The strategic implications of black empowerment policy in South Africa: a case study of boundary choice and client preferences in a small services firm

Abstract

This paper studies the relationship between a firm’s boundary choices within its value chain and the BEE pressures it faces from its clients. The paper shows that BEE policy alters the value chain preferences of a firm’s clients. These changes in client preferences motivate the firm to altering its boundaries. More important, boundary changes due to BEE are implemented in a way that ensures that the firm retains crucial architectural knowledge, which preserves its competitive advantage. Firms therefore do not respond passively to BEE-induced changes in client preferences, but aim to meet BEE aims within their broader strategic environment.