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Competitiveness Scale as a Basis for Brazilian

Small and Medium-Sized Enterprises

J. L. Schaefer , I. C. Baierle , M. A. Sellitto , J. C. M. Siluk , J. C. Furtado & E. O. B.

Nara

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Enterprises, Engineering Management Journal, DOI: 10.1080/10429247.2020.1800385

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 Competitiveness Scale as a Basis for Brazilian Small and
Medium-Sized Enterprises
J. L. Schaefer, University of Santa Cruz do Sul
I. C. Baierle, University of Vale do Rio dos Sinos
M. A. Sellitto, University of Vale do Rio dos Sinos
J. C. M. Siluk, Federal University of Santa Maria
J. C. Furtado, University of Santa Cruz do Sul
E. O. B. Nara, University of Santa Cruz do Sul

Abstract: This paper aims to present a competitiveness scale, 2015), in the industrial sector, microenterprises are those that
outlining the variables that influence competitiveness in small have up to 19 employees and small enterprises are those with
and medium-sized enterprises (SMEs) in Southern Brazil. 20 to 99 employees. This classification of the size of enterprises
Using survey data from 72 industrial SME managers, the was used in this research and, to fit the international nomen­
Multi-Attribute Utility Theory (MAUT) was applied to clature, these were referred to as small and medium-sized
a model to measure Brazilian SMEs’ competitiveness rates. enterprises.
The variables that influence their competitiveness were identi­ From a political point of view, the competitiveness of
fied and structured in a decision tree with three levels: key SMEs can be considered as a contributing factor to national
performance indicators (KPIs), critical success factors (CSFs), economies (Park & Yoo, 2017). SMEs are fundamental for
and fundamental points of view (FPVs). It was possible to a governmental economic strategy aiming to generate jobs
identify the KPIs, CSFs, and FPVs that are more important for and to promote economic and competitive growth (Cadil
SMEs’ competitiveness and measure their competitiveness et al., 2017). This happens through their proximity to custo­
rates. The managerial decision-making processes in SMEs mers and locations where large enterprises do not operate.
can be defined following the competitiveness standards in Accordingly, academic and political efforts are being made to
this research. improve the competitiveness of SMEs, promoting economic
growth and generating jobs and innovation (Lamp et al.,
Keywords: Multi-Attribute Utility Theory, Key Performance 2012; Monsen et al., 2012). Exhibit 1 shows the importance
Indicators, Small and Medium-Sized Enterprises, Individual of SMEs in the development of industry and the generation
Competitiveness Rate, Global Competitiveness Rate, Decision- of income and employment opportunities; however, the sec­
Making tor is sometimes disorganized (Hazarika & Goswami, 2018)
and the ability to change and react to different types of
EMJ Focus Areas: Decision Making & Risk Management, events and circumstances that may be important for the
Operations Management, Organizational & Performance survival of SMEs varies (Wiendahl & Elmaraghy, 2009).
Assessment, Strategic Management In this article, the variables that influence SMEs’ competi­
tiveness were divided into three levels: fundamental points of
view (FPVs), critical success factors (CSFs), and key perfor­
mance indicators (KPIs). FPVs correspond to what the decision

C
ompetitiveness can be characterized as the sum of all
the factors that contribute to an enterprise’s ability to maker deems necessary and sufficient to evaluate the context
continue in a business environment (Baierle et al., (Salazar-Fierro & Bayardo, 2015), while CSFs are crucial ele­
2019). Competitiveness in the industrial sector is intense, ments to be managed to achieve the organizational objectives
leading to changes in markets and forcing enterprises to (Rockart, 1979; Oakland, 2014), and KPIs can be used as a set
improve their operations regularly (Staniewski et al., 2016). of metrics to help managers to achieve continuous improve­
Competitiveness also determines the strength of an enterprise ment in the quality, operational performance, efficiency, and
in the market (E. O. B. Nara et al., 2013); with globalization, it productivity of an enterprise (Kang et al., 2016). Thus, consid­
encompasses territorial competition creating economic and ering the variations of KPIs, CSFs, and FPVs, an efficient
social conditions to attract new entrepreneurs (D’Aleo & system of competitive performance measurement can be con­
Sergi, 2017). In the European Union, in 2015, 98.8% of all structed (Chou, 2015).
enterprises were small and medium-sized enterprises (SMEs) Knowing this, the objective of this research was to present
(Muller et al., 2016), while, in the US, 99.7% of businesses a competitiveness scale, outlining a profile of the variables that
were small or medium sized (SBA, 2018). In Brazil, in 2013, influence competitiveness in the productive arrangement
99% of all enterprises were small or medium sized (SEBRAE, formed by the SMEs of Rio Pardo, Taquari, and Alto Jacuí
2014), generating 52% of the country’s formal jobs and 27% of Valleys of Rio Grande do Sul, Brazil. Therefore, it was possible
the Brazilian gross domestic product (GDP), as shown in to identify the main KPIs, CSFs, and FPVs that contribute to
Exhibit 1. increasing the competitiveness of SMEs.
In Brazil, there is an additional subdivision dealing with Pellicer et al. (2012) provided guidance for managers to
micro and small enterprises, and, according to the Brazilian innovate systematically. Similarly, in this article,
Micro and Small Business Support Service (SEBRAE) (SEBRAE, a competitiveness scale and the profile of the variables that

Refereed Research Manuscript. Accepted by Associate Editor Ng.

