Competitive forces and strategic choice decisions: an experimental investigation in the United States and Japan

Managers operate in a complex, uncertain environment and tend to form simplified models in order to cope with this environment and make competitive strategic decisions (i.e., cost‐leadership, differentiation, or focus). In this study, we use an experimental design to examine the strategic choice decision‐making process in firms located in the United States and Japan. We develop several main‐effect propositions regarding managerial selection of competitive strategies, depending on the competitive forces (buyer power, threat of substitutes, threat of new firm entry, and high intensity of rivalry) they are facing. We propose a main effect due to country of origin: Japanese managers prefer a cost‐leadership strategy more than American managers do. We also propose several interaction effects regarding cross‐national differences in strategy selection between Japanese and U.S. managers. To test our propositions, we collected experimental data from 316 U.S. executives and 459 Japanese executives. We assessed relative impacts of the competitive forces on strategic decision‐making using a multilevel regression analysis. The research findings indicated that high buyer power and high substitution threat were associated with a preference for cost‐leadership strategies, and Japanese managers were significantly more likely to prefer a cost‐leadership strategy than U.S. managers. We also found that, under conditions of high buyer power, U.S. managers were less likely than Japanese managers to enter a market with a differentiation or focus strategy. We found little support for other interaction hypotheses, suggesting points of similarity between U.S. and Japanese managers. We conclude with a discussion of theoretical and managerial implications of our results. Copyright © 2002 John Wiley & Sons, Ltd.     

Managerial perceptions of global pioneering advantage: Theoretical framework and empirical evidence in the U.S. and Korea

Managers form mental models of their business environment, and make strategic decisions based on these perceptions of reality. We study managerial perceptions of the competitive advantage gained by a pioneering firm. We expect that managers will make pioneering entry decisions based on their perceptions of pioneering advantages. Due to cross-national cultural and business environment differences, managers from different countries will employ different mental models and thus perceive the relative advantage of pioneering differently.Drawing from the literature on cultural influence on decision-making, we build a theoretical framework of perceived pioneering advantage in different cultural environments. From this framework, and from cultural differences that exist between the United States and South Korea, we derive hypotheses regarding expected cross-cultural perceptual differences. We test these hypotheses using samples of senior product managers from both countries. We find that some, but not all, of the principles of pioneering advantage empirically verified in North America are generalizable to the culturally-different South Korean business environment.     

Analyses of U.S. and Japanese Management Processes Associated with New Product Success and Failure in High and Low Familiarity Markets

As detailed in the pages of JPIM and other publications, considerable research effort has been devoted to identifying the preconditions for new product success. Studies of Japanese and U.S. new product development (NPD) practices have shown that such factors as sales and marketing expertise, technical expertise, decentralized decision making, R&D/marketing integration, project manager competency, and support from senior management can play key roles in influencing new product success. As William Souder and X. Michael Song point out, however, previous studies have not examined Japanese management practices across a range of environments. They also suggest that the similarities and differences between U.S. and Japanese NPD practices require more in-depth exploration. To help address these issues, they describe the results of a study involving 15 U.S. firms and 15 Japanese firms. Each participating firm provided information about two successful products and two unsuccessful products. Their conceptual model groups the various factors that influence new product success into three general classes: NPD climate, expertise, and management functions. In this model, a firm's level of familiarity with its target market moderates these influences. For example, greater expertise may be necessary to succeed in an unfamiliar market. Each participating firm in the study provided information about one successful product and one failure targeted for high familiarity markets; the other two products from each firm were targeted for low familiarity markets. The U.S. and Japanese models developed in this study exhibit some marked differences from one another. In a familiar market, the U.S. model emphasizes sales and marketing expertise and competent project managers. Under conditions of low market familiarity, this basic model is supplemented with high degrees of R&D/marketing integration, senior management involvement, and decentralization. In this way, the U.S. models reflect a degree of flexibility in adapting the approach to match the prevailing market conditions. In contrast, the two Japanese models of new product success (under low and high familiarity) point to a more invariant system. In other words, the findings from this study reinforce the notion that successful management of NPD requires careful consideration of the firm's environment. Practices that have been proven successful in a particular culture and market environment may not be directly transferable to another setting.     

