Int. J. Logistics Systems and Management, Vol. 18, No. 4, 2014
Contribution of supply chain to corporate strategy:
a case study in agriculture machinery industry
Javad Feizabadi*
Malaysia Institute for Supply Chain Innovation,
No. 2A, Persiaran Tebar Layar, Seksyen U8,
Bukit Jelutong, Shah Alam, 40150 Selangor, Malaysia
E-mail: [email protected]
*Corresponding author
Mahender Singh
Massachusetts Institute of Technology,
77 Massachusetts Avenue, Building E40-355,
Cambridge, MA 02139-4307, USA
and
Malaysia Institute for Supply Chain Innovation,
No. 2A, Persiaran Tebar Layar, Seksyen U8,
Bukit Jelutong, Shah Alam, 40150 Selangor, Malaysia
E-mail: [email protected]
Soroush Alibakhshi Motlagh
Industrial Engineering Department,
Isfahan University of Technology,
Daneshgah-e-SanatiBlv., Esteghlal Sq.,
Isfahan, 84156, Iran
E-mail: [email protected]
Abstract: The strategy-developing unit of analysis has shifted from industry
(industry structure view) to firm’s unique characteristics (resource-based
view) to dyad routine and processes (relational view) to the current network
relationships (strategic network) view. As a result, the supply chains, due to
their cross-functional and cross-organisational nature, are getting promoted
from being merely operational and tactical concerns to more strategic ones and
therefore becoming a major stakeholder in corporate strategy. This change is
significant particularly in industries that are classified as low clock-speed
and complex product industries. In this article, a conceptual framework for
investigating the contribution of supply chain management to corporate
strategy is developed and applied in agriculture machinery industry. The results
indicate that supply chain contribution to the corporate strategy is significant in
multi-business firms that are characterised by low clock-speed industry, high
reciprocal interdependence between OEM and immediate suppliers, related
diversification strategy, focus on economy of scale advantage, and that are
looking for synergies such as vertical integration, centralised procurement,
asset improvement and centralised inbound and outbound logistics.
Copyright © 2014 Inderscience Enterprises Ltd.
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J. Feizabadi et al.
Keywords: corporate strategy; corporate centre structure; supply chain
management; complex product industries; case study.
Reference to this paper should be made as follows: Feizabadi, J., Singh, M.
and Motlagh, S.A. (2014) ‘Contribution of supply chain to corporate strategy: a
case study in agriculture machinery industry’, Int. J. Logistics Systems and
Management, Vol. 18, No. 4, pp.473–499.
Biographical notes: Javad Feizabadi is an Assistant Professor in Malaysia
Institute for Supply Chain Innovation (MIT Global SCALE Network member
in Asia). During the period 2007–2008, he was involved in a study exploring
the supply chain challenges in the European auto industry at IMD, Switzerland.
His research has been published in several international conferences and
academic journals. His major research areas are supply chain strategy,
intersection between strategic management and SCM, and entrepreneurship in
SCM. He has been a Visiting Professor at the Massachusetts Institute of
Technology (MIT). He is also a Research Affiliate with MIT.
Mahender Singh is Rector of MISI and Research Director at MIT Center for
Transportation and Logistics. He has over 15 years of experience in the field of
SCM. Before returning to academia in 2003, he worked with a leading
consulting firm to implement cutting edge global supply chain planning
solution for Fortune 50 companies. He has spent considerable time in various
countries working on supply chain challenges. His research and teaching is
focused on operations and SCM, with particular interest in exploring the
underlying structure of complex supply chains. His current research efforts
span the domain of supply chain strategy; risk management and healthcare
supply chains.
Soroush Alibakhshi Motlagh achieved High School Diploma in Math and
Physics in 2008 and ranked among top 1% of the Iran National University
Entrance Exam. He started to study industrial engineering in Isfahan University
of Technology in September 2008. He graduated from this field in September
2012 and worked on different course projects and wrote his final project titled
‘The role of SCM in future competition between firms’.
1
Introduction
Many scholars believe that in some industries, supply chains are becoming the main unit
of competition (Christopher, 1996; Anderson and Katz, 1998; Birou et al., 1998; Lummus
et al., 1998; Morgan and Monczka, 1996; Zhang, 2006; Rice and Hoppe, 2001). In SCM
literature, there are two perspectives for studying this subject: supply and procurement,
and transportation and logistics (Tan, 2001). In the first perspective, many scholars
(e.g., Johnson and Leenders, 2008) have studied strategic role and importance of the
purchasing function and supply management in the corporation and argue that supply
chain management can play an essential role in coordinating and connecting other
functions of the firm. As a result, its organisational position should be somewhere at a
higher level of organisational structure and near to the corporate CEO to facilitate
coordination of various functions in the firm especially in industries with complex
products (Kim, 2006).
Contribution of supply chain to corporate strategy
475
The two main concerns in corporate strategy decision-making include the
identification of business opportunities that are attractive for the firm to deploy its
resources and how the firm can coordinate and leverage the synergies among its
homogeneous and heterogeneous businesses (Porter, 1985; Johnson and Scholes, 2002).
Interrelationships between business units, either vertically or horizontally, are very
important and they need to be identified and synergies among them need to be maximised
(Porter, 1985). Some scholars (e.g., Johnson and Leenders, 2008) argue that supply
function can play a vital role in such coordination among business units from the
perspective of interrelationships between units in terms of purchasing and procurement.
Also, in some industries, which are referred to as industries with complex products
(Thompson, 1967; Pfeffer and Salancik, 1978; Dyer, 2000), coordination between final
assembler and its key suppliers play an essential role in firm’s success.
Fine (1999) classifies industries into categories based on their clock-speed.
In situations where we have related businesses or related diversified strategy in
multi-business firm and the pace of changes in the industry is low, i.e., low clock-speed,
it is worthwhile to explore supply chain driven view to develop its strategy. In other
words, when the companies are growing in an inter-connected manner and there are many
potential overlaps in the business portfolio in terms of product technology, process
technology, and other value chain activities, exploring how a supply chain perspective
can help leverage the interrelationship and interconnection among the business units to
create more rent for the corporation is arguably a productive approach.
Other than vertical integration in the supply chains, which has been the main research
area in supply chain literature (Frohlich and Westbrook, 2001), the horizontal integration
(Cordon et al., 2012) is also becoming a new area of study to exploit the economies of
scale, economies of scope, resource pooling and so on. Through horizontal integration the
companies can find the synergic areas among the business unit and generate more rent for
the company. An extensive review of the supply chain and strategic management
literature, however, did not yield many relevant studies that address the linkage between
supply chains and corporate strategy and we believe that there is a gap in the literature
that needs to be filled.
