Tài liệu MBA strategic management wheenlen Phần 1

Eleventh Edition

STRATEGIC MANAGEMENT
and BUSINESS POLICY
Thomas L. Wheelen
Wheelen Strategic Audits

J. David Hunger
Iowa State University
St. John's University (MN)

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Dedicated to
Kathy, Richard, and Tom

Betty, Kari and Jeff Maddie and Megan, Suzi and
Nick, Summer and Kacey, Lori and Dave, Merry and
Dylan, and to Smokey the dog: Those for whom this
book was written; and to Elizabeth Carey and Jackson
S. Hunger—without whom there would be no book.

Special Dedication: Thomas Wheelen expresses his admiration and indebtedness to
Dr. Harry Page, Professor Emeritus of George Washington University. Dr. Page was a
military leader, an excellent academic professor and administrator, a successful consultant
and book author, and a true gentleman. Dr. Page was Tom Wheelen's dissertation chairman.
Tom was his case grader for three years while in GW's doctoral program. Harry was an
excellent role model for doctoral students. Tom ranks Harry among the top two or three men

that he has had the honor to know.


DEDICATION

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DEDICATION

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STACEY PROPPS
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DAN ROBERTSON
CHRIS ROGERS
TESSA ROHDE
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DOROTHY ROSENE
KELLY ROSS
RICH ROWE
GARY SACHECK
SUSAN SCHAUM

KRISTEN SCHMITT
CORRINA SCHULTZ
SCOTT SHAFER
KRISTINA SHUBEL
COLLETTE SIEVER
LEA SILVERMAN
PHYLLIS SIMON
ANGIE SMAJSTRLA

ROSS SMANIA
ELIZABETH SMITH
JANELL SMITH
KARA SMITH
KATE SPENCE
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MATTHEW SPIEGEL
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ANGELA STONE
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STEPHANIE SURFUS
KARIN SWANSON
LORI SYPHER
CHRISTINA TATE
DAVID THEISEN
SARAH THOMAS
NICHOLE THOMPSON

AMANDA TILLEY
FRANK TIMONEY
EMILY TRUMBOLD
JULIE TURLEY
HUNTER WAGNER
BALLARD WARD
MARY FRANCES WEATHERLY
LIZ WEIR
SHANNON WEIR
ERIC WEISS
DANIEL WELLS
TIFFANY WENDT
KIMBERLY WERNER
MARK WHEELER
LIZ WILDES
ERIN WILLIAMS
MONICA WOLFF
CRAIG WORTMANN
CINDY YATES
GEORGE YOUNG
SHARON YOUNG
ANDREW ZORICH



Brief Contents
PART ONE Introduction to Strategic Management and Business Policy 1
Chapter 1 Basic Concepts in Strategic Management 1
Chapter 2 Corporate Governance 34
Chapter 3 Ethics and Social Responsibility in Strategic Management 55

PART TWO Scanning the Environment 71
Chapter 4 Environmental Scanning and Industry Analysis 71
Chapter 5 Internal Scanning: Organizational Analysis 104

PART THREE Strategy Formulation 135
Chapter 6 Strategy Formulation: Situation Analysis and Business Strategy 135 -Chapter 7 Strategy Formulation: Corporate Strategy 161
Chapter 8 Strategy Formulation: Functional Strategy and Strategic Choice

Strategy Implementation and Control 211
Chapter 9 Strategy Implementation: Organizing for Action 211
Chapter 10 Strategy Implementation: Staffing and Directing 236
Chapter 11 Evaluation and Control 259

PART FIVE Other Strategic Issues 287
Chapter 12 Strategic Issues in Managing Technology and Innovation 287

PART SIX Introduction to Case Analysis 313
Chapter 13 Suggestions for Case Analysis 313

PART SEVEN Cases in Strategic Management 1-1

vii



Contents
Preface xxiii

PART ONE

Introduction to Strategic Management and Business Policy 1

Chapter 1 Basic Concepts in Strategic Management 1
1.1 The Study of Strategic Management 3
Phases of Strategic Management 3
Benefits of Strategic Management 5
1.2 Globalization and Electronic Commerce: Challenges to Strategic Management 6
Impact of Globalization 6
Global Issue: Regional Trade Associations Replace National Trade Barriers 7

