1. Strategy in historic perspective: A systematic literature review
1.6 Strategy research in the 1980s
1.6.9 Consumer and industrial products concept
Galbraith and Schendel’s (1983) approach focused the deepening of foregoing works. More precisely, they wanted to provide typologies of business level strategy of companies providing consumer or industrial goods. We thus categorized them to product strategy.
In contrast to Hall’s and Porter’s strategy approaches of 1980, Galbraith and Schendel’s (1983) idea was to categorize companies with respect to their products.
Their research was followed by a six-types approach for companies that manufacture consumer products as well as a four-types approach for industrial
Schendel’s (1978) work for the cashout strategy. From Galbraith and Schendel (1983), we can derive that one should assign a flexible model to the companies that fits to different products.
Figure 1.5: Strategy types for industrial products.
Figure 1.6: Strategy types for consumer products.
17%
49%
25%
9%
low commitment strategy
maintenance strategy
growth strategy
niche or speciazisation startegy
6%
11%
48%
9%
9%
17% harvest strategy/strategy of
disinvestment builder strategy
continuity or status quo strategy climber or posture improvement strategy
niche or speicalization strategy cashout strategy
dynamics and time. As a reaction to the fast developing global business environment, rapid responses to changes in market demands and technology had to be made. Zahn and Dillerup (1994) supported the theory of non-permanent competitive advantage. Continuous dynamics force companies to refight and defend their position (Pettigrew, 1992; Zahn, & Dillerup, 1994; Dess et al., 1995).
One of the first to somehow break with the idea of being smarter than the competition and to think dynamically was Stalk Jr. (1988) with his time-based competition theory, being cited more than 1,600 times and classified in competitive/cooperative behavior. Time is an essential variable for becoming competitive, and combining fast responses with increasing variety is important.
Stalk Jr. (1988) explained time to be a strategic weapon, as it is an equivalent of productivity, money, quality, and innovation. Coyne and Subramaniam (1996) understood time-based competition as a subvariant of competitive advantage and thus of Porter’s (1980, 1985) models. Time-based competition is a practice-oriented research field. Critics declared that though time is a relevant factor to the market, solely centering it might lead to a squandering of resources. Thus, time-based competition is called a subvariant of competitive advantage. With the implementation of time to strategic thinking, strategy moved from a constant to an evolving part of a company (Stalk Jr., 1988; Rumelt, Schendel, & Teece, 1991;
Coyne, & Subramaniam, 1996; Ghemawat, 2002). We will thus come to the 1990s and the 21st century in the following and see how the competitive and strategic thinking developed in those days.
1.7 Strategy research in the 1990s
As the importance of global resource markets became evident throughout the 1970s and 1980s, the perspective of strategic management started shifting from the
the enterprises’ competition in local product markets to global resource markets.
In the 1990s, globalization was clearly on its way, but only as a business-to-business phenomenon. While most consumers were still bound to regional markets, businesses managed global supply chains, established global partnerships, and created global alliances. Global success, it seemed, would depend as much on competition as on cooperation powered by enterprise application suites9that enabled a more efficient and a better coordinated interaction, both within and across firm boundaries.
Smith III (1981) summarized that business success of the 1980s mainly defined the relative position of the company of interest and its competitors. Thus, strategic decisions and planning orientate on the actions and reactions of competition.
Therefore, Smith III (1981) suggested eight approaches to analyze the competitive position, namely with respect to product lines or services overlap, financial conditions, product strategy commitment, international strategies, diversification, access to capital markets, the style of image of a management, as well as company ratings (Smith III, 1981). We can confirm that the basis of strategy research until the mid-1980s was to become competitive against other companies. Moreover, an increase in research interest in internal organization arose, including administrative processes (Rumelt, Schendel, & Teece, 1991).
In the 1990s, we identify seventeen influential works. We can thus see that the peak of the strategy research era was overcome as the amount of publications decreases.
Six works are empirical, three studies show models, but the majority, namely eight studies, represents theoretical treatises. The fourteen works cover eight classifications. Seven studies focus on globalization/internationalization in regards to strategy. In this context, it is important to recall that we only included those works into the systematic literature review that explicitly focused on globalization/internationalization and strategy. In the following, we will shortly introduce global strategies and elucidate the corporate strategy concept of the Balanced Scorecard as a company analysis concept. Additionally, our focus will lay
were among the first to break with the pure competitive thinking of the 1980s (Jansen, 2000). Table 1.6 shows strategy research in the 1990s.
Table 1.6: Strategy research in the 1990s.
