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Chapter 6 Strengthening a Company’s Competitive Position 607
CHAPTER 6
STRENGTHENING A COMPANY’S
COMPETITIVE POSITION
CHAPTER SUMMARY
Chapter 6 discusses that once a company has settled on which of the five generic strategies to employ, attention
must turn to what other strategic actions can be taken in order to complement the choice of its basic competitive
strategy. The three dimensions discussed include offensive and defensive competitive actions, competitive
dynamics and the timing of strategic moves, and the breadth of a company’s activities. These are explored
through seven broad categories: (1) Whether and when to go on the offensive, (2) Whether and when to employ
defensive strategies, (3) When to undertake strategic moves, (4) Whether to merge or acquire another firm,
(5) Whether to integrate the value chain backward or forward, (6) Whether to outsource certain value chain
activities, and (7) Whether to enter into strategic alliances.
LECTURE OUTLINE
I. Going on the Offensive – Strategic Options to Improve a Company’s Market Position
1. Regardless of which of the five generic competitive strategies the firm is pursuing, there are times
when the company must go on the offensive. The best offensive moves tend to incorporate several
key principles:
a. Focusing relentlessly on building competitive advantage and then striving to convert it into a
sustainable advantage.
b. Applying resources where rivals are least able to defend themselves.
c. Employing the element of surprise as opposed to doing what rivals expect and are prepared for.
d. Displaying a strong bias for swift, decisive, and overwhelming actions to overpower rivals
2. Choosing the Basis for Competitive Attack
a. Strategic offensives should, as a general rule be based on exploiting a company’s strongest

strategic assets.
b. The principal offensive strategy options include the following:
1. Offering an equally good or better product at a lower price.
2. Leapfrogging competitors by being first to market with next-generation products.
3. Pursuing continuous product innovation to draw sales and market share away from less
innovative rivals
4. Adopting and improving on the good ideas of other companies (rivals or otherwise).
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5. Using hit-and-run or guerrilla warfare tactics to grab market share from complacent or
distracted rivals
6. Launching a preemptive strike to secure an advantageous position that rivals are prevented
or discouraged from duplicating.
3. How long it takes for an offensive to yield good results varies with the competitive circumstances
including buyer response to the initiative and whether market rivals recognize the threat and begin
a counter-response.
4. Choosing Which Rivals to Attack - Offensive-minded firms need to analyze which of their rivals
to challenge as well as how to mount the challenge. The following are the best targets for offensive
attacks:
a. Market leaders that are vulnerable.
b. Runner-up firms with weaknesses in areas where the challenger is strong.
c. Struggling enterprises that are on the verge of going under.
d. Small local and regional firms with limited capabilities.
5. Blue Ocean strategies seek to gain a dramatic and durable competitive advantage by abandoning
effort to beat out competitors in existing markets and, instead, inventing a new industry or distinctive
market segment that renders existing competitors largely irrelevant and allows a company to create
and capture altogether new demand.
CORE CONCEPT
A blue-ocean strategy offers growth in revenues and profits by discovering or
inventing new industry segments that create altogether new demand.
a. This strategy views the business universe as consisting of two distinct types of market space:
1) Industry boundaries are defined and accepted, the competitive rules of the game are well
understood by all industry members, and companies try to outperform rivals by capturing
a bigger share of existing demand.
2) Industry does not really exist yet, is untainted by competition, and offers wide open
opportunity for profitable and rapid growth if a company can come up with a product
offering and strategy that allows it to create new demand rather than fight over existing
demand.
b. Blue-ocean strategies provide a company with a great opportunity in the short run. Long term
success depends on whether a company can protect the market position they opened up and
sustain their early advantage.
ILLUSTRATION CAPSULE 6.1

Gilt Groupe’s Blue-Ocean Strategy in the U.S. Flash Sale Industry
Discussion Question: Did Gilt Groupe’s pursue their Blue Ocean strategy in an industry with well-
defined boundaries and competitive rules or did they pioneer a new industry? What was the
fundamental nature of their competitive advantage?
Answer: The Gilt Groupe was operating in the well-defined fashion clothing industry with firmly
established market leaders and segments. By utilizing an innovative sales approach that provided
high fashion clothing in limited quantities via the internet the company was able to gain significant
market share. The company was able to develop a sustainable and creative product niche where
they maintained the cachet of exclusivity while offering deeply discounted merchandise in the
fashion industry.
II. Defensive Strategies – Protecting Market Position and Competitive Advantage
1. All firms in a competitive market are subject to the offensive challenges created by rival firms.
Defensive strategies counter these challenges by (1) lowering the risk of being attacked, (2)
weakening the impact of any attach that occurs, and (3) influencing challengers to aim their attacks
at other rivals.
2. Blocking the Avenues Open to Challengers – The most frequently employed approach to defending
a company’s present position is to block an attack. Methods can include alternative technology,
introduction of new features and models, maintaining economy priced options, enhancing support,
and volume discounts to dealers.
3. Signaling Challengers That Retaliation is Likely – The goal is to discourage challengers from
attacking, or diverting their attack to another rival. Methods can include public announcements of
management’s commitment to the market, public policies for matching rivals terms and prices, and
periodic strong responses to the moves of weaker competitors.
III. Timing a Company’s Offensive and Defensive Strategic Moves
1. When to make a strategic move is often as crucial to success as what strategic move to make. This
is especially important when first move advantage or disadvantages exist.
CORE CONCEPT
Because of first-mover advantages and disadvantages, competitive advantage can
spring from when a move is made as well as from what move is made.
2. The Potential for first-mover advantages is great however, first-movers typically bear greater risks
and development costs than firms that move later. There are five conditions where first-movers have
an advantage:
a. When pioneering helps build a firm’s reputation with buyers and creates brand loyalty.
b. When a first mover’s customers will thereafter face significant switching costs.
c. When property rights protections thwart rapid imitation of the initial move.
d. When an early lead enables the first mover to move down the learning curve ahead of rivals.
e. When a first mover can set the technical standard for the industry.
3. The Potential for Late-Mover Advantages or First-Mover Disadvantages - Late-mover advantages

(or first-mover disadvantages ) arise in four instances:
a. When pioneering is more costly than imitative following, and only negligible learning-curve
benefits accrue to the leader—a condition that allows a follower to end up with lower costs than
the first-mover.
b. When the products of an innovator are somewhat primitive and do not live up to buyer
expectations, thus allowing a follower with better-performing products to win disenchanted
buyers away from the leader.
c. When rapid market evolution (due to fast-paced changes in either technology or buyer needs)
gives second-movers the opening to leapfrog a first-mover’s products with more attractive
next-version products.
d. When market uncertainties make it difficult to ascertain what will eventually succeed.