Electronic Commerce 7
1.3 Theories of Organizational Adaptation 8
1.4 Creating a Learning Organization 9
1.5 Basic Model of Strategic Management 10
Environmental Scanning 10
Strategy Formulation 12
Strategy Highlight 1.1: Do You Have a Good Mission Statement? 13

Strategy Implementation 16
Evaluation and Control 17
Feedback/Learning Process 18
1.6 Initiation of Strategy: Triggering Events 18
Strategy Highlight 1.2: Triggering Event at Sun Microsystems 19

1.7 Strategic Decision Making 20
What Makes a Decision Strategic? 20
Mintzberg's Modes of Strategic Decision Making 20
Strategic Decision-Making Process: Aid to Better Decisions 21
1.8 The Strategic Audit: Aid to Strategic Decision Making 23

1.9 Conclusion 24
Appendix 1.A Strategic Audit of a Corporation 26
Chapter 2 Corporate Governance 34
2.1 Role of the Board of Directors 36
Responsibilities of the Board 36
Members of a Board of Directors 39

ix


CONTENTS
Strategy Highlight 2.1: Agency Theory Versus Stewardship Theory in Corporate
Governance 41

4 Global Issue: POSCO Adds an International Director 42
Nomination and Election of Board Members 44
Organization of the Board 44
Impact of the Sarbanes-Oxley Act on U.S. Corporate Governance 46
Trends in Corporate Governance 47
2.2 The Role of Top Management 48

Responsibilities of Top Management 48
Strategy Highlight 2.2: CEO Hubris at Disney? 51

2.3 Conclusion 52

Chapter 3 Ethics and Social Responsibility in Strategic Management

55

3.1 Social Responsibilities of Strategic Decision Makers 56

Responsibilities of a Business Firm 57
Corporate Stakeholders 59
3.2 Ethical Decision Making 61
Strategy Highlight 3.1: The Johnson & Johnson Credo 62

Some Reasons for Unethical Behavior 62
Strategy Highlight 3.2: Unethical Practices at Enron and WorldCom Exposed
by Whistle-Blowers 63
Global Issue: How Rule-Based and Relationship-Based Governance Systems Affect
Ethical Behavior 64

Encouraging Ethical Behavior 66
3.3 Conclusion 68

PART TWO

Scanning the Environment 71

Chapter 4 Environmental Scanning and Industry Analysis 71
4.1 Environmental Scanning 73
Identifying External Environmental Variables 73
orki, Global Issue: Identifying Potential Markets in Developing Nations 79
-

Identifying External Strategic Factors 81
4.2 Industry Analysis: Analyzing the Task Environment 82
Porter's Approach to Industry Analysis 82
Industry Evolution 86

Categorizing International Industries 87
International Risk Assessment 87
Strategic Groups 88


Strategic Types 88
Hypercompetition 89
Strategy Highlight 4.1: Microsoft in a Hypercompetitive Industry 90

Using Key Success Factors to Create an Industry Matrix 91
4.3 Competitive Intelligence 92
Sources of Competitive Intelligence 93
Strategy Highlight 4.2: Evaluating Competitive Intelligence 94

Monitoring Competitors for Strategic Planning 94
4.4 Forecasting 95
Danger of Assumptions 95
Using Forecasting Techniques 96
4.5 The Strategic Audit: A Checklist for Environmental Scanning 97
4.6 Synthesis of External Factors—EFAS 97
4.7 Conclusion 99
Appendix 4.A Competitive Analysis Techniques 101

Chapter 5 Internal Scanning: Organizational Analysis

104

5.1 A Resource-Based Approach to Organizational Analysis 106
Core and Distinctive Competencies 106
Using Resources to Gain Competitive Advantage 107

Determining the Sustainability of an Advantage 108
5.2 Business Models 110
5.3 Value-Chain Analysis

111

Industry Value-Chain Analysis 112
Corporate Value-Chain Analysis 113
5.4 Scanning Functional Resources and Capabilities 114
Basic Organizational Structures 114
Corporate Culture: The Company Way 116
Global Issue: Managing Corporate Culture for Global Competitive Advantage:
ABB Versus Matsushita 117

