Global Strategy and Competitiveness - Coursework Example

GLOBAL STRATEGY AND COMPETITIVENESS Student’s Name: Instructor’s Name: Course Code: Date of Submission: Table of contents GLOBAL STRATEGY AND COMPETITIVENESS 1 Global strategy and Competitiveness 3 THE GROWTH OF THE FIRM IN PLANNED ECONOMIES IN TRANSITION: INSTITUTIONS, ORGANIZATIONS, AND STRATEGIC CHOICE 3 Problem Statement 3 Introduction 4 Review of Literature 5 Methodology 6 The study approach 6 Method of data analysis 6 Analysis 7 Conclusion 8 References 9 Global strategy and Competitiveness THE GROWTH OF THE FIRM IN PLANNED ECONOMIES IN TRANSITION: INSTITUTIONS, ORGANIZATIONS, AND STRATEGIC CHOICE Problem Statement Peng and Heath (pp.492-99) documents different organizations adopt different models of growth of firms [hence different globalization/internationalization strategies] that are dependent on characteristics of the markets and economy1. Organizations in a given region adopt a shared type of globalization strategy that defines organizational growth which results into homogeneous organizations that lack competitive advantage. Different regions have different models of growth of the firm that are brought about by convergence or divergence of cultural values. The growth of firms have been determined to fall under three-strategic-choice model (Peng & Heath, p.492-3) namely generic expansion, mergers and acquisition and inter-organizational approach. Peng and Heath (pp.492-517) provide analysis of globalization strategy and model of growth of firms that are specific to planned economies with regard to Eastern Countries, for instance China. Peng and Heath (pp.492-95) claims the three models of growth of firms could be applied in planned economies that are in transitions however, firms in planned economies in transitions implement network-based strategy (pp.492-3). Peng and Heath (pp.499-512) claim models of growth of firms are affected by formal and informal constraints that are brought about by institutional framework [depending on type of economy]. The study as a result, sought to identify formal and informal constraints that affect globalization of firms in Eastern Countries. Introduction The models of growth of firms provide that firms achieve competitive advantage based on capacity for the globalization strategy to support creation of innovation value and support manager’s capacity to implement strategic choices that can form firm core competencies. The globalization strategy that a firm implements, influences capacity for firm’s implementation of Chandler and Hanks 1994 model of venture performance2 and Resource-Based View Model3. Firms in planned economies implement network-based strategy. Inter-organizational globalization strategy has been cited to contribute into achievement of competitive advantage in traditional economies and sustains organizational economic growth in economies that are transiting from traditional economies into open-market or market-based economy and information/knowledge-based economy. Network-based strategy as a growth model of a firm is cited to enhance sustainability of stakeholder relationships. Western firms that implement either generic expansion or acquisition strategies face challenges when they set up subsidiaries in international markets that are characterized by firms that are transiting from planned economies (pp.494-6). There has been need to identify values of network-based strategy that is implemented by firms transiting from planned economies. As a result, determination of values of hybrid or network strategy is important towards determination of rationale firms could penetrate markets that are transiting from planned economies. Appropriateness of an internationalization strategy depends on managerial competencies towards determination of strengths and weaknesses of an organization, quality of organization, organizational capabilities, organizational self-efficacy and network potential of the organization (pp.499-509). Review of Literature Westerns firms (Peng & Heath, pp.494) achieve globalization through either generic expansion approaches or mergers and acquisitions or both. However, firms in socialist markets demonstrate a different growth model that exploits competencies of network-based strategies that are implemented through firm network alliances, joint ventures, hybrid organizations, partnerships, corporate groups and research consortia which don’t satisfy characteristics of market or hierarchical organizations growth models (pp.493-5). In eastern nations, planned economies form foundation of entrepreneurship. In china for instance, the planned economy is characterized by firms that are state-owned and growth is minimal due to lack of firm acquisition or resource allocation towards firm expansion (pp.494). The managerial and entrepreneurial capabilities for firms operating in planned economies are low to support organizational competition and achievement of core competencies. Firms that implement network-based strategy demonstrate similarity in institutional infrastructure. The firms are characterized by weak bureaucratic controls and increased tolerance of private ownership as opposed to firms that implement generic expansion and acquisitions. The growth of the network-based strategies is dependent on sustainability of managerial network contacts (pp.493-6). Firms operating in planned economies are defined by organizational routines (p.497) that present constraints in managerial and organizational capabilities hence low level of creation of innovation value. The network-based strategy is affected by institutional constrains [due to influence of planned economy] that reduce opportunities for implementation of generic expansion or acquisition globalization strategies. Market forces through PESTLE [political, environmental, Social, Technological, legal and economic], shape the model of growth of firms and make organizations in Eastern Nations to implement network-based strategy. Network-based strategy is structured on personal trust and informal agreements between management. Network-based strategy is affected by boundary conditions that limit application of values of market-based economies and hierarchical-based economies (pp.495-7). Network-based strategy has been determined to limit capacity for a firm to adopt