The mediating effect of cost leadership on the relationship between market penetration, market development, and firm performance.

Abstract

The main objective of this study is to examine strategic alignment and implementation perspective of manufacturing based of SMEs in Nigeria. The study established the strategic match between firm's growth strategy, competitive strategy, and performance. Specifically, this paper aims to investigate the effects of market penetration strategy, market development strategy and cost leadership strategy on performance. Hence, this study employed cross-sectional survey design; SPSS and PLS-SEM were used for preliminaries and hypothesis testing. 277 usable questionnaires were collected from owners-managers of manufacturing based of SMEs. The findings of this study indicate that market penetration strategy and market development strategy significantly influence the firm performance of manufacturing based SMEs in Nigeria. Also, the result shows that market penetration and market development strategy have a significant impact on cost leadership strategy, which enhances firm's competitiveness and competitive advantage. However, the result of mediating role of cost leadership strategy was established. The findings suggest that cost leadership strategy exert the relationship of market penetration & market development strategy and performance alignment. Therefore, owners-managers of manufacturing based of SMEs possibly make decisions considering their strategic orientation perspective collectively to integrate growth strategies and competitive strategy to sustain competitive advantage, improve competency and achieve superior performance.

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“…The Ansoff Matrix, developed in 1957 in an article called 'Strategies for Diversification' (Ansoff, 1957), helps firms plan their strategies for growth. The matrix is known as the product-market growth matrix, but the set of strategies included in the matrix is perceived as a firm's or business's growth strategies and as a part of their strategic management (Kraus & Kauranen, 2009;Alkasim et al, 2018). Drucker (1985) proposes entrepreneurial strategies.…”

“…Market penetration is the process of going to market with a product in an existing market in which current or similar products are already placed. Market penetration allows a firm to create a competitive advantage, increase its volume of sales, generate more revenue, enhance its operational efficiency, and improve its performance (Alkasim et al, 2018). During a crisis, such a strategy may not be effective, as the crisis generally worsens the market situation for all market participants and reduces opportunities to increase sales.…”

“…Market-driven firms excel at finding attractive markets, determining customer needs, and developing goods and services to meet those needs (Vorhies & Harker, 2000). A market-development strategy enables SMEs to increase their competitive advantages and improve their performance (Alkasim et al, 2018). However, in some industries, market development is less effective than other growth strategies (Mwau et al, 2016).…”

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“…Strategi ini dapat diimplementasikan oleh Koperasi Kuta Mimba melalui beberapa cara seperti menambah tenaga penjual dalam hal ini kolektor tabungan, menambah perlengkapan/sarana untuk promosi penjualan, atau dengan usaha promosi lainnya. Hal ini sesuai dengan temuan peneliti sebelumnya, penetrasi pasar mempengaruhi standar layanan pelanggan (Njogu & Wanyoike, 2014), layanan yang ditawarkan (Njogu & Wanyoike, 2014), strategi utama untuk bersaing meluncurkan produk inovatif yang digunakan sebagai strategi untuk meningkatkan penetrasi pasar (Rodrigues et al, 2012), penetrasi pasar dan strategi pengembangan pasar memiliki dampak signifikan terhadap biaya strategi kepemimpinan yang meningkatkan daya saing dan keunggulan kompetitif perusahaan (Alkasim et al, 2018…”

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“…Cost leadership is about reducing cost, building quality into operation and producing the least expensive goods (Hunjra, Faisal & Gulshion, 2018). Alkasim et al (2018) defined cost leadership as the way in which firms charge lower price for their products than rivalry firms. Gakuya and Mbugua (2018) believed that cost leadership is the projected brand image of an organization with reference to cheapest goods or a provider of a particular products or commodities but with best value.…”