,SOLUTION MANUAL FOR Contemporary Strategy
Analysis 12th Edition Robert M. Grant
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
, Contemporary Strategy Analysis (12th edition)
SUGGESTED ANSWERS TO SELF-STUDY QUESTIONS
Chapter 1
The Concept of Strategy
1. In relation to the four characteristics of successful strategies in Figure 1.1, assess Donald
Trump‘s 2024 presidential campaign.
At the time of writing (August 2024), Donald Trump is odds-on favorite to win the
November 2024 presidential election. Given the legacy of his chaotic and mostly unpopular
term as president during 2016-2020, his campaign to date must be viewed as successful. In
terms of the four characteristics of successful strategies in Figure 1.1:
• Clear, consistent, long-term objectives. Trump’s goal throughout the campaign has
been highly focused—to win re-election as President of the USA. This goal takes
precedent over every other goal typically embraced by presidential candidates. But
despite the clarity of this overarching goal, his pursuit of the US presidency risks being
compromised by some of his personal goals—notably his sense of grievance over his
treatment by the US legal system, his stubborn refusal to accept the result of the 2020
presidential election, and his desire for vengeance over those he views as persecuting
him.
• Profound understanding of the environment. Trump possesses an intuitive
understanding of the concerns of the emotions of his core demographic—notably the
fears and anger of white males, especially among the middle aged and the old. His
emotional connection with this group forms the core of the MAGA (“Make America
Great Again”) movement. Trump strategy rests fundamentally upon his recognition
that 21st century politics in America is defined by cultural identity where appeals to
emotions are more influential than policies. He also demonstrates deep
understanding of the potential to intimidate fellow politicians and thereby force a
united support from the Republican party. More generally, he demonstrates
considerable understanding of the malleability of the political perceptions of others—
which he has exploited through the demonization of Democrat politicians and office
holders and those supporting liberal and humanitarian causes. However, Trump’s
understanding of the potential to exploit fear and anger among the electorate, is
accompanied by remarkable lack of understanding of the machinery of government
and the means by which policies can be transformed into action.
• Objective appraisal of resources. Trump’s strengths are his ability to empathize with,
communicate with, and motivate his core of supporters. However, this divisiveness
also represents a weakness—his inability to broaden the base of his political
support—especially at a time when his core of supporters is a shrinking part of the US
electorate. Trumps personal characteristics—notably his narcissism and disloyalty and
vengefulness also create a handicap in gain building the support needed for a
presidential campaign that, ultimately, must appeal to a more disparate group—
women as well as men, billionaires as well as the poor, and the godless as well as the
Christian right,
Copyright © 2025 John Wiley & Sons, Inc. 1
, Implementation. Trump has been highly effective in applying his skills of
communication and motivation through social media and political rallies. However, his
lack of self-control and lack of restrain over his anger and vindictiveness has made it
difficult to run consistent, effective campaigns. His erratic nature and propensity to
deflect criticism and blame have made collaboration with those outside his own family
exceptionally fraught.
2. What is your career strategy for the next five years? To what extent does your strategy fit
with your long‐term goals, the characteristics of the external environment, and your own
strengths and weaknesses?
This question offers an opportunity for personal reflection. I do not wish to impose any of
my own preferences or priorities on your own thinking about your strategies. However, in
pondering your own futures, the book offers some useful guidance:
a) The process of engaging in strategic thinking—or to be more formal, strategic
planning—can be very helpful in providing guidance your own life. The lessons from the
section “Why Do Firms Need Strategy?” (pp. 10- 14) can be applied to individuals as
well as to organizations. Thus, formulating a strategy can assist you first, by enhancing
the quality of decision-making, second, by facilitating coordination and, third, by
focusing you on the pursuit of long-term goals.
b) Gaining experience in applying the “Common Elements in Successful Strategies” shown
in Figure 1.1.
In relation to (b), the exercise offers you an opportunity to consider your career goals—
preferably in relationship to the goals for your life as a whole. These life goals may take the
form of an overall mission. or the linkages between your work and the other aspects of
your life. It is difficult to consider your career strategy without looking at what you hope to
achieve with your life.
Understanding the external environment requires knowledge of different occupations, the
kinds of opportunities they provide, the key success factors within them, and how they will
be impacted by economic and technological changes.
Understanding one’s own resources and capabilities is a critical requirement in formulating
a career strategy. What is your profile of skills in terms of strengths and weaknesses? What
are your psychological traits? What resources do you possess in terms of educational and
professional qualifications and relationships with people and institutions?
In terms of the content, what do we mean by a career strategy? The basic questions set out
in the section “Describing Strategy” (pp. 17-18): Where are we competing? and (b) How are
we competing? Offer a template for describing (the type of job, the sector in which you will
work and in which location, and the basis on which you will become a superior performer
within that job.
Finally, you can explore implementation: What actions to you need to take to get this
strategy off the ground?
