FrontMatter 15e
FrontMatter 15e
Management
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Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear
on the appropriate page within text with the exception of the Pepsi logo that appears throughout the text and is credited
to PSL Images/Alamy.
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10987654321
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Strategic
Management
Fifteenth
edition
Fred R. David
Francis Marion University
Florence, South Carolina
Forest R. David
Strategic Planning Consultant
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Brief Contents
Preface xv
Acknowledgments xxiii
About the Authors xxv
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Glossary637
Name Index 649
Subject Index 653
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Contents
Prefacexv
Acknowledgmentsxxiii
About the Authors xxv
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Technological Forces 70
Competitive Forces 71
Competitive Intelligence Programs 72 Market Commonality
and Resource Similarity 73
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viiiContents
Assurance Of Learning Exercises 84
Assurance of Learning Exercise 3A: Competitive Intelligence (CI)
Certification84
Assurance of Learning Exercise 3B: Develop Divisional PepsiCo EFE
Matrices85
Assurance of Learning Exercise 3C: Develop an EFE Matrix for
PepsiCo85
Assurance of Learning Exercise 3D: Perform an External Assessment 85
Assurance of Learning Exercise 3E: Develop an EFE Matrix for Your
University86
Assurance of Learning Exercise 3F: Comparing PetSmart With PETCO
Animal Supplies 86
Assurance of Learning Exercise 3G: Develop a Competitive Profile Matrix
for PepsiCo 86
Assurance of Learning Exercise 3H: Develop a Competitive Profile Matrix
for Your University 87
Marketing100
Customer Analysis 101 Selling Products and Services 101
Product and Service Planning 102 Pricing102
Distribution103 Marketing Research 103 Cost/
Benefit Analysis 104 Marketing Audit Checklist of
Questions104
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Contentsix
Restructuring224
Restructuring224
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xContents
The Art or Science Issue 296 The Visible or Hidden Issue 296
The Top-Down or Bottom-Up Approach 297
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Glossary637
Name Index 649
Subject Index 653
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Cases
USA Headquartered
1. Dominos Pizza, Inc. 372
2. Spirit Airlines, Inc. 382
3. Buffalo Wild Wings, Inc. 391
4. Rite Aid Corp. 400
5. Best Buy Co. 410
6. Publix Super Markets, Inc. 420
7. JPMorgan Chase & Co. 430
8. Walt Disney Company 441
9. Lowes Companies, Inc. 451
10. United Parcel Service, Inc. 460
11. United States Postal Service 471
12. Crocs, Inc. 482
13. Snyders-Lance, Inc. 492
14. Netgear, Inc. 500
15. Polaris Industries, Inc. 508
16. Under Armour, Inc. 517
17. Avon Products, Inc. 526
18. Exxon Mobil Corporation 534
19. Microsoft Corporation 545
Outside-USA Headquartered
20. The Emirates Group 554
21. Royal Bank of Canada 563
22. Embraer S.A. 570
23. Bayerische Motoren Werke (BMW) Group 579
24. Davide Campari-Milano S.p.A. 586
25. LOral Group SA 595
26. Nikon Corporation 603
27. Grupo Modelo S.A.B. 610
28. Pearson PLC 619
29. Lenovo Group Limited 628
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Preface
Why Adopt This Text?
This textbook is trusted around the world to provide managers the latest skills and concepts
needed to effectively formulate and efficiently implement a strategic plana game plan, if
you willthat can lead to sustainable competitive advantage for any type of business. The
Association to Advance Collegiate Schools of Business (AACSB) increasingly advocates a
more skills-oriented, practical approach in business books, which the David text provides,
rather than a theory-based approach. This textbook meets all AACSB-International guidelines
for the strategic-management course at both the graduate and undergraduate levels, and previous editions have been used at more than 500 colleges and universities around the world. We
believe you will find this edition to be the best textbook available for communicating both
the excitement and value of strategic management. Concise and exceptionally well organized, this text is now published in English, Chinese, Spanish, Thai, German, Japanese, Farsi,
Indonesian, Indian, and Arabic. A version in Russian is being negotiated. Not only universities, but also hundreds of companies, organizations, and governmental bodies use this text as
a management guide.
