Fundamentals of Strategy

230 Pages·2020·5.957 MB·English

by  Richard Whittington, Patrick Regnér, Duncan Angwin, Gerry Johnson, Kevan Scholes

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Understand and apply the essential concepts DITFIF
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and techniques of strategy N
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Fundamentals of Strategy, 5th Edition, by Whittington, Angwin, Regnér, Johnson F
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and Scholes is a concise and easy-to-follow overview of the fundamental issues OF STRATEGY
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and techniques of strategy from the author team of the market-leading Exploring
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Strategy. This book is up-to-date, including coverage of the covid-19 crisis, and
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provides insights and examples from a broad range of international organisations.
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Each chapter is complemented by a wide range of illustrations followed by an end-
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of-chapter case study to consolidate understanding of how the theories apply to real- N FIFTH EDITION
world scenarios. This book will particularly suit students on short strategy courses T
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and courses focused on strategy analysis.
Richard Whittington Patrick Regnér Duncan Angwin
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‘The book is easy to follow and easy to understand. It is well structured and covers
O Gerry Johnson Kevan Scholes
the relevant issues in strategy. A strength of the book is that it has a lot of practical •
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examples, successfully conveying to students that strategy is of practical relevance.’
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Ingo Kleindienst, Aarhus University T
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‘A great introduction to strategy with great illustrations.’
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Dr Noelia-Sarah Reynolds, University of Essex E
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About the authors
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Richard Whittington is Professor of Strategic Management at the Said Business h
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School, University of Oxford. in
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Patrick Regnér is Professor of Strategic Management at Stockholm School of n
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Duncan Angwin is Dean of Nottingham University Business School. n
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Gerry Johnson is Emeritus Professor of Strategic Management at Lancaster University A
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School of Management. g
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Kevan Scholes is Emeritus Professor of Strategic Management and formerly Director in
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Pearson, the world’s learning company. www.pearsoned.co.uk S
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Cover image © Otto Steininger / Ikon Images / Getty Images le
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About Fundamentals
of Strategy
Based on the twelfth edition of the market-leading Exploring Strategy, this book
concentrates on the fundamental issues and techniques of strategy. The book will
particularly suit those on short courses in strategy focused on strategy analysis, or studying
strategy as part of a wider degree, perhaps in the sciences or engineering. This fifth edition
of Fundamentals of Strategy reflects contemporary business issues and is updated to reflect
the covid-19 pandemic. Concepts that are particularly relevant given the recent crisis include
PESTEL and scenario analysis (Chapter 2), dynamic capabilities (Chapter 4), stakeholders and
corporate social responsibility (Chapter 5) and strategic change (Chapter 9).
Readers of Fundamentals of Strategy can be sure that they have the core concepts of
strategy in this book, while knowing that they can easily go deeper into particular topics
by referring to the complete twelfth edition of Exploring Strategy. There they will find
extended treatments of the issues covered here, as well as greater attention to issues of
strategy development and change and the role of the strategist. Exploring Strategy also
offers more cases and deeper exploration of issues through ‘Thinking Differently’ modules,
‘strategy lenses’ and ‘commentaries’. A brief contents of Exploring Strategy can be found
on p. v. Teachers familiar with Exploring Strategy will find that the definitions, concepts
and the content of Fundamentals of Strategy are entirely consistent, making it easy to
teach courses using the different books in parallel.
Fundamentals of Strategy now has nine chapters, with the emphasis on what Exploring
Strategy terms the ‘strategic position’ and ‘strategic choices’ facing organisations.
Under ‘strategic position’, Fundamentals introduces macro-environmental and industry
analysis, resource and capability analysis, stakeholders and culture. Under ‘strategic
choices’, the book addresses business-level strategy, business models, corporate-level
strategy, international strategy, strategic entrepreneurship, innovation and mergers and
acquisitions. The final ninth chapter, ‘Strategy in action’, raises implementation issues such
as organisational structure, managerial systems and strategic change.
We believe that Fundamentals of Strategy brings the proven benefits of Exploring
Strategy to the growing number of students on shorter courses. We hope that you will
enjoy using it too.
A guide to getting the most from all the features and learning materials of
Fundamentals of Strategy follows this preface.
Richard Whittington
Patrick Regnér
Duncan Angwin
Gerry Johnson
Kevan Scholes
April 2020
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Richard Whittington, MA, MBA, PhD is Professor
of Strategic Management at the Saïd Business
School and Millman Fellow at New College,
University of Oxford. He researches Strategy-as-
Practice and is and author of ten books, including
Opening Strategy: Professional Strategists and
Practice Change, 1960 to Today (2019). 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 internationally.
Patrick Regnér, BSc, MSc, PhD is Professor of
Strategic Management at Stockholm School of Economics. He has published in leading journals like
Strategic Management Journal, Journal of International Business, Human Relations, etc. and serves on
several editorial boards including Academy of Management Review, Journal of Management Studies
and Strategic Organization. He has extensive teaching experience on all academic levels at several
international institutions. He does executive teaching and consulting with organisations active
worldwide and is senior advisor at strategy advisory firm Value Formation. His current research focuses
on strategy and institutions.
