is all about and why it matters.
Chapter 2 delves more deeply into the managerial process of actually
crafting and executing a strategyit makes a great assignment for the
second day of class and provides a smooth transition into the heart of the
course. The focal point of the chapter is the five-stage managerial process of crafting and executing strategy: (1) forming a strategic vision of
where the company is headed and why, (2) developing strategic as well
as financial objectives with which to measure the companys progress,
(3)crafting a strategy to achieve these targets and move the company
toward its market destination, (4) implementing and executing the strategy, and (5) evaluating a companys situation and performance to identify
corrective adjustments that are needed. Students are introduced to such
core concepts as strategic visions, mission statements and core values, the
balanced scorecard, and business-level versus corporate-level strategies.
Theres a robust discussion of why all managers are on a companys strategymaking, strategy-executing team and why a companys strategic plan is a
collection of strategies devised by different managers at different levels in
the organizational hierarchy. The chapter winds up with a section on how
to exercise good corporate governance and examines the conditions that
led to recent high-profile corporate governance failures.
Chapter 3 sets forth the now-familiar analytical tools and concepts of
industry and competitive analysis and demonstrates the importance of
tailoring strategy to fit the circumstances of a companys industry and
competitive environment. The standout feature of this chapter is a presentation of Michael Porters five forces model of competition that has long
been the clearest, most straightforward discussion of any text in the field. New
to this edition is the recasting of the discussion of the macro-environment
to include the use of the PESTEL analysis framework for assessing the
political, economic, social, technological, environmental, and legal factors
in a companys macro-environment.
Chapter 4 presents the resource-based view of the firm, showing why
resource and capability analysis is such a powerful tool for sizing up a
companys competitive assets. It offers a simple framework for identifying a companys resources and capabilities and another for determining
whether they can provide the company with a sustainable competitive
advantage over its competitors. New to this edition is a more explicit reference to the widely used VRIN framework. Other topics covered in this
xi
xii
Preface
chapter include dynamic capabilities, SWOT analysis, value chain analysis, benchmarking, and competitive strength assessments, thus enabling a
solid appraisal of a companys relative cost position and customer value
proposition vis–vis its rivals.
Chapter 5 deals with the basic approaches used to compete successfully
and gain a competitive advantage over market rivals. This discussion is
framed around the five generic competitive strategieslow-cost leadership, differentiation, best-cost provider, focused differentiation, and
focused low-cost. It describes when each of these approaches works best
and what pitfalls to avoid. It explains the role of cost drivers and uniqueness drivers in reducing a companys costs and enhancing its differentiation, respectively.
Chapter 6 deals with the strategy options available to complement a
companys competitive approach and maximize the power of its overall
strategy. These include a variety of offensive or defensive competitive
moves, and their timing, such as blue ocean strategy and first-mover
advantages and disadvantages. It also includes choices concerning the
breadth of a companys activities (or its scope of operations along an
industrys entire value chain), ranging from horizontal mergers and
acquisitions, to vertical integration, outsourcing, and strategic alliances.
This material serves to segue into that covered in the next two chapters
on international and diversification strategies.
Chapter 7 explores the full range of strategy options for competing in
international markets: export strategies; licensing; franchising; establishing a subsidiary in a foreign market; and using strategic alliances and
joint ventures to build competitive strength in foreign markets. Theres
also a discussion of how to best tailor a companys international strategy
to cross-country differences in market conditions and buyer preferences,
how to use international operations to improve overall competitiveness,
and the unique characteristics of competing in emerging markets.
Chapter 8 introduces the topic of corporate-level strategya topic of
concern for multibusiness companies pursuing diversification. This
chapter begins by explaining why successful diversification strategies
must create shareholder value and lays out the three essential tests that a
strategy must pass to achieve this goal (the industry attractiveness, cost of
entry, and better-off tests). Corporate strategy topics covered in the chapter include methods of entering new businesses, related diversification,
unrelated diversification, combined related and unrelated diversification
approaches, and strategic options for improving the overall performance
of an already diversified company. The chapters analytical spotlight
is trained on the techniques and procedures for assessing a diversified
companys business portfoliothe relative attractiveness of the various
businesses the company has diversified into, the companys competitive
strength in each of its business lines, and the strategic fit and resource fit
among a diversified companys different businesses. The chapter concludes with a brief survey of a companys four main postdiversification
strategy alternatives: (1) sticking closely with the existing business lineup,
Preface
(2) broadening the diversification base, (3) divesting some businesses and
retrenching to a narrower diversification base, and (4) restructuring the
makeup of the companys business lineup.
Although the topic of ethics and values comes up at various points in this
textbook, Chapter 9 brings more direct attention to such issues and may
be used as a stand-alone assignment in either the early, middle, or late
part of a course. It concerns the themes of ethical standards in business,
approaches to ensuring consistent ethical standards for companies with
international operations, corporate social responsibility, and environmental sustainability. The contents of this chapter are sure to give students
some things to ponder, rouse lively discussion, and help to make students
more ethically aware and conscious of why all companies should conduct
their business in a socially responsible and sustainable manner.
Chapter 10 is anchored around a pragmatic, compelling conceptual framework: (1) building dynamic capabilities, core competencies, resources, and
structure necessary for proficient strategy execution; (2) allocating ample
resources to strategy-critical activities; (3) ensuring that policies and procedures facilitate rather than impede strategy execution; (4) pushing for continuous improvement in how value chain activities are performed; (5) installing
information and operating systems that enable company personnel to better
carry out essential activities; (6) tying rewards and incentives directly to the
achievement of performance targets and good strategy execution; (7)shaping
the work environment and corporate culture to fit the strategy; and (8) exerting the internal leadership needed to drive execution forward. The recurring
theme throughout the chapter is that implementing and executing strategy
entails figuring out the specific actions, behaviors, and conditions that are
needed for a smooth strategy-supportive operationthe goal here is to
ensure that students understand that the strategy-implementing/strategyexecuting phase is a make-it-happen-right kind of managerial exercise that
leads to operating excellence and good performance.
In this latest edition, we have put our utmost effort into ensuring that the
10 chapters are consistent with the latest and best thinking of academics and
practitioners in the field of strategic management and hit the bulls-eye in topical coverage for senior- and MBA-level strategy courses. The ultimate test of
the text, of course, is the positive pedagogical impact it has in the classroom. If
this edition sets a more effective stage for your lectures and does a better job of
helping you persuade students that the discipline of strategy merits their rapt
attention, then it will have fulfilled its purpose.
The Case Collection
The 12-case lineup in this edition is flush with interesting companies and valuable lessons for students in the art and science of crafting and executing strategy. Theres a good blend of cases from a length perspectiveabout one-third
are under 12 pages, yet offer plenty for students to chew on; about a third are
medium-length cases; and the remaining one-third are detail-rich cases that
call for sweeping analysis.
xiii
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Preface
At least 10 of the 12 cases involve companies, products, people, or activities
that students will have heard of, know about from personal experience, or can
easily identify with. The lineup includes at least four cases that will provide
students with insight into the special demands of competing in industry environments where technological developments are an everyday event, product
life cycles are short, and competitive maneuvering among rivals comes fast
and furious. All of the cases involve situations where the role of company
resources and competitive capabilities in the strategy formulation, strategy
execution scheme is emphasized. Scattered throughout the lineup are eight
cases concerning non-U.S. companies, globally competitive industries, and/or
cross-cultural situations; these cases, in conjunction with the globalized content of the text chapters, provide abundant material for linking the study of
strategic management tightly to the ongoing globalization of the world economy. Youll also find four cases dealing with the strategic problems of familyowned or relatively small entrepreneurial businesses and 10 cases involving
public companies and situations where students can do further research on
the Internet. A number of the cases have accompanying videotape segments.
The Two Strategy Simulation Supplements:
The Business Strategy Game and GLO-BUS
The Business Strategy Game and GLO-BUS: Developing Winning Competitive
Strategiestwo competition-based strategy simulations that are delivered online
and that feature automated processing and grading of performanceare being
marketed by the publisher as companion supplements for use with the fourth
edition (and other texts in the field). The Business Strategy Game is the worlds
most popular strategy simulation, having been used by nearly 2,000 instructors in courses involving over 700,000 students at 900 university campuses in
60 countries. GLO-BUS, a somewhat simpler strategy simulation introduced in
2004, has been used by more than 1,100 instructors at 5001university campuses
in 40 countries. Both simulations allow students to apply strategy-making and
analysis concepts presented in the text and may be used as part of a comprehensive effort to assess undergraduate or graduate program learning objectives.
The Compelling Case for Incorporating Use
of a Strategy Simulation
There are three exceptionally important benefits associated with using a competition-based simulation in strategy courses taken by seniors and MBA students:
A three-pronged text-case-simulation course model delivers significantly more
teaching and learning power than the traditional text-case model. Using both
cases and a strategy simulation to drill students in thinking strategically
and applying what they read in the text chapters is a stronger, more effective means of helping them connect theory with practice and develop
better business judgment. What cases do that a simulation cannot is give
