Understanding and breaking the rules of business: Toward a systematic four-step process

Knowing the rules of a business is a prerequisite of being successful. On the other hand, carefully and selectively breaking the rules of management is often the way to exceed the low margins of intensively competitive arenas, especially at a time when technological innovation is limited and industries are tending to consolidate. Drawing on their own practical know-how and intensive research into future business models, the authors of this article call for more dialectic in management thinking. Their “rule-breaking strategy creator” process is a combination of tested consulting and venture capital tools, and provides an entirely new approach to systematic rule-breaking and, thus, competitive advantages.     

Toward an Applied Meaning for Ethics in Business

The field of business ethics has been active for several decades, but it has yet to develop a generally agreed upon applied ethical perspective for the discipline. Academics in business disciplines have developed useful science-based models explaining why business people behave ethically but without a generally accepted definition of ethical behavior. Academics in moral philosophy have attempted to formulate what they believe ethical behavior is, but many seem to ignore or reject the basic mission of business. The purpose of this article is to offer one view of ethics in business that accommodates the mission of business. This purpose is achieved by reviewing the mission of ethics in applied disciplines like business and melding it into the mission of business in capitalistic societies.     

Ethics and the role of the manager

In order to understand the way in which the results of a study of business ethics could enter into the actual conduct of business, I formulate and examine five models of the role of the manager which can be found in the literature of management theory. These I call the engineering model, the economic model, the management of values model, the formal organization model, and the political model. While none of these models is wholly adequate, each provides important theoretical insights into the relevance of ethics to management decision making which can be of use in the examination of specific cases.John R. Boatright is Professor of Philosophy at John Carroll University. He is the author is several articles in the areas of ethical theory and the history of ethics.     

Removing the contextual lens: A multinational, multi-setting comparison of service evaluation models

Four service evaluation models are identified from the literature that are commonly offered to depict the relationships amongst the primary service evaluation constructs of sacrifice, service quality, service value, satisfaction, and behavioral intentions. We comparatively test the models using samples of service consumers in Australia, Hong Kong, Morocco, the Netherlands, and the United States, as well as across varied temporal and service settings. The results of the comparative analyses reveal that one conceptualization, the “comprehensive” model, best captures the identified relationships. This model is the best fitting across all countries and settings, which indicates it has the greatest external validity. These findings are discussed relative to the limitations associated with the use of less generalizable models.     

Coupons in context: discounting prices or decreasing profits?

A coupon is a commonly used sales promotion device offering the user a discount on the purchase of a product. Consumer coupon offerings are also becoming increasingly diverse: from “% off” and “$ off” to “Buy one, Get one free” (BOGO) offers and co-promotions (Buy X, Deal on Y). This paper reports the results of three experiments that examine whether the economic value of a coupon is a source of information to infer the price of the product/service, and the quality of the product/service, which inference can undercut the economic value, with resulting consequences for deal evaluations and purchase intentions. The framework predicts, and empirical results show, that increasing the value of the coupon does not always improve deal evaluations or purchase intentions. This could imply lower profits for the company. The presence of past price information about the brand, information about prices of other brands offered by the company, and information about competitors’ prices moderate the impact of coupon value on brand-related inferences. When such alternate sources of information are present and are diagnostic of the price of the promoted product, consumers are less likely to infer price and quality from the value of the coupon and higher coupon values are more likely to increase deal evaluations and purchase intentions. Implications for managers designing and communicating promotions are offered.     

Social entrepreneurship: Creating new business models to serve the poor

The term “social entrepreneurship” (SE) is used to refer to the rapidly growing number of organizations that have created models for efficiently catering to basic human needs that existing markets and institutions have failed to satisfy. Social entrepreneurship combines the resourcefulness of traditional entrepreneurship with a mission to change society. One social entrepreneur, Ibrahim Abouleish, recently received the “Alternative Nobel Prize” for his Sekem initiative; in 2004, e-Bay founder Jeff Skoll donated 4.4 million pounds to set up a social entrepreneurship research center; and many social entrepreneurs have mingled with their business counterparts at the World Economic Forum in Davos. Social entrepreneurship offers insights that may stimulate ideas for more socially acceptable and sustainable business strategies and organizational forms. Because it contributes directly to internationally recognized sustainable development (SD) goals, social entrepreneurship may also encourage established corporations to take on greater social responsibility.     

