© 2008 AGI-Information Management Consultants

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libraries associated to dandelon.com network.

Charles W. L
University of Washington

Gareth R. Jones
Texas A&M University

Houghton Mifflin Company

Boston New York
 Contents
Preface xxiii

PART 1 Introduction to Strategic Management

Strategic Leadership: Managing the Strategy-Making Process for

Competitive Advantage
Opening Case: Wal-Mart 1
Overview 3
Strategic Leadership, Competitive Advantage, and Superior Performance 4
Superior Performance 4
Competitive Advantage and a Company's Business Model 5
Industry Differences in Performance 7
Performance in Nonprofit Enterprises 7
Strategic Managers 8
Corporate-Level Managers 9
Business-Level Managers 10
Functional-Level Managers 10
The Strategy-Making Process 11
A Model of the Strategic Planning Process 11
Mission Statement 13
Strategy in Action 1.1: Strategic Planning at Microsoft 14
External Analysis 18
Internal Analysis 19
SWOT Analysis and the Business Model 19
Strategy Implementation 20
The Feedback Loop 20
Strategy as an Emergent Process 20
Strategy Making in an Unpredictable World 21
Autonomous Action: Strategy Making by Lower-Level Managers 21
Strategy in Action 1.2: A Strategic Shift at Microsoft 22
Serendipity and Strategy 22
Strategy in Action 1.3: The Genesis of Autonomous Action at 3M 23
Intended and Emergent Strategies 24
Strategic Planning in Practice 25
Scenario Planning 26
Decentralized Planning 26
Strategic Intent 27
Strategic Decision Making 28
VIII Contents

Cognitive Biases and Strategic Decision Making 28

Groupthink and Strategic Decisions 29
Techniques for Improving Decision Making 30
Strategy in Action 1.4: Was Intelligence on Iraq Biased by Groupthink? 30
Strategic Leadership 32
Vision, Eloquence, and Consistency 32
Articulation of the Business Model 33
Commitment 33
Being Well Informed 33
Willingness to Delegate and Empower 34
The Astute Use of Power 34
Emotional Intelligence 34
Summary of Chapter 35 I Discussion Questions 36
Practicing Strategic Management 36
Small-Group Exercise: Designing a Planning System I Article File 1 I Strategic Management
Project: Module 1 I Exploring the Web: Visiting 3M I General Task
Closing Case: Shattered Dreams: Level 3 Communications 38
Appendix to Chapter 1: Enterprise Valuation, ROIC, and Growth 40

fT External Analysis: The Idenfflcation of Opportunities and T t a

Opening Case: Why Is the Pharmaceutical Industry So Profitable? 42
42
Overview 43
Defining an Industry 44
Industry and Sector 44
Industry and Market Segments 45
Changing Industry Boundaries 46
Porter's Five Forces Model 46
Risk of Entry by Potential Competitors 46
Economies of Scale 47
Brand Loyalty 48
Absolute Cost Advantages 48
Customer Switching Costs 48
Government Regulation 48
Strategy in Action 2.1: Circumventing Entry Barriers into the Soft Drink Industry 49
Rivalry Among Established Companies 50
Industry Competitive Structure 50
Strategy in Action 2.2: Price Wars in the Breakfast Cereal Industry 52
Industry Demand 52
Cost Conditions 53
Exit Barriers 53
The Bargaining Power of Buyers 54
The Bargaining Power of Suppliers 55
Running Case: Wal-Mart's Bargaining Power over Suppliers 56
Substitute Products 57
A Sixth Force: Complementors 57
Summary 57
Strategic Groups Within Industries 57
 Contents IX

