Strategic Management And Competitive Advantage: Concepts and Cases
By Jay B. Barney and William S. Hesterly
Contents:
Part 1: THE TOOLS OF STRATEGIC ANALYSIS
CHAPTER 1 What Is Strategy and the Strategic Management Process? 2
Go, Pokémon Go 2
Strategy and the Strategic Management Process 4
Defining Strategy 4
The Strategic Management Process 5
What is Competitive Advantage? 8
Research Made Relevant: How Sustainable Are
Competitive Advantages? 10
The Strategic Management Process, Revisited 10
Measuring Competitive Advantage 11
Accounting Measures of Competitive Advantage 11
Strategy in Depth: The Business Model Canvas 12
Economic Measures of Competitive Advantage 16
Ethics and Strategy: Stockholders Versus Stakeholders 18
The Relationship Between Economic and Accounting
Performance Measures 19
Emergent Versus Intended Strategies 19
Why you Need to Know About Strategy 20
Summary 22
Challenge Questions 23
Problem Set 23
End Notes 25
CHAPTER 2 Evaluating a Firm’s External Environment 26
How Attractive is the Music Streaming Industry? 26
Understanding a Firm’s General Environment 28
The Structure-Conduct-Performance Model of Firm
Performance 32
Ethics and Strategy: Is a Firm Gaining a Competitive
Advantage Good for Society? 32
A Model of Environmental Threats 34
Threat from New Competition 34
Strategy in Depth: Environmental Threats and the S-C-P Model 35
Another Environmental Force: Complements 45
Industry Structure and Environmental
Opportunities 46
Research Made Relevant: The Impact of Industry and Firm
Characteristics on Firm Performance 47
Strategy in Depth: Network and Empty Core
Industries 48
Opportunities in Fragmented Industries:
Consolidation 49
Opportunities in Emerging Industries: First-Mover
Advantages 50
Opportunities in Mature Industries: Product
Refinement, Service, and Process Innovation 52
Opportunities in Declining Industries: Leadership,
Niche, Harvest, and Divestment 54
Summary 57
Challenge Questions 58
Problem Set 59
End Notes 60
CHAPTER 3 Evaluating a Firm’s Internal Capabilities 62
When a Noun Becomes a Verb 62
The Resource-Based View of the Firm 64
What Are Resources and Capabilities? 64
Critical Assumptions of the Resource-Based View 65
Strategy in Depth: Ricardian Economics and the
Resource-Based View 66
The VRIO Framework 67
The Question of Value 68
Ethics and Strategy: Externalities and the Broader
Consequences of Profit Maximization 69
The Question of Rarity 71
The Question of Imitability 73
The Question of Organization 77
Research Made Relevant: Strategic Human Resource
Management Research 78
Applying the VRIO Framework 80
Applying the VRIO Framework to Southwest Airlines 81
Southwest’s People-Management and Competitive
Advantage 82
Imitation and Competitive Dynamics in an
Industry 83
Not Responding to Another Firm’s Competitive
Advantage 84
Changing Tactics in Response to Another Firm’s
Competitive Advantage 84
Changing Strategies in Response to Another Firm’s
Competitive Advantage 85
Implications of the Resource-Based View 86
Where Does the Responsibility for Competitive
Advantage in a Firm Reside? 86
Competitive Parity and Competitive Advantage 88
Difficult-to-Implement Strategies 88
Socially Complex Resources 89
The Role of Organization 89
Summary 90
Challenge Questions 91
Problem Set 92
End Notes 93
End-of-Part 1 Cases
Case 1–1: Can SodaStream Disrupt the Carbonated
Soft Drink Market? PC 1–1
Case 1–2: True Religion Jeans: Flash in the
Pants or Enduring Brand? PC 1–11
Case 1–3: Walmart Stores, Inc. PC 1–26
Case 1–4: Harlequin Enterprises: The Mira
Decision PC 1–39
Part 2: BUSINESS-LEVEL STRATEGIES
CHAPTER 4 Cost Leadership 96
Fashion Eyeglasses—At a Fraction of the Price 96
What is Business-Level Strategy? 98
What is Cost Leadership? 98
Sources of Cost Advantages 98
Strategy in Depth: Determining the Optimal Level of
Production in an Industry 102
Research Made Relevant: How Valuable Is Market
Share—Really? 106
Ethics and Strategy: The Race to the Bottom 108
The Value of Cost Leadership 109
Cost Leadership and Environmental Threats 109
Strategy in Depth: The Economics of Cost Leadership 110
Cost Leadership and Sustained Competitive
Advantage 111
The Rarity of Sources of Cost Advantage 112
The Imitability of Sources of Cost Advantage 113
Organizing to Implement Cost Leadership 117
Organizational Structure in Implementing Cost
Leadership 117
