Influence of Porter’s diamond firm strategy, structure and rivalry construct on Pakistan automotive sector

The overriding purpose of the study was to ascertain through empirical research whether Porter’s diamond firm strategy, structure and rivalry construct influence the key automotive industry of Pakistan. The Researchers applied positivism research philosophy to help generalize the research study outcomes. Descriptive analytics was deployed to help determine the significance, direction and magnitude of the study. Primary data was obtained from senior managers working in the industry by applying a structured questionnaire for subsequent analysis. While soliciting data, an 85.6% response rate was documented. Statistical techniques were applied which included parametric and nonparametric to arrive at objectively based results to draw safe conclusions. The research findings have created significant value for practitioners in the auto industry as well as the decision-makers at the helm of policy formulation. Pragmatic inferences to be drawn from the research findings include improving the performance of the automotive sector by internalizing Porter’s diamond construct firm strategy, structure, and rivalry. Results in other industries may be tested with future research to help establish generalizability in the area.


Introduction
investigated hundred industries belonging to multiple sectors in ten distinctive countries across the world.At the center of the study was a critical question, that is, how the United States of America gained competitive advantage (CA) in the global arena and managed to sustain it.Rugman and Collison (2012) believe that in this process, after in-depth investigation followed by rigorous analysis, Porter maintained through objectively drawn conclusions that successful accomplishment of countries whilst competing globally rests on diamond framework comprising four components, viz.factor conditions, demand conditions, related & supporting industries, and firm strategy, structure and rivalry.Cohesive interaction and linkages of these constructs among each other form the country's diamond which provides impetus for realizing national competitiveness (Grant,1999).Besides, Porter's diamond, there are other theories of competitive advantage as presented by various eminent thinkers by providing insight and through advancing forceful arguments supporting their respective ideas and theories of CA.Resource-based view (RBV) theory was advanced by imminent scholars which states that distinct resources and competencies can lead the firms to gain CA (Hamel & Prahalad,1994).
The researchers attempted to undertake empirical study to determine the effect of Porter's diamond firm strategy, structure and rivalry construct on the performance of auto sector of Pakistan.The major players of auto industry in Pakistan, in comparison to other Asian countries, have sufficient experience of manufacturing progressively different makes and models for strategically carved out segments.Nonetheless the industry is facing daunting challenges namely(a) inconsistent government policies, (b) inadequate foreign investment, (c) inadequate results in terms of achieving localization as the industry is lagging behind in developing local content and continue to be import reliant (e) insufficient comprehension regards applying vehicles' manufacturing standards, and (f) failure to explore the attractive potential in export market (Japan International Cooperation Agency [JICA], 2011).To measure performance, Kaplan and Norton (1992) balance scorecard and its parameters constituted the part of the study.
The research study was aimed at research question to determine the influence of firm strategy, structure and rivalry construct to test the null hypothesis H01: Porter's diamond firm strategy, structure and rivalry determinant does not influence firm's performance in the automotive industry of Pakistan.

Literature Review Theoretical Context
Firm strategy, structure, and rivalry construct is defined as domestic environments and perspective having the force to impact the manner in which companies organize and make contribution to the character of local rivalry and competition.Porter (1990) advanced the theory that when domestic competition and rivalry is strong, the firms that succeed to compete and survive in domestic industry often excel in global economy as well.Porter (1990) argued further that states stand better chance for being successful in the industries where best practices of management and organization design and modes are in line with industries' sources of CA.
In strategic operational process, achieving economies of scale carries less importance; CA can be achieved through efforts of loosely connected companies and their effective cooperation.Derfus, Maggitti, Grimm, and Smith (2008) argued that intense competition is likely to create red queen influence; it forces the industries to craft better business strategies, reinvent its productive competencies to maintain competitiveness imperative for raising the productivity.Flannery (2014) has portrayed a contrasting scenario by putting forth the argument that the national firms which are protected from competition are least interested to consistently achieve improved productivity; these firms classically fail in the wake of venturing into global competition and resultantly, have less probability to be effective in generating value for national economy and in improving citizens' living standards.In addition, regarding performance, Kaplan and Norton (1992) aptly pointed out that combined financial, non-financial based determinants possess the requisite strength to provide information and data in order to achieve the objectives and results in the firm.

