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
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
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,
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,
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.
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.
* 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
* 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
* 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
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
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
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
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
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.
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
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.
* 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
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.
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
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
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
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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
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
Providing outstanding 1 2 3 4
Improving operational 1 2 3 4
Controlling the quality 1 2 3 4
Intense supervision of 1 2 3 4
Developing brand or 1 2 3 4
Targeting a specific 1 2 3 4
market niche or segment
Providing specialty 1 2 3 4
Most Almost Always
(61-80%) (81-99%) (100%)
Vigorous pursuit of cost 5 6 7
Providing outstanding 5 6 7
Improving operational 5 6 7
Controlling the quality 5 6 7
Intense supervision of 5 6 7
Developing brand or 5 6 7
Targeting a specific 5 6 7
market niche or segment
Providing specialty 5 6 7
Table 1. U.S. and Japanese Samples Compared
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
Average Number of 1,467 633
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
Strategy Differentiation Leadership
Innovation in marketing .776
technology and methods
Forecasting new market growth .750
Forecasting existing .724
Utilizing advertising .706
Fostering innovation and .659
Developing brand identification .657
Refining existing .646
Building a positive reputation .594
within the industry for
Extensive training of marketing .567
Developing a broad range of .502
Building high market share .366
Controlling the quality of .822
Providing outstanding customer .748
Improving operational .629
Extensive training of .455
Intense supervision of .206
Vigorous pursuit of cost
Tight control of overhead costs
Minimizing distribution costs
Targeting a specific market
Dropping unprofitable customers
for high price market segments
Strategy Leadership Differentiation
Innovation in marketing
technology and methods
Forecasting new market growth
Fostering innovation and
Developing brand identification
Building a positive reputation
within the industry for
Extensive training of marketing
Developing a broad range of
Building high market share
Controlling the quality of
Providing outstanding customer
Extensive training of
Intense supervision of
Vigorous pursuit of cost .880
Tight control of overhead costs .874
Minimizing distribution costs .423
Providing specialty .652
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
Strategy Differentiation Leadership
Innovation in marketing technology and .593
Developing brand identification .407
Refining existing products/services .708
Developing a broad range of new .659
Forecasting new market growth .532
Forecasting existing market growth .665
Extensive training of marketing .594
Building a positive reputation within .518
the industry for technological
Building high market share .458
Providing specialty products/services .619
Producing products/services for high .608
price market segments
Controlling the quality of .534
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%
Strategy Z statistic Level
Cost Leadership 0.673 n.s.
Product Differentiation 5.8071 p < .001