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see dox, i need two different answer

Two part HW, Part 1: Learning Objectives need 1.5 pages answer; Part 2: Discussion Question (need 1.5-page answer)

Only use the pdf I provided as a reference! ! ! !

Your answers must be relevant to the textbook. The answers are easy to find under each chapter (pdf), just use some words and explanations from the textbook. Also, you must write down the page number (where the topic came from) after your answer.

ALL answers should from your own words or the textbook.

Learning Objectives Chapters 1-2

CH.1 What Is Strategy and Why Is It Important?

LO 1 What we mean by a company’s strategy.

LO 2 The concept of a sustainable competitive advantage.

LO 3 The five most basic strategic approaches for setting a company apart from rivals and winning a sustainable competitive advantage.

LO 4 That a company’s strategy tends to evolve because of changing circumstances and ongoing efforts by management to improve the strategy.

LO 5 Why it is important for a company to have a viable business model that outlines the company’s customer value proposition and its profit formula.

LO 6 The three tests of a winning strategy.

CH. 2 Charting a Company’s Direction Its Vision, Mission, Objectives, and Strategy

LO 1 Why it is critical for company managers to have a clear strategic vision of where a company needs to head.

LO 2 The importance of setting both strategic and financial objectives.

LO 3 Why the strategic initiatives taken at various organizational levels must be tightly coordinated to achieve companywide performance targets.

LO 4 What a company must do to achieve operating excellence and to execute its strategy proficiently.

LO 5 The role and responsibility of a company’s board of directors in overseeing the strategic management process.

Discussion Question (CH 1-2) (need 0.5-page answer)

Defend the need for clear operating policies in an organization and include in your discussion how “organizational practices” sometimes supersede the “written policies” of an organization. Describe how this might hinder the implementation of a strategic goal.

tho32789_ch01_001-017.indd 2 10/11/16 07:45 PM


What Is
and Why Is
It Important?

Learning Objectives


LO 1 What we mean by a company’s strategy.

LO 2 The concept of a sustainable competitive advantage.

LO 3 The five most basic strategic approaches for setting a company apart from rivals and
winning a sustainable competitive advantage.

LO 4 That a company’s strategy tends to evolve because of changing circumstances and
ongoing efforts by management to improve the strategy.

LO 5 Why it is important for a company to have a viable business model that outlines the
company’s customer value proposition and its profit formula.

LO 6 The three tests of a winning strategy.

© Fanatic Studio/Getty Images

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Strategy means making clear-cut choices about how to

Jack Welch—Former CEO of General Electric

I believe that people make their own luck by great
preparation and good strategy.

Jack Canfield—Corporate trainer and entrepreneur

The underlying principles of strategy are enduring,
regardless of technology or the pace of change.

Michael Porter—Professor and consultant

According to The Economist, a leading publication
on business, economics, and international affairs,
“In business, strategy is king. Leadership and hard
work are all very well and luck is mighty useful, but
it is strategy that makes or breaks a firm.”1 Luck and
circumstance can explain why some companies are
blessed with initial, short-lived success. But only
a well-crafted, well-executed, constantly evolving
strategy can explain why an elite set of companies
somehow manage to rise to the top and stay there,
year after year, pleasing their customers, share-
holders, and other stakeholders alike in the pro-
cess. Companies such as Apple, Disney, Microsoft,
Alphabet (parent company of Google), Berkshire
Hathaway, General Electric, and Amazon come to
mind—but long-lived success is not just the prov-
ince of U.S. companies. Diverse kinds of com-
panies, both large and small, from many different
countries have been able to sustain strong perfor-
mance records, including Korea’s Samsung (in elec-
tronics), the United Kingdom’s HSBC (in banking),

Dubai’s Emirates Airlines, Switzerland’s Swatch
Group (in watches and luxury jewelry), China Mobile
(in telecommunications), and India’s Tata Steel.

