MGT 401 Saudi Electronic University Strategic Management Questions

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‫المملكة العربية السعودية‬ ‫وزارة التعليم‬ ‫الجامعة السعودية اإللكترونية‬ Kingdom of Saudi Arabia Ministry of Education Saudi Electronic University College of Administrative and Financial Sciences Assignment 3 Strategic Management (MGT 401) Due Date: 26/04/2022 @ 23:59 Course Name: Strategic Management Student’s Name: Course Code: MGT 401 Student’s ID Number: Semester: Second CRN: Academic Year:2021-22-2nd For Instructor’s Use only Instructor’s Name: Abdulrahman I. Almanie Students’ Grade: Marks Obtained/Out of 10 Level of Marks: High/Middle/Low General Instructions – PLEASE READ THEM CAREFULLY • • • • • • • • The Assignment must be submitted on Blackboard (WORD format only) via allocated folder. Assignments submitted through email will not be accepted. Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page. Students must mention question number clearly in their answer. Late submission will NOT be accepted. Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism). Submissions without this cover page will NOT be accepted. Learning Outcomes: ▪ ▪ ▪ Describe the different issues related to environmental scanning, strategy formulation, and strategy implementation in diversified organizations. ClO-2 Distinguish between different types and levels of strategy and strategy implementation-CLO4 Communicate issues, results, and recommendations coherently, and effectively regarding appropriate strategies for different situations, ClO-6 Assignment Question(s): A. Discussion questions 1. Is the evaluation and control process appropriate for a corporation that emphasizes creativity? Are control and creativity compatible? Discuss. (2 marks) Max 300 words 2. What skills should a person have for managing a business unit following a differentiation strategy? Why? What should a company do if no one is available internally and the company has a policy of promotion from within? (2 marks) Max 400 words 3. Why is an understanding of national cultures important in strategic management? (1 mark) Max 300 words B. Case study An acquisition is a situation whereby one firm (acquiring firm) purchases most or all of another firm's (acquired firm) shares in order to take control. From real national/international market, select an example of an acquisition between two firms and answer the following questions: 1. Briefly introduce the chosen acquiring and acquired firms (Industry, activity, nationality, market position, …). (1Mark). Max 100 words 2. Explain the different reasons for this acquisition. (1Mark) 3. Was this acquisition successful? Why? (1Mark) 4. Evaluate the competitive advantage of the acquiring company (after the acquisition). (1Mark) 5. What is the method used by the acquiring firm to manage the culture of the acquired firm? underline the pros and cons of this method. (1Mark) Answers A. Discussion questions 1. Answer Q1- 2. Answer Q2- A. Case study 1. Answer Q1- 2. Answer Q2- 3. Answer Q3- 4. Answer Q4- 5. Answer Q5- Strategic Management Model Environmental Scanning: Strategy Formulation: Strategy Implementation: Evaluation and Control: Gathering Information Developing Long-range Plans Putting Strategy into Action Monitoring Performance External: Opportunities and Threats Natural Environment: Resources and climate Societal Environment: General forces Task Environment: Mission Reason for existence Objectives What results to accomplish by when Strategies Plan to achieve the mission & objectives Policies Broad guidelines for decision making Industry analysis Programs Activities needed to accomplish a plan Budgets Cost of the programs Procedures Sequence of steps needed to do the job Internal: Strengths and Weaknesses Structure: Chain of command Culture: Beliefs, expectations, values Resources: Assets, skills, competencies, knowledge Feedback/Learning: Make corrections as needed Performance Actual results THIRTEENTH EDITION Strategic Management and Business Policy TOWARD GLOBAL SUSTAINABILITY This page intentionally left blank THIRTEENTH EDITION Strategic Management and Business Policy TOWARD GLOBAL SUSTAINABILITY Thomas L. Wheelen J. David Hunger Formerly with University of Virginia Trinity College, Dublin, Ireland Iowa State University St. John’s University with major contributions by Kathryn E. Wheelen Alan N. Hoffman Bentley University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sa~o Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editorial Director: Sally Yagan Editor in Chief: Eric Svendsen Senior Acquisitions Editor: Kim Norbuta Editorial Project Manager: Claudia Fernandes Editorial Assistant: Carter Anderson Director of Marketing: Patrice Lumumba Jones Senior Marketing Manager: Nikki Ayana Jones Marketing Assistant: Ian Gold Senior Managing Editor: Judy Leale Production Project Manager: Becca Groves Senior Operations Supervisor: Arnold Vila Operations Specialist: Cathleen Petersen Creative Director: Blair Brown Senior Art Director/Supervisor: Janet Slowik Cover Designer: Liz Harasymcuk Cover Photo: Courtesy of NASA/Shutterstock Interior Designer: Maureen Eide Media Project Manager, Editorial: Denise Vaughn Media Project Manager, Production: Lisa Rinaldi Full-Service Project Management: Emily Bush, S4Carlisle Publishing Services Composition: S4Carlisle Publishing Services Printer/Binder: Courier/Kendalville Cover Printer: Lehigh-Phoenix Color/Hagerstown Text Font: 10/12 Times Roman Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within text. Copyright © 2012, 2010, 2008, 2006, 2004 by Pearson Education, Inc., publishing as Prentice Hall. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458, or you may fax your request to 201-236-3290. Many of the designations by manufacturers and sellers to distinguish their products are claimed as trademarks. Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps. Library of Congress Cataloging-in-Publication Data Wheelen, Thomas L. Strategic management and business policy : toward global sustainability / Thomas L. Wheelen, J. David Hunger. — 13th ed. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-13-215322-5 ISBN-10: 0-13-215322-X 1. Strategic planning. 2. Strategic planning—Case studies. 3. Sustainability. I. Hunger, J. David, II. Title. HD30.28.W43 2012 658.4'012—dc22 2011013549 10 9 8 7 6 5 4 3 2 1 ISBN 10: 0-13-215322-X ISBN 13: 978-0-13-215322-5 Dedicated to KATHY, RICHARD, AND TOM BETTY, KARI AND JEFF, MADDIE AND MEGAN, SUZI AND NICK, SUMMER AND KACEY, LORI, MERRY AND DYLAN, AND WOOFIE (ARF!). SPECIAL DEDICATION TO KATHRYN WHEELEN: Kathryn has worked on every phase of the case section of this book. Until this edition, she also managed the construction of the Case Instructor’s Manual. She has done every job with a high level of dedication and concern for both the case authors and the readers of this book. This book is also dedicated to the following Prentice Hall/Pearson sales representatives who work so hard to promote this book: NOLA AKALA KASEY CROCKETT BRIDGET HANNENBERG DAVID ALEVY DAN CURRIER BRYAN HARRELL TARA ALGEO KELLY DAN TARA HARTLEY DAVID ARMSTRONG MICHLENE DAOUD HEALY KENNY HARVEY MIKE ASKEW STACY DAVIS ALISON HASKINS LAURA BAILEY FRANK DEL CASTILLO CAROL HAWKS NICK BAKER MEREDITH DELA ROSA JENNIFER HEILBRUNN ALICIA BARNES CHRIS DELANEY CHRISTINE HENRY ASHLEY BARNES GEORGE DEVENNEY LYNN HICKS ALICE BARR DANA DODGE (Frick) JULIE HILDEBRAND SHERRY BARTEL KATE DOLDER DAUNNE HINGLE KENDRA BASSI BARBARA DONLON WENDI HOLLAND JAY BECKENSTEIN HEIDI DRESSLER CHRISTY HUMENIUK JOSH BECKENSTEIN TRACY DYBALSKI GENE HUMENIUK NICOLE BELL BRIAN DYK ANDREA IORIO CATHY BENNETT KIM ECK SUSAN JACKSON KATIE BOLLIN TRISH EICHHOLD PAM JEFFRIES SCOTT BORDEN KRISTIN ELBER BRITTANY JUCHNOWSKI JENNIFER BOYLE KELSEY ELLIOTT ANJALI JUSTUS AUNDREA BRIDGES KATIE EYNON CHERYL KABB SUZANNE BROWN GENEVA FARROW LAURA KAPPES ALEXANDRA BUEHLER MARIA FELIBERTY GIA KAUL KYLE BURDETTE MIKE FINER JULIE KESTENBAUM WHITNEY CAMERON MICHELLE FINNERTY KARTAPURKH KHALSA RUTH CARDIFF CANDAS FLETCHER KIM KIEHLER AMY CAREY ROBERT FLORY AMANDA KILLEEN MEGAN CARRICO MARCIA FLYNN WALT KIRBY MARTI CARTER BRAD FORRESTER MARY-JO KOVACH ANDREA CATULLO-LINN MARGARET FRENCH ROBYN KOVAR MEREDITH CHANDLER STEPHANIE FRITSON GREG KRAMP LUKE CLAEYS MARK GAFFNEY DANIEL KRAUSS KAYLEE CLAYMORE MICHELLE GARCIA-JUCHTER MICHAEL KRISANDA BRIAN COBB SYBIL GERAUD GINA LaMANTIA JENNIFER COLE AMBER GOECKE CHAFIKA LANDERS TARYLL CONNOLLY CAROLYN GOGOLIN DOROTHY LANDRY THAYNE CONRAD ADAM GOLDSTEIN DUSTIN LANGE DONNA CONROY BETH GRUNFELD ALIX LaSCOLA CAITLIN COUTHEN MICAELA HAIDLE JOE LEE MEGAN JOY COWART GREG HAITH APRIL LEMONS CYNDI CRIMMINS DEMETRIUS HALL KIMBERLY LENAGHAN vi DEDICATION TRICIA LISCIO COLLEEN O’DELL MARY SHAPIRO BETH LUDWIG DEBBIE OGILIVE BARBARA SHERRY CARY LUNA SARI ORLANSKY KEN SHIPBAUGH JEMINA MACHARRY DAVE OSTROW DAVE SHULER KATIE MAHAN DARCEY PALMER JESSICA SIEMINSKI LAURA MANN KRISTINA PARKER LEA SILVERMAN PATRICIA MARTINEZ TONI PAYNE AUTUMN SLAUGHTER CHRISTINA MASTROGIOVANNI JULIANNE PETERSON KRISTA SLAVICEK SONNY MATHARU MELISSA PFISTNER SCOTT SMITH TONY MATHIAS CANDACE PINATARO ADRIENNE SNOW BROOK MATTHEWS BELEN POLTORAK LEE SOLOMONIDES GEORGIA MAY ELIZABETH POPIELARZ BEN STEPHEN ALICIA MCAULIFFE MEGAN PRENDERGAST DAN SULLIVAN MASON McCARTNEY NICOLE PRICE JOHN SULLIVAN KAREN McFADYEN JILL PROMESSO LORI SULLIVAN BRIAN McGARRY LENNY ANN RAPER STEPHANIE SURFUS MICHELLE McGOVERN JOSH RASMUSSEN AMANDA SVEC IRENE McGUINNESS AMANDA RAY CHRISTINA TATE RYAN McHENRY SONYA REED SARAH THOMAS CRISTIN McMICHAEL RICHARD RESCH ABBY THORNBLADH KEVIN MEASELLE MARY RHODES KATY TOWNLEY RAY MEDINA BRAD RITTER ELIZABETH TREPKOWSKI KELLY MEIERHOFER DAN ROBERTSON TARA TRIPP MOLLY MEINERS MATT ROBINSON CAROLYN TWIST MATT MESAROS JENNIFER ROSEN JOE VIRZI SHALON MILLER DOROTHY ROSENE AMANDA VOLZ JAMI MINARD KELLEEN ROWE BRITNEY WALKER WILLIAM MINERICH RICH ROWE MADELEINE WATSON EMILY MITCHELL PEYTON ROYTEK BEN WEBER JILINE MIX SENG SAECHAO DANIEL WELLS JULIE MOREL STEVE SARTORI MARK WHEELER RAFAEL MORENO LYNDA SAX LIZ WILDES TRACY MORSE BOB SCANLON MICHELLE WILES OLIVIA MOUG MARCUS SCHERER BRIAN WILLIAMS DOLLY MUNIZ KIMBERLY SCHEYVING ERIN WILLIAMS TRICIA MURPHY HEIDI SCHICK (Miller) CINDY WILLIAMSON LAUREN MURROW BRAD SCHICK RACHEL WILLIS AMBER MYLLION (Parks) CHRIS SCHMIDT SIMON WONG LINDA NELSON DEBORAH SCHMIDT KIMBERLY WOODS LYNNE NICLAIR MOLLY SCHMIDT JACKIE WRIGHT BOB NISBET CORRINA SCHULTZ HEATHER WRUBLESKY BETSY NIXON WHITNEY SEAGO GEORGE YOUNG TOM NIXON CHRISTIANA SERLE MARY ZIMMERMANN LAURA NOAH MARTHA SERNAS KACIE ZIN vii This page intentionally left blank Brief Contents PART ONE Introduction to Strategic Management and Business Policy 1 1 Basic Concepts of Strategic Management 2 2 Corporate Governance 42 3 Social Responsibility and Ethics in Strategic Management 70 CHAPTER CHAPTER CHAPTER PART TWO Scanning the Environment 93 4 Environmental Scanning and Industry Analysis 94 5 Internal Scanning: Organizational Analysis 136 CHAPTER CHAPTER PART THREE Strategy Formulation 173 6 Strategy Formulation: Situation Analysis and Business Strategy 174 7 Strategy Formulation: Corporate Strategy 204 8 Strategy Formulation: Functional Strategy and Strategic Choice 236 CHAPTER CHAPTER CHAPTER PART FOUR Strategy Implementation and Control 269 CHAPTER CHAPTER CHAPTER 9 Strategy Implementation: Organizing for Action 270 1 0 Strategy Implementation: Staffing and Directing 300 1 1 Evaluation and Control 328 PART FIVE Introduction to Case Analysis 363 CHAPTER 1 2 Suggestions for Case Analysis 364 PART SIX WEB CHAPTERS Other Strategic Issues WEB CHAPTER WEB CHAPTER WEB CHAPTER A Strategic Issues in Managing Technology & Innovation B Strategic Issues in Entrepreneurial Ventures & Small Businesses C Strategic Issues in Not-For-Profit Organizations PART SEVEN Cases in Strategic Management 1-1 GLOSSARY G-1 NAME INDEX I-1 SUBJECT INDEX I-7 ix This page intentionally left blank Contents Preface xxix PART ONE CHAPTER 1 Introduction to Strategic Management and Business Policy Basic Concepts of Strategic Management 2 1.1 The Study of Strategic Management Phases of Strategic Management Benefits of Strategic Management 1 5 5 6 1.2 Globalization and Environmental Sustainability: Challenges to Strategic Management 7 Impact of Globalization 8 Impact of Environmental Sustainability 8 Global Issue: REGIONAL TRADE ASSOCIATIONS REPLACE NATIONAL TRADE BARRIERS 9 Environmental Sustainability Issue: PROJECTED EFFECTS OF CLIMATE CHANGE 12 1.3 Theories of Organizational Adaptation 1.4 Creating a Learning Organization 13 1.5 Basic Model of Strategic Management Environmental Scanning Strategy Formulation 12 14 16 17 Strategy Highlight 1.1: DO YOU HAVE A GOOD MISSION STATEMENT? 