Strategy, 4th Edition Class Notes

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STRATEGYProcess, Content, ContextAN INTERNATIONAL PERSPECTIVEFourth EditionSTUDY NOTES

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CONTENTSPAGEIntroduction4Preface13CASETITLECase 1London Heathrow14Case 2Honda Motors20Case 3Apple27Case 4Gucci36Case 5UPS43Case 6DSM54Case 7Ferrari58Case 8COSCO66Case 9Starbucks73Case 10Pep Stores80Case 11Nestlé88Case 12Aditya Birla Group95Case 13Air France – KLM101Case 14BT – Group108Case 15NCR/Wi-Fi114Case 16VION129Case 17HP137Case 18BP145Case 19Wal-Mart152Case 20Kentucky Fried Chicken158Case 21PHARMAC169Case 22Nike177

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INTRODUCTIONThe cause of all human evil is not being able to apply general principles to special cases.(Epictetus, c. 60-120; Roman philosopher)Just as there is not one best way of making strategy, there is not one best way of teaching it either.Throughout the past number of years we have visited many colleagues and observed many different,yet effective, teaching styles, class formats and course structures. Each person has his/her ownpreferences, each business school has its own peculiarities and each national context has its ownparticular needs. It would be impossible to detail howStrategy: Process, Content, Context couldbeemployed to fit with all of these individual circumstances. Each strategy course needs to beindividually crafted - we can't give a few simple recipes for designing and running a course.Luckily, it has been our experience that most professors using or contemplating our book don'twant us to tell them how to run their courses. In general they are knowledgeable and experienced, andhaveintentionallyturnedawayfromthesimple"howto"textbooks.Theseprofessorsdislike"instructing" their students on how to follow simplified step-by-step strategy-making procedures. Thelast thing such professors need is a step-by-step manual instructing them on how to teach a strategycourse.So, what is required is not a manual, but a guide that helps the professor to explore theteaching opportunities offered by the book and aids him/her in extracting as much value as possiblefrom the book's use. In other words, just like the former two editions, the third edition ofStrategy –Process, Content, Context: An International Perspectiveis a resource that can be employed in avariety of different ways for professors that would like to become quickly acquainted with all of thepossibilities available to them. This insight will allow professors to blend the book into their ownspecific teaching approach.Before presenting you the teaching notes that guide you through the process of teaching thecases, we will focus on the conditions you can set in order to ensure that you and your students get themost out of your course and the cases you teach. We will outline a number of the ways in which thebook could be applied to teaching strategic management.COURSE DESIGNAttention will be paid to the following aspects of course design:Teaching objectives. What should students learn and what should be the role of the course and theprofessor in the learning process? In other words, what is thecourse mission?Teaching approaches. What type of general approach should the professor take to meet theteaching objectives? In other words, what is thecourse strategy?Teaching formats. How should the professor mix theory and cases and how should class time bespent? In other words, what are thecourse tactics?Teaching set-ups. How should the course be organized, in what order should the course cover thetopics and how much time should be spent on each chapter? In other words, what is thecoursestructure?

