Brief Contents

Preface xvii
Acknowledgments xxiii Part 4
About the Author xxvii Strategy Evaluation 284
Chapter 9
Part 1 Strategy Review, Evaluation,
Overview of Strategic Management 2 and Control 284

Chapter 1 Part 5
The Nature of Strategic Management 2
Key Strategic-Management Topics 308
THE COHESION CASE: MCDONALDS 2009 27
Chapter 10
Part 2 Business Ethics/Social Responsibility/
Strategy Formulation 40 Environmental Sustainability 308

Chapter 2 Chapter 11
The Business Vision and Mission 40 Global/International Issues 328

Chapter 3 Part 6
The External Assessment 58
Strategic-Management Case
Chapter 4 Analysis 346
The Internal Assessment 90 How to Prepare and Present
Chapter 5 a Case Analysis 346
Strategies in Action 130 Name Index 359
Chapter 6 Subject Index 363
Strategy Analysis and Choice 172

Part 3
Strategy Implementation 210
Chapter 7
Implementing Strategies: Management
and Operations Issues 210
Chapter 8
Implementing Strategies: Marketing, Finance/
Accounting, R&D, and MIS Issues 250

vii
Contents

Preface xvii What Is Our Business? 43

Acknowledgments xxiii
About the Author xxvii
Part 1
Overview of Strategic Management 2
Chapter 1
The Nature of Strategic Management 2
MCDONALDS CORPORATION: DOING GREAT
IN A WEAK ECONOMY 4
What Is Strategic Management? 5
Defining Strategic Management 6 & Stages of
Strategic Management 6 & Integrating Intuition
and Analysis 7 & Adapting to Change 8
Key Terms in Strategic Management 9
Competitive Advantage 9 & Strategists 10 & Vision and Mission
Statements 11 & External Opportunities and Threats 11&
Internal Strengths and Weaknesses 12 & Long-Term Objectives 13
& Strategies 13 & Annual Objectives 13 & Policies 14
The Strategic-Management Model 14
Benefits of Strategic Management 16
Financial Benefits 17 & Nonfinancial Benefits 18
Why Some Firms Do No Strategic Planning 18
Pitfalls in Strategic Planning 19
Guidelines for Effective Strategic Management 19
Comparing Business and Military Strategy 21
THE COHESION CASE: MCDONALDS
CORPORATION2009 27
ASSURANCE OF LEARNING EXERCISES 37
Assurance of Learning Exercise 1A: Gathering Strategy
Information 37
Assurance of Learning Exercise 1B: Strategic Planning
for My University 37
Assurance of Learning Exercise 1C: Strategic Planning
at a Local Company 38
Assurance of Learning Exercise 1D: Getting Familiar with SMCO 38
Part 2
Strategy Formulation 40
Chapter 2
The Business Vision and Mission 40
WAL-MART: DOING GREAT IN A WEAK ECONOMY 42
What Do We Want to Become? 43
Vision versus Mission 45 & The Process of Developing Vision
and Mission Statements 46
Importance (Benefits) of Vision and Mission
Statements 47
A Resolution of Divergent Views 48
Characteristics of a Mission Statement 49
A Declaration of Attitude 49 & A Customer
Orientation 50 & Mission Statement Components 51
Writing and Evaluating Mission Statements 53
ASSURANCE OF LEARNING EXERCISES 56
Assurance of Learning Exercise 2A: Evaluating Mission
Statements 56
Assurance of Learning Exercise 2B: Writing a Vision and Mission
Statement for McDonalds Corporation 56
Assurance of Learning Exercise 2C: Writing a Vision and Mission
Statement for My University 57
Assurance of Learning Exercise 2D: Conducting Mission Statement
Research 57
Chapter 3
The External Assessment 58
DUNKIN' BRANDS, INC.: DOING GREAT IN A WEAK
ECONOMY 60
The Nature of an External Audit 61
Key External Forces 61 & The Process of Performing an External
Audit 62
The Industrial Organization (I/O) View 63
Economic Forces 63
Social, Cultural, Demographic, and Natural Environment
Forces 66
Political, Governmental, and Legal Forces 68
Technological Forces 69
Competitive Forces 71
Competitive Intelligence Programs 72 & Market Commonality
and Resource Similarity 74
Competitive Analysis: Porters Five-Forces
Model 74
Rivalry Among Competing Firms 75 & Potential Entry of New
Competitors 76 & Potential Development of Substitute
Products 77 & Bargaining Power of Suppliers 77 & Bargaining
Power of Consumers 77
Sources of External Information 78
Forecasting Tools and Techniques 78
Making Assumptions 79

