Achieving alignment between manufacturing and marketing through positioning strategy.
Kumar, Vinod ; Kumar, Uma ; Butt, Irfan 等
Abstract
The alignment between manufacturing and marketing strategy,
repeatedly stressed in the literature, is associated with superior
organizational performance. This alignment, however, is mostly
recommended in the functional areas such as product development, process
development, sales planning and manufacturing planning. No framework has
been proposed in the literature which links strategic elements of
manufacturing and marketing and demonstrates their application. This
paper puts forth a conceptual model which links manufacturing and
marketing strategy through positioning strategy. An extensive literature
review is carried out first to justify the rationale of the conceptual
model and to identify its variables to facilitate the
operationalization.
I. INTRODUCTION
The alignment between manufacturing strategy and marketing
objectives has been directly linked with the competitive capability and
success of the firm (Gupta, Lonial, and Mangold, 1991). Cil and Evren
(1998) state that "the relationship between manufacturing
capabilities and marketing requirements is absolutely fundamental to the
competitive position of the business unit" (p.187). Weir et al.
(2000) echo the same sentiment by asserting that "it is widely
recognized that manufacturing can be a formidable competitive weapon if
equipped and managed properly, and that to achieve this success a
company must have the correct alignment of manufacturing and marketing
strategies" (p. 831).
The objective of manufacturing strategy is to provide competitive
advantage to firms using its manufacturing assets and capabilities. The
competitive advantage, however, can only be defined from the standpoint
of marketing objectives (Cil and Evren, 1998). Notwithstanding the need
for cooperation between manufacturing and marketing functions, there is
often conflict and antipathy between the two. The marketing objectives
and manufacturing objectives are frequently divergent. It is suggested
in the literature that marketing programs should be developed to take
advantage of manufacturing capabilities and manufacturing should adjust
its capability to become response to the needs of target customers (Cil
and Evren, 1998).
How does a firm achieve the alignment and coordination between
marketing and manufacturing? Despite the emphasis placed on the
alignment between the marketing and manufacturing functions, the
integrating framework and consequently empirical studies in this area
are extremely sparse. Weir et al. (2001) lament the lack of formal
procedures specifying how functional strategies should be integrated.
Tan and Platts (2004) contend that the fundamental question of
operationalisation of manufacturing strategy and linking manufacturing
objectives to action plans has not been adequately addressed in the
literature.
The purpose of this paper is to fill this gap and present a
conceptual model for linking the functional, business level strategies
in marketing and manufacturing. It is proposed that this alignment can
be achieved through the concept of positioning, by attaining
"FIT" between manufacturing strategy dimensions and
positioning strategy dimensions.
The remaining paper presents a description of manufacturing,
marketing, and positioning strategies, and alignment between them. The
rationale for integrative framework is followed by the conceptual
framework, research propositions and specification of elements of
framework, based on literature review.
II. LITERATURE REVIEW
Manufacturing Strategy
Manufacturing strategy, a concept introduced in the literature by
Skinner (1969), refers to the competencies that a firm develops around
its operations to achieve competitive advantage. Strongly integrated
with a firm's business strategy, manufacturing strategy is
considered to be an important component of overall corporate strategy
(Anderson et al., 1989).
Hayes and Wheelwright (1984) define manufacturing strategy as
"a consistent pattern of decision-making in the manufacturing
function linked to the business strategy". Swamidass and Newell
(1987) describe manufacturing strategy as "a tool for effective use
of manufacturing strengths as a competitive weapon for achievement of
business and corporate goals." It has been emphasized that firm
should develop manufacturing strategy within the broader context of
organizational level strategy. The manufacturing strategy dimensions are
generally classified as quality, cost, delivery and flexibility
(Sweeney, 1994).
Marketing Strategy
"Marketing strategy" has been synonymously used with
"strategic marketing" in the literature (Hooley, Beracs, and
Kolos, 1993). Varadarajan and Clark (1994) define it as
"configuration and allocation of resources across the marketing mix
variables in a particular product market." It is based on the
analysis of consumers, competitors and other environmental forces. In
terms of hierarchy, marketing strategy is a part of business-level
strategy, which in turn is driven from corporate strategy (Greenley,
1984). Three major decisions in marketing strategy are segmentation,
targeting and positioning.
