Instructors’ Manual to Accompany Contemporary Strategy Analysis (7th edn. Wiley, 2010)
CHAPTER 1
THE CONCEPT OF STRATEGY
Introduction
For my first class in a core course in strategic management, I have two major goals:
• To convey an appreciation of what strategy is—both in a business context and in other
competitive arenas (sport, politics, warfare).
• To introduce the basic framework for strategy analysis – in terms of external analysis (the
analysis of industry and competition) and internal analysis (primarily the analysis of resources
and capabilities).
The principal themes I stress in introducing the course in strategy management are:
• The contribution of strategy to the success of organizations (and individuals, too).
• The role of strategy in providing direction and integration to the activities and decisions of the
firm.
• Strategy as the linkage between organizational goals and values, organizational resources, and the
external environment.
• The distinction between business strategy and corporate strategy.
• How to identify and describe a firm’s strategy.
• The debate between the rational design and process schools of strategy.
Class Outline
Even with the first class, I find it useful to kick off with a case discussion. Given that getting students to
prepare a case before the first class is fraught with difficulty. Hence, it is helpful to select a case example
that students are likely to be familiar with—hence, it is possible to have a productive class discussion,
even if many students have not read the case.
My preferred case is Madonna. This case usually works well, first, because she is so well known; second,
because most people have an opinion on her and her attributes as an entertainer; third, because her career
illustrates very effectively some key issues concerning the nature of strategy and the characteristics of a
successful strategy.
Strategy Capsule 1.1 offers a brief description of Madonna’s career; the first case in the casebook,
“Madonna,” provides a fuller account.1
I start by asking: “Why has Madonna been so successful over such a long period?” This typically raises
issues concerning accommodating to emerging market trends, being controversial, image renewal and
repackaging.
Inevitably the issue of sex and use of sexual imagery looms large. If discussion focuses too much on
Madonna’s ability to respond to and lead market trends, then it’s good to shift from the external
environment to Madonna’s own resources and capabilities. The question “Is Madonna talented?” can
draw discussion of her capabilities as a singer, songwriter, dancer, and actress, and leads to comments
concerning her skills in self-promotion, communication, leadership, and image design.
© 2010 Robert M. Grant
www.contemporarystrategyanalysis.com
1
,This discussion typically results in a board filled with a variety of different observations. I group these
into four categories:
• Clear, consistent, long-term goals
• Profound understanding of the business environment
• Appreciation of her own resource and capabilities
• Effective implementation in terms of effort, leadership, and people management.
These categories are illustrated in Figure 1.1 of Chapter 1.
Having explored the reasons for Madonna’s outstanding success over almost three decades, I ask: “Does
Madonna have a strategy?” It is not apparent that her career has followed any preconceived plan—the
major features of her career are flexibility and opportunism. Yet, amidst this rich and every-changing
career, common patterns and themes are discernible:
• Early-mover advantage: identifying emerging trends in music and popular culture and building
them into her own music and lifestyle
• Creating integrated “product designs” that encompass music, image, personality, and lifestyle.
• Reinvention/new product development—Madonna’s remarkable ability to periodically create
entirely new “packages” of music and style
• A span of activities that is multimarket, multimedia, and multinational
• Her use of strategic alliances with key individuals and organizations (Sean Penn, Warren Beatty,
Time-Warner, Live Nation).
• Her strategic use of sex and controversy to courting constant public and media attention while
demonstrating astute risk management skills (she positions at the “edge of chaos” but astutely
avoids going too far).
I then go on to draw upon the issues raised in the Madonna case to develop some general themes
concerning the nature of business strategy and the overall framework for strategy analysis:
• The nature of strategy in a turbulent environment—it’s not about detailed planning; it’s about
consistency of decisions, clarity of direction, and focus upon the sources of success
• The framework for strategy analysis—the same elements that we derived from the Madonna
discussion (in Chapter 1, Figure 1.1), form the basis of our general strategy framework that views
strategy as a link between the firm and its industry environment (see Figure 1.2)
• Hence, the two primary components of our strategy analysis will be (a) analyzing the industry
environment and (b) analyzing resources and capabilities.
