Management 12th Edition Kreitner Solutions Manual

Management 12th Edition Kreitner
Solutions Manual
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Chapter 7: Strategic Management: Planning for Long-Term Success 133
CHAPTER 7
Strategic Management: Planning for Long-Term
Success
CHAPTER OBJECTIVES
• Define the term strategic management, and explain its relationship to strategic planning,
implementation, and control.
• Explain the concept of synergy, and identify four kinds of synergy.
• Describe Porter’s model of generic competitive strategies.
• Identify and explain the major contribution the business ecosystems model makes to strategic
thinking.
• Identify seven basic Internet business models and discuss the strategic significance of social media.
• Identify and describe the four steps in the strategic management process.
• Explain the nature and purpose of a SWOT analysis.
• Describe the three types of forecasts.
OPENING CASE
The Changing Workplace: Looking Backward is a Losing Strategy in the Age of New Media
This chapter focuses on strategic management and planning for long-term success. As the opening cases
reveals, an important ingredient for long-term success is strategic agility. Companies that have a plan
that provides for opportunity recognition, flexibility and the ability to fulfill the organization’s mission
and vision while leveraging new opportunities will ultimately achieve long-term success. Companies that
embrace uncertainty and change will have a competitive advantage. As we learned from the three
television networks that did not recognize and embrace how consumers were changing their viewing
habits. As a result, the cable networks (who did understand viewer preferences) quickly moved in on the
big three’s revenue from advertising. Technology combined with savvy consumers has led to viewers
doing their own programming. Watching what they want, when they want. This shift in the entertainment
industry happened quickly and companies who had the foresight to leverage this new viewer mindset
reaped the benefits. Pepsi for example began placing ads on cable channels early on, realizing the best
way to reach their target market was by advertising on channels such as MTV where viewers fit their
customer profile. The result: a big boost to Pepsi’s market share. Companies like Coca-Cola who
initially refused to advertise on the new cable channels took four or five years to come to their senses
investing in advertising in new media markets. Today, they are hoping technology can save the day and
help them gain back some of their lost market share.
Ask Students:
• What role do they think lower and mid-level managers should play in strategic management?
• At Pepsi, do you think it was the CEO that suggested MTV would be a good place to advertise? If
not the CEO then who may have been the source of this good idea?
• As management students what can we learn from situations like this?
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to
a publicly accessible website, in whole or in part.
LECTURE OUTLINE
Strategic management drives the effort to succeed amid constant change, uncertainty, and obstacles.
Strategy is not the exclusive domain of top management. There are three reasons why staff specialists and
managers at all levels need a general understanding of strategic management.
1. A strategic orientation encourages farsightedness (see Table 7.1).
2. Employees who think in strategic terms will have a better understanding of the reasoning
behind top-management decisions.
3. In terms of the five strategy-making modes in Table 7.2, there is a clear trend away from the
command, symbolic, and rational modes and toward the transactive and generative modes.
That means that today, more middle- and lower-level managers and technical specialists are
playing a direct role in both formulating and implementing long-term strategies.
Annotation 7a
Back to the Opening Case
Questions:
In terms of Table 7.1, what sort of strategic farsightedness can keep Google from being
pushed aside by Facebook?
There are several of the key dimensions presented in Table 7.1 that Google can implement to
remain competitive in the rapid growth and expansion of products and services on the Internet.
Number 2, Competitive Advantage emphasize being the leader to achieve this Google needs to
invest in Number 4, Research and Development where they continue to roll out innovative
products and services using innovative marketing and HR strategies. This will require Number
3, Organizational Structure that is flexible, embraces change and fosters an environment where
communication throughout the organization is quick and effective. From further research about
Google some of your students may be familiar with their job description that directs employees
to spend twenty percent of their time working outside of the regular duties to experiment,
innovate and simply try to develop new products or services to stay ahead of the competition.
I. STRATEGIC MANAGEMENT = STRATEGIC PLANNING + IMPLEMENTATION +

CONTROL
Strategic management is the ongoing process of ensuring a competitively superior fit between an
organization and its changing environment.
Strategy has been defined as an integrated and externally oriented perception of how to achieve the
organization’s mission.
Strategic management effectively merges strategic planning, implementation, and control.
II. THINKING AND ACTING STRATEGICALLY (INCLUDING INTERNET AND SOCIAL

MEDIA STRATEGIES)
Strategic thinking requires every employee, on a daily basis, to consider the “big picture” and to
think strategically about gaining and keeping a competitive edge.
A. Synergy
Synergy occurs when two or more variables interact to produce an effect greater than the sum
of the effects of the variables acting independently.
In strategic management, managers are urged to achieve as much market, cost, technology, and
management synergy as possible when making strategic decisions.
1. Market synergy occurs when one product or service fortifies the sales of one or more
other products or services.
2. Cost synergy comes from using the same overhead costs to produce multiple products or
from recycling waste products to create another revenue-producing area.
3. Technological synergy involves transferring technology from one application to
another, thus opening up new markets.
4. Management synergy occurs when a management team is more productive because its
members have complementary rather than identical skills.
B. Porter’s Generic Competitive Strategies

Michael Porter, a Harvard University economist, developed a model of four generic competitive
strategies. Porter’s model (see Figure 7.1) combines two variables, competitive advantage and
competitive scope.
Competitive advantage can be achieved via low costs or differentiation. Differentiation, according
to Porter, “is the ability to provide unique and superior value to the buyer in terms of product
quality, special features, or after-sale service.” Competitive scope refers to the firm’s target
market—is it broad or narrow?
Porter’s model helps managers think strategically. The four generic strategies Porter described are
listed below.
• Cost Leadership Strategy
• An overriding concern for keeping costs, and therefore prices, lower than those of
competitors is the essence of this strategy.
• Productivity improvement is a high priority for managers using this strategy.
• A relatively large market share is required to accommodate this high-volume, low-profit
margin strategy.
• Differentiation Strategy
• The product must be perceived as unique by most of its customers.
• Advertising and promotion, design, branding, technology, and service are common
methods of differentiating.
• This strategy can yield larger profit margins than the low-cost strategy.
• Cost reduction is not ignored with this strategy, but it is not the highest priority.
• Cost-Focus Strategy: Gaining a competitive edge in a narrow or regional market by exerting
strict control.
• Focused-Differentiation Strategy: Delivering a superior product and/or service to a limited
audience.
ETHICS: Character, Courage and Values

