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Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 1-0 
 
November 2003 
 
 
 
 
 
 
 
 
Manufacturing 
S trategy 
 
 
 
 
 
 
 
 
THE UNIVERSITY OF 
NEW SOUTH WALES 
 
Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 1-1 
 
November 2003 
 
 
 
 
 
Manufacturing 
Strategy 
 
 
 
 
 
 
 
 
Unit 1 
 
The Nature and 
Role of 
Manufacturing 
Strategy 
 
 
 
 
 
1-2 Manufacturing Strategy: The Nature and Role of Manufacturing Strategy 
 
 November 2003 
Contents 
 
Overview 
Learning Outcomes 
 
What is Strategy? 
Organisational Goals 
Characteristics of Strategy 
 Corporate Strategy and the Strategic Business Unit 
 
Linking Manufacturing Strategy with Corporate and Business 
Strategies 
 
Conclusion 
 
 
 
Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 1-3 
 
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Overview 
 
This unit examines the nature of manufacturing strategy, and its relationship 
with corporate strategy on the one hand, and with other functional strategies 
of marketing and finance on the other. 
 
The first section commences with a description of the goals of a typical 
manufacturing organisation in terms of purpose, mission and objectives, and 
how the overall strategy formulation process is concerned with formulating 
means of achieving an organisations objectives in the presence of 
competitive forces. 
 
The second section examines the differences between strategic and 
operations planning in terms of time scale and level of detail. From here we 
move on to consider the notion of corporate strategy, which considers the 
corporate mission of the organisation as a whole, the markets in which it 
will or will not participate, and the nature and role of the separate individual 
strategic business units of which it is composed. The functional strategies 
(manufacturing, marketing and financial) of the individual strategic business 
units, and how these relate to each other and to the overall business strategy. 
In particular, a blueprint for a new role for manufacturing in the strategy 
formulation process is developed, and reasons are examined for the 
subsidiary role often taken by manufacturing in the past 
 
Finally we look briefly at how manufacturing strategy and its formulation 
should be linked by a process of continuous iteration, with corporate and 
business strategies. 
 
 
Learning Outcomes 
After studying this unit, you should be able to: 
 
• analyse the goals of an organisation in terms of its purpose, mission and 
objectives 
• appreciate the key characteristics of strategy and the strategy 
formulation process. 
• understand the differences between strategic and operational planning. 
• appreciate the concepts of corporate strategy, and strategic business 
units 
• understand the role of manufacturing strategy and its relationship to 
corporate strategy, and to marketing and financial strategies. 
 
 
 
 
Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 1-5 
 
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What is Strategy? 
 
Strategy, according to the dictionary, is variously defined as: 
 
“the art or skill of careful planning towards a desired end” 
 
“the art of devising or employing plans towards a goal” 
 
“skillful management of getting the better of an adversary”: 
 
“science or art of combining and employing resources in planning 
and directing major (military) operations” 
 
For many years, strategy was used in a military context to denote “grand 
plans” made in the light of what an adversary might or might not do. In the 
context of modern business, strategy still has a competitive implication (in 
relation to an enterprise’s business rivals), but it is also used increasingly to 
denote broad, overall courses of action, and some form of implied 
deployment of both emphasis and resources to achieve some comprehensive 
set of objectives. Note that strategy is defined as being both a science and an 
art. In this subject we shall inevitably focus on the more systematic (and 
hence more “scientific”) aspects of strategy development, rather than the 
“gut feel” aspects associated with strategy development as an art. 
 
Organisational Goals 
Before we look at the concept of strategy in more detail, we must examine 
the important concept of organisational goals. 
 
