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THE HYBRID COMPETITIVE STRATEGY
FRAMEWORK
A managerial theory for combining differentiation
and low-cost strategic approaches based on a case study of a
European textile manufacturer
A thesis submitted to the University of Manchester
for the degree of Doctor of Business Administration
in the Faculty of Humanities
Alexandre H. H. Lapersonne
Alliance Manchester Business School
Management Sciences and Marketing Division
Table of Contents
3.4.2.2 Data analysis methods ..................................................................................... 115 3.4.2.3 Investigating and explaining the mixed strategy adoption through a causal process tracing method ................................................................................................ 118 3.4.2.4 Mixed strategy exploration through a possibilistic generalization approach. 123 3.5 CONCLUSION ............................................................................................................ 124 CHAPTER 4 - PRESENTATION OF THE SINGLE CASE STUDY AND CHOICE VALIDATION.................................................................................................................... 125 4.1 INTRODUCTION........................................................................................................ 125 4.2 PRESENTATION OF THE COMPANY CASE STUDY AND ITS BUSINESS ENVIRONMENT............................................................................................................... 126 4.2.1 A BRIEF PRESENTATION OF THE FIRM’S CASE STUDY .............................................. 126 4.2.2 BRIEF PRESENTATION OF THE EUROPEAN JEANSWEAR MARKET ............................ 128 4.3 PRESENTATION OF A SHORT STORYLINE OF THE FIRM’S CASE STUDY ............................................................................................................................................. 130 CHAPTER 5 - THE CAUSAL MECHANISMS OF A MIXED STRATEGY ADOPTION ........................................................................................................................ 133 5.1 INTRODUCTION........................................................................................................ 133 5.2 ANALYSING THE CAUSAL MECHANISMS THAT RESULTED IN THE ADOPTION OF A MIXED STRATEGIC APPROACH BY ALPHA-DENIM .......... 136 5.2.1 CAUSAL MECHANISMS RESPONSIBLE FOR THE BREAKDOWN OF ALPHA-DENIM’S ORIGINAL PURE LOW-COST STRATEGIC APPROACH .......................................................... 137 5.2.2 CAUSAL MECHANISM RESPONSIBLE FOR ALPHA-DENIM´S FAILURE IN ADOPTING A PURE DIFFERENTIATION STRATEGIC APPROACH............................................................... 140 5.2.2.1 Commoditization effect on Premium Jeanswear brands .................................. 140 5.2.2.2 Increase of consumer price sensitivity and demand volatility on the Premium Jeanswear brand market .............................................................................................. 142 5.2.2.3 Increase of competition in the Premium Jeanswear market ............................ 143 5.2.2.4 Increase of uncertainty in the Premium Jeanswear market ............................. 145 5.2.3 CAUSAL MECHANISMS RESPONSIBLE FOR ALPHA-DENIM TO ADOPT A MIXED STRATEGIC APPROACH ..................................................................................................... 147 5.2.4 NECESSARY AND SUFFICIENT CONDITIONS THAT EXPLAIN THE ADOPTION FOR A MIXED STRATEGY BY ALPHA-DENIM ............................................................................... 150 5.2.5 DISCUSSION AND CONTRIBUTION ............................................................................ 153 5.3 ANALYSING THE EVOLUTION OF THE STRATEGY MAKING PROCESS OF ALPHA-DENIM THAT RESULTED IN THE ADOPTION OF A MIXED STRATEGY APPROACH ................................................................................................ 155 5.3.1 PERIOD (2005-2006) - IMPLEMENTING A DIFFERENTIATION STRATEGY ................. 155 5.3.1.1 Definition process ............................................................................................ 155 5.3.1.2 Structural context ............................................................................................. 158 5.3.1.3 Strategic context............................................................................................... 159 5.3.1.4 Selection process (Impetus) ............................................................................. 160 5.3.1.5 Product market and Capital market................................................................. 161 5.3.2 PERIOD (2007-2009) - TESTING A LOW-COST PRODUCT LINE UNDER A DIFFERENTIATION STRATEGY ........................................................................................... 163 5.3.2.1 Definition process ............................................................................................ 163 5.3.2.2 Structural context ............................................................................................. 164 5.3.2.3 Selection process (Impetus) ............................................................................. 165
