Relationship of industry structure strategic orientation and firm performance an assessment of selected industries in India

Abstract

Increased competitiveness in the industrial sector has necessitated Indian industries to strive for competitive advantage. In this chapter, the importance of competitiveness in today s world and its need in the area of strategic management has been highlighted. This study explores the relationship between industry structure and firm performance with a mediating effect of strategic orientation across manufacturing and service sectors in India. The research uses Structure-Conduct-Performance (SCP) paradigm. Here, industry structure refers to industry sales growth and cash flows, conduct signifies strategic orientation i.e. aggressive, defensive, competitive and conservative orientation to determine performance through return on asset, return on equity, Tobin s Q and market share in Indian context using secondary databased economic and financial indicators. Panel regression, Hierarchical regression and Structural Equation Modelling have been employed on 815 firms from selected industries of manufacturing and service sector in India. Findings conclude individually, industry structure and strategic orientation has an effect on firm performance, however effect is more in manufacturing sector. Henceforth, strategic orientation is not essential for a firm s industry structure to have an impact on its performance. The results will provide a choice of directional strategy to decide a firm s overall orientation. However, being the first research of its kind to quantitatively examine variables using secondary and financial indicators, the study shapes the pathway for future research. newline