Strategic

Management
Formulation, Implementation, and Control
Table of Contents
PART ONE Key Terms 39
OVERVIEW OF STRATEGIC Questions for Discussion 40
Discussion Case: The Future
MANAGEMENT 1
of The New York Times 40
APPENDIX BB&T Vision, Mission,
Chapter 1
and Purpose 44
Strategic Management 2
The Nature and Value of Strategic Management 3 Chapter 3
Dimensions of Strategic Decisions 4 Corporate Social Responsibility
Formality in Strategic Management 7 and Business Ethics 49
Benefits of Strategic Management 9
Risks of Strategic Management 10
The Stakeholder Approach
The Strategic Management Process 10 to Social Responsibility 50
The Dynamics of Social Responsibility 52
Components of the Strategic Management Model 12
Strategic Management as a Process 14
Types of Social Responsibility 53
Corporate Social Responsibility and Profitability 54
Summary 16
Key Terms 16 Sarbanes-Oxley Act of 2002 60
The New Corporate Governance Structure 63
Questions for Discussion 17
CSR’s Effect on the Mission Statement 64
Discussion Case: Can Anyone Save HP? 17
Social Audit 64
Management Ethics 65
PART TWO The Nature of Ethics in Business 65
STRATEGY FORMULATION 21 Satisfying Corporate Social Responsibility 65
The Core of the CSR Debate 66
Chapter 2 Mutual Advantages of Collaborative
Company Mission 21 Social Initiatives 68
Five Principles of Successful Collaborative Social
What Is a Company Mission? 23 Initiatives 68
The Need for an Explicit Mission 23 Assembling the Components 73
Formulating a Mission 24 The Limits of CSR Strategies 73
Basic Product or Service; Primary Market; Principal The Future of CSR 75
Technology 24 Approaches to Questions of Ethics 77
Company Goals: Survival; Growth; Profitability 26 Codes of Business Ethics 78
Company Philosophy 27 Major Trends in Codes of Ethics 80
Public Image 29 Summary 80
Company Self-Concept 30 Key Terms 81
Newest Trends in Mission Components 32 Questions for Discussion 81
An Exemplary Mission Statement 34 Discussion Case: Wal-Mart vs. Class Actions 81
Boards of Directors 35
Agency Theory 36 Chapter 4
How Agency Problems Occur 37
The External Environment 83
Problems That Can Result from Agency 37
Solutions to the Agency Problem 39 The Firm’s External Environment 84
Summary 39 Remote Environment 84
Economic Factors 84
Social Factors 84

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xxii Table of Contents

Political Factors 87 Joint Ventures 140

Technological Factors 88 Foreign Branching 141
Ecological Factors 89 Wholly Owned Subsidiaries 141
International Environment 92 Summary 142
Industry Environment 92 Key Terms 143
How Competitive Forces Shape Strategy 93 Questions for Discussion 143
Contending Forces 95 Discussion Case: Fakes 144
Threat of Entry 95 APPENDIX Components of the Multinational
Powerful Suppliers 96 Environment 148
Powerful Buyers 99
Substitute Products 100 Chapter 6
Jockeying for Position 100 Internal Analysis 150
Industry Analysis and Competitive Analysis 101
Industry Boundaries 101 SWOT Analysis: A Traditional Approach to Internal
Industry Structure 103 Analysis 153
Competitive Analysis 105 Using SWOT Analysis in Strategic Analysis 154
Operating Environment 106 Limitations of SWOT Analysis 157
Competitive Position 106 Value Chain Analysis 158
Customer Profiles 107 Conducting a Value Chain Analysis 160
Suppliers 108 Recognizing the Difficulty in Activity-Based Cost
Creditors 108 Accounting 162
Human Resources: Nature of the Labor Market 108 Resource-Based View of the Firm 164
Emphasis on Environmental Factors 110 Three Basic Resources: Tangible Assets, Intangible Assets,
Summary 114 and Organizational Capabilities 165
Key Terms 114 What Makes a Resource Valuable? 165
Questions for Discussion 114 Using the Resource-Based View in Internal
Discussion Case: The Raja of Steel 115 Analysis 171
APPENDIX Sources for Environmental Internal Analysis: Making Meaningful
