Resumen Cap1 PDF

Chapter
1
What Is Strategy?
The AFI Strategy Framework
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descrip0on
©McGraw-‐Hill Educa0on.
Chapter 1 Outline
1.1 What Strategy Is: Gaining and Sustaining

Competitive Advantage
–  What Is Competitive Advantage?
–  Industry vs. Firm Effects in Determining Firm Performance
1.2 Stakeholders and Competitive Advantage

–  Stakeholder Strategy
–  Stakeholder Impact Analysis
1.3 The AFI Strategy Framework

1.4 Implications for the Strategist
Learning Objec0ves
LO 1-‐1 Explain the role of strategy in a firm’s quest for
compe00ve advantage.
LO 1-‐2 Define compe00ve advantage, sustainable
compe00ve advantage, compe00ve
disadvantage, and compe00ve parity.
LO 1-‐3 Differen0ate the roles of firm effects and
industry effects in determining firm
performance.
LO 1-‐4 Evaluate the rela0onship between stakeholder
strategy and sustainable compe00ve
advantage.
LO 1-‐5 Conduct a stakeholder impact analysis.
What Strategy Is: Gaining and Sustaining
Compe00ve Advantage
Strategic Management
Strategic Management: an integra0ve management

field that combines analysis, formula0on, and
implementa0on in the quest for compe00ve advantage
Strategy
•  Strategy: a set of goal-‐directed ac0ons a firm takes

to gain and sustain superior performance rela0ve to
compe0tors
•  To achieve superior performance, companies
compete for resources:
–  New ventures: for financial and human capital
–  Exis0ng companies: for profitable growth
–  Chari0es: for dona0ons
–  Universi0es: for the best students and professors
–  Sports teams: championships
–  Celebri0es: media aBen0on
Elements of a Good Strategy
•  Analysis
–  Diagnosis of the compe00ve challenge
•  Formula5on
–  Guiding policy to address the compe00ve challenge
•  Implementa5on
–  A set of coherent ac0ons to implement the firm’s guiding
policy
Elements of a Good Strategy: Analysis
•  Analysis
–  Diagnosis of the competitive challenge
–  Accomplished through strategy analysis of the firm’s
internal and external environments

Example: Twi<er
•  Compe00ve challenge: grow its user base
–  Become more valuable for online adver0sers
–  Also: Facebook allows adver0sers to target their online ads
precisely based on demographic data
Elements of a Good Strategy: Formulation
•  Formulation
–  Guiding policy to address the compe00ve challenge
–  Accomplished through strategy formula0on, resul0ng in
the firm’s corporate, business, and func0onal strategies

Example: Twi<er
•  Rather than formula0ng a guiding policy to grow ac0ve core
users, TwiBer defined its user base more broadly.
•  Defined users into 3 types to compare with Facebook
•  User types were hard to track and less valuable to adver0sers.
Elements of a Good Strategy: Implementation
•  Implementation
–  A set of coherent actions to implement the firm’s guiding
policy
–  Accomplished through strategy implementation

Example: Twi<er
•  Different user defini0ons confused management and limited
guidance for employees.
•  Consequences of the unclear mission:
•  Frustra0on among managers and engineers
•  Turnover of key personnel
•  Internal turmoil resulted, including management demo0ons
and promo0ons of CEO friends.
Compe00ve Advantage
•  Compe55ve Advantage: a firm that achieves

superior performance rela0ve to other compe0tors
in the same industry or the industry average
–  Always rela0ve, not absolute
•  To assess compe00ve advantage:
–  Compare firm performance to a benchmark
•  Performance of other firms in the same industry
•  An industry average
Compe00ve Advantage: Examples
•  In digital adver0sing: Google

–  Google has a compe00ve advantage over Facebook,
TwiBer, and Yahoo
•  In smartphones: Apple
–  Apple has achieved a compe00ve advantage over
Samsung, Microsoa, and BlackBerry
Compe00ve Advantage: Key Points
•  Compe55ve Advantage
–  Superior performance rela0ve to other compe0tors in the
same industry or the industry average
•  Sustainable Compe55ve Advantage
–  Outperforming compe0tors or the industry average over a
prolonged period of 0me
•  Compe55ve Disadvantage
–  Underperformance rela0ve to other compe0tors in the
same industry or the industry average
•  Compe55ve Parity
–  Performance of two or more firms at the same level
Strategy Is About Creating Superior Value
•  The rewards of superior value crea0on and capture

are profitability and market share.
–  Sam Walton (Walmart): offered lower prices.
–  Steve Jobs (Apple): “put a ding in the universe.”
–  Mark Zuckerberg (Facebook): made the world open and
connected.
–  Larry Page and Sergey Brin (Google): made informa0on
accessible.
Strategic Posi0oning
•  Stake out a unique posi0on within an industry to

provide value to customers, while controlling costs.
•  The greater the difference between value crea0on
and cost:
–  the greater the firm’s economic contribu0on.
–  the more likely it will gain compe00ve advantage.
Strategic Positioning Requires Trade-offs
•  Managers must make conscious trade-‐offs.

