Business Strategy and Organizational Performance: Measures and Relationships

Abstract

The contemporary literature is challenging the original idea that strategic purity leads to superior performance. Similarly, there is an inconclusive debate in extant literature about the superiority of strategic consistency over strategic flexibility. To address these issues, the objectives of the research include: the refinement of scoring methodology for classification of strategic types and strategic behavior of the firms; the comparison of strategic groups’ performance across firm size and industry; strategy-performance, size-performance, industry-performance, contingent effect of strategy, size, and industry on performance; and the comparative analysis of single industry results with multi-industry results for generalization. Drawing on the contingency theory perspective, Miles and Snow typology is used for operationalization of strategic types using seven years archived financial data of 307 joint stock companies listed at Pakistan Stock Exchange (PSE). The findings reveal that the defending and analysing strategies perform better than prospecting and reacting strategies. Hybrid strategies outperformed pure strategies while both consistent and flexible strategies performed equally well and outperformed the reactors. The performance of strategic types varies with the change in firm size and industry. The results imply that for better performance, firms in Pakistan should either compete on the basis of service, price, quality, and operational excellence or should focus on a balance of innovation and core product development. Innovation, rapid growth and new product developments is non-profitable. Similarly, inconsistent strategic behaviour results in poor performance. The conceptualization of pure, hybrid, consistent, and flexible strategic types, identification of strategic transition of the firms to find out behaviour along with their empirical testing, refinements in methodology for objective measures, a comparison of single industry vs multi-industry results are the major contributions of the study. Typology-driven theorizing for hybrid, consistent, and flexible strategic types is one of the promising area for future research