Strategic Management 3rd Edition Solution Manual

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Strategic Management 3eInstructor Manual1Course PreparationCONNECT INTEGRATIONInteractive Exercises, LearnSmart, Quizzes, and Exams: Introductory RemarksCONNECT INTEGRATIONCourse PreparationOpening Discussion Topics and ExercisesChapterCase:Does Twitter Have aStrategy?1.1What Strategy Is: Gaining and Sustaining Competitive Advantage(LO 1-1,LO 1-2, LO 1-3)CONNECT INTEGRATIONCase Analysis:Gaining Competitive Advantage at Nvidia1.2Stakeholders and Competitive Advantage(LO 1-4, LO 1-5)CONNECTINTEGRATIONInteractive Sequencing:Internal and External StakeholdersCONNECTINTEGRATIONInteractive Labeling: Identifying Social Responsibilities1.3 TheAFIStrategyFramework1.4Implications for the StrategistStrategy Term ProjectCONNECTINTEGRATIONRunningCase: HPmyStrategyChapter1What Is Strategy?

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Strategic Management 3eInstructor Manual5ChapterCase1: Does Twitter Have a Strategy?POWERPOINTSLIDES9–11AND36–37DISCUSSIONTOPICSNEWERFACULTY:Students will be familiar with Twitter and its battle for relevance with Facebook, Instagram, and othersocial media sites. You might want to open by taking a poll on which social media sites students in theclass interact withmost often. Explore that further by asking how many students have switched their predominant social media site in recentyears. Move the discussion from personal behaviors to strategic impact by asking students how their behavior impacts theattractiveness of a social media site for advertisers. This opens the floor for a discussion of sources of competitive advantage.Video update “After Twitter’s StockFallsto All-Time Lows, What’s Next?”TheWall Street Journal8/4/2015. Print update“Twitter toCutup to 8% ofWorkforce”(Y Koh 10/14/15TheWall Street Journal).The video describes the problems JackDorsey faced when he took over the CEO job. The print article describes some strategic leadership actions he has taken tocorrect the problems.EXPERIENCEDFACULTY:Ifyouwant to extend the discussion with another illustration, considerDell,once the undisputedleader in personal computers, now outpaced by Lenovo and HP. The Dell example is more complex than Apple. Apple iscompeting against Samsung with similar strategies. Dell is being squeezed on the bottom end by cost leadership strategies byAsian firms and on the top by greater innovation and broader service options by HP. You could use this example as anintroduction and then return to it in the section on competitive advantage. See“DellProfitFalls 72%; Sales Flat”TheWallStreet Journal, August 15, 2013. What were the keys to Dell’s success in the past? In what ways did the competitiveenvironment change? Why did Dell lose ground to its rivals?CONSIDERTHISDISCUSSIONQUESTIONSWhy is Twitter struggling? What role do industry and firm effects play here?This is a good opportunity to introduce the concept of measuring firm performance, which will be discussed in more detail inChapter 5. In particular, students need to be reminded that profitability is a critical element of most measures. Once thestudents are focused on the importance of generating ad revenue in this industry, rather than the satisfaction of revenue-lessusers, firmversusindustry effects will be more obvious. All of the social media sites (the industry) are struggling with thenegative effect of growth in mobile usage of their sites. Small mobile screens offer less opportunity for banner ads and havemuch lower associated ad revenue than usage on PCs. Yet, Facebook has been much more successful than Twitter both ingrowing their user base and in generating ad revenue.What grade would you give Dick Costolo, Twitter’s CEO from 2010 to 2015? Support your decision with specifics.Also, list some of his leadership strengths and weaknesses. What recommendations would you have for the newTwitter CEO to be a more effective strategic leader?Students can be encouraged to compare thefirms recent performance with the projections expected at the time of the IPO.This discussion question also offers scope for reviewing leadership traits and behaviors from earlier management courses. Inaddition, a discussion of the different challenges in leading a small startup focused on attracting users with a larger, publiccompany focused on delivering profit growth. The discussion can be augmented by reviewing the reasons that MarkZuckerberg added Sheryl Sandeberg to the Facebook executive team.You can also expand the discussion to the leadershipskills of other members of the executive team,such as Kevin Weil, Sr VPofProduct Development who is the fifth producthead in five years (see “Twitter shuffles product team amid CEO search”TheWall Street Journal9/2/15).Why is agood strategyso important, especially at high-tech startups like Twitter? Why is crafting agood strategyatTwitter so difficult? What are some of the pitfalls that a CEO of a company such as Twitter needs to watch out forwhen crafting and implementing a strategy?Tech industry firms have the same challenges as other firms in crafting and implementing strategies, except that they have todo so in a rapidly changing environment for customer preferences, technological capabilities, necessary employee skillsets,and competitive actions.Without the need for facilities to manufacture physical products, growth can potentially be quiterapid.

