Required ResourcesTextAbraham, S. C. (2012). Strategic managem.docx

Required Resources
Text
Abraham, S. C. (2012). Strategic management for
organizations [Electronic version]. Retrieved from
https://ashford.content.edu.
Read the followings chapters in Strategic management for
organizations:
· Chapter 5: Assessing the Company Itself
· Chapter 6: Creating Strategic-Alternative Bundles
Recommended Resources
Article
Berman, R. (2010, September 21). Some questions to ask during
a SWOT analysis. [Blog post]. Retrieved from http://www.rob-
berman.com/questions-to-ask-during-swot-analysis/
· (This article provides guidance, steps, and recommendations
for completing a SWOT analysis.)
Web Pages
U.S. Chamber of Commerce. (2012). Chamber directory search
page. Retrieved from
https://www.uschamber.com/chamber/directory
Week Three Lecture
Chapter Five – Assessing the Company Itself
In Chapter Five we are introduced to a very important tool in
business, referred to as the SWOT analysis. SWOT stands for
strengths, weakness, opportunities, and threats. A SWOT
analysis looks at both internal and external aspects. The
strengths and weaknesses will apply to the internal part of the
organization, whereas the opportunities and threats apply to the
external part of the organization. One may use a SWOT
analysis as a tool to look at the current situation of a company
and evaluate the possibilities in forecasting the future.

According to Goodrich (2013), “the SWOT analysis enables
companies to identify the positive and negative influencing
factors inside and outside of a company or organization” (Para
5). Below is a brief review of how to conduct a SWOT analysis.
· Strength – First, the company must identify what they are
doing right. What is working for the company and helping the
organization to meet its goals.
· Weakness – Second, the company needs to identify what areas
need improvement. The ultimate goal is to take a weakness and
turn it into a strength.
· Opportunities – Third, the organization needs to identify what
opportunities are available that would help the company. As
stated before, this typically comes from outside the company. It
is an external element in which the company is seeking
opportunities to help the business. This could entail working
with new vendors, using new software, or expanding into new
markets.
· Threats – Finally, the company must be aware of the threats
that are out there. Threats are not the same as weakness, as
many often confuse the two. A threat is something the company
has no control over, but is aware it is there. For example,
competition is a threat. A company cannot control what their
competitors do, but need to be aware of them. Another threat
could be a natural disaster. One can prepare with insurance, but
you have no control over that. Another example might be
economical situations in which the market shifts; again, there is
little a company can do about this. All of these factors and
many others can threaten a company. When it comes to threats,
you cannot control them, but can have a strategic plan in place
in terms of how to manage them.
Another important element in Chapter Five is identifying the
competitive strength of the organization. Please take a look at
Table 5.3, which highlights the competitive strength matrix.
Another tool that is often used with organizations is the Value
Chain Analysis. There are two parts to this analysis. The first is

internal, in which the company identifies the various value
added stages. This may include purchasing materials, selling
and/or servicing the product, etc (Abraham, 2012). The second
part looks at the external elements in terms of value added
stages. This may include material received from a distributer,
the manufacturer process, etc. (Abraham, 2012). Below are
three videos that all relate to the Value Chain Analysis. The
first is a dynamite video that helps explain Porter’s Value Chain
Analysis. The two remaining are examples of a Value Chain
analysis with Starbucks and Coke.
Porter's Value Chain (Links to an external site.)Links to an
external site.(http://youtu.be/hkisCzFHx80)
A Behind the Scenes Look at Starbucks Global Supply Chain –
Starbucks Coffee (Links to an external site.)Links to an external
site.(http://youtu.be/ElYNhGbOTOQ)
Coke value chain analysis (Links to an external site.)Links to an
external site.(http://youtu.be/gN8bhTfwpdQ)
Chapter Six – Creating Strategic – Alternative Bundles
In Chapter Six the focus is on creating strategic alternatives.
What is a strategic alternative? According to Abraham (2012),
“strategic alternative is one of several ways by which a firm
might compete in a marketplace, achieve its vision or, if no
vision has been articulated, decide where it might go and what
it might achieve” (section 6.2, para 1). Alternative strategies
can include a wide range of options from utilizing social media
to a more internal review of various strategies. The overall goal
is to help the company to be more competitive.
There are a number of ways a company may identify strategic
alternatives. Below is a graph that shows one option:
(Dunn, 2009, para. 9)

Another option that also ties in the SWOT analysis is seen
below:
(Olsen, 2014, para. 3)
There are a variety of ways a company can go about creating
strategic alternatives. Please take a few minutes to watch the
video below, which helps identify how to create strategic
alternatives.
Blair Cook_8 Strategic Management: Strategic Alternative
Analysis (Links to an external site.)Links to an external
site.(http://youtu.be/ZLLsGRZG4hM)
Forbes School of Business Faculty
References
Abraham, S. C. (2012). Strategic management for organizations.
San Diego, CA: Bridgepoint Education, Inc.
Cook, B. (2012, September 24). 8 strategic management:
Strategic alternative analysis [Video file]. Retrieved from
http://youtu.be/ZLLsGRZG4hM
Drsamoore. (2013, May 19). Porter's value chain Video file].
Retrieved from http://youtu.be/hkisCzFHx80
Dunn, S. (2009). MRO e-commerce - where's the
value? Retrieved from http://www.plant-
maintenance.com/articles/mro_benefits.shtml
Goodrich, R. (2015, January 1). SWOT analysis: Examples,
templates & definition Business News Daily. Retrieved from
http://www.businessnewsdaily.com/4245-swot-analysis.html

Olsen, E. (2014). Develop your strategic alternatives from
SWOT . Strategic Planning Kit For Dummies. Retrieved from
http://www.dummies.com/how-to/content/develop-your-
strategic-alternatives-from-swot.html
Ppespm. (2011, April 27). Coke value chain analysis .[Video
file]. Retrieved from http://youtu.be/gN8bhTfwpdQ
Starbucks Coffee. (2012, November 30).A behind the scenes
look at Starbucks global supply chain [Video file]. Retrieved
from http://youtu.be/ElYNhGbOTOQ
Assignments: Each part must be 250 words and clearly labeled
Part 1:
SWOT Analysis & Strategic Planning
Identify and describe the areas of a SWOT analysis and discuss
why it is important to consider these areas when developing a
strategic plan. Why is it often difficult to develop a realistic
analysis?
Part 2:
Strategic Alternatives
Imagine a nonprofit organization trying to raise funds for cancer
research. What types of strategic alternatives might such an
organization develop?
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Chapter 6
Creating Strategic-Alternative Bundles
Image Source/SuperStock
Learning Objectives
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By the time you have completedthis chapter, you should
be able to do the following:
Develop strategic issues from having done a full
situational analysis.
Understand what it means to develop strategic
alternatives and why many companies don't do
it.
Develop strategic alternatives from the list of key
strategic issues.
Create strategic-alternative bundles that meet certain
criteria.
Understand why the key strategic issues and bundle
elements should match.

This chapter shows how to develop a set of
key strategic issues that summarize the most
critical elements of the entire situation
analysis, and
from such issues create a small number of
viable strategic alternatives, or bundles, for
the company to seriously consider.
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6.1 Key Strategic Issues
Identifying key strategic issues is an act of
synthesis, that is, taking what you know about
the organization and its changing environment
(the situation analysis) and pinpointing the key
questions and concerns the organization must address
in its strategic plan. Strategic issues
derive from both external and internal sources. The
former includes the company's industry,
competitors, customers, suppliers, opportunities
and threats, and otherenvironmental forces. The latter
includes key organizational resources, culture,
technology, or strategic decisions that
the company must address. For example, consider a
medium-sized private university based in the
United States. Some critical external
strategic issues may include the nature of private
higher education in the United States; the

attitude toward it of the surrounding
community;
legislation and policy governing higher education;
the pool of graduating PhDs, which
represents potential faculty; economic forces
in�luencing education in general and private
education more speci�ically; the comparable
universities that prospective students consider;
and
the pro�ile of students the university attracts. Some
internal issues may include the size of the
university's �inancial endowment, scholarship
monies available, aspects of the university's history
and culture, the relationship between faculty
and administration, resources available for
faculty research and teaching, and technologies
available to students and faculty.
Together, thesestrategic issues form the basisfor
generating the strategic alternatives. Too often,
alternatives are generated from only a
subset of thesecategories, which means leaving
out a lot of information that is probably
known and should be considered.
External issues may take the form of a trend,
for example, likely increases in the interest
rate, priceof a critical raw material, or the
frequency
and severity of terrorist acts. Another form of
external issueis an impending event such as
legislation that is about to be enacted or
a large
competitor about to enterthe competitive arena,
perhaps with strategic consequences for the �irm.
Internal issues may present as a strategic

