wheelwright - 1984 - manufacturing strategy defining the missing link summary

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Strategic Ma nagement Journal, Vol.5, 77-91 {1984

Manufacturing Strategy: Defining the

Missing Link

STEVEN C WHEELWRIGHT

Graduate School of Business Stanford U niversity. Stanford

California U.S.A.

Summary

The primary objective of strategy is to develop and support a tastin

competitive advantage. In manufactur ing industries, substanti

focus has been given during the early eighties to the importance o

the manu facturing function s contribution to overall corpora

success, and yet the apparen t lack of attention (historically)

achieving that potential contribution. In this article, characteristi

of conipetiiive advantage in manu facturing firms are de.scnbcd,

general framew ork for relating such advantage io corporat

business and functional levels of strategy is given, and an approac

for pursuing that potential is ou tlined.

OVERVIEW

On the academic front, a number of business schools have begun to recognize the need fo

anufa cturing detail and operatio ns with a move 'back to the basics'. Finally,



78 Steven C Wh eelwright

researchers and teachers by suggesting additional topics for investigation and linkages wi

other strategy concep ts that are further along in their developm ent.

The first steps in prov iding such definitions were stated by Skinn er (1969): .A co m pa ny

competitive strategy at a given time places particular demands on its manufacturi

function, an d, conversely, that the com pan y s man ufacturing posture and operations shou

be specifically designed to fulfill the tasks d em and ed by strategic p lan s . Alth oug h th

provides a good starting point for the discussion in this article, clarifying and elaborati

this concept requires a brief overview of such ideas as basic philosophies, driving forces an

the competitive advantage of a company. A basic set of definitions of strategy, an

particularly m anufac turing strategy, is then provided , followed by some observations o

why manufacturing strategy is so important and what seems to be required to realize i

potential .

MANAGEMENT PHILOSOPHY, DRIVING FORCES AND COMPETITIV

ADVANTAGE

Several publications recently have described the concept of a management philosophy, ofte

referring to it as co m pa ny c ultu re (.Athos and Pa scale, 1981; Ou chi, 1981; Pete rs, 1980

Generally, philosophy is defined as the set of guiding principles, driving forces an

ingrained attitudes that help communicate goals, plans and policies to all employees an

that are reinforced through conscious and subconscious behaviour at all levels of t

organization. A division of a leading electronics firm recently identified the followin

examples of such driving forces and elements of philosophy:

1.

The desire for consistent and significant growth.

2.

Conservatism and tradition as important considerations in all decision making.

3 . Flexibility with regard to volume and mix changes and to cu stom ers special req ues ts

4.

Un com prom ising com mitment to quality, which dem ands that any identifie

opportunity for improving quality be pursued.

5.

Prod uct invention and innovation as the primary approach es to problem solving.

6. Equ al and consistent treatm ent of all employees (including perm anen t emp loym ent f

all).

W heth er they are stated explicitly or only implied, such elemen ts of an org an iza tion

philosophy and culture are extremely important. They serve as an umbrella over vario

elements of strategy, and guide decision making within the organization. Such philosoph

not only establishes the context within which day-to-day operating decisions are made b

also sets the bounds for the strategic options considered by the firm. Further, the philosoph

guides the organization in making trade-offs not only among competing performan

priorities (such as flexibility, delivery, cost, and quality) but between short-term and lon

term goals and performance. Finally, the achievement of consistency among all activities

the firm tends to be linked directly to this philosophy and the degree to which it is share

throughout the organization.



Manufacturing Strategy

79

major role in setting and communicating the philsophy to the remainder of the

org aniz ation . As a conse quenc e, the need for leadership within the m anufac turing function

is of critical importance to the overall success and direction of the company. This is all too

often overlooked, causing the company to do itself and manufacturing, a disservice when it

fails to perceive the opportu nity and the need for m anufac turing s contrib ution . Equally

important, however, is recognizing (as will be discussed later) that manufacturing strategy

consists of patterns of decisions in major areas of manufacturing operations. These patterns

are determined in large part by the philosophy shared by the company and its employees.

Thus, if patterns of decisions (and therefore manufacturing strategy) are to be changed,

some parts of that philosophy and the associated driving forces in the organization must be

changed first.