18 Strategy Implementation Evaluation and Control 21 22 Feedback/Learning Process 23 1.6 Initiation of Strategy: Triggering Events 23 Strategy Highlight 1.2: TRIGGERING EVENT AT UNILEVER 24 1.7 Strategic Decision Making 25 What Makes a Decision Strategic 25 Mintzberg’s Modes of Strategic Decision Making 25 Strategic Decision-Making Process: Aid to Better Decisions 1.8 The Strategic Audit: Aid to Strategic Decision-Making 1.9 End of Chapter Summary 27 28 29 APPENDIX 1.A Strategic Audit of a Corporation 34 xi xii CONTENTS CHAPTER 2 Corporate Governance 42 2.1 Role of the Board of Directors Responsibilities of the Board 45 45 Members of a Board of Directors 48 Strategy Highlight 2.1: AGENCY THEORY VERSUS STEWARDSHIP THEORY IN CORPORATE GOVERNANCE 50 Nomination and Election of Board Members Organization of the Board 53 54 Impact of the Sarbanes-Oxley Act on U.S. Corporate Governance 55 Global Issue: CORPORATE GOVERNANCE IMPROVEMENTS THROUGHOUT THE WORLD 56 Trends in Corporate Governance 2.2 The Role of Top Management 57 58 Responsibilities of Top Management 58 Environmental Sustainability Issue: CONFLICT AT THE BODY SHOP 59 2.3 End of Chapter Summary CHAPTER 3 62 Social Responsibility and Ethics in Strategic Management 3.1 Social Responsibilities of Strategic Decision Makers Responsibilities of a Business Firm 72 72 Sustainability: More than Environmental? Corporate Stakeholders 70 75 75 Environmental Sustainability Issue: THE DOW JONES SUSTAINABILITY INDEX 76 Strategy Highlight 3.1: JOHNSON & JOHNSON CREDO 78 3.2 Ethical Decision Making 79 Some Reasons for Unethical Behavior 79 Strategy Highlight 3.2: UNETHICAL PRACTICES AT ENRON AND WORLDCOM EXPOSED BY “WHISTLE-BLOWERS” 80 Global Issue: HOW RULE-BASED AND RELATIONSHIP-BASED GOVERNANCE SYSTEMS AFFECT ETHICAL BEHAVIOR 81 Encouraging Ethical Behavior 3.3 End of Chapter Summary 83 86 Ending Case for Part One: BLOOD BANANAS 90 PART TWO CHAPTER 4 Scanning the Environment 93 Environmental Scanning and Industry Analysis 4.1 Environmental Scanning 94 98 Identifying External Environmental Variables 98 Environmental Sustainability Issue: MEASURING AND SHRINKING YOUR PERSONAL CARBON FOOTPRINT 100 CONTENTS Global Issue: IDENTIFYING POTENTIAL MARKETS IN DEVELOPING NATIONS 107 Identifying External Strategic Factors 108 4.2 Industry Analysis: Analyzing the Task Environment Porter’s Approach to Industry Analysis Industry Evolution International Risk Assessment Strategic Types 110 114 Categorizing International Industries Strategic Groups 109 114 115 115 117 Hypercompetition 117 Using Key Success Factors to Create an Industry Matrix 118 Strategy Highlight 4.1: MICROSOFT IN A HYPERCOMPETITIVE INDUSTRY 118 4.3 Competitive Intelligence 120 Sources of Competitive Intelligence 121 Strategy Highlight 4.2: EVALUATING COMPETITIVE INTELLIGENCE 122 Monitoring Competitors for Strategic Planning 4.4 Forecasting 122 123 Danger of Assumptions 123 Useful Forecasting Techniques 124 4.5 The Strategic Audit: A Checklist for Environmental Scanning 4.6 Synthesis of External Factors—EFAS 4.7 End of Chapter Summary 5 126 127 APPENDIX 4.A Competitive Analysis Techniques CHAPTER 133 Internal Scanning: Organizational Analysis 136 5.1 A Resource-Based Approach to Organizational Analysis Core and Distinctive Competencies 138 138 Using Resources to Gain Competitive Advantage Determining the Sustainability of an Advantage 5.2 Business Models 125 139 140 142 5.3 Value-Chain Analysis 143 Strategy Highlight 5.1: A NEW BUSINESS MODEL AT SMARTYPIG 144 Industry Value-Chain Analysis Corporate Value-Chain Analysis 145 146 5.4 Scanning Functional Resources and Capabilities Basic Organizational Structures 147 Corporate Culture: The Company Way 149 147 xiii xiv CONTENTS Global Issue: MANAGING CORPORATE CULTURE FOR GLOBAL COMPETITIVE ADVANTAGE: ABB VERSUS MATSUSHITA 150 Strategic Marketing Issues Strategic Financial Issues 151 153 Strategic Research and Development (R&D) Issues Strategic Operations Issues 154 156 Strategic Human Resource (HRM) Issues 158 Environmental Sustainability Issue: USING ENERGY EFFICIENCY FOR COMPETITIVE ADVANTAGE AND QUALITY OF WORK LIFE 161 Strategic Information Systems/Technology Issues 162 5.5 The Strategic Audit: A Checklist for Organizational Analysis 163 5.6 Synthesis of Internal Factors 5.7 End of Chapter Summary 164 165 Ending Case for Part Two: BOEING BETS THE COMPANY 170 PART THREE CHAPTER 6 Strategy Formulation 173 Strategy Formulation: Situation Analysis and Business Strategy 6.1 Situation Analysis: SWOT Analysis 174 176 Generating a Strategic Factors Analysis Summary (SFAS) Matrix 176 Finding a Propitious Niche 177 Global Issue: SAB DEFENDS ITS PROPITIOUS NICHE 181 6.2 Review of Mission and Objectives 181 6.3 Generating Alternative Strategies by Using a TOWS Matrix 6.4 Business Strategies 182 183 Porter’s Competitive Strategies 183 Environmental Sustainability Issue: PATAGONIA USES SUSTAINABILITY AS DIFFERENTIATION COMPETITIVE STRATEGY 187 Cooperative Strategies 195 6.5 End of Chapter Summary CHAPTER 7 199 Strategy Formulation: Corporate Strategy 7.1 Corporate Strategy 7.2 Directional Strategy Growth Strategies 204 206 206 207 Strategy Highlight 7.1: TRANSACTION COST ECONOMICS ANALYZES VERTICAL GROWTH STRATEGY 210 CONTENTS Global Issue: COMPANIES LOOK TO INTERNATIONAL MARKETS FOR HORIZONTAL GROWTH 212 Strategy Highlight 7.2: SCREENING CRITERIA FOR CONCENTRIC DIVERSIFICATION 215 Controversies in Directional Growth Strategies 216 Stability Strategies 217 Retrenchment Strategies 7.3 Portfolio Analysis 218 220 BCG Growth-Share Matrix 221 Environmental Sustainability Issue: GENERAL MOTORS AND THE ELECTRIC CAR GE Business Screen 222 223 Advantages and Limitations of Portfolio Analysis Managing a Strategic Alliance Portfolio 7.4 Corporate Parenting 225 226 Developing a Corporate Parenting Strategy 227 Horizontal Strategy and Multipoint Competition 7.5 End of Chapter Summary CHAPTER 8 225 228 229 Strategy Formulation: Functional Strategy and Strategic Choice 8.1 Functional Strategy 238 Marketing Strategy 238 Financial Strategy 236 239 Research and Development (R&D) Strategy Operations Strategy 241 242 Global Issue: INTERNATIONAL DIFFERENCES ALTER WHIRLPOOL’S OPERATIONS STRATEGY Purchasing Strategy 243 244 Environmental Sustainability Issue: OPERATIONS NEED FRESH WATER AND LOTS OF IT! Logistics Strategy 245 246 Human Resource Management (HRM) Strategy Information Technology Strategy 247 8.2 The Sourcing Decision: Location of Functions 8.3 Strategies to Avoid 246 247 250 8.4 Strategic Choice: Selecting the Best Strategy Constructing Corporate Scenarios Process of Strategic Choice 257 251 251 xv xvi CONTENTS 8.5 Developing Policies 258 8.6 End of Chapter Summary 259 Ending Case for Part Three: KMART AND SEARS: STILL STUCK IN THE MIDDLE? 266 PART FOUR CHAPTER 9 Strategy Implementation and Control 269 Strategy Implementation: Organizing for Action 270 9.1 Strategy Implementation 272 9.2 Who Implements Strategy? 9.3 What Must Be Done? 273 273 Developing Programs, Budgets, and Procedures 274 Environmental Sustainability Issue: FORD’S SOYBEAN SEAT FOAM PROGRAM 274 Strategy Highlight 9.1: THE TOP TEN EXCUSES FOR BAD SERVICE 277 Achieving Synergy 278 9.4 How Is Strategy to Be Implemented? Organizing for Action Structure Follows Strategy 279 Stages of Corporate Development Organizational Life Cycle 280 283 Advanced Types of Organizational Structures Reengineering and Strategy Implementation Six Sigma 278 285 288 289 Designing Jobs to Implement Strategy 290 Strategy Highlight 9.2: DESIGNING JOBS WITH THE JOB CHARACTERISTICS MODEL 291 9.5 International Issues in Strategy Implementation International Strategic Alliances 291 292 Stages of International Development 293 Global Issue: MULTIPLE HEADQUARTERS: A SIXTH STAGE OF INTERNATIONAL DEVELOPMENT? 294 Centralization Versus Decentralization 294 9.6 End of Chapter Summary 296 CHAPTER 10 Strategy Implementation: Staffing and Directing 10.1 Staffing 300 302 Staffing Follows Strategy 303 Selection and Management Development 305 Strategy Highlight 10.1: HOW HEWLETT-PACKARD IDENTIFIES POTENTIAL EXECUTIVES 306 Problems in Retrenchment 308 International Issues in Staffing 309 CONTENTS 10.2 Leading 311 Managing Corporate Culture 311 Environmental Sustainability Issue: ABBOTT LABORATORIES’ NEW PROCEDURES FOR GREENER COMPANY CARS 312 Action Planning 316 Management by Objectives 318 Total Quality Management 318 International Considerations in Leading 319 Global Issue: CULTURAL DIFFERENCES CREATE IMPLEMENTATION PROBLEMS IN MERGER 321 10.3 End of Chapter Summary CHAPTER 11 Evaluation and Control 322 328 11.1 Evaluation and Control in Strategic Management 11.2 Measuring Performance Appropriate Measures Types of Controls 330 332 332 332 Activity-Based Costing 334 Enterprise Risk Management 335 Primary Measures of Corporate Performance 335 Environmental Sustainability Issue: HOW GLOBAL WARMING COULD AFFECT CORPORATE VALUATION 340 Primary Measures of Divisional and Functional Performance International Measurement Issues 342 344 Global Issue: COUNTERFEIT GOODS AND PIRATED SOFTWARE: A GLOBAL PROBLEM 346 11.3 Strategic Information Systems 347 Enterprise Resource Planning (ERP) 347 Radio Frequency Identification (RFID) 348 Divisional and Functional IS Support 348 11.4 Problems in Measuring Performance 348 Short-Term Orientation Goal Displacement 349 350 11.5 Guidelines for Proper Control 351 Strategy Highlight 11.1: SOME RULES OF THUMB IN STRATEGY 351 11.6 Strategic Incentive Management 11.7 End of Chapter Summary 352 354 Ending Case for Part Four: HEWLETT-PACKARD BUYS EDS 360 xvii xviii CONTENTS PART FIVE CHAPTER Introduction to Case Analysis 12 Suggestions for Case Analysis 12.1 The Case Method 363 364 365 12.2 Researching the Case Situation 366 12.3 Financial Analysis: A Place to Begin Analyzing Financial Statements 366 369 Environmental Sustainability Issue: IMPACT OF CARBON TRADING 370 Global Issue: FINANCIAL STATEMENTS OF MULTINATIONAL CORPORATIONS: NOT ALWAYS WHAT THEY SEEM 371 Common-Size Statements 371 Z-value and Index of Sustainable Growth Useful Economic Measures 371 372 12.4 Format for Case Analysis: The Strategic Audit 12.5 End of Chapter Summary 373 375 APPENDIX 12.A Resources for Case Research 377 APPENDIX 12.B Suggested Case Analysis Methodology Using the Strategic Audit APPENDIX 12.C Example of a Student-Written Strategic Audit 380 383 Ending Case for Part Five: IN THE GARDEN 391 GLOSSARY G-1 NAME INDEX I-1 SUBJECT INDEX I-1 PART SIX WEB CHAPTERS WEB CHAPTER A Other Strategic Issues Strategic Issues in Managing Technology and Innovation 1 The Role of Management Strategy Highlight 1: EXAMPLES OF INNOVATION EMPHASIS IN MISSION STATEMENTS 2 Environmental Scanning External Scanning Internal Scanning 3 Strategy Formulation Product vs. Process R&D Technology Sourcing Global Issue: USE OF INTELLECTUAL PROPERTY AT HUAWEI TECHNOLOGIES Importance of Technological Competence Categories of Innovation Product Portfolio CONTENTS 4 Strategy Implementation Developing an Innovative Entrepreneurial Culture Organizing for Innovation: Corporate Entrepreneurship Strategy Highlight 2: HOW NOT TO DEVELOP AN INNOVATIVE ORGANIZATION 5 Evaluation and Control Evaluation and Control Techniques Evaluation and Control Measures 6 End of Chapter Summary WEB CHAPTER B Strategic Issues in Entrepreneurial Ventures and Small Businesses 1 Importance of Small Business and Entrepreneurial Ventures Global Issue: ENTREPRENEURSHIP: SOME COUNTRIES ARE MORE SUPPORTIVE THAN OTHERS Definition of Small-Business Firms and Entrepreneurial Ventures The Entrepreneur as Strategist 2 Use of Strategic Planning and Strategic Management Degree of Formality Usefulness of the Strategic Management Model Usefulness of the Strategic Decision-Making Process 3 Issues in Corporate Governance Boards of Directors and Advisory Boards Impact of the Sarbanes-Oxley Act 4 Issues in Environmental Scanning and Strategy Formulation Sources of Innovation Factors Affecting a New Venture’s Success Strategy