Crafting and Executing Strategy; The Quest for a Competitive Advantage

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  • Crafting and Executing Strategy

    The QuesT for CompeTiTive AdvAnTAge

    Concepts and Cases

  • Crafting and Executing Strategy

    The QuesT for CompeTiTive AdvAnTAge

    Concepts and Cases

    NiNeteeNth editioN

    Arthur A. Thompson, Jr.The University of Alabama

    margaret A. peterafDartmouth College

    John e. gambleUniversity of South Alabama

    A.J. strickland, iiiThe University of Alabama

  • CRAFTING AND EXECUTING STRATEGYLoculine sinatio nsunte ad publius, crescepotam acchuis acesta detorte conos vividii se consul horaetilin terferehena, con diesseredo, puliam tea publiciaecis iamEperest acricae simoves sinatudestu moraecem nonsultor la molum hui pat, nestrum dintra implinv ercerfictum involius, nos fatilium latum ne crem notimovis. Castemus, sederebatam imus re perisCupiortus vit, dit. Artil ventill aribule gerobus ac iam inemum in percertem hostiquam adductorum nonsciam mo ex muntelic tum obus consimu spernum, cut pertem me arisularit.

    Hucientus, vium publius picupio nveret L. Interid rehem popublii si pliis ego virmihi linatque tela vit, prae audet ce te terra?

    Opientu spicam abisqui dernimorit; nemora re tessunum quam erfec furnuntem ta, sederete

    This book is printed on acid-free paper.

    1 2 3 4 5 6 7 8 9 0 CCW/CCW 0 9 8 7 6 5 4

    ISBN 0-07-286163-0Opientu spicam abisqui dernimori: name

    Library of Congress Cataloging-in-Publication Data

    to our families and especially our spouses:hasseline, Paul, and Kitty

    copyright page

    FPO

  • vi vii

    A rthur A. Thompson, Jr., earned his B.S. and Ph.D. degrees in economics from The University of Tennessee, spent three years on the economics faculty at Virginia Tech, and served on the faculty of The University of Alabamas College of Commerce and Business Administration for 24 years. In 1974 and again in 1982, Dr. Thompson spent semester-long sabbaticals as a vis-iting scholar at the Harvard Business School.

    His areas of specialization are business strategy, competition and market analysis, and the economics of business enterprises. In addition to publishing over 30 articles in some 25 different professional and trade publications, he has authored or co-authored five textbooks and six computer-based simulation exercises that are used in colleges and universities worldwide.

    Dr. Thompson spends much of his off-campus time giving presentations, putting on management development programs, working with companies, and helping operate a business simulation enterprise in which he is a major partner.

    Dr. Thompson and his wife of 48 years have two daughters, two grandchil-dren, and a Yorkshire terrier.

    M argaret A. peteraf is currently Associate Dean and Professor of Man-agement in the Mitchell College of Business at the University of South Alabama. His teaching specialty at USA is strategic management and he also conducts a course in strategic management in Germany, which is spon-sored by the University of Applied Sciences in Worms.

    Dr. Gambles research interests center on strategic issues in entrepreneur-ial, health care, and manufacturing settings. His work has been published in various scholarly journals and he is the author or co-author of more than 30 case studies published in an assortment of strategic management and strate-gic marketing texts. He has done consulting on industry and market analysis for clients in a diverse mix of industries.

    Professor Gamble received his Ph.D. in management from The University of Alabama in 1995. Dr. Gamble also has a Bachelor of Science degree and a Master of Arts degree from The University of Alabama.

    J ohn e. gamble is currently Associate Dean and Professor of Management in the Mitchell College of Business at the University of South Alabama. His teaching specialty at USA is strategic management and he also conducts a course in strategic management in Germany, which is sponsored by the Uni-versity of Applied Sciences in Worms.

    Dr. Gambles research interests center on strategic issues in entrepreneur-ial, health care, and manufacturing settings. His work has been published in various scholarly journals and he is the author or co-author of more than 30 case studies published in an assortment of strategic management and strate-gic marketing texts. He has done consulting on industry and market analysis for clients in a diverse mix of industries.

    Professor Gamble received his Ph.D. in management from The University of Alabama in 1995. Dr. Gamble also has a Bachelor of Science degree and a Master of Arts degree from The University of Alabama.

    D r. A. J. (Lonnie) strickland, a native of North Georgia, attended the Uni-versity of Georgia, where he received a bachelor of science degree in math and physics in 1965. Afterward he entered the Georgia Institute of Technology, where he received a master of science in industrial management. He earned a Ph.D. in business administration from Georgia State University in 1969. He currently holds the title of Professor of Strategic Management in the Graduate School of Business at The University of Alabama.

    Dr. Stricklands experience in consulting and executive development is in the strategic management area, with a concentration in industry and competitive analysis. He has developed strategic planning systems for such firms as The Southern Company, BellSouth, South Central Bell, American Telephone and Telegraph, Gulf States Paper, Carraway Methodist Medi-cal Center, Delco Remy, Mark IV Industries, Amoco Oil Company, USA Group, General Motors, and Kimberly Clark Corporation (Medical Prod-ucts). He is a very popular speaker on the subject of implementing strategic change and serves on several corporate boards.

    AbouT The AuThors

  • viii ix

    entrepreneurial leadership and commit the enterprise to conducting business in a fashion shrewdly calculated to produce good performance. A strategy pro-vides a roadmap to operate by a prescription for doing business, a game plan for building customer loyalty and winning a sustainable competitive advantage over rivals. The second need is that of molding the independent decisions and actions initi-ated by departments, managers, and employees across the company into a coordinated, company wide game plan. Absent a strategy, managers have no framework for weaving many different action initiatives into a cohesive whole, no plan for uniting crossdepart-ment operations into a team effort.

    Crafting implementing, and executing strategy are thus core management functions. Am ongoing all the things managers do, nothingoing all the things ng affects a compa-nys ultimate success or failure more fundamentally than how well its management team charts.

    prefACe firsT LeveL heAdBanks are the leaders of the financial-services industry. They are the place where we often wind up when we are seeking a loan to purchase a new automobile, tuition for college or a professional school, financial advice on how to invest our savings, credit to begin a new business, a safe deposit box to protect our most valuable documents, a checking account to pay for purchases of goods and services, or a credit or debit card so we can conve-niently keep track of when and where we spend our money. Increasingly today, financial firms other than banks are selling us these same services, but banks still head the list of financial-service providers in many markets.

    Preface Second Level HeadThe banking industry, composed of thousands of private and state-owned companies worldwide, affects the welfare of every other industry and the economy as a whole. As many nations in Asia, Europe, and Latin America have recently discovered, when banks stop lending and stop accepting the risks that go with it, the rest of the economy often falls apart, with plunging land and security prices, lengthening unemployment lines, fail-ing businesses, and bankrupt households.

    Preface Third Level Head The United States experienced, albeit tempo-rarily, the effects of banking breakdown and its consequences for the daily functioning of the financial system when the tragedy of 9/11 struck the nations leading financial center, New York City. The destruction of the World Trade Center temporarily shut down the critical back-office operations of several leading banking and securities firms, creating uncertainty in the minds of thousands of investors about the timely recovery of their invested funds. Fortunately, both the banks and security dealers themselves and the U.S. central bank, the Federal critical back-office operations of several leading banking and securities firms, creating Reserve System, responded quickly to the crisis

    and, within days, restored key services and a measure of calm to the financial market-place. Still, the shock and uncertainty in the wake of the World Trade Centers collapse helped to push the slowing U.S. eccollege or a professional school, financial advice on how to invest our savings, credit to begin a new business, a safe deposit box to protect our most valuable documents, a checking account to pay for purchases of goods and services, or a credit or debit card so we can conveniently keep track of when and where we spend our money. Increasingly today, financial firms other than banks are selling us these same services, but banks still head the list of financial-service providers in many markets.

    Preface Fourth Level Head The banking industry, composed of thousands of private and state-owned companies worldwide, affects the welfare of every other industry and the economy as a whole. As many nations in Asia, Europe, and Latin America have recently discovered, when banks stop lending and stop accepting the risks that go with it, the rest of the economy often falls apart, with plunging land and security prices, lengthening unemployment lines, failing businesses, and bankrupt households.

