Description

Strategy Planning: Critical Thinking Assignment -6
Module 12: Implementing Strategy
Critical Thinking: Strategic Recommendations
Managing the multi-business corporation to meet high performance
expectations is problematic. Research a company in KSA that manages multiple
businesses:
Questions:
1. Explain the corporate structure and provide a review of its business
portfolio.
2. What advice would you provide on the use of portfolio matrices and which
portfolio matrix would you recommend: the GE McKinsey, BCG, or
Ashridge matrix? Why?
3. Apply your recommended portfolio matrix and provide a portfolio
analysis.
4. How does diversification create value through the linkages between
businesses?
–Your well-written paper should meet the following requirements:
•
Be 7 pages in length, which does not include the required title and reference
pages, which are never a part of the content minimum requirements.
•
Use Saudi Electronic University academic writing standards and APA style
guidelines.
•
Support your submission with course material concepts, principles, and
theories from the textbook and at least two scholarly, peer-reviewed journal
articles unless the assignment calls for more.
•
It is strongly encouraged that you submit all assignments into the Turnitin
Originality Check before submitting it to your instructor for grading. If you
are unsure how to submit an assignment into the Originality Check tool,
review the Turnitin Originality Check—Student Guide for step-by-step
instructions.
•
Review the grading rubric to see how you will be graded for this assignment.
==
•
The assignment must include an introduction, and in the introduction should include:
a) Includes a purpose statement
b) Mentions the upcoming sections
•
•
The assignment must include at least 4 references in addition to course book.
Course book must be used for this assignment.
The Course book is
Grant, R. M. (2019). Contemporary strategy analysis (10th ed.) Hoboken, NJ: John Wiley &
Sons. ISBN: 9781119495727
•
Please find out the attachments
•
Make sure to cite your statements and in-text citation using APA
•
Please Use APA 7th edition,
•
Please attach copy of all references you use
CONTEMPORARY STRATEGY ANALYSIS
tenth edition
Robert M. Grant
John Wiley & Sons Ltd., 2019
Chapter 13
Implementing Corporate
Strategy: Managing the
Multibusiness Corporation
1
Implementing Corporate Strategy:
Managing the Multibusiness Corporation
OUTLINE
• The Role of Corporate Management
• Managing the Corporate Portfolio
• Managing Linkages across Businesses
• Managing Individual Businesses
• Managing Change in the Multibusiness Corporation
• Governance of Multibusiness Corporations
Copyright © 2019 John Wiley & Sons, Inc.
THE ROLE OF CORPORATE MANAGEMENT
How does Corporate Management add
Value to its Individual Businesses?
• Managing the corporate portfolio
—including acquisitions, divestments, and
resource allocation
• Managing linkages among businesses
• Managing each individual business
• Managing change
Copyright © 2019 John Wiley & Sons, Inc.
Berkshire Hathaway’s portfolio of businesses
Insurance
Energy
General Re
GEICO
BH Primary
BHRG
Mid American Energy
Northern Powergrid
PacificCorp
NV Energy
Retail
Nebraska Furniture Mart
RC Willey Home Furnishings
Borsheims
Pampered Chef
Pampered
Chef
Dairy Queen
BERKSHIRE
HATHAWAY
INC.
See’s Candy
Media and
Services
Home Services of America
Store Capital
BH Media
Business Wire
NetJets
© 2019 Robert M. Grant,
www.contemporarystrategyanalysis.com
Manufacturing
Lubrizoil
CTB International
Fruit of the Loom
Google
Books
Clayton Homes
IMC
Main Portfolio
Investments
• Heinz Kraft
• Apple
• Coca-Cola
• Wells Fargo
• American Express
• Phillips 66
• Goldman Sachs
• Delta Airlines
MANAGING THE CORPORATE PORTFOLIO
The Uses of Portfolio Planning Models
in Strategy Formulation
• Allocating resources—indicating both the investment
requirements of different businesses and their likely returns
• Formulating business-unit strategy—offering generic strategy
recommendations (e.g.: “build”, “hold”, or “harvest”)
• Setting performance targets—indicating likely performance
outcomes in terms of cash flow and ROI
• Portfolio balance—guiding business portfolio changes in
order to achieve corporate goals such as a balanced cash
flow by combining mature and growing businesses.
Copyright © 2019 John Wiley & Sons, Inc.