The driving forces tha t com plemen t and implement the firm s basic philosophy usually

include views on at least three fundamental elements of strategy—a dominant orientation, a

diversification pattern and a perspective on growth. These driving forces, in concert with

biases or preferences for alternative competitive priorities, do much to establish the context

in which the competitive advantage is defined and pursued.

ominant orientation

Some companies are clearly market oriented. They consider their primary expertise to be the

ability to understand and respond effectively to the needs of a particular market or

consumer group. In exploiting this market knowledge, they use a variety of products,

materials and technologies. Gillette and Head Ski come to mind as examples of such

com panies . Other firms are clearly oriented to materials or pro du cts. They arc steel

comp anies , rubber com panies , or oil comp anies (or, more recently, energy companies ).

They develop multiple uses for their product or material and follow those uses into a variety

of markets. Corning Glass, Firestone, Du Pont, and Conoco are examples of companies

with such a dominant orientation. Still other companies and businesses are technologically

oriented. Most electronics companies would fall into this class. In such businesses, the

dominant orientation is to follow the lead of the technology into various materials and

markets.

\

company often experiences considerable trauma vvhen it ventures outside of its

dominant orientation. Te.xas Instruments entry into consumer marketing in the mid-

seventies was an example of this. Its initial products were electronic calculators and digital

watches. Although Texas Instruments may continue in some of these consumer marketing

areas,

it announced in mid-1981 that it was abandoning the digital watch market to

emphasize more traditional components (integrated circuits).

iversification patterns

A second and related attitude or driving force is the pattern of diversification a company

follows. D iversification can be accom plished in several ways: (a) produc t diversification

within a given market; (b) market diversification (geographic or consumer group) using a

given product line; (c) process or vertical diversification (increasing the span of the process

so as to gain more control over vendors and/or customers) with a given mix of products and

markets; and (d) unrelated (horizontal) diversification, as exemplified by conglomerates.




The resulting variety and diversity of businesses, and thus of business strategies, ha

important implications for the variety of manufacturing strategies needed. Genera

speaking, the more variety in the businesses, the more likely there is to be variety in t

business strategies pursued and thus in the corresponding manufacturing strategies. Rece

personal observations suggest that the greater the variety of manufacturing strategies, t

less likely it is that senior-level managers will view manufacturing as a potential competit

we apo n, simply because there are not enough com m on thre ads that they can exploit fro

their position, and the less likely it is that a strong philosophy will be shared throughout t

organizat ion.

Perspective on growth

A third driving force that is im porta nt in determining the competitive role of m anufa cturi

pertains to grow th. Fo r som e, growth represents an input to the com pan y s or busine

unit s planning process . For others it is an out pu t. Every com pany co ntinually confronts

variety of growth opportunities. Its decisions about which to accept and which to reje

signal the kind of company it prefers to be. Some companies, in their concentration on

particular market, geographical area or material, essentially accept the growth permitted

that m arket o r area or m aterial. A com pa ny s acceptance of a low ra te of growth , on t

other hand, reflects a decision, conscious or unconscious, to retain a set of priorities

which a given orientation and pattern of diversification are more highly valued than growt

Other companies, however, are so .structured and managed that a certain rate of growth

required if they are to function properly. If their current set of products and markets w

not perm it tha t desired ra te of grow th, they will seek new ones to fill the ga p . This decisi

reflects their dominant orientation and diversification attitude. .Among firms with

orientation that requires a certain rate of growth, two different approaches for transmitti

that orientation to individual business units can be observed. Under one approach t

corporation requires each business unit to meet that growth rate. Under the other, ea

business unit is assigned a mission within the corpora te portf olio that varies the grow

rate expected (as well as varying the other dimensions of expected performance) by busines

The attitude toward growth is particularly important in establishing the likely perspecti

on manufacturing as a competitive weapon. In businesses in which growth is a prima

m otivating factor, the role of m anu facturing often becomes one of simply keeping up w

that growth, as opposed to providing other characteristics to the products and services bei

delivered to the custom ers. Thu s, in high-growth businesses, m anu fac turing s prim a

thrust is getting out the product, and that tends to take precedence over establishing

competitive advantage on other dimensions of manufacturing capability. In divisions

businesses where growth is not a primary motivating factor, the opportunities f

establishing m anufa cturing as a critical input to the business strategy are generally g reate

om petitive priorities

A final set of attitudes—and in a .sense those that are implied by, and integrate a

summarize, the others—is embodied in the choice of competitive priorities. In its simple

form, this choice is between seeking high profit margins or seeking high output volumes.



