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"Strategy answers two questions: where do you want to go? And how do you want to get there?"

The problem, however, with corporate strategy as it is taught today in many top business schools is that it is essentially a static analysis. That is, corporate strategy discusses in great detail how static or time-independent factors such as economies of scale or the degree of product differentiation will determine industry structure and competitive advantage, and why certain strategic decisions to acquire or expand or diversify should be made.
However, the strategy literature is largely silent on the "when" or timing of implementing such strategic decisions. This is precisely where the equally critical dynamic role of movements in the business cycle and events and shocks in the broader macroeconomic environment come into strategic play.

For example, sound corporate strategy might dictate that a firm acquires a key rival to improve price margins or perhaps vertically integrate to cut costs by acquiring a key supplier. However, the timing of such acquisitions critically depends on which particular phase that the business cycle, and the related stock market and interest rate cycles might be in. This is because the acquiring firm might want to wait for the appropriate time in these cycles when stock prices or interest rates are likely to be facing to make sure the strategic acquisitions are truly attractive to earnings.

Perhaps not surprisingly, this lack of any systematic theory of the role of the business cycle in the timing of corporate strategy and tactics is reflected in a similar oversight in the board rooms of many corporations, and many MBA classrooms, indeed, far too many executives. That is, they react to, rather than skillfully ride, the business cycle and invariability wind up in this classic trap. They continue to ramp-up production employment, and even capital expansion late into the expansionary cycle, even as they borrow funds at premium rates and hire more workers at premium wages.

Inevitably, those executives find themselves stuck with huge inventory overhangs, idle workers, and a big squeeze on their cash flow when the recession hits. It is precisely these gaps in both the corporate strategy literature and accepted best management practices that the research and key findings of the project have sought to fill.

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* Contributed by: -
N. Suman,
MBA First Year,
Vinod Gupta School of Management,
IIT Kharagpur.