CH-12-13 Strategic Leadership – Strategic Management: Concepts and Cases: Competitiveness and Globalization : Book Guide

This Document Contains Chapters 12 to 13 Chapter 12 Strategic Leadership ANSWERS TO REVIEW QUESTIONS 1. What is strategic leadership? Why are top-level managers considered important resources for an organization? Strategic leadership is a complex form of leadership in organizations. It means that the leader must have the ability to manage through others. Being a strategic leader requires the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary. Top executives are important to effective strategy formulation and implementation. A key reason for this is that the strategic decisions made by top managers influence the firm’s design and performance outcomes. Thus, having a top management team with superior managerial skills is a critical element of organizational success. In addition to determining new strategic initiatives, top-level managers also develop the appropriate organizational structure and reward systems of a firm. Furthermore, top executives have a major effect on a firm’s culture. Research suggests that managers’ values are critical in shaping a firm’s cultural values—i.e., top executives have an important effect on organizational activities and performance. The significance of this effect should not be underestimated. 2. What is a top management team, and how does it affect a firm’s performance and its abilities to innovate and design and implement effective strategic changes? The top management team includes the key managers responsible for formulating and implementing the organization’s strategies. Typically, the top management team includes the officers of the corporation as defined by the title of vice president and above and/or by service as a member of the board of directors. The quality of the strategic decisions made by a top management team affects the firm’s ability to innovate and engage in effective strategic change. Given the challenges, it is imperative that firms try to form a top management team with the appropriate knowledge and expertise to operate the internal organization, yet also deal with external stakeholders. This normally requires a heterogeneous top management team, one composed of individuals with different functional backgrounds, experiences, and education. The more heterogeneous the team, the more capacity it has to provide effective strategic leadership for the formulation of strategy. Members of a heterogeneous top management team benefit from discussing varied perspectives, which increases the quality of decisions. This is especially true when a synthesis emerges from the conversations generated from diverse ideas, which is generally superior to individual perspectives. The net benefit of these actions is market share gains and above-average returns. In sum, heterogeneity among top management team members promotes effective debate, which leads to better strategic decisions and, in turn, higher firm performance. Heterogeneous top management teams are also positively associated with innovation and strategic change. Heterogeneity may force the team or some of its members to “think outside the box” and thus be more creative in their thinking and decisions. Therefore, firms that need to change their strategies are more likely to do so if they have top management teams with diverse backgrounds and expertise. A top management team with various areas of expertise is more likely to identify environmental changes (opportunities and threats) or changes within the firms (strengths and weaknesses) that require a different strategic direction. 3. What is the managerial succession process? How important are the internal and external managerial labor markets to this process. The managerial succession process is the process that firms undertake to select a new CEO to lead the firm. The succession process is a primary responsibility of the firm’s board of directors and should involve the incumbent CEO as well. Succession planning is important to ensure that the board’s expectations of the CEO and his/her top management team are realized. There are two types of managerial labor markets (internal and external) from which organizations select managers and strategic leaders. An internal managerial labor market consists of the opportunities for managerial positions within a firm, whereas an external managerial labor market is the collection of career opportunities for managers in organizations outside of the one for which they currently work. Several benefits accrue to firms using the internal labor market to select a new CEO. Because they have experience with the firm and the industry environment, insiders are familiar with company products, markets, technologies, and standard operating procedures. Additionally, internal hiring produces less turnover among existing personnel, many of whom possess valuable firm-specific knowledge. Therefore, if the firm is performing well, internal succession is more likely to lead to knowledge retention and sustained high performance. Employees usually prefer using the internal managerial labor market to select top management team members and the CEO. The selection of insiders to fill top-level management positions reflects a desire for continuity and a continuing commitment to the firm’s current vision, mission, and chosen strategies. In contrast, valid reasons exist for a firm to select an outsider as its new CEO. For example, research suggests that long tenure with a firm seems to reduce the number of innovative ideas top executives are able to develop to cope with conditions facing their firm. Given the importance of innovation for firm success in the 21st century competitive landscape, an inability to innovate and/or to create conditions that stimulate innovation is a liability for a strategic leader. In contrast to insiders, CEOs selected from outside the firm may have broader, less limited perspectives and usually encourage innovation and strategic change. 4. What is the effect of strategic leadership on determining the firm’s strategic direction? Determining the strategic direction of a firm refers to the development of a firm’s long-term vision, normally looking at least 5 to 10 years into the future. Whereas the core ideology motivates employees through the company’s heritage, the envisioned future encourages employees to stretch beyond their expectations and requires significant change and progress. The envisioned future serves as a guide to many aspects of a firm’s strategy implementation process, including motivation, leadership, employee empowerment, and organizational design. Nonetheless, it is important not to lose sight of the strengths of the organization in making changes required by a new strategic direction. The goal is to balance the firm’s short-term need to adjust to a new vision while maintaining its long-term survivability by managing its portfolio of resources effectively. 5. How do strategic leaders effectively manage their firm’s resource portfolio to exploit its core competencies and leverage the human capital and social capital to achieve a competitive advantage?) Strategic leaders manage the firm’s portfolio of resources by organizing them into capabilities, structuring the firm to use the capabilities, and developing and implementing a strategy to leverage those resources to achieve a competitive advantage. In particular, strategic leaders must exploit and maintain the firm’s core competencies and develop and retain the firm’s human and social capital. Typically, core competencies relate to an organization’s functional skills, such as manufacturing, finance, marketing, and research and development. Firms develop and exploit core competencies in many different functional areas. Strategic leaders must verify that the firm’s competencies are emphasized in strategy implementation efforts. In many large firms, and certainly in related diversified ones, core competencies are effectively exploited when they are developed and applied across different organizational units. Firms must continuously develop or even change their core competencies to stay ahead of the competition. Additionally, firms must guard against the competence becoming a liability such that the firm is unwilling to change. Human capital refers to the knowledge and skills of a firm’s entire workforce. Investments in human capital are productive; in fact, people are perhaps the only truly sustainable source of competitive advantage. Human capital’s increasing importance suggests a significant role for the firm’s human resource management activities. Effective training and development programs