The core-customer concept

The purpose of this paper is to define and discuss the core-customer concept. This concept examines how a company develops its operations around a single or only a few customers. The customer steers what products and services the supplier develops, which means that it is the customer that dictates the supplier's operations. The core-customer concept may be one method for designing a company's operations, but the paper also aims to challenge companies to consider how they think about customers. The paper contributes to research on customer value and extended service offerings by indicating a business-development strategy based on the customer rather than the supplier's operations. Building a company around a single customer, requires flexibility and competences in finding collaboration partners or in adjusting the organisation to new requirements. The paper refers to these as secondary/supporting competences, while the core competence upon which the company builds its operation is the customer.     

American boomers and the flotation of shares in the city of London in the late nineteenth century

During the late nineteenth century there was a wave of promotions of American companies on the London Stock Exchange, which have been described as ‘free-standing’. The British company promoter, H. Osborne O'Hagan, is often regarded as the first mover in these promotions, a view based on his autobiography. This article suggests that, in fact, the American lawyer promoters, Samuel and Isaac Untermyer, were the first movers in these company promotions. This article looks at a number of free-standing companies where everyday managerial control was retained by the original managers, and in particular, the case of the Untermyer brothers who competed with O'Hagan.     

Petromin: The slow death of statist oil development in Saudi Arabia

The paper recounts the history of Saudi Arabia's first national oil company, Petromin, which was originally supposed to take the place of foreign-owned Aramco. As a result of Petromin's inefficiency and personal rivalries among the Saudi elite, however, Petromin was progressively relegated to the sidelines in favour of a gradually ‘Saudiised’ Aramco. As a result, the organisation of the Saudi oil sector today is very different from – and more efficient than – that of most other oil exporters in the developing world. The paper concludes with a tentative taxonomy of national oil companies, based on the circumstances of nationalisation.     

Product Innovation and Small Business Growth: A Comparison of the Strategies of German,U.K. and Irish Companies

Innovation in small firms is important both because of its direct contribution to the competitiveness of those companies but also because of the potential for the small firm sector to act as the initiator, catalyst and medium for wider technical change. In this paper data from the Product Development Survey, a new international survey of firms' product innovation activity and strategy, is used to examine the relationship between product innovation and growth in German, Irish and U.K. small firms. In each country the output of innovative small firms was found to grow significantly faster than that of non-innovators. In Germany, output growth was achieved by a product innovation strategy which sharply increased productivity but reduced employment. U.K. and Irish small firms adopted a more balanced approach with increases in both employment and productivity associated with innovative behaviour. Comparison of the organisation of product innovation indicated that German small firms adopted a less market-oriented, less risky, and more formally organised approach than their U.K. and Irish counterparts. The revealed characteristics of U.K. and Irish small firms suggested that they may be the most effective initiators and catalysts for wider technological change. The larger proportion of German small firms which were innovating, however, suggested that the German small firm sector may be the more effective technology transfer medium.     

Technological change and the governance of joint-stock enterprise in the early nineteenth century: The case of coastal shipping

Recent studies of the innovation process have viewed it as the outcome of organizational dynamics rather than as the product of technological developments exogenous to the governance of firms. We apply this approach to our examination of British coastal shipping companies during the early nineteenth century as they grappled with the problem of making a successful transition from sail to steam technology. Within the industry there were contrasting responses to this transition, but also common elements in the decision-making process. Before the 1840s, there remained a widespread assumption of shareholder involvement in this sector as in others. The evidence suggests that shipping company directors were generally able to determine resource-allocation decisions, but not without first taking into account governance relations.     

Mining, Displacement and the World Bank: A Case Analysis of Compania Minera Antamina's Operations in Peru

The transformation in the structure of the world mining industry over the last decade has opened up enormous new regions for mineral exploration and development by transnational mining companies in countries in the South. This new access has inevitably brought mining companies into conflict with local communities. With the involvement of transnational advocacy networks and new global publics, these conflicts have prompted a growing transnational debate on the principles that ought to govern mining and community relationships. One effort to provide guidance on this question comes from the World Bank's Operational Directive 4.30 on Involuntary Resettlement. This paper examines the regulatory impact of this policy upon relationships between mining companies and communities, as well as its "legitimation effect" in providing standards which, once met, can serve to certify a degree of responsible behaviour on the part of the company. The analysis of the effects of the directive is taken up in the form a case study involving a transnational mining company operating in the Andes of Peru and the local communities impacted by its land acquisition project.     