Summary 120
Challenge Questions 121
Problem Set 122
End Notes 123
CHAPTER 5 Product Differentiation 124
Who Is Victoria, and What Is Her Secret? 124
What is Product Differentiation? 126
Bases of Product Differentiation 127
Research Made Relevant: Discovering the Bases of Product
Differentiation 129
Product Differentiation and Creativity 132
The Value of Product Differentiation 133
Product Differentiation and Environmental
Threats 133
Strategy in Depth: The Economics of Product
Differentiation 134
Product Differentiation and Environmental
Opportunities 135
Ethics and Strategy: Product Claims and the Ethical
Dilemmas in Health Care 136
Product Differentiation and Sustained Competitive
Advantage 137
Rare Bases for Product Differentiation 137
The Imitability of Product Differentiation 137
Organizing to Implement Product
Differentiation 143
Organizational Structure and Implementing Product
Differentiation 143
Management Controls and Implementing Product
Differentiation 144
Strategy in Depth: Going in Search of Blue Oceans 145
Compensation Policies and Implementing Product
Differentiation Strategies 147
Can Firms Implement Product Differentiation and
Cost Leadership Simultaneously? 148
No: These Strategies Cannot Be Implemented
Simultaneously 148
Yes: These Strategies Can Be Implemented
Simultaneously 149
Summary 150
Challenge Questions 151
Problem Set 152
End Notes 153
CHAPTER 6 Flexibility and Real Options 154
Why Is Netflix called Netflix? 154
What is Strategic Flexibility? 156
Types of Flexibility 156
The Value of Strategic Flexibility 158
Incorporating Risk in Strategic Decision Making 159
Limitations of Risk Based Decision Making Under
Uncertainty 159
Valuing Flexibility 160
Strategy in Depth: The Black-Scholes Model for Valuing
Financial Options 161
Research Made Relevant: The Value of Real Options
Thinking 169
Strategic Flexibility and Sustained Competitive
Advantage 172
Rare and Costly-to-Imitate Flexibility 172
Organizing to Implement Strategic Flexibility 173
Ethics and Strategy Feature: Treating Employees as
Flexible Assets 174
Summary 175
Challenge Questions 175
Problem Set 176
End Notes 177
CHAPTER 7 Collusion 178
A Gas Station Conundrum 178
What is Collusion? 180
Ethics and Strategy Feature: The Ethics of Collusion 181
The Value of Collusion 182
Colluding to Reduce the Threat of New Competitors 182
Colluding to Reduce the Threat of Current Competitors 183
Strategy in Depth: How Colluding Firms Generate
Economic Profits 183
Colluding to Reduce Other Competitive Threats 184
Collusion and Sustained Competitive Advantage 184
Ways Firms Can Cheat on Collusive Agreements 185
Explicit and Tacit Collusion 189
Industry Attributes and the Threat of Cheating 189
Research Made Relevant: Sending Signals to Maintain Collusion 190
Rarity and Costly to Imitate Collusion Strategies 196
Organizing to Implement Tacit Collusion 197
Organizational Efficiency 197
Organizational Self-Discipline 198
Summary 198
Challenge Questions 199
Problem Set 199
End Notes 200
End-of-Part 2 Cases
Case 2–1: McDonald’s: Comeback in the U.S. Burger Market? PC 2–1
Case 2–2: The Levi’s Personal Pair Proposal PC 2–7
Case 2–3: Papa John’s International, Inc.: Growth Challenges PC 2–17
Case 2–4: Ryanair—The Low Fares Airline PC 2–24
Case 2–5: Torrey Nano, Inc. PC 2–48
Case 2–6: Collusion in Major League Baseball PC 2–52
Part 3: CORPORATE STRATEGIES
CHAPTER 8 Vertical Integration 202
Outsourcing Research 202
What Is Corporate Strategy? 204
What Is Vertical Integration? 204
The Value of Vertical Integration 205
Strategy in Depth: Measuring Vertical Integration 206
Vertical Integration and the Threat of Opportunism 207
Vertical Integration and Firm Capabilities 209
Vertical Integration and Flexibility 210
Applying the Theories to the Management of Call Centers 212
Research Made Relevant: Empirical Tests of Theories of
Vertical Integration 212
Integrating Different Theories of Vertical Integration 214
Vertical Integration and Sustained Competitive Advantage 215
The Rarity of Vertical Integration 215
Ethics and Strategy: The Ethics of Outsourcing 216
The Imitability of Vertical Integration 217
Organizing to Implement Vertical Integration 218
Organizational Structure and Implementing Vertical Integration 218
Management Controls and Implementing Vertical Integration 219