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Teaching ObjectivesPerfection of means and confusion of goals characterize our age.(Albert Einstein 1879-1955; German-American physicist)What do we actually want students in a strategic management or business policy course to learn? Itseems an obvious question to start with, especially to strategy professors. Yet, in practice, the largemajority of strategic management textbooks on the market do not make their teaching objectivesexplicit. These books implicitly assume that the type of teaching objectives and teaching methodsneeded for a strategic management course do not differ radically from any other subject - basically,strategy can be taught in the same way as accounting or baking cookies. Their approach is based onthe following teaching objectives:1.Knowledge. To get the student to clearly understand and memorize all of the "ingredients";2.Skills. To develop the student's ability to follow the detailed "recipes";3.Attitude. To instill a disciplined frame of mind, whereby the student automatically attempts toapproach all issues by following fixed procedures.This is an important way of teaching - it is how all of us were taught to read and write, do arithmeticand drive a car. We refer to this type of teaching as instructional, because students are told what toknow and do. The instructor is the authority who has all of the necessary knowledge and skills, and itis his/her role to transfer these to the students. Thus the educational emphasis is on communicatingknow how and ensuring that students are able to repeat what they have heard. Students are notencouraged to question the knowledge they receive - on the contrary, it is the intention of instructionalteaching to get students to absorb an accepted body of knowledge and to follow established recipes.The student shouldaccept, absorb and apply.However, while instructing students on a subject and programming their behavior might be useful insuch areas as mathematics, cooking and karate, we believe it is not a very good way of teachingstrategy. In our opinion, a strategic management professor should have a different set of teachingobjectives:1.Knowledge. To encourage the understanding of the many, often conflicting, schools of thought andto facilitate the gaining of insight into the assumptions, possibilities and limitations of each set oftheories;2.Skills. To develop the student's ability to define strategic issues, to critically reflect on existingtheories, to creatively combine or develop theories where necessary and to flexibly employ theorieswhere useful;3.Attitude.Toinstillacritical,analytical,flexibleandcreativemindset,whichchallengesorganizational, industry and national paradigms and problem-solving recipes.In other words, strategy professors should want to achieve the opposite of instructors - not to instillrecipes, but rather to encourage students to dissect and challenge recipes. Strategic thinking is in itsvery essence questioning, challenging, unconventional and innovative. These aspects of strategicthinking can not be transferred through instruction. A critical, analytical, flexible and creative state ofmind must be developed by practicing these very qualities. Hence, a learning situation must encouragestudents to be critical, must challenge them to be analytical, must force them to be mentally flexibleand must demand creativity and unconventional thinking. In short, students can not be instructed, butmust learn the art of strategy by thinking and acting themselves - they mustdiscuss, deliberate and do.The role of the professor is to create the circumstances for this learning. We therefore refer to this typeof teaching as facilitative.This teaching philosophy has lead to a radical departure from traditional textbooks that focus onknowledge transfer and application skills, and that have often been written from the perspective of just

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one paradigm. This book incorporates a number of features intended to help professors to create acourse that can meet the ambitious teaching objectives mentioned above:Broad coverage of strategic management field. Contrary to conventional textbooks, this bookcovers all three dimensions of strategic management (process, content and context) and deals witha wide range of issues on each dimension. The underlying philosophy is that strategic thinkingrequires students to have an overview over all relevant aspects of strategy. A capstone strategicmanagement book should help the professor to present the breadth of the field and challengestudents to develop a holistic and integrative perspective.Broad coverage of different schools of thought. While most other textbooks have been written fromone perspective or present only a few opposing ideas, this book makes the fundamental differencesin opinion within the field of strategic management its focal point. The underlying philosophy isthat strategic thinking requires the ability to recognize perspectives and recipes, and the mentalflexibility to shift between paradigms. A strategic management book should help the professor tochallenge students to use and combine different perspectives when approaching and tacklingstrategic issues.Academic depth. This book goes beyond just understanding and applying relatively simple toolsand basic concepts. Strategy is more than "five steps to strategic success." Students are challengedto understand more complex phenomena and to critically reflect upon them. This intellectualstimulus is reinforced by not shielding students from the uncertainties, inconsistencies and disputeswithin the field of strategic management. The underlying philosophy is that strategic thinkingrequires an analytical and critical mind, which can see the limitations of simple recipes. A strategicmanagement book must not pretend that strategizing can be learned by following recipes, butshould help the professor to challenge students to question existing ideas and develop a tolerancefor theoretical complexity, ambiguity and uncertainty.International perspective. This book has been explicitly developed for professors who want or needto take an international perspective. This is not only reflected in the cases and in the chapters aboutthe international and European contexts, but also in the broad spectrum of approaches that arepresented - this allows the professor to discuss which approach might be more suitable to whichcountry or culture. The underlying philosophy is that strategic thinking requires a culturallyadaptive mind. A strategic management book must help the professor to challenge students tounderstand that "the best" approach to strategy may depend on the country one is in.Strong link between theory and cases. In many other books little effort is made to tie cases andtheory together, or at best the theory is directly "applied" to the case. In this book, however, textchapters and cases are closely linked and each case is approached from a variety of perspectives -the theoretical debate is continued as a practical debate on how the case's issues can best beapproached. In this way, the case discussions yield two major benefits. First, the theoretical debatesbecome more concrete once they are conducted on the basis of an actual business situation. Theusefulness and limitations of each theoretical perspective become much more apparent if studentscan discuss them in the setting of a practical case. Second, students acquire the ability to employtheoretical concepts in practice, without resorting to "blind" application. Students learn thatapproaching practical strategic issues does not call for a "fill in the blanks" mindset - "applying"theory is in itself a delicate art. In other words, the underlying philosophy is that strategic thinkingrequires a mind that can skillfully move from general principle (theory) to specific situation(practice) and back. A strategic management book must help the professor to challenge students todevelop this "vacillation" ability.These characteristics of the book are the embodiment of our teaching philosophy and teachingobjectives. Users of the book do not need to agree, nor do they need to follow our approach. However,it is important to acknowledge that the rest of this teaching guide has been based on the characteristicsdescribed above.

