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A comparison of competitive strategies in Japan and the United States.
Subject:
Competition (Economics) (Comparative analysis)
Strategic planning (Business) (Comparative analysis)
Authors:
Allen, Richard S.
Helms, Marilyn M.
Takeda, Margaret B.
White, Charles S.
White, Cynthia
Pub Date:
01/01/2006
Publication:
Name: SAM Advanced Management Journal Publisher: Society for the Advancement of Management Audience: Trade Format: Magazine/Journal Subject: Business; Business, general Copyright: COPYRIGHT 2006 Society for the Advancement of Management ISSN: 0036-0805
Issue:
Date: Wntr, 2006 Source Volume: 71 Source Issue: 1
Geographic:
Geographic Scope: Japan; United States Geographic Code: 9JAPA Japan; 1USA United States

Accession Number:
145338594
Full Text:
The generic strategies of cost Michael Porter (1985)--leadership, product differentiation, and focus--are generally accepted as a strategic typology for organizations. Porter's typology has been in vogue in the United States since the late 1980s. The degree to which these strategies have taken hold in non-US markets, and how these American-born strategies are manifested in strategic practices in non-US cultures has been of interest to scholars and academicians alike (Gibbons and O'Conner, 2005; Torgovicky, et. al, 2005; Garrigos-Simon, Marques and Narangajavana, 2005; Zhang, 2004; Kim, Nam, and Stimpert, 2004).

Of particular interest is Japan, which has been in economic decline over this same period and where efforts at economic stimulus have repeatedly failed. Many offer the notion that Japanese business strategy has been at least partially responsible for the inability of Japan to regain a position of global business leadership that it held in the early 1980s (Ahmadjian and Robinson, 2001). This study examines the implementation of the generic strategies in Japanese firms compared with U.S. firms.

Porter's Generic Business Strategies

Porter (1979) used economic concepts to derive the five forces determining the attractiveness of a market. The forces are those close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to reassess the marketplace and alter its strategy. The first four forces--the bargaining power of customers, the bargaining power of suppliers, the threat of new entrants, and the threat of substitute products--combine to influence a fifth force: the level of competition in an industry. Based on these five forces, a firm crafts the most appropriate generic strategy.

Porter (1985) also asserts that there are basic business strategies, and that a company performs best by choosing one strategy to concentrate on. However, some researchers feel a combination of these strategies may offer a company the best chance to achieve a competitive advantage (Karnani, 1984; Miller and Friesen, 1986; White, 1986; Hill, 1998; Murray, 1988; and Miller, 1992). Whatever strategy a business chooses, it must fit with the company's goals and objectives to provide a competitive advantage (Parker and Helms, 1992).

Porter states that companies must be competitive to become industry leaders and to succeed nationally and abroad. Furthermore, he contends that strategies for gaining competitive advantage apply to all industries in most nations (McNamee and Hugh, 1989; Green, Lisboa, and Yasin, 1993; Kim and Lim, 1988; and Campbell-Hunt, 2000).

While various organizational strategies have been identified over the years (Miles and Snow; 1978; Chrisman, Hofer, and Bolton, 1988; Porter, 1980) Porter's remain the most commonly supported and identified in key strategic management textbooks and in the literature (Kim and Lim, 1988; Miller and Dess, 1993). Porter (1980) suggests that a firm must choose between one of the generic strategies to achieve profitability rather than end up "stuck in the middle." The chosen strategy, must be supported by decision-makers who create complementary internal processes along with clear management philosophies and values that help defend their strategic position (Kumar and Subramanian, 1997/98). The generic strategies are summarized in the following sections.

Cost Leadership. Lower costs and cost advantages result from process innovations, learning curve benefits, economies of scale, reductions, product designs that reduce manufacturing time and costs, and reengineering activities. A low-cost or cost-leadership strategy is implemented effectively when the company designs, produces, and markets a product more efficiently than its competitors. The firm may have access to raw materials or superior proprietary technology.

