SWOT Analysis of the Walt Disney Company

profileOK_Student
Chapter_2_A_Primer_in_Strategic_Management_for_Media_Firms.pdf

Chapter 2

A Primer in Strategic Management for Media Firms

The goals of gaining a competitive advantage and increasing profitabil- ity are quite challenging for media firms, which constantly have to wrestle with their social responsibilities, regulatory concerns, techno- logical advances, and changing consumer preferences. Historically, these media firms’ attempts to analyze, plan, and implement strategies in response to environmental changes have been largely presented de- scriptively in media management literature. For example, most have ac- knowledged that terrestrial radio stations have started delivering programming products online, but few have investigated the drivers be- hind these strategic decisions. It is also well documented that nearly all television networks have invested in joint ventures with Internet-based firms, but what factors contributed to such alliances and what kind of partnerships produce a sustainable competitive advantage? Many of these managerial decisions are a result of the dynamic relationship be- tween a media organization, its environment, and its attempt to develop and implement activities that align its organizational resources with environmental changes. And how our media environment has changed in the last 20 years! The previous chapter depicted this magnitude of change with discussions on the additions of new media, media outlets, and distribution systems; trends in consolidation and convergence; and alternative business models in today’s media marketplace. Under such a dynamic environment, media managers have to be proactive, anticipate change, and continually refine their strategies to stay competitive. Ac- cordingly, it is essential for media scholars to go beyond the mere syn- thesis of current industry practices and examine the antecedents and

13Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

predictors of certain firm conducts. Such an emphasis on developing and testing theory-based propositions offers a better contextual expla- nation of the firm and the linkage between strategy and superior per- formance in this particular sector.

Nevertheless, moving from anecdotal, descriptive studies to analyti- cal, prescriptive research of media firms requires a sound understanding of various economics and management concepts in firm behavior. The current chapter offers a primer of some relevant frameworks and con- structs in “strategic management” because this field of study addresses the process and content of a firm’s efforts in aligning its resources with the changing environment, the premise as well as focus of this book. In this context, strategic management offers valuable insights about the nature of mass media as business entities at the firm level, complement- ing existing media economics research that often provides the norma- tive view of resource allocation of media goods. Furthermore, strategic management highlights the importance of traditional decision-making research; the critical process of strategic planning; the tug of war be- tween environment and resources; the fluidity of competitive dynam- ics; and the many market phenomena we witness daily in media industries such as mergers and acquisitions, corporate diversification, and strategic alliances. Given the broad and diverse nature of strategy research, our goal here is not to provide a comprehensive review of all streams of strategic management literature. Instead, after briefly re- viewing some key strategic management concepts and frameworks such as strategic decision making, value creation, the resource-based view (RBV), and competitive dynamics theories, this chapter focuses on how these concepts and frameworks might be applicable to media prod- ucts in the context of a changing marketplace.

WHAT IS A STRATEGY?

The term strategy can be defined and subsequently studied from two distinctive perspectives: “process” and “content”; that is, “how” a strat- egy is formulated and implemented and “what” the strategy is. Inte- grating both perspectives, strategy involves a range of a firm’s decisions and activities that are enacted to fulfill the firm’s strategic missions and goals through the effective use of skills and resources, considering the opportunities and threats in its market environment. For example, a media strategy study may encompass the examination of one or more aspects of the financial, marketing, operation, and personnel functions that lead to the sustainable competitive advantage (SCA) of a firm or a group of firms in media industries. Consequently, strategic manage- ment is generally defined as the “analysis,” “decisions,” and “actions” an organization takes to create and sustain competitive advantages. Task-wise, strategic analysis generally involves the examinations of or- ganizational objectives, the external and internal environments, and a

14 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

firm’s intellectual assets; strategic decisions include the formulation of business, corporate, international, and Internet strategies; and strategic actions entail the implementation of strategic control and corporate governance, effective organizational designs and structures, and ongo- ing activities that aim to achieve organizational excellence, ethical be- havior, and entrepreneurship (Dess, Lumpkin, & Taylor, 2004).

DEVELOPMENT OF STRATEGIC MANAGEMENT STUDIES

The history of the strategic management discipline is rooted between the economic and behavioral/organizational perspectives and reflected by a variety of prior theories such as industrial organization (IO) eco- nomics, game theory, leadership, human resource management, Penrose’s theory of the growth of firms, evolutionary theory, organiza- tional learning, and cognitive models (Sanchez & Heene, 2004). Meth- odologically, most of the early studies were carried out by profiling of actual managerial decisions and thus were more descriptive and anec- dotal. In addition, the focus on the “strategy” component of a firm or a group of firms actually began in the general capstone courses offered in many master of business administration (MBA) programs in the United States. Such an origin has significant implications for the initial direc- tion of strategic management as an academic field of inquiry. For in- stance, the emphasis on integrating disciplines and practical applications translated into limited theory construction during its early stage of development, with a focus on models and typologies of various approaches to strategy formulation rather than synthesis of multiple, integrated theoretical perspectives (Hoskisson, Hitt, Wan, & Yiu, 1999).

Because of the complexity and breadth of this subject, many different theories on the studies and practice of strategic management eventually emerged. They may be summarized in two main approaches: the pre- scriptive and the evolutionary. Although the two basic approaches share the same commonalities, the prescriptive approach stresses that the practice of strategic management is a rational and linear process with well-defined and -developed elements before the strategy begins. By comparison, the evolutionary view does not present a clear, final ob- jective for its strategy as proponents believe that strategy emerges, adapts, and evolves over time (Lynch, 1997). Chaffee (1985) further suggests that strategy can be studied from three distinct approaches: linear strategy, which focuses on planning and forecasting; adaptive strategy, which emphasizes the concept of “fit” and is most related to “strategic management”; and interpretive strategy, which sees strategy as a metaphor and thus views it in qualitative terms. After analyzing contemporary research and taking into consideration the historical per- spectives in this area, Mintzberg, Ahlstrand, and Lampel (1998) identi- fied 10 “schools” of strategy research that have developed since strategic management emerged as a field of study during the 1960s. These schol- ars proposed that the “design schools” see strategy as a process of con-

A PRIMER IN STRATEGIC MANAGEMENT I 15

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

ception, the “planning schools” treat strategy as a formal process, the “positioning schools” view strategy as an analytical process, the “entre- preneurial schools” regard strategy as a visionary process, the “cogni- tive schools” see strategy as a mental process, the “learning schools” treat strategy as an emergent process, the “power schools” view strat- egy as a process of negotiation, the “cultural schools” regard strategy as a collective process, the “environmental schools” see strategy as a reac- tive process, and the “configuration schools” treat strategy as a process of transformation. The contrasting definitions of the 10 emphases clearly show that the studies of strategy or strategic management have evolved tremendously over time.

THEORETICAL FOUNDATIONS IN STRATEGIC MANAGEMENT

To establish a base on which applicable frameworks and propositions might be suggested for media products, this chapter first reviews some major theoretical foundations in strategy studies.

