effects of strategy evaluation on - USIU-Africa

EFFECTS OF STRATEGY EVALUATION ON

ORGANIZATIONAL PERFORMANCE: A CASE OF

CENTRE STAR COMPANY LIMITED

BY

ABDALLA YUSUF IBRAHIM

UNITED STATES INTERNATIONAL UNIVERSITY-

AFRICA

SPRING 2015

EFFECTS OF STRATEGY EVALUATION ON

ORGANIZATIONAL PERFORMANCE: A CASE OF

CENTRE STAR COMPANY LIMITED

BY

ABDALLA YUSUF IBRAHIM

A Research Project Report Submitted to Chandaria School of

Business in Partial Fulfillment of the Requirement for the

Degree of Masters of Business Administration (MBA)

UNITED STATES INTERNATIONAL UNIVERSITY-

AFRICA

SPRING 2015

ii

STUDENT’S DECLARATION

I, the undersigned, declare that this is my original work and has not been submitted to any

other college, institution or university other than the United States International

University in Nairobi for academic credit.

Signed: ________________________ Date: _________________________

Abdalla Yusuf (ID:628111)

This research project proposal has been presented for examination with my approval as

the appointed supervisor.

Signed: ________________________ Date: _________________________

Dr. Katuse Paul

Signed: _______________________ Date: _________________________

Dean, Chandaria School of Business

iii

COPYRIGHT

All rights reserved; no part of this work may be reproduced, stored in a retrieval system

or transmitted in any form or by any means, electronic, mechanical, photocopying,

recording or otherwise without the express written authorization from the writer.

Abdalla Yusuf © 2015

iv

ABSTRACT

The purpose of the study was to determine the effects of strategy evaluation on

organizational performance. The study was guided by the following research questions;

What are the approaches to strategy evaluation at Centre Star Company Limited? What

are the effects of strategy evaluation on performance at Centre Star Company Limited?

How can strategy evaluation be enhanced at Centre Star Company Limited?

The study employed a descriptive research approach. The population for this study

comprised of all the 200 staff members at Centre Star Company stratified in

departments; administration, logistics, operations and sales & marketing. The study used

a stratified random sampling approach to select 30% (60) of the 200 employees to

participate in the survey. The data collection was carried in March 2015.

The first research objective sought to identify the approaches adopted at CSC in strategy

evaluation. The study identified four approaches to Strategy evaluation at CSC to enhance

performance of the organization. First, the strategy objectives must be consistent to the

overall organizational objectives, organizational culture, organizational operations and

organizational spending patterns. Second is the suitability of the strategy to effectively

exploit the opportunities in the organization’s environment, avoid threats in the

organization’s environment, avoid the organization’s weaknesses and to address the

cultural and political context of the organization. Third, is the feasibility of implementing

the strategy in line with the availability of the required employee expertise, raw materials,

operating systems, and operating cash flows. Fourth, is the acceptability of the strategy by

having the ability to increase dividend development, decrease cost of income ratio,

increase residual value/net income, reduce investor risk and increase shareholder value.

The second study objective sought to identify the effects of strategy evaluation at CSC.

First, the study showed that strategy evaluation at CSC facilitates organizational direction

setting at it ensures compliance to organizational vision, streamline operations to specific

objectives, targets correcting strategic directions and establishes common tactics and

purpose. Secondly, strategy evaluation results helps in inspiring and motivating employee

at CSC as it enables employees measure their performance; helps employees in

determining the nature of adjustments needed; helps employees relate their objectives to

that of the organization; good results inspires hard work; and the information inspires

better work. Third, strategy evaluation at CSC is used as a tool for benchmark with other

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industry players. The evaluation is used to compare performance or peers; compares

performance to industry standards; compares performance among deportments; and

compares performance between strategies. Finally, strategy evaluation results helps in

legitimizing the use of strategy at CSC. The evaluation results legitimize management’s

actions in the eyes of the shareholders; customers; government and the general public.

The third study objective sought to highlight strategies for enhancing strategy evaluation

at CSC. The study showed that there is a well-established strategy evaluation culture at

CSC. There is common drive for strategy evaluation; well-established procedures for

strategy evaluation; deliberate effort to seek information on strategy performance;

established responsibilities for evaluation performance; and regular informed demand for

results of information. Second, CSC has well established organizational capacity that

enhances strategy evaluation. There is effective organizational capacity in designing,

implementing and managing strategy evaluation process; there is capacity in accessing,

building and using evaluative knowledge; continuous learning, improvement and

accountability; awareness and support for strategy evaluation; knowledge and evaluative

thinking; integrating evaluation into practice; and capability towards positive change.

Third, there is sufficient organizational support for strategy evaluation at CSC. This was

demonstrated by sufficient finances, time, technological support, top management’s

commitment, supportive organizational incentives, and built in learning systems for

strategy evaluation. Lastly, there are appropriate strategy evaluation methods at CSC

which supports the strategy evaluating efforts. The organization uses a mix of financial

ratios, systematic analysis, shareholder value and customer/process learning and growth.

The study recommends that, it would be strategic for the organization to have strategies

that are completely consistent with the organizational overall strategic direction for

enhanced performance. The study also calls for re-evaluation of the strategies and their

alignment to the overall organizational goals. Still the study calls for sstrengthening of

evaluation enhancing strategies. Finally, broadening the scope of the study considering

other organizations within the sector are much welcome.

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ACKNOWLEDGEMENT

My appreciation goes to Prof. Katuse Paul for his for guidance and suggestions during

this research. His insights were very valuable in making this work a success. I would also

like to appreciate my family for their support and encouragement.

vii

DEDICATION

I dedicate this work to my family who has always been a source of motivation in all that I

do. Especially my dad Mr. Yusuf Ibrahim Ismail who has always been my side and

motivating me. My beautiful wife Salma Abdi Ali who has ensured I always have quite

environment in the house and providing me with the required support and my children for

being my source of motivation. My final dedication goes to my small brother Abdirizak

Yusuf who always ensured he stood in for me at workplace so that I had time to complete

my research.

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TABLE OF CONTENTS

STUDENT’S DECLARATION .................................................................................... ii

COPYRIGHT ............................................................................................................... iii

ABSTRACT .................................................................................................................. iv

ACKNOWLEDGEMENT ............................................................................................ vi

DEDICATION ............................................................................................................. vii

LIST OF ABBREVIATIONS ....................................................................................... x

LIST OF TABLES........................................................................................................ xi

LIST OF FIGURES ..................................................................................................... xii

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

1.0 INTRODUCTION ................................................................................................... 1

1.1 Background of the Problem .................................................................................... 1

1.2 Statement of the Problem ....................................................................................... 4

1.3 Purpose of the Study .............................................................................................. 5

1.4 Research Questions ................................................................................................ 5

1.5 Importance of the Study ......................................................................................... 5

1.6 Scope of the Study ................................................................................................. 6

1.7 Definition of Terms ................................................................................................ 6

1.8 Chapter Summary .................................................................................................. 7

CHAPTER TWO ........................................................................................................... 8

2.0 LITERATURE REVIEW ........................................................................................ 8

2.1 Introduction ........................................................................................................... 8

2.2 Approaches to Strategy Evaluation ......................................................................... 8

2.3 Effects of Strategy Evaluation on the Organizational Performance ....................... 12

2.4 Strategies for Enhancing Strategy Evaluation ....................................................... 16

2.5 Chapter Summary ................................................................................................ 20

CHAPTER THREE..................................................................................................... 21

3.0 RESEARCH METHODOLOGY .......................................................................... 21

3.1 Introduction ......................................................................................................... 21

3.2 Research Design................................................................................................... 21

3.3 Population and Sampling Design .......................................................................... 21

3.4 Data Collection Method ....................................................................................... 23

ix

3.5 Research Procedure .............................................................................................. 24

3.6 Data Analysis Method .......................................................................................... 24

CHAPTER FOUR ....................................................................................................... 25

4.0 RESULTS AND FINDINGS ................................................................................. 25

4.1 Introduction ......................................................................................................... 25

4.2 Demographic Characteristics of the Respondents ................................................. 25

4.3 Approaches to Strategy Evaluation ....................................................................... 28

4.4 Effects of Strategy Evaluation .............................................................................. 31

4.5 Strategies for Enhancing Strategy Evaluation ....................................................... 34

4.6 Chapter Summary ................................................................................................ 38

CHAPTER FIVE ......................................................................................................... 39

5.0 DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS ..................... 39

5.1 Introduction ......................................................................................................... 39

5.2 Summary.............................................................................................................. 39

5.3 Discussions .......................................................................................................... 41

5.4 Conclusions ......................................................................................................... 46

5.5 Recommendations ................................................................................................ 48

REFERENCES ............................................................................................................ 49

APPENDICES ............................................................................................................. 54

Appendix A: Cover Letter .......................................................................................... 54

Appendix B: Questionnaire ........................................................................................ 55

x

LIST OF ABBREVIATIONS

CSC Centre Star Company

xi

LIST OF TABLES

Table 3.1: Study Population………………………………………………………….…..22

Table 3.2: Sample Size……………………………………………………………...……23

Table 4.1: Length of Service……………………………………………………….…….27

Table 4.2: Highest Education Level…………………………………………………...…27

Table 4.3: Position within the Organization……………………………….……………..28

Table 4.4: Factor Analysis for Approaches to Strategy Evaluation……………………...29

Table 4.5: Cronbach’s Alpha Analysis for Approaches to Strategy Evaluation…………30

Table 4.6: Approaches to Strategy Evaluation…………………………………………...30

Table 4.7: One-Way Analysis of Variance on Approaches to Strategy Evaluation by

Department……………………………………………………………………………….31

Table 4.8: Factor Analysis for Effects of Strategy Evaluation…………………………...32

Table 4.9: Cronbach’s Alpha Analysis for Effects of Strategy Evaluation………………33

Table 4.10: Effects of Strategy Evaluation………………………………………………33

Table 4.11: One-Way Analysis of Variance on Effects of Strategy Evaluation by

Department………………………………………………………………………………34

Table 4.12: Factor Analysis for Enhancing Strategy Evaluation………………………...35

Table 4.13: Cronbach’s Alpha Analysis for Enhancing Strategy Evaluation……………36

Table 4.14: Enhancing Strategy Evaluation……………………………………………...36

Table 4.15: One-Way Analysis of Variance on Enhancing Strategy Evaluation by

Department……………………………………………………………………………….37

xii

LIST OF FIGURES

Figure 2.1: Framework for StrategyEvaluation……………………………………………8

Figure 4.1: Response Rate………………………………………………………………..25

Figure 4.2: Gender………………………………………………………………………..26

Figure 4.3: Age…………………………………………………………………………...26

Figure 4.4: Department…………………………………………………………………...26

1

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Problem

The basic premise of strategic management is that the chosen strategy will achieve the

organization's mission and objectives as planned. In practice, this may not be the case due

to complexities as well as rapid and unpredictable changes in the business environment

(Gianos, 2013). Therefore, a business needs to review its strategic choices and

continuously make adjustments in order to maintain fit with the changing environment.

This is achievable through systematic review, evaluation and controlling of the

implementation of strategies because the best formulated and well-implemented strategies

become valueless as the business environment changes (Dubihlela & Sandada, 2014). The

need for such re-examination of past assumptions, the comparison of actual results with

earlier hypotheses have since become common features of strategic management.

According to Strydom (2011), strategy evaluation and control inform the managers about

the reasons leading to the failure to meet a certain objective, performance standard and/or

any other performance indicator. In this sense evalaution is used as strategic learning tool

and has continued to to play a role in strategy formulation and implementation. Despite

this, there still lacks clear understanding on the role played by evaluation. Preskill and

Mack (2013) lament that in many organizations, the meaningfulness and usability of

evaluation information has been limited because of its disconnection from strategic and

organizational-level decision making. They posit that if learning and evaluation efforts

are to inform an organization’s decision making practices, then there needs to be a

comprehensive strategy for evaluating the strategy itself and the organization’s

effectiveness.