Product differentiation. Product differentiation fulfills a unique customer need by tailoring the product or service, allowing organizations to charge a premium price to capture market share. The differentiation strategy is implemented effectively when the business provides unique or superior value to the customer through product quality, features, or after-sale support. The quality may be real or perceived, based on fashion, brand name, or image. Firms following a differentiation strategy can charge a higher price for their products based on product characteristics, delivery system, quality of service, or distribution channels. The differentiation strategy appeals to a sophisticated or knowledgeable consumer who wants a unique, quality product and is willing to pay the higher price.

Focus. Focus, the third generic strategy, is based on adopting a narrow competitive scope within the industry. Focus strategies grow market share by operating in a niche market or markets not attractive to, or overlooked by, larger competitors. These niches arise from a number of factors including geography, buyer characteristics, product specifications, or requirements. A successful focus strategy (Porter, 1980) needs an industry segment large enough to have good growth potential but not of key importance to major competitors. Firms may utilize a focus strategy in conjunction with either the cost or differentiation strategies in a specific market niche.

Strategy in Japan

Japanese business strategy has been firmly rooted in the philosophy of total quality management (Deming, 1986; Juran, 1988) since the end of WWII. TQM is based on the philosophy of continuous cost reduction through the elimination of waste and rework. A TQM-based strategy of continuous improvement and cost reduction was widely considered to be responsible for Japan's postwar recovery and transcendence into a global economic powerhouse in the last half of the past century (Ho, 1999).

But Japan is currently experiencing a shrinking economy, failing stocks, and rising unemployment. Companies are restructuring and cutting jobs and without reforms, the economy is predicted to grow at only 0.8% a year from 2006 to 2010. Layoffs have caused a change of attitude as many young people abandon hopes of lifetime jobs (Wiseman, 2001). Bankruptcies are soaring and leaving behind a record level of debt in the country ("Japan Corporate Failures Up," 2001).

The long recession has begun to take its toll on Japanese managers' faith in their economic system. Recently, firms have begun to search for new ways to break out of their long commitment to the traditional Japanese management system and have discovered Porter's (1980, 1985) generic strategies as a possible impetus for change and renewal.

In their groundbreaking and controversial article, "Fixing what Ails Japan," Porter and Takeuchi (1999) contend that it was not government oversight of industry that led to the global success of Japanese companies but rather operational effectiveness and strategy. They believe the current long period of Japanese economic stagnation is due to the lack of discernable business strategies. Their hypothesis builds on Porter's position paper (Porter, 1996) in which he argues that if Japanese companies are to escape the mutually destructive battles now ravaging their performance, they will have to learn strategy, and to do so they have to overcome strong cultural barriers.

Since the publication of the article and the subsequent book "Can Japan Compete?" (Porter and Takeuchi, 2000), the Hitotsubashi University Graduate School of Corporate Strategy with support from Japan's Ministry of Economic Trade and Industry and Ministry of Education has established the Porter Prize, dedicated to recognizing Japanese companies that achieve and maintain superior profitability in their industry by implementing unique strategies based on innovations in products, processes, and ways of managing. Clearly, for Japanese bureaucrats to promote such an incentive indicates belief in the efficacy of Porter's strategic management model.

Understanding the degree to which Japanese companies are embracing strategic Porter-style management is essential to understanding the future of the Japanese economy. Japanese policy-makers think a significant shift in strategic policy is necessary for a successful transition from the traditional Japanese system (Miyagawa and Yoshida, 2005).

Research based on the Toyota production system, with its superior competitiveness in cost, quality, and delivery time, provided the impetus for a world-wide shift toward increasing efficiency through cost-cutting as a strategic imperative (Schonberger, 1994). The natural evolution was for the Japanese manufacturers to go up market in terms of quality and price, but this metamorphosis was more the result of a cost-minimization strategy rather than a proactive approach to use product differentiation or focus strategies. This mindset has changed little and is seen as a major barrier to global competitiveness for Japanese firms (Porter and Takeuchi, 2000).

