Academic journal article Journal of Business Economics and Management

The Harmonized Effects of Generic Strategies and Business Capabilities on Business Performance/ Bendru Strategiju Ir Verslo Galimybiu Poveikio Veiklos Rezultatams Derinimas

Academic journal article Journal of Business Economics and Management

The Harmonized Effects of Generic Strategies and Business Capabilities on Business Performance/ Bendru Strategiju Ir Verslo Galimybiu Poveikio Veiklos Rezultatams Derinimas

Article excerpt

1. Introduction

One of the main questions in strategic management field is why some firms in the same industry have systematically performed better than others (Crook et al. 2006; Teece et al. 1997)? It is usually assumed that well planned strategy will lead the business performance. If the answer was only the business strategy, when lower-performed firms imitate the same strategy they should perform as the same. So there must be other issues under the performance differences.

There are two main approaches that try to explain the performance differences among the firms in the same industry. These two approaches, which are considered as contrary to each other, are strategically based on competitive position and resource-based view (RBV).

Traditionally strategy has taken greater notice of the external environment and hence put more emphasis on external analysis. Positioning theory deals with analysis of the external environment of business as the starting point of the corporate strategy. It analyzes the firm's position on the market and makes such strategic plans to exploit the opportunities on markets.

Porter's (1980, 1985) works have an important place in the Positioning School which sees the fundamental role of strategy as positioning the firm for the future. His premise is that some industries are intrinsically more attractive than others. Thus, a business should have access to the possible strategic positions in the market and select the most efficient one among these positions. Followers of the positioning theory suggest that analyzing of external environment should result in decision about which was the advantageous position in market (Porter 1985). The basic determinant of this strategic aspect of the business positioning strategy is five-force model (Porter 1985) or similar external analysis.

RBV (Penrose 1959; Wernerfelt 1984; Barney 1991) advocates a contrary view to acquire strategically advantageous position. This theory deals with the resource base of the business itself as a starting point. RBV theorists (Wernerfelt 1984; Barney 1986, 1991; Grant 1991; Peteraf 1993) argued that firms need to achieve competitive advantage to give response to ever-changing market conditions through strategically deploying resources and capabilities within the firm and adding new capabilities to existing ones. Consequently, if the organizations or strategic business units (SBU) are able to deploy their resources and capabilities strategically, they will convert competitive struggle to their own interests in the best way and create a sustainable competitive advantage.

These two theories and related researches have emerged independently. Thus, studies were conducted independently and made use of various measurement instruments, leading to disparate results. Furthermore, most of the researches involved one of these two approaches while ignoring the other. Especially, there has been a major increase in the number of studies into RBV concept since the 1980's. Researchers have tested the relationship between capabilities and business performance (e.g. Hitt and Ireland 1986; Barney 1991; Hall 1993; Day 1994; Droge et al. 1994; Celuch et al. 2002; Ray et al. 2004; O'Regan and Ghobadian 2004) and between business strategies and business performance (e.g. Miles and Snow 1978; Porter 1980; Dess and Davis 1984; Miller 1986; Droge et al. 1994; Yamin et al. 1999) many times, but there is little empirical evidence about the details of those capabilities or the relationship among capabilities, strategy, and overall firm performance.

Despite these two theories are notified as contrary to each other, in practice executives deal with both of them concurrently while making their strategic decisions. Thus, the main purpose of this study is to make a contribution to executives through giving them a realistic analysis of their business internal capabilities to make their strategic decisions. …

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