The authors here are trying to test and ascertain certain competing notions hypothesized in different earlier studies as regards the relationships exhibited between quality of product and costs and their overall effect on business performance. In specific terms, the authors seek a deeper clarification on whether it is the achievement of high quality products relative to other competitors or it is the low relative cost position that has the greatest impact on returns to invested capital and through what mechanisms. Secondly, the authors sought to examine and determine the extents at which there are trade-offs or compliments between product quality and cost leadership are as business strategies.
Third and finally, the study aims to measure and assess the effectiveness of previous PIMS studies in terms of their correctness in the use and interpretation of key variables in their reports. To achieve all this, the study employs a structural equation methodology to model a causal relationships system of variables that are thought or suspected to have any effect direct or indirect on the hypotheses being tested. This approach makes use of econometric procedures which do also take into account the effect of other undetermined factors on the system an effect that had mostly been left out or assumed in other previous studies.
One distinguishing feature and also an added advantage of this study over and above what other similar previous studies have done on the subject, is firstly how the author s appreciate the need to account on any errors of measurements as well as of other key assumptions made to complete the study. To address this problem, the authors use an econometric approach to assess and determine the extent to which any other factors such as measurement errors and assumptions unaccounted for in the model can affect the results of the study. Secondly, the authors appreciate the complexity and the complex nature of studying multiple relationships that impart the same influence on the subject of analysis albeit from different perspectives.
In order to address this problem and answer the questions of what, to what extent and how the variables under consideration here affect the results being tested rather than wholesomely put everything in the same basket, the authors use multiple equations to assess each variable individually. This way, the authors are bale to ascertain those factors that have a direct force on the results being tested and those that indirectly influence the results through causal effects. These two additions by the author’s on their model makes it extra appealing for use in other similar studies in the future as in the world of business it is hardly the truth that one factor alone will always lead to the desired performance effect. Rather, it is a complex web of many interrelated factors that the desired effects are realized.
Even though the authors have compared to other earlier studies tried to be as precise and accurate as possible to assess the impact of these two business strategies, there are areas or rather assumptions that are always present in a model that might probably underscore their findings. Firstly, quality achievement is a continuous process rather than a one time achievement and that is all. As such, it becomes extremely difficult and subjective of time to measure the impact of its investment for its achievement by businesses. In addition, it is hardly in the real world practice that any firm can purely focus on quality and disregard costs as there are always limitations to that cause. The real practice would be to target on achieving the best quality at the bare minimum cost.
Secondly, the generalization made regards product quality and the authors specifically excludes service firms such as retail stores to go for manufacturing firms in their study. In doing this, the authors disregard the vital value added on a product through such services as distribution channels, advertising, sales and promotions. These services are however very vital because even when a manufacturing firm has the best quality products but lacks proper distribution channels can lead to a very counterproductive impact on its overall performance. Investment in related services is therefore very important on product quality as well. Third and finally, even though the study was motivated by the controversy on superiority of the two competing strategies by previous studies, the authors do not arrive to a very convincing conclusion that completely erases the confusion.
In conclusion, the study sums up a great work by the authors that has many insights and faults to learn from in conducting similar studies on the same subject in future. Such separate assessment of individual variables helps a great deal in identifying the major factors that firms need to put more focus on and invest in. It would have been better however, had the authors focused their conclusion on a specific industry, sector or condition to explain where either of the strategies would best fit and not the other. Such is the approach albeit using a different methodology is employed in a study by Kim & Swinney (2009).
Another study by Prajogo (2007) that also seeks to look into these two competing strategies comes to a conclusion that, a firm whose primary focus is on product quality can in the long run achieve also cost leadership to the positive synergies between the two and not vice versa. All in all, as is observed in the two latter studies, there is not one better strategy than the other but suitability of one over the other depends on the business environment. It is therefore the wisdom and discretion of managers to determine which strategy to pursue that best suits their situation.
References
Prajogo, D. I. (2007), “The relationship between competitive strategies and product quality”, Industrial Management & Data Systems, 107 (1) pp.69 – 83.
Kim S. and Swinney, R. (2009), Lower Cost or Higher Quality? Product Enhancement Decisions When Consumers Are Strategic. Management Science, 55 (3).