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ISSN: 2249-7196
IJMRR/August 2016/ Volume 6/Issue 8/Article No-4/1012-1029
Biswaranjan Ghosh et. al., / International Journal of Management Research & Review
*Corresponding Author www.ijmrr.com 1012
LINKAGE AMONG COMPETITIVENESS, COMPETITIVE ADVANTAGE AND
COMPETITIVE PRIORITY OF APPAREL EXPORT FIRMS AT TIRUPUR
Biswaranjan Ghosh*1, Dr. K.Kumuthadevi
2, Dr. D. Jublee
3
1Research Scholar, Dept. of Management, Karpagam University, Coimbatore, India.
2Prof. & Head, Dept. of Commerce, Karpagam University, Coimbatore, India.
3Prof, Dept. of Management Studies, Karunya University, Coimbatore, India.
ABSTRACT:
To face the intense international competition and sustain the growth rate in business, a firm
has to develop competitive priorities and action plans so as to create for itself a competitive
advantage position. The competitive advantage is created by development and proper
exercise of a set of competitive priorities. The present study tries to identify the competitive
factors contributing to the growth of business in Tirupur knitwear manufacturing cluster.
Infrastructure, resource, supplier and related industries, demand condition, firm structure-
strategy and competitor, dynamic capabilities of firm and Government have emerged as the
determinants of competitive advantage. The competitive priorities are quality, cost, time,
flexibility and innovative product. Survey data from 223 manufacturer and exporter shows
that time and cost are more important, while innovative product is less important competitive
priorities. Performance of firms is good in terms of increase in profit and sales revenue. There
is significant coexistence between determinants of competitive advantage and competitive
priorities. There is no significant coexistence between competitive priority set by the firm and
competitive capacity developed.
Keywords: Competitiveness, competitive advantage, competitive priorities, firm capability
and performance, Tirupur.
INTRODUCTION
Globalization, liberalization, changing customer needs, rapid technological innovation
coupled with environmental issues have brought new challenges for the companies to remain
competitive in the market place. It is difficult for a manufacturer/exporter/firm to produce the
goods in insulation of global demand, changes and competition. The competitiveness at firm
level depends upon the capability of the firm to mobilize its resources to produce or supply
the products superior to those offered by competitors and remain in the global market
fulfilling the challenges posed. The competitiveness of Tirupur based apparel manufacturer
and exporter can be understood by knowing the present and past performance of the sector.
Studies revealed that the cluster has been facing many challenges in recent past. Year 2007-
08 and 2008-09, due to global recession, the knitwear cluster export was in declined trend.
Year 2011, the cluster faced a major jolt after Madras High Court order to stop the processing
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plants, which were not maintaining zero liquid discharge. But, studies also revealedthat since
last five years, despite having turbulence in global market, Tirupur based knitwear
manufacturers and exporters have maintained a good track record of growth of 15% CAGR
(Textile Excellence, April-2016) as against the national average growth rate at less than 9
percent and consistently facing the global challenges to maintain the growth spirit and sustain
in the business. T E. Narasimhan (2014) opined, since 2005, category 338 (Men / Boys knit
shirts, cotton) and 339 (Women/ Girls knit blouse/shirts, cotton)garments‟ export growth
ratefrom Tirupur is lagging behind the competing countries such as: Vietnam, Bangladesh,
Srilanka and China. Apparel Resources (Feb. 2016), in the year 2015, India's overall apparel
exports to US markets grew by 7.78 percent, Sri Lanka‟s grew by 15.82 percent,
Bangladesh's grew by 11.7 percent and Vietnam‟s grew by 13.97 percent. From this it is
evident that the overall export growth rate of competing countries are higher than India and in
category 338 and 339, higher than Tirupur exporters‟ growth rate. This implies huge
international competition posed severe challenges to Indian as well as Tirupur apparel
manufacturer and exporter to sustain and increase the growth rate. To cope it is essential for
an exporter to formulate appropriate competitive strategy and emphasize proper
manufacturing strategies to execute the competitive strategy, so as to deliver the product and
its attributes superior to those offered by competitor.
To remain competitive, development of competitive priorities (CP) is the first step in
developing a firm‟s manufacturing strategies (Shaohan Cai et. al., 2014).With the established
competitive priorities solidly in place in relation to business environment, the firm then
develops a set of plans that is operationalized through programs, processes and assets to be
pursued in order to accomplish those plans. Together, the competitive priorities and action
plans constitute the firm's manufacturing strategy, which ultimately influences the firm's
operational capabilities and business outcomes. Competitive priorities are decided and
executed to create competitive advantage based on the requirements poised by the business
environment. Earlier studies suggest that business environmental factors such as resources,
market condition, infrastructure, firm management and structure, competitive hostility, local
Government etc. jointly create a competitive advantage condition. To develop a competitive
advantage condition, first the firm needs to know the determinants which create competitive
advantages condition, then formulate the appropriate strategies to execute the same at
operational and other levels as well.
