Rift Valley University

Sidist Kilo Campus

College of Business and Economics

Department of Business Administration

Effect of Strategic Implementation on Organizational Profitability: Case

Study of Oromia Bank S.C Branches in Addis Ababa City

By: Bachu Borena

A Thesis Submitted to the Department of Business Administration in Partial

Fulfillment for the Requirement for the Award of Masters of Business
Administration of Rift Valley University

Advisor

Alemayu Garomsa (Ass.Prof.)

July, 2022

I
 Addis Ababa, Ethiopia

RIFT VALLEY UNIVERSITY

SCHOOL OF GARDUATE STUDIES

EFFECT OF STRATEGY IMPLEMENTATION ON ORGANIZATIONAL PROFITABILITY:

CASE STUDY OF OROMIA INTERNATIONAL BANK S.C BRANCHES IN ADDIS
ABABA CITY

BY: - BACHU BORENA

APPROVED BY: EXAMINING BOARD

Dean, Graduate Studies Signature

_________________________ _____________

Advisor Signature

Alemayehu Garomsa (Ass.Prof) __ _____________

External Examiner Signature

____________________________ ______________

Internal Examiner Signature

_________________________ ____ _____________

II
STATEMENT OF CERTIFICATION

This is to certify that Bachu Borena has carried out her research work on the topic entitled.

“Effect of strategy implementation on organizational profitability: case study of Oromia bank s.c
branches in Addis Ababa city”.

This Work is original and suitable for the submission in partial fulfillment of the requirement for
the award of Master of Business Administration

Advisor: - Alemayehu Garomsa (Ass.Prof)

Signature _______________________ Date__________________________

III
 STATEMENT OF DECLARATION

I, Bachu Borena, hereby declare that this thesis entitled “effect of strategy implementation on
organizational profitability: case study of Oromia bank S.C branches in Addis Ababa city”.
Submitted by me for the award of the degree of Master of Business Administration Master of
Rift Valley University at Sidist kilo campus, Ethiopia is my original work and it has never been
presented in any university. All sources and materials used for this thesis have been duly
acknowledged.

Name: Bachu Borena, Signature: ___________________

Place: Addis Ababa Date of Submission: July, 2021

IV
 Acknowledgements

I am keep giving glory to JESUS CHIRIST, for his abundance grace and for every blessing in
my life.

I owe my deepest gratitude to Alemayehu Garomsa (Ass.Prof) my advisor, for his unreserved
and active guidance throughout the study. I would also like to thank my relatives for sharing
their time and showed the patience and understanding during the most intensive phases of this
study.

Finally, I would like to acknowledge my dear father, mother, sister and brothers for their prayers,
love, care, and encouragement throughout the study period.

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 Contents

Page
Acknowledgements..........................................................................................................................i

LIST OF TABLES...........................................................................................................................v

LIST OF FIGURES........................................................................................................................vi

Acronyms......................................................................................................................................vii

ABSTRACT.................................................................................................................................viii

CHAPTER ONE..............................................................................................................................1

INTRODUCTION...........................................................................................................................1

1.1 Background of the Study........................................................................................................1

1.1.1 Background of OB...........................................................................................................3

1.2. Statement of the problem......................................................................................................4

1.3 Objectives of the Study..........................................................................................................5

1.3.1 General Objective............................................................................................................5

1.3.2 Specific Objectives..........................................................................................................5

1.4 Hypothesis of Study...............................................................................................................6

1.5 Significance of the Study.......................................................................................................7

1.6 Scope of the Study.................................................................................................................7

1.7 Definition of Terms................................................................................................................7

CHAPTER TWO.............................................................................................................................9

REVIEW OF RELATED LITERATURE.......................................................................................9

2.1. Theoretical Review...............................................................................................................9

2.1.1. Strategy Implementation................................................................................................9

2.1.2. Factor Affecting Strategy Implementation.....................................................................9

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 2.1.3. Task of Strategy Implementation.................................................................................10

2.1.4. Thompson and Strickland Model.................................................................................11

2.1.5. Ricky Griffin’s Model..................................................................................................12

2.1.6. Employee Empowerment.............................................................................................13

2.1.7. Strategic Leadership.....................................................................................................13

2.1.8. Strategic organizational Structure................................................................................15

2.1.9. Strategic Resource allocation.......................................................................................16

2.1.10. Effective Communication...........................................................................................17

2.2 Empirical Review.................................................................................................................17

2.2.1. Strategy Management and Strategy Implementation in Ethiopian Banks....................19

2.2.2. Previous Studies on determinates of bank profitability in Ethiopia.............................21

2.3 Conceptual framework.........................................................................................................23

CHAPTER THREE.......................................................................................................................25

RESEARCH DESIGN AND METHODOLOGY.........................................................................25

3.1. Introduction.........................................................................................................................25

3.2 Research approach...............................................................................................................25

3.3 Research Design...................................................................................................................25

3.4 Sample size and Sampling techniques.................................................................................26

3.5 Nature and d Sources of Data..............................................................................................28

3.6 Data gathering tools.............................................................................................................28

3.7. Data gathering procedures..................................................................................................29

3.8 Method of Data Analysis.....................................................................................................30

3.7.1. Descriptive method.......................................................................................................30

3.7.2. Econometrics method...................................................................................................30

3.7.2.1. Regression.............................................................................................................31

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 3.7.2.2. Correlation............................................................................................................31

3.9 Research Design Quality......................................................................................................31

3.9.1 Reliability Test..............................................................................................................31

3.9.2 Validity..........................................................................................................................31

3.10 Ethical Consideration.........................................................................................................32

CHAPTER FOUR.........................................................................................................................33

DATA ANALYSIS AND DISCUSSION OF FINDINGS...........................................................33

4.1 Reliability test......................................................................................................................33

4.2 Description of Demographic pattern....................................................................................34

4.2.1 Distribution of gender...................................................................................................35

4.2.2 Level of education.........................................................................................................35

4.2.3 Work Experience...........................................................................................................36

4.2.4 Work position................................................................................................................36

4.3 Descriptive Statistics of Dependent and Independent Variables.........................................37

4.4 Inferential Statistics..............................................................................................................39

4.4.1 Correlation Analysis......................................................................................................39

4.4.2 Discussion of the Regression Analysis Result..............................................................41

4.4.3. Hypothesis testing........................................................................................................45

CHAPTER FIVE...........................................................................................................................48

SUMMARY, CONCLUSION AND RECOMMENDATIONS....................................................48

5.1 Summary of Findings...........................................................................................................48

5.2 Conclusion...........................................................................................................................49

5.3 Recommendation.................................................................................................................50

REFERENCE................................................................................................................................52

Appendix........................................................................................................................................57

iv
 LIST OF TABLES

Tables Page

Table 4.1 Cronbach’s Alpha test result

Table 4.2 Gender (Sex) of respondents
Table 4.3 Level of education of respondents
Table 4.4 Work Experience of respondents
Table 4.5 Work position of respondents
Table 4.6 Description of Dependent and Independent Variables
Table 4.7 Correlation of dependent with independent variable
Table 4.8 Regression Table
Table 4.9 Hypothesis testing
Table 4.10 Five years Trend of profit growth OB branches in Addis Ababa city in million

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 LIST OF FIGURES

Figures Page

Figure 1: Relationship between Effective communication, strategic resource allocation,

leadership, organizational structure and employee commitment with organizational
profitability

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 Acronyms

OLS Ordinary Least Square

NIM Net Income

GDP Grosse Domestic Product

ROA Return on Asset

ROE Return on Equity

RAP Resources Allocation Process

NBE National Bank of Ethiopia

OB Oromo Bank

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 ABSTRACT

The purpose of this study was investigating the effects of strategic implementation on
organizational profitability: Case Study of Oromia Bank S.C Branches in Addis Ababa City. The
study was used mixed methods that provide a solution of the research problem requires both
quantitative and qualitative strategies. The study was adopted both descriptive and explanatory
research method by using mean, tables correlation and regression analysis. A sample of 129
Employees was selected from the Population of Oromia Bank S.C Branches in Addis Ababa City.
and stratified sampling technique was applied to identify sample from the target population.
Data was collected using structured questionnaires and the research was used both descriptive
and inferential method of analysis. The result of regression analysis is independent variables
collectively, are good explanatory variables to identify the strategic implementation of the bank
that enhance the profitability. The adjusted R squared value of 58.25 % indicates the bank’s
profitability moves in line with the independent variables. Employee’s commitment a negative
effect on organizational profitability of Oromia Bank S.C branches in Addis Ababa city.
According Beta value of-Employee commitment insignificant and negative effect on
organizational profitability; hence the null hypothesis (H0) is accepted. According Beta value
organizational structure has significant and positive effect for organizational profitability.
According Beta value strategic resource allocation has significant and positive effect for
organizational profitability. According to the coefficients Beta value communication has
significant and positive effect for organizational profitability. The research recommends OB
should give attention to effective implementation of employee commitment, organizational
structure, strategic resource allocation, communication, and leadership with extreme
engagement among all its staffs. Further recommended that the bank shall better to introduce a
culture of innovativeness or new way of doing things that helps to foster strategy
implementation.

Key Words

Organizational profitability,

Strategic implementation,

Regression and correlation,

Inferential statistics,

Qualitative data and Quantitate data,

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 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The meaning of term strategy has been approached differently by different scholars. According
to Porter (1996), the essence of a strategy is to choose a unique and a valuable position rooted in
system of activities that are much more difficult to match. The term strategy was first used by
Chandler (1962) to refer to the determination of basic long term goals of an enterprise, the
adoption of the courses of action and the allocation of resources necessary to carry out these
goals.

Ahuja (2003) indicated that executing strategy implies marshaling employees alongside
managers in order to put formulated strategies into action. Successful strategy implementation
requires discipline, commitment, sacrifice and tests manager's ability to motivate employees.
Interpersonal skills are critical for a successful strategy implementation. Implementation affects
all employees and employers in an organization. Each segment of an organization must position
them to answer questions such as actions to be taken to implement their part of the organization's
strategy (Ahuja, 2003).

Most banks currently are operating in an environment with dynamic development in the financial
systems and financial markets which are forcing them to conduct their businesses differently so
as to evade risks (Ofunya, 2013). With the escalating competition in the banking industries, most
of the banks have now been forced to adopt new strategies in order to survive. Their performance
relies solely on the particular strategies that the management has executed in order to run their
companies. For the banking institutions to remain relevant and minimize the banking risks then
they must management policies that enable them to be in the forefront and compete effectively
with others in the global market.

According to Bakar et al, (2011) Strategic management is a phenomenon that involves decision
making, proper execution of the idea so as to achieve the particular target or objective of the

1
organization. Additionally, implementation and formulating Pearce & Robinson, (2005) posits
that strategy encompasses decisions made and measures undertaken so as to realize on plans
which are structured to attain the firms’ goals. As a result of the dynamic changes in technology
and changing customer needs as well items demanded by the markets the companies have
adopted strategic management. Proper application of strategies influences greatly influence the
profitability of organization Hubbard, (2000). It is therefore fundamental for institution to put in
place good strategies so that they can survive.

Assessment of financial profitability is highly useful to identify the financial strengths and
weaknesses of the firm by properly establishing the relationship between the items of balance
sheet and profit and loss account (Drake, 2010). It also helps in short-term and long-term
forecasting and growth can be identified with the help of a financial profitability analysis.

