Solution Manual for Crafting and Executing Strategy: Concepts , 22nd Edition

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The Que st for Compe titive Adva ntageSTRATEGYCrafting & ExecutingConcepts and Cases22eArthur A. Thompson, Jr.The University of AlabamaMargaret A. PeterafDartmouth CollegeJohn E. GambleTexas A&M University – Corpus ChristiA. J. Strickland IIIThe University of AlabamaSolution Guide

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Section 1Resources, Chapter Features, and Case Overview1Section 2Using a Strategy Simulation in Your Course:The Compelling Benefits, What’s Involved, and How to Proceed13Section 3Organizing Your Course, Deciding What the Workload Should Be,and Settling on Specific Assignments43Section 4Sample Syllabi and Daily Course Schedules76Section 5Lecture Notes for Chapters 1-12105Chapter 1What is Strategy and Why is it Important?106Chapter 2Charting a Company’s Direction: Vision and Mission, Objectives, and Strategy114Chapter 3Evaluating a Company’s External Environment127Chapter 4Evaluating a Company’s Resources, Capabilities, and Competitiveness141Chapter 5The Five Generic Competitive Strategies – Which One to Employ?156Chapter 6Strengthening a Company’s Competitive Position169Chapter 7Strategies for Competing in International Markets185Chapter 8Corporate Strategy: Diversification and The Multibusiness Company200Chapter 9Ethics, Corporate Social Responsibility, Environmental Sustainabilityand Strategy220Chapter 10Building an Organization Capable of Good Strategy Execution233Chapter 11Managing Internal Operations: Actions that Promote GoodStrategy Execution247Chapter 12Corporate Culture and Leadership: Keys to Good Strategy Execution258Section 6Teaching Notes270Case 1Mystic Monk Coffee271Case 2Airbnb in 2018279Case 3Wil’s Grill287Case 4Costco Wholesale Corpin 2018: Mission, Business Model, and Strategy298Case 5Competition in the Craft Beer Industry in 2018323Case 6Fixer Upper: Expanding the Magnolia Brand331Case 7Under Armour’s Turnaround Strategy in 2018: Efforts toRevive North American Sales and Profitability338Case 8MoviePass—Are Subscribers Loving It to Death?362Case 9TOMS Shoes: Expanding Its Successful One For One Business Model377Case 10Lola’s Market: Capturing a New Generation384Case 11iRobot in 2018: Can the Company Keep the Magic?395Case 12Chipotle Mexican Grill’s Strategy in 2018: Will the New CEO Be Ableto Rebuild Customer Trust and Revive Sales Growth?408TABLE OF CONTENTS

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’s Manual for Crafting and Executing Strategy, 20th EditioniiiCase 13Twitter, Incin 2018: Too Little Too Late?427Case 14Netflix’s Strategy in 2018: Does the Company Have SufficientCompetitive Strength to Fight Off Aggressive Rivals?439Case 15Walmart’s Expansion into Specialty Online Retailing463Case 16Amazoncom, Inc: Driving Disruptive Change in the USGrocery Market472Case 17Aliexpress: Can It Mount a Global Challenge to Amazon?487Case 18Tesla in 2018: Will the New Model 3 Save the Company?499Case 19Mattel Incorporated in 2017: Can Ynon Kriez Save the Toys?520Case 20Shearwater Adventures Ltd535Case 21TJX Companies: Its Strategy in Off-Price Home Accessories and Apparel546Case 22IKEA’s International Marketing Strategy in China557Case 23Pepsico’s Diversification Strategy in 2018: Will the Company’sNew Acquisitions Restore Its Growth570Case 24The Walt Disney Company: Its Diversification Strategy in 2018582Case 25Robin Hood592Case 26Dilemma at Devil’s Den601Case 27Nucor Corporation in 2018: Contending with the Challenges of Low-CostForeign Imports and Launching Initiatives to Grow Sales and Market Share607Case 28Vail Resorts, Inc628Case 29Starbucks in 2018: Striving for Operational Excellence and Innovation Agility638Case 30Concussions in Collegiate and Professional Football: Who HasResponsibility to Protect Players?655Case 31Chaos at Uber: The New CEO’s Challenge668Case 32Profiting from Pain: Business and the USOpioid Epidemic677

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case1 •Case Assignment QuestionsMystic Monk CoffeeAssignment Questions1.Has Father Daniel Mary established a future direction for the Carmelite Monks of Wyoming? What is hisvision for the monastery? What is his vision for Mystic Monk Coffee? What is the mission of the CarmeliteMonks of Wyoming?2.Does it appear that Father Daniel Mary has set definite objectives and performance targets for achieving hisvision?3.What is Father Prior’s strategy for achieving his vision? What competitive advantage might Mystic MonkCoffee’s strategy produce?4.Is Mystic Monk Coffee’s strategy a money-maker? What is MMC’s business model? What is your assessmentof Mystic Monk Coffee’s customer value proposition? its profit formula? its resources that enable it to createand deliver value to customers?5.Does the strategy qualify as a winning strategy? Why or why not?6.What recommendations would you make to Father Daniel Mary in terms of crafting and executing strategyfor the monastery’s coffee operations? Are changed needed in its long-term direction? its objectives? itsstrategy? its approach to strategy execution? Explain.