5.3.2.4 Strategic context............................................................................................... 165 5.3.2.5 Product market and Capital market................................................................. 166 5.3.3 PERIOD (2010-2011) – WHEN THE DIFFERENTIATION STRATEGY SEEMED TO WORK ......................................................................................................................................... 168 5.3.3.1 Definition process ............................................................................................ 168 5.3.3.2 Structural context ............................................................................................. 169 5.3.3.3 Selection process (Impetus) ............................................................................. 169 5.3.3.4 Strategic context............................................................................................... 170 5.3.3.5 Product market and Capital market................................................................. 170 5.3.4 PERIOD (2012-2013) - DEFINITIVE FAILURE OF THE DIFFERENTIATION APPROACH AND ADOPTION OF A MIXED STRATEGY ........................................................................... 172 5.3.4.1 Definition process ............................................................................................ 172 5.3.4.2 Structural context ............................................................................................. 173 5.3.4.3 Selection process (Impetus) ............................................................................. 174 5.3.4.4 Strategy context ................................................................................................ 175 5.3.4.5 Product market and Capital market................................................................. 175 5.3.5 DISCUSSION AND CONTRIBUTION ............................................................................ 177 5.3.5.1 Evolution of the strategy making patterns as an adaptive process to fit the environment and development of a dynamic capability in altering strategy renewal sub- process as a result of a learning process ..................................................................... 177 5.3.5.2 Conflict management of the strategy making process at the operational level 182 5.3.5.3 The risk of excessive strategic alignment between managerial levels ............. 183 5.4 CONCLUSION ............................................................................................................ 185 CHAPTER 6 - MIXED STRATEGY IMPLEMENTATION AT THE FIRM’S STRATEGY MARKET LEVEL ...................................................................................... 186 6.1 INTRODUCTION........................................................................................................ 186 6.2 COMBINING DIFFERENTIATION AND LOW-COST MARKET APPROACHES .................................................................................................................. 188 6.2.1 THE DIFFERENTIATION APPROACH OF ALPHA-DENIM´S MIXED STRATEGY ............ 188 6.2.2 THE LOW-COST APPROACH OF ALPHA-DENIM’S MIXED STRATEGY........................ 189 6.3 CAPABILITY IN MANAGING THE BALANCE BETWEEN DIFFERENTIATION AND LOW-COST STRATEGIC APPROACHES .................. 194 6.3.1 MANAGING THE BALANCE BETWEEN DIFFERENTIATION AND LOW-COST MARKET SEGMENT .......................................................................................................................... 194 6.3.2 MANAGING THE BALANCE BETWEEN DIFFERENTIATION AND LOW-COST PRODUCT LINE .................................................................................................................................. 198 6.4 UNDERSTANDING THE ORGANIZATIONAL MECHANISMS INVOLVED IN THE MANAGEMENT OF A DUAL STRATEGY MARKET APPROACH .............. 200 6.5 DISCUSSION AND CONTRIBUTION ..................................................................... 206 6.5.1 DEFINING AND MANAGING THE DUAL STRATEGIC FOCUS THROUGH CLEAR AND COMPLEMENTARY ROLES ................................................................................................. 206 6.5.2 MIXED STRATEGY AND STRATEGY FLEXIBILITY ..................................................... 208 6.5.3 CONTROLLING THE FLEXIBILITY OF THE MIXED STRATEGY, A COMBINATION OF RATIONAL-ACTOR AND INTERNAL-ECOLOGY STRATEGY MAKING PROCESS MODEL ....... 209 6.5.4 MIXED STRATEGY, FLEXIBILITY AND PERFORMANCE ............................................. 212 6.6 CONCLUSION ............................................................................................................ 213