Internationalization strategy,financial constraints and assets (in)tangibility. A study of euro area countries after the 2008 crisis

This paper studies the determinants of companies’ performance during the crisis based on their short-term (sales changes) and medium-term (exit) reaction, using firms’ data from the European Firms in Global Economy (EFIGE) survey and combining them with balance-sheet statistics. The results, based on the four largest euro area countries show that vulnerability to the crisis depended on a company’s mode of international operation. More sophisticated forms of internationalization increased firms’ resilience in the first and second waves of the crisis. The paper also investigates the mediating role of intangible assets and financial constraints in the relationship between internationalization and companies’ response to the crisis. While intangible assets were very important for preventing a drop in sales for internationalized firms immediately after 2008, they amplified the probability of firms’ exit five years after the crisis in weaker European countries (Spain and Italy). At the same time, financial constraints increased companies’ probability of exit. Innovation prevented a drop in firms’ sales and firms’ exit.     

Transnational corporations and spatial divisions of ‘service’ expertise as a competitive strategy: the example of 3M and Boeing

Production processes are becoming increasingly more complicated as firms develop corporate strategies that are designed to increase profitability or capture market share. The focus of this article is on manufacturing companies (3M and Boeing) and on understanding the social organisation of production and the ways in which firms manipulate spatial divisions of expertise (service inputs) as well as labour (manufacturing inputs). This distinction recognises that there are important differences between production and non-production tasks. The 3M case examines the firm's global labour market by exploring the geographies of its transnational or foreign service employees. The Boeing case examines the design and manufacture of the 787 and the development by Boeing of a new complex spatial division of expertise.     

Knowledge-intensive service activities in the success of the Australian mining industry

No other industry in Australia has achieved a greater significance in economic development terms as mining. The mineral industries have built a national infrastructure throughout Australia for more than a century and Australia's minerals boom has produced generations of mining technology services (MTS) companies. This paper discusses the role of MTS firms in the transformation of the mining industry into the knowledge economy. Results from a study of Australian MTS and mining firms suggest that innovation results from the interaction of these firms through knowledge-intensive service activities.     

A comparison of Japanese and U.S. firms completing initial public offerings

We set out to examine firms breaking into the top tier of for-profit companies in the U.S. and Japan to find differences across the two groups. To accomplish this, we conducted a questionnaire survey of companies that had recently undergone an initial public offering (IPO) in each country and compared them on characteristics frequently associated with new firms.As we expected, even when the different sizes of the two economies were taken into account, there were considerably fewer listings in Japan than in the U.S. One reason for this is that the listing requirements for young Japanese firms, although not stricter, are much more strictly enforced. Hence, fewer Japanese firms are able to list.Our results show that the Japanese firms were markedly different from their U.S. counterparts on several characteristics. They tended to be older and larger, which is consistent with more stringent listing requirements in Japan. They were also much more often led by their original founders. This is a surprising result given that the Japanese firms, being older, had longer to lose their founders. When a successor to the founder was president, it was much more often a relative of the founder than in the U.S. The Japanese founders rated themselves higher on relatively emotional characteristics, such as aggressiveness, paternalism, and charisma than did either the U.S. presidents or the Japanese nonfounder presidents.The Japanese firms relied solely on the president for decision-making prior to the IPO more often than the U.S. firms did. However, the Japanese firms also moved in greater numbers to group decision-making around the time of the IPO.The post-IPO investment strategies of the Japanese firms were characterized by a focus on new product development, an increase in R&D spending, and investment in the company's capital plant. In contrast, the U.S. firms reported more interest in exploiting their existing market and buying other companies, usually leaving R&D spending at its pre-IPO level.Overall, it is surprising that on many characteristics, the Japanese IPOs tended to fall more to the extreme associated with new companies than did the U.S. firms. They were dominated by founder influence, the founders were apparently highly emotional, their management style was initially autocratic, and their strategies targeted innovation and internal development as avenues to growth. This pattern is consistent with a prior hypothesis that the lack of structural support for new firms in Japan results in only the most extreme personalities pursuing and succeeding in company formation.For researchers, a significant implication of this research is that Japanese ventures may not behave according to the same rules as U.S. ventures. Research samples that fail to distinguish nationality may obscure cross-regional variations.For practitioners, the major lesson is that a Japanese venture is likely to be much different from one in the U.S. Dealing with one is probably even more unlike dealing with an established company than working with a U.S. start-up might be.     