Manufacturing Strategy 8

This concept of competitive priorities must be expanded and enriched, since businesse

can compete in other ways than simply the prices of their products. If a broader set o

priorities is considered, the possible roles for manufacturing strategy as a basis fo

competitive advantage are significantly enhanced. These priorities can include quality

dependability and flexibility—in addition to cost (price).

In some businesses the basis of competitive advantage is superior quality—either b

providing higher quality in a standard product (for example, Mercedes-Benz) or b

providing a product that has features or performance characteristics that are unavailable i

competing products. In discussing quality, it is important to differentiate between actua

quality and perceived quality (the latter often more a function of selling and advertisin

approaches), as well as between quality defined as the absence of defects and quality define

in term s of performance capabilities.

Another dimension that some businesses use in establishing competitive priorities is tha

of dependability Although the products of such firms may be priced higher than th

products of others, and may not have some of the features and workmanship found in othe

products, they do work as specifled, they are delivered on time, and the company stand

ready to mobilize its resources instantly to ensure that any failures are correcte

immediately. IBM, Caterpillar and Sears have often been cited as examples of companie

whose typical strategies emphasize this competitive priority.

Still another major priority that can be used as a basis for competitive advantage i

Two important aspects of flexibility are product flexibility and volume flexibility

A business that competes on the basis of product flexibility emphasizes its ability to handl

difficult, non-standard orders and to lead in new product introduction. Often it is smalle

companies that adopt this as a primary competitive priority. Still other businesses compe

through volume flexibility, emphasizing their ability to accelerate or decelerate productio

very quickly. Successful companies in highly cyclical industries like housing or furnitu

often exhibit this trait as a primary priority.

In summary, within a given industry diflerent companies (different business unit

emphasize each of these four competitive dimensions—price, quality, dependability an

flexibility—to varying degrees. It is both difficult (if not impossible) and potentiall

dangerous for a company to try to compete by offering superior performance along all o

these dimensions simultaneously. Instead, a business must attach definite priorities to each

and those priorities determine how that business will be positioned relative to i

competitors—in terms of its competitive advantage. It is the specification and clarificatio

of these priorities and their pursuit in the manufacturing function that determine th

com petitive role of that func tion.

Practially every decision a senior manager makes will have a diflerent impact on each o

these four dimensions. Thus, a wide range of decisions confronts the organization, an

trade-offs must be made among them. Unless these trade-offs are made in a consisten

manner over time, the business vvill slowly lose its competitive distinctiveness. Without suc

consistency, it does not matter how much effort the organization puts into formulating an

expou nding its str at eg y ; it will not have an effective on e.



82 Steven C. Wheelwright

Tab le 1. Cha racteristics of strategy

Time Horizon. Generally, strategy is used to describe activities that involve a long-term time horizon, both w

regard to the time it takes to accomplish such activities and the time it takes to observe their impact

Impact. .Although the consequences of pursuing a given strategy will not be clear until considerable time h

elapsed, the ultimate impact will be relatively greater Ihan the impact of shorter-term tactics or operat

activities

Concentration of effort. The concept of strategy usually imples conccntratmg one's activity, effort, or attent

on a fairly narrow range or dimension of pursuits. Implicitly, focusing on certam activities means that one m

reduce the elTon in other directions

Pattern of decisions. Although some companies need to make only a few major decisions in order to implem

an entire straiegy, most strategies require a pattern of decisions across a vanety of subareas. Certain types

decisions must be repeated over time, and a number of secondary or supporting decisions are needed

implement the strategy

Pervasiveness. .\t\ organization s strategy embraces a wide breadth of re.source allocation processes and day-

day operations. In addition, the need for depth requires that all levels of an organization act instinctively

ways that reinforce the straiegy

general characteristics arc associated with the term when talking about strategy in a busin

setting. Five of the most important characteristics are summarized in Table 1.