Unless having competitive advantages position, it is difficult for the Tirupur based apparel
manufacturer and exporter (AME) to achieve the growth rate of CAGR 15 percent as against
less than 9 percent national average growth rate. The present studyis planned with the
following objectivesand this will help the individual firm to focus on the specific competitive
determinants and corresponding strategies to create competitive advantages condition.
OBJECTIVES:
1. To find out the determinants of competitive advantage for Tirupur based Apparel
Manufacturer and exporter Organization (AMEO).
2. To find the relative importance of various competitive priorities among the Tirupur
AMEO.
Biswaranjan Ghosh et. al., / International Journal of Management Research & Review
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3. To analyze the coexistence among elements of competitive priorities and determinant of
competitive advantages in AMEO‟s
4. To find the coexistence between competitive priority and capability of firm.
THEORY OVERVIEW
Competitiveness
Competitiveness has been described by many researchers as a multidimensional and relative
concept. The significance of different criteria of competitiveness changes with time and
context. According to Altomonteet.al (2011), competitiveness is related to the ability of firms
in a given country – not the country itself – to mobilize and efficiently employ (within and
also outside the country‟s borders) the productive resources required to offer those goods and
services against which other goods and services can be obtained (domestically or
internationally) at favorable rates of substitution (or terms of trade). Competitiveness, as
explained by Porter (1990), can be defined at three levels: firm, industry and nation.
Measures of the competitiveness at the firm level include firm's profitability, firm's exports,
and market share. Measures at the industry level include the firms' profitability, the industry's
trade balance, and the balance of outbound and inbound foreign direct investment (JMOP-
2003). At the national level, it is the ability of citizens to achieve a high and constantly rising
standard of living. M. Porter (2004), stresses on the inter-dependability of firm's and
country's competitiveness. He says, “Unless there is appropriate improvement at the
microeconomic level, macroeconomic, political, legal and social reforms will not bear full
fruit”.In other words, macroeconomic conditions influence microeconomic (business)
environment and vice versa. This opinion was stated earlier by him thus: "It is firms that
ultimately compete internationally, but it is the international competitiveness of a country that
shapes the international competitive advantage of firms [Porter (1990a)].
Conner (2003) addresses the central question: who decides if a company is competitive? He
lists a number of answers to this question. For example, governments might define a
company as competitive if it conforms to criteria contained within competition or anti-trust
law. Managers might define competitiveness in terms of market share and growth.
Shareholders may judge competitiveness in terms of profit and growth. It is clear that the
definition will vary with differing points of view and with nature of the viewer‟s interest in
the performance of a business (Conner, 2003, p. 196). Some authors view competitiveness
with the competency approach. They emphasize the role of factors internal to the firms such
as firm strategy, structures, competencies, capabilities to innovate, and other tangible and
intangible resources for their competitive success (Bartlett and Ghoshal, 1989; Hamel and
Prahalad, 1989, 1990). Ability to develop and deploy capabilities and talents far more
effectively than competitors can help in achieving world-class competitiveness (Smith, 1995).
“Competitiveness is a capability and its potential has to be realized in a firm‟s everyday
operations” (Dilek C. et. al., 2013)
Barney (2002) opines that competitiveness of a firm is its capacity to achieve its targets.
These targets are likely to be expressed in a variety of terms depending on the context.
Within a macroeconomic perspective, a competitive firm develops and sustains a level of
performance that contributes to the Gross Domestic Product (GDP), employment
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opportunities, and the wealth of the people. From an entrepreneurial perspective, a
competitive firm needs to survive in the market and to achieve market share and profitability.
The success of a competitive firm can be measured by both objective and subjective criteria.
Objective criteria include return on investment, market share, profit and sales revenue, while
subjective criteria include enhanced reputation with customers, suppliers, and competitors,
and improve quality of delivered services (Barney 2002). Chikan et. al. (2008), view that
competitiveness is a capability of a firm to sustainably fulfill its double purpose: meeting
customer requirement and profit. This capability is realized through offering on the market
goods and services which customers value higher than those offered by others. C. Daniele et.
al., (2011), suggest that at firm level, competitiveness can be understood in two different
perspectives: one is drivers responsible to drive the competitiveness of a firm‟s performance
and the other is firm‟s competitive performance as outcome. The drivers are available or
accessible resources (labor, raw material, technology, finance, knowledge etc.), infrastructure
facilities, access to market, managerial dynamic capabilities, supplier and related industries,
presence of rivalry and Government. The outcome may be expressed in terms of firm‟s
superior performance such as increase in sales revenue, profit, market share etc.
Summarizing the above, it is understood that, in a dynamic business environment, firm's
competitiveness is possible only when managerial capability of a firm is able to utilize the
resources and assets effectively as compared to other firms engaged in similar kind of
business for better performance in relation to customer satisfaction. Also at firm level
competitiveness can be expressed by profitability, market share and sales revenue etc.
