Showing papers in "Strategic Management Journal in 1983"

Strategy-making and environment: The third link

Abstract: Whereas much is known about the relationships between strategy and structure, and between environment and structure, too little is known about a third link—the relationship between strategy-making and environment. An empirical study was conducted upon two distinct samples of firms. We hypothesized that increases in environmental dynamism, hostility and heterogeneity should be related to specific changes in the amount of analysis and innovation which characterizes strategy-making activity. Most of these relationships tended to be much stronger in successful than in unsuccessful samples of firms.

An Empirical Analysis of Strategy Types

Abstract: Using the PIMS SPIYR data base, which pools cross-section and timeseries data, an empirical study to identify business strategy types was undertaken. Using a two-stage methodological approach combining principal component and cluster analysis on both a consumer products and an industrial products data base, two sets of strategy typologies were identified. Six strategy types were identified for consumer products: (1) harvest, (2) builder, (3) cashout, (4) niche or specialization, (5) climber, and (6) continuity. For industrial products, four strategy types were identified: (1) low commitment, (2) growth, (3) maintenance, and (4) niche or specialization. A discussion of the characteristics of each strategy type is offered.

Toward understanding strategic issue diagnosis

Abstract: This paper calls attention to a central but neglected process in strategic decision making, i.e. strategic issue diagnosis (SID). A framework for discussing SID is presented in terms of three critical components: inputs, process characteristics and outputs. The framework is illustrated in the context of PIMS and BCG, two widely recognized strategy models. The major implications highlight the theoretical significance of SID for understanding strategic decision making.

The impact of formalized strategic planning on financial performance in small organizations

Abstract: The relationship between formality of planning procedures and financial performance was examined for a sample of small U.S. banks. Small banks without formal planning systems performed equally with small, formal planners. Regardless of formality, each set of banks placed equal emphasis on all aspects of strategic decision-making except formalized goals and objectives. Results suggest that managers responsible for strategic planning activity in smaller organizations do not appear to benefit from a highly formalized planning process, extensive written documentation, or the use of mission and goal identification as the beginning of a strategic planning process.

Type of Entrepreneur, Type of Firm, and Managerial Motivation: Implications for Organizational Life Cycle Theory

Abstract: Miner Sentence Completion Scale measures of managerial motivation for a sample of Oregon entrepreneurs were compared with interview data on entrepreneur and firm type using a system of differentiation derived from the Enterprising Man (Collins, Moore and Unwalla, 1964) research. Certain relationships between aspects of managerial motivation and firm expansion and growth were found. In addition, the overall level of managerial motivation among the entrepreneurs relative to corporate managers was found to be low, and the previously noted association between an opportunistic entrepreneurial type and growthoriented firms was confirmed. These findings are discussed in the context of organizational life cycle theory with special reference to the early stages of transition from entrepreneurial to bureaucratic forms and various typologies of entrepreneurs. It appears that under certain circumstances growth may not require a shift in leadership style, but that in some important respects entrepreneurial and bureaucratic systems are managerially distinct.

Customer analysis for strategy development in industrial markets

Abstract: This paper reports on concepts and techniques which have been developed for analysing customers and used as an aid to assessing the strategic position of companies in industrial markets. The emphasis on supplier/customer relationships presented here derives from the interaction approach to marketing and purchasing strategy. Many industrial markets are highly concentrated, and many companies develop in conjunction with key customers in a symbiotic relationship, where strategy evolves as proposals made by either side are either accepted or rejected. To take account of this we propose a 3-stage framework for analysing customers which builds on and transforms techniques traditionally used for an analysis of products. The purpose of the analysis is to improve the allocation of scarce marketing and technical resources, to reappraise the company's competitive position with different customer groups and to ensure that key relationships are managed effectively.

Evaluating strategic planning systems

Abstract: A direct methodology for the evaluation of strategic planning systems is illustrated, and contrasted with the indirect evaluation methodologies that have previously been used. The direct methodology involves twelve distinct varieties of assessment of the goals, inputs, outputs, feedback mechanisms, and impacts of the planning system that are made in terms of the system's goals as well as various bodies of external standards.

Firm profitability and relative firm power

Abstract: This paper expands the notion of extended rivalry as cross-industry relations within the chain of production and distribution, and argues that firm power resides in the exclusivity and essentiality of the firm's function in the chain. A cross-section of U.S. manufacturing firms representing components for finished goods, capital goods, and supplies or consumable products is examined. The analysis of the three industry groups by simultaneous equation estimation provides general support for the hypothesis that firm power, as expressed in inter-industry transactions, and industry structure, is associated with firm profitability.

