FACTORS AFFECTING STRATEGY IMPLEMENTATION (A CASE OF OMO KURAZ

SUGAR FACTORIES AND PROJECTS)

MBA THESIS

BY

ABENEZER TEFERI ALEMU

OCTOBER, 2020
ARBA MINCH, ETHIOPIA
 FACTORS AFFECTING STRATEGY IMPLEMENTATION

(A CASE OF OMO KURAZ SUGAR FACTORIES AND PROJECTS)

BY

ABENEZER TEFERI ALEMU

A THESIS SUBMITTED TO SCHOOL OF GRADUATE STUDIES, ARBA MINCH

UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF MASTER OF ART IN BUSINESS ADMINISTRATION

OCTOBER, 2020

ARBA MINCH, ETHIOPIA

 Declaration
I hereby declare that this MBA thesis is my original work and has not been presented for a
degree in any other university, and all sources of material used for this thesis have been duly
acknowledged.

Name: Abenezer Teferi Alemu Signature: _______________ Date: _________________

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 Advisors’ Thesis Submission Approval Sheet

This is to certify that the thesis entitled ''Factors Affecting Strategy Implementation (A Case
Of Omo Kuraz Sugar Factories and Projects)"submitted in partial fulfillment of the
requirements for the degree of Master’s with specialization in Business Administration, the
Graduate Program of the College of Business And Economics, and has been carried out by
Abenezer Teferi Alemu Id. No. PEBE/1763/09, under my/our supervision. Therefore, I/we
recommend that the student has fulfilled the requirements and hence here by can submit the
thesis to the department for defense.

Name of Principal advisor Signature Date

Name of co-advisor Signature Date

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 Examiners’ Thesis Approval Sheet
Approved by: We the examiners' board approve that this thesis has passed through the
defense and review process

Chairperson Signature Date

External Examiner Signature Date

Internal Examiner Signature Date

Principal advisor Signature Date

iv
 Acknowledgement

I would like to extend my appreciation to my supervisor Dr. Habtamu E.; this thesis would
not have been possible without his help and endless guidance. I am truly thankful to have
such loving and caring family, which I owe my sincere gratitude to them for being there for
me in all times with continuous support and encouragement. Last but not least to all my
friends for showing their support in numerous ways and having faith in me.

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 Table of Contents
Declaration................................................................................................................................ ii
Advisors’ Thesis Submission Approval Sheet......................................................................... iii
Examiners’ Thesis Approval Sheet.......................................................................................... iv
Acknowledgement .................................................................................................................... v
Table of Contents..................................................................................................................... vi
List of Tables ........................................................................................................................... ix
List of Figures ........................................................................................................................... x
Acronyms/Abbreviations ......................................................................................................... xi
Abstract ................................................................................................................................... xii
CHAPTER ONE ....................................................................................................................... 1
1. INTRODUCTION ................................................................................................................ 1
1.1. Background of the study ................................................................................................ 1
1.2. Problem Statement ......................................................................................................... 5
1.3. Research Questions ........................................................................................................ 8
1.4. Objectives of the Study .................................................................................................. 8
1.5. Significance of the Study ............................................................................................... 8
1.6. Scope of the Study.......................................................................................................... 9
1.7. Organization of the study ............................................................................................... 9
CHAPTER TWO .................................................................................................................... 10
2. LITERATURE REVIEW ................................................................................................... 10
2.1. Introduction .................................................................................................................. 10
2.2. The Concept of Strategy............................................................................................... 10
2.3. Strategic Management.................................................................................................. 11
2.4. Strategy Implementation .............................................................................................. 12
2.5. Theoretical Framework ................................................................................................ 13
2.6. Empirical Review......................................................................................................... 16
2.7 Research Gap................................................................................................................. 31
2.8. Conceptual Framework of the study ............................................................................ 32

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 2.9. Summary ...................................................................................................................... 33
CHAPTER THREE ................................................................................................................ 34
3. RESEARCH METHODOLOGY........................................................................................ 34
3.1. Introduction .................................................................................................................. 34
3.2. Research Design........................................................................................................... 34
3.3. Research approach........................................................................................................ 34
3.4. Target Population ......................................................................................................... 35
3.5. Sampling design ........................................................................................................... 35
3.6. Sources and Method of Data Collection ...................................................................... 37
3.7. Measurement Scales..................................................................................................... 38
3.8. Method of data Analysis .............................................................................................. 39
3.9. Assumption tests and procedures ................................................................................. 41
3.10. Reliability and validity ............................................................................................... 42
3.11. Research Ethics .......................................................................................................... 44
CHAPTER FOUR................................................................................................................... 45
4. RESULTS AND DISCUSSIONS....................................................................................... 45
4.1. Introduction .................................................................................................................. 45
4.2. Response rate................................................................................................................ 45
4.3 Description of respondents............................................................................................ 45
4.4 Descriptive and Factor analyses .................................................................................... 48
4.5 Correlation analysis....................................................................................................... 56
4.6. Path analysis................................................................................................................. 57
CHAPTER FIVE .................................................................................................................... 60
5. CONCLUSIONS AND RECOMMENDATIONS ............................................................. 60
5.1 Introduction ................................................................................................................... 60
5.2 Summary of major findings .......................................................................................... 60
5.3 Conclusion..................................................................................................................... 62
5.4 Recommendations ......................................................................................................... 64
5.5 Contributions of the Study ............................................................................................ 68

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 5.6 Limitation and Future research ..................................................................................... 69
REFERENCES ....................................................................................................................... 70
APPENDICES ........................................................................................................................ 75

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 List of Tables

Table 3.1 Sample size and its distribution...............................................................................37

Table 3.2 Reliabilities of the study variables...........................................................................43

Table 4.1 Job position of the respondents................................................................................46

Table 4.2 Department of the respondents................................................................................47

Table 4.3 Year of service of respondents in the organization .................................................48

Table 4.4 Descriptive Statistics of internal environment.........................................................50

Table 4.5 Descriptive Statistics of macro environment...........................................................53

Table 4.6 Descriptive Statistics of industry environment........................................................54

Table 4.7 Descriptive Statistics of strategy implementation...................................................55

Table 4.8 Correlations of the study variables..........................................................................56

Table 4.9 Unstandardized estimates and model fit indices of the path analysis......................58

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 List of Figures

Figure 2.1 Conceptual framework of the study.......................................................................32

Figure 4.1 Gender distributions of the respondents ................................................................45
Figure 4.2 Factory/project worked by the respondents ...........................................................46
Figure 4.3 Level of education of the respondents....................................................................47
Figure 4.4 Path diagram with standard estimate coefficients .................................................57

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Acronyms/Abbreviations
ESC; Ethiopian Sugar Corporation

GDP; Gross Domestic Product

GOE; Government of Ethiopia

GTP; Growth and Transformation Plan of Government of Ethiopia

HR; Human Resource

MY; manufacturing year

PEST; Political-Legal, Economic, Socio-Cultural, and Technological

R & D; Research and Development

SWOT; Strengths, Weaknesses, Opportunities and Threats

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 Abstract
The purpose of the study was to examine factors affecting strategy implementation (i.e.
internal, macro and industry environments) in the case of Omo Kuraz Sugar Factories and
Projects. The study has a nature of descriptive and explanatory type of design. A quantitative
approach was adapted that the author develops a questionnaire for this research by
reviewing literature. A pilot study of 10% of the sample was conducted to improve on validity
and reliability of the instruments, followed by a survey, which covered 50 managers in all
levels. After passing through several reliability and validity tests, the data collected was
subjected to descriptive, factor, correlation and path analyses; to describe factors that affect
strategy implementation, assess whether it would be more efficient to construct composite
variables, explain overall empirical relationships among variables and to decomposed the
relationships into a series parts of separate paths. The result shows that internal environment
has a direct positive effect on strategy implementation performance. The Macro environment
also has a strong effect on implementation, but it does so indirectly. However, the industry
environment has non-significant negative effect on strategy implementation. The study
recommends that Ethiopian Sugar Corporation, Omo Kuraz sugar factories and projects to
strive for developing and improving the internal environment to enhance strategy
implementation. The researcher recommends opportunities and threats arising from the
macro environment should be carefully and continuously scanned and analyzed by
developing proactive strategy. Regarding the industry environment also, the Sugar factories
should prepare themselves to have a competitive advantage over future rivals in the industry.
Even if it must be tested by a larger sample again, the study also tried to combine Higgins 8S
model, the systems theory, resource based view theory (RBV) and Porter’s Five Forces of
Competition Framework, as well as other related studies on strategy implementation.

Key words: Internal environment, Macro environment, Industry environment, Strategy

Implementation

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 CHAPTER ONE

1. INTRODUCTION

1.1. Background of the study

Strategy is the direction and scope of an organization over the long term, which achieves
advantage in a changing environment through its configuration of resources and competences
with the aim of fulfilling stakeholder expectations (Johnson, Scholes, & Whittingham, 2008).
Planning strategically is certainly a new requirement in the global business world and recent
studies have concluded that organizations engaged in strategic management have
outperformed those who do not (Alkhafaji, 2003). The strategic management process is a
sequential set of analyses and choices that can increase the likelihood that a firm will choose
a good strategy that generates competitive advantages. The process begins when a firm
defines its mission and objectives (Barney & Hesterly, 2012). In enabling firms adapt to
changing environments as well as sustaining their performance; external scanning, internal
scanning, strategy formulation, strategy implementation, control and evaluation are key
strategic management processes (Pearce & Robinson, 2007). However, the hardest part is
translating an analyzed and chosen strategy into organizational action (Li, Guohui, & Eppler,
2008).

Often called the “action stage”, strategy implementation is the sum total of the activities and
choices required for the execution of a strategic plan (David, 2015; Wheelen & Hunger,
2012). It includes creating and designing an effective organizations structure, mobilizing
employees and managers, allocating resources, preparing budgets, developing information
and decision processes, and measuring and monitoring performance to evaluate whether
action should be taken to better pursue attainment of the strategic goals (Sterling, 2003; Hill
& Jones, 2009). Although, the strategy-implementing task plays a vital role in the attainment
of corporate performance (Hrebiniak, 2006), it is easily the most dynamic, complicated,
iterative and time-consuming part of strategic management (Thompson & Strickland, 2003).

A wide range of different tools and frameworks exist to get a proper and profound strategy
(Kaplan & Norton, 2008). Among the theories that form the foundation of strategic
management include; profit maximizing and competition –based theory, the resource based

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theory, the system theory, the human resource based theory, the agency theory and the
contingency theory (Barney & Hesterly, 2012; Li et al., 2008; Scott & Davis, 2016).

However, to translate all the strategic goals into operational targets the literature provides
only a handful of tools and frameworks and by contrast; there is no agreed-upon, generally
accepted and dominant framework in strategy implementation (Kaplan & Norton, 2008).
Galbraith and Nathanson (1978) model considered as the first among the tools and
frameworks that mainly focuses on strategy Implementation. The model designed based on
systemic perspective of input, process, and output (BAM, 2013). Noble (1999) developed a
framework which identified five managerial ‘levers’ for strategy implementation
(organizational structure, leadership, communications, and incentives). Okumus (2001)
framework identifies ten key critical variables for strategy implementation and groups them
into four categories: (strategic content, strategic context, process and outcome). In 1982
Peters and Waterman developed a framework best known as McKinsey's Seven S,
identifying seven key factors to effective strategy implementation: (strategy, structure,
systems, shared values, skills, style, and staff) (Peters & Bay, 2011). Revising the McKinsey
model, Higgins (2005) sets up an Eight S's framework of strategy implementation by
replacing skills by resources and adding strategic performance. Kaplan and Norton (2008)
introduced a circular step-by step process model for implementing strategy which includes
six stages (developing strategy, planning the strategy, aligning the organization with the
strategy, planning operations, monitoring and learning, and testing and adapting strategy).
Hrebiniak (2013) also developed a framework, which identified four major factors (the
change management context, the culture of the organization, the organizational power
structure, and the leadership context).

Strategy execution cannot succeed unless the strategy itself is designed being executable
(Frigo, 2003). However, a technically imperfect plan that is implemented well will achieve
more than the perfect plan that never gets off the paper on which it is typed (David, 2015).
Higgins (2005) suggests that much of strategy execution revolves around aligning key
organizational functions/factors with the chosen strategy. However, he asserts that with
frequently occurring changes in the business environment make the alignment process a
bigger challenge. Okumus (2001) also noted that internal context plays a key role in

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implementing strategic decisions, however ignoring the wider context does not provide a
clear and holistic picture of the implementation process and its challenges. This study also
discusses about strategic plan implementation of Omo Kuraz Sugar Factories and Projects of
Ethiopian Sugar Corporation (ESC).

Sugar industry in Ethiopia was started by an agreement between the Government and
Handles Vereening Amsterdam (HVA), company of the Netherlands, in 1951 for the
establishment of Wonji Sugar Factory in Awash Valley. Subsequently, similar agreements
were concluded between them for the establishment of Shoa Sugar Factory in 1962 and
Metehara Sugar Factory in 1965 within the Valley. Another sugar project had started in
Finchaa Rift Valley in 1989, and Finchaa Sugar Factory started production of sugar and
ethanol in 1998. Latter in 2006, capacity-enhancing projects were started: replacing the
oldest two (Wonji and Shoa) Sugar Factories by a new one, expansion of Finchaa and
Metehara Sugar Factories and developing new sugar factory (Tendaho) in Afar region.
However in 2010, when the government released the first Growth and Transformation Plan
(GTP I), the projects were not completed and annual sugar production of the country was
about 300,000 tons, which only covered 60% of the annual demand for domestic
consumption (Ethiopian Sugar Corporation [ESC], 2015).

Ethiopian government GTP I (2010/11-2014/15), and its successor, GTP II (2015/16-

2019/20), five-year strategies driving the development agenda, aim to turn the country into a
middle-income country by 2025. The development of the sugar sector was a key component
of both plans, with a goal of making the country stand as one of the ten largest sugar
producers and exporters of the world by 2023. Accomplishing the goal by undertaking the
responsibility of the country entire sugar sector development, Ethiopian Sugar Corporation
came into existence by the Council of Ministers Regulation No. 192/2010. The mission is
creating modern technology and capable human resource to develop the national potential in
the sugar sector, taking remarkable foreign market share beyond satisfying domestic demand
to support the economy and ensuring the benefits of the public. The corporation key
objectives were to complete the ongoing projects and to build additional ten sugar factories
throughout the country. The Lower Omo Valley is the largest and key area targeted for the
sugar development activities. Omo Kuraz Sugar Development Project commenced on 2010

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in Southern Nation Nationalities and People's Regional State, planned to develop five sugar
factories (ESC, 2015; Ministry of Finance and Economic Development, 2016)

However, poorly integrated and delayed execution of installation of factories and sugar cane
plantation, early failure of some of the new factories with lower quality, inability to privatize
ethanol projects and strained financial situation challenges implementation of the strategic
plans. Consequently, towards the end of the second GTP period, the implementation
remained with considerable gaps from the official plans. Throughout the country, including
Omo Kuraz 2 and 3, only five new plants have become operational partially. In
Manufacturing Year 2018/19, the country annual production of sugar was around .25 million
metric tons, around 23,170 metric tons was from Omo Kuraz sugar development. It was
considerably far less than the projected, 3.4 and .95 million metric tons of sugar respectively
(ESC, 2015, 2019). The overall production amount could not address the sugar demand-
supply gap that sugar shortage becomes the main problem of businesses and individuals. For
the last decade, the government annually spent 280 million dollars for importing sugar
(Ethiopian Reporter, 2020; Global Agricultural Information Network, 2019).

Even if many organizations like ESC have been developing and trying to implement their
corporate strategies, the success rate is the fatal problem and most organizations incur
enormous costs attributed to failure of strategy implementation (Kaplan & Norton, 2008;
Raps, 2004; Speculand, 2009). The interrelationship between the firm and its remote, its
industry and its operating environments form the basis of the opportunities and threats that a
firm faces in its competitive environment (Li et al., 2008; Pearce & Robinson, 2007). In
underlying theoretical foundation applied and as fundamental basis of the variables and their
relationships that will be analyzed, the study mainly utilized the resource-based theory (RBT)
and the system theory, Higgins eight S's model and Porter’s five-force model which focus on
industry environment analysis. Therefore, this study concentrate on internal, macro and
industrial environment factors that affects strategy implementation based on the case of Omo
Kuraz Sugar Factories and Projects of ESC.