Competitive Advantage
The concept of competitive advantage is often mentioned and discussed within strategic
management field, but lack of consensus is there about these definitions. Competitive
advantage may be defined as the extent to which a firm is able to create and maintain a
defensible position over its competitors [M. Tracey et. al,. ( 1999)]. Alternatively, it may be
considered to refer to the capabilities which allow a firm to shape its competitive advantage
so defined and differentiate itself from its competitors (S. Li et.al., 2006). In the same vein,
H. Ma (1999) defines competitive advantage as the asymmetry or differential in any attribute
or factor that allows a firm to serve its customers more effectively than others and hence to
create better customer value and achieve superior performance.. Porter (1991) defines
competitive advantages as the capability of a company or industry to make the products that
provide more value to the customer than competing products, such as by offering lower
prices or providing quality services or other benefits that justify higher prices. The strongest
competitive advantage is a strategy that cannot be imitated by other companies. Anna Mar
(2013) states that competitive advantage is often confused with pricing, cost, return on
investment, margins, innovation, sustainability, brand and reputation. In other words,
businesses tend to call anything they consider good to be a competitive advantage.
Porter (1998) states that industrial clusters act as a source of competitive advantage by
facilitating the organizations in making more conscious decisions regarding the selection of
their location, fostering productive social relationships in those locations and working with
other constituents nurturing the cluster. Researchers claim that the companies, which are
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within the cluster, are more progressive as they have better competitive advantages
conditions. According to Passemard and Kleiner (2000) the competitive advantage is gained
by five sources of innovation which includes: the new technologies, modification of the
demand or a new demand, the occurrence of a new segment, the changes in the costs or the
availability of means of production and changes in regulation.
Summarizing the above, competitive advantage of a firm can be understood as a state that
fixes a firm in a favorable position to add more value to its customer than of competitors.
Competitive priorities
The literature on operations strategy has extensively focused on the competitive priorities that
act as strategic capabilities which can help organizations create and develop competitive
advantage. Competitive priorities are the capabilities that the operations function of a firm
can develop in order to give a company a competitive advantage in its market place. In 1984,
Hayes and Wheelwright introduced the term „competitive priorities‟, which they defined as
strategic preferences or the dimensions along which a company chooses to compete in the
targeted market. Leong et al. (1990) term competitive priorities as a consistent set of goals for
manufacturing to gain competitive advantage. According to Skinner (1969, 1974) and Hayes
and Wheelwright (1984), competitive priorities denote a strategy which emphasize on
developing certain manufacturing capabilities that may enhance a plant‟s or a firm-level
position in the marketplace. Over the years numerous articles have been published using a
multiplicity of competitive priorities. The widely accepted competitive priorities are cost,
delivery, quality and flexibility (Kathuria, 2000). Leong et al. (1990) introduced a fifth
competitive priority called innovativeness. There is a broad agreement that competitive
priorities can be generally expressed in terms of low cost, flexibility, quality, and delivery
speed and reliability (e.g. Hayes, & Wheelwright, 1984; Leong, Snyder & Ward, 1990;)
Nada R. et al. (2012) opines that, once a business strategy has been developed, an operation
strategy must be formulated. This will provide a plan for the design and management of the
operations functions in ways that support the business strategy. The operation strategy relates
the business strategy to the operation function. It focuses on specific capabilities of the
operation that give the company a competitive edge. These capabilities are called competitive
priorities. By excelling in one of these capabilities, company can become a winner in the
market place. In determining competitive priorities, firms needs to work out on business
strategies in relation to several factors, such as the business environment (Mady, 2008),
customer needs (Connell, 2010) and competitor actions, as well as internal resources. By
balancing these elements with respect to market condition, firms can develop competitive
priorities or acquire the same to gain competitive advantage. It‟s also important for a firm to
understand the source of competitive advantage and establish a set of competitive priorities,
while formulating competitive strategy for their manufacturing, so that resources and
managerial capabilities can be oriented to develop desired competitive capabilities for
competitive advantage. Vickery et al. (1993) and Boyer et. al., (2002); define competitive
priorities in a manufacturing setting as, “a strategic emphasis on developing certain
manufacturing capabilities that may enhance a plant's position in the marketplace” and key to
the achievement of competitive advantage.
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From the above, it is understood that to have the competitive advantage, a firm needs to
develop a set of competitive priorities in relation to the factors of competitive advantage and
business strategy and acquire the capabilities at operational level to fulfill the same.
