Strategic Groups,Frontier Benchmarking and Performance Differences: Evidence from the UK Retail Grocery Industry*

ABSTRACT In this paper we seek to advance the theory and practice of strategic group theory by means of powerful benchmarking tools that allow the composition of strategic groups on the basis of empirically derived production function frontiers. The relative performance of firms is assessed based on multiple inputs and outputs and as a result, firms are associated with different segments of the efficient frontiers. These segments constitute strategic facets and are used in the current paper as strategic group variables. The strategic facets are composed by outlier firms in the sense that they satisfy the Pareto dominance criterion when compared with other firms. Such advancement offers significant advantages compared to the ‘average’ firm that is used traditionally as a basis to define strategic groups. The proposed methodology for the formation of strategic groups has been applied on a panel of data from the grocery industry in the UK in the period 1987–93. The results of the study confirmed the existence of three stable strategic groups and one with a more volatile membership. Performance differences were also identifiled both between and within strategic groups using as criteria traditional accounting methods and also the relative efficiency indices obtained from the benchmarking methodology applied to the panel of data.     

An Empirical Analysis of Strategic Groups in the Airline Industry using Latent Class Regressions

Two major controversies in strategic group research have been whether strategic groups actually exist and if so what is the best methodological approach to identify them. One perspective on strategic groups suggests that a strategic group exists if and only if the performance of a firm in the group is a function of group characteristics after controlling for firm and industry characteristics. We test this theoretical position by developing and estimating a model for the airline industry using latent class regressions. Our analysis finds evidence for the existence of four distinct strategic groups of firms in the airline industry. Copyright © 2012 John Wiley & Sons, Ltd.     

Strategic groups: Untested assertions and research proposals

Strategic group theory has become a popular tool for analyzing competitive structure of industries. Indeed, testing for the existence of strategic groups, and the impact of strategic groups on a firm's performance, has become one of the dominant areas of empirical research in the strategic management literature. Unfortunately, the impact of this stream of research will be limited until some fundamental assertions in strategic groups theory are tested. Two of these assertions are: (1) that strategic groups exist and (2) that a firm's performance depends upon strategic group membership. These key assertions in strategic group theory remain untested for a variety of theoretical and empirical reasons. What needs to be done to test these assertions is discussed. Until these tests are complete, the contribution of the strategic groups concept will be unclear. If these tests do not build credibility for the concept of strategic groups, it may be necessary to abandon this concept and develop models where the strategically relevant attributes of firms are those that are idiosyncratic.     

Strategic groupings as competitive benchmarks for formulating future competitive strategy: A modelling approach

Previous studies on strategic groups have examined issues such as the identification of strategic groups, the relationship between strategic groups structure and industry performance, and the movement of strategic groups over time. In contrast to previous studies, this paper uses the analytical concepts of game theory to explore the question of what strategic groups will exist in the future. These benchmark (future) strategic groups represent long-run strategic positions available within an industry and thus reference points for firms in developing sustainable competitive strategies. The benchmark strategic groups are discussed and comments are offered to illustrate how firms can use the benchmark information to redirect their strategic positions in order to survive and remain competitive in the long run.     

Purchasing practices in small- to medium-sized enterprises: An examination of strategic purchasing adoption,supplier evaluation and supplier capabilities

The benefits that can be derived from effective purchasing have long been recognised in the management literature. Despite a growing body of research on purchasing practices in small- to medium-sized enterprises (SMEs), a number of key issues remain under-examined. We investigate SME purchasing practices in terms of (1) the degree to which purchasing is regarded as a ‘strategic’ activity by SMEs, (2) the use of supplier evaluation systems by SMEs and (3) the supplier capabilities emphasised by SME buyers. Through a survey of UK SME managers, we find that purchasing practices varied greatly across SMEs. Purchasing formality is generally low with limited evidence of purchasing being employed strategically and with many firms not undertaking formal supplier evaluations. In terms of supplier capabilities, we find that SMEs differ in the capabilities they prioritise, with three distinct groups evident. These groups are labelled ‘holistic’, ‘process’ and ‘logistics’ based on the supplier capabilities they emphasise. These three groups of firms also differed in terms of the emphasis they placed on strategic purchasing, supplier evaluation, technological focus and how they compete in their main markets, but not in terms of firm size or number of suppliers utilised. The implications of these findings are discussed and areas meriting future research are proposed.     