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1.2. Problem Statement

Effective strategy implementation requires decisions or actions that support the strategy;
regarding appropriate organization structure, leadership, culture, and systems for monitoring
and controlling organizational action as well as rewarding performance (Pearce & Robinson,
2007). Successful implementation also requires resource allocation, managing change from
the process approach, diagnosing barriers to change, managing any issues and
communication of change (Beer & Nohria, 2000). Hence, Strategy implementation is not the
result of a single decision or action but a series of integrated decisions or actions over time,
which presents a challenge to managers and increases the difficulty of strategy
implementation efforts (Hrebiniak, 2006). Thus most strategies accomplish less than half of
what their sponsors had hoped for, with as high as 9 out of 10 strategies fail to implement
successfully (Speculand, 2009; Raps, 2004).

According to Li et al. (2008), factors affecting strategy implementation in any organization

are resources, leadership, communication, resistance to change, organizational culture,
disconnect in planning and implementation, employee motivation, and information
communication technology. Sterling (2003) assert that strategies fail due to unanticipated
market changes, lack of senior management (CEO) support, lack of effective monitoring and
application of insufficient resources, insufficient buy in to or understanding of the strategy
among those who need to implement it. Okumus (2001) analysis indicates factors that
identified as influencing strategy implementation are strategy development, environmental
uncertainty, organizational structure, culture, leadership, operational planning, resource
allocation, people, communication, and control. A research survey of Hrebiniak (2013) on
400 managers indicates that factors that may cause obstacles to successful strategy
implementation includes; lack of feelings of ownership, inability to generate agreement on
critical execution steps or actions, lack of incentives or inappropriate incentives, and
insufficient financial resources to execute the strategy. Čater and Pučko (2010) study on 172
Slovenian companies, demonstrated that managers mostly rely on planning and organizing
activities when implementing strategies, while the biggest obstacle to strategy
implementation and execution is poor leadership. Analysis of factors affecting successful
implementation of strategic plan of Wonji-Shoa Sugar Factory of ESC by Bayeh (2020),

5
identified variables and categorized them in to planning, organization, individual, and
managerial related obstacles.

As part of Ethiopian government GTP I, and its successor, GTP II, ESC developed a strategic
plans with key objectives of completing ongoing projects (renovate and expand the existed
sugar factories), building ten new sugar factories throughout the country and increasing
plantation of sugar cane around 400,000 hectares. It aimed to achieve annual production of
4.22 million metric tons of sugar, 363,210 cubic meters of ethanol and export 3 million
metric tons of sugar to acquire 1.2 billion USD. Specifically in Omo Kuraz sugar
development project, ESC objectives were to develop 175,000 hectares of land that relies on
irrigation schemes from the Omo River and construct five sugar and ethanol-processing
factories. The strategic plans set to bring all of them operational to produce over 1.3 million
metric tons of sugar and 130,000 cubic meter ethanol annually (ESC, 2015; Ministry of
Finance and Economic Development, 2016).

However, towards the end of the second GTP, only five new sugar factories (including Omo
Kuraz 2 and 3) had become operational with partial capacity. In 2018/19 MY, development
of sugar cane reached 105,000 hectares and annual sugar production of the country was .25
million metric tons. It was considerably far less than the projected, 328,000 hectares and 3.4
million metric tons of sugar respectively. During this period, Omo Kuraz development of
sugar cane reached 17,309 hectares and production of sugar was 23,170 metric tons, which
are much less than the projected 109,000 hectares of sugar cane and .95 million metric tons
of sugar. Omo Kuraz 2 and 3 Sugar Factories have become operational with partial capacity,
after Chinese Company known as COMPLANT was carried out the construction. Other
Chinese Company, JIEC, is still carrying out the construction work of Omo Kuraz 5. Metals
and Engineering Corporation (METEC), an Ethiopian government institution, was
contracting and carrying out Omo Kuraz 1 factory construction work. However, the
government convinced that its unsuccessful effort to build the sugar projects resulted in
delays and loss of earning; ESC had terminated the contract with METEC. While, Omo
Kuraz 4 sugar development is not yet started (ESC, 2019).

According to ESC, the gap between the predetermined objectives and actual implementation
performance level was due to several challenges. Poorly integrated and delayed execution of

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installation of factories and sugar cane plantation; early failure of some of the new factories;
inability to privatize ethanol projects; incapability of some contractors; lack of expertise with
respect of the complexity of the sector and shortage of budget are the significant challenges
phased by ESC and Omo Kuraz sugar development factories and projects. The problems
were credited to several reasons, which include incomplete and improper planning; poor
project management; poor structure and communication between different departments; lack
of investment policies to privatize ethanol factories projects; low generation of income and
inability of creating and transfer of modern technology (ESC, 2015, 2019).

The government of Ethiopia has recognized the low productivity of existing and new sugar
factories compared to the potential, the mounting debt burden on the corporation, its under-
performance in implementing the projects. Recently, the corporation total debt reached 4.6
billion dollars (including 2.1 billion dollars from foreign creditors). This has resulted in the
government has announced its intention to privatize sugar factories. Accordingly, it has taken
active measures to prepare sugar factories for privatization (Ethiopian Reporter, 2020).

As noted above, organization internal and external environments contain a set of influential
forces that affect implementation of strategic plans and significant difficulties usually arise
during this phase, hence it is a key challenge for today's organizations (Hrebiniak, 2006;
Pearce & Robinson, 2007). Strategy implementation needs to be given as much emphasis as
the other processes if not more, however, little attention has been given to it that literature
provides only a handful of tools and frameworks to support companies in this phase (Kaplan
& Norton, 2008; Li et al., 2008). Moreover, the literature dominant view in strategy
implementation remains that strategy implementation is recognized as a separate stage after
strategy formulation and most studies focused on a single process and context alone.
However, strategy formulation and implementation are intertwined processes and ignoring
the wider context of strategic management does not provide a clear and holistic picture of the
implementation process and its challenges (Okumus, 2001; Pearce, Robinson, 2007;
Speculand, 2014). In addition, most of the previous studies carried out on the implementation
of strategic plans are on developed countries rather than the developing countries and
specifically on other companies other than sugar industry. As earlier highlighted, there is a
gap between the predetermined strategic objectives and actual implementation performance

7
level of Omo Kuraz Sugar Factories and Projects. To the best of the researcher’s knowledge,
no study has been done on the factors and their effect on implementation of strategic plan of
those Factories and Projects. Therefore, the study sought to fill these gaps by answering the
research question, what are the internal, macro and industrial environments factors and their
effect on implementation of strategic plan of Omo Kuraz Factories and Projects of ESC.

1.3. Research Questions

The following questions guide the research process:

 What is the effect of internal environment on strategy implementation of Omo Kuraz

Sugar Factories and Projects?

 What is the effect of macro environment on strategy implementation of Omo Kuraz

Sugar Factories and Projects?

 What is the effect of industry environment on strategy implementation of Omo Kuraz

Sugar Factories and Projects?

1.4. Objectives of the Study

1.4.1. General Objective

The main objective of this study was to examine the factors affecting strategic
implementation of Omo Kuraz Sugar Factories and Projects.

1.4.2. Specific Objectives

The study tried to achieve the following specific objectives:

i. To examine the effect of internal environment on strategy implementation

ii. To investigate the effect of macro environment on strategy implementation

iii. To examine the effect of industry environment on strategy implementation

1.5. Significance of the Study

The research has both theoretical and empirical contributions to academics and management
practices respectively. This study primarily benefits the mentioned sugar factories and
projects in terms of developing and improving strategy implementation processes that will

8
lead to high performance. In addition to the Government and other stakeholders, the findings
of this research would also help ESC in improving its strategic implementation practices and
preparedness on the future competition on the industry. The research will contribute to the
existing pool of knowledge by deepening readers’ understanding of strategic implementation
from the perspective of sugar factories. Besides, it also contributes to the academia by
jumpstarting future researches.

1.6. Scope of the Study

This study was generally focused on ESC and in relation to the geographical context; it
focused on Omo Kuraz sugar factories and projects, which located at Southern Nations,
Nationalities, and People’s Regional State (SNNPR). the units of analysis for the study were
two operational sugar factories (Omo Kuraz 2 and 3) and two sugar projects (Omo Kuraz 1
and 5), since considering multiple project implementations can provide further insights into
understanding how current and future projects may influence the implementation process of
one project (Okumus, 2001). The survey was carried out on managerial level positions; top,
middle and lower levels of the selected sugar factories and projects. Although there are many
factors affecting strategy implementation, the research was concerned in explaining main
factors by examining the internal, macro and industry environments. The study utilized
primary data collected using questionnaires between May and June 2020.

1.7. Organization of the study

The study is organized into five major chapters in order to make presentable to readers. The
first chapter is dedicated to an introductory part composed of background of the study,
research problem and questions. The second chapter presented the literature reviewed. In the
third chapter the research methodology, that includes research design, population and
samples of the study, data collection and analysis tools. The fourth chapter covered the data
analysis presentation and conclusion parts. Finally, chapter five presents the summary of the
major findings, conclusions, recommendations, limitations and further study areas.

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 CHAPTER TWO

2. LITERATURE REVIEW
2.1. Introduction
This chapter reviews relevant theoretical and empirical literatures, which provide more
insight and understanding of strategy implementation. It also provides a conceptual
framework of the study, which gives a guide of reviewing literatures on the factors affecting
strategy implementation and examining the relationship between dependent variable and
independent variables.

2.2. The Concept of Strategy

Many of the concepts and theories of business strategy have their antecedents in military
strategy. The term strategy derives from the Greek word strategia, meaning “generalship.”
However, the concept of strategy predates the Greeks: Sun Tzu’s classic, The Art of War,
from about 500 BC is regarded as the first treatise on strategy (Grant, 2018). Strategy is a
multi-dimensional concept in terms of content and substance, which embraces all critical
activities of the organization providing it with a sense of unity, direction, and purpose, as
well as facilitating the necessary changes induced by its environment (Pearce & Robinson,
2007). Mintzberg (1994) defined strategy as proofed to the idea that it is concern with
systemic sets of steps. He proposed 5P for strategy. The first 'P' is plan that strategy can be
seen as a comprehensive plan to show how organization sets up the goals and the ideal
process that should be taken to achieve them. The second 'P' is ploy, which refers to ways to
accomplish and achieving the ultimate goal. Internal and external analysis needed in order to
have proper strategy. The third 'P' is pattern, which refers to sets of systemic action. The
fourth 'P' is position, that identifying the correct position might give proper consideration
unto top management’s decision-making. The last 'P' is perspective, refers that strategy is a
concept, which requires commitment from all organization members to deal with strategy.
According to Johnson et al. (2008) strategy is the direction and scope of an organization over
the long term, which achieve advantage in changing environment through its configuration of
resources and competition with aim of fulfilling stakeholder expectation. It exists at a number
of levels in an organization. Hitt, Ireland, and Hoskisson (2009) define strategy as an
10
integrated and coordinated set of commitments and actions designed to exploit core
competencies and gain a competitive advantage. When choosing a strategy, firms make
choices among competing alternatives. In this sense, the chosen strategy indicates what the
firm intends to do, as well as what it does not intend to do.

2.3. Strategic Management

Wheelen and Hunger (2012) define strategic management as the set of managerial decisions
and actions that determine the long run performance of a corporation. Speculand (2014)
identified strategic management as the process of setting and accomplishing goals using
human, R&D, technical, and financial resources within the context of the environment.
Among the theories that form the foundation of strategic management include; profit
maximizing and competition –based theory, the resource based theory, the system theory, the
human resource based theory, the agency theory and the contingency theory. The profit
maximizing and competition based theory was based on the notion that business
organization’s main objective is to maximize long term profit and developing sustainable
competitive advantage over rivals in the external market place. The resource-based theory
hinges on the premise that the source of firms competitive advantage lies in their internal
resources as opposed to their positioning in the external environment. The system theory
centers on the premise that human organization is an organic system in which everything is
related to everything else and a change in one element of the system will affect all other
relationships in the system. The human resource-based theory emphasizes the importance of
the human element in the strategic development of firms. The agency theory is the mother of
the theory as this theory builds on the human element as a source of the organization’s
competitiveness. The agency theory stresses the underlying important relationship between
the shareholders or owners and the agents or managers in ensuring the success of the
organization. The contingency theory draws the idea that there is no one or single best way or
approach to manage organizations. It recommends that organizations should develop
managerial strategy based on the situation and condition they are experiencing (Barney &
Hesterly, 2012; Li et al., 2008; Scott & Davis, 2016).

According to Johnson et al. (2008), strategic management includes understanding the

strategic position of an organization, strategic choices for the future and managing strategy

11
inaction. Barney and Hesterly (2012) state that the strategic management process is a
sequential set of analyses and choices that can increase the likelihood that a firm will choose
a good strategy; that is; a strategy that generates competitive advantages. Through strategic
management, an organization can handle its mission while at the same time assessing the
relationship of the organization to its environment. The environment, in this case, means any
internal or external force that may cause an organization to stray from the path of its stated
mission (Alkhafaji, 2003). In any industry, strategic management processes namely;
environmental scanning, strategy formulation, strategy implementation, control and
evaluation, are key in enabling manufacturing firms adapt to changing environments as well
as sustaining their performance (Pearce & Robinson, 2007).

2.4. Strategy Implementation

Strategy implementation often is called the "action stage" of strategic management.
Implementing strategy means mobilizing employees and managers to put formulated
strategies into action. Strategies formulated but not implemented serve no useful purpose
(David, 2015). The strategy-implementing/strategy-executing task is easily the most
complicated and time-consuming part of strategic management. Strategy implementation is
aimed at ensuring that the vision, mission, strategy and strategic objectives of the firm are
achieved as planned (Thompson & Strickland, 2003). 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 into action through the
development of programs, budgets, and procedures (Wheelen & Hunger, 2012).

Strategy implementation includes creating and designing an effective organizations structure,

allocating resources, developing information and decision process, and effective supportive
culture, redirecting marketing efforts, preparing budgets, developing and utilizing
information and managing human resources (Sterling, 2003). Organizations should also
create means for measuring and monitoring performance, that performance can be compared
with the established standards to evaluate whether action should be taken to better pursue
attainment of strategic goals (Hill & Jones, 2009).

12
Kaplan and Norton (2008) assert that companies and the management literature were only
focused on the topic of strategy formulation over the last years. For this phase a wide range
of different tools and frameworks exist which supports the Management team to get a proper
and profound strategy. However, to translate all the strategic goals into operational targets
the literature provides only a handful of tools and frameworks to support the companies in
this phase.

Among the frameworks, Galbraith and Nathanson (1978) model considered as the first that
mainly focuses on strategy Implementation. The model designed based on systemic
perspective of input, process, and output (BAM, 2013). Noble (1999) developed a framework
which identified five managerial ‘levers’ for strategy implementation. These levers are goals,
organizational structure, leadership, communications, and incentives. Okumus (2001)
framework identifies ten key critical variables for strategy implementation and groups them
into four categories: (strategic content, strategic context, process and outcome). In 1982
Peters and Waterman developed a framework best known as McKinsey's 7S, identifying
seven key factors to effective strategy implementation: (strategy, structure, systems, shared
values, skills, style, and staff) (Peters & Bay, 2011). Kaplan and Norton (2008) introduced a
circular step-by step process model for implementing strategy which includes six stages
(developing strategy, planning the strategy, aligning the organization with the strategy,
planning operations, monitoring and learning, and testing and adapting strategy). Hrebiniak
(2013) developed a framework, which identified four major factors (the change management
context, the culture of the organization, the organizational power structure, and the leadership
context).

2.5. Theoretical Framework

In underlying theoretical foundation applied, the study will mainly utilize the resource-based
theory (RBT), which hinges on the premise that the source of firm competitive advantage lies
in it's internal resources and the system theory, which is linked with the interrelationship
between the firm and it's remote. Also, besides the other main strategy implementation
frameworks mentioned above, the researcher based on Higgins eight S's model which in
particular addresses the organizational factors that influence strategy implementation and

13
Porter’s five-force model which focus on industry environment analysis, as fundamental
basis of the variables and their relationships that will be analyzed.

2.5.1. Resource based view theory (RBV)

During the 1990s, ideas concerning the role of resources and capabilities in coalesced into
what has become known as the resource-based view of the firm, which is a conceptualization
of the firm as a collection of resources and capabilities that form the basis of competitive
advantage and the foundation for strategy. Resources are the productive assets owned by the
firm (which encompass three main types of resource: Tangible, Intangible, and Human);
capabilities are what the firm can do. On their own, individual resources do not confer
competitive advantage; they must work together to create organizational capability (Grant,
2018).

The RBV rests on two fundamental assumptions about the resources and capabilities that
firms may control. First, different firms may possess different bundles of resources and
capabilities, even if they are competing in the same industry. Second, some of these resource
and capability differences among firms may be long lasting, because it may be very costly for
firms without certain resources and capabilities to develop or acquire them. Taken together,
these two assumptions make it possible to explain why some firms outperform other firms,
even if these firms are all competing in the same industry. If a firm possesses valuable
resources and capabilities that few other firms possess, and if these other firms find it too
costly to imitate these resources and capabilities, the firm that possesses these tangible and
intangible assets can gain a sustained competitive advantage (Barney & Hesterly, 2012).

