You are on page 1of 13

Journal of High Technology Management Research 17 (2006) 7183

Industrial competitiveness analysis: Using the analytic hierarchy process

Sajee B. Sirikrai a,1 , John C.S. Tang b,
a b

Thammasat Business School, Thammasat University, 2 Prachan Road, Pranakorn, Bangkok, 10200, Thailand School of Management, Asian Institute of Technology, P.O. Box 4, Klong Luang, Pathumthani, 12120, Thailand Available online 19 June 2006

Abstract Industrial competitiveness is an important issue for countries pursuing export-oriented industrialization policies. Assessing the competitiveness of an industry is a complex process and it can be analyzed from several perspectives. This paper proposes that the aggregate performance of many firms in a particular industry can reflect the competitiveness of that industry as a whole. Based on theories from strategic management and operations management research, it presents an AHP-based model to comprehensively explore the varying degrees of importance of the indicators and drivers of industrial competitiveness. The model helps to identify the degree to which organizational performance indicators are important when assessing industrial competitiveness. Further, it helps to evaluate the importance of particular factors that drive firms to perform better. The paper presents an application of this model by applying it to the automotive components industry in Thailand. 2006 Elsevier Inc. All rights reserved.
Keywords: Competitiveness; Analytic hierarchy process; Automotive industry

1. Introduction Intense competition in international markets requires firms to improve competitiveness. These improvements not only benefit the firms themselves, but also have a direct impact on the competitiveness of an industry as a whole. The competitiveness of the firms within a particular industry therefore, reflects the competitiveness of that industry. However, there is still debate among several disciplines regarding how the competitiveness of these firms should be measured and what factors affect competitive performance. These divergent perspectives suggest an alternative approach that would apply multiple theories to analyze competitiveness in order to better appreciate its complexity (Coates & McDermott, 2002; Hoskisson, Hitt, Wan, & Yiu, 1999). Although conventional approaches to competitiveness tend to be limited in scope, this study takes a more comprehensive approach. It considers how the competitiveness of many firms can signify the competitiveness of an overall industry by proposing an analytical model that applies theories rooted in both strategic management and

Corresponding author. Tel.: +66 2524 5684; fax: +66 2524 5667. E-mail addresses: (S.B. Sirikrai), (J.C.S. Tang). 1 Tel.: +66 9789 5890; fax: +66 2524 5667. 1047-8310/$ - see front matter 2006 Elsevier Inc. All rights reserved. doi:10.1016/j.hitech.2006.05.005


S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183

operations management to study the complex relationship between factors that affect industrial competitiveness. The strategic management school tends to measure competitiveness mainly from the firm's financial performance. The factors that drive performance are explained according to the industrial organization (IO) or the resource-based view of the firm (RBV). On the other hand, the operations management (OM) school suggests that competitiveness indicators should encompass multiple aspects of organizational performance, by considering manufacturing functions as competitiveness drivers. The analytic hierarchy process (AHP) is proposed as an ideal analytical tool to develop a generic model of industrial competitiveness that comprises theories from two different management points of view and takes best advantage of each theory's particular strengths. The model shows how both strategic and operations management theories can be used to explain the complex relationship between competitiveness indicators and drivers. This approach offers a deeper understanding of competitiveness because it helps to identify the degree to which a specific performance indicator is important to the firms within an industry and how it reflects the competitiveness of that particular industry. In addition, it helps evaluate the extent to which each driver affects the indicators. Therefore, this model can be used to solve practical problems that arise when devising strategies to improve competitiveness. To illustrate the potential benefits of this model, this study applies it to the analysis of the automotive components industry in Thailand. This particular industry is selected as a case example for several reasons. First, automotive parts makers in developing countries are struggling in the global arena. Second, the industry is a good representative example of the manufacturing sector since it demonstrates substantial degrees of complexity both in terms of production and competition in the global market. The automotive sector has also become increasingly important to the Thai economy. In 2003, the Thai government launched a campaign to develop this sector into the Detroit of Asia. Two years later (2005) this sector generated about 10% of the total exports of industrial goods and employed more than 250,000 people. Results obtained from the model proposed in this study therefore, should be useful to automotive parts makers as well as to policy makers who must devise sound competitiveness improvement strategies. 2. Industrial competitiveness analysis Since it is the individual firm that produces goods and competes in the global market, an analysis of industrial competitiveness should take into account the involvement of firms' collective performance. This section reviews the literature to identify the specific indicators and drivers of competitiveness that are pertinent to the manufacturing sector. 2.1. Competitiveness indicators Although financial indicators such as return on investment and return on assets are the conventional proxies of competitiveness, several non-financial performance indicators are also important. Non-financial performance indicators that are widely used include overall customer satisfaction (Sharma & Fisher, 1997; Tracey, Vonderembse, & Lim, 1999); market share (Anderson & Sohal, 1999; Li, 2000; Sharma & Fisher, 1997); market share growth (Tracey et al., 1999); overall competitiveness (Anderson & Sohal, 1999; Lau, 2002); sales volume (Anderson & Sohal, 1999; Li, 2000); sales growth (Lau, 2002; Sharma & Fisher, 1997); overall plant success (Gordon & Sohal, 2001); and productivity (Noble, 1997; Ross, 2002; Sharma & Fisher, 1997). The use of both financial and non-financial performance indicators creates a more accurate performance measurement system because it offers a more complete view of a business and can therefore lead to better-informed business decisions (Kaplan & Norton, 1992; McAdam & Bailie, 2002; Neely, Filippini, Forza, Vinelli, & Hii, 2001; Nilsson & Kald, 2002). This performance measurement system is a useful strategic tool for manufacturing firms (Chenhall, 2005; De Toni, Nassimbeni, & Tonchia, 1997) because it gives them a more detailed analysis of organizational performance, which can in turn, lead to a more meaningful analysis of industrial competitiveness. 2.2. Competitiveness drivers Two strategic management theories the IO and RBV can explain why firms achieve different degrees of financial performance (Hoskisson et al., 1999). The latest development of the IO theory by Porter