Amazon.com’s First-Mover Advantage in Online Retailing
Discussion Question: Discuss the basis for Amazon.com’s competitive advantage and how they
leveraged first-mover advantages.
Answer: In 1994 Jeff Bezos noted the tremendous growth in internet use and saw an opportunity
to sell products online that could be easily shipped. Books made up the bulk of the firm’s initial
product offering and selling them online allowed the firm to quickly gain market share over traditional
booksellers with large retail spaces to support. This large volume and large customer base translated
into strong brand recognition and allowed the firm to spread to other product lines and further grow
market share. By moving down the learning curve quickly and well ahead of their rivals, Amazon.com
was able to develop further competitive advantage and stay ahead of new entrants.
4. To Be a First Mover or Not - In weighing the pros and cons of first-mover versus fast-follower, it
matter whether the race to market leadership in a particular industry is a marathon or a sprint. In a
marathon a slow-mover is not unduly penalized – first mover advantage can be fleeting.
a. The lesson is that there is a market-penetration curve for every emerging opportunity; typically
the curve has an inflection point at which all the pieces of the business model fall into place,
buyer demand explodes, and the market takes off. It can come early in a fast-rising curve (like
e-mail) or farther up on a slow-rising curve (like use of broadband)
b. Any company that seeks competitive advantage by being a first-mover thus needs to ask some
hard questions:
1. Does market takeoff depend on the development of complementary products of services

that currently are not available?
2. Is new infrastructure required before buyer demand can surge?
3. Will buyers need to learn new skills or adopt new behaviors? Will buyers encounter high
switching costs?
4. Are there influential competitors in a position to delay or derail the efforts of a first-mover?
c. When the answer to any of these questions is yes, then a company must be careful not to pour
too many resources into getting ahead of the market.
IV. Strengthening A Company’s Market Position Via Its Scope Of Operations
1. Separate from competitive moves and timing, managers must also carefully consider the scope of
a company’s operations. These decisions essentially determine where the boundaries of the firm lie
and the degree to which the operations within the boundaries are common.
CORE CONCEPT
The scope of the firm refers to the range of activities which the firm performs
internally, the breadth of its product and service offerings, the extent of its
geographic market presence, and its mix of businesses.
2. There are several dimensions of firm scope that are relevant to business level strategy. The two
primary dimensions are horizontal and vertical scope.
CORE CONCEPT
Horizontal scope is the range of product and service segments that a firm serves
within its focal market.
CORE CONCEPT
Vertical scope is the extent to which a firm’s internal activities encompass one, some,
many, or all of the activities that make up an industry’s entire value chain system,
ranging from raw-material production to final sales and service activities.
V. Horizontal Merger and Acquisition Strategies
1. Mergers and acquisitions are a much-used strategic plan. They are especially suited for situations
where alliances and partnerships do not go far enough in providing a company with access to the
needed resources and capabilities.
2. Combining the operations of two companies within the same industry, via merger or acquisition,
is an attractive strategic option for achieving operating economies, strengthening the resulting
company’s competencies and competitiveness, and opening up avenues of new market opportunity.
3. The difference between a merger and an acquisition relates more to the details of ownership,
management control, and financial arrangements than to strategy and competitive advantage. The
resources, competencies, and competitive capabilities of the newly created enterprise end up much
the same whether the combination is the result of acquisition or merger.
4. Many horizontal mergers and acquisitions are driven by strategies to achieve one of five strategic
objectives:
a. Creating a more cost-efficient operation out of the combined companies.
b. Expanding a company’s geographic coverage.
c. Extend a company’s business into new product categories.
d. Gaining quick access to new technologies or complementary resources and capabilities.
e. Leading the convergence of industries whose boundaries are being blurred by changing
technologies and new market opportunities.

Bristol-Myers Squibb’s “String-of-Pearls” Horizontal Acquisition Strategy
Discussion Question: How did Bristol-Meyer Squibb use a horizontal acquisition strategy to gain
competitive advantage in the pharmaceutical industry?
Answer: In examining their competitive position in 2007, the firm realized that several key
pharmaceutical patents were about to expire and they did not have new patented drugs in their
development pipeline. Realizing the time involved in new product development and approval, the
company undertook a strategy of horizontal acquisitions and purchased several small companies
that with pre-identified drugs well into the development and approval phase, dramatically shortening
the time to market for Bristol-Meyer Squib and preserving their revenue stream.
5. Why Mergers and Acquisitions Sometimes Fail to Produce Anticipated Results – Many mergers and
acquisitions do not always produce the hoped for outcomes, reasons include:
a. Cost savings may prove smaller than expected.
b. Gains in competitive capabilities may take substantially longer to realize or, worse, may never
materialize at all.
c. Key employees at the acquired company can quickly become disenchanted and leave.
d. The morale of company personnel who remain can drop to disturbingly low levels because they
disagree with newly instituted changes.
VI. Vertical Integration Strategies
1. Vertical integration extends a firm’s competitive and operating scope within the same industry. It
involves expanding the firm’s range of activities backward into sources of supply and/or forward
toward end users.
2. Vertical integration strategies can aim at full integration or partial integration.
A. The Advantages of a Vertical Integration Strategy
1. The two best reasons for investing company resources in vertical integration are to strengthen the
firm’s competitive position and/or boost its profitability,
CORE CONCEPT
A vertically integrated firm is one that performs value chain activities along more
than one stage of an industry’s value chain system.
2. Integrating Backward to Achieve Greater Competitiveness: For backward integration to be a

viable and profitable strategy, a company must be able to:
a. Achieve the same scale economies as outside suppliers.
b. Match or beat suppliers production efficiency with no drop-off in quality.
CORE CONCEPT
Backward integration involves performing industry value chain activities previously
performed by suppliers or other enterprises engaged in earlier stages of the industry
value chain; forward integration involves performing industry value chain activities
closer to the end user.
1. Backward integration is most likely to reduce costs when:
a. The firm can achieve the same scale economies as outside suppliers.
b. The firm can match or beat suppliers’ production efficiency with no drop-off in quality.
c. The needed technological skills and product capability are easily mastered or can be gained by
acquiring a supplier with desired expertise
2. Backward vertical integration can produce a differentiation-based competitive advantage when