Organisational goals provide the basic sense of direction and purpose for an 
organisation and may be usefully divided into a hierarchy of the three 
slightly more specific concepts of: 
 
• purpose 
• mission 
• objectives 
 
as shown in Fig 1.1 
 
 
 
1-6 Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 
 
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The purpose of an organisation is its primary role as defined by the society 
in which it operates, and applies to all organisations of that type in society. 
In the context of private industry, arguments can occur as to the purpose of a 
profit-making organisation. From an economic rationalist perspective, the 
ultimate purpose of any profit making organisation is to make a profit (i.e. 
make money). Thus the ultimate purpose of any privately funded 
organisation may be regarded as being that of being profitable and making 
money both now and in the future. 
 
The mission of an organisation is the unique aim that sets it apart from 
others of its type, and may be regarded as the vehicle through which it 
achieves its purpose. The particular vehicle used by a manufacturing 
organisation to make money is through the production physical goods. The 
vehicle used by an airline to make money is to transport people etc. In the 
case of manufacturing, since the “production of physical goods” is rather too 
general to be useful, it is normally stated in terms of the specific types of 
product manufactured and the markets served... If at any stage the particular 
vehicle used to make that profit ceases to achieve desired results, then the 
nature of the vehicle, and hence the mission of the organisation, needs to be 
reviewed. 
 
Example: Certain organisations (eg IBM) used to make profits by the 
manufacture of computers. With the advent of increasing competition, this 
form of business became less and less profitable. IBM now make most of 
their profits by selling Information Technology solutions (mostly involving 
systems and software) rather than manufacturing and selling computers. 
 
The wording of mission statements can be important and can indicate 
significant ways in which the organisation perceives itself. For example a 
company currently producing glass bottles may consider itself to be 
operating in the glass bottle industry, its mission being to satisfy customers 
who require glass bottles. A similar company also currently manufacturing 
glass bottles may take a broader view of its mission which it might regard as 
being to satisfy customers who require liquid containers. Whilst not 
Purpose 
Mission 
Objectives 
Figure 1.1 
 
 
 
Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 1-7 
 
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excluding glass bottles, this mission statement does not exclude the 
manufacture of other forms of liquid container (eg plastic) and can imply the 
servicing of a much wider range of markets than the company who 
deliberately restricts itself to glass bottles. 
 
The mission statement represents an answer to the question “what sort of 
business are we in?” or conversely “what sort of business are we not in?” 
For example the glass bottle manufacturer might deliberately choose not to 
broaden its mission statement, so as to focus on those sections of the market 
that specifically require
glass. 
Implicit in the mission statement will be the particular posture the 
organisation intends to adopt in relation to its competitors (eg “to achieve 
the shortest customer delivery time in the industry at the same time as 
maintaining acceptable levels of cost, quality and product range”.) 
 
Objectives are the translation of the mission statement into specific concrete 
targets against which results can be measured. Specific objectives might 
represent milestones in fulfilling the organisation’s mission - eg “increase 
market share by 5% per year over the next 5 years”, or “half product lead 
times over the next two years” 
 
A pertinent question to ask at this point is “who decides the purpose, 
mission and objectives of an organisation?” In private manufacturing 
industry, it would normally be accepted without question that the owners of 
the company (be they an individual, a small group of individuals, or a large 
number of small shareholders) would have the absolute right to determine 
the company’s purpose. A more enlightened modern view however is that 
when purpose is being decided, the views of all the stakeholders should be 
considered. Stakeholders generally comprise a larger group than merely the 
owners, and in a large organisation might consist of: 
 
• shareholders 
• employees 
• customers 
• suppliers 
• local community etc 
 
This is not to say that strategy should be jointly decided by the stakeholders, 
but that on the other hand responsible strategy formulation should take into 
account the interests of the various stakeholders, since alienation of one 
particular stakeholder group might well have adverse consequences for the 
company in the longer term 
 
Reading 1.1 
Stop now and read “The Purpose of the Firm” by Andrew Campbell, Long 
Range Planning, Vol. 26 No 6 pp140-141, 1993 
 
 
 
1-8 Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 
 
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Exercise 1.1 
For your own organisation or one which is familiar to you, indicate the 
purpose, mission, and a number of specific objectives 
 
 
 
 
 
 
 
 
 
 
Characteristics of Strategy 
 
Strategy then is the broad program for achieving an organisation’s 
objectives and so implementing its mission. It creates a uniform direction 
and consistency in actions, and guides the way in which resources are 
deployed. Conversely, in cases where the “strategy” of an organisation does 
not appear to be very clearly formulated, it can also be regarded as the 
pattern of the organisations response to its environment over time (i.e. an 
organisation’s strategy, rather than being explicit, is implicitly contained in 
the way the organisation behaves). 
 