The Essence of Strategic Thinking

Fundamental to the development of strategy literature and the practice of strategic management, “strategic thinking” is a particular mode of thinking with specific characteristics (Liedtka, 2001). Mintzberg (1994) stressed that, unlike strategic planning, which is preoccupied with fol- lowing preprogramming rules, strategic thinking involves synthesis, intuition, creativity, and exploration, which results in an integrated perspective for reaching organizational goals. Liedtka succinctly identi- fied five elements that define “strategic thinking.” Specifically, strategic thinking is built on a systems perspective, under which the interrela- tionships between a firm and its external business ecosystem have to be seen as interdependent and evaluated as an end-to-end system of value creation. Strategic thinking is intent focused with a directed organiza- tional energy toward the intended goals. Strategic thinking also in- cludes intelligent opportunism. This means that the intention should be flexible enough to allow for unanticipated opportunities and the emer- gence of new, alternative strategies for a changing environment. Strate- gic thinking also stresses time continuity in that it takes into account institutional memory and historical context in working toward its in- tended goals. Finally, strategic thinking is a hypothesis-driven process in that it formulates hypotheses and analytically tests the hypotheses. Applications of strategic management in media industries, conse- quently, first need to be consistent with these principles.

Strategic Decision-Making, Agency Theory, and Strategic Leadership

Within the strategic thinking context, research in decision making fo- cuses on determining how decisions are made in organizations to best develop a competitive advantage and how to improve such processes for

16 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

the best outcome. Through either the descriptive approach by observing firm behaviors or the prescriptive approach by testing theories, scholars in this area have addressed personality topics such as risk propensity, uncertainty tolerance, creativity, decision styles, need for control, and experience; system factors such as domains of action, types of decisions, and authority structures; and organizational issues such as firm types, communications, and power. Notably, scholars have empirically pro- filed decision making in many corporations to identify the typical activ- ities and steps of decision making. From the early study by Mintzberg, Raisinghani, and Theoret (1976), which more simplistically categorized decision-making phases (e.g., identification, development, selection, and authorization), to later studies that attempted to uncover the ante- cedents and contexts of effective decisions (Dean & Sharfman, 1996; Sharfman & Dean, 1998), literatures in this area are rich in anecdotal discussions of typological managerial decisions. For example, Mintzberg and Westley (2001) suggested that managers can rely on “logic,” “vision,” or “action” in making decisions and the outcome of the different approaches is often dependent on the context in which the deci- sion is made. Nevertheless, Nutt (2001) argued that most strategic deci- sion-making studies are still behavioral in nature because of the missing empirical linkages between decisions, actions, measures of key contex- tual factors, and decision consequences.

Another strategy-related theoretical perspective that involves the role of managers is the traditional economics model of agency relation- ships in firm governance. The agency theory in strategic management deals primarily with the topics of corporate governance, compensation, firm performance, as well as diversification, mergers, and acquisition strategies. Microeconomists use agency theory to study the problems of motivating and controlling cooperative action. The primary focus here is the situation in which one party, the risk-neutral principal (e.g., shareholders, board of directors), seeks some outcome but requires the assistance of a risk-averse agent (e.g., managers) to carry out the neces- sary activities. It is assumed that both parties are motivated by self-in- terest. As a result, conflicts might arise because their goals might not be congruent. The assumptions are that although there are ways of miti- gating this problem of conflicts, it cannot be totally eliminated. Agency problems may include overcompensation (chief executive officer [CEO] salaries), empire building (unprofitable growth strategy), executive per- quisites, and CEO duality (CEO on board of directors). Unfortunately, agents usually know more about the tasks than the principals, but prin- cipals, unable to observe agents’ actions directly, can attempt to control in a variety of ways (e.g., inspection, evaluation, and incentive systems) (Alchian & Demsetz, 1972; Eisenhardt, 1989). In essence, agency theory stresses the importance of organizational incentives to induce effective, coordinated, and cooperative work and the control of managerial be- havior for the benefit of the corporation. Considering the importance of agents as resources and strategy formulators and implementers and the

A PRIMER IN STRATEGIC MANAGEMENT I 17

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

importance of principals in resource acquisition and development (Chatterjee & Harrison, 2001), agency theory is a significant area of dis- cipline for strategic media management scholars to venture into.

Finally, approaching the agent factor from a leadership angle in the context of strategic management, Hitt, Ireland, and Hoskisson (2001) proposed that top-level managers are an important resource for firms seeking to formulate and implement effective strategies and that strategic leadership is the essential managerial ability of anticipating, envisioning, maintaining flexibility, and empowering others to create strategic change as needed. Hitt et al. also suggested that the domain of strategic leader- ship involves five sets of activities: (a) determination of strategic direc- tion, (b) exploitation and maintenance of core competencies, (c) development of human capital, (d) emphasis of ethical practices, and (e) establishment of balanced organizational controls. In summary, effective strategic leadership is necessary for a successful strategic management process, and strategic leaders can be a basis of competitive advantage.

Moving to a discussion of more macro, systematic explanations of strategic behavior and competitive advantage, two main perspectives that theorize the persistent firm performance differences in the field of strategic management, the industrial organization and the re- source-based view of strategy, are presented next.

The Industrial Organization (IO) View of Strategy

As mentioned earlier, the study of strategic management has its roots in industrial economics. Based primarily on industrial organization con- cepts, the discipline has traditionally focused on the linkage between a firm’s strategy and its external environment. Such a linkage is espe- cially evident in the structure-conduct-performance (SCP) paradigm proposed by Bain (1968) and popularized with a strategic emphasis by Porter (1985). Specifically, the foundation of strategic management as a field may be traced to Chandler ’s definition of strategy as a set of mana- gerial goals and choices, distinct from a structure, and the allocation of resources necessary to carry out these goals (Chandler, 1962). In a sense, the industry structure in which a firm chooses to compete deter- mines the state of competition, the context for strategies, and thus the resulting performance of the strategies (Collis & Montgomery, 1995; Grant, 1991). Process-wise, the IO approach to developing competitive advantage begins with examining the external environment, followed by locating an industry with a high potential for above-average re- turns. A strategy is then formulated to benefit from the exogenous fac- tors, and assets and skills are developed to effectively implement the chosen strategy (Hitt et al., 2001).

As the foundational theory of antitrust applications, the IO view of strategy was initially derived from its implications for social policy, which denote the undesirability of a less than perfectly competitive in-

18 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

dustry structure because it allows for conduct options that lead to supe- rior performance of firms and thus reduction of social welfare. The SCP paradigm, which aims at developing competitive advantage and thus better performance, basically turned the antitrust notion on its head by suggesting that firms should seek to enter markets with the best envi- ronment (i.e., structure) that allows for strategic options to obtain per- sistent superior performance.

Some have argued that one of the most significant contributions to the development of strategic management came from industrial eco- nomics paradigms, especially the work of Michael Porter. His SCP model and the notion of strategic groups, where firms are clustered into groups of firms with strategic similarity within and differences across groups, have established a foundation for research on competitive dy- namics (Hoskisson et al., 1999). As economics scholars gradually adopt other theories such as “game theory,” “transaction costs economics,” and “agency theory,” strategic management research moves closer to firm-level and competitive dynamics (Hoskisson et al., 1999). Begin- ning in the late 1980s, business scholars, seeking to explain the impact of firm attributes and behavior, such as diversification, vertical integra- tion, and technological experience, on performance (Lockett & Thomp- son, 2001), started investigating an “inside-out,” resource-based view of strategy.