Highlight 1: SUGGESTIONS FOR LOCATING AN OPPORTUNITY AND FORMULATING A BUSINESS STRATEGY 5 Issues in Strategy Implementation Substages of Small Business Development Transfer of Power and Wealth in Family Businesses 6 Issues in Evaluation and Control 7 End of Chapter Summary WEB CHAPTER C Strategic Issues in Not-for-Profit Organizations 1 Why Not-for-Profit? Global Issue: WHICH IS BEST FOR SOCIETY: BUSINESS OR NOT-FOR-PROFIT? xix xx CONTENTS 2 Importance of Revenue Source Sources of Not-for-Profit Revenue Patterns of Influence on Strategic Decision Making Usefulness of Strategic Management Concepts and Techniques 3 Impact of Constraints on Strategic Management Impact on Strategy Formulation Impact on Strategy Implementation Impact on Evaluation and Control 4 Not-for-Profit Strategies Strategic Piggybacking Strategy Highlight 1: RESOURCES NEEDED FOR SUCCESSFUL STRATEGIC PIGGYBACKING Mergers Strategic Alliances 5 End of Chapter Summary PART SEVEN SECTION A CASE 1 Cases in Strategic Management 1-1 Corporate Governance and Social Responsibility: Executive Leadership The Recalcitrant Director at Byte Products Inc.: Corporate Legality versus Corporate Responsibility 1-7 (Contributors: Dan R. Dalton, Richard A. Cosier, and Cathy A. Enz) A plant location decision forces a confrontation between the board of directors and the CEO regarding an issue in social responsibility and ethics. CASE 2 The Wallace Group 2-1 (Contributor: Laurence J. Stybel) Managers question the company’s strategic direction and how it is being managed by its founder and CEO. Company growth has resulted not only in disorganization and confusion among employees, but in poor overall performance. How should the board deal with the company’s founder? SECTION B CASE 3 Business Ethics Everyone Does It 3-1 (Contributors: Steven M. Cox and Shawana P. Johnson) When Jim Willis, Marketing VP, learns that the launch date for the company’s new satellite will be late by at least a year, he is told by the company’s president to continue using the earlier published date for the launch. When Jim protests that the use of an incorrect date to market contracts is unethical, he is told that spacecraft are never launched on time and that it is common industry practice to list unrealistic launch dates. If a realistic date was used, no one would contract with the company. CONTENTS CASE 4 xxi The Audit 4-1 (Contributors: John A. Kilpatrick, Gamewell D. Gantt, and George A. Johnson) A questionable accounting practice by the company being audited puts a new CPA in a difficult position. Although the practice is clearly wrong, she is being pressured by her manager to ignore it because it is common in the industry. SECTION C CASE 5 International Issues in Strategic Management Starbucks’ Coffee Company: The Indian Dilemma 5-1 (Contributors: Ruchi Mankad and Joel Sarosh Thadamalla) Starbucks is the world’s largest coffee retailer with over 11,000 stores in 36 countries and over 10,000 employees. The case focuses on India as a potential market for the coffee retailer, presenting information on India’s societal environment and beverage industry. Profiles are provided for various existing coffee shop chains in India. The key issue in the case revolves around the question: Are circumstances right for Starbucks to enter India? CASE 6 Guajilote Cooperativo Forestal: Honduras 6-1 (Contributors: Nathan Nebbe and J. David Hunger) exclusive SECTION This forestry cooperative has the right to harvest, transport, and sell fallen mahogany trees in La Muralla National Park of Honduras. Although the cooperative has been successful thus far, it is facing some serious issues: low prices for its product, illegal logging, deforestation by poor farmers, and possible world trade restrictions on the sale of mahogany. D General Issues in Strategic Management INDUSTRY ONE: Information Technology CASE 7 Apple Inc.: Performance in a Zero-Sum World Economy 7-1 (Contributors: Kathryn E. Wheelen, Thomas L. Wheelen II, Richard D. Wheelen, Moustafa H. Abdelsamad, Bernard A. Morin, Lawrence C. Pettit, David B. Croll, and Thomas L. Wheelen) new exclusive CASE 8 Apple, the first company to mass-market a personal computer, had become a minor player in an industry dominated by Microsoft. After being expelled from the company in 1985, founder Steve Jobs returned as CEO in 1997 to reenergize the firm. The introduction of the iPod in 2001, followed by the iPad, catapulted Apple back into the spotlight. However, in 2011 Jobs was forced to take his third medical leave, leading to questions regarding his ability to lead Apple. How can Apple continue its success? How dependent is the company on Steve Jobs? iRobot: Finding the Right Market Mix? 8-1 (Contributor: Alan N. Hoffman) new exclusive CASE 9 Founded in 1990, iRobot was among the first companies to introduce robotic technology into the consumer market. Employing over 500 robotic professionals, the firm planned to lead the robotics industry. Unfortunately, its largest revenue source, home care robots, are a luxury good and vulnerable to recessions. Many of iRobot’s patents are due to expire by 2019. The firm is highly dependent upon suppliers to make its consumer products and the U.S. government for military sales. What is the best strategy for its future success? Dell Inc.: Changing the Business Model (Mini Case) 9-1 (Contributor: J. David Hunger) new exclusive Dell, once the largest PC vendor in the world, is now battling with Acer for second place in the global PC market. Its chief advantages—direct marketing and power over suppliers—no longer provided a competitive advantage. The industry’s focus has shifted from desktop PCs to mobile computing, software, and technology services, areas of relative weakness for Dell. Is it time for Dell to change its strategy? xxii CONTENTS CASE 10 Rosetta Stone Inc.: Changing the Way People Learn Languages 10-1 (Contributors: Christine B. Buenafe and Joyce P. Vincelette) new exclusive CASE 11 Rosetta Stone’s mission was to change the way people learn languages. The company blended language learning with technology at a time when globalization connected more and more individuals and institutions to each other. How should the company move forward? Would it be appropriate for Rosetta Stone to offer products like audio books or services in order to increase market share? Which international markets could provide the company with a successful future? Logitech (Mini Case) 11-1 (Contributor: Alan N. Hoffman) new exclusive Logitech, the world’s leading provider of computer peripherals, was on the forefront of mouse, keyboard, and video conferencing technology. By 2010, however, Logitech’s products were threatened by new technologies, such as touch pads, that could replace both the mouse and keyboard. As the peripherals market begins to disintegrate, Logitech is considering a change in strategy. INDUSTRY TWO: CASE 12 INTERNET COMPANIES Google Inc. (2010): The Future of the Internet Search Engine 12-1 (Contributor: Patricia A. Ryan) new exclusive CASE 13 Google, an online company that provides a reliable Internet search engine, was founded in 1998 and soon replaced Yahoo as the market leader in Internet search engines. By 2010, Google was one of the strongest brands in the world. Nevertheless, its growth by acquisition strategy was showing signs of weakness. Its 2006 acquisition of YouTube had thus far not generated significant revenue growth. Groupon, a shopping Web site, rebuffed Google’s acquisition attempt in 2010. Is it time for a strategic change? Reorganizing Yahoo! 13-1 (Contributors: P. Indu and Vivek Gupta) Yahoo! created the first successful Internet search engine, but by 2004 it was losing its identity. Was it a search engine, a portal, or a media company? On December 5, 2006, Yahoo’s CEO announced a reorganization of the company into three groups. It was hoped that a new mission statement and a new structure would make Yahoo leaner and more responsive to customers. Would this be enough to turn around the company? INDUSTRY THREE: CASE 14 ENTERTAINMENT AND LEISURE TiVo Inc.: TiVo vs. Cable and Satellite DVR: Can TiVo survive? 14-1 (Contributors: Alan N. Hoffman, Randy Halim, Rangki Son, and Suzanne Wong) TiVo was founded to create a device capable of recording digitized video on a computer hard drive for television viewing. Even though revenues had jumped from $96 million in 2003 to $259 million in 2007, the company had never earned a profit. Despite many alliances, TiVo faced increasing competition from generic DVRs offered by satellite and cable companies. How long can the company continue to sell TiVo DVRs when the competition sells generic DVRs at a lower price or gives them away for free? CASE 15 Marvel Entertainment Inc. 15-1 (Contributors: Ellie A. Fogarty and Joyce P. Vincelette) exclusive Marvel Entertainment was known for its comic book characters Captain America, Spider Man, the Fantastic Four, the Incredible Hulk, the Avengers, and the X-Men. With its 2008 self-produced films, Iron Man and The Incredible Hulk, Marvel had expanded out of comic books to become a leader in the entertainment industry. The company was no longer competing against other comic book publishers like DC Comics, but was now competing against entertainment giants like Walt Disney and NBC Universal. What should Marvel’s management do to ensure the company’s future success? CONTENTS CASE 16 xxiii Carnival Corporation and plc (2010) 16-1 (Contributors: Michael J. Keeffe, John K. Ross III, Sherry K. Ross, Bill J. Middlebrook, and Thomas L. Wheelen) new exclusive With its “fun ship,” Carnival Cruises changed the way people think of ocean cruises. The cruise became more important than the destination. Through acquisition, Carnival expanded its product line to encompass an entire range of industry offerings. How can Carnival continue to grow in the industry it now dominates? INDUSTRY FOUR: CASE 17 TRANSPORTATION Chrysler in Trouble 17-1 (Contributors: Barnali Chakraborty and Vivek Gupta) new CASE 18 On April 30, 2009, Chrysler Motors, the third-largest auto manufacturer in the United States, filed for bankruptcy protection along with its 24 wholly owned U.S. subsidiaries. As a condition of the U.S. federal government’s loan of more than $8 billion, Fiat was given 20% of the new Chrysler Corporation with the option of increasing its stake to 51% by 2016 after the new company had repaid the federal government’s loan. What does Chrysler need to do to ensure the success of its partnership with Fiat? Tesla Motors Inc. (Mini Case) 18-1 (Contributor: J. David Hunger) new exclusive CASE 19 Tesla Motors was founded in 2004 to produce electric automobiles. Its first car, the Tesla Roadster, sold for $101,000. It could accelerate from zero to 60 mph in 3.9 seconds and cruise for 236 miles on a single charge. In contrast to existing automakers, Tesla sold and serviced its cars through the Internet and its own Tesla stores. With the goal of building a full line of electric vehicles, Tesla Motors faced increasing competition from established automakers. How could Tesla Motors succeed in an industry dominated by giant global competitors? Harley-Davidson Inc. 2008: Thriving through a Recession 19-1 (Contributors: Patricia A. Ryan and Thomas Wheelen) exclusive CASE 20 Harley-Davidson 2008: Thriving Through Recession is a modern success story of a motorcycle company that turned itself around by emphasizing quality manufacturing and image marketing. After consistently growing through the 1990s, sales were showing signs of slowing as the baby boomers continued to age. Safety was also becoming an issue. For the first time in recent history, sales and profits declined in 2007 from 2006. Analysts wondered how the company would be affected in a recession. How does Harley-Davidson continue to grow at its past rate? JetBlue Airways: Growing Pains? 20-1 (Contributors: Shirisha Regani and S. S. George) JetBlue Airways had been founded as a “value player” in the niche between full service airlines and low-cost carriers. Competition had recently intensified and several airlines were taking advantage of bankruptcy protection to recapture market share through price cuts. JetBlue’s operating costs were rising as a result of increasing fuel costs, aircraft maintenance expenses, and service costs. Has JetBlue been growing too fast and was growth no longer sustainable? CASE 21 TomTom: New Competition Everywhere! 