JSTOR’s Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www. jstor. org/action/showPublisher? publisherCode=jwiley. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission.
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor. org. John Wiley ; Sons is collaborating with JSTOR to digitize, preserve and extend access to Strategic Management Journal. http://www. jstor. org Strategic Management Journal, Vol. 9, 375-385 (1988) AND COMPETITIVE MATCHING COLLECTIVE RUDIK. F.
BRESSER Baruch College, The City University of New York,New York,New York,U. S. A. This paper discusses possibilities for combining collective and competitive strategies. Combinations can be problematic if competitive intentions are disclosed through the information links resultingfrom collective strategies. After describing how different collective strategies may lead to an uncontrolled disclosure of strategic information, a typology evaluating the feasibility of strategy combinations is developed. The typology’s implications for research and managerial practice are discussed.
A recent development in the business policy literature is a concern with strategic planning at a collective level. Collective strategies are attempts by sets of organizations to manage their mutural interdependence and the system dynamics of their interorganizational environments (Astley and Fombrun, 1983a; Bresser and Harl, 1986; Thorelli, 1986). In managing interdependent and dynamic environments, collective strategies can be reactive by absorbing movement within an environment, or they can be proactive by forestalling the unpredictable behavior of other organizations.
Firms can use collective strategies in combination with competitive strategies. This paper discusses the extent to which such combinations are feasible. MANAGING INTERDEPENDENCE Organizational interdependence exists whenever one organization does not entirely control all the conditions necessary for achieving a desired action or outcome (Pfeffer and Salancik, 1978). In addition to environmental movement, interdependence can cause problems of decision-making uncertainty for focal organizations. This occurs because the success of activities chosen by any interdependent organization depends on the activities selected by other organizations.
Consequently, an interdependent organization may need to consider other organizations’ actions, and it faces decision-making uncertainty if it is aware of its interdependence and has difficulties in controlling the activities of other organizations. Decision-making uncertainty is most likely to be perceived among horizontally interdependent organizations operating in oligopolistic markets. Under these conditions all organizations are aware of their mutual interdependence and have considerable difficulties in controlling each other’s behaviors as they compete with one another for market share (Fombrun and Astley, 1982; Pennings, 1981).
Business firms can use both competitive and collective strategies to manage their interdependencies. The literature distinguishes three major dimensions of competitive strategies: price, promotional, and product competition strategies (Khandwalla, 1981). Competitive strategies manage interdependence successfully if they result in advantageous competitive positions, thus forestalling interdependence and reducing decisionmaking uncertainty (Pennings, 1981). For Received 20 October 1986 Revised 21 July 1987 ? 0143-2095/88/040375-11$05. 50 1988 by John Wiley & Sons, Ltd. 376 R. K. F. Bresser Table 1.
Coordination mechanisms for collective strategies Coordination mechanism Regulative legislation Contracting Mergers Joint ventures Interlocking directorates Trade associations Collusion and industry leadership Degree of formalization High High High High Moderate Moderate Low instance, product differentiation can create a protected domain for a focal organization with boundaries hard to penetrate by other competitors. However, in complex business environments interdependencies often are obscured from focal organizations so that individually coping with the dynamics of these environments becomes problematic (Emery and Trist, 1965).
In these situations, collective strategies can supplement competitive strategies as a means of coping with the variation of interdependent environments (Astley and Fombrun, 1983a). CONCEPTIONS STRATEGY OF COLLECTIVE CONFLICTS BETWEEN COMPETITIVE AND COLLECTIVE STRATEGIES Bresser and Harl (1986) described the dynamic relationship between competitive and collective strategies as being composed of two strategic perspectives that are dialectically related to one another.
For instance, when competitive strategies prevail within a market the resulting turbulence and decision-making uncertainty eventually will encourage organizations to use more collective forms of strategizing. However, when collective strategies prevail and create dysfunctions (such as reductions in strategic flexibility, amplified impacts of external disturbances, and attraction of innovative outsiders) which also cause environmental movement and decision-making uncertainty, competitive strategies may again be considered the more attractive methods for coping with interdependence.
The dialectical relationship between competitive and collective strategies implies that organizations should remain alert to potential dysfunctions developing from their operating strategies, and that they should maintain a capacity to alternate between more collective and more competitive forms of strategizing (Bresser and Harl, 1986). However, some conflicts between competitive and collective strategies can be anticipated and should be considered before a particular strategy mix is adopted.
This paper evaluates combinations between competitive and collective strategies in light of a potential conflict arising from the need to both share and conceal strategic information. Whenever organizations attempt to use both types of strategies simultaneously, i. e. competitive The term ‘collective strategy’ has been defined in two different ways (Astley and Fombrun, 1983a; Bresser and Harl, 1986). On the one hand a collective strategy is defined as a larger interorganizational network which emerges unintendedly.
