Company Strategy Economics Economic and Management Classics Series

Author: David Besanko, David DeRenoof, Mark Shanley
Translator: Wu Yajun et al. (United States/USA)
Publisher:
Publish Date: 1999-09-01
Features: In the preface to his classic work Competitive Strategy, Michael Porter argued that the field of strategic management lacked an analytical foundation and rarely provided general or principled insights. He also believed that economists, particularly those studying industries and competition, could contribute to developing such insights, but in practice, they were largely insensitive to the needs of practicing managers. Porter's work provides an excellent example of how economic analysis can reveal and develop useful insights for practicing managers, especially in dealing with a firm's strategic approach to its external environment. Since the publication of Porter's work, research in economics and strategic management has made significant progress in understanding the relationship between a firm's external market environment and its internal organization. The purpose of this book is to organize and present these advances in a way that is easily understandable for MBA students, upper-level undergraduates, executive education participants, and practicing managers. This book adopts a comprehensive economic perspective, based on our fundamental belief that insights derived from economics can provide an internally consistent foundation for the formation and evaluation of internal and external strategies. However, readers of this book do not need to take a microeconomics course to understand its content or benefit from it. The basic economic knowledge required by readers is introduced in the economic foundations section of this book, and we attempt to illustrate some key propositions and ideas with examples from real companies and industries.
This book represents the result of several years of collaboration among its co-authors, a collaboration that began when we joined the Management and Strategy Department at the Kellogg Graduate School of Management at Northwestern University four years ago. The department offers a course titled "Organizational Management" in the fall semester of the first year. Prior to this, the course was taught as a traditional case-based business policy course, focusing on the integration of various functional areas of business (marketing, finance, production, etc.) and the development of a "general management approach." Although it was once very popular and skillfully taught, by 1991, the course had become quite challenging to teach, and it became almost impossible for discipline-trained faculty to teach it. The three of us were assigned the task of redesigning the course. The challenge we faced was immense. The university's policy (and it still is) is that students cannot waive this course. While many Kellogg students have undergraduate training in business and economics, many do not. Additionally, in the Kellogg curriculum, students take this course before enrolling in microeconomics, finance, and marketing courses. Later, once the winter semester begins, Kellogg first-year students who will be interning at consulting firms must undergo case interviews for consulting firms, so they need to learn some material that will help them improve their speed and performance during the interviews in the fall semester.
When we looked at the Kellogg curriculum, the natural idea was that the course we were redesigning should provide a solid foundation in strategic analysis tools and concepts for students. Given our background in applied economics and strategic management research and teaching, we believe that for a course to be teachable, it needs an internally consistent knowledge core that should come from industrial economics, transaction cost economics, organizational economics, and modern strategic literature. We also felt that the course should have a strong managerial, empirical, and historical perspective. Unfortunately, after searching extensively, we still could not find a satisfactory textbook that fit our teaching approach for the course. Most available standard strategic management textbooks lack a disciplinary foundation, and only a few include new knowledge from economics and strategic research in the 1980s and 1990s (such as the fact that very few textbooks discuss transaction cost economics or the resource-based view of the firm). Moreover, most of these books are aimed at general readers rather than business school students like those at Kellogg. Discussions with colleagues across the country led us to conclude that we are not the only ones struggling to find a suitable textbook for teaching business strategy. Indeed, many business schools face difficulties when selecting textbooks for their core strategic courses. Our conclusion is that this is a market gap, so we wrote this book to fill it.