Rethinking the new corporate philanthropy

More than ever, corporations are expected to practice “citizenship” by engaging in various community or social philanthropy programs. These corporate social responsibility (CSR) programs have broad appeal among business scholars, business executives, and the public. After first setting some theoretical boundaries for CSR as it relates to the legal and strategic management fields, the authors examine how CSR (both its implementation and expectations) can lead to unintended results, compromising the distinct roles business and government play in market-driven, democratic systems.     

Wisdom Paradigms for the Enhancement of Ethical and Profitable Business Practices

Many organizations continually search for new business models and ways to conduct business ethically, yet profitably. Kirk Cheyfitz (2003) proclaims that organizations should not waste time trying to create new business models because the rules of commerce never change. Instead of searching for new business models, organizations can improve business practices by looking at different paradigms or mental models for seeing how to build practices that lead to long-term success. The employment elements of wisdom as paradigms for developing sound structures and practices that will encourage management behaviors that are ethical and lead to profitability. First, a theory of wisdom is developed. Then, the elements of wisdom are applied to the design of a general business structure and to refocusing some basic business practices.     

Global key account management and systems selling

Adoption of global key account management systems typically represents a response by selling companies to two inter-related structural changes in their business environment: first, the growing internationalisation of their industry and unprecedented levels of foreign competition; and second, the urgent need to retain customers of strategic importance (i.e. key accounts) against a background of centralised purchasing and supply base rationalisation. Global key account management is central to the ongoing, and often acrimonious debate captured in the slogan, “Think Global, Act Local”, suggesting serious implications for organisation structure, co-ordination/control and relationship management. Yet global key account management is under-researched and its efficacy, therefore, only partially understood. Such matters have long preoccupied executives in multi-national companies operating in industries where “systems selling” is a way of life and where practice is ahead of both theoretical development and empirical research.     

Decision under uncertainty: A poet's view The leap of judgment in a famous frost poem

Despite all the talk about decision making, uncertainty remains a factor, and no one tells executives how to deal with it. Scientific management stops at the point where nature is not rational. If help is to be found, it must come from poets and preachers, men whose business begins at the limits of rational certainty. For a “case study,” the author uses Frost's famous poem, “The Road Not Taken”—an inside view of a moment of decision. The poet confronts uncertainty by taking the leap o f judgment, beyond facts and logic. We are reminded that such leaps are possible and necessary, and that courage stands next to intelligence as an irreducible ingredient in the decision-making process.     

Customer Experience Management in Retailing: An Organizing Framework

Survival in today's economic climate and competitive retail environment requires more than just low prices and innovative products. To compete effectively, businesses must focus on the customer's shopping experience. To manage a customer's experience, retailers should understand what “customer experience” actually means. Customer experience includes every point of contact at which the customer interacts with the business, product, or service. Customer experience management represents a business strategy designed to manage the customer experience. It represents a strategy that results in a win-win value exchange between the retailer and its customers. This paper focuses on the role of macro factors in the retail environment and how they can shape customer experiences and behaviors. Several ways (e.g., promotion, price, merchandise, supply chain and location) to deliver a superior customer experience are identified which should result in higher customer satisfaction, more frequent shopping visits, larger wallet shares, and higher profits.     

The lessons from stakeholder theory for U.S. business leaders

It has been 20 years since Freeman [Freeman, R. E. (1984). Strategic management: A stakeholder approach. Marshfield, MA: Pittman Publishing.] first proposed his stakeholder approach to strategic management, which stated that corporations must consider the needs and demands not only of their shareholders but also those of a wide range of other external constituencies, or “stakeholders.” Examples of stakeholders include customers, employees, suppliers, and communities. Freeman's theory has generated an extensive body of research, including not only the efforts of the management researchers who have tested, revised, and refined the theory, but also the views of corporate executives who have used the stakeholder approach in their strategic planning. This article, based upon a review of that literature, identifies five important lessons from the stakeholder model for today's business leaders. These lessons are particularly timely, given the inappropriate behavior that has occurred in the business world during recent years.     

The birth and growth of toshiba's laptop and notebook computers: A case study in Japanese corporate venturing