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Strategic Management 3eInstructor Manual6Apply the three-step process for developing agood strategyoutlined above (diagnose the competitive challenge, derivea guiding policy, and implement a set of coherent actions) to Twitter’s situation today. Which recommendationswould you have for Twitter to outperform its competitors in the future?It is earlyin the course for students to be effective in strategy formulation, but some key principles can be emphasized usingbasic information in Chapter 1. A good beginning point is to discuss the importance of defining the industry, so that youknow which firms you are trying to outcompete. Similarly, you can guide the students to identify whether Twitter has thepotential to take the same direction as Facebook, but be lower cost, or whether their smaller user base requires them to inventnew ways to compete. It is also important to emphasize for the students that an excellent strategy that is poorly implementedis not going to deliver the anticipated results. The rapid growth rate and the entrepreneurial skillsets of the leadership teamboth create challenges for implementation skills.1.1What Strategy Is: Gaining and SustainingCompetitive Advantage LO1-1POWERPOINTSLIDES11–14DISCUSSIONTOPICSNEWERFACULTY:Strategy is a set of goal-directed actions a firm intends to take in its quest to gain and sustain competitiveadvantage relative to competitors. A good strategy consists of three elements: A diagnosis of the competitive challenge, aguiding policy to address the competitive challenge, and a set of coherent actions to implement the firm’s guiding policy. Thestrategic management process, therefore, is a never-ending cycle of analysis, formulation, implementation, and feedback.Strategy is neither grandiose statements, a failure to face a competitive challenge, nor operational effectiveness. Differentplans and activities may be called a “strategy,” but like operational effectiveness, they are not part of our definition forthistextbook. Pricing strategies, Six Sigma, and other programs are more likely to be tools for improvement and not lead to acompetitive advantage.You might enjoy opening this discussion with a humorous video. One possibility isNASCAR coachreveals winning strategy: Drive Fast.Research Update“New venture strategic adaptation: The interplay of belief structures and industry context,”Andreea N. Kiss andPamela S. Barr,Strategic Management Journal,Volume 36, Issue 8,pages 1245–1263,August 2015EXPERIENCEDFACULTY:This research, based on the information processing perspective, offers a model of high tech, newventure, strategic adaptation encompassing both the industry growth rate and choices firms make based on the complexity,centrality, and causal logistics of the leadership’s belief systems. It can be used as a basis for a discussion of how Twitter’sleadership’s belief systems regarding their user base might contribute to the firm’s slowness relative to Facebook in makingstrategic decisions to capture value in their very dynamic industry.

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Strategic Management 3eInstructor Manual7NEWERFACULTY:The underlying assumptions about competitive positions and resources are very important in creatingforward-looking strategies. Whether you choose to talk about this subject using Walmart, the auto industry, or PDAs, wehope you will bring it up in class. If you choose to highlight the Apple Newton example, here is a link to a three-minute videoby Jeff Hawkins who was founder and CEO of Palm at the time they released the PalmPilot (http://stanford.io/TJImn).Discusshow a strategy differs from a business model. How is it similar? A strategy is the ideas that managers attempt to putinto practice. A business model is how the managers translate the strategy into working practices. The business model shouldbe grounded in the strategy of the firm. A business model, however, is more “putting strategy into action.” Thus, a singlestrategy could exploit several different business models for the firm. Students often come into the class confused about whatis a strategy and what is not. Many areas now use the term “strategy,” and students have likely heard it in many other courses(IT strategy, Strategic HR, Marketing Strategy, and so on). It is worth spending a few minutes on this discussion, particularlyon the “effectiveness” items. The classic read on this subject is Michael Porter’s (1996), “What is strategy?”HarvardBusiness Review, November–December: 61–78.Extended DiscussionEXPERIENCEDFACULTY:ExplainApple’ssuccess over the last decade. Think about which industries it has disrupted andhow. Also take a look at Apple’s main competitors. Begin with a discussion of how Apple revolutionized the way welisten to music. Younger students may have little knowledge of the music world before iTunes. Tease out a list ofresources and capabilities, including Steve Jobs, high R&D budget, emphasis on simplicity, design, brand image, andcustomer loyalty. Then extend the discussion to smartphones andtablets. Which of Apple’s earlier resources andcapabilities were key to the success of these products in creating or revolutionizing an industry? Which new resources andcapabilities did Apple need to develop? Blackberry once had 50% of the U.S. market for cell phones that accessed email;in 2013 it had 3% and has continued to fall. (See “Blackberry Seeks a Sale by November”The Wall Street Journal9/4/13.) Why did they lose ground? What advantages did Apple’s competitors gain that joined the Open Handset Allianceto create the Android eco-system? (See “Google’s Android Seizes Smartphone Market”TheWall Street Journal8/8/13.)IsApple’ssuccess attributable to industry effect or firm effects, or a combination of both? Explain. A rising tide lifts allboats and some of Apple’s success can be attributed to changes in the external environment, including the growth in theavailability of broadband, digital media, and apps. Yet Apple was able to gain and sustain large market shares, due inlarge part to a track record of consistently out-innovating their rivals.Apply the three-step process for developing a good strategy (diagnose the competitive challenge, derive a guiding policy,and implement a set of coherent actions) to Apple’s situation today. Which recommendations would you have for Appleto outperform its competitors in the future? Use this question to transition from the past to the present and future. IsApplefacing increased pressure because the market for phones and tablets is becoming structurally less profitable or becausethey are losing competitive position versus Samsung and others? Depending on where the discussion goes in this analysisphase, develop alternative strategies to (a) react to industry changes or (b) out-innovateSamsung.Solutions for (a) mightinclude supply chain management or design strategies to reduce cost structure. Solutions for (b) might include increasedR&D, adding new features, or reimagining the category. Some implementation strategies might include bringing in newexecutives to reinvigorate the innovation climate or redesigning the organization structure to be more product-based,rather than functional.AACSB 2015 Standard 9 Thinking creatively and making sound decisions and exercising goodjudgment under uncertaintyDo you think it is so hard to not only gain, but also to sustain a competitive advantage? At this early point in the course,itis unreasonable to expect the students to have opinions on this matter that are well-grounded in theory, but it is a goodopportunity to get them thinking about resources that are more durable and less imitable and capabilities that are dynamic,allowing the firm to respond quickly to competitive advantage.A good example to expand this discussion is Xiaomi (see“Rivals try to reinvent Xiaomi business model”Eva Dou.09/08/2015TheWall Street Journal). Xiaomi’sbusiness modelof selling high-end phones at very low prices is being imitated by multiple Asian rivals.

