Business strategy – applications and advancing tools

Business strategy – applications and advancing tools

Article Type: Guest editorial From: Management Decision, Volume 51, Issue 7

Introduction

Business strategy (BS) research is complex. Today’s managers face a large number of unprecedented challenges in the global marketplace and seek to design strategies, capable of providing their companies with competitive advantages that can be sustained over time. Existent literature on what has come to be described as BS (e.g. Mintzberg, 1990; Porter, 1996; Bowman and Ambrosini, 2007; Sheehan and Foss, 2007) has extensively analyzed the application of tools that may help managers in designing such strategies. However, there exist exciting opportunities for further development in the theories, applications and advancing tools, surrounding BS, with several questions yet to be explored. In particular, increasingly many studies, discussing business tools and techniques, seem to provide only incremental variations of existing models or choose to concentrate on highly focused research questions or dilemmas, encountered in provoking strategy debates (Faulker and Campbell, 2003). Meanwhile, the role of theorists as drivers of general BS research continues to be seen as major and critical.

The specific focus of this special issue was on the emerging BS tools and applications, as well as on the effects that various BS phenomena can cause. For instance, manuscripts that aimed to develop theoretical frameworks, able of synthesising the existing body of knowledge in the field, and contributions, presenting strategic problem-solving applications in business context, based on accurate methodology, were welcome to this special issue.

Business strategy – applications and advancing tools

Strategy prepares businesses for the future. In this preparation, organizations operating in vibrant competitive environments are potentially faced with several paths to follow. So what is the future for BS? Given the increasing dynamics of the current business ecosystems, the position of this special issue is that future is agnostic. The contributors were, therefore, invited to draw their original points-of-view on the subject of BS.

This special issue offers a collection of eight articles devoted to BS applications and advancing tools. Each article makes a valuable contribution to BS research and to our understanding of BS.

The effects of internal and external discontinuity on business strategy are analysed by Antonio Ghezzi in the first paper of this special issue. His paper is a relevant contribution to fill the research gap in the modelling of such effects and disclosing their influences on the strategic planning process. Specifically, the author presents a theoretical framework and two case studies of telecommunication companies (TIM and Vodafone) to show:

how a discontinuity, either external (i.e. environment-driven) or internal (i.e. enterprise-driven), impacts business model performance, value network configuration and resource management recommendations, by modifying their initial (or pre-discontinuity) status; and

how these modifications in the pre-discontinuity status of these three constructs influence the firm’s business strategy and determine a strategy re-planning process that aims at tackling the effects of discontinuity.

Supported by the analysis of these case studies, the author concludes that business model, value network and resource management are key tools for strategy monitoring and control that can help to adapt when the internal or external environments have changed to an extent to which the former strategy is no longer adequate.

An innovative approach to the resource based theory (RBT) is presented in the conceptual paper by Xavier Lecocq, Vanessa Warnier and Xavier Weppe. Going beyond of the traditional approach in this field, i.e. focus on strategic resources, the authors also consider two new typologies of resources: ordinary resources and junk resources. Specifically, an ordinary resource is a common resource on the market, generally perceived as neutral in terms of performance. A junk resource is a resource overlooked or ignored by firms and not highly valuated on the market, which is generally perceived as negative in terms of performance. The authors show how possession of ordinary or junk resources is not reserved by companies in difficult situations or with little capacity for investment. These resources are also present inside the most competitive firms. Moreover, authors’ arguments reveal that ordinary resources may be necessary for the replication of a given business model in various business units or countries and that ordinary or junk resources can be behind the emergence of new business models when a manager invents new services for them, leading to unsuspected performance. The approach developed in this article allows going beyond traditional critiques of RBT, specifically its tautological character: the most successful firms are those that possess strategic resources because strategic resources offer a competitive advantage.