Wal-Mart Takes the High Road on Renewable Energy
For Discussion:
As a Wal-Mart executive, how would you justify your company’s renewable-
energy strategy to a skeptical Wal-Mart stockholder on both cost leadership and
ethical grounds?
As we discussed in Chapter 6, Wal-Mart has made a major commitment to
sustainability across their supply chain. If that effort works they will change how
manufacturers and retailers manage their supply chains in the future. Wal-Mart
will be the trend setter in that arena just as they will likely be the trend setter in
using renewable energy sources. As a Wal-Mart executive I will remind
stockholders that we will pursue renewable energy sources but only if it costs
the same as or less than traditional power. This effort will be a win-win. We will
be viewed as a leader in sustainable business practices which is of course
outstanding from a PR perspective and at the same time it will not have a
negative impact on our bottom line. Ultimately, we believe it will have a positive
impact on our bottom line as consumers choose to spend their money at our
environmentally friendly stores. Wal-Mart will be viewed as ethical business
leaders. It is quite likely that other businesses will follow their lead to remain
competitive.
A contingency management approach is necessary for determining which of Porter’s generic

strategies is appropriate. Research on Porter’s model indicates a positive relationship between long-
term earnings growth and a good strategy/environment fit.
Annotation 7b
Runway Fashion on a Budget
Questions:
Which of Porter’s four generic competitive strategies is being followed here? Explain your
choice. How would you tweak RentTheRunway’s strategy to ensure continued success?
Right now RentTheRunway has a focused differentiation strategy because they are delivering a
unique service to a limited audience. However, as the word spreads and their member lists
grows they could quickly shift strategies to maintain competitive advantage. Currently they
have no competitors however with every good idea comes a copy cat. Therefore, they will
probably soon face competition. At that point they can continue with focused differentiation if
they have exclusive contracts with the best designers which will allow them to still charge
between $50 and $300 per dress rental. For those with a desire to wear the latest fashion
designs this is worth the price. However, they could decide to go after a broader market with a
cost leadership strategy where they offered lesser known designs at a cheaper cost which would
expand their market share to include teenagers renting dresses for homecoming or prom. Their
price points are more likely to be in the $25 to $75 range. The key to RentTheRunway’s
continued success is to define their competitive strategy and implement a plan for growth and
profitability.
C. Business Ecosystems
A business ecosystem is an economic community of organizations and all their stakeholders,
including suppliers and customers. According to this model, organizations need to be as good
at cooperating as they are at competing if they are to succeed.
• A Business Ecosystem in Action
Within a dominant business ecosystem, key organizations selectively cooperate and
compete to achieve both their individual and their collective goals.
• Needed: More Strategic Cooperation
Innovation requires cooperation across broad, diverse communities of players—greater
cooperation, even among the toughest of competitors.
D. Strategies for the Internet and Social Media
The Internet is not a fixed thing. It is a complex bundle of emerging technologies at various
stages of development. It has evolved into the mobile Internet, smart phones, cloud computing,
social media and augmented reality. How can businesses squeeze maximum value from the
Internet and social media?
• Basic Internet Business Models
Relative to buying, selling, and trading things on the Internet, it is possible to fashion a
strategy around one or a combination of seven basic business models (see Table 7.3).
These are
o Commission-based
o Advertising-based
o Markup-based
o Production-based
o Referral-based
o Subscription-based
o Fee-for-service-based
• There is No One-Size-Fits-All Internet Strategy
Harvard’s Michael Porter sees two major categories of Internet strategies: Dot-coms
must develop real strategies that create economic value. Established companies, in turn,
need to use the Internet to enhance the distinctiveness of their strategies.
• Customer Loyalty Is Built with Reliable Brand Names and “Sticky” Web Sites
Web sites doing business need to satisfy three criteria:
(1) High-quality layout and graphics
(2) Fast, responsive service
(3) Complete and up-to-date information
(4) High ranking on search engines such as Google.
A trusted brand name can add to the “stickiness” of a Web site—bringing customers
back again and again.
• Emerging Business Models for Social Media

o Second-generation web tools include Internet blogs, social networking sites
such as Facebook and LinkedIn, microblogging sites such as Twitter, and
photo and video sharing sites such as Fickr and YouTube. All of these are
examples of user generated content.
o Social media empowers users to create and distribute information. This can
be both a challenge and opportunity for businesses. Companies must have a
social media strategy that is not perceived as over-commercialized.
o At a minimum, companies need to monitor social media and respond promptly
to postings that company reputations and brands at risk.
Annotation 7c
A CEO Gets Comfortable with Social Media
Questions:
What are the pros and cons of Dunn’s heavy involvement with social media? Is it wise to
rely on the company’s values for controlling employee abuse of social media?
Brian Dunn, CEO of Best Buy personally posts on Twitter and Facebook. Many other
companies have employees take responsibility for writing content that is posted on an
executive’s Twitter, Linked-In or Facebook account. By taking a hands-on approach Dunn is
learning firsthand what is said about his company and he is controlling his message. He is
always demonstrating to his stakeholders that he is in-tune with how people communicate. The
downside to this is that it can be very time consuming and some would argue that the CEO
should be spending their time on higher level, more strategic activities.
The fact that he is counting on his employees to exercise good judgment by acting within the
company’s values is good and bad. The upside is that he is demonstrating incredible confidence
in his employees while also recognizing that they are engaged in social media. Rather than
prohibiting activity, he is encouraging it (with a broad directive). Employees will feel
empowered and are quite likely to post items that will reflect positively on the organization. The
risk, of course, is that some employees lack good judgment or are disgruntled and choose to
post items that may damage the company’s image, brand and reputation. Having someone on
staff to monitor the company’s image on the Internet would help protect against damaging posts
and save Dunn some valuable time, although he may still post, particularly to counter anything
negative.
III. THE STRATEGIC MANAGEMENT PROCESS