Strategic Marketing Issues 117
Strategic Financial Issues 119
Strategic Research and Development (R&D) Issues 120
Strategy Highlight 5.1: A Problem of Technology Transfer at Xerox Corporation 121

Strategic Operations Issues 123
Strategic Human Resource Management (HRM) Issues 125
Strategic Information Systems/Technology Issues 127


CONTENTS

5.5 The Strategic Audit: A Checklist for Organizational Analysis 129
5.6 Synthesis of Internal Factors 129
5.7 Conclusion 131

PART THREE

Strategy Formulation 135

Chapter 6 Strategy Formulation: Situation Analysis and Business Strategy 135
6.1 Situational Analysis: SWOT Analysis 136
Generating a Strategic Factors Analysis Summary (SFAS) Matrix 137
Finding a Propitious Niche 140
*; Global Issue: SAB Defends Its Propitious Niche 141

6.2 Review of Mission and Objectives 141
6.3 Generating Alternative Strategies by Using a TOWS Matrix 142

6.4 Business Strategies 143
Porter's Competitive Strategies 143
Strategy Highlight 6.1: Grim Reaper Uses Focused Differentiation Strategy 147

Cooperative Strategies 154
6.5 Conclusion 159

Chapter 7 Strategy Formulation: Corporate Strategy 161
7.1 Corporate Strategy 162
7.2 Directional Strategy 163
Growth Strategies 163
Strategy Highlight 7.1: Transaction Cost Economics Analyzes Vertical
Growth Strategy 166
Strategy Highlight 7.2: Screening Criteria for Concentric Diversification 169

International Entry Options 169
.4‘) Global Issue: Wal - Mart Looks to International Markets for Growth 170

Controversies in Directional Growth Strategies 172
Stability Strategies 173
Retrenchment Strategies

174

Strategy Highlight 7.3: Turnaround Strategy at IBM 175

7.3 Portfolio Analysis 177

BCG Growth-Share Matrix 177
GE Business Screen 179
Advantages and Limitations of Portfolio Analysis 180
7.4 Corporate Parenting 181
Developing a Corporate Parenting Strategy 182


Horizontal Strategy and Multipoint Competition 183
7.5 Conclusion 183

Chapter 8 Strategy Formulation: Functional Strategy and Strategic Choice

186

8.1 Functional Strategy 187
Marketing Strategy 188
Financial Strategy 189
Research and Development (R&D) Strategy 190
Operations Strategy 191

Global Issue: International Differences Alter Whirlpool's Operations Strategy 192

Purchasing Strategy 193
Logistics Strategy 194
Strategy Highlight 8.1: Staples Uses Internet to Replenish Inventory from 3M 195

Human Resource Management (HRM) Strategy 195
Information Technology Strategy 196
8.2 The Sourcing Decision: Location of Functions 196
8.3 Strategies to Avoid 199
8.4 Strategic Choice: Selecting the Best Strategy 199
Constructing Corporate Scenarios 200
Process of Strategic Choice 205
8.5 Developing Policies 206
8.6 Conclusion 207

Strategy Implementation and Control 211
Chapter 9 Strategy Implementation: Organizing for Action 211
9.1 Strategy Implementation 212
9.2 Who Implements Strategy? 213
9.3 What Must Be Done? 214
Developing Programs, Budgets, and Procedures 214
Achieving Synergy 216
9.4 How Is Strategy to Be Implemented? Organizing for Action 217
Structure Follows Strategy 217
Stages of Corporate Development 218
Strategy Highlight 9.1: The Founder of the Modem Blocks Transition to Stage II 222

Organizational Life Cycle 222
Advanced Types of Organizational Structures 224

CONTENTS
Reengineering and Strategy Implementation 227
Six Sigma 228
Designing Jobs to Implement Strategy 229
Strategy Highlight 9.2: Designing Jobs with the Job Characteristics Model 230

9.5 International Issues in Strategy Implementation 230
Global Issue: Multiple Headquarters: A Sixth Stage of International
Development? 232

9.6 Conclusion 234

Chapter 10 Strategy Implementation: Staffing and Directing 236
10.1 Staffing 238
Staffing Follows Strategy 238
Selection and Management Development 241
Strategy Highlight 10.1: How Hewlett - Packard Identifies Potential Executives 242