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Teaching ApproachesThe thinker without a paradox is like a lover without feeling: a paltry mediocrity.(Soren Kierkegaard 1813-1855; Danish philosopher)Even within the facilitative teaching philosophy, there remains a wide range of teaching approachesthat professors can adopt. In our view, the most important choice professors must make is on how todeal with theory diversity.Strategy - Process, Content, Context: An International Perspectivepresentsa broad coverage of different schools of thought and professors must decide on how the debatebetween these different perspectives should be conducted. In principle, there are four ways ofstructuring a discussion using articles representing rivaling schools of thought:Collection. The first and least appealing, teaching approach is to treat the articles as a collection ofunconnected readings. In this approach each article is discussed in isolation and the book is viewedas a handy reader bringing together a number of strategy classics. There is no real debate and thedifferent underlying paradigms are not made explicit. This approach is taken if a strategicmanagement course is intended to be no more than an aggregation of individual insights (non-paradigmatic approach).Competition. An alternative teaching approach is to let the various schools of thought compete withone another, to see which perspective has the most descriptive and/or prescriptive value. In thisapproach each article is seen a combatant and the book is viewed as an arena from which the mostfit school of thought will emerge. In other words, the debate focuses on selecting the bestperspective, which may also lead to the discrediting of the other contenders. This approach is takenif a strategic management course is intended to result in one clear-cut, yet dogmatic, theoreticalperspective (mono-paradigmatic approach).Coexistence. A more appealing teaching approach is to compare the various schools of thought andto explore how each can contribute to a better understanding of strategy. In this approach thearticles are treated as complementary and the book is viewed as a set of lenses, each offering adifferent, yet beneficial, insight. The various schools of thought coexist and the debate focuses ondetermining the value and limitations of each perspective. This approach is taken if it is theintention of a strategic management course to acknowledge and respect the richness of theoreticalperspectives (multi-paradigmatic approach).Connection. Finally, professors can also opt for a teaching approach whereby they attempt tocombine the various schools of thought into a more integrated view of strategy. In this approach thearticles are seen as building blocks and the book is viewed as a research laboratory, where thevariousperspectivesaremixedandmatchedtoconstructamorebalancedandcompleteunderstandingofstrategy.Thedebatefocusesongaininginsightintotheconflictingandcomplementary relations between perspectives. The discussions can lead to cross-fertilization ofperspectives and a higher level synthesis. This approach is taken if it is the intention of a strategicmanagement course to challenge students to leverage the set of theoretical perspectives byemploying them simultaneously, instead of sequentially (inter-paradigmatic approach).While the book can be used in combination with all four approaches, we believe that the highest addedvalue is obtained in the cases of 'coexistence' and 'connection’. Especially connection has ourdidactical preference. Understanding and appreciating different points of view, as in the case of amulti-paradigmatic approach, is an important step in the development of strategic thinking. The abilityto switch lenses is essential for the creativity, flexibility and critical analyses needed of a strategist.However, the sequential use of lenses can lead to a fragmented and unbalanced view of strategic