Given all the uncertainties concerning our own personal development and a changing
external world it cannot be formulated in specific terms. As with companies operating in
turbulent industries it is likely to be a set of guidelines underpinned by a recognition of
Copyright © 2025 John Wiley & Sons, Inc. 2
, identity. In addition, such a strategy will be continually evolving. In the words of General
Eisenhower: “Plans are nothing; planning is everything.”
3. As the business environment of most firms has become more complex and more turbulent,
there has been a growing tendency for firms to express their strategies in simple statements
(e.g., Southwest Airlines: “Meet customers’ short‐haul travel needs at fares competitive
with the cost of automobile travel”). Why might firms find this beneficial?
In discussing “Design versus Emergence” in the process of strategy making, Chapter 1
observes that: “The balance between the two depends greatly upon the stability and
predictability of the organization’s business environment… As the business environment
becomes more turbulent and less predictable, so strategy-making becomes less about
detailed decisions and more about guidelines and general direction.” (p.19). As a firm’s
business environment becomes more complex and turbulent, it becomes increasingly
difficult to forecast the future. Inevitably, intended strategy cannot be expressed in detail
and is increasingly about general direction-which can typically be summarized in a simple
statement. At the same time, to ensure that emergent strategy is coherent and aligned
with the firm’s goals and with its resource/capability strengths, it is vital that there is a
consensus among decision makers as to what the core strategy is. Simple statements of
strategy help forge consensus.
4. I have noted that a firm’s strategy can be described in terms of the answers to two
questions: “Where are we competing?” and “How are we competing?” Applying these two
questions, provide a concise description of Taylor Swift’s career strategy (see Strategy
Capsule 1.2).
In terms of positioning, we can describe Taylor Swift’s strategy as follows:
Where is she competing? Supplying popular music, music videos, and concerts to a worldwide
audience of mainly young people (aged from 12 to 25), with a strong appeal to older
generations too, and an emphasis on female fans. Her business model comprised the following
revenue streams: live (concert) and TV performances, royalties from recorded music (both as a
performer and songwriter), product endorsements/product placements and licensing income
from her trademarks (which include “Taylor Swift”, “Swiftie”, “Swiftmas”, and many more.
Central to her success has been here repositioning from country into mainstream pop music
that has allowed her to access a much bigger market.
How is she competing? Taylor Swift’s competitive advantage rests primarily upon a
combination of music and personal image with which her audience—predominantly young,
white, and female—can identify with. And which is reinforced through sophisticated social
marketing and selective personalized interventions. She has also maneuvered deftly in
managing power within the popular music ecosystem—especially in enhancing and deploying
her intellectual property.
In terms of future direction, Taylor Swift’s strategy seems to n primarily one of reinforcing her
current positioning through reinforcing her relationships with middle America, notably through
her romance with Travis Kelce which has allowed her to identify with American football, while
also continuing to delight her fanbase through her communications and promotional
strategies. .
5. I have argued that, in the two years following Russia’s invasion of Ukraine, President
Zelensky’s strategy of building national resistance while seeking the military, financial, and
Copyright © 2025 John Wiley & Sons, Inc. 3
, moral support of other nations has been effective. With the war in stalemate and
weakening support from the West, would you recommend a change of strategy for
Zelensky?
During 2024, Russia’s superior military resources—notably manpower and munitions—
have become increasingly apparent. Russia has become increasingly able to evade western
trade and financial sanctions—particularly through the support of China, India, Iran, Turkey
and North Korea. Meanwhile US and EU financial and military support for Ukraine has been
flagging. The re-election of Donald Trump as US president would be especially problematic
for Ukraine. In these circumstances, Zelensky must continue to build support among both
Western politicians and public opinion. However, given Ukraine’s vulnerability to a Russian
military victory and to continued destruction of its civilian infrastructure (especially
electrical power), it seems inevitable that Zelensky will need to abandon his objective of
reunifying Ukraine within its pre-2014 boundaries and consider a peace settlement that
might involve accepting the annexation of Crimea and parts of Donbas by Russia.
6. Your business school is considering appointing as dean someone whose entire career has
been spent in business management. What challenges might the new dean face in applying
their strategic management skills to a business school?
This question draws upon the differences in strategic management between for-profit and
not-for-profit organizations—see “Strategic Management of Not-For-Profit Organizations”
(pp. 24-26).
Because business schools operate in a highly competitive, global marketplace, many of the
skills of business leader are relevant to a business school leader. For example, forging a
compelling vision, understanding the importance of competitive positioning, recognizing,
and exploiting relative strengths in resources and capabilities (see Table 1.2).
Probably the greatest challenge is in adapting to the more complex goals of a not-for-profit
such as a business school. While most universities and their constituent schools have
mission statements—articulating mission in terms of actionable goals is difficult. I the
purpose of a business school to serve business, to serve the interests of its students, to
build reputation, to create and disseminate knowledge, to serve its country and its local
community, or what? To the extent that all these are probably worthy goals, how are trade-
offs among them established?
The process of strategy implementation is also likely to be very different in an academic
institution as compared to a business enterprise. Academic institutions—especially
universities—have complex governance structures reflecting multiple stakeholder groups:
students, faculty, non-academic employees, alumni donors, and—in the case of public
universities—government. As a result. Implementing strategy is likely to be far more
complex in a business school and will require extensive negotiation and persuasion.
