mass customization:levels of customization and · 2017-08-17 · mass customization(mc)was...

of 17 /17
商学研究論集 第20号 2004.2 Mass Customization:Levels of Cus Operational Capabilities 博士後期課程 商学専攻 2003年度入学 USUI, Tetsuya Introduction and Research agenda 1.Levels of customization 1.1.MC concept 1.2. Levels of customization 2.Operational capabilities 2.1. Operational capabilities 2.2.Operational capabilities in MC cases 3.Levels of customization and operational capabilities Conclusion lntroduction and Research Agenda In marketing literatures, researchers have suggested that firms urg maintain the relationship with individual customers and some sug increasingly broken down into smaller portions over time. Their su that markets and customers are not homogeneous in nature(Smith 1 Wind 1978, Alderson 1983, Kotler 1989)and individual uses of pro have been found to differ in terms of customer’s individual prefer responses to marketing actions of firms(Kara and Kaynak 1997). To describe the importance of getting close to individual customers have been widely introduced in the last two decades, such as mass 1993,Pine et aL 1993, Pine et aL 1995, Gilmore and Pine 1997), m 論文受付日 2003年10月2日 掲載決定日 2003年11月19日 一315一

Author: others

Post on 16-Jul-2020




0 download

Embed Size (px)


  • 商学研究論集

    第20号 2004.2

    Mass Customization:Levels of Customization and

                       Operational Capabilities

    博士後期課程 商学専攻 2003年度入学

           臼  井  哲  也

                      USUI, Tetsuya

    Introduction and Research agenda

    1.Levels of customization

      1.1.MC concept

      1.2. Levels of customization

    2.Operational capabilities

      2.1. Operational capabilities

      2.2.Operational capabilities in MC cases

    3.Levels of customization and operational capabilities


    lntroduction and Research Agenda

      In marketing literatures, researchers have suggested that firms urge to develop appropriate ways to

    maintain the relationship with individual customers and some suggest that market segments have been

    increasingly broken down into smaller portions over time. Their suggestions are based on the notion

    that markets and customers are not homogeneous in nature(Smith 1956, Claycamp and Massy 1968,

    Wind 1978, Alderson 1983, Kotler 1989)and individual uses of product/class/form/brand/options

    have been found to differ in terms of customer’s individual preferences, as well as their effective

    responses to marketing actions of firms(Kara and Kaynak 1997).

      To describe the importance of getting close to individual customers, the various concepts or terms

    have been widely introduced in the last two decades, such as mass customization(Davis 1987, Pine

    1993,Pine et aL 1993, Pine et aL 1995, Gilmore and Pine 1997), micro marketing(Kotler 1989,

    論文受付日 2003年10月2日  掲載決定日 2003年11月19日


  • Hapoineu 1990, Tedlow 1990),one to one marketing(Peppers and Rogers 2000),and relationship

    marketing(Berry 1983, Copulsky and Wolf 1991, Shani and Chalasani 1992).However, these emerg-

    ing concepts or terms may sound completely different from one another, the idea behind these con-

    cepts is very similar, and that is to create more effective and ef且cient ways of reaching individual

    costumers in order to satisfy their unique needs and wants in the best way(Kara and Kaynak 1997).

      Among these emerging concepts, mass customization(MC)is identi五ed as the bridge that links

    wide range of research fields including, production and operations management, marketing, logistics,

    and information management. MC is the ability of且rms to produce and deliver individually customized

    products or services through且exible business processes in high volumes and at reasonably low costs

    (Siliveira et al.2001). Delivering some level of customized products or services from individually

    designed single item(high level of customization)to item with cosmetic minor changes(low level of

    customization)is assumed to become the best way to satisfy most customer’s speci五c needs and

    desires, however, little is known about under what conditions firm choose the appropriate levels of cus-


      Although market requirements in many industries have been shifted more toward the notion of

    customization1, the conventional practice of MC may not be effective for all industries and all types of

    products or services as been expected(Zinn and Bowersox 1988, Duray et al.2000, and Duray 2002).

    In the consumer product markets, employing modular production and postponing血nal assemblies in

    order to individualize the configuration of product and service are not only the way to satisfy cus-

    tomers. Literatures in strategic management studies, especially those that focus on the Japanese au-

    tomotive industry, suggest that continuous investment in their upstream activities(e.g. R&Dand

    supplier relationship)enable the且rm to sustain the distinctive and inimitable capabilities to develop

    highly differentiated products with competitiveness in the market(Dyer and Ouchi 1993, Dyer 1996a,

    1996b, Clark and Fujimoto 1997).With those capabilities that focused on upstream activities, the且rm

    may market one standardized product(or product line)for their segmented markets to satisfy cus-

    tomers, rather than not to implement practices of product customization(e.g. high level of product

    customization).It is important task that identifying differences in the focus of operational capabilities

    between one emphases on customizing product configurations for individuals(high level of customiza-

    tion)and the other emphases on developing highly distinctive products that are hardly duplicated for

    the segmented market(10w level of customization)in the same streamline of research.

      The objective of this article is to explore operational capabilities that determine firm’s levels of cus一

    1The notion that the variety of products and services has been increasing over years could be described from

     different perspectives such as a product proliferation(Gupta and Srinivasan 1998).