increase the probability that a manager will be a successful strategic leader. These programs have grown progressively important to the success of firms as knowledge has become more integral to gaining and sustaining a competitive advantage. Additionally, such programs build knowledge and skills, inculcate a common set of core values, and offer a systematic view of the organization, thus promoting the firm’s strategic vision and organizational cohesion. The programs also contribute to the development of core competencies. Furthermore, they help strategic leaders improve skills that are critical to completing other tasks associated with effective strategic leadership. Thus, building human capital is vital to the effective execution of strategic leadership. Strategic leaders must acquire the skills necessary to help develop human capital in their areas of responsibility. When human capital investments are successful, the result is a workforce capable of learning continuously, which minimizes the risk of making errors. Strategic leaders tend to learn more from their failures than their successes because they sometimes make the wrong attributions for the successes. Learning and building knowledge is important for creating innovation in firms, and innovation leads to competitive advantage. Social capital involves human relationships that help the firm accomplish tasks and create value for customers and shareholders. Social capital is a critical asset for a firm. Inside the firm, employees and units must cooperate to get the work done. In multinational organizations, units often must cooperate across country boundaries on activities such as R&D to produce outcomes needed by the firm (e.g., new products). External social capital has become critical to firm success in the last several years. Few firms, if any, have all the resources they need to compete in global (or domestic) markets. Thus, they establish alliances with other firms that have complementary resources in order to gain access to them. These relationships must be effectively managed to ensure that the partner trusts the firm and is willing to share the desired resources. 6. What must strategic leaders do to develop and sustain an effective organizational culture? An organizational culture consists of a complex set of ideologies, symbols, and core values that is shared throughout the firm and that influences the way it conducts business. Evidence suggests that a firm can develop core competencies both in terms of the capabilities it possesses and the way the capabilities are used to produce desired outcomes. In other words, because it influences how the firm conducts its business and helps regulate and control employee behavior, organizational culture can be a source of competitive advantage. Thus, shaping the context within which the firm formulates and implements its strategies—that is, shaping the organizational culture—is a central task of strategic leaders. Organizational culture often encourages (or discourages) the pursuit of entrepreneurial opportunities, especially in large firms. Successful outcomes derived through employees’ pursuit of entrepreneurial opportunities are a major source of growth and innovation for firms. Five dimensions characterize a firm’s entrepreneurial mind-set—autonomy, innovativeness, risk taking, proactiveness, and competitive aggressiveness. Changing organizational culture is more difficult than maintaining it, but effective strategic leaders recognize when change is needed. Incremental changes to the firm’s culture typically are used to implement strategies. However, more significant and sometimes even radical changes to organizational culture are designed to support the selection of strategies that differ from the ones the firm has implemented historically. Regardless of the reasons for change, shaping and reinforcing a new culture requires effective communication and problem solving, along with the selection of the right people (those who have the values desired for the organization), effective performance appraisals (establishing goals and measuring individual performance toward goals that fit with the new core values), and appropriate reward systems (rewarding the desired behaviors that reflect the new core values). Evidence suggests that cultural changes succeed only when the firm’s CEO, other key top management team members, and middle-level managers actively support them. One catalyst for change in organizational culture, particularly for critical changes, is the selection of new top management team members from outside the corporation. 7. As a strategic leader, what actions could you take to establish and emphasize ethical practices in your firm? Strategic leaders are challenged to take actions that increase the probability that an ethical culture will exist in their organization. One means of doing this that is gaining favor in companies is to institute a formal program to manage ethics in the organization. While these formal ethics programs operate much like control systems, they help inculcate values throughout the organization as well. Therefore, when these efforts are successful, the practices associated with an ethical culture become institutionalized in the firm; that is, they become the set of behavioral commitments and actions accepted by most of the firm’s employees and other stakeholders with whom employees interact. Other actions that strategic leaders can take to develop an ethical organizational culture include: (1) Establishing and communicating specific goals to describe the firm’s ethical standards (e.g., developing and disseminating a code of conduct), (2) Continuously revising and updating the code of conduct, based on inputs from people throughout the firm and from other stakeholders (e.g., customers and suppliers), (3) Disseminating the code of conduct to all stakeholders to inform them of the firm’s ethical standards and practices, (4) Developing and implementing methods and procedures to use in achieving the firm’s ethical standards (e.g., use of internal auditing practices that are consistent with the standards), (5) Creating and using explicit reward systems that recognize acts of courage (e.g., rewarding those who use proper channels and procedures to report observed wrongdoings), and (6) Creating a work environment in which all people are treated with dignity. These actions increase in effectiveness when they are taken simultaneously, making them mutually supportive. 8. Why are strategic controls and financial controls important aspects of the strategic management process? Organizational controls have long been viewed as an important part of strategy implementation processes. Controls are necessary to help ensure that firms achieve their desired outcomes of strategic competitiveness and above-average returns. Defined as the formal, information-based procedures used by managers to maintain or alter the patterns of activities within the organization, controls help strategic leaders build credibility, demonstrate the value of strategies to the firm’s stakeholders, and promote and support strategic change. Most critically, controls provide the parameters within which strategies are to be implemented as well as corrective actions to be taken when implementation-related adjustments become necessary. Financial controls focus on short-term financial outcomes. In contrast, strategic controls focus on the content of strategic actions, rather than their outcomes. Some strategic actions can be correct, but poor financial outcomes may still result from external conditions such as economic problems, unexpected domestic or foreign government actions, or natural disasters. Therefore, an emphasis on financial control often produces more short-term and risk-averse managerial decisions because financial outcomes may be due to events beyond managers’ direct control. Alternatively, strategic controls encourage lower-level managers to make decisions that incorporate moderate and acceptable levels of risk because outcomes are shared between the business-level executives making strategic proposals and the corporatelevel executives evaluating them. Successful strategic leaders balance strategic controls and financial controls with the intent of achieving more positive long-term returns. In fact, most corporate restructuring is designed to refocus the firm on its core businesses, thereby allowing top executives to reestablish strategic control of their separate business units. Thus, both types of controls are important. The balanced scorecard approach underscores this essential notion. INSTRUCTOR'S NOTES FOR EXPERIENTIAL EXERCISES EXERCISE 1: THE CEO AND