Moreover, bank profitability assessment can also help improve managerial profitability by
identifying best and worst practices associated with high and low measured efficiency. However,
according to Drake failures of commercial banks have been relatively high in recent years in all
over the world while the reason of each bank failure is somewhat unique experiences, which
differ from one bank to another. Recent studies have identified a few factors that most failing
banks seem to have in common.. (Adem Jiru)

Various strategic decisions have been made in the banking industry in Kenya in the past two
decades. Specifically, the NIC Bank Limited which was incorporated in 1971 and is quoted on
the Nairobi Stock Exchange with approximately 22,000 shareholders has witnessed vigorous
reforms to cut a niche in the Kenyan banking industry. With a vision of establishing a long term,
profitable customer relationships through the establishment of a complete range of banking and
financial services, strategic management practices should be embedded in its mission.

Bank of Abyssinia, one of the private banks in our country was established on February 15, 1996
according to the Ethiopian commercial code of 1960 and the licensing and supervision of
banking business proclamation no. 84/1994.Complying with a strong demand for better service
and products from all direction on the one hand, and ground breaking development in ICT on the
other, the bank had replaced its in-house developed IT system with the state of art technology

2
called T-24. Besides, card banking, mobile banking, Internet banking services ATM and POS
(point of sell) services are on operation. (Bank of Abyssinia annual report) Over the last years
the bank implement three strategy but left behind from peer competitor in its deposit, market
share, and overall profitability even if the bank start its operation by offering best innovative
product such as gift saving account, safe deposit boxes and saving account linked with current
account /SALCA/ to enable customers to transfer funds from one’s saving account to one’s
current account to write cheque when there is no sufficient balance in current account. Even if
the bank is pioneer to provide such kind of service the last fifteen years profitability is week
when comparing with its peer competitor (Haymanot).

1.1.1 Background of OB

Oromiaa Bank S.C began operation on October 25, 2008 with a starting capital of 110
million birr (Br), surpassing the minimum capital requirement by 35 million Br. With its
headquarters located in front of Dembel City Centre, near Getu Commercial Center in its 23
story building on Africa Avenue (Bole Road).

Established with the commercial banking business objectives, OB is undertaking a universal

commercial banking services such as deposit mobilization, lending of money, remittance service,
and banking services and interest free banking. The Bank has now launched Electronic banking
outputs such as Card banking known as Oro-Card(ATM and POS), Mobile Banking named as
Oro-Cash, Agent Banking-Oro Agent and Internet banking namely Oro-Click. The numbers of
OB branches are now reached 225 throughout Ethiopia all connected by core banking system.
Oromia Int'l Bank owns a 13 storey building Headquarters in Addis Ababa City on Bole road
next to Getu Commercial Center. The Bank is now one of the most influential and popular
private banks in Ethiopia and also known for pioneering Interest free banking services.
(www.orointbank.et)

When we came to in the case of OB, the bank is computing strongly in the industry specially on
mobilizing higher amount of deposit. Addis Fortune magazine [VOL 13, No 654] states about
the bank with a title of ‘OB mobilizes significant deposits within a challenging environment’ that
‘the bank mobilizes significant deposits within a challenging environment at a time when most of

3
the private banks in Ethiopia are witnessing their deposit mobilization sources drying up.’’ Addis
Fortune continues and states that the banks return on average equities is lower than few years
back and also indicates there are uncontrolled expenses which minimize the earning of the bank.

This statement on Addis Fortune about the performance of the bank leads the researchers as
indices to take a preliminary study on the performance evaluation of the bank. In the preliminary
study we can look that the profitability of the bank is inconsistent, the proportion of liquid asset
from the overall total asset is rapidly declining, and the bank’s ability to cover noninterest
expenses by non-interest income is also weak. Besides, provision for loan loss and non-
performing loan grow at a higher rate.

1.2 Statement of the problem

Okumus (2001) noted that despite the importance that strategy execution process has, more
research has been carried out into strategy formulation while few have been carried out with
regard to strategy implementation. The indifference to strategy implementation can be credited to
several reasons which include: greater likelihood of failures in strategies' implementation; higher
complexity in strategy implementation process; the perception that strategy implementation is
less desirable than formulation; and practical challenges in research involving middle level
managers (Alexander, 1985). There was gap still exists between knowing what to do and actually
doing it. Hrebiniak (2006) argues that most managers know far more about developing strategy
than they do about executing it. As a result, they spend a lot of time formulating their strategies
but often find that almost nothing ultimately changes in their companies. According to David
(2003), elements to be looked during strategy implementation are; policies, objectives, conflict
management, resource allocation, organization structure, organization culture, and ability to
manage resistance to change. Parnell (2008) explains strategy implementation through the
concepts of participation, conception, and commitment that affect the dissemination of the
strategy. Therefore, strategy implementation is a complex process. (Schellenberg, 1983).

Hambrick and Cannella, (1989) stated that “Without successful implementation, a strategy is a
fantasy”. In many companies the main focus in regard to strategy is put on the formulation of a
new strategy. However, a good formulated strategy does not automatically mean that the

4
company achieves the objectives set in the strategy. To ensure achievement of organizational
objectives, the formulated strategy needs to be implemented at all levels of the organization.
Implementing a strategy means putting the strategy to action (Hill and Jones, 2009).

Local studies have been done such as Amelework (2015), Dinberu (2015) and Timotiyos (2015)
put their effort to show strategic management practice in insurance and banking industries.
However, as per the researcher knowledge no study has been done to that investigate the
relationship between strategy implementation and organizational profitability in our country,
however research has been done in Kenya commercial banks by Linet & Henry (2014) to show
the relationship between strategy implementation and profitability but the industry scenario in
Kenya is completely different from the trends of banking industry in Ethiopia.

Given the important role strategy implementation plays in the organization Profitability, the aim
of this paper was examine the effect of strategy implementation on organizational profitability of
OB branches in Addis Ababa city. Therefore the researcher was going to determine the effect of
those factors (communication, strategic resource allocation, leadership, organizational structure,
and employee commitment) on organizational profitability a case study of OB branches in Addis
Ababa city.

1.3 Objectives of the Study

1.3.1 General Objective

The main aim of this work is to investigate the effect of strategic Implementation on
organizational profitability of Oromia l Bank S.C branches in Addis Ababa City.

1.3.2 Specific Objectives

Specific objectives are to:

 Investigate the impact of OB employee’s commitment on organizational profitability of

Oromia Bank S.C. branches in adis ababa City.
 Determine the impact of effective communication on profitability of Oromia
bank S.C branches in Addis Ababa City.

5
  Find out the effect of resource availability to implement the plan on profitability of
Oromia bank S.C branches in Addis Ababa City.
 Examine the impact of organizational structure on profitability of Oromia bank S.C
branches in Addis Ababa City.
 Analyzing the effect of leadership on profitability of Oromia bank S.C branches in Addis
Ababa City.

1.4 Hypothesis of Study

The null and alternate hypotheses of the explanatory analysis of the research stated as follows:

Hypothesis of the study

Hypothesis I

Ho: effective communication has not significant effect organizational profitability.

Hi: effective communication has a significant effect on organizational profitability

Hypothesis II

Ho: employee’s commitment has not a positive effect on organizational profitability

Hi employee’s commitment has a positive effect on organizational profitability

Hypothesis III

Ho: organizational structure has not a positive effect on organizational profitability

Hi organizational structure has a positive effect on organizational profitability

Hypothesis IV

Ho: leadership has not a positive effect on organizational profitability

Hi leadership has a positive effect on organizational profitability

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Hypothesis V

Ho: There is no significant relationship between strategic resource allocation and organizational
profitability

Hi: There is a significant relationship between strategic resource allocation and organizational
profitability

1.5 Significance of the Study

It is envisaged that the findings of this work enable organizations to adopt .Strategic
management in their management process. The recommendations made of immense help to
future researchers on Strategic Implementation on organizational profitability. Similarly, the
study enlist the importance of Strategic Implementation organizational profitability, which serve
as a reference for future studies.

1.6 Scope of the Study

The study examine the relevance of in effect of strategic Implementation on organizational

profitability of Oromia Bank S.C branches in adisi ababa City. the study, emphasis laid on the
top and middle level management and few other employees who can give relevant information
needed for the research. However, this achieved through the use of questionnaires, interview and
manual report of the bank.

1.7 Definition of Terms

Strategic managers: These are individuals who bear responsibility for the overall productivity
of the organization or for one of its major self-contained divisions.

Strategic gap: This is the difference in the level of profitability called for in the firm's state
objective and the level of profitability that seems likely to result from the continuation of current
operations.

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Scenarios: This is a form of educated guesses made by planners. Objective: a statement of what
is to be achieved.

Goal: This is synonymous with objective; a statement of what is to be achieved.

Mission: This defines the basic purpose or purposes of the organization; usually includes a
description of the organization's basic products and/or services and a definition of its market
and/or sources of revenue.

Profitability: is a measurement of efficiency and ultimately its success or failure and it is a

business ability to produce a return on investment based on its resource with an alternative
investment.

Organizational profitability: provides a view of the true profitability of a branch, department or

region allowing for a comparison of allocated expense as they relate to their income and showing
accurate view of their adjusted earnings.

8
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1. Theoretical Review

2.1.1. Strategy Implementation

Implementing strategy is a tough and time consuming challenge. Practitioners emphatically agree
that it is a whole lot easier to develop a sound strategic plan than it is to “make it happen.”
Putting strategy into effect and getting the organization moving in the chosen direction calls for a
different set of managerial skills. Successful strategy implementation depends on working
through others, organizing, motivating, culture-building and creating strong fits between strategy
and how the organization does things. Ingrained behavior does not change just because a new
strategy has been announced (Thompson & Strickland, 1993). Although formulating a consistent
strategy is a difficult task for any management team, making that strategy work by implementing
it throughout the organization is even more difficult (Hrebiniak, 2006).

2.1.2. Factor Affecting Strategy Implementation

A myriad of factors can potentially affect the process by which strategic plans are turned into
organizational action. Unlike strategy formulation, strategy implementation is often seen as
something of a craft, rather than a science, and its research history has previously been described
as fragmented and eclectic (Noble, 1999b). It is thus not surprising that, after a comprehensive
strategy or single strategic decision has been formulated, significant difficulties usually arise
during the subsequent implementation process. Noble further notes that even the best formulated
strategies may fail to produce superior performance for the firm if they are not successfully
implemented. Results from several surveys have confirmed this view: An Economist survey
found that a discouraging 57 percent of firms were unsuccessful at executing strategic initiatives
over a period of three years, according to a survey of 276 senior operating executives in 2004
(Allio, 2005).