Forecasting 118 Comparisons 173
Comparison with Past Performance 173
Chapter 5 Benchmarking: Comparison with Competitors 174
Comparison with Success Factors in the Industry 175
The Global Environment 120
Summary 176
Globalization 121 Key Terms 177
Development of a Global Corporation 121 Questions for Discussion 177
Why Firms Globalize 123 Discussion Case: Apple’s Blueprint for Genius 177
Strategic Orientations of Global Firms 124 APPENDIX A Key Resources across
At the Start of Globalization 126 Functional Areas 180
Complexity of the Global Environment 128 APPENDIX B Using Financial Analysis 181
Control Problems of the Global Firm 129
Global Strategic Planning 131 Chapter 7
Multidomestic Industries and Global Industries 131
Long-Term Objectives and Strategies 190
The Global Challenge 134
Market Requirements and Product Characteristics 136 Long-Term Objectives 191
International Strategy Options 137 Qualities of Long-Term Objectives 192
Competitive Strategies for Firms The Balanced Scorecard 194
in Foreign Markets 137 Generic Strategies 195
Niche Market Exporting 138 Low-Cost Leadership 195
Licensing and Contract Manufacturing 139 Differentiation 196
Franchising 140 Focus 197
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The Value Disciplines 198 Summary 256

Operational Excellence 199 Key Terms 256
Customer Intimacy 200 Questions for Discussion 257
Product Leadership 201 Discussion Case: DHL’s American Adventure 257
Grand Strategies 202
Concentrated Growth 202 Chapter 9
Market Development 206 Multibusiness Strategy 261
Product Development 208
Innovation 209 The Portfolio Approach: A Historical
Horizontal Integration 211 Starting Point 263
Vertical Integration 211 The BCG Growth-Share Matrix 264
Concentric Diversification 212 The Industry Attractiveness–Business Strategy
Conglomerate Diversification 212 Matrix 265
Turnaround 215 BCG’s Strategic Environments Matrix 266
Divestiture 217 Limitations of Portfolio Approaches 268
Liquidation 217 The Synergy Approach: Leveraging Capabilities and
Bankruptcy 218 Core Competencies 269
Joint Ventures 220 Capitalize on Core Competencies 269
Strategic Alliances 221 The Corporate Parent Role: Can It Add
Consortia, Keiretsus, and Chaebols 222 Tangible Value? 276
Selection of Long-Term Objectives and Grand Strategy The Parenting Framework 276
Sets 225 The Patching Approach 279
Sequence of Objectives and Strategy Selection 226 Summary 283
Summary 226 Key Terms 283
Key Terms 227 Questions for Discussion 284
Questions for Discussion 227 Discussion Case: Beyond Blue 284
Discussion Case: 3M’s Rising Star 227

Chapter 8 PART THREE

Business Strategy 232 STRATEGY IMPLEMENTATION,
CONTROL, AND INNOVATION 289
Evaluating and Choosing Business Strategies: Seeking
Sustained Competitive Advantage 233 Chapter 10
Evaluating Cost Leadership Opportunities 234
Implementation 291
Evaluating Differentiation Opportunities 237
Evaluating Speed as a Competitive Advantage 240 Short-Term Objectives 293
Evaluating Market Focus as a Way to Competitive Qualities of Effective Short-Term Objectives 294
Advantage 242 The Value-Added Benefits of Short-Term Objectives and
Stages of Industry Evolution and Business Strategy Action Plans 298
Choices 245 Functional Tactics That Implement Business
Competitive Advantage in Fragmented Industries 250 Strategies 298
Competitive Advantage in Global Industries 250 Differences between Business Strategies
Dominant Product/Service Businesses: Evaluating and and Functional Tactics 300
Choosing to Diversify to Build Value 251 Outsourcing Functional Activities 301
Grand Strategy Selection Matrix 252 Empowering Operating Personnel: The Role
Model of Grand Strategy Clusters 254 of Policies 303
Opportunities for Building Value as a Basis for Choosing Creating Policies That Empower 304
Diversification or Integration 256 Executive Bonus Compensation Plans 306