ix
x CONTENTS
Industry Analysis: The External Factor Evaluation (EFE)
Matrix 80
The Competitive Profile Matrix (CPM) 81
ASSURANCE OF LEARNING EXERCISES 86
Assurance of Learning Exercise 3A: Developing an EFE Matrix for
McDonalds Corporation 86
Assurance of Learning Exercise 3B: The External
Assessment 86
Assurance of Learning Exercise 3C: Developing an EFE Matrix for
My University 87
Assurance of Learning Exercise 3D: Developing a Competitive
Profile Matrix for McDonalds Corporation 87
Assurance of Learning Exercise 3E: Developing a Competitive
Profile Matrix for My University 87
Chapter 4
The Internal Assessment 90
AMAZON.COM, INC.: DOING GREAT IN A WEAK
ECONOMY. HOW? 92
The Nature of an Internal Audit 93
Key Internal Forces 93 & The Process of Performing an Internal
Audit 93
The Resource-Based View (RBV) 96
Integrating Strategy and Culture 97
Management 99
Planning 100 & Organizing 100 & Motivating 101 & Staffing
102 & Controlling 102 & Management Audit Checklist of
Questions 103
Marketing 103
Customer Analysis 103 & Selling Products/Services 103 &
Product and Service Planning 104 & Pricing 105 & Distribution
105 & Marketing Research 106 & Cost/Benefit Analysis 106 &
Marketing/Audit Checklist of Questions 106
Finance/Accounting 106
Finance/Accounting Functions 107 & Basic Types of Financial
Ratios 108 & Finance/Accounting Audit Checklist 113
Production/Operations 113
Production/Operations Audit Checklist 115
Research and Development 115
Internal and External R&D 116 & Research and Development
Audit 117
Management Information Systems 117
Strategic-Planning Software 118 & Management Information
Systems Audit 119
Value Chain Analysis (VCA) 119
Benchmarking 120
The Internal Factor Evaluation (IFE) Matrix 122
ASSURANCE OF LEARNING EXERCISES 128
Assurance of Learning Exercise 4A: Performing a Financial Ratio
Analysis for McDonalds Corporation (MCD) 128
Assurance of Learning Exercise 4B: Constructing an IFE Matrix for
McDonalds Corporation 128
Assurance of Learning Exercise 4C: Constructing an IFE Matrix for
My University 128
Chapter 5
Strategies in Action 130
VOLKSWAGEN AG: DOING GREAT IN A WEAK
ECONOMY. HOW? 132
Long-Term Objectives 133
The Nature of Long-Term Objectives 133 & Financial versus
Strategic Objectives 134 & Not Managing by
Objectives 135
The Balanced Scorecard 135
Types of Strategies 136
Levels of Strategies 138
Integration Strategies 139
Forward Integration 139 & Backward Integration 140
& Horizontal Integration 141
Intensive Strategies 141
Market Penetration 141 & Market Development 142
& Product Development 142
Diversification Strategies 143
Related Diversification 144 & Unrelated Diversification 144
Defensive Strategies 146
Retrenchment 146 & Divestiture 148 & Liquidation 149
Michael Porters Five Generic Strategies 151
Cost Leadership Strategies (Type 1 and Type 2) 152 & Differentiation
Strategies (Type 3) 153 & Focus Strategies (Type 4 and Type 5) 154
& Strategies for Competing in Turbulent, High-Velocity
Markets 155
Means for Achieving Strategies 155
Cooperation Among Competitors 155 & Joint Venture/
Partnering 156 & Merger/Acquisition 158 & First Mover
Advantages 161 & Outsourcing 161
Strategic Management in Nonprofit and Governmental
Organizations 162
Educational Institutions 162 & Medical Organizations 163
& Governmental Agencies and Departments 163
Strategic Management in Small Firms 164
ASSURANCE OF LEARNING EXERCISES 168
Assurance of Learning Exercise 5A: What Strategies Should
McDonalds Pursue in 20112013? 168
Assurance of Learning Exercise 5B: Examining Strategy Articles 168
Assurance of Learning Exercise 5C: Classifying Some Year 2009
Strategies 169
Assurance of Learning Exercise 5D: How Risky Are Various
Alternative Strategies? 169
Assurance of Learning Exercise 5E: Developing Alternative
Strategies for My University 170
Assurance of Learning Exercise 5F: Lessons in Doing Business
Globally 170
Chapter 6
Strategy Analysis and Choice 172
APPLE: DOING GREAT IN A WEAK ECONOMY. HOW? 174
The Nature of Strategy Analysis and Choice 175
The Process of Generating and Selecting Strategies 175