CONCEPTUALIZATION OF PRESENT STUDY
Creating competitive advantages requires determination of the factors that may put the firm
in a better position. M. Porter (1990) devised a diamond model of competitiveness, where he
opined, four interlinked broad attributes of the proximate environment of a firm have the
greatest influence on its ability to innovate and upgrade. These attributes are (1) factor
condition, (2) demand condition, (3) related and supporting industries,(4) firm strategy,
structure, and rivalry. In the same vein, role of Government was also an indirect determinant
or attribute. Tim Padmore and Hervey Gibson (1998) improved the Porter‟s diamond model
as GEM (Groundings-Enterprises-Markets)model. They created a new model which can
describe and assess the competitiveness of firms situated in a cluster. The GEM model
established the six categories of determinants affecting the competitiveness of industrial
cluster , which include: “resources”, “infrastructures”, “suppliers and related industries”,
“enterprise structure, strategy and rivalry”, “local market”, and “external market”. The GEM
Model variables are quite appropriate for the present study, since Tirupur is termed as
knitwear industrial cluster where group of similar and related firms are working together in a
defined geographic area and share common market, technologies, worker skill needs etc.
Owing to business environment dynamism, several researches suggest dynamic capabilities
of firm are also an important factor for determining competitive advantage. David J. Teeceet.
al. (1997) defines dynamic capabilities, as the firm's ability to integrate, build, and
reconfigure internal and external competences to address rapidly changing environments.
Dynamic capabilities thus reflect an organization's ability to achieve new and innovative
forms of competitive advantage given path dependencies and market positions (Leonard-
Barton, 1992). More recently, Wang and Ahmed (2007) have defined dynamic capabilities as
„a firm's behavioral orientation constantly to integrate, reconfigure, renew and recreate its
resources and capabilities and, most importantly, upgrade and reconstruct its core capabilities
in response to the changing environment to attain and sustain competitive advantage.
The present study has taken determinants‟ such as: resources, infrastructure, supplier and
related industries, demand condition, firm structure-strategy and rivalry, dynamic capabilities
of firm and Government for competitive advantage. The resources are considered as natural
resources such as raw material and other resources such as man power, technology, finance
etc. The infrastructure consists of information technology, logistic facilities, existence of
industry association, etc. Demand condition here refers to external international demand.
Related supporting industries refer to the industries, such as upstream, downstream and
ancillary industries, which are closely related and can greatly affect the competitive
advantage. Firm strategy, structure, competitors refers to the foundation, organization and
management patterns, as well as competitors or rivalry in the domestic market situation in a
region. Dynamic capabilities refer to the ability of firm‟s management to seize and
accomplish the business opportunities quickly by providing desired products and services.
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The competitive priorities are taken as quality, cost, time, flexibility and innovative product.
Quality: This represents firm‟s emphasis to manage the processes of manufacturing for
desired quality in the final product, so as to remain competitive in the market place.
Cost: This represent firm‟s emphasis to reduce all sorts of cost including final product cost to
remain competitive in the market
Time: This represents firm‟s emphasis to cope up with desired lead time through timely
manufacturing and delivering the product to customer to remain competitive.
Flexibility: This represents firm‟s emphasis to react with changing customer requirement
with the changes in production, changes in product mix, modifications in design, fluctuations
in quantity, and changes in sequence for being competitive.
Innovativeness/ new product design: This represents firm‟s emphasis to introduce new
designs, products and product features as per market to remain competitive in market place.
RESEARCH HYPOTHESIS
H1: Determinants of competitive advantage affect its emphasis on competitive priority
“quality”.
H2: Determinants of competitive advantage affect its emphasis on competitive priority “cost‟
H3: Determinants of competitive advantage affect its emphasis on competitive priority “time”
H4: Determinants of competitive advantage affect its emphasis on competitive priority
“flexibility”.
H5: Determinants of competitive advantage affect its emphasis on competitive priority
“innovative product design”.
H6: Competitive priority affects the development of desired capability
RESEARCH METHODOLOGY
The study is designed to explain the relative importance of different competitive priorities,
their coexistence with determinants of competitive advantage and firm capability in Tirupur
based (AMEO). Manufacturer-exporters located in Tirupur region and registered with
Tirupur Exporters' Association are considered as population of the study. Out of total 941
registered exporters, 223 exporters are chosen as sample following simple random sampling
method. Primary data was collected through personal interview after administering a well-
structured interview schedule to the firm‟s top management officials such as proprietor or
head of the organization. The secondary data was collected from past research papers, leading
journals, books, conference proceedings etc. Questionnaires were designed to know the
demographic profiles of firms, to rank the competitive priority and determinants of
competitive advantage of individual firms. For ranking the most preferred one is denoted
with numerical number -1 and the least preferred one is denoted with higher numbers
depending upon the total number of factors or elements. Five point Likert scale (1-very low
capacity, 2 – low capacity, 3- average capacity, 4- high capacity, 5-very high capacity) was
used to collect the data of individuals firm‟s capacity to attain desired competitive priorities.
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Firms' past three years relative performance data qualitatively measured in terms of increase
in sales revenue and increase in profit. For performance a five point Likert Scale was used (1-
worst, 2-worse, 3- no change, 4-better, 5-best).Friedman test of significance applied to find
the coexistence between competitive priorities and determinants of competitive advantage.
Spearman correlation test was applied to determine the coexistence between competitive
priorities and individual firm‟s capacity to attain the desired competitive priorities.