a company, by performing activities in-house that were previously outsourced, ends up with a
better quality offering, improves the caliber of its customer service, or in other ways enhances the
performance of its final product.
3. Other potential advantages of backward integration include:
a. Decreasing the company’s dependence on suppliers of crucial components
b. Lessening the company’s vulnerability to powerful suppliers inclined to raise prices at every
opportunity
4. Integrating Forward to Enhance Competitiveness: The strategic impetus for forward integration
is to gain better access to end-users and better market visibility.
a. Forward integration can lower costs by increasing efficiency and bargaining power. In addition,
it can allow manufacturers to gain better access to end users.
b. Forward integration can improve market visibility and include the end user’s purchasing
experience as a differentiating feature.
C. The Disadvantages of a Vertical Integration Strategy - Vertical integration has some substantial
drawbacks:
1. It raises a firm’s capital investment in the industry, increasing business risk
2. Vertically integrated companies are often slow to embrace technological advances
3. It can impair a company’s operating flexibility
4. It can result in less flexibility in accommodating shifting buyer preferences.
5. It may not be able to achieve economies of scale
6. It poses all kinds of capacity-matching problems
7. It often calls for changes in skills and business capabilities
D. Weighing the Pros and Cons of Vertical Integration
1. A strategy of vertical integration can have both important strengths and weaknesses. The tip of the
scales depends on:
a. Whether vertical integration can enhance the performance of strategy-critical activities in ways
that lower cost, build expertise, or increase differentiation
b. The impact of vertical integration on investments costs, flexibility and response time, and
administrative costs of coordinating operations across more value chain activities
c. The administrative costs of coordinating operations across more vertical chain activities.
d. How difficult it will be for the company to acquire the set of skills and capabilities needed

American Apparel’s Vertical Integration Strategy
Discussion Question: In what way has American Apparel used vertical integration to gain
competitive advantage in the clothing industry?
Answer: American Apparel has moved backward into the industry value chain by doing its own
fabric cutting and sewing and also owns its own knitting and dying facilities. It also does its own
clothing design, marketing, and advertising. Through this ‘end to end’ approach, the company is
better able to respond to changes in the market and reduce inventory problems. It can also leverage
its integrated operations by marketing its products as ‘sweatshop free.’
VII. Outsourcing Strategies: Narrowing the Boundaries of the Business
CORE CONCEPT
Outsourcing involves farming out certain value chain activities to outside vendors.
1. When Outsourcing Value Chain Activities Makes Sense:
a. An activity can be performed better or more cheaply by outside specialist
b. An activity is not crucial to the firm’s ability to achieve sustainable competitive advantage and
will not hollow out its core competencies.
c. It improves organizational flexibility and speeds time to market.
d. It reduces the company’s risk exposure to changing technology and/or changing buyer
preferences
e. It allows a company to assemble diverse kinds of expertise speedily and efficiently.
f. It allows a company to concentrate on its core business, leverage its key resources, and do even
better what it already does.
2. The Big Risk of Outsourcing Value Chain Activities
a. The biggest danger of outsourcing is that a company will farm out too many or the wrong types
of activities and thereby hollow out its own capabilities.
b. Another risk of outsourcing comes from the lack of direct control. It may be difficult to
monitor, control, and coordinate the activities of outside parties via contracts and arm’s-length
transactions alone.
VIII. Strategic Alliances and Partnerships
1. Strategic alliances and cooperative partnerships provide one way to gain some of the benefits offered
by vertical integration, outsourcing, and horizontal mergers and acquisitions while minimizing the
associated problems.
2. Companies in all types of industries have elected to form strategic alliances and partnerships to
complement their own strategic initiatives and strengthen their competitiveness. These are the very
same goals that motivate vertical integration, horizontal mergers and acquisitions, and outsourcing
initiatives.
3. Collaborative arrangements may entail a contractual agreement, but they commonly stop short of
formal ownership ties between the partners.
CORE CONCEPT
A Strategic alliance is a formal agreement between two or more separate companies
in which they agree to work cooperatively toward some common objective.
CORE CONCEPT
A joint venture is a type of strategic alliance in which the partners set up an
independent corporate entity that they own and control jointly, sharing in its
revenues and expenses.
4. An alliance becomes “strategic,” as opposed to just a convenient business arrangement, when it

serves any of the following purposes:
a. It facilitates achievement of an important business objective (like lowering costs or delivering

more value to customers in the form of better quality, added features, and greater durability).
b. It helps build, sustain, or enhance a core competence or competitive advantage.
c. It helps block a competitive threat.
d. It helps remedy an important resource deficiency or competitive weakness.
e. It increases the bargaining power of alliance members over suppliers or buyers.
f. It helps open up important new market opportunities.
g. It mitigates a significant risk to a company’s business.
5. Why and How Strategic Alliances are Advantageous - The most common reasons why companies
enter into strategic alliances are to collaborate on technology or the development of promising new
products, to overcome deficits in their technical and manufacturing expertise, to acquire altogether
new competencies, to improve supply chain efficiency, to gain economies of scale in production
and/or marketing, and to acquire or improve market access through joint marketing agreements.
6. A company that is racing to stake out a strong position in a technology or industry of the future
needs alliances to:
a. Establish a stronger beachhead for participating in the target technology or industry
b. Master new technologies and build new expertise and competencies faster than would be
possible through internal efforts
c. Open up broader opportunities in the target industry by melding the firm’s own capabilities
with the expertise and resources of partners
7. Capturing the Benefits of Strategic Alliances - The extent to which companies benefit from entering
into alliances and collaborative partnerships seem to be a function of six factors:
a. Picking a good partner
b. Being sensitive to cultural differences
c. Recognizing that the alliance must benefit both sides
d. Ensuring that both parties live up to their commitments
e. Structuring the decision-making process so that actions can be taken swiftly when needed
f. Managing the learning process and then adjusting the alliance agreement over time to fit new
circumstance
8. Alliances are more likely to be long lasting when:
a. They involve collaboration with partners that do not compete.
b. A trusting relationship has been established.
c. Both parties conclude that continued collaboration is in their mutual interest.
9. The Drawbacks of Strategic Alliances and Partnerships
a. Anticipated gains may fail to materialize due to an overly optimistic view of the synergies or a
poor fit in terms of the combination of resources and capabilities.
b. The greatest danger is that a partner will gain access to a company’s proprietary knowledge
base, technologies, or trade secrets, enabling the partner to match the company’s core strengths
and costing the company its hard-won competitive advantage.
10. The principle advantages of strategic alliances over vertical integration or horizontal mergers/
acquisitons are threefold:
a. They lower investment costs and risks for each partner.
b. They are more flexible organizational forms and allow for faster market response.
c. They are faster to deploy.
11. They key advantages to using strategic alliances are the increased ability to exercise control over
the partner’s activities and a greater willingness for the partners to make relationship specific
investments.
12. How to Make Strategic Alliances Work - The success of an alliance depends on how well the partners
work together, their capacity to respond and adapt to changing internal and external conditions, and
their willingness to renegotiate the bargain if circumstances so warrant.
13. Companies that have greater success in managing their strategic alliances and partnerships often
credit the following factors:
a. They create a system for managing their alliances.