In this opening chapter, we define the concept of
strategy and describe its many facets. We explain
what is meant by a competitive advantage, dis-
cuss the relationship between a company’s strat-
egy and its business model, and introduce you to
the kinds of competitive strategies that can give a
company an advantage over rivals in attracting cus-
tomers and earning above-average profits. We look
at what sets a winning strategy apart from others
and why the caliber of a company’s strategy deter-
mines whether the company will enjoy a competi-
tive advantage over other firms. By the end of this
chapter, you will have a clear idea of why the tasks
of crafting and executing strategy are core man-
agement functions and why excellent execution of
an excellent strategy is the most reliable recipe for
turning a company into a standout performer over
the long term.

A company’s strategy is the set of actions that its managers take to outperform the
company’s competitors and achieve superior profitability. The objective of a well-
crafted strategy is not merely temporary competitive success and profits in the short
run, but rather the sort of lasting success that can support growth and secure the


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4 PART 1 Concepts and Techniques for Crafting and Executing Strategy

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Strategy is about
competing differently
from rivals—doing what
competitors don’t do or,
even better, doing what
they can’t do!

LO 2

The concept of a
competitive advantage.


A company’s strategy
is the set of actions that
its managers take to
outperform the company’s
competitors and achieve
superior profitability.

LO 1

What we mean by a
company’s strategy.

company’s future over the long term. Achieving this entails making a managerial
commitment to a coherent array of well-considered choices about how to compete.2
These include:

· How to position the company in the marketplace.
· How to attract customers.
· How to compete against rivals.
· How to achieve the company’s performance targets.
· How to capitalize on opportunities to grow the business.
· How to respond to changing economic and market conditions.

In most industries, companies have considerable freedom in choosing the hows of
strategy.3 Some companies strive to achieve lower costs than rivals, while others aim
for product superiority or more personalized customer service dimensions that rivals
cannot match. Some companies opt for wide product lines, while others concentrate
their energies on a narrow product lineup. Some deliberately confine their operations
to local or regional markets; others opt to compete nationally, internationally (several
countries), or globally (all or most of the major country markets worldwide).

Strategy Is about Competing Differently
Mimicking the strategies of successful industry rivals—with either copycat product
offerings or maneuvers to stake out the same market position—rarely works. Rather,
every company’s strategy needs to have some distinctive element that draws in customers
and provides a competitive edge. Strategy, at its essence, is about competing differently—
doing what rival firms don’t do or what rival firms can’t do.4 This does not mean that
the key elements of a company’s strategy have to be 100 percent different, but rather that
they must differ in at least some important respects. A strategy stands a better chance of
succeeding when it is predicated on actions, business approaches, and competitive moves
aimed at (1) appealing to buyers in ways that set a company apart from its rivals and
(2) staking out a market position that is not crowded with strong competitors.

A company’s strategy provides direction and guidance, in terms of not only
what the company should do but also what it should not do. Knowing what not to
do can be as important as knowing what to do, strategically. At best, making the
wrong strategic moves will prove a distraction and a waste of company resources.
At worst, it can bring about unintended long-term consequences that put the com-
pany’s very survival at risk.

Figure 1.1 illustrates the broad types of actions and approaches that often char-
acterize a company’s strategy in a particular business or industry. For a more con-

crete example of the specific actions constituting a firm’s strategy, see Illustration
Capsule 1.1 describing Starbucks’s strategy in the specialty coffee market.

Strategy and the Quest for Competitive Advantage
The heart and soul of any strategy are the actions in the marketplace that managers are
taking to gain a competitive advantage over rivals. A company achieves a competitive
advantage whenever it has some type of edge over rivals in attracting buyers and cop-
ing with competitive forces. There are many routes to competitive advantage, but they
all involve either giving buyers what they perceive as superior value compared to the
offerings of rival sellers or giving buyers the same value as others at a lower cost to the
firm. Superior value can mean a good product at a lower price, a superior product that

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CHAPTER 1 What Is Strategy and Why Is It Important? 5

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FIGURE 1.1 Identifying a Company’s Strategy—What to Look For

