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1 This page intentionally left blank Strategic ManagementCONCEPTS AND CASESE ditorial Director:Sally YaganEditor in Chief:Eric SvendsenAcquisitions Editor:Kim NorbutaProduct Development Manager:Ashley SantoraEditorial Project Manager:Claudia FernandesEditorial Assistant:Meg O RourkeDirector of Marketing:Patrice Lumumba JonesMarketing Manager:Nikki Ayana JonesMarketing Assistant:Ian GoldSenior Managing Editor:Judy LealeAssociate Production Project Manager:Ana JankowskiOperations Specialist:Ilene KahnArt Director:Steve FrimText and Cover Designer:Judy AllanManager, Visual Research:Beth BrenzelManager, Rights and Permissions:Zina ArabiaImage Permission Coordinator:Cynthia VincentiManager, Cover Visual Research & Permissions:Karen SanatarCover Art:Vetta TM Collection Dollar Bin: istockphotoEditorial Media Project Manager:Ashley LullingProduction Media Project Manager:Lisa RinaldiFull-Service Project Management:Thistle Hill Publishing Services, LLCC omposition:Integra Software Services, :Courier/KendallvilleCover Printer:Lehigh-Phoenix Color/HagerstownText Font:10/12 TimesCredits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbookappear on appropriate page within 2011, 2009, 2007 by Pearson Education, Inc.

2 , publishing as Prentice Hall, One Lake Street,Upper Saddle River, New Jersey rights reserved. Manufactured in the United States of publication is protected by Copyright, and permission should be obtained from the publisher prior to anyprohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic,mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work,please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, UpperSaddle River, New Jersey of the designations by manufacturers and seller to distinguish their products are claimed as those designations appear in this book, and the publisher was aware of a trademark claim, thedesignations have been printed in initial caps or all of Congress Cataloging-in-Publication DataDavid, Fred management: concepts and cases / Fred R.

3 David. 13th bibliographical references and : 978-0-13-612098-8 (casebound)ISBN-10: 0-13-612098-9 (casebound)1. Strategic planning. 2. Strategic planning Case studies. I. '012 dc2220090520361098765432 ISBN 10:0-13-612098-9 ISBN 13: 978-0-13-612098-8 THIRTEENTH EDITIONS trategic ManagementCONCEPTS AND CASESFred R. DavidFrancis Marion UniversityFlorence, South CarolinaPrentice HallBoston Columbus Indianapolis New York San Francisco Upper Saddle RiverAmsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal TorontoDelhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo To Joy, Forest, Byron, and Meredith my wife and children for their encouragement and page intentionally left blank This page intentionally left blank Brief ContentsPreface xviiAcknowledgments xxiiiAbout the Author xxviiPart 1 Overview of Strategic Management 2 Chapter 1 The Nature of Strategic Management 2 THE COHESION CASE.

4 MCDONALD S 2009 27 Part 2 Strategy Formulation 40 Chapter 2 The Business Vision and Mission 40 Chapter 3 The External Assessment 58 Chapter 4 The Internal Assessment 90 Chapter 5 Strategies in Action 130 Chapter 6 Strategy Analysis and Choice 172 Part 3 Strategy Implementation 210 Chapter 7 Implementing Strategies: Management and Operations Issues 210 Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues 250 Part 4 Strategy Evaluation 284 Chapter 9 Strategy Review, Evaluation, and Control 284 Part 5 Key Strategic-Management Topics 308 Chapter 10 Business Ethics/Social Responsibility/Environmental Sustainability 308 Chapter 11 Global/International Issues 328 Part 6 Strategic-Management Case Analysis 346 How to Prepare and Present a Case Analysis 346 Name Index 359 Subject Index 363viiThis page intentionally left blank ContentsPreface xviiAcknowledgments xxiiiAbout the Author xxviiPart 1 Overview of Strategic Management 2 Chapter 1 The Nature of Strategic Management 2 MCDONALD S CORPORATION: DOING GREAT IN A WEAK ECONOMY 4 What Is Strategic Management?

