EXTREME TURBULENT ENVIRONMENTS:

A Qualitative Examination of Strategic Responses to the 2008 Economic Crisis

By CHRISTIANNE M LAURIA

Submitted in partial fulfillment of therequirements

for the degree of Master of BusinessAdministration

ST. JOHN’S UNIVERSITY

April 2014

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Approval

Date: Date:

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ABSTRACT

Beginning in the summer of 2008 the global economy faced

a crippling global financial crisis. Millions of people,

thousands of organizations and hundreds of governments

were affected by the rapid decline of a modern globalized

economy. Some of these organizations have been able to

thrive, some have failed and others have just skated

under the radar and are barely viable. This thesis

explores and identifies the most common strategic

responses to extreme turbulence and collects qualitative

data through a series of case studies of different

organizations and their reaction to the global financial

crisis of 2008. It focuses on understanding extreme

turbulent environments and the analysis of specific

organizations’ successes and failures during the global

financial crisis of 2008. This thesis will analyze and

assess this theory through extensive research using

industry journals and peer-reviewed articles. It will

also closely analyze Lehman Brothers, Ryan Air, AIG and

Alibaba Group as four dynamic organizations that all

proceeded through the most intense, extreme turbulent

economic environment and global recession in history, all

with different strategies. Through this research I plan

to demonstrate the attributes of a firm that can affect

an organization’s viability during such extreme

turbulence. This type of research and analysis is

important in order to construct, revitalize or

resuscitate organizations through good economic times and

bad. The findings from this research provide evidence

that marketing overhauls, agility, resilience, dynamic

resourcefulness, proactivity and collaboration are the

most important factors for organizations to survive

through extreme turbulent markets. While the results

were not conclusive, in that there may not be a specific

formula or combination of strategic responses to handle

extreme turbulent environments, there was some evidence

that extreme turbulence must be addressed with adaptive

capacity.

DEDICATION

I would like to dedicate this thesis to my Dad, Joseph

Lauria aka “cinque teschi”. You are my hero and my

inspiration. You have set the quintessential example to

me of what it means to study hard and work hard to earn

everything that you get in life. Without your constant

motivation and belief in me I would not be where I am

today. And yes, I still remember, “Christi, you get ‘C’,

you no ski”! It may have been silly but I understand now

it was for my own good! Your support and personal

cheerleading have driven me to make you proud. You and

Genie set an above par standard for me and with your

encouragement, I have been able to achieve. I love you

both very much!

Forever and always,

Your “briciola”,

Christi

PREFACE

My inspiration comes from a fascination of the global

financial crisis and its devastating effects on an

international level. In August of 2008 I had just moved

from Los Angeles, California to New York City after

completing my bachelor’s degree at Pepperdine University.

I received my first job offer working for a team of

stockbroker’s for one of the largest international asset

management firms in the world. I was elated and felt

invincible! But the honeymoon quickly ended when just 2

short months after starting my new job, the market took a

HUGE dip! Things at work were very exciting, but in an

anxious, “the sky is falling” type of manner. I

experienced the start of the global financial crisis from

within the point of origination. After eventually

becoming a victim of the economic downtown, I experienced

the unemployed life. Luckily my period of unemployment

was relatively brief and I returned to asset management.

After a year at my new firm, I decided that the timing

was right so packed up and moved to Europe to pursue my

MBA studies. Living in Europe and experiencing the

Eurozone crisis first hand has been an eye opening

experience, to say the least. Throughout my masters’

studies, I was ever more intoxicated by the idea and

effects of the global financial crisis. This sheer sense

of delusion led me to research and write my thesis about

the global financial crisis, via environment theory,

turbulence and case study analysis.

ACKNOWLEDGEMENTS

I must acknowledge Dr. R. Mitch Casselman; he was

instrumental to the creation of this document! Dr.

Casselman has all of the qualities of a superior

educator! His level of intelligence is incredible but

yet is never condescending. He makes you want to learn

by pushing you just beyond what you think you are capable

of and continually challenges his pupils. I have learned

so much about myself through working with Dr. Casselman

on my thesis. I cannot thank you enough! You are the

best educator I have ever had! Cheers, Mitch! I would

also like to acknowledge Dr. W. Ryall Carroll and Dr.

Vincent Shea. Both Dr. Carroll and Dr. Shea are

excellent educators with a similar style of constantly

challenging students in a way that makes them want to

learn. All three professors enhance the learning

process and help to mold critical thinking and learning

skills. These three gentlemen set the bar very high for

all future educators. Thank you all, very much, for your

continued inspiration.

TABLE OF CONTENTS

ABSTRACT ...........................................IIDEDICATION .........................................IVPREFACE .............................................VACKNOWLEDGEMENTS ...................................VIINTRODUCTION ........................................1UNDERSTANDING ENVIRONMENT THEORY ....................2EXTREME TURBULENT ENVIRONMENTS ......................4COMPONENTS OF EXTREME TURBULENT ENVIRONMENTS .................. 4

Uncertainty ............................................................................................5Complexity .............................................................................................7Dynamism ...............................................................................................8Munificence ............................................................................................9

STRATEGIC RESPONSES TO EXTREME TURBULENT ENVIRONMENTS ......... 10 Adaptive capacity ................................................................................10

Marketing Overhaul ...................................................................................12Agility ........................................................................................................... 15Resilience .................................................................................................... 16Proactivity ................................................................................................... 17Dynamic Resourcefulness ..........................................................................22Collaboration .............................................................................................. 24

Final Words ...........................................................................................28

CASE STUDY METHODOLOGY .............................30Measures ..............................................................................................35

CASE STUDY ANALYSIS ................................38LEHMAN BROTHERS ......................................... 38 AIG .................................................. 42 RYAN AIR .............................................. 46 ALIBABA GROUP .......................................... 49

DISCUSSION AND CONCLUSION ..........................52WORKS CITED ........................................57

APPENDIX A: TYPES OF ENVIRONMENTS ..................59APPENDIX B: STRATEGIC RESPONSES TO TURBULENCE ......60APPENDIX C: SUMMARY OF CASE STUDY MATERIAL .........61APPENDIX D: EVIDENCE OF STRATEGIC RESPONSES ........62APPENDIX F: KEYWORD COUNT TRACKER ..................64APPENDIX G: PRINT ADVERTISEMENTS ...................65LEHMAN BROTHERS ......................................... 65 AIG .................................................. 66 RYANAIR ............................................... 68 ALIBABA GROUP .......................................... 70

APPENDIX H: CONSOLIDATED CONTENT ANALYSIS RESULTS ..71VITA ...............................................72

INTRODUCTION

The problem I am addressing in this document is the

Global Financial Crisis of 2008; the largest economic

recession since the Great Depression and the first

international realization of the impact of a globalized

economy. Over 100 mortgage lenders went bankrupt between

2007 and 2008. An astonishing 8.8 million jobs were lost

in the US alone causing the unemployment rate to double

from 5.3% to a staggering 10.1% as of October 2009. The

average number of hours worked per week declined to 33,

which is the lowest level recorded since the government

began collecting these data in 1964. The US Real GDP

fell from a +3% in Q2 of 2008 to nearly -6% in Q4.

(us dept of commerce) On an international scale, it is

estimated that European banks lost more than $1 trillion

on toxic assets and bad loans.

The research question explored is what are the strategic

approaches that organizations take to successfully

survive a period of extreme turbulence. The reasoning

being turbulence happens and extreme turbulence will

happen again but if a set of business strategies are

identified that have been proven to lead to the survival

of organizations through extreme turbulence, it may be

possible that any future extreme turbulence experienced

could have less of an impact on an international economic

scale. The key figures in the formation of Environment

Theory are Trist, Emery, Selsky, McCann, Dess, Beard and

Castrogiovanni. Emery and Trist were the true pioneers

of environment theory; they were the first to distinguish

causal texture and classify environments into four

classifications. Selsky and McCann then expanded on this

idea to propose a fifth type of environment

classification. Dess and Beard explored an approach to

measure task environments of organizations.

Castrogiovanni proposed that task environments of

organizations change over time and do not remain

stagnant.

In this thesis I examine the different proposals of

environment theory. Then, through research, identify how

to determine an extreme turbulent environment. Themes of

strategic responses to extreme turbulence were then

recognized and several hypotheses were distinguished. In

order to test the hypotheses a case study approach was

chosen so a methodology was constructed in a manner that

could be repeated for each of the case study

participants. Four organizations were chosen as case

study participants and then analyzed through a rigorous

content analysis. Having performed the case study

analysis, I found relatively inconclusive results.

UNDERSTANDING ENVIRONMENT THEORY

Environment theory was first introduced in 1965 by Dr.

