Global business strategies in crisis

Contributions to Management Science

Ümit Hacioğlu

Hasan Dinçer

Nihat Alayoğlu Editors

Global Business

Strategies in

Crisis

Strategic Thinking and Development

Contributions to Management Science

More information about this series at http://www.springer.com/series/1505

U¨ mit Hacio
glu • Hasan Dinc¸er • Nihat Alayo
glu

Editors

Global Business Strategies

in Crisis

Strategic Thinking and Development

Editors

U¨ mit Hacio
glu

Istanbul Medipol University

Beylikduzu, Istanbul

Turkey

Hasan Dinc¸er

Istanbul Medipol University

Eyup, Istanbul

Turkey

Nihat Alayo
glu

Istanbul Medipol University

Zeytinburnu, Istanbul

Turkey

ISSN 1431-1941 ISSN 2197-716X (electronic)

Contributions to Management Science

ISBN 978-3-319-44590-8 ISBN 978-3-319-44591-5 (eBook)

DOI 10.1007/978-3-319-44591-5

Library of Congress Control Number: 2016959553

© Springer International Publishing AG 2017

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The views expressed in this book are those of the authors, but not necessarily of the publisher

and editors.

Foreword

The systemic indicators of the world are artificial but humanistic, and their vari￾ability is as crucial as their multidimensionality. Hence, apart from both the natural

and created indicators, the establishment of social and technical systems by utiliz￾ing those already available and the breakdown of this system can stem from only

rational and/or emotional human genius. Social and systemic behaviors derive from

this ability, and they manage, conduct, and monitor that which is already

established. Considering the number of foundations which are widely observed,

most commonly organizations and businesses, and the sociogram in which they are

mapped, we can imagine what kind of social network we are in right now. The

reason I have used the term imagination is that we can only try to visualize this

quantitativeness. Therefore, we live in a world that is surrounded by organizations

and businesses and this can influence, direct, and change our behaviors.

The faults mentioned above are directly related to the life span and durability of

these social and technical systems, and solutions for these are qualified enough to be

planned. Thus, texts, just as medicine prospectuses, can be considered and

documented in terms of technical systems. However, this situation has a feature

which can be implemented in a more routine and predictable scale. Social systems

represent a much more problematic area in terms of the perspectives we focus

on. Due to the fact that social systems are required to be successful in terms of their

social aspects as well as their technical ones, they need prospectuses related to

systemic breakdown and incompetency for both aspects. Notwithstanding, social

prospectuses do not have the quality that can be made monotonous and uniform as

the technical scales do. We seem to face forming a prospectus dependent on each

socio-technical system. Even though they share some major common points, their

differences always outnumber their similarities owing to their humanistic

properties.

Besides this reality of socio-technical systems, and the aforementioned busi￾nesses which illustrate internal conditions, there are also issues of vulnerability and

failure, identified as natural disasters, stemming from the external world, as well as

from socio-technical and also natural systems.

v

Monitoring these influences, as well as the ones that can occur internally, and

offering solutions require much more effort and work than forming a prospectus.

This is the point where strategical analysis emerges. Via a perspective which

follows world trends and also develops suggestions accordingly related to new

routes and paths, it is possible to plan efforts and studies for the crisis which

originates from the most significant socioeconomic problems. A system or a

business can only be enhanced, grown, and, thus, turn a crisis into an opportunity

in this way.

Grasping the philosophy and vision mentioned above paves the way for deter￾mining global strategies for businesses during crisis periods. Otherwise, the prob￾lem would not be fully understood and it would not be possible to reach the reality

of a strategic way of life. Offering solutions for a strategic way of thinking and

problems under pressure from entropy dependent on external conditions is directly

correlated with adapting to all the requirements of strategic management. Only this

approach can enable systems to improve themselves while showing a tendency to

break down, to renew while showing a tendency to be exhausted, and to survive

when they are about to vanish under various threats.

If you need a prospectus in order to develop and think strategically during crisis

periods, this book offers a great opportunity to you. In my opinion, there is no need

for any other words apart from the introduction above.

I appreciate the efforts of the editors and writers.

