The applicability of Porter's generic strategies in pure online firms: A case study approach

• Author: Saffa Firoz Suleman,Marwa Firoz Suleman,Mona Rashidirad
• Date: 01 May 2019
• Published date: 01 May 2019
• DOI: http://doi.org/10.1002/jsc.2258

RESEARCH ARTICLE

The applicability of Porter's generic strategies in pure online

firms: A case study approach

*

Marwa Firoz Suleman

1

| Mona Rashidirad

2

| Saffa Firoz Suleman

1

1

Sunny Safaris Ltd., Arusha, Tanzania

2

Brighton Business School, University of

Brighton, Brighton, United Kingdom

Correspondence

Mona Rashidirad, Brighton Business School,

Mithras House, University of Brighton, Lewes

Road, Brighton BN24AT, United Kingdom

Email: M.Rashidirad@Brighton.ac.uk

Abstract

The aim of this paper is to investigate the usability and applicability of Porter's

generic strategies in the current e-business environment. In this paper, a review of

Porter's generic strategies was conducted to recognise the limitations and weak-

nesses of the model, which prevent its effective application in the e-business envi-

ronment. To do so, a case study approach on three pure online firms, e.g., Amazon,

e-bay and Google was employed. The findings acknowledged the application of Por-

ter's generic strategies to pure online firms in order to achieve competitive advantage

and proved the positive impact of generic strategies on firms' performance. The paper

suggests that although cost leadership strategy is able to generate greater perfor-

mance, pursuing a differentiation strategy can be more worthwhile and sustainable for

pure online firms compared to cost leadership strategy. This research contributes to

existing research by suggesting Porter's generic strategies as a valid and viable model

for pure online firms whichoperate in the current e-business environment.

1|INTRODUCTION

The extent to which e-businesses have been effective in cutting costs,

speeding up the pace of innovation (Zhu, Kraemer, & Xu, 2006),

increasing productivity (Scott & Walter, 2003), flexibility, and their

responsiveness to emerging markets and customers' needs

(Gunasekaran & Ngai, 2005) is undeniable (see also Bharadwaj, El

Sawy, Pavlou, & Venkatraman, 2013; Ramanathan, Ramanathan, &

Hsiao, 2012). Taking this dynamism into account, and with respect to

the increasing level of competition among firms, and the extent to

which customers are using the Internet to make purchases (Liu, Xiao,

Lim, & Tan, 2017), the majority of firms have been forced to adapt

their e-business strategies (Bi, Davison, & Smyrnios, 2017). Previous

research has confirmed that e-business has a positive impact on firm

performance. For example, Karagozoglu and Lindell (2004) found that

e-business leads to higher sales. Similarly, Straub and Klein (2001)

identified that e-business reduces operational costs, increases produc-

tivity, and improves efficiency.

The extant literature (e.g., Rashidirad, Salimian, Soltani, & Fazeli,

2017) shows that an e-business without a clear competitive strategy

is very unlikely to outperform; so in order to succeed in the increas-

ingly competitive environment of e-business, firms would need to

carefully develop and implement successful competitive strategies.

Porter (1980) asserts that in order for firms to compete successfully

and achieve above-average profit, they need to choose one of the

three strategic positions of cost leadership, differentiation, and focus.

Although there are numerous studies suggesting the positive impact

of generic strategies on firm performance (Allen & Helms, 2006;

Banker, Mashruwala, & Tripathy, 2014; Dess & Davis, 1984; Kinyuira,

2014; Powers & Hahn, 2004), research into e-business context is still

spare. As e-business has dispersed progressively among firms, it is

vital to understand how generic strategies affect firms' performance.

According to Porter and Miller (1985), information technology (IT) can

be applied to assist firms to adopt and implement generic strategies.

Similarly, Kim, Nam, and Stimpert (2004) stated that the incorporation

of the Internet into firms' overall strategy is necessary if firms are to

exploit the advantages of e-business. This is particularly crucial to

large multinational e-businesses due to their size, complex value chain,

*JEL classification codes: L10, L21.

DOI: 10.1002/jsc.2258

Strategic Change. 2019;28:167–176. wileyonlinelibrary.com/journal/jsc © 2019 John Wiley & Sons, Ltd. 167