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Strategic Management 3eInstructor Manual8END OFCHAPTERDISCUSSIONQUESTION4Choose an industry with a clear leader, thenexamine the differences between the leader and one or two of the othercompetitors in the industry. How do the strategies differ? What havethe leadersdone differently?Ideally this questionwould be assigned in advance and the students would be encouraged to consider profits in deciding which firm has acompetitive advantage. Some examples that could provide rich dialogue areCoca ColaversusPepsi in the soft drinkindustry(especially attractive if you are using a Cola Wars case in your course),Barnes & NobleversusAmazonin the textbookindustry, orMcDonaldsversusWendy’sin quick service restaurants.To take a more international perspective, considerUber’s competition in China with Didi Kualdi (see“Inside Uber’sFightwithItsChinese Nemesis, Didi Kualdi”E Dou and RCarew09/03/15TheWall Street Journal).Students will have a natural tendency to fall into the trap of basing theirassessment of competitive advantage on the consumer preferences of a sample size of one (themselves). You can use thisdiscussion to emphasize strategic management as a firm-level discipline in which all methods of measuring competitiveadvantage depend, at least in part, on firm profitability. You can also use this exercise to bring out the issue of the differencebetween a cost leadership position and low prices to the consumer to point out that low revenue cannot lead to competitiveadvantage unless it is matched by even lower cost and expense.AACSB 2015Standard 9 Financial theories, analysis,reporting, and marketsNEWERFACULTY:Competitive advantage is always relative, not absolute. Explain the differences among competitivedisadvantage, competitive parity, temporary competitive advantage, and sustainable competitive advantage. Competitiveadvantage has to come from performing different activities or performing the same activities differently than rivals are doing.What Strategy Is: Gaining and SustainingCompetitive Advantage?LO1-2POWERPOINTSLIDES15–18DISCUSSIONTOPICSNEWERFACULTY:ConsiderGoogle’scompetition withMicrosoftin search engines. Google was not the first search engineon the Internet, but it has been the most successful for a decade. What is Google’s competitive advantage? Google possessessome 70 percent of the market share in the online search/advertising business. One way they have developed a competitiveadvantage is through their PageRank algorithm which (by providing more relevant search results) offers a higher-qualitysearch engine (product) to Internet users (customers). What strategy and business model is Microsoft using today with Bingto try to succeed in the Internet-search business? Microsoft is essentially subsidizing Bing with the profits from its softwareand operating systems. They are attempting to create a competitive advantage bymaking search faster and easier.This hasthe potential to be a game changer in the field of online searches. For example, if you are looking for a place to eat dinner, onBing you could see which local restaurants yourFacebookfriends have said they “like.” The same for searching to buy a newTV, and so on. There is value created with social searching. Time will tell as to who can capture the benefits from it.