The Resource-Based View of Strategy

Emphasizing the critical value of the internal resources of a firm and the firm’s abilities to manage them, the RBV assumes that each firm is a col- lection of unique resources that provide the foundation for its strategy and lead to the differences in each firm’s performance (Hitt et al., 2001; Peteraf, 1993; Wernerfelt, 1984). The RBV literature also stresses that a firm’s heterogeneous resources are the foremost factors influencing performance and sustainable competitive advantage. Historically, the RBV drew its rationales from four theoretical sources: (a) the traditional notion of distinctive competencies, which regards general managers and institutional leaders as distinctive competencies that critically impact a firm’s strategy and final performance, (b) Ricardian economics, which proposes that certain resources used by firms are inelastic in supply and are possible sources of economic rents through proper exploitations (Barney & Arikan, 2001), (c) Penrosian economics, which stresses firms’ heterogeneity, and (d) the IO-based theories of antitrust, which stimu- lated the RBV’s counterargument of firm competency as the source of superior performance instead of the presumed anticompetitive activi- ties.

The RBV theory has several assumptions. First, as in many other eco- nomics theories, RBV assumes that managers are generally rational and firms aim to maximize profits. Second, resource heterogeneity exists in

A PRIMER IN STRATEGIC MANAGEMENT I 19

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

industries because different firms might have different combinations of resources. Third, resource immobility exists in industries because firms’ resource differences may persist (Barney & Arikan, 2001). According to the RBV, four specific attributes—value, rareness, nonsubstitutability, and inimitability—must work in tandem to increase performance. Valuable resources “exploit opportunities and/or neutralize threats in a firm’s environment” (Barney, 1991, p. 105). A rare resource is one that is not easily located and implemented, moving firms beyond the “com- petitive parity” that is associated with common resources. Similarly, a nonsubstitutable resource has no strategic equivalents that perform the same function. The final factor, imperfect imitability, virtually guaran- tees a firm’s sustainable competitive advantage, but it must work jointly with the aforementioned characteristics. That is, although a re- source may be valuable, rare, and not easily substituted, it must be in- imitable to bestow the firm with a sustained competitive advantage. Imperfect imitability may be the result of three factors: unique histori- cal conditions, causal ambiguity, and social complexity (Barney, 1991). That is, competitors may not be able to capture and re-create the histor- ical conditions that have led the firm to experience success. They may not be able to understand the linkages between the firm’s resources and its competitive advantage, or they may be unable to unravel the com- plex interactions among resources. In sum, the concurrent interactions between these four resource attributes form the basis of a firm’s supe- rior performance.

Process-wise, an RBV approach begins with identifying and assessing a firm’s resources and capabilities, locating an attractive industry in which the firm’s resources and capabilities can be exploited, and finally selecting a strategy that best utilizes the firm’s resources and capabili- ties relative to opportunities in that industry (Hitt et al., 2001). Schol- ars, such as McGahan and Porter (1997), have examined the relationship between the comparative impact of firm (an RBV approach) and industry (an IO approach) attributes on firm performance and con- cluded that firm-related factors seem to carry more weight in influenc- ing performance.

As a theoretical framework of investigation, the RBV approach has become more popular among strategic management scholars since the 1990s after the initial dominance of the IO approach. There seems to be an interesting parallel in such a progression between the general studies of strategic management and strategy studies in the context of media economics. As some media scholars have pointed out, historically, there has been an overreliance on industrial organization studies in media economics (Picard, 2002); examinations of the exogenous factors (i.e., the IO framework) that influence firm conduct have been the primary focus of many media industry studies. As we move toward the study of media firms, the RBV investigative approach might provide more in- sight into explaining the different performances of individual media firms and various clusters of media firms.

20 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

The IO and RBV perspectives of strategic management establish the basic approaches for investigating media firms’ strategic postures and their relationships to superior performance. Four more areas of re- search—strategic and resource taxonomy, value creation, competitive dynamics, and strategic entrepreneurship—have also made a substan- tial contribution to the strategic management literature and are re- viewed next. These supporting constructs may offer a rich theoretical base to inspire more investigations of media products within a strategic management perspective. Note that other relevant concepts in the field of corporate strategy such as strategic networks, diversification, merg- ers, and acquisitions are examined in chapter 3. However, strategy-re- lated organizational topics such as organizational design and structure, human resources management, organizational learning, and strategic leadership and stewardship are not discussed in this chapter because of the extensiveness of these issues and our focus on the RBV perspective of the strategic formulation phase of strategic management.

Strategic and Resource Taxonomy

Classification of strategy types offers the utility of comparative analysis and systematic assessment of the relationship between different strate- gic postures and market performance. To this end, the strategy typologies proposed by Miles and Snow (1978) and Porter (1980) are perhaps the most popular frameworks used by strategic management researchers for analyzing business strategy (Slater & Olson, 2000). Whereas Porter proposed that most business strategies fall under one of three strategic types—“focus,” “differentiation,” and “low-cost leader- ship”—Miles and Snow developed a framework for defining firms’ ap- proaches in product market development, structures, and processes. The notion is that different types of firms have different strategic prefer- ences. Though firms in the same category might have a similar strategic tendency, they could achieve various levels of performance due to differ- ent implementations of the strategy. Miles and Snow classified firms into four groups: (a) prospectors, who continuously seek and exploit new products and market opportunities and are often the first to mar- ket with new products and services, (b) defenders, who focus on occupy- ing a market segment to develop a stable set of products and customers, (c) analyzers, who have an intermediate position between prospectors and defenders by cautiously following the prospectors while at the same time monitoring and protecting a stable set of products and customers, and (d) reactors, who do not have a consistent product–market orienta- tion but act or respond to competition with a more short-term focus (Zahra & Pearce, 1990).

Despite the differences in strategic aggressiveness, empirical studies have found that except for the reactors, the other three groups of firms achieve equal performance on average (Zahra & Pearce, 1990). The im- plication is that the implementation of the strategy is most critical to the

A PRIMER IN STRATEGIC MANAGEMENT I 21

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

performance variation within each strategy type. Strategic taxonomy might be applied in the media industries to empirically assess how orga- nization factors and activities contribute to the effective implementa- tion of different strategies. For example, how have different types of television stations, with their various organizational resources and ca- pabilities, implemented their Internet-related strategies? The taxonomy approach also provides a useful framework for analyzing cross-media competition in an increasingly converged media world. For example, in- stead of investigating media corporations by sectors, which is becoming increasingly meaningless, one might use the Miles and Snow (1978) typology to examine these firms by analyzing their strategic prefer- ences toward different media sectors.

In examining a firm’s strategy, the relationship between strategy and resources, and the link between strategy and performance, strategy scholars have also developed a number of resource categorization sys- tems in an attempt to assess the different contributions of various re- sources to performance in different market environments. Hofer and Schendel (1978) suggested that resources can be classified into six cate- gories: financial, physical, human, technological, reputation, and orga- nizational. Barney (1991) placed firm resources into three groups: physical capital, human capital, and organizational. Porter (1996) maintained that resources are of three types: activities, skills/routines, and external assets such as reputations and relationships. Black and Boal (1994) further argued that resources are best classified as operat- ing in bundles—or network configurations—of two types: contained and system, based on the complexity of the network to which the re- source belongs. Habann (2000), from a different perspective, divided firm resources into two sets according to their contents: competence, which refers to firm-specific capabilities, and strategic assets, which re- fer to tangible and intangible assets of strategic importance.

