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CONTENTSA Comprehensive Strategy-Formulation Framework 176The Input Stage 177The Matching Stage 177The Strengths-Weaknesses-Opportunities-Threats (SMOT) Matrix178 & The Strategic Position and Action Evaluation (SPACE)Matrix 181 & The Boston Consulting Group (BCG) Matrix 185 &The Internal-External (IE) Matrix 188 & The Grand StrategyMatrix 191The Decision Stage 192The Quantitative Strategic Planning Matrix (QSPM) 192& Positive Features and Limitations of the QSPM 195Cultural Aspects of Strategy Choice 196The Politics of Strategy Choice 196Governance Issues 198ASSURANCE OF LEARNING EXERCISES 205Assurance of Learning Exercise 6A: Developing a SWOT Matrix forMcDonald’s 205Assurance of Learning Exercise 6B: Developing a SPACE Matrix forMcDonald’s 205Assurance of Learning Exercise 6C: Developing a BCG Matrix forMcDonald’s 205Assurance of Learning Exercise 6D: Developing a QSPM forMcDonald’s 206Assurance of Learning Exercise 6E: Formulating IndividualStrategies 206Assurance of Learning Exercise 6F: The Mach Test 206Assurance of Learning Exercise 6G: Developing a BCG Matrix forMy University 208Assurance of Learning Exercise 6H: The Role of Boards ofDirectors 208Assurance of Learning Exercise 6I: Locating Companies in a GrandStrategy Matrix 209Part 3Strategy Implementation 210Chapter 7Implementing Strategies: Managementand Operations Issues 210GOOGLE: DOING GREAT IN A WEAK ECONOMY.HOW? 212The Nature of Strategy Implementation 213Management Perspectives 214Annual Objectives 215Policies 217Resource Allocation 219Managing Conflict 220Matching Structure with Strategy 220The Functional Structure 222 & The Divisional Structure 222& The Strategic Business Unit (SBU) Structure 225 & The MatrixStructure 226 & Some Do’s and Don’ts in DevelopingOrganizational Charts 228Restructuring, Reengineering, and E-Engineering 229Restructuring 230 & Reengineering 231xiLinking Performance and Pay toStrategies 231Managing Resistance to Change 234Creating a Strategy-Supportive Culture 235Production/Operations Concerns When ImplementingStrategies 236Human Resource Concerns When ImplementingStrategies 237Employee Stock Ownership Plans (ESOPs) 239 & Balancing WorkLife and Home Life 240 & Benefits of a Diverse Workforce 242& Corporate Wellness Programs 242ASSURANCE OF LEARNING EXERCISES 248Assurance of Learning Exercise 7A: Revising McDonald’sOrganizational Chart 248Assurance of Learning Exercise 7B: Do Organizations ReallyEstablish Objectives? 248Assurance of Learning Exercise 7C: Understanding My University’sCulture 249Chapter 8Implementing Strategies: Marketing,Finance/Accounting, R&D, and MISIssues 250The Nature of Strategy Implementation 252JOHNSON & JOHNSON (J&J): DOING GREAT IN A WEAKECONOMY. HOW? 252Current Marketing Issues 253New Principles of Marketing 254 & Advertising Media 256& Purpose-Based Marketing 257Market Segmentation 257Does the Internet Make Market Segmentation Easier? 259Product Positioning 260Finance/Accounting Issues 261Acquiring Capital to Implement Strategies 262New Source of Funding 266 & Projected FinancialStatements 266 & Projected Financial Statement forMattel, Inc. 268 & Financial Budgets 271 & Evaluatingthe Worth of a Business 273 & Deciding Whether toGo Public 275Research and Development (R&D) Issues 275Management Information Systems (MIS) Issues 277ASSURANCE OF LEARNING EXERCISES 282Assurance of Learning Exercise 8A: Developing a ProductPositioning Map for McDonald’s 282Assurance of Learning Exercise 8B: Performing an EPS/EBITAnalysis for McDonald’s 282Assurance of Learning Exercise 8C: Preparing Projected FinancialStatements for McDonald’s 282Assurance of Learning Exercise 8D: Determining the Cash Value ofMcDonald’s 283Assurance of Learning Exercise 8E: Developing a ProductPositioning Map for My University 283Assurance of Learning Exercise 8F: Do Banks Require ProjectedFinancial Statements? 283

