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Strategic Management 3
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Instructor Manual
1
Course Preparation
CONNECT INTEGRATION
Interactive Exercises, LearnSmart, Quizzes, and Exams: Introductory Remarks
CONNECT INTEGRATION
Course Preparation
Opening Discussion Topics and Exercises
ChapterCase: Does Twitter Have a Strategy?
1.1 What Strategy Is: Gaining and Sustaining Competitive Advantage (LO 1-1,
LO 1-2, LO 1-3)
CONNECT INTEGRATION
Interactive Labeling: Identifying Social Responsibilities
1.4 Implications for the Strategist
Strategy Term Project
CONNECT INTEGRATION
Chapter 1
What Is Strategy?
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Strategy Term Project, an exercise for students in applying strategic concepts to their careers and self-
development, and various end of chapter discussion questions, exercises, and ethical issues.
Learning Objectives
LO 1-1 Explain the role of strategy in a firm’s quest for competitive advantage.
LO 1-2 Define competitive advantage, sustainable competitive advantage, competitive disadvantage, and
competitive parity.
LO 1-3 Differentiate the role of firm effects and industry effects in determining firm performance.
LO 1-4 Evaluate the relationship between stakeholder strategy and sustainable competitive advantage.
LO 1-5 Conduct a stakeholder analysis.
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Instructor Manual
Course Preparation
integrate into their courses, while others are identified as being most effectively used by faculty who have more experience
leading and directing class discussions and case analyses. Where the activities are related to program-level learning
objectives established by AACSB 2015 Standard 9, the learning objective has been identified for you.
INTEGRATION
Interactive Exercises, LearnSmart, Quizzes, and Exams: Introductory
Remarks
Consider assigning one or two interactives per chapter. Interactives are based on chapter learning objectives, so the
instructor can choose based on his/her focus for the course. Assignments can be due before class as preparatory
materials (this is especially good for an interactive classroom style), or after class as a check on understanding of the
concepts.
To find the interactives in Connect, go to “Add Assignment” and then select “Question Bank.” Interactives are
organized by chapter and may include follow-on questions to be paired. Instructors may want to give students unlimited
would be to make “Quiz Questions” worth 1 or 2 points each and “Interactives” worth 5 to 10 points each since these
require more time and thought. The feedback given to students is time-flexible. Selecting feedback to be displayed after
the assignment due date helps keep students from giving the correct answers to other students while the interactive is
still available. For this reason, quizzes and exams are suggested to have no feedback available until after the due date
for the entire class assignment.
LearnSmart is an adaptive study tool designed for students. It can also show you where students are struggling to
assign less than an entire chapter segment of LearnSmart in Connect. The expected average time changes based on
which sections are selected and deselected for the chapter. The system also allows instructors to adjust the expected
completion time by dragging the toggle lever left or right to increase or decrease the depth of coverage of the activity.
The entire LearnSmart module is available to your student at all times; however, assigning 30 minutes or so will prompt
students to try it. You are required to select a due date for LearnSmart. However, this will not prevent the student from
LearnSmart access. It is designed to show instructors that the student has completed the LearnSmart assignment.
4
OPENING DISCUSSION TOPICS AND EXERCISES
What enables some firms to gain and then sustain their competitive advantage over time? Why do once-great firms fail? How
can a firm’s managers influence performance? Strategic management is the integrative management field that combines
analysis, formulation, and implementation in the quest for competitive advantage. Many students will relate to strategy
through sports analogies. You may want to start the course by discussing the contrast between a powerful sports dynasty and
its weaker competitors. In the U.S., compare the Yankees to the Cubs. Why does U-Conn appear in the NCAA Men’s and
Women’s Basketball Final Four so frequently? In other countries, you might compare Man U or Real Madrid to your local
football club or discuss the ability of Mercedes to overwhelm the traditional strength of Ferrari in Formula 1. How have these
teams built and implemented strategies? What successes have they seen? What resources do they have that their weaker rivals
lack?
