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Faculty Bookshelf

Management Strategy offers method to tap talent, market

by Ed Finkel

Kellogg School Professor Daniel Spulber’s eighth book helps MBA students see the ‘best match’ of organizational abilities and market opportunities

Many dot-coms that went dot-bomb a few years ago saw promising market opportunities but did not have the organizational capacity to take advantage of them. Many American manufacturers whose gears have ground to a halt recently have an abundance of talent but lack a clear sense of where their markets lie.

So says Kellogg School Professor Daniel Spulber, author of the new textbook Management Strategy (McGraw Hill, 2003), which gives MBA students a five-step approach for formulating successful corporate strategy. A key to that success, Spulber says, is analyzing a firm’s internal and external context.

“ There’s some debate in management strategy about whether we’re guided by markets or organizational abilities,” says Spulber, who sees that debate as nonproductive. Ideally, he says, “the manager chooses the best combination of organizational abilities and market opportunities — what I call in the book, ‘the best match.’”

Management Strategy is packed with vignettes about companies who have made this match well and not so well. Spulber, who teaches International Business Strategy and has a distinctly global focus, puts the Mexican construction materials firm Cemex high on his list of successes. “They’ve been very successful at matching their organizational skills, in this case in trading and in manufacturing, with marketing opportunities all around the world,” he says.

The first step in Spulber’s approach is to set goals. “There’s a lot of confusion about what goals are. This book tells you how to go through the process of goal selection,” he says. Having done that, the manager should perform an external analysis that examines customers, suppliers, competitors and partners as well as an internal analysis that looks at structure, performance, abilities and resources, he believes.

The manager should next figure out how the company can create competitive advantage, including the traditional aims of cost and differentiation advantage along with a third type for which Spulber coined the term transaction advantage. “That’s where the company lowers transaction costs,” he says. “These companies learn how to make money by saving you time, whether it’s a superstore or a convenient retail experience.”

While the concept “time is money” may be as old as markets themselves, the search for transaction advantage has intensified considerably in recent years, especially given online transactions, Spulber says. He points to eBay as perhaps the iconic example of that phenomenon. “They’ve built a gigantic business just on providing convenience in transactions. That’s a critical example,” he says, “but the principle is not confined to the Internet. It’s any company that draws you in by sheer convenience.”

Spulber’s text also outlines a method for formulating competitive strategy and reshaping the organizational structure accordingly. “To be an effective leader, you have to be able to set a direction and bring others along with you,” he says. “People can have a wealth of tools, but they may not be able to sit down with a blank piece of paper and say, ‘All right. How do I start?’”

Management Strategy is the eighth book and second textbook for Spulber, a Kellogg School professor since 1990 and founding chair of the Kellogg International Business and Markets Program.

“ It’s the culmination of my career, inspired the most by my time here at Kellogg,” he says. “It also reflects Dean [Dipak] Jain’s exhortation to faculty to write more textbooks.”

“ We talk generally about communicating what we discover, making it accessible. Textbooks are an important part of that.”

About Professor Spulber
Prof. Spulber is an economist and expert in international business. He is also a professor of law and director of the Kellogg School International Business and Markets Program, and founding editor of the Journal of Economics & Management Strategy.

Prof. Spulber’s research includes the areas of industrial organization, microeconomic theory, management strategy, regulation and energy economics. His numerous articles have been published in such journals as the American Economic Review, Quarterly Journal of Economics, Journal of Economic Theory, Rand Journal of Economics, International Economic Review and the Harvard Journal on Law and Public Policy.

Representative publications include Management Strategy (McGraw Hill, 2003); Famous Fables of Economics: Myths of Market Failures (Basil Blackwell, 2002); and Market Microstructure: Intermediaries and the Theory of the Firm (Cambridge UP, 1999).

©2002 Kellogg School of Management, Northwestern University