b. They build relationships with their partners and establish trust.
c. They protect themselves from the threat of opportunism by setting up safeguards.
d. They make commitments to their partners and see that their partners do the same.
e. They make learning a routine part of the management process.
14. Managers must realize that alliance management is an organizational capability and develop it over
time to become another source of competitive advantage.
ASSURANCE OF LEARNING EXERCISES

1. Does it appear that Nintendo relies more heavily on offensive or defensive strategies as it competes in the
video game industry? Has Nintendo’s timing of strategic moves made it an early mover or a fast follower?
Could Nintendo’s introduction of the Wii be characterized as a blue ocean strategy? You may rely on your
knowledge of the video game industry and information provided at Nintendo’s investor relations website
(www.nintendo.co.jp) to provide justification for your answers to these questions.
Answer: The student should find that in a heavily competitive industry, Nintendo was able to make their
way back to a leadership position through the use of offensive strategic moves. This resulted in Nintendo
working its way into the top ten list of Business Week’s Most Innovative Companies in 2008. Nintendo has
taken an early mover position in the industry in the last few years. Key to this change was the Blue Ocean
Strategy introduction of the Wii. With this product, Nintendo moved into an entirely new area of game
control that did not rely on standard human interfaces. Rather, this new system allowed the user to control
the game with body movements. This has put Microsoft in a follower position with their Kinect controller.
2. Using your university library’s subscription to Lexis-Nexis, EBSCO, or a similar database, perform a search
on “acquisition strategy.” Identify at least two companies in different industries that are using acquisitions
to strengthen their market positions. How have these acquisitions enhanced the acquiring companies’
competitive capabilities?
Answer: The vast amount of choices should permit students to offer extensive, well-developed answers to
this question. Suggested student responses may identify the following examples:
The first example is SCM Microsystems, Inc.’s merger with Hirsch Electronics Corporation. Following the
merger, revenue more than doubled, reflecting the success of the Company’s strategy to increase its revenue
by expanding its customer base and market reach through acquisitions and market investment. According
to Felix Marx, chief executive officer of SCM Microsystems, “The integration of Hirsch and SCM has
proceeded rapidly as we have focused on creating synergies within our sales and marketing organizations
to accelerate the acquisition of new customers, expand our mutual distribution channels and introduce new
products in target markets.”
A second example is Nucor Corporation’s acquisition of Harris Steel. This acquisition was based on Nucor’s
desire to achieve vertical integration both upstream for lower cost raw materials and downstream for a
higher value-added product mix and diversification.
3. American Apparel, known for its hip line of basic garments and its provocative advertisements, is no stranger
to the concept of “doing it all.” Concepts & Connections 6.2 describes how American Apparel has made
vertical integration a central part of its strategy. What value chain segments has American Apparel chosen
to enter and perform internally? How has vertical integration aided the company in building competitive
advantage? Has vertical integration strengthened its market position? Explain why or why not.
Answer: The student should find that American Apparel has moved backward into the industry value chain
by doing its own fabric cutting and sewing and also owns its own knitting and dying facilities. It also does
its own clothing design, marketing, and advertising.
This strategy has allowed the company to gain competitive advantage by reducing the time required to
respond to market changes and reduce inventory requirements. From a marketing perspective, the company
has the unique ability to market products that are ‘sweatshop free.’
4. Perform an Internet search to identify at least two companies in different industries that have entered into
outsourcing agreements with firms with specialized services. In addition, describe what value chain activities
the companies have chosen to outsource. Do any of these outsourcing agreements seem likely to threaten
any of the companies’ competitive capabilities?
Answer: There are numerous choices that should allow students to provide extensive, well-developed
answers to this question. Suggested student responses may identify the following examples.
The first example is IBM and Grupo Gigante, one of Mexico’s leading business groups. The companies
have extended their business contract for five additional years through a series of outsourcing agreements.
IBM will be responsible for fully managing and monitoring the information technology (IT) infrastructure
under two managed service modes, applications and infrastructure. IBM’s outsourcing solution for Grupo
Gigante includes infrastructure services components for equipment and server hosting, help desk activation,
distributed computing services, on-site support services, data center security and disaster recovery planning.
Grupo Gigante will strategically retain a team of experts to manage the main IT applications that support
the business which will enable the company to keep in-house the value of the key human capital it has
developed over time. This provides the company with opportunities to test new solutions that facilitate
strategic business decision-making and will bring more efficiency to day-to-day operations. The value chain
activity involved is a support activity, i.e. information technology.
A second example involves a three-year ATM-outsourcing agreement between NCR Corporation and Co-op
Financial Services that enables Co-op’s credit-union members to lease instead of buy new ATMs to reduce
participating credit unions’ capital expenses. According to Bill Allen, NCR’s marketing director, “Leasing
ATMs is a lot more attractive for some financial institutions because leasing agreements are not carried
on the books as a capital expense.” Co-op ATM Managed Services, a unit of Co-op Financial Services,
will manage credit-union members’ leased ATMs. NCR will provide first- and second-line maintenance on
all of the leased machines so if the ATM breaks down, NCR fixes it. It does not appear these outsourcing
agreements are likely to threaten the competitive capabilities of these companies.
5. Using your university library’s subscription to Lexis-Nexis, EBSCO, or a similar database, find two examples
of how companies have relied on strategic alliances or joint ventures to substitute for horizontal or vertical
integration.
Answer: Students will be able to find a wealth of companies engaged in successful alliances and joint
ventures. LG Electronics is one example of a company that has use alliances to broaden their base (horizontal)
and add to their value chain (vertical). The company has been able to gain significant market share in recent
years. The company attributes part of their success to their use of Strategic
Alliances to gain advantage in business and technology fields. Alliance partners include:
• Qualcom – Early 3G/3.5G Market Entry

• Schneider – Mobile Phone Camera Lenses
• GE – Cross license and patent sharing
• Viking – Home appliances
• Skype – Broadband TV
• Maxdome – Premium Video on Demand
• Skylife – 3DTV Technology
• Hitachi – Optical Storage
• Microsoft – Windows based Smart Devices
• Intel – TV/Internet Convergence Market
• Sun – Java applications for LG Phones
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But now I know he was away
Upon the hills of Italy.
He showed me once long months before

