Strategy

Does the strategy of linking market share to profits really work? This investigation argues that there is simply no causal relationship between market share and profits. In highly volatile industries, market-share-based strategies can be misleading. The authors provide evidence from two studies, one using the FTC Line of Business data and the other employing data on the performance of sixty-three companies in three countries. In the first case, companies that maintained stable operations were more profitable than those that maintained stable market shares. In the latter, Japanese companies in a wide variety of industries had more stable operations than comparable U.S. firms.

Although few would deny that vision serves a critical role in today's organizations, in practice, most managers are intimidated and frustrated by the challenge of developing one. The author explores the notion of vision by first explaining how and why visions work. He presents a template, tested in organizations representing the corporate, nonprofit, and public sectors, that outlines the principal themes necessary for an effective vision. Because not all great visions succeed, the author analyzes why they sometimes fail.

What lessons do IBM's failure in the 1980s and early 1990s and its apparent successful comeback have for other large corporations? In an extensive study of the company's history (only part of which is covered here), the author finds two factors that contributed to IBM's difficulties: it ignored its commitments to customers to provide effective, high-quality technology and service support, and it broke its implied promise to employees to provide job security. Large corporations will survive only if they can avoid some of the hazards that IBM has faced.

Positioning products in a complex market can be one of a company's most difficult decisions. In determining whether to combine or maintain separate product lines, Hewlett-Packard used an approach it calls strategic market modeling (SMM) to design "what if" scenarios and run simulations to predict market behavior. SMM combines demographic, user needs, and competitive perception data into a database for testing alternative positioning strategies. The author describes HP's development of SMM and the lessons learned.

Many firms commonly place expatriate women in positions abroad, yet know little about the women's job adjustment and performance. The authors have studied in depth the factors that help and hinder foreign women in one particularly difficult environment -- Japan -- and found that, while women can be successful and bring some advantages to the assignment, they face special challenges. Based on the findings from their study, the authors suggest how firms can increase the effectiveness of foreign women in assignments abroad.

As original equipment manufacturers reevaluate whether to make or buy parts for their products under conditions of intense competition, small to medium-size manufacturers that specialize in producing well-defined types of products have a unique opportunity to become world-class competitors. The authors present a prescriptive approach for staying or becoming a successful parts supplier. They follow a printed circuit board manufacturer, Hadco Corporation, along the four different paths suggested by the strategic supplier typology they developed from a survey of 200 New Hampshire manufacturers.

Are rebounding U.S. corporate profits causing managers to be complacent about the Japanese competitive challenge? Is the world market share of Japanese industry really shrinking? According to this author, it's too soon to count the Japanese out. Using company data, he has tracked changes in world market shares in various industries since the 1960s. The results of his survey suggest that the current U.S. response to the Japanese global challenge is inappropriate and that managers should reexamine their efforts to position their companies in world markets.

A survey of CEOs at Fortune 1,000 firms asked about their firms' hurdle rates and time horizons. Survey results suggest that most U.S. firms use hurdle rates that are higher than standard cost-of-capital analyses would suggest. The average discount rate applied to constant-dollar cash flows was 12.2 percent, distinctly higher than equity holders' average rates of return and much higher than the return on debt during the past half-century. At the time of the survey, the fall of 1990, U.S. CEOs believed that their firms had systematically shorter time horizons than their major competitors in Europe and (especially) Asia. U.S. CEOs also thought that government policy is a powerful agent affecting corporate planning horizons. They saw several policy reforms, including a cut in corporate tax rates, a permanent R&;D tax credit, a corporate tax deduction for dividend payments, and a credible commitment to a stable tax policy for the next decade, as policies that could lengthen planning horizons.

Despite the popularity of flexible manufacturing systems, managers suffer from inadequate frameworks to help incorporate flexibility into their strategic planning. Through a study of thirty-one plants in the printed circuit board industry, the authors progress toward such a framework, define types of flexibility, and examine the relationships among them. Their findings have implications for technology, production management, human resource management, supplier relationships, and product development.

Is it time to reform the financial reporting regulations that were established in the early 1900s? Will new regulations improve the corporate disclosure process? The authors conducted a national survey of corporate managers, financial analysts, and portfolio managers to examine their options on disclosure regulation and how companies communicate with the capital markets. Their analysis indicates that, while all three groups think market functioning is imperfect, they do not see a need for increased financial reporting regulation. Rather, the authors' analysis suggests that companies can improve the processes of disclosure and communication by developing a strategy for corporate information disclosure, upgrading the role of the investor relations staff, and voluntarily reporting nonfinancial information. Such improvements would increase management credibility, analysts' understanding of the firm, investors' patience, and, potentially, share value.