Eric Trist, a distinguished British scientist and leading

figure in the field of organizational development, and by

Dr. Frederick Emery, an Australian psychologist and

revered social scientist. Dr. Trist and Dr. Emery

proposed a classification of the environment into four

types, each with escalating levels of complexity. It

remains unclear whether the transformation of

environments from one type to another is an abrupt or

gradual process. Nor is it clear whether an environment

uniformly or differentially undergoes transformation

(Emery & Trist, 1965). What is inevitable is the

transformation of one environmental type to the next

because of the inherent limitations of each adaptive

response in managing the consequences of ever-greater

density of social interaction and technological

innovation (McCann & Selsky, 1984). Dess and Beard

researched operational specification and empirical

description of the task environments of organizations.

Their unit of analysis was based on the directness of

interaction between an organization and elements of its

environment and whether or not the information describing

the environment was derived objectively or subjectively

derived from Starbuck’s previous findings. Dess and

Beard concentrated on three dimensions to task

environments, munificence, dynamism and complexity and

were able to find statistically significant evidence to

support their hypotheses. Castrogriovanni proposes that

task environments become more complex as inter-

organizational connections increase. He concludes

through his research that environment munificence

decreased over time, but was not able to support his

other two hypotheses environmental dynamism and

environmental complexity do not increase over time. Some

other academics cited mention the idea of environmental

hostility, but it is important to keep in mind this

thesis is more concerned with environmental turbulence

and not hostility. For this Emery and Trist and Selsky

and McCann will be examined much more closely.

McCann and Selsky (1984) summarize that Type I

environments are random, with goals and noxiants

unchanging, placid and randomly distributed. Type II

environments have clustering patterns, where goals and

noxiants are no longer random but are rather grouped

together. Imperfect competition arises, a combination of

resources and a naturally hierarchy is formed therefore

leading to the emergence of strategy within the placid

clustered environment. Type III, disturbed reactive

environments, are classified by having more than one type

of each organization; said organizations try to advance

themselves while hindering others. There is a need to

meet competitive challenge naturally leading to a higher

level of organization than in type II. Type IV

environments or “turbulent fields” are characterized by

interdependence and the increasing and enmeshing of

economics, legislation and regulation with perpetual

research and development in order to not only meet but

exceed existing competitive challenge. Turbulent fields

are dynamic. For a more detailed, graphical

representation, please see “Appendix A”. With all of

this in mind we must remember, environmental contexts are

ever changing (Emery & Trist, 1965).  Due to ever-

changing contexts, Joseph McCann and John Selsky

introduced the theory of type V, hyper-turbulent

environments in 1984 (McCann & Selsky, 1984); these

hyper-turbulent or extreme turbulent environments, as

referred to in this document, are where the focus of this

thesis lies.

EXTREME TURBULENT ENVIRONMENTS

Components of extreme turbulent environments

Several academics have previously written of environment

theory, all identify factors that lead to the progression

of one stage of the environment to the next. These

aforementioned theorists have defined different

characteristics that induce progression of environmental

stages, but there is quite a bit of overlap in these

contributing factors. For example, Ansoff (1979)

proposes six key factors of environmental stage

progression: changeability of the market environment,

speed of change, intensity of competition, abundance of

technology, discrimination by customers and pressures

from governments and influence groups. Likewise, Sharma

and Aragón-Correa (2003) identify three factors,

uncertainty, complexity, and munificence. Selsky and

McCann proposed the idea that environments can experience

a fifth stage in addition to the four types of

environments proposed by Emery and Trist two decades

earlier. The new, type five environment is a further

progression due to external influences on society. The

most common, most prominent symptoms of this type 5 or

extreme turbulent environments, as referred to in this

thesis, that will be further examined on their

contribution are uncertainty, complexity, dynamism and

munificence. When all of these characteristics are

present the environment becomes extremely disrupted and

highly turbulent.

The condition, turbulence, is inherently unstable and

diffused in its sources and effects. The word

"turbulence" is a metaphor, and all metaphors are

difficult to operationalize. The difficulty presented by

attempting to operationalize them does not negate their

usefulness. Turbulence is characterized by complexity as

well as rapidity (Terreberry, 1968)of change in causal

interconnections in the environment.

Before elaborating on type five environments, it is

important to acknowledge the fact that after type four

environments it is feasible that a complete collapse can

lead to the reemergence of type one or two environments.

The regression in a lower type of environment would

result from complexity reversing instead of progressing.

The most obvious example of a type four environment

reverting to type one is after the Roman Empire fell,

society entered the Dark Ages (McCann & Selsky, 1984).

The other alternative is then to continue the progression

to type five environments. It is also important to

recognize that turbulence is not a threshold state passed

through by all members of an environment in the same way

or at the same time. The factor making turbulence an

unevenly experienced condition is the relative adaptive

capacity of members (McCann & Selsky, 1984). In the

following sections the different components of extreme

turbulent environments are examined.

Uncertainty

Extreme turbulence is almost always caused by the un-

readiness and uncertainty in a given environment.

Various dimensions of complexity influence the degree of

uncertainty in organizational decision-making; the more

complex the environment, the greater perceived

uncertainty. In contrast, a static and simple environment

has low perceived uncertainty (Smart & Vertinsky, 1984).

Uncertainty is the dominant characteristic of turbulent

environments (Terreberry, 1968). Smart and Vertinsky

(1984) comment on different combinations of complexity

and turbulence and what are the potential interactive

effects with various combinations. They offer that

highly complex and turbulent environments are perceived

to be very uncertain; such environments encourage

retrenchment and adaptive responses to discontinuities.

Milliken (1987) identifies three different types of

uncertainty, state, effect and response uncertainty. He

defines effect uncertainty as an inability to predict

what the nature of the impact of the future state of the

environment or environmental change will be on the

organization. In essence, an organization may know or

predict what is going to happen, but there is uncertainty

as to how the event will affect the organization. The

second, or state uncertainty is when the organization

perceives the organizational environment, or a particular

component of that environment, to be unpredictable.

Response uncertainty is lack of knowledge of response

options and/or an inability to predict the likely

consequences of a response choice; in other words, what

types of responses are available. Snyder (1987)

identified three trends that lead to uncertainty – rapid

growth, deepening interdependence between economic and

other facets of society, and increasing reliance on

research and development to achieve capacity/competitive

challenge.

Complexity

Extreme turbulent environments exhibit complexity;

complexity beyond a comprehensible level of adaptive

capacity when requisite resources and skills are strained

beyond a tolerable level. There are many theories

about complexity and how it relates to environmental

turbulence, but is always concerned with the number of

factors in the environment that must be taken into

consideration by the firm in a decision-making situation.

Child (1972) (as cited in Vertinsky, 1984) defined

complexity as the heterogeneity and range of activities

relevant to organizational decision-making strategies.

Senge (1990) distinguishes between two types of

complexity, dynamic complexity or the relationships

between parts, and detail complexity or the number of

parts (as cited in Casselman, 2007).

Another aspect of complexity is the traditional issue of

the range and complexity of competitors, which places

demands from a competitive hostility perspective

(Casselman, 2007). Complexity and change have escalated

to a point at which member adaptive capacities are

severely challenged and, for many, are overwhelmed. That

is, turbulence has become endemic, and cases of

organizational failure and collapse are increasingly

frequent (McCann & Selsky, 1984).

Knowledge accumulation drives environmental complexity,

which means that as more information is learned, the more

complex the environment in which we live in becomes.

When considering complexity it is important to carefully

consider each of the stakeholders involved in the

environment (Castrogiovanni, 2002). Complex environments

not only place greater demands on information systems,

but also call for a higher quality of decision-making to

account for diverse constituencies in the environment

(Smart & Vertinsky, 1984). The tendency to support

complexity and change seems more common than unusual,

given the tendency of organizations to undermanage their

interdependencies by using adaptive responses

inappropriate for prevailing environmental conditions

(Castrogiovanni, 2002).

Dynamism

Dynamism, or the rate of change is another indicator of

the environment. Extreme turbulence is that the

accelerating rate of interactive effects exceeds the

component systems' capacities for prediction and, hence,

control of the compounding consequences of their actions

(Terreberry, 1968). A symptom of extreme turbulence is

rapid velocity, which is just a different way of saying

ultra dynamism. Change in the environment is occurring

at such a rapid pace organizations require greater

adaptability than what is physically obtainable. The

accelerating rate of change witnessed during extreme

turbulence becomes incomprehensible to organizations

(McCann & Selsky, 1984). Dynamism is a function of

interdependencies as well. Increasing complexity and the

accelerating rate of change, in organizational

environments require greater organizational adaptability

(Terreberry, 1968). Dynamic processes create significant

variances for the component organizations; as the

variances emerge, turbulence changes in a striking

fashion.

