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MODEL OF A STRATEGIC MANUFACTURING ANALYSIS

Borut Rusjan
Faculty of Economics, University of Ljubljana,
Kardeljeva ploscad 17, 1001 Ljubljana, SLOVENIA
Fax | +386 1 589 26 98;
E-mail | borut.rusjan@uni-lj.si

Abstract
There is a real need for improved management processes to develop manufacturing
strategies. A strategic planning process usually includes three phases: analysis, goal
setting and strategy development. The paper will study analysis as a part of the
strategic planning process. Enterprise transition has to be based on appropriate
strategic analysis. The purpose is to discuss the phases of strategic manufacturing
analysis which is the basis of manufacturing strategy formulation. Strategic
manufacturing analysis is an important part of management system, inevitable for
guiding enterprise restructuring with the aim to achieve competitive advantage. The
aim is to develop and test a process which will provide managers with a practical
approach to improve their operations. The method requires the implementation of two
research stages:
1. Developing the strategic manufacturing analysis model: Development of a model
has to be based on the conceptual frameworks for manufacturing strategic planning
developed in the past theoretical work.
2. Testing and refining the model by application: Testing the model demands that the
researcher use action research approach, which means that he tries to direct and
influence the way in which the process is conducted. The role of the researcher is that
of a facilitator, his role is to guide and structure the process.

The paper will focus on the implementation of the first phase. The second stage will
be implemented in the future on the basis of the first stage results.



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1. INTRODUCTION AND DEFINITION OF THE RESEARCH
PROBLEM

A lot of attention has been paid to manufacturing strategy in recent years as an
important element in firms attempts to gain competitive advantage in the
marketplace. Skinner was the first to argue that manufacturing has the potential to
strengthen or weaken the companys competitive ability /1/. Proper strategic
positioning or aligning of operations capabilities can significantly impact the
competitive strength and business performance of an organisation. Manufacturing can
and should represent a competitive weapon. The task is to configure a production
system that, through a series of interrelated and internally consistent choices, reflects
the priorities and trade-offs implicit in its competitive situation and strategy /2/.

Strategic planning process usually involves three basic hierarchical levels of a firm:
corporate, business unit and functional level strategies /3, 4/. This paper focuses on
the functional level strategy. A functional level strategy specifies how functional
strategies, for example marketing/sales, manufacturing, research and development or
finance, support the competitive business strategy and complement each other. The
business strategy on the other side specifies the scope of each business and defines the
basis on which a business unit can achieve and maintain competitive advantage within
its industry. The literature suggests that manufacturing, as a functional level strategy,
should support the business level strategy of a firm. Manufacturing must also be
compatible with the strategies of other functional areas.

The literature indicates that there are different definitions of manufacturing strategy,
but there seems to be an agreement that manufacturing strategy is a collective pattern
of co-ordinated decisions within key manufacturing strategic decision areas which
should provide manufacturings strategic goals /5, 6, 7/. In the manufacturing strategy
literature strategic goals of manufacturing are termed manufacturing competitive
priorities. Decisions made in different strategic decision areas in production represent
the means of achieving manufacturing competitive priorities.

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Good decision-making is based on the appropriate identification of problems which is
guaranteed by a proper analysis. A usual cause for inappropriate decision-making is
the neglect of analysis, which means that the present state of the object of decision
making (business unit, business function, department, etc.) is not being taken into
account. In order to guarantee effective decision-making, the role of the analysis in
the process of planning has to be studied. This phase of the planning process was not
getting enough attention from researchers, despite the fact that the analysis results
have a major impact on the selection of appropriate actions to be implemented in the
future. A similar situation can be found in practitioner decision-making for which
quick jumping to solution-seeking is characteristic, without appropriate determination
of problems beforehand. Often solutions are chosen from the list of popular, universal
techniques based on benchmarking.

The basic hypothesis of this paper is that appropriate strategic analysis is necessary in
order to ensure appropriate strategic decisions and consequentially appropriate
enterprise competitiveness. Therefore the strategic decision-making in an enterprise
and the role of manufacturing analysis in the process of strategic decision-making will
be explained. The objective of this paper is to develop the model of strategic
manufacturing analysis based on the identification of the role of manufacturing
analysis in the process of strategic decision-making.