This case study presents the “under the table” birth, accelerated growth, and ultimate success of two major technological and market innovations: (1) the Toshiba laptop computer, a project vetoed twice by corporate headquarters, and (2) the notebook computer, a project hidden from headquarters. Because of the vision, persistence, and championing efforts of a team of passionate Japanese corporate entrepreneurs, a new business was created that is now part of Toshiba's mainstream operations and that has become a significant contributor to the growth and profitability of the corporation. We follow the evolution of this corporate venture from initial failures in 1978 to the success of the laptop computer, first in Europe (1985), then in the United States, and finally in Japan. This was followed by the reincorporation of the venture in the corporate “mainstream” (1987), the worldwide success of the notebook computer (1989), and the continued growth of the business in parallel with repeated promotions of the entrepreneurs.First, a framework is presented for interpreting the case within current theories and practices of the management of innovation and the processes of championing innovative corporate ventures. This framework is expanded to include recent studies on how major corporations have achieved worldwide leadership in high-tech markets. Second, using the analogy of human life from conception to adulthood, the key phases, events, and entrepreneurial actions of Toshiba's PC business are summarized in Table 1. Third, the theoretical framework is applied to a discussion of the unusual aspects of this case. Fourth, we analyze the business strategy and the technology strategy developed by Toshiba. Finally, we summarize the cultural and organizational context of Toshiba as well as other critical factors that contributed to the enduring success of this corporate venture.There are four aspects, in addition to the international setting, that make this case interesting for both scholars and practitioners: (1) the “under the table” development of both the laptop and notebook, (2) the unexpected success of the first product, followed by a second success, (3) the evolution of champi oning at various organizational levels, and (4) the continuity of the strategic vision for Toshiba's information systems business from 1978 to the present, and how this vision was translated into specific business and technological strategies.From the perspective of management of innovation, the successes of both the laptop and the notebook computers were due to the “back to the future“ market research and design process summarized in Table 2. This process, where market requirements drive the design process, was developed by the lead entrepreneur, Tetsuya Mizoguchi, after repeated failures of the conventional process, where the results of R&D drive the design and productspecifications, regardless of market requirements. From the perspective of the championing processes, we can observe both bottom-up and top-down roles (Day 1994): Mizoguchi was the product champion and Nishida the marketing champion in Europe, while General Manager Koga protected Mizoguchi from interference by headquarters; executive champion Mizushima orchestrated the difficult transition of the venture into a corporate mainstream operation. The evolution of the championing process is summarized in Table 3, using the Venkatamaran et al. model (1992). We conclude that the most appropriate model for interpreting this case is a combination of the Day and Venkatamaran et al. models, which emphasizes both multiple championing roles and the transfer of the lead role from one champion to another during the corporate entrepreneurship process.The business strategy and market and technological strategies developed by Toshiba for achieving worldwide leadership in the portable PC market are summarized in Figures 1 and 2. More broadly, the process and critical factors that determined Toshiba's success can be visualized according to Figure 3. The corporate entrepreneurs and champions were driven away from mainframes by a vision of distributed and interconnected computing that compelled them to focus on personal computers. This focus determined the winning business strategy (fully compatible portable units) which in turn determined the technological and market strategies (miniaturization and complementarity to IBM). At the same time, this focus allowed the entrepreneurs to concentrate their scarce resources on the “back to the future” design process and develop unique core competencies. This coupling of winning strategies with unique core competencies made possible Toshiba's potential leadership in the marketplace. Actual leadership was achieved through continuous, step-by-step learning by doing and through market feedback that further reinforced the adopted strategies and enhanced the core competencies. Six critical factors contributed to the long-term success of the corporate venture: (1) the venture had the potential to achieve worldwide leadership in a mainstream area of the corporation, (2) the PC market in Europe and the United States (but not initially in Japan) was fragmented and highly receptive to unique innovations, (3) the corporate entrepreneurs were driven by a long-range vision of the business, with focused strategies and well-defined objectives, (4) the entrepreneurs were persistent and undeterred by repeated failures in the marketplace and by the distrust and hostility of headquarters, (5) the organizational context, because of slack internal controls, allowed the diversion of funds and manpower to the “under the table” venture and, finally (6) the role of entrepreneurs evolved from underground innovators to product, executive, and corporate champions in order to reinforce, broaden, and implement their vision.     

Impact of positioning strategies on service firm performance

This research examines the application of positioning strategies of retail service firms in Texas. Four in-depth qualitative case studies and covert observation methods provide candid subterranean insight into retail positioning in a dynamic marketplace. “Branding”, “service”, “value for money” and, to a lesser extent, “reliability” and “attractiveness” positioning strategies emerge as the most dominant positioning strategies, although emphasis placed on each varies from firm to firm. Furthermore, all of the firms achieve acceptable sales and favorable consumer perceptions when employing these positioning strategies. Desired profits, return on investment (ROI), and market share are associated with these positioning strategies although not as “sales” and favorable “consumers' perceptions”. The results further show that the pursuit of multiple positioning strategies relates to multiple performance indicators. The paper concludes by providing normative suggestions and discussing theoretical and managerial implications.     

