A CRITICAL APPRAISAL OF THE IMPACT OF STRATEGIC DEVELOPMENT ON ORGANIZATIONAL PERFORMANCE
Abstract
Actuality of the research. Strategic management is a key factor of the success of any organization. At what degree managers pay attention to strategy formulation and its implementation is reflected on a company performance. worldwide experience shows, that successful companies have clearly formulated the strategic choice so they reach set goals step by step. In this way, they get desired results at local or international levels. Theoretical basis of the work. Literature analysis showed that the main field of interest of strategic management is to answer the following question-what causes performance heterogeneity between the competitor organizations? (Rummelt, 1994). According to the existing point of view, het-erogeneity in the performance indicators can be explained by strategic planning process, strategy formulation and the degree of planning strategy implementation (Minzberg, 1990; Parnell, 1997). Therefore, the impact of the above mentioned three factors on organizational performance is discussed in the following research. The organizational results are measured with two mechanisms
-“Objective fulfillment” and “Relative competitive performance”.
The objective fulfillment shows how an organization manages to reach its outlined short-term or long-term goals, while “Relative competitive performance” show the degree of improvement or worsening the company’s performance according to sales, profit, market share, etc. The scientific novelty of the work. It is estimated, that the manufacturing companies’ in Georgia, which are focused on a rational and comprehensive strategic planning have better results than those putting less emphasis on strategic planning. Also, it is empirically proved that the companies adopting rational and comprehensive strategic planning in Georgia do not focus on the degree of planning the strategy implementation. Practical value of the work. The research results are important not only for those studying strategic management issues but for the managers of running enterprises in Georgia who try to succeed on a competitive market through the strategic planning process. Given study will help managers to identify impeding factors in making a strategic choice and overcome difficulties arising in this process. 1. The impact of Strategic planning on organizational performance Strategic planning process. Strategy formulation rational and comprehensive choice is used in this research. This method is used by many researchers to explain the phenomenon of different performance of competitor organizations. It should be noted, that some works showed positive effect of strategic planning on companies’ results. Though, some researchers did not find any connection between these two phenomena. Besides, the most researchers did not indicate the field or the sector of their studies. Review of empirical literature. After reviewing the strategy formulation models, the choice was made in favor of strategy formulation rational choice model. According to this method, the strategy should be made with the assistance of formal strategic planning and analytical techniques. The formal strategic planning is a clearly formulated process consisting of the following elements: goal identification, strategy formulation and its evaluation (Armstrong, 1982, Steiner, 1979; Boyd, 1991).
Measurements for the strategic planning process.
Various measurement methods were used by strategy scholars. It is seen that those methods defer significantly from each other. After the studying several works Boyd and Raining-Elliot (1998) revealed incoherence and discordance in the process of measuring strategic planning. They identified the following indicators: and strategy. Most of these works characterized the strategic planning according to the meaning of indicators and formality (Pierce, Friedman and Robinson, 1987) while, other works indicated that knowledge and abilities play more important role than other aspects (Vencatraman and Ramanujam, 1987). Boyd and Roining-Elliot (1998) considered the strategic planning to be a normative process and identified its main indicators: mission statement, tendency analysis, competition analysis, long-term annual goals, action plans and liquidity.
2. The degree of planning of strategy implementation
Strategy Implementation and Performance-Although there is significant theoretical and or empirical literature available on strategic processes, its implementation process has not yet been studied widely enough. According to Noble and Mokwa strategy implementation is the most important link between a strategy formulation and a firm’s performance. Nutt has conducted research studying on both the U.S. and Canadian organizations. He came to the conclusion that not even half of these organizations have fulfilled their goals because of the mistakes in the implementation process.
