Corporate strategic tasks

Europm

Pergamon 0263-2373(94)00040-9

Management .,

/ournal Vol. 12, No. 4, pp. 366-381, 1994 Copyright 0 1994 El&vier Science Ltd Printed in Great Britain. All rights reserved 0263-2373194 $9.50+0.00

CorporateStrategicTasks ARNOLD0 HAX, Alfred P. Sloan Professor of Management and Leaders for Manufacturing Professor, Massachusetts lnstitute of Technology; NICGLAS MAJLUF, P;ofessor of Management, Catholic University of Chile

This article chooses to deal exclusively with one perspective of strategy - corporate strategic tasks. There are three different imperatives here leadership, economic and managerial, that are useful to characterize these tasks. Again, a focus is made on the second and third of these imperatives. Arnold0 Hax and Nicolas Majluf identify eight corporate tasks associated with the economic imperative of corporate strategy, and two further

ones with the managerial imperative. They illustrate the corporate strategic tasks in a strategic planning framework by reference to the case of Procter and Gamble using publicly-available information. The authors are confident that the disciplined-process they describe, leading towards the ten corporate strategic tasks, will improve managers’ understanding of corporate strategy. We distinguish three perspectives in a formal strategic planning process: corporate, business, and functional. These perspectives are different both in terms of the nature of the decisions they address, as well as the organizational units and managers involved in formulating and implementing the corresponding action programmes generated by the strategy formation process. At the corporate level we deal with the tasks that can not be delegated downward in the organization, because they need the broadest possible scope -involving the whole firm - to be properly addressed. At the business level we face those decisions that are critical to establish a sustainable competitive advantage, leading toward superior economic returns in the industry where the business competes. At the functional level we attempt to develop and nurture the core competencies of the firm - the capabilities that are the sources of the competitive advantages.

Strategic Tasks at the Corporate Level This paper deals exclusively with corporate strategic tasks.’ There are three different imperatives - leadership, economic, and managerial - that are useful to characterize these tasks, depending on whether we are concerned with shaping the vision of the firm, extracting the highest profitability levels, or assuring proper coordination and managerial capabilities.

The Leadership Imperative This imperative is commonly associated with the CEO, who is expected to define a vision for the firm, and communicate it in a way that generates contagious enthusiasm. The CEO’s vision provides a sense of purpose to the organization, poses a significant but yet attainable 366

EUROPEAN

MANAGEMENT

JOURNAL

Vol12

No 4 December

1994

CORPORATE STRATEGIC TASKS

challenge, and draws the basic direction to the pursuit of that challenge. Successful organizations invariably seem to have competent leaders who are able to define and transmit a creative vision, that generates a spirit of success. In other words, success breeds success. Hamel and Prahalad’ argue that the vision of the firm should carry with it an ‘obsession’ that they refer to as ‘Strategic Intent’. It implies a sizeable stretch for the organization that requires leveraging resources to reach seemingly unattainable goals. Much has been written and said about leadership including the controversy on ‘nature or nurture’ lvhether leaders are born or made - and on the existence of common characteristics to describe successful leaders.3 We will not review this literature here, since we will be concentrating on the economic and managerial imperatives of the corporate strategic tasks. Nonetheless, the set of corporate tasks that will be the subject of this paper - dealing with the economic and managerial imperatives - are the critical instruments to imprint the vision of the firm. The leadership capabilities are expressed and made tangible through the tasks that are discussed herein.4

The Economic Imperative This imperative is concerned with creating value at the corporate level. The acid test is whether the businesses of the firm are benefiting from being together, or if they would be better off as separate and autonomous units. From this point of view, the essence of corporate strategy is to assure that the value of the whole firm is bigger that the sum of the contributions of its businesses as independent units. The economic imperative involves three central issues: the definition of the businesses of the firm; the identification and exploitation of interrelationships across those businesses; and the coordination of the business activities that allow sharing assets and skills.5

Environmental Scan at the corporate level: understanding the external forces impacting the firm The environmental scan provides an assessment of the distinct business opportunities offered by the geographical regions in which the firm operates. It also examines the general trends of the various industrial sectors related to the portfolio of businesses of the corporation. Finally, it describes the favourable and unfavourable impacts to the firm from technological trends, supply of human resources; and political social, and legal factors. The output of the environmental scan is the identification of key opportunities and threats resulting from the impact of external factors. The mission of the firm: choosing competitive domains and the way to compete The mission of the firm defines the business scopeproducts, markets, and geographical locations - as well as the unique competencies that determine its capabilities. The level of aggregation used to express this mission statement is very broad, because we need to encompass all the critical activities and capabilities of the corporation. The mission of the firm defines the overall portfolio of businesses. It selects the businesses in which the firm will enter or exit, as well as the discretionary allocation of tangible and intangible resources assigned to them. The selection of a business scope at the level of the firm is often very hard to reverse without incurring significant or prohibitive costs. The development of unique competencies shape the corporate advantage, namely, the capabilities that will be transferred across the portfolio of businesses. The mission of the firm involves two of the most essential decisions of corporate strategy: selecting the business of the firm, and integrating the business strategies to create additional economic value. Mistakes in these two categories of decisions could be painful, because the stakes are very high indeed. Business segmentation: selecting planning and organizational

There are eight corporate tasks that we associate with the economic imperative of corporate strategy. The first one is the environmental scan at the corporate level, which allows us to start the reflection of the firm’s competitive position by a thorough understanding of the external forces that it is facing. One of the principal objectives of strategy is to seek a proper alignment between the firm and its environment. Therefore, it seems logical to start the corporate strategic planning process with a rigorous examination of the external environment. The other additional tasks imply critical strategic decisions seeking the attainment of corporate competitive advantages. They are: mission of the firm, business segmentation, horizontal strategy, vertical integration, cc)rporate philosophy, strategic posture of the firm, and portfolio management. We comment now on the essence of these tasks.

f ocuses The mission of the firm defines its business scope, namely the products and services it generates, the markets it serves, and the geographical locations in which it operates. The business segmentation defines the perspectives or dimensions that will be used to group these activities in a way that will be managed most effectively. It adds planning and organizational focuses, which are central for both the strategic analysis and the implementation of the business strategies. This concept is of great importance in the conduct of a formal strategic planning process, since the resulting businesses are the most relevant units of analysis in the process. Horizontal strategy pursuing synergistic linkages across business units One could argue that horizontal strategies are the primary sources for corporate advantage of a diversified firm. It is through the detection and realization of the

EUROPEAN MANAGEMENT JOURNAL Vol 12 No 4 December 1994

367

CORPORATE

STRATEGIC

TASKS

existing synergy across the various businesses that significant additional economic value can be created. The value chain is the basic framework that is used to detect opportunities for sharing resources and activities across businesses.6 The resulting degree of linkages among businesses determines their relative autonomy and independence. The mission of the firm defines the business scope; business segmentation organizes the businesses into planning and managerial units; horizontal strategies determine their degree of interdependence. Consequently, these tasks are highly linked. Moreover, the mission of the firm also defines the current and future corporate core competencies, which is the basis that supports the relationship among the various businesses, and the role to be played by horizontal strategy.

