cdc-coteauxdegaronne
» » Strategy, Structure, and Economic Performance
eBook Strategy, Structure, and Economic Performance ePub

eBook Strategy, Structure, and Economic Performance ePub

by Richard P. Rumelt

  • ISBN: 0875841090
  • Subcategory: No category
  • Author: Richard P. Rumelt
  • Language: English
  • Publisher: Harvard University Press (October 1974)
  • Pages: 249
  • ePub book: 1390 kb
  • Fb2 book: 1249 kb
  • Other: mbr mobi docx mbr
  • Rating: 4.7
  • Votes: 808

Description

Strategy, Structure, and Economic Performance. This book, which is Rumelt's 1973 Harvard dissertation in book form, is truly stunning.

Strategy, Structure, and Economic Performance. by. Richard P. Rumelt (Author). Find all the books, read about the author, and more. Are you an author? Learn about Author Central. It was the first to analyze what kinds of diversification worked and what kinds did not; diversification could come from acquisition or from internal organic efforts.

This book, which is Rumelt's 1973 Harvard dissertation in book form, is truly stunning. Unrelated-Passive companies had the worst performance

This book, which is Rumelt's 1973 Harvard dissertation in book form, is truly stunning. Unrelated-Passive companies had the worst performance. The Acquisitive Conglomerates were high-growth, but average in profitability; most of these probably went by the wayside during the takeover heyday of the 1980s.

Start by marking Strategy, Structure, And Economic Performance as Want to Read .

Start by marking Strategy, Structure, And Economic Performance as Want to Read: Want to Read savin. ant to Read. Rumelt received his doctorate from the Harvard Business School in 1972.

His 2011 book (Good Strategy/Bad Strategy) . Rumelt, Richard P. (1974). Strategy, structure, and economic performance.

His 2011 book (Good Strategy/Bad Strategy) redefined strategy as a form of problem solving. It was chosen one of six finalists for the Financial Times & Goldman Sachs Business Book of the Year award for 2011. Personal life Lippman, S. and Rumelt R. 1982. Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency Under Competition, The Bell Journal of Economics.

Dear Internet Archive Supporters, Thank you for helping us reach our fundraising goal. You keep us going and growing – with your support we will do even more in 2020. Happy New Year! –The Internet Archive Team. We’ve reached our goal! Dear Internet Archive Supporters, Thank you for helping us reach our fundraising goal. Towards a strategic theory of the firm. Resources, firms, and strategies: A reader in the resource-based perspectiv. 1997. How much does industry matter? RP Rumelt. Strategic management journal 12 (3), 167-185, 1991.

Together, let's build an Open Library for the World. December 14, 2009 History. Are you sure you want to remove Strategy, structure, and economic performance from your list? Strategy, structure, and economic performance. by Richard P. Rumelt.

Strategy, Structure and Economic Performance. Select Format: Hardcover. ISBN13:9780875841267.

Bibliographic information. Strategy, Structure, and Economic Performance Harvard Business School Publications.

Common terms and phrases. Bibliographic information.

Comments

Landarn Landarn
If you don't read and understand Dr Rumelt's work and apply it, you are an idiot. Hands down, Dr Rumelt has been a favorite of mine for a very long time. This guy knows what he is talking about.
Winail Winail
This book, which is Rumelt's 1973 Harvard dissertation in book form, is truly stunning. It was the first to analyze what kinds of diversification worked and what kinds did not; diversification could come from acquisition or from internal organic efforts. The fact that its findings have held up under repeated review and updating for over four decades makes it a truly seminal work. This work represents a type of study that the strategy field needs far more of: longitudinal. Most strategy research if cross-sectional--at a given point in time. Rumelt's and also the Miles & Cameron book, 'Coffin Nails and Corporate Strategies' (1982)--which detailed the diversification attempts of the cigarette-manufacturing industry in the wake of the Surgeon General's report in 1964--stand out as the kinds of longer-perspective research effort that we have far too little of. It's easier to download SEC cross-sectional data and test hypotheses. No fuss, no muss, no bother. But the lessons that connect theory and practice in strategic management come from longitudinal studies.

