Exploring Corporate Strategy: Text & Cases (8th Edition) PDF
Preview Exploring Corporate Strategy: Text & Cases (8th Edition)
Corporate strategy exploring gerry JoHnson KeVan sCHoles riCHarD WHittington 8TH EDITION TEXT & CASES are small fi rms more innovative than large organisations? What impact do culture and history have on strategy? What does a strategist actually do? Explore key and contemporary questions such as these, as well as all the fundamental concepts and tools of strategy, plus: • Get the latest developments in this fast-moving fi eld: brand new chapters on innovation and entrepreneurship, international strategy and the practice of strategy keep you at the cutting edge • Read the most recent and intriguing strategy ‘stories’: case studies on familiar and headline-grabbing organisations, such as eBay, Skype, Virgin and many more • Develop your critical thinking skills, using key debates and critical commentaries throughout the text exploring Corporate strategy TEXT & CASES JoHnson sCHoles WHittington 8TH EDITION succeed in your studies, enhance your understanding and improve your grade. Use the unique access card provided with all new copies of this book to log on to www.pearsoned.co.uk/ecs and • Reinforce key concepts using audio downloads, animated models and quick tests • Track your progress with self-assessment questions and a personal gradebook • Prepare for your exams with revision ‘fl ashcards’ and a multi-lingual mini-dictionary of strategy www.pearson-books.com An imprint of over 750,000 students worldwide have used this best-selling book through their academic and professional careers. Join them today and stay at the top of the class with the 8th edition of Exploring Corporate Strategy! ‘By far the best book in the fi eld I have ever read! [The authors] relate theory to real-life examples which are up to date with current business news. I would most certainly recommend this book to anyone! The on-line features are excellent as well.’ ‘I found this book to be invaluable during [my] Strategic Management module. During my written assignment (which I passed easily) I drew heavily on the concepts and ideas introduced in this publication.’ Customer reviews of 7th edition on amazon.co.uk 9780273711926_COVER.indd 1 17/10/07 08:58:15 EXPLORING CORPORATE STRATEGY Visit the Exploring Corporate Strategy, eighth edition Companion Website at www.pearsoned.co.uk/ecs. Register to create your own personal account using the access code supplied with this book to find valuable student learning material including: ● Key concepts: audio downloads, video clips, animations and quick tests to reinforce your understanding ● Chapter audio summaries that you can download or listen to online ● Self assessment questions and a personal gradebook so you can test your learning and track your progress ● Revision flashcards to help you prepare for your exams ● A multi-lingual online glossary to explain key concepts ●l Guidance on how to analyse a case study ● Links to relevant sites on the web so you can explore more about the organisa- tions featured in the case examples and case studies ECS8_A01.qxd 22/10/2007 11:37 Page i Gerry Johnson BA, PhD (left) is The Professor Sir Roland Smith Chair of Strategic Management at Lancaster University School of Management and a Senior Fellow of the UK Advanced Institute of Management (AIM) Research. He is the author of numerous books, has published papers in many of the foremost management research journals in the world and is a regular speaker at the major academic conferences throughout the world. He also serves on the editorial boards of the Academy of Management Journal, the Strategic Management Journal and the Journal of Management Studies. His research is into strategic management practice, processes of strategy development and strategic change in organisations. As a consultant he works with senior management teams on issues of strategy development and strategic change where he applies many of