STRATEGIC PLANNING PRACTICES AND ITS EFFECT ON ORGANIZATIONAL

PERFORMANCE, IN CASE OF COMMERCIAL BANK OF ETHIOPIA, IN DEBRE

BERHAN TOWN, ETHIOPIA
BY: ABINET TEFERA

DEPARTMENT OF MANAGEMENT
COLLAGE OF BUSINESS AND ECONOMICS
DEBRE BERHAN UNIVERSITY

JUNE, 2019
DEBRE BERHAN, ETHIOPIA
 STRATEGIC PLANNING PRACTICES AND ITS EFFECT ON
ORGANIZATIONAL PERFORMANCE, IN CASE OF COMMERCIAL BANK
OF ETHIOPIA IN DEBRE BERHAN TOWN, ETHIOPIA
BY: ABINET TEFERA
ADVISOR: HALIE YESHANEW (PHD)
A THESIS SUBMITTED TO THE DEPARTMENT OF MANAGEMENT OF
DEBRE BERHAN UNIVERSITY FOR THE PARTIAL FULFILLMENT OF
MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT
COLLAGE OF BUSINESS AND ECONOMICS
DEBRE BERHAN UNIVERSITY

MAY, 2019
DEBRE BERHAN, ETHIOPIA

I
 DEBRE BERHAN UNIVERSITY
SCHOOL OF GRADUATE STUDIES
Approval of the thesis
As member of board examiners of final MBA. Thesis open defense examination, we
certify that we have read and evaluate the thesis prepared by Abinet Tefera entitled
STRATEGIC PLANNING PRACTICES AND ITS EFFECT ON
ORGANIZATIONAL PERFORMANCE, IN CASE OF COMMERCIAL BANK OF
ETHIOPIA IN DEBRE BERHAN TOWN, ETHIOPIA and examine the candidate. We
recommended that the thesis be accepted a fulfilling the thesis requirement for the
degree of master of business administration.
Board of examiners
External examiner:
___________________________________________
Internal examiner:
___________________________________________
Chairperson:
___________________________________________

Date:

II
 DECLARATION
Undersigned, declare that this thesis is my own original work and has not been
presented in another university. All sources of material used in this thesis have been
duly acknowledged.
Name: _______________________________________
Signature: ____________________________________
Date: ________________________________________

III
 DEBRE BERHAN UNIVERSITY
SCHOOL OF GRADUATE STUDIES
As a thesis researcher advisor, I hereby certify that I have read and evaluate this thesis
prepared under my guidance by………………………………
entitled…………………………………………………………………………………
………..…………………………......I recommended that it be submitted as fulfilling
the thesis requirement for the degree of Masters of Business Administration.

____________________ (Ph.D.) _________________ ____________________

Name Signature Date

IV
 Acknowledgement
This thesis is a synergistic piece of work of many personalities. Firstly, I owe my
deepest gratitude to God. Secondly, I have come across to my advisor who generates
such an awe-inspiring positive reaction it was a pleasure working with you. Thirdly, I
feel a deep-seated form of appreciation to my family. Finally, I offer my sincere regards
to all who supported me in any respect during the writing of this thesis.

V
 Table of Contents
Acknowledgement ......................................................................................................... v

List of Tables ................................................................................................................. x

List of Figures ............................................................................................................... xi

List of Appendices .......................................................................................................xii

Acronyms ................................................................................................................... xiii

Abstract ....................................................................................................................... xiv

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

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

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

1.2 Statement of the Problem and Justification ......................................................... 4

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

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

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

1.4 Research Questions .............................................................................................. 6

1.5 Significance of the Study ..................................................................................... 6

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

1.7 Limitation of the Study ........................................................................................ 7

1.8 Organization of the Study .................................................................................... 8

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

LITERATURE REVIEW .............................................................................................. 9

2.1 Theoretical Literature........................................................................................... 9

2.1.1 Strategic Planning ......................................................................................... 9

2.1.2 Strategic Planning Process and Practice ..................................................... 10

2.1.2.1 Strategic formulation ........................................................................... 11

2.1.2.2 Strategic Implementation ..................................................................... 12

2.1.2.3 Strategic Evaluation and Control ......................................................... 13

VI
 2.1.3 Other Dimensions of Strategic Planning..................................................... 15

2.1.3.1Formality of Strategic Planning ............................................................ 15

2.1.3.2 Employee Participation in Strategic Planning ..................................... 17

2.1.4 Organizational Performance ....................................................................... 18

2.1.5 Performance Measurements ........................................................................ 19

2.1.5.1 Performance Measurements in Banking Industry ................................ 20

2.1.5.2 Subjective Vs Objective Performance Measurement .......................... 21

2.2 Empirical Literature ........................................................................................... 22

2.3 Conceptual Framework ...................................................................................... 29

2.4 Research Hypothesis .......................................................................................... 30

CHAPTER THREE ..................................................................................................... 31

RESEARCH METHODOLOGY................................................................................. 31

3.1 Research Design................................................................................................. 31

3.2 Research Approach ............................................................................................ 31

3.3 Research Strategy............................................................................................... 32

3.4 Sampling Technique and Sample Size ............................................................... 33

3.5 Source of Data and Data Collection Methods.................................................... 33

3.5.1 Questioner Design ....................................................................................... 33

3.5.2 Common Method Variance Analysis .......................................................... 34

3.6 Reliability and Validity of the Instrument ......................................................... 35

3.7 Method of Data Analysis ................................................................................... 35

3.8 Ethical Considerations ....................................................................................... 36

CHAPTER FOUR ........................................................................................................ 38

DATA PRESENTATION, ANALYSIS AND INTERPRETATION ......................... 38

4.1 Characteristics of Respondents .......................................................................... 38

4.2 Reliability Analysis ............................................................................................ 39

4.3 Descriptive Analysis .......................................................................................... 39

VII
 4.3.1 Practice of Strategic Formulation in Commercial Bank of Ethiopia. ......... 41

4.3.2 Practice of Strategic Implementation in Commercial Bank of Ethiopia..... 41

4.3.3 Practice of Strategic Evaluation and Control in Commercial Bank of

Ethiopia. ............................................................................................................... 43

4.3.4 Practice of Formal Strategic Planning in Commercial Bank of Ethiopia. .. 43

4.3.5 Practice of Participating Employee in Strategic Planning in Commercial

Bank of Ethiopia. ................................................................................................. 43

4.4 Factor Analysis .................................................................................................. 44

4.4.1 Strategic Formulation Construct ................................................................. 46

4.4.2 Strategic Implementation Construct ........................................................... 46

4.4.3 Strategic Evaluation and Control Construct ............................................... 47

4.4.4 Formality of Strategic Planning Construct ................................................. 47

4.4.5 Employee Participation Construct .............................................................. 47

4.4.6 Objective Fulfilment Performance Construct ............................................. 48

4.4.7 Relative Competitive Performance Construct ............................................ 48

4.5 Inferential Analysis ............................................................................................ 50

4.5.1 Correlational Analysis ................................................................................ 50

4.5.2 Linear Regression Model Assumptions and Diagnostic Tests ................... 52

4.5.2.1 Heteroskedasticity Test ........................................................................ 53

4.5.2.2 Multicollinearity Test........................................................................... 54

4.5.2.3 Normality Test ..................................................................................... 54

4.5.2.4 Autocorrelation Test ............................................................................ 55

4.5.2.5 Linearity Test ....................................................................................... 55

4.5.2.6 Omitted Variable bias Test .................................................................. 55

4.5.3 Regression Analysis .................................................................................... 56

4.5.3.1 Regression Analysis of Objective Fulfillment Performance ............... 56

4.5.3.2 Regression Analysis of Relative Competitive Performance ................ 59

VIII
 4.6 Model Fitting Using Partial Least Squares ........................................................ 62

CHAPTER FIVE ......................................................................................................... 68

CONCLUSION AND RECOMMENDATION ........................................................... 68

5.1 Conclusion ......................................................................................................... 68

5.2 Recommendation ............................................................................................... 69

5.3 Contribution of the Study................................................................................... 69

5.3.1 Contribution to the Existing Knowledge .................................................... 69

5.3.2 Practical use of the Research Findings ....................................................... 69

5.4 Indications for Further Research ........................................................................ 70

Reference ..................................................................................................................... 71

Appendices ................................................................................................................... 82

IX
 List of Tables
Table 4. 1: Demographic Profile of the Respondents. ................................................. 38
Table 4. 2: Reliability of the Scales ............................................................................. 39
Table 4. 3: Descriptive statistics of Independent Variables ......................................... 40
Table 4. 4: One Sample t-test Result for Strategic Planning Practices. ....................... 40
Table 4. 5: Independent Samples Test on Perception of Strategic Implementation
Practice. ........................................................................................................................ 42
Table 4. 6: Independent Samples Test on Perception of Participating Employee in
planning........................................................................................................................ 44
Table 4. 7: KMO and Bartlett's Test Results for Study Variables. .............................. 45
Table 4. 8: Variables Representing Different Constructs used in this Study............... 49
Table 4.9: Correlations between Strategic Planning and organizational Performance 51
Table 4. 10: Regression using Backward Elimination on Objective Fulfilment ......... 57
Table 4. 11: Regression using Backward Elimination on Relative Competitive
Performance ................................................................................................................. 60
Table 4. 12: Composite Reliability and AVEs for the Model...................................... 64
Table 4. 13: Discriminant Validity of the Model ......................................................... 64
Table 4. 14: Path Coefficients and Predictability using PLS bootstrapping ................ 65
Table 4. 15: Model fit Summery using PLS ................................................................ 67
Table 4. 16: R square values using PLS ...................................................................... 67

X
 List of Figures
Figure 1: Conceptual Model for Strategic Planning and Organizational Performance30
Figure 2: Breusch-Pagan Test for Heteroskedasticity ................................................. 53
Figure 3: VIF test for Multicollinearity on Independent Variables ............................. 54
Figure 4: Shapiro-Wilk Test for Normality ................................................................. 54
Figure 5: Normal-p plot Regression Standardized Residual........................................ 55
Figure 6: Ovtest for Omitted Variable bias.................................................................. 56
Figure 7: Regression Model Summary: Strategic Planning and Objective Fulfillment
...................................................................................................................................... 56
Figure 8: Regression Model Summary: Strategic Planning and Relative Competitive
...................................................................................................................................... 59
Figure 9: Confirmatory Factor Analysis using PLS .................................................... 63
Figure 10: Tested Model with Path Coefficients using PLS........................................ 66

XI
 List of Appendices
Appendix 1: Strategic planning and Organizational performance questioner ............. 82
Appendix 2: Factor analysis results ............................................................................. 88
Appendix 3: Regression Assumption Test Results ...................................................... 94

XII
 Acronyms
ANOVA: Analysis Of Variance

AVE: Average Variance Extracted

CBE: Commercial Bank of Ethiopia

CEO: Chief Executive Officer

CFA: Confirmatory Factor Analysis

NBE: National Bank of Ethiopia

NFI: Normal Fit Index

NGO: Non-Governmental Organization

PLS-SEM: Partial Least Square Structural Equation Modelling

ROA: Return on Asset

ROE: Return on Equity

ROS: Return on Sale

SME: Small and medium Enterprises

SPSS: Statistical Package for the Social Sciences

SRMR: Standardized Root Mean Square Residual

STATA: Statistics and Data

XIII
 Abstract
The purpose of this study is to assess strategic planning practices and its effect on the
performance of banks in Ethiopia with reference to the operations of the commercial
bank of Ethiopia (CBE). The study use descriptive and explanatory research designs.
Using census sampling techniques our target population consists of managerial and
clerical (non-managerial) employees of commercial bank of Ethiopia in Debre Berhan
branches. A total of 164 employees selected and all of them are taken for this study
since they have manageable size. Primary data is utilized in this study, gathered with
the aid of questionnaires and 150 responses obtained. The data analyzed in descriptive
and inferential statistics using IBM SPSS v20 and STATA 14.2. The study also use
SMART PLS v3.0 for confirmatory factor analysis and structural equation modelling.
The results of the study shows a fairly high level of agreement for the practice of various
dimensions of strategic planning in CBE. Multiple regressions showed that
participating employees in strategic planning, implementation and evaluation have an
effect on the performance of CBE measured subjectively using two constructs namely,
objective fulfillment and relative competitive performance. The model test conceptual
framework of the study and the final model shows same result with regression analysis.
Finally, the study conclude that strategic planning has a positive effect on
organizational performance. The study recommends that all factors of the various
dimensions should be put into the right perspective so as to help the general workforce
of the bank to understand strategic plans in place to achieve the best organizational
performance.

Key words: Strategic Planning, Objective Fulfillment Performance, Relative

Competitive Performance Formality of Strategic Planning, Strategic Planning Process

XIV
 CHAPTER ONE

INTRODUCTION
1.1 Background of the Study
Globalization has purified universal extending exercises and progressively becomes
vital for the survival, development and achievement of present day firms (Spyropoulou
et al., 2011). All the while, the financial business has been experiencing real
solidification as of late, with various worldwide players rising through progressive
mergers and acquisitions (Konstantopoulos et al., 2009). Rivalry is commonly viewed
as a positive power in many businesses; it should positively affect an industry's
productivity, nature of organization and global aggressiveness.

Regarding this, The Ethiopian Banking Sector is right now involved a national bank
(The National Bank of Ethiopia or NBE), two governments possessed banks and sixteen
private banks. Under the Growth and Transformation Plan II (GTP II), NBE expanded
the base capital for banks to operate to 2 billion Birr ($90 million) and requires every
one of the sixteen as of now working private banks to build their paid up cash-flow to
that sum by 2020.

As of mid-2018, foreign banks are not allowed to give financial related managements
in Ethiopia and the market is shut to remote retail banks, yet the division might be liable
to change as the legislature of Prime Minister Abiy Ahmed seeks after expansive
financial changes. Presently, Ethiopia has enabled some foreign banks to open contact
workplaces in Addis to encourage credit to from their countries of origins. Chinese,
German, Kenyan, Turkish, and South African banks have opened contact workplaces
in Ethiopia.

Banking sector in Ethiopia, as per Admassu B. et al. (2014), is undeveloped and fragile.
They moreover expressed that the sector is exceptionally restricted, generally weak and
represented by a huge offer of state proprietorship. For them, the oppressive strategies
forced by the management are adversely influencing the performance of cash and
outside trade advertises and weaken private business banks. Regardless of the
previously mentioned troubles of the sector, the number of banks in Ethiopia is
expanding every now and then. This is coming about with the expanding in rivalries

1
among banks. This thus prompts sensational impact on the performance of banks,
especially in financial and technological advancements.

Think of that story in mind, banking industry assumes a critical job in the improvement
of national economies. Additionally, since borders between the economies of
independent nations are continuously losing significance, financial institutions are step
by step being fused into the worldwide economy. Their job and significance is
consistently expanding and today, they speak to real players available both at domestic
and global dimension (Central Banks Guide, 2015).

According to Harker and Zenios (2000), the banking industry has been constantly
changing in the most recent decades like different business organizations in light of the
fact that the earth it works in is dynamic and exceptionally fused.

Because of the dynamism of the present business condition organizations scan their
environment and inner capacities to create a strategic plan with the goal that they
accomplish their objectives and gain relative competitive performance. How well an
organization actualizes its approaches and programs and achieves its strategic goal as
far as its main objective and vision is of prevailing concern. So specialists have made a
significant effort to consider the relationship between strategic planning and
organization performance since understanding the idea of this relationship is urgent to
organizations and to the nation all in all (Aldehayyat and Twaissi, 2011; Gică and
Negrusa, 2011; Suklev and Debarliev, 2012).

As Drucker (2012) noted in his book The Practice of Management, we can't be content
with designs for a future we can predict. We should get ready for all conceivable and a
decent numerous incomprehensible possibility. We should have a useful answer for
whatever may come up. This underscored the requirement for strategic planning in each
organization; expanded or one specialty unit, huge or little. In this context, Strategy is
a key management instrument in any organization and it is a multi-dimensional idea
that different creators have characterized in various ways. As per Thompson (2012) it
is the match between an organization's assets and aptitudes and the natural open doors
just as the dangers it faces and the reasons it wishes to achieve.

As a result, in the strategic management field performance of the organization has been
examined over and again and the significance of evaluating the performance has been

2
generally perceived. The powerful job of strategic planning so as to improve
organizational performance is very much archived in the strategic management writing
(McIlquham-Schmid, 2010). Proof from the written works proposed that strategic
planning is one of the components that can improve the organization performance
(Sarason and Tegarden, 2003; Efendioglu and Karabulut, 2010; Arasa and K'Obonyo,
2012; Chavunduka et al., 2015).

It is trusted that, through legitimate strategic planning, organizations will accomplish

better performance (Walker and Redmond, 2007). Greenly (1986) noticed that strategic
planning has potential focal points and essential qualities that in the long run convert
into improved firm performance. It is in this way that encourages improved firm
performance. Organizational performance contains the genuine outcome or
consequences of an organization as measured against its expected outcome (or
objectives and destinations).

The relationship between strategic planning and firms' performance has been
extensively considered in the past studies about (Aldehayyat and Twaissi, 2011; Gică
and Negrusa, 2011 and Suklev and Debarliev, 2012). In any case, it very well may be
said that, the findings are as yet uncertain. A portion of these studies has demonstrated
that strategic planning has relation to the firm's performance. For example, Aldehayyat
and Twaissi (2011); Suklev and Debarliev (2012), while different specialists finished
up the inverse, where there is no relationship exist between the two (Gică and Negrusa,
2011).

So as to clarify the uncertain findings from the past research, a few researchers
expressed that, the conceivable reasons adding to this insufficient findings are most
likely because of certain researches have given more consideration on the formality of
planning (Lyles et al., 1993; Kraus et al., 2006) while some different researches may
have ignored on another element of strategic planning, for example, the implementation
of planning itself (Hutzschenreuter and Kleindienst, 2006).

By exploring multidimensional of strategic planning, it is trusted that the findings of

this examination probably give a commitment in broadening the limits of the collection
of learning. This study examine strategic planning practices and its effect on
organizational performance in commercial bank of Ethiopia, in case of Debre
BERHAN branches, Ethiopia.
3
1.2 Statement of the Problem and Justification
The performance of financial organizations is an imperative determinant of financial
development and improvement of the manufacturing and service sector business areas
(Beck et al., 2004). Since banks in Ethiopia are assuming a vital job in intermediating
account and wheeling the economy to work, there is a colossal requirement for
understanding what will influence the performance of these institutions in the
developing nations like Ethiopia. The issue of the study emerged through the need for
learning about variables that have effect on the performance of banks in the nation
which is convenient and important.

Findings from past researches show that there is a relation between strategic planning
and organization performance (Veskaisri et al.,2007; Aldehayyat et al.,2011;
Chavunduka et al., 2015) However, certain gaps are seen in researches that cause
inconsistent result, which whenever took care of, as indicated by the researcher could
give more knowledge into the relationship being analyzed.

In the first place, it has been seen that the researches concentrated on the immediate
relation between strategic planning and performance without taking an impression of
the way that there are different constructs that could impact the relationship being
analyzed (Delmar and Shane ,2003; Dincer et al., 2006; Rudd et al.,2008). The
dimensions used to define strategic planning in past studies were the following:
formality, sophistication, effectiveness, comprehensiveness, extensiveness,
completeness, importance, rationality, analysis, goal setting, scanning and analysis,
process, factors, systems, openness, innovativeness, characteristics, capabilities and
strategy.