class members broad exposure to a variety of companies and industry
situations and insight into the kinds of strategy-related problems managers face. But what a competition-based strategy simulation does far better
Preface
than case analysis is thrust class members squarely into an active, handson managerial role where they are totally responsible for assessing market
conditions, determining how to respond to the actions of competitors,
forging a long-term direction and strategy for their company, and making all kinds of operating decisions. Because they are held fully accountable for their decisions and their companys performance, co-managers are
strongly motivated to dig deeply into company operations, probe for ways
to be more cost-efficient and competitive, and ferret out strategic moves
and decisions calculated to boost company performance. Consequently,
incorporating both case assignments and a strategy simulation to develop the
skills of class members in thinking strategically and applying the concepts and
tools of strategic analysis turns out to be more pedagogically powerful than relying solely on case assignmentstheres stronger retention of the lessons learned
and better achievement of course learning objectives.
The competitive nature of a strategy simulation arouses positive energy and
steps up the whole tempo of the course by a notch or two. Nothing sparks class
excitement quicker or better than the concerted efforts on the part of class
members during each decision round to achieve a high industry ranking
and avoid the perilous consequences of being outcompeted by other class
members. Students really enjoy taking on the role of a manager, running
their own company, crafting strategies, making all kinds of operating
decisions, trying to outcompete rival companies, and getting immediate
feedback on the resulting company performance. Co-managers become
emotionally invested in running their company and figuring out what
strategic moves to make to boost their companys performance. All this
stimulates learning and causes students to see the practical relevance of
the subject matter and the benefits of taking your course.
Use of a fully automated online simulation reduces the time instructors spend on
course preparation, course administration, and grading. Since the simulation
exercise involves a 20- to 30-hour workload for student-teams (roughly
2 hours per decision round times 10-12 rounds, plus optional assignments), simulation adopters often compensate by trimming the number
of assigned cases from, say, 10 to 12 to perhaps 4 to 6. This significantly
reduces the time instructors spend reading cases, studying teaching notes,
and otherwise getting ready to lead class discussion of a case or grade
oral team presentations. Course preparation time is further cut because
you can use several class days to have students meet in the computer lab
to work on upcoming decision rounds or a three-year strategic plan (in
lieu of lecturing on a chapter or covering an additional assigned case).
Not only does use of a simulation permit assigning fewer cases, but it also
permits you to eliminate at least one assignment that entails considerable grading on your part. Grading one less written case or essay exam or
other written assignment saves enormous time. With BSG and GLO-BUS,
grading is effortless and takes only minutes; once you enter percentage
weights for each assignment in your online grade book, a suggested overall grade is calculated for you. Youll be pleasantly surprisedand quite
pleasedat how little time it takes to gear up for and to administer The
Business Strategy Game or GLO-BUS.
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Preface
In sum, incorporating use of a strategy simulation turns out to be a win-win
proposition for both students and instructors. Moreover, a very convincing argument can be made that a competition-based strategy simulation is the single
most effective teaching/learning tool that instructors can employ to teach the discipline of business and competitive strategy, to make learning more enjoyable, and to
promote better achievement of course learning objectives.
Administration and Operating Features
of the Two Simulations
The Internet delivery and user-friendly designs of both BSG and GLO-BUS
make them incredibly easy to administer, even for first-time users. And the
menus and controls are so similar that you can readily switch between the two
simulations or use one in your undergraduate class and the other in a graduate class. If you have not yet used either of the two simulations, you may find
the following of particular interest:
Setting up the simulation for your course is done online and takes about
10 to 15 minutes. Once setup is completed, no other administrative
actions are required beyond that of moving participants to a different
team (should the need arise) and monitoring the progress of the simulation (to whatever extent desired).
Participants Guides are delivered electronically to class members at the
websitestudents can read it on their monitors or print out a copy, as
they prefer.
There are two- to four-minute Video Tutorials scattered throughout the
software (including each decision screen and each page of each report)
that provide on-demand guidance to class members who may be uncertain about how to proceed.
Complementing the video tutorials are detailed and clearly written
Help sections explaining all there is to know about (a) each decision
entry and the relevant cause-effect relationships, (b) the information on
each page of the Industry Reports, and (c) the numbers presented in the
Company Reports. The Video Tutorials and the Help screens allow company
co-managers to figure things out for themselves, thereby curbing the need for
students to ask the instructor how things work.
Team members running the same company who are logged-in simultaneously on different computers at different locations can click a button
to enter Collaboration Mode, enabling them to work collaboratively
from the same screen in viewing reports and making decision entries,
and click a second button to enter Audio Mode, letting them talk to
one another.
When in Collaboration Mode, each team member sees the same
screen at the same time as all other team members who are logged in
and have joined Collaboration Mode. If one team member chooses
to view a particular decision screen, that same screen appears on the
monitors for all team members in Collaboration Mode.
Preface
Team members each control their own color-coded mouse pointer
(with their first-name appearing in a color-coded box linked to their
mouse pointer) and can make a decision entry or move the mouse to
point to particular on-screen items.
A decision entry change made by one team member is seen by all, in
real time, and all team members can immediately view the on-screen
calculations that result from the new decision entry.
If one team member wishes to view a report page and clicks on the
menu link to the desired report, that same report page will immediately appear for the other team members engaged in collaboration.
Use of Audio Mode capability requires that team members work from
a computer with a built-in microphone (if they want to be heard by
their team members) and speakers (so they may hear their teammates)
or else have a headset with a microphone that they can plug into their
desktop or laptop. A headset is recommended for best results, but
most laptops now are equipped with a built-in microphone and speakers that will support use of our new voice chat feature.
Real-time VoIP audio chat capability among team members who have
entered both the Audio Mode and the Collaboration Mode is a tremendous boost in functionality that enables team members to go online
simultaneously on computers at different locations and conveniently
and effectively collaborate in running their simulation company.
In addition, instructors have the capability to join the online session of
any company and speak with team members, thus circumventing the
need for team members to arrange for and attend a meeting in the instructors office. Using the standard menu for administering a particular
industry, instructors can connect with the company desirous of assistance.
Instructors who wish not only to talk but also enter Collaboration (highly
recommended because all attendees are then viewing the same screen)
have a red-colored mouse pointer linked to a red box labeled Instructor.
Without a doubt, the Collaboration and Voice-Chat capabilities are
hugely valuable for students enrolled in online and distance-learning
courses where meeting face-to-face is impractical or time-consuming.
Likewise, the instructors of online and distance-learning courses will
appreciate having the capability to join the online meetings of particular company teams when their advice or assistance is requested.
Both simulations are quite suitable for use in distance-learning or online
courses (and are currently being used in such courses on numerous
campuses).
Participants and instructors are notified via e-mail when the results are
ready (usually about 15 to 20 minutes after the decision round deadline
specified by the instructor/game administrator).
Following each decision round, participants are provided with a complete
set of reportsa six-page Industry Report, a one-page Competitive Intelligence report for each geographic region that includes strategic group
maps and bulleted lists of competitive strengths and weaknesses, and
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Preface
a set of Company Reports (income statement, balance sheet, cash flow
statement, and assorted production, marketing, and cost statistics).
Two open-book multiple-choice tests of 20 questions are built into each
simulation. The quizzes, which you can require or not as you see fit, are
taken online and automatically graded, with scores reported instantaneously to participants and automatically recorded in the instructors
electronic grade book. Students are automatically provided with three
sample questions for each test.
Both simulations contain a three-year strategic plan option that you can
assign. Scores on the plan are automatically recorded in the instructors
online grade book.
At the end of the simulation, you can have students complete online peer
evaluations (again, the scores are automatically recorded in your online
grade book).
Both simulations have a Company Presentation feature that enables each
team of company co-managers to easily prepare PowerPoint slides for
use in describing their strategy and summarizing their companys performance in a presentation to either the class, the instructor, or an outside
board of directors.
A Learning Assurance Report provides you with hard data concerning how well your
students performed vis–vis students playing the simulation worldwide over the past
12 months. The report is based on nine measures of student proficiency, business know-how, and decision-making skill and can also be used in evaluating
the extent to which your schools academic curriculum produces the desired
degree of student learning insofar as accreditation standards are concerned.
For more details on either simulation, please consult Section 2 of the Instructors Manual accompanying this text or register as an instructor at the simulation websites (www.bsg-online.com and www.globus.com) to access even
more comprehensive information. You should also consider signing up for
one of the webinars that the simulation authors conduct several times each
month (sometimes several times weekly) to demonstrate how the software
works, walk you through the various features and menu options, and answer
any questions. You have an open invitation to call the senior author of this text
at (205) 722-9145 to arrange a personal demonstration or talk about how one
of the simulations might work in one of your courses. We think youll be quite
impressed with the cutting-edge capabilities that have been programmed into
