Achieving Simultaneous Cost and Differentiation Competitive Advantages through Continuous Improvement: World Class Manufacturing as a Competitive Strategy

Abstract

Since the early 1980s, the issue of the competitiveness of U.S. industry has been widely discussed because of an increased awareness of global competition and the appreciation that management approaches transcend national boundaries. This has resulted in what Hayes and Wheelwright (1984) described as the world class manufacturing (WCM) approach. WCM is based on creating and sustaining a manufacturing-based competitive advantage by using the best management practices, regardless of their national origin. It focuses on continuous improvement of all aspects of the firm, not just manufacturing, by emphasizing the integration of practices related to human resources management, product and process management, and organization characteristics, in order to develop manufacturing capability as a competitive weapon. By achieving continuous improvement throughout the firm, world class manufacturers can provide products that achieve economies of scope (cost reduction through the ability to share activities), as well as revised economies of scale (cost reduction through the efficiencies associated with high volume production) which result in products that can attain and sustain several competitive advantages simultaneously. This ability to achieve simultaneous competitive advantages enables WCM to be viewed in the context of management, which is the goal of this article. The most dominant management paradigm in recent years is known as the competitive strategies model (Fredrickson, 1991; Hambrick, 1990). Exemplified by Porter's (1980, 1985, 1990) work, this approach addresses the issue of how firms compete within their product markets. Porter identified two competitive advantages that provide a firm with a defensible position: lower cost and differentiation. The lower cost advantage is defined as the ability to more efficiently design, manufacture, and distribute a comparable product than the competition. Products with unique and superior value--in terms of quality, features, and after-sales service--are examples of the differentiation competitive advantage. Pursuing one of these advantages will make a firm's product or service unique, and is strongly recommended so the firm is not stuck in the middle (Porter, 1991: 40), where, by pursuing both competitive advantages, neither is achieved. Thus, there is an apparent contradiction between WCM and the competitive strategies paradigm. The competitive strategies approach identifies two competitive advantages, either of which can be successful, but only individually. Attempting to pursue simultaneous competitive advantages will result in strategic mediocrity, except for firms in unusual industry niches (Porter, 1991: 40). This appears to contradict WCM's intentional goal of simultaneously achieving excellence on several product attributes, or potential competitive advantages, to create a position that is especially difficult to challenge. This article attempts to reconcile these apparently disparate perspectives by synthesizing concepts from the literature of management and operations management. It begins with brief overviews of the WCM and competitive advantages approaches. Although many of the individual practices included in WCM have been previously examined in the literature of diverse fields, including organization theory, human re. sources management, operations management, as well as other areas, the WCM approach brings these diverse practices and approaches together under a common umbrella. The article then examines the theoretical and empirical work that has challenged Porter's assertion that it is unlikely a firm's products can be both lower cost and differentiated, including drawing upon the WCM literature for support. It concludes by extracting a set of propositions to guide re. search related to attaining and sustaining competitive advantages. World Class Manufacturing It has been noted that corporate and business level strategy have often overlooked the manufacturing function (Kotha and Orne, 1989). …

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