Rumelt's database comprised 249 companies and covered the period 1949-1969. He began by modifying a system developed by Leonard Wrigley in his Harvard dissertation a few years before. Wrigley's 'specialization ratio' (SR), which was the ratio of its annual revenues from a discrete product-market activity divided by its total annual revenues, defined a single-product business as having an SR above 0.95; a dominant-product business had an SR > 0.70 and <= 0.95; a related-product firm had an SR <= 0.70 from adding new activities somewhat connected to the skills, knowledge, and strengths that a firm had originally; and the unrelated-product company (a.k.a. 'conglomerate') that diversified, invariably through acquisition, that had no connection to its roots. When Rumelt later looked at the companies that Wrigley had classified as "unrelated," he reclassified some of them into the 'related' category; he also reclassified some that Wrigley had put in that classification as "unrelated."

As a result of these changes, Rumelt devised the 'related ratio' (SR), which he defined as "the proportion of a firm's revenues attributable to its largest group of related businesses." Rumelt also set an RR of 0.7 as the dividing line between Related and Unrelated businesses. His rationale was this: "[S]ettung the critical RR equal to the critical SR insures that a company cannot qualify for the Dominant category on the basis of its SR and, at the same time, qualify for the Unrelated category on the basis of its RR" (p. 16).

After looking at vertically integrated companies (pp. 19-23), he devised the 'Vertical Ratio' (VR). He defined the VR as "the proportion of the firm's revenues that arise from all by-products, intermediate products, and end products of a vertically integrated sequence of processing activities" (p. 23). He also set the line of demarcation between vertically integrated and not vertically integrated as, you guessed it, 0.7.

Here's how the SR, the RR, and the VR play out (pp. 29-32):

1. single-business firm: either a non-vertically integrated (VR < 0.7) company with an SR >= 0.95, or a vertically integrated (VR >= 0.7 with an end-product business that generates at least 95% of its annual revenues.

2. Rumelt came up with four classifications of 'Dominant' businesses:

a. Dominant-Vertical: a business w/VR >= 0.7 with no single end product accounting for at least 95% of annual revenues;

b. Dominant-Constrained: non-vertically integrated (VR < 0.7) companies that have diversified by building on one (1) strength/skill/resource associated w/the dominant activity.

c. Dominant-Related: non-vertically integrated (VR < 0.7) companies that have diversified by building on > one (1) strength/skill/resource associated w/various non-dominant businesses.

d. Dominant-Unrelated: non-vertically integrated (VR < 0.7) companies that have diversified by getting into businesses that are unrelated to the dominant activity.

3. He devised two kinds of 'Related' businesses with VR < 0.7, SR < 0.7, and RR >= 0.7:

a. Related-Constrained: related businesses that have diversified into new businesses connected to one existing skill or resource and, as a result, every business activity is related to every other business activity.

b. Related-Linked: related businesses that have diversified into new businesses connected to an existing skill or resource, but not always the same skill or resource. Such firms are active in "widely disparate businesses" (p. 32).

4. Unrelated businesses are those with an RR < 0.7:

a. Acquisitive Conglomerates: unrelated businesses with aggressive acquisition programs without regard to existing relationships between the new business and the old ones. Such firms also had to have, over the past five years, (1) annual EPS growth of at least 10%; (2) at least five acquisitions, at least three of which were in businesses unrelated to past activities; and (3) issued new equity whose total value at the time of issue was equal to or greater than the total amount of common-share dividends paid during the same period.

b. Unrelated-Passive: those companies that didn't qualify as Acquisitive Conglomerates.

