The Impact and Implications of Environmentally Linked Strategies on Competitive Advantage: A Study of Malaysian Companies

Abstract

It is increasingly difficult for companies to ignore environmental issues as pressure increases on them to disclose their environmental policies, with possible repercussions on consumer and investor behavior. Even among so-called enlightened companies, the natural environment is rarely among their top priority concerns. Where high, it is often subsumed among other, wider social and ethical ones (e.g., The Body Shop). It goes without saying that companies need to make profits and, if profits are threatened by “green” issues, the latter will be relegated to low priority. However, there should be no presumption that environmental concerns will lead to reduced profits. There is a complex and dynamic set of trade-offs between profitability and environmental concerns to be taken into account in strategy formulation. This paper aims to investigate the extent to which companies: incorporate environmental forces into corporate strategy; are influenced by environmental pressures in making investment decisions (including cross-border product and market extension); and differ in any systematic fashion in any of the above. The empirical findings derive from a detailed questionnaire-based survey of about 30 locally controlled companies in Malaysia. Insofar as the research is survey based, the results depend upon companies' perceptions of their own behavior and their willingness to disclose information. It was discovered, by using logistic regression analysis, that, not unexpectedly, variation exists in the degree of strategic response to environmental regulation, but that there is also a systematic difference between two major types of company; that is, between future transnationals and the others.