Nonetheless, Miller and Shamsie (1996) and Das and Teng (2000) maintained that the classification of resources is theoretically sound only when incorporated into the aforementioned characteristics of value, rareness, nonsubstitutability, and inimitability. Specifically, be- cause the basis of a sustainable competitive advantage lies mainly in the inimitability of a resource, categorization of resources therefore must incorporate this notion of imperfect imitability. Resources thus may be classified into two broad categories: property based and knowledge based, each based on the inimitability of property rights or knowledge barriers, respectively. Miller and Shamsie (1996) further incorporated Black and Boal’s (1994) concept of resource configurations, thus subclassifying property- and knowledge-based resources into discrete or systemic resources. That is, both property- and knowledge-based re- sources may stand alone or compose part of a network of resources.

Specifically, property-based resources are inimitable due to the pro- tection afforded by property rights. A firm may secure a competitive ad- vantage based on the length of the protection, thus proscribing

22 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

competitors from imitation and appropriation of the resource (Miller & Shamsie, 1996). Contractual agreements form the foundation of the two types of property-based resources. Discrete property-based re- sources, for example, “take the form of ownership rights or legal agree- ments that give an organization control over scarce and valuable inputs, facilities, locations, or patents” (Miller & Shamsie, 1996, p. 524). Disney, for example, has “international rights to about 853 feature films, 671 cartoon shorts and animated features, and tens of thousands of television productions” (Hollywood wired, 2001). Systemic prop- erty-based resources include configurations of physical facilities and equipment whose inimitability lies in the complexity of the network configurations. Viacom’s television station group, which consists of 34 owned and operated (O&O) stations, is an example of systemic prop- erty-based resources (Viacom, 2003).

Knowledge-based resources refer to a firm’s intangible know-how and skills, which cannot be imitated because they are protected by knowledge barriers. Competitors do not have the know-how to imitate a firm’s processed resources, such as technical and managerial skill (Hall, 1992). McEvily and Chakravarthy (2002) attributed uncertain imitability to complexity, tacitness, and specificity of knowledge. Like property-based resources, knowledge-based resources are composed of discrete and systemic resources. Discrete knowledge-based resources, such as technical, creative, and functional skills, stand alone. The man- agement experience of specific media subsidiaries is an example of dis- crete knowledge-based resources. Systemic knowledge-based resources, on the other hand, “may take the form of integrative or coordinative skills required for multidisciplinary teamwork” (Miller & Shamsie, 1996, p. 527). Increasing attention in the strategy literature within the RBV framework has centered on the factor of “knowledge.” Many stud- ies have focused on how firms generate, leverage, transfer, integrate, and protect knowledge (Wright, Dunford, & Snell, 2001). Some have gone even further, arguing for a “knowledge-based” theory of the firm under the notion that firms exist because they can better integrate, ap- ply, and protect knowledge than can markets (Grant, 1991; Liebeskind, 1996). In recent years, knowledge-based competition has become a pop- ular area of study among strategic management scholars and practitio- ners. Some researchers claim that knowledge is the most important source of sustainable competitive advantage and performance (McEvily & Chakravarthy, 2002). Because media content products are intangible and largely rely on knowledge-based resources for both production and marketing, this is another fruitful ground for further application of strategic management constructs of media products.

Value Creation

To better understand the activities through which a firm develops com- petitive advantages, it is useful to separate its business system into a se-

A PRIMER IN STRATEGIC MANAGEMENT I 23

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

ries of value-generating activities referred to as the value chain. The value chain categorizes the generic value-adding activities of an organi- zation and serves as an analysis tool for strategic planning. The ulti- mate goal is to maximize value creating while minimizing costs in this process. Porter ’s (1998) model of the value chain is perhaps the most well known value-creating system (Sanchez & Heene, 2004). Porter pro- posed that a firm’s value-creating activities can be divided into primary and support activities. Whereas the primary activities include those that are directly concerned with creating and delivering a product such as outbound logistics, inbound logistics, operations, sales, marketing, and service, support activities involve those that are not directly connected to the production function but may increase the efficiency or effective- ness of the process such as infrastructure, human resource manage- ment, technology development, and procurement (Porter, 1998). Value chain analysis is critical in strategic management because a firm might outperform its competitors by capturing value through cost reduction or differentiation in a specific segment of the chain, better coordination of connected chain activities, or even the creation of new business mod- els that modify these value chain activities. The value chain concept has also been extended beyond individual organizations. It can be applied to the whole value creation system in an industry. Thus, the delivery of a product or service to the end customer (i.e., the extended industry value chain) would involve different parts of a value system such as the sup- plier value chain, channel value chain, organization value chain, and customer value chain, each managing its own value chain while inter- connecting to others (Porter, 1998). The value creation/value chain con- cept, though in need of modifications to apply to certain media products (e.g., intangible content product), is useful for identifying the vital ac- tivities that might lead to competitive advantages, optimizing the link- age between different activities, and identifying possible cost reduction opportunities in a rapidly changing media marketplace.

Competitive Dynamics

Competitive dynamics may be defined as a series of competitive actions and counter responses among firms pursuing superior performance in an industry. Thus, the study of competitive dynamics is the study of how a firm’s moves affect its competitors’ countermoves, competitive advantage, and performance (Smith, Ferrier, & Ndofor, 2001). Consider- ing the changing competitive landscape today—infused by technologi- cal advances, a global market, and changing competitive relationships (e.g., increasing use of alliance strategy)—an understanding of this topic seems to be even more critical. In essence, strategies are formulated to exploit the competitive asymmetries due to different firms’ different resources, capabilities, core competences, and external opportunities and threats in the environments (Hitt et al., 2001).

24 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

Research on competitive dynamics began in the 1980s; many studies investigated competitor response timing/orders, antecedents, predic- tors, consequences of competitive moves and countermoves, and rela- tionships between different kinds of rivalry and performance (Smith et al., 2001). Various models have been proposed to explain the competi- tive dynamics between firms. Most have examined the following com- ponents: the actor (i.e., the move initiator), the action, the responder, the response, drivers for competitive behavior, and the competitive envi- ronment of the industry. In researching the dynamic rivalry, one may examine the market commonality and resource similarity between the actor and responder; the awareness, capability, and motivation for competitive moves; the organizational characteristics of movers (e.g., reputations, dependence on the market, resource availability, size, speed, and innovativeness); likelihood of moves and countermoves by types of actions; types of environment in inducing certain rivalries (e.g., slow-, standard-, or fast-cycle market); and the sustainability of com- petitive advantage as a result of action or response. In general, studies in this area suggest the following (Chen & Hambrick, 1995; Dimmick, 2003; Hitt et al., 2001; Smith et al., 2001):

1. Firms’ awareness of the competitive environment, the resource similarities, and relative characteristics between competitors is linked to the timing, actions, and reactions of the rivalry.

2. The magnitude, scope, and threat of an action is related to the speed and likelihood of response.

3. Organizational characteristics such as size, age, and reputation play a role in rivalry timing and initiation (e.g., smaller firms are more likely to initiate moves and do them quickly).

