Forest L. Reinhardt

Environmental Product Differentiation: Implications for Corporate Strategy:

Political demands for environmental improvement create obligations for managers that can conflict with shareholder value creation. While differentiating products along environmental lines is a conceptually straightforward way of reconciling these apparently conflicting demands, not all attempts to do so have succeeded. This article describes three requirements for successful environmental product differentiation. Firms must discover or create a willingness in consumers to pay for public goods; they must overcome barriers to the dissemination of credible information about the environmental attributes of their products; and they must defend themselves against imitation. More broadly, environmental strategy must be integrated with the overall strategy of the business. The appropriate environmental strategy depends, like the businesss overall strategy, on the fundamental economics of the industry and the businesss internal capabilities—basic constraints that have often been obscured in the academic debate about business and the environment.

Sustainability and the Firm

Macroeconomic definitions of sustainability focus on the need to maintain aggregate stocks of natural and manufactured capital constant over time, so that future generations have consumption possibilities similar to those of the current generation. Similar tests can be applied at the firm level. To be sustainable, a company must maintain on its balance sheet an undiminished level of total net assets, measured at their social costs. It must also pass a similar test when assets are valued at prevailing private costs. To make realistic assessments of a countrys or firms sustainability, therefore, one needs to consider its overall economic performance as well as its environmental performance. By this definition, sustainability is intimately linked to the fundamental preoccupations of business managers: productivity, investment, and profit.

Losing to Win: U.S. Steel's Pricing, Investment Decisions, and Market Share, 1901–1938

U.S. Steel held two-thirds of the American market in 1901, but by the 1930s its share had dropped to one-third. Such a decline is consistent with the economic theory of oligopoly pricing and capacity expansion, but the available data offer limited opportunities for formal testing of hypotheses. A close examination of U.S. Steels early history leads us to argue that Chairman Elbert Garys desire for price stability, his fear of antitrust litigation, and shortcomings in the firms organizational capability constrained it from the unbridled pursuit of discounted profits that the economic theory assumes.