9
According to the White Paper of Strategy Implementation of Chinese Corporations (2006)
strategy implementation has become “the most significant management challenge which all
kinds of corporations face at the moment”. The survey reported in that white paper indicates that
83 percent of the surveyed companies failed to implement their strategy smoothly, and only 17
percent felt that they had a consistent strategy implementation process. Great strategies are
worth nothing if they cannot be implemented (Okumus & Roper 1999). It can be extended to say
that better to implement effectively a second grade strategy than to ruin a first class strategy by
ineffective implementation. Less than 50% of formulated strategies get implemented (Mintzberg,
1994; Miller, 2002; Hambrick & Canella, 1989). Every failure of implementation is a failure of
formulation. It is thus obvious that strategy implementation is a key challenge for today’s
organizations. There are many soft, hard and mixed factors that influence the success of strategy
implementation, ranging from the people who communicate or implement the strategy to the
systems or mechanisms in place for co-ordination and control. Strategy implementation entails
converting the strategic plan into action and then into results (Thompson & Strickland,19a
considered successful if the company achieves its strategic objectives and targeted level of
financial performance. In deciding how to implement strategies, managers must have to
determine what internal conditions are needed to execute the strategic plan successfully. This
involves creating a series of tight fits between how things are managed internally and what is
required for first rate strategy execution between strategy and: organization structure,
organization’s skills and competencies, budget allocations, internal policies, procedures and
support systems, reward structure, strategy and the corporate structure. The tighter the fits the
more likely targeted organizational performance can actually be achieved. While the details of
strategy implementation are specific to every situation, certain operational and administrative
bases have to be covered no matter what the organization’s situation is (Thompson & Strickland,
1993)

2.1.3. Task of Strategy Implementation

These principal tasks crop up repeatedly in the strategy implementation process. Depending on
the organization’s circumstances, some of the tasks will prove more significant and time-
consuming than others. To devise an action agenda, managers have to determine what internal
conditions are necessary to execute the strategy successfully and then create these conditions as

10
rapidly as practical. The keys to successful implementation are to unite the total organization
behind the strategy and see that every relevant activity and administrative task is done in a
manner that tightly matches the requirements for first-rate strategy execution. The motivational
and inspirational challenge is to build such determined commitment up and down the ranks that
an enthusiastic organization wide crusade emerges to carry out the strategy and meet
performance targets as well as a concerted managerial effort to create a series of strategy-
supportive “fits”. The stronger the strategy supportive fits created internally, the greater the
chances of successful implementation. The process of strategy implementation therefore involves
two major steps namely operationalization of strategy or tactical issues and institutionalization or
administration of strategy. During strategy implementation, the strategy must be made
operational or ready for action thus making it ready for eventual implementation. This
operationalization of strategy involves breaking long-term corporate objectives to operational
short-term objectives and developing specific 8functional, unit or departmental strategies and
drawing action plans to achieve the objectives (Pearce & Robinson, 1996).

Policies to guide decision making must also be established, programs developed and procedures
on how things will be done determined. In addition responsibility should be assigned to specific
people, human resource aligned to strategy and strategy supportive budgets established. The
implementation phase also requires institutionalization of strategy that is, developing
organizational capability to a point where it is fully supportive of the new strategy. The reality of
strategy resides in its strategic actions rather than its strategic statements (Burgelman, Grove &
Meza, 2006). This involves action-oriented activities such as communicating strategic intentions
throughout the organization, matching strategy with organizational structure, matching strategy
with culture, selecting effective leadership and designing effective reward systems. These two
phases of strategy implementation are geared towards improving organizational performance.
Organizational performance comprises the actual output or results of an organization as

2.1.4. Thompson and Strickland Model

According to Thompson and Strickland Model (2003) implementation processes and activities or
consumption sets up processes that can be used to gear an organization towards set objective.
According to this model, several steps that an organization should undertake in order to have a

11
successful strategic plan implementation have been proposed. Each step has special task that
should be undertaken. In the first step, according to Thompson model, an organization should
have structure that supports strategy implementation i.e. appropriate people to task in the
organization, reinforcing relevant skills and capabilities in an organization through capacity
building and training. It also goes further and states that an organization should provide adequate
financial resources that will enable the strategy to be executed because for a strategy to be
executed sufficient funds should be available. The third step states that organization should have
inter-support units which promote development of policies and procedures that will enable the
organization to run smoothly and focus their energy towards one direction. It sets objectives and
goals. Thompson and Strickland Model (2003), Leadership in an organization according to this
model influences, motivate the staffs to be innovative promote teamwork in an organization.
Organization that have certain culture do have a special way of relating to stakeholders, every
organization should have a culture of how they want to be perceived hence leadership influences
value formation, conflict resolution shared values that are seen throughout the organization. The
factors in this model are relevant to this study because they show what an organization should
undertake in order to have successful implementation towards organization performance. It
shows how leadership leads to values formation, culture development, conflict resolution, and
motivation in an organization providing financial resources (budgeting). This dimension was
considered because it shows financial allocation and budgeting is relevant to the contribution of
strategic goals in the organization Thompson and Strickland Model (2003).

2.1.5. Ricky Griffin’s Model

According to Griffin (2007), the main focus in implementation is identifying perspective and
effective factors about implementation of strategies. According Ricky Griffin’s Model (2007),
the main factors that influence performance according to this model are: Leadership, which
provides direction, communication, motivation of staffs and setting up of culture and value in an
organization. By doing this, leaders offer direction and influences organization performance.
Another factor is organization structures which, according to this model, are division of labor,
decentralization of functions and setting up simple organization structures that will make
decision making faster. The third factor is Technology. Proper use of technology, job designing
can influence organization performance. Information control system, proper control system

12
which includes financial budgeting, information system, proper rules and procedures will
influence organization performance. Human Resource, recruitment of qualified personnel
promotion, job enrichment will enhance organization performance. This model is relevant to this
study because it shows ways in which an organization can do in order to influence their
performance. It has five basic functions that an organization should look into, they are
leadership, structures, technology, information control system, human resource each of this
functions have sub functions that should be done. This model helps us to understand
implementation and organization performance. Shows what is needed to be done in order to have
successful implementation.

2.1.6. Employee Empowerment

According to Hellriegel and Slocum, (2013) employee empowerment revolves around giving
employees the authority, skills, and self-control to perform their tasks. Further, Pearce and
Robinson (2007) defines empowerment as the act of allowing an individual or team the right and
flexibility to make decisions and initiate action. Brymer (1991) sees empowerment as a process
of decentralizing decision making in an organization, where managers give more autonomy to
their lower level and front line employees. In the same regard, Lincoln, Travers, Ackers &
Wilkinson (2012) view empowerment as the use of certain techniques to transform those without
power into equitable position. In this regard, it is clear that the concept of empowerment is the
practice of giving employees the authority to make decisions that enhance the processes without
referring to superiors. Employees who are competent aware of the strategy and their role to
participate in its execution.

2.1.7. Strategic Leadership

Functional leadership theory (Hackman & Walton, 1986; McGrath, 1962; Adair, 1988; Kouzes
& Posner, 1995) is a particularly useful theory for addressing specific leader behaviors expected
to contribute to organizational or unit effectiveness. This theory argues that the leader's main job
is to see that whatever is necessary to group needs is taken care of; thus, a leader can be said to
have done their job well when they have contributed to group effectiveness and cohesion
(Fleishman et al., 1991; Hackman & Wageman, 2005; Hackman & Walton, 2003. While

13
functional leadership theory has most often been applied to team leadership (Zaccaro, Rittman,
& Marks, 2001), it has also been effectively applied to broader organizational leadership as well
(Zaccaro, 2001). In summarizing literature on functional leadership (see Kozlowski et al. (1996),
Zaccaro et al. (2001), Hackman and Walton (1986), Hackman & Wageman (2005), Morgeson
(2005)), Klein, Zeigert, Knight, and Xiao (2006) observed five broad functions a leader performs
when promoting organization's effectiveness. These functions include environmental monitoring,
organizing subordinate activities, teaching and coaching subordinates, motivating others, and
intervening actively in the group's work.

From the begging of 20th century theories of leadership took place. At the very first the theories
were developed in 1900, which are known as Great Man theories. According to that theory
leadership is an innate ability that is who is born to lead. After such theories in 1930 Group
theory was proposed which stated that how leadership emerges and develops in small groups.
Trait theory was developed during 1940-50 which holds the concept that what universal traits are
common to all leaders. During 1950-60 Behavior theory was come into existence. This theory
emphasizes what key behavioral patterns result in leadership. After this theory another theory
was proposed during 1960-70, which is known as Contingency/Situational theory. Its main
concern about leadership is that which leadership behaviors succeeded in specific situations.
Excellence theory was developed in 1980 which holds the concept that what interaction of traits,
behaviors, key situations and group facilitation allows people to lead organizations to excellence.

Primarily by Management Science and Social Psychology researchers, which are limited in
perspective, excluding views of leadership developed in other disciplines, as well as in
Philosophy, History and Art. These theories are dominated by hierarchical, linear, male,
pragmatic and Newtonian perspective

Leadership is an important function in small business. Leadership and management represent

two completely different business concepts. Leadership is commonly defined as establishing a
clear vision, communicating the vision with others and resolving the conflicts between various
individuals who are responsible for completing the company vision. Management is the
organization and coordination of various economic resources in a business. Leadership can have
a significant impact on an organization’s performance (Hackman & Wageman, 2005).

14
2.1.8. Strategic organizational Structure

Organizational structures developed from the ancient times of hunters and collectors in tribal
organizations through highly royal and clerical power structures to industrial structures and
today's post-industrial structures.

As pointed out by Lawrence B. Mohr, the early theorists of organizational structure, Taylor,
Fayol, and Weber "saw the importance of structure for effectiveness and efficiency and assumed
without the slightest question that whatever structure was needed, people could fashion
accordingly. Organizational structure was considered a matter of choice... When in the 1930s, the
rebellion began that came to be known as human relations theory, there was still not a denial of
the idea of structure as an artifact, but rather an advocacy of the creation of a different sort of
structure, one in which the needs, knowledge, and opinions of employees might be given greater
recognition." However, a different view arose in the 1960s, suggesting that the organizational
structure is "an externally caused phenomenon, an outcome rather than an artifact.

In the 21st century, organizational theorists such as Lim, Griffiths, and Sambrook (2010) are
once again proposing that organizational structure development is very much dependent on the
expression of the strategies and behavior of the management and the workers as constrained by
the power distribution between them, and influenced by their environment and the outcome.

Organizational structures can inhibit or promote performance, depending how effectively the
supervisory relationships and workflow influence productivity. These define departmental
structure and the reporting hierarchy. Performance management involves goal-setting activities
and periodic reviews by managers in the reporting hierarchy. Without defined policies and
procedures that are consistently enforced throughout the organization, performance management
strategies can fail to achieve their desired goal of improving product and service quality for end-
user customers Lim, Griffiths, and Sambrook (2010).

Organizational structure defines the supervisory relationships, departmental structure and

workflow within a company. Performance management involves the systematic improvement of
individual and team performance through goal-setting and regular performance reviews.
Performance management systems and policies can be greatly influenced by a company's

15
organizational structure, and organizational performance goals can help to shape a company's
structure, as well. Understanding the interplay between these two concepts can help you to
design the most effective performance management systems for your organizational structure.

Organizational structure includes certain policies and procedures which are followed by the
employees when they are performing their day to day activities. It also includes the goal or
targets set by the company’s management for the organizational population to achieve. The
actual work flows that employees are encouraged towards their targets and goals, (Lim, Griffiths,
& Sambrook (2010).

2.1.9. Strategic Resource allocation

The decision of whether or not to fund a particular strategic initiative can have substantial
implications for the firm’s viability (Wheelwright and Clark 2002, Cooper et al. 2001, Chao and
Kavadias 2009). At the time such a decision is made, the initiative may not be fully defined, or
precisely understood. Knowledge regarding what it takes to execute a specific initiative is
dispersed across different levels of the firm’s hierarchy creating significant asymmetries of
information. As a result, the decision process (i.e which decisions are made by whom) that senior
management implements, influences both whether the initiative is funded, and if it is, what the
funding level will be. The fact that resource allocation processes (RAP) shape what initiatives a
firm funds is not, by itself, new (Bower 2004, Burgelman 2005, Bower and Gilbert 2005). Yet,
understanding how the chosen processes determine which initiatives the firm funds, is an
important operational element that determines strategy execution. The resource allocation
processes employed in practice fall within two broad categories. In a top-down process, senior
management dictates fixed levels of resources for middle management (i.e. project managers) to
oversee, whereas in bottom-up processes project managers are granted decision rights (Aghion
and Tirole 2007) to 38 determine the right level of resources (Maritan 2001, Chao & Kavadias
2010, Kavadias & Kovach 2010).