Who A dvertises Prices? A Firm Level Study Based on Survey Data

Recent years have seen a growing body of literature devoted to the analysis of price advertising. Much of this work argues that price advertising leads to lower prices and is likely to be welfare improving. The questions of how much price advertising takes place and which firms are more likely to include price information in advertising have been somewhat neglected. This paper uses a unique new data set of UK company advertising to answer these questions. The evidence presented suggests that only a small proportion of firms include price information in any of their advertisements. Price information tends to be included in a higher percentage of the advertisements of distribution companies and of those which face more than ten competitors. In addition, the importance of price as a form of competition is a factor in determining the inclusion of price information, but only where the firm aims most of its advertisements towards final consumers.     

Does the Quality of Corporate Governance Affect Firm Valuation and Risk? Evidence from a Corporate Governance Scorecard in Hong Kong*

Using Hong Kong firm data, we construct an index of corporate governance during 2002–2005, which scores the corporate governance practices of listed companies from the public shareholders' perspective based on the Organization for Economic Corporation and Development Principles of Corporate Governance. The findings show that family firms and firms with concentrated ownership structures are associated with bad corporate governance. The evidence also shows that these firms improve their corporate governance practices slower than their peers. Overall, the quality of corporate governance is very significant in explaining future company stock returns and risk. Good corporate governance is associated with both higher stock returns and with lower risk. Improvements in corporate governance are associated with significantly higher stock returns and lower company risk.     

Guanxi and Salesforce Management Practices in China

Executives in 111 foreign enterprises selling within the People's Republic of China completed questionnaires examining the extents to which guanxi was recognized as a critical factor in salesforce marketing, and the influences of such recognition on their companies' local salesforce remuneration policies. The results suggest that businesses which did regard guanxi as important for Chinese salesforce marketing were more likely to employ behaviour-based than outcome-based reward systems. This finding is compatible with the proposition that the banking and recall of personal favours, network integration, willingness to rely on partners and other guanxi-related characteristics can lead to sales performances for which outcome-based remuneration systems may not be appropriate. Notwithstanding the influence of guanxi on the manners in which salespeople were paid, volatility in the business environments within which firms operated encouraged their managements to adopt more market-led approaches to remuneration. Differences in the perceptions of the role of guanxi held by managers in foreign firms based in Chinese commonwealth and in other countries were also investigated. It emerged that companies based in the Chinese commonwealth acknowledged the importance of guanxi to a greater extent than companies with headquarters in Western nations. The longer a company had operated in China the more likely it was to incorporate guanxi considerations into its local management systems.     

The product life cycle trap

Many of America's most successful companies have gone through a life cycle similar to the product life cycle. They began as innovators, and then grew to be giants in their markets. But, as their products mature, they need new products to continue company growth. However, the organizational structure of an established company is no longer suited for innovation. The authors provide some insight into this cycle, and offer some solutions for big companies which need new products.     

The impact of bank holding companies on local market rivalry and performance

The bank holding company movement in banking is, in many respects, the counterpart of the conglomerate movement in the industrial sector. Both are characterized by a substantial amount of merger activity and thus raise questions as to the affect of the acquiring firms on competition. This study uses Tobit analysis and OLS to examine the influence of bank holding companies on rivalry and performance in 154 banking markets (1970–1979). Test results indicate that in markets where bank holding companies are a significant factor rivalry is higher, but so are prices even though profits are not higher, than in markets where bank holding companies are less important. These seemingly conflicting findings may be explained by the finding that significant holding company presence in a market is associated with relatively high noninterest expenses.     