Strategic plans are formulated during an evolutionary process with identifiable steps. Figure 7.2
outlines the four major steps of the strategic management process. It is important to note that this
model represents an ideal approach. Typically, a less systematic process results.
A. Formulation of a Grand Strategy
The grand strategy is a general explanation of how the organization’s mission is to be
accomplished. This strategy is derived from a careful situational analysis of the organization
and its environment.
• A situational analysis is a technique for matching organizational strengths and

weaknesses with environmental opportunities and threats to determine the right niche for
the organization (see Figure 7.3).
This is often called a SWOT analysis (SWOT stands for strengths, weaknesses,
opportunities, and threats). You can perform an actual SWOT analysis in the Action
Learning Exercise at the end of the chapter.
• A capability profile involves identifying the organization’s strengths and weaknesses.
• The strategic need for speed has become an important competitive advantage.
Organizations are using reengineering to develop new and better production processes.
B. Formulation of Strategic Plans

In this second major step in the strategic management process, general intentions are translated
into more concrete and measurable strategic plans, policies, and budget allocations. This
translation is the responsibility of top management, with input from staff planning specialists
and middle managers.
The criteria for a good strategic plan:
1. Develop clear, results-oriented objectives in measurable terms.
2. Identify the particular activities required to accomplish the objectives.
3. Assign specific responsibility and authority to the appropriate personnel.
4. Estimate times to accomplish activities and their appropriate sequencing.
5. Determine the resources required to accomplish the activities.
6. Communicate and coordinate the above elements and complete the action plan.
This process is not easy or fast. Strategic plans usually evolve over a period of months.
IV. STRATEGIC IMPLEMENTATION AND CONTROL

The entire strategic management process is only as strong as these two areas, which are traditionally
underemphasized.
A. Implementation of Strategic Plans
Top managers need to do a better job of facilitating the implementation process and building
middle-manager commitment.
• A systematic filtering-down process: Strategic plans require further translation into
successively lower-level plans. Top management can do some groundwork for this by
asking four key questions.
o Organizational structure. Is it compatible with the strategy?
o People. Is the right combination of skills, abilities, and development in place?
o Culture. Is it compatible with the strategy, or does it have to be modified or
“managed around”?
o Control systems. Is the necessary apparatus in place to support the plan and
assess performance?
Strategic plans that address these four questions have a much greater chance of successful
implementation.
Annotation 7d
What’s Our Mission?
Questions:
What does this teach us about micromanaging, mission statements, and employee
empowerment?
Wouldn’t you think that the one place to anticipate top-down strategy would be the military?
Actually, the management style of the four branches has always been sophisticated, and it’s no
surprise that there is initiative in terms of problem solving. Realistically, no matter how well-
trained military personnel are, there is no predicting what to expect in a war situation. Without
a focus on solving problems, particularly among the officers, the best training in the world
would fail. The fact that soldiers know the mission, have been trained, are not micro-managed
and feel empowered increases their likelihood for success.
A lot of organizations could learn from this approach.
• Building Middle-Manager Commitment

o Resistance among middle managers can kill an otherwise excellent strategic
management program. One primary reason for resistance is the perception (or
the reality) that the plan is not in their self-interest.
o Participative management (see Chapter 12) and influence tactics (see Chapter
14) can foster middle-management commitment.
B. Strategic Control
A formal control system is needed to keep strategic plans on track. The ultimate goal of a
strategic control system is to detect and correct downstream problems in order to keep
strategies updated and on target, without stifling creativity and innovation in the process.
C. Corrective Action Based on Evaluation and Feedback

Corrective action makes the strategic management process a dynamic cycle (refer to Figure
7.2). In the absence of prompt corrective action, problems can rapidly worsen.
V. FORECASTING
Forecasts may be defined as predictions, projections, or estimates of future events or conditions in
the environment in which an organization operates. Forecasts vary in reliability from sophisticated
statistical analyses to educated guesses.
A. Types of Forecasts (Table 7.4)
1. Event outcome forecasts are predictions of the outcome of highly probable future
events.
2. Event timing forecasts predict when, if ever, given events will occur.
3. Time series forecasts seek to estimate future values in a sequence of periodically
recorded statistics.
Green Management: Toward Sustainability

Experts Say Sustainability Is Changing the Competitive Landscape
For Discussion:
What hard evidence of this sustainability megatrend have you observed in how businesses are
being run today? Is the sustainability movement likely to be just a fad? Explain.
Consider for a moment how your college operates. Many colleges committed to sustainability
are implementing alternative energy sources towards sustainability. Anne Arundel Community
College located in Arnold, Maryland now has an entire parking lot with car ports that are
covered with solar panels. This initiative will ultimately lower the energy costs to the college
and will have a positive impact on the environment. The presence of energy efficient vehicles,
trucks, buses and cars that are now part of the fleet of vehicles being used by companies and
government municipalities is yet another example. As Wal-Mart indicated earlier in the
chapter, the key to this working is that the cost to implement the new sustainable products is
that they have to cost the same or less than what the company spent before. If the industry
cannot produce these new products in a cost efficient way then it may just become a fad.
Particularly when you look at regulatory trends: where some elected officials continue to
submit legislation to reduce the environmental protection agencies pollution requirements
basically paving the way for factories to continue spewing pollution with no consequences. If
there is no incentive for these companies to improve air quality and pollution entering our
water supply many ask why would they spend the money to implement more environmentally
friendly technology? Only time will tell. However, business leaders and elected officials are
beginning to face the reality that we have limited natural resources. Eventually we will need to
explore alternative energy sources, renewable power, and technology to increase efficiency
and reduce pollutants.
B. Forecasting Techniques
• Informed Judgment: Judgmental forecasts are both fast and inexpensive, but their
accuracy depends greatly on how well informed the strategist is.
• Scenario Analysis: The preparation and study of written descriptions of alternative but
equally likely future conditions. Scenarios are visions of what “could be.”
o Longitudinal scenarios describe how the present is expected to evolve into

