Why pure strategies may be wrong for transition economy firms

Abstract

The strategy purity hypothesis argues firms will have better results pursuing a single, businesslevel strategy of either cost leadership or differentiation rather than a mix of both. Since this claim implicitly assumes a developed-economy context, we examine the efficacy of business strategies in transition economies. We find the benefits of a pure strategy are diminished when the institutional environment has a low degree of market orientation but are increased when the institutional environment is more market oriented. Our results indicate a boundary condition for the strategy purity hypothesis and support arguments for an institution-based view of business strategy.

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

“…A turbulent environment requires that firms not only manage their current resources effectively, but also be flexible to change their strategies (Pettus, Kor & Mahoney, 2009). Especially, in intensively turbulent environments, hybrid strategies are more effective, which create competitive advantage and enhance flexibility (Shinkle, Kriauciunas & Hundley, 2013). Hybrid strategy is regarded as one of the most important sources of sustainable competitive advantage in an increasingly turbulent environment; hence, it leads to product and process improvements, and ensures continuous advancements.…”

“…Hybrid strategy is regarded as one of the most important sources of sustainable competitive advantage in an increasingly turbulent environment; hence, it leads to product and process improvements, and ensures continuous advancements. Therefore, this helps firms to survive, to grow more quickly, to be more efficient and flexible and to be more profitable compared to the pure strategy (Shinkle, Kriauciunas & Hundley, 2013). D'Aveni et al (2010) pointed out that in a turbulent environment marked by high level of competition, instability of demand and fast transformation of the industry, the rules of strategic purity lose their importance because at best they have a temporary validity.…”

“…According to the findings of many empirical studies, hybrid strategy enabled higher performance in turbulent environments (Leitner & Güldenberg, 2010;Claver-Corté s et al, 2012;Shinkle et al, 2013), however researches are still limited in different sectors especially the automotive supplier industry (Proff, 2000;. Only one recent study, in a case study of the German automotive industry, Proff (2000) identified six turbulent environmental factors that have been influencing the automotive industry and lead to the adoption of a hybrid approach.…”

“…Therefore, a firm must make a choice between low cost, differentiation or focus strategies or it will be stuck in the middle without a coherent strategy because each specific (pure) strategy involves a different set of resources and organizational arrangements. Although strategic purity initially received considerable support, (Dess & Davis, 1984;Hawes & Crittendon, 1984;Roos,Flinkman, Jä ppinen, Lönner & Warensjö, 2002;Lä htinen & Toppinen, 2008), it was challenged in later studies (Campbell-Hunt, 2000;Parnell & Hershey, 2005;Raynor, 2007;Salavou, 2010;Huang, 2011;Salavou, 2013;Shinkle, Kriauciunas & Hundley, 2013). While some studies revealed that pure strategies improved performance (Ebben & Johnson, 2005;Lechner, Gudmundsson & Vidar, 2014;Hansen, Nybakk & Panwar, 2015), others suggested that different generic strategies were linked to different aspects of performance (Chandler & Hanks, 1994;Baum, Locke & Smith, 2001).…”

“…Especially in intensively turbulent environments, hybrid strategies are more effective, which create competitive advantage and enhance flexibility. The empirical study conducted by Shinkle et al (2013) demonstrated that hybrid strategies were related to higher performance in turbulent environments. The strategic purity is probably too rigid and may not be suitable to compete under conditions increasing market and technological turbulence (Pertusa-Ortega et al, 2007).…”