Porter's (1980) Generic Strategies,Contextual Factors and Performance: An Empirical Examination of Their Relationship

Abstract

This research investigates the pattern of adoption of Porter's (1980) generic strategies in the Australian Manufacturing Industry by contextual factors such as industry category, type of goods produced, product life cycle stage, finn size, market type, and business unit's growth trend relative to industry. The findings suggest that there is a statistically significant relationship between the choice of generic strategy and finn size, product life cycle stage, and business unit's growth trend relative to industry. The research extends further to investigate the relationship between generic strategies and various measures of business performance. Contrary to what Porter suggests, Australian manufacturing businesses are found to have a preference for combined strategies such as cost leadership and differentiation or focused differentiation. This suggests that Australian manufacturing businesses are now pursuing customers and market-oriented strategy as suggested by Hilmer (1991) than a single strategy of cost control or differentiation. An analysis of performance by generic strategy adoption, however, suggests that companies that adopt a single strategy outperform those which adopt combined strategies on a number of performance measures, providing support to Porter's contentions.