Journal of the Academy of Marketing Science

, Volume 35, Issue 4, pp 475–491 | Cite as

Structure in product line management: The role of formalization in service elimination decisions

  • Paraskevas C. ArgouslidisEmail author
  • George Baltas
Original Empirical Research


Formalization is a core structural characteristic of the firm and an important determinant of decision-making efficiency. This empirical paper explores formalization in financial institutions’ product line pruning decisions. The authors develop a set of hypotheses that are empirically tested in a stratified random sample of UK financial institutions. The results demonstrate that the level of formalization in the elimination decision-making process depends on specific organizational and environmental conditions, including overall company strategy, product line length, market orientation, top management attitude toward line pruning, austerity of the regulatory context, and rate of technological change. The results also show that formalization enhances the procedural rationality of elimination decisions, and leads to customer-sensitive implementation strategies. This paper is the first attempt to link service elimination decision-making with structural characteristics of organizational decision-making. The results yield important managerial implications and point at useful directions for future research.


Elimination Product Line Pruning Formalization Services Structure 



The authors thank two anonymous JAMS reviewers, the previous Editor George Zinkhan and the new Editor David Stewart, whose constructive comments improved the paper.


  1. Aiken, L. S., & West, S. G. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park, CA: Sage.Google Scholar
  2. Argouslidis, P. C., & McLean, F. (2003). Service elimination decision-making: Analysis of candidates for elimination and remedial actions. Journal of Marketing Management, 19, 307–344 (April).CrossRefGoogle Scholar
  3. Armstrong, S. J. (1982). The value of formal planning for strategic decisions: Review and empirical research. Strategic Management Journal, 3, 197–211 (July–September).CrossRefGoogle Scholar
  4. Armstrong, S. J., & Overton, T. S. (1977). Estimating non-response bias in mail surveys. Journal of Marketing Research, 14, 396–402 (August).CrossRefGoogle Scholar
  5. Avlonitis, G. J. (1985). Product elimination decision-making: Does formality matter? Journal of Marketing, 49, 41–52.CrossRefGoogle Scholar
  6. Bagozzi, R. P., Yi, Y., & Phillips, L. W. (1991). Assessing construct validity in organizational research. Administrative Science Quarterly, 36, 421–458 (September).CrossRefGoogle Scholar
  7. Bayus, B. L., & Putsis, W. P. Jr. (1999). Product proliferation: An empirical analysis of product line determinants and market outcomes. Marketing Science, 18(2), 137–153.CrossRefGoogle Scholar
  8. Blair, E., & Zinkhan, G. M. (2006). Nonresponse and generalizability in academic research. Journal of the Academy of Marketing Science, 34, 4–7 (Winter).CrossRefGoogle Scholar
  9. Cartwright, P. (1999). Consumer protection in financial services. London: Kluwer Law International.Google Scholar
  10. Cottrell, T., & Nault, B. R. (2004). Product variety and firm survival in the microcomputer industry. Strategic Management Journal, 25, 1005–1025 (October).CrossRefGoogle Scholar
  11. Davis, D., Morris, M., & Allen, J. (1991). Perceived environmental turbulence and its effect on selected entrepreneurship, marketing, and organizational characteristics on industrial firms. Journal of the Academy of Marketing Science, 19, 43–51 (Winter).CrossRefGoogle Scholar
  12. Day, G. S. (1994). The capabilities of market-driven organizations. Journal of Marketing, 58, 37–52 (October).CrossRefGoogle Scholar
  13. Dean, J. W. Jr., & Sharfman, M. P. (1993). Procedural rationality in the strategic decision-making process. Journal of Management Studies, 30, 587–610 (July).CrossRefGoogle Scholar
  14. Diacon, S. R., & Ennew, C. T. (1996). Ethical issues in insurance marketing in the UK. European Journal of Marketing, 30(5), 67–80.CrossRefGoogle Scholar