Additionally, Most researcher's attempts to describe effect of strategic planning with

performance of organization just in terms of financial related performance (Murphy et
al., 1996; O'Regan, et al., 2008).

In Ethiopia, Wubishet (2018) evaluate the strategic management practices of private

business banks in Ethiopia. In spite of the fact that, Selamawit (2018) examine was led
to the point of surveying the strategic planning, detailing procedure, achievement and
its difficulties in commercial bank of Ethiopia. Regardless of the strategic management
in an organization, the greater part of the researchers studied in Ethiopia (Tsehay, 2014;
Timoteyos, 2015; Dinberu, 2016; Amelework, 2015) and other related studies on the
4
branch of knowledge generally centered on procedure from strategy formulation,
strategy implementation to strategy evaluation of an individual firm or non-
governmental organizations (NGOs).

Furthermore, the previous researches have proved and considered the relationship of
strategic planning with firm performance of high importance to business organizations.
But a review of the findings of previous studies suggests that the impact of strategy on
overall performance is not as clear-cut as one might expect. The empirical studies
investigating direct relationships between strategic planning and performance have
attracted criticisms. The main reason for criticism is the mixed results on the
relationship between strategic planning and business performances. Chinyamurindi
(2016) says there is the need to more investigations into the concept of strategic
planning on outcomes such as organizational performance. And as indicates there is
scant research that had been done in Ethiopia, especially on the effect of strategic
planning on performance of banks of Ethiopia.

Therefore considered gaps distinguished from the past studies in the branch of
knowledge and constrained study in our nation the researcher put its push to determine
strategic planning practice and its effect on organizational performance by taking five
dimensions of strategic planning(formulation, implementation, control, employee
participation and formality) and their effect on organizational performance in Ethiopian
setting, if there should be an occurrence of selected commercial banks of Ethiopia in
the Debre Berhan city branches, Ethiopia.

1.3 Objectives of the Study

1.3.1 General Objective
The General objective of this study is to examine strategic planning practice and its
effect on organizational performance in the case of the commercial bank of Ethiopia,
in the Debre Berhan Town, Ethiopia.

1.3.2 Specific Objectives

This research aimed at achieving the following specific objectives

 To investigate the current practices on strategic planning in commercial bank of

Ethiopia (CBE).
 To analyze the effect of strategic formulation on organizational performance.

5
  To analyze the effect of strategic implementation on organizational
performance.
 To analyze the effect of strategic evaluation and control on organizational
performance.
 To analyze the effect of strategic planning formality on organizational
performance.
 To analyze the effect of employee participation in strategic planning on
organizational performance.

1.4 Research Questions

As indicated by Foss and Waters (2007), the question directs the examination
procedure, advises the analyst what to take a gander at and what to overlook. Coming
up next are the research questions:-

 To what extent commercial bank of Ethiopia practices strategic planning?

 What is the effect of strategic formulation on organizational performance?
 What is the effect of strategic implementation on organizational performance?
 What is the effect of strategic evaluation and control on organizational
performance?
 What is the effect of formality of strategic planning on organizational
performance?
 What is the effect of employee participation in strategic planning on
organizational performance?

1.5 Significance of the Study

Strategic planning is a vital survival instrument for organizations and organizations
which don't understanding it might end up being terminated from business. The findings
of this study will be of critical to the accompanying:

First, the findings of the research will likewise help Commercial bank of Ethiopia to
see how its strategic plans influence the level of performance. The banks will discover
the relationship between strategic planning and the overall performance. This might be
one path through which the bank can roll out any essential improvements to guarantee
synchronization between its strategic plans and performance.

6
Although, empower organizations in other sector business and in alternate parts of
Ethiopia to more likely understand the job strategic planning plays in improving the
performance. Organizations would profit by better seeing how its strategic plans
influence the performance of organizations.

The findings of this study are immensely useful to the CEOs and senior managers. This
study emphasizes the need for carrying out strategic planning in organizations. This
study indicates that planning helps organizations. The results of this study clearly
establish the importance of strategy implementation, evaluation and participating of
employee in strategic planning. Managers need to pay careful attention to properly plan
and prioritize the implementation of strategies, evaluating them and participating
employees in decision making for enhancing the organizational performance.

At last, it will help academicians and researchers keen on issues relating to strategic
planning, and its relationship to organization's performance, particularly in banks.

1.6 Scope of the Study

The scope of the study only focuses on commercial bank of Ethiopia to all Debre
Berhan branches only. Even though there are a number of important determinant
variables which have significant influence on the performance of any company like
political affairs, inflation, economy, management philosophy etc. they will not
considered in this study. The study limited to those strategic planning independent
variables (employee participation in planning, formality of plan, evaluation and control,
formulation, and strategic implantation) in their relation overall performance of the
bank. Finally the study limited to last five years performance of CBE and its strategic
planning practices and used cross-sectional research design.

1.7 Limitation of the Study

The study has a number of limitations. First, the study used one organization for the
study. Also this study has used subjective performance measures and respondent’s
information provided about the organizational performance considered to be accurate.
The use of cross-sectional research design for the study is another limitation since
respondents gave their assessment of the given questionnaire statements only once and
at a specific time.

7
1.8 Organization of the Study
A brief outline of each chapter is given in order to provide the reader with an overall
summary of the content:

Chapter One: The reader is provided with a general introduction, background

information, the aims and objectives and the research questions designed for the
purpose of this thesis are outlined.

Chapter Two: The Strategic planning and organizational performance are defined.
Various definitions are provided and one of the most prominent definitions in the
academic literature is utilized as the framework for analysis. Furthermore, empirical
findings about strategic planning impact on performance and at last conceptual
framework for this thesis is derived intrust of the literature.

Chapter Three: The research methods are identified, and the reason why a quantitative
approach was chosen to fulfill the aims of this thesis will be analyzed in detail.

Chapter Four: The findings are analyzed, interpreted and discussed.

Chapter Five: All the findings are interpreted in order to answer the research question
and a critical evaluation of the thesis is provided. Finally, the author offers future
recommendations based on the outcome of this thesis.

In the next chapter the author critically evaluate all the relevant academic literature
dealing with the subject of Strategic planning and Organizational performance.

8
 CHAPTER TWO

LITERATURE REVIEW
This section examines basic issues that structure the foundation of the examination. It
is sorted out deliberately beginning of the theoretical literature, principle talk, exact
proof of the connection between strategic planning and firm/organization's performance
lastly the applied structure or conceptual framework.

2.1 Theoretical Literature

2.1.1 Strategic Planning
Strategic planning is the improvement of the long range strategies and plans for
compelling management of condition openings and dangers, in light of corporate
qualities and shortcomings (Johnson et al., 2011)

Strategic planning has additionally been conceptualized as the assurance of how the
organization's central goal, vision, objectives and targets, will be met (Kuria, 2014). It
can be characterized as the system of making and maintaining consistency between the
institution's objectives and assets and its moving prospects (Grant, 2014).

Strategic planning in expansive part, is a basic leadership movement. Despite the fact
that these choices are regularly upheld by a lot of quantifiable information, strategic
choices are in a general sense judgmental. Since strategic choices can't generally be
evaluated, managers must depend on "informed judgment" in settling for this kind of
choice (Mugadza, 2012).

In this unique situation, Mbogo (2013) contends that strategic planning choices submit
an organization to explicit items, markets, assets, and innovations over an all-inclusive
time frame and the recognized techniques are gone for deciding long term objectives.
Porter (2008) also says strategic planning is making choices amongst alternative actions
and finding the best options that suits and enhances a firm’s efficiency and productivity
to be executed through the efforts of the people, therefore making it competitive.
Strategic planning improves the process of people working together. It brings everyone
together to pursue opportunities for better meeting of stakeholder needs.

Hodgetts and Kuratko (2001) and Kraus et al. (2006) are of the opinion that strategic
planning can contribute to performance by generating relevant information, by reducing
uncertainty and by creating a better understanding of the important environment.
9
Strategic planning is part of strategic management, if unchecked, it often strangles
strategic thinking to death (Khan et al., 2014).

According to Dincer et al. (2006), the key aspects of strategic planning include the
formulation of a mission statement of the enterprise, establishing the objectives,
crafting and implementing the strategies, monitoring and controlling the progress in
strategy implementation.

Again, Hutzschenreuter and Kleindienst (2006) see strategic management as a control

where strategic planning is housed. Strategic planning is considered to comprise of: (1)
formulation, (2) implementation and (3) strategy control and evaluation. Strategy
formulation consists of those steps taken to set the direction of the organization through
analyzing the internal and external environment. Conversely, strategic implementation
consists of those actions of putting into practice the actions set out as part of strategy
formulation. At last, strategy evaluation and control is a method for ensuring that the
ideal procedure stays on course, according to the past advances (Chang, 2016).

2.1.2 Strategic Planning Process and Practice

O'Regan et al. (2002) states that strategic planning can be considered from a content or
process perspective. The content identifies with distinct elements of the strategic plan
which vary from firm to firm. The process identifies with the instruments for the
advancement of the strategic plan and its subsequent deployment. Lyles et al. (1993)
argued that it's the process of planning that is important not the plan.

The key constituents of strategic planning practices involve probing questions about
where the establishment intends to go, the current situation of the organization, how the
organization will get there and what alterations or fluctuations will occur in the
establishment’s environment (Guerras-Martina et al., 2014; Grant & Jordan, 2015).

Johnson and Scholes (2009) states strategy is the direction and the scope of an
organization over the long term, which achieves advantage for the organization through
its alignment of its resources which are at its disposal within a dynamic environment to
meet the market demand and stakeholders aspirations. This indicates that strategic
planning is a process that requires an organization to stay alert of its capacity and of the
operating environment if competitiveness is to be realized. The firm must match its
activities on the environment. Effective strategic planning involves the processes

10
which, when successfully implemented at all levels of the organization- corporate,
business and functional, can enhance efficiency and productivity. For strategic planning
process to be followed in an organization, consideration has to be given to both the long
term view and the short term requirements. The strategic planning process is evolving
in its response to the increasing rate of change in the business environment (Bryson,
2004).

Morgan and Strong (2003) concluded the findings of research that businesses with high
level of performances have well strategic orientations. Many empirical studies on the
role of strategic planning have proved that in creating better long term competitive
positions and better organizational performance of the company’s strategic planning
plays an important role and that strategic planning is essential for better business
performance and success (Suklev & Debarliev, 2012).

Strategic planning consists of a set of underlying processes that are intended to create
or manipulate a situation to create a more favourable outcome for a company (Akinyele
and Fasogbon, 2010). Strategic planning defined as the process of using systematic
criteria and rigorous investigation to formulate, implement and control strategy and
formally document organizational expectations (Mintzberg, 1994).

2.1.2.1 Strategic formulation

Strategy formulation is the development of long-term plans for the effective
management of opportunities and threats in light of the organization’s strengths and
weaknesses. On the other hand, strategy implementation is the process that turns
formulated strategies and plans into actions to accomplish objectives. Strategy
formulation traditionally involves the use of analytical tools and highly structured
processes (Mintzberg, 1994).

Mintzberg, and Shakun (1978) explained the developing enthusiasm with respect to the
management scientists in the topic of strategy formulation, to some degree since it has
turned out to be progressively clear that an organization’s effectiveness is highly
dependent on it.

Hitt et al. (1997) argue that when formulating strategies, thought must be given to
implementation. At the time of strategy formulation, it is not possible to enumerate all
the project possibilities that will be uncovered. Therefore, strategy formulation must be

11
based on highly aggregated, incomplete and uncertain information about courses of
alternatives.

To formulate effective strategies, managers in an organization need to be aware of

realities in the business environment. Analysis of the external environment helps to
identify the possible threats and opportunities while analysis of internal environment
helps to identify strengths, weaknesses and the key people required within the
organization to meet its objectives (Kanter, 2002).

Lumpkin & Dess (1995) defines strategic planning as a complex and participative
management technique of scanning the environment and the formulation of mission,
vision and strategies in order to improve the performance of the organization, and hence
its competitiveness in the market.

2.1.2.2 Strategic Implementation

Implementation is a well-known topic and represents a crucial stage in public policy
implementation that focuses on the relationship between an expression of proposed
intent and its realisation (O’Toole, 2000). From a more conventional viewpoint, it has
been defined as “the process by which strategies and policies are put into action through
the development of programs, budgets and procedures” (Wheelan and Hunger, 2002).

Strategy implementation is the process of putting strategies into practice, which

includes planning and delivering services, developing the efficiency and effectiveness
of operations, and designing organizational structures, evaluation systems and cultures
required to fit the new strategy (Hill and Jones, 2008).

Strategy implementation is the sum total of the activities and choices required for the
execution of a strategic plan. It is the process by which objectives, strategies, and
policies are put in to action through the development of programs and tactics, budget
and procedures. Although implementation is often considered only after strategy has
been formulated, implementation is a key part of strategic management, strategy
formulation and strategy implementation should thus be considered as two sides of the
same coin (Wheelen & Hunger, 2015).

The challenges and problems faced in implementing strategies and the key attributes of
successful strategy implementation have been widely investigated (Alashloo et al.,
2005; Elbanna et al., 2015). Between the ideal of strategic planning and the reality of

12
implementation lie many difficulties. Beer and Eisenstat (2000) stated that “leaders
must engage in an honest conversation about the barriers and their underlying causes.
O’Regan et al. (2002), quoting several authors in the literature, noted that effective
implementation is vital for success of any strategic plan.

Kargar and Blumenthal (1994) analyzing the research of Lawless et al. (1989) cited that
firm performance is not so much a result of a company’s strategy, but of its capacity to
implement that strategy effectively. Walker & Brewer (2009) acknowledge that
organisations with excellent strategy implementation processes had much sounder
organisational performance compared to those with a poor or fair strategy
implementation process.

2.1.2.3 Strategic Evaluation and Control

Strategy evaluation is a critical tool for managers to understand the reasons behind
failures and success of certain objectives, performance standard and/or any other
performance indicator (Strydom, 2011). In this sense, evaluation is used as a strategic
learning tool and has continued to play a role in strategy formulation and
implementation. Strategy evaluation becomes a critical tool and measure in assessing
the organization’s strategic position.

Wheelen and Hunger (2015) defines strategic control as the process used by firms to
control the formation and execution of strategic plans. They contend that it is a
specialized form of management control which differs from other forms of management
control in respect of its need to handle uncertainty and ambiguity at various points in
the control process. It focuses on achievement of future goals rather than the evaluation
of past performance. The point for strategic control is not to bring to light past errors
but to identify needed corrections so as to steer the firm in the desired direction (Pearce
and Robinson, 2009).

The positive effects of strategy evaluation on the organizational performance. These

include direction setting, guidance on bench marking and motivation. Literature has
significantly underscored the importance of strategic direction setting for organizations.
The strategic direction provides multiple benefits to an organization. Thompson et al.
(2007) proposed that the direction setting process involves vision development
followed by setting of objectives, designing of strategy, implementation and review of
the process.
13
According to Lai (2011), motivation refers to reasons that underlie behaviour that is
characterized by willingness and volition. Goal setting theory links goal setting and
evaluation to motivation and performance of an organization. According to Lunenburg
(2011), evaluation provides the much needed feedback that helps organization members
to measure and attain their performance goals. He explains that feedback helps in two
important ways. First, it helps people determine how well they are doing. Further, he
indicates that feedback also helps people determine the nature of the adjustments to
their performance that are required.

Apart from goal setting and motivation, strategy evaluation is needed to serve as tool
of providing information on how performance compares to the peers and other
standards. It highlights what is expected and what needs to be done to keep up
improving the performance. In this way strategy evaluation is used to establish a step
by step guidelines on future actions based on learning from the past and the
environment (Kvarnerud & Maspers, 2007).

Evaluating strategy in line with the environment is critical in establishing guidelines on

benchmarking with the peers. The assumption is that for any organization, environment
consists of external factors (i.e. customers, competitors, stakeholders and many more)
that have the powers to influence organization’s performance and for every action
taken by an organization, there is a creation of some degree of changes in its internal
and external environment (Ayub et al., 2013).

The arguments are supported by an empirical study by Ajelabi and Tang (2010) which
saw strategy evaluation as a tool for strategic benchmarking. The process involves a
systematic process of evaluating alternatives, implementing strategies and improving
performance by understanding and adapting successful strategies from external partners
who participate in an ongoing business alliance.

In its connection with the dynamic changes of the environment, the strategic control
has an important role in controlling mechanism that is able to make the company
competes. Meanwhile, it also takes a significant role in processing the indecisive
environment and increasing performance (Desarbo et al., 2005). In its relation to
business environment, the company’s main ability to read its environment and able to
quickly adapt to changes will be able to generate the right competitive strategy
(Wijbenga and Witteloostuijn, 2007; Kariuki et al., 2012).
14
Gavetti and Ocasio (2015) argue that strategic control necessarily comprise a small set
of standard elements, the absence of any one of which makes strategic control
impossible to achieve. Short et al. (2016) agrees and advances four elements. One of
the elements is the articulation of the strategic outcomes being sought. The second is
the description of the strategic activities to be carried out in pursuit of the required
outcomes. Third is the definition of a method to track progress made against these two
elements. This is usually done through monitoring of a small number of performance
measures and associated target values. The last element is the identification of an
effective intervention mechanism that would allow observers, usually the
organisation’s managers, to change, correct or adjust the organisation's activities when
targets are not achieved.

These elements imply an active involvement by senior managers in the determination

of the strategic activities pursued by the component parts of an organisation, and this
has led some to observe that strategic control is most effective in organisations (Johnson
and Scholes, 2008).

2.1.3 Other Dimensions of Strategic Planning

Mintzberg (1994), suggests that strategic planning has no value in and of itself, but
takes on value only as committed people infuse it with energy. A strong conclusion to
be drawn from this work is that strategic planning results in superior performance only
when managers engage in the process with some intensity. In support of this position
the research of Miller and Cardinal (1994) set forth and tested the notion, with
affirmative results, that the amount of strategic planning a firm conducts positively
affects its performance.

The 21st century has seen a rise in the need to focus closely, not just on the production
of a strategic plan document but also have an intense and inclusive process which is
formal and comprehensive enough (Chavunduka et al., 2015). In light of this, it is not
just having a strategic plan for an organization but going through the strategic planning
process that counts since strategic planning process formality and employee
participation may have a possible effect on performance of organizations.

2.1.3.1Formality of Strategic Planning

A working definition for formal strategic planning process has been broadly considered
by Boateng et al. (2016) as the science and art of a deliberate, persistent and consistent
15
futurist positioning of a firm, having taken a realistic purview of its existing infrequent
environs, then the adoption of actions on how limited resources may be effectively and
efficiently acquired and utilized for enhanced performance.

Many guidelines for implementing effective strategic planning suggest that the
planning process should be comprehensive, flexible, adaptable, efficient, realistic,
focused on the objective, and maybe the most important, it should be formalized in
written form. Besides, many definitions of strategic planning (some of them cited in the
previous section) the formality of the strategic planning process involves “explicit,
systematic procedures used to gain the involvement and commitment of those principal
stakeholders affected by the plan. The process includes detailed formats, quantification
of all inputs and rigid calendar of events.”(Pearce, Freeman and Robinson, 1987).