MANAGING THE CORPORATE PORTFOLIO
Industry Attractiveness
The GE/McKinsey Matrix
High
Medium
Low
Low
Medium
High
Business Unit Position
Industry Attractiveness Criteria
– Market size
– Market growth
– Industry profitability
– Inflation recovery
– Overseas sales ratio
Copyright © 2019 John Wiley & Sons, Inc.
Business Unit Position
– Market share (domestic,
global, and relative)
– Competitive position
– Relative profitability
MANAGING THE CORPORATE PORTFOLIO
HIGH
Earnings:
low, unstable, growing
Earnings:
high stable, growing
Cash flow: negative
Cash flow:
neutral
Strategy:
Strategy:
invest for
growth
analyze the
potential to
develop the
business
into a “star”
Earnings:
LOW
Annual real rate of market growth (%)
The BCG Growth-Share Matrix
?
low, unstable
Earnings:
high stable
Cash flow:
neutral or negative
Cash flow:
high stable
Strategy:
divest
Strategy:
milk
HIGH
LOW
Relative market share
Copyright © 2019 John Wiley & Sons, Inc.
MANAGING THE CORPORATE PORTFOLIO
Ashridge Portfolio Display:
The Potential for Patenting Advantage
LOW
HEARTLAND
BALLAST
Potential for value
destruction from
misfit between
needs of the
business and
patent’s corporate
management style
–typical legacy
business: good
fit high, but limited
potential to add
value
EDGE OF
HEARTLAND
–businesses with
high potential
for adding value
— less value adding
potential; more risk is
of value destruction
ALIEN TERRITORY
VALUE TRAP
–exit: no potential for
value creation
–lack of management fit
limits potential to add
value
HIGH
LOW
HIGH
Potential for parent to add value to the business
© 2019 Robert M. Grant,www.contemporarystrategyanalysis.com
MANAGING THE CORPORATE PORTFOLIO
Do Portfolio Planning Models Help or Hinder
Corporate Strategy Formulation?
ADVANTAGES
• Simplicity: Quick and easy to
prepare
• Big picture: Permits one page
representation of the corporate
portfolio & strategic positioning of
each business
• Analytically versatile: Applicable
to businesses, products, countries,
distribution channels.
• Can be augmented: A useful
point of departure for more
sophisticated analysis
Copyright © 2019 John Wiley & Sons, Inc.
DISADVANTAGES
• Simplicity: Oversimplifies the
factors determining industry
attractiveness and competitive
advantage
• Ambiguity: The positioning
of a business depends
critically upon how a market is
defined
• Ignores synergy: the analysis
takes no account of any
interdependencies between
businesses
MANAGING LINKAGES ACROSS BUSINESSES
Sources of Synergy within
the Multibusiness Corporation
▪ Shared corporate services: Centralizing services such as IT, HR,
purchasing, research, facilities management exploits cost economies
and develops capabilities
▪ Transferring skills between businesses: E.g. LVMH transfers brand
management capabilities; P&G transfers technologies and product
development skills across product sectors and across countries
▪ Sharing resources and activities: E.g. Virgin Group shares its brand
across its businesses; Samsung Electronics’ globally dispersed
design centers serve all its businesses
BUT, Exploiting synergies is not costless: Transferring skills and
sharing resources and activities tends to involve the corporate HQ in
managing relationships between the businesses and complicates the
appraisal of business performance
Copyright © 2019 John Wiley & Sons, Inc.
MANAGING INDIVIDUAL BUSINESSES
The McKinsey Restructuring Pentagon
Current
market
value
1
Current perceptions
gap
Company
value as is 2
Strategic and
operating
opportunities
RESTRUCTURING
FRAMEWORK
Potential value
with internal
improvements
Copyright © 2019 John Wiley & Sons, Inc.
Maximum raider
opportunity
3
Disposal/acquisition
opportunities
4
5
Optimal
restructured
value
Total company
opportunities
Potential value
with external
improvements
MANAGING INDIVIDUAL BUSINESSES
Exxon’s Strategic Planning Process
Economic Review
Energy Review
Stewardship
Review
Business
Plans
Discussion
with contact
director
Financial
Forecast
Stewardship
Basis
Investment
Reappraisals
Annual
Budget
Approval by
Mgmt.