The empirical study by Wen-Ting Lin and Kuei-Yang Cheng is related to the impact of compensation levels of the chief executive officer (CEO) and the top management team (TMT) with respect to the rhythm of firm internationalization. This paper helps to give an answer to the question of “how” to expand globally, a question that is more critical and less studied than those of the “why,” “where,” or “when” with regard to a global posture. Using longitudinal data (1997-2005) from Taiwan’s public firms, the authors show that CEO compensation levels and the compensation gap between the CEO and TMT members have a significant influence on a firm’s internationalization strategy. Specifically, they show that higher CEO compensation can lead to a regular foreign expansion pattern. Moreover, compensation gaps between the CEO and TMT members affect the internationalization rhythm in a manner consistent with both the economic and behavioural perspectives (i.e. an appropriate compensation gap may facilitate regulation in the internationalization rhythm by frequent collection of new information about the foreign market). Finally, they show how the effect of compensation on the internationalization rhythm is moderated by firm performance.

One of the fundamental questions faced by all entrepreneurs when founding a new venture is how broadly to serve the market they are entering: to start up as a generalist or as a specialist. The analysis of this key question is the goal of the paper by Jiatao Li and Weiping Liu. Following an organizational ecology approach, the authors study how population dynamics influence the initial founding strategies of new banking organizations in California over 1979-1988. Specifically, they analyze how market dynamics within (especially market concentration and organizational density) and the actions of peer organizations can help predict entrepreneurial decisions about market niche positioning. The authors classify 363 new banks founded over these ten years into specialist and generalist banks and develop a logistic regression model to examine the propensity of the new banks to enter as a specialist rather than a generalist. The authors conclude that:

increasing market concentration among the market generalists freed up peripheral resources and encouraged the founding of new specialist banks to draw on those resources; and

that there was an inverted U-shaped relationship between specialist bank density and the rate at which new banks entered as specialists.

The next paper by Junghoon Moon, Jogtae Lee and Myong-Cheol Park examines the impact of different types of outsourcing relationships (i.e. support, reliance, alliance, alignment) on performance and argues that outsourcing should be viewed as a strategic issue. By focusing on mobile office outsourcing, where mobile office is defined as an integrated system that supports businesses by means of mobile devices (e.g. mobile applications, smartphones), the authors analyse the effect of the outsourcing strategy of mobile office on work performance. As a result of the analysis, the authors find out that the perceived usability and impact of a mobile office are higher when the relationship with outsourcing vendor takes the form of the “alliance”, which implies that outsourcing vendors participate in the designing and consulting of the client’s information system as equally worthy partners and co-creators of the information system.

Doordarshi Singh, Jaspreet Oberoi and Inderpreet Ahuja contribute to the business strategy literature in two ways. First, the authors clarify the constructs of dynamic capabilities and strategic flexibility and identify their multiple dimensions. Dynamic capabilities are conceptualised as intangible assets or processes, which enable organisations to adapt to the fast changing environment and to reconfigure its internal structure in response to external fluctuations. The dimensions of such capabilities are R&D capabilities, alliance capabilities, innovative and technological capabilities, advanced technology and human resource capabilities. Strategic flexibility is defined in the paper as a capability of an organisation to respond quickly to the fast-occurring environmental changes and to maintain its competitive advantage. The multiple dimensions of strategic flexibility are market, new product, expansion, and manufacturing and supply chain flexibility. The second contribution this paper makes to the business strategy research is the empirical evaluation of the interplay of relationship between different capabilities and flexibility constructs in achieving strategic flexibility, and the establishment of the positive influence of dynamic capabilities on strategic flexibility.

Further, the study by Lopin Kuo and Yi-Ju Chen investigates the role of sensitive information disclosure and its impact on business strategy. More precisely, the authors raise the issue of environmental disclosure and its ability to establish environmental legitimacy for organisations. By investigating disclosure practices of 208 Japanese firms, they conclude that environmental news exposure and environmental disclosure in corporate social responsibility (CSR) reports constitute an effective strategy for improving legitimacy of the organisations from the environmentally sensitive industries. The theoretical contribution of the paper is its specific focus on ecological and CO2 information in corporate environmental disclosure as well as its measurement; whereas the practical significance of the paper is the specific recommendations to Japanese firms on how they can make more effective use of their environmental initiatives to improve their legitimacy image.