In this article, based on corporate strategy and industry clock-speed literature we aim
to develop a conceptual framework for addressing the contribution of supply chain
management to corporate strategy, and then through a case study in the agricultural
machine industry namely, Iran Tractor Manufacturing Group (ITMG), we evaluate the
framework. The rest of the article is organised as follows. After reviewing the relevant
literature in strategic management and supply chain management domain, the conceptual
model is developed. Then the research method is explained, followed by the case study in
agriculture machine industry. The final section of the article is devoted to discussion of
the result and conclusion.
2
Literature review
The relevant literature is reviewed in three distinct parts. First, literature of industries
categorisation and its implication for company’s functioning and supply chains will be
reviewed. In the second part, the literature around organisational structure of supply
chains, especially in multi-business firms is reviewed and in the last part we will review
literature about corporate strategy and supply chain management.
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2.1 Industry clock-speed
It is obvious that the industry clock-speed has a significant effect on the way it is
organised and managed in the twenty first century (Meijboom et al., 2007). Fine (1999)
introduced the industry clock-speed concept to study industry change rate that is
guided through endogenous factors, i.e., technological and competition. He specified
three dimensions of industry clock-speed: product, process and organisational.
The product clock-speed defines the rate of new product introduction and the rate of
product obsolescence. For example, aircraft industry has low clock-speed. The firms in
this industry introduce two new products on average every decade. In contrast, in the
movie industry, studios introduce more than twenty new products during a year and
therefore classified as high clock-speed.
The process clock-speed determines process technology change rate in an industry.
High change rate in semiconductor industry leads to more frequent changes in process
technology. For instance, semiconductor companies invest billions of dollars in a chip
making plant and it is expected that the plant will be obsolete in four years! On the other
hand, change rate in automobile industry is low. In this industry, the process technology
substitution rate is less frequent and automobile companies expect to utilise an assembly
plant or engine plant over 20 years.
Organisation clock-speed determines change rate in organisational actions (e.g.,
merger, acquisitions, internal development and organisational alliances) and structures
(e.g., restructuring and CEO changing) of companies in the related industry (Fine, 1999;
Nadkarni and Narayanan, 2007).
Fine (2000) suggests that there are some differences in supply chain design
considerations and their success in industries with low and high clock-speed, and
designing options in supply chain in high clock-speed industries can offer insights
that can be used by all industries. The industry clock-speed effect on supply
chain coordination was studied (Meijboom et al., 2007) and it is revealed that with
increasing industry clock-speed, amount of inventory for protecting against
uncertainty can be decreased while relationships with customers and suppliers should be
increased. Also, it was highlighted that the role of outsourcing in both cases (high
clock-speed and low clock-speed) is very important and in medium clock-speed
it plays a less important role (Meijboom et al., 2007). Guimaraes et al. (2002) argue
that despite the conventional wisdom, deep relationships with suppliers in high
clock-speed industries and the performance of supply network are negatively correlated
and there is a positive and significant correlation among deep relationship with suppliers
and the performance of supply network in low clock-speed industries (Guimaraes et al.,
2002). In another study (Fernandez and Kekale, 2005), the influence of industry
clock-speed on reverse logistic activities was explored and it is specified that industry
clock-speed and product architecture are important factors in determination of reverse
logistic activities.
2.2 Strategic importance of supply chain and its organisational position
The unit of analysis in strategy and explaining the firm performance has changed from
industry in industry structure view, to firm in resource-based view and also to inter-firm
and dyad routine and processes in relational view and eventually to network relationships
Contribution of supply chain to corporate strategy
477
in network theory (Dyer and Singh, 1998; Gulati et al., 2000). The strategic importance
of the supply chain can largely be explained through relational and network view of
strategy. Ketchen and Guinipero (2003) state that there are many common research areas
between supply chain management and strategic management fields. They go on to state
that strategic management researches can pose following key questions for supply chain
management: Are some activities or specifications of supply chain rare, valuable and
inimitable? (resource-based view); to what extent knowledge exchange can facilitate
coordinated supply chain actions and improve the results (knowledge-based view)?; when
can a member of supply chain attempt to abuse other members (agency theory)?; when
should supply chain activities imitate industry best practices so that it can reflect the
unique characteristics of its partners (institutional theory)?; how, and to what extent
supply chain activities directly and indirectly affect firm’s profitability and stock price
(emphasise on explaining firm’s performance)?
On the other hand, questions that supply chain management can pose to strategic
management include: how and to what extent supply chain analysis can assist in
clarifying the firm’s conduct and results beyond currently offered explanations (supply
chain as an analysis level in strategy)?; to what extent do strategic supply chains
represent an organisation? How long does it take to transform supply chain capabilities
into sustainable strategic advantage? What are the key performance implications for
development of such chains (SC as an organisation)?
Vertical integration in many industries is giving way to outsourcing in a noticeable
manner, thereby influencing the established operations strategy concepts. Supply chain
strategy is related to integration of activities associated with procuring supply within the
firms, in dyad relations, in chains of companies, and in inter-organisational networks
(Harland et al., 1999). In this case, the role of purchasing and supply function has been
changed from an operational and departmental function to a strategic function and
managers should be able to determine their position in a network of cooperative
relationships and adopt appropriate direction to fulfil final customer requirements.
With increasing strategic importance of supply, many scholars (Ketchen and Hult,
2007a, 2007b; Cousins, 2005; Katz et al., 2003; Halldorsson et al., 2007; Miles and
Snow, 2007; Sahay et al., 2006; Chen and Curtis, 2006; Hult et al., 2007; Ireland and
Webb, 2007; Cousins and Menguce, 2006) have investigated the characteristics and
specifications of strategic supply chains and argued that the purchasing and supply
function can become an important driving force for strategic management of supply
chains and that now, the competition is between the supply chains. Meanwhile, it is
specified that firms with higher level of strategic purchasing compared to the firms with
lower level can gain a better performance in most aspects of their performance (Paulraj
et al., 2006).
The relational capabilities (Dyer, 2000; Dyer and Singh, 1998) can also lead to
higher level of strategic purchasing and, in some industries, higher level of strategic
purchasing can result in sustainable competitive advantage (Paulraj et al., 2006). Strategic
purchasing, therefore, can create a win-win situation for both buyer and seller companies.
