Operations strategy, environmental uncertainty and performance: a path analytic model of industries in developing countries

We extend the research of Ward et al. [Ward P, Duray R, Leong G, Sum C. Business environment, operations strategy and performance: an empirical study of Singapore manufacturers. Journal of Operations Management 1995;25 99–115] to the business environment of developing industries by adding two neglected environment variables: ‘government laws and regulations’ and ‘political consideration’. We use a path analytic framework to study the effects of environment on the choice of operations strategy (low cost, quality, flexibility and delivery) and performance (self-reported change in profits) for a sample of United Arab Emirates manufacturers. We test the model suggested by Ward et al. and then test the extended model suggested for developing industries. For industries that are described as ‘small business’ and ‘developing’ rather than ‘mature’, we identify strong relationships between environmental factors such as labor availability, competitive hostility, government laws and regulations, political concerns and market dynamism and the operations strategy choices encompassed by competitive priorities. The data also indicates, that successful organizations (high performers), adopt competitive priorities that best fits the conditions of the environment, notably stability and dynamism. Results show that most firms accept their environment as given and install the mechanism to react to its forces. High performers match the complexity of their external environment by utilizing environmental variables as sources for effective controls within their organizations.