As outlined in Figure 1, there are three primary levels of strategy in a manufactur

firm—corporate, business and functional—corresponding roughly to the organizatio

units charged with formulating and pursuing each level of strategy.

Corporate strategy specifies two areas of overall interest to the corporation:

definition of the businesses in which the corporation will participate (and, by omissi

those in which it will not participate), and the acquisition of corporate resources and th

commitment to each of those businesses. In very large diversified companies it may

necessary to specify for each of several sectors or groups, a strategy (the businesses in wh

the sector or group will and will not participate, and an allocation of resources).

As discussed previously, the dominant orientation frequently defines the businesses

which a corporation will participate, using such dimensions as materials, markets a

technologies. The second element of corporate strategy—the acquisition and deployment

resources—usually results in a strong flnance function at the corporate level. This functi

(along with the treasurer) is normally concerned with acquiring financial capital, a

allocating it as part of the firm's capital budgeting procedures. The portfolio concept

aimed in large part at improving such resource allocation (Haspeslagh, 1982). Hum

resources are important too, and personnel has strengthened its corporate-level activity

firms have recognized the importance of acquiring and deploying valuable hum

resources.

The second major level of strategy outlined in Figure 1, that of business strate

generally refers to two critical tasks carried out by each 'strategic business unit' (SBU),

strategic planning unit (SPU). First, it specifies the scope or boundaries of each business in

way that operationally links the business strategy to the corporate strategy. Second,

specifles the basis on which that business unit will achieve and maintain a competit

advantage.



Manufacturing Straiegy

Corporate

strategy '

Business A *

strategy

Business B

strategy

Business C

strategy

oirket^ng /

saies

strategy

Manufacturing

strategy

R SD

strotegy

Accounting /

control

strategy

• Might also refer to group or sector levels m a large diversified organization.

•* Most often refers to a division or strategic business unit (SBU).

Figure 1. Levels of strategy

Functional strategy the third level in Figure 1, must be developed and pursued if ea

an ac co un ting /co ntro l strategy— although in anoth er business, different function

petitive adv antag e (business strategy) and how it will comp lement the other function

To be effective, each functional strategy must support, through a consistent pattern

sub parts of the R D and m anufa cturing functional strategies, respectively.




Table 2. Decision categories com posing a ma nufacturing strategy

1. Capacity—amount, t iming, type

2 Facilities—size, location, focus

3 . Technology—equipment , automation, connectedness

4. Vertical Integration—direction, extent, balance

5. Workforce—skill level, pay, security

6. Quality—defect prevention, monitoring, intervention

7.

Production planning./materials control—computenzation, centralization, decision rules

8. Organization—structure, reporting levels, support groups

its capabilities an d policies and the bu siness s com petitive a dva ntage . Tra nslating

business strategy into an appropriate collection of bricks, mortar, equipment, people a

procedures requires resources, time and management perseverance to ensure that the la

number and variety of manufacturing decisions are complementary and mutua

supportive.

Because of the diversity of manufacturing decisions made in different businesses,

organizing framework that groups them into major categories is a useful tool in b

identifying and planning the functional strategy for manufacturing. One framework t

has proved particularly helpful in working with a variety of firms is summarized in Tabl

(Hayes and Wheelwright, 1983). This framework specifies eight categories into wh

manufacturing related decisions can be grouped.

It is the collective pattern of decisions in the eight categories of Table 2 which determin

th e

structure and capabilities

of a manufacturing organization. Like any piece

equipment, a manufacturing organization will be able to do certain things well and to

other things only with difficulty—and probably poorly. These inherent strengths a

weaknesses are the direct result of the patterns of decisions pursued by the organizatio

just as the capabilities and limitations of an airplane are a function of the patterns

decisions its designers and producers adopt for it.