The starting point of the work is the study of the phases of the process of planning and
the definition of the role of analysis phase in that process. The process of planning is
determined by the general planning methodology, the study of which will enable to
define strategic planning. The emphasis will be placed on the need for strategic
planning processes and analysis needed for strategic planning at two levels, enterprise
and business function levels. The relationship and interconnectedness of strategic
planning processes at business and business function levels will be identified. Based
on the differentiation of two levels of strategic decision-making, the role of analysis in
the process of strategic planning at business and functional level will be identified.
This will allow to define purpose and goals of strategic manufacturing analysis and to
develop the model of strategic manufacturing analysis.

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2. PROCESS OF PLANNING

Methodologically, planning represents a decision-making process. Decisions are
based on problems identified for the object of planning in the process of planning.
Problems are related to strengths, weaknesses, threats and opportunities. Therefore
problems do not only include difficulties that we want to overcome and threats that
we want to avoid, but also certain opportunities that we would like to take /8/. There
are different alternatives to resolving or avoiding the problems. Decision means the
choice of one of the alternatives, made on the basis of one or more criteria that
determine the preference for one of the alternatives. Criteria are predetermined to the
decision-making. The purpose of planning is therefore to make sure that the decision-
making criteria are met to the largest extent possible. On the other hand the goal of
planning is to make decisions about future actions that would enable the achievement
of the purpose of planning. To sum up, there are two conditions necessary for
decision-making in the process of planning: decision criteria that determine the
purpose of decision-making, and problems that are the reason for decision-making.

In defining the phases of the process of planning we have to take into account that
planning determines future activities for the purpose of meeting the decision-making
criteria to the largest extent possible. The starting point of determining future
activities is the identification of the present situation for the object of planning
(business unit, business function, department, etc.) and for its environment as well as
the prediction of future developments in the environment of the object of planning.
This identification enables us to imagine different possible future states for the object
of planning and paths that would lead to these different states. The process of
planning can therefore be divided into four phases /9/:
1 Analysis of the present state of the object of planning.
2 Analysis and prediction of the environment of the object of planning.
3 Definition of the future state for the object of planning, expressed with different
planned objectives.
4 Definition of paths to achieving planned objectives.

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In phases 1 and 2 problematic situations and problems are identified, which represent
the basis for decision-making. Phases 3 and 4 are decision-making phases in which
goals and paths for their achievement are set. The choice of goals and paths to achieve
them is based on decision-making criteria. Planning therefore includes analysis and
decision-making.

3. STRATEGIC PLANNING

Strategic planning is defined as the setting of strategic goals and strategies as a means
to achieve strategic goals with the purpose of achieving appropriate ROE for an
enterprise. The setting of strategic goals and strategies is based on an enterprise
analysis, and analysis and prediction of environment. It is assumed ROE represent the
basic goal of an enterprise in a market economy. Most researchers agree that the main
emphasis of strategic decision-making is on ensuring the achievement of competitive
advantage of an enterprise /10, 11, 12/. Competitive advantage enables an enterprise
to achieve appropriate ROE due to the appropriate sales value which is a result of
competitiveness of the enterprise. Competitive advantage represents the basic
strategic goal at the enterprise level, from which other strategic goals and strategies
are derived. Setting strategic goals in an enterprise and adoption of strategies that
should be pursued in order to achieve strategic goals therefore represents the objective
of strategic planning. Strategic decision-making guarantees the achievement of
appropriate ROE in the future. ROE therefore represents decision-making criteria in
defining competitive advantage. The business strategy of an enterprise aims to
achieve competitive advantage. The business strategy has to be supported by
appropriate performance of all business functions. In order to implement business
strategy successfully, strategic goals of different business functions have to be derived
from competitive advantage as the basic strategic goal of an enterprise. Strategic goals
of business functions are set at the enterprise level and are considered as tasks that
have to be performed by business functions. They are therefore defined as competitive
priority tasks. Competitive priority tasks represent a means to achieve competitive
advantage of an enterprise, while they also represent strategic goals of business
functions. This is in accordance with the hierarchy of goals and interconnectedness of
goals and means of their achievement. Manufacturing competitive priorities usually
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include cost, flexibility (product mix and volume), quality (design and conformance),
delivery performance (dependability and speed) /13, 14, 15/. There is an apparent
relationship between Porters types of a competitive advantage and manufacturing
competitive priorities. There is a direct connection of cost leadership at the business
level with cost priority at the functional level. Quality, flexibility and delivery on the
other side represent types of differentiation strategies for a firm. From the point of
view of a business function, competitive priority tasks represent goals that have to be
achieved with appropriate decision-making in different strategic decision areas inside
the business function. Strategic decisions inside business functions are those decisions
that have an influence on the competitive priority tasks results. Hayes and
Wheelwright identify eight strategic decision categories and place them into two
groups: structural and infrastructural. Structural categories include capacity, facilities,
technology, and vertical integration. Infrastructural categories include workforce,
quality, production planning / materials control, and organisation /16/.

