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Journal of International Marketing 

Achieving Superior Financial Performance in China: Differentiation, Cost Leadership, or Both? 

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Published 9/1/2008 

Author: Caroline Bingxin Li and Julie Juan Li 

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Executive Summary
Firms operating in emerging economies must choose appropriate marketing strategies to address the idiosyncratic challenges of rapid changes and institutional voids. On the one hand, domestic firms need a proper marketing strategy to take advantage of their local position; on the other hand, foreign firms must adjust the marketing strategies they traditionally have deployed to confront the environmental pressures for change. Despite its importance, the question of which marketing strategy is more appropriate for domestic and foreign firms in the emerging Chinese market remains largely unanswered. Moreover, debates about the effectiveness of pure versus dual strategies persist in existing literature. Therefore, to bridge the research gaps, Li and Li investigate when various types of marketing strategies might work by examining the effects of both pure and dual strategies on financial performance for domestic versus foreign firms and across different market concentration levels in China’s emerging economy.

The authors conducted a survey in the manufacturing industry in China and obtained 249 complete questionnaires, of which 97 were from domestic firms and 152 were from foreign firms. The results show that the effectiveness of a certain marketing strategy varies depending on domesticity and the level of market concentration. The impacts of both cost and dual strategies on financial performance are stronger for foreign firms than for domestic firms. Although cost leadership and dual strategies are less effective in less concentrated markets than in more concentrated ones, the effect of a differentiation strategy is stronger when the level of market concentration is low rather than high.

The findings suggest that managers of domestic Chinese firms should use quality- and innovation-based differentiation strategies. Foreign firms can leverage their relative advantages to achieve a low-cost position or a balance between cost and quality. However, managers should use caution when considering the cost and dual strategies in less concentrated (more competitive) markets because the fierce competition among the many competitors dampens their effectiveness in terms of financial performance.

Biography
Caroline Bingxin Li is a Ph.D. candidate at the University of Hong Kong. Her research interests include marketing strategy, knowledge management, and new product development.  She has published in the Journal of Business Research and Asia Pacific Journal of Management.

Julie Juan Li is Assistant Professor of Marketing at City University of Hong Kong. Her research interests include strategic alliance and networks, trust and trust building in organizations, and strategic issues affecting China’s market. Her research has been published in Strategic Management Journal, Journal of International Business Studies, and Journal of the Academy of Marketing Science, among others.

Journal of International Marketing, Volume 16, Number 3, September 2008
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