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Major Plan Types 306 Clarifying Strategic Intent 361

Matching Bonus Plans and Corporate Goals 312 Building an Organization 364
Summary 314 Shaping Organizational Culture 367
Key Terms 314 Recruiting and Developing Talented Organizational
Questions for Discussion 315 Leadership 368
Discussion Case: Toyota Implements a Low-Cost Organizational Culture 372
Strategy 315 The Role of the Organizational Leader in Organizational
APPENDIX Functional Tactics 318 Culture 372
Build Time in the Organization 373
Chapter 11 Emphasize Key Themes or Dominant Values 376
Organizational Structure 324 Encourage Dissemination of Stories and Legends about
Core Values 376
Traditional Organization Structures and Their Strategy-
Institutionalize Practices That Systematically Reinforce
Related Pros and Cons 327
Desired Beliefs and Values 377
Simple Organizational Structure 328
Adapt Some Very Common Themes in Their Own
Functional Organizational Structure 328
Unique Ways 377
Divisional Structure 330
Manage the Organizational Culture in a Global
Matrix Organizational Structure 332
Organization 377
Product-Team Structure 332
Manage the Strategy-Culture Relationship 378
What a Difference a Century Makes 334
Globalization 334 Summary 383
The Internet 337 Key Terms 384
Speed 337 Questions for Discussion 384
Initial Efforts to Improve the Effectiveness of Discussion Case: The Immelt Revolution 384
Traditional Organizational Structures 338
Redefine the Role of Corporate Headquarters from
Control to Support and Coordination 338
Chapter 13
Balance the Demands for Control/Differentiation with the Control, Innovation, and
Need for Coordination/Integration 339 Entrepreneurship 390
Restructure to Emphasize and Support Strategically Establishing Strategic Controls 391
Critical Activities 340 Premise Control 393
Reengineer Strategic Business Processes 340 Strategic Surveillance 393
Downsize and Self-Manage: Force Decisions Special Alert Control 394
to Operating Level 341 Implementation Control 395
Creating Agile, Virtual Organizations 343 The Balanced Scorecard Methodology 398
Outsourcing—Creating a Modular Organization 343 Innovation and Entrepreneurship 400
Strategic Alliances 347 Incremental Innovation 403
Toward Boundaryless Structures 349 Breakthrough Innovation 408
Summary 352 Risks Associated with Innovation 409
Key Terms 354 Entrepreneurship 413
Questions for Discussion 355 Intrapreneurship 419
Discussion Case 1: A Crash Diet for Sara Lee 355 Summary 421
Discussion Case 2: Online Extra: Turning Two Tech Key Terms 422
Teams into One 356 Questions for Discussion 422
Chapter 12 Discussion Case 1: The Nimble Shall Inherit
the Earth 422
Leadership and Culture 358
Discussion Case 2: Building an Idea
Strategic Leadership: Embracing Change 360 Factory 423
 Table of Contents xxv

PART FOUR and management in the dawning global era. Now

CASES 427 the Coke machine is badly out of order. Coke’s
Guide to Strategic Management Analysis 428 struggles now include battles with its own bottlers;
the aged, overbearing board; the failed CEOs and
Section A BusinessWeek Cases 1-1 failed attempts to recruit a successor; the dearth
1 American Express: CHARGE! 1-1 of new products; the lackluster marketing.
Mara Der Hovanesian 6 Golf Equipment Industry: Driven
This is the moment Kenneth I. Chenault, chief To Succeed 6-1
executive office of American Express Co., has waited Mark S. Murphy
for his entire career. As a fresh recruit in charge of As the pressure to perform has ratcheted up across
strategic planning more than two decades ago, he the whole economy and especially for publicly traded
sought to move AmEx beyond its lucrative niche as companies, golf equipment manufacturers have taken
an upscale credit card—an idea too radical for the big risks to develop a hit driver. The rewards are
company’s old guard. Now he has his chance. tremendous, but the cost of failure can be huge.