Managing strategic responsibility in the MNC

Abstract: An issue that confronts the top management of every multinational company is that of determining where in the organization basic strategy decisions should be made. The firm may concentrate responsibility for a broad range of strategic tasks at headquarters, or cede strategic responsibility to foreign affiliates. This paper argues that deriving an appropriate apportionment of strategic responsibility is largely a matter of recognizing the unique strategic imperatives imposed on the multinational firm by the conflicting requirements of integration within a global context, and responsiveness to local environments. For the firm whose businesses can benefit from world-wide co-ordination and standardization of manufacturing and product development, there is strong pressure to consolidate strategic responsibility at headquarters. For the firm whose businesses require attention to the idiosyncracies of national markets, the strategic autonomy of subsidiaries may be requisite for success. A variety of factors renders difficult a clear-cut, one-time identification of the strategic imperative facing a business. For example, even within a single business, certain functions respond to the logic of integration, whereas others require a posture of responsiveness. At times both imperatives exist at full strength within a single functional area. Often, in a multi-business, multinational firm, different businesses are subject to different pressures for integration and responsiveness. It is shown that managing strategic responsibility in situations of such ambiguity forces the firm to look far beyond traditional structural mechanisms in order to enact an appropriate division of strategic responsibility between headquarters and affiliates.

Evaluation of the strategies and performance of low ROI market share leaders

Abstract: This study examines the strategies of 41 businesses which are market share leaders, but have poor performance. Hypotheses are tested relating to market stability and product demand characteristics, as well as organizational commitments and competitive strategies.

The relationship of internal versus external orientations to financial measures of strategic performance

Abstract: Field research involving 137 respondents in eight organizations was conducted to study the relationship between alternative measures of the internal/external orientations of sociometrically identified dominant coalition members and their firms' financial performance. Results showed that attitudinal measures were more often correlated with financial measures of strategic performance than were traditional ‘insider’ to ‘outsider’ measures based on descriptive categorizations. The significant findings were related to four performance indicators of company profitability, namely, profit margin, return on average assets, net interest spread, and return on average equity.

Progression or regression in facilities focus

Abstract: In many industries today, advances in technology and changes in market demand have together resulted in the need for significant manufacturing change, both in terms of products and processes. This need to respond in order to stay competitive means not only planning for product change but also planning for process change. Further, this latter aspect has two dimensions. The first concerns process technology changes which are due to the introduction of new products or to gain distinct, accrued advantages such as process capability or cost. The second is the need for process alterations which are necessary to support changes relating to existing products in terms of mix, volumes and product maturity. In many situations, however, the consideration of process change, particularly to support alterations in product mix, is an anathema to the presently-held view of cost-effective manufacturing. Consequently, such changes tend to be made on an ad hoc rather than planned basis. However, if this attitude is not reviewed then companies may gradually lose their competitive edge as the required facilities focus deteriorates.

Strengthening managerial approaches to improving technological capabilities

Abstract: This paper draws on an extensive array of theoretical and empirical studies covering a variety of industries in the U.S. and elsewhere in order: (a) to review common shortcomings found in evaluating technological innovations both before and after adoption, as well as in generating proposals for new innovations; and (b) to suggest means of improving each of these efforts.

Strategy, external communication and environmental context

Abstract: Summary It has long been argued that organizations must interact with their environments in order to survive. But is the nature of this interaction invariant across environmental contexts? This paper considers the importance of communication between organizations and key environmental elements to the development of organizational strategic nor ms. Based on a grounded theory framework of analysis, it is theorized that organizational strategic norms are negotiated with the environment in an in teractive fashion, and that task environmental elements concerned with assessing organizations tend to employ evaluation processes that are broadly reflective of an organization's conitext. Views of financial analysts and individual investors, elicited in both a quantitative and a qualitative form, are suggestive of the mer its of this theor izing. Sever al inmplicationis Jf6r resear chers and strategists ar e discussed. An organization's environment has long been recognized as important in formulating strategy. Environment has been defined as those external factors which impact on the functioning of the organization as well as on which the organization has impact. Contained within this definition is the more traditional view that the organization is dependent on the environment, and hence must continually adapt its goals, action strategies, structure, etc., in response to changes in its