the concepts from Exploring Corporate Strategy to help them challenge, question and develop the strategies of their organisations. Kevan Scholes MA, PhD, DMS, CIMgt, FRSA (centre) is Principal Partner of Scholes Associates – specialising in strategic management. He is also Visiting Professor of Strategic Management and formerly Director of the Sheffield Business School, UK. He has extensive experience of teaching strategy to both undergraduate and postgraduate students at several universities. In addition his corporate management development work includes organisations in manufacturing, many service sectors and a wide range of public service organisations. He has regular commitments outside the UK – including Ireland, Australia and New Zealand. He has also been an advisor on management development to a number of national bodies and is a Companion of The Chartered Management Institute. Richard Whittington MA, MBA, PhD (right) is Professor of Strategic Management at the Saïd Business School and Millman Fellow at New College, University of Oxford. He is author or co-author of eight books and has published many journal articles. He is a senior editor of Organization Studies and serves on the editorial boards of Organization Science, the Strategic Management Journal and Long Range Planning, amongst others. He has had full or visiting positions at the Harvard Business School, HEC Paris, Imperial College London, the University of Toulouse and the University of Warwick. He is active in executive education and consulting, working with organisations from across Europe, the USA and Asia. His current research is focused on strategy practice and international management. ECS8_A01.qxd 22/10/2007 11:37 Page ii EIGHTH EDITION EXPLORING CORPORATE STRATEGY Gerry Johnson University of Strathclyde Kevan Scholes Sheffield Hallam University Richard Whittington Saïd Business School, University of Oxford ECS8_A01.qxd 22/10/2007 11:37 Page iii Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk Fifth edition published under the Prentice Hall imprint 1998 Sixth edition published under the Financial Times Prentice Hall imprint 2002 Seventh edition 2005 Eighth edition published 2008 © Simon & Schuster Europe Limited 1998 © Pearson Education Limited 2002, 2008 The rights of Gerry Johnson, Kevan Scholes and Richard Whittington to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN: 978-0-273-71191-9 (text only) ISBN: 978-0-273-71192-6 (text and cases) British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10 9 8 7 6 5 4 3 2 1 11 10 09 08 07 Typeset in 9.5/13pt Linoletter by 35 Printed and bound by Rotolito Lombarda, Italy The publisher’s policy is to use paper manufactured from sustainable forests. ECS8_A01.qxd 22/10/2007 11:37 Page iv Chapter 1 Introducing Strategy 1 Commentary The Strategy Lenses 29 Part I THE STRATEGIC POSITION 49 Introduction to Part I 51 Chapter 2 The Environment 53 Chapter 3 Strategic Capability 93 Chapter 4 Strategic Purpose 131 Chapter 5 Culture and Strategy 177 Commentary on Part I The Strategic Position 212 Part II STRATEGIC CHOICES 215 Introduction to Part II 217 Chapter 6 Business-Level Strategy 221 Chapter 7 Directions and Corporate-Level Strategy 255 Chapter 8 International Strategy 293 Chapter 9 Innovation and Entrepreneurship 323 Chapter 10 Strategy Methods and Evaluation 355 Commentary on Part II Strategic Choices 392 Part III STRATEGY IN ACTION 395 Introduction to Part III 397 Chapter 11 Strategy Development Processes 399 Chapter 12 Organising for Success 433 Chapter 13 Resourcing Strategies 473 Chapter 14 Managing Strategic Change 517 Chapter 15 The Practice of Strategy 557 Commentary on Part III Strategy in Action 594 Brief Contents ECS8_A01.qxd 22/10/2007 11:37 Page v ECS8_A01.qxd 22/10/2007 11:37 Page vi List of Illustrations xvii List of Exhibits xix Preface xxiii Getting the Most from Exploring Corporate Strategy xxvi Guided Tour xxx Acknowledgements xxxiv 1 Introducing Strategy 1 1.1 Introduction 2 1.2 What is strategy? 