Fluent Essays

For this assignment, the Group will analyze the assigned Company's current condition. You will use the text chapters 7 through 9 as your framework for the analysis, and will incorporate information from external sources including the company and other credible sites. Your Group deliverable will be presented in APA format, amend refernce correctely. For this assignment, the Group will analyze the assigned Company's current condition. You will use the text chapters 7 through 9 as your framework for the analysis, and will incorporate information from external sources including the company and other credible sites. Note: The whole paper should need 500 words. The key point is the International Business-Level Strategy. Write more in this part. I only need the the International Business-Level Strategy what I post You should do this company:www.inva.com How to use Citation inside Word You must open the document in the desktop app for this to work. I have put in pictures to show you where everything is located. Once you are in the desktop app you will click on References and then Manage Sources. Once you click on Manage Sources you will check to see if one the citations has already been used before adding it again. You will select new when adding your citation information. If something was left out you can always go back to edit. When selecting new this box will pop up for you to select what type of source you are citing. You do not have to enter every single field. When selecting Wed site you should put in the actual web page name and then the URL at the bottom. See below for next step When you are finished creating the citation you will click on where you are wanting the citation to go. Select insert citation and choose the one you are using. It will then show up as followed and just make sure you put the period at the end because it will not add it. The boxes will be greyed out and I can go in and fix that once we are finalizing the deliverable. I would try to limit the URL to as short as possible to where it will still get you to the link and it should always have the http:/ in front of the website. If we all do it this way then I can add the full Work Cited box at the bottom of the deliverable. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 1–1 Chapter 9 Cooperative Strategy © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 1–2 Learning Objectives Studying this chapter should provide you with the strategic management knowledge needed to: Define cooperative strategies and explain why firms use them. Define and discuss the three major types of strategic alliances. Name the business-level cooperative strategies and describe their use. Discuss the use of corporate-level cooperative strategies in diversified firms. Understand the importance of cross-border strategic alliances as an international cooperative strategy. Explain cooperative strategies’ risks. Describe two approaches used to manage cooperative strategies. Cooperative Strategy A strategy in which firms work together to achieve a shared objective. Cooperating with other firms is a strategy that: creates value for a customer. exceeds the cost of constructing customer value in other ways. establishes a favorable position relative to competitors. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–3 Cooperative Strategy 3 A primary type of cooperative strategy in which firms combine some of their resources and capabilities to create a mutual competitive advantage. Involves the exchange and sharing of resources and capabilities to co-develop or distribute goods and services. Requires cooperative behavior from all partners. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–4 Strategic Alliance 4 Examples of cooperative behavior known to contribute to alliance success Actively solving problems Being trustworthy Consistently pursuing ways to combine partners’ resources and capabilities to create value Collaborative (Relational) Advantage A competitive advantage developed through a cooperative strategy. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–5 Strategic Alliance Behaviors 5 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–6 Strategic Alliance Combined Resources Capabilities Core Competencies Resources Capabilities Core Competencies Resources Capabilities Core Competencies Firm A Firm B Mutual interests in designing, manufacturing, or distributing goods or services 6 Joint Venture Two or more firms create a legally independent company by sharing some of their resources and capabilities. Equity Strategic Alliance Partners who own different percentages of equity in a separate company they have formed. Non-equity Strategic Alliance Two or more firms develop a contractual relationship to share some of their unique resources and capabilities. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–7 Three Types of Strategic Alliances 7 9–8 Reasons for Strategic Alliances by Market Type © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 8 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–9 Reasons for Strategic Alliances Market Reason Slow Cycle Gain access to a restricted market Establish a franchise in a new market Maintain market stability (e.g., establishing standards) 9 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–10 Reasons for Strategic Alliances (cont’d) Market Reason Fast Cycle Speed up development of new goods or service Speed up new market entry Maintain market leadership Form an industry technology standard Share risky R&D expenses Overcome uncertainty 10 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–11 Reasons for Strategic Alliances (cont’d) Market Reason Standard Cycle Gain market power (reduce industry overcapacity) Gain access to complementary resources Establish economies of scale Overcome trade barriers Meet competitive challenges from other competitors Pool resources for very large capital projects Learn new business techniques 11 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–12 Business-Level Cooperative Strategies 12 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–13 Business-Level Cooperative Strategies Combine partner firms’ assets in complementary ways to create new value Include distribution, supplier or outsourcing alliances where firms rely on upstream or downstream partners to build competitive advantage Complementary Strategic Alliances 13 9–14 Vertical and Horizontal Complementary Strategic Alliances © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14 Vertical Complementary Strategic Alliance Formed between firms that agree to use their skills and capabilities in different stages of the value chain to create value for both firms. Outsourcing is one example of this type of alliance. Horizontal Complementary Strategic Alliance Formed when partners who agree to combine their resources and skills to create value in the same stage of the value chain. Focus is on long-term product development and distribution opportunities. The partners may become competitors which requires a great deal of trust between the partners. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–15 Complementary Strategic Alliances 15 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–16 Uncertainty-Reducing Strategy Complementary Strategic Alliances Competition Response Alliances Occurs when firms join forces to respond to a strategic action of another competitor Because they can be difficult to reverse and expensive to operate, strategic alliances are primarily formed to respond to strategic rather than tactical actions 16 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–17 Uncertainty-Reducing Strategy Used to hedge against risk and uncertainty These alliances are most noticed in fast-cycle markets. An alliance may be formed to reduce the uncertainty associated with developing new product or technology standards. Complementary Strategic Alliances Competition Response Alliances Uncertainty Reducing Alliances 17 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–18 Uncertainty-Reducing Strategy Complementary Strategic Alliances Competition Response Alliances Uncertainty Reducing Alliances Competition Reducing Alliances Created to avoid destructive or excessive competition Explicit collusion: when firms directly negotiate production output and pricing agreements to reduce competition (illegal). Tacit collusion: when firms indirectly coordinate their production and pricing decisions by observing other firm’s actions and responses. 18 Complementary business-level strategic alliances, especially the vertical ones, have the greatest probability of creating a sustainable competitive advantage. Horizontal complementary alliances are sometimes difficult to maintain because they are often between rival competitors. Competitive advantages gained from competition and uncertainty reducing strategies tend to be temporary. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–19 Assessment of Cooperative Strategies 19 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–20 Corporate Level Cooperative Strategies 20 Corporate-level Strategies Help the firm diversify in terms of: products offered to the market the markets it serves Require fewer resource commitments Permit greater flexibility in terms of efforts to diversify partners’ operations © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–21 Corporate-Level Cooperative Strategy 21 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–22 Diversifying Strategic Alliances Allows a firm to expand into new product or market areas without completing a merger or an acquisition Provides some of the potential synergistic benefits of a merger or acquisition, but with less risk and greater levels of flexibility Permits a “test” of whether a future merger between the partners would benefit both parties Diversifying Strategic Alliance 22 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–23 Franchising Synergistic Strategic Alliance Diversifying Strategic Alliance Creates joint economies of scope between two or more firms Creates synergy across multiple functions or multiple businesses between partner firms 23 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–24 Franchising Spreads risks and uses resources, capabilities, and competencies without merging or acquiring another firm A contractual relationship (franchise) is developed between two parties, the franchisee and the franchisor An alternative to pursuing growth through mergers and acquisitions Synergistic Strategic Alliance Franchising Diversifying Strategic Alliance 24 Assessing Corporate-Level Cooperative Strategies Compared to business-level strategies Broader in scope More complex More costly Can lead to competitive advantage and value when: successful alliance experiences are internalized. the firm uses such strategies to develop useful knowledge about how to succeed in the future. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–25 25 International Cooperative Strategy Cross-border Strategic Alliance A strategy in which firms with headquarters in different nations combine their resources and capabilities to create a competitive advantage. A firm may form cross-border strategic alliances to leverage core competencies that are the foundation of its domestic success to expand into international markets. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–26 26 International Cooperative Strategy (cont’d) Synergistic Strategic Alliance Allows risk sharing by reducing financial investment Host partner knows local market and customs International alliances can be difficult to manage due to differences in management styles, cultures or regulatory constraints. Must gauge partner’s strategic intent such that the partner does not gain access to important technology and become a competitor. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–27 27 A cooperative strategy wherein several firms agree to form multiple partnerships to achieve shared objectives. Stable alliance network Dynamic alliance network Effective social relationships and interactions among partners are keys to a successful network cooperative strategy. © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–28 Network Cooperative Strategy 28 © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–29 Network Cooperative Strategies (cont’d) Long term relationships that often appear in mature industries where demand is relatively constant and predictable Stable networks are built for exploitation of the economies (scale and/or scope) available between the firms Stable Alliance Network 29 Network Cooperative Strategies (cont’d) © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–30 Arrangements that evolve in industries with rapid technological change leading to short product life cycles Primarily used to stimulate rapid, value-creating product innovation and subsequent successful market entries Purpose is often exploration of new ideas Stable Alliance Network Dynamic Alliance Network 30 Competitive Risks of Cooperative Strategies Partners may act opportunistically Partners may misrepresent competencies brought to the partnership Partners fail to make committed resources and capabilities available to other partners One partner may make investments that are specific to the alliance while its partner does not © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–31 31 Managing Competitive Risks in Cooperative Strategies © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–32 32 Managing Risks in Cooperative Strategies © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–33 Risk and Asset Management Approaches Desired Outcome Competitive Risks Detailed contracts and management Developing