The structure of service firms and their marketing policies

Abstract: There is a growing interest in understanding the way in which firms' marketing and manufacturing policies interact. The studies carried out so far have almost entirely concerned themselves with goods-producing organizations. However this paper suggests that these studies also provide useful insights into the problems faced by service firms in organizing themselves efficiently. Furthermore it suggests that a distinctive problem faced by such firms is that adaption of their organizations may have a significant effect upon consumers' perceptions of the service they offer. The paper first outlines some investigators' views of the link between marketing and manufacturing and follows this by discussing the concept of ‘production’, ‘delivery’ and ‘consumption’ of services. A brief consideration of the pressures for change which particularly impinge upon service firms precedes a discussion of the problems, and apparent contradictions, whch are linked with the concepts of standardization and personalization of services. The paper concludes with three examples of the issues discussed.

Technological evolution and competitive response

Abstract: This paper focuses and extends some emerging views on technological evolution and competition. First, that over the evolution of many product-market segments there is a generalizable pattern, a shift from the investment characteristics of product technology to those of process technology as the primary focus of competition. Eventually, market price falls below production costs, not because firms face U-shaped cost curves, but because of shifts in demand to the innovative form of the product. To this framework is added a hypothesis on the evolving risk structure of rival investments. The interaction of required and realized returns then provides a stopping rule for technologically-driven competition which is different from the static case. Because technological change within a segment is non-controllable but predictable the production functions and organization structures of participating firms must change in generalizable ways which can be used to predict industry structure. For the competing organization, these changes require particular kinds of decisions which are particularly suited to the level of the organization's strategic management.

Study of the undergraduate business policy course at AACSB‐accredited universities

Abstract: This paper reports the results of a study directed toward determining: (1) the current pervasiveness of the requirement of a business policy course by AACSB-accredited undergraduate programmes, (2) the general characteristics of the courses, (3) the organization of the courses, and (4) anticipated future changes in the courses. A questionnaire was mailed to all 208 AACSB-accredited schools and returns were obtained from 203 of them. The paper presents the results derived from these responses and draws conclusions with regard to the study's objectives.

Effectiveness in marketing planning

Abstract: This paper is concerned with the assessment of effectiveness, despite the problems involved in its determination. The conventional approach to assessment is considered first. This is based upon a determination of the success of the planning in achieving its objectives. However, the problem here is that it does not consider the actual nature of the planning. A multidimensional approach is then considered, which attempts to overcome this problem, by measuring effectiveness within the planning system. The paper concludes that there are two types of effectiveness to be measured. However, although it recognizes the value of the conventional approach, the multidimensional approach is only seen to be useful in being an indicator to certain factors.

The visible and the invisible hand: Resource allocation in the industrial sector

Abstract: The standard economic analysis holds that resource allocation in the industrial sector is primarily a market process operating through the capital markets. The current political resurgence of free market economics has popularized this approach. Contrary to this approach the authors demonstrate that: (1) trends in the size, diversity and administrative complexity of firms; (2) structural features of the capital markets; and (3) the emergence of the state as a major source of capital in developed countries imply that internal organizational and political/ ideological considerations are also vital to understanding resource allocation in the economy.

The stock market and competitive analysis

Abstract: Summary A method is presented for analysing the stock market's implicit assessment of relative strategic position in an industry. The market's overall perception of strategic position is obtained by comparing the value offuture growth potential to that oJ the existing earnings stream Jor each company. More detail is extracted by using the quality and quantity offuture gr-owth, implicit in the relative value offuture growth, as a measure of competitive position and product market outlook respectively. The method is applied to a sample of firms from the computer and data processing industry. INTRODUCTI ON The objective of this paper is to present a method for analysing the stock market's implicit assessment of relative strategic position in an industry. As such, the paper is concerned with the contribution of financial valuation models to inter-company comparisons in strategic analyses. The factors affecting financial market value have been considered by Fruhan (1979), who examined several cases of how company strategy resulted in the creation, transfer, and destruction of value. This paper is concerned with the reverse relationship, namely, what relative market value implies about strategic position. The financial value of a company contains an implicit assessment of corporate strategy on the part of all traders in the firm's shares. The financial market's perception of relative standing in an industry is revealed by the proportion of the firm's total value attributable to future growth and by its quality and quantity. The strategic information associated with the implicit value of future growth represents a readily available independent viewpoint which can be used as a regular input into the planning process. Such a perspective is especially useful in situations where an objective internal evaluation of competitive status is complicated by the problem of management bias. Extracting the relevant strategic information from financial market data requires an appropriate valuation model. Fruhan employed a version of the model developed by Miller and Modigliani (1961). He assumed growth with returns superior to the opportunity cost of capital for a finite number of years after which the return drops to the cost of capital. These finite growth models, however, are highly sensitive to small changes in their specification. Moreover, they are difficult to apply to an analysis of the market's valuation of a particular firm, as opposed to valuation by an individual investor, because they require an estimate of the period over which the market expects superior growth to continue. It will be argued, therefore,