Central Bank of Turkey

Ankara, Turkey

Nurullah Genc¸

vi Foreword

Preface

The latest economic turmoil with its reflections on business performance forced top

managers to develop effective business strategies in order to boost efficiency at

company level. The latest global financial crisis also urged them to redefine the

boundaries of their operational and strategic activities globally. During recession,

global challenges in the competitive business environment became the premier

source of threats for entrepreneurs in emerging markets. Subsequently, operational

risks have been increasing overseas for decision-makers and investors.

Volatile business environment under fierce economic conditions today led

investors to demand more capital gains on their investments as global threats and

risks have been increasing dramatically. For sustainable business operations,

decision-makers at the top should be designing more effective plans by adopting

novel strategies in an efficient way in order to challenge market obstacles while

mitigating risks and offering investors more sufficient gains. Are today’s managers

capable of planning and implementing strategic actions defiantly in a volatile

business environment? This book also features some performance assessment

tools for top managers.

Enhancing business performance with strategic decisions covers some critical

factors: areas of business including organizational effectiveness, performance man￾agement, finance, asset management, business culture, leadership, sustainability,

innovation, risk management, and data management systems. Strategies out of

global recession for business operations will also contribute to the industrial

development and economic stability.

In this novel book, it is aimed to analyze effective managerial strategies and

practices from an interdisciplinary perspective as a reaction to global challenges in

the competitive business environment. The fundamental approach of this publica￾tion brings together global issues exclusively in business management, including

topics in culture, leadership, and innovation, the competitive strategies, finance,

risk management and auditing, and models as well as unique approaches related to

strategic management in a reflective way.

vii

All strategies and practices in this book are also aimed to design core compe￾tencies for the growth of business. It is also expected to contribute to financial

stability, recovery, and sustainability of global business operations overseas.

The authors of the chapters in this publication have contributed to the success of

our work by the inclusion of their respective studies. This book, consisting of

28 chapters, is divided into five parts: Strategic Management and Practices in

High Velocity Markets during Crisis; Designing Competitive Strategies, Leader￾ship and Culture during Recession; Strategic Entrepreneurship, Innovation and

Design; Managing Risks through Adaptive Strategies and Decision Systems during

Crisis; and finally Evaluation of Firm Performance, Financial Efficiency and

Managerial Control. In the first part of this book, the authors assess the institutional

and economic approach to strategic management, analyze the decision-making

process with strategies out of global recession, design strategic alternatives for

global operations, and build organizational insights.

In the second part, the authors develop competitive strategies including topics in

organizational behavior, culture, and leadership. Titles cover competitiveness,

stakeholder relations, and the human side of strategic decisions, organizational

identity, partnership, and leadership.

In the third part, an innovative approach to strategic entrepreneurship during

crisis to enhance business performance is developed. Topics include innovation,

new product and service development strategies, and sustainable strategic entre￾preneurship in volatile business environment.

In the fourth part, the role of adaptive strategies and decision systems in

mitigating risks is assessed, including topics in risk management, decision support

systems, and logistic risks.

Consequently, in the last part of this book, the authors contribute to enhancing

business performance by the evaluation of firm performance, financial efficiency,

and managerial control strategies.

Chapter “Institutional Approach to Strategic Management” develops an institu￾tional approach to strategic management with the idea of an institution-based view

as a third perspective in strategic analysis in addition to the first two being the

industry-based and resource-based views. This chapter underlines that given the

influence of institutions on firm behavior, any strategic choice is inherently affected

by the formal and informal constraints of a given institutional framework.

Dr. Brunetta, Capo, and Vicentini’s major contribution is to focus on a review of

the role of institutions in strategic analysis drawing from literature on Institution￾alism and on the recently developed stream of institution-based view.

Chapter “Economic Approach to Strategic Decisions” features an economic

approach to strategic decisions. Dr. Aslan demonstrates the significance of trans￾action cost approach including another important strategic instrument of integra￾tion. This chapter demonstrates also the recent advances in transaction cost

approach that have greatly improved our understanding of the strategic

maneuverers.

Chapter “Leading the Strategic Decision-Making Process: Conceptual Frame￾works” evaluates how to lead the strategic decision-making process from a

viii Preface

conceptual framework. Dr. O¨ zda
go
glu and her colleagues investigate the critical

success factors of the strategic decision-making process emphasized in the current

literature and propose two conceptual frameworks based on the factors for top

managers that would help them to track the causality and the performance of their

organizations within this scope.