the future.
o Cross-sectional scenarios, the more common type, simply describe future
situations at a given time.
o “No surprise” strategic planning uses two to four scenarios for narrowly
defined topics as focal points for developing alternative strategies. As the
future unfolds, the strategy matching the most realistic scenario is used.
• Surveys
A forecasting technique that involves face-to-face or telephone interviews and Internet or
mailed questionnaires. Surveys can provide comprehensive and fresh information. They
can also be difficult to construct, time-consuming to administer and interpret, and
expensive.
• Trend Analysis
The hypothetical extension of a past pattern of events or time series into the future. This
assumption that past trends will continue into the future does not anticipate trend shifts.
Each forecasting technique has limitations, so strategists are wise to use two or more methods to
help validate the projections.
Annotation 7e
Calling All Oddball Curiosities and Failures
Questions:
Among the failed businesses and product flops you have observed recently, which ones are
“interesting failures” that, given the right conditions, could be profitable ideas? Explain.
A good idea by itself is not enough. You also need business savvy to make your ideas into
reality. My father-in-law is a source of great ideas, developed before their time. But he was
never able to take them to the next step, and he watched as others came up with similar ideas
and succeeded. Someone with business smarts could have talked with him and created a
successful product—or two or three, or ten. Proper planning, forecasting and execution of the
plan can be the difference between greatness and going back to the drawing board.
END OF CHAPTER FEATURES

• Terms to Understand – encourage students to make use of the flashcards available on the student
website. Also, suggest they visit the Manager’s Toolkit section on the website for tips and
suggestions for aspiring managers.
• Action Learning Exercise – Thinking Strategically: A SWOT Analysis. Encourage students (in
groups or individually) to develop a SWOT analysis for an organization or company they know
relatively well. You may want to show the end of chapter video about Preserve by Recycline and
have them complete a SWOT analysis for Preserve. Have students respond to the questions for
discussion that follow.
• Ethics Exercise – Do the Right Thing, Where is the Fine Line Between Free Internet Content and
Pirating? Ask your students if they have ever illegally downloaded a song, video or other
content for free. This issue will only grow as newspapers hang on for dear life and students think
that Wikipedia is a credible source. Have them contemplate the ethical questions - a few
possible responses they are likely to offer are included.
What are the ethical implications of the following interpretations?
1. Any information you can access for free on the Internet is fair game. That’s what the
Web is all about, greater and greater access to information for more and more people
around the world. In your circle of acquaintances, how common is pirating music and
plagiarizing? Opinions will vary. Encourage students to put themselves in the shoes of
the artist who is trying to make a living at their craft. If everyone steals their music they
will not survive and ultimately an entire industry may suffer. Writers, musicians,
computer game software creators…..the list of potential artists impacted is extensive.
2. Those who create original intellectual property deserve to fairly compensated for their
creativity and effort and not have it stolen via the Internet. What are the practical
business implications for entrepreneurs and companies attempting to make money with
an Internet strategy? To make money, artists need to protect their works. Apple’s i-tunes
is an excellent model. They offer product sampling but you may not simply download to
your own device without paying (unless there is a free promotion available). They
transformed the music industry. We e-readers, we are seeing a similar transformation
taking place with published books. What’s next?
3. The Internet is an evolving technology still in its infancy, and the dividing line between
free and paid content needs to be sorted out by lawmakers and the competitive
marketplace. Any suggestions? Based on your students experience with e-commerce this
discussion could be quite interesting. Remind students to ponder all types of
transactions. Should transactions be taxed? If yes, who gets the tax revenue? How
should transactions such as prescription drug purchases be handled -who is responsible
for validating the doctor’s actually written the prescription? What about the ordering of
alcohol online – how do you know the recipient is really old enough to drink? The list of
potential risks goes on for e-commerce. Now add the additional variable of free vs paid
content and who owns the rights to intellectual property and it becomes more
complicated. Just for fun, insert the global variable. Many countries do not respect,
recognize or enforce U.S. Intellectual property laws – basically pirating is part of the
culture. With just about everyone in the world having access to the Internet how should
Internet content providers proceed?
4. Your own ethical interpretations?
• Managers-In-Action Video Case Study – Preserve by Recycline
CHAPTER 7 MANAGERS-IN-ACTION VIDEO: PRESERVE® BY