Entrepreneurial Versus Conservative Firms: A Comparison of Strategies and Performance

This article describes a study of the business strategies and performance levels of firms with entrepreneurial and conservative strategic postures. Data were collected from the senior executives of 111 small manufacturing firms. Results indicate that entrepreneurial firms differ from conservative firms in terms of their growth rates as well as several financial, operating, and marketing-related variables. the data suggest that the patterns of strategic behaviour associated with high performance are different for entrepreneurial and conservative firms.     

中国医药企业国际化特征分析——基于战略组的视角

本文基于战略组的视角,将选择的31家医药企业划分为4个战略组。通过对战略组以及从战略组中选择的典型医药企业的分析,总结了在新的时代背景下我国医药企业在国际化进程中的特征。尽管从总体上看,我国医药企业国际化还处于初级阶段,但少数医药企业已经具备了向纵深层次国际化经营拓展的能力。日趋多元化的国际化策略将推动我国医药企业的国际化进程。     

An existence theorem for Cournot–Walras equilibria in a monopolistically competitive economy

We establish an existence theorem for Cournot–Walras equilibria in a monopolistically competitive economy. Instead of the traditional approach which depends on Kakutani’s fixed point theorem, we employ the theories of aggregative games and best reply potential games. We show that, if there exists a representative consumer, under some conditions on preferences and production technologies, the profit maximization game is a (pseudo) best reply potential game. Hence, the existence of the equilibria is proved independently of the well known convex-valued assumption on the best responses. Although our assumptions result in the additive separability on a utility function of a representative consumer, the existence of increasing returns and indivisible productions can be allowed. In our model, it is shown that the game played by firms exhibits strategic substitutes whether the products of firms are substitutes or complements, and this plays an important role for the existence of the equilibria.     

RECENT ADVANCES IN OLIGOPOLY THEORY FROM A GAME THEORY PERSPECTIVE

Abstract. This paper surveys the contribution that recent developments in game theory have made to the understanding of oligopoly theory. It is argued that conventional models suffer from the problem that there are a number of solution concepts offered with little guidance as to which should be selected, and this is related to the static nature of the models employed. One important development in game theory has been the analysis of repeated games, and when applied to oligopoly theory this suggests that outcomes may be more cooperative than conventional theory suggests. Related to this is the requirement that firms employ credible threats to punish cheating from cooperative outcomes, and the paper examines the extent to which imperfect information may restrict the scope of firms to employ such punishments. One way in which firms may seek to make threats credible is through strategic investments, for example in production capacity, and the paper explores how competition over price or output is integrated with competition over instruments for strategic investment.     

High technology localization and extra-regional networks

Firms in spatial concentrations of advanced-technology activities do not constrain their knowledge inputs to opportunities found within their industrial cluster. Rather, firms seeking extra-regional markets augment their in-house resources by means of material (embodied technology) and knowledge inputs obtained from sources at the extra-regional scale in addition to within the region. Literature is reviewed on the clustering of firms and their network geography, models of open and closed industrial systems, and absorptive capacity. The latter is used to interpret the search for knowledge undertaken by firms, which are discussed in terms of their organizational differences and strategic choices. A sample of manufacturing establishments from the electronics cluster in the Toronto metropolitan region (Canada) shows firms that are export-intensive have significantly stronger international input connections, especially with consultants and alliance partners. Export orientation is associated with higher levels of expenditure on the in-house generation of knowledge, more innovation inputs from external sources, and distinctive network geographies. Differences in network relations occur within and between three organizational groups of firms – foreign affiliates, multi-location and single-location domestic firms. Geographically wide-ranging networks are interpreted in terms of opportunities in extra-regional locations compared with local supplies. Regional innovation policy implications are considered.     