8.5 INDUCING CHARACTERISTICS OF THE MIXED STRATEGY
REINFORCEMENT PERSPECTIVE ............................................................................. 284
8.5.1 REINFORCING AN ORIGINAL PURE DIFFERENTIATION STRATEGY WITH A LOW-COST
APPROACH ........................................................................................................................ 284
8.5.2 REINFORCING AN ORIGINAL PURE LOW-COST STRATEGY WITH A DIFFERENTIATION
APPROACH ........................................................................................................................ 286
8.5.3 MIXED STRATEGY MAKING PROCESS UNDER A REINFORCEMENT PERSPECTIVE ..... 287
8.5.4 TYPE OF BUSINESS MODEL ADOPTION UNDER A REINFORCEMENT PERSPECTIVE.... 288
8.5.5 MANAGING TRADE-OFF UNDER A REINFORCEMENT PERSPECTIVE.......................... 291
8.5.5.1 Managing trade-off when reinforcing an original pure differentiation strategy with a low-cost approach. ............................................................................................ 291 8.5.5.2 Managing trade-off when reinforcing an original pure low-cost strategy with a differentiation approach. ............................................................................................. 292 8.6 INDUCING CHARACTERISTICS OF THE MIXED STRATEGY DIVERSIFICATION PERSPECTIVE ............................................................................ 293 8.6.1 MIXED STRATEGY MAKING PROCESS UNDER A DIVERSIFICATION PERSPECTIVE .... 293 8.6.2 TYPE OF BUSINESS MODEL ADOPTION UNDER A DIVERSIFICATION PERSPECTIVE ... 294 8.6.3 MANAGING TRADE-OFF UNDER A DIVERSIFICATION PERSPECTIVE ......................... 294 8.7 RECOMMENDATION IN IDENTIFYING THE CORRECT ENVIRONMENTAL SITUATION ....................................................................................................................... 295 8.8 CONCLUSION ............................................................................................................ 297 CHAPTER 9 - CONCLUSION......................................................................................... 298 9.1 INTRODUCTION........................................................................................................ 298 9.2 MAIN CONTRIBUTION OF THIS STUDY ........................................................................ 298 9.2.1 CONTRIBUTION TO THE FIELD OF STRATEGY MANAGEMENT .................................. 298 9.2.1.1 Mixed strategy and environmental factors ....................................................... 298 9.2.1.2 Mixed strategy and strategy making process ................................................... 299 9.2.2 CONTRIBUTION TO THE PRACTICE OF STRATEGY IMPLEMENTATION ...................... 301 9.3 RESEARCH LIMITATIONS ..................................................................................... 303 9.4 DIRECTIONS FOR FUTURE RESEARCH ............................................................ 304 9.4.1 FUTURE RESEARCH IN THE FIELD OF STRATEGY PROCESS....................................... 304 9.4.2 FUTURE RESEARCH IN THE PRACTICE OF MIXED STRATEGY IMPLEMENTATION ..... 306 9.5 CONCLUSION ............................................................................................................ 306 APPENDICES .................................................................................................................... 307 APPENDIX 1 – CONGRUENCE ANALYSIS FOR THE VALIDATION OF THE SINGLE CASE STUDY ......................................................................................................................................... 308 APPENDIX 2 – A COMPREHENSIVE STORYLINE OF A MIXED STRATEGY ADOPTION ......... 379 APPENDIX 3 – LETTER OF PRESENTATIONS, INTERVIEWS STRUCTURE, MEMOS AND CODING INFORMATION ................................................................................................................... 420 REFERENCES ................................................................................................................... 449
List of Figures
Figure 1 - A taxonomical representation of the Porter´s generic strategies model. ... 41
Figure 2 - A taxonomical representation of the Miles & Snow strategy types. ......... 42
Figure 3 - A space matrix based on the dimensional paradigm with a discrete relative
position. Compiled by the authors based on the principles of the Bowman´s
strategy clock model (Johnson et al., 2003)........................................................ 44
Figure 4 - A representation of pure, mixed and “stuck-in-the-middle” strategies
following a dimensional paradigm of continuum intensity strategic emphasis.
