A World-Class Company Is One Whose Customers Cannot Be Won Away by Competitors: Internationalizing Strategic Management

By Harrigan, Kathryn Rudie | Journal of Business Administration, Fall 1992 | Go to article overview

A World-Class Company Is One Whose Customers Cannot Be Won Away by Competitors: Internationalizing Strategic Management


Harrigan, Kathryn Rudie, Journal of Business Administration


1.0 INTRODUCTION

Business schools exist to improve management practice. All scholarly research, development of teaching materials, testing of theories, and other activities carried on by faculties of business schools should help managers develop tools for coping with the problems of international value creation. These tools frequently take the form of paradigms taught in core business school curricula.(1)

Strategy is how the firm creates value for its customers -- wherever those customers might be located. The study of international strategic management involves the content and process of identifying and nurturing of core competencies (Prahalad and Hamel, 1990). These core competencies are the root of a firm's competitiveness in the sense that competencies enable firms to develop new capabilities. Organizational growth is engendered by matching the firm's in-house capabilities to its diverse customer needs. To do so successfully, managers must understand their firm's basis for competitive advantage as well as how to serve their customers. Such bases for competitive advantage may differ from country to country where international firms serve diverse types of customers or face differing types of infrastructures.

"Becoming a world-class company" represents an internationally-attractive goal that can serve as an integrating paradigm when teaching the subject of international strategic management. It is effective because it best captures the demand-side (customers and markets) as well as supply-side (competitors and local industry structures) of the problem of international value creation. Developing the world-class company paradigm enables instructors to bring together the diverse streams of knowledge necessary to internationalize strategic management education. The development of this integrating paradigm follows.

2.0 A CUSTOMER-BASED THEORY OF STRATEGY

Strategy has content and timing. Strategy content determines which customers to serve, with what product attributes, using which technological (problem-solving) posture.(2) Strategy timing determines whether any "first-mover" advantage accrues from timely execution of a strategy. Strategic timing issues include the study of unorthodox arrangements -- like strategic alliances or various forms of quasi-integration -- which can be used to accelerate a strategy's implementation. The process surrounding the implementation of strategy communicates throughout an organization which customers the firm wants to satisfy, what technologies the firm will use in satisfying chosen customers, and what policies will guide the firm in serving its current customers while developing the new capabilities believed to be important for future competitiveness in serving customers that will be attractive then. The firm's business-level strategies -- those formulated to compete in a particular industry -- must be consistent with its corporate strategy -- how the activities of the firm's business units are coordinated (or not) -- especially within an international context.

Resource allocation decisions (which are made at both the business-unit and corporate levels) proceed from analyses of industry profitability potential that match customer demand to vendors' willingness to supply that demand. Analysis of demand proceeds from the study of each country's market segments, factors affecting demand growth in each venue, and customer's divergent expectations from country to country. Analysis of supply proceeds from the study of industry structure (including local variations in the factors of production) and competitor behavior. The profitability potential of each industry in each country where a firm operates is evolving over time and managers must understand the resource allocation implications of coping with this evolution.

2.1 Find Attractive Market Segments

Since the world-class company can serve the customers of its choice, the managers of such firms must choose which are the most attractive customers to serve. …

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