4. There might be less rivalry when firms compete against one an- other in several product or geographic markets (i.e., multipoint competition or multimarket contact) because of fear of mutual re- taliation.

5. The timing and magnitude of a response is linked to a competitor’s reliance on a particular market.

6. Degrees of rivalry are negatively related to industry characteristics such as conditions of demand, concentration, and barriers to en- try.

7. Because markets evolve over time, competitive dynamics may be examined as evolutionary interactions longitudinally.

Considering the asymmetric resources between many different types of media firms, the necessity of multimarket contact and competition be- tween media conglomerates, and the changing market environment due to technological development, one might garner additional insight by examining the strategies of media firms by applying the perspective of competitive dynamics.

A PRIMER IN STRATEGIC MANAGEMENT I 25

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

Strategic Entrepreneurship

Today’s organizations are in a new landscape filled with threats to exist- ing ways of competition, new opportunities due to innovations, and temporary competitive advantages. Such an environment offers revo- lutionaries (i.e., entrepreneurs) the potential to capture market shares, develop new markets, and develop innovative resources and capabilities (Hitt, Ireland, Camp, & Sexton, 2002). In other words, entrepreneurial strategies are vital for success in today’s media landscape. In fact, media industries are fundamentally shaped by many entrepreneurs who took the risks required to introduce a media product in response to opportu- nities presented by environmental changes. From Disney to CNN to the DISH Network, media entrepreneurs such as Walt Disney, Ted Turner, Charlie Ergen, and many more have offered new products and/or devel- oped new markets. In a sense, strategic entrepreneurship offers an excel- lent framework for investigating how media products evolve and develop over time.

Entrepreneurship is a well-established disciplinary area that is in- creasingly regarded as highly complementary to the study of strategic management. This is because both are primarily concerned with growth and wealth creation, albeit with slightly different emphases (Ireland, Hitt, & Sirmon, 2003). Whereas strategic management is based mostly on the theories of competitive advantage, entrepreneurship often con- centrates on the theories of organizational creativity, innovation, and opportunity recognition and exploitation. Empirically, whereas entre- preneurship has mostly examined small businesses, strategic manage- ment focuses on large businesses (Meyer, Neck, & Meeks, 2002). Integrating entrepreneurial activities with strategic perspectives, stra- tegic entrepreneurship may be defined as the strategic management and deployment of resources for identifying and exploiting opportunities to form competitive advantages and thus superior performance in estab- lished firms or new ventures. In fact, entrepreneurial and strategic ac- tions are complementary and likely achieve the best results when integrated (Hitt et al., 2002).

Scholars have presented various models or frameworks for examining entrepreneurship in a strategic setting. Specifically, Johnson and Van de Ven (2002) suggested that one might utilize the theories in population ecology to study market opportunity recognition, new institutionalism models to examine the establishment of legitimacy for entrepreneurs, or- ganizational evolution theories to consider the subjects of adaptability and fitness of entrepreneurs, and industrial communities notions to ex- plore the issues involved in constructing an industrial infrastructure that facilitates entrepreneurship. Ireland, Hitt, and Sirmon (2003) suggested four dimensions of strategic entrepreneurship for investigation: entre- preneurial mindset, entrepreneurial culture and leadership, the strategic management of resources, and the development of creativity and innova- tion. Specifically, the entrepreneurial mindset is defined as a way of ap-

26 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

proaching business with a focus on uncertainty in order to capture the benefits of uncertainty (McGrath & MacMillan, 2000). Such a mindset enables a firm to proactively and cognitively handle environmental risk and ambiguity because it is oriented toward growth opportunities and promotion of flexibility, creativity, and renewal. Entrepreneurial culture is defined as a set of shared entrepreneurial values that shape the behav- ioral norms and actions of a firm (and its members). The value system might include expectations of creativity, risk taking, occasional failure, learning and innovation, and continuous change. A related concept, en- trepreneurial leadership, is the ability to influence others, nurture the aforementioned culture, and manage resources to both exploit opportu- nities and sustain competitive advantages. Strategic management of re- sources in this context includes the functions of structuring, integrating, and leveraging financial, human, and social capital to enhance entrepre- neurial activities. Finally, the development of creativity and innovation involves the process of bisociation (i.e., the combining of previously unre- lated information or skills) (Koestler, 1964) and results in either disrup- tive (brand-new) innovation or sustaining (improved) innovation (Ireland et al., 2003).

Scholars have suggested that strategic entrepreneurship manifests it- self differently in established firms than in smaller firms or new ven- tures (Ireland et al., 2003). Although established firms are more skilled at developing sustainable competitive advantages, they are often less able to effectively identify new market opportunities. On the other hand, smaller firms or new ventures often excel at recognizing and ex- ploiting new market opportunities, but they are often less capable of sustaining competitive advantages. Nevertheless, entrepreneurial atti- tudes and conduct are important for firms of all sizes to survive and prosper in competitive environments (Barringer & Bluedorn, 1999). The subfield of how large established firms can become entrepreneurial through integration of strategic and entrepreneurial actions is referred to as corporate entrepreneurship.

Hoskisson and Busenitz (2002) linked market entry modes to degrees of market uncertainty and learning distance, recommending entry modes from joint venture, to internal venture, to acquisition for markets with high to low uncertainty and learning distance. Because alliances and joint ventures have been a staple strategy in media industries, it would also be fruitful to investigate strategic entrepreneurship in the context of such strategies, especially the topic of alliance proactiveness, which might create access relationships to resources and capabilities that contribute to the exploitation of opportunities (Sarkar, Echambadi, & Harrison, 2001). Another concept that is especially suitable to incorpo- rate in a media context is entrepreneurial intensity. Scholars have found that firms in turbulent environments tend to be more innovative, risk taking, and proactive (Naman & Slevin, 1993). As the media environment continues to be infused with new technologies such as content digitization and the Internet, it would be interesting to examine how

A PRIMER IN STRATEGIC MANAGEMENT I 27

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

strategic entrepreneurship in the media sectors is influenced by external contexts, in both intensity and approaches (e.g., attitudes and activities).

EMPIRICAL STUDIES IN STRATEGIC MANAGEMENT

To test the main propositions in strategic management, such as firm ef- fects in determining performance; immobile, valuable resources in in- fluencing performance; and the impact of certain corporate strategies (e.g., global/product diversification, mergers, and acquisitions) on per- formance, many empirical studies have been conducted. In general, these studies confirmed that:

1. Firm effects are relatively more important in determining perfor- mance.

2. Many firm resources such as innovativeness, corporate culture, a firm’s history, and employee know-how are effective in influenc- ing firm performance.

3. Only diversification strategies based on valuable, rare, and costly-to-imitate resources generate superior performance.

4. There is a noticeable impact of national differences on firm capabil- ities.

5. Certain resources and combinations of resources produce better performance for alliances.

6. There are no rules for garnering “persistent” superior performance (Barney & Arikan, 2001).

Although many empirical methods of investigation have been adopted for these studies, strategic management researchers have found it challenging to develop ways to empirically test the resource-based view of a firm because valuable resources, by nature, are less observable (Godfrey & Hill, 1995). As previously stated, the resources and capabili- ties that create sustainable competitive advantages are valuable, rare, not substitutable, and imperfectly imitable. Such a definition seems to be fundamentally tautological and presents difficulties in strategy mea- surement and thus causality examination. It becomes even more chal- lenging when intangible, knowledge-based assets are considered. Lockett and Thompson (2001) concluded that causal ambiguity and firm-specific opportunity sets have been the greatest challenges for em- pirical testing in such studies.

