Background of the Study on Corporate Strategy, Strategic Leadership, and Organisational
Performance
Name
Liberty University - Lynchburg, VA
BUSI 101 - Introduction to Business
2022
Background of the Study on Corporate Strategy, Strategic Leadership, and Organisational
Performance
Optimal organizational performance can be perceived as an inimitable capability or even a
unique competency (Breene, 2008). Corporate strategy has been a neglected issue in both
theoretical and empirical discussions on superior firm performance. A decent organization
structure is needed so that a firm can manage its plans (Lear, 2009). Changes made to an
organization's strategy will result in new administrative issues which will necessitate for a new
structure in the fruitful implementation of the new strategy (Rau, 2008). Implementation of
strategy in respect to new company policy requires the participation in all affected departments.
Subject to the organization that affects the structure; the quality in which leadership influences
the structure in place defines the performance of the firm (Ongeti, 2014; Herath, 2007). Several
empirical studies have established that firm performance is influenced by numerous components
in determining the ability of a firm to attain and sustain a viable equilibrium among a
combination of these elements or variables. Lear (2009) shows that disparities in incorporating
organizational structure, strategic leadership for the implementation of a firm’s strategy might
have an effect on performance resulting to variations across organizations.
This research is anchored on three theories, specifically: the resource-based view; Institutional
theory to organization structure and the Leadership contingency theory. The concept of corporate
strategy is founded on the resource-based view. The RBV theory proposes that the resources
owned by an organisation are the key influences of its performance. Resources comprise of all
assets, capabilities, organizational processes, firm attributes, information, knowledge controlled
by a firm that enable it to implement strategies that increase its efficiency and effectiveness
(Peretomode, 2012).
The organization structure is based on the Institutional theory to management. This approach is
based on the idea that distinctive segments of institutional theory clarify how these components
are made and adjusted after some time. The accentuation on institutional theory is regularly seen
from the administrative viewpoint. The better legal environment supports the appropriation of
good organization structure (Anon, 2004). The third theory, strategic leadership is based on the
Fielder’s Leadership Contingency Theory (Bolden, et al. 2003). This theory analyzes the
implication of the circumstances to the impact on the leader, and confirms that leadership
effectiveness is influenced by the context in which the leader must operate in. In conclusion, an
authority approach which is fruitful in one association, or at one point in time, may not be
effective in another association or at another point in time.
Performance of Kenya state-owned corporations have deteriorated considerably through the
years. Miring’u and Muoria (2011) showed that low performance was accredited to labor in the
rigid market, amplified economic and external debt and continual price increase issues. State-
owned corporations were mismanaged, had bureaucracy, wastage, pilferage incompetence and
negligence in its operations ensuing to poor performance. Privatization and divestiture of SCs are
proposed to remedy these decision-making problems (Miring’u & Muoria, 2011). Awino (2015)
established a positive association with organizational structure and company effectiveness in
addition to an affirmative association amid unstructured organizational outlines and firm
performance of large Manufacturing Firms in Kenya. Serfontein (2010) concluded that Strategic
leadership is directly and indirectly positively related to operational strategy and organizational
performance.
Hidayat et al. (2015) found that environmental components (not the business conditions)
significantly affected the corporate strategy of assembling industries in Indonesia. Miring'u and
Muoria (2011) established a positive relationship between return on equity (RoE), board size and
board arrangements of all SCs. Koech and Namusonge (2012) examined the key effects of
leadership styles on organizational performance in defining the laissez-faire, transaction and
transformation leadership styles on organizational performance at state-owned corporations in
Kenya. These studies did not look at the moderating effects of organizational structure, and
strategic leadership on the relationship between corporate strategy and performance of Kenya
state-owned corporations. This is the gap that needs to be addressed by exploring the theoretical,
conceptual, contextual and methodological relationship amongst key variables as well as giving a
serious assessment of the major aspects of the key variables in this study.
The Concept of Corporate Strategy
According to Haythem (2015), corporate strategy is viewed as an arrangement, play, example,
position and point of view. The strategy a firm executes ought to be coordinated toward building
strengths in zones that fulfill the needs of purchasers and other key players within the
organization’s external environment. It hence shapes an extensive present-day plan that states
how the organization will accomplish its primary goals, augments competitive advantage and
limits losses, (Kyereboah and Biekpe, 2006).
In the globalized associations, organizations require vital thinking and just by intertwining
incredible corporate strategy would they have the capacity to efficient. A strengthened
competitive advantage happens when a firm actualizes a value-creating blueprint of which
different organizations can't duplicate the edges or realize it too expensive to duplicate (Herath,
2007). The corporate strategy joins the obligations, decisions, and exercises required for a firm to
achieve key aggressiveness and better to expected returns (Lear, 2009). The targets of the
corporate strategy are challenging for big firms and also for little retail outlets.
