Contemporary Strategy Analysis: Instructor's Manual, Fourth Edition

This document is the Instructor's Manual for Robert M. Grant's 'Contemporary Strategy Analysis', a textbook designed to introduce students to the fundamental concepts and principles of strategy. The manual provides guidance to instructors on course design, case selection, and teaching strategies. It outlines the key features of the book, including its focus on practical application and its integration of current academic thinking and management practice. The manual is structured to assist instructors in using the book effectively, offering insights into the book's organization, which centers on the relationship between the firm and its environment. It also suggests cases that complement the text and highlights the book's versatility, which allows it to be used in various types of strategic management courses. The manual covers topics such as the concept of strategy, tools of strategic management (industry analysis, resource and capability analysis), and the analysis of competitive advantage, business strategies, and corporate strategy. The manual also includes sample course outlines and aims to provide instructors with the necessary tools to enhance student learning and understanding of strategic management.

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Contemporary
Strategy Analysis
Concepts, Techniques,
Applications
Fourth Edition
Instructors’ Manual
by
Robert M. Grant
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Copyright © Robert M. Grant, 2002
The right of Robert M. Grant to be identified as author of this work has been
asserted in accordance with the Copyright, Designs and Patents Act 1988.
ISBN 0-631-23140-4
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Contents
Page
OBJECTIVES OF THE GUIDE 5
KEY FEATURES OF THE BOOK 6
DESIGNING YOUR STRATEGIC MANAGEMENT COURSE 13
TOPICS, OUTLINES, AND RECOMMENDED CASES 16
PART I: INTRODUCTION 16
The Concept of Strategy (Chapter 1) 16
PART II: TOOLS OF STRATEGIC MANAGEMENT 21
Goals, Values, and Performance (Chapter 2) 21
The Analysis of Industry and Competition (Chapters 3 and 4) 23
Analyzing Resources and Capabilities (Chapter 5) 27
Organization Structure and Management Systems (Chapter 6) 31
PART III: THE ANALYSIS OF COMPETITIVE ADVANTAGE 34
The Nature and Sources of Competitive Advantage, Cost and
Differentiation Advantage (Chapters 7, 8, and 9) 34
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PART IV: BUSINESS STRATEGIES IN DIFFERENT INDUSTRY
CONTEXTS 37
Industry Evolution (Chapter 10) 37
Technology-Based Industries and the Management of Innovation
(Chapter 11) 37
Competitive Advantage in Mature Industries (Chapter 12) 40
PART V: CORPORATE STRATEGY 43
Vertical Integration and the Scope of the Firm (Chapter 13) 43
Global Strategies and the Multinational Corporation (Chapter 14)44
Diversification Strategy and Managing the Multibusiness
Corporation (Chapters 15 and 16) 47
Current Trends in Strategic Management (Chapter 17) 50
APPENDIX: SAMPLE COURSE OUTLINES 54
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OBJECTIVES OF
THE GUIDE
The purpose of this Instructors’ Guide is to assist teachers in the use of Contem-
porary Strategy Analysisin the classroom. The guide will:
n Inform you of the principal features of the book
n Assist you in designing your own course in strategic management
n Help you to select cases to use with the text
n Provide you with slides that reproduce figures from the book and summarize
key points from the chapters.1
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1 The slides are in Microsoft PowerPoint.
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KEY FEATURES OF
THE BOOK
Contemporary Strategy Analysiswas written to introduce students to the funda-
mental concepts and principles of strategy, to reflect current academic thinking and
management practice, and to give students the tools they need to formulate and
implement strategies that will enhance the performance of the organizations they
join.
MY GOALS INWRITING THEBOOK
The first edition of Contemporary Strategy Analysis was published in 1991. It grew
out of a training course in strategy analysis that I developed for a London-based
consulting company and my redesign of the core MBA strategic management course
at the University of British Columbia. It was never my intention to write a textbook
on strategy; the task was forced on me by my inability to find a strategic manage-
ment text that met my needs. I wanted a book that combined the intellectual chal-
lenge and dynamism that have characterized this rapidly developing field with
information on the essentially practical task of managing the development of a busi-
ness enterprise and ensuring its successful performance. While a course in strategic
management must be founded on basic concepts and rigorous theories of what deter-
mines profit, ultimately strategic management is concerned with making decisions:
What businesses should we be in? Producing which products? Serving which
customers? In which geographic areas? And above all: How are we to compete in
order to establish and sustain a competitive advantage over rivals? Thus, while
Contemporary Strategy Analysisis rich in concepts and theoretical frameworks, its
purpose is not to teach theory for its own sake. Its purpose is, rather, to allow insight
into the determinants of superior performance and to use that insight to permit
better strategic decisions.
