Solution Manual
Book Title
Strategic Management: Text and Cases 8th Edition

978-1259278211 Case 22 Solution Manual

December 22, 2019
Teaching Note: Case 22 – World Wrestling Entertainment
Case Objectives
1. To discuss corporate strategy choices and how to apply the concepts of innovation to a
firm in the entertainment industry.
2. To examine how tangible and intangible resources are tied to a firm’s success.
See the table below to determine where to use this case:
Chapter Use Key Concepts Additional Readings or
12: Managing
Innovation; scope of innovation;
See NOTE additional reading
6: Corporate-
Level Strategy
Corporate strategy; diversification;
synergy; related and unrelated
View a video link of WWE’s
3: Internal
Resource-based view of the firm Watch videos at the WWE
4: Intellectual
Intellectual and human capital;
View the NOTE to visit
Case Synopsis
World Wrestling Entertainment (WWE) announced on January 27, 2015, that its WWE
Network, which had been launched just 11 months earlier, had surpassed one million subscribers,
making it the fasting-growing digital subscription service. Vince McMahon had taken over a
small wrestling business from his father and built it into a large national business. For years, the
firm managed to show consistent growth by attracting more and more fans. In an effort to
diversify, in 1999, shortly after going public, WWE launched a eight-team football league called
In the years since that misstep, CEO Vince McMahon explored new avenues of growth and
turned pro wrestling into a perpetual traveling road show. WWE used wrestling’s increased
popularity to build up a stronger ad-supported Internet presence, where content can be watched
Regarding competition, the firm has had to face a challenge from mixed martial arts (MMA), a
growing form of combat sport that combines kickboxing and grappling. Because of its similarity
to wrestling, this new sport might pull away some of WWE’s fans. The question remained: could
WWE identify opportunities for further diversification and expansion to maintain its current
Teaching Plan
This can be a fun case. While not all students have seen a WWE wrestling match, there is usually
at least one fan in a class. This person’s enthusiasm seems to energize the room. Although the
focus is primarily on how to grow a business with an innovative business model, the importance
of identifying and leveraging both tangible and intangible resources is key to the discussion.
Therefore, this case can be positioned fairly early in the course to prepare students for the more
formal (and boring) corporate strategy discussions to follow.
Summary of Discussion Questions
Here is a list of the suggested discussion questions. You can decide which questions to assign,
and also which additional readings or exercises to include to augment each discussion. Refer
This case can start with an icebreaker. Ask students how many of them have seen a professional
wrestling match, and whether this was on TV or in person. Ask students who are fans of WWE
why they are fans. The answers may be more about the entertainment value, the story lines about
Here’s where a quick visit to the WWE website at http://www.wwe.com/worldwide/ and a look
at video highlights at http://www.youtube.com/user/WWEFanNation can get the class excited.
Before engaging in discussion, you might want to test student’s basic knowledge regarding the
Which statement is most true?
a. WWE used to own a football team.
b. WWE has a line of toys.
e. All these statements are true.
ANSWER: e. In 1999, shortly after going public, WWE launched an eight-team football league
called the XFL. WWE has a licensing agreement with toymaker Mattel to sell DVDs, video
Was WWE successful at exporting this very violent, very American content to the predominantly
Muslim countries of Egypt and UAE?
a. Yes
b. No
ANSWER: a. Over the past few years, WWE introduced live performances in six new countries,
Discussion Questions:
1. What corporate innovation strategies did Vince McMahon use to grow World Wrestling
2. What resources does WWE have and how valuable are they?
3. What are the future prospects for WWE? What should be done to expand or grow the
Discussion Questions and Responses
1. What corporate innovation strategies did Vince McMahon use to grow World Wrestling
Referencing Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship
Innovation involves using new knowledge to transform organizational processes or create
Some of challenges of innovation involve choosing when and how to continue to innovate, the
scope of future innovation and the pace, as well as whether or not to collaborate with innovation
Before proceeding, firms must first define the scope of the innovation efforts, and they must
ensure that their innovation efforts are not wasted on projects that are outside the firm’s domain
of interest. In defining the innovation scope, a firm should answer several questions:
How much will the innovation cost?
How likely is it to actually become commercially viable?
How much value will it add; that is, what will it be worth if it works?
What will be learned if it does not pan out?
Vince McMahon needs to make sure the above questions are answered before committing the
Vince took after a small wrestling operation and turned it into a large and growing national
business by taking several steps: he began to challenge the existing regional structure of the
He broke with established tradition by admitting to the public that wrestling matches were
scripted. He had the creative insight to use the storylines and characters to build up an audience
for his matches. Vince was good at applying this soap opera style to the wrestling business. Vince
Even though McMahon took risks, he also was quick to learn from his mistakes. Once he
Organizations must have the entrepreneurial orientation necessary to succeed in a new venture.
Students should assess the vision, dedication and drive, and commitment to excellence
Interestingly, Vince McMahon has exhibited each of these dimensions in making WWE what it is
today. In short, he has used his autonomy (first buying the firm from his father and then running
This link offers quotes from Vince McMahon discussing WWE’s rebranding in April of 2011 –
WWE will no longer stand for World Wrestling Entertainment. It will just be WWE, plain and
simple: http://articles.latimes.com/2011/apr/07/business/la-fi-ct-wwe-20110407
McMahon discusses several potential new WWE ventures, some of which may require them to
expand beyond their core, move them “beyond the wrestling mat.” However, as one analyst says,
“Clearly, their prospects in terms of growth are limited if they stick to their knitting.” Which of
these ventures offers the highest profit potential in your opinion? Which ones might be most
Referencing Chapter 6: Corporate-Level Strategy
Corporate strategy focuses discussion on the questions of what businesses a corporation should
compete in, and how the businesses should be managed so they can create “synergy” – creating