2.5.2. The systems Theory

The roots of Modern organization theory lie in the general system theory as interpreted in the
open system theory. Biologist Ludwig Von Bertalanffy introduced the theory in the early 19
century. The system theory is acquired from the biological and ecological sciences that
human organization is an organic system in which everything is related to everything else
and a change in one element of the system will affect all other relationships in the system
(Scott & Davis, 2016).

14
Johnson et al. (2008) observed that a business is a man-made system which has dynamic
interplay with various elements that include environment, competitors, customers, suppliers,
labor organizations, the government and other agencies. Pearce and Robinson (2007) suggest
that the interrelationship between the firm and its remote, its industry and its operating
environments form the basis of the opportunities and threats that a firm faces in its
competitive environment.

PEST (Political, economic, socio-cultural, and technological) forces have a clear impact on
strategic formulation. Managers must cope with change in these external environments, to
effectively deal with threats and opportunities presented to the organization (Alkhafaji,
2003). PEST analysis describes a framework of macro-environmental factors used in the
environmental scanning component of strategic management (Collins, 2010).

The core of the firm’s business environment is its industry environment, which is formed by
its relationships with three sets of players: customers, suppliers and competitors. This is its
industry environment and Michael Porter’s five forces of competition framework is the most
widely used tool for analyzing it (Grant, 2018).

2.5.3. Higgins Eight S's Model

Revising the original McKinsey Seven S's model, Higgins (2005) sets up an Eight S's
framework of strategy implementation. He has deleted skills from the McKinsey framework
and added resources in their place. He also added strategic performance in order to help focus
the strategy execution process. Hence, the framework includes strategy and purposes
structure, resources, shared values, style, staff, systems and processes, and strategic
performance (Li et al., 2008).

The model is divided into two parts; the Seven Contextual S’s and strategic performance.
The Eight S’s model enables management to manage the implementation of strategies in their
organizations more effectively and efficiently. Higgins (2005) submits that the key here is
that all the factors falling in the Contextual Seven S’s must be aligned to achieve best
possible strategic performance. Executives must align the cross functional organizational
factors with the new strategy so that the strategy opted for can succeed. He however noted

15
that these strategies may not be fully implemented due to changes in the organizational
environment.

2.5.4. Porter’s Five Forces of Competition Framework

As mentioned before Michael Porter’s five forces of competition framework is the most
widely used tool for analyzing competition within industries. The model is a simple but
influential tool for the identification where power lies in a certain business situation by using
the outside-in perspective (Johnson et al., 2008). It includes three sources of “horizontal”
competition: competition from substitutes, competition from entrants, and competition from
established rivals; and two sources of “vertical” competition: the power of suppliers and the
power of buyers. The strength of each of these competitive forces is determined by key
structural variables (Grant, 2018).

The critical strengths and weaknesses of the company animate the positioning of the
company in the industry, clarify the areas where strategic change may yield greatest payoff,
and highlight the places where industry trends promise to hold the greatest significance as
either opportunities or threats (Pearce & Robinson, 2007). The strength of each of the five
forces is inversely proportional to the price and profits such that a weak competitive force
may serve as an opportunity, while a strong one, may serve as a threat (Hill & Jones, 2012).

2.6. Empirical Review

2.6.1. Strategic Implementation

Strategy implementation is aimed at ensuring that the vision, mission, strategy and strategic
objectives of the firm are achieved as planned (Thompson & Strickland, 2003). Becher
(2005) draws attention to the need for measuring the achievements of implementation in a
way that allows for both identification of emerging issues and areas for further development.
Without the appropriate performance measurements, the strategy execution can be in
jeopardy. Strategic performance is a derivative of the other seven ‘S’s. Strategic performance
is possessed by an organization as a total, or for profit-based parts of the whole and it can be
measured at any level. It can be used in different ways, starting from objectives to measuring
results. Financial performance measurements are critical barometers of strategic
performance. However, an expanded balanced scorecard approach is best (Higgins, 2005).

16
The Cranfield University conducted a survey in 2003 and found out that 45% of the
organizations use a formal process of performance management, 25% of those organizations
use a form of total quality management (TQM). Whereas, 75% of those organizations use a
management system based on the Balanced Scorecard (Kaplan & Norton, 2008).

The Balanced Scorecard has been developed in the early 1990s by R. Kaplan and D. Norton
and provides a framework to translate strategy into operational terms. It is a tool that
provides a mix of financial and non-financial means to monitor and manage organizational
performance. The financial perspective provides a combination of both traditional accounting
measures and identification of leading financial indicators of future performance. The
internal process focuses on metrics that reveal internal operating performance. The customer
measures often focus on satisfaction, loyalty and profitability to ensure that the right
customers are receiving the right response. The learning and growth perspective focuses on
how well-learning and knowledge are managed and cultivated to support strategic goals
(Kaplan & Norton, 2001, 2004, 2008).

2.6.2. Internal Environment and Strategy Implementation

2.6.2.1. Strategy and purposes

Strategies are formulated to achieve an organization’s purpose. Strategic purpose includes

strategic intent, vision, focus, mission, goals, and strategic objectives (Higgins, 2005). Vision
or vision statement is the concise description of the image, or an aspiration, of what the firm
will be in the future. It should be; simple, challenging but yet workable, unique, value
centered, concise, verifiable, feasible and purpose driven. Mission statement is a clear
definition of the organization’s business. It must include the following: Who is the company?
What does it want to accomplish? What type of commitments does the company provide its
customers and employees? A clear and concise mission statement is invaluable. It will give
the company a firm foundation on which to stand. The company’s mission must be turned
into objectives and goals (Alkhafaji, 2003).

Both Goals as general statement of purpose and objectives as precise statements point to a
desired result. An effective goal should; provide a verified path to the achievement of a firms
strategy, take stakeholders into account, support the mission, and represent a desired result

17
that can be achieved and encompass a relatively longer period. It is extremely important for a
successful strategy implementation to translate the strategic long-term goals into measurable,
operational short-term metrics to assess strategic performance and to achieve the long-term
strategic goals of the company (Hrebiniak, 2013). Objectives must fulfill the SMART criteria
(Specific, Measurable, Attainable, Realistic and Timely) (Drucker, 1954). Even a well-
organized implementation process will lead to poor performance, if it aims at achieving
improper objectives and making wrong decisions (Frigo, 2003).

Okumus (2001) identifies, project Management as a new strategy implementation key

variable. Project management as standardized approach provides tools and processes that
facilitate the implementation of a strategy. A good and clear strategy can translated into
different strategic key projects and objectives (Günther, 2016).

Hrebiniak (2013) identified that the first key factor affecting the strategy implementation is
the strategy itself. He also identified critical aspects within the strategy that affect the success
of the implementation efforts as follows: Alignment of corporate and business strategies,
Definition and communication of operative elements, and Comprehension of requirements
for strategy execution, which are dependent of the type of strategy. According to Čater and
Pučko (2010),the three reasons why poor strategic planning is an obstacle to strategy
implementation are a strategy is not really a strategy but “a mixture of budgets and
management wish list”; a strategy is not executable; and a strategy is not owned by the
executors because they did not participate in its formulation. Moreover, if the employees are
unaware of the strategy, they surely cannot help the company implement it effectively.

2.6.2.2. Structure

Organizational structure is the shape, division of labor, job duties and responsibilities, the
distribution of power and decision-making procedures within the company (Okumus, 2001).
According to Higgins (2005), structure consists five parts; jobs, the authority to do those
jobs, the grouping of jobs in a logical fashion, the managers span of control and mechanism
of coordination. Hence when executing a business strategy, decisions are to be made
regarding how an organization is structured. Johnson et al. (2008) distinguish that different
organization structures exist, including functional, multidivisional, matrix, transnational and
project-based. Hrebiniak (2013) states that, organizational structure varies with the chosen
18
type of strategy. However, it is also important to find the right mixture of centralization and
decentralization and to find the right balance of costs, benefits, efficiency and effectiveness
to implement a strategy successfully.

Several studies show that factors relating to the organizational structure are the second most
important implementation barriers (Li et al., 2008). A large and more complex organizational
structure requires a greater involvement of middle and operational level managers. As shown
by research results, this is a prerequisite for effective strategic implementation and
achievement of better results in the competitive struggle (Ogbeide & Harrington, 2011).

2.6.2.3. Systems and processes

Higgins has described systems and processes by stating that systems and process enable an
organization to execute daily activities. Hence, this element is about the formal and informal
procedures used in an organization to manage information systems, planning systems,
budgeting and resource allocation systems, quality control systems and reward systems
(Higgins, 2005). Procedures, also known as organizational routines, are the primary means
by which organizations accomplish much of what they do (Wheelen & Hunger, 2012).
Formalization of procedures and processes not only brings order to decision-making, but also
introduces a certain rationality, which contributes to the efficiency and effectiveness of the
actions taken (Betz, 2001).

Mankins and Steele (2005) survey results show that the strategy-to-performance gap can be
assigned to a combination of factors, such as poorly formulated plans, misapplied resources,
breakdowns in communication and limited accountability for results. Beer and Eisenstat
(2000) stated that 60 percent of strategy implementation failures are due to ineffective
communication among executives, managers and line workers. The information flow does
not only include people communicating with each other but also information systems through
which management is monitoring the implementation efforts. David (2015) asserts that a
good information system allows the firm to reduce costs. Direct communications between
suppliers, manufacturers, marketers, and customers can link together elements of the value
chain as though they were one organization. Improved quality and service often result from
an improved information system.

19
2.6.2.4. Style

According to the Eight S model, style refers to leadership or the management style exhibited
by the leaders or managers especially when relating to subordinate staff or those working
under them (Higgins, 2005). Strategic leadership may be defined as the leader's ability to
anticipate, envision and maintain flexibility and to empower others to create strategic change
as necessary (Hitt et al., 2007). Pearce and Robinson (2007) note that CEO and key managers
must have the necessary skills, personalities, education, and experience to execute the
strategy, However, a lack of leadership commitment and specifically strategic leadership by
top management of the organization has been identified as one of the major barriers to
effective strategy implementation. Raps (2004) also suggests when implementing strategy,
the most important facet is the top management's lack of commitment to the strategic
direction itself.

Involving middle level managers in the original strategy formulation can improve
implementation since the middle level managers involved in the original strategy formulation
will be better at interpreting strategic intentions into action, have a stronger personal
commitment to strategic goals, and communicate the strategy more effectively to their teams
(Johnson et al., 2008).

Managing change is difficult but critical for successful strategy execution. Wharton-
Gartner’s study found that problems with change management constitute the single biggest
threat to strategy implementation. Leaders must therefore identify areas of necessary change
and overcome any potential resistance to change (Hrebiniak, 2006). In 1986, Nutt identified
four types of implementation tactics used by managers in making planned changes by
profiling 91 case studies: intervention, participation, persuasion, and edict. The study found
a found a 100 percent success rate when key executives used an intervention tactic, but
observed this tactic in less than 20 percent of the cases. Both the persuasion and participation
tactics had 75 percent success rates; persuasion had the highest frequency of use, 42 percent,
and participation the lowest, 17 percent. Implementation by edict had a 43 percent success
rate and a 23 percent frequency of use (as cited in Li et al., 2010).

20
2.6.2.5. Staff

After defining company’s strategic purpose, management must settle, as how many
employees are needed and what are the required backgrounds and skills essential to achieve
the strategic purpose. This factor also covers aspects such as staff training, career
management, and promotion of employees (Higgins, 2005).There are a limited number of
studies conducted regarding the influence of lower management and non-managerial
employees to strategy implementation (Li et al., 2008).

Human resource management practices enhance organizational effectiveness and

performance by attracting, identifying and retaining employees with knowledge, skills and
abilities, and getting them to behave in a manner that will support the mission and objectives
of the organization. Cooperatives should evolve scientific staffing norms, come up with a
conscious policy for developing a second tire of management in all key functional areas.
Human resource management strategies improve organizational effectiveness by developing
policies in such areas as knowledge management, talent management and generally creating
‘a great place to work’. Human resource management strategies should be aligned to
organizational strategies to ensure success of such strategies (Armstrong, 2006; Johnson, et
al., 2008; Soni & Saluja, 2013).

When there is improper communication, low training, and insufficient level of knowledge
and capacity in the performance of their functions and when departmental heads do not
provide adequate leadership and direction, lower management and non-managerial
employees may obstruct the implementation of the strategy. Strategy implementation efforts
may fail if the strategy does not enjoy support and commitment by the majority of employees
and middle management. If middle and lower level managers and key subordinates are
permitted to be involved with the detailed implementation planning, their commitment will
be likely to increase. Successful firms use both financial incentives and non-monetary carrot
and stick incentives to gain wholehearted employee commitment to good strategy execution
and operation excellence (Li et al, 2008; Thompson & Strickland, 2003).

21
2.6.2.6. Re-Sources

Higgins (2005) submits that resources include people, money, and technology and other
management systems. He affirms that management must ensure that an organization has
access to sufficient resources toward successfully strategy execution. Okumus (2001) also
identified that there should be a process of ensuring that all necessary time financial
resources, skills and knowledge are made available. He suggests that resources are closely
linked with operational planning and have a great deal of impact on communications and on
providing training and incentives. Ehrhardt and Brigham (2011) explain that the key
attributes of successful companies as first, successful companies have skilled people at all
levels inside the company. Second, they have strong relationships with groups outside the
company. Third, they have enough funding to execute their plans and support their
operations. On the other hand, Thompson and Strickland (2003) emphasize that the proper
usage of available resources is essential for successful implementation.

Johnson et al. (2008) asserts that finance is a resource of central importance in all
organizations and that the type of funding should vary with the strategy. When your cash
resources are too limited, it affects the number of people you can hire, the quality of your
equipment, and the amount of advertising you can buy. According to Owen and Žitković,
(2009), if you are flush with cash, you have a lot more flexibility to grow and expand your
business or endure an economic downturn.

Fleisher and Bensoussan (2015) argue that the competitiveness of manufacturing companies
depends on the availability and productivity of their production facilities. According to David
(2015) technological changes can reduce or eliminate cost barriers between businesses, create
shorter production runs, create shortages in technical skills, and result in changing values and
expectations of employees, managers, and customers. Technological advancements can
create new competitive advantages that are more powerful than existing advantages.

2.6.2.7. Shared values

Organizational culture refers to the shared values, attitudes and norms of behaviour that
create the propensity for individuals in an organization to act in certain ways (Čater & Pučko,
2010). According to the Eight S model shared values on the whole relates to organizational

22
culture. Therefore, shared values are the values shared by the members of the organization
making it different and diverse from the other organizations (Higgins, 2005). An
organization's culture can exert a powerful influence on the behavior of all employees and
therefore it can strongly affect a company's ability to shift strategic direction (Wheelen &
Hunger, 2012).

Organization's culture can be both important blockages and facilitators to change. It is strong
because it eases and economizes communication, facilitates organizational decision-making
and control and may generate higher levels of cooperation and commitment in the
organization, which results in efficiency. However, a culture can also prevent a company
from meeting competitive threats or adapting to changing economic and social environments
that a new strategy is designed to overcome (Johnson et al., 2008). Alamsjah (2011) study on
Indonesian organizations identified corporate culture is seen as the enabler or catalyst for
successful strategy implementation. The study classified cultural values as innovation, action
orientation, results orientation, team orientation, information sharing, and openness to
constructive criticism.

According to Čater and Pučko (2010), one of the most common culture-related problems in
companies is a lack of trust, which usually results in poor or inadequate information and
knowledge sharing between individuals and/or business units responsible for strategy
implementation. Another common cultural problem is the domination of the short-term
orientation in a company. Griffin and Moorhead (2012) also postulate that culture influences
managerial risk-taking directly through its effect on individual decision-making and
indirectly through its effect on an organization’s managerial practices.

The act of changing organizational culture is very difficult because of the heavy anchor of
deeply held values and habits. This is because people like clinging to the old and familiar and
fear change. Strategists should strive to preserve, emphasis, and build upon aspects of an
existing culture that support proposed new strategies, while the major role of the leadership
within an organization is creating an appropriate strategy-culture fit (Thompson &
Strickland, 2003; Kazmi, 2002).

23
2.6.3. Macro Environment and Strategy Implementation

2.6.3.1. The Political/Legal Forces

Within the regulatory environment, all levels of government enact laws and regulations
affecting business organization. Primarily, regulations involve employment practices, tax
revenue generation, or the legal structure within which the organization operates. These laws
tend to reduce the firms‟ profits or to benefit by protecting some firms. These are through
actions like patent laws, government subsidies or product research grants (Alkhafaji, 2003;
Pearce & Robinson, 2007).

