Competitive Fitness of Global Firms

Professor Jean-Claude Larreche of INSEAD heads an initiative that effectively quantifies the Competitive Fitness of Global Firms. He has published a report each year since 1998, providing an evaluation of the business capabilities of firms among the 500 largest in North America and Europe. Instead of relying on the short-term, financial information that is so easy to find on business corporations, his report delves deeper into the firm’s functionality to pin down the secret ingredients of success and to determine its fitness across a number of specified criteria.

For each firm, Professor Larreche and his five-member team collect data from multiple respondents. Each executive (on average, 3 levels from the CEO, 43 years of age with 17 years of experience) completes a 182-item survey. Then, the firm is evaluated in terms of 12 fundamental business capabilities: mission & vision, customer orientation, corporate culture, organization & systems, planning & intelligence, human resources, technical resources, innovation, market strategy, marketing operations, international, and performance.

Then, they apply an OMEC rating system, which maps the data into an overall capability profile. The measurements of the 12 capabilities are distilled into a single number, providing an index value can be used to compare, contrast and rank the firms.

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“The data on which the ranking is based is obtained from questionnaire responses; multiple employees from each firm respond to the 182-item questionnaire. The average respondent is a 43-year-old manager, three levels from the CEO, with 17 years of business experience. The obvious weakness in this approach is the subjective nature of the data, which means that the line between competitive fitness and corporate complacency may be a fine one. The fact that companies whose data is insufficient are excluded also makes comparisons between years problematic.”

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