As individual organizational actions aggregate into interorganizational networks an unintended collective strategy emerges that none of the participating organizations could have foreseen. Developments in the telecommunications industry exemplify the emergence of an unintended collective strategy (Astley and Fombrun, 1983b). On the other hand a collective strategy can also be voluntary and intended. Such a collective strategy results from the purposive collaboration of organizations attempting to manage their mutual interdependence.
This paper focuses on voluntary collective strategies, developed by oligopolists to manage their horizontal interdependence. Voluntary collective strategies can be based on different coordination mechanisms. Table 1 presents these mechanisms using degree of formalization as the distinguishing criterion (Bresser and Harl, 1986; Fombrun and Astley, 1983). Regulative legislation (resulting from collective lobbying) and contracting represent coordination forms with high levels of formality.
Collective strategies based on interlocking directorates or trade associations are characterized by moderate levels of formality, and collusion as well as industry leadership can be classified as informal coordination mechanisms. Matching Collective and Competitive Strategies strategies in one business area and collective strategies in others, a potential for contradictory activities or conflicts arises, because the major advantage of a collective strategy is a major disadvantage from a competitive point of view.
With regard to managing interdependence the major advantage of a collective strategy is that it establishes linkages and communication channels through which information about other interdependent organizations can be obtained. Through this information the behavior of other organizations becomes predictable. This makes an environment more stable and less threatening for a focal organization, and thus reduces decision-making uncertainty (Fombrun and Astley, 1983; Pennings, 1981).
Precisely this advantage of a collective strategy (stability through predictability) is a disadvantage if organizations wish to use competitive strategies to further their growth goals. Successful competitive strategies require that organizations maintain the secrecy of their strategic plans to forestall imitation (Starbuck and Nystrom, 1981). However, this need for secrecy is jeopardized if interorganizational linkages and communication channels resulting from a collective strategy allow organizations to predict and anticipate one another’s moves in areas where they wish to compete.
Thus, organizations face a risk of uncontrolled information disclosure when using collective and competitive strategies side by side. Risk of uncontrolled information disclosure is defined as the likelihood that a disclosure of strategically sensitive information will occur, where the process of disclosue is uncontrolled from a focal organization’s point of view and damaging to its competitive plans. The potential damage resulting from an uncontrolled disclosure of information is particularly salient in oligopolies (the dominant US market structure) because in such markets ompetitors typically are in a position to use sensitive information to exert control over each other’s fates (Pennings, 1981; Scherer, 1980). Evaluating the risk of uncontrolled information disclosure emanating from collective strategies is important for two reasons. On the one hand, such information disclosure tends to render competitive strategic intentions ineffective. On the other hand uncontrolled information disclosure tends to aggravate problems of strategic inflexibility.
Bresser (1984) and Bresser and 377 Harl (1986) argued that organizations adopting collective strategies limit their strategic flexibility because, by agreeing to abstain from certain types of competitive behaviors such as price competition, they curtail their repertoire of available strategic tools. When considering the problem of uncontrolled information disclosure, losses in strategic flexibility resulting from a collective strategy may be even more encompassing.
If the managements of organizations realize that the communication links provided by a collective strategy allow for an uncontrolled disclosure of strategic plans, they may be reluctant to pursue competitive strategies even in those business areas that are not subject to a collective agreement. PROCESSES IMPAIRING SECRECY Since potential combinations between competitive and collective strategies face the risk of uncontrolled information disclosure resulting from collective strategy links, they raise the issue of strategic fit (Venkatraman and Camillus, 1984).
In order to minimize problems of uncontrolled information disclosure it is necessary to obtain some degree of compatability among possible strategy combinations. Attaining a fit between competitive and collective strategies requires first of all an appreciation of the processes that may impair an organization’s desire to maintain the secrecy of its strategic plans. Table 2 summarizes for each type of collective strategy the particular processes that may lead to an impairment of secrecy, and it assesses the risk of uncontrolled disclosure of information.
If collective lobbying leads to protective regulation the activities of regulators may impede competition (Pennings, 1981). Regulators often collect and disseminate a wealth of information about regulated industries. Through these information flows, regulators can allow competitors to forecast each other’s moves even in areas that are not subject to regulatory control.
