Surviving the Bulls and the Bears: Robust Strategies and Shareholder Wealth

This paper raises the issue of robustness of strategy over financial market cycles. Using an inductive approach, it examines the performance of companies in term of relative value creation or destruction over a bull and bear market cycle. The sample for this research consists of 54 large US firms from seven industries (airlines, banking, computers, network equipment, pharmaceuticals, retail, and semiconductors). The findings demonstrate that few firms performed well in both the bull and bear markets but those that did achieve superior performance over the market cycle employed innovative strategies that competitors struggled to imitate. These superior strategies resulted in lower cost structures and/or the ability to charge premium prices. It concludes by offering lessons that managers should integrate into their business models to obtain similar competitive advantage that is robust to drastically changing market conditions.