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Market pull or legislative push: A framework for strategic ecological reorientation
Scand. J. Mgmt, Vol. 12, No. 3, pp. 305-315, 1996 Copyright © 1996 Elsevier Science Ltd Printed in Great Britain. All fights reserved 0956-5221/96 $15.00 + 0.00
Pergamon S0956-5221(96)00008-5
MARKET PULL OR LEGISLATIVE PUSH: A FRAMEWORK STRATEGIC ECOLOGICAL REORIENTATION
FOR
RIKARD LARSSON,* HELleNE OLSSON-TJARNEMO,* ANN-CHARLOTTE PLOGNERt" and SUSANNE OSTLUND*
*School of Economics and Management, Lund University, Sweden, ~fPelog Consulting AB, Sigtuna and ~Stockholm School of Economics, Sweden (First received December 1992; accepted March 1994) Abstract - - Our understanding of how organizations become reoriented towards more environmentally apt strategies suffers from previously fragmented conceptual approaches and insufficient attention in research to the process and content of such ecological reorientations. This paper develops an orientational framework that systematizes different conceptualizations in the organizational, strategy and marketing literature and adds an ecological orientation. The framework is applied to an exploratory case study of an attempted reorientation towards a greener strategy in a household appliance firm. The minor ecological reorientation that occurred was found to be primarily driven by legislation rather than market pull owing to the dominant production orientation of the finn. Thus it is suggested here that the relative effectiveness of legislative push or market pull in achieving ecological reorientation varies according to the initial orientation of the firms. Copyright © 1996 Elsevier Science Ltd Key words: Organizational orientation, greening of strategy, ecological reorientation, legislation versus market, contingency theory, environmental policy.
INTRODUCTION Organizations are facing increasing environmental regulation and ecologically conscious customers, as people become more aware of the negative effects of pollution from organizational activities and products. These changes ought to prompt strategic adaptation among at least the most environmentally hazardous firms. There have been some indications of this happening in practice, such as compliance with tougher environmental legislation, green advertizing, and the establishment of formal environmental functions, audits, etc. in organizations (see e.g. Kiernan, 1991; Stern, 1991). Research on reorientation towards more environmentally apt strategies, on the other hand, has largely lagged behind. We argue that, on top of the previously failure to recognize the full importance of environmental issues, the traditional strategic management frameworks are inadequate for several other reasons as well, when it comes to understanding this type of environmental reorientation. First, the systematic identification of organizational reorientation requires a coherent framework embracing different orientations, to determine whether an organization has changed from one type to another. Unfortunately, research on various types of orientations suffers from a fragmented approach, with contradictory and partial frameworks (Payne, 1988; Shapiro, 1988). Second, among these conceptualized orientations, an environmental orientation in the ecological sense is clearly the least developed and the least empirically studied. While research has focused 305
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on contrasting the traditional production orientation with more external market or customer orientations (e.g. Galbraith, 1988; Levitt, 1975), Kotler's (1991) societal marketing concept may be seen as approaching the ecological orientation by considering society's well-being. And yet practice has shown all too often that societal well-being is created at the expense of the environment. Third, the process of strategic reorientation has been left undeveloped in research terms owing to the literature's focus on content (Johnson, 1987; Pettigrew, 1987) and its fragmentation among numerous different types of strategic change, such as mergers and acquisitions, strategic alliances and restructuring. The specific study of strategic reorientation has been limited mainly to major transformation processes in general (Melin, 1985; Normann, 1971; Pettigrew, 1985) and to shifts between the different generic strategies of Porter (Gilbert and Strebel, 1988) and, Miles and Snow (Zajack and Shortell, 1989). Since none of these generic strategies have any specific ecological content, the process of shifting towards greener strategies represents a virtually uncharted area of strategic management. In all, neither the systematization of different orientations in relation to one another, nor the content and process of ecological reorientation towards greener strategies, have received sufficient attention. Our understanding of how organizations reorient themselves towards more environmentally apt strategies could therefore be significantly improved by the establishment of a systematic framework which includes an ecological orientation. Such a framework would not only be able to identify shifts towards greener strategies, but can also compare the impact of the starting-points of such ecological reorientations. For instance, can customer-oriented firms become greener more readily than production-oriented firms? These distinctions between different starting points for ecological reorientations can shed light on the important question of whether ecological reorientation is primarily pushed by legislation or pulled by green demand (Helm and Pearce, 1991). Rather than committing the error of attempting to find the "one best solution" once again, it will be assumed here that the strategic impact of legislation and market demand is contingent upon the situation. More precisely, an orientational framework can provide a basis for a contingency theory of ecological reorientation, where it is suggested that the relative effectiveness of legislative push or market pull in relation to greener strategies will differ between organizations, depending on their prior orientation. Such a framework can have substantial policy implications for governments in choosing between pushing ecological legislation and/or encouraging greener demand through customer-awareness progranunes. This paper attempts (a) to develop such an orientational framework by systematizing relevant parts of the marketing and organizational literature; (b) to apply the model to an exploratory study of the attempted strategic reorientation of a household appliance manufacturer faced with environmental legislation and the potentially greener demand of more environmentally conscious customers; (c) to compare, in light of this, the impact of market demand and of legislation on the reorientation process; and (d) to identify some research and policy implications.