Problems in Retrenchment 243
International Issues in Staffing 244

10.2 Leading 246
Managing Corporate Culture 246
Strategy Highlight 10.2: Admiral Assimilates Maytag's Culture 250

Action Planning 251
Management By Objectives 252
Total Quality Management 253

International Considerations in Leading 254
Global Issue: Cultural Differences Create Implementation Problems in
Merger 256

10.3 Conclusion 256

Chapter 11 Evaluation and Control 259
11.1 Evaluation and Control in Strategic Management 261
11.2 Measuring Performance 261
Appropriate Measures 261
Types of Controls 263
Activity-Based Costing 264
Enterprise Risk Management 265
Primary Measures of Corporate Performance 265
Strategy Highlight 11.1: Eyeballs and MUUs: Questionable Performance Measures 267

Primary Measures of Divisional and Functional Performance 271
International Measurement Issues 274
Global Issue: Piracy: 15%-20% of China's Goods Are Counterfeit 275


CONTENTS

11.3 Strategic Information Systems 276
Enterprise Resource Planning (ERP) 276
Divisional and Functional IS Support 277

11.4 Problems in Measuring Performance 277
Short-Term Orientation 277
Goal Displacement 278

11.5 Guidelines for Proper Control 280
Strategy Highlight 11.2: Some Rules of Thumb in
Strategy 280

11.6 Strategic Incentive Management 281
11.7 Conclusion 283

PART FIVE

Other Strategic Issues 287

Chapter 12 Strategic Issues in Managing Technology and Innovation 287
12.1 The Role of Management 289
Strategy Highlight 12.1: Examples of Innovation Emphasis in Mission
Statements 290

12.2 Environmental Scanning 291
External Scanning 291
Internal Scanning 294

12.3 Strategy Formulation 295
Product Versus Process R&D 295
Technology Sourcing 296
Importance of Technological Competence 298
Global Issue: Use of Intellectual Property at Huawei Technologies 298

Categories of Innovation 299
Product Portfolio 301
12.4 Strategy Implementation 301

Developing an Innovative Entrepreneurial Culture 301
Organizing for Innovation: Corporate Entrepreneurship 302
Strategy Highlight 12.2: How Not to Develop an Innovative
Organization 305

12.5 Evaluation and Control 305
Evaluation and Control Techniques 305
Evaluation and Control Measures 307

12.6 Conclusion 308


CONTENTS

PART SIX

Introduction to Case Analysis 313

Chapter 13 Suggestions for Case Analysis 313
13.1 The Case Method 315
13.2 Researching the Case Situation 315
13.3 Financial Analysis: A Place to Begin 316
Analyzing Financial Statements 316
Global Issue: Financial Statements of Multinational Corporations: Not Always What
They Seem 319

Common-Size Statements 319
Z-Value, Index of Sustainable Growth, and Free Cash Flow 320
Useful Economic Measures 320
13.4 Format for Case Analysis: The Strategic Audit 321

13.5 Conclusion 323
Appendix 13.A Resources for Case Research 325
Appendix 13.B Suggested Case Analysis Methodology Using the Strategic Audit 328
Appendix 13.0 Example of a Student-Written Strategic Audit 331
Endnotes 336

Cases in Strategic Management 1 1
-

SECTION A Corporate Governance, Social Responsibility, and Executive Leadership

case 1

The Recalcitrant Director at Byte Products, Inc.: Corporate Legality Versus
Corporate Responsibility 1-9
(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

new and
exclusive

SECTION B

case 3

The Boeing Company's Board of Directors Fires the CEO 2-1
(Contributors: Kathryn E. Wheelen, Richard D. Wheelen, Thomas L. Wheelen II, and

Thomas L. Wheelen)
On February 25, 2005, Boeing's Chairman of the Board Lewis Platt was informed of a romantic oftOir
between Boeing's President and Chief Executive Officer; Harry Stonecipher, and a female executive.
What action should the board take?