2 Two Men and a Lot of Trucks 2-1 7 Iran: The Mideast’s Model Economy 7-1
Stacy Perman Stanley Reed and Babak Pirouz
Lansing (Mich.)-based Two Men and a Truck Believe it or not, Iran, a charter member of
operates in 27 states, making 250,000 moves last President Bush’s “axis of evil,” may be morphing
year, generating $150 million in revenue along the into a fairly progressive capitalist economy.
way. This case examines how its success was born Propelled by rising oil prices, the Iranian economy
largely out of founder Sheets’s early discovery that grew at a respectable 5.9 percent last year while
local, residential hauls—from Point A to Point B the Tehran Stock Exchange produced gains of 130
within the same city, as opposed to long-distance— percent for its investors.
were a greatly underserved market and her strategy 8 Juicy Couture: To Live and Thrive in L.A. 8-1
to build a franchised business to serve that need. Christopher Palmeri
She initially ran the part-time operation from her Juicy Couture’s founders are spinning gold from
dining room, starting it in 1985 with $385 to Valley Girl “casual chic.” After selling out to Liz
invest: paying two men to help load a customer’s Claiborne, Juicy’s founders have become a major
furniture into an old, rented pick-up truck. force in U.S. retail apparel sales by featuring laid-
3 Bang! Racing Company: A Wild Ride at back, sometimes cheeky clothes that are priced
NASCAR 3-1 just his side of outrageous.
Mark Hyman and Jordan Burke 9 Legal Environment of Business: How to Fix the
Beseiged by angry investors and stung by sponsor Tort System 9-1
defections, Alex Meshkin’s once-promising Bang! Mike France
Racing is reeling. That begs a number of The passage of the Class Action Fairness Act
questions: For starters, how did a whippersnapper (CAFA), the recent federal tort fix, influences the
with zero experience running a motor racing team design of children’s toys, the contents of 10-ks,
elbow his way into NASCAR? how often office workers must view sexual
4 Best Buy and Circuit City: The Warranty harassment prevention videos, the amount of
Windfall 4-1 money given to asbestos victims, and countless
Robert Berner other unique features of U.S. society.
Here’s a secret two of the nation’s largest consumer- 10 Lehman Brothers: Lehman’s New Street
electronics chains don’t want investors to know. As Smarts 10-1
TVs, portable DVD players, and other stuff fly off Emily Thornton
their shelves, Best Buy Co. and Circuit City Inc. are In 2003, Lehman had catapulted ahead of a slew
not banking on them to rake in the profits. Instead, of Wall Street rivals to become a serious
they’re counting on the extended warranty contracts investment-banking power, and Chairman and
that they sell aggressively along with the goods. Chief Executive Officer Richard S. Fuld Jr. was
5 Coca-Cola: Gone Flat 5-1 not letting up. Lehman’s success is all the more
Dean Faust and Nanette Byrnes surprising given that for much of the 1990s, it
Coca-Cola Co. was one of the most respected was considered takeover bait for one of the
companies in America, a master of brand-building bigger and better-capitalized Wall Street houses.
xxvi Table of Contents

11 Louis Vuitton: The Vuitton Money Machine 11-1 production. The new guy, a 40-year-old up-and-
Carol Matlack and Diane Brady comer named Klaus Kleinfeld, even wanted some
From design to manufacturing to advertising, people to work weekends, practically unheard of.