decision or choice, somethingthat will have a
dramatic impact on the �irm and the way it
does business. For example, a company may need to
decide whether to merge or acquire another
�irm, go public, form strategic alliances, go
international, vertically integrate, change its vision
and core character, and so on.
Even after identifying a strategic issue, determining
whether it is really critical is still
dif�icult. It is useful to thinkof a
strategic issueas
somethingthat keeps the CEO up at night.
Andy Grove is the author of Only the
Paranoid Survive and former chairman and CEO of
Intel. In the book's preface, Grove
describes himself as
a worrier who was concerned with everything from
manufacturing issues and competition to the
ability to attract and maintain talented
employees. While such concerns kept him awake at
night, he believed strongly in the "value of
paranoia."So when reviewing a list of
strategic
issues, use this imagery as a way of pruning
from the list those that do not merit such
obsessive attention. Try also looking at a
particular
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strategic issuein relation to others on the list; is
it as important or less important? Ultimately,
the �inal decision is subjective; what one
person
might consider critical another might crossoff
the list. More to the point, a CEO or
top manager should rely on gut instincts when
creating the
list of strategic issues: What are the real issues,
problems, or dilemmas facing the �irm
(Roberto, 2009)?
Case Study
RiverbankUniversity
We have just described how the list of strategic issues
used by an organization to formulate a plan
may be either too limiting or
too broad and that to inform strategy effectively,
the issues must be thoughtfully generated and
edited. The following brief case
study summarizes how a recently hireduniversity
chancellor and her cabinet wrestled with the
strategic issues needing to be
faced by a small, private liberal arts college
in the NorthwestUnited States. (The identity of
both the university and the
individuals has been masked.)
RiverbankUniversity was situated in a metropolitan
area with many public and private higher
education institutions. It had a
long tradition of excellent undergraduate teaching that

primarily attracted local and in-state students.
Professors were known
for the long hours they spent advising students on
both course-related and personal issues, and for
their strong mentoring
skills. Research was not part of the landscape for
either professorsor students at this
undergraduate-only institution. Faculty at
Riverdale regularly invited students to their homes
for meals and participated in on-campus
events that afforded them informal
opportunities to meet and get to know students.
MostRiverbankfaculty had spent their entire
careers there, and turnover
among professorsand administration was very low.
In the late 1990s, as Riverbank's board of
trustees and administration designed a strategic
plan for the new millennium, there
was talk about the desire to become a
nationally, rather than regionally, known
and respected university. Of�icials reasoned that
attracting a more diverse pool of students as well as
benefactors would enhance the university's
pro�ile and set the stagefor
continued growth and competitiveness into the 2000s.
With this goal in motion, a search ensued
for a quali�ied chancellor
(chief academic of�icer) that had experience in
leading the transformation from a regionally to
nationally recognized institution
and eventually, one was selected.
When Dr. IreneCarson arrived on campus to
begin assessing the climate and identifying
the critical issues at hand, she quickly

became overwhelmed with the internal and external
factors that both inhibited and encouraged growth.
Professor satisfaction
and morale were huge issues: Faculty at Riverbank
likedthings the way they were and had no
experience with an "outside"
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administrator being hiredand setting the agenda
for them. University relationships with key
stakeholders—donors, board
members, and other"friends" of the school—were delicate
and needed to be carefully managed. The city
where the school was
located was resistant to growth of the physical
size of the university. The structure of the
university's academic schools and
departments seemed unbalanced and illogical. Many
professorswere using outdated and outmoded
teaching methods. The
university offered no online courses in an era
when all otherschools did. Physical
infrastructure, such as technology and lab
space, was lacking. Moreover,Dr. Carson knew
that universities don't rise to national prominence
based on excellent teaching.
She knew that she needed the resources to attract
somestar researchers.

So, Dr. Carson set about having strategic
conversations with key constituents: members of
faculty senate, deans, board
members, students, community members, and other
university of�icials. Through theseprivate meetings,
informal
conversations, and public town hall events, Dr. Carson
and her team began to clarify, prune, and
prioritize the list of strategic
issues into manageable, realistic, and relevant order.
This bundle of strategic issues allowed
Riverbankto move forward toward
its goal of national recognition.
First, Dr. Carson identi�ied structural problems
and corrected them by moving someacademic
departments to different schools
within the university where they made more sense
and stood a better chance of becoming
accredited. For example, a School of
Performing Arts was created to house theatre
and dance, because Riverbank's dance
department's primary barrier to national
accreditation was the lack of such a school. Next,
the chancellor leveraged important and longstanding
relationships with key
benefactors and the board of trustees to gain
commitments toward new facilities that would
enhance the university's goal of
attracting high-pro�ile, high-achieving research faculty.
With thesetwo critical strategic issues covered,
the new chancellor and
her team then focused on recruiting "stars."
Within �ive years, Riverbankwas home to a

growing number of graduate programs, a Nobel
laureate, numerous prestigious
faculty members recruited from well-known research
universities, and a student body that, for the
�irsttime,represented all 50
states in the United States. All concerned
acknowledged that the university's strategy was
working.
Questions for Critical Thinking and Engagement
1. When you consider Riverbank's history and
the case presented,do you believe that Dr.
Carson's eventual list of priorities
(key strategic issues) was appropriate? Why or why
not? (Note that the question uses the term
"appropriate" rather than
"successful.")
2. Based on your reading and analysis of this
brief case, was the list of critical issues
thorough enough? Was anything left off
the list that should have been there?
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3. Without any additional personal knowledge of
this institution, continue writing the case study.
The case ends on a note of

success, but what "fallout" might you expect based
on the background you were given? Be as
speci�ic as possible.
4. Comment on Dr. Carson's practice of strategic
conversations with key constituents. Based on
your reading of this chapter
to this pointand your own experience, did she do
the right thing? Why or why not?
The strategy development process is not a time to
pull punches or shy awayfrom the truth. As
Dennis Rheault, former vice president
responsible for corporate strategy and development at
Motorola, wrote, "The purpose of an effective
strategy-development process is not to
avoid but to confront uncertainty: to pose the
really tough questions that you do not have
the answers to—the issues and opportunities
that
can make or break the business" (Rheault, 2003,
p. 33). This is not a time to parrot what
the CEO wants to hear. Unless theseissues
are real
and phrased in plainterms, the resulting strategic
alternatives that are designed will likely not be
in the company's best interest. Having
strategic conversations with colleagues or outside
experts over the course of a year will help to
unearth the real issues that the company must
confront. As has been emphasized earlier, this process
is most fruitful if it is undertaken on an
ongoing basisrather than as an annual
exercise.
Strategic Conversations

A strategic conversation is a free-ranging
discussion on a topicof strategic interest to
an organization. Because of its characteristic
"no-
holds-barred" freedom to say whatever needs to be
said, it invariably produces ideasand thinking that
are ultimately useful in the strategic-
planning process and that might not be captured in
any formal process.
All major strategic planning, according to Peter
Schwartz, cofounder of the Global Business
Network, does not, in fact, take place during
the
strategic-planning process (Abraham, 2003). What
goes on in a formal process is almost
always a rati�ication of what has already
happened. A
strategic conversation is an attempt to understand
the real strategic-planning process and oftentakes
place entirely informally. Schwartz's
colleagues at Bell South used to call it the
HERs process—hallways, elevators, and restrooms—
because that's where the most interesting
conversations take place. While real decisions got
made, real issues got confronted, real
knowledge was developed, almost all of it
took place
in this conversational mode. And that is how real
learning also takesplace. If you are going to
have good strategy, it involves good learning—
learning about new realities, new facts, new
competition, new opportunities, new directions—and
challenging old knowledge. Simply writing
a strategic plan as an act of listing a set of

new objectives for the coming year as if nothing
had changed is pointless. The problem is that if
everything has changed and you need to come up
with a plan, how are you going to learnabout
those changes?
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One informal strategic planning process
involves "HERs"—hallways, elevators and
restrooms. These informal meetings can be
where the most interesting conversations take
place.
Comstock Images/Stockbyte/Thinkstock
Furthermore, again paraphrasing Schwartz, it is
one thingto do this for an individual, but
how
do you get a group of decision makers, who
almost always have to act together, to acquire
that
knowledge and to develop and implement
strategic plans? He maintains that the only way
you
learntogether is through conversations (Abraham,
2003). Whether formal or informal, a
strategic conversation is the learning vehicle through
which the group adjusts to a new

worldview to enable strategic plans to be
developed and implemented. The stepsin the
process oftenfollow this sequence: shared
conversations, shared learning, change one's
mental models, then develop better strategic plans.
TonyManning echoes Schwartz in
endorsing the value of informal dialogue:
Strategic conversation is far more than just an
occasional practice that can be
adopted or abandoned at will: it is without
doubt the central and most important
executive tool. . . . What senior managers
talk about—clearly,passionately, and
consistently—tells me what they pay attention to and
how sure they are of what
they must do. (Manning,2002)
The viewpoint of most strategic analyses is assumed to
be that of the CEO or leader of the
organization and may include the top-management
team. When examined from the viewpoint
of a board of directors, othervariables could be
added to the list of strategic issues, such as
whether to go public, and even whether it is
time to replace the CEO.
There is one �inal check on whether you
are dealing with the proper set of strategic
issues.
Because they constitute the critical questions and issues
a company should address, they
should all be taken into account explicitly when
forming strategic alternatives. In the event
that the alternatives fail to take into account one of
the strategic issues, it could mean that

