Achieving Superior Financial Performance in China: Differentiation, Cost Leadership, or Both?

Abstract

Firms operating in emerging economies must make appropriate marketing strategy choices to address the idiosyncratic challenges of rapid changes and institutional voids. The authors investigate when various types of marketing strategies work by examining the effects of both pure and dual strategies on financial performance for domestic versus foreign firms and across different market concentration levels in China's emerging economy. According to a survey of 249 firms, the effectiveness of specific strategy choices varies depending on domesticity and the level of market concentration. In particular, the impacts of both cost and dual strategies on financial performance are stronger for foreign firms than for domestic firms. Although cost-leadership and dual strategies are less effective in less concentrated markets than in more concentrated ones, the effect of a differentiation strategy is stronger when the level of market concentration is low rather than high.