• The development of business strategy over time. This view of strategy—as direction, as identity,
and as a quest for superior performance—contrasts sharply with earlier notions of strategy as
planning. Hence, I find it useful to review the evolution of strategic management thought and
practice since the practice of “long-range planning” emerged in the late 1950s (see Figure 1.3).
• The process of making strategy. If strategy is not about basing detailed plans on medium-term
forecasts, how should companies formulate their strategy? The debate between the “design
school” and the “process school” provides an interesting way into this.
I conclude by bringing the discussion back to strategic issues facing the students in the class. Whether
MBAs or undergraduates, they face critical strategic decisions with regard to future careers. I invite them
to consider (a) whether they have strategies, (b) whether these strategies are implicit or explicit, and (c)
how they might apply the ideas and framework outlined in the class (and in Chapter 1 of the book) to
developing a career strategy.
© 2010 Robert M. Grant
www.contemporarystrategyanalysis.com
2
,Cases
Apart from my Madonna case, several cases have been used by different instructors to accompany the
introductory chapter of the book. The critical factor is not so much the precise content of the case as the
role of the instructor in drawing out the main issues concerning the nature of business strategy and
providing a preview of the themes and issues which the course which will be dealing with. Particularly
suitable cases are those which deal broadly with issues of business success; which consider the roles of
goals/values, organizational resources, and the industry environment; and which can be used to embody
both analytical aspects of strategy and the human and process issues (especially the role of the
leader/general manager).
There is some advantage in using cases that are relatively simple – there will be ample opportunity for
bewildering students with the complexity of strategic decisions as the course unfolds – and are short. (If
you are beginning the first class with a case, many students will have little time for preparation.)
Entrepreneurial cases also work well. Startups such as Howard Schultz and Starbucks, James Dyson and
the bag-less vacuum cleaner can be excellent vehicles for exploring the nature and role of business
strategy.
Madonna (R. M. Grant, Cases to Accompany Contemporary Strategy Analysis, 7th edn, Wiley, 2010).
See above for a discussion on using the Madonna case to introduce strategic management.
Starbucks: The Coffee Goes Cold (R. M. Grant, Cases to Accompany Contemporary Strategy Analysis,
7th edn, Wiley, 2010).
This case was developed primarily for the purpose of diagnosing performance problems. However, the
case is also suitable for introducing the nature of strategy and the components of a successful strategy. For
these purposes, the discussion should focus on the entrepreneurial development of Starbuck’s under
Howard Schultz’s leadership rather than the Starbuck’s problems during 2008/9. The value of using
Starbucks as an introductory case is that the company is universally known, its growth under Schultz is a
terrific story of entrepreneurial initiative, and the strategy is clear and easy to comprehend and analyze.
Other Starbucks cases suitable for an introductory discussion of strategy include:
• S. Kotha and D. Glassman, Starbucks Corporation: Competing in a Global Market, University of
Washington, 2003, http://depts.washington.edu/bacisb/gbc/starbucks_final.doc
• Howard Schultz and the Starbucks Coffee Company, Harvard Business School Case No. 9-801-361,
2001).
Southwest Airlines (A. C. Inkpen and V. DeGroot, “Southwest Airlines 2002” Thunderbird, 2002,
http://www.tbird.edu/pdf/about_us/case_series/a07020009.pdf).
Like Starbucks, Southwest features a dynamic, founding entrepreneur – Herb Kelleher – and a consistent,
clearly articulated strategy that established an unchallenged competitive advantage within the industry.
The case is interesting because of success against a highly unfavorable industry background.
Doing A Dyson: Case [A] (Imperial College, ECCH Case No. 599-051-1).
James Dyson’s bag-less vacuum cleaner is a stirring tale of the trials and triumph of a determined and
stubborn British inventor and entrepreneur. The case offers an opportunity to explore the role of strategy
in the seemingly haphazard development of a successful startup.
