Corporate Strategy in Turbulent Environments: Key Roles of the Corporate Level

31 Pages Posted: 3 May 2006

See all articles by J. E. Ricart

J. E. Ricart

University of Navarra - IESE Business School

Abstract

This paper analyzes the evolution during the period 1986-2002 of the corporate strategy of Lujan, a highly successful car components manufacturer headquartered in Spain, as a way to explore how the corporate level influences the successful evolution of a company exposed to a turbulent environment over a long period. We find that the corporate level plays three key roles. First, it drives a firm's evolution by developing a cognitive representation of the firm's competitive landscape. Second, it paces the company's evolution by alternately shifting the balance of organizational initiatives between static efficiency-based local search strategies, chosen in times of stability or economic slowdown, and dynamic efficiency-based long jump strategies, adopted during periods of major environmental turbulence. Long-jump corporate strategies, carried out through limited downside strategic initiatives such as real options and strategic alliances (off-line long-jumps), are particularly frequent in these circumstances. The third role consists of developing an organizational architecture that frames the self-organized coordination of the different business divisions. The Lujan story clearly illustrates the important role of corporate strategy in a firm that must undergo radical transitions as a result of major environmental changes.

Keywords: corporate strategy, turbulent environments, complexity theory, car components

Suggested Citation

Enric Ricart, Joan, Corporate Strategy in Turbulent Environments: Key Roles of the Corporate Level. IESE Business School Working Paper No. 623, Available at SSRN: https://ssrn.com/abstract=899267 or http://dx.doi.org/10.2139/ssrn.899267

Joan Enric Ricart (Contact Author)

University of Navarra - IESE Business School ( email )

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