Diversification of cable television firms into broadband products

This research provides a new perspective to investigate the broadband diffusion in eight states of the U.S. by studying the two-stage entry decisions, namely, upgrading and subsequent product decisions, by the cable television system operators, one of the early dominant players in the broadband market, and examines the role of competition, market characteristics and firm heterogeneity in the cable company's decisions in a dynamic setting. Comparing the empirical results of the decision models of both stages can give new insights into the dynamics of broadband diffusion. The empirical results show that the subsequent product decision is affected more by the demand determinants, while the upgrading decision is affected more by the cost determinants. The results also indicate that policies which aim to reduce the entry cost such as a low city fee can largely encourage firms to upgrade the network, while subsequent policies that help boost the demand can help firms diversify into new digital services early. The effectiveness of competition policy in the broadband diffusion is confirmed in both stages. Strategic responses by cable firms to the presence of RBOCs are more noticeable in the second-staged product decision than in the first-staged upgrading decision.     

Mental models,decision rules,and performance heterogeneity

This paper focuses on the role of managerial cognition as a source of heterogeneity in firm strategies and performance. We link differences in mental models to differences in decision rules and performance in a management simulation. Our results show more accurate mental models lead to better decision rules and higher performance. We also find that decision makers do not need accurate knowledge of the entire business environment; accurate mental models of the key principles are sufficient to achieve superior performance. A fundamental assumption in much of strategic management is that managers who have a richer understanding about organizational capabilities and the dynamics of industry structure can improve the performance of their firms. Our findings provide empirical evidence supporting this assumption and show that differences in mental models help explain ex ante why managers and firms adopt different strategies and achieve different levels of competitive success. Copyright © 2010 John Wiley & Sons, Ltd.     

Strategic action generation: A comparison of emphasis placed on generic competitive methods by U.S. And Japanese managers

The paper identifies similarities and differences in the emphases and patterns that U.S. and Japanese managers attribute to a set of 22 generic competitive methods. It highlights the different ways that Japanese and American managers combine these methods to form general business strategies. Using factor analyses and smallest space analyses, the study shows differences in business strategy patterns between managers in Japan and the U.S. Such differences reflect the organizing principles underlying the strategy approaches in U.S. and Japanese firms. The organizing principle underlying U.S. responses is the desire to find way to differentiate a firm from its competitors. In contrast, the organizing principle underlying Japanese responses is a desire to establish a comprehensive, stable and defensible position. The paper discusses the implications of these results for strategic management and suggests directions for future U.S. and Japanese comparative strategy research.     

Pioneering Advantages and Entrepreneurs' First‐mover Decisions: An Empirical Investigation for the United States and China

New ventures are often launched for the purpose of pioneering an innovative new product or service in the marketplace. Entrepreneurs or founders of new ventures thus often have to make the decision whether to be the market pioneer or the first mover. While being a first mover potentially is advantageous, it also involves taking risks and facing uncertainties. Entrepreneurs must assess the benefits and risks of pioneering in the first‐mover decision‐making process to realize the potential competitive advantages associated with being a pioneer. Previous research has shown how entrepreneurs perceive potential gains and losses associated with exploring opportunities as the key defining element of entrepreneurial decision‐making. Past studies have also indicated that cultural and business environmental factors affect both perceptions and decision‐making. However, studies to date have insufficiently addressed the relationship between entrepreneurs' perceived pioneering advantages/disadvantages and their first‐mover decisions, with little attention to cross‐national differences. This study includes hypotheses postulating how entrepreneurs' perceived advantages and disadvantages of pioneering affect the number of first‐mover decisions made by entrepreneurs in two different cultural contexts, the United States and China. We collect data from 152 U.S. entrepreneurs and 140 Chinese entrepreneurs over a four‐year period and carry out empirical tests on the hypotheses using Poisson regression models. Our results provide insight on how culture affects perceptions of advantages and disadvantages of pioneering, and how these perceptions impact the likelihood of making a first‐mover decision. We find that a higher level of perceived advantages will drive first‐mover decisions, whereas perceived disadvantages will deter first‐mover decisions. The negative effect of perceived erosion disadvantages on the number of first‐mover decisions was higher for Chinese entrepreneurs, consistent with the high risk‐aversion culture in China. However, this effect was not found for perceived uncertainty disadvantages, suggesting that the risk‐averse characteristics of Chinese entrepreneurs is an oversimplification, and that the Chinese cultural, business, and legal environment helps offset uncertainty disadvantages. We also find an interesting positive moderating effect of perceived advantage on the relationship between perceived disadvantages and the number of first‐mover decisions in China only. That is, if perceived advantages are low, Chinese entrepreneurs are more risk averse than U.S. entrepreneurs; but if perceived advantages are high, Chinese entrepreneurs are more risk‐seeking than U.S. entrepreneurs. This finding again challenges the risk aversion conclusion found by previous studies of Chinese managers.     