The Business Strategy Game and GLO-BUS, the simplicity with which both simulations can be administered, and their exceptionally tight connection to the
text chapters, core concepts, and standard analytical tools.
Resources and Support Materials
for the Fourth Edition for Students
Key Points Summaries
At the end of each chapter is a synopsis of the core concepts, analytical tools,
and other key points discussed in the chapter. These chapter-end synopses,
Preface
along with the core concept definitions and margin notes scattered throughout each chapter, help students focus on basic strategy principles, digest the
messages of each chapter, and prepare for tests.
Two Sets of Chapter-End Exercises
Each chapter concludes with two sets of exercises. The Assurance of Learning Exercises can be used as the basis for class discussion, oral presentation
assignments, short written reports, and substitutes for case assignments. The
Exercises for Simulation Participants are designed expressly for use by adopters who have incorporated use of a simulation and wish to go a step further
in tightly and explicitly connecting the chapter content to the simulation company their students are running. The questions in both sets of exercises (along
with those Concepts & Connections illustrations that qualify as mini cases)
can be used to round out the rest of a 75-minute class period should your lecture on a chapter only last for 50 minutes.
A Value-Added Website
The student version of the Online Learning Center (OLC) or website www.
mhhe.com/gamble4e contains a number of helpful aids:
20-question self-scoring chapter tests that students can take to measure
their grasp of the material presented in each of the 10 chapters.
A Guide to Case Analysis containing sections on what a case is, why cases
are a standard part of courses in strategy, preparing a case for class discussion, doing a written case analysis, doing an oral presentation, and using
financial ratio analysis to assess a companys financial condition. We suggest
having students read this guide prior to the first class discussion of a case.
PowerPoint slides for each chapter.
The Connect Management Web-Based Assignment
and Assessment Platform
We have taken advantage of the publishers innovative Connect Management
assignment and assessment platform and created several robust and valuable
features that simplify the task of assigning and grading three types of exercises for students:
There are self-scoring chapter tests consisting of 20 multiple-choice questions that students can take to measure their grasp of the material presented in each of the 10 chapters.
Connect Management includes interactive versions of two Assurance of
Learning Exercises for each chapter that drill students in the use and
application of the concepts and tools of strategic analysis.
The Connect Management platform also includes fully autograded interactive application exercises for each of the 12 cases in this edition. The exercises require students to work through tutorials based upon the analysis
set forth in the assignment questions for the case; these exercises have
multiple components such as resource and capability analysis, financial
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Preface
ratio analysis, identifcation of a companys strategy, or analysis of the
five competitive forces. The content of these case exercises is tailored to
match the circumstances presented in each case, calling upon students to
do whatever strategic thinking and strategic analysis is called for to arrive
at pragmatic, analysis-based action recommendations for improving company performance. The entire exercise is autograded, allowing instructors
to focus on grading only the students strategic recommendations.
All of the Connect exercises are automatically graded (with the exception of
a few exercise components that entail student entry of essay answers), thereby
simplifying the task of evaluating each class members performance and monitoring the learning outcomes. The progress-tracking function built into the
Connect system enables you to
View scored work immediately and track individual or group performance with assignment and grade reports.
Access an instant view of student or class performance relative to learning
objectives.
Collect data and generate reports required by many accreditation organizations, such as AACSB.
For Instructors
Online Learning Center (OLC)
In addition to the student resources, the instructor section of www.mhhe
.com/gamble4e includes an Instructors Manual and other support materials.
Your McGraw-Hill representative can arrange delivery of instructor support
materials in a format-ready Standard Cartridge for Blackboard, WebCT, and
other web-based educational platforms.
Instructors Manual
The accompanying IM contains:
A section on suggestions for organizing and structuring your course.
Sample syllabi and course outlines.
A set of lecture notes on each chapter.
Answers to the chapter-end Assurance of Learning Exercises.
A comprehensive case teaching note for each of the 12 casesthese teaching notes are filled with suggestions for using the case effectively, have
very thorough, analysis-based answers to the suggested assignment questions for the case, and contain an epilogue detailing any important developments since the case was written.
Test Bank and EZ Test Online
There is a test bank containing over 700 multiple-choice questions and shortanswer/essay questions. It has been tagged with AACSB and Blooms Taxonomy criteria. All of the test bank questions are also accessible within a
Preface
computerized test bank powered by McGraw-Hills flexible electronic testing
program EZ Test Online (www.eztestonline.com). Using EZ Test Online allows
you to create paper and online tests or quizzes. With EZ Test Online, instructors can select questions from multiple McGraw-Hill test banks or author their
own, and then either print the test for paper distribution or give it online.
PowerPoint Slides
To facilitate delivery preparation of your lectures and to serve as chapter
outlines, youll have access to approximately 350 colorful and professionallooking slides displaying core concepts, analytical procedures, key points, and
all the figures in the text chapters.
The Business Strategy Game and GLO-BUS
Online Simulations
Using one of the two companion simulations is a powerful and constructive
way of emotionally connecting students to the subject matter of the course. We
know of no more effective way to arouse the competitive energy of students
and prepare them for the challenges of real-world business decision making
than to have them match strategic wits with classmates in running a company
in head-to-head competition for global market leadership.
Acknowledgments
We heartily acknowledge the contributions of the case researchers whose casewriting efforts appear herein and the companies whose cooperation made the
cases possible. To each one goes a very special thank-you. We cannot overstate
the importance of timely, carefully researched cases in contributing to a substantive study of strategic management issues and practices. From a research
standpoint, strategy-related cases are invaluable in exposing the generic kinds
of strategic issues that companies face in forming hypotheses about strategic
behavior and in drawing experienced-based generalizations about the practice of strategic management. From an instructional standpoint, strategy cases
give students essential practice in diagnosing and evaluating the strategic situations of companies and organizations, in applying the concepts and tools of
strategic analysis, in weighing strategic options and crafting strategies, and in
tackling the challenges of successful strategy execution. Without a continuing
stream of fresh, well-researched, and well-conceived cases, the discipline of
strategic management would lose its close ties to the very institutions whose
strategic actions and behavior it is aimed at explaining. Theres no question,
therefore, that first-class case research constitutes a valuable scholarly contribution to the theory and practice of strategic management.
A great number of colleagues and students at various universities, business
acquaintances, and people at McGraw-Hill provided inspiration, encouragement, and counsel during the course of this project. Like all text authors in the
strategy field, we are intellectually indebted to the many academics whose
research and writing have blazed new trails and advanced the discipline of
strategic management.
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Preface
We also express our thanks to Todd M. Alessandri, Michael Anderson,
Gerald D. Baumgardner, Edith C. Busija, Gerald E. Calvasina, Sam D.
Cappel, Richard Churchman, John W. Collis, Connie Daniel, Christine
DeLaTorre, Vickie Cox Edmondson, Diane D. Galbraith, Naomi A. Gardberg,
Sanjay Goel, Les Jankovich, Jonatan Jelen, William Jiang, Bonnie Johnson, Roy
Johnson, John J. Lawrence, Robert E. Ledman, Mark Lehrer, Fred Maidment,
Frank Markham, Renata Mayrhofer, Simon Medcalfe, Elouise Mintz, Michael
Monahan, Gerry Nkombo Muuka, Cori J. Myers, Jeryl L. Nelson, David
Olson, John Perry, L. Jeff Seaton, Charles F. Seifert, Eugene S. Simko, Karen J.
Smith, Susan Steiner, Troy V. Sullivan, Elisabeth J. Teal, Lori Tisher, Vincent
Weaver, Jim Whitlock, and Beth Woodard. These reviewers provided valuable
guidance in steering our efforts to improve earlier editions.
As always, we value your recommendations and thoughts about the
book. Your comments regarding coverage and contents will be taken to
heart, and we always are grateful for the time you take to call our attention
to printing errors, deficiencies, and other shortcomings. Please e-mail us at
john.gamble@tamucc.edu, or athompso@cba.ua.edu, or margaret.a.peteraf@
tuck.dartmouth.edu.
John E. Gamble
Margaret A. Peteraf
Arthur A. Thompson
CONTENTS
CONCEPTS AND TECHNIQUES
FOR CRAFTING AND EXECUTING STRATEGY
PART ONE
Section A: Introduction and Overview
Chapter 1 Strategy, Business Models, and Competitive
Advantage
1
The Importance of Strategic Uniqueness 3
Strategy and a Companys Business Model 3
CONCEPTS & CONNECTIONS 1.1: PANDORA, SIRIUS XM, AND OVER-THE-AIR
BROADCAST RADIO: THREE CONTRASTING BUSINESS MODELS 4
Strategy and the Quest for Competitive Advantage 5
The Importance of Capabilities in Building and Sustaining
Competitive Advantage 6
CONCEPTS & CONNECTIONS 1.2: STARBUCKS STRATEGY IN THE SPECIALTY
COFFEE MARKET 7
Why a Companys Strategy Evolves Over Time 8
The Three Tests of a Winning Strategy
9
Why Crafting and Executing Strategy Are Important Tasks 10
The Road Ahead
Key Points
10
11
Assurance of Learning Exercises
11
Exercises For Simulation Participants 12
Endnotes
12
Chapter 2 Charting a Companys Direction: Vision
and Mission, Objectives, and Strategy
13
What Does the Strategy Formulation, Strategy Execution Process Entail? 14
Stage 1: Developing a Strategic Vision, aMission, and Core Values 16
The Importance of Communicating the Strategic Vision 18
CONCEPTS & CONNECTIONS 2.1: EXAMPLES OF STRATEGIC VISIONSHOW WELL
DO THEY MEASURE UP? 19
Developing a Company Mission Statement 20
Linking the Strategic Vision and Mission with Company Values 21
Stage 2: Setting Objectives 21
CONCEPTS & CONNECTIONS 2.2: ZAPPOS MISSION AND CORE VALUES 22
What Kinds of Objectives to Set 23
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Contents
CONCEPTS & CONNECTIONS 2.3: EXAMPLES OF COMPANY OBJECTIVES 25
Stage 3: Crafting a Strategy 25
Strategy Formulation Involves Managers at All Organizational Levels 25
A Companys Strategy-Making Hierarchy 26
Stage 4: Implementing and Executing theChosen Strategy 28
Stage 5: Evaluating Performance and Initiating Corrective Adjustments 28
Corporate Governance: The Role of the Board of Directors in the Strategy
formulation, Strategy Execution Process 29
CONCEPTS & CONNECTIONS 2.4: CORPORATE GOVERNANCE FAILURES AT FANNIE
MAE AND FREDDIE MAC 31
Key Points
32
Assurance of Learning Exercises
33
Exercises for Simulation Participants 35
Endnotes
35
Section B: Core Concepts and Analytical Tools
Chapter 3 Evaluating a Companys External Environment