RECYCLINE - STRATEGIC PARTNERSHIPS
Length: 7 minutes
Topics: Strategic Thinking, Partnerships, Competitive Advantage, Green Marketplace,
Family of Products, Goal Setting, Strategic Planning, Prioritize, Relationships,
Sustainable, supply Chain, Brand, and Synergy.
Company Background
From the Preserve® Products website December 30, 2010.
http://www.preserveproducts.com/
Preserve® makes stylish, high performance, eco-friendly products for your home. As
a company, we strive to combine socially and environmentally responsible business
practices with groundbreaking design to create products that people feel good about
having in their homes. We believe that choosing eco-friendly products doesn't mean
having to sacrifice quality, price, or performance.
In 1996, founder and president Eric Hudson was committed to the need to use our
earth's resources more efficiently and responsibly. The developing plastic recycling
market represented a great new opportunity to reuse our earth's resources (plastics are
made from oil and natural gas—making up roughly 9% of the world's petroleum usage).
However, at the time that Preserve was formed, there was a lot of concern that
recyclables were not necessarily turning into new products. Seeing an opportunity, Eric
started Preserve to reuse Earth's precious resources and turn them back into products
that people wanted. He worked with dentists, scientists and engineers to create
Preserve's first high-quality product from recycled plastics—the Preserve Toothbrush.
Since then, Preserve has grown into a dynamic, green lifestyle company offering a
range of everyday products for almost every room in your home. Using innovative
methods, we turn used materials into razors, colanders, cutting boards, tableware and
more!
As we grow, our core principles remain the same
• Preserve products are made from 100% recycled plastics and 100% post-
consumer paper. By using recycled materials, we save energy, preserve natural
resources and create an incentive for communities to recycle.
• All of our plastic products are recyclable, either through our postage-paid labels
and mailers (toothbrushes and razor handles) or at the curb in communities that
recycle #5 plastic.
• We make our products in the USA, so that we can ship them shorter distances,
using less fuel and limiting our environmental footprint.
• We don't test on animals. Period.
• Preserve products are made to last—and to look good doing it.
The Preserve team is made up of 17 people and a host of talented interns who bike,
walk, train, and drive (some in bio-diesel fueled cars) to our office outside of Boston
intent on bringing Preserve and our mission into more homes every day.
To learn more about the partnership with Stoneyfield Farm select this link:
http://www.preserveproducts.com/aboutus/partnerships.html
Synopsis of Video
Preserve® by Recycline
Strategic Partnerships
Recycline company executives Eric Hudson, C.A. Webb, and Ben Anderson discuss
how strategic partnerships impact their Preserve® brand’s marketing and product
development. Hudson, President of Recycline considers partnerships with companies
such as Stoneyfield Farm to be a core advantage as the company is able to provide
service beyond their size. From college campuses to yogurt manufacturers, learn how
strategic partnerships are giving Preserve a competitive advantage.
For more information about Preserve® visit their website:

http://www.preserveproducts.com
Previewing Questions
1. What is meant by the concept, “strategic thinking”?
Every employee should be encouraged to participate and embrace this
concept as strategic thinking is taking a holistic view from a longer-term
perspective yet it is also personal and immediate. In other words,
everyone should look at the overall goals of their job, team and
organization on a daily basis. Strategically thinking about these and
looking for innovative ways to achieve success. It is constantly asking
why we do things the way we do them. Is there a faster, better, cheaper
way to achieve our strategic goals.? Should we be considering other
opportunities?
2. Describe what is involved in a SWOT analysis?
SWOT is also referred to as a situational analysis technique. It involves
analyzing a company’s Strengths, Weaknesses, Opportunities and
Threats.
3. When and why should a company conduct a SWOT analysis?

Organizations should conduct a SWOT analysis during the first phase of
the strategic management process when they are formulating the grand
strategy. This is the ideal time because organizations or determining how
they are going to fulfill their mission. Understanding the organization’s
strengths, weaknesses, opportunities and threats will help managers

identify the right market niche as they prepare their grand strategy and
strategic plans.
Postviewing Questions
4. Explain the process and approach the executives for Preserve® follow to
determine who they will partner with?
Preserve has a core management team that meets once every two weeks to determine
their top five strategic goals for the next six months. Each department head then
develops a strategy, often using unconventional approaches. They have now reached a
phase in their maturity where they are receiving calls from prospective partners which
has forced them to develop a systematic approach to decide who to partner with. They
prioritize which relationships make the most sense based on their strategic goals.
5. Describe the impact partnerships have on synergy and a sustainable

supply chain.
Preserve’s partnerships and their sustainable supply chain have helped them achieve
their ultimate goal of, “providing service beyond our size.” They are unique in getting
back materials from consumers that are then repurposed and converted into new
products. For example the yogurt cups that get sent to them are then converted into
toothbrush handles. Their synergistic relationship with their partners makes this
sustainable supply chain possible. Because of this synergy they are able to provide lines
of green products that provide the same level of quality and functionality consumers are
accustomed to while also being environmentally friendly. Sustainable products reach the
marketplace without any sacrifice to the consumer as it relates to everything from price
to reliability.
6. What are potential risks and rewards of using partners as part of the
Preserve® brand’s overall strategy?
The rewards are evident in the previous answers. Preserve grows their product lines
through their partnerships. They leverage college students to assess market demand and
their sustainable supply chain allows them to produce and deliver products that serve the
green marketplace without sacrifice. The risks are two-fold; first as larger companies
realize the demand for green goods they have the resources to enter this space increasing
competition. Second, they are relying on volunteers and people who buy-in to the
sustainable movement to complete their supply chain. If the external environment
changes in any way they run the risk of losing a necessary component in the supply
chain. These risks would certainly be an element to include in the “threats” category of
their SWOT.
7. Based on what you learned from the video and from visiting the Preserve
website, complete a SWOT analysis.
This is intended to be a class activity. Encourage students to research on the web
and perhaps visit retailers that sell green products. This is an opportunity to
encourage creative and critical thinking as they apply what they have learned about
situational analysis to complete a SWOT analysis.
CLOSING CASE: SOLUTION

