Showing papers in "Strategic Management Journal in 1981"
TL;DR: Two regression models of performance suggest that research and development expenditures are an important determinant in the performance advantage enjoyed by related diversified firms.
Abstract: SUMMARY This paper investigates performance differences (in terms of ROA) between related and unrelated diversified firms. Two regression models of performance are estimated using a sample of 80 firms. Performance differences are associated with advertising expenditures, accounting determined risk, research and development expenditures and capital intensity. The models suggest that research and development expenditures are an important determinant in the performance advantage enjoyed by related diversified firms. Building on the work of Chandler (1962), Wrigley (1970), and others, Rumelt (1974, 1977) investigated the relationships among diversification strategy, organizational structure and economic performance. Perhaps the most important result of Rumelt's study was that he was able to tie diversification strategy to financial performance. The related diversification strategies were found to outperform the other diversification strategies on the average. The related-constrained diversification strategy was found to be the highest performing on the average. By contrast the unrelated diversification strategy (and the minor categories within it) was found to be one of the lowest performing diversification strategies. These two results are jointly quite interesting because Rumelt also showed that firms are becoming more diversified. For the present purposes this means that related-constrained firms may be evolving (perhaps through the intermediate related-linked category) into unrelated firms (in related-constrained firms all component businesses are related to each other whereas in related-linked firms only one-to-one relationships are required). Such evolution could, therefore, logically result in performance declines. Rumelt was unable to conclusively show why these performance differences existed. However, he did speculate that related firms were able to extend their core skills (e.g. scientific research) into related areas:
634 citations
TL;DR: In this paper, a subsample of 128 firms from Rumelt's 1974 study was updated and utilized to investigate the possibility that market structure variables might model or confound the diversification/performance relationship he reported.
Abstract: SUMMARY This paper incorporates both diversification strategy and market structure variables in a study of corporate economic performance. A subsample of 128 firms from Rumelt's 1974 study was updated and utilized to investigate the possibility that market structure variables might modelrate or confound the diversification/performance relationship he reported. Study results indicate that performance differences could be demonstrated for some of Rumelt's categories, but, across the range of categories, a hypothesis of performance differences was rejected. As expected, categories associated with distinctly high or distinctly low economic performance were also associated with significant differences in a series of market structure variables. Researchers from several disciplines have sought to identify factors which influence corporate economic performance. Strategic management researchers have sought to relate corporate economic performance to the major direction-setting decisions made by the firm. For a new and growing firm, these decisions frequently relate to the degree and manner in which its product line and served market should be extended. For an older firm which wishes to continue to grow, the key decisions generally relate to the degree and manner in which it should diversify into different businesses (Chandler, 1962; Scott, 1971). Starting from a very different perspective, researchers in industrial organization economics have been guided by a conceptual framework which examines possible relationships among (1) the structure of the industry (or industries) in which the firm operates, (2) the conduct of the firms within that industry, and (3) the level of economic performance both of the individual firms and of their associated industries. This effort has yielded an extensive literature, much of which supports the proposition that firm profits are strongly influenced by the structure of the market or markets in which the firm operates (Scherer, 1970). These two streams of research have developed in large measure independently of each other. It is the purpose of the present research to incorporate both diversification strategy and market structure variables in a study of corporate economic performance.
563 citations
TL;DR: Strategic awareness is greater in organizations that have recently changed their strategies than in those that have not, and differs across the three industries studied.
Abstract: ‘Strategic awareness’ is viewed in two ways: the extent to which an executive's perception of the organization's strategy aligns (a) with the organization's ‘realized’ strategy and (b) with the chief executive's perception. Strategic awareness is positively related to hierarchical level, but differs across the three industries studied. Awareness is greater in organizations that have recently changed their strategies than in those that have not.
303 citations
TL;DR: The paper contains a review and evaluation of empirical and case studies on the performance of whole enterprises and discusses implications for future interdisciplinary research and the strategic management of contemporary organizations.