Chapter “Building Organizational Insight: Strategy and Organization” develops

an organizational insight. This chapter also focuses on the organizational insight as

a pivotal element in understanding the processes required to realize and achieve

interrelationships among businesses. Dr. Vicentini and her colleagues devote par￾ticular attention to the element of synergy creation, horizontal strategy, and orga￾nizational coordination mechanisms.

Chapter “Strategies out of Global Recession in Emerging Markets: An Applica￾tion for 2008 Global Crisis” is based on the claim that the success of the strategies in

emerging markets overcomes the impact of economic crisis. In this study, it was

determined that the explanatory variable of “government debt” is statistically

significant at 10 % level and the coefficient of this variable is negative.

Dr. Yuksel’s research also indicates that there is a negative relationship between

government debt and growth rate in emerging economies.

Chapter “Alternative Strategies for Global Operations of Organizations”

develops a theoretical framework for alternative strategies for global operations

of organizations. Dr. Eryilmaz’s research presents the entrance alternatives for

international markets and strategies that can be preferred by international organi￾zations in an integrative way. In this chapter, a basic framework will be drawn for

globalization by the author. Then, as part of globalization, alternative strategies of

organizations in order to access new markets have been examined. At the final

stage, fundamental strategic options for international competition have been

assessed.

Chapter “Building Competitive Strategies and Managing Stakeholder Relations”

builds on Competitive Strategies and the management of Stakeholder Relations. In

this chapter, the performance results of the stakeholder management theory ana￾lyses and competitive strategy on globalization have been illustrated.

Chapter “Human Side of Strategic Alliances, Cooperations and Manoeuvrings

During Recession and Crisis” explores the human side of strategic alliances,

cooperations, and maneuverings during recession and crisis. Dr. Uslu’s study

illustrates that the organizations that adapt to new condition by getting simpler

and getting rid of burdens in the constriction process are able to come out in a better

condition before the crisis. This chapter also discusses the way of organizations to

become human oriented when acting strategically during strategic alliances, coop￾erations, and maneuverings.

Chapter “The Role of Organizational Identity on Strategic Management Appli￾cations” underlines the importance of organizational identity on strategic manage￾ment applications. At the core of Dr. Buk’s chapter lies the idea that organizational

identity can act as a detector for identifying strategic issues and can be an influential

factor in developing strategies in response to change. Moreover, a strong organi￾zational identity is a valuable organizational capability that can create competitive

Preface ix

advantage through its urge to adapt to changes. Conversely, a loose identity is weak

in detecting changes or threats directed to the organization. Thereby, the chapter

focuses on the interaction between identity and strategy when organizations face

challenges in the turbulent business environment.

Chapter “The Importance of Trust for Partnership and Collaboration in Volatile

Economic Conditions” focuses on the importance of trust for partnership and

collaboration in volatile economic conditions. Dr. Gur and Dr. Alayoglu advocate

that maintaining and strengthening partnerships, retaining existing customers or

finding new ones through innovation, and finding external finance are extremely

vital to keep firms alive during volatile economic conditions.

Chapter “Complexity and Crisis Call for Shared Leadership and Empowered

Teams” develops a comparative approach to complexity and call for shared lead￾ership and empowered teams. Dr. Cirpan first explores the nature of complexity and

crisis. By doing that, he illustrated the requirements of those situations in terms of

leadership and moved on to explain the concept of shared leadership and what is

needed to apply it effectively. Since business culture has been of vital importance in

the effective application of shared leadership, he delineated how leaders can create

a culture that fosters empowerment for teams.

Chapter “Establishing an Innovation Culture and Strategic Entrepreneurship”

addresses the importance of establishing an innovation culture and strategic entre￾preneurship. The chapter concentrates on innovation management in terms of the

interrelationship among the four elements of a business: product, process, market￾ing, and organizational qualities. This chapter also provides a review and interpre￾tation of innovation and management literature in different fields with an eye

toward combining them into the framework of strategic entrepreneurship.

Chapter “Strategies for Innovative Organizational Structure: Innovative Culture

and Open Innovation” initially assesses the strategies for innovative organizational

structure: innovative culture and open innovation. Dr. G€urkan and T€ukelt€urs point

that strategies providing the speed and consequently the competitive advantage can

only be determined and applied in an appropriate organizational structure.