either (a) the strategic alternatives have not been
properly formulated and should be further
modi�ied to take it into account, or (b) the issuein
question is not as important as was initially
assumed, and thus could be deleted.
While it is possible that a �irm could
have any number of strategic issues at a
given point, the larger the number of
issues proposed, the higher
the chances are that someof them are not as critical
as others. Longlists of over 12 items should
be pruned down, eliminating those that
are
not so critical or combining someof them. If
the list cannot be reduced at this stage,
another chance to do so will be when
the strategic
alternatives have been created if it is found
that they have still not taken into account every
issue.
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When considering strategic issues, lists of 12
items or more
should be reduced to 8–10 items by the CEO
and/or the top

management team.
SOMOS/SuperStock
Strategic issues are typically expressed in one of
two forms: either as a
statement or as a question. For example:
Whether the company should acquire XYZ Corporation.
Should the company acquire XYZ Corporation?
The second is phrased as a question and is
the recommended form because, if
the outcome is known with certainty—"Yes, the
company should acquire XYZ
Corporation"—then the issueis not a strategic issue;
it is a decision the
company has already taken. It is not suf�icient,
however, that one simply pose
a question on a matter of strategic concern.
Consider the following:
Should the company try to lower costs?
How can the company lower its costs?
The strategic issueis not whether to lower costs;
the answer to that question
is that of course it should. Rather, the
strategic issuemight be "How can the
company lower its costs?" because that answer
may be uncertain, so it could
be included as a bona �ide strategic issue.
Thus, one criterion for a strategic issueis that
the answer to the issueis uncertain. The way in
which that uncertainty is resolved is through

the design of strategic alternatives and choosing a
preferred one. Given a strategic issue,
"Should the company broaden its product line?"
one
alternative could say, "Broaden it" and another,
leave it out altogether (not broaden it). Thus,
through deciding which alternative is
preferred,
the one that is chosen automatically "resolves"the
uncertainty inherent in the issue.
Discussion Questions
1. Having done a thorough situation analysis—both
external and internal—do you agree that it
makes sense to synthesize the
results? Explain your answer.
2. In your view, would the external analysis
previously done be more useful in scenario
planning than in forming strategic
issues? Why or why not?
3. It's possible that managers don't go through a
process of coming up with strategic issues
because it involves phrasing
questions to which the answers are unclear. Could
therebe any truth to such a view?
4. Suggest ways of shortening a list of 20
strategic issues to a more manageable number
of about 12.
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6.2 Strategic Alternatives
An ordinary alternative is one of several means
by which a goal is attained or a
problem solved. A strategic alternative is
one of many routes
a company might take to gain market advantage,
realize its goals, or, if no speci�ic goal
has been declared, decide where it might go
and what it
might accomplish. Notice two things about
the de�inition: (a) The designation "strategic"
is necessary because alternatives are fashioned in
a
competitive environment, where actions and
retaliations of competitors must be taken
into account; and (b) the alternatives are created
at
the level of the whole �irm and not any one of
its functions or units. In addition, they provide
choices about marketplace strategy or about

con�iguring the organization, address issues of
central importance to the organization, have
uncertain outcomes, and require resources to
develop before action can be taken (Lyles,
1994).
Alternatives are of threegeneral types. "Obvious"
alternatives arise from current strategies or simple
extrapolations of what the organization
is currently doing. For example, utilizing Facebook,
Twitter, and a blog to communicate with
consumers represents an obvious strategic
alternative. "Creative" alternatives take different
conceptual approaches than existing strategies do
and break away, to someextent, from the
assumptions and beliefs underlying current
strategies.A training-and-developmentorganization
specializing in the creation and facilitation
of live, face-to-face, trainer-led instruction might
pursue a creative alternative by entering
the e-learning market.
"Unthinkable" alternatives re�lect a radical
departure from the organization's historic mindset
(Lyles, 1994). For instance, as a result of
the
organization's organizational culture and values,
alcoholic beverages have never been made
available for sale within Disney theme parks.
The
idea that the sale of liquor could enhance pro�it
or attract new customers would represent an
unthinkable strategic alternative. As in the
Disney example, an unthinkable alternative might
be appropriately labeled as such because it
violates somedemonstrated, effective core

value of the organization. However, sometimes
alternatives are unthinkable simply because no
one before has bothered to break the rules of
what is appropriate for how an organization does
business—evenwhen experimenting with such
alternatives might be the right move.
Typically,such alternatives have little chance of being
accepted by management unless argumentsfor
their adoption are persuasive and made
by someone who commands respect in the
organization. Unthinkable alternatives illuminate
the current situation in a radically different
light
and inspire othermanagers to propose creative
solutions. However, this typology, while insightful,
is typically not advocated as a framework
to generate alternatives.
For somecompanies, the decision-making about
their future may involve tweaking their present
strategy slightly. This might be somethingas
simple as adding a distribution channel or
starting to advertise on television. Although
the company might claim that this represents a
change
in strategy, it is, in fact, simply a change in
implementation. Dutch digital-navigation-
equipment developer TomTom recently announced
that
it would scaleback the personal-navigation-device
division that had made it famous and shift
focus to its built-in automotive-navigation
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Pep Boys, an auto-service �irm in Southern
California, created a
strategic alternative to their business strategy when
they
decided to start advertising on television.
Business Wire via Getty Images
systems. TomTom had consistently lost pro�it on
the small personal-navigation devices since
consumers began relying on free or low
cost
mapping applications on smartphones and tablets.
Conversely, �inancial reports suggested the
strategy shift: The built-in-automotive systems
is the fastest growing division in the company
(TomTom shares, 2011).
For othercompanies, the strategy itselfmay remain
unaltered, but the objectives may change, such as
from 10% per year to 15% per year
growth in revenues or pro�its. Companies may
mistakenly characterize this as a change in
strategy; however, if the basicway in which
the
company competes has not changed, then this is not a
change in strategy.
Obstacles to Creating Strategic Alternatives

What many companies do when planning
ahead, it would appear, involves
simpleminded extrapolations of past accomplishments
involving no change in
strategy, or they make the �irstchange that occurs
to them that makes sense at
the time.Sometimes it works or works only
for a shorttime,but more oftenit
does not. As naıv̈ e as this analysis sounds, how
else can we account for so
many poor decisions made by various companies
over the years? Even the
best decision made at a given time can lead to
a poor result because of
unforeseen events and actions. Poor results are
notoriously the inevitable
byproduct of poor execution, even with an otherwise
sound strategy in place.
In each of thesecases, is the strategy the
company chose the best one it could
have adopted in the circumstances? The only way to
tell, really, is to have
analyzed the subset of all plausible alternative
strategies and chosen one for
very good, defensiblereasons. If this is done,
then any challenge or question
about what else might have been done can be
preempted because one can
argue convincingly why the chosen strategy is
superior or at least preferable
to any otherthat might be proposed.
Focus on Perceived Costs
Why don't companies develop alternative strategies

routinely? Many companies forego developing
strategic alternatives because they
perceive obstacles, real or imagined. An excuse
commonly heard is that it takesa lot of
effort and time:"We're in a hurry and
can't afford to
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Small groups of managers sometimes brainstorm
ideasthat
later become strategic alternatives. This process must
begin
with framing a problem and identifying a list of
alternatives.
Comstock/Stockbyte/Thinkstock
wait." In fact, to do somethingwell does require
time and effort, so claiming to be in a
hurry is just a convenient excuse. True,
circumstances
sometimes demand a quick decision, but even
so, making a decision without considering
alternatives is foolhardy. Besides, to make
any
decision at all, one needs at least two alternatives.
Another reason offered for not constructing

strategic alternatives is that the exercise doesn't
guarantee the "right" answer, so it may be a
waste of time and resources. It is true that no
one can guarantee the correctness of a
decision whose consequences play out in the
future, but
by considering the signi�icant trends and
impacts, including the relevant variables, assessing
the �it with the company's capabilities and
resources, and considering plausible strategic alternatives,
the chances of making the "right" decision
for the company are substantially
enhanced. Only when 3, 5, or even 10 years
have passed, can you look back in hindsight and
know whether a strategic decision was good or
not. Otherwise, one has to make the decision
while not knowing how things will actually
turn out. All one can do in the circumstances is
one's
best. But companies that skip the process entirely
for lack of certainty do not give themselves a
�ighting chance to make the best decision
they
can; they short-change themselves.
Focus on the Past
Many managers are more comfortable thinking about
and analyzing the past
than the future. They seemto �indnothing wrong
about examining past data
and then making a decision that will play out in
the future. The past is certain;
the future is not. In thesedays of rapid, even
discontinuous change, past data
are oftenirrelevant. What we need to examine

are trends about everything
that is changing and likely future moves of
competitors. How are industries
changing? What will merging industries become? How
will technology affect
our lives, what we buy, how we use products, how
we think, how we do
business? People are less comfortable in the future
because they are unable to
predict or forecast it, unable to extrapolate,
and unused to ambiguity and
uncertainty. An oft-repeated joke is that people
would rather be certainly
wrong than not sure whether they were right. The
thought that they might
even in�luencethe outcome of future events even
escapes them. Many people
simply regard the future as somethingbeyond
their control.
Complacency
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There are managers who don't take the responsibility
for strategic planning seriously enough, or they
don't devote enough time to ask
themselves really tough questions that might
put their companies on a stronger, albeit

