Academic journal article Journal of East European Management Studies

Factors of Effective Strategy Implementation: Empirical Evidence from Slovenian Business Practice*

Academic journal article Journal of East European Management Studies

Factors of Effective Strategy Implementation: Empirical Evidence from Slovenian Business Practice*

Article excerpt

The paper's purpose is to add to the body of knowledge on strategy implementation by systematically studying the activities for and obstacles to strategy execution on a sample of 172 Slovenian companies. The results show that managers mostly rely on planning and organising activities when implementing strategies, while the biggest obstacle to strategy execution is poor leadership. Moreover, the results of multiple regression analysis reveal that greater obstacles to strategy execution in the forms of inadequate leadership skills and employees' reluctance to share their knowledge have a negative influence on performance, while adapting the organisational structure to the selected strategy as an activity for strategy implementation has a positive influence on performance.

Der Zweck dieses Artikels ist, einen Beitrag zur Erweiterung des Wissens über Aktivitäten und die Hindernisse der Strategiedurchführung beizutragen anhand eines Samples von 172 Slowenischen Unternehmen. Die Ergebnisse zeigen, dass sich die Betriebsleiter bei der Implementation von Strategien größtenteils auf Planung und Organisaiton konzentrieren, während das größten Hindernis zur Durchführung der Strategie schlechte Führung ist. Weiter zeigen die Ergebisse der Multiplen Regression auf, dass Hindernisse zur Strategiedurchführung in Form von mangelhafter Fürung und der Zurückhaltung der Mitarbeitern, ihre Kenntnisse mitzuteilen, einen negativen Einfluss auf den Erfolg haben, während die Anpassung der Organisationsstruktur an die ausgewählte Strategie einen positiven Einfluss auf den Erfolg hat.

Key words: strategy, strategy implementation, activity, obstacle, performance, Slovenia

1. Introduction

One of the main reasons for the emergence of strategic management in the last quarter of the 20th century was to pay proper attention to the implementation of strategy in companies. There is no doubt that strategic planning is important yet formulated strategies must also be implemented otherwise the whole planning phase becomes worthless. The planning-implementation relationship is well described by Hrebiniak (2005b:4), one of the most prominent authors in the field of strategy implementation: "It is obvious that the execution of strategy is not merely as clear and understood as the formulation of strategy. Much more is known about planning than doing, about strategy making than making strategy work".

Hrebiniak' s (2006/2008) argument that, while formulating a strategy is hard, making it work, i.e. "executing or implementing it throughout the organisation", is even harder, is supported by past empirical studies which report weak relationships between strategy formulation and its implementation. Fortune magazine (Gurowitz 2007) finds that less than 10% of well-formulated strategies are also effectively executed. Identical results of just 10% of strategies being successfully implemented are also reported by Judson (1991) and Speculand (2006). Similarly, a Times' (Farsight Leadership Organisation 2007) study finds that 80%) of companies have the right strategies, yet only 14% implement them well. A 2003 survey by the Economist Intelligence Unit and Makaron Associates (Mankins/Steele 2005) reports slightly better but still very disappointing achievements, discovering that on average companies deliver a mere 63 % of the potential financial performance their strategies have promised. As reported by Raps (2004), a conclusion can be made that the real success rate of strategy implementation lies between 10 and 30%>. Therefore, most companies have strategies but only a few actually realise them. These low success rates are discouraging, especially since many companies recently have invested huge sums of money to improve their strategic planning (Raps 2004). At the end of the 20th century US companies were, for example, spending more than USD 10 billion annually in analysing their industries, markets and competitors, and then formulating their strategic plans (Judson 1991). …

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