Committee
Corporate
Plan
MANAGING INDIVIDUAL BUSINESSES
Rethinking Strategic Planning
Critiques of strategic planning:
• Strategic planning systems don’t make strategy—strategic
planning a ritualistic process, but most strategic decisions are
made outside the system
• Weak execution—procedures for converting plans into
actions are weak. Proposals for improving execution include:
– Strategic milestones
– Strategy maps
– Replacing strategic planning units by “offices of strategy
management”
Copyright © 2019 John Wiley & Sons, Inc.
MANAGING INDIVIDUAL BUSINESSES
Performance Management and Financial Control
• Multibusiness companies have a dual planning process:
– Strategic planning: medium and long term
– Financial planning : short-term
• The two are closely linked. Strategic plan is a basis for:
– Operating budget
– Capital expenditure budget
– Annual performance plans
– Strategic milestones
• Balance between strategic and financial control:
– Varies by firm and sector
– There’s a trade-off between the two—more of one means
less of the other
Copyright © 2019 John Wiley & Sons, Inc.
8
MANAGING INDIVIDUAL BUSINESSES
Strategic Planning and Financial Control as
Alternative Modes of Corporate Control
Two basic approaches
Input
control
Output
control
Monitoring and approving
business level decisions
Setting performance targets
and monitoring
their achievement
Primarily through strategic
planning system and capital
expenditure approval system
Primarily through performance
management system, including
operating budgets, scorecards,
milestones, and HR appraisals
Copyright © 2019 John Wiley & Sons, Inc.
MANAGING INDIVIDUAL BUSINESSES
Alternative Corporate Management Styles
Strategic planning
Financial control
Business
strategy
formulation
Strategy formulated by
businesses; corporate
HQ guides and coordinates
Strategy formulated at business
unit level;
HQ exerts financial control
Controlling
performance
Primarily strategic goals with
medium- to long-term horizon
Financial budgets set annual
targets—monitored quarterly
Advantages
Exploits (a) linkages among
businesses, (b) innovation, (c)
long-term development
Business unit autonomy conducive
to initiative, responsiveness, and
efficiency
Disadvantages
Loss of divisional autonomy and
initiative
Unitary strategic view
Tendency to persist with failing
strategies
Short-term focus discourages
innovation and long-term
development
Limited sharing of resources and
capabilities
Style suited to
Companies with few closely
related businesses
Capital and technologyintensive sectors with large,
long term investment projects
Highly diversified companies with
low relatedness among businesses
Mature, low-tech sectors where
investment projects small and
short term
Copyright © 2019 John Wiley & Sons, Inc.
MANAGING`CHANGE IN THE MULTBUSINESS CORPORATION
The Challenge of Leading Change
❑ The Problem: Counteracting Inertia
– The bigger and more complex the company—the greater the forces of
inertia
❑ Facilitating change:
– Adaptive tension Imposing high performance expectation on individual
and departments can create not just stress, but dynamism and
responsiveness that counteracts complacency (e.g. Jack Welch at GE)
– Institutionalizing change Shift focus of strategic planning from resource
allocation to sensing and responding to external change (e.g. IBM)
– New business development Incubating the new businesses that will
ultimately replace the old (Amazon, Netflix, Nokia)
– Top-down, large-scale development initiatives—the CEO as change
leader e.g. Samsung Electronics; Haier
Copyright © 2019 John Wiley & Sons, Inc.
GOVERNANCE OF MULTBUSINESS CORPORATIONS
The Challenge of Corporate Governance
•
What are the rights of shareholders?
– To transfer shares, access company information, elect directors,
share in the profits of the firm, vote on key strategic decisions
– Despite potential for divisions to develop distinctive strategies and
structures—corporate systems may impose uniformity.
•
What are the responsibilities of Company Boards?
– To act in the best interests of the company and its shareholders
– To oversee strategy, budgets, management performance, etc.
•
What’s gone wrong?
– Failure by boards to prevent managers pursuing their interests rather
than those of shareholders (e.g. excessive compensation)
– Failure board to take account of social/national interest
•
What other problems do multidivisional corporations face?
– Lack of decentralization of decision making to divisional managers
– Standardization of management systems across divisions
Copyright © 2019 John Wiley & Sons, Inc.
GOVERNANCE OF MULTBUSINESS CORPORATIONS
Highest Earning CEOs of US Companies 2016
Rank
CEO
Company
Direct
compensation
($m)
1
Thomas Rutledge
Charter Communications
98
2
Leslie Moonves
CBS
69
3
Robert A. Iger
Walt Disney
41
4
David Zaslav
Discovery
Communications
37
5
Robert Kotick
Activision Blizzard
33
6
Brian Roberts
Comcast Corp.