Actions to strengthen
competitiveness via
strategic alliances
and collaborative


Actions to strengthen
market standing and

by acquiring or merging
with other companies

Actions to gain sales
and market share

with lower
prices based on

lower costs

Actions to capture emerging
market opportunities and
defend against external

threats to the company’s
business prospects

Actions and approaches
used in managing
R&D, production,

sales and marketing,
finance, and other

key activities

Actions to enter new
product or geographic

markets or to exit existing

Actions to upgrade, build,
or acquire competitively
important resources and





Actions to strengthen
the firm’s bargaining

position with suppliers,
distributors, and others

Actions to gain sales and
market share via more

performance features, more
appealing design, better

quality or customer service,
wider product selection,

or other such actions

is worth paying more for, or a best-value offering that represents an attractive combina-
tion of price, features, quality, service, and other attributes. Delivering superior value or
delivering value more efficiently—whatever form it takes—nearly always requires per-
forming value chain activities differently than rivals and building capabilities that are
not readily matched. In Illustration Capsule 1.1, it’s evident that Starbucks has gained
a competitive advantage over its rivals in the coffee shop industry through its efforts to
create an upscale experience for coffee drinkers by catering to individualized tastes,
enhancing the atmosphere and comfort of the shops, and delivering a premium product

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Since its founding in 1985 as a modest nine-store opera-
tion in Seattle, Washington, Starbucks had become the
premier roaster and retailer of specialty coffees in the
world, with nearly 23,000 store locations as of Octo-
ber 2015. In fiscal 2015, its annual sales were expected
to exceed $19 billion—an all-time high for revenues and
net earnings. The key elements of Starbucks’s strategy
in the coffeehouse industry included:

• Train “baristas” to serve a wide variety of specialty cof-
fee drinks that allow customers to satisfy their individual
preferences in a customized way. Starbucks essentially
brought specialty coffees, such as cappuccinos, lattes,
and macchiatos, to the mass market in the United
States, encouraging customers to personalize their
coffee-drinking habits. Requests for such items as an
“Iced Grande Hazelnut Macchiato with Soy Milk, and no
Hazelnut Drizzle” could be served up quickly with con-
sistent quality.

• Emphasize store ambience and elevation of the cus-
tomer experience at Starbucks stores. Starbucks’s
management viewed each store as a billboard for the
company and as a contributor to building the compa-
ny’s brand and image. Each detail was scrutinized to
enhance the mood and ambience of the store to make
sure everything signaled “best-of-class” and reflected
the personality of the community and the neighbor-
hood. The thesis was “everything mattered.” The com-
pany went to great lengths to make sure the store
fixtures, the merchandise displays, the artwork, the
music, and the aromas all blended to create an inviting
environment that evoked the romance of coffee and
signaled the company’s passion for coffee. Free Wi-Fi
drew those who needed a comfortable place to work
while they had their coffee.

• Purchase and roast only top-quality coffee beans. The
company purchased only the highest-quality Ara-
bica beans and carefully roasted coffee to exacting
standards of quality and flavor. Starbucks did not use
chemicals or artificial flavors when preparing its roasted

• Foster commitment to corporate responsibility. Starbucks
was protective of the environment and contributed posi-
tively to the communities where Starbucks stores were
located. In addition, Starbucks promoted fair trade prac-
tices and paid above-market prices for coffee beans to
provide its growers and suppliers with sufficient funding
to sustain their operations and provide for their families.

• Expand the number of Starbucks stores domestically
and internationally. Starbucks operated stores in high-
traffic, high-visibility locations in the United States and
abroad. The company’s ability to vary store size and for-
mat made it possible to locate stores in settings such
as downtown and suburban shopping areas, office
buildings, and university campuses. The company also
focused on making Starbucks a global brand, expanding
its reach to more than 65 countries in 2015.

• Broaden and periodically refresh in-store product offer-
ings. Non-coffee products by Starbucks included teas,
fresh pastries and other food items, candy, juice drinks,
music CDs, and coffee mugs and accessories.

• Fully exploit the growing power of the Starbucks name
and brand image with out-of-store sales. Starbucks’s
Consumer Packaged Goods division included domes-
tic and international sales of Frappuccino, coffee ice
creams, and Starbucks coffees.

