THE QUEST FOR COMPETITIVE ADVANTAGE Concepts and Cases QUEST FOR COMPETITIVE ADVANTAGE Concepts and Cases ... Developing a Strategic Vision, ... The Moral Case for an Ethical Strategy 354

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<ul><li><p>SUB Hamburg</p><p>B/115489</p><p>m</p><p>THE QUEST FOR COMPETITIVE ADVANTAGE</p><p>Concepts and Cases</p><p>EIGHTEENTH EDITION</p><p>Arthur A. ThompsonThe University of Alabama</p><p>Margaret A. PeterafDartmouth College</p><p>John E. GambleUniversity of South Alabama</p><p>A. J. Strickland illThe University of Alabama</p><p>drawHill</p><p>McGraw-HillIrwin</p></li><li><p>TABLE OF CONTENTS</p><p>PAIRT ME Concepts and Techniques forCrafting and Executing Strategy</p><p>Section A: Introduction and Overview</p><p>IMPORTANT? 50What Do We Mean by Strategy? 52</p><p>Strategy and the Quest for Competitive Advantage 53Why a Company's Strategy Evolves over Time 57A Company's Strategy Is Partly Proactive and Partly Reactive 58</p><p>The Relationship between a Company's Strategy and Its BusinessModel 59</p><p>What Makes a Strategy a Winner? 60</p><p>Why Crafting and Executing Strategy Are Important Tasks 62</p><p>Good Strategy + Good Strategy Execution = Good Management 62</p><p>The Road Ahead 63</p><p>ILLUSTRATION CAPSULES1.1 McDonald's Strategy in the Quick-Service Restaurant</p><p>Industry 551.2 Microsoft and Red Hat Linux: Two Contrasting Business</p><p>Models 61</p><p>2 CHARTING A COMPANY'S DIRECTION:VISION AND MISSION, OBJECTIVES, A^DSTRATEGY 68What Does the Strategy-Making, Strategy-Executing ProcessEntail? 69</p><p>Stage 1: Developing a Strategic Vision, a Mission, and a Set of CoreValues 70</p><p>Developing a Strategic Vision 70Communicating the Strategic Vision 71Crafting a Mission Statement 74Linking the Vision and Mission with Company Values 75</p><p>Stage 2: Setting Objectives 76</p><p>What Kinds of Objectives to Set 76</p><p>Stage 3: Crafting a Strategy 8136</p></li><li><p>Table of Contents 37</p><p>Strategy Making Involves Managers at All Organizational Levels 81A Strategic Vision + Objectives + Strategy = A Strategic Plan 85</p><p>Stage 4: Executing the Strategy 86</p><p>Stage 5: Evaluating Performance and Initiating CorrectiveAdjustments 87</p><p>Corporate Governance: The Role of the Board of Directors in theStrategy-Crafting, Strategy-Executing Process 88</p><p>ILLUSTRATION CAPSULES2.1 Examples of Strategic VisionsHow Well Do They Measure Up? 732.2 Royal Dutch Shell Mission, Core Values, and Business Principles 772.3 Examples of Company Objectives 802.4 Corporate Governance Failures at Fannie Mae and Freddie Mac 90</p><p>Section B: Core Concepts and Analytical Tools</p><p>3 EVALUATING A COMPANY'S EXTERNALENVIRONMENT 96The Strategically Relevant Components of a Company'sMacro-Environment 98</p><p>Thinking Strategically about a Company's Industry and CompetitiveEnvironment 100</p><p>Question 1: Does the Industry Offer Attractive Opportunities forGrowth? 101</p><p>Question 2: What Kinds of Competitive Forces Are Industry MembersFacing, and How Strong Are They? 102</p><p>Competitive Pressures Created by the Rivalry among CompetingSellers 102Competitive Pressures Associated with the Threat of New Entrants 107Competitive Pressures from the Sellers of Substitute Products 111Competitive Pressures Stemming from Supplier Bargaining Power 112Competitive Pressures Stemming from Buyer Bargaining Power andPrice Sensitivity 115Is the Collective Strength of the Five Competitive Forces Conducive toGood Profitability? 118</p><p>Question 3: What Factors Are Driving Industry Change, and WhatImpacts Will They Have? 120</p><p>Analyzing Industry Dynamics 120Identifying an Industry's Drivers of Change 120Assessing the Impact of the Factors Driving Industry Change 124Developing a Strategy That Takes the Changes in Industry Conditionsinto Account 125</p><p>Question 4: How Are Industry Rivals PositionedWho Is StronglyPositioned and Who Is Not? 125</p><p>Using Strategic Group Maps to Assess the Market Positions of KeyCompetitors 126What Can Be Learned from Strategic Group Maps? 127</p></li><li><p>38 Table of Contents</p><p>Question 5: What Strategic Moves Are Rivals Likely to Make Next? 128</p><p>Question 6: What Are the Key Factors for Future CompetitiveSuccess? 