© 2016 Robert M. Grant
www.contemporarystrategyanalysis.com 1
Instructors’ Manual to Accompany Contemporary Strategy Analysis (9th edn. Wiley, 2016)
CHAPTER 2. GOALS, VALUES, AND PERFORMANCE
Introduction
Given that strategy is about achieving success, how we go about measuring performance is critically
important for strategic management, hence, this is a topic that I like to address early in the strategy
course. It requires students to link strategy analyses to financial analysis.
My goals in teaching this topic are for students to acquire:
• Familiarity with the debate over the goals of the firm (in particular the main arguments for and
against shareholders goals versus stakeholder goals) and the ability to link these different goals to
different conceptions and measure of what it means for the firm to create value. To emphasize the
The key topics I cover are:
• Using company information (both financial statements and qualitative information) to diagnose
the sources of high or low performance. This includes disaggregating return on investment into
sales margins and capital productivity ratios.
Class Outline
My starting point is to examine a company that is performing poorly (this can be a case study, or it can be
extracts from the annual report of a company). The class discussion focuses on the following questions:
• How badly is the company performing? This requires evaluating the company’s performance.
I encourage students to adopt a “scientific approach”: from their initial reading of the case they can adopt
I of two approaches:
(1) An inductive approach where they delve into the details of the firm’s performance and draw
consistent with the facts.
I tend not to go into much detail regarding the accounting and operating ratios and other data that should
be used to diagnose performance problems. However, I do emphasize that students should revisit finance
and accounting texts (for all business graduates, reading financial statements and using basic finance and
accounting ratios to assess performance are fundamental instruments of their “toolbox”).
Cases
Among the companies I have used as vehicles for exploring performance and linking financial and
strategic analysis are:
Kering SA: Probing the Performance Gap with LVMH (R. M. Grant, Contemporary Strategy Analysis:
Text and Cases, 9th edn, Wiley, 2016).
The case focuses upon the diagnosis of a firm’s financial performance as a foundation for evaluating and
developing its strategy. Kering SA is a French luxury and sports apparel company formerly known as
Starbucks Corporation, May 2015 (R. M. Grant, Contemporary Strategy Analysis: Text and Cases, 9th
edn, Wiley, 2016).
Howard Schultz’s leadership of Starbucks from a single Seattle coffee shop to a global chain of over
20,000 outlets is one of the great entrepreneurial achievements of recent decades. The case offers an
opportunity to diagnose the reasons why Starbucks’ business strategy has been so successful—focusing in
two?
Laura Ashley Holdings plc (R. M. Grant, Cases to Accompany Contemporary Strategy Analysis, 6th
Laura Ashley’s traditional English country styles were in the vanguard of the British fashion revival of
the late 1960s and 1970s. However, Laura’s death, overexpansion and changing customer preferences
resulted in a long period of decline. By 2000, Laura Ashley is owned by a Malaysian conglomerate and
Walt Disney Company [A] (in David J. Collis and Cynthia A. Montgomery, Corporate Strategy:
Resources and the Scope of the Firm, McGraw-Hill, 1997).
The early 1980s were a difficult time for Disney. Economic recession, heavy investment in Epcot and
other new projects, and lack of management direction combined to depress Disney’s profitability and
Despite its age, this case is an excellent vehicle for requiring students to take an analytical approach to
diagnosing the profitability problems of the struggling Cincinnati brewer facing intensifying competition
as the national brewing companies move into its local market.