21-1 (Contributor: Alan N. Hoffman) new exclusive TomTom, an Amsterdam-based company that provided navigation services and devices, led the navigation systems market in Europe and was second in popularity in the United States. However, the company was facing increasing competition from other platforms using GPS technology like cell phones and Smartphones with a built-in navigation function. As its primary markets in the United States and Europe mature, how can the company ensure its future growth and success? xxiv CONTENTS INDUSTRY FIVE: CASE 22 CLOTHING Volcom Inc.: Riding the Wave 22-1 (Contributors: Christine B. Buenafe and Joyce P. Vincelette) new exclusive CASE 23 Volcom was formed south of Los Angeles in 1991 as a clothing company rooted in the action sports of skateboarding, surfing, and snowboarding. By 2008, Volcom-branded products were sold throughout the United States and in over 40 countries. It did not own any manufacturing facilities, but instead worked with foreign contract manufacturers. As a primary competitor in the boardsports community, Volcom was committed to maintaining its brand, position, and lifestyle and needed to reassess its strategy. TOMS Shoes (Mini Case) 23-1 (Contributor: J. David Hunger) new exclusive INDUSTRY SIX: CASE 24 Founded in 2006 by Blake Mycoskie, TOMS Shoes is an American footwear company based in Santa Monica, California. Although TOMS Shoes is a for-profit business, its mission is more like that of a not-for-profit organization. The firm’s reason for existence is to donate to children in need one new pair of shoes for every pair of shoes sold. By 2010, the company had sold over one million pairs of shoes. How should the company plan its future growth? SPECIALTY RETAILING Best Buy Co. Inc.: Sustainable Customer Centricity Model? 24-1 (Contributor: Alan N. Hoffman) new exclusive CASE 25 Best Buy, the largest consumer electronics retailer in the United States, operates 4,000 stores in North America, China, and Turkey. Best Buy distinguishes itself from competitors by deploying a differentiation strategy based on superior service rather than low price. The recent recession has stressed its finances and the quality of its customer service. How can Best Buy continue to have innovative products, top-notch employees, and superior customer service while facing increased competition, operational costs, and financial stress? The Future of Gap Inc. 25-1 (Contributor: Mridu Verma) Gap Inc. offered clothing, accessories, and personal care products under the Gap, Banana Republic, and Old Navy brands. After a new CEO introduced a turnaround strategy, sales increased briefly, then fell. Tired of declining sales, the board of directors hired Goldman Sachs to explore strategies to improve, ranging from the sale of its stores to spinning off a single division. CASE 26 Rocky Mountain Chocolate Factory Inc. (2008) 26-1 (Contributors: Annie Phan and Joyce P. Vincelette) exclusive CASE 27 Rocky Mountain Chocolate Factory had five company-owned and 329 franchised stores in 38 states, Canada, and the United Arab Emirates. Even though revenues and net income had increased from 2005 through 2008, they had been increasing at a decreasing rate. Candy purchased from the factory by the stores had actually dropped 9% in 2008 from 2007. Was the bloom off the rose at Rocky Mountain Chocolate? Dollar General Corporation (Mini Case) 27-1 (Contributor: Kathryn E. Wheelen) new exclusive With annual revenues of $12.7 billion and 9,200 stores in 35 states, Dollar General is the largest of the discount “dollar stores” in the United States. Although far smaller than its “big brothers” Wal-Mart and Target, Dollar General has done very well during the recent economic recession. In 2011, it plans to open 625 new stores in three new states. Given that the company has substantial long-term debt, is this the right time to expand the company’s operations? CONTENTS INDUSTRY SEVEN: CASE 28 xxv MANUFACTURING Inner-City Paint Corporation (Revised) 28-1 (Contributors: Donald F. Kuratko and Norman J. Gierlasinski) Inner-City Paint makes paint for sale to contractors in the Chicago area. However, the founder’s lack of management knowledge is creating difficulties for the firm, and the company is in financial difficulty. Unless something is done soon, it may go out of business. CASE 29 The Carey Plant 29-1 (Contributors: Thomas L. Wheelen and J. David Hunger) exclusive The Carey Plant was a profitable manufacturer of quality machine parts until it was acquired by the Gardner Company. Since its acquisition, the plant has been plagued by labor problems, increasing costs, leveling sales, and decreasing profits. Gardner Company’s top management is attempting to improve the plant’s performance and better integrate its activities with those of the corporation by selecting a new person to manage the plant. I N D U S T R Y E I G H T: CASE 30 FOOD AND BEVERAGE The Boston Beer Company: Brewers of Samuel Adams Boston Lager (Mini Case) 30-1 (Contributor: Alan N. Hoffman) new exclusive CASE 31 The Boston Beer Company was founded in 1984 by Jim Koch, viewed as the pioneer of the American craft beer revolution. Brewing over 1 million barrels of 25 different styles of beer, Boston Beer is the sixth-largest brewer in the United States. Even though overall domestic beer sales declined 1.2% in 2010, sales of craft beer have increased 20% since 2002, with Boston Beer’s increasing 22% from 2007 to 2009. How can the company continue its rapid growth in a mature industry? Wal-Mart and Vlasic Pickles 31-1 (Contributor: Karen A. Berger) A manager of Vlasic Foods International closed a deal with Wal-Mart that resulted in selling more pickles than Vlasic had ever sold to any one account. The expected profit of one to two cents per jar was not sustainable, however, due to unplanned expenses. Vlasic’s net income plummeted and the company faced bankruptcy. Given that Wal-Mart was Vlasic’s largest customer, what action should management take? CASE 32 Panera Bread Company (2010): Still Rising Fortunes? 32-1 (Contributors: Joyce Vincelette and Ellie A. Fogarty) new exclusive CASE 33 Panera Bread is a successful bakery-café known for its quality soups and sandwiches. Even though Panera’s revenues and net earnings have been rising rapidly, new unit expansion throughout North America has fueled this growth. Will revenue growth stop once expansion slows? The retirement of CEO Ronald Shaich, the master baker who created the “starter” for the company’s phenomenal growth, is an opportunity to rethink Panera’s growth strategy. Whole Foods Market (2010): How to Grow in an Increasingly Competitive Market? (Mini Case) 33-1 (Contributors: Patricia Harasta and Alan N. Hoffman) new exclusive Whole Foods Market is the world’s leading retailer of natural and organic foods. The company differentiates itself from competitors by focusing on innovation, quality, and service excellence, allowing it to charge premium prices. Although the company dominates the natural/organic foods category in North America, it is facing increasing competition from larger food retailers, such as WalMart, who are adding natural/organic foods to their offerings. xxvi CONTENTS CASE 34 Burger King (Mini Case) 34-1 (Contributor: J. David Hunger) new exclusive CASE 35 Founded in Florida in 1953, Burger King has always trailed behind McDonald’s as the second-largest fast-food hamburger chain in the world. Although its total revenues dropped only slightly from 2009, its 2010 profits dropped significantly, due to high expenses. Burger King’s purchase by an investment group in 2010 was an opportunity to rethink the firm’s strategy. Church & Dwight: Time to Rethink the Portfolio? 35-1 (Contributor: Roy A. Cook) Church & Dwight, the maker of ARM & HAMMER Baking Soda, has used brand extension to successfully market multiple consumer products based on sodium bicarbonate. Searching for a new growth strategy, the firm turned to acquisitions. Can management successfully achieve a balancing act based on finding growth through expanded uses of sodium bicarbonate while assimilating a divergent group of consumer products into an expanding international footprint? new SECTION E WEB CASE Web Mini Cases Additional Mini Cases Available on the Companion Web Site at www.pearsonhighered.com/wheelen. 1 Eli Lily & Company (Contributor: Maryanne M. Rouse) A leading pharmaceutical company, Eli Lilly produces a wide variety of ethical drugs and animal health products. Despite an array of new products, the company’s profits declined after the firm lost patent protection for Prozac. In addition, the FDA found quality problems at several of the company’s manufacturing sites, resulting in a delay of new product approvals. How should Lily position itself in a very complex industry? WEB CASE 2 Tech Data Corporation (Contributor: Maryanne M. Rouse) Tech Data, a distributor of information technology and logistics management, has rapidly grown through acquisition to become the second-largest global IT distributor. Sales and profits have been declining, however, since 2001. As computers become more like a commodity, the increasing emphasis on direct distribution by manufacturers threaten wholesale distributors like Tech Data. WEB CASE 3 Stryker Corporation (Contributor: Maryanne M. Rouse) Stryker is a leading maker of specialty medical and surgical products, a market expected to show strong sales growth. Stryker markets its products directly to hospitals and physicians in the United States and 100 other countries. Given the decline in the number of hospitals due to consolidation and cost containment efforts by government programs and health care insurers, the industry expects continued downward pressure on prices. How can Stryker effectively deal with these developments? WEB CASE 4 Sykes Enterprises (Contributor: Maryanne M. Rouse) Sykes provides outsourced customer relationship management services worldwide in a highly competitive, fragmented industry. Like its customers, Sykes has recently been closing its call centers in America and moving to Asia in order to reduce costs. Small towns felt betrayed by the firm’s decision to leave—especially after providing financial incentives to attract the firm. Nevertheless, declining revenue and net income has caused the company’s stock to drop to an all-time low. CONTENTS WEB CASE xxvii 5 Pfizer Inc. (Contributor: Maryanne M. Rouse) With its acquisition in 2000 of rival pharmaceutical firm Warner-Lambert for its Lipitor prescription drug, Pfizer has become the world’s largest ethical pharmaceutical company in terms of sales. Already the leading company in the United States, Pfizer’s purchase of Pharmacia in 2002 moved Pfizer from fourth to first place in Europe. Will large size hurt or help the company’s future growth and profitability in an industry facing increasing scrutiny? WEB CASE 6 Williams-Sonoma (Contributor: Maryanne M. Rouse) Williams-Sonoma is a specialty retailer of home products. Following a related diversification growth strategy, the company operates 415 Williams-Sonoma, Pottery Barn, and Hold Everything retail stores throughout North America. Its direct sales segment includes six retail catalogues and three e-commerce sites. The company must deal with increasing competition in this fragmented industry characterized by low entry barriers. WEB CASE 7 Tyson Foods Inc. (Contributor: Maryanne M. Rouse) Tyson produces and distributes beef, chicken, and pork products in the United States. It acquired IBP, a major competitor, but has been the subject of lawsuits by its employees and the EPA. How should management deal with its poor public relations and position the company to gain and sustain competitive advantage in an industry characterized by increasing consolidation and intense competition? WEB CASE 8 Southwest Airlines Company (Contributor: Maryanne M. Rouse) The fourth-largest U.S. airline in terms of passengers carried and second-largest in scheduled domestic departures, Southwest was the only domestic airline to remain profitable in 2001. Emphasizing highfrequency, short-haul, point-to-point, and low-fare service, the airline has the lowest cost per available seat mile flown of any U.S. major passenger carrier. Can Southwest continue to be successful as competitors