Institutionalizing environmental performance in US industry: Is it happening and what if it does not?

A historical review of the ways business organizations in the United States have responded to demands that they improve their environmental performance reveals two clear outcomes: firms that effectively institutionalize improved environmental performance can garner significant strategic advantages for their efforts, and firms that do not often suffer severe legal consequences. Thus, institutionalization is a pivotal organizational process which determines whether a firm's environmental performance results in improved operating efficiency and market opportunities or in increased legal and regulatory hassles. In this paper, we use a survey and case-law review to investigate the degree to which improved environmental performance is being institutionalized in US firms and to determine what the potential legal consequences are for firms that fail to achieve such institutionalization. Our findings suggest that firms in US industry have made considerable efforts to institutionalize improved environmental performance, but they still have a long way to go. Unfortunately, our findings also suggest that failing to effectively institutionalize environmental performance has the potential for dire consequences, such as jail terms for strategic managers for environmental violations by subordinates. © 1998 John Wiley & Sons, Ltd and ERP Environment.     

The concept of strategic groups: Theoretical construct or analytical convenience

Despite the fact that a great deal of empirical research confirms the existence of strategic groups, not enough attention has been paid to their theoretical development. This paper links the theories of spatial competition and cognitive taxonomy to the very existence of strategic groups in a competitive environment. It is shown that the concept of strategic groups is not an analytical convenience but a theoretical construct.     

INDUSTRY AND STRATEGIC GROUP DYNAMICS: COMPETITIVE STRATEGY IN THE INSURANCE INDUSTRY, 1970–84

This article focuses upon dynamic aspects of strategic groups in the context of the US insurance industry from 1970–84. It examines the longitudinal structure of industry strategic groups and identifies the strategic patterns followed by these strategic groups over time. the mobility rates of firms between strategic groups are also assessed. It appears that three dominant groups are present throughout the period of the study while other group positions emerge and disappear over time. the evidence suggests that the quantum theory of strategic adaptation (i.e. dramatic and concerted change) satisfactorily models the processes of strategic group change. And, a low level of firm mobility is found to exist between strategic groups consistent with the presence of inertia and mobility barriers.     

Strategic entrepreneurship and competitive advantage of established firms: evidence from the digital TV industry

Although strategic entrepreneurship in established firms is recognized as a vital source of sustainable competitive advantage, this field has no clearly developed research paradigm. This study proposes a conceptual framework to investigate dimensions of strategic entrepreneurship and its function in sustainable competitive advantage of established firms in a modern volatile environment, through the lens of the dynamic capability view. By conducting a systematic literature review of previous research documents and considering conceptual interrelationships between strategic entrepreneurship and dynamic capabilities, we propose categories that comprise dimensions of a firm’s strategic entrepreneurship: environmental sensing, opportunity seizing, strategic flexibility, entrepreneurial orientation and organizational learning. We establish a conceptual framework of strategic entrepreneurship in which entrepreneurs’ managerial capabilities of environmental sensing, opportunity seizing, strategic flexibility and entrepreneurial orientation closely interact with organizational learning, thereby facilitating sustainable performance of established firms. Following empirical studies of established firms in the digital TV manufacturing industry, the proposed conceptual framework suggests that each dimension of strategic entrepreneurship plays a critical role in competitive advantage of firms. In addition, case study results indicate that a firm’s position and evolutionary path form antecedent factors influencing entrepreneurs’ managerial capabilities and organizational learning of established firms.     