Vuitton, the French luxury good purveyor, is a 17 Societal Trend: Far from the Madding
supremely well-oiled machine, easily Crowd 17-1
outdistancing rivals Gucci, Hermés, and Prada in Michelle Colin
sales and operating margins. And like all elite With housing prices on both coasts at nosebleed
brands, Vuitton must wage a constant battle level, more and more professional-class migrants are
against counterfeit rings—recently pressuring the cashing out of their homes and creating a growing
Chinese to close a knockoff factory in Guangzhou. group of real estate vanguards called equity
12 NASCAR: The Prince of NASCAR 12-1 refugees. The moves are also a response to mounting
Tom Lowry personal debt, battered portfolios, insufferable
The ascension of Brian France to the throne of traffic, and angst-producing status competition.
NASCAR signals new departures in a sport that’s 18 Societal Trend: Now, the Geezer Glut 18-1
become one of America’s biggest moneymakers. Peter Engardio and Carol Matlack
Brian, who loves Tinseltown, insists NASCAR It is not just Europe—China and other emerging-
races are entertainment. market economies are aging fast, too. But in the not-
13 Nokia: Will Rewiring Nokia Spark too-distant future, hundreds of millions of people in
Growth? 13-1 the industrialized world could look back at the early
Andy Reinhardt and Moon Ihlwan 21st century as the beginning of the end of a wonder-
Digital television on handsets is just one of the ful era, when even average workers could retire in
far-out schemes that Nokia Corp., the world’s reasonable comfort in their still-vigorous 50s.
largest mobile-phone maker, is hatching to 19 Sony’s Sudden Samurai 19-1
resurrect flagging growth. Although the company Brian Bremmer
sold an amazing 208 million handsets last year, up The announcement that Sir Howard Stringer, a
16 percent from 2003, fierce competition and non-Japanese, would take over management
sagging prices pushed mobile-phone revenues control of Sony Corp., a $68 billion consumer-
down 3 percent, to $30 billion. electronics and entertainment colossus, came
14 Outsourcing Innovation: A Contentious pretty close to defying belief in Japan.
Corporate Strategy 14-1 20 Symantec Corp.: I Can’t Wait to
Pete Engardio and Bruce Einhorn Compete . . . 20-1
When Western corporations started outsourcing, most Sarah Lacy
insisted all the important research and development John W. Thompson, chief executive of security
would remain in-house. But that pledge is now passé. software giant Symantec Corp., is trying to
Asian contract manufacturers and independent complete the $13 billion Veritas merger in the face
design houses have become forces in nearly every of Wall Street opposition, at the same time he’s
tech device, from laptops and high-definition TVs to preparing Symantec for what’s shaping up to be an
MP3 music players and digital cameras. all-out war with fearsome Microsoft Corp.
15 Pfizer’s Pharmaceutical’s Funk 15-1 21 Technological Environment of Business:
Amy Barrett Hydrogen Cars Are Almost Here, But . . . 21-1
For pharmaceutical companies, Pfizer being the Otis Port
leader, it looks an awful lot like the end of an era as At the 2005 auto show in Los Angeles, U.S. car
the blockbuster model doesn’t really work anymore. enthusiasts got their first look at the H2R, a race
The diseases Pfizer and others now chase are harder car from BMW. Running on hydrogen, it develops
to defeat with a one-pill, mass-market solution. 286 horsepower and propels the H2R from zero to
16 Siemens Corp.’s New Boss: Can He 60 in under six seconds. And the car hit 187 mph
Deliver? 16-1 at the Miramas racetrack in France.
Jack Ewing and Diane Brady 22 United Technologies: The Unsung CEO 22-1
Workers at a Siemens unit that makes X-ray Diane Brady
machines and other diagnostic equipment were George David of United Technologies Corp.
shocked when, in 1998, a cocky new boss asked transformed his old-line industrial conglomerate
them to work more flexible shifts to speed into a $31 billion powerhouse of productivity with
 Table of Contents xxvii

relentless attention to detail. And while he can international perspective. The case seeks an
terminate thousands of workers at a stroke in the evaluation of KFC’s industry and competitive
name of efficiency, he also has crafted one of the environments both domestically and in Latin
most progressive employee education programs in America with a conclusion about its most desirable
the world. strategic options.