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case2 •Case Assignment QuestionsAirbnb in 2018Assignment Questions1.How would you illustrate and compare the business models for Airbnb, large hotel chains such as Marriottand Hilton, and bed & breakfast operators? Use the example chart in the textbook for business models as aguide (Concepts & Connections 1.1)2.What are the general strengths and weaknesses of a) large, hotel chains such as Marriott and Hilton, b) bed& breakfasts, and c) Airbnb? Explain how you would compare and contrast those businesses.3.In what ways has the lodging consumer changed, and how does Airbnb’s customer value-proposition meetthis change?4.What key factors may determine the success or failure of Airbnb?5.What recommendations would you make to Airbnb to improve its competitiveness in the accommodationmarket while mitigating any current and future risks?

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case3 •Case Assignment QuestionsWil’s GrillAssignment Questions1.What are the resources, capabilities and core competencies required to compete in the street food marketsegment? How well do Wil’s Grill’s resources, capabilities, and core competencies stack up?2.What does a VRIN analysis for Wil’s Grill reveal about its current resource strengths and capabilities, aswell as competitive liabilities? Use the methodology in Table 4.3 to support your answer.3.What does a SWOT analysis for Wil’s Grill reveal about its current position? Use the methodology in Table4.2 to support your answer. Based on the SWOT, does Wil’s Grill have what it would take to compete in thecatering industry?4.Does it make good strategic sense for Wil’s Grill to be a competitor in both the street food and cateringsegments? Which one of these product lines — street food and catering segments — do you think is mostimportant to Wil’s Grill’s future growth and profitability? Why?5.What is your assessment of Wil’s Grill’s financial performance over the 2014 – 2016 period? (Use thefinancial ratios in Table 4.1 of the text as a guide in doing your financial analysis.)6.Assess Wil’s Grill’s projections for 2017 – 2019. Are these realistic? How do you know?7.What recommendations would you make to Wil’s Grill to address the strategic issues confronting it in 2016 inorder to sustain its impressive growth in street food sales and sustain its newly-achieved profitability?ShouldJohn Christ expand in its current street food market segment, add a new market segment, catering, or dosomething else?

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case4 •Case Assignment QuestionsCostco Wholesale Corp. in 2018:Mission, Business Model, and StrategyAssignment Questions1.What is Costco’s business model? Is the company’s business model appealing? Why or why not?2.What are the chief elements of Costco’s strategy? How good is the strategy?3.Do you think Jim Sinegal was an effective CEO? What grade would you give him in leading the process ofcrafting and executing Costco’s strategy? How well is Craig Jelinek performing as Sinegal’s successor; whatgrade would you give him so far in leading the process of crafting and executing strategy? What support canyou offer for these grades? Refer to Figure 2.1 in Chapter 2 in developing your answers.4.What core values or business principles did Jim Sinegal stress at Costco?5.(In the event you have covered Chapter 3) What is competition like in the North American wholesale clubindustry? Which of the five competitive forces is strongest and why? Use the information in Figures 3.4,3.5, 3.6, 3.7, and 3.8 (and the related discussions) in Chapter 3 to do a complete five-forces analysis ofcompetition in the North American wholesale club industry.6.How well is Costco performing from a financial perspective? Do some number-crunching using the data incase Exhibit 1 to support your answer. Use the financial ratios presented in Table 4.1 of Chapter 4 (pages85-87) to help you diagnose Costco’s financial performance.7.Based on the data in case Exhibits 1 and 4, is Costco’s financial performance superior to that at Sam’s Cluband BJ’s Wholesale?8.Does the data in case Exhibit 2 indicate that Costco’s expansion outside the U.S. is financially successful?Why or why not?9.How well is Costco performing from a strategic perspective? Does Costco enjoy a competitive advantageover Sam’s Club? Over BJ’s Wholesale? If so, what is the nature of its competitive advantage? Does Costcohave a winning strategy? Why or why not?10.Are Costco’s prices too low? Why or why not?11.What do you think of Costco’s compensation practices? Does it surprise you that Costco employeesapparently are rather well-compensated?12.What recommendations would you make to Costco top management regarding how best to sustain thecompany’s growth and improve its financial performance?