trusting relationships Creating Value Inadequate contracts Misrepresentation of competencies Partners fil to use their complementary resources Holding alliance partner’s specific investments hostage 33 Cost Minimization Management Approach Have formal contracts with partners Specify how strategy is to be monitored Specify how partner behavior is to be controlled Set goals that minimize costs and to prevent opportunistic behavior by partners © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–34 Managing Cooperative Strategies 34 Managing Cooperative Strategies (cont’d) Opportunity Maximization Approach Maximize partnership’s value-creation opportunities Learn from each other Explore additional marketplace possibilities Maintain less formal contracts, fewer constraints © 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9–35 35 Michael A. Hitt Texas A&M University and Texas Christian University R. Duane Ireland Texas A&M University Robert E. Hoskisson Rice University STRATEGIC MANAGEMENT Competitiveness & Globalization Concepts and Cases 12e Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it. For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest. Important Notice: Media content referenced within the product description or the product text may not be available in the eBook version. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. © 2017, 2015 Cengage Learning® WCN: 02-200-203 ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced, transmitted, stored, or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, Web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher. Unless otherwise noted all items © Cengage Learning. Library of Congress Control Number: 2015955692 ISBN: 978-1-305-50214-7 Cengage Learning 20 Channel Center Street Boston, MA 02210 USA Cengage Learning is a leading provider of customized learning solutions with employees residing in nearly 40 different countries and sales in more than 125 countries around the world. Find your local representative at www.cengage.com. Cengage Learning products are represented in Canada by Nelson Education, Ltd. To learn more about Cengage Learning Solutions, visit www.cengage.com Purchase any of our products at your local college store or at our preferred online store www.cengagebrain.com Strategic Management: Competitiveness & Globalization: Concepts and Cases, 12e Michael A. Hitt, R. Duane Ireland, and Robert E. Hoskisson Vice President, General Manager, Social Science & Qualitative Business: Erin Joyner Product Director: Jason Fremder Senior Product Manager: Scott Person Content Developer: Tara Singer Product Assistant: Brian Pierce Marketing Director: Kristen Hurd Marketing Manager: Emily Horowitz Marketing Coordinator: Christopher Walz Senior Content Project Manager: Kim Kusnerak Manufacturing Planner: Ron Montgomery Production Service: Cenveo Publisher Services Senior Art Director: Linda May Cover/Internal Designer: Tippy McIntosh Cover Image: © RomanOkopny/Getty Images Intellectual Property Analyst: Diane Garrity Project Manager: Sarah Shainwald Strategic Focus: © RomanOkopny/Getty Images Watercolor opener: © BerSonnE/Getty Images For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support, 1-800-354-9706 For permission to use material from this text or product, submit all requests online at www.cengage.com/permissions Further permissions questions can be emailed to [email protected] Printed in Canada Print Number: 01 Print Year: 2016 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. To My Family: I love each and every one of you. Thank you for all of your love and support. — Michael, DaD, PaPa To Mary Ann: “Now everyone dreams of a love lasting and true.” This was my dream that you have completely fulfilled. Thank you for all of the love, support, and encouragement throughout our life together. — R. Duane iRelanD To Kathy: My love for you is eternal, and I hope that we can be eternally together. Thanks for all the support and love you’ve given me throughout my life. — BoB Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Preface, xiii About the Authors, xx Part 1: Strategic Management Inputs 2 1. Strategic Management and Strategic Competitiveness, 2 2. The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis, 38 3. The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages, 76 Part 2: Strategic Actions: Strategy Formulation 108 4. Business-Level Strategy, 108 5. Competitive Rivalry and Competitive Dynamics, 142 6. Corporate-Level Strategy, 172 7. Merger and Acquisition Strategies, 204 8. International