I

In the last decade, firms in most developed economies have been forced to drastically restructure

Vertical integration:

defining

the boundaries

of the firm

Vertical integration determines the breadth of the value chain, as well as the intensity of each of the activities performed internally by the firm. It specifies the firm’s boundaries, and establishes the relationship of the firm with its primary outside constituencies - suppliers, distributors, and customers. The major benefits of vertical integration are realized through: cost reductions from economies of scale and scope; creation of defensive market power against suppliers and clients; and creation of offensive market power to profit from new business opportunities. The main deterrents of vertical integration are: diseconomies of scale from increases in overhead and capital investments; loss of flexibility; and administrative penalties stemming from more complex managerial activities.7 Corporate philosophy: defining firm and its stakeholders

the relationship

between

the

The corporate philosophy provides a unifying theme and a statement of basic principles for the organization. First, it addresses the relationship between the firm and its employees, customers, suppliers, communities, and shareholders. Second, it specifies broad objectives for the firm’s growth and profitability. Third, it defines the basic corporate policies; and finally, it comments on issues of ethics, beliefs, and rules of personal and corporate conduct. The corporate philosophy is the task that is most closely related to the leadership imperative, insofar as bringing a capability to articulate key elements of the CEO’s vision. Strategic posture of the firm:identifying and corporate performance objectives

the strategic thrusts,

The strategic posture of the firm is a set of pragmatic requirements developed at the corporate level to guide the formulation of corporate, business, and functional 368

EUROPEAN

strategies. The strategic thrusts characterize the strategic agenda of the firm. They identify all of the key strategic issues, and signal the organizational units responsible to respond to them. The corporate performance objectives define the key indicators used to evaluate the managerial results, and assign numerical targets as an expression of the strategic intent of the firm. The strategic posture captures the outputs of all of the previous tasks and uses them as challenges to be recognized and dealt with in terms of action-driven issues. Portfolio management: allocation and identifying divestment

assigning priorities for resource opportunities for diversification and

Portfolio management and resource allocation have always been recognized as responsibilities that reside squarely at the corporate level. We already have commented that the development of core competencies shared by the various businesses of the firm constitute a critical source of corporate advantage. Those competencies are borne from resources that the firm should be able to nurture and deploy effectively, including: physical assets, like plant and equipment; intangible assets, like highly-recognized brands; and capabilities, like skills associated with product design and development. The heart of an effective resource allocation process is the capacity to create economic value. Sometimes, this value emerges from internal activities of the firm, other times it is acquired from external sources through mergers, acquisitions, joint ventures, and other forms of alliances. Even, on occasions, value can be created by divesting businesses that are not earning their cost of capital - i.e. they are destroying instead of adding value to the firm. Portfolio management deals with all of these critical issues. In the last decade, most developed economies have been facing periods of stagnation which have forced firms to implement drastic restructuring policies. Restructuring leads to the realignment of physical assets including and organizational divestment, human resources, boundaries of the various businesses with the intent of reshaping their structure and performance. Restructuring decisions are also part of portfolio management.’

The Managerial Imperative This imperative is the major determinant for a successful implementation of corporate strategy. It involves two additional important corporate tasks: the design of the firm managerial infrastructure, and the management of its key personnel. Managerial infrastructure: designing and adjusting the organizational structure, managerial processes, and systems in consonance with the culture of the firm to facilitate the implementation of strategy

Organizational structure and administrative systems constitute the managerial infrastructure of the firm. An MANAGEMENT

JOURNAL

Vol 12 No 4 December

1994

Te&y~ the u3m o~a~~onaI ~~c~~ is c~mrno~ used to designate the design efforts that produce an alignment between the environment, the organizational resources, the culture of the firm, and its strategy.”

