M A N A G E M E N T

4EDITION

STRATEGICM A N A G E M E N T

Theory and Practice

JOHN A. PARNELLUniversity of North Carolina, Pembroke

Los Angeles | London | New DelhiSingapore | Washington DC

Preface xvDescription of Text xv

Key Features xvi

What's New inThis Edition

Ancillaries xvii

Acknowledgments xvm

About the Author xix

XVI

1. Fundamentals of Strategic ManagementWhat Is Strategic Management? 1

Intended and Realized Strategies 4

Scientific and Artistic Perspectives on

Strategic Management 5

Influence on Strategic Management 6

Corporate Governance and Boards

of Directors 7

Strategic Decisions 10

The Global Imperative 12

Summary 13

Key Terms 13

Review Questions and Exercises 14

Practice Quiz 14

True or False? 14

Multiple Choice 15

Student Study Site 15

Notes 16

STRATEGY+BUSINESS READING: THE CHINA CHALLENGE 18

2. Industry Competition 2730

32

Industry Life Cycle Stages

Industry Structure 32

Intensity of Rivalry Among Incumbent Firms

Concentration of Competitors 34

High Fixed or Storage Costs 35

Slow Industry Growth 35

lack of Differentiation or Low Switching Costs 35

Capacity Augmented in Large Increments 36

Diversity of Competitors 36

High Strategic Stakes 36

High Exit Barriers 36

Threat of Entry 37

Economies of Scale 38

Brand Identity and Product Differentiation 38

Capital Requirements 39

Switching Costs 39

Access to Distribution Channels 39

Cost Advantages Independent ofSize 39

Government Policy 39

Pressure FromSubstituteproducts 40

,\Bargaining;Power of Buyers 40

Bargaining Power of Suppliers 41

. Limitations of Porter's FiveForces Model: 42

. Summary 43 ;; . KeyTerms , 43 : v , • ' •"


* Practice Quiz ,44 /

JrueorFalse? M

: Multiple Choice AS


.. ". N o t e s 4 6 ; . ' - .• '• .• ••••.'• • ' . . , . '

STRATEGY"+BUSINESS^ READING: FOCUS AND SCALE ON THE INTERNET 4 7

3. The External Environment: Political-Legaland Economic Forces 53Analysis ofthe External Environment 53

Political-Legal Forcei 54

Global Considerations 60

Economic Forces 63

Gross Domestic Product 64 .

; : ; inflation Rates 66

Interest Rates 66 , , , ;

Exchange Rates 66 . ;•Ecological Influences 67 ,

Summary 69 ,•.:-"' ; ^ :

KeyTerms 69


Practice Quiz 69

TrueorFalse? 69

Multiple Choice 70


Notes 71

STRATEGY+BUSINESS READING: COMPETING FOR THE GLOBAL MIDDLE CLASS 7 3

4. The External Environment: Social and Technological Forces 79Social Forces 79

I Case #1;Eating Habits, 83 ,

Case #2: Automobiles 86Global Concerns 88

TechnolbgicalForces 90

Thelnternet 92

Strategic Dimensions of the Internet 96

Movement toward Information Symmetry 96

Internet as Distribution Channel 97

Speed]'; 97Interactivity 97Potential for Cost Reductions and Cost Shifting 97

Forms of Electronic Commerce 98

Busmess-tO'Business 98Business-to-Cohsumer 98

Busihess-to-Goverhment 99

Consunier-to-Coiisumer 99

Cohscimer-to-Business 99

Cpmmoditization and Mass Customization 99

Environmental Scanning 100

Summary 102

KeyTerms 102


PracticeQuiz 103

True or False? 103

Multiple Choice 103

Student Study Site \ 104

Notes 104

STRATEGY+BUSINESS READING: THE RISE OF GENERATION C 108

5. The Organization: Ethics and CorporateSocial Responsibility 117Organizational Direction: Mission, Goals, and Objectives 118

Goals and Stakeholders 118

The Agency Problem 120 _

Management Serves Its Own Interests 120

Management and Stockholders Sharethe Same Interests 122

Managerial Ethics 123

Perspectives on Ethics 126 , ,

Social Responsibility 129 , ,,

Corporate Social Responsibility in Practical T e r m s ^ 1 3 2Sustainable Strategic Management 1 3 5

