August 27, 2016

Evaluating a Company’s External Environment - Summary and Key Points

Crafting and Executing Strategy: Concepts and Readings


By Arthur Thompson and A. J. Strickland III and John Gamble
Copyright: 2016, Mcgraw Hill
Publication Date: January 19, 2015

Observing, studying and analyzing company's external situation involves probing for answers to the following seven questions:

Does the industry offer attractive opportunities for growth? 

Identifying the industry's basic economic features and growth potential sets the stage for the analysis to come, since they play an important role in determining an industry's potential for providing sales revenue and profits. Industries differ significantly on such factors as market size and growth rate, geographic scope, life-cycle stage, the number and size of competitors,  industry capacity, and other conditions that describe the industry's demand-supply balance and opportunities for growth.

What kinds of competitive forces are industry members facing, and how strong is each force? 

This analysis examines: (1) competitive pressures exerted by industry rivals, (2) competitive pressures created by the sellers of substitutes, (3) Threat of new entrants into the market, (4) supplier bargaining power, and (5) buyer bargaining power. The nature and strength of the competitive pressures have to be examined force by force and their collective strength must be evaluated. Porter's five-forces model forces strategy makers to assess competitive forces and come out with ideas of capturing or growing market share in the presence of the competitive forces. How do you neutralize the competitive force and gain your market share and profit is determined in the competitive force analysis.

What factors are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability? 

Industry and competitive conditions change because due to industry's macro-environment and changes originating within the industry. Such changes include: increasing globalization, changing buyer demographics, technological change, Internet-expansion, product and marketing innovations, entry or exit of major firms, diffusion of know-how, efficiency improvements in adjacent markets, reductions in uncertainty and business risk, government policy changes, and changing societal factors. Once an industry's change drivers have been identified, the analytical task becomes one of determining  the effect on of them industry growth and competition.

Are the change drivers causing demand for the industry's product to increase or decrease?
Are they acting to make competition more or less intense?
Will they lead to higher or lower industry profitability?

What market positions do industry rivals occupy—who is strongly positioned and who is not?

Strategic group mapping is a valuable tool for understanding the similarities, differences, strengths, and weaknesses inherent in the market positions of rival companies. Rivals in the same or nearby strategic groups are close competitors, whereas companies in distant strategic groups usually pose little or no immediate threat. The profit potential of different strategic groups varies due to strengths and weaknesses in each group’s market position. Often, industry competitive pressures and change drivers favor some strategic groups and hurt others. A strategic group analysis can be done to select the most profitable and suitable strategic group in which the company wants to enter, or even shift. The second use is that of creating a competitive strategy within the strategic group.

What strategic moves are rivals likely to make next? 

Competitor intelligence is collected to  anticipate their actions and take effective counteraction. Managers have to take rivals' probable actions into account in designing their own company's best course of action. Managers who fail to study competitors and know their strategies, risk being caught unprepared by the strategic moves of rivals.

What are the key factors for competitive success? 

An industry's key success factors (KSFs) are the strategy elements, product attributes,   and capabilities that all industry members must have in order to survive and prosper in the industry. KSFs vary by industry and may vary over time as well.

For any industry, KSFs can be deduced by answering three basic questions:

(1)Customer related - On what basis do buyers of the industry's product choose between the competing brands of sellers,

(2) Competition related - what resources and competitive capabilities must a company have to be competitively successful, and

(3) Weaknesses -  what shortcomings are almost certain to put a company at a significant competitive disadvantage?

Correctly diagnosing an industry's (KSFs) raises a company's chances of crafting a sound strategy.

What is the outlook for the company in the industry with the present strategy?  

Analysis of economy and industry analysis has to be summed to provide a forecast of performance of the company with the present strategy.  Clearly, insightful diagnosis of a company's external situation is an essential first step in crafting strategies that are well matched to industry and competitive conditions.

To do cutting-edge strategic thinking about the external environment, managers have to use analytical tools to answer the relevant questions.