Ethics and Social Responsibility
Everyone Does It 3-1
(Contributors: Steven M. Cox and Shawana P. Johnson)

new

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 was 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

SECTION C

case 4

International Issues in Strategic Management
GlaxoSmithKline's Retaliation Against Cross-Border Sales of Prescription Drugs 4-1
(Contributors: Sara Smith Shull and Rebecca. Morris)
Double-digit increases in costs for health care and pharmaceutical drugs were driving a number of
people in the United States to purchase cheaper drugs from Canadian pharmacies via the Internet. In
response, GlaxoSmithKline, the second-largest pharmaceutical firm in the world, stopped supplying

Canadian drug wholesalers that were exporting drugs to the United States. Portrayed as a powerful,
mean-spirited company more concerned with profits than with the health and well-being of its
consumers, the company struggled to repair its public image in both Canada and the United States.

case 5

Starbucks' International Operations 5-1
(Contributors: Sanjib Dutta and K. Subhadra)
The growing saturation of the U.S. market in coffee houses was driving Starbucks to look outside North
America for continued growth. This presented a dilemma. Even though Starbucks' North American
coffee houses continued to be profitable, the firm's international operations were losing money.
Analysts felt that the company should rethink its entry strategy for international markets.

case 6

Turkcell: The Only Turk on Wall Street 6-1
(Contributor: Sue Greenfeld)
Having more than 60% of the Turkish market for mobile phones, Turkcell was the only Turkish
company listed on the New York Stock Exchange. With three additional Turkish competitors entering
the market and an onerous 66% tax burden, management wondered how it should position the
company for success in the coming years. What strategies will enable Turkcell to become one of the
largest mobile communications operators in Europe?

case 7

Guajilote Cooperativo Forestal, Honduras 7-1
(Contributors: Nathan Nebbe and .1. David Hunger)

exclusive

SECTION D

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 jar, it was
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.

General Issues in Strategic Management

INDUSTRY ONE: INFORMATION TECHNOLOGY
case 8

McAfee 2005: Antivirus and Antispyware 8-1
(Contributors: Bethany Sweesy and Alan N. Hoffman)

new

Founded as McAfee Associates in 1989 to market anti-virus software, McAfee had successfully
competed against market leader Symantec to become a major provider of computer security software.
Microsoft's announcement that it was entering the security business rocked the industry. What strategy
should McAfee pursue to continue as a market leader in the computer security industry?

INDUSTRY- 0: INTERNET COMPANIES
Bay, Inc. 9-1
(Contributors: Darrin Kuykendall, Vineet Walia, and Alan N. Hoffman)
By 2002, eBay had successfully captured the lion's share of the American online auction market and
was attempting to do the same globally. Meg Whitman, its CEO, was considering multiple strategic
alternatives with the goal of becoming the "World's Online Marketplace." In their emphasis on
growth, management was aware that they needed to take care not to dilute brand value or company
image, but instead to focus on leveraging the firm's core competencies.

CONTENTS

case 10

Amazon.com: An E-Commerce Retailer 10-1
(Contributors: Patrick Collins, Robert J. Mockler, and Marc Gartenfeld)
Initially an online bookstore, Amazon.com successfully expanded to become the world's premier online
retailer. Although it earned its first operating profit in 2002, the company still lost $150 million that
year. Amazon was meeting its goals of increasing market share, greater product offerings, and overall
sales growth, but was under growing pressure to produce consistent profits and prove that its business
model worked ,financially over the long term.

case 11

Google: An Internet Search Service Company 11-1
(Contributors: Joseph Teye-Koff, Robert J. Mockler, and Marc Gartenfeld)

new

case 12

Google, an online company that provided a reliable Internet search engine, was founded in / 998 by
two Stanford Ph.D. students. Google soon replaced Yahoo as the market leader in Internet search
engines. The issue by 2005 was how to develop an effective differentiating enterprise-wide strategy.
especially for the company's internet search segment.

AOL Time Warner, Inc.—A Bad Idea from the Start? 12-1
(Contributors: Vineet Walia, Irene Hagenbuch-Sanjana, Stacey Foster, and Alan N. Hqffinan)

The $183 billion acquisition of Time Warner by the Internet provider American Online (AOL) in 2001
was criticized as one of worst mergers of all time. Even though revenues increased for the combined
company in 2001 and 2002, both operating and net income dropped significantly. The stock price fell
from $64.75 in 2001 to $9.90 in 2003. Management was examining various turnaround strategies to
make the company profitable once again.