They continue that this requires “a clear vision for evaluation; a culture that fosters

individual, group,and organizational learning; a compelling and cogent strategy;

coordinated evaluation and learning activities; and a supportive environment and when

these elements are fully implemented, they work together to ensure that learning and

evaluation activities reflect and feed into the organization’s latest thinking. In this

context, evaluation can help answer the most pressing questions of leadership and staff”

(Preskill & Mack, 2013, pg. 6).

2

Strydom (2011) proposed a four stage approach to strategy evaluation and control.

Dubihlela and Sandada (2014) expounded on the proposed stages by Stydom to include;

constant revision and updating of the strategy to meet the environmental conditions;

setting of standards to be met in order to achieve goals; evaluating performance of

employees through performance appraisals in order to ascertain if everyone is performing

as required; preventing problems and crises through proactive planning. This suggestion

is in line with earlier sentiments by Pearce and Robinson (2005) who indicated that, to be

effective, control systems need to follow four steps; setting standards of performance,

measuring actual performance,identifying deviations from set standards and initiating

corrective action.

Gavrea, Ilies and Stegerean (2011) present chronological view on the concept of

organizational performance and its evolution over time. They posit that in the 1950s, the

concept was seen as the extent to which organizations, then viewed as a social system,

fulfilled their objectives. During this time the performance evaluation focused on work,

people and organizational structure. In the 1960s and early 1970s, the perception shifted

to an organization's ability to exploit its environment for accessing and using the limited

resources.

Nineteen eighties and 1990s saw the realization that an organization is successful if it

accomplishes its goals (effectiveness) using a minimum of resources (efficiency). Thus,

the view that a successful organization is that which achieves its performance objectives

based on the constraints imposed by the limited resources. Hence, profit arose as one of

the performance indicators (Gavrea, Ilies, & Stegerean, 2011).

The foregoing study adopts definition by Lebans and Euske (2006) which sees

organizational performance as a set of financial and non-financial indicators which offer

information on the degree of achievement of objectives and results. The objective of

which may be short term, long term or strategic in nature.Hence, while it is acknowledged

that the identification of strategic issues and, strategy analysis and selection facilitates the

achievement of efficient allocation of resources, sustainable competitive advantage, and

improved innovation, it is also critical to take into account the development of

implementation programmes, evaluation and control systems which facilitates smooth

execution and implementation of the planned tasks (Arasa & K'Obonyo, 2012).

3

In Kenya, many companies are constantly re-evaluating their strategies due to increased

competition, dynamic business environment and rapid changes in customer demands to

achieve their goals and objectives (Kathuni & Mugenda, 2012). The evaluations are

mostly aimed at achieving integrated businesses which are operationally and strategic

efficient.

Centre Star Company Limited is a civil engineering and building construction company

founded in 2004 and based in Nairobi, Kenya. The company endeavors in professionalism

and continuity that enables it to provide attractive, functional, cost effective products and

services (CSC, 2014). The orientation of the organization towards continued learning has

seen the organization adopt dynamic strategies focusing on the market fluidity and

changes. Therefore to effectively mange the dynamic customer demands in the

construction industry, the company needs a constinous monitoring and evaluation of its

strategies for effective alignment of these strategies to both internal and external

demands.

Center Star Company is categorised as a small to medium enterprise comapny-SME. This

sector of the economy is unique in that competition is often intense for SMEs e.g. many

are small suppliers in near perfectly competitive markets and are unable to influence price

or quantity; the contingent, and standard view, of competitiveness where firms compete

on cost or differentiation is problematic for SMEs since they are unlikely to be able to

lock in customers and suppliers, build barriers to entry, or significantly lower costs

(Duhan, Levy, & Powell, 2005).

SMEs also suffer from limited access to resources, and a lack of expertise on the part of

the owner/manager. Thus, strong business strategies become inevitable for SME’s

performance (Kishore, Majumdar, & Kiran, 2012). It is thus necessary for the SMEs to

take a step back and evaluate work plans, as well as capacity acquisition processes and

enabling technology and determine a strategy that works for the organization.

The current study intends to identify how strategy evaluation impacts on the

organization’s performance. It will seek to identify the evaluation approaches adopted in

the evaluation of the institutiuon’s strategy as well as come up with suggestions on how

to enhance the evaluation process.

4

1.2 Statement of the Problem

The need for organizations to continuously review their strategic choices and make

adjustments in order to maintain a fit with the environment through a systematic review,

evaluation and controlling of the implementation of strategies has been widely

acknowledged in literature. This is critical since the best-formulated and well-

implemented strategies become valueless as the business environment changes (Dubihlela

& Sandada, 2014). Hence, the need for such re-examination of past assumptions, the

comparison of actual results with earlier hypotheses has since become common features

of strategic management.

Arasa and K'Obonyo (2012) posit that strategy evaluation and control just like any other

step in the strategic management is important e.g. they worder how the achievements and

successes of a business strategy can be measured if there is no critical evaluation of the

implementation plan put in place? The need for controlling and evaluation of strategies is

therefore to inform the process of direction and to enable an efficient and effective

achievement of strategic objectives.

Several studies have been carried out elswhere in the world and in the business sectors

regarding evaluation of strategies though no study have focused on Centre Star Company

Limited in Kenya, this thus presents a knowledge gap. The management of the

organization needs to be clearly aware of the impacts of the strategies in place to be able

to set clear direction for the organization. Njeru, Stephen and Wambui (2013) while

analysing factors influencing formulation of strategic plans in Embu, Kenya,

acknowledges the significance of strategy monitoring and evaluation since key action

areas are measured on pre-determined standards set by the evaluation creteria. While

studying the banks in Kenya, Kathuni and Mugenda (2012) posited that in order to stay

competitive and achieve their goals and objectives, banks are periodically re-evaluating

their strategies with the aim of achieving an integrated banking business which is

operationally efficient.

A study by Arasa and K'Obonyo (2012) while primarily focusing on the connection

between the strategic planning process and and organizational performance also

acknowledged the development of implementation programme, evaluation and control

systems facilitates smooth execution and implementation of the planned tasks.

5

This study was thus set out to examine the relationship between strategy evaluation and

organizational performance at Centre Star Company Limited. The afore mentioned

studies (Arasa & K'Obonyo, 2012; Kathuni & Mugenda, 2012; Njeru, Stephen, &

Wambui, 2013), on strategy evaluation did not take in to account the unique charactristics

presented by strategy evaluation at Centre Star Company Limited. Since strategic

management is fast being embraced in most organizations, whether for profit or non-

profit, it is important that the implications of evaluation of strategy is well researched and

documented in all sectors of the economy. This study therefore attempts to find out the

approaches used to evaluate strategies at Centre Star Company Limited; the effects of

strategy evaluation on the organizational performance; and how strategy evaluation can

be enhanced.

1.3 Purpose of the Study


organizational performance.

1.4 Research Questions

The study was guided by the following research questions;

1.4.1 What are the approaches to strategy evaluation at Centre Star Company Limited?

1.4.2 What are the effects of strategy evaluation on the performance at Centre Star

Company Limited?

1.4.3 How can strategy evaluation be enhanced at Centre Star Company Limited?

1.5 Importance of the Study

The findings of the study will be significant to the following stakeholders;

1.5.1 Management at Centre Star Company Limited

The study aimed to identify empirically the effects of strategy evaluation on

organizational performance. The findings gives evidence based information that can be

used for future strategy direction at the organization.

1.5.2 Management in Other Organizations

Other institutions in the sector can also borrow and better their strategic management

from the lessons from Centre Star Company Limited.

6

1.5.3 Researchers and Academicians

The findings of this study act as a point of reference for other scholars who intends to

further knowledge on the effects of strategy evaluation on the organizational

performance.

1.6 Scope of the Study

The population of this study included all the organization’s (CSC) departments of

administration, logistics, operations and sales and marketing. Each member of staff of

200 employees within the organization was targeted to participate in the survey.

The data collection was carried in March 2015. The study was limited to staff on duty at

the time of carrying out the survey. The study was expected to be limited by the

unwillingness of the respondents to give full information about their organization for fear

of victimization. This was mitigated by assuring the respondents before the study of the

confidentiality of the information given. Names were not captured as part of the study.

They assured that the information given was only be used for academic purposes.

1.7 Definition of Terms

1.7.1 Organizational Performance

A set of financial and non-financial indicators which offer information on the degree of

achievement of objectives and results (Lebans & Euske, 2006)

1.7.2 Evaluation

A systematic investigation of the worth or merit of an object or process (Stufflebeam,

1994).

1.7.3 Strategy

Basic directional decisions, that is, to purposes and missions i.e. the means to attaining

end goals (Nickols, 2012).

1.7.4 Strategy Evaluation

Systematic investigation to determine the reasons behind failures and success of certain

strategy in terms of objectives, performance standard and/or any other performance

indicator (Strydom, 2011).

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1.8 Chapter Summary

The chapter has discussed the importance of evaluating strategy. It has also brought out

the meaning of organizational performance and its relationship with strategy evaluation.

The chapter further highlights the knowledge gap and presented the objectives of the

study, scope, and the terminologies to be used in this study. The second chapter of this

study offers a review of other scholars’ work on the subject of the study. Chapter three

highlights step-wise how the actual study was carried out. This involves research design,

population, sampling design, data collection and analysis. Chapters four offers the

findings while chapter five gives a summary of the findings, discussions, conclusions and

recommendations of the study.

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CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter offers a review of literature on the subject of strategy evaluation and its

impact on organizational performance. It has five sections. The first coves the approaches

to strategy evaluation. Second, covers the effects of strategy evaluation on organizational

performance. Third, covers how to enhance strategy evaluation. Finally there is a chapter

summary.

2.2 Approaches to Strategy Evaluation

Strategy evaluation is a critical tool for managers to understand reasons behind failures

and success of certain objectives, performance standard and/or any other performance

indicator (Strydom, 2011). In this sense, evalaution is used as strategic learning tool and

has continued to to play a role in strategy formulation and implementation. Literature on

strategy evaluation has proposed several approaches to strategy evaluation exercise.

Kunene (2004) in his seminal study identified four types of strategy evaluation criteria.

Consitency, suitability, acceptability and feasibility.

Figure 2.1: Framework for StrategyEvaluation

Source: Kunene (2004, pg. 69)

Strategy Evaluation Criteria

Consistency Suitability Acceptability Feasibility

With mission

and objectives

With company

circumstances

Risk/sharehol

der

expectations

Capabilities,

competences/

resources

9

2.2.1 Consistency

There is a general agreement among the business strategists that a strategy should not

present mutually inconsistent goals and policies (Perez-Franco, Singh, & Sheffi, 2011).

Classical work by Rumelt (1979) gave an analogy with a mathematical equation where

conflicting objectives imply a nul set of feasibille solutions. Hence, a strategy that

contains goals, objectives and policies that are mutually inconsitent is null and should be

rejected.

The challenge of inconsitancy is mainly experienced in a multi-enterprise organization

with different units (Rumelt, 1979). Bryceson and Slaughter (2011) posit that one of the

key issues faced by a business, particularly a multi-enterprise one, is that of managing the

internal units effectively.They explain that in a multi-enterprise organisation, there is the

tendency for a disconnect to develop between the goals and strategies of each busines unit

and the overall business goals. This is mainly because each component is often an

autonomous business unit or profit centre which may result in lack of integration,

coordination, communication and cooperation. Thus, if a goal is incongruence (when

individuals or groups within an entity may have only partly overlapping goals) amongst

components of the units develops, a risk to busines integration and value creation for the

entire business arises.

This therefore calls for strategic alignment of strategies to the broader organizational

goals and vision. An empirical study by Issa-Salwe, Ahmed, Aloufi and Kabir (2010)

shows that aligning operational strategies to the organisational strategy goals is essential

for improved business performance. Alignment in this context is defined as the capacity

to demonstrate a positive relationship between operational strategy and the accepted

organizational measures of performance.

2.2.2 Suitability

According to Kunene (2004), assessing suitability is concerned with whether the strategic

option addresses the circumstances in which the organisation is operating or wishing to

operate. He explains that it further assesses the extent to which a proposed strategy fits

the situation as identified in the strategic analysis and how it would contribute to or

sustain the competitive position of the organisation.