According to Mintzberg (1994) the formality of the planning process is connected with
procedures, so he defines formality as using a formalized procedure to produce
articulated result, in the form of an integrated system of decisions.

Phillips and Peterson (1999) mention that the strategic planning process is considered
formal when it is preordained, seeks others’ commitment, and results in written
documents. However, Glaister & Falshaw (1999) says strategic planning is ‘formal’
when the “process involves explicit, systematic procedures used to gain the
involvement and commitment of those principal stakeholders affected by the plan”.

Strategic planning typically sounds lengthy, expensive, formal, detailed process

reserved for the few at the top managerial level (Fraser et al., 2006). Bryson (2011) has
mentioned that strategic planning can be thought of as a detailed formalized process
that incorporates the efforts of all organizational levels, resulting in essential short and
long term decisions and policies and recommended actions directed towards the
identified vision, mission, goals, and objectives.

Capon et al., (1994) indicated in a study that institutional performance may be improved
with a higher degree of sophistication of the strategic planning process. It is therefore
expected that formal strategic planners outperform financially than non-planners
(Glaister et al., 2008).

16
The formal strategic planning approach helps organizations adopt purposeful strategies
and initiatives to adjust and respond to the environment based on rational, logical, and
objective analysis (Boyne & Walker, 2004).

The measurement of formal strategic planning vary among organizations (Veliyath &
Shortell, 1993). Glaister et al. (2008) measure formality of a firm’s strategic planning
process with “The Planning Formality Scale”. O’Regan and Ghobadian (2007) adopted
a ‘written strategic plan’ as a surrogate measure of formality, while Veskaisri (2007)
determined ‘formality’ by the level/extent of strategic planning. Kargar (1996) used
five strategic planning system characteristics measures in studying small banks. These
are the degree of internal orientation; degree of external orientation; level of integration
within functional departments; extent of key personnel involvement; and extent of use
of analytical tools.

2.1.3.2 Employee Participation in Strategic Planning

Mintzberg (1994) stated that strategic planning failure can occur because of the
detachment or disconnectedness of strategy from operations Employee engagement
typically means staff enthusiasm for an organization that makes one go beyond what
might normally be expected on the job. In the context of strategic planning, employee
engagement is more along the lines of staff involvement or participation in the process.

It has long been known that companies that involve employees in the strategy process
have a higher improvement in firm performance than companies that don’t (Floyd &
Wooldridge, 1990). The reasons are logical; if employees agree with the strategy they
helped develop, they are more willing to participate in and understand the change
process. Because information and knowledge in a company are dispersed, employees
add a lot to the strategy process (Childers et al., 2005).

Thompson and Strickland (1989) state that organization-wide commitment is

instrumental to the successful implementation of strategic plans and ultimately the
achievement of set objectives. Wooldridge and Floyd (1990) concur with the notion
that involvement of line managers in strategic planning process enhances organizational
effectiveness. This seems to point out that strategic leadership has the effect of
improving employee commitment for the successful implementation of firm strategies.

17
Arasa et al. (2011) argue that a participatory approach by all employees including non-
managerial staff improves understanding and commitment by all to the strategic
planning process and reduces conflict and resistance to the implementation of
strategies. Hamel (1992) supports this by asserting that strategy should exploit both the
energy of the youth and the wisdom of age where majority of employees participate
through communicative and or consultative means.

Participate in strategy making clarifies responsibilities and roles. Pearce and Robinson
(1987) observed that employee involvement in the strategic planning process leads to a
better understanding of the productivity-reward relationship, and increases their
motivation.

Strategic leadership is seen as a key element in effective strategic management, and for
the strategic planning to be effective, there must be commitment and involvement from
top management (Elbanna, 2008).

Phillips and Moutinho (2000) have designed a model for calculating the strategic
planning effectiveness index, where these authors included several attributes concerned
with employee participation and they have seen them as very important for the strategic
planning effectiveness. One of the reasons for improving the strategic planning
effectiveness through the employee participation in the planning process is the
increased extent of motivation among the employees. The employees believe more in
the objectives when they participate in the formulating phase and when they know what
is expected from them in the implementation phase. Second, by the participation in the
planning process the employees strengthen their capabilities and skills and thus they
are more productive for their companies. Finally, the participation in the planning
process for the employees means greater authority in the planning and implementation
process, but in the same time greater accountability for the results achieved.

2.1.4 Organizational Performance

Organizational performance is a standout among the most critical builds in the
management inquire about. It involves the investigation of an organization's appearance
when contrasted with objectives and targets. Daft (2010), characterized organizational
performance as the capacity of an organization to use its resources (e.g. Knowledge,
people, and raw materials) to accomplish organizational objectives in a compelling and
effective way.
18
O’Regan and Ghobadian (2007) defines performance as “the ability of an object to
produce results in a dimension determined a priori, in relation to a target”. Wu (2009)
also defines an organization’s performance in terms of how well the organization is
managed, and the value the organization delivers for customers and other stakeholders.

2.1.5 Performance Measurements

Performance measurement is multi-dimensional, including the ways and habits through
which the activities of an organization extra time are checked and surveyed with the
end goal of deciding if the organization is accomplishing its objectives as far as esteem
conveyance to clients and different partners (Ibrahim, 2015). From the above
definitions, performance measurement is the methods by which the tasks of an
organization are checked and controlled to decide if the organization's objectives and
targets are accomplished.

Performance measurement is a framework that causes the managers to develop, arrange,

control, and improve certain parts of organizational exercises (Kollberg et al., 2005).

Despite its relevance, research into firm performance suffers from problems such as
lack of consensus, selection of indicators based on convenience and little consideration
of its dimensionality (Richard et al., 2009). Many studies measure firm performance
with a single indicator and represent this concept as unidimensional, even while
admitting its multidimensionality (Santos et al., 2012).

Historically the most common way to measure to performance has been through the
financial indicators which is the objective approach (White, 1996). Yet again, Ibrahim
(2015) states performance measurement frameworks center is around financial
measures.

So as to measure organizational performance, it very well may be seen from two

viewpoints, either financial related or non-financial performance .Financial related
measures are utilized to evaluate the performance of business organization and this has
been in the framework for long. In spite of the fact that the utilization of financial related
performance measures is imperative in performance measurement, few analysts have
contended the incorporation of relevant non-financial performance measures. (Kaplan
and Norton, 1996).

19
There are arguments on the use of subjective and objective performance measures.
Ketokivi and Schroeder (2004) states critics of the subjective approach emphasises that
subjective performance is dependent on human perception which might be influenced
by the individuals own perception and guesses. However, Richard et al. (2009) says we
used subjective measures, but not for convenience they allow for the assessment of non-
financial criteria.

Furthermore, Fisher and McGowan (1983) even argue that objective performance
approach are imperfect and is not appropriate for research purposes. Even though the
objective has been commonly used in history the use of subjective performance has
been more popular in the field of strategic planning and performance (Greenley and
Foxall, 1997).

Even though studies that have adopted both the measures have revealed a strong
relationship between the two measures (Dess and Robinson, 1984). Ondoro, (2015)
states that, there is no single, ‘one best’ approach to performance measurement but the
need for balance between quantification and relying on the numbers versus qualitative
evidence. When telling the ‘performance story’ should not escape researchers minds.

2.1.5.1 Performance Measurements in Banking Industry

The choice of performance measurement is a standout among the most pivotal test
looking by organizations. In banking part as they are for-profit companies’ ultimate
objective is to maximize shareholder’s value. To achieve this goal the company most
commonly needs a vision and a strategy after which comes the most important part:
implementation of the chosen strategy. Through performance measurement the
company can align the employees’ interests with the company’s interests and it can also
measure if the company and employees are fulfilling their targets derived from strategy
(Merchant, 2012).

There are variety of performance measures, both financial and nonfinancial. These
measures can be classified into three different categories: market measures, accounting
measures and combinations of measures (Rouse & Putterill, 2003).

The market measures are reflecting stock prices or shareholder returns. Accounting
measures include such measures as operating profit, residual income or return on
investment. Combinations of measures can include measures from the summary

20
measures mentioned above or non-financial measures such as market share or customer
satisfaction (Rouse & Putterill, 2003).

In all of these categories there is both positive and negative side. Market and accounting
measures are timely, precise, understandable and cost effective, just to name a few.
Negative side in the market measures is that they reflect the future expectations of the
firm value and not the realized performance. Accounting measures on the other hand
can lead to myopia, e.g. Investments that are important for the future firm value are
postponed due to pursuing short-term profits (Merchant, 2012).

2.1.5.2 Subjective Vs Objective Performance Measurement

In objective measurement, quantitative data (i.e. absolute performance data) is
measured whereas in subjective method what is measured is perceptive opinions about
performance according to the competitors or company expectations (Dess and
Robinson, 1984). The same performance criteria are measured both objectively and
subjectively. What matters is to determine those criteria. Your criteria can be qualitative
(e.g. customer satisfaction, overall business performance) or quantitative (e.g. profit,
sales).

Many studies rely on subjective measures that are evaluated by respondents. Scholars
have discussed the necessity to use subjective performance measures as a substitute for
objective measure, and the pioneering study for these discussions is that of Dess and
Robinson (1984).

The use of subjective measures can reduce the dependence on objective measures,
particularly when the research is executed at business units of multi-industry firms and
privately held firms (Dess & Robinson, 1984). Besides, the evaluation of performance
through subjective measures is necessary to attain flexibility and consistency of
performance, as objective measures can vary based on industry and can obscure the
relationship between independent variables and business performance (as a dependent
variable) (Dawes, 1999).

Again, Subjective measures allow comparison across firms and contexts, such as
industry types, time horizons, cultures or economic condition (Song et al., 2005).
Indeed, it can be a good alternative if the measures focus on the firm’s current condition

21
and the objective data may not be compatible with the intended level of analysis (Wall
et al., 2004).

Referring to this issue, managers can use the relative performance of their industry as a
benchmark when providing a response (Dawes, 1999), and these subjective measures
can also be cost-effective for the researcher when data can be collected through
questionnaire and/or interview methods that simultaneously elicit information on
practices (Wall et al., 2004).

In an effort to measure qualitative and quantitative performance, a subjective

measurement method is used by asking to what extent the managers of businesses find
their companies successful -compared with other businesses in the sector- in the context
of varied performance criteria (Alpkan et al., 2007).

Putting forward the view that subjective (perceptive) measurement may change
depending on the different personality traits or various organizational position and such
a measurement would cause incoherence and doubts in drawing comparison with
competitors, so that the researchers prefer the objective method in the measurement of
business performance (Lin et al., 2009).

Subjective assessments of financial and non-financial performance was used, consistent

with established practice in strategy research (Andersen, 2000; Morgan and Strong,
2003). In this study organizational performance measured subjectively using two
construct namely objective fulfilment and relative competitive performance adopted
from Venkatraman and Ramanujam (1988).

2.2 Empirical Literature

Strategic planning is a management work that centers on the development and future
supported prosperity of an organization. Strategic planning has gotten uncommon
consideration in strategic management look into, especially as far as its organization
with financial related performance and its job in strategic decision making (Grant,
2003). The inquiry regarding whether organizations that training, strategic planning
improve as far as their performance (financial and non-financial) tested numerous
management schools, creators, specialists and organizations to examine into and
measure the effect of strategic planning on organizational performance. Some related
researches are currently talking about.

22
Concerning the connection between parts of the strategic planning process, (for
example, formulation, implementation and evaluation) and organization performance,
blended outcomes seem to exist. A surge of work seems to propose that these parts of
the strategic planning process are connected to performance measurements inside the
organization (e.g. Arabzad et al. 2015). Chavunduka et al. (2015) found that there was
a positive connection between strategic planning and organizational performance
measures, for example, overall gain, net income, return on investment and market share,
among others.

Taiwo and Idunnu (2010) examined the impact of strategic planning on organizational
performance and survival. The study evaluated the planning-performance relationship
in organization and the extent to which strategic planning affected performance of First
Bank of Nigeria.

Perry (2001) led a study in United States and find positive connection among planning
and firms performance and furthermore concluded that very little formal planning goes
on in U.S. small businesses. However, the non-failed firms accomplish more planning
than comparable failed firms did before disappointment.

Stonehouse and Pemberton (2002) deduced in a study on 159 SMEs directed in United
Kingdom that a sum of 92 % organizations showed that they attempt strategic planning,
either very organized or of a general sort. While Stewart (2002) directed a study in 100
private ventures in Atlanta Metropolitan Statistical Area and found that those
organizations which practice formal business planning strategies were more fruitful
than those organizations which were not utilizing those procedures.

The aftereffects of the study of Morgan and Strong (2003) demonstrated that
organizations' accentuation upon analysis, defensiveness, and futurity in strategic
orientation were identified with business performance. Another study directed with 121
entrepreneurs and administrators of firms situated in the metropolitan Atlanta territory
by Stewart (2003) indicated huge relationship between strategic planning and
development linkage suggested that the little firms rehearsing effective formal business
planning will upgrade their development.

Delmar and Shane (2003) examined the relationship between planning and enterprise
development on the basis of 211 Swedish new ventures and found that planning reduces

23
the probability of enterprise dissolution and thus leads the firms towards success and
better performance and increase the probability of survival.

French et al. (2004) directed a study with 145 usable reactions in Australian little firms
and demonstrated no significant relationship between the performance measures and
factors identified. But a significant relationship between net profit and informal
planning was emerged. No relationship was found between any of the factors, i.e.,
vision, mission, latent abilities, competitor orientation and market orientation and the
performance of firms in Australian context.

According to Mintzberg and Quins (2004), 90% of well-formulated strategies fail at

implementation stage and only 10% of formulated strategies are successfully
implemented. The successful implementation of strategy is fully dependent on
involvement of all the stakeholders in an organization. Communicating progress of
implementing the strategy to the stakeholders will assist them in determining whether
corrective action is required. Njagi and Kombo (2014) examined the effect of strategy
implementation on performance of commercial banks in Kenya. Results revealed that
there was a strong relationship between strategy implementation and organizational
performance.

Gibson and Cassar (2005) explored causal connections among planning and
performance using a longitudinal database with reactions from the equivalent 2,956
organizations over a four-year time span with study created by the Australian Bureau
of Statistics . Their outcomes affirmed the relationship between movement of planning
and performance and that is likewise clear in most extant literature. Anyway they
provide reason to feel ambiguous about the customary impression of the causal
arrangement of those affiliations. Dincer et al. (2006) in a study led in Turkey by found
that there is a solid negative connection between formal strategic planning and firm
performance.

The study of Kraus et al. (2006) conducted in Austria with a random sample of 1,497
firms drawn from a population of 19,477 firms whereas (n = 290), showed that Planning
formalization has a positive and highly significant impact on the probability of
belonging to the group of growth firms, whereas other aspects of strategic planning
(time horizon, strategic instruments, and control) did not contributed to performance.

24
The findings of a study of Veskaisri et al. (2007) conducted in Thailand indicated that
the level of strategic planning is positively associated with the growth of the small and
medium enterprises (SME). This conclusion is very significant for SMEs because it
shows them the usefulness and benefits of practicing strategic planning. Furthermore,
their resulted reveal that certain demographic factors, such as age and education level,
were significantly and positively related to the decision to use strategic planning.
However, neither the gender of the SME decision maker nor the age of the SME
business was related to the decision to use strategic planning.

The study of Rudd et al. (2008) conducted in United Kingdom reported in findings that
two types of flexibility in planning mediate the relationship between strategic planning
and financial performance, while the other two types mediate the relationship between
strategic planning and non-financial performance. Both operational and financial
flexibility mediate the influence of strategic planning on financial performance, while
structural and technological flexibility mediate its influence on nonfinancial
performance. These were new insights that have not been empirically investigated in
the literature.

Glaister et al. (2008) conducted a study in Turkey with 135 usable questionnaires
received from largest manufacturing companies and reported the findings that there is
a good deal of support for the study’s hypotheses. A strong and positive relationship
was formed between formal strategic planning and firm performance, which tends to
confirm the arguments of the prescriptive strategic management literature. The test
results also verify the moderating roles of environmental turbulence, organization
structure and firm size on the strategic planning-performance link.

Karabulut and Efendioglu (2010) in their study with 71 returned responses in Turkey
purported that while observing the impact of different components/activities in a
strategic process and their impact on company performance, the only two that were
correlated (positively influenced) and statistically significant were “involvement of top
management in the process” and “having a mission statement”. Both of these strategic
process components identify and define the importance of the process in the
organization and had significant impacts on the profitability of the firms in their study.

In Nigeria Alaka et al. (2011) conducted a study with eighty (80) respondents including
heads of departments and executive management staff of selected insurance companies
25
and revealed that strategic planning has positive impact on insurance companies’
profitability.

Aldehayyat et al. (2011) conducted a study with questionnaire survey in Jordanian

hotels in two cities; namely Petra and Aqaba. They reported in the findings of their
research that the Jordanian hotels engage in the strategic planning process by using a
number of techniques. The use of strategic planning tools and techniques were related
more to the size of hotel and less to age and ownership type. They reported positive
relationship between the use of strategic planning techniques and size of hotel. The
managers of these hotels were having generally positive attitudes towards the strategic
planning process and managers who believed in the benefits of strategic planning where
those who engaged more in the practice of it.

In Finland Kohtamaki et al. (2012) using data from 160 small and medium-sized
Finnish IT companies presented in their results of study that participative strategic
planning positively affects personnel commitment to strategy implementation, which
thereby increases company performance. However, according to their analysis, the
participative strategic planning does not impact organizational learning and although
organizational learning does have a positive impact on company performance.

The study of Owolabi and Makinde (2012) in Nigeria conducted on employees of

Babcock University revealed that there was a significant positive correlation between
strategic planning and corporate performance. Their study therefore, concluded that
strategic planning is beneficial to organizations in achieving the set goals and
recommended that universities and other corporate organizations should engage in
strategic planning in order to enhance corporate performance.

Arasa and K'Obonyo (2012) conducted a study in Kenya and reported in their findings
that the correlation analysis results indicate the existence of a strong relationship
between strategic planning and firm performance. Further, all the strategic planning
steps (defining firm’s corporate purpose, scanning of business environment,
identification of firm’s strategic issues, strategy choice and setting up of
implementation, evaluation and control systems) were found to be positively related to
company performance.

26
In Republic of Macedonia, Suklev and Debarliev (2012) conducted a study and
concluded in their findings that strategic planning can generally contribute to
organizational effectiveness. The comparative analysis conducted in this study refers to
useful knowledge conclusions for the specifics of strategic planning effectiveness in the
emerging and developing countries and indicates the probable reasons for potential
differences in strategic planning effectiveness in different countries.

Khan and Khalique (2014) based on dubious findings on the connection between
strategic planning and firm performance and the contrasting idea of little and medium
ventures (SMEs) from that of extensive organizations, out of the blue proposed an
empirical study which combines strategic planning with that of intellectual capital. This
is one of the first studies in which any researcher has combined the literature of strategic
planning with that of intellectual capital in any empirical research.

Karabulut and Efendioglu (2010) found a positive relationship to exist between

strategic planning (the presence of the mission and involvement of top managers) and
financial related performances. Then again, a few researchers have discovered a
negative relationship to exist between parts of the strategic planning process and
financial performances (Gibson et al, 2001).