Strategy, 236 9. Cooperative Strategy, 276 Part 3: Strategic Actions: Strategy Implementation 308 10. Corporate Governance, 308 11. Organizational Structure and Controls, 344 12. Strategic Leadership, 382 13. Strategic Entrepreneurship, 416 Part 4: Case Studies C-1 Name Index, I-1 Company Index, I-20 Subject Index, I-23 Brief Contents iv Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Preface xiii About the Authors xx Part 1: Strategic Management Inputs 2 1: Strategic Management and Strategic Competitiveness 2 Opening Case: Alibaba: An Online Colossus in China Goes Global 3 1-1 The Competitive Landscape 7 1-1a The Global Economy 8 1-1b Technology and Technological Changes 10 Strategic Focus: Starbucks Is “Juicing” Its Earnings per Store through Technological Innovations 11 1-2 The I/O Model of Above-Average Returns 14 1-3 The Resource-Based Model of Above-Average Returns 16 1-4 Vision and Mission 18 1-4a Vision 18 1-4b Mission 19 1-5 Stakeholders 19 Strategic Focus: The Failure of BlackBerry to Develop an Ecosystem of Stakeholders 20 1-5a Classifications of Stakeholders 21 1-6 Strategic Leaders 25 1-6a The Work of Effective Strategic Leaders 25 1-7 The Strategic Management Process 26 Summary 28 • Key Terms 28 • Review Questions 29 • Mini-Case 29 • Notes 30 2: The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis 38 Opening Case: Are There Cracks in the Golden Arches? 39 2-1 The General, Industry, and Competitor Environments 41 2-2 External Environmental Analysis 43 2-2a Scanning 43 2-2b Monitoring 44 2-2c Forecasting 44 2-2d Assessing 45 2-3 Segments of the General Environment 45 2-3a The Demographic Segment 45 2-3b The Economic Segment 48 2-3c The Political/Legal Segment 49 2-3d The Sociocultural Segment 50 2-3e The Technological Segment 51 2-3f The Global Segment 52 Contents v Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. vi Contents 2-3g The Sustainable Physical Environment Segment 53 Strategic Focus: Target Lost Its Sway Because Tar-zhey No Longer Drew the Customers 54 2-4 Industry Environment Analysis 55 2-4a Threat of New Entrants 56 2-4b Bargaining Power of Suppliers 59 2-4c Bargaining Power of Buyers 60 2-4d Threat of Substitute Products 60 2-4e Intensity of Rivalry among Competitors 60 2-5 Interpreting Industry Analyses 63 2-6 Strategic Groups 63 Strategic Focus: Watch Out All Retailers, Here Comes Amazon; Watch Out Amazon, Here Comes Jet.com 64 2-7 Competitor Analysis 65 2-8 Ethical Considerations 67 Summary 68 • Key Terms 68 • Review Questions 68 • Mini-Case 69 • Notes 70 3: The Internal Organization: Resources, Capabilities, Core Competencies, and Competitive Advantages 76 Opening Case: Data Analytics, Large Pharmaceutical Companies, and Core Competencies: A Brave New World 77 3-1 Analyzing the Internal Organization 79 3-1a The Context of Internal Analysis 79 3-1b Creating Value 81 3-1c The Challenge of Analyzing the Internal Organization 81 3-2 Resources, Capabilities, and Core Competencies 84 3-2a Resources 84 Strategic Focus: Strengthening the Superdry Brand as a Foundation to Strategic Success 85 3-2b Capabilities 88 3-2c Core Competencies 89 3-3 Building Core Competencies 89 3-3a The Four Criteria of Sustainable Competitive Advantage 89 3-3b Value Chain Analysis 93 3-4 Outsourcing 96 3-5 Competencies, Strengths, Weaknesses, and Strategic Decisions 96 Strategic Focus: “We’re Outsourcing that Activity but Not That One? I’m Surprised!” 97 Summary 98 • Key Terms 99 • Review Questions 99 • Mini-Case 100 • Notes 101 Part 2: Strategic Actions: Strategy Formulation 108 4: Business-Level Strategy 108 Opening Case: Hain Celestial Group: A Firm Focused on “Organic” Differentiation 109 4-1 Customers: Their Relationship with Business-Level Strategies 112 4-1a Effectively Managing Relationships with Customers 112 4-1b Reach, Richness, and Affiliation 113 4-1c Who: Determining the Customers to Serve 114 4-1d What: Determining Which Customer Needs to Satisfy 114 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. viiContents 4-1e How: Determining Core Competencies Necessary to Satisfy Customer Needs 115 4-2 The Purpose of a Business-Level Strategy 116 4-3 Types of Business-Level Strategies 117 4-3a Cost Leadership Strategy 118 4-3b Differentiation Strategy 122 Strategic Focus: Apple vs. Samsung: Apple Differentiates and Samsung Imperfectly Imitates 126 4-3c Focus Strategies 127 4-3d Integrated Cost Leadership/Differentiation Strategy 129 Strategic Focus: RadioShack’s Failed Focus Strategy: Strategic Flip-Flopping 130 Summary 134 • Key Terms 135 • Review Questions 135 • Mini-Case 135 • Notes 136 5: Competitive Rivalry and Competitive Dynamics 142 Opening Case: Does Google Have Competition? Dynamics of the High Technology Markets 143 5-1 A Model of Competitive Rivalry 146 5-2 Competitor Analysis 147 5-2a Market Commonality 147 5-2b Resource Similarity 148 Strategic Focus: Does Kellogg Have the Tiger by the Tail or Is It the Reverse? 