Factory Positioning an Unpredictable Environment: A Managerial View of Manufacturing Strategy Formation

Jari Voutilainen

Research output: ThesisDoctoral ThesisMonograph

Abstract

Positioning of factories is an important element of manufacturing strategy that ensures that production supports the competitiveness of the company. The objective of this research is to understand how manufacturing strategy could be formed by defining factory positioning in an unpredictable business environment. More specifically, we focus on strategy formation, facilitation of positioning decisions, and managing complexity and cognitive constraints during the planning process. The study is based on direct managerial observation of a 3,5 year manufacturing strategy process in a 30 billion euro consumer electronics company. Its manufacturing division operated 9 factories on 4 continents, consumed over 100 billion components and employed 30,000 persons. The results indicate how factory positioning works even in a highly dynamic industry. The main finding is that the mode of strategy formation – be it deliberate or emergent – should be correlated with the confidence level of decision-makers. This is aptly illustrated in the new confidence-mode (CM) matrix where decision making is driven by the intended strategy formation mode and the experienced levels of confidence. Three implications for successful strategic management should be pointed out. First, the strategy formation mode needs to match the level of confidence. Second, in an unpredictable environment teams need to be facilitated with heuristics rather than with just quantitative analyses. Third, recoding with search and satisficing help to mitigate complexity and uncertainty in the planning situation. Two conclusions are obvious. First, manufacturing strategy formation and factory positioning processes are not always as mechanical and analytical as some researchers propose. A more abstract approach helps decision-makers to tolerate the complexities of the uncertain environment. Hence, a softer human element of strategy formation may be revealed. Second, analytical tools such as the product-process matrix can be applied not only for quantitative positioning of products and factories but as frameworks for guiding decision-making. The applicability of bounded rationality, recoding, and heuristics in strategy formation in an unpredictable environment offers a fertile ground for further research. Especially fruitful would be to study whether the observed phenomena are similar in other industries and under varying stages of business cycles.
Translated title of the contributionTehtaiden asemointi vaikeasti ennustettavassa ympäristössä: liikkeenjohdollinen näkemys tuotantostrategian muodostamisesta
Original languageEnglish
QualificationDoctor's degree
Awarding Institution
  • Aalto University
Supervisors/Advisors
  • Vepsäläinen, Ari, Supervisor
  • Tinnilä, Markku, Advisor
Publisher
Print ISBNs978-952-60-5610-4
Electronic ISBNs978-952-60-5611-1
Publication statusPublished - 2014
MoE publication typeG4 Doctoral dissertation (monograph)

Keywords

  • confidence-mode matrix
  • manufacturing strategy
  • strategy formation
  • bounded rationality
  • search and satisficing
  • recoding
  • product-process matrix

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