The main purpose of this study is to assess whether Porter's generic business strategies are being used by Japanese companies and to compare their use of strategies to those implemented in the United States. For several reasons, we believe that Japanese companies will be slow to adopt a mindset away from their traditional cost leadership strategy toward differentiation and focus strategies.

First, since the minimization of costs through TQM techniques has been the strategic focus in Japan since after WWII, we believe that the Japanese businesses mindset is so firmly rooted in cost minimization it will take a very long time to change. Even though other Porter generic strategies are being pushed by the government, it will require a major cultural shift before Japanese businesses are comfortable with them.

Second, Japanese businesses are currently making major moves into the burgeoning Chinese marketplace. These opportunities are very much cost-leadership in nature, based on china's low-wage workforce. Continuous, incremental improvements in quality and efficiency are needed in Chinese products to build the Chinese market into a manufacturing base able to compete in the Japanese marketplace (Miyagawa and Yoshida, 2005).

For these reasons, we believe that Japanese firms will be more likely to hold onto to their traditional cost-leadership approach to strategy while eschewing the product-differentiation and focus types of generic strategies. We propose hypotheses based on this view.

Hypotheses

The primary research question for this study is to determine the extent to which Japanese companies are using Porter's generic business strategies. Japan, as noted, has a long history of a cost-leadership strategy. Conversely, as previously discussed, the Japanese government has only recently begun to promote other generic strategies. Therefore, must, a priori, assume that the other strategies (namely, differentiation and focus) have yet to take hold in Japan.

Given the long history of implementation of Porter's generic strategies in the United States, we decided that American companies would be the logical benchmark for comparison as we addressed our research question. We propose the following hypotheses:

H1: There will be no difference between Japanese and American companies in their likely use of the cost-leadership strategy.

H2: Japanese companies will be significantly less likely than American companies to use the product-differentiation strategy.

H3: Japanese companies will be significantly less likely than American companies to use the focus strategy.

Methodology

* Research survey

An instrument to measure the generic strategies was required. In a previous study of American organizations, Allen and Helms (2001) developed and tested an appropriate scale based on Porter (1980, 1985) and Parker and Helms (1992). Twenty-five questions regarding various strategic practices were used to operationalize Porter's generic strategies for an American sample, and this same instrument was adapted for use with a Japanese sample in this study. The questionnaire was translated and then pilot-tested for clarity in language and meaning. Based upon the feedback from the pilot study, minor adjustments were made. The final Japanese version was translated back into English to make sure no meaning was changed from the original version.

The questionnaire was administered to a sample of American and Japanese respondents with adequate organizational knowledge to answer basic questions regarding strategic practices in their organizations. Respondents were guaranteed anonymity. If the organization under study had multiple divisions or subsidiaries, respondents were asked to base their answers on their specific division or subsidiary. Respondents were given ample time to complete the survey, and researchers were on hand to administer the questionnaire. Respondents were asked to determine how frequently their organizations used the various strategic practices. The following is a sample of some of the survey's 25 strategic practice items:

* The Sample

To reach a broad range of organizations and ensure a high response rate, the survey was administered to convenience samples of American and Japanese respondents. It was determined a respondent must have been employed at least six months by the organization under study to have adequate organizational knowledge to accurately complete the questionnaire. Respondents were Japanese and American business managers and professionals attending evening MBA courses offered at urban campuses in Japan and the U.S. This sample was chosen specifically because they were believed to have a reasonably high level of understanding of the strategic activities within their firms.

Post-administration interviews reinforced these selection criteria as respondents with a minimum of six months' work experience reported no difficulty in answering the questions. Only five respondents had to be eliminated because they lacked the required experience. Usable responses included 226 American and 101 Japanese, summarized in Table 1.

