The effect of generic positioning and product
market competition on firms' productive efficiency
Name: MARCIO VILELA MONTES
Publication date: 09/10/2023
Examining board:
Name |
Role |
|---|---|
| LUIZ CLAUDIO LOUZADA | Advisor |
Summary: This research investigates the specific and combined effects of the choice of business strategy
and product market competition on the firm's productive efficiency. At the firm level, the effects
of the strategy on productive efficiency depend on the firm's ability to position itself in relation
to its competitors, or by being more efficient in reducing production costs, or by differentiating
its products and increasing its profit margin. Porter (1985) classifies such positioning strategies
as cost leadership and product differentiation, respectively. On the other hand, in the context of
the product market, the degree of competition influences the choice of strategy adopted,
generating effects on productive efficiency. In this study, firms belonging to the Brazilian
market, listed in Brasil, Bolsa e Balcão - [B]3
, which were grouped by sector of activity,
according to their generic positioning based on Confirmatory Factor Analysis (CFA), to
definition of positioning variables. For productive efficiency, accounting information data from
these firms were used and the Data Envelopment Analysis (DEA) method was applied to
compose the variable. Competition was measured using the Herfindahl-Hirschman Index
(HHI), as a metric of market concentration, using the CR2 index, which considers the level of
competition based on the two largest firms in the market, and also the Hall Tideman index
(HTI), which classifies all firms in the sector based on their market share depending on the
substitutability of products. The results found showed that firms positioned in cost leadership
tend to be more likely to present superior production efficiency when compared to firms that
positioned themselves in differentiation. They also demonstrated that, in highly competitive
markets, firms are more likely to have greater efficiency and that, with the combined effects of
competition and positioning, as competition increases, productive efficiency tends to have a
greater chance of achieving greater levels. In this sense, this study contributes to research on
productive efficiency by demonstrating that the firm's strategic positioning choices, as well as
the level of competition in the product market, directly and positively influence its results.