corporate strategic analysis, As opposed to the case of business strategy, where the unit of analysis is the strategic business unit jSBI& corporate strategy can be applied at dierent levels in a large diversified organization. The amplest possible scope is the firm as a whole. However, there are circumstances under which we want to narrow the scope of the analysis to a sector, group or division of a given organization. These entities should encompass a number of &ferent business units to be the subject of a meaningful corporate strategic analysis. In the case of P&G we use the entire corporation as a focus of analysis.

~~~~~~~~1 r~~~~~ ~~~~~~~ i$ kg ~~s~~~~~; s~~~~~?~~ ~~~S@~~~~~~~~~~~~~ rmrd~* am2 ~~~~~~~ RegdrdLss how large a corporate is, it wif! be always managed by a few key individuals. Percy Barnevik, the CEO of Asea Brown-Boveri, a successful global company, stated that one of ABB’s biggest priorities and a cruciaI bottleneck is in creating gIobaI managers.. However, he i~ediateI~ added that a gIobal company does not need t~o~~~ds of them. At ABB, &ve hundred out of a total of fifteen thousand managers are enough to make ABB work well.‘o

Now, these are two important sets of issues that we have Iabelled corporate environmental scan and corporate internal scrutiny. Before we address the set of tasks associated with these issues, we need to define the time frame to be used. There is an ~nderIying time frame which has to be spefled out at the beginning of the corporate the planning process. Throughout strategic analysis, we are contrasting existing conditions with future ones.

effective managerial infrastructure is critical for the successful ~rn~lerne~t~t~on of the s~at~g~es of the firm, Its ~~l~rn~e ob@tive is the development of corporate managerial capabifities, o~gani~at~o~aI rafues, responsibilities, and managerial processes to create a self-sustaining set of rules that allow the decentralization of the activities of the firm.

Tom MacAvoy, the former Resident of Corning Glass Works used to talk, in a rather coIourfuf way, about the need for ‘one hundred centurions’ to run an ixganizarim. These are huge corporations, with operations in over one hundred countries. When it comes to identify ing the key personnel they need, the numbers are sur~risingIy small; yet* the process of ident~yi~~~ d~~~Io~ing~ ~romo~~g~ rewarding, an& staling them3 is one of the to~g~~~t chaIIenges that an organi~t~on faces.

The ertvlronmentaI scmning process considers two different ~eatmen~ of the future, When we are dealing with ~~rn~~e~e~~u~~~tr~~~ab~e factors, we need to forecast their most likely trends to be able to understand their potential impacts, However, there are cases in which we would like to intluence future events, when we can exercise some degree of control that wiil aflow us to shape the future to our advantage.. By contrast, in aI3 d the ti3sks &at are part d the inteernal scrutiny, the future represents a state that we are aiming at through a set of controllable decisions, In the case of P&G, the time frame covers 1992 to 1997,

TX&

Wecan

organize the corporate strategic tasks in a strategic planning framework that we label ‘The Fundamental Elements in the Defirtition of Corporate Strategy: The Ten Tasks” (Figum 1). We now discuss the sequence in which the corporate strategic tasks are carried out, as welI as their interaction. The scope of this paper prevents us from giving a detailed description of the methodology that we associate with each of the tasks. Instead, we will limit ourselves to providing an ~~~~strationof the final output of most of these tasks. We wirt use as an exampEe, the ca5e d Procter and GambIe (P&G), one of the Ieading gIobaI corporations in the packaging goods industry. We have prepared this case using public information. In no way do we intend it to represent the actual strategies of P&G. We have had no contact with any of its officers.

The Central Facus of Corparate Strategy The first element of the framework consists in identifying

the entity that is going to be part of the

2:

Cqwxa&3 ~~Y~~~~~~~~~ Scm

The corporate environmental scan should be conducted first in the planning process, because it serves to frame the impacts resulting from the external environment. It has also the important role of transferring a common set of assumptions to the w~itms lmsinesse~ and ~n~~o~a~ managers of the firm, to serve as inputs in their awn strategic pIanning efforts. It gives a sense of uniformity to the strategic planning thinking across all the key organizational units of the firm. This task culminates with the recognition of opportunities - the hvourabIe impacts of the external e~v~~o~~ent which we would Eke to seize - and threats, the ~nfavourabl~ impacts which we would like to neutralize. The environmental scanning process is a demanding task that ixtvohes geographical segmentation, evaluation of primary industrrial sectorsP and iissessment of a host of very subtle externali factors. It requires heavy quantification on a global scale, and matching capabi& ties in competitive intelligence, resulting in a highly sophisticated data base. In the case of P&G, we are limiting ourselves to illustrate a highly summarized -

CORPQRATE STRATEGK

TASKS

Centrat Focus of Corporate Strategy

/

Corporate Environmental Scan

Corpor8ta lnternsl Scrutiny

Economic outlook Analysis of critical geographical locations and industrial sectors Technological, human resources, political, social, and legal trends

Mission of the firm Business Segmentation Horizontal Strategy trerticai tntegfat~on Corporate F~i~~~hy

Opportunities

Strengths and Weaknesses

and Threats

Strategic Thrusts Corporate Performance Objectives

I

Managerial infrastructure Organizational Structure and Administrative Systems

Human Resources Management

of Key Personnel

4. Figure

1

The Fundamental

Elements

4 in the Definition

and we might say, rather generic - list of key opportunities and threats {Figure 2).

Corporate Internal Scrutiny The corporate internal scrutiny captures the key actions and decisions the corporation has to address to gain a 370

~~~UPEA~

of Corporate Strategy:

The Ten Tasks

competitive position that is in line with the challenges generated by the external environment, and conducive to the development of a sustainable corporate advantage. As we have indicated before, this advantage is transferable to the various business units of the firm, and enhances its resources and capabilities. The tasks which are part of the Internal Scrutiny in our framework are: MA~A~~M~NT

jOURNAL VoI 12 No 4 December 19%

CORPORATE STRATEGIC TASKS

-

_Key Opportunities Economic

Primary

The creation of unique markets in the European immunity,

~ve~ie~:

tndustriaf

Technologicaf

Sectors:

Trends:

Supply of Human Resources: Political

Factors:

Social Factors:

North America and the South Cone of Latin America should allow us to use our size to compete effectively on quality, brand recognition, and pricing. Rapid population growth in the Third World, and economic rebound in developing countries. In cosmetics and personal care, high brand recognition and leadership in R&D should be used to increase market share. Our leadership in R&D should be focused on environmental issues, to be recognized - if possible with proprietary technologies - as the ‘environmental company’. Opportunity to become leaders in small and recyclable packaging before its use is mandatory. Availability of skilled inexpensive labour in Latin American and Eastern European areas. The creation of a politically unified Europe will bring stability to the area, probably the same will happen in the South Cone of Latin America. Similarity of needs, tastes and fashions around the world lead to globalization of markets favourable for P&G products.

Key Threats Economic Uve~iew Primary Industrial Sectors:

Technological

Trends:

Supply of Human Resources:

Political

Factors:

Social Factors:

.__Note: This is an illustration

Figure 2

0

* 0 a l

Identification

Margins for consumer goods in the US markets are likely to keep on declining. Very hard competition in growing markets, especially Latin America where Unilever is very well positioned. Europe and North America are mature in all markets except men’s cosmetics. Increasing investment by pharmaceutical competitors are affecting the prescription drug and over-the-counter businesses. Intensive competition for talented individuals, pa~icularly global managers with multicultural and multilanguage skills. Unionization in the European Community may be problematic. Uncertainty, conflicts and chaos in former communist countries. Potential for increasing friction among block trading partners. Reduction in size of the diapers market due to the decrease of births. Increased concern over the environment could become a threat if we cannot become leaders in environmentally sound products and processes.

drawn from public sources.

of Opportunitles

and Threats -

mission of the firm; business segmentation; horizontal strategy; vertical integration; and corporate philosophy.

In all of these decisions we contrast the current state with a desirable future one, and we proceed to define the challenges those changes generate for the formulation of corporate strategy. The internal scrutiny concludes with an overall statement of corporate strengths - that the firm wishes to maintain and reinforce - as well as a statement of corporate weaknesses, that the firm wishes to correct or eliminate. We proceed now to discuss the five tasks pertaining to corporate internal scrutiny following the P&G illustration.

Task 2: Mission of the Firm The mission of the firm, contrary to what is a rather

general perception is one of the most insightful corporate strategic tasks. If properly conducted, it has enormous diagnostic and communication capabilities.