Engineering Management Journal Vol. 00 No. 00 2020 1

Exhibit 1. SMEs’ Participation in Brazil should trust large enterprises, but this trust is also limited
because large enterprises sometimes exploit SMEs by demand­
Variable Participation ing price reductions or copying their capabilities (Wang et al.,
2015). For these reasons, SMEs should be flexible in their
Percentage of Small and Medium-Sized Enterprises 99% operations by continually developing them in comparison
Formal Jobs 52% with large enterprises to maintain their competitiveness
(Majava & Ojanperä, 2017; Park & Yoo, 2017). SMEs are also
Revenues 28%
characterized by a training and development paradox because,
Gross Domestic Product (GDP) 27% due to resource scarcity, these activities are deferred, a situation
Value of Exports 0.9% that does not occur in large enterprises (Rabie et al., 2016). In
short, SMEs must seek good performance on fundamental
Source: SEBRAE (2014) points such as flexibility, speed, costs, and the training of
employees.
influence the competitiveness of SMEs provide important
insights for engineering management and facilitate decision Modeling and the Decision Tree of FPVs, CSFs, and KPIs
making. Helping managers to obtain a competitive advantage Given the existence of several variables that influence the compe­
over their competitors (Salgado et al., 2017) by identifying the titiveness of SMEs, in this study, we modeled them in a decision
indicators that have the greatest influence on the competitive­ tree to evaluate this competitiveness. The goal of a model is to find
ness of SMEs is another contribution of this paper. the optimal solution in a given situation, and this model should
SMEs are important for increasing employment and represent the decision problem as closely as possible by transform­
spreading innovation (Braune et al., 2016). The ability of ing information into actions and solutions (Lindblom & Tikka­
SMEs to scour the market and recognize opportunities is vital nen, 2010). Through a model based on different criteria, it is
to gain an advantageous position that leads to growth (Mioce­ possible to consolidate a way to check a global competitive index
vic & Morgan, 2018). However, in SMEs, there is a difficulty in (Nora et al., 2016) and thus obtain a metric to compare the
translating new knowledge into opportunities due to a lack of competitiveness of each enterprise with a rate that represents the
systematic research and development activity (Agostini & average competitiveness of the entire productive arrangement in
Nosella, 2017). Furthermore, SME managers have difficulty which the enterprise is embedded, enabling a form of benchmark­
distinguishing between short- and long-term goals (Crema & ing for these enterprises. To find this solution to a decision-
Nosella, 2014). making problem, one aspect to be considered as crucial, and to
The main concerns of managers of SMEs are customer be executed carefully, is the judgment matrix or decision tree
satisfaction, financial independence and profit, innovation, (Laforest et al., 2013). The tree diagram, also referred to as the
and quality of products and services (Gunasekaran et al., hierarchical structure of value, is formed by FPVs and their
2011). The information available in real decision-making pro­ descriptors, which can be decomposed into elementary points of
blems is not precise (Jiménez-Martín et al., 2017), and most view (EPVs), responsible for measuring each FPV (Ensslin et al.,
decisions in SMEs are based on the capacity and technical 2000). Thus, we have FPVs decomposed into EPVs, which in turn
knowledge of their owners (Roy & Dangayach, 2015). This is can be decomposed further into elementary sub-points of view
explained by the inexistence of roles and specialized functions (SubEPVs). In this research, the descriptors known as EPV are the
such as supply chain manager, information technology man­ CSFs and the descriptors of the CSFs are the KPIs, as shown in
ager, or financial manager (Moeuf et al., 2018), leading to Exhibit 2.
decisions being made without a technical–scientific rationale The following are the concepts and applications of FPVs,
(Shbair et al., 2016). CSFs, and KPIs. As this paper is directed to SMEs, it was
Whereas the competitiveness of SMEs is due to their market necessary to search for papers that could be related to this
share, profitability, products, exports, and employment levels type of enterprise. Thus, scientific papers indexed in the Scopus
(Carbone & Rivers, 2017), the main challenges can be identified and Web of Science databases and documents of entities from
as industrial transformation and the development of a high- the region where the research was conducted were sought. In
quality production style (Villa & Taurino, 2018). An attitude this way, a comprehensive scientific view could be provided,
that can help to overcome these challenges is the choice of part­ keeping in mind the competitiveness characteristics of SMEs in
nerships and networks among SMEs (De Moraes et al., 2020). the region where the research was conducted.
These partnerships should take into account the resources avail­
able and the orientation of these resources; the technological and Fundamental Points of View
market capacities of the partners; and the capture of clients in the With the modeling defined, it was necessary to define the
context of a competitive market (O’Dwyer & Gilmore, 2018). criteria for evaluating the problem. The construction of cogni­
With globalized competition, SMEs are under pressure to tive maps is a step toward the identification of FPVs to evaluate
grow and innovate, and developing their technical and infor­ the competitive capacity of an enterprise (Bana E Costa et al.,
mation capabilities can be a success factor (Raymond et al., 1999). An FPV should represent the objectives considered to be
2018). Since SMEs are close to their customers (Arbussa et al., strategic for those who carry out the decision-making process
2017), their characteristics of flexibility and reactivity to the of an enterprise and can compose the tree structure to be built
market can lead to lower productivity, higher costs, and longer (Negreiros et al., 2015), showing what is important in the
delivery times compared with large enterprises (Moeuf et al., decision-making context and defining the characteristics of
2018). Since SMEs operate mainly on a short-term basis and are the action taken (Bana E Costa et al., 1999). Slack et al.
suppliers of large enterprises (Hernández et al., 2016), they (2002) presented five performance objectives that productive

2 Engineering Management Journal Vol. 00 No. 00 2020

Exhibit 2. Proposal of Decision Tree Structure; GCR: Global Competitiveness Rate, FPV: Fundamental Point of View, CSF: Critical Success
Factor, KPI: Key Performance Indicator

