PERFORMANCE MEASUREMENT AND STRATEGY PROCESS OF AUTO COMPONENT MANUFACTURERS

Abstract

business intelligence systems, in the strategic management process of ACMs are investigated. The measures are mainly the tools, techniques, reports, etc. that help in improving performance of business organizations. The data are analyzed with the help of Principal Component Analysis and Logistic Regression. A list of key performance indicators (KPIs) is also presented to the ACMs to know their choices. The cluster analysis of the data suggests that the ACMs adopt mainly three different types of strategy processes. First ones are the ACMs that have 'more rational and tightly structured strategy process'; second, ACMs that have 'more generative and loosely structured strategy proccss' last, ACMs that have 'rational and tightly structured strategy process' on one hand and gcnerative and loosely structured strategy process' on the other. Furthermore, different ACMs have adopted different generic strategies. Strategies pursued by ACMs can again be divided in mainly three parts. First, there are ACMs that have adopted 'cost leadership' strategic position, second ones are those ACMs that have chosen 'product differentiation' strategic position, and third ones are the ACMs that have taken on a mix of both the strategic positions, i.e. a dual position. Further analysis of demographic information of the 112 respondent ACMs and the case studies of two companies (four ACMs) suggest that highly performing ACMs have strategy process with both the features, i.e. 'rational and tightly structured processes' on one hand and gencrative and loosely structured processes' on the other. Also highly performing ACMs simultaneously pursue both the strategies of 'cost leadership' and 'product differentiation' by maintaining a nice balance between the two. Regarding the use of measures in strategy process, the important findings are that the high usage of performance measures (financial as well as non-financial systems) is associated with the simultaneous pursuance of dual strategy processes and dual generic strategies. Among various measures used by the ACMs, the important measures that significantly explain strategic processes are financial accounting measures, target costing, advanced production and quality measures, customer related measures, and advanced business intelligence applications. The study carries important lessons for the industry and makes important contribution to the theory. The automotive manufacturers instead of making tough choice between 'cost leadership/defender position' and 'product differentiation/prospector position' should strive to pursue both. Considering a lot of emphasis being placed on focused strategic stance in the current literature, adopting this dual position seems a difficult decision. Although many ACMs that serve single OEM adopt a focused strategy, but many others are using dual position to their advantage. Also the automotive nianufacturers which make use of many measures (financial, non-financial, and business intelligence), and use those to a great extent in their strategic management process make higher sales and earn higher profits. Use of measures to a great extent in strategic management increases the odds of an ACM adopting dual strategy process and dual generic strategy. The high use of measures is positively associated with meeting both the requirements of remaining focused in established markets and finding new opportunities to grow in the competitive and disruptive world.