Hayes and Wheelright (1984) have identified five key characteristics of the 
term “strategy” when used in a business oriented sense: 
 
1. Time - strategy is concerned with activities that involve an extended 
time horizon in terms of both their implementation and their impact. 
2. Impact - the eventual impact of pursuing a given strategy will be 
significant. 
3. Concentration of effort - effective strategies normally require 
concentration of focus on a fairly narrow range of pursuits. 
4. Pattern of decisions - strategy implementation requires a consistent 
pattern of mutually supportive decisions over time 
5. Pervasiveness - strategy embraces a wide range of activities from 
overall resource allocation to daily operations; the need for consistency 
over time requires that all levels of the organisation act instinctively in a 
manner that supports the strategy. 
 
 
 
 
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Hax and Majluf (1988) have reviewed the definitions of business strategy 
and have produced a slightly different summary. 
 
According to them, strategy: 
 
1. is a coherent, unifying and integrative pattern of decisions; 
2. determines and reveals the organisational purpose in terms of long term; 
objectives, actions, programs and long term allocation priorities; 
3. selects the business the organisation is in or is to be in; 
4. defines the kind of economic and human organisation the company is or 
intends to be; 
5. attempts to achieve a long term sustainable advantage in each of its 
businesses by responding properly to the opportunities and threats in the 
firms environment and the strengths and weaknesses of the organisation; 
6. engages in all the hierarchical levels of the firm (corporate, business, 
functional); 
7. defines the nature of the economic and non-economic contributions it 
intends to make to its shareholders. 
 
Note how the critical question of “how do we compete?” is a pervasive 
theme in this definition. 
 
An organisation’s strategy should evolve from the answers to such basic 
questions as: 
 
• What business are we in? If this is defined too broadly the organisation 
may lack focus; if too narrowly, it may overlook attractive opportunities. 
• Who are our customers and who should they be? Examination of 
needs and characteristics of customers may point out the future direction 
for an organisation to take. 
• Where are we heading? Is the organisation’s market share increasing 
or decreasing? Does it need to diversify, or is more focus required? 
• What particular competitive advantages do we enjoy? What 
currently existing factors such as unique technology, proximity of 
suppliers, give the firm a strong advantage over its direct competitors, 
and how can these advantages be best exploited? 
• What are our particular strengths and weaknesses? Special 
capabilities such as a high degree of engineering excellence or a 
comprehensive distribution network, or weaknesses such as lack of 
experience in product innovation, can be very significant in determining 
future strategy. An organisation should embark on a course that makes 
maximum utilisation of its strengths and minimises its weaknesses. 
 
Answers to the above questions help to determine what H. Igor Ansoff has 
called the “common thread” for the organisations activities. Over-diversified 
organisations tend to lack this common thread and hence often lack any 
clear strategy. It has actually been suggested that the most successful 
organisations are in fact those that have properly identified their “core” 
 
 
 
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business which they know and in which they can excel, and stick to it in 
spite of temptations to expand by branching into other areas with which they 
are less familiar. 
 
Reading 1.2 
Stop now and read “Why do Companies Overdiversify?” by Andrew 
Campbell, Long Range Planning, Vol 25, No 5, pp 114-116, 1992 
 
Exercise 1.2 
1. Think of an example of a company which has overdiversified to the point 
where a loss of effectiveness is occurring. What reasons can you think of 
for the loss of effectiveness? 
 