In contrast to many other strategic-management textbooks, the David book provides:
1. An effective process for developing a clear strategic plan, rather than simply presenting
seminal theories in strategy, and
2. An effective model or flow for actually doing strategic planning.
Eric N. Sims, a professor who in 2013 adopted the David book for his classes at Sonoma State
University in California, says:
I have read many strategy books. I am going to use the David book. What I liketo steal
a line from Alabama coach Nick Sabanis your book teaches a process. I believe at the
end of your book, you can actually help a company do strategic planning. In contrast, the
other books teach a number of near and far concepts related to strategy.
A recent reviewer of this textbook says:
One thing I admire most about the David text is that it follows the fundamental sequence
of strategy formulation, implementation, and evaluation. There is a basic flow from vision/
mission to internal/external environmental scanning, to strategy development, selection,
implementation, and evaluation. This has been, and continues to be, a hallmark of the
David text. Many other strategy texts are more disjointed in their presentation, and thus
confusing to the student, especially at the undergraduate level.
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xviPreface
4. A brand new Cohesion Case on PepsiCo, Inc. (2013) is provided. PepsiCo is one of the
most successful, well-known, and best-managed global companies in the world. Students
apply strategy concepts to PepsiCo at the end of each chapter through brand new Assurance
of Learning Exercises.
5. Fifty percent new or improved Assurance of Learning Exercises appear at the end of all
chapters to apply chapter concepts. The exercises prepare students for strategic-management
case analysis.
6. A new boxed insert at the beginning of each chapter showcases a company doing strategic
management exceptionally well.
7. There are all new examples in all the chapters.
8. There is new narrative on strategic-management theory and concepts in every chapter.
9. On average, 10 new review questions are provided at the end of each chapter.
10. Twenty-two brand new color photographs bring this new edition to life and illustrate the
practice of strategic management.
11. All current readings at the end of all chapters are new, as new research and theories of seminal thinkers are included. However, practical aspects of strategic management are center
stage and the trademark of this text.
12. For the first time ever, the Excel Student Template is provided free at www.strategyclub.
com to all students who use this textbook. Widely used for more than a decade by both
students and businesses, and improved dramatically just for this edition, the free Excel
Student Template enables students to more easily apply strategic-management concepts
while engaging in assurance of learning exercises or case analysis. Using the Template,
students can devote more time to applying strategy concepts and less time to the mechanics
of formatting strategy matrices, tables, and PowerPoints.
13. Every sentence and paragraph has been scrutinized, modified, clarified, deleted, streamlined, updated, and improved to enhance the content and caliber of presentation.
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Prefacexvii
16. The 29 case companies provide an excellent mix of firms performing really well and some
performing very poorly, including 13 service-based and 16 manufacturing-based firms, and
a good mix of small cap to large cap firms.
17. All 29 case companies have excellent websites in English that provide detailed financial
information, history, sustainability statements, ethics statements, and press releases, so students can easily access current information to apply strategy concepts.
18. For the first time ever with this textbook, all 29 cases are written by the authors, to ensure
maximum control and effectiveness in applying strategic-management concepts through
case analysis.
19. For the first time ever with any strategic-management text, a Case MyLab testing feature
has been carefully developed and designed specifically to apply strategic-management
concepts through case analysis. The Case MyLab product assures that the cases apply the
concepts, simplifies grading for professors, and achieves AACSBs key assurance of learning objectiveseven in purely or partly online class settings. The new Case MyLab testing
feature enables professors to use the cases to monitor student learning of strategy concepts,
as revealed in the Concepts by Cases Matrix given below.
Time-Tested Features
1. This text meets all AACSB-International guidelines that support a practitioner orientation
rather than a theory/research approach. This text offers a skills-oriented process for developing a vision and mission statement; performing an external audit; conducting an internal
assessment; and formulating, implementing, and evaluating strategies.