The only statistically significant difference between the Japanese and American samples was the higher prevalence of unions in Japan (p < .001). This difference can be easily explained and was determined to have no detrimental influence on the data. Unions have been losing membership and power in the United States for the past 30 years. In contrast, unionization is still widespread in Japan, where company-sponsored unions are the norm. In fact, if a Japanese company has a union, all of its workers are automatically members--even the managers.

* Data analysis

Factor analysis of the U.S. sample. Each nation's responses to the 25 strategic practices were subjected to a factor analysis to determine which discernable business strategies were being used in the U.S. and in Japan. Using SPSS-X principal component analysis with a Varimax rotation and Kaiser normalization, a four-factor solution emerged in the U.S. data and explained 50.67% of the variance with an eigen value of 1.373.

As is typically the case with a factor analysis, the individual items (strategic practices) loaded with differing strengths onto several identified factors. The final four factors identified were composed of those strategic practices with the highest factor loadings. Thus, each factor is defined by a different set of strategic practices. The strategic practices and highest factor loadings for each item for the American sample are summarized in Table 2.

This is not to imply that any of the individual strategic practices are exclusive to a single strategy. For example, the practice of extensive training of front-line personnel loaded onto the factor that was labeled focus-cost leadership at the .455 level. It also loaded onto the other three factors, but at much weaker levels (for example, .244 on the differentiation factor, and at miniscule levels onto the other two strategies).

Certainly training of frontline personnel is also important to the other three strategies, but the data indicated it is most strongly associated with the first factor. It was, therefore, deemed to be a focus-cost leadership item.

After all the individual practices composing each factor were analyzed, the resulting factors conceptually corresponded with Porter's (1980, 1985) framework of the four generic organizational strategies. Factor 1 represents the product differentiation strategy, factor 2 the focus-cost leadership strategy, Factor 3 the Cost Leadership strategy, and Factor 4 represents the focus-product differentiation strategy.

These four factors and their associated items were used to form scales and Cronbach Alphas were computed for the scale reliabilities. The product differentiation factor of 11 items has an Alpha of 0.8997; the focus-cost leadership factor of five items had an Alpha of 0.7707, the cost leadership scale consisted of three items with an Alpha of 0.7761, and the focus-product differentiation factor with four items had an alpha of 0.5723.

While the alpha for factor 4 was not as strong as the other three factors, it is still within the expected range for a broad construct established by Van de Ven and Ferry (1980) and was deemed acceptable. Likewise, the average inter-factor correlations were low and within the acceptable range established by Van de Ven and Ferry (1980). The focus strategies concentrate on smaller, unique, or niche markets and are combination strategies (with differentiation or cost leadership). Therefore, they have more conceptual overlap in strategic positioning than the pure forms of cost leadership or product differentiation. Their Alphas would be expected, a priori, to be lower than the pure strategic forms.

The following sections briefly describe each of the American strategic factors and the items composing them.

Product differentiation factor. Because a product differentiation strategy emphasizes the uniqueness of a product or service and attempts to make the product or service special in the mind of the customer, marketing related actives are vital to this strategy. All 11 of the factor loadings are indeed marketing-related and emphasize developing or refining products and services and planning for market growth. By fostering innovation and creativity as well as building a reputation of technological leadership, a finn should be assured of a stream of innovations to attract new customers and meet existing customer's demands for uniqueness.

Cost leadership factor. Three strategic practices comprise the cost leadership factor. A deep discount retailer using a pure cost-minimization strategy stresses ongoing cost reductions and tight control of overhead costs to the exclusion of almost any other organizational issues. This is contrasted with a focus-cost leadership retailer who also competes on the basis of providing outstanding customer service and quality in addition to low costs for a chosen niche.