A FRAMEWORK FOR ORGANIZATIONAL ORIENTATION The orientation of an organization can be seen as the "center of gravity" (Galbraith, 1988), the focus or driving perspective that comprehensively guides organizational activities. Traditionally research has contrasted internal production orientations with external market or customer orientations (Levitt, 1975). There are several possible indicators of the overall orientation of an organization, such as: (a) where in the industry supply chain the organization started and where it creates most of its strategic value - - the more downstream, the more external the orientation
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(Galbraith, 1988); (b) whether the organization is offering goods or services - - the more service intensive, the more extemal the orientation (Bowen, Siehl and Schneider, 1989); (c) the education and functional background of the top management - - the more engineers and production specialists, the more internal the orientation (Chaganti and Sambharya, 1987); and (d) the number of employees in different functions - - the more production employees relative to marketing employees, the more internal the orientation. Most literature on organizational orientation addresses no more than two or three types. Some researchers have made broader attempts to categorize multiple orientations in relation to one another, as for example Payne's (1988) listing of product, cost, capacity, erratic and marketing orientations. Galbraith (1988) developed a more systematic model of six sequential stages in the industry supply chain along which a firm's centre of gravity can be located more, or less, upstream or downstream. One of the best known orientational frameworks is Kotler's (1991) set of marketing management philosophies with the concepts of production (i.e. focusing large scale and low cost), product (i.e. high quality, performance and features), selling (i.e. aggressive promotion), marketing (i.e. more effective customer satisfaction than competitors), and societal marketing (i.e. extension of the marketing focus to include the well-being of society). It is possible to cross-fertilize Kotler's set of concepts with Galbralth's logic of functional flow, to form an organizational orientation framework containing seven modified orientations. Kotler's comprehensive marketing concept is divided into two major types, namely the market and customer orientations which unfortunately are often used interchangeably. The market orientation refers to marketing products which attempt to meet specific customer demand more effectively than those of competitors, whereas the customer orientation considers the whole customer with all her needs and wants, rather than merely focusing on the demand for a specific product or the positioning of the manufacturer's own products relative to those of competitors. The modified market orientation can be seen as including the selling concept, since advertizing and other selling activities play a central role in the positioning of products relative to those of competitors. Thus, the orientational framework will not include any specific selling type. Further, an input orientation is added to cover dependence on the supply from previous stages in the industry supply chain outlined by Galbraith, such as raw materials and primary manufacturing. In the past the input orientation has been neglected and has probably occurred mainly among wholesalers competing for suppliers with popular brands, but recent developments towards a greater use of outsourcing suggest its growing importance. Finally, the increasing prominence of environmental issues suggests the addition of a green ecological orientation (Cross, 1990; Kiernan, 1991), which points to an even broader context by taking account of the ecological environment as an overall guide for organizational activity. These seven types can constitute an orientational spectrum as shown by the model in Fig. 1. The orientations in Fig. 1 are arranged in the sequence of the internal functional flow from input to production and product, followed by the widening external context of its output from the market, via the customer (representing more than the mere demand for a specific product) and society (representing more than individual customers), to the ecological environment. The orientations also partly overlap, since each type more or less includes one or more of the others. For instance, the market orientation focuses on the marketing process but also takes the product and customer into consideration, since they partly determine the input and output of the marketing function. It is suggested that the degree of overlap between the different orientations varies inversely with the angle between them in the semicircular spectrum in the figure, as illustrated by the array of varying partial intersections. While an organization can be expected to have different degrees of all these orientations (Lorange and Roos, 1990), a dominant orientation or centre of gravity is still likely to prevail.
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~iCle°i°d?e
Orientation Fig. 1. An orientational spectrum framework.
ECOLOGICAL REORIENTATION In the past, different orientations have been emphasized at different times. O'Leary and Iredale (1976) suggest that the orientation of business firms has shifted from production, via finance and sales, to marketing. Kotler's (1991) set of concepts shows a similar gradual progression over time, with an increasingly wider external focus. The production orientation has become stronger during times of demand surplus (Lorange and Roos, 1990). Galbraith (1988) identifies downstream shifts by chemical firms as well as upstream shifts by areospace firms. A shift from one dominant organizational orientation to another can be seen as a reorientation. The presented orientational spectrum model offers a systematic way of identifying such reorientations, by defining a specific set of orientational types between which the shifts occur. The logic of the model, with different orientations overlapping in varying degrees along a functional flow and a widening external context, also enables the identification of the direction and the magnitude of the reorientation. For example, a shift from a production orientation to an ecological orientation can be classified as a major downstream reorientation, while a shift from a market orientation to a product orientation is a minor upstream reorientation. In contrast, the common use of reorientation as more or less synonymous with any major organizational transformation not only forgoes these conceptual and operational advantages, but also casts doubt on the criteria that are being used for classifying - - or not classifying - - the change as a reorientation. It is possible to note a shift towards more ecological orientations during the 1990s (Cross, 1990; Helm and Pearce, 1991; Kiernan, 1991). Here we use the term ecological rather than environmental, since the latter is often used in a system theory sense, referring to almost anything outside the focused system, whereas ecological refers more specifically to the natural environment. An ecological orientation can be seen as a broader orientation beyond society in the sense that it does not focus on the well-being of the customer or of society, but rather on the well-being of
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society's ecological environment. Whereas many organizations may claim that they are ecologically oriented, it is difficult to determine how far this is mere words and how far it refers to substantive action. A pilot study of the orientational spectrum model was conducted in 174 Swedish municipalities as part of an investigation of the relationship between municipal restructuring and reorientation (Larsson et al., 1992). Among other things, the municipal respondents ranked the different orientations according to their relative importance to the technological operations in the municipality during the past decade, at present, and as anticipated in the future. These survey rankings showed a clear pattern of rising importance for the ecological orientation, from being the least important during the 1980s to being currently ranked third and anticipated second in the future (after the customer orientation, which appears to surpass the traditionally dominating societal and production orientations). However, these findings were simple rank orderings of orientational descriptions, and they suffer from social desirability bias and a lack of separate measurements of the respective orientations. One way of tentatively operationalizing different degrees of ecological orientation is to distinguish between different levels of ambition in the organizations' ecological policies-in-use (rather than their espoused policies). On the basis of extensive consulting experience of environmental issues in industry, Ann-Charlotte Plogner, one of the co-authors of the present article, has developed a framework for analysing such ecological levels of ambition as follows: (1) Ecological compliance: whereby externally determined regulations are followed - - often slowly, minimally and under protest; (2) Ecological image-creation: whereby efforts are made not only to be ecologically sound according to the law, but also to appear so in the eyes of the public; (3) Professional ecological practice: whereby an organization's environmental standards are based on the best available knowledge rather than on what happens to be the regulation or the popular opinion in a particular country; (4) Ecological adaptation: whereby the overall environmental effects of products are evaluated with the help of life-cycle analysis, used to adapt products towards more sustainable development; (5) Ecological enhancement: goes beyond the ecological adaptation of an organization's own products and moves towards developing products that remedy or prevent environmental pollution from sources other than the home organization. Thus an ecological reorientation can be recognized not only by its increasing importance to other orientations but also by the more evaluated ambition of the ecological policy-in-use. Ecological reorientation can be driven by a variety of forces, two of the most important ones being legislative push and market pull (Buchanan and Tullock, 1975; Coles, 1991; Helm and Pearce, 1991). The character of pollution as an externality suggests that market forces will not be sufficient to deal with many ecological problems, and legislation is therefore needed. On the other hand, the legislative approach can be compromised by lobbying and other activities geared to minimal environmental compliance (Ostlund and Larsson, 1991). Organizations may be more motivated to adopt ecologically apt strategies if they face green market opportunities rather than legislative threats. An alternative approach is thus to encourage greener demand by educating customers about the ecological impact of products and organizational activities. There are of course also other approaches, such as the ideological and the economic. The latter represents a hybrid legislative-market approach whereby emission charges, for example, are used to improve ecological behaviour by introducing altered economic incentives rather than imposing mandatory conditions (Tietenberg, 1991).