2 1.2.1 The characteristics of strategic decisions 2 1.2.2 Levels of strategy 7 1.2.3 The vocabulary of strategy 9 1.3 Strategic management 11 1.3.1 The strategic position 13 1.3.2 Strategic choices 14 1.3.3 Strategy in action 15 1.4 Strategy as a subject of study 16 1.5 Strategy as a job 18 1.6 The strategy lenses 19 Summary 22 Work assignments 23 Recommended key readings 23 References 24 Case example: Electrolux 25 Commentary The Strategy Lenses 29 Introduction to Part I 51 2 The Environment 53 2.1 Introduction 54 2.2 The macro-environment 55 2.2.1 The PESTEL framework 55 2.2.2 Building scenarios 57 Detailed Contents THE STRATEGIC POSITION Part I ECS8_A01.qxd 22/10/2007 11:37 Page vii DETAILED CONTENTS viii 2.3 Industries and sectors 59 2.3.1 Competitive forces – the five forces framework 59 2.3.2 The dynamics of industry structure 67 2.4 Competitors and markets 73 2.4.1 Strategic groups 73 2.4.2 Market segments 77 2.4.3 Identifying the strategic customer 78 2.4.4 Understanding what customers value – critical success factors 79 2.5 Opportunities and threats 81 Summary 83 Work assignments 85 Recommended key readings 86 References 86 Case example: Global forces and the European brewing industry 88 3 Strategic Capability 93 3.1 Introduction 94 3.2 Foundations of strategic capability 95 3.2.1 Resources and competences 95 3.2.2 Threshold capabilities 96 3.2.3 Unique resources and core competences 97 3.3 Cost efficiency 99 3.4 Capabilities for achieving and sustaining competitive advantage 101 3.4.1 Value of strategic capabilities 102 3.4.2 Rarity of strategic capabilities 102 3.4.3 Inimitable strategic capabilities 103 3.4.4 Non-substitutability of strategic capabilities 106 3.4.5 Dynamic capabilities 107 3.5 Organisational knowledge 107 3.6 Diagnosing strategic capability 109 3.6.1 The value chain and value network 110 3.6.2 Activity maps 114 3.6.3 Benchmarking 116 3.6.4 SWOT 119 3.7 Managing strategic capability 120 3.7.1 Limitations in managing strategic capabilities 120 3.7.2 Developing strategic capabilities 121 3.7.3 Managing people for capability development 121 Summary 123 Work assignments 125 Recommended key readings 125 References 126 Case example: Making eBay work 128 4 Strategic Purpose 131 4.1 Introduction 132 4.2 Corporate governance 133 ECS8_A01.qxd 22/10/2007 11:37 Page viii DETAILED CONTENTS ix 4.2.1 The governance chain 133 4.2.2 Corporate governance reforms 138 4.2.3 Different governance structures 138 4.2.4 How governing bodies influence strategy 143 4.2.5 Ownership choices 144 4.3 Business ethics and social responsibility 145 4.3.1 Corporate social responsibility 145 4.3.2 The role of individuals and managers 150 4.4 Stakeholder expectations 153 4.4.1 Stakeholder mapping 156 4.4.2 Power 160 4.5 Organisational purposes: values, mission, vision and objectives 163 4.5.1 Corporate values 163 4.5.2 Mission and vision statements 164 4.5.3 Objectives 164 Summary 167 Work assignments 169 Recommended key readings 170 References 170 Case example: Product Red and Gap 173 5 Culture and Strategy 177 5.1 Introduction 178 5.2 Strategic drift 179 5.2.1 Strategies change incrementally 179 5.2.2 The tendency towards strategic drift 180 5.2.3 A period of flux 183 5.2.4 Transformational change or death 183 5.3 Why is history important? 184 5.3.1 Path dependency 185 5.3.2 Historical analysis 188 5.4 What is culture and why is it important? 