In response to such measurement challenges, early scholars focused on examining strategies using in-depth case studies, especially in in- stances in which less tangible resources are involved (Hoskisson et al., 1999). Although one might review a firm or a group of firms in their market context, by adopting detailed field-based case studies that incor- porate both archival and interview data, the lack of large data sets to test theory and apply multivariate statistical tools creates significant challenges for strategic management researchers. It also makes it more

28 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

difficult for media strategy studies to become a more mature, respected scholarly field of study. Finally, because it is difficult to measure many intangible resources, proxy variables such as awards (e.g., Emmys) and salaries (e.g., CEO’s compensation) have been used as measures of many intangible resources (Landers & Chan-Olmsted, 2002; Miller & Shamsie, 1996). Some strategic management researchers have expressed reserva- tions that proxies may not be valid measures for many underlying con- structs (Godfrey & Hill, 1995).

In response to such empirical challenges, some strategy researchers have tried combining quantitative questionnaires and qualitative inter- views to increase the validity and reliability of their measures (Henderson & Cockburn, 1994). Some have suggested a step-by-step approach: First, identify a potential resource; second, examine its prop- erties theoretically based on previous research; third measure the effect of the resource on performance (Deephouse, 2000). Because of the mul- tiplicity of methods needed to identify, measure, and understand firm characteristics, strategy might be best researched as a dynamic or evo- lutionary phenomenon and empirically approached with a combination of longitudinal, in-depth case studies and other quantitative measures.

In terms of the application of statistical techniques, cluster analysis, which groups observations into similar segments, has been used fre- quently in strategic management research since the 1970s. This multivariate technique is often used because the variables in strategy studies are complex and multidimensional. As a result, researchers need some way to identify sets of firms that share commonalities among a set of variables and to find configurations that capture the complexity of organizational reality (Ketchen & Shook, 1996). Nevertheless, cluster analysis has been heavily criticized by scholars in recent years because of its extensive reliance on researcher judgment and its lack of test sta- tistics for hypothesis testing. In fact, many empirical studies in strategic management have failed to find links between group membership and performance. As a result, strategic management scholars recommend limited use of this statistical technique and stress the importance of se- lecting variables inductively. When using this technique, researchers should also pay extra attention to determining and validating the num- ber of clusters (Ketchen & Shook, 1996).

APPLICATIONS OF STRATEGIC MANAGEMENT CONCEPTS TO MEDIA PRODUCTS

The strategic management frameworks and constructs discussed thus far present a fertile ground for both theoretical propositions and empiri- cal investigations from media management and economics scholars who are interested in studying firm behavior and performance. Consid- ering the economic properties reviewed in chapter 1, although some of the concepts might be applicable, some would need to be modified. For

A PRIMER IN STRATEGIC MANAGEMENT I 29

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

instance, “intangible,” “content-based” media products may be stored and presented in various formats. A strategy of “related product diversi- fication,” which extends a media firm’s product lines into related con- tent formats (e.g., print and online content), typically benefits firms by enabling content repurposing, marketing know-how, and sharing of production resources and thus is likely to be preferred over many man- ufactured tangible products. It is also logical for media firms to seek out distribution products and content products that complement each other because the two are inseparable in consumption. Furthermore, because of the importance of cultural sensitivity and understanding of the regu- latory environment, media firms are more inclined to diversify into re- lated product and geographic markets to take advantage of their acquired local knowledge and relationships. The dependency on local communication and media infrastructure may also lead to a strategy that is geographically related (i.e., regionalized). This is because geo- graphically clustered markets are often at similar stages of infrastruc- ture development, and clusters of media distribution systems may lead to cost- and resource-sharing benefits. The dual-revenue source mecha- nism and the public-goods characteristic of media content products also drive firms to offer media content that appeals to the largest possible group of marketable consumers. This is because a larger number of sub- scribers or bigger audience adds to the value of advertising spots or space with minimal incremental costs for the firms. On the other hand, because of the heterogeneous, nonstandardizable, creative characteris- tic of media content products, intangible resources become especially es- sential in building competitive advantages. As a result, small firms that do not have access to a mass audience but that possess unique creative resources still have the opportunity to achieve superior performance. Next, some examples of applying strategic management concepts on media products are presented.

Resource Typology in Media Industries

The property–knowledge resource typology presents a meaningful sys- tem for classifying and analyzing media firms’ resources because knowledge-related resources are particularly important in developing competitive advantages in a media industry where the end product is mostly in the form of “intangible content,” where “creativity” and “in- dustry knowledge” remain the essential elements in the production of the content product, and where “content” is often seen as the key to suc- cess in any media distribution system. Furthermore, because of the fact that today’s media industries are entering a period of unprecedented changes brought about by emerging new technologies such as the Internet and digitization, examinations of knowledge-based resources for media firms are becoming more critical. For example, applying the property–knowledge resource typology, Landers and Chan-Olmsted (2002) studied the broadcast television networks’ changing strategies

30 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

longitudinally as the broadcast market becomes less stable due to many technological developments. The notion of market uncertainty might be another important factor to investigate. As Miller and Shamsie (1996) discovered in their study of Hollywood film studios, both discrete and systemic property-based resources led to superior performance in the stable environment, whereas knowledge-based resources led to superior performance in the uncertain environment.

Landers and Chan-Olmsted (2002) suggested that resources such as affiliate contracts (or franchise agreements for cable television), station ownership, top content or news properties, and content or product copyright might be considered property-based resources, whereas tech- nology management, audience expertise, talent pools, and content multipurposing expertise might be viewed as knowledge-based re- sources. Logically, the list of resources would be somewhat different de- pending on the nature and the value chain of the particular media market. For example, for the newspaper sector, distribution and print- ing properties represent essential property-based resources. Note that knowledge is a difficult resource to measure because of its fluidity. Most strategy studies have used proxies for knowledge-related variables un- der the assumption that firms acquire more knowledge about activities they invest or engage in to a greater extent (McEvily & Chakravarthy, 2002). In the case of media industries, film and television program awards as well as managers’ average tenures have been used as proxy measures for such a variable (Landers & Chan-Olmsted, 2002).

Media Product Taxonomy

As discussed earlier, technological development is constantly changing the degree of substitutability between different types of media products. For example, the increasing application of digitization is blurring radio product consumption patterns as more and more audiences begin lis- tening to radio stations on the Internet. As a result, it might be fruitful to examine the audio product or the providers of the product from the perspective of the consumer rather than of the radio industry. In other words, as technology shifts more control and power to consumers, me- dia strategies and “competitive dynamics” may be evaluated based on consumer rather than industry factors or definitions.