The Case of P&G It is the process leading to its fo~ulation that contributes to making this task so important. This process has a number of different steps. In the formulation of the business scope, we have to identify existing and new products, markets and geographic locations; assign priorities to each of these dimensions; and prepare product-market and product-geography matrices which show the interactions among these three dimensions. In the definition of unique competencies, we need to reflect on our current as well as desired core capabilities, and assign priorities to them to identify their relative importance. Next, we prepare some qualitative statements that document the challenges resulting from changes in business scope and unique competencies. These challenges contrast the existing conditions with the desired ones, and reflect upon the actions needed to fill in the gaps. It is after all these steps that we con&de with a definition of the mission of the firm. Figure 3 offers the example of the corporate mission of P&G. Notice that we start with a broad statement which resembles what one finds in annual reports. However, this is expanded by a commentary of the existing and new product, market, and geographical scope, as well

EUROPEAN MANAGEMENT JOURNAL Vol 12 No 4 December 1994

371

CORPORATE STRATEGIC TASKS

P&G is devoted to providing products of superior quality and value to the world’s consumers based on the traditional principles of integrity and doing the right thing. P&G is to be recognized as the world leader in providing consumers everywhere with cleaning, personal care, medicinal, and food products. Its purpose is achieved through an organization and working environment able to attract the most qualified individuals. P&G is committed to preserving the environment in its production process, and its products and packaging. P&G provides its shareholders with long-term growth and profitability by establishing and maintaining leadership position in all markets. Product Scope Now:

Manufacture and distribute laundry and cleaning, food and beverage, personal care, pharmaceutical, and pulp and chemical products of superior quality to best fill the needs of the world customers. Maintain market leadership in the same segments, but focus on the development and sale of convenient products, and environmentally friendly products and packaging.

Future:

Market Scope Now:

Provide products to all individual consumers and institutions through an integrated, global network which includes R&D, manufacturing, marketing, sales, distribution and services. Respond effectively to the ever increasing health concerns, demographics changes, ageing in US, and fast growth in developing countries. Market world brands that share global technology but respond to local needs.

Future:

Geographical Now: Future:

Scope

Worldwide with different product scopes in different world regions Expand distribution of basic products (laundry and personal care) to East European countries with the highest per capita income. Establish a strong position in South America to effectively compete in the newly liberalized markets.

Unique Competencies R&D leadership has been the foundation of P&G success. Horizontal integration and multinational management have allowed the firm to compete effectively. P&G is committed to becoming the leader in the protection of our environment, through environmentallyrelated R&D in the detergent and packaging industries. The firm will develop a transnational culture to allow for a sharper focus on the differences of local market segments, but without losing the economies of global leadership.

Now: Future:

Note: This is an illustration

Figure

3

Mission

drawn from public sources.

Statement

-

The Case of P&G

as unique competencies. These last comments are intended to summarize the major findings of the mission statement process, and carry with them a commitment toward action.

Task 3: Business Segmentation Figure 4 identifies the fifteen business units that we recognize for P&G. Notice that all of them have product connotations. This is not an exception, since the product dimension seems to prevail in business segmentation. Moreover, we have attempted to provide a brief rationale for the reasons to adopt each business unit. These reasons, by and large, result from differences in competitors, technology, customers, and channels of distribution. Occasionally, a business unit can be singled out for possible divestment, as is the case of drinks in our example.

Task 4: Horizontal Strategy Horizontal strategy is a set of coherent long-term objectives and action programmes aimed at identifying 372

and exploiting interrelationships across distinct but related business units. Therefore, a crucial first step in the definition of horizontal strategy is to identify the sources of possible interrelationships. The most comprehensive and laborious way is to identify the interrelationships for each activity independently. We select one activity - say, manufacturing - and proceed to make pair-wise comparisons among business units to detect the extent to which this activity is shared between each pair of businesses. Figure 5 illustrates this process in the case of P&G. There are four activities represented in this figure: wholesale distribution, manufacturing, raw materials, and R&D; each one of them having a very different pattern of sharing. P&G has always been recognized by its enormous clout in distribution, and its ability to position it as one of its most formidable sources of competitive advantage. This fact emerges clearly in the first picture of the figure. Virtually all the businesses share the same distribution channels. The only exceptions are cellulose - which is a backward integrated business that does not relate with any other in terms of distribution - and prescription

EUROPEAN MANAGEMENT JOURNAL Vol 12 No 4 December 1994

CORPORATE

Business

-. 1

2 3

Unique competitors, technology and customers Unique competitors and technology Largest unit Unique competitors and technology Different suppliers and customers Most profitable food segment Unique competitors and technology Unique competitors and technology Unique competitors and technology Different R&D and competitors Separated to facilitate possible divestment Well-defined set of customers, competitors and technologies Different customers and competitors Different customers and competitors Core product with large external market Well defined customers and competitors Different customers, channels, and competitors Different R&D and competitors Different R&D, competitors, customers, and channels Separated to facilitate possible divestment

Cellulose Tissue and Towel Paper Products Disposable Diapers Coffee

9 10 11 12

Cosmetics Oral Care Soap/Shampoos Detergents

13

Chemicals OTC Drugs Prescription

14 15

Butter

Drugs

-.Note: This is an illustration

Figure 4

drawn from public sources

Business Segmentation

-

The Case of P&G

drugs, which only shares distribution channels with the over the counter (OTC) drugs business. Manufacturing, raw materials, and R&D behave quite differently. They share activities with clusters of businesses. For instance, cellulose, tissue paper, and disposable diapers constitute one n~anufacturing cell, while cake mixes, potato chips, peanut butter, and shortening oils represent another. Figure 5 clearly demonstrates the visual impact portrayed by this process of detecting interrelationships. One can easily detect the degree of relatedness of the business portfolio by each critical activity of the value chain.

Task 5: Vertical Integration We have conceptualized the firm as a chain of activities that relates to the administration, production, distribution, and marketing of the goods and services that constitute its primary outputs. The degree of ownership the firm chooses to exercise on these activities determines the breadth and extent of its vertical integration. To decide this question, the firm has to weigh carefully the economic, administrative, and strategic benefits against the costs resulting from vertical integration. Worizontal strategy and vertical integration are very closely linked. A business unit which is considering extending its value chain independently of other businesses, might conclude that it is both infeasible and uneconomical due to its own reduced scope. However, when the issue of adding another value activity is examined from the overall point of view of the firm, it might be perfectly affordable and desirable to add that activity because it would be shared by a Iarge number EUROPEAN

MANAG~ME~

TASKS

Rationale

Unit

Cake Mixes Shortening Oils Potato Chips/Peanut Drinks

STRATEGIC

JOURNAL

of business units. That is the central linking between vertical integration decisions - which extend the activities of the value chain, and horizontal strategies - which share activities across business within the value chain. A simple way of identifying potential opportunities of horizontal and vertical integration is presented in Figure 6, for the case of P&G. This figure represents a much more compact way of addressing the interrelationships among activities than the pair-wise comparisons shown in Figure 5. Moreover, it allows us to make explicit the linkage betwen horizontal and vertical integration decisions. The illustration shows the high degree of horizontal integration of P&G activities, primarily in manufacturing and R&D; as well as the various degrees of vertical integration existing on its business units. The contrast between current and future states generates requirements for strategic action programmes.