and implement strategic choices that could contribute into achievement of competitive advantage. Due to strategic limitations, the firms have constrained motivations towards growth. Methodology The study approach The Peng and Heath (pp.492-528) study adopted a study protocol that was proposed by North (1990, and North (1990) argument that interaction between institutions and organizations form basis for network-based strategy and facilitates exploitation of opportunities that shape and model economic activities. The modeling of economic activities is dependent on managerial and organizational capabilities towards resource allocation [physical and human]. Peng and Heath (pp.492-528) study integrated Penrose Model of firm growth. The North and Penrose model have capacity to provide foundation for management of formal and informal constraints that affect different models of growth of firms and role of institutional framework in shaping the organizational model of growth. The study assumed informal and formal constraints depend on cultural context [high context culture vs. low context culture] and rationale it shapes managerial and organizational capabilities. Method of data analysis The article was analyzed through use of Qualitative Content Analysis that was achieved through analysis of textual data. Qualitative Content Analysis was used because Content Analysis is compatible with reflexive analysis and circular analysis of arguments. Content Analysis is further compatible with data interpretation methods for textual data or narrative data. Content analysis was used because it involves analysis of arguments, propositions and opinions. Content analysis utilized values of Key-Word-In-Context (KWIC) that made it possible to determine similarities and differences between different models of growth of firms and rationale the models are adopted in planned economies. Through KWIC, it was possible to implement data coding/decoding of the raw textual data hence capability for categorization of the data and eventual application of qualitative modeling approach which made it possible to achieve consistency that is vital in achievement of internal validity of the analysis. Analysis The analysis determined that firms operating in planned economies “don’t implement generic expansion” and “mergers and acquisition models of firm growth” but implement “inter-organizational growth strategy”. The inter-organizational strategy resonates “application to western hybrid model for firm’s growth” but without “characteristics that define market-based strategy or hierarchy-based strategies”. The analysis showed that Eastern Nations “implement network-based relationships” through “strategic alliances”, “joint ventures”, “hybrid organizations”, “corporate partnerships”, “corporate groups” and “research consortia”. It was found that “informal constraints” shape “inter-institutional and inter-organizational relationships” and play a significant role in “regulating economic exchanges” between institutions and organizations. Transition has played a role in “shaping behavior of management and firms” and “challenge of formal constraints” that define market-based economy. Use of network-based strategy by firms in transiting planned economies were found to “face constraints” characterized “managing change” and “leading change” from initial planning regime that reduced capability for “appropriation of resources or innovation” and challenges characterized by “implementation of market-based economies” into organizational “managerial independence and autonomy”, need to align the organizational globalization strategy on market-based strategy and challenges brought about by “need to achieve globalization and centered location strategies” [glocalization]. The firms operating in transiting planned economies could “reduce formal and informal constrains” by pooling resources that can “promote managerial and organizational capabilities”. The firms could maintain “values of network-based strategies” in growth of firms in order to “reduce impacts of firm ownership transfer and control interests”. The firms could enhance their competitiveness by “coordinating activities across the firm’s networks” which could provide foundation for sustainable growth. Network-based strategy was found to be an “adaptability approach” that makes it possible for an organization to “economically grow within a specified institutional framework” although criticism has been observed in network-based strategy that arises due to “capacity to acquire managers who could articulate “firm organizational routines” and “information communication” due to communication channels that delay capacity to “implement market strategic approaches” that correspond to shifting customer expectations hence “low dynamic capabilities”. The model of network-based strategy has been criticized due to “failure of managers to manage cost transactions” which impact negatively on returns on investment and returns on opportunities. Conclusion The study concludes that planned economies implement a network-based strategy of growth of firms through boundary blurring. The organizations in planned economies that are transiting into market-based economy achieve competitive advantage through co-ordination of organizational resources and activities across the organizational networks. Preferences of network-based strategy is based on need to eliminate political [legal regulatory requirements] that are characterized by organizational mergers and acquisition that makes it possible for organizational ownership transfer to be implemented without high costs. Network-based strategy provides basis for adaptability, market penetration and economic growth through institutional frameworks. The study established that firms that adopt network-based strategy face constrains characterized by inability of the organizations to have a management that can articulate organizational routines into entrepreneurship and limited capabilities to overcome transactions costs due to limitations of managerial and organizational capabilities. References Mike W. Peng and Peggy Sue Heath, The Growth of the Firm in Planned Economies in Transition: Institutions, Organizations, and Strategic Choice, The Academy of Management Review, 21:2., pp. 492-528, (April, 1996). Read More