Academic journal article Journal of Applied Management and Entrepreneurship

Competitive Operations Priorities and Firm Performance in Small Community Banks: A Test of Trade-Offs

Academic journal article Journal of Applied Management and Entrepreneurship

Competitive Operations Priorities and Firm Performance in Small Community Banks: A Test of Trade-Offs

Article excerpt

Introduction

The concept of competitive priorities has been widely adopted by operations strategy researchers (Ward, McCreery, Ritzman, & Sharma, 1998; Avella, Vazquez-Bustelo, & Fernandez, 2011), and these researchers continue to produce a growing body of literature on manufacturing operations strategy, including the identification of competitive strategies, the process for developing and implementing strategies, and the relationship between strategy and performance (Kroes & Ghosh, 2010; Ferdows & De Meyer, 1990; Noble, 1995; Skinner, 1969; Ward, Leong, & Boyer, 1994). However, despite growing interest in the topic, the concept has been rarely applied to firms outside of a manufacturing context. Moreover, there have been few attempts to assess the value of these priorities in smaller firms. This work submits that it is imperative that this work be extended to these contexts if this worthwhile sub-field is to add value outside of operations management.

One such context, community based banking, is undergoing a revolutionary transformation as these institutions attempt to recover and reorganize after a deep recession (Prasad, Tata, and Guo, 2012). This study contends that a study targeted at these firms and their use of competitive operations priorities is timely, and may provide valuable insights for firms existing in this turbulent sector. To assist these firms in overcoming the effects of this downturn, and prepare for the next, researchers, policy-makers and managers need to have an understanding of the competitive operations priorities that are most important to them. More importantly, managers need to understand how selected priorities relate to firm performance.

It is the goal of this research to empirically explore this relationship. The extant literature regarding competitive priorities is first reviewed. This literature is then wedded with established strategic management theory. In this literature review, the focus is on the few studies that have been published utilizing samples of smaller firms and banking firms. After stating theoretically derived hypotheses, the study utilizes a valid and reliable scale to examine the competitive priorities in a sample of small, community based banks. Finally, the relation between these priorities and firm performance is empirically explored. Results and implications are then discussed.

Competitive Operations Priorities and Strategic Management

The process of formulating strategy requires decisions about how resources should be managed in order to achieve goals and build capabilities. Much of the theory about strategies at the operational level of organizations developed from ideas proposed by Skinner (1969). He suggested that manufacturing strategy should support the corporate strategy of the company. To accomplish this, manufacturing choices are made among alternatives such as lower costs, better quality, and dependable delivery. Four widely recognized manufacturing strategies consisting of cost, quality, flexibility, and dependability evolved from the work of Skinner (1969, 1978) and others, including Ferdows and De Meyer (1990), Noble (1991), Hayes and Wheelwright (1984), and Hill (1989). Notably, as the field of manufacturing strategy developed, researchers used various terms to describe strategic attributes. In this study, the term competitive operations priorities (e.g. Diaz, Machuca, & Alvarez-Gil, 2003) is used to identify operational-level strategic alternatives that firms may emphasize in the pursuit of competitive advantage. It might also be noted that, after some initial vacillation, the extant literature coalesced around these four priorities some 20 years ago and did not evolve extensively. As a result the base of literature on the construct of competitive operations priorities is somewhat dated. Below this literature is developed and definitional choices are elucidated.

The extant literature with regard to competitive priorities in service firms is far less developed, but not insignificant (e. …

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