Task 6: Corporate Philosophy This is another corporate strategic task that we regard as critical as well as insightful in its diagnostic capabilities, that is often perceived as soft and irrelevant. The common conception is that once a statement of corporate philsophy has been made, it becomes permanent. Therefore, there is no need or use to revisit it. Without denying the continuity of some thoughtful principles, often written by the firm’s founders, we have found it useful to contrast the existing and desired conditions of the four major dimensions of corporate philosophy: relationships with stakeholders, broad corporate objectives, corporate policies, and corporate values.

Vol 12 No 4 December

1994

373

CORPORATE

STRATEGIC

NSuu

TASKS

& PAPXR

DISP. DlAPERS COFFRS CAKJI MIXES sxoxr~mta ~ffftPSl

PRAN.

DRi?xS COsKKffcs OR*LcARH SOAP.WiAMPODS DSXKRGBNl-S “IEhfIcAIs OTC DRUGS PRESCR.

DRUGS

CELLIll,

L PAPER

TISSUE!

DISP. DUPERS COFFES UKE

MiKSs

SifDPTEmHG P.CniPSl

PMN.

DfSNKs cOS&SE.TI(s ORAL

CARS

SOAP.wAMPOOS DETERCENCS C,IEMIcAW OTC DRUGS PRESCR.

DRUGS

FtAW M.4TERtAt.S

CELLU" PAY%*

TISS”B&

DlSP. DUPERS COFFES CAKR

Mi?iEF

SIMRTENIBC P.clfiPsl

PEW.

DRlKKS COSMKI-‘ICS ORAL

CARE

SOAP-SHAMPOOS DETERCBMS CIIEMicAIS 0FC.I DRLGS PRESCR.

DRUGS

Note: This is an illustration Key:

l

denotes

AJ3,C.D

drawn from public sources.

sharing of wholesale

374

activities

across business

units

Identifies ctusters of manufaet~r~ng activities across business units. For instance, ceftutose, tissue paper, and disposable diapers all have common ~afl~fa~turj~g activities designated by A. Cake, Shortening, Potato chips, and peanuts

Figure 5

distribution

also have common

manufacturing

activities

Horizontet Interrelationships Among Business Units -

EUROPEAN

designated

by B, but these are different

to A.

The Case of P&G

MANAGEMENT

fUURNAL

Vol12 No 4 December

19%

CORPORATE STRATEGIC TASKS

CbemicaisOTC Prescript. Horizonffal lntegrabon C&dass TissueDisposable CoffeeCake SofteningPotatoDrinksCosmetics Oral Soap, Defergents Drugs Drugs Mixes O&G Chips& Cam Shampoo & DiSpSfS cwent Future & Peanufs f+w LkWorants

-

WhOleSale X X distribution A A Manutacturing A E Raw Materials E E H H H R&D -_ Oveell Oegree ofVertical lnfegrafion X X H Current M x L

Fulu~e

H WI L

X

x

x B

X B

x B

I

I

I

X

X

X

X c F J

X c F J

X c F J

X C F J

X c F J

X

X

X

X

X

X&Y C&D F&G J&K

Y D G K

X

X

X

X

HML x X X X

HL X X X X

X

X

X

x

x

x

X

X

X

X X

-.Nole This is an illustration drawn from public sources.

X

X

X

X

Key, Letters identify clusters of sharing value chain activities across the various businesses of P&G. At the margins we indicate the current and future levels of horizontal and vertical Integration. Figure

6

Horizontal and Vertkai Integration -

The Case of P&G

Figure 7 illustrates the output of the process of reexamining the corporate philosophy of the firm, by using the case of P&G. Finding major differences between the existing and desired states, calls for serious reflection and important action programmes which are occasionally difficult to implement, because they point at transformation in deeply rooted cultural behaviour. Perhaps the content of Figure 7 does not capture the richness of this task, because, as we have said repeatedly, the illustration used in this paper is simply an exercise that has not involved the managers of P&G.

Summary of the Corporate Internal Scrutiny: The Strengths and Weaknesses of the Firm At the end of the corporate internal scrutiny, we summarize the strengths and weaknesses of the firm, as illustrated in Figure 8 for the case of P&G. This step should provide an opportunity for the top managers of the organization to make a broad reflection about the nature of the existing competencies and those who will be required to preserve competitive advantage into the future.

Task 7: Strategic Posture: Strategic Thrusts and Corporate Performance Objectives The corporate environmental scan and the corporate internal scrutiny provide the basic inputs that will define the strategic posture of the firm. This task serves as a synthesis of the analysis conducted so far, and captures the strategic agenda of the firm. The strategic thrusts are a powerful expression of all of the issues that, from the perspective of the firm, need to be addressed to produce an integrative strategy. The corporate performance objectives define the key indicators that will be used to detect the operational and strategic effectiveness of the firm.

The strategic posture is the essence of the formulation of the corporate strategy, and as such, it is a task that should receive the utmost attention. When properly conducted, the firm is able to frame the activities, responsibilities and performance measurements that are critical for its superior strategic position.

Definition of Strategic Thrusts Figure 9 illustrates in a very succinct way the statement of strategic thrusts for P&G and the assignment of planning challenges to the organizational levels in charge of responding to those thrusts. The statement also includes relevant measures of performance intended to monitor the operational and strategic results associated with each thrust. Notice that there is a priority assigned to those planning challenges, depending on the intensity of the necessary participation required. The first column of the chart identifies corporate responsibilities; the next fifteen business columns correspond to the business units described in Figure 4; the activities of the value chain are represented in the six functional columns: finance, procurement, production, marketing, technology, and managerial infrastructure (which includes human resources management). The chart containing strategic thrusts can be read in three different ways. First, we could analyse the overall set of issues identified to check whether they capture the totality of the strategic initiatives facing the corporation, and the extent to which they represent a forceful and impacting challenge. This is a check for completeness and aggressiveness. Second, we can read each thrust horizontally to make sure that we have properly identified the organizational units and managers who should be involved in formulating the action programmes addressing each

EUR(X?EAN MANAGEMENT JOURNAL Vol 12 No 4 December 1994

375

CORPORATE

S-l-RATEGIC TASKS

Existing

Desired

Competition among individuals, brands, and teams. Commitment to recruiting and retaining talented people irrespective of creed, race, sex, or national origin.