–  Enables compe00ve advantage
•  In the retail industry, for example:
–  Walmart: “everyday low prices”
–  Nordstrom’s: professional sales people in a luxury sehng
Unique Posi0oning
•  The key to successful strategy: combine ac0vi0es for a unique

posi0on in an industry
•  Compe00ve advantage has to come from:
–  performing different ac0vi0es or
–  performing the same ac0vi0es differently than rivals
•  Example: Walmart’s strategic ac0vi0es strengthen its posi0on

as cost leader
–  Big stores in rural loca0ons
–  Low corporate overhead
–  Low base wages
Strategy Highlight 1.1 (1 of 2)
•  Threadless: an online design community and apparel store

•  Let consumers work for them
–  Community members vote on which t-‐shirt designs they like best.
•  Leverages the wisdom of the crowds

•  At Threadless, the customers play a cri0cal role across the
en0re value chain.
–  From idea genera0on to design, marke0ng, sales forecas0ng, and
distribu0on
•  Business model translates market research and design into

quick sales.
–  Good understanding of the market
–  Design contest par0cipa0on
•  Threadless has sold every T-‐shirt it has printed.
•  Has a cult-‐like following
•  It is outperforming established companies
–  American Eagle, Old Navy, and Urban OuiiBers
What Strategy Is Not
1.  Grandiose statements

–  Statements of desire
–  Ex: “Our strategy is to win” or “We will be No. #1”
2.  A failure to face a compe00ve challenge
–  Managers must know whether they are making progress
in addressing the challenge.
3.  Opera0onal effec0veness, compe00ve
benchmarking, or other tac0cal tools
–  These support compe00ve strategy, but are not
sufficient to sustain it.
Industry Vs. Firm Effects In Determining Firm Performance
(1 of 3)
•  Industry effects: describe the underlying economic

structure of the industry.
–  Determined by elements common to all industries
–  Examples:
•  Entry and exit barriers
•  Number and size of companies
•  Types of products and services offered
•  About 20% of a firm’s profitability depends on the
industry it’s in.
(2 of 3)
•  Firm effects: firm performance is aBributed to

managerial ac0ons.
–  More important factor in determining firm performance
than external environment forces
•  A firm’s strategy can explain up to 55% of its
performance.
(3 of 3)
•  Exhibit 1.1
Stakeholders and Compe00ve Advantage
Value Crea0on for Society (1 of 2)
•  Companies with good strategy generate value for

society.
–  Firms compete in their own self-‐interest.
–  Firms obeying the law and ac0ng ethically
•  Companies with a good strategy:
–  Provide products or services to consumers at an affordable
price
–  Make a profit
–  Benefit both par0es
–  Make society beBer
Value Crea0on for Society (2 of 2)
•  Successful companies create value for the economy:

–  Educa0on, public safety, and health care
•  Superior performance allows a firm to reinvest some
of its profits for growth
–  More opportuni0es for employment
•  Example: Google
–  Employs 55,000 people
–  People rely on Google for informa0on
Strategic Failure is Expensive
•  HP has not been able to address the compe00ve

challenges effec0vely:
–  Stakeholders suffered
–  Shareholder value was destroyed
–  Had to lay off thousands of employees
–  Customers no longer received innova0ve products
•  Google and HP illustrate the rela0onship between
individual firms and society at large
Black Swan Events (1 of 2)
•  In the past, most people assumed that all swans

were white.
–  When they first encountered swans that were black, they
were surprised.
•  Today, the metaphor of a black swan describes the
high impact of a highly improbable event.
Black Swan Events (2 of 2)
•  Trust between corpora0ons and society have

deteriorated because of black swans .
–  Accoun0ng Scandals: Enron
–  Real Estate Bubble: 2008 financial crisis
•  Managerial ac0ons can affect the well-‐being of
people around the globe.
–  Most black swan events result from execu0ve ac0ons (or
inac0ons.)
Stakeholders (1 of 2)
•  Stakeholders:
•  Organiza0ons, groups, and individuals
•  They can affect or are affected by a firm’s ac0ons.
•  Have a vested claim or interest in the performance
and con0nued survival of the firm.
–  Internal stakeholders:
•  Stockholders, employees (including execu0ves, managers, and
workers), and board members
–  External stakeholders:
•  Customers, suppliers, alliance partners, creditors, unions,
communi0es, media, and governments at various levels
Stakeholders (2 of 2)
•  Stakeholders make contribu0ons, and they also

receive benefits.
–  Employees
–  Shareholders
–  Communi0es
•  The firm is embedded in an exchange rela0onship
with internal and external stakeholders.
Exhibit 1.2 Internal and External Stakeholders in an Exchange
Rela0onship with the Firm

