Effectiveness of Strategy Implementation Approaches in Multinational Companies: A Research Proposal
In any organization, the management is always faced with a single mandate of ensuring things are done. In the execution of this mandate, planning and execution of management plans comes into play, and a strategic approach is required in order to complete the cycle of planning through to implementation. The concept of strategic planning has however gained significant traction over time, with limited focus on strategy implementation, which refers to putting the strategy into practice to ensure consistent progress towards the intended direction. Different organizations use different approaches to strategy execution, and understanding their disparate approaches can help to explain progress towards expected outcomes. Multinational companies use different strategies across different locations in alignment with host country cultures and ethics; for German MNCs therefore, it is highly probable that strategy execution varies from country to country.
2.1 Problem Statement
Several studies have been conducted over the years on strategic planning. The subject has therefore become a mandatory consideration in strategic decision making, with evidence showing that despite the significant emphasis on strategy planning, the transfer of the strategic plans into strategy implementation is seldom monitored even in large corporations. Furthermore, serious empirical research is yet to be conducted in the Central and South-east Europe region, which includes Germany, on strategy implementation in multinational companies (MNCs) (Okumus, 2003). The scarcity in literature on strategy implementation in Germany calls for greater focus on the MNCs in the country, especially in the contemporary times where multinational countries from Germany are increasing their international impacts. To bridge this gap in literature, the proposed study will analyse strategy execution in German MNCs, with a focus on top-10 German MNCs. Additionally, the study will explore the mechanisms by which MNCs contribute to the complexity of strategy implementation in companies.
The objective of the proposed study will be to determine the approaches through which executives and boards of directors of Germany-headquartered MNCs can improve strategy implementation to realize value for the shareholders of those MNCs. To achieve this objective, the study will focus on determining the effectiveness of different approaches for MNC strategy execution through analysis of the methods used and the success and growth of MNCs in the international scene. The most effective approaches will be recommended for the improvement of strategy implementation and value realization in German MNCs.
4.1 Preliminary Literature Review
Understanding strategy execution practices is essential for MNCs across the world. The choice of particular strategies for implementation affects the outcomes of the strategy execution process. Different organizations use different approaches to align practice with the organizational strategic plans. Hrebiniak (2008) posited that making strategies work is not a straightforward activity and that the relationship between strategy formation and strategy execution is rarely linear. Making a strategy work throughout an organization is so hard so that there is a very weak relationship between a well-formulated organizational strategy and strong organizational outcomes; in fact, less than 10% of the well-formulated strategies are executed successfully in organization (Cater & Pucko, 2010). This low success rate in strategy implementation is attributed to the complexity of factors that contribute to strategy progress from one level to another, and which may also contribute to strategy failure even in excellently formulated organizational strategies.
Various frameworks have been proposed to explain effective strategy implementation practices because of the complexity of the strategy execution environment. According to Okumus (2003), most of the frameworks focus on different factors affecting the organizational operational processes. These factors include strategic content, strategic context, operational process, and outcomes (Okumus, 2003). Each of these factors plays an essential role towards effective decision making in strategy implementation. For instance, the strategic content describes the actual development and projections presented in the strategic plan; strategic context defines the internal and external factors affecting execution including organizational leadership, culture and structure (internal) and political and economic environmental uncertainty (external) (Okumus, 2003). In most MNCs, the external environment varies depending on the location of implementation, while the internal factors depend on pre-set organizational behaviours. The operational process relates to the people, operational planning, allocation of resources, control and communications; while the outcomes describes all the effects of the strategy implementation process (Radomska, 2014). Any potentially effective strategy implementation framework has to be founded on the mentioned factors, albeit in different proportions depending on individual organizational characteristics.
The differences in the external and internal environments in organizations particularly imply that each organization has to work with a strategy implementation technique that is customized to the developed strategy. Dorrenbacher and Geppert (2009) opine that effective strategy implementation processes in MNCs should adopt a bottom-up approach. The bottom-up approach to strategy implementation is based on the argument that each MNC functions as a micro-political system in which strategies are executed to pursue independent organizational interests, securing options, and attaining success through different approaches that are not necessarily motivated by the individual interests of the key actors (Dorrenbacher & Geppert, 2009). The large number of political micro-actors indicates the need for collaboration to cushion MNCs against the potentially adverse effects of heterogeneous needs of the micro-actors. In this context, contingency planning is an inescapable outcome that MNCs have to experience regardless of the specific approaches adopted for strategy implementation.
Various similarities have been reported in the strategy execution within German MNCs. German MNCs are reported to run their operations in ways that are slightly different from other MNCs. Contrary to MNCs from countries such as the U.S. which offshore both production and distribution to the host countries, German MNCs often opt to offshore only distribution and distribution support activities, with all production still occurring in Germany. Dorrenbacher and Geppert (2009) further assert that leaders in German MNCs are mostly driven by the prospect for career growth. German MNCs are also extensively affected by changes in the home country, such as the tightening of financial systems, which has led to many German MNCs selecting strategies that enable them to engage in internal strategizing in order to change the rules of the game in competitive environments (Gilbert & Benham, 2009). Other studies have shown that differences in leadership practices and nationalities of leaders in German MNCs also influence the strategy implementation processes, with some leaders working through unorganized approaches to strategy execution, which are opportunistic (Gilbert & Benham, 2009). The German companies rely on information on the external environment, and make decisions based on the happenings in the external environment.