TOP MANAGEMENT TEAM The goal of this exercise is to allow the students to examine the relationship between the CEO and his or her team and his or her board. These relationships are vitally important in being able to understand how power is influential, or not, in the firm. A good way to debrief this assignment is to summarize the team’s findings and then attempt to find some common themes. You may want to put a matrix together similar to that below: Company Name Industry CEO Tenure TMT Tenure Board Tenure % board members chosen with incumbent CEO Any inter locking directors % TMT hired by incumbent CEO By doing a review such as the above the class should be able to uncover the ways in which the power relationship can be altered by various dynamics. Such as: * Did a majority of the board become board members since the CEO was hired as CEO? * Does the CEO and other board members serve on other firm’s boards together? * Did most of the TMT get hired to their current position by the CEO, in such a case you may suspect an allegiance to the CEO. * Are there any unusual findings regarding industry participation? For example we would expect to see difference between automobile manufacturing and software development. EXERCISE 2: HOW COME THEY HIRED THAT PERSON? This exercise allows students to use real-world examples of corporate leaders to understand the concepts of strategic leadership (or lack thereof) and managerial succession. To help prepare for the presentations, you may familiarize yourself with the leaders identified in the exercise. Some articles on their dismissals have been identified below: Ron Johnson- J.C. Penney • The 5 Big Mistakes That Led to Ron Johnson’s Ouster at JC Penney http://business.time.com/2013/04/09/the-5-big-mistakes-that-led-to-ron-johnsonsouster-at-jc-penney/#ixzz2bzsdXXDy John Riccitiello- Electronic Arts Inc • John Riccitiello Steps Down As EA CEO - Why, And What Now? http://www.forbes.com/sites/danielnyegriffiths/2013/03/18/john-riccitiello-stepsdown-as-ea-ceo/ Andrew Mason- Groupon • Groupon Fires CEO Andrew Mason: The Rise and Fall of Tech’s Enfant Terrible http://business.time.com/2013/03/01/groupon-fires-ceo-andrew-mason-the-riseand-fall-of-techs-enfant-terrible/#ixzz2bzu7Rtm9 • Groupon's Stock Since Andrew Mason Was Fired http://www.businessinsider.com/chart-of-the-day-groupons-stock-since-andrew-masonwas-fired-2013-8 Brian Dunn- Best Buy • Why Best Buy CEO Brian Dunn had to Quit http://www.forbes.com/sites/bruceupbin/2012/04/10/why-best-buy-ceo-briandunn-had-to-quit/ Andrea Jung- Avon • Avon Chairman Andrea Jung to Resign; Fred Hassan to Take Over http://online.wsj.com/article/SB10000872396390443635404578038203052881038.html • Avon's Jung to leave board early; new CEO in spotlight http://www.reuters.com/article/2012/10/05/us-avon-jung-idUSBRE8940SZ20121005 Leo Apotheker- HP • HP's Ray Lane on why Leo Apotheker had to go http://news.cnet.com/8301-1001_3-20110396-92/hps-ray-lane-on-why-leoapotheker-had-to-go/ Christopher Kubasik- Lockheed Martin • Lockheed CEO-Elect Kubasik Fired Over Improper Relationship With Female Subordinate http://www.forbes.com/sites/afontevecchia/2012/11/09/lockheed-ceo-electkubasik-fired-over-relationship-with-subordinate/ Allow teams to present their findings on the leaders identified in the exercise. Be sure that teams specific identify which component(s) of strategic leadership the CEO was failing -- strategic direction, management of resource portfolio, organizational culture, ethical practices, balanced organizational controls. You may take the discussion a step further and ask teams if it had been up to them: Would they have dismissed the executive in question? And would they have chosen a different successor? Why or why not? INSTRUCTOR'S NOTES FOR VIDEO EXERCISES Title: AN EXAMPLE OF STRATEGIC LEADERSHIP: MEG WHITMAN/CEO/EBAY RT: 4:20 Topic Key: Strategic leadership, Top management team, Human Capital, Social Capital, Organizational culture In an interview, Meg Whitman describes the company and site, Auction Classifieds, when she went to interview for the job of CEO. Today, eBay is one of the great success stories of Internet commerce with over 10 million registered users, 224 million in revenue, and most important for an e-business an actual income of 10.8 million. Meg Whitman indicates that leaving the land-based economy for the Internet has meant being a pioneer by creating an entirely new global marketplace at the beginning of an Internet revolution. Whitman attributes the womanly aspect of being a consensusoriented manager—being raised to build consensus, be a team player, not be ego driven, and happy to have other people take credit for things has proven effective in the eBay environment. Whitman is noted for living a simple life such as driving a Jeep and living in a simple house with a couple of kids. She says that what drives her to keep working is that she loves what she does in helping build eBay into a company she thinks it can be or the next chapter in the Ebay story. As mom, Meg Whitman, says that her success has meant making some real and difficult sacrifices. She says her biggest regret is not spending as much time with the kids. She admits she missed certain parts of their development and wasn’t there to see some of the really fun things they did. She concurs that such time can never be gotten back and that those trade-offs are there for people like her. She says when children are at the ages of 1 and 3 or 2 and 5 there is a lot of guilt for not being there so you have to love what you do. Her first advice to young women coming out of college or business school is that you find something that you love because you will do better at it and it will make making those trade-offs a bit easier. She doesn’t believe that men worry about such issues as much because they may have stay at home wives, which is an incredible support system allowing them to focus perhaps 100% of their efforts on their career. She believes that as a woman, you can have a wonderful life but you must decide what trade-offs you are willing to make, which is different for every single person. She firmly says she would do it over again. Also check out http://blogs.forbes.com/clareoconnor/2011/07/29/ebay-billionaire-megwhitman-eyeing-vp-role-under-romney/ Suggested Discussion Questions and Answers 1. In what ways did Meg Whitman’s characteristics and the orientations resulting from them contribute to her effectiveness as CEO at eBay? o Text: Strategic leadership is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary. Strategic leadership involves managing through others, managing an entire enterprise rather than a functional subunit, and coping with change that continues to increase in the global economy. o Meg Whitman characteristics: Consensus-oriented manager, being able to build consensus, being a team player, flexibility, experience in making trade-offs with children and work, and allowing others to take credit and have a role in decision making 2. How is Meg Whitman appropriate for a top management team? o Text: Top executives need to have self-confidence but must guard against allowing it to become arrogance and a false belief in their own invincibility. o Meg Whitman: She is a consensus builder, not ego driven, and allows others a role in determining strategic opportunities and handling problems. Being a female, she also brings a heterogeneous perspective to top management. 3. What do you think would be Whitman’s approach to human capital? o Human Capital Approach: Meg’s approach, due to her knowledge of people’s characteristics, would include development and retention of human capital. She would consider employees as a capital resource, which requires continuous investment in training and development programs. 4. How important is social capital to the success of eBay? o Text: Social capital involves relationships inside and outside the firm that help the firm accomplish tasks and create value for customers and shareholders. o eBay: Internally, employees must cooperate to get the work done. Externally, eBay must be able to obtain resources needed to compete, such as in strategic alliances that would provide multiple capabilities for future opportunities. 