Strategic clarity, business strategy and performance

John A. Parnell

108 citations0/0 files storedJournal of strategy and management

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Business Strategies and Innovation Management and Organizational Practices Organizational Strategy and Culture

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.

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References

1991Firm Resources and Sustained Competitive Advantage 2004Firm resources and sustained competitive advantage 1984A resource‐based view of the firm 1995The Theory of the Growth of the Firm 1993The cornerstones of competitive advantage: A resource‐based view 1991The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation 1989Asset Stock Accumulation and Sustainability of Competitive Advantage 1978Organizational Strategy, Structure, and Process

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