2. The authors writing style is concise, conversational, interesting, logical, lively, and supported by numerous current examples.
3. A simple, integrative strategic-management model appears in all chapters and on the inside
front cover. The model is widely used by strategic planning consultants and companies
worldwide.
4. An exciting, new Cohesion Case on PepsiCo, Inc. follows Chapter 1 and is revisited at the
end of each chapter, allowing students to apply strategic-management concepts and techniques to a real company as chapter material is covered, thus preparing students for case
analysis as the course evolves.
5. End-of-chapter Assurance of Learning Exercises apply chapter concepts and techniques
in a challenging, meaningful, and enjoyable manner. Seventeen exercises apply text material to the Cohesion Case; 11 exercises apply textual material to a college or university;
another 9 exercises send students into the business world to explore important strategy
topics.
6. There is excellent pedagogy, including learning objectives opening each chapter and key
terms, current readings, discussion questions, and assurance of learning exercises ending
each chapter.
7. There is excellent coverage of strategy formulation issues, such as business ethics, global
versus domestic operations, vision and mission, matrix analysis, partnering, joint venturing, competitive analysis, value chain analysis, governance, and matrices for assimilating
and evaluating information.
8. There is excellent coverage of strategy implementation issues such as corporate
culture,organizational structure, outsourcing, marketing concepts, financial analysis,
business e thics, whistleblowing, bribery, pay and performance linkages, and workplace
romance.
9. A systematic, analytical process is presented that includes nine matrices: IFEM, EFEM,
CPM, SWOT, BCG, IE, GRAND, SPACE, and QSPM.
10. Both the chapter material and case material is published in four colors.
11. Chapters-only paperback and e-book versions of the text are available.
12. Custom-case publishing is available whereby an instructor can combine chapters from
this text with cases from a variety of sources or select any number of the 29 cases
provided.
13. For the chapter material, an outstanding ancillary package includes a comprehensive
Instructors Manual, Test Bank, TestGen, and Chapter PowerPoints.
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xviiiPreface
Instructor Supplements
At www.pearsonhighered.com/irc, instructors can access a variety of resources that accompany this new edition. Registration is easy, please contact your Pearson Sales Representative
who will provide you with the access information you need.
If you ever need assistance, our dedicated technical support team is ready to help with the
media supplements that accompany this text. Visit http://247.pearsoned.com/ for answers to
frequently asked questions and toll-free user support phone numbers.
The following supplements are available to adopting instructors:
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Avila University
Azusa Pacific University
Baker CollegeFlint
Baldwin Wallace College
Barry University
Belhaven UniversityJackson
Bellevue University
Belmont Abbey College
Benedictine University
Black Hills State University
Bloomsburg University
Briar Cliff University
Brooklyn College
Broward CollegeCentral
Broward CollegeNorth
Broward CollegeSouth
Bryant & StrattonOrchard Park
Buena Vista UniversityStorm Lake
Caldwell College
California Polytechnic State University
California State UniversitySacramento
California State UniversitySan
Bernadino
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Prefacexix
California University of PA
Calumet College
Capella University
Carlow University
Carson-Newman College
Catawba College
Catholic University of America
Cedar Crest College
Central Connecticut State University
Central Michigan University
Central New Mexico Community College
Central Washington University
Chatham University
Chestnut Hill College
Chicago State University
Christian Brothers University
Claflin University
Clarion University of Pennsylvania
Clarkson College
Clatsop Community College
Cleveland State University
College of William & Mary
Colorado State UniversityPueblo
Columbia College
Columbia Southern UniversityOnline
Concordia University
Concordia University Wisconsin
Curry College
Cuyahoga Community College
Daniel Webster College
Davis & Elkins College
Delaware State University
Delaware Technology & Community
CollegeDover
Delaware Technology & Community
CollegeWilmington
DePaul UniversityLoop Campus
East Stroudsburg University
Eastern Michigan University
Eastern Oregon University
Eastern Washington University
ECPI College of TechnologyCharleston
