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Modeling Factors that Influence Firm Performance of Eastern Hardwood Lumber Manufacturers. Brian Perkins September 15, 2014. Why study hardwood lumber business performance?. Business Performance. Given that hardwood mills are: Privately held Highly competitive
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Modeling Factors that Influence Firm Performance of Eastern Hardwood Lumber Manufacturers Brian Perkins September 15, 2014
Business Performance Given that hardwood mills are: • Privately held • Highly competitive How can we measure business performance? • Reliably • Confidentially • Quickly Performance Indicator!
Theoretical Development H1: Firms with a focus or differentiation strategy perform better than firms with a cost leadership strategy. H2: The hardwood lumber industry has shifted towards a differentiation and focus strategy from a cost leadership strategy. H3: More Southern hardwood lumber producers have a cost leadership strategy than a focus or differentiation strategy. H4: More Northern and Appalachian hardwood lumber producers have a focus or differentiation strategy than a cost leadership strategy. H5: Hardwood lumber producers who are geographically diversified perform better than those firms who have geographically limited operations. H6: Hardwood lumber producers who utilize advanced production technology perform better than firms who do not utilize advanced production technology. H7: Hardwood lumber producers who utilize advanced information technology perform better than firms who do not utilize advanced information technology. H8: Product diversification is positively related to performance of hardwood lumber producers. H9: Customer diversification is positively related to performance of hardwood lumber producers. H10: Promotion diversification is positively related to performance of hardwood lumber producers. H11: Vertically integrated firms perform better than non-vertically integrated firms.
Objectives • Develop multiple measures of firm performance for eastern hardwood lumber manufacturers. • Determine the influence of firm-controlled factors on the firm performance of eastern hardwood lumber manufacturers. • Determine the current marketing tactics and strategy of eastern hardwood lumber manufacturers.
Methods Phone interviews – open ended questions Fax survey – 10% of sample Performance indicator development Mail survey - Appendix 3 questionnaire mailings 2 postcard mailings 4 month data collection period
Methods Sampling Strategy 1100+ NHLA members 500+ randomly selected non-members Questionnaire Personalized cover letter Tailored design method Used measures from previous research Sensitive info towards end of questionnaire
Methods Statistical Techniques ANOVA & t-test for comparing means between groups Cluster analysis used to identify groups Factor & correspondence analysis to reduce data Linear regression used to identify relationships Chi² test of independence used to compares null & observed frequencies Z-test used to compare proportions
Results Performance Indicator
Performance Index Distribution 35 StDv = 6.64 Average Kurtosis = -0.190 Skewnesses = 0.010 30 25 20 Frequency 15 10 5 0 27 29 32 34 36 39 41 44 46 48 51 53 55 58 58+ Results
Results Response Summary
Std. Integration Level Performance Mean N Deviation Mean Differences* Backward A 47.7 18 7.39 Backward & A Forward 47 18 7.42 Forward B 43.9 60 6.36 Not Integrated B 43.7 101 6.78 * Means with same letter are not significantly different. LSD (alpha 0.05) Results Organizational Factor
Performance Std. Region Mean N Deviation p-value Appalachian 45.2 107 6.66 Northern 43.8 60 6.26 43.4 24 8.65 Southern 0.322 Results Geographic Factor
Production Technology Performance Std. Level Mean N Deviation p-value High 48.1 18 6.12 44.1 179 6.84 Low 0.02 Results Production Technology Factor
Results Information Technology Factor
Results Marketing Diversification Factor
Calculated Strategy Bush Proportion Current P roportion z - value p - value None 0.25 0 4.7610 < 0.0 1 Differentiation 0.22 0.426 - 3.3629 <0.01 Cost Leadership 0.324 0.22 1.6275 0.10 Cost Leadership & Differentiation 0.206 0.231 - 0.4353 0.66 Focus 0 0.123 - 5.2830 <0.01 Results Change in Strategy
Calculated Production Technology Bowe Proportion Current Proportion z - value p - value Bucking Optimizer 0.05 0.036 0.4738 0.64 <0.01 Headrig Optimizer 0.271 0.49 - 3.3950 <0. 01 Edger Optimizer 0.101 0.26 - 3.3139 Trimmer Optimizer 0.045 0.132 - 2.5034 0.01 Automated Sort Bins 0.071 0.122 - 1.3132 0.19 Results Change in Technology
Conclusions • To improve performance firms should: • vertically integrate, • diversify promotions, • adopt all three optimizing production technologies, • adopt information technology, • adjust their marketing mix and business strategy to fit the markets they serve and the forest resources that are available.
Acknowledgements • USDA Forest Service, Northeastern Area, WERC for funding this project Questions?