xiiCONTENTSPart 4Strategy Evaluation 284Chapter 9Strategy Review, Evaluation, andControl 284FAMILY DOLLAR STORES: DOING GREAT IN A WEAKECONOMY. HOW? 286The Nature of Strategy Evaluation 286The Process of Evaluating Strategies 290A Strategy-Evaluation Framework 290Reviewing Bases of Strategy 290 & Measuring OrganizationalPerformance 292 & Taking Corrective Actions 294The Balanced Scorecard 295Published Sources of Strategy-EvaluationInformation 297Characteristics of an Effective Evaluation System 298Contingency Planning 299Auditing 300Twenty-First-Century Challenges in StrategicManagement 301The Art of Science Issue 301 & The Visible or Hidden Issue 301& The Top-Down or Bottom-Up Approach 302ASSURANCE OF LEARNING EXERCISES 306Assurance of Learning Exercise 9A: Preparing a Strategy-EvaluationReport for McDonald’s Corp. 306Assurance of Learning Exercise 9B: Evaluating My University’sStrategies 306Part 5Key Strategic-Management Topics 308Chapter 10Business Ethics/Social Responsibility/Environmental Sustainability 308WALT DISNEY: DOING GREAT IN A WEAK ECONOMY.HOW? 310Business Ethics 311Code of Business Ethics 312 & An Ethics Culture 313 & Bribes314 & Love Affairs at Work 314Social Responsibility 315Social Policy 315 & Social Policies on Retirement 316Environmental Sustainability 317What Is a Sustainability Report? 317 & Lack of StandardsChanging 318 & Obama Regulations 318 & ManagingEnvironmental Affairs in the Firm 319 & Should Students ReceiveEnvironmental Training? 319 & Reasons Why Firms Should “BeGreen” 320 & Be Proactive, Not Reactive 320 & ISO14000/14001 Certification 320 & Electric Car Networks AreComing 321 & The March 2009 Copenhagen Meeting 322ASSURANCE OF LEARNING EXERCISES 326Assurance of Learning Exercise 10A: Does McDonald’s Have aCode of Business Ethics? 326Assurance of Learning Exercise 10B: The Ethics of Spying onCompetitors 326Assurance of Learning Exercise 10C: Who Prepares a SustainabilityReport? 327Chapter 11Global/International Issues 328MARRIOTT INTERNATIONAL: DOING GREAT IN A WEAKECONOMY. HOW? 330Multinational Organizations 331Advantages and Disadvantages of InternationalOperations 332The Global Challenge 333Globalization 334 & A Weak Economy 335United States versus Foreign Business Cultures 335The Mexican Culture 337 & The Japanese Culture 338 &Communication Differences Across Countries 338Worldwide Tax Rates 339Joint Ventures in India 339ASSURANCE OF LEARNING EXERCISES 343Assurance of Learning Exercise 11A: McDonald’s Wants to EnterAfrica. Help Them. 343Assurance of Learning Exercise 11B: Does My University Recruit inForeign Countries? 343Assurance of Learning Exercise 11C: Assessing Differences inCulture Across Countries 343Assurance of Learning Exercise 11D: How Well Traveled AreBusiness Students at Your University? 344Part 6Strategic-Management Case Analysis 346How to Prepare and Present a CaseAnalysis 346What Is a Strategic-Management Case? 348Guidelines for Preparing Case Analyses 348The Need for Practicality 348 & The Need forJustification 348 & The Need for Realism 348 & The Need forSpecificity 349 & The Need for Originality 349 & The Need toContribute 349Preparing a Case for Class Discussion 349The Case Method versus Lecture Approach 349 & The CrossExamination 350Preparing a Written Case Analysis 350The Executive Summary 350 & The Comprehensive WrittenAnalysis 351 & Steps in Preparing a Comprehensive WrittenAnalysis 351Making an Oral Presentation 351Organizing the Presentation 351 & Controlling YourVoice 352 & Managing Body Language 352 & Speaking fromNotes 352 & Constructing Visual Aids 352 & AnsweringQuestions 353 & Tips for Success in Case Analysis 353 &Content Tips 353 & Process Tips 354 & Sample Case AnalysisOutline 355

CONTENTSSTEPS IN PRESENTING AN ORAL CASE ANALYSIS 356Oral Presentation—Step 1: Introduction (2 minutes) 356Oral Presentation—Step 2: Mission/Vision (4 minutes) 356Oral Presentation—Step 3: Internal Assessment (8 minutes) 356Oral Presentation—Step 4: External Assessment (8 minutes) 357Oral Presentation—Step 5: Strategy Formulation (14 minutes) 357xiiiOral Presentation—Step 6: Strategy Implementation (8 minutes) 357Oral Presentation—Step 7: Strategy Evaluation (2 minutes) 358Oral Presentation—Step 8: Conclusion (4 minutes) 358Name Index 359Subject Index 363

