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Strategic Management STRATEGIC MANAGEMENT Adapted by Reed Kennedy with Eli Jamison, Joseph Simpson, Pankaj Kumar, Ayenda Kemp, Kiran Awate, and Kathleen Manning Why do some companies outperform others? In a dynamic and competitive busi- ness environment, the answer to this question can be the difference between success and failure. Firms that are successful generally have a strategic man- agement process that helps them set goals and execute on a clear vision. This textbook offers an introduction to the key topics and themes of strategic management. The authors draw on examples of familiar companies and person- alities to illustrate the different strategies used by today’s firms - and how they go about implementing those strategies. Students will learn hot to conduct a case analysis, measure organizational performance, and conduct external and internal analyses. In short, they will understand how organizations operate at the strategic level to be successful. Strategic Management is intended for a wide range of business students including those majoring in marketing, management, business administration, accounting, finance, real estate, business information technology, and hospi- tality and tourism. It is ideal for a senior capstone course in an undergraduate business program. It is available online for free in multiple formats and also as affordable print editions. Kennedy Licensed with a Creative Commons Attribution NonCommercial-ShareAlike 3.0 License. DOI: https://doi.org/10.21061/strategicmanagement Cover design: Kindred Grey Published by Pamplin College ISBN 9781949373967 of Business in association with 90000 > 7819499 373967 STRATEGIC MANAGEMENT adapted by EED ENNEDY R K with ELI JAMISON, JOE SIMPSON, PANKAJ KUMAR, AYENDA KEMP, KIRAN AWATE, AND KATHLEEN MANNING DOI: https://doi.org/10.21061/strategicmanagement P AMPLIN C OLL E G E OF B USIN E SS IN ASSOCIATION WITH BLACKSBURG, VIRGINIA Contents Copyright and License Information ix Acknowledgments xi Introduction 1 Instructor Resources 5 Chapter 1: Mastering Strategy: Art and Science 7 1.1 Introduction 7 1.2 What is Strategic Management? 9 1.3 Intended, Emergent, and Realized Strategies 12 1.4 The History of Strategic Management 17 1.5 Contemporary Critique of Strategic Management 25 1.6 Understanding the Strategic Management Process 27 1.7 Conclusion 31 Chapter 2: Assessing Organizational Performance 32 2.1 Introduction 32 2.2 Vision, Mission, and Goals 33 2.3 Assessing Organizational Performance 42 2.4 Competitive Advantage 50 2.5 Conclusion 52 Chapter 3: Evaluating the External Environment 53 3.1 Introduction 53 3.2 The Relationship between an Organization and its Environment 55 3.3 Evaluating the General Environment 58 3.4 Evaluating the Industry 69 3.5 Mapping Strategic Groups 83 3.6 Conclusion 87 Chapter 4: Evaluating the Internal Environment 88 4.1 Introduction 88 4.2 Managing Firm Resources 90 4.3 Resource-Based View 92 4.4 Intellectual Property & Isolating Mechanisms 101 4.5 Value Chain 110 4.6 Conclusion 114 Chapter 5: Synthesis of Strategic Issues and Analysis 116 5.1 Introduction 116 5.2 SWOT Framework 117 5.3 Strategic Issue Identification 120 5.4 Conclusion 123 Chapter 6: Selecting Business-Level Strategies 124 6.1 Introduction 124 6.2 Understanding Business-Level Strategy through “Generic Strategies” 127 6.3 Cost Leadership 131 6.4 Differentiation 136 6.5 Focused Cost Leadership and Focused Differentiation 143 6.6 Best-Cost Strategy 152 6.7 Stuck in the Middle 158 6.8 Conclusion 162 Chapter 7: Innovation Strategies 163 7.1 Introduction 163 7.2 Entrepreneurial Orientation 164 7.3 Why Innovate? 170 7.4 Types of Innovation 173 7.5 Implementing Innovation 180 7.6 Responding to Innovation in the Market 188 7.7 Conclusion 194 Chapter 8: Selecting Corporate-Level Strategies 195 8.1 Introduction 195 8.2 Corporate-Level Strategy Defined 196 8.3 Diversification 199 8.4 Implementing Corporate Strategy 211 8.5 Strategies for Getting Smaller 213 8.6 Portfolio Planning and Corporate-Level Strategy 216 8.7 Conclusion 220 Chapter 9: Competing in International Markets 221 9.1 Introduction 221 9.2 Advantages and Disadvantages of Competing in International Markets 222 9.3 CAGE Framework 234 9.4 Types of International Strategies 237 9.5 Drivers of Success and Failure When Competing in International Markets 241 9.6 Options for Competing in International Markets 249 9.7 Conclusion 257 Chapter 10: Executing Strategy through Organizational Design 259 10.1 Introduction 259 10.2 Why Organizational Design? 