23 UPS: Big Brown’s New Bag 23-1 28 High Tech Burrito 28-1
Dean Foust Armand Gilinsky, Diana Clark, Randall D.
With its U.S. delivery business maturing, UPS has Harris, and T. K. Clarke
been working feverishly to transform itself into a Californian Greg Maple’s restaurant business started
logistics expert. The shift in focus is not without as a small well-located Burrito shop and has grown
risks for UPS. Contract logistics is historically a to be a 16-store enterprise in the San Francisco Bay
lower-margin business than package delivery. But Area. Capitalizing on the beginning of the “fast-
UPS maintains it is already seeing such a payoff. casual” trend in the restaurant industry, Greg consid-
UPS is taking on more and more contracts where ered several options for his business as he attempted
its brown trucks aren’t involved—or where they to position HTB for future growth and success.
come into play only at the end of the journey. 29 The Pet Care Industry: From PetsMart to
24 Video Game Industry: Game Wars 24-1 Camp Bow Wow 29-1
Ronald Glover and Cliff Edwards Debora J. Gilliard
While broadcast TV audiences dwindle and movie The $36 billion U.S. pet products industry is
going stagnates, gaming is emerging as the newest expected to average 6 percent annual growth
and, perhaps, strongest pillar of the media world. through 2010. Industry leader PetsMart must
Gaming is exploding in all directions—going consider its future strategy needs as it looks
online, mobile, and global. toward 2010. The case also examines the rapidly
25 Young & Rubicam: ACT II: Ann Fudge’s Two growing niche (20% annually) market of dog
Year Break from Work Has Changed Her daycare, and a Denver-based startup. Camp Bow
Life 25-1 Wow—a rapidly growing participant in this niche.
Diane Brady 30 From KaZaA to Skype 30-1
Ann Fudge is an odd duck in Corporate America, N. Rajshekar, V. Kalyani
and not just because she’s a CEO who is also The creators of KaZaA, the online file-sharing
black and female. Fudge, who now heads program, entered the Voice over Internet Protocol
communications and advertising giant Young & (VoIP) market with their new service, Skype—a
Rubicam Inc., did the unthinkable for a high- PC-to-PC telephony software using the same peer-
powered, rising-star executive: She took two years to-peer (P2P) infrastructure that was the basis of
off—to read, write, travel, and enjoy life. KaZaA and that did not require expensive central
servers for its maintenance. Skype’s business
Section B Comprehensive Cases 26-1
model, legal issues, its position in the market, and
26 JetBlue Airways 26-1 the challenges it faces are examined.
Brian Shutt, Mary Kay Sullivan, and 31 Nokia and the Global Mobile Phone
John Gallagher Industry 31-1
JetBlue has developed the ability to build Shirisha Regani
competitive advantage from a set of interrelated Nokia faced many problems in 2004, including the
value-creating activities that are also very difficult company’s tardiness in introducing the clamshell
for other participants in the airline industry to phones and its resistance to manufacturing
replicate. Should JetBlue continue this strategy or operator specific handsets. The challenges the
consider alternatives based on dramatic changes company faces in the future and the various
occurring in or arising outside the airline industry options ahead of it in attempting to reclaim its
that dramatically influence its future? previous prominence are examined and analyzed.