Abstract: The paper contains a review and evaluation of empirical and case studies on the performance of whole enterprises. Research from a diverse array of academic disciplines and research traditions is included. The central focus is on identifying factors that influence organizational performance, and discussing implications for future interdisciplinary research and the strategic management of contemporary organizations.
276 citations
TL;DR: Thirty‐three case histories of the process of formulating the nature of a strategic decision are analysed to determine what patterns emerge when they are compared with the Lyles' model of strategic problem formulation.
Abstract: SUMMARY Thirty-three case histories of the process of formulating the niature of a strategic decision are analysed to determine what patterns emerge when they aire comppared with the Lyles' model of strategic problem formulation. A descriptioni of each pattern, its causes, aind results are discussed.
196 citations
TL;DR: This study examines the product-market choices and competitive strategies of effective low share businesses, comparing them with two control groups: effective high share and ineffective high share businesses.
Abstract: Previous research has suggested that low share market businesses have dismal prospects. This study examines low share businesses which are effective. In particular, it examines the product-market choices and competitive strategies of effective low share businesses, comparing them with two control groups: effective high share and ineffective low share businesses. Data are drawn from PIMS data bases and hypotheses are tested using cluster analysis and discriminant analysis. Effective low share businesses are found to locate in stable rather than protected environments. Their competitive strategies are strongly characterized by selective focus on specific strengths.
166 citations
TL;DR: Research was conducted to determine general relationships between changes in market share and variables representing market strategies and competitive position and includes variables that are—or should be—readily available to most businesses.
Abstract: The decision to build market share has major resource-allocation implications. To aid managers in assessing these implications, research was conducted to determine general relationships between changes in market share and variables representing market strategies and competitive position. The research was based on multiproduct, cross-sectional regression analyses and includes variables that are—or should be—readily available to most businesses.
161 citations
TL;DR: Investigation of the relationships between the difficulty of entry and competitive strategies in five industries found that the creation of idle productive capacity appears to be a potent deterrent to new entrants.
Abstract: The relationships between the difficulty of entry and competitive strategies in five industries, chosen for their differing structural contexts, were tested. Statistical support was found for the value of pre-entry analysis of entry barriers and of firms' predicted responses to potential entry. In particular, the creation of idle productive capacity appears to be a potent deterrent to new entrants.
151 citations
TL;DR: In this article, the authors examine the differences found in regulated environments that affect strategic planning and propose proposals which can serve as the basis for future empirical research arc offered and a theoretical framework in which to view the regulated industry situation is developed.
Abstract: SUMMARY The need for strategic planning by firms to achieve an alignment vvith their environment is widely recognized. Various studie.'^ have analysed the structures and strategic processes utilized b> t'lrms in their altetnpts to eslahlish domains and attain goals. Yet the problems faced by firms in regulated environments by and large have been ignored. This paper examines the c.-itical differences found in regulated environments that aflect strategic planning. Propositions which can serve as the hasis of future empirical research arc offered and a theoretical .'"ranfiework in which to view the regulated industry situation is developed.
144 citations
TL;DR: The conclusion drawn is that, whereas venture capital is a useful tool for corporate development, it is difficult to do internally and an outside partnership investment can serve as an alternative first step or as a supplement.
Abstract: SUMMARY Many corporations have now discovered the value of a venture capital programme as an aid to the corporate development function. The article describes the venture capital business, reviews its history, and indicates the reasons for the resurgence of interest in corporate venturing. The problems of direct venture capital investment by corporations are enumerated and the trend towards investment in outside venture capital partnerships is explained. The conclusion drawn is that, whereas venture capital is a useful tool for corporate development, it is difficult to do internally and an outside partnership investment can serve as an alternative first step or as a supplement.
115 citations
TL;DR: An integrated approach to market analysis and definition begins with a common model of the principal dimensions of a market and the recognition that different market definitions are needed for different strategic purposes.
