A framework for effective strategy implementation- a resource- capability approach: the case of commercial banks in Ethiopia

Abstract

Extensive research in strategic management has shown that more than half of the business strategies fail to accomplish their intended objectives due to problems with strategy implementation. However, in comparison to strategy formulation, strategy implementation has received insufficient attention both at the theoretical and empirical levels. The strategy implementation practices in Ethiopian commercial banks were not adequately documented and most of the commercial banks lack an appropriate strategy implementation framework to execute their strategy effectively. The objective of the study was to develop a comprehensive framework that augments the effectiveness of strategy implementation. The study used an explanatory sequential mixed methods research design which utilized a quantitative research approach in the first phase of the study and a qualitative approach in the second part of the study. A sample of 229 top and middle-level managers of commercial banks in Ethiopia was chosen to collect quantitative data, and around 187 (82 percent) questionnaires were returned. In-depth interviews were also held with eight concerned bank officials to obtain qualitative data. The quantitative and qualitative data analyses were carried out using structural equation modelling and thematic analysis, respectively. The results of the study confirmed that strategy communication, incentives and rewards alignment, organisational structure alignment, organisational culture alignment, and strategy monitoring and evaluation are the major components of strategy implementation capability that positively influence strategy implementation success. Furthermore, the study identified managerial skills and managerial social capital as critical organisational resources that positively affect strategy implementation capability. The study also revealed that strategy implementation capability mediates the relationship between the two critical strategy implementation-related resources and strategy implementation success. By operationalizing strategy implementation capability as a second-order reflective-formative construct, the study established an empirically informed strategy implementation framework that entails three components: critical strategy implementation related resources, key elements of strategy implementation capability and strategy implementation performance. The study contributes to the existing knowledge on strategy implementation by expanding the extant strategy implementation frameworks to a broad-based and integrative framework. The study also supplements the strategy implementation literature by employing the resource-capability approach of the resource-based view in developing a framework for effective strategy implementation.