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E1FTOC.qxd 2/11/09 15:13 Page vi
vi BRIEF CONTENTS
PART V CORPORATE STRATEGY 345
14 Vertical Integration and the Scope of the Firm 347

15 Global Strategies and the Multinational Corporation 369
16 Diversification Strategy 401
17 Implementing Corporate Strategy: Managing the
Multibusiness Firm 422
18 Current Trends in Strategic Management 455
Index 479
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CONTENTS
Preface xii
Guide to Web Resources xiv
PART I INTRODUCTION 1
1 The Concept of Strategy 3
Introduction and Objectives 4

The Role of Strategy in Success 5
The Basic Framework for Strategy Analysis 11
A Brief History of Business Strategy 13
Strategic Management Today 16
The Role of Analysis in Strategy Formulation 26
Summary 27
Self-Study Questions 28
Notes 29
PART II THE TOOLS OF STRATEGY ANALYSIS 31
2 Goals, Values, and Performance 33

Strategy as a Quest for Value 35
Strategy and Real Options 42
Putting Performance Analysis into Practice 44
Beyond Profit: Values and Social Responsibility 52
Summary 58
Notes 60
3 Industry Analysis: The Fundamentals 62

From Environmental Analysis to Industry Analysis 64
The Determinants of Industry Profit: Demand and Competition 65
Analyzing Industry Attractiveness 66
Applying Industry Analysis 78
Defining Industries: Where to Draw the Boundaries 83
From Industry Attractiveness to Competitive Advantage:
Identifying Key Success Factors 86
vii
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viii CONTENTS
Summary 91
Notes 93
4 Further Topics in Industry and Competitive Analysis 94

Extending the Five Forces Framework 96
The Contribution of Game Theory 99
Competitor Analysis 105
Segmentation Analysis 108
Strategic Groups 114
Summary 116
Notes 117
5 Analyzing Resources and Capabilities 120

The Role of Resources and Capabilities in Strategy Formulation 122
The Resources of the Firm 127
Organizational Capabilities 131
Appraising Resources and Capabilities 135
Putting Resource and Capability Analysis to Work: A Practical Guide 139
Summary 146
Notes 148
6 Developing Resources and Capabilities 150

Developing Resources 152
The Challenge of Capability Development 152
Approaches to Capability Development 158
Knowledge Management and the Knowledge-based View 162
Designing Knowledge Management Systems 169
Summary 170
Notes 171
7 Organization Structure and Management Systems:

The Fundamentals of Strategy Implementation 174

The Evolution of the Corporation 177
The Organizational Problem: Reconciling Specialization
with Coordination and Cooperation 180
Hierarchy in Organizational Design 183
Applying the Principles of Organizational Design 188
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CONTENTS ix
Organizing on the Basis of Coordination Intensity 189

Alternative Structural Forms 191
Management Systems for Coordination and Control 197
Summary 203
Notes 204
PART III THE ANALYSIS OF COMPETITIVE ADVANTAGE 207
8 The Nature and Sources of Competitive Advantage 209

The Emergence of Competitive Advantage 211
Sustaining Competitive Advantage 214
Competitive Advantage in Different Market Settings 219
Types of Competitive Advantage: Cost and Differentiation 222
Summary 224
Notes 226
9 Cost Advantage 227

Strategy and Cost Advantage 229
The Sources of Cost Advantage 231
Using the Value Chain to Analyze Costs 239
Summary 242
Notes 243
10 Differentiation Advantage 245

The Nature of Differentiation and Differentiation Advantage 247
Analyzing Differentiation: The Demand Side 250
Analyzing Differentiation: The Supply Side 253
Bringing It All Together: The Value Chain in Differentiation Analysis 259
Summary 263
Notes 264
PART IV BUSINESS STRATEGIES IN DIFFERENT

INDUSTRY CONTEXTS 267
11 Industry Evolution and Strategic Change 269

The Industry Life Cycle 271
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x CONTENTS
Structure, Competition and Success Factors over the Life Cycle 276
Organizational Adaptation and Change 281
Summary 291
Notes 293
12 Technology-based Industries and the Management

of Innovation 295

Competitive Advantage in Technology-intensive Industries 297
Strategies to Exploit Innovation: How and When to Enter 304
Competing for Standards 310
Implementing Technology Strategies: Creating the Conditions
for Innovation 316
Summary 323
Notes 326
13 Competitive Advantage in Mature Industries 328

Competitive Advantage in Mature Industries 330
Strategy Implementation in Mature Industries: Structure,
Systems and Style 336
Strategies for Declining Industries 338
Summary 342
Notes 343
PART V CORPORATE STRATEGY 345
14 Vertical Integration and the Scope of the Firm 347

Transaction Costs and the Scope of the Firm 349
The Costs and Benefits of Vertical Integration 352
Designing Vertical Relationships 362
Summary 366
Notes 367
15 Global Strategies and the Multinational Corporation 369

Implications of International Competition for Industry Analysis 372
Analyzing Competitive Advantage in an International Context 374
E1FTOC.qxd 2/11/09 15:13 Page xi
CONTENTS xi
Applying the Framework: International Location of Production 378

Applying the Framework: Foreign Entry Strategies 382
Multinational Strategies: Global Integration versus
National Differentiation 385
Strategy and Organization within the Multinational Corporation 393
Summary 397
Notes 399
16 Diversification Strategy 401

Trends in Diversification over Time 404
Motives for Diversification 406
Competitive Advantage from Diversification 409
Diversification and Performance 414
Summary 417
Appendix: Does Diversification Confer Market Power? 419
Notes 420
17 Implementing Corporate Strategy: Managing

the Multibusiness Firm 422

Governance and the Structure of the Multibusiness Corporation 424
The Role of Corporate Management 430
Managing the Corporate Portfolio 431
Managing Individual Businesses 434
Managing Linkages between Businesses 440
Managing Change in the Multibusiness Corporation 443
External Strategy: Mergers and Acquisitions 448
Summary 451
Notes 453
18 Current Trends in Strategic Management 455
Introduction 456
The New External Environment of Business 456
Managing in an Economic Crisis 459
New Directions in Strategic Thinking 462
Redesigning the Organization 468
New Modes of Leadership 472
Summary 474
Notes 476
Index 479
E1FPREF.qxd 2/11/09 15:07 Page xii
P R E FA C E
I wrote Contemporary Strategy Analysis to equip managers and students of man-

agement with the concepts, frameworks and techniques needed to make better
strategic decisions. I wanted a strategy text that would reflect the dynamism and
intellectual rigor of this fast-developing field of management. At that time, the
existing texts failed to incorporate either the enormous advances taking place in
strategy research or the strategic management practices of leading-edge companies.
The result is a strategy text that endeavors to be both rigorous and relevant. While
embodying the latest thinking in the strategy field, Contemporary Strategy Analysis
aims to be accessible to students from different backgrounds and with varying levels
of experience. I achieve this accessibility by combining clarity of exposition with
concentration on the fundamentals of value creation and an emphasis on practicality.
These same objectives are unchanged in this seventh edition of Contemporary
Strategy Analysis. My approach is simultaneously analytical and practical. If
strategic management is all about managing to achieve outstanding success then the
essential tasks of strategy are to identify the sources of superior business
performance and to formulate and implement a strategy that exploits these sources
of superior performance.
The seventh edition also reflects the developments that have occurred since 2007
both in the business environment and in strategy analysis. With regard to the former,
the dominant feature is the global recession that followed the financial crisis of
2008–9. I view this financial crisis less as an isolated event than one in a series of
shocks that have afflicted the twenty-first century business environment. Looking
ahead, I anticipate that turbulence, unpredictability, and intense competition will
continue to dominate the global business environment.
The principal implications I draw are, first, that strategy will become increasingly
important to firms as they navigate a challenging and unpredictable business
environment and, second, that a determined focus on the fundamentals of value
creation will be critical to firm survival and prosperity. Despite the reaction against
shareholder value maximization for its inducement to short-termism and crass
materialism, strategy analysis must focus on the pursuit of long-run profitability.
This requires a penetrating understanding of customer needs, competitive forces and
the firm’s strengths and weaknesses.
Achieving profitability in the face of intense competition means that competitive
advantage must be the central focus of strategy. This new edition places a stronger
emphasis on the primary sources of competitive advantage: the resources and
capabilities of the enterprise.
This edition also places a greater emphasis on strategy implementation. Establishing
competitive advantage in a complex and unpredictable business environment requires
that firms reconcile scale economies with entrepreneurial flexibility, innovation with
cost efficiency and globalization with local responsiveness. This creates new challenges
xii
E1FPREF.qxd 2/11/09 15:07 Page xiii
PREFACE xiii
for the design of organizational structures and management systems. At the same time
I have maintained an integrated approach to strategy formulation and strategy
implementation recognizing their codependence. A strategy that is formulated without
regard to its implementation is likely to be fatally flawed. It is through the process of
implementation that strategies adapt and emerge.
As well as emphasizing the fundamentals of strategy analysis, I draw upon
promising new approaches to strategy analysis including the role of complementarity,
the use of real options to analyze flexibility, the nature of complexity and the
potential for self-organization, and the role of legitimacy and its relevance to
corporate social responsibility.
There is very little in this book that is original—I have plundered mercilessly the
ideas, theories and evidence of fellow scholars. My greatest debts are to my colleagues
and students at the business schools where this book has been developed and tested—
notably Georgetown University and Bocconi University. This edition has also
benefitted from feedback and suggestions from professors and students in other
schools where Contemporary Strategy Analysis is used. I am particularly grateful to
Andrew Campbell for assisting with Chapters 16 and 17. With the enhanced Web-
based support being provided by the publisher, I look forward to closer interaction
with users.
The success of Contemporary Strategy Analysis owes much to the professionalism
and enthusiasm of the editorial, production and sales and marketing teams at John
Wiley & Sons, Ltd. I am especially grateful to Steve Hardman, Deborah Egleton,
Catriona King and Rosemary Nixon.
Robert M. Grant
London
E1FPREF.qxd 2/11/09 15:07 Page xiv
GUIDE TO
WEB RESOURCES
Guide to the Instructor and Student resources to accompany Contemporary Strategy