130</p><p>Question 7: Does the Industry Offer Good Prospects for AttractiveProfits? 131</p><p>ILLUSTRATION CAPSULES3.1 Comparative Market Positions of Selected Retail Chains: A</p><p>Strategic Group Map Example 127</p><p>4 EVALUATING A COMPANY'S RESOURCES,CAPABILITIES, AND COMPETITIVENESS 138Question 1: How Well Is the Company's Present StrategyWorking? 140</p><p>Question 2: What are the Company's Competitively ImportantResources and Capabilities? 141</p><p>Identifying the Company's Resources and Capabilities 144Determining Whether a Company's Resources and Capabilities ArePotent Enough to Produce a Sustainable Competitive Advantage 147</p><p>Question 3: Is the Company Able to Seize Market Opportunities andNullify External Threats? 150</p><p>Identifying a Company's Internal Strengths 151Identifying Company Weaknesses and Competitive Deficiencies 152Identifying a Company's Market Opportunities 152Identifying the Threats to a Company's Future Profitability 153What Do the SWOT Listings Reveal? 155</p><p>Question 4: Are the Company's Prices and Costs Competitive withThose of Key Rivals, and Does It Have an Appealing Customer ValueProposition? 156</p><p>The Concept of a Company Value Chain 157The Value Chain System for an Entire Industry 161Benchmarking: A Tool for Assessing Whether the Costs and Effectivenessof a Company's Value Chain Activities Are in Line 162Strategic Options for Remedying a Disadvantage in Costs orEffectiveness 163Translating Proficient Performance of Value Chain Activities intoCompetitive Advantage 166</p><p>Question 5: Is the Company Competitively Stronger or Weaker thanKey Rivals? 168</p><p>Strategic Implications of Competitive Strength Assessments 172</p><p>Question 6: What Strategic Issues and Problems Merit Front-BurnerManagerial Attention? 173</p><p>ILLUSTRATION CAPSULES4.1 The Value Chain for Just Coffee, a Producer of Fair-Trade Organic</p><p>Coffee 1604.2 Benchmarking and Ethical Conduct 164</p></li><li><p>Table of Contents 39</p><p>Section C: Crafting a Strategy</p><p>5 THE FIVE GENERIC COMPETITIVE STRATEGIES:WHICH ONETO EMPLOY? 182</p><p>The Five Generic Competitive Strategies 183</p><p>Low-Cost Provider Strategies 185</p><p>The Two Major Avenues for Achieving a Cost Advantage 185The Keys to Being a Successful Low-Cost Provider 190When a Low-Cost Provider Strategy Works Best 192Pitfalls to Avoid in Pursuing a Low-Cost Provider Strategy 193</p><p>Broad Differentiation Strategies 193</p><p>Managing the Value Chain to Create the Differentiating Attributes 194Delivering Superior Value via a Broad Differentiation Strategy 197When a Differentiation Strategy Works Best 199Pitfalls to Avoid in Pursuing a Differentiation Strategy 199</p><p>Focused (Or Market Niche) Strategies 201</p><p>A Focused Low-Cost Strategy 201A Focused Differentiation Strategy 201When a Focused Low-Cost or Focused Differentiation Strategy IsAttractive 202The Risks of a Focused Low-Cost or Focused Differentiation Strategy 203</p><p>Best-Cost Provider Strategies 205</p><p>When a Best-Cost Provider Strategy Works Best 206The Big Risk of a Best-Cost Provider Strategy 207</p><p>The Contrasting Features of the Five Generic CompetitiveStrategies: A Summary 208</p><p>Successful Competitive Strategies Are Resource-Based 210</p><p>ILLUSTRATION CAPSULES5.1 How Walmart Managed Its Value Chairi'fo Achieve a Huge Low-</p><p>Cost Advantage over Rival Supermarket Chains 1915.2 Vizio's Focused Low-Cost Strategy 2035.3 Nestle Nespresso's Focused Differentiation Strategy</p><p>in the Coffee Industry 2045.4 Toyota's Best-Cost Provider Strategy for Its Lexus Line 207</p><p>6 STRENGTHENING A COMPANY'S COMPETITIVEPOSITION: STRATEGIC MOVES, TIMING, ANDSCOPE OF OPERATIONS 214</p><p>Going on the OffensiveStrategic Options to Improve a Company'sMarket Position 215</p><p>Choosing the Basis for Competitive Attack 216Choosing Which Rivals to Attack 218Blue-Ocean StrategyA Special Kind of