The Tyranny of the SBU of the Firm in Competence Perspective

The new terms of competitive engagement cannot be understood using analytical tools devised to manage the diversified corporation of 20 years ago, when competition was prima- rily domestic (GE versus Westinghouse, Gen- eral Motors versus Ford) and all the key play- ers were speaking the language of the same business schools and consultancies. Old

Developing Strategic Architecture of the Firm in Competence Perspective

The fragmentation of core competencies be-comes inevitable when a diversified com-pany’s information systems, patterns of com-munication, career  paths, managerial rewards, and processes of strategy develop- ment do not transcend SBU lines. We believe that senior management should spend a sig- nificant amount of its time developing a cor-poratewide strategic architecture that estab- lishes objectives

Developing Strategic Architecture of the Firm in Competence Perspective

The idea that top management should develop a corporate strategy for acquiring and deploying core competencies is relatively new in most U.S. companies. There are a few exceptions. An early convert was Trinova (previously Libbey Owens Ford), a Toledobased corporation, which enjoys a worldwide position in power and motion controls and engineered plastics. One

Redeploying to Exploit Competencies in Corporation

If the company’s core competencies are its critical resource and if top management must ensure that competence carriers are not held hostage by some particular business, then it follows that SBUs should bid for core compe- tencies in the same way they bid for capital. We’ve made this point glancingly. It is impor- tant

The relational view: Sources of relational rents

1. Theoretical Discussion By examining the relevant characteristics of arm’s-length market relationships, we find clues that guide our search for relational advantages. Arm’s-length market relationships are charac- terized by nonspecific asset investments, minimal information exchange (i.e., prices act as coordinating devices by signaling all relevant information to buyers and sellers), separable technological and functional

The relational view: Mechanisms that preserve relational rents

An explanation of how firms generate relational rents necessarily requires an explanation of why competing firms do not simply imitate the partnering behavior, thereby eliminating any competitive advantages that might be gained through collaboration. There are a variety of isolating mechanisms that preserve the rents generated by alliance partners. First, it is important to

Comparing the relational RBV, and industry structure views

Although an individual firm’s ability to work effectively with other firms may be classified as a firm-specific capability (which may generate relational rents), there is value in distinguishing a relational view, which offers a distinct, but complementary, view on how firms generate rents. A relational view considers the dyad/ network as the unit of

Introduction to Hypercompetition

1. HYPERCOMPETITION While cost and quality, timing and know-how, strongholds, and deep pockets have always played a role in competition, the difference today is the speed and aggressiveness of interaction in these arenas. Part I of the book will examine patterns of interactions in each arena and show how they have taken on an

New ways of thinking about competitive advantage

1. Every Advantage Is Eroded The pursuit of a sustainable advantage has long been the focus of strategy. But advantages last only until competitors have duplicated or out- maneuvered them. As will be seen in the discussions of Part I, protecting advantages has become increasingly difficult. Once the advantage is cop­ied or overcome, it

Old ways of thinking about competitive advantage

To be effective in times of change, strategy must look to an industry’s fu-ture. It must provide an understanding of possible moves and counter-moves of rivals and offer a map of where the interactions between compet, itors might be headed. This requires a dynamic view of strategy. Static models of strategy provide an invaluable

Beyond static competitive advantage

The theories of strategy and competitive advantage described above have been helpful in focusing the attention of managers and researchers on stra­tegic decisions. But have they enabled managers to improve their strategic viability? As Gary Hamel and C. K. Prahalad note, strategy, as it is cur­rently practiced, may be a distraction from real strategic

The big picture: Escalation ladders and hypercompetition

1. Two Types of Escalation Research of the trajectories within each arena of competition reveals two types of escalation. The first is the escalation within each arena. As outlined in the discussion of trends in each arena, moves lead to counter­moves, and the competition continues to escalate. Firms move to higher and higher levels

New rules for hypercompetition: The new 7-s’S

In hypercompetition success depends on developing a series of new advan, tages that disrupt (not sustain) the status quo and that cope with other firms trying to disrupt the status quo. But what is it that allows companies to rapidly and continuously identify and develop new advantages? What is it that allows them to

Traditional views of cost-quality advantages

Cost and quality are the staples of competitive positioning. As discussed, Porter identified three generic strategies based on cost and quality advan­tages: overall cost leadership, differentiation, and focus strategies.1 The cost-leadership strategy involves offering a mass-marketed, low-priced, low-quality product. The differentiation strategy involves offering a pre­mium-priced, high-quality good, and the focus strategy targets a

Dynamic strategic interactions and the escalation ladder

We begin this chapter with the most primitive of all economic situa­tions—the case where two companies make the same product ( with the same quality) and thus are forced to compete on price. We see how this simple situation escalates into price wars, then differentiated markets, then full-line producers, and then niche strategies, as

Beyond cost and quality: no product positioning advantage is sustainable

Sometimes, when this point of ultimate value is reached, firms may tum to one of two strategies that abandon the market because the market seems too competitive to be profitable. Product-line extensions: Just as service can enhance product quality, companies can also add new products to fill in excess distribution ca­pacity. For example, McDonald’s

Hypercompetitive behavior in the cost-quality arena

Hypercompetitive firms attempt to (1) stay ahead of competitors who are attempting to catch up to or overtake them on the escalation ladder and (2) slow down competitors’ efforts to overtake them without slowing down their own advancement up the escalation ladders. These hypercompetitive actions are efforts to avoid perfect competition (where no one

Traditional views of timing and know-how advantages

The Hoffmann,LaRoche and Wang examples illustrate that arriving first to market can give a company a substantial advantage. If the first,mover firm arrives long before competitors, it may be the only seller of a product or provider of a service, allowing it to charge a premium because of its status as a monopolist. In

Timing-based strategies and dynamic strategic interaction

The timing of a firm’s rents and cash outflows depends upon the timing of its competitors’ movements into new markets and the timing of the firm’s own development of new technology and other know-how. This often de­pends upon whether firms choose to make revolutionary or evolutionary product changes. Moreover, the timing of the rents

Timing and know-how advantages are not sustainable

Even if the company successfully negotiates its way downstream or up­stream, it experiences yet another barrier that limits the continued use of new downstream moves to create advantage. As firms move into more and more downstream activities, the complexity of the organization grows. Management finds it more and more difficult to coordinate all the