33
7
Jeffrey L. Bewkes
Time Warner
33
8
Virginia Rometty
32
9
Leonard Schleifer
10
Stephen Wynn
IBM
Regeneron
Pharmaceuticals
Wynn Resorts Ltd.
Copyright © 2019 John Wiley & Sons, Inc.
28
28
C O N T E M POR A R Y
S T R ATE GY
A N A LYSI S
CONT EMPORARY
ST RATEGY
A NALYSIS
TENTH EDITION
ROBERT M. GRANT
VP AND EDITORIAL DIRECTOR
George Hoffman
EDITORIAL DIRECTOR
Veronica Visentin
EXECUTIVE EDITOR
Lise Johnson
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Jennifer Manias
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Leah Michael
EDITORIAL MANAGER
Judy Howarth
CONTENT MANAGEMENT DIRECTOR
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PRODUCTION EDITOR
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COVER PHOTO CREDIT
© iStockPhoto/Sergey_Peterman
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ISBN: 978-1-119-49572-7 (PBK)
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Library of Congress Cataloging-in-Publication Data
Names: Grant, Robert M., 1948– author.
Title: Contemporary strategy analysis / Robert M. Grant.
Description: Tenth edition. | Hoboken, NJ : Wiley & Sons, 2018. | Includes
index. | Description based on print version record and CIP data provided
by publisher; resource not viewed.
Identifiers: LCCN 2018037723 (print) | LCCN 2018041783 (ebook) | ISBN
9781119495796 (Adobe PDF) | ISBN 9781119495673 (ePub) | ISBN 9781119495727
(pbk.)
Subjects: LCSH: Strategic planning.
Classification: LCC HD30.28 (ebook) | LCC HD30.28 .G722 2018 (print) | DDC
658.4/012—dc23
LC record available at https://lccn.loc.gov/2018037723
The inside back cover will contain printing identification and country of origin if omitted from this page.
In addition, if the ISBN on the back cover differs from the ISBN on this page, the one on the back cover is
correct.
To Liam, Ava, Finn, Evie, Max, Lucy, and Bobby
BRIEF CONTENTS
Author Biography
Preface to Tenth Edition
PART I
1
INTRODUCTION
The Concept of Strategy
xiv
xv
1
3
PART II THE TOOLS OF STRATEGY ANALYSIS
31
2
Goals, Values, and Performance
33
3
Industry Analysis: The Fundamentals
59
4
Further Topics in Industry and Competitive Analysis
83
5
Analyzing Resources and Capabilities
107
6
Organization Structure and Management Systems:
The ­Fundamentals of Strategy Implementation
131
PART III  BUSINESS STRATEGY AND THE QUEST FOR
COMPETITIVE ADVANTAGE
153
7
The Sources and Dimensions of Competitive Advantage
155
8
Industry Evolution and Strategic Change
189
9
Technology-Based Industries and the
Management of Innovation
219
PART IV
CORPORATE STRATEGY
249
10 Vertical Integration and the Scope of the Firm
251
11 Global Strategy and the Multinational Corporation
269
12 Diversification Strategy
297
viii BRIEF CONTENTS
13 Implementing Corporate Strategy: Managing
the Multibusiness Firm
315
14 External Growth Strategies: Mergers, Acquisitions,
and Alliances
340
15 Current Trends in S
­ trategic Management
360
CASES TO ACCOMPANY CONTEMPORARY STRATEGY
ANALYSIS, TENTH EDITION
Glossary
Index
637
643
CONTENTS
Author Biography
Preface to Tenth Edition
xiv
xv
PART I INTRODUCTION
1
1
3
The Concept of Strategy
Introduction and Objectives
The Role of Strategy in Success
The Basic Framework for Strategy Analysis
A Brief History of Business Strategy
Strategy Today
How is Strategy Made? The Strategy Process
Strategic Management of Not-For-Profit Organizations
Summary
Self-Study Questions
Notes
4
4
9
11
14
20
24
26
28
28
PART II THE TOOLS OF STRATEGY ANALYSIS
31
2
Goals, Values, and Performance
33
Introduction and Objectives
Strategy as a Quest for Value
Profit, Cash Flow, and Enterprise Value
Putting Performance Analysis into Practice
Beyond Profit: Values and Corporate Social Responsibility
Beyond Profit: Strategy and Real Options
Summary
Self-Study Questions
Notes
34
35
39
42
49
53
56
57
57
Industry Analysis: The Fundamentals
59
Introduction and Objectives
From Environmental Analysis to Industry Analysis
Analyzing Industry Attractiveness
Applying Industry Analysis to Forecasting Industry Profitability
Using Industry Analysis to Develop Strategy
Defining Industries: Where to Draw the Boundaries