Compiled by the author based on an interpretation of the literature review....... 46
Figure 5 - A representation of pure, mixed and “stuck-in-the-middle” strategies
following a dimensional paradigm of principal strategy criteria (Thornhill and
White, 2007; Manev et al., 2015). ...................................................................... 47
Figure 6 - The RAP model (Bower and Gilbert, 2005) – Compiled by the author.... 84
Figure 7 - Case study project – A unique case study with an integrated multiple unit
analysis approach. ............................................................................................. 107
Figure 8 - Alpha-Denim organizational structure in 2013 (Source: Based on the
firm´s organizational structure charts). ............................................................. 127
Figure 9 - The conjunction factors that led to the loss of Alpha-Denim’s low-cost
competitive advantage. ..................................................................................... 137
Figure 10 - Causal chains that result in a commoditization effect on Premium
Jeanswear brands. ............................................................................................. 140
Figure 11 - Causal chains that cause the European Premium Jeanswear market to be
volatile, unstable and unpredictable.................................................................. 142
Figure 12 - Causal chains that make the European Premium Jeanswear market more
competitive........................................................................................................ 143
Figure 13 - Causal chains that make the European Premium Jeanswear into a very
uncertain environment. ..................................................................................... 145
Figure 14 - Causal chains that resulted in the adoption of a mixed strategic approach
by Alpha-Denim. .............................................................................................. 147
Figure 15 - Graph representation of all the causal mechanisms that resulted in an
adoption of a mixed strategic approach by Alpha-Denim for the period 2005-
Figure 16 - Process interpretation of field data: Period (2005-2006) - Implementing a
differentiation strategy. ..................................................................................... 162
Figure 17 - Process interpretation of field data: Period (2007-2009) - Testing a low-
cost product line under the differentiation strategy. ......................................... 167
List of Tables
Table 1 - Summary of Porter’s generic competitive strategies. Compiled and
summarized from Porter (1980, 1985, 1996)...................................................... 30
Table 2- Listing of the literature of the diversity of the mixed strategy definitions and
their classification of conceptual paradigms. ...................................................... 51
Table 3 - Compilation of independent variables used to measure mixed strategic
approach in empirical studies. ............................................................................ 55
Table 4 - A proposition of definition on four levels of strategy formulation to define
the boundary between the mixed and pure strategic approach. .......................... 59
Table 5 - Example of Enabling conditions of Strategy agency in Manager’s role
expectation (Mantere, 2008) ............................................................................... 92
Table 6 - Endogenous and exogenous criteria to choose the single case study. ...... 105
Table 7 - Interview plan achieved for the first and second stage. ............................ 110
Table 8 - Data analysis plan ..................................................................................... 114
Table 9 - Test of the crucialness of the case study selected. Source: created by the
author based on the definition of degree of crucialness defined by Blatter and
Haverland (2012). ............................................................................................. 117
Table 10 - Evolution of Alpha-Denim strategy making process for the period 2005-
Table 11 - Evolution of Alpha-Denim role management in the strategy renewal sub-
processes for the period 2005-2013. ................................................................. 181
Table 12 - Summary of the two approaches of the Alpha-Denim mixed strategy.
(Source: compiled by the author based on information extracted from interviews
and firm’s documents). ..................................................................................... 192
Table 13 - Distribution of the Alpha-Denim product line across Premium and
Popular markets in 2013. (Source: compiled from sales product database). .... 193
Table 14 - Alpha-Denim production cost structure 2012-2013 (Source: Table
summary compiled from managerial reports of the firm 2012-2013). ............. 218
Table 15 - Illustrative simulation of variation of setup cost of a weaving machine.