Munificence

During periods of extreme turbulence the workforce is

larger than what the demands of organizations need

therefore producing an excess capacity of labor. The

excess capacity of labor and production lead a decrease

in the availability of resources. The availability of

resources and extent to which the environment can support

sustained growth with said resources is referred to as

environmental munificence (Beard & Dess, 1984). Slack

resources are produced by organizations during periods of

growth and stability; the production of slack provides a

buffer during periods of relative scarcity and may also

provide a means of maintaining organizational coalitions,

organizational innovation and aid in conflict resolution

((Bourgeois, 1981; Chakravarthy, 1982) as cited in (Beard

& Dess, 1984)). Boyne & Meier (2008) proposed

munificence could be measured through two variables—the

level of financial resources available and the size of

the workload. Periods of high growth and stability are

sought after by organizations and are said to “munificent

environments”. The rate of sales growth is a key

indicator in the determining of an environment’s

munificence (Beard & Dess, 1984). Staw and Szwajkowski

(1975) as cited in (Beard & Dess, 1984) found

organizations competing in less munificent environments

were more likely to commit illegal acts. Extreme

turbulent environments are highly unstable, therefore

drawing the parallel that in such turbulent times

munificence is considered too low.

Strategic Responses to Extreme Turbulent Environments

Now that extreme turbulent environments have been clearly

and concisely defined with their key factors outlined, it

is necessary to explore how to strategically respond to

the hazards of extreme turbulent environments. It is

also quite important to understand the possible side

effects of being in an extreme turbulent environment. All

strategic responses are some shape or form of

adaptability; such adaptability is handled in different

methods and strategies by each different organization.

The strategy chosen has historically led to the health of

the organization after periods of turbulence. Some of

the most common adaptive capacity of strategic responses

of extreme turbulent environments are collaboration,

dynamic capabilities, marketing alterations, agility,

environmental scanning or various methods of hiding out.

As environments become increasingly disrupted the

strategies for dealing with inter-organizational

relationships have become and will need to be ever more

sophisticated (McCann & Selsky, 1984). Please see

Appendix B for a chart that outlines and summarizes these

reactions. With flexible coping strategies and a

positive attitude towards uncertainty, a dynamic

organization will find even the most turbulent

environment a source of opportunity rather than threat

(Smart & Vertinsky, 1984).

Adaptive capacity

Adaptive capacity strategies come in all shapes and

sizes. These types of strategies are about the amount

and variety of resources and skills possessed and

available for maintaining viability and growth relative

to the requirements posed by the environment. In extreme

turbulent environments some form or another of adaption

is exhibited by all organizations; responses range from

aggressive marketing strategy overhaul to simply hiding

out and waiting for the storm to pass. Escalating

complexity and dynamism require greater adaptive capacity

as regions of relevant uncertainty grow for members.

Adaptive capacity at the level of the organization varies

greatly; abilities to assimilate large amounts of

information about the environment can vary significantly

from one organization to another. Organizations also vary

considerably in their capacities for responding to

threats quickly and fully (McCann & Selsky, 1984).

Inter-organizational adaptive capacity uses other firms

in order to leverage the adaptive capacity of the firm in

a particular area and alter the internal structures and

operation of organizations so that the speed and quality

of decisions are more capable of responding to external

changes. Adaptive capacity is an organization’s ability

to adapt to the environmental conditions that it faces.

As the conditions become more complex and uncertain, the

problem of adaptive capacity becomes more critical to the

survival of the firm. In fact, the environment can become

so complex that it exceeds the ability of the firm to

“individually” respond. Outsourcing becomes a forced

adaptive strategic measure for organizations when the

opportunity cost of not outsourcing becomes greater than

the potential additional costs involved in establishing

the use of outsourcing (Casselman, 2007).

Inter-organizational cooperation attempts to break the

environment into more manageable pieces. This inter-

organizational sharing of adaptive capacity between firms

aids in leveraging the adaptive capacity of the firm in a

particular area. This allows the firm to apply its

capacity in areas in which it is more capable.

If an organization can predict the extent and direction

of environmental change with some degree of certainty, it

may adapt effectively to this change. An inability to

predict change may trigger either a search for measures

to control the environment, or focus the thrust of the

organization towards coping with problems as they arise.

That being said, organizations tend to run the risk of

underinvesting in information gathering activities. Such

firms may find that they are responding to a crisis

without sufficient effort being spent to diagnose the

roots of the crisis (Smart & Vertinsky, 1984).

Marketing Overhaul

Informational Advertising

When an environment is experiencing extreme turbulence,

it has been observed that marketing campaigns change from

transformational to informational marketing.

Transformational marketing is made up of images and

emotional advertising. A transformational advertisement

would therefore make the experience of using the brand

richer and more enjoyable by connecting the experience of

the ad with that of using the brand in such an intimate

fashion that “consumers cannot remember the brand without

recalling the experience generated by the advertisement”.

On the other hand, informational marketing has fewer

images, is more practical and attempts to establish

credibility. During the financial crisis of 2008, Lee and

Taylor (2011) examined financial services advertisements

and found that post crisis the ads relied on delivering

accurate information and rational advertising strategy to

guide the consumer to “where to save and invest”. The

main point is to cater to the needs of consumers

depending on the environment, in this case providing the

audience with factual information about the product and

relevant brand data in a clear and logical manner such

that they have greater con dence in their ability tofi

assess the merits of buying the brand after having seen

the advertisement. The extreme turbulence experienced

during the financial crisis led to a signi cant increasefi

in the use of informational message strategies in order

to appeals to different needs (Lee & Taylor, 2011).

Informational advertising is more prevalent than

transformational during environments with extreme

turbulence because prospective clients are less worried

about image but more concerned with fulfilling needs.

Analyze Marketing Research

Marketing research analysis is always critical, but a

perpetual environmental scanning and forecasting is

crucial during periods of extreme turbulence (Milliken,

1987). Organizations must be on high alert mode for the

discovery of any possible threats and/or opportunities

whether they be ambitious or expansionist (Glaister &

Thwaites, 1992). As threats or opportunities approach,

they need to be integrated into the administrative,

entrepreneurial, and engineering dimensions of a firm.

Lee and Taylor (2011) recommend categorizing advertising

by four important distinctions: intangibility,

inseparability of production and consumption,

perishability and heterogeneity.

Glaister and Thwaites (1992) categorize firms into four

different types of groups, proactive, reactive, creative

and predictive. The proactive groups are more committed

to obtaining market research studies to identify

opportunities and threats within the environment than the

other three types of groups. Both the predictive and

creative groups strongly support the adoption of the

marketing concept and production orientation. Reactive

groups are significantly less inclined to develop

marketing to the level at which a specific department is

necessary to co-ordinate market-related activities. The

creative group is likely to give marketing a greater

input to the strategic planning process than the other

three types of groups. Over 73% of “creative”

organizations suggest that marketing has a major role in

strategic planning or even leads the process. They

observe that successful organizations should seek to

develop a mode of strategic behavior, which is

appropriate for the environment in which they operate.

They must also be configured in a manner, which

complements their chosen mode (Glaister & Thwaites,

1992).

Hypothesis 1: Organizations that overhaul their marketingstrategies will be able to withstand extreme turbulentenvironments better than organizations that do not alter theirmarketing strategies.

Agility

The recent interest in agility comes from a belief that

the best-performing organizations in fast-paced

environments move quickly to identify opportunities and

avoid collisions. Many of the skills associated with

agility have a long pedigree in psychological and change-

management studies. Agility is referred to as the

capacity for moving quickly, flexibly and decisively in

anticipating, initiating and taking advantage of

opportunities and avoiding any negative consequences of

change. Lee, McCann and Selsky (2009) propose that

agility can be built and developed through different

tactics. One agility measure is improving “sense-making”

skills through a better understanding of uncertainty and

ambiguity. Creating and sustaining an openness to change

via financial rewards and career incentives for

innovation and continuous improvement also develops

agility. Agility can be increased through delivering and

applying knowledge quickly and efficiently through clear

and consistent communication channels. Organizations are

said to be “agile” when new issues present themselves,

the response is fast, including the deploying and

redeploying resources, talent and skills as well as

cross-training and frequently moving people around to

broaden their skill or knowledge base. Streamlining and

clarifying roles and responsibilities in decision-making

processes prevents firms from becoming paralyzed during

turbulence (Lee, McCann, & Selsky, 2009).

Hypothesis 2: Organizations that demonstrate agility will be able towithstand extreme turbulent environments better than organizationsthat do not demonstrate agility.

Resilience

Environmental turbulence may be managed by building

resiliency. Resilience is a newer concept about the

robustness of systems that is rooted in psychotherapy and

social psychology, material science and ecology. It is

defined as the capacity for resisting, absorbing and

responding, even reinventing if required, in response to

fast and/or disruptive change that cannot be avoided

(Lee, McCann, & Selsky, 2009). A strong sense of a

valued identity, common purpose and shared beliefs are

central to both individual and group resiliency ((Coutu,

2002; Freeman, Hirschhorn & Maltz, 2004; Hirschhorn &

Gilmore, 1992) as cited in (Lee, McCann, & Selsky,

2009)). Resiliency is also associated with creative,

prompt responses to minimize the impact of surprises and

jolts encountered during extreme turbulence. In order to

build resilience organizations have tried to create

information system firewalls, incorporate redundancy in

operations, build reserves, use scenarios for "what if"

forecasting and engage in enterprise risk management

(Lee, McCann, & Selsky, 2009).