27 Kentucky Fried Chicken and the Global Fast- 32 Anheuser-Busch and Harbin Brewery Group of
Food Industry—2005 27-1 China 32-1
Jeffrey A. Krug Michael H. Moffet and Kannan Ramaswamy
KFC’s business strategy from the 1990s through Anheuser-Busch, the U.S. multinational brewer,
2005 is examined from both a domestic and an acquired Harbin Brewery, a Chinese-owned
xxviii Table of Contents

company with extensive operations in the northeast industry. Here is an excellent study of innovation
of China. Harbin Brewery was partly owned by strategy and a chance to explore whether this is
SABMiller through a joint venture when AB launched Apple’s last hoorah or just an interim step.
a takeover bid. 38 Best Buy: Staying at the Top 38-1
33 Coca-Cola’s Marketing Challenges in Brazil: Henri Bourgeois
The Tubaínas War 33-1 Best Buy is the largest North American retailer in
Davi Gertner, Rosane Gertner, and consumer electronics. However, the company’s
Dennis Guthery current chief executive officer, Brad Anderson,
Coca-Cola Company was facing challenges in who recently took over from Best Buy’s legendary
Brazil. Not only was Coke up against its nemesis, founder, Dick Schulze, is facing some major
Pepsi, it also had to compete with hundreds of challenges. We ask you to analyze and make
local brands, called tubaínas, many of which did recommendations regarding the leadership
not pay taxes. How can Coke better compete in the challenges in sustaining superior performance, as
Brazilian soft-drink industry? well as compare your inclinations to what
34 The National Basketball Association’s Anderson has done.
International Strategy 34-1 39 Benetech Bookshare.org: A Technology Social
Kyle Moon and John Lawrence Venture 39-1
The National Basketball Association has played Geoffrey Desa, Suresh Kotha, and
with international growth through a variety of Douglas E. Olesen
different tactics over the past several decades. Due Bookshare.org is a nonprofit venture started by a
to the success of its international campaign, the successful Silicon Valley entrepreneur, Jim
NBA has seen a dramatic influx of foreign-born Fruchterman. Based on Napster file-sharing
players in the NBA. The NBA’s strategic options software, he began this venture that shares digital
for global expansion are examined and evaluated. books with sight and print impaired persons. The
35 Wal-Mart Stores Inc.: Dominating Global strategies, tactics, and issues involved in the
Retailing 35-1 development of this social venture and its growth
Kannan Ramaswamy are examined and discussed.
The fundamental features of the business model 40 Making It Big 40-1
that Wal-Mart has been adopting, both in the Joan Winn
United States and abroad, are examined. The Cynthia Riggs founded a company that
likelihood of Wal-Mart’s continued success in the manufactures clothing for large and “super size”
face of allegations of labor violations, increasing women. After rapid growth into the new century,
competition in foreign markets, and the likelihood Make It Big experienced average annual sales
of a supplier push-back against Wal-Mart’s declines exceeding 5 percent over the last four
continued pressure to bring down their prices is years. Employee morale dropped, as did Riggs’s
questioned and examined. enthusiasm, and she was not sure what to do.
36 Target Stores’ Differentiation Strategies 36-1 Strategic analysis and sound strategic options are
Suchitra Jampani and Ajith Sankar explored in response to this dilemma.
Target entered the discount retailing sector in 1962. 41 The Apollo Group, Inc. (University of
It has succeeded in differentiating itself from other Phoenix) 41-1
discount retailers. The case also elaborates on the Richard B. Robinson
merchandising, advertising, and branding efforts of The University of Phoenix and three other
Target, which helped to create a unique image in the educational businesses comprise The Apollo
minds of Target customers, allowing it to become the Group, Inc. It is an exciting story about an
second largest retailer in the discount retail industry. education business built by a visionary
37 Apple Computer 2005: iTunes, iPod entrepreneur, John Sperling, who was concerned
and iMac 37-1 about the inadequate higher educational options
Katie Sticklor, Wendy Silva, and Alan N. Hoffman provided to working adults by traditional colleges
Much like Steven Jobs’s first Apple computer in the and universities. In the process, UOP has become
mid-1980s, the brilliant creation of the iPod and the largest private university in America. Has its
iTunes music service in the last few years by Jobs phenomenal ride to the top reached its peak, or is
and Apple has launched a whole new global future growth just as bright?
