Manufacturing strategies and financial performance - The effect of advanced information technology: CAD/CAM systems

Nowadays, the business environment is characterized by great uncertainty and variability. In this environment, information technology (IT) has proved to be an important strategic ingredient for the creation of competitive advantage. This role of IT has been widely accepted during the past few years [Feeny D. Creating and sustaining competitive advantage with IT. In: Earl M, editor. Information management the strategic direction. Oxford, 1990; Ives B. Wingtip Courtiers, Southern Methodist University Case Study #SMY/MIS/90-01, Edwin L. Cox School of Business, Dallas, TX, January 1990]. In the new era of production, strategic priorities rather than a cost contained focus have proved to be important for competition, namely: quality, dependability, flexibility, customer service, after sale service, supply chain management, etc. IT proved to be vital for successful competition as it can facilitate the attainment of these strategic targets. In this paper, the impact of IT on financial performance for the different types and levels of business strategy is examined. After the clustering of firms according to their strategic priorities, the effect of IT on financial performance is estimated. To do this a cross-sectional study was held in the field of Greek manufacturing firms that apply advanced IT, in order to explore which, how and in what level manufacturing priorities have been adopted. For that purpose, cluster analysis and VACOR algorithm were used, to distinguish clusters of firms and estimate the effect of IT on financial performance, for each type and level of strategic choice. Return on invested capital (ROIC) has been used as a criterion of performance in order to incorporate the effect of cost, revenues and profits. It was found that the effect of IT on financial performance was observed to be greater for firms which emphasize the higher level of flexibility strategy and the middle level of cost strategy. On the contrary, the effect of IT on performance, was observed to be greater for firms which emphasize a lower level of quality and innovation strategy. Further discussion of these results and conclusions were drawn. (c) 2006 Elsevier Ltd. All rights reserved.