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Strategic Management 3eInstructor Manual9NEWERFACULTY:If you chose to start the course with a sports analogy for competition and your group of students have ahigh level of engagement with that topic, you might want to reintroduce it at this point in your lecture with a sports-relatedexample.Long an industry leader, ask students to consider what new strategies ESPN could pursue to combat the industrytrend of customers trying to cut cable bills that might be more effective than firing talent. (See “ESPN tightens its belt aspressure on it mounts”S Ramachandran and J Flint07/10/15TheWall Street Journal. This example tends to resonate withstudents because their age group is in the forefront of the trend to replace cable TV with streaming options, such as Hulu,Netflix, and Amazon Prime.EXPERIENCEDFACULTY:ConsiderMicrosoft’srecent efforts to launch the Surface tablet and to buy Nokia’s cell phonebusiness andGoogle’s recent acquisition of Motorola’s cell phone business. Although Microsoft and Google still have verysmall market shares compared to Apple and Samsung, how should Apple address this potential threat? We suggest splittingthe class in half for this exercise and then forming small groups of 3–4 students. One half of the small groups will be Appleand the other half will beSamsung.After the small groups have five or so minutes to discuss the issue, the class returns tonormal, and through discussion, brings out the high points of each firm. The students should identify that Samsung’sdependence on open software gives it less protection against these new rivals in hardware. They may also note that morerobust application development ecosystems provide at least a temporary protection against Microsoft.Strategy Highlight 1.1POWERPOINTSLIDES16–17:Threadlessis an example of a firm building on its customer base through crowdsourcing to use new products and alsoparticipate in the design and vetting of popular designs. The firm invites its customers to submit designs for t-shirts. In thesummer of 2010, Dell Computer announced a partnership with Threadless for designs on its laptop computers. For a smalladditional fee (and an extra day’s delay in shipping), you can get a Threadless design etched on your new Dell laptop. Whydo you think Dell is keen on offering this service? What other firms use this crowdsourcing technique to achieve competitiveadvantage? Where else might this type of business model show up in the future? How durable is a competitive advantagederived from crowdsourcing? Students could say Dell is keen on offering this service because it provides differentiation, andhopefully a competitive advantage. Dell is able to tap into a community of talented online designers and try to regain somemarket share with a younger demographic at the same time. Crowdsourcing is becoming more and more popular and widelyaccepted. A well-known example is Wikipedia, which has become a giant crowdsourced encyclopedia. Threadlessspecifically has partnered with Thermos for lunch box designs and Griffin for smartphone cases. One area where it would notbe surprising to see this type of crowdsourcing is in video games. An enterprising company could ask for ideas, perhaps frommany fans, to create a new game that would fit the desires of many of their customers. Students may cite Lego as a firm thatis letting customers submit their own designs and then produces them as the demand is generated, or they may just providethe parts for the custom design back to the client.AACSB 2015Standard 9 Information technology and statistics/quantitativemethods impacts on business practices to include data creation, data sharing, data analytics, data mining, data reporting, andstorage between and across organizations including related ethical issuesINTEGRATIONCase Analysis:Gaining Competitive Advantage at NvidiaThis case analysis provides the students an opportunity to think through the three elements of a good strategy with acomplementary application from the textbook. The case also helps students see the value in learning from failures. Thecase here ties closely to the materials in the beginning sections of Chapter 1. Students will read the case and then answerthe four questions following it.Difficulty:MediumBlooms:EvaluateAACSB:AnalyticThe instructor can expand on the concepts in this case analysis by comparing some of the business decisions made byNvidia and Apple. Many students may not be familiar with Nvidia as a firm, but they may find some of their favoritegaming devices are powered by Nvidia products. We find students sometimes lacking in business-to-business experiencesand firms such as Nvidia, which are not retail oriented, can enhance their conceptual application and give studentsthought-provoking business examples.

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Strategic Management 3eInstructor Manual10ExerciseNEWERFACULTY:Ask students to scan the current mainstream media for examples of companies that are launchingnew products or services. Identify whether the company seems to be emphasizing ways that it has lowered costs (andwill compete on the basis of price) or ways that it is adding features (and will compete on the basis of uniqueness). Or,does the company seem to be trying to do both?JetBlueoffers an example of a firm that allowed their competitive positionto become stuck in the middle. After the students’ presentations, you may want to extend the discussion to talk about whetherthe strategyformulation was misguided or whether the firm was unclear in its implementation of that strategy. At the end ofthe day, shareholder value creation requires both a successful strategy and effective implementation. However, with a poorstrategy, the board may want to replace the CEO. Poor implementation may call for investment in new systems andprocesses.EXPERIENCEDFACULTY:McKinseyQuarterly,Sept. 2015offers a video interview, “Capturing Southeast Asia’s financialsystem opportunity.” After showing the video in class, invite students to brainstorm ideas on how a firm might gain andsustain a competitive advantage in this arena.AACSB 2015Standard 9 Thinking creatively andmanagingin a global contextWhat Strategy Is: Gaining and SustainingCompetitive AdvantageLO 1-3POWERPOINTSLIDES19–20EXERCISEIf you are teaching a capstone course that meets broad program-level learning objectives, such as critical reasoning skills anddecision-making skills, as well as discipline-specific strategy learning objectives, theWall Street Journalarticle, “GE set toexit retail lending” (8/30/13), offers material for one such exercise. You can begin exploring the concept of competitiveadvantage by contrasting shareholder value creation under Jack Welch and destruction under Jeff Immelt and then discuss therole thatGECapital played in both of these trends. What changed in the external environment to cause the crown jewels tobecome a liability? Then challenge the students to use critical reasoning skills to (a) identify specific information in thearticle that is relevant to making that determination and (b) evaluate the validity of that information. From that point youcould move into a discussion of decision-making skills. What information would you want to know in order to determinewhether Immelt is making the right choice for GE Capital? What other alternative solutions might the company consider?AACSB 2015Standard 9 Analytical thinkingDISCUSSIONTOPICSNEWERFACULTY:Industry effects describe the underlying economic structure of the industry. Firm effects, or the actionsmanagers take, tend to be more important in determining firm performance. Since this is a strategy class, it’s good to knowthe decisions that managers make can have significant (good or bad) impacts on the firm. Industry and firm effects areINTERDEPENDENT. Firms can create or influence the structure of their industry. You may want to bring in somebackground here and mention that if we were in the perfectly competitive environment often used in economics, strategywould not be important. In a perfectly competitive market, all the firms are identical and therefore none have superiorperformance relative to the rest. Perfect markets though do make the math easier for us to get through those econ courses.EXPERIENCEDFACULTY:Given that traditional U.S. firms such asIBMhave over 70 percent of their employees andover 60 percent of their revenues outside the United States (in 2009), what is an appropriate definition of a “U.S.firm”? Is there any special consideration a firm should have for its “home country”?A “U.S. firm” typically will haveits headquarters inside the U.S. So where the CEO and senior leaders are located is the “home” of the firm. Historically,where the company is incorporated and what stock market its shares are listed on have also been used to denote a homecountry firm. In today’s “flatter world,” the senior officers of large firms may not all be in the same country. Sometraditionally U.S. firms such as Accenture, Tyco, and Ingersoll-Rand have moved their incorporation to places like Bermuda,the Cayman Islands, or Ireland, largely for tax reasons, though all still maintain their senior offices largely in the U.S. Ahome country in most corporations still carries significant influence in the organization, structure, and culture of the firm.