5 5 Defining Strategic Management 6& Stages of Strategic Management 6 & Integrating Intuition and Analysis 7& Adapting to Change 8 Key Terms in Strategic Management 9 Competitive Advantage 9& Strategists 10 & Vision and MissionStatements 11 & External Opportunities and Threats 11&Internal Strengths and Weaknesses 12 & Long-Term Objectives 13& Strategies 13 & Annual Objectives 13 & Policies 14 The Strategic-Management Model 14 Benefits of Strategic Management 16 Financial Benefits 17 & Nonfinancial Benefits 18 Why Some Firms Do No Strategic Planning 18 Pitfalls in Strategic Planning 19 Guidelines for Effective Strategic Management 19 Comparing Business and Military Strategy 21 THE COHESION CASE: MCDONALD S CORPORATION 2009 27 ASSURANCE OF LEARNING EXERCISES 37 Assurance of Learning Exercise 1A: Gathering Strategy Information 37 Assurance of Learning Exercise 1B: Strategic Planning for My University 37 Assurance of Learning Exercise 1C: Strategic Planning at a Local Company 38 Assurance of Learning Exercise 1D: Getting Familiar with SMCO 38 Part 2 Strategy Formulation 40 Chapter 2 The Business Vision and Mission 40 WAL-MART: DOING GREAT IN A WEAK ECONOMY 42 What Do We Want to Become?

6 43 What Is Our Business? 43 Vision versus Mission 45 & The Process of Developing Vision and Mission Statements 46 Importance (Benefits) of Vision and Mission Statements 47A Resolution of Divergent Views 48 Characteristics of a Mission Statement 49A Declaration of Attitude 49 & A Customer Orientation 50 & Mission Statement Components 51 Writing and Evaluating Mission Statements 53 ASSURANCE OF LEARNING EXERCISES 56 Assurance of Learning Exercise 2A: Evaluating Mission Statements 56 Assurance of Learning Exercise 2B: Writing a Vision and MissionStatement for McDonald s Corporation 56 Assurance of Learning Exercise 2C: Writing a Vision and MissionStatement for My University 57 Assurance of Learning Exercise 2D: Conducting Mission StatementResearch 57 Chapter 3 The External Assessment 58 DUNKIN' BRANDS, INC.: DOING GREAT IN A WEAKECONOMY 60 The Nature of an External Audit 61 Key External Forces 61& The Process of Performing an ExternalAudit 62 The Industrial Organization (I/O) View 63 Economic Forces 63 Social, Cultural, Demographic, and Natural EnvironmentForces 66 Political, Governmental, and Legal Forces 68 Technological Forces 69 Competitive Forces 71 Competitive Intelligence Programs 72& Market Commonalityand Resource Similarity 74 Competitive Analysis: Porter s Five-Forces Model 74 Rivalry Among Competing Firms 75& Potential Entry of New Competitors 76& Potential Development of SubstituteProducts 77& Bargaining Power of Suppliers 77& BargainingPower of Consumers 77 Sources of External Information 78 Forecasting Tools and Techniques 78 Making Assumptions 79ixIndustry Analysis.

7 The External Factor Evaluation (EFE)Matrix 80 The Competitive Profile Matrix (CPM) 81 ASSURANCE OF LEARNING EXERCISES 86 Assurance of Learning Exercise 3A: Developing an EFE Matrix forMcDonald s Corporation 86 Assurance of Learning Exercise 3B: The External Assessment 86 Assurance of Learning Exercise 3C: Developing an EFE Matrix forMy University 87 Assurance of Learning Exercise 3D: Developing a CompetitiveProfile Matrix for McDonald s Corporation 87 Assurance of Learning Exercise 3E: Developing a CompetitiveProfile Matrix for My University 87 Chapter 4 The Internal Assessment , INC.: DOING GREAT IN A WEAKECONOMY. HOW? 92 The Nature of an Internal Audit 93 Key Internal Forces 93& The Process of Performing an InternalAudit 93 The Resource-Based View (RBV) 96 Integrating Strategy and Culture 97 Management 99 Planning 100& Organizing 100& Motivating 101& Staffing102& Controlling 102& Management Audit Checklist ofQuestions 103 Marketing 103 Customer Analysis 103& Selling Products/Services 103&Product and Service Planning 104& Pricing 105& Distribution105& Marketing Research 106& Cost/Benefit Analysis 106&Marketing/Audit Checklist of Questions 106 Finance/Accounting 106 Finance/Accounting Functions 107& Basic Types of FinancialRatios 108&Finance/Accounting Audit Checklist 113 Production/Operations 113 Production/Operations Audit Checklist 115 Research and Development 115 Internal and External R&D 116& Research and DevelopmentAudit 117 Management Information Systems 117 Strategic-Planning Software 118& Management InformationSystems Audit 119 Value Chain Analysis (VCA)