The picture of a dark-eyed girl
Within a locket that he wore—
A little keepsake wrought of pearl.
His life had known no counter gale,

He had the aid of wind and tide,
And dreamed that soon a snowy sail
Should bear him to his future bride.
’Twas but a letter—nothing much—

A scrap of paper sent to him,
Yet something he did clutch and clutch
The while his dusky eyes grew dim.
And oh, how eagerly he scanned

Each syllable that formed her name!
He crushed the letter in his hand
And fed it to the driftwood flame.
As in a dream he sat and stared

At night’s black pall around us hung;
I would have spoken if I’d dared,
But silence had a gentler tongue.
He did not curse as men will do,

Of grief he gave no outward sign;
That bitter draught of myrrh and rue
He drank as though it had been wine.
With joyless heart he crooned a song

Of love and hope, as day by day
We hauled our heavy seine along
The pebbled beaches of the bay.
At last—ah, Christ, I’ll not forget!
I never saw the like before!
An empty boat—we, chilled and wet,
And ten leagues from our cabin door!
Ten leagues—a stormy row!

But fishermen know naught of fear;
Had we ere this not faced the snow
When winter nights were dark and drear?
Had we not braved the Storm-king’s glee

When winds were shrill and waves were high,
Been battered by a raging sea
And swung below a ragged sky?
“Oho! Cheer up!” I cried,

“We’ve dared the seas before, my mate,
What matter if ill luck betide?—
Why, we were born to laugh at fate!”
He grasped his oar with one long sigh,

Nor spoke he any word to me;
And so together, he and I,
Put out upon the angry sea.
And side by side, with steady stroke;

We fought against the veering flaw;
In flakes of froth the billows broke—
The wildest wolves I ever saw!
Ah, how the cutting north wind blew,

And in our faces dashed the spray!
The sullen twilight round us grew,
The green shore faded into gray.
“Cheer up! Cheer up! A merry row

We’ll have ere dawn of day!” laughed I;
“And what care we how winds may blow?”
The Sea’s voice only made reply.
A silent man he left the shore,

Nor yet a single word had said;
A silent man he dipped his oar
As though it were a thing of lead.
The night came down and still we toiled,

The tumult fiercer grew, and now
The swirling tide-rip foamed and boiled,
And ghostly seas swept o’er the prow.
The air was filled with flying spume,

Cloud-galleons sailed down the sky,
Strange forms groped toward us in the gloom,
Pale phantoms glided swiftly by.
Afar, at times, a lonely loon

Sent quavering laughter through the night,
While from a filmy sheath the moon
Drew forth a sabre, keen and bright.
Oh, it was weird!—the seabird’s screech,

The distant buoy’s warning bell,
The white palms lifting high to reach
A loosened star that downward fell!
Within my breast each moment grew

A fear of more than wind-blown sea;
And lo! that mute man, laughing, threw
Aside his oar and leered at me.
That moonlit face! It haunts me still!

The eyes that spoke the maddened brain!
That moonlit face! it sent a thrill
Of terror through my every vein!
“Aha! You thought me dead, you cur!”—

His breath blew hot against my cheek;
“Aha! You coward, you lied to her!”—
I felt my limbs grow strangely weak.
“Lorenzo! Look! The boat! The boat!”—

But how can mad men understand?
My God! He leaped to clutch my throat,
A wicked dagger in his hand!
That lifted knife! Ah, yet I feel

A horror of the deadly thing!
The long, keen blade of polished steel
Against the white stars quivering.
I upward sprang—I grasped somehow

The hand that held the hilt of bone;
With panther strength he struggled now,
A demon I must fight—alone!
He strove to slay, and I to save

His life and mine if such might be,
And in the trough and on the wave
Like beasts we grappled savagely.
To plead were vain; I could not hear

My voice above the tempest’s breath,
I only knew my feet were near
The awful, icy edge of Death.
We fought until the dark became

A glare of crimson to my eyes,
Until the stars were snakes of flame
That writhed along the lurid skies.
We fought I know not how—to me

All things of that mad night appear
As vague as when in dreams you see
The ghouls that haunt the coast of Fear.
We fought—we fought and then—and then—
A leap—a cry—and he was gone!
And I alone pulled shoreward when
The East had grown the flower of dawn.
...
I knew he was morose that day

Because he did not speak to me,
But now I know he was away
Upon the hills of Italy.
—Copyright by the Harr Wagner Co., San Francisco, and used by

kind permission of author and publisher.
WHY SANTA CLAUS FORGOT

By Herbert Bashford
A wind from the south swept down the bay,

And pale with anger the waters turned
As the ranchman’s wife looked far away
To where the lights of the city burned.
Like feeble stars on that Christmas eve

Were the pulsing lights beyond the tide;
“Now play with your dolly and do not grieve,”
Said she to the wee one at her side.
“Good Santa Claus will come to you

This very night if you do not cry,”
And she wiped a tear like a drop of dew
From the rosy cheek and the anxious eye.
“No sail! No sail!” and the sad wife pressed

A wan face close to the window-pane,
But naught she saw but the sea’s white breast
And the long gray lash of the hissing rain.
The night fell black and the wild gale played
In the chimney’s throat a shrill, weird tune,
While into a cloud as if afraid
Stole the ghostly form of the groping moon.
Then the steeds of the sea all landward came,

Each panting courser thundered o’er
The rocks of the reef and died in flame
Along the utmost reach of shore.
Ah, heavy the heart of the ranchman’s wife!