My intention has never been to provide “the complete instructor’s package” for stra-
tegic management courses. The book was envisioned as a text only, capable of being
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used with a wide variety of supporting materials. My concept of a good strategic
management course is one designed to take account of the interests and character-
istics of the students and the goals and expertise of the instructor. The problem of
the “one size fits all” strategy coursebook, combining text and cases and supported
by variety of teaching materials, is that it does not lend itself to easy customization
to meet different instructor preferences and teaching situations. Over the four edi-
tions, Contemporary Strategy Analysis has been supplemented by various supporting
materials, including a casebook. However, my basic intention remains intact: the book
seeks to combine excellence in delivering the concepts, theories, and techniques of
strategic management with versatility in terms of its ability to be used as a core text
in many types of strategic management course with a variety of different teaching
materials.
This versatility is apparent among current users of the book. Contemporary Strategy
Analysis has been adopted as a required text by over 200 business schools across five
continents. The most striking feature of these courses is their diversity. While the
majority are core courses in strategy at MBA level, the book is also used successfully
at undergraduate level and on executive programs. Contemporary Strategy Analysis
is also required reading on management courses accompanying degrees in engineering
and finance, and is used on the inhouse training courses of several management
consulting firms. The text typically is used together with company case studies; it is
also employed with very different course formats, e.g., strategy courses built around
simulations or talks by visiting executives. Common to these different courses, and
a major source of joy to me, has been the enthusiastic response of students to the
book.
CASES ANDSUPPORTINGMATERIALS
What I shall try to do in this Instructors’ Guide is to draw on this diversity of experi-
ence to offer suggestions for course design and teaching. A key goal is to offer guid-
ance on cases that have been found to work well with the book—as I have tried to
emphasize, the only value of concepts, frameworks, and techniques is their applica-
tion to diagnose problems and prescribe solutions. What better medium for practical
application within a classroom context than case study discussion?
A casebook is available for use with Contemporary Strategy Analysis(the third edi-
tion of which will appear very soon).2 Most of these cases have been written
specifically to complement the ideas and frameworks expounded in the text. At the
same time, Contemporary Strategy Analysisis used successfully with a broad range
of cases from many other sources, most commonly from the Harvard Business School,
but also cases from Darden (University of Virginia), Stanford, Insead, London Business
School, IMD, IESSE, Western Ontario, and the North American Case Writers’
Association.
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2 Robert M. Grant, Cases for Contemporary Strategy Analysis, 3rd edn, Blackwell Publishers, 2002.
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CONTENT ANDSTYLE
The content and style of Contemporary Strategy Analysishave been driven by my
desire to create a textbook that is analytically incisive, practical, and thoroughly up
to date. The past decade has seen an upsurge of new ideas, concepts, theories, and
techniques in the area of strategic management. The intellectual dynamism of the
field is reflected in the rapid expansion of research efforts, by both business schools
and consulting firms. It was once dependent on the concepts and theories devel-
oped in the contributing disciplines of economics, social and cognitive psychology,
organizational theory, and systems science, but recent years have seen greater level-
ing of the balance of trade. Increasingly, it is strategic management scholars who are
providing the thought leadership that is reinvigorating firm-level research in indus-
trial economics, the theory of the firm, organizational theory, industrial psychology,
and technology management. As well as articulating the core strategy concepts and
analytical frameworks, I have tried to capture and integrate into the book the most
promising, exciting, and applicable of these more recent ideas and research themes.
HOW THEBOOK IS ORGANIZED
The structure and content of the book are guided by two central ideas. The first is
that strategy is a quest for superior performance, and that superior performance is
essentially about profitability (or, to be more precise, maximizing shareholder value).