A review of Table 2 can help clarify several key management issues related to the noti

of a functional manufacturing strategy. The first four decision categories generally

viewed as structural or strategic in nature because of their long-term impacts, the difficu

of reversing or undoing them once they are in place, and their tendency to requ

substantial capital investment when altered or extended. In fact, this latter aspect has l

man y org anization s to view their capital budgeting process as the mechanism by which th

stra teg ic m anu factu ring decisions get reviewed. The last four decision categories often

viewed as much more tactical in nature because of the myriad of on-going decisions th

encompass, the need to link them to specific operating aspects of the business, and th

tendency not to require large capital investments at a single point in time. However, the

are included in Table 2 because recent empirical evidence suggests that the cumulat

impact of patterns of decisions in these categories can be as difficult and costly to change

not mo re so) than the first four categories (Ab erna thy, C lark and Ka ntrow , 1981; Hay

1981; Wheelwright, 1981).

Some subareas in which decisions are made within each of these categories are also show




85

capacity depends on whether the production rate is kept constant

(level)

over time or it i

changed frequently in an attempt to 'chase demand'. Similarly, work-force policies interac

with location and production process choices, and purchasing policies interact with vertica

integration choices. Decisions regarding organizational design also are highly dependent on

vertical integration decisions, as well as on the company's decisions about how various

plants are located, specialized and interrelated.

Only infrequently will an organization make a basic change in any one of these categorie

(that is the traditional definition of a structural strategic decision), but, depending on the

industry and the firm's approach to its business, it probably will make numerous decision

that fall into these categories during the course of every year. It is critical that the decision

made be consistent with the decisions made at other points in time and in other categories

and that over time they lead to the kind of manufacturing strategy and capabilities required

for the business strategy to be effective. // is this pattern of structural dec isions over tim

that constitutes the man ufacturing strategy of a business unit.

More formally,

manufacturing strategy consists of a sequence of decisions that will enable a business unit to

achieve its desired com petitive adv antag e.

As a business strategy evolves, change usually becomes necessary in all of these struc tura

categories if consistency is to be preserved. The root cause of many a 'manufacturing crisi

is that a business's m anufac turing policies and people— wo rkers, supervisors and

managers—have become incompatible with its plant and equipment, or that both hav

become incompatible with its competitive needs. Even more subtly, plants may still b

consistent with policies, but the manufacturing organization that attempts to co-ordinat

them all is no longer doin g its jo b efl ectively. T he m an ufac turing org aniz ation i

particularly crucial, because it is the glue that keeps manufacturing priorities in place and

welds the manufacturing organization into a competitive weapon.

Defining manufacturing strategy as a pattern of decisions suggests criteria that might b

used to evaluate the app ropriate ness of a given ma nufacturing decision (and strategy ). Such

criteria generally fall into one of two subgroups, as suggested in Table 3. The flrst group

relates to the notion of consistency. One manufacturing strategy is considered 'better' than

another to the degree that it incorporates the types of consistency outlined in Table 3

internal consistency (within the manufacturing function and across functions in the busines

unit), and external consistency (between the manufacturing function and the environmen

of the business unit). The other group of criteria indicates the degree to which the factor

and activities most important to the competitive .success of the business are emphasized.

There are three important aspects that can be summarized at this point. First, a

manufacturing strategy is determined by the pattern of decisions actually made (that is, by

Table .V Criteria for evalu ating a ma nuf actu ring strategy

.\ Consistency

1. Between the m anu factu ring strateg y and the overall business strategy

2. Am ong the man ufacturing strategy and the other functional strategies within the business

.V Am ong tbe decision categories that make up the man ufacturing strategy

4. Between the man ufacturing strategy and the business environ men t (resources available, competitiv



Steven C Wheelwright

of manufacturing capab ilities that will allow the business to pursue its current (an

of a corporate manufacturing strateg}

corporate manufacturi

The first option is to consider that such an overall manufacturing strategy exists only

and Ta ble 2 suggests tha t this is no t a pa rticula rly useful definitio

gen eric business strategies (that is, pursu e similar desired com petiti

A second and much more useful definition of corporate manufacturing strategy can b

Within a corporation, the business strategies often have elements in common. Therefor

by the cross-hatched are as, and the colum n on the far right of the Tab

ities, or certain p ersonne l policies indepen dent of the business or division they serve.

With this definition, a corporate manufacturing strategy consists of those subparts

ion categories that are held constan t across the firm s bu sinesses. T

extensive set of work-force policies com mo n across all of the co rpo rat io n



anufacturing Strategy 8

Table 4. The concept of a corporate manufacturing strategy

Dimensions

of

manufactur ing

strategy*

1. Capacityt

2.