5. What was the organizational culture like at eBay during Meg Whitman’s time as CEO? Is there evidence that an entrepreneurial mind-set was part of that culture? If so, what is that evidence? o Text: Organizational culture is a complex set of ideologies, symbols, and core values that are shared throughout the firm and influence the way business is conducted. o eBay’s culture: supportive, innovative, caring, challenging, decisive, entrepreneurial mind-set: o Text: In firms of all sizes, strategic entrepreneurship is more successful when employees have an entrepreneurial mind-set. Five dimensions characterize a firm’s entrepreneurial mind-set: autonomy, innovativeness, risk taking, proactiveness, and competitive aggressiveness. o eBay: Meg’s characteristics such as being able to make trade-offs, allowing for consensus decision-making, being a team player, and happy to have other people take credit for things apparently have been instrumental in bringing eBay from Auction Classifieds. Given the success of eBay, it can be concluded that she encourages and promotes innovation from her people, which coincides with the characteristics of a firm with an entrepreneurial mind-set. ADDITIONAL QUESTIONS AND EXERCISES The following questions and exercises can be presented for in-class discussion or assigned as homework. Application Discussion Questions 1. Have the students choose a CEO of a prominent firm that they believe exemplifies the positive aspects of strategic leadership. What actions does this CEO take that demonstrate effective strategic leadership? What are the effects of those actions on the firm’s performance? Positive Strategic Leadership Example: Students might choose Satya Nadella of Microsoft as a positive strategic leader. His actions, such as fostering a culture of collaboration and innovation, pivoting to cloud services, and emphasizing inclusivity, have revitalized Microsoft’s brand and market performance. These initiatives have significantly increased the company’s market capitalization and employee engagement, showcasing the impact of effective strategic leadership. 2. Now have the students select a CEO of a prominent firm that they believe does not exemplify the positive aspects of strategic leadership. What actions did this CEO take that are inconsistent with effective strategic leadership? How have those ineffective actions affected the firm’s performance? Negative Strategic Leadership Example: A student may select Elizabeth Holmes of Theranos as an example of ineffective strategic leadership. Her actions, including misleading stakeholders about the technology's capabilities and prioritizing ambition over transparency, led to the company's collapse and legal issues. This ineffective leadership ultimately resulted in substantial financial losses and a tarnished reputation in the healthcare industry. 3. What are managerial resources? What is the relationship between managerial resources and a firm’s strategic competitiveness? Managerial Resources: Managerial resources refer to the skills, capabilities, and experiences of a firm's leaders and managers. These resources are critical for strategic competitiveness, as effective leadership drives strategic decision-making, resource allocation, and organizational adaptability. Strong managerial resources can enhance a firm’s ability to identify opportunities, navigate challenges, and execute strategies effectively. 4. Have students examine some articles in the popular press and select an organization that recently went through a significant strategic change. They should collect as much information as they can about the organization’s top management team. Is there a relationship between the top management team’s characteristics and the type of change the organization experienced? If so, what are the nature and outcome of that relationship? Top Management Team and Strategic Change: Students could examine Ford Motor Company under Jim Hackett, noting how his background in design thinking and innovation led to a strategic shift toward electric vehicles and mobility solutions. The characteristics of the top management team, such as their diverse expertise and collaborative mindset, directly influenced the organization’s successful adaptation to changing market demands. 5. Ask students to read some articles in the popular press and identify two new CEOs, one from the internal managerial labor market and one from the external labor market. Why do they think these individuals were chosen? What do they bring to the job, and what strategy do students think they will implement in their respective organizations? Internal vs. External CEO Selection: A student might identify Tim Cook of Apple (internal) and Phebe Novakovic of General Dynamics (external). Cook was chosen for his deep knowledge of Apple’s operations and culture, while Novakovic brought fresh perspectives from outside the company. Students might speculate that Cook will continue focusing on product innovation, while Novakovic may emphasize defense technology advancements to strengthen the company’s market position. 6. Based on this chapter and accounts in the popular press, each student should select a CEO who has exhibited vision. Has this CEO’s vision been realized? If so, what have its effects been? If the vision has not been realized, why not? CEO Vision Realization: A student could select Elon Musk of Tesla as a visionary leader. Musk’s vision of sustainable energy and transportation has largely been realized, evidenced by Tesla’s market leadership in electric vehicles and significant revenue growth. However, challenges such as production delays and regulatory scrutiny highlight the complexities of fully realizing such ambitious visions. 7. Students should identify a firm in which they believe strategic leaders have emphasized and developed human capital. What are the effects of this emphasis and development on the firm’s performance? Emphasis on Human Capital: A good example is Google, where strategic leaders have prioritized employee development and well-being. This emphasis on human capital has fostered innovation, increased job satisfaction, and enhanced productivity, contributing to Google's sustained competitive advantage and strong performance in the tech industry. 8. Have students select an organization that has a unique organizational culture. What characteristics of that culture make it unique? Has the culture had a significant effect on the organization’s performance? If so, what is that effect? Unique Organizational Culture: Students might explore the culture at Zappos, known for its customer-centric approach and emphasis on employee happiness. This unique culture fosters strong employee engagement and loyalty, leading to exceptional customer service and brand loyalty, significantly enhancing Zappos’ market performance and reputation. 9. Why is the strategic control exercised by a firm’s strategic leaders important for long-term competitiveness? How do strategic controls differ from financial controls? Importance of Strategic Control: Strategic control is essential for long-term competitiveness as it ensures alignment between a firm's strategy and its operations, facilitating proactive adjustments to market changes. Unlike financial controls, which focus on fiscal performance, strategic controls assess the effectiveness of strategies in achieving broader organizational goals, allowing firms to adapt and thrive in dynamic environments. Ethics Questions 1. As discussed in this chapter, effective strategic leadership occasionally requires managers to make difficult decisions. Is it ethical for managers to make these types of decisions without obtaining feedback from employees about the effects of those decisions? Be prepared to justify your response. Ethical Decision-Making Without Feedback: It is generally unethical for managers to make significant decisions without obtaining feedback from employees, as this can undermine trust and engagement. Employees are often directly affected by these decisions and can provide valuable insights. Managers should seek input to ensure that decisions consider the impact on all stakeholders, fostering a more inclusive and ethical organizational culture. 2. As an employee with less than one year of experience in a firm, what actions would you pursue if you encountered unethical practices by a strategic leader? Responding to Unethical Practices: As an employee with less than a year of experience, I would document the unethical practices I encountered and seek guidance from a trusted mentor or HR representative. If the issue persists, I would consider reporting it through the company’s whistleblower policy. It's important to address unethical behavior while ensuring that I protect myself and follow proper channels for reporting. 3. Are firms ethically obligated to promote employees from within, rather than relying on the external labor market to select strategic leaders? What reasoning supports your position? Obligation to Promote Internally: Firms are not strictly obligated to promote from within, but doing so can enhance ethical practices by rewarding loyalty and fostering a culture of growth. Promoting from within can motivate employees and build trust, but firms should balance this with the need for fresh perspectives and skills. Ultimately, ethical leadership involves transparency in hiring and promotion practices. 