NEWER FACULTY: Another option could be a brief discussion of the game of chess. In chess, the best position is relative to
the placement of your opponent’s pieces. You also need to think about where your opponent may be moving the pieces in the
future. In the firm, strategy will entail allocating resources in a manner that positions your firm well compared to competitors
both today and in the future. If you prefer bridge to chess, take a look at this article “Bridge—not chess—is the ultimate war
game” M Ledeen 5/18/15 The Wall Street Journal.
EXPERIENCED FACULTY: PowerPoint Slides 4–7: Strategy Smart Exercise: Break out into small groups of 3–4. Make sure
someone in the group has a laptop. Create a league if you like. Craft a collaborative strategy for throwing a paper airplane the
greatest distance. Competitive Advantage: Throw the plane through the window. Sustained Competitive Advantage:
Repeatedly throw the plane through the window. Take into account external and internal factors for maximum performance.
Watch the video: http://flightsimx.archive.amnesia.com.au/index.html.
NEWER FACULTY: If you plan to have a number of team assignments in your course, you may want to do an ice breaker
activity that allows students to get to know each other. One such exercise is “Hidden Diversity.” Students are asked to stand
up, then the instructor quickly goes through a list of invisible sources of diversity, such as number of siblings, marital/dating
status, number of languages spoken, work schedule, favorite place to do homework, generation in U.S., major, etc. After you
name each category, send students to different corners of the room by group. For example, only child, front left; one sibling,
front right; two siblings,back left; three siblings,center; etc. This exercise gets students moving around and can uncover
important commonalities for team formation, such as work schedule. It also accentuates the point that there are many more
types of diversity than the racial, height, and other differences that we can see. AACSB 2015 Standard 9 Diverse and
multicultural work environments (able to work effectively in diverse environments)
INTEGRATION
Course Preparation
Helpful Suggestions Regarding Assignment Policies: Connect gives instructors a wide array of flexibility in making
assignments and creating grading policies. Instructors may choose to:
• assign as many assignments as appropriate given the level and time commitment expected for the class,
• determine point values for each question/interactive that works within the total course percentages,
• make available multiple attempts per assignment with options of accepting the highest score or averaging all the
attempts together (several attempts are particularly good for homework assignments),
• deduct points for late assignment submissions (percentage deduction per hour/day/week/etc.) or create hard
deadlines thus accepting no late submissions,
• show feedback on interactives/questions immediately upon submission or at the time the assignment is due for the
whole class, create new assignments or questions from scratch, or edited versions from a variety of provided
resources.
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ChapterCase 1: Does Twitter Have a Strategy?
POWERPOINT SLIDES 9–11 AND 36–37
DISCUSSION TOPICS
NEWER FACULTY: Students will be familiar with Twitter and its battle for relevance with Facebook, Instagram, and other
social media sites. You might want to open by taking a poll on which social media sites students in the class interact with
most often. Explore that further by asking how many students have switched their predominant social media site in recent
years. Move the discussion from personal behaviors to strategic impact by asking students how their behavior impacts the
attractiveness of a social media site for advertisers. This opens the floor for a discussion of sources of competitive advantage.
Video update “After Twitter’s Stock Falls to All-Time Lows, What’s Next?” The Wall Street Journal 8/4/2015. Print update
“Twitter to Cut up to 8% of Workforce” (Y Koh 10/14/15 The Wall Street Journal). The video describes the problems Jack
Dorsey faced when he took over the CEO job. The print article describes some strategic leadership actions he has taken to
correct the problems.
EXPERIENCED FACULTY: If you want to extend the discussion with another illustration, consider Dell, once the undisputed
leader in personal computers, now outpaced by Lenovo and HP. The Dell example is more complex than Apple. Apple is
competing against Samsung with similar strategies. Dell is being squeezed on the bottom end by cost leadership strategies by
Asian firms and on the top by greater innovation and broader service options by HP. You could use this example as an
introduction and then return to it in the section on competitive advantage. See “Dell Profit Falls 72%; Sales Flat” The Wall
Street Journal, August 15, 2013. What were the keys to Dell’s success in the past? In what ways did the competitive
environment change? Why did Dell lose ground to its rivals?