Positioning Strategy
Positioning, considered as one of the fundamental components of
marketing strategy is a well-established concept in literature (Hooley,
Broderick, and Moller, 1998). Positioning is considered to be one of the
most important elements of marketing strategy since it has a direct
effect on the tactical decisions undertaken by the company to influence
and serve the customers (Hooley et al., 2001).
Positioning is defined as "the act of designing the
company's offerings (products and services), so that they occupy a
meaningful and distinct competitive position in the target
customer's minds" (Kotler, 1998). Positioning strategy is
defined as the choice of target segments and the selection of
differential advantage(s) used by firm to compete in the market (Doyle,
1994). The differential advantage used by the firm to compete is called
the dimension of positioning strategy. The firms normally compete on one
or more dimensions such as innovation, quality, value, service, etc.
It is very common to find statements in the literature highlighting
the importance of positioning. Dovel (1990) states that,
"Positioning should not be just a part of your strategy but the
backbone of your business plan." Huber and Holbrook (1979) state
that, "product positioning decisions have become central to a
firm's competitive strategy". Hibbert (1995) calls it a vital
tool to combat competitive pressures in the market place. Porter (1996)
cautions that companies who opt for operational efficiency instead of
focusing on positioning strategies may not be able to achieve long-term
growth. Proposed as a theoretical concept in literature, positioning is
primarily an applied process practiced by firms. Its importance as a
strategic tool is expected to rise in future due to accelerating
national and international competition in virtually all economic sectors
(Augustine, Long, and Pantzallis, 1992).
Aligning Manufacturing Strategy with Marketing Strategy
The alignment of manufacturing strategy with other functional
strategies, specifically marketing has received special attention in the
literature since marketing strategy is explicitly formed after
conducting customer and competitor analysis while manufacturing strategy
implicitly considers customers and competitor's perspective.
Manufacturing strategy is connected to business strategy through market
requirements (Hill, 1985). Market requirement or identification of
customer's needs and wants is the foundation of marketing strategy.
Thus, manufacturing and marketing strategies are inadvertently linked
through their focus on understanding market requirements.
A number of studies have emphasized the alignment of manufacturing
resources and capabilities with the requirements of the market in the
manufacturing strategy development process. Various methods have been
proposed in the literature to achieve harmony between manufacturing and
marketing strategies (e.g. Hill, 2000; Platts and Gregory, 1990; Ray,
2005). Most of the studies emphasize open communication and operational
integration and coordination in various functions such as product
development, process development, marketing/sales planning, and
manufacturing planning decisions.
Aligning Manufacturing Strategy with Positioning Strategy
Marketing strategy is a relatively broad concept which deals with
allocating marketing resources across marketing mix variables--product,
price, promotion and place. Within marketing strategy, positioning is
the concept and activity which is focused on understanding the
requirements of a particular target segment and coordinating all the
other aspects of marketing mix in such a way that enables a brand to
occupy a preferred and unique niche in a customer's mind vis-a-vis
that of competitors. Thus, positioning is focused on understanding needs
of the market and a manufacturing strategy based on understanding market
requirements ought to be aligned with it.
The main premise of this research is that alignment between
manufacturing and marketing can be achieved by aligning manufacturing
strategy with the positioning strategy and this alignment will have a
positive impact on firm's performance. Cross-border barriers to
trade and investments have fallen significantly in the last two decades.
This has caused tremendous change in two aspects of the commercial
landscape. First, the number of companies chasing the customers has
risen significantly, making the business environment ever more
competitive. Second, as a consequence of the first factor as well as due
to incredible improvements in technology, today's consumers are
faced with an array of product choice that was never possible in earlier
times. The concept of positioning with its focus on identifying a target
set of customers and then presenting a product based on dimensions
considered relevant and important by customers enables the firm to
compete effectively in today's fiercely competitive market.
However, an effective positioning, based on sustainable competitive
advantages, is strongly influenced by manufacturing strategy, amongst
other things. The positioning strategy must be based on the competitive
advantage of a firm and the role of manufacturing in establishing
competitive advantage for a firm is well established now. However, it is
the marketing which takes that competitive advantage and converts it
into positioning strategy.
