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Charles Baden-Fuller Editorial
Recognising linkages between internal actions and the environment
through network effects is a theme of this issue of LRP. Our first two articles
develop the theme of Value Networks as a mode of analysis and thinking. Øystein
Fjeldstad and Christian Ketels talk about a Swedish Life Insurance company
and Lars Huemer analyses a Nordic mediation exchange. Through these vivid
examples, we see how Value Network analysis gives added insight to traditional
Value Chain thinking on how to manage both internal and external relationships
when industries have layered and/or network structures. Many service industries
(such as insurance, communications, fashion, media and supply chain organizers)
have these structures because customer capture and supplier capture relies
on network effects. As one executive in such an industry explained “The
Value Network gives a more realistic business model and adds to our understanding
of how to increase competitiveness”.
Our third paper examines the old question of renewal in SMEs.
As we know, SMEs face particular issues in change management: resources are
slender and the mindsets of the owners-managers can often pose a major barrier
to change. Oswald Jones and Allan Macpherson use three cases to show how external
partners can greatly assist in the process by triggering actions for renewal.
Where owner-managers can open themselves and their businesses and allow outside
knowledge to become embedded, the “intertwining” of external and
internal can usher in a new learning atmosphere that will lead to lasting
positive effects.
Our final essay by Klaus Meyer and Yen Thi Thu Tran reminds
us that the rapidly growing emerging markets represent excellent opportunities
for well established Western firms as a source of demand for established branded
products. Developing ideas put forward in LRP by Dawar and Chattopadadhay
(vol 45:457) the authors explain how Carlsberg overcame local obstacles to
develop strong brands in local mass markets in Eastern Europe and Asia. Many
of the moves required Carlsberg to positively recognise the local environment
and adjust subtly its strategy. Here again we can see the influence of network
thinking and there are many practical hints here for executives.
I am pleased to announce a rich pipeline of articles for
the rest of the year- for some of the titles please see our back cover and
our website. Of particular note are two forthcoming special issues: “Regaining
Trust: Control of the Public Corporation” and “Strategy and Strategizing:
A New Agenda”.
Øystein D. Fjeldstad and Christian H.M. Ketels Competitive
Advantage and the Value Network Configuration: Making Decisions at a Swedish
Life Insurance Company oystein.fjeldstad@bi.no
When the Swedish Life Insurers Fo¨renade Liv found themselves
in difficulties in a rapidly changing market, their response was to call in
the consultants. And one of the consultants’ first suggestions was to
use the Value Network, rather than the Value Chain, as a new analytical tool
to represent the company’s activities. How the Value Network model changed
the way company executives and consultants framed the company’s problems
and identified and evaluated its strategic options provides the background
to this article. The authors take care to outline how value creation and competitive
advantage work in mediating industries that facilitate transactions between
customers within a network, and show that, in such situations, the Value Network
model asks more effective questions, and thus yields more useful answers.
In sectors such as communications and insurance, where firms manage pools
of customers, and recognise the network effects among transactions, the composition
and size of the existing customer set can be an
important influence on the network’s ability acquire new customers.
So mechanisms affecting the make-up of the customer pool are at the heart
of the company’s competitive position. The case analysis illustrates
this point, showing how market changes had an damaging affect on the company’s
ability to attract a viable customer pool. The authors point to the growing
importance of the new ‘network’ market sectors, where old value
configurations are being challenged and supplanted, and emphasize how using
the appropriate analytical tools can be critical to companies’ attempts
to gain a competitive edge in their strategic decision making.
Lars Huemer Supply Management: Value Creation, Coordination
and Positioning in Supply Relationships lars.huemer@bi.no
Is it a chain or is it a network? e sometimes it depends
where you are looking from! This article compares the Value Configuration
Analysis with the traditional (Porter) value chain and value system, and looks
at Value Network perspectives on value creation, supply structure, interdependencies,
coordination and firm positioning. The author discusses these themes from
the point of view of a mediating firm, and illustrates with an analysis of
LINC, Norway’s largest buyer of 3rd party logistic services. He shows
how, without losing the lessons of chain thinking, awareness of different
supply configurations can lead to a more sophisticated understanding of how
value is created in different supply structures, and how to recognise and
successfully coordinate three different types of interdependencies. He introduces
the terminology of ‘‘over’’- and ‘‘under’’-current
to describe activities not captured by traditional up- and down-stream labelling,
showing how a fuller understanding of various types of flows can offer mediating
firms new options for strategic positioning.
Oswald Jones and Allan Macpherson Inter-Organizational Learning
and Strategic Renewal in SMEs: Extending the 4I Framework ossie.jones@mmu.ac.uk
How can mature SMEs achieve strategic renewal? What do they
do when the dynamism and clear focus of their owner manager and their informal
style of business become barriers to increased learning? This article shows
how three owner-managers opened themselves and their businesses up to access
to outside knowledge, and how that knowledge became institutionalized as organizational
learning. Motivated by falling profits or new customers’ demands, the
three case studies show how knowledge from academic, industry or customer
sources can be developed via normative, mimetic or coercive learning patterns
to aid renewal. It also shows how such learning, supported by outside standards,
research or pressure, can become embedded as a source of future advantage.
The authors point out that these stories show how traditional ideas of renewal
(such as the Crossan 4i model) overemphasise internal factors and ignore the
potential importance of external learning.
Klaus E. Meyer and Yen Thi Thu Tran Market Penetration and
Acquisition Strategies for Emerging Economies k.meyer@rdg.ac.uk
As companies globalise they bring their products and brands
to new countries and new markets. Their search for untapped consumers brings
them to emerging economies, but here the strategy for entry may be quite different
to that employed in more developed countries. The strategy that created a
global brand in developed markets is often unsuitable because customers are
so different, supply chains are less adequate, local competition is strong
and there are limits on foreign ownership. The authors divide the entry modes
into ‘‘foothold’’, which includes partial acquisitions
and joint ventures, and ‘‘aggressive’’, where multiple
or brownfield acquisitions are undertaken. They illustrate the aggressive
adaptation of strategies to local contexts by comparing the methods used by
one multinational enterprise, Carlsberg Breweries, over the past decade in
four emerging economies: Poland, Lithuania, Vietnam and China. In Poland,
Carlsberg was a relatively late entrant but a multitrack strategy of continuous
investment and development of niche brands allowed it to become the country’s
third-largest brewer. In contrast Carlsberg’s expansion in Lithuania
through acquisition succeeded to such an extent that it came to the notice
of the country’s competition authorities. In Vietnam, Carlsberg initially
established two joint ventures and through them undertook training and restructuring
investments. This paid off in terms of sales of local brands and gave it a
foothold for its global Carlsberg brand. In China, the ‘‘Go West’’
strategy aimed to establish market positions by acquiring stakes in one region’s
brewers. In this way it acquired more than 50 local brands, which in the future
may be complemented by the global product. The authors show that combining
general principles with a nuanced appreciation to local contexts can lead
to success.
This issue is available in full on-line at www.sciencedirect.com
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