Year Author Content Method,
measurement
Classifi-cation
Published in
Frequency of quotes 1990 Prahalad,
& Hamel
Core competencies at known international companies, case
studies
Empirical work
Globali-zation and
strategy
HBR 20,874
1991 Porter Dynamic theory of strategy, longitudinal competitive position
problem
Theoretical treatise
Competiti ve/coope-rative behavior
SMJ 3,226
1991 Rumelt, Schendel,
& Teece
Relationship between strategic
management and economics
Theoretical treatise
Strategic
manage-ment
SMJ 938
1992 Melin Internationalization as a strategy process, review
Theoretical treatise
Globali-zation and
strategy
SMJ 712
1992 Miller Mixed generic strategies (not using
only one of them)
Theoretical treatise
Generic strategies
JBS 166
1992 Wiersema,
& Bantel
Sample of 87 of the 500 largest manufacturing firms
of 1980 (based on TRINET data and other available data), measurements
of firm performance, organizational size,
top management team size, industry
structure, relationship between
demography of top management teams and strategic change
Empirical work
Strategic change
AMJ 1,664
1993 Peteraf Competitive advantage and the resource-based view
Model development
Resource-based view
SMJ 7,981
1992-1998, 2000
Kaplan,
& Norton;
Epstein,
& Manzoni
Several treatises and empirical work on
the balanced scorecard (corporate
strategy), Financial, internal business process, customer, learning and growth
Model development
Corporate strategy
book;
HBR;
EMJ
> 13,000;
288
1995 Dess, Gupta, Hennart,
& Hill
Integrative studies on globalization and
internationalisation/
corporate-level strategy (acquisitions, diversification, vertical integration,
new ventures)/
business-level strategy (competitive
advantage)/
integration of multiple levels of strategy, theoretical
summaries of research, supported
by short case examples
Theoretical treatise
Globali-zation and
strategy
JOM 203
1996 Collins,
& Porras
Superior long-term performance with a clear vision that consists of core ideology and envisioned future, core values and core
purpose have to remain fixed, business strategies and practices adapt
to changes
Theoretical treatise
Strategic
manage-ment
HBR 967
1996 Coyne,
& Subra-maniam
Old and new strategy concepts,
concept creation, Interviews with more than 60
international consultants of McKinsey (review
of traditional strategy model, survey of academic
literature, examination of
practitioner’s theories, discussion/applica-tion with more than
70 countries), Examination of
more than 25 separate strategy concepts that are not
appropriate to each business
Empirical work
Business strategy
MKQ 119
1996 Lassar,
& Kerr
Influence of competitive strategy
on relationship between suppliers
and their distribution networks, Cluster analysis, interviews
with 40 manufacturing company managers,
manufacturer-distributer relationships
Empirical work
Generic strategies
SMJ 181
1996 Porter What strategy is (operational effectiveness, unique activities, sustainable strategy
position requires trade-offs, fit drive
competitive advantage and
sustainability, rediscover strategy)
Theoretical treatise
Strategy definition
HBR 7,257
1996, 1997
Nalebuff,
& Branden-burger
Coopetition theory, game-theoretic model, cooperating
and competing simultaneously
Model development
Competiti ve/coope-rative behaviour
book; SL > 3,000
1998 Gupta,
& Lonial
Linkages between manufacturing,
business and organisational strategy, exploratory
study, 175 questionnaires
Empirical work
Business strategy
POMS 68
1998 Lane Case studies on the largest British and German MNCs, operating in highly
globalized industries, defining themselves as global
players
Empirical work
Globali-zation and
strategy
ES 69
1999 Campbell, Stonehouse,
& Houston
An introductory overview on business strategy
Theoretical treatise
Business strategy
book 87
1.7.0 Resource-based perspective
Another subvariant concept of competitive advantage is the resource-based strategy management which goes back to Penrose (1959) and Wernerfelt (1984). We included three studies of the resource-based view into our systematic literature review. The main idea is that companies consist of a set of resources, which they use in different ways. This usage enables managers to emphasize process, change, and diversity while also showing resource flows. The usage of resources influences a company’s strength and weaknesses. Thus, the concept is widely accepted as an adequate starting point for analyzing a company’s strength and weaknesses, as e.g.
in a SWOT analysis. Although the concept is not based on factor-market impediments or barriers, it includes similar ideas as Porter’s (1980, 1985) value chain, the five forces, or the concept of core competences. In Figure 1.7 we visualize
Figure 1.7: The resource-based model of strategy.
Source: Adapted from Campbell, Stonehouse , & Houston, 1999, p. 125.
