1. SMS stands for short message service, by which cell phone users text one another.
2. Koh, Y., and K. Grind, “Twitter CEO Dick Costolo struggles to define vision,” The Wall Street Journal, November 6, 2014; Koh, Y.,
“Twitter CEO Dick Costolo stepping down,” The Wall Street Journal, June 11, 2015; and “Twit- ter’s future: How high can it fly?” The Economist, November 8, 2014.
3. “Twitter’s future,” The Economist.
4. This ChapterCase is based on: Koh, Y., and T.W. Martin, “Twitter’s debt is rated as junk,”
The Wall Street Journal, November 14, 2014;
“Twitter’s future,” The Economist; Koh and Grind, “Twitter CEO Dick Costolo struggles to
define vision”; Bilton, N. (2013), Hatching Twit- ter: A True Story of Money, Power, Friendship, and Betrayal (London, UK: Sceptre); Guynn, J., “Twitter CEO Dick Costolo is determined to get the last laugh,” Los Angeles Times, January 30, 2011; and http://www.wolframalpha.com/
input/?i5Twitter.
5. This section draws on: McGrath, R.G. (2013), The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business (Boston, MA: Harvard Business Review Press);
Rumelt, R. (2011), Good Strategy, Bad Strategy:
The Difference and Why It Matters (New York:
Crown Business); Porter, M.E. (2008), “The five competitive forces that shape strategy,” Harvard Business Review, January: 78–93; Porter, M.E.
(1996), “What is strategy?” Harvard Business Review, November–December: 61–78; and Porter, M.E. (1980), Competitive Strategy: Techniques for Analyzing Competitors (New York: The Free Press).
6. Rumelt, Good Strategy, Bad Strategy.
7. This section draws on: “Twitter’s future,” The Economist; Koh and Grind, “Twit- ter CEO Dick Costolo”; and Bilton, Hatching Twitter.
8. “Twitter’s future,” The Economist.
9. This section draws on Porter, “The five com- petitive forces,” “What is strategy?” and Com- petitive Strategy.
10. Ibid.
rot20477_ch01_002-031.indd 29 11/25/15 01:40 PM 11. Rumelt, Good Strategy, Bad Strategy; and
Porter, “What is strategy?”
12. Albergotti, R., “Facebook vows aggressive spending,” The Wall Street Journal, October 28, 2014.
13. Nickell, J. (2010), Threadless: Ten Years of T-shirts from the World’s Most Inspiring Online Design Community (New York: Abrams); Howe, J. (2008), Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business (New York: Crown Business); and Surowiecki, J. (2004), The Wisdom of Crowds (New York: Anchor Books).
14. Rumelt, Good Strategy, Bad Strategy; Por- ter, “What is strategy?” and Porter, Competitive Strategy.
15. This interesting debate unfolds in the follow- ing articles, among others: Misangyi, V.F., H.
Elms, T. Greckhamer, and J.A. Lepine (2006), “A new perspective on a fundamental debate: A mul- tilevel approach to industry, corporate, and busi- ness unit effects,” Strategic Management Journal 27: 571–590; Hawawini, G., V. Subramanian, and P. Verdin (2003), “Is performance driven by industry- or firm-specific factors? A new look at the evidence,” Strategic Management Journal 24:
1–16; McGahan, A.M., and M.E. Porter (1997),
“How much does industry matter, really?” Stra- tegic Management Journal 18: 15–30; Rumelt, R.P. (1991), “How much does industry matter?”
Strategic Management Journal 12: 167–185; and Hansen, G.S., and B. Wernerfelt (1989), “Deter- minants of firm performance: The relative impor- tance of economic and organizational factors,”
Strategic Management Journal 10: 399–411.
16. Ibid.
17. Ibid.
18. Smith, A. (1776), An Inquiry into the Nature and Causes of the Wealth of Nations, 5th ed.
(published 1904) (London: Methuen and Co.).
19. Levy, S. (2011), In The Plex: How Google Thinks, Works, and Shapes Our Lives (New York: Simon & Schuster); and www.wolframalpha.com/input/?i5google.
20. “The HP Way,” see www.hpalumni.org/
hp_way.htm; and Packard, D. (1995), HP Way:
How Bill Hewlett and I Built Our Company (New York: Collins).
21. This discussion draws on: Carroll, A.B., and A.K. Buchholtz (2012), Business & Society. Eth- ics, Sustainability, and Stakeholder Management (Mason, OH: South-Western Cengage); Porter, M.E., and M.R. Kramer (2011), “Creating shared value: How to reinvent capitalism—and unleash innovation and growth,” Harvard Business Review, January–February; Parmar, B.L., R.E.
Freeman, J.S. Harrison, A.C. Wicks, L. Purnell, and S. De Colle (2010), “Stakeholder theory:
The state of the art,” Academy of Management Annals 4: 403–445; and Porter, M.E., and M.R.
Kramer (2006), “Strategy and society: The link between competitive advantage and corporate social responsibility,” Harvard Business Review, December: 80–92.
22. Talib, N.N. (2007), The Black Swan: The Impact of the Highly Improbable (New York:
Random House).