The aftereffects of studies are viewed as unsure and conflicting, with no unmistakable
ends (Mintzberg, 1994; Grant, 2003; Falshaw et al 2006). For example, Sarason and
Tegarden (2003) found a positive connection between rational strategic planning and
firm performance, Fredrickson and Mitchell (1984) a negative relationship, and Pearce
and Robinson (1983) finish up there is no critical relationship by any means.

In African Context, Adegbie and Fakile (2013) examined strategic planning and
performance: catalyst for sustainability and stability in the Nigerian financial sector
utilizing Multivariate Analysis of variance (MANOVA) model. The findings from the
observational examination uncovered that strategic planning was not legitimately
organized and at times missing in the financial sector which made difficult issues for
the country.

In a related improvement, Falilat (2013) analyzed strategic marketing planning and the
Nigerian financial industry. Utilizing Chi-square strategy, he found that marketing
division is the principle income creating an office in the financial business. Hence, he

27
presumed that for a bank to effectively accomplish its objectives and target for
preparing an expansion in long-run benefit, it needs to build up a decent marketing plan
and strategy.

Moreover, Alaska et al. (2011) evaluated the effect of strategic planning on

performance of insurance agencies in Nigeria. Implementing Analysis of Variance
(ANOVA) method, their findings demonstrated that strategic planning improves client
support and decreases unethical practices in the Nigeria insurance industry, in this way,
strategic planning can get ready organizations, regardless of areas in the future, set up
a long haul course and demonstrate the organization's purpose to stake out a specific
business position.

Arasa and K'Obonyo (2012) noticed that there is a positive connection between
strategic planning and organizational performance. The two creators further pressure
that the achievement and great performance of organizations are fixated on how usage,
control and assessment of the strategic planning process is led.

Numerous analysts’ endeavors to distinguish the impact of strategic planning on

organizational performance by mulling over various measurement. Beneath here are a
few researches on measurement of strategic planning and performance.

Right off the bat, the formality of the strategic planning. Formality of strategic planning
is a standout among the most every now and again contemplated by past researchers.
Concentrates demonstrated that formality of planning has a positive organization with
firms' performance (Suclev and Debarliev, 2012).

Furthermore, there is likewise positive connection between employee participation and

organization performances (Suclev and Debarliev, 2012). It is trusted that employees'
interest in strategic planning will most likely add to the viability of the improvement of
strategy and will consequently, lead to better adequacy of implementation.

The implementation of strategic planning is additionally another dimension professed

to be a standout among the most imperative part in the strategic planning process. It is
as proposed by Veliyath et al. (1993) that a fruitful strategic planning can clarify
whether it has been actualized legitimately. Hambrick and Cannella (1989) expressed
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. In any

28
case, a great formulated strategy does not naturally imply that the organization
accomplishes the goals set in the strategy. To guarantee the accomplishment of
organizational objectives, the formulated strategy should be actualized at all
dimensions of the organization. Another element of strategic planning is the control of
the strategic plan (Kraus, et al., 2006).

In light of concentrating by past researchers, dimensions of strategic planning

(formality, formulation of strategic planning, employee participation, and
implementation of planning, control of strategic planning) have demonstrated their
critical commitment to accomplishing better performance and the accompanying
conceptual framework is defined for this research.

2.3 Conceptual Framework

Strategic planning is a process of using systematic criteria and rigorous investigation to
formulate implement and control strategy and formally document organizational
expectations (Mintzberg 1994).

According to Greenley (1993), Strategic planning is a multidimensional construct

covering all functional areas of the firm. Hence, researchers should try to identify the
most important attributes of planning. Finding the variables that reflect good planning
should be the thrust of the literature. By using dimensions of planning, it might be
possible to investigate the impact of individual dimensions on specific performance
measures (Boyd, 1991).

To investigate the relationship we use 3 arms of the strategic planning process

(formulation, implementation, control and evaluation) and other dimensions of strategic
planning (employee participation in planning and formality of strategic planning) and
organisational performance measured in two constructs namely, objective fulfillment
performance and relative competitive performance.

The conceptual schema of the relationship between the dependent variable

(Performance) and independent (Strategic Planning) variables is depicted here below:

29
 Figure 1: Conceptual Model for Strategic Planning and Organizational Performance

2.4 Research Hypothesis

The extant empirical literature highlighted, there are inconclusive and conflicting
results on the relationship between strategic planning and organisational performance.
Intrust of our theoretical literature and conceptual framework the following hypotheses
are set to answer the research questions.

Hypothesis 1: Strategic formulation has no effect on organizational performance of

Commercial bank of Ethiopia.
Hypothesis 2: Strategic implementation has no effect on organizational performance
of Commercial bank of Ethiopia.
Hypothesis 3: Strategic evaluation and control has no effect on organizational
performance of Commercial bank of Ethiopia.
Hypothesis 4: Formality of strategic planning has no effect on organizational
performance of Commercial bank of Ethiopia.
Hypothesis 5: Employee participation in strategic planning has no effect on
organizational performance of Commercial bank of Ethiopia.

30
 CHAPTER THREE

RESEARCH METHODOLOGY
This chapter covers and present the research design, approach, strategy, target
population and sampling technique, the data collection instruments and the procedure
that is used, and method for data analysis to configure the responses to the research
questions.

3.1 Research Design

This research direct in commercial bank of Ethiopia in Debre Berhan Town branches,
Ethiopia and utilized explanatory and descriptive research design. An extraordinary and
exhaustive investigation on the strategic planning practices and its effect in organization
in relation to performance.

The research take advantages of descriptive research like its effectiveness to analyze
the issues and the possibility to observe the phenomenon in a completely neutral and
unchanged natural environment. The descriptive research design has been
conceptualized as a design used to describe characteristics of objects, people, groups,
or organizations (Mugenda, 2003). Saunder et al. (2007) further indicates that the
purposes of the descriptive method of research is used to gather information about the
present existing condition where the researcher interacts freely with the respondents;
the emphasis is on describing rather than on judging.

But, Descriptive studies are not helpful in identifying cause behind described
phenomenon, so to confront this gaps this research use extra research method called as
explanatory research. It is conducted in order to identify the extent and nature of cause-
and-effect relationships. When the focus is on cause-effect relationships, the study can
be explanatory explaining which causes produce which effects (Yin, 1994). Our
concern in casual analysis is how one variable (strategic planning) affects, or is
responsible for changes in another variable (organizational performance).

3.2 Research Approach

The research approach is deducted when the model and theory are made and examine
technique is planned to test the hypothesis, or it might be demonstrated when the data
are assembled and speculation is made as a result of data examination.

31
The deductive methodology owes more to positivism and inductive methodology owes
more to phenomenology (Saunders, 2000). Deductive approach is appropriate for the
research at hand as there are hypotheses deduced and checked and the approach is more
rigid and scientific in its entirety. It is the most common way to link between theory
and research. In the view of Cooper and Schindler (2008), the researchers collect data
to evaluate hypothesis or hypotheses related to an existing theory. Then the result of
the finding will modify theory or verify the theory.

During this research, the research questions are created. Research techniques are
structured and research questions are addressed as needs be. Along these lines, it very
well may be reasoned that the examination approach is deductive.

3.3 Research Strategy

In light of the study of Guba and Lincoln (1994), there are two methodologies or
strategies for research, for example Quantitative and Qualitative that are accessible to
analysts. The most essential contrast between the two methodologies is the utilization
of numbers and insights.

As indicated by Malhotra and Birks (2003), quantitative research is reasonable for

estimating the two frames of mind and conduct. Quantitative research can be utilized
to make models that foresee regardless of whether somebody holds a specific
supposition or would act with a particular goal in mind depending on a visible
trademark. What's more, this examination will pursue quantitative research approach.

As Saunders et al. (2000) brought up that there are a few research strategies that can be
utilized in the examination, for example, experiment, survey, case study, grounded
theory, and action research. The most important step is that the appropriate strategy for
the research question (s) and destinations be picked.

The research strategy would react to a general arrangement of how the analyst will
approach addressing the research questions that have been set (Saunders et al., 2009).
Yin (1994) has separated strategies as per three conditions. These conditions are the
kind of research questions, the degree of control an agent has over real social occasions
and furthermore the level of spotlight on contemporary rather than authentic occasions.
In this examination, the research questions begin with 'what'. Additionally, this

32
examination is on contemporary occasions and with no control on the practices. Along
these lines, survey strategy is suitable and chosen for this study.

3.4 Sampling Technique and Sample Size

The portion of the population to which the researcher has reasonable access may be a
subset of the target population. The target population in this case comprises employees
of the Commercial bank of Ethiopia who are working in Debre Berhan branches. Using
census sampling techniques a sample which constitutes of managerial staff and non-
managerial staffs are selected. Employees outside Debre Berhan, are 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 didn’t perform professional services and aren’t
considered as part of a team.

CBE has 6 branches in the Debre Berhan Town and the total number of managerial and
non-managerial staff is 164(Managerial staff=23, Non-Managerial (clerical) =141).

A sample is a sub-group or representative selection of a population that is examined or

tested to obtain statistical data or information about the whole population (Saunders et
al., 2007). Because of the number of managerial and non-managerial employee of the
commercial bank of Ethiopia is easily manageable the entire size is selected as a sample
for this study.

3.5 Source of Data and Data Collection Methods

Primary data is collected for the purpose of this research. For clarity, Saunders et al.
(2007) characterizes data as actualities, suppositions and statistics that have been
gathered together and recorded for reference or for research. Primary Data required for
this study acquired by overseeing questionnaire to respondents with the assistance of
field collaborators and associates because of time imperatives.

3.5.1 Questioner Design

A questionnaire is a research instrument consisting of a set of questions (Kothari, 2004)
and is for the purpose of gathering information from respondents. The questioner has 7
parts. Part A of the questionnaire cover information on the respondent, from part B to
F strategic planning dimensions consist of (Strategic formulation, Strategic
implementation, Strategic Evaluation and Control, Formality of strategic planning,

33
Employee participation in planning) respectively. Lastly part G is about organizational
performance consist of (Objective fulfillment and relative competitive performance).

The questionnaire had various indicators to measure this, the strategic planning
practices and organizational performance measured using a five point Likert scale
where 1 = strongly disagree while 5=strongly agree. A 5 - point Likert-type scale was
used to increase response rate and response quality along with reducing respondents’
“frustration level” (Babakus and Mangold 1992).

Strategic formulation part of questionnaire covered the essential content, process and
views of strategy formulation in CBE. In this study Strategy Implementation considered
as Degree of emphasis given to implementing Strategies and providing a set of variables
which could be used to measure the success of strategy implementation. The scale
adopted from Hickson et al. (2003).

Strategic control and evaluation part of questionnaire indicate the degree to which
respondents agree or disagree with the statements regarding strategy evaluation at CBE
adopted from Ondoro (2015) and Ketchen and Short (2016).

Glaister et al. (2008) measure formality of a firm’s strategic planning process with “The
Planning Formality Scale” used for this study. Employee Participation part of
questionnaire uses Phillips and Moutinho’s (2000) lists of attributes that are important
in calculating the strategic planning index, we utilized the indicators to assess the
employee participation.

Organisational Performance: The subjective organizational performance was measured

by asking the respondents, on a five-point scale to indicate to their corporate
performance two using two constructs namely objective fulfillment and relative
competitive performance adapted from Venkatraman and Ramanujam (1988).

As a result, the final questionnaire consists of 5 questions related to respondent’s

information, two constructs 15 items related to organizational performance and 40
items related to strategic planning practice belonging to five sets of questions.

3.5.2 Common Method Variance Analysis

Common method variance (CMV) refers to the amount of forged covariance shared
among variables because of the common method used in collecting data (Buckley et al.
1990). In typical survey studies in which the same later responds to the items in a single
34
questionnaire at the same point in time, data are likely to be susceptible to CMV
(Lindell and Whitney 2001).

Harman's single factor score, in which all items (measuring latent variables) are loaded
into one common factor. If the total variance for a single factor is less than 50%, it
suggests that CMV does not affect your data, hence the results. Note that, Harman's
approach is to test for CMV, but not to control for CMV (Podsakoff et al., 2012).

According to this test all the variables of interest are entered into a factor analysis
moreover, all 55 variables were loaded on one factor to examine the fit of the
confirmatory factor analysis model using SMART PLS v3.0. If common method
variance is largely responsible for the relationship among the variables, the one-factor
confirmatory factor analysis (CFA) model should fit the data well (Podsakoff et al.,
2012). The results indicated that the factor loadings of 36 out of 55 variables were below
0.5 and the Average Variance Extracted (AVE) value obtained was 0.158. Hence a
single-factor model did not fit the data well. While the results of these analyses do not
preclude the possibility of common method variance, they do suggest that common
method variance is not of great concern and thus is unlikely to distort the interpretations
of results.

3.6 Reliability and Validity of the Instrument

Reliability refers to the consistency and dependability of a measuring instrument. One
of the internal consistency methods of assessing reliability, Cronbach alpha coefficient,
is apply 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. It
measures how well items in a set are related to one another.

Using Partial Least Squares (PLS) the composite reliability and convergent validity of
the measures were assessed. The discriminant validity of the measures was also
assessed using PLS. If the measures have both convergent validity and discriminant
validity, it implies that these measures have construct validity.
3.7 Method of Data Analysis
The data collected analyze using both descriptive statistics and inferential statistics
(Multiple regression, correlation analysis), Graphs, charts, pie charts, figures and tables
are used to present the findings and interpreted in light of the study objectives.

35
Descriptive statistics and one sample t tested were used to assess the extent of strategic
planning practices in commercial bank of Ethiopia using IBM SPSS v20.

In this study, the process of data reduction is carried out in three stages. First of all the
reliabilities of all the variables measuring a construct are examined. Then an
exploratory factor analysis is conducted to examine the loadings of the variables using
IBM SPSS v20. Finally confirmatory factor analysis (CFA) is carried out using Partial
Least Squares, and the composite reliability which is a measure of internal consistency
similar to Cronbach's alpha, convergent validity and discriminant validity of the
measures were assessed. PLS-Graph (Version 3.0), a Graphical User Interface software
program developed by Wynne Chin and Tim Frye was used to implement the PLS
technique. The acceptable level of composite reliability is 0.7 and an AVE of 0.5
indicated convergent validity.

Correlational analysis used to see the relationship between strategic planning constructs
(strategic formulation, strategic implementation, strategic evaluation and control,
formality of strategic planning, employee participation in strategic planning) and
organizational performance measured in two constructs namely objective fulfilment
and relative competitive performance using IBM SPSS v20.

Regression analysis were used using STATA v14.2 to determine the impact of strategic
planning on organizational performance. Most of the studies have examined bivariate
relationships and this could be one of the main drawbacks of the studies. The
relationships may change if more variables are studied together. Structural equation
modelling technique using SMART PLS v3.0 is used to examine multivariate causal
relationships.

3.8 Ethical Considerations

As per Bryman and Bell (2007) the accompanying ten points speak to the most critical
standards identified with moral contemplation in dissertations:

 The research participant ought not to be exposed to hurt in any ways at all.
 Respect for the nobility of research participant ought to be prioritized.
 Full assent ought to be gotten from the participant preceding the study.
 The security of the protection of research participant must be guaranteed.
 Adequate dimension of secrecy of the study information ought to be guaranteed.

36
  Anonymity of people and associations taking part in the study must be
guaranteed.
 Any misdirection or misrepresentation about the points and targets of the
exploration must be evaded.
 Affiliations in any structures, wellsprings of subsidizing, just as any conceivable
irreconcilable circumstances must be pronounced.
 Any kind of communication in connection to the research ought to be finished
with genuineness and straightforwardness.

Any kind of misdirecting data, just as a portrayal of essential information among some
of the ethical issues I expect to come across on my thesis elaboration are summarized
as follows:

The respondents may have little interest in reflecting information on their finance and
talking about personal attitude on performance indicators about the firm and regarding
the questionnaire creation, respondents would prove difficult to deal with elaborated
and sophisticated questions. To avoid those potential pitfalls, I clearly present at the
beginning to my participants how the research is confirmed and structured, selling its
benefits and adding confidential clauses to be sure that at any time there is a
maintenance of confidentiality and protection of candidates anonymity and voluntary
participation of respondents in the research is important. Moreover, participants have
rights to withdraw from the study at any stage if they wish to do so.

Acknowledgement of works of other authors used in any part of the dissertation with
the use of the APA referencing system and maintenance of the highest level of
objectivity in discussions and analyses throughout the research is considered.

37
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

This chapter starts with a summary of the characteristics of the respondents and of the
data collected. This discussion is followed by a reliability analysis, descriptive analysis,
factor analysis and detailed presentation of results relating to the hypotheses in turn
using correlational and regression analysis. The hypothesis focuses on the effect of
strategic planning on organization performance. Lastly model developed is presented.

4.1 Characteristics of Respondents

A data was collected from commercial bank of Ethiopia in Debre Berhan Town
branches 164 questionnaire was distributed to managerial and clerical staff members of
selected employees. From the total number of questioners 91.45% was collected from
the respondents.

Table 4. 1: Demographic Profile of the Respondents.

Participant Gender
Frequency Percent Valid Percent Cumulative Percent
Male 89 59.3 59.3 59.3
Female 61 40.7 40.7 100.0
Total 150 100.0 100.0
Years of Experience
Frequency Percent Valid Percent Cumulative Percent
0-5 44 29.3 29.3 29.3
6-10 90 60.0 60.0 89.3
11-15 13 8.7 8.7 98.0
Above 15 3 2 2 100.0
Total 150 100.0 100.0
Participant position in the Bank
Frequency Percent Valid Percent Cumulative Percent
Managerial 28 18.7 18.7 18.7
Clerical Non
122 81.3 81.3 100.0
Managerial
Total 150 100.0 100.0

As the above table shows from the total of collected questioners 40.7% respondents
were female. Also 18.7 % of the respondent have managerial position and others are
non-managerial clerical staff members of CBE. The result also shows around 70.7 %
38
of respondents are in the bank more than 5 years. It illustrates that the study collected
credible information on strategic planning practices and performance of CBE.

4.2 Reliability Analysis

Reliability refers to the consistency and dependability of a measuring instrument.
Cronbach alpha coefficient is 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. Coefficient of 0.7 or above are nearly always acceptable. In this study
the result of the overall reliability test of questioner is Cronbach alpha coefficient is
0.897. Table 4.2 shows the reliability of each constructs before factor analysis using
SPSS v20 and all the values of Cronbach alpha are above acceptable value.

Table 4. 2: Reliability of the Scales

Reliability Statistics
Cronbach's Cronbach's N of Items
Alpha Alpha Based
on
Standardized
Items
Formulation .722 .723 6
Implementation .718 .719 9
Evaluation .759 .760 9
Formality .721 .716 9
Participation .717 .725 7
Objective fulfillment .711 .709 7
Relative competitive performance .712 .714 8
Overall questioner .897 55

4.3 Descriptive Analysis

The study was aimed at examining and describing the current practices pertaining to
strategic planning in the commercial bank of Ethiopia. Below the table show descriptive
statistic using SPSS v20. The Tests of Normality helpful for evaluating assumptions of
some common inferential (parametric) analyses are used.

Skewness refers to the amount of non-symmetry a distribution of scores contains.

Kurtosis is used to ensure the amount of tail magnitude, commonly referred to as peaks
or flatness of a distribution. Kurtosis is also referred to as a measure of normality. The

39
values for asymmetry and kurtosis between -2 and +2 are considered acceptable in order
to prove normal univariate distribution (George & Mallery, 2010).