150 5-3 Drivers of Competitive Behavior 150 5-4 Competitive Rivalry 152 5-4a Strategic and Tactical Actions 152 5-5 Likelihood of Attack 153 5-5a First-Mover Benefits 153 5-5b Organizational Size 155 5-5c Quality 156 5-6 Likelihood of Response 157 5-6a Type of Competitive Action 157 5-6b Actor’s Reputation 158 5-6c Market Dependence 158 5-7 Competitive Dynamics 159 5-7a Slow-Cycle Markets 159 5-7b Fast-Cycle Markets 161 5-7c Standard-Cycle Markets 162 Strategic Focus: The Ripple Effect of Supermarket Wars: Aldi Is Changing the Markets in Many Countries 163 Summary 164 • Key Terms 166 • Review Questions 166 • Mini-Case 166 • Notes 167 6: Corporate-Level Strategy 172 Opening Case: Disney Adds Value Using a Related Diversification Strategy 173 6-1 Levels of Diversification 175 6-1a Low Levels of Diversification 176 6-1b Moderate and High Levels of Diversification 177 6-2 Reasons for Diversification 178 6-3 Value-Creating Diversification: Related Constrained and Related Linked Diversification 179 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. viii Contents 6-3a Operational Relatedness: Sharing Activities 180 6-3b Corporate Relatedness: Transferring of Core Competencies 181 6-3c Market Power 182 6-3d Simultaneous Operational Relatedness and Corporate Relatedness 184 6-4 Unrelated Diversification 185 6-4a Efficient Internal Capital Market Allocation 185 Strategic Focus: GE and United Technology Are Firms that Have Pursued Internal Capital Allocation and Restructuring Strategies 186 6-4b Restructuring of Assets 187 6-5 Value-Neutral Diversification: Incentives and Resources 188 6-5a Incentives to Diversify 188 Strategic Focus: Coca-Cola’s Diversification to Deal with Its Reduced Growth in Soft Drinks 190 6-5b Resources and Diversification 192 6-6 Value-Reducing Diversification: Managerial Motives to Diversify 193 Summary 196 • Key Terms 196 • Review Questions 196 • Mini-Case 197 • Notes 198 7: Merger and Acquisition Strategies 204 Opening Case: Mergers and Acquisitions: Prominent Strategies for Firms Seeking to Enhance Their Performance 205 7-1 The Popularity of Merger and Acquisition Strategies 206 7-1a Mergers, Acquisitions, and Takeovers: What Are the Differences? 207 7-2 Reasons for Acquisitions 208 Strategic Focus: A Merger of Equals: Making It Happen Isn’t Easy! 209 7-2a Increased Market Power 210 7-2b Overcoming Entry Barriers 211 Strategic Focus: Different Strategic Rationales Driving Cross-Border Acquisitions 212 7-2c Cost of New Product Development and Increased Speed to Market 213 7-2d Lower Risk Compared to Developing New Products 214 7-2e Increased Diversification 214 7-2f Reshaping the Firm’s Competitive Scope 215 7-2g Learning and Developing New Capabilities 215 7-3 Problems in Achieving Acquisition Success 216 7-3a Integration Difficulties 217 7-3b Inadequate Evaluation of Target 218 7-3c Large or Extraordinary Debt 219 7-3d Inability to Achieve Synergy 220 7-3e Too Much Diversification 221 7-3f Managers Overly Focused on Acquisitions 221 7-3g Too Large 222 7-4 Effective Acquisitions 222 7-5 Restructuring 224 7-5a Downsizing 224 7-5b Downscoping 224 7-5c Leveraged Buyouts 225 7-5d Restructuring Outcomes 225 Summary 227 • Key Terms 228 • Review Questions 228 • Mini-Case 228 • Notes 230 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. ixContents 8: International Strategy 236 Opening Case: Netflix Ignites Growth Through International Expansion, But Such Growth Also Fires Up the Competition 237 8-1 Identifying International Opportunities 239 8-1a Incentives to Use International Strategy 239 8-1b Three Basic Benefits of International Strategy 241 8-2 International Strategies 243 8-2a International Business-Level Strategy 243 8-2b International Corporate-Level Strategy 246 Strategic Focus: Furniture Giant IKEA’s Global Strategy 248 8-3 Environmental Trends 250 8-3a Liability of Foreignness 250 8-3b Regionalization 251 8-4 Choice of International Entry Mode 252 8-4a Exporting 253 8-4b Licensing 253 8-4c Strategic Alliances 254 8-4d Acquisitions 255 8-4e New Wholly Owned Subsidiary 256 8-4f Dynamics of Mode of Entry 257 8-5 Risks in an International Environment 258 8-5a Political Risks 258 8-5b Economic Risks 259 Strategic Focus: The Global Soccer Industry and the Effect of the FIFA Scandal 260 8-6 Strategic Competitiveness Outcomes 262 8-6a International Diversification and Returns 262 8-6b Enhanced Innovation 263 8-7 The Challenge of International Strategies 264 8-7a Complexity of Managing International Strategies 264 8-7b Limits to International Expansion 264 Summary 265 • Key Terms 266 • Review Questions 266 • Mini-Case 266 • Notes 268 9: Cooperative Strategy 276 Opening Case: Google, Intel, and Tag Heuer: Collaborating to Produce a Smartwatch 277 9-1 Strategic Alliances as a Primary Type of Cooperative Strategy 279 9-1a Types of Major Strategic Alliances 279 9-1b Reasons Firms Develop Strategic Alliances 281 9-2 Business-Level Cooperative Strategy 284 9-2a Complementary Strategic Alliances 284 9-2b Competition Response Strategy 286 9-2c Uncertainty-Reducing Strategy 287 9-2d Competition-Reducing Strategy 287 Strategic Focus: Strategic Alliances as the Foundation for Tesla Motors’ Operations 288 9-2e Assessing Business-Level Cooperative Strategies 290 9-3 Corporate-Level Cooperative Strategy 290 9-3a Diversifying Strategic Alliance 291 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. x Contents 9-3b Synergistic Strategic Alliance 291 9-3c Franchising 291 9-3d Assessing Corporate-Level Cooperative Strategies 292 9-4 International Cooperative Strategy 292 9-5 Network Cooperative Strategy 293 9-5a Alliance Network Types 294 9-6 Competitive Risks with Cooperative Strategies 295 Strategic Focus: Failing to Obtain Desired Levels of Success with Cooperative Strategies 296 9-7 Managing Cooperative Strategies 297 Summary 299 • Key Terms 300 • Review Questions 300 • Mini-Case 300 • Notes 302 Part 3: Strategic Actions: Strategy Implementation 308 10: Corporate Governance 308 Opening Case: The Corporate Raiders of the 1980s Have Become the Activist Shareholders of Today 309 10-1 Separation of Ownership and Managerial Control 312 10-1a Agency Relationships 313 10-1b Product Diversification as an Example of an Agency Problem 314 10-1c Agency Costs and Governance Mechanisms 316 10-2 Ownership Concentration 317 10-2a The Increasing Influence of Institutional Owners 318 10-3 Board of Directors 319 10-3a Enhancing the Effectiveness of the Board of Directors 321 10-3b Executive Compensation 322 10-3c The Effectiveness of Executive Compensation 323 Strategic Focus: Do CEOs Deserve the Large Compensation Packages They Receive? 324 10-4 Market for Corporate Control 325 10-4a Managerial Defense Tactics 326 10-5 International Corporate Governance 328 10-5a Corporate Governance in Germany and Japan 328 Strategic Focus: “Engagement” versus “Activist” Shareholders in Japan, Germany, and China 330 10-5b Corporate Governance in China 331 10-6 Governance Mechanisms and Ethical Behavior 332 Summary 333 • Key Terms 334 • Review Questions 334 • Mini-Case 335 • Notes 336 11: Organizational Structure and Controls 344 Opening Case: Luxottica’s Dual CEO Structure: A Key to Long-Term Success or a Cause for Concern? 345 11-1 Organizational Structure and Controls 347 11-1a Organizational Structure 347 Strategic Focus: Changing McDonald’s Organizational Structure: A Path to Improved Performance? 348 11-1b Organizational Controls 350 11-2 Relationships between Strategy and Structure 351 11-3 Evolutionary Patterns of Strategy and Organizational Structure 351 11-3a Simple Structure 352 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xiContents 11-3b Functional Structure 353 11-3c Multidivisional Structure 353 11-3d Matches between Business-Level Strategies and the Functional Structure 354 11-3e Matches between Corporate-Level Strategies and the Multidivisional Structure 357 Strategic Focus: Sony Corporation’s New Organizational Structure: Greater Financial Accountability and Focused Allocations of Resources 362 11-3f Matches between International Strategies and Worldwide Structure 365 11-3g Matches between Cooperative Strategies and Network Structures 369 11-4 Implementing Business-Level Cooperative Strategies 370 11-5 Implementing Corporate-Level Cooperative Strategies 371 11-6 Implementing International Cooperative Strategies 372 Summary 373 • Key Terms 373 • Review Questions 374 • Mini-Case 374 • Notes 375 12: Strategic Leadership 382 Opening Case: Can You Follow an Icon and Succeed? Apple and Tim Cook After Steve Jobs 383 12-1 Strategic Leadership and Style 384 12-2 The Role of Top-Level Managers 387 12-2a Top Management Teams 387 12-3 Managerial Succession 391 Strategic Focus: Trial by Fire: CEO Succession at General Motors 395 12-4 Key Strategic