RESULTS AND DISCUSSIONS
Ranking of Competitive Priorities (CP)
To determine the level of emphasis placed on the CP, the mean rank of each computed and
ranked accordingly (Table 1 and 2).
Table 1: Ranking of Competitive priorities
CompetitivePriorities Mean Rank Ranks
Improvement in product quality ( quality) 2.87 3
Reduction in production cost (cost) 2.05 2
Cope with reduction in lead time ( time) 1.66 1
Flexibility in production system and producing variety ( flexibility) 3.56 4
Innovative Product design ( innovative design) 4.89 5
Table 2: Significance Test
Test Statisticsa
N Chi-Square df Asymp. Sig.
223 890.712 5 .000
a. Friedman Test (Sig. <5%) Significant difference
Friedman test value (<0.05) shows rank differences are statistically significant. Cope up with
reduction in lead time or in other word “time” is the most preferred competitive priority
followed by cost as second , quality as third, flexibility as fourth and innovative product
design as the last preferred competitive priorities to create competitive advantage and for
better performance.
This shows apparel products manufactured in Tirupur are time sensitive and timely
completion of manufacturing tasks including shipment is the key for competitiveness and
success. Earlier studies [Y. Li., et. al., ( 2014)] point out that apparel products have high
marginal value with time and lose their value at the rate in excess of 1% per week. They also
point out that value of apparel products vary with season and the values decrease after the end
of season. Nordas et. al., (2006) point out that time is the critical criteria in case of labour
intensive products such as clothing and electronics. The results of present study, which
explains “time” as one of the very important CP choices corroborates with the studies
mentioned above indicating fact that time factor is very important to attain competitive
advantage position.
The least preferred competitive priority, “innovative design” indicates that, firms are less
bothered for innovative product as a means of competitiveness, which eventually reveal that
product designs for export orders are specified by overseas buyers and timely fulfilment of
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the same is the major criteria to attain competitive advantage. Cost being second preferred
priority indicates, that Tirupur based AMEOs are shifting their traditional competitive stand
from cost to time to win customer order and gain competitive edge over their competitors.
Ranking of Determinants of Competitive Advantage (DCA)
To find the coexistence between elements of competitive priority and determinants of
competitive advantage, mean rank analysis and their coexistence statistical significance test
carried out. Friedman test is applied to test the significance (Tables- 3,7& 8). The past three
years' performance of a firm in relation to other firms engaged in similar business and their
nature is depicted in Table 4 and Table 5
Table 3: Ranking of Determinants of Competitive Advantage
The results of Table 3, (Friedman test value<0.05) shows rank difference is statistically
significant and it indicates demand-condition is the most influential competitive factor of
competitive advantage followed by dynamic capabilities of firm as second, the supplier and
related industries as third, resources as fourth, Government as fifth, firm structure strategy &
rivalry as sixth and infrastructure as the last influential determinants of competitive
advantage.
In general, the factors in a competitive advantage frame wok does not work in isolation with
each other, rather they are interdependently work to create a competitive advantages
condition. The result of Table (3) indicates relative importance of factors as perceived by
individual firm for competitive advantageous condition.
Table 4: Performances of firms in last three years i.e. 2011-12, 2012-13, and 2013-14
Worst
(1)
Worse
(2)
No change
(3)
Better
(4)
Best
(5)
Mean Std.
Dev.
Sales revenue rise 0.4 % 1.3 % 39.9 % 49.8 % 8.5 % 3.6457 .67455
Increase in Profit 00 % 6.7 % 52.9 % 37.7 % 2.7 % 3.3632 .64925
Determinant of Competitive Advantage or
Competitiveness Factors
Mean
Rank
RANK
Resources 3.85 4
Infrastructure 5.80 7
Supplier and related industries 3.63 3
Demand condition 1.62 1
Firm structure, strategy and rivalry 5.02 6
Dynamic capabilities of firm 3.50 2
Government 4.58 5
Test Statistics
N 223
Kendall's Wa .381
Chi-Square 510.019
df 6
Asymp. Sig. .000
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The table (4) indicates mean value of performance in terms of rise in sales revenue and
increase in profit are 3.65 and 3.37 respectively. This implies performances of firms are good
in last 3- years. As per Textile Excellence Magazine (April-2016) in the last five years,
exports from Tirupur have grown at CAGR of around 15 percent, even as the overall garment
exports from the country have increased at a CAGR of less than 9 percent. From the above
information, it may be concluded that Tirupur‟s high growth rate as compared to the national
may be attributed to favorable demand condition and ability of firms to cope up with
changing attributes of customer satisfaction.
