BUS631: Brand Management

Increasing the global market, internationalize of firms, nowadays, the uncertainty of firms is increased much more, consequently the ambiguity of firms on answering the questions, what do we have to do? and how to do it? is increased. As well as a lot of other questions that enhance the need to have a strategy, so the importance of strategy is greater today than ever before. In addition to this, it is valuable answering the question, what is the importance of having a good strategy?

The first challenge faced by firms that enter into the market is finding a way to survive in that market. Statistics and studies that are done have shown approximately one-third of new European firms do not reach the second year of their existence, whereas 50%–60% of them do not manage to survive till the seventh year.

Currently, firms are losing their energy to find methods that offer them to maintain the existing position in the market, as well as to increase the market share and profit. About 55% of new entrants fail in the first 5 years. According to Eurostat, about 83% of newborn enterprises in 2011 have survived in 2012, whereas over the years a gradual decrease is marked only 45% of created enterprises in 2007 which were active in 2012. The death rate of organizations tends to decrease as they age. Newly born organizations suffer a "liability of newness", in which they have to learn how to survive, and must create successful patterns of operations despite having limited resources. Slightly older organizations can suffer a "liability of adolescence" in which they can survive for a time on their initial store of resources, but then their failure rate tends to follow an inverted U-shaped pattern as they age, whereas firms in the phase of decrease try to find ways in order to have a longer life circle in the market. Older organizations can suffer a "liability of obsolescence" if their operations are highly inertial and unchanging and become increasingly misaligned with their environment.

So, to survive, to be more profitable, and to increase the market share, firms should create strategies. Regarding organizational strategies, organizations are referred to as "specialists" if they can survive only within a limited range of resources. However, firms are referred to as "generalists" if they can survive using a wide range of resources. Empirical research has shown that organizations that are more generalist in nature tend to last longer than specialized organizations. Generalist organizations tend to have more resources than they need for routine operations, and only operate at full capacity when responding to unanticipated environmental demands. Generalist organizations also tend to introduce more new products and reach beyond their typical market segments than do specialist organizations. However, the strength of generalization versus specialization can be influenced by the typical duration of environmental fluctuations.

Researches of this scope have shown that firms during their life cycle can be faced with strong competition that leads them to failure. This was the reason that aroused our curiosity to research the relationship between Porter's generic strategies and firm performance, as a way that can decrease the failure scale of firms. The findings of this paper enrich the strategic literature by empirical evidence and offer an opportunity for business strategists to choose the path that will provide for their organizations to survive, to increase the profit, and to increase the market share.

On these days, firms are coping with a very competitive, turbulent, and unstable market that stems from prompt technological development. Therefore, the manager's focus is on creating a competitive advantage by creating a new way of strategic development, which is appropriate for them and enables a successful adaption to that technological and industrial changes. A major stream of strategy research examines the relationship between strategy type and firm performance. These strategy types are sometimes called generic strategies.

The rest of this paper is organized as follows: The second section includes literature review regarding Porter's generic strategies that present the characteristics of low-cost strategy, differentiation strategy, and focus strategy, as well as their way of relation with firm performance. In the third section, the research hypotheses are presented, whereas the fourth section deals with the methodology used to test the raised hypotheses. In the fifth section, the model used is presented and analyzed. In the sixth section, hypotheses are tested and discussion for results is included, and this study ends with some contributive conclusions.