Unlike the transaction cost economic argument (Williamson, 1985) for minimising
the opportunism in order to economise transaction costs, strategic purchasing could
potentially lead to maximisation of transaction value (Dyer, 1997) and create competitive
advantage for supply chain. In order to reveal the strategic role of supply management
and purchasing, many studies (e.g., Nollet et al., 2005) have been conducted to
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J. Feizabadi et al.
specifically highlight the implications of strategic view of supply management at various
levels of strategy development.
Strategic supply chains comprise members that are strategically, operationally and
technologically integrated and emphasise long-term relationships based on consistency
and flexibility (Ireland and Webb, 2007). For creating and sustaining rents through
supply chains, commitment and appropriate governance structure are necessary
(Fawcett et al., 2006). Since in supply chain management the cross-functional and
cross-partner processes need to be coordinated, having the appropriate mechanism for
building cross-functional and cross-partner capabilities would be critical. Fawcett et al.
(2006) argue that there are four levels of commitment for a supply chain: chief executive
commitment, comprehensive functional support, channel partner support and
commitment for developing infrastructure and governance mode. A model is developed
for SC governance mode (Fawcett et al., 2006) and shown in Figure 1.
Figure 1
A model of SC governance
Supplier consultancy committee
Order fulfillment
Executive VP
R&D VP
Sourcing VP
Operations VP
Logistics VP
Marketing VP
Executive steering committee
Collaboration in SC
New
product
Process
redesigning
Raw
materials
Customer consultancy committee
SC chief VP
Customerrel
ationships
Marketing
Logistics
Operation
Sourcing
Engineering
Cross-functional
Cross-functional
Functional Excellence in world class
Source: Fawcett et al. (2006)
Recently, in multi-business corporations with several business divisions, leveraging
corporate-wide supply chains and logistics operations is gaining a lot of attention. For
instance, in one study in the paper industry (Koskinen, 2009), it was revealed that in
addition to business unit attention to leverage the supply chain capability, centralising the
supply chain at the corporate level to cater to various business units had a significant
impact on corporate performance.
Although SCM unit has equal position relative
to existing functional units, but it does not
play a role as a function but it does as a
planner or coordinator
Although SCM unit has higher position than
existing functional units like IS unit, but plays
a role not as a function but as a staff or
comprehensive coordinator of other functional
areas
Present functional areas like IS are under
control of SCM unit and this unit controls all
functional areas and SCM activities with
responsibility and practical authority.
Matrix channel structure
Process-staff structure
Integrated-filament structure
Source: Adopted from Kim (2006)
There is a particular unit for SCM as a
functional area equivalent to existing
functional areas including IS unit
Functional structure
Strategic position of SCM department
There is not a particular department for SCM
or it is under control of existing department
such as IS
Scope of business control by SCM
Representative firms
LG, Cisco, Benetton, Eli Lilly, Corning Glass,
Honeywell
Rohm & Haas Company, US Steel
Corp.,TRWIc.,Dana Corporation,
SPX Corp, Denso Manufacturing Inc.,
Continental General Tire Inc
SCM unit integrates and manages all SCM
functions in and out of corporation including
IS unit as a value-adding chain
Samsung Electronics, Whirlpool Corp.,
Hooker Chemicals & Plastics Corp.,
Johnson & Johnson
Although SCM unit assist to all SCM activities Toyota, Nike, BMW, Motorola, Benetton, Dell
Computer, General Motors, General Electric
within and outside of corporation and
coordinate them, but real work about each
SCM activity is performed by line functions
like IS unit
SCM unit focuses on activities aiming
Texas Instrument, Shell Oil, Daewoo
coordinate and connect other units or other
Matsushita, SONY, Hewlwtt-Packard,
General Motors, ABB
channel members. In this kind of structure
high priority is given to revising primary SCM
activities within organisation like SCMIS and
then linking them to outside organisation
activities.
SCM department controls traditional SCM
activities and SCM-related activities that are
performing in other functions. Both SCM unit
and IS unit in common, undertake
responsibility and authority of scheduling and
using SCMIS
SCM department performs limited group of
traditional SCM activities that manage along
business units. Primary SCM activities are
done individually by each function and
without any organisation or executive
.Planning and using SCMIS take place under
responsibility and authority of IS department
Table 1
Non-SCM-centred structure
Structure type
Contribution of supply chain to corporate strategy
479
Characteristics of different types of SCM organisational structure
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J. Feizabadi et al.
In another research (Kim, 2006), five types of organisational structure for supply chains
are suggested based on three structural characteristics: formalisation, centralisation and
structural relationship. In this research, relationships among each type of supply chain
structures with supply chain integration stage and two performance aspects of supply
chain; i.e., administrative performance and technological performance; are explored. The
research revealed that functional and process staff structure of supply chain management
can further enhance the impact of supply chain integration and performance.
Characteristics of each type of organisational structure of supply chain management are
summarised in Table 1.
2.3 Corporate strategy and supply chain management
Mahoney and Pandian (1992) claim that strategy is nothing more than continuous seeking
of rent, where rent means bringing more output than lost opportunity cost of a resource
for its owner. Thus, attempting to create above normal output rate or rent is the focal
point of competitive advantage analysis (Porter, 1998). Principal kinds of rent are as
follows (Mahoney and Pandian, 1992; Dyer and Singh, 1998; Lavie, 2006; Duschek,
2004):
•
Monopoly rent: This rent can be obtained when obstacles for potential competitors
are high and the firms establish possible desirable position with aim of local
monopoly (industry structure approach).
•
Ricardian rent: Due to the use of valuable, non-imitable and non-substitutable
resources (Barney, 1991) (resource-based approach).
•
Relational rent: Rents gained through specific assets that companies assign for their
alliances and form complements between their resources and their partner’s
resources (Dyer and Singh, 1998) (relational approach).
•
Schumpeterian or entrepreneurship rent: Rent obtained from innovations that are
converted in to sellable products in the market (Powell, 2001) (Austrian school).
Supply chain management can play a crucial role in realising above-mentioned rents.
Knudsen (2003) has explained procurement function’s role in creating monopoly,
Ricardian and Schumpeterian rents. Therefore the question is how supply chain
management can contribute towards other types of rents. In the following, the supply
chain contribution to generate various rents is described:
•
Competitive forces (industry structure):
a
b
c
d
Rent type: monopoly.
Strategic logic: positioning and strengthening the position.
Way of attaining competitive advantage: Using market power through
obstructive actions such as establishing barrier for new arrivals, increasing the
bargaining power with suppliers and customers, and advancing of competitors.
Supply chain management role in rent creation: Maintain and enhance
bargaining power against suppliers and customers and avoid having long-term
relationships with them, which might give rise to shrinking competitive
advantage. Emphasis on cost reduction in all stages of procurement and
costumer order processing.