Therefore, the suitability is the ability of the strategy to exploit the opportunities in the

environment as it avoids the potential threats. It also includes the ability to takes

10

advantage of the organizational strengths and find ways of dealing with the organizational

weaknesses (Jeffs, 2012). The chosen strategy should also be in congruent with the firm’s

existing culture and in alignment with the broader environmental, political and social

context (Wu, 2010).

According to Virvilaite, Seinauskiene and Sestokiene (2011), the suitability of a strategy

is confirmed by the influence of the strategy on the company’s performance, economic

and strategic benefit received after the implementation of the strategy. They add that the

assessment method of cash flows is the most suitable one when assessing sutability of

different strategic choices while added economic value is a suitable method, when the aim

is to assess current (ongoing) performance and its efficiency and to determine, if the

current strategic decision creates value for shareholders. Earlier Doyle (2008) indicated

that the analysis of shareholder value is the most effective means when seeking to assess

the efficiency of alternative strategies in financial terms.

Wu (2010) explains that, to determine the suitability, managers can use external analytical

tools to evaluate each strategic choice. The models include, PESTEL analysis, Porters

Five Forces, Poters diamond, life cycle analysis, value chain analysis, positioning of the

firm or its products, portfolio anlaysis, business profile evaluation, gap analysis, ranking,

scenerio planning, and sensitivity analysis among others.

2.2.3 Feasibility

According to Wu (2010), feasibility evaluation focuses on whether the organization has

the resources to pursue the strategic choice. In this sense it becomes an evaluation of the

internal capabilities of the organization e.g. where a firm does not have adequate

resources to pursue a straregic choice, the organization can decide to exclude the that

particulr strategic choice. The resources may be in form of money, manpower, machines,

markets, materials and among others

This is hinged on the resource based view. The resource based view as proposed by

Penrose (1959) argued that a firm’s success or growth, both internally and then

externally, is based on the internal resources and how they are employed. In her

arguments, resource availability and strategy must be in tandem for a firm to gain a

competitive edge over its competitors. These arguments tends to support the theory that

strategy follows resources.

11

As Kunene (2004) puts it that the requirements of future strategies should be analysed and

key resources and competencies identified before hand as the strategy implementation

could be impossible as it would be hindered by poor resourcing of the strategy e.g. for

better efficiencies to be achieved, it must be established whether there are resources in

place to acquire new systems and whether the expertise and skills are available to develop

the systems to yield the required efficiencies.

Therefore the success of a strategic may only be achieved if there are sufficeint resources

within the organization to support the strategic direction (Penrose, 1959). This implies

that where the resources are not available for new strategies, the organization ought to

generate or borrow the resources (Wu, 2010). This comes with the accessibility and cost

of funds or competencies to determine whether the strategy makes any economic sense at

all if implemented.

2.2.4 Acceptability

Acceptability on the other hand focuses on financial aspects such as return to risk of each

alternative and stakeholder aspects such as strategic impact influence of the stakeholders’

interests. The financial return of the strategic choice may be calculated using various

financial measurements such as net present value; internal rate of return; cost benefit

analysis; economic value added and shareholder value analysis (Wu, 2010).

According to Arshad (2012) NetPresent Value-NPV, is the sum of all the future cash

flows to determine the present value. Cash flows include the both inflows and outflows

that are discounted at a rate. It is calculated as:

NPV = Cash inflows – Cash outflows or expenditure of Investment.

Kalhoefer (2010) posit that an investment should be accepted if the NPV is exceeding

zero. Therefore, the interest rate used to discount the cash flows is the hurdle rate for the

decision. Stakeholders normally like to relate their future of their investment in relation to

the current situation. Inability of a strategy to generate favourable net present value may

see reduced level of acceptability and support of the strategy.

On the other hand internal rate of return -IRR, is the interest rate that, when applied to the

NPV formula, gives an NPV of zero i.e.it is the interest rate where the sum of the

discounted cash flows equals the initial investment (Kalhoefer, 2010). Hence, IRR shows

the effective return of the internally invested capital and an investment should be

12

undertaken if the IRR exceeds the applied interest rate i, because in this case it will have a

positive net present value.

The other financial indicator of strategy evaluation and acceptance is the economic value

added. It defines the net operating profit after taxes reduced by cost of capital i.e.it is an

economic over profit, that remains for the equity holders after considering all economic

cost (Zdeněk, 2011). Further, cost benefits analysis assumes that an act should not be

undertaken unless its benefits outweigh its costs (Kelman, 2011) while shareholder value

analysis determines whether the value of shareholders holdings in a company are

increasing, decreasing or have remained unchanged. Earning per share (EPS) is a popular

indicator of shareholders' return and can be defined as the net profit after tax divided by

total number of shares in issue (Singh & Pattanayak, 2014).

2.3 Effects of Strategy Evaluation on the Organizational Performance

This section discusses the positive effects of strategy evaluation on the organizational

performance. These include direction setting, guidance on bench marking and motivation.

2.3.1 Direction Setting

Literature has significantly underscored the importance of strategic direction setting for

organizations. The strategic direction provides multiple benefits to an organization.

According to Olk, Rainsford and Chung (2010), direction setting presents a broadly

shared sense of organizational direction and purpose. They posit that the direction is

needed because few organizations have achieved greatness by being all things to all

consumers. Thus to instil a purpose, most successful companies achieve their leadership

position by adopting a vision far greater than their resource base and competencies would

allow.

Various scholars have had different views on the direction setting process. Brady and

Walsh (2008), hold the view that direction setting requires a charismatic leader who

through force of personality and leadership acumen can line up all the members of the

organisation in one direction. Thompson, Strickland and Gamble (2007) proposed that the

direction setting process involves vision development followed by setting of objectives,

designing of strategy, implementation and review of the process. Hill and Jones (2008),

further proposes that the process starts with mission and goals selection, followed by

identification of opportunities and threats, identification of strengths and weaknesses,

selection of a strategy and its implementation.

13

Strategy evaluation therefore becomes a critical tool and measure in assessing the

organization’s strategic position. This enables the management to make sure that the

organisation is heading in the right direction and that corrective action is taken where

needed. There is the need for management to continuously evaluate its strategies against

performance so that any indication that the company is failing to achieve its objectives

calls for corrective adjustments.

For example, according to McGraw-Hill Education (2014), where the company’s

implementation efforts have fallen short, new tactics must be devised to fully exploit the

potential of the company’s strategy. Whereas if management determines through strategy

evaluation that the company’s execution efforts are sufficient, it should challenge the

assumptions underlying the company’s business strategy and alter the strategy to better fit

competitive conditions and the company’s internal capabilities. If the company’s strategic

approach to competition is rated as sound, then perhaps management set overly ambitious

targets for the company’s performance.

2.3.2 Inspire Confidence/Motivation

According to Lai (2011), motivation refers to reasons that underlie behaviour that is

characterized by willingness and volition. She explains that intrinsic motivation is

animated by personal enjoyment, interest, or pleasure, whereas extrinsic motivation is

governed by reinforcement contingencies. Hence, motivation involves a constellation of

closely related beliefs, perceptions, values, interests, and actions.

Goal setting theory links goal setting and evaluation to motivation and performance of an

organization. According to Lunenburg (2011) evaluation provides the much needed

feedback that helps organization members to measure and attain their performance goals.

He explains that feedback helps in two important ways. ‘First, it helps people determine

how well they are doing. For example, sports teams need to know the score of the game; a

sharp shooter needs to see the target; a golfer needs to know his score. Likewise a work

team, department, or organization. Performance feedback tends to encourage better

performance’ (Lunenburg, 2011, pg. 3).

Further, Lunenburg (2011) indicates that feedback also helps people determine the nature

of the adjustments to their performance that are required to improve. For example, a CEO

of an organization can gauge the growth, profitability, and quality of a product line. The

general presumption is that information about good performance inspires confidence in

14

everybody. Those within the organisation are likely to be more motivated to maintain and

achieve better performance in order to keep up their record of accomplishment. Those

outside – customers, government authorities, shareholders –are likely to be impressed

with the good performance.

These arguments are in line with Muhammad (2013) who indicated that performance

appraisal provides feedback to performance. He states that a person works better when he

knows how he is working. This works in two ways, firstly, the person gets feedback about

his performance. Secondly, when the person gets feedback about his performance, he can

relate his work to the organizational objectives and be inspired to do more as it creates

awareness on exact contribution to the organizational success.

While giving an example of self-regulated individuals, (Lai, 2011) posits that they use a

variety of strategies, have high self-efficacy, and set goals for themselves. These groups

of individuals or managers also monitor their own activities and strategies, evaluate their

performance, and experience reactions to evaluation outcomes. She continues that the

valence of a person’s reaction to evaluation depends on the way that successes and

failures are framed, with positive reactions more likely to spur increased motivation than

negative ones. ‘Thus, self-regulation theory postulates that individuals can fortify their

own motivation by engaging in a number of self-regulatory strategies, such as setting

appropriate and achievable goals and monitoring and evaluating their strategies’ progress

toward goals’ (Lai, 2011, pg. 12) .

2.3.3 Provide Guidance on Benchmarking

Apart from goal setting and motivation, strategy evaluation is needed to serve as tool of

providing information on how performance compares to the peers and other standards. It

highlights what is expected and what needs to be done to keep up improving the

performance. In this way strategy evaluation is used to establish a step by step guidelines

on future actions based on learning from the past and the environment (Kvarnerud &

Maspers, 2007).

For example, evaluating strategy in line with the environment is critical in establishing

guidelines on benchmarking with the peers. The presumption is that for any organization,

environment consists of external factors (i.e. customers, competitors, stakeholders and

many more) that have the powers to influence organization’s performance and for every

15

action taken by an organization, there is a creation of some degree of changes in its

internal and external environment (Ayub, Razzaq, Aslam, & Iftekhar, 2013).

According to Luštický and Kincl (2012), ccompetitive advantage comes not only from the

potential possibilities of external environment, but also from internal characteristics, i.e.,

from unique sources and methods of their use. Hence, to achieve a competitive advantage

it is essential to use these resources effectively with regard to changing environmental

conditions. They define benchmarking as the continuous measurement of the performance

(strengths and weaknesses) against not only oneself or other competitors in the same or in

a different country but also against national / international quality grading systems by

assessing both primary and secondary data for the purpose of establishing priorities,

setting targets and gaining improvements in order to gain competitive advantage.

The arguments are supported by an empirical study by Ajelabi and Tang (2010) which

saw strategy evaluation as a tool for strategic benchmarking. The process involves a

systematic process of evaluating alternatives, implementing strategies and improving

performance by understanding and adapting successful strategies from external partners

who participate in an ongoing business alliance. The other forms of benchmarking

include, competitive benchmarking, internal benchmarking, process benchmarking,

functional benchmarking, generic benchmarking and global benchmarking.

2.3.4 Legitimising Use of Strategy Evaluation

Apart from the will to fill knowledge gap, strategy evaluation may also be needed as a

strategy in itself to legitimise managements’ actions before the eyes of the stakeholders.

Organizations normally have different stakeholders with varied opinions. An organization

typically present a mix of individuals with many counteracting wills. Therefore,

evaluation is needed to justify decisions i.e. the legitimising purpose of evaluation has the

function of a source power that can help strengthen a strategic resolve. In this sense,

evaluation findings are used as legitimising factor (Kvarnerud & Maspers, 2007).

Earlier works by Sundin (1995) explained that it is crucial for organizations to obtain

legitimacy as a legitimate issue is seen as valid and without which the management losses

support of the stakeholders. Hence, evaluation is used to persuade the environment in

which the organization exist that certain opinions or actions taken are correct (Kvarnerud

& Maspers, 2007).

16

2.4 Strategies for Enhancing Strategy Evaluation

To carry out an independent, credible and high quality evaluations that assess whether the

organization is doing the right things and whether they are doing them right; contributes

to learning and knowledge sharing; enhance the generation and use of value-added

evaluative information; and identifies what works, literature points to some key

evaluation capacities. These include a strong evaluation culture; capabilities of the people

carrying out the evaluation; management support in terms of resources; organization of

the process; independence of the process and the actual decision process.