Resource allocation is a process and strategy involving a company deciding where scarce
resources should be used in the production of goods or services. A resource can be considered
any factor of production, which is something used to produce goods or services. Resources

16
include such things as labor, real estate, machinery, tools and equipment, technology, and natural
resources, as well as financial resources, such as money, and it has a great influence on how
efficiency and effective resource are allocated on organizational Performance.

2.1.10. Effective Communication

It is not easy to execute strategy when the strategy itself is not well understood. Poorly
communicating strategy to employees has a strong impact to strategy execution (Beer and
Eisenstat, 2010). Beer and Eisenstat avowed that a well-conceived strategy communicated to the
organization equals a well-executed strategy. The knowledge of the strategy and understanding it
are two different concepts. As such, for a strategy to be successfully executed these two concepts
have to be integrated.

According to Raps (2005), one of the reasons why strategy implementation processes frequently
leads to very challenging and complex problems or even fail, is the vagueness of the assignment
of responsibilities. Michlitsch (2000) asserts the need for people to know clearly what they are
supposed to do if the company wants to succeed. In addition, employees have to be given clear
guidance to enable them successfully executing the strategy. Wheelen and Hunger (2005) states
that lack of direction in the organization makes people to do their work according to their
personal view of what tasks should be done, how, and in what order. This therefore compromises
the priorities of the organization.

2.2 Empirical Review

The job of strategy implementation is to translate plans into actions and the intended results. The
test of successful strategy implementation is whether actual organization performance matches or
exceeds the targets spelled out in the strategic plan. Shortfalls in performance signify weak
strategy, weak implementation or both. The effectiveness with which a particular strategy is
implemented should strongly affect performance on dimensions on which the strategy is
expected to affect. Empirically, most strategy research studies employ the construct of business
performance to examine a variety of strategy content and process issues. For example, an article
concerning the use of financial and operational performance; through the summarization of two
seminal papers written by Venkatraman and Ramanujam (1986) and Kaplan and Norton (1992).

17
The study by Venkatraman and Ramanujam (1986) discusses evaluation of the measurement of
business performance by delineating the performance concept. Their study found out that
business performance, which reflects the perspective of strategic management, is a subset of the
overall concept of organizational effectiveness.

According to Venkatraman and Ramanujam financial performance improvement is central to

strategy research, their research shows that on average just 63% of the potential return of a
strategy is realized through the implementation. This is the Strategy-to-Performance gap which
as applied to business strategy indicates that the problem is not the strategy, but the
implementation despite enormous time and energy that goes into strategy development, many
companies have little to show for the effort. On average they deliver only 63 percent of the
financial performance promised by their strategies (Mankins & Steele 2005). Companies rarely
track performance against long-term plans and their multiyear expectations rarely meet
projections as much value is lost in translation (Kahneman, Slovic & Tversky, 1982).

Mankins and Steele break out the relative contributions of various factors to the performance
gap. On average, 7.5 percent of the value leaks away due to failing to have the right resources
available at the right time; 5.2 percent is lost due to poor communications; 4.5 percent to poor
action planning; and 4.1 percent to unclear accountability. However, they say a company can
close this gap and reap an increase in performance anywhere from 60% to 100% through proper
planning and implementation. A cultural multiplier effect is experienced when companies create
tight links between their strategies, plans, and performance, leading eventually to a culture of
over performance.

The empirical literature survey helps the development of the theoretical framework and
hypothesis for testing. There have been a lot of studies conducted on the topic and the following
were the summary of some of them. Organizational process includes operational planning,
resource allocation, people, communication, control and feedback. The various processes have
an impact on each other in one way or the other. For instance, the process of project initiation
and operational planning of the implementation activities affect communication, the resource
allocation, and the provision of training and incentives. Places emphasis on the need to use clear
multiple modes of communication (top-down, bottom-up, lateral, formal informal, internal, and

18
external, one time and continuous communication) to communicate the new strategy within and
outside the organization. The efforts and results of the implementation are to be monitored and
compared against predetermined objectives. The operational plans and communication are
regarded as key to monitoring the process (Okumus, 2001).

Ahuja (2003) indicated that executing strategy implies marshaling employees alongside
managers in order to put formulated strategies into action. Successful strategy implementation
requires discipline, commitment, sacrifice and tests manager's ability to motivate employees.
Interpersonal skills are critical for a successful strategy implementation. Implementation affects
all employees and employers in an organization. Each segment of an organization must position
them to answer questions such as actions to be taken to implement their part of the organization's
strategy (Ahuja, 2003).

2.2.1. Strategy Management and Strategy Implementation in Ethiopian Banks

Local studies made on the assessment of strategic management practice and strategy
implementation of Nib Bank by Dinberu (2016). Both primary and secondary data were collected
using questionnaires, interview and written materials. Simple random sampling was used to
collect primary information and accordingly descriptive statistics was used to analyze the data
gathered. Based on this, the finding of the study revealed that NIB’s practice of communicating
the strategy plan is poor and thorough participation of stakeholders is not realized. In addition,
the Bank’s weak use of SWOT analysis results, misalignment or linking strategic plan with work
unites and individual tasks are observed. When it comes to the performance measures, the
strategic plan lacks comprehensive performance measurements. Work unit and individuals’
performance measurements are not effective; if performance management is not linked with
strategic management. The researcher recommended that the bank should work on its strategic
plan communication, alleviate its weakness of utilizing its analysis, shall balance its performance
measures and link those measures with work unit and individual performances.

Another thesis entitled the assessment on strategic management practice in the case of Ethiopian
Insurance Corporation by Amelework (2015). The purpose of the research was assessing the
strategic management practices of EIC, both primary and secondary sources of data were used

19
for the research. The quantitative data analysis was done using descriptive statistics while the
qualitative data was analyzed using narrative form. The results indicated that the strategy
formulation process in EIC doesn’t participate all employees on a bottom up approach. Outlining
branches and districts aren’t also involved in the process. The process gives less emphasis to the
long term insurance aspect of the core process. The researcher recommended that as employee
engagement in strategy formulation encourages a sense of ownership of the strategy and further
develops organizational capabilities, EIC should make sure that all employees have a say in the
process. The top management or the process council and the strategic management team shall
make sure that the strategy formulation process involves districts and branches outside Addis.

A thesis entitled ‘Effect of strategy implementation on performance of commercial banks in

Kenya by Linet & Henry (2014), the purpose of this study was to determine the effect of strategy
implementation on performance of commercial banks in Kenya. The specific objectives of the
study were to determine the effect of operationalization of strategy on performance of the banks
and to determine the effect of institutionalization of strategy on performance of the banks. To
achieve these objectives, the study adopted correlational research design. The target population
was the forty three commercial banks in Kenya. Given the small number of commercial banks, a
census study was conducted. The data gathered was analyzed using descriptive statistics such as
percentages to summarize the data. Pearson’s correlation coefficient was used to determine the
nature and strength of the relationship between strategy implementation and organizational
performance. To determine the effect of strategy implementation on organizational performance,
a multiple regression model was developed. The results reveal that there is a moderately strong
relationship between strategy implementation and organizational performance. The researcher
recommended that for institutions to thrive and compete they must implement strategies
effectively. Most of this thesis usually focuses on strategy management practice, which shows
that they lack focus on strategy implementation as they try to cover all the four steps of strategic
management process. And even if the other research which was done by Dinberu focus on
strategy implementation the study did not consider organizational performance. Therefore this
research contributes a lot to the literature as it assesses the strategy implementation in connection
with organizational performance.

20
2.2.2. Previous Studies on determinates of bank profitability in Ethiopia

In this sub section of the study, the researcher presented the studies which have been conducted
on Ethiopian banks, regarding to the bank profitability and factors affecting the performance of
Ethiopian commercial banks related to strategy and other common factors, internal or bank
specific and external or macroeconomic factors to develop the current study by pervious
empirical studies below.

By Alemu (2015), Determinants of commercial banks profitability, the case study of Ethiopian
Commercial Banks. Demena (2011), determinants of commercial banks, by Abebe 2014,
Determinants of Financial Performance: An Empirical Study on Ethiopian banks profitability: an
empirical review of Ethiopian commercial banks by Belayneh (2011), factors affecting
profitability: an empirical study on Ethiopian banking industry by Amdemikael (2012),
determinants of commercial banks profitability: an empirical evidence from the commercial
banks of Ethiopia by Birhanu (2012), determinants of bank profitability: an empirical study on
Ethiopian private commercial banks by Habtamu (2012).

Alemu (2015), in his study examined the determinants of Ethiopian commercial banks
profitability. The study applied the balanced panel data of eight Ethiopian commercial banks that
covers the period 2002- 2013. Abebe, (2014).Carried out a study on determinants of financial
performance .And the study examined the determinants by using panel data of banks over the
period of 2002-2013. By using quantitative approach and the random effect model. The study
applied the fixed effect model rather than random effect model based on the hausman
specification test. Under this study, both internal and external factors were included. The internal
factors used in this study include capital structure; Income Diversification, operating cost and
bank size whereas the external factors are effective tax rate, real GDP growth and inflation.
Moreover, ROA and NIM were used as the performance measure.

Belayneh (2011) examined the determinants of Ethiopian commercial banks profitability. The
study applied the balanced panel data of seven Ethiopian commercial banks that covers the
period 2001- 2010. The paper used Ordinary Least Square (OLS) technique to investigate the
impact of some internal as well as external variables on major profitability indicator i.e., ROA,

21
The estimation results of his study show that all bank-specific determinants, with the exception
of saving deposit, significantly affect commercial banks profitability in Ethiopia. Market
concentration is also a significant determining factor of profitability. Finally, with regard to
macroeconomic variables, only economic growth exhibits a significant relationship with banks
“profitability.

The study made by Amdemikael (2012) examined the determinants of Ethiopian commercial
banks profitability. The study applied the balanced panel data of eight Ethiopian commercial
banks that covers the period 2001- 2011. The study adopts a mixed methods research approach
by combining documentary analysis and in-depth interviews to investigate the impact of some
internal as well as external variables on major profitability indicator i.e., ROA. The findings of
the study show that capital strength, income diversification, bank size and gross domestic
product have statistically significant and positive relationship with bank’s profitability. On the
other hand, variables like operational efficiency and asset quality have a negative and statistically
significant relationship with bank’s profitability. However, the relationship for liquidity risk,
concentration and inflation is found to be statistically insignificant.

Other research was made by Birhanu (2012), and examined the determinants of Ethiopian
commercial banks profitability. The study applied the balanced panel data of eight Ethiopian
commercial banks that covers the period 2001- 2011. The paper used Ordinary Least Square
(OLS) technique to investigate the impact of some internal as well as external variables on
profitability indicator i.e., ROAA, NIM the finding shows, all bank-specific determinants, with
the exception of bank size, expense management and credit risk, affect bank profitability
significantly and positively in the anticipated way. However, bank size, expense management
and credit risk affect the commercial banks profitability significantly and negatively. In addition
to this, no evidence is found in support of the presence of market concentration. Finally, from
macro-economic determinants GDP has positive and significant effect on both asset return and
interest margin of the bank. But interest rate policy has significant and positive effect only on
interest margin.