different course. It is much easier to
keep doing what
the company has been doing, particularly if the
company is performing reasonably well.
Setbacks can be blamed on a competitor, an
unexpected piece of new legislation, a
downturn in the economy, or a rise in
supplier prices. True, the unexpected often
happens, but in
hindsight, many "unexpected' occurrences could
have been anticipated and taken into account
had strategic planning been properly done.
Insuf�icient Training
Many people who don't know how to do
strategic planning would rather avoid
admitting so to save face and will instead do
what they thinkis
strategic planning—as they have always done it. This
may be a validreason but, if that is the
case, the company is at risk unless and until it
has management in place that is trained in
strategic planning. While thereis no foolproof
way of coming up with a good strategy, the
process
relies to a very largeextent on strategic
thinking, and the results achieved depend in
largepart on one'sstrategic-thinking ability and on
experience with and commitment to the approach.
Even after a company has decided on a
strategy, it must be fully invested in making it
succeed. It will require the leaders of the
company to provide ideas, motivation,
arguments, and skill at implementation that
will bring the

results desired. So, although it is more convenient
to stay in one'scomfort zone, it may not be
the best way to chartthe company's future
course.
In many companies, staff planners and even some
line managers who value the process of
strategic planning �indonly lip service paid to it
because of disinterest or a lack of commitment
on the part of top management. This might be
the product of a tradition or culture of
risk
avoidance or entrenched and threatened interest
groups raising impediments to the process.
Finally, top management's reluctanceto
embrace the process may stem from simple ignorance
about what strategic planning really is and is
supposed to do.
Myopia
Companies put a far greater emphasis on short-
term �inancial results than on longer-term strategic
performance. While short-term �inancial
performance is important, it should never
come at the expense of longer-term
performance. CEOs who feel threatened with
losing their jobs
or whose judgment may be in�luenced by the
value of their stock holdings may tend to
focus on the shortterm. Boards of
directors concerned
principally with the company's stock priceor
the company's immediate survival also
represent instances where shortterm considerations
dominate. In this environment, the company's long-

term future and potential are oftensacri�iced, as
when expenditures for R&D, new-
product development, advertising, and training
programs are slashed to showpro�its for the
quarterly and year-end reports. Clearly, such
decisions are suboptimal and not made in the
long-term best interests of the company. Such
decisions also adversely affect any strategic
alternatives the company may consider and the
strategic direction the company pursues.
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1. Which of the obstacles to creating viable
strategic alternatives are most easily removed?
Which ones might be the most
dif�icult to mitigate? Discuss.
2. Think of a personal decision you made
for which you actually considered at least
one otheralternative. Could you have
made the decision without considering the
alternative? If so, why did you consider the
alternative? Was your decision
affected by having considered the alternative?
3. If you follow sports, try to imagine your

favorite team. As hard as it may be for
that team to win games, the real strategic
decisions are made awayfrom the arena and
probably in the off-season. Which players to
trade? Who would improve the
team, and could the team acquire that person?
How to lower the total payroll and still �ield
a winning team? Describe
which people in the organization participate in
such strategic decision making and whether in
your opinion they go
through a systematic process of creating and
weighing different alternatives.
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To unlock your imagination and visualize ideal
solutions, consider the future needs of your
ideal company or industry, the perfect product
and packaging, and the ideal service or system
for your company.
Blend Images/SuperStock
6.3 Creating Strategic Alternatives
One typical way that strategic planning is conducted is
for a small group or team of managers
to brainstorm ideasthat later become alternatives.

Some follow a speci�ic process, somedon't.
Marjorie Lyles (1994), suggests a process that
begins with framing a problem, identifying an
initial list of alternatives, extending the list if
resources and time permit, then narrowing the
list through a process of evaluation and
consolidation. However, who is to say that the
resulting list contains good rather than mediocre or
unimaginative alternatives? Clearly, a
worthwhile strategy cannot come from poorly
conceived alternatives. Lyles speci�ies certain
criteria as to what makes a list of alternatives
useful:
The variety of alternatives
Differences among them compared to the present
situation
The costsand dif�iculties of implementation; if
they are all too easy to implement, the
organization is not stretching itselfor being
ambitious enough
The degree to which they challenge existing goals,
aspirations, long-held assumptions,
and beliefs (Lyles, 1994)
Edward de Bono (1992) makes the distinction
between choosing from alternatives that
already exist, such as ties in a closet or
menu choices at a restaurant, and
alternatives that do
not exist and need to be found. In the latter
case, one cannot suggest just any alternative
and
have that alternative make sense. It has to be
related to a reference point. For example,
what

alternatives are thereto achieving this purpose or
carrying out this function?
To help in coming up with alternatives, de Bono
suggests thinking of groups, resemblances,
similarities, or concepts. For example, as an
alternative to an orange, do you search
for other
citrus fruit,domestic fruit,refreshing beverages, or
colors? His technique of lateral thinking is
directly concerned with changing concepts and perceptions,
especially when used to come up
with alternatives in solving problems (de Bono,
1992). It is a systematic way of
generating new ideasand new concepts. Besides
leading to a
defensiblestrategy, coming up with suitable strategic
alternatives is an excellent opportunity to
explore whether the organization should be
heading in another direction or doing business a
different way. Of course, companies that have
been operating in a certain way for years
experiencing satisfactory results are not inclined to
change their way of doing business, because
thereis no perceived need to do so. One
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overlooked reason for complacency is that it is

almost impossible even to thinkabout doing
business in a different way or heading in a
different direction when you are an intrinsic part of
the organization and have become used to doing
things the way you do. In fact, this is an
ideal, if somewhat counterintuitive, time to explore
otheroptions. Many companies fall into the
mindset of "If it ain't broke, don't �ix it,"
and
they are dif�icult to persuade otherwise. They address
the issueonly when their strategy falters, or
when competitors overtake them, or some
otherthreat looms, by which time it's oftentoo
late. Opportunities go unrecognized because they
are seldom sought or considered, which is
yet another reason to be doing strategic
thinking all the time.In cases like this, the
organization may well bene�it from an outside
facilitator
and speci�ic exercises to stimulate creativity.
James Bandrowski offers one of the most
powerful techniques for using creative
imagination to �indalternatives or, more
accurately,
breakthroughs (Bandrowski, 1990). He suggests
visualizing the ideal solution and then "�illing in
the feasibility" afterwards, that is, �iguring
out how to achieve that ideal solution (Figure 6.1).
The advantages include coming up with
somethingradical, leapfrogging the competition
instead of just catching up, getting ready for
tomorrow's markets, and injecting new life into a
possibly complacent and mentally tired
organization.

Figure 6.1: The creative leap
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Rather than just blindly searching for ideal solutions,
Bandrowski offers the following suggestions
for making a creative leap, all of which
will
improve your ability to thinkstrategically and
supplement the ideasdiscussed in Chapter 3:
Year 2020—Pick a date in the future such as
the year 2020. Call it "Challenge 2020," a
technique employed by 3M. Unlock your
imagination and visualize what your industry, products,
services, markets, and so on will be like then.
Bandrowski says, "The future
will be invented by those who see it today."
Idealcompany—What would the ideal company look
like? Who is the best competitor in the
industry? What do you most covet in this
competitor? What company would you most like to
acquire and why? Bandrowski quotes Lee
Iacocca's description of an ideal
automobile company: "It would combine German
engineering, Japanese production ef�iciency,
and American marketing."
Idealindustry—Reconceptualize your entire industry.
How could it become more pro�itable? How

could technology revitalize it?
Would it make sense for it to merge
with another industry? How could you tilt the
playing �ield in your favor?
Sweeping solution—Start with a blank canvas and
try to �ind a total solution, rather than trying
to improve various components such as
production, marketing, and distribution. Is therea
completely different way of doing business
that is better?
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Hyundai's cars were once considered inferior products
until
the company retooled its strategic intent and
upgraded the
quality of its cars. It paid off with increasingmarket
share.
Spencer Platt/Getty Images
Perfect product—What ideal products could be
provided to either
existing or new customers, assuming no �iscal or
technical constraints?
Customers should be included in this fantasy
exploration; in fact, how
might customers be persuaded to help co-create value?

One place to
start might be to list or collect data about all
the shortcomings of
existing products.
Perfect package—How could packaging most bene�it
the product?
Could it make the product easier to use,
last longer, more convenient,
more transportable, and the like? Could it be
combined with the
product or even eliminated?
Idealservice—Ask what customer needs are directly or
even indirectly
related to the product the customer buys. Any
time you can make your
product easier to use, save your customer money or
time,or increase
your customer's sales, it may provide an
opportunity to improve your
service to that customer.
Idealinformation—What information must you have to
win? What
don't you know that is hampering your efforts or
causing you to be
uncompetitive? Include information also about trends
and the future.
Rankthe list in terms of importance to the
company, not in terms of
what is possible or what coststhe least.
Idealsystem—Focus on new ways of increasingthroughput,
reducing costs, reducing cycle time,or
bringing new products to market
faster. This is an area in which business-process
reengineering traditionally takesplace. But what do
you do for an encore after your
reengineering has taken place?

