Please read chapter 3 and chapter 4 in the attached textbook and answer the following

timer Asked: Jan 25th, 2021

Question Description

This assignment covers chapter three, Internal Analysis: Distinctive Competencies, Competitive Advantage, and Profitability, and chapter four, Building Competitive Advantage through Functional-Level Strategy.

Chapter 3 Questions:

  1. Define value creation for customers and the components that can be used to determine value creation per unit. How value creation is related to competitive advantage?
  2. What is a value chain? Why is efficiency so important in an organizations' value chain activities?
  3. What building blocks in value creation can an organization use to sustain competitive advantage? How best you can sustain competitive advantage?
  4. What does internal analysis help a company to determine? How does this process contribute to the overall health (value creation, competitive advantage, profitability) of a company?
  5. Why do companies fail? How does competitive advantage relate to failure? If competitive advantage is not maintained, what would be the consequence for a company?

Chapter 4 Questions:

  1. What are functional level strategies? How they relate to competitive advantage of a company? How can functional level strategy contribute to efficiency?
  2. Describe economies of scale and how it relates to competitive advantage. What strategic significance does economies of scale have for a company? What it does with the competitive advantage of a company?
  3. How does innovation relate to competitive advantage? What can be done to sustain innovation in a company?
  4. How does customer relations contribute to competitive advantage? What is the effect of customer relations on value creation and its components?


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11TH EDITION STRATEGIC MANAGEMENT THEORY 11TH EDITION Strategic Management THEORY Charles W. L. Hill University of Washington – Foster School of Business Gareth R. Jones Melissa A. Schilling New York University – Stern School of Business Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it. For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit to search by ISBN#, author, title, or keyword for materials in your areas of interest. Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Strategic Management: Theory, 11e 2015, 2013 Cengage Learning Charles W. L. Hill Gareth R. Jones Melissa A. Schilling ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced, transmitted, stored, or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher. Product Director: Joe Sabatino Sr. Product Manager: Scott Person Sr. Content Developer: Mike Guendelsberger Product Assistant: Tamara Grega Sr. Content Project Manager: Cliff Kallemeyn Media Developer: Courtney J. Bavaro Sr. Media Developer: Sally Nieman Sr. Art Director: Stacy Jenkins Shirley For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support, 1-800-354-9706 For permission to use material from this text or product, submit all requests online at Further permissions questions can be emailed to Manufacturing Planner: Ron Montgomery Sr. Rights Acquisitions Specialist: Amber Hosea Library of Congress Control Number: 2013941272 Production Service: MPS Limited Student Edition: Internal/ Cover Designer: Mike Stratton Cover Image: © ISBN-13: 978-1-285-18449-4 ISBN-10: 1-285-18449-1 Cengage Learning 200 First Stamford Place, 4th Floor Stamford, CT USA 06902 Cengage Learning is a leading provider of customized learning solutions with office locations around the globe, including Singapore, the United Kingdom, Australia, Mexico, Brazil, and Japan. Locate your local office at: Cengage Learning products are represented in Canada by Nelson Education, Ltd. To learn more about Cengage Learning Solutions, visit Purchase any of our products at your local college store or at our preferred online store Printed in Canada 1 2 3 4 5 6 7 17 16 15 14 