Firms must carefully analyze a new political administration’s business-related policies and
philosophies. Antitrust laws, taxation laws, industries chosen for deregulation, labor training
laws, and the degree of commitment to educational institutions are areas in which an
administration’s policies can affect the operations and profitability of industries and
individual firms. When new regulations are adopted based on new laws, they often affect the
competitive actions taken by firms (their actions are regulated). An example is the recent
global trend toward privatization of government-owned or -regulated firms. The
transformation from state-owned to private firms has substantial implications for the
competitive landscapes in countries and industries (Hitt et al., 2009).

Political unrest in the Middle East threatens to raise oil prices globally, which could cause
inflation. Many countries worldwide are resorting to protectionism to safeguard their own
industries. The EU recently restricted imports of U.S. chicken and beef. India is increasing
tariffs on foreign steel. Russia perhaps has instituted the most protectionist measures by
raising tariffs on most imports and subsidizing its own exports. Russia even imposed a new
toll on trucks from the EU, Switzerland, and Turkmenistan. The debate continues over trade
policies. Some believe that a nation should erect trade barriers to protect its companies’
products. However, as countries continue to join the World Trade Organization (WTO), more
countries seem to believe that free trade across nations serves the best interests of individual
countries and their citizens. A Geneva-based organization, the WTO establishes rules for
global trade (David, 2015; Hitt et al., 2009).

24
2.6.3.2. Economic Forces

Economic factors concern the nature and direction of the economy that the organization
operates in Both the national and international level management must consider the
availability of credit, the level of disposable income, the propensity of people to spend,
interest rates, inflation rates, and trends in the growth of the gross national product among
other economic factors. The economic climate is the overall health of the economic systems
within which a firm operates. The health of die economy varies over time in a distinct
pattern: Periods of relative prosperity, when demand for goods and services is high and
unemployment is low, are followed by periods of relatively low prosperity, when demand for
goods and services is low and unemployment is high. When activity in an economy is
relatively low, the economy is said to be in recession. A severe recession that lasts for several
years is known as a depression. This alternating pattern of prosperity followed by recession,
followed by prosperity, is called the business cycle (Barney & Hesterly, 2012; Pearce &
Robinson, 2007).

Companies are usually affected by the general condition of the national economy, either
directly or indirectly. The value of the dollar might affect multinational corporation
performance. Therefore, the firm’s strategies are somewhat dependent upon economic
conditions. For example, with interest rates, funds needed for capital expansion are less
costly. As interest rates rise, discretionary income declines, and the demand for discretionary
goods falls. When stock prices increase, the desirability of equity as a source of capital for
market development increases. When the market rises, consumer and business wealth
expands (Alkhafaji, 2003; David, 2015).

Firms must also scan, monitor, forecast, and assess the health of economies outside their host
nation. It is commonly agreed that the federal government exerts a powerful influence on the
U.S. (and thus world) economy through the fiscal or monetary policies of the Federal
Reserve Board. In addition, the amount of spending by the federal government directly
affects the level and composition of business activity within the economy. Where and how
the federal government spends its money also influences the business environment
(Alkhafaji, 2003; Hitt et al., 2009).

25
2.6.3.3. Socio-cultural Forces

The social factors that affect a business involve from beliefs, values, attitude, opinions and
lifestyles of persons in the business or firm's external environment. This usually is developed
from cultural, ecological, demographic, religious, educational and ethic conditions. It has
however been noted that translating social change into business forecasts is a difficult
process due to shifts in population, changing work values, ethical standards and religious
orientation. Social, cultural, demographic, and environmental changes have a major impact
on virtually all products, services, markets, and customers. Small, large, for-profit, and
nonprofit organizations in all industries are being staggered and challenged by the
opportunities and threats arising from changes in social, cultural, demographic, and
environmental variables (Pearce & Robinson, 2007; David, 2015).

Culture is the values, beliefs, and norms that guide behavior in a society. These values,
beliefs, and norms define what is "right and wrong" in a society, what is acceptable and
unacceptable, what is fashionable and unfashionable. Failure to understand changes in
culture, or differences between cultures, can have a very large impact on the ability of a firm
to gain a competitive advantage. This becomes most obvious when firms operate in multiple
countries simultaneously. Even seemingly, small differences in culture can have an impact
(Barney & Hesterly, 2012).

Demographic is the distribution of individuals in a society in terms of age, sex, marital status,
income, ethnicity, and other personal attributes that may determine buying patterns.
Understanding this basic information about a population can help a firm determine whether
its products or services will appeal to customers, and how many potential customers for these
products or services it might have. The population of the world recently surpassed 7 billion;
remaining solely domestic is an increasingly risky strategy, especially as the world
population continues to grow to an estimated 8 billion in 2028 and 9 billion in 2054. Aging
populations are a significant problem for countries because of the need for workers and the
burden of funding retirement programs. In Japan and other countries, employees are urged to
work longer to overcome these problems. It seems that governments will have to increase the
retirement age, cut benefits, raise taxes, and/or run significant budget deficits. The ethnic mix
of countries’ populations continues to change. Through careful study, companies can develop

26
and market products that satisfy the unique needs of different ethnic groups. Changes in the
ethnic mix also affect a workforce’s composition and cooperation (Barney & Hesterly,
2012;David, 2015; Hitt, et al., 2009).

The natural environment includes physical resources, wildlife, and climate that are an
inherent part of existence on Earth. The concept of Environmental sustainability argues that a
firm’s ability to continuously renew itself for long-term success and survival is dependent not
only upon the greater economic and social system of which it is a part, but also upon the
natural ecosystem in which the firm is embedded. A business corporation must thus scan the
natural environment for factors that might previously have been taken for granted, such as
the availability of fresh water and clean air. Research reveals that scanning the market for
environmental issues is positively related to firm performance because it helps management
identify opportunities to fulfill future market demand based upon environmentally friendly
products or processes (Wheelen & Hunger, 2012).

Social responsibility covers a wide range of influences, from government regulation to

pressure from organizations that, if not resolved, could lead to more regulations. Due to the
threat of added, and sometimes contradictory, regulations, organizations must develop
proactive strategies to deal with what others perceive to be the organization’s social
responsibility. Social responsibility is an internal attitude or choice reflected in management
attitudes toward the external environment, i.e., whether management has to conform to social
norms via regulations, or whether management voluntarily selects to be socially responsible
because it is inherently right and inherently good business (Alkhafaji, 2003).

2.6.3.4. Technological forces

Technological change is perhaps the most dynamic force shaping our destiny hence,
organizations that do not keep up with the rapid technological change will soon have
outdated products and will miss out on new product and market opportunities. The
technological segment includes the institutions and activities involved with creating new
knowledge and translating that knowledge into new outputs, products, processes, and
materials (Hitt et al., 2009; Kotler & Armstrong, 2016).

27
Technological change creates both opportunity, as firms begin to explore how to use
technology to create new products and services, and threats, as technological change forces
firms to rethink their technological strategies. Therefore, all firms especially those in
turbulent growth must strive for understanding both of existing technology and technological
advances and the probable future advances that may affect their products and services. The
importance of these efforts is suggested by the finding that early adopters of new technology
often achieve higher market shares and earn higher returns. Thus, firms should continuously
scan the external environment to identify potential substitutes for technologies that are in
current use, as well as to identify newly emerging technologies from which their firm could
derive competitive advantage (Barney & Hesterly, 2012; Hitt et al., 2009; Pearce &
Robinson, 2007).

The Internet has changed the nature of opportunities and threats by altering the life cycles of
products, increasing the speed of distribution, creating new products and services, erasing
limitations of traditional geographic markets, and changing the historical trade-off between
production standardization and flexibility. The internet has lowered entry barriers and
redefined the relationship between industries and various suppliers, creditors, customers, and
competitors. Papa John’s international a few years ago received more than 50 percent of all
its pizza orders through its website, up from 30 percent in 2011 and far more than the
industry average of 10 percent (David, 2015).

2.6.4. Industry Environment and Strategy Implementation

2.6.4.1. Industry Competitors

Because an industry’s firms are mutually dependent, actions taken by one company usually
invite competitive responses. In many industries, firms actively compete against one another.
Competitive rivalry intensifies when a firm is challenged by a competitor’s actions or when a
company recognizes an opportunity to improve its market position. Strong rivalry represents
a threat to established companies, whereas weak rivalry constitutes an opportunity to raise
prices and earn greater returns. The intensity of rivalry among competing firms tends to
increase as the number of competitors increases, as competitors become more equal in size
and capability, as demand for the industry’s products declines, and as price cutting becomes
common. Rivalry also increases when consumers can switch brands easily; when barriers to
28
leaving the market are high; when fixed costs are high; when the product is perishable; when
consumer demand is growing slowly or declines such that rivals have excess capacity or
inventory; when the products being sold are commodities (not easily differentiated, such as
gasoline); when rival firms are diverse in strategies, origins, and culture; and when mergers
and acquisitions are common in the industry. As rivalry among competing firms intensifies,
industry profits decline, in some cases to the point where an industry becomes inherently
unattractive. When rival firms sense weakness, typically they will intensify both marketing
and production efforts to capitalize on the “opportunity” (Alkhafaji, 2003; David, 2015; Hitt
et al., 2009).

2.6.4.2. New Entrants

Identifying new entrants is important because they can threaten the market share of existing
competitors. One reason new entrants pose such a threat is that they bring additional
production capacity. Unless the demand for a good or service is increasing, additional
capacity holds consumers’ costs down, resulting in less revenue and lower returns for
competing firms. Management has to assess the possibility of new competitors joining the
market. This means increasing industry capacity and preparing for intense battles for market
share. The possibility of new entries depends on the existing barriers to entry into the
industry and the possibility of retaliation from established companies in that market.
Whenever new firms can easily enter a particular industry, the intensity of competitiveness
among firm’s increases. Barriers to entry, however, can include the need to gain economies
of scale quickly, the need to gain technology and specialized know-how, the lack of
experience, strong customer loyalty, strong brand preferences, large capital requirements,
lack of adequate distribution channels, government regulatory policies, tariffs, lack of access
to raw materials, possession of patents, undesirable locations, counterattack by entrenched
firms, and potential saturation of the market. Despite numerous barriers to entry, new firms
sometimes enter industries with higher quality products, lower prices, and substantial
marketing resources. The strategist’s job, therefore, is to identify potential new firms entering
the market, to monitor the new rival firms’ strategies, to counterattack as needed, and to
capitalize on existing strengths and opportunities. Often, new entrants have a keen interest in
gaining a large market share. As a result, new competitors may force existing firms to be

29
more efficient and to learn how to compete on new dimensions (Alkhafaji, 2003; David,
2015; Hitt et al., 2009).

2.6.4.3. Substitutes

Substitute products are goods, services from outside a given industry that perform similar, or
the same functions as a product that the industry produces. For example, as a sugar substitute,
NutraSweet (and other sugar substitutes) places an upper limit on sugar manufacturers’
prices. NutraSweet and sugar perform the same function, though with different
characteristics. In many industries, firms are in close competition with producers of substitute
products in other industries. The presence of substitute products puts a ceiling on the price
that can be charged before consumers will switch to the substitute product. Price ceilings
equate to profit ceilings and more intense competition among rivals. Producers of sugar face
similar pressures from artificial sweeteners. In general, product substitutes present a strong
threat to a firm when customers face few, if any, switching costs and when the substitute
product’s price is lower or its quality and performance capabilities are equal to or greater
than those of the competing product. Differentiating a product along dimensions, such as
price, quality, service after the sale, and location, reduces a substitute’s attractiveness (David,
2015; Hitt et al., 2009).

2.6.4.4. Suppliers

Suppliers make a wide variety of raw materials, labor, and other critical assets available to
firms. Any profits that were being earned in an industry can be transferred to suppliers in this
way. The bargaining power of suppliers affects the intensity of competition in an industry,
especially when there are few suppliers, when there are few good substitute raw materials, or
when the cost of switching raw materials is especially high. Firms may pursue a backward
integration strategy to gain control or ownership of suppliers. This strategy is especially
effective when suppliers are unreliable, too costly, or not capable of meeting a firm’s needs
on a consistent basis. Firms generally can negotiate more favorable terms with suppliers
when backward integration is a commonly used strategy among rival firms in an industry
(Barney & Hesterly, 2012;David, 2015).

30
2.6.4.5. Buyers

Firms seek to maximize the return on their invested capital. Alternatively, buyers (customers
of an industry or a firm) want to buy products at the lowest possible price; the point at which
the industry earns the lowest acceptable rate of return on its invested capital. To reduce their
costs, buyers bargain for higher quality, greater levels of service, and lower prices. Whereas
powerful suppliers act to increase a firm's costs, powerful buyers act to decrease a firm's
revenues. The ability of buyers to make demands on a company depends on their power
relative to that of the company. Consumers gain increasing bargaining power under the
following circumstances; if they can inexpensively switch to competing brands or substitutes,
if they are particularly important to the seller, if sellers are struggling in the face of falling
consumer demand, if they are informed about sellers’ products, prices, and costs and if they
have discretion in whether and when they purchase the product (Alkhafaji, 2003; Barney &
Hesterly, 2012; David, 2015; Hitt et al., 2009).

2.7 Research Gap

The literature review has generally indicated that strategy implementation has increasingly
become a key challenge for today's organizations particularly because significant difficulties
usually arise during this phase (Hrebiniak, 2006; Pearce & Robinson, 2007). However, little
attention has been given to strategy implementation and literature provides only a handful of
tools and frameworks to support companies in this phase. Since it plays a vital role in the
attainment of corporate performance, it needs to be given as much emphasis as the other
processes if not more (Kaplan & Norton, 2008; Li et al., 2008). It is also noted that the
dominant view in strategy implementation remains that strategy implementation is
recognized as a separate stage after strategy formulation. However, it is acknowledged that
strategy formulation and implementation are intertwined processes (Pearce, Robinson, 2007;
Speculand, 2014). Additionally most studies focused on a single process and context alone.
However, focusing on the implementation process alone and ignoring the wider context does
not provide a clear and holistic picture of the implementation process and its challenges
(Okumus, 2001). Finally, the studies cited in the literature mostly concentrate on the
developed countries. There exists a glaring gap on studies on strategy implementation in

31
Ethiopia and other developing countries. Specifically the studies have been done on other
companies other than sugar industry.

This study, therefore, sought to fill these gaps; utilizing the resource-based theory (RBT), the
system theory, Higgins eight S's model and Porter’s five-force model mainly as fundamental
basis of the variables and their relationships, and examining the factors affecting strategy
implementation of Ethiopian Sugar Corporation in the case of Omo-Kuraz Sugar Factories
and Projects.

2.8. Conceptual Framework of the study

Macro Environment

Internal Environment Strategy Implementation

Industry Environment

Figure 2.1 Conceptual framework of the study

Source: Created by the researcher for this study

Li et al., (2010) argued that strategy implementation is a complex phenomenon that can be
looked at from different theoretical positions. They further argued for a combination of
theoretical perspectives to explore complexities in strategy implementation. The study seeks
to consider several factors and their relationships. Based on the objectives and the theoretical
review, the factors are categorized into internal, macro and industrial environments, which
are independent variables of the study. The variables considered as a collective impact of a
number of single factors on the success of strategy implementation i.e. the dependent
variables of the study. It is considered dependent since the success of any strategy
implementation depends on the outcomes of factors of internal, macro and industrial
32
environments. The interrelationship between the firm and its remote, its industry and its
operating environments form the basis of the opportunities and threats that a firm faces in its
competitive environment (Pearce and Robinson,2007). Hence, the conceptual framework
assumes that, the macro and industry environments can affect the internal environment. In
addition, it assumes that the macro environment affects the industry environment since there
is a restriction on privatization on the context of the study i.e. the sugar sector.

2.9. Summary
This chapter examined both the theoretical and empirical literature relevant to the study. The
dependent and independent variables of internal, macro and industry environments and
literature relevant to the effect of independent variable on the dependent was reviewed have
been reviewed. In addition, the conceptual framework of the study was indicated, showing
the relationship between the predictor, and outcomes variables in the study. The next chapter
looks at the methodology used by the study.

33
 CHAPTER THREE

3. RESEARCH METHODOLOGY
3.1. Introduction
This chapter describes the approach of organizing the research and the methods used for
gathering and analyzing data to answer the research questions proposed in the introductory
chapter.