S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183


(1998) explains how the profit potential of firms in a particular industry depends on the five market forces bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitute products and rivalry among competitors. To maximize profitability, managers should seek to manipulate the underlying factors of these forces to their favor (Porter, 1998). Fairbanks and Lindsay (1997) show, through many case studies, how market forces and government can influence the performance of firms in several industries. The RBV theory asserts, however, that the resources and capabilities of firms are the most important factors affecting profitability (Barney, 2001; Wernerfelt, 1984, 1995). The term resources refers to bundles of tangible and intangible assets as well as skills, which are valuable, rare and are either not substitutable or can only be imitated imperfectly (Barney, Wright, & Ketchen, 2001). For example, resources can include employee expertise, product reputation, company reputation and organizational culture (Hall, 1992, 1993). The RBV school of thought argues that firms rely on their resources to successfully establish a competitive edge. As a result, RBV theorists such as Dierickx and Cool (1989) emphasize studies on processes by which firms create and use their resources to sustain competitiveness. By developing and exploiting their firms' resources, managers can change the rules of the game, i.e., the competitive conditions, and establish a competitive advantage that addresses customer values (Stoelhorst & van Raaij, 2004). Aside from these two strategic management theories, the OM literature asserts that operations can be an important source of competitiveness. The proactive roles of operations have been mentioned since the 1960s, when Skinner (1969) proposed that manufacturing should not be dominated by engineering matters but be systematically linked with corporate strategies. Operations affect competitiveness through the development and implementation of operations strategies, which involve a series of decisions by firms to leverage their resources and exploit market opportunities identified by customer needs (Lowson, 2003). The existence of operations strategies results in improved performance in terms of manufacturing quality, product variety, product development time, numbers of new products and production costs (Demeter, 2003). Operations strategies involving quality management, process efficiency improvement, new process technology, customersupplier collaboration, and uses of benchmarking, also significantly improve the performance of firms in manufacturing industries (Ahmed, Montagno, & Firenze, 1996; Morita & Flynn, 1997). In particular, the use of advanced manufacturing technology (Gordon & Sohal, 2001; Sharma & Fisher, 1997; Tracey et al., 1999), quality management practices (Anderson & Sohal, 1999; Gordon & Sohal, 2001; Sharma & Fisher, 1997), and product design and development (Gordon & Sohal, 2001; Li, 2000; Sharma & Fisher, 1997) contribute positively to the firms' competitiveness. The OM literature also indicates that technology and operations management capabilities are highly regarded as important competitiveness drivers. Thus, OM research explains how a competitive advantage can be achieved through resources generated by operational functions (Amundson, 1998). Additionally, several authors point out how the OM literature complements RBV theory and the benefits that can be derived from a combined approach (Amundson, 1998; Coates & McDermott, 2002; Dangayach & Deshmukh, 2001; Gagnon, 1999). In conclusion, competitiveness drivers can be classified into two groups. The first group consists of market forces characterized by the IO-based theory, or external drivers. The second group encompasses resources and capabilities, or internal drivers found in the RBV theory and the OM literature. 2.3. A multiple-theory framework for competitiveness analysis Previous studies have shown that the indicators and drivers of competitiveness are multi-faceted in nature with complex relationships. Given such complexity, several researchers (Coates & McDermott, 2002; Hoskisson et al., 1999) have advocated the use of multiple theories to develop a more comprehensive analysis of competitiveness. In particular, the combined application of both the IO and the RBV theories provides an understanding of performance from both the outside-in and the inside-out perspectives (Hansen & Wernerfelt, 1989; Mauri & Michaels, 1998; Spanos & Lioukas, 2001; Stoelhorst & van Raaij, 2004). This paper develops this further by proposing a theoretical framework that includes a comprehensive set of links between competitiveness indicators and drivers, shown as Fig. 1. Knowing the extent to which each competitiveness driver affects the indicators is imperative in order to devise successful competitiveness improvement strategies. To determine this however, elements in the framework need to be


S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183

Fig. 1. A framework for industrial competitiveness analysis using multiple-theory approach.