Demand condition is an external factor and its volatility depends upon several socio
economic changes in the market. Cope up with volatile demand condition and considering the
same as a competitive advantage is a challenging issue for Tirupur based AMEO. M. Porter
(1990) pointed out that having sophistication in demand at local market will motivate the
firms to acquire the capabilities, which ultimately put them in a competitive advantage
condition. Since Tirupur is in active export market in past three decades, where competition
is multifaceted, the possibilities of predicting demand condition and acquiring the capabilities
to meet the same is quite obvious. Moreover all over the world, cotton based garments are in
high demand and Tirupur is known to produce mainly cotton based garments. In apparel
market more demand fluctuation is noticed in high fashion and high priced garment and less
fluctuation in low to mid-priced fashion garments. Since Tirupur is known for low to mid-
priced fashion garments, coping up with less demand fluctuation is quite obvious.
The positioning of dynamic capabilities of firm at second rank indicates that, Tirupur based
AMEOs are not only having conducive demand condition but also possess required dynamic
capabilities to cope up with the changing demand condition by reorganizing and remobilizing
their resources and capabilities and meeting the international market requirements. M.
Porter's diamond model for competitive advantages points that all the determinants in
competitive advantage framework are working together to create a competitive advantage
condition rather working in isolation. From this it is understood that coping up with demand
condition is backed by the factor dynamic capabilities of firm.
Table 5: Nature of company
Frequency Percent
Micro enterprise 16 7.2
Small enterprise 123 55.2
Medium enterprise 75 33.6
Large enterprise 9 4.0
Total 223 100.0
The frequency distribution table (5) indicates, majorities (55%) of firms at Tirupur are small
enterprises and these firms are normally under direct observation of proprietor to manage the
state of affairs. As explained earlier, dynamic capability is the ability of firm‟s quick response
to changes in the business environment and acting accordingly to seize the opportunities.
Dynamic capability at the firm level demands leaders with thorough market information,
quick & firm decision making ability and power to execute the same. It also demands flexible
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manufacturing system where resources can be reconfigured, realigned as per demand
condition. Since proprietor‟s involvement in business is keen among the Tirupur based
AMEO‟s, it is obvious, they and their firm possess the characteristics demanded by dynamic
capabilities.
Production of garment involves several multiple dissimilar processes and multi-varieties of
raw materials such as: fabric, button, zipper, hanger, toggles, elastic, laces, ties, etc. Since,
getting all these multi processes and materials in one firm is quite challenging, depending
upon various specialized contractors, job workers and suppliers is quite obvious to fulfill the
requirement. Firms at present study believe importance of supplier and related industries as a
competitive factor after demand condition and dynamic capabilities. Tirupur knitwear
manufacturing cluster has units all along the value chain of knitwear starting from spinning,
knitting, wet processing, printing, garment manufacturing, embroidery, compacting,
calendaring and exports. In addition there are ancillary units supplying buttons, laces,
embroidery, cones and yarn processing etc. Presence of these high degree of subcontracting
facility and raw material units within a close community culture coupled with continuous
growth and innovations in value chain activities other than CMT (cutting-making and
trimming) has provided the required support system for growth of the knitting industry in
Tirupur.
Moreover, when demand condition is highly volatile and dynamic and garment production
processes and material requirements for each styles are heterogeneous and availability of
subcontracting opportunities are in place; relying on favorable supplier and related industries
are obvious to have competitive advantage. The performance of AMEOs indicates that
supplier and related industries support is quite conducive to have competitive advantage.
Resources are ranked as the fourth preferred determinant for competitive advantage.
Normally resources as raw materials are considered to be an important factor, since it
constitutes 55 to 65 % of total production cost. But here as per competitive priority ranking
(Table -1), time is the most preferred competitive priority for competitive advantage, which
indicates timely getting of right resources is more important than cost and quality of
resources. Having good performance of firm indicates that Tirupur based AMEOs are backed
with nearby spinning mills to supply the right yarn as major resource and the cluster is
equipped with necessary facilities to have desired labour locally and nationally.
The factors of competitive advantage framework such as demand condition, dynamic
capabilities, supplier condition and resources etc. are interlinked with each other and works in
integrated fashion for competitive advantage. Dynamic capability sense the market demand
condition and accordingly mobilize and reconfigure the own resources and external resources
through suppliers following regulative laws and principles laid by the Government.
Resources usefulness can be ensured only after assessing the demand condition and supplier
source. Since performances of AMEOs are good, the preferred choice to place resources at
fourth position after demand condition, dynamic capability and supplier condition is quite
desirable.
Biswaranjan Ghosh et. al., / International Journal of Management Research & Review
Copyright © 2016 Published by IJMRR. All rights reserved 1023
Competitive Priority and Determinants of Competitive Advantage Coexistence
Table 6: Competitive Priority and Determinants of Competitive Advantage Coexistence
Mean Rank Rank
Competitive Priority Groups Competitive Priority Groups
Quality Cost Time Flexibility Innovati
ve.