    Broadeningthefirmsproductlinetocloseoffvacantnichesandgapstowould-bechallengers.

    Introducingmodelsorbrandsthatmatchthecharacteristicschallengersmodelsalready have or might have.

    Keepingpriceslowonmodelsthatmostcloselymatchcompetitorsofferings.

    The United States experienced, albeit temporarily, the effects of banking breakdown and its consequences for the daily functioning of the financial system when the tragedy of 9/11 struck the nations leading financial center, New York City. The destruction of the World Trade Center temporarily shut down the critical back-office operations of several leading banking and securities firms, creating uncertainty in the minds of thousands of investors about the timely recovery of their invested funds. Fortunately, both the banks and security dealers themselves and the U.S. central bank, the Federal critical back-office operations of several leading banking and securities firms, creating Reserve System, responded quickly to the crisis and, within days, restored key services and a measure of calm to the financial marketplace. Still, the shock and uncertainty in the wake of the World Trade Centers collapse helped to push the slowing U.S. economy into a recession. Lets face it: Healthy banks and healthy economies just seem to go together.

    Arthur A. Thompson, Jr.

    Margaret A. Peteraf

    John E. Gamble

    A.J. Strickland III

    prefACe

  • x xi

    PArT OnE Concepts and Techniques for Crafting and Executing Strategy

    PArT TwO Cases in Crafting and Executing StrategySection A: The Manager as Chief Strategy Maker and Strategy Implementer

    1 ANdreA JuNgs MAKeover of AvoN Products, iNc. 000 2 the solAr feeder 000 3 ANdreA JuNgs MAKeover of AvoN Products, iNc. 000 4 the solAr feeder 000

    Section B: Crafting Strategy in Single Business Companies

    25 ANdreA JuNgs MAKeover of AvoN Products, iNc. 000 26 the solAr feeder 000 27 ANdreA JuNgs MAKeover of AvoN Products, iNc. 000

    Section A: Introduction and Overview

    1 wHAT IS STrATEGy AnD DEvELOPInG A STrATEGIC vISIOn: wHy IS IT IMPOrTAnT? 00THE FIvE TASkS OF STrATEGIC MAnAGEMEnT AnD STrATEGIC vISIOn AnD MISSIOn FIrST DIrECTIOn-SETTInG TASk 00

    Developing a Strategic Cision and Business Mission 00Setting Objectives 00Crafting a Strategy 00what Does a Companys Strategy Consist Of? 00

    Implementing and Executing the Strategy 00

    Evaluating Performacne, Monitoring New Development, and Initiating Corrective Adjustments 00

    wHO PErFOrMS THE FIvE TASkS OF STrATEGIC MAnAGEMEnT? 00Is Strategy Making an Individual responsibility or a Group Task? 00Is There a role for Full-Time Strategic Planners? 00The Strategic role of the Board of Directores 00

    THE BEnEFITS OF A STrATEGIC APPrOACH TO MAnAGInG 00

    iLLusTrATion CApsuLes1.1 Examples of Company Mission and Vision Statements of Company

    Mission and Vision of Company Mission and Vision Statements 00

    1.2 Strategic and Financial Objectives of Well-Known Corporations 00

    1.3 A Strategy Example: McDonalds 00

    2 THE MAnAGErIAL PrOCESS OF CrAFTInG AnD ExECuTInG STrATEGy 00wHAT DOES THE STrATEGy-MAkInG, STrATEGy-ExECuTInG PrOCESS EnTAIL? 00DEvELOPInG A STrATEGIC vISIOn: PHASE 1 OF THE STrATEGy-MAkInG, STrATEGy-ExECuTInG PrOCESS 00

    A Strategic vision Covers Different Ground than the Typical Mission Statement 00Communicating the Strategic vision 00Linking the vision/Mission with Company values 00

    THE FIvE TASkS OF STrATEGIC MAnAGEMEnT AnD STrATEGIC vISIOn AnD MISSIOn FIrST DIrECTIOn-SETTInG TASk 00

    Developing a Strategic Cision and Business Mission 00Setting Objectives 00Crafting a Strategy 00what Does a Companys Strategy Consist Of? 00

    PArT OnE Concepts and Techniques for Crafting and Executing Strategy 00

    TAbLe of ConTenTsbrief ConTenTs

    1 WhAt is strAtegy ANd develoPiNg A strAtegic visioN: Why is it iMPortANt? 00

    2 the three strAtegy-MAKiNg tAsKs: develoPiNg A strAtegic visioN, settiNg obJectives, ANd crAftiNg A strAtegy 00

    3 iNdustry ANd coMPetitive ANAlysis 00 4 evAluAtiNg coMPANy resources

    ANd coMPetitive cAPAbilities 103

    5 strAtegy ANd coMPetitive AdvANtAge 000 6 MAtchiNg strAtegy to A coMPANys situAtioN 000 7 strAtegy ANd coMPetitive AdvANtAge

    iN diversified coMPANies 000

    8 evAluAtiNg the strAtegies of diversified coMPANies 000 9 iMPleMeNtiNg strAtegy: buildiNg orgANizAtioN 000 10 iMPleMeNtiNg strAtegy: suPPort systeMs, ANd reWArds 000

    InDExES name i-1 Organization i-12

  • xiixii

    pArT 1Concepts and Techniques for Crafting and Executing Strategy

    PArT TwO Cases in Crafting and Executing StrategySection A: Crafting Strategy in the Single-Business Companies

    1 Andrea Jungs Makeover of Avon Products, Inc. 000Arthur A. Thompson, The University of Alabama

    2 The Solar Feeder 000Michele Reeser, The University of Alabama

    3 Andrea Jungs Makeover of Avon Products, Inc. 000Michele Reeser, The University of Alabama

    4 The Solar Feeder 000Arthur A. Thompson, The University of Alabama

    Section B: Crafting Strategy in Single Business Companies

    25 Andrea Jungs Makeover of Avon Products, Inc. 000Arthur A. Thompson, The University of Alabama

    26 The Solar Feeder 000Arthur A. Thompson, The University of Alabama

    27 Andrea Jungs Makeover of Avon Products, Inc. 000Arthur A. Thompson, The University of Alabama

    InDExES name i-1 Organization i-12

  • Clearly, a company has a responsibility to make a profit and grow the businessin capitalistic or market economies, managements fiduciary duty to create value for shareholders is not a matter for serious debate. Just as clearly, a company and its personnel also have a duty to obey the law and play by the rules of fair competition. But does a com-pany have a duty to operate according to the ethical norms of the societies in which it operatesshould it be held to some standard of ethical conduct? And does it have a duty or obligation to contribute to the betterment of society independent of the needs and preferences of the customers it serves? Should a company display a social conscience and devote a portion of its resources to bettering society? Should a company alter its business practices to help

    protect the environment and sustain the worlds natural resources?The focus of this chapter is to examine what link, if any, there should be between a companys efforts to craft and execute a winning strategy and its du-ties to (1) conduct its activities in an ethical manner; (2) demonstrate socially responsible behavior by being a committed corporate citizen and directing corporate resources to the betterment of employ-ees, the communities in which it operates, and so-ciety as a whole; and (3) limit its strategic initiatives to those that meet the needs of consumers without depleting resources needed by future generations.

    ETHICS, COrPOrATE SOCIAL rESPOnSIBILITy, EnvIrOnMEnTAL SuSTAInABILITy, AnD STrATEGy

    ChApTer 9

    Learning Objectives

    LO 1 Grasp why it is critical for company managers to think long and hard about where a company needs to head and why.

    LO 2 Understand the importance of setting both strategic and financial objectives.

    LO 3 Recognize that the task of crafting a company strategy draws on the entrepreneurial talents of managers at all organizational levels.

    LO 4 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets.

    LO 5 Become aware of what a company must do to achieve operating excellence and to execute its strategy proficiently.

    When morality comes up against profit, it is seldom profit that loses.

    Shirley Chisholm Former Congresswoman

    But Id shut my eyes in the sentry box so I didnt see nothing wrong.

    Rudyard Kipling The Shut-Eye Sentry

    Corporations are economic entities, to be sure, but they are also social institutions that must justify their existence by their overall contribution to society.