4. What ethical issues, if any, are involved with a firm’s ability to develop and exploit a core competence in the manufacture of goods that may be harmful to consumers (e.g., cigarettes)? Ethical Issues in Core Competence Development: Developing a core competence in manufacturing harmful goods, like cigarettes, raises significant ethical concerns. Firms must consider the societal impact and potential harm to consumers. Ethically, companies should weigh profit against their responsibility to public health, potentially leading to actions like investing in harm-reduction alternatives or transparent communication about product risks. 5. As a strategic leader, would you feel ethically responsible for developing your firm’s human capital? Why or why not? Do you believe that your position is consistent with the majority or minority of today’s strategic leaders? Responsibility for Developing Human Capital: As a strategic leader, I would feel ethically responsible for developing my firm's human capital, as it directly affects employee satisfaction, performance, and retention. Investing in people demonstrates a commitment to their growth and well-being. This view aligns more with a minority of leaders who prioritize human capital, as some focus primarily on short-term financial gains. 6. Select an organization, social group, or volunteer agency of which you are a member that you believe has an ethical culture. What factors caused this culture to be ethical? Are there any events that would cause the culture to become less ethical? If so, what are they? Ethical Culture in an Organization: An example of an organization with an ethical culture could be a volunteer agency focused on community service. This culture is often rooted in clear values, open communication, and a commitment to transparency. Events that could undermine this culture include leadership changes that prioritize profit over mission or instances of misconduct that go unaddressed, potentially leading to a loss of trust among members. Internet Exercise Women in the United States are advancing to top positions in some of America’s leading firms. Today, more than 10 percent of Fortune 500 companies have women in 25 percent of their corporate officer teams, an increase from 5 percent in 1995. The advancement of women in this area sounds promising. Go to the Working Woman website at http://www.workingwoman.com to see which companies were rated as leaders in hiring women executives. What practices in these companies promote the selection of women for managerial roles? *e-project: Amazon.com has revolutionized the Internet shopping industry, a fact that can, in large part, be accredited to Jeff Bezos, America’s number-one CEO of an Internet-based company. Learn about Bezos’s background through the Amazon home page and other web resources. What was his initial strategy in creating Amazon? Was he able to implement the strategy effectively? What successes spurred him to expand and diversify his web-based business? Chapter 13 Strategic Entrepreneurship ANSWERS TO REVIEW QUESTIONS 1. What is strategic entrepreneurship? What is corporate entrepreneurship? Strategic entrepreneurship is taking entrepreneurial actions using a strategic perspective. When engaging in strategic entrepreneurship, the firm focuses on finding opportunities in its external environment that it can try to exploit through innovation. Identifying opportunities to exploit through innovation is the entrepreneurship part of strategic entrepreneurship, whereas determining the best way to manage the firm’s innovation efforts is the strategic part. Thus, strategic entrepreneurship involves firms integrating their actions to find opportunities and to successfully innovate as a primary means of pursuing them. In the 21st century competitive landscape, firm survival and success increasingly is a function of a firm’s ability to continuously find new opportunities and quickly produce innovations to pursue them. The focus in Chapter 13 is on innovation and entrepreneurship within established organizations. This phenomenon is called corporate entrepreneurship, which is the use or application of entrepreneurship within an established firm. An important part of the entrepreneurship discipline, corporate entrepreneurship is widely thought to be linked to the survival and success of established corporations. Indeed, established firms use entrepreneurship to strengthen their performance and to enhance growth opportunities. Of course, innovation and entrepreneurship play a critical role in the degree of success achieved by start-up entrepreneurial ventures as well. 2. What is entrepreneurship, and what are entrepreneurial opportunities? Why are they important for all aspects of the strategic management process? Entrepreneurship is the process by which individuals or groups identify and pursue entrepreneurial opportunities without being immediately constrained by the resources they currently control. Entrepreneurial opportunities are conditions in which new goods or services can satisfy a need in the market. These opportunities exist because of competitive imperfections in markets and among the factors of production used to produce them and when information about these imperfections is distributed asymmetrically across individuals. Entrepreneurial opportunities come in a host of forms (e.g., the chance to develop and sell a new product and the chance to sell an existing product in a new market). Firms should be receptive to pursuing entrepreneurial opportunities whenever and wherever they may surface. The contemporary competitive landscape presents firms with substantial change, a global marketplace, and significant complexity and uncertainty. Because of this uncertain environment, firms cannot easily predict the future and must therefore develop strategic flexibility to have a range of strategic alternatives that they can implement as needed. They can do this by acquiring resources and building the capabilities that allow them to take necessary actions to adapt to or proact in a dynamic environment. In this environment, entrepreneurs and entrepreneurial managers design and implement actions that capture more of existing markets from less aggressive and innovative competitors while creating new markets. In effect, they are trying to create tomorrow’s businesses. 3. What are invention, innovation, and imitation? How are these concepts interrelated? Peter Drucker argued that “innovation is the specific function of entrepreneurship, whether in an existing business, a public service institution, or a new venture started by a lone individual.” Moreover, Drucker suggested that innovation is “the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth.” Thus, entrepreneurship and the innovation resulting from it are important for large and small firms, as well as for start-up ventures, as they compete. In fact, firms failing to innovate will stagnate. Indeed, the realities of competition in the 21st century competitive landscape suggest that “No company can maintain a long-term leadership position in a category unless it is in a continuous process of developing innovative new products desired by customers.” This means that innovation should be an intrinsic part of virtually all of a firm’s activities. Innovation is a key outcome firms seek through entrepreneurship and is often the source of competitive success, especially in turbulent, highly competitive environments. For example, research shows that firms competing in global industries that invest more in innovation also achieve the highest returns. In fact, investors often react positively to the introduction of a new product, thereby increasing the price of a firm’s stock. Innovation, then, is an essential feature of high-performance firms. Furthermore, “innovation may be required to maintain or achieve competitive parity, much less a competitive advantage in many global markets.” The most innovative firms understand that financial slack should be available at all times to support the pursuit of entrepreneurial opportunities. In his classic work, Schumpeter argued that firms engage in three types of innovative activity. Invention is the act of creating or developing a new product or process. Innovation is the process of creating a commercial product from an invention. Innovation begins after an invention is chosen for development. Thus, an invention brings something new into being, whereas an innovation brings something new into use. Accordingly, technical criteria are used to determine the success of an invention, whereas commercial criteria are used to determine the success of an innovation. Finally, imitation is the adoption of an innovation by similar firms. Imitation usually leads to product or process standardization, and many times products based on imitation are offered at lower prices, but without as many features. Entrepreneurship is critical to innovative activity in that it acts as the linchpin between invention and innovation. 