Timing of Strategy Choice: An Exploration of Industry Cycle, Strategy Choice, and Performance

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Date

2011-07-07

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Virginia Tech

Abstract

This study focuses on cyclical behavior in the restaurant industry, types of strategy choices made by the casual dining industry, and the use of the industry cycle to make a timing decision of strategy choice. The main idea of this study is that the phases of the industry cycle differently support a firm's strategy choice, so the use of the cycle allows firms to find the right time for a particular strategy choice.

This is done by developing and understanding of the restaurant industry cycle and determining the phase of the cycle that possesses different opportunities and threats. This is followed by identifying strategy choices adopted by casual dining firms through a content analysis. Next, a casual dining firm's responses to phases of the industry cycle are investigated. Using an individual firm's data regarding performance and the emphasis of strategy choice over the industry cycle, this study undertakes an investigation into whether the effect of a strategy choice adopted by a firm varies according to the phase of the restaurant industry cycle.

The results of the study revealed that the movements of the restaurant industry cycle have unique timing, duration, and amplitude, and that casual dining firms adopt thirteen distinct types of strategy choices. Firms change strategy choices to respond to change in the industry cycle phase. Summarizing these findings, the study found that the effects of strategy choices on firm performance differed according to the cyclical change of the industry environment so adjusting strategy choices over the industry cycle is critical to outperform competitors

This study aims at providing a relevant framework for using the industry cycle as a tool for well-timed strategy choices in the casual theme restaurant industry. In practice, by utilizing the industry cycle, executives would be better able to assess possible success or failure of a particular strategy at different phase of the industry cycle, and to determine the timing relevance as it relates to new investments or asset allocation. Managing the industry cycle allows firms to have an appropriate strategic portfolio to maximize their outcomes and sustain competitive advantage over long periods of time.

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Keywords

Strategic Timing, Industry Cycle, Strategy Choice, Firm Performance

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