clearly defined, and an appropriate analytical tool needs to be applied. The following section explains how this can be implemented. 3. An AHP model of competitiveness analysis AHP is an effective technique for analyzing a complex problem because it facilitates step-by-step causeeffect explanations and systematically accommodates the use of expert judgment (Saaty, 1990); these advantages make AHP the appropriate method for an analysis of competitiveness. The complexities of competitiveness result from several competitiveness indicators that evolve from conflicting business objectives and various factors that can be credible competitiveness drivers. After these factors are identified, their relationships need to be simultaneously considered in order to reveal sensible indicators and influential drivers. AHP can facilitate such an analysis by showing how different factors are related to each other by organizing them into a meaningful hierarchical model. Informed experts can use the model to systematically assess the relationship between the drivers and the indicators. In addition, the consistency of expert opinion can be monitored using AHP-consistency ratios. Therefore, AHP is a reliable way to synthesize expert opinion for this analytical context. Appendix A presents a brief discussion about the AHP method. The above-mentioned theoretical framework served as a basis for the development of a generic AHP model of competitiveness analysis, shown as Fig. 2.

Fig. 2. Proposed AHP model of industrial competitiveness.

S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183


To apply this model, all the elements within the model need to be configured for a specific industry. Then, expert opinion needs to be collected using the AHP pairwise comparison process to assess the relative importance of the drivers with respect to the industrial competitiveness indicators, and to evaluate the relative importance of the indicators with regard to overall competitiveness. Ultimately, the AHP model produces global and local weights of importance for the three sets of variables the indicator, the driver category and the driver. First, the priority vx represents the degree to which the indicator x (x = 1, 2, , p) contributes to defining industrial competitiveness. The global and local weights of each particular indicator are identical since the indicators are the ones shown at the level closest to the overall goal of the model. Second, the local weights wEDx and wIDx denote the degree to which the groups of external and internal drivers can contribute to the indicator x. The weighted aggregation of the local weights results in the global weights wED and wID that reveal the degree to which the two driver categories contribute to competitiveness. Third, the global weights kEi and kIj signify the degree to which the drivers Ei (i = 1, 2, , n) and Ij ( j = 1, 2, , m) contribute toward competitiveness. To simplify Fig. 2, the global weights of the driver categories and the local weights of the drivers are not shown. Appropriate methodological procedures must be applied to take full advantage of the AHP model and expert opinion. Obviously, the qualifications and combination of experts are crucial to determining the quality and credibility of the derived outcome. Even though AHP does not require input from a large number of experts, it is nevertheless necessary that the experts participating in the study understand the competitive market conditions and are fully aware of the competitive capabilities of the industry players. To ensure a comprehensive industry overview, experts from different backgrounds should participate in the study. If expert opinions vary significantly, Basak (1988) suggests performing an independent analysis for each specific group. Further, Madu and Kuei (1995) noted that the consistency of group decision-making improves the reliability of the model's results. It is important that the decision-making process is reliable so that the experts can make consistent assessments when they consider a particular problem in a similar context. When all elements in the model are well defined, the quality of expert opinion is more reliable because the experts are more likely to understand the model in the same way (Saaty, 1990). In addition, proper pairwise comparison questions are important to AHP methodology because they lead to sensible and reliable results (Saaty, 1990). These questions would be based on the underlying structure of the AHP model. Consequently, four sets of questions need to be asked. (1) To compare the relative degree of importance of the competitiveness indicators: when comparing the indicators CI1 and CI2, to what degree is one more important than the other in defining the competitiveness status of firms competing in a given industry? (2) To compare the relative contributions among categories of competitiveness drivers toward each indicator: when comparing the two categories of competitiveness drivers, to what degree is a particular category more important than another for bringing about competitiveness in a particular aspect? (3) To compare the contribution of the external drivers toward each indicator: when the current performance of drivers E1 and E2 are taken into account, to what degree is one more influential than the other in terms of strengthening the impact of the firm-external drivers in general? (4) To compare the contribution of the internal drivers toward each indicator: when the current performance of drivers I1 and I2 are taken into account, to what degree is one more influential than the other in terms of strengthening the impact of the firm-internal drivers in general? These questions are repeated to make sure there are adequate comparison questions for elements in the model. Since this study applies the AHP model to analyze industrial competitiveness of the automotive components industry in Thailand, the following section provides a review of the indicators and drivers of competitiveness relevant to this industry. 4. The automotive components industry in Thailand 4.1. Competition in the automotive components market The automotive components industry is a growing sector in Thailand. According to the Thailand Automotive Institute (TAI), this industry includes more than 1600 companies (TAI, 2002). About two-thirds of these are local


S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183

Table 1 Automotive sector exportsimports 19992004 ($US million) Year Total exports of industrial goods Exports of automobiles and parts Proportion of automotive exports to total exports Imports of automotive parts 1999 43,960 2140 4.9% 764 2000 53,252 2808 5.3% 1514 2001 49,083 2996 6.1% 1619 2002 51,901 3335 6.4% 1875 2003 61,223 4590 7.5% 2490 2004 75,754 7028 9.3% 2986