Various recommendations have been made on enhancing the effectiveness of the strategy implementation process in MNCs. Gilbert and Benham (2009) mention that the strategy implementation process follows a simplistic process with rather simple tools that can easily be assumed. Techniques such as environmental analysis for the internal and external environment are reported to be quite essential as predecessors to any strategy implementation process; the corresponding tools such as SWOT, benchmarking and performance measurement systems are utilized to evaluate progress and determine the next steps in the strategy implementation process. These approaches have been applied by German MNCs. However, different host country cultures play a moderating role in the effectiveness of the strategy execution techniques. Gilbert and Benham (2009) therefore recommend that German MNCs should integrate the simple processes and tools with more advanced techniques such as the use of technology to initiate conversations and to monitor progress towards the right successful strategy implementation.
While there are multiple studies that have been conducted on the strategy implementation approaches in MNCs, most of these studies adopt a general outlook that does not reflect the situation as it is in Germany. Moreover, there is still a scarcity of information regarding the effectiveness of different strategy implementation approaches in German MNCs as well as in companies across the world. The proposed study will be able to address part of the currently existing gap in information by focusing on the German MNCs and will use empirical research to determine the relevance and effectiveness of strategy implementation to MNC performance.
The objective of the proposed research is to will be to determine the approaches through which executives and boards of directors of Germany-headquartered MNCs can improve strategy implementation to realize value for the shareholders of those MNCs. A qualitative approach to research will be adopted to further explore this research subject and to determine the unique attributes of strategy implementation in Germany. Using an empirical research approach, data will be collected from 10 of the top-tier MNCs in Germany, which are also in among the Fortune 500 firms in Germany. The empirical approach to research is considered an effective approach to research on concepts based on observational experiences in the field. The data collection will be carried out using surveys administered to leaders in local branches of German MNCs. The participating MNCs will be sampled through convenience sampling based on recent Fortune Magazine reports on organizational ratings as well as historical financial performance data. The theoretical framework for the proposed empirical research will be the concept of empiricism, which confounds that data can be an independent source of information and does not have to be linked to theory.
The independent variable in the research will therefore be the strategy implementation practices in different organizations, while the dependent variable will be the organizational outcomes in terms of target achievement. The targets will mainly be in terms of financial achievements. The data will be analysed quantitatively, through assignment of different weights to different strategy implementation practices and charting the financial achievements of organizations against the scores on the strategy implementation practices. To establish the particular strategy used in an organization, a combination of the data from the surveys and historical information pertaining to the management of different MNCs will be used.
Upon conducting the proposed research, it is expected that the information obtained will be able to address the research objective as stated. The selected empirical research methodology is considered effective for attaining the research objective. The study will provide data that can be generalized to German MNCs. However, its main limitation will be the focus on a limited sample size.
Cater, T. & Pucko, D. (2010), Factors of effective strategy implementation: Empirical evidence from Slovenian business practice. Journal for East European Management Studies, 15(3), 207-236. Retrieved from https://www.econstor.eu/bitstream/10419/84060/1/766454746.pdf
Dorrenbacher, C. & Geppert, M. (2009). Micropolitical strategies and strategizing in multinational corporations: The case of subsidiary mandate change. In, Costanzo, LA & MacKay, RB (Eds.), Handbook of research on strategy and foresight. Edward Elgar Publishing. Retrieved from https://books.google.co.ke/books?id=v6Q3KjdT7m4C&pg=PA211&lpg=PA211&dq=strategy+execution+processes+in+German+MNCs&source=bl&ots=6y6SN-CFVu&sig=ACfU3U0Dv-IgVvi9_OI62R3bxmehrbtwWw&hl=en&sa=X&ved=2ahUKEwjZztCqrcLpAhVKRBoKHY9fDRYQ6AEwA3oECAkQAQ#v=onepage&q=strategy%20execution%20processes%20in%20German%20MNCs&f=false
Gilbert, D. U. & Benham, M. (2009). Strategy management process in multinational companies: status quo, deficits and future perspectives. Problems and Perspectives in Management, 7(1), 70-85. Retrieved from https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/2477/PPM_EN_2009_01_Gilbert.pdf
Hrebiniak, L. (2008). Making strategy work: Overcoming the obstacles to effective execution. Ivey Business Journal, 1 – 7. Wharton School Publishing.
Okumus, F. (2003). A framework to implement strategies in organizations. Management Decisions, 41(9), 871-882. Retrieved from https://www.researchgate.net/publication/235293632_A_Framework_to_Implement_Strategies_in_Organizations
Radomska, J. (2014). Linking the main obstacles to the strategy implementation with the company’s performance. Procedia- Social and Behavioral Sciences, 150, 263-270. Available from: <https://core.ac.uk/download/pdf/81165172.pdf