The implication is that the skills and personality traits of the effective business school dean
tend to be different from those of an effective business leader.
Copyright © 2025 John Wiley & Sons, Inc. 4
, Contemporary Strategy Analysis (12th edition)
SUGGESTED ANSWERS TO SELF-STUDY QUESTIONS
Chapter 2
Goals, Values and Performance
1. Since long-run profitability requires that a firm is sensitive to the interests of its
customers, employees, suppliers, and society-at-large, whether a firm is run in the
interests of its shareholders or its stakeholders makes no real difference. Do you agree?
Are there situations where shareholder and stakeholder interests diverge?
As chapter 2 notes: “Profitability over the long term requires loyalty from employees, trusting
relationships with suppliers and customers, and support from governments and communities.”
(p. 36). The more volatile a firm’s environment, the more attentive it must be to the changing
needs of these constituencies in order to sustain a competitive advantage.
Yet, this does not mean that pursuing the interests of all stakeholders is the same as pursuing
shareholder value. There is a region of convergence, but also a region of conflict between the
interests of different groups. E.g.:
Consumer interests are served by lower prices—clearly this is injurious to profitability
Employees prefer job security and defined-benefit pensions—a major source of low
profitability among legacy airlines, automobile manufacturers, and other companies
Hence, the importance of Porter and Kramer’s concept of “shared value: “creating economic
value in a way that also creates value for society” (p. 50)—this the region where the interests of
shareholders and the interests of society as a whole intersect.
2. Table 2.1 compares companies according to different profitability measures.
a. Which two of the six performance measures do you think are the most useful
indicators of how well a company is being managed?
b. Is return on sales or return on equity a better basis on which to compare the
performance of the companies listed?
c. Several companies are highly profitable yet delivered very low returns to their
shareholders. How is this possible?
a) There is no unambiguously correct answer here. All performance measures are imperfect.
Important criteria are, first, consistency with value maximization, second, usefulness in
comparing with other firms. On this basis, I offer the following comments:
Market capitalization is the best available indicator of the net present value of a
firm’s future profit flows. Hence, it has the key advantage of being forward looking
rather than backward looking. Its flaw as an indicator of management performance
is that a firm’s stock market value at any point of time reflects many influences
other than how well the company is being managed including the overall level of
the stock market and the likelihood of a takeover.
Increases in a company’s net income are normally associated with increases in the
value of the firm. For comparing performance between companies, net income is
Copyright © 2025 John Wiley & Sons, Inc. 1
, not a good indicator when the companies are of different sizes: it is better to look
at profitability ratios.
Return on sales is generally not a good indicator of management effectiveness.
Margins vary between greatly between different businesses (depending on their
capital intensity).
Return on equity and return on assets are usually closely correlated. However,
return on equity is influenced by a firm’s ratio of debt/equity. Hence, as an
indicator of management effectiveness, the more broadly-based return on assets is
better in comparing the performance of different firms.
Return to shareholders (i.e. share price gains plus dividends) measures changes in
the stock market’s expectations of changes in a firm’s future profit streams. Over
periods of a year or more, this will indicate management’s success in boosting
expectations of future profits. However, it is also influenced by other factors: share
buybacks, expectations of a takeover, and movements in the general level of the
stock market.
b) See the point made above: “Return on sales is generally not a good indicator of
management effectiveness. Margins vary between greatly between different businesses
(depending on their capital intensity).” See for example, the low ROS earned by Amazon
and Walmart compared to the fat margins of Tencent and JPMorgan Chase. Yet, Amazon
and Walmart each earned a ROA than Tencent or JPMorgan Chase.
3. Return to shareholders is determined primarily by changes in the stock market’s
expectations of changes in a firm’s future profit streams. Hence, LVMH, a highly profitable
company, had a negative shareholder return in 2023 because the stock market feared s
slowdown in Chinese demand. Conversely, modestly profitable Novo Nordisk posted strong
shareholder return in expectation of the profit surge from its new anti-obesity drug.
3. With regard to Strategy Capsule 2.2, what additional data would you seek and what
additional analysis would you undertake to investigate further the reasons for UPS’s
superior profitability to FedEx??
The analysis of the financial statements of UPS and FedEx in Strategy Capsule 2.2 is only the
starting point for a more probing analysis. The key here is to use the financial analysis in order
to target the underlying strategic and operational factors that give rise to the financial numbers.
UPS’s higher ROA is primarily the result of UPS’s return on sales (double that of FedEx). In all the
major cost items: labor, fuel, maintenance and depreciation, UPS is at an advantage to FedEx.
To investigate further we need to determine whether UPS’s higher sales margin is the result of
(a) its business mix (i.e. ground transportation being more profitable than air transportation),
(b) superior efficiency—i.e. UPS’s operational management and/or ability to motivate its
employees exceeded those of FedEx, (c) lower input costs—in particular, lower wage and salary
rates. The financial data can shed light on some of these, e.g. annual compensation per
employee for the two companies. However, for the most part this will require looking beyond
the financial data to inquire into management and operational systems.