23. See the discussion by Lowenstein, R. (2010), The End of Wall Street (New York: Penguin Press);
Paulson, H.M. (2010), On the Brink: Inside the Race to Stop the Collapse of the Global Financial System (New York: Business Plus); and Wessel, D.
(2010), In FED We Trust: Ben Bernanke’s War on the Great Panic (New York: Crown Business).
24. Parmar et al., “Stakeholder theory.”
25. Phillips, R. (2003), Stakeholder Theory and Organizational Ethics (San Francisco: Berrett- Koehler); Freeman, E.R., and J. McVea (2001),
“A stakeholder approach to strategic manage- ment,” in Hitt, M.A., E.R. Freeman, and J.S. Har- rison (eds.), The Blackwell Handbook of Strategic Management (Oxford, UK: Blackwell), 189–207;
Freeman, E.R. (1984), Strategic Management: A Stakeholder Approach (Boston, MA: Pitman).
26. To acknowledge the increasing importance of stakeholder strategy, the Strategic Manage- ment Society (SMS)—the leading association for academics, business executives, and consultants interested in strategic management—has recently created a stakeholder strategy division; see http://
strategicmanagement.net/. Also see Anderson, R.C. (2009), Confessions of a Radical Industrial- ist: Profits, People, Purpose—Doing Business by Respecting the Earth (New York: St. Martin’s Press); Sisodia, R.S., D.B. Wolfe, and J.N. Sheth (2007), Firms of Endearment: How World-Class Companies Profit from Passion and Purpose (Upper Saddle River, NJ: Prentice-Hall Pearson);
and Svendsen, A. (1998), The Stakeholder Strat- egy: Profiting from Collaborative Business Rela- tionships (San Francisco: Berrett-Koehler).
27. Parmar et al., “Stakeholder theory,” 406.
28. Ibid.
29. Kapner, S., L. Stevens, and S. Germano,
“Wal-Mart and Target take fight to Amazon for holiday sales,” The Wall Street Journal, Novem- ber 28, 2014.
30. Parmar et al., “Stakeholder theory,” 406 31. Fortune 2014 The World’s Most Admired Companies, http://fortune.com/
worlds-most-admired-companies/.
32. Eesley, C., and M.J. Lenox (2006), “Firm responses to secondary stakeholder action,”
Strategic Management Journal 27: 765–781; and Mitchell, R.K., B.R. Agle, and D.J. Wood (1997),
“Toward a theory of stakeholder identification and salience,” Academy of Management Review 22: 853–886.
33. Ostrower, J., “Boeing to build stretched 787- 10 in South Carolina,” The Wall Street Journal, July 30, 2014.
34. Benoit, D., “Icahn ends Apple push with hefty profit,” The Wall Street Journal, February 10, 2014.
35. People for the Ethical Treatment of Animals (PETA) is an animal-rights organization.
36. This example is drawn from: Esty, D.C., and A.S. Winston (2006), Green to Gold: How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage (Hoboken, NJ: Wiley).
37. This discussion draws on: Carroll, A.B., and A.K. Buchholtz (2012), Business & Society:
Ethics, Sustainability, and Stakeholder Manage- ment (Mason, OH: South-Western Cengage);
Carroll, A.B. (1991), “The pyramid of corporate social responsibility: Toward the moral manage- ment of organizational stakeholders,” Business Horizons, July–August: 39–48; and Carroll, A.B.
(1979), “A three-dimensional, conceptual model of corporate social performance,” Academy of Management Review 4: 497–505.
38. For an insightful but critical treatment of this topic, see the 2003 Canadian documentary film The Corporation.
39. For recent empirical findings concern- ing the relationship between corporate social responsibility and firm performance, see Barnett, M.L., and R.M. Salomon (2012), “Does it pay to be really good? Addressing the shape of the relationship between social and financial per- formance,” Strategic Management Journal, 33:
1304–1320; Wang, T., and Bansal, P. (2012),
“Social responsibility in new ventures: profiting from a long-term orientation,” Strategic Manage- ment Journal, 33: 1135–1153; and Jayachandran, S., K. Kalaignanam, and M. Eilert (2013),
“Product and environmental social performance:
Varying effect on firm performance,” Strategic Management Journal, 34: 1255–1264.
40. “Will Obamacare destroy jobs?” The Econo- mist, August 21, 2013; and Patton, M., “Obam- acare: Seven major provisions and how they affect you,” Forbes, November 27, 2013.
41. “Wake up and smell the coffee: Starbucks’s tax troubles are a sign of things to come for mul- tinationals,” The Economist, December 15, 2012.
42. Gates, B., “How to help those left behind,”
Time, August 11, 2008.
43. Carroll, “The pyramid of corporate social responsibility,” 39–48.
44. Gilbert, D., and J. Scheck, “BP is found grossly negligent in Deepwater Horizon disaster,” The Wall Street Journal, September 4, 2014.
45. The total listed here ran to $47.5 billion, but BP was able to recover some $5 billion in the process. Gilbert and Scheck, “BP is found grossly negligent.”