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Strategic Management 3eInstructor Manual11However, in a global economy, the corporation must make decisions based on what is best for the variety of stakeholders.Hiring and investment decisions are made relative to the competitive environment and often only limited consideration isgiven to the home country ahead of other locales for investment and the growth of the firm.AACSB 2015Standard 9Managing in a global contextEND OFCHAPTERDISCUSSIONQUESTION3As noted in the chapter, research found that firm effects are more important than industry effects. What does thismean? Can you think of situations where this might not be true?It means that, in general, how a company is run is moreimportant than the success or failure of an industry as a whole. For instance, an oil company (that should be makingenormous profits), if poorly run, could still go bankrupt, while a Nevada home construction company (hit hard by therecession), if well-run, could still manage to turn a profit. Situations where this might not be true may include the totalcollapse of the industry due to legal issues or obsolescence. Hypothetically, if the U.S. government outlawed the use oftobacco, it would become virtually impossible for even a well-run tobacco company to survive. If automobiles could now runon water, oil companies would assuredly face hard times.1.2Stakeholders and CompetitiveAdvantageLO1-4POWERPOINTSLIDES19–26DISCUSSIONTOPICSNEWERFACULTY:Stakeholders are organizations, groups, and individuals who have a vested interest in the performance andsurvival of the firm. Stakeholder strategy is a framework that connects corporate governance, business ethics, and strategicleadership and thus helps managers think through these issues in a holistic fashion. Stakeholder theory is a theoreticalframework that is concerned with how different stakeholders create and trade value. Instructors can discuss the importance ofpublic companies and their influence on our daily life. Students need to understand the interdependent relationships betweenthese organizations and the average citizen. Then, discuss the importance of the public companies’ stakeholders and whycompanies need to take good care of them. The answer is, “It is an interdependent relationship.” Only by taking care of thestakeholders can they create a win–win, with mutually beneficial results to both companies and to society. This section sets afoundation that allows instructors to talk later about social responsibilities.NEWERFACULTY:Tap into the students’ very real experience of the impacts of the recent financial crisis on society and itstrust in business institutions. How has their trust in the financialsystem changed? What impacts might a loss of trust have onfinancial firms’ ability to operate? (See “Life on Wall Street grows less risky”TheWall Street Journal9/9/13.)

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Strategic Management 3eInstructor Manual12EXERCISECorporations are increasing their use of social media to stay in touch with their stakeholders. They use company blogs,Twitter feeds, and Facebook postings to communicate the firm’s message in a positive way. They also have begun to payattention to and engage with third party websites, such as Yelp and blogs written by others. This exercise on the use ofblogging by large companies can be used to discuss the communication of strategies by these firms. Here is a link to theBusinessWeekarticle about Dell’s response to a negative customer blog that generated a flurry of other negative customerresponses (http://buswk.co/RPOWr).Ask students to search for a large company that includes a blog on its official website.Ask them to determine: What seems to be the primary purpose of the blog that you found? Does the blog seem to be updatedregularly? Does the blog allow users to post comments or questions? If so, what type of stakeholders post most of thecomments and how effectively does the company respond? Students may enjoy surfing the Web for companies that makesome of their favorite products. We have suggested a large firm because big and well-known firms have more of an Internetpresence than newer startup ventures. Another alternative for this exercise is to look for the corporation’s Twitter postingsortheir Facebook fan page. We selected blogging for the exercise because that media format provides enough length for themessage to be captured fairly quickly. It is also a less restrictive communication tool and provides room for a wide diversityof uses between different firms.This exercise lends itself well to blended or online courses.AACSB 2015Standard 9Information technology and statistics/quantitative methods impacts on business practices to include data creation, datasharing, data analytics, data mining, data reporting, and storage between and across organizations including related ethicalissuesEND OFCHAPTERDISCUSSIONGROUPEXERCISEStudents inOklahoma,New Jersey, Louisiana,Texas, Japan, Nepal,and other areas around the world that have recentlyexperienced natural disasters will be able to relate to this topic.This exercise canbe used to push students to address thisproblem from the perspective of a senior leader, such as a mayor, a governor, or the head of FEMA, rather than an individualperson or one functional discipline. Before breaking the students into small groups for discussion, you might want to work asa large group to identify a list of critical social needs that must be met during a crisis. Then to lead into a discussion oftherole of business in society, you might want to start a discussion on how business needs during a black swan event mightdiffer from societal needs, but may be critical to meeting societal needs. For example, businesses need backup IT systems tokeep their supply chain and production operational; without this they may be unable to deliver vital goods, such as food orenergy.AACSB 2015Standard9 Social responsibility, including sustainability, and ethical behavior and approaches tomanagementINTEGRATIONInteractive Sequencing:Internal and External StakeholdersThisclick-drag sequencing activitystarts with chronological ordering of some black swan events, as discussed in thetextbook. Then, the students are asked to consider the benefits and contributions of severaldifferent types of stakeholdersby answering two multiple choice questions from the text material.The student must read the textbook and then drag theelements to the correct locations in both stages of this activity.Difficulty: Medium Blooms: Understand AACSB:AnalyticThe instructor can expand on the concepts from this interactive by discussing recent activist stockholderactivities at firms such as Apple (Carl Icahn’s push for stock buybacks) and others pulled from the headlines.