xivCONTENTSCasesHOSPITALITY/ENTERTAINMENT1. Walt Disney Company — 2009, Mernoush Banton12. Merryland Amusement Park — 2009, Gregory Stone14AIRLINES3. JetBlue Airways Corporation — 2009, Mernoush Banton4. AirTran Airways, Inc. — 2009, Charles M. Byles2637RETAIL STORES5. Family Dollar Stores, Inc. — 2009, Joseph W. Leonard506. Wal-Mart Stores, Inc. — 2009, Amit J. Shah and Michael L. Monahanat7. Whole Foods Market, Inc. — 2009, James L. Harbin and PatriciaHumphrey738. Macy’s, Inc. — 2009, Rochelle R. Brunson and Marlene M. Reed83INTERNET BASED9. Yahoo! Inc. — 2009, Hamid Kazeroony10. eBay Inc. — 2009, Lori Radulovich9199FINANCIAL11. Wells Fargo Corporation — 2009, Donald L. Crooks, Robert S. Goodman,and John Burbridge111RESTAURANTS12. Krispy Kreme Doughnuts (KKD) — 2009, John Burbridge andColeman Rich12013. Starbucks Corporation — 2009, Sharynn Tomlin129NONPROFIT14. The United States Postal Service (USPS) — 2009, Fred andForest David 13815. National Railroad Passenger Corporation (AMTRAK) — 2009,Kristopher J. Blanchard15016. Goodwill of San Francisco, San Mateo and Marin Counties — 2009,Mary E. Vradelis 158TRANSPORTATION17. Harley-Davidson, Inc. — 2009, Carol Pope and Joanne Mack18. Ford Motor Company — 2009, Alen Badal166176FOOD19. Kraft Foods Inc. — 2009, Kristopher J. Blanchard18420. Hershey Company — 2009, Anne Walsh and Ellen MansfieldPERSONAL CARE21. Johnson & Johnson — 2009, Sharynn Tomlin, Matt Milhauser,Bernhard Gierke, Thibault Lefebvre, and Mario Martinez20122. Avon Products Inc. — 2009, Rochelle R. Brunson andMarlene M. Reed212BEVERAGE23. Molson Coors — 2009, Amit J. Shah24. PepsiCo — 2009, John and Sherry Ross22023219259

CONTENTSHEALTH CARE25. Pfizer, Inc. — 2009, Vijaya Narapareddy24326. Merck & Company Inc. — 2010, Mernoush Banton252SPORTS27. Nike, Inc. — 2010, Randy Harris26128. Callaway Golf Company — 2009, Amit J. Shah272ENERGY29. Chevron Corporation — 2009, Linda Herkenhoff282xv

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PrefaceWhy the Need for This New Edition?The global economic recession has created a business world today that is quite differentand more complex than it was just two years ago when the previous edition of this textwas published. Thousands of businesses have vanished, and consumers have becomeextremely price sensitive and oftentimes reluctant purchasers of products and services.Very tight credit markets, high unemployment, and millions of new entrepreneurs havealso changed the business landscape. Business firms that have survived the last threeyears of global economic turmoil are today leaner and meaner than ever before.Gaining and sustaining competitive advantage is harder than ever. Social networkingand e-commerce have altered marketing to its core since the prior edition. This new edition reveals how to conduct effective strategic planning in this new world order.Since the prior edition, thousands of liquidations, bankruptcies, divestitures, mergers, alliances, and partnerships captured the news. Corporate scandals highlighted theneed for improved business ethics and corporate disclosure of financial transactions.Downsizing, rightsizing, and reengineering contributed to a permanently altered corporate landscape. Thousands of firms began doing business globally, and thousands moreclosed their global operations. Thousands prospered, and yet thousands failed in the lasttwo years as the global recession spared few. Long-held competitive advantages haveeroded as new ones formed. This new edition captures the complexity of this world business environment.Both the challenges and opportunities facing organizations of all sizes today aregreater than ever. There is less room than ever for error in the formulation and implementation of a strategic plan. This new edition provides a systematic effective approachfor developing a clear strategic plan, even in the worst of times. Changes made in thisedition are aimed squarely at illustrating the effect of new business concepts and techniques on strategic-management theory and practice.Due to the magnitude of recent changes affecting companies, cultures, and countries,every page of this edition has been updated. The first edition of this text was published in1986. Since then, this textbook has grown to be one of the most widely read strategicmanagement books, perhaps the most widely read, in the world. This text is now publishedin nine languages.What Is New in This Edition?This edition includes exciting new features, changes, and content designed to position thistext as the clear leader and best choice for teaching strategic management. Here is a summary of what is new in this edition: A new Chapter 10, “Business Ethics/Social Responsibility/EnvironmentalSustainability”; there is extensive new coverage of ethics and sustainability because thistext emphasizes that “good ethics is good business.” Unique to strategic-managementtexts, the natural environment discussion is strengthened in this edition to promote andencourage firms to conduct operations in an environmentally sound manner. Respect forthe natural environment has become an important concern for consumers, companies,society, and AACSB-International. A new Chapter 11, “Global/International Issues”; there is extensive new coverageof cultural and conceptual strategic-management differences across countries.Doing business globally has become a necessity, rather than a luxury in mostindustries because nearly all strategic decisions today are affected by global