operations need to pursue: reliability, cost, flexibility, quality, and adopted action plans (Podgórski, 2015). Thus, KPIs are
and speed. These objectives can be considered as FPVs for used in performance evaluation through easy and comparable
SMEs from the industry sector, as they can satisfactorily reflect measures (Bai & Sarkis, 2014).
the needs of these enterprises. The choice of KPIs should be related to the performance
objectives and processes that characterize the value flows of an
Critical Success Factors enterprise (Ciemleja & Lace, 2008). The Federation of Indus­
CSFs provide a comprehensive approach with a critical focus tries of the State of Rio Grande do Sul (FIERGS, 2017) performs
and clarity of position, indicating which factors will make monthly evaluations of enterprises with the use of indicators.
a positive impact on the performance of organizations (Venka­ Rodriguez et al. (2009) used KPIs for a system of performance
taraman & Cheng, 2018). CSFs are those areas of activity in measurement in the textile industry. Behrens and Lau (2008)
which an enterprise needs to obtain positive results by trans­ used related KPIs to evaluate the industrial process of shaping
forming strategies into concrete actions to reach the proposed sheet metal. Graham et al. (2015) recommended KPIs to mea­
objectives (Gupta et al., 2018; Lu et al., 2008; Rockart, 1982). sure remanufacturing processes. Kaganski and Paavel (2015)
Ahmad and Cuenca (2013) classified 33 CSFs for the presented KPIs as a way to evaluate design engineering teams
implementation of Enterprise Resource Planning (ERP) systems in SMEs. Nastasiea and Mironeasa (2016) highlighted a more
in SMEs, dividing them into three groups: organizational CSFs, generic list of KPIs for SMEs.
operational CSFs, and neutral CSFs. García et al. (2013) con­
cluded that six CSFs are the most important for implementing Multi-Attribute Utility Theory (MAUT)
Kaizen in SMEs in Mexico: education and training in opera­ To achieve the expected results, the study used the Multi-
tions, communication processes, documentation and evaluation Attribute Utility Theory (MAUT) (Fishburn, 1970; Keeney &
of project results, human resource integration, management, Raiffa, 1976), which is a decision support method with
and customer focus. Wong and Aspinwall (2005) studied the a systematic approach, to quantify the preferences of an indi­
CSFs for the implementation of knowledge management in vidual using the preferences of decision makers (Ishizaka &
SMEs and listed eleven: management and leadership, organiza­ Nemery, 2013). The MAUT can be characterized as
tional culture, information technology, organizational strategy, a mathematical structure to analyze choices quantitatively in
performance measurement, infrastructure, processes, motiva­ decision problems involving multiple competitive outcomes
tion, resources, training and education, and human resource (Arif et al., 2015). The MAUT has one of the best theoretical
management. bases for applications that involve risk and uncertainty because
it not only deals with the choice of an alternative but also allows
Key Performance Indicators the user to analyze the decision-making process as a whole
Traditional performance indicators lead managers to focus (Monte & Almeida-Filho, 2016).
more on the efficiency of an organization (Yadav et al., 2017), According to the existing literature, the MAUT is com­
while KPIs can be defined as indicators that can be used to monly used to measure performance in several areas, such as
measure the performance of different objects, tasks, or employ­ the maintenance (Carnero, 2017), retail (Ersoy, 2017), and
ees of an enterprise (Ding et al., 2017). KPIs are an effective banking sectors (Rebai et al., 2016). This gives an idea of the
means of supporting decision making (Bai & Sarkis, 2011), range of possible applications of the MAUT.
providing managers with concise, synthesized, and relevant
information on system performance and enabling them to Methodological Procedures
make decisions associated with the verification of objectives This research was subdivided into five stages.

Engineering Management Journal Vol. 00 No. 00 2020 3

Stage 1 – Decision Tree Modeling a degree of association of these numbers (Ma et al., 2011). The
From bibliographical and documentary research, the FPVs, method was implemented using equation 1:
CSFs, and KPIs were defined to compose the model to measure
SMEs’ competitiveness. The definition of FPVs was based on ðU i L i Þ þ ðM i Li Þ
the five performance objectives of Slack et al. (2002), which are Gi ¼ þ Li (1)
3
reliability, cost, flexibility, quality, and speed. These perfor­
mance objectives were used in the research by González- Where:
Benito and Dale (2001) and Siluk et al. (2017). The second
level of the proposed model is composed of CSFs. In this ● Gi: Fuzzy-Delphi KPIs’ score;
research, the CSFs proposed by Wong and Aspinwall (2005) ● Ui: Maximum value among the specialists’ opinions;
were used due to the similarity of the approach related to SMEs. ● Li: Minimum value among the specialists’ opinions;
Finally, initial KPI research was carried out from the studies of ● Mi: Geometric mean of the specialists’ opinions.
Behrens and Lau (2008), FIERGS (2017), Graham et al. (2015),
Kaganski and Paavel (2015), Nastasiea and Mironeasa (2016), The KPIs selected to compose the model (presented in
and Rodriguez et al. (2009). Forty-eight KPIs were initially Exhibit 3) were those with a score equal to or greater than 4
selected for the proposed simulation. (Gi � 4), classified between very and extremely important. This
To refine this selection of KPIs and to classify them accord­ Fuzzy-Delphi score for KPIs is indicated in the right-hand
ing to the most relevant CSFs, a survey was created and dis­ column of Exhibit 3, and discarded KPIs do not appear in the
tributed to six specialists in the field. A survey must be exhibit. The classification of each KPI according to the most
conducted to gather facts by questioning people to solve the relevant CSF among the 11 CSFs identified by Wong and
research problem (Napitupulu, 2018). Our survey used a five- Aspinwall (2005) was performed using a simple majority of
point Likert scale (one = not important to five = extremely the experts’ opinions. Questions were included in which experts
important) (Tsuchiya & Hiramoto, 2018), on which the specia­ indicated on which CSF each KPI has the most influence. Of
lists indicated the relative importance of KPIs to SMEs. To the 11 CSFs, four were excluded (infrastructure, information,
consider the opinions of all the specialists, the Fuzzy-Delphi human resource management, and organizational culture). The
method was used, in which the maximum and minimum values selected CSFs are presented in Exhibit 3 as well as their classi­
of the collected opinions are taken as terminal points of diffuse fication and integration according to the FPVs. This relation­
triangular numbers. To derive the statistical effect and avoid the ship between CSFs and FPVs was accomplished through
impact of extreme values, the geometric mean is considered as a critical analysis of the concepts and definitions found in the

Exhibit 3. FPVs, CSFs and KPIs Integration

Fuzzy-Delphi
FPV CSF KPI KPIs’ score (Gi)

