Product/customer scope: Competition antecedents, performance effects and market context moderations

Abstract

Purpose

The purpose of this paper is to explore the competition antecedents and performance effects of firm product/customer scope, and the moderating role of market growth.

Design/methodology/approach

The theoretical model follows the contingency perspective on strategy and draws on the strategy and competitive dynamics literature. A questionnaire was used to gather the quantitative data for testing the hypotheses using regression analyses. The questionnaires were completed by executives of 432 Swedish industrial firms serving business customers. The firms offering clean technology products operate in growing markets while the firms offering miscellaneous products operate in mature markets.

Findings

Competition is an antecedent of firm product/customer scope. The more competitive the action of the main competitor, the more limited the customer scope of the firm if it operates in a mature market. The impact of the main competitor's scope is robust across all market contexts. Furthermore, the broader the product scope of the firm, the better the financial performance if the firm operates in a growing market.

Research limitations/implications

The study contributes theoretically, as it extends our knowledge of crucial relationships of firm product/market scope. A firm must be aware of its main competitor's scope and action, and adapt its scope to the level of market growth.

Originality/value

The theoretical model and the tests go beyond those used in previous research. Another key value is the analysis of perceptual data gathered from executives. Earlier studies of competition assume equal perceptions among competing firms and do not acknowledge that market contexts are ambiguous realities.

Citation

Pehrsson, A. (2011), "Product/customer scope: Competition antecedents, performance effects and market context moderations", European Business Review, Vol. 23 No. 5, pp. 418-433. https://doi.org/10.1108/09555341111158092