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Long Range Planning

39/2 April 2006

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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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