Other variations of the resource-based perspective exist, e.g. the knowledge-based view. Among other researches that further developed the resource-based approach, Prahalad and Hamel’s (1990) study is possibly one of the best-known works on multinational corporations in the context of the resource-based view. Prahalad and Hamel (1990) underlined the importance of core competencies to companies. They regarded the competencies as the initial factor of business development of global competitive companies. A firm should use its core competencies, such as special access to markets, in order to produce core products and end products, which customers value. The differences should be inimitable. However, critics blame the resource-based perspective and its outcomes not to be a concept of strategy (Penrose, 1959; Wernerfelt, 1984; Prahalad, & Hamel, 1990; Porter, 1991; Rumelt,
The organization
Product markets Resource
markets
Competence-related industries The company’s industry Competitive rivalry
Buyer power
Threat of substitutes
Threat of new entrants Supplier power
Organization’s products New markets Substitutes
management with a clear strategic approach, namely four studies in total. While Martinez and Jarillo (1989) centralized coordination mechanisms in multinational enterprises in their research, Jemison (1981) faced administrative behavior in general, and Rumelt, Schendel, and Teece (1991) analyzed the relationship to economics. Later studies (e.g. Collins, & Porras, 1996) focused mission and vision research and explain that these core ideology definitions help the company to achieve superior long-term performance. Chang and Singh’s (2000) study on business strategy further adds the importance of differences between small business units and firm size. This leads to globalization/internationalization and strategy.
Although the debate on globalization with respect to strategy had originated in the 1960s, it gained new importance in the 1990s and after the millennium. We will neglect the history of the development of globalization and internationalization, respectively, here.10Overall, our systematic literature review includes seven studies on globalization/internationalization and strategy. However, Tapscott (1997) appealed to consider the changing, dynamic business environment. The new economy forces companies to adapt their strategy: Murray (1988) saw globalization as a factor that raises competitive intensity and reduces a company’s strategic choices. In the 1990s, international strategies became of special interest, as more and more companies operated internationally and globally. Companies faced similar, but also new problems: Companies had to find a balance between cost pressures and local responsiveness while also including a multitude of political frameworks, developments, and other nation characteristics into their thoughts. Discussions occurred with respect to the question of where decisions about products are made (in headquarter or in the subsidiaries) and whether and to what extent customer interests and world needs homogenize. Dess et al. (1995) defined international strategy to be a third dimension of strategy research, next to corporate and business strategy (Fayerweather, 1969; Doz, 1980; Levitt, 1983; Kogut, 1985; Douglas, & Wind, 1987; Murray, 1988; Allio, 1989; Prahalad, & Hamel, 1990; Melin, 1992; Rennie 1993; Dess et al., 1995; Lane, 1998; Tapscott, 1997; Knight, 2000; Yip, 2000; Yip,
Regardless of the question of where decisions about products are made (in headquarter or in the subsidiaries), some strategies emerged. Levitt (1983), for example, distinguished between multinational or global corporations and regionally acting companies. Multinationals adjust their offers to the countries they operate in, whereas global corporations perceive the world as a whole market (Levitt, 1983).
Prahalad and Hamel (1990) claimed that focusing on core competencies in enterprises is of most importance. Yip (1995) summarized four factors that are of interest when analyzing a company’s industry globalization potential.
We opted for Hill and Hernández-Requejo (2011) to show the new dimension of strategy. Hill and Hernández-Requejo (2011) explained the existence of four basic strategies in 2011. They categorized the strategies with respect to pressures for cost reductions (low or high) and pressures for local responsiveness. (1) The global standardization strategy is defined by companies that pursue a low-cost orientation.
Standardized products, R&D, and marketing are pursued and thus learning effects and economies of scale occur. Pressures for cost reductions are high, whereas those for local responsiveness are low. (2) Companies following an international strategy offer core products that are somehow locally customized. Cost pressures as well as pressures for local responsiveness are hence relatively low. (3) The transnational strategy, as the global standardization strategy, focuses low costs. Responsiveness for local needs is simultaneously followed. Thus, different products are offered in different geographic markets. (4) By centering high local responsiveness, the localization strategy concentrates on local preferences and tastes. Customized goods and services are provided, and pressures for cost reductions are low (Hill, &
Hernández-Requejo, 2011). Douglas and Wind (1987) explained a continuum to be existent between pure standardization, a cluster of countries, and pure differentiation. They advise to standardize the products and to use hybrid and mixed categories. This standardization can be implemented in the field of marketing and production or by customer segments. In contrast, pricing or distribution policies are
multinational, and global strategy approaches, the glocal strategy is intended to harmonize and optimize adaptation and standardization as well as homogenization and tailoring.
