Small manufacturers in Brazil: competitive priorities vs. capabilities

Abstract

Small- and medium-sized manufacturing enterprises are important to both economic growth and supply chains, yet research focused on this type of organization—and specifically in the area of manufacturing strategy—has been limited. In response, this study compares the competitive priorities and capabilities of small- and medium-sized manufacturing enterprises in Brazil. Using a large-scale survey, it assesses the impact of measuring competitive priorities vs. capabilities and examines how competitive priorities are shaped. First, findings support the argument that tradeoff decisions in these firms are better captured by measuring competitive capabilities than by measuring competitive priorities. Second, competitive priorities appear to be shaped more by the business environment than by capabilities. Meanwhile, competitive capabilities appear to be shaped more by priorities than by the business environment. However, for the studied enterprises, capabilities appear not completely deliberate or aligned with priorities, leaving scope for future research. Cluster analysis then identified a group of firms that rate all competitive priorities as high yet have low competitive capabilities. These companies seem to have no clear strategy. The best performing cluster of companies had strong capabilities in terms of delivery, quality, and innovativeness rather than cost. This provides an indication as to which capabilities small- and medium-sized enterprises need to develop in order to succeed in the current business environment.