Analytical Tools

PESTEL Analysis

Competitive Weapons for Increasing Market Share

Discounts, Clearance Sales
Offering discounts through coupons
Improving warranties
Offering attractive financing terms
Building a bigger and better dealer network
Increasing Advertising
Innovating and increasing product features and benefits
Innovating and improving quality so that external failures are minimum
Innovating and reducing cost and decreasing the price
Increasing the number packsizes, flavours, styles etc. so that customer gets a bigger choice
Increasing the customisation of the product or service

What weapons are being used by competitors?

Charting a Company’s Direction: Its Vision, Mission, Objectives, and Strategy - Summary and Important Points

Crafting and Executing Strategy: Concepts and Readings


By Arthur Thompson and A. J. Strickland III and John Gamble
Copyright: 2016, Mcgraw Hill
Publication Date: January 19, 2015

The strategic management process consists of five interrelated and integrated stages:

Mission defines the company's current purpose.  A set of core values guide the pursuit of the mission. Strategic vision defines the company's future in pursuit of the mission.  These strategic plans are the  managerial decisions that provide direction for the company. The strategic vision has to envisage good performance at the company level so that associates in the company can be given good rewards. A strategic vision that promises performance and rewards motivates and inspires company personnel, aligns and guides actions throughout the organization. The mission, values and vision are to be communicated to all stakeholders. They are the  management's aspirations for the company's future.

Objectives are to be derived from  the mission and vision. The objectives are further converted into performance targets which are used  as yardsticks for measuring the company's performance. Objectives need to spell out how much of what kind of performance by when. Objectives are required in many areas. They also have to be spelt out in relation to all stakeholders. But strategic objectives and financial objectives derived from strategic objectives in business plan are important. A balanced-scorecard approach provides a popular method for visualizing financial objectives and objectives in other areas.

Crafting strategy calls for strategic analysis. Strategic analysis has an external component and an internal component. Strategies created by top management are mostly top-down,  but  require two-way interaction between different types of managers. In large, diversified companies, there are four levels of strategy, each of which involves a corresponding level of management: corporate strategy (multibusiness strategy), business strategy (strategy for individual businesses that compete in a single industry), functional-area strategies within each business (e.g., marketing, R&D, logistics), and operating strategies (for key operating units, such as manufacturing plants). Thus, strategy making is an inclusive, collaborative activity involving not only senior company executives but also the heads of major business divisions, functional-area managers, and operating managers on the frontlines. The larger and more diverse the operations of an enterprise, the more points of strategic initiative it has and the more levels of management that play a significant strategy-making role.

Managing the execution of strategy is an operations-oriented activity in both marketing and sales and product related departments aimed at shaping the performance of business activities in a strategy-supportive manner. Management's handling of the strategy implementation process can be considered successful if things go efficiently, and the company meets or beats its strategic and financial performance targets,

As a part of strategy execution, developments in the external environment and internal environment are to be monitored, company performance is to be monitored, and corrective adjustments are to be done in light of actual experience, changing conditions, new ideas, and new opportunities.

The sum of a company's strategic vision and mission, objectives, and strategy constitutes a strategic plan for coping with industry conditions, outcompeting rivals, meeting objectives, and making progress toward the strategic vision. A company with an unwavering commitment to execute its strategic plan is said to have strategic intent.

Boards of directors have to play a vigilant role in overseeing management's handling of a company's strategy-making, strategy executing process. This consists of  four important activities: (1) Critically appraise the company's strategic plan and strategy execution, (2) evaluate the caliber of senior executives' strategic leadership skills, (3) institute a compensation plan for top executives that rewards them for actions and results that serve stakeholder interests— especially those of shareholders, and (4) ensure that the company issues accurate financial reports and has adequate financial controls. Board of directors use financial reports to assess the performance of top management of the company and hence they have to ensure that the financial accounts are properly maintained and financial statement are made to report the performance accurately.

What Is Strategy and Why Is It Important? - Summary and Important Points

What Is Strategy and Why Is It Important?