4. What is an entrepreneur, and what is an entrepreneurial mind-set? Entrepreneurs are individuals, acting independently or as part of an organization, who see an entrepreneurial opportunity and then take risks to develop an innovation to pursue it. Often, entrepreneurs are the individuals who receive credit for making things happen! Entrepreneurs are found throughout an organization—from top-level managers to those working to produce a firm’s goods or services. Entrepreneurs tend to demonstrate several characteristics, including those of being optimistic, highly motivated, willing to take responsibility for their projects, and courageous. In addition, entrepreneurs tend to be passionate and emotional about the value and importance of their innovation-based ideas. Evidence suggests that successful entrepreneurs have an entrepreneurial mind-set. The person with an entrepreneurial mind-set values uncertainty in the marketplace and seeks to continuously identify opportunities with the potential to lead to important innovations. Because it has the potential to lead to continuous innovations, individuals’ entrepreneurial mind-sets can be a source of competitive advantage for a firm. Entrepreneurial mind-sets are fostered and supported when knowledge is readily available throughout a firm. Indeed, research has shown that units within firms are more innovative when they have access to new knowledge. Transferring knowledge, however, can be difficult, often because the receiving party must have adequate absorptive capacity (or the ability) to learn the knowledge. This requires that new knowledge be linked to existing knowledge. Thus, managers need to develop the capabilities of their human capital to build on their current knowledge base while incrementally expanding that knowledge to facilitate the development of entrepreneurial mind-sets. 5. What is international entrepreneurship? Why is it important? International entrepreneurship is “the process of creatively discovering and exploiting opportunities that lie outside a firm’s domestic markets in the pursuit of competitive advantage.” As the practices suggested by this definition show, entrepreneurship is a global phenomenon. A key reason for this is that in general, internationalization leads to improved firm performance. Nonetheless, decision makers should recognize that the decision to internationalize exposes their firms to various risks, including those of unstable foreign currencies, problems with market efficiencies, insufficient infrastructures to support businesses, and limitations on market size, among others. Thus, the decision to engage in international entrepreneurship should be a product of careful analysis. Because of its positive benefits, entrepreneurship is at the top of public policy agendas in many of the world’s countries, including Finland, Germany, Ireland, and Israel, as well as others. Placing entrepreneurship on these agendas may be appropriate in that some argue that regulation hindering innovation and entrepreneurship is the root cause of Europe’s productivity problems. In Ireland, for example, the government is “… particularly focused on encouraging new innovative enterprises that have growth potential and are export oriented.” Some believe that entrepreneurship is flourishing in New Zealand, a trend having a positive effect on the productivity of the nation’s economy. 6. How do firms develop innovations internally? Increasingly, successful R&D results from integrating the skills available in the global workforce. Firms seeking internal innovations through their R&D must understand that “Talent and ideas are flourishing everywhere—from Bangalore to Shanghai to Kiev—and no company, regardless of geography, can hesitate to go wherever those ideas are.” In the years to come, the ability to have a competitive advantage based on innovation may accrue to firms able to meld the talent of human capital from countries across the world. In the 21st century competitive landscape, R&D may be the most critical factor in gaining and sustaining a competitive advantage in some industries, such as pharmaceuticals. Larger, established firms, certainly those competing globally, often try to use their R&D labs to create competence-destroying new technologies and products. Being able to innovate in this manner can create a competitive advantage for firms in many industries. Although critical to long-term corporate success, the outcomes of R&D investments are uncertain and often cannot be achieved in the short term, meaning that patience is required as firms evaluate the outcomes that result from their R&D efforts. 7. How do firms use cooperative strategies to innovate and to have access to innovative capabilities? It is difficult for a firm to possess all the knowledge required to compete successfully in its product areas over the long term. Complicating this matter is the fact that the knowledge base confronting today’s organizations is not only vast, but also increasingly more specialized. Therefore, the knowledge needed to commercialize inventions is frequently embedded within different corporations. Strategic alliances are partnerships between firms whereby resources, capabilities, and core competencies are combined to pursue common interests and goals—namely, to gain either competitive parity or competitive advantage relative to rivals. Used with increasing frequency, one important reason firms form alliances is to produce or manage innovations (including sharing knowledge and skill sets between partners). Forming alliances for this purpose can yield value creation. Because of the importance of alliances, particularly in the development of new technology and in commercializing innovations, firms are beginning to build networks of alliances that represent a form of social capital to them. This social capital (in the form of relationships with other firms) helps them obtain the knowledge and other resources necessary to develop innovations. Knowledge from these alliances helps firms develop new capabilities. Some firms now even allow other companies to participate in their internal new product development processes. On the other hand, alliances formed to innovate are not without risks. One important risk is that a partner will appropriate a firm’s technology or knowledge and use it to enhance its own competitive abilities. To discourage this outcome, a firm needs to select its partners carefully. The ideal partner is one with complementary skills as well as compatible strategic goals. 8. How does a firm acquire other companies to increase the number of innovations it produces and improve its capability to produce innovations? Firms complete strategic acquisitions in an effort to continuously strengthen their ability to innovate. By integrating the capabilities of acquisitions with those it already owns, firms can continue producing and managing innovations in ways that create value for customers. Firms often seek innovation through more than one of the three approaches available to produce and manage innovations (i.e., internal corporate ventures, alliances, and acquisitions). Thus, firms can use alliances and acquisitions to appropriate what it hopes will be full value from its innovation activities. As with internal corporate venturing and strategic alliances, acquisitions are not a risk-free approach to producing and managing innovations. A key risk of acquisitions is that a firm may substitute an ability to buy innovations for an ability to produce innovations internally. Research suggests that this substitution may not be in the firm’s best interests. For example, firms gaining access to innovations through acquisitions risk reductions in both R&D inputs (investments in R&D) and R&D outputs (e.g., number of patents). Additional research shows that firms engaging in acquisitions introduce fewer new products to market. These relationships indicate that firms substitute acquisitions for internal corporate venturing processes. This substitution may take place because firms lose strategic control and emphasize financial control of original (and especially acquired) business units. Reduced innovation may not always be the result, but managers in acquiring firms should be aware of this potential outcome. 