Leadership Actions 396 12-4a Determining Strategic Direction 396 12-4b Effectively Managing the Firm’s Resource Portfolio 397 Strategic Focus: All the Ways You Can Fail! 400 12-4c Sustaining an Effective Organizational Culture 401 12-4d Emphasizing Ethical Practices 402 12-4e Establishing Balanced Organizational Controls 403 Summary 406 • Key Terms 407 • Review Questions 407 • Mini-Case 407 • Notes 409 13: Strategic Entrepreneurship 416 Opening Case: Entrepreneurial Fervor and Innovation Drive Disney’s Success 417 13-1 Entrepreneurship and Entrepreneurial Opportunities 419 13-2 Innovation 420 13-3 Entrepreneurs 420 13-4 International Entrepreneurship 421 13-5 Internal Innovation 422 13-5a Incremental and Novel Innovation 423 Strategic Focus: Innovation Can Be Quirky 425 13-5b Autonomous Strategic Behavior 426 13-5c Induced Strategic Behavior 427 13-6 Implementing Internal Innovations 427 13-6a Cross-Functional Product Development Teams 428 13-6b Facilitating Integration and Innovation 429 13-6c Creating Value from Internal Innovation 429 13-7 Innovation through Cooperative Strategies 430 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. xii Contents 13-8 Innovation through Acquisitions 431 Strategic Focus: What Explains the Lack of Innovation at American Express? Is It Hubris, Inertia, or Lack of Capability? 432 13-9 Creating Value through Strategic Entrepreneurship 433 Summary 435 • Key Terms 436 • Review Questions 436 • Mini-Case 436 • Notes 437 Part 4: Case Studies C-1 Preparing an Effective Case Analysis C-4 CASE 1: Kindle Fire: Amazon’s Heated Battle for the Tablet Market C-13 CASE 2: American Express: Bank 2.0 C-30 CASE 3: BP In Russia: Bad Partners or Bad Partnerships? (A) C-42 CASE 4: Carlsberg in Emerging Markets C-47 CASE 5: Fisk Alloy Wire, Inc. and Percon C-56 CASE 6: Business Model and Competitive Strategy of IKEA in India C-66 CASE 7: Invitrogen (A) C-78 CASE 8: Keurig: From David to Goliath: The Challenge of Gaining and Maintaining Marketplace Leadership C-87 CASE 9: KIPP Houston Public Schools C-97 CASE 10: Luck Companies: Igniting Human Potential C-112 CASE 11: Corporate Governance at Martha Stewart Living Omnimedia: Not “A Good Thing” C-126 CASE 12: The Movie Exhibition Industry: 2015 C-141 CASE 13: Polaris and Victory: Entering and Growing the Motorcycle Business C-161 CASE 14: Safaricom: Innovative Telecom Solutions to Empower Kenyans C-179 CASE 15: Siemens: Management Innovation at the Corporate Level C-193 CASE 16: Southwest Airlines C-208 CASE 17: Starbucks Corporation: The New S-Curves C-223 CASE 18: Super Selectos: Winning the War Against Multinational Retail Chains C-237 CASE 19: Tim Hortons Inc. C-250 CASE 20: W. L. Gore—Culture of Innovation C-262 Name Index I-1 Company Index I-20 Subject Index I-23 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 2: xiii Preface xiii Our goal in writing each edition of this book is to present a new, up-to-date standard for explaining the strategic management process. To reach this goal with the 12th edition of our market-leading text, we again present you with an intellectually rich yet thoroughly practical analysis of strategic management. With each new edition, we work hard to achieve the goal of maintaining the standard that we established for presenting strategic management knowledge in a readable style. To prepare for each new edition, we carefully study the most recent academic research to ensure that the content about strategic management that we present to you is up to date and accurate. In addition, we continuously read articles appearing in many different and widely read business publications (e.g., Wall Street Journal, Bloomberg Businessweek, Fortune, Financial Times, Fast Company, and Forbes, to name a few). We also study post- ings through social media (such as blogs) given their increasing use as channels of infor- mation distribution. By studying a wide array of sources, we are able to identify valuable examples of how companies are using (or not using) the strategic management process. Though many of the hundreds of companies that we discuss in the book will be quite familiar, some will likely be new to you. One reason for this is that we use examples of companies from around the world to demonstrate the globalized nature of business operations. To maximize your opportunities to learn as you read and think about how actual companies use strategic management tools, techniques, and concepts (based on the most current research), we emphasize a lively and user-friendly writing style. To facilitate learning, …