International acquisition and other growth strategies: Some lessons from the food and drink industry

This article explores profitable international growth strategies when markets are mature through a two‐stage study of companies in the food and drink industry. The first stage assessed 400 announcements about such strategies made by medium‐ and large‐sized food and drink firms in the period 1998–2001. The second stage examined in depth the international growth strategies of the world's 35 leading food and drink companies over the period 1985–2001. Both stages showed that acquisition was the most widely used method of international expansion. The second stage suggested that organic international growth (i.e., based on the company's current product portfolio) was the other main option for such expansion. Importantly, the international acquisition route was usually focused on the existing product portfolio of a company. In this sense, there was clear convergence between the purpose of an international acquisition (i.e., to support or enhance the existing product portfolio outside the home country) and the broader company purpose of delivering successful organic growth from its current range of products. The second study also suggested that international acquisitions can bring faster sales growth than organic activity but come with greater risk and other potential problems. The research identified some practical lessons derived from such strategies in the food and drink industry. © 2006 Wiley Periodicals, Inc.     

‘Do versus Buy’ Decisions in the Demand for Knowledge Intensive Business Services

The search for the maximum use of scale and agglomeration economies and the need to operate firms in the most flexible way have provided a strong impulse for companies to increase their use of external intermediate services. Because of their strategic role, the use of business services that are intensive both in labour qualification and in technological requirements is key for these policies. The purpose of this paper is to analyse the patterns followed by companies in the two relevant decisions on this issue: firstly, whether to use knowledge intensive business services or not and, secondly, whether (and to what extent) to buy these services from another firm or to provide them inside the organisation. In both cases, we intend to identify the factors that affect the ‘do versus buy’ decision with respect to total KIBS as well as particular categories. A specific feature in our study is that it focuses on the behaviour of firms working in a region without a well-developed supply of KIBS. Applying discrete response models to the data obtained in a survey elaborated by the authors, the most relevant variables for the use of KIBS are satisfaction with previous outsourcing experiences and location of the firm in a large urban centre, but they do not affect their external provision. The size of the firm, its export orientation and its technological complexity have opposite effects on use and outsourcing.     

Competitive by design

This paper is concerned with the role of design in the competitiveness of manufacturing companies and reports on design management in commercially successful firms. The findings are based on a survey of design policies and practices in over one hundred British and foreign companies from several industries, ranging from furniture to electronics. The paper shows that while in theory design plays a key role in competition, influencing both “price” and “non‐price” factors, in practice many managers do not give design high priority in company strategy and product development. The commercially most successful firms were those that not only invested resources in design and managed it effectively, but had other strengths, for example in marketing and manufacturing.     

The Impact of Changes in the Political and Economic Environment on Foreign Direct Investment Opportunities in Romania

Abstract

This study reports findings of a survey including 139 Finnish and 97 Austrian companies active in Eastern Europe. The study focuses on two major areas in the firm's business activities in Eastern Europe, namely on market strategies-the timing of market entry, market selection, entry modes and motives-and company performance. The number of market entries has increased after the transition, but the majority of business activities still take place in geographically-close countries. Companies have gradually started to use more high-commitment modes of operation, but contrary to our expectations, high commitment modes were also frequently used in more unstable markets. Company performance in Russia and especially in other countries of Eastern Europe was in general clearly lower than in domestic markets and foreign markets in general. Against expectations, firm size, dependence on international markets, length of operation, and mode of operation in Eastern Europe did not significantly influence the performance. However, firms which concentrated on Russian markets on a continuous basis performed much better than other firms.     

Why do boycotts sometimes increase sales? Consumer activism in the age of political polarization

In this article, we argue that the occurrence, trajectory, and impact of consumer activism are in large part driven by the political environment in which firms operate, particularly by their country’s level of polarization and the political makeup of their core customer base. In environments characterized by low levels of political polarization, companies are embroiled in a relatively small number of political controversies, and as a result are rarely the target of consumer activism. Conversely, in highly polarized environments, people’s political sensibilities are easily offended, which leads to a relatively large number of political controversies. These controversies tend to arise along party lines, meaning they elicit a consumer boycott exclusively from one side of the political spectrum. Such partisan boycotts lead people on the other side of the political spectrum to rally around the company at the center of the controversy and to purchase more of its products. Whether a company’s sales end up decreasing or increasing depends on the nature of the issue at the heart of the controversy as well as on the political beliefs of its core customer base. We conclude by describing how companies can successfully navigate this complex interplay between political polarization, consumer activism, and customers’ political preferences.