Strategy amongst food industry firms: a cluster analysis of results of a Danish survey, and comparisons with classical models of strategy

Abstract

<p>This study investigates the strategic behaviour of a sample of Danish food industry firms, characterises that behaviour and assembles clusters of firms with similar strategic stances, and examines the usefulness of conventional models of strategy. A set of 14 testable hypotheses is established from a literature review, and all are able to be tested adequately. Survey data from 131 firms (a 30% response rate) are employed across 11 strategic orientations and 57 strategic actions in the years 2000 and 2005.</p><p> Strategic actions yielded far better research information for further analysis than did strategic orientation. The chosen method imposed as little structure as possible on the models of behaviour, by exercising the cluster analysis on strategic variables only. The derived clusters are composed of firms with either distinct strategies, or distinct sets of strategies that occur in unique combinations. The clusters are distinct in a surprisingly large number of ways, including their strategies for growth of market share, pricing behaviour, approach and response to regulation, and use of export markets and retailers' own-label brands. However, clusters were not able to be differentiated by some intuitively obvious strategic variables, including use of technology and approach to costs, and new product introduction. The principal components and cluster analysis performed reasonably well, and yielded clusters of firms can be described as:</p><ol><li>"Small, buyer oriented, local specialisations"</li><li>"Small, price followers, high value"</li><li>"Price discriminators, range of markets, research-oriented"</li><li>"Large, unspecialised, price discriminators"</li><li>(omitted, as only one firm appeared in this cluster)</li><li>"Domestic market, high quality, customer loyalty"</li><li>"All things to all people"</li><li>"Small, price discriminators, little information exchange"</li></ol><p> In general, the more specific and applied are the taxonomies offered by the business strategy literature, the more applicable is that classification to the firms studied here: general statements tended to have little relevance to the clusters identified in this study. There is substantial agreement between the characteristics of firms in clusters derived here, and the clusters predicted by models reviewed in the study. This is both in terms of the strategies pursued ("adherence") and the combinations in which firms in each cluster pursue them ("coherence"). Although anomalies were identified, the correspondence between adherence and coherence was quite strong.</p><p>This study identified key variables that determine firms' types in relation to their suitability as trading partners and as compliers with policy. However, the types were found to be poorly predicted by variables such as sector, stage of chain and location. Rather the appropriate taxonomy would include size, choice of markets, pricing behaviour, brand characteristics, product introduction practices and sales per employee. The report concludes with identification of applications of the results for commercial firms and for policy makers, a summary of the weaknesses of the methodology, and proposals for future research.</p>