From Industry Attractiveness to Competitive Advantage:
Identifying Key Success Factors
60
60
62
71
74
75
3
77
x CONTENTS
4
5
6
Summary
Self-Study Questions
Notes
80
81
81
Further Topics in Industry and Competitive Analysis
83
Introduction and Objectives
The Limits of Industry Analysis
Beyond the Five Forces: Complements, Ecosystems, and Business Models
Competitive Interaction: Game Theory and Competitor Analysis
Segmentation and Strategic Groups
Summary
Self-Study Questions
Notes
84
84
86
91
98
103
103
104
Analyzing Resources and Capabilities
107
Introduction and Objectives
The Role of Resources and Capabilities in Strategy Formulation
Identifying Resources and Capabilities
Appraising Resources and Capabilities
Developing Strategy Implications
Summary
Self-Study Questions
Notes
108
108
112
119
123
128
129
130
Organization Structure and Management Systems:
The ­Fundamentals of Strategy Implementation
131
Introduction and Objectives
Strategy Formulation and Strategy Implementation
The Fundamentals of Organizing: Specialization,
Cooperation, and Coordination
Developing Organizational Capability
Organization Design
Summary
Self-Study Questions
Notes
132
133
136
139
142
150
150
151
PART III  BUSINESS STRATEGY AND THE QUEST
FOR COMPETITIVE ADVANTAGE
153
7
The Sources and Dimensions of Competitive Advantage
155
Introduction and Objectives
How Is Competitive Advantage Established?
How Is Competitive Advantage Sustained?
Cost Advantage
Differentiation Advantage
Can Firms Pursue Both Cost and Differentiation Advantage?
156
156
162
166
173
184
CONTENTS   xi
8
9
Summary
Self-Study Questions
Notes
185
186
186
Industry Evolution and Strategic Change
189
Introduction and Objectives
The Industry Life Cycle
The Challenge of Organizational Adaptation and Strategic Change
Managing Strategic Change
Summary
Self-Study Questions
Notes
190
191
198
204
215
215
216
Technology-Based Industries and the
Management of Innovation
219
Introduction and Objectives
Competitive Advantage in Technology-Intensive Industries
Strategies to Exploit Innovation: How and When to Enter
Standards, Platforms, and Network Externalities
Implementing Technology Strategies: Internal and External
Sources of Innovation
Implementing Technology Strategies: Organizing for Innovation
Summary
Self-Study Questions
Notes
220
221
227
232
238
242
245
246
246
PART IV CORPORATE STRATEGY
249
10 Vertical Integration and the Scope of the Firm
251
Introduction and Objectives
Transaction Costs and the Scope of the Firm
The Benefits and Costs of Vertical Integration
Designing Vertical Relationships
Summary
Self-Study Questions
Notes
11 Global Strategy and the Multinational Corporation
Introduction and Objectives
Implications of International Competition for Industry Analysis
Analyzing Competitive Advantage in an International Context
Internationalization Decisions: Locating Production
Internationalization Decisions: Entering a Foreign Market
Multinational Strategies: Global Integration versus
National Differentiation
Implementing International Strategy: Organizing the
Multinational Corporation
252
252
256
263
266
266
267
269
270
271
273
276
278
281
287
xii CONTENTS
Summary
Self-Study Questions
Notes
12 Diversification Strategy
Introduction and Objectives
Motives for Diversification
Competitive Advantage from Diversification
Diversification and Performance
The Meaning of Relatedness in Diversification
Summary
Self-Study Questions
Notes
293
294
295
297
298
299
303
307
309
311
312
312
13 Implementing Corporate Strategy: Managing the Multibusiness
Firm
315
Introduction and Objectives
The Role of Corporate Management
Managing the Corporate Portfolio
Managing Linkages Across Businesses
Managing Individual Businesses
Managing Change in the Multibusiness Corporation
Governance of Multibusiness Corporations
Summary
Self-Study Questions
Notes
14 External Growth Strategies: Mergers, Acquisitions,
and Alliances
Introduction and Objectives
Mergers and Acquisitions
Strategic Alliances
Summary
Self-Study Questions
Notes
15 Current Trends in ­Strategic Management
Introduction
