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