Contribution of supply chain to corporate strategy
•
•
•
481
Resource-based view:
a
Rent type: Ricardian.
b
Strategic logic: create, deploy, leverage and protect strategic resources.
c
Way of attaining competitive advantage: create, deploy, leverage and protect
resources and capabilities which are valuable, rare, costly to imitate and
non-substitutable.
d
Supply chain management role in rent creation: create, deploy, leverage and
protect strategic resources and capabilities for cross-functional integration
within company.
Relational view:
a
Rent type: relational.
b
Strategic logic: create, deploy, leverage and protect strategic resources and
capabilities in inter-firm dyad processes and routines.
c
Way of attaining competitive advantage: establishing strategic alliances with
suppliers and customers, which are costly to imitate and non-substitutable.
d
Supply chain management role in rent creation: create, deploy, leverage and
protect strategic resources and capabilities in dyad routines and processes in
order to enhance cross-partner integration with suppliers and customers.
Austrian school:
a
Rent type: entrepreneurship.
b
Strategic logic: seeking innovative opportunities.
c
Way of attaining competitive advantage: Quick response and seeking
opportunity for discovering and accessing of superior information about new
innovations. Entrepreneurship role is gathering, assessing and using information.
d
Supply chain management role in rent creation: Searching, finding and giving
identity to new suppliers and customers and new and innovative products and
services; making all supply chain activities capable of quick response.
Many researchers (Porter, 1985, 1998; Chandler, 1992; Hax and Mujluf, 1996; Johnson
and Scholes, 2002) believe that economic corporations are changing from irrelevant or
heterogeneous diversification to related and homogenous, and more coherence in
corporations suggest existence of related technologies and market/product relative to
unrelated technology, market/product which will lead to better performance for
corporation (Piscitello, 2004). Companies seek their related-growth strategies more often
based on economy of scale and economy of scope (Chandler, 1992). Piscitello (2004)
argues that corporate coherency or related diversification is not only based on
products/markets; companies should consider diversity in their technological
competencies as well. The more the firm’s technological base associated with firm’s
product/market base, the higher will be the extent of corporation coherency, allowing it to
exploit both, economy of scale and economy of scope. Thus, if firms can utilise same
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technology for different market/product with lower compatibility cost, then they can
enjoy economies of scale; on the other hand, different technology has the potential for
enhancing other technologies, leading to new functions and enhancement of
product/process performance for economies of scope.
Synergy among a multi-business firm’s business units can take different forms
(Goold and Campell, 2000; Rozemeijer, 2000; Porter, 1985, 1998) including: vertical
integration, sharing tangible and non-tangible resources, sharing technical knowledge and
best practices and centralising purchasing power (resource pooling). Similarly, Markides
and Williamson (1994) suggest that in companies with related diversification strategy,
there are four potential synergy areas: asset amortisation, asset improvement, asset
creation, asset split and analysis.
From the synergy forms mentioned above, two forms are highly related to supply
chain management: vertical integration and centralising purchasing. Asset amortisation
and improvement in second categorisation are also potential areas that can be employed
by firms through supply chain perspective. Many scholars (Woodside and Samuel, 1981;
Rozemeijer, 2000; Smart and Dudas, 2007; Munson and Hu, 2010; Johnson and
Leenders, 2008) have studied the topic of synergy among business units of a company
through centralising purchasing function (procurement or supply management) at the
corporate level. Companies that centralised their purchasing and procurement activities
are as follows (Smart and Dudas, 2007): Ford Motor Co., SONY, Motorola, Otis,
Safeway, Ahold, Krogers, Great Atlantic & Pacific Tea & Co., American Stores and Co.,
Wakefern Food Corp and Union Pacific Railroad; major stock exchange registered
companies, such as Dow Chemical, Alcoa, 3Com and IBM. Johnson and Leenders (2008)
investigated organisational position of chief purchasing officer (CPO) in 26 successful
US and European companies by using contingency theory. They explored CPO
appointment in these companies and revealed that 80% of the changes in reporting
method of CPO and his appointment are the result of changes in corporate strategy. Two
points were highlighted in this research: First, in sample firms, supply function which is
responsible for supply chain management activities is organised at corporate level and
second, supply and purchasing activities that were previously decentralised and carried
out by the business units, were now organised at the corporate level as a centralised
function.
In multi-business firms, a new structure is necessary for realising synergies among
businesses (Chandler, 1992). These structures are referred to as headquarters and their
logic, existence philosophy, size and performance implications have been studied in
detail by many scholars, e.g., Foss (1997), Collis et al. (2007), Goold et al. (2001),
Johnson and Scholes (2002), Knotes (2004), Sanford et al. (2005) and Ward et al. (2005).
In almost all the studies about corporation headquarters, value-adding role is emphasised.
Porter (1985, 1988) treats this entity as a horizontal organisation comprising horizontal
structure, horizontal systems, horizontal human resource activities and horizontal
activities for resolving conflict and disagreement. One of the mechanisms underlying a
horizontal structure is partial centralisation such that procurement activities, sale and
common logistics systems among business units of a corporation are done in a centralised
way (Porter, 1985, 1988). This mechanism refers distinctly to role and position of supply
chain management at the corporate level. Also, Ward et al. (2005) proposed a model for
designing corporate centres or headquarters as shown in Figure 2.
Contribution of supply chain to corporate strategy
Direct
Design frameworks of corporate centres including key required skills
Scale configuration/SCM
Scope configuration/management of
processes and systems
Indirect
Interference/involvement of
corporate center
Figure 2
483
Control configuration/financial
management
Creative configuration/management of
values and visions
Knowledge
Economy of scale
Corporate advantage source
Source: Ward et al. (2005)
As shown in Figure 2, companies that follow related growth strategy or homogenous
diversification (two upper parts of Figure 2) could take advantage of economy of scale
and economy of scope (Chandler, 1992; Piscitello, 2004). In situations where source of
corporate advantage is economy of scale and due to related-growth or homogenous
diversification strategy, headquarter must be directly involved in business units’ activities
and plans, and the most important skills at the headquarter must be supply chain
management.
2.4 Conceptual model development
Having reviewed the literature and found the gap, this section discusses a conceptual
model to explain the role and contribution of supply chain management in industries with
low clock-speed and/or industries with complex products (those industries that have
bilateral and reciprocal close dependence among final assemblers and key suppliers)
(Krause et al., 2007; Dyer, 2000). This model is shown in Figure 3.