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issues. The more lenses, the more complex and contradictory the analyses - not uncommonly leadingto paralysis by analysis. The student will come to understand the paradoxes described in the book, butwill not be capable of resolving them.Being able to combine and balance the various perspectives depending on the strategic issue andcircumstances encountered, as in the case of an inter-paradigmatic approach, is ultimately an essentialcapability for engaging in the art of strategy. Strategists must be able to make the move from thesisand antithesis to synthesis; otherwise they will not be able to move from thought to action. Wetherefore always try to challenge students to try to resolve the strategy paradoxes by blending thevarious perspectives into a holistic view of strategic management.Teaching FormatsStrategy. Power and knowledge. Science when mere knowing; Art when doing is the object.(Karl von Clausewitz 1780-1831; German military theorist)Once professors have chosen their teaching objectives and teaching approach, they must determinehow to structure the learning situation. In other words, professors must select a teaching format. Ingeneral, there are four types of teaching formats from which professors can choose:Theory only. A classical university course is one that revolves around the theory, whereby no use ismade of cases. Such a teaching format is usually employed if, to paraphrase Von Clausewitz,science and not art is the objective. It is also used if case teaching is too difficult - for example, ifone professor must teach a group of more than 100 students.Theory first, then case. Many professors prefer to supplement a discussion of the theory with a caseanalysis. Commonly they will spend a class session or the beginning of a class session with apresentation and/or class discussion based on the theory. After this initial exploration, the professorwill turn to the case as an exercise for gaining a deeper understanding. This teaching format isusually employed if professors prefer to have a well-structured, theory-driven case discussion. Thekey questions are ‘How can the theories be applied’ and ‘What are their limitations?’Case first, then theory.The opposite teaching format is to start with apracticalstrategicmanagement issue, in the form of a case or otherwise. The class discussion will then focus onunderstanding the strategic issue and seeking a course of action. Only after the students havefinished the case and have developed a 'feel' for the issue, does the professor place it in a broadertheoretical context. In other words, the theoretical discussion is grounded in the class's practicalcase analysis. This teaching format is usually employed if professors prefer an exploratory, theory-seeking case discussion. The key questions are ‘What can be learnt from this specific situation’ and‘Can these lessons be generalized and transferred to other situations’?Theory and case simultaneously. Finally, some professors try to combine the theory-driven andcase-driven teaching formats by intertwining the two. They will often start with a short theoreticalintroduction to the topic and then launch into the case. The case discussion will often require ashort theoretical intermezzo, for clarification and conclusions, after which the case discussion isresumed. At the end of the case discussion the theoretical insights are consolidated by means of afinal overview. This teaching format is usually employed if professors place much emphasis onstudents' ability to skillfully move from general principle to practical situations and back.As stated earlier, there is no best way to teach strategy - no teaching format that is best under allcircumstances. The most appropriate format will depend on such variables such as the number ofstudents, their level and abilities, the skills of the professor and the time available. The most importantthing is to make a choice that fits with these circumstances and to follow this choice through in aconsistent manner.