FPV1RELIABILITY CFS1ORGANIZATIONAL KPI1 – Customer satisfaction indicator 4.14

STRATEGY KPI2 – Indicator of the existence of price strategies of products according to the 4.09
market
KPI3 – Percentage of active customers’ indicator 4.02
KPI4 – Customer loyalty indicator 4.49
FPV2COST CFS2RESOURCES KPI5 – Reinvestment of profits in the enterprise indicator 4.04
KPI6 – Raw material cost indicator 4.04
FPV3FLEXIBILITY CFS3 TRAINING and KPI7 – Indicator of the use, by employees, of the personal protective equipment 4.38
EDUCATION indicated for their function
FPV4QUALITY CFS4MANAGEMENT and KPI8 – Control of the enterprise’s working capital indicator 4.49
LEADERSHIP KPI9 – Attracting new customers indicator 4.49
CFS5PROCESSES KPI10 – Quality of products indicator 4.49
KPI11 – Indicator of warranty products returned by defects 4.09
KPI12 – Machine availability indicator 4.04
KPI13 – Production capacity utilization indicator 4.55
FPV5SPEED CFS6PERFORMANCE KPI14 – Indicator of order delivered in the combined period with the customer 4.55
MEASUREMENT KPI15 – Customer complaints indicator 4.55
KPI16 – Sales results indicator 4.09
KPI17 - Employee productivity indicator 4.04
CFS7MOTIVATION KPI18 – Employee attendance indicator 4.49

4 Engineering Management Journal Vol. 00 No. 00 2020

literature cited above, in which relations of similarity and procedure used to identify the main components of a large
complementarity were established between these concepts. data set (Nadkarni & Neves, 2018) and verify the existence of
The results of the proposed model are presented in Exhibit 3. outliers or nonstandard samples, which is the first step in any
With the variables defined and structured in a decision exploratory data analysis (Wang & Serfling, 2018). Exhibit 5
tree, the individual competitiveness rates (ICRs) and the global shows the graph with the representation of the Principal Com­
competitiveness rate (GCR) of SMEs can be measured. The ponent 1 × Principal Component 2 outliers, which together
ICRs and GCR were proposed by E. O. B. Nara et al. (2019b) correspond to 97.26% of the significance of the data, elaborated
to assess the influence of health and safety indicators on the from the Chemostat software, which uses Hotelling’s T2 multi­
competitiveness of enterprises and can also be used to assess variate method to identify outliers (Helfer et al., 2015) in an
the competitiveness of SMEs. By knowing their rates, SMEs can F-distribution at the 95th percentile. The samples above the
make comparisons with the global rate to improve the manage­ “Outliers line,” referring to SMEs 6, 28, 36, 37, and 58, were
ment in their enterprises. The decision tree is presented in classified as outliers and were withdrawn to avoid distorting the
Exhibit 4. data. Thus, with data from 67 SMEs, we had a study of multiple
cases that could be applied to the proposed model.
Stage 2 – Data Collection
Data were collected from SMEs’ managers through a second Stage 3 - Calculation of Local Replacement Rates
survey using a five-point Likert scale (one = not important to The MAUT was applied in stage 3. The preferences of decision
five = extremely important) on which managers assessed the makers are part of a utility function, allowing the initial criteria
importance of using KPIs in enterprises. The data for this to be transformed so that they are all expressed on the same
research were collected between February and April 2018. To scale, and the result is the classified evaluation of the alterna­
conduct the survey, the Sphinx® software was used, the func­ tives reflecting these decision makers’ preferences (Ishizaka &
tions of which include all the stages of research from data Nemery, 2013). According to the MAUT, a value function for
collection to data analysis (Sphinxbrasil, 2018). E-Mails with each criterion must be constructed by cardinally expressing the
the survey link were sent to the managers of 316 SMEs from the value associated with each scale level used to measure the
Rio Pardo, Taquari, and Alto Jacuí Valleys that are registered in performance of that criterion (Sarabando & Dias, 2010).
the Program of Productive Extension and Innovation of the As the structured modeling in this research was composed
Secretariat of Economic Development Science and Technology of KPIs, CSFs, and FPVs, to build the value function, it was
of Rio Grande do Sul, Brazil, linked to the University of Santa necessary to normalize the subcriteria (KPIs and CSFs) used
Cruz do Sul. Of these, 72 were returned, resulting in a response through replacement rates. Replacement rates demonstrate the
rate of 22.78%, a sample with a 95% confidence level, and differences in importance between each criterion of the model,
a sampling error of 10.16%. A Principal Component Analysis allowing them to be evaluated quantitatively (Almeida, 2013),
(PCA) was applied to the collected data; this is a statistical and they can be considered as scale constants. In this sense,

Exhibit 4. Decision Tree; GCR: Global Competitiveness Rate, FPV: Fundamental Point of View, CSF: Critical Success Factor, KPI: Key
Performance Indicator

Engineering Management Journal Vol. 00 No. 00 2020 5

Exhibit 5. Outliers PC1 X PC2 Chart

local replacement rates quantify respondents’ preferences in ● LRRCSF: CSFs’ local replacement rate,
global values for each level of modeling: KPIs (equation 2), ● w: number of KPIs within the FPV,
CSFs (equation 3), and FPVs (equation 4). These local replace­ ● x: total number of KPIs.
ment rates are calculated for each KPI, CSF, and FPV of the
decision tree.
Pj
1 KPI 1 Stage 4 – Calculation of Global Replacement Rates
LRRKPI ¼ � (2) The global replacement rates of KPIs, CSFs, and FPVs can be
j k
calculated using the local replacement rates. These global repla­
Where: cement rates are important because they evaluate KPIs, CSFs,
and FPVs according to the importance given to them by SME
● LRRKPI: KPIs’ local replacement rate, managers. Equations 5, 6, and 7 are used to calculate the global
● j: number of survey respondents, replacement rates of KPIs, CSFs, and FPVs.
● KPI: value of KPI responses,
● k: number of KPIs within the CSF. GRRKPI ¼ LRRKPI �LRRCSF �LRRFPV (5)