For example, Litwak and Rothman (1970) suggested that the Federal Communications Commission had provided the broadcasting networks with so much information about the broadcasting industry that the networks were able to anticipate their competitors’ behavior and, as a result, effective competition was not possible. The autonomy of 378 R. K. F. Bresser Table 2. Processes impairing secrecy and risk of uncontrolled disclosure by type of collective strategy Type of collective strategy Impairment of secrecy Risk of uncontrolled information disclosure
Regulative legislation Contracting Mergers Joint ventures Interlocking directorates Trade associations Collusion and industry leadership Regulators collecting and disseminating information Contracts contingent on information Dissatisfied employees (defectors) Mediation of information Passing on of information due to multiple and indirect communication links Distribution of trade statistics Informal communication High Low Low Intermediate High Intermediate Low regulatory agencies in their information-gathering activities results in high risk of uncontrolled disclosure.
Contracting refers to the negotiation of formal agreements among organizations (Thompson, 1967). In general, the information exchanged as a result of contractual negotiations will be focused, avoiding the disclosure of sensitive competitive aspects. However, some contracts such as bank loans may require that focal organizations provide extensive information about their competitive plans. This raises the possibility that information leaks within the information-seeking institution will be exploited by a focal organization’s competitors. Since he disclosure of sensitive information in the context of contractual negotiations is not very common, the risk of uncontrolled disclosure can be considered low. Mergers and joint ventures are two special forms of contracting. Mergers, with the exception of hostile takeovers, are contracts through which two or more organizations comneunder common control. Joint ventures can be viewed as partial mergers which preserve the autonomy of the organizations involved. Often mergers are accompanied by a host of administrative problems (Lubatkin, 1983).
For example, departments and operations must be consolidated and initial inequities in compensation have to be resolved. If such administrative problems remain unresolved, inefficiencies will result, as well as employee dissatisfaction and turnover. The merger between Kennecott Corp. and Carborundum Co. is a case in point (Business Week, 1983). The two companies’ managements quarreled over administrative problems and, after a short period of infighting, most Carborundum executives jumped ship.
There is danger that defecting executives may disclose strategically sensitive information concerning the merging firms when they join other organizations within the same industry. However, the risk of uncontrolled disclosure resulting from a merger is considered low. This is because senior executives leaving merging firms often receive generous severance compensation for which they promise continued confidentiality. Additionally, since merging firms often develop new strategic concepts, the information available to departing executives is likely to be quickly obsolete.
If a collective strategy is based on a joint venture the risk of uncontrolled disclosure is considered to be at intermediate levels. Although the cooperation provided by a joint venture is restricted to specific, mutual business problems, the regularity and longevity of interactions typical of a joint venture may allow participating firms to improve their intelligence about each other’s competitive strategies. For example, firm representatives engaged in joint ventures can develop friendship ties where they feel free to discuss more general strategic issues.
During such discussions sensitive information may be disclosed inadvertently. Interlocking directorates result from organizational co-optation activities whereby organizations appoint external representatives to their Matching Collective and Comnpetitive Strategies boards of directors. Since many directors sit on the boards of two or more companies (Bunting and Barbour, 1971), interlocking directorates emerge which can be used as instruments for managing interdependence and uncertainty by encouiraging cooperation and the formation of collective strategies (Aldrich, 1979; Pennings, 1980, 1981).
However, the risk of uncontrolled disclosure is high because the scope and the intensity of intra-industry communication facilitated by direct and indirect interlocks is beyond the control of individual organizations. Therefore, it is very difficult for individual organizations to conceal their competitive strategies when their directors have membership in a network of interlocking directorates. Trade associations provide member organizations with special services at low costs.
For instance, they may distribute trade statistics, provide credit references on customers, offer legal and technical advice, or help collect bills (Olson, 1965). In addition, associations can aid in removing decision-making uncertainty resulting from interdependence. Since trade statistics generally include prices quoted in recent sales transactions as well as cost developments, member organizations have the opportunity to coordinate their market behavior and thus implement a collective strategy (Scherer, 1980).
The dissemination of statistical information provided by trade associations may impair the desire of focal organizations to maintain secrecy their competitive strategies. While firms regiarding are often in favor of price and cost reporting activities, they run the risk that other sensitive information concerning their competitive strategies may also be disclosed. Trade associations sometimes analyze industry trends regarding product development or marketing strategies, and thus allow competitors to anticipate each others’ moves.
A focal organization may have little control over the kind of information being disseminated because trade associations are often dominated by a few powerful organizations. Olson (1965) described the National Association of Manufacturers as largely financed and controlled by a few big corporations, although the association had several thousand members. There is the possibility that such domination leads to activities favoring a handful of member organizations rather than the majority. In addition, the selective services provided by 379 ssociations function as subtle forms of coercion restricting a firm’s flexibility. The exclusivity and low costs of legal, financial or other services operate as strong incentives for joining or remaining within an association even if a focal organization disagrees with some association activities. Thus, when using trade association activities to enforce a collective strategy, a moderate risk of uncontrolled information disclosure is likely. The term collusion denotes express agreements, open or secret, that have the purpose of restricting competition.