HOWARD SCHULTZ GETS STARBUCKS PERKING AGAIN
1. Initially, the turnaround required a traditional command strategy where Schultz took control
and made some difficult decisions. However, after further reading you realize he was
primarily committed to a transactive strategy where he refocused the company on their core
mission and values, learned from their mistakes and moved on. By empowering his
employees to maintain the intimate, small café feel even though it is a huge company. The
risk is that the internal processes miss the mark. If the road map is not on target they could
lose the battle.
2. Starbuck’s continues to use a differentiation strategy focused on an intimate customer experience
where quality is not compromised. The pros and cons both center on the market. If customers
continue to want that quality, intimate coffee house experience than Starbuck’s will be successful
and McDonald’s will not put a dent in their market share. However, they are wrong and either
people decide to go local or cheaper than the competition may win.
3. Starbuck’s business ecosystem includes all stakeholders including customers and suppliers. To
continue to be healthy they need to understand the needs, wants, and habits of their customers.
They also need to maintain a leadership role in leveraging the rapidly changing world around
them. Introducing the smart phone app that allows customers to place their order from their
device and simply walk in and grab it from the barista counter is one example. From a supplier
perspective they need to maintain their commitment to high quality beans sourced from growers
that embrace sustainable practices and fair trade policies. As evidenced by the erroneous dipper
well story, part of their strategy needs to be a focused commitment on feeding the social media
accurate and positive information about their business ecosystem.
4. As Figure 7.2 illustrates, the final two stages implementation and strategic control are essential to
the strategic management process. As Schultz realized when it was almost too late, they had not
done a good job of evaluating results and taking corrective action based on monitoring and
feedback. The case illustrates how Schultz started over in the planning process. They didn’t
change the core mission or values but they did update the strategic plan. Now, time will tell how
they do with implementation and control.
5. This is another great opportunity for a group activity or assignment. Consider breaking the class
into groups. Have one SWOT Starbuck’s, another take a local coffee shop\roaster, another group
can take Dunkin Donuts and another SWOT McDonald’s (particularly their coffee business).
Each group can report back. It will be interesting to see the similarities and differences.
6. Schultz clearly learned that he needed to include social media in his overall communication plan
and have a proactive strategy for leveraging this user driven space for Starbuck’s benefit. His
lack of awareness allowed one story to turn into a firestorm overnight. Although negative PR
cannot be eliminated it can be minimized with an aggressive social media strategy that can help
bolster a brand’s image while putting out the fires quickly.
INSTRUCTIONAL TIPS
1. To bring the concept of synergy home, have students consider how the four types of synergy work
at a grocery store. From basic examples such as market synergy (supermarkets with in-store banks
and dry cleaners) and cost synergy (having one check-out process for all parts of the store, bar
codes), students can begin to recognize synergistic business behavior.
Another approach would be to discuss synergy in terms of class group projects. Technological
synergy could come from students with different backgrounds, majors, or skills. For example, one
student may have strong writing skills, and another may be good at handling the numerical portion
of the project.
2. An interesting way to generate discussion of strategic management is to have your students perform
a situational (SWOT) analysis on your own college or university. You can have the students
brainstorm ideas while you write the four lists on the board. Following the SWOT analysis, the lists
can be matched and reviewed to determine the best niche and strategic direction for the school.
3. A variation of the exercise above is to have your students select a hardcopy or online article from
Business Week, Fast Company (http://www.fastcompany.com/backissues), or Fortune that profiles
a company in depth and list its environmental opportunities and threats and organizational strengths
and weaknesses. The strategic health of the organization can then be assessed in class. You can also
ask your students which of Porter’s generic competitive strategies each company uses and whether
that strategy is the best option.
4. Using the four forecasting techniques—informed judgment, scenario analysis, surveys, and trend
analysis—you can create a four-way debate with teams of students. By arguing for and against the
four forecasting techniques, students can increase their depth of understanding about forecasting and
gain an appreciation for its subjective variations.
5. Using a major current political or business issue, such as a civil war in another country, an
upcoming election, or a decision on major legislation, have students create differing scenarios based
on the various possible outcomes. Vote on the probability of each occurring. Save these scenarios
from semester to semester so that if solutions develop later, you can compare the reality to the
scenarios developed by the students in either the current class or classes from past semesters.
ADDITIONAL DISCUSSION/ESSAY QUESTIONS

1. Why is strategic management especially important today?
2. What does the term synergy mean, and what kinds of synergy should strategic planners seek to
achieve? What are Porter’s generic competitive strategies and how do they differ?
3. Is it impractical to ask highly competitive managers in the United States to cooperate with their
competitors as suggested by the business ecosystems model? Explain.
4. What are the four basic steps in the strategic management process? What can strategic planners
do to keep their strategies internally consistent and up-to-date?
5. Discuss the relative advantages and disadvantages of the following four forecasting techniques:
informed judgment, scenario analysis, surveys, and trend analysis.
6. How does social media impact strategic planning? and what should managers do to effectively
leverage social media?
Discussion Starter: Forecasting

Imagine for a moment you own a local sports bar in a large college town such as
Columbus, Ohio. Consider for a moment the four forecasting techniques discussed in the
book. As a manager tasked with planning for everything from staffing to food &
beverage orders how would you go about forecasting customer volume from July 1st –
December 31st?
For Discussion
• Is one of the four techniques more accurate for this type of forecasting? (Remind
students that each forecasting technique has limitations, so strategists are wise to use two
or more methods to help validate the projections).
• Strategic thinking should involve every employee at every level of the organization. Is
this also true of forecasting? Explain.
BONUS VIDEOS
BIZFLIX VIDEO CASES FROM THE TEXTBOOK WEBSITE
Discussion Questions and Guide
Video Case: Played (I)
VIDEO CASE SYNOPSIS
Ray Burns (Mick Rossi) does prison time for a crime he did not commit. After his release, he
focuses on getting even with his enemies. This fast-moving film peers deeply into London’s
criminal world, which includes some crooked London police, especially Detective Brice (Vinnie
Jones). The film’s unusual ending reviews all major parts of the plot.
This BizFlix video case starts with a nighttime shot of a house on Edenville Street. Ray says,
"OK, what we got guys? Nathan. One, two, three, four moves, okay?" They begin after Ray tells
Terry (Trevor Nugent) and Nikki (Meredith Ostrom) that they have the robbery job. These scenes
end as Ray and Terry leave with the sound of the alarm.
VIDEO CASE DISCUSSION QUESTIONS AND SUGGESTED

ANSWERS
1. How is this film clip an example of strategic planning?
In the scene, the thieves are discussing how they are going to achieve their long-term goals. They
discuss not only the resources they have, but also others they’ll need and how they’re going to
get them. They also discuss what they know about the environment in which they’ll be working.
2. This chapter discusses situational analysis and defines a SWOT analysis as “a search for
strengths, weaknesses, opportunities, and threats that affect organizational performance.” Did
Ray and the others do such an analysis? If not, what was missing from their analysis?
Ray had already done a SWOT analysis and describes it to the others in the early part of these
scenes. It included the number of moves (four), cut both CCTVs, the number of guards, no dogs,
messing up the place to make it look like a random robbery, and their car’s location. Their plan
included little analysis of threats or other contingencies that could occur.
3. Synergy results from combining organizational resources in a way that gets more than the sum of
individual resources. Assess the synergy that occurred in these scenes. Did Ray and the others
combine in a way to have the most positive effect? Why or why not?
Ray and Terry had worked together on other operations. They knew each other well enough to
predict what each could do. Nathan was the weak link in their strategic chain. His inattention to
where he placed his gun led to both his death and the operation’s partial failure.
BONUS DECISION CASE