  • Fig.1 Framework for Determinants of Levels of Customization


    Vision of






       Levels of


    tomization. Sustaining close relationships with customer is an ultimate objective of firms that sug9est-

    ed in the recent marketing literatures, however, the ways of getting close to customers are differ from

    且rm to firm accordance with its focus of operational capabilities(Pine 1993, Silveria et al.2001, Usui

    2003).Figure l describes the relationship between levels of customization and operational capabilities

    of丘rms. While market requirements in many industries have been shifted more toward the notion of

    customization(Pine 1993),difference in the focus of operational capabilities of firms may differ even

    when且rms are in the same industry(e.g. consumer products that have a complex product architecture

    and production process).The level of customization that once selected by the且rm is not unchanged or

    且xed strategy, it have to be reevaluated to seek the optimal level of customization over time. The mar-

    ket experiments may require the且rm to modify its operational capabilities and further strategic vision

    in long-term basis.

      This article is divided into three sections. In且rst section, the classification for levels of customiza-

    tion is discussed. It seems to come to the agreement among researchers that high level of customiza-

    tion requires customization activities from earlier stage of the value chain and low level requires activi・

    ties only at later stage. In the second section, operational capabilities in conventional practices of MC

    are identified and classified through intensive literature reviews from wide range of academic丘elds.

    Analysis from six case studies in MC literatures describes how operational capabilities enhance the

    system abilities to deliver customized products on the value chain. Then in third section, identified

    operational capabilities of MC will be discussed from the relational aspects with levels of customiza-



  • 1. Levels of Customization

    1.1. Mass Customization Concept

      Mass customization(MC)was conceptualized且rst by Davis(1987)and was further elucidated by

    Pine(1993).Since Davis, the debate of MC has progressed from simple future outlooks in the late

    1980’s,to identifying the relationship between highly automated production systems and levels of cus-

    tomization in the mid 1990’s to today(Gilmore and Pine 1995, Lampel and Mintzberg 1996, Duray et

    al.2000).MC is based on the idea of tying computer-based information systems together with new

    modes of operation such as且exible manufacturing and just-in-time(JIT)production and then using

    those linked systems to make it possible to provide each customer with the attractive, tailor-made

    benefits of the pre・industrial craft era at the low cost of modem production.

      In production and operations management literatures, more narrowly and speci且ed practical con-

    cepts have been de且ned. Researchers in this且elds de且ne MC as a system that uses information struc-

    ture and cos亡一e伍cient manufacturing methods of mass production to deliver a wide range of products

    and services that meet specific needs of individual customers at a cost near that of mass-produced

    items.(Hart 1995, Duray et al.2000, Duray 2002).From this point of view, MC concept is a systemic

    idea involving all aspects of product sales, development, production, and delivery, full-circle from

    the customer option up to receiving the丘nished product(Siliveira et al.2001).In other words, one of

    the main focuses of MC research is to elucidate the mechanisms that how the production system and

    other functional activities on the value chain enable firms to accomplish to deliver customized offerings

    to customers. The goal of MC is accomplishing two antimony objectives that且rms offer items

    that meet with specific needs of individual customer effectively and maintains its cost ef五ciency,


    1.2. Levels of Customization

      As it is generally known, the word‘‘mass customization”is a coined word of‘‘mass production”and

    ‘‘モ浮唐狽盾高奄嘯≠狽奄盾氏@of products(or services)”. First factor‘‘mass”is represented as mass production or

    the system produce items based on high volumes production cycle for relatively a larger size of cus-

    tomer group. In the microeconomic sense, as more amounts of a standardized item produce in a single

    production cycle, less the unit cost of item could be achieved linearly. In general, the main benefit of

    mass production of items is achieving high level of cost e伍ciency on its value chain. Modular

    production2,0ne of the crucial solutions for achieving cost ethciency, is intensively discussed in MC

    2The concept of modular production was introduced first by Starr(1965).


  • literatures(Pine 1993, Duray et al.2000).By producing standardized modular components in mass

    production basis that con且gure product itself,五rms could produce customized products without

    scarifying economic of scale in production. The issue is how the五rm configures and delivers indlvid-

    ually customized products by combining different standardized components.

      Several authors propose a continuous framework upon which MC may occur at various points along

    the value chain, ranging from the simple‘‘adaptation”of delivered products by customers themselves,

    up to the total customization of product sale, design, fabrication, assembly, and delivery. Based on Si1-

    veira’s work, table 1 summarizes the combination of different MC approaches(I name it MC models)

    and levels of customization. Table l represents levels of customization on one axis and the use of

    different MC models on the other. Here, the vertical axis dlstingulshes levels of customization, ranging

    from pure customization down to pure standardization. The horizontal axis re且ects those different MC

    models introduced in MC literature.