22
Habtamu (2012) examined the determinants of Ethiopian private commercial banks profitability.

The study applied the balanced panel data of seven Ethiopian commercial banks that covers the
period 2002- 2011. The paper used Ordinary Least Square (OLS) technique to investigate the
impact of some internal as well as external variables on profitability indicator i.e., ROA, ROE
&NIM, the finding shows The empirical results shows that bank specific factors; capital
adequacy, managerial efficiency, bank size and macro-economic factors; level of GDP, and
regulation have a strong influence on the profitability of private commercial banks in Ethiopia

Kebede (2014), examined the other factor (national banks regulation), under the title of the
impact of national banks regulation on banks performance. The study applied balanced fixed
effect panel regression for the data of six private commercial banks in the sample covered the
period from 2004 to 2013. Three regulatory factors affecting banks performance in terms of
return on asset and net interest margin were selected and analyzed. The results of panel data
regression analysis showed that NBE Bill and Credit cap had negative and statistically
significant impact on banks profitability but reserve requirement had negative and insignificant
impact on profitability. While measuring banks cost of intermediation through Net Interest
Margin three of the regulatory variables (i.e. NBE Bills, Reserve requirement and credit cap) had
negative and statistically significant effect on net interest margin. Among the control variables
bank size had positive and statistically significant effect on both performance measures, which
means ROA & NIM. Operating efficiency and GDP had positive and statistically insignificant
effect on ROA but both were statistically significant on NIM. Equity had positive and significant
effect on ROA but had negative and statistically insignificant on NIM. Inflation had positive and
insignificant effect on ROA but had positive and significant effect on NIM.

2.3 Conceptual framework

The framework for this study examine factors affecting strategy implementation as being a key
factor in improving organizational profitability as illustrated in figure one.

23
Figure 1: Relationship between Effective communication, strategic resource allocation,
leadership, organizational structure and employee commitment with organizational profitability

Independent Variables Dependent

Variable

Effective communication

Strategic resource allocation

Employee commitment Organizational Profitability

Leadership

Organizational structure

24
 CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3.1. Introduction

Research method is the process used to collect information and data for the purpose of making
business decisions. The methodology may include interviews, questionnaires, surveys and other
research techniques. The research methodology can be qualitative, quantitative or mixed
approach in nature that provide solutions for research questions and /or research problem. Also
help management to insight on existing problems and to devise ways to overcome the problems.

3.2 Research approach

The three common approaches for conducting a research are quantitative, qualitative, and mixed
Methods. The knowledge claims, the strategies, and the method all contribute to a research
approach that tends to be more quantitative, qualitative or mixed (Creswell 2003). The
quantitative approach involves the collection of quantitative data, which are put to rigorous
quantitative analysis in a formal and rigid manner while as the qualitative approach uses the
method of subjective assessment of opinions, behavior, factors and attitudes Borland (2001).
Quantitative research engages in systematic and scientific investigation of quantitative properties
and phenomena and their relationships Borland (2001). The research approach used in this study
mixed methods that provide solutions of the research problem requires both quantitative and
qualitative strategies.

3.3 Research Design

The study expected to investigate on the effect of strategic management Implementation on

organizational profitability of Oromia l Bank S.C branches in Addis Ababa City. The study
adopts both descriptive and explanatory research method by using mean, tables correlation and
regression analysis.

25
The explanatory research design used in this study provides accurate and valid representation of
the effect of strategic Implementation on organizational profitability ;( such as Effective
communication, strategic resource allocation, leadership, organizational structure and employee
commitment) on profitability of OB branches in Addis Ababa city explained. The descriptive
research design used to analyze the demographic pattern of the respondents in tables and the
effect of the variables on average.

3.4 Sample size and Sampling techniques

Target Population refers to the set of all elements belonging to a certain defined group to be
studied or to which research results are going to be generalized to. The target population in this
case comprises 129 employees of the bank who are working in Oromia Bank S.C branches in
Addis Ababa City. This constitutes District manager, Branch Managers, Customer Service
Managers, senior foreign officer, loan officer, Senior Customer Service Officers, Customer
Service Officers and Internal Control Officers .Employees outside Addis Ababa city, be not
involved since they are not reachable easily and the remaining segment of the population like
outsourced (subcontracted Employee,) temporary employees and non-clerical employees are not
involved since they have not perform professional services and aren’t considered as part sample
frame.

A stratified sampling technique applied to identify sample from the remaining target population.
A stratified sample can be defined as one in which every member of the population has an equal
chance of being selected in relation to their proportion within the total population (Denscombe,
2007:14). A stratified sampling chosen as the target population comprises of 9 strata. If the
population from which a sample is to be drawn doesn’t constitute a homogeneous group, then
stratified sampling technique applied so as to obtain a representative sample (Kohtari, 20004). In
this technique, the population is stratified into a number of non-overlapping subpopulations or
strata and sample items selected from each stratum. Proportional stratified sampling specifically
is the one in which the number of sampling units drawn from each stratum is in proportion to the
relative population size of that stratum. This sampling technique is advantageous since it assures
representation of all groups in sample population needed.

26
Sample frame

In total, the banks have more than 3000 employees but out of them 129 employees are found
under branches of Addis Ababa city. These l29 employees of the bank, which constitute the
sample frame of the target population.

Sample size

Sampling is the process of selecting a small number of elements from a larger target group of
population. The information gathered from the small group allows judgments to the larger
groups. While making sampling analysis, the research take maximum care to save time, to avoid
high cost of collecting the data, and also the cost of an incorrect inference or conclusion resulting
from the data. However, the research used optimum number of sampling to make representative
sample size and which minimizes the sampling error. Since it is not possible to study the whole
sample frame, Simple Random Sampling technique is installed in order to select the number of
sample respondents and reached a total number of 129 respondents the researcher takes all of the
population, since the population is small.

Strata :-is the group of population that have the same character in our case the position of the
employee used as strata and the way we use from each strata is as follows

Therefore the sample size is n = 129

Strata :-is the group of population that have the same character in our case the position of the
employee used as strata and the way we use from each strata is as follows

Employees by position Total Sample from the

population strata
District manager 1 (129*1)/129 = 1
Branch Managers 10 (129*10)/129 = 10
Seniors(CSM,LO,BA,IC,FO&SCO) 46 (129*46)/129 = 46
Customer Service Officers 72 (129*72)/129 = 72
total 129 129

Own survey, 2021

27
The research be used probability sampling techniques and from that stratified sampling
techniques. The table shows how we can select our sample from the given population by
stratified sampling technique.

3.5 Nature and d Sources of Data

The study be based on the collection of both primary and secondary data. Primary data gathered
through multiple data collecting techniques which are questionnaires and interview. The
questionnaires designed in close ended way, while the interview used semi structured methods. It
be designed for the concerned management staff whose task is directly related with strategy
implementation. Secondary data used to gather review from different published documents,
Annual reports, and other related documents from the organization.

3.6 Data gathering tools

Data collection tools refer to the devices/instruments used to collect data, such as a paper
questionnaire or computer-assisted interviewing system. Case Studies, Checklists, Interviews,
Observation sometimes, and Surveys or Questionnaires are all tools used to collect data. It
important to decide the tools for data collection because research is carried out in different ways
and for different purposes. The objective behind data collection is to capture quality evidence
that allows analysis to lead to the formulation of convincing and credible answers to the
questions that posed. This study utilized open ended and closed ended questionnaires and
secondary sources as the main tools for data collection.

To obtain relevant, detailed and factual information about the effect of strategic Implementation
on organizational profitability of Oromia Bank S.C branches in adis ababa citythe researcher
applied both primary and secondary data collection method. The primary data collected from
employees and bottom level Managers of the bank through questionnaire and interview.
Secondary data collected from customer suggestion book, bank module, web address, related
literatures and others.

28
Questionnaire: - This technique chosen because it is flexible and used to gather information
from large number of respondents. Besides, it is relatively inexpensive to administer and allow
respondents to fill out at their own convenience.

The questionnaire included Likert scale psychometric constructs with a scale ranging from 1-5
where each respondent required to rate each and every statement given describing a given
variable. The scale ranged from 5=Strongly Agree, 4=Agree, 3=Neutral, 2= Disagree and
1=Strongly Disagree. Each and every item in the psychometric constructs was meant to measure
a certain attribute of the main variable. These constructs set in unambiguous terms allowing the
respondents to react to them without wasting time. At the end of each Likert scale questions,
open ended questions included to allow the respondent give additional information that is not
captured in the Likert scales questions. This the section that enabled the study to capture vital
information directly from the respondents based on their understanding of their working
environment and the challenges they face on a daily basis.

3.7. Data gathering procedures

Data collection is the process of gathering and measuring information on variables of interest, in

an established systematic fashion that enables one to answer stated research questions, test
hypotheses, and evaluate outcomes The definition of data gathering procedure is that it is the
technique used to obtain the information used in a dissertation to substantiate the claims made by
a writer. To get the perfect outcome, you should use the best procedure.

The research qualitatively and quantitatively examined the effect of strategic Implementation on
organizational profitability of Oromia Bank S.C branches in adis ababa City with the help of the
following methods.

1. Questionnaires- a questionnaire with a standard set of questions addressed to managers

of credit and risk management, credit divisions, senior credit analyst, and controller
2. Interview- both structured and unstructured interviews conducted.
3. Annual report and documents of the banks and at the end of fiscal year.

29
The investigation focused generally on management level of the selected employees considering
the fact that with their position that are responsible for those implementing the strategy at the
same time who are responsible for success or failure.

3.8 Method of Data Analysis

The data analysis methods for this research both qualitative and quantitative. To analyze the data
obtained through questionnaire, descriptive analysis employed. Regarding the data collected
using qualitative approach both content and narrative analysis used. All the analysis performed
by SPSS (Statics package for social Science) and STATA. In the study descriptive and
econometric methods doing to be used for data analysis

3.7.1. Descriptive method

The difficulties of the researcher, while conducting the research, is not much significant but
some time constraint, cost, lack of quick accessibility of some information sources, and delay in
collection of distributed questionnaires observed. We use both quantitative and qualitative data
analysis. The research use different measurement of descriptive data analysis like mean, graph,
variance, standard deviation, frequency of sample that have the same character, percentage etc.

3.7.2. Econometrics method

The statistical analysis that the study is carried out by using STATA windows version 12.0 or
SPSS windows version 16.0.

The Econometrics model on conducted by using multiple linear regression with 95%
confidence interval. Multiple linear regression is the method used when there dependent variable
affected multiple independent. Multiple regression models, the model expressed as:

The specification of the multiple linear regression models is;

Log P/1-P = β0+ β₁ X₁ + β₂ X₂ + β₃ X₃ + β4 X4 + β5 X5 + ε

Y = Profitability of the bank (OB) = dependent variables;

30
 X₁, X2, X3 ….X5 = Independent variables;

ε = Error term;

β = Constant term;

P/1-P = p, high organizational profit and 1-p =low organizational profit

3.7.2.1. Regression

Regression is an extension of the simple correlation. The Regression Analysis is a statistical tool
used to determine the probable change in one variable for the given amount of change in
another. This means, the value of the unknown variable can be estimated from the known value
of another variable. It shows cause-and-effect relationship between the variables.