3.2. Research Design

Conducting the research and achieve the aforementioned objectives properly descriptive and
explanatory research design are used. Descriptive study is concerned with descriptions of
phenomena or characteristics associated with a subject population (who, what, when, where,
and how of a topic), estimates of the proportions of a population that have these
characteristics and discovery of associations among different variables. The third study
objective is sometimes labeled as a correlational study, a subset of descriptive studies. In
addition, if a study is concerned with learning why, that is how one variable produces
changes in another, it is explanatory study, which tries to explain relationships among
variables (Cooper & Schindler, 2014). Descriptive and explanatory research design was
considered appropriate for this study because the primary purpose of this study was to
describe and explain factors that affect strategy implementation of Omo Kuraz sugar
factories and projects, and explain relationships among variables.

3.3. Research approach

Methods used to conduct the research should be in line with the research questions.
According to Cohen and Manion (1980), quantitative research is used when the intention of
the study is to describe through empirical statements what the case is in the real world rather
than what ought to be the case. In addition, Creswell (1994) states quantitative research is
appropriate for ‘explaining phenomena by collecting numerical data that are analyzed using
mathematically based methods (in particular statistics). Hence, this thesis aims to describe
and measure the underlying variables presented in the conceptual framework and explain the
relationships between the variables using statistical techniques, a quantitative approach was

34
carried out in this study to answer the research questions. Quantitative research is useful to
quantify opinions. The study seeks to investigate the opinions of respondents in relation to
factors influencing strategic implementation, and to reach on a conclusions, which can be
done by quantifying the respondents’ opinions. Quantitative research is also suitable to
generalize the findings. Since the objective of this study is to generalize the findings of
accepted propositions to the whole population, the use of quantitative methods is deemed to
be the most suitable.

3.4. Target Population

A population is the total collection of elements about which we wish to make some
inferences (Kothari, 2004). The study population was full time managerial Omo Kuraz sugar
factories and projects employees, since they were mandated with carrying out strategic
planning and execution decisions regarding of.

3.5. Sampling design

The study adopted stratified random sampling method. The difference in level of
participation in strategy planning, the difference of quality (skills, attitudes, capabilities,
experiences and other characteristics) of people involved in strategy implementation, and the
perspective that considers the effect of context on behavior (Johnson et al., 2008; Li et al,
2008), influenced the study to adopt the method. The method ensures representation of all
groups in a sample and reducing variability for the same sample size (Kothari, 2004).

3.5.1. Sampling frame

The sampling frame describes the list of all population units from which the sample was
selected (Cooper & Schindler, 2014). The sampling frame is a physical representation of the
target population and comprises all the units that are potential members of a sample (Kothari,
2004). According to ESC structure, top, middle and lower management leadership was the
target respondents. The sampling frame of this study was derived based on the data from
Human Resource Administration Team Leaders of Omo Kuraz sugar factories and projects.
When the study is conducted, the numbers of employees in all the factories and projects, that
are in top, middle and lower management positions, were 100.

35
3.5.2 Sample size and Sampling technique

The formula below was used to calculate the sample size as:

z ∗p∗q∗N
=
e (N − 1)+ z ∗ p ∗ q

Where:

N = size of population which is 100

n = size of sample for a finite population

z = the value of the standard variation, for the study it is 1.96 at confidence level of 95%

e = allowance for random sampling error, for this study the selected margin of error was 10%

p = the proportion in the target population that assumes the characteristics being measured. In
this study, a 50:50 basis is assumed which is a probability of 50% (0.5), q= 1- p (Kothari,
. ∗ . ∗ . ∗
2004); Therefore, = . ( ) . ∗ . ∗ .
= 50

The target proportion that is assumed to have the characteristics of interest of the population
was placed at 50% that is p=0.5, Due to unavailable estimate of the proportion in the target
population (Kothari, 2004). The selected margin of error was 10%, i.e. allowance for random
sampling error considered for this study is ±0.1. This proportion was arrived at after an
extensive consideration of the cost and time to be spent in the research. Lower proportions of
will lead to bigger samples and in effect may make the research cumbersome to carry out.
With higher proportions, a more realistic sample population, which is neither too high nor too
low for the study was established and vice versa (Cooper & Schindler, 2014). The researcher
also considered the fact that a smaller sample would lead to a bigger sampling error despite it
being cheap, as compared to a larger sample which would lead to a smaller sampling error
and precision required in research but costly. According to Saunders, Lewis, and Thornhill
(2009), the sample size is almost a matter of judgment rather than calculation. They also state
statistical analyses usually require a minimum sample size of 30. A sample of at least 10% of
the population is usually acceptable in a study (Cooper & Schindler, 2014). Bentler and Chou
(1987) note that researchers may go as low as five cases per parameter estimate in Path
analysis. They mention that measured variables typically have at least one path coefficient

36
associated with another variable in the analysis, plus a residual term or variance estimate, so
it is recommendations dovetail at approximately 15 cases per measured variable, minimum.
According to the recommendation, a minimum of 45 cases are acceptable for this study.
From this discussion, a sample size of 50 management position employees constituting 50%
of the population was targeted for investigation.

Table 3.1 Sample size and its distribution

Factory/project Omo Kuraz 1 Omo Kuraz 2 Omo Kuraz 3 Omo Kuraz 5 Total
stratum
Management
N1 n1 N2 n2 N3 n3 N5 n5 N n
level

Top 4 2 4 2 4 2 2 1 14 7

Middle 5 3 7 3 7 3 2 1 21 10

Lower 18 9 20 10 20 10 7 4 65 33

Total 27 14 31 15 31 15 11 6 100 50

The population was stratified by factories/projects and further by management levels and the
method of proportional allocation under which the sizes of the samples from the different

strata are kept proportional to the sizes of the strata; = ∗ , is applied (Kothari, 2004).

Hence, the size of the sample of each stratum were determined and prepared for the simple
random selection of items as shown in table 3.1.

3.6. Sources and Method of Data Collection

3.6.1. Data collection instruments

The study began with literature review; searching for various types of information from
books, articles and the web; to gain more knowledge about the topic and to know what other
scholars have documented. Furthermore, a primary research was adopted as it entails first-
hand information or data derived from people who participated in the research. In this regard,
the data gathered from the questionnaire served as the primary basis for the research.
Questionnaires are preferred for primary data collection because they are less costly, ensure

37
anonymity, permit use of standardized questions and ensure uniform procedures. It also
ensures that respondents have adequate time to give well thought out answers in their own
words (Kothari, 2004). For the purpose of this study, the researcher developed a self-
administrated type questionnaire, taking into account the key factors of strategy
implementation performance found in the literature. The questionnaire is composed of five
sections including the demographics and variables.

3.6.2. Data collection procedure

The researcher used self-administered questionnaires to collect primary data from 50

management staff of Omo Kuraz sugar factories and projects. The questionnaires were
distributed to the respondents and a reasonable time was given before collected; it was
carried out between May and June 2020. Respondents were assured of confidentiality of
information provided.

3.7. Measurement Scales

Due to the nature of variables and the choice of design, the study used a number of items to
construct summated subscales and scales. The study dependent variable (strategy
implementation performance) and one of the independent variables (Industry environment),
were assessed with the average scores of the respective response of four and five response
items. The other two independent variables (internal and macro environments) were assessed
at further averaged values of their respective seven and five components scales (here treated
as subscales). Five-point-Likert-type scales, (From 1=strongly agree to 5=strongly disagree)
are used for measuring all variables except the demographics part. Both positive and negative
items were included to construct the variables of the study; negative items were reverse-
scored. Likert-type scales produce interval data, which are probably more reliable and
provide a greater volume of data than many other scales (Cooper & Schindler, 2014).

To establish the reliability of questionnaire, before launching the final survey the researcher
conducted a pre-test with ten non-sampled management members of the factories and the
projects. They were asked to give their opinion on the instruments appropriateness, which
enables to refine the questionnaire and assess the content were suitable to the study with
respect of the factories and projects context. Pre-test aims to discover ways to increase

38
participant interest, increase participants engagement to the completion of the survey,
confirm the clarity and logical flow, ensure the questionnaires composed of carefully
constructed questions, avoid ambiguity, show the duration it takes to complete it, and explore
ways to improve the overall quality of survey data (Cooper & Schindler, 2014; Kothari,
2004). The pre-test enabled the researcher to check the comprehensibility of the
questionnaire. The data collected from pre-test was converted into numerical codes to
facilitate the determination of reliability. The results of the pilot test were used to develop a
more reliable and effective data collection tool. However, the results of the pilot testing were
not included in the final analysis.

The sum of the responses to a set of multiple items is a more stable and unbiased estimate
than are responses to any single item in the set, empirically demonstrates that summated
scores derived from responses to multiple items on a Likert-type scale are more reliable than
responses to single items comprising the scale (Trochim, 2006). Hence, the study dependent
variable and one of the independent variables (Industry environment), were assessed with the
average scores of the respective response four and five response items. The other two
independent variables, internal and macro environments were assessed at further averaged
values of their respective seven and five components scales (here treated as subscales), which
are measured with average of their respective items. In addition, a principal component
analysis was conducted on the response items and the subscales, to make sure that they are
really measure their respective factors and variables

3.8. Method of data Analysis

Data from the questionnaire was, coded, labeled and tabulated preceding the data analysis.
Through editing, the researcher confirmed that all the respondents had completely marked all
the scores, that they were asked. The analysis was aimed to describe factors that affect
strategy implementation, assess whether it would be more efficient to construct composite
variables, explain overall empirical relationships among variables and to decomposed the
relationships into a series parts of separate paths concerning internal, macro and industry
environments, and strategy implementation. For this purposes, factor, descriptive, correlation
and path analyses were used. Statistical Package for Social Sciences (SPSS), ver. 21 software

39
and Linear structural Relations (LISREL), ver. 8.8 software were used to analyze and
synthesis the summarized data.

The data analysis begins with reliability and correlations analyses. The most common
method to measure reliability is internal consistency, which applies to the consistency among
the variables in a summated scale. Rule of thumb suggests that Cronbach's alpha coefficient
exceeds over .60, item-to-total correlation exceeds over .50 and inter-item correlations
exceed over .30 (Hair, Black, Babin, & Anderson, 2010).

Factor analysis is an excellent starting point for many other multivariate techniques. It
provides the researcher with two distinct, but interrelated, outcomes: data summarization and
data reduction, the basis for creating a new set of variables that incorporate the character and
nature of the original variables in a much smaller number of new variables, whether using
representative variables, factor scores, or summated scales. Data summarization makes the
identification of the underlying dimensions or factors ends in themselves. Thus, estimates of
the factors and the contributions of each variable to the factors (termed loadings) are all that
is required for the analysis. Data reduction relies on the factor loadings as well, but uses them
as the basis for either identifying variables for subsequent analysis with other techniques or
making estimates of the factors themselves (factor scores or summated scales), which then
replace the original variables in subsequent analyses. In this manner, the researcher can
benefit from both the empirical estimation of relationships and the insight into the conceptual
foundation and interpretation of the results (Hair, et al., 2010). Hence, a Factor analysis,
principal components analysis, was conducted on the response items and the subscales (see
annex 4), to assess whether it would be more efficient to retain the separate items or construct
summated scales. To use the analysis KMO- MSA (Kaiser-Meyer-Olkin Measure of
Sampling Adequacy) and Bartlett’s test for sphericity were assessed first. Varimax, An
orthogonal rotation method, was applied since it is preferred for subsequent use in the other
multivariate techniques (Hair, et al., 2010). The results show that all the factors related to
Internal Environment, Macro Environment, Industry Environment and Strategy
Implementation had a factor loading of 0.5 and above, the least was 0.58. Therefore, they
were used in the subsequent analysis.

40
Path analysis is an extension of the regression model. The main principle of path analysis is
that any correlation coefficient between two variables, or a gross or overall measure of
empirical relationship can be decomposed into a series of parts: separate paths of influence
leading through chronologically intermediate variable to which both the correlated variables
have links. Each dependent variable is regarded as determined by the variables preceding it
in the path diagram, and a residual variable, defined as uncorrelated with the other variables,
is postulated to account for the unexplained portion of the variance in the dependent variable.
Through path analysis, a simple set of equations can be built up showing how each variable
depends on preceding variables (Kothari, 2004). Path analyses are distinguished by three
characteristics: estimation of multiple and interrelated dependence relationships, ability to
represent unobserved concepts in these relationships and account for measurement error in
the estimation process and defining a model to explain the entire set of relationships (Hair, et
al., 2010). Taking into account the objectives and the smaller sample size of the study,
maximum likelihood (ML) method was applied for the parameter estimation and chi-square
test, the χ2 values relative to the degrees of freedom χ2 values, the root mean square error
approximation (RMSEA) and goodness-of-fit index (GFI) were used for assessing the overall
fit of the model. In absolute fit sense, if the p-value associated with the χ2 value is below
0.05 the model is rejected. Further, rule of thumb suggests for RMSEA a value less than or
equal to 0.06 and for GFI, a value above 0.90 is considered acceptable, and a good fit (Hu &
Bentler, 1999). The model fit indices, (Table 4.9), shows acceptable fit, chi-square 0.000, df
= 0, p = 1.00, and RMSEA (0.000). Moreover, the residuals covariance matrix, Appendix 5
shows that the values are zero.

3.9. Assumption tests and procedures

Parametric tests are more powerful than non-parametric tests, when the assumptions about
the distribution of the data are true. The tests are quite robust to departures of non-normality
so the data only needs to be approximately normally distributed. Path analyses assume that
the data follows additive linearity, multivariate normal distribution and absence of outliers
(Hu & Bentler, 1999). Hence, the data were tested for each of them (see Annex 2.)

41
3.9.1. Linearity Test

The use path analysis requires the assumptions that, there are linear additive, a symmetric
relationships among a set of variables. A linear relationship between the independent
variables and the dependent variable in the study were checked using matrix scatter. It
showed that additive linearity could be assumed.
3.9.2. Normality Test
Secondly, path analysis assumes that there is multivariate normality. To assess the
multivariate normal distribution the study utilized the Q-Q plot and One-Sample K-S
(Kolmogorov-Smirnov) test. The Q-Q plot indicates that that the variables are normally
distributed as it is randomly distributed along their lines of best fit. The output of the one
sample Kolmogorov-Smirnov test also indicates that the significant values are greater than
0.05, which confirmed that the normality of the data could be assumed.
3.9.3. Outliers Test
The other assumption for the use path analyses is that the data has no outliers. A box plot
displays the distribution information of a variable. More specifically, it displays the quartiles
of the data. If the sample contains outliers, they are displayed as data points outside the
whiskers. For this study, the box plots indicate that the data has no outliers; hence, it was
qualified to conduct the analyses.

3.9.4. Test of Sphercity and Sampling Adequacy

Before the main analysis, the KMO (Kaiser-Meyer-Olkin Measure of Sampling Adequacy)
test and Bartlett’s test for Sphericity were conducted. Rule of thumb suggests that, MSA
Should be above 0.5 and Bartlett's test hypothesis should be significant (sig. < 0.05) (Hair, et
al., 2010). The result of the tests indicates that Measure of Sampling Adequacy for all
variables is above 0.5 and Bartlett's test hypotheses are significant hence, the analyses could
proceed.

3.10. Reliability and validity

3.10.1 Reliability

The Cronbach's alpha is an appropriate measure of variance attributable to subjects and

variance attributable to the interaction between subjects and items. A greater number of items

42
in the test can artificially inflate the value of alpha and a sample with a narrow range can
deflate it (Zikmund, 2010). In addition, item-to-total correlation (items to the summated
scale) and inter-item correlation (among items) analysis was carried out to inspect the
minimum values are achieved. Pearson's correlation analysis is applied for the inspection,
since both the independent and dependent variables measured in scale level and data is
normally distributed.

Table 3.2 Reliabilities of the study variables

Variable α
Strategy implementation .85
Internal Environment .82
Macro Environment .74
Industry Environment .80
Source: Own Survey, 2020

The values of the Cronbach's alpha coefficient, shows that all the scales and subscales had
coefficients over .60. The item-to-total and inter-item correlations for sub scales and scales
(see Annex 3) appear to be adequate, with the exception of strategy, style and political/legal
forces, which were retained for further factor analysis, all the item-to-total correlation
exceeds .50 and that the inter-item correlations exceed .30. Hence, the construct reliability of
the study is in the accepted level.

3.10.2. Validity

3.10.2.1 Content validity

The instruments for the present study identified from intensive review of literature and the
scales constructed were created based on the response from the pre-test. Hence, Content
validity is assumed to exist.

3.10.2.2 Convergent validity

Convergent validity is a tool frequently employed in behavioral sciences. It involves the

degree to which two measures of constructs that theoretically should be related, are indeed
related (Trochim, 2006). In addition to item-to-total and inter-item correlations test, a
principal components factor analysis was conducted in order to test the dimensionality of all
of summated scales and establish the validity of the study scales.