Disasters, both natural and man-made, are bound to happen

and can provide opportunities for innovation and growth

for organizations with greater resiliency, but they

damage those with less resiliency. Airlines demonstrated

resiliency after the extremely turbulent environment that

occurred post 9/11 shock by reinventing themselves around

core values. Reinvention post extreme turbulence is an

example of how organizations can demonstrate resiliency.

The ability to improve contingency planning and crisis

response capabilities are also factored in when analyzing

resilience levels. A few ways that may improve

contingency planning are simulations, role-playing and

scenario planning to ensure the skills and competencies

for surprises and crises are built. Strategic risk

assessment on an enterprise basis can add to resilience

by developing plans to proactively manage each identified

major risk with an emphasis on higher-risk, under-managed

relationships first. Resilience is based on how well a

company can “take a hit” and react appropriately and

efficiently. Other factors affecting an organization’s

resilience are developed and sustained alliances and

partnerships, and instilling a deep, shared belief in

company core values and beliefs as well as always being

prepared to rethink and redesign internally via developed

transformation skills (Lee, McCann, & Selsky, 2009).

Hypothesis 3: Organizations that demonstrate resilience duringextreme turbulent environments will be able to withstand the changebetter than organizations that do not demonstrate resilience.

Proactivity

Extensive research has been conducted on the type of

continuums organizations exhibit during extreme

turbulence; the two that are examined here are the

proactive versus reactive. Proactive organizations

attempt to shape their environment, or at least have

detailed knowledge of it, in order to anticipate events

(Aragon-Correa & Sharma, 2003). Companies with a

proactive orientation seek to exploit new opportunities

by introducing new products, technologies and

administrative techniques and attempt to lead rather than

follow competitors (Miller and Friesen, 1978;

Venkatramen, 1988). Proactive firms, historically,

invested more on research and development and innovation

than reactive oriented firms. Reactive orientation firms

are driven by the environment and seek to avoid

discontinuous strategic measures. Major changes are

invariably a response to crisis or unsatisfactory results

for reactive organizations (Aragon-Correa & Sharma,

2003). They, also, typically move on an incremental

basis, rooted on precedent and geared to the avoidance of

risk. Functional emphasis is on operations and finance,

while leadership style focuses on control (Ansoff and

McDonnell, 1990; Mintzberg, 1973).

Predictive societies may have an overdeveloped resource

capability with the capacity to be more strategically

aggressive. An organization should seek to develop a mode

of strategic behavior, which is appropriate to the levels

of environmental turbulence. Resource capabilities should

then be assembled to support the chosen mode. In

assessing levels of turbulence and resource capabilities

the differences between perception and reality will prove

critical. Where perception is divorced from reality the

organization's response to change will be inappropriate.

Attention must therefore be focused on developing those

activities, which provide information about both the

internal and external environments; for example,

marketing audits, a blend of executive and non-executive

directors and consultants. The attitudes towards

marketing and strategic issues illustrated by the

reactive group were compatible with organizations that

tend to be driven by their environment and respond after

the impact of change. In this respect it can be argued

that their internal capabilities (configuration) are

complementary with the external environment (Aragon-

Correa & Sharma, 2003).

Similarly, Smart & Vertinsky (1984) theorized that

entrepreneurial strategies are more similar to the

proactive continuum and adaptive strategies more similar

to the reactive continuum. Entrepreneurial strategies,

whether they are active or offensive, have the objective

of exerting control over the environment. In contrast,

adaptive strategies react to a specific problem stimulus.

These types of strategies are then divided according to

long-term or short-term and are all experienced during

times of discontinuity. Small changes are considered

part of the normal operating environment and are dealt

with by standard operating procedures, but in this

context discontinuities imply a major change in the

company's environment and require new strategic efforts.

Adaptive strategies are reactions to environments that

are oriented primarily towards returning to or

maintaining the status quo (Smart & Vertinsky, 1984).

Adaptive responses with long-term objectives are deemed

as planning strategies and adaptive responses with short-

term objective are said to be “fire-fighting” strategies.

Planning strategies are characterized by comprehensive or

synoptic measures and emerge when there are

discontinuities in predictable environments. Less

uncertainty in an environment allows for more well

thought through coping responses, and aids in the

revision of long term plans to avoid crises. Adaptive

postures are preferred as this type of posture helps to

diminish uncertainty and increase the value of

information in a given environment. When discontinuities

are present in a static environment, fire-fighting

strategies will be evoked. Said discontinuities are

regarded as temporary deviations from normal operations.

In a static environment, firms tend to make heavy

investments in standard operating procedures that, in

turn, lead to long-term change becoming quite costly.

Fire-fighting strategies typically consist of incremental

actions to buffer an organization and to provide for

limited remedies (Smart & Vertinsky, 1984).

Entrepreneurial strategies attempt to control the

environment through innovative methods. Entrepreneurial

responses with long-term objectives can be termed

strategic, whereas entrepreneurial responses that seek

immediate impacts can be termed tactical responses.

Discontinuities in turbulent environments will evoke

strategic responses. To survive in a turbulent

environment it is suggested that a firm seeks to control

and exploit change. Tactical strategies are deployed

when there are discontinuities in complex environments.

Complex environments are characterized by the

interactions of many diverse components and due to great

diversity, managers in complex environments often find it

difficult to accurately assess or predict changes in

components and their impact on the firm, especially in

the long-term. The level of complexity leads to

strategies with an emphasis placed on short-run impacts

in an effort to simplify the decision (Smart & Vertinsky,

1984).

The results suggest, surprisingly, that there is a

threshold of change, such that when it is exceeded, even

risk-takers may consider it unbeneficial to control the

environment. Alternatively, this result may indicate that

when an environment becomes more volatile it is not

necessarily risk-takers who are attracted to a firm, but

optimists. Managers in complex, turbulent environments

often find it difficult to accurately assess or predict

changes in components and their impact on the firm,

especially in the long-term (Smart & Vertinsky, 1984).

For this reason, during extreme turbulence an emphasis is

placed on short-run impacts in an effort to simplify the

decision process ((Cyert and March, 1963) as cited in

Smart & Vertinsky, 1984). When an organization responds

solely by increasing their aggressiveness, it usually

suggests there has been a failure to put in place the

support mechanisms, which are essential to strategic

underpinnings (Glaister & Thwaites, 1992). During

periods of extreme turbulence Glaister and Thwaites

(1992) recommend adopting a long-term, consistent

strategy that fosters continuous outside-in learning from

multiple stakeholders, so as to reduce the complexity and

state uncertainty of conflicting environmental issues;

develop managerial and organizational knowledge for

managing the organization and effect uncertainty at the

business-natural environment interface; and generate

continuous improvement and innovation. Organizations that

adopt a consistently proactive approach will develop a

powerful dynamic capability (Glaister & Thwaites, 1992).

Hypothesis 4: Organizations that exhibit a proactivity will be able towithstand extreme turbulent environments better than organizationsthat fail to exhibit such behavior.

Dynamic Resourcefulness

Interdependence among environmental elements tends to

increase during extreme turbulence, which in turn gives

rise to increasing dynamism, as such elements converge in

pursuit of common interests. Thomas (1996)(as cited in

(Castrogiovanni, 2002)) referred to such innovative

tendencies “dynamic resourcefulness”, and argued that his

data supported the view that it was increasing. Dynamic

resourcefulness is more frequently referred to as dynamic

capability. By definition, such capabilities vary with

the level of market dynamism and enable an organization

to adapt to changes in the general business environment.

The general business environment affects the process and

capability of environment theory and its impact on

competitive advantage. This posits that organizational

performance (competitive advantage) is a result of the

proper alignment of endogenous organizational design

variables with exogenous context variables. A dynamic

capability of environment theory requires a complex

integration of these environmental capabilities through

the use of organizational and managerial resources

(Aragon-Correa & Sharma, 2003).

Aragón-Correa and Sharma (2003) discuss proactive versus

reactive dynamic capabilities. Proactive capabilities

take into consideration stakeholder integration,

continuous innovation and improvement, and higher-order

shared learning as well as a set of specific and

identifiable processes that have significant commonality

in the form of best practices across firms, allowing them

to generate new, value creating strategies (Eisenhardt &

Martin, 2000 as cited in (Aragon-Correa & Sharma, 2003).

Cross-functional employee involvement, coordination, and

integration, as well as reconfiguration and recombination

of resources are all contributing factors to a firm’s

proactive dynamic capabilities. If organizations are

able to develop the dynamic capability of a proactive

environmental approach in a complex business environment,

it is likely to generate a competitive advantage when the

general business environment is turbulent and competitors

lack this capability. The competitive advantage becomes

increasingly valuable, as it is inimitable, non-

substitutable, path dependent, and socially complex. But

the full extent to which the dynamic capability of

proactive environmental strategy will lead to a positive

impact on an organization's competitiveness will depend

on exogenous factors (Aragon-Correa & Sharma, 2003).