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Stakeholder Strategy
•  Managing stakeholders in order to gain and sustain

compe00ve advantage
–  Firms analyze and manage stakeholders
–  Determine how external and internal stakeholders interact
–  Stakeholders can create and trade value
•  Exemplifies how managers can act to improve firm
performance
–  Enhances compe00ve advantage
–  Enhances con0nued survival
•  Example: Target Corpora0on
Effec0ve Stakeholder Management Benefits
Firm Performance
1.  Coopera0on and informa0on availability

2.  Lowered costs
3.  Greater organiza0onal adaptability and flexibility
4.  More predictable and stable returns
5.  Stronger reputa0on
“World’s Most Admired Companies”
•  Most managers care about public percep0on.

•  Fortune magazine publishes the “World’s Most
Admired Companies” annually:
–  In 2014, the top five companies were Apple, Amazon,
Google, Berkshire Hathaway, and Starbucks.
Stakeholder Impact Analysis (1 of 3)
•  Primary stakeholders: achieve their objec0ves

–  Shareholders and investors
•  Other stakeholders: sa0sfy concerns
–  Employees, suppliers, and customers
•  Stakeholder impact analysis:
–  A decision tool
–  Managers recognize, priori0ze, and address stakeholder
needs
Stakeholder Impact Analysis (2 of 3)
•  A five-‐step process recognizing stakeholders’ claims.

•  Managers must note three stakeholder aBributes:
–  Power
–  Legi5macy
–  Urgency
Exhibit 1.3 Stakeholder Impact Analysis (3 of 3)

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Step 1: Iden0fy Stakeholders
•  Focus on stakeholders that the firm has, or

poten0ally can have
•  Iden0fy: powerful internal and external stakeholders
and their needs
–  For public-‐stock companies: shareholders and suppliers of
capital
–  Also: customers, suppliers, and unions
•  Example: Boeing
–  Its new 787 Dreamliner will be built in its non-‐unionized
South Carolina factory
Step 2: Iden0fy Stakeholder Interests
•  Specify and assess the interests and claims of

stakeholders.
•  Use the power, legi0macy, and urgency criteria.
•  Shareholders:
•  Legal owners
•  Have legi0mate claim on a company’s profits
•  Employees can be turned into shareholders.
–  Coca-‐Cola, Google, Microsoa, Southwest Airlines, Starbucks,
Walmart, and Whole Foods all offer stock ownership plans.
•  Shareholder ac0vists put public pressure on a company
to change its strategy,
Step 3: Iden0fy Opportuni0es and Threats
•  Opportuni0es and threats are two sides of the same

coin.
–  Example: consumer boycoBs can be a credible threat.
•  Example: PETA: called for a boycoB of McDonald’s due to alleged
animal-‐rights abuses.
•  Managers should try to transform threats into

opportuni0es.
–  Example: Sony
•  Dutch government blocked PlaySta0on shipments due to a toxic
cable.
•  Sony’s response included a redesign of its supplier management
system.
Step 4: Iden0fy Societal Responsibili0es
•  “What economic, legal, ethical, and philanthropic

responsibili0es do we have to our stakeholders?”
•  Corporate Social Responsibility (CSR):
–  A framework to recognize and address economic, legal,
social, and philanthropic expecta0ons
Exhibit 1.4 The Pyramid of Corporate Social
Responsibility
SOURCE: Adapted from A. B. Carroll (1991), “The pyramid of corporate social responsibility: Toward
the moral management of organizational stakeholders,” Business Horizons, July-August: 42.

©McGraw-‐Hill Educa0on. descrip0on
Step 5: Address Stakeholder Concerns
•  Managers decide the appropriate course of ac0on.

•  The aBributes of power, legi0macy, and urgency
help to priori0ze legi0mate claims.
•  On April 20, 2010, an explosion occurred.

–  At a drilling rig off the Louisiana coastline
–  Killed 11 workers
•  The oil spill con0nued for over three months.
•  It released an es0mated 5 million barrels of crude oil
into the Gulf of Mexico.
–  The largest environmental disaster in U.S. history
•  The cleanup cost was $14 billion.

