Market structure and strategy: a study in the industry of automotive bateries

Abstract

To face market structure, companies in different strategic groups need to design different strategies. Especially concerning competitive oligopolies, many studies focus on large companies in the core of sectors. We consider that the analysis of strategies of companies in the margin of large companies, i.e. in the “fringe” of those markets, are also relevant, since strategic choice and performance of firms in the “fringe” influences sectorial dynamics. Based on Industrial Organization and Structure-Conduct-Performance paradigm, this papers aims to analyze how strategies of companies in the “fringe” are aligned to the market structure of non-OEM automotive battery. This qualitative descriptive research comprised semi structured interviews with managers of four non-OEM battery manufacturers. Results revealed the importance of market structure for firms’ conduct: the need to compete on price make firms to combine different strategies. Besides price strategies to support price competition, typical for companies in the “fringe” of competitive oligopolies, firms set a combination of different strategies, such as innovation and quality, which indicates complexity in terms of strategies. Thus, price competition is largely supported by non-price strategies. Firms’ diversity, a remarkable feature in competitive oligopolies, is also observed in the “fringe”, which includes differences in terms of techniques, technologies and scale, and the existence of informal market. Thus, high competition complexity indicates the need of public policies to foment non-price strategies even for firms in the “fringe” and to reduce market failures from informal firms’ competition.