Figure 3
Conceptual model of SCM position in corporate strategy
Industry clock-speed: low
Relationship between OEM and supplier:
Reciprocal relationship and dependence
Corporate strategy: related diversification
Corporate advantage: economy of scale
Type of synergy among business units:
vertical integration, centralised purchasing,
asset improvement, centralised logistics
High importance of
cross-boundary and
cross-functional integration
among business units in
corporate strategy
Enhancement of
organisational and
strategic position of SCM
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In the proposed model (Figure 3), four factors are recognised as principal drivers of
increasing the importance of cross-functional and cross-partner integration among
business units. Low industry clock-speed, relationship between OEM and supplier (high
extent of reciprocal relationship and dependency), corporate growth strategy (related or
homogenous) and corporate advantage (economy of scale) and type of corporate
synergies are the factors that can enhance the strategic importance of supply chain and its
consideration in strategy development and organisational structure at the corporate level.
It is evident that cross-functional and cross-boundary integration is essential in every firm
whether it is a related-diversified or unrelated, but the main idea here is that when we
have those characteristics in the multi-business corporation the possibility of exploiting
supply chain level thinking and practices is significantly higher.
3
Research method
Although studies with large samples are useful for identifying characteristics of a broad
population, case study approach is more appropriate for explaining how and why of
events (Yin, 1994). Quite a number of studies have been done about using case study
method in operations and supply chain management (Seuring, 2008; Dubois and Araujo,
2007; Stuart et al., 2002). Yin (1994) has explained three determinant conditions in
selecting research method: type of research question, extent of researcher’s control on
events’ real behaviour, and whether the research is focused on historical or contemporary
events. These conditions determine which empirical approach: experimental, survey
(statistical study), archive analysis, historical and case study are appropriate for different
situations. The research question of this article, ‘How SCM can contribute to corporate
strategy?’ is exploratory in nature and requires a deep context comprehension in order to
address it. Also, this study is focused on contemporary events and there is no control on
event’s behaviour.
Following Yin’s (1994) recommendations and taking into account research context,
three types of research strategy and method could possibly be considered: case study,
survey and archive analysis. Among these options, case study method was selected as
main research method for this research. There are several reasons for this selection.
Firstly, since the aim of this study is to explore the contribution of supply chain
management in corporate strategy, the case study method is superior to archive analysis
because doing a pure archive analysis will not reveal all aspects of relationship, although
archive and secondary data are gathered and included as one of the data sources for this
study. On the other hand, intended phenomenon and respective concepts are not
adequately known and established, hence limited literature is available to conduct a
survey (hypothesis testing and statistical analysis). Case study method is appropriate for
researching complex phenomena that involve a number of variables. Accordingly, we
believe that our research objectives will be best served by the case study method.
There are three types of case studies (Yin, 1994): explorative case study (the aim is to
define question and hypothesis for later studies), descriptive case study (provides
complete explanation of a phenomenon in its context and environment) and explanative
case study (includes studying data related to causal relationships and it explain how
events occur). Nevertheless, there is a blurred boundary among these types of case
studies, but according to the given description one can locate the particular type into
these three categories. Our case study belongs to the explorative category and aimed to
Contribution of supply chain to corporate strategy
485
develop some propositions about the strategic and organisational role and the position of
supply chain management in corporate strategy.
3.1 Case study selection
According to Yin (1994), a single case study plan can be used under special
circumstances: situation where one intends to conduct important test of existing theory,
situation where case study of an event is scarce and unique, situation where case study
fulfil a visionary goal. However, it might be argued that single case study is not adequate
for providing reliable and generalisable result. In this research, we do not intend to
generalise the results but to apply developed theory about supply chain management
contribution to corporate strategy for a single company and propose viable hypothesis for
large-scale study in the future.
A common sampling technique in case study domain is theoretical sampling that
means selecting case studies based on theoretical reason not statistical reason (Glaser and
Strauss, 1967; Eisenhardt, 1989; Stuart et al., 2002). The main criterion utilised in this
research for selecting case study is how the case matches with the developed conceptual
model.
This study is a part of larger research on the topic of restructuring ‘Iran
Tractor Manufacturing Group’ (ITMG). ITMG is the largest agriculture machinery
manufacturing company in Iran and it has several subsidiary companies such as Tabriz
Tractor Manufacturing Company, Kurdistan Tractor Manufacturing Company, Urmia
Tractor Manufacturing Company, Machines and Tools Manufacturing Company,
Industrial Services Company, Foundry Company, Engine Manufacturing Company,
Ven-Iran Company, Taj-Iran Company, Oog-Iran Company, Iran Tractor After-sale
service company, Engineering and Supply Company.
3.2 Data gathering
Both secondary and primary data were collected from each business unit of ITMG. A
number of site visits were conducted that usually lasted one day. The interview schedules
were set with CEO and other senior executives to include directors of most functional
departments. Average length of the interviews was 100 minutes; some interviews took far
more than the planned time.
Using a protocol in interviews for case study is highly recommended (Yin, 1994).
Interview protocol includes several pre-designed tables and questions, and we attempted
to revise these questions and tables during interview process based on the feedback from
interviewees. Prior to the interview sessions, some documents, such as company
strategy and its organisational structure were reviewed. Interviews were designed to be
semi-structured to allow interviewee to express his/her comments and opinions, and at
the same time making sure that the overall flow of the interview flow is aligned with the
objective of the investigation.
Gathering data was not limited to interview protocol and primary data. Several data
sources, including related documents and other extant information were also collected.
As mentioned earlier, some data were reviewed before the interview and other
information was gathered from managerial reports, website and some managerial
presentations for board of directors.
486
J. Feizabadi et al.
One of the methods for improving research validity is the review of case study
content by experts (Yin, 1994). Accordingly, we had asked of CEOs of various
companies to verify the gathered information from each studied business units.
3.3 Data analysis
Yin (1994) states that there are two approaches for analysing qualitative data:
theory-based and case description. Theory-based approaches uses the knowledge from
existing theories as a basis for establishing initial proposition which guides the study
design and analysis. Case description strategy relies on rich description of the case that
acts as a mechanism for framing and organising the study. In this research, having
reviewed the literature and developed a conceptual model, the theory-based approach was
used for analysing the data, the researchers, however, stayed open minded and
encouraged formation of new ideas during the research process.
According to Miles and Huberman’s (1994), analysis of data involves three distinct
stages: data reduction, data display, verification and conclusion. Each type of activity
follows an interactive and cyclical process. Data reduction refers to the process of
selecting, focusing, simplifying, summarising and moving data from written notes and
recorded tapes. Gathered data included recorded interviews, written notes related to
interviews and documents about strategies and strategic planning of each company and
also documents about procurement of parts and inbound logistic system.