increasingly imitate its competitive strategy? WEB CASE 9 Outback Steakhouse Inc. (Contributor: Maryanne M. Rouse) With 1,185 restaurants in 50 states and 21 foreign countries, Outback (OSI) is one of the largest casual dining restaurant companies in the world. In addition to Outback Steakhouse, the company is composed of Carrabba’s Italian Grill, Fleming’s Prime Steakhouse & Wine Bar, Bonefish Grill, Roy’s, Lee Roy Selmon’s, Cheeseburger in Paradise, and Paul Lee’s Kitchen. Analysts wonder how long OSI can continue to grow by adding new types of restaurants to its portfolio. WEB CASE 10 Intel Corporation (Contributor: J. David Hunger) Although more than 80% of the world’s personal computers and servers use its microprocessors, Intel is facing strong competition from AMD in a maturing market. Sales growth is slowing. Profits are expected to rise only 5% in 2006 compared to 40% annual growth previously. The new CEO decides to reinvent Intel to avoid a fate of eventual decline. WEB CASE 11 AirTran Holdings Inc. (Contributor: Maryanne M. Rouse) AirTran (known as ValuJet before a disastrous crash in the Everglades) is the second-largest lowfare scheduled airline (after Southwest) in the United States in terms of departures and, along with Southwest, the only U.S. airline to post a profit in 2004. The company’s labor costs as a percentage of sales are the lowest in the industry. Will AirTran continue to be successful in this highly competitive industry? xxviii CONTENTS WEB CASE 12 Boise Cascade/Office Max (Contributor: Maryanne M. Rouse) Boise Cascade, an integrated manufacturer and distributor of paper, packaging, and wood products, purchased OfficeMax, the third-largest office supplies catalogue retailer (after Staples and Office Depot), in 2003. Soon thereafter, Boise announced that it was selling its land, plants, headquarters location, and even its name to an equity investment firm. Upon completion of the sale in 2004, the company assumed the name of OfficeMax. Can this manufacturer become a successful retailer? WEB CASE 13 H. J. Heinz Company (Contributor: Maryanne M. Rouse) Heinz, a manufacturer and marketer of processed food products, pursued global growth via market penetration and acquisitions. Unfortunately, its modest sales growth was primarily from its acquisitions. Now that the firm has divested a number of lines of businesses and brands to Del Monte Foods, analysts wonder how a 20% smaller Heinz will grow its sales and profits in this very competitive industry. WEB CASE 14 Nike Inc. (Contributor: Maryanne M. Rouse) Nike is the largest maker of athletic footwear and apparel in the world with a U.S. market share exceeding 40%. Since almost all its products are manufactured by 700 independent contractors (99% of which are in Southeast Asia), Nike is a target of activists opposing manufacturing practices in developing nations. Although industry sales growth in athletic footwear is slowing, Nike refused to change its product mix in 2002 to suit Foot Locker, the dominant global footwear retailer. Is it time for Nike to change its strategy and practices? WEB CASE 15 Six Flags Inc.: The 2006 Business Turnaround (Contributor: Patricia A. Ryan) Known for its fast roller coasters and adventure rides, Six Flags has successfully built a group of regional theme and water parks in the United States. Nevertheless, the company has not turned a profit since 1998. Long-term debt had increased to 61% of total assets by 2005. New management is implementing a retrenchment strategy, but industry analysts are unsure if this will be enough to save the company. WEB CASE 16 Lowe’s Companies Inc. (Contributor: Maryanne M. Rouse) As the second-largest U.S. “big box” home improvement retailer (behind Home Depot), Lowe’s competes in a highly fragmented industry. The company has grown with the increase in home ownership and has no plans to expand internationally. With more than 1,000 stores in 2004, Lowe’s intended to increase its U.S. presence with 150 store openings per year in 2005 and 2006. Are there limits to Lowe’s current growth strategy? WEB CASE 17 Movie Gallery Inc. (Contributor: J. David Hunger) Movie Gallery is the second-largest North American video retail rental company, specializing in the rental and sale of movies and video games through its Movie Gallery and Hollywood Entertainment stores. Growing through acquisitions, the company is heavily in debt. The recent rise of online video rental services, such as Netflix, is cutting into retail store revenues and reducing the company’s cash flow. With just $135 million in cash at the end of 2005, Movie Gallery’s management finds itself facing possible bankruptcy. Preface Welcome to the 13th edition of Strategic Management and Business Policy! Although the chapters are the same as those in the 12th edition, many of the cases are new and different. We completely revised seven of your favorite cases (Apple, Dell, Google, Carnival, Panera Bread, Whole Foods, and Church & Dwight) and added 12 brand-new ones (iRobot, Rosetta Stone, Logitech, Chrysler, Tesla Motors, TomTom, Volcom, TOMS Shoes, Best Buy, Dollar General, Boston Beer, and Burger King) for a total of 19 new cases! More than half of the cases in this book are new to this edition! Although we still make a distinction between full-length and mini cases, we have interwoven them throughout the book to better identify them with their industries. This edition continues the theme that runs throughout all 12 chapters: global environmental sustainability. This strategic issue will become even more important in the years ahead, as all of us struggle to deal with the consequences of climate change, global warming, and energy availability. We continue to be the most comprehensive strategy book on the market, with chapters ranging from corporate governance and social responsibility to competitive strategy, functional strategy, and strategic alliances. To keep the size of the book manageable, we offer special issue chapters dealing with technology, entrepreneurship, and not-for-profit organizations on the Web site (www.pearsonhighered.com/wheelen). FEATURES NEW TO THIS 13th EDITION Nineteen New Cases: Both Full Length and Mini Length Eleven full-length new or updated comprehensive cases and eight mini-length cases have been added to support the 16 popular full-length cases carried forward from past editions. Twelve of the cases are brand new. Seven are updated favorites from past editions. Of the 35 cases appearing in this book, 22 are exclusive and do not appear in other books. 쏋 쏋 쏋 쏋 쏋 쏋 쏋 Five of the new cases deal with technology issues (Apple, iRobot, Dell, Rosetta Stone, and Logitech). One of the new cases deals with the Internet (Google). One new case involves entertainment (Carnival). Three new cases are of old and new transportation firms (Chrysler, TomTom, and Tesla Motors). Two new cases are of entrepreneurial clothing companies (Volcom and TOMS Shoes). Two new specialty retailing cases spotlight electronics (Best Buy) and variety (Dollar General). Five new cases come from the food, beverage, and restaurant industries (Boston Beer, Panera Bread, Whole Foods Market, Burger King, and Church & Dwight). HOW THIS BOOK IS DIFFERENT FROM OTHER STRATEGY TEXTBOOKS This book contains a Strategic Management Model that runs through the first 11 chapters and is made operational through the Strategic Audit, a complete case analysis methodology. The Strategic Audit provides a professional framework for case analysis in terms of external xxix xxx PREFACE and internal factors and takes the student through the generation of strategic alternatives and implementation programs. To help the student synthesize the many factors in a complex strategy case, we developed three useful techniques: 쏋 쏋 쏋 External Factor Analysis (EFAS) Table in Chapter 4 This reduces the external Opportunities and Threats to the 8 to 10 most important external factors facing management. Internal Factor Analysis (IFAS) Table in Chapter 5 This reduces the internal Strengths and Weaknesses to the 8 to 10 most important internal factors facing management. Strategic Factor Analysis Summary (SFAS) Matrix in Chapter 6 This condenses the 16 to 20 factors generated in the EFAS and IFAS Tables into the 8 to 10 most important (strategic) factors facing the company. These strategic factors become the basis for generating alternatives and a recommendation for the company’s future direction. Suggestions for Case Analysis are provided in Appendix 12.B (end of Chapter 12) and contain step-by-step procedures for how to use the Strategic Audit in analyzing a case. This appendix includes an example of a student-written Strategic Audit. Thousands of students around the world have applied this methodology to case analysis with great success. The Case Instructor’s Manual contains examples of student-written Strategic Audits for each of the full-length comprehensive strategy cases. FEATURES FOCUSED ON ENVIRONMENTAL SUSTAINABILITY 쏋 쏋 쏋 쏋 Each chapter contains a boxed insert dealing with an issue in environmental sustainability. Each chapter ends with Eco Bits, interesting tidbits of ecological information, such as the number of plastic bags added to landfills each year. Special sections on sustainability are found in Chapters 1 and 3. A section on the natural environment is included in the societal and task environments in Chapter 4. TIME-TESTED FEATURES This edition contains many of the same features and content that helped make previous editions successful. Some of the features are the following: 쏋 A Strategic Management Model runs throughout the first 11 chapters as a unifying concept. (Explained in Chapter 1) PREFACE 쏋 쏋 The Strategic Audit, a way to operationalize the strategic decisionmaking process, serves as a checklist in case analysis. (Chapter 1) Corporate governance is examined in terms of the roles, responsibilities, and interactions of top management and the board of directors and includes the impact of the Sarbanes-Oxley Act. (Chapter 2) FIGURE 3–1 Discretionary Responsibilities of Business 쏋 Social responsibility and managerial ethics are examined in detail in terms of how they affect strategic decision making. They include the process of stakeholder analysis and the concept of social capital. (Chapter 3) 쏋 Equal emphasis is placed on environmental scanning of the societal environment as well as on the task environment. Topics include forecasting and Miles and Snow’s typology in addition to competitive intelligence techniques and Porter’s industry analysis. (Chapter 4) Social Responsibilities Ethical Economic Legal SOURCE: Based on A. B. Carroll, “A Three Dimensional Conceptual Model of Corporate Performance,” Academy of Management Review (October 1979), pp. 497–505; A. B. Carroll, “Managing Ethically with Global Stakeholders: A Present and Future Challenge,” Academy of Management Executive (May 2004), pp. 114–120; and A. B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” Business Horizons (July–August 1991), pp. 39–48. 쏋 쏋 쏋 쏋 xxxi Core and distinctive competencies are examined within the framework of the resourcebased view of the firm. (Chapter 5) Organizational analysis includes material on business models, supply chain management, and corporate reputation. (Chapter 5) Internal and external strategic factors are emphasized through the use of specially designed EFAS, IFAS, and SFAS tables. (Chapters 4, 5, and 6) Functional strategies are examined in light of outsourcing. (Chapter 8) xxxii PREFACE 쏋 쏋 쏋 Two chapters deal with issues in strategy implementation, such as organizational and job design plus strategy-manager fit, action planning, corporate culture, and international strategic alliances. (Chapters 9 and 10) A separate chapter on evaluation and control explains the importance of measurement and incentives to organizational performance. (Chapter 11) Suggestions for in-depth case analysis provide a complete listing of financial ratios, recommendations for oral and written analysis, and ideas for further research. (Chapter 12) PREFACE 쏋 쏋 쏋 xxxiii The Strategic Audit Worksheet is based on the time-tested Strategic Audit and is designed to help students organize and structure daily case preparation in a brief period of time. The worksheet works exceedingly well for checking the level of daily student case preparation—especially for open class discussions of cases. (Chapter 12) Special chapters deal with strategic issues in managing technology and innovation, entrepreneurial ventures and small businesses, and not-for-profit organizations. (Web Chapters A, B, and C, respectively) These issues are often ignored by other strategy textbooks, but are available on this book’s Web site at www.pearsonhighered.com/wheelen. An experiential exercise focusing on the material covered in each chapter helps the reader to apply strategic concepts to an actual situation. 