2.4.1 Enhancing Evaluative Culture

According to Ehtesham, Muhammad and Muhammad (2011), organizational culture is the

patterns of shared values and beliefs over time, which produces behavioural norms that

are adopted in solving problems. They explain that an organization’s internal environment

is represented by its culture and is construed by the assumptions and beliefs of the

managers and employees. Hence, organizational culture shapes organizational

procedures, unifies organizational capabilities into a cohesive whole, provides solutions

to the problems faced by the organization, and, thereby, hindering or facilitating the

organization’s achievement of its goals.

The concept of values which is embedded in culture is a fundamental aspect in evaluation

systems. An evaluation being an aspect of determining merit, worth and value of things,

processes or strategies, the use of value systems, including perceived biases and problems

associated with them, has strongly emerged in the social science research literature

(SenGupta, Hopson, & Thompson-Robinson, 2004).

This has seen emergence of two approaches to evaluation value systems. One is the

inherent values created in the evaluation system to come up with valid evaluation

outcomes and the creation of the perceived common drive for evaluation values or culture

within an organization. This study will focus on the latter dimension of embedding a

strong and sustainable evaluation culture to enhance strategy evaluation and the

organizational performance.

Mayne (2008) posits that evaluative culture denotes an organizational culture that

deliberately seeks out information on its performance in order to use that information to

learn how to better manage and deliver its programs and services, and thereby improve its

17

performance. She continues that such an organization values empirical evidence on the

results—outputs and outcomes—it is seeking to achieve.

Building an evaluative culture has three main components; leadership, organizational

support structure and learning focus (Mayne, 2008). Leadership entails demonstrated

senior management leadership and commitment to evaluation; regular informed demand

for results information; building results measurement and results management capacity;

establishing and communicating a clear role; and establishing responsibilities for results

management. Second, the organizational support structures entail a supportive

organizational incentives; supportive organizational systems, practices and procedures; an

outcome-oriented and supportive accountability regime; and learning focussed evaluation

and monitoring. Thirdly, a learning focus is about build in learning systems; and ability to

tolerating and learning from mistakes (Mayne, 2008).

2.4.1 Capacity Building

In broader sense, strategy evaluation is not only limited to top management but it’s a

collective exercise that involves strategies at the functional units and business units,

which defines the overall organizational strategy. Therefore, for an effective strategy

evaluation systems, developing capacity needs of individual within the organization and

the organizational capacities are paramount.

There has been varied views on the definition of evalaution capacity building. Scrafford

(2012, pg. 3) defined evaluation capacity building as “context-dependent, intentional

action system of guided processes and practices for bringing about and sustaining a state

of affairs in which quality program evaluation and its appropriate uses are ongoing

practices within and/or between one or more organizations/programs/sites”. He therefore

saw evaluation capacity building as an ongoing process that takes into consideration

organizational factors that may influence sustained evaluation.

On the other hand, this study will adopt Taylor-Powell and Boyd (2008) definition of

evaluation capacity building as strengthening and sustaining an organization’s capacity to

design, implement, and manage effective evaluation process; access, build, and use

evaluative knowledge and skills; cultivate a spirit of continuous organizational learning,

improvement, and accountability; and create awareness and support for program

evaluation and self-evaluation as a performance improvement strategy.

18

At the individual level, there are the cognitive capacities, behavioural capacities, and

affective outcomes capacities (García-Iriarte, Suarez-Balcazar, Taylor-Ritzler, & Luna,

2011). The cognitive outcome is defined as including increasing that is incorporated into

everyday professional practice while behavioural outcomes include improving skills to

integrate evaluation into everyday practice; and lastly affective outcomes are positive

changes in attitudes towards evaluation, increasing ownership regarding evaluation, and

increasing motivation to engage in evaluation (García-Iriarte, et al., 2011).

To enhance individual evaluation capacity Taylor-Powell and Boyd (2008) proposes

training, technical assistance, collaboration, mentorship/coaching and establishing

communities of practices to form an evaluation capacity building frame work.

2.4.3 Enhancing Organizational Support

García-Iriarte, et al. (2011) observe that despite strategy evaluation being highly

recorgnized, organization’s lack of support in terms of resources or funds often negatively

affect the precess of implementing the evaluation processes.Strategy evaluators use a

number of finacial resources to suppot their evaluation activities. Therefore, monetary

resources serves as both a signal and a tool for strategy evaluation. Unless sufficient

finances are set aside for the exercise the outcome may not be as exhoustive.

The other supporting resources include availability of sufficient time, technological

support such as evaluation materials, programs (Taylor-Powell & Boyd, 2008). The

underlying presumpions is that for an organization to understake an effective strategy

evaluation, it needs to ensure that there is an access to the supporting resources needed.

2.4.4 Choice of Strategy Evaluation Methods

Use of financial ratios alone to measure performance of corporate strategies has been

widely criticized as being too narrow, thus leaving out too much information that would

guide in giving the best assessment on the impacts of a strategy (Institute of Management

Accountants, 2014). Therefore, the choice of strategy evaluation method to use by an

organization is critical in presenting the true picture on the performance of a strategy.

Some of the methods to evaluate the success or failure of a strategy are, balanced score

card, strategic audit, shareholder values and stakeholder measures.

According to Poureisa, Ahmadgourabi and Efteghar (2013) in order for firms to

effectively evaluate their performance, they should not only lend on financial aspects but

19

also should consider their performance from customer, processes, and learning and

growth view. This school of thought is what was captured by Kaplan and Norton in their

Balanced Score Card strategy evaluation matrix.

According to Kaplan and Norton (2009) for successful companies to assess their

performance, they should not only use financial measures but also assess their

organizations based on their other three perspectives, i.e. customer, internal processes,

and learning and growth. Hence, companies in each of these four perspectives, determine

their goals and objectives for evaluating success in each perspective, measures and

targets; and identify quantitative goals for all of these measures for the period considered

(Poureisa, Ahmadgourabi, & Efteghar, 2013). Therefore, a well-defined balanced

scorecard should be able to describe ones strategies through the objectives and measure

chosen (Niven, 2007).

On the other hand, strategy audit has also been used to evaluate performance of strategies

by providing a checklist of questions, by area or issue, which enables a systematic

analysis of various organizational functions or activities (Argandona, 2011). In this way,

the audit is an extremely useful diagnostic tool to pinpoint the problems areas and

highlights organizational strengths and weaknesses for corporate planning with the main

objective of strategic audit being to develop benchmarks (Argandona, 2011).

According to the report by Institute of Management Accountants [IMA], (2014),

shareholder value takes into account the owners of equity expectations for management to

generate value over and above the costs of resources consumed, including the cost of

using capital. For example if suppliers of capital do not receive a fair return to

compensate them for the risk they are taking, they will withdraw their capital in search of

better returns, since value will be lost. The report posits that evidence is mounting that

accounting measures such as earnings per share (EPS) and profit or growth in earnings do

not take into account the cost of the investment required to run the business.

Further, stakeholder theory was developed to challenge the narrow view which holds that

the sole purpose of a company is to maximise economic value for shareholders.

According to Argandona (2011), increasing value creation for all stakeholders broadens

the framework of management bringing it closer to a more realistic economic optimum,

generating new cooperative value creation capabilities and overcoming some conflicts.

20

He explains that so lomg as the focus remains on economic value, any solutions adopted

will be insufficient and the outcome will be liable to conflict from the stakeholders.

Therefore since there are various approaches to evaluation and no single one is exhaustive

in nature, the choice of evaluation methods will be directed by the need for the evaluation

process. This means the results wil also be dependent on the specific approach adopted.

Hence for an organization to effectively enhance the outcome and effectiveness of

strategy eveluation, empahis should be put on the approach in line with the objectives.

2.5 Chapter Summary

Chapter two was a discussion on the views held by other scholars in line with strategy

evaluation. The chapter captured approaches to strategy evaluation; effects of strategy

evaluation on organizational performance and strategies for enhancing strategy

evaluation. The following chapter will capture the methodology that offers the road map

for the study.

21

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

The section gives a blue print on how the study was carried out. It describes the research

approach, population of study, sampling frame, sampling procedure, data collection

method, research procedure, data analysis and data presentation methods.

3.2 Research Design

The study employed a descriptive research approach to establish relationships between

the study variables. The approach was appropriate as it enabled testing and confirmation

of the hypotheses objectively, and to explain the impact of strategy evaluation on

organizational performance (Dubihlela & Sandada, 2014).

Further, descriptive research approach is recommended when investigating peoples’

attitudes and views as they are, without manipulating the variables (Kombo & Tromp,

2006). Descriptive survey design also helps in gathering, summarising, presenting and

interpreting information for the purpose of clarification (Mugenda & Mugenda, 2003).

The dependent variable in the study is the organizational performance while the

dependent variable is the strategy evaluation.

3.3 Population and Sampling Design

3.3.1 Population

A population is any entire collection of people, animals, plants or things from which data

may be collected (Easton & McColl, 2012). According to (Cooper & Schindler, 2008) it

represents the entire set of units of analysis or the total collection of elements on which

inference is to be made.

The population for this study comprised of all the 200 staff members at Centre Star

Company. The population was grouped into four departments of the Company. That is the

departments of administration, logistics, operations and sales & marketing.

22

Table 3.1: Study Population

Category Sample Frame Total Percentage

Administration 23 11.5%

Logistics 44 22.0%

Operations 76 38.0%

Sales & Marketing 57 28.5%

Total 200 100%

3.3.2 Sampling Design

3.3.2.1 Sampling Frame

Sample frame defines all the population elements that can be accessed during the data

collection period or a listing of the entire population from where a sample size is selected

(Cooper & Schindler, Business Research Methods, 2008). This may represent a part or

the entire population. For this study, the sample frame was all the 200 employees of

Centre Star Company (CSC, 2014). This was verified by the actual employee database

held by the human resources department at CSC.

3.3.2.2 Sampling Technique

This is the procedure of gathering people, places or things to study (Orodho & Kombo,

2002). The study used a stratified random sampling approach to select a sample size from

each stratum according the proportion. The population was stratified depending on the

department where one works and the selected sample size from each stratum drawn

randomly from within each stratum. This method of sampling ensures that each stratum is

properly represented so that the sample drawn from it is proportionate to the stratum’s

share of the population. It ensured that every element in the population was represented

and it was also used to achieve statistical efficiency (Fricker, 2007).

3.3.2.3 Sample Size

This as a subset or any combination of sampling units that does not include the entire set

of sampling units that has been defined as the population of a sampling units from a

population (Garson, 2012). According to Mugenda and Mugenda (2003) a representative

sample size 30% of the total population is sufficient to draw conclusions about the study

population. For this study, 30% of 200 employees which translate into 60 employees

was selected to form the sample size.

23

Table 3.2: Sample Size

Category Sample Frame Total

Percentage

Sample

Size

Total

Percentage

Administration 23 11.5% 7 3.5%

Logistics 44 22.0% 13 6.5%

Operations 76 38.0% 23 11.5%

Sales & Marketing 57 28.5% 17 8.5%

Total 200 100% 60 30%

3.4 Data Collection Method

A structured questionnaire comprising three research constructs was developed in line

with the research questions and the context for primary data collection. The measurement

constructs measure separately the the approaches to strategy evaluation at Centre Star

Company Limited; The effects of strategy evaluation on the performance at Centre Star

Company Limited; and how strategy evaluation can be enhanced at Centre Star Company

Limited.

The questionnaire began with the demographic information section, which incorporated

individual characteristics such as number of years worked within the organization, level

of education, departments, and the management level to which the individual belongs.

This data was critical in profiling the respondents. The second section of the

questionnaire covered the approaches to strategy evaluation while the third and fourth

will covered the effects of strategy evaluation and how strategy evaluation can be

enhanced respectively.

The questionnaire had two types of questions, the closed ended and open-ended question.