ECPI Computer Institute
Elmhurst College
Embry-Riddle Aero UniversityPrescott
Ferrum College
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xxPreface
La Salle University
Lake Michigan College
Lebanon Valley College
Lee University
Lehman College of CUNY
Liberty University
Limestone CollegeGaffney
Lincoln Memorial University
Loyola College Business Center
Loyola CollegeChennai
Loyola UniversityMaryland
Lyndon State College
Madonna University
Manhattan College
Manhattanville College
Marian UniversityIndiana
Marshall University
Marshall University Graduate College
Marymount UniversityArlington
Medgar Evers College
Medical Careers Institute/Newport News
Mercer UniversityAtlanta
Mercer UniversityMacon
Miami-Dade CollegeHomestead
Miami-Dade CollegeKendal
Miami-Dade CollegeNorth
Miami-Dade CollegeWolfson
Michigan State University
Mid-America Christian
Millersville University
Mississippi University for Women
Morgan State University
Morrison College of Reno
Mount Marty CollegeSouth Dakota
Mount Mercy University
Mount Wachusett Community College
Mt. Hood Community College
Mt. Vernon Nazarene
MTI Western Business College
Muhlenberg College
Murray State University
New England College
New Mexico State University
New York University
North Carolina Wesleyan College
North Central College
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Preface xxi
Stevenson University
Strayer UniversityDC
Texas A&M UniversityCommerce
Texas A&M UniversityTexarkana
Texas A&MSan Antonio
Texas Tech University
The College of St. Rose
The Masters College
Tri-County Technical College
Trinity Christian College
Troy State University
Troy UniversityDothan
Troy UniversityMain Campus
Troy UniversityMontgomery
University AlabamaBirmingham
University MarylandCollege Park
University of ArkansasFayetteville
University of Findlay
University of HoustonClearlake
University of Louisiana at Monroe
University of Maine at Augusta
University of MaineFort Kent
University of Maryland
University of MassachusettsBoston
Harbor
University of MassachusettsDartmouth
University of Miami
University of MichiganFlint
University of MinnesotaCrookston
University of Mobile
University of Montevallo
University of NebraskaOmaha
University of Nevada Las Vegas
University of New Orleans
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Acknowledgments
Many persons have contributed time, energy, ideas, and suggestions for improving this text
over 15 editions. The strength of this text is largely attributed to the collective wisdom, work,
and experiences of strategic-management professors, researchers, students, and practitioners.
Names of particular individuals whose published research is referenced in this edition are listed
alphabetically in the Name Index. To all individuals involved in making this text so popular and
successful, we are indebted and thankful.
Many special persons and reviewers contributed valuable material and suggestions for this
edition. We would like to thank our colleagues and friends at Auburn University, Mississippi
State University, East Carolina University, the University of South Carolina, Campbell
University, the University of North Carolina at Pembroke, and Francis Marion University. We
have taught strategic management at all these universities. Scores of students and professors
at these schools helped shape the development of this text. Many thanks go to the following
reviewers whose comments shaped the fourteenth and fifteenth editions:
Moses Acquaah, University of North Carolina at Greensboro
Gary L. Arbogast, Glenville State College
Charles M. Byles, Virginia Commonwealth University
Charles J. Capps III, Sam Houston State University
Neil Dworkin, Western Connecticut State University
Jacalyn M. Florn, University of Toledo
John Frankenstein, Brooklyn College/City University of New York
Bill W. Godair, Landmark College, Community College of Vermont
Carol Jacobson, Purdue University
Susan M. Jensen, University of Nebraska at Kearney
Dmitry Khanin, California State University at Fullerton
Thomas E. Kulik, Washington University at St. Louis
Jerrold K. Leong, Oklahoma State University
Trina Lynch-Jackson, Indiana University
Elouise Mintz, Saint Louis University
Raza Mir, William Paterson University
Gerry N. Muuka, Murray State University
Braimoh Oseghale, Fairleigh Dickinson University
Lori Radulovich, Baldwin-Wallace College
Thomas W. Sharkey, University of Toledo
Frederick J. Slack, Indiana University of Pennsylvania
Daniel Slater, Union University
Demetri Tsanacas, Ferrum College
Jill Lynn Vihtelic, Saint Marys College
Michael W. Wakefield, Colorado State UniversityPueblo
Don Wicker, Brazosport College
We want to thank you, the reader, for investing the time and effort to read and study thistext.