INDUSTRY THREE: RECREATION AND TRANSPORTATION

case 13

Harley-Davidson, Inc., 2006: The Building of a Second Century 13-1
(Contributors: Patricia A. Ryan and Thomas L. Wheelen)

new and
exclusive

case 14

Harley-Davidson is a modern success story of a company that turned itself around by emphasizing
quality manufacturing and image marketing. Encouraged by the high market demand for Harley's
motorcycles in the 1980s and 1990s, competitors increasingly challenged Harley's dominant position.
Meanwhile, Harley's sales were slowing as the Baby Boomers, the ,firm's target market, continued to age.

Carnival Corporation & plc (2006): Twelve Distinct Brands Serving
Seven Continents 14-1
(Contributors: Michael .1 Keefe, John K. Ross III, Bill J. Middlebrook, and Thomas L. Wheelen)

new and
exclusive

With its "fun ships," Carnival Cruises changed the way people think of ocean cruises. The cruise has
become 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: SPECIALTY RETAILERS

case 15

Tiffany & Co.: A Specialty Fine Jewelry Retailer 15-1

\,/

(Contributors: Marcia Chan, Robert J. Mockler, and Marc Gartenfeld)
Tiffany was a retailer, designer, manufacturer, and distributor of luxury goods and specialty fine jewelty. It
was known for luxury brand quality craftsmanship, and value jewelry, but faced a number of strong
competitors. Even though the company had almost twice as many stores (82) outside the United States than
it did within the United States (44), its international stores produced less than 42% of overall net sales. How
could the company increase its international sales and thus boost its overall sales and profits?


CONTENTS

INDUSTRY FIVE: MANUFACTURING

case 16

The Haier Group: U.S. Expansion 16-1
(Contributors: YongJun Lu, Robert J. Mockler, and Marc Gartenfeld)
Already a market leader in China, Haier was rapidly expanding into Europe and the Americas. The

Chinese company faced a number of long-term decisions needed to build an American presence. The
main problem for Haier was how to differentiate itself General Electric, Whirlpool, Maytag, and
Electrolux in major appliances and from Sony, Panasonic, Philips, and LG in electronics to achieve a
winning competitive advantage.

new

case 17

Invacare Corporation, 2004 17-1
(Contributors: Walter E. Greene and Jeff Totten)
Invacare had grown from a minor player in home medical equipment to the world's largest
manufacturer of home medical equipment, such as wheelchairs, respiratory equipment, hospital-type
beds, and motorized scooters. Although the company was well positioned to take advantage of an
aging population's growing need for health care, government regulations were making things difficult.
The challenge for Invacare's executive team was to decide how to deal with restrictive government
regulations and an increasingly competitive industry.

new

INDUSTRY SIX: BEVERAGE/FOOD

case 18

Hershey Foods Company: Board of Directors and Stakeholders Conflict
over Sale 18-1
(Contributor: Cynthia Clark Williams)
The CEO of the Hershey Trust Company (HTC), which owned 77% voting control of the Hershey
Foods Company, was facing one of the most challenging decisions of his 25-year career as a trust
officer: whether or not to recommend to his board that the American chocolate-making icon he sold.

Hershey Foods' profit margins had been steadily declining against strong competition from competitors
Nestle and Mars, but the firm's new CEOs had introduced a turnaround strategy.

new

case 19

Church & Dwight Builds a Corporate Portfolio 19-1
(Contributor: Roy A. Cook)
Church & Dwight, the maker of Arm & Hammer baking soda, has used line extension to successfully
market multiple consumer products based on sodium bicarbonate. Searching ,for a new growth
strategy, the firm has 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

case 20

Mini-Cases
Intel Corporation 20-1
(Contributor: J. David Hunger)



new and

exclusive

Although more than 80% of the world's personal computers and servers used its microprocessors, Intel
was facing strong competition from AMD in a maturing market. Sales growth was slowing. Profits
were expected to rise only 5% in 2006 compared to 40% annual growth previously. The new CEO
decided to reinvent Intel to avoid a fate of eventual decline.

case 21 AirTran Holdings, Inc. 21-1
(Contributor: Maryanne M. Rouse)
AirTran (known as ValuJet before a disastrous crash in the Everglades) was the second largest low fare
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 were
the lowest in the industry. Will AirTran continue to be successful in this highly competitive industry?


