Environmental factors, strategic choice, and implementation: determinants of performance at the product-market level
Snider, Craig T
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Extensive research has been conducted on various aspects of the relationships between environmental factors, strategy, and performance. Because these relationships are numerous and complex, many studies have focused on just one or two interactions, and have not attempted to offer a comprehensive model nor consider the importance of implementation of strategy. In addition, previous studies have typically focused on the corporate or strategic business unit (SBU) level of analysis, and have used single informants exclusively. While this approach is appropriate for certain firms/industries, it is not appropriate for diversified companies organized into multi-product, multimarket SBUs. This study uses multiple Informants from the same SBU and an integrated framework of constructs representing environmental factors, strategic choice, and implementation of strategy to explore determinants of performance at the product-market level within multi-product, multi-market SBUs under varying market conditions. A modified total design approach serves as the basis for data collection from a random sample of product managers from Fortune 500 companies. The data analysis utilizes ANOVA and multiple regression techniques. Environmental conditions and strategic choice are shown to have moderating effects on performance. The levels of strategic commitment and implementation skills present demonstrate significant and direct effects on performance outcomes. Appropriate strategic choices outperform inappropriate strategic choices in four of five market conditions that were testable, especially when supported by high levels of strategic commitment and implementation skills. These findings suggest that when an integrated framework consisting of more of the major elements of the environment-strategy-performance continuum is used to investigate determinants of performance, new Insights are provided. Specifically, strategy and environmental factors, which have been shown to produce significant and direct effects on performance in previous research, demonstrate moderating effects when other determinants of performance such as strategic commitment and implementation skills are considered. The use of multiple respondents from within the same SBU provided evidence suggesting that different strategies can be at work simultaneously at various product-market levels within the same SBU. Those respondents reporting the use of different strategies within the same SBU did not perform significantly differently than those using the same strategy. This finding challenges the traditional view that an SBU is the smallest unit of a company for which it makes sense to develop and follow a separate strategy, and further reinforces the need for future research at the product-market level of analysis.