Chapter 1 of
Crafting and Executing Strategy: Concepts and Readings


By Arthur Thompson and A. J. Strickland III and John Gamble
Copyright: 2016, Mcgraw Hill
Publication Date: January 19, 2015

The tasks of crafting and executing company strategies important for a business enterprise to win in the marketplace by getting an economic market share and produce and deliver the goods or services demanded at profit to the organization.

A company's strategy is the plan management is using to identify a favorable market position, conduct its operations, attract and please customers, compete successfully, and achieve the desired performance targets.

The central thrust of a company's strategy is undertaking marketing and operations moves to build and strengthen the company's long-term competitive position and financial performance by undertaking value chain activities differently from rivals so that customers are attracted to its offerings and thus provide a  sustainable competitive advantage over competitors.

A company achieves a sustainable competitive advantage when it can meet customer needs more effectively or efficiently (at lower cost and price) than rivals and when the basis for this is durable, despite the best efforts of competitors to match or surpass this advantage.

A company's strategy typically evolves over time, emerging from a blend of (1) proactive and deliberate actions on the part of company managers to improve the strategy and (2) reactive, as-needed adaptive responses to unanticipated developments and actions by customers and competitors.

A company's business model is management's estimate of revenues and costs that indicates  profit. It contains two crucial elements: (1) the customer value proposition —a plan for satisfying customer wants and needs at a price customers will consider good value, and (2) the profit formula —a plan for a cost structure that will enable the company to deliver the customer value proposition profitably. In effect, a company's business model sets forth the economic logic for making money in a particular business, given the company's current strategy. Both demand estimates and cost estimates have to satisfy the theories of economics in the area of consumer or business demand and production/productivity economics.

A winning strategy will pass three tests: (1) Fit (external, internal, and dynamic consistency - It satisfies all stakeholders and all constraints of the company resources and market demand), (2) Competitive Advantage (durable competitive advantage), and (3) Performance (outstanding financial and market performance).

Crafting and executing strategy are core management functions of top management of a company. How well a company performs and the degree of market success it enjoys are directly attributable to the caliber of its strategy and the strategy is execution of the strategy. Strategy is a plan and is the primary step of top management. Execution phase consists of the next four steps of management organizing, resourcing, execution (allocation or resources, directing and leadership) and control.  

Readings in Strategic Management - Bibliography

Readings Included in in Crafting and Executing Strategy 17 Edition

1 . Can You Say What Your Strategy Is?
David J. Collis, Harvard Business School
Michael G. Rukstad, Harvard Business School
lL. Enabling Bold Visions
Douglas A. Ready, London Business School
Jay A. Conger, London Business School
3 . Location, Location: The Geography of Industry Clusters
Holger Schiele, Leibniz University
4 . Identifying Valuable Resources
Cliff Bowman, Cranfield School of Management
Veronique Ambrosini, Cranfield School of Management
5 . The Battle of the Value Chains: New Specialized versus Old
Gillis Jonk, A. T. Kearney
Martin Handschuh, A. T. Kearney
Sandra Niewiem, A. T. Kearney
6 . Playing Hardball: Why Strategy Still Matters
George Stalk, The Boston Consulting Group
7. Hitting Back: Strategic Responses to Low-Cost Rivals
Jim Morehouse, A. T. Kearney
Bob O 'Meara, A. T. Kearney
Christian Hagen, A. T. Kearney
Todd Huseby, A. T. Kearney
8 . Limited-Potential Niche or Prospective Market Foothold? Five Tests
Ken Hutt, Deloitte Consulting
Ruben Gravieres, Deloitte Consulting
Betosini Chakraborty, Deloitte Consulting
9 . Value Innovation: A Leap into the Blue Ocean •
W. Chan Kim, INSEAD
Renee Mauborgne, INSEAD
10 . Racing to Be 2nd: Conquering the Industries of the Future
Costas Markides, London Business School
Paul A. Geroski, London Business School
11 . Globalization Is an Option, Not an Imperative. Or,
Why The World Is Not Flat
Pankaj Ghemawat, Harvard Business School
12 . The Challenge for Multinational Corporations in China: Think Local, Act Global
Seung Ho Park, Samsung Economic Reseawrch Institute
Wilfried R. Vanhonacker, HKUST Business School
13 . How to Win in Emerging Markets
Satish Shankar, Bain & Co.
Charles Ormiston, Bain & Co.
Nicolas Bloch, Bain & Co.
Robert Schaus, Bain & Co.
Vijay Vishwanath, Bain & Co.
14 . Why Is Synergy So Difficult in Mergers of Related Businesses?
Sayan Chatterjee, Case Western Reserve University
15 . Corporate Social Responsibility: Why Good People Behave Badly
in Organizations
Pratima Bansal, University of Western Ontario
Sonia Kandola, University of Western Ontario
16 . Competing Responsibly
Bert van de Ven, University ofTilburg
Ronald Jeurissen, Nyenrode Business University
17. The Secrets to Successful Strategy Execution
Gary L. Neilson, Booz & Company
Karla L. Martin, Booz & Company
Elizabeth Powers, Booz & Company
18 . Some Pros and Cons of Six Sigma: An Academic Perspective
Jiju Antony Caledonian Business School
19 . Linking Goals to Monetary Incentives
Edwin A. Locke, University of Maryland
20. The Seven Habits of Spectacularly Unsuccessful Executives
Sydney Finkelstein, Dartmouth College