It will help you formulate, implement, and evaluate strategies for any organization with which
you become associated. We hope you come to share our enthusiasm for the rich subject area
of strategic management and for the systematic learning approach taken in this text. We want
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xxivAcknowledgments
to welcome and invite your suggestions, ideas, thoughts, comments, and questions regarding
any part of this text or the ancillary materials. Please contact Dr. Fred R. David at the following
e-mail [email protected], or write him at the School of Business, Francis Marion
University, Florence, SC 29501. We sincerely appreciate and need your input to continually
improve this text in future editions. Your willingness to draw my attention to specific errors or
deficiencies in coverage or exposition will especially be appreciated.
Thank you for using this text.
Fred R. David and Forest R. David
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Fred R. and Forest R. David, a fatherson team, have published more than
50 journal articles in outlets such as Academy of Management Review,
Academy of Management Executive, Journal of Applied Psychology, Long
Range Planning, International Journal of Management, Journal of Business
Strategy, and Advanced Management Journal. Fred and Forests February
2011 Business Horizons article titled What are Business Schools Doing
for Business Today? is changing the way many business schools view their
curricula.
Fred and Forest are coauthors of Strategic Management: Concepts and
Cases that has been on a two-year revision cycle since 1986 when the first edition was published. This text is among the best-selling strategic-management
textbooks in the world. This text has led the field of strategic management for
more than two decades in providing an applications, practitioner-approach to
the discipline. More than 500 colleges and universities have used this textbook
over the years, including Harvard University, Duke University, CarnegieMellon University, Johns Hopkins University, the University of Maryland,
University of North Carolina, University of Georgia, San Francisco State
University, University of South Carolina, Wake Forest University, and countless universities in Japan, China, Australia, Mexico, and the Middle East. For
six editions of this book, Forest has been sole author of the Case Instructors
Manual, having developed extensive teachers notes (solutions) for all the
cases. Forest is author of the Case MyLab ancillary and the free Excel Student
Template that accompany this fifteenth edition.
Fred and Forest actively assist businesses globally in doing strategic
planning. They have written and published more than 100 strategic management cases. Fred and Forest were recently keynote speakers at the Pearson
International Forum in Monterrey, Mexico. With a PhD in Management
from the University of South Carolina, Fred is the TranSouth Professor of
Strategic Planning at Francis Marion University (FMU) in Florence, South
Carolina. Forest has taught strategic-management courses at Mississippi State
University, Campbell University, and FMU.
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Fred R. David
Forest R. David
xxv
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Case Number
Strategy Types
IFE Matrix
EFE Matrix
Competitive Profile
Matrix
Vision/Mission
Statements
Strategy Model/Process
USA Headquartered
Case 2
Case 3
Case 4
Case 5
Case 6
Case 7
Case 8
Case 9
Case 10
Case 11
Crocs, Inc.
Case 13
Snyders-Lance, Inc.
Case 14
Netgear, Inc.
Case 15
Case 16
Case 17
Case 18
Case 19
Microsoft Corporation
Outside-USA
Headquartered
Case 20
Case 21
Case 22
Embraer S.A.