Table 4. 3: Descriptive statistics of Independent Variables

N Mean Skewness Kurtosis

Statistic Statistic Statistic Std. Error Statistic Std. Error

Formulation 150 3.7889 -.312 .198 -.668 .394

Implementation 150 3.4830 .440 .198 .056 .394

Evaluation 150 3.8733 -.001 .198 -.360 .394

Formality 150 3.9719 -.661 .198 .486 .394

Participation 150 3.4514 -.314 .198 .534 .394

Valid N (listwise) 150

As indicated in the above table the means of each constructs are normally distributed.
The mean value of each construct accurately represents the center of distribution and
sample size is large enough, so this study consider a parametric test.

In this study strategic planning consist of constructs (Formulation, Implementation,

Evaluation and Control, Formality of Planning and Employee Participation) and to see
the practice of strategic planning in CBE. Below here the table shows the result of the
one sample t test and we interpret them one by one in the sub sections.

Table 4. 4: One Sample t-test Result for Strategic Planning Practices.

One-Sample Test

Test Value = 2.5

t df Sig. (2- Mean 95% Confidence

tailed) Difference Interval of the
Difference

Lower Upper

40
Strategic Formulation 34.618 149 .000 1.28889 1.2153 1.3625

Strategic
30.487 149 .000 .98296 .9193 1.0467
Implementation

Strategic Evaluation 40.341 149 .000 1.37333 1.3061 1.4406

Formality of Planning 40.154 149 .000 1.47185 1.3994 1.5443

Employee Participation
27.466 149 .000 .95143 .8830 1.0199
in Planning

4.3.1 Practice of Strategic Formulation in Commercial Bank of Ethiopia.

The results in above table indicate that the mean ratings of respondents from CBE were
in agreement that their organization carried out its strategic formulation by applying all
the key dimensions required for the successful strategic formulation (Over all Mean=
3.788).

Strategy formulation thus begins with scanning of the external as well as internal
environment of the organization. Analysis of the external environment helps to identify
the possible threats and opportunities while analysis of internal environment helps to
identify strengths, weaknesses and the key people required within the organization to
meet its objectives (Moss Kanter, 2002).

4.3.2 Practice of Strategic Implementation in Commercial Bank of

Ethiopia.
The overall findings regarding the strategy implementation practices summarized as
mean ratings of respondents from CBE were in agreement that their organization
carried out its strategic implementation by applying all the key dimensions required for
the successful strategic implementation (Over all Mean= 3.483).

Without successful implementation, an organization’s preferred strategy is nothing

more than a dream. Regarding the strategy implementation practices in CBE
quantitative data were collected from respondents at management positions, non-
managerial staff members.

41
Table 4. 5: Independent Samples Test on Perception of Strategic Implementation
Practice.

Independent Samples Test

Levene's t-test for Equality of Means

Test for
Equality of
Variances

F Sig. t df Sig. Mean Std. 95%

(2- Differe Error Confidence
tailed) nce Differe Interval of the
nce Difference

Lower Upper

Equal
variances 2.287 .133 -1.206 148 .230 -.13466 .11167 -.35534 .08602

Implem assumed

entation Equal
variances -.999 34.061 .325 -.13466 .13478 -.40855 .13923
not assumed

As can be seen in Table 4.5 the significance levels obtained are not less than or equal
to 0.05, so the results are not significant. According to these results there is no
statistically significant difference in the perception of both managers and non-managers
regarding practices related strategy implementation in CBE.

The implementation of strategy is arguably the most important stage in the process of
strategic planning for one reason: Without successful implementation, an
organization’s strategy is really nothing more than a fantasy. Hence, if CBE did not
implement the strategies they identified what was the purpose of strategy formulation?
It is simply a waste of time, talent and energy as well as other resources.

42
 4.3.3 Practice of Strategic Evaluation and Control in Commercial Bank of
Ethiopia.
When we see the overall mean (in Table 4.3) for strategic evaluation and control
practices by CBE is 3.8733. Which indicate, CBE gives more attention to evaluation
and control than other strategic planning process activities. There were formal ways of
evaluation which had been used by the bank to gauge whether it was on the right path
towards the achievement of the goals of its strategic plan.

Most of the respondents were of the opinion that evaluation and control practices have
enabled the CBE to improve its services. These practices gave organization a
competitive edge over other banks.

4.3.4 Practice of Formal Strategic Planning in Commercial Bank of

Ethiopia.
Formality strategic planning practices in CBE that the overall mean value of 3.971
which is the highest of all other dimensions of strategic planning. It can argued that in
CBE there is a deliberate means to include factors and techniques in symmetrical way
to achieve specified tasks.

4.3.5 Practice of Participating Employee in Strategic Planning in

Commercial Bank of Ethiopia.
When we see the overall mean (in Table 4.3) of all the five constructs of strategic
planning, the one of main aspects necessary for successful strategic planning process
such as employee participation in strategic planning process has a value of (M=3.451).
The results in Table 4.3 have also indicated that CBE did take advantage of giving
adequate chance for the participation of as many stakeholders as possible in their
strategic planning process. Independent t test applied to this if the perception changed
between two groups (managerial and non-managerial) responders.

43
Table 4. 6: Independent Samples Test on Perception of Participating Employee in
planning
Independent Samples Test

Levene's t-test for Equality of Means

Test for
Equality of
Variances

F Sig. t df Sig. Mean Std. 95%

(2- Differe Error Confidence
tailed) nce Differ Interval of the
ence Difference

Lower Upper

Equal
variances .012 .914 -.809 148 .420 -.07201 .0890 -.24790 .10387
assumed
Participatio
Equal
n
variances
-.819 40.89 .418 -.07201 .0879 -.24961 .10558
not
assumed

As it’s shown in above table the perception towards employee participation in strategic
planning in CBE both managerial and non-managerial staff members have no
significant difference. Contrary to these findings, the literature suggests that successful
strategic planning is inclusive, allowing every major stakeholders-the management,
non-managerial staff (Hayward et al., 2003).

4.4 Factor Analysis

Unlike dependence oriented techniques like regression analysis and ANOVA, factor
analysis provides the tools for analysing the structure of the interrelationships among a
large number of variables by defining sets of variables that are highly interrelated,
known as factors (Hair et al., 2006). The main purpose of conducting a factor analysis

44
is to summarise the information contained in a number of original variables into a
smaller number of factors without losing much information.

Three types of checks are generally carried out for determining whether the data is
suitable for factor analysis or not. As a first step the correlations between the variables
measuring a construct is examined to see whether they are correlated or not. Another
method is to do the Bartlett's test of sphericity to examine the presence of correlations
among the variables using one measure. It provides the statistical significance that the
correlation matrix has significant correlations among at least some of the variables. The
third method which can be used to assess the inter correlations among the variables and
the appropriateness of factor analysis is the measure of sampling adequacy (MSA). The
value of this measure ranges from 0 to 1 and 1 indicates that each variable can be
perfectly predicted without error by the other variables. According to the guidelines
provided by Kaiser (1974) the MSA values can be interpreted as follows: Above 0.80 -
excellent, above 0.70 - good, above 0.60 - average, above 0.50 - miserable and below
0.50 - unacceptable.

The results of the KMO measure of sampling adequacy and Bartlett's Test of Sphericity
for all the seven constructs are shown in Table 4.3. The results indicate that the variables
used can be factor analysed, Principal Component’s analysis was carried out separately
on all the five strategic planning constructs and other two constructs of organization
performance.

Table 4. 7: KMO and Bartlett's Test Results for Study Variables.

Variables KMO Measure of Bartlett's Test of

sampling adequacy Sphericity

Formulation of plan .754 Significant *

Strategic Implementation .635 Significant *
Strategic Evaluation .713 Significant *
Formality of the plan .743 Significant *
Participation in planning .727 Significant *
Objective fulfillment .728 Significant *
Relative competitive .723 Significant *
Significant * at P<0.001 level
45
A number of correlations shown in these seven tables are significant and this indicates
that they could be factor analysed. The results of the factor analyses conducted on each
of the constructs are presented below. The factor loadings which are less than 0.5 are
not shown in the tables for ease of interpretation (See Appendix2).Variable selected for
each constructs indicated in number and coding of each variable is by the question
number in the questioner (e.g. variable Formulation 1 is the number one question in the
questioner of strategic formulation part).

4.4.1 Strategic Formulation Construct

All the variables are strongly loaded on the first component indicating that these
variables measure the strategy formulation construct but the composite reliability and
AVE value are not above standard (See Appendix2, A2Table 1). A common factor
analysis was conducted on these variables and the loadings are shown in (See
Appendix2, A2Ttable 2).

By examining the three variables (Formulation 1, Formulation 5 and Formulation 6)

the composite reliability (.814) and AVE (.594) is achieved using PLS. It was decided
to take the mean of the summated scale of all these variables as a measure of the strategy
formulation construct.

4.4.2 Strategic Implementation Construct

From principal component matrix in order to identify the variables which could be used
to form this single factor the composite reliability and convergent validity of the
variables were examined using PLS. It was possible to find an effective combination of
variables which would satisfy the requirements of reliability and validity.

The best combination of variables loaded on factor 1 and factor 3(See Appendix2,
A2Ttable 3). The composite reliability and convergent validity of this measure was
assessed using PLS. After excluding the items one by one on the basis of factor
loadings, it was possible to obtain a composite reliability value of 0.763 and an AVE
value of 0.517 with three variables namely Strategic Implemn1, Strategic Implemn4
and Strategic Implemn9. However six out of nine variables measuring this construct
had to be excluded for obtaining acceptable levels of composite reliability and AVE.

46
 4.4.3 Strategic Evaluation and Control Construct
Even though the rotated component matrix indicates that three factors could be formed
with these variables, when Cronbach's alpha values were calculated for the variables
belonging to these factors, it was found that only the first factor had a satisfactory value
(0.792). (See Appendix2, A2Ttable 4). These three factors Strategic Evaluatn4,
Strategic Evaluatn2 and Strategic Evaluatn7 has composite reliability (.879) and AVE
(.707) using PLS. It was decided to take the mean of the summated scale of these
variables as a measure of the strategic evaluation and control construct.

4.4.4 Formality of Strategic Planning Construct

The result of component analysis that four factors could be formed with these variables,
when Cronbach's alpha values were calculated for the variables belonging to these
factors, it was found that only the first factor had a satisfactory value (0.731) (see
Appendix2, A2Ttable 6). It was decided to use the mean of the summated scale
consisting of the variables Formality of strategic 1, Formality of strategic 2 and
Formality of strategic 9 as the measure of strategic planning formality. This measure
has acceptable levels of composite reliability and AVE of 0.8 and 0.582 respectively.

4.4.5 Employee Participation Construct

The result from component matrix on employee participation construct shows the
variables can be loaded in two factor (see Appendix2, A2Ttable 5). A second order
factor analysis was conducted to find out whether these two factors load on one factor
and it was found that all the three factors loaded on one factor. This shows that the
variables loaded on the two factors could be effectively combined to form a single
factor which represents the construct (see Appendix2, A2Ttable 6). In order to identify
the variables which could be used to form this single factor the composite reliability
and convergent validity of the variables were examined using PLS.

The variables namely Employee Partic3 corresponding to the employee participation

construct had to be dropped in order to obtain an acceptable level of composite
reliability and AVE 0.806 and 0.512 respectively. And other left four factors Employee
Partic1, Employee Partic4, Employee Partic6 and Employee Partic7 used to take the
mean of the summated scale of all these variables as a measure of the employee
participation construct.

47
 4.4.6 Objective Fulfilment Performance Construct
Organisational performance was measured using two constructs namely objective
fulfilment and relative competitive performance. The scale used to measure objective
fulfilment had a Cronbach's alpha value of 0.612 and the scale used to measure relative
competitive performance had a Cronbach's alpha value of 0.675 after factor analyzed.

The KMO measure of sampling adequacy for the objective fulfilment measures is 0.728
and for relative competitive performance measures the value is 0.723.The Bartlett's test
of sphericity is significant for both the performance measures. Hence the variables
corresponding to both the measures can be factor analysed.

Principal components analysis with varimax rotation was conducted on the variables
measuring Objective Fulfillment performance (see Appendix2, A2Ttable 7). All the
variables are strongly loaded on the second component indicating that these variables
measure the Objective Fulfillment construct. This was ascertained by examining the
composite reliability (.749) and AVE (.563) using PLS. It was decided to take the mean
of the summated scale of all these variables (Objective Fullfilment1, Objective
Fullfilment3, and Objective Fullfilment6) as a measure of the objective fulfillment
construct.

4.4.7 Relative Competitive Performance Construct

The variables loaded on first factor namely Relative Performance5, Relative
Performance6, Relative Performance7, Relative Performance8 has acceptable levels of
composite reliability and convergent validity. The Cronbach's alpha value for these five
variables is .675 which is acceptable. It was decided to compute the mean of the
summated scale of these four variables for use in further analysis (see Appendix2,
A2Ttable 8).

Factor analysis was conducted on the variables in order to facilitate data reduction. Both
Principal Component Analysis (PCA) and Factor Analysis (FA) were used for
conducting the factor analysis on the variables. As a result the variables which should
be used as measures for each construct were identified. The details of these variables
including their Cronbach's alpha, composite reliability and AVEs are summarised
below.

48
Table 4. 8: Variables Representing Different Constructs used in this Study

Constructs Variables Used Cronbach's Composite AVE

Alpha Reliability
Strategic Mean of the 0.659 0.814 0.594
formulation summated scale
consisting of fsp1,fsp5,fsp6
variables
Strategic Mean of the 0.537 0.763 0.517
implementati summated scale
on consisting of si1,si4,si9
variables
Strategic Mean of the 0.792 0.879 0.707
Evaluation summated scale
consisting of se2,se4,se7
variables
Participation Mean of the 0.68 0.806 0.512
in planning summated scale
consisting of
ep1,ep4,ep6,ep7
variables
Formality of Mean of the 0.731 0.8 0.582
Planning summated scale
consisting of fp1,fp2,fp9
variables
Objective Mean of the 0.612 0.794 0.563
Fulfillment summated scale
consisting of op1,op3,op6
variables
Relative Mean of the 0.675 0.801 0.502
Competitive summated scale
performance consisting of rp5,rp6,rp7,rp8
variables

49
According to Babbie (1992), Cronbach Alpha values are classified based on the
classification in which the reliability index of 0.90-1.00 is very high, 0.70-0.89 is high,
0.30-0.69 is moderate, and 0.00 to 0.30 is low. The results showed that the Cronbach
Alpha for this instrument is on the classification of high and very high, higher than 0.70.
Composite reliability was calculated in addition to the Cronbach’s alpha, because the
number of variables used influence this reliability index less. According to Sekaran
(2003), Cronbach Alpha value must be greater than 0.5 after factor analyzed. Composite
reliability should be at least 0.7 (Hair et al., 2005). So that can the instrument used is
reliable and valid.

4.5 Inferential Analysis

The analytical techniques used to test these hypotheses are correlation analysis and
regression analysis. In this study organisational performance is measured using two
constructs namely objective fulfilment and relative competitive performance.
According to Venkatraman and Ramanujam (as sited in veettil, 2008), Objective
fulfilment is defined as the extent to which the organisation has achieved its short-term
and long-term performance objectives and minimised the problems. Relative
competitive performance is defined as the extent to which organisational performance
has either improved or deteriorated in terms of profit, market share, return on assets,
return on equity, and return on sales, current ratio and competitive position.

4.5.1 Correlational Analysis

Below here Table 4.9 shows the correlation between the five arms of strategic planning
and their relation with the two constructs of organizational performance namely
objective fulfillment performance and relative competitive performance using IBM
SPSS v20. Pearson’s product-moment correlation was used to establish the degree of
association between the independent and dependent variables.

50
Table 4.9: Correlations between Strategic Planning and organizational Performance

Correlations
Form Imple Evalu Forma Partici Objective Relative
ulatio mentat ation lity pation Fulfillment Competitive
n ion Perfo. Perfo.
Pearson
1 .297** .230** .099 .243** .310** .107
Formulation Correlation
Sig. .000 .005 .226 .003 .000 .194
Pearson
Implementatio .297** 1 .316** .259** .271** .371** .383**
Correlation
n
Sig. .000 .000 .001 .001 .000 .000
Pearson
.230** .316** 1 .155 .347** .492** .396**
Evaluation Correlation
Sig. .005 .000 .058 .000 .000 .000
Pearson
.099 .259** .155 1 .147 .070 .089
Formality Correlation
Sig. .226 .001 .058 .072 .397 .277
Pearson
.243** .271** .347** .147 1 .386** .333**
Participation Correlation
Sig. .003 .001 .000 .072 .000 .000
Objective Pearson
.310** .371** .492** .070 .386** 1 .581**
Fulfillment Correlation
Performance Sig. .000 .000 .000 .397 .000 .000
Relative Pearson
.107 .383** .396** .089 .333** .581** 1
Competitive Correlation
Performance Sig. .194 .000 .000 .277 .000 .000
**. Correlation is significant at the 0.01 level (2-tailed).

The results indicate that there is a correlation between the variables under study. The
researcher made use of correlation as a statistical measure since correlation best
describes the strength and direction of a linear relationship between two variables
(Graham 2009).

51
Strategy evaluation and control with objective fulfillment performance have the highest
correlation value of 0.492 and significant at 0.01 level. The second highest correlation
occurs between participation of employee in strategy planning and objective fulfillment
performance which is 0.383 and significant at 0.01 level.

Relative competitive performance with strategy implementation, evaluation and

control, and participation of employee in planning have a significant correlation at 0.01
level.

The correlation result shows that, strategic formulation and objective fulfillment
performance has lowest correlation value of 0.31 and significant at 0.01 level.
Although, in relation with the dependent variable relative competitive performance,
formulation correlation squared is 1.14%, means variance in one variable accounted for
by the other variable is weak and the relation is not significant at p=0.05 level.

The correlation between formality of planning and objective fulfillment performance

0.07. And relative competitive performance correlate with formality of planning has a
value of 0.089. But in both cases the value is not significant at p=0.05 level. Clearly
seen that there is a very weak and not statistically significant relationship between the
variables.

As the results obtained in the correlation analysis, the study found a relation exists
between strategic planning consisting of (formulation, implementation, evaluation and
participation of employees in strategic planning) and the dependent objective
fulfillment performance. And three of strategic planning variables (strategic
implementation, evaluation and participation of employees in strategic planning) are
significantly correlated with performance measured in relative competitive
performance.

Finally, the inter-correlations for the two performance constructs, understandably, are
relatively high; however, not so much so as to undermine the independence of each
measure. So the traditional assumptions for multi-variate analysis should hold.

4.5.2 Linear Regression Model Assumptions and Diagnostic Tests

In this study of regression analysis STATA v14.2 is used. The diagnostic tests were
undertaken to ensure that the assumptions of classical linear regression model are
concerned, the coefficient estimators of both α (constant term) and β (independent

52
variables) that are determined by ordinary least square (OLS) will have a number of
desirable properties, and usually known as Best Linear Unbiased Estimators (BLUE).
Hence, the following sections discuss results of the diagnostic tests (i.e.,
heteroscedasticity, autocorrelation, multicollinearity and normality test) that were
conducted to ensure whether the data fits the basic assumptions of classical linear
regression model or not.