      According to table 1, MC can occur each stage along the value chain, ranging from the simplest cus-

    tomization(lowest level of customization)that occurs only at distribution stage by individualizing

    packageS and usages of products, up to the total customization(highest level of customization)at the

    Table 1. Levels of Customization and MC Models

    Generic Levels Stages of MC MC Approach MC Strategies    MCbonfigurations PIS strategies

      MC Models

    kevels ofbustomization

      Silveira?煤@al.(2001) Pine(1993)

    Gilmore andoine(1997)

    Lampel [email protected] (1996)

      Durayeta1.(2000)   Pagh andbooper(1998)

    High Design   Pure      .■CUStOmlzat10n



      Tailared      .,CUStOmlZat10n


      The fulI


    Assembly Modularoroduction


    The manufactur-,1ng Postponement


    Point of delivery      ■,customlzatlon

      Levels ofbustomization

    Additiona1    ◆ serVlces Customizedrervices


    The logistics垂盾唐狽垂盾獅?高?獅

    Package andр奄唐狽窒奄b浮狽奄盾

    Cosmetic   Segmented唐狽≠獅р≠窒р奄嘯≠狽奄盾

    UsageEmbedded      レ        幽CUStOmlZatlOn


    LowStandardization     Pure


    The full唐垂?モ浮撃≠狽奄盾

    *MC ・= Mass Customization

    *PIS;Postponment and Speculation

    Source:Based on Silveira et aL(2000),pp.3


  • initial stage by individualizing product design itself. Since the costs of customization tends to increase

    in proportion to the number of product changes, it makes sense to customize the downstream functions

    且rst(Lample and Mintzberg 1996, p.25)。To accomplish higher levels of customization, the firm must

    generate its customizing activities from earlier stage of the value chain, in contrast, lower levels of cus-

    tomization that require products with cosmetics changes, can be accomplished only at later stage of the

    value chain.

      One of the most traditional MC models, known as postponement concept introduced且rst by Alder-

    son(1950),also follow this relationship between levels of customization and points of value chain

    where customizations occur(Zinn and Bowersox 1988, Pagh and Cooper 1998).Alderson stated that

    producer should add options or make differentiating changes to the product close to the time of pur-

    chase by the end-use customer. He viewed that offering product options to end-use customers by

    delaying且nal production process until customer order is received enable且rms to meet with customer

    preferences more closely. He proposed that the time delay of distribution and final production process

    could be one of the critical approaches to accomplish product customization.

      When the firm postpones its production, they take risks to lose some customers by making them

    wait longer. Offering product options to customers should cause to be delayed the processes of total

    production time. Unlike Alderson’s perspective, Bucklin (1965)presented the framework of

    postponement・speculation strategies;while postponement involves delaying value-adding activities

    until a customer order is received, speculation involves adding value before the order received. He de-

    fined postponement as which a supplier may shift risk to the buyer and speculation is zero postponed

    production. This suggests us that when the characteristic of product can be added the most critical

    value of that product at initial stage of product development chain, mass production can be an optimal

    option for firms to meet with customer preferences, rather not all firms and businesses have to

    postpone their productions.

      This common agreement on the relationship between levels of customization and MC models also

    suggests difference in the focus of operational capabilities of firms re且ect choice of appropriate levels

    of customization. The capabilities in production system to achieve high degree of production且exibili-

    ties, known as FMS or JIT, have been defined as a driver for delivering customized products to cus-

    tomers. The point of customer involvement(Duray 2002)or the focus on maintaining relationships

    with end。customers at the downstream activities may be identi五es as distinctive capabilities that hard・

    ly to imitate by competitors. In the next section,1 will explore operational capabilities of MC firms that

    may affect to the choice of customization levels.

    一320 一

  • 2, Operational capabilities

      In the first section,1 summarize different MC aspects(MC models)into single table to show the

    relationship betWeen levels of customization and points of customization activities on value chain. The

    sizable MC literatures suggest that achieving any levels of customization relies heavily on the firm’s

    operational capabilities.

    2,1. Operational capabilities

      In strategic management literatures, it seems to come the agreement among researchers that sus。

    tainable competitive advantage of firms can be generated through continuous development of

    resources or capabilities of且rms that provide the values to customers(Werefelt 1984, Barney 1991,

    Peteraf 1993, Day 1994).While the competitive forces approach(Porter 1980,1985)have put empha・

    sis on the intensity of competition in the industry and market segment that determines the profit poten-

    tia1, the resource-based approach has viewed the heterogeneousness of丘rms as the source of com-


      Although, in general, the resource・based approach in且rm has addressed several different perspec-

    tives;including resource-based view(Barney 1991, Peteraf 1993, Priem and Butler 2001),accumulat-

    ed assets(Dierickx and Cool 1989, Amit and Schoemaker 1993),core competence(Praharad and

    Hamel 1990, Hamel and Praharad 1993),as well as capabilities(Day 1994, Collis 1994, Chang 1995,

    Gri伍th and Harvey 2001),the main objective of this research stream is to describe how heterogenei-

    ties of resources and processes of strategic planning in firms can obtain sustainable competitive advan-

    tage over others while all players are in the similar environment(e.g. in the industry that positioned as

    ahighly pro趾able one).The attributes of those resources or capabilities in且㎜s are characterized as

    cost-to-copy(Barney 1991,1999, Peteraf 1993),and more over, it is impossible to imitate even by the

    firm that generate and own the original resource(known as the causal ambiguity and path dependen-


      The capabilities of a firm are what it can do as a result of teams of resources working together and it

    can be identified, and appraised using a standard functional classi且cation of the五rm’s activities(Grant

    1991,Day 1994).The capabilities can be distinguished as intangible resources(Hal11992)from con-

    ventional tangible resources such as plants, physical properties, and speci且c equipments. Because the

    capabilities are embedded in complexity of organizational structure, they cannot be given a monetary

    value as a tangible plant and equipment, and it also cannot be traded or imitated(Dierkx and Cool

    1989,Hall 1992, Day 1994).