1. De Bono talked about alternatives to an
orange being othercitrus fruit,domestic fruit,
refreshing beverages, or colors.
How would you apply this kind of lateral
thinking to the problem of how customers buy?
What unusual alternatives might
this suggest for a company?
2. Which of Bandrowski's suggestions for
brainstorming strategic alternatives appeals to
you most and why? Which ones
would you as a student �indmost dif�icult to
do? Give your reasons.
3. Companies are oftenstymied in pursuing
different options—even what they feel they need to
do—because of some
perceived insurmountableobstacle ("just can't be done").
Do you believe that trying to focus on a
desirable end-state
(taking a "creative leap") and working backward
would help managers? If so, what would be
most dif�icult about
persuading them to do this?
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6.4 Creating Strategic-Alternative Bundles
The process proposed here starts with the list of
key strategic issues discussed in the previous
section. Because thesestrategic issues
represent the most pressing and important problems and
issues facing the organization, any subsequent
plan or strategy that is developed
should address all of them. So, starting with
that list, create two to four alternatives that
meet certain criteria. Most organizations manage to
come up with three; identifying more than four is
extremely dif�icult. You must be wondering, "Surely
one can come up with many more than
four?" Read on, theseare not "ordinary" alternatives.
Because of the largenumber of possible strategies
available, my students have always found it
extremely dif�icult to create good strategic
alternatives otherthan the obvious "safe" ones.
Consider for a moment the full range of
strategies discussed in Section 3.2, which are
organizationwide "master" or "grand" strategies,and do
not include functional or operational strategies,
classi�ied as programs in this book.
An organization could choose a particular

combination of strategies to adopt, but in
order to showthat it is the best choice at
the time,it
would have to compare it to all other
combinations of strategies,a Herculean and
impractical task. It took several years to
make the
conceptual leap and ask, "What if therewere only a
small number, say two to four choices,
available? And what if they constituted "either/or"
choices such as choosing A or B or C, rather
than saying that A + B together was better
than A alone, or A + B was better
than C + D? As the
technique took shape, it seemed to make more
and more sense, but making it practical proved
to be elusive for a while.
What also became clear was that thesealternatives
did not consist solely of strategies but rather
"bundles" that comprise strategies,strategic
intent, core competence, programs (which are an
operational component of a strategy),
�inancing method, geographic scope, and
any other
element that would help de�ine and clarify a
future course of action to an observer.
The bundles would be derived in largepart
from the key
strategic issues that, in turn, were derived from a
comprehensive situation analysis of the external
and internal environments. This sequence
of dependencies gives the method a logicthat is
easy to grasp and learn.
As we shall see later, thesebundles are one step

awayfrom being business models. That is why
creating more than a few is extraordinarily
dif�icult—companies are hard pressed to come up
with one alternative business model, let alone
up to four.
Strategic Intent
Mostwell-managed companies try to achieve an
overall purpose and vision. The strategies it
chooses have to be aligned with this purpose
and vision. So what is strategic intent? Strategic
intent is the market position and market
share that a company sets as its goals.
Strategic
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intent is, of course, related to the strategies
the �irm has decided to pursue. Market
position is the position in an industry that a
company
occupies ranked by market share; the market
leader is #1, followed by #2, #3, and so
on.
It is a given in any industry that the #2
company ranked by market share has a
strategic intent of overtaking the leader

and becoming #1.
Likewise #3 sets a goal of becoming #2. In
practice this may take someyears dependingon
the industry, relative market shares, and other
factors. However, when a company is ranked
#23 in market share, it doesn't set a
goal of becoming #22, because at that level, it
doesn't even
know it's #23. In many industries, market
shares are not monitored or known. In such
cases, the strategic intent is expressed in
terms of
either increasingor maintaining market share.
What exactly is involved in gaining market
share? Figure 6.2 shows a hypothetical
industry in which sales are growing at a
constant 7% per
year. For simplicity this is assumed to growin a
straight line with no seasonal variation. In order
to gain market share, a company would
have
to growat a rate higher than 7% per year (as
Company X in the �igure) and at an equal
rate to maintain market share. And even though
a
company in this industry might be growing at
5% per year (CompanyY in the �igure), it
would actually be losing market share.
Figure 6.2: Gaining, maintaining, and losing market
share
Google's Chrome browser represents a contemporary
example of strategy driving market-share gain.
Poised to overtake both Firefox and

Internet Explorer, Chrome is a byproduct of
Google's strategy to draw people into the
Internet, then search the Web using Google,
thus
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engaging with the company's pro�itable advertising
system. Chrome offers Internet surfers a
simple, clean interface with Google's online
empire. Chrome keeps usersfocused on Google's
products including cloud applications (Google
Docs, for example) and otherofferings (such
as Google maps). The marketing strategy (and dollars)
behind this push is resulting in the growth of
Chrome's market share while Firefox and
Explorer remain more static.
Again, strategic intent and strategy have to be
aligned. If pursuing a particular strategy results
in the company just keeping up with industry
growth, then it cannot "overtake" a competitor
in terms of market position, and it cannot
increase market share.
Major Programs
For purposes of developing a bundle, only the
new major programs or operational taskscalled

for by the strategies in the bundle need be
identi�ied. Later, during operational planning,
which precedes implementation, the programs
and objectives are �leshed out by every
operating unit and department in the company.
Programs in every alternative bundle can
and should include successfuland needed
programs
that the company is currently implementing, usually by
inserting a catchall like "continue current
programs." Without doing this, the
implication is to stop doing everything the
company is currently doing in favor of
only what is in the bundle, clearly an
unrealistic situation. In
addition, the company may have to initiate new
programs called for by the strategy. Programs
implemented the very next year are oftencalled
tactics.
Every strategy implies a set of programs, shown
in general form in Table 6.1.
Table 6.1: Program components of common
strategies
Product
development
Market expansion Acquisition Turnaround Diversi�ication
Differentiation
R&Dprograms Market research De�ine criteria Control
cash Choose industry Market research
Engineering design Hire sales force Search broker

lists
Meet with creditors Set criteria Develop concept
Develop
prototypes
Train sales staff Analyze
candidates
Talk to major
customers
Acquire
company
Invest capital
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Testing Mount ad campaign Conduct due
diligence
Divest assets Invest capital Develop ad
campaign
Quality program Secure distribution
channels

Negotiate deal Reduce staff Negotiate
objectives
PR campaign
Get �inancing Form new strategy Redesign product
Consolidate Raise price
Other common programs include hiring a new
CEO or vice president, seeking a strategic alliance
with an external organization such as an
international distributor, installing an integrated
accounting system, or improvingproduct quality.
Remember that key programs are already
included in the chosen strategic-alternative bundle.
Bundles should also describe in speci�ic terms
the method by which the strategies and
associatedactivities would be �inanced.An
organization can derive funds from threesources:
Cash—including actual cash and assets that can
quickly generate cash such as marketable
securities,disposing of excess inventories,
factoring accounts receivable(i.e., selling them at a
discount to a factoring �irm for ready
cash), or selling assets no longer needed.
Taking on debt or additional debt—such as
extending existing lines of credit from banks or
certain suppliers (paying late), taking on
additional long-term debt, or in more dire circumstances,
trying to get customers to prepay for goods
not yet received.
Getting an infusion of equity capital—such as
issuing new stock if a public company, or

�inding an investor.
Notice that thesesources of funds are available to
the �irm in cash.To fund anything it does in
the future, it needs cash,either what it
has or
can secure through a loan or equity investment.
As previously discussed,a business cannot,
for example, spend "retained earnings."
It is useful to thinkof funds available to
the business as being of two kinds. The
�irstis baseline funds that are needed to
support the �irm's
current business and ongoing operations, that is,
pay current operating expenses, maintain adequate
working capital, and maintain current
plantand equipment. The second is "strategic"
funds that could be invested in new
strategic initiatives, that is, purchase assets
such as
facilities, equipment, and inventory,increase working
capital, increase R&Dor marketing/promotion
expenses, or acquire another company
(Rowe, 1987). Increasing market share usually
requires strategic funds, while maintaining
market share needs only baseline funds.
Firms
are in serious trouble when they do not even
have the level of baseline funds they need to
maintain current operations.

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Millennium Images/SuperStock
1. Does trying to achieve a strategic intent
complicate what a company is trying to do
or does it help? Isn't trying to achieve a
vision, strategy, and objectives enough? Explain your
answer.
2. Increasing or maintaining market share
applies only to the industry in which the
company competes. What happens when
it enters another industry or the boundaries of
the current industry change?
3. Discuss developing a strategic intent for a
company with markets in several different
countries.
4. When one talks about one or two companies
in an industry gaining market share over
time,must others in the industry
lose market share? Is it a zero-sum game?
5. In developing alternative bundles and,
naturally, the winning bundle, one has to include
not only the strategy that sets each
bundle apartbut also the major programs needed to
implement the strategy. Are such programs enough
to do detailed
operational planning later, or should more detail

be added at this stage?
6. Judging from Table 6.1, coming up with major
programs seems straightforward. Would you
agree? Or does it require
substantial real-world experience?
7. Do you thinkthat knowledge of the major
programs in a bundle affects the decision as
to which bundle to choose as "best"?
Explain your answer.
Carmike Cinemas, Inc.
The chapter concludes with a case study on
Carmike Cinemas, Inc., a movie-
theater chain in the Southeast United States in
the mid-'80s, which forms a
perfect vehicle for illustrating how bundles are
formed from key strategic
issues and how the strategic issues are modi�ied
later to match the bundle
elements.
In 1986, Carmike Cinemas was the �ifth largest
movie-theater chain in the
United States and the largest in the Southeast
region. Carmike was being run
con�idently and entrepreneurially by CEO MikePatrick,
and he believed that
Carmike was not only a strong competitor but
also smarter than most of the
others. Revenues and NIAT were growing at an
average 15.3% per year and
50.2% per year respectively between 1982 and 1985.
In 1986, a year in which

the major movie studios produced fewer
commercially successfulpictures,
revenues and NIAT dropped 11.6% and 44.4%
respectively. Its debt/equity
ratio in 1986 was 1.66,down from 6.66 in 1983 when
it acquired another
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If Carmike was to go national as part of its
alternative-strategy
bundle, it would consider acquiring small-town
theaters
starting in the Southeast, then Midwest, then the
Southwest
and West.
movie theater chain principally through debt.
The company was well managed
and growing aggressively through acquiring failed
theater chains throughout
the Southeast, staying mainly in small towns
where oftenit would be the only
theater; in effect, thesesmall towns represented
blue oceans. Like other
chains at that time,it was rapidly multiplexing,
that is, converting single-screen theaters into
multiscreen theaters (Taylor, 1996).