쏋 쏋 쏋 쏋 A list of key terms and the pages in which they are discussed enable the reader to keep track of important concepts as they are introduced in each chapter. Learning objectives begin each chapter. Each Part ends with a short case that acts to integrate the material discussed within the previous chapters. Timely, well-researched, and class-tested cases deal with interesting companies and industries. Many of the cases are about well-known, publicly held corporations—ideal subjects for further research by students wishing to “update” the cases. Both the text and the cases have been class-tested in strategy courses and revised based on feedback from students and instructors. The first 11 chapters are organized around a Strategic Management Model that begins each chapter and provides a structure for both content and case analysis. We emphasize those concepts that have proven to be most useful in understanding strategic decision making and in conducting case analysis. Our goal was to make the text as comprehensive as possible without getting bogged down in any one area. Endnote references are provided for those who wish to learn more about any particular topic. All cases are about actual organizations. The firms range in size from large, established multinationals to small, entrepreneurial ventures, and cover a broad variety of issues. As an aid to case analysis, we propose the Strategic Audit as an analytical technique. xxxiv PREFACE SUPPLEMENTS Instructor Resource Center At www.pearsonhighered.com/irc, instructors can access teaching resources available with this text in downloadable, digital format. Registration is simple and gives you immediate access to new titles and new editions. As a registered faculty member, you can download resource files and receive immediate access and instructions for installing course management content on your campus server. In case you ever need assistance, our dedicated technical support team is ready to assist instructors with questions about the media supplements that accompany this text. Visit http://247.pearsoned.com/ for answers to frequently asked questions and toll-free user support phone numbers. The Instructor Resource Center provides the following electronic resources. Instructor’s Manuals Two comprehensive Instructor’s Manuals have been carefully constructed to accompany this book. The first one accompanies the concepts chapters; the second one accompanies the cases. Concepts Instructor’s Manual To aid in discussing the 12 strategy chapters as well as the three web special issue chapters, the Concepts Instructor’s Manual includes: 쏋 쏋 Suggestions for Teaching Strategic Management: These include various teaching methods and suggested course syllabi. Chapter Notes: These include summaries of each chapter, suggested answers to discussion questions, and suggestions for using end-of-chapter cases/exercises and part-ending cases, plus additional discussion questions (with answers) and lecture modules. Case Instructor’s Manual To aid in case method teaching, the Case Instructor’s Manual includes detailed suggestions for use, teaching objectives, and examples of student analyses for each of the full-length comprehensive cases. This is the most comprehensive Instructor’s Manual available in strategic management. A standardized format is provided for each case: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Case Abstract Case Issues and Subjects Steps Covered in the Strategic Decision-Making Process Case Objectives Suggested Classroom Approaches Discussion Questions Case Author’s Teaching Note Student-Written Strategic Audit, if appropriate EFAS, IFAS, and SFAS Exhibits Financial Analysis—ratios and common-size income statements, if appropriate PowerPoint Slides PowerPoint slides, provided in a comprehensive package of text outlines and figures corresponding to the text, are designed to aid the educator and supplement in-class lectures. PREFACE xxxv Test Item File This Test Item File contains over 1,200 questions, including multiple-choice, true/false, and essay questions. Each question is followed by the correct answer, page reference, AACSB category, and difficulty rating. TestGen TestGen software is preloaded with all of the Test Item File questions. It allows instructors to manually or randomly view test questions, and to add, delete, or modify test-bank questions as needed to create multiple tests. Videos on DVD Exciting and high-quality video clips help deliver engaging topics to the classroom to help students better understand the concepts explained in the textbook. Please contact your local representative to receive a copy of the DVD. CourseSmart CourseSmart eTextbooks were developed for students looking to save on required or recommended textbooks. Students simply select their eText by title or author and purchase immediate access to the content for the duration of the course using any major credit card. With a CourseSmart eText, students can search for specific keywords or page numbers, take notes online, print out reading assignments that incorporate lecture notes, and bookmark important passages for later review. For more information or to purchase a CourseSmart eTextbook, visit www.coursesmart.com. Acknowledgments We thank the many people at Prentice Hall/Pearson who helped to make this edition possible. We thank our editor, Kim Norbuta. We are especially grateful to Kim’s project manager, Claudia Fernandes, who managed to keep everything on an even keel. We also thank Becca Groves and Emily Bush, who took the book through the production process. We are very thankful to Jeanne McNett, Assumption College; Bob McNeal, Alabama State University; Don Wicker, Brazosport College; Dan Kipley, Azusa Pacific University; Roxanna Wright, Plymouth State University; Kristl Davison, University of Mississippi; Francis Fabian, University of Memphis; Susan Fox-Wolfgramm, Hawaii Pacific University; Conrad Francis, Nova Southeastern University; and Gene Simko, Monmouth University for their constructive criticism of the 12th edition cases. They helped us to decide which of our favorite cases to keep and which to delete or update. We are very grateful to Kathy Wheelen for her first-rate administrative support of the cases and to Alan N. Hoffman for helping us with the Case Instructor’s Manual. We are especially thankful to the many students who tried out the cases we chose to include in this book. Their comments helped us find any flaws in the cases before the book went to the printer. In addition, we express our appreciation to Wendy Klepetar, Management Department Chair of Saint John’s University and the College of Saint Benedict, for her support and provision of the resources so helpful to revise a textbook. Both of us acknowledge our debt to xxxvi PREFACE Dr. William Shenkir and Dr. Frank S. Kaulback, former Deans of the McIntire School of Commerce of the University of Virginia, for the provision of a work climate most supportive to the original development of this book. We offer a special thanks to the hundreds of case authors who have provided us with excellent cases for the 13 editions of this book. We consider many of these case authors to be our friends. A special thanks to you!! The adage is true: The path to greatness is through others. Lastly, to the many strategy instructors and students who have moaned to us about their problems with the strategy course: We have tried to respond to your problems and concerns as best we could by providing a comprehensive yet usable text coupled with recent and complex cases. To you, the people who work hard in the strategy trenches, we acknowledge our debt. This book is yours. T. L. W. Saint Petersburg, Florida J. D. H. St. Joseph, Minnesota About the Contributors MOUSTAFA H. ABDELSAMAD, DBA (George Washington University), is Dean of the College of Business at Texas A&M University–Corpus Christi. He previously served as Dean of the College of Business and Industry at University of Massachusetts–Dartmouth and as Professor of Finance and Associate Dean of Graduate Studies in Business at Virginia Commonwealth University. He is Editor–in-Chief of SAM Advanced Management Journal and International President of the Society of Advancement of Management. He is author of A Guide to Capital Expenditure Analysis and two chapters in the Dow Jones–Irwin Capital Budgeting Handbook. He is the author and coauthor of numerous articles in various publications. Hitesh (John) P. Adhia, CPA, MS and BA (University of South Florida), is the President and Chief Investment Officer of Adhia Investment Advisors, Inc. (the “Firm”). Mr. Adhia is a CPA and has been in the finace industry since 1982. Mr Adhia is the founder and Investment Manager for the Adhia Twenty Fund, and the Adhia Health Care Fund, the Adhia Short Term Advantage Fund, the Adhia Arbitrage Fund, and the Adhia Derivative Fund. Prior to forming Adhia Investment Advisors, Mr. Adhia owned a Tampa-based public accounting practice and also served as Acting CFO and Independent Advisor to the Well Care Group of Companies. Mr. Adhia has over twenty years experience in managing fixed income strategies. KAREN A. BERGER, PhD (M. Phil and New York University), MBA (University of Connecticut), MA (Columbia University), and BA (S.U.N.Y. at Buffalo), is Chairperson of the Marketing Department and Associate Professor of Marketing at Pace University. She previously held academic positions with New York University, Stern School of Business, and Mercy College. Berger has published literature in the field of Marketing and has won several teaching awards. CHRISTINE B. BUENAFE, student of The College of New Jersey, co-author with Joyce Vincelette of the Rosetta Stone and Volcom cases in this edition. BARNALI CHAKRABORTY, is a faculty member at the ICFAI Center for Management Research (ICMR). RICHARD A. COISER, PhD (University of Iowa), is Dean and Leeds Professor of Management at Purdue University. He formerly was Dean and Fred B. Brown Chair at the University of Oklahoma and was Associate Dean for Academics and Professor of Business Administration at Indiana University. He served as Chairperson of the Department of Management at Indiana University. For seven years prior to assuming his current position, he was a Planning Engineer with Western Electric Company and Instructor of Management and Quantitative Methods at the University of Notre Dame. Dr. Coiser is interested in researching the managerial decisionmaking process, organization responses to external forces, and participative management. He has published in Behavior Science, Academy of Management Journal, Academy of Management Review, Organizational Behavior and Human Performance, Management Science, Strategic Management Journal, Business Horizons, Decision Sciences, Personnel Psychology, Journal of Creative Behavior, International Journal of Management, The Business Quarterly, Public Administration Quarterly, Human Relations, and other journals. In addition, Dr. Coiser has presented numerous papers at professional meetings and has coauthored a management xxxvii xxxviii ABOUT THE CONTRIBUTORS text. He has been active in many executive development programs and has acted as managementeducation consultant for several organizations. Dr. Coiser is the recipient of Teaching Excellence Awards in the MBA Program at Indiana and a Richard D. Irwin Fellowship. He belongs to the Institute of Management, Sigma Iota Epsilon, and the Decision Sciences Institute. ROY A. COOK, DBA (Mississippi State University), is past Associate Dean of the School of Business Administration and previously a Professor at Fort Lewis College, Durango, Colorado. He has written a best-selling textbook, Tourism: The Business of Travel, now in its 2nd edition, and has two forthcoming textbooks: Cases and Experiential Exercises