An appropriate manufacturing strategy provides competitive
advantages to the firm. The market positions are based on the concept of
differentiation from competitors which is driven by competitive
advantages of the firm. In a nutshell, the concept of competitive
advantage links manufacturing and positioning strategies. Theoretically,
the competitive advantages created by manufacturing strategy form the
underlying basis on which the positions are created.
Theoretical Rationale for Aligning Manufacturing and Positioning
Strategies
The underlying theory which supports the development of
manufacturing strategy is resource based view (RBV) though market
orientation has also been purported to influence manufacturing strategy.
Positioning strategy, on the other hand is primarily developed on the
premise of market orientation though RBV is also used as a viable
rationale. A brief discussion of both the perspectives is presented
next.
Resource-based View
Resource Based View (RBV) advocates using the company's
internal resources, competencies, and capabilities as essential
determinants of strategy. RBV assumes that each firm has unique
resources and capabilities (Wernerfelt, 1984) and the growth of the firm
is subject to the efficient use of the resources and deployment of
capabilities. The RBV states that firm's resources and capabilities
determine its competitive advantage and firms that enjoy superior
capabilities relative to their competitors have significant advantage
over competitors (Russo and Fours, 1997).
Resource-based view of manufacturing strategy is manifested by
Hayes and Wheelwright (1984) who state that manufacturing strategy leads
to the creation of a set of specific capabilities. Bates et al. (2001)
emphasize the role of resources in building manufacturing capability
which aligned with business strategy serve as a source of competitive
advantage. Cagilano et al. (2005) discriminate between four different
types of manufacturing strategies: market-based, product-based,
capability-based, and price based. They conclude that capability or
resource-based manufacturing strategy is the "rising star" and
market-based manufacturing strategy is lagging. Schroeder et al. (2002)
empirically investigate the influence of resource-based view on
manufacturing strategy. They posit that competitive advantage in
manufacturing is achieved through proprietary processes and equipment,
which are driven by external and internal learning.
Within strategic management literature, positioning represents the
"classical view of strategy formulation", and is well
documented in the literature. Strategic management literature gives a
useful account of how positions are created to begin with. Positioning
primarily rests on identifying differential advantage which culminates
from competitive advantage of the firm created by the RBV of the firm.
It suggests that a strategy needs to be based on the firm's
resources and capabilities if it is to generate any long-term
sustainable competitive advantage. In fact, the changes in the external
environment could only be responded to by adhering to the long term
strategy of relying on internal resources (Hooley, Broderick, and
Moller, 1998). It follows, therefore, that the positioning strategy of
the firm should be based on internal strengths and weaknesses rather
that external market factors.
Market-based View
Manufacturing strategy based on market-orientation focuses on
external factors. The external environment comprising of economic,
technological, political, environmental and social issues is relevant
but the real emphasis is on the industry. A company's success is
strongly influenced by the competitive forces, measured by Porter (1980)
five forces model. According to this perspective business environment
should be monitored frequently and customer's needs and preferences
should be taken into consideration to develop dynamic capabilities
(Lopez, 2005).
The market-based positioning strategy represents an outside--in
perspective. The leading proponents of market-based view are Miles and
Snow (1978) and Porter (1985). The strategy type propositions,
postulated by Miles and Snow (1978) and Porter (1980) propose that
management decisions about strategy are guided by the industry context,
with considerable freedom of movement in charting the course of the
firm.
Integration of Resource Based and Market Based Views
Though the recent literature suggests that resource-based view is
more likely to prevail for the development of manufacturing strategy,
the issue of integration of resource and market based views has also
been deliberated, especially within the context of alignment of
manufacturing and marketing strategies. Sustainable competitive
advantage, it is argued, ought not to be based solely on the firm's
assets and capabilities as advocated by the RBV of the firm which
assumes that resources and capabilities are created through company
history and are the results of learning processes and longer term
accumulation of assets which can not be changed in the short run
(Hooley, Broderick, and Moller, 1998). A competitive advantage could
only be sustained as long as customers consider it as an advantage. Any
changes in customers' perceptions due to changing tastes and
preferences or competitive moves could nullify an existing advantage.