Starbucks’s Strategy in the
Coffeehouse Market

© Craig Warga/Bloomberg via Getty Im-

Sources: Company documents, 10-Ks, and information posted on Starbucks’s website.

produced under environmentally sound fair trade practices. By differentiating itself in
this manner from other coffee purveyors, Starbucks has been able to charge prices for
its coffee that are well above those of its rivals and far exceed the low cost of its inputs.
Its expansion policies have allowed the company to make it easy for customers to find a
Starbucks shop almost anywhere, further enhancing the brand and cementing customer
loyalty. A creative distinctive strategy such as that used by Starbucks is a company’s

© Craig Warga/Bloomberg via Getty Images

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CHAPTER 1 What Is Strategy and Why Is It Important? 7

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most reliable ticket for developing a competitive advantage over its rivals. If a strategy
is not distinctive, then there can be no competitive advantage, since no firm would be
meeting customer needs better or operating more efficiently than any other.

If a company’s competitive edge holds promise for being sustainable (as opposed
to just temporary), then so much the better for both the strategy and the company’s
future profitability. What makes a competitive advantage sustainable (or durable),
as opposed to temporary, are elements of the strategy that give buyers lasting rea-
sons to prefer a company’s products or services over those of competitors—reasons
that competitors are unable to nullify or overcome despite their best efforts. In the
case of Starbucks, the company’s unparalleled name recognition, its reputation for
high-quality specialty coffees served in a comfortable, inviting atmosphere, and the
accessibility of the shops make it difficult for competitors to weaken or overcome
Starbucks’s competitive advantage. Not only has Starbucks’s strategy provided the
company with a sustainable competitive advantage, but it has made Starbucks one
of the most admired companies on the planet.

Five of the most frequently used and dependable strategic approaches to setting
a company apart from rivals, building strong customer loyalty, and winning a com-
petitive advantage are:
1. A low-cost provider strategy—achieving a cost-based advantage over rivals.

Walmart and Southwest Airlines have earned strong market positions because
of the low-cost advantages they have achieved over their rivals. Low-cost pro-
vider strategies can produce a durable competitive edge when rivals find it hard to
match the low-cost leader’s approach to driving costs out of the business.

2. A broad differentiation strategy—seeking to differentiate the company’s product
or service from that of rivals in ways that will appeal to a broad spectrum of
buyers. Successful adopters of differentiation strategies include Apple (innova-
tive products), Johnson & Johnson in baby products (product reliability), LVMH
(luxury and prestige), and BMW (engineering design and performance). One way
to sustain this type of competitive advantage is to be sufficiently innovative to
thwart the efforts of clever rivals to copy or closely imitate the product offering.

3. A focused low-cost strategy—concentrating on a narrow buyer segment (or market
niche) and outcompeting rivals by having lower costs and thus being able to serve
niche members at a lower price. Private-label manufacturers of food, health and
beauty products, and nutritional supplements use their low-cost advantage to offer
supermarket buyers lower prices than those demanded by producers of branded

4. A focused differentiation strategy—concentrating on a narrow buyer segment (or
market niche) and outcompeting rivals by offering buyers customized attributes
that meet their specialized needs and tastes better than rivals’ products. Lulule-
mon, for example, specializes in high-quality yoga clothing and the like, attract-
ing a devoted set of buyers in the process. Jiffy Lube International in quick oil
changes, McAfee in virus protection software, and The Weather Channel in cable
TV provide some other examples of this strategy.

5. A best-cost provider strategy—giving customers more value for the money by
satisfying their expectations on key quality features, performance, and/or service
attributes while beating their price expectations. This approach is a hybrid strat-
egy that blends elements of low-cost provider and differentiation strategies; the
aim is to have lower costs than rivals while simultaneously offering better dif-
ferentiating attributes. Target is an example of a company that is known for its hip
product design (a reputation it built by featuring limited edition lines by designers


A company achieves a
competitive advantage
when it provides buyers
with superior value
compared to rival sellers or
offers the same value at a
lower cost to the firm. The
advantage is sustainable
if it persists despite the
best efforts of competitors
to match or surpass this

LO 3

The five most basic
strategic approaches
for setting a company
apart from rivals and
winning a sustainable
competitive advantage.