Studies have shown a positive relationship between

proactive environmental strategies and organizational

performance results when firms develop complex

capabilities; some examples of these capabilities are

total quality management, the socially complex

capabilities of cross-functional and cross-stakeholder

management, and the rare capabilities of shared vision

(Aragon-Correa & Sharma, 2003).

Hypothesis 5: Organizations that demonstrate dynamic capabilitieswill be able to withstand extreme turbulent environments better thanorganizations that cannot demonstrate dynamic capabilities.

Collaboration

During periods of extreme turbulence organizations have

been observed to extend some type of peace offerings and

collaborate to help navigate said turbulence.

Collaboration, also referred to as multi-lateral

agreements, promotes mutual understanding and provides a

positive climate for managing interdependencies as well

as producing economies of scale that reduce the level of

resources needed by a single firm. The capacity of an

organization or inter-organizational collectivity for

managing environmental complexity and change is

contingent not only upon its own capacity, but also upon

the capacities of those sharing the environment with it.

Under-management of interdependencies is quite often

subject to misinterpretation risk, which proportionally

increases as inter-organizational knowledge sharing

increases. As inter-organizational collaborative

strategies are not resolved in a timely manner,

turbulence can escalate beyond the range of adaptive

capacity within an environment and the more radical the

disruption presented by the turbulence becomes (McCann &

Selsky, 1984). In order to attempt to manage the

turbulence and not let it become out of control, inter-

organizational relationships have to become more and more

sophisticated. But collaboration can become so resource

intensive that the only remaining alternative is either

bounded rationality and satisficing, or partitioning

adaptive capacity (Casselman, 2007). Several studies by

various academics have shown that collaborative

strategies frequently prove to be inadequate, but more

interestingly, are maladaptive and tend to promote

turbulence, not lessen it. There are four types of

collaborative responses in extreme turbulent

environments: retrenchment, partitioning, social enclave

and social vortex.

Retrenchment

Retrenchment is a type of collaborative response. Within

the existing framework, retrenchment may be viewed as a

tactical retreat in defense of the status quo during a

crisis. As a routine environment becomes more volatile

and less standardized, managers also have a greater

tendency to select retrenchment strategies as responses

to discontinuity (Smart & Vertinsky, 1984).

Another side effect of collaboration caused by extreme

turbulence is partitioning through social triage. Social

triage implies that the gap between those with and those

without sufficient adaptive capacity will increase, not

lessen, under turbulent conditions. The gap created by

social triage increases based on how quickly turbulence

accelerates, the amount of excess capacity within the

given environment, the ability of members to minimize the

dysfunctional consequences of their interdependencies

with other members and the type and enforceability of

prevailing ethical standards (McCann & Selsky, 1984).

Partitioning

In the following paragraphs three effects of partitioning

will be explained. A partitioned environment is said to

by dynamic, not static. The act of partitioning occurs

when members attempt to allocate and protect limited

adaptive capacity. Partitioning becomes a likely

phenomenon because of the essentially asymmetrical

distribution of resources and skills among members. When

an environment becomes grossly overloaded, but before

extreme turbulence becomes endemic, attempts to partition

or segment the environment into domains radically varying

in turbulence and adaptive capacities will first occur.

Social triage is a direct side effect of partitioning and

both, as a policy and as an allocation process, is

undesirable for humanistic and ethical reasons. Ethical

standards can prevent social triage only as long as

agreement can be maintained about the desirability of

those standards and effective means exist for enforcing

them. The use of markets and prices in a capitalist

economy may well reinforce social triage. This is because

the ability to compete for additional resources and

skills in a market is largely a function of existing

capacity (McCann & Selsky, 1984). Therefore the greater

the turbulence experienced, the more partitioning and

social triage become evident within lower echelons of

society in a given environment.

Under extreme turbulence, as a direct result of social

triage, gives rise to two very different types of

coexisting, highly bounded domains within an environment:

social enclaves and social vortices. Enclaves and

vortices can coexist contiguously but only if

partitioning proves effective (McCann & Selsky, 1984).

Social Enclave

Another form of collaboration as theorized by McCann &

Selsky (1984) is known as a social enclave. A social

enclave is surrounded by higher levels of complexity and

change and classified by members that effectively protect

adaptive capacity. McCann and Selsky define three

criteria for obtaining membership within an enclave: the

adequacy of a member's current adaptive capacity; its

ability to contribute excess capacity and build the

capacity of others within the enclave; and, the

compatibility of the values and goals of prospective

members. The boundaries between domains are actively

managed and "closed-system" logic prevails.

To explain this phenomenon in terms a bit more

comprehensible lets use the analogy of a river and

several rafting boats on this river. One boat arrives at

a section of fierce and violent rapids and stops. They

collaborate with oncoming rafts and

Decide to tether together and head through the rapids

using all of their resources as one large raft; this is

similar to the social enclave, as the enclave combines

their resources and takes on the turbulent environment

together.

Social Vortex

Similar to the social enclave is the social vortex.

Social vortices are surrounded by lower levels of

turbulence and are populated domains of very low adaptive

capacity relative to the surrounding environment. Such

phenomenon is exactly where extreme turbulence prevails.

Vortex members collectively lack sufficient adaptive

capacity relative to prevailing environmental conditions

and are the "have-nots" in terms of requisite resources

and skills (McCann & Selsky, 1984).

Going back to our river and raft analogy, imagine if the

rafting boats make a collective decision to set to the

side of the river just before the rapids and wait for the

turbulent waters to secede as a group. This is like the

social vortex as the collaborative group separates

themselves and decides to wait out the turbulent

environment in a group.

Hypothesis 6: Organizations that engage in collaboration will be ableto withstand extreme turbulent environments better thanorganizations that cannot demonstrate collaboration efforts.

Final Words

There are many different types of strategic responses to

extreme turbulence ranging from banding together in

collaborative ways to developing proactive “what if”

plans for different scenarios. The capabilities are

complex and path dependent on the accumulation of, and

the interaction between, resources such as physical

assets, technologies, and people (Aragon-Correa & Sharma,

2003). Turbulence as an environmental condition is

contingent on the adaptive capacities of those

experiencing it (Emery & Trist, 1965). All of the

strategic responses to extreme turbulence are some how

some way adaptability to the current environment.

Hypothesis 7: Organizations that realize any combination of theaforementioned strategic responses will be able to withstandextreme turbulent environments better than organizations thatare unsatisfactory at exhibiting one or more of such strategies.

CASE STUDY METHODOLOGY

Case studies allow for rigorous qualitative data research

to be conducted in order to explore or describe a

phenomenon (Baxter & Jack, 2008). Investigating

strategic management and more specifically the strategies

themselves is extremely challenging, since the underlying

constructs are intangible and difficult to measure

(Casselman, 2007). There are a wide range of issues that

have been identified with the reliability and validity of

measures and research design in business research but the

following methodology has been designed to diminish the

chances of unreliable and invalid measures. In order to

investigate the phenomenon of extreme turbulent

environments, a rigorous qualitative case study method

has been chosen to examine and analyze the most extreme

turbulent environment society has seen since the Great

Depression, the 2008 Global Financial Crisis. In this

section, the methodology necessary to conduct quality,

rigorous case study research is outlined. Research has

been conducted with data from multiple perspectives to

produce multi-faceted analysis, in order to reveal the

phenomenon.

Amongst industry leaders, Robert Yin’s book, Case Study

Research: Design and Methods, is cited thousands of times

as a solid foundation for constructing the methodology

used in qualitative case study research. The following

methodology is constructed based on his findings. The

process began with a constructivist paradigm or research

question (Yin, 2008). In this case our primary interests

are how can an organization navigate through extreme

turbulent environments and emerge as a flourishing

entity? The goal of the research is to identify patterns

or commonalities within one or more of the organizations

studied; to determine how these patterns or commonalities

manifest themselves in the organization and to understand

the relationships and underpinnings between the patterns

or commonalities (Casselman, 2007). More research

questions or propositions may be added on in order to

focus the research, making the study more feasible

(Baxter & Jack, 2008).

Now that the constructivist paradigm is established we

must consider what is the “case”. The case is the unit

of analysis; defining the case presents a challenge for

not only novice researchers but seasoned experts as well

(Baxter & Jack, 2008). One key issue in strategic

management research is the poor quality of the measures

used (as cited in Carlson 2004). In order to properly

define the case and avoid the pitfall of low quality

measures, the following question will be answered: Do I

want to analyze the difference between organizations?

(Baxter & Jack, 2008). This study analyzes the

differences between organizations, specifically during

the financial crisis of 2008. Arguably just as equally

important as defining the case, is determining what is

not to be included in the case (Yin, 2008). In order to

manage the excessive amounts of information available

about the financial crisis and impact on all different

organizations, four specific companies have been chosen

to analyze. The four companies are international

organizations that span across different industries but

the primary constraint for selection was the outcome of

the company in today’s market. The four chosen

organizations are as follows: an organization that was

not successful through this period of extreme turbulence,

Lehman Brothers; one organization that was established

just at the onset of the crisis and has emerged with

exponential growth, Alibaba Group; one organization that

suffered severely through the crisis, AIG; and one

organization that was able to exploit the financial

crisis and take advantage of the turbulence, Ryan Air.