in Human Resource Management and Guide to Business Etiquette. He has authored numerous articles, cases, and papers based on his extensive experience in the hospitality industry and research interests in the areas of strategy, small business management, human resource management, and communication. Dr. Cook has served as the Director of Colorado’s Center for Tourism Research® and Editor of The Annual Advances in Business Cases, and also on the editorial boards of the Business Case Journal, the Journal of Business Strategies, and the Journal of Teaching and Tourism. He is a member of the Academy of Management, Society for Case Research (past President), and the International Society of Travel and Tourism Educators. Dr. Cook teaches courses in Strategic Management, Small Business Management, Tourism and Resort Management, and Human Resource Management. STEVEN M. COX, PhD (University of Nebraska), is an Associate Professor of Marketing, McColl School of Business, Queens University of Charlotte. He has a 25-year career in executive level marketing and sales positions with AT&T, GE, and several satellite imaging companies. He owns and manages LSI, a geographic information system company. He currently serves as a case reviewer for the Business Case Journal and the Southeast Case Research Journal. DAVID B. CROLL, PhD (Pennsylvania State University), is Professor Emeritus of Accounting at the McIntire School of Commerce, the University of Virginia. He was Visiting Associate Professor at the Graduate Business School, the University of Michigan. He is on the editorial board of SAM Advanced Management Journal. He has published in the Accounting Review and the Case Research Journal. His cases appear in 12 accounting and management textbooks. DAN R. DALTON, PhD (University of California, Irvine), is the Dean of the Graduate School of Business, Indiana University, and Harold A. Polipl Chair of Strategic Management. He was formerly with General Telephone & Electronics for 13 years. Widely published in business and psychology periodicals, his articles have appeared in the Academy of Management Journal, Journal of Applied Psychology, Personnel Psychology, Academy of Management Review, and Strategic Management Journal. CATHY A. ENZ, PhD (Ohio State University), is the Lewis G. Schaeneman Jr. Professor of Innovation and Dynamic Management at Cornell University’s School of Hotel Administration. She is also the Executive Director of the Center for Hospitality Research at that institution. Her doctoral degree is in Organization Theory and Behavior. Professor Enz has written numerous articles, cases, and books on corporate culture, value sharing, change management, and strategic human resource management effects on performance. Professor Enz consults extensively in the service sector and serves on the Board of Directors for two hospitality-related organizations. ELLIE A. FOGARTY, EdD (University of Pennsylvania), MBA (Temple University), MLS (University of Pittsburgh), and BA (Immaculata University), is the Director of Compliance and Ethics at The College of New Jersey (TCNJ). Previously, she served as the Associate Provost for Planning and Resource Allocation, Executive Assistant to the Provost, and Business and ABOUT THE CONTRIBUTORS xxxix Economics Librarian, all at TCNJ. She has written five cases used in earlier editions of Strategic Management and Business Policy. She has taught management courses at both TCNJ and Rutgers University. GAMEWELL D. GANTT, JD, CPA, is Professor of Accounting and Management in the College of Business at Idaho State University in Pocatello. Idaho, where he teaches a variety of legal studies courses. He is past President of the Rocky Mountain Academy of Legal Studies in Business and a past Chair of the Idaho Endowment Investment Fund Board. His published articles and papers have appeared in journals including Midwest Law Review, Business Law Review, Copyright World, and Intellectual Property World. His published cases have appeared in several textbooks and in Annual Advances in Business Cases. S. S. GEORGE is a faculty associate at the ICFAI Center for Management Research (ICMR). NORMAN J. GIERLASINSKI, DBA, CPA, CFE, CIA, is Professor of Accounting at Central Washington University. He served as Chairman of the Small Business Division of the Midwest Business Administration Association. He has authored or coauthored cases for professional associations and the Harvard Case Study Series. He has authored various articles in professional journals as well as serving as a contributing author for textbooks and as a consultant to many organizations. He also served as a reviewer for various publications. VIVEK GUPTA is a faculty member at the ICFAI Center for Management Research (ICMR). RENDY HALIN, MBA and BS (Bentley University), is currently focusing on equity and commodity trading, as well as venturing on a new startup company. Actively involved in his church ministry, he is also contributing his time and thought on how to properly manage the church’s management and financial report effectively. PATRICIA HARASTA, MBA (Bentley McCallum Graduate School of Business), is Director of Quality Assurance at CA (formerly Computer Associates). She manages a distributed team responsible for new development and maintenance QA activities for products that provide management of applications such as SAP, Microsoft Exchange, Lotus Domino, WebSphere, WebLogic, MQ, and Web Servers. ALAN N. HOFFMAN, MBA, DBA (Indiana University), is Professor of Strategic Management and Director of the MBA program at the McCallum Graduate School, Bentley University. His major areas of interest include strategic management, global competition, investment strategy, and technology. Professor Hoffman is coauthor of The Strategic Management Casebook and Skill Builder textbook. His recent publications have appeared in the Academy of Management Journal, Human Relations, the Journal of Business Ethics, the Journal of Business Research, and Business Horizons. He has authored more than 20 strategic management cases including The Boston YWCA, Ryka Inc., Liz Claiborne, Ben & Jerry’s, Cisco Systems, Sun Microsystems, Palm Inc., Handspring, Ebay, AOL/Time Warner, McAfee, Apple Computer, Tivo Inc., and Wynn Resorts. He is the recipient of the 2004 Bentley University Teaching Innovation Award for his course: “The Organizational Life Cycle—The Boston Beer Company Brewers of Samuel Adams Lager Beer.” J. DAVID HUNGER, PhD (Ohio State University), is currently Strategic Management Scholar in Residence at Saint John’s University in Minnesota. He is also Professor Emeritus at Iowa State University where he taught for 23 years. He previously taught at George Mason University, the University of Virginia, and Baldwin-Wallace College. He worked in brand management at Procter & Gamble Company, worked as a selling supervisor at Lazarus Department Store, and xl ABOUT THE CONTRIBUTORS served as a Captain in U.S. Army Military Intelligence. He has been active as a consultant and trainer to business corporations, as well as to state and federal government agencies. He has written numerous articles and cases that have appeared in the Academy of Management Journal, International Journal of Management, Human Resource Management, Journal of Business Strategies, Case Research Journal, Business Case Journal, Handbook of Business Strategy, Journal of Management Case Studies, Annual Advances in Business Cases, Journal of Retail Banking, SAM Advanced Management Journal, and Journal of Management, among others. Dr. Hunger is a member of the Academy of Management, North American Case Research Association, Society for Case Research, North American Management Society, Textbook and Academic Authors Association, and the Strategic Management Society. He is past President of the North American Case Research Association, the Society for Case Research, and the Iowa State University Press Board of Directors. He also served as a Vice President of the U.S. Association for Small Business and Entrepreneurship. He was Academic Director of the Pappajohn Center for Entrepreneurship at Iowa State University. He has served on the editorial review boards of SAM Advanced Management Journal, Journal of Business Strategies, and Journal of Business Research. He has served on the Board of Directors of the North American Case Research Association, the Society for Case Research, the Iowa State University Press, and the North American Management Society. He is coauthor with Thomas L. Wheelen of Strategic Management and Business Policy and Essentials of Strategic Management plus Concepts in Strategic Management and Business Policy and Cases in Strategic Management and Business Policy, as well as Strategic Management Cases (PIC: Preferred Individualized Cases), and a monograph assessing undergraduate business education in the United States. The 8th edition of Strategic Management and Business Policy received the McGuffey Award for Excellence and Longevity in 1999 from the Text and Academic Authors Association. Dr. Hunger received the Best Case Award given by the McGraw-Hill Publishing Company and the Society for Case Research in 1991 for outstanding case development. He is listed in various versions of Who’s Who, including Who’s Who in the United States and Who’s Who in the World. He was also recognized in 1999 by the Iowa State University College of Business with its Innovation in Teaching Award and was elected a Fellow of the Teaching and Academic Authors Association and of the North American Case Research Association. P. INDU is a student of Vivek Gupta at the ICFAI Center of Management Research (ICMR). GEORGE A. JOHNSON, PhD, is Professor of Management and Director of the Idaho State University MBA program. He has published in the fields of Management Education, Ethics, Project Management, and Simulation. He is also active in developing and publishing case material for educational purposes. His industry experience includes several years as a Project Manager in the development and procurement of aircraft systems. SHAWANA P. JOHNSON, PhD (Case Western Reserve University), is president of Global Marketing Insights, Inc. She has 27 years of management and marketing experience in the Hi-Tech Information and Geospatial Technology Industry with companies such as Lockheed Martin and General Electric Aerospace. MICHAEL KEEFFE, PhD (University of Arkansas), is Associate Professor of Management and Chair of Undergraduate Assurance of Learning in the McCoy College of Business Administration, Texas State University. He was the developer and draft writer of the College of Business policy and procedure system, co-director of initial AACSB-International accreditation efforts, sponsor of the Alpha Chi University Honor Society for over a decade, and developed and implemented the Assurance of Learning system for the McCoy College. Additionally, he has been Chair or Acting Chair of three departments in the college. With over a dozen journal articles and ABOUT THE CONTRIBUTORS xli numerous refereed proceedings, Dr. Keeffe is an avid case writer with over 21 cases appearing in 32 textbooks over the last 20 years. JOHN A. KILPATRICK, PhD (University of Iowa), is Professor of Management and International Business, Idaho State University. He has taught in the areas of business and business ethics for over 25 years. He served as Co-Chair of the management track of the Institute for Behavioral and Applied Management from its inception and continues as a board member for that organization. He is author of The Labor Content of American Foreign Trade, and is coauthor of Issues in International Business. His cases have appeared in a number of organizational behavior and strategy texts and casebooks, and in Annual Advances in Business Cases. DONALD F. KURATKO is the Jack M. Gill Chair of Entrepreneurship, Professor of Entrepreneurship, and Executive Director of the Johnson Center for Entrepreneurship & Innovation at The Kelley School of Business, Indiana University–Bloomington. He has published over 150 articles on aspects of entrepreneurship, new venture development, and corporate entrepreneurship. His work has been published in journals such as Strategic Management Journal, Academy of Management Executive, Journal of Business Venturing, Entrepreneurship Theory & Practice, Journal of Small Business