(Source: compiled by the author and based on cost information derived from
interviews and the firm’s documents)............................................................... 227
Table 16 - Development of the product mix composition of Alpha-Denim for the
period 2008-2013. (Source: Extracted from product mix composition
development – R&D department). .................................................................... 230
Table 17- Evidence of Extended departmental consciousness enabling condition for
championing strategy alternatives .................................................................... 262
Table 18 - Evidence of Organizational altruism enabling conditions for championing
strategy alternatives. ......................................................................................... 264
Table 19 - Evidence of Shared vision enabling conditions for championing strategy
alternatives. ....................................................................................................... 266
Table 20 - Evidence of an Integration and conciliation management role for
championing strategy alternatives. ................................................................... 268
Table 21- Environmental situation generalized from the particular case study of
Alpha-Denim for the adoption of mixed strategy. ............................................ 275
Table 22 - Mixed strategy business model dimensions generalized from the particular
case study of Alpha-Denim and literature review. ........................................... 277
Table 23 - Mixed strategy map characterized by nine possible implementations. .. 278
Table 24 - Trade-off approach in a reinforcement perspective where differentiation is
the strategy to be reinforced.............................................................................. 292
Table 25 - Example of mixed strategy implementations extracted from the literature.
Table 26 - A suggested theoretical framework for the study of dynamic capability of
strategy process management. .......................................................................... 305
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Abstract
The fact that we have entered turbulent times has been a central theme in the recent
strategy literature. Turbulent environments are commonly described by increased
competitive intensity, disruptive changes in the industry structure, volatility of
demand, and unpredictability of customer behaviour, alongside instability of
economic, social and political factors. In such a context, the adoption of traditional
approaches to strategy, which assumes a relatively stable world, have been questioned
by new approaches. Mixed strategy, which emerged as a contingency option to Porter’s
generic strategies model, defends that in a turbulent environment the simultaneous
pursuit of the low-cost and differentiation approaches is fundamental for the short-
term performance and long-term survival of the firm. A vast corpus of literature
supports the benefits of adopting a mixed approach strategy: several empirical studies
have proved that a combination of low-cost and differentiation strategic elements
establishes a firm’s performance superiority over the pure strategy choice. The mixed
literature has concentrated on the performance linkage and on the debate countering
the pure strategy approach, however very little attention has been paid to the challenges
presented by the mixed strategy implementation. In fact, despite the rich empirical
literature, it is still not clear how firms that adopt a mixed strategy may successfully
integrate the inherent contradiction of the low-cost and differentiation approaches.
The aim of this study is to investigate how a firm has been implementing the mixed
strategy approach, unveiling its managerial characteristics and to generate a proposed
managerial framework that could serve as a guide for further implementation. This
study approaches the subject of mixed strategy implementation on three levels:
environment, strategy definition and making process, and value chain activity. After
having elucidated several ambiguities related to the concept of mixed strategy present
in the literature and having proposed a normalized definition, this study investigates
through a unique case study approach, an in-depth explorative process using causal
process methods the managerial implication of the mixed strategy. Several
characteristics are revealed from the unique case study and represent a major
contribution to the field of strategy management. Furthermore, a managerial
framework is proposed which could serve as support in the implementation of a mixed
strategy.
Copyright Statement
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Acknowledgements
This research would not have been possible without the guidance and support of my
supervisors, Prof. Paul R. Jackson, Prof. Nitin Sanghavi and Dr. Claudio De Mattos,
to whom I am profoundly indebted for their insightful contribution and critical eye. It
is to them that I owe the great learning opportunity afforded to me in these past years.
I would also like to thank the Doctoral staff of the Alliance Manchester Business
School for all their assistance. Finally, I would like to thank my family for always
looking at the bigger picture and being there for me. I want to thank especially dear
work colleagues and friends that have in some way contributed to the completion of
this thesis. Special thanks go to Dr. Dirk Hickert, Dr. Rui Torres de Oliveira, Marcelo
Castro, Francisco Maiolino, Anderson Cunha, Pablo Lara, Sergio Cesari, David
Bardin, Andrew Bruce and José Luis Zabaleta.