Where:
Xk k
LRRCSF ¼ LRRKPI � (3) ● GRRKPI: KPI global replacement rate,
1 w ● LRRKPI: KPI local replacement rate,
Where: ● LRRCSF: CSF local replacement rate,
● LRRFPV: FPV local replacement rate.
● LRRCSF: CSFs’ local replacement rate,
● LRRKPI: KPIs’ local replacement rate, Xk
● k: number of KPIs within the CSF, GRRCSF ¼ 1
GRRKPI (6)
● w: number of KPIs within the FPV.
Where:
Xl w
LRRFPV ¼ LRRCSF � (4) ● GRRCSF: CSF global replacement rate,
1 x ● GRRKPI: KPI global replacement rate,
● k: number of KPIs within the CSF.
Where:

● LRRFPV: FPVs’ local replacement rate, Xn

● l: number of CSFs within the FPV, GRRFPV ¼ 1
GRRCSF (7)

6 Engineering Management Journal Vol. 00 No. 00 2020

Where: Results and Analysis
In this section, we analyzed the global replacement rates of
● GRRFPV: FPV global replacement rate, KPIs, CSFs, and FPVs obtained through the managers’
● GRRCSF: CSF global replacement rate, responses to the model and the ranking of SMEs according to
● l: number of CSFs within the FPV. their ICRs and GCRs.

KPIs’ Global Replacement Rates

Stage 5 – ICR and GCR Calculation The global replacement rates reflect the importance given by
Considering n = 1 in equation 2, local replacement rates were the managers of SMEs to each KPI and allow us to establish
calculated (equations 2, 3, and 4) for each SME, and, from a ranking through their percentages. Among the 18 KPIs, six
equation 8, SMEs’ ICRs were obtained. were given more than 6% importance: KPI6 (Cost of raw
materials), KPI14 (Delivery of orders on time), KPI10 (Quality
Xm of products), KPI9 (Attracting new customers), KPI16 (Sales
ICR ¼ 1
LRRFPV (8) results), and KPI8 (Control of working capital). Therefore,
there is a greater concern regarding KPIs related to new clients,
Where: finance, and quality, a reality perceived in the SMEs of the
region being researched, which is in line with the results
● ICR: individual competitiveness rate, obtained by Gunasekaran et al. (2011). KPI3 (Percentage of
● LRRFPV: FPV local replacement rate, active customers) and KPI 4 (Customers loyal to the enterprise)
● m: number of FPVs. are the least relevant from the perspective of the managers. The
managers did not consider KPIs related to the processes and
To obtain the GCR, it is sufficient to calculate the simple employees of the enterprises to be among the most relevant.
average of the ICRs obtained (equation 9). Baierle et al. (2020) Concerning customer-related KPIs, there is a questionable
also used an approach based on a global average rate. view, since managers consider it to be especially important to
attract new clients, but they do not consider customer loyalty or
Pj maintaining customer relationships to be important; this estab­
1 ICR lishes an important counterpoint to be highlighted concerning
GCR ¼ (9)
j manager preferences. In Exhibit 6, the graph shows the percen­
tages of KPI global replacement rates; the KPIs are on the
Where: vertical axis and the assigned percentages are on the horizontal
axis.
● GCR: global competitiveness rate, To verify the results of the KPIs’ global replacement rates,
● ICR: individual competitiveness rate, it is possible to use Hierarchical Cluster Analysis (HCA), which
● j: number of survey respondents. is a widely used tool to explore hidden similarities and patterns

Exhibit 6. KPIs’ Global Replacement Rates

Engineering Management Journal Vol. 00 No. 00 2020 7

in samples developed using the Chemostat software (Granato decisions (Zizlavsky, 2016). In this sense, the measurement
et al., 2018). Exhibit 7 shows the HCA, highlighting the similar techniques of these KPIs can assist in the identification of
percentages (vertical axis) between the KPIs (horizontal axis). failures even in the initial phase of a project, for example, by
The horizontal line indicates the formation of three KPI group­ allowing corrective activities to be performed (Janssen et al.,
ings with 55% similarity: one comprising KPIs 6, 1, 10, 14, 9, 2011), thus enabling the leveraging and enhancing of the
and 16, another comprising KPIs 3 and 4, and the third con­ competitive opportunities of an enterprise (Saunila, 2017).
taining the remaining KPIs. The HCA indicates similarity of
standards as compared with the global replacement rates of the
KPIs in Exhibit 6. For example, the grouping of KPIs 3 and 4 CSFs’ Global Replacement Rates
can be explained by the fact that these were the least relevant CFS6 (Performance Measurement) and CFS5 (Processes), with
KPIs according to the managers of the SMEs. Five of the six over 20%, were the most representative according to the
most important KPIs according to the global replacement rates survey respondents. While CSF3 (Training and Education)
(KPIs 6, 14, 10, 9, and 16) make up one of the clusters high­ and CSF7 (Motivation) had global replacement rates of
lighted by the HCA, proving their similarity and importance. around 5%, it is understood that SMEs consider their market
As shown by the global replacement ratios, the others, located performance to be a critical area, given their need to measure
in the third group, are of intermediate importance according to and monitor their performance. Processes are also considered
the opinions of the SMEs’ managers. to be critical by managers; however, the training of employees
The percentages of KPIs’ global replacement rates were also and their level of education are not viewed as critical, proving
calculated by separating SMEs into microenterprises and small the paradox as cited in Rabie et al. (2016), who stated that
enterprises (Exhibit 8). KPI9 (Attracting new customers) is the training and development initiatives are less likely to be avail­
most important for microenterprises but only the seventh most able to employees of SMEs than employees of larger enter­
important for small enterprises. The most relevant for small enter­ prises. Acting on motivational issues with employees is not
prises is KPI6 (Cost of raw materials), which is the fourth most considered to be critical either. Regarding this situation, there
important for microenterprises. It is noteworthy that KPI7 (Use of is a counterpoint: managers are concerned about constantly
personal protection equipment) is ranked fifth for microenter­ monitoring their performance but do not consider it to be
prises and sixth for small enterprises. The need to protect employ­ important to train and motivate their employees to achieve
ees is the same in micro and small enterprises; however, in small this desired performance. Exhibit 9 presents the graph with
enterprises, the number of employees is greater and their produc­ the global substitution rates of the CSFs, showing the CSFs on
tion processes are larger and more complex, leading to a greater the horizontal axis and the percentages of the rates on the
concern of managers about personal protection equipment. vertical axis.
In line with these results, SMEs need to develop or The representativeness of the CSFs dividing the SMEs
monitor their internal processes through KPIs, and it is by size presents little change, only reversing the positions
relevant to use real data and information to assist in of CSFs 4 and 2 and CSFs 7 and 3, as shown in Exhibit 10.