Facilitiesf

3. Technologyt

4.

Vertical

integrationt

5.

Work forcet

6. Qualityt

7. Production planning/

materials control^

8. Organizationt

Individual business strategies

Business

A*

X X X X X X

OOOOOO

oooooo

oooooo

X X X X X X

X X X X X X

X X X X X X

oooooo

oooooo

X X X X X X

oooooo

oooooooooooo

oooooo

X X X X X X

oooooo

oooooo

X

X X X X X

X X X X X X

X

X X X X X

oooooo

X X X X X X

X X X X X X

oooooo

oooooo

X X X X X X

X X X X X X

X X X X X X

oooooo

oooooo

X X X X X X

oooooo

oooooo

Business

X X X X

,

/ /• /

I / / .

/ / * •

X X X X

X X X X

X X X X

• 1

X X X X

/ /

1

i I 1

1

i I i

X X X X

• 1 1 1

i i 1

X

X X X

X X X X

X X X X

/

• '

X X X X

X X X X

/

/ *• /

/ .• ,• /

. t 1 '

X X X X

X X X X

X

X X X

/ • ••

1 1

X

X X X

/ / / ;

/

/

B*

X

X

,

/

/ /

/ ./

X X

X X

X

X

/

/

./ . •

X X

/

/

/

/

/

/

..•

/

X X

/

1

1

X

X

X X

X

X

( .

X X

X X

/

/

/ /

X

X

X

X

X

X

/

/

;

/

X

X

/

/•

Business

C*

X X X X X X

4-4-4-4-4-4-

4-4-

-^ 4- 4-

+

4-4-4-4-4-4-

X X X X X X

X

X X X X X

X X X X X X

4-4-4-4-4-4-

4-4-4-4-4-4-

X X X X X X

4-4-4-4-4-4-

4-4-4-4-4-4-

4-4-4-4-4-4-

4-4-4-4-4-4-

X

X X X X X

4- 4- 4- 4- 4-

+

4 - 4 - 4 - 4 - 4 - 4 -

X X X X X X

X X X X X X

X

X X X X X

-f 4- 4- -f 4—t-

X X X X X X

X X X X X X

4-4-4-4-4-4-

4-4-4-4-4-4-

X X X X X X

X X X X X X

X

X X X X X

4- -r 4- 4- 4-

4-

4 - 4 - 4 - 4 - 4 - 4 -

X X X X X X

4-4-4-4-4-4-

+ + + + + +

Examples of

generic corporate-wide

guidelines

Justification required

for investment

Timing of additions

relative

to

business cycle

Size

and

location

of

new

facilities

Handling of old facilities

Type

of

produc tion process

organization preferred

(e.g. assembly line)

Relative level

of

technology advancement

Motivation (e.g., cost)

Pricing of internal

transfers

Relative pay scales

Hir ing, promotion,

and

layoff policies

Reporting relationships

Philosophy

on

warranty

Computer suppor t

Charges for inventory

Job classifications

Staff/line relationships

Each column represents the manu facturing straiegy (p attern of manu facturing decisions) that com plements a specific

business strategy.

Each

row

represents beh aviour or pi^ctices and policies in that decision category that are consistent across businesses and

behaviour

not

consistent across

all

businesses.

business unit.

For

instance,

in

their initial response

to the

U .S. O ccupational Safety

and

Health Act (OSHA), a number of companies established a corporate-level position to

oversee their conformity to the Act, because no single op erating unit had enough e.xperience

or motivation

to

address

it

adequately

at the

t ime

it was

passed. Subsequently, many

of

those efforts were decentralized;

now

they

are

more likely

to be

part

of

individual business

unit manufacturing strategies. A similar appro ach

has

been used frequently in dealing with



88 Steven C Wheelwright

present time. The company may choose to pursue that technology and develop an in-hous

capability at the corporate level so it will be available when it is needed by one or mor

individual businesses.

This third definition of corporate manufacturing strategy is very consistent with th

second definition outlined in Table 4. It suggests additional dimensions of manufacturin

strategy and/or subcategories of the eight primary decision categories that at a given poin

in time cut across several businesses. Thus this definition can be considered an extension o

the one described imm ediately ab ove.