Empirical Context
In the US, Sardy and Fetscherin (2009) of Collins College undertook a study comparing the automotive sectors of China, India and South Korea using double diamond framework.The research methodology included usage of most recent data of Chinese, Indian and South Korean automotive sector coupled with descriptive data translated into quantifiable scores related to double diamond determinants.The major findings of this paper, based on evaluation of the Chinese and Indian automotive industry, were found to be useful to determine their competitiveness and comparison thereof with the developed automotive sector of South Korea.In Lithuania, Stonkiene, Matkeviciene, and Vaiginiene (2016) conducted a study based on the diamond model with the purpose to perform the analysis of competitiveness in Lithuania's higher education system.Theoretical research methodology induction, deduction and comparison was used as research design.Conclusions drawn by the authors indicated that applying the model provided factors for evaluation of institutions linked with higher education sector's performance coupled with their capability to monitor the environments to initiate changes internally.Findings of the study reflected that human competencies were playing key role in evaluating overall competitiveness of the system.
On South Korea and Dubai national cooperation initiative, a study was conducted by Cho, Moon, and Yin (2016) with the purpose to determine how countries formulated cooperation strategy more effectively while keeping in view their competitive strengths and weaknesses.While taking into account the current competitiveness status of the two countries in question, i.e., South Korea and Dubai, the study recommends cooperation strategy and highlights its importance.Conclusion was drawn that the both countries can enhance their overall competitiveness by way of cooperation disregarding their cultural divergence and geographical distances.In Spain, the authors Moliner, Ortega, Tarí, Gamero, and Azorín (2016) undertook a research study; purpose thereof was to examine the linkage existing between quality management (QM) followed practices, competitive advantage and organizational design.The authors have drawn conclusion through the findings that QM pressures firms toward formalization, specialization and interactions inter-departmentally, and that QM system influences differentiation competitive advantage.
In Kenya, Kaunyangi (2014) undertook a study and sought to assess the influence of competitive forces on the performance of mobile telecommunication industry in the country.The descriptive research design was used, stratified technique of sampling was deployed to draw the sample from sample frame and data collected from four firms representing mobile service.The study attempted to explore how the four firms, namely, Orange Kenya, Airtel, Yu and Safaricom (K) Ltd got impacted by competition and competitive forces.The researcher concluded that industry environment does get influenced by competition in the industry.

Research Methodology
Research philosophy essentially refers to the convictions being organized in the study and reflecting assumptions for knowledge development related to a specific field (Saunders, Lewis & Thornhill, 2016).Axiology and epistemology for positivism philosophy was being applied by the researchers as positivism provides a deterministic doctrine whereby results are regulated by logic and rational reasoning.Consistent with Crowther and Lancaster (2008) views, positivist research studies, as a general rule, support deductive approach.From the perspective of Cooper and Schindlеr (2014) research design reflects a chosen strategy to help integrate various constructs of the study in cohesive and rational way with the objective to deal with research problem.
In this study, the researchers deployed descriptive and analytical surveys' methodology together with its regulating framework and parameters.Most fundamental method of sampling in probability technique is simple random method (Christensen, Johnson, &Turner,2014).For this study, simple random sampling technique was applied.To determine the size of population in the study (Yamane,1967) equation was used.Total sample size determined as 194.The response rate was 85.6% (i.e.,166) respondents.While conducting the interviews with senior managers of automotive sector, structured questionnaire was used as data collection instrument.Pilot study reaffirmed the questionnaire's reliability and validity.Having multiple items to evaluate a construct assists in determining and respectively developing measurement for the reliability (Saunders et al., 2016;Cooper & Schindler, 2014).If coefficient value is 0.6 or less than that internal homogeneity reliability is unsatisfactory (Malhotra,2004).For firm strategy, structure, and rivalry construct Cronbach's alpha coefficient is analyzed.In the research study it was computed α =.82, which reflects that there is internal consistency in firm strategy, structure, and rivalry construct items.Results is provided on Table 1.2014) correlation analysis encompasses statistics to determine the linear relationship strength between two or more variables; planned changes in result in one variable results in changes in the other.To determine the strength of linear relationship between Porter's framework firm strategy, structure and rivalry construct and firm's performance in the automotive sector Pearson's correlation coefficient is applied.Chi-square is treated as statistical test practiced on dataset to obtain two variables labeled as independent or to ascertain if the observed agreements are by way of chance (Sekaran &Bougie, 2016).Thompson (2006) explained that model of regression analysis is reasonably used to investigate the relationship between a single continuous outcome variable, and two or more predicting variables.Regression analysis model was considered in the study.Ethical doctrines were implemented by the researchers in virtually every facet thereof, and in all phases of this study.