According to Miles and Huberman’s (1994), recommendation, we had listened to
recorded transcripts and transcribed key points of each interviews. Transcribed points of
recorded files were supplemented by notes taken during the interview and based on this
information temporary summary of case study was prepared. This summary represents a
combination of what the researcher knows about case and what he obtains during case
investigation (Miles and Huberman, 1994). Temporary summary of case study in this
research is used as a mechanism for summarising case study related data in a document
and obtaining a general understanding of different aspects of the situation. Temporary
summary of case study includes background information of studied company, its position
in growth strategy of ITMG, interdependence relationships of that company with other
group’s companies in term of value chain activities point of view.
Data display states organised assembly of data that reinforces conclusion of data
(Miles and Huberman, 1994). In this study, because of using conceptual framework and
well-defined concepts, it was possible to show data within case study and according to
pre-specified concepts.
Conclusion and results’ verification refers to making the findings meaningful and
conceptualise them, and it can be done with considerations to discipline and arrangement,
patterns, explanation, possible configuration and causal flows. In this study, the main
mechanism is conclusion and verification of result based on developed conceptual model.
4
Findings
In this section, research findings are presented based on the key constructs of the
conceptual model discussed previously, namely industry clock-speed, relationship
between OEM1 and suppliers, corporate strategy, headquarter competitive advantage and
Contribution of supply chain to corporate strategy
487
type of synergy among business units. Tables and charts in this section are used as
data-reduction tools in the data analysis stage (Miles and Huberman, 1994).
Industry clock-speed: ITMG operates in the agricultural machinery industry with an
average time of introducing new tractors of almost four years, the changes in the process
technology are infrequent and last around a decade with the exception when they entered
the heavy tractors segment with model no. 399 (till then the focus was the semi-heavy
tractors market with model no. 285). There are also no general structural changes around
organisational characteristics during recent ten years and strategic alliance of this
company with Messy Fergusson Company took place without any change. So, based on
the above evidence, we conclude that ITMG operates in the low clock-speed category.
Relationship between OEM and suppliers: From relationship between OEM and
suppliers standpoint, industries can be divided into two categories: industries with simple
products and industries with complex products (Krause et al., 2007; Dyer, 2000). In some
industries, due to increasing growth in outsourcing of non-core activities to suppliers,
suppliers play a critical role in the success of OEMs. In other words, there is a lot of
interdependence on first-tier suppliers. In industries that are classified as simple product
industries, such as the ones involved in commodity products, the interdependence
between OEMs and its suppliers is low or absent.
Agricultural machinery industry is classified as complex product industries (Krause
et al., 2007). Therefore, there is a lot of mutual interdependency between ITMG and its
suppliers, such as Engine Manufacturing Company and Casting Company and other
suppliers, which was emphasised by the business units’ presidents during our interview.
Corporate strategy: For company’s growth, two alternatives are available, namely
expansion into existing businesses or diversification into new businesses. There are two
typical paths for expanding into existing businesses includes changing the product,
market and geographic scope (Hax and Majluf, 1996) or deploying existing products to
new markets and introducing new products to existing markets.
ITMG offers two tractor models 285 and 399 in the domestic market and to open new
market, it has set up Kurdistan Tractor Manufacturing Co. for assembling tractor model
285 for the Western province of the country. Establishing companies such as Ven-Iran,
Taj-Iran and Oog-Iran, it is seeking new ways to grow. ITMG also tried to grow
internationally – Venezuela, Tajikistan and Uganda to grow via geographical scope
(Chandler, 1992).
To boost the footprint in a different product segment of existing market, ITMG
acquired Urmia Tractor Manufacturing Co., which manufactures small agriculture
machinery, and gain more market share via the small and light agriculture machines.
Also, ITMG has tried to expand the range of its assembly line by offering different
models of semi-heavy tractors (Mf/135,165,185,295,285,ITM/800,840) and models
MF/399,6290 in the heavy tractors’ segment in single-differential and double-differential
models and garden models – 930, 938 and 942 – in light tractors’ market.
Integrating vertically is another way to grow for companies – Figure 4, by expanding
along the value chain (whether forward or backward). ITMG through its TESCO business
unit manages the dealerships, offers trade and after-sale services. In the backward
direction, companies such as the Engine Manufacturing Co., Foundry Co., Engineering
and Supply Co., and other entities such as Urmia Foundry, Urmia Iron Wielding and also
Foundry Training Organization are all owned by ITMG.
488
Figure 4
J. Feizabadi et al.
Growth strategy of ITMG (see online version for colours)
Changes of
product, market,
and geographical
scope
Expansion into
existing
business
Existing products and markets
•
Ven-Iran, Taj-Iran, Oog-Iran and Kurdistan
Tractor-Man. and Urmia Tractor-Man
Releasing existing products to new markets
•
Urmia Tractor-Man. and paddy tractors
Releasing new products to existing markets
•
Variety of tractor models in heavy, semi-heavy
and light segment
Vertical integration
(extending
value chain)
Options for
growth
Forward: getting closer to customer: Tesco company
(after-sale services and dealer)
Backward: getting closer to suppliers: Engine Co. and
Foundry Company, Engineering and Supply Company
Product technology
Related
(horizontal
strategy)
Diversification
into new business
Process technology
Machines and Tools Co.
Procurement
Engineering and Supply Co.
Basic raw materials
Processes or fabricated materials
Fabricated components
Assembled products
Experiment
Distribution
Marketing and sale
Tesco Company
Retailing
Services
Unrelated
(conglomeration)
Azerbaijan LCV Auto Company
Diversification is yet another way to grow by setting up new businesses. In Figure 4, the
growth options tree the diversification branch is further divided into two sub-branches
referred to as related-diversification (horizontal strategy) and unrelated-diversification
(or conglomeration).
In the related-diversification branch, opportunities such as changing tractor usage by
Kurdistan Tractor Manufacturing Co. by adding mechanical shovel to the tractor and
selling these tractors as construction machinery are in the scope. Although this market
does not generate much revenue for Kurdistan Tractor Manufacturing Co., it has the
potential and needs more attention as an expansion strategy for ITMG in the future.
Clearly, the product technology is associated with tractor and agriculture machinery,
which is the main business area of ITMG and can be considered as another way of
growth, i.e., horizontal growth strategy.