4. The CEO of a chain of pizza restaurants wishes to initiate a program of CSR to be funded
by a 5% levy on the company’s operating profit. The board of directors, fearing a
negative shareholder reaction, is opposed to the plan. What arguments might the CEO
use to persuade the board that CSR might be in the interests of shareholders, and what
types of CSR initiatives might the program include to ensure that this was the case?
Copyright © 2025 John Wiley & Sons, Inc. 2
, The key here is to identify convergence between the firm’s CSR policies and the interests of
shareholders. The arguments made by Porter and Kramer (see pp. 48-50) provide the basic
arguments. In terms of the “sustainability argument” this implies that the pizza chain should
invest in the communities within which it resides. This might involve providing jobs for
disadvantaged youths, involving itself in local charities, using local suppliers and contractors
wherever possible. In the long terms it would mean supporting the natural environment
through involvement in energy reduction and waste recycling programs. In terms of the
“reputation argument” the chain might seek to improve its image among its customers by many
of the same policies—the key however is (a) to focus on initiatives that are clearly visible to key
stakeholders (e.g. customers) and (b) select initiatives that are most appealing to the most
important of these stakeholders and have the biggest potential payoff to the firm in terms of
future revenue generation. The emphasis should be on initiatives that have an impact within
the local markets of the firm’s pizza restaurants.
5. Nike, a supplier of sports footwear and apparel, is interested in the idea that it could
increase its stock market value by creating options for itself. What actions might Nike
take that might generate option value?
The discussion of real options (pp. 51-53) points to two major types of option: flexibility options
and growth options. Nike could create options be increasing flexibility throughout its whole
range of activities. For example, to take account of opportunities to exploit lower costs resulting
from exchange rate movements it could move to shorter contracts with its suppliers or have
contracts which are more flexible with regard to quantity. It could require that suppliers
reorganize their production processes to allow greater flexibility with regard to color and size to
permit faster responses to market preferences. In terms of growth options, Nike could make
initial investments in new product areas, new markets, and new product and process
technologies. Alliances including minority investments in companies which offer the potential
to diversify into new product areas (e.g. emerging sports such as pickleball/padel) would also
create option value.
Copyright © 2025 John Wiley & Sons, Inc. 3
, Contemporary Strategy Analysis (12th edition)
SUGGESTED ANSWERS TO SELF-STUDY QUESTIONS
Chapter 3
Industry Analysis: The Fundamentals
1. From Table 3.1, select a high-profit industry and a low-profit industry. From what you
know of the structure of your selected industries, use the five forces framework to
explain why profitability has been high in one industry and low in the other.
For each of your selected industries, it is possible to analyse all five of the forces of
competition that impact the industry. However, to speed up the analysis it is best to
concentrate on those forces of competition that, at first sight, appear to be critically
important in driving profitability in the industry under consideration.
High profit industries:
Tobacco. The high profitability of the industry is primarily a result of limited competitor
rivalry within the industry. This reflects high concentration (US industry dominated by Altria
and R.J. Reynolds) and high product differentiation (most consumers strongly brand loyal).
Other forces also weak: entry barriers high (government restrictions of advertising handicaps
potential entrants); the only close substitutes are hand rolled cigarettes and e-cigarettes—
but these are also supplied by the major tobacco companies; supplier power weak (tobacco
growers are fragmented); so is buyer power (cigarettes distributed through very wide range
of retail outlets, none with significant clout).
Aerospace and Defence. The industry has two main segments: civil and military. Both
segments are characterized by very high concentration, highly differentiated products, and
very high barriers to entry. Customers become captive as a result of long product life spans
and the need for spares and service.
Household & personal products. Industry rivalry weak due to few competitors (many product
areas dominated by P&G and Unilever) and high levels of product differentiation (supported
by heavy advertising) resulting in brand-loyal, price insensitive customers and limited
incentives for the main companies to compete on price. Barriers to entry high due to control
over distribution (newcomers have difficulty getting shelf space).
Healthcare Products. The industry comprises a diverse array of devices and non-durable
medical products hence there is substantial product differentiation and competition is
limited by the prevalence of patents. Price competition is further limited by the lack of buyer
power—patents have little choice, and hospitals and healthcare providers simply pass on
costs to patients and insurance companies. Entry barriers are high due to R&D outlays and
regulations.
Low profit industries:
Motor vehicles. The key force here is internal industry rivalry. There are about 20 major
global producers of automobiles. Most of these have excess capacity. The importance of
scale economies mean that they all wish to expand market share. Among mass-market
vehicles, product differentiation and brand loyalty are weak. The suppliers of sophisticated,
technology-intensive components (e.g. antilock braking systems, fuel injection systems, etc.)
exert significant supplier power. Ride-share services are increasingly important substitutes
Copyright © 2025 John Wiley & Sons, Inc. 1
Analysis 12th Edition Robert M. Grant
Notes
1- The file is chapter after chapter.
2- We have shown you few pages sample.