We are interested in two levels of strategic decision making, enterprise and business
function (production) level and their interconnectedness. The purpose of strategic
planning at an enterprise level is to ensure the achievement of appropriate ROE. The
objective of this planning is to set planned competitive advantage of the enterprise
and to set business strategy that represents a path to achieving competitive advantage.
Business strategy defines strategic priority tasks for business functions as their
strategic goals. The purpose of strategic planning at a business function level is to
ensure the achievement of competitive advantage of the enterprise. The objective of
this planning is to set planned results for business functions competitive priorities
and to set business function strategy that represents a path to achieving planned
results for competitive priorities. Business function strategy defines appropriate
actions within key business function strategic decision areas.

One can say that there is a need for strategic planning at both enterprise and
functional levels, and consequently there is a need for strategic analysis at both levels.
Moreover we have to take into account relations between strategic planning processes
at both levels and relations between strategic analysis at both levels, as this enables us
to define the purpose and objective of strategic manufacturing planning and
consequently the purpose and objective of strategic manufacturing analysis.
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Competitive priorities represent the common ground between strategic planning at the
enterprise level and strategic planning of a business function. In accordance with the
hierarchy of goals and interconnectedness of goals and paths leading to their
achievement, competitive priorities on one side represent paths leading to
achievement of competitive advantage of an enterprise, and on the other side they
represent strategic goals a business function is supposed to achieve by appropriate
inside activities. This relationship demonstrates the connectedness of strategic
planning processes at both levels. This connectedness is represented in figure 1.

Figure 1: Connectedness between processes of strategic planning of an enterprise and
strategic planning of a business function





















Figure 1 shows that we have to determine strategic goals and means of their
achievement at both levels. There are vertical links between the levels, which means
ENTERPRISE
BUSINESS
FUNCTION
Strategic goal of an enterprise:
competitive advantage
Analysis of the enterprise
Analysis and prediction of
the enterprise environment
Business strategy:
competitive priority tasks of
business functions
Strategic goals of business
functions: competitive priorities
of business functions
Business functions analysis
Analysis and prediction of enterprise
environment relevant to the business
functions
Business functions strategies:
collective pattern of co-
ordinated decisions within key
business function strategic
decision areas
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that goals and strategies at both levels have to be congruent. This is the reason why
the process of strategic planning should be iterative. The process is not implemented
only from the top to the bottom. The top-to-the-bottom approach guarantees co-
ordination of goals for different business functions and thus defines the desired results
for competitive priority tasks. However when setting planned results for competitive
priorities of a certain business function, the evaluation of the present state of that
business function has to be taken into account. The setting of planned results is
carried out in the process that is implemented from the bottom to the top. The present
state of a business function sets limits to changes of results in competitive priorities.

Manufacturing will be crucial for appropriate ROE of an enterprise in case
manufacturing provides the achievement of important competitive priority tasks.
Often manufacturing business function defines the capability of an enterprise to adjust
to environment to a large extent.

