Large corporations often display striking similarities in their corporate strategies, objectives, and core values. These resemblances are not coincidental but arise from a confluence of institutional, competitive, and cultural factors. This article examines the drivers behind this phenomenon, including the concept of institutional mimicry (or isomorphism), market pressures, the influence of consultants, executive thinking, regulatory norms, and internal organizational limitations. Together, these factors contribute to the widespread adoption of similar strategies across many large companies.
Institutional Mimicry (Isomorphism)
Institutional theory posits that organizations tend to adopt similar strategies and structures due to external pressures and the need for legitimacy. This phenomenon is known as isomorphism, where companies mimic successful strategies to reduce uncertainty and maintain their competitive standing. Large companies, in particular, operate in volatile markets and face significant risks. Consequently, they often imitate the practices of other successful firms to safeguard their market position.
Mimicry occurs through three forms of isomorphism: coercive, normative, and mimetic. Coercive isomorphism arises from external pressures like regulations, while normative isomorphism stems from professional norms and education. Mimetic isomorphism, the most relevant in corporate strategy, occurs when companies copy others to mitigate risk and uncertainty. This imitation reduces the need for companies to experiment with radically new strategies, allowing them to follow proven models, ensuring legitimacy and competitive parity. (Di Maggio and Powell, 1983).
The authors argue that isomorphism creates stability in organizational fields, but it can also limit innovation and diversity.
Market Pressures
The global market is highly interconnected, and competition is fierce. Large corporations operate within this landscape, constantly pressured to adopt the latest strategic trends. These trends often revolve around globalization, digital transformation, sustainability, and social responsibility. Companies that fail to adapt risk losing relevance, market share, and investor confidence.
For example, in recent years, there has been a surge in companies adopting sustainability as a core part of their business strategies. This is not just driven by a moral imperative but by the need to meet investor and consumer expectations. Companies like Unilever, Tesla, and Apple have led this charge, and as a result, many others have followed, ensuring they remain competitive by aligning with these strategic trends .
Influence of Consultants and Experts
Management consulting firms like McKinsey, Boston Consulting Group, and Bain have played an instrumental role in shaping corporate strategy across the globe. These firms have developed and promoted standardized strategic models that have been adopted by many organizations, leading to homogeneity in strategy.
Consultants provide “proven” frameworks such as the Balanced Scorecard, Porter’s Five Forces, and Six Sigma, which are widely perceived as effective and reliable. This further encourages companies to align with industry norms rather than diverge into riskier, untested strategies. While these frameworks are valuable in optimizing operations and driving efficiency, their widespread adoption contributes to the uniformity of corporate strategies .
Homogenization of Executive Thinking
Another key factor contributing to the similarity of corporate strategies is the homogenization of executive thinking. Many business leaders come from similar educational and professional backgrounds, often graduating from elite business schools that emphasize similar strategic frameworks and values. This shared educational experience fosters conformity in the approach to corporate strategy.
Furthermore, executives often move between different companies throughout their careers, carrying with them the same ideas and practices. For instance, many CEOs and senior executives in Fortune 500 companies have worked in multiple industries, yet their strategic approaches often remain consistent due to their common professional and educational foundations . This cross-pollination of ideas within an executive cohort further entrenches uniformity in strategic thinking. (Hambrick and Mason, 1984) .
Conformity to Regulatory and Social Norms
Large companies must comply with a myriad of global regulations and standards, which impose constraints on their strategic choices. Whether it is adhering to environmental laws, labor standards, or financial regulations, companies are often compelled to adopt similar practices to ensure compliance.
In addition to regulatory pressures, companies face increasing social expectations, particularly in areas such as corporate social responsibility (CSR), environmental sustainability, and diversity and inclusion. Investors, consumers, and even employees now expect companies to take strong stands on these issues, further narrowing the range of strategic options. This conformance to regulatory and social norms drives companies to adopt similar CSR strategies, contributing to strategic homogeneity. (Campbell, 2007).
Innovation Inhibited by Size and Bureaucracy
As organizations grow, their size and bureaucratic structures can stifle innovation. Large corporations, by their nature, become more risk-averse and process-driven, which limits their capacity to pursue radically different or disruptive strategies. As a result, they are more likely to rely on proven, established strategies that fit within their existing operational frameworks.
The focus on minimizing risks and ensuring consistent returns often leads large companies to adopt strategies that are conservative and uniform across the industry. For example, in the tech industry, companies like Google, Microsoft, and Amazon have followed similar paths in terms of cloud computing, AI investments, and diversification, mainly because these strategies offer a balance of innovation with manageable risk .
Focus on Maximizing Shareholder Value
One of the most significant forces driving strategic conformity in large companies is the overwhelming focus on maximizing shareholder value. This focus often results in a short-term orientation where the primary goal is to deliver steady, predictable returns to shareholders. As a result, companies are incentivized to adopt strategies that prioritize efficiency, cost reduction, and risk mitigation.
This narrow focus on financial performance reinforces uniformity in corporate strategy, as companies are driven to optimize for similar financial metrics such as earnings per share, return on investment, and shareholder dividends .
The similarity in corporate strategies among large companies is the product of various institutional, competitive, and internal forces. Institutional mimicry, market pressures, the influence of consultants, executive homogeneity, regulatory compliance, and an overriding focus on maximizing shareholder value all contribute to this phenomenon. While these strategies help companies maintain competitiveness and minimize risks, they also limit strategic diversity and innovation in the long run. In a rapidly evolving global market, this lack of diversity in strategy could inhibit the ability of companies to respond to disruptive changes, ultimately undermining their long-term success.
References
- DiMaggio, P. J., & Powell, W. W. (1983). “The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields.” American Sociological Review, 48(2), 147-160.
- McKinsey & Company. (2020). “Strategic Frameworks and Models: A Guide to Business Success.”
- Campbell, J. L. (2007). “Why Would Corporations Behave in Socially Responsible Ways? An Institutional Theory of Corporate Social Responsibility.” Academy of Management Review, 32(3), 946-967.
- Hambrick, D. C., & Mason, P. A. (1984). “Upper Echelons: The Organization as a Reflection of Its Top Managers.” Academy of Management Review, 9(2), 193-206.
- Powell, W. W., & DiMaggio, P. J. (Eds.). (1991). The New Institutionalism in Organizational Analysis. University of Chicago Press.
- Porter, M. E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press.
- Christensen, C. M. (1997). The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business Review Press.
- Friedman, M. (1970). “The Social Responsibility of Business Is to Increase Its Profits.” The New York Times Magazine, September 13, 1970.