Diversification is the process of firms expanding their operations by entering new businesses.
When achieving synergy through diversification, a firm has two choices: related diversification
Vince’s efforts to diversify have not always been well thought out. He appears to have had
difficulty in following a path of related diversification. As the chapter in the text indicates,
related diversification enables a firm to benefit from horizontal relationships across different
WWE’s boldest effort at diversification in the form of XFL suffered from a lack of links to the
wrestling base. Football is already established as a spectator sport with its own rules and
procedures. Vince was not able to sufficiently differentiate his form of football from what had
The plans to push for more investments into television shows and motion pictures would draw
off some of the entertainment aspects of the wrestling operation. But these were very expensive
A question that should be raised is this: what effect has McMahon’s diversification effort had on
WWE? It is likely that the McMahon’s diversification efforts in the pasts (into the XFL and
other ventures) had taken the firm’s eyes off of its core business. During the time of significant
WWE faces growing competition from new sources, such as reality based television shows.
These shows attract the same demographic (the 12-34 age group) that watches WWE shows. The
When organizations grow, it’s important to be aware of possible detrimental managerial
behaviors that indicate managerial self-interest, such as egotism or growth for growth’s sake.
These can erode the creation of a firm’s value. Vince McMahon’s public persona appears to be
highly driven by his ego. His daughter, Stephanie, was heavily inserted into the character line-up
as both a wrestler and a good vs. evil figure in the continuing struggle for control between family
members (part of the story line). She is married to Triple H (Paul Levesque), one of the wrestling
superstars. Does this pose a problem for the firm’s future growth?
Stephanie McMahon Levesque is on the management team, as Chief Brand Officer. Her
husband, Paul Levesque, (Triple H) in turn, is the Executive Vice President for Talent and Live
Events. See the Governance website at http://corporate.wwe.com/governance/executive.jsp
2. What resources does WWE have and how valuable are they?
Referencing Chapter 3: Analyzing the Internal Environment
It’s important to consider the concept of the resource-based view of the firm, and the three key
types of resources: tangible resources, intangible resources, and organizational capabilities that
can help a firm sustain a competitive advantage. WWE’s profile might look like this:
Tangible Resources:
Financial Resources: High cash flow, low capital expenditures, almost no debt
Technological: Rights to characters – VERY VALUABLE
Intangible Resources:
Human: Wrestlers with acting capabilities, good script writers
Innovation: Capabilities for developing compelling characters and storylines – VERY
Reputation: Strong brand name, relationships with sporting arenas, relationships with television
In the context of where WWE competes, these resources provide a valuable competitive
advantage to WWE. The characters created by WWE (“Stone Cold” Steve Austin, Triple-H, etc.)
differentiate WWEs offerings from those of the competition. The characters also provide
continuity in the sense the audience is interested in knowing what is happening to these
characters and so tune into WWE. When McMahon announced that wrestling was scripted, it
Referencing Chapter 4: Assessing Intellectual Capital
Consider the concepts of intellectual capital and human capital, both of which are intangible
assets that a company such as WWE needs to have in order to compete successfully. Intellectual
capital is a measure of the value of a firm’s intangible assets, its reputation, employee loyalty and
Dynamic capabilities are a firm’s capacity to build and protect a competitive advantage, which
rests on knowledge, assets, competencies, complementary assets, and technologies. Dynamic
NOTE: Check out how WWE markets their personality superstar John Cena:
The athletes seem to be the primary competitive resource WWE has. Would Vince McMahon
3. What are the future prospects for WWE? What should be done to expand or grow the
The McMahons seem to have reacted well to the challenges the company faced following the
unsuccessful diversification moves. The company is now looking at more focused related
diversification that plays to WWE’s core competence, such as the YouTube channel original
programming and the relationship with HuluPlus. They may also increase the number of road
The succession issue is important for this tightly controlled business. At present, Vince
McMahon runs the company. Wife Linda was heavily involved until she left to run for Senate in
2009 and 2012 (in Connecticut – she was not successful). Daughter Stephanie is immersed in the
business. Son Shane was involved but has left to pursue his own interests. The point here is
whether Shane and Stephanie will have the experience to run the company when their parents
Watch the video of the first fifteen minutes of the 2009 WWE annual shareholders meeting
linked here:
Both Linda and Vince McMahon lead the shareholders meeting. It might be interesting to WWE
fans to see the different personality Vince portrays in this corporate setting.
To what extent do you believe WWE will be successful in their diversified entertainment
venues? More generally, after listening to Vince and Linda McMahon discuss WWE, would you
be more or less likely to invest in WWE stock yourself? Why?
One other issue facing the wrestling entertainment industry threatens its continued viability: the
use of steroids and other risky lifestyle choices has contributed to the early deaths of dozens of
wrestlers. Read the linked article from 2004 and watch the accompanying audio slideshow:
In 2007, after the deaths of several more wrestlers, including the double-murder/suicide of WWE
wrestler Chris Benoit, the WWE announced the suspension of 10 of its wrestlers for violation of
its “wellness policy”:
The WWE will continue to come under scrutiny for this, specifically by the U.S. House
Committee on Oversight and Government Reform regarding their talent wellness policy. (See
WWE’s code of business at http://corporate.wwe.com/governance/code-of-business-conduct and
full drug testing policy here: http://corporate.wwe.com/wellness/substance-abuse-drug-testing-
policy ) What is WWE’s responsibility, and is there anything further WWE should do here? Does
this threaten WWE’s growth prospects internationally?
WWE seems to be taking steps to continue to develop its key talent: In 2013, in collaboration
with Florida’s Full Sail University, WWE opened the World Wrestling Entertainment
Performance Center. WWE executive Paul Triple H Levesque pointed to the seven professional

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