Most collusive agreements are outlawed in the United States because they encourage monopolistic pricing behavior. Nevertheless, collusive practices are widespread and often effective means of managing interdependence. Their attraction is associated with their high degree of informality which makes it difficult for outsiders to detect conspiratorial agreements (Khandwalla, 1981). Industry leadership is a tacit version of collusion based on imitation. It describes a situation where a specific firm is the acknowledged leader in setting prices, and other firms follow.
As opposed to collusive agreements, industry leadership has the advantage of not being contrary to the antitrust laws. It is considered legal as long as it is grounded on voluntary imitation rather than explicit communication (White, 1981). Since collective strategies mediated by collusive agreements are based on informal communication and, in the case of industry leadership, on imitation, the risk of uncontrolled disclosure is low. Colluding firms will share information only in areas where they wish to cooperate while maintaining the secrecy of their competitive plans.
The above risk assessments imply that uncontrolled information disclosure is always damaging for the success of a focal organization’s competitive plans. While the dynamics of oligopolistic markets would tend to support this assumption (Scherer, 1980), the degree of damage resulting from uncontrolled disclosure can be viewed as contingent upon several situational variables. Specifically, four situational variables appear important: breadth of information disclosure, quality of information disclosure, asymmetry in interdependence, and event control.
These situational variables can facilitate the combination of a ‘high-risk’ collective strategy with competitive strategies, and they can make the adoption of a 380 Matching Collective and Competitive Strategies dimensions. This is relevant for evaluating strategy combinations because an uncontrolled disclosure of information is less troublesome if competitors are unable to capitalize on the information due to their inability to respond rapidly to a focal organization’s competitive moves.
Table 3 presents a typology of possible combinations between competitive and collective strategies, and evaluates their feasibility from the perspective of individual firms. Generally, a strategy combination is considered feasible if (1) the risk of uncontrolled information disclosure is low. Feasibility evaluations also take into account (2) the degree of competitor responsiveness typical for a competitive dimension, and (3) typical characteristics of specific collective strategies, namely the number of participants involved and the stability of an agreement.
Considering typical characteristics of collective strategies is important because such characteristics can modify feasibility ratings that are based on assessments of the risk of uncontrolled information disclosure and the level of competitor responsiveness. Situational variables, described above, may mediate the damage resulting from uncontrolled information disclosure but do not lend themselves to generalizations and therefore are excluded from considerations leading to the typology shown in Table 3.
However, in using the typology, situational variables will have to be taken into account, as is shown in the implications section. In Table 3 the competitive dimensions pricing, advertising and promotion, and product innovation are distinguished for each of the seven collective strategies summarized in Tables 1 and 2. Within each of these competitive dimensions, organizations can relate to each other by using either competitive or collective strategies.
Thus, six strategy combinations are possible for each type of collective strategy,’ leading to a total of 42 combinations presented in Table 3. I Since only two values are possible within each competitive dimension, and since the extreme cases (competitive or collective strategies across all competitive dimensions) are irrelevant as they do not represent combinations of collective and competitive strategies, the total number of strategy combinations C for each type of collective strategy can be calculated by collective strategy with low or moderate risks of uncontrolled disclosure problematic.
For example, the potential damage resulting from uncontrolled disclosure may be considered low, and thus can facilitate the adoption of a collective strategy where the risk of uncontrolled disclosure is high, when the competitive information that could be disclosed is not very encompassing (breadth of information disclosure), or of questionable quality regarding its reliability and/or timeliness (Adams, 1976; Smart and Vertinsky, 1977). Similarly, if interdependence is asymmetric, with some organizations being in a relatively powerful competitive position (e. . due to their size), uncontrolled information disclosure may not be very troublesome for these powerful organizations because they know that other competitors lack the resources to exploit the disclosed information (Pfeffer and Salancik, 1978). Likewise, damage may be low and containable, if organizations can rapidly and effectively counteract events leading to uncontrolled information disclosure, for example, by changing personnel or the content of a collective strategy (Pfeffer and Salancik, 1978).
Implications for evaluating the feasibility of strategy combinations resulting from the role of situational variables are discussed below. COMBINATIONS OF COMPETITIVE AND COLLECTIVE STRATEGIES Apart from an understanding of how collective strategies can lead to uncontrolled information disclosure, an assessment of what types of combinations between competitive and collective strategies are feasible requires that different competitive strategies also be distinguished. Three distinguishing dimensions of competitive strategies are pricing, advertising and promotion, and product innovation (Khandwalla, 1981).