Source: and

companies and joint ventures making intermediate products such as sheet metal stamping, forging, and plastic parts. Their customers make up the remaining one-third. They are the parts makers who produce and supply particular automotive parts to carmakers. Thus, the first group consists of the indirect suppliers, while the second group consists of the direct suppliers. The direct suppliers include subsidiaries of leading global parts makers such as Delphi, Denso, Robert Bosch, TRW, and Visteon. Some ThaiJapanese joint ventures and local companies also compete in this market. Parts manufactured in the country include engines, suspension controls and springs, axles, hubs, propeller shafts, brakes, clutches, steering systems, body parts, electronic parts, air conditioning systems, tires, wheels, internal and external trim components and glass (OIE, 2002). While parts produced in the country are mainly for vehicle assembly and domestic use, their exports have increased sharply since 1999. The growth of Thailand's exports and imports in the automotive sector is shown in Table 1. 4.2. Identifying competitiveness indicators Parts makers are expected to meet rigorous customer requirements in terms of cost, quality and delivery targets. These requirements are the primary criteria in the selection and evaluation of suppliers (TAI, 2002). Besides satisfying their customers, parts makers need to sustain their financial health and business growth (Fahy, 2002). Financial health can be assessed by profitability ratios and cash flows. Indicators of business growth are more complicated since growth can also result from either an expanded product line or an expanded customer base. In addition, Simpson, Siguaw, and White (2002) points out that intangible qualities such as trust and the relationship between suppliers and customers are considered an important source of growth for automotive parts makers. The above studies suggest there are five dimensions to the parts makers' performance, which can be reliable competitiveness indicators of the automotive components industry. These indicators are: manufacturing excellence, value-added of product, market expansion, financial returns and intangible values. Expert opinions obtained from public seminars and interviews conducted by the first author helped to validate and define these indicators. The operating definitions of these indicators are shown in Table 2.

Table 2 Competitiveness indicators Competitiveness indicators Manufacturing excellence Value-added of product Market expansion Financial returns Intangible values Operational definition Parts makers can consistently produce and deliver goods according to customers' requirements in terms of quality of conformance and punctual delivery, at competitive costs (QCD). Parts makers succeed in offering products with higher value-added to customers. The added value can result from improvement of existing products or introduction of new products. Parts makers succeed in expanding their customer base by tapping on new customers. Parts makers achieve satisfactory financial returns such as generation of cash inflows, profit margin, and profit amount from the existing business. Parts makers benefit from continuing business with customers in terms of intangible values. Such values are, for example, a better business opportunity in the future, a prospect of penetrating new markets/customers, an increased volume of order, an opportunity to utilize existing facilities, etc.

S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183


4.3. Identifying competitiveness drivers The firm-external drivers are basically the five market forces proposed by Porter (1998). However, research in the automotive sector reveals that carmakers have considerable influence over parts makers, particularly through their procurement strategies (Corra & de Miranda, 1998; Humphrey & Memedovic, 2003; Noble, 2001). For this study, the procurement strategies of the carmakers' parent companies should be taken into account as an important force, since
Table 3 Competitiveness drivers Competitiveness drivers Operational definition

Firm-external drivers (1) Industrial competitive conditions Procurement strategies Vehicle maker procurement strategies refer to the policies and regulations for procurement of automotive parts. of vehicle makers For example, the strategies include supplier selection, allocation of supply quota and global purchasing plan. Bargaining power Bargaining power of buyers is the degree of influence parts makers perceive the buyers to have on their of buyers business. Bargaining power Bargaining power of sellers is the degree of influence parts makers perceive the suppliers to have on their of suppliers business. Existing competitors The extent of rivalry among existing parts makers depends on various factors e.g., overall growth of the industry, different characteristics of parts makers in terms of size, production capability, products, and competitive strategies, influence of parent companies, significance of loss if parts makers lose customers, market share or the entire business, etc. Potential entrants Threats of potential entrants include effects of having new competitors in the market no matter how they compete, i.e., setting up manufacturing plants in Thailand or imports from other countries. Substitute products Substitutes refer to all goods that can be used as alternatives to the current type of automotive components. Such substitutes can result from technological advancement or a better price/performance ratio of the substitute product, as well as preference of buyer toward the substitutes. (2) Governmental Roles Provision of workforce Development of relationships between the industry, educational institutes and other governmental agencies in order to produce a workforce with suitable qualifications for the industry. Provision of technology Development of relationships between the industry, educational institutes and other governmental agencies to support development support joint technology development projects. The support includes access to locally developed technology and funding. Provision of benefits for Investment incentives that the government provides for foreign investment in the automotive components industry. foreign investment Financial policies Financial policies that affect interest rates and foreign exchange rates to encourage industrial growth. Trade policies Trade policies such as those related to the development of AFTA and other FTA regulations as well as adjustment of tariff structure and non-tariff barriers. Administrative policies General administration policies on the tax system, energy, political stability, infrastructure as well as laws and regulations for businesses located in Thailand. Firm-internal drivers (1) Managerial resources Systematic management

Top management capability People asset Financial asset (2) Technology capabilities Existing production Production technology refers to the knowledge of the manufacturing processes as well as production capability. technology Access to new technology Access to new technology refers to the ability to acquire and use new technology through technical assistance agreements or licenses, and development of joint ventures or joint technological development projects. Process improvement Process improvement capability refers to the ability to improve the current manufacturing technology to satisfy capability customer requirements. Product improvement Product improvement capability refers to the ability to improve the existing products in their functional capability characteristics, performance or appearance, to better satisfy customers. New product development Ability to design and develop new products to satisfy customers, either by itself or with other companies. capability

Implementation of systematic management systems such as ISO9000, QS9000, ISO/TS16949, as well as decisionaid information technology, effective shop-floor management, production management system, and JIT system. Knowledge about the nature of the industry, the global competitive environment, the strategies of vehicle makers, and the importance of business networking. Availability of employees who possess sufficient working skills and a cooperative working attitude. Availability of or access to sufficient capital for additional investment and are able to manage associated risks.


