Hybrid competitive strategy, strategic capability and performance

Abstract

This research examines how strategic capabilities impact hybrid competitive strategies and the effect on organizational performance. The target population of this study was 475 3 to 5-star hotels in Malaysia. Questionnaires were sent by mail and email to all the targeted 3 to 5-star hotels’ managers. Multiple regressions were used to analyse the relationship of hybrid competitive strategy, strategic capability and organizational performance. The outcomes indicate that hybrid competitive strategy has a significant impact on performance and strategic capability. Similarly, strategic capability has a significant impact on performance. Specifically, it establishes that strategic capability partially mediates the association of hybrid competitive strategy and performance. This study found hoteliers that executing hybrid competitive strategy should simultaneously use strategic capability to attain better performance. It fills in some of the gap and showing the importance of hybrid competitive strategy and strategic capability in the Malaysia hotel industry which has received little empirical attention. Corresponding author: Narentheren Kaliappen Email addresses for the corresponding author: narentheren@uum.edu.my First submission received: 28th March 2018 Revised submission received: 20th June 2018 Accepted: 14th August 2018 Introduction Strategic management literatures emphasize how firms can attain the competitive advantage and superior performance in present turbulence business setting (Okumus, Altinay & Chathoth 2010; Okumus 2003). In order to, attain that superior level various theories, concepts, typologies, taxonomies and methodologies were developed by several well-known scholars, strategists and practitioners (Nandakumar, Ghobadian & O'Regan 2011). So, one of the famous strategy typologies is Porter’s competitive strategies that assist the firms to focus on particular strategic direction (Kaliappen & Hilman, 2017). There are a lot of literatures, empirical researches and case studies were conducted over Porter’s competitive strategy in different fields, which guided the management to make best strategy executions. However, hotels in the hunt for developing their performance cannot solely depend on the competitive strategy but need to create strategic capabilities that could propel for better performance attainment. Prior studies recommended that strategies would convert resources into strategic capabilities that support as a foundation for business strategies along with leads to strategy accomplishment (Campbell-Hunt 2000; Pandza & Thorpe 2009; Parnell 2011). Indeed, equally competitive strategy and strategic capability are Journal of Business and Retail Management Research (JBRMR), Vol. 13 Issue 4 July 2018 www.jbrmr.com A Journal of the Academy of Business and Retail Management (ABRM) 44 linked to the outcome of organizations (Parnell 2011; Desarbo, Di Benedetto, Song & Sinha 2005). However, empirical studies that emphasize on the influence of hybrid competitive strategy and strategic capability are still fewer within the context of Malaysia hotel industry, which provides an immense potential for future research. To enrich the existing literatures of hybrid competitive strategy and strategic capability use in the Malaysia hotel industry, this study makes an attempt to achieve following objectives; (1) to examine the relationship of hybrid competitive strategy and organizational performance; and (2) to examine the influence of strategic capability in mediating the association between hybrid competitive strategy and organizational performance. To achieve above mentioned objectives, we used a research framework which containing 27 items of questionnaires that administrated to hotels’ top and middle management from 3 to 5 rated hotels in Malaysia. The remainder of this paper discusses about the overview of Malaysia hotel industry, related literatures on hybrid competitive strategy, strategic capability, organizational performance, research methodologies, research findings, discussions, implications, future research directions and conclusions. 2. Literature Review 2.1 Hybrid Competitive Strategy Practices in Hotels Porter (1980) emphasizes cost leadership and differentiation as main two strategies; meanwhile, focus is a subset of those two strategies (Hilman 2009; Seedee, Sulaiman & Ismail 2009). Cost leadership is pursuing to organize the value-added activities in achieving low cost advantage within the industry (Bordean, Borza, Nistor & Mitra 2010; Allen & Helms 2006). The literatures suggested that hoteliers can achieve cost advantage by involving in mass production, economies of scales, advanced technology usage, distribution / value chain activities, effective service design, lowering input cost, high capacity utilization, outsourcing, experience curve and improving access to raw materials (Bordean et al. 2010; Akan, Allen, Helms & Spralls III 2006). Hotels lowering