Abstract: Two distinct approaches to market analysis and definition have evolved. Those approaches which adopt a top-down persepective, tend to specify markets in terms of competitive capabilities and resource transferability. The alternative bottom-up perspective emphasizes customer requirements or usage patterns when defining markets. An integrated approach begins with a common model of the principal dimensions of a market. The second element is the recognition that different market definitions are needed for different strategic purposes. Next, the strategic planning framework which links business units and product-market units should be compatible with these purposes and reflect a strategically relevant balance of cost and demand factors. A procedure for forming business units from groups of product-markets is shown to be effective for achieving this balance.
TL;DR: The linkages and interactions between rational/analytical and behavioural/political conceptions of strategic decision making are explored in the context of a specific decision arena—strategic energy management.
Abstract: This paper attempts to bridge the divide between rational/analytical and behavioural/political conceptions of strategic decision making. The linkages and interactions between these approaches to the making of strategic decisions are explored in the context of a specific decision arena—strategic energy management.
TL;DR: In this paper, the authors describe three methods that can be used to match rewards with accomplishment of strategic goals: the weighted-factor method which weights various performance measurements according to strategic objectives, the long-term evaluation method, which ties compensation to goals achieved over a multi-year period, and the strategic funds deferral method which varies from the conventional financial accounting model for the measurement of performance.
Abstract: SUMMARY Corporationsl often find, it difficult !to carry out their strategies because they have executive compensation systems that measure and reward performance in a way that ignores or even frustrates strategic thinking, planning, and action. In particular, reward systems rarely emphasize the long run adequately, nor are they well coordinated with the methods and objectives of other management systems. This article describes three methods that can be used to match rewards with accomplishment of strategic goals: the weighted-factor method which weights various performance measurements according to strategic objectives, the long-term evaluation method, which ties compensation to goals achieved over a multiyear period, and the strategic funds deferral method which varies from the conventional financial accounting model for the measurement of performance. The article recommends that all three methods be combined into a single system in which the rewards for senior managers throughout the company are determined by the three methods in different proportions according to those factors that constitute successful performance in their positions.
TL;DR: Results indicate that environmental interaction is the primary factor in determining departmental influence on strategic decisions.
Abstract: The relative importance of internal organizational activities versus environmental interaction as sources of influence on strategic decision making was explored in a field study in 15 organizations. Results indicate that environmental interaction is the primary factor in determining departmental influence on strategic decisions.
TL;DR: The most successful divestments are precisely those where line management's co-operation has been elicited at very early stages and to suggest that such a participative management mode is likely to produce better results as mentioned in this paper.
Abstract: In many large diversified corporations there is a largely prevalent habit to consider divestment decisions as ‘top secret’: information concerning potential divestitures is restricted to top management and only a handful of senior managers are involved in the decision making process.
The major assumption underlying such behaviour is the fear of failure; that is, top management is concerned about involving line—generally divisional—managers in the process of making up one's mind to divest (a time consuming process as will be seen later) and searching a potential acquirer, in the fear that such involvement might work in counteractive ways and perhaps cause the abortion of the project.
As a result, information is most often withheld, decisions in progress are kept secret; an ‘underground’ strategy is developed.
The purpose of this article is to show that the most successful divestments are precisely those where line management's co-operation has been elicited at very early stages and to suggest that such a participative management mode is likely to produce better results.
Our research, based on the study of 14 divestments in the US and Europe (see Appendix), thus shows that the division manager is a key person on the divestment chess-board and accomplishes varied missions.
TL;DR: Five diagrams indicate how crises open up five different kinds of ‘opportunity space’ that may allow for better prediction of crises, better choices during crises, and greater stability in solutions to crises.
Abstract: SUMMARY Five diagrams indicate how crises open up five different kinds of 'opportunity space'. Expanded opportunity spaces involve, in effect, a relaxation of the 'normal' constraints around decisionmaking in governmental systems. This perspective may allow for better prediction of crises, better choices during crises, and greater stability in solutions to crises.
TL;DR: A quantitative investigation into the role of diversification in the failure of new foreign manufacturing activities based upon some of the results of the Harvard/CEI Comparative Multinational Enterprise Project shows a considerable company-to-company spread in the rate of failure.
