Strategic ManagementConcepts and CasesFourteenth EditionGlobal EditionFred R. DavidFrancis Marion UniversityFlorence, South CarolinaPEARSONBoston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal TorontoDelhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

ContentsPreface 15I m p o r t a n c e (Benefits) of Vision a n d Mission S t a t e m e n t sA Resolution of Divergent ViewsAcknowledgmentsAbout the Author23Characteristics o f a Mission S t a t e m e n t79A Declaration of Attitude 79 A CustomerOrientation 81 n Mission Statement Components27Writing a n d Evaluating Mission StatementsPART 1 Overview of StrategicManagement 32Special N o t e t o Students35Key Terms in Strategic M a n a g e m e n tAssurance of Learning Exercise 2E: Selecting the Best Vision and MissionStatements in a Given Industry 8938The Strategic-Management M o d e l43Benefits of Strategic M a n a g e m e n t45Assurance of Learning Exercise 2F: Writing an Excellent Vision andMission Statement for Novartis AG 89Why Some Firms Do No Strategic PlanningKey External Forces46Comparing Business a n d Military StrategyEconomic Forces47949595Social, Cultural, Demographic, and Natural Environment Forces49Political, G o v e r n m e n t a l , a n d Legal Forces50THE COHESION CASE: THE ADIDAS GROUP—2011American Labor Unions5569Technological ForcesAssurance of Learning Exercise 1A: Examine Recent and FutureAcquisitions for Nokia 69C o m p e t i t i v e Forces69Assurance of Learning Exercise 1C: Getting Familiar with SMCOAssurance of Learning Exercise 1D: Becoming a Certified Strategic PlannerAssurance of Learning Exercise 1E: Strategic Planning at Nestle7070Assurance of Learning Exercise 1F: Interviewing Local Strategists99102 Market Commonality and7172Chapter 2 The Business Vision and Mission 72105Rivalry Among Competing Firms 106 n Potential Entryof New Competitors 107 Potential Developmentof Substitute Products 107 o Bargaining Power ofSuppliers 109 Bargaining Power of Consumers 109Sources of External I n f o r m a t i o nPART 2 Strategy Formulation104C o m p e t i t i v e Analysis: Porter's Five-Forces M o d e l709798101Competitive Intelligence ProgramsResource Similarity 105Assurance of Learning Exercise 1B: Gather Strategy Information onAdidas93The Industrial Organization (I/O) V i e w47ASSURANCE OF LEARNING EXERCISES9092The Process of Performing an External Audit46Guidelines for Effective Strategic M a n a g e m e n tSpecial Note t o StudentsChapter 3 The External AssessmentThe Nature of an External AuditIBM CORPORATION: EXCELLENT STRATEGIC MANAGEMENTSHOWCASED 92D Nonfinancial BenefitsPitfalls in Strategic Planning88Assurance of Learning Exercise 2D: Evaluating the Mission Statement ofUnder Armour—A Competitor of Adidas AG 88Competitive Advantage 38 p Strategists 39 D Visionand Mission Statements 40 External Opportunities andThreats 40 Internal Strengths and Weaknesses 41 D LongTerm Objectives 41 Strategies 41 AnnualObjectives 41 Policies 424587Assurance of Learning Exercise 2C: Evaluating Mission StatementsDefining Strategic Management 35 n Stages ofStrategic Management 35 Integrating Intuition andAnalysis 36 Adapting to Change 37Financial BenefitsAssurance of Learning Exercise 2B: Studying an Alternative View ofMission Statement Content34What Is Strategic M a n a g e m e n t ?87Assurance of Learning Exercise 2A: Examining Potential Changes Neededin a Firm's Vision/Mission 87NOKIA CORPORATION: EXCELLENT STRATEGIC MANAGEMENTSHOWCASED818282ASSURANCE OF LEARNING EXERCISESChapter 1 The Nature of StrategicManagement 327878Forecasting Tools a n d TechniquesMaking Assumptions109109110MICROSOFT CORPORATION: EXCELLENT STRATEGIC MANAGE-Industry Analysis: The External Factor Evaluation (EFE) Matrix 110MENT SHOWCASEDThe Competitive Profile Matrix (CPM) 11374What Do W e Want t o Become?What Is Our Business?7575Vision versus Mission 77Mission Statements 77Special Note to Students 114ASSURANCE OF LEARNING EXERCISES The Process of Developing Vision and118Assurance of Learning Exercise 3A: IBM and Africa: An ExternalAssessment 118

