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Explains relationships between asset specificity, holdup, and vertical integration. In particular, it emphasizes solutions to the holdup problem through vertical integration and contracting.

Many companies today are searching for growth. But how and where should they look? Breaking compromises can be a powerful organizing principle. Even in the most mature businesses, compromise breakers have emerged from the pack to achieve breakaway growth--far outpacing the rest of their industry. Examples include Chrysler Corp., Contadina, CarMax, and the Charles Schwab Corp. Compromises are concessions customers are forced to make. Unlike trade-offs, which are the legitimate choices customers make between different product or service offerings, compromises are imposed. The authors propose a number of alternative approaches to finding the compromises hidden in any business.

A basic premise of strategy is that superior profits occur when a corporation secures favorable positions in attractive industries, and pursues economies of scope across business units. This note draws on research that documents the importance of industry, positioning, and corporate-parent effects on profitability. The research shows differences in the influence of the effects for high and low performers, and differences for firms that are in the process of achieving and sustaining performance.

Focuses on the difficulty established companies face when confronted with disruptive technological innovations. The power that their prior asset investments, their cost structures, and their customers have in constraining their investment and innovation decisions are clearly illustrated. Rewritten version of an earlier case.

Designed to illustrate the complexity of buyer-seller arrangements in an established industry. When movie studios negotiate with theater operators to show new films, the costs to the studios of making the films are largely sunk. Similarly, the costs to the theaters of showing films are also sunk. Thus, both parties to the exchange have high bargaining power and are vulnerable to hold-up. Allows students to identify the implications for industry structure. In particular, the case highlights the recent trend toward multiplexes and small screen sizes.

Describes U.S. antitrust policy, including major judicial decisions and their impact on competitive strategy. Omits information on the history of antitrust policy and on the specific prohibitions of the various acts.

Perhaps no other article published in the management literature has had the impact of Richard Pascale's piece on the "Honda Effect" that was published in the Spring 1984 issue of the California Management Review. This now classic article has stimulated considerable debate over the role and value of corporate strategy in business decision making--which is the subject of this forum. This special collection of essays includes an abridged version of Pascale's original article ("Perspectives on Strategy: The Real Story Behind Honda's Success"), an exchange of correspondence between Henry Mintzberg and Michael Goold, and new essays by Richard Rumlet, Michael Goold, and Richard Pascale, who revisits his own original article as well as this whole debate.

Our understanding of how markets and businesses operate is based on the assumption of diminishing returns: products or companies that get ahead in a market eventually run into limitations so that a predictable equilibrium of prices and market shares is reached. The theory was valid for the bulk-processing, smokestack economy of Alfred Marshall's day. But in this century, Western economies have gone from processing resources to processing information, from the application of raw energy to the application of ideas. The mechanisms that determine economic behavior have also shifted--from diminishing returns to increasing returns. Increasing returns are the tendency for that which is ahead to get further ahead and for that which is losing advantage to lose further advantage. If a product gets ahead, increasing returns can magnify the advantage, and the product can go on to lock in the market.

In many companies, strategy making is an elitist procedure and "strategy" consists of nothing more than following the industry's rules. But more and more companies, intent on overturning the industrial order, are reviewing those rules. What can industry incumbents do? Either surrender the future to revolutionary challengers or revolutionize the way their companies create strategy. What is needed is not a tweak to the traditional strategic-planning process, but a new philosophical foundation: strategy is revolution. The author offers ten principles to help a company think about the challenge of creating truly revolutionary strategies.

Over the past decade, business units have increasingly taken the role of strategy formulation away from corporate headquarters. The change makes sense: business units are closer to customers, competitors, and costs. Nevertheless, business units can fail, just as headquarters once did, by losing their focus on the organization's priorities and capabilities. The author offers a method for refocusing companies that he calls the strategic-renewal process. The principles behind the process are straightforward, but its execution demands extensive data, rigorous analysis, and the judgment of key decision makers. However, when applied with diligence, it can produce a strategy that yields both growth and profit.

This is an MIT Sloan Management Review article. Although few would deny that vision serves a critical role in today's organizations, in practice, most managers are intimidated and frustrated by the challenge of developing one. The author explores the notion of vision by first explaining how and why visions work. He presents a template, tested in organizations representing the corporate, nonprofit, and public sectors, that outlines the principal themes necessary for an effective vision. Because not all great visions succeed, the author analyzes why they sometimes fail.

XcelleNet, a $35 million system software company based in Atlanta, was founded in 1986 to address the computing needs of a class of remote and mobile users and data that were rarely connected to a network. Though the clear first mover and leader in the remote enterprise computing segment in 1996, XcelleNet and its market had been stalled by successive waves of networking technology--remote LAN Access, Groupware, and the Internet/Intranet. The company's founder and CEO, Dennis Crumpler, must formulate a strategy for capitalizing on XcelleNet's first-mover advantage and responding to the opportunities created by these emerging technologies.

A leading Indian pharmaceutical company reacts to changes in its industry by trying to reposition along several dimensions from developing markets to developed ones, from bulk drugs toward pharmaceuticals in dosage forms, and from reverse-engineering products developed by others toward original research.

Bombardier, a Canadian manufacturer of passenger railcars and market leader in the United States, faces aggressive competition from a new entrant, U.S.-owned Morrison Knudsen, that has come into the industry with closely related capabilities in engineering and transportation construction. Bombardier must decide is how to respond to the loss of market share and the strategic threat posed by the new competitor.

The notion of community has been at the heart of the Internet since its early days, when scientists used it to share data, collaborate on research, and exchange messages. But how can businesses best use its community-building capabilities? Not merely by putting their products or services on-line, the authors contend. Real value will come from providing people with the ability to interact with one another--from satisfying their multiple social needs as well as their commercial needs. Companies that create strong on-line communities will command customer loyalty to a degree hitherto undreamed of and consequently, will generate strong economic returns. The authors present four different types of community: communities of transaction, interest, fantasy, and relationship.

Describes the competitive position of Arborite, a Canadian manufacturer of high-pressure laminates (HPL) (a product sold under the Formica name in the United States). Arborite's market share has slipped, and a new general manager must evaluate whether a change in strategy is warranted. Provides detailed information for Arborite and its competitors on the costs of performing the activities necessary to manufacture and market HPL.

Canon is one of the leading innovators in the world. This case describes the processes by which Canon manages the flow of ideas from basic science to new products, and how it harnesses product innovation to a strategy of diversification.

Describes the opportunities that confront the African Communications Group, an entrepreneurial organization that plans to introduce a wireless pay-phone system in Tanzania. Provides a foundation for the analysis of value creation and of value capture. The possibility of entry by other companies, the presence of a large supplier, and uncertainties about demand all create important tradeoffs for the new venture.

Will banks as we know them continue to exist in the twenty-first century? Today other financial institutions are usurping the roles traditionally played by banks--and banks themselves are reconsidering the services they offer. Some have narrowed their focus, while others are broadening their product offerings. The authors show how a functional perspective developed by the Global Financial System Project at the Harvard Business School provides a framework for explaining the changes under way and helps predict how the future will evolve.

Two entrepreneurs face a tough decision when confronted with disappointing test results from the medical application they have chosen to commercialize their innovative process technology. They must decide whether to redesign the technology's current lead-application or to change applications altogether.