  15. Duhachek, A., Coughlan, A. T., & Iacobucci, D. (2005). Results of the standard error of the coefficient alpha index of reliability. Marketing Science, 24, 294–301 (Spring).CrossRefGoogle Scholar
  16. Easingwood, C., & Storey, C. (1991). Success factors for new consumer financial services. International Journal of Bank Marketing, 9(1), 3–10.CrossRefGoogle Scholar
  17. Eckles, R. W. (1971). Product line deletion and simplification. Business Horizons, 14, 71–74 (October).CrossRefGoogle Scholar
  18. Economist (2002). Big, bigger, biggest. 6, 69–70 (April).Google Scholar
  19. Eisenhardt, K. M. (1989). Making fast strategic decisions in high-velocity environments. Academy of Management Journal, 32, 543–576 (September).CrossRefGoogle Scholar
  20. Ennew, C., Wright, T. M., & Watkins, T. (1990). New competition in financial services. Long Range Planning, 23, 80–90 (December).CrossRefGoogle Scholar
  21. Fornell, C., & Larcker, D. F. (1981). Structural equation models with unobservable variables and measurement error: Algebra and statistics. Journal of Marketing Research, 18, 382–388 (August).CrossRefGoogle Scholar
  22. Fredrickson, J. W. (1984). The comprehensiveness of strategic decision processes: Extension, observations, future directions. Academy of Management Journal, 27, 445–466 (September).CrossRefGoogle Scholar
  23. Fredrickson, J. W. (1986). The Strategic Decision Process and Organizational Structure. Academy of Management Review, 11, 280–297 (April).CrossRefGoogle Scholar
  24. Fredrickson, J. W., & Iaquinto, A. L. (1989). Inertia and creeping rationality in strategic decision processes. Academy of Management Journal, 32, 516–542 (September).CrossRefGoogle Scholar
  25. Fredrickson, J. W., & Mitchell, T. R. (1984). Strategic decision processes: Comprehensiveness and performance in an industry with an unstable environment. Academy of Management Journal, 27, 399–423 (June).CrossRefGoogle Scholar
  26. Greene, W. H. (1997). Econometric analysis. NJ: Prentice-Hall.Google Scholar
  27. Harness, D., & Marr, N. (2001). Strategies for eliminating a financial services product. Journal of Product and Brand Management, 10(7), 423–438.CrossRefGoogle Scholar
  28. Jaworski, B. J., & Kohli, A. K. (1993). Market orientation: Antecedents and consequences. Journal of Marketing, 57, 53–70 (July).CrossRefGoogle Scholar
  29. Jennings, D. F., & Seaman, S. L. (1994). High and low levels of organizational adaptation: An empirical analysis of strategy, structure and performance. Strategic Management Journal, 15, 459–475 (July).CrossRefGoogle Scholar
  30. Jöreskog, K. J., & Sörbom, D. (2004). LISREL 8.71. Mooresville, IN: Scientific Software International.Google Scholar
  31. Kotler, P. (1965). Phasing out weak products. Harvard Business Review, 43, 107–118 (March–April).Google Scholar
  32. Langley, A. (1989). In search of rationality: The purposes behind the use of formal analysis in organizations. Administrative Science Quarterly, 34, 598–631 (December).CrossRefGoogle Scholar
  33. Lindsay, W. M., & Rue, L. W. (1980). Impact of the organization environment on the long-range planning process. Academy of Management Journal, 23, 385–404 (September).CrossRefGoogle Scholar
  34. Lukas, B. A., & Ferrell, O. C. (2000). The effect of market orientation on product innovation. Journal of the Academy of Marketing Science, 28, 239–247 (Spring).CrossRefGoogle Scholar
  35. Miller, D. (1987). The structural and environmental correlates of business strategy. Strategic Management Journal, 8, 55–76 (January–February).CrossRefGoogle Scholar
  36. Miller, D., & Dröge, C. (1986). Psychological and traditional determinants of structure. Administrative Science Quarterly, 31, 539–560 (December).CrossRefGoogle Scholar
  37. Myers, R. H. (1990). Classical and modern regression with applications. MA: Duxbury.Google Scholar
  38. Narver, J. C., & Slater, S. (1990). The effect of market orientation on business profitability. Journal of Marketing, 54, 20–35 (October).CrossRefGoogle Scholar