Analysis
Visit www.contemporarystrategyanalysis.com to access all the teaching and learning

materials that accompany this text.
Students can see video clips of the author summarising and extending the learning
in each chapter. There are also self-test quizzes and case study activities, including
case-related video clips with questions.
Instructors can access the password-protected resources including the Instructor’s

Manual, case teaching notes, PowerPoint slides and a Test Bank with over 1500
questions.
xiv
E1FPREF.qxd 2/11/09 15:07 Page xv
GUIDE TO WEB RESOURCES xv
Contemporary Strategy Analysis is also accompanied by a WileyPLUS course
WileyPLUS is an online teaching and learning environment that integrates the entire
digital textbook with the most effective instructor and student resources to fit every
learning style.
With WileyPLUS:
● Students achieve concept mastery in a rich, structured environment that is

available 24/7.
● Instructors personalize and manage their course more effectively with
assessment, assignments, grade tracking, and more.
For Students - Personalize the learning experience
Different learning styles, different levels of proficiency, different levels of

preparation—each of your students is unique. WileyPLUS empowers them to take
advantage of their individual strengths:
● Students receive timely access to resources that address their demonstrated

needs, and get immediate feedback and remediation when needed.
● Integrated, multi-media resources provide multiple study-paths to fit each
student’s learning preferences and encourage more active learning.
For Instructors - Personalize the teaching experience
WileyPLUS empowers you with the tools and resources you need to make your
teaching even more effective:
● With WileyPLUS you can identify those students who are falling behind and
intervene accordingly, without having to wait for them to come to you in
office hours.
● WileyPLUS simplifies and automates such tasks as student performance
assessment, creating assignments, scoring student work, keeping grades,
and more.
E1FPREF.qxd 2/11/09 15:07 Page xvi
E1C01.qxd 10/12/09 12:16 Page 1
I
INTRODUCTION
1 The Concept of Strategy

E1C01.qxd 10/12/09 12:16 Page 2
E1C01.qxd 10/12/09 12:16 Page 3
1 The Concept of Strategy
Strategy is the great work of the organization. In situations of life or death, it is the Tao of
survival or extinction. Its study cannot be neglected.
—SUN TZU, THE ART OF WAR
OUTLINE
◆ Introduction and Objectives Corporate and Business Strategy

Describing a Firm’s Strategy
◆ The Role of Strategy in Success How Is Strategy Made? Design versus
Emergence
◆ The Basic Framework for Strategy Analysis
Identifying a Firm’s Strategy
Strategic Fit
Multiple Roles of Strategy
◆ A Brief History of Business Strategy
◆ The Role of Analysis in Strategy Formulation
Origins and Military Antecedents
From Corporate Planning to Strategic ◆ Summary
Management
◆ Self-Study Questions
◆ Strategic Management Today
What Is Strategy? ◆ Notes
E1C01.qxd 10/12/09 12:16 Page 4
4 PART I INTRODUCTION
Introduction and Objectives

Strategy is about winning. This chapter explains what strategy is and why it is important
to success—both for organizations and individuals. We will distinguish strategy from
planning. Strategy is not a detailed plan or program of instructions; it is a unifying theme
that gives coherence and direction to the actions and decisions of an individual or an
organization.
The principal task of this chapter will be to introduce the basic framework for strategy
analysis that underlies this book. I will introduce the two basic components of strategy
analysis: analysis of the external environment of the firm (mainly industry analysis) and
the analysis of the internal environment (primarily analysis of the firm’s resources and
capabilities).
By the time you have completed this chapter, you will be able to:
◆ appreciate the contribution that strategy can make to successful performance,

both for individuals and for organizations;
◆ recognize the key characteristics of an effective strategy;
◆ comprehend the basic framework of strategy analysis that underlies this book;
◆ become familiar with the major trends in the development of business
strategy during recent decades;
◆ understand how strategy is made within organizations and the role played by
strategic planning systems.
Since the purpose of strategy is to help us to win, we start by looking at the role of
strategy in success.
E1C01.qxd 10/12/09 12:16 Page 5
CHAPTER 1 THE CONCEPT OF STRATEGY 5
The Role of Strategy in Success

Strategy Capsules 1.1, 1.2, and 1.3 outline examples of success in three very
different arenas: Madonna in popular entertainment, General Giap and the North
Vietnamese armed forces in warfare, and Lance Armstrong in cycling. Can the
success of these diverse individuals and the organizations they led be attributed to
any common factors?
STRATEGY CAPSULE 1.1
Madonna
The fifty-first birthday of Madonna Louise modest. Few would regard her as an
Veronica Ciccone on August 16, 2009 offered outstanding beauty.
no respite from her hectic work schedule. The She possesses relentless drive. Her wide
day before she had performed the 71st concert range of activities—records, concerts, music
in her Sweet and Sticky world tour; a tour that videos, movies, books, and charity events—are
would gross over $400 million. For yet another unified by her dedication to a single goal: the
year it seemed unlikely that Madonna would be quest for superstar status. “Even as a little girl, I
displaced in the Guinness Book of Records as knew I wanted the whole world to know who I
the world’s top-earning female entertainer and was.” She is widely regarded as a workaholic
most successful female recording artist of all who survives on little sleep and rarely takes
time. vacations: “I am a very disciplined person. I
In the summer of 1978, aged 19, Madonna sleep a certain number of hours each night,
arrived in New York with $35 to her name. After then I like to get up and get on with it. All that
five years of struggle, she landed a recording means that I am in charge of everything that
contract. Madonna (1983) ultimately sold comes out.”
10 million copies worldwide, while Like a Virgin She has drawn heavily on the talents of
(1984) topped 12 million copies. Between 1985 others: writers, musicians, choreographers, and
and 1990, six further albums, three world tours, designers. Many of her personal relationships
and five movie roles had established Madonna have been stepping stones to career transitions.
with an image and persona that transcended Her transition from dance to music was assisted
any single field of entertainment: she was rock by relationships, first, with musician Steve Bray,
singer, actor, author, and pinup. Yet, she was then with disc jockey John Benitex. Her entry
more than this—as her website proclaims, she is into Hollywood was accompanied by marriage
“icon, artist, provocateur, diva, and mogul.” She to Sean Penn and an affair with Warren Beatty.
has also made a great deal of money. Most striking has been continuous reinvention
What is the basis of Madonna’s incredible of her image. From the street-kid look of the
and lasting success? Certainly not outstanding early 1980s, to the hard-core sexuality of the
natural talent. As a vocalist, musician, dancer, 90s, to the Madonna-with-children spirituality of
songwriter, or actress, Madonna’s talents seem the past decade, her fans have been treated to
E1C01.qxd 10/12/09 12:16 Page 6
multiple reincarnations. As Jeff Katzenberg of acumen, and mastery of the strategic use of sex.
Dreamworks observed: “She has always had a As a self-publicist she is without equal, using
vision of exactly who she is, whether performer nudity, pornography, bisexuality, spirituality and
or businesswoman, and she has been strong philanthropy as publicity tools. She is also
enough to balance it all. Every time she comes astute at walking the fine line between the
up with a new look it is successful. When it shocking and the unacceptable. Through
happens once, OK, maybe it’s luck, but twice is Maverick Inc., a joint venture with Time
a coincidence, and three times it’s got to be a Warner, she has been able to control her own
remarkable talent. And Madonna’s on her fifth creative output and also manage and develop
or sixth time.” younger entertainers and musicians. Her 2007,
She was quick to learn the ropes both in Tin $120 million contract with Live Nation revealed
Pan Alley and in Hollywood. Like Evita Perón, her understanding of the shifting of economic
whom Madonna portrayed in Evita, Madonna power from recorded music to live perfor-
has combined determination, ambition, social mances.
General Giap and the Vietnam Wars, 1948–75
As far as logistics and tactics were Vietnam so long as the south was backed by the
concerned, we succeeded in everything we world’s most powerful military and industrial
set out to do. At the height of the war the nation. South Vietnam and its U.S. ally were
army was able to move almost a million defeated not by superior resources but by a
soldiers a year in and out of Vietnam, feed superior strategy. North Vietnam achieved what
them, clothe them, house them, supply them Sun Tzu claimed was the highest form of
with arms and ammunition and generally victory: the enemy gave up.
sustain them better than any army had ever The master of North Vietnam’s military
been sustained in the field . . . On the strategy was General Vo Nguyen Giap. In 1944,
battlefield itself, the army was unbeatable. Giap became head of the Vietminh guerrilla
In engagement after engagement the forces forces. He was commander-in-chief of the North
of the Vietcong and the North Vietnamese Vietnamese Army until 1974 and Minister of
Army were thrown back with terrible losses. Defense until 1980. Giap’s strategy was based
Yet, in the end, it was North Vietnam, not on Mao Tse Tung’s three-phase theory of
the United States that emerged victorious. revolutionary war: first, passive resistance to
How could we have succeeded so well yet mobilize political support; second, guerrilla
failed so miserably? warfare aimed at weakening the enemy and
building military strength; finally, general
Despite having the largest army in Southeast counteroffensive. In 1954, Giap’s brilliant victory
Asia, North Vietnam was no match for South over the French at Dien Bien Phu fully vindicated
E1C01.qxd 10/12/09 12:16 Page 7
the strategy. Against the U.S., the approach was sustain the U.S. peace movement accelerated
similar. the crumbling of American will.
The effectiveness of the U.S. military
Our strategy was . . . to wage a long- response was limited by two key uncertainties:
lasting battle . . . Only a long-term war what the objectives were and who the enemy
could enable us to utilize to the maximum was. Was the U.S. role one of supporting the
our political trump cards, to overcome our South Vietnamese regime, fighting Vietcong
material handicap, and to transform our terrorism, inflicting a military defeat on North
weakness into strength. To maintain and Vietnam, conducting a proxy war against the
increase our forces was the principle to Soviet Union, or combating world communism?
which we adhered, contenting ourselves The consistency and strength of North
with attacking when success was certain, Vietnam’s strategy allowed it to survive errors in
refusing to give battle likely to incur implementation. Giap was premature in
losses. launching his general offensive. Both the 1968
Tet Offensive and 1972 Easter Offensive were
The strategy built on the one resource where beaten back with heavy losses. By 1974, U.S.
the communists had overwhelming superiority: resistance had been sapped by the Watergate
their will to fight. As Prime Minister Pham Van scandal On April 29, 1975, Operation Frequent
Dong explained: “The United States is the most Wind began evacuating all remaining
powerful nation on earth. But Americans do not Americans from South Vietnam, and the next
like long, inconclusive wars . . . We can outlast morning North Vietnamese troops entered the
them and we can win in the end.” Limited Presidential Palace in Saigon.
military engagement and the charade of the
Sources: Col. Harry G. Summers Jr., On Strategy (Novato, CA:
Paris peace talks helped the North Vietnamese
Presidio Press, 1982): 1; Vo Nguyen Giap, Selected Writings
prolong the conflict, while diplomatic efforts to (Hanoi: Foreign Language Publishing House, 1977); J. Cameron,
isolate the U.S. from its Western allies and to Here Is Your Enemy (New York: Holt, Rinehart, Winston, 1966).
Lance Armstrong and the Tour de France
On July 24, 2005, Lance Armstrong became the greatest cyclist ever. Despite certain natural
first person to win the Tour de France seven advantages—notably a heart 30% larger than
times. His achievement was all the more normal with an abnormally slow beat rate
remarkable for the fact that he had recovered (32 times per minute while at rest)—Armstrong’s
from testicular cancer that had spread to his aerobic rate was less than that of cycling greats
lungs and brain. such as Miguel Indurain and Greg LeMond. For
Even without cancer, Lance Armstrong was most of his career, Armstrong was not the
not an obvious candidate for title of the world’s pre-eminent cyclist. He won the world
E1C01.qxd 10/12/09 12:16 Page 8
championship just once (1993) and his Olympic through the flatter stages of the Tour. Roberto
best was a bronze medal in the 2000 Sydney Heras and Jose Asevedo defended Armstrong in
games. the mountains—shielding him from the wind
Armstrong’s seven-year dominance of the and supporting him during breakaways. George
Tour de France resulted from a combination of Hinkapie rode in all seven of Armstrong’s Tour
factors, not least of which was his single- victories as a versatile all-rounder. Why did the
minded focus, not just on cycling, but on a team show a unique degree of loyalty to their
single race: between his seven Tour de France team leader? Part was Armstrong’s infectious
victories, Armstrong won only five other races. commitment; part was his willingness to pay
Armstrong raised planning for the Tour to bonuses out of his own pocket to other riders,
new levels of sophistication: with meticulous but also important was reciprocity—while team
attention to training, diet and calorific intake members gave total support to Armstrong on
and expenditure. His all-round abilities as a the Tour de France, in other competitions the
cyclist, mental resilience, and mastery of bluff roles were reversed and Armstrong served as a
and psychological warfare were well suited domestique to other team members.
to the requirements of the Tour. His feigning The team’s master planner was director,
exhaustion at critical junctures before devas- Johan Bruyneel, whose unrivaled knowledge of
tating his rivals with a powerful breakaway has the Tour spanned sports physiology, game
been deemed “worthy of a Hollywood Oscar.” theory, psychology, and tactics. As well as team
However, it was in team planning and selection, role assignment, and discipline,
coordination where the major differences Bruyneel managed a network of secret
between Armstrong and his competitors were agreements with other teams. In return for
most evident. financial support, other teams agreed to
The principal prize in the Tour de France is for support Armstrong should he find himself split
the individual who achieves the fastest overall from his own team members. Bruyneel gave
time, but cyclists compete within teams. Team particular attention to team dynamics:
coordination and the willingness of the other fostering loyalty, camaraderie discussion, and
team members (domestiques) to sacrifice shared emotions to overcome the notorious
themselves for the leader is critical to individual individualism of professional cyclists.
success. Armstrong’s U.S. Postal Service team Armstrong’s decision to come out of
(which became the Discovery Channel team for retirement electrified the 2009 Tour. In the
the 2005 Tour) was remarkable not just for the Astana team, Armstrong rejoined Bruyneel and
quality of other team members but for the other former USPS/Discovery riders—but with
willingness of these world-class cyclists to serve one difference: Alberto Contador was team
their leader. Olympic gold medal winner leader, not Armstrong. Contrador duly won the
Viatcheslav Ekimov—”The Russian Power 2009 Tour de France; Lance Armstrong in third
House”—was critical to pulling Armstrong place.
For none of these three examples can success be attributed to overwhelmingly