Cutting to the chase--and there is a LOT of interesting reading that I'm bypassing here in the interest of brevity--the dominant-constrained (DC) and related-constrained (RC) firms performed the best. Unrelated-Passive companies had the worst performance. The Acquisitive Conglomerates were high-growth, but average in profitability; most of these probably went by the wayside during the takeover heyday of the 1980s. My favorite example of an Acquisitive Conglomerate that was really a house of economic cards: the old Beatrice company. Beatrice comprised the following companies:

1. Beatrice Foods - Tropicana O.J., LaChoy Chinese foods, etc.

2. Daytimers - Yep, those writing-intensive manual activity systems.

3. Samsonite Luggage

4. Culligan Water Treatment

5. Play-tex undergarments

6. Stiffel lamps

7. Morgan yachts

8. World Dryer hand-dryers

9. Chapelcord religious apparel

10. Airstream luxury RVs

11. Avis

12. Bubblestream plumbing equipment

If anyone can see how those thirteen business fit together with anything other than s-I-n-e-r-g-y, you have a far better imaginatino than I do. . .and than the takeover artists of the 1980s had. Beatrice was taken over, broken up, and the component parts sold off. That was one of the blessings of the rise of 'efficient markets' during the Reagan and first Bush administrations. A company like that couldn't get to first-base today. . .unless it was named. . .wait for it. . .Berkshire Hathaway. The company of which Warren Buffett is the CEO has the following under one roof:

1. Fruit-of-the-Loom and Justin Brands (several branded boot companies, including Justin, Nocona, and Tony Lama)

2. Mid-American Energy (utility companies)

3. Burlington Northern Railroad

4. NetJets (fractional ownership of corporate jets)

5. GEICO and General Re (insurance)

6. Johns-Manville, Benjamin Moore, Acme Building Brands (building products)

7. Clayton Homes (manufactured housing)

8. Flight Safety Int'l (professional aviation training services)

9. Nebraska Furniture Mart (retail furniture store)

10. Cort Business Services (rental furniture)

11. See's Candies and Dairy Queen (retail eateries)

12. Pampered Chef (retailer of kitchen tools)

13. Richmond Times-Dispatch, Omaha World-Herald, Tulsa World, Roanoke Times, Buffalo Evening News, and others (newspapers)

14. Marmon Holdings (railroad tank cars, wiring/water-treatment parts, shopping carts, etc.)

15. Wrigley Company (chewing gum; transaction also gave B-H a stake in Mars, the candy-bar company)

16. B-H also owns significant chunks of equity in the following companies: American Express Co. (13.7%), The Coca-Cola Company (8.9%), ConocoPhillips (2.0%), DIRECTV (3.8%), Goldman Sachs (2.8%), IBM (6.0%), Moody's Corporation, owner of Moody's Analytics (12.5%), Munich Re (11.3%), Phillips 66 (3.3%), POSCO (5.1%), The Procter & Gamble Company (1.9%), Sanofi (2.0%), Tesco plc (5.2%), U.S. Bancorp (4.2%), Wal-Mart (1.6%), Graham Holdings Company (27.86%), Wells Fargo (8.7%).

Unlike the executives @ Beatrice, Buffett and his alter-ego, Charlie Munger, have printed money. B-H went public in 1965 at $18/share. It closed today at $169,511.91/share. (You read that right.) An $18 investment in a share of B-H in 1965 would have grown at over 20.5%/yr. for 49 years. Albert Einstein reportedly called compound interest "the eighth wonder of the world." One wonders how Berkshire Hathaway would have stacked up in Rumelt's research.

Work by other scholars, plus a 1982 paper from Rumelt himself, has separated 'industry effects' from 'company effects' to try to fine-tune what managers can control and what they can't. One such paper is here: [...] The list of references at the end of that paper cites others, including Rumelt's later paper. For those interested in pursuing this subject further, I recommend that one and the papers by Barney (1991), McGahan & Porter (1997), Rumelt (1991), and Short, et al. (2007). Each contributes knowledge worth having and nuance worth contemplating. The Wernerfelt (1984) paper, while not about diversification, per se, is one of the seminal contributions to the strategy literature. Building on Edith Penrose's ground-breaking (1959) book, 'The Theory of the Growth of the Firm,' Wernerfelt set down the predicate for what today is the dominant perspective on strategic management: the resource-based view (RBV) of the firm. We use it every day in our work with middle-market privately-held clients.