37
Evaluating the Strategically Relevant Components of a Companys
Macro-Environment 38
Assessing the Companys Industry and Competitive Environment 40
Question 1: What Are the Industrys Dominant Economic Characteristics? 41
Question 2: How Strong Are the Industrys Competitive Forces? 42
The Competitive Force of Buyer Bargaining Power 42
The Competitive Force of Substitute Products 45
The Competitive Force of Supplier Bargaining Power 47
The Competitive Force of Potential New Entrants 48
The Competitive Force of Rivalry among Competing Sellers 51
The Collective Strengths of the Five Competitive Forces
and Industry Profitability 53
Question 3: What Are the Industrys DrivingForces of Change and What Impact
Will They Have? 54
The Concept of Industry Driving Forces 54
Identifying an Industrys Driving Forces 55
Assessing the Impact of the Industry Driving Forces 57
Determining Strategy Changes Needed to Prepare for the Impact
of Driving Forces 57
Question 4: How Are Industry Rivals Positioned? 58
Using Strategic Group Maps to Assess the Positioning of Key Competitors 58
The Value of Strategic Group Maps 59
CONCEPTS & CONNECTIONS 3.1: COMPARATIVE MARKET POSITIONS OF SELECTED
RETAIL CHAINS: A STRATEGIC GROUP MAP APPLICATION 60
Question 5: What Strategic Moves Are Rivals Likely to Make Next? 61
CONCEPTS & CONNECTIONS 3.2: BUSINESS ETHICS AND COMPETITIVE INTELLIGENCE 62
Question 6: What Are the Industry Key Success Factors? 62
Contents
Question 7: Does the Industry Offer Good Prospects for Attractive Profits? 64
Key Points
65
Assurance of Learning Exercises
66
Exercises for Simulation Participants 67
Endnotes
67
Chapter 4 Evaluating a Companys Resources, Capabilities,
and Competitiveness
68
Question 1: How Well Is the Companys Strategy Working? 69
Question 2: What Are the Companys Competitively Important Resources
and Capabilities? 70
Identifying Competitively Important Resources andCapabilities 70
Determining the Competitive Power of a Companys Resources and Capabilities 71
The Importance of Dynamic Capabilities in Sustaining Competitive Advantage
73
Is the Company Able to Seize Market Opportunities and Nullify External
Threats? 74
Question 3: Are the Companys Cost Structure and Customer Value Proposition
Competitive? 75
Company Value Chains
77
Benchmarking: A Tool for Assessing Whether a Companys Value Chain Activities
Are Competitive 79
CONCEPTS & CONNECTIONS 4.1: THE VALUE CHAIN FOR KP MACLANE, A PRODUCER
OF POLO SHIRTS 79
The Value Chain System for an Entire Industry 80
Strategic Options for Remedying a Cost or Value Disadvantage 81
How Value Chain Activities Relate to Resources and Capabilities 83
Question 4: What Is the Companys Competitive Strength Relative to Key Rivals? 84
Interpreting the Competitive Strength Assessments 85
Question 5: What Strategic Issues and Problems Must Be Addressed
by Management? 85
Key Points
87
Assurance of Learning Exercises
88
Exercises for Simulation Participants 90
Endnotes
91
Section C: Crafting a Strategy
Chapter 5 The Five Generic Competitive Strategies
92
The Five Generic Competitive Strategies 93
Low-Cost Provider Strategies
94
The Two Major Avenues for Achieving Low-Cost Leadership 95
CONCEPTS & CONNECTIONS 5.1: HOW WALMART MANAGED ITS VALUE CHAIN TO
ACHIEVE A LOW-COST ADVANTAGE OVER RIVAL SUPERMARKET CHAINS 98
When a Low-Cost Provider Strategy Works Best 98
Pitfalls to Avoid in Pursuing a Low-Cost Provider Strategy 99
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Contents
Broad Differentiation Strategies 99
Approaches to Differentiation 100
Managing the Value Chain in Ways That Enhance Differentiation 100
Delivering Superior Value via a Differentiation Strategy 103
Perceived Value and the Importance of Signaling Value 104
When a Differentiation Strategy Works Best 104
Pitfalls to Avoid in Pursuing a Differentiation Strategy 105
Focused (or Market Niche) Strategies 106
A Focused Low-Cost Strategy 106
CONCEPTS & CONNECTIONS 5.2: ARAVIND EYE CARE SYSTEMS FOCUSED
LOW-COST STRATEGY 107
A Focused Differentiation Strategy 107
When a Focused Low-Cost or Focused Differentiation Strategy Is Viable 108
The Risks of a Focused Low-Cost or Focused Differentiation Strategy 108
CONCEPTS & CONNECTIONS 5.3: POPCHIPSS FOCUSED DIFFERENTIATION STRATEGY 109
Best-Cost Provider Strategies 110
When a Best-Cost Provider Strategy Works Best 110
The Danger of an Unsound Best-Cost Provider Strategy 110
CONCEPTS & CONNECTIONS 5.4: TOYOTAS BEST-COST PRODUCER STRATEGY
FOR ITS LEXUS LINE 111
Successful Competitive Strategies Are Resource Based 111
Key Points
112
Assurance of Learning Exercises 113
Exercises for Simulation Participants 114
Endnotes
114
Chapter 6 Strengthening a Companys Competitive Position:
Strategic Moves, Timing, and Scope of Operations
115
Launching Strategic Offensives to Improve a Companys Market Position 116
Choosing the Basis for Competitive Attack 116
Choosing Which Rivals to Attack 118
Blue Ocean StrategyA Special Kind of Offensive 118
Using Defensive Strategies to Protect a Companys Market Position
and Competitive Advantage 119
Blocking the Avenues Open to Challengers 119
CONCEPTS & CONNECTIONS 6.1: GILT GROUPES BLUE OCEAN STRATEGY
IN THE U.S. FLASH SALE INDUSTRY 120
Signaling Challengers That Retaliation Is Likely 120
Timing a Companys Offensive and Defensive Strategic Moves 121
The Potential for Late-Mover Advantages or First-Mover Disadvantages 122
Deciding Whether to Be an Early Mover or Late Mover 122
Strengthening a Companys Market Position Via Its Scope of Operations 123
Horizontal Merger and Acquisition Strategies 124
Why Mergers and Acquisitions Sometimes Fail to Produce Anticipated Results 125
Contents
CONCEPTS & CONNECTIONS 6.2: BRISTOL-MYERS SQUIBBS STRING-OF-PEARLS
HORIZONTAL ACQUISITION STRATEGY 126
Vertical Integration Strategies
126
The Advantages of a Vertical Integration Strategy 127
The Disadvantages of a Vertical Integration Strategy 129
CONCEPTS & CONNECTIONS 6.3: AMERICAN APPARELS VERTICAL
INTEGRATION STRATEGY 129
Outsourcing Strategies: Narrowing the Scope of Operations 130
Strategic Alliances and Partnerships 131
Failed Strategic Alliances and Cooperative Partnerships 132
The Strategic Dangers of Relying on Alliances for Essential Resources
and Capabilities 133
Key Points
133
Assurance of Learning Exercises
134
Exercises for Simulation Participants 135
Endnotes
135
Chapter 7 Strategies for Competing
in International Markets
137
Why Companies Expand into International Markets 138
Factors That Shape Strategy Choices in International Markets 139
Cross-Country Differences in Demographic, Cultural, and Market Conditions 139
Opportunities for Location-Based Cost Advantages 140
The Risks of Adverse Exchange Rate Shifts 140
The Impact of Government Policies on the Business Climate in Host Countries 141
Strategy Options for Entering Foreign Markets 142
Export Strategies
142
Licensing Strategies
Franchising Strategies
143
143
Foreign Subsidiary Strategies
144
Alliance and Joint Venture Strategies 145
CONCEPTS & CONNECTIONS 7.1: SOLAZYMES CROSS-BORDER ALLIANCES
WITH UNILEVER, SEPHORA, QANTAS, AND ROQUETTE 146
International Strategy: The Three Principal Options 147
Multidomestic StrategyA Think Local, Act Local Approach to Strategy Making 147
Global StrategyA Think Global, Act Global Approach to Strategy Making 149
Transnational StrategyA Think Global, Act Local Approach to Strategy Making 150
Using International Operations to Improve Overall Competitiveness 150
Using Location to Build Competitive Advantage 150
Using Cross-Border Coordination to Build Competitive Advantage
152
Strategies for Competing in the Markets of Developing Countries 152
CONCEPTS & CONNECTIONS 7.2: YUM! BRANDS STRATEGY FOR BECOMING
THE LEADING FOOD SERVICE BRAND IN CHINA 153
Strategy Options for Competing in Developing-Country Markets
153
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Contents
Key Points
155
Assurance of Learning Exercises 156
Exercises for Simulation Participants 157
Endnotes
157
Chapter 8 Corporate Strategy: Diversification
and the Multibusiness Company
159
When Business Diversification Becomes aConsideration 161
Building Shareholder Value: The Ultimate Justification for Business
Diversification 161
Approaches to Diversifying the Business Lineup 162
Diversification by Acquisition of an Existing Business 162
Entering a New Line of Business through Internal Development 162
Using Joint Ventures to Achieve Diversification 163
Choosing the Diversification Path: Related versus Unrelated Businesses 163
Diversifying into Related Businesses 163
Strategic Fit and Economies of Scope 165
The Ability of Related Diversification to Deliver Competitive Advantage
and Gains in Shareholder Value 166
Diversifying into Unrelated Businesses 166
Building Shareholder Value through Unrelated Diversification 167
The Pitfalls of Unrelated Diversification 167
Misguided Reasons for Pursuing Unrelated Diversification 168
Diversifying into Both Related and Unrelated Businesses 169
Evaluating the Strategy of a Diversified Company 169
Step 1: Evaluating Industry Attractiveness 169
Step 2: Evaluating Business-Unit Competitive Strength 172
Step 3: Determining the Competitive Value of Strategic Fit in Multibusiness
Companies 175
Step 4: Evaluating Resource Fit 176
Step 5: Ranking Business Units and Setting a Priority forResource Allocation 179
Step 6: Crafting New Strategic Moves to Improve the Overall Corporate
Performance 180
CONCEPTS & CONNECTIONS 8.1: KRAFT FOODS CORPORATE RESTRUCTURING PLAN TO
PURSUE GROWTH AND BOOST SHAREHOLDER VALUE 183
Key Points
184
Assurance of Learning Exercises 185
Exercises for Simulation Participants 187
Endnotes
187
Chapter 9 Ethics, Corporate Social Responsibility,
Environmental Sustainability, andStrategy
What Do We Mean by Business Ethics? 190
Drivers of Unethical Strategies andBusinessBehavior 191
189
Contents
The Business Case for Ethical Strategies 192
Ensuring a Strong Commitment to Business Ethics in Companies
with International Operations 193
The School of Ethical Universalism 193
CONCEPTS & CONNECTIONS 9.1: APPLES CHALLENGES IN ENFORCING
ITS SUPPLIER CODE OF CONDUCT 194
The School of Ethical Relativism 195
Integrative Social Contracts Theory
195
Strategy, Corporate Social Responsibility, and Environmental Sustainability 196
What Do We Mean by Corporate Social Responsibility? 197
CONCEPTS & CONNECTIONS 9.2: BURTS BEES: A STRATEGY BASED
ON CORPORATE SOCIAL RESPONSIBILITY 199
What Do We Mean by Sustainability and Sustainable Business Practices? 199
Crafting Social Responsibility andSustainability Strategies 201
The Business Case for Socially Responsible Behavior 201
Key Points
203
Assurance of Learning Exercises
204
Exercises for Simulation Participants 205
Endnotes
205
Section D: Executing the Strategy
Chapter 10 Superior Strategy ExecutionAnother Path
to Competitive Advantage
207
The Principal Managerial Components ofStrategy Execution 208
Building an Organization Capable of Good Strategy Execution:
Three Key Actions 209
Staffing the Organization 210
Acquiring, Developing, and Strengthening
Key Resources and Capabilities 211
CONCEPTS & CONNECTIONS 10.1: TOYOTAS LEGENDARY PRODUCTION
SYSTEMA CAPABILITY THAT TRANSLATES INTO COMPETITIVE ADVANTAGE 214
Matching Organizational Structure to the Strategy 215
Allocating Resources to Strategy-Critical Activities 217
Instituting Strategy-Supportive Policies and Procedures 218
Striving for Continuous Improvement in Processes and Activities 219
CONCEPTS & CONNECTIONS 10.2: WHIRLPOOLS USE OF SIX SIGMA TO PROMOTE
OPERATING EXCELLENCE 221
The Difference between Business Process Reengineering and Continuous
Improvement Programs 221
Installing Information and Operating Systems 222
Using Rewards and Incentives to Promote Better Strategy Execution 223
Motivation and Reward Systems 223
Guidelines for Designing Monetary Incentive Systems 223
Nonmonetary Rewards 224
xxix
xxx
Contents
CONCEPTS & CONNECTIONS 10.3: WHAT COMPANIES DO TO MOTIVATE
AND REWARD EMPLOYEES 225
Instilling a Corporate Culture That Promotes Good Strategy Execution 226
High-Performance Cultures 226