Offensive 219</p></li><li><p>40 Table of Contents</p><p>Defensive StrategiesProtecting Market Position and CompetitiveAdvantage 220</p><p>Blocking the Avenues Open to Challengers 220Signaling Challengers That Retaliation Is Likely 221</p><p>Timing a Company's Offensive and Defensive Strategic Moves 221</p><p>The Potential for First-Mover Advantages 221The Potential for First-Mover Disadvantages or Late-MoverAdvantages 223To Be a First Mover or Not 224</p><p>Strengthening a Company's Market Position via Its Scope ofOperations 225</p><p>Horizontal Merger and Acquisition Strategies 226</p><p>Why Mergers and Acquisitions Sometimes Fail to Produce AnticipatedResults 229</p><p>Vertical Integration Strategies 229</p><p>The Advantages of a Vertical Integration Strategy 231The Disadvantages of a Vertical Integration Strategy 233Weighing the Pros and Cons of Vertical Integration 234</p><p>Outsourcing Strategies: Narrowing the Scope of Operations 235</p><p>The Big Risk of Outsourcing Value Chain Activities 236</p><p>Strategic Alliances and Partnerships 237</p><p>Why and How Strategic Alliances Are Advantageous 240Capturing the Benefits of Strategic Alliances 241The Drawbacks of Strategic Alliances and Partnerships 242How to Make Strategic Alliances Work 243</p><p>ILLUSTRATION CAPSULES6.1 Amazon.corn's First-Mover Advantage in Online Retailing 2246.2 Clear Channel Communications: Using Mergers and</p><p>Acquisitions to Become a Global Market Leader in RadioBroadcasting '230</p><p>7 STRATEGIES FOR COMPETING ININTERNATIONAL MARKETS 250Why Companies Decide to Enter Foreign Markets 252</p><p>Why Competing across National Borders Makes Strategy Making MoreComplex 253</p><p>Cross-Country Variation in Factors That Affect IndustryCompetitiveness 253Locating Value Chain Activities for Competitive Advantage 255The Impact of Government Policies and Economic Conditions in HostCountries 256The Risks of Adverse Exchange Rate Shifts 257Cross-Country Differences in Demographic, Cultural, and MarketConditions 259</p></li><li><p>Table of Contents 41</p><p>The Concepts of Multidomestic Competition and GlobalCompetition 260</p><p>Strategic Options for Entering and Competing in InternationalMarkets 262</p><p>Export Strategies 262Licensing Strategies 263Franchising Strategies 263Acquisition Strategies 264Greenfield Venture Strategies 264Alliance and Joint Venture Strategies 265</p><p>Competing Internationally: The Three Main StrategicApproaches 268</p><p>Multidomestic StrategyThink Local, Act Local 269Global StrategyThink Global, Act Global 271Transnational StrategyThink Global, Act Local 272</p><p>The Quest for Competitive Advantage in the International Arena 273</p><p>Using Location to Build Competitive Advantage 273Sharing and Transferring Resources and Capabilities across Borders toBuild Competitive Advantage 275Using Cross-Border Coordination for Competitive Advantage 277</p><p>Profit Sanctuaries and Cross-Border Strategic Moves 277</p><p>Using Cross-Market Subsidization to Wage a Strategic Offensive 279Using Cross-Border Tactics to Defend against International Rivals 280</p><p>Strategies for Competing in the Markets of Developing Countries 280</p><p>Strategy Options for Competing in Developing-Country Markets 281</p><p>Defending against Global Giants: Strategies for Local Companiesin Developing Countries 284</p><p>ILLUSTRATION CAPSULES</p><p>7.1 Four Examples of Cross-Border Strategic Alliances 2677.2 Yum! Brands' Strategy for Becoming the Leading Food Service</p><p>Brand in China 2827.3 How Ctrip Successfully Defended against International Rivals to</p><p>Become China's Largest Online Travel Agency 285</p><p>8 CORPORATE STRATEGY: DIVERSIFICATIONS ANDTHE MULTIBUSINESS COMPANY 292</p><p>When to Diversify 294</p><p>Building Shareholder Value: The Ultimate Justification forDiversifying 295</p><p>Strategies for Entering New Businesses 296</p><p>Acquisition of an Existing Business 296Internal Development 297</p></li><li><p>42 Table of Contents</p><p>Joint Ventures 298Choosing a Mode of Entry 298</p><p>Choosing the Diversification Path: Related versus