Some strategic issues arising from a situation
analysis include the following initial list.
Should Carmike:
Stay regional or expand nationally? How fast and
where should it grow? ("Should Carmike
grow?" is not an issueas its recent history
suggested strong growth, and the CEO's style and
characteristics lean toward aggressive growth.)
Increase its debt or go public to secure
additional capital?
Invest in screen/projection/sound technology?
Upgrade the quality and amenities of its theaters?
Experiment with serving hot food and coffees in its
theaters?
Sell memorabilia associatedwith the movies it shows?
Show foreign, classic, cult, or othertypes of
movies?
Get into domestic or foreign distribution?
Stay in small towns or expand into urban
areasand cities?
Continue to growthrough acquisition?
If in doubt as to whether or not to include
somethingas a strategic issue, go ahead
and include it. Err on the side of having
too many strategic
issues. Later in the process, you will come to
realize which of them are real issues and
which are not important enough, so you can
then delete
them. With experience, you will be able to gauge
which strategic issues are meaningful and
�ind yourself adding very few that are later

deleted. The process is iterative.
After much trial and error (adding, moving, erasing,
changing items in each bundle), you can arrive
at a set of strategic alternatives; at least
two are required, otherwise therecan be no decision.
Creating two is not dif�icult—the strategy the
company is currently pursuing and a
different or potentially better alternative;
creating threetakessubstantially more effort and
thought, and four is extremely dif�icult. The
reason is that theseare not just strategic alternatives,
but rather different business models with
alternative visions (Collis & Rukstad, 2008).
Echoing Lyle's list, the best set of strategic
alternatives should meet six criteria:
Be mutually exclusive—the bundles must be either/or
choices.
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Contain signi�icant variety—that is, showthat some
creative and daring thinking has been done and
are not so closeto what the �irm is
doing now, unless one of the bundles embodies
the current strategy or the status quo.
(Despite Lyle's criterion of variety, using a

status
quo alternative is quiteunderstandable if the
company is currently performing very well.)
Be feasible—given the circumstances, resources, and
capabilities of the �irm.
Would all lead to success—even though the �irm
might end up in a very different place
with each alternative.
Challenge the organization's existing goals, aspirations,
long-held assumptions, and beliefs—to improve its
performance, competitive
position, value proposition, and economic value.
Haveaddressed all the strategic issues.
Table 6.2 presents three"bundles" for Carmike
Cinemas as an illustration. Giving each bundle
a label helps distinguish it from the others
and
underscores how they are mutually exclusive. The �irst
check is for mutual exclusivity—doing any
one means not being able to do the others.
Although components of one alternative might
also be part of another one, the criterion refers
to the whole alternative and not just
particular
components. The check shows the threebundles to
be mutually exclusive. However, if it were to
reveal that the bundles were not mutually
exclusive, and if therewere general agreementon that
point, then the bundles would have to be
recon�igured. Only when the resulting
bundles meet all the criteria and do not change
any more is this part of the process complete.
Do they contain suf�icient variety? Because of
the subjectivity involved, the question is hard to

answer. Imagine a continuum with no variety
at one end (same strategy in every bundle,
distinguished only by different rates of growth)
and bundles quiteunlike anything the company is
doing at the other. The criterion of variety
forces a search for strategies the company
may not even be contemplating, while going
out too far
on a limb probably means the company is unable
to implement it. So requisite variety is
somewhere on the continuum and should be
a
balance between trying to be different and yet
reasonable.
Table 6.2: Alternative strategy bundles for
Carmike Cinemas (1986)
Bundle Element 1. Go national 2. Stay regional 3.
Go international
Strategic intent Target #4 ranking near-term and
#1 ranking nationally eventually
Maintain #5 ranking nationally
but continue to dominate the
Southeast region
Maintain #1 ranking regionally
and become a major player
internationally
Strategies Market expansion Market expansion and
differentiation
International expansion

D/E comparison Increase D/E ratio Lower D/E ratio
Maintain D/E ratio
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Contrasting
purposes
Strive for market share Strive for pro�itability
Strive for international
recognition
Different
acquisition
programs
Lookfor acquisitions in small
towns �irstin the Northeast, then
Midwest, then Southwestand
West
Lookfor acquisitions in small
towns primarily in Florida but
also in otherSoutheast and
Southern states
Lookfor acquisitions in United
Kingdom and Australia, Canada,

European countires (in large
cities), and also in the Southeast
United States (small towns)
Whether to go
public
Do not go public unless a very
largeacquisition is contemplated
Do not go public Go public to �inance international
acquisitions
Other programs Develop a cost-effective national
marketing campaign
Experiment with serving hot
foods and coffee, and selling
movie memorabilia in selected
theatres
Set up a matrix organizational
structure to manage the
international company
Facility programs Maintain quality of theatres Upgrade
facilities and technology
of the worst 1/5 of all theatres
Maintain quality of theatres
Continue to do
what the company
is doing
Continue current programs Continue current programs

Continue current programs
How to �inance Finance through debt and cash Finance
through cash and some
debt
Finance through cash,debt, and
proceeds from IPO
Are the bundles feasible? Could the company
actually implement each one were it to be
accepted? People in the company would be in
the best
position to gauge feasibility, while those
analyzing a company they are unfamiliar with
have to go with their best educated guess.
Would the bundles lead to success? While
"success" means different things to different
people and companies, assume for the moment
that it
means becoming a stronger competitor and
realizing a strategic intent. We are not
concerned yet with organizational objectives. Some
�irms
set objectives �irstand then �ind a strategy to meet
them. The process described here does it the
otherway around for good reasons that will
soon become clear.
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You must involve key "idea people" in
implementing your situational analysis. Your
alternatives should challenge existing goals,
aspirations, old assumptions, and beliefs.
Flirt/SuperStock
Do the bundles challenge the organization's existing
goals, aspirations, long-held assumptions, and
beliefs? The value of this criterion
becomes clear in the case of companies that have
been in a rut for a few years and have a
culture that is content with "satis�icing" and
the
status quo. However, for companies striving to
become a stronger competitor, the alternative
bundles it chooses should all meet this
criterion.
Put another way, if the existing goals, aspirations,
and beliefs are challenging to begin with,
then the bundles don't have to challenge them.
When analyzing a company with which you are
unfamiliar, it is important to juxtapose
mentally each bundle with the situation analysis and
determine whether the bundle is
somethingthat the company would implement, is
capable of implementing, and would bene�it
from if implemented. This is why the key people
who would be involved in implementing the
strategy must be part of this process. They will have a
better feel for whether a particular
bundle is feasible and what it might take to

implement it. At this pointit would be
premature
to argue which is the best bundle; the
analysis is simply to determine whether each
bundle
meets the six previously stated criteria. If
not, then the process of tweaking them should
continue until they do.
So often, particularly in cases when an
executive or analyst comes up with one strong
strategic
bundle, coming up with a second or even third
one is very dif�icult. The strong proposal has
preoccupied the person who has chosen it and
any otheralternative gets added as an
afterthought. A common pitfall is deciding on
the best strategy before coming up with
alternatives. Many companies are guilty of
doing this when they decide on the
strategy that
they will pursue without contemplating or contrasting
it with otheralternatives. Without
generating and considering good alternatives, the
company has no way of knowing whether
the strategy it will pursue is the best under
the circumstances.
Let's examine for a moment somestrategic alternatives
that were suggested but later
discarded:
Vertical integration—Nothing in the case information
suggests that vertically
integrating backward would bene�it the company.
Movie production and distribution

are very different businesses and demand a level of
investment and risk that is beyond
the capability of the company to bear. Because it is
already the "retail" arm of the
movie industry, it cannot vertically integrate
forward.
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Strategic alliances—Unfortunately,the case contains no
competitive information. This is similar to
the situation of a company whose
competitors are privately held and about which no
information is available. Only managers experienced
in the industry and who can
obtain information by "picking up the phone"
can get around this obstacle. However, two
avenues of thought should be pursued: (1)
Which of all considered courses of action
might bene�it more from, or be done better
with,a strategic alliance? (2) What kind of
strategic alliance might bene�it the company? Both
considerations are an important part of strategic
thinking.
Diversi�ication—Related diversi�ication means
getting into another segment of the
entertainment industry. Even though the case gives
no information about othersegments, that does not
mean to say that none of them contains an

opportunity. (This sort of thinking
comes under the heading of "unthinkable"
alternatives mentioned previously. However,
suggesting a course of action into another
segment such as live theater, broadcasting, TV,
professional sports, and the like has to be
justi�ied and defended and supported with
more information and research.)
As you can see, coming up with two to four
alternative bundles may mean coming up
with �ive or even six, determining whether they
are
mutually exclusive, plausible, and would lead to
success, and deleting those that do not meet
the criteria or combining them with others
until
they do. Carmike executives, with their additional
knowledge of their own and related industries,
are perhaps the only group that could mine
the above four possibilities for yet another viable
bundle. It's a creative and time-consuming
process, but ultimately rewarding.
1. What is the difference between a strategic
alternative and otherkinds of alternative
(e.g., considering alternative media for
advertising, alternative ERMsoftware)?
2. Picture a health center trying to raise
funds for AIDS research. What types of
strategic alternatives might such a group
consider?