Takeovers 135

Outsourcing and Offshoring 136

Linking Managerial Ethics and Corporate Social Responsibility 139

Summary 140

, KeyTerms 140


PracticeQuiz 141

TrueorFalse? 141

MultipleChoice 142


Notes 143

STRATEGY+BUSINESS READING: VALUES VS. VALUE 146

6. Corporate-Level Strategies 151The Corporate Profile 151

Strategic Alternatives at the Corporate Level 153

Growth Strategies 153

Horizontal (Related) Integration 156

Horizontal (Related) Diversification 156

Conglomerate (Unrelated) Diversification 157

Vertical Integration 157

,:• Strategic Alliances (Partnerships) 157

Stability Strategy 159

Retrenchment Strategies 161

Turnaround 161

Divestment 163Liquidation 163 •

Boston Consulting Group Growth-Share Matrix 163

Global Corporate Strategy 166

Wal-Mart Abroad 168

Global Orientation Assessment 169

Summary 170 /

KeyTerms , 170

Review Questions and Exercises 172 ,

PracticeQuiz 172

TrueorFalse? 172MultipleChoice 172

Student Study Site 173 -

Notes 173 :

STRATEGY+BUSINESS READING: THE UNIQUE ADVANTAGE 176

7. Business Unit Strategies 183Porter's Generic Strategies 184

Low-Cost (Cost Leadership) Strategy (Without Focus) 185

Focus-Low-Cost Strategy 187

Differentiation Strategy (WithoutFocus) 188

Focus-Differentiation Strategy 190

Low-Cost-Differentiation Strategy 191

Focus-Low-Cost-Differentiation Strategy 195

Multiple Strategies 195

The Miles and Snow Strategy Framework 196

Business Size, Strategy, and Performance 197

Assessing Strategies 198

Global Concerns 199

Summary 202 ;

KeyTerms 203


PracticeQuiz 204

TrueorFalse? 204

MultipleChoice 204


Notes 205

STRATEGY+BUSINESS READING: GROWTH THROUGH FOCUS:

A BLUEPRINT FOR DRIVING PROFITABLE EXPANSION 2 0 8

8. Functional Strategies 219Marketing 221

Pricing Strategies 221

Promotion Strategies 222

Product/Service Strategies 222

Place (Distribution)Strategies 224

Finance 225 •

Production 227 ;

Quality Considerations , 228

Research and Development 229

Purchasing 230

Human Resources 231

Human Capital and Knowledge Management 233

Knowledge and Competitive Advantage 234

Information Systems Management 234

Functional Strategies and Industry Life Cycle 235

Summary 236

KeyTerms 236


PracticeQuiz 237 , . . ,_.. ,

TrueorFalse? 237 ;

MultipleChoice 238 ' :


Notes 239

STRATEGY+BUSINESS READING: THE POWER OF THE

POST-RECESSION CONSUMER 2 4 1 „

9. Strategy Formulation 247Strengths and Weaknesses 247 , , r ,,

Human Resources 248 : ;v ,

Board of Directors 249

Top Management 249 ,"'••

Middle Management, Supervisors, and Employees 250

Organizational Resources 250

Physical Resources 251 .

," Opportunities and Threats 254

SW/OT Matrix 255

Issues in Strategy Formulation 260

Evaluating Strategic Change 260

Strategy, Corporate Social Responsibility, and Managerial Ethics 262

Effects on Organizational Resources 262

Anticipated Responses From Competitors and Customers 262

Summary 263

KeyTerms , 263


PracticeQuiz 264

TrueorFalse? 264

MultipleChoice 265


Notes 266

STRATEGY* BUSINESS READING: 10 CLUES TO OPPORTUNITY 2 6 7

10. Strategy Execution: Structure 271©rganizational Structure 271

Vertical Growth 273

Horizontal Growth 27'4

StructuraLForms 275 ; , . ' . - ' ,

Functional Structure 275

Product Divisional Structure 276

Geographic Divisional Structure 277

Matrix Structure 278 '"•>;,

Assessing Organizational Structure 279

Corporate Involvement in Business Unit Operations 281

Corporate Restructuring 282

Summary 282

KeyTerms 283


PracticeQuiz 284

TrueorFalse? 284

MultipleChoice 284


Notes 285 -

STRATEGY+BUSINESS READING:

DESIGN FOR FRUGAL GROWTH 2 8 6

11. Strategy Execution: Strategic Change,Culture, and Leadership 293Organizational Culture and Strategy 295

Cultural Strength and Diversity 297

Shaping the Culture 298

Global Concerns 298

Strategic Leadership 299 :

Leadership Style 300

Executing Strategic Change 303

Recognize the Need for Change 304Create a Shared Vision 304Institutionalize the Change 304

Summary 306KeyTerms 306Review Questions and Exercises 307PracticeQuiz 307


Student Study Site 308Notes 308

STRATEGY+BUSINESS READING: CEO SUCCESSION 2 0 1 0 :

THE FOUR TYPES OF C E O S 3 1 1

12. Strategic Control and Crisis Management 327Step 1:The Focus of Strategic Control 328Step 2: Strategic Control Standards (Benchmarks) 329

Published Information for Strategic Control 330Product/Service Quality 330Innovation 331Market Share and Relative Market Share 331

Steps 3Through 5: Exerting Strategic Control 332Control Through the Formal and Informal Organizations 333

Crisis Management 334Prominent Crises in Recent History 336Crisis Planning 339

Trends in Strategic Management 341Summary 342KeyTerms 342Review Questions and Exercises 342PracticeQuiz 343


Student Study Site 344Notes 344STRATEGY+BUSINESS READING: HOW TO PREVENT SELF-INFLICTED DISASTERS 3 4 7

Appendix 3 5 3

Case Analysis 354

Real-Time Cases 361

Case 1: Allstate 361 •-.' .Case 2: Amazon.com 362Case3: American Express 363Case 4: Anheuser-Busch InBev 364Case 5: AutoZone 366Case 6: Avon 366Case 7: Bank of America 368

Case 8: Bed Bath & Beyond 369

Case 9: Stanley Black & Decker 370

Case 10:Cici's Pizza 371

Case11:Costco 372

Case12:Dell 373

Case 13: Delta Air Lines 374 ;

Case14:DollarTree 375

Case15:FedEx 376 ; -

Case16:Ford 377

Case 17: Home Depot 378

Case 18: International Paper 379

Case 19: Jack in the Box 380

Case 20: Kroger 382

Case 21: Lands'End 382 ;

Case 22: Mattel 384 .

Case23:Nike 385 V

Case 24: Papa John's 386 . ,

Case25:Pfizer 387

Case 26: Southwest Airlines 388

Case 27: Starbucks 389 '

Case28:Walgreens 391 . .

Case 29: Wal-Mart 392

Case 30: Yum! Brands 393

Traditional Cases 395

Case 1: Bob's Supermarket: Competing With the Big Boys 395

Case 2: Costco: Maximum Employee Benefits or Maximum Shareholder

Return? 407

Case 3: Dollar General—Today's Neighborhood Store 422

Case4;:Family Dollar Stores 448

Case}5: General Electric: Ecomaginatipn as a CSR Initiative 476

:^ase§:iKapai,New Zealand: Eat Your Greens! 484

Case7: Kodak's Challenge: Surviving the Disruptive "Winds of Change" 499

Case 8: Macy's, Inc. 2010: Could Macy's Bring Back the Magic? 518

Case 9: Netflix: Entering, Engaging, and Embracing Innovation in the Movie Rental

Industry 539

Case 10: Skoda Auto—2011 552

Case 11: Staples—Pantaloon Retail Limited Tie-Up: Going for Growth in India's Modern

Retail Market 563

Case 12: Hitting the Brakes:Toyota in Crisis 593

G l o s s a r y 6 1 1 / ' , • - ' ' - . ; ' : ' ••/ .;- ;: "• - v ; :

i n d e x 6 2 1

M A N A G E M E N T

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