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Strategic Management 3eInstructor Manual13END OFCHAPTERETHICAL/SOCIALISSUESAACSB 2015Standard 9 Ethical understanding and reasoning (able to identify ethical issues and address the issues in asocially responsible manner) or Social responsibility, including sustainability, and ethical behavior and approaches tomanagementChoose one of the companies discussed in the chapter (such asBP,Target,Threadless,Twitter,orFacebook).Bylooking at the company’s annual report on its web page or conducting an Internet search for news about thecompany, identify instances where the company has acted ethically or showed its interest in a key stakeholder—orwhere it has failed to do so.Encourage the students to draw a distinction between illegal behavior and actions that are legal,but might be considered unethical under one or more value systems.Corporate leaders are responsible for setting the firm’s strategies to gain and sustain a competitive advantage. Shouldmanagers be only concerned about the company’s financial performance? What responsibility do company managershave for other consequences of their strategies? For example, shouldWalmarttry to mitigate the negative impact itsarrival in communities can have on small locally owned stores? ShouldApplebe concerned about the workingconditions at Foxconn (the company that manufactures Apple’s devices such as the iPhone and the iPad in China)?Why or why not? Explain.The senior leadership should be accountable for the firm’s performance and its relationship withboth internal and external stakeholders. As noted in the chapter, those stakeholders will include the community. However, theinfluence of the community stakeholders is quite often small relative to many other groups.Generally, consumer-orientedfirms such as Walmart should care particularly about the reception they receive when moving into a new location. However,it is not Walmart’s responsibility to use its competitive advantage to subsidize small locally owned stores that may havedifficulty competing against the economy of scale and scope that Walmart has developed. Students may point out that patronscan choose to shop at local stores or big-box retailers. Also, the array of economical products and services provided by majorretail chains likeWalmartbenefitted all the customers, suppliers, and employees involved.Apple needsto be concernedabout working conditions atFoxconndue to the expectations of customers that social responsibility extends through thesupply chain. This issue is becoming particularly salient for fashion retailers who are coming under pressure due to poorworking conditions for employees of their suppliers in Bangladesh. SeeFoxconn says 11 injured in large scale fight atChinese campusTheWall Street Journal9/24/13 andWalmart and other U.S.retailers commit to factory safety inBangladeshTheWall Street Journal7/10/13.Other thanWhole Foods,think of company examples where “doing things right” and acting in the interests of broaderstakeholders (rather than just stockholders alone) have produced a stronger competitive advantage. Why was thisthecase?Challenge students to identify firms whose products they prefer due to the firm’s reputation for social responsibility.Do these firms create a higher “willingness to pay” among their customers or do they command a larger market share? Someexamples includeTom’s of Maine,Starbucks,andBen & Jerry’s. Starbucks is a great example for a dialogue about howmuch difference positive social responsibility makes in consumer choice. Which students buy Starbucks coffee because ittastes best, because it has a comfortable ambiance, or because it has fair trade contracts with coffee farmers? Then switch tonegative social responsibility. How many students have stopped buying clothing manufactured in Bangladesh(“U.S.retailersto implement Bangladesh factory plan”TheWall Street Journal8/20/13) or BP gasoline?1.2 Stakeholders and Competitive AdvantageLo 1-5POWERPOINTSLIDES27–31Strategy Highlight 1.2END OFCHAPTERDISCUSSIONQUESTION2PowerPoint Slide 31: The BP Horizon environmental disaster shows the consequences of failure to live up to the expectationsof society for corporate social responsibility. One might argue that they were effective in responding to stakeholder concernsafter the fact, by setting up processes for rapid payment of claims, supporting fishing communities, and runningadvertisements for tourism. Others will fault their performance after the fact, arguing that the CEO at the time was toostandoffish and that the firm took too long to recognize and solve the technical issues and stop the leak. You might invite