superior resources:
● Madonna possesses vitality, intelligence and magnetism, but lacks outstanding

talents as a vocalist, musician or actress.
E1C01.qxd 10/12/09 12:16 Page 9
● The military, human, and economic resources of the Vietnamese communists

were dwarfed by those of the U.S. and South Vietnam. Yet, with the U.S.
evacuation from Saigon in 1975, the world’s most powerful nation was
humiliated by one of the world’s poorest.
● Lance Armstrong possessed a powerful combination of physical and
psychological attributes. Yet these endowments were not markedly superior
to other top-class cyclists—especially after Armstrong’s near-death encounter
with cancer.
Nor can their success be attributed either exclusively or primarily to luck. For all
three, lucky breaks provided opportunities at critical junctures. None, however, was the
beneficiary of a consistent run of good fortune. More important than luck was the
ability to recognize opportunities when they appeared and to have the clarity of
direction and the flexibility necessary to exploit these chances.
My contention is that the key common ingredient in all three success stories was
the presence of a soundly formulated and effectively implemented strategy. These
strategies did not exist as a plan; in most the strategy was not even made explicit.
Yet, in all three, we can observe a consistency of direction based on a clear
understanding of the “game” being played and a keen awareness of how to maneuver
into a position of advantage.
● Underpinning Madonna’s many years as a superstar has been a strategy built

on dedication, opportunism, reinvention of herself and a well-coordinated
multimarket presence.
● The victory of the Vietnamese communist forces over the French and then
the Americans is a classic example of how a sound strategy pursued with total
commitment over a long period can succeed against vastly superior resources.
The key was Giap’s strategy of a protracted war of limited engagement. With
the U.S. constrained by domestic and international opinion from unleashing
its full military might, the strategy was unbeatable once it began to sap the
willingness of the U.S. government to persevere with a costly, unpopular
foreign war.
● Lance Armstrong’s domination of the Tour de France from 1999 to 2005
was because he and his team did the most effective job of analyzing the
requirements for success in the race, developing a strategy around those
requirements and executing it almost faultlessly.
We can go further. What do these examples tell us about the characteristics of a

strategy that are conducive to success? In all three stories, four common factors stand
out (see Figure 1.1):
1 Goals that are simple, consistent, and long term. All three individuals
displayed a single-minded commitment to a clearly recognized goal that was
pursued steadfastly over a substantial part of their lifetime.
● Madonna’s career featured a relentless drive for stardom in which other
dimensions of her life were absorbed within her career.
● North Vietnamese efforts were unified and focused on the ultimate goal of
reuniting Vietnam under communist rule and expelling a foreign army
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FIGURE 1.1 Common elements in successful strategies
Successful
strategy
EFFECTIVE IMPLEMENTATION
Simple, consistent, Profound Objective

long-term understanding of the appraisal
goals competitive environment of resources
from Vietnamese soil. By contrast, U.S. efforts in Vietnam were bedeviled

by confused objectives.
● On his return to professional cycling in 1998, Lance Armstrong committed
to a single goal: winning the Tour de France.
2 Profound understanding of the competitive environment. All three individuals
designed their strategies around a deep and insightful appreciation of the
arena in which they were competing.
● Fundamental to Madonna’s continuing success has been a shrewd
understanding of the ingredients of stardom and the basis of popular
appeal. This extends from the basic marketing principle that “sex sells” to
recognition of the need to manage gatekeepers of the critical media
distribution channels. Her periodic reincarnations reflect an acute
awareness of changing attitudes, styles, and social norms.
● Giap understood his enemy and the battlefield conditions where he would
engage them. Most important was appreciation of the political
predicament of U.S. presidents in their need for popular support in waging
a foreign war.
● Lance Armstrong and team director Johan Bruyneel took analysis of the
requirements for success in the Tour de France to unprecedented levels of
detail and sophistication.
3 Objective appraisal of resources. All three strategies were effective in
exploiting internal strengths, while protecting areas of weakness.
● By positioning herself as a “star,” Madonna exploited her abilities to
develop and project her image, to self-promote and to exploit emerging
trends while avoiding being judged simply as a rock singer or an actress.
Her live performances rely heavily on a large team of highly qualified
dancers, musicians, vocalists, choreographers and technicians, thus
compensating for any weaknesses in her own performing capabilities.
● Giap’s strategy was carefully designed to protect against his army’s
deficiencies in arms and equipment while exploiting the commitment and
loyalty of his troops.
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● Armstrong’s campaign to win the Tour de France was based on two key
strengths: unmatched determination to win and superior team-building
capability.
4 Effective implementation. Without effective implementation, the best-laid
strategies are of little use. Critical to the success of Madonna, Giap, and
Armstong was their effectiveness as leaders in terms of their capacity to reach
decisions, energy in implementing them, and ability to foster loyalty and
commitment among subordinates. All three built organizations that allowed
effective marshaling of resources and capabilities and quick responses to
changes in the competitive environment.
These observations about the role of strategy in success can be made in relation
to most fields of human endeavor. Whether we look at warfare, chess, politics, sport,
or business, the success of individuals and organizations is seldom the outcome of a
purely random process. Nor is superiority in initial endowments of skills and
resources typically the determining factor. Strategies that build on the basic four
elements almost always play an influential role.
Look at the “high achievers” in any competitive area. Whether we review the
world’s political leaders, the CEOs of the Fortune 500, or our own circles of friends
and acquaintances, those who have achieved outstanding success in their careers are
seldom those who possessed the greatest innate abilities. Success has gone to those
who managed their careers most effectively—typically by combining the four
strategic factors mentioned above. They are goal focused; their career goals have
taken primacy over the multitude of life’s other goals—friendship, love, leisure,
knowledge, spiritual fulfillment—which the majority of us spend most of our lives
juggling and reconciling. They know the environments within which they play and
tend to be fast learners in terms of understanding the keys to advancement. They
know themselves in terms of both strengths and weaknesses, and they implement
their career strategies with commitment, consistency and determination. As the late
Peter Drucker observed: “we must learn how to be the CEO of our own careers.”4
There is a downside, however. Focus on a single goal may lead to outstanding
success, but may be matched by dismal failure in other areas of life. Many people
who have reached the pinnacles of their careers have led lives scarred by poor
relationships with friends and families and stunted personal development. These
include Howard Hughes and Jean Paul Getty in business, Richard Nixon and Joseph
Stalin in politics, Marilyn Monroe and Elvis Presley in entertainment, Joe Louis and
O. J. Simpson in sport, and Bobby Fischer in chess. Fulfillment in our personal lives
is likely to require broad-based lifetime strategies.5
These same ingredients of successful strategies—clear goals, understanding the
competitive environment, resource appraisal and effective implementation—form
the key components of our analysis of business strategy.
The Basic Framework for Strategy Analysis