9. How does strategic entrepreneurship help firms create value? Newer entrepreneurial firms often are more effective than larger firms in identifying opportunities. Some believe that these firms tend to be more innovative as well because of their flexibility and willingness to take risks. Alternatively, larger and well-established firms often have more resources and capabilities to exploit opportunities that are identified. So, younger, entrepreneurial firms are generally opportunity seeking and more established firms are often advantage seeking. However, to compete effectively in the landscape of the 21st century, firms must identify and exploit opportunities, but do so while achieving and sustaining a competitive advantage. Thus, newer entrepreneurial firms must learn how to gain a competitive advantage and older more established firms must relearn how to identify entrepreneurial opportunities. The concept of strategic entrepreneurship suggests that firms can be simultaneously entrepreneurial and strategic, regardless of their size and age. Many entrepreneurial opportunities remain in international markets. Thus, firms should seek to enter and compete globally. Firms can learn new technologies and management practices from international markets and diffuse this knowledge throughout the firm. Furthermore, the knowledge learned can contribute to a firm’s innovations. Research has shown that firms operating in international markets tend to be more innovative. Small and large firms are now regularly moving into international markets. Both types of firms must also be innovative to compete effectively. Thus, with resources (human and social capital), taking advantage of opportunities in domestic and international markets and using the resources and knowledge gained in these markets to be innovative, firms achieve competitive advantages. In so doing they create value for their customers and shareholders. Firms that practice strategic entrepreneurship contribute to a country’s economic development. In fact, some countries such as Ireland have made dramatic economic progress by changing the institutional rules for businesses operating in the country. This could be construed as a form of institutional entrepreneurship. Likewise, firms that seek to establish their technology as a standard, also representing institutional entrepreneurship, are engaging in strategic entrepreneurship because creating a standard produces a sustainable competitive advantage for the firm. Research shows that because of its economic importance and individual motives, entrepreneurial activity is increasing across the globe. Furthermore, many women are becoming entrepreneurs because of the economic opportunity it provides and the individual independence it affords. In future years, entrepreneurial activity may increase the wealth of less affluent countries and continue to contribute to the economic development of more affluent countries. Regardless, the companies that practice strategic entrepreneurship are likely to be the winners in the twenty-first century. INSTRUCTOR'S NOTES FOR EXPERIENTIAL EXERCISES EXERCISE 1: CAN CORPORATIONS REALLY INNOVATE? This is a fairly straightforward exercise. Have each team present their findings on a company or web enabler for companies interested in improving their innovation or entrepreneurial capabilities. Following the presentations, encourage a discussion around trends they saw amongst the companies presented. Are these strategies/approaches to innovation successful? How might they be more successful? EXERCISE 2: THE SOCIAL NATURE OF ENTREPRENEURSHIP This exercise provides students with social network sites that they have probably never heard of with maybe an exception or two, e.g. Linked In. By assigning one Top 10 to each team the instructor should be able to establish a very interesting class discussion on the sites and their unique contribution to entrepreneurship. It is recommended to read the article at Mashable in its March 12, 2009 posting (http://mashable.com/2009/03/12/entrepreneur-networks/). Here the site provides its opinion of the uniqueness of each site and the types of followers who would find this of interest. The additional interesting conversation for this exercise is to describe the intent of corporate entrepreneurs and if they might find this information of use. An interesting discussion regarding the applicability of this type of information for a corporate entrepreneur about to launch a spin off, or new venture would also be useful. The discussion could also lead to a niche that is potentially being underserved; a social media site for corporate entrepreneurs. INSTRUCTOR'S NOTES FOR VIDEO EXERCISES Title: A NEW ENTREPRENEUR ON THE BLOCK: SARA BLAKELY, FOUNDER AND ENTREPRENEUR/SPANX RT: 3:03 Topic Key: Strategic entrepreneurship, Corporate entrepreneurship, Entrepreneurial opportunities, Innovation, Entrepreneurial mind-set, International entrepreneurship SPANX is Sara Blakely’s million dollar baby. She is a 30-something undergarment entrepreneur offering females something to help them look better in their clothes. Ten years ago, Blakely struck her first blow in the battle of the bulge by simply cutting the feet off a pair of pantyhose and created a comfortable, slimming underlayer which was all but invisible. Now, bringing in almost $150 million a year, Blakely began with $5,000 in the bank and had pursued standup comedy instead of an MBA. Blakely’s success, while seen in hindsight, received much resistance for two years because of the male dominated manufacturing of women’s shapewear who didn’t understand the concept. Blakely understood than every woman wants to straighten out some kind of figure flaw without suffering for it—which has been known down through 100 years of history. With the support of a celebrity stylist, Blakely’s invention works painlessly. But competing brands such as Body Wrap and Flexies are now squeezing into the marketplace with sales of traditional hosiery shrinking as a victim of the casual workplace. However, so-called shapewear is an expanding segment of the more than $2.5 billion undergarment business. With the support of Oprah Winfrey, Blakely is not resting. As her own best customer, Blakely is designing a wide range of SPANX products with names that reflect her sense of humor. Also check out http://www.spanx.com/home/index.jsp Suggested Discussion Questions and Answers 1. Is there evidence, on the part of Sara Blakely, that strategic entrepreneurship exists? o Text: Strategic entrepreneurship is taking entrepreneurial actions using a strategic perspective. In this process, the firm tries to find opportunities in its external environment that it can try to exploit through innovation. o Sara Blakely: The fact that Sara Blakely looked at how women wanted to cover up figure flaws as a means for developing SPANX coincides with strategic entrepreneurship. Also, Her pursuit of additional SPANX designs furthers her entrepreneurial spirit. 2. Does Sara Blakely set the stage for corporate entrepreneurship? o Text: Corporate entrepreneurship is the use or application of entrepreneurship within an established firm. o Sara Blakely: Yes; Sara Blakely continues to recognize that the market for shapewear is indeed expanding and acts as her own best customer to make future SPANX designs. 3. What entrepreneurial opportunities do you see ahead for Sara Blakely? o Text: Entrepreneurial opportunities are conditions in which new goods or services can satisfy a need in the market. o Blakely opportunities: Examples: Combined clothing and SPANX products, other underlayers for both men and women, athletic apparel with SPANX capability. 4. How would you classify the SPANX innovation? What advantages and risks are associated with the SPANX innovation? o Text: Innovation is the process of creating a commercial product from an invention. o SPANX: SPANX is an innovation. The invention of undergarments and shape garments were already available. Blakely simply brought something new into use. o Advantages: Growing market, Non-standard product, and Quick Return on Investments o Risks: Competitors, Inability to continue needed R&D, Inability to continue commercialization 5. Does Sara Blakely have an entrepreneurial mind-set? o Text: Entrepreneurs are individuals, acting independently or as part of an organization, who perceive an entrepreneurial opportunity and then take risks to develop an innovation to pursue it. The person with an entrepreneurial mind-set values uncertainty in the marketplace and seeks to continuously identify opportunities with the potential to lead to important innovations. o Sara Blakely: Yes, she continues to be her own best customer, and with knowledge of the competition looks for new design opportunities. 