Values of Business Schools

Melbourne Business School -  Mission, Vision & Values

We enable individuals and organisations to be global leaders through the creation, application and dissemination of business and economics knowledge.

Our aspiration is to become one of the leading global providers of business and economics education and research.
We aim to critically evaluate and influence policy design, corporate governance, and business practices to secure the best possible outcomes for our stakeholders and for the broader societies in which we operate.

We are a non-discriminatory learning community in which there is respect for our diverse backgrounds and interests and where there is a shared joy in learning and scholarship.
Rigour and relevance are the foundations of all that we do.
Integrity and ethical behaviour guide all of our actions, policies and decision making.
Openness and transparency characterise our organisational culture.
Academic freedom is paramount.

Olin Business School - Mission and Values

We live our mission everyday. Since our founding in 1917, Olin Business School has been guided by these words: Create knowledge. Inspire individuals. Transform business.

Core Values

Excellence: We have an unwavering commitment to excellence in all that we do, continually striving to provide the highest level of educational experience, learning opportunities and research.

Leadership: Olin cultivates a leadership mind-set, infusing students with both the value of acting responsibly and the desire to make an impact in whatever path they pursue.

Integrity: Our Midwestern heritage is the cornerstone of our character – we are honest, hard working, authentic, loyal and supportive.

Collaboration: Our culture fosters a collaborative community that creates innovative ideas, unique opportunities, and strong personal bonds.

Diversity: We embrace the diversity of individuals, cultures, ideas, and opinions for the richness it brings to our school.

The UNC Kenan-Flagler:  Core Values

The UNC Kenan-Flagler community lives by its core values: excellence, leadership, integrity, community and teamwork.


We, the members of the UNC Kenan-Flagler community, strive for the very highest standards in everything that we do. We challenge each other to produce important new knowledge at the leading edge of our disciplines, to create an intellectually rigorous learning environment and to show uncompromising dedication to those we serve.


Leadership Development: We offer the best, most comprehensive leadership program of any top business school.
UNC Kenan-Flagler Faculty: The thought leadership of UNC-Kenan Flagler professors is recognized in both academic and corporate circles and makes an impact on the practice of business. R.O.I. Magazine, a school publication, features UNC Kenan-Flagler experts.


We cultivate an environment of honesty, sincerity and trust in which we hold ourselves to the highest ethical standards. We believe integrity is the foundation of all moral character and is an essential trait for truly successful professional and personal lives.

Required Ethics Course: While other schools offer ethics courses as an elective, all UNC Kenan-Flagler MBAs take ethics during their first year as part of the required curriculum.
Graduate Honor Court: The business school joins the graduate and professional programs of law, dentistry, pharmacy and medicine with its own student-run honor court.