3.7.2.2. Correlation

The Correlation measures the “degree of relationship” between variables, say X and Y.

Correlation coefficient does not clearly indicate the cause-and-effect relationship between the
variables.

3.9 Research Design Quality

3.9.1 Reliability Test

Reliability refers to the consistency and dependability of a measuring instrument. One of the
internal consistency methods of assessing reliability, cronbach alpha coefficient, applied to check
if it is proper to rely on the outcome of the questionnaires. This coefficient measures the extent to
which an instrument yields consistent results.

3.9.2 Validity

Validity is the most critical criterion that indicates the degree to which an instrument measures
what it is supposed to measure (Kothari, 2004). Among the various forms of measuring validity,

31
the content validity the important one. Content validity is the extent to which a measuring
instrument provides adequate coverage of the topic under study (Kothari, 2004). As per the same
author, content validity is good if an instrument contains a representative sample.

3.10 Ethical Consideration

Concerning ethical consideration, an attempt make to ensure all respondents to keep their
identity and respondents as confidential in order for all the information to be given with
complete confidence .The questionnaire are dispersed based on willingness of each respondents.
In addition, the purpose of the questionnaire and interview clearly revealed. Also the research put
any sources of the words and statements that the research used in the research.

32
 CHAPTER FOUR

DATA ANALYSIS AND DISCUSSION OF FINDINGS

This chapter deals with the analysis, discussion and presentation of quantitative and qualitative
data identified in chapter three. The data were analyzed based on STATA analysis; in the
analysis descriptive statistics, correlation, linear regression, and ANOVA analysis was used.
Moreover, the average results of each explanatory variable in the responses are analyzed using
“Transform” in stata to check the average result of the independent variables, also to see
correlation and regression of explanatory variable with explained variable. Appropriate
interpretation of results and tables are included for better presentation and to show the result. A
total of 129 questionnaires were distributed to employees of the bank to investigate the effect
on organizational profitability of OB branches in Addis Ababa city 120 questionnaires were
filled up and returned making the response rate 93 percent. This indicates that; -the bank under
study was committed to give information relevant to the research understudy

4.1 Reliability test

Reliability defined as the degree of consistency that the instrument or procedure demonstrates
(Best &Kahn, 2006). Reliability test indicates that how the item in a test does positively related
to each other in the reliability coefficient. According to the result all the result of the reliability
test, the closer the cronbache’s Alpha is to the higher internal consistency reliability. If the
reliability is less than 0.60 then it is considered as poor. If, it is in the range of 0.70, it is
considered as acceptable. As for those which are more than 0.80, it is considered as good
(Sekaran, 2007).

33
Table 4.1 Cronbach’s Alpha test result

Cronbach’s Alpha test result of the study

Alpha or profitability emplcommit orgstrctu restresalloc communication leadrship, item item-test

item-rest inter item

Item | Obs Sign correlation correlation covariance alpha

orgprofita~y 120 + 0.8303 0.7441 .0312534 0.7991
emplcommit 120 + 0.5940 0.4664 .0393997 0.8478
orgstrcture 120 + 0.7857 0.7058 .0348643 0.8136
stresalloc 120 + 0.7673 0.6481 .0325398 0.8166
communicat~n 120 + 0.7925 0.6460 .0294804 0.8220
leadrship 120 + 0.7786 0.6364 .0305461 0.8215
Test scale .033014 0.8461

Source: Own survey, 202

As table 4.1 above depicted the overall variables Cronbache’s Alpha value showed 0.8461 which
is acceptable reliability internal consistency of Overall Variables. From the variables data all
variables on average showed the cronbache’s Alpha value of 0.8461 is greater than 0.7 which
means the data are at acceptable range of reliability in internal consistency.

4.2 Description of Demographic pattern

In this part of the study, brief discussions of the descriptive statistics of each demographic,
independent and dependent variables gathered from primary data are presented. The independent
variables such as employee commitment, organizational structure, strategic resource allocation,
Effective communication, leadership used in this study were assessed, analyzed, and interpreted
o show their effect on organizational profitability of Oromia bank s.c branches in Addis Ababa
city

34
4.2.1 Distribution of gender

Table 4.2 Gender (Sex) of respondents

Frequency Percent Cumulative Percent

male 73 60.83% 60.83
Female 47 39.17% 100%
TOTAL 120 100%

Source: Own survey, 2022

Table 4.2 shows the gender or sex of the respondents. Out of all distributed questionnaires 129
the returned was 120 with responses. The respondents were all of the employees selected and the
gender profile of the respondents that responded to the questionnaires are male (73 respondents)
and they constituted 60.83% whereas female respondents (47 respondents) covered 39.17% of
the total.

4.2.2 Level of education

Table 4.3 Level of education of respondents

Frequency Percent Cumulative Percent

Master’s Degree 31 25.83% 25.83%
1ST Degree 89 74.17% 100%
Total 120 100%

Source: Own survey, 2022

Table 4.3 above shows the education level of the respondents. The highest numbers of
respondents from the total respondents were first degree graduates and their frequency is 89
which constituted 74.17. % and the other 25.83% of the respondents are graduates of Master’s
Degree and their frequency is 31.

35
4.2.3 Work Experience

Table 4.4 Work Experience of respondents

Frequency Percent Cumulative Percent

1 to 3years 27 22.5% 22.5%
4 to 6 years 49 40.83% 63.33%
7 to 10 years 31 25.83% 88.16%
Above 10 years 13 10.84% 100%
Total 120 100%

Source: Own survey, 2022

Table 4.4 shows the work experience status of the respondents. Twenty seven (27) respondents
have one to three years of work experience which constitutes 22.5%; the other 49 respondents
have four to six years’ experience that constitutes 40.83%. Respondents that have seven to ten
years work experience are 31in number which constitutes 25.83%. In addition, there are 13
respondents who have work experience above ten years and their percentage is 10.84%.Here, I
learnt that respondents with higher the number of work experience have better knowledge about
the key role of strategic implementation for organizational profitability.

4.2.4 Work position

Table 4.5 Work position of respondents

Employees by position Frequency Percent Cumulative Percent

District manager 1 0.83 0.83
Branch Managers 8 6.67 7.5
Seniors 43 35.83 43.33
Customer Service Officers 68 56.67 100
total 120 100

Own survey, 2022

36
In the above table 4.5, respondents covered 0.83% of the respondent is district manager those
who is managing the operation of the branches under district with cooperation: 8 respondents
covered 6.67% of respondents are branch managers, who have good banking operation
experience; respondents that constituted 43(35.83%) are seniors who have more than five years
work experience and they are well aware of effect of strategic implementation ; 56.67% of the
respondents who consisted 68 number are customer Service Officers; they directly serve to
customers at front line and are well understand the test and preference of customers.

4.3 Descriptive Statistics of Dependent and Independent Variables

Table 4.6 Description of Dependent and Independent Variables

Variable

Communication
Organizational

Organizational
commitment
profitability

leadership
Employee

Strategic
structure

resource

Obs 120 120 120 120 120 120

Mean 3.58 3.74 3.71 3.55 3.56 3.38
Std.Dev. 0.79 0.69 0.68 0.84 0.95 0.85
Min 1.38 1.57 1.86 1 1 1
Max 5 5 5 5 5 5

Source own survey, 2022

a) Organizational profitability

As can be seen from the table 4.6 above the mean value of Oromia Bank S.C branches in Addis
Ababa city average profit is 3.58.If all explanatory variables appropriately applied, profit was
increase. It is also noted that Organizational profitability between 1.38 and 5 or the minimum
profit is 1.38 while the maximum profit is 5. The standard deviation result for Organizational
profitability is 0.79 which indicates that the Organizational profitability varies due to the
explanatory variables effect.

b) Employee commitment
37
As can be seen from the table 4.6 above the mean value of Oromia bank S.C branches in Addis
Ababa city average employee commitment is 3.74. It is also noted that employee commitment
between 1.57 and 5 or the minimum employee commitment rating is 1.57 while the maximum
employee commitment rating is 5. The standard deviation result for employee commitment is
0.69 which indicates that the employee commitment varies from the true mean.

c) Organizational structure

As can be seen from the table 4.6 above the mean value of Oromia bank S.C branches in Addis
Ababa city average organizational structure is 3.71. It is also noted that organizational structure
between 1.86 and 5 or the minimum organizational structure rating is 1.86 while the maximum
organizational structure rating is 5. The standard deviation result for organizational structure is
0.68 which indicates that the Organizational structure varies from the true mean.

d) Strategic resource allocation

As can be seen from the table 4.6 above the mean value of Oromia bank S.C branches in Addis
Ababa city average Strategic resource allocation is 3.55. It is also noted that Strategic resource
allocation between 1 and 5 or the minimum Strategic resource allocation rating is 1 while the
maximum Strategic resource allocation rating is 5. The standard deviation result Strategic of
resource allocation is 0.84 which indicates that the employee commitment varies from the true
mean.

e). Effective communication

As can be seen from the table 4.6 above the mean value of Oromia bank S.C branches in Addis
Ababa city average of Effective communication is 3.56. It is also noted that Effective
communication between 1 and 5 or the minimum Effective communication rating is 1 while the
maximum Effective communication rating is 5. The standard deviation result for Effective
communication is 0.95 which indicates that the Effective communication varies from the true
mean.

f) Leadership

38
As can be seen from the table 4.6 above the mean value of Oromia bank S.C branches in Addis
Ababa city average of Leadership is 3.38. It is also noted that Leadership between 1 and 5 or the
minimum Leadership rating is 1 while the maximum Leadership rating is 5. The standard
deviation result for Leadership is 0.85 which indicates that the Leadership varies from the true
mean.

4.4 Inferential Statistics

4.4.1 Correlation Analysis

The Correlation Analysis is the statistical tool used to study the closeness of the relationship
between two or more variables. The correlation analysis is the most widely used method. The
variables are said to be correlated when the movement of one variable is accompanied by the
movement of another variable. In the correlation analysis, there are two types of variables-
Dependent and Independent. The purpose of such analysis is to find out if any change in the
independent variable results in the change in the dependent variable or not.

Positive and Negative Correlation: Whether the correlation between the variables is positive or
negative depends on its direction of change. I.e. The value of r ranges between any real number
in correlation is from -1 to 1. The correlation is positive if both the variables move in the same
direction, i.e. Values of r close to 1 implies that there is a positive linear relationship between the
data. When one independent variable increases the other dependent variable on average also
increases and if one independent variable decreases the other dependent variable also decreases.
The correlation is said to be negative when both the variables move in the opposite direction, i.e.
Values of r close to -1 implies that there is a negative linear relationship between the data. When
one variable increases the other decreases and vice versa. But if the Values of r close to 0 imply
that there is little to no linear relationship between the data.

The correlation is said to be linear when the amount of change in one variable is the same as the
amount of change in another variable or the tends to bear a constant ratio; whereas the

Correlation is called as non-linear or curvilinear when the amount of change in one variable does
not bear a constant ratio to the amount of change in the other variable. Thus this study falls on

39
non-linear or curvilinear correlation. The researcher studied these carefully to determine the
correlation used to identify the extent to which the variables are correlated.