10CONTENTSAssurance of Learning Exercise 3B: Preparing a CPM for IBM Based onCountries Rather than Companies118Assurance of Learning Exercise 3C: Develop Divisional IBM EFE Matrices118Assurance of Learning Exercise 3D: Developing an EFE Matrixfor Adidas AGThe Balanced Scorecard120Assurance of Learning Exercise 3G: Developing a CPM for Adidas AG120Assurance of Learning Exercise 3H: Analyzing Your College or University'sExternal Strategic Situation 121124Key Internal ForcesAudit 126125 The Process of Performing an Internal128Retrenchment176o Backward Integration170Motivating 132n Management Audit134Customer Analysis 134 D Selling Products/Services 134 Product and Service Planning 136 o Pricing 136n Distribution 137 D Marketing Research 137 Cost/Benefit Analysis 137 Marketing Audit Checklist of Questions 138138Finance/Accounting Functions 138 D BasicTypes of FinancialRatios 139 D Finance/Accounting Audit Checklist 144Production/Operations145Production/Operations Audit ChecklistResearch and DevelopmentInternal and External R&DAudit 148 Market Development172 173174 Unrelated DiversificationResearch and Development148Management Information Systems AuditValue Chain Analysis (VCA)175176 Divestiture177DLiquidationMeans for Achieving Strategies183Cooperation Among Competitors 183 Joint Venture/Partnering 183 Merger/Acquisition 185 a Private-EquityAcquisitions 187 First Mover Advantages 187D Outsourcing 188Strategic Management in Nonprofit and GovernmentalOrganizations 189Strategic Management in Small Firms191191ASSURANCE OF LEARNING EXERCISES195Assurance of Learning Exercise 5A: Market Development: Procter &Gamble (P&G) 195148149Assurance of Learning Exercise 5B: Alternative Strategiesfor P&G 196151The Internal Factor Evaluation (IFE) MatrixSpecial Note to Students 153ASSURANCE OF LEARNING EXERCISES152Assurance of Learning Exercise 5C: Private-EquityAcquisitions158196Assurance of Learning Exercise 5D: Adidas AG: 2011-2013197Assurance of Learning Exercise 4A: Develop a Corporate IFE Matrix forJ&J 158Assurance of Learning Exercise 5E: Lessons in Doing BusinessGlobally 197Assurance of Learning Exercise 4B: Should J&J Deploy More Resources orAssurance of Learning Exercise 5F: Procter & Gamble (P&G):2011-2013 197Less Outside of the USA?178178Cost Leadership Strategies (Type 1 and Type 2) 180D Differentiation Strategies (Type 3) 181 Focus Strategies(Type 4 and Type 5) 182 n Strategies for Competing in Turbulent,High-Velocity Markets 182Special Note to StudentsManagement Information Systems171Religious Facilities 190 D Educational Institutions 190 Medical Organizations 190 a Governmental Agencies andDepartments 191146146147169171Michael Porter's Five Generic StrategiesPlanning 130 n Organizing 132 Staffing 133 Controlling 133Checklist of Questions 134Benchmarking168Diversification StrategiesDefensive Strategies130Finance/AccountingIntegration StrategiesRelated Diversification127Integrating Strategy and CultureMarketing166Market Penetration 171 Product Development124The Resource-Based View (RBV)Management165Levels of StrategiesIntensive StrategiesJOHNSON & JOHNSON (J&J): EXCELLENT STRATEGICMANAGEMENT SHOWCASEDTypes of Strategies165Forward Integration 168DHorizontal IntegrationChapter 4 The Internal