Focus-product differentiation factor. The focus-product differentiation factor emphasizes a unique product or service but to a smaller, possibly undefined or overlooked specialty niche. Targeting a specific market and providing it with specialty products and service is, by definition, the focus--product differentiation strategy. Dropping unprofitable customers ensures an even tighter focus while providing products and services for high-price market segments further focuses the strategy on customers with unique needs.

Focus-cost leadership factor. For the focus-cost leadership factor, the emphasis is on reducing costs while at the same time meeting the needs of an undeveloped niche. The items that loaded highly on this factor support this strategy. By providing outstanding customer service, a previously neglected market segment is emphasized. The variables of improving operational efficiency and controlling quality emphasize the overarching cost objectives. Quality is important to ensuring low costs because producing a product or delivering a service right the first time eliminates rework and scrap costs. Extensive training and supervision of front-line personnel will also serve to meet customer needs by streamlining processes to provide for cost efficiency.

* Factor analysis of the Japanese sample Responses to the 25 strategy items were subjected to a factor analysis to determine what types of strategies were present in the Japanese data. Using SPSS-X principal component analysis with a Varimax rotation and Kaiser normalization, a four-factor solution emerged, explaining 58.8% of the variance.

Items that loaded at a level of 0.40 were included in the resulting four factors. Three of the original 25 items did not load strongly onto a single factor and were excluded from further analysis, leaving 22 strategy items. The items and factor loadings for each factor are summarized in Table 3.

The resulting four factors were then interpreted for their meaning. Based on the items composing the factors, it appeared that only two of the resulting factors represent Porter generic strategies; namely, cost leadership and product differentiation. Interestingly, neither of the two focus strategies appeared to be represented in the Japanese sample. Therefore, hypothesis 3 (Japanese companies will be significantly less likely than American companies to make use of the focus strategies) could not be formally statistically tested.

Two alternative, apparently non-Porter, factors also emerged from the Japanese data. These factors were disregarded since they were not germane to our study.

* Determining the relative frequency of use of strategies

To determine the frequency of use of the various strategies identified by the factor analyses, an additional procedure was performed. Each strategic practice item in the questionnaire was rated by the respondents on a Likert-type scale ranging from one through seven, with a score of five or better indicating significant use of the strategy. The scores on the respective questions loading on each of the factors were summed. The resulting summated scale was used to assess which of the four strategies each respondent used. If a company scored above a cutoff score calculated by the product of a) the scale response (one through seven) times, b) the number of questions used to define the respective factor (for example, differentiation loaded on eleven questions), the company was considered to be using the strategy. In a number of cases respondents reported the use of more than one major strategy, which resulted in the percentages of strategy usage totaling greater than 100%. This conceptual overlap is to be expected because many of the strategic practices are not entirely exclusive to each respective strategy identified in the factor analysis.

The resulting percentages in each respective strategy were analyzed for relative differences using a proportions test (z-statistic). The results of this analysis are summarized in Table 4.

Results

The results of the analysis indicate that both the Japanese and American companies tend to use the cost leadership strategy. This strategy was evidenced in 45.4% of the American companies and 41.4% of the Japanese companies. There was no statistically significant difference between the American and Japanese samples. This finding supports hypothesis 1: there will be no difference between Japanese and American companies in their likelihood to use of the cost leadership strategy.

The product differentiation strategy was found in 39.3% of American companies but in only 7.6% of the Japanese companies. This was a highly significant difference (p < .001). This finding supports hypothesis 2: Japanese companies will be significantly less likely than American companies to make use of the product differentiation strategy.

Hypothesis 3, Japanese companies will be significantly less likely than American companies to make use of the focus strategies, could not be formally tested since the Japanese sample did not contain factors representative of either of the focus strategies. However, the fact that the Japanese data did not display any recognizable focus factors is consistent with our hypothesis that American companies are more likely to use focus strategies than the Japanese. In fact, the focus strategies may be practiced so infrequently in Japan that they are imperceptible.