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such as Jason Wu), as well as a more appealing shopping ambience for discount
store shoppers. Its dual focus on low costs as well as differentiation shows how a
best-cost provider strategy can offer customers great value for the money.

Winning a sustainable competitive edge over rivals with any of the preceding five
strategies generally hinges as much on building competitively valuable expertise and
capabilities that rivals cannot readily match as it does on having a distinctive product
offering. Clever rivals can nearly always copy the attributes of a popular product or
service, but for rivals to match the experience, know-how, and specialized capabilities
that a company has developed and perfected over a long period of time is substan-
tially harder to do and takes much longer. FedEx, for example, has superior capabili-
ties in next-day delivery of small packages, while Apple has demonstrated impressive
product innovation capabilities in digital music players, smartphones, and e-readers.
Hyundai has become the world’s fastest-growing automaker as a result of its advanced
manufacturing processes and unparalleled quality control systems. Capabilities such
as these have been hard for competitors to imitate or best.

Why a Company’s Strategy Evolves over Time
The appeal of a strategy that yields a sustainable competitive advantage is that it offers
the potential for an enduring edge over rivals. However, managers of every company
must be willing and ready to modify the strategy in response to changing market condi-
tions, advancing technology, unexpected moves by competitors, shifting buyer needs,
emerging market opportunities, and new ideas for improving the strategy. Most of
the time, a company’s strategy evolves incrementally as management fine-tunes vari-
ous pieces of the strategy and adjusts the strategy in response to unfolding events.5
However, on occasion, major strategy shifts are called for, such as when the strategy
is clearly failing or when industry conditions change in dramatic ways. Industry envi-
ronments characterized by high-velocity change require companies to repeatedly adapt
their strategies.6 For example, companies in industries with rapid-fire advances in tech-
nology like medical equipment, shale fracking, and smartphones often find it essential
to adjust key elements of their strategies several times a year, sometimes even finding it

necessary to “reinvent” their approach to providing value to their customers.
Regardless of whether a company’s strategy changes gradually or swiftly, the

important point is that the task of crafting strategy is not a one-time event but
always a work in progress. Adapting to new conditions and constantly evaluating
what is working well enough to continue and what needs to be improved are nor-
mal parts of the strategy-making process, resulting in an evolving strategy.7

A Company’s Strategy Is Partly Proactive and
Partly Reactive
The evolving nature of a company’s strategy means that the typical company strategy
is a blend of (1) proactive, planned initiatives to improve the company’s financial
performance and secure a competitive edge and (2) reactive responses to unantici-
pated developments and fresh market conditions. The biggest portion of a company’s
current strategy flows from previously initiated actions that have proven themselves
in the marketplace and newly launched initiatives aimed at edging out rivals and
boosting financial performance. This part of management’s action plan for running
the company is its deliberate strategy, consisting of proactive strategy elements that

LO 4

A company’s strategy
tends to evolve
because of changing
circumstances and
ongoing efforts by
management to
improve the strategy.

Changing circumstances
and ongoing management
efforts to improve the
strategy cause a company’s
strategy to evolve over
time—a condition that
makes the task of crafting
strategy a work in progress,
not a one-time event.

A company’s strategy
is shaped partly by
management analysis and
choice and partly by the
necessity of adapting and
learning by doing.

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are both planned and realized as planned (while other planned strategy ele-
ments may not work out and are abandoned in consequence)—see Figure 1.2.8

But managers must always be willing to supplement or modify the proac-
tive strategy elements with as-needed reactions to unanticipated conditions.
Inevitably, there will be occasions when market and competitive conditions
take an unexpected turn that calls for some kind of strategic reaction. Hence,
a portion of a company’s strategy is always developed on the fly, coming as
a response to fresh strategic maneuvers on the part of rival firms, unexpected
shifts in customer requirements, fast-changing technological developments,
newly appearing market opportunities, a changing political or economic cli-
mate, or other unanticipated happenings in the surrounding environment.
These adaptive strategy adjustments make up the firm’s emergent strategy.
A company’s strategy in toto (its realized strategy) thus tends to be a combina-
tion of proactive and reactive elements, with certain strategy elements being abandoned
because they have become obsolete or ineffective. A company’s realized strategy can be
observed in the pattern of its actions over time, which is a far better indicator than any
of its strategic plans on paper or any public pronouncements about its strategy.