13 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Brief Contents PART ONE  INTRODUCTION TO STRATEGIC MANAGEMENT 1 2 Strategic Leadership: Managing the Strategy-Making Process for Competitive Advantage External Analysis: The Identification of Opportunities and Threats 1 43 PART TWO  THE NATURE OF COMPETITIVE ADVANTAGE 3 4 Internal Analysis: Distinctive Competencies, Competitive Advantage, and Profitability Building Competitive Advantage Through Functional-Level Strategies 80 116 PART THREE  STRATEGIES 5 6 7 8 9 10 Business-Level Strategy Business-Level Strategy and the Industry Environment Strategy and Technology Strategy in the Global Environment Corporate-Level Strategy: Horizontal Integration, Vertical Integration, and Strategic Outsourcing Corporate-Level Strategy: Related and Unrelated Diversification 153 178 210 246 286 318 PART FOUR  IMPLEMENTING STRATEGY 11 12 13 Corporate Performance, Governance, and Business Ethics Implementing Strategy in Companies That Compete in a Single Industry Implementing Strategy in Companies That Compete Across Industries and Countries Glossary Index 359 395 439 G-1 I-1 v Contents Preface xix Acknowledgements xxiii Dedication xxvii PART one INTRODUCTION TO STRATEGIC MANAGEMENT Chapter 1  trategic Leadership: Managing the Strategy-Making S Process for Competitive Advantage Opening Case 1 Overview 3 Strategic Leadership, Competitive Advantage, and Superior Performance 4 Superior Performance 5 Competitive Advantage and a Company’s Business Model Industry Differences in Performance 7 Performance in Nonprofit Enterprises 8 Strategic Managers 9 Corporate-Level Managers 10 Business-Level Managers 10 Functional-Level Managers 11 The Strategy-Making Process 11 A Model of the Strategic Planning Process 11 Mission Statement 12 Major Goals 16 External Analysis 17 Internal Analysis 17 SWOT Analysis and the Business Model 17 1 6 Strategy in Action 1.1: Strategic Analysis at Time Inc. 18 Strategy Implementation 19 The Feedback Loop 20 Strategy as an Emergent Process 20 Strategy Making in an Unpredictable World 20 Autonomous Action: Strategy Making by Lower-Level Managers 21 Strategy in Action 1.2: Starbucks’ Music Business Serendipity and Strategy 22 Intended and Emergent Strategies 22 21 vii viii Contents Strategy in Action 1.3: A Strategic Shift at Charles Schwab Strategic Planning in Practice 25 Scenario Planning 25 Decentralized Planning 26 Strategic Decision Making 27 Cognitive Biases and Strategic Decision Making 27 Techniques for Improving Decision Making 29 Strategic Leadership 29 Vision, Eloquence, and Consistency 30 Articulation of the Business Model 30 Commitment 30 Being Well Informed 31 Willingness to Delegate and Empower 31 The Astute Use of Power 32 Emotional Intelligence 32 Chapter 2 23  xternal Analysis: The Identification of Opportunities E and Threats Opening Case 43 Overview 44 Defining an Industry 45 Industry and Sector 46 Industry and Market Segments 47 Changing Industry Boundaries 47 Competitive Forces Model 47 Risk of Entry by Potential Competitors 48 Rivalry Among Established Companies 50 Strategy in Action 2.1: Circumventing Entry Barriers into the Soft Drink Industry 51 Strategy in Action 2.2: Price Wars in the Breakfast Cereal Industry 53 The Bargaining Power of Buyers 55 The Bargaining Power of Suppliers 56 Substitute Products 58 Complementors 58 Summary: Why Industry Analysis Matters 59 Strategic Groups Within Industries 60 Implications of Strategic Groups 61 The Role of Mobility Barriers 62 Industry Life-Cycle Analysis 63 Embryonic Industries 63 Growth Industries 64 Industry Shakeout 64 Mature Industries 65 Declining Industries 66 Summary 66 43 Contents Limitations of Models for Industry Analysis Life-Cycle Issues 67 Innovation and Change 67 Company Differences 69 The Macroenvironment 69 Macroeconomic Forces 69 Global Forces 71 Technological Forces 71 Demographic Forces 72 Social Forces 72 Political and Legal Forces 72 67 PART two THE