Entry Strategies and Market Performance Causal Modeling of a Business Simulation

A key decision faced by marketing managers is the development of entry strategies for new markets. In addition to selecting which product market to enter, the manager must make decisions about the entry strategy itself. The entry strategy, whether managed actively or passively, affects the entrant's performance. In this article, Donna Green and Adrian Ryans discuss the three major components of an entry strategy: the timing of entry, the magnitude and areas of investment and the basis for competitive emphasis. They report that very little empirical research has focused on relationships between entry strategy and eventual product performance.     

Motivation matters: Corporate scope and competition in complementary product markets

Research summary : We argue that a pure capabilities‐based view does not accurately explain the competitive dynamics of increasingly common settings in which firms act as both complementors and competitors. We propose that the Awareness‐Motivation‐Capability framework is more appropriate for these settings. We derive predictions from both a pure capabilities view and the AMC framework, and test those predictions in the U.S. auto leasing market, in which the leasing subsidiaries of car manufacturers directly compete with the same independent lessors who provide complements to the manufacturers. Although our results are consistent with capabilities playing an important role, motivation appears to be a critical factor explaining the competitive dynamics of the market. Managerial summary : Firms that compete with business units owned by larger corporate parents face additional considerations. Such subsidiary competitors can be motivated by broader corporate considerations, shifting their objectives, and consequently, their strategic actions. Expecting subsidiary competitors to pursue business unit profitability can mislead managers toward pricing, product mix, or market entry errors. We present an important example from consumer finance, where independent auto lessors, such as Bank of America (BoA), compete with captive leasing subsidiaries like Ford Motor Credit (FMC). Since FMC is motivated to subsidize and support vehicle sales for its manufacturer parent, a cost advantage is not enough for BoA to dominate the market. Understanding broader corporate motivations of competitors helps managers anticipate competition levels in potential markets, thereby improving decision‐making and performance. Copyright © 2015 John Wiley & Sons, Ltd.     

A LONGITUDINAL STUDY OF THE COMPETITIVE POSITIONS AND ENTRY PATHS OF EUROPEAN FIRMS IN THE U.S. PHARMACEUTICAL MARKET

This paper combines the statistical insights of dynamic strategic group analysis with the qualitative richness of historical analysis to explore the modes of entry, expansion paths, and competitive postures of European firms in the U.S. pharmaceutical market. Patterns of entry and market development over a 20-year period are analyzed. The roles of strategic assets and competencies in determining both the entry strategy and the final competitive posture of these firms in the U.S. market are discussed.     

Marketing capabilities and innovation-based strategies for environmental sustainability: An exploratory investigation of B2B firms

While emerging literature on sustainability shows that environmentally responsible strategies can contribute to competitive advantage and enhanced financial performance, little is known about specific marketing capabilities that lead to sustainable consumption behavior, and whether implementing such strategies leads to firm competitive advantage. Using the case method approach, this study explores marketing-related strategies and practices pertaining to sustainable consumption as reported by leading sustainable firms in the B2B context. We examine case studies of forty seven B2B firms and identify key marketing capabilities that tie to innovation-based sustainability strategies, sustainable consumption behavior and firm performance. We use our findings to develop a conceptual framework linking marketing capabilities to innovation strategies for firm sustainability, sustainable consumption behavior and firm competitive advantage, and put forward propositions for future research.     

A Comparative Study of Pioneer Entry Decisions in the United States and China

According to the resource‐based view of the firm, competitive advantages arise from control and deployment of productive resources that are rare and difficult to imitate. Through early entry, pioneers can gain preferential access to key resources. However, the value of that access depends on the presence of isolating mechanisms that limit or prevent competitive imitation. Isolating mechanisms increase the desirability of early entry by lengthening the time horizon over which the firm can earn Ricardian rents on those resources. To explore these implications of the resource‐based view, this study examines the impact of isolating mechanisms on pioneer advantages by analyzing the market entry timing decisions of 209 U.S. and 302 Chinese entrepreneurs. We hypothesize that the stronger intellectual property and legal protections available in the United States are an isolating mechanism that should increase the perceived importance of differentiation and cost advantages in the United States relative to China. Consistent with this argument, we find evidence that the relationships between the number of successful first‐mover decisions and (1) perceived pioneer differentiation advantages and (2) perceived cost advantages are relatively stronger in the United States than in China. We also argue that the importance of personal relationships in China constitutes an isolating mechanism that should increase the perceived importance of preemptive pioneer advantages in China relative to the United States. Consistent with this reasoning, we find that the coefficient linking perceptions of pioneer preemptive advantages with the number of successful first‐mover decisions is significant in the Chinese sample and not in the U.S. sample, but the difference between these coefficients is not significant. These results provide support for the argument that the availability of strong IP and legal protection encourages early entry decisions by entrepreneurs because these protections enhance the pioneer's ability to build a differentiated position in the minds of target customers and secure a cost advantage over later entrants. The results also support the argument that strong personal connections and the practice of reciprocity play a key role in the success of Chinese entrepreneurs.     