3- The file contains all Appendix and Excel sheet
if it exists.
4- We have all what you need, we make update
at every time. There are many new editions
waiting you.
5- If you think you purchased the wrong file You
can contact us at every time, we can replace it
with true one.
Our email:
, Contemporary Strategy Analysis (12th edition)
SUGGESTED ANSWERS TO SELF-STUDY QUESTIONS
Chapter 1
The Concept of Strategy
1. In relation to the four characteristics of successful strategies in Figure 1.1, assess Donald
Trump‘s 2024 presidential campaign.
At the time of writing (August 2024), Donald Trump is odds-on favorite to win the
November 2024 presidential election. Given the legacy of his chaotic and mostly unpopular
term as president during 2016-2020, his campaign to date must be viewed as successful. In
terms of the four characteristics of successful strategies in Figure 1.1:
• Clear, consistent, long-term objectives. Trump’s goal throughout the campaign has
been highly focused—to win re-election as President of the USA. This goal takes
precedent over every other goal typically embraced by presidential candidates. But
despite the clarity of this overarching goal, his pursuit of the US presidency risks being
compromised by some of his personal goals—notably his sense of grievance over his
treatment by the US legal system, his stubborn refusal to accept the result of the 2020
presidential election, and his desire for vengeance over those he views as persecuting
him.
• Profound understanding of the environment. Trump possesses an intuitive
understanding of the concerns of the emotions of his core demographic—notably the
fears and anger of white males, especially among the middle aged and the old. His
emotional connection with this group forms the core of the MAGA (“Make America
Great Again”) movement. Trump strategy rests fundamentally upon his recognition
that 21st century politics in America is defined by cultural identity where appeals to
emotions are more influential than policies. He also demonstrates deep
understanding of the potential to intimidate fellow politicians and thereby force a
united support from the Republican party. More generally, he demonstrates
considerable understanding of the malleability of the political perceptions of others—
which he has exploited through the demonization of Democrat politicians and office
holders and those supporting liberal and humanitarian causes. However, Trump’s
understanding of the potential to exploit fear and anger among the electorate, is
accompanied by remarkable lack of understanding of the machinery of government
and the means by which policies can be transformed into action.
• Objective appraisal of resources. Trump’s strengths are his ability to empathize with,
communicate with, and motivate his core of supporters. However, this divisiveness
also represents a weakness—his inability to broaden the base of his political
support—especially at a time when his core of supporters is a shrinking part of the US
electorate. Trumps personal characteristics—notably his narcissism and disloyalty and
vengefulness also create a handicap in gain building the support needed for a
presidential campaign that, ultimately, must appeal to a more disparate group—
women as well as men, billionaires as well as the poor, and the godless as well as the
Christian right,
Copyright © 2025 John Wiley & Sons, Inc. 1
, Implementation. Trump has been highly effective in applying his skills of
communication and motivation through social media and political rallies. However, his
lack of self-control and lack of restrain over his anger and vindictiveness has made it
difficult to run consistent, effective campaigns. His erratic nature and propensity to
deflect criticism and blame have made collaboration with those outside his own family
exceptionally fraught.
2. What is your career strategy for the next five years? To what extent does your strategy fit
with your long‐term goals, the characteristics of the external environment, and your own
strengths and weaknesses?
This question offers an opportunity for personal reflection. I do not wish to impose any of
my own preferences or priorities on your own thinking about your strategies. However, in
pondering your own futures, the book offers some useful guidance:
a) The process of engaging in strategic thinking—or to be more formal, strategic
planning—can be very helpful in providing guidance your own life. The lessons from the
section “Why Do Firms Need Strategy?” (pp. 10- 14) can be applied to individuals as
well as to organizations. Thus, formulating a strategy can assist you first, by enhancing
the quality of decision-making, second, by facilitating coordination and, third, by
focusing you on the pursuit of long-term goals.
b) Gaining experience in applying the “Common Elements in Successful Strategies” shown
in Figure 1.1.
In relation to (b), the exercise offers you an opportunity to consider your career goals—
preferably in relationship to the goals for your life as a whole. These life goals may take the
form of an overall mission. or the linkages between your work and the other aspects of
your life. It is difficult to consider your career strategy without looking at what you hope to
achieve with your life.
Understanding the external environment requires knowledge of different occupations, the
kinds of opportunities they provide, the key success factors within them, and how they will
be impacted by economic and technological changes.
Understanding one’s own resources and capabilities is a critical requirement in formulating
a career strategy. What is your profile of skills in terms of strengths and weaknesses? What
are your psychological traits? What resources do you possess in terms of educational and
professional qualifications and relationships with people and institutions?
In terms of the content, what do we mean by a career strategy? The basic questions set out
in the section “Describing Strategy” (pp. 17-18): Where are we competing? and (b) How are
we competing? Offer a template for describing (the type of job, the sector in which you will
work and in which location, and the basis on which you will become a superior performer
within that job.
Finally, you can explore implementation: What actions to you need to take to get this
strategy off the ground?