Exhibit 7. Hierarchical Cluster Analysis

8 Engineering Management Journal Vol. 00 No. 00 2020

 Exhibit 8. Ranking of KPIs’ Global Replacement Rates by Enterprise Size

Position Microenterprises Small Enterprises

1º KPI9 – Attracting new customers 6.68% KPI6 – Raw material cost 7.01%
2º KPI14 – Order delivered in the combined period 6.67% KPI14 – Order delivered in the combined period 6.42%
3º KPI10 – Quality of products 6.43% KPI10 – Quality of products 6.42%
4º KPI6 – Raw material cost 6.37% KPI16 – Sales results 6.22%
5º KPI8 – Working capital 6.25% KPI8 – Working capital 6.06%
6º KPI16 – Sales results 6.14% KPI7 – Use of the personal protective equipment 5.98%
7º KPI5 – Reinvestment of profits 6.02% KPI9 – Attracting new customers 5.96%
8º KPI15 – Customer complaints 5.84% KPI5 – Reinvestment of profits 5.71%
9º KPI17 – Employee productivity 5.69% KPI17 – Employee productivity 5.63%
10º KPI12 – Machine availability 5.34% KPI13 – Production capacity utilization 5.55%
11º KPI13 – Production capacity utilization 5.31% KPI15 – Customer complaints 5.53%
12º KPI11 – Warranty products returned by defects 5.27% KPI11 – Warranty products returned by defects 5.36%
13º KPI1 – Customer satisfaction 5.23% KPI12 – Machine availability 5.36%
14º KPI18 – Employee attendance 5.04% KPI1 – Customer satisfaction 5.20%
15º KPI7 – Use of the personal protective equipment 4.67% KPI18 – Employee attendance 4.96%
16º KPI2 – Price strategies according to the market 4.54% KPI2 – Price strategies according to the market 4.50%
17º KPI3 – Percentage of active customers 4.29% KPI3 – Percentage of active customers 4.18%
18º KPI4 – Customer loyalty 4.23% KPI4 – Customer loyalty 3.93%

Exhibit 9. CSFs’ Global Replacement Rates

FPVs’ Global Replacement Rates the affirmation of Moeuf et al. (2018) that SMEs have rapid
Based on the global replacement rates of FPVs, it can be seen reactivity to market changes.
that FPV4 (Quality) is perceived as the most important by Given the characteristic of higher costs in the operations of
managers, with 35%, followed by FPV5 (Speed) with 29%. SMEs, FPV2 (Cost), ranked fourth with 12.54%, appears as an
This is why SMEs are committed to delivering quality, fast- opportunity for strategic advancement for enterprises that can
paced products to their customers. The result of FPV5 proves increase the importance given to cost management. FPV3

Engineering Management Journal Vol. 00 No. 00 2020 9

 Exhibit 10. Ranking of CSFs’ Global Replacement Rates by Enterprise Size

Position Microenterprises Small Enterprises

1º CSF6 – Performance Measurement 24.33% CSF6 – Performance Measurement 23.81%

2º CSF5 – Processes 22.34% CSF5 – Processes 22.69%
3º CSF1 – Organizational Strategy 18.30% CSF1 – Organizational Strategy 17.81%
4º CSF4 – Management and Leadership 12.93% CSF2 – Resources 12.73%
5º CSF2 – Resources 12.39% CSF4 – Management and Leadership 12.03%
6º CSF7 – Motivation 5.04% CSF3 – Training and Education 5.98%
7º CSF3 – Training and Education 4.67% CSF7 - Motivation 4.96%

(Flexibility) was considered as the least relevant for SMEs, with Clothing and apparel (7.5%), Machines and equipment
only 5%, countering Majava and Ojanperä (2017) and Moeuf (7.5%), and Others (32.8%). The main insight of this ranking
et al. (2018) and showing a significant possible area of devel­ is a visualization of ICRs’ distribution for each SME, allowing
opment for the enterprises surveyed. In Exhibit 11, a graph is a comparative analysis of these concerning the GCR. Through
presented to illustrate the global replacement rates of the FPVs the proposed scale of competitiveness, the GCR is the index
arranged on the horizontal axis with their respective percen­ that companies can use as a reference to review the control of
tages on the vertical axis. KPIs, increasing their competitiveness. As a result of these
The FPVs’ global replacement rate percentages, which improvements, the GCR will rise, starting a cycle of continuous
categorize the enterprises as either micro or small, are pre­ improvement in the competitiveness of the SMEs surveyed.
sented in Exhibit 12.

Individual Competitiveness Rates Global Competitiveness Rate

With the data collected, in Exhibit 13, a ranking of enterprises Finally, the GCR was calculated, resulting in a value of 4.066 on
was established according to their ICRs. The sectors repre­ a scale of 1 to 5. With an approach similar to that used by
sented in this exhibit are the following: Food and drinks E. O. B. Nara et al. (2019b), it can be said that the managers of
(20.9%), Mechanical metal (17.9%), Furniture (13.4%), SMEs understand the importance of KPIs, CSFs, and FPVs