•  Tony Hayward, BP’s CEO at the 0me, was fired.
•  Experts said BP’s problems were systemic:
–  Management repeatedly failed to put a safety culture in
place.
•  BP faced thousands of claims by many small business

owners.
–  Mainly in the tourism and seafood industries
•  Collec0vely, the small business owners became
powerful BP stakeholders.
•  BP paid out over $25 billion to seBle their claims.
•  Total cost for this incident: $60 billion

•  The Environmental Protec0on Agency (EPA) banned
BP from any new contracts with the U.S.
government.
•  This ban puts BP at a major compe00ve
disadvantage.
The AFI Strategy Framework

Overview of AFI
•  Outlines ac0ons that managers take to gain and

sustain compe00ve advantage
•  AFI helps managers craa and execute a strategy that
enhances the chances of achieving superior
performance.
•  AFI includes three broad tasks:
–  Analyze (A)
–  Formulate (F)
–  Implement (I)
The AFI Strategy Framework (1 of 2)
•  AFI: A model that links three interdependent strategic

management tasks
–  Analyze
–  Formulate
–  Implement
•  This model help managers plan and implement a strategy
that can
–  Improve performance
–  Result in compe00ve advantage.
•  Each of these tasks are interdependent.
•  Each of these tasks can happen simultaneously.
Exhibit 1.5 The AFI Strategy Framework (2 of 2)

descrip0on
Strategy Analysis (A) Topics and Ques0ons
•  Strategic leadership and the strategy process:

–  What roles do strategic leaders play? What are the firm’s vision, mission, and
values? What is the firm’s process for crea0ng strategy and how does strategy
come about? (Chapter 2)
•  External analysis:
–  What effects do forces in the external environment have on the firm’s poten0al to
gain and sustain a compe00ve advantage? How should the firm deal with them?
(Chapter 3)
•  Internal analysis:
–  What effects do internal resources, capabili0es, and core competencies have on
the firm’s poten0al to gain and sustain a compe00ve advantage? How should the
firm leverage them for compe00ve advantage? (Chapter 4)
•  Compe00ve advantage, firm performance, and business models:
–  How does the firm make money? How can one assess and measure compe00ve
advantage? What is the rela0onship between compe00ve advantage and firm
performance? (Chapter 5)
Strategy Formula0on (F) Topics and Ques0ons
•  Business strategy:
–  How should the firm compete: cost leadership,
differen0a0on, or integra0on? (Chapters 6 and 7)
•  Corporate strategy:
–  Where should the firm compete: industry, markets, and
geography? (Chapters 8 and 9)
•  Global strategy:
–  How and where should the firm compete: local, regional,
na0onal, or interna0onal? (Chapter 10)
Strategy Implementa0on (I) Topics and Ques0ons
•  Organiza0onal design:
–  How should the firm organize to turn the formulated
strategy into ac0on? (Chapter 11)
•  Corporate governance and business ethics:
–  What type of corporate governance is most effec0ve? How
does the firm anchor strategic decisions in business ethics?
(Chapter 12)
Implica0ons for the Strategist
The Difference Between Success and Failure
Lies in a Firm’s Strategy
•  Applying tools and frameworks can enable your firm

to be more successful.
•  You can apply the strategic management toolkit to
your own career:
–  To pursue your professional goals
–  Reference the myStrategy modules
•  Strategy is the art and science of success and failure
Compe00on Is Everywhere
•  Strategic management principles can be applied

universally.
•  Strategists work in:
–  Small start-‐ups and large, mul0-‐na0onal companies
–  For-‐profit and nonprofit organiza0ons
–  Private and public sectors
–  Developed and emerging economies
The Strategist Follows a Three-‐step Process
1.  Analyze the external and internal environments.

2.  Formulate an appropriate business and corporate
strategy.
3.  Implement the formulated strategy through
structure, culture, and controls.
The Role of Uncertainty and Complexity
•  Decisions must consider uncertainty and complexity.

•  Maintain awareness of key stakeholders.
–  They can affect or be affected by decisions.
•  Monitor and evaluate progress toward strategic
objec0ves.
–  Make adjustments as necessary.
Chapter 1 Summary
Take Away Concepts (1 of 5)
LO 1-‐1 Explain the role of strategy in a firm’s quest for compe55ve
advantage.
• Strategy is the set of goal-‐directed ac0ons a firm takes to gain and sustain
superior performance rela0ve to compe0tors.
• A good strategy enables a firm to achieve superior performance. It consists
of three elements:
–  A diagnosis of the compe00ve challenge.
–  A guiding policy to address the compe00ve challenge.
–  A set of coherent ac0ons to implement the firm’s guiding policy.
• A successful strategy requires three integra0ve management tasks—analysis,

formula0on, and implementa0on.
LO 1-‐2 Define compe55ve advantage, sustainable compe55ve advantage,