Discussion

* Cost leadership strategy. The most common strategy in Japanese organizations was cost leadership. The items composing this factor clearly describe strategic practices that have been associated with the rise of Japanese products in the late 1970s. For example, Japanese manufacturers were able to make great inroads internationally into such markets as consumer electronics, automobiles, and steel. Their vigorous control of both cost and quality led to significant competitive advantages allowing Japan to export and compete globally in these markets.

In Japan, customer service is defined somewhat differently than in the West, which may explain its presence in this factor's makeup. Customer service is offered to consumers through a product's value as well as its on-time delivery. Customers often cite Japanese cars as offering better service due to the infrequent need for repairs. Thus good quality leads to overall low cost although not necessarily low price. The low-cost leader, by providing a valued product, is, in turn, offering customer service.

* Product differentiation strategy.

The differentiation strategy also emerged in the Japanese sample but was being used much less frequently than any of the other strategies identified. In fact, a mere 7.6% of the organizations appeared to be using it. Perhaps, as Porter contends, the relative lack of use of his generic strategies could be partially responsible for the inability of the Japanese economy to rebound.

This factor primarily comprises marketing items. Since a product differentiation strategy emphasizes the uniqueness of a product or service, one would expect marketing-related activities to predominate. By fostering innovation as well as building a reputation of technological leadership, a firm should be assured of a stream of innovations to attract new customers as well as to meet existing customer's demands for uniqueness.

Part of Japan's recent economic malaise might be attributable the inability of Japanese companies to effectively differentiate their products from those of their competition. The entire country has operated under a strategic focus on steel, consumer electronics, and automobile production since the end of WWII. Their core international markets for these products have been invaded by other nations over the past few decades. For example, American minimills as well former Soviet bloc and other developing countries are now able to compete with Japanese steel; the Koreans and Chinese now compete in consumer electronics; and the Americans and Europeans have rebounded in their ability to compete in the automobile markets. Japan no longer enjoys the same cost and quality differentiated position in these markets that they once had. Interestingly, very few organizations in our sample seemed to use a differentiation strategy. Perhaps Japan, an island nation dependent on exports, needs to regain a differentiated edge in some new markets if their economy is to rebound.

* Focus strategy.

Unlike the American sample, none of the strategic factors that emerged in our analysis of the Japanese data appeared to represent a focus strategy. Thus it appears that Japanese firms are not utilizing these Porter strategies. Practices that one would typically consider to be associated with this sort of strategy either did not clearly factor into a discernable strategy (i.e., "dropping unprofitable customers") or loaded onto the differentiation strategy (i.e., "providing specialty products or services" and "producing products/services for high-price market segments"). Perhaps Japanese firms need to focus on specific product/service niches to begin the process of developing new markets in which they can compete globally. This may be an important first step towards economic recovery.

Implications

Clearly there are some important differences in American and Japanese business strategy implementation. The American companies tend to stick with the well-known Porter generic business strategies, while the Japanese appear to use only the cost leadership strategy. As mentioned, the Japanese government has been attempting to facilitate a transition of Japanese businesses to a more Porter-based model to increase their ability to compete globally. Given this finding it appears that the strategic paradigm transition is still a work-in-progress in Japan.

The heavier utilization of the cost leadership strategy may be a natural reaction to the decade-long economic slump and the necessity for cutting costs. Japanese labor is among the highest paid in the world, imports of raw materials remain high despite attempts to reform the system, and the Japanese are increasingly competing with Chinese and other Asian conglomerates for business that used to go automatically to them. For these reasons, a cost leadership strategy may be seen as a means of survival. The high use of the cost leadership strategy lends further support to the notion that the Japanese are stuck in the strategies of the past.

This study indicates that the differentiation and focus strategies have not yet caught on in Japan, a finding that has major implications for Japanese international competitiveness. If Japan continues to rely on low cost strategies, the economy may be doomed to a lower position in world rankings. The Japanese will be forced to continue to compete on price with other low-cost producers, such as China and other developing Asian economies. Given the low wages and standards of living of these competitors, the outlook for Japan may be bleak.

