MULTIPLICITY JUSTIFIES CORPORATE STRATEGY

Abstract

This study conducts an analysis of the relationship between strategic theory, industry- or market-wide practices, valuation metrics, and justification rhetoric in performing strategic practice. In doing this, we refer to Michel Callon on the performativity of economics and Boltanski and Thévenot on the justification of strategic action. The paper introduces an analytical framework for studying the corporate strategy pragmatics of a forest industry company – Stora Enso – over the 1990–2008 period. The authors argue that Stora Enso's corporate strategy is justified by and represents the outcome of multiple performances that coexist and interact with each other. These multiple performances, ranging from general strategic management conceptual theories to industry-wide practices and valuation metrics, may lead to conflict when creating successful businesses.

Keywords:

• performativity
• Stora Enso
• strategic management
• valuation metrics
• industry-wide practices
• justifications

ACKNOWLEDGEMENTS

The authors would like to thank Jonas Anshelm, Hans Andersson, and C.-F. Helgesson at Linköping University as well as the anonymous reviewers for providing insightful and encouraging comments on earlier drafts of this paper. Remaining shortcomings are entirely our own responsibility.

Notes

1. Our selection of metrics has been dictated by Stora Enso's choice of key financial targets; see Annual Report, Stora Enso (1999, p. 4).

2. Performativity refers (1) to the Austinian ‘performative utterance’, in which there is a strong and exclusive link between an authoritative model (e.g. the Solow–Swan growth model) and a socioeconomic arrangement (e.g. a national labour market); and (2) to ‘generic performativity’ in which various theories (i.e. those of the strategic management research field) partake in formatting practices (Kjellberg & Helgesson 2006, p. 845).

3. For example, Skanska, SCA, Stora Enso, SKF, Sandvik, Atlas Copco, Astra Zeneca, Scania, ABB, and Electrolux.

4. The concept of vertical integration, according to Bjuggren (1985), refers to ‘the extent to which different stages in a chain are under the ownership, management and control of a single firm’ (Bjuggren 1985, p. 1). The theoretical idea underlying vertical integration is that each step (including the production and distribution of a product) in the production line of a firm is controlled by a single entity.

5. The merger between STORA and Enso Oyj could be seen as the first of a number of mergers and acquisitions in the global forest industry that occurred in the late 1990s and early 2000s (see Vaara et al. 2006). However, it could also be argued that other companies, such as the Swedish Holmen, chose a completely different corporate strategy from the one we are about to present in this case. For example, Holmen kept its vertically integrated organization, did not seek to grow globally, and, instead of focusing on core business, invested in becoming more diversified (compare Holmen 2009).

6. Of this power, 7.3 TWh was generated at the mills through back pressure, 4.9 TWh was hydroelectric power, and 3.5 TWh was nuclear power.

7. Consulting company PricewaterhouseCooper's (PwC) annual surveys of ROCE in the world's 100 largest forest industry companies indicate that the average ROCE was 3% in 1997 and 6.5% in 2000 (PwC 1998, p. 1, 2002).