CONSIDER THIS DISCUSSION QUESTIONS
Why is Twitter struggling? What role do industry and firm effects play here?
This is a good opportunity to introduce the concept of measuring firm performance, which will be discussed in more detail in
Chapter 5. In particular, students need to be reminded that profitability is a critical element of most measures. Once the
What grade would you give Dick Costolo, Twitter’s CEO from 2010 to 2015? Support your decision with specifics.
Also, list some of his leadership strengths and weaknesses. What recommendations would you have for the new
Twitter CEO to be a more effective strategic leader?
Students can be encouraged to compare the firms recent performance with the projections expected at the time of the IPO.
This discussion question also offers scope for reviewing leadership traits and behaviors from earlier management courses. In
addition, a discussion of the different challenges in leading a small startup focused on attracting users with a larger, public
Why is a good strategy so important, especially at high-tech startups like Twitter? Why is crafting a good strategy at
Twitter so difficult? What are some of the pitfalls that a CEO of a company such as Twitter needs to watch out for
when crafting and implementing a strategy?
Tech industry firms have the same challenges as other firms in crafting and implementing strategies, except that they have to
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Apply the three-step process for developing a good strategy outlined above (diagnose the competitive challenge, derive
a guiding policy, and implement a set of coherent actions) to Twitter’s situation today. Which recommendations
would you have for Twitter to outperform its competitors in the future?
It is early in the course for students to be effective in strategy formulation, but some key principles can be emphasized using
basic information in Chapter 1. A good beginning point is to discuss the importance of defining the industry, so that you
know which firms you are trying to outcompete. Similarly, you can guide the students to identify whether Twitter has the
1.1 What Strategy Is: Gaining and Sustaining
Competitive Advantage LO 1-1
POWERPOINT SLIDES 11–14
DISCUSSION TOPICS
NEWER FACULTY: Strategy is a set of goal-directed actions a firm intends to take in its quest to gain and sustain competitive
advantage relative to competitors. A good strategy consists of three elements: A diagnosis of the competitive challenge, a
guiding policy to address the competitive challenge, and a set of coherent actions to implement the firm’s guiding policy. The
strategic management process, therefore, is a never-ending cycle of analysis, formulation, implementation, and feedback.
Strategy is neither grandiose statements, a failure to face a competitive challenge, nor operational effectiveness. Different
plans and activities may be called a “strategy,” but like operational effectiveness, they are not part of our definition for this
textbook. Pricing strategies, Six Sigma, and other programs are more likely to be tools for improvement and not lead to a
competitive advantage. You might enjoy opening this discussion with a humorous video. One possibility is NASCAR coach
reveals winning strategy: Drive Fast.
Research Update
“New venture strategic adaptation: The interplay of belief structures and industry context,” Andreea N. Kiss and
Pamela S. Barr, Strategic Management Journal, Volume 36, Issue 8, pages 1245–1263, August 2015
EXPERIENCED FACULTY: This research, based on the information processing perspective, offers a model of high tech, new
venture, strategic adaptation encompassing both the industry growth rate and choices firms make based on the complexity,
centrality, and causal logistics of the leadership’s belief systems. It can be used as a basis for a discussion of how Twitter’s
leadership’s belief systems regarding their user base might contribute to the firm’s slowness relative to Facebook in making
strategic decisions to capture value in their very dynamic industry.
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NEWER FACULTY: The underlying assumptions about competitive positions and resources are very important in creating
forward-looking strategies. Whether you choose to talk about this subject using Walmart, the auto industry, or PDAs, we
hope you will bring it up in class. If you choose to highlight the Apple Newton example, here is a link to a three-minute video
by Jeff Hawkins who was founder and CEO of Palm at the time they released the PalmPilot (http://stanford.io/TJImn).
