CONTENTS
1 INTRODUCTION = 1
1.1 Strategic Management = 1
1.2 The Role of Business Strategy = 2
Examples : Dell Computer and Compaq Computer = 4
The Dynamics of Business Strategy = 6
Strategic Planning versus Strategic Thinking = 8
1.3 The Organization and Its Objectives = 10
Performance : Overarching Objectives = 10
Firms and Managers = 12
1.4 Perspectives on the Impact of the General Manager = 14
1.5 Organization of the Book = 16
2 BUSINESS STRATEGY = 19
2.1 Introduction = 19
2.2 Describing Business Strategy = 19
Goals = 20
Scope = 21
Competitive Advantage = 21
Logic 22
2.3 Relationship of Strategy to Mission, Purpose, Values, and Vision = 24
Mission, Purpose, and Values = 24
Vision = 27
2.4 The Strategy Statement = 28
Benefits of an Explicit Strategy Statement = 29
The Form and Use of the Strategy Statement = 30
An Example : Borders Books = 31
2.5 Developing Strategy : The Strategy Process = 33
Strategy Identification = 34
Strategy Evaluation : Testing the Logic = 35
Strategy Process and Strategic Change = 36
2.6 Summary = 38
3 COMPETITIVE ADVANTAGE = 39
3.1 Introduction = 39
3.2 Value and Competitive Advantage = 39
3.3 Two Main Routes to Competitive Advantage = 41
Position = 43
Capabilities = 46
3.4 Sustainable Competitive Advantage = 48
Capability as Sustainable Competitive Advantage = 49
Position as Sustainable Competitive Advantage = 50
3.5 The Relationship of Position to Capabilities = 51
3.6 Position, Capabilities, and "The Resource-Based View of the Firm" = 53
3.7 The Cost-Quality Frontier and Competitive Advantage = 55
Product Quality and Cost = 56
A Cost-Quality Framework = 58
Using the Cost-Quality Frontier to Illustrate Competitive Advantage : An Example = 59
3.8 Summary = 63
4 INTERNAL CONTEXT : ORGANIZATION DESIGN = 65
4.1 Introduction = 65
4.2 Organization Design and Competitive Advantage = 65
4.3 Strategy and Organization at Southwest Airlines = 67
Southwest's Strategy and Performance = 67
Southwest's Organization = 68
Comparisons to Other Airlines = 70
Summary : Consistency and Alignment = 71
4.4 The Challenge of Organization Design = 71
The Coordination Problem = 72
The Incentive Problem = 73
4.5 Meeting the Challenge = 75
Architecture : Structure = 76
Architecture : Compensation and Rewards = 82
Routines = 86
Culture = 88
4.6 ARC Analysis = 89
4.7 Summary = 90
5 ORGANIZATION AND COMPETITIVE ADVANTAGE = 93
5.1 Introduction = 93
5.2 Aligning Strategy and Organization = 95
Applying ARC Analysis to Assess Strategic Alignment : Southwest Airlines Revisited = 97
Other Examples : Sony, Apple Computer, and Silicon Graphics = 101
5.3 Building and Creating Competitive Advantage = 102
Explorers and Exploiters = 103
Interdependence and Tight-Coupling = 106
Organizational Slack = 109
Central Direction = 110
The ARC of Explorers and Exploiters = 111
5.4 Combining Exploration and Exploitation = 114
5.5 Costs of Organizational Change = 117
5.6 Summary = 117
6 EXTERNAL CONTEXT : INDUSTRY ANALYSIS = 119
6.1 Introduction = 119
6.2 The Effects of Industry Characteristics on Firm Performance = 120
6.3 Organizing Industry Analysis = 123
6.4 A Framework for Industry Analysis = 127
Value Creation : Potential Industry Earnings(PIE) = 129
Determinants of PIE = 130
An Example of Value Creation : Lobster PIE = 133
Capturing Value : Dividing PIE = 136
Competition = 136
Entry and Incumbency Advantage = 138
An Example of the Effects of Competition and Entry = 139
Vertical Power : Buyer or Supplier Power 140
Dividing the Lobster PIE = 142
6.5 Industry Definition = 144
Industry Definition Based on "Close" Substitutes = 145
Industry Definitions for Systems of Complementary Products = 146
6.6 Summary = 147
7 THE SPECTRUM OF COMPETITION AND NICHE MARKETS = 149
7.1 Introduction = 149
7.2 The Spectrum of Competition = 150
Structure and Behavior = 153
7.3 Niche Markets and Product Differentiation = 154
Building, Defending, and Exploiting a Market Niche : Benetton and the Gap = 155
7.4 Consumer Preferences and Product Differentiation = 157
Preferences and Products = 157
Horizontal and Vertical Product Differentiation = 161
7.5 Differentiation and Competition = 162
Niches and Neighbors = 163
Differentiation Softens Competition = 165
Price Competition and Market Share = 168
7.6 Product Positioning = 170
7.7 Summary = 172
Appendix Monopoly, Competition, and Niche Markets = 172
Monopoly = 173
Perfect Competition = 176
Niche Markets = 178
8 COMPETITION IN CONCENTRATED MARKETS = 185
8.1 Introduction = 185
8.2 Oligopoly : The Elements of Strategic Interaction = 186
Differences in Actions = 189
Timing = 197
Players = 199
Information = 200
Repetition = 202
Summary = 208
8.3 Dominant Firms = 209
8.4 Antitrust = 211
Collusion and Antitrust = 211
8.5 Summary = 213
9 ENTRY AND THE ADVANTAGE OF INCUMBENCY = 215
9.1 Introduction = 215
9.2 Types of Incumbency Advantage = 217
Scale Advantages = 217