Ghemawat (2007) claimed that the assumptions of the 21stcentury, in particular that striking the right balance between responsiveness to local conditions and economies of scale misinterpret the opportunities of the globalized markets. Ghemawat (2007) thus proposed the AAA Triangle. With the AAA Triangle, Ghemawat (2007) aimed to approach global integration by focusing on the three types of global strategy, namely adaptation, aggregation, and arbitrage.
First, in the aim of adaptation, a company maximizes its local relevance in order to increase market share and revenues. Second, by balancing regional and global market presence by standardizations and centralizations, companies that aggregate try to push towards economies of scale. Third, the act of taking advantage of differences between markets is called arbitrage. Different parts of the company are located where it is most efficient. Combinations are hereby possible (Ghemawat, 2007).
In conclusion of the strategic management and globalization studies, they have in common that they emphasize the importance of integrating international orientation, coordination approaches, and the relationship to the enterprises surroundings in strategy models.
1.7.2 The Tableau de Bord and the Balanced Scorecard
The French Tableau de Bord is a tool to articulate and cascade a company’s strategy.
Developed in the 1950s by process engineers, managers increasingly used it in the 1990s. The Bord should help monitoring a business progress, comparing goals, and correcting actions. Epstein and Manzoni (1998) advised to implement a Tableau de Bord in each business unit. As the Tableau de Bord cannot provide an all-encompassing company overview, Kaplan and Norton (1992) enhanced the concept to be more complex and precise (Epstein, & Manzoni, 1998). Epstein and
help of this tool, an articulation and spread of key success factors and strategy should take place. On the one side, the aim is to achieve a balanced system of strategic goals. On the other side, these goals should be put into action (Crespo et al., 2009). Consequently, the scorecard serves as the linkage between a firm’s long-term strategy and its short-term actions and might help clarifying and updating a firm strategy. The Balanced Scorecard includes four perspectives: The financial perspective that centers shareholders’ interests, as well as three non-financial perspectives which support the financial outcomes. The first and second non-financial perspective includes customer relationships and internal business processes. The third non-financial perspective refers to improvements and innovation activities (also called learning and growth) that have to be equally considered to create sustainable value. These four perspectives are aimed to help the planner to translate, together with the mission, the Scorecard into specific objectives which can finally be measured. Especially globally-oriented and competing companies use the Balanced Scorecard to improve their corporate structure and the offered products, but also to evolve their strategy (Kaplan, & Norton, 1992, 1996;
Epstein, & Manzoni, 1998).
Especially with respect to small businesses, the usage of the Balanced Scorecard in practice is yet seldom realized. Moreover, some scorecards do not focus strategy, and only a bundle of scorecards lead to strategy implementation. Besides these challenges, further industry differences exist (Crespo et al., 2009; Kaplan, & Norton, 1993, 1996, 2000). Summarizing the idea of the Tableau de Bord and the Balanced Scorecard, we suggest including financial aspects for shareholder’s interests, and non-financial aspects, like internal business processes, customer relationship, and innovation.
1.7.3 Coopetition
The 1980s were coined by competitive thinking in the field of strategy research.
Cooperations were somehow seen as market failures (Jansen, 2000). Among the first
by combining the notions of cooperation and competition in a new concept they coined ‘coopetition.’ Nalebuff and Brandenburger (1996, 1997) methodologically followed Porter (1980, 1985) by keeping the enterprise in the focus of their coopetition concept, which is based on the generic knowledge that had been accumulated in non-cooperative and cooperative game theory at that time. Resisting the purely competitive view that all interaction is a constant sum game and leaves players either in the role of the winner or the loser, they put emphasis on win-win situations, in which cooperation enhances the performance of all interacting partners. Now, the five forces that were only threatening in Porter’s (1980, 1985) work were exposed in a more differentiated way. On the one hand, enterprises remained competitors in the contest for shares of the market rent. On the other hand, they could be partners in the creation of market rents.
Obviously, coopetition had a lot going for it in the booming 1990s. Global markets were growing (especially due to the enormous growth rates in the newly liberated European states and the BRIC), and enterprises found cooperation was a profitable way to increase production, extend global reach and share the market surplus.
Joint-ventures and coproduction were similarly on the rise, and businesses grew by sharing knowledge, risks, and profits. Empirical evidence seemed to confirm that Porter’s (1980, 1985) five competitive forces were tameable, just as Nalebuff and Brandenburger (1996, 1997) had suggested.
Polenske (2004) refined coopetition strategy and introduced the so-called uneasy 3C triangle. We include this model of the 21st century in this part, because of its logical link to coopetition. According to Polenske (2004), cooperation implements informal and formal arrangements that are mostly horizontal and external. Collaboration is an exclusive arrangement, such as joint-ventures. Figure 1.8 illustrates the uneasy 3C triangle.