These dimensions can be classified according to their degree of ‘competitor responsiveness’ (Ansoff, 1984). The term competitor responsiveness refers to the speed with which competitors can respond to variations in competitive conditions. While price cuts usually can be matched instantly, it takes much longer to organize retaliations to a heavy advertising campaign, and even longer to respond to product innovations (Khandwalla, 1981; Scherer, 1980). Thus competitor responsiveness decreases along these three competitive
C = (2″1- 2) where d is the number of competitive dimensions considered. For d=-3 dimensions the number of possible strategy combinations is C=6. R. K. F. Bresser Table 3. Combinations of competitive and collective strategies and their feasibility Dimensions of competition Types of strategy Pricing combinations 1. 1 1. 2 1. 3 1. 4 1. 5 1. 6 2. 1 2. 2 2. 3 2. 4 2. 5 2. 6 3. 1 3. 2 3. 3 3. 4 3. 5 3. 6 4. 1 4. 2 4. 3 4. 4 4. 5 4. 6 5. 1 5. 2 5. 3 5. 4 5. 5 5. 6 6. 1 6. 2 6. 3 6. 4 6. 5 6. 6 7. 1 7. 2 7. 3 7. 4 7. 5 7. IL Competition Regulation Regulation Competition Regulation Competition Competition Contracting Contracting Competition Contracting Competition Competition Merger Merger Competition Merger Competition Competition Joint Venture Joint Venture Competition Joint Venture Competition Competition Interlocks Interlocks Competition Interlocks Competition Competition Trade Association Trade Association Competition Trade Association Competition Competition Collusion/IL Collusion/IL Competition Collusion/IL Competition Advertising and promotion Regulation Competition Regulation Competition Competition Regulation Contracting Competition Contracting Competition Competition Contracting Merger Competition Merger Competition Competition Merger Joint Venture Competition Joint Venture Competition Competition Joint Venture Interlocks Competition Interlocks Competition Competition Interlocks Trade Association Competition Trade Association Competition Competition Trade Association Collusion/IL Competition Collusion/IL Competition Competition Collusion/IL 381
Product innovation Regulation Regulation Competition Regulation Competition Competition Contracting Contracting Competition Contracting Competition Competition Merger Merger Competition Merger Competition Competition Joint Venture Joint Venture Competition Joint Venture Competition Competition Interlocks Interlocks Competition Interlocks Competition Competition Trade Association Trade Association Competition Trade Association Competition Competition Collusion/IL Collusion/IL Competition Collusion/IL Competition Competition Feasibility of strategy combination Low Low Intermediate Intermediate Intermediate Intermediate Intermediate High High High High High High High High High High High Intermediate Intermediate High High High High Low Low Low Low Low Low Low Intermediate Intermediate Intermediate Intermediate Intermediate Intermediate Intermediate Intermediate Intermediate Intermediate Intermediate Industryleadership
The first group of (six) strategy combinations uses competition in one or two competitive dimensions in conjunction with regulation as the basis for enforcing a collective strategy. The feasibility of all six combinations is rated either at low or intermediate levels. The first two combinations (1. 1 and 1. 2) have a low feasibility rating. If organizations use regulation to harmonize their promotional and product innovation activities, and have competitive flexibility in the area of pricing (combination 1. 1), their chances of competing successfully are slim. This is because 382 R. K. F. Bresser an industry may remain intense. In fact, often firms merge to obtain strategic advantages in the areas of price competition, promotion or product innovation wlhich may increase rather than decrease competitive interactions.
When joint ventures serve as mechanisms to enforce collective strategies, feasibility ratings for strategy combinations are similarly favorable. This form of collective strategizing also tends to involve only a few organizations, allowing for competition within a particular area in spite of joint venture activity. fHowever, joint ventures carry a higher risk of uncontrolled information disclosure than contracting or mergers. Thus cautious feasibility evaluations seem appropriate when a focal organization engages in joint ventures in more than one comnpetitivearea, and when the only competitive dimension not subject to collective coordination is characterized by relatively high levels of competitor responsiveness (combinations 4. 1 and 4. 2).
In these situations the relatively high number of information links among firms participating in several joint ventures multiplies the risk and potential damage of uncontrolled disclosure. If organizations choose interlocking directorates to coordinate intra-industry activity, they constantly run a high risk of uncontrolled information disclosure. Co-opted directors may intentionally or inadvertently, directly or indirectly, pass on sensitive information to a focal organization’s competitors. Thus, relying on interlocks to enforce collective strategies while simultaneously attempting to maintain some competitive flexibility does not appear feasible.