Table 4.7 Correlation of dependent with independent variable

orgpro~y orgpro~ emplco~t orgstr~e stresa~c commun~n leadrs~p

y
orgprofita~y 1.0000
emplcommit 0.4158 1.0000
orgstrcture 0.6410 0.5441 1.0000
stresalloc 0.6791 0.5457 0.6495 1.0000
communicat~n 0.5578 0.3136 0.5006 0.4790 1.0000
leadrship 0.5981 0.3184 0.4766 0.5375 0.6813 1.0000

Source: Own survey, 2022(from STATA correlation test table)

In the above table 4.7 the calculated correlation showed there is relationship between dependent
variable (organizational profitability) and the other five independent variables. As per the table,
all explanatory variables have positive correlation with organizational profitability. That means
when any of the independent variable effectively implemented, the organizational profitability of
the bank also increases. The vice versa is also true.

Although the independent variables (employee commitment, organizational structure, strategic

resource allocation, Effective communication and leadership) have positive relationship with the
dependent variable (organizational profitability), their correlation is Non-Linear (Curvilinear);
because, the amount of change in one of independent variables does not bear a constant ratio to
the amount of change in the dependent variable or organizational profitability.

All independent (explanatory) variables are positive relationship with organizational profitability
also they correlation is moderate except employee commitment is weak relationship and positive.
(Armitage P, Berry G.)

40
The assumptions for Pearson correlation coefficient are as follows: level of measurement, related
pairs, absence of outliers, and normality of variables, linearity, and homoscedasticity. Level of
measurement refers to each variable. For a Pearson correlation, each variable should be
continuous.

4.4.2 Discussion of the Regression Analysis Result

Regression is an extension of the simple correlation. The Regression Analysis is a statistical tool
used to determine the probable change in one variable for the given amount of change in another.
This means, the value of the unknown variable can be estimated from the known value of
another variable. It shows cause-and-effect relationship between the variables. The degree to
which the variables are correlated to each other depends on the Regression Line. (Aitkin, M. A.
(1974).

The regression also tells about the relationship between the two or more variables. However,
there are two important points of differences between Correlation and Regression. These are:
The Correlation Coefficient measures the “degree of relationship” between variables, say X and
Y whereas the Regression Analysis studies the “nature of relationship” between the variables. .
(Aitkin, M. A. (1974).

Correlation coefficient does not clearly indicate the cause-and-effect relationship between the
variables, i.e. it cannot be said with certainty that one variable is the cause, and the other is the
effect; whereas, the Regression Analysis clearly indicates the cause-and-effect relationship
between the variables. The regression analysis is widely used in all the scientific disciplines. In
this study, it plays a significant role in measuring or estimating the relationship among the
independent and dependent variables.

Andrews, D. F. (1974).A robust method for multiple linear regressions.

Assumptions

There are seven "assumptions" that underpin linear regression. If any of these seven assumptions
are not met, you cannot analyze your data using linear because you have not get a valid result.

41
Assumption #1: Your dependent variable should be measured at the continuous level.

Assumption #2: Your independent variable should be measured at the continuous or
categorical level.

Assumption #3: There needs to be a linear relationship between the dependent and

independent variables.

Assumption #4: There should be no significant outliers. Outliers are simply single data points
within your data that do not follow the usual pattern.

Assumption #5: You should have independence of observations, which you can easily check
using the Durbin-Watson statistic, which is a simple test to run using Stata.

Assumption #6: Your data needs to show homoscedasticity, which is where the variances along
the line of best fit remain similar as you move along the line

Assumption #7: Finally, you need to check that the residuals (errors) of the regression line
are approximately normally distributed.

The multiple linear regression equation is as follows:

Y= β0+ β₁ X₁ + β₂ X₂ + β₃ X₃ + β4 X4 + β5 X5 + ε

where Ŷ is the predicted or expected value of the dependent variable, X1 through Xn are n
distinct independent or predictor variables, b0 is the value of Y when all of the independent
variables (X1 through X5) are equal to zero, and b1 to b5 are the estimated regression
coefficients. Each regression coefficient represents the change in Y relative to a one unit change
in the respective independent variable. In the multiple regression situations, b1, for example, is
the change in Y relative to a one unit change in X1, holding all other independent variables
constant (i.e., when the remaining independent variables are held at the same value or are fixed).
Again, statistical tests can be performed to assess whether each regression coefficient is
significantly different from zero.

42
Accordingly, the estimated regression coefficients for the value of dependent variable
(Organizational Profitability) in this study is determined by the constant value

Organizational Profitability = 0.11 + -0.07 of Employee Commitment + 0.39 of Organizational

Structure +0.32 of Strategic Resource Allocation+ 0.14 of Communication + 0.13 of Leadership

Table 4.8 Regression Table

Source SS df MS Number of obs = 120

F( 5, 114) = 34.21
Model 4.40164996 5 .880329991 Prob > F = 0.0000
Residual 2.93349659 114 .025732426 R-squared = 0.6001
Adj R-squared = 0.5825
Total 7.33514655 119 .061639887 Root MSE = .16041

orgprofitab~y Coef. Std. Err. t P>|t| [95% Conf. Interval]

emplcommit -.0707574 .0899411 -0.79 0.433 -.2489301 .1074152
orgstrcture .3923449 .1069783 3.67 0.000 .1804217 .6042681
Stresalloc .3164752 .0752323 4.21 0.000 .1674407 .4655097
communication .143634 .064516 2.23 0.028 .0158284 .2714396
leadrship .1284114 .067083 1.91 0.058 -.0044795 .2613023
_cons .1147818 .1096367 1.05 0.297 -.1024077 .3319714

Source: Own survey, 2022

In this section, the relationship between the independent variables and dependent variable was
discussed on the basis of the findings on this study. The nature of growth of dependent variable
i.e. organizational profitability is measured by the independent variables. On the above
regression outputs, the cause on independent variables has an effect on dependent variable. P-
value indicates at what precession level of each variable is significant. Hence, P-value is p< 0.05
means that there is a relationship between the dependent variable (organizational profitability)
and independent variable (employee commitment, organizational structure, strategic resource
allocation, communication, leadership) is significant.
43
The R-squared value measures how well the regression model explains the actual variations in
the dependent variable. R-squared values range from 0 to 1 and are commonly stated as
percentages from 0% to 100%. An R-squared of 100% means all movements of dependent
variable are completely explained by movements in the independent variable. A high R-squared,
between 85% and 100%, indicates the dependent variable performance moves relatively in line
with the independent variables. (Brooks,2008). As per the result of the Regression analysis
model shown on table 4.8 above, R-squared statistics and the adjusted-R squared statistics results
are 60.01% and 58.25% respectively. The adjusted R squared value of 58.25% indicates the
organizational profitability moves in with the independent variables. Thus these variables
collectively, are good explanatory variables to identify the organizational profitability.

The regression of F-statistic 34.21 and the p-value of zero in the above table 4.8 reveal that the
null hypothesis that all of the coefficients are jointly zero should be rejected. Thus, it implies that
the independent variables shown under the table 4.8 above are able to explain variations in the
dependent variable that is organizational profitability.

The estimated model coefficient shows that the all independent variables of the study are
significant at 5% level of significance and 95% level of confidence except employee
commitment and leadership. The Unstandardized coefficients indicate how much the dependent
variable varies with an independent variable when all other independent variables are held
constant. Thus, it infers the organizational structure and strategic resource allocation contributes
the most to the effective strategy implementation on organizational profitability Oromia Bank
S.C of branches in Addis Ababa city, followed by effective communication, leadership but
employee commitment affects it negatively; this means there is a lack of motivation beside the
employee of the Oromia Bank S.C of branches in Addis Ababa city.

44
4.4.3. Hypothesis testing

Table 4.9 Hypothesis testing

Model Unstandardized T (p)Sig.

Beta Std. Error

(Constant) 0.11 0.11 1.05 0.297
EMPLCOMMIT -0.07 0.01 -0.79 0.433
ORGSTRCTURE 0.39 0.01 3.67 0.000

STRESALLOC 0.32 0.75 4.21 0.000

COMMUNICATION 0.14 0.64 2.33 0.028
LEADRSHIP 0.13 0.07 1.91 0.058

Source: Own survey, 2022

(H1):- Employee’s commitment has a negative effect on organizational profitability of Oromia

Bank S.C branches in Addis Ababa city

According to the coefficient table 4.9 above statistically stated P-value of 0.433 with
corresponding Beta value of -0.07. Which is insignificant that is employee commitment has
insignificant and negative effect on organizational profitability; hence the null hypothesis (H0) is
accepted. However Employee’s commitment is rejected by the f-statistics with 0.000 p-values.

(H2):- Organizational structure has a positive effect on organizational profitability of Oromia

Bank S.C branches in Addis Ababa city.

According to the coefficients table 4.9 above statistically stated P-value of 0.000 with
corresponding Beta value of 0.39 which means significant that is organizational structure has
significant and positive effect for organizational profitability; hence the null hypothesis (H0) is
rejected.

(H3):- There is a significant relationship between strategic resource allocation and organizational
profitability of Oromia Bank S.C branches in Addis Ababa city

45
According to the coefficients table 4.9 above statistically stated P-value of 0.000 with
corresponding Beta value of 0.32 which means significant that is strategic resource allocation has
significant and positive effect for organizational profitability; hence the null hypothesis (H0) is
rejected.

(H4):- Effective communication has a significant effect on organizational profitability of Oromia

Bank S.C branches in Addis Ababa city.

According to the coefficients table 4.9 above statistically stated P-value of 0.00 with
corresponding Beta value of 0.14 which means significant that is effective communication has
significant and positive effect for organizational profitability; hence the null hypothesis (H0) is
rejected.

(H5):- Leadership has a positive effect on organizational profitability of Oromia Bank S.C
branches in Addis Ababa city.

According to the coefficients table 4.9 above statistically stated P-value of 0.58 with
corresponding Beta value of 0. 13 Which means insignificant that is systematic leading of
leadership has insignificant contribution or effect for the organizational profitability; hence the
null hypothesis (H0) is accepted. However leadership is rejected by the f-statistics with 0.000 p-
values.

From the open ended question Respondents rate the overall Strategy Implementation of OB S. C
branches in Addis Ababa city to achieve the planned profit out of 100% is 64.41 on average this
is almost the same with the result of the regression. The implication is organizational
profitability is the effect of strategic implementation on organizational profitability is taken or
cover 64.41%.

The other comment respondents regarding the subject of the research.is the respondents said that
the topic is best it needs further research and it is very important for the organization and the
suggestion(s) they give to achieve the planned profit or to implement strategy effectively it to
enhance the profitability of the bank is the bank should keep the benefit of employees and create
more motivation a on them and advice the to work further and the bank has some unfair action

46
at the time of promotion that dissatisfy the employee and kills the motivation of employees and
most of them says in order to make the bank profit the bank should improve its organizational
structure and leadership strategy at the time of strategic implementation.

Primarily, five years profit growths of the bank are presented by table based on OB Annual
Report. In order to carry out completed research activity; data are gathered from proper or
relevant sources. According to (Yuqi, 2006), secondary data has its own advantages.

Secondary data sometimes give higher quality data, compared to primary data to conduct
longitudinal studies and the permanence of data. Secondary data provides a source of data of
both permanently available and feasible that can be checked easily by others. Therefore, in this
study the researcher used secondary data which increases the dependability and it is five years
audited financial statements of the bank which are readily available in the hands of OB branches
in Addis Ababa city.