Given all the uncertainties concerning our own personal development and a changing
external world it cannot be formulated in specific terms. As with companies operating in
turbulent industries it is likely to be a set of guidelines underpinned by a recognition of
Copyright © 2025 John Wiley & Sons, Inc. 2
, identity. In addition, such a strategy will be continually evolving. In the words of General
Eisenhower: “Plans are nothing; planning is everything.”
3. As the business environment of most firms has become more complex and more turbulent,
there has been a growing tendency for firms to express their strategies in simple statements
(e.g., Southwest Airlines: “Meet customers’ short‐haul travel needs at fares competitive
with the cost of automobile travel”). Why might firms find this beneficial?
In discussing “Design versus Emergence” in the process of strategy making, Chapter 1
observes that: “The balance between the two depends greatly upon the stability and
predictability of the organization’s business environment… As the business environment
becomes more turbulent and less predictable, so strategy-making becomes less about
detailed decisions and more about guidelines and general direction.” (p.19). As a firm’s
business environment becomes more complex and turbulent, it becomes increasingly
difficult to forecast the future. Inevitably, intended strategy cannot be expressed in detail
and is increasingly about general direction-which can typically be summarized in a simple
statement. At the same time, to ensure that emergent strategy is coherent and aligned
with the firm’s goals and with its resource/capability strengths, it is vital that there is a
consensus among decision makers as to what the core strategy is. Simple statements of
strategy help forge consensus.
4. I have noted that a firm’s strategy can be described in terms of the answers to two
questions: “Where are we competing?” and “How are we competing?” Applying these two
questions, provide a concise description of Taylor Swift’s career strategy (see Strategy
Capsule 1.2).
In terms of positioning, we can describe Taylor Swift’s strategy as follows:
Where is she competing? Supplying popular music, music videos, and concerts to a worldwide
audience of mainly young people (aged from 12 to 25), with a strong appeal to older
generations too, and an emphasis on female fans. Her business model comprised the following
revenue streams: live (concert) and TV performances, royalties from recorded music (both as a
performer and songwriter), product endorsements/product placements and licensing income
from her trademarks (which include “Taylor Swift”, “Swiftie”, “Swiftmas”, and many more.
Central to her success has been here repositioning from country into mainstream pop music
that has allowed her to access a much bigger market.
How is she competing? Taylor Swift’s competitive advantage rests primarily upon a
combination of music and personal image with which her audience—predominantly young,
white, and female—can identify with. And which is reinforced through sophisticated social
marketing and selective personalized interventions. She has also maneuvered deftly in
managing power within the popular music ecosystem—especially in enhancing and deploying
her intellectual property.
In terms of future direction, Taylor Swift’s strategy seems to n primarily one of reinforcing her
current positioning through reinforcing her relationships with middle America, notably through
her romance with Travis Kelce which has allowed her to identify with American football, while
also continuing to delight her fanbase through her communications and promotional
strategies. .
5. I have argued that, in the two years following Russia’s invasion of Ukraine, President
Zelensky’s strategy of building national resistance while seeking the military, financial, and
Copyright © 2025 John Wiley & Sons, Inc. 3
, moral support of other nations has been effective. With the war in stalemate and
weakening support from the West, would you recommend a change of strategy for
Zelensky?
During 2024, Russia’s superior military resources—notably manpower and munitions—
have become increasingly apparent. Russia has become increasingly able to evade western
trade and financial sanctions—particularly through the support of China, India, Iran, Turkey
and North Korea. Meanwhile US and EU financial and military support for Ukraine has been
flagging. The re-election of Donald Trump as US president would be especially problematic
for Ukraine. In these circumstances, Zelensky must continue to build support among both
Western politicians and public opinion. However, given Ukraine’s vulnerability to a Russian
military victory and to continued destruction of its civilian infrastructure (especially
electrical power), it seems inevitable that Zelensky will need to abandon his objective of
reunifying Ukraine within its pre-2014 boundaries and consider a peace settlement that
might involve accepting the annexation of Crimea and parts of Donbas by Russia.
6. Your business school is considering appointing as dean someone whose entire career has
been spent in business management. What challenges might the new dean face in applying
their strategic management skills to a business school?
This question draws upon the differences in strategic management between for-profit and
not-for-profit organizations—see “Strategic Management of Not-For-Profit Organizations”
(pp. 24-26).
Because business schools operate in a highly competitive, global marketplace, many of the
skills of business leader are relevant to a business school leader. For example, forging a
compelling vision, understanding the importance of competitive positioning, recognizing,
and exploiting relative strengths in resources and capabilities (see Table 1.2).
Probably the greatest challenge is in adapting to the more complex goals of a not-for-profit
such as a business school. While most universities and their constituent schools have
mission statements—articulating mission in terms of actionable goals is difficult. I the
purpose of a business school to serve business, to serve the interests of its students, to
build reputation, to create and disseminate knowledge, to serve its country and its local
community, or what? To the extent that all these are probably worthy goals, how are trade-
offs among them established?