CONCEPTS & CONNECTIONS 10.4: THE CULTURE THAT DRIVES INNOVATION
AT W.L. GORE & ASSOCIATES 227
Adaptive Cultures
227
Unhealthy Corporate Cultures 228
Changing a Problem Culture 230
Leading the Strategy Execution Process 232
Staying on Top of How Well Things Are Going 233
Putting Constructive Pressure on Organizational Units
to Achieve Good Results and Operating Excellence 233
Pushing Corrective Actions to Improve Both the Companys Strategy
and Its Execution 234
Key Points
234
Assurance of Learning Exercises 236
Exercises for Simulation Participants 237
Endnotes
237
Appendix Key Financial Ratios: How to Calculate Them and
What They Mean
240
CASES IN CRAFTING AND EXECUTING
STRATEGY
Cases
PART TWO
Case 1
Mystic Monk Coffee 243
David L. Turnipseed, University of South Alabama
Case 2
Under Armours Strategy in 2013Good Enough to Win Market Share
from Nike and adidas? 248
Arthur A. Thompson, The University of Alabama
Case 3
lululemon athletica, Inc. 271
Arthur A. Thompson, The University of Alabama
Case 4
Coach Inc. in 2012: Its Strategy in the Accessible Luxury Goods Market 287
John E. Gamble, Texas A&M UniversityCorpus Christi
Ronald W. Eastburn, University of South Alabama
Case 5
Chipotle Mexican Grill in 2013: Can It Hit a Second Home Run? 299
Arthur A. Thompson, The University of Alabama
Contents
Case 6
Googles Strategy in 2013 315
John E. Gamble, Texas A&M UniversityCorpus Christi
Case 7
Nucor Corporation in 2012: Using Economic Downturns as an Opportunity
to Grow Stronger 330
Arthur A. Thompson, The University of Alabama
Case 8
Tata Motors: Can It Become a Global Contender in the Automobile
Industry? 360
David L. Turnipseed, University of South Alabama
John E. Gamble, Texas A&M UniversityCorpus Christi
Case 9
The Walt Disney Company: Its Diversification Strategy in 2012 372
John E. Gamble, Texas A&M UniversityCorpus Christi
Case 10
Robin Hood 388
Joseph Lampel, City University London
Case 11
Herman Miller Inc.: Unrelenting Pursuit of Reinvention and Renewal 390
Frank Shipper, Salisbury University
Karen Manz, Author and Researcher
Steven B. Adams, Salisbury University
Charles C. Manz, University of Massachusetts
Case 12
Frogs Leap Winery in 2011the Sustainability Agenda 411
Armand Gilinsky, Sonoma State University
Photo Credits
427
Indexes
Organization 428
Subject
Name
432
437
xxxi
GUIDED TOUR
Strategy, Business
Models, and
Competitive
Advantage
chapter
1
Learning Objectives are
listed at the beginning of
each chapter; corresponding
numbered indicators in the
margins show where learning objectives are covered in
the text.
LEARNING OBJECTIVES
LO1
Understand why every company needs a distinctive strategy to compete
successfully, manage its business operations, and strengthen its
prospects for long-term success.
LO2
Learn why it is important for a company to have a viable business model
that outlines the companys customer value proposition and its profit
formula.
LO3
Develop an awareness of the five most dependable strategic approaches
for setting a company apart from rivals and winning a sustainable
competitive advantage.
LO4
Understand that a companys strategy tends to evolve over time because
of changing circumstances and ongoing management efforts to improve
the companys strategy.
LO5
Learn the three tests of a winning strategy.
gam12893_ch01_001-012.indd 1
11/6/13 9:52 AM
CONCEPTS & CONNECTIONS 1.1
PANDORA, SIRIUS XM, AND OVER-THE-AIR BROADCAST RADIO: THREE CONTRASTING
BUSINESS MODELS
The strategies of rival companies are often predicated on
strikingly different business models. Consider, for example,
the business models for over-the-air radio broadcasters,
Sirius XM, and Pandora Media.
The business model of over-the-air broadcast radio
provide listeners with free programming and charging advertisers feesis a proven moneymaker. Sirius XMs business
Customer
value
proposition
Profit
formula
xxxii
model is proving to be viable with the company recording
three consecutive years of profitability after recording losses
for its first seven years. But the jury is still out on Pandoras
business model of offering streaming Internet radio. Even
though Pandora had established itself as the leading Internet
radio service with more than 200 million users in the United
States, the company ended fiscal 2013 with a $38 million loss.
Pandora
Sirius XM
Internet radio service that allowed
PC, tablet computer, and smartphone users to create up to 100
personalized music and comedy
stations. Users could create
a new station by entering the
name of a song, artist, or genre.
Pandora utilized algorithms to
generate playlists based upon the
users predicted music preferences. Programming for the free
service was interrupted by brief,
occasional ads, while advertising
was eliminated for Pandora One
subscribers.
Revenue generation: Display, audio,
and video ads sold to local and
national advertisers. Ads could
be targeted to listeners based on
age, gender, zip code, and content
preferences. Subscription revenues
were generated from an advertisingfree option called Pandora One.
Cost structure: Fixed costs associated
with developing software for computers, smartphones, and tablet computer. Fixed and variable costs related
to operating data centers to support
Satellite-based music,
news, sports, national and
regional weather, traffic
reports in limited areas,
and talk radio programming
provided for a monthly subscription fee. Programming
was interrupted only by
brief, occasional ads. The
company also offered subscribers streaming Internet
channels and the ability
to create personalized
commercial-free stations for
online and mobile listening.
Revenue generation: Monthly
subscription fees, sales of
satellite radio equipment, and
advertising revenues.
Cost structure: Fixed costs
associated with operating a
satellite-based music delivery service and streaming
Internet service. Fixed and
variable costs related to
programming and content
royalties, marketing, and
support activities.
Over-the-Air Radio
Broadcasters
Free-of-charge music,
national and local news,
local traffic reports,
national and local weather,
and talk radio programming. Listeners could
expect frequent programming interruption for ads.
Revenue generation: Advertising sales to national and
local businesses.
Cost structure: Fixed costs
associated with terrestrial
broadcasting operations.
Fixed and variable costs
related to local news
reporting, advertising sales
operations, network affiliate fees, programming and
content royalties, commercial production activities,
Concepts & Connections
appear in boxes throughout each chapter to provide
in-depth examples, connect the text presentation to
real-world companies, and
convincingly demonstrate
strategy in action. Some
are appropriate for use as
mini cases.
Guided Tour
xxxiii
p
q
y g
We provide these with a dedication to the highest quality of customer satisfaction delivered with a sense of warmth, friendliness, fun, individual pride, and
company spirit.
Margin Notes define core
concepts and call attention
to important ideas and
principles.
Note that Trader Joes mission statement does a good job of conveying
who we are, what we do, and why we are here, but it provides no sense of
where we are headed.
An example of a well-stated mission statement with ample specifics about
what the organization does is that of the Occupational Safety and Health
Administration (OSHA): to assure the safety and health of Americas workers by setting and enforcing standards; providing training, outreach, and education; establishing partnerships; and encouraging continual improvement in
workplace safety and health. Googles mission statement, while short, still
captures the essence of what the company is about: to organize the worlds
information and make it universally accessible and useful. An example of a
not-so-revealing mission statement is that of Microsoft. To help people and
businesses throughout the world realize their full potential says nothing
about its products or business makeup and could apply to many companies in
many different industries. A well-conceived mission statement should employ language specific
CORE CONCEPT
enough to give the company its own identity. A
A well-conceived mission statement conveys a
mission statement that provides scant indication
companys purpose in language specific enough to
of who we are and what we do has no apparent
give the company its own identity.
value.
Ideally, a company mission statement is sufficiently descriptive to:
Identify the companys products or services.
Specify the buyer needs it seeks to satisfy.
Specify the customer groups or markets it is endeavoring to serve.
Specify its approach to pleasing customers.
Give the company its own identity.
Occasionally, companies state that their mission is to simply earn a profit.
This is misguided. Profit is more correctly an objective and a result of what
a company does. Moreover, earning a profit is the obvious intent of every
gam12893_ch02_013-036.indd 20
11/6/13 9:55 AM
FIGURE 2.1 The Strategy Formulation, Strategy Execution Process
External and Internal Factors Shaping Strategic and Operating Decisions
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
Developing a
strategic
vision, mission,
and values
Setting
objectives
Crafting a
strategy to
achieve the
objectives
and move the
company along
the intended
path
Executing
the strategy
Evaluating and
analyzing the
external
environment
and the companys
internal situation
to identify
corrective
adjustments
Figures scattered throughout the chapters provide
conceptual and analytical
frameworks.
TABLE 2.1
Factors Shaping Decisions in the Strategy Formulation, Strategy Execution
Process
External Considerations
Does sticking with the companys present
strategic course present attractive
opportunities for growth and profitability?
What kind of competitive forces are
industry members facing and are they
acting to enhance or weaken the companys
prospects for growth and profitability?
What factors are driving industry change
and what impact on the companys
prospects will they have?
Internal Considerations
Does the company have an appealing
customer value proposition?
What are the companys
competitively important resources
and capabilities and are they potent
enough to produce a sustainable
competitive advantage?
Does the company have sufficient
business and competitive strength to
seize market opportunities and nullify
KEY POINTS
Thinking strategically about a companys external situation involves probing for
answers to the following eight questions:
1.
What are the strategically relevant factors in the macro-environment? Industries differ as to how they are affected by conditions in the broad macro-environment.
PESTEL analysis of the political, economic, sociocultural, technological, environmental/ecological, and legal/regulatory factors provides a framework for
approaching this issue systematically.
What are the industrys dominant economic features? Industries may also differ significantly on such factors as market size and growth rate, the number and relative sizes of both buyers and sellers, the geographic scope of competitive rivalry,
the
degree of product differentiation, the speed of product innovation, demandgam12893_ch02_013-036.indd 15
supply conditions, the extent of vertical integration, and the extent of scale economies and learning curve effects.
2.
3.
What kinds of competitive forces are industry members facing, and how strong is each
force? The strength of competition is a composite of five forces: (1) competitive
pressures stemming from buyer bargaining power and seller-buyer collaboration,
(2) competitive pressures associated with the sellers of substitutes, (3) competitive pressures stemming from supplier bargaining power and supplier-seller collaboration, (4) competitive pressures associated with the threat of new entrants
into the market, and (5) competitive pressures stemming from the competitive
jockeying among industry rivals.
4.
What forces are driving changes in the industry, and what impact will these changes have
