Electronic Commerce Strategies, Generic Strategies, and Firm Performance: A Study of Small and Medium Enterprises in Aichi, Japan

Abstract

This paper reports research findings on the relationship among electronic commerce strategies,generic strategies,and firm performance.Findings are based on 186 small and medium enterprises(SMEs)operating in Aichi,Japan.A multiple regression analysis revealed that both electronic commerce strategies and generic strategies lead to significant performance improvements among SMEs.Importantly,the findings indicate that both types of strategies can be exploited by SMEs to improve firm performance.However,interaction effects of these two types of strategies on firm performance were not observed.Among e-commerce strategies,customer base expansion and operational efficiency improvement were found to be significant for performance.Among generic strategies,cost leadership and differentiation were significant for improving firm performance.Keywords:electronic commerce strategy,generic strategies,firm performance,e-commerce, small and medium enterprises E-commerce,without doubt,has helped companies to be more responsive and flexible to ever-changing customer needs and markets (Gunasekaran and Ngai,2005).As the competition between companies and the number of customers using electronic purchases has increased,the great majority of companies have been compelled to use some form of e-commerce applications.Prior research confirms that e-commerce affects firm performance positively. Karagozoglu and Lindell (2004)found that e-commerce strategies lead to significantly higher sales. Straub and Klein(2001)stated that e-commerce results in increasing productivity and/or reducing production costs.Further,they stated that e-commerce results in improving efficiency, increasing revenue,and expanding markets.Thus,it is apparent that e-commerce strategies result in improvement of firm performance in many ways.In order to compete effectively,companies need generic strategies. Porter(1980)found that a company must focus on one of the three strategic directions(cost leadership,differentiation,or focus)if it hopes to gain above-average returns.Prior research has confirmed that generic strategies affect firm performance (Dess and Davis,1984;Powers and Hahn,2004;Allen and Helms,2006).As e-commerce has increasingly diffused among firms in recent years,it is important to see how it affects generic strategies. Porter and Millar(1985)argue that information technology(IT)can be used to support generic generic strategies.Porter (2001) states that companies have to integrate the Internet into their overall strategies if they are to gain competitive advantages. Lee(2001) too stated that the integration of e-commerce into the firms overall strategy is required if it is to exploit e-commerce.Clearly,these studies show that generic strategies continue to play a vital role in the companies.The studies also make the point that companies may need to integrate e- The contribution of SMEs to any economy is significant In many economies it plays a major part in employment and job creation (Analoui and Krami,2003).In Japan,the SMEs make up 99% of Japanes...

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“…Porter (1980) suggests that a company must focus on one of the two generic strategies if it hopes to gain above average returns. The findings of Dushyantha (2008), Allen and Helms (2006), Thomas andWilliam (2004), Power andHahn (2004) and Nayyar (1993) support the view that firms employing one of the generics strategies perform better than firms which employ the stuck -in -the middle strategy. This is because firms applying this strategy avoid customers who demand low cost products and also lose high margin products demanders, leading to lower market share.…”

“…However, Dushyantha (2008) found out that cost leadership and differentiation strategies significantly affect firm performance in small and middle enterprises in Japan. Rajiv et al (2014) also argue that both cost leadership and differentiation strategies have positive impact on contemporaneous performance.…”

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