The process of strategy implementation is also likely to be very different in an academic
institution as compared to a business enterprise. Academic institutions—especially
universities—have complex governance structures reflecting multiple stakeholder groups:
students, faculty, non-academic employees, alumni donors, and—in the case of public
universities—government. As a result. Implementing strategy is likely to be far more
complex in a business school and will require extensive negotiation and persuasion.
The implication is that the skills and personality traits of the effective business school dean
tend to be different from those of an effective business leader.
Copyright © 2025 John Wiley & Sons, Inc. 4
, Contemporary Strategy Analysis (12th edition)
SUGGESTED ANSWERS TO SELF-STUDY QUESTIONS
Chapter 2
Goals, Values and Performance
1. Since long-run profitability requires that a firm is sensitive to the interests of its
customers, employees, suppliers, and society-at-large, whether a firm is run in the
interests of its shareholders or its stakeholders makes no real difference. Do you agree?
Are there situations where shareholder and stakeholder interests diverge?
As chapter 2 notes: “Profitability over the long term requires loyalty from employees, trusting
relationships with suppliers and customers, and support from governments and communities.”
(p. 36). The more volatile a firm’s environment, the more attentive it must be to the changing
needs of these constituencies in order to sustain a competitive advantage.
Yet, this does not mean that pursuing the interests of all stakeholders is the same as pursuing
shareholder value. There is a region of convergence, but also a region of conflict between the
interests of different groups. E.g.:
Consumer interests are served by lower prices—clearly this is injurious to profitability
Employees prefer job security and defined-benefit pensions—a major source of low
profitability among legacy airlines, automobile manufacturers, and other companies
Hence, the importance of Porter and Kramer’s concept of “shared value: “creating economic
value in a way that also creates value for society” (p. 50)—this the region where the interests of
shareholders and the interests of society as a whole intersect.
2. Table 2.1 compares companies according to different profitability measures.
a. Which two of the six performance measures do you think are the most useful
indicators of how well a company is being managed?
b. Is return on sales or return on equity a better basis on which to compare the
performance of the companies listed?
c. Several companies are highly profitable yet delivered very low returns to their
shareholders. How is this possible?
a) There is no unambiguously correct answer here. All performance measures are imperfect.
Important criteria are, first, consistency with value maximization, second, usefulness in
comparing with other firms. On this basis, I offer the following comments:
Market capitalization is the best available indicator of the net present value of a
firm’s future profit flows. Hence, it has the key advantage of being forward looking
rather than backward looking. Its flaw as an indicator of management performance
is that a firm’s stock market value at any point of time reflects many influences
other than how well the company is being managed including the overall level of
the stock market and the likelihood of a takeover.
Increases in a company’s net income are normally associated with increases in the
value of the firm. For comparing performance between companies, net income is
Copyright © 2025 John Wiley & Sons, Inc. 1
, not a good indicator when the companies are of different sizes: it is better to look
at profitability ratios.
Return on sales is generally not a good indicator of management effectiveness.
Margins vary between greatly between different businesses (depending on their
capital intensity).
Return on equity and return on assets are usually closely correlated. However,
return on equity is influenced by a firm’s ratio of debt/equity. Hence, as an
indicator of management effectiveness, the more broadly-based return on assets is
better in comparing the performance of different firms.
Return to shareholders (i.e. share price gains plus dividends) measures changes in
the stock market’s expectations of changes in a firm’s future profit streams. Over
periods of a year or more, this will indicate management’s success in boosting
expectations of future profits. However, it is also influenced by other factors: share
buybacks, expectations of a takeover, and movements in the general level of the
stock market.
b) See the point made above: “Return on sales is generally not a good indicator of
management effectiveness. Margins vary between greatly between different businesses
(depending on their capital intensity).” See for example, the low ROS earned by Amazon
and Walmart compared to the fat margins of Tencent and JPMorgan Chase. Yet, Amazon
and Walmart each earned a ROA than Tencent or JPMorgan Chase.
3. Return to shareholders is determined primarily by changes in the stock market’s
expectations of changes in a firm’s future profit streams. Hence, LVMH, a highly profitable
company, had a negative shareholder return in 2023 because the stock market feared s
slowdown in Chinese demand. Conversely, modestly profitable Novo Nordisk posted strong
shareholder return in expectation of the profit surge from its new anti-obesity drug.
3. With regard to Strategy Capsule 2.2, what additional data would you seek and what
additional analysis would you undertake to investigate further the reasons for UPS’s
superior profitability to FedEx??
The analysis of the financial statements of UPS and FedEx in Strategy Capsule 2.2 is only the
starting point for a more probing analysis. The key here is to use the financial analysis in order
to target the underlying strategic and operational factors that give rise to the financial numbers.
UPS’s higher ROA is primarily the result of UPS’s return on sales (double that of FedEx). In all the
major cost items: labor, fuel, maintenance and depreciation, UPS is at an advantage to FedEx.
To investigate further we need to determine whether UPS’s higher sales margin is the result of
(a) its business mix (i.e. ground transportation being more profitable than air transportation),
(b) superior efficiency—i.e. UPS’s operational management and/or ability to motivate its
employees exceeded those of FedEx, (c) lower input costs—in particular, lower wage and salary
rates. The financial data can shed light on some of these, e.g. annual compensation per
employee for the two companies. However, for the most part this will require looking beyond
the financial data to inquire into management and operational systems.