Asymmetric interactions between foreign and domestic banks: effects on market entry

An inverted U‐shaped relationship is thought to exist between the number of firms entrenched in a market and the rate of new entrants. This study examined early and late entry by foreign and U.S. banks into the California market following a deregulation in the banking industry in the early 1980s. The study was designed to elucidate the competitive interactions between foreign and domestic banks. Specifically, what response did the entry of foreign banks elicit from domestic banks and what influence did the entry of domestic banks exert on the evolution of the foreign banks in the market. Data covering the period from 1979 to 1988 demonstrate that the density of foreign banks operating in the market had a U‐shaped relationship with the rate of entry of U.S. banks, supporting the argument that foreign investment can encourage the expansion of domestic banks. Although foreign banks were not an obstacle to domestic bank entries, the presence of domestic banks deterred the entry of foreign banks. Copyright © 2008 John Wiley & Sons, Ltd.     

Contingent Product Design and Marketing Strategies Influencing New Product Success and Failure in U.S. and Japanese Electronics Firms

The commercial success or failure of a product doesn't rest solely on the whims of the marketplace. The myriad, often interdependent, strategic trade-offs made throughout the product development process go a long way toward determining whether a product succeeds or fails. The key to success often rests in finding the right combination of product design and market choice decisions. Toward that end, William E. Souder and X. Michael Song examine the relationship between product success and several product design and market choice strategies. In particular, they explore the possibility that the correct strategy combination differs depending on a firm's perception of market uncertainty, which they measure in terms of the respondents' perceived familiarity with the market for a product, perceived understanding of customer needs, and perceived capability to translate those needs into product performance specifications. Recognizing that the correct combination of strategic choices may also depend on firm size, industry, and culture, the study focuses on small U.S. suppliers of electronics components. Fortune 500 producers of electronics final products, and Japanese producers of electronics final products. For the small U.S. firms in the study, an emphasis on performance superiority, technical superiority, or radically new products provides a recipe for failure under low market uncertainty. Even under high market uncertainty, these characteristics do not equate to success for the small U.S. firms in this study. The findings suggest that these firms should focus on design compatibility with a purchaser's installed base. The responses from Fortune 500 firms and Japanese companies indicate that under low market uncertainty these larger organizations should consider emphasizing compatibility and avoiding radical designs. For markets that the larger firms perceive to be highly uncertain, the results suggest that these companies should emphasize performance superiority, technical superiority, and radical designs. The findings related to market choice strategies also support the notion that the correct combination of strategic decisions depends on firm size, culture, and the perceived level of market uncertainty. However, the guidelines presented in this study should not be construed as hard-and-fast rules for formulating product strategy. Instead, the results presented here will be helpful for challenging assumptions and guiding actions, as one element in the effort to shape an effective product strategy.     

Optimal pricing and advertising strategy for introducing a new business product with threat of competitive entry

The problem of optimal joint pricing and advertising decision making for a new product facing potential competitive entry has received inadequate attention. We propose a model that attempts to find the optimal price-advertising frontier in the face of potential competitive entry that maximizes total discounted profits for pre- and post-entry periods. We find that a firm would charge the price that equates price elasticity to marginal revenue product of advertising (as predicted by [Dorfman, R. and Steiner, P.O. (1954), Optimal Advertising and Optimal Quality, American Economic Review, 44(5), 826-836.]) only when the potential effects of pricing and advertising on its market share are not considered. Under optimal conditions, aware that market share is subject to erosion, the firm charges a somewhat lower price than the profit maximizing price, and sets an advertisement expense that is somewhat higher than the profit-maximizing advertising level as predicted by Cournot's monopolistic setting. We illustrate the applicability of our model using business product examples taken from several industries including operating systems, software, pharmaceutical, and telephone switching. Directions for future research with implications for B2B managers (for example, the possible effects of preannouncement to forestall competitive entry) are discussed.     