A Comprehensive Strategy-Formulation Framework 176
The Input Stage 177
The Matching Stage 177
The Strengths-Weaknesses-Opportunities-Threats (SMOT) Matrix
178 & The Strategic Position and Action Evaluation (SPACE)
Matrix 181 & The Boston Consulting Group (BCG) Matrix 185 &
The Internal-External (IE) Matrix 188 & The Grand Strategy
Matrix 191
The Decision Stage 192
The Quantitative Strategic Planning Matrix (QSPM) 192
& Positive Features and Limitations of the QSPM 195
Cultural Aspects of Strategy Choice 196
The Politics of Strategy Choice 196
Governance Issues 198
ASSURANCE OF LEARNING EXERCISES 205
Assurance of Learning Exercise 6A: Developing a SWOT Matrix for
McDonalds 205
Assurance of Learning Exercise 6B: Developing a SPACE Matrix for
McDonalds 205
Assurance of Learning Exercise 6C: Developing a BCG Matrix for
McDonalds 205
Assurance of Learning Exercise 6D: Developing a QSPM for
McDonalds 206
Assurance of Learning Exercise 6E: Formulating Individual
Strategies 206
Assurance of Learning Exercise 6F: The Mach Test 206
Assurance of Learning Exercise 6G: Developing a BCG Matrix for
My University 208
Assurance of Learning Exercise 6H: The Role of Boards of
Directors 208
Assurance of Learning Exercise 6I: Locating Companies in a Grand
Strategy Matrix 209
Part 3
Strategy Implementation 210
Chapter 7
Implementing Strategies: Management
and Operations Issues 210
GOOGLE: DOING GREAT IN A WEAK ECONOMY.
HOW? 212
The Nature of Strategy Implementation 213
Management Perspectives 214
Annual Objectives 215
Policies 217
Resource Allocation 219
Managing Conflict 220
Matching Structure with Strategy 220
The Functional Structure 222 & The Divisional Structure 222
& The Strategic Business Unit (SBU) Structure 225 & The Matrix
Structure 226 & Some Dos and Donts in Developing
Organizational Charts 228
Restructuring, Reengineering, and E-Engineering 229
Restructuring 230 & Reengineering 231
CONTENTS xi
Linking Performance and Pay to
Strategies 231
Managing Resistance to Change 234
Creating a Strategy-Supportive Culture 235
Production/Operations Concerns When Implementing
Strategies 236
Human Resource Concerns When Implementing
Strategies 237
Employee Stock Ownership Plans (ESOPs) 239 & Balancing Work
Life and Home Life 240 & Benefits of a Diverse Workforce 242
& Corporate Wellness Programs 242
ASSURANCE OF LEARNING EXERCISES 248
Assurance of Learning Exercise 7A: Revising McDonalds
Organizational Chart 248
Assurance of Learning Exercise 7B: Do Organizations Really
Establish Objectives? 248
Assurance of Learning Exercise 7C: Understanding My Universitys
Culture 249
Chapter 8
Implementing Strategies: Marketing,
Finance/Accounting, R&D, and MIS
Issues 250
The Nature of Strategy Implementation 252
JOHNSON & JOHNSON (J&J): DOING GREAT IN A WEAK
ECONOMY. HOW? 252
Current Marketing Issues 253
New Principles of Marketing 254 & Advertising Media 256
& Purpose-Based Marketing 257
Market Segmentation 257
Does the Internet Make Market Segmentation Easier? 259
Product Positioning 260
Finance/Accounting Issues 261
Acquiring Capital to Implement Strategies 262
New Source of Funding 266 & Projected Financial
Statements 266 & Projected Financial Statement for
Mattel, Inc. 268 & Financial Budgets 271 & Evaluating
the Worth of a Business 273 & Deciding Whether to
Go Public 275
Research and Development (R&D) Issues 275
Management Information Systems (MIS) Issues 277
ASSURANCE OF LEARNING EXERCISES 282
Assurance of Learning Exercise 8A: Developing a Product-
Positioning Map for McDonalds 282
Assurance of Learning Exercise 8B: Performing an EPS/EBIT
Analysis for McDonalds 282
Assurance of Learning Exercise 8C: Preparing Projected Financial
Statements for McDonalds 282
Assurance of Learning Exercise 8D: Determining the Cash Value of
McDonalds 283
Assurance of Learning Exercise 8E: Developing a Product-
Positioning Map for My University 283