Duncan Angwin, MA, MPhil, MBA, PhD is the Dean of Nottingham University Business School. He
was previously the Sir Roland Smith Professor of Strategic Management and Head of Department
for Entrepreneurship and Strategy at Lancaster University. He has authored twelve books, over forty
refereed articles in journals such as Academy of Management Learning & Education, British Journal
of Management California Management Review, Journal of World Business, MIT Sloan Management
Review, and Organization Studies and is on the editorial boards of several journals. He teaches strategy
to executives internationally. He has won in excess of €10m in research grants and currently focuses on
international M&A and strategy practices. See http://www.duncanangwin.com
Gerry Johnson, BA, PhD is Emeritus Professor of Strategic Management
at Lancaster University School of Management. He has also taught
at Strathclyde Business School, Cranfield School of Management,
Manchester Business School and Aston University. He is the author of
numerous books and his research has been published in many of the
foremost management research journals in the world. He also works
with senior management teams on issues of strategy development and
strategic change.
Kevan Scholes, MA, PhD, DMS, CIMgt, FRSA is Principal Partner of
Scholes Associates – specialising in strategic management. He is also
Emiritus Professor of Strategic Management and formerly Director of the
Sheffield Business School, UK. He has extensive experience of teaching
strategy to undergraduate and postgraduate students inside and outside
the UK, as well as of management development work in private and public sector organisations. He has
been an advisor on management development to a number of national bodies and is a Companion of
The Chartered Management Institute.
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FUNDAMENTALS
OF STRATEGY
FIFTH EDITION
Richard Whittington
Saïd Business School, University of Oxford
Patrick Regnér
Stockholm School of Economics
Duncan Angwin
Nottingham University Business School
Gerry Johnson
Lancaster University Management School
Kevan Scholes
Sheffield Business School
Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney • Dubai • Singapore • Hong Kong
Tokyo • Seoul • Taipei • New Delhi • Cape Town • São Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan
F01 Fundamentals of Strategy 51377.indd 3 14/10/2020 09:07
PEARSON EDUCATION LIMITED
KAO Two
KAO Park
Harlow CM17 9SR
United Kingdom
Tel: [phone]
Web: www.pearson.com/uk
______________________________
First published 2009 (print)
Second edition published 2012 (print)
Third edition published 2015 (print and electronic)
Fourth edition published 2018 (print and electronic)
Fifth edition published 2021 (print and electronic)
© Pearson Education Limited 2009, 2012 (print)
© Pearson Education Limited 2015, 2018, 2021 (print and electronic)
The rights of Richard Whittington, Patrick Regnér, Duncan Angwin, Gerry Johnson and Kevan Scholes to be identified as
authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
The print publication is protected by copyright. Prior to any prohibited reproduction, storage in a retrieval system,
distribution or transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission
should be obtained from the publisher or, where applicable, a licence permitting restricted copying in the United
Kingdom should be obtained from the Copyright Licensing Agency Ltd, Barnard’s Inn, 86 Fetter Lane, London EC4A 1EN.
The ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed, leased, licensed
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All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not
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Pearson Education is not responsible for the content of third-party internet sites.
ISBN: 978-1-292-35137-7 (print)
978-1-292-35139-1 (PDF)
978-1-292-35138-4 (ePub)
British Library Cataloguing-in-Publication Data
A catalogue record for the print edition is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Whittington, Richard, 1958- author. | Angwin, Duncan, author. |
Regnér, Patrick, author. | Johnson, Gerry, author. | Scholes, Kevan,
author.
Title: Fundamentals of strategy / Richard Whittington, Duncan Angwin,
Patrick Regnér, Gerry Johnson, Kevan Scholes.
Description: Fifth edition. | Hoboken : Pearson, 2021. | Previous edition
entered under: Gerry Johnson. | Includes bibliographical references and
index. | Summary: “Fundamentals of Strategy builds on the established
strengths of Exploring Strategy, proven over twelve best-selling
editions. A range of in-text features and supplementary resources have
been developed to enable you and your students to gain maximum added
value to the teaching and learning of strategy”-- Provided by publisher.
Identifiers: LCCN 2020037969 (print) | LCCN 2020037970 (ebook) | ISBN
9781292351377 (print) | ISBN 9781292351391 (PDF) | ISBN 9781292351384
(ePub)
Subjects: LCSH: Business planning. | Strategic planning. | Business
planning--Case studies. | Strategic planning--Case studies.
