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16933_00_fm3_pi-xxvii.qxd 1/17/06 5:44 PM Page i Strategic 7 Management COMPETITIVENESS AND GLOBALIZATION Michael A. Hitt Texas A&M University R. Duane Ireland Texas A&M University Robert E. Hoskisson Arizona State University Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. T T T T • • I I R R E E L L A A N N D D • • H H O O S S K K I I S S S S O Edition O N N • • H H I I Strategic Management: Competitiveness and Globalization (Concepts and Cases) Seventh Edition Michael A. Hitt, R. Duane Ireland, and Robert E. Hoskisson VP/Editorial Director: Sr. Production Project Manager: Production House: Jack W. Calhoun Cliff Kallemeyn Lachina Publishing Services VP/Editor-in-Chief: Technology Project Editor: Printer: Melissa Acuña Kristen Meere Quebecor World Versailles, KY Executive Editor: Art Director: John Szilagyi Tippy McIntosh Sr. Developmental Editor: Sr. Manufacturing Coordinator: Mardell Glinski Schultz Doug Wilke Sr. Marketing Manager: Kimberly Kanakes COPYRIGHT © 2007 ALL RIGHTS RESERVED. Library of Congress Control Number: Thomson South-Western, a part of The No part of this work covered by the 2005911294 Thomson Corporation. Thomson, the Star copyright hereon may be reproduced or used logo, and South-Western are trademarks in any form or by any means—graphic, used herein under license. electronic, or mechanical, including For more information about our photocopying, recording, taping, Web products, contact us at: Printed in the United States of America distribution or information storage and 1 2 3 4 5 09 08 07 06 retrieval systems, or in any other manner— Thomson Learning Academic Resource without the written permission of the Center ISBN 0-324-31694-1 (Student Edition) publisher. 1-800-423-0563 ISBN 0-324-36432-6 (Instructor Edition) For permission to use material from this text or product, submit a request online at ISBN 0-324-40536-7 (Concepts) http://www.thomsonrights.com. Thomson Higher Education 5191 Natorp Boulevard Mason, OH 45040 USA R e l e va n t . A c c u r a t e. Co m p l e t e. Strategize your students’ success with this book! In today’s competitive business world, what consistently separates successful firms from those that fail is making the right strategic decisions and actions. Prepare your students for success with Strategic Management: Competitiveness and Globalization, the most accessible and practical presentation of strategic management you’ll find. Up-to-date with the latest academic research and trends, this book uses hundreds of real-world examples throughout the text to highlight key concepts and put them into context. An author team that’s at the head of the class This well-respected author team consists of acknowledged experts in strategic management. Hitt, Ireland, and Hoskisson are active scholars and leaders in the strategy field, and they build a conceptual foundation based on proven strategic management concepts and the latest in cutting-edge research and practice. Their unique approach blends the classic industrial organizational model with the resource-based view of the firm to explain the strategic management process and its application in all types of organizations. Proven cases that teach and engage A wealth of compelling case studies allows students to hone their own strategic management skills as they examine dilemmas facing actual firms and learn what it takes to build and sustain a competitive advantage. And the case notes for the text—prepared by leading experts in strategic management—are the most complete, accurate, and reliable on the market. Also available in these split versions: Strategic Management: Competitiveness and Globalization, Concepts Seventh Edition — ISBN: 0-324-40536-7 Strategic Management: Competitiveness and Globalization, Cases Seventh Edition — ISBN: 0-324-40537-5 RSEULMEVMAANRYT The strategic management process comes to life — from vision to implementation. Strategic Focus Three new or updated Strategic Focus segments in every chapter showcase familiar organizations—many of which compete internationally—to emphasize applications of the chapter’s content and to increase your students’ ability to achieve higher performance. Also included is additional content discussing leaders who have both succeeded or failed based on their ability to implement the right business strategy. New Cases This application-oriented text includes 30 all-new cases, drawing