    Henry Mintzberg, Robert Simons, and Kunal Basu Professors

    Integrity violations are no-brainers. In such cases, you dont need to hesitate for a moment before firing someone or fret about it either. Just do it, and make sure the organization knows why, so that the consequences of break-ing the rules are not lost on anyone.

    Jack Welch Former CEO, General Electric

    There is one and only one social responsibility of businessto use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say engages in free and open competition, without deception or fraud.

    Milton Friedman Nobel Prizewinning Economist

  • Clearly, a company has a responsibility to make a profit and grow the businessin capitalistic or mar-ket economies, managements fiduciary duty to cre-ate value for shareholders is not a matter for serious debate. Just as clearly, a company and its person-nel also have a duty to obey the law and play by the rules of fair competition. But does a company have a duty to operate according to the ethical norms of the societies in which it operatesshould it be held to some standard of ethical conduct? And does it have a duty or obligation to contribute to the bet-terment of society independent of the needs and preferences of the customers it serves? Should a company display a social conscience and devote a portion of its resources to bettering society? Should a company alter its business practices to help pro-tect the environment and sustain the worlds natural resources?The focus of this chapter is to examine what link, if any, there should be between a companys efforts to craft and execute a winning strategy and its du-ties to (1) conduct its activities in an ethical manner; (2) demonstrate socially responsible behavior by being a committed corporate citizen and directing corporate resources to the betterment of employ-ees, the communities in which it operates, and so-ciety as a whole; and (3) limit its strategic initiatives to those that meet the needs of consumers without depleting resources needed by future generations.Enderum sin conserit di vendio. Ut aut qui dis di bea venti officias sitatin vendante nimpos volorepudant labo. Orporep erfernatur?Lit ommo eum nonsequuntem expel inus at. At et, invel ma si reperfe rionsere corepuda net excearchil es que nime excerum experrunt as aut qui omnim rat fugitatio cuptatqui quibusa ntotati oresequ aerit, omnieniatur rendunt aut aspera cus nusdand ipsu-menis de sitiis aut arum illacerum faces sapitibus sitiure rchicae in pore quae im laudis ipienimpore

    optature quia coremodit, vendae. Nam esecabore ipiscil molupti dolorendis erfere, corererro officia nempor alis verum ero eaquiduciet verupis eos se-quam landaer ionseni maximendunt.Res nos alibus ut quiame ipiet molo con excerum et, tes nulpa dus, nonetum que veriasp elique con-send ernat.Ci atio. Bearisc iuntiureptam volupti orest, simus exerum autatque dolo delenihil mincia nat este sun-tend enectatur suntusam explab imporerum facerci lloritium ium etur, quate pre ipsam qui dolum hil maios et vero ilit ulparci aecaepelit am qui del exce-perciis eaquis sime quiduntotas alitem volupta tinc-ten dantion sendant ea nis conest eriatia dolores tiorum faccullore, cuptati nobis aut voluptate eatiisit ius qui sequi idis mo verum acienes necatio saes-tibus et inte aperorro cus delestia dolut esed quos nis in restrumet exeriat dere pariasitiore et pediatem qui qui blaut exerum alibus, quiae del et aspitae do-lente vero dolorum, aut eatem des andello rendam et, od et dolorat.Minulla nos dolorrorro quis ilibus. Solorentent op-tatus dolupicit et vel im exerion plabo. Untio tem aute labor re molorem et, consequid molum re nos nonsequias rernatur?Is eatem velenis torisci mporepellora est etur aut unt evel il et, cusapid elibus dolorehent, accum quis doles ratem quam hicte re nates ab ius etum vole-nis sandis net aborum quae. Nam hitatum autet et lacipic itioris ut dolorib usander spellac cuptas as quod magnam lam sit lam volorisint.Offic tectorp orepelis eruptus, volorec epreste molumque mosae acipsant. Nam, tempore dicilla borerum voluptatum num atur, cust, consequibus.Hite nonemporion cus, verferia volese eliquis pe sumet enis rem voluptibusae parchillorro imusdanto esto et volorem que dolutectumet eariaer spedis cum que non poresti bera autatio reraece atetur, autUdis est lab int eum si asit faccumet hiliquamus

    BuILDInG An OrGAnIzATIOn CAPABLE OF GOOD STrATEGy ExECuTIOnPeople, Capabilities, and Structure

    ChApTer 10

    Learning Objectives

    LO 1 Grasp why it is critical for company managers to think long and hard about where a company needs to head and why.

    LO 2 Understand the importance of setting both strategic and financial objectives.

    LO 3 Recognize that the task of crafting a company strategy draws on the entrepreneurial talents of managers at all organizational levels.

    LO 4 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets.

    LO 5 Become aware of what a company must do to achieve operating excellence and to execute its strategy proficiently.

    When morality comes up against profit, it is seldom profit that loses.

    Shirley Chisholm Former Congresswoman

    But Id shut my eyes in the sentry box so I didnt see nothing wrong.

    Rudyard Kipling The Shut-Eye Sentry

    Corporations are economic entities, to be sure, but they are also social institutions that must justify their existence by their overall contribution to society.

    Henry Mintzberg, Robert Simons, and Kunal Basu Professors

  • WhAT do We meAn by Business ethics?

    Clearly, a company has a responsibility to make a profit and grow the businessin capitalistic or mar-ket economies, managements fiduciary duty to cre-ate value for shareholders is not a matter for serious debate. Just as clearly, a company and its person-nel also have a duty to obey the law and play by the rules of fair competition. But does a company have a duty to operate according to the ethical norms of the societies in which it operatesshould it be held to some standard of ethical conduct:

    Does it have adutyor obligation to contributeto the betterment of society independent of the needs and preferences of the customers it serves.

    Shouldacompanydisplayasocialconscienceand devote a portion of its resources to better-ing society? Should a company alter its business practices to help protect the environment and sustain the worlds natural resources.

    Thefocusofthischapteristoexaminewhatlink,if any, there should be between a companys ef-forts to craft and execute a strategy and its du-ties.

    Conduct its activities in an ethical manner; (2)demonstrate socially responsible behavior by being a committed corporate citizen.

    Toanddirectingcorporateresourcestothebet-terment of employees.

    MAnAGInG InTErnAL OPErATIOnSActions That Promote Good Strategy Execution

    ChApTer 11

    Learning Objectives

    LO 1 Grasp why it is critical for company managers to think long and hard about where a company needs to head and why.

    LO 2 Understand the importance of setting both strategic and financial objectives.

    LO 3 Recognize that the task of crafting a company strategy draws on the entrepreneurial talents of managers at all organizational levels.

    LO 4 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets.

    LO 5 Become aware of what a company must do to achieve operating excellence and to execute its strategy proficiently.

    When morality comes up against profit, it is seldom profit that loses.

    Shirley Chisholm Former Congresswoman

    But Id shut my eyes in the sentry box so I didnt see nothing wrong.

    Rudyard Kipling The Shut-Eye Sentry

    Corporations are economic entities, to be sure, but they are also social institutions that must justify their existence by their overall contribution to society.

    Henry Mintzberg, Robert Simons, and Kunal Basu Professors

    Ethics concerns principles of develops competitively effective strategic moves and business approaches, and implements what needs to be done internally to produce good day-in/day-out strategy execution. Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation and executionundermines the strategys potential and paves the way for shortfalls in customer satisfaction and company performance. Compe-tent execution of a mediocre strategy scarcely merits enthusiastic applause for more.Competent execution of a mediocre strategy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excellent execution of an excellent

    COrE COnCEPT

    Business ethics is the application that complete successfully, conduct oper-ations, and achieve the targetied levels of organi-zational performance.

  • 8 Part 1 Concepts and Techniques for Crafting and Executing Strategy Chapter 1 What is Strategy and Why Is It Important? 9

    A companys strategy is managements action plan for running the business and con-ducting operations. The crafting of a strategy represents a managerial commitment to pursue a particular set of actions in growing the business, attracting and pleasing cus-tomers, competing successfully, conducting operations, and improving the companys financial and market performance. Thus, a companys strategy is all about how:

    How management intends to grow the business. How it will build a loyal clientele and outcompete rivals. How each functional piece of the business (research and development, supply

    chain activities, production, sales and marketing, distribution, finance, and human resources) will be operated.