Incumbency Advantage from Cumulative Investment = 222
Incumbency Advantage from Consumer Loyalty = 226
Incumbency Advantage from Switching Costs and Demand-Side Increasing Returns = 227
Incumbency Advantage from Sunk Costs = 228
Firm Scope = 229
9.3 Entry Barriers at Work = 231
9.4 Strategically Creating Incumbency Advantage = 232
Packing the Product Space = 232
Blocking Entry through Contact or Vertical Integration = 235
Signaling to Prevent Entry = 235
Entry Barriers and Antitrust = 236
9.5 Summary = 237
10 CREATING AND CAPTURING VALUE IN THE VALUE CHAIN = 239
10.1 Introduction = 239
10.2 Value Creation and Value Capture = 239
10.3 The Value Chain and Buyer or Supply Power = 242
10.4 Capturing Value = 244
Value Capture without Buyer or Supplier Power = 245
Value Capture by a Single Powerful Supplier(or Buyer) = 247
Value Capture When Buyers and Suppliers Are Powerful = 249
Reducing Power in Other Segments = 254
10.5 Creating Value = 255
Opportunities for Creating Value : The Coordination Problem = 257
Contracting to Create Value : The Incentive Problem = 260
10.6 Summary = 263
Appendix Price Discrimination = 264
11 STRATEGIC MANAGEMENT IN A CHANGING ENVIRONMENT = 271
11.1 Introduction = 271
11.2 The Evolution of the U.S. Automobile Industry = 272
11.3 Change and Competitive Advantage = 274
11.4 Industry Life Cycle = 277
Emergence = 278
Growth 283
Maturity and Decline = 284
11.5 The Evolution of Industry Organization = 287
Horizontal vs. Vertical Organization = 287
Organizational Implications of Industry Structure = 292
11.6 Managing Strategic Change = 294
Overcoming the Barriers to Strategic Change = 294
Managing Under Uncertainty : Scenario Analysis = 301
Strategic Change : An Example = 302
11.7 Summary = 304
12 STRATEGY IN MARKETS WITH DEMAND-SIDE INCREASING RETURNS = 305
12.1 Introduction = 305
12.2 Sources of Demand-Side Increasing Returns(DSIR) = 306
Compatibility Benefits = 306
Network Benefits = 308
12.3 Competition in Markets with Demand-Side Increasing Returns = 311
Installed Base and Tipping = 311
Competitive Strategies for Building DSIR = 315
12.4 Systems of Components = 317
System Compatibility = 317
Leveraging Market Position = 318
12.5 Technology Adoption = 321
12.6 Managing the Adoption Process = 323
Marketing to Create Momentum = 324
Leveraging Reputation = 324
Committing to "Open" Standards = 325
Winning Over An Influential Buyer = 325
Advance Sign-Ups = 325
Winks at Pirates = 325
Leasing = 326
Price Commitments = 326
12.7 Standards-Setting Processes = 326
12.8 Summary = 328
13 GLOBALIZATION AND STRATEGY = 329
13.1 Introduction = 329
13.2 Implications for Managers = 330
13.3 Strategic Gains from Globalization = 332
13.4 Globalization of Industries and Economies = 334
13.5 Strategic Challenges = 335
The Challenge of Local Responsiveness = 336
The Challenge of Global Efficiency = 340
The Challenge of Learning = 341
13.6 Organizing to Meet the Challenge = 344
Federated vs. Centralized = 344
Building the Middle Ground = 345
The Regional Organization = 346
Locational Advantage = 346
The Transnational Corporation = 348
13.7 Summary = 349
14 CORPORATE STRATEGY : MANAGING FOR VALUE IN A MULTIBUSINESS COMPANY = 351
14.1 Introduction = 351
14.2 A Framework for Corporate Strategy = 352
Managing Strategic Spillovers = 354
A Framework for Corporate Strategy = 356
14.3 Does Corporate Add Value? = 358
The Performance of Diversified Firms = 359
14.4 Strategic Spillovers and Competitive Advantage = 361
Identifying and Managing Spillovers = 362
Sources of Spillovers = 363
14.5 Levers : Resource Allocation and Organization Design = 366
Resource Allocation = 367
Organization Design = 371
Corporate Direction = 377
14.6 Summary = 379
15 THE STRATEGY PROCESS = 381
15.1 Introduction = 381
15.2 Some Principles of the Strategy Process = 382
15.3 Business Strategy Process = 383
Strategy Identification = 384
Strategy Evaluation = 385
Developing and Evaluating Strategic Options = 387
Selecting and Communicating the Strategy = 388
Strategy Process in a Rapidly Changing Environment = 389
15.4 Strategic Plans = 390
15.5 The Evolution of Strategy = 393
Autonomous and Intentional Strategic Changes = 396
15.6 Corporate Strategic Processes = 397
Corporate Strategy Processes for Strategically Independent
Businesses = 397
Corporate Strategy for Strategically Interdependent
Businesses = 401
The Role of General Managers = 402
15.7 Concluding Remarks = 403
APPENDIX APPLYING GAME THEORY TO STRATEGIC MANAGEMENT = 405
A.1 Introduction = 405
A.2 A Famous Example : The Prisoners' Dilemma = 406
A.3 Nash Equilibrium and = 410
A.4 The Effect of Repetition = 414
A.5 Credibility, Commitment, and Flexibility = 416
The Value of Flexibility : Real Options = 417
Commitment and Credibility = 418
A.6 Strategic Behavior in the Presence of Asymmetric Information = 422
A 7 Summary = 425
CREDITS = 427
INDEX = 429