Implications of Strategic Groups 59

The Role of Mobility Barriers 59
Industry Life Cycle Analysis 60
Embryonic Industries 60
Growth Industries 61
Industry Shakeout 61
Mature Industries 62
Declining Industries 63
Summary 63
Limitations of Models for Industry Analysis 63
Life Cycle Issues 63
Innovation and Change 64
Company Differences 66
The Macroenvironment 66
Macroeconomic Forces 66
Global Forces 68
Technological Forces 68
Demographic Forces 69
Social Forces 70
Political and Legal Forces 70
Summary of Chapter 71 I Discussion Questions 71
Practicing Strategic Management 72
Small-Group Exercise: Competing with Microsoft I Article File 2 I Strategic Management
Project: Module 2 I Exploring the Web: Visiting Boeing and Airbus I General Task
Closing Case: Plane Wreck: The Airline Industry in 2001-2004 73

PART 2 The Nature of Competitive Advantage

3 Internal Analysis: Distinctive Competencies,

Competitive Advantage, and Profitability 75
Opening Case: Dell's Competitive Advantage 75
Overview 76
Competencies, Resources, and Competitive Advantage 77
Strategy, Distinctive Competencies, and Competitive Advantage 77
Competitive Advantage, Value Creation, and Profitability 79
Differentiation and Cost Structure 83
The Value Chain 83
Primary Activities 83
Strategy in Action 3.1: Value Creation at Pfizer 85
Support Activities 85
The Building Blocks of Competitive Advantage 86
Efficiency 86
Running Case: Support Activities as a Source of Value Creation at Wal-Mart 87
Strategy in Action 3.2: Southwest Airlines' Low-Cost Structure 89
 Contents

Quality as Excellence and Reliability 89

Innovation 91
Responsiveness to Customers 92
Business Models, the Value Chain, and Generic Distinctive Competencies 92
Analyzing Competitive Advantage and Profitability 94
The Durability of Competitive Advantage 98
Barriers to Imitation 98
Capability of Competitors 100
Industry Dynamism 100
Summary 101
Avoiding Failure and Sustaining Competitive Advantage 101
Why Companies Fail 101
Steps to Avoid Failure 103
Strategy in Action 3.3: The Road to Ruin at DEC 104
The Role of Luck 105
Strategy in Action 3.4: Bill Gates's Lucky Break 105
Summary of Chapter 106 I Discussion Questions 106
Practicing Strategic Management 106
Small-Group Exercise: Analyzing Competitive Advantage I Article File 3 I Strategic
Management Project: Module 3 I Exploring the Web: Visiting
Johnson & Johnson I General Task
Closing Case: Google 107

(T Building Competitive Advantage Through Functional-Level Strategy

Opening Case: Verizon Wireless 109
109
Overview 110
Achieving Superior Efficiency 111
Efficiency and Economies of Scale 111
Efficiency and Learning Effects 113
Efficiency and the Experience Curve 114
Strategy in Action 4.1: Too Much Experience at Texas Instruments 116
Efficiency, Flexible Manufacturing, and Mass Customization 117
Strategy in Action 4.2: Toyota's Lean Production System 118
Marketing and Efficiency 119
Materials Management, Just-in-Time, and Efficiency 121
Strategy in Action 4.3: Supply-Chain Management at Office Superstores 122
R&D Strategy and Efficiency 123
Human Resource Strategy and Efficiency 123
Running Case: Human Resource Strategy and Productivity at Wal-Mart 124
Information Systems and Efficiency 125
Infrastructure and Efficiency 126
Achieving Superior Quality 127
Attaining Superior Reliability 127
Implementing Reliability Improvement Methodologies 128
I Contents XI

: Strategy in Action 4.4: General Electric's Six Sigma Quality Improvement Process 129
Improving Quality as Excellence 133
I Strategy in Action 4.5: Six Sigma at Mount Carmel Health J33
; Achieving Superior Innovation 135
!. The High Failure Rate of Innovation 135
| Building Competencies in Innovation 137
I Achieving Superior Responsiveness to Customers 142
? Focusing on the Customer 142
?• Satisfying Customer Needs 144
% Summary of Chapter 145 I Discussion Questions 146
f. Practicing Strategic Management 146
Small-Group Exercise: Identifying Excellence I Article File 4 I Strategic Management
Project: Module 4 I Exploring the Web: Visiting Applied Materials I General Task
Closing Case: Redesigning the American Car 147