CONTENTS

case 22

Boise Cascade/OfficeMax 22-1
(Contributor: Maryanne M. Rouse)
Boise Cascade, an integrated manufacturer and distributor of paper, packaging, and wood products,
purchased OfficeMax, third-largest office supplies catalog 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. On completion of the sale in 2004, the company assumed
the name of OfficeMax. Can this manufacturer become a successful retailer?

case 23

Dell, Inc. 23-1
(Contributor: J. David Hunger)

new and

exclusive

case 24

Dell was the largest PC vendor in the world, but its chief advantages—direct marketing and power
over suppliers—were losing their punch. The percentage 42005 PC sales via the phone and Internet
MI in the United States as the sales through U.S. retail stores rose—a channel in which Dell was
absent. By 2006, the once torrid-growth in PC sales had slowed to about 5% a year. How should Dell
adjust to its changing environment?

Six Flags, Inc.: The 2006 Business Turnaround 24-1
(Contributor: Patricia A. Ryan )

new and
exclusive

case 25

Known for its fast roller coasters and adventure rides, Six Flags had successfully built a group of regional
theme and water parks in the United States. Nevertheless, the company had not turned a profit since
1998. Long-term debt had increased to 61% of total assets by 2005. New management was implementing
a retrenchment strategy, but industry analysts were unsure if this would be enough to save the company.

H.J. Heinz Company 25-1
(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 had divested a number of lines of businesses and brands to Del Monte Foods, analysts
wondered how a 20% smaller Heinz would grow its sales and profits in this very competitive industry.

case 26

Lowe's Companies, Inc. 26-1
(Contributor: Maryanne M. Rouse)
As the second-largest U.S. "big box" home improvement retailer (behind Home Depot), Lowe's
competed in a highly fragmented industry. The company had grown with the increase in home
ownership and had 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. Were there
limits to Lowe's current growth strategy?

case 27

Nike, Inc. 27-1
(Contributor: Maryanne M. Rouse)
Nike was the largest maker of athletic footwear and apparel in the world with a U.S. market share
exceeding 40%. Because almost all its products were manufactured by 700 independent contractors
(99% of which were in Southeast Asia), Nike was a target of activists opposing manufacturing practices
in developing nations. Although industry sales growth in athletic footwear was slowing, Nike refused to
change its product mix in 2002 to suit Foot Locker, the dominant global footwear retailer Was it time
for Nike to change its strategy and practices?


case 28 Outback Steakhouse, Inc. 28-1
(Contributor: Maryanne M. Rouse)
With 1,185 restaurants in 50 states and 21 foreign countries, OSI was one of the largest casual dining
restaurant companies in the world. In addition to Outback Steakhouse, the company was 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 Chinese Kitchen. Analysts wonder how long OSI
could continue to grow by adding new types of restaurants to its portfolio.

case 29

Movie Gallery, Inc. 29-1
(Contributor: J. David Hunger)

new and
exclusive

Movie Gallery was 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 was heavily in debt. The recent rise of online video
rental services, such as Netflix, was 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 found itself
facing possible bankruptcy.

Additional Mini-Cases Available on the Companion Web Site at
www. prenhall.com/wheelen
web case 1 Eli Lilly & Company 1-1
(Contributor• Maryanne M. Rouse)
A leading pharmaceutical company, Eli Lilly produced 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. The FDA found quality problems at several of the company's
manufacturing sites, resulting in a delay of new product approvals. How should Lilly position itself in
a very complex industry?

web case 2 Tech Data Corporation 2-1

(Contributor: Maryanne M. Rouse)
Tech Data, a distributor of information technology and logistics management, had rapidly grown
through acquisition to become the second-largest global IT distributor. Sales and profits had been
declining, however, since 2001. As computers become more like a commodity, the increasing emphasis
on direct distribution by manufacturers threatened wholesale distributors such as Tech Data.