Extend coordination and cooperation across different organizational units. Make corporate profit a goal of all individuals. Continue and expand the employee ownership programme.

Customers

US customer dominant characteristics

Our customers are the people of the world. Detect geographical differences and account for the ever increasing power of the distribution channels. Our customers will choose P&G products for their outstanding value.

Shareholders

High returns and stock appreciation

Continue providing appreciation.

Suppliers

Regarded as important partners. Solid relationships in the US; uneven in the rest of the world.

Recognize them as essential our global value chain.

Communities

Environmental

Attain indisputable leadership.

~~Iationships/Stakeholders Employees

Broad Corporate Growth

product

concerns

high returns and stock

partners

in

environmental

~~~e~t~~es Continuous past years

market

Profitabilitv

Above averaae

Corprate F83Wes Management Style

Mainly centralized.

Organizational

in defining

share increases

Growth should not be limited to market share. It includes product development and the entrance in geographical areas in which P&G has no presence. Maintain

returns

above average

returns

Become truly global and decentralized in those aspects needing local focus. Create a transnational culture.

US Focused

Focus on the ability to transfer and retain individuals.

Policies

in

tec~~~fogy

Increase mobility and team spirit. Emphasize international training.

Good professionals

Finance

Local funding and management currency exchanges

Marketing

Localized

Manufacturing

Good with some ageing

plants

Improve cost structure; process advantages.

Technology

Innovate

and markets

Become ‘the environmental company’; both in products and packages as well as production processes

of

Centralize

access to worldwide

Disseminate

in all products

knowledge.

markets

Local focus. emphasis

on

Values Environmental

Good reputation Honest dealings

Beliefs Rules of Personal

Behaviour

AWe: This is an illustration Figure 7

focus

of the learning

Human Resources Management

Corporate Ethics

with individual

Adopt the philosophy organization.

are rewarded

The power resides in the indivjdua~

drawn from public sources.

Corporate Philosophy -

The Case of P&G

Honest dealings

focus. wilf always

Add long term perspective

be rewarded. in afi areas

CORPORATE STRATEGIC TASKS

Current Corporate Strengths Information Technology linking customers to production. 1 Application of R&D for innovation to extend product life cycle. 2 R&D capabilities to generate new products. 3. Advanced Regional R&D centres focused on regional differences. Human resource management. Marketing and advertisement. Brand management. International management experience. Proactive environmental policies. Vertical integration from paper and packaging to a broad distribution network ending at the store itself. 10 Employee stock ownership plan. Required Corporate Strengths (Current Corporate Weaknesses) Increase knowledge of the food and beverage businesses. 1 2 Attain cost leadership in as many product lines as possible. 3 Develop transnational infrastructure and corporate culture. 4 Expand in newly opening markets. 5 Improve responsiveness to local markets. 6 Become the environmental leader. Note: This is an illustration

drawn from public sources.

Figure 8 Identification of Corporate Strengths and Weaknesses - The Case of P&G

as well as supporting their implementation. When a strategic thrust cuts across several functions and business units of the firm, it is an indication that a business process might be identified by that thrust. Business process reengineering has become one of the mcst widely used best business practices. The literature on the subject is very vague on how to define business processes. We believe that the strategic thrusts chart, such as the one in Figure 9, provides a proper insight into this matter.” thrust,

And third, we can read this chart vertically to detect the roltl assigned to each individual organizational unit. This allows us to spot potential bottlenecks and the criticality of the involvement of each unit. To some extent, that alsg, gives us another check of completeness.

Definition of Corporate Performance Objectives Although there is no universal set of corporate performance indicators, we can classify them as two major categories.‘* The first includes quantitative financial measures that relate to size, growth, profitability, capital markets, and a host of other financial variables. These performance indicators are of the greatest importance because they address objectives which are central to the short-term well-being of the firm, as well as its long-term survival and development. Also, the financial standing of the firm and its position in the capital markets constitute parameters of undeniable managerial significamp. Figure 10 lists the financial performance indicators for the case of P&G, registers its historical values, and seti. up objective targets. These corporate performance objectives should not be applied indiscriminately to every business, but should be adjusted to recognize the different contribution they make to the short- and longrun performance of the firm.

The second major category of corporate performance objectives is oriented at measuring the overall efficiency of the managerial functions of the firm, particularly human resources, technology, procurement, manufacturing, and marketing. Incorporating these functional measures at the corporate level is relevant whenever we deal with centralized functions. Otherwise, the functional measures become part of either divisional or business performance indicators, depending on where the function resides within the organization. Figure 11 lists the non-financial performance objectives for the case of P&G. Notice that, in this case, it is often difficult to assign specific numbers to measure the performance of each indicator. The challenge imposed by management control is to continue monitoring and assessing non-financial performance in as objective a way as possible. Financial indicators often give us an understanding of the historical performance of the firm. Nonfinancial indicators, on the other hand, can address the issue of future sustainability of the firm’s performance.

I

Recently, several new approaches to measuring managerial performance have produced best business practices

The issue of managerial performance has been hotly debated in the recent past. Quite a number of pathbreaking new approaches have been proposed to enhance the ability of managers to measure performance in the short and in the long run, and from an operational and strategic perspective. Some of these new approaches have produced best business practices. Paramount among them are competitive benchmarking, created at Xerox; and activity-based costing and the balance scorecard, both ioneered by Robert Kaplan and some of his associates. p3 The three tasks that remain - resource allocation and portfolio management, managerial infrastructure, and human resources management of key personnel - are not going to be treated here with the same level of detail that we devoted to the previous ones, nor are they going to be illustrated with the case of P&G. This is not because they are unimportant, but because their nature is closely associated with issues of implementation, whose proper treatment is outside the scope of this paper.