Outsourcing: Pros and cons

Overseas outsourcing of jobs is far more complicated than is generally understood. Pressures to outsource range from better-serving overseas markets to increasing the competitiveness of American business. Outsourcing—domestic and international—responds to management's desire to focus the firm's in-house activities on its core competence. A negative side to outsourcing results from companies doing so simply because “everybody is doing it.” They may be surprised by accompanying factors such as unexpected costs and complications, as well. Governmental policymakers need to realize that foreign companies outsource more business services to the United States than American firms send overseas.     

Student stereotypes of business National sample contains message for analysts

The allegations that college attendance causes a business career to appear undesirable are unfounded, according to the results of a recent survey. The data show that students come with probusiness or antibusiness opinions already formed. The national sample of 4,000 high school students also disclosed that their feeling depends on whether they are thinking of business as a career or as an organizational setting for a career not directly in management. They also consider the size of the firm (big business is preferred for salary and advancement, and small business for “lasting friendship”). Business is favored by more boys than girls, and by more students from backgrounds low on the socioeconomic scale. Planners, recruiters, and analysts need to be aware of these student perceptions.     

Twin deficit or twin divergence? Fiscal policy, current account, and real exchange rate in the U.S.

In spite of concerns about “twin deficits” (fiscal and the current account deficits) for the United States economy, empirical evidence suggests that “twin divergence” is a more usual feature of the historical data, i.e., when fiscal accounts worsen, the current account improves and vice versa. This paper empirically studies the effects of fiscal policy (government budget deficit shocks) on the current account and the real exchange rate, during the flexible exchange rate regime period. Based on VAR (Vector Auto-Regression) models, we identified “exogenous” fiscal policy shocks after controlling for business cycle effects on fiscal balances. In contrast to the predictions of most theoretical models, the U.S. results suggest that an expansionary fiscal policy shock, or a government budget deficit shock, improve the current account and depreciate the real exchange rate. Increases in private savings and declines in investment contribute to the current account improvement while a nominal exchange rate depreciation, as opposed to a relative price level change, is mainly responsible for the real exchange rate depreciation. The “twin divergence” of fiscal balances and current account balances is also explained by the prevalence of output shocks, i.e. output shocks — more than fiscal shocks — appear to drive the co-movements of the current account and the fiscal balance.     

The present-value model of the current account has been rejected: Round up the usual suspects

Tests of the present-value model (PVM) of the current account are frequently rejected by data. Standard explanations rely on the “usual suspects” of non-separable preferences, fiscal policy and world real interest rate shocks, external imperfect international capital mobility, and an internalized risk premium. We confirm these rejections on post-war Canadian data, then investigate their source by calibrating and simulating alternative versions of a small open economy, real business cycle model (RBC). Bayesian Monte Carlo experiments reveal that a “canonical” RBC model is close to the data, but far from the PVM predictions. Although each suspect matters in some way, none improve the fit to the data. However, the PVM restrictions are reproduced when the internalized risk premium is introduced into the canonical model. By adding the exogenous world real interest rate shock to this version of the model, it matches the data better and is moved closer to the PVM predictions. This suggests that there is an important common world component to current account fluctuations, which points to additional underlying macroeconomic factors that drive the current account.     

The changing sensitivity of realized portfolio betas to U.S. output growth: An analysis based on real-time data

Our results shed light on the sensitivity of the betas of portfolios formed on market capitalization (“size”) and book-to-market value (“value”) to output growth in the United States. We estimate a state-space model to analyze the sensitivity of portfolio betas to output growth. We measure output growth using real-time and revised data. Output growth has a significant effect on portfolio betas when size and value are high. Such portfolio betas exhibit countercyclical dynamics. They are more sensitive, in absolute terms, to output growth when the latter is measured using real-time data. Their sensitivity to output growth has grown over time. Portfolio betas with respect to output growth have become smaller over time, in contrast, when size is large but value is low.     

Co-creating brands: Diagnosing and designing the relationship experience

The traditional goods-dominant logic of marketing is under challenge and leading researchers are now emphasizing the new service-dominant logic [Vargo, S.L., Lusch, R.F., Evolving to a new dominant logic for marketing. J Mark 2004; 68 (1): 1-17.]. One of the key foundational propositions of this logic is the customer as “always being a co-creator of value” where “the brand becomes the experience” [Prahalad, C.K., The co-creation of value. J Mark 2004; 68 (1): 23.]. In this paper, the authors examine the concept of brand relationship experience in the context of co-creation and service-dominant logic and outline a conceptual model for designing and managing the customer experience. Case study research illustrates how this model helps in the design and management of the brand relationship experience for an innovative new product.