And long she listened, yet only heard
The voice of breakers in awful strife
And the plaintive cry of a frightened bird.
So long she waited and prayed for day

As the firelight flickered upon the floor,
While the prowling wind like a beast of prey
Did growl and growl at the cabin door.
The gray dawn crept through the weeping wood,

The clouds set sail and all was still;
With a breast of gold the fair morn stood
Above the firs of the eastern hill.
The waters slept and the raindrops clung

Like shimmering pearls to the maple tree;
The sky was clear and the brown birds flung
Sweet showers of crystal melody.
A splintered mast and a tattered sail

Lay out in the sun on the hard brown sands
And plainer than words they told a tale
To the woman who wept and wrung her hands.
And the little girl with the gold-crowned head

Looked up with her tear-wet eyes of blue;
“Oh, please don’t cry, mamma,” she said,
“Old Santa Claus forgot me, too.”
—Copyright by Harr Wagner Co., San Francisco, and used by kind

permission of author and publisher.
DICKENS IN CAMP
By Bret Harte
Above the pines the moon was slowly drifting,

The river sang below;
The dim Sierras, far beyond, uplifting
Their minarets of snow:
The roaring camp-fire, with rude humor, painted

The ruddy tints of health
On haggard face and form that drooped and fainted
In the fierce race for wealth;
Till one arose, and from his pack’s scant treasure

A hoarded volume drew,
And cards were dropped from hands of listless leisure
To hear the tale anew.
And then, while round them shadows gathered faster,

And as the firelight fell,
He read aloud the book wherein the Master
Had writ of “Little Nell.”
Perhaps ’twas boyish fancy—for the reader

Was youngest of them all—
But, as he read, from clustering pine and cedar
A silence seemed to fall;
The fir-trees, gathering closer in the shadows,

Listened in every spray,
While the whole camp, with “Nell” on English meadows
Wandered and lost their way.
And so in mountain solitudes—o’ertaken
As by some spell divine—
Their cares dropped from them like the needles shaken
From out the gusty pine.
Lost is that camp and wasted all its fire;

And he who wrought that spell?—
Ah! towering pine and stately Kentish spire,
Ye have one tale to tell!
Lost is that camp, but let its fragrant story

Blend with the breath that thrills
With hop-vines’ incense all the pensive glory
That fills the Kentish hills.
And on that grave where English oak, and holly

And laurel wreaths entwine,
Deem it not all a too presumptuous folly—
This spray of Western pine!
—Copyright by Houghton, Mifflin & Co., Boston, Mass., and used

by their kind permission.
WHEN THE OLD MAN DREAMED

By A. J. Waterhouse
Sometimes ’long after supper my grandsire used to sit

Where the sunbeams through the window things of beauty liked to
knit,
And he’d light his pipe and sit there in a sort of waking dream,
While to bathe his form in glory seemed the sunlight’s pretty scheme;
And then, whatever happened, he didn’t seem to see,
And a smile lit up his features that used to puzzle me,
And I would often wonder what pleasant inner theme
Had caused that strange and tranquil smile when grandpa used to
dream.
Sometimes, though, when I’d listen I’d hear the good man sigh,
And once I’m almost sure I saw the moisture in his eye,
But whether he would smile or sigh, he didn’t seem to see
The things that happened ’round him, and that’s what puzzled me.
With the wreaths of smoke ascending as the twilight gathered there,
The shadows crept about him in the old arm chair,
And through the evening darkness I could see the fitful gleam
From the embers in his lighted pipe when grandpa used to dream.
I used to wonder in those days. I wonder now no more,

For now I understand the thing that puzzled me of yore,
And I know that through the twilight and the shadows gathering fast
Came unto my grandsire, dreaming, the visions of the past.
The boys who played with him were there within that little room;
His mother’s smile no doubt lit up the darkness and the gloom;
Again he ran and leaped and played beside an Eastern stream;
The ones he loved were there, I know, when grandpa used to dream.
And so he smiled—and then she stood, his dearest, at his side,

With the glow of youth upon her, red-lipped and laughing eyed,
And he told the old, sweet story, and she listened, nothing loth,
And dreams of hope were written in the happy hearts of both;
And then, by strange transition, he saw her pulseless lie—
And ’twas then I viewed the moisture in the corner of his eye.
Old friends were gathered round him, though they’d crossed death’s
mystic stream,
In that hour of smiles and sighing when my grandsire used to dream.
Oh, glad, sad gift of memory to call our dear ones back
And win them from their narrow homes to Time’s still beaten track!
Yours was the power my grandsire held while twilight turned to night;
Through you his loved returned again and blessed his longing sight;
And I no longer wonder, when his dreaming I recall,
At smiles and sighs succeeding while the shadows hid us all,
For, while my pencil’s trailing and I’ve half forgot my theme,
I, too, am seeing visions, as my grandsire used to dream.
WHEN LITTLE SISTER CAME[14]
By Joaquin Miller
We dwelt in the woods of the Tippe-canoe,

In a lone lost cabin, with never a view
Of the full day’s sun for a whole year through.
With strange half hints through the russet corn
We children were hurried one night. Next morn
There was frost on the trees, and a sprinkle of snow,
And tracks on the ground. Three boys below
The low eave listened. We burst through the door,
And a girl baby cried,—and then we were four.
We were not sturdy, and we were not wise

In the things of the world, and the ways men dare.
A pale-browed mother with a prophet’s eyes,
A father that dreamed and looked anywhere.
Three brothers—wild blossoms, tall-fashioned as men

And we mingled with none, but we lived as when
The pair first lived ere they knew the fall;
And, loving all things, we believed in all.
Ah! girding yourself and throwing your strength

On the front of the forest that stands in mail,
Sounds gallant, indeed, in a pioneer’s tale,
But, God in heaven! the weariness
Of a sweet soul banished to a life like this!
This reaching of weary-worn arms full length;

This stooping all day to the cold stubborn soil—
This holding the heart! it is more than toil!
What loneness of heart! what wishing to die
In that soul in the earth, that was born for the sky!
We parted wood-curtains, pushed westward and we,

Why, we wandered and wandered a half year through,
We tented with herds as the Arabs do,
And at last lay down by the sundown sea.
Then there in that sun did my soul take fire!
It burned in its fervor, thou Venice, for thee!
My glad heart glowed with the one desire
To stride to the front, to live, to be!
To strow great thoughts through the world as I went,
As God sows stars through the firmament.
Venice, 1874.
—Copyright by Harr Wagner Co., San Francisco, and used by kind

permission of author and publisher.
WHEN THE OLD MAN SMOKES

By Paul Laurence Dunbar
In the forenoon’s restful quiet,

When the boys are off at school,
When the window lights are shaded
And the chimney corner cool,
Then the old man seeks his arm-chair,
Lights his pipe and settles back;
Falls a-dreaming as he draws it
Till the smoke wreaths gather black.
And the tear-drops come a-trickling

Down his cheeks, a silver flow—
Smoke or memories you wonder,
But you never ask him, no;
For there’s something almost sacred
To the other family folks
In those moods of silent dreaming
When the old man smokes.
Ah, perhaps he sits there dreaming

Of the love of other days
And how he used to lead her
Through the merry dances maze;
How he called her “little princess.”
And, to please her, used to twine
Tender wreaths to crown her tresses,
From the “matrimony vine.”
Then before his mental vision