Finally, Kuo-An Tseng, Yu-Wen Lan and Pin-Yu Chen explore the mediating effect of business strategy on intellectual capital and financial performance in the pre- and post-financial crisis periods. The empirical evidence from the sample of 2,493 Taiwanese IT-companies suggests that intellectual capital has a significant impact on business strategy and financial performance in both samples, whilst business strategy has a partial significant impact on financial performance and a partial significant mediating effect on intellectual capital and financial performance. From the theoretical viewpoint, the study adds value to the strategic performance management literature by simultaneously exploring the relationships between intellectual capital, business strategy and financial performance and by adding to the existing list of criteria for strategic performance management. From the practitioner perspective, the work confirms the relationships between intellectual capital, business strategy and financial performance and puts forward such practical recommendations as to pay more attention to intellectual capital (e.g. employee human capital, enterprise R&D, improvement of process capital, development and maintenance of customer relationships), to appreciate the link between financial and non-financial performance and to continuously scan the environment for changes to be able to develop appropriate strategies in a timely manner and to maintain stable financial performance.

Conclusion

Research in BS has made remarkable progress in the last decades by establishing itself as a legitimate scientific area. The research has expanded and evolved into a fascinating and dynamic research field, which has provoked an incessant stream of BS captivating questions. With this special issue we tried to take a step forward in contributing to some of those questions and in furthering our understanding of BS. A number of diverse BS visions, using various tools, techniques and schools of thought were presented, however the decision on the appropriate view of the future is left to the readers.

Acknowledgements

The Guest Editors would like to thank anonymous reviewers for their cooperation and useful comments. Without their support it would not have been possible to produce this special issue so efficiently.

João J.M. Ferreira, Jose Vila and Anastasia Mariussen

Guest Editors

References

Bowman, C. and Ambrosini, V. (2007), “Firm value creation and levels of strategy”, Management Decision, Vol. 45 No. 3, pp. 360–371

Faulker, D.O. and Campbell, A. (2003), The Oxford Handbook of Strategy: A Strategy Overview and Competitive Strategy, Vol. 1, Oxford University Press, Oxford

Mintzberg, H. (1990), “The design school: Reconsidering the basic premises of strategic management”, Strategic Management Journal, Vol. 11 No. 3, pp. 171–195

Porter, M.E. (1996), “What is strategy?”, Harvard Business Review, Vol. 74 No. 6, pp. 61–78

Sheehan, N.T. and Foss, N.J. (2007), “Enhancing the prescriptiveness of the resource-based view through Porterian activity analysis”, Management Decision, Vol. 45 No. 3, pp. 450–461

About the Guest Editors

João J.M. Ferreira

Associate Professor of Management at the University of Beira Interior (UBI), and Researcher at NECE – Research Unit in Science Business, Portugal. He holds a PhD in Management and his research interests include: strategy, competitiveness and entrepreneurship. He is editor, editorial board member and reviewer of several international journals. He has published extensively in a variety of leading journals.

Jose Vila

Professor of Quantitative Methods for Management and Strategic Behaviour at the University of Valencia and Research Fellow of the Centre for Research in Social and Economic Behaviour. He holds a PhD on Economics and his research interests include behavioural economic, quantitative methods for evidence-driven decision making in business strategy and policy design, and entrepreneurship. He has lead several projects of research knowledge transfer for private companies and public organisations. He has published extensively in a variety of leading journals.

Anastasia Mariussen

Associate Professor at the Department of Marketing, Oslo School of Management, Norway. Her PhD and current research concern digital marketing, affiliate networking, online distribution and business performance measurement.