Task 8: Resource Allocation and Portfolio Management Resource allocation and portfolio management permits backup to the strategic actions implicit in the strategic posture of the firm with the necessary resources needed for their deployment. We are entering now into the realm of strategy implementation.

EUROPE:AN MANAGEMENT JOURNAL Vol 12 No 4 December 1994

377

Thrust

lines.

diapers

with suppliers

for

both in the

organization

Flgure

9

2

1

1

2

1

1

6

2

I

1

7

1

1

8

1

1

1

1

2222222

1

2

1

2

Statement of Strategic Thrusts -

2 -

2

1

1

1

Important

1

1

1

1

2

1

1

1

2222222

1

1

1

support role.

1

1

The Case of P&G

12222222

1

2

2

1

1

1

1

1

I

10 17

2222222

9

2222222

2

1

1

5

2

2

1

1

4

1

2

222222

1

2

3

Businesses

21111111

1

1

22222222

2

2

1

1

Code: 1 - Key role in formulation and implementation Note: This is an illustration drawn from public sources.

15. Develop a transnational

14. Develop entry strategies for China and countries without P&G presence in Eastern Europe, Latin America, and Africa, through distribution alliances

13. Develop distribution channels through Wholesale Clubs and Discount Drugstores

12. Develop combined products, food and detergent segments

11. Develop a full line of men’s cosmetics

10. Encourage communication between market research and product R&D

9. Improve relationships

8. Develop specialty stores as a channel prestige care products

6. Constantly monitor changes of tastes and health concerns 7. Develop geographical strategies for different regions, with emphasis on Latin America, W. Europe, and Asia

5. Develop biodegradable

4. Increase R&D in process manufacturing

3. Develop OTC product

2. Emphasize environmentally friendly products, particularly compact and liquid detergents.

1. Concentrate on the profitability of food and beverages. Divest if necessary.

Strategic

C

0 R

2

1

1

1

1

1

72

1

1

2

1

1

I

1

1

1

1

13 14 15

2

2

2

2

2

2

1

Fin

2

2

1

2

2

2

2

2

2

Proc.

2

2

2

2

2

2

2

1

2

2

2

Prd.

2

1

1

1

1

1

1

1

1

1

2

2

Mkt

2

1

1

1

1

2

2

1

1

1

1

2

Tee

M.I.

Measurements

line. Overall

mix

sales to

Completion

of a first proposal

Market share per product introduced and country

Market share

sales,

line market share

product

Number of products, market share

Product

Customer-driven innovations

Increase % of supplier P&G

Market share

Number of consumer surveys and product improvements. Regional market shares

Time to market

Production costs and environmental impact.

Size of product market share.

Sales and product

Sales, profit, and margin

Performance

CORPORATE STRATEGIC TASKS

Objectives

Past Years 1990

1997

7992

Total Growth (O/o)

21,398

24,081 12.5

27,026 12.2

29,306

Total Profit Gr. (O/o) Profit/Sales

1206

1602 32.8 6.65%

1773 10.7 6.56%

1879 6.0 6.41 O/o

Maintain Profits above 6% of sales Monitor by product line. Concentrate decide on divestment.

16,351

18,487 13.1

20,464 10.7

21,696 6.0

Continue

investing

59.5 43.7

47.7 40.4

53.1 53.1

Maintain

current

23.1 7.4

24.6 8.7

30.9 8.7

Maintain Maintain

around 25% around 9%

3.47

4.27

4.62

Maintain

around 4.5%

41

41

42

3.37

4.63

4.56

Sales

Profits

1993-97

1989

Assets

5.64%

Total Growth

Capital Structure Long Term DIE Long Term D/K Profitability

ROE ROA

Earnings/Share Div./Earn.

(O/o)

Market/Book Note: This is an illustration

drawn from public sources.

Figure

Financial

10

Corporate

Performance

Performance

To $42 billion by 1997. Increases mainly overseas. Monitor by product, specifically OTC and cosmetics.

8.4

levels

ratios

Above 40% Maintain

Objectives

Indicators

at current

on Food and

-

above 4.0

The Case of P&G

Objectives/Metrics

R&D spending/sales R&D productivity Product development time Job satisfaction Procurement costs Procurement quality Supplier relationships New product introductions Manufacturing costs Manufacturing quality Environmental protection Geographical expansion

Maintain at 3% Number of R&D driven innovations Average of 3 months Turnover - Employee Surveys Decrease 10% cost of materials Quality control report on purchases Percentage of supplier’s sales to P&G Number of introductions Decrease by 100/o production costs Number of defects (or defective runs) Number of environmentally safe products Percentage of sales in different regions

Note: This is an illustration

drawn from public sources.

Figure 11 Corporate Case of P&G

Non-Financial

In most organizations, top managers face the difficult task of having to discriminate among the proposals that are finally submitted because the financial, technological, and human resources available to the firm are not sufficient to support every proposed initative. This fact of life is the fundamental reason why resource allocation is a truly centralized decision that cannot be delegated to lower echelons of the firm. Besides, this calls for the identification of criteria to allow the oxganization to make the best possible use of the avrrilable restricted resources. In business firms, the bottom line for resource allocation is ~nlue creation. In financial terms, it means that the profitability enjoyed by the economic entity - the firm, the business, or a project - should exceed its cost of

Performance

Objectives

-

The

capital. There are a number of different approaches to assist managers in the effective allocation of resources. The most conventional one is based upon capital budgeting techniques, and net present value calculations. More recently, the value-creation school has generated some valuable insi@ts linking strategy with capital budgeting decisions.

Tasks 9 and 10: Managerial Infrastructure and Human Resources Management of Key Personnel These implementation efforts are going to be strongly reinforced by the remaining two corporate tasks: managerial infrastructure, and human resources

EUR(~PEAN MANAGEMENT JOURNAL Vol 12 No 4 December 1994

379

CORPORATE

STRATEGIC

TASKS

management of key personnel. Corporate strategy is a subject of critical importance in management. Perhaps surprisingly, it has not received the attention we feel it deserves. We hope that the disciplined process we have described, leading towards the ten Corporate Strategic tasks, might improve managers’ understanding of this most vital area.

Notes 1

For a comprehensive review of the concepts and methodologies associated with the three strategic perspectives - corporate, business, and functional see Arnold0 C. Hax, and Nicolas S. Majluf, The Strategy Concept and Process: A Pragmatic Approach, (Englewood Cliffs, MJ, Prentice Hall, 1991).