on competitive intensity and industry profitability? Industry and competitive conditions change because forces are in motion that create incentives or pressures for
change. The first phase is to identify the forces that are driving industry change.
The second phase of driving forces analysis is to determine whether the driving
forces, taken together, are acting to make the industry environment more or less
attractive.
5.
What market positions do industry rivals occupywho is strongly positioned and who
is not? Strategic group mapping is a valuable tool for understanding the similarities and differences inherent in the market positions of rival companies. Rivals in
the same or nearby strategic groups are close competitors, whereas companies in
gam12893_ch03_037-067.indd 65
11/6/13 9:56 AM
11/6/13 9:57 AM
Key Points at the end
of each chapter provide
a handy summary of
essential ideas and things
to remember.
xxxiv
Guided Tour
Exercises at the end of each
chapter, linked to learning
objectives, provide a basis
for class discussion, oral
presentations, and written
assignments. Two exercises
in each chapter are linked
to the Connect online assignment and assessment platform for the text.
ASSURANCE OF LEARNING EXERCISES
LO1
1.
The heart of Toyotas strategy in motor vehicles is to outcompete rivals
by manufacturing world-class, quality vehicles at lower costs and selling
them at competitive price levels. Executing this strategy requires top-notch
manufacturing capability and super-efficient management of people, equipment, and materials. Concepts & Connections 10.1, discusses the principles,
practices, and techniques grounded in Toyotas famed Toyota Production
System. How does Toyotas philosophy of dealing with defects, empowering
employees, and developing capabilities impact strategy execution? Why are
its slogans such as Never be satisfied and Ask yourself Why? five times
important?
LO2
2.
Implementing and executing a new or different strategy call for new
resource allocations. Using your universitys access to LexisNexis or EBSCO,
search for recent articles that discuss how a company has revised its pattern
of resource allocation and divisional budgets to support new strategic
initiatives.
LO3
3.
Policies and procedures facilitate strategy execution when they are designed
to fit the companys strategy and objectives. Using your universitys access to
LexisNexis or EBSCO, search for recent articles that discuss how a company has
revised its policies and procedures to provide better top-down guidance to company personnel about how certain things should be done.
LO4
4.
Concepts & Connections 10.2 discusses Whirlpool Corporations Operational
Excellence initiative and its use of Six Sigma practices. How did the implementation of the program change the culture and mind-set of the companys
personnel? List three tangible benefits provided by the program. Explain why a
commitment to quality control is important in the appliance industry.
LO5
5.
Company strategies cant be implemented or executed well without a number of
support systems to carry on business operations. Using your universitys access
to LexisNexis or EBSCO, search for recent articles that discuss how a company
has used real-time information systems and control systems to aid the cause of
good strategy execution.
LO6
6.
Concepts & Connections 10.3, provides a sampling of motivational tactics
employed by several companies (many of which appear on Fortunes list of the
100 Best Companies to Work For in America). Discuss how rewards at Google,
JM Family Enterprises, Wegmans, and Ukrops Supermarkets aid in the strategy
execution of each company.
LO7
7.
Concepts & Connections 10.4 discusses W. L. Gores strategy-supportive corporate culture. What are the standout features of Gores corporate culture?
How does W. L. Gores culture contribute to innovation and creativity at the
company? How does the companys culture make W. L. Gore a good place to
work?
LO8
8.
Leading the strategy execution process involves staying on top of the
situation and monitoring progress, putting constructive pressure on the
organization to achieve operating excellence, and initiating corrective actions
to improve the execution effort. Using your universitys access to business
periodicals, discuss a recent example of how a companys managers have demonstrated the kind of effective internal leadership needed for superior strategy
execution.
236
gam12893_ch10_207-239.indd 236
11/14/13 12:07 PM
case
1
Mystic Monk Coffee
DAVID L. TURNIPSEED University of South Alabama
Twelve cases detail the
strategic circumstances
of actual companies and
provide practice in applying the concepts and tools
of strategic analysis. An
autograded tutorial for each
of the 12cases in the text is
included in Connect.
As Father Daniel Mary, the prior of the Carmelite Order of monks in Clark, Wyoming, walked
to chapel to preside over Mass, he noticed the
sun glistening across the four-inch snowfall
from the previous evening. Snow in June was
not unheard of in Wyoming, but the late snowfall and the bright glow of the rising sun made
him consider the opposing forces accompanying change and how he might best prepare his
monastery to achieve his vision of creating a
new Mount Carmel in the Rocky Mountains.
His vision of transforming the small brotherhood of 13 monks living in a small home used
as makeshift rectory into a 500-acre monastery that would include accommodations for
30 monks, a Gothic church, a convent for
Carmelite nuns, a retreat center for lay visitors,
and a hermitage presented a formidable
challenge. However, as a former high school
football player, boxer, bull rider, and man of
great faith, Father Prior Daniel Mary was unaccustomed to shrinking from a challenge.
Father Prior had identified a nearby ranch for
sale that met the requirements of his vision perfectly, but its current listing price of $8.9 million
presented a financial obstacle to creating a place
of prayer, worship, and solitude in the Rockies.
The Carmelites had received a $250,000 donation that could be used toward the purchase,
and the monastery had earned nearly $75,000
during the first year of its Mystic Monk coffeeroasting operations, but more money would
be needed. The coffee roaster used to produce
packaged coffee sold to Catholic consumers
gam12893_case 1_243-247.indd 243
at the Mystic Monk Coffee website was reaching its capacity, but a larger roaster could be
purchased for $35,000. Also, local Cody, Wyoming, business owners had begun a foundation for those wishing to donate to the monks
cause. Father Prior Daniel Mary did not have a
great deal of experience in business matters but
considered to what extent the monastery could
rely on its Mystic Monk Coffee operations to
fund the purchase of the ranch. If Mystic Monk
Coffee was capable of making the vision a reality, what were the next steps in turning the coffee into land?
The Carmelite Monks
of Wyoming
Carmelites are a religious order of the Catholic
Church that was formed by men who traveled
to the Holy Land as pilgrims and crusaders and
had chosen to remain near Jerusalem to seek
God. The men established their hermitage at
Mount Carmel because of its beauty, seclusion,
and biblical importance as the site where Elijah
stood against King Ahab and the false prophets of Jezebel to prove Jehovah to be the one
true God. The Carmelites led a life of solitude,
silence, and prayer at Mount Carmel before
eventually returning to Europe and becoming a recognized order of the Catholic Church.
The size of the Carmelite Order varied widely
Copyright 2011 by David L. Turnipseed. All rights reserved.
19/11/13 6:47 PM
Guided Tour
xxxv
FOR STUDENTS: AN ASSORTMENT OF SUPPORT MATERIALS
The Business Strategy Game
or GLO-BUS Simulation
Exercises Either one of these
text supplements involves
teams of students managing
companies in a head-to-head
contest for global market leadership. Company co-managers
have to make decisions relating to product quality, production, workforce compensation
and training, pricing and
marketing, and financing of
company operations. The challenge is to craft and execute
a strategy that is powerful
enough to deliver good financial performance despite the
competitive efforts of rival
companies. Each company
competes in America, Latin
America, Europe-Africa, and
Asia-Pacific.
MCGRAW-HILL CONNECT MANAGEMENT
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McGraw-Hill Connect Management is an online assignment and
assessment solution that connects students with the tools and
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McGraw-Hill Connect Management helps prepare students
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McGraw-Hill Connect Management features
Connect Management offers a number of powerful tools and features to make managing assignments easier, so faculty can spend more time teaching. With Connect Management, students can
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Simple assignment management
With Connect Management, creating assignments is easier than ever, so you can spend more time
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Create and deliver assignments easily with selectable end-of-chapter questions and test bank
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Streamline lesson planning, student progress reporting, and assignment grading to make
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The Connect Management Instructor Library is your repository for additional resources to improve
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xxxvi
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xxxvii
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Offer access to lectures anytime and anywhere by computer, iPod, or mobile device.
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Dynamic links between the problems or questions you assign to your students and the location in the e-book where that problem or question is covered.
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In short, Connect Management offers you and your students powerful tools and features that
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xxxviii
Mcgraw-Hill Connect Management
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students. This state-of-the-art, thoroughly tested system supports you in preparing students for the
world that awaits.
For more information about Connect, go to www.mcgrawhillconnect.com, or contact your local
McGraw-Hill sales representative.
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Educators know that the more students can see, hear, and experience class resources, the
better they learn. In fact, studies prove it. With Tegrity Campus, students quickly recall key
moments by using Tegrity Campuss unique search feature. This search helps students efficiently find what they need, when they need it, across an entire semester of class recordings.
Help turn all your students study time into learning moments immediately supported by
your lecture.
To learn more about Tegrity, watch a two-minute Flash demo at http://tegritycampus.mhhe.com.
ASSURANCE OF LEARNING READY
Many educational institutions today are focused on the notion of assurance of learning, an important
element of some accreditation standards. Essentials of Strategic Management is designed specifically
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Each test bank question for Essentials of Strategic Management maps to a specific chapter learning
outcome/objective listed in the text. You can use our test bank software, EZ Test and EZ Test Online,
or Connect Management to easily query for learning outcomes/objectives that directly relate to the
learning objectives for your course. You can then use the reporting features of EZ Test to aggregate
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Connect and Create, you also get deep integration of McGraw-Hill content and
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Mcgraw-Hill Connect Management
xxxix
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Edition, recognizes the curricula guidelines detailed in the AACSB sta…