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case5 •Case Assignment QuestionsCompetition in the Craft BeerIndustry in 2018Assignment Questions1.What are the strategically relevant components of the U.S. and global craft beer industry macro-environment?2.What is competition like in the craft beer industry? Which of the five competitive forces is strongest? Whichis weakest? What competitive forces seem to have the greatest effect on industry attractiveness and thepotential profitability of new entrants?3.What does your strategic group map of the craft beer industry look like? Which strategic groups do you thinkare in the best positions? The worst positions?4.What key factors may determine the success of a start-up or smaller, craft brewery?5.What recommendations would you make to a smaller, craft brewery to improve its competitiveness in themarket while mitigating any current and future risks?6.Identify the strategic issues facing craft brewers in 2018. What effects may these issues have on the industry?

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case6 •Case Assignment QuestionsFixer Upper: Expandingthe Magnolia BrandAssignment Questions1.What are the major elements of Magnolia Inc.’s competitive strategy? How well do the pieces fit together?Is the strategy evolving?2.Explain the pressures facing Magnolia Inc. in its internal and external environments. How would you priori-tize those pressures?3.What strategic issues confront Magnolia Inc. in 2018? What market or internal circumstances should mostconcern owners Chip and Joanna Gaines and the company’s senior management team?4.What recommendations would you make to Magnolia Inc. to address the strategic issues confronting it in2016 in order to sustain its impressive growth in revenues and achieve profitability?

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case7 •Case Assignment QuestionsUnder Armour’s Turnaround Strategyin 2018Assignment Questions1.What is your assessment of the Under Armour’s performance downturn in North America that first appearedin the fourth quarter of 2016? Causes? Reasons?2.What financial performance issues do you see at Under Armour based on the data in case Exhibits 1, 2, and3?3.What is your assessment of the strength of the competitive rivalry among the leading participants in theNorth American market for performance sports apparel headed into 2018?4.How strong are the other four competitive forces confronting Under Armour, Nike, and The adidas Group asof 2018? Do a five-forces analysis to support your answer.5.Does Under Armour have any core competencies and, if so, what are they?6.Does Under Armour have any resource strengths or competitive capabilities that qualify as a distinctivecompetence?7.What does a SWOT analysis reveal about the overall attractiveness of Under Armour’s situation headed into2018?8.What are the key elements of Under Armour’s strategy?9.Which one of the five generic competitive strategies discussed in Chapter 5 most closely approximates thecompetitive approach that Under Armour is employing?10.As of 2018, how does Under Armour’s competitive strength in the global market for sports apparel andathletic footwear compare against that of Nike and The adidas Group? Do a weighted competitive strengthassessment using the methodology presented in Table 4.4 in Chapter 4 to support your answer. Based onyour assessment and calculations, does Under Armour have a net competitive advantage or disadvantage incompetinggloballyagainst Nike and The adidas Group?11.What financial performance issues do you see at Under Armour based on the data in case Exhibits 1, 2, and3?12.What are the key issues confronting Under Armour’s top management team as of mid- 2018?13.What recommendations and suggestions for improvement would you make to Kevin Plank regarding theturnaround strategy put in place at Under Armour?

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case8 •Case Assignment QuestionsMoviePass—Are SubscribersLoving It to Death?Assignment Questions1.Describe the Movie Pass business model. From the data in the case, does it appear to be a sound corporatestrategy? Support your answer.2.What are the key elements of MoviePass’ strategy going into 2018?3.Identify the threats that Movie Pass may face in its competitive environment. Prepare a SWOT analysisof the company. From this information, how do you evaluate the company’s overall situation and futureprospects?4.Assess the financial condition of Helios & Matheson. What is your assessment of the company’s liquidityand profitability?5.Does the financial condition of Movie Pass support your SWOT assessment?6.Consider the financial trends, the SWOT analysis and other information from the MoviePass case: does thecollective information indicate survival for MoviePass? Support your conclusion.7.From the data in the case, would you expect MoviePass to be able to achieve profitability before the cashruns out?8.What advice would you give to the MoviePass Board of Directors?

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case9 •Case Assignment QuestionsTOMS Shoes: Expanding Its SuccessfulOne For One Business ModelAssignment Questions1.What are the key elements of TOMS shoes’ competitive strategy? Is the strategy best described as low cost,differentiation, or best cost? Has the company focused on a niche or chosen to pursue the broader footwearmarket? Explain.2.In what ways does TOMS exercise its commitment to corporate social responsibility?3.How does TOMS’ dedication to corporate social responsibility contribute to its competitive advantage?4.What is TOMS Shoes situation like? What are its internal strengths and weaknesses? Its external opportunitiesand threats?5.What evidence suggests whether TOMS shoes strategy is working? Does it have a competitive advantage?Is its financial performance improving or declining?6.What strategic issues should TOMS shoes management and investors be most concerned with? Are therepossible improvements to its competitive strategy? Are there internal weaknesses or external threats to itswell-being that must be addressed?