4.5.2.1 Heteroskedasticity Test

The homoskedasticity is one of the assumptions of the CLRM which states that the
variance of the errors must be constant. If the errors do not have a constant variance,
they are said to be heteroskedastic (Brooks, 2008). A non-graphical way to detect
heteroskedasticity the Breusch-Pagan test is used. The null hypothesis is that residuals
are homoskedasticity. The Breusch–Pagan test tests for conditional heteroskedasticity.
If the Chi Squared value is significant with p-value below an appropriate threshold (e.g.
p<0.05) then the null hypothesis of homoskedasticity is rejected and heteroskedasticity
assumed.

Figure 2: Breusch-Pagan Test for Heteroskedasticity

The regression between objective fulfilment performance and strategic planning

variables is homoskedasticity as seen in above table because we can’t reject the null
hypothesis. But when we regress relative competitive performance with strategic
planning variable the test shows there is Heteroskedasticity (see Appendix 3). There are
two ways to deal with this problem, one is using Heteroskedasticity robust standard
errors, and the other one is using weighted least squares (Stock and Watson, 2003).
Weighted least squares requires knowledge of the conditional variance on which the
weights are based, which is unknown in this study so heteroskedasticity robust standard
errors to deal with heteroskedasticity is used.

53
 4.5.2.2 Multicollinearity Test
Multicollinearity means the existence of a “perfect” or exact, linear relationship among
some or all explanatory variables (Gujarati, 2004). As noted in (Gujarati, 2004) if
multicollinearity is perfect, the regression coefficients of the explanatory variables are
indeterminate and their standard errors are infinite. A (variance inflation factor) VIF>
10 or a 1/VIF< 0.10 indicates trouble and our VIF value for independent variables result
have acceptable value that multicollinearity in this study.

Figure 3: VIF test for Multicollinearity on Independent Variables

4.5.2.3 Normality Test

According to (Brooks, 2008) in order to conduct hypothesis test about the model
parameter, the normality assumption must be fulfilled. The normality assumption is
about the mean of the residuals is zero. A non-graphical test is the Shapiro-Wilk test
for normality is used. The null hypothesis for this test is that the data are normally
distributed. The Prob < W value listed in the output is the p-value. If the chosen alpha
level is 0.05 and the p-value is less than 0.05, then the null hypothesis that the data are
normally distributed is rejected.

Figure 4: Shapiro-Wilk Test for Normality

54
The null hypothesis is that the distribution of the residuals is normal, here the p-value
is 0.22 we failed to reject the null (at 95%). We conclude then that residuals are
normally distributed. The Shapiro-Wilk test of relative competitive performance and
standardized residual presented in Appendix 3.

4.5.2.4 Autocorrelation Test

The value of Durbin –Watson test 1.778 and 2.012 for both regression models with two
dependent measures of performance (objective fulfillment and relative competitive) is
positive this indicates that there is a positive autocorrelation. This implies that our
model is well defined.

4.5.2.5 Linearity Test

Below Figure is approximately normal it shows that there is approximately a linear
relationship between response and explanatory variables. The normal –p plot regression
of relative competitive performance and standardized residual presented in Appendix
3.

Figure 5: Normal-p plot Regression Standardized Residual

4.5.2.6 Omitted Variable bias Test

Testing for omitted variable bias is important for our model since it is related to the
assumption that the error term and the independent variables in the model are not
correlated (E(e|X) = 0). If we are missing variables in our model and “is correlated with
the included regressor” and, “the omitted variable is a determinant of the dependent
variable” (Stock and Watson, 2003), then our regression coefficients are inconsistent.
55
 Figure 6: Ovtest for Omitted Variable bias

The null hypothesis is that the model does not have omitted-variables bias, the p-value
is higher than the usual threshold of 0.05 (95% significance), so we fail to reject the
null and conclude that we do not need more variables.

4.5.3 Regression Analysis

4.5.3.1 Regression Analysis of Objective Fulfillment Performance
The finding of regression analysis is described below. Multiple regression analysis was
carried out with Performance - Objective Fulfillment as the dependent variable and
Strategic Planning variables as the independent variable.

Figure 7: Regression Model Summary: Strategic Planning and Objective Fulfillment

The regression model result shows that three of the independent variables are
significantly affects organizational performance measured in objective fulfillment
performance. But the coefficient of formality is changed to negative which contradicts
with the result of correlation analysis.

The confusion is coming from, when that relationship between independent variable
and dependent variable is changing from simple to multiple linear regression. The effect
called suppression.

56
A more general definition of a suppressor variable was advanced by Darlington (1968).
Darlington defined suppression as occurring when all predictor variables have positive
pairwise correlations with each other and with the dependent variable, but the
suppressor variable receives a negative estimated coefficient in the regression model.

According to Cohen et al., 2003, Suppressor variables are predictors that in isolation
correlate weakly (or zero) with the outcome variable but are strongly correlated with
one or more predictors that are correlated with the outcome variable. In our case
formality of strategic planning with both performance measures and strategic
formulation with relative competitive performance measure (see Table 4.9).

When there is suppressor effects in regression model. Thompson (1992) point out
researchers that, interpreting only beta weights seriously risk neglecting information
about critical relationships between the variables. So to make the model better by
eliminating the variables which do not have much impact on objective fulfillment
performance. The researcher apply backward elimination for multiple linear regression
using SPSS.

Table 4. 10: Regression using Backward Elimination on Objective Fulfilment

Model Summary

Model R R Square Adjusted R Square Std. Error of the

Estimate

1 .593a .351 .329 .46611

2 .588b .346 .328 .46635

a. Predictors: (Constant), Formality, Formulation, Evaluation, Participation,

Implementation

b. Predictors: (Constant), Formulation, Evaluation, Participation, Implementation

Coefficientsa

57
Model Unstandardized Standard t Sig. Correlations
Coefficients ized
Coeffici
ents

B Std. Error Beta Zero- Partial Part

order

(Constant) .493 .390 1.264 .208

Formulation .142 .076 .135 1.874 .063 .310 .154 .126

Implementation .184 .079 .172 2.336 .021 .371 .190 .157

Evaluation .332 .072 .341 4.594 .000 .492 .356 .309

Participation .226 .088 .188 2.559 .012 .386 .208 .172

a. Dependent Variable: Objective_Full_Per

Now coming to our scenario, we want our predictions to be more accurate and we have
to decide which independent variables to consider for making a final model. Formality
of planning is excluded from the model in the second iteration. Then, the new original
model is our selected model.

The model summary presented in a good R Square value of 0.346. This indicates that
34.6 % of the variance in Performance measured in Objective Fulfillment is explained
by Strategic Planning.

The beta value corresponding to the strategic planning variables (participation of

employee in planning, Strategic Implementation and Strategic evaluation and control)
which are significant at the 0.05 level. This regression analysis indicates that Strategic
planning has a significant positive impact on performance measured in terms of
objective fulfillment.

Thus, the fitted regression equation for predicting Y (objective fulfillment

performance) could be depicted as follows:

58
Y = α + β1x1+β2x2+β3x3 + β4x4 + β5x5

Where:

Y = value of the Dependent variable (Objecttive_full_per)

α = Constant or intercept

i =the slope (Beta coefficient) for Xi

X1 = Formulation [form]

X2 = Implementation [impl]

X3 = Evaluation [eval]

X4 = Formality [frmt]

X4 = Participation [parti]

Y = 0.184impl+ 0.332eval+0.226parti

As Mintzberg et al. (2005) indicated no organization anywhere in the world has ever
added a single penny to its profits from making plans: the rewards are only realized
when plans are implemented . Thus in this study formulation of planning has positive
but not significant effect on performance measured in terms of objective fulfillment.

The constant term in this regression model is not significance means if all the values of
strategic planning variables are zero no objective fulfillment performance is achieved.

4.5.3.2 Regression Analysis of Relative Competitive Performance

The regression analysis was carried out using the second performance measure, namely
Relative Competitive Performance as the dependent variable and the model summary
is presented below.

Figure 8: Regression Model Summary: Strategic Planning and Relative Competitive

59
Again the same problem is happening in the regression result. Due to the reasons
illustrated above here again the researcher apply backward regression and results are
presents in the following tables.

Table 4. 11: Regression using Backward Elimination on Relative Competitive

Performance

Model Summary

Model R R Square Adjusted R Square Std. Error of the

Estimate

1 .514a .264 .239 .40592

2 .512b .262 .242 .40504

3 .507c .257 .241 .40519

a. Predictors: (Constant), Formality, Formulation, Evaluation, Participation,

Implementation

b. Predictors: (Constant), Formulation, Evaluation, Participation, Implementation

c. Predictors: (Constant), Evaluation, Participation, Implementation

Coefficientsa
Model Unstandardized Standardiz t Sig. Correlations
Coefficients ed
Coefficien
ts
B Std. Error Beta Zero- Parti Part
order al
(Constant) 2.150 .311 6.914 .000
Implementation .222 .067 .255 3.337 .001 .383 .266 .238
Evaluation .202 .062 .254 3.238 .001 .396 .259 .231
Participation .173 .076 .176 2.272 .025 .333 .185 .162
a. Dependent Variable: Relative_Comp_Per

60
The beta value corresponding to the strategic planning variables (participation in
planning, strategic implementation and strategic evaluation) which are significant at the
0.05 level. This regression analysis indicates that Strategic planning has a significant
positive impact on performance measured in terms of relative competitive performance.
Coefficient of determination explains the extent to which changes in the dependent
variable can be explained by the change in the independent variables or the percentage
of variation in the dependent variable (commercial bank performance) that is explained
by all the independent variables (strategic planning dimensions) is 25.7%.

Thus, the fitted regression equation for predicting Y (Relative_comp_per) could be

depicted as follows:

Y = α + β1x1+β2x2+β3x3 + β4x4 + β5x5

Where:

Y = value of the Dependent variable (Relative_comp_per)

α = Constant or intercept

i =the slope (Beta coefficient) for Xi

X1 = Formulation [form]

X2 = Implementation [impl]

X3 = Evaluation [eval]

X4 = Formality [frmt]

X4 = Participation [parti]

Y = 2.15+ 0.222impl+ 0.202eval+0.171parti

The findings of the regression results provide confirmatory evidence to reject the null
hypothesis 2, 3, 5 at p value of 0.05 level. The strategic implementation, strategic
evaluation and employee participation in the planning helps organizations to improve
their performance to some extent.

61
4.6 Model Fitting Using Partial Least Squares
Using PLS it is possible to test the measurement and structural components within the
context of one structural equation model. Unlike other structural equations modelling
techniques such as LISREL and AMOS, PLS does not need to satisfy assumptions like
multivariate normality and independence of observations. PLS combines regression,
path analysis and principal components analysis and avoids the problems of factor
indeterminacy and inadmissible solutions (Buchan, 2005). Because of the reasons cited
above it was decided to use PLS for testing the model.

PLS can relate the set of independent variables to multiple dependent (response)
variables. On the predictor side, PLS can handle many independent variables, even
when predictors display multicollinearity. PLS may be implemented as a regression
model, predicting one or more dependents from a set of one or more independents; or
it can be implemented as a path model, handling causal paths relating predictors as well
as paths relating the predictors to the response variables.

Thus, when the suppressor phenomenon occurs in a path analysis, it is usually not
anticipated. A variable expected to have explanatory value suddenly appears to play
only the role of suppressor variable. The suppressor variable may substantially correlate
with the dependent variable but also shares with the other explanatory variable much
information that is irrelevant to the dependent variable. In our case formality of
planning and strategic formulation with the dependent variable relative competitive
performance are suppressor variables. If the suppressor variable and the explanatory
variable are substantively strongly related, then one can drop one of the two or both the
variables for reasons of parsimony (Cohen, 1975).

The analysis carried out using partial least squares, a structural equation modelling
technique is explained here. In the first stage of the analysis the composite reliability
and convergent validity of the measures are assessed. In the second stage of the analysis
the structural model is tested by assessing the path coefficients and predictability of the
model. Finally the discriminant validity of the fitted model is assessed.

Stage 1: Reliability and Validity of the Measures

The various items used to measure the constructs were assessed for reliability and
validity. Reliability was assessed in two different ways. Firstly, the magnitudes of the
factor loadings corresponding to each construct were examined. Fornell and Larcker
62
(1981) recommend a loading of 0.7 for each item on the constructed factor, but 0.5 is
often used in factor analysis.

Figure 9: Confirmatory Factor Analysis using PLS

All the variables corresponding to each construct were included in the first run of PLS
while testing the models. For improving the composite reliabilities and AVE values
certain items were excluded in the subsequent runs. The items for exclusion were
chosen by examining the factor loadings, communality estimates and t-statistic
corresponding to each item. The indicators with the outer loading of .4 to .7may also
be retained. While dropping the indicators, check if after removing the indicator every
time the AVE and composite reliability. If it does not increase either of the two, then
retain the indicator in this range. Necessarily drop the items below .4 (Hair et al, 2006).
Finally the items representing each construct were selected when acceptable Composite
Reliabilities and AVE values were obtained. Above figure 9 shows the last PLS result.

Factor loadings of all the items shown in figure 9 are above 0.5 and most of them are
either above 0.7 or very dose to 0.7. The ‘t’ values most of the items are significant and
the construct's composite scale, reliability, which is a measure of internal consistency

63
similar to Cronbach's alpha is used as another measure of reliability. Convergent
validity was assessed by examining the average variance extracted for each of the
constructs.

Table 4. 12: Composite Reliability and AVEs for the Model

Composite Average Variance

Reliability Extracted (AVE)
Evaluation 0.879 0.707
Implementation 0.762 0.517
Object Fulfillment Performance 0.795 0.563
Participation 0.806 0.512
Relative Competitive Performance 0.800 0.501
Formulation 0.814 0.595

For assessing the discriminant validity of the model, the AVE values are plotted as
diagonal items and Squares of the correlations obtained from the PLS output are plotted
as off-diagonal items as shown in Table 4.11. If the amounts shown in the off-diagonals
are less than the diagonals the measures have discriminant validity. The measures have
construct validity if they have both convergent validity and discriminant validity.

Table 4. 13: Discriminant Validity of the Model

Evaluat Implement Object_P Participa Rela_ Formula

ion ation er tion Per tion
Evaluation 0.841
Implementation 0.320 0.719
Object_Per 0.495 0.376 0.751
Participation 0.343 0.274 0.392 0.715
Rela_Per 0.416 0.390 0.586 0.356 0.708
Formulation 0.234 0.310 0.314 0.232 0.117 0.771

Stage 2: Testing the Structural Model - Path Coefficients and Predictability

At this stage of the analysis, the R2 values are examined to assess the predictability of
the model. For assessing the R2values the guidelines provided by Hair et al. (2006)
were used. Subsequently the path coefficients are examined and their statistical
64
significance was assessed. PLS being a distribution-free technique, uses the
bootstrapping resampling technique to determine the significance of the paths
(MacMillan et al, 2005). In this study 1000 resamples were taken in performing the
bootstrap.

Table 4. 14: Path Coefficients and Predictability using PLS bootstrapping

Path Coefficients P Values

Evaluation_ -> Object_Per 0.341 0.000
Evaluation_ -> Rela_Per_ 0.268 0.000
Implementation_ -> Object_Per 0.171 0.018
Implementation_ -> Rela_Per_ 0.251 0.001
Participation_ -> Object_Per 0.197 0.014
Participation_ -> Rela_Per_ 0.195 0.020
formulation_ -> Object_Per 0.135 0.051

The result in above Table 4.14 shows the relationship path coefficients between two
performance measures and strategic planning variables. As indicated above the p values
for strategic planning are significant which almost same result found using regression
analysis. However, testing is accomplished by resampling methods such as the
bootstrapping as illustrated by Davies (2001) bootstrapping, which involves taking
random samples and randomly replacing dropped values, will give slightly different
standard error estimates on each run.

65
 Figure 10: Tested Model with Path Coefficients using PLS

The variables chosen to represent each construct as a result of confirmatory factor

analysis were used as indicators for the constructs.

The model indicates that relative competitive performance predicted by using the
variables in this study is less than objective fulfillment performance. Performance
measured in both objective fulfillment and relative competitive performance can be
effectively predicted using strategic planning. The model also indicates that strategic
planning has significant positive relationships with performance.

Henseler et al. (2014) introduce the SRMR as a goodness of fit measure for PLS-SEM
that can be used to avoid model misspecification. A value less than 0.10 or of 0.08 (in
a more conservative version; Hu and Bentler, 1999) is considered a good fit. For the
approximate fit indices such as SRMR and NFI, we may directly look at the outcomes
of a PLS-SEM or PLS-SEM model estimation (i.e., the results report) and these
criteria's values with a certain threshold (e.g., SRMR < 0.1 and NFI > 0.90). So we can
say our model fits and it’s shown in below table.

66
Table 4. 15: Model fit Summery using PLS

Fit Summary

Saturated Model Estimated Model

SRMR 0.000 0.057
Chi-Square 0.000 31.142
NFI 1.000 0.854

The analysis for testing the structural model was carried out as follows. In the model
shown Objective Fulfillment, Relative Competitive Performance has R2 values at the
5% level of significance.
Table 4. 16: R square values using PLS

R Square R Square Adjusted

Objective Fulfillment 0.352 0.334
Relative Competitive Performance 0.279 0.264

Partial Least Squares has been used to test the conceptual model used in this study. By
testing the structural model, confirmatory evidence was obtained for rejecting the null
hypotheses H2, H3 and H5. The model indicates that relative competitive performance
cannot be effectively predicted by using the strategic formulation and formality
involved in this study. However objective fulfilment can be effectively predicted using
strategic formulation, implementation, evaluation and control, and participation of
employee in planning but not with formality of strategic planning.

67
 CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

This chapter aimed to present conclusion and recommendation of the study. Then
contribution of this study to the existing knowledge, the practical use of the research
findings, and the directions for future research are presented.

5.1 Conclusion
Performance in this study was measured using two constructs namely objective
fulfillment and relative competitive performance. This indicates that strategic planning
helps organizations to achieve its set of objectives and make a contribution towards
improving organizational performance in comparison to its main competitor. The
results taken together indicate that strategic planning helps organizations to improve
their performance.

It was found that the degree given to strategic implementation and evaluation and
participating employees in strategic planning helps organizations to process
information using analytical tools and arrive at consensus through participative
decision-making. Also Planning helps firms to identify the threats arising out of these
unfavourable factors through systematic analysis resulting in improved performance.

Strategic planning gives bank the ability to predict future trends in the business, the
capacity to resolve Problems and avoid problem areas which leads to improving short-
term performance of the bank. Additionally, strategic planning leads to better ROA,
ROE, ROI, and overall performance and success of the commercial bank of Ethiopia
relative to its competitors.

By testing the structural model, confirmatory evidence was obtained for hypotheses.
The results of the PLS analysis provided support for rejecting null hypothesis. The
model indicates that relative competitive performance and objective fulfillment
performance can be effectively predicted by using most of the strategic elements
involved in this study. And Strategic planning is an effective way of improving
performance of organizations.

68
5.2 Recommendation
The findings of the study show that strategic planning has positive effect on
organizational performance and result are from strategic implementation, evaluation
and control and the involvement of employee in strategic planning.

