The Role of Competitive Strategy

Despite the research results of the significant impacts of information technology on supply chain performance, it is argued that information technology alone does not completely determine supply chain performance. Business strategic thinking also plays an important role towards supply chain performance. For example, Huo et al. (2014) survey 604 Chinese manufacturers and find competitive strategies significantly influenced the effectiveness of supply chain practices, including internal, process and product integration.

Porter’s framework for competitive strategy is one of the most widely accepted business competition models (Miller, 1988). Porter’s research in industrial economics suggests three generic strategies of competing above average rates of return: cost leadership, differentiation and focus (Porter, 1980, 1985). He argues that to succeed in business, a firm needs to adopt one or more of the three generic competitive strategies, and that the firm’s strategic choice ultimately determines its competitiveness and profitability (Miller & Dess, 1993).

In the meantime, the resource-based view (RBV) (Wernerfelt, 1984) of the firm attribute superior firm performance to firm resources. Firms build competitive advantage by utilizing unique sets of resources and strategies (Barney, 1991). Resources enable firms to conceive and implement strategies, improving effectiveness (Barney, 1991). In contrast, strategies are the ways in which firms relate to their environment (Porter, 1980, 1985). Strategies therefore impact the link between resources and performance (Edelman et al., 2005).

Day and Wensley (1988) extend the work of Porter (1980) by introducing the sources→

positions→performance (SPP) framework of competitive advantage. In addition to acknowledging the performance impact of positional advantages in terms of superior customer value (e.g., differentiation) and lower relative costs (e.g., cost leadership). Their framework embraces elements from the resource-based view (Wernerfelt, 1984) by arguing that organizational capabilities are the key sources of positional advantages.

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Bharadwaj (2000) develops the concept of Information Technology as an organization resource by drawing on the resource-based view of the firm. The study empirically examines the association between IT resource and firm performance and finds the relationship to be positive and significant.

Koo et al. (2004) investigate Porter’s competitive strategies in electronic virtual markets. In their research framework, the resource of a firm is on-line business capability. Porter’s framework of competitive strategies is used to compare the market strategies of on-line firms and firms operating concurrently in the traditional and electronic markets. They also examine the connection between the competitive strategies and business performance in electronic markets.

Edelman et al. (2005) provide a schematic representation of the resources → strategy → performance model. They examine the relationship between firm resources, strategies, and performance in a cross-section of small firms. They model firm strategy as a mediating variable by arguing that mediation tests specify the existence of a significant intervening mechanism (e.g., firm strategy) between an antecedent variable (e.g., firm resources) and the consequent variable (e.g., firm performance).

Reimann et al. (2009) draw from the sources→positions→performance framework and build a research model in which two strategic postures of firms - differentiation and cost leadership - mediate the effect of CRM on firm performance. Their results reveal that CRM does not affect firm performance directly. Rather, the CRM-performance link is fully mediated by differentiation and cost leadership.

In this research, the emerging information technology is viewed as sources of competitive advantage to supply chain performance (DeGroote & Marx, 2013; Dong et al., 2009; Vijayasarathy, 2010). The basic premise of our study is that the relationship between emerging information technology use in the supply chain and supply chain performance can be affected by three key mediators: cost leadership, differentiation, and focus. Figure 1 shows this conceptual model.

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Figure 1 Conceptual model

(1) Cost Leadership

With a cost leadership strategy, a firm can improve its competitive stance by lowering its manufacturing and marketing costs. A lower cost structure can improve profitability and market share.

The advent of the emerging information technology has complicated the market dynamics, making it harder to predict how firms will compete in the market (Porter & Heppelmann, 2014).

By now there are few studies of how companies compete in a market in terms of EST can be related with cost leadership strategy. However, previous studies have shown that the integration of information technology with supply chain management can reduce the cost of information exchange between parties in the supply chain, and thus impacting the supply chain performance (Dong et al., 2009; Qrunfleh & Tarafdar, 2014).

Therefore, we propose that emerging information technology indirectly affects firm performance by increasing efficiency and driving down costs, implying that emerging information technology significantly affects a firm’s cost leadership position, leading to superior supply chain performance. It is thus hypothesized:

H2a: There is a significant association between intention use of emerging information technology and position of cost leadership strategy.

Emerging Information Technology

Supply Chain Performance

Competitive Strategy

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H2b: There is a significant association between cost leadership strategy position and supply chain performance.

H2c: Cost leadership mediates the relationship between emerging information technology and supply chain performance.

(2) Differentiation

On the other hand, a firm may pursue a strategic advantage by differentiating its products and services from those offered by competitors. By providing unique and innovative products and services with creative marketing, a firm can establish strong brand recognition and customer loyalty.

With a differentiation strategy, a firm seeks to be unique in the way it offers products and services to customers, because it is viewed as valuable by customers (Porter, 1980). Porter and Millar (1985) further envisioned the potential of information technology as a driving force behind differentiation strategies. Many believe that firms can also enhance value by creatively exploiting differentiated market segments and channels. Differentiation strategies in market allow firms to charge premium prices for products and services deemed unique by customers (Porter, 2001).

Adoption of information technologies may enable a firm to obtain in-depth information about its suppliers and customers and then use this knowledge to adapt its offerings to meet the needs of its supply chain operations in a better way than does its competitors. Therefore, the emerging information technology is linked to the business strategy of differentiation, which enables firms to achieve superior performance. This link is consistent with the sources→positions→performance framework; emerging information technology is as the source that allows firms to achieve a differentiated position, and in turn drives firm’s supply chain performance (Day and Wensley 1988).

H3a: There is a significant association between intention use of emerging information technology and position of differentiation strategy.

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H3b: There is a significant association between differentiation strategy position and supply chain performance.

H3c: Differentiation mediates the relationship between emerging information technology and supply chain performance.

(3) Focus

An alternative strategy, focus, is generally held to be appropriate for small firms or entrepreneurs with few resources, because it allows them to compete with larger firms and position themselves based on other strategic strengths (Wright, 1987).

With a focus strategy, a firm concentrates its efforts on a specific market segment (Porter, 1980). This strategy is generally held to be appropriate for small firms with few resources, because it allows them to compete with larger firms and position themselves based on other strategic strengths (Wright, 1987). How this strategy would play in an IT based market is not clear. Further, there have been no extensive empirical studies of the behavior and performance of firms in the market competing on the basis of information technology. Koo et al. (2004) examine Porter’s competitive strategies in electronic virtual markets and find on-line firms incline to differentiation strategy, whereas click-and-mortar firms prefer strategies based on focus strategy.

Both on-line firms and click-and-mortar firms are pioneer adopters of emerging information technologies such as cloud computing and big data analytics. We thus hypothesize:

H4a: There is a significant association between intention use of emerging information technology and position of focus strategy.

H4b: There is a significant association between focus strategy position and supply chain performance.

H4c: Focus mediates the relationship between emerging information technology and supply chain performance.

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Drawing from these hypotheses proposed above, the research framework is illustrated in Figure 2.

Figure 2 Research framework

Emerging Information Technology

Differentiation

Supply Chain Performance Cost Leadership

Market Focus

H1

H2c

H3c

H4c

H2a H2b

H3a

H4a

H3b

H4b

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