Relatively large firms were selected based on the

assumption that as firms become larger and more complex,

they have a greater requirement for more formalized

strategic use (Casselman, 2007). These four organizations

comprise the research boundaries of this study.

“…case studies, like experiments, are generalizable to theoreticalpropositions and not to populations or universes. In this sense thecase study, like the experiment, does not represent a ‘sample,’ and theinvestigator’s goal is to expand and generalize theories (analyticgeneralization) and not to enumerate frequencies (statisticalgeneralization)” (Yin, 1994, page 10).

In following Yin’s theory, by having selected companies

that have experienced turbulence differently, the hope is

to improve the ability to make theoretical conclusions

about the drivers of success in extreme turbulence.

The next step is to determine what type of case study

will be performed. In this instance we will be using a

multi-case design as we are analyzing in different

settings (Yin, 2008) i.e. different organizations

spanning different industries and different nations

during the financial crisis. Multi-case studies have

both pro’s and con’s; for example multi-case studies are

said to be more robust as multiple cases tend to provide

more compelling results but it can also lead to extensive

resources and more time than one researcher is capable.

Also, multi-case studies must be approached like an

experiment that is to be replicated therefore the same

parameters, ratios and aspects of the aforementioned

organizations must analyzed in the same manner for each

of the four. The replication technique used in this

study creates external validity and is specifically

referred to as a theoretical replication as we are

predicting contrasting results from the outset of the

investigation. An embedded approach has been used as

each organization has been analyzed separately and

results were not pooled. I have also conducted a

flexible design to allow for modifications depending on

findings throughout the investigation (Yin, 2008).

To increase the credibility, which is the number one

pitfall of case study research, different data sources

must be taken into consideration (Baxter & Jack, 2008).

This study uses annual reports, peer reviewed journals,

periodicals, financial records, company websites

and other media publications to measure the different

strategic adaptive capacity responses to extreme

turbulence. Multiple sources of evidence are examined

and explored to demonstrate a concrete chain of evidence

and establish patterns in order to create construct

validity (please see Appendix C for a complete list of

materials used to explore this case study). Objective

performance data was obtained from annual reports and

other public databases. Data on sales revenue, number of

employees and assets were based on figures found on

company websites and published public information.

Although financial performance measures have some

indication of relative health of an organization, we want

to examine more specifically if our selected

organizations exhibited any of the strategic adaptive

capacity responses previously identified. This will be

conducted via sophisticated content analysis of annual

reports. Please see Appendix D for a complete list of

the characteristics of each strategic response that were

used as research parameters. The consistency of only

using the same few types of sources to assess patterns

and logic establish internal validity of the study. The

content of these sources will be analyzed and scaled

according to the demonstration of each strategic adaptive

capacity.

The analysis is to be compiled into a report. The

primary goal of the report is to describe the study in

such a comprehensive manner that the reader feels as if

they had been an active participant on the research team.

As a novice researcher, it is necessary to clearly state

the study research questions, provide propositions, the

case study design has been scrutinized and is appropriate

for the research question, purposeful strategies are

appropriate for the case study, data are collected and

managed systematically and the data are analyzed

correctly (Baxter & Jack, 2008). In the previous

paragraphs I have outlined these critical steps of the

case study methodology design and in order to circumvent

the lack of rigor pitfall, every effort was made to

approach the research in a reasoned, well-justified and

easily replicable, scientific manner.

Measures

Once all of the steps of the case study design and

methodology have been completed it is time to collect the

data. But we must establish what measures and what data

are to be collected. For this case study analysis there

are two parts; the financial performance data and the

content analysis data. Please see appendix E for a table

with all four companies’ financial performance compiled

together.

The financial performance data will be collected via

published information available to the general public.

To assess the financial performance of the selected

organizations, annual sales growth, return on sales,

return on assets and growth in employee data will be

collected and analyzed. Annual sales growth will be

calculated by using the change in sales from one year to

another divided by the sales of the previous year.

Return on sales will be calculated by using net income

from continuing operations, excluding extraordinary items

and divide it by sales. Return on assets will be

calculated by taking net income from continuing

operations, excluding extraordinary items and divide by

assets (Goll & Rasheed, 2005). Growth in employees will

be calculated by taking the difference of number of

employees divided by the current number of employees.

Both (Baxter & Jack, 2008) and (Yin, 2008) strongly

recommend the use of a database to organize data. The

advantage of using a database to accomplish this task is

that raw data are available for independent inspection.

The following is a section of the database I used to

compile the financial performance analysis:

Through all of the stages of case study analysis an

emphasis on rigor is pertinent; this holds true for the

content analysis as well. The annual report materials

that were collected are textual in nature. Content

analysis suggests that different approaches to coding

data are necessary as traditional ratios are not

calculated. A set of pre-specified codes will be used.

Each strategic response and its major components or

“indicators” were searched for and counted in the content

of each annual report for each of the three years chosen

(2006, 2008 and 2010) and compiled in the coding sheet

database that can be found in Appendix F.

The total counts were then averaged for the three years

and assigned a title based on the following scale:

*Where x = the count

The “control of the market” indicator, under the

“agility” response, was ranked on a unique scale as it

was observed signifcantly more frequent than any other

indicator. The scale for “control of the market” is:

Then using an excel spreadsheet each alphabetic code was

converted to a numeric code ranging from 0 – 4, an

average was calculated for each strategic response and

the corresponding alphabetic code was assigned in a table

similar to the following:

Finally, an overall rating was assigned to each firm

using the same method that was used to determine the

ratings for the strategic responses.

CASE STUDY ANALYSIS

The following section presents the results found during

the content analysis of the research. The results of the

research are organized by each organization.

Lehman Brothers

Henry Lehman, an immigrant from Germany, and his two

brothers Emanuel and Mayer opened a cotton trading

business in Montgomery, Alabama, naming it Lehman

Brothers in 1880. By 1889 the Lehman Brothers expanded

their business into investment banking, by underwriting

its first stock offering. Lehman Brothers continued to

grow into the world’s most reputable investment bank. In

the early 1980’s American Express Co acquired Lehman

Brothers, but within 10 years, American Express spun off

Lehman with little capital and saddled with losses and

admitting it was never a good fit for the two

organizations. Lehman took a huge leap of faith in 2002

and purchased 745 Seventh Avenue to make the midtown

building its new headquarters. In 2003 Lehman bought

Neuberger Berman for $3.2 billion to give its wealth

management division a boost. Lehman closed the BNC

Mortgage LLC subprime-lending unit, eliminating 1,200

jobs. March 17, 2008 Lehman shares dropped off as

concerns rose that it would be the next Wall Street firm

to collapse after Bear Stearns. Lehman stock then

recovered all its loss the next day when first-quarter

profit beat analysts' estimates. The firm announces its

first quarterly loss since going public and sells $6

billion of stock to bolster capital in early June of

2008. The following quarter Lehman reported a $3.9

billion loss, primarily due to more than $5.6 billion in

write downs. At this point, Lehman announced its plans

to sell a majority stake. After analysis and discussions

with several potential buyers, Barclays pulls its bid

after failing to secure guarantees against losses. Bank

of America withdraws hours later leaving no other bidders

on 14 September 2008. The next day, September 15, 2008

Lehman petitioned for Chapter 11 bankruptcy, listing $639

billion of assets making it the largest filing in U.S.

history.

Lehman Brothers is the only one of the four organizations

chosen to analyze that did not successfully navigate

through the 2008 financial crisis. Due to their failure

to emerge from the severe economic downturn, Lehman

Brothers was chosen under the assumption that an

organization that does not survive through extreme

turbulence would not exhibit any of the strategic

responses.

Table 1: Lehman Brothers Financial Performance

The table shows the severe decrease in return on sales

and sales growth from pre-turbulence to extreme

turbulence. The return on assets figures do not present

any conclusive evidence as the total shift was than 1%.

The rate of growth of employees also dropped off from a

positive 11.6% to a negative 9.1%. As a whole, the

financial ratios calculated show a severe decline,

especially as an organization is to enter a historically

extreme period of turbulence.

Despite extensive research, I was unable to produce only

but one print advertisement for Lehman Brothers. This

leads me to believe that their advertising was limited to

none prior to the financial crisis of 2008. The one

advertisement is from 2007, it has an elephant in an

empty room on it with the caption, “Well Bob, the

economy’s just not what it was last year” (see Appendix

G). The simplicity of advertisement makes it fall into

the informational category but there is no evidence of a

switch from transformational to informational marketing

for Lehman Brothers. From the lack of advertising to

introduction of one advertisement during the height of

the extreme turbulence suggests marketing was being

attempted but as there was no prior evidence of marketing

one cannot say that an overhaul was being executed.