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The question as to whether legislative push or market pull is most effective in bringing about ecological reorientation is pertinent to all the governments, organizations and individuals who are interested in solving environmental problems anywhere in the world. There seems to be no obvious answer to the question, given the apparent multiplicity of advantages and disadvantages associated with both approaches. One possible answer is that the question is wrongly worded since it implies that there is "one best solution" to the greening-of-strategy problem. Researchers in business administration are learning in area after area that there is no such thing as the one best solution to things irrespective of the particular situations, and that the effectiveness of different solutions is contingent upon the specific circumstances at hand. The development of a contingency theory of ecological reorientation can provide answers to a more relevant question, namely: in what situations is the legislative approach more effective than the market pull, and vice versa? The orientational spectrum model offers a framework for such a theory. Given the sequence along the orientational spectrum, it can be expected that ecological reorientation will differ depending on whether it starts from the internally oriented part of the spectrum or from a more external orientation. That is, the less an organization's orientation overlaps with the ecological orientation, the more drastic the change that is needed. Is it therefore possible that the effectiveness of the legislative push and the market pull differs, depending on the orientational starting-point of the change? This is one of the questions that will be addressed below with the help of the exploratory case study.
THE CASE STUDY The case study method was chosen to generate some in-depth data for an exploration of the process of an attempted ecological reorientation. A sales subsidiary of a major multinational household appliance manufacturer was chosen because it was currently involved in a consultancy/action research project with one of the authors. The sales subsidiary was conducting an experiment with its trademark, seeking to give it a green profile in the Scandinavian market. The data was collected by Ann-Charlotte Plogner and Susanne 0stlund in 1990/91 from: (1) 15 semistructured interviews with key persons in the sales subsidiary and the parent company regarding environmental policy and other ecological aspects of the organization, R&D, design, production and marketing; (2) interviews with household appliance retailers; (3) marketing and product information available to customers from the company, its competitors and the consumer authorities, and (4) a survey of 51 company salesmen to discover their ecological knowledge and their opinion of the market potential of green products and of possible green market signals. The multinational to which the subsidiary belonged, included the manufacturing of refrigerators, freezers, dishwashers, washing machines, dryers, stoves and microwave ovens. It had become an increasingly concentrated and global organization with subcontractors and large-scale assembly production. Products were differentiated with respect to size, quality, design and combination possibilities. A set of relatively stable brand names had been maintained through numerous acquisitions, which meant that most manufacturers in the group had several different brands in different geographical markets. The leading European household appliance fair ("Domotechnica") at Cologne in 1991 highlighted several green features including recyclable plastics and reduced reliance on energy, water and detergents, It appeared that these environmental responses were fairly uniform across the industry in line with existing or pending regulations, rather than that individual manufacturers were trying to gain competitive advantages over one another (Ostlund and Larsson, 1991).
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The Scandinavian market was viewed as fairly homogeneous as regards consumer preferences and socio-economic structure, and with respect to specific product regulations for child safety, energy and water consumption, noise, etc. Traditionally, the most important competitive factors had been function, design and price. The increasingly tough price competition was reflected in recent price developments, which showed that prices were much lower for household appliances than the overall customer price index (see Fig. 2). Energy consumption subsequently became another competitive factor, as the standards and tests of the consumer authorities began to affect product development. The salesmen in the survey considered that top ratings in these tests were necessary for the marketing of dishwashers, which were also one of the first products to become officially eco-labelled with the "Nodic Swan". Sweden had been in the forefront of the gradual replacement of ozone-depleting "chloroflourocarbons" (CFCs, popularly known as freons) in refrigerators, through government-industry negotiations. At the time of the study, there had been no evident, spontaneous consumer demand for greener household appliances as such. Advisory books from the Swedish Society for Nature Conservation, such as "Green Shopping" (Thunberg and Holm, 1989), had focused on detergents and energy savings. The general debate had shown clear signs of increased consumer awareness of the ecological aspects of products and consumption, but there had been only one market-driven green breakthrough in the Swedish market at the time, namely a drastic change in demand from bleached to unbleached paper for household use during the late 1980s.
The Greening of the Sales Subsidiary The multinational group to which the sales subsidiary belonged was geared as a whole to efficient production. This was understandable in view of the fact that Swedish production labour costs constituted about 60 per cent of the total labour costs, as compared with 10 per cent for marketing labour costs (SPK, 1991). The sales subsidiary represented one of 40 brand names within the group. It was based in the Scandinavian market and its products were mainly manufactured in Swedish plants. The market consisted of four or five other competing brands in the group and four or five external competitors. The competence and organization of the sales subsidiary were mainly oriented towards the selling function. The company had no resources for product devel-
General consumer priceindex
~ ~ 6
Household appliances
.,... ~ <
4
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f f 1986
1987
1988
1989
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Year
Fig. 2. Annual prices increases for household appliances compared to General ConsumerPrice Index 1986-1989. (Source:SPK, 1991:125).
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opment, which instead was organized within the matrix organization of the group as a whole, where development capacity was located at headquarters and in the different plants. The main reason for attempting to profile the subsidiary's brand as green was the potential profitability, rather than any idea of achieving environmental goals as such. There was practically no notion of running unprofitable but ecologically oriented projects just for the sake of improving the ecological image. Even though the sales subsidiary felt that it deserved a better ecological image, there had been no corporate advertizing or other direct activities to improve it. The strength of the technocratic culture was reflected in the fact that no "second best" technical solutions were ever accepted in favour of some more environmentally apt solution. The sales subsidiary had no previous experience in dealing with ecological issues. Nonetheless the salesmen in the survey were clearly interested in responding to the demand for greener products, provided it was profitable. But they felt this would be difficult, since they perceived their customers as being more interested in low prices than in environmentally apt solutions. This was only their own assumption, however, based on the price-oriented behaviour of competitors, and it was not substantiated by any consumer research. As the sales subsidiary saw it, "The factories are pushing us to market products that they regard as environmentally favourable." While German manufacturers had been successful in green profiling on their home market, the salesmen in our study claimed, that their products - - such as an award-winning prototype refrigerator for energy-saving and replaced CFCs - - were just as good or in some respects even better. The sales subsidiary's product line consisted of about 250 items. The consultancy project attempted to identify a set of these appliances with sufficient ecological attributes to be credibly marketed as green products. This proved to be a tricky task requiring lifecycle analyses of the ecological impacts of the product from its sourcing of raw materials and its production, marketing and distribution processes to its use and disposal.