Figure 1.2 shows the basic framework for strategy analysis that we shall use
throughout the book. The four elements of a successful strategy shown in Figure 1.1
are recast into two groups—the firm and the industry environment—with strategy
forming a link between the two. The firm embodies three sets of these elements:
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FIGURE 1.2 The basic framework: strategy as a link between the firm and its
environment
THE FIRM THE INDUSTRY

ENVIRONMENT
Goals and values
Resources and Competitors
STRATEGY
capabilities Customers
Structure and Suppliers
systems
goals and values (“simple, consistent, long-term goals”), resources and capabilities
(“objective appraisal of resources”), and structure and systems (“effective
implementation”). The industry environment (“profound understanding of the
competitive environment”) is defined by the firm’s relationships with customers,
competitors and suppliers.
This view of strategy as a link between the firm and its industry enviroment has
close similarities with the widely used, but inferior, SWOT Framework (see strategy
capsule 1.4).
The task of business strategy, then, is to determine how the firm will deploy its
resources within its environment and so satisfy its long-term goals, and how to
organize itself to implement that strategy.
What’s Wrong with SWOT?
Distinguishing between the external and the whether it is sensible and worthwhile to classify
internal environment of the firm is common to internal factors into strengths and weaknesses
most approaches to strategy analysis. The best and external factors into opportunities and
known and most widely used of these approaches threats. In practice, such distinctions are difficult:
is the “SWOT” framework, which classifies the
various influences on a firm’s strategy into four ● Is Steve Jobs a strength or a weakness for
categories: Strengths, Weaknesses, Opportunities, Apple? As both founder and reincarnator of
and Threats. The first two—strengths and Apple, few major companies owe so much
weaknesses—relate to the internal environment; to a single person. Yet, having suffered
the last two—opportunities and threats—relate pancreatic cancer and the subject of
to the external environment. continuing health concerns, Jobs is also a
Which is better, a two-way distinction critical source of vulnerability for Apple.
between internal and external influences or the ● Is global warming a threat or an
four-way SWOT taxonomy? The key issue is opportunity to the world’s automobile
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producers? Global warming may encourage threats, and internal factors into strengths and
governments to raise taxes on motor fuels weaknesses, is less important than a careful
and support public transport, thereby identification of these external and internal
threatening the demand for private factors followed by an appraisal of their
motoring. At the same time, these implications. My approach to strategy analysis
circumstances create an opportunity for favors a simple two-way classification of
developing new, fuel-efficient cars that internal and external factors. What will
may encourage consumers to scrap their characterize our strategic appraisal will be the
gas-guzzlers. rigor and depth of our analysis of these factors,
rather than a superficial categorization into
The lesson here is that an arbitrary classifi- strengths or weaknesses, and opportunities or
cation of external factors into opportunities and threats.
Strategic Fit
Fundamental to this view of strategy as a link between the firm and its external
environment is the notion of strategic fit. For a strategy to be successful, it must be
consistent with the firm’s external environment, and with its internal environment—
its goals and values, resources and capabilities, and structure and systems. As we shall
see, the failure of many companies is caused by lack of consistency with either the
internal or external environment. General Motors’ long-term decline is a
consequence of a strategy that has failed to break away from its long-established
ideas about multibrand market segmentation and adapt to the changing market for
automobiles. In other cases, many companies have failed to align their strategies to
their internal resources and capabilities. A critical issue for Nintendo in the coming
years will be whether it possesses the financial and technological resources to
continue to compete head-to-head with Sony and Microsoft in the market for video
game consoles.
As you will discover, the notion of strategic fit extends beyond the simple notion
that strategy must fit with the external and the internal environment of the firm. The
principles of strategic fit extend to organizational design—what is called contingency
theory (see Chapter 7) and the view of the firm as a system of interlinked activities
(see the discussion of contextuality in Chapter 8 and complementarity in Chapter 11).
A Brief History of Business Strategy

Origins and Military Antecedents
Enterprises need business strategies for much the same reasons that armies need
military strategies—to give direction and purpose, to deploy resources in the most
effective manner and to coordinate the decisions made by different individuals.
Many of the concepts and theories of business strategy have their antecedents in
military strategy. The term strategy derives from the Greek word strategia, meaning
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“generalship.” However, the concept of strategy did not originate with the Greeks.
Sun Tzu’s classic The Art of War, written circa 500 BC, is regarded as the first treatise
on strategy.6
Military strategy and business strategy share a number of common concepts and
principles, the most basic being the distinction between strategy and tactics. Strategy is
the overall plan for deploying resources to establish a favorable position; a tactic is a
scheme for a specific action. Whereas tactics are concerned with the maneuvers
necessary to win battles, strategy is concerned with winning the war. Strategic
decisions, whether in military or business spheres, share three common characteristics:
● they are important

● they involve a significant commitment of resources
● they are not easily reversible.
Many of the principles of military strategy have been applied to business

situations. These include the relative strengths of offensive and defensive strategies;
the merits of outflanking over frontal assault; the roles of graduated responses to
aggressive initiatives; the benefits of surprise and the potential for deception,
envelopment, escalation and attrition.7 At the same time, the differences between
business competition and military conflict must be recognized. The objective of war
is (usually) to defeat the enemy. The purpose of business rivalry is seldom so
aggressive: most business enterprises limit their competitive ambitions, seeking
coexistence rather than the destruction of competitors.
The tendency for the principles of military and business strategy to develop along
separate paths indicates the absence of a general theory of strategy. The publication
of Von Neumann and Morgenstern’s Theory of Games in 1944 gave rise to the hope
that a general theory of competitive behavior would emerge. During the subsequent
six decades, game theory has revolutionized the study of competitive interaction, not
just in business but in politics, military conflict and international relations as well.
Yet, as we shall see in Chapter 4, game theory has achieved only limited success as a
practical and broadly applicable general theory of strategy.8
From Corporate Planning to Strategic Management

The evolution of business strategy has been driven more by the practical needs of
business than by the development of theory. During the 1950s and 1960s, senior
executives were experiencing increasing difficulty in coordinating decisions and
maintaining control in companies that were growing in size and complexity.
Financial budgeting, in the form of annual financial planning and investment
appraisal provided short-term control and project selection but did little to guide the
long-term development of the firm. Corporate planning (also known as long-term
planning) was developed during the late 1950s to serve this purpose.
Macroeconomic forecasts provided the foundation for the new corporate planning.
The typical format was a five-year corporate planning document that set goals and
objectives, forecasted key economic trends (including market demand, the
company’s market share, revenue, costs and margins), established priorities for
different products and business areas of the firm, and allocated capital expenditures.
The diffusion of corporate planning was accelerated by a flood of articles and books
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addressing this new science.9 The new techniques of corporate planning proved
particularly useful for developing and guiding the diversification strategies that many
large companies were pursuing during the 1960s. By the mid-1960s , most large U.S.
and European companies had set up corporate planning departments. Strategy
Capsule 1.5 provides an example of such formalized corporate planning.
Corporate Planning in a Large U.S. Steel Company, 1965
The first step in developing long-range plans was Engineer of the corporation and various district
to forecast the product demand for future years. engineers. Alternative plans for achieving
After calculating the tonnage needed in each company goals were also developed for some
sales district to provide the “target” fraction of areas, and investment proposals were formulated
the total forecast demand, the optimal after considering the amount of available capital
production level for each area was determined. A and the company debt policy. The Vice President
computer program that incorporated the who was responsible for long-range planning
projected demand, existing production capacity, recommended certain plans to the President and,
freight costs etc., was used for this purpose. after the top executives and the Board of
When the optimum production rate in each Directors reviewed alternative plans, they made
area was found, the additional facilities needed to the necessary decisions about future activities.
produce the desired tonnage were specified. Then
Source: Harold W. Henry, Long Range Planning Processes in
the capital costs for the necessary equipment, Forty-five Industrial Companies (Englewood Cliffs, NJ: Prentice-
buildings, and layout were estimated by the Chief Hall, 1967): 65.
During the 1970s and early 1980s, confidence in corporate planning and infatuation with scientific
approaches to management were severely shaken. Not only did diversification fail to deliver the
anticipated synergies but the oil shocks of 1974 and 1979 ushered in a new era of macroeconomic
instability, combined with increased international competition from resurgent Japanese, European, and
Southeast Asian firms. Faced with a more turbulent business environment, firms could no longer plan
their investments, new product introductions and personnel requirements three to five years ahead,
simply because they couldn’t forecast that far into the future.
The result was a shift in emphasis from planning to strategy making, where the focus was less on the
detailed management of companies’ growth paths than on positioning the company in markets and in
relation to competitors in order to maximize the potential for profit. This transition from corporate
planning to what became termed strategic management was associated with increasing focus on
competition as the central characteristic of the business environment and competitive advantage as the
primary goal of strategy.
This emphasis on strategy as a quest for performance directed attention to the sources of profitability.
During the late 1970s and into the 1980s, attention focused on sources of profit within the industry
environment. Michael Porter of Harvard Business School pioneered the application of industrial
organization economics to analyzing industry profitability.10 Other studies focused on how profits were
E1C01.qxd 10/12/09 12:16 Page 16
distributed between the different firms in an industry—in particular the impact of

