HOMEWORK 5
USING STRAT 2 DATASET
1. Using the path diagram and the Strat2 dataset develop the 5 factor CFA model shown below.
Please note the questionnaire is attached.
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P1Q1G
P1Q1B
P1Q1F
P1Q1E
Differentiation
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P1Q1H
P1Q1I
P1Q1K
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P1Q1L
Cost
Leadership
P1Q1N
P1Q2A
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P1Q2C
Scope
P1Q2G
P1Q2H
P4Q2A
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P4Q2B
Market
Effectiveness
P4Q2C
P4Q2K
P4Q2E
P4Q2F
P4Q2G
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Profitability
P4Q2I
2. After you have tested this CFA, save a copy. In the new file, make the following modifications.
a. Delete the scaling loading (the one set to 1 for each construct) from the object properties
box for all five constructs. Then set the variance of each construct equal to 1. Re-run the
CFA.
b. Then, do the discriminant validity tests proposed by Anderson and Gerbing (1988) and
report the results in Table 1. (Remember, you can only test the discriminant validity
properly if you have set the latent variable variances = 1 and deleted the regression weight
= 1 for the scaling loading).
c. Calculate the Cronbach alpha, Construct Reliability and AVE for each of the five
constructs.
d. Prepare a table showing the results of your analysis using the table attached (Table 2).
3. Recall the first CFA (with 1 loading per construct set to 1) and convert this to a structural
model. Run the following analyses.
a. Run a model with all paths specified between the endogenous and exogenous latent
variables. There should be 7 total paths specified. Report the results in Table 3.
b. Run a Direct effects model where you specify only the paths from the three strategy latent
variables to profitability. Do not specify paths from strategy to market effectiveness. Do not
specify paths from market effectiveness to profitability. Report the results in Table 3.
c. Run an Indirect effects model where you specify only the indirect paths from the three
strategy latent variables to market effectiveness and 1 path from market effectiveness to
profitability. Report the results in Table 3.
4. Now that the analysis is complete, write up a short discussion of your findings and interpret
them for your readers (me!). Please discuss what you found in the theory based model, the
direct effects and the indirect effects models. Be sure to discuss the significant paths and report
the parameter estimates and t-values in your discussion for each model. Also be sure to discuss
the differences between the theory based, the direct and the indirect effects models. Don’t
forget to discuss which model give the best fit.
STRATEGY QUESTIONS
Part I: The first set of questions asks for information about the overall strategy of your business unit.
Please circle the number which you feel best answers the question.
1. To what extent is the strategy of your business to...
a)
b)
c)
d)
e)
f)
g)
h)
develop new products and/or services? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
provide unique products and/or services? . . . . . . . . . . . . . . . . . . . . . . . . . . .
offer products and/or services for specialized needs? . . . . . . . . . . . . . . . . . . .
offer higher quality products and/or services than your competitors? . . . . . . .
offer innovative products and/or services? . . . . . . . . . . . . . . . . . . . . . . . . . .
offer highly differentiated products and/or services? . . . . . . . . . . . . . . . . . . .
offer a high degree of value in your products and/or services? . . . . . . . . . . .
offer products and/or services with distinctly different features from those of
competing products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i) be the lowest cost provider in your industry? . . . . . . . . . . . . . . . . . . . . . . . . .
j) provide your customers with the lowest prices among your major competitors?
.................................................
k) invest in cost saving technology? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
l) emphasize efficiency? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
m) redesign products or services to reduce costs? . . . . . . . . . . . . . . . . . . . . . . .
n) strive for high volume to spread costs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
o) search out high growth markets for your products/services? . . . . . . . . . . . . .
p) dominate stable, slower growth markets? . . . . . . . . . . . . . . . . . . . . . . . . . . .
q) develop products and/or services for new markets? . . . . . . . . . . . . . . . . . . . .
r) find new applications for existing products and/or services? . . . . . . . . . . . . . .
s) find growth in existing markets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
t) seek growth by moving into markets closely related to your current markets?
u) grow by moving into new markets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Part I: Continued
2. Compared to your competitors, to what extent does your business strategy call for
...
a)
b)
c)
d)
e)
f)
g)
h)
offering more products and/or services than your competitors? . . . . . . . . . . .
offering different products and/or services than competitors? . . . . . . . . . . . . .
offering a broader range of products/services than competitors? . . . . . . . . . .
offering products/services in more market niches than your competitors? . . . .
focusing on a narrow market segment(s)? . . . . . . . . . . . . . . . . . . . . . . . . . . .
concentrating on market niches? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
offering a more limited line of products/services than competitors? . . . . . . . .
serving more market segments than your competitors? . . . . . . . . . . . . . . . . .
ORG. PERFORMANCE QUESTIONS
Part IV: The following questions concern your organization's performance
2. Please evaluate the performance of your major line of business over the past year
relative to your major competitors.
a) Changes in market share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b) Market share growth relative to our competition. . . . . . . . . . . . . . . . . . . . . . .
c) Growth in sales of our product and/or services. . . . . . . . . . . . . . . . . . . . . . . .
d) Number of successful new products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e) Business unit profitability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
f) Return on Investment (ROI). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
g) Return on Sales (ROS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
h) Increases in business unit net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i) Cost position. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
j) Customer satisfaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
k) Delivering value to your customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
l) Introduction of new products/services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
m) Time to market for new products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Table 1
Discriminant Validity Results
Base Model
2
Inter-factor Correlations
Differentiation
Differentiation
Differentiation
Differentiation
Cost Leadership
Cost Leadership
Cost Leadership
Scope
Scope
Market Effectivness










Cost Leadership
Scope
Market Effectiveness
Profitability
Scope
Market Effectiveness
Profitability
Market Effectiveness
Profitability
Profitability

2 d
Table 2
Confirmatory Factor Analysis
Constructs and Items
Differentiation
P1Q1G
P1Q1B
P1Q1F
P1Q1E
P1Q1H
Cost Leadership
P1Q1I
P1Q1K
P1Q1L
P1Q1N
Scope
P1Q2
P1Q2
P1Q2
P1Q2
Market Effectiveness
P4Q2
P4Q2
P4Q2
P4Q2
Profitability
P4Q2
P4Q2
P4Q2
P4Q2
Overall Fit:
2 (and d.f.)
CFI
RMSEA
Cronbach
Alpha
Construct
Reliability
AVE



Standardized
Coefficient
t-Value
Table 3
Structural Equation Modeling Results
Theory Based Model
Parameter
Coefficient
t-value
Paths Modeled:
Differentiation
Cost Leadership
Scope



Market Effectiveness
Market Effectiveness
Market Effectiveness
Differentiation
Cost Leadership
Scope



Profitability
Profitability
Profitability
Market Effectiveness

Profitability
Overall Fit:
2 (and d.f.)
CFI
RMSEA
Direct Paths Only
Parameter
Coefficient
t-value
Indirect Paths Only
Parameter
Coefficient
t-value