 
 
 
 
 
 
 
 
2. Think of an example of a company that has diversified without any loss 
of effectiveness. What are the main differences between this and the first 
company? 
 
 
 
 
 
 
 
 
 
 
 
Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 1-11 
 
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Strategic and Operations 
Planning 
 
If strategy provides a set of broad goals stemming from the common thread 
of an organisation, and the vision for achieving them, strategic planning is 
concerned with the process of developing specific programs and policies for 
implementing the strategy. 
 
Strategic planning bears a hierarchical relationship to operations planning 
as shown in Fig 1.2. 
 
 
 
 
 
 
 
 
 
 
 
The strategic plan generally provides the
framework within which 
operations planning, at the more detailed level, will take place. Some of the 
essential differences in the nature of strategic planning and operational 
planning are shown in Fig 1.3. 
 
Strategic Planning Operations Planning 
 
• Long time horizon 
• Less certainty 
• Less Structured 
• More ends-oriented 
• Poorly defined information 
requirements 
• Tends to have irreversible 
impact 
• Focuses on the whole 
 • Short time horizon 
• More certainty 
• More structured 
• More means-oriented 
• Well defined information 
requirements 
• Tends to have reversible impact 
• Focuses on parts 
 
 
Strategic 
Plan 
Operations Plan 
Figure 1.2 Figure 1.3 
 
 
 
1-12 Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 
 
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Due to their longer time horizons, strategic plans are made with more 
uncertainty than operational plans since making accurate forecasts far into 
the future is difficult. Strategic plans are also less structured than operational 
plans for two reasons. Firstly they are more ends-oriented in the sense that 
goals and objectives must be decided before the means of achieving them 
(the object of operational plans) can be determined. Secondly, strategic 
plans tend to have poorly defined information requirements. We can be less 
certain about the type of information that will be needed to make a strategic 
choice now that may not have an impact for five years. Operations planning 
is by contrast more routine, repetitive and requires quite specific 
information. 
 
Strategic plans lead to decisions that are major commitments of present and 
future resources. As a result, they tend to have irreversible impact. An 
operational choice, such as how much to order this month from a certain 
supplier, has far less impact than whether or where to build a new factory. If 
a mistake is made in the former, a supplemental order can be placed. If a 
mistake is made in the latter, the firm may be stuck with a costly, inefficient 
facility. 
 
Finally, strategic planning focuses more on the whole organisation and 
strategic plans made for different functional areas and departments need to 
be very closely integrated with each other. 
 
 
 
 
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Corporate Strategy and the 
Strategic Business Unit 
 
The relationship between Strategic and Operational planning is one form of 
hierarchical relationship that exists between different types of planning 
activities in an organisation. A form of hierarchical relationship also exists 
between different forms of strategy and strategic planning (see Fig 1.4) 
Deciding on the common thread underlying an organisation’s activities (i.e. 
the particular industry in which it will operate, the markets it will serve etc) 
it would not be uncommon to find the organisation to be composed of more 
than one “business”. 
In the paint industry for example, a single company could be involved in 
five businesses - eg: 
 
1. decorative or architectural paints 
2. industrial coatings 
3. automotive paints 
4. refinish paints 
5. marine coatings 
 
Although the common thread, paint manufacture, clearly exists, each 
business has different market requirements in for example, customer 
service, and each will have a visible and obvious set of competitors. Each 
business will be operating in different product/market environments and as 
such, different bases for competitive advantage and different strategies for 
achieving it are likely to be appropriate. 
 
The term strategic business unit has been coined to describe a separate 
business entity with its own particular strategic focus. The most logical top-
level division of the organisation is therefore into such strategic business 
units. Obviously, only larger companies will divide into separate strategic 
business units in this way. Many smaller companies will comprise only 
single business units and so this top level division will be absent. 
 