market share and experience upon costs and profits.11 These two lines of inquiry—
into interindustry and interfirm differences in profitability—were combined in the
Strategic Planning Institute’s PIMS (Profit Impact of Market Strategy) project.12
During the 1990s, the focus of strategy analysis shifted from the sources of profit
in the external environment to the sources of profit within the firm. Increasingly the
resources and capabilities of the firm became regarded as the main source of
competitive advantage and the primary basis for formulating strategy.13 This
emphasis on what has been called the resource-based view of the firm represented a
substantial shift in thinking about strategy. Rather than firms pursuing similar
strategies, as in seeking attractive markets and favorable competitive positions,
emphasis on internal resources and capabilities has encouraged firms to identify how
they are different from their competitors and design strategies that exploit these
differences. Michael Porter’s answer to the question “What is strategy?” emphasized
that: “Competitive strategy is about being different. It means deliberately choosing
a different set of activities to deliver a unique mix of value.”14
During the first decade of the twenty-first century, the principles and practice of
strategy have been molded by the uniquely challenging circumstances of a new era.
Technology has been a particularly potent force.15 The beginning of the decade saw
the bursting of the TMT (technology, media, telecommunications) bubble and the
realization that the “new knowledge economy” and internet-based business models
did not require a rewriting of the principles of strategy. Nevertheless, technology
continues to reshape industries: digital technologies are associated with standards
wars,16 the emergence of “winner-take-all” markets, 17 and the potential for strategic
innovation as firms seek the “blue oceans” of uncontested market space.18
In the face of continuous change and relentless competition, strategy becomes less
about building positions of sustained competitive advantage and more about
developing the responsiveness and flexibility to create successive temporary
advantages. Reconfiguring resources and capabilities to achieve such responsiveness
typically requires firms to collaborate within networks of strategic alliances.
The continuing traumas of the twenty-first century, including the recession of
2008–9, are encouraging new thinking about the purpose of business. Disillusion
with “shareholder value capitalism” has been accompanied by renewed interest in
corporate social responsibility, ethics, sustainability of the natural environment and
the role of social legitimacy in long-term corporate success.
Figure 1.3 summarizes the main developments in strategic management over the
past 60 years.
Strategic Management Today

What Is Strategy?
In its broadest sense, strategy is the means by which individuals or organizations
achieve their objectives. Table 1.1 presents a number of definitions of the term
strategy. Common to definitions of business strategy is the notion that strategy is
focused on achieving certain goals; that the critical actions that make up a strategy
involve allocation of resources; and that strategy implies some consistency,
integration, or cohesiveness of decisions and actions.
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FIGURE 1.3 Evolution of strategic management: dominant themes
FINANCIAL CORPORATE STRATEGY AS QUEST FOR STRATEGY STRATEGY IN

BUDGETING PLANNING POSITIONING COMPETITIVE FOR THE NEW THE NEW
DCF-based Medium-term Industry ADVANTAGE ECONOMY MILLENNIUM
capital economic analysis Analysis of Strategic CSR and
budgeting forecasting Market resources and innovation business
Financial Formal corporate segmentation capabilities New business ethics
control through planning The experience Shareholder value models Competing for
operating Diversification curve maximization Disruptive standards
budgets and quest for PIMS analysis Restructuring and technologies Winner-take-
synergy re-engineering all markets
Planning
Creation of business Alliances Global
corporate portfolios strategies
planning
departments
1950 1960 1970 1980 1990 2000 2009
17
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civilization of the Iroquois before the alarm was given. Their farms,
sown with corn and beans, were models of orderliness. Their
palisaded forts, he noted, contained buildings of three to four stories,
similar to those he had previously observed among the highly
organized natives of Mexico.
Champlain must have had some premonition then that these
intelligent but bloodthirsty savages would prove far more
troublesome than any other natives the French had encountered in
America.
When the battle was joined, the invading savages cunningly kept
the three Frenchmen hidden behind ranks until, by the sudden
appearance of white men with death-dealing thunder, the greatest
consternation might be created among the Iroquois. The effect upon
the Iroquois was even more dramatic than was anticipated. “On a
sodaine, all was in disorder, astonished at such a noise, and death
so unexpected. Upon this feare, the men of Kebec loosing no
occasion, followed earnestly their enemies, and killed about fiftie of
them, whose heads they brought backe, to make therewith merry
feasts, and dances, at their returne, according to their custome.”
They also took back ten or twelve live prisoners reserved for torture.
The Iroquois, when they recovered sufficiently from their shock to
learn more about white men and guns, became the irreconcilable
haters of the French. The flame blazed. And it would be fed even
more by the Frenchmen—by surprise arquebus massacres and the
savagery of the white men’s Algonkin and Huron allies.
Champlain went back to France that fall. Once more the monopoly
had been cancelled; the company had lost its exclusive patent. The
government was permitting free trade to all Frenchmen in the St.
Lawrence valley. However, the company decided to stick it out in the
face of this competition. Champlain became affianced, under a
marriage contract, to a girl of twelve who was to join him later as his
wife, and then he returned to Canada.
The French captain now carried the war to the Iroquois nations
again, successfully urging his Indian allies to help him push farther
west. All his battles with the Five Nations were not victories, for the
Iroquois were fiercely stubborn foes. However Champlain forced his
way to Lake Ontario and Niagara. He ascended the Ottawa and
visited Lakes Nipissing and Huron, blazing a trail west for the beaver
traders to follow. Because of his tireless efforts in the western
wilderness the economy of the new country rested solidly on the fur
trade for many years, and the beaver rightfully came to occupy a
prominent place in the Canadian coat of arms.
Samuel de Champlain became the first Governor of French
Canada, the ruler of all New France. But he didn’t find the western
sea, or a passage to China.
He did force the Five Nations of the Iroquois into alliances with the
enemies of the French, the incoming Dutch fur traders who furnished
the savages with guns, and then with the English. The story of the
brutal border wars that resulted is in large measure the story of the
colonial struggle for most of the American continent.
V
England Moves to Extend Her Realm
ENGLAND came of age in the sixteenth century. Labor troubles
helped to bring this about.
When the tenants on demesne land asserted their right to sell their
labor to the best advantage, the lords in turn claimed their right to
use their lands to the best advantage. Since profitable sheep farming
required fewer laborers than ploughing and reaping, less and less
acres were kept in cultivation by the lords. Frustrated and starving,
the tenants were forced to abandon their homes and seek precarious
employment in the towns and cities.
But feudalism retreated before this shift to community life and a
nation of five million restless people emerged from its former
agricultural isolation. Although the sheep farmers and wool
merchants improved their capital fortunes at the expense of the poor
laborers, they had notwithstanding built up a great national industry.
England at last had something to sell!
In 1553 an expedition carrying woolens for trade with the Tartars
attempted unsuccessfully to reach Cathay by a northeast polar
passage. Defeated by ice and death, a surviving remnant did
nevertheless manage to reach the White Sea and to journey south
into Russia to Moscow. There they made a trade agreement of sorts
with Ivan IV, called “the Terrible.”
The merchant adventurers of England promptly set up the
Muscovy Company to handle what looked like a promising
commerce with Russia and through that country with the caravans of
Persia. But the English never found the Russians rewarding as either
customers or middlemen. While their czar was willing to sell furs,
felts and naval stores, or wax and honey, he wasn’t particularly
interested in buying coarse woolens. His subjects wore fur.
The subjects of the czar did indeed indulge themselves in both the
beauty and warmth of fur.
Except for the summer months Russians of quality went about in
all manner of furred luxury. From bearskin, lynx, squirrel, beaver, fox
and marten were fashioned their capes and bonnets, as well as their
fine tailored coats sporting decorative braid loops and toggles.
Women wore handsomely brocaded velvet coats lined and trimmed
with expensive fur. Nowhere in the western world did royalty make
such extravagant use of precious pelts. The nobility of Russia
affected enveloping gowns and pelisses of sable, ermine and vair.
Esteemed above all other pelts for certain wear was black fox.
Nobles used this rare fur to make up their distinctive wide caps
enclosing tall felted bonnets in the fashion of Babylonian hats.
Millions of lesser folk in Russia, wearing caps and buskins, and
shedding cloth tunics for long waistcoats of fur in the winter,
consumed vast quantities of muskrat, wolf, lamb skin and reindeer
hide.
Still, there were plenty of pelts for export. They were in fact the
country’s chief commodity. Caravans from Siberia brought their
cargoes of fine pelts to the great market towns of Novgorod and
Moscow. Ivan the Terrible personally enforced a tribute of thousands
of sables each year from the western Tartars across the Urals. The
value of Russia’s fur exports to Turkey, Persia and the countries of
Christendom reached into millions of rubles yearly.
Trade with the Russians, however, was very unsatisfactory to the
English. For one thing Dutch competition bid up the prices of
Russian fur. Some pelts “cost more there with you than we can sell
them for here” the London merchants wrote ruefully to their factors in
Russia. Then there was the fickleness and downright trickiness of
the Russians who being “very mistrustful ... doe not alwaies speake
the trueth, and think other men to bee like them.” To these woes
were added the enormous difficulties of the icy northern route. They
were almost insuperable; yet the taxes imposed on cargoes through
the Baltic by the King of Denmark were unbearably high. It was all
very frustrating.
In the end proclamations were published in England against the
use of foreign furs—and these laws were not entirely sumptuary.
True, the Renaissance had brought fashion consciousness to the
middle class Englishman to such an extent that it was often difficult
to distinguish between a noble and a well-furred commoner. There
was urgent need for proclamations to stop that. Often in the past
such proclamations had been necessary when the craze for furs
mounted inordinately. “Sabyls be for great estates” had been one
historic royal edict. Henry VIII, who decked himself lavishly with furs
plundered from the monasteries and indulged in cozily “furred
nightgowns” for his evening escapades, issued many a decree
limiting the use of precious pelts to the chosen few. Other monarchs
had done the same thing.
Over and above this need for class distinction however, it irked the
relatively poor English royalty to be gouged in the market place for
one of its regal necessities.
From earliest Norman times imported furs had been used in
England to designate royal rank. Even before that, in the ninth and
tenth centuries, nobility and ranking clergy trimmed their garments
with beaver and fox. In the fourteenth century Edward III issued a
decree specifying ermine, symmetrically spotted with astrakan or
other bits of black, to be a royal fur. A whole set of heraldic tinctures
was based on fur. Ermine was represented by white flecked with
black, variant patterns and colors being termed ermines, erminois,
pean and so forth. Vair was shown as blue and white alternating in
the manner of small skins sewn together, some of its variants being
counter-vair, potent and counter-potent. Feudal lords of England had
been inclined to treat their equipage of furs as heirlooms, handing
them down from generation to generation.
The use of fur was so firmly embedded in English tradition that it
was not in the nature of things that the new restrictive laws now
promulgated would be accepted without protest. One English
merchant put it tellingly when describing presents of fur that had
previously been brought to Queen Elizabeth by a Russian
ambassador.
“The Presents sent unto her Majesty were Sables, both in paires
for tippets, and two timbars, to wit, two times fortie, with Luzerns and
other rich furres. For at that time that princely ancient ornament of
furres was yet in use. And great pitie but that it might be renewed
especiall in Court, and among Magistrates, not only for the restoring
of an olde worshipful Art and Companie, but also because they be
for our Climate wholesome, delicate, grave and comely; expressing
dignitie, comforting age, and of longer continuance, and better with
small cost to be preserved, then these new silks, shagges and
ragges, wherein a great part of the wealth of the land is hastily
consumed.”
Whether or not the merchant’s protest was heeded, it was in fact
prophetic in its suggestiveness.
The recent proclamations had decreed “that no furres shall be
worn here, but such as the like is growing here within this our
Realme.” Well, the “Realme” was about to be vastly extended.
Now that England was no longer in a state of complete