43
Confirming the dimensionality of the respective items and factors, convergent validity is
accepted and considered practically significant accepted when factorial loadings are higher
than .50 (Hair, et al., 2010). The Principal Component Analysis revealed that only one
component is extracted for each variables which confirms the dimensionality of the
respective items and factors, convergent validity is accepted when factorial loadings are
higher than 0.5. In this study, all the items had a factor loads more than the threshold, with
the least having loading of 0.58 and hence retained (see Annex 4).

3.10.2.3 Discriminant validity

Discriminant validity is used to test whether measurements, which are expected to be related,
are in fact unrelated (John & Benet, 2000). It is the degree to which, two conceptually similar
concepts are distinct. The empirical test is again the correlation among measures, but this
time the summated scale is correlated with a similar, but conceptually distinct measures. The
correlation should be low, demonstrating that the summated scale is sufficiently different
from the other similar concept (Hair, et al., 2010). Pearson's correlation analysis also applied
for this inspection, if a coefficient is greater than 0.9 for two variables, they are too related
and only one is needed. Pearson's correlation coefficients of the summated scales are lower
than 0.9 (see Annex 3), providing an evidence of discriminant validity. In sum, the
measurement scales of the study are valid and constitute an appropriate measurement tool.

3.11. Research Ethics

Nevertheless, to ensure human subjects protection and to ensure that the answers are genuine
it is guaranteed that the data collected from all respondents will be confidential and to be
used only for research purpose. This is done in respect for the autonomy, freedom and
dignity of the respondents.

44
 CHAPTER FOUR

4. RESULTS AND DISCUSSIONS

4.1. Introduction
This chapter presents the findings in line with the within the framework of the study
objectives, and questions. In addition to textual description, tables, graphs and charts were
used to present the results. It begins with descriptive of respondents' demographic data
followed by, the reliability and validity test results combined with the descriptive and
correlation analyses findings. Finally, the path analyses findings are presented. The chapter
also presents the interpretations and discussions of each finding.

4.2. Response rate

The researcher aimed to collect primary data from 50 management staff of Omo Kuraz sugar
factories and projects using self-administered questionnaires, on a personal basis. In the end,
49 questionnaires were obtained, all of them were usable. It meant a response rate of 98 %,
indicated that the study findings will not be nullified. The high response rate managed to
access can be attributed to the fact that the researcher is an employee of the one of the
factories and projects being studied.

4.3 Description of respondents

4.3.1 Gender

Figure 4.1 Gender distributions of the respondents

Source: Own Survey, 2020

45
In the study, Majority 98% of the respondents were male while only 2% were female. The
organization had a fewer number of female in managerial level positions. The distribution
represents high gender unbalancing, an indication of unsuccessful efforts of various gender
mainstreaming campaigns by various stakeholders.

4.3.2 Factory/project worked by the respondents

Figure 4.2 Factory/project worked by the respondents

Source: Own Survey, 2020

Figure 4.2 presents the distribution of the Factory/project worked by the respondents. All the
four sugar factories and projects included in the study are administered by the state owned,
Ethiopian Sugar Corporation and have the same structure; here the difference on the numbers
is the reflection of the progress of the factory construction and sugar cane agriculture
expansion rate.

4.3.3 Job position of the respondents

Table 4.1 Job position of the respondents

Job position Frequency Percent

Lower-Management 33 67.3
Middle-Management 10 20.4
Top-Management 6 12.2
Total 49 100.0
Source: Own Survey, 2020

The respondents were mostly Lower level managers (67.3%), middle-level managers
(20.4%) and the remaining were top-level managers (12.2%). The described structure of

46
respondents can be regarded as very satisfactory and specifically the number of lower level
managers will fill the gap of the past studies as they were focus on middle level managers
and top level managers.

4.3.4 Department of the respondents

Table 4.2 Department of the respondents

Department Frequency Percent

General manager office 8 16
Factory operation 14 29
Agricultural operation 10 20
Service 17 35
Total 49 100.0
Source: Own Survey, 2020

The factories and projects have four departments each. The departments of the respondents
encompassed 16% General manager office, 29% Factory operation, 20% Agricultural
operation, 35% Service. As discussed in the introduction section before, the rate of strategy
implementation differs across the factories and projects, two starts operation and two are on
project phase, and three of them are agriculturally operational on sugar cane plantation, while
Omo Kuraz-five not started yet. The distribution was satisfactory, that would minimize a
potential bias due to perception of the contribution of departments on implementation.

4.3.5 Level of education of respondents

Figure 4.3 Level of education of respondents

Source: Own Survey, 2020

47
The respondents' highest level of education was majority 78% Bachelor’s degree, and 22%
Master degree. This is highly expected since the respondents are at different management
level. This indicates that the respondents were educated and quite informed and therefore
furnished this study with better information.

4.3.6 Year of service of respondents in the organization

Table 4.3 Year of service of respondents in the organization

Year of service Frequency Percent

Less than 5 Years 7 14.3
5 to 10 Years 33 67.3
10 to 15 Years 4 8.2
15 to 20 years 1 2.0
Over 20 years 4 8.2
Total 49 100.0
Source: Own Survey, 2020

The period worked in the organization helped ascertain the experience of the respondent in
their areas of work and how well the understood the environment of the organization. Most
of the respondents (67%) have been in the organization longer than 5-10 years hence are
more familiar and experienced with the GTP plan of the sugar industry.

4.4 Descriptive and Factor analyses

Descriptive statistics was used to describe basic features of the data in the study. Arithmetic
mean, average was used to analyze the data. The study also adopted factor analysis in order
to provide the basis for creating summated scales that incorporate the character and nature of
the original variables and uses them as the basis for either identifying variables for
subsequent analyses. It helps the researcher to make decisions on whether variables under
summated scales explain the dependent variable as indicators and factors or making estimates
of the original variables themselves explain the dependent variable, i.e. strategy
implementation of Omo Kuraz sugar factories and projects. Appendix 4 provides the result of
principal components factor analysis, factor loading for each indicators and factors. The
findings of the descriptive and factor analyses for each of the variables are discussed below.

48
4.4.1. Descriptive and Factor analyses of Internal Environment

Internal environment is the variable that includes seven factors; strategy, structure, Systems,
style, staff, resources, and shared values. Specific questions were asked in each of these areas
and the descriptive analysis of the variables provided as shown below (Table 4.4). Regarding
the factor analysis, the Principal Component analysis of Internal environment factors
indicated that all the seven items met the threshold value with the least value of 0.58 (see
Annex 4). Staff had a higher factor loading .85 on internal environment with an average value
of 2.8. Structure had the second highest loading .74 with a mean value of 2.9. Systems and
processes had a loading of .73 and a mean value of 2.7. Resource also had factor load of .72
on internal environment with a mean value of 2.48, Shared Value with a loading of .65 and
mean value of 3.18. Strategy had the second lowest component loading .59 with a mean
value of 3.63. Style had the lowest loading .58 with a mean value of 2.97.
Strategy is one of the internal factors, which affect performance having mean value 3.63 and
according to the mean of the response items in the factor; the alignment of factory/project
strategies with the corporate strategy has highest influence. Feasibility of the vision statement
is indicated as having the second highest influence. Several studies mention the fact that the
kind of strategy that is developed and the actual process of strategy formulation, namely, how
a strategy is developed will influence the effect of implementation. Effective implementation
is impossible if strategies are flawed, because without a clear direction and translation, lower
levels in the organization cannot put in place executable plans (Li et al., 2013, Mankins &
Steele, 2005).

Structure has a mean value of 2.9, with the second highest influence on strategy
implementation, among the internal environment factors. It fits well with the literature review
of Li et al. (2008), which several studies show that factors relating to the organizational
structure are the second most important implementation barriers. According to the response
items it is related with the response items that the organizational structure does not includes
all the jobs needed with some degrees of illogical jobs grouping and responsibility is does not
clearly assigned with accountability. Such findings also support the results of a large and
complex organizational structure requires a greater involvement of middle and operational
level managers. As shown by research results, this is a prerequisite for effective strategic

49
implementation and achievement of better results in the competitive struggle (Ogbeide &
Harrington, 2011).

Table 4.4 Descriptive Statistics of Internal Environment

Subscales and Indicators Mean S.D.
1 Strategy and purposes 3.63 1.29
Our strategy has a feasible vision 3.80 .96
The strategic goals support the mission 3.87 .95
Factory/project strategy alignment with the corporate strategy 3.20 1.26
2 Structure 2.99 .97
Organization structure does includes all the jobs needed 2.59 1.34
Jobs grouping is logical 3.39 1.03
Responsibility is clearly assigned with accountability 2.98 1.23
3 Systems and processes 2.70 .91
Budgeting system in line with every activities and tasks 2.49 1.30
Administrative system 2.88 .95
Communication among all level managers and line workers 2.71 1.22
4 Style 2.97 .83
Managers involvement in the strategy formulation process 2.86 1.10
Managers adequate leadership 2.96 1.19
Persuasion and/or participation tactics in making planned changes 3.12 .95
5 Staff 2.80 .92
Human resource strategy alignment with the strategic goals 2.71 1.02
Effectiveness in recruiting and selection of skilled employees 2.92 1.11
Employees feeling of ownership 2.77 1.31
6 Re-sources 2.48 .88
Financial resources to execute all operations 2..27 1.09
Production facilities are available 2.55 1.21
Proper usage of available resources 2.63 1.15
7 Shared values 3.18 .86
Knowledge sharing practice 2.88 1.20
Team orientation 3.49 1.10
Action orientation 3.16 1.03
Source: Own Survey, 2020

Systems and processes is also one of the internal factors, which affect performance having
mean value of 2.7. Positive associations of budgeting system in line with every activities and
tasks and excellent administrative system and communication among all level managers and

50
line workers with implementation successes were displayed by the research. There have been
stated that 60 percent of strategy implementation failures are due to ineffective
communication among executives, managers and line workers (Beer & Eisenstat, 2000). In
addition, the strategy-to-performance gap can be assigned to a combination of factors, such
as poorly formulated plans, misapplied resources, breakdowns in communication and limited
accountability for results Mankins and Steele (2005).

Style has a mean value of 2.97 and according to the response items, it is highly related with
all level managers were uninvolved in the strategy formulation process and they provide
inadequate leadership. Involving middle level managers in the original strategy formulation
can improve implementation since the middle level managers involved in the original
strategy formulation will be better at interpreting strategic intentions into action, have a
stronger personal commitment to strategic goals, and communicate the strategy more
effectively to their teams (Johnson et al., 2008). Raps (2004) also suggests when
implementing strategy, the most important facet is the top management's lack of commitment
to the strategic direction itself (Cited in Li et al., 2010).

Staff has an average value of 2.8, with the highest influence on strategy implementation,
among the internal environment factors. It is supported by Armstrong (2006) statement,
human resources are the most important aspect of an organization because they are the most
critical in achieving the goals of the organization. It is connected with the low feeling of
ownership of employees, weak alignment of human resource strategy with the strategic goals
and in effectiveness in recruiting and selection of skilled employees is resulted. It is
supported by Acquaah (2004), which argues that human resource management practices
enhance organizational effectiveness and performance by attracting, identifying and retaining
employees with knowledge, skills and abilities, and getting them to behave in a manner that
will support the mission and objectives of the organization.

Resource also has a mean value of 2.48, connected with the availability of production
facilities are available and financial resources to execute all operations and proper usage of
the available resources. It is supported by Higgins (2005) submits that management must
ensure that an organization has access to sufficient resources and Thompson and Strickland
(2003) emphasize that the proper usage of available resources is essential for successful

51
implementation. Moreover, Fleisher and Bensoussan (2015) argue that the competitiveness of
manufacturing companies depends on the availability and productivity of their production
facilities.

Shared Value count a mean value of 3.18, which can be referred to team orientation and
action orientation and knowledge sharing cultural values. According to Čater and Pučko
(2010), one of the most common culture-related problems in companies is a lack of trust,
which usually results in poor or inadequate information and knowledge sharing between
individuals and/or business units responsible for strategy implementation.

4.4.2 Descriptive and Factor analyses of Macro Environment

Macro environment is the second independent variable in this study including four factors;
political/legal, socio-cultural and technological forces. Specific questions were asked in each
of these areas and the descriptive analysis of the variable provided as shown below (Table
4.5). Regarding the factor analysis, the Principal component analysis of the macro
environment factors indicated that all the four items met the standard value with the least
value of 0.64 (see Annex 4). Economic forces had the highest loading .85 with a mean value
of 2.9. Technological forces had the second highest loading .78 on macro environment on
implementation performance with a mean value of 2.7. Socio-cultural Forces had a loading
of .74 on strategy implementation performance with a mean value of 3.1. The Political/Legal
Forces had the lowest but significant value of loading .64 on macro environment with a mean
value of 2.7.

The Political/Legal Forces have a mean value of 2.7, with the lowest influence on strategy
implementation, among the macro environment factors. However when new regulations are
adopted based on new laws, they often affect the competitive actions taken by firms (their
actions are regulated). An example is the recent global trend toward privatization of
government-owned or -regulated firms. The transformation from state-owned to private firms
has substantial implications for the competitive landscapes in countries and industries (Hitt et
al., 2009). As the factories are state owned and privatization is not yet started until the
current time, its loading effect is relatively low.

52
 Table 4.5 Descriptive Statistics of Macro Environment
Subscales and Indicators Mean S.D.
1 political/Legal Forces 2.71 .82
Free from unnecessary political interference 2.28 1.14
Government policies 3.00 1.10
Business-related laws 2.86 1.02
2 Economic Forces 2.90 .78
Careful analysis of new economic trends 2.71 1.08
Fiscal and monetary policies 2.65 1.01
Demand for product 3.35 1.05
3 Socio-Cultural Forces 3.15 .91
Assessing new socio-cultural trends 2.90 1.12
Ecological aspects 3.14 1.10
Social responsibility 3.41 1.15
4 Technological Forces 2.71 .87
Careful analyzes of technology 2.86 1.06
Adequate infrastructure to keep up with the rapid change 2.39 1.02
Influence of the internet 2.88 1.23
Source: Own Survey, 2020

Economic forces have a mean value of 2.9, with the highest influence on strategy
implementation, among the macro environment factors. Nature and direction of the economy
that the organization operates in both the national and international level management must
considered the availability of credit, the level of disposable income, the propensity of people
to spend, interest rates, inflation rates, and trends in the growth of the gross national product
among other economic factors (Barney & Hesterly, 2012; Pearce & Robinson, 2007).

Socio-cultural Forces has also a significant influence on strategy implementation with a mean
value of 3.1. this finding is supported by Pearce & Robinson, (2007); David (2015) that
small, large, for-profit, and nonprofit organizations in all industries are being staggered and
challenged by the opportunities and threats arising from changes in social, cultural,
demographic, and environmental variables (Pearce & Robinson, 2007; David, 2015).
Researchers also reveals that scanning the market for environmental issues is positively
related to firm performance because it helps management identify opportunities to fulfill
future market demand based upon environmentally friendly products or processes (Wheelen
& Hunger, 2012).

53
Technological is also the other macro environment factor, which affects strategy
implementation with a mean value of 2.7. Hitt et al. (2009) and Barney& Hesterly (2012),
confirmed that technological change is perhaps the most dynamic force shaping our destiny.
in addition Technological change creates both opportunity, as firms begin to explore how to
use technology to create new products and services, and threats, as technological change
forces firms to rethink their technological strategies.

4.4.3 Descriptive and Factor analyses of Industry Environment

Industry environment is the third independent variable in this study including five items;
industry competitors, new entrant, substitutes, suppliers and buyers. Questions were asked in
each of these items and the descriptive analysis of the variable provided as shown below
(Table 4.6). Regarding the factor analysis, the Principal Component analysis of industry
environment factors indicated that all the five items met the threshold value (see Annex 4).
Suppliers had the least value of 0.72 with a mean of 3.06, and Substitutes had the highest
value .77 and a mean value of 2.96. Industry competitors and new entrants had an equal
loading of .74 and a mean value of 3.33 and 3.06 respectively. Buyers had a loading of .72
with a mean value of 3.24.

