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Strategic ManagementColin White

Strategic Management

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Strategic ManagementColin White

Colin White 2004All rights reserved. No reproduction, copy or transmission of thispublication may be made without written permission.No paragraph of this publication may be reproduced, copied or transmittedsave with written permission or in accordance with the provisions of theCopyright, Designs and Patents Act 1988, or under the terms of any licencepermitting limited copying issued by the Copyright Licensing Agency, 90Tottenham Court Road, London W1T 4LP.Any person who does any unauthorised act in relation to this publicationmay be liable to criminal prosecution and civil claims for damages.The author has asserted his right to be identified as the author of this workin accordance with the Copyright, Designs and Patents Act 1988.First published 2004 byPALGRAVE MACMILLANHoundmills, Basingstoke, Hampshire RG21 6XS and175 Fifth Avenue, New York, N.Y. 10010Companies and representatives throughout the worldPALGRAVE MACMILLAN is the global academic imprint of the PalgraveMacmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd.Macmillan is a registered trademark in the United States, United Kingdomand other countries. Palgrave is a registered trademark in the EuropeanUnion and other countries.ISBN 1–4039–0400–6This book is printed on paper suitable for recycling and made from fullymanaged and sustained forest sources.A catalogue record for this book is available from the British Library.Library of Congress Cataloging-in-Publication DataWhite, Colin (Colin M.)Strategic management / Colin White.p. cm.Includes bibliographical references and index.ISBN 1–4039–0400–6 (pbk.)1. Strategic planning. I. Title.HD30.28.W447 2004658.4’012—dc222003062091Editing and origination by Aardvark Editorial, Mendham, Suffolk10 9 8 7 6 5 4 3 2 113 12 11 10 09 08 07 06 05 04Printed and bound in China

vBrief contentsProloguePart IIntroducing Strategic Management1234Part IIPart IIIPart IVPart VIntroducing strategy and strategy makingThinking and acting strategicallyAdopting a global perspectiveReading an uncertain futurexxi144378113Strategic Environments and Competitive Advantage1575678910160199233266302338Identifying opportunity and riskReading the competitive environmentAnalysing resources, capabilities and core competenciesCreating and maintaining competitive advantageReducing costsDifferentiating the productStrategic Dilemmas3751112131415378416456495530Determining the size of an enterpriseIntegrating the strategistsWhen to compete and when to cooperateManaging riskParticipating in the global economyBringing it all Together56516 Formulating strategy17 Implementing strategy18 Monitoring strategic performance568614651Strategic Analysis and Audit699Long case 12823

viFull contentsList of figuresList of tablesAcknowledgementsPrologueWho this book is forHow to use the bookThe case studiesCompanion websiteIntroductory readingPart IxiiixvxviixxixxiixxiiixxixxxxiixxxiiiIntroducing Strategic Management123Introducing strategy and strategy makingWhat is strategy?A brief history of the conceptA multiplicity of meaningsAssumptions and metatheoriesStrategists and stakeholdersThe social web and the ‘political’ process of strategy makingThinking and acting strategicallyCase Study Scenario The IKEA wayThe distinction between strategic thinking, strategic managementand strategic planningSTRATEGY IN ACTION Quick strategic thinking in unfavourable circumstancesSTRATEGY IN ACTION Sony – the disruptive innovatorPrinciples for the successful use of strategyFinding the right strategic mix of entrepreneurial creativity andadministrative expertiseCase Study The IKEA wayAdopting a global perspectiveCase Study Scenario The airlines and the integration of global marketsThe meaning of globalizationThe five main elements of globalizationHome country biasA convergent worldGlobal playersThe impact of globalization on strategyCase Study Bad strategy and bad fortune – Swissair and 1103

Full contents4Part IIReading an uncertain futureCase Study Scenario Airbus Industrie and the next generationof civil airlinersLimited informationInformation, knowledge and strategyReading the general environmentCoping with the futureDifferent kinds of riskScenario buildingCase Study Airbus Industrie and the next generation of civil airlinersStrategic Environments and Competitive Advantage567Identifying opportunity and riskCase Study Scenario A clean vehicle – the hybrid electric vehicle (HEV)General and competitive environmentsThe nature of the general environmentChange and strategyEnvironment segmentsSTRATEGY IN ACTION Riding the Internet wave – Amazon.comSTRATEGY IN ACTION The Celtic tigerSTRATEGY IN ACTION Argentina, a case of recurrent crisesSTRATEGY IN ACTION The development state – the port of TanjungPelepas (PTP)The main features of global changeCase Study A clean vehicle – the hybrid electric vehicle (HEV)Reading the competitive environmentCase Study Scenario Video game warsStrategic playersThe forces of competitionSTRATEGY IN ACTION Competitive forces for StarbucksRisk and market structuresIndeterminateness of outcomesSTRATEGY IN ACTION Banking in Europe, Germany and market structureCountry riskSTRATEGY IN ACTION Business crisis, country risk and the caseof IndonesiaStrategic riskSTRATEGY IN ACTION The Deutsche Bank and investment bankingCase Study Video game warsAnalysing resources, capabilities and core competenciesCase Study Scenario Branding a sports team – Manchester UnitedEnterprise identityThe nature of resources: tangible and intangibleResources and capabilitiesSTRATEGY IN ACTION Charles Schwab and online 219219221222224233234235237239240