Exhibit 11. FPVs’ Global Replacement Rates

10 Engineering Management Journal Vol. 00 No. 00 2020

Exhibit 12. Ranking FPVs’ Replacement Rates by Enterprise Size with 3.972, food and drink with 4.012, and furniture with 4.049.
The factors that can influence the results for these segments of
Position Microenterprises Small Enterprises SMEs in the surveyed region may include less automation of
production processes as well as a low level of adherence to
1º FPV4 – Quality 35.28% FPV4 – Quality 34.72% programs for structuring market strategies and financial con­
2º FPV5 – Speed 29.36% FPV5 - Speed 28.77% trol. The first four segments are below the GCR of all SMEs,
which stands at 4.066. Above the general GCR of the research
3º FPV1 – Reliability 18.30% FPV1 – Reliability 17.81%
are the SMEs of machines and equipment with 4,089 and SMEs
4º FPV2 – Cost 12.39% FPV2 – Cost 12.73% that fit into other segments of the industry in the region
5º FPV3 – Flexibility 4.67% FPV3 – Flexibility 5.98% surveyed, of which we can mention the plastic industry, foot­
wear, computer products, the pharmaceutical industry, agricul­
tural products, wood, and metallic frames and shipyards. The
because the GCR result was above 80% given the final result GCR of SMEs classified as others is 4.2, indicating that, for the
between 4 and 5. managers of these SMEs, their competitive performance is
Dividing companies according to size, microenterprises better given the smaller number of competitors.
reached a GCR of 4.092 while small enterprises attained a GCR
of 4.031. From these results, it can be seen that microenterprises
are perceived as being slightly more competitive than small Implications for Engineering Management
enterprises in the region where the research was conducted. The ranking of KPIs, CSFs, and FPVs made it possible to
The GCR was also calculated according to enterprise seg­ analyze the importance of these variables, producing
ments. In Exhibit 14, the GCRs by SME segments are depicted a benchmark to support engineering management in SMEs.
and the horizontal line represents the value of the general GCR Considering that decision making in SMEs is based on the
of the research. It can be seen that clothing and apparel SMEs personal knowledge of their owners (Roy & Dangayach,
are those with the lowest perceived market competitiveness, 2015), the approach developed in this paper now provides
with a GCR of 3.844, followed by mechanical metal enterprises scientific support for decision making in these enterprises.

Exhibit 13. SMEs’ Ranking

Position Enterprise ICR Position Enterprise ICR Position Enterprise ICR

1º E67 5.000 24º E53 4.167 47º E11 3.889

2º E60 4.944 25º E2 4.167 48º E33 3.833
3º E65 4.722 26º E16 4.167 49º E32 3.833
4º E45 4.722 27º E41 4.111 50º E18 3.833
5º E54 4.667 28º E70 4.111 51º E39 3.833
6º E10 4.611 29º E72 4.111 52º E43 3.833
7º E68 4.611 30º E23 4.056 53º E8 3.778
8º E62 4.556 31º E24 4.056 54º E14 3.778
9º E46 4.500 32º E30 4.056 55º E25 3.778
10º E52 4.500 33º E40 4.056 56º E50 3.778
11º E56 4.500 34º E55 4.056 57º E31 3.667
12º E9 4.444 35º E1 4.000 58º E3 3.611
13º E51 4.444 36º E35 4.000 59º E15 3.611
14º E57 4.444 37º E42 4.000 60º E21 3.611
15º E27 4.389 38º E61 4.000 61º E48 3.611
16º E22 4.333 39º E47 3.944 62º E13 3.556
17º E7 4.278 40º E4 3.944 63º E17 3.500
18º E38 4.278 41º E34 3.944 64º E19 3.444
19º E12 4.222 42º E20 3.889 65º E71 3.444
20º E26 4.222 43º E29 3.889 66º E66 3.389
21º E59 4.222 44º E49 3.889 67º E44 3.333
22º E5 4.222 45º E64 3.889
23º E63 4.222 46º E69 3.889

Engineering Management Journal Vol. 00 No. 00 2020 11

Exhibit 14. GCR by Segment

The most relevant KPIs according to the managers were those competitiveness. The article provides managers with a decision
related to raw material costs, on-time deliveries, product quality, tree, consisting of KPIs, CSFs, and FPVs, which allows the
and attracting new customers. Performance measurement and evaluation of organizational strategies through employment indi­
processes were the most important CSFs for SMEs. Regarding cators and can help to minimize the implementation costs of
FPVs, Quality and Speed were considered to be the most relevant. each KPI since it shows that it is possible to predict which KPI
These insights can guide SMEs’ managers regarding which vari­ has the biggest impact on the results (GCR) and which will
ables should be the starting point in engineering management to produce good results for enterprises.
improve their competitive position in the market. For SMEs, it is important to associate the levels of compe­
From a broad point of view, the measurement and monitor­ titiveness surveyed with innovative actions, a feature of SMEs
ing of competitiveness through KPIs is important to give greater discussed by Moeuf et al. (2018) and Raymond et al. (2018),
reliability to a decision, assist in the decision analysis, and enable thus developing a consistent relationship between management,
decision makers to adjust their decisions to the uncertainties of innovation, and competitiveness. There is also a strong concern
the specific environment (E. O. B. Nara et al., 2019a). Therefore, about new clients, finance, and quality, which is in line with the
the purpose of the KPI ranking presented in this research is results obtained by Gunasekaran et al. (2011), but, with Flex­
simply to serve as a guide for enterprises to start the process of ibility being considered to be the least relevant FPV by SMEs,
implementation and monitoring of these indicators to improve this area needs further exploration.