Chapter “Building Innovative Strategies for the Competitiveness of Family

Firms in Emerging Markets” underlines the importance of building innovative

strategies for the competitiveness of family firms in emerging markets.

Dr. Erdo
gmus¸ and his colleagues review the characteristics of family firms and

their relation to innovation strategies in emerging markets, with the case of Turkish

family firms, and provide an explorative analysis of the relationship between the

factors affecting the development of family business and their innovative strategies

in Turkey.

Chapter “Innovative Processes in New Product and Service Development”

identifies the innovative processes in new product and service development.

Dr. Bayık’s reviews the existing new product development processes and sheds

light on two new models: (1) customer development and (2) lean startup in terms of

customer feedback, market connection, and product revision.

x Preface

Chapter “Increasing Strategic Competitiveness through Innovation: The Finance

Perspective” discusses the concept of financial innovation as a strategically com￾petitive tool. Dr. Turan also questions how to increase strategic competitiveness

through innovation within a finance-based perspective.

Chapter “Economic Growth and Dynamic R&D Investment Behavior” develops

an economic approach to strategic decisions by examining economic growth and

dynamic R&D investment behavior. This chapter aims to test whether R&D model

predictions are valid for 76 countries’ economies. The economic methodology used

in this study is Panel VAR analysis. Values for the GDP per capita variable that is

considered to represent economic growth and R&D per capita variable that is

considered to represent R&D activities have been obtained from the World Bank

Database. The analysis of the annual data between 1996 and 2014 suggests that

economic growth Granger causes R&D spending, but there is no evidence to

suggest that R&D spending has an impact on economic growth.

Chapter “Risk Management Practices in Strategic Management” examines the

impact of risk management practices in strategic management. This chapter dis￾cusses risk factors and risk management practices in terms of strategic management

in order to understand effects of economical fluctuations on the firms and to keep up

with the globalization. In this study, the process of risk management

implementations has been examined in terms of strategic management by

reviewing the literature.

Chapter “Reducing Risk Through Strategic Flexibility and Implementation

Leadership in High Velocity Markets” explains the effects of strategic flexibility

and implementation leadership on reducing risk in high volatile markets.

Dr. Kamasak and his colleagues evaluate how to establish a flexible organization,

as firms scan environment thoroughly and make their investment decisions deter￾mining their priorities according to existing situations. Strategic flexibility can play

a critical role for firms to reduce the risk by offering agile and prudent solutions in

volatile environments. Yet, implementation of these decisions and objectives is

subject to senior management’s determination. Therefore, an implementation lead￾ership style can also be vitally important to achieve “risk reduction”-related objec￾tives. Strategic leadership that initiates the alignment of people to strategy may

enable the implementation of risk management practices in the firm.

Chapter “Implementing Adaptive Strategies of Decision Support Systems Dur￾ing Crises” implements adaptive strategies of decision support systems during

crises. Dr. Silahtaroglu’s study presents decision support systems in general. Addi￾tionally, some details have been given about how to use decision support systems

and for what business purposes they may be exploited by the top management.

Chapter “The Formulation of Strategies to Mitigate Supply Risks” formulates

strategies to mitigate supply risks. Dr. Sorkun and Dr. Onay indicate that it is

imperative for these firms to determine the right strategy so that they are able to

both prevent themselves from the destructive negative impacts of risky events and

reduce the amount of expenditure made on the actions to mitigate their supply risks.

Preface xi

Chapter “Applying Data Envelopment Analysis to Evaluate Firm Performance”

applies a data envelopment analysis to evaluate firm performance. In this research,

it was observed that the efficiency of the firms increased significantly in almost

every aspect. This increase indicates that it was required to use corporate gover￾nance rating to get an appropriate firm performance as well as financial values.

Chapter “Efficiency and Managerial Control in Financial Institutions” takes a

contrary view and follows the discussion on efficiency in regard to managerial

control from stakeholder perspective and international diversification strategies.

Dr. Acar and his colleagues evaluate the dilemma by focusing on the impact of

ownership specifically over to the efficiency differences between foreign versus

domestic and state versus private financial institutions.