8 119 Benchmarking 120 The Internal Factor Evaluation (IFE) Matrix 122 ASSURANCE OF LEARNING EXERCISES 128 Assurance of Learning Exercise 4A: Performing a Financial RatioAnalysis for McDonald s Corporation (MCD) 128 Assurance of Learning Exercise 4B: Constructing an IFE Matrix forMcDonald s Corporation 128 Assurance of Learning Exercise 4C: Constructing an IFE Matrix forMy University 128 Chapter 5 Strategies in Action 130 VOLKSWAGEN AG: DOING GREAT IN A WEAK ECONOMY. HOW? 132 Long-Term Objectives 133 The Nature of Long-Term Objectives 133& Financial versusStrategic Objectives 134& Not Managing by Objectives 135 The Balanced scorecard 135 Types of Strategies 136 Levels of Strategies 138 Integration Strategies 139 Forward Integration 139& Backward Integration 140& Horizontal Integration 141 Intensive Strategies 141 Market Penetration 141& Market Development 142& Product Development 142 Diversification Strategies 143 Related Diversification 144& Unrelated Diversification 144 Defensive Strategies 146 Retrenchment 146& Divestiture 148& Liquidation 149 Michael Porter s Five Generic Strategies 151 Cost Leadership Strategies (Type 1 and Type 2) 152& DifferentiationStrategies (Type 3) 153& Focus Strategies (Type 4 and Type 5)

9 154& Strategies for Competing in Turbulent, High-Velocity Markets 155 Means for Achieving Strategies 155 Cooperation Among Competitors 155& Joint Venture/Partnering 156& Merger/Acquisition 158&First MoverAdvantages 161 & Outsourcing 161 Strategic Management in Nonprofit and GovernmentalOrganizations 162 Educational Institutions 162& Medical Organizations 163& Governmental Agencies and Departments 163 Strategic Management in Small Firms 164 ASSURANCE OF LEARNING EXERCISES 168 Assurance of Learning Exercise 5A: What Strategies ShouldMcDonald s Pursue in 2011 2013? 168 Assurance of Learning Exercise 5B: Examining Strategy Articles 168 Assurance of Learning Exercise 5C: Classifying Some Year 2009 Strategies 169 Assurance of Learning Exercise 5D: How Risky Are VariousAlternative Strategies? 169 Assurance of Learning Exercise 5E: Developing AlternativeStrategies for My University 170 Assurance of Learning Exercise 5F: Lessons in Doing BusinessGlobally 170 Chapter 6 Strategy Analysis and Choice 172 APPLE: DOING GREAT IN A WEAK ECONOMY.

10 HOW? 174 The Nature of Strategy Analysis and Choice 175 The Process of Generating and Selecting Strategies 175xCONTENTSA Comprehensive Strategy-Formulation Framework 176 The Input Stage 177 The Matching Stage 177 The Strengths-Weaknesses-Opportunities-Threa ts (SMOT) Matrix178& The Strategic Position and Action Evaluation (SPACE) Matrix 181& The Boston Consulting Group (BCG) Matrix 185&The Internal-External (IE) Matrix 188& The Grand Strategy Matrix 191 The Decision Stage 192 The Quantitative Strategic Planning Matrix (QSPM) 192& Positive Features and Limitations of the QSPM 195 Cultural Aspects of Strategy Choice 196 The Politics of Strategy Choice 196 Governance Issues 198 ASSURANCE OF LEARNING EXERCISES 205 Assurance of Learning Exercise 6A: Developing a SWOT Matrix forMcDonald s 205 Assurance of Learning Exercise 6B: Developing a SPACE Matrix forMcDonald s 205 Assurance of Learning Exercise 6C: Developing a BCG Matrix forMcDonald s 205 Assurance of Learning Exercise 6D: Developing a QSPM forMcDonald s 206 Assurance of Learning Exercise 6E: Formulating IndividualStrategies 206 Assurance of Learning Exercise 6F: The Mach Test 206 Assurance of Learning Exercise 6G: Developing a BCG Matrix forMy University 208 Assurance of Learning Exercise 6H: The Role of Boards of Directors 208 Assurance of Learning Exercise 6I: Locating Companies in a GrandStrategy Matrix 209 Part 3 Strategy Implementation 210 Chapter 7 Implementing Strategies: Management and Operations Issues 210 GOOGLE: DOING GREAT IN A WEAK 212 The Nature of Strategy Implementat