Strategic clarity, business strategy and performance

Abstract

PurposeThis paper seeks to investigate the link between business strategy and performance, giving special attention to the composition of combination strategies.Design/methodology/approachA survey assessing business strategy and performance was completed by managers representing 277 retail businesses in the USA.FindingsThe combination strategy was associated with higher performance in some but not all instances. Strategic clarity – the extent to which a single strategy reflects the organization's strategic intent – was also associated with organizational performance. Businesses with high and low strategic clarity outperformed those with moderate strategic clarity.Research limitations/implicationsThis paper investigated US retailers and did not assess businesses in other industries or countries. Future research that seeks to replicate these findings is warranted.Practical implicationsBusinesses can pursue either a single generic strategy (i.e. low cost or differentiation, prospector or defender or analyzer, etc.) or attempt to combine two or more strategies. Porter and others have warned that a combination strategy is suboptimal because of trade‐offs inherent in “pure” strategies. While some businesses have pursued a combination strategy and performed poorly, others have done so with great success. Evidence presented in the paper attempts to resolve this conundrum, suggesting that high‐performing businesses either concentrate on a single strategy along the Miles and Snow typology or combine all three equally. Those attempting intermediate combinations are more likely to perform poorly.Originality/valueThe paper proposes the notion of strategic clarity and provides evidence that supports a U‐shaped link between strategic clarity and business performance.