Assessment 122The Nature of an Internal Audit162The Nature of Long-Term Objectives 163 Financial versus StrategicObjectives 163 D Not Managing by Objectives 164119Assurance of Learning Exercise 3F: Developing a CPM for IBMCorporationPROCTER & GAMBLE (P&G): EXCELLENT STRATEGICMANAGEMENT SHOWCASED119Assurance of Learning Exercise 3E: The External AssessmentChapter 5 Strategies in Action 160Long-Term Objectives 162158Assurance of Learning Exercise 4C: Apply Breakeven Analysis158Assurance of Learning Exercise 5G: What Strategies Are MostRisky?198Assurance of Learning Exercise 4D: Performing a Financial Ratio Analysisfor Adidas AG 159Assurance of Learning Exercise 5H: Exploring BankruptcyAssurance of Learning Exercise 4E: Constructing an IFE Matrix for AdidasAG 159Assurance of Learning Exercise 51: Examining StrategyArticles 198Assurance of Learning Exercise 4F: Analyzing Your College or University'sInternal Strategic Situation 159Assurance of Learning Exercise 5J: Classifying SomeStrategies 199198

11CONTENTSChapter 6 Strategy Analysis and Choice 200Resource AllocationThe Nature of Strategy Analysis and ChoiceManaging Conflict202THE COCA-COLA COMPANY (TCCC): EXCELLENT STRATEGICMANAGEMENT SHOWCASED202The Process of Generating and Selecting Strategies203A Comprehensive Strategy-Formulation FrameworkThe Input Stage204205The Matching Stage249Matching Structure with Strategy220250The Functional Structure 251 The Divisional Structure 252 The Strategic Business Unit (SBU) Structure 253 The MatrixStructure 257 n Some Do's and Don'ts in Developing OrganizationalCharts 257Restructuring and Reengineering205The Strategic Position and Action Evaluation (SPACE) Matrix 208B The Boston Consulting Group (BCG) Matrix 212 a The InternalExternal (IE) Matrix 216 0 The Grand Strategy Matrix 219The Decision Stage249Restructuring260 260Reengineering261Linking Performance and Pay to StrategiesManaging Resistance to Change264Creating a Strategy-Supportive CultureThe Quantitative Strategic Planning Matrix (QSPM)Positive Features and Limitations of the QSPMCultural Aspects of Strategy Choice221261265Production/Operations Concerns When Implementing224Strategies266226Human Resource Concerns When Implementing StrategiesThe Politics of Strategy ChoiceGovernance Issues226227Special Note to Students230ASSURANCE OF LEARNING EXERCISES267Employee Stock Ownership Plans (ESOPs) 269 BalancingWork Life and Home Life 270 n Benefits of a DiverseWorkforce 272 a Corporate Wellness Programs 272Special Note to Students233Assurance of Learning Exercise 6A: Should the Coca-Cola Company(TCCC) Penetrate Russia Further? 233274ASSURANCE OF LEARNING EXERCISES278Assurance of Learning Exercise 7A: Developing an Organizational Chart forAssurance of Learning Exercise 6B: Perform a SWOT Analysis forTCCC'sIKEA 278Global OperationsAssurance of Learning Exercise 7B: Assessing IKEA's SustainabilityEfforts 278233Assurance of Learning Exercise 6C: Preparing a BCG Matrix for TCCC 234Assurance of Learning Exercise 6D: Developing a SWOT Matrixfor Adidas AG 234Assurance of Learning Exercise 7C: Revising Adidas AG's OrganizationalAssurance of Learning Exercise 6E: Developing a SPACE Matrixfor Adidas AG 235Assurance of Learning Exercise 7D: Exploring ObjectivesAssurance of Learning Exercise 6F:Developing a BCG Matrixfor Adidas AG 235Assurance of Learning Exercise 6G: Developing a QSPMfor Adidas AG 236Assurance of Learning Exercise 6H: Developing a SWOT Matrixfor TCCC 236Assurance of Learning Exercise 61: Developing a SPACE Matrixfor TCCC 236Assurance of Learning Exercise 6J: Developing a BCG Matrix for yourCollege or University 237Assurance of Learning