The New Environment of Business
New Directions in Strategic Thinking
Redesigning Organizations
The Changing Role of Managers
Summary
Notes
316
316
317
319
323
329
333
337
338
338
340
341
342
351
357
357
358
360
361
361
365
369
371
372
373
CONTENTS   xiii
CASES TO ACCOMPANY CONTEMPORARY STRATEGY
ANALYSIS, TENTH EDITION
1
Tough Mudder Inc.: Building Leadership in Mud Runs
375
2
Kering SA: Probing the Performance Gap with LVMH
384
3
Pot of Gold? The US Legal Marijuana Industry
393
4
The US Airline Industry in 2018
403
5
The Lithium-Ion Battery Industry
415
6
Walmart Inc. in 2018: The World’s Biggest Retailer Faces
New Challenges
428
7
Harley-Davidson, Inc. in 2018
442
8
BP: Organizational Structure and Management Systems
455
9
Starbucks Corporation, March 2018
462
10 Eastman Kodak’s Quest for a Digital Future
475
11 The New York Times: Adapting to the Digital Revolution
492
12 Tesla: Disrupting the Auto Industry
503
13 Video Game Console Industry in 2018
515
14 Eni SpA: The Corporate Strategy of an International
Energy Major
527
15 Zara: Super-Fast Fashion
546
16 Manchester City: Building a Multinational Soccer Enterprise
554
17 Haier Group: Internationalization Strategy
566
18 The Virgin Group in 2018
577
19 Google Is Now Alphabet—But What’s the Corporate Strategy?
587
20 Restructuring General Electric
600
21 Walt Disney, 21st Century Fox, and the Challenge of New Media 617
22 W. L. Gore & Associates: Rethinking Management
629
Glossary
Index
637
643
AUTHOR BIOGRAPHY
Robert M. Grant is Professor of Strategic Management at Bocconi University, Milan,
Italy and a Visiting Professor at Cass Business School, London. He was born in Bristol,
England and has taught at Georgetown University, London Business School, University of British Columbia, California Polytechnic, UCLA, Insead, and University of South
Africa. His business experience includes making tires (Firestone) and meat pies (Kraft
Foods) and strategy consulting at American Express, Eni, BP, and other companies.
PREFACE T O
TENTH EDITION
Contemporary Strategy Analysis equips managers and students of management with
the concepts and frameworks needed to make better strategic decisions. My goal is
a strategy text that reflects the dynamism and intellectual rigor of this ­fast-developing
field of management and takes account of the strategy issues that companies face today.
Contemporary Strategy Analysis endeavors to be both rigorous and relevant. While
embodying the latest thinking in the strategy field, it aims to be accessible to students
from different backgrounds and with varying levels of experience. I achieve this accessibility by combining clarity of exposition, concentration on the fundamentals of value
creation, and an emphasis on practicality.
This tenth edition maintains the book’s focus on the essential tasks of strategy: identifying the sources of superior business performance and formulating and implementing a strategy that exploits these sources of superior performance. At the same time,
the content of the book has been revised to reflect recent developments in the business
environment and in strategy research.
Distinctive features of the tenth edition include:
●●
●●
●●
●●
More explicit guidance on how to apply the tools of strategy to analyze strategic
situations and develop strategy recommendations. See, in particular: “Applying
Strategy Analysis” in Chapter 1, “Putting Performance Analysis into Practice”
in Chapter 2, “Using Industry Analysis to Develop Strategy” in Chapter 3, and
“Developing Strategy Implications” [from the analysis of resources and capabilities] in Chapter 5.
Increased emphasis on strategy making under conditions of technological
change—especially in digital markets where strategy analysis must take account
of complements, network externalities, platform-based competition, and the
application of innovative business models to complex business ecosystems (see
Chapters 4, 8, and 9).
Integration of stakeholder interests and corporate social responsibility within a
view of the firm as an institution for creating value (Chapter 2).
