Sunday, March 02, 2008
A New Tool for Resurrecting an Old Theory of the Firm
It's one of the oldest, most fundamental ideas in management theory: that executives should understand how the many distinct functional components of a firm -- production, distribution, product mix, human resources -- interrelate to achieve the proper fit.
For a firm to establish an effective, overarching strategic position relative to its competitors -- what management theorists call "firm positioning" -- the varied functional elements should, ideally, be complementary and reinforcing.
In recent years, however, this notion of comprehending the "part-whole" relationship of the firm fell out of favor as thinkers turned to other concepts to analyze and explain why organizations are effective. One well-known concept that emerged was the idea that companies could turn to core competencies to attain competitive advantage.