© 2010 Robert M. Grant
www.contemporarystrategyanalysis.com
3
, Innovation and Renovation: The Nespresso Story (Kamran Kashani and Joyce Miller, IMD Case No.
046, 2000; also available through HBS and ECCH).
The case traces Nestlé’s development of its Nespresso coffee system in a separate business unit using a
strategy that is a radical departure from that of most of Nestlé’s businesses. The case requires students to
identify and describe Nespresso’s strategy; to consider its fit, both externally with the market and
internally with Nestlé’s resources, capabilities and organizational structure and systems. It also introduces
ideas of strategy as innovation.
24 Hour Fitness (Harvard Business School Case No. 706404-PDF-ENG, 2005)
The case considers the foundation and development of 24 Hour Fitness which, by the end of 2004, had
become the world’s largest privately owned health club chain. The case allows students to identify the
strategy of the firm and the reasons for its success, nad ot address the future stratregy of 24 Hour
Fitness—including expansion into the Northeast of the USA, acquisition targets, and potential threats.
Honda [A] and [B] (Harvard Business School Case Nos. 9-384-049 and 9-384-050).
Chapter 1 of Contemporary Strategy Analysis discusses the debate between the “rational design” and
“process” schools of strategy and refers to the Honda case as a central feature of this debate. This account
by Richard Pascale of Honda’s entry into the US motorcycle market at the beginning the 1960s is one of
the most insightful strategy cases ever written. The strength of the case is its two stories of the same
events. The “A” case reviews Honda’s success in motorcycles through the eyes of the Boston Consulting
Group—a tale of careful analysis and rational decision making. The “B” case tells the story of Honda’s
US entry in the words of the managers involved—a tale of guesswork, errors, and luck.
Although the case is somewhat complex as an introduction, it provides a uniquely insightful contrast
between rational and process views of strategy.
1
“Madonna” (in R. M. Grant, Cases to Accompany Contemporary Strategy Analysis, 7th edition, John
Wiley & Sons).
© 2010 Robert M. Grant
www.contemporarystrategyanalysis.com
4
CHAPTER 1
THE CONCEPT OF STRATEGY
Introduction
For my first class in a core course in strategic management, I have two major goals:
• To convey an appreciation of what strategy is—both in a business context and in other
competitive arenas (sport, politics, warfare).
• To introduce the basic framework for strategy analysis – in terms of external analysis (the
analysis of industry and competition) and internal analysis (primarily the analysis of resources
and capabilities).
The principal themes I stress in introducing the course in strategy management are:
• The contribution of strategy to the success of organizations (and individuals, too).
• The role of strategy in providing direction and integration to the activities and decisions of the
firm.
• Strategy as the linkage between organizational goals and values, organizational resources, and the
external environment.
• The distinction between business strategy and corporate strategy.
• How to identify and describe a firm’s strategy.
• The debate between the rational design and process schools of strategy.
Class Outline
Even with the first class, I find it useful to kick off with a case discussion. Given that getting students to
prepare a case before the first class is fraught with difficulty. Hence, it is helpful to select a case example
that students are likely to be familiar with—hence, it is possible to have a productive class discussion,
even if many students have not read the case.
My preferred case is Madonna. This case usually works well, first, because she is so well known; second,
because most people have an opinion on her and her attributes as an entertainer; third, because her career
illustrates very effectively some key issues concerning the nature of strategy and the characteristics of a
successful strategy.
Strategy Capsule 1.1 offers a brief description of Madonna’s career; the first case in the casebook,
“Madonna,” provides a fuller account.1
I start by asking: “Why has Madonna been so successful over such a long period?” This typically raises
issues concerning accommodating to emerging market trends, being controversial, image renewal and
repackaging.
Inevitably the issue of sex and use of sexual imagery looms large. If discussion focuses too much on
Madonna’s ability to respond to and lead market trends, then it’s good to shift from the external
environment to Madonna’s own resources and capabilities. The question “Is Madonna talented?” can
draw discussion of her capabilities as a singer, songwriter, dancer, and actress, and leads to comments
concerning her skills in self-promotion, communication, leadership, and image design.
