Cluster analysis application for understanding SME manufacturing strategies

Abstract

Small and medium size enterprises’ (SME) manufacturing strategy configurations are identified in a small developed economy with the aim to explore how SME manufacturing strategy configurations affect business stability and performance during a period of macroeconomic shock. Drawing on a survey-based dataset, our two-step cluster analysis results suggest that three distinctive manufacturing strategy configurations can be observed among the SMEs of the Finnish manufacturing sector, namely: Responsive niche-innovators, Subcontractors, and Engineer-servers. Furthermore, we are able to establish a link between the strategy configurations and business stability and performance. The results support conclusions that the nature of manufacturing strategy taxonomies are driven by the business context, and that volume flexibility, design flexibility and service provision capabilities enable better business outcomes during macroeconomic shocks, in comparison to the more easily achievable conformance quality as well as delivery speed and dependability. In light of this research, best performing cluster under the macroeconomic shock is the Engineer-servers, emphasizing flexibility-oriented broad product line and after sales service, while having less priority concerning low price and volume flexibility. The results offer important insights for managers, but also for other stakeholders in the form of for example expert systems development for SME funding decisions.