Orientational spectrum analysis In terms of the orientational spectrum model it can be said that the whole group was predominantly production-oriented, as several factors - - the importance of economies of scale in the dominant production function, the price competition and the fact that R&D was linked to the production units rather than the sales subsidiaries - - all testify. There were also signs of a relatively strong product orientation with many variations in product features. The sales subsidiary's main market orientation focused on its own selling function and on its competitors, rather than on customer demand. A major reason for this limited market orientation was the emphasis on price as the main competitive component of the marketing mix. Given the assumption that customers would choose products with lower prices rather than paying premiums for revolutionary product designs, it did not seem very relevant to go to the trouble of identifying specific needs and wants on the part of the customers. Overall, the group as a whole and the sales subsidiary itself displayed a primarily internal orientation. In terms of the levels of ambition for ecological policies defined above, this group started at the first level namely, ecological compliance. Previously, the sales subsidiary had hardly addressed any green issues at all. By the end of the study period the reorientation was approaching the second level, involving actual concern regarding the ecological image. The absence of any further ecological reorientation towards yet higher levels, was attributed to low expectations of profitable green demand. So far, the greening effort had generated some new ecological considerations in R&D, production and marketing, but these were still secondary to the dominating internal orientation. This minor ecological reorientation was not driven by any market pull. No green demand
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seems to have been observed or developed. The internal orientation probably inhibited observations or marketing efforts of such a kind. The idea that price was the major competitive factor also undermined the notion that an ecological orientation might be relevant, since it was assumed that the customers would not be willing to pay premiums for more environmentally apt products. Thus the initial ecological reorientation was primarily driven not by market pull but by legislative push. Earlier environmental legislation in Sweden had focused largely on factory discharges. Thus legal issues touching on pollution had traditionally been managed by the production function, not by marketing. Pressure to replace CFCs in refrigerators and freezers also came via the production units, which recognized the necessity to come up with new product designs without CFCs. These new products were then to be marketed by the sales subsidiary. The production orientation of the whole group gave the legislative push "entry" to the corporate decision-making.
CONCLUSIONS The tentative findings of the case study showed that the minor reorientation towards greener behaviour was production-driven as a result of new legislation, rather than market-driven. There may have been a potential green demand for refrigerators and freezers, but it had yet to be realized in demand expressed by customers or developed through competitive green marketing by the manufacturers. Furthermore, the lack of a customer orientation made it difficult for the sales subsidiary or the group as a whole to detect any potential green demand. They were primarily production-oriented and their external focus was mainly directed at their competitors, i.e. it was a limited market orientation. The ecological reorientation was driven instead by the dominating production units which were facing legislative pressure to replace CFCs. A plausible explanation of the relative effectiveness of the legislative push was the strong production orientation of the manufacturer. The products were designed to fulfill green pressures from legislative and customer authorities, rather than in response to greater ecological awareness among the consumers. If the firm had been more customer-oriented, it might have discovered a potential green demand waiting to be exploited. The Swedish paper market provides an example of a firm, and later the whole industry, which took advantage of such a potential green demand. In the early 1970s, following the 1960s debate about water and air pollution, a paper and pulp firm started a paper-recycling plant. The recycled paper was used for the manufacture of toilet paper and paper towels. Over time, as these greener products generated consumer acceptance, other manufacturers followed suit. The green trend was further pursued by the replacement of chlorine bleached paper by unbleached paper in the mid-1980s. This relatively market-driven process towards more ecologically apt solutions in the paper industry provides an interesting contrast to the legislative push noted in the studied case. The difference suggests that the existing orientation from which an ecological reorientation starts, does matter. Thus, these findings provide a basis for a contingency theory of the relative effectiveness of legislative push versus market pull in bringing about ecological reorientation. The more production-oriented the firm, the more effective environmental legislation will be in achieving ecological reorientation. Conversely, the more customer-oriented the firm, the more effective green market demand will be in achieving ecological reorientation. The basic logic of these propositions is that externally oriented firms are more receptive to market-driven responses than the internally oriented firms. A possible policy implication of this contingency theory is that governments can benefit from
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adapting their ecological policies to the orientational characteristics of specific industries. The propositions suggest that the relative effectiveness of governmental policies favouring legislative push or market pull to achieve more ecologically apt behaviour, depends on the dominating organizational orientation of the industry in question. The more production-oriented the firms in an industry, the more effective a legislative governmental policy can be in achieving ecological reorientation in that industry. But the more customer-oriented the firms in an industry, the more effective a governmental policy can be in educating customers in ecological issues to stimulate green demand with a view to achieving an ecological reorientation in that industry. Further, the case indicated that the legislative push may be largely limited to encouraging the more modest ambitions of ecological compliance and image-creation. Regulatory approaches to environmental problems may be seen by the polluting organizations as cosily threats rather than as market opportunities (t)stlund and Larsson, 1991). The organizational response to environmental legislation might therefore stop at cost-minimizing compliance and lip service, instead of competing for larger market shares with the help of greener products. This suggests the possible effectiveness of a timed hybrid solution, starting with legislative push to increase ecological awareness in production-oriented industries, combined with subsequent encouragement of market pull to entice the firms to go beyond the minor ecological reorientation found in the present case. The orientational spectrum model outlined here seems to provide a useful framework for understanding strategic reorientation in general, and ecological reorientation in particular. It reminds us that reorientation processes have starting-points as well as the "end-point" of the achievement of a new orientation. The case study illustrates the importance of this starting-point. Much more research is needed, however, to develop a comprehensive orientational framework that is capable of addressing the complex process of strategic reorientation, such as to achieve more ecologically apt organizational behaviour. Apart from difficulties in operationalization and the continuing conceptual confusion in the literature, numerous other pertinent questions remain. What are the barriers to ecological reorientation? Are hybrid solutions such as the economic "threat" of emission charges sufficient to overcome them? To what extent do environmental problems create business opportunities by way of the demand for an ecological life quality? How can firms be enabled to detect, develop and realize green market potentials? The study of successes and failures in ecological reorientation from different orientational starting points across industries and in countries with different legal and market conditions could provide valuable insights into the possible achievement of a sustainable movement towards green performance. Acknowledgements - - An earlier version of this paper was presented at the 1lth Annual International Conference of
Strategic ManagementSociety, Toronto,October 1991. The revised version was submittedto this special issue of the Scandinavian Journal of Management in December,1992. The researchhas been funded in part by The Bank of Sweden TercentenaryFoundation, the Marketing TechnologyCenter (MTC), "Stiftelsenfrr fr~imjandeav ekonomiskforskning vid Lunds universitet,"and the Wallander and Hedelius' Research Foundation. We thank ProfessorRichard Sjolander and Pia Richardson for helpful comments.