FIGURE 1.2 A Company’s Strategy Is a Blend of Proactive Initiatives
and Reactive Adjustments

Deliberate Strategy
(Proactive Strategy Elements)

Current (or

strategy elements

New strategy elements that emerge
as managers react adaptively to

changing circumstances

New planned initiatives plus
ongoing strategy elements

continued from prior periods

Emergent Strategy
(Reactive Strategy Elements)


A company’s deliberate
strategy consists of
proactive strategy
elements that are planned;
its emergent strategy
consists of reactive strategy
elements that emerge
as changing conditions

At the core of every sound strategy is the company’s business model. A business
model is management’s blueprint for delivering a valuable product or service to cus-
tomers in a manner that will generate revenues sufficient to cover costs and yield an
attractive profit.9 The two elements of a company’s business model are (1) its customer
value proposition and (2) its profit formula. The customer value proposition lays out


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LO 5

Why it is important for
a company to have
a viable business
model that outlines
the company’s
customer value
proposition and its
profit formula.

FIGURE 1. 3 The Business Model and the Value-Price-Cost Framework

Customer Value (V)

Customer’s share
(Customer Value

Product Price (P)

Per-Unit Cost (C)

Firm’s share
(Profit Formula)

the company’s approach to satisfying buyer wants and needs at a price customers will
consider a good value. The profit formula describes the company’s approach to deter-
mining a cost structure that will allow for acceptable profits, given the pricing tied to
its customer value proposition. Figure 1.3 illustrates the elements of the business model
in terms of what is known as the value-price-cost framework.10 As the framework
indicates, the customer value proposition can be expressed as V – P, which is essen-
tially the customers’ perception of how much value they are getting for the money. The
profit formula, on a per-unit basis, can be expressed as P – C. Plainly, from a customer
perspective, the greater the value delivered (V) and the lower the price (P), the more
attractive is the company’s value proposition. On the other hand, the lower the costs
(C), given the customer value proposition (V – P), the greater the ability of the business
model to be a moneymaker. Thus the profit formula reveals how efficiently a com-
pany can meet customer wants and needs and deliver on the value proposition. The
nitty-gritty issue surrounding a company’s business model is whether it can execute its
customer value proposition profitably. Just because company managers have crafted a
strategy for competing and running the business does not automatically mean that the

strategy will lead to profitability—it may or it may not.
Aircraft engine manufacturer Rolls-Royce employs an innovative “power-by-

the-hour” business model that charges airlines leasing fees for engine use, main-
tenance, and repairs based on actual hours flown. The company retains ownership
of the engines and is able to minimize engine maintenance costs through the use
of sophisticated sensors that optimize maintenance and repair schedules. Gillette’s
business model in razor blades involves selling a “master product”—the razor—at
an attractively low price and then making money on repeat purchases of razor blades
that can be produced cheaply and sold at high profit margins. Printer manufactur-
ers like Hewlett-Packard, Canon, and Epson pursue much the same business model
as Gillette—selling printers at a low (virtually break-even) price and making large
profit margins on the repeat purchases of ink cartridges and other printer supplies.
McDonald’s invented the business model for fast food—providing value to custom-

ers in the form of economical quick-service meals at clean, convenient locations. Its
profit formula involves such elements as standardized cost-efficient store design, strin-
gent specifications for ingredients, detailed operating procedures for each unit, sizable
investment in human resources and training, and heavy reliance on advertising and in-
store promotions to drive volume. Illustration Capsule 1.2 describes three contrasting
business models in radio broadcasting.


A company’s business
model sets forth the
logic for how its strategy
will create value for
customers and at the same
time generate revenues
sufficient to cover costs and
realize a profit.

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