The Concept Of Corporate Strategy

The Concept of Corporate Strategy The Concept of Corporate Strategy Kenneth R. Andrews Donald Kirk David Professor of Business Administration Emeritus Harvard University Third Edition 1987 IRWIN Homewood, Illinois 60430 © DOW JONES-IRWIN, 1971 © RICHARD D. IRWIN, INC., 1980, and 1987 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. ISBN 0-256-03629-2 Library of Congress Catalog Card No. 86-81803 Printed in the United States of America 234567890ML43210987 Preface This book, originally published in 1971, revised in 1980, and pre­ sented now in a third edition, is still dedicated to this classically simple idea: The highest function of an executive is leading the continuous process that shapes the nature of an organization and determines, revises, and achieves its purposes. Management in the business enterprise is the art form I have in mind. But educational institutions, other nonprofit undertakings, governments, and asso­ ciations of professionals have as much or greater need for the kind of strategic management described here. The central idea applies equally to individuals who, rather than drift through life, wish to contribute to the purposes of organizations and society that are worth serving. The substance of this book is essentially that of another titled Business Policy: Text and Cases, also published by Richard D. Irwin, Inc. This casebook in business policy, widely used in busi­ ness schools and executive education programs, currently appears in its sixth edition, with C. Roland Christensen, Joseph L. Bower, Michael E. Porter, Richard G. Hamermesh, and me as its com­ pilers. This version of the current text is published for use by the executive readers who will apply it in detail to their own compa­ nies as their single crucial case. It is available also to educators to use with sequences of cases different from the selection we offer. The hundreds of case studies undertaken over the years to under­ stand how policy decisions are made in business have made possi­ ble a practitioner-oriented theory of general management. ComV vi Preface pany cases disciplined by field research skills and standards re­ veal, when subjected to the analytical approach described here, how the process of decision making might become more accurate and productive. That strategic decision should be more accurate and productive has become obvious. During the decade of the 1980s American business management, taken as a whole, faltered in world competi­ tion. The emulative Japanese, in particular, are popularly thought to have surpassed American managers in techniques for increasing productivity, speeding up the transition of new products from labo­ ratory to market, and winning consumer loyalty with reliable high quality. They are held to be equally skilled in cooperating with government to succeed in export markets rather than only compet­ ing with each other domestically. The rise of Japanese industry has been blessed by temporary advantages like the strength of the dollar in relation to the yen and supported by ingenious forms of protectionism. But its real accomplishment cannot be denied. As we have become used to seeing Japanese industry progress from low-cost production of standard products to world-class perfor­ mance in high technology products like electronics and ceramics, it has become evident that the crucial difference between American and Japanese management is strategic perspective. In the United States, the pressure to keep quarterly earnings increasing regu­ larly to support share price is intense. Huge pension funds are managed by pe