PART 3 Strategies

5 Building Competitive Advantage Through Business-Level Strategy 149

Opening Case: Samsung Changes Its Business Model Again and Again 149
Overview 150
Competitive Positioning and the Business Model 151
Formulating the Business Model: Customer Needs and Product Differentiation 151
Formulating the Business Model: Customer Groups and Market Segmentation 153
Implementing the Business Model: Building Distinctive Competencies 156
Competitive Positioning and Business-Level Strategy 158
Competitive Positioning: Generic Business-Level Strategies 159
Cost Leadership 160
Strategy in Action 5.1: Ryanair Takes Control over the Sky in Europe 163
Focused Cost Leadership 164
Differentiation 166
Focused Differentiation 169
Strategy in Action 5.2: L.L. Bean's New Business Model 170
Strategy in Action 5.3: Up, Up, and Away in the Restaurant Business 171
The Dynamics of Competitive Positioning 172
Competitive Positioning for Superior Performance 173
Strategy in Action 5.4: Toyota's Goal? A High-Value Vehicle to Match Every Customer Need 175
Failures in Competitive Positioning 181
Strategy in Action 5.5: Holiday Inns on Six Continents 182
Summary of Chapter 183 I Discussion Questions 184
Practicing Strategic Management 185
Small-Group Exercise: Finding a Strategy for a Restaurant I Article 5 I Strategic Management
Project: Module 5 I Exploring the Web: Visiting the Luxury Car Market I General Task
Closing Case: How E*TRADE Uses the Internet to Gain a Low-Cost Advantage 186
XII Contents

Business-Level Strategy and the Industry Environment 187

Opening Case: Nike's Winning Ways 187
Overview 188
Strategies in Fragmented Industries 188
Chaining 189
Franchising 190
Horizontal Merger 191
Using Information Technology and the Internet 191
Strategies in Embryonic and Growth Industries 191
Strategy in Action 6.1: Clear Channel Creates a National Chain of Local Radio Stations 192
The Changing Nature of Market Demand 194
Strategic Implications: Crossing the Chasm 195
Strategy in Action 6.2: How Prodigy Fell into the Chasm 198
Strategic Implications of Market Growth Rates 198
Factors Affecting Market Growth Rates 199
Strategic Implications of Differences in Growth Rates 200
Navigating Through the Life Cycle to Maturity 201
Embryonic Strategies 202
Growth Strategies 202
Shakeout Strategies 203
Maturity Strategies 203
Strategy in Mature Industries 204
Strategies to Deter Entry: Product Proliferation, Price Cutting, and Maintaining Excess Capacity 205
Strategies to Manage Rivalry 207
Strategy in Action 6.3: Toys "R" Us's New Competitors 208
Game Theory 214
Strategy in Action 6.4: Coca-Cola and PepsiCo Go Head-to-Head 221
Strategies in Declining Industries 221
The Severity of Decline 222
Choosing a Strategy 223
Strategy in Action 6.5: How to Make Money in the Vacuum Tube Business 224
Summary of Chapter 225 I Discussion Questions 226
Practicing Strategic Management 226
Small-Group Exercise: How to Keep the Hot Sauce Hot I Article File 6 I Strategic Management
Project: Module 6 I Exploring the Web: Visiting Wal-Mart I General Task
Closing Case: Information Technology, the Internet, and Changing Strategies
in the Fashion World 227

Strategy in High-Technology Industries 229

Opening Case: The Smart Phone Format War 229
Overview 230
Technical Standards and Format Wars 231
Examples of Standards 231
Benefits of Standards 232
 Contents XIII