While positioning strategy is primarily based on market-based
view--analysis of customers, competitors and external environment--the
role of resources in providing sustainable competitive advantage to
create and defend positions can not be ignored in the development of
positioning strategies. Therefore, integration of resource-based and
market-based perspectives is also alluded to in positioning literature.
By integrating the resource based view (internally focused) with
market based view (externally focused), the firm's positioning
strategy is linked with its resources and capabilities (Morgan, Strong,
and McGuinness, 2003). It is, therefore, concluded that competitive
positions are created by matching the needs of the target customers with
sustainable competitive advantages, achieved through a firm's
resources and capabilities.
III. THE CONCEPTUAL FRAMEWORK
The conceptual framework linking manufacturing strategies to
positioning strategies is given below:
Based on the above conceptual framework, the following propositions
are posited:
[P.sub.1] :I: There will be a direct correspondence between the
dimensions of positioning strategy and manufacturing strategy of the
firm.
[P.sub.2]: Positioning strategy will have a direct effect on the
firm's financial performance.
[P.sub.3]: Positioning strategy will have a direct effect on the
firm's non-financial performance.
[P.sub.4]: Manufacturing strategy will have a direct effect on the
firm's financial performance.
[P.sub.5]: Manufacturing strategy will have a direct effect on the
firm's non-financial performance.
[P.sub.6]: Manufacturing strategy and positioning strategy fit will
have a direct effect on the firm's financial performance.
[P.sub.7]: Manufacturing strategy and positioning strategy fit will
have a direct effect on the firm's non-financial performance.
[FIGURE 1 OMITTED]
There are three set of variables in the conceptual framework--(1)
positioning strategy dimensions, (2) manufacturing strategy dimensions,
and (3) organizational performance. A detailed discussion on each
follows. The fit analysis is also explained.
Positioning Strategy Dimensions
"Positioning strategy dimension" for this study is
defined as features, benefits, attributes, any other characteristic or
differentiating aspect of a product/brand offered by the firm to the
customer. Two approaches were used to identify positioning strategy
dimensions. First, the positioning literature was extensively reviewed
to develop taxonomy of positioning dimensions, based on the content
analysis. Second, major positioning typologies proposed in the
literature were identified and compared with one another. Taxonomy is
called the classification of the objects according to the genesis of
things.
The literature for taxonomy was searched extensively. A total of 41
studies were found relevant to product, service and generic positioning.
The findings of taxonomy, based on content analysis of positioning
literature, revealed twenty-two positioning strategy dimensions. The
dimensions mentioned by less than four studies (less than 10% of the
studies) were eliminated for further consideration. This purging left
the following six positioning strategy dimensions which are most
frequently used in the literature: Value/ Price, Attribute, Reliability,
Quality/Top of the range, Service, Attractiveness.
Typology is a classification scheme, the process of setting up and
selecting categories to organize and analyze data. Blankson and
Kalafatis (2004) define positioning typology as "the theoretical
foundation underpinning a grouping of factors that reflect or describe
positioning strategies." A firm can employ a single strategy or
collection of strategies which are mutually inclusive rather than being
the indicators of different types of positions. So a set of strategies
proposed by a researcher would be called a typology.
There are two typologies which are considered seminal-Aaker and
Shansby (1982) and Crawford (1985). Both of these typologies have been
referred by numerous articles. The two recent typologies-Blankson and
Kalafatis (2004) and Hooley and Greenley (2005)-have been proposed by
teams of authors who have authored the highest and second highest number
of studies in the area of positioning, 11 and 6 studies respectively, in
an otherwise highly fragmented area of research. The topologies proposed
by these two teams of authors have thus taken advantage of cumulative
tradition.
However, it was decided to consider only empirically tested
positioning typologies for this study-Crawford (1985) and Blankson and
Kalafatis (2004). The positioning strategy dimensions of empirically
tested typologies are: Attractive, Attribute, Benefits, Brand Name,
Country, Customization, Features, Innovation, Price/Value, Quality/Top
of the range, Reliability, and Service.
All the top six positioning strategy dimensions identified on the
basis of taxonomy (content analysis) and all the dimensions culled from
the empirically tested positioning typologies are proposed to be
included in the model except country dimension. Four dimensions from
typology--attribute, feature, benefit and brand name--are labeled as
"differentiation" dimension for the purpose of this study.