Corporate strategy is concerned with defining the overall corporate 
mission of the organisation as a whole, the product/markets in which it will 
or will not participate, the nature and scope of each Strategic Business Unit, 
the way in which the individual units will be funded, how resources will be 
allocated between them, what types of performance measure will be used, 
how return to shareholders will be established etc. 
 
Each strategic business unit will have its own business strategy and strategic 
plan that is appropriate for the particular product/market situation in which 
it is operating. This will be concerned with the particular way in which the 
 
 
 
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units has decided to compete, the cash flow and expected profitability of the 
unit and the ways in which this will relate to the corporate plan. 
 
The strategy for each unit may be broken down into three functional 
strategies: 
 
• a marketing strategy 
• a financial strategy 
• a manufacturing strategy 
 
The marketing strategy is generally concerned with the range of products 
that will be made, where and to who they will be sold, and at what price. 
The typical questions to be answered in formulating a marketing strategy 
are: 
 
• who are our customers? 
• where are our customers? 
• what do our customers want (eg price, value, quality, availability, 
service?) 
• how much will they buy at what price? 
• do we wish to be a market leader? 
• how is it best for us to sell? 
• what sort of channels do we need for distributing the product? 
• do we need and can we supply supporting services? 
• what is the best pricing strategy and policy for our operation? 
 
The financial strategy is concerned with establishing targets of profitability, 
productivity, capital investment, and the allocation of funds between 
different activities. Typical questions to be asked in formulating a financial 
strategy are: 
 
• what level of profits and profitability should be targeted over the next 
few years 
• what type of payback period will be required on new capital investments 
 
If we assume that the strategic business unit is divided into the different 
functional areas of finance, manufacturing and marketing, 
 
Given a good marketing and financial strategy it is necessary that the 
manufactured by the company be produced in the right quantity, at the right 
time, to an appropriate standard of quality and at a cost which ensures the 
company will remain profitable. In other words, the product must be 
manufactured competitively. 
 
The manufacturing strategy is concerned with developing a broad 
framework for the acquisition and maintenance of the appropriate resources, 
technology, skills, management systems, quality assurance systems, 
maintenance systems etc to do this. 
 
 
 
Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 1-15 
 
November 2003 
 
Skinner (1983) has defined manufacturing strategy as: 
 
“...a long-term plan for developing consistent operations policies and 
structures and providing focused facilities to achieve limited but absolutely 
key corporate strategic objectives. This is a matter of designing the parts to 
do the job for the whole of the corporation. It's also designing the part so 
that it is a focused part and doesn't try to do everything. Manufacturing 
strategy is addressed to key structural decisions. By structural, I mean the 
decisions that lock your operation in for years--things that are hard to 
change, the number of plants, the size of the plants, the location of plants, 
the major systems for control, organization, and
human resource 
management, the selection of the equipment and process technology. Those 
are the long-term structural decisions. Heaven help you in your operation if 
you've got the wrong plant or the wrong equipment at the wrong place with 
a whole pipeline of people who have been selected and trained and 
supervised and managed wrong. We are talking about trying to look ahead 
to the strategic objectives and plans.” 
 
Manufacturing strategy should basically: 
 
• provide manufacturing processes that give the business a distinct 
advantage in the marketplace 
• provide coordinated support for the essential ways in which products 
win orders in the market place at a better level than competitors 
 
By achieving the first of these two objectives, manufacturing will be able to 
provide a marketing edge through distinct, unique technology developments 
in its process and manufacturing operations which competitors are unable to 
match. 
 
By achieving the second, manufacturing develops a set of policies in both its 
process choice and infrastructure design (for example controls, procedures, 
systems and structures) which are consistent with the existing ways in which 
products can win orders, whilst being able to reflect future developments in 
line with changing business needs. 
 