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case10 •Case Assignment QuestionsLola’s Market: Capturinga New GenerationAssignment Questions1.What are the strategically relevant components of the U.S. supermarket industry macro-environment?2.What is competition like in the supermarket industry? Which of the five competitive forces is strongest?Which is or are weakest? What competitive forces seem to have the greatest effect on industry attractivenessand the potential profitability of new entrants?3.What does your strategic group map of the supermarket industry look like? Is Lola’s Market well positioned?Why or why or why not?4.What do you see as the key drivers of change in the U.S. supermarket industry?5.What key factors may determine the success of Lola’s Markets?6.What recommendations would you make to David Ortega to improve Lola’s Market’s competitiveness in themarket while mitigating any current and future risks?

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case11 •Case Assignment QuestionsiRobot in 2018: Can the CompanyKeep the Magic?Assignment Questions1.Identify the driving forces in the robotic vacuum industry. Which of these forces appears to be the strongest?Where does the industry appear to be headed as a result of these forces?2.What are iRobot’s competitive and resource strengths, and what opportunities do you identify? What notableweaknesses and threats are facing the company? Assess the combined impact of these forces on iRobot’sfuture profitability.3.Describe iRobot’s business strategy. Does it appear well-suited for the company in 2018?4.iRobot has the largest market share in a growing market, but does the company have a competitive advantage?A sustainable advantage? What additional strategies could the company adopt to secure or sustain competitiveadvantage?5.Which of iRobot’s competitors presents that greatest competitive threat? Why? Support your answer.6.From the provided financial data, what is iRobot’s financial condition? What do the financial statementssuggest about the company’s future? If present trends continue, where do you see iRobot in the next fewyears?7.What advice would you offer to CEO Angle to improve iRobot’s market position and profitability. Supportyour decision.

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case12 •Case Assignment QuestionsChipotle Mexican Grill’s Strategy in 2018Assignment Questions1.What is your assessment of the ways in which Chipotle responded to the food poisoning incidents in someof its restaurants?2.Do you agree with Steve Ells’s decision to relinquish his position as CEO? Do you approve of the choice ofBrian Nicol to become Chipotle’s new CEO? Are you surprised by the choice of Brian Nicol?3.Does Chipotle Mexican Grill have any core competencies and, if so, what are they?4.What does a SWOT analysis reveal about the attractiveness of Chipotle Mexican Grill’s situation and futureprospects, as of mid-2018?5.What are the primary and secondary components of Chipotle’s value chain?6.What were the chief components of Chipotle’s strategy prior to the food poisoning episodes? What furtherstrategy adjustments are needed now that Chipotle has (seemingly) gotten through the worst of the fallout ofthe food poisoning incidents?7.Which one of the five generic competitive strategies discussed in Chapter 5 most closely approximates thecompetitive approach that Chipotle Mexican Grill is employing?8.What chief difference(s) do you see between Chipotle’s strategy and the strategy being employed at Moe’sSouthwest Grill?9.What does an analysis of the data in case Exhibit 1 reveal about Chipotle Mexican Grill’s financial andoperating performance? Use the financial ratios in Table 4.1 of Chapter 4 as a guide in doing the calculationsneeded to arrive at an analysis-based answer to your assessment of Chipotle’s financial performance. Inaddition to the ratios in Table 4.1, there are occasions when you will also need to calculate compound averagegrowth rates (CAGR) for certain financial measures. The formula for calculating CAGR (in percentageterms) is as follows:CAGR % = [ending value ÷ beginning value]1/n – 1x 100(where n = the number of year-to-year or period-to-period changes)10.How does Chipotle Mexican Grill’s competitive strength compare against that of Taco Bell, Qdoba MexicanEats, and Moe’s Southwest Grill as of mid-2018? Do a weighted competitive strength assessment using themethodology presented in Table 4.4 in Chapter 4 to support your answer. Based on your assessment andcalculations, does Chipotle have a net competitive advantage over some or all of these rivals? Which rival—Chipotle Mexican Grill or Moe’s Southwest Grill or Qdoba Mexican Eats—seems to have the strongest set ofresource strengths and competitive capabilities and is most likely to achieve the best financial performance?Does Chipotle have a good enough strategy and adequate resource strengths and competitive capabilities tocompete effectively against Taco Bell? Your assessment should most definitely take into account the extent towhich Chipotle’s food poisoning problems have cut into its competitive capabilities and performance prospects.11.What action recommendations would you make to CMG’s new CEO, Brian Nicol, to help rejuvenate thecompany’s growth and profitability in the remainder of 2018 and on into 2019?

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