Abstract: The paper describes a quantitative investigation into the role of diversification in the failure of new foreign manufacturing activities based upon some of the results of the Harvard/CEI Comparative Multinational Enterprise Project. These results are related to the foreign subsidiaries of 69 of the largest continental European multinationals and show a considerable company-to-company spread in the rate of failure. Nearly half of this spread can be accounted for by the differing diversities of the companies when diversity is measured in relation to the marketing characteristics of the products manufactured and when the balance between the differing marketing categories is taken into account. The rate of foreign subsidiary expansion is also significant.
TL;DR: The study found that the Guttman scaling method can be used to develop a corporate planning scale and suggested that future research into the relationship between formal planning efforts and organizational performance might incorporate this approach.
Abstract: The study dealt with the degree of formal planning undertaken by the commercial banking industry during 1969, 1972, 1975, and 1978. The study found that the Guttman scaling method can be used to develop a corporate planning scale. An outline of the steps in the construction of a Guttman planning scale is presented. Future research into the relationship between formal planning efforts and organizational performance might incorporate this approach.
TL;DR: Much is made these days of planning models, which I take to mean models from which plans could be extracted; but, to switch metaphors, when English is used in planning it does not thereby become planning English.
Abstract: Much is made these days of planning models, which I take to mean models from which plans could be extracted. It seems odd to me to think there is, or can be, such a model, as odd as it would be to think there is, or can be, a set of medical instruments from which health can be extracted. Obviously, medical instruments can sometimes be used in providing health care, and models can sometimes be used in planning; but, to switch metaphors, when English is used in planning it does not thereby become planning English. The same is true for models: when they are used in planning they do not become planning models. Several years ago Thomas Naylor and Horst Schauland (1976) surveyed the planning practices of 2000 corporations in the United States, Canada, and Europe. They concluded:
TL;DR: In this article, the authors focus on factors which influence the speed of communication of environmental information and propose management policies regarding the use of the sales force as an efficient source of strategic information.
Abstract: Environmental information is very important to strategic management. Human sources are among the most commonly used sources of information and among them, boundary people, such as salesman, hold a privileged position. One dimension which measures the quality of a strategic response is its speed of implementation. Recognizing this, to ensure a good (fast) strategic response, fast communication of information is imperative.
This article focuses on factors which influence the speed of communication of environmental information. It is based on an exploratory research which has been carried out on a sample of salesmen of an industrial company. Management policies regarding the use of the sales force as an efficient source of strategic information are proposed in conclusion.
TL;DR: General managers of large industrial plants in Israel were asked to evaluate the effects of environmental dependencies on their freedom of action, and it was found that most segments of the environment were perceived as homogeneous—affecting the firms' autonomy in similar ways.
Abstract: General managers of large industrial plants in Israel were asked to evaluate the effects of environmental dependencies on their freedom of action. It was found that most segments of the environment were perceived as homogeneous—affecting the firms' autonomy in similar ways. Different components of government, however, were perceived as having conflicting interests both within the segment and with other segments of the environment. When a segment of the environment is heterogeneous, it is possible that managers use a tradeoff strategy, in which pressures generated by one component of the environment can be used as a means to reduce pressure of the other components.
TL;DR: The paper reports the major descriptive results of a study of corporate planning in 48 U.K. companies in the mid-1970s, finding that corporate planners had widened the scope of their plans since the late 1960s, made fairly extensive use of written documents and procedures, and often used a high number of sophisticated techniques for forecasting and evaluation.
Abstract: The paper reports the major descriptive results of a study of corporate planning in 48 U.K. companies in the mid-1970s. Introduction of corporate planning clearly quickened in the 1970s. The number of specialist corporate planners tended to be small and was correlated with company size. Responsibilities of planners varied between operating companies, divisions, and the corporate parent company. Corporate planners had widened the scope of their plans since the late 1960s, made fairly extensive use of written documents and procedures, and often used a high number of sophisticated techniques for forecasting and evaluation, but their use of documents and techniques was far from uncritical. The extent of planning varied between types of companies.
TL;DR: The authors advocate a procedure which incorporates the establishment of dynamic function profiles ( based on the future function requirements) and dynamic manager profiles (based on the likely and desired development of the managers) to fill the future gap in the quality and quantity of the company's management.