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Strategic Management 3eInstructor Manual14students to research BP/Amoco safety incidents. They will find that one of the reasons theU.S.government was unwilling toexcuse this disaster as an unavoidable accident is that BP/Amoco had a track record that included several large-scale safetyincidents with fatalities. Persistent accidents argue that safety leadership and safety culture were lacking, thus breachingthepublic trust. If time permits, you might also open a discussion as to whether energy, food, and pharmaceutical firms that servebasic human needs should be held to a higher standard than manufacturers of less critical products, such as fashion.AACSB2015Standard 9 Social responsibility, including sustainability, and ethical behavior and approaches to managementDISCUSSIONTOPICSNEWERFACULTY:Stakeholder impact analysis is a decision tool with which managers can recognize, assess, and address theneeds of different stakeholders to allow the firm to perform optimally and act as a good corporate citizen. Stakeholder impactanalysis is a five-step analysis. Who are our stakeholders? What are our stakeholders’ interests? What opportunities andthreats do our stakeholders present? What economic, legal, ethical, and philanthropic responsibilities do we have to ourstakeholders? What should we do to effectively address the stakeholder concerns?Possible examples to illustrate the five-step stakeholder impact analysis could beBP’s relationships with its shareholders andU.S.government agencies. Another possibility isNestle’srelationships with its shareholders, its customers, and nutritionactivists. If you choose the Nestle example, you may want to ask students to read the comments about Nestle in its socialmedia pages. A way to make this discussion more interesting if you have journalism, public relations, public health, orcommunications majors in your course, would be to invent an “event” for Nestle or use the real event for BP. Then askselected students to “report” on the incident from a few different perspectives and ask other students to present the company’sposition, as if they were the CEO.AACSB 2015Standard9 Social responsibility, including sustainability, and ethicalbehavior and approaches to management and written and oral communicationEXPERIENCEDFACULTY:A more complex example that one might use for stakeholder impact analysis is theU.S.autoindustry during the recent financial crisis and the impact on its supplier stakeholders. Financial weakness in suppliers ofspecialized parts can make it impossible for an auto manufacturer to continue to produce cars or to recover production levelsafter the crisis. However, the auto manufacturers were going through or approaching bankruptcy themselves, so throwingfinancial lifelines or even paying the bills was challenging. Invite students to step through the five-step process with thisexample. A similar example that might be more salient for some groups is the relationship between the home buildingindustry and its relationship with skilled tradesmen.AACSB 2015Standard 9 Systems and processes in organizations,including planning and design, production/operations, supply chains, marketing, andINTEGRATIONInteractive Labeling:Identifying Social ResponsibilitiesThisclick-drag matchingactivitybuilds student comprehension of the Stakeholder Impact Analysis. In particular, itbuilds upon step 4 and the concept of Corporate Social Responsibility for the students. The student must read theapplication examples provided and move the correct type of social responsibility to the box provided.Then the studentwill answer three further questions.Difficulty: MediumBlooms: ApplyAACSB: AnalyticThe instructor can expand onthe concepts from the Click and Drag by having students discuss the variety of social responsibilities surroundingStrategy Highlight 1.2 about the Deepwater Horizon oil spill.

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Strategic Management 3eInstructor Manual15EXERCISENational differences may cause the definitions of corporate social responsibilities to differ across national borders. Also,therelationship between “doing well” and “doing good” is perhaps not yet clear enough to guide business practices. That meansthe causal relationships are not clear. If you have international students represented in your class this would be an interestingtopic for small group discussion.1.3The AFI Strategy FrameworkPOWERPOINTSLIDES32–34DISCUSSIONTOPICSNEWERFACULTY:You might consider using discussion of a popular movie that illustrates strategy, such as “Master andCommander” or “Braveheart.” What were the keys to the hero’s success? These types of examples will enable you to bringout the importance of careful analysis, a well-formulated strategy, and effective implementation. Each also offers illustrationsof effective and ineffective strategic leadership.AACSB 2015Standard 9 Leading in organizational situationsEND OFCHAPTERDISCUSSIONQUESTION1Consider the brief description ofTarget’s stakeholder relationships and combine that information with yourexperience shopping in a Target store. How might Target’s stakeholders (in particular, its employees, customers, localcommunities, and suppliers) influence the manager’s decisions about building competitive advantage in the analysisstage of the AFI framework? How might Target gather information from its stakeholders to inspire a better customerexperience in the formulation stage in order to differentiate? Or in order to lower costs? Brainstorm (by jotting downas many ideas as you can think of) about how key stakeholders may affect (or be affected by) the implementationstage.We recommend dividing the class into groups of 3–4 for small group discussion and assigning some groups torepresent each stakeholder group: customers, employees, suppliers, shareholders, and the local community. Ask them tofocus on one method to gather data for analysis and one change in strategy that might be proposed. Then focus the rest oftheir efforts on identifying the implementation steps for that strategy and how they might affect their assigned stakeholdergroup.AACSB 2015Standard 9 Creative thinking, Group and individual behaviors in organizations and society, andIntegrating knowledge across fieldsResearchUpdate“Product andenvironmental socialperformance: Varyingeffect on firmperformance,”SatishJayachandran1,*, KartikKalaignanam1, Meike Eilert,Strategic ManagementJournal,Volume 34, Issue 10,pages 1255–1264, October2013EXPERIENCEDFACULTY:These researchers disaggregate corporate social performanceinto product social performance (“actions of a firm include meeting consumer needseffectively and efficiently while avoiding ethical and regulatory problems”) andenvironmental social performance (“diligent policy of limiting the negative impact thatits business has on the natural environment as well as acting to sustain the naturalenvironment proactively”). They find that product social performance has a positiveimpact on firm performance (Tobin’s Q) and that environmental social performancewas not related to firm performance. They suggest that environmental socialperformance is harder for shareholders to diagnose. They also found a negativity bias,in that the negative effect of poor product social performance was greater than thepositive effect of good product social performance. This suggests that shareholderspunish negative social performance. This research can be incorporated into your coursewith a class discussion on how a firm’s product social performance and environmentalsocial performance impact students’ purchasing behavior. Marketing students could beinvited to discuss how they might raise consumer awareness of a firm’s superiorenvironmental social performance.