One example would be to review the relative positions of different media firms using consumer-based concepts such as “risk involved” (i.e., time and cost invested) and “degree of involvement.” Chan-Olmsted (2006) proposed such a media product taxonomy. Media products like the Internet, broadcast radio and television, cable televi- sion, books, and magazines are classified based on how involved a typi- cal consumer might be with the specific media product and how much time and cost are required to consume the product (see Fig. 2.1). These factors influence consumers’ perceived risk and thus their assessment of the value of that product. For instance, whereas the Internet, by nature,

A PRIMER IN STRATEGIC MANAGEMENT I 31

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

is a relatively more involved product than broadcast television, pay ca- ble is often perceived to involve more risks and is, therefore, subject to different value scales than the mostly free Internet content product. On the other hand, paid Internet content product is evaluated differently as it moves to the right on the “risks” scale. The taxonomy may be used to assess the competitive dynamics of various firms in a particular media market or a mixture of media markets. It may also be used as a tool for analyzing corporate strategy portfolios. The integrated factors of risks and involvement are only one example of a consumer-based framework for analyzing media products and firms. As technology continues to re- shape the media landscape, strategy scholars need to construct more theoretically sound taxonomies to reflect the changing nature of media products and to take into consideration the factor of consumer choice and consumers’ changing degree of control over the media products they consume.

A Media Strategy Research Framework

Incorporating both the IO and RBV concepts, Chan-Olmsted (2006) pro- posed a system of factors that might affect the formulation and imple-

32 I CHAPTER 2

FIG. 2.1. A proposed media product taxonomy. *This might be paid or personalized online content in which the audience has invested money and/or relatively more time.

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

mentation of strategy in the media industries. This analytical framework integrates both exogenous and endogenous variables and serves as a be- ginning point to stimulate more media strategy inquiries (see Fig. 2.2). Theoretically, a media firm’s strategy (formulation) and its ability to exe- cute that strategy (implementation) are influenced by a combination of external characteristics relating to the general environment and a partic- ular media market in which the media firm operates. General exogenous factors, such as the economy and technological advancement, affect the interplay of the six forces present in a specific media industry (i.e., audi- ence preferences, substitutability between different media products, sup- plier–buyer relationship, in-market competition, and threats from potential entrants), ultimately impacting the strategic behavior of a me- dia firm. The environmental complexity is further complicated by a series of firm capabilities and resources at the business and corporate level, which shape the firm’s strategy. Either property or knowledge based, a media firm’s corporate structure (e.g., its degree of vertical and horizon- tal integration with other media properties, its product and geographical diversification, and its windowing and resource alignment corporate ca- pabilities) along with its specific business unit resources and capabilities (e.g., cross-media integration and marketing) directly determine the type of strategy formulated and implemented. Adding the essential factors of strategic leadership and entrepreneurship, along with the consideration of competitive dynamics in an industry, the framework presents a useful starting point for analyzing the antecedents of strategic behavior and predictors of performance.

FINAL THOUGHTS

This chapter has examined an array of strategic management theories for further applications to media products. For research ideas, media man- agement and economics researchers may also want to survey the schol- arly work published in the top strategy research academic journals: Strategic Management Journal, Academy of Management Journal, Academy

A PRIMER IN STRATEGIC MANAGEMENT I 33

FIG. 2.2. A system of factors that affect strategy formulation and implementation.

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

of Management Review, the Journal of Management, and the Journal of Management Studies (Park & Gordon, 1996). The fluidity of media indus- tries, due to the continuous changes in communication technology, cre- ative development, and audience preferences, encourages the introduction, incorporation, and testing of new paradigms. In fact, we believe that a multiplicity of theories is needed in this area of study be- cause media management and economics, by nature, are multidimen- sional disciplines. Chapters 5 to 9 empirically showcase some additional applications of the concepts discussed here in a media industry setting.

REFERENCES

Alchian, A. A., & Demsetz, H. (1972). Production, information costs, and eco- nomic organization. American Economic Review, 62(5), 777–795.

Bain, J. S. (1968). Industrial organization. New York: Wiley. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal

of Management, 17(1), 99–120. Barney, J. B., & Arikan, A. M. (2001). The resource-based view: Origins and im-

plications. In M. A. Hitt, R. E. Freeman, & J. Harrison (Eds.), The Blackwell handbook of strategic management (pp. 124–188). Oxford, England: Blackwell.

Barringer, B. R., & Bluedorn, A. C. (1999). The relationship between corporate enterpreneurship and strategic management. Strategic Management Journal, 20(5), 421–444.

Black, J. A., & Boal, K. B. (1994). Strategic resources: Traits, configurations and paths to sustainable competitive advantage. Strategic Management Journal, 15(special issue), 131–148.

Chaffee, E. (1985). Three models of strategy. Academy of Management Review, 10(1), 89–98.

Chandler, A. (1962). Strategy and structure. Cambridge, MA: MIT Press. Chan-Olmsted, S. M. (2006). Issues in strategic management. In A. B. Albarran,

S. M. Chan-Olmsted, & M. O. Wirth (Eds.), Handbook of media management and economics (pp. 161–180). Mahwah, NJ: Lawrence Erlbaum Associates.

Chatterjee, S., & Harrison, J. (2001). Corporate governance. In M. A. Hitt, R. E. Freeman, & J. Harrison (Eds.), The Blackwell handbook of strategic manage- ment (pp. 23–46). Oxford, England: Blackwell.

Chen, M. J., & Hambrick, D. C. (1995). Speed, stealth, and selective attack: How small firms differ from large firms in competitive behavior. Academy of Man- agement Journal, 38(2), 453–482.

Collis, D. J., & Montgomery, C. A. (1995). Competing on resources: Strategy in the 1990s. Harvard Business Review, 73(4), 118–129.

Das, T. K., & Teng, B. (2000). A resource-based theory of strategic alliances. Jour- nal of Management, 26(1), 31–61.

Dean, J. W., Jr., & Sharfman, M. P. (1996). Does decision making matter: A study of strategic decision making effectiveness. Academy of Management Journal, 39(2), 368–396.

Deephouse, D. L. (2000). Media reputation as a strategic resource: An integra- tion of mass communication and resource-based theories. Journal of Manage- ment, 26(6), 1091–1113.

Dess, G. G., Lumpkin, G. T., & Taylor, M. (2004). Strategic management: Creating competitive advantages. Maidenhead, England: McGraw-Hill Education.

34 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

Dimmick, J. (2003). Media competition and coexistence: The theory of niche. Mahwah, NJ: Lawrence Erlbaum Associates.

Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.

Godfrey, P. C., & Hill, C. W. (1995). The problem of unobservables in strategic management research. Strategic Management Journal, 16(7), 519–535.

Grant, R. M. (1991). The resource-based theory of competitive advantage: Im- plications for strategy formulation. California Management Review, 33(3), 114–135.

Habann, F. (2000). Management of core resources: The case of media enter- prises. International Journal on Media Management, 2(1), 14–24.

Hall, R. (1992). The strategic analysis of intangible resources. Strategic Manage- ment Journal, 13(2), 135–144.

Henderson, R., & Cockburn, I. (1994). Measuring competence? Exploring firm effects in pharmaceutical research. Strategic Management Journal, 15(special issue), 63–84.

Hitt, M. A., Ireland, R. D., Camp, S. M., & Sexton, D. L. (Eds.). (2002). Strategic entrepreneurship: Creating a new integrated mindset. Oxford, England: Blackwell.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2001). Strategic management: Com- petitiveness and globalization. Cincinnati, OH: South-Western College.

Hofer, C. W., & Schendel, D. (1978). Strategy formulation: Analytical concepts. St. Paul, MN: West.