However, indicators of the "differentiation" measure should
comprise of the four dimensions. Thus, the positioning strategy
dimensions proposed for this study are: attractive, innovation, quality,
reliability, service, customization, value, and differentiation.
Manufacturing Strategy Dimensions
Competitive priorities of manufacturing strategy, also called
competitive strategy in the literature, are defined as the dimensions on
which the firm competes in the marketplace (Hayes and Wheelwright,
1984). The terms "manufacturing priority", "competitive
priorities" and "manufacturing strategy dimensions" are
used interchangeably in the literature (Swamidass and Newell, 1987).
A number of studies in the literature propose manufacturing
strategy dimensions. Fang and Wang (2006), however, conducted a
systematic and an extensive review of the literature to develop taxonomy
of manufacturing strategy dimensions from the literature. They reviewed
thirty-seven studies over a period of twenty years. For the sake of
comparison we call their study era 1. They found cost, quality,
reliability and flexibility to be the most frequently used dimensions.
Since their analysis was limited to 1995, twenty-four most recent
studies, starting from 1996 to 2008, were scanned to identify the
manufacturing strategy dimensions currently being proposed in the
literature. We call this recent literature review era 2.
A comparison of findings of era 1 and 2 made it clear that three
dimensions--cost, quality and flexibility--had the same significance in
both eras. However, the dimension of reliability is almost non-existent
in era 2 while the dimension of delivery is not mentioned in era 1. A
review of literature unearthed that they are the same dimensions i.e. it
is the reliability of the delivery. The dimension of innovation,
however, does not appear in era i and is found repeatedly in era 2.
Prajogo et al. (2007) argue that quality is now taken as granted
but the dimensions of flexibility, responsiveness and specifically
innovation are "considered as order winners". They claim that
innovation is the key factor in attaining outstanding manufacturing
status and competing successfully in global markets: Osmanagiae,
Prester, and Podrug (2005) also highlight the importance of innovation
in "meeting new consumer needs, offering wider range of products
and services, and winning new markets."
Spring and Dalrymple (2000) argue that competitive criteria
(manufacturing strategy dimensions) have evolved over time and that
innovation is the most recent addition. Therefore, based on the above
discussion and synthesis of analysis, the manufacturing strategy
dimensions to be used for this model are cost, quality, reliability,
flexibility, and innovation.
Organizational Performance
Organizational performance is a widely used construct and a number
of studies in varying disciplines measure organizational performance for
different objectives. There are two types of measures, objective and
subjective, that are used in the literature to capture organizational
performance. Objective measures are more tangible but are constrained to
financial data only and thus are limited in scope. The standard measures
of financial performance--revenue and profitability growth--are used by
most of the studies. Subjective measures, on the other hand, are less
concrete but provide a different and richer perspective about
organizational effectiveness, especially in comparison to the
competitors. The subjective measures, however, vary depending upon the
precise objective of the study. It is recommended that researchers
should consider multiple indicators of the performance to get a more
comprehensive assessment of the performance (Allen et al., 2008). The
financial performance measures could comprise growth in sales and
profits, return on investment and market share. Customer satisfaction
and customer loyalty have been used as non-financial measures.
Fit Analysis
Various terms including "match", "alignment",
"congruence", "complementary",
"coalignment", and "consistency"--have been used in
the literature to signify "relationships between multidimensional
phenomena" like business strategy and marketing organization. Many
times such terms are used interchangeably, though, in reality, each of
these terms can have different meanings and underlying technical
specifications (Vorhies and Morgan, 2003).
This study uses the term "fit" since it has mostly been
used in the literature with the connotations of correspondence based on
statistical measures. The fit, in the literature, is defined in several
ways depending upon conceptualization and testing of relationships
between variables (Powell, 1992). The choice of a statistical test for
fit without understanding the validity of underlying assumptions can
lead to serious errors in the research findings (Venkatraman and
Prescott, 1990). Venkatraman (1989) has specified six different types of
fit based on different conceptualizations and technical specifications.
The six types are: (1) Fit as matching, (2) Fit as profile deviation,
(3) Fit as gestalts, (4) Fit as moderation, (5) Fit as mediation and (6)
Fit as covariation.