S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183

such influence is beyond the control of their affiliates, which are the direct buyers in Thailand. In addition, Kawahara (1997) and OIE (2002) show how government policies play an important role in developing the automotive industry in many countries. For example, the Japanese and the US governments were involved in trade disputes in the automotive sector. In developing countries, governments play a crucial role by attracting investment from foreign carmakers and suppliers. In Thailand, several measures concerning tax incentives, infrastructure and local workforce improvement have been introduced to encourage investment in this sector (OIE, 2002; Siroros, 1997). It can be said that firm-external drivers of competitiveness can be categorized into two groups, i.e., industrial competitive conditions and governmental roles. Regarding the firm-internal drivers, the implementation of quality management systems and lean production helps firms achieve a better competitive performance (Lewis, 2000; Liker & Wu, 2000; Johnson, 2002; Kojima & Kaplinsky, 2004). Effective shop-floor management enables front-line operators to effectively pursue problem solving and continuous improvement activities in terms of product development, quality management and cost reduction (Delbridge & Barton, 2002). Engineering expertise is also important to the competitive position of a parts maker. A highly trained workforce and up-to-date technology are thus considered to be competitiveness drivers. For example, new manufacturing technology helps parts makers improve performance significantly in terms of quality of conformance, production efficiency and company image (Laosirihongthong, Paul, & Speece, 2003). Research in product design may result in new product technology that adds more value to automotive parts such as the Commonrail technology in diesel combustion engines. Therefore, firm-internal drivers should include the managerial and technological capabilities of parts makers. In order to identify the appropriate attributes of these competitiveness drivers and define them for this study, information from industrial seminars and interviews was used to supplement the literature. Table 3 presents the operational definitions of the drivers. 5. AHP model of industrial competitiveness analysis for the automotive components industry Fig. 3 depicts a 4-level AHP model of competitiveness analysis, by presenting the structural relationship between the indicators and the drivers of competitiveness relevant to the automotive components industry in Thailand. It is based on the generic AHP model of industrial competitiveness and relevant components of competitiveness analysis mentioned earlier. The first level of the model expresses the overall goal of this study, which is to improve competitiveness. This goal can be achieved by analyzing the effects of the competitiveness drivers on the competitiveness indicators. The second level presents the five indicators of the parts makers' performance, which represents the defining criteria for competitiveness. The third level shows the four categories of competitiveness drivers. The lowest level features the attributes of the drivers in each category. This model facilitates a comprehensive analysis of industrial competitiveness, the evaluation of which starts with asking informed experts to make pairwise comparisons among the five indicators on their relevance to industrial competitiveness. The categories of competitiveness drivers are compared according to their ability to improve each indicator. Each attribute in the fourth level is then compared with other members within its category. Since the opinions of industrial experts are fully solicited at this stage, the priority weights of all elements in the model can be synthesized using the AHP software. With respect to the global priority of the goal, which is standardized to the value of 1 (Forman & Gass, 2001), two sets of weighting results are obtained at each level. These are the local and global weights of elements. At Level 2, the global weights of competitiveness indicators are identical to the local ones. These values identify which aspects of the parts makers' performance are necessary to define a competitive position. At Level 3, the global weight of each category of the drivers denotes the degree to which all drivers of that category can improve competitiveness. The local weight identifies the degree to which it affects each competitiveness indicator. At Level 4, the global weights indicate the degrees to which the drivers influence competitiveness. The local weights denote the extent to which the drivers strengthen the impact of their respective categories. In brief, the weight of each indicator reflects its relevance to competitiveness. The global weight of each driver reveals the degree to which the driver can improve competitiveness. Both parts makers and policy makers can benefit from these results in two ways. First, the process of arranging competitiveness indicators according to priorities clarifies which performance indicators are necessary for assessing competitiveness. The indicator with the highest weight reflects the most important area of organizational

S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183


Fig. 3. Model of automotive components industry competitiveness.

performance. Conversely, lower priorities of indicators imply lesser significance. Thus, parts makers should focus on examining and upgrading the high priority areas. They may also use the weights to analyze the competitive positions in a holistic way, by constructing a composite index based on the five performance indicators. This can be done by multiplying the weights of the five competitiveness dimensions with the scores of the relevant performance indicators the firms currently employ. A self-evaluation process to assess competitiveness is possible by monitoring how this composite index changes over time. Similarly, policy makers may consider the five indicators as targets for policy assessment. Second, because the local weights of the four categories of drivers identify the degree to which they have an impact on each performance dimension, practitioners can use this information to devise competitiveness improvement strategies. For example, if a parts maker needs to improve its manufacturing performance and the results reveal that the weight of Managerial Resources is greater than that of Technological Capabilities with respect to achieving Manufacturing Excellence, the company should focus on upgrading its managerial resources which involve the drivers at the fourth level. These priority weights also allow policy makers to devise and direct governmental efforts to effectively improve industrial competitiveness. Therefore, the weights of competitiveness drivers guide both the private and public sectors to rationally allocate their resources in order to improve the competitiveness of this particular industry.