4. PROCESS OF ANALYSIS

Decisions are choices between different possible solutions and actions, and
consequently choices between possible results. Decision-making is always related to a
certain object such as business unit, business function, department, etc., its purpose is
to assure the meeting of decision-making criteria relevant to the object to the largest
extent possible. In order to make appropriate decisions, levers that have an impact on
the goals of the object have to be studied. The possibility of influencing the goals of
the object assumes the possibility of choice in determining specific levers. Decisions
are therefore made regarding levers that have an impact on goals, and there is a
possibility of choice related to them, and consequently decisions regarding results of
the object are made. Decision-making criteria stand outside the process of studying
the object and as such define the economic purpose of analysis; goals of the object on
the other side define organisational purpose of analysis.

The purpose of analysis is to identify problems in performance, which represent
reasons for decision-making. Analysis can be distinguished from decision-making, as
the purpose of analysis is to guarantee effective decision-making about the object,
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while the purpose of decision-making is to meet decision-making criteria relevant to
that object to the largest extent possible.

Systematic learning of the object requires an appropriate method. Generally, the
method of learning is defined as a logical path leading to the knowledge based on
thinking procedures determined in advance. Such a path is analysis, which includes
two basic phases:
1 Identification of problematic situation.
2 Identification of problems.

In the first phase of analysis monitoring is used to identify facts which are then
compared with a basis chosen for comparison. As a result of the comparison
deviations are identified. Problematic situation can be identified on the basis of the
assessment of identified deviations. Identification of problematic situation represents
the assessment of the present performance.

The second phase of analysis is the diagnosis of the present performance in which
problems are identified on the basis of explanation of problematic situations. That
means we examine them, classify them according to their impact and look for
relations between problematic situations, which all reveals the most important
problematic situations. Problems can be identified only after connecting the explained
problematic situations with the goals of object of decision-making, by asking a
question how it is possible to improve the level of achievement of object goals
regarding the identified present state of the object. The improvement of the level of
achievement of the object goals is determined by decision-making criteria of the
object. Problem identification is therefore a result of relating the impact levers to the
goals of the object. The identification of the problem is conditioned with the goals of
the object and therefore with the goal of decision-making. Identification of problems
represents the result of analysis on one side, while on the other side it represents the
starting point for decision-making.

On the basis of the purpose and objective of decision-making, we can distinguish
between economic end organisational purpose of an analysis. The purpose of
decision-making is to ensure the meeting of decision-making criteria to the largest
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extent possible, while the objective of decision-making is to choose appropriate goals
and paths to their achieving in order to satisfy the purpose of decision-making. The
economic purpose of analysis is related to the purpose of planning; the organisational
purpose of analysis is related to the objective of planning. The economic purpose of
analysis is therefore to guarantee the meeting of decision-making criteria to the largest
extent possible. The organisational purpose of analysis is to guarantee appropriate
decision-making in order to satisfy the economic purpose of analysis.

The objective of analysis on the other side is to get knowledge of the object of
planning, as this represents the basis of effective decision-making that is supposed to
guarantee meeting of decision-making criteria. The objective of analysis can therefore
be defined as learning of those facts about the object that have an impact on the object
goals and consequently get to know different possible alternatives to meeting object
decision-making criteria to the largest extent possible.

5. DEFINITION OF STRATEGIC MANUFACTURING ANALYSIS

The emphasis has been placed on the need for use of strategic planning processes and
of analysis needed for strategic planning at two levels: the enterprise and the business
function one. The purpose of strategic planning of an enterprise is to achieve
appropriate ROE for an enterprise. The objective of strategic planning of an enterprise
is to define competitive advantage of the enterprise and business strategy as a mean of
its achievement, on the basis of strategic analysis of the enterprise, and analysis and
prediction of environment of the enterprise. Therefore economic purpose of strategic
analysis of an enterprise is to assure appropriate ROE, while the organisational
purpose of the strategic analysis of enterprise is to guarantee effective decision-
making concerning competitive advantage of an enterprise and business strategy.
Business strategy defines the desired level of results for competitive priority tasks of
business functions.

Competitive priority tasks are strategic goals of business functions. The purpose of
strategic planning of production is to achieve competitive advantage of an enterprise.
The objective of strategic planning of production is to define the planned level of
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results for competitive priority tasks and the production strategy as a mean of
achievement of the planned level of results, on the basis of strategic analysis of
manufacturing, and analysis and prediction of the environment of the manufacturing
business function. Consequently, the economic purpose of strategic analysis of
manufacturing is to assure competitive advantage of an enterprise, while the
organisational purpose of this analysis is to guarantee effective decision-making
concerning planned level of results for manufacturing competitive priority tasks and
manufacturing strategy. The manufacturing strategy determines a pattern of decisions
in different strategic decision areas in production.