For the closed ended questions, the respondents were asked to rank their levels of

agreement on a five-point Likert scale where 1 = strong disagreement, 2 = moderate

disagreement, 3 = neutral 4= moderate agreement and 5 = strong agreement. The Likert

scale was closed ended to limit the external interference and to minimise the completion

time (Pushpakumari & Watanabe, 2009). The respondents were simply required to tick

the most appropriate answer (Dubihlela & Sandada, 2014). The open-ended questions on

the other hand gave the respondents a leeway of answering the questions without any

limitations.

24

3.5 Research Procedure

Before the actual study, a pilot of 5 respondents from the company’s departments of

administration, operations and sales and marketing was carried out. This helped clarify

and remove questions that were ambiguous or not clear to the respondents. The

respondents who participated in the pilot were excluded from the actual study to limit bias

of pre formed opinions created during the pilot stage.

The content of the study instrument was validated by use of experts (Njeru, Stephen, &

Wambui, 2013). In this case, the opinions of the University appointed supervisor was

sought to improve on the questionnaire. This was critical in identifying whether the

instrument measured what it intended to measure. The actual data collection adopted a

drop and pick strategy where hard copy questionnaires were distributed to the respondents

during official working hours for filling before returning. The respondents were assured

of confidentially and allowed a period of two days after which the questionnaires were

collected for analysis.

3.6 Data Analysis Method

The primary data collected by the questionnaire was first coded and entered into

Statistical Package for Social Science [SPSS]. Where the respondents were found to have

offered answers which were not clear or incomplete, call-backs were made to those

individual respondents to fill the gaps before data analysis. This was to ensure

completeness of the information collected.

Descriptive statistics in form of frequencies and percentages was used to analyse the

descriptive elements of the study. Further analysis of variance was carried out to

determine the relationships between the test variables (Arasa & K'Obonyo, 2012). The

findings of the study were presented in form of table and figures for ease of interpretation

and understanding.

3.7 Chapter Summary

The chapter presented the research design, population size of study, sampling technique,

sample frame, sample size, research procedure, data analysis and presentation tools to be

used in this study. Chapter 4 covers the findings of the study in line with research

questions.

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CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction

The purpose of this study was to determine effects of strategy evaluation on

organizational performance. The chapter four presents the findings in line with the

research objectives. There are four sections in this chapter. Section one is the general

information about the respondents. Section two covers the approaches to strategy

evaluation. Section three covers the effects of strategy evaluation on performance.

Section four presents the how strategy evaluation can be enhanced. The last section

presents the chapter summary.

4.2 Demographic Characteristics of the Respondents

4.2.1 Response Rate

Sixty questionnaires were distributed to the sample size. Figure 4.1 indicates 77%

response rate.

Figure 4.1: Response Rate

4.2.2 Gender

Figure 4.2 shows that females were the majority at 61 percent while males were 39

percent.

Questionnaires duly filled

77%

Unreturned questionnaires

23%

26

Figure 4.2: Gender

4.2.3 Age

Figure 4.3 shows that majority were aged below 25 years [41%]. Those aged between 25

and 36 years were 33 percent while those aged between 36 and 45 years were 26 percent.

Figure 4.3: Age

4.2.4 Department

Figure 4.4 indicates that 43% of the respondents were drawn from operations department,

26 percent from sales and marketing department, 20 percent from the logistics department

and 11 percent from the administration department.

Figure 4.4: Department

Male 39%

Female 61%

Less than 25 years 41% 26-35 years

33%

36-45 years 26%

Administration 11%

Logistics 20%

Operations 43%

Sales and Marketing

26%

27

4.2.5 Length of Service

Table 4.1 shows that 20% of the respondents had served in the organization for less than

1 year. Sixty five percent for 1 to 3 years, 13 percent for 4-6 years while less than 2

percent had served for more than 6 years.

Table 4.1: Length of Service

Number of years Percentage [%]

Less than 1 year 20

1-3 years 65

4-6 years 13

More than 6 years 2

Total 100

4.2.5 Highest Education Level

Majority of the respondents were diploma holders at 35 percent. Those with bachelor

degrees were 33 percent, postgraduate diplomas at 15 percent, certificate 13 percent and

Masters degree holders were 4 percent as shown in Table 4.2.

Table 4.2: Highest Education Level

Highest Education Level Percentage [%]

Certificate 13

Diploma 35

Degree 33

Postgraduate Diploma 15

Masters 4

Total 100

4.2.6 Management Position

Table 4.3 indicates that the majority of the respondents were drawn from the senior staff

level position at 46 percent. This was followed by those from the junior staff level at 8

percent, junior level managers at 20 percent, middle level management position at 22

percent and top-level management position at 3 percent.

28

Table 4.3: Position within the Organization

Position Percentage [%]

Junior Staff 8

Senior Staff 46

Junior Manager 20

Middle Level Manager 22

Senior Level Manager 3

Total 100

4.3 Approaches to Strategy Evaluation

The study sought to identify the approaches adopted by the organization [Centre Star

Company] to strategy evaluation. The study looked at four approaches, consistency,

suitability, feasibility and acceptability. The analysis involved descriptive statistics. First,

the data underwent reliability and validity testing. Thereafter one-way analysis of

variance was carried out to determine associations between the independent and

dependent variables. The findings were also summed to get general findings for the test

items.

The responses were first subjected to a factors analysis with a varimax rotation. Emory

and Cooper (1991) indicated that factor analysis helps to reduce a large number of

variables to some smaller number by indicating which factors belong together and seem

to say the same thing. The advantage of which is to ensure that the finding conclusions

are focused. Factor loading of more than 0.5 indicates focused findings. The responses

were then tested for internal reliability using Cronbach alpha tests. Makgosa (2006)

indicated that a Cronbach’s Alpha of less than 0.5 indicates unreliability of the variables

hence, cannot be used to deduce findings. The criteria listed in Table 4.4 include only

those likert elements, which had factor loadings of 0.50 and above.

29

Table 4.4: Factor Analysis for Approaches to Strategy Evaluation

Factor Loadings

Consistency

Streamlining strategy expenditure patterns to overall

organizational spending patterns

.885

Aligning strategy objectives to the mission and objectives of the

organisation

.885

Closely fitting strategy to the organizational culture .920

Fitting strategy operationalization to organizational

systems/structures

.827

Suitability

Ability to effectively exploit the opportunities in the

organization’s environment

.884

Ability to effectively avoid threats in the organization’s

environment

.853

Ability to effectively capitalises on the organizational strengths

and core competencies

.850

Ability to effectively avoid the organizational weaknesses .824

Ability to effectively address the cultural and political context of

the organisation

.714

Feasibility

Availability of the required employee expertise .515

Availability of machines and equipments .552

Availability of the raw materials .724

Availability of operating systems .561

Availability of operating cash flows .654

Acceptability

Increasing dividend development .891

Decreasing cost to income ratio .844

Increasing residual value/net income .945

Reducing investor risks .806

Increasing shareholder value .853

Table 4.5 indicates that the overall Cronbach’s alpha test for the approaches to strategy

evaluation is 0.968. The alpha for the test variables was between 0.720 and 0.960, which

indicated that the test scale is valid and reliable (Makgosa, 2006).

30

Table 4.5: Cronbach’s Alpha Analysis for Approaches to Strategy Evaluation

Cronbach’s Alpha Test The Overall Cronbach’s Alpha Test

Variable Alpha N of items Alpha N of items

Consistency .949 4 .968 19

Suitability .945 5

Feasibility .792 5

Acceptability .960 5

Descriptive findings in Table 4.6 indicate that majority at 70 percent agreed [42% agreed;

28% strongly agreed] that consistency is used as measure of evaluating strategy at Centre

Star Company. Similarly, majority 65 percent agreed [28% agreed; 37% strongly agreed]

that strategy suitability is being used as a measure of evaluation strategy at CSC. 100

percent of the respondents agreed [48% agreed; 52% strongly agreed] that strategy

feasibility is used as a benchmark of evaluation strategy. Finally, majority at 66 percent

agreed [38% agreed; 28% strongly agreed] that strategy acceptability is another measure

of evaluating strategy at CSC.

Table 4.6: Approaches to Strategy Evaluation

Variable Percentage [%] Mean SD

SDA [1] DA [2] N [3] A [4] SA [5]

Consistency 4 15 10 42 28 3.70 1.17

Suitability 0 13 22 28 37 3.89 1.05

Feasibility 0 0 0 48 52 4.52 .505

Acceptability 0 20 15 38 28 3.70 1.09

The study then sought to find out if the descriptive findings were influenced by the

departments within the organization i.e. are the findings in any way related to the

departments or it’s a general to the entire population. One way analysis of variance

[ANOVA] was done to determine significance of the relationship. The findings in Table

4.7 indicate lack of statistically significant relationship [p>.05] between the department

and use of consistency [p=.996]; suitability [p=.593]; feasibility [p=.387]; and

acceptability [p=.814] as measures or approaches to strategy evaluation. This means that

regardless of a difference in department, the approach to strategy evaluation at CSC

31

doesn’t change. Hence, we can conclude that consistency, suitability, feasibility, and

acceptability are adopted as strategy evaluation at CSC.

Table 4.7: One-Way Analysis of Variance on Approaches to Strategy Evaluation by

Department

One-Way Analysis of Variance by Department

Approaches of

Strategy

Evaluation Source

Sum of

Square

s df

Mean

Square F Sig.

Consistency Between Groups .089 3 .030 .020 .996

Within Groups 61.650 42 1.468

Total 61.739 45

Suitability Between Groups 2.207 3 .736 .640 .593


Total 50.457 45

Feasibility Between Groups .789 3 .263 1.034 .387

Within Groups 10.689 42 .254

Total 11.478 45

Accessibility Between Groups 1.184 3 .395 .315 .814


Total 53.739 45

Note. Approaches to strategy evaluation [consistency, suitability, feasibility,

acceptability] p>.05

4.4 Effects of Strategy Evaluation

The study sought to identify the effects of strategy evaluation at CSC. The study looked at

four possible effects, direction setting; inspiration/motivation; benchmarking; and

legitimization of use of strategy.

The responses were first subjected to a factors analysis with a varimax rotation. The

criteria listed in Table 4.8 include only those likert elements, which had factor loadings of

0.50 and above.

32

Table 4.8: Factor Analysis for Effects of Strategy Evaluation

Factor Loadings

Direction Setting

1. Strategy evaluation at my work place is to ensure compliance

to the organizations visions .561

2. Strategy evaluation at my work place aims to streamline

operations to specific objectives .828

3. Strategy evaluation at CSC targets correcting strategic

variations .803

4. Strategy evaluation at CSC aims to establishing common

tactics and purpose .902

Inspiration/Motivation

5. Strategy evaluation results inspires me to work better by

enabling me measure my performance goals .771

6. Strategy evaluation results helps me determine the nature of

adjustments needed on my performance .792

7. Information on good performance inspires me to work harder .718

8. Information on how I am working makes me work better .820

9. Strategy evaluation results allow me relate my work to the

organizational objectives and be inspired to do more .768

Benchmarking

10. Strategy evaluation has been used as tool at CSC for comparing

performance to our peers .886

11. Strategy evaluation has been used as tool at CSC for comparing performance to industry standards

.879

12. Strategy evaluation has been used as tool at CSC for comparing

performance among the various departments .808

13. Strategy evaluation has been used as tool at CSC for comparing performance between strategies

.852

Legitimizing use of Strategy

14. Strategy evaluation at CSC serves to legitimise managements’

actions before the eyes of shareholders .868

15. Strategy evaluation at CSC serves to legitimise managements’ actions before the eyes of customers

.925


actions before the eyes of the government .903


actions before the eyes of general public .838

Table 4.9 indicates that the overall Cronbach’s alpha test for the effects of strategy



33

Table 4.9: Cronbach’s Alpha Analysis for Effects of Strategy Evaluation


Variable Alpha N of

items

Alpha N of items

Direction Setting .883 4 .975 17

Inspiration/motivation .924 5

Benchmarking .943 4

Legitimizing use of

strategy

.954 4

Descriptive findings in Table 4.10 indicate that majority at 63 percent agreed [46%

agreed; 17% strongly agreed] that strategy evaluation at CSC facilitates organizational

direction setting. Similarly, majority 71 percent agreed [21% agreed; 50% strongly

agreed] that strategy evaluation results helps in inspiring and motivating employee at

CSC. Sixty three percent of the respondents agreed [35% agreed; 28% strongly agreed]

that strategy evaluation at CSC is used as a tool for benchmark with other industry

players. Finally, majority at 70 percent agreed [35% agreed; 37% strongly agreed] that

strategy evaluation results helps in legitimizing the use of strategy at CSC.