The results of this study further emphasize the need for Japanese companies to develop strategies that focus on particular market segments and differentiate Japanese products in the world marketplace. It is only by making this sort of a transition that Japanese companies can hope to command premium prices for their goods and help propel the Japanese standard of living back into a top tier position among international economies.

Limitations of this Study; Areas for Research

This study is specifically designed to compare Japanese and American business strategies and their use in their respective economies, so the findings do not necessarily apply to other countries. This research used a convenience sample consisting of graduate business students primarily from large firms. Future research may be strengthened by using a sample comprising a more diverse set of firms, including women-owned business, entrepreneurial firms, and even foreign firms operating in Japan.

Another approach would be to conduct a longitudinal comparative study among those firms competing for the Porter prize to identify specific practices and their relationship with strategies and performance and assess if their strategic practices mirror the questionnaire constructs for the generic strategies. Future research should collect data on a longitudinal basis to aid in drawing causal inferences and validating the efficacy of Porter's strategies in use.

Based on what was learned in this study, the survey questions regarding strategic practices could be further refined to more closely capture each of the business strategies. Future research should be designed to test whether strategic practices other than those consistent with generic strategies are being operationalized.

As with any research, other important research questions have been uncovered. For example, why don't Japanese firms adopt Porter's generic strategies? Are they too focused, too limiting to the traditionally open and fluid Japanese management system? Are Japanese companies too locked into quality improvement processes, lean manufacturing and productivity enhancements to shift toward more differentiation and market-driven strategies? Are the Japanese firms concentrating only on large markets and ignoring profitable niche markets and the corresponding focus strategies? Is the Japanese management tradition of evolutionary change and bottom-up consensus or team management antithetical to a top-down planning approach favored by Porter? All these are areas for future research.

Finally the problems experienced in Japan need further research to determine the role of strategies or lack thereof in the current economic crisis. For example, what part of the problem is due to external and economic factors and what part to internal organizational strategies? Also, when Japanese firms set up operations in the U.S., what strategic styles do they use, and do they differ from the strategies used by the same organization in Japan? These are all questions to be pondered in future studies.

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Richard S. Allen, The University of Tennessee at Chattanooga

Marilyn M. Helms, Dalton State College

Margaret B. Takeda, The University of Tennessee at Chattanooga

Charles S. White, The University of Tennessee at Chattanooga

Cynthia White, The University of Tennessee at Chattanooga

Dr. Allen's research interests include organizational development and the strategic use of rewards. Prior to entering academia, he spent over 15 years in corporate management, training, and consulting roles. Dr. Helms, who was a Fulbright teaching and research fellow in Portugal, focuses her research on manufacturing strategy, quality, and international management. Dr. Takeda, who formerly taught at Aoyama Gakuin University in Tokyo, researches international human resource management, international business, spirituality and leadership, and Japanese management. Dr. White, a professor of management, teaches in the areas of general management, organizational behavior, small business, and research methods. Cynthia White, currently a management instructor, holds a Master of Science in Engineering (Computer Science).
How frequently does your organization utilize the following practices?

                           Never   Almost      Some      About
                                    never     times       half
                            0%     (1-20%)   (21-40%)   (41-60%)

Vigorous pursuit of cost     1        2         3          4
reductions

Providing outstanding        1        2         3          4
customer service

Improving operational        1        2         3          4
efficiency

Controlling the quality      1        2         3          4
products/services

Intense supervision of       1        2         3          4
front-line personnel

Developing brand or          1        2         3          4
company name
identification

Targeting a specific         1        2         3          4
market niche or segment

Providing specialty          1        2         3          4
products/services
                             Most      Almost    Always
                            times      always
                           (61-80%)   (81-99%)   (100%)

