Formulation Implementation, and Control of Competitive Strategy [With Access Code for Business Week Subscription]

512 Pages·2008·5.103 MB·English

by  II Pearce, John A., Jr. Robinson, Richard B.

Formulation,
Implementation,
and Control of
Competitive
Strategy

Formulation,
Implementation,
and Control of
Competitive
Strategy
Eleventh Edition
John A . Pearce II
Villanova School of Business
Villanova University
Richard B. Robinson , Jr.
Moore School of Business
University of South Carolina
Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis
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FORMULATION, IMPLEMENTATION, AND CONTROL OF COMPETITIVE STRATEGY
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This book is printed on acid-free paper.

1 2 3 4 5 6 7 8 9 0 DOW/DOW 0 9 8
ISBN 978-0-07-336812-2
MHID 0-07-336812-1
Editorial director: B rent Gordon
Publisher: Paul Ducham
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Library of Congress Cataloging-in-Publication Data
Pearce, John A.
Formulation, implementation, and control of competitive strategy / John A. Pearce II,
Richard B. Robinson, Jr.—Eleventh ed.
p. cm.
Includes index.
ISBN-13: 978-0-07-336812-2 (alk. paper)
ISBN-10: 0-07-336812-1 (alk. paper)
1. Strategic planning. 2. Strategic planning—Case studies. I. Robinson, Richard B.
(Richard Braden), 1947–II. Title.
HD30.28.P3385 2009
658.4’012—dc22
2007052592
www.mhhe.com
To Susan McCartney Pearce, David Donham Pearce,
Mark McCartney Pearce, Katherine Elizabeth
Robinson, Corporal John Braden Robinson, and
Chance Robinson—for the love, joy, and vitality that
they give to our lives.

About the Authors
John A. Pearce II
Villanova University
John A. Pearce II , Ph.D., holds the Villanova School of Business Endowed Chair in
Strategic Management and Entrepreneurship at Villanova University. In 2004, he was the
Distinguished Visiting Professor at ITAM in Mexico City. Previously, Professor Pearce
was the Eakin Endowed Chair in Strategic Management at George Mason University and a
State of Virginia Eminent Scholar. He received the 1994 Fulbright U.S. Professional Award,
which he served at INTAN in Malaysia. Dr. Pearce has taught at Penn State University, West
Virginia University, the University of Malta as the Fulbright Senior Professor in Interna-
tional Management, and at the University of South Carolina where he was Director of Ph.D.
Programs in Strategic Management. He received a Ph.D. degree in Business Administration
and Strategic Management from the Pennsylvania State University.
P rofessor Pearce is coauthor of 36 books and has authored more than 250 articles and
refereed professional papers. The articles have appeared in journals that include A cademy
of Management Executive, Academy of Management Journal, Academy of Management
Review, Business Horizons, California Management Review, Journal of Applied Psychol-
ogy, Journal of Business Venturing, Long-Range Planning, Organizational Dynamics, Sloan
Management Review, and S trategic Management Journal. Several of these publications have
resulted from Professor Pearce’s work as a principal on research projects funded for more
than $2 million. He is a widely recognized expert in the field of strategic management, with
special accomplishments in the areas of strategic planning and management, including strat-
egy formulation, implementation, and control, mission statement development, environmen-
tal assessment, industry analysis, and tools for strategy evaluation and selection.
Professor Pearce is the recipient of several awards in recognition of his accomplishments
in teaching, research, scholarship, and professional service, including three Outstanding
Paper Awards from the Academy of Management and the 2003 Villanova University Out-
standing Faculty Research Award. A frequent leader of executive development programs
and an active consultant to business and industry, Dr. Pearce’s client list includes domestic
and multinational firms engaged in manufacturing and service industries.
Richard B. Robinson, Jr.
University of South Carolina
Richard B. Robinson, Jr., Ph.D., is a Moore Fellow at the Moore School of Business, Uni-
versity of South Carolina. He also serves as Director of the Faber Entrepreneurship Center at
USC and Assistant Director of the Center for Manufacturing and Technology in USC’s College
of Engineering and Computing. Dr. Robinson received his Ph.D. in Business Administration
from the University of Georgia. He graduated from Georgia Tech in Industrial Management.
Professor Robinson has authored or coauthored numerous books, articles, professional
papers, and case studies addressing strategic management and entrepreneurship issues that stu-
dents and managers use worldwide. His research has been published in major journals including
the A cademy of Management Journal, Academy of Management Review, Strategic Management
Journal, Academy of Entrepreneurship Journal, and the Journal of Business Venturing.
Dr. Robinson has previously held executive positions with companies in the pulp and
paper, hazardous waste, building products, lodging, and restaurant industries. He cur-
rently serves as a director or adviser to entrepreneurial companies that are global leaders
in niche markets in the log home, building products, animation, and visualization software
industries. Dr. Robinson also advises more than 250 students each year that undertake field
consulting projects and internships with entrepreneurial companies worldwide.
vii