Table 4.10: Effects of Strategy Evaluation


SDA

[1]

DA

[2]

N

[3]

A

[4]

SA

[5]

Direction Setting 0 17 20 46 17 3.63 .974

Inspiration/motivation 0 9 20 21 50 4.06 1.06

Benchmarking 0 32 4 35 28 3.58 1.22

Legitimizing use of

strategy

9 13 4 35 37 3.58 1.42





34


and effects of strategy evaluation. Direction setting [p=.739]; Inspiration/Motivation

[p=.927]; Benchmarking [p=.720]; and Legitimizing use of strategy [p=.336]. This means

that regardless of the department, the effects of strategy evaluation at CSC don’t change.

Hence, we can conclude that direction setting; inspiration/motivation; benchmarking; and

legitimization of use of strategy are some of the effects of strategy evaluation at CSC.

Table 4.11: One-Way Analysis of Variance on Effects of Strategy Evaluation by

Department


Approaches of

Strategy

Evaluation Source

Sum of

Square

s df

Mean

Square F Sig.

Direction setting Between Groups 1.245 3 .415 .420 .739


Total 42.717 45

Inspiration/moti

vation

Between Groups .538 3 .179 .150 .929


Total 50.804 45

Benchmarking Between Groups 2.086 3 .695 .449 .720


Total 67.152 45

Legitimizing

use of strategy

Between Groups 6.980 3 2.327 1.161 .336


Total 91.152 45

Note. Effects of [direction setting; inspiration/motivation; benchmarking; and

legitimization of use of strategy] p>.05

4.5 Strategies for Enhancing Strategy Evaluation

The third study objective sought to identify the strategies used to enhance strategy

evaluation at CSC. The responses were first subjected to a factors analysis with a varimax

rotation. The criteria listed in Table 4.12 include only those likert elements, which had

factor loadings of 0.50 and above.

35

Table 4.12: Factor Analysis for Enhancing Strategy Evaluation

Factor Loadings

Evaluation Culture

1. Perceived common drive for strategy evaluation .871

2. Well established procedures for strategy evaluation .916

3. Deliberate efforts to seek information on strategy

performance .855

4. Established responsibilities for evaluation results

management .781

5. Regular informed demand for results information .717

Capacity

6. Effective organizational capacity in designing, implementing,

and managing strategy evaluation process .757

7. Effective organizational capacity in accessing, building, and

using evaluative knowledge and skills .780

8. Established spirit of continuous organizational learning,

improvement, and accountability .869

9. Established ability to create awareness and support .819

10. Established staff capability in evaluation knowledge and

evaluative thinking .855

11. Established staff capability for skills for integrating

evaluation into practice .785

12. Established staff capability towards positive changes in

attitudes towards evaluation, increasing ownership regarding

evaluation, and increasing motivation to engage in evaluation

.709

Organization Support

13. Sufficient finances are set aside for strategy evaluation

exercise .853

14. Sufficient time is set aside in operations for strategy

evaluation .942

15. There is an effective technological support such as evaluation

tools .860

16. There is demonstrated commitment to evaluation by senior

management and leadership .881

17. There is supportive organizational incentives .797

18. There are in built learning systems; and ability to tolerating

and learning from mistakes .925

Strategy Evaluation Method

19. Our strategy evaluation methods only uses financial ratios .925

20. Customers, processes, learning and growth view are

effectively embedded in our strategy evaluation methods .913

21. Systematic analysis of various organizational functions or

activities to identify problems, strengths, weaknesses for

benchmarking are effectively considered

.901

22. Shareholder value is well considered .850

36

Table 4.13 indicates that the overall Cronbach’s alpha test for the approaches to strategy



Table 4.13: Cronbach’s Alpha Analysis for Enhancing Strategy Evaluation


Variable Alpha N of

items

Alpha N of items

Evaluation Culture .942 5 .987 22

Capacity .954 7

Organization support .971 6

Strategy Evolution

Method

.960 4

Table 4.14 shows that majority at 67 percent agreed [36% agreed; 31% strongly agreed]

that there is a well established strategy evaluation culture at CSC. Majority at 66 percent

agreed [33% agreed; 33% strongly agreed] that CSC has well established organizational

capacity that enhances strategy evaluation. Sixty four percent of the respondents agreed

[33% agreed; 31% strongly agreed] that there is sufficient organizational support for

strategy evaluation at CSC. Lastly, 61 percent of the respondents agreed [28% agreed;

33% strongly agreed] that there are appropriate strategy evaluation methods at CSC

which supports the strategy evaluating strategy efforts at CSC.

Table 4.14: Enhancing Strategy Evaluation


SDA

[1]

DA

[2]

N

[3]

A

[4]

SA

[5]

Evaluation Culture 5 15 13 36 31 3.71 1.21

Capacity 0 10 23 33 33 3.89 .994

Organization support 5 21 10 33 31 3.64 1.26

Strategy Evolution

Method

10 10 18 28 33 3.64 1.32

37






and Evaluation Culture [p=.212]; Organizational Capacity [p=.291]; Organizational

Support [p=.712]; and Strategy Evaluation [p=.276] as strategies for enhancing strategy

evaluation. This means that regardless of a difference in department, the strategies

adopted to enhance strategy evaluation at CSC don’t change. Hence, we can conclude

that, instilling of evaluation culture, establishing sufficient organizational capacity,

having organizational support and choice of appropriate strategy evaluation method are

used as strategies to enhance strategy evaluation at CSC.

Table 4.15: One-Way Analysis of Variance on Enhancing Strategy Evaluation by

Department


Approaches of

Strategy

Evaluation Source

Sum of

Square

s df

Mean

Square F Sig.

Evaluation

Culture

Between Groups 6.658 3 2.219 1.577 .212


Total 55.897 38

Organizational

Capacity

Between Groups 3.749 3 1.250 1.292 .292


Total 37.590 38

Organizational

Support

Between Groups 2.316 3 .772 .461 .712


Total 60.974 38

Strategy

Evaluation

Method

Between Groups 6.916 3 2.305 1.343 .276


Total 66.974 38

Note. Approaches to strategy evaluation [Evaluation Culture, Organizational Capacity,

Organizational Support, Strategy Evaluation Method] p>.05.

38

4.6 Chapter Summary

Chapter Four presented the study findings. The chapter was divided into four sections.

The first section covered the demographic characteristics of the population. The second

section presented the findings on the approaches to strategy evaluation at CSC. The third

section dwells on the effects of strategy evaluation while the fourth section covers the

strategies for enhancing strategy evaluation. Chapter five of the study presents the study

summary, discussions, conclusions and recommendations.

39

CHAPTER FIVE

5.0 DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

The purpose of this study was to identify the effects of competitive strategies on gaining

competitive advantage in the banking industry in Kenya. The study used Barclays Bank

of Kenya as a case study. The current chapter gives the summary of the findings, presents

a discussion of the results, and offers conclusions and recommendation drawn from the

study.

5.2 Summary


organizational performance. The study was guided by the following research questions;

What are the approaches to strategy evaluation at Centre Star Company Limited? What

are the effects of strategy evaluation on performance at Centre Star Company Limited?

How can strategy evaluation be enhanced at Centre Star Company Limited?

The study employed a descriptive research approach. The population for this study

comprised of all the 200 staff members at Centre Star Company stratified in

departments; administration, logistics, operations and sales & marketing. The study used

a stratified random sampling approach to select 30% (60) of the 200 employees to

participate in the survey. The data collection was carried in March 2015. The data was

tested for reliability and validity before conducting descriptive analysis using

percentages, means and standard deviations. Analysis of variance was conducted to

determine statistically significant relationship between the dependent and independent

variables. The findings were presented in tables and figure.

The study showed that majority of staff members at CSC are females at 61 percent. Those

aged 25 years were 41%; those aged between 25 and 36 years were 33 percent while

those aged between 36 and 45 years were 26 percent. The study also showed that majority

of the respondents [43%] were drawn from operations department, 26 percent from sales

and marketing department, 20 percent from the logistics department and 11 percent from

the administration department. Twenty percent of the respondents had served in the

organization for less than 1 year. Sixty five percent for 1 to 3 years, 13 percent for 4-6

years while less than 2 percent had served for more than 6 years. Diploma holders were

at 35 percent, bachelor degrees were at 33 percent, postgraduate diplomas at 15 percent,

40

certificate 13 percent and Masters Degree holders were 4 percent. Finally, majority of the

respondents were drawn from the senior staff level position at 46 percent. This was

followed by those from the junior staff level at 8 percent, junior level managers at 20

percent, middle level management position at 22 percent and top-level management

position at 3 percent.


evaluation. The study showed that majority at 70 percent agreed [42% agreed; 28%

strongly agreed] that consistency is used as measure of evaluating strategy at Centre Star

Company. Secondly, majority at 65 percent agreed [28% agreed; 37% strongly agreed]

that strategy suitability is being used as a measure of evaluating strategy at CSC. Third,

100 percent of the respondents agreed [48% agreed; 52% strongly agreed] that strategy

feasibility is used as a benchmark of evaluation strategy. Finally, majority at 66 percent

agreed [38% agreed; 28% strongly agreed] that strategy acceptability is another measure

of evaluating strategy at CSC. Analysis of variance with department as the independent

variable indicated lack of statistically significant relationship [p>.05] between the

department and consistency [p=.996]; suitability [p=.593]; feasibility [p=.387]; and

acceptability [p=.814] as measures or approaches to strategy evaluation. This means that

regardless of the difference in department, the approach to strategy evaluation at CSC

doesn’t change. Hence, we can conclude that consistency, suitability, feasibility, and

acceptability are adopted as approaches to strategy evaluation at CSC.


The study showed that majority at 63 percent agreed [46% agreed; 17% strongly agreed]

that strategy evaluation at CSC facilitates organizational direction setting. Secondly,

majority 71 percent agreed [21% agreed; 50% strongly agreed] that strategy evaluation

results helps in inspiring and motivating employee at CSC. Third, Sixty three percent of

the respondents agreed [35% agreed; 28% strongly agreed] that strategy evaluation at

CSC is used as a tool for benchmark with other industry players. Finally, majority at 70

percent agreed [35% agreed; 37% strongly agreed] that strategy evaluation results helps

in legitimizing the use of strategy at CSC. Analysis of variance with department as the

independent variable indicated lack of statistically significant relationship [p>.05]

between the department and Direction setting [p=.739]; Inspiration/Motivation [p=.927];

Benchmarking [p=.720]; and Legitimizing use of strategy [p=.336]. This means that

41

regardless of the department, the effects of strategy evaluation at CSC don’t change.

Hence, we can conclude that direction setting; inspiration/motivation; benchmarking; and

legitimization of use of strategy are some of the effects of strategy evaluation at CSC.


at CSC. The study showed that majority at 67 percent agreed [36% agreed; 31% strongly

agreed] that there is a well established strategy evaluation culture at CSC. Second,

majority at 66 percent agreed [33% agreed; 33% strongly agreed] that CSC has well

established organizational capacity that enhances strategy evaluation. Third, Sixty four

percent of the respondents agreed [33% agreed; 31% strongly agreed] that there is

sufficient organizational support for strategy evaluation at CSC. Lastly, 61 percent of the

respondents agreed [28% agreed; 33% strongly agreed] that there are appropriate strategy

evaluation methods at CSC which supports the strategy evaluating strategy efforts at

CSC. Analysis of variance with department as the independent variable indicated lack of

statistically significant relationship [p>.05] between the department and Evaluation

Culture [p=.212]; Organizational Capacity [p=.291]; Organizational Support [p=.712];

and Strategy Evaluation [p=.276] as strategies for enhancing strategy evaluation. This

means that regardless of a difference in department, the strategies adopted to enhance

strategy evaluation at CSC don’t change. Hence, we can conclude that, inst illing of

evaluation culture, establishing sufficient organizational capacity, having organizational

support and choice of appropriate strategy evaluation method are used as strategies to

enhance strategy evaluation at CSC.