Design
Quality Cost Time Flexibili
ty
Innova
tive
Design
Resources 4.26 3.49 4.04 3.90 3.00 4 3 4 4 3
Infrastructure 6.12 5.70 5.85 5.40 5.33 7 7 7 6 6
Supplier and
related
Industries
3.88 3.46 3.72 3.50 4.00 3 2 3 3 4
Demand
Condition
1.35 1.77 1.57 1.50 2.00 1 1 1 1 2
Firm
structure,
strategy and
Rivalry
4.74 5.01 5.14 4.30 5.00 5 6 6 5 5
Dynamic
capabilities of
firm
2.65 3.87 3.51 3.10 1.67 2 4 2 2 1
Government 5.00 4.70 4.18 6.30 7.00 6 5 5 7 7
Table 7: Friedman Test of significance
Competitive Priority Groups
Quality Cost Time Flexibility Innovative
Design
N 18 84 107 11 3
Kendall's W .534 .355 .393 .524 .794
Chi-Square 54.505 176.799 249.689 31.414 14.286
df 6 6 6 6 6
Asymp. Sig. .000 .000 .000 .000 .027
Significant Significant Significant Significant Significant
The table (7) shows the Friedman‟s significance values are less than 0.05 for all the elements
of competitive priorities such as quality, time, cost, flexibility and innovative design. This
implies there is a significant coexistence in between determinants of competitive advantage
and the competitive priority group, indicating fact that determinants of competitive advantage
affect its emphasis on competitive priorities such as quality, cost, time, flexibility and
innovative design.
Table (6) indicates that “demand condition” and “dynamic capabilities” have highest level of
coexistence with competitive priorities group. Demand condition‟s coexistence is highest
with quality, cost, time and flexibility, whereas dynamic capability‟s coexistence is highest
with new innovative product design. This implies demand condition has highest level of
emphasis and influence to have desired competitive priorities of quality, cost, time and
flexibility at operational level, whereas dynamic capability emphasis is on innovative product
design. On the other hand, “infrastructure” and “role of Government” have lowest level of
coexistence with competitive priorities (CP) group. Infrastructure‟s coexistence is lowest
Biswaranjan Ghosh et. al., / International Journal of Management Research & Review
Copyright © 2016 Published by IJMRR. All rights reserved 1024
with quality, cost and time, whereas Government‟s coexistence is lowest with flexibility and
new innovative product design.
This clearly indicates that if a company possess required dynamic capabilities it can plan to
have innovative products as competitive priorities and develop the capability accordingly for
competitive advantage, whereas to meet the demand condition, a company can have the
priorities of quality, cost, time and flexibility. While comparing the results of ranking of
competitive priority depicted in (Table-1), it is understood that demand conditions have got
highest coexistence and influence on “time” to be chosen as the important competitive
priority for competitive advantage. Emphasis and influence on cost, quality and flexibility
comes next in sequence. Looking in to the firm's performance (Table-4), it is understood
that, demand condition is key competitive advantage factor and time is the key competitive
priority for competitiveness of Tirupur based AMEO.
While comparing individual competitive priority and level of its coexistence with
determinants of competitive advantage, the following observations are made and a summary
of the same is depicted in Table 8.
Table 8: Summary of coexistence between competitive priorities and factors
Determinants of Competitive Advantage’s coexistence with Competitive Priorities:
(1- Highest coexistence, 7- Lowest coexistence)
Competitive Priority - Quality
Determinants
of
Competitive
Advantage
1 2 3 4 5 6 7
Determinants
of
Competitive
Advantage
Demand
Condition
Dynamic
Capabilities
Supplier
& related
industries
Resources Firm
structure,
management
& rivalry
Government Infrastructure
Competitive Priority- Cost
Demand
Condition
Supplier &
related
Industries
Resources Dynamic
Capabilities
Government Firm
structure,
management
& rivalry
Infrastructure
Competitive Priority - Time
Demand
Condition
Dynamic
Capabilities
Supplier
& related
Industries
Resources Government Firm
structure,
management
& rivalry
Infrastructure
Competitive Priority - Flexibility
Demand
Condition
Dynamic
capabilities
Supplier
& related
Industries
Resources Firm
structure,
management
& rivalry
Infrastructure Government
Competitive Priority – Innovative Design
Dynamic
Capabilities
Demand
Condition
Resources Supplier
& related
Industries
Firm
structure,
management
& rivalry
Infrastructure Government
Biswaranjan Ghosh et. al., / International Journal of Management Research & Review
Copyright © 2016 Published by IJMRR. All rights reserved 1025
Competitive Priority and Capability Coexistence:
The competitive priorities mean rank, the capability mean score and their coexistence
calculated through Spearman Correlation Analysis. The details are depicted in below table
(9).
