Strategy Competition

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By Clive Sutton (auth.)

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If it is to effect change, management must have information about what is happening, sufficient knowledge to appraise and select alternatives, and the means to implement its choices. In large organisations both the initial flow of information and the instructions for implementation may be distorted as they are gathered or disseminated more widely through many people and through many layers in the organisation; and at the same time managers with bounded rationality may find it more difficult to handle some of the problems which become more complex as the organisation grows larger.

This leads on to the different strengths and weaknesses of large, medium and small firms and the way in which their different resource bases should be reflected in different strategies. These differences point to the complementarity of firms of different size, which must be reflected further in their strategies. ENDURING ADVANTAGES OF SIZE Economies of Scale The nature of economies of scale was discussed in general terms on pages 22-3 above. These advantages may arise in any or all of the firm's operations; in purchasing, distribution, marketing and research, for example, as well as in production.

Stature In other cases even though there may be few technical economies of scale in production, the trend towards globalisation may favour firms which are large enough to offer products or services on a global scale. We might refer to this as the firm's stature rather than its scale. The potential advantages include the ability to bring together a large pool of financial resources, possibly a powerful brand, worldwide networks and perhaps even political influence. Consider, for example, the firms specialising in international reinsurance, which accept insurance business from the primary insurers who sell insurance to the general public, and so enable risks to be spread so that the impact of an exceptional loss or series of losses can be borne more easily.

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