In the light of the above, the researcher wishes to make some recommendations, which,
if taken into consideration, might bring some positive changes to the current approach.

 Having the right planning process is key. Executives should be aware of this
aspect so that planning outcomes get higher a few points as a result.
 It’s recommended that banks in Ethiopia should embrace the use of strategic
planning as a tool and a concept to be used in achieving organisational
performance.

5.3 Contribution of the Study

5.3.1 Contribution to the Existing Knowledge
This study makes an important contribution to the literature in the following ways:

 Critical examination of existing knowledge through systematic literature review

and identifying the gaps in the literature;
 Examining the relationships between some of the dimensions of strategic
planning formulation, implementation, evaluation and control, formality of
planning and participation in planning with organizational performance.
 Developing a structural equation model, using Partial Least Squares (PLS).

5.3.2 Practical use of the Research Findings

The findings of this study are immensely useful to the CEOs and senior managers. This
study emphasises the need for carrying out strategic planning in organisations. This
study indicates that planning helps organisations to have better performance. The
results of this study clearly establish the importance of strategy implementation,
evaluation and control and participating employee in planning. Managers need to pay
careful attention to properly plan and prioritise the implementation of strategies for
enhancing the organisational performance.

69
5.4 Indications for Further Research
The study also suggested that the response rate should be broadened to cover a larger
population so as to have more inclusive findings to make better conclusions and
recommendations from Strategic planning practices and its effect on performance.

Another prospect for future research is to conduct comparative studies of the

relationship between strategic planning and organizational performance. Further
research might consider the use of multiple organizations located in different areas.
Also consider other dimensions of strategic planning.

Objective financial data were not used to measure organizational performance in this
study. Further research in to other industries with different performance measures and
the use of longitudinal design are possible areas for further research to enhance
generalization of current findings.

70
 Reference
Adegbie, F.R., & Fakile, S.A. (2013), Strategic planning and performance: Catalysts
for sustainability and stability in the Nigerian financial sector. European
Scientific Journal,9 (25).
Admassu Bezabeh and Asayehgn Desta (2014). Banking Sector Reform in Ethiopia.
International Journal of Business and Commerce School of Business and
Leadership, Dominican University of California, San Rafael, California. Vol. 3,
No.8.
Ajelabi, I., & Tang, Y. (2010). The adoption of benchmarking principles for project
management performance improvement. International Journal of Managing
Public Sector Information and Communication Techniques, 1(2), 1-8.
Akinyele S. T. and Fasogbon O. I.(2010). Impact of strategic planning on organizational
performance and survival. Research Journal of Business Management 4 (1): 73-
82.
Aldehayyat, J. S. & Twaissi, N. (2011). Strategic planning and corporate performance
relationship in small business firms: Evidence from a Middle East country
context. International Journal of Business and Management, 6(8), 255-263.
Aldehayyat, J.S. & Al Khattab, A.A. 2013, ‘Strategic planning and organizational
effectiveness in Jordanian hotels’, International Journal of Business and
Management, 8(1), 11–25.
Alpkan, L., Ergun, E., Bulut, C. and Yilmaz, C., (2005), The Effects of Firm
Entrepreneurship on Firm Performance, The Journal of Dogus University, 6(2),
pp.175-189.
Alpkan, L., Yilmaz, C., & Kaya, N. (2007). Market orientation and planning flexibility
in SMEs: performance implications and an empirical investigation.
International Small Business Journal, 25(2), 152-172.
Amelework, M. (2015) Assessment of Strategic Management Practice: the case of
Ethiopian Insurance Corporation, A Thesis for the Degree of Master of Business
Administration, ST. Mary’s University.
Andersen, T. J. (2000). Strategic planning, autonomous actions and corporate
performance. Long Range Planning, 33(2), 184-200.
Arabzad, S.M., Ghorbani, M., Razmi, J. & Shirouyehzad, H., 2015, ‘Employing fuzzy
TOPSIS and SWOT for supplier selection and order allocation problem’, The
International Journal of Advanced Manufacturing Technology 76(5), 803–818.
Arasa, R. M., Aosa, E. O., & Machuki, V. N. (2011). Participatory orientation to
strategic planning process: Does it pay? Prime Journal of Business
Administration and Management, 1(10), 319-327.
Arasa, R., & K’Obonyo, P. (2012), the relationship between strategic planning and firm
performance. International journal of humanities and social science, 2(22),
201-213
Ayub, A., Razzaq, A., Aslam, M. S. And Iftekhar, H. (2013). A conceptual framework
on Evaluating SWOT Analysis as the mediator in Strategic Marketing Planning
71
 through Marketing Intelligence, European Journal of Business and Social
Sciences.
Babbie, E. (1992). The practice of social research. California: Wardsworth Publishing
Company.
Barney, J. B., dan Clark, D. N. (2007). Resource-based theory: Creating and sustaining
competitive advantage. UK: Oxford University Press.
Beer, M., & Eisenstat, R. A. (2000). The silent killers of strategy implementation and
learning. MIT Sloan Management Review, 41(4), 29.
Boateng, P. A., Amponsah, E. B., Akafo, V., & Yamoah, P. (2016). Strategic planning
process formality: a model. VVU Journal of Business Research, 1(2), 52-64.
Boyd, B. K. (1991). 'Strategie planning and fïnancial performance: a meta-analytic
review'. Journal of Management Studies, 28(4), pp. 353-374.
Boyne, G. A., and Walker, R. M. (2004). Strategy content and public service
organizations. Journal of Public Administration Research and Theory, 14(2),
231-252.
Capon, N., Farley, J. U & Hulbert, J.M (1994). Strategic planning and financial
performance: More evidence. Journal of Management Studies. 31:1. 0022-
2380.
CentralBanksGuide.com (2015).Cited27.11.2016.
http://www.centralbanksguide.com/banking+industry+regulation/
Chakravarthy, B. S. (1986). 'Adaptation: A promising metaphor for strategic
management'. Academy of Management Review, 7: 35-37.
Chang, J. F. (2016). Business process management systems: strategy and
implementation. Auerbach Publications.
Chavunduka, D., Chimunhu, P. & Sifile, O., 2015, ‘Strategic planning intensity and
firm performance: A case of Zimbabwe mining development corporation’,
European Journal of Business and Management, 7(5), 201–222
Chinyamurindi, W.T., 2016, ‘A narrative investigation on the motivation to become an
entrepreneur amongst a sample of Black entrepreneurs in South Africa:
Implications for entrepreneurship career development education’, Acta
Commercii 16(1), 1–9.
Cohen, Jacob, and Patricia Cohen. 2003. Applied Multiple Regression/Correlation
Analysis for the Behavioral Sciences. Hillsdale, NJ: Lawrence Erlbaum
Cooper, D., & Schindler, P. (2008). Marketing Research. New York: McGraw-Hill.
Daft, R. L. (2010). New era of management (9th Ed.). South-Western College, Cengage
Learning.
Darlington, R. B. (1968). Multiple regression in psychological research and practice.
Psychological Bulletin, 69, 161-182.
Delmar F, Shane S. Does business planning facilitate the development of new ventures?
Strategy Management J 2003;24: 1165–85.
72
DeSarbo, W. S., Anthony Di Benedetto, C., Song, M., & Sinha, I. (2005). Revisiting
the Miles and Snow strategic framework: uncovering interrelationships between
strategic types, capabilities, environmental uncertainty, and firm performance.
Strategic management journal, 26(1), 47-74.
Dess, G. G. & Robinson Jr., R. B. (1984). 'Measuring Organizational Performance in
the Absence of Objective Measures: The Case of the Privately-held Firm and
Conglomérate Business Unit'. Strategic Management Journal, 5(3), pp. 265-
273.
Dess, G.G. (1987), “Consensus on strategy formulation and organizational
performance: competitors in a fragmented industry”, Strategic Management
Journal, Vol. 8, pp. 259-77.
Dinberu G. (2016). Assessment of Strategic Management and Implementation Practice
in the case of Nib International Bank, A Thesis for the Degree of Master of
Business Management, ST. Mary’s University.
Dincer, O., Tatoglu, E., Glaister, K. W., Demirbag, M., & Zaim, S. (2006). A causal
analysis of formal strategic planning and firm performance: evidence from an
emerging country.
Downes, S. (2001). Meta-abilities and the Implementation of Strategy - Knowing what
to do is Simply not Enough. Journal of Management Development, 17, 564-575
Drago, W. A., & Clements, C. (1999). Leadership characteristics and strategic planning.
Management Research News, 22(1), 11-18.
Drucker, P. (2012). The practice of management. Europe and Australia.Routledge.
Efendioglu, A., & Karabalut, A. (2010). Impact of Strategic Planning on Financial
Performance of Companies in Turkey. International Journal of Business and
Management, 3-12.
Elbanna, S. (2012). Slack, planning and organizational performance: Evidence from the
Arab Middle East. European Management Review, 99–115.
Falilat, A.A. (2013). Strategic marketing planning and the Nigerian banking
industry.Journal 11(1).www.transcampus.org/journals.
Falshaw, J., Glaister, K., and Tatoglue, E. (2006). Evidence on formal strategic
planning and company performance. Management Decision, 44 (1), 9-30.
Fisher, F. M., & McGowan, J. J. (1983). On the misuse of accounting rates of return to
infer monopoly profits. The American Economic Review, 73(1), 82-97.
Flores, L. G., Catalanello, R. F., Rau, D., & Saxena, N. (2008). Organizational learning
as a moderator of the effect of strategic planning on company performance.
International Journal of Management, 25(3), 569-594
Floyd, S.W. & Wooldridge, B. (1990) ―Managing Strategic Consensus: The
Foundation of Effective Implementation‖. Academy of Management Executive,
6, 27-39.

73
Fornell, C., & Larcker, D. F. (1981). Evaluating structural equations models with
unobservable variables and measurement error. Journal of Marketing Research,
18(1), 39-50.
Foss, S. K., Waters, W. J., & Armada, B. J. (2007). Toward a theory of agentic
orientation: Rhetoric and agency in Run Lola Run. Communication Theory,
17(3), 205-230.
Fraser, E. D., Dougill, A. J., Mabee, W. E., Reed, M., & McAlpine, P. (2006). Bottom
up and top down: Analysis of participatory processes for sustainability indicator
identification as a pathway to community empowerment and sustainable
environmental management. Journal of environmental management, 78(2),
114-127.
Fredrickson, J., & Mitchell, T. (1984). Strategic decision processes: comprehensiveness
and performance in an industry with an unstable environment. Academy of
Management Journal, 399–423.
French, S.J., Kelly, S.J. & Harrison, J.L., 2004, ‘The role of strategic planning in the
performance of small, professional service firms – A research note’, Journal of
Management Development 23 (9), 765–776.
Gavetti, G. & Ocasio W. (2015). Cognition and strategy: Advances in strategic
management, volume 32. Emerald Group Publishing Limited.
George, D., & Mallery, M. (2010). SPSS for Windows Step by Step: A Simple Guide
and Reference, 17.0 update (10th ed.) Boston:

Gibson, B., Cassar, G. & Wingham, D., 2001, ‘Longitudinal analysis of relationships
between planning and performance in small Australian firms’, Proceedings of
the USASBE/SBIDA Annual National Conference, Orlando, FL, February 7–10,
2001, pp. 1–22.
Gică, O. A., & Negrusa, A. L. (2011). The Impact of strategic planning activities on
Transylvanian SMEs – an empirical research, Procedia Social and Behavioral
Sciences, 24. 643-648
Glaíster, K. W. & Falshaw, J. R. (1999). 'Strategie Planning: Still Going Strong?'. Long
Range Planning, 32(1), pp. 107-116.
Glaister, K. W., Dincer, O., Tatoglu, E., Demirbag, M., & Zaim, S. (2008), “A causal
analysis of formal strategic planning and firm performance”: evidence from an
emerging country. Management Decision, 46(3), 365-391.
Graham, J.W., 2009, ‘Missing data analysis: Making it work in the real world’, Annual
Review of Psychology 60, 549–576.
Grant, M. R. & Jordan, J.J., 2015, Foundations of strategy, 2nd edn., Wiley, West
Sussex.
Grant, M. R., 2014, Contemporary strategic management, 6th edn., Wiley, West
Sussex.
Grant, R.M. (2003), “Strategic planning in a turbulent environment: evidences from oil
majors”, Strategic Management Journal, Vol. 24 No. 2, pp. 491-517.
74
Greenley, E. (1986). Does strategic planning improve company performance? Long
Range Planning, 19 (2), 101-108. Churchill Jr GA. A paradigm for developing
better measure of marketing constructs. J Mark Res 1979;16:64–73.
Greenley, G. E., & Foxall, G. R. (1997). Multiple stakeholder orientation in UK
companies and the implications for company performance. Journal of
Management Studies, 34(2), 259-284.
Guerras-Martína, L.A., Madhokb, A. & Montoro-Sánchezc, A., 2014, ‘The evolution
of strategic management research: Recent trends and current directions’, BRQ
Business Research Quarterly 17(2), 69–76.
Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. L. (2009).
Multivariate Data Analysis (7th Ed.). Upper Saddle River, New Jersey: Pearson
Education Limited.
Hambrick, D. C. & Cannella, Jr., A. A. (1989). 'Strategy Implementation as Substance
and Selling'. Academy of Management Executive, 3(4), pp. 278-285.
Hamel, G. (1996). Strategy as revolution. Harvard Business Review, 74(4), 69–76.
Harker, P. T., and Zenios, S. A. eds., (2000) Performance of Financial Institutions,
Efficiency, Innovation, Regulation (Cambridge, UK: Cambridge University
Press), pp. 259–311.
Hickson, D. J., Miller, S. J. & Wilson, D. C. (2003). 'Planned or Prioritized? Two
Options in Managing the Implementation of Strategie Décisions'. Journal of
Management Studies, 40(7), pp.1803-1836.
Hill, C., & Jones, G. (2008). Essentials of strategic management. Boston, MA:
Houghton Mifflin.
Hitt, M.A., Ireland, R.D. and Hoskison, R.E. (2003) Strategic Management:
Competitiveness and Globalization (Concepts and Cases) 5th ed. Ohio
Thomson Learning
Hodgetts, R. M., & Kuratko, D. F. (2001). Effective Small Business Management.
Dryden, Fort Worth, TX.
Hutzschenreuter, T. & Kleindienst, I., 2006, ‘Strategy-process research: What have we
learned and what is still to be explored’, Journal of Management 32, 673–720.
Ibrahim, M., & Murtala, S. (2015). The relevance of balanced scorecard as a technique
for assessing performance in the Nigerian banking industry. European Journal
of Business, Economics and Accountancy, 3(4), 71-80.
Johnson, G., Scholes, K., & Whittington, R. (2009). Fundamentals of strategy. Pearson
Education.
Johnson, G., Whittington, R., Scholes, K., Angwin, D., & Regnér, P. (2011). Exploring
strategy. Financial Times Prentice Hall.
Kanter, R. M. (2002). Strategy as improvisational theater. MIT Sloan Management
Review, 43(2), 76.

75
Kaplan, R. and Norton, D. (1996). Translating strategy into action: The balanced
scorecard. Havard Business School Press.
Karabulut, A. T., & Efendioglu, A. M. (2010). Impact of strategic planning on financial
performance of companies in Turkey. International Journal of Business and
Management, 5(4), 3-12.
Kargar, J. & Blumenthal, R. A. (1994). 'Successful Implementation of Strategic
Decisions in Small Community Banks'. Journal of Small Business Management,
32(2), pp. 10-22.
Kargar, J. (1996). Strategic planning system characteristics and planning effectiveness
in small mature firms. Mid-Atlantic Journal of Business, 32(1), 19-34.
Kariuki, P., Awino, Z. B., & Ogutu, M. (2012). Firm strategy, Business environment
and the relationship between firm level factors and performance. Journal of
Department of Business Administration, 2(1), 95-122.
Ketokivi, M., & Schroeder, R. (2004). Manufacturing practices, strategic fit and
performance: a routine-based view. International Journal of Operations &
Production Management, 24(2), 171-174
Khan, M., & Khalique, M. (2014). A holistic review of empirical studies of strategic
planning and future research avenues. International Journal of Academic
Research in Economics and Management Sciences, 3(6).
Kim, S. W. (2006), "Effects of supply chain management practices, integration and
competition capability on performance." Supply Chain Management: An
International Journal, 11, No. 3, pp. 241-248.
Kohtamäki, M., Vesalainen, J., Henneberg, S., Naudé, P., & Ventresca, M. J. (2012).
Enabling relationship structures and relationship performance improvement:
The moderating role of relational capital. Industrial Marketing Management,
41(8), 1298-1309.
Kollberg, B., Elg, M., & Lindmark, J. (2005). Design and implementation of a
performance measurement system in Swedish health care services: a multiple
case study of 6 development teams. Quality Management in Healthcare, 14(2),
95-111.
Konstantopoulos, N., Sakas, D. and triantafyllopoulos, Y. (2009) Lessons from a case
study for Greek banking M&A negotiations, Management Decision, 47(8), pp.
1300-1312.
Kothari, C. R. (2004). Research methodology: methods and techniques. New Delhi:
Age international
Kraus, S., Haarms, R. & Schwarz, E.J. (2006). Strategic planning in smaller enterprises-
new empirical findings. Management Research News, 29 (6), 334-344.
Kuria, G. (2014). Strategic Management Practices Adopted by the Directorate of
Vertinary Services, Ministry of Agriculture, Livestock and Fisteries, Kenya.
International Business Research, 2(4), 35–38.

76
Kvarnerud, A., & Maspers, A. (2007). Strategic Evaluation-a study of its purpose in
SIDA and SADVE. Combined Masters and Bachelor's Thesis in Business
Economics. School of Business Economics and Law, Gothenburg University.
Lumpkin, G. T., & Dess, G. G. (1995). Simplicity as a strategy-making process: The
effects of stage of organizational development and environment on
performance. Academy of Management Journal, 38(5), 1386-1407
Lunenburg, F. C. (2011). Goal-setting theory of motivation. International journal of
management, business, and administration, 15(1), 1-6.
Lyles, M. S. Inga, J. Burdeane Orris, and D. Kurako (1993). “Formalised Planning in
Small Business: Increasing Strategic Choices.” Journal of Small Business
Management, 38-50.
Mbogo, R. W. (2013). Strategic Management Practices at General Motors East Africa
Limited. IOSR Journal of Business and Management, 2(3), 55–62.
McIlquham-Schmidt, A. (2010): Strategic planning and corporate performance: An
integrative research review and a meta-analysis of the strategic planning and
corporate performance literature from 1956–2003. Doctoral dissertation,
Copenhagen Business School, Samfundslitteratur, Copenhagen.
Miller, C. C., & Cardinal, L. B. (1994). Strategic planning and firm performance: a
synthesis of more than two decades of research. Academy of Management
Journal, 37(6), 1649-1665.
Miller, C., Burke, L., & Glick, W. (1998). Cognitive Diversity among Upper-Echelon
Executives: Implications for Strategic Decision Processes. Strategic
Management Journal, 39–58.
Miller, C.C. & Cardinal, L.B. (2001). Strategic Planning and Firm Performance.
Management Review, Vol.43, Pg.139–60.
Mintzberg, H. (1994). The Rise and fall of Strategic Planning: Reconceiving Roles for
Planning, Plans, Planners. Free Press
Mintzberg, H., & Shakun, M. F. (1978). Strategy formulation. Management Science
(pre-1986), 24(9), 920.
Mintzberg, H., Lampel, J., Quinn, J.B. & Goshal, S. (2004). The Strategy Process. 4th
Edition. Pearson Education International.
Mintzberg, H., Ahlstrand, B., & Lampel, J. (2005). Strategy Safari: a guided tour
through the wilds of strategic management. Simon and Schuster.
Morgan, R. E., & Strong, C. A. (2003). Business performance and dimensions of
strategic orientation. Journal of Business Research, 56, 163-176.
Mugadza, N. O. V. (2012). Challenges of defining and implementing strategic market
segmentation (Doctoral dissertation, University of Pretoria).
Mugenda, O., & Mugenda, A. (2003). Research Methods: Quantitative and Qualitative
Approaches. Nairobi: Acts press.