      The capabilities that embedded in organizational routine can be classi五ed into two most fundamental


  • Table 2. Aframework of intangible resources&capability differentials



    SKILLSKnow-How of:dmployee, SupPliers,


    Perception of Quality,Ability to Leam, etc.

    ASSETSReputation, Networks.


    Contracts, Licenses,srade Secrets, Intellec-

    狽浮≠戟@Property Rights.

    Source:Based on Hall(1992),pp.140

    levels, which are organizational and operational capabilities(other researchers often call it for capabili・

    ties in each function).According to Collis(1994, p145),broadly speaking prior definitions of capabili-

    ties can be classified into three categories. The first capabilities he defined are those that reflect an

    ability to perform the basic functional activities of the firm, such as plant layout, distribution logistics,

    and marketing campaigns, more ef五ciently than competitors. The second and third categories share

    the common theme of dynamic improvement to the activities of the且rm. These require firm to identify

    the value of other resource or develop novel strategies before competitors and they became the main

    driver for product and process innovations. Hall also identifies functional capabilities as skills along

    with value chain that include know-how of employee, suppliers, and distributors as well as an ability to

    learn(Table 2).According to Hall, capabilities that categorized in cultural, positional, and regulatory

    segments are related with the organizational routine and top management decisions while functional

    skills are de且ned as the capabilities to produce and deliver the apPropriate products or services to cus-


      Although researchers tend to view‘organizationar capabilities as social embedded or corporate cul-

    tural type of elements in the firm routines, in this article, I de且ne the‘operational’capabilities of MC is

    the embedded knowledge, know-how, or abilities in each functional routine on its value chain that are

    vertically coordinated one another to produce and deliver some levels of customized products or serv-

    ices to customers. Because operational capabilities are unique to the firm, it can be assumed that differ-

    ence in the focus of operational capabilities among且rms exist even they face to the similar(even the

    same)market requirements。

    2.2. Operational capabilities in MC cases

      There is a flood of the word‘‘mass customization”in various areas of business literatures as well as

    articles in business magazines and related sources. Through the depth review of related sources that

    emphasize on MC study or practice, the major focuses(objectives)of their studies and MC concepts


  • Table 3. MC cases and some focus of operational capabilities

    Case 1 Case 2 Case 3 Case 4 Case 5 Case 6

    Authors(Year)   Kothai1995,1996)



    van Hoek&@ [email protected] (1998)

    Industryiproduct or service)

    Bicycle PC PC PrinterCellular

    ohoneAutomotiveiSMART car)

    Fim1 NBIC   Dellモ盾高垂浮狽?

    HP HP Motolora   MCCiMerchedes-@ SMH)

    Levels of CustomizationRelativelygigher








    Opened/Modularity Opened/Modularity Opened/Modularity Closed/Modularity Closed/Modularity









    Someeocuses ofnperationalbapabilities



    狽?№窒≠狽?一 『


    Point ofbustomerhnvolvement

    Earlier Earlier Earlier Later Later Later

    they apply as well as industries they look at are classified.3

      To identify the speci且c operational capabilities of MC, I focus on 6 case studies that describe success

    factors of MC in the consumer product market4. Table 3 summarizes those 6 cases from 5 articles that

    reveal difference in focuses of operational capabilities in each function as well as activities related to

    the whole value chain.1 identify four differences in operational capabilities that affect the choice of cus-

    tOmiZatiOn leVelS.

    Product architecture

      The product architecture relates with the choice of levels of customization and further structure of

    3This original literature survey is conducted by using two popular academic online journal databases;include the

     Proquest and the Business Premier Research。 A key word‘mass customization’provides 225 articles and the final

     lists are prepared by deducting non-academic joumals(such as articles from magazine or news sources)from

     first results. This remains 64 articles for this study.7articles that refereed more than 3 times by major contribu-

     tors in MC studies are added on the且nal result, This original distribution of those 71MC articles shows that arti-

     cles are distributed in different research fields;it is apProximately 19 percent from marketing related journals,24

     percent from strategic management,33 percent from production and operations management, and 16 percent

     frorn logistics.

    4The identi丘ed 71MC articles from the original survey include ll cases in g industries.


  • its value chain. Opened product architecture is created when the interfaces between functional compo-

    nents are standardized in the industry and specified to allow to the substitutions of a range of variations

    in components into the product architecture without requiring changes in the designs of other compo-

    nents(Sanchez and Mahoney 1996, Schilling 2000).Modular production is most familiar example of o-

    pened product architecture modeL PC, for example, which typically allows the substitutions of varia-

    tions in hard disk drive, CPU, memories, monitors, keyboards, and other components within the one

    product architecture. Dell computer of正’ers the menu of different combinations of PC for customers

    (case 2)and customers of NBIC(case 1)can choose from about eight million possible variations of bi-

    cycles based on model types, color, frame size, and other features(Kotha 1996).

      While the openness of product architecture is expected to reduce procurement costs of components

    since it is standardized in the industry, nothing exclusive to the supplier, modular production reduce

    assembly costs for customized products since the stnlcture that interconnect with other components

    allow firms to easily assemble different components into a single product. The opened/modular

    product architecture enhances the ef五ciency of production cost in MC(Pine 1993, Hart 1996, Gilmore

    and Pine 1997, van Hoek and Weken 1998, Duray 2002)。

      When the且rm chooses its product architecture to be opened(and modularity),they will maintain

    the operational capabilities to produce and deliver the products by assembling different standardized

    components into a single customized product based on individual customer orders. Such capabilities

    that enable firms to deliver products with high level of customization are not easy to accomplished or

    duplicated and non-tradable。 In NBIC case, Kotha defines long-term investments in advanced-

    manufacturing technologies and human resource development that allow implementing MC as one of

    the necessary conditions for success.