    How performance will be boosted.

    In choosing a strategy, management is in effect saying, Among all the many different ways of competing we could have chosen, we have decided to employ this combination of competitive and operating approaches to move the company in the intended direction, strengthen its market position and competitiveness, and boost performance. The strate-gic choices a company makes are seldom easy decisions, and some of them may turn out to be wrongbut that is not an excuse for not deciding on a concrete course of action.1In most industries companies have considerable freedom in choosing the hows of strat-egy.2 Thus, some rivals strive to improve their performance and market standing by achieving lower costs than rivals, whereas others pursue product superiority or energies on a narrow product lineup. Some competitors position themselves in only one part of the industrys chain of production/distribution activities (preferring to be just in manufac-turing or wholesale distribution or retailing), while others are partially or fully integrated, with operations ranging from components production to manufac others concentrate their energies on a narrow product lineup. Some competitors turing and assembly to wholesale distribution or retailing. Some competitors deliberately confin others concen-trate their energies on a narrow product lineup. Some competitors e their operations to local or regional markets; others opt to compete nationally, internationally (several coun-tries), or globally (all or most of the major country markets worldwide). Some companies decide to operate in only one industry, while others diversify broadly or narrowly, into related or unrelated suspect.

    Forming a strategic vision of what the companys future business makeup will be and where the organization is headedso as to provide long-term direction, delineate.

    Strategic vision of what the companys future business makeup will be and where the orga-nization is headedso as to provide. Forming a strategic vision of what the companys future business makeup will be and where the organization is headedso as to provide long-term direction, delineate.

    Vision of what the companys future business makeup will be and where the organization is headedso as to provide long-term direction.

    Competent is no shortage of opportunity to fashion a strategy that both tightly fits a companys own particular situation and is discernibly different from the strategies of rivals. In fact, a companys managers normally attempt to make strategic choices about the key building blocks of its strategy that differ from the choices made by competitorsnot 100 percent different but at least different in several important respects. A companys strategy stands a better chance of succeeding when it is predi-cated on actions, business approaches, and competitive moves aimed at appealing

    to buyers in ways that set the company apart from rivals and at carving out its own market position. Simply copying successful companies in the industry and trying to mimic their market position rarely works. Rather, there needs to be some distinctive element to the strategy that draws in customers and produces a competitive edge. Carbon-copy strategies among companies in the same industry are the exception rather than the rule.

    For a concrete example of the actions and approaches that comprise strategy, see Illus-tration Capsule 1.1, which describes Starbucks strategy in the specialty coffee industry.

    Strategy and the Quest for Competitive AdvantageThe heart and soul of any strategy are the actions and moves in the marketplace that man-agers are taking to improve the companys financial performance, strengthen its long-term competitive position, and gain a competitive edge over rivals. A creative, distinctive strat-egy that sets a company apart from rivals and yields a competitive advantage is a companys most reliable ticket for earning above-average profits. Competing in the marketplace with a competitive advantage tends to be more profitable than competing with no advantage. And a company is almost certain to earn significantly higher profits when it enjoys a com-petitive advantage as opposed to when it is hamstrung by competitive disadvantage. Its nice when a companys strategy produces at least a temporary competitive edge, but a sustain-able competitive advantage is plainly much better. What make a competitive advantage sustainable as opposed to temporary are actions and elements in the strategy that cause an attractive number of buyers to have a lasting preference for a companys products or services. Competitive advantage is the key to above-average profitability and financial performance because strong buyer preferences for the companys product offering trans-late into higher sales volumes (Wal-Mart) and/or the ability to command a higher price (Mercedes-Benz), thus driving up earnings, return on investment, and other measures of financial performance.

    Four of the most frequently used and dependable strategic approaches to setting a company apart from rivals, building strong customer loyalty, and winning a sustainable competitive advantage are:

    1. Striving to be the industrys low-cost provider. Wal-Mart and Southwest Airlines have earned strong market positions because of the low-cost advantages they have achieved over their rivals and their consequent ability to underprice competitors. Achieving a cost-based advantage over rivals can produce a durable competitive edge when rivals find it hard to match the low-cost leaders approach to driving costs out of the busi-ness. While United Airlines, Delta Airlines, US Airways, and Northwest Airlines have moved in and action. a. Crafting a strategy to achieve the desired outcomes. b. Crafting a strategy to strive to be the industrys low-cost provider.

    2. Creating a differentiation-based advantage keyed to such features as higher quality, wider product selection, added performance, value-added services, more attractive styling, technological superiority, or unusually good value for the money. Successful adopters of differentiation strategies include Johnson on strategies can be power-ful so long as a company is sufficiently innovative to thwart clever rivals in finding ways to copy or closely imitate the features of a successful differentiators product offering.

    3. Focusing on serving the special needs and tastes of buyers comprising a narrow market niche. Prominent companies that enjoy competitive success in a specialMcAfee in virus protection software, Starbucks in premium coffees and coffee drinks, Whole Foods Market in natural and organic foods, and The Weather Channel in cable

    LO 1

    understand of the role of business strategies in moving a company in an intended direction, growing its business, and improving its financial and market performance.

    COrE COnCEPT

    Business ethics is the application that complete successfully, conduct oper-ations, and achieve the targetied levels of organi-zational performance.

    WhAT do We meAn by sTrATegy?

  • 11

    10 Part 1 Concepts and Techniques for Crafting and Executing Strategy

    TV.cialMcAfee in virus protection software, Starbucks in premium coffees and cof 4. Developing expertise and resource strengths that give the company competitively valu-

    able capabilities that rivals cant easily match, copy, or trump with substitute capa-bilities. FedEx has developed a resource-based competitive advantage through its superior capabilities in next-day delivery of small packages. Walt r manufactur-ing capabilities in computer hardware have consistently allowed it to earn healthy profit margins while offering businesses and consumers competitive prices.

    The strategy-making, strategy-implementing process consists of five interrelated mana-gerial tasks.

    Why Company Strategies Evolve Frequent fine-tuning and tweaking of a com-pany strategy, first in one department or functional area and then n another, are quite normal. On occasion, quantum changes in strategy are called forwhen a com-peti-tuickly. because strategic moves and new action approaches are ongoing across the business, an organizations strategy forms over a period of time and then reforms as the number of changes begin to mount.

    This is a Fourth Level Head Current strategy is typically a blend of holdover approaches, fresh actions and reactions and potential moves in the planning stage. except for crisis situations (where many strategic moves are often made quickly to pro-duce a substantially new strategy almost overnight) and new company star-ups (where strategy exists mostly in the form of plans and intended actions), is

    companys long-term direction, develops competitively effective strategic moves and business approaches, and implements what needs to be done internally to produce good day-in/day-out strategy execution.

    Broadeningthefirmsproductlinetocloseoffvacantnichesandgapstowould-be challengers.

    Introducingmodelsorbrandsthatmatchthecharacteristicschallengersmodels already have or might have.

    Keeping prices low on models that most closely match competitorsofferings.

    Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially bril-liant strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation and exe-cutionundermines the strategys potential and paves the way for shortfalls in customer satisfaction and company per-formance.Keepingpriceslowonmodelsthatmostcloselymatchcompetitorsofferings.

    Competent execution of a mediocre strategy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company

    must exhibit excellent execution of an excellent strategy. Otherwise, any claim of talented management is suspect.

    Forming a strategic vision of what the companys future business makeup will be and where the organization is headedso as to provide long-term direction, delineate.

    Strategic vision of what the companys future business makeup will be and where the organi-zation is headedso as to provide.

    Vision of what the companys future business makeup will be and where the organization is headedso as to provide long-term direction.

    Competent execution of a mediocre strategy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excellent execution of an excellent strategy. Otherwise, any claim of talented

    iLLusTrATion CApsuLe 1.1

    Starbucks Strategy in the Specialty Coffee Industry

    speCiALTy Coffeeto be one of the top three banking companies in terms of market share in all significant markets we nies in terms of market share in all significant markets we serve. to provide shareholders a secure investment with a superior return. www.starbucks.com

    Second Level Headto be one of the top three banking companies in terms of market share in all significant markets we serve. to be one of the top three banking companies in terms of market share in all significant markets we serve.serve.

    broadening the firms product line to close off vacant niches and gaps to would-be challengers.

    introducing models or brands that match the char-acwteristics challengers. Keeping prices low on models that most closely match competitors offerings.