commercial dependence upon the continent, ingenuity at home and
pluckiness abroad were rising to meet the challenge. Participation in
world affairs was eagerly sought. While adventurers of purse formed
companies to trade overseas, venturers of person took a sudden
interest in such things as ship design and ordnance. With an eye on
plunder as well as legitimate commerce shipwrights were trained to
turn out swift and manageable craft of small burden, well gunned for
oceanic warfare and easy to maintain.
Of course Mary Tudor, the Catholic Queen of England who
succeeded her father Henry VIII, had prohibited her countrymen from
sailing west to America. It wouldn’t have pleased Philip II of Spain.
He married her to extend his empire, not to share it.
But Englishmen had tasted salt water and they liked it. They liked
it even more after seeing the American silver, fifty thousand pounds
of it, that Philip sent to London as a wedding present. When Mary
died in 1558 after a short but bloody reign and her Protestant sister,
Elizabeth, ascended the throne, there was no holding those who
wanted to sail west.
Elizabeth, herself, applied no restraints. Like the French king,
Francis I, she winked broadly enough when her own newly
toughened mariners pirated Spain’s shipping and disputed that
country’s ascendancy even on the Spanish main. The destiny of
empire was beckoning the English. John Hawkins, the slaver, and
Francis Drake, the privateer, were only the forerunners of captains of
their stripe who were to make their country the mistress of the seas.
In the beginning it was envy of Spain, a thirst for silver and gold,
and the quest for a trade passage to Cathay that drove the English
westward, just as it had the French before them. Colonization,
except as an eventual means to an end, had no part in the French
scheme—nor in the English. The primary objects other than the
harassment of Spain were the discovery of mines and a northwest
passage.
Colonization was visualized, when at all, only as occupation—to
hold the route to the mines or to Cathay against the possibility of
foreign claims.
Not until an English venturer in America by the name of John
Smith challenged the wasteful search for gold and demanded the
development of the country’s more obvious resources did it begin to
dawn on the merchant adventurers of England that colonization
might be a commercially desirable end in itself.
And it was this same John Smith who demonstrated how trade
with the natives could be employed to get the country planted with
Englishmen. Along with the usual trade for pelts he bartered
successfully for Indian corn and other food stuffs. This kept the
colonists alive until they were “seasoned” to the new land; then came
the profits from organized fur trading to maintain them until
agricultural settlement could be effected with some degree of
economic success.
Prior to the coming of John Smith the English ventures in America
had been one costly failure after another.
Among the earliest of these were the expeditions led by that
enigmatic Yorkshireman, Martin Frobisher. Reputedly a successful
privateer, it was also said that he knew how to hold his tongue.
Maybe what he did tell gained in importance thereby. It might
account for the otherwise unaccountable backing he obtained for
three successive voyages to America. Many thousands of pounds
sterling were wasted on these ventures by a usually hard-headed
merchant named Michael Lok. A large part of the expenditure was
underwritten by the queen, herself, and Elizabeth was not normally
one to squander her silver.
Frobisher went out first in 1576 in search of a northwest passage.
He succeeded only in discovering the bay, or “strait” as he called it,
that bears his name before coming on “gold ore” in the form of bright,
black rocks. Since the samples must have proved worthless on his
return to England, his promise of a strait to Cathay was probably
very impressive. Certainly the fur-clad Eskimo he brought back from
the north side of the “strait” was accepted as an Asiatic. In any
event, back he went to America the next year with three ships and
the financial blessings of Lok’s newly formed Company of Cathay.
Martin Frobisher did some further exploring on this voyage, but not
enough it appears to learn that his strait was only a bay. It is all very
strange. An abundance of spiders in the region was taken as
convincing evidence that gold-bearing ore was close at hand. In the
end Frobisher loaded his ships with worthless black earth and
returned to England. What he said, or didn’t say, must have been
doubly impressive this time for the merchants evidently were not one
whit discouraged. They backed him with a fine fleet, fifteen ships, for
a third voyage in 1578.
A large band of miners was sent along this time by the company,
and two hundred twenty men were provided for the purpose of
planting a settlement on the “strait” that would protect both the mines
and the route to Cathay. But, so anxious was everyone to dig for
gold, the necessary buildings never did get erected. Again it is not
clear what happened, but apparently all thought of settlement was
abandoned.
Before the ice began to close in, Martin Frobisher set sail for home
with all his company and another three hundred tons of fool’s gold,
bankrupting the Company of Cathay.
Next there was Sir Humphrey Gilbert. He and his half-brother, Sir
Walter Raleigh, were the queen’s two favorite gallants among her
soldiers of fortune. Both were brave men and both were intensely
nationalistic. Sir Humphrey said that a man is “not worthy to live at
all, that for feare, or danger of death, shunneth his country service,
and his owne honour.”
Like other gentlemen marauders of England at the time Gilbert
and Raleigh practiced piracy abroad because it was considered both
patriotic and sportingly profitable to do so. They were particularly
jealous of Spain’s sea commerce and lent support to raids on that
country’s shipping with lucrative results. But when they personally
led forays against the silver fleet they were none too successful.
Humiliatingly enough, they were beaten off with severe losses.
Sir Humphrey, however, was good at drawing maps. Using a globe
he showed the queen how interminably long were the southern
routes to the Indian Ocean as compared with a great circle route to
the northwest. This was true enough in theory—only there was land
and ice to block the northern way. But Humphrey Gilbert didn’t let
that bother him. He drew in a convenient strait, and once a thing is
drawn in detail on a map it has a way of looking real, even to the
artist who conceived it.
So the queen gave Gilbert a patent to “discover and inhabit” all the
land in the west not occupied by another Christian prince. In the
language of the time this meant to explore and occupy such land.
And as an incentive the patentee was given absolute title to all the
country he occupied, except of course for precious metals. One-fifth
of that went to the crown.
Sir Humphrey planned to occupy Newfoundland as a starter. It
was conveniently situated off the entrance to his strait—the Gulf of
St. Lawrence!
Newfoundland had natural advantages for colonization.
Englishmen were in fact already living there at some seasons—
fishermen comfortably occupying their well-lardered huts alongside
their drying frames. Domination of the fishing banks would surely
prove profitable, Gilbert thought. Naval stores were plenteous too,
according to all reports.
And everyone knew that Newfoundland was as rich in furs as
Muscovy. Only a year or so earlier an English sea-captain, Richard
Whitbourne, bound for the Gulf of St. Lawrence to kill whales, had
put in at Trinity Harbor in Newfoundland. There he took so great a
store of bears, beaver, otter and seal that after killing a few fish he
returned forthwith to Southampton to sell his more profitable cargo.
There were few of the difficulties in taking these furs that impeded
trade with Russia.
However, when Gilbert took possession of Newfoundland at St.
John’s in 1583, he showed small interest in fish, naval stores or furs.
Certainly, he was not much concerned with the potentials of the fur
trade. That there were “foxes, which to the Northward a little further
are black, whose furre is esteemed in some Countries of Europe
very rich: Otters, bevers and marternes,” he seems to have
acknowledged. And an American pine marten appears to have
arrested his attention at least fleetingly. “The Generall had brought
unto him a Sable alive, which he sent unto his brother Sir John
Gilbert, knight of Devonshire.” But that was all.
From the first hour of his arrival at Newfoundland, Humphrey
Gilbert showed deep interest only in metals. He commanded his
miners to be diligent, and they obediently discovered what he took to
be copper and silver. Excitedly loading one of his ships with a
treasure trove of this ore, Sir Humphrey postponed the planting of
Newfoundland. He sailed to discover other mines to the south under
his patent.
But, unfortunately, he met with bad weather and his supply ship
foundered. Even after changing his course for England, storms
plagued his fleet. The “treasure” was lost, and Gilbert himself went
down in the sea after having gallantly refused to abandon the men
aboard his own leaking craft when he might have transferred to a
safer consort ship. “We are as near to heaven by sea as by land!” he
cried out above the tempest at the last.
Sir Walter Raleigh took over his half-brother’s patent. Since there
was no limit placed on the land to be explored and occupied, except
that it should not be already occupied by another Christian prince,
Raleigh had wide latitude in choosing a theatre for his operations.
Newfoundland didn’t appeal to him. It wasn’t the most favorable site
for what he had in mind.
The survivors of Sir Humphrey’s ill-fated expedition had been
thoroughly interrogated; obviously it wasn’t silver that had been
mined in Newfoundland. After all, precious metals didn’t come from
the bleak coasts of the north, but from the warmer regions of the
south where the Spaniards had discovered them. And that suited
Raleigh’s purpose, as much as the rising hope that a passage to the
Indian Ocean might also lie in those parts where Verrazano once
claimed to have actually sighted the other sea. Those southern
coasts were near New Spain!
For, what Raleigh really had in mind was a site close to the route
of the Spanish treasure galleons. He wanted an English outpost, a
garrisoned base, within easy striking distance of the silver fleets.
That was the quickest way to riches and the surest means of
destroying the power of Spain. The Caribbean was the Spaniard’s
Achilles’ heel.
The first step in the achievement of this purpose was to be the
planting of a colony.
A reconnaissance expedition, sent out by the southern route in
1584, chose the vicinity of Albemarle and Pamlico Sounds near
Hatteras for the settlement. Curiously, however, this party failed to
recognize the poor harbor and stormy hazards of the location.
Possibly it was just the first agreeable site they came upon as they
coasted north from the borders of Spanish-held Florida. If they had
gone on just a little farther they would have found Chesapeake Bay,
a likely spot indeed.
In that case Virginia, as Raleigh called the new country in honor of
his “virgin” queen, might have been successfully planted in the
sixteenth rather than the seventeenth century.
However the reconnaissance expedition suggested Roanoke
Island, near Cape Hatteras, bringing back glowing reports of the
country, a few dark pearls and a good quantity of soft furs.
“Chamoys, Buffe, and Deere skinnes” had been taken in trade with
the friendly natives. A single bright tin dish given in barter had gained
twenty skins, each worth all of a crown, and a copper kettle had
gained as many as fifty. The voyagers also brought back two of the
native inhabitants who were as anxious to please the white men with
tales that found favor as was Chief Donnacona of Canada when he
was taken to France, and probably for the same reasons.
Sir Walter Raleigh tried hard during the next three years to plant a
colony at Hatteras, sending out one expedition after another.
Everything failed. Storms contributed to the disasters as much as
bad leadership and worsening relations with the Indians. But, mainly,
the objectives were wrong.
It was the search for precious metals, the quest for a trade
passage through to the Indian Ocean, the harrying of Spain, all
coupled with a complete neglect of the country’s more obvious
resources, that brought defeat. No one thought of growing food or
trading with the Indians. The “colonists” were mostly fortune hunters,
ex-soldiers and adventurers, bent on finding El Dorado in one form
or another.
All except one—he was Thomas Hariot, a precise man and an
observant one. Raleigh sent him out as geographer to the second
expedition. Noting the resources of the country, he listed among
other things wine, “medicinal” tobacco and furs as saleable exports.
He made special mention of the fur trade potential.
“All along the Sea coast,” Hariot wrote, “there are great store of
Otters, which being taken by weares and other engines made for the
purpose, wil yeeld good profit. We hope also of Marterne furres, and
make no doubt by the relation of the people, that in some places of
the countrey there are store, although there were but two skinnes
that came to our hands. Luzernes also we have understanding of,
although for the time we saw none.”
But even Hariot, along with Ralph Lane, the governor of the colony
at the time, listened gullibly to the tales of Indians who wanted to
gain favor. While Sir Richard Grenville, the admiral of the Virginia
fleet, raided the Spaniards in the West Indies, Lane and his men
spent months of fruitless search in the interior for white pearls or
mines, and followed many a river whose source might prove to be
“near unto a sea.”
They explored north as far as the Chesapeake, entering the capes
and looking for a channel that might be the passage, while one of
their party, John White, made sketches of the region. The south side
of the bay thus became well known in England about 1590 when
White’s work was included in the first engraved map of Virginia
published by Theodore de Bry. What the Englishmen failed to
understand at the time, because they were more concerned with
gold mines and channel passages, was that the Chesapeake
tidewater represented a storehouse of valuable fur—muskrat,
beaver, mink and otter—all in vast reserve.
Lane, however, was convinced that only “the discovery of a good
mine by the goodness of God, or a passage to the South Sea, or
some way to it, and nothing else, can bring this country in request to
be inhabited by our nation.” If only he had realized that within easy
reach there was far more quick gold in fur than the English would
ever take out of America in ore!