 Table of Contents xxix

42 XM Radio: The Sky Is the Limit 42-1 47 The Procter & Gamble (P&G)–Gillette
Joseph Jordan, Melissa A. Schilling, Merger 47-1
Matthew Shaffer, Jason Sullivan, and Nancy Ruchi Chaturvedi N.
Wolfe (Part A), and Richard Robinson (Part B) Gillette and Procter & Gamble, the two leading
XM Satellite Radio’s business model called for two global consumer goods companies, have merged.
primary revenue sources, a $9.99 subscription fee What was the thinking behind the merger? What
and advertising space in several of its synergies can the companies expect? Possible
programming channels. By 2005, however, XM threats to the merger, including cultural
was facing mounting losses and the future seemed differences, are also discussed.
anything but certain. Some market analysts were 48 Turnaround of JCPenney 49-1
beginning to have second thoughts about XM’s Ajith Sankar
long-term prospects. JCPenney used to be a leading U.S. retailer, but it
43 BET: The Edge on Talent 43-1 was unable to adapt itself to the changing business
Gerry Yemen, Erika James, and Martin Davidson environment of the 1990s. It has since moved from a
Robert L. Johnson accomplished what many decentralized to a centralized merchandising system,
thought couldn’t be done: He founded a company revamped its HR practices, sold off its drugstore
that leveraged managerial talent, largely African Eckerd, and repositioned itself as a trendy, yet value-
American, and grew it into one of the leading oriented retailer. Now Penney’s revenues and stock
media companies in the world. The start-up of prices are improving dramatically.
Black Entertainment Television (BET) is compared 49 DaimlerChrysler AG and the Global
with businesses in other industries and markets. Automotive Industry 49-1
The case offers an opportunity to examine the Robert J. Mockler, Marc E. Gartenfeld, and
strategic benefits of the BET brand to various Besnik Fetoski
consumer groups and to assess the growth and DaimlerChrysler and the automobile industry are
viability of each group and product category. emerging from the economic downturn of a few years
44 Robin Hood 44-1 ago and making strategic decisions looking toward
Joseph Lampel 2010 and beyond. DaimlerChrysler has still been
You are put in the position of being a strategic aid- losing money long after the synergies from its earlier
de-camp to Robin Hood as CEO of his merry band merger had been expected to be in full swing. The
of outlaws in Sherwood Forest many years ago. challenge facing its CEO? Reshape DaimlerChrysler
Robin seeks to evaluate his past tactics and so that it can once again produce attractive returns
current strategic options in an evolving for its increasingly frustrated stockholders.
competitive rivalry with the Sheriff of Nottingham 50 General Motors—2005 50-1
for the hearts and minds of people in the region. David Welch, Dan Beucke, Emily Thornton, and
45 Southwest Airlines Act II—An Airline in Richard Robinson
Trouble? 45-1 General Motors is a global icon at a critical
Shirisha Regani juncture in its existence. GM is losing an average
Southwest’s culture has changed in the last few years. of $1 billion every two months, it is saddled with a
To what extent were these changes related to $1,600-per-vehicle handicap in “legacy costs,”
leadership? New CEO Gary Kelly must now change retirement health and pension benefits, and an
the culture for the better and replace legendary Herb inevitable junk bond rating. Can it survive intact,
Kelleher at the helm of Southwest Airlines. or will its 100-year-old brand names be acquired
46 IKEA’s Innovative Human Resource by a Chinese, Korean, or Japanese suitor?
Management Practices and Work Culture 46-1
Shirisha Regani NAME INDEX I-1
IKEA was one of the largest furniture manufacturers
and retailers in the world, with operations in 32
countries. It is also well known for its stylish and SUBJECT INDEX I-11
innovative designs. IKEA’s main strength has always
been its committed workforce, which was often the
CASE INDEX I-25
source of the company’s innovative concepts. Can
IKEA keep that in an outsourcing world?