The impact of the core company’s strategy on the dimensions of supply chain integration

• Pages: 231-260
• Date: 11 February 2019
• Published date: 11 February 2019
• DOI: https://doi.org/10.1108/IJLM-03-2017-0080
• Author: Tesfaye Tolu Feyissa,R. Raghavendra Kumar Sharma,Kuei-Kuei Lai
• Subject Matter: Management science & operations,Logistics

The impact of the core company’s

strategy on the dimensions of

supply chain integration

Tesfaye Tolu Feyissa and R. Raghavendra Kumar Sharma

Department of Industrial and Management Engineering,

Indian Institute of Technology Kanpur, Kanpur, India, and

Kuei-Kuei Lai

Chaoyang University of Technology, Taichung, Taiwan

Abstract

Purpose –Nowadays, supply chain integration (SCI) is considered as an enabler of competitive firm

performance. It has three important dimensions: internal, supplier and customer integration. Understanding

the interaction between these dimensions and organisational strategy would pave the way for effective

implementation of SCI. The famous Miles et al. (1978) strategy typology classifies firms into four strategy

types: defenders, prospectors, analysers and reactors. The purpose of this paper is to explore the impact of the

core company’s product-market innovation strategy on the dimensions of SCI, and to investigate the

comparative strength of each dimension of SCI in defenders and prospectors.

Design/methodology/approach –Primary data were collected through an online survey of 112 firms in 24

countries across Africa, Asia, Europe and North America. Direct and mediated relationships were assessed by

conducting structural equation modelling on the dimensions of SCI and product-market innovation strategy

variables. Cluster analysis was conducted on organisational strategy variables to group the firms into

different strategy types. Next, a one-way analysis of variance was applied to assess the impact of

organisational strategy on each dimension of the SCI. Finally, a post hoc analysis was conducted to compare

the strength of each dimension of the SCI against the different strategy types.

Findings –The resultsindicate that internal integration(II) mediates thepositive effects of the core company’s

product-marketinnovation strategyon supplier and customerintegration. Furthermore,the results indicatethat

prospectors havestronger internal, supplier and customer integration ascompared to defenders.

Research limitations/implications –This study had two main limitations. One limitation is the lack of

consideration of possible differences in the strengths of the investigated relationships across different

geographical locations and cultures. The second limitation is the inability of the cross-sectional research

design to capture the dynamics in the process of adopting SCI and organisational strategy.

Practical implications –The present study highlights to executives the need for understanding the

implications of speci fic strategies on the SC linkages and r elationships that are required t o implement those

strategies. Thus, it c ould serve as a preliminary clu e in decision-making for establi shing integrated SC that

is compatible with the or ganisational strateg y. Furthermore, it cou ld serve as a guidance to m anagers

in steering their firm s in the organisationa l adaptive cycle, by indi cating that the imple mentation of

product-market innov ation strategy requires ado pting strong SCI, and by highlighting the importance of

adopting II prior to ext ernal integration.

Originality/value –This paper tests relationships that explain how the core company’s strategy influences

each dimension of SCI.

Keywords Strategy, Asia, Europe, Africa, Survey, Supply chain integration, Supplier integration,

Internal integration, Customer integration, Product-market innovation

Paper type Research paper

1. Introduction

Supply chain integration (SCI) is often studied by considering its dimensions. Some authors

break it down into internal integration (II) and external integration (EI) (Wong et al., 2013);

others considerupstream (supply-side), downstream(customer-side) and II (Baharanchi,2009;

Xue et al., 2013); yet others break SCI into supplier integration, customer integration and

II (Flynn et al., 2010; Lii and Kuo, 2016).

The International Journal of

Logistics Management

Vol. 30 No. 1, 2019

pp. 231-260

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-03-2017-0080

Received 30 March 2017

Revised 19 December 2017

20 April 2018

28 May 2018

27 June 2018

30 June 2018

Accepted 5 July 2018

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

231

Impact

of the core

company’s

strategy

Although it offers better firm performance benefits (Kannan and Tan, 2010), SCI beyond

first-tier supply chain (SC) partners is complex and unlikely to be adopted by focal firms

( Jayaram et al., 2010). Even when adopted, the number of processes linked beyond first-tier

customers and suppliers would be limited due to strain on resources especially when

integration involves many first-tier SC partners (Lambert et al., 1998). Thus, a study of SCI

may consider immediate external partners (suppliers and customers) and internal units.

Moreover, supplier and customer integration as separate constructs would reflect the SC

better than the more generic EI. This study considers three dimensions of SCI, namely,

internal, supplier and customer integration.

SCI offers both short- and long-term benefits: short-term benefits in the form of financial

performance for the focal firm, and long-term benefits of value creation for the customer

which would partly and eventually help enhance the focal firm’s financial performance

(Annan et al., 2016). The interaction between SCI and strategy deserves attention, as the

achievement of a firm’s goals and objectives is often contingent upon the crafting and

implementation of appropriate business strategy.

Miles et al.’s (1978) strategy typology is a comprehensive approach that incorporates a

wide-ranging set of parameters and practices, including industry dynamics, product/market

domain choice and behaviour, technology choice, organisational structure and strategy.

It addresses the organisational adaptation cycle as a result of which a firm formulates its

organisational strategy, structure and processes to cope with environmental dynamics.

It covers SCM issues as it deals with product-market domain choice. It also deals with

technology choice that helps the firm deploy the capacity within its internal units as well as

that of its SC partners. Thus, it is suitable for SCM-related studies.

Despite the abundant literature on SCI, only a few relate specific organisational

strategies to SCI. A study by Huo et al. (2014) assesses the impact of Porter’s (1980) cost

leadership and differentiation strategies on SCI practices. Sabherwal and Chan (2001)

argue that the impact of the alignment between business strategy and information-system

strategy on firm performance differs from one strategy type to another. No study to our

knowledge examined the relationship between Miles et al.’s (1978) strategy types and the

strength of SCI. The present study addresses this gap by investigating how business

strategy based on Miles et al. (1978) interacts with three dimensions of SCI: internal,

supplier and customer integration. It captures the strategy and SC linkages and

collaborations that a firm adopts as a result of the dynamics in the business environment.

However, it does not attempt to capture the dynamic process itself as it happens over time.

In this study, II refers to the coordination of organisational information, processes and

behaviours as well as collaboration within a firm, while supplier integration and customer

integration are the coordination of inter-organisational information, processes and

behaviours as well as collaboration with key suppliers and customers, respectively

(Chang et al., 2016).

The remaining portion of this paper is organised as follows. Section 2 provides a

theoretical background by discussing relevant literature. In Section 3, we develop research

hypotheses. Section 4 describes the research design and measurement tools, followed by a

discussion of the reliability and validity of these tools. In Section 5, we present and discuss

data-analysis results including hypotheses tests. Finally, Section 6 presents theoretical

contributions, practical implications and limitations of the study as well as scope for

future researches.

2. Literature review

2.1 Supply chain integration

Flynn et al. (2010)define SCI as “the degree to which a manufacturer strategically collaborates

with its SC partners and collaboratively manages intra- and inter-organisational processes,

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