viiiFull contents89The core competencies of an enterpriseSTRATEGY IN ACTION Haier: developing a new core competency andpioneering the Chinese export brandSTRATEGY IN ACTION Business models in brokingSTRATEGY IN ACTION John Doerr and Kleiner Perkins Caulfield & Byers,the leading venture capital firm in Silicon ValleyCase Study Branding a sports team – Manchester United243Creating and maintaining competitive advantageCase Study Scenario Hutchison and the introduction of thirdgeneration wireless communicationThe concept of competitive advantageSTRATEGY IN ACTION Inventing a new product – cosmetic contact lensesSTRATEGY IN ACTION The virtual university and the MBAStrategies for acquiring competitive advantageSTRATEGY IN ACTION The Mt Buller winter resort and global warmingFocusingSTRATEGY IN ACTION Samsung Electronics: a dramatic turnaround –creating the brandRemaking the environment by innovationSTRATEGY IN ACTION Samsung Electronics: a dramatic turnaround –investing in new technologySTRATEGY IN ACTION Vivendi Universal – divesting to surviveCompetitive advantage and market structuresE-commerce and servicesSTRATEGY IN ACTION Dell and direct salesCase Study Hutchison and the introduction of third generationwireless communication266Reducing 286289291293296Case Study Scenario Infosys and the Indian comparative advantage303Cost leadershipCost drivers305STRATEGY IN ACTION304The rise of Haier309Pricing strategy311Southwest Airline – the no-frills airlineFocused cost minimizationSTRATEGY IN ACTION Packaging a cheap holiday – Club MedThe nature of a technologySTRATEGY IN ACTION Wal-Mart: the origins of a cost-reducing machineThe limits of cost leadershipSTRATEGY IN ACTION Caterpillar vs. KomatsuSTRATEGY IN ACTION Wal-Mart: IT as a source of cost leadershipCase Study Infosys and the Indian comparative advantage315STRATEGY IN ACTION317321322323325325330332

Full contents10Part IIIDifferentiating the productCase Study Scenario Turning a stone into a jewel – De BeersNeeds and wantsSTRATEGY IN ACTION The democratization of luxurySTRATEGY IN ACTION Creating and maintaining demand for luxury andaspirational automobilesMarketing as a source of competitive advantageSTRATEGY IN ACTION Formula OneSTRATEGY IN ACTION Promoting a good imageProduct differentiationSTRATEGY IN ACTION Exploiting a brand name – Harley-DavidsonIntangible qualitiesBrandingSTRATEGY IN ACTION Sir Richard Branson and many wise virginsA product differentiation strategyCase Study Turning a stone into a jewel – De BeersStrategic Dilemmas1112Determining the size of an enterpriseCase Study Scenario A merger and a demergerThe optimum size of an enterpriseSTRATEGY IN ACTION Communication, information and entertainment –the forces making for fusionThe strategic gains from vertical and horizontal integrationSTRATEGY IN ACTION Integration in ns and mergersSTRATEGY IN ACTION The Hewlett-Packard/Compaq mergerFocusing, strategic alliances and networks as devices for reducing thedisadvantages of sizeOutsourcing and downscopingCase Study A merger and a demergerIntegrating the strategistsCase Study Scenario The house of GucciIntegrating structuresThe influence of the principal/agent relationship on strategySTRATEGY IN ACTION Microsoft, a giant comes of ageThe behaviour of principals and agentsSTRATEGY IN ACTION Semco and Ricardo Semler – democracy as amanagement strategySTRATEGY IN ACTION Finding a new structure and new strategyfor MicrosoftSTRATEGY IN ACTION Reliance and the death of the founderStrategy and organizational designSTRATEGY IN ACTION Asea Brown Boveri 421424425428429431437

xFull contentsMonitoring, incentives and corporate cultureOutside controlCase Study The house of Gucci131415When to compete and when to cooperateCase Study Scenario The wine industry in AustraliaDealing with other strategic playersSTRATEGY IN ACTION Benetton: cooperation as strategySTRATEGY IN ACTION The strategic alliance between Renault and NissanThe commons and free ridingSTRATEGY IN ACTION Benetton and changing networksGame theory and the prisoner’s dilemmaThe universality of the prisoner’s dilemmaHow to cooperateStrategic alliancesSTRATEGY IN ACTION When does a strategic alliance become a merger?Case Study The wine industry in AustraliaManaging 87495Case Study Scenario Africa – AIDS and civil wars496The universality of risk managementStrategic responses to riskSTRATEGY IN ACTION Enron and the Dabhol projectSTRATEGY IN ACTION Lloyd’s of London and ‘long-tailed’ riskSTRATEGY IN ACTION Responses to the Asian economic crisisSTRATEGY IN ACTION Disney and the redistribution of riskRisk and diversificationStrategic risk, scenario building and strategy makingSTRATEGY IN ACTION Three different reform scenarios in ChinaCase Study Africa – AIDS and civil wars497Participating in the global economyCase Study Scenario Entry into the Chinese automobile industryParticipation strategiesSTRATEGY IN ACTION Wal-Mart and the internationalization of retailingSTRATEGY IN ACTION News Corporation and expansion in the USAParticipation strategies and competitive advantageSTRATEGY IN ACTION The Japanese entry into the USA automobile marketCountry-specific assets and enterprise-specific assetsSTRATEGY IN ACTION 1. Disney and a tale of three culturesSTRATEGY IN ACTION 2. The trials of Euro DisneyInternalizationThe nature of a world (global) enterpriseSTRATEGY IN ACTION SingTel and its Asia Pacific roleSTRATEGY IN ACTION Nestlé – a global enterprise?Case Study Entry into the Chinese automobile 539541542545546547549549554555