Do stable strategic time periods exist? Towards new methodological and theoretical insights

This paper investigates a fundamental issue in the current research on strategic groups: the existence or non‐existence of the so‐called ‘stable strategic time periods’ (SSTPs). Our study provides new evidence by adding new methodological and theoretical insights. The research setting is the Spanish banking industry over a 15‐year period, 1983–1997. Unlike all prior longitudinal research that found SSTPs, the multi‐method procedure that we used in this study (i.e. equality of variance and covariance matrix and mean vector of strategic variables and a subsequent grouping analysis performed through the MCLUST) has led us to reject the existence of SSTPs in the industry under study. Based on these original findings, we conclude by suggesting a proposition which should be corroborated in future empirical studies on strategic groups. Copyright © 2007 John Wiley & Sons, Ltd.     

External and internal labour flexibility in Spain: a substitute or complementary effect on firm performance?

The contingent perspective in strategic human resource management maintains that it is necessary to observe the interaction between human resource practices by encouraging external and internal labour flexibility. An issue still to be resolved is whether this fit leads to a complementary or substitute effect on firm performance. In order to contribute to this debate, we examine how the relationship between external labour flexibility and firm performance is moderated by the degree of internal labour flexibility. To do this, we use the Survey on Business Strategies of the Ministry of Industry, Tourism and Trade on a sample of 1,403 Spanish industrial firms. The results show the existence of a substitute effect between the two types of labour flexibility. Using them simultaneously does not lead to greater benefits for firms.     

Better Late than Early: Vertical Differentiation in the Adoption of a New Technology

After the initial breakthrough in the research phase of R&D, a new product undergoes a process of change, improvement, and adaptation to market conditions. We model the strategic behavior of firms in this development phase. We emphasize that a key dimension to this competition is the innovation that leads to product differentiation and quality improvement. In a duopoly model with a single adoption choice, we derive endogenously the level and diversity of product innovations. We demonstrate the existence of equilibria in which one firm enters early with a low-quality product while the other continues to develop the technology and eventually markets a high-quality good. In such an equilibrium, no monopoly rent is dissipated and the later innovator makes more profits. Incumbent firms may well be the early innovators, contrary to the predictions of the "incumbency inertia" hypothesis.     

Proposing new variables for the identification of strategic groups in franchising

The identification of strategic groups in the Spanish franchising area is the main aim of this study. The authors have added some new strategic variables (not used before) to the study and have classified franchisors between sectors and distribution strategy. The results reveal the existence of four perfectly differentiated strategic groups (types of franchisors). One of the major implications of this study is that the variables that build a strategic group vary depending on the respective sector the network operates in and its distribution strategy. This fact indicates that including sector and distribution strategy is absolutely necessary to achieve good classifications of franchisor types.     

一类价格调整问题的数学模型及其求解方法

虽然市场需求是价格的函数，但企业在价格调整实践中往往不能直接获取需求函数的具体表达式，而只能在某一给定价格水平下观察到市场需求量的值。因此，企业通常不能直接利用需求函数来调整价格以完成预期的市场需求调整的战略计划。本文将企业为达到市场需求战略调整目的而考虑的价格调整问题归结为一个隐式互补问题。在该模型中，企业可以依据自身经营战略目标的调整相应地调整各类产品的市场价格，使得价格调整后的产品销量迭到预定的目标。文章给出了求解这类隐式互补问题的直接迭代法，并给出了数值结果。     

Ownership Types and Strategic Groups in an Emerging Economy*

ABSTRACT Existing strategic group studies have rarely examined ownership type as a variable to classify firms in an industry. Using Chinese firms of different ownership types, we suggest that ownership type can be a parsimonious and important variable that managers use to cognitively classify firms into different strategic groups. While ownership itself is an objective variable, we contend that different ownership types lead to different managerial outlook and mentality due to a number of macro and micro foundations giving rise to various managerial cognitions. Employing the Miles and Snow typology, we find that state‐owned enterprises (SOEs) and privately‐owned enterprises (POEs) tend to adopt defender and prospector strategies, respectively, while collectively‐owned enterprises (COEs) and foreign‐invested enterprises (FIEs) exhibit an analyser orientation that falls between defenders and prospectors on the strategy continuum. Three statistical tests suggest that ownership types can be used to successfully predict strategic group memberships in China's emerging economy.