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Pergamon S0956-5221(96)00008-5
MARKET PULL OR LEGISLATIVE PUSH: A FRAMEWORK STRATEGIC ECOLOGICAL REORIENTATION
FOR
RIKARD LARSSON,* HELleNE OLSSON-TJARNEMO,* ANN-CHARLOTTE PLOGNERt" and SUSANNE OSTLUND*
*School of Economics and Management, Lund University, Sweden, ~fPelog Consulting AB, Sigtuna and ~Stockholm School of Economics, Sweden (First received December 1992; accepted March 1994) Abstract - - Our understanding of how organizations become reoriented towards more environmentally apt strategies suffers from previously fragmented conceptual approaches and insufficient attention in research to the process and content of such ecological reorientations. This paper develops an orientational framework that systematizes different conceptualizations in the organizational, strategy and marketing literature and adds an ecological orientation. The framework is applied to an exploratory case study of an attempted reorientation towards a greener strategy in a household appliance firm. The minor ecological reorientation that occurred was found to be primarily driven by legislation rather than market pull owing to the dominant production orientation of the finn. Thus it is suggested here that the relative effectiveness of legislative push or market pull in achieving ecological reorientation varies according to the initial orientation of the firms. Copyright © 1996 Elsevier Science Ltd Key words: Organizational orientation, greening of strategy, ecological reorientation, legislation versus market, contingency theory, environmental policy.
INTRODUCTION Organizations are facing increasing environmental regulation and ecologically conscious customers, as people become more aware of the negative effects of pollution from organizational activities and products. These changes ought to prompt strategic adaptation among at least the most environmentally hazardous firms. There have been some indications of this happening in practice, such as compliance with tougher environmental legislation, green advertizing, and the establishment of formal environmental functions, audits, etc. in organizations (see e.g. Kiernan, 1991; Stern, 1991). Research on reorientation towards more environmentally apt strategies, on the other hand, has largely lagged behind. We argue that, on top of the previously failure to recognize the full importance of environmental issues, the traditional strategic management frameworks are inadequate for several other reasons as well, when it comes to understanding this type of environmental reorientation. First, the systematic identification of organizational reorientation requires a coherent framework embracing different orientations, to determine whether an organization has changed from one type to another. Unfortunately, research on various types of orientations suffers from a fragmented approach, with contradictory and partial frameworks (Payne, 1988; Shapiro, 1988). Second, among these conceptualized orientations, an environmental orientation in the ecological sense is clearly the least developed and the least empirically studied. While research has focused 305
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on contrasting the traditional production orientation with more external market or customer orientations (e.g. Galbraith, 1988; Levitt, 1975), Kotler's (1991) societal marketing concept may be seen as approaching the ecological orientation by considering society's well-being. And yet practice has shown all too often that societal well-being is created at the expense of the environment. Third, the process of strategic reorientation has been left undeveloped in research terms owing to the literature's focus on content (Johnson, 1987; Pettigrew, 1987) and its fragmentation among numerous different types of strategic change, such as mergers and acquisitions, strategic alliances and restructuring. The specific study of strategic reorientation has been limited mainly to major transformation processes in general (Melin, 1985; Normann, 1971; Pettigrew, 1985) and to shifts between the different generic strategies of Porter (Gilbert and Strebel, 1988) and, Miles and Snow (Zajack and Shortell, 1989). Since none of these generic strategies have any specific ecological content, the process of shifting towards greener strategies represents a virtually uncharted area of strategic management. In all, neither the systematization of different orientations in relation to one another, nor the content and process of ecological reorientation towards greener strategies, have received sufficient attention. Our understanding of how organizations reorient themselves towards more environmentally apt strategies could therefore be significantly improved by the establishment of a systematic framework which includes an ecological orientation. Such a framework would not only be able to identify shifts towards greener strategies, but can also compare the impact of the starting-points of such ecological reorientations. For instance, can customer-oriented firms become greener more readily than production-oriented firms? These distinctions between different starting points for ecological reorientations can shed light on the important question of whether ecological reorientation is primarily pushed by legislation or pulled by green demand (Helm and Pearce, 1991). Rather than committing the error of attempting to find the "one best solution" once again, it will be assumed here that the strategic impact of legislation and market demand is contingent upon the situation. More precisely, an orientational framework can provide a basis for a contingency theory of ecological reorientation, where it is suggested that the relative effectiveness of legislative push or market pull in relation to greener strategies will differ between organizations, depending on their prior orientation. Such a framework can have substantial policy implications for governments in choosing between pushing ecological legislation and/or encouraging greener demand through customer-awareness progranunes. This paper attempts (a) to develop such an orientational framework by systematizing relevant parts of the marketing and organizational literature; (b) to apply the model to an exploratory study of the attempted strategic reorientation of a household appliance manufacturer faced with environmental legislation and the potentially greener demand of more environmentally conscious customers; (c) to compare, in light of this, the impact of market demand and of legislation on the reorientation process; and (d) to identify some research and policy implications.
