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Published by: Allied Business Academies
Published in: "Academy of Information and Management Sciences Journal", 2004
Length: 14 pages

Abstract

This paper evaluates the stability of the efficiency scores of the three largest American automotive companies over three 4-year windows (1986-1989, 1990-1993, and 1994-1997). The study employs a nonparametric technique called Data Envelopment Analysis (DEA), in particular DEA window analysis, to evaluate the stability of the companies' efficiency. The automotive firms are classified based on their stability scores, using cluster analysis into four groups: efficient stable, efficient unstable, inefficient unstable, and inefficient stable. The results of two DEA models (CCR and BCC) are consistent to a great extent in classifying the firms over the three 4-year windows. Both models indicate that, for the studied period, Ford Motor Company is classified by both DEA models 92% (22/24) of the time as either efficient stable or efficient unstable. Chrysler Corporation is classified 71% (17/24) of the time as efficient stable or efficient unstable. On the other hand, General Motors Company is classified 67% (16/24) as efficient stable or efficient unstable. The empirical results reveal that each company could have reduced advertising spending, total assets and number of employees while maintaining sales volume and market share during the period.

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Abstract

This paper evaluates the stability of the efficiency scores of the three largest American automotive companies over three 4-year windows (1986-1989, 1990-1993, and 1994-1997). The study employs a nonparametric technique called Data Envelopment Analysis (DEA), in particular DEA window analysis, to evaluate the stability of the companies' efficiency. The automotive firms are classified based on their stability scores, using cluster analysis into four groups: efficient stable, efficient unstable, inefficient unstable, and inefficient stable. The results of two DEA models (CCR and BCC) are consistent to a great extent in classifying the firms over the three 4-year windows. Both models indicate that, for the studied period, Ford Motor Company is classified by both DEA models 92% (22/24) of the time as either efficient stable or efficient unstable. Chrysler Corporation is classified 71% (17/24) of the time as efficient stable or efficient unstable. On the other hand, General Motors Company is classified 67% (16/24) as efficient stable or efficient unstable. The empirical results reveal that each company could have reduced advertising spending, total assets and number of employees while maintaining sales volume and market share during the period.

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