Diversifying acquisitions and financial relationships: Testing 1974-1976 behaviour

Abstract: Fifty-four diverisifying acquisitions in manufacturing and mining industries from 1974 to 1976 are investigated in terms of sales growth rate, rate of return on assets, and current ratio of the acquiring and acquired companies. The average characteristics of acquired companies, classified by the characteristics of their acquiring companies, are compared. Results indicate significant structural matches between the acquired and acquiring companies to exploit strengths and avoid weaknesses in growth, profitability, and liquidity. It appears that firms try to balance their business segments in terms of product life cycle stages within a limit of maintaining proper levels of profit.

Approaches for the experimental examination of the dialectic

Abstract: A great deal of attention has focused on the potential benefits of the dialectic during strategic decision making. Some field studies have shown favourable perceptions of the dialectic. Exclusive use of field studies, however, is inadequate for a comprehensive evaluation of the dialectic. Controlled studies in the laboratory and the field are needed. Operationalizing the dialectic and measuring its effectiveness in controlled settings has been the subject of debate. This paper reviews three controlled approaches—lens model studies, creative task experiments, and case studies. The applicability of these approaches to dialectical research is discussed. Basic assumptions underlying controlled research are that the dialectic can be created in controlled settings and its effectiveness can be measured in terms of better decisions.

The sustainable growth model: A tool for evaluating the financial feasibility of market share strategies

Abstract: Market share objectives constitute a key element of a firm's corporate strategy. Market share strategy decisions—to build, maintain, or harvest share—are generally based on a careful consideration of the long-term and short-term profitability and cash flow implications of such decisions. The product sales growth rate and capacity expansion implications of share building strategies, the sustainability of implied sales growth targets and its consistency with the established financial policies and objectives of the firm are the subject of this report. The sustainable growth model outlined provides a framework for evaluating the financial feasibility of sales growth objectives at the strategic business unit level and the firm level, from the standpoint of expected return on sales, investment requirements per dollar of sales, target capital structure and the dividend policy of the firm.

A diagnostic framework for planning

Abstract: The traditional framework for strategy formulation in the field of business policy is deliberately broad and generalized, so as to encompass an almost limitless number of potentially influential factors. There is also a need for a more focused view, a means for showing similarities and differences among firms and how these relate to strategy formulation—a framework, in other words, that allows companies to be diagnosed by key situational elements and uses these, in turn, to define the appropriate strategy alternatives. What is proposed is a framework based on three familiar key elements—organizational levels, management styles, and stages of growth—integrated with and related to four basic strategy alternatives.

The trade-off between production and transportation costs in determining optimal plant size

Abstract: An important element of manufacturing strategy is to decide on the shipping radius and the size of a geographically focused plant. This decision involves a trade-off between exploiting economies of scale in production by building a large plant and decreasing transportation costs by building a small plant. The paper presents a model for analysing this trade-off. It is shown that scale economies in transportation facilitate the exploitation of production economies of scale. For an optimal sized plant, the ratio of transportation to production costs does not depend on the absolute cost levels in production and transportation, but only the economies of scale present in production and in transportation.

Business and national priorities for industrial development: Intersectoral consensus in Israel

Abstract: This study describes a survey of experts chosen from Industry, Labour, and Government in Israel, who ranked and scored three business and four national goals in the context of industrial development. The business goals represented profitability, capital use and growth potential. The national goals involved human resource utilization, added value, foreign exchange conservation, and export of technologically advanced products. The findings support a hypothesis of consensus on goals and goal priorities between different sectors of the Israel economy, despite what might appear to be their divergent special interests. The findings also indicate overall consensus with respect to a balance between business and national goals. The study concludes that this consensus is the result of the need to respond to environmental threats and uncertainties which has created a sense of mutual interdependence among the sectors.