compe55ve disadvantage, and compe55ve parity.
• Compe00ve advantage is always judged rela0ve to other compe0tors or the industry
average.
• To obtain a compe00ve advantage, a firm must either create more value for
customers while keeping its cost comparable to compe0tors, or it must provide the
value equivalent to compe0tors but at a lower cost.
• A firm able to outperform compe0tors for prolonged periods of 0me has a sustained
compe00ve advantage.
• A firm that con0nuously underperforms its rivals or the industry average has a
compe00ve disadvantage.
• Two or more firms that perform at the same level have compe00ve parity.
• An effec0ve strategy requires that strategic trade-‐offs be recognized and addressed—
for example, between value crea0on and the costs to create the value.
LO 1-‐3 Differen5ate the roles of firm effects and industry effects in
determining firm performance.
• A firm’s performance is more closely related to its managers’ ac0ons (firm
effects) than to the external circumstances surrounding it (industry effects).
• Firm and industry effects, however, are interdependent. Both are relevant in
determining firm performance.
LO 1-‐4 Evaluate the rela5onship between stakeholder strategy and

sustainable compe55ve advantage.
• Stakeholders are individuals or groups that have a claim or interest in the
performance and con0nued survival of the firm. They make specific contribu0ons for
which they expect rewards in return.
• Internal stakeholders include stockholders, employees (for instance, execu0ves,
managers, and workers), and board members.
• External stakeholders include customers, suppliers, alliance partners, creditors,
unions, communi0es, and governments at various levels.
• Several recent black swan events eroded the public’s trust in business as an
ins0tu0on and in free -‐market capitalism as an economic system.
• The effec0ve management of stakeholders—the organiza0on, groups, or individuals
that can materially affect or are affected by the ac0on of a firm—is necessary to
ensure the con0nued survival of the firm and to sustain any compe00ve advantage.
LO 1-‐5 Conduct a stakeholder impact analysis.

• Stakeholder impact analysis considers the needs of different stakeholders,

which process enables the firm to perform op0mally and to live up to the
expecta0ons of good ci0zenship.
• In a stakeholder impact analysis, managers pay par0cular aBen0on to three
important stakeholder aBributes: power, legi0macy, and urgency.
• Stakeholder impact analysis is a five-‐step process that answers the following
ques0ons for the firm:
1.  Who are our stakeholders?
2.  What are our stakeholders’ interests and claims?
3.  What opportuni0es and threats do our stakeholders present?
4.  What economic, legal, and ethical responsibili0es do we have to our
stakeholders?
5.  What should we do to effec0vely address the stakeholder concerns?
Key Terms
•  AFI strategy framework •  Industry effects
•  Black swan events •  Stakeholders
•  Compe00ve advantage •  Stakeholder impact analysis
•  Compe00ve disadvantage •  Stakeholder strategy
•  Compe00ve parity •  Strategic management
•  Corporate social •  Strategy
responsibility (CSR)
•  Sustainable compe00ve
•  Firm effects advantage
Chapter 1 Cases & Exercises
Chapter Case 1: Consider This… (1 of 2)
•  Launched in 2006

•  Users send short messages: “tweets”
•  Restricted to 140 characters
•  300 million worldwide ac0ve users
•  TwiBer’s business model:
–  Grow its user base
–  Charge adver0sers for promo0on
Chapter Case 1: Consider This… (2 of 2)
•  Why is TwiBer struggling?

•  What role do industry and firm effects?
•  What grade would you give Dick Costolo?
–  TwiBer’s CEO from 2010 un0l 2015
•  Why is craaing a good strategy at TwiBer so difficult?
My Strategy Exercise
•  Considera0ons for your career choices

•  Referencing Table 1.1:
–  What effect does industry growth play in your career
choices?
–  Why are growth rates an important considera0on?
Small Group Exercise
•  Hurricanes Katrina and Sandy highlighted the need

for:
•  Resilient infrastructure and buildings
•  More flexible & effec0ve responses
•  Each group should search the Internet for op0ons
and plans to:
–  (1) build more sustainable communi0es
–  (2) organize responses to black swan events
–  (3) addi0onal recommenda0ons for policy makers
End of Chapter 01
Strategy Smart Videos
Strategy Smart Videos (1 of 6)
•  Professor Frank T. Rothaermel

•  Meet your textbook author -‐ a personal introduc0on
•  Link:
–  hBps://www.youtube.com/watch?v=6SsQfXrFNqo
•  1:55 Minutes
•  Professor Frank T. Rothaermel

•  An Overview of Your Textbook
•  Link:
–  hBps://www.youtube.com/watch?v=85-‐A8Wz14PU
•  1:59 Minutes
•  Professor Michael E. Porter

•  What is Strategy?
•  Link:
–  hBps://www.youtube.com/watch?v=NY4myVa5Wkw
•  1:46 Minutes
•  Professor Michael E. Porter

