Five Competitive Forces Model and the Implementation of Porter’s Generic Strategies to Gain Firm Performances
Science Journal of Business and Management
Volume 5, Issue 1, February 2017, Pages: 9-16
Received: Dec. 29, 2016;
Accepted: Jan. 9, 2017;
Published: Jan. 26, 2017
Views 3553 Downloads 214
Sirajuddin Omsa, Department of Accounting, State Polytechnic of Ujung Pandang, Makassar, Indonesia
Ibrahim H. Abdullah, Department of Management Science, Economic Faculty, Muhammadiyah University, Mataram, Indonesia
Hisnol Jamali, Program Pascasarjana (PPS) Magister Manajemen (MM), Sekolah Tinggi Ilmu Ekonomi Makassar (STIEM) Bongaya, Makassar, Indonesia
Five competitive forces that comprise bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitute products or services, and intensity of rivalries have been studied by many researchers for several years. However, linking them with Porter’s generic strategy in order to gain financial and market performance in the Micro, Small and Medium Enterprises (MSMEs) context is very rare. The main purpose of this study is to analyze how those five competitive forces affect generic strategies developed by Porter and how the generic strategies affect firm performances. Questionnaire, survey and deep interview were conducted to figure out the implemented generic strategies by the owners of MSMEs of wooden furniture in East Java, Indonesia. Smart partial least square (PLS) was used to analyse the data. The results show that power of buyers (PoB) significantly affects only differentiation strategy (DS), power of supplies (PoS) significantly affects cost leadership strategy (CLS) and focus strategy (FS) but does not significantly affect differentiation strategy (DS), and threat of rivalries (ToR) significantly affects differentiation strategy (DS) and focus strategy (FC). In regards to the relationship between generic strategies and firm performances (FP), the results of this study show that both DS and FS significantly affect FP, while CLS does not significantly affect FP. Based on these findings, it is suggested that the owners of MSMEs wooden furniture in East Java (Indonesia) consider PoB, PoS, and ToR before performing DS and FS to gain much greater firm performances in the future.
Ibrahim H. Abdullah,
Five Competitive Forces Model and the Implementation of Porter’s Generic Strategies to Gain Firm Performances, Science Journal of Business and Management.
Vol. 5, No. 1,
2017, pp. 9-16.
Adidam, P. T., Banerjee, M., and Shukla, P. (2012). Competitive intelligence and firm’s performance in emerging markets: an exploratory study in India. Journal of business and industrial marketing, 27 (3), 242-254.
Asika, N. (1991), Research Methodology in the Behavioural Sciences. Nigeria: Longman, (Chapter Five).
Banker, R. D., Mashruwala, R., and Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than acost leadership strategy? Management Decision, Vol. 52 (5), 872-896.
Baroto, M. B., Abdullah, M. M. B., and Wan, H. L. (2012). Hybrid Strategy: A New Strategy for Competitive Advantage. International Journal of Business and Management, Vol. 7 (20), 120-133.
Baum, J. R., Edwin, A., Locke, E. A., & Ken, S. G. (2001). A Multidimensional Model of Venture Growth. Academic Management Journal. 44 (2), 292-303.
Bordean, O. N., Borza, A., & Segura, D. G. (2011). A comparative approach of the generic strategies within the hotel industry: Romania VS. USA. Management and Marketing Challenges for the Knowledge Society. Vol. 6 (4), 501-514.
Dauda, Y. A.; Akingbade, W. A.; and Akinbali, H. B. (2010). Strategic management practice and corporate performance of selected small business enterprises in Lagos Metropolis. International Journal of Business and Management, 5 (11), 97-105.
East Java Statistical Bureau Center. (2013). Indonesia furniture export in 2012 based on the provinces’ contributions.
Herri and Wafa, S. A. (2003). The Influence of Internal and External Factors on the Performance of Indonesian SMEs.
Ingga, I (2008). The effect external environments, Internal environments, cost leadership strategy, and differentiation strategy on customer value and competitive advantage. Unpublished dissertation. Brawijaya University, Malang.
Karel, S., Adam, P., and Radomir, P. (2013). Strategic planning and business performance of micro, small and medium-sized enterprises. Journal of competitiveness, vol. 5 (4), 57-72.
Lahiri, S. (2007). Industry-Level Competitive Forces, Firm Resource, Strategy, and Performance: An Investigation of Indian Business Process Outsourcing Providers. Unpublished Dissertation, the University of Memphis.
Latan, H., & Ghozali, I. (2012), Partial Least Square: Consept, Technique and Aplication. Semarang: Badan Penerbit Undip.
Leitner, K. H., and Guildenberg. (2010). Generic strategies and firm performance in SMEs: a longtidunal study of Austrian SMEs. Small Business Economics, 35: 169-189.
Levine, N., & Ross, J. W. (2003). From the vendor's perspective: Exploring the value proposition in information technology outsourcing. Management Information System Quarterly, 27 (3), 331-364.
Nandakumar, M. K., Ghobadian, A., and O’Regan, N. (2011). Generic strategies and performance – evidence from manufacturing firms. International Journal of Productivity and Performance Management, Vol. 60 (3), 222-251.
Nasikh, S. (2015). The value of non-oil exports in East Java, access online on 10th July 2015 from www.republika.co.id.
Omsa, S., Salim, U., Djumahir., and Rahayu, M. (2015). Competitive strategy orientation and company performance in selected SMEs Wooden Furniture in Pasuruan city. International Journal of Applied Business and Economic Research (IJABER), 13 (7), 4659-4676.
Parnel, J. A., & Hershey, L. (2005). The strategy-performance relationship revisited: The blessing and curse of the combination strategy. International Journal of Commerce and Management, 75 (1), 17-33.
Pearce, J. A., & Robinson, J. R. (2009). Strategic Management: Formulation, Implementation and Control (11th Ed.). New York: The McGraw-Hill Companies, Inc.
Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance, New York: Free Press.
Powers, T. L., and Hahn, W. (2004). Critical competitive methods, generic strategies, and firm performance. The International Journal of Bank Marketing, Vol. 22 (1), 43-63.
Shane, S., & Kolvereid, L. (1995). National Environment, Strategy, and new Venture Performance: A Three Country Study. Journal of Small Business Management, 33 (2), 37-51.
Wan, Z., & Bullard, S. H. (2009), “Competitive Strategy and Business Performance in the US. Upholstered, Wood Household Furniture Industry”. Forest Product Journal, 59 (9), 5-19
Yani, A. (2010). Competitive advantage trough strategy approach in Islamic banks in South Kalimantan. Unpublished dissertation. Brawijaya University, Malang.
Yonggui, W., Yuli, Z., & Hing-P, L. O. (2003). The Key Factors Distinguishing High-Growth SME from Those Poor Performance: Evidence from China.