6. Should Sara Blakely pursue international entrepreneurship? Why or why not? What concerns might she have? o Text: International entrepreneurship is a process in which firms creatively discover and exploit opportunities that are outside their domestic markets in order to develop a competitive advantage. o Sara Blakely: Yes, it would be a good idea for SPANX to move internationally given its early position in the life cycle and the opportunities available for market competitive advantage. However, she must consider what approach to use, e.g., exporting, etc., investment requirements, unstable foreign currencies, problems with market efficiencies, insufficient infrastructures to support the business, culture differences, necessary international teams, and limitations on market size. ADDITIONAL QUESTIONS AND EXERCISES The following questions and exercises can be presented for in-class discussion or assigned as homework. Application Discussion Questions 1. Is the term “corporate entrepreneurship” an oxymoron? In other words, can corporations—especially large ones—be innovative? Corporate Entrepreneurship as an Oxymoron: The term "corporate entrepreneurship" is not an oxymoron. While large corporations may face challenges like bureaucracy and risk aversion, they can still foster innovation through dedicated teams, resources, and a culture that encourages creative thinking. Many successful companies, such as Google and Amazon, demonstrate that with the right structures and leadership, corporations can be highly innovative. 2. Ask students for an example of a product champion supporting an innovation in a corporation. What were the results of the champion’s efforts? Example of a Product Champion: An example is Steve Jobs at Apple, who championed the development of the iPhone. His efforts resulted in a revolutionary product that transformed the smartphone industry, significantly increasing Apple's market share and profitability. Jobs' vision and commitment to innovation were pivotal in creating a culture that supported ongoing product development and creativity. 3. The economies of countries such as Russia and China have historically been operated through centralized bureaucracies. What can be done to infuse such economies with a commitment to corporate entrepreneurship and the innovation resulting from it? Infusing Economies with Corporate Entrepreneurship: To promote corporate entrepreneurship in economies like Russia and China, governments can encourage policies that support innovation, such as reducing bureaucratic red tape, providing tax incentives for startups, and fostering an entrepreneurial ecosystem. Educational programs focused on entrepreneurship and innovation can also cultivate a culture that values creativity and risk-taking. 4. Have students use the Internet to find an example of two corporate innovations— one brought about through autonomous strategic behavior and one developed through induced strategic behavior. Which innovation seems to hold the most promise for commercial success and why? Autonomous vs. Induced Strategic Behavior: An example of autonomous strategic behavior is 3M's Post-it Notes, developed from a scientist's creative idea. An example of induced strategic behavior is Coca-Cola's development of new beverage lines through structured innovation processes. The Post-it Notes innovation seems to hold more promise for commercial success, as it originated from individual creativity and has become a staple product with widespread use. 5. Are strategic alliances a way to enhance a firm’s technological capacity, or are they used more commonly to maintain pace with technological developments in a company’s industry? In other words, are strategic alliances a tool of firms that have a technological advantage, or are they a tool of technologically disadvantaged companies? Strategic Alliances and Technological Capacity: Strategic alliances can enhance a firm's technological capacity and are often used by both technologically advantaged and disadvantaged companies. Technologically advanced firms may seek alliances to innovate faster or enter new markets, while those at a disadvantage can use alliances to access expertise and resources. Ultimately, alliances serve as a tool for collaboration and competitive advantage in various contexts. Ethics Questions 1. Is it ethical for a company to purchase another firm to gain ownership of its product innovations and innovative capabilities? Why or why not? Ethics of Acquiring Innovations: It can be ethical for a company to purchase another firm to gain its product innovations if the acquisition is conducted transparently and respects the interests of all stakeholders. The acquiring firm should ensure that the purchase does not stifle competition or innovation in the market. Ethical considerations include how the acquisition affects employees, consumers, and the broader industry. 2. Do firms encounter ethical issues when they use internal corporate-venturing processes to produce and manage innovation? If so, what are these issues? Ethical Issues in Internal Corporate Venturing: Firms may face ethical issues in internal corporate venturing, such as conflicts of interest, lack of transparency, and potential exploitation of employee ideas without proper recognition. Additionally, there can be ethical concerns about resource allocation and whether employees are incentivized fairly for their contributions to innovation processes. 3. Firms that are partners in a strategic alliance may legitimately seek to gain knowledge from each other. At what point does it become unethical for a firm to gain additional and competitively relevant knowledge from its partner? Is this point different when a firm partners with a domestic firm as opposed to a foreign firm? If so, why? Knowledge Acquisition in Strategic Alliances: It becomes unethical for a firm to gain additional competitively relevant knowledge from its partner when it crosses the line into intellectual property theft or breaches trust agreements. This ethical boundary may differ when partnering with domestic versus foreign firms due to varying legal standards and cultural expectations surrounding intellectual property and competitive practices. 4. Small firms often have innovative products. When is it appropriate for a large firm to buy a small firm for its product innovations and new product ideas? Acquiring Small Firms for Innovations: A large firm should consider acquiring a small firm for its product innovations when the acquisition aligns with its strategic goals and can enhance its competitive advantage without harming the small firm’s employees or market dynamics. It’s appropriate when the small firm's innovations are complementary to the large firm's offerings and can drive mutual growth, provided the acquisition is conducted ethically and transparently. Internet Exercise The Web has made it both possible and necessary for many traditional businesses to market and sell their goods and services online. Consumer goods and services such as banking, clothing, vacations, and grocery items can be ordered through the Internet. Creating new, safe, and reliable methods to access, pay for, and deliver goods and services via the Web has added to the list of innovations and management strategies that corporate entrepreneurs need to explore to be successful. To find out more about entrepreneurship and innovation, explore the following websites: • Babson College’s Arthur M. Blank Center for Entrepreneurship at http://www.babson.edu/eship • EGOPHER, a site produced by St. Louis University at http://eweb.slu.edu/ • The Kauffman Foundation’s Entre World at http://www.eventuring.org *e-project: America’s most successful pizza delivery chains, including Domino’s, Pizza Hut, and other regional businesses, have long since relied on phone orders for delivery. How can the Internet’s capabilities be integrated into their business? Weighing the pros and cons of ordering pizza online, make a list of ten management concerns and techniques to consider to successfully promote, develop, and run an online business in this lucrative market. Solution Manual for Strategic Management: Concepts and Cases: Competitiveness and Globalization Michael A. Hitt, R. Duane Ireland, Robert E. Hoskisson 9781285425184, 9781285425177, 9780538753098, 9781133495239, 9780357033838, 9781305502208, 9781305502147