The following table presents the data collected from the

content analysis for Lehman Brothers. The annual reports

for 2006 and 2007 were analyzed in this case because

there were no publications of annual reports for 2008 and

2010 as the organization no longer existed. There was no

evidence of agility or any of its indicators. As for

resilience, there was a very high indication of extensive

risk management and moderate to low evidence of

innovation and creativity. There was no evidence of

dynamic resourcefulness in either of the two annual

reports. There was some demonstration of proactivity via

an attempt to control the environment, broad innovation

and knowledge of the environment. The only discussion of

collaboration was through complexity management.

Table 2: Lehman Brothers Response Counts

AIG

AIG traces its roots back to 1919, when American

Cornelius Vander Starr established a general insurance

agency. The business grew rapidly, and two years later,

Mr. Starr formed a life insurance operation.  In 1926,

Mr. Starr opened his first office in the United States,

and decided to focus on opportunities in Latin America.

But by the early 1950’s the organization moved its

headquarters to New York City in order to focus on the

American market. Maurice R. Greenberg, Starr’s

predecessor, focused on selling insurance through

independent brokers rather than agents to eliminate agent

salaries. In 1967, American International Group, Inc.

(AIG) was incorporated as a unifying umbrella

organization for most of C.V. Starr’s general and life

insurance businesses.  The 60’s and 70’s brought the

closure of many operations in the Middle East and

Southeast Asia while growing operations in America. By

1979, AIG had a reputation for offering superior

technical and risk management skills. The early 2000s

saw a marked period of growth and entrance into new

markets including India. October of 2004 brought about

the first of AIG’s severe legal issues with two top tier

executives being convicted of various white collar

crimes. Beginning in 2005, AIG became embroiled in a

series of fraud investigations conducted by several

leading US federal agencies. Greenberg then resigned and

AIG was left with tens of billions of risk associated

with mortgages. When losses hit the mortgage market in

2007-8, AIG had to pay out insurance claims and also

replace the losses in its collateral accounts. After

entering the period of extreme turbulence in such poor

condition, the United States Federal Reserve Bank stepped

in, announcing the creation of a secured credit facility

of up to US$85 billion to prevent the company's collapse;

this is the largest government bailout of a private

company in U.S. history. The U.S. Department of The

Treasury in December 2012 published an itemized list of

the loans, stock purchases, etc. engaged in with AIG.

AIG had received a total of 182.3 billion in government

assistance and by the beginning of 2013 had paid back,

including the positive return, 205 billion.

The figures for AIG are quite impressive (see Table 3

below). The return on sales figures are consistent from

2006 and 2010 but there is an incredibly severe drop off

in 2008 when the insurance giant was bailed out by the

United States government. Annual sales growth had a

remarkable drop off as well in 2008 as that was the

height of the extreme turbulence. The growth of

employees figures demonstrate that there was a lag with

the constriction of the organization.

Table 3: AIG Financial Performance

In the spring of 2006 AIG published print advertisements

with few images and few words. The ad campaign was very

informational via its simplicity. In January of 2008 AIG

had print advertisements with several images and a lot of

small print therefore becoming more of transitional style

appealing more to the emotions and overall experience.

This alteration to their published advertisements is

their initial overhaul, but does not compare to the

complete revolutionary campaign launched in May of 2008.

Later in 2008 AIG released a series of print

advertisements all with a similar style, one simple photo

that consumed the entire page, the light focused on the

left with the object in the image on the left hand side

while on the right hand side the background fades to

black. Above the image is plus sign with a number and to

the right is a written statement about the image and how

that image and associated activity can add however many

years to your life. This advertising campaign is

extremely different and completely overhauled when

compared to the previous campaign in 2006. This campaign

was executed at the entry of the extreme turbulence of

2008. After the extreme turbulence AIG once again

overhauled their advertising strategies and called it

called “Thank You America,” which is a return to their

more traditional plain photo but with the appeal to the

American public noting how they have successfully paid

back their debt and then some to the United States

Federal government. This campaign featured several

company employees, including AIG President and CEO Robert

Benmosche, who talked directly to the camera and offered

their thanks for the government assistance.

The table below displays the counts and evidence found

for the strategic responses to extreme turbulence for

AIG. Their attempt at controlling the market is

extremely high and with moderate flexibility, internal

efficiency and understanding of the market; AIG

demonstrated agility through the extreme turbulence.

From the parameters defined, AIG also demonstrated

resilience through their effective risk management and

emphasis on innovation. The primary demonstration of

dynamic resourcefulness was through their emphasis on

future cash flows. There was also evidence found of

proactivity through broad innovation and knowledge of the

overall environment. There was little to no evidence of

collaboration but there was some demonstration of

complexity management.

Table 4: AIG Response Counts

Ryan Air

RyanAir was established in 1985, with a share capital of

£1 and 25 employees, using a 15-seater Bandeirante

aircraft. By 1990, Ryanair dropped its Business Class

product and closed the Frequent Flyer Club, but re-

launched as Europe's first low fare airline, offering the

lowest fares in every market and moving to a single

aircraft fleet type. 1993 saw more than one million

passengers carried in a year for the first time. In

August, 2001, Ryanair carried more than 1 million

passengers in a month for the first time. Rapid expansion

continued, and Ryanair broke the 30 million passenger

barrier in a year at the end of 2005, carrying more

passengers in August than British Airways. Between 2006

and 2009 the fleet grew from 100 to 200. While not being

known for their customer service, no Ryanair aircraft has

been involved in incidents leading to deaths or serious

injuries so far.

Return on sales figures have had a consistent decline for

Ryanair over the three year period analyzed; but they

have remained above 10%. Their annual growth has a large

dip in 2010. The return on assets figures are relatively

consistent varying less than 2% from one year to another.

The growth of employment spikes at 32% in 2008 but then

dips off to 10% in 2010.

Table 5: RyanAir Financial Performance

RyanAir has a reputation for using extremely provocative

images in their advertisements. From 2005 until 2009

many of the images used were of scantily clad women in

suggestive poses; with the release of every new

publication controversy arose. In 2009, the emphasis was

switched from objectifying women to the use of political

images and sayings taken out of context, yet again always

surrounded by controversy. The advertisements are all

transformational and the types of alterations to the

marketing campaigns are hardly different when compared

from pre to the height of post extreme turbulence.

Table 6 presents the count analysis for Ryan Air. There

was some evidence found in terms of agility; the

“internal efficiency” and “process improvements” fell in

the moderate level range whereas the “control of the

market” evidence was high. There was a high count of

“evidence of risk management” and low evidence of

“awareness of change” both of which contributing to the

evidence of resilience. There was very little evidence

found in regards to dynamic resourcefulness, the only

evidence found a few mentions of emphasis of future cash

flows. Evidence of almost all of the key indicators of

proactivity were found in the RyanAir annual reports.

There was only one mention of collaboration in the three

years of annual reports that were examined.

Table 6: RyanAir Response Counts

Alibaba Group

The mission of the Alibaba group is to provide an

internet-based business focused on fostering the

development of an open, collaborative and prosperous e-

commerce ecosystem. In 1999, Alibaba Group was

officially established by Jack Ma and its 17 other

founders out of Mr. Ma’s Hangzhou apartment. Alibaba

group is a family of internet-based businesses which

makes it easy for anyone to buy or sell online anywhere

in the world. Since its inception, it has developed

leading businesses in consumer e-commerce, online

payment, business-to-business marketplaces and cloud

computing, reaching Internet users in more than 240

countries and regions. After being in business for only

three years Alibaba group became profitable. Alibaba

group partnered with Yahoo! and began to head Yahoo!

China’s operations in 2005. After several mergers,

acquisitions and creation of several new business

divisions, Alibaba Group announced that beginning in 2010

they will earmark 0.3 percent of annual revenues to fund

efforts designed to spur environmental awareness and

conservation in China.

Alibaba Group was reorganized into 25 business units to

better adapt to China’s fast-growing e-commerce

environment as of January 2013. The privately held

Alibaba Group, including its affiliated entities, employs

some 24,000 people around the world and has more than 70

offices in Greater China, India, the United Kingdom and

the United States.

As easily seen from the table above, Alibaba Group has

been in an exponential growth period from 2006. Their

return on sales figures are incredible, increasing by a

minimum of 30% per year. The annual sales growth figures

are a bit misleading as it is a percentage ratio and the

business was just getting going in 2006 so figures were

relatively small so a large percentage of a small thing

could be less indicative of growth a modest percentage of

a very large thing. Their return on assets figures are

relatively consistent even through the period of extreme

turbulence. For the first two years, the growth of the

employees is remarkably high, even the 2010 figure of

nearly 22% is quite impressive.

Table 7: Alibaba Group Financial Performance

Alibaba Group had not launched any official marketing

campaigns until 2009. Pre 2009, their ads were limited

and very basic such as an ad placed on a column in a

subway station (see in Appendix G). In 2009 their first

full-blown marketing campaign was launched. It seems as

if pre-2009 their marketing style was informational, as

it was simple and practical. The 2009 marketing campaign

was dedicated to introducing and creating an

understanding of the organization to an international

client base. Bright colors and pictures of ordinary

people were used, making the style a hybrid of both

informational and transitional styles. The increased

marketing presence could be considered a type of

marketing overhaul.