S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183

6. Concluding remarks This paper presents a comprehensive analytical model that investigates the varying degrees of importance of the indicators and drivers of industrial competitiveness. The AHP model offers a platform for exploring a meansend relationship between the drivers and the indicators. By focusing on the automotive components industry in Thailand, this study suggests three managerial implications of the model. First, this model shows which performance indicators are relevant to competition in this sector, and how parts makers can use them in a self-assessment process. Second, it reveals and classifies various factors that affect industrial competitiveness in an analytical framework. Third, since the indicators notify the objectives of industrial competitiveness improvement, the results of the proposed model should guide parts makers and policy makers in the development of competitiveness improvement plans. This paper presents a new way to study competitiveness. It shows how AHP can be a useful technique to address the complex aspects of competitiveness. It is the first attempt to analyze competitiveness by applying theories from both the strategic management and operations management perspectives. This study therefore, offers a starting point for further research into the development of a multiple-theory approach. This paper can also contribute to the industrial competitiveness literature by providing a systematic model for competitiveness analysis. The AHP model proposed here can be used to analyze other industries, provided that the competitiveness indicators and drivers are relevant to that context. Finally, by demonstrating how the model can be applied to the automotive components industry in Thailand, this study makes a significant contribution toward the development of automotive industry research within the Association of Southeast Asian Nations (ASEAN) since most studies on emerging economies tend to be limited to China and Latin America. Appendix A. AHP methodology Saaty (1990) describes how the AHP model can evaluate trade-offs among competing factors and how it can simultaneously handle both the qualitative and quantitative aspects of decision-making factors. Because of these benefits, AHP is applied to many fields but it is especially conducive to engineering and industrial management. For example, AHP has been used to evaluate and select suppliers, technologies and locations, to prioritize performance indicators, to facilitate costbenefit analyses, to plan and allocate resources, and for forecasting (Vaidya & Kumar, 2006). AHP consists of three basic steps: 1) organizing a problem into a hierarchical structure, 2) prioritizing elements in the model by making pairwise comparisons of elements at each level against their related criteria specified at the adjacent higher level by using the AHP scale, and 3) computing the results (Partovi, 1994). Constructing the hierarchy of a decision problem is the most creative and challenging part of the decision-making process and has a critical effect on the outcome (Saaty, 1996). The first level of hierarchy represents the ultimate goal of a problem or a desired situation. Other elements of the problem are organized into levels that allow for pairwise comparison on preferences of elements across each level. The hierarchy development approach suggested by Bititci, Suwignjo, and Carrie (2001) serves as the basis for constructing the AHP model in this study. The second step involves determining the degree of relative importance for the elements at each level. AHP uses pairwise comparison of elements in the model as input data. Each comparison score indicates a relative degree of importance of an element, when compared with its corresponding pair with respect to each relevant criterion specified in the immediate level above it. The AHP scale ranges from 1 to 9, and each is explained in Table A1. The scale and the pairwise comparison questions are tools for data collection. The output from this step is a matrix of cross-tab preferences that result from the pairwise comparison scores of elements in a given hierarchy. The final step involves deriving the global weights for all elements, with respect to the model's overall goal. The AHP algorithm is based on a matrix algebra, which is discussed in Saaty (1990). In practice, computer software such as Expert Choice is available for this process. The application of AHP in this study is somewhat similar to previously developed models, which were used to identify key success factors for achieving certain objectives. For example, Partovi (1994) developed an AHP model to prioritize and select production processes that were crucial for process benchmarking. The hierarchical model was based on a strategic benchmarking procedure. Rangone (1996) analyzed manufacturing performance by constructing an AHP model that assessed the overall performance of factories. Chin, Pun, Xu, and Chan (2002) used AHP to

S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183 Table A1 AHP scale (Saaty, 1990) Scale 1 3 5 7 Definition Equal importance Moderate importance Strong importance Very strong or demonstrated importance Explanation


9 2,4,6,8 Reciprocals of above nonzero

Extreme importance Intermediate values between the adjacent scale values If element a has one of the above nonzero numbers assigned to it when compared with element b, then b has the reciprocal value when compared with a


Ratios arising from the scale

Two elements contribute equally to the objective Experience and judgment slightly favor one element over another Experience and judgment strongly favor one element over another An element is favored very strongly over another, its dominance demonstrated in practice The evidence favoring one element over another is of the highest possible order These scales are used when compromise is needed A reasonable assumption, for example: Scale 1/5 means Strongly less importance Scale 1/9 means Extremely less importance If consistency were to be forced by obtaining n numerical values to span the matrix

Examples are adapted from Tavana, Kennedy, and Mohebbi (1997).