3. With respect to Question 2, is it possible to
come up with strategic alternatives without
�irstknowing what key strategic
issues the nonpro�itfaces? Why or why not?
4. The section argued for six criteria that
strategic-alternative bundles should meet for them to
be worth considering in
choosing the best one. What if you, the analyst,
couldn't come up with a set that met all
six criteria? Would meeting �ive be
acceptable? Four? If you thinka fewer number
would be acceptable, give your reasons.
5. Imagine developing and completing a criteria
matrix. Some of your criteria would be
positively and somenegatively
correlated. What part of rating your bundles on
each criterion would you �indmost dif�icult to
do? Why? What tips could
you offer to cope with such a dif�iculty?
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In 2010, Carmike CFO Richard B. Hare
announced a global box-of�ice sales increase of
7.6%to a record $29.9 billion in 2009.
PeterFoley/Bloomberg via Getty Images

6.5 Closing the Loopwith Strategic Issues
One last check needs to be performedbefore
beginning to analyze the strategic alternatives
and argue for a preferred one, and that is to
compare the �inal bundles with the list of
strategic
issues. Every strategic issueshould have been
addressed in someway by the elements in each
bundle. In our example, two strategic issues were
not addressed:
Should it showforeign, classic, cult, or othertypes
of movies?
Should it get into domestic or foreign distribution?
This means that either (a) theseissues are not as
important as we �irstthought and can be
deleted from the list; or (b) they are important and
the bundles need further work to take
them into account. Either solution is acceptable—there
is no right or wrong answer. What
matters is what is realistic and in the
organization's best interest. If, for example, the
�ilm-
distribution business was not considered before, a
greatdeal of research and data collection
about that business—domestic and foreign—needs to be
done before an intelligentanalysis
and decision can be made (this would come
under "related diversi�ication"). For the
moment,
let's assume that we are satis�ied with the bundles as
they are and delete those two issues
from the list.

Notice also that bundle 3 contained the notion of
going international. In fact, going
international is the principal dimensionthat made it
different from the othertwo. But
whether the company should go international was
never identi�ied originally as a strategic
issue. Clearly, as a bona �ide bundle, the issueis
important. So it should be added to
the list,
making the �inal list of strategic issues as
follows:
Should Carmike stay regional, expand nationally, or
expand internationally?
How fast and where should it grow?
Should it increase its debt position or go public
to secure equity capital?
Should it invest in screen, projection, and
sound technology?
Should it upgrade the quality and amenities of its
theaters?
Should it experiment with serving hot food and
coffees in its theaters?
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Should it sell memorabilia associatedwith movies it
shows?

Should it stay in small towns or expand
into urban areasand cities?
Should it continue to growthrough acquisition?
1. The sixth criterion for good bundles is to have
addressed all the key strategic issues so that
the �inal list "matches" the
elements of all the bundles. Despite the argument
for doing so in this section, do you think
this criterion is really
necessary? Explain your answer.
2. What would be the problem if they didn't
match? Explain.
3. Do you feel that it's somewhat contrived to "make"
them match at the end? Try to articulate your
thoughts whatever your
stance is.
4. Discuss one bene�it that checking back with the
list of strategic issues might have on your
�inal bundles.
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Summary

This chapter presented a way of developing a
list of key strategic issues and why doing so
is a fundamental step in creating viable
strategic
alternatives for the company. Such strategic issues
synthesize what really matters to the
company—what keeps the CEO up at night
and on a
"front burner" the rest of the time—andderive
from a comprehensive external and internal
analysis of the company. A key strategic issue
should be phrased as a question whose answer
is not known (if it is, for example,
"Should the company reduce costs?"—Answer,
yes—then the
issueshould be deleted from the list; it is
somethingthe company would do anyway no
matter which alternative was chosen).
Before choosing the best alternative, the company
must �irstgo through a process of convincing
itselfthat it is the best one, which can be
done only by comparing it to otherequally good
alternatives. A strategic alternative as used
here comprises a bundle of strategies,a
strategic
intent, core competence, programs, �inancing
method, geographic scope, and any otherelement
that helps �lesh out an alternative future
for
the company—which is why it is more aptly
referred to as a bundle. And the reason
the list of key strategic issues is so vital,
besides
summarizing all the issues that future plans
should address, is that the alternative bundles

are formed from them.
Creating good bundles is a creative process, and
the chapter adds a few techniques to help do
this in addition to those in Chapter 3
under
strategic thinking. One of them is not really a
technique, but rather the willingness to
talk informally about what's really
important to the
company and external changes it should take into
account; theseare called strategic conversations.
It's where one in�luential thinker says the
real strategic planning takesplace.
Unfortunately, many companies �indexcuses not to
go to the trouble of creating good strategic
alternatives. Excuses include being in a
hurry
and it taking too long,it not guaranteeing the
"right" answer (so why bother?), being more
comfortable thinking about and analyzing the
past,
not wanting to ask really tough questions (so
let's keep doing the same thing), not knowing
how to form viable alternatives and not
admitting
it to save face, disinterest or lack of commitment
on the part of top management, and paying
more attention to short-term �inancial results
instead of long-term strategic performance.
The chapter explains in more detail why having a
strategic intent is important and what it is. It
is about improvingor maintaining market
position and also about maintaining or increasing

market share. Maintaining market share
happens when the company's revenue growth
equals that of the industry; gaining market share
is possible only when the company grows
faster, and losing market share when it
grows
slower. Major programs are also included in a
bundle to showwhat it is going to take to
implement the bundle; every strategy implies
a set of
programs, though thesecan be different for different
companies. And theremust be suf�icient cash—
whether from cash on hand (or what can
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quickly be converted to cash), a loan, or an
infusion of equity capital—to �inance any
bundle if it is to be feasible. A
minimum of baseline funds
is needed to keep the �irm operating, but
additional strategic funds are required to
�inance new strategic initiatives.
Creating good, viable, worthy bundles must meet
six criteria: be mutually exclusive (involve
either/or decisions); contain signi�icant variety;

be feasible; lead to success; challenge the
organization's existing goals, aspirations, long-
held assumptions, and beliefs; and have addressed all
the strategic issues. With respect to the last
criterion, to the extent they don't, the bundles
and/or the strategic issues must be changed so
that, in the end, they match. (Everything is �luid
until the bundles are ready to be evaluated,so
changes are OK.)
The chapter concludes with a case study on
Carmike Cinemas, Inc., a movie-theater chain in
the Southeast United States in the mid-'80s,
which forms a perfect vehicle for illustrating
how bundles are formed from key strategic issues
and how the strategic issues are modi�ied
later to match the bundle elements.
Concept Check
Key Terms
baseline funds Funds needed to support the
�irm's current business and ongoing operations,
that is, pay current operating expenses,
maintain adequate working capital, and maintain current
plantand equipment.
bundles Strategic alternatives that comprise strategies,
strategic intent, core competence, programs,
�inancing method, geographic scope,
and any otherelement that would help de�ine and
clarify a future course of action to an
observer.

