|
Article Excerpt
The generic strategies of cost Michael Porter (1985)--leadership, product differentiation, and focus--are generally accepted as a strategic typology for organizations. Porter's typology has been in vogue in the United States since the late 1980s. The degree to which these strategies have taken hold in non-US markets, and how these American-born strategies are manifested in strategic practices in non-US cultures has been of interest to scholars and academicians alike (Gibbons and O'Conner, 2005; Torgovicky, et. al, 2005; Garrigos-Simon, Marques and Narangajavana, 2005; Zhang, 2004; Kim, Nam, and Stimpert, 2004).
Of particular interest is Japan, which has been in economic decline over this same period and where efforts at economic stimulus have repeatedly failed. Many offer the notion that Japanese business strategy has been at least partially responsible for the inability of Japan to regain a position of global business leadership that it held in the early 1980s (Ahmadjian and Robinson, 2001). This study examines the implementation of the generic strategies in Japanese firms compared with U.S. firms.
Porter's Generic Business Strategies
Porter (1979) used economic concepts to derive the five forces determining the attractiveness of a market. The forces are those close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to reassess the marketplace and alter its strategy. The first four forces--the bargaining power of customers, the bargaining power of suppliers, the threat of new entrants, and the threat of substitute products--combine to influence a fifth force: the level of competition in an industry. Based on these five forces, a firm crafts the most appropriate generic strategy.
Porter (1985) also asserts that there are basic business strategies, and that a company performs best by choosing one strategy to concentrate on. However, some researchers feel a combination of these strategies may offer a company the best chance to achieve a competitive advantage (Karnani, 1984; Miller and Friesen, 1986; White, 1986; Hill, 1998; Murray, 1988; and Miller, 1992). Whatever strategy a business chooses, it must fit with the company's goals and objectives to provide a competitive advantage (Parker and Helms, 1992).
Porter states that companies must be competitive to become industry leaders and to succeed nationally and abroad. Furthermore, he contends that strategies for gaining competitive advantage apply to all industries in most nations (McNamee and Hugh, 1989; Green, Lisboa, and Yasin, 1993; Kim and Lim, 1988; and Campbell-Hunt, 2000).
While various organizational strategies have been identified over the years (Miles and Snow; 1978; Chrisman, Hofer, and Bolton, 1988; Porter, 1980) Porter's remain the most commonly supported and identified in key strategic management textbooks and in the literature (Kim and Lim, 1988; Miller and Dess, 1993). Porter (1980) suggests that a firm must choose between one of the generic strategies to achieve profitability rather than end up "stuck in the middle." The chosen strategy, must be supported by decision-makers who create complementary internal processes along with clear management philosophies and values that help defend their strategic position (Kumar and Subramanian, 1997/98). The generic strategies are summarized in the following sections.
Cost Leadership. Lower costs and cost advantages result from process innovations, learning curve benefits, economies of scale, reductions, product designs that reduce manufacturing time and costs, and reengineering activities. A low-cost or cost-leadership strategy is implemented effectively when the company designs, produces, and markets a product more efficiently than its competitors. The firm may have access to raw materials or superior proprietary technology.
Product differentiation. Product differentiation fulfills a unique customer need by tailoring the product or service, allowing organizations to charge a premium price to capture market share. The differentiation strategy is implemented effectively when the business provides unique or superior value to the customer through product quality, features, or after-sale support. The quality may be real or perceived, based on fashion, brand name, or image. Firms following a differentiation strategy can charge a higher price for their products based on product characteristics, delivery system, quality of service, or distribution channels. The differentiation strategy appeals to a sophisticated or knowledgeable consumer who wants a unique, quality product and is willing to pay the higher price.
Focus. Focus, the third generic strategy, is based on adopting a narrow competitive scope within the industry. Focus strategies grow market share by operating in a niche market or markets not attractive to, or overlooked by, larger competitors. These niches arise from a number of factors including geography, buyer characteristics, product specifications, or requirements. A successful focus strategy (Porter, 1980) needs an industry segment large enough to have good growth potential but not of key importance to major competitors. Firms may utilize a focus strategy in conjunction with either the cost or differentiation strategies in a specific market niche.
Strategy in Japan
Japanese business strategy has been firmly rooted in the philosophy of total quality management (Deming, 1986; Juran, 1988) since the end of WWII. TQM is based on the philosophy of continuous cost reduction through the elimination of waste and rework. A TQM-based strategy of continuous improvement and cost reduction was widely considered to be responsible for Japan's postwar recovery and transcendence into a global economic powerhouse in the last half of the past century (Ho, 1999).
But Japan is currently experiencing a shrinking economy, failing stocks, and rising unemployment. Companies are restructuring and cutting jobs and without reforms, the economy is predicted to grow at only 0.8% a year from 2006 to 2010. Layoffs have caused a change of attitude as many young people abandon hopes of lifetime jobs (Wiseman, 2001). Bankruptcies are soaring and leaving behind a record level of debt in the country ("Japan Corporate Failures Up," 2001).
The long recession has begun to take its toll on Japanese managers' faith in their economic system. Recently, firms have begun to search for new ways to break out of their long commitment to the traditional Japanese management system and have...
|
