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‘and you shall know the truth, and the truth shall set you free.’
John 8:32
PART TWO STRATEGIC ANALYSIS
5.3
PART THREE STRATEGY FORMULATION
6.4
6.5
7.3.3
7.7.1
8.7
8.8
PART FOUR STRATEGY IMPLEMENTATION
PART TWO STRATEGIC ANALYSIS
PART THREE STRATEGY FORMULATION
Acknowledgements
At Oxford University Press, I would like to extend a special thank you to publishing editor, Kate Gilks, and all those involved with the production and distribution of this book. I would like to thank copy-editor, Fiona Barry, proofreader, Francesco Ingrao, and Prem Tiwari for managing the proofs. I would also like to thank the reviewers who provided constructive comments. My foremost thanks are to my wife, Sue, for her encouragement and support.
Every effort has been made to trace and contact copyright holders but this has not been possible in every case. If notified, the publisher will undertake to rectify any errors or omissions at the earliest opportunity.
About the Author
Anthony Henry worked as a Market Analyst for HSBC in central London before joining the university sector. He has experience working for public and private sector organizations, including Arthur Andersen. He has also counted traffic for a firm of transport consultants, worked in a soap factory, and taught strategy in the UK and Germany to global managers working for a FTSE-100 organization. He has worked as a Senior Lecturer in Strategic Management. In developing and teaching strategy modules over several years, he has acquired a deep understanding of students’ needs, as well as insights into how a textbook can be a powerful tool for successful teaching.
He recently spent seven years updating his business experience by working as a senior manager in a medical company before returning to the university sector. His appreciation of the business environment is used to enhance student understanding of the theory and practice of strategy. Anthony currently teaches strategy to undergraduate and MBA students at Aston University’s Business School.
About the Book
This third edition is a major update of the previous edition. It focuses on the aspects of strategy students encounter as they seek to analyse, evaluate, and understand this topic. The pursuit of sustainable competitive advantage continues as a key theme throughout the book. This is tempered by experience which suggests disruptive markets make competitive advantage ephemeral. Each chapter provides clear, robust, and practical discussions of the concepts students encounter when studying strategy. The use of analysis, formulation, and implementation provides students with a structure to understand the subject while making it clear the business world has a tendency to differ from neat, academic theories.
We not only discuss strategic concepts, frameworks, and analytical tools but, importantly, critique them. This encourages students to think analytically. Each chapter includes relevant business examples to facilitate student understanding. A few of the many changes in the third edition include a robust discussion of strategy in Chapter 1, grounded in the business world. Chapter 3 and 6 include an assessment of disruptive innovation. In Chapter 4, there is an evaluation of financial metrics. In Chapter 5, we evaluate dynamic capabilities as a means of dealing with the limitations of the resource-based view of strategy. Chapter 10 includes the latest thinking on leadership, while Chapter 11 updates the reader with the changes taking place in corporate governance. The existing literature on strategy is updated in every chapter.
The majority of Case Examples and Strategy in Focus boxes are written by the author to provide students with a seamless transition from discussion to application. The third edition is comprehensive which allows a detailed study of strategy while its eleven chapters also facilitate shorter courses without sacrificing important strategy content. Guidance on how to use this book and online resources is available to students in the next section.
Anthony E. Henry January 2018
How to Use this Book
Chapter Maps
Easily navigate through the key coverage and the online resources accompanying each chapter with these handy chapter maps.
earning Objec tives
After completing this c
ter completing this chapter you should be able to:
Explain what is meant by strategy
● Explain what is mea
● Commentonthe ro
● Develop a strategic management framework Learning
Comment on the role of values, vision, and mission in facilitating strategy
Describe the changes in the approach to strategy
● Identify different perspectives on strategy formulation
Learning Objectives
Clear, concise learning objectives outline the main concepts and themes to be covered within the chapter. These lists will help you review your learning and effectively plan revision, ensuring you have considered all key areas.
General Robert Wood John STRATEGY Johnson &
STRATEGY IN FOCUS 1.1 Organizational Values at Johnson & Johnson: How their Credo Guides Strate
General Robert Wood Johnson guided Johnson & Johnson from a small, family-owned business to enterprise. In doing so he had an enlightened view of a corporation’s responsibilities beyond the m and marketing of products. In 1935, in a pamphlet titled Try Reality he urged his fellow industrialis ‘a new industrial philosophy’. Johnson defined this as the corporation’s responsibility to customer the community, and stockholders.
Eight years later, in 1943, Johnson wrote and first published the Johnson & Johnson Credo document outlining these responsibilities in greater detail. Putting customers first and stockho arefreshingapproach to themanagementofa businessHoweverJohnson wasa practicalbus
C ASE EXAMPLE Intel’s Theory of the Business
C ASE EXAMPLE
ve: Intel’s First Employee
Andy Grove: Intel’s First Employee Andy Grove was born Andras Istvan Grof in Hungary, where he lived under both Nazi and late occupation. He arrived in the United States in January 1957 and shortly after changed his nam Stephen Grove. He acquired a Ph.D. in chemical engineering at the University of California at Be joining Fairchild Semiconductor. In 1968, Gordon Moore, along with another executive, Robert No child Semiconductor to found Intel. When Andy Grove heard they were leaving, he decided to go w Grove recalls, ‘I never got an invitation’; he just went. At this time, there were many companies alr hi hl ih illd iWhM id
is always changing. To suc
Strategy in Focus boxes
Learn from real-life situations in the business world with these short illustrations taken from a range of contemporary news sources, demonstrating how vital effective strategic management is to any business.
