The search for competitive advantage through simultaneous execution of cost leadership and differentiation strategies: An investigation into the impact of multiple strategies on the financial performance of firms in the United States automotive component

The relationship of the business level strategy to a firm's financial performance cannot be over exaggerated. However, exactly what strategy to employ by a firm within a specific industry is a difficult task for practitioners. In 1980, Porter described three "generic" strategies that he argued would allow a firm to obtain a competitive advantage vis-a-vis its rivals. The strategies were termed "generic" by Porter to illustrate their application by any firm in any market. Although Porter's strategy types have become the foundation for much of the business policy research in the past twenty years, theorists and researchers alike continue to debate over the appropriateness of the generic strategies and the actual operationalization of the strategies to enhance a firm's performance. This dissertation seeks to expand on this area of economics and strategic management by attempting to answer this question by examining a small segment of the US automotive component industry and the impact of these firms' strategy choice on their financial performance. This research incorporates two measures of firm performance: return on assets and Tobin's q. The results indicate that when measured in financial accounting terms, Porter's "stuck in the middle" contention does not hold. However, using Tobin's q, firms who committed to a single generic strategy exhibited higher levels of performance.