77
Murphy, G. B., Trailer, J. W., & Hill, R. C. (1996). Measuring performance in
entrepreneurship research. Journal of business research, 36(1), 15-23.
Njagi, L., & Kombo, H. (2014). Effect of strategy implementation on performance of
commercial banks in Kenya. European Journal of Business and Management,
6(13), 62-71.
O’Regan, N., Sims, M. A., & Gallear, D. (2008). Leaders, loungers, laggards: the
strategic-planning-environment-performance relationship re-visited in
manufacturing SMEs, Journal of Manufacturing Technology Management,
19(1), 6-21.
O’Toole, L. J., & Meier, K. J. (2014). Public management, context, and performance:
In quest of a more general theory. Journal of Public Administration Research
and Theory, 25, 237–256.
Ondoro (2015) measuring organization performance” from Balanced Scorecard to
Balanced ESG Framework. International Journal of Economics, Commerce and
Management III( 11), 715-725
Ondoro, C. O. (2015). Measuring Organization Performance: From Balanced
Scorecard to Balanced ESG Framework.
O'Regan, N. and Ghobadian, A, (2006). 'Perceptions of generic strategies of small and
medium sized engineering and electronics manufacturers in the UK:
Owolabi, S. A., & Makinde, O. G. (2012). The effect of strategic planning on the
corporate performance in university education: a study of Babcock University.
Kuwait Chapter of Arabian Journal of Business and Management Review, 2(4),
27-44.
Pearce, J. A., Freeman, E. B., & Robinson, R. B. J. (1987). The tenuous link between
formal strategic planning and financial performance. The Academy of
Management Review, 12(4), 658-675.
Pearce, J.A. and R.B. Robinson, Jr, (2009): Strategic Management: Formulation,
Implementation and Stoner, J.A.F., Freeman.
Perry, S. C. (2001). The relationship between written business plans and the failure of
small businesses in the U.S. Journal of Small Business Management, 39(3),
201-208.
Phillips, P. A., & Moutinho, L. (1999). Measuring strategic planning effectiveness in
hotels. International Journal of Contemporary Hospitality Management, 11(7),
349-358.
Podsakoff, P. M., MacKenzie, S. B., & Podsakoff, N. P. (2012). Sources of method bias
in social science research and recommendations on how to control it. Annual
Review of Psychology, 63(1), 539-569.
Porter, M. E. (1980). Competitive Strategy - Techniques for Analysing Industries and
Competitors. New York: The Free Press
Porter, M. E. (2008). Competitive advantage: Creating and sustaining superior
performance. Simon and Schuster.

78
Richard et al. (2009): Measuring Organizational Performance: Towards
Methodological Best Practice. Journal of Management.
Rouse, P., & Putterill, M. (2003). An integral framework for performance
measurement. Management decision, 41(8), 791-805.
Rudd, J. M., Greenley, G. E., Beatson, A. T., & Lings, I. N. (2008). Strategic planning
and performance: extending the debate. Journal of Business Research, 61, 99-
108.
Santos, J. B., & Brito, L. A. L. (2012). Toward a subjective measurement model for
firm performance. BAR-Brazilian Administration Review, 9(SPE), 95-117.
Sarason, Y., & Tegarden, F. (2003). The erosion of the competitive advantage of
strategic planning. Journal of Business and Management, 1–21.
Saunders, M., Lewis, P., & Adrian, T. (2009). Research methods for business students
(5th ed.). London:
Sekaran, U. (2003). Research Methods for Business: A Skill Building Approach (2nd
Edition). New York: John Wiley & Sons, Inc.
Short, J. C., McKenny, A. F., Ketchen, D. J., Snow, C. C., & Hult, G. T. M. (2016). An
empirical examination of firm, industry, and temporal effects on corporate
social performance. Business & Society, 55(8), 1122-1156.
Singh, J. V. (1986). Performance, slack, and risk taking in organizational decision
making. Academy of management Journal, 29(3), 562-585.
Song, J. H., and Kolb, J. A. (2012). Learning organizational culture and firm
performance: The mediating effects of knowledge creation in Korean firms.
Journal of Leadership and Organizational Studies, 20(2), 252-264.
Spyropoulou, S., Skarmeas, D. and Katsikeas, C. (2011) an examination of branding
advantage in export ventures, European Journal of Marketing, 45(6), pp. 910-
935.
Stewart, K. S. (2003). The relationship between strategic planning and growth in small
businesses. PhD Dissertation. School of Business and Entrepreneurship, Nova
South eastern University.
Stonehouse, G., & Pemberton, J. (2002). Strategic planning in SMEs-some empirical
findings. Management Decision, 40(9), 853-861.
Strydom, J. (2011). Principles of Business Management (2nd ed.). Cape Town: Oxford
University Press.
Suklev, B. & Debarliev, S. (2012). Strategic planning effectiveness comparative
analysis of the Macedonian context, Economic and Business Review, 14(1), 63-
93
Taiwo, A.S. & Idunnu, F.O. (2010), “Impact of Strategic Planning on Organisational
Performance and Survival”. Research Journal of business management, 4 (1),
pp. 73 – 77.
Thompson (2012) Crafting and Executing Strategy McGrew Hill/Irwin companies/inc

79
Thompson, A. A., Strickland, A.J & Gamble, J.E. (2005), “Crafting and Executing
Strategy”: The quest for competitive advantage. 14th edition. Tata McGraw –
Hill.
Thompson, B. (1992, April). Interpreting regression results: beta weights and structure
coefficients are both important. Paper presented at the annual meeting of the
American Educational Research Association, San Francisco. (ERIC Document
Reproduction Service No. ED 344 897)
Timotiwos, Y. (2015). Assessment of the Practice of Strategic Management Process: In
the Case of Nyala Insurance S.C.
Tsehay, A. (2014) Practice and Challenge of Formulating, Implementing and
Controlling Strategic Planning in Selected NGOs University of Reading,
CAMBRIDGE University press.
Veettil, N. M. K. (2008). Strategy formulation and implementation in manufacturing
organisations: the impact on performance (Doctoral dissertation, Middlesex
University).
Veliyath, R., & Shortell, S. M. (1993). Strategic orientation, strategic planning system
characteristics and performance. Journal of Management Studies, 30(3), 359-
381.
Venkatraman, N. &Ramanujam, V. (1988). Measurement of business performance in
strategy research: A comparison of approaches. Academy of Management
Review, 11(4): 801-814.
Veskaisri, K. (2007). The relationship between strategic planning and growth in small
and medium enterprises (SMEs) in Thailand. RU International Journal, 1(1),
55-67.
Walker, R. M., & Brewer, G. A. (2009). Can management strategy minimize the impact
of red tape on organizational performance? Administration & Society, 41(4),
423-448.
Wall, T. D., Michie, J., Patterson, M., Wood, S. J., Sheehan, M., Clegg, C. W. & West,
M. (2004), "On the validity of subjective measures of company performance."
Personnel Psychology, 57, No. 1, pp. 95-118.
Wheelan, T. L., and Hunger, D. J. (2002). Strategic management and business policy.
USA: Prentice Hall.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2015). Strategic
management and business policy. Pearson.
White, C. (2004). Strategic Management. 1st ed. China: Palgrave Macmillan.
Wijbenga, F. H., & van Witteloostuijn, A. (2007). Entrepreneurial locus of control and
competitive strategies–The moderating effect of environmental dynamism.
Journal of Economic Psychology, 28(5), 566-589.
Wooldridge, B., and Floyd, S. W. (1990). The strategy process, middle management
involvement, and organizational performance. Strategic Management Journal.
11(3), 231-241.

80
Wu, T. (2010, Spring). Strategic Choice-Johnson and Scholes Suitability, Feasibility
and Acceptability Model. Learning Centre, News Update, pp. 16-20.
Yin, R. K. (1994). Case Study Research: design and methods, (second edition),
Thousand

81
 Appendices
Appendix 1: Strategic planning and Organizational performance questioner

SURVEY QUESTIONNAIRE

Debre Berhan University

College of Business and Economics

MBA Program

Dear respondent,

Please take a few minutes to complete this questionnaire. Your honest opinion will be
completely anonymous. Your views are extremely important in this research. All the
information provided will be kept strictly confidential and will only be used for the
purpose of the study. This study is about “Assessment of Strategic Planning Practices
and its effect on organizational performance: The Case of Commercial Bank of
Ethiopia”. I highly appreciate your participation and prompt response to the following
questions and please do not hesitate to contact me via mail or phone, if you face any
difficulty while responding to the below listed questions.

Abinet Tefera

Student Researcher in Debre Berhan University, College of Business and Economics

Cell Number 0913863171, mail address abinet22@gmail.com

PART A: DEMOGRAPHIC INFORMATION

Please use “X” this mark for your response

2. Age 18- - - -

3. Service Year at your bank 0- - -

4. Your current position Managerial

From PART B – PART G of the questioner please respond for each statements by circle
the given alternatives to your personal opinion.

Key: 1=Strongly Disagree 2=Disagree 3=Neutral 4=Agree 5=Strongly Agree

82
PART B: FORMULATION OF STRATEGIC PLAN

Indicate the degree to which you agree or disagree with the following statements
regarding strategy formulation at CBE.

1 2 3 4 5

1 The vision statement relevant to the banks' activities and mandates 1 2 3 4 5

2 The current mission statement is compatible with the activities being 1 2 3 4 5

carried on by the bank

3 The bank gives priority SWOT (strength, weakness, opportunity, 1 2 3 4 5

treat) analysis process of the business

4 It is important is it to establish long-term objectives for the bank 1 2 3 4 5

5 The generate strategies are important and deal with issues of the 1 2 3 4 5
bank

6 The SWOT (strength weakness opportunity treat) analysis process 1 2 3 4 5

is importance to the effective operation of your bank

PART C: STRATEGIC IMPLEMENTATION

Indicate the degree of emphasis given to planning first while implementing strategies
in CBE.

1 There is a relevant experience available (either in-house, 1 2 3 4 5

outsourced, or bought-in) to implement strategies in the bank.

2 The criteria for success of strategy implementation used in your 1 2 3 4 5

organization is clear

3 Tasks to be performed were specified beforehand to ensure 1 2 3 4 5

effective strategy implementation in the bank

4 The resources (including people, money and time) were available 1 2 3 4 5

during the strategy implementation process

83
 5 What was done during the implementation process was acceptable 1 2 3 4 5
to those involved

6 Strategy implementation had a receptive context at the outset due 1 2 3 4 5

to the conditions within and/or external to the bank

7 The bank structure facilitated the strategy implementation process 1 2 3 4 5

through appropriate allocation of responsibilities and roles

8 Strategy implementation given priority over other commitments 1 2 3 4 5

9 The success of strategy implementation is defined as the extent to 1 2 3 4 5

which the performance over time of what was done was as intended
or better. And assessment of this performance is better.

PART D: STATEGIC EVALUATION AND CONTROL

Indicate the degree to which you agree or disagree with the following statements
regarding strategy evaluation at CBE.

1. Strategy evaluation at my work place is to ensure compliance to the 1 2 3 4 5

organizations visions

2. Strategic evaluation of my work place aims to streamline operations 1 2 3 4 5

to specific objectives

3. Strategy evaluation at CBE targets correcting strategic variations 1 2 3 4 5

4. Strategy evaluation results inspire me to work better by enabling me 1 2 3 4 5

measure my performance goals

5. Strategic control practice can articulate Strategic Outcomes in the 1 2 3 4 5

organization

6. Strategic evaluation and control practice describe sets of Strategic 1 2 3 4 5

activities

7. There is a definition of strategic progress tracking methods in the 1 2 3 4 5

organization

84
 8. Strategy evaluation has been used as a tool at CBE for comparing 1 2 3 4 5
performance to industry standards

9. Strategy evaluation at CBE serves to legitimize management’s actions 1 2 3 4 5

before the eyes of shareholders and customers

PART E: FORMALITY OF STRATEGIC PLANNING

Indicate the degree to which you agree or disagree with the following statements
regarding to formality of strategic plan at CBE.

1 There is uniform planning procedures in the bank 1 2 3 4 5

2 There is a regular scheduled review of strategies in the bank 1 2 3 4 5

3 There is strict time limits on reviews about strategy in the bank 1 2 3 4 5

4 There is formal presentations of strategy in the bank 1 2 3 4 5

5 There is numerous observers of strategy process in the bank 1 2 3 4 5

6 There is massive paperwork of strategy in the bank 1 2 3 4 5

7 There is open dialogue about strategy 1 2 3 4 5

8 Decisions on strategy are compulsory 1 2 3 4 5

9 There is regular progress reviews in the bank 1 2 3 4 5

PART F: EMPLOYEE PARTICIPATION IN STRATEGIC PLANNING

Indicate the degree to which you agree or disagree with the following statements
regarding employee participation in strategic planning at CBE.

1 Strategy planning use knowledge and experience from different 1 2 3 4 5

functions within the bank

2 There is assignment of implementation responsibilities to specified 1 2 3 4 5

individuals/groups

85
 3 The bank use a variety of motivational factors to encourage good 1 2 3 4 5
planning

4 The bank seeking commitment to the long-term plan 1 2 3 4 5

5 There is opportunity to independently plan and organize work? 1 2 3 4 5

6 There is an opportunity to suggest improvements of work processes 1 2 3 4 5

and employee involvement in decision-making at higher levels

7 Employees being organized into teams and have the authority to 1 2 3 4 5

make decisions about service quality improvements; upgrading
work processes and working conditions, operating cost reduction,
and purchase of new equipment.

PART G: ORGANIZATION PERFORMANCE

Indicate the degree to which you agree or disagree with the following statements
regarding the performance of CBE by comparing the last five years with their main
competitors' performance. Use a scale of 1-5 where 1 is strongly disagree, 2 disagree,
3 neutral, 4 agree and 5 strongly agree.

Objective There is an improvement in short-term performance 1 2 3 4 5

fulfillment of the bank
Performance

There is improvement in long-term performance of 1 2 3 4 5

the bank

The bank can predict future trends in the business 1 2 3 4 5

The bank can evaluate strategic alternatives based on 1 2 3 4 5

relevant information

The bank has the ability to avoid problem areas 1 2 3 4 5

The bank has the capacity to resolve Problems 1 2 3 4 5

86
 There is Enhancement in development of bank 1 2 3 4 5
management

Relative Customer growth of the bank enhanced over the past 1 2 3 4 5

Competitive years
Performance

Growth in profit after tax of the bank enhanced over 1 2 3 4 5

the past years

Market share change over the past years 1 2 3 4 5

Return on Assets (ROA) of the bank enhanced over 1 2 3 4 5

the past years

Return on Equity (ROE) of the bank enhanced over 1 2 3 4 5

the past years

Return on investment (ROI) of the bank enhanced 1 2 3 4 5

over past years

Current Ratio of the bank enhanced over past years 1 2 3 4 5

Overall firm performance and success of the bank is 1 2 3 4 5

increased

87
Appendix 2: Factor analysis results

A2Table 1: Component Matrix for Strategy formulation Variables

Component Matrixa

Items on the scale Component

Formulation 6 .791

Formulation 5 .684

Formulation 1 .679

Formulation 3 .583

Formulation 2 .574

Formulation 4 .567

Extraction Method: Principal Component Analysis.

a. 1 components extracted.

A2Table 2: Principal axis factoring on strategic formulation

Factor Matrixa

Factor

Formulation 6 .768

Formulation 5 .587

Formulation 1 .579

Formulation 3

Formulation 2

88
Formulation 4

Extraction Method: Principal Axis

Factoring.

a. 1 factors extracted. 8 iterations

required.

A2Table 3: Rotated Component Matrix for Strategy implementation Variables

Rotated Component Matrixa

Component

1 2 3

Strategic Implemn5 .753

Strategic Implemn4 .638

Strategic Implemn6 .580

Strategic Implemn1 .531

Strategic Implemn2 .892

Strategic Implemn8 .755

Strategic Implemn3 .795

Strategic Implemn9 .715

Strategic Implemn7 .547

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 5 iterations.

89
A2Table 4: Component Matrix for Strategy evaluation Variables

Rotated Component Matrixa

Component

1 2 3

Strategic Evaluatn4 .819

Strategic Evaluatn2 .797

Strategic Evaluatn7 .707 .526

Strategic Evaluatn5 .757

Strategic Evaluatn3 .653

Strategic Evaluatn1 .574

Strategic Evaluatn8 .777

Strategic Evaluatn6 .763

Strategic Evaluatn9 .529

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 7 iterations.

A2Table 5: Component Matrix for Strategy participation Variables

Rotated Component Matrixa

Component

1 2

Employee Partic7 .791

Employee Partic1 .749

90
Employee Partic5 .670

Employee Partic6 .668

Employee Partic3 .854

Employee Partic4 .758

Employee Partic2 .533

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 3 iterations.

A2Table 6: Principal Axis Factoring on employee participation

Rotated Factor Matrixa

Factor

1 2

Employee Partic7 .748

Employee Partic1 .654

Employee Partic6 .520

Employee Partic5

Employee Partic3 .928

Employee Partic4 .508

Employee Partic2

Extraction Method: Principal Axis Factoring.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 3 iterations.

91
A2Table 7: Component Matrix for Strategy formality Variables

Rotated Component Matrixa

Component

1 2 3 4

Formality of strategic1 .822

Formality of strategic 9 .813

Formality of strategic 2 .666

Formality of strategic 3 .869

Formality of strategic 6 .761

Formality of strategic 5 .566

Formality of strategic 7 .902

Formality of strategic 4 .757

Formality of strategic 8 -.640

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 4 iterations.

A2Table 8: Rotated Component Matrix for Performance - Objective Fulfillment

Variables

Rotated Component Matrixa

Component

1 2

Objective Fullfilment7 .746

92
Objective Fullfilment5 .716

Objective Fullfilment4 .696

Objective Fullfilment2 .527

Objective Fullfilment3 .746

Objective Fullfilment6 .732

Objective Fullfilment1 .717

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 3 iterations.

A2Table 9: Rotated Component Matrix for Performance – Relative competitive

performance Variables

Rotated Component Matrixa

Component

1 2

Relative Performance5 .833

Relative Performance6 .694

Relative Performance8 .594

Relative Performance7 .559

Relative Performance2

Relative Performance3 .835

Relative Performance1 .673

Relative Performance4 .636

93
Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 3 iterations.

Appendix 3: Regression Assumption Test Results

A3Figure 1: Box plot for Independent variables

94
A3Figure 2: Heteroskedasticity test for relative competitive performance regression

A3Figure 3: Normality of Dependent Variables

95