Exercise 6K: Developing a QSPM for a CompanythatYou are Familiar With 237Assurance of Learning Exercise 6L: Formulating IndividualStrategies 237Assurance of Learning Exercise 6M: The Mach TestPART 3238Strategy Implementation240Chart278Chapter 8 Implementing Strategies: Marketing,Finance/Accounting, R&D, and MISIssues 280The Nature of Strategy ImplementationIKEA: EXCELLENT STRATEGIC MANAGEMENTSHOWCASED242The Nature of Strategy ImplementationMANAGEMENT SHOWCASEDCurrent Marketing Issues282283New Principles of Marketing 284 D Purpose-Based Marketing 286Market Segmentation Does the Internet Make289291Acquiring Capital to Implement Strategies 294 ProjectedFinancial Statements 294 D Projected Financial Statement Analysisfor Whole Foods Market 298 D Financial Budgets 300Evaluating the Worth of a Business 302 a Deciding Whether to GoPublic 305243305244Management Information Systems (MIS) IssuesAnnual Objectives245Business AnalyticsPolicies247285286Retention-Based Segmentation r 287Market Segmentation Easier? 289Product PositioningAdvertising MediaResearch and Development (R&D) IssuesManagement Perspectives282HEWLETT-PACKARD (HP): EXCELLENT STRATEGICFinance/Accounting IssuesChapter 7 Implementing Strategies: Managementand Operations Issues 240279Assurance of Learning Exercise 7E: Understanding My University'sCulture 279308307

12CONTENTSSpecial Note t o StudentsSocial Responsibility308ASSURANCE OF LEARNING EXERCISESSocial Policy311Assurance of Learning Exercise 8A: Preparing an EPS/EBIT Analysis forHewlett-Packard (HP) 311Assurance of Learning Exercise 8B: Developing a Product-PositioningMap for Adidas AG 311Assurance of Learning Exercise 8C: Performing an EPS/EBIT Analysis forAdidas AG 312Assurance of Learning Exercise 8D: Preparing Projected FinancialStatements for Adidas AG 312Assurance of Learning Exercise 8E: Determining the Cash Value of AdidasAG 313346346 Social Policies on RetirementEnvironmental Sustainability347347p What Is a Sustainability Report? 349 Lack of StandardsChanging 349 D Federal Regulations 350 ManagingEnvironmental Affairs in the Firm 350 n Should Students ReceiveEnvironmental Training? 350 Reasons Why Firms Should"Be Green" 351 o Be Proactive, Not Reactive 351 o ISO14000/14001 Certification 351 D Electric Car Networks AreHere 352Special Note to Students 353ASSURANCE OF LEARNING EXERCISES356Assurance of Learning Exercise 8F: Developing a Product-Positioning Mapfor My College 313Assurance of Learning Exercise 10A: Sustainability and GoldmanSachs 356Assurance of Learning Exercise 8G: Do Banks Require Projected FinancialStatements? 313Assurance of Learning Exercise 10B: How Does My Municipality CompareTo Others on Being Pollution-Safe? 356Assurance of Learning Exercise 10C: Compare Adidas AG versus Nike onSocial Responsibility 356PART 4 Strategy Evaluation 314Assurance of Learning Exercise 10D: How Do You Rate Adidas AG's .Sustainability Efforts? 357Chapter 9 Strategy Review, Evaluation, andControl 314The Nature of Strategy EvaluationAssurance of Learning Exercise 10E: How Do You Rate Goldman Sach'sSustainability Efforts? 357316Assurance of Learning Exercise 10F: The Ethics of Spying onCompetitors 357GOOGLE INC.: EXCELLENT STRATEGIC MANAGEMENTSHOWCASED316The Process of Evaluating StrategiesA Strategy-Evaluation Framework320Chapter 11 Global/International Issues 358321PFIZER INC. EXCELLENT STRATEGIC MANAGEMENT SHOW-Reviewing Bases of Strategy 321 o Measuring OrganizationalPerformance 322 o Taking Corrective Actions 325The Balanced Scorecard326Published Sources of Strategy-Evaluation InformationCharacteristics of an Effective Evaluation SystemContingency