Strategy and industry effects on profitability: evidence from Greece

Abstract

The present study examines the impact of firm and industry-specific factors on profitability, using census data on Greek manufacturing. At the firm level, particular attention is given to strategy effects. Based on a modification of Porter's typology, these effects are captured through different forms of both 'pure' and 'hybrid' strategies. Industry effects are represented using industry concentration, entry barriers, and growth. Hypotheses are developed taking into account both previous research and the particular idiosyncrasies of the national context. The results obtained provide important insights on specific determinants of firm profitability. With respect to strategy, results confirm the hypothesis that hybrid strategies are clearly preferable compared to pure ones. In addition, it was found that the more generic strategy dimensions are included in the strategy mix, the more profitable the strategy is, provided that one of the key ingredients is low cost. Industry-level effects, although weaker, show strong impact of industry entry barriers. Moreover, the findings suggest that while both sets of factors significantly contribute to firm profitability, firm-specific factors explain more than twice as much profit variability as industry factors.

Extent of managerial IT use, learning routines, and firm performance: A structural equation modeling of their relationship

“…According to Porter (1980), cost improvement implies that the firm is constantly becoming more cost efficient, by improving its ability to produce at costs lower than the competition, by emphasizing efficient-scale facilities, vigorously pursuing cost reductions along the value chain driven by experience, tightly controlling cost and overhead, and minimizing cost (Spanos et al, 2004). This cost improvement strategy can also provide above-average returns because it allows the firm to lower prices to match those of competitors and still earn profits.…”

A Case Study on Performance Implications of Hybrid Strategy in Automotive Supplier Industry

“…However, another empirical study by Pertusa-Ortega et al (2009, 520) demonstrated that low cost and differentiation strategies can be developed in a complimentary way. Spanos, Zaralis and Lioukas (2004) support the superiority of hybrid strategy over the pure forms for competitive advantage in Greek firms. Similarly, empirical study by Salavou (2010) showed that hybridists (service firms placing high emphasis on low cost and differentiation) are better performers compared with non-strategists (strategy-less firms) and confused strategists (service firms placing medium emphasis on differentiation).…”

Approach to strategy and enterprise size

“…In practice it is diffi cult, however, to make a clear distinction between development concepts realised by an enterprise, and other researchers have indicated application values of hybrid, mixed, integrated or combination strategies (Hill 1988, pp. 265-98), demonstrating that these are more effective than pure strategies (Spanos et al 2004, pp. 139-65).…”