Implementation of low cost and differentiation strategies in three industries

Abstract

Implementation is a stage in strategic management that pertains to the ways in which firms' commpetitive plans are put into operation. Most research focuses on budgetary allocations as a means of studying strategy implementation. The purpose of this research was to enlarge that focus by examining framework and process concepts of organization. Specifically, it was proposed that two generic strategies, low cost and differentiation, would each be implemented through dissimilar organization components. A secondary purpose of the research was to determine the extent to which implementation outcomes were consistent with expected outcomes. Each generic strategy was posited to differ in regard to expected and actual outcome consistency. The research was conducted in three industries: integrated circuits, petroleum, and health care. Nineteen executives from each industry were personally interviewed with a structured questionnaire. A total of 57 business units were represented in the sample. Each executive described a single competitive event that served as a focal point in tracking implementation. Executives who described the 57 competitive events also indicated the extent to which an event's purpose was to achieve a low cost or differentiated competitive position. As in previous research, low cost was found to be associated with operations related expenditures. Additionally, low cost strategy was found to be correlated with monetary and nonmonetary rewards as well as reduced post sales service evaluation. Differentiation strategy was associated with market related expenditures, a finding that is consistent with previous studies. Differentiation was also correlated with performance related turnover, nonmonetary rewards, Informal communication, and champions. In related findings, neither low cost nor differentiation strategy resulted in entirely expected outcomes. On four dimensions, operating costs, capital intensity, image, and quality, executives noted that expected implementation outcomes frequently differed from actual outcomes. Differentiation strategy appears to result in more discrepant outcomes than low cost strategy...