Competitive strategies and value creation: a twofold perspective analysis

Abstract

Purpose – The purpose of this paper is to investigate whether the implementation of a defined competitive strategy – differentiation or cost leadership – brings about different value creation levels, where “value” is defined in a twofold perspective as “shareholder value” vs “stakeholder value” and “social capital”. Design/methodology/approach – A sample of 169 European companies is investigated. Simple linear regressions and t-tests for the equality of means are conducted. Findings – While no significant differences are found in the creation of value for the shareholders, firms following differentiation strategies generate considerably higher value for all the stakeholder groups than companies pursing cost leadership strategies. Results also show that size and reputational considerations play a significant role in explaining the different stakeholder value performances. Research limitations/implications – Some data such as off-balance sheet items could have influenced the calculation of the discriminant values for strategy classification. Practical implications – Although the two groups manage to achieve comparable levels of profitability, the differentiators, presumably because of their structural outward-facing orientation, seem to be better positioned to meet the challenges of the next wave of growth, which resides in the substantial interconnection between economic and societal value. Companies need a better understanding of how the stakeholder value theory and social capital can influence value creation and long-term success. Originality/value – In light of the importance of competitive strategy as a value-creation tool, the paper sheds new light on the relationship between competitive strategies and value creation.

Entrepreneurial orientation and generic competitive strategies for emerging SMEs: Financial and nonfinancial performance perspective

“…There is a debate between the two schools of thoughts: one gives value to pursuing DS while the other favors CLS. For example, some studies argue that only DS improves firms' performance directly (Teti et al, 2014; Yuliansyah et al, 2016) while other studies suggest the importance for CLS (Oyewobi, Windapo, & James, 2015; Allen & Helms, 2006). In fact, both CLS and DS improve SME's performance.…”

“…Notably, prior studies have claimed that only EO is not sufficient to gain a superior performance. SMEs must have unique strategy in addition to EO in order to constitute their endurance in the tempestuous markets (Brenes, Montoya, & Ciravegna, 2014; Teti, Perrini, & Tirapelle, 2014; Yuliansyah, Rammal, & Rose, 2016). Though, previous literature has discussed a variety of strategies but Porter's (1980) strategy is generally rated as the most essential tool for SMEs success.…”

Impact of European Union Timber Regulation on Forest Certification Strategies in the Finnish Wood Industry Value Chain

“…Finally, companies link with both suppliers and customers, through their outward-facing strategy [43] and also with other stakeholders [44] by integrating more generalized strategies for different production levels with transparent and revealed stakeholder value focus in order to improve the cohesiveness of the entire value-network and the business performance of the overall value chain [8]. This also contributes to the better understanding of companies about how stakeholder-value and social capital can influence value creation and long-term profitability [44].…”

“…Supplier-facing strategies are usually adopted in the industry's total quality management (TQM) [37,38], while more state-of-the-art customer-facing strategies are adopted in customer relationship management (CRM), e.g., [39][40][41], can lead to more product and service innovations and improved infrastructure to enhance customer value perceptions and strengthen customer engagement and loyalty [42]. Finally, companies link with both suppliers and customers, through their outward-facing strategy [43] and also with other stakeholders [44] by integrating more generalized strategies for different production levels with transparent and revealed stakeholder value focus in order to improve the cohesiveness of the entire value-network and the business performance of the overall value chain [8]. This also contributes to the better understanding of companies about how stakeholder-value and social capital can influence value creation and long-term profitability [44].…”

Entrepreneurial Strategy Stimulating Value Creation: Conceptual Findings and Some Empirical Tests

“…When formulating the value creating strategy on Porter's value chain, the question arises how much value is being created when implementing a certain strategy. Recent research carried out among 169 European companies shows that while no significant differences are found in the creation of value for shareholders, companies implementing differentiation rather than cost leadership strategies generate a considerably higher value for all the stakeholder groups (Teti, Perrini, & Tirapelle, 2014). This brings the argument of stakeholders into discussion.…”