The concept of fit is a rather complex phenomenon and requires a
careful consideration of underlying assumptions and interplay of study
variables to choose the appropriate operationalization of fit.
Venkatraman (1989) insists upon choosing an appropriate perspective of
fit within a given research context. When a situation involves fit
between two concepts, moderation, mediation, and matching perspectives
of fit could be considered. Fit as profile deviation and fit as gestalt
could be used with multiple variables. However, he recommends using
multiple perspectives for the sake of triangulation, which emphasizes
using multiple methods to study a problem. Convergence of results across
multiple perspective is an evidence of robustness; the reverse, however,
is not true (Venkatraman, 1989).
There is a considerable discussion about fit in the configuration
theory-based studies. A configurational approach, it is suggested,
provides more holistic view of coalignment. Configuration is described
as "common alignments among elements" (Miller, 1996, p. 507)
and "multidimensional constellation(s) of the strategic and
organizational characteristics of a business" (Vorhies and Morgan,
2003, p. 102). Configurations could also be called clusters which
represent elements of "strategy, structure and environment"
(Miller and Friesen, 1984). Extending the configuration theory to
existing study, we can say that common natural clusters of manufacturing
strategy and positioning strategy 'exist.
Configurational theory stipulates "that the closer a firm
matches an "ideal constellation," the better its
outcomes" and profile deviation analysis is considered the most
appropriate technique in this case (Hult, Boyer, and Ketchen Jr., 2007).
Sabjerwal and Chan (2001) caution against using interaction or
moderating perspectives of fit when multiple variables are involved.
They also recommend the profile deviation approach on the basis of
theoretical or empirical "configuration" to measure fit
between two multivariate constructs.
A number of studies in the literature have used profile deviation
analysis to measure fit (e.g., Hult, Boyer, and Ketchen Jr., 2007;
Kathuria and Porth, 2003). The major arguments in favour of using
profile deviation are summarized as follows: 1) both the constructs,
manufacturing strategy and positioning strategy are multivariate and
bivariate perspective of fit is not recommend in the literature. 2) a
holistic perspective employing configurations-based profile deviation is
favoured over reductionistic perspective in the literature. Profile
deviation fit is defined as "the degree of adherence to an
externally specified profile" (Venkatraman, 1989, p. 433). In this
perspective the researcher specifies an ideal profile, normally top
performer, and determines how adherence to such a profile impacts
performance (Venkatraman, 1989). The misalignment is calculated as the
lack of correspondence between the profile of the top performing
strategic configuration and rest of the strategic configurations. The
Euclidean distance measure is used for this purpose. The lack of
correspondence indicated by the misalignment score is correlated with
the performance measures. A negative correlation is expected between
misalignment and performance, i.e., as the distance between the top
performing strategic configuration increases, performance should decline
(Kathuria and Porth, 2003).
CONCLUSION
Despite four decades of research in manufacturing strategy, the
alignment between manufacturing strategy and positioning strategy, an
integral component of marketing strategy has not been deliberated in the
literature. This study fills this gap by presenting a conceptual
framework depicting the "FIT" between positioning strategy and
manufacturing strategy and its impact on organizational performance.
This alignment is theoretically supported by resource-based and
market-based views, both of which are necessary to develop competitive
advantage on the basis of manufacturing strategy leading to differential
advantage, needed by positioning strategy to create a distinct image of
the product in the minds of the customers.
The conceptual framework comprises of three set of variables:
positioning
strategy dimensions, manufacturing strategy dimensions and
organizational performance. The positioning and manufacturing strategy
dimensions proposed in the model are culled from extensive and
systematic synthesis of the literature. The measures of organizational
performance are also discussed. The statistical calculation of the fit
is subject of debate in the literature. Profile deviation analysis for
fit is recommended on basis of various arguments presented in the
literature.
It is envisaged that this conceptual model will be operationalized
and empirically tested by researchers to ascertain it validity. This
model will help manufacturing companies to attain the alignment with
marketing, so often emphasized in the literature.
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VINOD KUMAR, UMA KUMAR
Carleton University, Ottawa, Canada
IRFAN BUTT
Suleman Dawood School of Business, LUMS, Pakistan