Linking financial performance to strategic orientation and operational priorities: An empirical study of third‐party logistics providers

Abstract

Purpose

Aims to investigates the relationship of strategic choices of pure cost‐, pure differentiation‐, or a combination‐strategy on a composite measure of financial performance for third‐party logistics (3PL) providers in Hong Kong. In addition, it seeks to identify the importance of operations priorities underlying the respective adopted strategy, as well as the importance given to future competitive challenges for each strategy.

Design/methodology/approach

Uses cluster analysis, ANOVA.

Findings

Logistics service providers classified to follow different strategies report different financial performance, with companies adhering to the combined strategy of cost and differentiation performing best, followed by pure differentiation companies, which in turn outperform pure cost‐, commodity driven‐companies.

Research limitations/implications

Future research may be widened to include customer, and not solely competitor, perceptions. Further studies could elaborate on technology adoption, information sharing, strategy formulation, operations practices, and benchmarking. Other studies could focus on the differences between high and low performers in terms of business performance, and the processes that enable low performers to become high performers; as well as comparing logistics strategies and practices between different countries.

Practical implications

Third‐party logistics providers, solely competing on cost and offering basic services only, need to differentiate to gain improved financial performance. Logistics companies can improve along multiple operational dimensions to achieve competitive advantage in the marketplace. Research identifies operational areas to be emphasized to drive strategy according to strategic orientation, as well as generic factors that will drive future logistics management in Hong Kong.

Originality/value

Linking perceived financial performance to strategic choices of pure cost‐, pure differentiation‐, or a combination‐strategy for 3PL providers in Hong Kong.

Citation

Hoi Yan Yeung, J., Selen, W., Sum, C. and Huo, B. (2006), "Linking financial performance to strategic orientation and operational priorities: An empirical study of third‐party logistics providers", International Journal of Physical Distribution & Logistics Management, Vol. 36 No. 3, pp. 210-230. https://doi.org/10.1108/09600030610661804