•  2 cri0cal aspects of management:
1.  Have the right goal -‐ to achieve a superior return on investment.
2.  Differen0a0on -‐ to be beBer and unique from your compe0tors.
•  Link:
–  hBps://www.youtube.com/watch?v=q8NZ|cNMrM
•  1:35 Minutes
•  An Interview with Warren BuffeB

•  Maintaining the Compe00ve Advantage
•  Link:
–  hBps://www.youtube.com/watch?v=_3Qh9iVlLoE
•  The first 2:06 minutes of an 8:48 minute video
•  Doreen Shanahan, Professor of Marke0ng at

Pepperdine University
•  7 Steps to Crea0ng a Compe00ve Advantage
•  Link:
–  hBps://www.youtube.com/watch?v=BM4nNsvmRaE
•  5:29 Minutes
Chapter Case 1
Chapter Case 1: Twitter (1 of 2)
•  TwiBer is currently not flying high.

–  In 2015, stock was 50% what it was in 2013.
–  Departure of CEO who served from 2010-‐2015
–  Turmoil among execu0ve ranks
•  Overview of TwiBer
–  Users send short messages of 140 characters.
–  Users can follow each other.
–  300 million ac0ve users worldwide
•  TwiBer appears constantly in the mass media.
Chapter Case 1: Twitter (2 of 2)
•  Business model
–  Grow user base (individual users pay nothing)
–  Adver0sers charged for promo0on of goods/services.
–  Companies pay for promoted tweets.
–  Ads can be delivered real 0me.
•  TwiBer’s current challenges
–  Turnover / reshuffling in management & engineering
–  Struggles to grow its user base
•  TwiBer = 300 million; Facebook = 1.5 billion
•  User growth con0nues to slow
–  Could it be taken over?
Appendix 1 The AFI Strategy Framework
This image shows several circles, represen0ng the main themes from the textbook, as well as how the chapters map
into each theme. The important inside circle is 0tled "Gaining and Sustaining a Compe00ve Advantage" that is at the
very center of the image, with five different circles on the outside of it. Arrows go back and forth from the center circle
to each of the five outer circles. The five outer circles are labeled: (1) Gehng Started, (2) External and Internal Analysis,
(3) Formula0on: Business Strategy, (4) Formula0on, Corporate Strategy, and (5) Implementa0on.
Each of these outer five circles have a brief descrip0on beside them to explain what the circle means:
Under the first outer circle 0tled "Gehng Started", it says: Part 1, Strategy Analysis, "What is Strategy (Chapter 1)" and
"Strategic Leadership: Managing the Strategy Process (Chapter 2)."
Under the second outer circle 0tled "External and Internal Analysis", it says: Part 1, Strategy Analysis, "External Analysis:
Industry Structure, Compe00ve Forces and Strategic Groups (Chapter 3)", "Internal Analysis: Resources, Capabili0es and
Core Competencies (Chapter 4)", and "Compe00ve Advantage, Firm Performance, and Business Models (Chapter 5)."
Under the third outer circle 0tled "Formula0on: Business Strategy", it says: Part 2, Strategy Formula0on, "Business
Strategy: Differen0a0on, Cost Leadership and Integra0on (Chapter 6)" and "Business Strategy, Innova0on and
Entrepreneurship (Chapter 7)."
Under the fourth outer circle 0tled "Formula0on: Corporate Strategy", it says: Part 2, Strategy Formula0on, "Corporate
Strategy: Ver0cal Integra0on and Diversifica0on (Chapter 8)", "Corporate Strategy: Strategic Alliances, Mergers and
Acquisi0ons (Chapter 9)", and "Global Strategy: Compe0ng Around the World (Chapter 10)."
Under the fiah outer circle 0tled "Implementa0on", it says: Part 3, Strategy Implementa0on, "Organiza0onal Design:
Structure, Culture and Control (Chapter 11)", and "Corporate Governance and Business Ethics (Chapter 12)."
Return to slide

Appendix 2 Exhibit 1.2 Internal and External Stakeholders in
an Exchange Rela0onship with the Firm
This image shows a firm in the middle, with External Stakeholders on the lea
side of it and Internal Stakeholders on the right. An arrow points from the
firm to External Stakeholders named "Benefits," and an arrow points from
External Stakeholders to the firm named "Contribu0ons." Under External
Stakeholders are the following sub-‐bullets: customers, media, suppliers,
alliance partners, creditors, unions, communi0es and governments. An arrow
points from the firm to Internal Stakeholders named "Benefits,” and an arrow
points from Internal Stakeholders to the firm named "Contribu0ons." Under
Internal Stakeholders are the following sub-‐bullets: employees, stockholders,
and board members.
Return to slide

Appendix 3 Exhibit 1.3 Stakeholder Impact Analysis (3 of 3)
Step 1 -‐ Who are our stakeholders?