A FRAMEWORK FOR ORGANIZATIONAL ORIENTATION The orientation of an organization can be seen as the "center of gravity" (Galbraith, 1988), the focus or driving perspective that comprehensively guides organizational activities. Traditionally research has contrasted internal production orientations with external market or customer orientations (Levitt, 1975). There are several possible indicators of the overall orientation of an organization, such as: (a) where in the industry supply chain the organization started and where it creates most of its strategic value - - the more downstream, the more external the orientation
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(Galbraith, 1988); (b) whether the organization is offering goods or services - - the more service intensive, the more extemal the orientation (Bowen, Siehl and Schneider, 1989); (c) the education and functional background of the top management - - the more engineers and production specialists, the more internal the orientation (Chaganti and Sambharya, 1987); and (d) the number of employees in different functions - - the more production employees relative to marketing employees, the more internal the orientation. Most literature on organizational orientation addresses no more than two or three types. Some researchers have made broader attempts to categorize multiple orientations in relation to one another, as for example Payne's (1988) listing of product, cost, capacity, erratic and marketing orientations. Galbraith (1988) developed a more systematic model of six sequential stages in the industry supply chain along which a firm's centre of gravity can be located more, or less, upstream or downstream. One of the best known orientational frameworks is Kotler's (1991) set of marketing management philosophies with the concepts of production (i.e. focusing large scale and low cost), product (i.e. high quality, performance and features), selling (i.e. aggressive promotion), marketing (i.e. more effective customer satisfaction than competitors), and societal marketing (i.e. extension of the marketing focus to include the well-being of society). It is possible to cross-fertilize Kotler's set of concepts with Galbralth's logic of functional flow, to form an organizational orientation framework containing seven modified orientations. Kotler's comprehensive marketing concept is divided into two major types, namely the market and customer orientations which unfortunately are often used interchangeably. The market orientation refers to marketing products which attempt to meet specific customer demand more effectively than those of competitors, whereas the customer orientation considers the whole customer with all her needs and wants, rather than merely focusing on the demand for a specific product or the positioning of the manufacturer's own products relative to those of competitors. The modified market orientation can be seen as including the selling concept, since advertizing and other selling activities play a central role in the positioning of products relative to those of competitors. Thus, the orientational framework will not include any specific selling type. Further, an input orientation is added to cover dependence on the supply from previous stages in the industry supply chain outlined by Galbraith, such as raw materials and primary manufacturing. In the past the input orientation has been neglected and has probably occurred mainly among wholesalers competing for suppliers with popular brands, but recent developments towards a greater use of outsourcing suggest its growing importance. Finally, the increasing prominence of environmental issues suggests the addition of a green ecological orientation (Cross, 1990; Kiernan, 1991), which points to an even broader context by taking account of the ecological environment as an overall guide for organizational activity. These seven types can constitute an orientational spectrum as shown by the model in Fig. 1. The orientations in Fig. 1 are arranged in the sequence of the internal functional flow from input to production and product, followed by the widening external context of its output from the market, via the customer (representing more than the mere demand for a specific product) and society (representing more than individual customers), to the ecological environment. The orientations also partly overlap, since each type more or less includes one or more of the others. For instance, the market orientation focuses on the marketing process but also takes the product and customer into consideration, since they partly determine the input and output of the marketing function. It is suggested that the degree of overlap between the different orientations varies inversely with the angle between them in the semicircular spectrum in the figure, as illustrated by the array of varying partial intersections. While an organization can be expected to have different degrees of all these orientations (Lorange and Roos, 1990), a dominant orientation or centre of gravity is still likely to prevail.
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~iCle°i°d?e
Orientation Fig. 1. An orientational spectrum framework.
ECOLOGICAL REORIENTATION In the past, different orientations have been emphasized at different times. O'Leary and Iredale (1976) suggest that the orientation of business firms has shifted from production, via finance and sales, to marketing. Kotler's (1991) set of concepts shows a similar gradual progression over time, with an increasingly wider external focus. The production orientation has become stronger during times of demand surplus (Lorange and Roos, 1990). Galbraith (1988) identifies downstream shifts by chemical firms as well as upstream shifts by areospace firms. A shift from one dominant organizational orientation to another can be seen as a reorientation. The presented orientational spectrum model offers a systematic way of identifying such reorientations, by defining a specific set of orientational types between which the shifts occur. The logic of the model, with different orientations overlapping in varying degrees along a functional flow and a widening external context, also enables the identification of the direction and the magnitude of the reorientation. For example, a shift from a production orientation to an ecological orientation can be classified as a major downstream reorientation, while a shift from a market orientation to a product orientation is a minor upstream reorientation. In contrast, the common use of reorientation as more or less synonymous with any major organizational transformation not only forgoes these conceptual and operational advantages, but also casts doubt on the criteria that are being used for classifying - - or not classifying - - the change as a reorientation. It is possible to note a shift towards more ecological orientations during the 1990s (Cross, 1990; Helm and Pearce, 1991; Kiernan, 1991). Here we use the term ecological rather than environmental, since the latter is often used in a system theory sense, referring to almost anything outside the focused system, whereas ecological refers more specifically to the natural environment. An ecological orientation can be seen as a broader orientation beyond society in the sense that it does not focus on the well-being of the customer or of society, but rather on the well-being of
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society's ecological environment. Whereas many organizations may claim that they are ecologically oriented, it is difficult to determine how far this is mere words and how far it refers to substantive action. A pilot study of the orientational spectrum model was conducted in 174 Swedish municipalities as part of an investigation of the relationship between municipal restructuring and reorientation (Larsson et al., 1992). Among other things, the municipal respondents ranked the different orientations according to their relative importance to the technological operations in the municipality during the past decade, at present, and as anticipated in the future. These survey rankings showed a clear pattern of rising importance for the ecological orientation, from being the least important during the 1980s to being currently ranked third and anticipated second in the future (after the customer orientation, which appears to surpass the traditionally dominating societal and production orientations). However, these findings were simple rank orderings of orientational descriptions, and they suffer from social desirability bias and a lack of separate measurements of the respective orientations. One way of tentatively operationalizing different degrees of ecological orientation is to distinguish between different levels of ambition in the organizations' ecological policies-in-use (rather than their espoused policies). On the basis of extensive consulting experience of environmental issues in industry, Ann-Charlotte Plogner, one of the co-authors of the present article, has developed a framework for analysing such ecological levels of ambition as follows: (1) Ecological compliance: whereby externally determined regulations are followed - - often slowly, minimally and under protest; (2) Ecological image-creation: whereby efforts are made not only to be ecologically sound according to the law, but also to appear so in the eyes of the public; (3) Professional ecological practice: whereby an organization's environmental standards are based on the best available knowledge rather than on what happens to be the regulation or the popular opinion in a particular country; (4) Ecological adaptation: whereby the overall environmental effects of products are evaluated with the help of life-cycle analysis, used to adapt products towards more sustainable development; (5) Ecological enhancement: goes beyond the ecological adaptation of an organization's own products and moves towards developing products that remedy or prevent environmental pollution from sources other than the home organization. Thus an ecological reorientation can be recognized not only by its increasing importance to other orientations but also by the more evaluated ambition of the ecological policy-in-use. Ecological reorientation can be driven by a variety of forces, two of the most important ones being legislative push and market pull (Buchanan and Tullock, 1975; Coles, 1991; Helm and Pearce, 1991). The character of pollution as an externality suggests that market forces will not be sufficient to deal with many ecological problems, and legislation is therefore needed. On the other hand, the legislative approach can be compromised by lobbying and other activities geared to minimal environmental compliance (Ostlund and Larsson, 1991). Organizations may be more motivated to adopt ecologically apt strategies if they face green market opportunities rather than legislative threats. An alternative approach is thus to encourage greener demand by educating customers about the ecological impact of products and organizational activities. There are of course also other approaches, such as the ideological and the economic. The latter represents a hybrid legislative-market approach whereby emission charges, for example, are used to improve ecological behaviour by introducing altered economic incentives rather than imposing mandatory conditions (Tietenberg, 1991).