Strategic Leadership
Ireland and Hitt (1999) depict strategic leadership as the capacity to expect, predict, maintain
adaptability, think strategically, and foster cooperation with others to present changes that will
make a manageable future for the organization. Ireland and Hitt (1999) provide six segments of
strategic leadership, specifically; characterizing the firm's vision, utilizing and keeping up core
aptitudes, augmenting human capital, supporting a compelling organizational culture,
highlighting good practices, and establishing stable hierarchical controls.
Wendy (2012) underlines that; organizations can enhance their exceptional individual outline for
strategic leadership. This is a consolidated group of practices that shape an organization's ability
for change. With a specific end goal to create and keep up this capacity, this author characterizes
four essential basics that should be coordinated: commitment to the organization's motivation;
the composition of top management team; the capabilities and energy of individuals all through
the organization; and a structure of focused, well-picked vital activities that may give the firm a
competitive edge.
Organizational Structure
Yazdani (2009) highlights that organization structure helps staff in cooperating viably. It
underpins how internal and external techniques, authority and responsibility function within an
organization. It additionally characterizes how obligations are assigned and guarantees
commitment among its faculty (Herath, 2007). Walton (1986) perceived that organization
structure includes hierarchical levels and ranges of responsibility, aids in organizing of purposes
in a firm and defines notable roles or positions and generates solutions for integration and
problem-solving.
While most organizations require unmistakably agreed-upon processes, correspondence
channels, characterized obligations, among others, there is no ideal model of an organizational
structure, yet appropriate one is chosen to suit individual firms (Serfontein, 2010). Organization
structure influences the acknowledgment of the set firm targets and critical objectives (Robbin
and DeCenzo, 2005). It demonstrates the example of reporting relationships which are delineated
in an organizational chart. Firms whose reporting relationships are not clearly defined often have
no clear structure to be implemented in practice (Collins, 2015).
Organisational Performance
Performance includes the organization’s efficiency as estimated against its objectives. Richard et
al. (2009) characterize organization performance into two groups: financial performance (profits,
return on assets, return on investment, etc.) and product market performance. Daft (2000)
describes the organizational performance as the firm’s ability in attaining its goals effectively
and efficiently within the available resources and is used to obtain a corporate solution to a
problem (Hefferman & Flood, 2000).
The balanced scorecard approach is one of the unmistakable tools utilized in measuring
performance (Kaplan and Norton, 1992). It fuses measurements that have both monetary and
non-monetary qualities which demonstrate the yields of the actions made in the organization. It
weighs on both the internal and external performance pointers of a firm. This technique is
typically utilized for observing authoritative key objectives and the achievability of
accomplishing these objectives (Huang and Li, 2009; Kaplan and Norton, 1996).
Kenya State Corporations
A state corporation is termed as a corporate body founded by an Act of parliament. The president
of Kenya can also form it as an order to direct a corporate entity to execute specific functions
indicated in the law and, lastly, it might epitomize a monetary establishment licensed in the
Banking Act (Wamalwa, 2003). State corporations (SC’s) or parastatals were fashioned to meet
various Socio-Politico-Economic objectives and offer services that cannot be successfully
delivered by private financiers (Kobia & Mohammed, 2006). SC’s encourage national growth in
generating employment prospects as well as social, economic changes in the delivery of public
services (Akaranga, 2008; GoK, 2012). The Kenyan Government has encountered numerous
economic challenges from the mid-1970s forcing obtain extra funding from the World Bank and
IMF.
Through the years the output of these parastatals has been below par with the general public and
numerous investors continually draining funds from the exchequer. Further, the government
continually bailed out loss-making SC's (Mwaura, 2007; Obong’o, 2009). This resulted in the
World Bank and IMF encouraging the Kenya Government to embrace organizational change
programs. This decreased the government’s involvement in productive activities resulting in a
steady favorable economic situation for private sector activities and provision of general
administrative and social services. The World Bank and IMF proposed for privatization of the
SC’s to improve on their productivity. Precedence was given to local investors as some services
were privatized through the enactment of the Privatization act of 2005 which aimed toward
involving the private sector to improve the infrastructure and delivery of public services.
Numerous investigations in establishing ways of improving performance in Kenya’s SC's were
made. Miring’u & Muoria (2011) asserted that developing countries were applying the idea of
corporate governance since it inspired economic development. It was recognized that state
corporations have many governance challenges like corruption, nepotism, and mismanagement
resulting inclosure in the case of South Africa (Kyereboah & Biekpe, 2006). In June 2003 The
Kenya government publicized its economic salvage strategy for wealth and job creation. This
study will focus on all Kenya state corporations as of 10th August 2018. The corporations are
classified into: purely commercial public corporations (47); state corporations with strategic
functions (11); state agencies (62); independent regulatory agencies (25) and state agencies –
research institutions, public universities, tertiary education and training institutions (44) total
189, (National Treasury, 2018).