Results and Findings
Data was analyzed on 166 out of 194 completed questionnaires followed by result generation.85.6% is the response rate.The recommended acceptable level is 70% (Mugenda &Mugenda,2003).Researchers computed arithmetic mean and reached at the value which is by and large equidistant from the dataset values.When enquired from respondents of the study, majority of participants concurred that organizations that develop effective strategies perform competitively in the industry; this result is espoused by mean score of 4.25.Similarly, majority of respondents agreed that effective strategies serve as a source of competitive advantage for the firms, supported by score of mean value 4.23.On the statement that 'effective strategies' is the key determinant in realizing high performance for the firms in the automotive sector, the mean score is 4.20, supporting the given assertion.Low mean score of 3.60 was recorded on the statement that protected companies are less effective in raising the living standards of their citizens and finally the lowest mean score 3.55 was recorded on the statement that protecting companies from competition in the market brings about negative impact on gaining competitive advantage indicating that mostly the respondents from the auto industry did not agree to this.
Standard deviation (SD) provides an indication of how far the participants' responses to statement(s) deviate from the mean.A high SD means that the responses received from participants are spread out or scattered far.Regarding the question that 'lean organizational structure design results in firm's better performance' computed standard deviation score of .934supports the fact that responses on the statement are varied and are scattered far from the mean.Relative to the question that management practices of organization are the key attributes for national competitive advantage standard deviation of .894was recorded indicating that respondents' responses do differ as these are scattered far from the mean.On the statement that 'effective strategies' is the key determinant in realizing the high performance for firms, the recorded standard deviation of .732suggests the fact that participants have varied perspective.
On the question of domestic rivalry among competitors pressurizing the firms to innovate consistently in order to remain competitive, the recorded standard deviation of .682supports the fact that respondents have less diverse views on this statement as the SD is relatively low.

Source: Authors
In factor analysis, determinable and observable are shortened to fewer variables (latent) which are unobservable, and common variance is called as dimensionality reduction.In the study generated factor analysis scores have been used in correlation analysis and linear regression models.While doing factor analysis, Kaiser-Meyer-Olkin (KMO) is applied to help determine the adequacy of sampling and to compute value which is recorded as .841that is considered acceptable position as the KMO is above .5.
Secondly, Bartlett (1937) test of sphericity was performed to confirm that all the fifteen components in firm strategy, structure and rivalry conditions determinant and its components have patterned relationship.Bartlett's recorded test result x2(105, N=166) = 849.223,p=.000 shows that the Porter's diamond attribute of firm strategy, structure and rivalry has patterned relationship among the elements (p<.001).These provided results served as indication to continue with the factor analysis.Table 3 provides the results of KMO and Bartlett's test for firm strategy, structure and rivalry.Scree plot is graph of the eigenvalues used to determine how many components to be retained in Porter's diamond attribute of firm strategy, structure, and rivalry.From the factor analysis test, it is concluded that components one to four have eigenvalues greater than one; hence, the results corroborate with the documented total variance.Figure 1 presents the outcome.Significance level is p<.01was obtained through the test.Results from test identify that firm strategy, structure and rivalry being independent construct does impact the automotive firm's performance as being positively and linearly related r = 0.256, p<.01.
Identification is depicted by two asterisks.Table 5 provides the results on correlation between firm strategy, structure and rivalry index and firm's performance.

Source: Authors
Nonparametric test like Chi-square test of significance was applied in the analysis to compare observed results with expected results.Also, to determine how reasonably a sample fits the distribution of a known population (goodness-of-fit).Statistics results Chi-square test provide conclusion that there is association between firm strategy, structure and rivalry Porter's diamond attribute and firm's performance x2(26.039,df= 9, N=166, p =.002).Table 6 depicts results of Chi-square test.

