abstract – Euromot 2006
Paper title: Towards a Narrowly Functional Strategic Focus

Purpose of the paper

The purpose is to test hypothesis put forward by Larsson & Lundberg in “Konsekvenser av ökad elektronisk handel”, that electronic interaction between companies facilitates the creation of new corporate structures. This hypothesis stated that, through electronic interaction, which can be performed at a lower cost than the manual exchange of information, companies will be able to focus on a more narrow set of core competencies than previously.
Related work

The primary sources are the following works by Larsson & Lundberg:

“The Transparent Market” (Palgrave Macmillan, Basingstoke 1998)
“Den transparenta ekonomin” (SNS Förlag, Stockholm 2000)
“Konsekvenser av ökad elektronisk handel” (IT-Kommissionen, Stockholm 2000)

In these works the authors foretold a development of e-business, which would lead to increased competition and price pressure in electronic markets, new corporate structures among companies that participated in electronic interaction internally in their own organizations and externally with customers and suppliers.

The hypothesis that will be tested puts forward the following typical areas of specialization in the future:

We also draw on other contributions within e-business theory, the resource based view of business strategy and transaction cost theory.


Design/methodology/approach

The hypothesis will be tested through three different case studies from three different industries.

Findings

These case studies indicate that the development goes in the direction of more narrowly defined core competencies, and that electronic interaction within and between organizations facilitates this development.

Electronic interfaces are sometimes complex and costly to set up, but once they have been set up, it becomes possible to exchange large volumes of information at a very low cost. Previously, complex information exchanges generally involved manual communication within an organization. With electronic interaction, it becomes less difficult and expensive to have increasingly complex interaction between organizations.


Research implications/limitations

The research presented in the article indicates that electronic interaction within and between organizations may have consequences that have not yet been in focus in the research on electronic business and electronic commerce.

The cost of information exchange may be one of the determinants of where borders are drawn between organizations. A more narrow strategic focus for companies may also have implications for future strategy development, in that more narrowly focused companies, with more narrowly focused sets of resources, may find it more difficult in the future to move to new strategic directions.

Practical implications

It may be tempting for managers to focus on a narrow set of core competencies, within production, logistics, administration etc, and it may have substantial short term benefits. However, it may also limit the opportunities for future development and it may sometimes cause more intense competition on price, as companies have to compete against increasingly similar competitors, that are also narrowly focused in a particular area.


Originality/value of the paper

The paper brings up a hypothesis that has previously not been published in English and tests this through case studies that are highly up-to-date. The hypothesis in itself was made in the early days of e-business development (published in 2000) and as far as the authors know, a similar idea has not yet been put forward.