Strategic Coherence and Company Performance: Research Results

Abstract

Objective: Maintaining cohesion of different elements of the organisation is crucial, especially for building effectiveness, implementing a business model and improving performance. The key aim of this article is to analyse the relationship between strategic coherence and a company’s performance.

Research Design & Methods: Strategic coherence is the author’s concept allowing measurement of vertical and horizontal adjustment of a business entity. Vertical adjustment describes the fit of the elements of the business model to the company strategy. This is captured by following measurements: 1) how a company’s goals are cascaded, 2) what is the feedback in terms of the cohesion of the components of the business model with its strategy and 3) how the control process of strategy implementation and financial outcome are organised. Horizontal adjustment covers the phenomenon of a business model’s cohesion. It measures: 1) how customer value is created, 2) how value is attained by a business and 3) how a synergy effect is created within an organisation. In total, 400 medium and large sized companies were researched.

Findings: Based on the survey results companies have similar levels of strategic coherence in both horizontal (6.29) and vertical (6.47) dimensions (in a 1.00–10.00 scale). In general it is confirmed that the higher the strategic coherence level is, the higher the profit, the competitive advantage, and other analysed figures.

Implications / Recommendations: Achieving a higher level of coherence should improve integration between strategic goals, actions taken to implement them, and cohesion of business model components. A critical issue is creating the ability to identify the essential elements of strategy, and on their basis reconcile competing or conflicting ideas and paths of development more coherently than other organisations. However, pushing towards total coherency can cause some imbalance between the long-term and short-term results of the firm.

Contribution: This article provides a unique insight into how strategic coherence is shaped in a two dimensional perspective – vertical and horizontal adjustment. In addition, it introduces guidelines for improving the strategic coherence of companies in terms of improving performance.