Posts Tagged ‘mergers’

The Shifting Language of Strategy

December 23, 2010

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.



Stretching an advantage further

May 5, 2009

cutting_costsLow cost is a common option in the business strategy literature. Often we assume that a firm that dominates market share, has substantial economies of scale, and offers a very price competitive product relative to its main rivals most be pursuing such a strategy to a greater extent than differentiation. The recent acquisition of Anheuser-Busch by InBev demonstrates that such assumptions should be tested.

As reported in the Wall Street Journal, the Brazilian-run, Belgian-headquartered InBev has certainly made some sweeping changes in taking over the US brewing rival.

The new owner has cut jobs, revamped the compensation system and dropped perks that had made Anheuser-Busch workers the envy of others in St. Louis. Managers accustomed to flying first class or on company planes now fly coach. Freebies like tickets to St. Louis Cardinals games are suddenly scarce.

InBev eschews fancy offices and company cars, and groups of its executives share a single secretary. It uses zero-based budgeting — meaning all expenses must be justified each year, not just increases. The company says it saved €250,000 ($325,000) by telling employees in the U.K. to use double-sided black-and-white printing, spending the money to hire more salespeople.

The story also reports extensions in payment terms to suppliers and cuts in advertising spend and format.

InBev clearly saw a lot of fat in this business despite (or perhaps because of) its 48.9% domestic market share. And it seems to be working thus far, with retail share up almost another 1% in the last quarter. Presumably margins are increasing even more.

I guess this could also be dropped in the benefits of multinationality box, with an MNE prepared to make the tougher decisions and to transfer capabilities into a new environment.

Chasing synergies in a downturn

December 14, 2008

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.