Concrete learning of an object is defined by the needs of the decision-making which is
supposed to improve results in decision-making criteria. For that reason, analysis
means identification of performance facts for the object of analysis which have an
impact on determination of object goals and paths to achieve them. In strategic
analysis, learning the facts about the most important characteristics of an enterprise
defines problems that have an impact on setting of strategic goals and strategies. On
the basis of their positive or negative influence on the object goals, facts about the
characteristics of an enterprise can be classified into strengths and weaknesses.
Strengths and weaknesses are usually defined relatively in comparison with
competitors, previous periods or planned goals. Which facts represent the strengths
and weaknesses from the strategic point of view, depends on the level of analysis. The
strengths and weaknesses on the enterprise level differ from the strengths and
weaknesses at the business function level.

Previous results of manufacturing competitive priorities determine the strengths and
weaknesses at the business unit level. Business strengths (weaknesses) are represented
by manufacturing competitive priorities that contribute positively (negatively) to
competitive advantage of the company. The situation in different strategic decision
areas in the production determines the strengths and weaknesses at the manufacturing
function level. The situation in different strategic decision areas in the production is
defined by policies, resources, systems, tools, methods, etc. used in the production.
Manufacturing strengths (weaknesses) are represented by those strategic decision
areas in manufacturing that contribute positively (negatively) to the achievement of
the desired results of manufacturing competitive priorities.
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Strengths and weaknesses are the basis of the identification of performance problems.
The process of identification of problems also requires considering both levels of
strategic decision-making. Problems on the enterprise level can be illustrated with a
question of how to assure competitive advantage of the enterprise, and consequently
ensure appropriate ROE, considering the strengths, weaknesses, opportunities and
threats characteristic for the enterprise. By resolving this problem competitive
advantage of an enterprise and the business strategy are determined. On the other
hand, problems on the business function level can be illustrated with a question of
how to improve results in specific competitive priorities for that business function,
and consequently assure achievement, improvement of competitive advantage of an
enterprise, considering the strengths and weaknesses defined by different strategic
decision areas inside business function, and considering the opportunities and threats
characteristic for that business function. By resolving this problem, planned results for
competitive priorities and the business function strategy are determined. The role of
strategic manufacturing analysis is defined with the help of the hierarchy of strategic
decision-making that explains the relationship between strategic planning of an
enterprise and strategic planning at the business function level. Defining the results of
competitive priority tasks represents the common ground in developing business and
manufacturing strategy. There are two analysis of studying manufacturing business
function from the strategic point of view. In strategic analysis of an enterprise,
manufacturing is considered as one of the business functions. This analysis studies
how present manufacturing business function contributes to competitive advantage of
an enterprise. The result of the strategic planning in an enterprise is the definition of
desired results of competitive priority tasks. The strategic analysis of manufacturing
studies how manufacturing business function achieves its strategic goals. At this level,
the focus is on definition of activities in different strategic decision areas inside
manufacturing that will enable the achievement of desired results in manufacturing
competitive priority tasks.

The strategic analysis of an enterprise therefore identifies facts that have an impact on
definition of competitive advantage and business strategy. The strategic
manufacturing analysis on the other hand identifies facts that have an impact on the
definition of the results of manufacturing competitive priorities and manufacturing
strategy.
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6. MODEL OF STRATEGIC MANUFACTURING ANALYSIS

Based on the definition of the strategic manufacturing analysis and a general method
of analysis, order and content of phases of strategic manufacturing analysis can be
defined. The manufacturing analysis has to consider present results of manufacturing
competitive priorities and desired results, determined in business strategy, then the
present state of different strategic decision areas inside manufacturing, as well as the
relationship between present results of manufacturing competitive priorities and the
present state of different strategic decision areas. Activities needed to improve
manufacturing depend on the relationship between present and desired results of
manufacturing competitive priorities. This relationship represents the basis of the
identification of problems at the manufacturing business function level, as the
problems are related to obstacles to the achievement of desired results. The
framework for strategic manufacturing analysis is shown in Figure 2.