Table 4.10 Five years Trend of profit growth OB branches in Addis Ababa city in million

Fiscal year profit Variance %age increase

2016/17 48.10
2017/18 55.23 7.13 14.81
2018/19 60.58 5.34 9.68
2019/20 67.11 6.53 10.78
2020/21 73.34 6.24 9.29

Source: Five years Annual Report of OB branches in Addis Ababa city

Hence, as per the annual report of OB branches in Addis Ababa city, total profit are growing at
increasing rate as shown on the table 4.10 above. The increasing percentage of profits in the
fiscal year ending June 30, 2016/17 over the fiscal year ending June 30, 2015/16 is 14.81%,
whereas the increase in the fiscal year ending June 30, 2017/18 over June 30, 2016/17 is 9.68%,
the profits increase in fiscal year ending June 30, 2018/19 over June 30, 2017/18 is 10.78%, and
the percentage increase on June 30,2019/20 over June 30, 2018/19 is 9.29%. The improvement in
profits of all financial years is increased at increasing rate. This is because the bank implements
the strategy effectively.

47
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

This chapter deals with summary, conclusions and recommendations that are drawn based on the
findings of data analysis and discussion in the fourth chapter of the study. The chapter is
classified into three sections. The first section deals with the general summary, the second
section deals with the conclusion of the study and the third section deals with possible
recommendations.

5.1 Summary of Findings

The purpose of this study was to investigate the effects of strategic implementation on
organizational profitability: Case Study of OB branches in Addis Ababa city. Moreover,
organizational profitability enables the bank to increase their capital to more and more that helps
the bank for more achievement and growth. The objective of the study is to determine the effect
of strategic implementation on organizational profitability a case study of OB branches in Addis
Ababa city. From the analysis the effect of strategic implementation is positive and significant on
organization profitability according to the regression and F-statistics result

The Organization structure, effective resource allocation, effective communication and

leadership of the bank is good for strategic implementations that enhance the profitability of the
banks and a positive impact on Organizational profitability of OB branches in Addis Ababa city.
But the employee commitment has negative effect on organizational profitability and the
employee of the bank has lack of motivation from themselves and lack of inspiration from their
supervisors.

Therefore, Organizational profitability is the major and crucial function of banking business
operations. Since strategic implementation is not a onetime activity, the bank should strive hard
to continuous of effective strategic implementation without fail.

48
5.2 Conclusion

In the descriptive statistics both independent and dependent variable were analyzed. The
relationship between independent variables such as employee commitment, organizational
structure, strategic resource allocation, communication, and leadership over the dependent
variable that is Organizational profitability were analyzed. As per the descriptive statistics result
all independent variables have positive relationship with the dependent variable or
Organizational profitability; because, the movement of one of the independent variables was
affected the movement of dependent variable.

The other independent variable tested was organizational structure, strategic resource allocation,
and communication showed that it has positive as well as significant relationship with
organizational profitability. The practice of organizational structure, strategic resource allocation,
and communication for a bank is appreciable and good in case of effective strategic
implementation the affect our organizational profitability. However employee commitment there
is a problem because the bank has not gain the maximum profit due to lack of its employee
motivation and commitment. The bank leadership strategy is almost good it has positive effect
on organizational profitability but its effect also insignificant.

The variables are said to be correlated when the movement of one variable is accompanied by the
movement of another variable. Hence, based on STATA software, correlation analysis is used in
this study to check the closeness of variables.

The F value is measurement of how different the means are relative to variability within the
variables. Accordingly, the F result in the study model F-statistics is F (5, 14) is 34.21 with p-
value of 0.000 It also shows that the significance value is 0.000, which is p < 0.05; it means that
there is a significant variation between independent variables such as employee commitment,
organizational structure, strategic resource allocation, communication, and leadership when
compared with their contribution to dependent variables. The test statistic reveals that the null
hypothesis that all of the coefficients are jointly zero and should be rejected. Thus, I can
conclude that employee commitment, organizational structure, strategic resource allocation,

49
communication, and leadership have variable relationship or variable rates of contribution to
organizational profitability.

The R-squared value measures how well the regression model explains the actual variations in
the dependent variable. An R-squared of 100% means all movements of dependent variable are
completely explained by movements in the independent variable. Accordingly, the adjusted R
squared value of 58.25 % indicates the bank’s profitability moves in line with the independent
variables. Thus these independent variables collectively, are good explanatory variables to
identify the strategic implementation of the bank that enhance the profitability.

5.3 Recommendation

Based on the findings of the study and conclusions drawn, the following recommendations are
forwarded:-

 Leadership qualities that are education background, leadership skills (conceptual,

technical and human skill), Leadership experience, attitudes, and other characteristics of
people required by a specific position are great impact on the implementation of strategy.
Therefore, it is recommended that the bank leaders should be equipped with both
professional and leadership competencies.
 Leader’s professional competency rests on a particular expertise of certain professional
area that helps decision making, case analysis, problem solving and Innovation skills.
Leadership competency, which refers to how the leader understands different levels of
leadership responsibility and kinds of leadership approach applied appropriately to the
right level.
 The study reveals that there is negative relationship between employee commitment and
organizational profit. So The bank has to give training program for every employees of
the bank whether the employee is experienced or not in other banking industry because
every employee of the bank needs to have a clear knowledge about the goals, missions,
organizational structure and to work by understanding what is expected from them and
create a concept of belongingness’ on them.
 The human resources and technologies are critical to achieve the strategies objectives of

50
 the bank. The study recommends that the bank should be better to launch continuous
professional development and short term training programs to upgrade the competencies
of employees to solve shortage of trained and certified manpower in the sector and also
implementing of advance technology like cost effective construction technology, City net
etc.
 Communications one of the most important vehicles for successful implementation.
Therefore, it is recommended that the OB should adapt an effective and timely
communication system. Two way communication systems should be used across the
offices and departments which allow participation of staffs in questioning, criticizing and
giving feedback on the bank strategy implementation. This helpful to create a team spirit
and shared accountability as well as enhances participation of employees.
 Regarding with the organizational structure it is recommended that the top management
and concerned bodies should take initiations to amend the current organizational structure
of the OB to make in line with and flexibly adjusted to the strategy and not too
hierarchical which foster the decision making process.
 It is further recommended that the bank shall better to introduce a culture of
innovativeness or new way of doing things that helps to foster strategy implementation.

51
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 Appendix

Rift Valley University

Sidist Kilo Campus
College of Business and Economics
Department of Business Administration

Questionnaires to be filled by employees of OB S.C branches in Addis Ababa city

The purpose of this questionnaire is to enable me to carry out a research for the partial
fulfillment of master’s degree of Master of Business Administration. The research focuses on
Oromia Bank S.C branches in Addis Ababa city. The topic of “The effect of strategy
implementation on organizational Profitability “in case of OB branches in Addis Ababa
city. Factors affecting strategy implementation questionnaires are tools used to collect data from
people regarding to the title. Hence, to gather information, I kindly seek your assistance in
responding to the questions listed below. Any information you present will be kept utterly
confidential and will be used only for academic purpose. Your cooperation and prompt
response will be highly appreciated.

N.B: Writing your name is not necessary

Put “√” for your choice in the box provided

Contact Address

If you have any question, please contact me and I am available as per your convenience at
(Mobile: 09-65-51-27-63)

Thank You!!

57
Part1: Demographic Information

1. Gender

1. Male 2. Female

2. Age

1. Under 25 years 2. 25-35years 3.36-45years 4. 46 years and above

3. Educational level

1. Certificate 2. Diplomas 3. BA/BSC 4. MA/MSC/MBA and

above

4. Position

1. District manager 2. Branch Managers 3. Seniors officer (CSM, LO, BA, IC,
FO&SCO) 4 Branch sales&CSO 5. Other________________

5. How long have you been employee of Oromia International Bank S.C?

1. Less than 1 year 2.2– 3 years 3.4 – 5 years 4. 6 years and above

6. Other (if any) ________________________

Part 2: In relation to the impact of Strategy implementation on Organizational profitability

in OIB branches in adama town

Please to the statement below in the table, kindly rating each and every statement given
describing a given variable 5= Strongly Agree, 4=Agree, 3=Neutral, 2= Disagree and
1=Strongly Disagree and give an explanation to the open –ended questions.
Extent

58
1. Employees Commitment 5 4 3 2 1
1.The Bottom managers create a better condition that encourages commitment to
the strategic Implementation.
2.Employee empowerment is considered critical in the implementation success.

3. Employee competencies is critical factors in the success of strategy

implementation.
4.The employee’s commitment implement strategy effectively is commendable.
5.Procedures is committing the human resources to improve the organizational
profit.
6.The bank gives authority, skills, and self-control to perform their tasks for
their employees.
7. The bank allows an individual to make own decisions,
2. Organizational Structure 5 4 3 2 1

1.There is a well-defined organizational structure to generate the required profit

2. There is a structure that supports decisions being implemented to achieve the

profit goals.
3. Lines of communication encourage the flow of information OIB to implement
the strategy effectively.
4. The Organizational structure of the bank is flexibly adjusted to support
strategic implementation.
5.Organizational Structure influence strategy implementation that affect
profitability in the OIB's
6. There are clear lines of authority and responsibility including reporting
relationships among the management of the banks.
7. The bank has hierarchy structure that response decision making at the moment
with decentralized use of management structure.

59
3. Strategic Resource Allocation 5 4 3 2 1
1. The bank is appropriately staffed with well-paid personnel.

2. There are training opportunities to build the capacity of employees.

3. The organization is able to attract competent employees.

4.Resource allocation management affects strategy implementation of the bank.

5.The bank has a clear resource planning allocation for strategic execution of the
bank.
6. The bank has enough competent human capital (employee) for strategic
implementation.
7. The bank has enough of financial resources to execute the planned strategies.
8. The bank has a sufficient technology required for strategy implementation.
4. Communication 5 4 3 2 1
1. Effective Communication influence strategic implementation in the bank that
makes the bank profitable.
2. There is adequate internal communication of strategic implementation among
staffs.
3. There is a frequent communication among staffs.

4. Information systems used to monitor strategy implementation is adequate.

5.OIB allow participation of staffs in giving feedback on the OIB strategy

implementation.
6. There is a good horizontal communication among staffs.
7. OIB has a good external communication to enhance profitability of the bank.

8. The OIBs employees has effectively communicated in order to implement

strategic implementation effectively
5. Leadership 5 4 3 2 1
1. The bank’s management is a model for effective leadership by example that
works for profit of the organization.

60
2 The management inspires employees to achieve organizational profits.
3.The management team takes responsibility for creating an environment for
profit motive of the bank.
4. Leadership capabilities affect strategy implementation

5. The leaders/managers in the bank have sufficient educational background to

implementation strategic effectively.

6.The OIB leaders/managers have equipped with a good conceptual skill to

implement strategy effectively
7.The OIB leaders/managers have equipped with a good technical skill to
implement strategy effectively
6 .The OIB leaders/managers have equipped with a good human skill to
implement strategy effectively
6. Organizational Profitability 5 4 3 2 1

1. The bank achieved maximum profitability as a result of the effective resource

utilization.
2. The Bank achieved maximum profitability as a result of effective
communication.
3. The Bank achieved maximum profitability as a result of good communication
4 The Bank achieved maximum profitability as a result of good leadership
5. The Bank achieved maximum profitability as a result better organizational
strycture.
6. The Bank achieved maximum profitability as a result of overall effective
strategic implementation

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7. Please rate the overall Strategy Implementation of OIB to achieve the planned profit out of
100%? ___________________

8. Please give any other comment you may have regarding the subject of this research.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________

9. What suggestion(s) would you give that will help the bank to achieve the planned profit or to
implement strategy effectively it to enhance the profitability of the bank?

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
_________________________________________________________________________

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