© 2010 Robert M. Grant
www.contemporarystrategyanalysis.com
1
,This discussion typically results in a board filled with a variety of different observations. I group these
into four categories:
• Clear, consistent, long-term goals
• Profound understanding of the business environment
• Appreciation of her own resource and capabilities
• Effective implementation in terms of effort, leadership, and people management.
These categories are illustrated in Figure 1.1 of Chapter 1.
Having explored the reasons for Madonna’s outstanding success over almost three decades, I ask: “Does
Madonna have a strategy?” It is not apparent that her career has followed any preconceived plan—the
major features of her career are flexibility and opportunism. Yet, amidst this rich and every-changing
career, common patterns and themes are discernible:
• Early-mover advantage: identifying emerging trends in music and popular culture and building
them into her own music and lifestyle
• Creating integrated “product designs” that encompass music, image, personality, and lifestyle.
• Reinvention/new product development—Madonna’s remarkable ability to periodically create
entirely new “packages” of music and style
• A span of activities that is multimarket, multimedia, and multinational
• Her use of strategic alliances with key individuals and organizations (Sean Penn, Warren Beatty,
Time-Warner, Live Nation).
• Her strategic use of sex and controversy to courting constant public and media attention while
demonstrating astute risk management skills (she positions at the “edge of chaos” but astutely
avoids going too far).
I then go on to draw upon the issues raised in the Madonna case to develop some general themes
concerning the nature of business strategy and the overall framework for strategy analysis:
• The nature of strategy in a turbulent environment—it’s not about detailed planning; it’s about
consistency of decisions, clarity of direction, and focus upon the sources of success
• The framework for strategy analysis—the same elements that we derived from the Madonna
discussion (in Chapter 1, Figure 1.1), form the basis of our general strategy framework that views
strategy as a link between the firm and its industry environment (see Figure 1.2)
• Hence, the two primary components of our strategy analysis will be (a) analyzing the industry
environment and (b) analyzing resources and capabilities.
• The development of business strategy over time. This view of strategy—as direction, as identity,
and as a quest for superior performance—contrasts sharply with earlier notions of strategy as
planning. Hence, I find it useful to review the evolution of strategic management thought and
practice since the practice of “long-range planning” emerged in the late 1950s (see Figure 1.3).
• The process of making strategy. If strategy is not about basing detailed plans on medium-term
forecasts, how should companies formulate their strategy? The debate between the “design
school” and the “process school” provides an interesting way into this.
I conclude by bringing the discussion back to strategic issues facing the students in the class. Whether
MBAs or undergraduates, they face critical strategic decisions with regard to future careers. I invite them
to consider (a) whether they have strategies, (b) whether these strategies are implicit or explicit, and (c)
how they might apply the ideas and framework outlined in the class (and in Chapter 1 of the book) to
developing a career strategy.
© 2010 Robert M. Grant
www.contemporarystrategyanalysis.com
2
,Cases
Apart from my Madonna case, several cases have been used by different instructors to accompany the
introductory chapter of the book. The critical factor is not so much the precise content of the case as the
role of the instructor in drawing out the main issues concerning the nature of business strategy and
providing a preview of the themes and issues which the course which will be dealing with. Particularly
suitable cases are those which deal broadly with issues of business success; which consider the roles of
goals/values, organizational resources, and the industry environment; and which can be used to embody
both analytical aspects of strategy and the human and process issues (especially the role of the
leader/general manager).
There is some advantage in using cases that are relatively simple – there will be ample opportunity for
bewildering students with the complexity of strategic decisions as the course unfolds – and are short. (If
you are beginning the first class with a case, many students will have little time for preparation.)
Entrepreneurial cases also work well. Startups such as Howard Schultz and Starbucks, James Dyson and
the bag-less vacuum cleaner can be excellent vehicles for exploring the nature and role of business
strategy.
Madonna (R. M. Grant, Cases to Accompany Contemporary Strategy Analysis, 7th edn, Wiley, 2010).