From its earliest days, UNC Chapel Hill has honored and cherished its special responsibility to serve the people of North Carolina. We at UNC Kenan-Flagler extend this notion of responsibility to include service to the nation and the world through research, teaching and community leadership.


We create at UNC Kenan-Flagler a unique atmosphere of collaboration, mutual support and genuine interest in each other's success. Our diverse mix of cultures, races and experiences provides a variety of perspectives and talents that, when united through teamwork, strengthens our ability to achieve our goals.

University of Leeds Business School - Mission - Values

Our Mission is to make an exceptional impact on business and society globally through leadership in research and teaching.

Professor Peter Moizer, Dean of Leeds University Business School

We Are International
Create knowledge. Make an impact.


To produce and disseminate research of world-class quality, within the School and through international partnerships, which increases knowledge, skills, understanding and impact.

Student education

To enable individuals to develop their academic potential, their employability, their global and cultural insight and their ethical awareness to enhance their potential to benefit business and society.

Building an Organization Capable of Good Strategy Execution - Summary

Crafting and Executing Strategy: Concepts and Readings
By Arthur Thompson and A. J. Strickland III and John Gamble
Copyright: 2016, Mcgraw Hill
Publication Date: January 19, 2015

Executing strategy is an operations-driven activity revolving around the management of people and business processes involving man-machine systems. The way for managers to start in implementing a new strategy is with a probing assessment of what the organization must do differently in the coming peridos to carry out the strategy successfully. This requires changes in the value chain that consists of number of activities. They should then determine how to make the necessary internal changes as rapidly as possible so that the strategy implementation process starts with focus on the new strategy.

All managers have strategy executing responsibility in their areas of authority, and all employees are active participants in the strategy execution process. Hence strategy needs to be communicated to all managers and their involvement in organization structure design has to be ensured.

The managerial tasks involved in the company's efforts to execute strategy: (1) Designing the new organization structure and staffing the organization well, (2) Acquiring the new resources required and  building the necessary organizational capabilities, (3) Finetuning a supportive organizational structure though feedback from all employees (4) allocating sufficient resources to each value chain activity, (5) instituting policies and procedures that support new strategy, (6) Implementing processes for continuous improvement of all value chain activities, (7) installing systems that enable effective and efficient company operations, (8) tying incentives to the achievement of desired targets, (9) Making efforts to bring into existence right corporate culture, and (10) exercising internal strategic leadership.

The two best signs of good strategy execution are whether a company is meeting or beating its performance targets and performing value chain activities in a manner that is conducive to companywide operating excellence. Shortfalls in performance signal weak strategy, weak execution, or both.

Building an organization capable of good strategy execution entails three types of organization-building actions:  (1) structuring the organization and work effort —instituting organizational arrangements that facilitate good strategy execution, deciding how much decision-making authority to delegate, and managing external relationships. (2) staffing the organization —assembling a talented management team, and recruiting and retaining employees with the needed experience, technical skills, and intellectual capital; and (3) building and strengthening core competencies and competitive capabilities —developing proficiencies in performing strategy-critical value chain activities and updating them to match changing market conditions and customer expectations;

Building new core competencies and competitive capabilities  can be approached in three ways: (1) developing capabilities internally, (2) acquiring capabilities through mergers and acquisitions, and (3) accessing capabilities via collaborative partnerships.

In building capabilities internally, the first step is to develop the ability to do something, through experimentation, active search for alternative solutions, and learning by trial and error. As experience grows and company personnel learn how to perform the activities consistently well and at an acceptable cost, the ability evolves into a tried-and-true capability. The process can be accelerated by making learning a more deliberate endeavor and providing the incentives that will motivate company personnel to achieve the desired ends. At the third level, the capability development concentrates of trying make it an above industry average capability in the industry so that it provides scope for above average profit earning.

As firms get better at executing their strategies, they develop capabilities in the domain of strategy execution. Superior strategy execution capabilities allow companies to get the most from their organizational resources and competitive capabilities. But excellence in strategy execution can also be a more direct source of competitive advantage, since more efficient and effective strategy execution can lower costs and permit firms to deliver more value to customers. Superior strategy execution capabilities are internal to a company and they are  hard to imitate and have no good substitutes. As such, they can be an important source of sustainable competitive advantage.