Vigorous pursuit of cost      5          6         7
reductions

Providing outstanding         5          6         7
customer service

Improving operational         5          6         7
efficiency

Controlling the quality       5          6         7
products/services

Intense supervision of        5          6         7
front-line personnel

Developing brand or           5          6         7
company name
identification

Targeting a specific          5          6         7
market niche or segment

Providing specialty           5          6         7
products/services


Table 1. U.S. and Japanese Samples Compared

                           U.S.                   Japan

Sample Size                226 respondents        101 respondents
Average Experience         4 years                8 years
Time Employed--Range       6 months to 27 years   6 months to 35 years
Time Employed--Standard    4.37 years             8.6 years
  Deviation
Average Number of          1,467                  633
  Employees in
  Organization
Service Organizations      62%                    53%
Manufacturing              28%                    21%
Government/NonProfit       10%                    4%
Unionized                  17%                    56% *

* Difference is significant at the p < .001 level.

Table 2. U.S. Factor Analysis--Factor Loadings

                                      Product       Focus-Cost
Strategy                          Differentiation   Leadership

Innovation in marketing                .776
technology and methods
Forecasting new market growth          .750
Forecasting existing                   .724
market growth
Utilizing advertising                  .706
Fostering innovation and               .659
creativity
Developing brand identification        .657
Refining existing                      .646
products/services
Building a positive reputation         .594
within the industry for
technological leadership
Extensive training of marketing        .567
personnel
Developing a broad range of            .502
new products/services
Building high market share             .366
Controlling the quality of                             .822
products/services
Providing outstanding customer                         .748
service
Improving operational                                  .629
efficiency
Extensive training of                                  .455
front-line personnel
Intense supervision of                                 .206
front-line personnel
Vigorous pursuit of cost
reductions
Tight control of overhead costs
Minimizing distribution costs
Providing specialty
products/services
Targeting a specific market
Dropping unprofitable customers
Producing products/services
for high price market segments

                                     Cost       Focus-Product
Strategy                          Leadership   Differentiation

Innovation in marketing
technology and methods
Forecasting new market growth
Forecasting existing
market growth
Utilizing advertising
Fostering innovation and
creativity
Developing brand identification
Refining existing
products/services
Building a positive reputation
within the industry for
technological leadership
Extensive training of marketing
personnel
Developing a broad range of
new products/services
Building high market share
Controlling the quality of
products/services
Providing outstanding customer
service
Improving operational
efficiency
Extensive training of
front-line personnel
Intense supervision of
front-line personnel
Vigorous pursuit of cost             .880
reductions
Tight control of overhead costs      .874
Minimizing distribution costs        .423
Providing specialty                                 .652
products/services
Targeting a specific market                         .649
Dropping unprofitable customers                     .548
Producing products/services                         .545
for high price market segments

Table 3. Japan Factor Analysis - Factor Loadings

                                               Product          Cost
Strategy                                   Differentiation   Leadership

Innovation in marketing technology and          .593
methods
Developing brand identification                 .407
Refining existing products/services             .708
Developing a broad range of new                 .659
products/services
Forecasting new market growth                   .532
Forecasting existing market growth              .665
Extensive training of marketing                 .594
personnel
Building a positive reputation within           .518
the industry for technological
leadership
Building high market share                      .458
Providing specialty products/services           .619
Producing products/services for high            .608
price market segments
Controlling the quality of                                      .534
products/services
Providing outstanding customer service                          .529
Improving operational efficiency                                .769
Vigorous pursuit of cost reductions                             .732
Tight control of overhead costs                                 .667

Table 4. Frequency of Use of Strategies

Strategy                  U.S. sample   Japan sample

Cost Leadership              45.4%         41.4%
Product Differentiation      39.3%          7.6%

                                        Significance
Strategy                  Z statistic       Level

Cost Leadership              0.673          n.s.
Product Differentiation     5.8071        p < .001
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