Of course, firms pursue other goals as well, but for the purposes of formulating and
implementing strategy, I assume the paramount goal to be profitability. While it is
possible to introduce other goals into strategic decisions, the consequence of adopt-
ing broader and richer motivational assumptions is that our tools of strategy analy-
sis give little guidance as to how these goals can be achieved. Virtually all analytical
techniques are oriented to identifying and accessing the sources of profit available
to a firm. If the organization’s goal is to maximize the political influence of its CEO,
or the welfare of its employees, or global biodiversity, there is not much that the
concepts and techniques of strategy analysis can offer to further this objective.
The second central idea is that there are two main inputs into strategic decisions:
analysis of the firm’s business environment of the firm, and analysis of its internal
environment. The central aspect of the business environment is the firm’s industry
environment, which is defined by its business relationships (with competitors, sup-
pliers, and customers). The internal environment of the firm comprises three major
elements:
n the goals and valuesof the firm (the primary goal, as I have noted, being
profitability)
n the resources and capabilitiesthat the firm owns or controls and that it will
deploy within its industry environment
n the organizational structure and management systems that the firm will use to
implement its strategy.
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Figure 1 shows these relationships. The idea of strategy forming an interface
between the firm and its environment forms the organizing framework for the
Competitive Strategy Analysis. Thus, after introducing the concept of strategy (Part
I and Chapter 1), Part II of the book, “Tools of Strategy,” is build around the four
main elements of this framework:
n Chapter 2 looks at “Goals, Values, and Performance”
n Chapter 3 is concerned with “Analyzing the Industry Environment,” which
is developed further in Chapter 4
n Chapter 5 deals with “Analyzing Resources and Capabilities”
n Chapter 6 introduces key concepts and issues of strategy implementation under
the title “Organization Structure and Management Systems.”
Once the primary tools of strategy analysis have been acquired, the student is encour-
aged to develop and apply these in relation to different aspects of competitive advan-
tage, in different business contexts, and in relation to both business and corporate
strategy. Thus:
n Part III develops “The Analysis of Competitive Advantage” by integrating in-
dustry analysis and resource analysis. After establishing the key principles of
competitive advantage (Chapter 7), Chapters 8 and 9 explore cost and dif-
ferentiation advantage.
n Part IV applies this analysis of competitive advantage to formulating and im-
plementing business strategies in different industry contexts. Chapter 10
examines the evolution of industries over time. Chapters 11 and 12 look at
competitive advantage in technology-based and mature industries respectively.
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F I G U R E 1 The basic framework: strategy as a link between the firm and its
environment
THE INDUSTRY
ENVIRONMENT
n Competitors
n Customers
n Suppliers
THE FIRM
n Goals and values
n Resources and
capabilities
n Structure and
systems
STRATEGY
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n Part V deals with corporate strategy in relation to vertical scope (Chapter 13),
international scope (Chapter 14), and product scope (Chapter 15). Chapter
16 addresses the task of managing the multibusiness corporation. Chapter 17
looks at the themes and ideas likely to influence strategic management at the
outset of a new millennium.
The framework for the book is shown in Figure 2.
ANALYZINGCOMPETITIVEADVANTAGE: BEYONDSWOT
In relation to both business strategy and corporate strategy, the creation and sus-
taining of competitive advantage form a dominant theme. Central to the analysis
of competitive advantage is the idea that the core of strategy formulation is the de-
ployment of the firm’s resources and capabilities within its industry environment.