Assurance of Learning Exercise 8F: Do Banks Require Projected
Financial Statements? 283
xii CONTENTS
Part 4
Strategy Evaluation 284
Chapter 9
Strategy Review, Evaluation, and
Control 284
FAMILY DOLLAR STORES: DOING GREAT IN A WEAK
ECONOMY. HOW? 286
The Nature of Strategy Evaluation 286
The Process of Evaluating Strategies 290
A Strategy-Evaluation Framework 290
Reviewing Bases of Strategy 290 & Measuring Organizational
Performance 292 & Taking Corrective Actions 294
The Balanced Scorecard 295
Published Sources of Strategy-Evaluation
Information 297
Characteristics of an Effective Evaluation System 298
Contingency Planning 299
Auditing 300
Twenty-First-Century Challenges in Strategic
Management 301
The Art of Science Issue 301 & The Visible or Hidden Issue 301
& The Top-Down or Bottom-Up Approach 302
ASSURANCE OF LEARNING EXERCISES 306
Assurance of Learning Exercise 9A: Preparing a Strategy-Evaluation
Report for McDonalds Corp. 306
Assurance of Learning Exercise 9B: Evaluating My Universitys
Strategies 306
Part 5
Key Strategic-Management Topics 308
Chapter 10
Business Ethics/Social Responsibility/
Environmental Sustainability 308
WALT DISNEY: DOING GREAT IN A WEAK ECONOMY.
HOW? 310
Business Ethics 311
Code of Business Ethics 312 & An Ethics Culture 313 & Bribes
314 & Love Affairs at Work 314
Social Responsibility 315
Social Policy 315 & Social Policies on Retirement 316
Environmental Sustainability 317
What Is a Sustainability Report? 317 & Lack of Standards
Changing 318 & Obama Regulations 318 & Managing
Environmental Affairs in the Firm 319 & Should Students Receive
Environmental Training? 319 & Reasons Why Firms Should Be
Green 320 & Be Proactive, Not Reactive 320 & ISO
14000/14001 Certification 320 & Electric Car Networks Are
Coming 321 & The March 2009 Copenhagen Meeting 322
ASSURANCE OF LEARNING EXERCISES 326
Assurance of Learning Exercise 10A: Does McDonalds Have a
Code of Business Ethics? 326
Assurance of Learning Exercise 10B: The Ethics of Spying on
Competitors 326
Assurance of Learning Exercise 10C: Who Prepares a Sustainability
Report? 327
Chapter 11
Global/International Issues 328
MARRIOTT INTERNATIONAL: DOING GREAT IN A WEAK
ECONOMY. HOW? 330
Multinational Organizations 331
Advantages and Disadvantages of International
Operations 332
The Global Challenge 333
Globalization 334 & A Weak Economy 335
United States versus Foreign Business Cultures 335
The Mexican Culture 337 & The Japanese Culture 338 &
Communication Differences Across Countries 338
Worldwide Tax Rates 339
Joint Ventures in India 339
ASSURANCE OF LEARNING EXERCISES 343
Assurance of Learning Exercise 11A: McDonalds Wants to Enter
Africa. Help Them. 343
Assurance of Learning Exercise 11B: Does My University Recruit in
Foreign Countries? 343
Assurance of Learning Exercise 11C: Assessing Differences in
Culture Across Countries 343
Assurance of Learning Exercise 11D: How Well Traveled Are
Business Students at Your University? 344
Part 6
Strategic-Management Case Analysis 346
How to Prepare and Present a Case
Analysis 346
What Is a Strategic-Management Case? 348
Guidelines for Preparing Case Analyses 348
The Need for Practicality 348 & The Need for
Justification 348 & The Need for Realism 348 & The Need for
Specificity 349 & The Need for Originality 349 & The Need to
Contribute 349
Preparing a Case for Class Discussion 349
The Case Method versus Lecture Approach 349 & The Cross-
Examination 350
Preparing a Written Case Analysis 350
The Executive Summary 350 & The Comprehensive Written
Analysis 351 & Steps in Preparing a Comprehensive Written
Analysis 351
Making an Oral Presentation 351
Organizing the Presentation 351 & Controlling Your
Voice 352 & Managing Body Language 352 & Speaking from
Notes 352 & Constructing Visual Aids 352 & Answering
Questions 353 & Tips for Success in Case Analysis 353 &
Content Tips 353 & Process Tips 354 & Sample Case Analysis
Outline 355
 CONTENTS xiii