Preface
This eleventh edition of Formulation, Implementation, and Control of Competitive
Strategy is a comprehensive revision designed to accommodate the needs of strategy
students worldwide in our fast changing twenty-first century. These are exciting times,
and they are reflected on the many new developments in this book and the accompanying
McGraw-Hill supplements. This preface describes what we have done to make the eleventh
edition uniquely effective in preparing students for strategic decisions in tomorrow’s fast-
paced global business arena. They include:
• A chapter dedicated to corporate social responsibility and business ethics
• A chapter dedicated to structuring effective 21st century organizations
• E xtensive coverage of globalization as a central theme integrated and illustrated through-
out this book and in a separate, updated chapter of the global business environment
• A major section on leadership including numerous examples and illustrations that help
provide practical guidelines young, emerging leaders can use
• A NEW chapter on innovation and entre-
Top Strategist Exhibit
preneurship
Jean-Pierre Garnier, CEO of GlaxoSmithKline 3.12
• “Top Strategist” boxes highlighting the
When Jean-Pierre to customers in the developing world. In 2005, it
Garnier took over as set a new paradigm in the vaccine industry. It chose world’s best new leaders as strategists
CEO of GlaxoSmith- Mexico over other, wealthier nations as the launch
Kcolimnep aniny’ s 2re0p0u0,t attiohne pnaadl r footra vRiorutas.r i“xW, ae n weawn vteadcc tinoe g aegt atihnes tv gaaccsitnroei ntote tshtie- • 100 NEW BusinessWeek Strategy in Action
on corporate social children who needed it most,” Garnier explains.
responsibility was at Creating medicines for the Third World while still boxes
its nadir. As part of a posting a profit required fancy financial footwork.
coalition of 39 phar- GSK has formed 14 different partnerships with the
maceutical compa- World Health Organization and other nongovern-
nies, the drugmaker mental bodies, and with philanthropies such as the
was suing N elson Bill & Melinda Gates Foundation. A cSotllrabaotreatgiony w iinth Action Exhibit 3.7
Mandela’s South the Gates Foundation led to a vaccine that provides a
African government minimum of 18 months of protectioHn ealgpaiinnsgt mBiagla rBiar.other in China Go High Tech
for voiding patents Garnier says efforts such as these give the com-
on prescription drugs. Mandela’s top priority was giv- pany several advantages over its rivals. Top scientists
ing desperately sick patients access to HIV treatments, are drawn to GSK because they waCinscto t, hOeriarc lree, saenadr coht her U.S. companies are supplying massacre of hundreds of pro-democracy demonstrators
and GSK—the world’s largest supplier—was standing to make a difference. Doing gCohoinda,’ s paonldic e wbeitihn sgo ftware and gear that can be used in Tiananmen Square in 1989. The Tiananmen sanctions
in the way. “It was a public relations disaster,” Garnier admired for it, also boosts genertaol kmeeop rtaalbes oant ctrihmei nals and dissidents. prohibited the export “of any crime control or detec-
concedes. company, he says. “This creates a moGreoo agllieg, nYeadho aon!,d a nd Microsoft endured a wave of tion instruments or equipment” to China. “We wanted
The experience convinced Garnier that GSK engaged workforce, which helps uPCsuh obinluiects ped eiscraefpnopsrormorsv haoilp ui nro 2f 0t0h6e oirv eWr etbh eisri tceos.m Bpulita nacneo wthitehr tinog u unpd,e rimmpinreis othnein egf,f eacntdiv etonretsusr ionfg t hpeo lpitoicliacle d iins sridoeunntds-,
should lead the crusade to improve access to medi- competitors.” striking form of tech commerce with China is taking not only those involved in the Tiananmen Square
cine. In 2001, GSK became the first major drug- place below the radar of the U.S. public: major movement, but for year to come,” explains Represent-
mcitosau vknaetcrrc iietnsoe ws,s oeinrlll d vwiotsliu dmeA.Ie DI ntSe frammctes,,d GaictSi Knne osset -lflasot r 9-0cpo rposetf ritci nepn rt1ic 0oe0fs GJSaoenututriacnregy: A2E9xIDc, eS2r 0Dp0tr7eu,dg p sf. r t6oo0m M. Coarpe eSlilc, kK Peerroyp. l“eAptGr,o”mylal OiBoecxrrfeuoia csSPwciamulnenibte i htClsmih scrtW oaKhSnpleeei.un c elhfuaekaart:,ci e stt syust,o riwelndrhf sosi coarhmfr teoaw tvraiueorsrenhs e ittneoesg c t hbhtnooeot hCslou hcgpirnypim.elysie nC aMhl iinannais’ds- aDsTttheaievsgpe eUi ,tT e.SoC .mht hSi netLaa at inmest tpoiDlrls eo hp(vDaae–srm tCmeaAn e)dt,n itwso mfhs aaoiytl ssh hietumhlmpaaetag dnet hdoreringa Chfttot hsmt ehr meew culoonarrwidlsdt..
ideological investigations. The ministry uses the soft- government is holding at least 260,000 people in
ware to manage digital identity cards that are replacing ideological “reeducation” camps.
the paper ID that Chinese citizens must carry. Mean- The upshot is that “manufacturers of handcuffs aren’t
while, regional Chinese police departments are modern- allowed to sell their products to China’s police, but
izing their computer networks with routers and switches Cisco and other companies are selling Chinese authori-
purchased from Cisco Systems Inc. And Motorola Inc. has ties much more useful technology,” Harry Wu, a former
sold the Chinese authorities handheld devices that will Chinese political prisoner living in the United States,