NATURE OF COMPETITIVE ADVANTAGE Chapter 3 Internal Analysis: Distinctive Competencies, Competitive Advantage, and Profitability Opening Case 80 Overview 82 The Roots of Competitive Advantage 82 Distinctive Competencies 83 Competitive Advantage, Value Creation, and Profitability 85 The Value Chain 89 Primary Activities 89 Strategy in Action 3.1: Value Creation at Burberry Support Activities 91 91 Strategy in Action 3.2: Competitive Advantage at Zara 92 The Building Blocks of Competitive Advantage 93 Efficiency 93 Quality as Excellence and Reliability 94 Innovation 96 Customer Responsiveness 96 Business Models, the Value Chain, and Generic Distinctive Competencies 97 Analyzing Competitive Advantage and Profitability 98 The Durability of Competitive Advantage 103 Barriers to Imitation 103 Capability of Competitors 105 Industry Dynamism 106 Summary 106 Avoiding Failure and Sustaining Competitive Advantage 106 Why Companies Fail 106 Steps to Avoid Failure 108 Strategy in Action 3.3: The Road to Ruin at DEC 109 80 ix x Contents Chapter 4  uilding Competitive Advantage Through B Functional-Level Strategies 116 Opening Case 116 Overview 117 Achieving Superior Efficiency 119 Efficiency and Economies of Scale 119 Efficiency and Learning Effects 120 Strategy in Action 4.1: Learning Effects in Cardiac Surgery Efficiency and the Experience Curve 122 Efficiency, Flexible Production Systems, and Mass Customization 124 Marketing and Efficiency 125 122 Strategy in Action 4.2: Pandora: Mass Customizing Internet Radio 126 Materials Management, Just-in-Time Systems, and Efficiency 128 R&D Strategy and Efficiency 129 Human Resource Strategy and Efficiency 129 Information Systems and Efficiency 132 Infrastructure and Efficiency 132 Summary 133 Achieving Superior Quality 134 Attaining Superior Reliability 134 Strategy in Action 4.3: General Electric’s Six Sigma Quality Improvement Process 135 Implementing Reliability Improvement Methodologies 136 Improving Quality as Excellence 138 Achieving Superior Innovation 139 The High Failure Rate of Innovation 140 Reducing Innovation Failures 141 Strategy in Action 4.4: Corning—learning from Innovation Failures 142 Achieving Superior Responsiveness to Customers 144 Focusing on the Customer 144 Satisfying Customer Needs 145 PART Three Chapter 5 STRATEGIES Business-Level Strategy Opening Case 153 Overview 154 Low Cost and Differentiation Lowering Costs 155 153 155 Contents Strategy in Action 5.1: Low Costs at Southwest Airlines 156 Who are Our Customers? Market Segmentation 161 Business-Level Strategy Choices 164 Business-Level Strategy, Industry and Competitive Advantage 166 Strategy in Action 5.2: Microsoft Office versus Google Apps Implementing Business-Level Strategy 168 Competing Differently: Searching for a Blue Ocean 171 Chapter 6 Business-Level Strategy and the Industry Environment 167 178 Opening Case 178 Overview 179 Strategy in a Fragmented Industry 180 Reasons for Fragmentation 180 Consolidating a Fragmented Industry Through Value Innovation 181 Chaining and Franchising 182 Horizontal Mergers 183 Strategies in Embryonic and Growth Industries 184 The Changing Nature of Market Demand 185 Strategic Implications: Crossing the Chasm 188 Strategy in Action 6.1: Crossing the Chasm in the Smartphone Market 189 Strategic Implications of Differences in Market Growth Rates 190 Strategy in Mature Industries 191 Strategies to Deter Entry 192 Strategies to Manage Rivalry 194 Strategy in Action 6.2: Toyota Uses Market Development to Become the Global Leader 198 Strategy in Action 6.3: Non-Price Competition at Nike Strategies in Declining Industries 201 The Severity of Decline 201 Choosing a Strategy 202 Chapter 7 199 Strategy and Technology Opening Case 210 Overview 211 Technical Standards and Format Wars 210 213 Strategy in Action 7.1: “Segment Zero”—A Serious Threat to Microsoft? 