PlanningAuditingOperations328329GlobalizationThe Art of Science IssueH331331333365Business Culture Across CountriesASSURANCE OF LEARNING EXERCISES336Assurance of Learning Exercise 9A: Evaluating Google's Strategies336Assurance of Learning Exercise 9B: Preparing a Strategy-EvaluationReport for Adidas AG 336Assurance of Learning Exercise 9C: Preparing a Balanced Scorecard forAdidas AG 337Assurance of Learning Exercise 9D: Evaluate My University'sStrategies 337PART 5 Key Strategic-ManagementTopics 338Chapter 10 Business Ethics/Social Responsibility/Environmental Sustainability 338GOLDMAN SACHS GROUP EXCELLENT STRATEGICBusiness EthicsCorporate Tax Rates GloballyCommunication Differences Across Countries333MANAGEMENT SHOWCASED364365United States versus Foreign Business Cultures13 The Visible or HiddenThe Top-Down or Bottom-Up ApproachSpecial Note t o Students363363The Global Challenge330331360Advantages and Disadvantages of International327Twenty-First-Century Challenges in Strategic ManagementIssueCASEDMultinational Organizations340369369Mexico—Business Culture 369 Japan—BusinessCulture 370 Brazil—Business Culture 372 D Germay—BusinessCulture 372 D Egypt—Business Culture 373 China—Business Culture 373 n India—Business Culture 374D Nigeria—Business Culture 375Business Climate Across Countries/ContinentsAfrican Countries 375 Chinaa Taiwan 379 a India 379Mexico 381Special N o t e t o Students1375377 a Philippines 378o Germany 380 382ASSURANCE OF LEARNING EXERCISES386Assurance of Learning Exercise 11 A: Adidas AG Wants to Enter Africa.Help Them. 386Assurance of Learning Exercise 11B: Assessing Differences in CultureAcross Countries 386Assurance of Learning Exercise 11C: Pfizer Wants to Enter Vietnam. HelpThem. 386341Code of Business Ethics 342 An Ethics CulturenBribes 344 Love Affairs at Work 345367342Assurance of Learning Exercise 11D: Does My University Recruit inForeign Countries? 387

CONTENTSPART 6Strategic-Management CaseAnalysis388How to Prepare and Present a CaseAnalysis 388What is a Strategic-Management Case? 390Guidelines for Preparing Case Analyses 390The Need for Practicality 390 The Need forJustification 390 n The Need for Realism 390 The Need forSpecificity 390 The Need for Originality 391 D The Need toContribute 39113Making an Oral Presentation 393Organizing the Presentation 393 n Controlling YourVoice 394 D Managing Body Language 394 Speaking fromNotes 394 a Constructing Visual Aids 394 Answering Questions 394 D Tips for Success inCase Analysis 394 Content Tips 395 n ProcessTips 395 Sample Case Analysis Outline 396STEPS IN PRESENTING AN ORAL CASE ANALYSIS397Oral Presentation—Step 1: Introduction (2 minutes) 397Oral Presentation—Step 2: Mission/Vision (4 minutes) 397Oral Presentation—Step 3: Internal Assessment (8 minutes)398Oral Presentation—Step 4: External Assessment (8 minutes) 398Preparing a Case for Class Discussion 391The Case Method versus Lecture ApproachOral Presentation—Step 5: Strategy Formulation (14 minutes) 398391The Cross-Examination 392Preparing a Written Case Analysis 392The Executive Summary 392 D The Comprehensive WrittenAnalysis 392 Steps in Preparing a Comprehensive WrittenAnalysis 393Oral Presentation—Step 6: Strategy Implementation (8 minutes) 399Oral Presentation—Step 7: Strategy Evaluation (2 minutes) 399Oral Presentation—Step 8: Conclusion (4 minutes) 399Name Index 401Subject Index 409

Competitive Analysis: Porter's Five-Forces Model 105 Rivalry Among Competing Firms 106 n Potential Entry of New Competitors 107 Potential Development . Performing a Financial Ratio Analysis for Adidas AG 159 Assurance of Learning Exercise 4E: Constructing an IFE Matrix for Adidas AG 159