Strategy in Action 7.1: Where Is the Standard for DVD Recorders? 233
Establishment of Standards 234
Network Effects, Positive Feedback, and Lockout 235
Strategy in Action 7.2: How Dolby Became the Standard in Sound Technology 237
Strategies for Winning a Format War 239
Ensure a Supply of Complements 239
Leverage Killer Applications 239
Aggressively Price and Market 240
Cooperate with Competitors 240
License the Format 241
Costs in High-Technology Industries 241
Comparative Cost Economics 242
Strategic Significance 243
Strategy in Action 7.3: Lowering Costs Through Digitalization 244
Managing Intellectual Property Rights 244
Intellectual Property Rights 245
Digitalization and Piracy Rates 245
Strategies for Managing Digital Rights 246
Capturing First-Mover Advantages 247
First-Mover Advantages 248
First-Mover Disadvantages 249
Strategies for Exploiting First-Mover Advantages 250
Technological Paradigm Shifts 253
Paradigm Shifts and the Decline of Established Companies 253
Strategy in Action 7.4: Disruptive Technology in Mechanical Excavators 257
Strategic Implications for Established Companies 258
Strategic Implications for New Entrants 259
Summary of Chapter 260 I Discussion Questions 260
Practicing Strategic Management 261
Small-Group Exercise: Burning DVDs I Article File 7 I Strategic Management
Project: Module 7 I Exploring the Web: Visiting Kodak I General Task
Closing Case: Battling Piracy in the Videogame Market 262

Strategy in the Global Environment 263

Opening Case: The Evolution of Global Strategy at Procter & Gamble 263
Overview 264
The Global and National Environments 265
The Globalization of Production and Markets 265
Strategy in Action 8.1: Finland's Nokia 267
National Competitive Advantage 268
Increasing Profitability and Profit Growth Through Global Expansion 270
Expanding the Market: Leveraging Products 271
Realizing Cost Economies from Global Volume 271
Running Case: Wal-Mart's Global Expansion 272
Realizing Location Economies 273
Leveraging the Skills of Global Subsidiaries 275
XIV Contents

Cost Pressures and Pressures for Local Responsiveness 276

Pressures for Cost Reductions 277
Pressures for Local Responsiveness 277
Strategy in Action 8.2: MTV Goes Global, with a Local Accent 279
Choosing a Global Strategy 280
Global Standardization Strategy 281
Localization Strategy 281
Transnational Strategy 282
International Strategy 283
Changes in Strategy over Time 284
Basic Entry Decisions 285
Which Overseas Markets to Enter 285
Strategy in Action 8.3: Merrill Lynch in Japan 286
Timing of Entry 287
Scale of Entry and Strategic Commitments 288
The Choice of Entry Mode 289
Exporting 289
Licensing 290
Franchising 291
Joint Ventures 292
Wholly Owned Subsidiaries 293
Choosing an Entry Strategy 294
Global Strategic Alliances 296
Advantages of Strategic Alliances 296
Disadvantages of Strategic Alliances 297
Making Strategic Alliances Work 297
Partner Selection 297
Alliance Structure 298
Managing the Alliance 299
Summary of Chapter 300 I Discussion Questions 301
Practicing Strategic Management 301
Small-Group Exercise: Develop a Global Strategy I Article File 8 I Strategic Management
Project: Module 8 I Exploring the Web: Visiting IBM I General Task
Closing Case: Planet Starbucks 302

9 Corporate-Level Strategy: Horizontal Integration,

Vertical Integration, and Strategic Outsourcing 304
Opening Case: Read All About News Corp 304
Overview 305
Corporate-Level Strategy and the Multibusiness Model 306"
Horizontal Integration: Single-Industry Strategy 307
Benefits of Horizontal Integration 309
Strategy in Action 9.1: Beating Dell: Why Hewlett-Packard Wanted to Acquire Compaq 310
Running Case: Wal-Mart's New Chain of "Neighborhood Markets" 312
Problems with Horizontal Integration 313
Strategy in Action 9.2: Horizontal Integration in Health Care 314
 Contents XV