    SuPPIier 1~elationshiP

      The recent literatures in strategic management suggest that interfrim(or relational)governance in

    the value chain is expected to become a source of high business performance generator(Dwyer,

    Schurr, and Oh 1987, Johnston and Lawrence 1988, Dyer 1996a,1996b, Dyer and Singh 1998).Inter一

    且rm governance is defined as the alternative governance structure that two firms(e.g. supplier and

    buyer)operate their transactions and business development through being a relatively longer-term of

    partnership. Several empirical studies support that cooperative specialization within interfrim relation-

    ship increases productivity of resource owners(Dyer and Singh 1998)and the costs creating and ac-

    quiring resources within a single firm(and vertically integrated organization)are incurred and it tends

    to avoid those costs under high degree of uncertainty of demand and technological changes. This per-

    spective assumes the emergence of interfirm governance occurs when firm recognizes the effective-


  • ness of creating and accumulating resources or capabilities with the partners, rather not within own or-

    ganization. The main premise of this perspective is that firms will seek to reduce uncertainty and

    manage dependence by purposely structuring their exchange relationships means of establishing for-

    mal or semiformal links with other firms.

      In the empirical settings, the most relative cases for valid success of interfirm relationship are

    Japanese automotive industry(Dyer and Ouchi 1993, Dyer 1996a,1996b, Clark and Fujimoto 1997,

    Dyer and Singh 1998).The intensive works by Dyer theoretically and empirically suggests that

    Japanese automotive value chains are characterized by greater inter五rm asset co-specialization than

    U.S. chain and that co-specialization are the main drivers to lead firm’s performance such as product

    quality, speed of new product development, and inventory cost(Dyer 1996a,1996b, Dyer and Sigh

    1998).The co-specialization within inter五rm setting he defines is distinct types of transaction・specific

    investments, includes site, physical, human and dedicated asset specificity that originally de丘ned by

    Williamson(1985).Researchers in this且eld assume that joint・investments of supPlier and manufac-

    turer will generate capabilities that lead to sustainable competitive advantages.

      The reviewed MC cases do not emphase on those joint-investments within inter且rm setting;rather

    their relationships are maintained through market transaction. Because there can be hardly found one

    time discrete market transactions between components suppliers and manufacturers, firms with high

    level of customization tend to take transactions through using quai-market that characterized as a less

    tie of relationship between五㎜s。 Ih MC cases,且rms exchange sales and order related information with

    their suppliers to maintain appropriate level of inventory(Eastwood 1996, Margretta 1998);however,

    relational speci且c investments are not identified. The cases show that firms concentrate on maintain-

    ing the discrete relationships with several different suppliers, not having a concrete relationship with a

    single supplier, to choose the best supplier possible at each time of transaction.

    Channel relationship and、Point(ゾα6ε勧zθ7伽oZηθ〃zent         圃

      Unlike the supplier relationship, it seems that developing close relationship with sales channels or

    end customers can be de丘ned as the one of the critical success factors for implementing customization.

    In some cases, the五㎜even vertically integrated sales channels within their organization to built

    direct relationships with end-customers because-all product customization will be achieved through

    communications with customers. In order to deliver customized products and services, maintaining

    some relational links with customers is critical. For example, Kotha’s case of NBIC stated that cus-

    tomer service, appropriate pricing, and extensive communication with the customer are all integral

    parts of NBIC’s approach to MC(Kotha 1996, p。448).Magretta’s case of Dell computer(also see Dell

    1999)describes how the firm develops a direct customer relationship. In the interview with Michael


  • Dell, CEO of Dell, he spoke up that;there are so many information links between us(Dell)and our

    customers. Close customer relationships have allowed us to dramatically extend the value we deliver to

    our customers. We have developed customized intranet sites called Premier Pages for customers and

    beyond the mechanisms we have for sales and support, we have set up a number of forums to ensure

    the free flow of information with the customer on a constant basis(Magretta 1998, p.79-80).

    3. Levels of customization and operational capabilities

      The main objective of this article is to explore the relationship between levels of customization and                                                                       「

    operational capabilities that五rm has accumulated or enhanced through taking their own historical

    path. It is important task that identifying differences in focus of operational capabilities of且rms be・

    tween one emphases on relatively higher level of customization and the other emphases on developing

    highly distinctive products that are hardly duplicated for the segmented market(relatively lower level

    of customization)in the same streamline of research.

      One of the most popular criticizes against MC can be summarized into the question that where MC

    really occurs. Indeed, the operational capabilities of six cases I reviewed do not focus on long-term in・

    vestment in their upstream activities(e.g. R&Dand supplier relationship).The operational capabili-

    ties of those firms aim to develop the unique product and process technologies with partners;there-

    fore,五rms may market one standardized product(or product line)for their segmented market to satis-

    fy customers, rather not to implement practices of high level of customization.

      Table 4 shows two different levels of customizatlon in the MC range. It can be assumed that there

    are almost no products and services that purely customized or standardized in mass production based

    consumer market, most products and services offered by firms are categorized to the some levels of

    MC range in Table 4.