An updated approach to strategy implementation. While maintaining an
integrated approach to strategy formulation and strategy implementation,
­Chapters 6, 8, and 13 offers a systematic approach to strategy execution that
the role of organizational capabilities and capability development in guiding resource allocation, and the design of organizational structures and
management systems.
My thanks to my editorial and production team at Wiley, especially to Lise Johnson,
Judy Howarth, and S. Indirakumari; and to Mary Fogarty and Nitish Mohan for their
xvi PREFACE TO TENTH EDITION
assistance. This tenth edition of Contemporary Strategy Analysis has benefitted hugely
from feedback and suggestions from users—both instructors and students. I thank you
and look forward to continuing my engagement with you. Please feel free to contact me at
grant@unibocconi.com.
Robert M. Grant
I
INTRODUCTION
1 The Concept of Strategy
1
The Concept of Strategy
Strategy is the great work of the organization. In situations of life or death, it is the Tao
of survival or extinction. Its study cannot be neglected.
—SUN TZU, THE ART OF WAR
To shoot a great score you need a clever strategy.
—RORY MCILROY, GOLF MONTHLY, MAY 19, 2011
Everybody has a plan until they get punched in the mouth.
—MIKE TYSON, FORMER WORLD HEAVYWEIGHT BOXING CHAMPION
OUTLINE
◆◆
Introduction and Objectives
●●
Corporate and Business Strategy
◆◆
The Role of Strategy in Success
●●
Describing Strategy
◆◆
The Basic Framework for Strategy Analysis
●●
◆◆
◆◆
◆◆
Strategic Fit
A Brief History of Business Strategy
●●
Origins and Military Antecedents
●●
From Corporate Planning to Strategic Management
Strategy Today
How Is Strategy Made? The Strategy Process
●●
Design versus Emergence
●●
Applying Strategy Analysis
◆◆
Strategic Management of Not-For-Profit
­Organizations
◆◆
Summary
What Is Strategy?
◆◆
●●
Self-Study Questions
●●
Why Do Firms Need Strategy?
◆◆
Notes
●●
Where Do We Find Strategy?
4 PART I INTRODUCTION
Introduction and Objectives
Strategy is about achieving success. This chapter explains what strategy is and why it is important to
success, for both organizations and individuals. We will distinguish strategy from planning. Strategy is
not a detailed plan or program of instructions; it is a unifying theme that gives coherence and direction
to the actions and decisions of an individual or an organization.
The principal task of this chapter will be to introduce the basic framework for strategy analysis that
underlies this book. This framework comprises two components of strategy analysis: analysis of the
external environment of the firm (mainly industry analysis) and analysis of the internal environment
(primarily analysis of the firm’s resources and capabilities). We shall then examine what strategy is, how it
has developed over time, how to describe the strategy of a business enterprise, and how organizations
go about making strategy.
By the time you have completed this chapter, you will be able to:
◆◆
Appreciate the contribution that strategy can make to successful performance and recognize the essential components of an effective strategy.
◆◆
Comprehend the basic framework of strategy analysis that underlies this book.
◆◆
Recognize how strategic management has evolved over the past 60 years.
◆◆
Identify and describe the strategy of a business enterprise.
◆◆
Understand how strategy is made within organizations.
◆◆
Recognize the distinctive features of strategic management among not-for-profit organizations.
Since the purpose of strategy is to help us to win, we start by looking at the role of strategy in success.
The Role of Strategy in Success
Strategy Capsules 1.1 and 1.2 describe the careers of two individuals, Queen Elizabeth
II and Lady Gaga, who have been outstandingly successful in leading their organizations. Although these two remarkable women operate within vastly different arenas,
can their success be attributed to any common factors?
For neither of them can success be attributed to overwhelmingly superior resources.
For all of Queen Elizabeth’s formal status as head of state, she has very little real power
and, in most respects, is a servant of the democratically elected British government.
Lady Gaga is clearly a creative and capable entertainer, but few would claim that
she entered the music business with outstanding talents as a vocalist, musician, or
songwriter.
CHAPTER 1 The Concept of Strategy   5
Nor can their success be attributed either exclusively or primarily to luck. Both have
experienced difficulties and setbacks at different stages of their careers. Central to their
success, however, has been their ability to respond to events—whether positive or negative—with flexibility and clarity of direction.
My contention is that, common to both the 60-year successful reign of Queen Elizabeth II and the short but stellar career of Lady Gaga, is the pr