See above for a discussion on using the Madonna case to introduce strategic management.
Starbucks: The Coffee Goes Cold (R. M. Grant, Cases to Accompany Contemporary Strategy Analysis,
7th edn, Wiley, 2010).
This case was developed primarily for the purpose of diagnosing performance problems. However, the
case is also suitable for introducing the nature of strategy and the components of a successful strategy. For
these purposes, the discussion should focus on the entrepreneurial development of Starbuck’s under
Howard Schultz’s leadership rather than the Starbuck’s problems during 2008/9. The value of using
Starbucks as an introductory case is that the company is universally known, its growth under Schultz is a
terrific story of entrepreneurial initiative, and the strategy is clear and easy to comprehend and analyze.
Other Starbucks cases suitable for an introductory discussion of strategy include:
• S. Kotha and D. Glassman, Starbucks Corporation: Competing in a Global Market, University of
Washington, 2003, http://depts.washington.edu/bacisb/gbc/starbucks_final.doc
• Howard Schultz and the Starbucks Coffee Company, Harvard Business School Case No. 9-801-361,
2001).
Southwest Airlines (A. C. Inkpen and V. DeGroot, “Southwest Airlines 2002” Thunderbird, 2002,
http://www.tbird.edu/pdf/about_us/case_series/a07020009.pdf).
Like Starbucks, Southwest features a dynamic, founding entrepreneur – Herb Kelleher – and a consistent,
clearly articulated strategy that established an unchallenged competitive advantage within the industry.
The case is interesting because of success against a highly unfavorable industry background.
Doing A Dyson: Case [A] (Imperial College, ECCH Case No. 599-051-1).
James Dyson’s bag-less vacuum cleaner is a stirring tale of the trials and triumph of a determined and
stubborn British inventor and entrepreneur. The case offers an opportunity to explore the role of strategy
in the seemingly haphazard development of a successful startup.
© 2010 Robert M. Grant
www.contemporarystrategyanalysis.com
3
, Innovation and Renovation: The Nespresso Story (Kamran Kashani and Joyce Miller, IMD Case No.
046, 2000; also available through HBS and ECCH).
The case traces Nestlé’s development of its Nespresso coffee system in a separate business unit using a
strategy that is a radical departure from that of most of Nestlé’s businesses. The case requires students to
identify and describe Nespresso’s strategy; to consider its fit, both externally with the market and
internally with Nestlé’s resources, capabilities and organizational structure and systems. It also introduces
ideas of strategy as innovation.
24 Hour Fitness (Harvard Business School Case No. 706404-PDF-ENG, 2005)
The case considers the foundation and development of 24 Hour Fitness which, by the end of 2004, had
become the world’s largest privately owned health club chain. The case allows students to identify the
strategy of the firm and the reasons for its success, nad ot address the future stratregy of 24 Hour
Fitness—including expansion into the Northeast of the USA, acquisition targets, and potential threats.
Honda [A] and [B] (Harvard Business School Case Nos. 9-384-049 and 9-384-050).
Chapter 1 of Contemporary Strategy Analysis discusses the debate between the “rational design” and
“process” schools of strategy and refers to the Honda case as a central feature of this debate. This account
by Richard Pascale of Honda’s entry into the US motorcycle market at the beginning the 1960s is one of
the most insightful strategy cases ever written. The strength of the case is its two stories of the same
events. The “A” case reviews Honda’s success in motorcycles through the eyes of the Boston Consulting
Group—a tale of careful analysis and rational decision making. The “B” case tells the story of Honda’s
US entry in the words of the managers involved—a tale of guesswork, errors, and luck.
Although the case is somewhat complex as an introduction, it provides a uniquely insightful contrast
between rational and process views of strategy.
1
“Madonna” (in R. M. Grant, Cases to Accompany Contemporary Strategy Analysis, 7th edition, John
Wiley & Sons).
© 2010 Robert M. Grant
www.contemporarystrategyanalysis.com
4
