Khai Sheang Lee

Dealing with Resource Disadvantage: Generic Strategies for SMEs

This paper identifies three generic strategies for SMEs taking into account explicitly their resource disadvantage. In addition to the much advocated niching strategy, we show that SMEs can free-ride on the bigger firms market development efforts and/or they can form strategic alliances to force accommodation by the bigger rivals. Contrary to conventional arguments, we show that success in niching is not conditional upon the continued ignorance of the niche by the bigger firms. It is also not true that the SMEs must have a cost advantage vis-à-vis the bigger firms in order to niche or to free-ride successfully. The bigger firms faced with entry into their markets by SMEs encounter the classical chain-store paradox. The three generic strategies proposed here are designed to force accommodation by the bigger firms.

Should a firm with a reputation for outstanding service quality offer a service guarantee

Studies reputation for service quality as a potential moderator of the relationship between a service guarantee and its impact on consumer perceptions of service quality, risk and purchase intent. A before‐after experimental design, set in the hotel industry, was employed to explore the impacts of a service guarantee for an outstanding versus a good service provider. Contrary to what had been implied in the past, the introduction of an explicit guarantee had no negative effect for the outstanding service provider in our study. In fact, the provision of a guarantee marginally improved expected quality, reduced perceived risk, and had no effect on purchase intent. However, for the good quality provider, the impacts were all positive and strong, and apart from the impact on perceived risk, the effects were significantly stronger than those for the outstanding quality provider. Our findings thus support the hypothesized moderating role of service quality.

The strategic role of unused service capacity

Services are by nature perishable. As such, managing a service firm’s capacity to match supply and demand has been touted as one of the key problems of services marketing and management practice. This paper advances an alternative perspective of unused service capacity. Based on a review of current literature and an exploratory study, this paper employs a theory‐in‐use methodology to map out a set of capacity strategy propositions. These propositions show a divergence between what literature suggests and what service firms actually practise with regard to reducing the occurrence of unused service capacity. The paper also demonstrates that capacity can be employed as a resource to achieve a series of strategic objectives that serve to improve the performance of the firm. Service firms should therefore approach capacity management not only from the standpoint of operations management, but also from that of marketing.

Advanced sale of service capacities: a theoretical analysis of the impact of price sensitivity on pricing and capacity allocations

Abstract Should service firms sell in advance? Using a theoretical approach, we study the optimality of advanced sale of capacity for a monopolistic service firm and examine the impact of market price sensitivity on the optimal price and capacity allocations for advanced sale. We show that when firms undertake advanced sale, capacity utilization and profits are higher even though prices for sale in advance are discounted. In addition, we show that optimal pricing and capacity allocations for advanced sale depend on the expected price sensitivity at the time of consumption. When price sensitivity at the point of consumption is expected to be low (unchanged), it is optimal to allocate more (less) capacity for sale at time of consumption than in advance. Although optimal price and capacity allocations in advanced sale result in excess capacity, we show that having excess capacity is a strategic decision in that it is a dominant strategy.

Generic marketing strategies for small and medium-sized enterprises – conceptual framework and examples from Asia

Although the existing literature discusses strategies available to small and medium-sized enterprises (SMEs), they do not address the plight faced by SMEs, namely resource limitations in their strategy formulation. Drawing on deductive logic, this paper identifies and conceptualizes three marketing strategies which are generic to SMEs and which specifically take into consideration the competitive reactions of bigger incumbent firms. These three generic marketing strategies are substitution, free riding and strategic deterrence. Successful substitution calls for the SME to offer differentiated yet substitutable products to that of an incumbent so as to force accommodation by the latter. Free riding allows the SME to enter a served market segment without having to incur market development expenses. Finally, strategic deterrence aims to deter a bigger incumbent firm from embarking on aggressive counteractions against the SME. This can be achieved by the formation of strategic alliances and/or incurring sunk costs in order to signal the SMEs commitments to stay in the market credibly. Examples from Asian SMEs are given to illustrate the three generic strategies.

Warranty and warrantor reputations as signals of hybrid product quality

Examines the use of warranty and warrantor reputations, which have been shown to be credible signals of product quality for uni‐national products, to overcome consumers’ negative perceptions about hybrid products. An experiment is conducted, in which the level of warranty coverage and the warrantor’s reputation are manipulated. Results indicate that warranty strategies, in terms of warranty coverage and warrantor reputation, are effective in overcoming consumers’ negative perception about the hybrid product’s quality. Strategy implications for firms in the advanced and emerging economies are discussed.

Feasibility of strategic alliance as an entry strategy into markets dominated by major competitors

Although the benefits of strategic alliances are well documented, whether strategic alliances can be a viable entry strategy option for small and medium‐size enterprises (SMEs) to successfully penetrate markets held by major incumbent suppliers is less clear. In this paper, strategic alliances are shown to be an effective entry‐cum‐deterrence strategy for SMEs to successfully penetrate markets that are well established and dominated by major corporations. In addition, the conditions under which SMEs can use strategic alliances as an entry strategy without restricting themselves to target only those markets ignored by bigger firms are identified. In terms of methodology, this paper follows a deductive approach – one based on game theory, to examine explicitly the reactions of bigger firms to the entry of SMEs into their markets, specifically taking into account the resource limitations faced by SMEs. To verify that the theoretical arguments presented are consistent with practice, two cases of the use of strategic alliances by SMEs as an entry strategy to penetrate markets dominated by major corporations are examined. The practices and experiences of these SMEs were found to be consistent with the theoretical arguments presented here.

The art and the science of strategic marketing: synergizing Sun Tzu's Art of War with game theory

In general, there are two approaches to competitive decision-making — the art and the science. The ‘art’ school can be represented by Sun Tzus Art of War, while game theory probably best represents the ‘scientific’ school of thought. Researchers who follow either of these approaches tend to ignore the other. This paper shows that the two approaches should not be viewed as mutually exclusive. Instead, they can be used to complement each other so as to provide a more complete analysis of a given strategic scenario. By applying both Sun Tzus principles of war and game theory to analyse a marketing problem, both approaches of strategic thinking are shown to be consistent with each other. This is possible by drawing on the strengths of both approaches so that precision and realism are attained.

Competition in the advanced sale of service capacity

Since service production and consumption are inseparable, many service firms sell their capacity in advance. This paper examines the optimality and practice of advanced sale of service capacity under duopolistic competition. Using a game-theoretic approach, it attempts to explain why, despite sophisticated practices of advanced sale in many service industries, many service firms still do not sell in advance. It demonstrates that competition and market price sensitivity to a firms capacity can impact not only a firms decision to sell in advance, but also its pricing and capacity allocation decisions.

Strategic management of grey marketing

Grey marketing or parallel importing has predominantly been viewed as a result of the price discriminatory practices of manufacturers. Strategy prescriptions based on this perspective call for antagonistic actions by authorized dealers and/or manufacturers against grey marketers. However, if grey marketing is not due solely to price discrimination, then such prescriptions become questionable. This paper offers an alternative view of grey marketing - that it is a free-rider problem. We present a conceptual model based on a game theoretic approach of grey marketing in which the grey marketer free rides on the authorized distributors market-creating advertising and promotional efforts. Based on this perspective, we derive strategic responses for authorized distributors and manufacturers for managing grey marketing and identify when they should counter, pre-empt or even accommodate the grey marketers. This contrasts with the price discrimination perspective, which seems to imply that there is little authorized dealers can do to counter the grey marketers, short of pleading with the manufacturer for prohibitive actions.