46. Gilbert and Scheck; Gara, T., “U.S. govern- ment slams BP’s ‘lack of business integrity,’”
The Wall Street Journal, November 28, 2012;
“BP and the Deepwater Horizon disaster,” The Economist, November 15, 2012; Fowler, T., “BP slapped with record fine,” The Wall Street Jour- nal, November 15, 2012; and Fowler, T., “BP, plaintiffs reach settlement in Gulf oil spill,” The Wall Street Journal, March 4, 2012.
47. Rusli, E.M., “Profitable learning curve for Facebook CEO Mark Zuckerberg,” The Wall Street Journal, July 5, 2014; Albergotti, “Face- book vows aggressive spending”; Koh and Grind,
“Twitter CEO Dick Costolo”; Koh, “Twitter CEO Dick Costolo stepping down”; “Twitter’s future,”
The Economist; and Koh and Martin, “Twitter’s debt is rated as junk.”
48. Compiled from Value Line data by A. Damo- daran, NYU, used as of January 2015, at http://
people.stern.nyu.edu/adamodar/New_Home_
Page/datafile/histgr.html.
rot20477_ch01_002-031.indd 30 11/25/15 01:40 PM CHAPTER 1 What Is Strategy? jGaining and Sustaining Competitive Advantage jStakeholder Strategy jStakeholder Impact Analysis jAnalysis, Formulation, Implementation (AFI) Framework CHAPTER 2 Strategic Leadership: Managing the Strategy Process jVision, Mission, Values jCorporate, Business, and Functional Strategy jTop-Down Strategic Planning jScenario Planning jStrategy as Planned Emergence CHAPTER 5 Competitive Advantage, Firm Performance, and Business Models jAccounting Profitability jShareholder Value Creation jEconomic Value Creation jBalanced Scorecard jTriple Bottom Line jBusiness Models CHAPTER 6 Business Strategy: Differentiation, Cost Leadership, and Blue Oceans jGeneric Business Strategies jValue Drivers and Differentiation Strategy jCost Drivers and Cost-Leadership Strategy jValue Drivers, Cost Drivers, and Blue Ocean Strategy j“Stuck in the Middle”
CHAPTER 3 External Analysis: Industry Structure, Competitive Forces, and Strategic Groups jPESTEL Framework jPorter’s Five Forces Model jStrategic Complements jIndustry Dynamics jStrategic Groups CHAPTER 4 Internal Analysis: Resources, Capabilities, and Core Competencies jCore Competencies jResource-Based View (RBV) jVRIO Framework jDynamic Capabilities Perspective jValue Chain Analysis jSWOT Analysis: Integrating External & Internal Analyses
The Str ategic Ma na gement P rocess Map
30
ANALYSIS FORMULATION
rot20477_ch01_002-031.indd 31 11/25/15 01:40 PM CHAPTER 7 Business Strategy: Innovation and Entrepreneurship jThe 4 I’s: Idea, Invention, Innovation, & Imitation jStrategic and Social Entrepreneurship jInnovation and the Industry Life Cycle jCrossing the Chasm jTechnology and Markets: Types of Innovation jOpen vs. Closed Innovation CHAPTER 8 Corporate Strategy: Vertical Integration and Diversification jBoundaries of the Firm jVertical Integration along the Industry Value Chain jTypes of Corporate Diversification jCore Competence-Market Matrix jBCG Growth-Share Matrix CHAPTER 9 Corporate Strategy: Strategic Alliances, and Mergers & Acquisitions jThe Build, Borrow, or Buy Framework jStrategic Alliances jAlliance Management Capability jHorizontal Integration jMergers and Acquisitions (M&A) CHAPTER 10 Global Strategy: Competing Around the World jGlobalization jGoing Global: Why?, Where?, and How? jThe CAGE Distance Framework jThe Integration-Responsiveness Framework jPorter’s Diamond Framework CHAPTER 11 Organizational Design: Structure, Culture, and Control jOrganizing for Competitive Advantage jFunctional Structure jMultidivisional Structure jMatrix Structure jControl and Reward Systems
CHAPTER 12 Corporate Governance and Business Ethics jThe Shared Value Framework jSeparation of Ownership and Control jAgency Theory jBoard of Directors jOther Governance Mechanisms jBusiness Ethics and Sustainable Competitive Advantage
31
IMPLEMENTATION
32
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Chapter Outline
2.1 Vision, Mission, and Values Vision
Mission Values
2.2 Strategic Leadership What Do Strategic Leaders Do?
How Do You Become a Strategic Leader?
Formulating Strategy across Levels 2.3 The Strategic Management Process
Top-Down Strategic Planning Scenario Planning
Strategy as Planned Emergence: Top-Down and Bottom-Up
2.4 Implications for the Strategist
Learning Objectives
LO 2-1 Describe the roles of vision, mission, and values in the strategic management process.
LO 2-2 Evaluate the strategic implications of product-oriented and customer-oriented vision statements.
LO 2-3 Explain why anchoring a firm in ethical core values is essential for long-term success.
LO 2-4 Outline how managers become strategic leaders.
LO 2-5 Describe the roles of corporate, business, and functional managers in strategy formu- lation and implementation.
LO 2-6 Evaluate top-down strategic planning, scenario planning, and strategy as planned emergence.