Comes, perhaps, a sadder day,
When they left his little princess
Sleeping with her fellow clay.
How his young heart throbbed, and pained him!
Why the memory of it chokes!
Is it of these things he’s thinking
When the old man smokes?
But some brighter thoughts possess him,

For the tears are dried the while.
And the old worn face is wrinkled
In a reminiscent smile,
From the middle of the forehead
To the feebly trembling lip,
At some ancient prank remembered
Or some unheard of quip.
Then the lips relax their tension

And the pipe begins to slide,
Till in little clouds of ashes,
It falls gently at his side;
And his head bends lower and lower
Till his chin lies on his breast,
And he sits in peaceful slumber
Like a little child at rest.
Dear old man, there’s something sad’ning,

In these dreamy moods of yours,
Since the present proves so fleeting,
All the past for you endures;
Weeping at forgotten sorrows,
Smiling at forgotten jokes;
Life epitomized in minutes,
When the old man smokes.
—Copyright by Dodd Mead & Co., New York, and used by

arrangement.
DRAMATIC SELECTIONS IN POETRY
EACH IN HIS OWN TONGUE

By W. H. Carruth
A fire mist and a planet,

A crystal and a cell,
A jelly-fish and a saurian,
And caves where the cavemen dwell;
Then a sense of law and beauty,
And a face turned from the clod;
Some call it Evolution,
And others call it God.
A haze on the far horizon,

The infinite tender sky;
The ripe, rich tints of the cornfields,
And the wild geese sailing high;
And all over upland and lowland
The charm of the golden-rod;
Some of us call it Autumn,
Like the tide on the crescent sea beach,

When the moon is new and thin,
In our hearts high yearnings
Come welling and surging in.
Come from the mystic ocean,
Whose rim no foot has trod;
Some of us call it Longing,
A picket frozen on duty,

A mother starved for her brood;
Socrates drinking the hemlock,
And Jesus on the road;
The millions who, humble and nameless,
The straight, hard pathway trod;
Some call it Consecration,
—Copyright, and used by kind permission of the author.
THE MAN WITH THE HOE

By Edwin Markham
(Written after seeing Millet’s World-Famous Painting)
God made man In His own image, in the image of God made He
him.—Genesis.
Bowed by the weight of centuries he leans

Upon his hoe and gazes on the ground,
The emptiness of ages in his face,
And on his back the burden of the world.
Who made him dead to rapture and despair,
A thing that grieves not and that never hopes,
Stolid and stunned, a brother to the ox?
Who loosened and let down this brutal jaw?
Whose was the hand that slanted back this brow?
Whose breath blew out the light within this brain?
Is this the Thing the Lord God made and gave
To have dominion over sea and land;
To trace the stars and search the heavens for power;
To feel the passion of Eternity?
Is this the Dream He dreamed who shaped the suns
And pillared the blue firmament with light?
Down all the stretch of Hell to its last gulf
There is no shape more terrible than this—
More tongued with censure of the world’s blind greed—
More filled with signs and portents for the soul—
More fraught with menace to the universe.
What gulfs between him and the seraphim!
Slave of the wheel of labor, what to him
Are Plato and the swing of Pleiades?
What the long reaches of the peaks of song,
The rift of dawn, the reddening of the rose?
Through this dread shape the suffering ages look;
Time’s tragedy is in the aching stoop;
Through this dread shape humanity betrayed,
Plundered, profaned and disinherited,
Cries protest to the Judges of the World,
A protest that is also prophecy.
O masters, lords and rulers in all lands,

Is this the handiwork you give to God,
This monstrous thing distorted and soul-quenched?
How will you ever straighten up this shape;
Touch it again with immortality;
Give back the upward looking and the light;
Rebuild in it the music and the dream;
Make right the immemorial infamies,
Perfidious wrongs, immedicable woes?
O masters, lords and rulers in all lands,

How will the Future reckon with this Man?
How answer his brute questions in that hour
When whirlwinds of rebellion shake the world?
How will it be with kingdoms and with kings—
With those who shaped him to the thing he is—
When this dumb Terror shall reply to God,
After the silence of the centuries?
—Copyright by Doubleday, Page & Co., New York, and used by

kind permission of author and publisher.
TOMMY
By Rudyard Kipling
I went to a public-’ouse to get a pint o’ beer,
The publican ’e up an’ sez, “We serve no redcoats here.”
The girls be’ind the bar they laughed an’ giggled fit to die,
I out into the street again, an’ to myself sez I:
O it’s Tommy this, an’ Tommy that, an’ “Tommy, go away”;
But it’s “Thank you, Mister Atkins,” when the band begins to
play,
The band begins to play, my boys, the band begins to play,
O it’s “Thank you, Mister Atkins,” when the band begins to play.
I went into a theater as sober as could be,

They gave a drunk civilian room, but ’adn’t none for me;
They sent me to the gallery or round the music-’alls,
But when it comes to fightin’, Lord! they’ll shove me in the stalls!
For it’s Tommy this, an’ Tommy that, an’ “Tommy, wait outside”;
But it’s “Special train for Atkins” when the trooper’s on the tide,
The troopship’s on the tide, my boys, the troopship’s on the tide,
O it’s “Special train for Atkins” when the trooper’s on the tide.
Yes, makin’ mock o’ uniforms that guard you while you sleep
Is cheaper than them uniforms, an’ they’re starvation cheap;
An’ hustlin’ drunken soldiers when they’re goin’ large a bit
Is five times better business than paradin’ in full kit.
Then it’s Tommy this, an’ Tommy that, an’ “Tommy, ’ow’s yer
soul?”
But it’s “Thin red line of ’eroes” when the drums begin to roll,
The drums begin to roll, my boys, the drums begin to roll,
O it’s “Thin red line of ’eroes” when the drums begin to roll.
We aren’t no thin red ’eroes, nor we aren’t no blackguards too,

But single men in barracks, most remarkably like you;
An’ if sometimes our conduck isn’t all your fancy paints,
Why, single men in barracks don’t grow into plaster saints;
While it’s Tommy this, an’ Tommy that, an’ “Tommy, fall be’ind,”
But it’s “Please to walk in front, sir,” when there’s trouble in the
wind,
There’s trouble in the wind, my boys, there’s trouble in the wind,
O it’s “Please to walk in front, sir,” when there’s trouble in the
wind.
You talk o’ better food for us, an’ schools, an’ fires, an’ all:
We’ll wait for extry rations if you treat us rational.
Don’t mess about the cook-room shops, but prove it to our face
The Widow’s Uniform is not the soldier-man’s disgrace.
For it’s Tommy this, an’ Tommy that, an’ “Chuck him out, the
brute!”
But it’s “Saviour of ’is country” when the guns begin to shoot;
An’ it’s Tommy this, an’ Tommy that, an’ anything you please;
An’ Tommy ain’t a bloomin’ fool—you bet that Tommy sees!
THE CAVALIER’S SONG