allow street cops to tap into the sorts of sophisticated told a House subcommittee on human rights in February
data repositories that EMC Corp. markets to the Ministry 2006. His testimony was eclipsed by the panel’s heavily
of Public Security. “It’s a booming market,” says Simon covered excoriation of Google, Yahoo!, and Microsoft
Zhou, the top executive in Beijing for EMC, which is for their agreement to block parts of their Chinese Web
based in Hopkinton, Mass. “We can expect big r evenue sites as a condition of operating in the country.
from public security” agencies in china.
enfTohrcee rssc rsaememblse, ftoor ssetallr tetersc,h ntoo lobge ya tt oo dCdhsi nweisteh ltahwe “SHouelrpcien:g E xBciger Bprtoetdh ferro Gmo B Hruigche TEeinchh,o”r nB uasninde BsseWn eEelgki,n,
intent of an American export law enacted after the September 18, 2006, p. 46.
• NEW coverage of the pros and cons of outsourcing and the reality of what is now a truly
global economy
• 14 NEW BusinessWeek end of chapter cases providing practical, interesting, contempo-
rary applications of chapter topics
• NEW coverage and illustration of franchising as a major global economic trend
• NEW cases and illustration modules about companies founded and run by women and
minorities
• N EW chapter material, cases, and illustrations examining the accelerating pace of global
and technological change and its impact on companies, markets, and whole industries
ix
x Preface
• NEW coverage of specific companies that have responded to the need for improved
business ethics in a manner that provides solid illustration and practical guidance to
future business leaders using this book today
• NEW illustrations of renewal, growth, and enhanced profitability among companies in
established, mature industries including airlines, pet care, automotive, food, retail, and
consumer products
• Comprehensive supplemental material and industry-leading e-book support
• Comprehensive Web site for both the student and the instructor
• A proven model-based treatment of strategic management that allows for self-
directed study, easy-to-understand presentation—in a package that represents the most
cost-effective book on the market today. Professors and students receive all the advan-
tages of the most expensive books for the lowest price of any major text
• A proven author team recognized with more than 20 research awards from various
professional organizations including five “Best Paper” awards from the prestigious
Academy of Management
The eleventh edition of F ormulation, Implementation, and Control of Competitive
Strategy is divided into 14 chapters. They provide a thorough, state-of-the-art treatment of
the critical business skills needed to plan and manage strategic activities. While the text
continues a solid academic connection, students will find the text material to be practical,
skills oriented, and relevant to their jobs and entrepreneurial aspirations.
W e were thrilled to have access to the world’s best business publication, B usinessWeek , to
create examples, illustration modules, and a wide variety of chapter-ending cases. The result is
an extensively enhanced text and chapter discussion cases benefiting from hundreds of contem-
porary examples and illustrations provided by B usinessWeek writers worldwide. You will see
BusinessWeek’ s impact on our discussion case feature, our Strategy in Action modules, and our
Web site. Of course, we are also pleased with several hundred examples blended into the text
material, which came from recent issues of BusinessWeek or www.businessweek.com .
AN OVERVIEW OF OUR TEXT MATERIAL
The eleventh edition uses a model of the strategic management process as the basis for the
organization of the text material. Adopters have identified this model as a key distinctive
competence for our text because it offers a logical flow, distinct elements, and an easy-to-
understand guide to strategic management. The model reflects strategic analysis at different
organizational levels as well as the importance of innovation in the strategic management
process. The model and parallel chapter organization provides a student-friendly approach
to the study of strategic management.
T he first chapter provides an overview of the strategic management process and explains
what students will find as they use this book. The remaining 13 chapters cover each part
of the strategic management process and techniques that aid strategic analysis, decision
making, implementation, control and renewal. The literature and research in the strategic
management area have developed at a rapid pace in recent years in both the academic and
business press. The eleventh edition includes several upgrades designed to incorporate
major developments from both these sources. While we include cutting-edge concepts, we
emphasize straightforward, logical, and simple presentation so that students can grasp these
new ideas without additional reading. The following are a few of the elements of the text
that deserve particular note:
Corporate Social Responsibility and Business Ethics
B ecause of the public’s heightened sensitivity to the behavior of strategic managers,
we developed a new chapter for the eleventh edition that focuses on Corporate Social