The predominant feasibility rating assigned to the group of strategy combinations using trade associations as a means to develop collective strategies is ‘intermediate’. Although experience demonstrates that the coordination provided by trade associations mostly does not go beyond price and cost reporting (Scherer, 1980), the possibility of trade associations collecting and reporting other sensitive information is always acute. Often individual organizations cannot oppose such uncontrolled reporting of industry developments, especially if the association is dominated by a few powerful corporations. If trade associations do not engage in price reporting, but are used to develop collective strategies in the areas of advertising and promotion, and product innovation (combination 6. 1), a low uick competitor responsiveness can be expected with respect to the pricing dimension, and regulators are likely to disclose sensitive information concerning advertising and innovations. A similar argument applies to combination 1. 2, where competitive conditions exist only with regard to advertising and promotion, a dimension characterized by intermediate levels of competitor responsiveness. Since competitors usually need considerable time to respond to product innovations, combination 1. 3 (with regulation in the other two dimensions) is not quite as problematic as the first two combinations. However, the distinct possibility of uncontrolled information disclosure through regulator activities makes combination 1. 3 feasible only at an intermediate level. Combinations 1. 4 through 1. allow for competition in at least two dimensions. While these combinations provide organizations with a larger arsenal of competitive tools than the first three combinations, they also are considered feasible only at intermediate levels because of the risk of uncontrolled disclosure through regulators. The feasibility of strategy combinations involving contracting as a form of collective strategizing generally is considered high because the risk of uncontrolled information disclosure tends to be low. In addition, often (and in contrast to regulation) only few organizations participate in a particular contractual agreement, thus limiting the extent to which competition is constrained.
If, within an industry of say eight oligopolists, three contract to standardize product designs, competition with the remaining five oligopolists in the area of product innovations is still possible and likely. The only strategy combination where a less favorable (intermediate) feasibility rating is assigned is combination 2. 1. If extensive contracting in the areas of advertising/promotion and product innovation has considerably lowered the participating firms’ strategic flexibility, relying on price competition as the sole competitive tool does not appear sensible. Price competition is likely to face a high degree of competitor responsiveness. The third group of strategy combinations, using merger activity to realize collective strategies, has high feasibility ratings throughout.
The risk of uncontrolled information disclosure is low, and the number of firms involved in a merger is usually quite small, so that competition within Matching Collective and Competitive Strategies feasibility rating seems appropriate. Again, in this situation firms would maintain competition only in an area where high competitor responsiveness is likely. Combinations of competitive and collective strategies using the various forms of collusion and industry leadership are not as problem-free as the risk evaluation in Table 2 might suggest. Although collusive agreements are not burdened with the problem of uncontrolled information disclosure, their combination with competitive strategies appears feasible at an intermediate level at best.
Since collusive agreements are informal and difficult to enforce, individual firmns have a strong incentive to chisel-that is to increase their profits by secretly deviating from the agreement (Stigler, 1964). Secret deviations cannot be concealed for long periods of time, and frequently result in collusive conspiracies breaking down and touching off bitter rivalries such as price wars (Scherer, 1980; Weiss, 1961). It is likely that the tendency of collusive agreements towards breakdown will be aggravated if colluding organizations decide to compete in some competitive areas rather than displaying ‘gentlemanly’, non-competitive behavior across all competitive dimensions. A firm’s successful competitive behavior in one area will encourage less successful firms to chisel in other areas that are subject to collusive coordination.
Thus combinations of competitive and collective strategies can be expected to be volatile when collusion serves as a means for enforcing collective strategies. This volatility results from the particular characteristics of collusive agreements, and exists regardless of the risk for uncontrolled information disclosure or the level of competitor responsiveness. 383 SUMMARY AND IMPLICATIONS This paper extends the literature advocating the development of voluntary collective strategies as means to manage environmental turbulence and interdependence (Astley and Fombrun, 1983a; Bresser and Harl, 1986). It assesses the possibilities of combining competitive with collective strategies from the perspective of individual organizations.
Such combinations may be problematic because an organization’s ability to maintain the secrecy of competitive strategic plans may be jeopardized by information links established through different forms of collective strategy (Fornbrun and Astley, 1983a; Starbuck and Nystrom, 1981). After discussing how collective strategies may lead to an uncontrolled disclosure of strategically sensitive information, combinations of competitive and collective strategies are classified according to their varying degrees of feasibility. A comparison of the ratings presented in Tables 2 and 3 makes apparent that the feasibility of strategy combination tends to be inversely related to the risk of uncontrolled information disclosure.