Source: Authors
Model of regression analysis may be adequately used to examine the relationship between a single, continuous outcome variable and two or more continuous, predictor variables (Thompson, 2006).Also, model of linear regression determines the linear relationship strength between independent variables (set of it) and dependent variable (single) used.The model summary portraits how firm strategy, structure and rivalry determinant influences and predicts firm's performance in the automotive sector.The predictor variable firm strategy, structure and rivalry is (independent variable) and firm's performance is (dependent variable).Results are depicted in model summary R, R-squared, adjusted R, and the standard error are exhibited.R expressed the relationship between the observed values and predicted values of the dependent variable (i.e., firm's performance) The value of R maintains -1 to 1 range.The R sign expresses the direction of positive or negative relationship.Reflected in model summary r=.256 provided the strength of firm strategy, structure and rivalry as a determinant of firm's performance and the relationship which is emerging as positive.In the analysis the coefficient of determination R square is .066;reflects that 6.6% of variation in performance automotive sector is caused by firm strategy, structure and rivalry determinant.93.4% remaining is caused by other elements not considered in the study along with the error term.Table 7 provides model summary results of firm strategy, structure and rivalry influence on firm's performance.

Discussion of Findings
From the study results it is surmised that Porter's diamond framework construct, firm strategy, structure and rivalry impacts the performance of automotive sector.Results drawn from the correlation test indicates that relationship exists between firm strategy, structure and rivalry determinant and firm's performance as it positively and linearly related r = 0.256, p<.01.Evidently the results are in agreement with Porter (1990) arguments that diamond centers on the industrial context and the environment in which the organizations are created, established and managed and where they operate and compete, and that they stand better chance of being successful in the industry where best practices of management and organization design and modes are in line with industries' sources of CA.
From the study findings it is inferred that effective strategies serve as a source of CA and high performance for firms in the automotive sector of Pakistan, and that recrafting of the strategy on continuous basis will result in sustaining competitive advantage overtime.
The results are in consistency with the research project undertaken in the US by Sardy and Fetscherin (2009) of Collins College in which automotive sector of China, India and South Korea were studied and compared; the conclusions drawn in the study among others are that Chinese success in automotive industry indirectly correlates with defining the strategic goals and crafting strategy.This inferred perspective of study by (Sardy & Fetscherin, 2009) also authenticates the results of empirical study conducted in Pakistan's automotive in sector.Stonkiene, Matkeviciene, and Vaiginiene (2016) found out in the context of higher education sector's performance in Lithuania that applying the diamond model provided factors for evaluation of institutions linked with higher education coupled with their capability to monitor the environments to initiate changes internally.The study findings, however, is not in full agreement with the results emerged from the concluded study in automotive sector.The research study found out that domestic rivalry among competitors in the automotive industry of Pakistan pressurize the firms to innovate consistently in order to remain competitive.Drawn results corroborate with the findings of Kaunyangi (2014) study carried out in telecommunication industry of Kenya.The chief conclusion drawn after the analysis was that telecommunication industry in Kenya does get impacted by the forces of competition which in turn foster industry's firms' competitiveness and performance.
The research study findings and the conclusions drawn on antecedent perspective reject the H01: Porter's diamond firm strategy, structure and rivalry determinant does not influence firm's performance in the automotive industry of Pakistan.These results are consistent with (Porter, 1990;Sardy & Fetscherin, 2009;and Kaunyangi;2014).The study results indicate that firm strategy, structure, rivalry determinant of Porter diamond have determining force to provide impetus to industry players in Pakistan's automotive sector, and to contribute toward improving the performance of automotive industry by way of playing a catalytic role in potentially achieving the national competitive advantage (NCA) pragmatically.

Conclusions
It is construed fairly from the foregoing results of the research-based study that firm strategy, structure and rivalry construct of Porter's diamond have linear relationship with the performance of the players in the sector, operating and competing in the arena.The sub-constructs forming determining thrust included like: effective strategies serve for the firms as a source of competitive advantage, effective strategies are the key determinant in realizing the high performance for the firms, recrafting the strategy on continuous basis consistent with dynamic environment results in sustaining competitive advantage overtime, countries are best poised to succeed in industries where the management internalize practices well-tailored to their sources of CA, management practices of firms are the critical attributes for national competitive advantage, and finally, domestic rivalry among competitors pressurizes the firms to innovate consistently in order to remain competitive.
The study concluded that 'firm strategy, structure and rivalry' determinant of Porter's framework impacts the performance of automotive sector and predicts an increase .066for every incremental rise in firm strategy, structure and rivalry attribute in the industry.It is recommended through this study that further empirical studies may be undertaken to determine the effect of Porter's diamond, particularly in the broad-based critical role of firm strategy, structure and rivalry construct, to reinforce the industry's overall competitiveness and strategic policy formulation, crafting strategic dimensions to guide the Pakistan automotive sector and resultantly, accomplishing the national competitiveness advantage.