UnrelatedBusinesses 300</p><p>Strategic Fit and Diversification into Related Businesses 300</p><p>Identifying Cross-Business Strategic Fit along the Value Chain 304Strategic Fit, Economies of Scope, and Competitive Advantage 306</p><p>Diversification into Unrelated Businesses 307</p><p>Building Shareholder Value via Unrelated Diversification 308The Path to Greater Shareholder Value through UnrelatedDiversification 310The Drawbacks of Unrelated Diversification 311Inadequate Reasons for Pursuing Unrelated Diversification 312</p><p>Combination Related-Unrelated Diversification Strategies 313</p><p>Evaluating the Strategy of a Diversified Company 313</p><p>Step 1: Evaluating Industry Attractiveness 314Step 2: Evaluating Business-Unit Competitive Strength 317Step 3: Checking the Competitive Advantage Potential of Cross-BusinessStrategic Fit 321Step 4: Checking for Resource Fit 322Step 5: Ranking the Performance Prospects of Business Units andAssigning a Priority for Resource Allocation 325Step 6: Crafting New Strategic Moves to Improve Overall CorporatePerformance 326</p><p>ILLUSTRATION CAPSULE8.1 Managing Diversification at Johnson &amp; Johnson: The Benefits</p><p>of Cross-Business Strategic Fit 329</p><p>9 ETHICS, CORPORATE SOCIAL RESPONSIBILITY,ENVIRONMENTAL SUSTAINABILITY, ANDSTRATEGY 338What Do We Mean by Business Ethics? 339</p><p>Where Do Ethical Standards Come FromAre They Universal orDependent on Local Norms? 340</p><p>The School of Ethical Universalism 340The School of Ethical Relativism 342Ethics and Integrative Social Contracts Theory 345</p><p>How and Why Ethical Standards Impact the Tasks of Craftingand Executing Strategy 346</p><p>What are the Drivers of Unethical Strategies and BusinessBehavior? 348</p><p>Why Should Company Strategies be Ethical? 352</p><p>The Moral Case for an Ethical Strategy 354The Business Case for Ethical Strategies 354</p></li><li><p>Table of Contents 43</p><p>Strategy Corporate Social Responsibility, and EnvironmentalSustainability 356</p><p>What Do We Mean by Corporate Social Responsibility? 356What Do We Mean by Sustainability and Sustainable BusinessPractices? 362Crafting Corporate Social Responsibility and SustainabilityStrategies 364The Moral Case for Corporate Social Responsibility and EnvironmentallySustainable Business Practices 365The Business Case for Corporate Social Responsibility andEnvironmentally Sustainable Business Practices 366</p><p>ILLUSTRATION CAPSULES9.1 Many of Apple's Suppliers Flunk the Ethics Test 3419.2 Investment Fraud at Bernard L. Madoff Investment Securities and</p><p>Stanford Financial Group 3509.3 How General Electric's Top Management Built a Culture That Fuses</p><p>High Performance with High Integrity 3539.4 John Deere's Approach to Corporate Social Responsibility 359</p><p>Section D: Executing the Strategy</p><p>10 BUILDING AN ORGANIZATION CAPABLE OF GOODSTRATEGY EXECUTION: PEOPLE, CAPABILITIES,AND STRUCTURE 374A Framework for Executing Strategy 376</p><p>The Principal Components of the Strategy Execution Process 377</p><p>Building an Organization Capable of Good Strategy Execution: Whereto Begin 379</p><p>Staffing the Organization 381</p><p>Putting Together a Strong Management Team 381Recruiting, Training, and Retaining Capable Employees 382</p><p>Building and Strengthening Core Competencies and CompetitiveCapabilities 385</p><p>Three Approaches to Building and Strengthening Capabilities 385Upgrading Employee Skills and Knowledge Resources 389Strategy Execution Capabilities and Competitive Advantage 390</p><p>Organizing the Work Effort With a Supportive OrganizationalStructure 390</p><p>Deciding Which Value Chain Activities to Perform Internally and Whichto Outsource 391Aligning the Firm's Organizational Structure with Its Strategy 393Determining How Much Authority to Delegate 397Facilitating Collaboration with External Partners and Strategic Allies 400Further Perspectives on Structuring the Work Effort 401</p></li><li><p>M Table of Contents</p><p>ILLUSTRATION CAPSULES10.1 How Ge...</p></li></ul>

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