If the risk and the feasibility ratings are expressed numerically with the values of ‘low’ equaling 1, ‘intermediate’ equaling 2, and ‘high’ equaling 3, a correlation coefficient can be calculated on the basis of all 42 strategy combinations. The resulting coefficient is r = -0. 70, indicating that within the present classification scheme about 50 percent of the variance in feasibility evaluations is accounted for by the risk of uncontrolled information disclosure. However, high risks of uncontrolled disclosure do not generally lead to low feasibility ratings, and low risks do not necessarily imply high feasibility scores , as is demonstrated by the combinations involving collective strategies based on regulation and collusion respectively.
The unexplained variation in feasibility ratings suggests additional factors are important in assessing the feasibility of strategy combinations, notably the degree of competitor responsiveness and the particular characteristics of the type of collective strategy employed. Further variation in feasibility ratings can be expected when situational variables such as breadth and quality of information disclosure, asymmetry in interdependence, and event control are considered (Adams, 1976; Pfeffer and Salancik, 1978; Smart and Vertinsky, 1977). This is so because these situational variables can contain or amplify the potential damage resulting from uncontrolled infornmationdisclosure.
While situational variables were not considered in the development of this paper’s typology of strategy combinations, they have implications both for research and managerial decision-making that can originate from the typological classification given in Table 3. The existence of situational variables highlights a feature common to all typologies or organi- 384 R. K. F. Bresser information disclosure is of little relevance? 7. How rapidly and effectively can events of uncontrolled information disclosure be counteracted? Answers to these and similar questions can help executives to apply the information provided by Table 3 situationally before adopting a specific combination of collective and competitive strategies. From this process the selection of compatible strategies should result.
This paper’s discussion has concentrated on oligopolistic markets because, typically, in such markets competitors are aware of their mutual interdependence, have incomplete control of each other’s moves, and yet the success of each oligopolist’s strategic intentions depends considerably on the activities chosen by other competitors (Pennings, 1981). Obviously, within such a context, the damage resulting from an uncontrolled disclosure of sensitive information is potentially high. While the theory of oligopoly has been developed mainly for domestic, nondiversified enterprise (Stigler, 1964), the issues and ideas discussed in this paper can also be of relevance to multinational and diversified corporations. Due to the dominance of oligopolies, both multinational and diversified firms will often find themselves operating in different national or regional oligopolies.
Additionally, managing a match between collective and competitive strategies may be more difficult in interindustry and international arenas than in intraindustry environments because the number of interdependent segments representing a particular coporation’s domain is larger and more complex (Bresser and Harl, 1986; Hawkins and Walter, 1981). Thus, anticipating factors such as the risk of uncontrolled information disclosure and the potential damage resulting from such disclosure may be even more important for multinational and diversified firms than for domestic oligopolists. zational phenomena. Classifications of the type developed in Table 3 are ideal types, based on generalizations derived from common knowledge and common sense (Blau and Scott, 1962; Pugh, Hickson and Hinings, 1969).
However, the strategy combinations distinguished represent 42 separate hypotheses regarding the opportunities and risks organizations might encounter when utilizing competitive and collective strategies side by side. The accuracy of any particular feasibility evaluation is an empirical question open to resolution through historical research, where the mediating role of situational variables has to be included in the research design. From a managerial point of view a typology of strategy combinations with varying levels of feasibility can aid in strategic decision-making. The strategic options evaluated in Table 3 can serve as a guide to managers considering a particular strategy combination. In attempting to extrapolate easibility evaluations, decisionmakers would have to assess whether the variables leading to the feasibility ratings shown in Table 3 are of the assumed magnitude, and to what extent deviations would lead to different feasibility assessments. In addition, decision-makers would have to evaluate the extent to which situational variables require changes in feasibility ratings. For example, a firm intending to implement a strategy mix similar to combination 4. 3 would have to consider the following questions before deciding whether the feasibility of such a combination is high: 1. Is the risk of uncontrolled information disclosure resulting from the planned joint venture activity really at moderate levels, and how can it be contained? 2.
