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Strategic clarity, business strategy and performance

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Abstract:

Purpose ‐ This paper seeks to investigate the link between business strategy and performance, giving special attention to the composition of combination strategies. Design/methodology/approach ‐ A survey assessing business strategy and performance was completed by managers representing 277 retail businesses in the USA. Findings ‐ The combination strategy was associated with higher performance in some but not all instances. Strategic clarity ‐ the extent to which a single strategy reflects the organization's strategic intent ‐ was also associated with organizational performance. Businesses with high and low strategic clarity outperformed those with moderate strategic clarity. Research limitations/implications ‐ This paper investigated US retailers and did not assess businesses in other industries or countries. Future research that seeks to replicate these findings is warranted. Practical implications ‐ Businesses can pursue either a single generic strategy (i.e. low cost or differentiation, prospector or defender or analyzer, etc.) or attempt to combine two or more strategies. Porter and others have warned that a combination strategy is suboptimal because of trade-offs inherent in "pure" strategies. While some businesses have pursued a combination strategy and performed poorly, others have done so with great success. Evidence presented in the paper attempts to resolve this conundrum, suggesting that high-performing businesses either concentrate on a single strategy along the Miles and Snow typology or combine all three equally. Those attempting intermediate combinations are more likely to perform poorly. Originality/value ‐ The paper proposes the notion of strategic clarity and provides evidence that supports a U-shaped link between strategic clarity and business performance.

Keywords: Corporate strategy; Management strategy; Retail trade; Strategic groups

Document Type: Research Article

DOI: http://dx.doi.org/10.1108/17554251011092683

Publication date: October 26, 2010

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