Strategic Interdependence in Organizations: Deconglomeration and Marketing Strategy

Abstract

Although strategy exists at multiple levels in a firm (corporate, business, and functional), there is a dearth of research in marketing literature that focuses on the dependency among strategy at different levels. The authors address this issue by examining the relationship between deconglomeration and marketing strategy. Deconglomeration refers to the divestiture behavior of a conglomerate firm and the transformation of its business portfolio from one that is largely composed of several unrelated businesses to one composed of fewer and related businesses. Drawing on multiple theoretical perspectives, the authors propose a conceptual model delineating the environmental and organizational drivers of deconglomeration and its outcomes for marketing. The authors suggest that after deconglomeration, (1) a firm can be expected to be more competitor and customer oriented, (2) multimarket contact with competing firms and seller concentration will increase, (3) businesses retained by the firm will be more innovative and place greater emphasis on advertising compared with sales promotion, and (4) the firm's culture may become more externally oriented. Furthermore, the locus of decision making for marketing strategy may shift more toward senior management levels. In summary, changes in a firm's corporate strategy could lead to significant changes in the marketing strategy of its business units.