Chapter 1 – Introduction
1.1 Research background
The scope of this research is centred on the study of the adoption of mixed strategy,
also known as combination, hybrid or dual strategy (Markides and Charitou, 2004;
Pertusa-Ortega, Molina-Azorín and Claver-Cortés, 2009; Claver-Cortés, Pertusa-
Ortega and Molina-Azorín, 2012). Since the success of Porter’s generic strategies
model, a long debate has existed between two points of view: the proponents of
Porter’s model, who defend that the pursuit of both low-cost and differentiation
strategies by a firm would result in a poor performance situation called “stuck-in-the-
middle”, and the proponents of the adoption of mixed strategy, which involves a
combination of low-cost and differentiation elements, and who defend superior
performance over the pure strategy adoption.
At the centre of this debate, the concept of trade-offs has been playing a key role as it
could be considered the central part of the coherence of a strategy (Magretta, 2012).
Trade-offs are determined by choosing one strategic dimension to the detriment of the
other. In the trade-offs paradigm, opposed strategic dimensions could not be pursued
at the same time without creating some sort of inefficiency in the firm’s value chain
(Porter, 1980b, 1996). This is because strategic positioning, such as differentiation and
cost leadership, involves contradictory activities and resources allocation that are
mutually exclusive. In fact, the choice of a differentiation strategy usually requires an
emphasis in product innovation, customer customization, service differentiation and
premium image to sustain a premium price. In contrast, a low-cost strategy usually
requires an emphasis on limited product and service scope, standardization, efficiency
through economy of scale and learning curve to achieve a lower cost. Consequently,
any firm that does not choose one type of strategy, or tries to implement the two
simultaneously, will find itself in a poor performance situation, referenced to as stuck-
in-the-middle (Porter, 1996).
Numerous empirical studies defend this point of view (Dess, Carolina and Davis,
1980; Aulakh, Kotabe and Teegen, 2000; Thornhill and White, 2007). In fact, a firm
that chooses a particular position in an industry, which should be by low-cost or
differentiation approaches, could sustain a competitive advantage based on two types
of sources: the attractiveness of the industry associated to the barriers that could offer
protection (Porter, 1981, 1996) and the set of unique resources that were developed
internally that could offer protection through heterogeneity and imperfect mobility
(Barney, 1991; Amit and Schoemaker, 1993; Peteraf, 1993). Consequently, the rules
of trade-offs associated with the industry idiosyncrasy, which shape the strategic
choices of this firm, remain valid while these industry characteristics remain
unchanged (Spanos and Lioukas, 2001). In such a context of predictability and
stability, it is recommended and sensible that a firm concentrates its focus on one
strategic dimension and specializes in a few competencies.
Conversely, in a turbulent environment marked by a high level of competition,
instability of demand and fast transformation of the industry, the rules of trade-offs
lose their importance, because at best they have a temporary validity (D’Aveni, 1995;
D’Aveni, Dagnino and Smith, 2010). Consequently, a firm in such a context is forced
to deploy a more complex and dynamic approach to strategy (Chakravarthy, 1997).
The modern era of globalization, high speed and instability has been at the origin of
this need. In fact, many authors argue that business environments have been much
more dynamic, unstable and competitive. These turbulent environments are commonly
described by increased competitive intensity, disruptive changes in the industry
structure, volatility of demand, and unpredictability of customer behaviour; alongside
instability of economic, social and political factors. In these uncertain business
environments, firms have been compelled to adapt to survive and to maintain their
financial performance. In such a context, the adoption of traditional approaches to
strategy, such as the positioning school, which assumes a relatively stable world, has
been questioned by the emergence of the mixed strategy alternative, which seems to
be more suitable for adaptation.
An extensive body of theoretical and empirical studies endorses the pursuit of a
combination of the low-cost and differentiation strategy approach (Phillips, Chang and
Buzzell, 1983; Hill, 1988; Murray, 1988; Beal and Yasai-Ardekani, 2000; Proff, 2000;
Spanos, Zaralis and Lioukas, 2004). Additionally, several studies demonstrate that
firms that have adopted a mixed approach in a dynamic environment have presented a
superior or at least equivalent performance compared to pure strategy options (Pertusa-
Ortega, Molina-Azorín and Claver-Cortés, 2009).