4. The CEO of a chain of pizza restaurants wishes to initiate a program of CSR to be funded
by a 5% levy on the company’s operating profit. The board of directors, fearing a
negative shareholder reaction, is opposed to the plan. What arguments might the CEO
use to persuade the board that CSR might be in the interests of shareholders, and what
types of CSR initiatives might the program include to ensure that this was the case?
Copyright © 2025 John Wiley & Sons, Inc. 2
, The key here is to identify convergence between the firm’s CSR policies and the interests of
shareholders. The arguments made by Porter and Kramer (see pp. 48-50) provide the basic
arguments. In terms of the “sustainability argument” this implies that the pizza chain should
invest in the communities within which it resides. This might involve providing jobs for
disadvantaged youths, involving itself in local charities, using local suppliers and contractors
wherever possible. In the long terms it would mean supporting the natural environment
through involvement in energy reduction and waste recycling programs. In terms of the
“reputation argument” the chain might seek to improve its image among its customers by many
of the same policies—the key however is (a) to focus on initiatives that are clearly visible to key
stakeholders (e.g. customers) and (b) select initiatives that are most appealing to the most
important of these stakeholders and have the biggest potential payoff to the firm in terms of
future revenue generation. The emphasis should be on initiatives that have an impact within
the local markets of the firm’s pizza restaurants.
5. Nike, a supplier of sports footwear and apparel, is interested in the idea that it could
increase its stock market value by creating options for itself. What actions might Nike
take that might generate option value?
The discussion of real options (pp. 51-53) points to two major types of option: flexibility options
and growth options. Nike could create options be increasing flexibility throughout its whole
range of activities. For example, to take account of opportunities to exploit lower costs resulting
from exchange rate movements it could move to shorter contracts with its suppliers or have
contracts which are more flexible with regard to quantity. It could require that suppliers
reorganize their production processes to allow greater flexibility with regard to color and size to
permit faster responses to market preferences. In terms of growth options, Nike could make
initial investments in new product areas, new markets, and new product and process
technologies. Alliances including minority investments in companies which offer the potential
to diversify into new product areas (e.g. emerging sports such as pickleball/padel) would also
create option value.
Copyright © 2025 John Wiley & Sons, Inc. 3
, Contemporary Strategy Analysis (12th edition)
SUGGESTED ANSWERS TO SELF-STUDY QUESTIONS
Chapter 3
Industry Analysis: The Fundamentals
1. From Table 3.1, select a high-profit industry and a low-profit industry. From what you
know of the structure of your selected industries, use the five forces framework to
explain why profitability has been high in one industry and low in the other.
For each of your selected industries, it is possible to analyse all five of the forces of
competition that impact the industry. However, to speed up the analysis it is best to
concentrate on those forces of competition that, at first sight, appear to be critically
important in driving profitability in the industry under consideration.
High profit industries:
Tobacco. The high profitability of the industry is primarily a result of limited competitor
rivalry within the industry. This reflects high concentration (US industry dominated by Altria
and R.J. Reynolds) and high product differentiation (most consumers strongly brand loyal).
Other forces also weak: entry barriers high (government restrictions of advertising handicaps
potential entrants); the only close substitutes are hand rolled cigarettes and e-cigarettes—
but these are also supplied by the major tobacco companies; supplier power weak (tobacco
growers are fragmented); so is buyer power (cigarettes distributed through very wide range
of retail outlets, none with significant clout).
Aerospace and Defence. The industry has two main segments: civil and military. Both
segments are characterized by very high concentration, highly differentiated products, and
very high barriers to entry. Customers become captive as a result of long product life spans
and the need for spares and service.
Household & personal products. Industry rivalry weak due to few competitors (many product
areas dominated by P&G and Unilever) and high levels of product differentiation (supported
by heavy advertising) resulting in brand-loyal, price insensitive customers and limited
incentives for the main companies to compete on price. Barriers to entry high due to control
over distribution (newcomers have difficulty getting shelf space).
Healthcare Products. The industry comprises a diverse array of devices and non-durable
medical products hence there is substantial product differentiation and competition is
limited by the prevalence of patents. Price competition is further limited by the lack of buyer
power—patents have little choice, and hospitals and healthcare providers simply pass on
costs to patients and insurance companies. Entry barriers are high due to R&D outlays and
regulations.
Low profit industries:
Motor vehicles. The key force here is internal industry rivalry. There are about 20 major
global producers of automobiles. Most of these have excess capacity. The importance of
scale economies mean that they all wish to expand market share. Among mass-market
vehicles, product differentiation and brand loyalty are weak. The suppliers of sophisticated,
technology-intensive components (e.g. antilock braking systems, fuel injection systems, etc.)
exert significant supplier power. Ride-share services are increasingly important substitutes
Copyright © 2025 John Wiley & Sons, Inc. 1