A last contingent of Raleigh’s colonists, which included some
women and children, provided one of history’s most mystifying
episodes when the entire colony simply vanished from Roanoke
Island. Among them was the first Christian child born in English
Virginia, little Virginia Dare, granddaughter of the colony’s new
governor, John White, the artist. The word “Croatan,” carved in “faire
Romane letters” on a post of the abandoned stockade, was the only
clue to the lost colony ever found by those who came later to search
for it. A tribe of Indians by that name lived on a near-by island. Even
this proved futile however, and the mystery has only darkened with
the passing of the centuries.
Other English ventures in America also ended in failure. Beginning
in 1585 Captain John Davis, an expert navigator, went out three
times in quest of a northwest passage to Cathay. He penetrated
farther north than anyone before him to discover the straits that bear
his name, never fully realizing that beyond lay only pack ice. Captain
George Weymouth followed Davis’ track in 1593, meeting eventual
defeat.
Weymouth tried again for a northern passage in 1602; so did
Captain John Knight in 1606 while exploring for gold and silver
mines. Ice and mutiny stopped Weymouth. Knight simply
disappeared ashore one day.
Not long after the turn of the century Captain Charles Leigh led a
daring expedition to South America in an attempt to establish a base
of operations in what is now French Guiana. Only a remnant
survived a massacre by the natives in 1605 to straggle back to
England.
The coast of North America from Spanish Florida to Nova Scotia
also came in for more investigation at this time. Bartholomew Gilbert,
son of Sir Humphrey, was sent out by James I in 1603. He visited the
Chesapeake Bay area, possibly hoping to find survivors of the
Roanoke colony, only to be killed himself by Indians when he landed
with a shore party.
Others explored in the vicinity of Cape Cod and northward,
Bartholomew Gosnold, going out to that coast in 1602, and Martin
Pring in 1603. They found no mines, but they took back to England
quantities of cedar, sassafras and furs. Gosnold’s cargo of pelts
obtained from the Buzzard’s Bay area included beaver, marten, otter,
“Wild-cat skinnes very large and deepe furre,” seal, deer, black fox,
rabbit and “other beasts skinnes to us unknowen.”
Pring was more interested in sassafras trees, but he later wrote
that the furs of certain wild beasts in those parts “being hereafter
purchased by exchange may yield no smal gaine to us. Since as we
are certainly informed, the Frenchmen brought from Canada the
value of thirtie thousand Crownes in the yeare 1604. Almost in
Bevers and Otters skinnes only.”
A great deal of sassafras was cut and stowed aboard their ships
by these two captains. Sassafras brought fancy prices at the time as
a cure for the French pox as well as a specific for certain other
diseases. But such windfall importations glutted the London and
Bristol markets, seriously depressing the price.
Both Gosnold and Pring brought back the usual tales about a
passage to the South Sea and the fertility of the land. So Captain
George Weymouth went over in 1605, visiting the Maine coast where
he explored for colonization sites. He also drove a good though
hazardous trade for pelts. In one instance, “for knives, glasses,
combes and other trifles to the valew of foure or five shillings, we
had 40 good Beavers skins, Otters skins, Sables, and other small
skins which we knewe not how to call.”
These were the interlopers who had alarmed the French traders
then settled in the Bay of Fundy. Before Weymouth left Maine,
Champlain was making his own exploration southward along the
coast as far as Cape Cod. He learned enough to decide that all the
English ventures had been failures. They had discovered no mines,
no passage, and, although they had made a temporary camp or two,
no colony was yet planted. Obviously, the Frenchman surmised, the
English had found nothing of great value to the south or they would
be trying to occupy that coast. Champlain turned back, convinced
that the best prospects lay in the valley of the St. Lawrence.
But then, late in 1606, three small ships put down the Thames,
bound for America. Aboard, in addition to the crews, were a hundred
or more men committed to colonizing an English plantation in the
vicinity of Chesapeake Bay. One of these was Captain John Smith,
soldier and adventurer extraordinary—and, fortunately, a forthright
man who spoke his mind.
VI
Captain John Smith Takes to Trade
WHEN Captain John Smith arrived in America early in 1607 he
was but freshly turned twenty-seven years of age. And he was in
serious trouble—a prospect for the gibbet, in fact, because of alleged
treason. On the voyage over he had plotted to supplant those in
charge, or so it was charged by his enemies in the expedition.
But, when the sealed instructions from the London Company were
opened that spring in Virginia, it was learned that John Smith himself
was to be a member of the council in the government of the colony.
In the end he had to be given his rightful position of authority at
Jamestown where the colony was planted.
It had always been thus with young Smith. By just such amazing
experiences he had succeeded in raising himself from the status of a
poor tenant farmer’s son in Lincolnshire to that of soldier and
“gentleman.”
Unfortunately, however, at this period in England’s history such
social climbing, though countenanced and legitimate enough, had
not quite come to be “accepted.” It provided fertile ground for the
cultivation of jealous enemies.
Still, John Smith had probably packed more thrilling experiences
and hairbreadth escapes into his life than anyone else in the realm.
He had warred in far-off countries, engaged in sea fights and been
forced to ship with Barbary pirates. An award of a coat of arms and
the princely sum of fifteen hundred gold ducats had come to him
from Transylvania where, like a knight of old, he cut off three Turks’
heads in single combat. He had escaped death from wounds on a
middle-eastern battlefield, only to be enslaved by the Turks. This
hard fate was mitigated somewhat by the favors of a high-born
Turkish lady who acquired him as a slave. But then her brother
mercilessly shackled him off to the land of the Tartars. From there,
however, Smith succeeded in making a miraculous escape after
killing his cruel master.
The fiction-like pattern was to be repeated over and over again in
the new world. Captured by the Indians of Virginia, Smith saved
himself from a tortured death by an ingenious oration and his flare
for the dramatic. Later, in the nick of time, he won the love of the
young Indian “princess,” Pocahontas, who rescued him from having
his brains beaten out by her father, Powhatan. He escaped from this
predicament only to find the living remnant of his distressed
comrades in the fort at Jamestown again ready to hang him, this
time for allegedly having gone over to the enemy. And so they would
have done, if it had not been for the timely arrival of the admiral of
the Virginia fleet, Captain Christopher Newport, returning from
England with more colonists and stopgap supplies.
Delivered from the gallows once more, Captain Smith was
subsequently to be asked to assume the highest office in the colony,
that of president, because he was the only man with ingenuity
enough to keep his comrades alive while enforcing discipline.
It was a poorly chosen group of colonists—these original
Jamestown venturers. Fully half of them were gentlemen of sorts
bent only on a quest for riches. A handful of craftsmen, a few boys
and a brawling lot of seaport loafers and ex-soldiers who were
indisposed to agriculture or any peaceful pursuits completed the ill-
balanced company. They came to find gold and they expected to
relieve the natives of it quickly, if not to scoop it up by the handful
along the banks of Virginia’s rivers. Instead, they met with hostile
Indians, killing diseases and famine.
Not more than one out of four who pioneered the settlement at
Jamestown survived the first few months in America.
The joint-stock company that sent them out, backed by the
patronage of King James I and headed by one of the greatest of
England’s merchant adventurers, Sir Thomas Smith, only had the
usual primary objectives in view—the discovery of mines and a
northwest passage to Cathay. The instructions of the London
Company, in fact, dwelt on these things, while saddling the colony
with a communalistic form of government that encouraged idleness,
bred suspicion and brought about deadly factional disputes. Malarial
fevers, dysentery and typhoid laid many of the venturers low. Famine
and attacks by the natives completed a grim toll of death.
While others remained behind the palisades of the fort, bemoaning
their fate and dying helplessly to prove it, Captain Smith was on the
rivers and in the forests laying the foundations of successful trade
with the Indians and sizing up the country’s resources. Resolutely, he
foraged among the natives for needed corn and other food. With a
few men in a barge he explored and mapped the entire Chesapeake
Bay and tidewater region, realistically recording Virginia’s natural
resources with a view toward making the plantation self-supporting.
And when he assumed the stewardship of the colony in the fall of
1608, following two presidents who had failed miserably, John Smith,
the soldier of fortune, truly became John Smith, the colonizer. To do
this, under communalism, he had to become a virtual dictator. But
his rule was as honest and as ingenious as it was arbitrary. These
qualities of leadership coupled with his understanding of the true
nature of Virginia’s resources and of the need for a firm foundation of
trade relations with the natives saved the plantation from extinction.
The colony on the James River became the first permanent English
settlement in America.
For that matter, it was the British Empire’s first permanent colonial
settlement anywhere in the world.
The tidewater Indians with whom Smith had to deal mostly
belonged to a group of Algonquian tribes known as the Powhatan
Confederacy. Ruling this confederacy was a tyrannous old chief,
himself called Powhatan, who was held in considerable awe by his
subjects. From each of the tribes under his domination Powhatan
demanded an annual tribute consisting mainly of beads and skins
and bits of the decorative copper that was so scarce in his kingdom.
Beads were used by the Indians not only for adornment but as a
form of currency. As Captain Smith observed, they were the cause of
“as much dissention among the Salvages as gold and silver amongst
the Christians.” Their manufacture by the natives did indeed call for a
high degree of skill, each bead being cut individually from shell, then
polished and drilled with crude stone tools. When strung together in
belts or arm’s length ropes they were known universally among the
Algonquin nations of the eastern seaboard as wampum.
In Virginia wampum strings of white beads made from cockle shell
were called roanoke, whereas strings of beads cut from conch shell,
dark purple in color, were called peake. Generally speaking the latter
were worth ten times as much as the former. The natives used their
wampum, or shell money, in barter among themselves to such an
extent that the white men found it very convenient as a means of
promoting their own fur trade. Often they would trade their wares
with a rich tribe for wampum, and then exchange this shell money
with a less prosperous tribe for furs.
The collecting of skins for taxes, or tribute, was of course a device
older than history. The Romans employed it to collect taxes from
barbarian subjects; so did the pharaohs of prehistoric Egypt in
gathering tribute from the upper Nile valley. Powhatan could demand
pelts in some variety. A contemporary chronicler among the first
settlers at Jamestown noted that within the great chief’s kingdom the
forests and streams abounded with bears, foxes, otters, beavers,
muskrats and “Deere both Red and Fallow.”
The skins of these animals were the tidewater Indians’ most
necessary and useful commodity next to food. Mainly they were
necessary as clothing in winter, but they were also used as
adornment by chiefs and priests, and for many ceremonial purposes.
They were utilized, too, as closures and decorations for the Indians’
long-houses. And soft hide leather, such as buckskin, came in for a
variety of aboriginal hunting and household requirements, as well as
for garments and footwear.
Actually Powhatan’s common subjects often went quite naked,
except for skins worn much like aprons. However, when it was cold,
they wore matchcores—an Indian word for garments of fur which
was later turned into “match-coats” by the English.
At his first meeting with Powhatan, Smith found the old savage
blanketed with a matchcore of raccoon skins. One of the priests was
“disguised with a great Skinne, his head hung round with little
Skinnes of Weasels and other vermine.” Many of the better sort of
savages, such as werowances and chief men, affected mantles of
carefully dressed deerskin, some painted and embossed with white
beads or bits of copper. Others who were opulent had matchcores
made from squirrel, beaver, muskrat and otter, the last being held in
highest esteem.
Women wore fur blankets of beaver and otter, or tastefully fringed
and embroidered skin skirts, appropriate to the season. Children
usually went naked, although marriageable maidens, twelve to
fifteen, modestly covered their loins at least. Pocahontas herself is
referred to on one occasion as being girdled with soft otter skins.
About most of the great Bay of the Chesapeake, on his
expeditions, Captain Smith found “Wilde Cats ... Martins, Powlecats,
weessels and Minkes.” When he explored the Eastern Shore he
discovered it to be thickly inhabited by “Otters, Beavers, Martins,
Luswarts and sables.” Truly, the tidewater literally swarmed with fur
bearers.
In the northernmost reaches of the bay Smith managed to trade
with the giant Susquehannocks. “Their attire,” he recorded, “is the
skinnes of beares and Woolves, some have Cassacks made of
Beares heades and skinnes that a man’s necke goes through the
skinnes neck, and the eares of the beare fastened to his shoulders
behind, the nose and teeth hanging downe his breast, and at the end
of the nose hung a Beares Pawe: the halfe sleeves comming to the
elbowes were the neckes of Beares and the armes through the
mouth, with pawes hanging at their noses. One had the head of a
Woolfe hanging in a chaine for a Jewell.”
These majestic savages came from the banks of the
Susquehanna River, the headwaters of which reached to the territory
of the Five Nations in the lake country of French Canada. As castoff
relatives of the Iroquois, the Susquehannocks lived in palisaded forts
along the river where they were subjected to constant raiding by their