Table 8: Alibaba Group Response Counts

They demonstrated evidence of both understanding and

attempting to control the market in moderate and high

levels, respectively. As an organization they proved to

have high awareness of change and effective risk

management. There was virtually no evidence found

demonstrating dynamic resourcefulness as well as

collaboration. There was also moderate demonstration of

proactivity throughout all of the identified indicators.

Table 9: Consolidated content analysis results (also inAppendix H)

Table 9 presents the evidence rating for each strategic

response for each of the four organizations examined in

the case study. This gives an opportunity to look at all

of the ratings side by side for a different perspective

to visualize the analysis.

DISCUSSION AND CONCLUSION

The results of the content analysis are rather

inconclusive but nonetheless interesting. But through a

retrospective lens we can examine the four case study

participants and see how they are performing under

present market conditions. Lehman Brothers did not

withstand the extreme turbulence as they filed for

bankruptcy at the height of the turbulent period. AIG

did not withstand the extreme turbulence well and if it

had not received a government bailout, one could

speculate, they too would have had the same fate as

Lehman Brothers, with an extreme spillover effect on

other companies and countries throughout the world.

RyanAir, on the other hand, has seen an influx of clients

whom are searching for a low cost means to travel due to

restraints on finances caused by the extreme turbulence,

therefore leading to business growth. The Alibaba Group

hit their stride as the extreme turbulence was first

being experienced by the United States and took off with

exponential growth from 2006 until the present. With

these retrospective observations, each of the seven

hypotheses will be examined, one by one, in the following

paragraphs.

Table 10 displays the overall level of confirmation of

each of the seven hypotheses made in this report.

Following the consolidated chart each hypothesis is

broken down on individual account.

Table 10: Hypotheses and their confirmation

Hypothesis 1: Organizations that overhaul their marketing strategieswill be able to withstand extreme turbulent environments better thanorganizations do not alter their marketing strategies

The Lehman Brothers figure confirms our hypothesis as

well as the Alibaba Group data but AIG having a “very

high” rating does not support the hypothesis and neither

does RyanAir’s rating of “low”.

Hypothesis 2: Organizations that demonstrate agility will be able towithstand extreme turbulent environments better than organizationsthat blunder with agility.

As for evidence of agility being demonstrated, Lehman

Brothers “low”, AIG “moderate”, and RyanAir “moderate”

confirm the hypothesis although the Alibaba Group is an

extreme outlier as their business has really taken off

but there was no evidence from the annual reports of

agility. The Alibaba Group rating creates a

contradiction to the hypothesis making it difficult to

confirm the hypothesis.

Hypothesis 3: Organizations that perform with resilience duringextreme turbulent environments will be able to withstand the changebetter than organizations that flounder with resilience.

Again, Lehman Brothers and AIG follow the prediction and

hypothesis. But RyanAir and Alibaba Group do not confirm

the hypothesis leading to inconclusive results.

Hypothesis 4: Organizations that exhibit a proactive continuum will beable to withstand extreme turbulent environments better thanorganizations that fail at exhibiting such behavior.

Across all four cases chosen, there was next to no

evidence of resilience. It could be that resilience is

more frequently occurring post extreme turbulence which

then there fore leads to the conclusion that more time

periods should b scrutinized before confirming or not

confirming the hypothesis of resilience.

Hypothesis 5: Organizations that demonstrate dynamic capabilitieswill be able to withstand extreme turbulent environments better thanorganizations that cannot demonstrate dynamic capabilities.

Dynamic capabilities also present an interesting argument

as Lehman Brothers, the only organization of the four

studied to not survive through the extreme turbulence,

demonstrated a moderate level of execution. Likewise,

AIG and RyanAir, presented a moderate level of evidence

of dynamic capabilities, both of which emerged from the

extreme turbulence on a decline in business health. Even

further negating the hypothesis is Alibaba Group and

their “low” level rating when according to our previous

observations Alibaba Group is and has been in a period of

rapid growth since before the height of the extreme

turbulence.

Hypothesis 6: Organizations that engage in collaboration will be ableto withstand extreme turbulent environments better than

organizations that cannot demonstrate collaboration efforts.

Overall, there was little to no evidence of collaboration

as a strategic response to extreme turbulence. But

interestingly enough, Lehman Brothers and Alibaba Group

(the loser and the winner) both had the same amount of

evidence of collaboration. In general the results are

contrary to the hypothesis or inconclusive at best.

Hypothesis 7: Organizations that realize any combination of theaforementioned strategic responses will be able to withstand extremeturbulent environments better than organizations that areunsatisfactory at exhibiting one or more of such strategies.

Overall our original assumptions were proven inconclusive

or incorrect. For the study of Leman Brothers the

overall rating of evidence of the identified strategic

responses to extreme turbulence was very low which is in

line with our original assumption. But the other three

organizations examined did not fall in line with our

original assumption. Overall, AIG received a rating of

“moderate”, RyanAir “low” and Alibaba Group

“low/moderate”. The original assumption and observation

is that Alibaba Group would be our shining star and

exhibit high levels of evidence as a business that

emerged very healthy and flourishing from the extreme

turbulence. AIG was the outstanding variable as without

government subsidy they also would have filed for

bankruptcy just as Lehman Brother did. The expectation

is that AIG would be on the low end of the scale and

instead they were ranked in the middle. RyanAir is one

organization that really took off once the extreme

turbulence hit as people were looking for low-cost air

care providers and RyanAir was amongst the first to offer

deep discount fares but the evidence found of the

strategic responses to extreme turbulence were ranked

low.

In conclusion, the research method used did not provide

conclusive evidence. The evidence was more contradictory

than supportive of the proposed hypotheses. While the

evidence was inconclusive, the problem could have been

with the examples chosen. Also the results could have

been improved with more organizations analyzed and

possibly conducting interviews with executives of each of

the organizations as not all organizations disclose all

of their secrets in their annual reports. Maybe Hall

(1980, p. 85) had it right:

“both great successes and failures are occurring as basic, matureindustries move into a hostile business environment created by slowergrowth, higher inflation, more regulation, and intensified competition.Uniformly, the successes come to those companies that achieve eitherthe lowest cost or most differentiated position. Simultaneously,survival is possible for those companies that have the foresight todownsize their asset commitments into niches in their basic industryand to use their incremental capital for meaningful diversificationmoves.”

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APPENDIX A: TYPES OF ENVIRONMENTS

Further information and definition of the different types

of environments (Casselman, 2007):

APPENDIX B: STRATEGIC RE S PONSES TO TURBUL E NCE

APPENDIX C: SUMMARY OF CASE STUDY MATERIAL

APPENDIX D: EVIDENCE OF STRATEGIC RESPONSES

Appendix E: Summary of financial PERFORMANCE

Summary of Financial FindingsReturn on SalesCompany Year

2006 2008 2010Lehman Brothers 8.579% -84.819% -

AIG 12.411% -894.173% 12.916%RyanAir 18.122% 14.397% 10.217%Alibaba Group 16.112% 39.945% 85.786%Annual Sales GrowthCompany Year

2006 2008 2010Lehman Brothers 20.185% -85.257% -AIG 3.938% -89.911% 2.756%RyanAir 28.316% 21.321% 1.567%Alibaba Group 84.731% 38.760% 41.109%

Return on AssetsCompany Year

2006 2008 2010Lehman Brothers 0.580% -0.377% -AIG 1.434% -11.540% 1.465%RyanAir 6.618% 6.175% 4.037%Alibaba Group 10.755% 15.279% 11.566%

Growth of EmployeesCompany Year

2006 2008 2010Lehman Brothers 11.583% -9.160% -AIG 9.434% 0.000% -47.619%RyanAir 17.627% 31.847% 10.410%Alibaba Group 41.935% 51.111% 21.893%

APPENDIX F: KEYWORD COUNT TRACKER

Please note that the first line in each of the

“indicators” colums is blank as the key word that was

searched for was the same as the “strategic response”

itself.

APPENDIX G : PRINT ADVERTISEMENTS

Lehman Brothers

AIG

March 2006-

January 2008

May 2008-

Post 2010

RyanAir

December 2004

April 2008

July 2010

November 2010

Alibaba Group

October 2007

August 2009

September 2009

APPENDIX H : CONSOLIDATED CONTENT ANALYSIS RESULTS

VITA

Name Date of Birth Elementary School

Date Graduated

High School

Date Graduated

Baccalaureate Degree

Date Graduated Other Degrees

Christianne Lauria

April 21, 1986

Veterans Park ElementaryRidgefield, CT

June 1997

Ridgefield High SchoolRidgefield, CT

June 2004

Bachelor of SciencePepperdine University

April 2008

Masters of Business AdministrationSt. John’s UniversityQueens, NY