Since Skinner’s(1969) landmark paper, a number of researchers have depicted the manufacturing function as the missing link in corporate strategic processes and emphasized that manufacturing strategy can be a formidable competitive weapon, if equipped and managed properly (Hayes and Wheelwright 1984, Hill 1987, Miller and Roth 1994, Hayes and Pisano 1995, Berry et al. 1999). Hayes and Wheelwright (1984) categorized manufacturing organizations in four stages according to manufacturing’s strategic role. Stage I organizations react blindly to the demands placed on them from the top and offer no strategic advantage to the firm. Stage II organizations follow the trends of industry practice. The difference between stages III and IV firms lies primarily in their proactiveness. Three dimensions distinguish organizations in stage IV:
· Manufacturing is involved up front in major marketing and engineering decisions.
· Efforts are made to anticipate the potential of new manufacturing practices and technologies.
· Long-range programmes are pursued in order to acquire manufacturing capabilities
· In advance of needs.
Stage IV organizations are proactive and they follow world class practices. Proactiveness is the single characteristic that discriminates between manufacturing functions that offer strategic benefit to the firms, whereas reactive manufacturers are forced to catch up with the leader when their product engineering departments responded to the competitive challenge. Various researchers (Skinner 1969, Hill 1987, Gerwin 1993, DeToni and Tonchia 1998) elaborated on customer expectations on attributes such as cost, quality, delivery, flexibility and innovation, which are popularly termed as competitive priorities or manufacturing performance objectives. These competitive priorities can be defined as follows:
Cost: production and distribution of product at low cost.
· Quality: manufacture of products with high quality or performance standards.
· Delivery dependability: meet delivery schedules.
· Delivery speed: respond quickly to customer orders.
· Flexibility: react to changes in production, changes in product mix, modifications in design, fluctuations in materials, changes in sequence.
· Innovation: introduction of new product and processes.
A review in this area reveals that the conceptual model presented in Fig. 1 is a representative view of manufacturing strategy in its context. The model suggests that environmental dynamism affects both competitive strategy and manufacturing strategy. Competitive strategy is cast in a mediating relationship because it intervenes between environmental dynamism and manufacturing strategy (Venkatraman, 1989). The model also implies that competitive strategy directly influences manufacturing strategy. Further, the model suggests that the relationship of environment, competitive strategy, and manufacturing strategy is linked to performance. The model also implies that direct links exist between strategies and performance. The numbering of the arrows on Fig. 1 refers to hypotheses developed below.
Conceptual basis
The model in Fig. 1 is familiar to students of manufacturing strategy. The model’s origin can be traced to the seminal paper of Skinner (1969). On manufacturing strategy that prescribed in detail the links among environment, competitive strategy, and manufacturing strategy to achieve good business performance. In their reviews of the operations strategy literature, Anderson et al. (1989) and Leong et al. (1990) find broad support for the conceptual model introduced by Skinner, although relatively little empirical evidence. A contemporary review reveals that this finding still holds. For example, Hill (1994) incorporates environment especially markets, competitive strategy and manufacturing strategy in his conceptual model, but the model is not tested empirically.
A review of the literature also reveals no instance where the connections among environment, competitive and manufacturing strategy and performance implications are considered simultaneously using empirical evidence. Although no empirical study incorporates all the dimensions represented in Fig. 1, pieces of the conceptual model have been tested. For example, the links among competitive strategy, manufacturing strategy, and performance are addressed by Vickeryet al. (1993), who finds covariance between competitive strategy and production competence with business performance. Another example on the connection between competitive and manufacturing strategies is the numerical taxonomy of manufacturing strategy types of Miller and Roth (1994), which are found to be related to competitive strategies, in some instances. In their study of firms in the textile industry, Williams et al. (1995) find a relationship between competitive strategy and manufacturing strategy and also between manufacturing strategy and performance. Gupta and Lonial (1998) use a path model to test linkages among business strategy, manufacturing strategy, and organizational performance. None of these studies address the effects of environment on strategy choice nor are the relationships considered simultaneously.
The linkages among environmental dynamism, manufacturing strategy and performance are explored empirically by Swamidass and Newell (1987) and Ward et al. (1995) both papers show that environmental dynamism is positively related to manufacturing flexibility. The latter paper also finds positive links between environmental dynamism and quality and delivery capabilities among high performers.
Both of these studies use path models to establish that environmental factors affect manufacturing strategy and performance, but neither includes competitive strategy in the model. In contrast with manufacturing strategy research, many empirical studies in competitive strategy have found relationships among environment, competitive strategy, and performance. Keats and Hitt (1988) use a covariance structure model to describe the relationship among several environmental dimensions, competitive strategy, and performance. Miller (1988) supports earlier conceptual work on the types of environmental and strategic configurations that lead to good performance. Kim and Lim (1988) also provide evidence for the model linking environment, competitive strategy, and performance. In general, environmental dynamism is shown to be positively linked with differentiation (as opposed to cost-based) competitive strategies.
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