Vertical Integration: Entering New Industries to Strengthen the "Core" Business Model 315
Increasing Profitability Through Vertical Integration 317
Strategy in Action 9.3: Specialized Assets and Vertical Integration in the Aluminum Industry 319
Problems with Vertical Integration 320
The Limits of Vertical Integration 322
Alternatives to Vertical Integration: Cooperative Relationships 322
Short-Term Contracts and Competitive Bidding 322
Strategic Alliances and Long-Term Contracting 323
Building Long-Term Cooperative Relationships 324
Strategy in Action 9.4: DaimlerChrysler's U.S. Keiretsu 325
Strategic Outsourcing 326
Strategy in Action 9.5: Cisco's $2 Billion Blunder 328
Benefits of Outsourcing 329
Risks of Outsourcing 331
Summary of Chapter 332 I Discussion Questions 332
Practicing Strategic Management 333
Small-Group Exercise: Comparing Vertical Integration Strategies I Article File 9 I Strategic
Management Project: Module 9 I Exploring the Web: Visiting Motorola I General Task
Closing Case: The Rise of WorldCom 334

Corporate-Level Strategy: Formulating and Implementing

Related and Unrelated Diversification 336
Opening Case: United Technologies Has an "ACE in Its Pocket" 336
Overview 337
Expanding Beyond a Single Industry 338
A Company as a Portfolio of Distinctive Competencies 338
Increasing Profitability Through Diversification 340
Transferring Competencies Across Industries 341
Leveraging Competencies 342
Sharing Resources: Economies of Scope 343
Strategy in Action 10.1: Diversification at 3M: Leveraging Technology 344
Using Product Bundling 345
Managing Rivalry: Multipoint Competition 346
Utilizing General Organizational Competencies 346
Two Types of Diversification 349
Related Diversification 349
Unrelated Diversification 350
Strategy in Action 10.2: Related Diversification at Intel 351
Disadvantages and Limits of Diversification 352
Changing Industry- and Firm-Specific Conditions 352
Diversification for the Wrong Reasons 352
The Bureaucratic Costs of Diversification 354
Choosing a Strategy 356
Related Versus Unrelated Diversification 356
The Web of Corporate-Level Strategy 356
Entry Strategy: Internal New Ventures 357
XVI Contents

The Attractions of Internal New Venturing 358

Pitfalls of New Ventures 358
Guidelines for Successful Internal New Venturing 360
Entry Strategy: Acquisitions 361
The Attractions of Acquisitions 361
Acquisition Pitfalls 362
Strategy in Action 10.3: Postacquisition Problems at Mellon Bank 363
Guidelines for Successful Acquisition 365
Entry Strategy: Joint Ventures 366
Restructuring 367
Why Restructure? 367
Summary of Chapter 368 I Discussion Questions 369
Practicing Strategic Management 369
Small-Group Exercise: Dun & Bradstreet I Article File 10 I Strategic Management
Project: Module 10 I Exploring the Web: Visiting General Electric I General Task
Closing Case: Tyco International 377

PART 4 Implementing Strategy

Corporate Performance, Governance, and Business Ethics 373

Opening Case: Nike: The Sweatshop Debate 373
Overview 374
Stakeholders and Corporate Performance 374
Stakeholder Impact Analysis 375
Strategy in Action 11.1: Bill Agee at Morrison Knudsen 376
The Unique Role of Stockholders 377
Profitability, Profit Growth, and Stakeholder Claims 378
Strategy in Action 11.2: Price Fixing at Sotheby's and Christie's 380
Agency Theory 381
Principal-Agent Relationships 381
The Agency Problem 382
Governance Mechanisms 385
Strategy in Action 11.3: Did Computer Associates Inflate Revenues to Enrich Managers? 386
The Board of Directors 387
Stock-Based Compensation 388
Financial Statements and Auditors 390
The Takeover Constraint 391
Governance Mechanisms Inside a Company 392
Ethics and Strategy 394
Ethical Issues in Strategy 395
The Roots of Unethical Behavior 397
Running Case: Working Conditions at Wal-Mart 398
Philosophical Approaches to Ethics 399
Behaving Ethically 403
Summary of Chapter 406 I Discussion Questions 406
 Contents XVII