213 Examples of Standards 216 Benefits of Standards 217 xi xii Contents Establishment of Standards 218 Network Effects, Positive Feedback, and Lockout Strategies for Winning a Format War 222 Ensure a Supply of Complements 222 Leverage Killer Applications 222 Aggressive Pricing and Marketing 223 Cooperate with Competitors 223 License the Format 224 Costs in High-Technology Industries 224 Comparative Cost Economics 225 Strategic Significance 226 219 Strategy in Action 7.2: Lowering the Cost of Ultrasound Equipment Through Digitalization 227 Capturing First-Mover Advantages 227 First-Mover Advantages 229 First-Mover Disadvantages 229 Strategies for Exploiting First-Mover Advantages 230 Technological Paradigm Shifts 233 Paradigm Shifts and the Decline of Established Companies 234 Strategy in Action 7.3: Disruptive Technology in Mechanical Excavators 238 Strategic Implications for Established Companies 238 Strategic Implications for New Entrants 240 Chapter 8 Strategy in the Global Environment Opening Case 246 Overview 247 The Global and National Environments 248 The Globalization of Production and Markets 248 National Competitive Advantage 250 Increasing Profitability and Profit Growth Through Global Expansion 253 Expanding the Market: Leveraging Products 253 Realizing Cost Economies from Global Volume 255 Realizing Location Economies 256 Leveraging the Skills of Global Subsidiaries 257 Cost Pressures and Pressures for Local Responsiveness 258 Pressures for Cost Reductions 259 Pressures for Local Responsiveness 259 Strategy in Action 8.1: Local Responsiveness at MTV Networks 260 Choosing a Global Strategy 261 Global Standardization Strategy 262 Localization Strategy 263 Transnational Strategy 264 246 Contents International Strategy 265 Changes in Strategy over Time 265 Strategy in Action 8.2: The Evolving Strategy of Coca-Cola 267 The Choice of Entry Mode 268 Exporting 268 Licensing 269 Franchising 270 Joint Ventures 271 Wholly Owned Subsidiaries 272 Choosing an Entry Strategy 273 Global Strategic Alliances 275 Advantages of Strategic Alliances 275 Disadvantages of Strategic Alliances 276 Making Strategic Alliances Work 276 Chapter 9  orporate-Level Strategy: Horizontal Integration, C Vertical Integration and Strategic Outsourcing 286 Opening Case 286 Overview 287 Corporate-Level Strategy and the Multibusiness Model 288 Horizontal Integration: Single-Industry Corporate Strategy 289 Benefits of Horizontal Integration 290 Strategy in Action 9.1: Larry Ellison Wants Oracle to Become the Biggest and the Best 293 Problems with Horizontal Integration 294 Vertical Integration: Entering New Industries to Strengthen the “Core” Business Model 295 Increasing Profitability Through Vertical Integration 297 Strategy in Action 9.2: Specialized Assets and Vertical Integration in the Aluminum Industry 299 Problems with Vertical Integration 301 Alternatives to Vertical Integration: Cooperative Relationships Short-Term Contracts and Competitive Bidding 303 Strategic Alliances and Long-Term Contracting 303 Strategy in Action 9.3: Apple, Samsung, and Nokia Battle in the Smartphone Market 304 Building Long-Term Cooperative Relationships 305 Strategy in Action 9.4: Ebay’s Changing Commitment to Its Sellers 306 Strategic Outsourcing 307 Strategy in Action 9.5: Apple Tries to Protect Its New Products and the Workers Who Make Them 308 Benefits of Outsourcing 310 Risks of Outsourcing 311 302 xiii xiv Contents Chapter 10 Corporate-Level Strategy: Related and Unrelated Diversification 318 Opening Case 318 Overview 322 Increasing Profitability Through Diversification 322 Transferring Competencies Across Businesses 323 Leveraging Competencies to Create a New Business 324 Sharing Resources and Capabilities 325 Using Product Bundling 326 Utilizing General Organizational Competencies 327 Strategy in Action 10.1: United Technologies Has an “ACE” in Its Pocket 329 Two Types of Diversification 331 Related Diversification 331 Unrelated Diversification 331 The Limits and Disadvantages of Diversification 333 Changes in the