Step 2 -‐ What are our stakeholders' interests and claims?
Step 3 -‐ What opportuni0es and threats do our stakeholders
present?
Step 4 -‐ What economic, legal, ethical and philanthropic
responsibili0es do we have to our stakeholders?
Step 5 -‐ What should we do to effec0vely address stakeholder
concerns?
Return to slide
Appendix 4 Exhibit 1.4 The Pyramid of
Corporate Social Responsibility
This image depicts a pyramid, with four separate sec0ons. The boBom (and
broadest) sec0on is named Economic Responsibili0es, the next smaller one
up is labeled Legal Responsibili0es, the next smaller one up is named Ethical
Responsibili0es, and at the top of the pyramid is Philanthropic
Responsibili0es. A brief clarifica0on for each sec0on of the pyramid is
provided:
Economic responsibili0es -‐ gain and sustain compe00ve advantage
Legal responsibili0es -‐ laws and regula0ons are society's codified ethics.
Define minimum acceptable standard
Ethical responsibili0es -‐ do what is right, just, and fair
Philanthropic responsibili0es -‐ corporate ci0zenship
Return to slide

Appendix 5 Exhibit 1.5 The AFI Strategy Framework (2 of 2)
This image shows several circles, represen0ng the main themes from the textbook, as well as how the chapters map into each
theme. The important inside circle is 0tled "Gaining and Sustaining a Compe00ve Advantage" that is at the very center of the
image, with five different circles on on the outside of it. Arrows go back and forth from the center circle to each of the five outer
circles. The five outer circles are labeled: (1) Gehng Started, (2) External and Internal Analysis, (3) Formula0on: Business Strategy,
(4) Formula0on, Corporate Strategy, and (5) Implementa0on.
Each of these outer five circles have a brief descrip0on beside them to explain what the circle means:
Under the first outer circle 0tled "Gehng Started", it says: Part 1, Strategy Analysis, "What is Strategy (Chapter 1)" and "Strategic
Leadership: Managing the Strategy Process (Chapter 2)".
Under the second outer circle 0tled "External and Internal Analysis", it says: Part 1, Strategy Analysis, "External Analysis: Industry
Structure, Compe00ve Forces and Strategic Groups (Chapter 3)", "Internal Analysis: Resources, Capabili0es and Core
Competencies (Chapter 4)", and "Compe00ve Advantage, Firm Performance, and Business Models (Chapter 5)".
Under the third outer circle 0tled "Formula0on: Business Strategy", it says: Part 2, Strategy Formula0on, "Business Strategy:
Differen0a0on, Cost Leadership and Integra0on (Chapter 6)" and "Business Strategy, Innova0on and Entrepreneurship (Chapter
7)".
Under the fourth outer circle 0tled "Formula0on: Corporate Strategy", it says: Part 2, Strategy Formula0on, "Corporate Strategy:
Ver0cal Integra0on and Diversifica0on (Chapter 8)", "Corporate Strategy: Strategic Alliances, Mergers and Acquisi0ons (Chapter
9)", and "Global Strategy: Compe0ng Around the World (Chapter 10)".
Under the fiah outer circle 0tled "Implementa0on", it says: Part 3, Strategy Implementa0on, "Organiza0onal Design: Structure,
Culture and Control (Chapter 11)", and "Corporate Governance and Business Ethics (Chapter 12)".
Return to slide


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Chapter

Jump to Appendix 1 long image

1.1 What Strategy Is: Gaining and Sustaining

1.2 Stakeholders and Competitive Advantage

1.3 The AFI Strategy Framework

Strategic Management: an integra0ve management

• Strategy: a set of goal-­‐directed ac0ons a ﬁrm takes

• Compe55ve Advantage: a ﬁrm that achieves

• In digital adver0sing: Google

• The rewards of superior value crea0on and capture

• Stake out a unique posi0on within an industry to

• Managers must make conscious trade-­‐oﬀs.

• The key to successful strategy: combine ac0vi0es for a unique

• Example: Walmart’s strategic ac0vi0es strengthen its posi0on

• Threadless: an online design community and apparel store

• Leverages the wisdom of the crowds

• Business model translates market research and design into

1. Grandiose statements

• Industry eﬀects: describe the underlying economic

• Firm eﬀects: ﬁrm performance is aBributed to

• Companies with good strategy generate value for

• Successful companies create value for the economy:

• HP has not been able to address the compe00ve

• In the past, most people assumed that all swans

• Trust between corpora0ons and society have

• Stakeholders make contribu0ons, and they also

Jump to Appendix 2 long image

• Managing stakeholders in order to gain and sustain

1. Coopera0on and informa0on availability

• Most managers care about public percep0on.