Discuss how a strategy differs from a business model. How is it similar? A strategy is the ideas that managers attempt to put
into practice. A business model is how the managers translate the strategy into working practices. The business model should
be grounded in the strategy of the firm. A business model, however, is more “putting strategy into action.” Thus, a single
strategy could exploit several different business models for the firm. Students often come into the class confused about what
is a strategy and what is not. Many areas now use the term “strategy,” and students have likely heard it in many other courses
(IT strategy, Strategic HR, Marketing Strategy, and so on). It is worth spending a few minutes on this discussion, particularly
on the “effectiveness” items. The classic read on this subject is Michael Porter’s (1996), “What is strategy?” Harvard
Business Review, November–December: 61–78.
Extended Discussion
EXPERIENCED FACULTY: Explain Apple’s success over the last decade. Think about which industries it has disrupted and
how. Also take a look at Apple’s main competitors. Begin with a discussion of how Apple revolutionized the way we
listen to music. Younger students may have little knowledge of the music world before iTunes. Tease out a list of
resources and capabilities, including Steve Jobs, high R&D budget, emphasis on simplicity, design, brand image, and
customer loyalty. Then extend the discussion to smartphones and tablets. Which of Apple’s earlier resources and
capabilities were key to the success of these products in creating or revolutionizing an industry? Which new resources and
capabilities did Apple need to develop? Blackberry once had 50% of the U.S. market for cell phones that accessed email;
in 2013 it had 3% and has continued to fall. (See “Blackberry Seeks a Sale by November” The Wall Street Journal
9/4/13.) Why did they lose ground? What advantages did Apple’s competitors gain that joined the Open Handset Alliance
to create the Android eco-system? (See “Google’s Android Seizes Smartphone Market” The Wall Street Journal 8/8/13.)
Is Apple’s success attributable to industry effect or firm effects, or a combination of both? Explain. A rising tide lifts all
boats and some of Apple’s success can be attributed to changes in the external environment, including the growth in the
availability of broadband, digital media, and apps. Yet Apple was able to gain and sustain large market shares, due in
large part to a track record of consistently out-innovating their rivals.
Apply the three-step process for developing a good strategy (diagnose the competitive challenge, derive a guiding policy,
and implement a set of coherent actions) to Apple’s situation today. Which recommendations would you have for Apple
to outperform its competitors in the future? Use this question to transition from the past to the present and future. Is Apple
executives to reinvigorate the innovation climate or redesigning the organization structure to be more product-based,
rather than functional. AACSB 2015 Standard 9 Thinking creatively and making sound decisions and exercising good
judgment under uncertainty
Do you think it is so hard to not only gain, but also to sustain a competitive advantage? At this early point in the course, it
is unreasonable to expect the students to have opinions on this matter that are well-grounded in theory, but it is a good
opportunity to get them thinking about resources that are more durable and less imitable and capabilities that are dynamic,
allowing the firm to respond quickly to competitive advantage. A good example to expand this discussion is Xiaomi (see
“Rivals try to reinvent Xiaomi business model” Eva Dou. 09/08/2015 The Wall Street Journal). Xiaomi’s business model
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END OF CHAPTER DISCUSSION QUESTION 4
Choose an industry with a clear leader, then examine the differences between the leader and one or two of the other
competitors in the industry. How do the strategies differ? What have the leaders done differently? Ideally this question
would be assigned in advance and the students would be encouraged to consider profits in deciding which firm has a
competitive advantage. Some examples that could provide rich dialogue are Coca Cola versus Pepsi in the soft drink industry
(especially attractive if you are using a Cola Wars case in your course), Barnes & Noble versus Amazon in the textbook
industry, or McDonalds versus Wendy’s in quick service restaurants. To take a more international perspective, consider
What Strategy Is: Gaining and Sustaining
Competitive Advantage? LO 1-2
POWERPOINT SLIDES 15–18
DISCUSSION TOPICS
NEWER FACULTY: Consider Google’s competition with Microsoft in search engines. Google was not the first search engine
on the Internet, but it has been the most successful for a decade. What is Google’s competitive advantage? Google possesses
some 70 percent of the market share in the online search/advertising business. One way they have developed a competitive
advantage is through their PageRank algorithm which (by providing more relevant search results) offers a higher-quality
search engine (product) to Internet users (customers). What strategy and business model is Microsoft using today with Bing
to try to succeed in the Internet-search business? Microsoft is essentially subsidizing Bing with the profits from its software
and operating systems. They are attempting to create a competitive advantage by making search faster and easier. This has
the potential to be a game changer in the field of online searches. For example, if you are looking for a place to eat dinner, on
Bing you could see which local restaurants your Facebook friends have said they “like.” The same for searching to buy a new
TV, and so on. There is value created with social searching. Time will tell as to who can capture the benefits from it.