Chapter “Examining Financial Innovation and Performance in Financial Sector:

A Comprehensive Review of Emerging Markets” examines financial innovation

and performance in financial sector within a comprehensive review of emerging

markets. Dr. Karabay and Dr. C¸ a
gıl examine the concept of innovation and review

the given literature of financial innovation and financial performance relationship in

financial sector, particularly in emerging markets. It is also intended to contribute to

literature by providing a comprehensive review of conceptual relationship between

financial innovation and performance.

Chapter “The Impact of Selected Firm Features on Sales Growth: Empirical

Evidence from S&P500” examines the impact of selected firm features on sales

growth demonstrating empirical evidence from S&P500. Dr. Gurbuz and his

colleagues investigate how selected factors influence sales growth of firms by

employing 22 years of consecutive data on a sample of 243 nonfinancial Standard

and Poor’s 500 (S&P500) companies. The empirical findings of this study demon￾strate significant influence of previous year sales growth, average growth rate of

relevant industry, firm size, and change in profitability level on the selected proxy

of firm growth.

Chapter “Determinants of Working Capital in Emerging Markets: Do Economic

Developments Matter?” focuses on the determinants of working capital in emerging

markets and questions economic developments. In this chapter, it is aimed to

examine the determinants of working capital management not only at firm level

but also at industry-country level.

Chapter “Liquidity Position and Working Capital Adequacy of Companies in

Turkey: Outlook from Industry Financial Statements” examines the liquidity posi￾tion and working capital adequacy of companies in Turkey. In this chapter, the

importance of liquidity is addressed and also the relationship between the liquidity

and working capital adequacy is highlighted from an industrial perspective.

Chapter “Determinants of Corporate Cash Holdings: Firm Level Evidence from

Emerging Markets” focuses on the determinants of corporate cash holdings and

assesses the firm level evidence from emerging markets. In this study, Dr. Akben￾Selc¸uk and Dr. Yıldız investigate the factors affecting corporate cash holdings of

five emerging markets, namely Brazil, Indonesia, Mexico, Russia, and Turkey.

xii Preface

The authors of the chapters in this book developed models for innovative

solutions to strategic issues during recession by assessing critical case studies.

Finally, this book gathers colleagues and professionals across the globe from

multicultural communities to design and implement innovative practices for the

entire global society of banking and finance.

Istanbul Medipol University, Istanbul, Turkey U¨ mit Hacio
glu

Hasan Dinc¸er

Nihat Alayo
glu

Preface xiii

Acknowledgment

We have many colleagues and partners to thank for their impressive contribution

to this publication. First, we would like to praise the people at Springer Interna￾tional Publishing AG: Dr. Prashanth Mahagaonkar, who has the attitude and

substance of a genius: he continually and convincingly conveyed a spirit of

adventure in regard to our research at each stage of our book development process;

Sivachandran Ravanan, our Project coordinator, without his persistent help this

publication would not have been possible; and others who assisted us to make

critical decisions about the structure of the book and provided useful feedback on

stylistic issues.

We would like to express our appreciations to the Editorial Advisory Board

Members. The members helped on the book included Dursun Delen, Ekrem

Tatoglu, Ekrem Tatoglu, Idil Kaya, Ihsan Isik, Martie Gillen, Michael S. Gutter,

Nicholas Apergis, Ozlem Olgu, Ulas Akkucuk, and Zeynep Copur. The excellent

advice from these members helped us to enrich the book.

We would also like to thank all of the authors of the individual chapters for their

excellent contributions.

We would particularly like to thank the Center for Strategic Studies in Business

and Finance for the highest level of contribution in the editorial process.

The final words of thanks belong to our families and parents separately: U¨ mit

Hacio
glu would like to thank his wife Mrs. Burcu Hacioglu and his son Fatih Efe

Hacıo
glu as well as his parents; Hasan Dinc¸er would like to thank his wife Mrs.

Safiye Dinc¸er as well as his parents. They deserve thanks for their enthusiasm,

appreciation, help, and love; and Nihat Alayo
glu would like to thank his wife Elif

Alayo
glu and his sons Fuat Orhun Alayo
glu and Vedat Emre Alayo
glu as well as

his parents. Their pride in our accomplishments makes it even more rewarding to

the editors.

Istanbul Medipol University, Istanbul, Turkey U¨ mit Hacio
glu

Hasan Dinc¸er

Nihat Alayo
glu

xv