The impact of external market factors on the operational practices and performance of companies

The links between operational practices and performance are well studied in the literature, both theoretically and empirically. However, it is mostly internal factors that are inspected more closely as the basis of operational performance, even if the impact of external, environmental factors is often emphasized. Our research fills a part of this existing gap in the literature. We examine how two environmental factors, market dynamism and competition impact the use of some operational practices (such as quality improvement, product development, automation, etc.) and the resulting operations and business performance. The method of path analysis is used. Data were acquired through the International Manufacturing Strategy Survey, which was carried out in 2005 in 23 participating countries in so called “innovative” industries with a sample of 711 firms. Results show that both market dynamism and competition have a large impact on business performance, but the indirect effects, through operations practices are rather weak compared to direct ones. The most influential practices are from the area of process and control, and quality management.