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The question as to whether legislative push or market pull is most effective in bringing about ecological reorientation is pertinent to all the governments, organizations and individuals who are interested in solving environmental problems anywhere in the world. There seems to be no obvious answer to the question, given the apparent multiplicity of advantages and disadvantages associated with both approaches. One possible answer is that the question is wrongly worded since it implies that there is "one best solution" to the greening-of-strategy problem. Researchers in business administration are learning in area after area that there is no such thing as the one best solution to things irrespective of the particular situations, and that the effectiveness of different solutions is contingent upon the specific circumstances at hand. The development of a contingency theory of ecological reorientation can provide answers to a more relevant question, namely: in what situations is the legislative approach more effective than the market pull, and vice versa? The orientational spectrum model offers a framework for such a theory. Given the sequence along the orientational spectrum, it can be expected that ecological reorientation will differ depending on whether it starts from the internally oriented part of the spectrum or from a more external orientation. That is, the less an organization's orientation overlaps with the ecological orientation, the more drastic the change that is needed. Is it therefore possible that the effectiveness of the legislative push and the market pull differs, depending on the orientational starting-point of the change? This is one of the questions that will be addressed below with the help of the exploratory case study.
THE CASE STUDY The case study method was chosen to generate some in-depth data for an exploration of the process of an attempted ecological reorientation. A sales subsidiary of a major multinational household appliance manufacturer was chosen because it was currently involved in a consultancy/action research project with one of the authors. The sales subsidiary was conducting an experiment with its trademark, seeking to give it a green profile in the Scandinavian market. The data was collected by Ann-Charlotte Plogner and Susanne 0stlund in 1990/91 from: (1) 15 semistructured interviews with key persons in the sales subsidiary and the parent company regarding environmental policy and other ecological aspects of the organization, R&D, design, production and marketing; (2) interviews with household appliance retailers; (3) marketing and product information available to customers from the company, its competitors and the consumer authorities, and (4) a survey of 51 company salesmen to discover their ecological knowledge and their opinion of the market potential of green products and of possible green market signals. The multinational to which the subsidiary belonged, included the manufacturing of refrigerators, freezers, dishwashers, washing machines, dryers, stoves and microwave ovens. It had become an increasingly concentrated and global organization with subcontractors and large-scale assembly production. Products were differentiated with respect to size, quality, design and combination possibilities. A set of relatively stable brand names had been maintained through numerous acquisitions, which meant that most manufacturers in the group had several different brands in different geographical markets. The leading European household appliance fair ("Domotechnica") at Cologne in 1991 highlighted several green features including recyclable plastics and reduced reliance on energy, water and detergents, It appeared that these environmental responses were fairly uniform across the industry in line with existing or pending regulations, rather than that individual manufacturers were trying to gain competitive advantages over one another (Ostlund and Larsson, 1991).
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The Scandinavian market was viewed as fairly homogeneous as regards consumer preferences and socio-economic structure, and with respect to specific product regulations for child safety, energy and water consumption, noise, etc. Traditionally, the most important competitive factors had been function, design and price. The increasingly tough price competition was reflected in recent price developments, which showed that prices were much lower for household appliances than the overall customer price index (see Fig. 2). Energy consumption subsequently became another competitive factor, as the standards and tests of the consumer authorities began to affect product development. The salesmen in the survey considered that top ratings in these tests were necessary for the marketing of dishwashers, which were also one of the first products to become officially eco-labelled with the "Nodic Swan". Sweden had been in the forefront of the gradual replacement of ozone-depleting "chloroflourocarbons" (CFCs, popularly known as freons) in refrigerators, through government-industry negotiations. At the time of the study, there had been no evident, spontaneous consumer demand for greener household appliances as such. Advisory books from the Swedish Society for Nature Conservation, such as "Green Shopping" (Thunberg and Holm, 1989), had focused on detergents and energy savings. The general debate had shown clear signs of increased consumer awareness of the ecological aspects of products and consumption, but there had been only one market-driven green breakthrough in the Swedish market at the time, namely a drastic change in demand from bleached to unbleached paper for household use during the late 1980s.
The Greening of the Sales Subsidiary The multinational group to which the sales subsidiary belonged was geared as a whole to efficient production. This was understandable in view of the fact that Swedish production labour costs constituted about 60 per cent of the total labour costs, as compared with 10 per cent for marketing labour costs (SPK, 1991). The sales subsidiary represented one of 40 brand names within the group. It was based in the Scandinavian market and its products were mainly manufactured in Swedish plants. The market consisted of four or five other competing brands in the group and four or five external competitors. The competence and organization of the sales subsidiary were mainly oriented towards the selling function. The company had no resources for product devel-
General consumer priceindex
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1987
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Fig. 2. Annual prices increases for household appliances compared to General ConsumerPrice Index 1986-1989. (Source:SPK, 1991:125).
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opment, which instead was organized within the matrix organization of the group as a whole, where development capacity was located at headquarters and in the different plants. The main reason for attempting to profile the subsidiary's brand as green was the potential profitability, rather than any idea of achieving environmental goals as such. There was practically no notion of running unprofitable but ecologically oriented projects just for the sake of improving the ecological image. Even though the sales subsidiary felt that it deserved a better ecological image, there had been no corporate advertizing or other direct activities to improve it. The strength of the technocratic culture was reflected in the fact that no "second best" technical solutions were ever accepted in favour of some more environmentally apt solution. The sales subsidiary had no previous experience in dealing with ecological issues. Nonetheless the salesmen in the survey were clearly interested in responding to the demand for greener products, provided it was profitable. But they felt this would be difficult, since they perceived their customers as being more interested in low prices than in environmentally apt solutions. This was only their own assumption, however, based on the price-oriented behaviour of competitors, and it was not substantiated by any consumer research. As the sales subsidiary saw it, "The factories are pushing us to market products that they regard as environmentally favourable." While German manufacturers had been successful in green profiling on their home market, the salesmen in our study claimed, that their products - - such as an award-winning prototype refrigerator for energy-saving and replaced CFCs - - were just as good or in some respects even better. The sales subsidiary's product line consisted of about 250 items. The consultancy project attempted to identify a set of these appliances with sufficient ecological attributes to be credibly marketed as green products. This proved to be a tricky task requiring lifecycle analyses of the ecological impacts of the product from its sourcing of raw materials and its production, marketing and distribution processes to its use and disposal.
