The Effect of Manufacturing Strategy on Organizational Performance

Introduction 

In the current manufacturing industry, manufacturing companies are facing enormous market pressure as a result of a sophisticated market, competition from global firms, and changing customer preferences. Thus, market pressure necessitates a tactical and strategic framework that can allow manufacturing companies to behave in flexible and adaptive ways that will permit them to constantly evolve in the market. The manufacturing industry is under a lot of pressure due to market and environmental forces. Manufacturers in Ghana are facing competition from foreign firms on cost, flexibility, quality, and innovation. Global competitors are continuously working on ways to improve manufacturing, create new products, and make manufacturing more responsive and proactive. 

These competitive forces should make manufacturers understand the forces that drive competition in the manufacturing sector. Different manufacturing strategies which have different effects on organizational performance have been suggested. Manufacturing businesses should be able to follow more that one manufacturing strategy to have a competitive edge. These strategies involve speed of production, quality, flexibility, and cost. Also, decreasing life of products in the face of intense competition require organizations to include innovation as an important factor in achieving competitive advantage. That said, this paper seeks to critique the article by Rose, Kumar, & Ibrahim (2008) 

Overview of Case 

The research reported in the article by Rose, Kumar, & Ibrahim (2008), investigated the effect of manufacturing strategy on organizational performance in the Malaysian electrical and electronic sector. The research found that a strategy that is based on cost tremendously affected organizational performance of the manufacturing companies that participated in the study. According to Rose, Kumar, & Ibrahim (2008), the information gathered in the study is crucial in formulation of strategies and understanding how manufacturing strategies can improve performance of organizations in general. Rose, Kumar, & Ibrahim (2008) conducted a regression analysis, and based on the regression analysis, an equation was proposed that can predict organizational performance. The equation shows that cost-based strategies have overall contribution in predicting manufacturing organizations’ performance in the electrical and electronic sector in Malaysia. 

This result was unexpected because other studies have indicated that cost hardly makes a significant impact on performance of firms, especially in industries that are characterized by rapid changes and a highly innovative and competitive market environment. The result was unprecedented for flexibility and quality since previous studies about manufacturing strategy had shown that the two competitive priorities had been the key contributors towards achieving objectives of organizations. According to Rose, Kumar, & Ibrahim (2008), a strategy that is based on cost is normally characterized by overhead minimization, pursuit of economies of scale, and tight controls. Strategy for cost reduction involves improving competitiveness by lowering prices of services and products. This method improves efficiency of production and minimizes expenditure by increasing production scale, adopting new technology, or reengineering processes of production with the aim of selling products and services at prices that are lower. 

Critique 

Although cost-based strategy can work as posited by Rose, Kumar, & Ibrahim (2008). There are many factors that could have played a role in the findings of the study. According to Alford & Greve (2017), strategy is the long-term direction an organization takes in which the resources of the organization are matched to the economic climate and customers’ expectations and owners of business. On the other hand, manufacturing strategy is a decision sequence, that over time, enables an organization to achieve its desired manufacturing infrastructure, structure, and a set of other abilities (Helms, 2018). Since manufacturing strategies take effect over time, no organization can completely avoid the impact of cost increases, which the study by Rose, Kumar, & Ibrahim (2008) failed to take into account. 

Further, the study did not take into account the effects of inflation on current operation costs of the organizations that were sampled for the study. The findings may not apply in the long run because increasing capital requirements may dilute the impact of cost reductions and affect the ability of organizations to compete in the long-term. Because different organizations are affected differently by inflation, the first step in the study would be to diagnose the changing economics of cost from raw materials stage to the final price paid of the product paid by the consumer. This involves creating a value chain that indicates the value added at every stage in the entire market process and expose the shifting cost elements. 

Next, the long-term shifts need to be assessed in the competitors’ cost position relative to the organizations under study. Finally, implications of future inflation into the organizations’ costs and the costs of their competitors. This type of analysis would help in providing the backdrop for devising a strategy that is effective to help manufacturing firms avoid competitive pricing traps, whether they want to be the low-cost producers, focus sales efforts on specific market segment, or differentiate products. Finally, the study findings are based on a single sector which implies that it lacks generalizability and cannot be applied to other sectors. 

Applicability to Ghana 

Ghana’s industrial sector is a major driver of growth and the country leverages its abundant resources to diversify the economy and attract investment. Import substitution and industrial development underscore key initiatives and projects throughout the manufacturing sector. Manufacturing has a strategic power creating competitive edge and supporting business strategies. From 1960s to 1970s, many researchers contended that linking ling-term and major decisions in manufacturing such as the extent of vertical integration, facilities, and focus to business strategy could make manufacturing a competitive weapon (Diallo & Mingaine, 2013). During this time manufacturing was viewed as a simple process of turning materials into products. This is the simplistic view that Rose, Kumar, & Ibrahim (2008) take in their study. Coming up with ideas to make manufacturing efficient and effective, most authors have suggested that organizations should aim for the lowest possible cost. 

However, this view that Rose, Kumar, & Ibrahim (2008) also seems to take no longer suits the manufacturing environment in Ghana and many countries around the world because there have been fluctuations in manufacturing in the past few years. For instance, globalization has led to increased complexity levels and ambiguity. Also, customers have varied demands, there are radical declines in lifecycles of products, and progress in information and manufacturing. Therefore, the findings by Rose, Kumar, & Ibrahim (2008) cannot apply to the manufacturing sector in Ghana. Effective manufacturing strategies should anticipate advancements in technology, link business strategy and manufacturing strategy, and a strategic planning process that includes the leaders of organizations, and communication of the strategy to employees. 

Conclusion and Recommendations 

In the current manufacturing industry, manufacturing companies are facing enormous market pressure as a result of a sophisticated market, competition from global firms, and changing customer preferences. Although cost-based strategy can work as posited by Rose, Kumar, & Ibrahim (2008). There are many factors that could have played a role in the findings of the study. For instance, the study findings are based on a single sector which implies that it lacks generalizability and cannot be applied to other sectors. For this reason, the study findings are not applicable to Ghana. This paper recommends a manufacturing strategy that includes five areas of decision such as product engineering or design, product control and planning, management and organization, equipment and plant, and staffing and labor. 

References 

Alford, J., & Greve, C. (2017). Strategy in the Public and Private Sectors: Similarities, Differences and Changes. Administrative Sciences , 1-17. 

Diallo, A. B., & Mingaine, L. (2013). Manufacturing Strategies adopted By Companies For business performance. Research Journal of Economics and Business Studies , 22-30. 

Helms, M. M. (2018). Manufacturing Strategy and its Importance Organizational Competitiveness. Competitiveness Review An International Business Journal incorporating Journal of Global Competitiveness , 47-53. 

Rose, R. C., Kumar, N., & Ibrahim, H. I. (2008). The Effect of Manufacturing Strategy on Organizational Performance . International Performance Improvement , 18-25.