Is there really a low degree of competitor responsiveness to product innovations within this industry? 3. Is competitive flexibility in pricing and promotional strategies maintained in spite of joint venture activity within these competitive dimensions? 4. How encompassing is the information that could get disclosed? 5. How reliable and timely is the information that competitors could obtain? 6. Does asymmetrical interdependence typical for this industry favor our firm so that REFERENCES Adams, J. S. ‘The structure and dynamics of behavior in organizational boundary roles’. In Dunette, M. (ed. ), Handbook of Industrial and Organizational Psychology, 1175-1199. Rand McNally, Chicago, 1976, pp. Matching Collective and Competitive Strategies
Aldrich, H. E. Organizations and Environment, Prentice-Hall, Englewood Cliffs, NJ, 1979. Ansoff, H. I. Implanting Strategic Management, Prentice-Hall, Englewood Cliffs, NJ, 1984. Astley, W. G. and C. J. Fombrun. ‘Collective strategy: social ecology of organizational environments’, Academy of Management Review, 8, 1983a, pp. 576-587. Astley, W. G. and C. J. Fombrun. ‘Technological innovation and industrial structure: the case of telecommunications. In Lamb, R. (ed. ), Advances in Strategic Management, vol. 1, JAI Press, Greenwich, CT, 1983b, pp. 205-229. Blau, P. M. and W. R. Scott. Formal Organizations, Chandler, San Francisco, 1962. Bresser, R. K. The captives of collective strategies’, Proceedings of the American Institute for Decision Sciences, Toronto, 1984, pp. 383-385. Bresser, R. K. and J. E. Harl. ‘Collective strategy: vice or virtue? , Academ. y of Management Review, 11, 1986, pp. 408-427. Bunting, D. and J. Barbour. ‘Interlocking directorates in large American corporations, 1896-1964’, Business History Review, 45, 1971, pp. 317-335. Business Week. ‘How Kennecott has mismanaged Carborundum’, 23 May, 1983, pp. 127-130. Emery, F. E. and E. L. Trist. ‘The causal texture of organizational environments’, Human Relations, 18, 1965, pp. 21-32. Fombrun, C. J. and W. G. Astley. ‘The telecommunian institutional cations community: overview’, Journal of Communication, 32(4), 1982, pp. 6-68. Fombrun, C. J. and W. G. Astley. ‘Beyond corporate strategy’, Journal of Business Strategy, 4(1), 1983, pp. 47-54. Hawkins, R. G. and I. Walter. ‘Planning multinational operations’. In Nystrom, P. C. and W. H. Starbuck (eds), Handbook of Organizational Design, vol. 1, Oxford University Press, New York, 1981, pp. 253-267. Khandwalla, P. N. ‘Properties of competing organizations’. In Nystrom, P. C. and W. H. Starbuck (eds), Handbook of Organizational Design, vol. 1, Oxford University Press, New York, 1981, pp. 409-432. Litwak, E. and J. Rothman. ‘Towards the theory and practice of coordination between formal organizations’. In Rosengren, W.
R. and M. Lefton (eds), Organizations and Clients: Essays in the Sociology 385 of Service, Merrill, Columbus, OH, 1970, pp. 137-186. Lubatkin, M. ‘Mergers and the performance of the acquiring firms’, Academy of Management Review, 8, 1983, pp. 218-225. Olson, M. The Logic of Collective Action, Harvard University Press, Cambridge, MA, 1965. Pennings, J. M. Interlocking Directorates, Jossey-Bass, San Francisco, 1980. Pennings, J. M. ‘Strategically interdependent organizations’. In Nystrom, P. C. and W. H. Starbuck (eds), Handbook of Organizational Design, vol. 1, Oxford University Press, New York, 1981, pp. 434-455. Pfeffer, J. and C. R. Salancik.
The External Control of Organizations, Harper and Rowe, New York, 1978. Pugh, D. S. , D. J. Hickson and C. R. Hinings. ‘An empirical taxonomy of structures of work organizations’, Administrative Science Quarterly, 14, 1969, pp. 115-126. Scherer, F. M. Industrial Market Structure and Economic Performance, 2nd edn, Rand McNally, Chicago, 1980. Smart, C. and I. Vertinsky, ‘Designs for crisis decision units’, Administrative Science Quarterly, 22, 1977, pp. 640-657. Starbuck, W. H. and P. C. Nystrom. ‘Designing and understanding organizations’. In Nystrom, P. C. and W. H. Starbuck (eds), Handbook of Organizational Design, vol. 1, Oxford University Press, New York, 1981, pp. ix-xxii. Stigler, G. J. A theory of oligopoly’, Journal of Political Economy, 72, 1964, pp. 44-61. Thompson, J. D. Organizations in Action, McGrawHill, New York, 1967. Thorelli, H. B. ‘Networks: between markets and hierarchies’, Strategic ManagementJouirnal,7, 1986, pp. 37-51. Venkatraman, N. and J. C. Camillus. ‘Exploring the concept of “fit” in strategic management’, Academy of Management Review, 9, 1984, pp. 513-525. Weiss, L. W. Economics and American Industry, John Wiley, New York, 1961. White, L. J. ‘How organizations use exchange media and agreements’. In Nystrom, P. C. and W. H. Starbuck (eds), Handbook of Organizational Design, vol. 2, Oxford University Press, New York, 1981, pp. 440-453.