web case 3 Stryker Corporation 3-1
(Contributor: Maryanne M. Rouse)
Stryker was a leading maker of specialty medical and surgical products, a market expected to show
strong sales growth. Stryker marketed 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 expected
continued downward pressure on prices. How could Stryker effectively deal with these developments to
continue its growth?

web case 4 Sykes Enterprises 4-1
(Contributor: Maryanne M. Rouse)
Sykes provided outsourced customer relationship management services worldwide in a highly
competitive, fragmented industry. Like its customers, Sykes had 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 they had provided financial incentives to attract the firm. Nevertheless,
declining revenue and net income caused the company's stock to drop to an all-time low


CONTENTS

web case 5

Pfizer, Inc. 5-1
(Contributor: Maryanne M. Rouse)

With its acquisition in 2000 of rival pharmaceutical firm Warner-Lambert for its Lipitor prescription
drug, Pfizer had 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 6-1
(Contributor: Maryanne M. Rouse)
Williams-Sonoma was a specialty retailer of home products. Following a related diversification growth
strategy, the company operated 415 Williams-Sonoma, Pottery Barn, and Hold Everything retail stores
throughout North America. Its direct sales segment included six retail catalogs 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. 7-1
(Contributor: Maryanne M. Rouse)
Tyson produced and distributed beef, chicken, and pork products in the United States. It acquired IBP,
a major competitor, but had 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 8-1
- (Con- tributor: 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 had 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?


Preface
Welcome to the 1 lth edition of Strategic Management and Business Policy! The chapters are the
same as those in the 10th edition, but the cases are different. We completely revised five of your
favorite cases and added 10 brand-new ones for a total of 15 new full-length cases. This book contains a broad-based review of strategic management research and cases of well-known and not-sowell known companies dealing with complicated strategic issues. Enjoy!

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 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:
n 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.
n 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.
n 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 13.B (end of Chapter 13) 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 comprehensive strategy cases.

Features New to This Eleventh Edition
NEW CASES: BOTH FULL-LENGTH AND MINI-LENGTH
Ten full-length cases and four mini-cases are new to this edition for a total of 14 new cases.
Together with 9 full-length and 6 mini-cases cases carried forward from past editions, this edition
contains a total of 29 cases.
New Full Length Cases
Ten full-length cases are new to this edition. Ten of them are brand-new cases. Five of them are
newly revised versions of favorites from the 10'h edition. Of the 29 full-length cases appearing in
this book, nine are exclusive and do not appear in other books.
-


PREFACE

n Two of the new cases deal with corporate governance (Boeing) and ethics (Everyone Does It).
n Two of the new cases are in information technology (McAfee) and the Internet (Google).
n Two new cases are in transportation and leisure (Harley-Davidson and Carnival Cruise).
n Two new manufacturing cases deal with products ranging from major appliances (Haier) to
wheelchairs (Invacare).
n Two new cases come from the food industry (Hershey and Church & Dwight).

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:

n A strategic management model runs throughout the

first 11 chapters as a unifying concept. (Explained in

Chapter 1)

APPENDIX 1.A

n The strategic audit, a way to operationalize the strategic decision-making process, serves as a checklist in
case analysis. (Chapter I)
►

Strategic Audit
of a Corporation
I CURRENT SITUATION
A Current Performance

Strate, Post.,

CORPORA I

n 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)

►

OfOREE Oi NVOLVEMEXT 114 StRATEGIC YIAN.94EMENT -

111


PREFACE

lbaglamin
M. DO

law,

Mae.

n 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)
4

n 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)
n Core and distinctive competencies are examined within
the framework of the resource-based view of the firm.
(Chapter 5)
n Organizational analysis includes material on business
models, supply chain management, and corporate reputation. (Chapter 5)

n Internal and external strategic factors are emphasized
through the use of specially-designed EFAS, IFAS, and
SFAS tables. (Chapters 4, 5, and 6)
n Functional strategies are examined in light of outsourcing.
(Chapter 8)

4.1 Environmental Scanning

Ifi,nta,ng Ex • •

Sc.ming the Societal Envisonmerl
•

n 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)

CHAPTER 9

Strategy
Implementation:
Organizing for Acti

4

o

CHAPTER 10

Strategy

Implementation:
Staffing and Directing