Establishing the engineering and supply company and TESCO is best described as
horizontal growth via procurement and marketing and sale capability the group
accumulated over the time. Given that there is a high level of reciprocity between
engineering and supply company and other business units of ITMG in terms of
procurement, and within this company the knowledge of sourcing and contracting with
suppliers and generally the supply of material and component parts is created. Access to
Contribution of supply chain to corporate strategy
489
additional resources and capabilities in sourcing and procurement of parts and material
offers a potential opportunity to generate more revenue for the group by not only
procuring supplies for group’s business unit but also the other companies outside the
group.
After-sale service, retailing and distribution operated separately as TESCO
is a another potential area for ITMG’s growth since providing after-sale service for
agriculture machinery is a unique area and needs specialised knowledge and expertise
that is not available in open market and a related diversification growth area for
ITMG. Currently, TESCO operates in three domains: trading of agricultural machinery
attachments and implements, providing after-sale services and tractors retailing.
As for TESCO’s activities, growth on the basis of distribution, retailing and providing
after-sale services and also introducing new businesses in this area can be taken into
consideration by ITMG. Currently, TESCO is a retail agent in agricultural machinery
industry and the possibility of entering into distribution business broadly is achievable for
this company in the near future. The growth options for ITMG are described in Figure 4.
The related vertical growth strategy of producing and trading agricultural machinery
attachments and implements could be considered as a new business area for the group,
given that they can complement the main product of agricultural machinery. This way of
group growth is shown in Figure 4.
On the other hand, ITMG also pursued another way to expand. Because of reciprocal
interdependence in value chain in the process technology dimension, manufacturing and
assembling processes and tractor manufacturing process, this group got into conversional
machinery market and established the machine and tools manufacturing company. This
allowed ITMG to explore the commercial vehicles markets with Azerbaijan Light
Commercial Vehicle Manufacturing Company. The study of the interaction between
various strategic business units, however, suggests that there is limited or no
interrelationship between light commercial vehicle business unit and other business units
in ITMG. Consequently, entering into this business can be classified as an unrelated
growth strategy or diversification.
Overall, however, it can be concluded that predominantly, the growth strategy of
ITMG is the related growth strategy except one case (entering into light commercial
vehicles industry).
Corporate advantage: Given that most of growth areas of ITMG are either in
expanding product lines or expanding its market and geographical scope, the advantage
that group can gain, is via economy of scale (Chandler, 1992).
Type of synergies between business units: Synergy areas between business units are
as following.
Figure 5
Part of ITMG’s SC and position of groups’ companies
Tier two
Tier one
Engineering and supply
company
Foundry Co.
Engine Co.
OEM
•
•
•
•
•
•
T.T.M. Co.
K.T.M. Co.
I.T.M. Co.
Ven-Iran
Taj-Iran
Oog-Iran
Retailer
Trade and
after-sale company
3
A.L.C.V. Co.
3
5, 3, 2, 1
2, 3
4, 3
3
5, 3, 2, 1
5, 3, 2, 1
5, 3, 2, 1
5, 3, 2, 1
U.T.M. Co.
3
4, 3
3, 2
4, 3
3
5, 3, 2, 1
5, 3, 2, 1
5, 3, 2, 1
K.T.M. Co.
3
4, 3
4, 3
3
Vaniran
3
4, 3
4, 3
3
Oogiran
3
4, 3
4, 3
3
Tajiran
3
3
3
3
Tesco
4, 3
4, 3
3
E.M. Co.
3
3
M. & T. Manu.
4, 3
3
Foundry Co.
Similar or same product technology
Similar or same process technology
Common technology in other activities of value chain such as inbound and outbound logistics, procurement, marketing and sales, and after-sales services
Technological aspects of integrating one product in another product
Common interface between products.
3
E. & S. Co.
Notes: 1
2
3
4
5
5, 4, 3, 2, 1
2, 3
M. & T. Manu.
Foundry Co.
3
Tajiran
4, 3
5, 3, 2, 1
Oogiran
E.M. Co.
5, 3, 2, 1
Vaniran
Tesco
5, 3, 2, 1
5, 3, 2, 1
K.T.M. Co.
5, 3, 2, 1
T.T.M. Co.
E. & S. Co.
Table 2
U.T.M. Co.
490
J. Feizabadi et al.
Interrelationships among business units in R&D
5, 4, 3, 1
5, 4, 3, 1
5, 4, 3, 1
Vaniran
Oogiran
Tajiran
Notes: 1
2
3
4
5
5, 4, 2
2, 4, 2, 1
5, 4, 1
5, 4, 3, 1
5, 4, 3, 1
5, 4, 3, 1
5, 4, 3, 2, 1
U.T.M. Co.
5, 4, 2, 1
5, 4, 2
5, 4, 1
5, 1, 2, 3, 4
5, 1, 2, 3, 4
5, 1, 2, 3, 4
K.T.M. Co.
5, 4, 2, 1
5, 4
5
5, 4, 1
Vaniran
5, 4, 2, 1
5, 4
5
5, 4, 1
Oogiran
Common location of supplying new materials or common supplier
Similar or same manufacturing process
Similar or same assemble process
Similar or same quality test/control procedure
Common plant supportive activities such as preventive maintenance.
A.L.C.V. Co.
E. & S. Co.
4, 2, 5, 1
M. & T. Manu.
Foundry Co.
5, 4, 1
2, 5, 4, 1
E.M. Co.
Tesco
5, 4, 3, 2, 1
K.T.M. Co.
T.T.M. Co.
5, 4, 3, 2, 1
5, 4, 2, 1
5, 4
5
5, 4, 1
Tajiran
Tesco
5, 4
5, 4
4, 5, 1
E.M. Co.
5
5, 4
M. & T. Manu.
5, 4
Foundry Co.
E. & S. Co.
Table 3
U.T.M. Co.
Contribution of supply chain to corporate strategy
Interrelationships among business units in production and manufacturing
491
2, 1
2, 1
2, 1
3, 2, 1
Vaniran
Oogiran
Tajiran
Tesco
3, 2
3, 2, 1
3, 2
3, 2, 1
3
2, 3, 1
1
1
1
3, 2, 1
U.T.M. Co.
Notes: 1 Common customer
2 Common distribution channel
3 Common geographical market.
A.L.C.V. Co.
E. & S. Co.
Foundry Co.
M. & T. Manu.
3
3, 2, 1
K.T.M. Co.
E.M. Co.
3, 2, 1
T.T.M. Co.
3, 2
3
1, 2, 3
1
1
1
K.T.M. Co.
2
1, 2
Vaniran
2
1, 2
Oogiran
2
1, 2
Tajiran
2
Tesco
1
E.M. Co.
