Concepts used by JSE listed companies in strategy formulation and implementation and its effect on financial performance

Abstract

Continuous changes taking place in the business environment require organisations to adapt constantly to new realities, new products, new technologies, and new concepts. The manner in which organisations create and sustain competitive advantage is therefore one of the fundamental questions in the field of strategic management research. Most concepts taught in business schools are largely based on research in American and European countries. Previous research work has also shown that there are clear key differences in concepts used across regions, industries, and company size. These arguments therefore led one to conclude that there is a lack of research available on popular concepts used by local companies and the impact on their financial performance, hence the purpose of this research study. This research was the first research study and therefore a pioneering study in establishing concepts used in the South African context. This research, in a small measure, attempted to build concepts based on local research. The objectives of this study were firstly to identify the popular concepts used by JSE listed companies in formulating and implementing their strategy; and secondly, to establish the effect of these popular concepts on financial performance. The research was quantitative and descriptive in nature. Self-administered questionnaires were sent to 250 CEO’s of the JSE listed companies out of whom 35 completed the survey. The popular concepts used by JSE listed companies in formulating and implementing their strategy were identified; and the effect on financial performance were established. The popular concepts used by JSE listed companies in formulating and implementing their strategy identified were the concepts “environmental analysis”, “strategic positioning”, “growth”, “customer focused/ customer relationship management”, and “shareholder return/ shareholder value”. The following relationships were found to be significant and important: The relationship between “environmental analysis” and market capitalisation from years 1 to 3 and years 2 to 3 show a negative relationship; and The relationship between “environmental analysis” and share price from years 1 to 3 and years 2 to 3 show a negative relationship.