evaluate factors affecting the adoption and implementation of total quality management systems in thirteen organizations. Hafeez, Zhang, and Malak (2002) explored competence-based competition by using AHP to prioritize key capabilities essential for improving a firm's performance. To date, AHP has proved to be a useful tool to analyze competitiveness, by prioritizing competitiveness indicators and exploring the degree of contribution of the competitiveness drivers. References
Ahmed, N. U., Montagno, R. V., & Firenze, R. J. (1996). Operations strategy and organizational performance: An empirical study. International Journal of Operations and Production Management, 16(5), 4153. Amundson, S. D. (1998). Relationship between theory-driven empirical research in operations management and other disciplines. Journal of Operations Management, 16, 341359. Anderson, M., & Sohal, A. (1999). A study of the relationship between quality management practices and performance in small businesses. International Journal of Quality and Reliability Management, 16(9), 859877. Barney, J. B. (2001). Is the resource-based view a useful perspective for strategic management research? Yes. Academy of Management Review, 26 (1), 4156. Barney, J., Wright, M., & Ketchen, D. J. (2001). The resource-based view of the firm: Ten years after 1991. Journal of Management, 27, 625641. Basak, I. (1988). When to combine group judgments and when not to in the analytic hierarchy process: A new method. Mathematical Computation Modelling, 10(6), 395404. Bititci, U. S., Suwignjo, P., & Carrie, A. S. (2001). Strategy management through quantitative modelling of performance measurement systems. International Journal of Production Economics, 69, 1522. Chenhall, R. H. (2005). Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes: An exploratory study. Accounting, Organizations and Society, 30(5), 395422. Chin, K. S., Pun, K. F., Xu, Y., & Chan, J. S. F. (2002). An AHP based study of critical factors for TQM implementation in Shanghai manufacturing industries. Technovation, 22, 707715. Coates, T. T., & McDermott, C. M. (2002). An exploratory analysis of new competencies: a resource based view perspective. Journal of Operations Management, 20, 435450. Corra, H. L., & de Miranda, N. G. M. (1998). Supply network management in the Brazilian automotive industry. Integrated Manufacturing Systems, 9(5), 261271. Dangayach, G., & Deshmukh, S. (2001). Manufacturing strategy: Literature review and some issues. International Journal of Operations and Production Management, 21(7), 884932.


S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183

De Toni, A., Nassimbeni, G., & Tonchia, S. (1997). An integrated production performance measurement system. Industrial Management and Data Systems, 97(5), 180186. Delbridge, R., & Barton, H. (2002). Organizing for continuous improvement: Structure and roles in automotive components plants. International Journal of Operations and Production Management, 22(6), 680692. Demeter, K. (2003). Manufacturing strategy and competitiveness. International Journal of Production Economics, 8182, 205213. Dierickx, I., & Cool, K. (1989). Asset stock accumulation and sustainability of competitive advantage. Management Science, 35(12), 15041513. Fahy, J. (2002). A resource-based analysis of sustainable competitive advantage in a global environment. International Business Review, 11, 5778. Fairbanks, M., & Lindsay, S. (1997). Plowing the sea: Nurturing the hidden sources of growth in the developing world. Boston, Massachusetts: Harvard Business School Press. Forman, E. H., & Gass, S. I. (2001). The analytic hierarchy process An exposition. Operations Research, 49(4), 469486. Gagnon, S. (1999). Resource-based competition and the new operations strategy. International Journal of Operations and Production Management, 19(2), 125138. Gordon, J., & Sohal, A. (2001). Assessing manufacturing plant competitiveness: An empirical field study. International Journal of Operations and Production Management, 21(1/2), 233253. Hafeez, K., Zhang, Y., & Malak, N. (2002). Determining key capabilities of a firm using analytic hierarchy process. International Journal of Production Economics, 76, 3951. Hall, R. (1992). The strategic analysis of intangible resources. Strategic Management Journal, 13, 135144. Hall, R. (1993). A framework linking intangible resources and capabilities to sustainable competitive advantage. Strategic Management Journal, 14, 607618. Hansen, G., & Wernerfelt, B. (1989). Determinants of firm performance: The relative importance of economic and organizational factors. Strategic Management Journal, 10, 399411. Hoskisson, R., Hitt, M., Wan, W., & Yiu, D. (1999). Theory and research in strategic management: Swings of a pendulum. Journal of Management, 25, 417456. Humphrey, J., & Memedovic, O. (2003). The global automotive industry value chain: What prospects for upgrading by developing countries. Vienna: Sectoral Studies Series, UNIDO. Johnson, D. (2002). Empirical study of second-tier automotive suppliers achieving QS 9000 Reference No. 718. International Journal of Operations and Production Management, 22(8), 902928. Kaplan, R., & Norton, D. (1992). The balanced scorecard Measures that drive performance. Harvard business review on measuring corporate performance (pp. 123145). Boston: Harvard Business School Press. Kawahara, A. (1997). The origin of competitive strength: Fifty years of the auto industry in Japan and the U.S. New York: Springer-Verlag New York Inc. Kojima, S., & Kaplinsky, R. (2004). The use of a lean production index in explaining the transition to global competitiveness: The auto components sector in South Africa. Technovation, 24, 199206. Laosirihongthong, T., Paul, H., & Speece, M. (2003). Evaluation of new manufacturing technology implementation: An empirical study in the Thai automotive industry. Technovation, 23, 321331. Lau, R. S. M. (2002). Competitiveness factors and their relative importance in the US electronics and computer industries. International Journal of Operations and Production Management, 22(1), 125135. Lewis, M. (2000). Lean production and sustainable competitive advantage. International Journal of Operations and Production Management, 20(8), 959978. Li, L. (2000). An analysis of sources of competitiveness and performance of Chinese manufacturers. International Journal of Operations and Production Management, 20(3), 299315. Liker, J. K., & Wu, Y. C. (2000, Fall). Japanese automakers, U.S. suppliers and supply-chain superiority. Sloan Management Review, 8193. Lowson, R. H. (2003). The nature of an operations strategy: Combining strategic decisions from the resource-based and market-driven viewpoints. Management Decision, 41(6), 538549. Madu, C. N., & Kuei, C. -H. (1995). Stability analysis of group decision making. Computers and Industrial Engineering, 28(4), 881892. Mauri, A. J., & Michaels, M. P. (1998). Firm and industry effects within strategic management: An empirical examination. Strategic Management Journal, 19, 211219. McAdam, R., & Bailie, B. (2002). Business performance measures and alignment impact on strategy: The role of business improvement models. International Journal of Operations and Production Management, 22(9), 972996. Morita, M., & Flynn, E. J. (1997). The linkage among management systems, practices and behaviour in successful manufacturing strategy. International Journal of Operations and Production Management, 17(10), 967993. Neely, A., Filippini, R., Forza, C., Vinelli, A., & Hii, J. (2001). A framework for analyzing business performance, firm innovation and related contextual factors: Perceptions of managers and policy makers in two European countries. Integrated Manufacturing Systems, 12(2), 114124. Nilsson, F., & Kald, M. (2002). Recent advances in performance management: The Nordic case. European Management Review, 20(3), 235245. Noble, G. W. (2001). Congestion ahead: Japanese automakers in Southeast Asia. Business and Politics, 3(2), 157184. Noble, M. (1997). Manufacturing competitive priorities and productivity: An empirical study. International Journal of Operations and Production Management, 17(1), 8599. OIE (2002). Automotive industry in Thailand. Ministry of Industry, Thailand: Office of Industrial Economics. Partovi, F. (1994). Determining what to benchmark: An AHP approach. International Journal of Operations and Production Management, 14(6), 2539. Porter, M.E. (1998). Competitive strategy: Techniques for analyzing industries and competitors: With a new introduction. Free Press, New York, Originally published by Free Press, New York, c1980. Rangone, A. (1996). An analytical hierarchy process framework for comparing the overall performance of manufacturing departments. International Journal of Operations and Production Management, 40(2), 104119.