M. & T. Manu.
Foundry Co.
E. & S. Co.
Table 4
U.T.M. Co.
492
J. Feizabadi et al.
Interrelationships among business units in market
*
Foundry Co.
*
*
*
*
*
*
*
U.T.M. Co.
Note: *Common purchased materials and parts
A.L.C.V. Co.
*
*
M. & T. Manu.
E. & S. Co.
*
Tajiran
*
*
Oogiran
E.M. Co.
*
Vaniran
Tesco
*
*
K.T.M. Co.
*
T.T.M. Co.
*
*
*
*
*
K.T.M. Co.
*
*
Vaniran
*
*
Oogiran
*
*
Tajiran
*
*
Tesco
*
*
*
E.M. Co.
*
M. & T. Manu.
Foundry Co.
E. & S. Co.
Table 5
U.T.M. Co.
Contribution of supply chain to corporate strategy
493
Interrelationships among business units in procurement
494
J. Feizabadi et al.
Vertical integration: As depicted in Figure 4, some companies in the group are placed in
area of synergies related to vertical integration. As shown in Figure 5, group SC is shown
only for companies inside ITMG. Ownership of these companies by the group is an
evidence of vertical integration in ITMG. It should be noted, however, that leading firms
do not use ownership mechanism for coordinating efforts with their suppliers; there are
other more effective mechanisms that have been used by successful companies of the
world such as John Deer and Toyota.
Centralising purchasing, asset management and logistics activities brings about
efficiency via resource pooling. For studying these types of synergies, we employ value
chain approach (Porter, 1985, 1998; Hax and Mujluf, 1996) to identify areas of reciprocal
interdependence among business units. These areas of reciprocal interrelationships are
available under R&D, production (manufacturing and inbound logistics), markets
(outbound logistics, marketing, selling and after-sale services) and procurement. Tables 2
to 5 depict these areas of reciprocal interdependence among ITMG business units.
Table 2 exhibits asset improvement synergy that a multi-business firm can deploy to
make best use of its technological assets in other businesses. In Table 3, we see synergies
of inbound logistics and asset improvement type between business units. Table 4 shows
synergies of outbound logistics and asset improvement type. And finally Table 5 depicts
synergies of centralising purchasing among ITMG’s business units.
5
Discussion and conclusions
The research progressed by developing a conceptual model based on extant knowledge in
the literature and a case study was conducted to validate the model. Indeed, applying the
concepts in only one case is not the best way for developing a theory and it needs to be
validated in more instances to claim sound insights. But as highlighted previously,
explorative case studies play a critical role in theory building by identifying potentially
new constructs for broadening the knowledge funnel. Present research intends to play this
key role and initiate a new dialog to bring supply chain management closer to the
corporate strategy realm.
The conceptual model of ITMG in Figure 3 captures its key corporate underpinnings,
i.e., low clock-speed industry, high reciprocal interdependence between OEM and
suppliers, homogeneous growth strategy, seek economy of scale and synergy areas in
vertical integration, asset improvement, inbound and outbound logistics and centralised
purchasing. All these choices result in high importance of cross-functional and
cross-border integration requiring greater focus on supply chain management in the
corporate strategy. In addition, supply chain management must be promoted across all its
firms.
The ITMG case study reveals that the concepts highlighted as the conceptual model
constructs can provide directional guidance on what underlying capabilities are important
for a multi-business firm to compete more effectively. In this particular case, we show
how supply chain capabilities underscore various choices made at the corporate level for
ITMG. Many interrelationships were identified among ITMG’s business units that are
best served by using supply chain management capabilities and eventually result in more
effective and efficient performance for ITMG. As such, the supply chain function can
operate in a manner to connect the dots across all business units to enhance the ITMG’s
performance.
Contribution of supply chain to corporate strategy
495
Supply chain management is receiving increasing attention at various levels of
strategy making in corporations. It can be argued that companies should pay special
attention to its supply chain capabilities to derive superior relational advantages as well
as other types of the rents. The predominant focus of this article is the relational approach
[see Feizabadi (2009) for more discussion and a model for explaining strategic conduct of
supply chains].
Other than implication of supply chain in functional, business and corporate level
strategy, Hofmann (2010) argues that even in the network strategy development,
corporation needs to pay attention to supply chain management. Accordingly, the main
objective of this article is to explore the circumstances under which supply chains can get
more attention at the corporate level. As we discussed in the case of ITMG, when
corporation pursue a related diversification strategy, it is well suited for exploiting supply
chain capabilities to play a cross-business unit role. Along these lines, this research
highlights some of the factors that can foster an environment suitable for a supply chain
view. These factors include low clock-speed, importance of scale in corporate strategy,
high interdependency between OEM and its suppliers and type of synergy among the
business units to include vertical integration, asset improvement, resource pooling in
terms of purchasing and logistics activities. Specifically this research looked into
horizontal aspect of supply chain contribution to multi-business firms (Cordon et al.,
2012), and how a multi-business firm can exploit its supply chain not only by facilitating
the flows vertically in the chain but also leveraging the horizontal synergies in the firm.
The main objective of this research is to develop some concrete propositions being an
exploratory study and the proposed conceptual model needs a larger scale study to
validate the findings. Based on what we found from our investigation, we put forth the
following four propositions:
•
Proposition 1: In multi-business firms with related diversification strategy and low
rate of industry clock-speed, the advantage of corporation would usually be gained
from the economy of scale.
•
Proposition 2: Synergistic areas for multi-business firms that are pursuing economy
of scale advantages in their HQ include vertical integration, asset improvement,
resource pooling (centralised procurement and logistics activities).
•
Proposition 3: The possibilities for cross-functional and cross-boundary integration
for multi-business firms with related diversification strategy, low rate of industry
clock-speed and economy of scale advantage is high.
•
Proposition 4: The multi-business firms with related diversification strategy, low
rate of industry clock-speed, and economy of scale advantage will benefit from an
emphasis on supply chain management in their corporate strategy and promoting it
as an organisation wide capability.
Clearly, the research and its findings have limitations given that it involved a single albeit
a large conglomerate. As a result, the finding cannot be generalised as such, however, this
study is grounded in well-researched conceptual model. We have deployed proven
concepts and frameworks to examine a single case study in depth and seek evidence for
concepts of the model in the empirical data. It is obvious that a multiple case study and or
a large-scale survey should be planned to increase the generalisability of the results
496
J. Feizabadi et al.
of this research. Specifically, the four propositions listed above can be tested via a
large-scale survey in a future study.
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Notes
1
Original equipment manufacturer (OEM).