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|List of Figures|
|Ch. 1||What Is Strategy?||1|
|What Is Strategy?||1|
|The Changing Strategy Context||5|
|Evaluating Strategic Options||10|
|The Evolution of Strategic Thinking||11|
|Major Issues in Strategic Management||12|
|Ch. 2||Change and Uncertainty in the External Strategic Environment||14|
|Change in the External Environment||15|
|Change in the Industry Environment||18|
|Risk and Uncertainty||25|
|Ch. 3||Leveraging Internal Resources and Change Drivers for Competitive Advantage||30|
|Strategic Resources and Competitive Advantage||40|
|Analyzing Internal Change Forces||43|
|Ch. 4||Formulating Business Unit Strategy||49|
|Porter's Generic Strategies||52|
|Strategic Analysis at the Business Unit Level||58|
|Designing a Profitable Business Model||63|
|Ch. 5||Business Unit Strategy: Context and Special Dimensions||68|
|Emerging, Growth, Mature, and Declining Industries||68|
|Fragmented, Deregulating, and Hypercompetitive Industries||71|
|Business Unit Strategy: Special Dimensions||77|
|Horizontal Strategic Thinking||82|
|Ch. 6||The Dynamics of Corporate Strategy||85|
|The Economics of Scale and Scope||86|
|Strategy and Corporate Governance||88|
|The Evolution of Strategic Thinking at the Corporate Level||89|
|Ch. 7||Strategic Options at the Corporate Level||99|
|Disinvestment Strategies: Sell-offs, Spin-offs, and Liquidations||108|
|Management Style Options: The Role of the Corporate Office||109|
|Evaluating Strategy Options at the Corporate Level||110|
|Ch. 8||Formulating a Global Strategy||113|
|Industry and Market Globalization||114|
|Generic Global Strategies||117|
|Formulating a Global Strategy||117|
|Global Strategy and Risk||123|
|Ch. 9||Strategy Implementation and Control||125|
|Implementation: Responsibility, Tasks, and Learning||125|
|Strategy and Performance: A Conceptual Framework||128|
|Purpose, Strategy, and Leadership||128|
|Structure, Systems, Processes, People, and Culture||130|
|Performance and Control||135|
|A Final Word||136|
Corporate success is increasingly tied to the ability of senior executives to craft and implement effective strategies. There is a demonstrated link between executives' strategic choices and their companies' long-term performance. The benefits accrue because companies that enjoy a substantial competitive advantage over their rivals typically have a better grasp of what their customers prefer, how they can create value, who their competitors are, and how they behave.
Formulating a sound strategy requires both analysis and synthesis, and therefore is as much a rational act as it is a creative one. Successful strategies reflect a clear strategic intent and a deep understanding of an organization's core competencies and assets. Generic strategies rarely propel a company to a leadership position. Knowing where you want to go and finding carefully considered, creative ways of getting there are the hallmarks of successful strategy.
This book is designed for practicing executives who are getting ready to assume broader responsibilities and need a short, practical, highly readable guide to strategy formulation, and for MBA and EMBA students who aspire to top management responsibilities.
The first chapter defines strategy as the act of positioning a company for competitive advantage by focusing on unique ways to create value for customers. It contrasts strategy with operational effectiveness, links strategy development to value creation and competitive advantage, and notes the importance of organizational learning in crafting an effective strategy.
Chapter 2 looks at the importance of changes in a firm's external strategic environment—drivenby economic, technological, political, and sociocultural change—and the impact of the evolutionary forces that shape an industry environment on a company's strategy formulation. In particular, we focus on two key issues that every strategist must confront: how to assess change and uncertainty and how to deal with them.
Chapter 3 focuses on the analysis of a firm's strategic resources including its physical assets, its relative financial position, the quality of its people, and specific knowledge, competencies, processes, skills, or cultural aspects of the organization.
Chapters 4 and 5 address the development of a competitive strategy at the business unit level. The principal focus of business unit or competitive strategy is on how to compete in a given competitive setting. In Chapter 4, we begin this discussion by asking: What determines profitability at the business unit level? We look at the relative importance of the nature of the industry in which a company competes, of a company's competitive position within the industry, and of the drivers that determine sustained competitive advantage. We also introduce a number of techniques that are useful for generating and assessing strategic alternatives, such as profit pool, growth vector, gap, competitor, and product life cycle analyses.
Since business unit strategy is developed in a specific industry context, Chapter 5 discusses six different industry environments. Three represent different stages in an industry's evolution—emerging, growth, and maturity. We then discuss three additional industry environments that pose unique strategic challenges—fragmented, deregulating, and hypercompetitive. Because hypercompetition is increasingly characteristic of business-level competition in many industries, we then discuss two critical attributes of successful firms in dynamic industries: speed and innovation. We conclude this chapter by considering the importance of vertical integration and horizontal thinking in business unit strategy formulation.
Chapters 6 and 7 deal with corporate strategy, which is concerned with identifying the businesses in which a company should compete and how a parent company can add value to its business units. In Chapter 6 we look at the concept of economics of scale and scope—a fundamental underpinning of corporate strategy—and try to answer the question: When is it better to be bigger? Next, we turn to the context in which corporate strategy is developed and executed. In particular, we note the importance of the dispersion in the ownership of large corporations and of the emergence of the market for corporate control. With this background, we trace the evolution of strategic thinking at the corporate level. Three perspectives are identified—the portfolio, value-based, and resource-based points of view—and their relative merits are assessed.
Chapter 7 looks at the different strategy choice options at the corporate level. We discuss concentrated growth strategies, diversification issues, merger and acquisition activities, cooperative strategies including joint ventures and alliances, and sell-offs, spin-offs, and liquidations. Next, we look at the issue of corporate management and how a parenting style affects portfolio composition. We conclude the chapter with a discussion of how to evaluate strategy choices at the corporate level.
Chapter 8 deals with formulating a global strategy. We first look at the driving forces behind the emerging global economy and characterize globalization in greater detail as an economic, political, social, and technological phenomenon. Next, we discuss industry globalization. In this section we focus on such questions as: What factors drive the globalization of industries? What explains the dominance of particular countries or regions in global industries? In the third section, we identify the principal dimensions of global strategy and introduce a framework for global strategic thinking that links global strategy options to the nature of the global industry environment. A major tenet of this discussion is that global strategy, more than strategy at the corporate or business unit levels, increasingly is played out in two arenas—a market and a nonmarket arena. We conclude this chapter with a consideration of the various strategic risk factors associated with a global strategic posture.
In Chapter 9 we identify key issues associated with implementing and controlling a chosen strategic direction. To this end, we present a conceptual framework that relates a company's strategy to its ultimate performance. This model has three primary components; the first links strategy, leadership, and corporate purpose; the second describes the organization in terms of its structure, systems, processes, people, and culture; while the third component relates performance to control.
Writing a book about a vast subject such as strategy involves making compromises and trade-offs. This book is no exception. In choosing what to include, where, and at what level of depth, we were guided by the book's primary objective—as a guide for practicing executives, MBA and EMBA students, and corporate development courses. As a consequence, we kept the book relatively short, practical, and highly readable. We adopted a broad perspective, sometimes at the expense of depth and detail about particular techniques or analysis frameworks.
We focused on the process of strategy development—not on strategic recipes. We tried to give the reader a sense of context—through the use of real examples and, where appropriate, of relevant historical references. Finally, a fundamental premise underlying this book is that strategy formulation and implementation are a dynamic process. As committed as they are to excellence in strategic decision-making, executives must remain equally committed to change. Successful implementation therefore increasingly calls for the use of change management techniques.