Academic journal article Journal of Business Strategies

The Strategic Planning Process and Performance Relationship: Does Culture Matter?

Academic journal article Journal of Business Strategies

The Strategic Planning Process and Performance Relationship: Does Culture Matter?

Article excerpt

Abstract

Given the growth of multinationals, it is important that managers learn whether strategic planning enhances firm performance in cross-cultural situations. Using an international sample of firms, this study found that the general planning-performance model is relevant across the cultures sampled. While there appears to be little direct relationship between culture and planning, culture did moderate the planning-performance relationship. Furthermore, specific cultural values were found to account for some of the cross-cultural differences in the planning-performance relationship. Implications for management and future research are discussed.

Introduction

Concerns of increased international competition abound not only in the U.S. but also in Europe with the further expansion of the European Union and in Asia and Latin America with increased economic integration (Rugman, 2003) in those regions. Theorists (Goll & Rasheed, 1997; Brews & Hunt, 1999) have argued that firms should respond to environmental changes, such as increased competition, by engaging in more systematic strategic planning to anticipate and respond to changing events. There is evidence that U.S. firms have responded to greater environmental uncertainty and complexity with more extensive planning (Javidan, 1984; Kukalis, 1989). Furthermore, it appears that formal strategic planning enhances firm performance although the relationship is not unequivocal (Boyd, 1991; Capon, Farley & Hulbert, 1994; Miller & Cardinal, 1994). It is worth noting that, as firms in other regions of the world are confronting increasingly volatile environments, there is a need to extend planning research to firms representing a diversity of national and cultural settings (Brock, Barry & Thomas, 2000). Such research will help ensure that current prescriptions concerning the use of planning have external validity in a variety of locales. Thus, the purpose of this study is to examine the relationship between strategic planning and firm performance among a group of firms representing different cultural regions.

Strategic Planning Processes

Strategic management seeks to align the firm's activities with its external environment. At the heart of this management approach is the strategic planning system. As firms face increased environmental change (e.g., more globalization) theorists (Grant, 2003) argue that firms benefit from strategic planning. For over thirty years, a plethora of studies have examined formal long range or strategic planning. Many of these studies have found that firms that plan possess different characteristics than non-planners. In particular, many studies have sought to examine the relationship between planning and firm performance (Boyd, 1991). A review of much of the literature suggests that strategic planning can be described along two broad dimensions, planning content or ends and planning processes or means (Boyd, 1991 ; Brews & Hunt, 1999; Miller & Cardinal, 1994; Ramanujan & Venkatraman, 1987). Planning content refers to the ends of the planning process such as: goals, mission statements, environmental information programs (Veliyath & Shortell, 1993), and internal resources. Much of this content helps distinguish strategic planning from that which is purely operational planning. Planning processes focus on the means or methods by which the planning process is carried out. Characteristics such as commitment, system maturity, comprehensiveness, time horizon, and importance are typical examples of such system or process characteristics (Capon, Farley & Hulbert, 1994; Ramanujam & Venkatraman, 1987; Rhyne, 1986).

This study focuses on planning processes or system characteristics because these processes have been examined far more in the literature (Boyd, 1991; Miller & Cardinal, 1994) on planning and performance. This makes it easier to compare this study to the stream of literature that has preceded it. …

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