THE HENDERSON HARDWARE CHALLENGE
At Janine’s graduation party, her Uncle Harry walked over and shook her hand. “I understand you’re in
the job market now that you’ve gotten that fresh, new M.B.A.” “Well,” Janine replied, “I realize my real-
world experience is limited, but I hope to find a place where I can learn and work my way up.”
“I know it’s not as glamorous as some big corporate job, but how would you like to come work for me in
the hardware business? I’d like you to consider coming into the head office; we could use some new ideas
over there.” “Let me think about it and call you tomorrow,” Janine replied.
Janine considered the offer. Since her childhood, the Henderson Hardware stores had been part of her life.
The family owned twelve stores in eight counties in the state. The privately held company had been
started by her great-grandfather in the 1800s, and as it expanded over the years, children, aunts, uncles,
cousins, and in-laws had grown up and joined the business. The income from the stock Janine received
automatically at birth paid for her college education.
Janine’s Uncle Harry had taken over the company six months ago. Janine knew from her mother’s letters
that Harry was trying to bring the company into the new millennium, but it was quite a task. Janine
decided to ask her mother what she thought. As a family member who was not actively involved with the
company, her mother would be more objective than some.
“I’m not sure that it’s the place for you, Janine,” her mother answered. “The company isn’t doing as well
as it once was. The stores are going downhill, and there is a lot of blaming going on among family
members in the company. Your Uncle Harry is the third company president in four years. I do know that
they could use a new perspective over there. Your grandfather and the great-uncles think they can run the
business the way they always have, and everything will be fine, but the market’s changed. The baby
boomers are buying, but from ‘big box’ competitors such as Home Depot and Lowe’s.”
After considering the situation, Janine called her uncle. “What sort of job did you have in mind?” “Well,”
Harry replied, “to start, I would like you to work in human resources and help them develop a customer-
service program. I don’t think we pay enough attention to our customers anymore. But I’d also like your
opinion in general. You’ve got a fresh viewpoint and a newly minted business degree. We can use your
knowledge of new management trends and ideas.”
Janine’s first week on the job was a real eye opener. She started by visiting all the stores with her Uncle
Tom, the operations director. While Tom chatted with the managers, Janine wandered up and down the
aisles and looked through the stockrooms in the back of each store. She soon realized that the types and
levels of inventory, attention to service, cleanliness, the knowledge and competency of the sales staff, and
even the prices varied dramatically from store to store. The only consistency was the name. Even sales
promotions could vary, since each store had a small, individual advertising budget.
The customers were also a concern. Most of them were older and tended to make small purchases. Janine
asked her Uncle Tom about this. “Well, a lot of the young kids just look at price, and then they shop at
these big warehouse and discount stores like Home Depot and Wal-Mart. We’ve already got three
different stores entering this market. It’s also tough for us to compete against the national chains because
they can get much better price discounts.”
Janine’s concern grew deeper when she looked at the company’s financial reports. Several stores had lost
money regularly for over three years. When she asked Uncle Harry about them, Harry replied, “I know,
but the last three great-uncles in the family are running those, and they’re on the board of directors. I can’t
do much about them. Besides, it isn’t really their fault; those neighborhoods have really gone downhill in
the last five to ten years.”
The next thing Janine asked to see was the company’s strategic plan. “There isn’t one,” Harry explained.
“We’re all so busy getting the day-to-day things done that we just don’t have time.”
Altogether, it had been a discouraging week for Janine.
Discussion Questions
1. Based on the information in the case, do a mini-SWOT analysis. What are the biggest problems
facing Henderson Hardware?
2. Consider Porter’s generic competitive strategies. Which approach would work best for Henderson,
given the nature of the competition?
3. What steps can Janine take to help convince her Uncle Harry that the company needs a strategic
plan? Do you think Janine will succeed?
DECISION CASE: ANSWERS TO DISCUSSION QUESTIONS

THE HENDERSON HARDWARE CHALLENGE
1. STRENGTHS: A solid group of people who know the basics of the hardware
business at all levels of the company.
1
.
The company is privately held, so stock market fluctuations and
pressure for short-term results are not a problem.
Henderson Hardware has a “hometown advantage.” Through its
years in business, the company is well established in the
communities it serves.
A fundamental loyalty to the company on the part of many
employees, due to strong family ties.
WEAKNESSES: Decisions are being made on a family basis, not on a business basis.
Less successful areas of the business are draining cash from
successful areas.
There is a total lack of standards or controls from the top. This has
led to inconsistency on major issues from store to store, which can
create a confusing market image.
No strategic planning or strategic management techniques are
implemented.
The company’s customer base is older, and its competition is getting
the newer customers.
High turnover at the top. With a board of directors that is easily
dissatisfied and that doesn’t give the top person enough time to
implement decisions and see results, it is impossible to succeed with
long-term planning.
OPPORTUNITIES: The potential for Janine and others like her to join the company and
contribute.
As a local company, it may be able to position itself in a different
way than the national chains moving into the area.
The increased need for hardware products, as aging baby boomers
seek bigger homes.
THREATS: The competition: more variety, consistency, and lower prices.
Potential financial problems if negative cash flow continues and
competition undercuts other, more successful stores.
PROBLEMS: This is an opinion question. Some possible issues are the
family/business conflict, an absence of a plan or direction for the
company, the competition, and an unwillingness to change.
2. Henderson Hardware would probably do best with a focused differentiation strategy. Due to the
price breaks possible with the larger national chains, Henderson is simply incapable of adopting a
cost leadership strategy. Henderson’s potential success comes from its ability to serve customers
better, thanks to its years of experience.
3. This is an opinion question. Janine may want to have some information gathered to support her
concerns. This could include articles on strategic planning, surveys and interviews of Henderson
customers, and some information on the industry and the competition.
Janine may also want to get some support from family members. The younger members of the
family should be concerned about where the business is going because they stand to inherit it some
day.
BONUS COOPERATIVE LEARNING ACTIVITY: INSTRUCTOR NOTES
Building a New Opportunity for Lego