189 5.4.1 National and regional cultures 190 5.4.2 The organisational field 192 5.4.3 Organisational culture 194 5.4.4 Organisational subcultures 195 5.4.5 Culture’s influence on strategy 196 5.4.6 Analysing culture: the cultural web 197 5.4.7 Undertaking cultural analysis 201 5.5 Managing in an historic and cultural context 203 Summary 205 Work assignments 205 Recommended key readings 206 References 206 Case example: Marks & Spencer (A) 208 Commentary on Part I The Strategic Position 212 ECS8_A01.qxd 22/10/2007 11:37 Page ix DETAILED CONTENTS x Introduction to Part II 217 6 Business-Level Strategy 221 6.1 Introduction 222 6.2 Identifying strategic business units 223 6.3 Bases of competitive advantage: the ‘strategy clock’ 224 6.3.1 Price-based strategies (routes 1 and 2) 227 6.3.2 (Broad) Differentiation strategies (route 4) 229 6.3.3 The hybrid strategy (route 3) 230 6.3.4 Focused differentiation (route 5) 230 6.3.5 Failure strategies (routes 6, 7 and 8) 231 6.4 Sustaining competitive advantage 231 6.4.1 Sustaining price-based advantage 232 6.4.2 Sustaining differentiation-based advantage 233 6.4.3 Strategic lock-in 235 6.4.4 Responding to competitive threat 236 6.5 Competitive strategy in hypercompetitive conditions 238 6.5.1 Overcoming competitors’ bases of strategic advantage 238 6.5.2 Characteristics of successful hypercompetitive strategies 239 6.6 Competition and collaboration 240 6.7 Game theory 241 6.7.1 The ‘prisoner’s dilemma’: the problem of cooperation 243 6.7.2 Sequential games 246 6.7.3 Changing the rules of the game 246 Summary 247 Work assignments 249 Recommended key readings 250 References 250 Case example: Madonna: still the reigning queen of pop? 251 7 Directions and Corporate-Level Strategy 255 7.1 Introduction 256 7.2 Strategic directions 257 7.2.1 Market penetration 258 7.2.2 Consolidation 260 7.2.3 Product development 261 7.2.4 Market development 261 7.2.5 Diversification 262 7.3 Reasons for diversification 262 7.3.1 Related diversification 265 7.3.2 Unrelated diversification 267 7.3.3 Diversification and performance 269 7.4 Value creation and the corporate parent 270 7.4.1 Value-adding and value-destroying activities of corporate parents 270 STRATEGIC CHOICES Part II ECS8_A01.qxd 22/10/2007 11:37 Page x DETAILED CONTENTS xi 7.4.2 The portfolio manager 274 7.4.3 The synergy manager 275 7.4.4 The parental developer 276 7.5 Portfolio matrices 278 7.5.1 The growth/share (or BCG) matrix 278 7.5.2 The directional policy (or GE–McKinsey) matrix 280 7.5.3 The parenting matrix 282 Summary 286 Work assignments 286 Recommended key readings 287 References 287 Case example: The Virgin Group 289 8 International Strategy 293 8.1 Introduction 294 8.2 Internationalisation drivers 295 8.3 National and international sources of advantage 300 8.3.1 Porter’s Diamond 300 8.3.2 The international value network 302 8.4 International strategies 304 8.5 Market selection and entry 306 8.5.1 Market characteristics 307 8.5.2 Competitive characteristics 308 8.5.3 Entry modes 311 8.6 Internationalisation and performance 314 8.7 Roles in an international portfolio 315 Summary 316 Work assignments 318 Recommended key readings 318 References 319 Case example: Lenovo Computers: East meets West 320 9 Innovation and Entrepreneurship 323 9.1 Introduction 324 9.2 Innovation dilemmas 325 9.2.1 Technology push or market pull 326 9.2.2 Product or process innovation 328 9.2.3 Technological or business model innovation 329 9.3 Innovation diffusion 331 9.3.1 The pace of diffusion 332 9.3.2 The diffusion S-curve 333 9.4 Innovators and followers 336 9.4.1 First-mover advantages and disadvantages 336 9.4.2 First or second? 337 9.4.3 The incumbents’ response 338 9.5 Entrepreneurship and relationships 342 9.5.1 Stages of entrepreneurial growth 342 9.5.2 Entrepreneurial relationships 343 9.5.3 Social entrepreneurship 346 ECS8_A01.qxd 22/10/2007 11:37 Page xi DETAILED CONTENTS xii Summary 348 Work assignments 349 Recommended key readings 350 References 350 Case example: Skype: innovators and entrepreneurs 352 10 Strategy Methods and Evaluation 355 10.1 Introduction 356 10.2 Methods of pursuing strategies 356 10.2.1 Organic development 357 10.2.2 Mergers and acquisitions 357 10.2.3 Strategic alliances 360 10.3 Strategy evaluation 365 10.3.1 Suitability 366 10.3.2 Acceptability 368 10.3.3 Feasibility 380 10.3.4 Evaluation criteria: three qualifications 382 Summary 383 Work assignments 385 Recommended key readings 386 References 386 Case example: Tesco conquers the world? 