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Teaching Set-upsWhen translating the teaching objectives, approach and format into a course set-up, professors mustconsider a large number 'design variables'. In other words, strategic management course structures cansignificantly differ from one another on quite a few dimensions. Some design variables can bedetermined by the professor, while others must be taken as a given. Some of the most important onesare:Course scope. Professors must decide whether to cover all chapters in the book and whether toskip, or even add, particular articles.Class session sequence. The order in which topics will be covered must also be determined.Following the chapters in their numerical sequence is a logical choice. However, some professorsmight prefer to let section III (strategy content) precede section II (strategy process).Class session length. The length of class sessions can vary from 45 minutes to 4 hours, althoughthe professor does not usually determine this.Class session frequency. The number of class sessions can vary from 5 to 45 sessions, and isusually also difficult to influence.Class session density. Class sessions can be clustered into a compact module of 2 to 5 days or canbe spread, so that teaching takes place intermittently - 1 to 3 times a week - over a longer period oftime.Class session preparation. Some professors require students to perform activities prior to a classsession, for instance to prepare readings, a case and/or an assignment. Other professors integratethese activities into the class sessions.Class session structure. Each class session can be a mix of activities ranging from listening anddiscussions to role-playing and assignments. All of these activities can be plenary, in small groupsor individual. Each can involve different levels of student-professor interaction.Course cases. Professors also need to determine which specific cases will be employed. Thechapter coverage table in section VI can be of assistance for making these choices. Especially ifprofessors want to combine the discussion of two or more issues, this table can help to determinethe most suitable case.Course assignments. Beside class session related work, professors can also assign other duties,such as the writing of an essay, desk research or field work. These assignments can be carried outin groups or individually.Course examination. It must also be determined how the students' progress will be evaluated.Exams can be written or oral, open or closed book, open answers or multiple choices, individual orgroup work, and can vary in number, length, weight and level.With so many variables, it is clear why no blueprint course structure can be given. Professors will needto tailor their teaching set-up to meet their own circumstances.Strategy - Process, Content, Context:An International Perspectiveis flexible enough to fit with almost any of these. However, to giveinterested professors a point of reference, we have made our most recent course outlines available fordownload from our website.

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TEACHING NOTESThose who have read of everything are thought to understand everything too, but this is not always so-reading furnishes the mind only with the materials of knowledge. It is thinking that makes what is readours.It is not enough to cram ourselves with a great load of collections; unless we chew them over and overagain, they will not give us strength and nourishment.(John Locke, 1632-1704; English philosopher)As Locke correctly observed, true understanding requires more than just reading. Ideas, concepts andperspectives must be ‘chewed over’ before they can be absorbed in our minds. One of the mostcommon and beneficial ways of achieving this is by means of case discussions. Therefore, 22 longcases and 11 short cases have been included in the book, giving the reader ample opportunity to applythe theoretical concepts to practical situations.To increase the accessibility of the long cases, three tables have been included on the next pages,clarifying the content and potential usage of the cases. These tables deal with the following topics:1.Chapter Coverage. Table 1 indicates which cases are most suited to which chapters. The extent towhich cases and chaptersfithas been expressed by means of stars. Three stars mean that there is anexcellentfit between the case and the theoretical issues being discussed in the chapter. Two starsindicate that the fit isgoodand that the theoretical issues can be well illustrated by the casematerial. One star means that there is only a partial (reasonable) fit; the chapter’s theory is ofsecondary importance to understanding the case issues. Table 1 shows that at least two cases havean excellent fit with each chapter.2.Industry Sector Coverage. Table 2 indicates which industries are dealt with in which cases. Thistable reflects the balanced coverage of the cases.3.Country Coverage. Table 3 indicates which countries are dealt with in which cases. Two stars areused to dignify that the country is a primary focus of the case. One star means that the country isdiscussed in the case, but that it is only of secondary importance to the case topic. Table 3illustrates the broad international coverage of the cases.As the link between the theoretical chapters and the cases is the most important, the sequence of thecases in the book follows the chapters with which they have the best fit. The teaching notes arepresented in the same order.Each teaching note has been structured in the same way, to make them more readily usable. Eachteaching note consists of the following paragraphs:Case Synopsis. This paragraph gives a short summary of the case’s key points.Teaching Objectives. This paragraph outlines which major elements of the corresponding chapter’stheory can be illustrated using the case.Teaching Guideline. Subsequently, it is explored how the case can be employed, what its strengthsare, whether there are any pitfalls and what the professor should keep in mind while teaching.Case Questions. In this paragraph case questions are suggested that roughly cover the main caseissues.Case Analysis. Here a general analysis is given on the basis of the case questions.What Happened After the Case? Each case discussion is wrapped up by a short review of the majorevents that have happened after publication of the case. This section is also regularly updated onour website.