Figure 2: Framework for strategic manufacturing analysis

















- Importance and comparative results of
different manufacturing competitive
priorities
- Desired results of manufacturing
competitive priorities (business
strategy)

Business
unit
Problematic
situations for
different strategic
decision areas in
manufacturing
(strengths and
weaknesses)
Analysis and
prediction of
environment
relevant to
manufacturing
(threats and
opportunities)
Manufacturing
Manufacturing
Problems in manufacturing Manufacturing
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In accordance with the analysis general methodology, strategic manufacturing
analysis can be divided into two phases: identification of problematic situations
(strengths and weaknesses) and identification of problems (based on strengths and
weaknesses and threats and opportunities) in manufacturing. Both phases consist of
various necessary steps.

6.1. IDENTIFICATION OF PROBLEMATIC SITUATIONS

Problematic situations are determined by the present state of different manufacturing
strategic decision areas which influences the present results of manufacturing
competitive priorities. Strategic manufacturing analysis tries to identify strategic
decision areas that have an important influence on the results of manufacturing
competitive priorities, as well as their impact, whether positive or negative.


In order to identify problematic situations, one therefore has to:
1 Identify which manufacturing strategic decision areas represent important
strategic levers to influence manufacturing strategic goals.
2 Collect data that illustrate the present state of the important strategic levers and
identify problematic situations associated with different important strategic levers on
the basis of comparison of collected data with an appropriate basis.

Identification of important strategic levers

The first step in strategic manufacturing analysis is to asses to what extent different
strategic decision areas influence the results of different manufacturing strategic
priorities. The importance of a certain strategic lever differs between different
manufacturing strategic priorities. The importance of different levers also dynamically
changes as a function of a changing combination of situations that are characteristic
for different decision areas. As the exact correlations between changes in different
strategic decision areas and changes in results of different manufacturing competitive
priorities are not known, there is always a certain amount of subjectivity involved in
the assessment of the importance of strategic levers. Different techniques for the
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assessment of their importance can be used, such as interviews or surveys. An
important question in this step is who should be involved in the assessment. This can
be people who are directly involved in the areas assessed, or outsiders. Assessments
can be made either by individuals or by groups. In case the assessment is made by an
individual, an appropriate aggregation of individual assessments has to be assured. On
the other hand, in case of group assessments, the work of groups has to be structured
appropriately.

Identification of strengths and weaknesses

A detailed collection of data about different strategic decision areas is based on
desired changes of manufacturing competitive priorities and identified important
strategic levers. The data are collected about those strategic levers that have an
important influence on the manufacturing competitive priorities the results of which
we want to improve. The collected data enable us to describe the present state of
different manufacturing strategic decision areas. Problematic situations are then
identified by comparing the present state of different manufacturing strategic decision
areas with different comparison bases. Solutions expressed in quantitative or
qualitative terms are compared in different manufacturing strategic decision areas
with theoretical models, recommendations, concepts and methods, with past
experience, or with other companies. Deviations of present solutions from comparison
bases lead to the identification of problematic situations in which the importance and
influence of deviations are evaluated. Deviations related to each strategic lever can
have either a positive, neutral or negative influence on the results of manufacturing
competitive priorities. With the evaluation of the importance and influence of
deviations, strengths and weaknesses of the manufacturing are identified from a
strategic point of view.

As has been explained, the exact correlations between changes in different strategic
decision areas and changes in results of different manufacturing competitive priorities
is not known, therefore there is always a certain amount of subjectivity involved in
the evaluation of the importance and influence of deviations of different strategic
levers. The subjectivity is controlled by an appropriate choice of techniques and
working methods, as has already been mentioned above.
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The identification of strategic weaknesses and strengths in manufacturing assure
effective decision-making about the planned results of manufacturing competitive
priorities and about changes in different strategic decision areas necessary to improve
results of manufacturing competitive priorities.