389 Commentary on Part II Strategic Choices 392 Introduction to Part III 397 11 Strategy Development Processes 399 11.1 Introduction 400 11.2 Intended strategy development 401 11.2.1 Strategy development through strategic leadership: the role of vision and command 401 11.2.2 Strategic planning systems 402 11.2.3 Externally imposed strategy 407 11.3 Emergent strategy development 407 11.3.1 Logical incrementalism 408 11.3.2 Resource allocation processes 411 11.3.3 Organisational politics 414 11.3.4 Cultural processes 416 11.4 Patterns of strategy development 417 11.5 Challenges for managing strategy development 419 11.5.1 Managing intended and realised strategy 419 11.5.2 The learning organisation 421 11.5.3 Strategy development in uncertain and complex conditions 422 STRATEGY IN ACTION Part III ECS8_A01.qxd 22/10/2007 11:37 Page xii DETAILED CONTENTS xiii Summary 424 Work assignments 426 Recommended key readings 427 References 427 Case example: Strategy development at Intel 429 12 Organising for Success 433 12.1 Introduction 434 12.2 Structural types 436 12.2.1 The functional structure 436 12.2.2 The multidivisional structure 438 12.2.3 The matrix structure 440 12.2.4 The transnational structure 440 12.2.5 Project-based structures 443 12.2.6 Choosing structures 444 12.3 Processes 446 12.3.1 Direct supervision 447 12.3.2 Planning processes 447 12.3.3 Cultural processes 450 12.3.4 Performance targeting processes 450 12.3.5 Market processes 453 12.4 Relationships 455 12.4.1 Relating internally 455 12.4.2 Relating externally 459 12.4.3 Configuration dilemmas 463 Summary 465 Work assignments 467 Recommended key readings 467 References 468 Case example: Hurricane Katrina: human-made disaster? 470 13 Resourcing Strategies 473 13.1 Introduction 474 13.2 Managing people 475 13.2.1 People as a resource 475 13.2.2 People and behaviour 477 13.2.3 Organising people 478 13.2.4 Implications for managers 480 13.3 Managing information 482 13.3.1 Information and strategic capability 482 13.3.2 Information and changing business models 485 13.3.3 Implications for managers 487 13.4 Managing finance 489 13.4.1 Managing for value 490 13.4.2 Funding strategy development 492 13.4.3 The financial expectations of stakeholders 496 13.5 Managing technology 497 13.5.1 Technology and the competitive situation 497 13.5.2 Technology and strategic capability 500 ECS8_A01.qxd 22/10/2007 11:37 Page xiii DETAILED CONTENTS xiv 13.5.3 Organising technology development 503 13.5.4 Implications to managers 505 13.6 Integrating resources 505 Summary 509 Work assignments 510 Recommended key readings 511 References 511 Case example: Video games 514 14 Managing Strategic Change 517 14.1 Introduction 518 14.2 Diagnosing the change situation 519 14.2.1 Types of strategic change 519 14.2.2 The importance of context 521 14.2.3 Diagnosing the cultural context 524 14.2.4 Forcefield analysis 526 14.3 Change management: styles and roles 527 14.3.1 Roles in managing change 527 14.3.2 Styles of managing change 529 14.4 Levers for managing strategic change 533 14.4.1 Challenging the taken for granted 533 14.4.2 Changing operational processes and routines 534 14.4.3 Symbolic processes 535 14.4.4 Power and political processes 538 14.4.5 Change tactics 539 14.5 Managing strategic change programmes 541 14.5.1 Strategy reconstruction and turnaround strategy 541 14.5.2 Managing revolutionary strategic change 544 14.5.3 Managing evolutionary strategic change 545 14.5.4 Some overall lessons on the management of change programmes 546 Summary 547 Work assignments 549 Recommended key readings 550 References 550 Case example: Managing change at Faslane 553 15 The Practice of Strategy 557 15.1 Introduction 558 15.2 The strategists 559 15.2.1 Top managers and directors 559 15.2.2 Strategic planners 561 15.2.3 Middle managers 563 15.2.4 Strategy consultants 565 15.2.5 Who to include in strategy? 566 15.3 Strategising 569 15.3.1 Strategy analysis 569 15.3.2 Strategic issue selling 570 ECS8_A01.qxd 22/10/2007 11:37 Page xiv
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