xviiiPREFACE issues and concerns. Every case company in this edition does business globally,providing students ample opportunity to evaluate and consider internationalaspects of doing business.A new boxed insert at the beginning of each chapter showcases a company that hasdone exceptionally well in the 2008–2010 global economic recession and reveals theirstrategy.Hundreds of new examples abound in every chapter.A new cohesion case on McDonald’s Corporation (2010); this is one of the mostsuccessful, well-known, and best managed global companies in the world; studentsapply strategy concepts to McDonald’s at the end of each chapter through newAssurance of Learning Exercises.Thirty-two new tables in the chapters to better capture key strategic-managementconcepts.A revised comprehensive strategic management model to reflect the new chapters.Extensive new narrative on strategic management theory and concepts in everychapter to illustrate the new business world order.On average, 15 new review questions at the end of each chapter.Forty-eight new Assurance of Learning Exercises at the end of chapters that applychapter concepts; the exercises prepare students for strategic-management caseanalysis.Twenty-four new color photographs bring the edition to life and illustratecompanies/concepts.All new current readings at the end of each chapter; new research and theories ofseminal thinkers in strategy development, such as Ansoff, Chandler, Porter,Hamel, Prahalad, Mintzberg, and Barney are provided in the chapters; practicalaspects of strategic management, however, are still center stage and the trademarkof this text below.Twenty-nine new cases—grouped by industry; great mix of profit/nonprofit,large/small, and manufacturing/service organizations; all the cases have a2009–2010 time setting; all the cases are “comprehensive” in the sense that eachfocuses on multiple business functions, rather than addressing one particular business problem or issue; all the cases are undisguised and feature real organizationsin real industries using real names and real places (nothing is fictitious in anycase); all the cases feature an organization “undergoing strategic change,” thusoffering students up-to-date issues to evaluate and consider; all the cases arewritten in a lively, concise writing style that captures the reader’s interest andestablishes a time setting, usually in the opening paragraph; all the cases provideexcellent quantitative information such as numbers, ratios, percentages, dollar values, graphs, statistics, and maps so students can prepare a more specific, rational,and defensible strategic plan for the organization; all the cases provide excellentinformation about the industry and competitors.This edition continues to offer many special time-tested features and content that havemade this text so successful for over 20 years. Historical trademarks of this text that arestrengthened in this edition are described below.Chapters: Time-Tested Features This text meets AACSB-International guidelines that support a practitioner orientation rather than a theory/research approach. It offers a skills-oriented approachto developing a vision and mission statement; performing an external audit; conducting an internal assessment; and formulating, implementing, and evaluatingstrategies. The author’s writing style is concise, conversational, interesting, logical, lively, andsupported by numerous current examples throughout.

PREFACE A simple, integrative strategic-management model appears in all chapters and on theinside front cover of the text. This model is widely used for strategic planningamong consultants and companies worldwide. One reviewer said, “One thing I haveadmired about David’s text is that he follows the fundamental sequence of strategyformulation, implementation, and evaluation. There is a basic flow frommission/purposes to internal/external environmental scanning to strategy development, selection, implementation, and evaluation. This has been, and continues to be,a hallmark of the David text. Many other strategy texts are more disjointed in theirpresentation, and thus confusing to the student, especially at the undergraduatelevel.” A Cohesion Case follows Chapter 1 and is revisited at the end of each chapter. ThisCohesion Case allows students to apply strategic-management concepts and techniques to a real organization as chapter material is covered, which readies studentsfor case analysis in the course. End-of-chapter Assurance of Learning Exercises effectively apply conceptsand techniques in a challenging, meaningful, and enjoyable manner. Eighteenexercises apply text material to the Cohesion Case; 10 apply textual material toa college or university; another 10 exercises send students into the business worldto explore important strategy topics. The exercises are relevant, interesting, andcontemporary. There is excellent pedagogy in this text, including notable quotes and objectives toopen each chapter, and key terms, current readings, discussion questions, and experiential exercises to close each chapter. There is excellent coverage of strategy formulation issues, such as business ethi

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