Table 4.6 Descriptive Statistics of Industry Environment

Industry Environment Mean S.D

Industry Competitors 3.33 1.18
New Entrants 3.06 1.07
Substitutes 3.24 1.05
Suppliers 3.06 1.01
Buyers 2.96 .82
Source: Own Survey, 2020

Industry competitors count a mean value of 3.3. The intensity of rivalry among competing
firms tends to increase as the number of competitors increases, as competitors become equal
in size and capability, as demand for the industry’s products declines, rivalry also increases
when consumers can switch brands easily (David, 2015). New entrants have a mean value of
3.1. Whenever a barrier to entry is relatively high, the intensity of competitiveness among
firms decreases. Among the main barriers to entry are government regulatory policies

54
(Alkhafaji, 2003). Substitutes have a mean value of 3.2 with the highest influence among
industry environment. It is supported by if any switching costs and when the substitute
product’s price is lower or its quality and performance capabilities are equal to or greater
than those of the competing product are. Differentiating a product along dimensions, such as
price, quality, service after the sale, and location, reduces a substitute’s attractiveness (Hitt et
al., 2009). Suppliers have a mean value of 3.1. It is supported by the concept that, suppliers
can threaten the performance of firms in an industry by increasing the price of their supplies
or by reducing the quality of those supplies (Barney & Hesterly, 2012). Buyers have a mean
value of 3.0. It is supported by the concept that, consumers gain increasing bargaining power
under the following circumstances; if they can inexpensively switch to competing brands or
substitutes, if they are particularly important to the seller, if sellers are struggling in the face
of falling consumer demand (Alkhafaji, 2003).

4.4.4 Descriptive and Factor analyses of Strategy Implementation

Strategy implementation was assessed from the opinion of all level managers. The
questionnaires asked them, how they would rate the extent of their factory/project achieves in
executing strategic plan (GTP 2). The variable was a summated scale constructed from items
of the perspectives of balanced scorecard approach (Finance, Internal Process, Customer and
Learning and Growth). The descriptive analysis of the variable provided as shown below
(Table 4.7). Principal component analysis regarding Strategy implementation factors
indicated that all the four items met the standard value with the least value of 0.79 (see Annex
4). Finance and customers have the highest factor loading value of 0.85. Internal Process had
a loading value of .83, while learning growth had the lowest factor loading .79 on strategy
implementation.

Table 4.7 Descriptive Statistics of Strategy Implementation

Strategy Implementation Mean S.D

Finance 2.29 1.29

Internal Process 2.90 1.14
Customers 2.65 1.33
Learning and Growth 2.45 1.28
Source: Own Survey, 2020

55
The descriptive analysis from the managers' responses on all the four perspectives; finance,
internal process, customer and, learning and growth perspectives reflect that the strategy
implementation performance is low, with a mean value of 2.29, 2.90, 2.65 and 2.45
respectively. The finding shows that the overall extent of strategy implementation
performance of Omo Kuraz sugar factories and projects is lower with a mean of 2.57. This
result is supported by other empirical studies. Fortune magazine finds that less than 10% of
well-formulated strategies are also effectively executed. Judson (1991) and Speculand (2006)
also report identical results of just 10% of strategies being successfully implemented.
Economist Intelligence Unit and Makaron Associates (Mankins & Steele 2005) reports
slightly better but still very disappointing achievements, discovering that on average
companies deliver a mere 63% of the potential financial performance their strategies have
promised. As reported by Raps (2004) and (Cited in Li, et al., 2008).

4.5 Correlation analysis

Table 4.8 Correlations of the study variables
Variable 1 2 3 4
1. Strategy implementation performance .
2. Internal Environment .59**
3. Macro Environment .45** .76**
4. Industry Environment -.28* -.38** -.61**
Source: Own Survey, 2020

Pearson correlation coefficients showed that strategy implementation performance had a

positive and strong correlation with internal environment (α= .59), positive and moderate
correlation with macro environment (α= .45). However, it has a weak and negative
correlation with industry environment (α= -.28). The analysis also indicated that internal
environment had a strong and positive relation with macro environment (α= .76), negative
and moderate relation with industry environment (α= -.38). Finally it indicates that macro
environment and industry environment had negative and strong correlation (α= -.61). All the
mentioned values are significant at 0.01 level, except the correlation coefficient between
strategy implementation performance and industry environment which is significant at 0.05
level.

56
4.6. Path analysis
Path analysis lies in making explicit assumptions underlying the causal connections and in
elucidating the indirect effects due to antecedent variables of the given system (Kothari,
2004). The correlation between two variables decomposed into components the direct effect,
the indirect effect through an intervening variable, an unanalyzed component due to our not
knowing the direction of causation for a path, and a spurious component being caused by
some third variable or set of variables in the model.

The first step in the analysis is to define an anatomical model; a model was defined, prior
based on the theories presented in the previous chapters and sections. The next step is to use
the interregional covariances of activity to estimate the parameters of the model. The starting
values of the estimates are initially obtained using two-stage least squares, and they are
iteratively modified using a maximum likelihood fit function (Jöreskog & Sörbom,
2006).The results are presented as; Figure 4.4, standardized parameters, Table 4.9 shows
unstandardized estimates and the model fit indices, in addition Appendix 5 shows the
observed, estimated, and residuals covariance matrices. The model fit indices, showed
acceptable fit, chi-square 0.000, df = 0, p = 1.00, and RMSEA (0.000). Moreover, the
residuals covariance matrix (see Annex 5) shows that the values are zero.

Macro Environment
-.07
.83

-.61 .61 Strategy Implementation

Internal Environment

.13 -.10

Industry Environment

.64
.63 .42

Figure 4.4 Path diagram with standard estimate coefficients

57
 Table 4.9 Unstandardized estimates and model fit indices of the path analysis

Dependent variable Independent variable Parameter Estimates Std. t p

Error Value

Indirect effect
Industry Macro Environment P1P2 -.73 .14 -5.21 <0.001
Environment
Internal Environment Macro Environment P1P3 .81 .12 7.05 <0.001
Industry Environment P2P3 .10 .10 1.08 .29
Direct effect
Strategy Macro Environment P1P4 -.12 .35 -.34 .74
Implementation Industry Environment P2P4 -.13 .20 -.65 .52
Internal Environment P3P4 1.03 .31 3.36 .001
Variance
Industry Environment VarIndu .37 .08 4.85
Internal Environment VarInt .16 .03 4.85
Strategy VarImp .71 .15 4.85
Implementation
Model fit: Degrees of Freedom = 0
Minimum Fit Function Chi-Square = 0.00 (P = 1.00)
Normal Theory Weighted Least Squares Chi-Square = 0.00 (P = 1.00), RMSEA=0.000
The Model is Saturated the Fit is Perfect!

The analyses of the direct and indirect effects are explained as;

1) The direct effect indicated that, internal environment has a strong and positive influence
on strategy implementation (β= .61), However, macro environment (β= -.07) and industry
environment (β= -.10) have negative but non-significant influence on strategy
implementation.

2) The in direct effect shows that macro environment has a strong and positive effect on
internal environment (β= .83), and a strong negative influence on industry environment (β= -
.61). In addition, industry environment has positive but non-significant effect on internal
environment (β= .13)

3) The model unexplained variance is 64 %, it meant that the model explained 36 % of the
variance of strategy implementation performance.

58
There are evidences of the resulted link between internal, macro and industry environments,
and strategy implementation which supported by previous researches. Higgins (2005)
submits that Executives must align the cross functional organizational factors with the new
strategy so that the strategy opted for can succeed. He however noted that these strategies
may not be fully implemented due to changes in the organizational environment. Johnson et
al. (2008) observed that a business is a man-made system which has dynamic interplay with
various elements that include environment, competitors, customers, suppliers, labor
organizations, the government and other agencies. Pearce and Robinson (2007) suggest that
the interrelationship between the firm and its remote, its industry and its operating
environments form the basis of the opportunities and threats that a firm faces in its
competitive environment. The result of the influence of industry environments deviates from
other researches that, whenever new firms can easily enter a particular industry, the intensity
of competitiveness among firm's increases, resulting in less revenue and lower returns for
competing firms (Alkhafaji, 2003). Ethiopian sugar industry is still under the government
that International companies are restricted to join the industry; in addition, the effort of some
national private companies is still unsuccessful; it implies that rivalry competition is non-
intensive that Ethiopian Sugar Corporation is still free to operate without a competitive edge
for survival in the industry. However, according to Hitt et al. (2009), often, new entrants have
a keen interest in gaining a large market share. As a result, new competitors may force
existing firms to be more efficient and to learn how to compete on new dimensions.

59
 CHAPTER FIVE

5. CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction
This chapter presents the summary of the main findings (results) of the study and conclusions
drawn in relation to the research objectives and based on results and the discussions. It also
indicates contributions of the study to the existing practice and knowledge. It suggests
measures to be taken by managements of Ethiopian Sugar Corporation and Omo Kuraz sugar
factories, and projects and different stakeholders to improve the strategy execution practices
and knowledge. The chapter also discusses the limitation of the study and finally
recommends areas where further studies should focus.

5.2 Summary of major findings

The study sought to examine the factors that affects strategy implementation performance of
Omo- Kuraz sugar factories and specifically examined four independent variables (internal,
macro environment and industry environments) and one dependent variable (strategy
implementation performance). Factor analysis was conducted to examine the loading of all
factors on their respective independent and dependent variables, hence confirming the
dimensionality of the scales. Then descriptive, correlation and path analysis were used
achieving the aforementioned research objective.

 Internal environment analyzed from scores the respondents as having a mean value of
2.96. In terms of its specific factors, Principal Component analysis on the factors
indicated that all the seven items met the threshold value with the least value of 0.58.
Staff had a higher loading .85 on internal environment with an average value of 2.8.
Structure had the second highest loading .74 with a mean value of 2.9. Systems and
processes had a loading of .73 and a mean value of 2.7. Resource also had a factor
loading .72 on internal environment with a mean value of 2.48, Shared Value with a
loading of .65 and mean value of 3.18. Strategy had the second lowest component
loading .59 with a mean value of 3.63. Style had the lowest loading .58 with a mean
value of 2.97.

60
 Regarding of the macro environment, it also analyzed from scores by the respondents
as having a mean value of 2.87. Principal component analysis of specific factor
indicated that all the four items met the standard value with the least value of 0.64.
Economic forces had the highest loading .85 with a mean value of 2.9. Technological
forces had the second highest loading .78 on macro environment on implementation
performance with a mean value of 2.7. Socio-cultural Forces had a loading of .74 on
strategy implementation performance with a mean value of 3.1. The Political/Legal
Forces had the lowest but significant value of loading .64 on macro environment with
a mean value of 2.7.
 Industry environment analyzed from scores by the respondents as having a mean
value of 3.13. With respect to industry environment also, factor analysis was done in
order to measure the loadings of items and confirm the dimensionality of the scale,
where all the five items met the threshold value, with suppliers with the least value of
0.72 with a mean of 3.06, and Substitutes with the highest value .77 and a mean value
of 2.96. Industry competitors and new entrants had an equal loading of .74 and a
mean value of 3.33 and 3.06 respectively. Buyers had a loading of .72 with a mean
value of 3.24.
 Pearson's correlation analysis correlation coefficients showed that strategy
implementation had a positive and strong correlation with internal environment (α=
.59), positive and moderate correlation with macro environment (α= .45). However, it
has a weak and negative correlation with industry environment (α= -.28). The
analysis also indicated that internal environment had a strong and positive relation
with macro environment (α= .76), negative and moderate relation with industry
environment (α= -.38). Finally it indicates that macro environment and industry
environment had negative and strong correlation (α= -.61). All the mentioned values
are significant at 0.01 level, except the correlation coefficient between strategy
implementation and industry environment which is significant at 0.05 level.
 The result of the path analysis prevailed that that internal environment has a strong
and positive direct effect on strategy implementation. Macro environment and
industry environments showed as having, non-significant and negative direct effects.
Macro environment has a strong effect on implementation, but it does so indirectly,
61
 majorly through the internal environment. The influence of macro environment on
industry environment is strong and negative. However, industry environment has non-
significant positive impact on internal environment and non-significant negative
influence on strategy implementation.

5.3 Conclusion
Based on the summary of the major findings the following conclusions are drawn:

 The descriptive analysis from the respondents found the performance of the strategy
implementation is low. From the analysis of the direct and indirect effects, the study
concluded that a well-developed and improved internal environment could enhance
strategy implementation performance. The macro environment also has a positive
effect on implementation performance but it does so indirectly through the internal
environment. It also concluded that industry environment has non-significant and
direct positive effect on internal environment even if it has a non-significant and
direct negative effect on strategy implementation.
 Regarding the internal environment, the research concludes that strategic goals, which
are drawn from the mission and strongly, support it, feasibility of the vision, and the
alignment of business units' strategies with the corporate strategy are critical for
effective of strategy implementation. There may be also drawn a conclusion all level
managers and key subordinates should involve in the strategy formulation process. A
logical job grouping which includes all the jobs needed is mandatory. Responsibility
should clearly assigned with accountability is critical also critical for effective
strategy implementation. Administrative system which capitalize on good
communication among all level managers and line workers and which creates
budgeting system in line with every activities and tasks important for effective
strategy implementation.
 The study also confirmed that human resources are the most important aspect of an
organization. Hence, Employees need to be motivated by using both financial
monetary and non-monetary carrot and stick incentives to gain their wholehearted
commitment to good strategy execution and operation excellence, as their strengths
are essential internal business factor. It can be also stated, that the research showed
62
 that strong alignment of human resource strategy with the strategic goals is critical,
although effectiveness in recruiting and selection of skilled employees is necessary.
Managers should provide adequate leadership, and it is better to use persuasion and/or
participation tactics in making planned changes for successful strategy
implementation.
 The study also concludes that financial resources to execute all operations and the
availability of all needed production facilities are critical. However, particular
attention shall be paid, that the available resources are properly used. Based on the
study successful strategy implementation requires a good knowledge sharing practice,
team and action orientation is among our organizational cultural values.
 Regarding the macro environment, the study concluded that careful and continuous
scanning and analyzing opportunities and threats arising from changes of the
political/Legal, Economic, socio-cultural, and technological forces and taking
necessary measures are critical to effective strategy implementation. Organizations
must develop proactive strategies to deal with what others perceive to be the
organization’s social responsibility. Carefully assessing and understanding, both of
existing technology and technological advances and the probable future advances that
may affect their products and services, is critical to effective strategy. The Internet
should be exploited as a tool, which create a competitive advantage and enhance the
performance execution of strategy. However, adequate infrastructure is one of the
most prerequisite, to keep up with the rapid change.
 Ethiopian sugar industry is still under the government ownership, restricting
international companies and with unsuccessful effort of some national private
companies; it implies that rivalry competition is non-intensive that Ethiopian Sugar
Corporation is still free to operate without a competitive edge for survival in the
industry. However, the sugar market does not enjoy safeguard of sugar imports, since
the supply from the government owned factories did not covered the demand.
 Whenever new firms cannot easily enter a particular industry, the intensity of
competitiveness among firms is low due to the barriers to entry, majorly the
government regulatory policies. This study concludes that regarding new entrants the
strategist’s job were only capitalizing on the existing strengths and opportunities and
63
 which were relatively unsuccessful. However, the current intention of the government
to partially open field for privatization implies that strategist’s job will be more
difficult than before, it would include identifying potential new firms entering the
market, monitoring the new rival firms’ strategies and to counterattack as needed.
However, often-new competitors may force existing firms to be more efficient and to
learn how to compete on new dimensions.