    To Those who use Our Products We affirm bristol-Myers squibbs commitment to the highest standard of market share in all significant markets we serve. to pro

    excellence, safety and reliability in everything we make,. We pledge to offer the highest quality and to work.

    Broadening the firms product line to closeoff vacantniches and gaps to would-be challengers.

    Introducingmodelsorbrandsthatmatchthecharacter-istics challengers models already have or might have.

    Keepingpriceslowonmodelsthatmostcloselymatchcompetitors offerings.

    to be one of the top three banking companies in terms of market share in all significant markets we serve.

    Source: based on information in Malone says tci Push into Phone, internet isnt Working for Now, the Wall street Journal, January 2, 1997, pp. A1 and A3.

    Enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excellent execution of an excellent strategy. Otherwise, any claim of talented management is suspect. Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational means in place to carry it out in high-caliber.Weak implementation and executionundermines the strategys potential and paves

    the way for shortfalls in customer satisfaction and company performance. Competent execution of a mediocre strategy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excellent execution of an excellent strategy.

    Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation and exe-cutionundermines the strategys potential and paves the way for shortfalls in customer satisfaction and company performance. poten-tial and paves the way for shortfalls in customer satisfaction and company performance.

    A companys strategy consists of the competitive moves and that managers are employing to grow the business, attract and please customers, com-plete successfully, conduct operations, and achieve the targetied levels of organi-zational performance.

    LO 2

    develop an awarness of the role of business strategies in direction, growing its business, and improving its financial performance.

    idenTifying A CompAnys sTrATegy

  • Chapter 1 What is Strategy and Why Is It Important? 13

    12

    iLLusTrATion CApsuLe 2.1

    Examples of Strategic VisionsHow Well Do They Measure Up?

    Identifying a Companys Strategycompanys long-term direction, develops competitively effective strategic moves and business approaches, and implements what needs to be done internally to produce good day-in/day-out strategy execution. Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation and executionundermines the strategys potential and paves the way for shortfalls in customer satisfaction and company performance. Compe-tent execution of a mediocre strategy scarcely merits enthusiastic applause for more.Competent execution of a mediocre strategy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excellent execution of an excellent strategy. Othgood strategy execu-tion are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation and execu-tionundermines the strategys potential and paves the way for shortfalls in customer satisfaction and company performance. Competent execution of a mediocre strategy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excellent execution of an excellent strategy

    Vision Statement Effective Elements Shortcomings

    Red Hat

    To extend our position as the most trusted Linux and open source provider to the enterprise. We intend to grow the market for Linux through a complete range of enterprise Red Hat Linux software, a powerful Internet management platform, and associated support and services.

    Directional Focused Feasible Desirable Easyto

    communicate

    Blandoruninspiring

    UBS

    Wearedeterminedtobethebestglobalfinancialservicescompany. We focus on wealth and asset management, andoninvestmentbankingandsecuritiesbusinesses.We continually earn recognition and trust from clients, shareholders,andstaffthroughourabilitytoanticipate,learnandshapeourfuture.Weshareacommonambitiontosucceedbydeliveringqualityinwhatwedo.Ourpurposeistohelpourclientsmakefinancialdecisionswithconfidence.We use our resources to develop effective solutions and services for our clients. We foster a distinctive, meritocratic cultureofambition,performanceandlearningasthisattracts,retainsanddevelopsthebesttalentforourcompany.Bygrowingbothourclientandourtalentfranchises,weaddsustainablevalueforourshareholders.

    Focused Feasible Desirable

    Notforward-looking Blandoruninspiring

    Caterpillar

    Bethegloballeaderincustomervalue. Directional Desirable Easytocommunicate

    Vagueorincomplete Couldapplyto

    many companies in many industries

    eBay

    Provideaglobaltradingplatformwherepracticallyanyonecan trade practically anything.

    Graphic Flexible Easytocommunicate

    Toobroad

    Footnote: this is an example of an illustration capsule footnote.

    Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation and exe-cutionundermines the strategys potential and paves the way for shortfalls in customer the way for shortfalls in customer satisfaction and company performance. Potential and paves the way for shortfalls in customer satis-faction and company performance.worthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the orga-nizational meagy scarcely excellently managed, a company must exhibit excellent execu-tion of an excellent strategy. Otherwise, any claim of talented management is suspect.

    figure 1.1 Identifying a Companys Strategywhat to Look For

    Actions to diversify the companys revenues and earnings by entering new businesses

    Actions to gain sales and market share via lower prices, more performance features, more appealing design, better quality or customer service, wider product selection, or other such actions

    Actions to strengthen competitiveness via strategic alliances and collaborative partnerships

    Actions to strengthen market standing and competitiveness by acquiring or merging with other companies

    Actions to capture emerging market opportunities and defend against external threats to the companys business prospects

    Actions to respond to changing market conditions or other external factors

    Actions to strengthen competitive capabilities and correct competitive weaknesses

    Actions to enter new geographic or product markets or exit existing ones

    Actions and approaches used in managingR&D, production, sales and marketing, nance, and other key activities

    THE PATTERN OF ACTIONS AND

    BUSINESS APPROACHES

    THAT DEFINE A COMPANYS STRATEGY

    Source: based on information in Malone says tci Push into Phone, the Wall street Journal, January 2, 1997, pp. A1 and A3.

    Business approaches that grow the business, attract and please customers, complete successfully, conduct operations, and achieve the targetied levels of organizational performance.

  • 14 Part 1 Concepts and Techniques for Crafting and Executing Strategy Chapter 1 What is Strategy and Why Is It Important? 15

    figure 1.2 A Companys Strategy Is a Blend of Proactive Initiatives and reactive Adjustments

    Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation and exe-cutionundermines the strat-egys potential and paves the way for shortfalls in customer satisfaction and company performance. potential and paves the way for shortfalls tion and exe-cutionunder-mines the strategys potential and paves the way for the way for shortfalls in customer satisfaction and company performance.worthy signs of good management. Manag-ers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational meagy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excel-lent execution of an excellent strategy. Otherwise, any claim of talented management is suspect.

    Identifying a Companys StrategyA companys long-term direction, develops competitively effective strategic moves and business approaches, and implements what needs to be done internally to produce good day-in/day-out strategy execution. Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation and exe-cutionundermines the strategys potential and paves the way for shortfalls in customer satisfac-tion and company performance. Competent execution of a mediocre strategy scarcely

    Competent execution of a mediocre strategy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must agement is suspect. Indeed, good strategy and good strategy execution are the most trust-worthy signs of good management.

    Indeed, good strategy and good strategy execution are the most trustworthy signs potential and paves the way for shortfalls in customer. satisfaction and company perfor-

    PriorVersion ofCompanyStrategy

    Proactive Strategy Elements

    Reactive Strategy Elements

    Adaptive reactions to changingcircumstances

    New initiatives plus ongoing strategy elements continued from prior periods

    LatestVersion ofCompanyStrategy

    Abandoned strategy elements

    TAbLe 2.1 Factors to Consider in Deciding on a Companys Future Direction

    External Considerations Internal Considerations

    Istheoutlookforthecompanypromisingifthecompany sticks with its present product/market/customer/technology focus and strategic direction?

    Arechangesunderwayinthecompetitivelandscapeacting to enhance or weaken the companys prospects?

    What,ifany,newcustomergroupsand/orgeographic markets should the company get in position to serve?

    Shouldweplantoabandonanyofthemarkets,market segments, or customer groups we are currently serving?

    Whatareourambitionsforthecompanywhatindustry standing do we want the company to have?

    What,ifany,newcustomergroupsand/orgeographic markets should the company get in position to serve?

    Arethereanyemergingmarketopportunitiesthecompany ought to pursue?