Practicing Strategic Management 407

Small-Group Exercise: Evaluating Stakeholder Claims I Article File 11 I Strategic Management
Project: Module 11 I Exploring the Web: Visiting Merck I General Task
Closing Case: The Collapse of Enron 408

Implementing Strategy in Companies That Compete in a Single Industry 411

Opening Case: Nokia's New Product Structure 411
Overview 412
Implementing Strategy Through Organizational Design 413
Building Blocks of Organizational Structure 414
Grouping Tasks, Functions, and Divisions 414
Allocating Authority and Responsibility 415
Strategy in Action 12.1: Union Pacific Decentralizes to Increase Customer Responsiveness 418
Integration and Integrating Mechanisms 418
Strategic Control Systems 419
Levels of Strategic Control 420
Types of Strategic Control Systems 422
Using Information Technology 424
Strategic Reward Systems 424
Strategy in Action 12.2: Control at Cypress Semiconductor 425
Organizational Culture 425
Culture and Strategic Leadership 426
Strategy in Action 12.3: How Ray Kroc Established McDonald's Culture 427
Traits of Strong and Adaptive Corporate Cultures 428
Building Distinctive Competencies at the Functional Level 429
Functional Structure: Grouping by Function 429
Running Case: Sam Walton's Approach to Implementing Wal-Mart's Strategy 430
The Role of Strategic Control 431
Developing Culture at the Functional Level 431
Functional Structure and Bureaucratic Costs 433
The Outsourcing Option 435
Implementing Strategy in a Single Industry 435
Implementing Cost Leadership 437
Implementing Differentiation 437
Product Structure: Implementing a Wide Product Line 438
Marketing Structure: Increasing Responsiveness to Customer Groups 439
Geographic Structure: Expanding Nationally 440
Matrix and Product-Team Structures: Competing in Fast-Changing, High-Tech
Environments 441
Focusing on a Narrow Product Line 444
Strategy in Action 12.4: Restructuring at Lexmark 445
Restructuring and Reengineering 446
Summary of Chapter 448 I Discussion Questions 449
Practicing Strategic Management 449
Small-Group Exercise: Deciding on an Organizational Structure I Article File 12 I Strategic
Management Project: Module 12 I Exploring the Web: Visiting Home Depot I General Task
Closing Case: Strategy Implementation at Dell Computer 450
XVIII Contents

13 Implementing Strategy in Companies That Compete Across Industries

and Countries 452
Opening Case: GM Searches for the Right Global Structure 452
Overview 453
Managing Corporate Strategy Through the Multidivisional Structure 453
Advantages of a Multidivisional Structure 456
Problems in Implementing a Multidivisional Structure 457
Strategy in Action 13.1: Amoco, ARCO, and Burmah Castrol Become Part of BP 458
Structure, Control, Culture, and Corporate-Level Strategy 460
The Role of Information Technology 464
Implementing Strategy Across Countries 464
Strategy in Action 13.2: SAP's ERP Systems 465
Implementing a Localization Strategy 466
Implementing an International Strategy 467
Implementing a Global Standardization Strategy 468
Implementing a Transnational Strategy 469
Strategy in Action 13.3: Using IT to Make Nestle's Global Structure Work 471
Entry Mode and Implementation 472
Internal New Venturing 473
Joint Venturing 475
Mergers and Acquisitions 476
Information Technology, the Internet, and Outsourcing 478
Information Technology and Strategy Implementation 478
Strategy in Action 13.4: Oracle's New Approach to Control 480
Strategic Outsourcing and Network Structure 480
Strategy in Action 13.5: Li & Fung's Global Supply-Chain Management 481
Summary of Chapter 483 I Discussion Questions 483
Practicing Strategic Management 484
Small-Group Exercise: Deciding on an Organizational Structure (Continued)
Article File 13 I Strategic Management Project: Module 13 I Exploring the Web:
Visiting Sears I General Task
Closing Case: The New HP Gets Up to Speed 485
Endnotes 486
Box Source Notes 501