5.4 Recommendations
Based on the major findings and conclusions drawn the following recommendations are
forwarded:

 In general, the study recommends that Omo Kuraz sugar factories needed an intensive
effort to develop and improve the internal environment before the gap between the
predetermined objectives and actual implementation performance level is getting into
an irreversible stage.
 The study recommends; future implementation shall be preceded by extensive
feasibility study. The alignment of; strategic goals to mission, business units'
strategies to the corporate strategy, human resource strategy to the strategic goals
shall be reconsidered. It is also recommends that, all level managers and key
subordinates should involve in the strategy formulation process.
 Regarding of the structure, grouping of jobs should be done on a detailed study.
Clearly defined responsibility with accountability should be assigned for each job
position. The researcher recommends that, for the purpose of using resources
efficiently and to avoid shortage of skilled personnel in different areas, the structure
of the factories in Omo Kuraz should be revised. With respect of all, (four) Omo
Kuraz sugar factories and projects, the matrix structure is better, that resources can be
used effectively and it may avoid unnecessary duplication of specialist in the
company. Each factory can use the resources of the other factory without much
interference.
 The study also recommends the adaptation and implement of contemporary
information systems for all areas, to enhance the communication gap and to make
decision based on timely, accurate and reliable information. Administrative system
64
 which capitalize on good communication among all level managers and line workers,
on budgeting system in line with every activities and tasks, and on strong internal
monitoring and control system which will inform policies and procedures for
effective strategy implementation.
 Firm’s resources are extremely important for the firm’s development, and that
human capital is a key resource of a firm. The function of this resource depends on
the employees’ ability and enthusiasm, and on efficient human resource
management.
 The study also recommends that human resource strategy practice, the training of
the employees, motivation and effective appraisal and control should need to be
developed. Employees need to be motivated by using both financial monetary and
non-monetary carrot and stick incentives to gain their wholehearted commitment to
good strategy execution and operation excellence, as their strengths are essential
internal business factor. It is better to build knowledge management system and
intensive training and development shall be done on effectiveness of recruiting and
selection of skilled employees. It also recommended that all level managers and
employees should be selected based on the fulfillment of the necessary requirements
for their position Training should be needs based and aimed at building core
competencies that facilitate strategy implementation. Managers should provide
adequate leadership, and it is better to use persuasion and/or participation tactics in
making planned changes.
 The study also recommends that the required financial resources shall provide by the
government based on detail research on return rate and payback period. In addition,
evaluation and control shall be done, that the available resources are properly used.
The study recommends for successful strategy implementation, there should culture
strategy compatibility that encourages communication and sharing of ideas between
the management and the subordinates. Based on the findings, the study recommends
that the management of sugar companies should consider teamwork, coaching,
employee recognition and feedback through regular meetings in their strategy
execution efforts. The study recommends sugar companies to create awareness about
vision and mission, strategic objectives, goals, tactics and tasks, to celebrate
65
 achievement of milestones and recognize highly achieving employees in strategy
implementation.
 In general regarding of the macro environment the researcher recommends that the
sugar factories to develop proactive strategies, which helps to carefully and
continuously scan and analyze opportunities and threats arising from changes of the
political/Legal, Economic, socio-cultural, and technological forces and to act
accordingly for effective strategy implementation.
 The researcher believes that now a day's sugar is a political commodity in Ethiopia
that the government gives extra emphasis on the sugar industries. The demand of
sugar is rising and the current sugar factories still cannot cover it. The government of
Ethiopia seems partially open the field for privatization; it meant that some will
continue as it is and some will be privatized, hence new rules of the game will
emerge. The researcher recommends that the sugar factories should make them self-
ready in different areas and aspects for the future competition.
 Ethiopia had one of the highest growing economies in the world during the last few
years and the agricultural based economy is on the way to be replaced by the
industrial based economy, which implies many industries will appear and it will
change the trend of the structure, systems and resource of the sugar industry in
many ways. The study recommends that sugar factories and the projects should
continuously asses the economic force and respond accordingly.
 Since sugar industry needs a lot of land and in the case of Omo Kuraz the land is
inhabited by the pastorals', it is a fact that further expansion of sugar cane plantation
will lead to further displacement of people. Hence, a great effort is needed to fulfill
their needs and change their perception towards the factories and the project. The
researcher recommends that Social responsibility should be the main part of the
strategy that the factory should employee them more and trained them more in
different sectors, increase the coverage of potable water to them and their cattle's,
building more schools for their children's, enhance public and animal health services
and increase the coverage of infrastructure. Simultaneously the nearby societies
shall be trained to grow sugar cane and supply the factory since out growers can
increase efficiency of the factory and get them a good income.
66
 The increase in the number of technological alternatives or innovation in business
functions creates a positive image for firms, which further increase its revenues and
image in the market. Different countries are still doing extensive researches to
optimize the processing of sugar that will decrease their cost of production, which in
turn increase their profit, Harvesting of sugar cane in Ethiopia is done manually and
it is not feasible during the rainy seasons. The researcher recommends that
mechanization should be developed and adopted to achieve the goal of the industry.
The researcher also recommends our sugar factories should give particular emphasis
on research and development areas. For this purpose, the sugar industry must work
with institutions, which focus on different fields of the industry. Further
technological innovations, which improve the factories performance, shall be highly
recognized
 The researcher recommends that the Internet should be exploited as a tool, which
create a competitive advantage and enhance the execution of strategy. However,
adequate infrastructure is one of the most prerequisite, to keep up with the rapid
change. Information system is one of the ingredients of successful industries in the
world that the researcher recommends that the sugar factories and projects should
start applying different types of information system for all management levels and
departments (Transaction processing systems, Management information systems,
Decision support systems and Executive information systems).
 The researcher also suggests the government shall continue its plan of paradigm shift
to privatization, as the loan of the corporation reached over 4.6 billion dollars
(including 2.1 billion dollars from foreign creditors), that some amount of injection of
new entrant will not badly affect the existing factories performance unless they are
not improving the internal environment. The sugar factories and projects shall prepare
themselves to have a competitive advantage over future rivals in the industry and to
satisfy customers who are important in the business, hence future strategic plans of
ESC could better to overemphasized and include competitive advantages in terms of
price, quality, promotion, and service.

67
5.5 Contributions of the Study
5.5.1 Theoretical Implications

This study has made several important contributions to strategy implementation and its
performance. First, confirms the existing literature in terms of the positive effect of internal
environment and strategy implementation performance. Seven key interrelated elements are
important, i.e. strategy, structure, system and process, style, staff, resources and shred values.
Secondly, this study confirms existing literature in terms of the positive effect of macro
environment and strategy implementation, confirming that organizations must be alert on
scanning and analyzing of the macro environment factors, which are usually beyond their
control; however the impact can be absorbed through improving the internal environment.
Scholarly research has clearly examined the link between external environment and strategy
implementation. This study has tried to combine enhanced Higgins 8S model, the systems
theory, resource based view theory (RBV) and Porter’s Five Forces of Competition
Framework, as well as other related studies on strategy implementation, even if it must be
tested by a larger sample again. Although strategy implementation is a complex
organizational process that still requires further research, one of the related contributions of
this study is that it allows us to improve our understanding of the process of executing
strategy implementation.

Finally, the relationship between industry environment and strategy implementation

performance is low and not significant. This result confirms that, often, new entrants have a
keen interest in gaining a large market share. As a result, new competitors may force existing
firms to be more efficient and to learn how to compete on new dimensions (Hitt, et al.,2009).
This finding does not imply that industry environment factors are not important, but it reveals
that they are not predominant in influencing those particular sugar industries.

5.5.2 Practical Implication

Further to an academic contribution, the study also has interesting implications for practice.
It shows managers and strategist should rely on improving the internal environment,
however, they have to carefully and continuously scan and analyze the various factors of the
Macro and industry environments and incorporate them into strategy implementation.

68
Managers need to be proactive and agile. The results also suggest that the all-level managers
should participate in strategy formulation stage, and the feasibility of the vision should be
studied well. Communication throughout the factories and projects and decision making by
management shall be improved and supported by management information systems. The
results also examined staff and suggest, improving the human resource strategy practice,
especially the motivation of employees. In addition, planned changes should be carried out
with persuasion and/or participation. The results also examined the resources and suggest
that evaluation and control shall be done, that the available resources are properly used. The
study also has an implication that the sugar factories to facilitate team and action orientations
celebrate achievement of milestones and recognize highly achieving employees in strategy
implementation.

5.6 Limitation and Future research

The results presented here should be viewed in light of the following limitations. First, the
sample size was relatively small since the population size was small relative to the study
variables and the time and budget constraints that it might have best been estimated with a
confirmatory analysis for each factors hence structural equations model approach can be
used. This limited the study’s generalizability for other sugar industries. A study on greater
sample could provide stronger relationships.

The study focused on Ethiopian Sugar Corporation, specifically Omo Kuraz sugar factories
and projects. Subsequent studies should consider examining this study to other sugar
factories and projects. Secondly, future research may attempt to study in different sectors to
examine the effect of internal, macro and industry environments on strategy implementation
performances. Thirdly, the study was done on a summated scales based on exploratory factor
analysis. Other studies should consider testing it by increasing the sample size and utilize a
confirmatory factor analysis followed by structural equation model to describe and explain
factors affecting strategy implementation. Finally, Subsequent studies should also consider
examining strategy implementation on the perspectives of both management and
subordinates.

69
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 APPENDICES

Appendix 1: Questionnaire

Dear Sir/Madam,
Dear respondent,

I am a Masters of Business Administration student at Arba Minch University. One of the

requirements of the award of the degree would be to write a thesis in an area of my studies. I
have chosen the sugar industry with a topic, "Factors Affecting Implementation of Strategy, A
Case of Omo Kuraz Sugar Factories”.

This questionnaire is meant to collect data from the factories and projects managerial level
employees. The data collected will be used for academic purpose. You will not be identified
personally and your responses will be kept confidential. Your sincere and genuine response is
extremely important and encouraged to make the study fruitful.

Thank you in advance.

Abenezer Teferi

Demographic Information

1. Gender: Male Female

2. Education level: ___________________
3. Factory/project: Omo Kuraz 1 2 3 5
4. Department: ______________________
5. job/position level: __________________
6. Length of service at ESC: ____________

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Part 1: Strategy Implementation

 The following items used in assessing strategy implementation performances. Please

indicate to what extent your factory/project achieves in executing strategic plan (GTP 2),
based on the following perspectives. The responses are rated as:
(5= very high 4= high 3= Neutral 2= low 1= very low)
perspective 5 4 3 2 1
1 Finance
2 Internal Process
3 Customer
4 Learning and Growth

 The following (part 2, 3 & 4) items are used to assess that the effect of the internal, the
macro and the industry environments on implementation of strategic plan. Read the
statements carefully and rate your level of agreement with the statements. The responses
are rated as:
(5= strongly agree 4= Agree 3= Neutral 2= Disagree 1=strongly Disagree)
Part 2: Internal Environment

Strategy and purposes 5 4 3 2 1

1 Our strategy has a feasible vision
2 The strategic goals support the mission
3 Factory/project strategy misaligned with the corporate strategy
Structure 5 4 3 2 1
1 Our organization structure does not includes all the jobs needed
2 Jobs grouping is logical
3 Responsibility is clearly assigned with accountability
Systems and processes 5 4 3 2 1
1 We have a budgeting system in line with every activities and tasks
2 We have excellent administrative system
3 We have poor communication among all level managers and line workers
Style 5 4 3 2 1
1 Managers (all level) uninvolved in the strategy formulation process
2 Managers provide inadequate leadership
3 Persuasion and/or participation tactics are used in making planned changes
Staff 5 4 3 2 1
1 Our human resource strategy is well aligned with the strategic goals
2 We are effective in recruiting and selection of skilled employees
3 Our employees have low feeling of ownership
Re-sources 5 4 3 2 1
1 There is a shortage of financial resources to execute all operations
2 All needed production facilities are available
3 All available resources are properly used

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 Shared values 5 4 3 2 1
1 We have good knowledge sharing practice
2 Team orientation is one of our value
3 Action orientation is among our organizational cultural values

Part 3: Macro Environment

political/Legal Forces 5 4 3 2 1
1 There is unnecessary political interference in the sugar sector
2 Government policies improve our strategy execution
3 Government business-related laws hinder our execution success
Economic Forces 5 4 3 2 1
1 Our organization carefully analyzes new economic trends
2 We get sufficient credit to execute our strategy
3 The demand for our product enhance our execution
Socio-Cultural Forces 5 4 3 2 1
1 Our organization is active in assessing new socio-cultural trends
2 Our activities are not influenced by ecological aspects
3 Our organization is highly social responsible
Technological Forces 5 4 3 2 1
1 Our organization analyzes technology substitutes that are in current use
2 We have adequate infrastructure to keep up with the rapid change
3 The Internet create an opportunity for our organization

Part 4: Industry Environment

Industry Environment 5 4 3 2 1
1 The competition in the industry is intense
2 New firms can easily join the industry
3 There are substitute products substitutes in the market
4 The bargaining power of our suppliers is low
5 Our buyers power is relatively higher to make demands on our company

Any other suggestions that you think relevant for the study

…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
……………………

Thank you very much for your kind cooperation and sparing your valuable time.

77
APPENDIX 2: Assumption Test Results

Matrixes scatter Plot of the variables

Normal Q-Q plots of the variables

One-sample K-S tests of Normality

Strategy Internal External Industry

Implementation Environment Environment Environment
Performance
Kolmogorov-Smirnov Z .769 .568 .475 .706
Asymp. Sig. (2-tailed) .595 .904 .978 .700

Box plots of the variables

Box plots of the variables

78
 KMO and Bartlett's Test

Strategy Internal Macro Industry

Implementation Environment Environment Environment
Performance
Kaiser-Meyer-Olkin Measure .744 .752 .641 .817
of Sampling Adequacy
Bartlett's Approx. Chi- 87.197 108.578 53.376 62.781
Test of Square
Sphericity df 6 21 6 10
Sig. .000 .000 .000 .000

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 APPENDIX 3: Reliabilities and Correlations of the study subscales

α Correlation between the study variables

Internal Environment 1 2 3 4 5 6 7
1. Strategy .67 (.46) . .
2. Structure .73 .41** (.61)
3. Systems .67 .41** .45** (.60)
4. Style .65 .14 .35* .42** (.45)
5. Staff .71 .49** .46** .50** .41** (.75)
6. Re-sources .65 .27* .54** .43** .30* .59** (.58)
7. Shared values .66 .23 .36* .32* .32* .62** .31* (.50)

Macro Environment 1 2 3 4
1. political/Legal .63 (.43)
2. Economic .61 .32* (.66)
3. Socio-Cultural .73 .47** .46** (.53)
4. Technological .69 .26 .69** .32* (.50)

Industry Environment 1 2 3 4 5
1. Industry Competitors (.58)
2. New Entrants .45 (.57)
3. Substitutes .50 .39 (.61)
4. Suppliers .40 .42 .48 (.56)
5. Buyers .40 .50 .47 .41 (.59)

Strategy Implementation 1 2 3 4
1. Finance (.72) . .
2. Internal Process .73** (.68)
3. Customers .60** .53** (.72)
4. Learning Growth .50** .48* .68** (.64)
N = 49, Item to Total correlation coefficients are shown on the diagonal.
**. Correlation is significant at the 0.01 level (2-tailed,) *. Correlation is significant at the 0.05 level (2-tailed).

Source: Own Survey, 2020

80
APPENDIX 4: Validity Test Results

Component Matrixes of the study variables

Strategy Implementation Internal Environment Macro Environment Industry Environment

Performance
Component Component Component Component
1 1 1 1
Finance .85 Strategy .59 Political/Legal .64 Industry competitors .74

Internal process .83 Structure .74 Economy .85 New entrant .74

Customers .85 System .73 Socio/Culture .74 Substitutes .77

Learning & Growth .79 Style .58 Technology .78 Suppliers .72

Staff .85 Buyers .75

Resource .72

Shared Value .65

Extraction Method: Principal Component Analysis
a. 1 components extracted

Component Matrixes of the study Macro Environment subscales

Subscales and Indicators Component

1 political/Legal Forces 1
1.1 Unnecessary political interference in the sugar sector .76
1.2 Influence of government policies .77
1.3 Influence of business-related laws .74
2 Economic Forces
2.1 Careful analysis of new economic trends .81
2.2 Fiscal and monetary policies .65
2.3 Demand for product .78
3 Socio-Cultural Forces
3.1 Assessing new socio-cultural trends .87
3.2 Influence of ecological aspects .72
3.3 Social responsibility .82
4 Technological Forces
4.1 Careful analyzes of technology .76
4.2 Adequate infrastructure to keep up with the rapid change .84
4.3 Influence of the internet .76

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Component Matrixes of the study Internal Environment subscales

Subscales and Indicators Component

1 Strategy and purposes 1
1.1 Our strategy has a feasible vision .80
1.2 The strategic goals support the mission .85
1.3 Factory/project strategy alignment with the corporate strategy .707
2 Structure
2.1 Organization structure does includes all the jobs needed .58
2.2 Jobs grouping is logical .81
2.3 Responsibility is clearly assigned with accountability .60
3 Systems and processes
3.1 Budgeting system in line with every activities and tasks .69
3.2 Administrative system .84
3.3 Communication among all level managers and line workers .82
4 Style
4.1 Managers involvement in the strategy formulation process .71
4.2 Managers adequate leadership .82
4.3 Persuasion and/or participation tactics in making planned changes .76
5 Staff
5.1 Human resource strategy alignment with the strategic goals .73
5.2 Effectiveness in recruiting and selection of skilled employees .87
5.3 Employees feeling of ownership .78
6 Re-sources
6.1 Financial resources to execute all operations .79
6.2 Production facilities are available .75
6.3 Available resources are properly used .74
7 Shared values
7.1 knowledge sharing practice .83
7.2 Team orientation .78
7.3 Action orientation .68

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Appendix 5: Observed, Estimated and Residuals Covariance Matrix

1 2 3 4
(A) Observed Covariance Matrix
1. Strategy Implementation Performance 1.10
2. Internal Environment .38 .38
3. Industry Environment -.23 -.18 .58
4. Macro Environment .30 .30 -.29 .40
(B) Estimated Covariance Matrix

.38
-.23 -.18
.30 .30 -.29
(C) Residuals: Observed Minus Estimated Covariances

.00
.00 .00
.00 .00 .00
N=49

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