In the past, manufacturing decisions have traditionally been subservient to 
financial and marketing decisions in that the former are made by the 
relevant directors without any reference to the capabilities of the 
manufacturing function to deliver the necessary outcomes required by such 
decisions. Marketing decisions and plans were merely handed down to 
manufacturing who were supposed to simply accept them without question, 
and do the best they could. The manufacturing function frequently did not 
have any representative on the board of directors who would be primarily 
responsible for setting strategic direction. This type of relationship between 
manufacturing and other functional strategies is shown in Fig 1.4. 
 
 
 
 
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A more modern view of the relationship between the functional and 
corporate strategies is shown in Fig 1.5. Here, manufacturing strategy has 
been raised to equal partnership with financial and marketing strategies. 
 
 
 
Figure 1.4 
Figure 1.5 
Relationship between Functional 
Strategies (modern) 
Business 
Strategy 
Marketing 
Strategy 
Financial 
Strategy 
Manufacturing 
Strategy 
product technology 
process technology 
process positioning 
capacity strategies 
degree of focus 
experience curve issues 
human resource issues 
interaction with suppliers/customers (supply 
chain issues) 
Manufacturing 
Plans 
Relationship between Corporate and 
Functional Strategies (traditional) 
Corporate 
Strategy 
Marketing 
Strategy 
Financial 
Strategy 
What business or businesses are we in? 
Degree 
of 
diversification 
Mergers/takeovers 
Cash allocation between businesses 
Relation with shareholders 
Relation with society 
Debt/equity financing 
Capital budgeting 
Return on investment 
target
s Taxation 
Liquidity/Cash flow 
issue
s Financial performance 
goal
s 
In what markets to 
compete? 
With what products? 
Competitive advantage 
exploited 
Advertising and 
promotion 
Product image 
 
 
 
Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 1-17 
 
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Note how this relationship is not strictly speaking a hierarchical one. The 
major functional strategies in one sense are part of but also serve to define 
the business strategy. Likewise marketing, finance and manufacturing 
strategies are equally important in defining the business strategy with no 
single functional strategy taking precedence over the others. This is 
consistent with the modern notion that properly formulated and 
implemented manufacturing strategies provide a powerful platform to 
launch new competitive thrusts. Whereas an effective marketing strategy 
can ensure that a company can get and stay close to the customer and can 
identify market niches associated with particular forms of competitive 
advantage, such that customers will want to buy from your company and no 
other, the manufacturing function is the engine that drives and supplies the 
power that the marketing function can exert in the marketplace. Thus any 
strategic corporate or marketing decisions that are made should be in full 
conjunction with a complementary set of strategic decisions about the 
manufacturing infrastructure that will need to be available to implement 
these decisions, and will allow manufacturing policies to be aligned “hand-
in-glove” with marketing and financial policies. 
 
This contrasts strongly with the older style view of manufacturing having 
only a reactive role in business strategy. 
 
Reading 1.3 
Stop now and read “Setting the Strategy” Tangram Technology, 2001 
 
Exercise 1.3 
Make notes in the space below on the points in this article that you see as 
being relevant to your own organisation 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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The reasons for manufacturing’s traditionally reactive role may be examined 
by looking at how manufacturing organisations have evolved in recent 
history. 
 
Up to the mid 1960’s manufacturing companies could generally sell all they 
produced, and this created a dominance for the manufacturing function in 
many organisations. From the mid-1960’s to the mid 1970’s, selling into 
existing and new markets became more difficult, and marketing became the 
pre-eminent function. From the 1970’s onwards, recessions, energy crises, 
and shortage of key resources opened the door to the influence of the 
finance function, and this has increased in recent years with corporate 
restructuring, mergers, the creation of “paper” organisations, and the need to 
maintain the organisation’s listed price in the stockmarket as a defence 
against corporate takeovers. The latter has also lead to renewed emphases on 
cost minimisation (generally pertaining to manufacturing costs) and asset 
liquidation and a rather short term view being taken of capital investment 
decisions, which has not encouraged the renewal of ageing plant and 
equipment or investment in new technology. 
 