Management, Journal of Small Business Strategy, Family Business Review, and Advanced Management Journal. Dr. Kuratko has authored 20 books, Entrepreneurship: Theory, Process, Practice, 7th edition (South-Western/Thomson Publishers, 2007), as well as Strategic Entrepreneurial Growth, 2nd edition (South-Western/Thomson Publishers, 2004), Corporate Entrepreneurship (South-Western/Thomson Publishers, 2007), and Effective Small Business Management, 7th edition (Wiley & Sons Publishers, 2001). In addition, Dr. Kuratko has been consultant on Corporate Entrepreneurship and Entrepreneurial Strategies to a number of major corporations such as Anthem Blue Cross/Blue Shield, AT&T, United Technologies, Ameritech, The Associated Group (Acordia), Union Carbide Corporation, ServiceMaster, and TruServ. Before coming to Indiana University, he was the Stoops Distinguished Professor of Entrepreneurship and Founding Director of the Entrepreneurship Program at Ball State University. In addition, he was the Executive Director of The Midwest Entrepreneurial Education Center. Dr. Kuratko’s honors include earning the Ball State University College of Business Teaching Award 15 consecutive years as well as being the only professor in the history of Ball State University to achieve all four of the university’s major lifetime awards: Outstanding Young Faculty (1987); Outstanding Teaching Award (1990); Outstanding Faculty Award (1996); and Outstanding Researcher Award (1999). He was also honored as the Entrepreneur of the Year for the state of Indiana and was inducted into the Institute of American Entrepreneurs Hall of Fame (1990). He has been honored with The George Washington Medal of Honor; the Leavey Foundation Award for Excellence in Private Enterprise; the NFIB Entrepreneurship Excellence Award; and the National Model Innovative Pedagogy Award for Entrepreneurship. In addition, Dr. Kuratko was named the National Outstanding Entrepreneurship Educator (by the U.S. Association for Small Business and Entrepreneurship) and selected as one of the Top 3 Entrepreneurship Professors in the United States by the Kauffman Foundation, Ernst & Young, Inc. magazine, and Merrill Lynch. He received the Thomas W. Binford Memorial Award for Outstanding Contribution to Entrepreneurial Development from the Indiana Health Industry Forum. Dr. Kuratko has been named a 21st Century Entrepreneurship Research Fellow by the National Consortium of Entrepreneurship Centers as well as the U.S. Association for Small Business & Entrepreneurship Scholar for Corporate Entrepreneurship in 2003. Finally, he has been honored by his peers in Entrepreneur magazine as one of the Top 2 Entrepreneurship xlii ABOUT THE CONTRIBUTORS Program Directors in the nation for three consecutive years including the #1 Entrepreneurship Program Director in 2003. RUCHI MANKAD is a former faculty member at the ICFAI Center for Management Research (ICMR). BILL J. MIDDLEBROOK, PhD (University of North Texas), is Professor of Management at Southwest Texas State University. He served as Acting Chair of the Department of Management and Marketing, published in numerous journals, served as a consultant in industry, and is currently teaching and researching in the fields of Strategic Management and Human Resources. BERNARD A. MORIN, B.S., M.B.A., Ph.D., Professor Emeritus of Commerce at the University of Virginia. NATHAN NEBBE, MBA and MA (Iowa State University), has significant interests in the indigenous peoples of the Americas. With an undergraduate degree in Animal Ecology, he served as a Peace Corps Volunteer in Honduras, where he worked at the Honduran national forestry school ESNAACIFORE (Escuela National de Ciencias Forestales). After some time in the Peace Corps, Nathan worked for a year on a recycling project for the Town of Ignacio and the Southern Ute Indian Tribe in southwestern Colorado. Following his experience in Colorado, Nathan returned to Iowa State University where he obtained his MBA, followed by an MA in Anthropology. He is currently studying how globalization of the Chilian forestry industry is affecting the culture of the indigenous Mapuche people of south central Chile. LAWRENCE C. PETTIT, Jr., B.S., M.S., D.B.A., Professor Emeritus of Commerce at the McIntire School of Commerce University of Virginia. ANNIE PHAN, BS (The College of New Jersey), is currently an associate at Goldman Sachs Asset Management, and is an MBA candidate at New York University Leonard N. Stern School of Business. In addition, she has assisted with research for The Global Corporate Brand Book. SHIRISHA REGANI is a faculty associate at the ICFAI Center for Management Research (ICMR). JOHN K. ROSS III, PhD (University of North Texas), is Associate Professor of Management at Southwest Texas State University. He has served as SBI Director, Associate Dean, Chair of the Department of Management and Marketing, published in numerous journals, and is currently teaching and researching in the fields of Strategic Management and Human Resource. SHERRY K. ROSS, CPA (Texas), MBA (Southwest Texas State University), is a Senior Lecturer at Texas State University–San Marcos, Texas. She is the core course coordinator for financial accounting and teaches introductory financial accounting courses. Her recent work experience is Executive Director of a not-for-profit corporation. MARYANNE M. ROUSE, CPA, MBA (University of South Florida) was a faculty member, Assistant Dean, and Director of Management Education and Development at the College of Business Administration of the University of South Florida until her retirement. PATRICIA A. RYAN, PhD (University of South Florida), is an Associate Professor of Finance, Colorado State University. She currently serves on the Board of Directors of the Midwest Finance Association and was the Associate Editor of the Business Case Journal. Her research ABOUT THE CONTRIBUTORS xliii interests lie in corporate finance, specifically initial public offerings, capital budgeting, and case writing. She has published in the Journal of Business and Management, the Business Case Journal, Educational and Psychological Measurement, the Journal of Research in Finance, the Journal of Financial and Strategic Decisions, and the Journal of Accounting and Finance Research. Her research has been cited in the Wall Street Journal, CFO Magazine, and Investment Dealers Digest. RANGKI SON, MBA, earned his degree in Finance at the McCallum Graduate School of Business, Bentley University, in May 2007. He is currently working for KPMG Korea as a Business Performance Service Consultant. LAURENCE J. STYBEL, EdD (Harvard University), is cofounder of Stybel Peabody Lincolnshire, a Boston-based management consulting firm devoted to enhancing career effectiveness of executives who report to boards of directors. Its services include search, outplacement, outplacement avoidance, and valued executive career consulting. Stybel Peabody Lincolnshire was voted “Best Outplacement Firm” by the readers of Massachusetts Lawyers Weekly. Its programs are the only ones officially endorsed by the Massachusetts Hospital Association and the Financial Executives Institute. He serves on the Board of Directors of the New England Chapter of the National Association of Corporate Directors and the Boston Human Resources Association. His home page can be found at www.stybelpeabody.com. The “Your Career” department of the home page contains downloadable back issues of his monthly Boston Business Journal column, “Your Career.” JOEL SAROSH THADAMALLA is a faculty member at the ICFAI center for Management Research (ICMR). MRIDU VERMA serves as a Consulting Editor at ICFAI Business School (ICMR). JOYCE P. VINCELETTE, DBA (Indiana University), is a Professor of Management and the Coordinator of Management and Interdisciplinary Business Programs at The College of New Jersey. She was previously a faculty member at the University of South Florida. She has authored and coauthored various articles, chapters, and cases that have appeared in management journals and strategic management texts and casebooks. She is also active as a consultant and trainer for a number of local and national business organizations as well as for a variety of notfor-profit and government agencies. She currently teaches and conducts research in the fields of Strategic Management and Leadership. KATHRYN E. WHEELEN, MEd (Nova Southern University), BA, LMT, (University of Tampa), has worked as an Administrative Assistant for case and textbook development with the Thomas L. Wheelen Company (circa 1879). She works as a Special Education Teacher in the Hillsborough County School District at Citrus Park Elementary School, Tampa, Florida. RICHARD D. WHEELEN, BS (University of South Florida), has worked as a case research assistant. He is currently practicing in the field of Health Care. He currently lives in Everett, Washington. THOMAS L. WHEELEN, DBA (George Washington University), MBA (Babson College) and BS cum laude (Boston College), has taught as Visiting Professor at Trinity College of the University of Dublin, University of South Florida as Professor of Strategic Management, the McIntire School of Commerce of the University of Virginia as the Ralph A. Beeton Professor of Free Enterprise, and Visiting Professor at both the University of Arizona and Northeastern xliv ABOUT THE CONTRIBUTORS University. He was also affiliated with the University of Virginia College of Continuing Education, where he served in the following capacities: (1) Coordinator for Business Education (1978–1983, 1971–1976)—approve all undergraduate courses offered at seven regional centers and approved faculty; (2) Liaison Faculty and Consultant to the National Academy of the FBI Academy (1972–1983) and; (3) developed, sold, and conducted over 200 seminars for local, state, and national governments, and companies for McIntire School of Commerce and Continuing Education. He worked at General Electric Company, holding various management positions (1961–1965); U.S. Navy Supply Corps (SC)–Lt. (SC) USNR–Assistant Supply Officer aboard nuclear support tender (1957–1960). He has been published in the monograph, An Assessment of Undergraduate Business Education in the United States (with J. D. Hunger), 1980. He’s also authored 60 published books, with 14 books translated into eight languages (Arabic, Bahasa, Indonesia, Chinese, Chinese Simplified, Greek, Italian, Japanese, Portuguese and Thai...
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Running head: MANAGEMENT DISCUSSION

Management Discussion

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Institutional Affiliation

Date

Discussion Questions

1

MANAGEMENT DISCUSSION

2

Is the evaluation and control process appropriate for a corporation that emphasizes
creativity? Are control and creativity compatible? Discuss

The evaluation and control procedure can be implemented by the right kind of
management in a company that values creativity. I believe it is more dependent on the agency's
leadership than on the agency itself. A manager who places a high value on control and
micromanages their staff may limit innovation and focus solely on core operations rather than
branching out. Companies must be able to respond rapidly to new market opportunities in order
to stay competitive in any business, and employees are often the finest resource. Rather than
competing in the same old way, they bring new ideas to the table and can produce new services
and products. If a company wants to promote creativity, it needs to give people the freedom to
think and work freely. This does not imply a complete lack of control but rather a level of control
that allows employees to work freely. For example, Google explicitly encourages people to be
creative, but the amount of innovation that can be carried over is limited.

Before being implemented, ideas are presented to a panel and considered by the panel.
This permits employees' opinions to be heard while yet giving management complete authority
over new processes (The Guardian, 2016). According to Kevin Dwyer's 2016 article "Balancing
process control and creativity," control and creativity should coexist. "They are not parts of
exclusive sets," Dwyer says. If your company leans too much one way or the other, it's either
miss...


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