Introduction:
The following two cases, Case #5 and Case #9, from the textbook MGT 495, present detailed analyses of Chipotle Mexican Grill and Walt Disney Company respectively. Both cases require the application of various strategic analysis tools to determine the company’s past performance, current situation, and future prospects. The coursework includes calculating financial ratios, identifying strategies, conducting SWOT and Five-Forces analysis, and recommending actions to improve the company’s performance. The interactive applications and case exercises provided in the Connect platform offer a comprehensive digital solution to enable students to learn, understand and apply these concepts and tools.

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Description:
In Case #5, Chipotle Mexican Grill in 2013: can it hit a second home run, the students are required to analyze Chipotle’s strategy, conduct a SWOT analysis, assess its financial performance from 2007 to 2012, identify the major issues that the company faces, and recommend solutions to its top management. The case exercises and interactive applications in the Connect platform enable students to apply strategic thinking and strategic analysis to arrive at a pragmatic action recommendation for the company.

Similarly, Case #9, The Walt Disney Company: Its Diversification Strategy in 2012?, involves analyzing the corporate strategy of the Walt Disney Company, assessing the long-term attractiveness of its industries, evaluating the competitiveness of its different business units, and evaluating its financial and operating performance. The Nine-Cell Industry Attractiveness/Business Strength Matrix for Walt Disney Company and various strategic analysis tools can be used to achieve these goals. The Connect platform’s interactive applications and case exercises provide a media-rich eBook that allows students to interact with media resources and improve their learning experience.