Abstract: In view of the increasing demands on managers and the corresponding scarcity of managers of high quality, management planning and development begins to emerge as one of the most important management techniques. In this paper, the authors advocate a procedure which incorporates the establishment of dynamic function profiles (based on the future function requirements) and dynamic manager profiles (based on the likely and desired development of the managers). The future gap in the quality and quantity of the company's management is found by comparing the two sets of profiles. The description of this gap is the basis for recruitments and other MPD actions. The procedure is closely synchronized with the strategic planning procedure and can therefore be considered as part of the strategic management concept. Experiences with the procedure in a multinational company show that it can be successful provided that the system is open to the managers and non-bureaucratic. Furthermore, it should not affect the normal powers of line managers with respect to their team formation.
Despite all the attention it attracts, management planning and development (MPD) is still an underutilized management tool in many companies. Procedures are often either lacking or too bureaucratic. Reasons for this are the inherent limitations to planning with human beings and, on the other hand, the availability of a safety net in the form of a market of managers.
TL;DR: Examining the planning experiences of 86 Fortune 1000 companies suggests that mature system companies do a better job in coping with planning problems, are more satisfied with their planning systems, and are more likely to recognize managerial contributions to long range planning.
Abstract: The decade of the seventies has seen a dramatic surge in the acceptance and adoption of long range planning systems by U.S. firms. This paper examines the planning experiences of 86 Fortune 1000 companies, many of them with formal planning systems ten years of age or more. Data collected in this study suggests that planning systems move through different phases in a development cycle. The ability to cope with planning problems, the satisfaction of planning participants, and the extent to which companies formulate explicit policies to recognize managerial contributions to long range planning activities are associated with the age of a company's formal planning system and its phase of planning system development. Mature system companies do a better job in coping with planning problems, are more satisfied with their planning systems, and are more likely to recognize managerial contributions to long range planning.
TL;DR: An attempt is made to integrate the zero based budgeting procedure into the firm's planning process using constituency oriented indicators of effectiveness and an empirical assessment of the effectiveness of the ZBB integrative framework in service oriented organizational units.
Abstract: An attempt is made to integrate the zero based budgeting (ZBB) procedure into the firm's planning process. Previous studies have failed to provide an integrative framework for the application of ZBB which may account for some of the conflicting results obtained in previous ZBB programmes. Next, the results of an empirical assessment of the effectiveness of the ZBB integrative framework in service oriented organizational units are reported. Strong support is evident for the ZBB planning framework developed here using constituency oriented indicators of effectiveness.
TL;DR: One of Mr Haggerty's last lectures given to NASA at Houston, Texas on 13th February 1980 is published in which he outlines briefly the history and philosophy which led to the development of many of the systems of strategic management at Texas Instruments, which have shaped policy within this highly innovative organization.
Abstract: On 1st October 1980 the untimely death of Patrick Haggerty, former chairman and chief executive officer of Texas Instruments, occurred. Patrick Haggerty was a founding member of the editorial board of this journal and in the formative years of the Texas Instruments Company made a major contribution to the practice of strategic management, in addition to shaping the destiny of a great and progressive corporation. As a mark of our respect and in memoriam the editors are proud to publish one of Mr Haggerty's last lectures given to NASA at Houston, Texas on 13th February 1980 in which he outlines briefly the history and philosophy which led to the development of many of the systems of strategic management at Texas Instruments, which have shaped policy within this highly innovative organization.
TL;DR: In this article, the authors provide an empirical test of these independently developed concepts; that is, a test that focuses on the relationship between corporate-level planning and diversity, focusing on the relationships between diversity and increasing diversification as companies progress through stages of growth.
Abstract: Two accepted concepts of management literature are (a) increasing diversification as companies progress through ‘stages of growth’, and (b) the responsibility of the corporate level for diversification-type planning. The thrust of this research note is to provide an empirical test of these independently developed concepts; that is, a test that focuses on the relationship between corporate-level planning and diversity.