Corporate strategies, environmental forces, and performance measures: a weighting decision support system using the k-nearest neighbor technique

Abstract

The choice of performance measures is critical to formulating strategies. This paper investigates the relationship among corporate strategies, environmental forces, and the Balanced Scorecard (BSC) performance measures. Corporate strategies are explored within the framework of Miles and Snow's taxonomy, where they are categorized into prospectors, defenders, analyzers, and reactors. The relative weights for each performance measure are calculated by the use of the Analytic Hierarchy Process. A sample of 219 companies can confirm the link between corporate strategies, environmental forces, and the weights of the BSC performance measures. These weights shift depending on the nature of challenges companies face. In the light of this empirical evidence, a decision support system is proposed to help retrieve the BSC weights of the companies with similar characteristics. In order to measure the proximity between companies, a k-nearest neighbor technique is employed. This system can help find the weights of the performance measures for particular strategies.