Compensation in Implementing Vertical Integration Strategies 221
Summary 223
Challenge Questions 224
Problem Set 225
End Notes 226
CHAPTER 9 Corporate Diversification 228
The Worldwide Leader 228
What is Corporate Diversification? 230
Types of Corporate Diversification 231
Limited Corporate Diversification 231
Related Corporate Diversification 232
Unrelated Corporate Diversification 233
The Value of Corporate Diversification 233
What Are Valuable Economies of Scope? 233
Research Made Relevant: How Valuable Are Economies of Scope? 234
Can Equity Holders Realize These Economies of Scope on Their Own? 247
Ethics and Strategy: Globalization and the Threat of the
Multinational Firm 248
Corporate Diversification and Sustained
Competitive Advantage 249
The Rarity of Diversification 249
Strategy in Depth: Risk-Reducing Diversification and a
Firm’s Other Stakeholders 249
The Imitability of Diversification 251
Summary 252
Challenge Questions 253
Problem Set 253
End Notes 254
CHAPTER 10 Organizing to Implement Corporate Diversification 256
Is It Soup Yet? 256
Organizational Structure and Implementing
Corporate Diversification 258
The Board of Directors 259
Strategy in Depth: Agency Conflicts Between Managers and Equity Holders 261
Research Made Relevant: The Effectiveness of Boards of Directors 262
Institutional Owners 263
The Senior Executive 264
Corporate Staff 265
Division General Manager 267
Shared Activity Managers 268
Management Controls and Implementing
Corporate Diversification 270
Evaluating Divisional Performance 270
Allocating Corporate Capital 273
Transferring Intermediate Products 274
Compensation Policies and Implementing
Corporate Diversification 277
Ethics and Strategy: Do CEOs Get Paid Too Much? 278
Summary 278
Challenge Questions 279
Problem Set 279
End Notes 281
CHAPTER 11 Strategic Alliances 282
Alliances Between Chinese and U.S. Firms 282
What is a Strategic Alliance? 284
How do Strategic Alliances Create Value? 285
Strategic Alliance Opportunities 285
Strategy in Depth: Winning Learning Races 287
Research Made Relevant: Do Strategic Alliances Facilitate
Tacit Collusion? 290
Alliance Threats: Incentives to Cheat on Strategic Alliances 292
Adverse Selection 293
Moral Hazard 293
Holdup 294
Ethics and Strategy: When It Comes to Alliances, Do
“Cheaters Never Prosper”? 295
Strategic Alliances and Sustained Competitive Advantage 296
The Rarity of Strategic Alliances 296
The Imitability of Strategic Alliances 297
Organizing to Implement Strategic Alliances 300
Explicit Contracts and Legal Sanctions 300
Equity Investments 301
Firm Reputations 302
Joint Ventures 303
Trust 304
Summary 304
Challenge Questions 305
Problem Set 305
End Notes 306
CHAPTER 12 Mergers and Acquisitions 308
The Travails of Technology Acquisitions 308
Ethics and Strategy: Is Greed Good? 310
What Are Mergers and Acquisitions? 311
The Value of Mergers and Acquisitions 312
Mergers and Acquisitions: No Economies of Scope 312
Mergers and Acquisitions: When Economies of Scope Exist 313
Returns to Mergers and Acquisitions: Research Results 317
Strategy in Depth: Evaluating the Performance Effects of Acquisitions 317
Why Are There So Many Mergers and Acquisitions? 318
Mergers and Acquisitions and Sustained
Competitive Advantage 321
Valuable, Rare, and Private Economies of Scope 321
Valuable, Rare, and Costly-to-Imitate Economies of Scope 322
Unexpected Valuable Economies of Scope Between
Bidding and Target Firms 323
Implications for Bidding Firm Managers 324
Implications for Target Firm Managers 328
Research Made Relevant: The Wealth Effects of
Management Responses to Takeover Attempts 329
Organizing to Implement a Merger or Acquisition 332
Post-Merger Integration and Implementing a
Diversification Strategy 332
Special Challenges in Post-Merger Integration 333
Summary 335
Challenge Questions 335
Problem Set 336
End Notes 337
End-of-Part 3 Cases
Case 3–1: National Hockey League Enterprises
Canada: A Retail Proposal PC 3–1
Case 3–2: Starbucks: An Alex Poole Strategy
Case PC 3–6
Case 3–3: Rayovac Corporation: International
Growth and Diversification Through
Acquisitions PC 3–19
Case 3–4: Aegis Analytical Corporation’s Strategic
Alliances PC 3–31
Case 3–5: Activision’s Crush on Mobile
Gaming PC 3–41
Appendix: Analyzing Cases and Preparing for Class Discussions 339
Glossary 344
Company Index 352
Name Index 355
Subject Index 359