2

Gary Hamel and C.K. Prahalad, Strategic Intent. Harvard Business Review, (May-June 1989) 63-76.

3

Edgar E. Schein, Organizational Culture and Leadership, 2nd edn. (San Francisco, CA, 1992); John I’. Kotter, The Leadership Factor, (New York, NY, Free Press, 1988).

4.

A related important topic to leadership is the issue of power. From this point of view, management is perceived as a political process addressing the creation, exercise, retention, and transfer of power. Power plays the central role in the implementation of strategy by influencing people’s behaviour, making them do things that otherwise they would not do, and changing the course of events. For an excellent treatment of the subject, see Jeffrey Pfeffer, Managing with Power: Politics and l&hence in Orpanizations (Boston, MA, Harvard Businiss School P&s, 1992).

5.

For two different typologies on corporate strategy and see Michael E. Porter, From managerial tasks, Competitive Advantage to Corporate Strategy. Harvard Business Review (May-June 1987, Vol. 65, No 3) 43-59; and Andrall E. Pearson, Six Basics for General Managers Hatvard Business Review (July-August 1989, Vol. 67, No 4) 94-101.

6.

For a treatment of the role of the value chain in obtaining competitive advantage, as well as the use of the value chain as a unit of analysis in achieving horizontal integration, see Michael E. Porter, Competitive Advantage (New York, NY, The Free Press, 1985).

7.

Some sources for the topic of vertical integration are: John Stuckey, and David White, When and When Not to Vertically Integrate, Sloan Management Review (Spring 1993) 71-83; Kathryn Rudie Harrigan, Strategic Flexibility: A Management GuiAe for Changing Times (Lexington, MA: Lexington Books. 19851: Gordon Walker, Strategic Sourcing, Vertical Integration and Transaction Costs. Interfaces, 19, (May-June 1988), 62-73; and David J. Profiting from Technological Innovations: Teece, Implications for Integration, Collaboration. Licensing, and Public Policy, in David J. Teece, (ed.), The Competitive Challenge: Strategies for Industrial Innovations and Renewal, (Cambridge, MA: Ballinger Publishing Co., 1987).

EUROPEAN

8.

For an excellent presentation on the nature, process and management of restructuring, see Gordon Donaldson, Corporate Restructuring, Managing the Change Process from Within (Boston, MA, Harvard Business School Press, 1994).

9.

For a discussion of ‘organizational architecture’, see David A. Nadler, Marc S. Gerstein, Robert B. Shaw, and Associates, Organizational Architecture: Designs for Changing Organizations (San Francisco, CA, Jossey-Bass, 1992).

10.

William Taylor, The Logic of Global Business: An Interview with ABB’s Percy Barnevik, Harvard Business Review (March-April 1991, Vol. 69, No 2) 91-105.

Il.

The two pioneering books on the subject of business reengineering are: Michael Hammer, and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution (New York, NY: Harper Business, 1993); and Thomas H. Davenport, Process Innovation: Reengineering Work Through Information Technology (Boston, MA: Harvard Business School Press, 1993).

12.

The issue of the soundness of the performance metrics used by the firm has received a great deal of attention recently. For some broad discussion of the subject, see: H. Thomas Johnson, and Robert S. Kaplan, Relevance Lost: The Rise and Full of Management Accounting (Boston, MA: Harvard Business School Press, 1987); John K. Shank, and Vijay Govindarajan, Strategic Cost Management: The New Tool for Competitive Advantage (New York, NY: Free Press, 1993); and Robert S. Kaplan (Editor), Measures for Manufacturing Excellence (Boston, MA: Harvard Business School Press, 1990).

13.

The pioneering reference for benchmarking is Robert C. Camp, Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance (Milwaukee, WI: Quality Press, 1989). The original references for the balanced scorecard are: Robert S. Kaplan, and David P. Norton, The Balanced Scorecard Measures that Drive Performance, Harvard Business Review (JanuaryFebruary, 1992) 71-79; and Robert S. Kaplan, and David I’. Norton, Putting the Balanced Scorecard to Work, Harvard Business Review (September-October, 1993) 134-142. The original reference for activity-based costing is Robin Cooper, and Robert S. Kaplan, Measure the Costs Right: Make the Right Decisions, Harvard Business Review (September-October, 1998).

14.

Good references for value creation are: Arnold0 C. Hax, and Nicolas S. Majluf, The Strategy Concept and Process: A Pragmatic Approach (Englewood Cliffs, NJ, Prentice Hall, 1991) Chapter 15; Tom Copeland, Tim Koller, and Jack Murrin, Valuation: Measuring and Managing the Value of Companies (New York, NY: John Wiley, 1990); James M. McTaggart, Peter W. Kontes and Michael C. Mankis, The Value Imperative: Managing for Superior Shareholder Returns (New York, NY: Free Press, 1994); and G. Bennett Steward, III, The Quest for Value: A Guide for Senior Managers (New York, NY: Harper Business, 1991). For a novel treatment of investment and competitive sustainability, see Pankaj Ghemawat, Commitment: The Dynamic of Strategy (New York, NY: Free Press, 1991).

MANAGEMENT

JOURNAL

Vol 12 No 4 December

1994

CORPORATE STRATEGIC TASKS

ARNOLD0 HAX, Sloan School of Management, Massachusetts Institute of Technology, 50 Memorial Drive, Cambridge, Mass. 02139-4307, USA Dr. Hax is Alfred P. Sloan Professor of Management and Leaders for Manufacturing Professor at the Sloan School of Management, MIT. A rrative of Chile, he was on the faculty of Harvard Business School and a senior consultant at Arthur D. I.ittle Inc., before joining MIT in 1972. Ife has authored and co-authored seven books and about 80 journal articles in the fields of strategic planning, management control, operations management und operations research. Among his most recent books [Ire: Strategic Management: An Integrative Perspective, and The Strategy Concept and Process: A Pragmatic Approach, both co-authored ~clith Nicolas Majluf.

NICOLAS MAJLUF, Professor of Management, School of Engineering, Catholic University, Chile. Nicolas Majluf received his Engineering degree from the Catholic University of Chile, Master of Science in Operations Research from Stanford University, and his PhD in Management from the Sloan School of Management, MIT. He has been a Visiting Professor at MIT, UCLA, IESE in Barcelona, and guest lecturer in many Latin American and Chilean universities. His main fields of interest are in Strategic Management and Finance. He has published and lectured extensively and has wide consulting experience in these areas. He is a Member of the board of important Chilean corporations in the copper, telecommunications and steel industries.

1)~. Hax is the recipient of many awards e.g. the Salgo Award for Excellence in Teaching, and Dean’s Award fi)r Excellence (both Sloan School of Management), and Ramon Salas Edward’s Award by the Chilean L ngineering Institute.

EUROPEAN MANAGEMENT JOURNAL Vol 12 No 4 December 1994

381