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Recommended Readings: Business Strategy


Core competencies and focus are popular mantras in the west. Managers in the West have dismantled many conglomerates assembled in the 1960s and 1970s. But large, diversified business groups continue to dominate many emerging markets. Consultants and foreign investors are increasingly pressuring groups to conform to Western practice by reducing the scope of their business activities. But the authors argue that this advice may be wrong. Companies must adapt their strategies to fit their institutional context: a country's product, capital, and labor markets; its regulatory system; and its mechanisms for enforcing contracts. Unlike advanced economies, emerging markets suffer from weak institutions in all or most of these areas. Conglomerates can add value by imitating the functions of several institutions that are present only in advanced economies.