    Shouldweplantoabandonanyofthemarkets,market segments, or customer groups we are currently serving?

    exhibiT 11 Trends in Southwest Airlines Operating Expenses per Average Seat Mile, 19952007

    Costs per Available Seat Mile

    Expense Category 2007 2006 2005 2004 2003 2002 2001 2000 1995

    Salaries,wages,bonuses, andbenefits

    3.22 3.29 3.27 3.18 3.10 2.89 2.84 2.81 2.40

    Fuel and oil 2.55 2.31 1.58 1.30 1.16 1.11 1.18 1.34 1.01

    Maintenance materials and repairs

    0.62 0.51 0 .52 0.60 0.60 0.57 0.61 0.63 0.60

    Aircraftrentals 0.16 0.17 0.19 0.23 0.25 0.27 0.29 0.33 0.47

    Landing fees and other rentals 0.56 0.53 0.53 0.53 0.52 0.50 0.48 0.44 0.44

    Advertising

    Depreciation 0.56 0.56 0.55 0.56 0.53 0.52 0.49 0.47 0.43

    Other expenses 1.43 1.43 1.41 1.37 1.44 1.55 1.65 1.71 1.72

    Total 9.10 8.80 8.05 7.70 7.60 7.41 7.54 7.73 7.07

    Note:FiguresinthisexhibitdifferfromthoseforSouthwestinExhibit9becausethecostfiguresinExhibit9arebasedoncost per pas-senger revenue mile,whereasthecostfiguresinthisexhibitarebasedoncosts per available seat mile.Costsperrevenuepassengerflown (irrespective of whether the seat was occupied or not).

    Source:Company10-Kreportsandannualreports.

    A companys strategy consists of the competitive moves and that managers are employing to grow the business, attract and please customers, com-plete successfully, conduct operations, and achieve the targetied levels of organi-zational performance.

  • 17

    16 Part 1 Concepts and Techniques for Crafting and Executing Strategy

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    mance. potential and paves the way for shortfalls in customer satisfaction and company performance. fashionweak implementation and exe-cutionundermines the strategys potential and paves the way for shortfalls in customer satisfaction and company perfor-mance. Potential and paves the way for shortfalls in customer satisfaction and company performance. Potential and paves the way for shortfalls in customer satisfaction and company performance.

    The strategy-making, strategy-implementing process consists of five interrelated mana-gerial tasks.

    companys long-term direction, develops competitively effective strategic moves and business approaches, and implements what needs to be done internally to produce good day-in/day-out strategy execution.

    Broadening the firms product line to close off vacant niches and gaps to would-be challengers.

    Introducing models or brands that match the characteristics challengers models already have or might have.

    Keepingpriceslowonmodelsthatmostcloselymatchcompetitorsofferings.

    Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation. Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organi-zational means in place to carry it out in high-caliber fashionweak implementation and exe-cutionundermines the strategys potential and paves the way for shortfalls in customer satisfaction and company performance. potential and paves the way for shortfalls in customer satisfaction and company performance. fashionweak imple-mentation and exe-cutionundermines the strategys potential and paves the way for

    shortfalls in customer satisfaction and company performance. Potential and paves the way for shortfalls in customer satisfaction and company

    performance.worthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational meagy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excellent execution of an excellent strategy. Otherwise, any claim of talented management is suspect.companys long-term direction, develops competitively effective strategic moves and business approaches, and imple-ments what needs to be done internally to produce good day-in/day-out strategy execu-tion. Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation and exe-cutionundermines the strategys potential and paves the way for shortfalls in customer satisfaction and company performance. Com-petent execution of a mediocre strategy scarcely merits enthusiastic applause for more.

    idenTifying A CompAnys sTrATegy And The QuesT for CompeTiTive AdvAnTAge

    COrE COnCEPT

    Employing to grow the business, attract and please customers, complete successfully, conduct operations, and achieve the targeted.

  • 18 Part 1 Concepts and Techniques for Crafting and Executing Strategy Chapter 1 What is Strategy and Why Is It Important? 19

    The strategy-making, strategy-implementing process consists of five interrelated mana-gerial tasks.

    companys long-term direction, develops competitively effective strategic moves and business approaches, and implements what needs to be done internally to produce good day-in/day-out strategy execution.

    Broadening the firms product line to close off vacant niches and gaps to would-be challengers.

    Introducing models or brands that match the characteristics challengers models already have or might have.

    Keepingpriceslowonmodelsthatmostcloselymatchcompetitorsofferings.

    Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for designing a potentially brilliant strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation.

    This undermines the strategys potential and paves the way for shortfalls in customer satisfaction and company performance.

    Broadening the firms product line to close off vacant niches and gaps to would-be challengers.Introducing models or brands that match the characteristics challengers models already have or might have.Keepingpriceslowonmodelsthatmostcloselymatchcompetitorsofferings.

    Competent execution of a mediocre strategy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excellent execution of an excellent strategy. Otherwise, any claim of talented man-agement is suspect excellent execution of an excellent strategy. Otherwise, any claim of talented management is suspect.

    Forming a strategic vision of what the companys future business makeup will be and where the organization is headedso as to provide long-term direction, delineate.

    Strategic vision of what the companys future business makeup will be and where the organi-zation is headedso as to provide.

    Vision of what the companys future business makeup will be and where the organization is headedso as to provide long-term direction.

    Competent execution of a mediocre strategy scarcely merits enthusiastic applause for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excellent execution of an excellent strategy. Otherwise, any claim of talented management is suspect. Indeed, good strategy and good strategy execution are the most trustworthy signs of good management. Managers dont deserve a gold star for design-ing a potentially brilliant strategy, but failing to put the organizational means in place to carry it out in high-caliber fashionweak implementation and executionunder-mines the strategys potential and paves the way for shortfalls in customer satisfaction and company performance. Competent execution of a mediocre strategy scarcely mer-its enthusiastic a company must exhibit excellent execution of an excellent strategy, for manage-ments efforts either. To truly qualify as excellently managed, a company must exhibit excellent execution of an excellent.any claim of talented management is suspect. Indeed, good strategy and good strategy execution are the most trustworthy signs of good

    kEy POInTS

    The managerial process of crafting and executing a companys strategy consists of five interrelated and integrated phases:

    1. Developing a strategic vision of where the company needs to head and what its future product/customer/market/technology focus should be. This manaof aspira-tions for the company are.

    2. Setting objectives and using the targeted results and outcomes as yardsticks spell out how much of what kind of performance by when, and they need to require a significant amount of organizational stretch. Measuring company performance entails setting both financial objectives and strategic objectives. A balanced score-card approach tracks both types of objectives.

    ASSurAnCE OF LEArnInG ExErCISES

    1. Go to www.redhat.com and check whether the companys recent financial reports indicate that its business model is working. Is the company sufficiently profitable to validate its business model and strategy? Is its revenue stream from selling training, consulting, and engineering services growing or declining as a percentage of total revenues? Does your review of the companys recent financial performance suggest that its business model and strategy are changing? Read the companys latest statement about its business model and about why it is pursuing the subscription approach (as compared to Microsofts approach of selling copies of its operating software directly to PC manufacturers and individuals).

    2. Go to www.bestbuy.com, click on the investor relations section, and explore Best Buyslatestannualreportsand10-Kfilingstoseeifyoucanidentifythekeyele-ments of Best Buys strategy. Use the framework provided in Figure 1.1 to help identify the key elements of Best Buys strategy. What type of competitive advan-tage does Best Buy seem to be pursuing?

    3. Given what you know about the specialty coffee industry, does Starbucks or or trump (or a mixture of these)? How has Starbucks strategy evolved (or failed to evolve) in recent years? What is there about Starbucks strategy that can lead to sustainable competitive advantage?

    Percentage of Scheduled Flights Arriving within 15 Minutes of Scheduled Time (previous 12 months ending in May of each year)

    Airline 2000 2005 2006

    AmericanAirlines 75.8 % 78.0 % 75.6 %

    ContinentalAirLines 76.7 78.7 74.8

    DeltaAirLines 78.3 76.4 76.2

    NorthwestAirlines 80.7 79.3 75.1

    SouthwestAirlines 78.7 79.9 80.3

    UnitedAirLines 71.6 79.8 75.7

    Source:OfficeofAviationEnforcementandProceedings,AirTravelConsumerReport,variousyears.

    LO 1, LO 2, LO 3

    LO 2

    LO 3

    understand of the role of business strategies in moving a company in an intended direction, growing its business, and improving its financial and market performance.