Hollywood wired. (2001, January). Multichannel News International. Retrieved June 21, 2002, from http://www.onesource.com

Hoskisson, R. E., & Busenitz, L. W. (2002). Market uncertainty and learning dis- tance in corporate entrepreneurship entry mode choice. In M. A. Hitt, R. D. Ireland, S. M. Camp, & D. L. Sexton (Eds.), Strategic entrepreneurship: Creating a new integrated mindset (pp. 151–172). Oxford, England: Blackwell.

Hoskisson, R. E., Hitt, M. A., Wan, W. P., & Yiu, D. (1999). Theory and research in strategic management: Swings of a pendulum. Journal of Management, 25(3), 417–456.

Ireland, R. D., Hitt, M. A., & Sirmon, D. G. (2003). A model of strategic entrepre- neurship: The construct and its dimensions. Journal of Management, 29(6), 963–989.

Johnson, S., & Van de Ven, A. (2002). A framework for entrepreneurial strategy. In M. A. Hitt, R. D. Ireland, & S. M. Camp (Eds.), Integrating strategy and en- trepreneurship perspectives (pp. 66–85). New York: Wiley.

Ketchen, D. J., & Shook, C. L. (1996). The application of cluster analysis in stra- tegic management research. Strategic Management Journal, 17(6), 441–458.

Koestler, A. (1964). The act of creation. New York: Dell. Landers, D., & Chan-Olmsted, S. M. (2002, April). Assessing the changing net-

work television market: A resource-based analysis of broadcast television net- works. Paper presented at the meeting of the Media Management and Sales Division of the Broadcast Education Association, Las Vegas, NV.

Liebeskind, J. P. (1996). Knowledge, strategy, and the theory of the firm. Strate- gic Management Journal, 17(special issue), 93–109.

Liedtka, J. M. (2001). Strategy formulation: The roles of conversation and de- sign. In M. A. Hitt, R. E. Freeman, & J. Harrison (Eds.), The Blackwell handbook of strategic management (pp. 70–94). Oxford, England: Blackwell.

Lockett, A., & Thompson, S. (2001). The resource-based view and economics. Journal of Management, 27(6), 723–755.

A PRIMER IN STRATEGIC MANAGEMENT I 35

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

Lynch, R. (1997). Corporate strategy. London: Pitman. McEvily, S. K., & Chakravarthy, B. (2002). The persistence of knowledge-based

advantage: An empirical test for product performance and technological knowledge. Strategic Management Journal, 23(4), 285–305.

McGahan, A. M., & Porter, M. E. (1997). How much does industry matter, re- ally? Strategic Management Journal, 18(special issue), 15–31.

McGrath, R., & MacMillan, I. C. (2000). The enterpreneurial mindset. Boston: Harvard Business School Press.

Meyer, G. D., Neck, H. M., & Meeks, M. D. (2002). The entrepreneurship: Strategic management interface. In M. A. Hitt, R. D. Ireland, S. M. Camp, & D. L. Sexton (Eds.), Strategic entrepreneurship: Creating a new integrated mindset (pp. 19–44). Oxford, England: Blackwell.

Miles, R. E., & Snow, C. C. (1978). Organizational strategy, structure, and process. New York: McGraw-Hill.

Miller, D., & Shamsie, J. (1996). The resource-based view of the firm in two en- vironments: The Hollywood firm studios from 1936 to 1965. Academy of Management Journal, 39(3), 519–543.

Mintzberg, H. (1994). The fall and rise of strategic planning. Harvard Business Review, 72(1), 107–114.

Mintzberg, H., Ahlstrand, B., & Lampel, J. (1998). Strategy safari: A guided tour through the wilds of strategic management. New York: The Free Press.

Mintzberg, H., Raisinghani, D., & Theoret, A. (1976). The structure of unstruc- tured decision process. Administrative Science Quarterly, 21(2), 246–275.

Mintzberg, H., & Westley, F. (2001). Decision making: It is not what you think. MIT Sloan Management Review, 42(3), 89–93.

Naman, J., & Slevin, D. (1993). Enterpreneurship and the scope of fit: A model and empirical tests. Strategic Management Journal, 14(2), 137–153.

Nutt, P. C. (2001). Strategic decision-making. In M. A. Hitt, R. E. Freeman, & J. Harrison (Eds.), The Blackwell handbook of strategic management (pp. 35–69). Oxford, England: Blackwell.

Park, S. H., & Gordon, M. E. (1996). Publication records and tenure decisions in the field of strategic management. Strategic Management Journal, 17(2), 109–128.

Peteraf, M. A. (1993). The cornerstones of competitive advantage: A re- source-based view. Strategic Management Journal, 14(3), 179–190.

Picard, R. G. (2002). Media firms: Structures, operations and performance. Mahwah, NJ: Lawrence Erlbaum Associates.

Porter, M. (1980). Competitive strategy. New York: The Free Press. Porter, M. (1985). Competitive advantage: Creating and sustaining superior perfor-

mance. New York: The Free Press. Porter, M. (1996). Toward a dynamic theory of strategy. In R. P. Rumelt, D. E.

Schendel, & D. J. Teece (Eds.), Fundamental issues in strategy: A research agenda (pp. 423–461). Cambridge, MA: Harvard Business School Press.

Porter, M. E. (1998). On competition. Boston: Harvard Business School Press. Sanchez, R., & Heene, A. (2004). The new strategic management: Organization,

competition, and competence. New York: Wiley. Sarkar, M., Echambadi, R., & Harrison, J. S. (2001). Alliance enterpreneurship

and firm market performance. Strategic Management Journal, 22(6/7), 701–711.

Sharfman, M. P., & Dean, J. W., Jr. (1998). The effects of context on strategic de- cision making processes and outcomes. In V. Papadakis & P. Barwise (Eds.), Strategic decisions (pp. 179–203). Boston: Kluwer Academic.

36 I CHAPTER 2

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .

Slater, S. F., & Olson, E. M. (2000). Strategy type and performance: The influence of sales force management. Strategic Management Journal, 21(8), 813–829.

Smith, K., Ferrier, W., & Ndofor, H. (2001). Competitive dynamics research: Cri- tique and future directions. In M. A. Hitt, R. E. Freeman, & J. Harrison (Eds.), The Blackwell handbook of strategic management (pp. 315–361). Oxford, Eng- land: Blackwell.

Vi a c o m Te l e v i s i o n S t a t i o n s G r o u p . ( 2 0 0 3 ) . Av a i l a b l e f r o m http://www.viacom/prodbyunit.tin

Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(2), 171–180.

Wright, P. M., Dunford, B. B., & Snell, S. A. (2001). Human resources and the re- source based view of the firm. Journal of Management, 27(6), 701–723.

Zahra, S. A., & Pearce, J. (1990). Research evidence on the Miles–Snow typology. Journal of Management, 16(4), 751–768.

A PRIMER IN STRATEGIC MANAGEMENT I 37

Chan-Olmsted, S. M. (2005). Competitive strategy for media firms : Strategic and brand management in changing media markets. Retrieved from http://ebookcentral.proquest.com Created from ashford-ebooks on 2019-02-24 07:30:38.

C op

yr ig

ht ©

2 00

5. R

ou tle

dg e.

A ll

rig ht

s re

se rv

ed .