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Strategic Management 3eInstructor Manual161.4Implications for StrategistsPOWERPOINTSLIDE35DISCUSSIONTOPICNEWERFACULTY:A nice video to illustrate the implications for strategists is this one by James Goth, Partner and ManagingDirector of BCG,Competitive Advantage.He discusses the meaning of competitive advantage and strategy.Strategy Term Project:Initial Firm Selection &ReviewThe goal of thiscourse-long project is to provide a tangible application of many of the concepts discussed in the text. By theend of the project, students will not only have practice in using key strategic management components and processes toincrease understanding of the material, but also will be able to conduct a complete strategic management analysis of anycompany.This first task is to identify a firm to study for this course-long project. In the text, we suggest two methods for choosing afirm. The easiest and most consistent method will be to select a medium-or large-sized public company to study. Thesecondary approach of selecting a local firm can provide challenges regarding the appropriate collection of data. Even if astudent works at the firm, there are quite often proprietary limits on the data (especially financial and competitive data) thatthese firms will allow to be used for such a project. Be sure the student checks with the local firm on data availability.Of course, as the instructor you may choose to assign firms or provide a list of acceptable firms for the student to select from.As you are kicking off this project, now is a good time to discuss appropriate data sources with your students. There is a lotof information available on the Internet. Unfortunately, a lot of it is nonsense, or is at least heavily flawed or biased.Encourage your students to stay away from websites such as “I hate Company X” and to focus on reputable news and marketoutlets for the bulk of their information. They should use a variety of sources, because even highly esteemed sources likeTheWall Street JournalandThe New York Timescan be biased in choosing their reporting topics and tone.Once the firm is selected, it’s time for the students to start gathering information on the history of the firm, its currenttopmanagement team, and the primary business model for the firm (How does the firm make most of its money?). The goal ofthis first assignment is basic familiarization with the firm and a check to be sure data sources are forthcoming and reputable.

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Strategic Management 3eInstructor Manual17myStrategyIf you are about to embark on a new career, what effect should the likelihood of industry growth play in yourdecision?It should have some effect, but it is not likely to be the most important concern. If your only goal is to become thehead of a large company, market growth and expansion may become a high priority. However, success can be found in manyplaces, and it is usually more important to find a company with good leadership (firm effects) than worry solely about marketgrowth (industry effects).Why could growth rates be an important consideration? Why not?A high growth rate indicates more and fasteradvancement. If, for example, you are planning on a career in accounting, you might focus your job search on firms ingrowing segments of the market such as power, pharmacy services, or property insurance rather than homebuilding orbanking. Particularly coming out of a recession when many workers have needed to delay their retirement dates, items likenew job opportunities, training, and promotions are more likely in growing organizations. On the other hand, if you knowexactly what you want to do or have a passion for something, you should not turn it down simply because higher growth ratesmay be in some other area.How do you expect this list to look five years from now? Which three to five industries do you expect to top the list,and which three to five industries will be at the bottom of the list? Why?This exercise speaks to the challenge offormulating a strategy of high uncertainty on key data. We suggest that students be challenged to choose one industry thatthey think will be high growth or low growth and justify their position with logic that draws on information that they doknow, for example, pent up demand for housing during the recession, lower energy costs in theU.S.due to booming shalegas production, aging of the baby boom generation, or growth in digital media accessibility.AACSB 2015Standard 9Analytical thinking (able to analyze and frame problems) and Making sound decisions and exercising good judgment underuncertaintyINTEGRATIONRunning Case:HPWhile offering each student the opportunity to explore and analyze the company of his/her choice can add interest to theexercise, there are many advantages for an instructor when the entire class works on the same firm. Connect allows you todo this with a running case for a single firm that encompasses every chapter in the textbook and tracks the Strategy TermProject. Inside Connect each new module of the Strategy Term Project is available in the chapter activities. HewlettPackard is used as an exemplar running case. If your term project is a team activity, these modules may be used to givethe teams an idea of the type of information and analysis needed for their own firm by running through the HP examples.Each module can be individually modified and assigned per the instructor’s desires.If you choose a term project for your course, you may want to consider inviting a local company representative to yourclassroom during the first week to speak to the students about the firm’s strategies and values.

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Strategic Management 3eInstructor Manual1OverviewChapterCase: Marissa Mayer: Turnaround at Yahoo2.1Vision, Mission, and Values(LO2-1,LO 2-2, LO 2-3)CONNECT INTEGRATIONVideo Case:The Power of a Mission: Christine Benninger, President Humane Society of SiliconValley2.2Strategic Leadership(LO2-4,LO 2-5, LO 2-6)CONNECTINTEGRATIONCase and Interactive Labeling: Formulating Strategy Across Levels at IBM2.3 TheStrategic Management ProcessCONNECTINTEGRATIONCase Analysis:Planned Emergent Strategy at 3M2.4Implications for the StrategistStrategy Term ProjectCONNECTINTEGRATIONHPRunningCase: Module 2myStrategyChapter2Strategic Leadership: Managing the Strategy Process

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