    LO 4

    understand of the role of business strategies in moving a company in an intended direction, growing its business, and improving its financial and market performance.

  • Chapter 1 What is Strategy and Why Is It Important? 21

    pArT 2Cases in Crafting and Executing Strategy

    endnotes

    1 Provision for merger costs reflects expenses related to the merger with the CoffeeConnection,Inc.infiscal1994.2 GainonsaleofinvestmentinNoahsresultfromhesaleofNoahsNewYorkBagel,Inc.(Noahs),stockinfiscal1996.3 Earningspershareisbasedontheweighted-averagesharesout-standingdur-ing the period plus.4 Includesonlycompany-operatedstoresopen 13 months or longer.5 Provision for merger costs reflects expenses related to the merger with the CoffeeConnection,Inc.infiscal1994.6 GainonsaleofinvestmentinNoahsresultfromhesaleofNoahsNewYorkBagel,Inc.(Noahs),stockinfiscal1996.7 Earningspershareisbasedontheweighted-averagesharesout-standingdur-

    ing the period plus.8 Includesonlycompany-operatedstoresopen 13 months or longer.9 Provision for merger costs reflects expenses related to the merger with the CoffeeConnection,Inc.infiscal1994.10 GainonsaleofinvestmentinNoahsresultfromhesaleofNoahsNewYorkBagel,Inc.(Noahs),stockinfiscal1996.11 Earningspershareisbasedontheweighted-averagesharesout-standingdur-ing the period plus.12 Includesonlycompany-operatedstoresopen 13 months or longer.13 Provision for merger costs reflects expenses related to the merger with the CoffeeConnection,Inc.infiscal1994.14 GainonsaleofinvestmentinNoahsresultfromhesaleofNoahsNewYork

    Bagel,Inc.(Noahs),stockinfiscal1996.15 Earningspershareisbasedontheweighted-averagesharesout-standingdur-ing the period plus.16 Includesonlycompany-operatedstoresopen 13 months or longer.17 Provision for merger costs reflects expenses related to the merger with the CoffeeConnection,Inc.infiscal1994.18 GainonsaleofinvestmentinNoahsresultfromhesaleofNoahsNewYorkBagel,Inc.(Noahs),stockinfiscal1996.19 Earningspershareisbasedontheweighted-averagesharesout-standingdur-ing the period plus.20 Includesonlycompany-operatedstoresopen 13 months or longer.

    LO 2, LO 3

    ExErCISE FOr SIMuLATIOn PArTICIPAnTS

    EnDnOTES

    4. Given what you know about the specialty coffee industry, does Starbucks or or trump (or a mixture of these)? How has Starbucks strategy evolved (or failed to evolve) in recent years? What is there about Starbucks strategy that can lead to sustainable competitive advantage?

    1. Setting objectivesconverting the strategic vision into specific performance out-comes for the company to achieve.

    2. Crafting a strategy to achieve the desired outcomes. 3. Implementing and executing the chosen strategy efficiently and effectively. for

    display the cultural norms.

    5. Go to www.bestbuy.com, click on the investor relations section, and explore Best Buyslatestannualreportsand10-Kfilingstoseeifyoucanidentifythekeyele-ments of Best Buys strategy. Use the framework provided in Figure 1.1 to help identify the key elements of Best Buys strategy. What type of competitive advan-tage does Best Buy seem to be pursuing?

  • C-22 C-23

    Arthur A. ThompsonThe University of Alabama

    John E. Gamble University of South Alabama

    founded in 1980, Whole Foods Market is book is about the managerial tasks of craft-ing, implementing, and executing company strategies. A companies strategy is the game plan manage ment has for positioning the company in its chosen market arena, competing successfully, pleasing customers, and achieving good business performance. Strategy consists of the whole (www.webaddress.com) array of competitive moves and business approaches that managers employ in run-ning a company.

    In crafting a strategic course, management is saying that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways of doing business.

    The nATurAL And orgAniC foods indusTryIn crafting a strategic course, management is saying that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways of doing business. A strategy thus entails managerial to specific mar-kets, competiaying taying that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particu-lar ways of doing business. A strategy that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways of doing business. A strategy ttive approaches, aying that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways

    of doing business. A strategy tand and ways of oper-ating and and ways of operating.

    Independent natural and Health Food GrocersIn crafting a strategic course, management is saying that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways of doing business. A strategy thus entails managerial choices among alternatives and signals organiza-tional commitment to specific markets, competitive approaches, and and ways of operating.

    Why Company Strategies Evolve Frequent fine-tuning and tweaking of a com-pany strategy, first in one department or functional area and then n another, are quite normal. On occasion, quantum changes in strategy are called forwhen a competi-tuickly. because strategic moves and new action a entails managerial to specific markets, competiaying taying that among all the paths and actition a entails managerial to specific markets, competiaying taying that among all the paths and actiopproaches are ongoing across the business, an organizations strategy forms over a period of time and then reforms as the number of changes begin to mount.characteristics.

    In crafting a strategic course, management is saying that among all the paths and actions we com-petitive approaches, and and ways of operating.

    1. Forming a strategic vision of what the companys organization with a sense of purposeful action.

    a. Crafting a strategy to achieve the desired. b. Crafting a strategy to achieve the desired

    outcomes. 2. Setting objectivesconverting the strategic vision

    into specific performance out-comes for the com-pany to achieve.

    3. Crafting a strategy to achieve the desired outcomes.

    Growth StrategyIn crafting a strategic course, management is saying that among all thgnals organiza-tional commitment to specific markets, competitive approaches, and and ways of operating.

    Broadening the firms product line to close off vacant niches and to would-be challengers.Introducing models match the or might have.Keepingprices lowonmodels thatmost closelymatch competitors offerings.

    A strategy thus entails managerial choices among alternatives and signals organiza-tional com-mitment ways of operating.

    Forming a strategic vision of what the companys is headedso as to provide long-term direction, delineate.

    Strategic vision of what the companys future busi-headedso as to provide.

    Vision of what the companys future business so as to provide long-term direction.

    A strategy thus entails managerial choices among alternativeerial choices among alternatives to specific markets, competitive approaches, and and ways of operating.

    Speaker1: Broadening the firms product line to close off vacant niches and gaps to would.

    Speaker2: Introducing models or brands that match the characteristics challengers models already have or might have.

    Speaker3: Keeping prices low onmodels thatmostclosely match competitors offerings.

    In crafting a strategic course, management is saying that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways of doing business.

    CA

    se 1 whole Foods Market in 2008:

    vision, Core values, and Strategy

    Copyright 2008 by Arthur A. Thompson and John E. Gamble. All rights reserved.

    exhibiT 1 Illustrations of unweighted and weighted Competitive Strength Assessments

    ABCCo. Rival 1 Rival 2

    KeySuccessFactor/ StrengthMeasure

    Importance Weight

    Strength Rating Score

    Strength Rating Score

    Strength Rating Score

    Quality/product performance 0.10 8 0.80 5 0.50 10 1.00Reputation/image 0.10 8 0.80 7 0.70 10 1.00Dealernetwork/distributioncapability

    0.05 9 0.45 4 0.20 10 0.50

    Newproductinnovationcapability

    0.05 9 0.45 4 0.20 10 0.50

    Financial resources 0.10 5 0.50 10 1.00 7 0.70Relative cost position 0.30 5 1.50 10 3.00 3 0.90Customerservicecapabilities 0.15 5 0.75 7 1.05 10 1.50 Sumofimportanceweights 1.00 Weighted overall strength rating 61 5.95 58 7.70 71 6.85

    Note:FiguresinthisexhibitdifferfromthoseforSouthwestinExhibit9becausethecostfiguresinExhibit9arebasedoncost per flown (irrespective of whether the seat was occupied or not).

    Source:Company10-Kreportsandannualreports.

  • C-24 C-25

    CA

    se 27

    Starbucks

    Arthur A. ThompsonThe University of Alabama

    John E. Gamble University of South Alabama

    I was a good musician, so I thought, what better thing to start than a music company? Darren Skanson

    this book is about the managerial tasks of craft-ing, implementing, and executing company strategies. A companies strategy is the game plan manage ment has for positioning the company in its chosen market arena, competing successfully, pleasing customers, and achieving good business performance. Strategy consists of the whole (www.webaddress.com) array of competitive moves and business approaches that managers employ in run-ning a company.

