The Strategy and Performance of British Industry, 1970–80

271 Pages·1984·23.487 MB·English

by  George A. Luffman, Richard Reed (auth.)

The Strategy and Performance
of British Industry, 1970--80
Also by George A. Luffman
SUCCESSFUL BUSINESS POLICIES (with G. D. Newbould)
The Strategy and Performance
of British Industry, 1970--80
George A. Luffman
and
Richard Reed
M
MACMILLAN
©George A. Luffman and Richard Reed 1984
Softcover reprint of the hardcover 1st edition 1984
All rights reserved. No part of this publication
may be reproduced or transmitted, in any form
or by any means, without permission
First published 1984 by
THE MACMILLAN PRESS LTD
London and Basingstoke
Companies and representatives
throughout the world
British Library Cataloguing in Publication Data
Luffman, George A.
The strategy and performance of British
industry 1970-80.
1. Diversification in industry-Great Britain
-History-20th century
I. Title II. Reed, Richard
338.8'042'0941 HD2756.2.G7
ISBN 978-1-349-07604-8 ISBN 978-1-349-07602-4 (eBook)
DOI 10.1007/978-1-349-07602-4
Contents
Acknowledgements vii
List of Figures viii
List of Tables ix
1 INTRODUCTION 1
2 ASSESSING STRATEGIC CHANGE 7
2.1 Research Outline 90
2.2 Measurement of Diversification 11
2.3 Measurement of Performance 17
2.4 The Chosen Sample 24
2.5 Data Collected 27
3 BRITISH INDUSTRY 1970--80 29
3.1 The UK Environment 31
3.2 General Characteristics of the Sample 35
3.3 Size Distribution of the Sample 37
3.4 The Industry Distribution of the Sample 39
3.5 General Characteristics of Performance 43
3.6 Performance for Shareholders 44
3.7 Performance for Managers 51
3.8 Performance for the Economy 53
3.9 Summary 58
4 DIVERSIFICATION IN THE 70s 61
4.1 Introduction 63
4.2 Previous Research on Diversification 66
4.3 The Nature and Extent of Diversification in British
Industry in 1970s 71
4.4 Comparison with Herfindahl Index 76
4.5 Summary 76
VI Contents
5 DIVERSIFICATION AND PERFORMANCE 81
5.1 Introduction 83
5.2 Diversification and Performance-Shareholder 87
5.3 Diversification and Performance-Manager 95
5.4 Diversification and Performance-Economy 99
5.5 Summary 104
6 DIVERSIFICATION, PERFORMANCE AND COMPANY
SIZE 109
6.1 Influence of Company Size and Growth 111
6.2 Classification by Size 113
6.3 Diversification and Size 117
6.4 Diversification, Performance and Size-Shareholder 121
6.5 Diversification, Performance and Size-Manager 127
6.6 Diversification, Performance and Size-Economy 130
6.7 Summary 133
7 DIVERSIFICATION, PERFORMANCE AND INDUSTRY 137
7.1 The Influence of Industry on Diversification and Perform-
ance 139
7.2 Diversification by Industry 140
7.3 Performance by Industry 145
7.4 Diversification, Performance and Industry-
Shareholders 150
7.5 Diversification, Performance and Industry-Manager 153
7.6 Diversification, Performance and Industry-Economy 154
7.7 Summary 154
8 CONCLUSIONS 159
8.1 Introduction 161
8.2 Nature and Extent of Diversification 165
8.3 Implications for Shareholders 167
8.4 Implications for Managers 169
8.5 Implications for Government 172
8.6 Summary 173
Appendix A: Companies Excluded from the Sample 177
Appendix B: Sample Companies and Strategic Classifications 183
Appendix C: Company Performance for al/496 Companies 240
Appendix D: Calculations used for Performance Measures 262
Appendix E: Comparison of Category and Herfindahl Systems 264
Index 267
Acknowledgements
Inevitably there are numerous people who make a contribution to a project
of this size and we would like to express our gratitude to them. Staff in the
libraries of the Bradford University Management Centre, the Manchester
Business School and Extel Services were extremely helpful during the
data-gathering stage. We would also like to thank Dr J. R. Sparkes and
Bryan Lowes for their assistance in the early stages of the research and also
Dr J. Sharp for his help in respect of some of the statistical problems. The
typing has been undertaken by an array of helpers at various stages, Sylvia
Ashdown, Sandra Bye, Jane Cordingley and Joan Luffman.
Finally, we would like to thank two very long-suffering wives, Margaret
and Joan, who, apart from enduring hours of solitude, have provided
positive support in interminable hours of data-checking and proof-reading,
and two children, Sarah and Mark, who had to accept periods of enforced
silence and an absentee father.
What finally appears in print is our responsibility.
GEORGE A. LUFFMAN
RICHARD REED
vii
List of Figures
2.1 Core Skills and Key Resources 12
2.2 Algorithm for Classifying Types of Diversification 16
2.3 The Firm: a Descriptive Model 19
3.1 Size Distribution of the Sample 38
3.2 Cumulative Percentage Sales 39
3.3 Distribution of Shareholder Performance Measure 46
3.4 Distribution of Risk Measure 49
3.5 Distribution of Manager Performance Measure 52
3.6 Distribution of Economy Performance Measure 56
4.1 Ansoff's Product-Mission Matrix and Growth-Vectors
Matrix 65
4.2 Results Summary of Research by D. F. Channon, Strategy
and Structure of British Enterprise 1950-70 66
4.3 Diversification Changes in US Companies 68
4.4 Extent and Direction of Diversification in UK Companies
1970-80 72
4.5 Incremental Change 79
5.1 Diversity, Diversification and Performance-Shareholders 89
5.2. Diversity, Diversification and Performance-Manager 92
5.3 Diversity, Diversification and Performance-Economy 101
6.1 Diversification and Diversity by Size-System A 119
6.2 Diversification and Diversity by Size-System B 120
6.3 Diversity and Company Size 121
6.4 Diversification, Diversity, Performance and Size (System A)
-Shareholders 125
6.5 Diversification, Diversity, Performance and Size (System A)
-Manager 129
6.6 Diversification, Diversity, Performance and Size (System A)
-Economy 132
viii
List of Tables
3.1 Key Economic Indicators 1970-80 32
3.2 Breakdown of the Top 1000 Companies by Sample
Selection Criteria 36
3.3 Distribution of Companies by Industry 1970 40
3.4 Correlation Coefficients for Performance Variables 44
3.5 Shareholder Measure 1970-80 45
3.6 Shareholder Measure -Twenty Highest and Twenty Lowest
Companies 47
3.7 Risk Measure 1970-80 48
3.8 Risk Measure -Twenty Highest and Twenty Lowest
Companies 50
3.9 Manager Measure 1970-80 51
3.10 Manager Measure-Twenty Highest and Twenty Lowest
Companies 54
3.11 Economy Measure 1970-80 55
3.12 Economy Measure-Twenty Highest and Twenty Lowest
Companies 57
4.1 Diversification in US Companies-Four-category Analysis 69
4.2 Diversification in US Companies-Nine-category Analysis 70
4.3 Diversification in UK Companies 1970-80-Four-category
Analysis 71
4.4 Diversification Strategy-a Comparison 73
4.5 Diversification in British Industry 1970-80 75
4.6 Comparison of Results using Herfindahl and Category
Methods 77
4.7 Summary of Company Movement by Category 79
5.1 Diversification and Performance-Shareholders 87
5.2 Diversification (Eight-category) and Performance-
Shareholders 91
5.3 Company Performance prior to Diversification-
Shareholders 94
ix