funds Cash that the company can use that is
generated from threesources: cash on hand and
whatever can be quickly converted to cash,
taking on debt or more debt, and getting an
infusion of equity capital (selling stock
for a public company).
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HERs process Strategic conversations that take place
informally in hallways, elevators, and restrooms.
key strategic issues The critical questions and issues
the organization must address in its strategic
plan and that are a distillation or
synthesis of the entire situation analysis.
market position The position in an industry that a
company occupies ranked by market share.
program An operational component of a
strategy. Every strategy implies a set of
programs.
strategic alternative One of many routes a
company might take to gain market advantage,
realize its goals, or, if no speci�ic goal
has been

declared, decide where it might go and what it
might accomplish.
strategic conversation A free-ranging discussion on
a topicof strategic interest to an
organization. Because of its characteristic "no-
holds-
barred" freedom to say whatever needs to be
said, it invariably produces ideasand thinking that
are ultimately useful in the strategic-
planning process and that might not be captured in
any formal process.
strategic funds Funds invested to �inance new
strategic initiatives.
strategic intent What a company intends to do
with respect to market position or market
share. For example, maintaining leadershipin an
industry or overtaking the #1, #2, or #X player
in the industry are intents regarding market
position. In industries where market share is
easy
to compute or is monitored closely, a company
can aim for a particular market share.
However, when this isn't possible, strategic intent
devolves into either increasingor maintaining market
share.
tactics Programs that are implemented the very next
year.
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Chapter 5
Assessing the Company Itself
Robert Harding Picture Library/SuperStock
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Learning Objectives
By the time you have completedthis chapter, you should
be able to do the following:
Understand what is involved in a thorough
�inancial analysis of a company and how to
make sense of the
data.
Perform an analysis of a company's strengths,
weaknesses, opportunities, and threats (SWOT
analysis).
Determine whether a company has a core
competence and a competitive advantage.
Understand a company's internal and external

value chains.
Determine the customer-value proposition and how
strong it is.
Understand the signi�icance of brand reputation,
how strong it is, and how to manage it.
Analyzingand assessing the internal environment of
the company is a key part of the strategic-
planning process. The recent �inancial
performance and current �inancial condition is an
obvious place to start using quantitative
data with which to reach an objective
conclusion.
There are also more subjective measures including an
examination of a company's competitive
strengths and weaknesses, its capabilities,
and determining which, if any of them, might
be core competencies that would give the
company a competitive advantage. The value
of a
company's brand and the effectiveness of its
management are also taken into consideration.
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5.1 Analysis of Financial Performance and
Condition
Any analysis of an organization usually begins

with careful evaluation of its �inancial
position. To assess the recent �inancial
performance and
current �inancial condition of the company, you need
threeto �ive years of historical �inancial data—
income statements and balance sheets
(see box on �inancial statements for generic
templates)—including the most recent year for
which complete data are available.
Financial statements: Generic templates
Income-statement Balance sheet
Total revenues (sales) Assets
Cost of goods sold (COGS) Cash & cash equivalents
Operating income (gross pro�it) Accounts receivable
(A/R)
Selling expenses Inventory
General & administrative (G&A) Other current assets
Earnings before interest & taxes& depreciation &
amortization
(EBITDA)
Total current assets
Total �ixed assets
Depreciation & amortization Total assets
Earnings before interest & taxes(EBIT) Total
liabilities and stockholders' equity
Net interest expense Accounts payable
Other expense (income) Accrued liabilities
Net income before taxes(NIBT) Other current
liabilities
Income tax expense Total current liabilities
Net income after taxes(NIAT) Long-term debt

Total liabilities
Common stock
Retained earnings
Paid-in capital
Other equity
Total stockholders' equity
Total liabilities and stockholders' equity
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To properly assess the �inancial state of a
company, you need
threeto �ive years of historical �inancial data in
the form of
income statements and balance sheets.
Igor Mazej/iStock/Thinkstock
Each subtotal in bold is equal to the
previous bold subtotal minus the
items in between. For example,
NIAT = NIBT – income tax expense.
Each subtotal is the sum of elements above it
Total assets = current assets + �ixed
assets
Total liabilities = current liabilities + L-T debt
Total assets = total liabilities + stockholders'
equity

An annual income statement presents a �inancial
picture of a company's
operations over the previous 12 months. A balance
sheetis a "snapshot" at a
pointin time (usually at the closeof a company's
�iscal year)that presents a
�inancial picture of its assets and the proportion
in which those assets are
�inanced through debt and equity. In a balance
sheet, the total assets equal the
total liabilities (debt) and stockholders' equity—the
two sidesmust "balance."
A convenient way of analyzing several years'
worth of �inancial data is to
create a spreadsheet and enterthe data for each
year in a different column
(Tables 5.1 and 5.2). Doing so enables annual
changes in line items and ratios
to be computed.More speci�ically, a thorough
analysis of multiyear �inancial
statements consists of the following elements (Bangs
& Pellecchia, 1999):
Computing all liquidity, activity, leverage, and
pro�itability ratios for all
years.
Computing year-to-year changes for all line items
(in both the income
statement and balance sheet) and all ratios for all
years.
Computing average annual changes over all years
for line items and
�inancial ratios.
Computing common-size income statements for all

years (everything on the income statement
expressed as a percent of revenues).
Computing a Z- or Z2-score for each year
(Calandro, 2007). This computation involves
�inancial ratios (see box on Z- and Z2-scores).
Forming a conclusion about how the company
has been performing �inancially (from the
income statements—revenueand NIAT
performance) and about its current �inancial
condition (from the balance sheets—�inancial
structure, cash �low, degree of debt,
liquidity), and its overall �inancial health (Z- or
Z2-scores).
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Table 5.1: Multiyear income statements for
Net�lix
In $ Thousands 2000 2001 2002 2003 2004
Subscriptions 35,894 74,255 150,818 270,410 500,611
Sales - 1,657 1,988 1,833 5,617
Total Revenues or Sales 35,894 75,912 152,806 272,243
506,228
Cost of Goods Sold 24,861 49,907 78,136 148,360

276,458
Operating Income 11,033 26,005 74,670 123,883 229,770
Operating Expenses 62,511 59,138 78,606 109,826 194,129
General & Administrative 6,990 4,658 6,737 9,585 16,287
Earnings Before Interest, Taxes, Depreciation &
Amortization
(EBITDA)
(58,468) (37,791) (10,673) 4,472 19,354
Depreciation and Amortization - - - - -
Earnings Before Interest & Taxes (EBIT) (58,468)
(37,791) (10,673) 4,472 19,354
Interest and otherincome (1,645) (461) (1,697) (2,457)
(2,592)
Interest and otherexpense 1,451 1,852 11,972 417 170
Net Income Before Taxes (NIBT) (58,274) (39,182)
(20,948) 6,512 21,776
Provision for income taxes - - - - -
Net Income After Taxes (NIAT) (58,274) (39,182)
(20,948) 6,512 21,595
Source: Maddox, B., & Thompson, A. A., Jr.
(2007). Net�lix versus Blockbuster versus
Video-on-Demand. A case in Thompson, A.
A., Jr., StricklandIII, A. J., &

Gamble, J. E. (Eds.), Crafting and Executing
Strategy: Concepts and Cases (15th ed.; pp. C-
148 to C-161). New York, NY: McGraw-Hill.
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Table 5.2: Multiyear balance sheets for Net�lix
2000 2001 2002 2003 2004
Assets
Cash & cash equivalents 14,895 16,131 59,814 89,894
174,461
Short-term investments - - 43,796 45,297 -
Other current assets - 3,421 3,465 3,755 12,885
Total Current Assets 14,895 19,552 107,075 138,946
187,346
Net investment in DVDlibrary - 3,633 9,972 22,238
42,158
Other �ixed assets 37,593 18,445 13,483 14,828 22,289
Total Fixed Assets 37,593 22,078 23,455 37,066 64,447

Total Assets 52,488 41,630 130,530 176,012 251,793
Liabilities& Stockholders' Equity
Liabilities
Current liabilities 16,550 26,208 40,426 63,019 94,910
Total Current Liabilities 16,550 26,208 40,426 63,019
94,910
Notes & sub notes payable 1,843 2,799 - - -
Other LT debt 107,362 103,127 748 285 600
Total Liabilities 125,755 132,134 41,174 63,304 95,510
Stockholders' Equity
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Red. conv. preferred stock 101,830 101,830 - - -
Other equity (175,097) (192,334) 89,356 112,708 156,283
Total Stockholders' Equity (73,267) (90,504) 89,356
112,708 156,283
Total Liabilities& Stockholders' Equity 52,488 41,630

130,530 176,012 251,793
Source: Maddox, B., & Thompson, A. A., Jr.
(2007). Net�lix versus Blockbuster versus
Video-on-Demand. A case in Thompson, A.
A., Jr., StricklandIII, A. J., &
Gamble, J. E. (Eds.), Crafting and Executing
Strategy: Concepts and Cases (15th ed.; pp. C-
148 to C-161). New York, NY: McGraw-Hill.
Financial Ratios
Liquidity Ratios
Current ratio (CR) = Current assets / current
liabilities
(When this ratio > 1.0, working capital (current
assets – current liabilities) is positive,
which is desirable.)
Quick ratio (QR) = (Current assets – inventory)
/ current liabilities
Inventory-to-net-working-capital ratio (INV/NWC) =
Inventory / (current assets – current
liabilities)
Activity Ratios
Inventory turnover (INVTurns) = Revenues /
inventory
Total-asset turnover (TAT) = Revenues / total
assets

Average collection period (ACP) (days) =
Accounts receivable(A/R) / average dailysales or
revenues/365
Leverage Ratios
Debt-to-equity ratio (D/E) = Total liabilities /
total equity
(When this ratio > 2.0, debt is too high and needs
to be reduced; when it is negative, debt is
so high as to exceed the assets of the
�irm and
cause stockholders' equity to go negative, a
serious problem.)
Debt-to-assets ratio (D/A) = Total liabilities /
total assets
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(When this ratio > 0.67,debt is too high and needs
to be reduced; when > 1.0, debt is so
high as to exceed the assets of the �irm
and cause
stockholders' equity to go negative indicating a
serious problem. Either D/E or D/A ratio is
used, not both.)

Required ResourcesTextAbraham, S. C. (2012). Strategic managem.docx

Required ResourcesTextAbraham, S. C. (2012). Strategic managem.docx

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Required ResourcesTextAbraham, S. C. (2012). Strategic managem.docx