Figure 1 :
Figure 1: Scree Plot for Firm Strategy, Structure and Rivalry; Source: AuthorsPearson's coefficient was used on normal variables (firm strategy, structure and rivalry as determinant of Porter diamond being independent variable and auto sector firm's performance being dependent variable) and linear association measured on paired data.Significance level is p<.01was obtained through the test.Results from test identify that firm strategy, structure and rivalry being independent construct does impact the automotive firm's performance as being positively and linearly related r = 0.256, p<.01.Identification is depicted by two asterisks.Table5provides the results on correlation between firm strategy, structure and rivalry index and firm's performance.

Table 1 :
Cronbach's Alpha for Firm Strategy, Structure, and Rivalry Construct Source: AuthorsDescriptive and inferential statistics were applied consistent with the specific research question and research hypothesis during the data analysis.According to Cooper and Schindler (

Table 2 :
Frequency Distribution for Firm Strategy, Structure and Rivalry Construct

Table 3 :
KMO and Bartlett's Test for Firm Strategy, Structure and Rivalry   AuthorsFactor analysis interpretation is established on rotated factor loadings, coupled with rotated eigenvalues, and scree test.The below Table has generated initiation solution on the attribute of firm strategy, structure and rivalry of Porter's diamond.To elaborate, the 'eigenvalue' is considered as total variance defined by each component.Thus, any component which scored eigenvalue less than 1.0 could not have adequate total variance expressed as representing a unique component, and is not considered henceforth in the model.Cut-off of 1.0 applied on eigenvalue and resultantly there are four components that explained a cumulative variance of 61.54%, namely, (1) organizations that develop effective strategies perform competitively in the industry recorded variance score 15.86 % (2) effective strategies serve for the firms as a source of competitive advantage recorded variance score 15.73%(3) 'effective strategies' is the key determinant in realizing high performance for the firms recorded variance score 15.24%, and (4) recrafting the strategy on continuous basis consistent with dynamic environments results in sustaining competitive advantage overtime recorded variance score 14.72%.These four components in the firm strategy, structure and rivalry determinant are significant for the model.Table4presents the outcomes of total variance.

Table 4 :
Total Variance Explained for Firm Strategy, Structure and Rivalry

Table 5 :
Correlation between Firm Strategy, Structure and Rivalry Index and Firm's Performance **. Correlation is significant at the 0.01 level (2-tailed).

Table 6 :
Chi-Square Test on Firm Strategy, Structure and Rivalry Construct

Table 7 :
Model Summary of Firm Strategy, Structure and Rivalry Influence on Firm's Performance squared as expressed in the above stated section, the study applied analysis of variance (ANOVA) to examine whether regression model fits the data in appropriate manner or not.The F statistics express the regression mean square divided by the residual mean square.If the significance value of F statistics is lower than 0.05, it is concluded that the independent variable performed reasonably appropriate task in defining the variation in dependent variable.Model findings p-value= .001,indicatinghenceforththat regression model is significant, F=11.522, df=1, p<.05.Besides, residual mean square is notably lower in comparison to the mean square of regression, explaining the fact that regression model construct is positioned well to predict the equation results.Table8displays the results on ANOVA of firm strategy, structure and rivalry influence on firm's performance.

Table 8 :
ANOVA of Firm Strategy, Structure and Rivalry Influence on Firm's Performance β1 = 0.970, p = .001sincethep value was less than<.05setby the study.These results demonstrate rejection of null hypothesis in this case and alternative hypothesis is true for consideration.It is safely concluded through this empirical study that Porter's diamond determinant firm strategy, structure and rivalry significantly influences firm's performance in the automotive industry of Pakistan.Table9depicts the statistical results on coefficients of firm strategy, structure and rivalry influence on firm's performance.

Table 9 :
Coefficients of Firm Strategy, Structure and Rivalry Influence on Firm's Performance Thus, with every unit increase in Porter's diamond determinant firm strategy, structure and rivalry, firm's performance increases by 0.970 units in automotive industry of Pakistan as the model implied.The study safely concludes that firm strategy, structure and rivalry significantly predicted firm's performance, resultantly rejected the null hypothesis, H01: Porter's diamond firm strategy, structure and rivalry determinant does not influence firm's performance.