When experience meets national institutional environmental change: foreign entry attempts of U.S. firms in the Central and Eastern European region

We develop an institutional change perspective to examine the tension that can exist between evolving external environmental influences and internal organizational influences on foreign entry attempts. Using data on the entries of 215 U.S. public firms made into 11 Central and Eastern European transition economies during the period of 1990–2003, we find that shifts in national institutional environments, from a socialist to a market economy, reduce the extent of challenges encountered to make a hierarchical entry, which leads to an increase in foreign hierarchical entry attempts but not necessarily to a decrease in relational entry attempts as institutional transformation. We find evidence of inertial influences as experienced entrants tend to follow their previous decisions when making subsequent entry attempts. Further, they are less responsive in their foreign entry strategies to the institutional transformation in a given host country than inexperienced firms. We also find that the experience gained from relational entries results in more hierarchical entry attempts, but hierarchical entry experience results in fewer relational entry attempts. Copyright © 2009 John Wiley & Sons, Ltd.     

The value of branding for B2B service firms—The shareholders' perspective

Increasingly fierce competition in many B2B service industries led managers to seek a competitive advantage through branding, as many firms operating in B2C markets have done. Although advertising spending in B2B service industries has soared and branding could be relevant for customers' purchase decisions, the distinct characteristics of B2B service transactions can make the creation of brand equity challenging. Conceptual arguments thus both support and question the net financial value of B2B service brands and, since empirical research on that value is missing, managers are left with no agreed upon and validated guidance. Drawing on observations of the brands and shareholder values of 380 U.S.-based public B2B service firms, this study introduces a shareholder perspective to empirically examine the financial value of B2B service brands. Results reveal that B2B service brands have positive value to shareholders. However, the extent of that value depends on a firm's branding strategy (corporate branding vs. multi-branding) in conjunction with the type of services offered (professional services vs. other B2B services) but not in conjunction with the breadth of services offered (degree of diversification). This research provides new insights for researchers and managers with regard to B2B service brands' value and important contingency factors.     

Does the fourth entrant make any difference?: Entry and competition in the early U.S. broadband market

We study the importance of sunk costs in determining entry conditions and inferences about firm conduct in an adapted Bresnahan and Reiss (1991, 1994) framework. In our framework, entrants incur sunk costs to enter, while incumbents disregard these costs in deciding on continuation or exit. We apply this framework to study entry and competition in the local U.S. broadband markets from 1999 to 2003. Ignoring sunk costs generates unreasonable variation in firms' competitive conduct over time. This variation disappears when entry costs are allowed. Once the market has one to three incumbent firms, the fourth entrant has little effect on competitive conduct.     

THE ROLE OF DIFFERENTIATION STRATEGY IN LOCAL TELECOMMUNICATION ENTRY AND MARKET EVOLUTION: 1999–2002*

We examine the role of differentiation among competitive local exchange carriers (CLECs) in nearly 1,200 U.S. cities in 1999 and 2002, before and after a valuation crash affecting communications firms. We test and reject the null hypothesis of homogeneous competitors. We also find strong evidence that differentiated CLECs account for both potential market demand and the business strategies of competitors when making their entry decisions. Finally, product heterogeneity in markets in 1999 helps predict how the structure of markets evolved through 2002. We conclude that the policy debate for local telecommunications regulation should account for differentiated behavior.     

UNDERSTANDING THE DIFFERENCES IN KOREAN AND U.S. EXECUTIVES’ STRATEGIC ORIENTATIONS

Competitive positioning in a global market requires an understanding of the decision processes and behavioral attributes of executives from different countries. These attributes reflect the executives’ cultural background, the national policies under which they have worked, and their home country’s level of economic development (institutional context). The current research compared strategic decision models of U.S. and Korean executives and the results suggest that criteria employed by the executives from the two countries differ. Differences in institutional context between Korea and the U.S.A. were reflected in the weightings of objective criteria used by the executives. Korean executives emphasized industry attractiveness, sales and market share (because of policies that encourage growth) and U.S. executives emphasized projected demand, discounted cash flow and ROI (because of policies and institutions that focus on profitability). The results suggest the importance of understanding the strategic orientations of international competitors, partners in international strategic alliances and managers of international subsidiaries or divisions. © 1997 by John Wiley & Sons, Ltd.