Orientational spectrum analysis In terms of the orientational spectrum model it can be said that the whole group was predominantly production-oriented, as several factors - - the importance of economies of scale in the dominant production function, the price competition and the fact that R&D was linked to the production units rather than the sales subsidiaries - - all testify. There were also signs of a relatively strong product orientation with many variations in product features. The sales subsidiary's main market orientation focused on its own selling function and on its competitors, rather than on customer demand. A major reason for this limited market orientation was the emphasis on price as the main competitive component of the marketing mix. Given the assumption that customers would choose products with lower prices rather than paying premiums for revolutionary product designs, it did not seem very relevant to go to the trouble of identifying specific needs and wants on the part of the customers. Overall, the group as a whole and the sales subsidiary itself displayed a primarily internal orientation. In terms of the levels of ambition for ecological policies defined above, this group started at the first level namely, ecological compliance. Previously, the sales subsidiary had hardly addressed any green issues at all. By the end of the study period the reorientation was approaching the second level, involving actual concern regarding the ecological image. The absence of any further ecological reorientation towards yet higher levels, was attributed to low expectations of profitable green demand. So far, the greening effort had generated some new ecological considerations in R&D, production and marketing, but these were still secondary to the dominating internal orientation. This minor ecological reorientation was not driven by any market pull. No green demand
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seems to have been observed or developed. The internal orientation probably inhibited observations or marketing efforts of such a kind. The idea that price was the major competitive factor also undermined the notion that an ecological orientation might be relevant, since it was assumed that the customers would not be willing to pay premiums for more environmentally apt products. Thus the initial ecological reorientation was primarily driven not by market pull but by legislative push. Earlier environmental legislation in Sweden had focused largely on factory discharges. Thus legal issues touching on pollution had traditionally been managed by the production function, not by marketing. Pressure to replace CFCs in refrigerators and freezers also came via the production units, which recognized the necessity to come up with new product designs without CFCs. These new products were then to be marketed by the sales subsidiary. The production orientation of the whole group gave the legislative push "entry" to the corporate decision-making.
CONCLUSIONS The tentative findings of the case study showed that the minor reorientation towards greener behaviour was production-driven as a result of new legislation, rather than market-driven. There may have been a potential green demand for refrigerators and freezers, but it had yet to be realized in demand expressed by customers or developed through competitive green marketing by the manufacturers. Furthermore, the lack of a customer orientation made it difficult for the sales subsidiary or the group as a whole to detect any potential green demand. They were primarily production-oriented and their external focus was mainly directed at their competitors, i.e. it was a limited market orientation. The ecological reorientation was driven instead by the dominating production units which were facing legislative pressure to replace CFCs. A plausible explanation of the relative effectiveness of the legislative push was the strong production orientation of the manufacturer. The products were designed to fulfill green pressures from legislative and customer authorities, rather than in response to greater ecological awareness among the consumers. If the firm had been more customer-oriented, it might have discovered a potential green demand waiting to be exploited. The Swedish paper market provides an example of a firm, and later the whole industry, which took advantage of such a potential green demand. In the early 1970s, following the 1960s debate about water and air pollution, a paper and pulp firm started a paper-recycling plant. The recycled paper was used for the manufacture of toilet paper and paper towels. Over time, as these greener products generated consumer acceptance, other manufacturers followed suit. The green trend was further pursued by the replacement of chlorine bleached paper by unbleached paper in the mid-1980s. This relatively market-driven process towards more ecologically apt solutions in the paper industry provides an interesting contrast to the legislative push noted in the studied case. The difference suggests that the existing orientation from which an ecological reorientation starts, does matter. Thus, these findings provide a basis for a contingency theory of the relative effectiveness of legislative push versus market pull in bringing about ecological reorientation. The more production-oriented the firm, the more effective environmental legislation will be in achieving ecological reorientation. Conversely, the more customer-oriented the firm, the more effective green market demand will be in achieving ecological reorientation. The basic logic of these propositions is that externally oriented firms are more receptive to market-driven responses than the internally oriented firms. A possible policy implication of this contingency theory is that governments can benefit from
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adapting their ecological policies to the orientational characteristics of specific industries. The propositions suggest that the relative effectiveness of governmental policies favouring legislative push or market pull to achieve more ecologically apt behaviour, depends on the dominating organizational orientation of the industry in question. The more production-oriented the firms in an industry, the more effective a legislative governmental policy can be in achieving ecological reorientation in that industry. But the more customer-oriented the firms in an industry, the more effective a governmental policy can be in educating customers in ecological issues to stimulate green demand with a view to achieving an ecological reorientation in that industry. Further, the case indicated that the legislative push may be largely limited to encouraging the more modest ambitions of ecological compliance and image-creation. Regulatory approaches to environmental problems may be seen by the polluting organizations as cosily threats rather than as market opportunities (t)stlund and Larsson, 1991). The organizational response to environmental legislation might therefore stop at cost-minimizing compliance and lip service, instead of competing for larger market shares with the help of greener products. This suggests the possible effectiveness of a timed hybrid solution, starting with legislative push to increase ecological awareness in production-oriented industries, combined with subsequent encouragement of market pull to entice the firms to go beyond the minor ecological reorientation found in the present case. The orientational spectrum model outlined here seems to provide a useful framework for understanding strategic reorientation in general, and ecological reorientation in particular. It reminds us that reorientation processes have starting-points as well as the "end-point" of the achievement of a new orientation. The case study illustrates the importance of this starting-point. Much more research is needed, however, to develop a comprehensive orientational framework that is capable of addressing the complex process of strategic reorientation, such as to achieve more ecologically apt organizational behaviour. Apart from difficulties in operationalization and the continuing conceptual confusion in the literature, numerous other pertinent questions remain. What are the barriers to ecological reorientation? Are hybrid solutions such as the economic "threat" of emission charges sufficient to overcome them? To what extent do environmental problems create business opportunities by way of the demand for an ecological life quality? How can firms be enabled to detect, develop and realize green market potentials? The study of successes and failures in ecological reorientation from different orientational starting points across industries and in countries with different legal and market conditions could provide valuable insights into the possible achievement of a sustainable movement towards green performance. Acknowledgements - - An earlier version of this paper was presented at the 1lth Annual International Conference of
Strategic ManagementSociety, Toronto,October 1991. The revised version was submittedto this special issue of the Scandinavian Journal of Management in December,1992. The researchhas been funded in part by The Bank of Sweden TercentenaryFoundation, the Marketing TechnologyCenter (MTC), "Stiftelsenfrr fr~imjandeav ekonomiskforskning vid Lunds universitet,"and the Wallander and Hedelius' Research Foundation. We thank ProfessorRichard Sjolander and Pia Richardson for helpful comments.
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