The following exercise allows your students to spend time on the ground floor of strategic planning. One
of the different aspects of this exercise is that students will work with actual Legos in the planning
process. A large tub of Legos—plenty for the exercise—can be purchased at any toy store for about $20.
If you try this exercise, you will be amazed at the energy the actual Legos will generate. In grade school
math, this type of tool is called a “manipulative,” but you don’t have to be eight to enjoy the chance to
work with blocks or to inspire learning with physical tools.
This exercise gives a brief history of Lego, focusing on its culture, its approach to the toy industry, and
some of the challenges it has faced recently. Then it gives your student teams a challenge—find a new
Lego product.
Students have to do a brief SWOT analysis for Lego, define and design the new product, define the
market, consider the competition, recommend a promotion for introducing the product, suggest various
distribution methods, and address any other areas they think should be part of the strategic plan for the
new product.
For a more detailed background on Lego, go to http://www.lego.com/ or to
http://www.fastcompany.com/ and do a company search for Lego. There is an article that gives an
extensive history, along with the description and examples of the amazing response to the article on its
Web site. You may want to capture some of the opinions to share with your class or to incorporate a visit
to the site and a review of the article and the responses as part of the exercise.
Building a New Opportunity for Lego

For over 70 years, a little town in Denmark has produced one of the world’s best-known and longest-
lasting toys, Legos. Most adults today played with the distinctive Lego bricks as children. But many
people don’t realize that the little Legos are part of the heritage of a company started by a far-seeing
carpenter, Ole Kirk Christiansen, who founded Lego in 1932 with his purchase of a plastics injection-
molding machine. One of his early plastic toys was a set of small blocks that snapped together, initially
called “automatic binding bricks.” The magic of these bricks was that when you pushed them together,
they stayed snapped together. This is something Lego calls “clutch power.”
There is another factor beyond clutch power that holds Lego together—Lego values. These include
inspiring and nurturing play and creativity and a belief that if they do things right, the profit will be there.
Some of Lego’s innovations over the years:
• Themed sets—such as town and farm kits, and (later) space, castle, and pirate sets.
• Developing Lego kits that are more like models, including construction instructions.
• Legoland—a theme park built around Legos.
• The introduction of Mindstorms—programmable Lego bricks that make your Lego creations behave
in certain ways.
• A partnership with Lucasfilm Ltd. in 1999 to produce Star Wars–themed kits. Other licensed kits
have followed.
• Bionicle action figures, introduced in 2001, are built around a story—the legend of Mata Nui.
In spite of the success of these introductions, Lego has been losing money steadily since the mid-1990s.
In addition, many Lego employees have been concerned, with each addition to the product mix, that the
primary values Lego was built around are in jeopardy. It’s a constant challenge to Lego to come up with
toys that today’s entertainment-rich children will want, while maintaining their belief in the importance of
creative, self-guided play. As Poul Plougmann, the CEO’s chief deputy at Lego, explained, “The
important thing is that we not grow beyond our values. We are here only to develop kids. And we should
be smart enough to make a business of it.”
Your Assignment:
Create a new Lego product. It can be anything, for any purpose or any market. When developing it,
include the following:
• How your product fits into the company with a brief SWOT analysis of Lego
• How your product fits in with Lego values
• A prototype of the product
• The demographic group your product will appeal to
• Lego’s competition for your new product with that demographic group
• What makes this product unique—its competitive advantage
• How the product would be introduced and promoted
• How the product would be distributed
• Anything else you think is relevant to the product plan

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Management 12th Edition Kreitner

I. STRATEGIC MANAGEMENT = STRATEGIC PLANNING + IMPLEMENTATION +

II. THINKING AND ACTING STRATEGICALLY (INCLUDING INTERNET AND SOCIAL

B. Porter’s Generic Competitive Strategies

ETHICS: Character, Courage and Values

A contingency management approach is necessary for determining which of Porter’s generic

• Emerging Business Models for Social Media

III. THE STRATEGIC MANAGEMENT PROCESS

• A situational analysis is a technique for matching organizational strengths and

B. Formulation of Strategic Plans

IV. STRATEGIC IMPLEMENTATION AND CONTROL

• Building Middle-Manager Commitment

C. Corrective Action Based on Evaluation and Feedback

Green Management: Toward Sustainability

o Longitudinal scenarios describe how the present is expected to evolve into

END OF CHAPTER FEATURES

• Managers-In-Action Video Case Study – Preserve by Recycline

CHAPTER 7 MANAGERS-IN-ACTION VIDEO: PRESERVE® BY

As we grow, our core principles remain the same

For more information about Preserve® visit their website:

3. When and why should a company conduct a SWOT analysis?

strengths, weaknesses, opportunities and threats will help managers

5. Describe the impact partnerships have on synergy and a sustainable

CLOSING CASE: SOLUTION

ADDITIONAL DISCUSSION/ESSAY QUESTIONS

Discussion Starter: Forecasting

Video Case: Played (I)

VIDEO CASE SYNOPSIS

VIDEO CASE DISCUSSION QUESTIONS AND SUGGESTED

1. How is this film clip an example of strategic planning?

BONUS DECISION CASE

DECISION CASE: ANSWERS TO DISCUSSION QUESTIONS

BONUS COOPERATIVE LEARNING ACTIVITY: INSTRUCTOR NOTES

Building a New Opportunity for Lego

Building a New Opportunity for Lego

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