Table 9: Mean Rank of Competitive Priority and Mean Score of Capability
Competitive Priorities Capability
Mean Rank Ranks Mean score (5 point) Rank
Improvement in Product Quality ( quality)
2.87 3 3.3004 2
Reduction in Production cost (cost) 2.05 2 3.1166 3
Cope with reduction in lead time (time) 1.66 1 3.5830 1
Flexibility in Production system and producing
variety ( flexibility)
3.56 4 2.7578 4
New Innovative Product design ( innovative
design)
4.89 5 2.2466 5
Spearman Correlation coefficient = 0.77; which is greater than 0.05 ( Not significant relation)
Spearman correlation coefficient value >0.05 indicates, there is no significant coexistence
between “competitive priorities” and “capability” developed by firm. Accordingly the
Hypothesis (H 6) not supported. This may be due to the fact that, competitive priorities (CP);
cost, quality, time, flexibility often described as attributes of customer satisfaction. These are
“the dimensions that a firm‟s production system must possess to support the demands of the
market or customer that the firm wishes to compete in (Krajewski and Ritzman, 1993, p. 47).
Numerous literatures depict that customer satisfaction attribute sare subjective in nature and
these are not exclusively restricted with product quality, cost, time, variety etc. rather
interdependent in nature. Developing capability as per competitive priority and its sequence
need to have close understanding of dynamic interdependent behavior and trade-off among
elements of CP. In other words, while deciding quality as top most competitive priority, the
cost, time etc. automatically come next and will follow the order as per preferences. But
development of capabilities may or may not follow the same order as of desired competitive
priorities. Capability development requires a set of interactive resources, knowledge, skills
and information etc. In a manufacturing system, it is difficult to isolate the parameters such as
cost, time and flexibility etc., while developing capability for better quality, since all these are
interdependent with each other and ultimately get influenced with each other and finally may
or may not necessarily follow the pattern and order of desired competitive priorities.
Competitive priorities, corresponding capability development and its coexistence need further
investigation after understanding dynamic interdependent behavior of each. This is out of
purview of present study.
MAJOR FINDINGS AND SUGGESTIONS
From the literature it is understood that, at firm level competitiveness can be expressed in
terms of profitability, market share and sales revenue etc. The competitiveness is possible
only when a firm can deliver better value to its customer as against the competitor.
Competitive advantage is a favorable state of a firm, where better customer value is ensured
Biswaranjan Ghosh et. al., / International Journal of Management Research & Review
Copyright © 2016 Published by IJMRR. All rights reserved 1026
as compared to other firm. Competitive priorities are the capability to be developed at
operational level of a firm for competitive advantage condition.
To attain competitiveness at the market place, a firm needs to know the interdependent
factors of competitive advantage and importantly the most influential factors. The
coexistence between competitive priorities and competitive factor reveal that selection of
competitive priorities is not in isolation with factors of competitive advantage. The demand-
condition‟s highest coexistence with CP such as: time, cost, quality and flexibility suggest
firms are deciding respective competitive priorities based on the emphasis poised by demand
condition, so as to develop capabilities at operational level. The dynamic capability, which is
the second highest influential factor of competitiveness, coexists with CP such as: time,
flexibility and quality. This indicates, it is the capability of individual firm, which copes with
demand condition by emphasizing the quality, time and flexibility capabilities to be
developed at operational level. Assessment of demand condition and dynamic capabilities is
highly subjective, hence it may be considered, to access relevant business intelligence and
forecasting services for getting advance information about demand condition such as:
international trade, macroeconomic and social changes etc. Services like ISO 9001 and QMS
may be hired to review and asses the various operational capabilities of firm. The above
mentioned tools and services will help the firm to formulate competitive strategies in
accuracy and set the competitive priorities accordingly. Since dynamic capabilities are the
second important determinant of competitive advantage, AMEO‟s can plan to have proper
assessment of processes capabilities and book value added innovative, high fashion and
customized products for better return and develop the capability accordingly.
Firms are more concerned towards reduction of process time as compared to reduction of cost
implies reduced time will help them to create competitive advantage. But, S. Kaththasami
(2015) opined that garments manufactured in Tirupur are costlier by 25 % as compared to
competing countries such as Bangladesh and Vietnam. This implies cost cutting measures
such as lean manufacturing and six sigma systems should be in place in line with responsive
supply chain management system for reducing processes time. It is also advisable, cost verses
time trade-off to be made in response to specific order and buyer. Government being one of
the determinants of competitive advantage and its influence is lowest on competitive
priorities such as: flexibility and innovative product design. This implies that, the firm on its
own or through their association should put effort to take various financial, technological and
R&D supports from the Government to invest in production of high value innovative
products. This will help the small firm to produce value added products and customized
varieties for better return and gain competitive advantage in long run.
CONCLUSION
In this study, discussion was made on theory of competitiveness, competitive advantage and
competitive priority and found competitive priority coexists with competitive advantage
factors, where demand condition is the most preferred choice as determinant of competitive
advantage. It emphasized on “time” as the most preferred competitive priority at operational
level to create competitive advantage. The finding of the study suggests linking of
Biswaranjan Ghosh et. al., / International Journal of Management Research & Review
Copyright © 2016 Published by IJMRR. All rights reserved 1027
competitive advantage determinants and competitive priorities may play a vital role to
formulate the business strategy for competitiveness in a dynamic business environment.
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