from a variety of topics, organizational settings, and industries. A correlation guide matches text With this edition, chapters with applicable cases. These timely and the authors examine intriguing cases feature a mix of well-known more than 600 companies to describe the use of organizations headquartered or based in the strategic management United States and a number of other countries. tools, techniques, With each case, students have an opportunity to and concepts. analyze, synthesize, and apply the parts of the strategic management process they’ve learned. Cases reflect a variety of management situations to offer a well-rounded learning experience. iv The case notes for the Seventh Edition are the most complete, accurate, and reliable on the market – and they have been compiled by six experts in the field of strategic management. Additionally, financial analysis accompanies some of case notes with tutorials to guide students. PREFACE ACCURATE Insightful research and a strong application orientation help students understand what it takes to succeed in today’s—and tomorrow’s—business world. Current Research with an Emphasis on Key Trends Thoroughly updated, this edition contains the most current research and findings, including references to 2004 and 2005 publications. Plus, this edition expands the text’s discussion of key trends—such as ethics & social responsibility, global strategy, cultural diversity—and the impact these trends are having on the practice of strategic management. Experiential Exercises In response to positive reviewer feedback, this edition includes updated Experiential Exercises. Each chapter includes carefully chosen exercises, many of which are new, providing ample opportunity for hands-on learning and practice with critical concepts and tools. EXPERIENTIAL COMPLETE EXERCISES From the authors’ engaging narrative to the text’s well-crafted pedagogy, Strategic Management sets the standard for accessibility and readability. Chapter Opening Vignettes v Each chapter opens with a short vignette featuring an actual firm to introduce the key points of the chapter and illustrate their relevance to modern organizations. These vignettes, as will the entire text, feature the authors’ live and concise writing style, which holds readers’ attention and increases their interest in strategic management. A Focus on Learning The text’s student-focused approach is extended into its well-crafted pedagogy, which helps students absorb and review what they’re learning. These features include knowledge objectives, a running glossary, chapter summaries, and review questions. PREFACE COMPLETE We make it easy to craft a winning strategy for teaching and learning. These exclusive resources will save you time and will help your students achieve success in your course and in their business endeavors. INTERNET RESOURCES Strategic Management: Competitiveness and Globalization Product Support Web Site http://hitt.swlearning.com The companion web site for Strategic Management: Competitiveness and Globalization includes complete student learning and teaching resources as well as Internet activities and links to strategic management resources. From a password-protected area, instructors can easily download the Instructor’s Manual, Test Bank, PowerPoint® slides, Integrated Video Guide, Case Notes, Test Bank in Word, and ExamView® Computerized Testing. For students, The Strategy Suite brings together complete web- based support including links to online academic journals, pro- fessional societies, and other business resources. A Case Analysis Method explains the case approach, while Your Career in Management offers a quick opportunity for students to explore their personal futures in management. Case Financial Analysis: Using BCRC, students are guided through performing a financial analysis of selected cases complete with specific directions to obtain the financial data. The Business & Company Resource Center (BCRC) Put a complete business library at your students’ fingertips! This premier online business research tool allows you and your students to search thousands of periodicals, journals, references, financial information, vi industry reports, and more. This powerful research tool saves times for students—whether they are completing a case analysis, preparing for a presentation, or writing a reaction paper. You can use the BCRC to quickly and easily assign readings or research projects. Visit