All of this has lead to a progressive decline in the influence of the 
manufacturing on corporate or business strategy which has been further 
exacerbated by typical internal organisational factors the more typical of 
which are listed below: 
 
• production managers view of themselves; production managers tend to 
define their role as that of merely reacting as well as possible to what is 
asked of the manufacturing system, rather than as making a contribution 
to corporate decisions. 
• company’s view of the production manager’s role; many production 
managers started their careers on the shop floor, or as technical or 
engineering specialists. Promotion often occurs with scant regard to the 
change in emphasis required if a more corporate perspective is to be 
taken of manufacturing’s role. 
• production managers are too late in the corporate debate; often 
production managers are not involved in corporate policy decisions until 
these decisions have started to take shape, hence they have little 
opportunity to contribute to decisions on strategy alternatives. 
• the “can’t say no” syndrome; production managers tend to accept the 
current or future demands placed on them and attempts to resolve them, 
rather than providing realistic feedback up the corporate chain
as to what 
is and is not possible. 
• functional goals and measures; whereas finance and marketing divisions 
tend to be measured in terms of overall effectiveness such as total 
profits, or total sales achieved (a business perspective) production 
divisions are usually measured in terms of efficiencies (an operational 
perspective). A focus on efficiency rather than effectiveness can lead to 
decisions which are sub-optimal from the point of view of the 
organisation as a whole. 
 
 
 
Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 1-19 
 
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• top management’s view of strategy; top level executives in a business 
tend to look outwards and centre their attention on the external 
environment in which the business operates; as such the outward looking 
perspectives associated with marketing and finance will occupy most of 
their attention. Manufacturing on the other hand is concerned with the 
inward dimensions of the business with which top executives are less 
likely to want to be associated. 
 
 
 
 
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Linking Manufacturing 
Strategy with Corporate and 
Business Strategies 
 
We have implied a degree of equality between the three functional strategies 
and how they collectively define the business strategy. This has an impact 
on the process of strategy formulation, which for a manufacturing 
organisation classically consists of the following steps: 
 
1. Define corporate/business objectives 
2. Determine marketing and financial strategies to meet these objectives 
3. Assess how different products win orders against competitors 
4. Establish the most appropriate mode to manufacture these products - 
process choice. 
5. Provide the manufacturing infrastructure required to support production. 
 
The problem in the past tends to have been that most corporate planners 
tend to treat the first three steps as iterative with “feedback loops” and the 
next two as linear and deterministic (i.e. process choice and manufacturing 
infrastructure somehow follow from the first three) in reality the 
manufacturing infrastructure that currently exists, and current process 
combined with those that are realistically implementable in the time frame 
given existing skills and expertise, should also have a strong input to the 
first three steps. This implies the whole process should be an iterative one. 
 
 
Exercise 1.4 
 
Try to think of some examples from your own organisation or from 
organisations known to you, of some negative effects of failing to regard 
strategy formulation as an iterative process 
 
 
 
 
 
 
 
 
 
 
 
Manufacturing Strategy: Unit 1 - The Nature and Role of Manufacturing Strategy 1-21 
 
November 2003 
 
Conclusion 
 
We have seen in this unit how a successful manufacturing company requires 
a long term and coherent strategy for survival, and that this strategy should 
comprise a set of integrated functional strategies of which the manufacturing 
strategy plays an equally important role to that of the financial and 
marketing strategies. We have also seen how the development of a strategy 
is an iterative process between the three functional strategies, the strategy of 
the business unit, and the corporate strategy. In the succeeding units we look 
at various components of the manufacturing strategy to see in more detail 
how “integration through iteration” can occur. 
 
 
 
 
 
 
 
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References 
 
Hax A.C and N.S. Majluf “The concepts of strategy and the strategy 
formation process”, Interfaces, Vol 18, pp99-109, May-June 1988 
 
Hayes R.H. and S.C. Wheelright, “Restoring our Competitive Edge: 
Competing through Manufacturing” NY, John Wiley, 1984