Classification: LCC HD30.28 .J6495 2021 (print) | LCC HD30.28 (ebook) |
DDC 658.4/012--dc23
LC record available at https://lccn.loc.gov/2020037969
LC ebook record available at https://lccn.loc.gov/2020037970
10 9 8 7 6 5 4 3 2 1
23 22 21 20
Cover: © Otto Steininger/Ikon Images/Getty Images
Print edition typeset in 9/12.5pt Frutiger Neue LT W1G by SPi Gobal
Print edition printed in Slovakia by Neografia
NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION
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Brief contents
About Fundamentals of Strategy i
Getting the most from Fundamentals of Strategy xi
Fundamentals of Strategy Online xiv
Chapter 1 Introducing strategy 1
Chapter 2 Macro-environment analysis 21
Chapter 3 Industry and sector analysis 41
Chapter 4 Resources and capabilities analysis 64
Chapter 5 Stakeholders and culture 86
Chapter 6 Business strategy and models 108
Chapter 7 Corporate strategy 131
Chapter 8 Entrepreneurship and innovation 154
Chapter 9 Strategy in action 177
Glossary 200
Name index 203
General index 207
Publisher’s acknowledgements 212
v
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Contents
About Fundamentals of Strategy i
Getting the most from Fundamentals of Strategy xi
Fundamentals of Strategy Online xiv
1 Introducing strategy 1
1.1 Introduction 2
1.2 What is strategy? 2
1.2.1 Defining strategy 2
1.2.2 The purpose of strategy: mission, vision,
values and objectives 6
1.2.3 Strategy statements 7
1.2.4 Levels of strategy 9
1.3 The Exploring Strategy Framework 10
1.3.1 Strategic position 11
1.3.2 Strategic choices 12
1.3.3 Strategy in action 13
1.4 Strategy development process 14
Summary 15
Recommended key readings 15
References 15
Case example: The rise of a unicorn: Airbnb 17
2 Macro-environment analysis 21
2.1 Introduction 22
2.2 PESTEL analysis 23
2.2.1 Politics 23
2.2.2 Economics 25
2.2.3 Social 26
2.2.4 Technology 27
2.2.5 Ecological 29
2.2.6 Legal 30
2.3 Forecasting 32
2.3.1 Forecast approaches 32
2.3.2 Directions of change 33
2.4 Scenario analysis 33
Summary 36
Recommended key readings 36
References 37
Case example: Alibaba: the Yangtze River Crocodile 38
vii
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Contents
3 Industry and sector analysis 41
3.1 Introduction 42
3.2 Industry analysis 42
3.2.1 Defining the industry 44
3.2.2 The competitive forces 44
3.2.3 Complementors and network effects 49
3.2.4 Implications of the competitive five forces 49
3.3 Industry dynamics 53
3.3.1 The industry life cycle 53
3.3.2 Comparative industry structure analyses 54
3.4 Competitors and markets 55
3.4.1 Strategic groups 56
3.4.2 Market segments 57
3.5 Opportunities and threats 58
Summary 59
Recommended key readings 59
References 59
Case example: Game-changing forces and the global advertising industry 60
4 Resources and capabilities analysis 64
4.1 Introduction 65
4.2 Foundations of resources and capabilities 65
4.2.1 Resources and capabilities 66
4.2.2 Threshold and distinctive resources and capabilities 66
4.3 D istinctive resources and capabilities as a basis of competitive
advantage 68
4.3.1 V – value of resources and capabilities 68
4.3.2 R – rarity 69
4.3.3 I – inimitability 70
4.3.4 O – organisational support 73
4.4 Analysing resources and capabilities 73
4.4.1 VRIO analysis 73
4.4.2 The value chain 74
4.4.3 SWOT 76
4.5 Dynamic capabalities 80
Summary 81
Recommended key readings 81
References 81
Case example: Rocket Internet – will the copycat be imitated? 83
5 Stakeholders and culture 86
5.1 Introduction 87
5.2 Stakeholders 87
5.2.1 Stakeholder groups 88
5.2.2 Stakeholder mapping 89
5.2.3 Owners 91
5.3 Corporate governance 93
5.4 Corporate social responsibility 96
viii
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Contents
5.5 Culture and strategy 98
5.5.1 Organisational culture 98
5.5.2 Analysing culture: the cultural web 99
Summary 102
Recommended key reading 103
References 103
Case example: Uber and the ubermensch 105
6 Business strategy and models 108
6.1 Introduction 109
6.2 Generic competitive strategies 110
6.2.1 Cost-leadership strategy 111
6.2.2 Differentiation strategy 114
6.2.3 Focus strategy 115
6.2.4 Hybrid strategy 117
6.3 Game theory 118
6.4 Business models 120
6.4.1 Value creation, configuration and capture 120
6.4.2 Business model patterns 123
Summary 124
Recommended key readings 124
References 125
Case example: The IKEA approach 126
7 Corporate strategy 131
7.1 Introduction 132
7.2 Strategy directions 133
7.2.1 Market penetration 134
7.2.2 Product and service development 134
7.2.3 Market development 136
7.2.4 Unrelated diversification 136
7.3 Diversification drivers 138
7.4 Vertical integration 139
7.4.1 Forward and backward integration 139
7.4.2 To integrate or to outsource? 140
7.5 Value creation and the corporate parent 141
7.5.1 Value-adding activities 142
7.6 The BCG (or growth/share) matrix 144
7.7 International diversification strategy 146
7.8 Growth methods: organic, acquisitions and alliances 148
Summary 148
Recommended key readings 149
References 149
Case example: Grand strategies in vision 150
8 Entrepreneurship and innovation 154
8.1 Introduction 155
ix
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