    Table 4. Difference in focus of operational capabilities in MC

    Some Focuses of Operational Capabilities in MC

    Levels of Customization  Focus of

    ualue [email protected]



      Point of



    High     Purebustomization


    Assembly, sales≠獅п@post-sales

    @ R&Dandoroduct design





    Earlier Stage:@ Design/Fabrication

    kater Stage:

    `ssembly/@ Delivery


    bosmetics/Product line

    Low    Purertandardization

    一 326一

  •   The products or services categorized in relatively higher level of customization in MC tend to imple-

    ment the conventional practices of MC that discussed in MC literatures and cases. The goal of

    manufacturing strategy of firms in this category can be accomplished through product flexibility and

    quick responsiveness to customers(Davis 1987, Pine 1993, Kotha 1995).

    As I discuss in the second section,且ve out of six cases in MC literatures indicate that丘㎜s with

    higher level of customization tend to use the opened/modular product architecture and discrete trans-

    actions with suppliers within quasi-market or typical arms・length relationship, not with inter且rm

    relationships. In addition, those firms put their efR)rt to build close relationships with channel members

    and end-customers because they need to have direct communication infrastructure to internalize

    specific needs or preferences of individual customers as possible. The operational capabilities of those

    firms are focused more on downstream activities of its value chain, including assembly of modular

    components, close channel relationship, and sales/post-sales functions, than upstream activities. In

    this type of MC, the main value for their customers relies on the operational capabilities of丘rms to

    offer the menu of customized products and quickly response to each customer’s order.

      In contrast, sizable literatures from strategic management fields indicate that firms apply relatively

    lower level of customization(e.g. product line, options, cosmetic minor changes)tend to focus more

    on upstream activities to add main values on their offerings at the initial stage. Thus the offerings of

    且rms are standardized within a narrow range of features. Upstream activities they focused on are R&

    Din new technologies and products, interfirm relationships with their primary supPliers. The major

    difference in relationships with suppliers is whether or not buyer and supplier have long-term joint in-

    vestments both on their physical assets and capabilities that speci且c to their transactions, not with

    other partners. The continuous face to face communications between specific partners are expected to

    lead faster product development cycle and higher product quality standards. When these capabilities

    are the most effective drivers for sustainable competitive advantage of firms, the main values for their

    customers are the operational capabilities to develop highly differentiated products with distinctive

    narrow range of features that customers in segmented market mostly satisfy, neither offering the wide

    variation of customization nor building close relationships with end-customers.


      This study’s main objective, identifying a relationship between levels of customization and opera-

    tional capabilities of firm, is discussed through reviewing literatures from conventional MC as well as

    strategic management fields. In the MC literatures, customizing levels of customization has been the

    central issue of MC debate for the last decade, however, little is known about the determinants of lev-

    els of customization in the consumer product market. In this article, I focus on how the operational


  • capabilities of firms a{fect the level of customization and MC activities on the overall value chain of

    且rms. This leads two types of MC along with levels of customization, While one type of MC that ap・

    plies relatively higher level of customization focuses on downstream activities to link the product且ex・

    ibility to the various customer inforrnation of preferences, another type of MC that applies relatively

    lower level of customization focuses on upstream activities to enable them to develop highly differen・

    tiated products at the initial stage of value chain.

      There are two major limitations of this article that lead future research agenda;1)dynamic changes

    in levels of customizations and portfolio management and 2)difference in market requirements in in-

    dustries。 First, this anicle excludes the aspect how dynamic changes of levels of customization affect

    the五rm’s plan and decision making process for future capability building. Pagh and Cooper(1998)

    suggests that the stages of product life cycle will affect on the decision making process of levels of cus-

    tomization. When the firm has products with different levels of customization, then it need to be main-

    tained the portfolio management approach to seek the optimal levels for each product. Thus, future

    research, it will be required to argue the dynamism of improvement of MC models and the portfolio

    management for different levels of customized products。

      Second, the dif正brence in the characteristics of products and industries are not discussed rigorously

    enough in this article. I address several consumer products(e.g. PC, printer, cellular phone, and au-

    tomotive)as a’complex product’. Complex product industries that defined here as industries whose

    production process involve a large number of components, functions, and process steps(Clark and

    Fujimoto 1997).The major differences in market requirements of products or industries must be con・

    sidered in the future research.


    Amit, R. and Schoemaker, P.(1993)‘‘Strategic Assets and Organizational Rent,∵Strategic Management/burnal,

     Vol.14, pp.33-46

    Alderson, W。(1950),“Marketing Eficiency and Principle of Postponement,”Cost and Profit Outloole,3, Septem-

     ber, pp.1-3

    Alderson, W.(1983),“The Heterogeneousness Market and the Organized Behavior,”in Hunt, S. D.(Ed.),Mar-

     keting Theory:The Philosophy of Marketing Science, Richard Irwin, Homewood, IL, pp.292-313

    Barney, J。 B.(1991),‘‘Fiml Resources and Sustained Competitive Advantage,”ノburnal(Ofルtanagement, Vol.17,

      No.1, pp.99-120

    Bamey, J. B.(1999),“How a Firm’s Capabilities Affect Boundary Decisions,” Slone Management 1~eview, Spring,


    Berry, L. L.(1983),“Relationship Marketing,”in Berry, L.,Shostack, G. L. and Upah, G. D.(Eds),Emerging Per一

     蜘o’魏oπS伽∫α落1吻伽’∫㎎,American Marketing Association, Chicago, IL, pp.25-28

    Bucklin, L. P.(1965),‘‘Postponement, Speculation and Structure of Distribution,”ノburnal ofルlarleeting Research,

      Vo1.3, February, pp.26-32


  • Chang, S. J.(1995),“Intemational Expansion Strategy of Japanese Fimls:Capability Building Through Sequential

      Entry,”Acadθmy ofル1σnagement/burual, Vo1.38, No.2, pp.383-407

    Claycamp, HJ.and Massy, W. F.(1968),“A theory of Market Segmentation,”Joumat(ofル1αrleeting 1~escarch, Vol.

