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Corporate strategy in turbulent environments: Key roles of the corporate level

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  • Caldart, Adrian A.

    (Warwick Business School)

  • Ricart, Joan E.

    ()
    (IESE Business School)

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    Abstract

    This paper analyzes the evolution during the period 1986-2002 of the corporate strategy of Lujan, a highly successful car components manufacturer headquartered in Spain, as a way to explore how the corporate level influences the successful evolution of a company exposed to a "turbulent" environment over a long period. We find that the corporate level plays three key roles. First, it drives a firm's evolution by developing a cognitive representation of the firm's competitive landscape. Second, it paces the company's evolution by alternately shifting the balance of organizational initiatives between static efficiency-based "local search" strategies, chosen in times of stability or economic slowdown, and dynamic efficiency-based "long jump" strategies, adopted during periods of major environmental turbulence. Long-jump corporate strategies, carried out through limited downside strategic initiatives such as real options and strategic alliances ("off-line long-jumps"), are particularly frequent in these circumstances. The third role consists of developing an organizational architecture that frames the self-organized coordination of the different business divisions. The Lujan story clearly illustrates the important role of corporate strategy in a firm that must undergo radical transitions as a result of major environmental changes.

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    Bibliographic Info

    Paper provided by IESE Business School in its series IESE Research Papers with number D/623.

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    Length: 31 pages
    Date of creation: 27 Mar 2006
    Date of revision:
    Handle: RePEc:ebg:iesewp:d-0623

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    Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
    Web page: http://www.iese.edu/
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    Related research

    Keywords: corporate strategy; turbulent environments; complexity theory; car components;

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    1. Gabriel Hawawini & Venkat Subramanian & Paul Verdin, 2003. "Is performance driven by industry or firm-specific factors? A new look at the evidence," ULB Institutional Repository 2013/14188, ULB -- Universite Libre de Bruxelles.
    2. Herbert A. Simon, 1996. "The Sciences of the Artificial, 3rd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691914, December.
    3. Schmalensee, Richard., 1984. "Econometric diagnosis of competitive localization," Working papers 1555-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    4. Ghemawat, Pankaj & Ricart, Joan E., 1993. "Organizational tension between static and dynamic efficiency, The," IESE Research Papers, IESE Business School D/255, IESE Business School.
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    1. Studies on the automobile industry

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