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Table 1Chapter CoverageCHAPTER1234567891011London Heathrow***************Honda Motors**************Apple************Gucci***********UPS************DSM*********Ferrari****************COSCO*****************Starbucks in US**************Pep Stores****************Nestlé***************Aditya Birla Group****************Air France - KLM***************BT Group************Wi-Fi*********VION**************HP**************BP*************Wal-Mart*************Kentucky Fried Chicken********PHARMAC**********Nike**********Excellent**Good*ReasonableTable 2Industry Sector CoverageSECTORSConsumerGoodsIndustrialGoodsConsumerServicesBusinessServicesSpecificLondon Heathrow**AirportHonda Motors**Cars, motorcycles, enginesApple**Consumer electronics, computer softwareGucci*Fashion and leather goodsUPS**Special transportation and logistics servicesDSM**Specialty chemicalsFerrari**CarsCOSCO**Global shipping, logistics, building repairingStarbucks in US**Retailer, roaster and brand of specialty coffeePep Stores*Discount retailNestlé**NutritionAditya Birla Group****DiversifiedAir France - KLM**Air trafficBT Group***TelecommunicationWi-Fi**Wireless data networkVION**Meat processingHP**PC manufacturingBP*Oil industryWal-Mart**RetailKentucky FriedChicken**Fast-foodPHARMAC*MedicinesNike*Sporting Goods

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Table 3Country CoverageCOUNTRIESAUCHCNFRGEINITJPMXNENZSASWUKUSLondon Heathrow**Honda Motors**Apple**Gucci**UPS**DSM**Ferrari***COSCO**Starbucks in US**Pep Stores**Nestlé**Aditya Birla Group***Air France-KLM****BT Group***Wi-Fi**VION**HP**BP***Wal-Mart****Kentucky FriedChicken*******PHARMACNike******AUAustraliaGEGermanyNENetherlandsCNChinaITItalySASouth AfricaCHSwitzerlandINIndiaSWSwedenDEDenmarkJPJapanUKUnited KingdomFRFranceMXMexicoUSUnited States**Primary focus*Secondary focus