Part 5 Cases in Strategic Management

I Introduction: Analyzing a Case Study and Writing a Case Study Analysis Cl

What Is Case Study Analysis? Cl
Analyzing a Case Study C2
Writing a Case Study Analysis C6
 Contents XIX

The Role of Financial Analysis in Case Study Analysis C8

Profit Ratios C8 I Liquidity Ratios C9 I Activity Ratios CIO I
Leverage Ratios CIO I Shareholder-Return Ratios Cll I Cash Flow C12
Conclusion C12

SECTION A: Business Level Cases: Domestic and Global

Case 1: Brown-Forman Wine Estates C13
Armand Gilinsky Jr., Sonoma State University; Sally Baack, San Francisco State University;
Murray Sliverman, San Francisco State University; and Lew Brown, University of North Carolina, Greensboro
What does the future hold for this marketer of premium wine? Can it survive as an independent entity within
Brown-Forman?
Case 2: Welch Foods, Inc. C35
Vincent Amanor-Boadu, Michael Boland, and David Barton, Kansas State University
How can this manufacturer of grape juices and jellies survive against competition from well-financed
competitors?
Case 3: The Global Automobile Industry in 2004 C50
Charles W. L. Hill, University of Washington
Profiles the structure of the competitive automobile industry.
Case 4: Toyota: Origins, Evolution, and Current Prospects C61
Charles W. L. Hill, University of Washington
How did Toyota grow from a small, Japanese automobile company in the 1950s to become the second largest
automobile company in the world by 2004?
Case 5: General Motors in 2005 C73
Gareth R. Jones, Texas A&M University
Can GM change its strategy and structure to lower costs and innovate competitive, new global cars?
Case 6: The Comeback of Caterpillar, 1985-2002 C88
Isaac Cohen, San Jose State University
How did Caterpillar come back from near bankruptcy to regain global leadership in the earthmoving
equipment business?
Case 7: Huawei Technologies Co., Ltd. C105
Jie Xu and Robert H. Girling, Sonoma State University
This fast-growing Chinese competitor to Cisco Systems is gaining market share rapidly. How?
Case 8: The Home Video Game Industry: From Pong to Halo 2 C121
Charles W. L. Hill, University of Washington
Profiles the dynamic history of the home video game industry from inception to the current strategic
struggle between Sony and Microsoft.
Case 9: Satellite Radio: XM Versus Sirius C137
Charles W. L. Hill, University of Washington
Two satellite radio companies are fighting it out for dominance in this fast-growing new market. Who will win?
Case 10: Strategic Inflection: TiVo in 2003 C153
David Yoffie, Pai-Ling Yin, and Christina Darwall, HBS California Research Center
TiVo's customers love the product, but can the company survive?
XX Contents

Case 11: The Music Industry in the Age of the Internet: From Napster to Apple's iPod C173
Charles W. L. Hill, University of Washington
The Internet has thrown the music industry into turmoil. Why is Apple succeeding where Napster failed?
Case 12: Staples C187
Charles W. L. Hill, University of Washington
How did Staples revolutionize the office supplies industry? Can it keep growing?
Case 13: Gap International: A Specialty Apparel Retailer C200
Robert J. Mockler, St. John's University
What is this fashion retailer's secret to success?
Case 14: Charles Schwab C230
Charles W. L. Hill, University of Washington
Discusses the rise of discount stockbroker Charles Schwab and its current strategic challenges.
Case 15: Li & Fung—The Global Value Chain Configurator C245
S.S. George, ICFAI Center for Management Research
Li & Fung has become a textile-industry powerhouse by creating and coordinating a global supply for its
customers: clothing companies.
Case 16: Starbucks Corporation: Competing in a Global Market C267
Suresh Kotha and Debra Glassman, University of Washington
Can Starbucks repeat its domestic success in the global marketplace?
Case 17: Kentucky Fried Chicken and the Global Fast-Food Industry C289
Jeffrey A. Krug, Appalachian State University
KFC was an early mover in the global fast-food industry. What must the company do to continue to prosper
in this competitive industry?