their price than rivals to gain larger market share and pushed some rivals out of the competitive marketplace (Hilman, Mohamed, Othman & Uli 2009; Porter 1980). Hoteliers can attain cost advantage when they really owned distinctive competencies in managerial process, efficient cost saving hotel design and effective operational cost reduction (Lewis & Chambers 2000). Hotels are pursuing a differentiation strategy to offer unique services to the customers (Bordean et al. 2010; Porter 1980). By creating unique, customized and personalized offerings, hotels are able to build strong customer loyalty (Allen & Helms 2006; Hyatt 2001). Hoteliers can attain differentiation advantage by involving in service innovation, superior service offerings, creative advertising, good supplier relationship, market segmentation and branding (Bordean et al. 2010). Effective differentiation provides greater service flexibility and compatibility (Davidson 2001; Porter 1980). Currently, there are few new designer and boutique hotels in Malaysia such as Le Apple boutique hotel, Waterfront boutique hotel and Zara’s boutique hotel which gives a unique image for the hotel industry. This uniqueness and high quality will make the price more expensive, but at the same time, customers are willing to pay more in order to experience the indulgence. Hotels nowadays provide high quality quest experience, Wi-Fi facilities, in-room facilities and delicious food and beverage to prove them as a differentiator (Victorina, Verma, Plaschka & Dev 2005). 2.2 Role of Strategic Capability Practices in Hotels Strategic capabilities are defined as complex bundles of skill, knowledge, resources, asset which enable the organization to create better performance and sustain competitive advantage (Parnell 2011; Desarbo et al. 2005, Day 1994). There are various types of strategic capabilities; management capabilities, technological capabilities, marketing capabilities, market linking capabilities and information technology capabilities. However, this study only examines the role of management capabilities and technological capabilities (strategic capability) on strategy and performance association. Desarbo et al. (2005) stated that management capabilities allow the organization to pursue cost control, integrate logistics system, financial management, human resource management, accurate profitability and revenue forecasting and marketing planning process. By utilizing management capabilities hoteliers are able to generate revenue by lowering their overall cost and increase their internal efficiency. Meanwhile, technological capabilities allow the organization to make new product development, manufacturing/ service process, technology Journal of Business and Retail Management Research (JBRMR), Vol. 13 Issue 4 July 2018 www.jbrmr.com A Journal of the Academy of Business and Retail Management (ABRM) 45 development, production facilities, quality control and predicting the technological changes (Desarbo et al. 2005). By employing technological capabilities hoteliers are capable to create unique and quality service that could fulfil the guests’ desire. Hence, both management and technological capabilities allow the hotels to keep lower cost and differentiate their offerings. Therefore, this study suggested that there is a possible linkage is existent between hybrid competitive strategy and strategic capability due to same characteristics and objectives. 2.3 Organizational Performance Many researchers have suggested performance evaluation need include both financial and nonfinancial measurements (Kaplan & Norton 1996, 2001; MacDougall & Pike 2003). So, Balanced Scorecard (BSC) retained the financial measures and added three non-financial perceptions; customer, internal process and learning and growth (Kaplan & Norton 1992, 1996). BSC widely recognized and applied evaluation instrument (Jusoh & Parnell 2008; Paranjape, Rossiter & Pantano 2006; Evans 2005; Olson & Slater 2002). Literatures identified that financial procedure as lagging indicators, to facilitate the BSC added with nonfinancial as prominent indicators of performance (Paranjape et al. 2006; Niven 2002; Kaplan & Norton 1992, 1996). This study utilized the subjective approach to evaluate the performance of hotels in BSC setting. The association of hybrid competitive strategy (cost leadership and differentiation) and strategic capability (management capabilities and technological capabilities) built with consideration of both factors possesses similar characteristics that emphasize cost control, production efficiency, technological expertise and new product development (Parnell 2011). The main research question of this research is to investigate the degree of strategic capability mediates the hybrid competitive strategy in its association with organizational performance. Based on the gap in the literature on this perspective, this research aims to examine four propositions; H1: Hybrid competitive strategy has a positive effect on strategic capabil