The focus strategy of industrial goods manufacturers in Japan
Abstract
This research is based upon Porter's (1980) concept of focus strategy, but may be the first to seriously study this type of strategy. Its purpose is to detect and examine the moderating effects of such contingencies as industry growth and concentration and firm size on the relationship between focus strategy and firm performance. Since Porter's focus strategy is not clear with regard to its basic distinction from his two other generic strategies (differentiation and low cost), this study starts by clarifying the concept of focus strategy from the standpoint of the strategy formulation mode. That is, focus strategy is characterized as having the distinct strategy formulation mode of determining a particular market segment first and then customizing a particular set of competitive advantages to better meet the needs of the targeted segment. The study then proceeds to review a number of sociological and economic studies bearing upon the effectiveness of focus strategy in different contingent situations. As a result, six propositions are developed about the contingent effectiveness of focus strategy. These propositions are translated into a set of causal hypotheses on the basis of a structural equation model which includes focus in product line and geographic market as the fundamental components of focus strategy and as the exogenous variables. The model structure is tested on a sample of 148 listed industrial goods manufacturers in Japan. Data for the model variables are collected from published accounting statements over a three-year period of 1980-83. Major findings from hypothesis testing are: (1) focus strategy had no substantially positive effects on sales growth in any environmental situations; (2) low industry growth was the key to the positive effects of focus strategy on profitability; (3) by creating scale economies, focus strategy was more effective for profitability under low industry concentration than under high industry concentration; and (4) focus strategy was much more effective in achieving profitability when implemented by the smaller firms than by the larger firms.
Degree
Ph.D.
Advisors
Cooper, Purdue University.
Subject Area
Management
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