The relationship between manufacturing strategic decisions, competitive priorities and firm performance in the automotive supply industry of Iran

Manufacturing strategic decisions and competitive priorities have effects on competitive advantage of firms. The focus of this study is on the relationship between the manufacturing strategic decisions and competitive priorities and its influence on the firm’s performance in the automotive supply industry of Iran. A survey has been conducted by the means of a questionnaire to collect data. Data was analyzed by descriptive and inferential statistics (bivariate correlation and multiple linear regression). In this study, after classifying the manufacturing strategic decisions (according to competitive priorities), its influence on the fulfillment of competitive priorities and business performance has been distinguished. Findings indicated that some of the decisions had more effects on profit, cost, quality, flexibility and delivery capabilities.

The manufacturing strategy seeks to answer the question “How to compete” (Voss, 2005). Competitive priorities and manufacturing strategic decisions are the most important components of the manufacturing strategy. The importance of making manufacturing strategic decisions should be sought in resource constraints. In other words, organizations have to choose the goals and priorities, and in order to fulfill them, they should be able to choose the most effective measures that on the one hand fulfill their priorities with least using resource, and, on the other hand, by doing so, improve their total business performance, such as profitability (Größler, 2010). In this study, after clarifying the competitive priorities in the automotive supplier industry and its relevance to the decisions made by the companies, two fundamental questions are answered. First, whether decisions made to fulfill competitive priorities have the maximum influence on generating manufacturing competence and competitive potentials, and that there is a combination of strategic manufacturing measures that if organizations pay attention to them, they will be able to better fulfill competitive capability. After answering the first question, the second question seeks to answer whether decisions that have the most influence on the fulfillment of competitive priorities have the maximum influence on total performance of companies.
Literature on studies performed on manufacturing strategy can be distinguished in different categories. In the first category, the relationship between competitive priorities (or capabilities) and the importance and type of relationship they have with each other has been examined. In the second category, companies have been classified (clustered) according to competitive priorities and the performance of each cluster has been examined. In the third category, structural and infrastructural decisions have not been omitted and in fact, they have been considered as a part of the manufacturing strategy (McCarthy, 2004). In addition, some researchers have studied the best practice companies (Shah & Ward, 2003; Voss, 2005).

Considering the field's relationship with the research question and access to information, active companies in the automotive supplier industry of Iran are selected as the statistical community. With regard to the subject and the possibility of better access to the suppliers, a list of companies in Sapco and Sazehgostar was prepared. The questionnaire was sent to all 215 companies in the list and 48 companies responded, which means a response rate of over 22%. In this study, measurement is used to collect data and information about competitive priorities, manufacturing strategic decisions and performance. For this purpose, a questionnaire is used. Spearman correlation coefficient is used to find the relationship between competitive priorities and manufacturing strategic decisions. Also, to investigate the effect of manufacturing strategic decisions on companies’ performance  (including cost, quality, flexibility, delivery) and business performance (including profitability, return of investment rate, sales growth and market share), multiple linear regression is employed. In this study, a stepwise approach is used.

In this study, after identifying the common manufacturing strategic decisions in the automotive supply industry to meet their competitive priorities, the influence of such decisions on the fulfillment of competitive priorities was studied. Since the influence of such decisions on the fulfillment of competitive priorities was less than what expected to be, efforts were made to identify those decisions that had the most influence on the fulfillment of competitive priorities. After identifying such decisions, they were referred to as the best manufacturing strategic decisions (Table 1).