THE ROLE OF MANUFACTURING IN DEFINING THE DESIRED COMPETITIV

A D V A N T A G E

Thus far the implicit assumption has been that after others define the desired competitiv

advantage, manufacturing responds with what is required to deliver on that advantage

Although that may be a worthy first step for many firms, recent competitive performanc

suggests that manufacturing can and should take a more proactive role in defining th

desired competitive advantage if manufacturing is to become a significant competitiv

weapon.

In its simplest form, such a proactive contribution can be viewed as manufacturing takin

an equal role—as compared with other functions—in defining the business strategy. In thi

form, manufacturing would give its perspective on major issues facing the business, th

strategies being proposed by other functional heads, and the options open t

manufacturing. Before this can occur, the status and credibility of manufacturing manager

within the firm need to be raised from what often has been a second-class status, to that o

other managers. A variety of steps can be used to establish such increased stature: individua

m anag em ent selection and training , altered career pa ths , a different org aniz ation a

structure, and modified planning and decision-making procedures.

Helpful though such actions might be, they omit important aspects of management tha

are tied to the charac ter, philosophy , and cult ure of an organ ization. The task of to

management is much broader than simply developing a set of marketing, production

engineering, organizational and control policies that support the chosen business strategy

To be really effective, management must work toward the development of a culture—a se

of ingrained attitudes—that helps to communicate its goals, plans, and policies to al

employees, and that reinforces these policies with everybody s subconscious behav iour

Observations from both the perspective of an academic and that of a practitioner may hel

one to understand this better.

From the academic perspective, it is useful to observe what has happened to the field o

policy and strategy over the past decade. Historically, the field of business policy included

not only what is currently referred to as strategy formulation, but also what might be terme

m anag em ent phi loso phy , that is, basic attitudes toward people and tow ard certain ways o

conducting business, independent of particular strategies and the type of competitiv

advantage being sought, (see, for example, Andrews, 1980). In a business school curriculum




89

This shift in academic emphasis is perhaps best captured in the PIMS project, now part o

the Strategic Planning Institute. When initiated by General Electric in the late fifties and

early sixties, PIMS was part of a broader project aimed at determining how

structura

characteristics

(such as market share and growth) and

management behaviour

(such as basi

attitudes and philosophies) affected business results. Subsequently, management behaviou

was dropped from study, not because it was considered unimportant, but because it prove

to be extremely difficult to measure, analyse and control. The

structural characteristic

dimension remained and now dominates the PIMS project. Although details of the PIM

analyses often are debated, the view that structural characteristics are the primar

determinants of success and thus the very heart of strategic management, has becom

widespread. It also forms the core of the field of economics called industrial organizatio

theory, which seeks to explain business success in terms of

industry

structure.

A second perspective relating to man ufactu ring s poten tial con tributio n in defining

com pany s desired comp etitive advanta ge comes from a handful of leading firms that hav

experienced continued success over several decades. Such companies as S. C. Johnson, th

Timken Corporation, Caterpillar and IBM are representative of this group. Th

management of each of these firms believes, as illustrated by what they say and what the

do,

that certain policies, philosophies and attitudes should pervade the entire organizatio

and that

they are more important than strategy

These firms have clear statements of belie

(creeds) relating to people and management practices. These beliefs take precedence ove

and serve as screens for all strategic plans and decisions.

In these companies the pervasive understanding of the philosophy and its implication

leads to reinforcing behaviour at all levels and makes the likelihood of consistency an

prioritized efforts much greater. It is not uncommon in such firms to find that allegiance t

the company supersedes allegiance to a profession. Employees use common terms and hav

a set of com m on examples (or folklor e ) to guide their be haviour. There tends to be

co m pa ny way of doing things. There is a sense of tradition and c ontinuity within the firm

and, finally, former employees tend to retain a strong sense of pride and loyalty in th

com pany and feel a com mo n bond with other alu m ni .

Clearly, there are risks associated with too much attention to philosophy and not enough

to strategy, just as when the reverse is true. It is the balance of both that can provide a bas

for manufacturing to be a truly equal partner in the strategy formulation process. I

addition, this balance seems to be excellent insurance against the type of disaster that can

occur when manufacturing strays too far afield or falls out of step with the other functions

Finally, this balance tends to ensure a more appropriate trade-off between long-term an

short-term actions.