Research Problem
Previous financial literature has not yet come to a definitive conclusion as to what firm related
factors affect firm performance during any state of the economy (Rumelt, 1991). There are
contradictions on the concepts that define firm performance among theorists and researchers over
the years. Some studies Banerjee, (2013) and Carlo, (2013) focused on direct influence of firm
strategy, environment and organizational culture on firm performance (Murgor, 2014). While
others Karlsson & Tavassoli, (2015) looked at both the direct and indirect relationships of firm
level strategy and performance concepts with firm capabilities, organizational culture,
environment, and organization structure and supply chain as moderating variables. For instance,
Karlsson & Tavassoli, (2015) established that the independent effect of corporate strategy,
organizational structure and strategic leadership on firm performance is weaker as compared to
the combined effect of both variables on performance. Murgor (2014) established lack of
significant relationship between corporate strategy and external environment. While appreciating
their contribution, these studies did not incorporate organizational structure and strategic
leadership as moderating variables in the model of corporate strategy and performance that the
current study will address.
In Kenya, the success of Kenya state corporations is vital to the economic growth of the nation as
this ensures increased incomes and employment to the population (KIPPRA, 2013). It is on this
basis that their performance continues being a key priority to the government of Kenya (GoK)
and strategic management practitioners. despite of several studies which have been undertaken
on the relationship of firm level strategy and performance in this sector (Martynez & Poole,
2004; Murgor, 2014; Karlsson & Tavassoli, 2015), the direct and indirect relationship between
corporate strategy, organizational structure and strategic leadership on performance of Kenya
state corporations still remains an area of interest as there is scanty information on how this
variables are connected. Bushardt, Glascoff, and Doty (2011) studied the relationship between
organizational culture and organizational reward structure in German, While Yesil and Kaya
(2013), studied organizational culture and firm financial performance in a developing country,
Oyewobi, Windapo, & Rotimi, (2013) studied the impact of organizational structure and
strategies on organizations performance in South Africa and Auckland University. However, the
findings of these studies may not necessarily be generalizable to the Kenyan context.
considerable researches that have been undertaken in state corporations operate in developed
economies such as USA, UK, Singapore, Spain and China (Tavassoli (2015), which are different
context and their results and suggestions may not apply to the Kenyan context which is a
developing economy. hence, this study attempts to bridge the gap in limited empirical studies
that have investigated the relationships of the variables of influence of corporate strategy,
organizational structure and strategic leadership on the performance of Kenya state corporations
Several studies that have been undertaken in Kenya state corporations in different contexts using
cross sectional survey methodology with effective results. Martynez and Poole (2004) and Siew
and Kelvin (2004) used factor analysis and ANOVA to analyze linkages between strategy,
performance, management structure and culture. While Karlsson and Tavassoli (2015), applied
longitudinal survey to study the relationship between innovation strategies of firms and
performance in Sweden. The cross sectional survey method has also not been exhausted as
various analytical skills and techniques on how different samples and populations connect are
still unexploited. Therefore, the current study applies multi-regression analysis to resolved
methodological issues along the concepts of the study.
It is evident from the various empirical studies that the nature of the relationship between
corporate strategy and performance is varied. Different empirical findings can be as a result of
the methodological differences, variations in measurement of firm performance and even
contextual differences. in addressing the identified existing knowledge gaps (Martynez & Poole,
2004; Karlsson & Tavassoli, 2015), the study therefore sort to establish the influence of
Corporate strategy, organizational structure and strategic leadership on the performance of
Kenya state corporations by answering the following research question; does corporate strategy,
organizational structure and strategic leadership on the performance of Kenya state corporations?
Value of the Study
The study aims at testing how existing theories of Resource-based theory, contingency approach
to organizational structure and Fielder’s Leadership Contingency theory ratifies or contradicts
their theoretical propositions compared to the critical variables of the study namely; corporate
strategy, organization structure, strategic leadership, and performance. The results of this study
will inform management of the Kenya state corporations in making suitable choices in achieving
their predefined aims and objectives resulting in a great performance in these institutions.
This study will match available data in guiding towards effectively associating performance of
individual Kenya state corporations with corporate strategy, through the influence of the
moderating effects of organizational structure and strategic leadership. This study will give
guidance on strategy creation and development in Kenya state corporations in empowering
policy-makers in comprehending how the operating environment surrounding Kenya state
corporations influences organization performance. Realization of improved management
strategies that will improve firm performance in the context of SC’s will be deduced from the
study.
The chapter introduces the background of the study and shows the concept of corporate strategy.
It further explains the other variables that are paramount to this study, namely: strategic
leadership, organization structure and organization performance. It also shows the linkages
between these variables and explains the context of this study, which are the Kenyan state
corporations. The research problem, research objectives and the value of the study are finally
expounded at the end of the chapter.
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