Case Examples
Applying the theoretical ideas from the chapter to a variety of business situations, these extensive Case Examples, with accompanying questions, encourage you to identify how strategy works in a variety of international, wide-ranging, and relevant business situations.
For a wider discuss online resources an www.oup.com/uk/h
For a wider discussion of the theory of the business and its impact on business strategy online resources and see the Extension Material for this chapter. www.oup.com/uk/henry3e/
1.3.2 Business Models
The concept of business model is actually captured by Drucker in ‘the theory of the business’, disc 1.3.1 This is because a business model will include assumptions about markets, customers, and t capabilities and weaknesses. Joan Magretta defines a business model as, a story which explains how works.30 It answers questions posed by Drucker, such as: who is the customer? And, what does the c
Extension Material Signposts
If your course goes into extra depth on a specific topic or you want more examples and discussion to aid your understanding, follow the relevant signposts to Extension Material available online for additional coverage that builds seamlessly on the book.
For more information on how to undertake scenario planning, go to the online resource the Working through Strategy feature for this chapter. www.oup.com/uk/henry3e/
For more informati the Working throug www.oup.com/uk/h
2.4 PEST Analysis
24 PEST An
A useful tool when scanning the macro-environment is PEST analysis. This refers to political, econ technological factors. It is worth noting that some commentators include legal and environmental fa preferring to extend the acronym to PESTLE. However, the legal element of the acronym can be subs political factor. In addition, the use of the last E (which refers to environmental factors) is often me
Working through Strategy Signposts
To help you get a firmer handle on the essential tools of analysis, the Working through Strategy resources, available online, are signposted wherever additional coverage and examples of analytical tools and techniques are provided to further your understanding.
Review and Discussion Questions
Review Q
Review Questions
1. What is strategy?
1. What is strategy?
2. How does a strategic management framework aid our understanding of strategy?
2. How does a strategic
Discussion Question
It is only companies which are not prepared to engage in rigorous analysis that have a vision. Discu
Research Topic
1. Identify organizations
Reinforce your learning, aid your revision, and share ideas with these end-of-chapter review and discussion questions covering the main themes and issues raised in the chapter.
Research Topics
1. Identify organizations in which clearly communicated values correlate with organizational su
2. Select a combination mission statement sig
2. Select a combination of private- and public sector organizations and identify the extent to wh mission statement signposts to stakeholders what business they are in.
Recommended Reading Research
Take your learning further and practise your researching skills with these stimulating starting points for focussed research on a specific topic or issue related to the chapter.
Recommen
Recommended Reading
● M. E. Porter, ‘What is st
● M. E. Porter ‘What is strategy?’, Harvard Business Review vol. 74, no. 6 (1996), pp. 61–78.
● R. P. Rumelt Good Stra
● R. P. Rumelt Good Strategy Bad Strategy Crown Business, 2011.
For an insight into the debate on deliberate and emergent strategies see:
● R. T. Pascale, ‘Perspectives on strategy: the real story behind Honda’s success’, California Manag vol. 26, no. 3 (1984), pp. 47–72.
● H. Mintzberg ‘The design school: reconsidering the basic premises of strategic management’ S Management Journal vol. 11, no. 3 (1990), pp. 171–95. HIA ff ‘C iti fH Mi tb Th di hl id ithb ii mission statement sign
Glossary
A Glossary
A Accounting profit – measures the difference between the total revenue generated by the organization and its total cost.
Acquisition (or takeover) – when one organization seeks to acquire another, often smaller, organization.
Blue oceans – represents a strategic competitors that has the potential fo and highly profitable growth.
Business model – answers question is the customer? And, what does the It answers a crucial question for man with how to make money from the b
Recommended Reading
Seminal books and journal articles that have contributed to the field of strategic management are provided in an annotated list at the end of chapters, offering the opportunity to read around a particular topic, broaden your understanding, or provide useful leads for coursework and assignments.
Glossary
A comprehensive glossary is provided at the end of the book to check your understanding of key terms.
How to Use the Online Resources
This book is accompanied by a bespoke package of online resources that are carefully integrated with the text to assist the learning and teaching of the subject. Students can benefit from extension material, multiple-choice questions, web links, and exercises, while lecturers can make use of a question test bank, suggested answers to questions in the book, and PowerPoint lecture slides.
Go to www.oup.com/uk/henry3e/ to find out more.
PART ONE
WHAT IS STRATEGY? CHAPTER 1
1.7 A Strategic Management Framework 1.5 Changes in the Approach to Strategic Management
Extension Material Organizations whose values influence their decision making
1.6 Different Perspectives on Strategy Formulation
Extension Material Theory of the business and its impact on business strategy
Extension Material Debate surrounding Honda’s domination of the US motorcycle industry
Main Reference Drucker, P.F. (1995). Managing in a Time of Great Change . Butterworth Heinemann, Oxford.
Learning Objectives
After completing this chapter you should be able to:
● Explain what is meant by strategy
● Comment on the role of values, vision, and mission in facilitating strategy
● Describe the changes in the approach to strategy
● Identify different perspectives on strategy formulation