Such an overriding philosophy (or culture) specifies the kind of company it is, how it i

viewed by com petitors , stock holders, employees and the public, and the values these group

desire to share. It bears repeating that this concept is particularly important in it

implications for manufacturing, because such a philosophy is effective only to the exten

that it is shared by the people in the organiz ation, and the m ajority of a comp any s peopl

tend to belong to the manufacturing organization. Recognizing that manufacturing is th

major kee per of the corp orate philosophy appears to be a prerequisite to m anufa cturing

making a ma jor co ntrib utio n to the definition of strategy and th e org an iza tion s desired



90 Steven C W heelwright

viewing decisions often seen as tactical (workforce, quality, production planning/materia

etc.),

in their strategic context. As an illustration of the perceived importance of suc

philosophy in certain management groups, it is interesting to note that as of early 198

none of the three Japanese-owned TV manufacturing facilities in the United States had y

adopted quality circles. Although quality circles were being used extensively in TV plants

Japan, the view of Japanese management was that their U.S. plants were not yet ready f

them. They felt that their philosophy of business had to become ingrained and pervasive

their American plants before it would be possible to achieve the full long-term benefits

the circle conc ept; without th at philosophy it would be just ano ther 'm otiv atio n' techniq

aimed more at window dressing than real improvement.

A strong company philosophy can make one further contribution. As suggested in earl

sections, a major component of effective manufacturing strategy involves anticipating a

providing capabilities that will be required for future competitive advantage. Such

philosophy can help guide manufa cturing in this task— adm ittedly never an easy one from

forecasting viewpoint—and enable it to contribute to the definition of future busine

strategy by identifying capabilities that might be developed and ways in which they mig

become a base for a new or modified competitive advantage. Thus, a strong philosophy c

serve as the glue that makes strategy development an interactive process, with inputs a

perspectives from all functions, and ensures consistency and integrity of the individu

components .

CONCLUSIONS

Perhaps the basic test of whether a company has a strategy at the level of each individu

business and its functions is not whether it is clear about what it wants to do, but whether

is clear about what it does not want to do, and whether it consistently reinforces th

desires through the pattern of decisions it makes over time.

Although the notion that manufacturing can be a competitive weapon, rather than a s

of ponderous resources for simply getting today's products made, is not new, its practice

not very widespread. Most manufacturing-based businesses appear to content themselv

with trying to minimize the negative impact that manufacturing could have on t

accomplishment of the business strategy. Even in many well-managed firms, the role

manufacturing is essentially a neutral one, with the view that m arke ting, sales, and R

are much better bases for achieving a competitive advantage.

Once the attitudes and competitive priorities are identified for a business, the task f

ma nufac turing is to structure and man age itself in such a way as to mesh with and reinfor

that strategy. Manufacturing should be capable of helping the company do what it wants

do without wasting resources in lower-priority pursuits.

It is surprising that general managers sometimes tend to lose sight of this concept, sin

the need for priorities permeates all other areas of management. In a sense, it is t

fundamental task of general management. Marketing management segments markets an

focuses product design, promotion, and pricing around the needs of chosen segmen



Manufacturing Strategy 91

easy to explain why many manufacturing managers themselves either try to be good at

everything at once, or focus on the wrong thing. They, more than anyone, should know that

all-purpose tools generally are used only when a specific tool is not available. Perhaps they

fall into the trap because of too much pride or too little time or a reluctance to say no to

their superiors. What is needed is a statement of manufacturing strategy that reflects the

true priorities of the business strategy, and one that allows the manufacturing organization

to be a major contributor to that competitive advantage.

It is to be hoped that the development of the strategy field—sparked by the efforts of

academics and practitioners alike—will pursue the various aspects of manufacturing

strategy at an increasing pace, changing references to it as a missing link to references to it

as the distinctive link in many firms.

ACKNOWLEDGEMENT

The author is particularly grateful to Professor Robert H. Hayes of Harvard for sharing in

the development of several of the ideas and thoughts discussed in this paper.

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