While strategy may be same, lasting competitive advantage can be gained through execution excellence.

Structuring the organization and organizing the work effort in a strategy supportive fashion has four aspects: (1) deciding which value chain activities to perform internally and which ones to outsource; (2) aligning the firm's organizational structure with its strategy; (3) deciding how much authority to centralize at the top and how much to delegate to down-the-line managers and employees; and (4) facilitating the necessary collaboration and coordination with external partners and strategic allies.

To align the firm's organizational structure with its strategy, it is important to make strategy-critical activities the main building blocks. There are four basic types of organizational structures: the simple structure, the functional structure, the multidivisional structure, and the matrix structure. Which is most appropriate depends on the firm's size, complexity, employee acceptance and strategy.

Crafting and Executing Strategy: Concepts and Readings -20th Edition - Thompson, Gamble and Strickland - Book Information

Crafting and Executing Strategy: Concepts and Readings


By Arthur Thompson and A. J. Strickland III and John Gamble
Copyright: 2016, Mcgraw Hill
Publication Date: January 19, 2015

Crafting and Executing Strategy: Concepts and Readings
Table of Contents 

PART 1 Concepts and Techniques for Crafting and Executing Strategy

Section A: Introduction and Overview
1 What Is Strategy and Why Is It Important?  Summary by NRao
2  Charting a Company’s Direction: Its Vision, Mission, Objectives, and Strategy - Smmary by NRao

Section B: Core Concepts and Analytical Tools
3 Evaluating a Company’s External Environment - Summary by NRao
4 Evaluating a Company’s Resources, Capabilities, and Competitiveness

Section C: Crafting a Strategy
5 The Five Generic Competitive Strategies
6 Strengthening a Company’s Competitive Position
7 Strategies for Competing in International Markets
8 Corporate Strategy
9 Ethics, Corporate Social Responsibility, Environmental Sustainability, and Strategy

Section D: Executing the Strategy
10 Building an Organization Capable of Good Strategy Execution
11 Managing Internal Operations
12 Corporate Culture and Leadership

PART 2 Readings in Crafting and Executing Strategy

Section A: What Is Strategy and How Is the Process of Crafting and Executing Strategy Managed?
1 The Perils of Bad Strategy
2 The Role of the Chief Strategy Officer
3 Managing the Strategy Journey
4 The Balanced Scorecard in China: Does It Work?

Section B: Crafting Strategy in Single-Business Companies
5 Competing in Network Markets: Can the Winner Take All?
6 BlackBerry Forgot to Manage the Ecosystem R-357 Dynamic Capabilities: Routines versus Entrepreneurial Action
8 Meta-SWOT: Introducing a New Strategic Planning Tool
9 Are You Ready for the Digital Value Chain?
10 Limits to Growing Customer Value: Being Squeezed Between the Past and the Future
11 Organizational Ambidexterity: Balancing Strategic Innovation and Competitive Strategy in the Age of Reinvention
12 Pioneering and First Mover Advantages: The Importance of Business Models
13 Adding Value through Offshoring

Section C: Crafting Strategy in International and Diversified Companies
14 Reverse Innovation: A Global Growth Strategy That Could Pre-empt Disruption at Home
15 How Emerging Giants Can Take on the World
16 Why Conglomerates Thrive (Outside the U.S.)
17 Diversification: Best Practices of the Leading Companies

Section D: Strategy, Ethics, Social Responsibility, and Sustainability
18 Pragmatic Business Ethics
19 Leaders as Stewards

Section E: Executing Strategy
20 Attract Top Talent
21 Building Superior Capabilities for Strategic Sourcing
22 How Collaboration Technologies Are Improving Process, Workforce, and Business Performance
23 The ROI of Employee Recognition
24 The Critical Few: Components of a Truly Effective Culture
25 How Strategists Lead