Relating Porter's configuration/coordination framework to competitive strategy and structural mechanisms: analysis and implications

Journal of Management, Winter, 1993 by Allen Morrison, Kendall Roth

As more and more industries experience declining trade barriers, rising technological intensity, and converging international demand patterns, businesses have moved to standardize production and integrate operations across national boarders (Ghoshal, 1987; Kogut, 1985; Yip, 1992). One well cited tool for conceptualizing these emerging patterns of international

competition has    been the configuration/coordination framework proposed by
Porter (1986). The    configuration/coordination framework identifies both

geographic positioning and the integration of value activities as determinants of competitive advantage in global industries. This use of the value chain to

examine the source and        transferability of competitive advantages has
stimulated a growing body of      research on the relationship between core

competencies and shifting patterns of international competitiveness (Hamel & Prahalad, 1989; Prahalad & Hamel, 1990; Tallman, 1991; Kogut & Kulatilaka, 1992). The basic premise behind the configuration/coordination framework is that businesses should alter their emphasis on configuration and coordination according to variations in industry pressures and differences in firm-specific competencies. How a business decides to configure and coordinate its activities ultimately determines its international strategy. Porter argues that there are four broad combinations of configuration and coordination and

hence four        variations in international strategy. Pursuing a particular
combination of      configuration/coordination produces competitive advantages

which are "additive to competitive advantages a firm derives/possesses from

its domestic market     positions" (Porter, 1986, p. 23). As a result,
configuration and coordination   are represented by Porter as mid-level
constructs, supportive of low cost and   differentiation-based competitive

strategy while also being themselves supportedby formal structural mechanisms.

The objective of this research is to evaluate the effectiveness of the configuration and coordination framework in characterizing business strategies in global industries. Recognizing that all businesses have the capacity to control the positioning of value activities, the paper examines whether common patterns of configuration and coordination are emphasized and if so whether these patterns approximate Porter's international strategy types. The research also examines the relationship between configuration and coordination and higherorder low cost and differentiation-based competitive strategies. Finally, this article explores the relationship between patterns of

configuration and         coordination and the use of supportive structural
mechanisms including          centralization, formalization, and
specialization. By examining the role        configuration/coordination play
in supporting competitive strategy,             differentiating international
strategy, and providing order to the use of       structural mechanisms, the
paper provides a number of extensions to our         understanding of strategy

content in global industries. This article is organized in four sections. The first section develops the theoretical foundations of the study. The nature of global industry imperatives is more completely discussed as are the foundations of competitive

strategy,    configuration/coordination and structural mechanisms. Based on a
synthesis of   these perspectives, hypotheses are generated that describe the
relationship     between competitive strategy, international strategy, and

structural mechanisms.The second section describes the design of the study,

including research        methodology and data analysis. The third section
presents the results of the    analysis according to the hypotheses generated.

The final section discusses the findings and provides several extensions to the configuration/coordination framework.

Conceptual Framework

Much of the existing research on business strategies in global industries draws heavily from the industrial organization (IO) perspectives of competition.

Within the IO school, the integration-responsiveness (IR) framework has become an invaluable tool in characterizing both industry pressures and the strategic responses of businesses (Doz, Bartlett, &

Prahalad, 1981; Ghoshal, 1987;        Prahalad & Doz, 1987; Roth & Morrison,
1990; Kobrin, 1991). The IR framework    identifies two concurrent imperatives
facing businesses: pressures for global   integration and pressures for local

responsiveness. Global integration pressuresare industry forces that compel businesses to coordinate activities to maximize the collective organization in the world-wide pursuit of competitive advantage. Industries structurally

integrated across the major national markets of the     world have been
broadly referred to as "global industries." Imperatives for     local
responsiveness, in contrast, necessitate the differentiation of company   o

fferings to meet local market needs. Industries dominated by pressures for local responsiveness have been broadly referred to as "multidomestic industries."