260 10.3 The Basic Building Blocks of Organizational Structure 264 10.4 Creating an Organizational Structure 269 10.5 Creating Organizational Control Systems 282 10.6 Legal Forms of Business 291 10.7 Conclusion 295 Chapter 11: Leading an Ethical Organization: Corporate Governance, Corporate Ethics, and Social 297 Responsibility 11.1 Introduction 297 11.2 Doing Well by Doing Good 300 11.3 Corporate Governance 306 11.4 Corporate Ethics and Social Responsibility 312 11.5 Contemporary Questions of Corporate Ethics 318 11.6 Conclusion 324 About the Author 327 Primary Contributor and Content Expert Coordinator 327 Reviewers and Contributors 327 Editorial and Production Teams 330 Editorial Team 330 Version Notes 332 Glossary 336 Copyright and License Information Strategic Management (c) 2020. Reed Kennedy. This book is licensed with a Creative Commons NonCommercial-ShareAlike 3.0 License. https://creativecommons.org/licenses/by-nc-sa/3.0/legalcode. You are free: To Share — to copy, distribute and transmit the work To Remix — to adapt the work Under the following conditions: Attribution — you must attribute the work in the manner specified by the author or licensor (but not in any way that suggests that they endorse you or your use of the work). Noncommercial — you may not use this work for primary commercial purposes. Share Alike — if you alter, transform, or build upon this work, you may distribute the resulting work only under the same or similar license to this one. Adaptation Attribution: This book is adapted from an open textbook produced and distributed under a Creative Commons license (CC BY NC-SA). This adapted edition is produced by Virginia Tech Publishing (http://publishing.vt.edu) through the University Libraries’ Open Education Initiative (https://guides.lib.vt.edu/oer/grantees). It is an adaptation of an edition produced in 2015 (https://open.lib.umn.edu/strategicmanagement) by the University of Minnesota Libraries Publishing through their eLearning Support Initiative. Whereas the University of Minnesota adapted and did not significantly update a 2010 version by a publisher who has requested that they and the original author not receive attribution, this version has been significantly updated. Version notes located in the back of the book describe changes and updates implemented in this version. Third-party works: All third-party works within the book (images, illustrations, etc.) retain their original licenses. We have undertaken diligent effort to clearly identify and attribute works reproduced under an open license, works used under fair use, and those in the Public Domain. Links to external content such but not limited to videos are not covered by the overall license on this book. Trademarks are the property of their respective owners. Suggested citation: Kennedy, Reed. (2020) Strategic Management. Blacksburg, VA: Virginia Tech Publishing. https://doi.org/10.21061/strategicmanagement CC BY NC-SA 3.0 Publisher: This work is published by Virginia Tech’s Pamplin College of Business in association with Virginia Tech Publishing. Copyright and License Information | ix Pamplin College of Business Pamplin Hall, RM 1030 880 West Campus Drive Blacksburg, VA 24061, USA Virginia Tech Publishing Virginia Tech University Libraries 560 Drillfield Drive Blacksburg, VA 24061, USA Peer Review: This work benefited from peer review and contributions of five subject matter experts; one recent business graduate also reviewed and contributed to this work. Accessibility Statement: Virginia Tech Publishing is committed to making its publications accessible in accordance with the Americans with Disabilities Act of 1990. The HTML and screen reader–friendly PDF versions of this book utilize header structures and include alternative text which allow for machine-readability. Publication Cataloging Information Kennedy, Reed, author Strategic Management / Reed Kennedy Pages cm ISBN 978-1-949373-94-3 (print-color) ISBN 978-1-949373-89-9 (print-black & white) ISBN 978-1-949373-96-7 (ebook-PDF) ISBN 978-1-949373-95-0 (ebook-Pressbooks) DOI: https://doi.org/10.21061/strategicmanagement 1. Management. 2. Strategy I. Title HD30.28.K45 Cover Design: Kindred Grey x | Copyright and License Information Acknowledgments Publication of this work was made possible in part by the University Libraries at Virginia Tech through its Open Education Initiative (https://guides.lib.vt.edu/oer/grants), which provides development assistance and financial support to Virginia Tech faculty who wish to use, create, or adapt openly licensed teaching materials to support student learning. The University Libraries also contributed faculty and staff labor. Reed Kennedy’s contributions were supported by the Pamplin College of Business at Virginia Tech. Acknowledgments | xi Introduction Goals for this Book This textbook is intended for seniors in undergraduate business programs taking a capstone course in strategic management. Most business school students begin with a broad introductory business course before concentrating on courses in their major.
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