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PREFACEThestonethatisrollingcangathernomoss,formasterandservantoftchangingisloss.Thomas Tusser, c.1524-1580, English poetAs few others, strategy professors know about switching costs – expenses that are incurred whenchanging over to a new product or service. Usually their knowledge about switching costs is not onlyof a theoretical nature, but also based on their personal circumstances. Many professors have investedtime and energy in getting to know their old strategic management textbook and cases inside out andnow feel “locked in” to these materials due to high switching costs. The more radically different thenew product, the higher are the switching costs.Yet, despite this barrier, hundreds of university professors around the world have switched toStrategy – Process, Content, Context. We are delighted that for so many colleagues the perceivedbenefits of the book outweigh the costs they expect to incur. Nevertheless, we believe that every efforton our part that can help to enlarge the benefits or lower switching costs should be undertaken. It hasbeen with this intention that we have put together this teaching guide.In practice, the most significant switching costs are not even due to the change of the actualtext employed. Strategy professors are well acquainted with the readings and debates highlighted inthe fourth edition ofStrategyand can quickly adapt their lecturing to this new material. Rather, mosttime and effort normally goes into getting to know the cases and linking the cases to the concepts inthe text. Especially this cross-fertilization of text and cases is extremely time-consuming, yet it is vitalfor the students’ learning process. For this reason, we have put a discussion of the cases, and their linkto the concepts, at the centre of this teaching guide.All of the supplementary material accompanyingStrategy: Process, Content, Contextisavailable via the Cengage Learning website (www.cengage.co.uk/strategy4e). The website offersprofessors a set of PowerPoint slides that they can download for their own use. Professors can alsogain access to a large test bank of multiple-choice questions. We invite you to visit this website and tocontribute your experiences, remarks and suggestions, to the benefit of the thousands of other users ofStrategy.If, after reading this teaching guide, you are still left with significant switching costs or believethat you cannot fully benefit from the potential of this book, please feel free to contact us directly. Wewould gladly be of assistance in answering any questions or in discussing your ideas. Of course, wealso welcome on our website any suggestions, feedback or advice that you could send us to help usimprove the next edition.Finally, we would like to thank the people directly involved in making this teaching guidepossible. We have been greatly assisted by the case writers, who have supplied us with all of theiravailable teaching materials. But we are even more heavily indebted to our trusted team of colleaguesat Strategy Academy, who have worked very hard in between their research, teaching and consultingactivities to get all of these teaching notes finished on time.We greatly benefited from the contributions of Peter Smith, Elizabeth Coaster, LjiljanaErakovic, Eric de Roos, Peer Ederer, Jaco Lok, Wolter Lemstra, Fred Huibers, and also from ourcolleagues Hester Duursema, Marcel van Gils, Geert-Jan Knegt, and Casper van der Veen. Specialmention is due for Claudia Cox and Eline Chivot, who spent months doing everything needed toensure that this Teaching Guide would be completed on time. Seeing the entire team work together togetStrategyand the Teaching Guide launched on time has made us very proud and makes us lookforward to the many projects to come.Bob de WitRon MeyerRotterdam, February 2010

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STRATEGY© BOB DE WIT AND RON MEYER, 2010TEACHINGNOTE1:LONDONHEATHROW:THEAIRPORTSEXPANSION DILEMMACase by Prabhu Sethuraman, and Abdul Samad Syed (ICFAI Business School)Teaching Note by Marcel van Gils and Geert Jan KnegtCase SynopsisLondon Heathrow is the world’s third busiest international hub airport. It operates as a hub betweenEurope and Latin America and forms a gateway to Europe. BAA is Heathrow’s hub operator. BesidesHeathrow, BAA also operates other airports like London Gatwick, London Stansted, Glasgow,Edinburgh, Aberdeen and Southampton in the UK.London Heathrow carries around 68 million passengers per annum and is an important economic assetfor the British and global economy.Right now, London Heathrow is operating at 99% of its permitted runway capacity. This lackof spare capacity threatens UK’s competitiveness as a global hub. An obvious solution to this problemis expansion by adding an extra runway and terminal. This case is about the dilemma concerning thisexpansion.In this dilemma, there are two parties with each their own interests. On one hand, there are theenvironmentalists that worry about the additional pollution and question Britain’s role in climatechange. On the other hand, there are the BAA and the broader business lobbies who think thatexpansion will increase the airport’s competitiveness and importance as an economic asset.Because passenger-traffic forecasts suggest that short after the opening of the third runway,the airport will burst at its seams again, four other alternatives for the lack of spare capacity aredescribed in this case too. These alternatives are the mixed mode operation of existing runways (1),moveHeathrowawayfromtheheavilypopulatedneighborhoods(2),thedevelopmentofanintermodal strategy that focuses on the limitation of air-passengers by encouraging the travelers to useother forms of transportation (3), and expand and use London-Gatwick for both short and long-haulservices (4).It is up to Gordon Brown (Britain’s Prime Minister) what Heathrow’s future will be.Teaching ObjectivesIf used in conjunction with Chapter 1, this case can be employed to meet the following teachingobjectives:Introduction of organizational purpose and several major strategic issues. The London Heathrowcase has a broad scope, touching on a variety of the major strategy topics in the book. This allowsfor a broad discussion on the major themes of strategic management (link to Introduction).Understanding the concepts of strategy. The case questions are aimed at testing the students’ability to distinct, define and work with complex strategy issues, paradoxes, conflicting demands,as well as strategy perspectives (link to Introduction).Understanding of organized complexity and wicked problems. London Heathrow’s owner (BAAwhich is part of Grupo Ferrovial) is faced with a complex set of stakeholders with divergentperspectives on the role and future of Heathrow. Secondly the information on future developmentsis highly uncertain. The issue is not tame and cannot be dealt with by employing simple problemsolving tools. Issues are interrelated: dealing with one means dealing with related issues too (linkto Introduction and Reading 1.2 Mason and Mitroff).Ability to recognize strategy issues. As in real life strategy matters, some issues could be morepresent than others. Despite the wickedness of these issues, students are asked to distill andcategorize the most important issues from the case.