http://bcrc.swlearning.com to learn more about packag- ing this powerful electronic tool with Strategic Manage- ment: Competitiveness and Globalization. PREFACE INSTRUCTOR RESOURCES Instructor Resource’s CD-ROM with PowerPoint® Lecture Slides 0-324-36044-4 Includes Case Notes, an Instructor’s Resource Manual and Video, Test Bank, Exam- View® Computerized Testing, PowerPoint® lecture slides, and financial analysis from the Student CD-ROM. Instructor’s Resource Manual with Video Guide and Transparency Masters 0-324-36043-6 This manual is organized around each chapter’s knowledge objectives and includes ideas about how to approach each chapter and how to reinforce essential principles with extra examples. The support product includes lecture outlines, detailed answers to end-of-chapter review questions, instructions for using each chapter’s experiential exercise, guides to all available videos, and additional assignments Instructor Case Notes 0-324-36045-2 Move beyond the typical prepared case notes with this innovative tool! These notes are team-prepared by six leading experts in the field of strategic management to ensure usefulness and thorough coverage of case content. All case notes follow a consistent framework for case analysis. Complete financial analysis for selected cases is supported by Excel spreadsheets on the Product Support Web Site. ExamView® Computerized Testing 0-324-36038-X Create, deliver, and customize tests and study guides (both print and online) in min- utes with this easy-to-use assessment and tutorial system. ExamView® offers both a Quick Test Wizard and an Online Test Wizard that guide you step-by-step through the process of creating tests. You can build tests of up to 250 questions using up to 12 question types. With the complete word processing capabilities of ExamView, you can enter an unlimited number of new questions or edit existing questions from the test bank. ABC Videos DVD: 0-324-36271-4 / VHS: 0-324-36270-6 ABC videos feature short, high-interest clips about current news events as well as historic raw footage going back 40 years. Perfect for discussion starters or to enrich your lectures. Ask your Thomson South-Western representative for a complete listing. vii Transparency Acetates 0-324-36040-1 Key figures from the main text have been re-created as colorful and attractive overhead transparencies for classroom use. PREFACE Brief Part 1 Strategic Management Inputs 1 CHAPTER 1 Strategic Management and Strategic Competitiveness 2 Contents CHAPTER 2 The External Environment: Opportunities,Threats, Industry Competition, and Competitor Analysis 34 CHAPTER 3 The Internal Environment: Resources, Capabilities, and Core Competencies 72 Part 2 Strategic Actions: Strategy Formulation 102 CHAPTER 4 Business-Level Strategy 104 CHAPTER 5 Competitive Rivalry and Competitive Dynamics 136 CHAPTER 6 Corporate-Level Strategy 166 CHAPTER 7 Acquisition and Restructuring Strategies 196 CHAPTER 8 International Strategy 228 CHAPTER 9 Cooperative Strategy 266 Part 3 Strategic Actions: Strategy Implementation 298 CHAPTER 10 Corporate Governance 300 CHAPTER 11 Organizational Structure and Controls 334 CHAPTER 12 Strategic Leadership 372 CHAPTER 13 Strategic Entrepreneurship 404 Part 4 Cases NAME INDEX I-1 COMPANY INDEX I-12 vviiiiii SUBJECT INDEX I-16 CBroinefteCnotsntents Preface xxii Contents Part 1 Strategic Management Inputs 1 Strategic Management and Strategic Competitiveness 2 Opening Case: General Motors:How Bright Is the Future? 3 The 21st-Century Competitive Landscape 6 The Global Economy 7 The March of Globalization 8 Technology and Technological Changes 10 Strategic Focus: Amazon.com: Using Technology to Create Change 12 Strategic Focus: Organizational Change: Be Ready, Because It Can’t Be Avoided! 14 The I/O Model of Above-Average Returns 15 The Resource-Based Model of Above-Average Returns 17 Vision and Mission 19 Vision 19 Mission 20 Stakeholders 21 Classifications of Stakeholders 21 Strategic Leaders 24 The Work of Effective Strategic Leaders 25 Predicting Outcomes of Strategic Decisions: Profit Pools 25 The Strategic Management Process 26 Summary 28 Review Questions 29 Experiential Exercises 29 Notes 31 The External Environment: Opportunities, Threats, ix Industry Competition, and Competitor Analysis 34 Opening Case: General and Competitive Environmental Influences on U.S.Airlines 35 The General, Industry,and Competitor Environments 37 Contents