Effects of Dynamic Strategies on Capital Market Performance, is a study of three different hypotheses that “make different assumptions on the rationality of decision maker and the dynamics of the competitive environment” (Effects of Dynamic Strategies on Capital Market Performance. pg 304). This study will help the organization make better decisions in the future that could put the company ahead of its competitors. By conducting the study, the organization will have a better understanding of where to transfer resources to increase market share.
The study conducts a hypothesis approach. They have tested a total of ten hypotheses across three different fields: resource based explanations, market based explanations, and competence based explanations.
The first two hypotheses are resource based theories. These hypotheses state that if external factors show the industry the firm is in, the faster they are able to recover the better chance they have at increasing their competitive position. For example, in a case of technological change in smart phone batteries where a firm A can increase batter life to 24 hours of constant use, if the competition, firm X,Y, and Z does not do anything about it quickly, firm A can jump ahead and better their position.
Hypothesis 3-5 are market based. These hypotheses test a firm’s willingness to react to their competitors. If firm X, Y, and Z are all moving in one direction, then firm A should be able to react to the situation. For example, Apple making an IPad, their competitors followed by making similar products at a cheaper price. Some firms provided different features, but overall the same product.
Hypotheses 6-10 are competence based. These hypotheses test an increase of resources to the areas in which the firm is striving. If firm A has a great training program, they should continue to make it better. Upgrading their strength can increase the firm’s competitive position.
This study has shown that a combination of several studies needs to be combined in order to have effect on the market rise above competitors. A combination from all three areas should be incorporated by the firm who wishes to conduct the study. The study conducted needs to increase their sample, since they were only testing within the automobile industry. Conducting a study like this, a company can increase the value. They can also decrease possible performance discounts. A company who has performance below industry average should take on the risk and conduct the study for themselves.
Practicing managers/ executives should conduct a study like this if their performance is below industry average, as stated above. The cost of the study can outweigh the added sustainable value to the firm.
Reference:
Heike Proff, Heike, and Thomas M. Fojcik. "Effects of Dynamic Strategies on Capital Market." International Journal of Management 4th ser. 28 (2011): 304-18. Business Source Complete. Web. 22 July 2012. <http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=6798da87-940a-498b-a6a1-214486a305d5%40sessionmgr110&vid=5&hid=104>.
Gilbert,
ReplyDeleteTesting the market in different areas is a great way to learn about the industry and the market they are in. Yet, as you stated the cost of the study can outweight the value of the firm, but I do agree that if the comapny is below the industry average they should consider performing the study.
Gilbert,
ReplyDeleteThis is a great article especially because I can relate it to the Glo-Bus simulation game. I agree with you and Jeanette that if a company is performing below industry average that they should at least attempt the recommendations of this study.
Hi Gilbert,
ReplyDeleteI thought it was interesting that one of the conclusions was that more than one study might be needed to gain a good perspective of the market, and what will be necessary for the company to be more competitive. Like Sara, I feel as if your article selection makes more sense after participating in the Glo-Bus simulation. I have a much deeper appreciation for competitive market analysis after the simulation. The dynamics of competing for market share proved very challenging, and trying to predict the actions of competitors to find the best strategy often took multiple studies to come to a conclusive decision. I can honestly say I understand the frustration of spending so much energy on a decision that seems to have a lot of promise, only to have it fail when the dynamics of competition in the market are applied with planned vs actual. Thank you for sharing this article.