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Five Competitive Forces Model and the Implementation of Porter’s Generic Strategies to Gain Firm Performances

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  • Omsa, Sirajuddin
  • Abdullah, Ibrahim H.
  • Jamali, Hisnol

Abstract

Five competitive forces that comprise bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitute products or services, and intensity of rivalries have been studied by many researchers for several years. However, linking them with Porter’s generic strategy in order to gain financial and market performance in the Micro, Small and Medium Enterprises (MSMEs) context is very rare. The main purpose of this study is to analyze how those five competitive forces affect generic strategies developed by Porter and how the generic strategies affect firm performances. Questionnaire, survey and deep interview were conducted to figure out the implemented generic strategies by the owners of MSMEs of wooden furniture in East Java, Indonesia. Smart partial least square (PLS) was used to analyse the data. The results show that power of buyers (PoB) significantly affects only differentiation strategy (DS), power of supplies (PoS) significantly affects cost leadership strategy (CLS) and focus strategy (FS) but does not significantly affect differentiation strategy (DS), and threat of rivalries (ToR) significantly affects differentiation strategy (DS) and focus strategy (FC). In regards to the relationship between generic strategies and firm performances (FP), the results of this study show that both DS and FS significantly affect FP, while CLS does not significantly affect FP. Based on these findings, it is suggested that the owners of MSMEs wooden furniture in East Java (Indonesia) consider PoB, PoS, and ToR before performing DS and FS to gain much greater firm performances in the future.

Suggested Citation

  • Omsa, Sirajuddin & Abdullah, Ibrahim H. & Jamali, Hisnol, 2017. "Five Competitive Forces Model and the Implementation of Porter’s Generic Strategies to Gain Firm Performances," INA-Rxiv 9hbwt, Center for Open Science.
    • Handle: RePEc:osf:inarxi:9hbwt
    DOI: 10.31219/osf.io/9hbwt
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    References listed on IDEAS

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    1. Ovidiu-Niculae BORDEAN & Anca BORZA & Daniel GLASER-SEGURA, 2011. "A comparative approach of the generic strategies within the hotel industry: Romania vs. USA," Management & Marketing, Economic Publishing House, vol. 6(4), Winter.
    2. Karl-Heinz Leitner & Stefan Güldenberg, 2010. "Generic strategies and firm performance in SMEs: a longitudinal study of Austrian SMEs," Small Business Economics, Springer, vol. 35(2), pages 169-189, September.
    3. M.K. Nandakumar & Abby Ghobadian & Nicholas O'Regan, 2011. "Generic strategies and performance – evidence from manufacturing firms," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 60(3), pages 222-251, March.
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