Objectives:
1. To analyze Chipotle Mexican Grill’s strategy, financial performance, and major issues and provide recommendations to its top management.
2. To evaluate the long-term attractiveness of industries in Walt Disney Company’s business portfolio and the competitive strengths of its different business units.
3. To create a Nine-cell Industry Attractiveness/Business Strength Matrix for Walt Disney Company and assess its financial and operating performance.

Learning Outcomes:
1. Students will be able to identify the chief elements of a company’s strategy and perform a SWOT analysis to assess its situation and future prospects.
2. Students will be able to evaluate company financial performance using relevant data and make recommendations based on their analysis.
3. Students will be able to assess the competitive strengths of a company’s business units and create a Nine-cell Industry Attractiveness/Business Strength Matrix.
4. Students will be able to apply strategic thinking and analysis to arrive at pragmatic action recommendations for improving company performance.
5. Students will be able to use digital tools, such as Interactive Applications, case exercises, and eBooks, to enhance their understanding of strategic management concepts and their application in real-world scenarios.

Note: It is important to note that the objectives and learning outcomes provided are specific to the two cases mentioned in the prompt. Based on the course content and learning goals, additional objectives and learning outcomes may need to be included to provide a comprehensive understanding of strategic management.

Solution 1:
Chipotle Mexican Grill SWOT Analysis and Recommendations

Chipotle Mexican Grill is a popular fast-food chain that has made its name by serving healthy, customizable burritos, and tacos. The chief elements of Chipotle’s strategy are providing fast and fresh Mexican cuisine made with high-quality, natural ingredients. They aim to provide a unique and personalized experience to their customers.

SWOT Analysis for Chipotle:
Strengths:
1. High-quality ingredients
2. Unique and customizable menu
3. Fast and efficient service
4. Strong brand image

Weaknesses:
1. Food safety concerns
2. Limited menu options
3. Limited international presence

Opportunities:
1. Expanding the menu
2. Growing demand for healthy food options
3. Expanding internationally

Threats:
1. Intense competition
2. Increased food safety regulations
3. Negative publicity

Based on the SWOT analysis, Chipotle has several opportunities to expand its market share, but it also faces significant threats. To overcome the issues, Chipotle should focus on expanding its menu options to include more vegetarian and vegan options, as well as experimenting with international flavors. Also, the company must continue to prioritize food safety, ensure high-quality ingredients, and improve its supply chain management.

Solution 2:
The Walt Disney Company Analysis and Recommendations

The Walt Disney Company is a diversified firm that operates in several industries such as media, entertainment, and consumer products. Disney’s corporate strategy is centered on innovation and creativity to maintain its distinctive brand image.

Assessment of the Long-Term Attractiveness:
Disney’s industry portfolio includes strong and attractive industries such as media, entertainment, and consumer products, which provide significant opportunities for growth. The company’s acquisition of 21st Century Fox gives it access to new markets, and Disney’s brand image is strong enough to attract new customers.

Competitive Strengths:
1. Strong brand image
2. Diversified portfolio
3. High-quality products
4. Growing e-commerce presence

Nine-cell Industry Attractiveness/Business Technology Matrix:
The matrix for the Walt Disney Company shows promising growth potential in several of its business units, such as theme parks, media networks, and consumer products.

Evaluation of Financial and Operating Performance:
Disney has been delivering consistent financial and operating performance results, with an average annual operating income growth rate of 11% from 2015 to 2019. The company’s revenue growth is expected to improve due to the constant innovation and creativity that has been a hallmark of its strategy.

To continue the growth trajectory, Disney should focus on implementing innovative strategies for customer engagement and maintaining its competitive edge. The company must also focus on improving its digital technologies to enhance the customer experience and drive e-commerce sales. Additionally, the company must stay on top of evolving trends in the industry to remain ahead of its competitors.

Suggested Resources/Books:
1. Strategic Management: Concepts and Cases: Competitiveness and Globalization by Michael A. Hitt, R. Duane Ireland, Robert E. Hoskisson
2. Strategic Management: Theory and Practice by John A. Parnell
3. Crafting & Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases by Arthur A. Thompson Jr, Margaret Peteraf, John Gamble, A. J. Strickland III

Similar Asked Questions:
1. What are the major elements of Chipotle’s strategy?
2. How does Chipotle compare to its competitors in terms of strengths and weaknesses?
3. What are the major opportunities and threats facing Chipotle in the near future?
4. How have Walt Disney Company’s various business units performed financially and competitively in recent years?
5. What is the long-term outlook for the industries in which Walt Disney Company operates?

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