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CASE 1: LONDON HEATHROWUnderstanding the nature of strategy paradoxes. This case can be used to illustrate that there areno straightforward ‘right’ solutions to strategy issues, but that strategists must deal with tensionsbetween opposite demands. The tension between economic and ecological perspectives is veryprominent in the London Heathrow case. As such this case can be used to illustrate the approachtaken in the rest of the book (link to Introduction).Teaching GuidelineAs the chapter coverage table indicates, the Heathrow case touches on a variety of strategy issues. Ifthe teacher wishes to focus on one issue, it might prove difficult to avoid class discussion going off ona variety of tangents. However, if an integral coverage of all aspects of the case is intended, then thecomplexity of drawing together a variety of elements within a short period of time might prove quitedaunting. Whatever the objective, usage of this case requires strong directing by the teacher anddisciplined discussion by the students. The case breadth can be exploited in three ways:Introductory case. The case can be used at the beginning of a course (as we suggest using itdirectly in conjunction with Chapter 1), to give students an overview of issues to come. The centralissue of several chapters is dealt with in the case, which makes it possible for the teacher toillustrate the topics that will be dealt with throughout the course.Wrap-up case. The Heathrow case can be used as a final wrap up case for the course, because itchallenges the student to integrate the issues discussed during the course.Exam or assignment case. Again because almost all issues are touched on in this case, anassignment or exam based upon this case will ensure that the most important elements of thecourse can be covered.Case on nature of strategy issues (wicked problems). The wickedness of the issues in the caseperfectly allows a course on wicked problems and the strategic management thereof. Analyzingstakeholders, perspectives and relations proves essential for understanding wicked problems.Generating options to tame the wicked problem helps students to think about managing these.A vital part of Chapter 1 is the distinction in strategy between organizational purpose, process, contentand context. The organizational purpose is central in this case and will serve as the first question. Thelast two questions will provide the students with the opportunity to dive more into the content of thebook, introducing strategy issues, underlying tensions and strategy perspectives. In Case 2 on Hondathe students will focus further on the nature of paradoxes and the paradoxes related to strategy process,content and context. The last two questions also provide the teacher with the handholds to add a bit ofpolarizationtoencouragedebate,especiallybyaskingthestudentsabouttheirownstrategyperspective. Sometimes we even ask the students to physically split between the two perspectives thatare handled: have each group sitting on one side of the classroom. This will add even morepolarization, debate and a lot of fun for the students, too.While the following cases in this teaching guide generally focus on one particular issue, thiscase will serve to test students on their skills to recognize the important strategic issues themselves. Beaware of the fact that the exhibits in this case can be linked directly to the case questions, adding greatdepth to the case analysis. Furthermore, even though the focus of the case is on transportation, weadvise you to expand the focus towards showing that the entire strategy context has been (and still is)very important for London Heathrow from the start. The first question therefore provides an ideal wayto start the case discussion.Case Questions1.Describe the context of London Heathrow’s strategy. What were the circumstances that BAAencountered?2.What is the main paradox encountered in this case?

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