      5,November, pp.34-45

    Clark, K. B. and Fujimoto, T.(1997),Prodκct Development Pet formance, Boston:Havard Business School Press.

    Collis, D. J.(1991),‘‘A Resource・Based Analysis of Global Competition:The Case of the Bearings Industry,” Stra-

      tegicルfanage〃zent/bur7ial, Vol.12, pp.49-68

    Copulsky, J. R, and Wolf, M. J.(1991),“Relationship Marketing:Positioning for the Future,”loumal OfBtesiness

      Stra tegy, July-August, pp.16-26

    Day, G. S.(1994),‘‘The Capabilities of Market-Driven Organizations,”ノ’ournal of Mαrleeting, Vol.58,0ctober, pp.


    Davis, S. M.(1987),Future Perfect, Addison-Wesley Publishing,Reading, MA.

    Del1, M.(1999),Direct from 1)ell: Strategies that revolutiondeed an industry, Boston:Harvard Business School Press.

    Dlerickx,1. and Coo1, K.(1989),‘‘Asset Stock Accumulation and Sustainability of Competitive Advantage,”

     ル1αnagement Science, Vol.35, December, pp.1504-1513

    Duray, R.(2002),“Mass Customization Origins:Mass or Custom ManufacturingP,”International/bκ㍑α1(ゾ()pera-

      tions and Productionル1αnagement, VoL 22, Issue 3, pp.314-328

    Duray, R.,Ward, P. T.,Milligan, G W.,and Berry, W. L.(2000),“Approaches to Mass Customization:Con丘gura-

      tions and Empirical Validation,’▽/oumal of()perations Management, Vol.18, Issue 6, pp.605-625

    Dwyer, R. Schurr, P. and Oh, S.(1987),‘‘Development Buyer-Seller Relationships,”ノburnal ofルlarketing, Vol.51,

      April, pp.11-27

    Dyer, J. H.(1996a),‘‘Specialized Supplier Networks as a Source of Competitive Advantage:Evidence from the

      Auto Industry,”Strategicルlanagement/burnal, Vol.17, pp.271-291

    Dyer, J. H.(1996b),“Does Governance Matter? Keiretsu Alliance and Asset Specificity as Sources of Japanese

      Competitive Advantage,”Organdeation Science, Vol.7, No。6, pp.649-666

    Dyer, J. H. and Ouchi, W. G.(1993),“Japanese-Style Partnerships:Giving Companies a Competitive,”Slone

     Management 1~eview, Fall, pp.51-63

    Dyer, J. H.’and Singh, H.(1998),‘‘The Relational View:Cooperative Strategy and Sources of Interorganizational

      Competitive Advantage,”Aαademy Of Management Review, Vol.23, No.4, pp。660-679

    Eastwood, M. A.(1996),“lmplementing Mass Customization,’℃bmψuters in lndustりy, Vol。30, Issue 3, pp.171-


    Feitzinger, E. and Lee, H. L,(1997),“Mass Customization at Hewlett-Packard:The Power of Postponement,”

     Haward」Business 1~eview, January-February, pp.116-121

    Gilmore, J. H. and Pine, J.(1997),“The Four Faces of Mass Customization,”Harvard Business Review, JanuarY・

      February, pp.91-101

    Grant, R. M.(1991),“The Resource-Based Theory of Competitive Advantage:Implications for Strategy Fomlula-

     tion,”()ali ornia Management Review, Spring, pp.114-135

    Gri伍th, D. A. and Harvey, M. G.(2001),“A Resource Perspective of Global Dynamic Capabilities,”ノburnal of ln-

      ternationat Business Studies, Vo1.32, Third Quarter, pp.597-606

    Gupta, D. and Srinivasan, M. M.(1998),“Note:How Does Product Proliferation Affect ResponsivenessP,”

     ル蛋αη卿ηzθ撹舗θη㏄,Vol.44, No.7, July, pp.1017-1020

    Hall, R.(1992),‘‘The Strategic Analysis of Intangible Resources,” Strategic Management/burnal, VoL 13, pp。135-


    Hamel, G. and Prahalad, C. K.(1993),“Strategy as Stretch and Leverage,”Hamard、Bttsine∬、ReviE刎, March-April,

    一 329 一

  •   pp.75-84

    Hapoineu, S. L.(1990),“The Rise of Micro Market{ng,ノ’ournal of、Business Strategy,”November-December, pp.


