Title

Content and Performance of Growth-Seeking Strategies: A Comparison of Small Firms in High- and Low Technology Industries

Document Type

Article

Publication Date

11-1990

Abstract

The question of how to grow and gain market share is repeatedly asked by small firm managers. Yet little help exists in the academic literature in terms of identification of specific business practices and competitive tactics associated with the pursuit of market share growth. Rather, most discussion of appropriate strategies for small firm growth centers around the prescription of broad strategy types (e.g., the often recommended niche strategy). Furthermore, the environment's potential effects on the viability of growth strategies seldom receive adequate treatment in the small firm strategy literature despite the long-acknowledged influence of environmental conditions on strategy content.

This paper describes a study of the business strategies used by small, growth-seeking firms in high- and low-technology industries. The construct of strategy was examined from both a micro level, focusing on individual strategy dimensions, and a macro level, focusing on the firms' overall strategic postures and patterns of strategy-related variables.

Data were collected from the senior executives of 57 small manufacturing firms whose mission strategies were to aggressively increase sales and market share. The data indicate that growth-seeking firms in high-technology industries, relative to those in low-technology industries, (1) rely more heavily on advertising, (2) place more emphasis on product-related issues (e.g., new product development, superior product warranties) as a basis for building market share, (3) rely more heavily on formal planning activities, (4) place more emphasis on customer service/support, (5) rely more heavily on external financing, (6) rely more heavily on premium pricing strategies, and (7) have more entrepreneurial strategic postures. The data also indicate that an entrepreneurial strategic posture is more positively associated with firm performance among growth-seeking firms in low-tech industries than among those in high-tech industries, although there are exceptions to this finding.

Cluster analysis was used to identify the content and performance of various strategies (operationally defined as patterns of strategic variables) associated with growth-seeking firms in high- and low-technology industries. Four strategies were identified through this technique — two of which are most common among firms in low-tech industries, one of which is most common among firms in high-tech industries, and one of which is equally prevalent in both industry types. These results corroborate several of the aforementioned findings regarding the effects of industry technological sophistication on dimensions of firm strategy. For example, they demonstrate the general aversion among growth-seeking firms in low-tech industries to premium pricing. Furthermore, they suggest that, overall, growth-seeking firms in low-tech industries may be somewhat more disposed to pursuing cost-leadership strategies and less disposed to pursuing differentiation strategies than growth-seeking firms in high-tech industries.

There were no overall performance differences across the four strategy types identified through the cluster analysis. However, the data suggest that an entrepreneurial strategic posture is most strongly associated with high performance among firms that have a cohesive and focused strategic mix or pattern of strategic decisions. This finding holds for growth-seeking firms in both industry types.