    In crafting a strategic course, management is saying that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways of doing business. A strategy thus entails managerial choices among alternatives and signals organiza-tional commitment to specific markets, competitive approaches, and and ways of operating.

    The CompAny bACKgroundIn crafting a strategic course, management is saying that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways of doing business. A strategy thus entails managerial choices among alternatives and signals organiza-tional commitment to specific markets, competitive approaches, and and ways of operating.

    Identifying a Companys Strategy

    In crafting a strategic course, management is saying that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways of doing business. A strategy thus entails managerial choices among alternatives and signals organiza-tional commitment to specific markets, competitive approaches, and and ways of operating.

    Why Company Strategies Evolve Frequent fine-tuning and tweaking of a com-pany strategy, first in one department or functional area and then n another, are quite normal. On occasion, quantum changes in strategy are called forwhen a competi-tuickly. because strategic moves and new action approaches are ongoing across the business, an organizations strategy forms over a period of time and then reforms as the number of changes begin to mount.

    Broadening the firms product line to close off vacant niches and gaps to would-be challengers.

    Introducing models or brands that match the characteristics challengers models already have or might have.

    Keepingprices lowonmodels thatmost closelymatch competitors offerings.

    Al Dunlaps Growing Expertise and reputation as a Turnaround Expert, 198395In crafting a strategic course, management is saying that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways of doing business. A strategy thus entails managerial choices among alternatives and signals organiza-tional commitment to specific markets, competitive approaches, and and ways of operating.

    Why Company Strategies Evolve Frequent fine-tuning and tweaking of a com-pany strategy, first in one department or functional area and then n another, are quite normal. On occasion, quantum changes in strategy are called forwhen a competi-tuickly. because strategic moves and new action approaches are ongoing across the business, an organizations strategy forms over a period of time and then reforms as the number of changes begin to mount.

    Broadening the firms product line to close off vacant niches and gaps to would-be challengers.

    Introducing models or brands that match the characteristics challengers models already have or might have.

    Keepingprices lowonmodels thatmost closelymatch competitors offerings.

    ing that among all the paths and actions we could have chosen, we have decided to go in this direction and rely upon these particular ways of doing busi-ness. A strategy thus entails managerial choices among alternatives and signals organiza-tional commitment to specific markets, competitive approaches, and and ways of operating.

    Why Company Strategies Evolve Frequent fine-tuning and tweaking of a com-pany strategy, first in one department or functional area and then n another, are quite normal. On occasion, quantum changes in strategy are called forwhen a comply. because strategic moves and new action.

    EnDnOTES

    1 Provision for merger costs reflects expenses relatedtothemergerwiththeCoffeeConnec-tion,Inc.infiscal1994.2 GainonsaleofinvestmentinNoahsresultfromhesaleofNoahsNewYorkBagel,Inc.(Noahs),stockinfiscal1996.3 Earningspershareisbasedontheweighted-averagesharesout-standingduringthe period plus.4 Includesonlycompany-operatedstoresopen13 months or longer.5 Provision for merger costs reflects expenses relatedtothemergerwiththeCoffeeConnec-tion,Inc.infiscal1994.6 GainonsaleofinvestmentinNoahsresultfromhesaleofNoahsNewYorkBagel,Inc.(Noahs),stockinfiscal1996.7 Earningspershareisbasedontheweighted-averagesharesout-standingduring

    the period plus.8 Includesonlycompany-operatedstoresopen13 months or longer.9 Provision for merger costs reflects expenses relatedtothemergerwiththeCoffeeConnec-tion,Inc.infiscal1994.10 GainonsaleofinvestmentinNoahsresultfromhesaleofNoahsNewYorkBagel,Inc.(Noahs),stockinfiscal1996.11 Earningspershareisbasedontheweighted-averagesharesout-standingduringthe period plus.12 Includesonlycompany-operatedstoresopen 13 months or longer.13 Provision for merger costs reflects expenses relatedtothemergerwiththeCoffeeConnec-tion,Inc.infiscal1994.14 GainonsaleofinvestmentinNoahsresultfromhesaleofNoahsNewYorkBagel,Inc.

    (Noahs),stockinfiscal1996.15 Earningspershareisbasedontheweighted-averagesharesout-standingduringthe period plus.16 Includesonlycompany-operatedstoresopen 13 months or longer.17 Provision for merger costs reflects expenses relatedtothemergerwiththeCoffeeConnec-tion,Inc.infiscal1994.18 GainonsaleofinvestmentinNoahsresultfromhesaleofNoahsNewYorkBagel,Inc.(Noahs),stockinfiscal1996.19 Earningspershareisbasedontheweighted-averagesharesout-standingduringthe period plus.20 Includesonlycompany-operatedstoresopen 13 months or longer.

    Copyright 2008 by Arthur A. Thompson and John E. Gamble. All rights reserved.

  • I-26 I-27

    orgAnizATion index

    AABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329

    A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193

    Abercrombie & Fitch, caseadvertising litigation history controversies,

    C-366toC-367brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314

    advertising litigation history controversies, C-366toC-367Accountantmanagement

    ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170

    Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370

    logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232

    Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314

    bBayer & Strauss, C-363Bccenture,117,167,219Bcclaim Entertainment, C-232

    advertising litigation history controversies, C-366toC-367history,C-359toC-363

    corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365social responshistory, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367ofadvertising

    firm, 319A. J. Gallaher & Company, 329ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2

  • I-28 I-29

    ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193

    cClear ChannelAbercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2

    ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314

    advertising litigation history controversies, C-366toC-367Accountantmanagementof advertising firm, 319

    AABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329

    A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193

    Abercrombie & Fitch, caseadvertising litigation history controversies,

    C-366toC-367brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449

    bBayer & Strauss, C-363Bccenture,117,167,219Bcclaim Entertainment, C-232

    advertising litigation history controversies, C-366toC-367history,C-359toC-363

    corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370

    nAme index

  • I-30 I-31

    AABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329

    A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193

    Abercrombie & Fitch, caseadvertising litigation history controversies,

    C-366toC-367brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314

    advertising litigation history controversies, C-366toC-367Accountantmanagement

    ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170

    Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370

    logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314A&Wrestaurants,247ABC network, 148, 314ABC News, C-2ABCOutdoor,170Abercrombie & Fitch, 193Abercrombie & Fitch, case

    advertising litigation history controversies, C-366toC-367

    brands, C-358 to C-359company history, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365socialresponsibility,C-367toC-368storeconcept,C-365toC-367supplychainmanagement,C-367

    Abraham & Strauss, C-363Accenture,117,167,219Acclaim Entertainment, C-232

    Accuvue,277ACE Ltd., 329Acer Computers, 244AckerleyGroup,170Acqua Panna, C-56Activision,C-201,C-217,C-231

    competitive strength, C-232financial performance, C-232, C-233history and operations, C-232strategy, C-232

    Acura, C-38Adams-Millis Corporation, C-306Adecco Group SA, C-343, C-344AdelphiaGroupCommunications,11,327,328,

    424, 449Adidas, 33Adidas Group, C-420sales/mediaexpenditure,C-375Adidas-Reebok, C-386, C-421ABC, 60Accountant management of advertising

    firm, 319A. J. Gallaher & Company, 329A.T.Kearney,117A&E network, 314

    bBayer & Strauss, C-363Bccenture,117,167,219Bcclaim Entertainment, C-232

    advertising litigation history controversies, C-366toC-367history,C-359toC-363

    corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367main competitors, C-359marketingstrategy,C-365toC-367NewYorkCitystoreopening,C-357numberofstores,C-357organizationalculture,C-368toC-370senior executives, C-363 to C-365social responshistory, C-359 to C-363corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357key milestones, C-361litigationagainst,C-369toC-370logistics,C-367ofadvertising

    firm, 319Bayer & Strauss, C-363Bccenture,117,167,219Bcclaim Entertainment, C-232

    advertising litigation history controversies, C-366toC-367history,C-359toC-363

    corporate governance, C-363 to C-365financialperformance,C-360,C-367five-year financial performance, C-368humanresourcemanagement,C-370toC-371image,C-357

    CompAny index

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