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PART V CORPORATE STRATEGY 345

14 Vertical Integration and the Scope of the Firm 347

1 The Concept of Strategy 3

Introduction and Objectives 4

PART II THE TOOLS OF STRATEGY ANALYSIS 31

2 Goals, Values, and Performance 33

Introduction and Objectives 34

3 Industry Analysis: The Fundamentals 62

Introduction and Objectives 62

4 Further Topics in Industry and Competitive Analysis 94

Introduction and Objectives 95

5 Analyzing Resources and Capabilities 120

Introduction and Objectives 121

6 Developing Resources and Capabilities 150

Introduction and Objectives 151

7 Organization Structure and Management Systems:

Introduction and Objectives 175

Organizing on the Basis of Coordination Intensity 189

PART III THE ANALYSIS OF COMPETITIVE ADVANTAGE 207

8 The Nature and Sources of Competitive Advantage 209

Introduction and Objectives 210

9 Cost Advantage 227

Introduction and Objectives 228

10 Differentiation Advantage 245

Introduction and Objectives 246

PART IV BUSINESS STRATEGIES IN DIFFERENT

11 Industry Evolution and Strategic Change 269

Introduction and Objectives 270

12 Technology-based Industries and the Management

Introduction and Objectives 296

13 Competitive Advantage in Mature Industries 328

Introduction and Objectives 329

PART V CORPORATE STRATEGY 345

14 Vertical Integration and the Scope of the Firm 347

Introduction and Objectives 348

15 Global Strategies and the Multinational Corporation 369

Introduction and Objectives 370

Applying the Framework: International Location of Production 378

16 Diversification Strategy 401

Introduction and Objectives 402

17 Implementing Corporate Strategy: Managing

Introduction and Objectives 423

18 Current Trends in Strategic Management 455

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