Pankaj Ghemawat

Competition and Business Strategy in Historical Perspective

A review of theories of competition and business strategy over the last half-century reveals a fairly linear development of early work by academics and consultants into efforts to understand the determinants of industry profitability and competitive position and, more recently, to add a time or historical dimension to the analysis. The possible implications of the emergence of a market for such ideas are also discussed.

The Devolution of Declining Industries

In declining industries capacity must be reduced in order to restore profitability. Who bears this burden? Where production is all or nothing, there is a unique subgame-perfect equilibrium: the largest firms exit first [Ghemawat and Nalebuff, 1985]. In this paper firms continuously adjust capacity. Again, there is a unique subgame-perfect equilibrium. All else equal, large firms reduce capacity first, and continue to do so until they shrink to the size of their formerly smaller rivals. Intuitively, bigger firms have lower marginal revenue and correspondingly greater incentives to reduce capacity. This prediction is supported by empirical findings.

Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows

This paper analyzes a dynamic mixed duopoly in which a profit-maximizing competitor interacts with a competitor that prices at zero (or marginal cost), with the cumulation of output affecting their relative positions over time. The modeling effort is motivated by interactions between Linux, an open-source operating system, and Microsofts Windows in the computer server segment, and consequently emphasizes demand-side learning effects that generate dynamic scale economies (or network externalities). Analytical characterizations of the equilibrium under such conditions are offered, and some comparative static and welfare effects are examined.

Competitive Shocks and Industrial Structure: The Case of Polish Manufacturing

A large number of countries have recently experienced competitive shocks: sudden increases in the role that market forces play in determining the evolution of various industries. In this paper, we study the implications of Polands competitive shock for three elements of the structure of that countrys manufacturing sector: entry, concentration, and foreign presence. Our analysis underlines the importance of explicitly identifying the specific distortions built into initial (pre-shock) industrial structure and lags in their adjustment to more competitive conditions.

The Decline of Dominant Firms, 1905–1929

The theory of dynamic limit pricing implies that a firm maximizes its wealth by gradually sacrificing its dominant market share. We extend the theory by simulation methods to show that higher structural entry barriers generally result in both higher profits and a slower sacrifice of market share. The model is applied to 42 once-dominant firms in U. S. manufacturing to explain jointly the declines of their market shares and the profit rates earned during 1905–1929. The statistical results agree substantially with the hypothesis that these firms behaved consistently with maximizing their wealth through dynamic limit pricing.

Choice Interactions and Business Strategy

Choice settings are strategic to the extent that they entail cross-sectional or intertemporal linkages. These same factors may impose daunting demands on decision makers. We develop a graph-theoretic generalization of the NK model of fitness landscapes to model the way in which policy choices may be more or less strategic. We use this structure to examine, through simulation, how fully articulated a strategy or set of policy choices must be to achieve a high level of performance and how feasible it is to offset past strategic mistakes through tactical adjustments (instead of alignment). Our analysis highlights the role of asymmetry in the interaction of strategic choices and in particular the degree to which choices vary in terms of being influential, dependent, or autonomous from other choices.

The globalization of business education: through the lens of semiglobalization

Purpose – This paper aims to provide a personal perspective on the extent to which business schools have globalized what they teach and to make content‐ and process‐related suggestions about how to make further progress.Design/methodology/approach – The paper provides a mixture of quantitative and qualitative/interpretative analysis.Findings – The paper finds that rhetoric around the globalization of business education has greatly outrun the reality of curricular change and this problem seems unlikely to be solved until the craving for distinctively global content can be satisfied.Research limitations/implications – Semiglobalization – the intermediate state of integration in which neither the bridges nor the borders between countries can be ignored – is proposed as a conceptual umbrella for organizing curricular change and in terms, of process, a two‐track‐approach, combining infusion and insertion, is recommended.Originality/value – Both the conceptual and procedural recommendations of this paper are novel.

Structural Analysis of a Queueing System with Multiclasses of Correlated Arrivals and Blocking

In assemble-to-order production systems, and others of a similar flavor, it is often the case that orders for components of various types are placed simultaneously, but that these components are manufactured or assembled at separate facilities. T he order process introduces correlation among the jobs at separate facilities. The purpose of this paper is to study the effect of this correlation on a variety of system performance measures. Consider a system that consists of s parallel servers, where e ach server has a finite buffer and is dedicated to a separate job type. Multiple classes of customer orders arrive to the system, where each class is composed of one or more unique job types. Upon the arrival of an order, each job in the order is separately routed to its designated buffer; if the buffer is full, that job is blocked and lost; otherwise, it enters the buffer and is served according to the FCFS discipline. Under Markovian assumptions, we systematically examine the impact of arrival correlati ons on system-based performance measures such as the queue length vector and the workload vector and class-based performance measures such as the waiting time vector and the order response time. Among other things, we establish several stochastic orders between performance vectors with different degrees of arrival correlations. We also show that greater arrival correlation can stochastically improve the worst component in a performance vector (e.g., the longest queue, the heaviest workload), reduce the expected sum of the j longest queues, 1 ≤ j ≤ s, and, for any given order type, increase its entering probability and reduce its order response time. Our results can also be extended to the compound Poisson arrival process, where each order contains multiple units of several job types.

Reconceptualizing international strategy and organization

Relatively little gets written about international strategy.1 According to one survey, 6 percent of the articles published in the top 20 academic management journals in 1996–2000 had specifically international content and, of that subset, 6 percent focused on the strategies and policies of multinationals (MNCs). The author of the survey concluded that: ‘Other than strategic alliances and entry mode strategies there is very little research on MNC strategies’ (Werner, 2002). An attempt to update the study for the period 2002–6 leads to broadly similar conclusions: just 5 percent of the articles published in the top 20 journals had specifically international content. MNCs’ strategies and policies accounted for a little more of that subset than before (12 percent), but continued to trail research on international joint ventures and alliances (15 percent) and on internationalization (14 percent) (or more specifically, measurements, antecedents and consequences thereof) and was closely followed by research on timing, motivation, location and consequences of foreign direct investment, and on knowledge transfer, with 11 percent apiece (Pisani, 2007). Such classifications, while subjective, do suggest a dearth of research on issues related to international strategy. To some extent, this dearth may reflect the lack of data that would facilitate large-sample analysis of strategic hypotheses: the last major data collection effort, Raymond Vernon’s Multinational Enterprise Project at Harvard Business School, was concluded 30 years ago.2 Remedying this constraint is complicated by the differences that arise at national borders, and that impede not only crossborder economic activity but also the assembly of data to better understand cross-border issues, as discussed further in the concluding section of this essay. International strategy has also experienced some indirect pressure from the surge of research on culture, starting in the 1980s and driven by the work of Hofstede (Ferreira et al., 2002). However, perhaps the most direct efforts at displacement have been those made by scholars broadly interested in international organization and management. Consider the most prominent book in this vein, Bartlett and Ghoshal’s Managing across Borders (1989), based on a study of nine MNCs in three industries/sectors: STRATEGIC ORGANIZATION Vol 6(2): 195–206 DOI: 10.1177/1476127008090010 Copyright ©2008 Sage Publications (Los Angeles, London, New Delhi and Singapore) http://so.sagepub.com

Introduction to the Special Issue on Strategic Dynamics

This introductory essay connects the various contributions included in the special issue on strategic dynamics and contrasts them with the static analyses that predominate in the strategy field. In addition to highlighting a variety of methodological approaches, the contributions shed substantive light on strategic dynamics at the value system and industry and firm levels. Taken together, they also suggest some broad directions for further work aimed at making dynamics a more important part of the future of the field of strategy.