S.B. Sirikrai, J.C.S. Tang / Journal of High Technology Management Research 17 (2006) 7183


Ross, A. (2002). A multi-dimensional empirical exploration of technology investment, coordination and firm performance. International Journal of Physical Distribution and Logistics Management, 32(7), 591609. Saaty, T. L. (1990). Multicriteria decision making: The analytic hierarchy process. Pittsburgh: RWS Publications. Saaty, T. L. (1996). Decision making with dependence and feedback: The analytic hierarchy process. Pittsburgh: RWS Publications. Sharma, B., & Fisher, T. (1997). Functional strategies and competitiveness: An empirical analysis using data from Australian manufacturing. Benchmarking for Quality Management and Technology, 4(4), 286294. Simpson, P. M., Siguaw, J. A., & White, S. C. (2002). Measuring the performance of suppliers: An analysis of evaluation processes. Journal of Supply Chain Management, 38(1), 2941. Siroros, P. (1997). The role of the Thai state in the development of the Thai automobile industry.Bangkok, Thailand: Thammasat University Press (in Thai). Skinner, W. (1969, MayJune). Manufacturing Missing link in corporate strategy. Harvard Business Review, 136145. Spanos, Y., & Lioukas, S. (2001). An examination into the causal logic of rent generation: Contrasting Porter's competitive strategy framework and the resource-based perspective. Strategic Management Journal, 22, 907934. Stoelhorst, J. W., & van Raaij, E. M. (2004). On explaining performance differentials marketing and the managerial theory of the firm. Journal of Business Research, 57, 462477. TAI (2002). Master plan for Thai automotive industry. Ministry of Industry, Thailand: Thailand Automotive Institute. Tavana, M., Kennedy, D. T., & Mohebbi, B. (1997). An applied study using the analytic hierarchy process to translate common verbal phrases to numerical probabilities. Journal of Behavioral Decision Making, 10, 133150. Tracey, M., Vonderembse, M. A., & Lim, J. S. (1999). Manufacturing technology and strategy formulation: Keys to enhancing competitiveness and improving performance. Journal of Operations Management, 17, 411428. Vaidya, O. S., & Kumar, S. (2006). Analytic hierarchy process: An overview of applications. European Journal of Operational Research, 169(1), 129. Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5, 171180. Wernerfelt, B. (1995). The resource-based view of the firm: Ten years after. Strategic Management Journal, 16, 171174.