    Hart, C.(1995),“Mass Customization:Conceptual Underp{nnings, Opportunities and Limits,”International/bur・

      nal of Sewice lndustry Management, Vol.6, Issue 2, pp.36-45

    Kara, A. and Kaynak, E,(1997),“Markets of a Single Customer:Exploiting Conceptual Developments in Market

      Segmentation,”Eκηρθ僻ノburnal ofル1αrleeting, VoL 31, Issue 11-12, pp.873-895

    Kotha, S.(1995),“Mass Customization:Implementing the Emerging Paradigm for Competitive Advantage,”Stra-

      tegic Mauagement/burnal, Vo1.16, pp.21-42

    Kotha, S.(1996),“From Mass Production to Mass Customization:The Case of the National Industrial Bicycle

      Company of Japan,”Eκηρθαηルlanagement/burnal, Vol.14, Issue 5, pp。442-450

    Kotler, P.(1989),“From Mass Marketing to Mass Customization,”Plann ing 1~eview, September・October, pp,10-

      23and 47

    Lampel, J. and M量ntzberg, H。(1996),‘‘Customizing Customization,”Sloan Management1~eview, Vol.38, pp.21-30

    Magretta, J.(1998),“The Power of Virtual Integration:An Interview with Dell Computer’s Michael Dell,”Har-

      vard Business Revieω, March-April, pp.75-84

    Pagh, J. D. and Cooper, M. C.(1998),“Supply Chain Postponement and Speculation Strategies:How to Choose

      the Right Strategy,”ノbumal()f Business Logistics, Volume 19, No.2, pp,13-33

    Peppers, D. and Rogers, M.(2000),The One to Oneルlanager Real VVorld Lessons in Customer RelationshiPルlanage-

      ment, Random House, Inc.

    Peteraf, M. A.(1993),“The Cornerstones of Competitive Advantage:AResource-Based View,”Stra tegicルlanage-

      〃zent/burnal, Vol.14, pp.179-191

    Pine, J.(1993),Mass Customi2ation, Boston:Harvard Business School Press.

    Pine,J.,Victor, B. and Boyton, A.(1993),“Making Mass Customization Work, Haroard Business 1~eview,”Vol.71,

      Issue 5, pp.108-111

    Pine, J.,Peppers, D. and Rogers, M.(1995),“Do You Want to Keep Your Customers Forever?,”Joumal OfProduct

      Innovationルfanagement, VoL 12, Issue 5, pp.446-447

    Porter, M. E.(1980),Competitive Strategy, New York:The Free Press.

    Porter, M. E.(1985),Competitive/Advantage. New York:The Free Press.

    Prahalad, C. K. and Hamel, G.(1990),“The Core Competence of the Corporation,”Ha ntard、Business Review, May-

      June, pp.79-91

    Priem, R. L. and Butler, J. E.(2001),“Is the Resource-Based“View”aUseful Perspective for Strategic Manage-

      ment Research?,” Academy(ゾルlauagement Review, Vol.26, No.’1, pp.22-40        ・

    Sanchez, R. and Mahoney, J. T.(1996),“Modularity, Flexibility, and Knowledge Management in Production and

      Organization Design,”Strategic Management Jo〃rnal, VoL 17, Winter, pp.63-76

    Schilling, M. A.(2000),“Toward a General Modular Systems Thoery and Its Application to Inter且㎜Product

      Modularity,”、4cademy(Of Management Review, VoL 25, No。2, pp.312-334

    Shani, D. and Chalasani, S.(1992),“Exploiting Niches Using Relationship Marketing,”ノburnal Of Consu〃ler」Var-

      keting, Vo1。9, No.3, Summer, pp.33-42

    Silveira, G. D., Borenstein, D.,and Fogliatto, F. S。(2001),‘‘Mass Customization:Literature Review and Research

      Directions,”International/bumal of Production Economics, Vo1.72, Issue 1, pp.1-13

    Smith, W. R.(1956),“Product Differentiation and Market Segmentation as Alternative Marketing,”lournat(ゾ

      Marleeting 1~esearch, July, PP.3-8

    Starr, M.(1965),“Modular Production, a New Concept,”Harvard、Business Review, November-December, pp.

    一330 一

  •   131-142

    Tedlow, R, S.(1990),Netv and lmproved:The Stoi y ofルla∬ルlarketing in/1翅爾αz, Heinemann:Oxford.

    Usui, T.(2003),“Global SCM and Mass Customization,”in Yamashita, H., Morokami, S., and Murata, K.(Eds),

      Global SCル1, Tokyo:Yuhikaku pp.61-82

    Van Hoek, R. L(1998),“Recon五guring the Supply Chain to Implement Postponed Manufacturing,”η3θ砺卿α一

      tional/burna’Of Logisties Management, Vol.9No.1pp.95-110

    Van Hoek, R I. and Weken, H.(1998),“The Impact of Modular Production on the Dynamics of Supply Chains,”

      International/burnal of Logistiosルlanagement, Vol.9, No.2, pp.1-13

    Wemerfelt, B.(1984),“A Resource-based View of the Fi叫”Strategr’cル1αnagementJouma’, Vo1.5, pp.171-180

    Williamson O. E(1985), The E伽o痂c伽伽”oη5(ゾCapitalism. New York:Free press,

    Wind, Y.(1978),“Issues and Advances in Segmentation Research,”lournal ofル1αrketing 1~esearch, Vol,15, Au-

      gust, pp,317-337

    Zinn, W. and Bowersox, D。 J.(1988),“Planning Physical Distribution with the Principle of Postponement,”Jour-

     nal〔)f/Busin e,∬Logis tics, VoL 9, No.2, pp.117-136

    一331 一