Competition, Strategy, and Business Performance

by Anita McGahan



What drove business profitability during the 1980s and early 1990s? Management consultants, business academics, investment analysts, and the business press have all offered managers a range of theories. However, managers have not had access to much data about aggregate trends and broad influences on business profitability over time. With new reporting requirements in place in the United States around 1980, the problem was partly solved. This article uses the new data to categorize the performance of U.S. businesses over the past two decades. The study begins by grouping businesses based on the trajectory in their accounting profitability. If offers information on the average size, growth, financial-market premium, and sectoral affiliation of businesses within each of the groups. Finally, this article describes the broad strategic issues that arise for a subset of the businesses within each group. The result is a series of suggestions about shifts in the strategic issues that face businesses across the economy.

California Management Review

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Published at Berkeley Haas for more than sixty years, California Management Review seeks to share knowledge that challenges convention and shows a better way of doing business.

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