6.2. IDENTIFICATION OF PROBLEMS

Based on the identification of strengths and weaknesses, and opportunities and threats
(as a result of the environment analysis and prediction), problems at the
manufacturing business function level are identified. As has been explained, strategic
problems in manufacturing can be identified by posing a question of how to improve
results of specific manufacturing competitive priorities, considering strengths and
weaknesses defined by different strategic decision areas inside manufacturing, and
considering opportunities and threats characteristic for the environment of the
manufacturing. By solving the problems, a manufacturing strategy is developed that
leads to the planned results of manufacturing competitive priorities.

The manufacturing strategy can not be developed from problematic situations
themselves, because the problem is not known yet. In order to identify the problem,
the relationship and interconnectedness between the identified deviations for strategic
levers has to be searched for. Certain deviations can be isolated, but there is often a
relationship between deviations that has to be studied. Therefore problematic
situations have to be studied as an interconnected system /17/. We are interested in the
cause-and-effect relationship between different problematic situations. In the process
of a problem identification, the findings for strategic levers have to be synthesised,
which leads to the identification of the basic and the most important deviations. As a
result of the identification of problems, strategic levers are defined that will have to be
changed in order to achieve desired manufacturing strategic goals. Following is the
identification of alternatives to changing strategic levers. However, the answer to the
question of how the strategic levers will be changed is not a part of the analysis, but a
part of strategic decision-making. The emphasis however is on the fact that changes
that will be implemented in the future can not be the result of an imitation of other
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companies work; necessary changes have to be based on problems identified in the
process of analysis.

7. CONCLUSION

The purpose of the paper was to develop a model of strategic manufacturing analysis
as a basis of manufacturing strategy formulation. Therefore the starting point of the
work was to study a general process of planning and to determine the role of analysis
in the process. After studying the general method of planning, strategic planning and
the role of strategic analysis were defined. Strategic planning was defined as
determination of strategic goals and strategies as a means of realising strategic goals
with the purpose to achieve appropriate ROE in an enterprise. The emphasise was
placed on the need to use strategic planning processes and analysis needed for
strategic planning at two levels: the enterprise and the business function one. Based
on the differentiation between two levels of strategic decision-making, the role of
strategic analysis in the process of strategic planning at business and functional levels
was identified. The economic purpose of strategic analysis of an enterprise is to assure
appropriate ROE; the organisational purpose of strategic analysis of an enterprise is to
guarantee effective decision-making, concerning competitive advantage of an
enterprise and as well as business strategy. The economic purpose of strategic
analysis of manufacturing is to assure competitive advantage of an enterprise; the
organisational purpose of the analysis is to guarantee effective decision-making
concerning a planned level of results of manufacturing competitive priority tasks and
as well as manufacturing strategy.

After defining the purpose and goals of strategic manufacturing analysis and
determining a general process of analysis, the model of strategic manufacturing
analysis was developed. Moreover, the order and content of phases of strategic
manufacturing analysis were described. In accordance with the general analysis
methodology, two phases in strategic manufacturing analysis were explained: the
identification of problematic situations (strengths and weaknesses), and the
identification of problems (based on strengths and weaknesses and threats and
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opportunities) in manufacturing. In both phases, steps necessary for the
implementation of the strategic manufacturing analysis were described.

The model of strategic manufacturing analysis should become an important part of
every enterprise management system, as such analysis is necessary for appropriate
enterprise restructuring that aims to achieve competitive advantage.

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Book: Thompson, A.A.; Strickland, A.J. (1989): Strategy Formulation and
Implementation, Homewood, Irwin.
Book: Pucko, D. (1993): Planiranje v podjetjih, Ekonomska fakulteta, Ljubljana.
Standard journal article: Vickery, S.K., (1991): A Theory of Production
Competence Revisited, Decision Science, 3: 635-643.
Standard journal article: Garvin, D.A., (1993): Manufacturing Strategic Planning,
California Management Review, 4: 85-106.
Book: Magnan, G.M. (1994): An Analysis of the Relationships Between Selected
Manufacturing Strategies, Production Competence, and Competitive
Priority, Michigan State University, Michigan.
Book: Hayes, R.H.; Wheelright, S.C. (1984): Restoring Our Competitive Edge,
John Wiley and Sons, New York.
Book: Lipovec, F. (1974): Uvod v analizo poslovanja, Moderna organizacija, Kranj.