5.3 Discussions

5.3.1 Approaches to Strategy Evaluation


evaluation. The study identified four approaches to Strategy evaluation at CSC. First, is

the consistency of the strategy objectives to the overall organizational objectives,

consistency to the organizational culture, consistency to organizational operations or

systems and consistency to the organizational spending patterns. The desire to have

consistent strategies is supported by Perez-Franco, Singh and Sheffi (2011) who indicated

that a strategy should not present mutually inconsistent goals and policies. Further, a

Rumelt (1979) gave an analogy with a mathematical equation where conflicting

objectives imply a null set of feasible solutions. The findings are also supported by an

empirical study by Issa-Salwe, Ahmed, Aloufi and Kabir (2010) which showed that

42

aligning operational strategies to the organisational strategy goals is essential for

improved business performance. Alignment in this context is defined as the capacity to

demonstrate a positive relationship between operational strategy and the accepted

organizational measures of performance.

Second is the suitability of the strategy to effectively exploit the opportunities in the

organization’s environment, suitability to effectively avoid threats in the organization’s

environment, suitability to effectively avoid the organization’s weaknesses and suitability

to effectively address the cultural and political context of the organization. This is in line

with Wu (2010) argument that firms exist within a given internal and external

environment thus, strategy being adopted must be suitable to the organization’s conytext.

The significance of strategy suitability was also underscored by Kunene (2004) who

indicated that suitability is concerned with whether the strategic option addresses the

circumstances in which the organisation is operating or wishing to operate. He explains

that it further assesses the extent to which a proposed strategy fits the situation as

identified in the strategic analysis and how it would contribute to or sustain the

competitive position of the organisation. This is line with Virvilaite, Seinauskiene and

Sestokiene (2011) sentiments that the suitability of a strategy is confirmed by the

influence of the strategy on the company’s performance, economic and strategic benefit

received after the implementation of the strategy.

Third, is the feasibility of implementing the strategy in line with the availability of the

required employee expertise, availability of the raw materials, availability of operating

systems, and availability of operating cash flows. This is in line with Kunene (2004)

arguments that the requirements of future strategies should be analysed and key resources

and competencies identified before hand as the strategy implementation could be

impossible as it would be hindered by poor resourcing of the strategy e.g. for better

efficiencies to be achieved, it must be established whether there are resources in place to

acquire new systems and whether the expertise and skills are available to develop the

systems to yield the required efficiencies. This supports the resource based view as

proposed by Penrose (1959) who argued that a firm’s success or growth, both internally

and then externally, is based on the internal resources and how they are employed.

43

Fourth, is the acceptability of the strategy by having the ability to increase dividend

development, decrease cost of income ratio, increase residual value/net income, reduce

investor risk and increase shareholder value. This supports the view by Wu (2010) that

investments are carried out for the benefit of the equity holders. He suggest that

acceptability a strategy can be measured on the financial return of the strategic choice and

may be calculated using various financial measurements such as net present value;

internal rate of return; cost benefit analysis; economic value added and shareholder value

analysis (Wu, 2010). This is further supported by Kalhoefer (2010) posited that an

investment should be accepted if the NPV is exceeding zero. Further, Kelman (2011)

supports this by indicating that cost benefits analysis of a strategy assumes that an act

should not be undertaken unless its benefits outweigh its costs..

5.3.2 Effects of Strategy Evaluation





purpose. This is in line with McGraw-Hill Education (2014) sentiment that strategy

evaluation becomes a critical tool and measure in assessing the organization’s strategic

position. It enables the management to make sure that the organisation is heading in the

right direction and that corrective action is taken where needed. Hence, there is the need

for management to continuously evaluate its strategies against performance so that any

indication that the company is failing to achieve its objectives calls for corrective

adjustments.

Secondly, strategy evaluation results helps in inspiring and motivating employee at CSC

as it enables employees measure their performance; helps employees in determining the

nature of adjustments needed; good results inspires hard work; helps employees relate

their objectives to that of the organization; and the information inspires better work. This

is in line with Goal setting theory which links goal setting and evaluation to motivation

and performance of an organization. It is further supported by Lunenburg (2011) who

indicated that evaluation provides the much needed feedback that helps organization

members to measure and attain their performance goals. The feedback helps people

determine how well they are doing and also helps people determine the nature of the

adjustments to their performance that are required to improve (Lunenburg, 2011). These

44

findings are also in line with Muhammad (2013) who indicated that performance

appraisal provides feedback to performance. He states that a person works better when he

knows how he is working. This works in two ways, firstly, the person gets feedback about

his performance. Secondly, when the person gets feedback about his performance, he can

relate his work to the organizational objectives and be inspired to do more as it creates

awareness on exact contribution to the organizational success (Muhammad, 2013).

Third, strategy evaluation at CSC is used as a tool for benchmark with other industry

players. The evaluation is used to compare performance or peers; compares performance

to industry standards; compares performance among deportments; and compares

performance between strategies. This is in line with Kvarnerud and Maspers (2007)

sentiments that apart from goal setting and motivation, strategy evaluation is needed to

serve as tool of providing information on how performance compares to the peers and

other standards. It highlights what is expected and what needs to be done to keep up

improving the performance. In this way strategy evaluation is used to establish a step by

step guideline on future actions based on learning from the past and the environment

(Kvarnerud & Maspers, 2007). This is also supported an empirical study by Ajelabi and

Tang (2010) which saw strategy evaluation as a tool for strategic benchmarking. The

study indicated that the process involves a systematic process of evaluating alternatives,

implementing strategies and improving performance by understanding and adapting

successful strategies from external partners who participate in an ongoing business

alliance.

Finally, strategy evaluation results helps in legitimizing the use of strategy at CSC. The

evaluation results legitimize management’s actions in the eyes of the shareholders;

customers; government and the general public. This is in line with the arguments that it is

crucial for organizations to obtain legitimacy as a legitimate issue is seen as valid and

without which the management losses support of the stakeholders (Sundin, 1995). Hence,

evaluation is used to persuade the environment in which the organization exist that certain

opinions or actions taken are correct (Kvarnerud & Maspers, 2007).

5.3.3 Strategies for Enhancing Strategy Evaluation



CSC. The study illustrates that there is perceived common drive for strategy evaluation in

45

all employees; there is well-established procedures for strategy evaluation; there is

deliberate effort to seek information on strategy performance; there is established

responsibilities for evaluation performance; and there is regular informed demand for

results of information. This supports the idea that organizational culture shapes

organizational procedures, unifies organizational capabilities into a cohesive whole, and

provides solutions to the problems faced by the organization, and, thereby, hindering or

facilitating the organization’s achievement of its goals (Muhammad, 2011). Hence,

evaluative culture denotes an organizational culture that deliberately seeks out

information on its performance in order to use that information to learn how to better

manage and deliver its programs and services, and thereby improve its performance

(Mayne, 2008). Promoting evaluative culture within an organization is therefore a

measure of determining merit, worth and value of things, processes or strategies

(SenGupta, Hopson, & Thompson-Robinson, 2004).

Second, CSC has well established organizational capacity that enhances strategy

evaluation. The study showed that there is effective organizational capacity in designing,

implementing and managing strategy evaluation process; capacity in accessing, building

and using evaluative knowledge and skills; capacity for continuous learning,

improvement and accountability; capacity to create awareness and support for strategy

evaluation; capabilities in knowledge and evaluative thinking; capability for integrating

evaluation into practice; and capability towards positive change. This is in line with

Taylor-Powell and Boyd (2008) sentiments that for effective strategy implementation,

there has to be effective capabilities at the leadership levels, functional units and business

units, which defines the overall organizational strategy. They proposes training, technical

assistance, collaboration, mentorship/coaching and establishing communities of practices

to form an evaluation capacity building frame work.




strategy evaluation. This is in line with García-Iriarte, et al. (2011) observation that

despite strategy evaluation being highly recorgnized, organization’s lack of support in

terms of resources or funds often negatively affect the precess of implementing the

evaluation processes. The underlying presumpions as suggested by Taylor-Powell and

46

Boyd (2008) is that for an organization to understake an effective strategy evaluation, it

needs to ensure that there is an access to the supporting resources needed.

Lastly, there are appropriate strategy evaluation methods at CSC which supports the

strategy evaluating strategy efforts at CSC. The organization uses a mix of financial

ratios, systematic analysis, shareholder value and customer/process learning and growth.

This is in line with the arguments that the choice of strategy evaluation method to use by

an organization is critical in presenting the true picture on the performance of a strategy

(Institute of Management Accountants, 2014). This supports sentiments by Poureisa,

Ahmadgourabi and Efteghar (2013) that in order for firms to effectively evaluate their

performance; they should not only lend on financial aspects but also should consider their

performance from customer, processes, and learning and growth view.

5.4 Conclusions

5.4.1 Approaches to Strategy Evaluation


evaluation. The study identified four approaches to Strategy evaluation at CSC to enhance

performance of the organization. First, the strategy objectives must be consistent to the

overall organizational objectives, consistent to the organizational culture, consistent to

organizational operations or systems and consistent to the organizational spending

patterns. Second is the suitability of the strategy to effectively exploit the opportunities in

the organization’s environment, suitability to effectively avoid threats in the

organization’s environment, suitability to effectively avoid the organization’s weaknesses

and suitability to effectively address the cultural and political context of the organization.

Third, is the feasibility of implementing the strategy in line with the availability of the

required employee expertise, availability of the raw materials, availability of operating

systems, and availability of operating cash flows. Fourth, is the acceptability of the

strategy by having the ability to increase dividend development, decrease cost of income

ratio, increase residual value/net income, reduce investor risk and increase shareholder

value.

5.4.2 Effects of Strategy Evaluation




47


purpose. Secondly, strategy evaluation results helps in inspiring and motivating employee

at CSC as it enables employees measure their performance; helps employees in

determining the nature of adjustments needed; helps employees relate their objectives to

that of the organization; good results inspires hard work; and the information inspires

better work. Third, strategy evaluation at CSC is used as a tool for benchmark with other

industry players. The evaluation is used to compare performance or peers; compares

performance to industry standards; compares performance among deportments; and

compares performance between strategies. Finally, strategy evaluation results helps in

legitimizing the use of strategy at CSC. The evaluation results legitimize management’s

actions in the eyes of the shareholders; customers; government and the general public.

5.4.3 Strategies for Enhancing Strategy Evaluation



CSC. The study illustrates that there is perceived common drive for strategy evaluation in

all employees; there is well-established procedures for strategy evaluation; there is

deliberate effort to seek information on strategy performance; there is established

responsibilities for evaluation performance; and there is regular informed demand for

results of information. Second, CSC has well established organizational capacity that

enhances strategy evaluation. The study showed that there is effective organizational

capacity in designing, implementing and managing strategy evaluation process; capacity

in accessing, building and using evaluative knowledge and skills; capacity for continuous

learning, improvement and accountability; capacity to create awareness and support for

strategy evaluation; capabilities in knowledge and evaluative thinking; capability for

integrating evaluation into practice; and capability towards positive change.




strategy evaluation. Lastly, there are appropriate strategy evaluation methods at CSC

which supports the strategy evaluating strategy efforts at CSC. The organization uses a

mix of financial ratios, systematic analysis, shareholder value and customer/process

learning and growth.

48

5.5 Recommendations

5.5.1 Recommendations for Improvement

5.5.1.1 Approaches to Strategy Evaluation

The study showed that feasibility [100% agreed] was the most prioritized approach

followed by consistency, acceptability and suitability, which scored seventy percent or

less. However, having a feasible strategy is equally important; it would be strategic for

the organization to have strategies that are completely consistent with the organizational

overall strategic direction for enhanced performance.