Hence, the most important elements of strategic decision making are the analysis of
the industry environment and the analysis of resources and capabilities. While this
emphasis is common to most approaches to strategy formulation, a key feature of
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I INTRODUCTION
Chapter 1 The Concept of Strategy
II TOOLS OF STRATEGY ANALYSIS
Analysis of Industry and Competition
Chapter 3 Analyzing the Industry
Environment
Chapter 4 Intra-Industry Analysis
Analysis of the Firm
Chapter 2 Goals, Values, and Performance
Chapter 5 Analyzing Resources and Capabilities
Chapter 6 Organization Structure and
Management Systems
III THE ANALYSIS OF COMPETITIVE ADVANTAGE
Chapter 7 The Nature and Sources of Competitive Advantage
IV BUSINESS STRATEGIES IN DIFFERENT INDUSTRY CONTEXTS
Chapter 10 Industry
Evolution
Chapter 12 Competitive
Advantage in Mature
Industries
V CORPORATE STRATEGY
Chapter 16 Managing the Multibusiness
Corporation
Chapter 17 Current Trends in Strategic
Management
Chapter 8 Cost Advantage Chapter 9 Differentiation Advantage
Chapter 11 Technology-based
Industries and the Management
of Innovation
Chapter 13 Vertical Integration
and the Scope of the Firm
Chapter 15 Diversification
Strategy
Chapter 14 Global Strategies
and the Multinational Corporation
F I G U R E 2 The framework for the book
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Contemporary Strategy Analysisis that it dispenses with the SWOT framework that
is central to many strategy texts. SWOT (Strengths, Weaknesses, Opportunities, Threats)
adopts a fourfold classification of factors influencing strategic choice: the strengths
and weaknesses of the firm, and the opportunities and threats in the external environ-
ment. My approach is to use a simpler, twofold classification of the factors influenc-
ing the choice of strategy. As Figure 1 shows, the two sets of influences are the firm
and the industry environment, where within the firm the critical influences (given
the assumption that the goal of the firm is to make money) are its resources and
capabilities.
The advantage of looking at the industry environment, rather than more specifically
at opportunities and threats, is that the important issue is to understand the com-
petitive forces and success factors that determine the sources of profitability in the
external environment. A key problem of identifying opportunities and threats is that
it is seldom clear what is an opportunity and what is a threat. Is third-generation
wireless telephony (3G) an opportunity or a threat to Nokia, the world’s largest sup-
plier of handsets and other wireless telecom hardware? Clearly, it is both. The intro-
duction of 3G services offers huge growth potential for wireless hardware with
multimedia capability. At the same time, incompatible 3G standards and Asian lead-
ership in internet-enabled wireless telephony create the risk that Asian (and US) equip-
ment manufacturers will undermine Nokia’s market position. The key strategic issue
for Nokia is not some arbitrary classification of 3G technology as a threat or an oppor-
tunity, but a deep understanding of the implications of 3G technology.
It is similar with the firm’s resources and capabilities. If we view Nokia’s location in
Finland as a resource, it is clear that this is both a strength and a weakness. It puts
Nokia in close contact with the world’s most heavily penetrated wireless telephony
market and access to Scandinavian design capabilities. At the same time, it is far from
the world’s most advanced centers for microelectronics and software development
(US, Japan) and from several of the world’s leading-edge markets for mobile inter-
net communication (Japan, Korea). The key issue is not arbitrarily to classify
resources and capabilities as strengths or weaknesses, but to understand their impli-
cations for a firm’s competitive position.
WHAT IS NEW IN THE FOURTHEDITION?
The structure of the fourth edition of Contemporary Strategy Analysis is almost iden-
tical to its predecessor: there are no new chapters and no major reorganizations of
the sequence of topics. The key changes are extensions of the book to include emerg-
ing ideas in strategy analysis and major changes in the business environment. I have
given more emphasis to two main areas:
n The implications of digital technologies and the internet. I have chosen not
to regard “strategic management in the New Economy” as a separate topic.
My approach has been to argue that the fundamentals of industry analysis,
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resource analysis, and the principles of competitive advantage are as relevant
to the New as to the Old Economy. Where I have added additional material
is the discussion of the strategic management of technology, especially in rela-
tion to standards and standards wars (Chapter 11).
n Increased emphasis on strategy implementation. Chapter 5 on resources and
capabilities features greater emphasis on the development of organizational
capability and adds an appendix on knowledge management. Chapter 6 on
organizational structure and management systems has been extended. How-
ever, one distinctive feature of the text remains: I offer an integrated treat-
ment of the formulation and implementation of strategy.
Other changes to the new edition include:
n More discussion of the role of complementary products in competitive analysis
and an extension of the Porter Five Forces analysis to include complements
(Chapter 3).
n A revised treatment of game theory (Chapter 4).
n Extension of Chapter 10 on industry evolution to include the contributions
of evolutionary economics and organizational ecology.
n Complete rewriting of Chapter 17 to include discussion of dynamic capabilities,
complexity theory, and emerging ideas in organizational design and leadership.
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