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Competing through

Group 1
Avneesh Bansal
Rahul Sadhu
Shubham Gupta
Ameya Shire
Kaushal Seth
Suman Sarkar
Suraj Kandoi
• Today managers want to boost productivity, improve product quality, and
incorporate new product innovation in a fiercely competitive environment
• But they generally lack powerful descriptive framework for understanding how
their manufacturing organizations are contributing to overall strategic goals
• The “secret weapon” is not better product design, marketing ingenuity, or
financial strength but superior overall manufacturing capability
• The article identified the different roles that manufacturing can play in a
company’s efforts to formulate and achieve its strategic objectives
Stages of manufacturing effectiveness
• Before going to the framework, few important points are to be
• First, the stages are not mutually exclusive
• Second, it is difficult, if not impossible, for a company to skip a
• Third, the real work of development occurs at the business unit
level and not the corporate level
Stage 1
• They have an “internally neutral” orientation toward
manufacturing not influencing corporate strategy
• They seek only to minimize any negative impact it may have
• They view manufacturing capability as the direct result of a
few structural decisions about capacity, facilities, technology
• Management usually calls in outside agencies to fix problems
• Eg. consumer electronics and electrical equipment
Stage 2
• They seek “external neutrality” with other firms by following
industry practice in matters regarding the work force, equipment
purchases, and the timing and scale of capacity additions
• They treat capital investments in new equipment and facilities as
the most effective means for gaining a temporary competitive
• They viewing economies of scale related to the production rate as
the most important source of manufacturing efficiency
• They avoid making major changes to product or processes
• Manufacturing investments are made in case of shortcomings
• Eg. electronic instrument assembly and pharmaceutical production
Stage 3
• They expect manufacturing actively to support and strengthen the
company’s competitive position
• They seek that manufacturing fits into their business strategy (being
“internally supportive”)
• They formulate a manufacturing strategy to guide manufacturing
activities over an extended period of time
• Over a period of time, they make systematic investments on
manufacturing capability that are in line with it
• They pursue advances in manufacturing practice, but in strictly defensive
Stage 4
• The competitive strategy rests to a significant degree on a company’s
manufacturing capability
• Manufacturing capability is expected to make an important contribution to
the competitive success of the organization (being “externally supportive”)
• They anticipate the potential of new manufacturing practices and
technologies and try to gain expertise on it before realizing its implications;
improving on both product and process
• They develop long-range business plans by treating the manufacturing
function as a strategic resource
• Two types of stage 4 firms- one has primary emphasis on a manufacturing-
based competitive advantage; the other seeks a balance of excellence in all
its functions
Managing the transition
• The four stages suggest the path and speed that a company might
follow to enhance the contribution of its manufacturing function
• Due to inertia of the large company make them slowly transition
from one stage to another and success of this transition is filled
with challenges which can not be overcome with just applying
endless resources but requires leadership from within the
manufacturing function
• For transition from one stage to another we need to change how
people think and shift of choices of decision like planning for
general purpose facilities to focused factories
• Most important viewpoint in this shift is the attitude
towards work force management
Alternative Views of Work Force Management
Stages 1, 2, and 3: Traditional, Stage 4: Broad Potential,
Static Dynamic
Command and control Learning
Management of effort Management of attention
Coordinating information Problem-solving information
Indirect (systems and values)
Direct (supervisory) control control
Process stability/worker Process evolution/worker
independence dependence
Big jump to Stage 4
• The jump from stage 3 to stage 4 is substantially different and
difficult as compared to previous transition, earlier transition are a
form of manufacturing fixing itself but moving to stage 4 changing
the view of how everyone thinks about manufacturing and
interacts with it
• In stage 3, manufacturing considerations feed into business
strategy, but the function itself is still seen as reactive, not as a
source of potential competitive advantage but Stage 4 implies a
deep shift in manufacturing’s role and is at last regarded as an
equal partner and is therefore expected to play a major role in
strengthening a company’s market position

• To indicate a companies position in stage 3 or 4 we use 4 variables to

check that out:
 The amount of ongoing in-house innovation
 The Extent to Which a Company Develops Its Own Manufacturing
 The Attention Paid to Manufacturing Infrastructure
 The Link Between Product Design and Manufacturing Process
Why Move it All?
• The companies begin their journey usually at stages 1 and 2 as they view
less focused is paid to manufacture compared to other functions.
• The companies plan to stay for an indefinite period in their initial stage
until there is a direct threat from their competitors (For instance US
Industries 1960)
• In general, the transition from Stage 1 to Stage 2 comes when problems
arise in the manufacturing function. Therefore they tend to look for well-
proven technology.
• The transition to Stage 3, however, usually begins when managers come
to doubt the effectiveness of their traditional approaches or to wonder
about the implications of new manufacturing technologies.
• Transition many times happens mainly due to critical economic
conditions, but as the economy improves, most of the firms revert to their
initial state.
Example 1: GE Dishwasher
• In late 1977, as part of its normal planning for product redesign, the SBU
proposed to corporate management that it invest $18 million in the
incremental improvement of the product and its manufacturing process.
• GE’s senior managers encouraged SBU managers to focus on long-term
prospects for the business and to think about pursuing a more innovative
and aggressive course.

• Possible benefits due to reformulated strategies are

1. Product designers had developed a top-of- the-line product with a plastic
tub and plastic door liner. Although currently more expensive than the
standard steel model, it offered significantly improved operating
performance and used proprietary GE materials.
2. More disciplined product design could increase component standardization
because little of the product was visible after installation

• They jettisoned their modest proposal for incremental product and process improvement
and developed much bolder proposals requiring an investment of more than $38 million.
• new plan also called for a complete redesign of the product around a central core
consisting of a single-piece plastic tub and a single-piece plastic door.
• 1983 there was pronounced improvement in such important areas as service call rates,
unit costs, materials handling, inventory turns, reject rates, and productivity—with a
promise of still further improvements in 1984.
• Their experience underlined the need to treat product and process design in a more
iterative and interactive fashion and the importance of involving the work force in solving
Inference to OS

Operations Operation Market

Resources Strategy Requirements
Inference to OS
Example 2: IBM
7 areas to address
Three Management Principles
• Low Cost
• Emphasizing activities
• Inventories • Recognizing Product and
• Quality Process interaction
• Automation • Focus of attention and
• Organization resources
• Manufacturing System
• Affordability
Stage 4 Implementation at IBM
Thank You