  39. Papadakis, V. M., Lioukas, S., & Chambers, D. (1998). Strategic decision-making processes: The role of management and context. Strategic Management Journal, 19, 115–147 (February).CrossRefGoogle Scholar
  40. Pelham, A. M., & Wilson, D. T. (1996). A longitudinal study of the impact of market structure, firm structure, strategy, and market orientation culture on dimensions of small-firm performance. Journal of the Academy of Marketing Science, 24, 27–43 (Winter).CrossRefGoogle Scholar
  41. Priem, R. L., Rasheed, A. M. A., & Kotulic, A. G. (1995). Rationality in strategic decision processes, environmental dynamism and firm performance. Journal of Management, 21(5), 913–929.CrossRefGoogle Scholar
  42. Pugh, D. S., Hickson, D. J., Hinings, C. R., & Turner, C. (1969). The context of organization structures. Administrative Science Quarterly, 14, 91–114 (March).CrossRefGoogle Scholar
  43. Putsis, W. P. Jr. (1997). An empirical study of the effect of brand proliferation on private label-national brand pricing behavior. Review of Industrial Organization, 12, 355–371 (June).CrossRefGoogle Scholar
  44. Putsis, W. P. Jr., & Bayus, B. L. (2001). En empirical analysis of firms’ product line decisions. Journal of Marketing Research, 38, 110–118 (February).CrossRefGoogle Scholar
  45. Rothe, J. T. (1970). The product elimination decision. MSU Business Topics, 18, 45–52 (Autumn).Google Scholar
  46. Salavou, H., Baltas, G., & Lioukas, S. (2004). Organizational innovation in SMEs: The importance of strategic orientation and competitive structure. European Journal of Marketing, 38(9), 1091–1112.CrossRefGoogle Scholar
  47. Saunders, J., & Jobber, D. (1994). Product replacement: Strategies for simultaneous product deletion and launch. Journal of Product Innovation Management, 11, 433–450 (November).CrossRefGoogle Scholar
  48. Schwenk, C. R., & Shrader, C. R. (1993). Effects of formal strategic planning on financial performance in small firms: A meta analysis. Entrepreneurship Theory and Practice, 18, 53–64 (Spring).Google Scholar
  49. Slater, S. F., & Narver, J. C. (1994). Does competitive environment moderate the market orientation–performance relationship? Journal of Marketing, 58, 46–55 (January).CrossRefGoogle Scholar
  50. Smart, C., & Vertinsky, I. (1984). Strategy and the environment: A study of corporate responses to crises. Strategic Management Journal, 5, 199–213 (July–September).CrossRefGoogle Scholar
  51. Smith, K. G., Grimm, C. M., Gannon, M. J., & Chen, M.-J. (1991). Organization information processing, competitive responses, and performance in the U.S. domestic airline industry. Academy of Management Journal, 34, 60–85 (March).CrossRefGoogle Scholar
  52. Sutcliffe, K. M., & McNamara, G. (2001). Controlling decision-making practice in organizations. Organization Science, 12, 484–501 (July–August).CrossRefGoogle Scholar
  53. Tzokas, N., Hart, S., Argouslidis, P. C., & Saren, M. (2000). Strategic pricing in export markets: Evidence from the UK. International Business Review, 9, 95–117 (February).CrossRefGoogle Scholar
  54. Vorhies, D. W., & Morgan, N. A. (2003). A configuration theory assessment of marketing organization fit with business strategy and its relationship with marketing performance. Journal of Marketing, 67, 100–115 (January).CrossRefGoogle Scholar
  55. Walker, O. C. Jr., Boyd, H. W. Jr., Mullins, J., & Larréché, J-C. (2003). Marketing Strategy. A Decision-Focused Approach (4th Edition). NY: McGraw Hill.Google Scholar
  56. Walker, O. C. Jr., & Ruekert, R. W. (1987). Marketing’s role in the implementation of business strategies: A critical review and conceptual framework. Journal of Marketing, 51, 15–33 (July).CrossRefGoogle Scholar
  57. Walsh, J. P., & Ungson, G. R. (1991). Organizational memory. Academy of Management Review, 16, 57–91 (January).CrossRefGoogle Scholar

Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  1. 1.Department of Marketing and CommunicationAthens University of Economics and BusinessAthensGreece

Personalised recommendations