5.5.1.2 Effects of Strategy Evaluation

The study has shown that strategy evaluation has a positive effect on employee

motivation, legitimization of the strategy, benchmarking and goal setting in that order.

The fact that goal setting scores last indicate weak link of the operational strategies to the

organization’s overall vision and mission. Hence, this calls for re-evaluation of the

strategies and their alignment to the overall organizational goals.

5.5.1.3 Strategies for Enhancing Strategy Evaluation

The study has shown that CSC has established an evaluative culture, sufficient capacity,

organizational support system and effective methods for strategy evaluation as strategies

for enhancing strategy evaluation. Strengthening of these strategies would be welcome as

their prevalence scored less than sixty-seven percent.

5.5.2 Recommendations for Further Studies

The current study like any other study did not test all variables under the test items.

Therefore, broadening the scope of the study to take into account other strategy

evaluation factors is welcome. The study also focused only on one organization. Studies

in other organizations within the sector are much welcome.

49

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APPENDICES

Appendix A: Cover Letter

Respondent,

Dear Sir/Madam,

RESEARCH QUESTIONNAIRE

I am a graduate student at United States International University pursuing a Master of

Business Administration (MBA). I am conducting a research on the effects of strategy

evaluation on organizational performancein partial fulfilment of the Master of Business

Administration degree program at United States International University-Africa (USIU-

Africa). The study is using Centre Star Company Limited a case study.

The findings of this study will provide the management at CSC with an understanding on

approaches to strategy evaluation; the effects of strategy evaluation on performance; and

how strategy evaluation can be enhanced at Centre Star Company Limited.

The information provided will be held in confidence and for academic purpose only. The

questionnaire take approximately 20 minutes to complete.

Yours faithfully,

Abdalla Yusuf

CELL: 0725896020

EMAIL: [email protected]

P.O. Box 14634, 00800

NAIROBI

DATE:

55

Appendix B: Questionnaire

Answer the following questions by ticking or marking the boxes using X or √ or by filling

the empty boxes.

PART I: GENERAL DEMOGRAPHICS

1. What is your gender?

Male ☐ Female ☐

2. What is your age range

Less than 25 years ☐ 26-35 years ☐ 36-45 years ☐ 46-55 years ☐

56 years and above ☐

3. In which department do you work at CSC

Administration☐ Logistics ☐

Operations ☐ Sales and Marketing ☐

4. How long have you worked for CSC

Less than one year ☐ 1-3 years ☐ 3-6 years ☐

More than 6 years ☐

5. What is your highest education level

Certificate ☐ Diploma ☐ Degree ☐ Post graduate Diploma ☐

Masters ☐

6. What is your position at CSC

Junior Staff ☐ Senior Staff ☐ Junior Manager ☐

Middle level Manager ☐Senior level Manager ☐

56

PART II: Approaches to Strategy Evaluation

Please indicate the degree to which you agree or disagree that the following are

considered while evaluating strategies at your workplace. Use a scale of 1-5 where 1 is

strongly disagree, 2 disagree, 3 neutral, 4 agree and 5 strongly agree.

Consistency

Strongly

disagree (1)

Disagree

(2)

Neutral

(3)

Agree

(4)

Strongly

agree (5)

1. Streamlining strategy expenditure patterns to overall

organizational spending patterns

( ) ( ) ( ) ( ) ( )

2. Aligning strategy objectives to

the mission and objectives of the organisation

( ) ( ) ( ) ( ) ( )

3. Closely fitting strategy to the

organizational culture ( ) ( ) ( ) ( ) ( )

4. Fitting strategy operationalization to

organizational

systems/structures

( ) ( ) ( ) ( ) ( )

Suitability

Strongly disagree

(1)

Disagree

(2)

Neutral

(3)

Agree

(4)

Strongly Agree

(5)

5. Ability to effectively exploit the

opportunities in the organization’s environment

( ) ( ) ( ) ( ) ( )

6. Ability to effectively avoid threats in

the organization’s environment ( ) ( ) ( ) ( ) ( )

7. Ability to effectively capitalises on the organizational strengths and core

competencies

( ) ( ) ( ) ( ) ( )

8. Ability to effectively avoid the

organizational weaknesses ( ) ( ) ( ) ( ) ( )

9. Ability to effectively address the

cultural and political context of the

organisation

( ) ( ) ( ) ( ) ( )

57

For number 10 to 14 kindly indicate in your opinion whether strategy implementation at

CSC is based on a clear match to the following competencies. Use a scale of 1-5 where 1

is strongly disagree, 2 disagree, 3 neutral, 4 agree and 5 strongly agree.

Feasibility

Strongly disagree

(1)

Disagree

(2)

Neutral

(3)

Agree

(4)

Strongly Agree

(5)

10. Availability of the required employee

expertise ( ) ( ) ( ) ( ) ( )

11. Availability of machines and

equipments ( ) ( ) ( ) ( ) ( )

12. Availability of the raw materials ( ) ( ) ( ) ( ) ( )

13. Availability of operating systems ( ) ( ) ( ) ( ) ( )

14. Availability of operating cash flows ( ) ( ) ( ) ( ) ( )

For number 15 to 19, kindly indicate your level of agreement or disagreement as to

whether strategies adopted at CSC meet the following acceptability criteria.Use a scale of

1-5 where 1 is strongly disagrees, 2 disagree, 3 neutral, 4 agree and 5 strongly agree.

Acceptability

Strongly

disagree (1)

Disagree

(2)

Neutral

(3)

Agree

(4)

Strongly

Agree (5)

15. Increasing dividend development ( ) ( ) ( ) ( ) ( )

16. Decreasing cost to income ratio ( ) ( ) ( ) ( ) ( )

17. Increasing residual value/net income ( ) ( ) ( ) ( ) ( )

18. Reducing investor risks ( ) ( ) ( ) ( ) ( )

19. Increasing shareholder value ( ) ( ) ( ) ( ) ( )

20. In your opinion, what other factors affects the choice of strategy at CSC?

…......................................................................................................................................

.......................................................................................................................... ......

58

PART III: Effects of Strategy Evaluation

Indicate the degree to which you agree or disagree to the following statements regarding

strategy evaluation at CSC. Use a scale of 1-5 where 1 is strongly disagrees, 2 disagree, 3

neutral, 4 agree and 5 strongly agree.

Strongly

disagree (1)

Disagree

(2)

Neutral

(3)

Agree

(4)

Strongly

Agree (5)

Direction Setting

18. Strategy evaluation at my work place is to

ensure compliance to the organizations visions

( ) ( ) ( ) ( ) ( )

19. Strategy evaluation at my work place

aims to streamline operations to specific

objectives

( ) ( ) ( ) ( ) ( )

20. Strategy evaluation at CSC targets

correcting strategic variations ( ) ( ) ( ) ( ) ( )

21. Strategy evaluation at CSC aims to

establishing common tactics and purpose ( ) ( ) ( ) ( ) ( )

Inspiration/Motivation

22. Strategy evaluation results inspires me to

work better by enabling me measure my

performance goals

( ) ( ) ( ) ( ) ( )

23. Strategy evaluation results helps me

determine the nature of adjustments

needed on my performance

( ) ( ) ( ) ( ) ( )

24. Information on good performance inspires me to work harder

( ) ( ) ( ) ( ) ( )

25. Information on how I am working makes

me work better ( ) ( ) ( ) ( ) ( )

26. Strategy evaluation results allow me relate my work to the organizational

objectives and be inspired to do more

( ) ( ) ( ) ( ) ( )

Benchmarking Tool

27. Strategy evaluation has been used as tool at CSC for comparing performance to our

peers

( ) ( ) ( ) ( ) ( )

28. Strategy evaluation has been used as tool at CSC for comparing performance to

industry standards

( ) ( ) ( ) ( ) ( )

29. Strategy evaluation has been used as tool

at CSC for comparing performance among the various departments

( ) ( ) ( ) ( ) ( )

30. Strategy evaluation has been used as tool

at CSC for comparing performance

between strategies

( ) ( ) ( ) ( ) ( )

Legitimising use of strategy

31. Strategy evaluation at CSC serves to legitimise managements’ actions before

the eyes of shareholders

( ) ( ) ( ) ( ) ( )

59

32. Strategy evaluation at CSC serves to

legitimise managements’ actions before the eyes of customers

( ) ( ) ( ) ( ) ( )


legitimise managements’ actions before

the eyes of the government

( ) ( ) ( ) ( ) ( )


legitimise managements’ actions before

the eyes of general public

( ) ( ) ( ) ( ) ( )

35. Please indicate other reasons why strategy evaluation is being carried out at your

workplace

…………………………………………………………………………………………

…………………………………………………………………………………….

60

PART IV: Strategies for Enhancing Strategy Evaluation

Please indicate the degree to which you agree or disagree to the presence of the following

regarding strategy evaluation at your workplace. Use a scale of 1-5 where 1 is strongly

disagrees, 2 disagree, 3 neutral, 4 agree and 5 strongly agree.

Strongly disagree

(1)

Disagree

(2)

Neutral

(3)

Agree

(4)

Strongly Agree

(5)

Evaluation Culture

23. Perceived common drive for strategy evaluation in all employees

( ) ( ) ( ) ( ) ( )

24. Well established procedures for strategy

evaluation ( ) ( ) ( ) ( ) ( )

25. Deliberate efforts to seek information on strategy performance

( ) ( ) ( ) ( ) ( )

26. Established responsibilities for evaluation

results management ( ) ( ) ( ) ( ) ( )

27. Regular informed demand for results information

( ) ( ) ( ) ( ) ( )

Capacity

28. Effective organizational capacity in

designing, implementing, and managing strategy evaluation process

( ) ( ) ( ) ( ) ( )

29. Effective organizational capacity in

accessing, building, and using evaluative

knowledge and skills

( ) ( ) ( ) ( ) ( )

30. Established spirit of continuous

organizational learning, improvement,

and accountability

( ) ( ) ( ) ( ) ( )

31. Established ability to create awareness and support for strategy evaluation

( ) ( ) ( ) ( ) ( )

32. Established staff capability in evaluation

knowledge and evaluative thinking ( ) ( ) ( ) ( ) ( )

33. Established staff capability for skills for integrating evaluation into practice

( ) ( ) ( ) ( ) ( )

34. Established staff capability towards

positive changes in attitudes towards evaluation, increasing ownership

regarding evaluation, and increasing

motivation to engage in evaluation

( ) ( ) ( ) ( ) ( )

Organizational Support

35. Sufficient finances are set aside for

strategy evaluation exercise ( ) ( ) ( ) ( ) ( )

36. Sufficient time is set aside in operations

for strategy evaluation ( ) ( ) ( ) ( ) ( )

37. There is an effective technological

support such as evaluation tools ( ) ( ) ( ) ( ) ( )

38. There is demonstrated commitment to evaluation by senior management and

leadership

( ) ( ) ( ) ( ) ( )

61

39. There is supportive organizational

incentives ( ) ( ) ( ) ( ) ( )

40. There are in builtlearning systems; and ability to tolerating and learning from

mistakes

( ) ( ) ( ) ( ) ( )

Strategy Evaluation Method

41. Our strategy evaluation methods only uses financial ratios

( ) ( ) ( ) ( ) ( )

42. Customers, processes, learning and

growth view are effectively embedded in

our strategy evaluation methods

( ) ( ) ( ) ( ) ( )

43. Systematic analysis of various

organizational functions or activities to

identify problems, strengths, weaknesses

for benchmarking are effectively considered in our strategy evaluation

methods

( ) ( ) ( ) ( ) ( )

44. Shareholder value is well considered in our strategy evaluation methods.

( ) ( ) ( ) ( ) ( )

45. Other than the strategies highlighted above, in your opinion how else can your

organization enhance strategy evaluation process?

…………………………………………………………………………………………

……………………………………………………………………………………

THANK YOU

62

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