SECTION B: Corporate Level Cases: Domestic and Global

Case 18: Nucorin2005 C310
Frank C. Barnes, University of North Carolina-Charlotte, and Beverly B. Tyler, North Carolina State
University
How does this steel company achieve such strong performance?
Case 19: 3M in the New Millennium C335
Charles W. L. Hill, University of Washington
3M's innovative culture took 100 years to build, but can it prosper in the new millennium?
Case 20: The Rise of IBM C350
Gareth R. Jones and Susan L. Peters, Texas A&M University
Details how IBM became the global leader in computer hardware and software.
Case 21: The Fall of IBM C361
Gareth R. Jones and Susan L. Peters, Texas A&M University
How did IBM respond to the rapidly changing computer industry? What happened to its competitive
advantage and its prosperity?
Case 22: The Rebirth of IBM C373
Gareth R. Jones, Texas A&M University
IBM searches for new strategies to compete in the age of the Internet and the World Wide Web.
Case 23: Hewlett Packard: The Merger with the Compaq Corporation C389
Isaac Cohen, San Jose State University
What was the strategic rationale for the joining of resources between HP and Compaq?
 Contents XXI

Case 24: Hewlett Packard Ousts Carly Fiorina C403

Gareth R. Jones, Texas A&M University
Why were the merger's strategic advantages slow to be realized?
Case 25: Michael Eisner's Walt Disney Company: Part One C405
Gareth R. Jones, Texas A&M University
Eisner's strategies turn around Walt Disney Company's fortunes and realize the value of its resources.
Case 26: The Walt Disney Company, 1995-2005: Part Two C421
Gareth R. Jones, Texas A&M University
Discusses the problems in strategy and structure that plagued the Walt Disney Company after 1995 and
helped destroy the value that Eisner had earlier created.
Case 27: First Greyhound, Then Greyhound Dial, Then Dial, Now Henkel-Dial C433
Gareth R. Jones, Texas A&M University
How did this company, which never had the right strategies, transform itself into a prospering success?
Case 28: Hanson PLC (A): The Acquisition Machine C448
Charles W. L. Hill, University of Washington
How did this once-small British company become one of the world's largest conglomerations? Through
acquisitions!
Case 29: Hanson PLC (B): Breaking It Up C462
Charles W. L. Hill, University of Washington
After two decades of dramatic growth, why did Hanson break up into a series of smaller companies?
Case 30: Philips Versus Matsushita: A New Century, a New Round C467
Christopher A. Bartlett, Harvard Business School
For half a century, Philips and Matsushita have been vying for market dominance in the consumer
electronics industry. They are still at it.
Case 31: GE's Two-Decade Transformation: Jack Welch's Leadership C481
Meg Wozny and Christopher A. Bartlett, Harvard Business School
How Jack Welsh transformed GE from a mediocre engineering conglomerate into one of the world's most
productive companies.

SECTION C: Ethics Cases

Case 32: Nike's Dispute with the University of Oregon C501
Rebecca J. Morris, University of Nebraska at Omaha, and Anne T. Lawrence, San Jose State University
Nike's utilization of subcontractors in Southeast Asia for shoe production gets the company into trouble with
its customers.
Case 33: Etch-A-Sketch Ethics C515
Charles W. L. Hill, University of Washington
The manufacturer of Etch-A-Sketch transfers production from Ohio to China—and runs into an ethical
storm.
Case 34: Western Drug Companies and the AIDS Epidemic in South Africa C517
Charles W. L. Hill, University of Washington
AIDS is ravaging South Africa. Should Western drug companies give away their AIDS treatments?

Index II