12 Engineering Management Journal Vol. 00 No. 00 2020

Conclusions and Future Research SME. Management Decision, 55(2), 271–293. https://doi.
From the calculations of SMEs’ ICRs and with a GCR of 4.066, on org/10.1108/MD-05-2016-0355
a scale from 1 to 5, it can be seen that 43% of the SMEs had an ICR Arif, F., Bayraktar, M. E., & Chowdhury, A. G. (2015). Decision
equal to or greater than the GCR and 57% of the SMEs had an ICR support framework for infrastructure maintenance invest­
less than the GCR. The value of 4.066 obtained for the GCR of ment decision making. Journal of Management in Engineer­
SMEs can be considered to be high, because translating this into ing, 32(1), 04015030. https://doi.org/10.1061/(ASCE)
percentage values results in competitiveness of 81.32%. This means ME.1943-5479.0000372
that, for SMEs’ managers, KPIs, CSFs, and FPVs have a high level of Bai, C., & Sarkis, J. (2011). Supply-chain
importance and directly influence the competitiveness of SMEs. performance-measurement system management using
However, the question remains of whether SMEs translate this neighborhood rough sets. International Journal of Produc­
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elements, often adopting them frequently in their management. 00207543.2011.581010
Thus, the objective of the research was fulfilled by presenting Bai, C., & Sarkis, J. (2014). Determining and applying sustain­
a competitiveness scale for SMEs, through the ICRs and the able supplier key performance indicators. Supply Chain
GCRs, according to the segments of the SMEs surveyed, and the Management: An International Journal, 19(3), 275–291.
GCR of 67 SMEs of the Rio Pardo, Taquari, and Alto Jacuí Valleys. https://doi.org/10.1108/SCM-12-2013-0441
Modeling the variables on three levels, FPVs, CSFs, and Baierle, I. C., Schaefer, J. L., Sellitto, M. A., Fava, L. P.,
KPIs, offers important insights for research with a similar Furtado, J. C., & Nara, E. O. B. (2020). MOONA software
scope. Thus, this methodology can serve as a guide for man­ for survey classification and evaluation of criteria to sup­
agers, presenting scientific evidence regarding the variables that port decision-making for properties portfolio. Interna­
can contribute to increasing competitiveness. In this article, the tional Journal of Strategic Property Management, 24(4),
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was researched, but this approach can be extended to verify Baierle, I. C., Sellitto, M. A., Schaefer, J. L., de Moraes, J.,
the competitiveness scale through the frequency of use of these Koncimal, J., & Nara, E. O. B. (2019). Performance analysis
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d6a2f925817b3410VgnVCM2000003c74010aRCRD About the Authors
Shbair, M. W., Al Sarraj, W. F., & Kahloot, K. M. (2016). The Jones Luís Schaefer is a PhD student in Production Engineer­
impact of factors of success on the in-house software ing at Federal University of Santa Maria. Master in Industrial
development for preserving tacit knowledge survey. Inter­ Systems and Processes and Production Engineer from the Uni­
national Journal of Management and Information Technol­ versity of Santa Cruz do Sul. Key areas of his research are
ogy, 11(2), 2687–2693. https://doi.org/10.24297/ijmit. multicriteria analysis, performance indicators, competitiveness,
v11i2.4860 artificial intelligence, industry 4.0, neural networks, energy
Siluk, J. C., Kipper, L. M., Nara, E. O. B., Júnior, A. L. N., Dal management, and energy cloud management.
Forno, A. J., Soliman, M., & Da Chaves, D. M. S. (2017). Ismael Cristofer Baierle is a Post-Doctoral student at Fed­
A performance measurement decision support system eral University of Santa Maria. He received his PhD in Produc­
method applied for technology-based firms’ suppliers. tion and Systems Engineering in 2019 from University of Vale
Journal of Decision Systems, 26(1), 93–109. https://doi.org/ do Rio dos Sinos. Master in Industrial and Systems and Pro­
10.1080/12460125.2016.1204213 cesses and Production Engineer from University of Santa Cruz
Slack, N., Chambers, S., & Johnston, R. (2002). Papel Estraté­ do Sul. Key areas of his research are multicriteria analysis,
gico e Objetivos da Produção. In Production administration performance indicators, competitiveness, artificial intelligence,
[Administração da Produção]. (2nd ed., pp. 63). Editora industry 4.0, and neural networks.
Atlas. Miguel Afonso Sellitto earned his doctorate in industrial
Sphinxbrasil. (2018). Sphinx. engineering. His research activities include advanced manufac­
Staniewski, M. W., Nowacki, R., & Awruk, K. (2016). Entrepre­ turing management dealing with operations, supply chains,
neurship and innovativeness of small and medium-sized automation, and production management. Dr. Sellitto currently
construction enterprises. International Entrepreneurship holds positions as a professor and researcher at UNISINOS
and Management Journal, 12(3), 861–877. https://doi.org/ University in the Production and System Engineering Graduate
10.1007/s11365-016-0385-8 Program and provides consultancy services on problems related
Tsuchiya, Y., & Hiramoto, N. (2018). Measuring consensus and to his research line. He can be reached by e-mail at sellitto@u­
dissensus: A generalized index of disagreement using nisinos.br.

16 Engineering Management Journal Vol. 00 No. 00 2020

 Julio Cezar Mairesse Siluk is Graduated in Business work and master’s students. He was head of the Department of
Administration (1987) and Master in Production Engineering Informatics-UNISC and coordinator of PPGSPI-UNISC. He
from Federal University of Santa Maria (2001). He concluded has been researching optimization methods in solving indus­
his PhD in Production Engineering at the Federal University of trial problems.
Santa Catarina (2007), and currently is a professor at the Elpidio Oscar Benitez Nara completed his Post Doctorate
Federal University of Santa Maria. He research mainly on the at Federal University of Santa Maria in 2014. He concluded his
following topics: Strategic Management, Innovation and Com­ Doctorate in Quality Management and Productivity at the
petitiveness, Performance Evaluation, Strategic Planning, Per­ Federal University of Santa Catarina in 2005. Master Degree
formance Indicators, Investment Analysis and Balanced in Production Engineering and Mechanical Engineer. He is an
Scorecard. Adjunct Professor at the University of Santa Cruz do Sul,
João Carlos Furtado completed his doctorate in Applied Brazil. He has experience in the area of management and
Computing at the National Institute for Space Research in engineering with emphasis in administration production and
1998. He is currently an Adjunct Professor at the University production engineering.
of Santa Cruz do Sul. and the Graduate Program in Industrial Contact: E. O. B. Nara, PhD, University of Santa Cruz do
Systems and Processes - PPGSPI. Guided of scientific initiation Sul, Santa Cruz do Sul, RS, Brazil; [email protected]

Engineering Management Journal Vol. 00 No. 00 2020 17

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