Industry or Company 333 Diversification for the Wrong Reasons 334 The Bureaucratic Costs of Diversification 335 Strategy in Action 10.2: How Bureaucratic Costs Rose Then Fell at Pfizer 337 Choosing a Strategy 338 Related Versus Unrelated Diversification 338 The Web of Corporate-Level Strategy 338 Strategy in Action 10.3: Sony’s “Gaijin” CEO Is Changing the Company’s Strategies 340 Entering New Industries: Internal New Ventures 341 The Attractions of Internal New Venturing 341 Pitfalls of New Ventures 342 Guidelines for Successful Internal New Venturing 344 Entering New Industries: Acquisitions 345 The Attraction of Acquisitions 345 Acquisition Pitfalls 346 Guidelines for Successful Acquisition 348 Entering New Industries: Joint Ventures 349 Restructuring 350 Why Restructure? 350 PART four IMPLEMENTING STRATEGY Chapter 11 C  orporate Performance, Governance, and Business Ethics Opening Case 359 Overview 361 359 Contents Stakeholders and Corporate Performance 362 Stakeholder Impact Analysis 363 The Unique Role of Stockholders 363 Profitability, Profit Growth, and Stakeholder Claims 364 Strategy in Action 11.1: Price Fixing at Sotheby’s and Christie’s Agency Theory 367 Principal–Agent Relationships 367 The Agency Problem 367 366 Strategy in Action 11.2: Self-Dealing at Hollinger International Inc. 371 Governance Mechanisms 372 The Board of Directors 372 Stock-Based Compensation 373 Financial Statements and Auditors 374 The Takeover Constraint 375 Governance Mechanisms Inside a Company 376 Ethics and Strategy 378 Strategy in Action 11.3: Nike–the Sweatshop Debate 379 Ethical Issues in Strategy 380 The Roots of Unethical Behavior 383 Behaving Ethically 384 Chapter 12 Implementing Strategy in Companies That Compete in a Single Industry Opening Case 395 Overview 396 Implementing Strategy Through Organizational Design Building Blocks of Organizational Structure 398 Grouping Tasks, Functions, and Divisions 399 Allocating Authority and Responsibility 399 Strategy in Action 12.1: Bob Iger Flattens Walt Disney Integration and Integrating Mechanisms 403 395 397 402 Strategy in Action 12.2: Centralization and Decentralization at Union Pacific and Yahoo! 404 Strategic Control Systems 405 Levels of Strategic Control 407 Types of Strategic Control Systems 407 Strategic Reward Systems 410 Organizational Culture 410 Culture and Strategic Leadership 411 Traits of Strong and Adaptive Corporate Cultures 413 Building Distinctive Competencies at the Functional Level 414 Functional Structure: Grouping by Function 414 The Role of Strategic Control 415 xv xvi Contents Developing Culture at the Functional Level 416 Functional Structure and Bureaucratic Costs 418 The Outsourcing Option 419 Implementing Strategy in a Single Industry 419 Implementing Cost Leadership 421 Implementing Differentiation 421 Product Structure: Implementing a Wide Product Line 422 Market Structure: Increasing Responsiveness to Customer Groups 424 Geographic Structure: Expanding by Location 424 Strategy in Action 12.3: The HISD Moves from a Geographic to a Market Structure 426 Matrix and Product-Team Structures: Competing in High-Tech Environments 426 Focusing on a Narrow Product Line 429 Restructuring and Reengineering 430 Chapter 13 Implementing Strategy in Companies That Compete Across Industries and Countries Opening Case 439 Overview 440 Corporate Strategy and the Multidivisional Structure 441 Advantages of a Multidivisional Structure 443 Problems in Implementing a Multidivisional Structure 444 Strategy in Action 13.1: Organizational Change at Avon Structure, Control, Culture, and Corporate-Level Strategy 447 Implementing Strategy Across Countries 451 The International Division 451 Worldwide Area Structure 452 Worldwide Product Divisional Structure 454 Global Matrix Structure 455 Strategy in Action 13.2: Dow Chemical’s Matrix Structure Entry Mode and Implementation 458 Internal New Vent ...
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