By Sir Walter Scott
While the dawn on the mountain was misty and gray,

My true love has mounted his steed, and away
Over hill, over valley, o’er dale, and o’er down—
Heaven shield the brave Gallant that fights for the Crown!
He has doff’d the silk doublet the breastplate to bear,

He has placed the steel cap o’er his long-flowing hair,
From his belt to his stirrup his broadsword hangs down—
Heaven shield the brave Gallant that fights for the Crown!
For the rights of fair England that broadsword he draws;

Her King is his leader, her Church is his cause;
His watchword is honor, his pay is renown—
God strike with the Gallant that strikes for the Crown!
They may boast of their Fairfax, their Waller, and all

The roundheaded rebels of Westminster Hall;
But tell these bold traitors of London’s proud town,
That the spears of the North have encircled the Crown.
There’s Derby and Cavendish, dread of their foes;

There’s Erin’s high Ormond, and Scotland’s Montrose!
Would you match the base Skippon, and Massey, and Brown
With the Barons of England, that fight for the Crown?
Now joy to the crest of the brave Cavalier!

Be his banner unconquer’d, resistless his spear,
Till in peace and in triumph his toils he may drown,
In a pledge to fair England, her Church, and her Crown.
WAR
Anonymous
Ivor never heard of Rudolph,

Rudolph never heard of Ivor,
Yet each of them flies at the other—and dies;
For some one, somewhere, has said “War!”
Twelve million men to be marshaled

And murdered and mangled and maimed;
Twelve million men, by the stroke of the pen,
To be slaughtered—and no one ashamed.
Mountains of wealth to be wasted,

Oceans of tears to be shed,
Valleys of light to be turned into night,
Rivers of blood to run red.
Thousands of wives to be widowed,

Millions of mothers to mourn,
Thousands in sorrow to wait the to-morrow,
Millions of hearts to be torn.
Thousands of fathers to perish,

Millions of children to moan,
Ages of time to prepare for a crime
That eons can never atone.
Thousands of homes to be shattered,
Millions of prayers to be vain.
Thousands of ways to the glory that pays
In poverty, panic and pain.
Twelve million men in God’s image

Sentenced to shoot and be shot,
Kill and be killed, as ruler has willed,
For what—For what—For what?
Ivor never heard of Rudolph,

And Rudolph knows naught of Ivor,
Yet each of them flies at the other—and dies,
For some one, somewhere, has said “War!”
LOVE OF COUNTRY
By Sir Walter Scott
Breathes there a man with soul so dead,

Who never to himself hath said,
This is my own, my native land!
Whose heart hath ne’er within him burned,
As home his footsteps he hath turned,
From wandering on a foreign strand!
If such there breathe, go, mark him well;
For him no minstrel raptures swell
High tho’ his titles, proud his name,
Boundless his wealth as wish can claim;
Despite those titles, power, and pelf,
The wretch, concentered all in self,
Living, shall forfeit fair renown,
And doubly dying, shall go down
To the vile dust, from whence he sprung,
Unwept, unhonor’d, and unsung.
SIR GALAHAD

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Crafting And Executing Strategy 19th

Edition Thompson Solutions Manual

b. Applying resources where rivals are least able to defend themselves.

2. Choosing the Basis for Competitive Attack

a. Strategic offensives should, as a general rule be based on exploiting a company’s strongest

b. The principal offensive strategy options include the following:

1. Offering an equally good or better product at a lower price.

2. Leapfrogging competitors by being first to market with next-generation products.

a. Market leaders that are vulnerable.

b. Runner-up firms with weaknesses in areas where the challenger is strong.

c. Struggling enterprises that are on the verge of going under.

d. Small local and regional firms with limited capabilities.

ILLUSTRATION CAPSULE 6.1

II. Defensive Strategies – Protecting Market Position and Competitive Advantage

III. Timing a Company’s Offensive and Defensive Strategic Moves

3. The Potential for Late-Mover Advantages or First-Mover Disadvantages - Late-mover advantages

ILLUSTRATION CAPSULE 6.2

1. Does market takeoff depend on the development of complementary products of services

2. Is new infrastructure required before buyer demand can surge?

IV. Strengthening A Company’s Market Position Via Its Scope Of Operations

V. Horizontal Merger and Acquisition Strategies

a. Creating a more cost-efficient operation out of the combined companies.

b. Expanding a company’s geographic coverage.

c. Extend a company’s business into new product categories.

d. Gaining quick access to new technologies or complementary resources and capabilities.

ILLUSTRATION CAPSULE 6.3

a. Cost savings may prove smaller than expected.

VI. Vertical Integration Strategies

2. Vertical integration strategies can aim at full integration or partial integration.

A. The Advantages of a Vertical Integration Strategy

2. Integrating Backward to Achieve Greater Competitiveness: For backward integration to be a

a. Achieve the same scale economies as outside suppliers.

b. Match or beat suppliers production efficiency with no drop-off in quality.

1. Backward integration is most likely to reduce costs when:

2. Backward vertical integration can produce a differentiation-based competitive advantage when

3. Other potential advantages of backward integration include:

a. Decreasing the company’s dependence on suppliers of crucial components

1. It raises a firm’s capital investment in the industry, increasing business risk

2. Vertically integrated companies are often slow to embrace technological advances

3. It can impair a company’s operating flexibility

4. It can result in less flexibility in accommodating shifting buyer preferences.

5. It may not be able to achieve economies of scale

6. It poses all kinds of capacity-matching problems

7. It often calls for changes in skills and business capabilities

D. Weighing the Pros and Cons of Vertical Integration

ILLUSTRATION CAPSULE 6.4

VII. Outsourcing Strategies: Narrowing the Boundaries of the Business

1. When Outsourcing Value Chain Activities Makes Sense:

a. An activity can be performed better or more cheaply by outside specialist

c. It improves organizational flexibility and speeds time to market.

e. It allows a company to assemble diverse kinds of expertise speedily and efficiently.

2. The Big Risk of Outsourcing Value Chain Activities

VIII. Strategic Alliances and Partnerships

4. An alliance becomes “strategic,” as opposed to just a convenient business arrangement, when it

a. It facilitates achievement of an important business objective (like lowering costs or delivering

b. It helps build, sustain, or enhance a core competence or competitive advantage.

c. It helps block a competitive threat.