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NEWER FACULTY: If you chose to start the course with a sports analogy for competition and your group of students have a
high level of engagement with that topic, you might want to reintroduce it at this point in your lecture with a sports-related
example. Long an industry leader, ask students to consider what new strategies ESPN could pursue to combat the industry
trend of customers trying to cut cable bills that might be more effective than firing talent. (See “ESPN tightens its belt as
pressure on it mounts” S Ramachandran and J Flint 07/10/15 The Wall Street Journal. This example tends to resonate with
students because their age group is in the forefront of the trend to replace cable TV with streaming options, such as Hulu,
Netflix, and Amazon Prime.
EXPERIENCED FACULTY: Consider Microsoft’s recent efforts to launch the Surface tablet and to buy Nokia’s cell phone
business and Google’s recent acquisition of Motorola’s cell phone business. Although Microsoft and Google still have very
small market shares compared to Apple and Samsung, how should Apple address this potential threat? We suggest splitting
the class in half for this exercise and then forming small groups of 3–4 students. One half of the small groups will be Apple
and the other half will be Samsung. After the small groups have five or so minutes to discuss the issue, the class returns to
normal, and through discussion, brings out the high points of each firm. The students should identify that Samsung’s
dependence on open software gives it less protection against these new rivals in hardware. They may also note that more
robust application development ecosystems provide at least a temporary protection against Microsoft.
Strategy Highlight 1.1
POWERPOINT SLIDES 16–17:
Threadless is an example of a firm building on its customer base through crowdsourcing to use new products and also
participate in the design and vetting of popular designs. The firm invites its customers to submit designs for t-shirts. In the
summer of 2010, Dell Computer announced a partnership with Threadless for designs on its laptop computers. For a small
additional fee (and an extra day’s delay in shipping), you can get a Threadless design etched on your new Dell laptop. Why
do you think Dell is keen on offering this service? What other firms use this crowdsourcing technique to achieve competitive
advantage? Where else might this type of business model show up in the future? How durable is a competitive advantage
derived from crowdsourcing? Students could say Dell is keen on offering this service because it provides differentiation, and
hopefully a competitive advantage. Dell is able to tap into a community of talented online designers and try to regain some
market share with a younger demographic at the same time. Crowdsourcing is becoming more and more popular and widely
accepted. A well-known example is Wikipedia, which has become a giant crowdsourced encyclopedia. Threadless
specifically has partnered with Thermos for lunch box designs and Griffin for smartphone cases. One area where it would not
be surprising to see this type of crowdsourcing is in video games. An enterprising company could ask for ideas, perhaps from
INTEGRATION
Case Analysis: Gaining Competitive Advantage at Nvidia
This case analysis provides the students an opportunity to think through the three elements of a good strategy with a
complementary application from the textbook. The case also helps students see the value in learning from failures. The
case here ties closely to the materials in the beginning sections of Chapter 1. Students will read the case and then answer
the four questions following it. Difficulty: Medium Blooms: Evaluate AACSB: Analytic
The instructor can expand on the concepts in this case analysis by comparing some of the business decisions made by
Nvidia and Apple. Many students may not be familiar with Nvidia as a firm, but they may find some of their favorite
gaming devices are powered by Nvidia products. We find students sometimes lacking in business-to-business experiences
and firms such as Nvidia, which are not retail oriented, can enhance their conceptual application and give students
thought-provoking business examples.