STEPS IN PRESENTING AN ORAL CASE ANALYSIS 356
Oral PresentationStep 1: Introduction (2 minutes) 356
Oral PresentationStep 2: Mission/Vision (4 minutes) 356
Oral PresentationStep 3: Internal Assessment (8 minutes) 356
Oral PresentationStep 4: External Assessment (8 minutes) 357
Oral PresentationStep 5: Strategy Formulation (14 minutes) 357
Oral PresentationStep 6: Strategy Implementation (8 minutes) 357
Oral PresentationStep 7: Strategy Evaluation (2 minutes) 358
Oral PresentationStep 8: Conclusion (4 minutes) 358
Name Index 359
Subject Index 363
xiv CONTENTS

Cases

HOSPITALITY/ENTERTAINMENT
1. Walt Disney Company 2009, Mernoush Banton 1
2. Merryland Amusement Park 2009, Gregory Stone 14

AIRLINES
3. JetBlue Airways Corporation 2009, Mernoush Banton 26
4. AirTran Airways, Inc. 2009, Charles M. Byles 37

RETAIL STORES
5. Family Dollar Stores, Inc. 2009, Joseph W. Leonard 50
6. Wal-Mart Stores, Inc. 2009, Amit J.Shah and Michael L. Monahanat 59
7. Whole Foods Market, Inc. 2009, James L. Harbin and Patricia
Humphrey 73
8. Macys, Inc. 2009, Rochelle R. Brunson and Marlene M. Reed 83

INTERNET BASED
9. Yahoo! Inc. 2009, Hamid Kazeroony 91
10. eBay Inc. 2009, Lori Radulovich 99

FINANCIAL
11. Wells Fargo Corporation 2009, Donald L. Crooks, Robert S. Goodman,
and John Burbridge 111

RESTAURANTS
12. Krispy Kreme Doughnuts (KKD) 2009, John Burbridge and
Coleman Rich 120
13. Starbucks Corporation 2009, Sharynn Tomlin 129

NONPROFIT
14. The United States Postal Service (USPS) 2009, Fred and
Forest David 138
15. National Railroad Passenger Corporation (AMTRAK) 2009,
Kristopher J. Blanchard 150
16. Goodwill of San Francisco, San Mateo and Marin Counties 2009,
Mary E. Vradelis 158

TRANSPORTATION
17. Harley-Davidson, Inc. 2009, Carol Pope and Joanne Mack 166
18. Ford Motor Company 2009, Alen Badal 176

FOOD
19. Kraft Foods Inc. 2009, Kristopher J. Blanchard 184
20. Hershey Company 2009, Anne Walsh and Ellen Mansfield 192

PERSONAL CARE
21. Johnson & Johnson 2009, Sharynn Tomlin, Matt Milhauser,
Bernhard Gierke, Thibault Lefebvre, and Mario Martinez 201
22. Avon Products Inc. 2009, Rochelle R. Brunson and
Marlene M. Reed 212

BEVERAGE
23. Molson Coors 2009, Amit J. Shah 220
24. PepsiCo 2009, John and Sherry Ross 232
 CONTENTS xv

HEALTH CARE
25. Pfizer, Inc. 2009, Vijaya Narapareddy 243
26. Merck & Company Inc. 2010, Mernoush Banton 252

SPORTS
27. Nike, Inc. 2010, Randy Harris 261
28. Callaway Golf Company 2009, Amit J. Shah 272
ENERGY
29. Chevron Corporation 2009, Linda Herkenhoff 282