The Shifting Language of Strategy

My post on International Business terms got me thinking about the shifting popularity of Strategic Management terms.

So, here we go with some comparisons.

Let’s start with the topic itself and its two main constituent threads (i.e. strategic management, corporate strategy, and business strategy):

All three terms boomed from the late 1970s, but it was business strategy (i.e. decisions about how to compete in markets) that screamed away from corporate strategy (what markets to compete in).  As with many of the IB terms, all the concepts have faded in recent years, perhaps as conversations became more specific (or even less-business focussed).

It doesn’t surprise that such corporate strategy has waned in a relative sense, as the orthodox rhetoric has been towards streamlined, focused organisations.  Looking at some of the typical such corporate strategy terms (diversification, mergers, acquisitions, outsourcing), shows a genuine plateauing in all terms, other than outsourcing which has raced up in the past decade (this no doubt reflects not just usage by strategy scholars, but also the critics thereof). Diversification peaked way back in the late 1980s (although this term has a considerably wider usage than its strategy meaning), which correlates pretty nicely with the decline in such behaviour (at least by Western firms):

The influence of Michael Porter, and his big ideas/tools (Five Forces, generic strategies) have proven surprisingly consistent in terms of usage, although they too have waned this millennium:

In terms of talking about competitive advantages, core competences/core competencies peaked in the early 200s, while dynamic capabilities are still on a steady rise (I get similar results with the singular versions of the terms):

What terms have I missed (conscious that comparing phrases with different word counts is not practical/tenable, nor does it make much sense to use terms with other common uses, such as resources)?

As this is likely to be my last pre-Christmas post, I wish you all a fun festive season and safe passge into 2011.

 

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Hear, hear Mr Cochlear

A nice quote from Cochlear CEO, Dr. Chris Roberts yesterday:

“Growth by acquisition is a tough gig. More companies die from indigestion than starvation.”

Pretty much sums up what I was teaching in class this week about diversification and M&A. Firms need to avoid the synergy bias and think very carefully before taking on the task of extracting more benefits than costs from takeovers.

Chasing synergies in a downturn

One of the arguments for mergers and acquisitions (M&A) is the synergies that come from sharing value chain activities (economies of scope). Coupled with better parenting, this should see M&As produce cost savings and efficiencies. It can all fall apart, however, if you paid too much for the acquisition, or the costs of funding the purchase leap considerably.

This Economist piece highlights the dramas facing six of the world’s largest materials and mining firms (Xstrata, ArcelorMittal, Tata Steel, Rio Tinto, Lafarge and Cemex) as they try to bed down some very significant M&As from past year or so.

As the article notes, with debt refinancing a whole lot harder to get, and share prices tumbling, these firms are finding life a hell of lot more difficult than they were. It certainly demonstrates the dangers of buying at (or near) the top of the boom, and reminds us again that firms too regularly overestimate the ease of realising such synergies. One hopes that these experienced multinationals have also accurately assessed the complexities of chasing such syenergies across borders.