• Primary stakeholders: achieve their objec0ves

• A ﬁve-­‐step process recognizing stakeholders’ claims.

Jump to Appendix 3 long image

• Focus on stakeholders that the ﬁrm has, or

• Specify and assess the interests and claims of

• Opportuni0es and threats are two sides of the same

• Managers should try to transform threats into

• “What economic, legal, ethical, and philanthropic

Jump to Appendix 4 long image

• Managers decide the appropriate course of ac0on.

• On April 20, 2010, an explosion occurred.

• The cleanup cost was $14 billion.

• BP faced thousands of claims by many small business

• Total cost for this incident: $60 billion

• Outlines ac0ons that managers take to gain and

• AFI: A model that links three interdependent strategic

Jump to Appendix 5 long image

• Strategic leadership and the strategy process:

• Applying tools and frameworks can enable your ﬁrm

• Strategic management principles can be applied

1. Analyze the external and internal environments.

• Decisions must consider uncertainty and complexity.

• A successful strategy requires three integra0ve management tasks—analysis,

LO 1-­‐2 Deﬁne compe55ve advantage, sustainable compe55ve advantage,

LO 1-­‐4 Evaluate the rela5onship between stakeholder strategy and

LO 1-­‐5 Conduct a stakeholder impact analysis.

• Stakeholder impact analysis considers the needs of diﬀerent stakeholders,

• Launched in 2006

• Why is TwiBer struggling?

• Considera0ons for your career choices

• Hurricanes Katrina and Sandy highlighted the need

• Professor Frank T. Rothaermel

• Professor Frank T. Rothaermel

•  Strategy: a set of goal-‐directed ac0ons a ﬁrm takes

•  Compe55ve Advantage: a ﬁrm that achieves

•  In digital adver0sing: Google

•  The rewards of superior value crea0on and capture

•  Stake out a unique posi0on within an industry to

•  Managers must make conscious trade-‐oﬀs.

•  The key to successful strategy: combine ac0vi0es for a unique

•  Example: Walmart’s strategic ac0vi0es strengthen its posi0on

•  Threadless: an online design community and apparel store

•  Leverages the wisdom of the crowds

•  Business model translates market research and design into

1.  Grandiose statements

•  Industry eﬀects: describe the underlying economic

•  Firm eﬀects: ﬁrm performance is aBributed to

•  Companies with good strategy generate value for

•  Successful companies create value for the economy:

•  HP has not been able to address the compe00ve

•  In the past, most people assumed that all swans

•  Trust between corpora0ons and society have

•  Stakeholders make contribu0ons, and they also

•  Managing stakeholders in order to gain and sustain

1.  Coopera0on and informa0on availability

•  Most managers care about public percep0on.

•  Primary stakeholders: achieve their objec0ves

•  A ﬁve-‐step process recognizing stakeholders’ claims.

•  Focus on stakeholders that the ﬁrm has, or

•  Specify and assess the interests and claims of

•  Opportuni0es and threats are two sides of the same

•  Managers should try to transform threats into

•  “What economic, legal, ethical, and philanthropic

•  Managers decide the appropriate course of ac0on.

•  On April 20, 2010, an explosion occurred.

•  The cleanup cost was $14 billion.

•  BP faced thousands of claims by many small business

•  Total cost for this incident: $60 billion

•  Outlines ac0ons that managers take to gain and

•  AFI: A model that links three interdependent strategic

•  Strategic leadership and the strategy process:

•  Applying tools and frameworks can enable your ﬁrm

•  Strategic management principles can be applied

1.  Analyze the external and internal environments.

•  Decisions must consider uncertainty and complexity.

• A successful strategy requires three integra0ve management tasks—analysis,

LO 1-‐2 Deﬁne compe55ve advantage, sustainable compe55ve advantage,

LO 1-‐4 Evaluate the rela5onship between stakeholder strategy and

LO 1-‐5 Conduct a stakeholder impact analysis.

• Stakeholder impact analysis considers the needs of diﬀerent stakeholders,

•  Launched in 2006

•  Why is TwiBer struggling?

•  Considera0ons for your career choices

•  Hurricanes Katrina and Sandy highlighted the need

•  Professor Frank T. Rothaermel

•  Professor Frank T. Rothaermel

•  Professor Michael E. Porter

•  Professor Michael E. Porter

•  An Interview with Warren BuﬀeB

•  Doreen Shanahan, Professor of Marke0ng at

•  TwiBer is currently not ﬂying high.

Step 1 -‐ Who are our stakeholders?