Case 23
Case 24
Case 25
LOral Group
Case 26
Nikon Corporation
Case 27
Case 28
Pearson PLC
Case 29
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Environmental
Sustainability
Business Ethics
Balanced Scorecard
Company Valuation
Projected Financial
Statements
EPS-EBIT Analysis
Human Resource
Management
Organizational Culture
Organizational Structure
Governance
SPACE Matrix
SWOT Matrix
Outsourcing
Concepts by Cases Matrixxxix
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Country HQ
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to insurance and capital markets services. With more than 1,000 locations in Canada and
operations in more than 50 countries, RBC sold its RBC Bank unit in the Southeast USA
to PNC Financial in 2012, but still owns investment bank RBC Dominion Securities and
RBC Wealth Management in the USA. Founded in 1864, RBC has about 68,000 full-time
employees.
Manufacturing Firms
22. Embraer S.A.
Brazil
Headquartered in Sao Paulo, Brazil, Embraer is one of the worlds top four aircraft
manufacturers, making commercial jets (55%) that seat between 30120 passengers,
7models of executive jets (20%), and military aircraft (12%). About 40% of its Embraer
sales are in North and South America. With 17,200 employees, Embraer is Brazils
largest exporter of industrial products. Embraers CEO, Frederico Curado, received the
2012 Tony Jannus Award, given annually for distinguished contributions to commercial
aviation.
23. Bayerische Motoren Werke (BMW) AG Germany
Headquartered in Munich, Bavaria, Germany, BMW is a large automobile, motorcycle and
engine manufacturing company founded in 1917. BMW is the parent company of RollsRoyce Motor Cars. With about 100,000 employees, BMW produces motorcycles under
the Motorrad and Husqvarna brands and is the sponsor of the 2012 Olympics in London.
Financial services bolster BMWs bottom line, including purchase financing and leasing,
asset management, dealer financing, and corporate fleets. About 3,000 dealers worldwide
sell BMWs.
24. Campari Group S.p.A Italy
Headquartered in Milan, Italy, Gruppo Campari is the sixth largest producer of alcoholic
and non-alcoholic beverages worldwide. Campari owns a portfolio of over 40 brands,
including Wild Turkey bourbon. Campari markets and distributes drinks in more than 190
countries. With 2,270 employees, Campari is structured into three segments: spirits, wines,
and soft drinks. The Garavoglia family owns 51% of Campari, which is expanding through
acquisitions (it owns U.S. vodka maker Skyy Spirits) and by entering growing markets in
Asia and South America.
25. LOral Group
France
Headquartered outside of Paris in Clichy, Hauts-de-Seine, France, LOral is the worlds
largest cosmetics and beauty company. Specializing in hair color, skin care, sun protection, make-up, perfumes, and hair care, LOral is the leading nanotechnology patentholder in the USA. LOral recently opened a huge new factory in Indonesia. LOral is
a listed company with 66,000 employees, but the founders daughter Liliane Bettencourt
and the Swiss food company Nestle each control over a quarter of the shares and voting
rights.
26. Nikon Corporation
Japan
Headquartered in Tokyo, Japan, Nikon develops, produces, and markets cameras, binoculars, microscopes, measurement instruments, imaging lenses, photographic enlargers,
and other imaging products such as Nikonos underwater film cameras. Nikon competes
with Canon, Casio, Kodak, Sony, Pentax, Panasonic, Fujifilm, and Olympus. With 24,000
employees and founded in 1917, Nikon is part of the huge Mitsubishi keiretsu, a group of
businesses linked by cross-ownership.
27. Grupo Modelo, S.A.B. de C.V.
Mexico
Headquartered in Mexico, Mexico, Grupo Modelo is among the largest beer producing,
distributing, and marketing firms in the world. Some of Modelos 13 beer brands include
Corona Extra, the number one Mexican beer sold in the world, Barrilito, Victoria, Estrella,
Medelo, and Paciffico. With 37,300 employees, Modelo also produces bottled water and
operates 960 convenience stores under the Extra name. With more than a 60% share of
the Mexican beer market and operating 8 breweries, Modelo was recently acquired by
Anheuser-Busch InBev.
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Strategic
Management
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