UNIVERSITY OF GHANA AN EXAMINATION OF STRATEGIC MANAGEMENT BEHAVIOUR OF FIRMS FROM EMERGING MARKETS: EVIDENCE FROM GHANA BY SUSAN SENA GUDU 10263289 THIS THESIS IS SUBMITTED TO THE UNIVERSITY OF GHANA, LEGON IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF MPHIL HUMAN RESOURCE MANAGEMENT DEGREE December, 2015. University of Ghana http://ugspace.ug.edu.gh i DECLARATION I hereby declare that this work is the result of my own research and has not been replicated by anyone for any academic award in this or any other university. All references used in the work have been fully acknowledged. I bear sole responsibility for any shortcomings. ..................................................... ............................................... SUSAN SENA GUDU DATE (10263289) University of Ghana http://ugspace.ug.edu.gh ii CERTIFICATION I hereby certify that this thesis was supervised in accordance with procedures laid down by the University. ........................................... ................................... DR. OBI BERKO DAMOAH DATE (SUPERVISOR) University of Ghana http://ugspace.ug.edu.gh iii DEDICATION This work is dedicated to the Almighty God, my mother Grace Sedor and siblings. All glory and honour belong to God. University of Ghana http://ugspace.ug.edu.gh iv ACKNOWLEDGEMENTS I am highly indebted to my supervisor Dr Obi Berko Damoah for his timeless dedication, guidance, corrections and constructive criticisms throughout the supervision of this thesis. My profound gratitude also goes to all the lecturers and staff of the Department of Organization and Human Resource Management, University of Ghana Business School, for contributing in diverse ways to the successful completion of this study. Also, I wish to express my heartfelt appreciation to Mr Godson Sena Adjavor for his immense contribution towards the success of this work. I am highly indebted to my family and friends who were strongly encouraging me in time of my academic challenges. I wish to acknowledge all the authors whose measuring instruments and scholarly articles I made reference to in this study. University of Ghana http://ugspace.ug.edu.gh v TABLE OF CONTENTS DECLARATION ............................................................................................................ i CERTIFICATION ......................................................................................................... ii DEDICATION ............................................................................................................. iii ACKNOWLEDGEMENTS .......................................................................................... iv TABLE OF CONTENTS ............................................................................................... v LIST OF TABLES ..................................................................................................... viii LIST OF FIGURES ...................................................................................................... ix LIST OF ABBREVIATIONS ........................................................................................ x ABSTRACT .................................................................................................................. xi CHAPTER ONE INTRODUCTION ....................................................................... 1 1.1 Background ..................................................................................................... 1 1.2 Statement of the Research Problem ................................................................ 2 1.3 Research Objectives ........................................................................................ 2 1.4 Research Questions ......................................................................................... 3 1.5 Research Hypotheses....................................................................................... 4 1.6 Justification of the Study ................................................................................. 4 1.7 Delimitations ................................................................................................... 5 1.8 Limitations ...................................................................................................... 5 1.9 Chapter Disposition ......................................................................................... 6 CHAPTER TWO LITERATURE REVIEW ............................................................ 7 2.1 Introduction ..................................................................................................... 7 2.2 Definition of Terms ......................................................................................... 7 2.2.1 Strategy ...................................................................................................... 8 2.2.2 Strategic Management ............................................................................. 10 University of Ghana http://ugspace.ug.edu.gh vi 2.2.3 Strategic Planning .................................................................................... 11 2.2.4 Emerging Markets (EM) .......................................................................... 12 2.2.5 Globalization ............................................................................................ 14 2.2.6 Competitiveness ....................................................................................... 14 2.2.7 Models of Strategic Management (SM) Behaviour ................................. 15 2.2.7.1 Strategy Formulation ...................................................................... 18 2.2.7.1.1 Strategic Management Practices (H1) .......................................... 19 2.2.7.1.2 Strategic Management Tools (H2) ............................................... 26 2.2.7.2 Strategy Implementation ................................................................. 41 2.2.7.3 Strategic Control and Evaluation .................................................... 45 2.3 Further Empirical Literature on Firms‟ Behaviour ...................................... 51 2.4 Firm Demographics ..................................................................................... 55 2.5 Conceptual Framework ................................................................................ 57 2.6 Summary of the Hypotheses for the Study .................................................. 59 CHAPTER THREE METHODOLOGY .................................................................. 60 3.1 Introduction .................................................................................................. 60 3.2 Research Design........................................................................................... 60 3.3 Population .................................................................................................... 60 3.4 Sample and Sampling Technique................................................................. 61 3.5 Unit of Analysis ........................................................................................... 62 3.6 Instruments for Data Collection ................................................................... 62 3.7 Validity and Reliability ................................................................................ 63 3.8 Ethical Considerations ................................................................................. 64 3.9 Administration of Research Instrument ....................................................... 65 3.10 Data Analysis ............................................................................................... 65 University of Ghana http://ugspace.ug.edu.gh vii 3.11 Conclusion ................................................................................................... 65 CHAPTER FOUR PRESENTATION AND DISCUSSION OF FINDINGS ....... 66 4.1 Introduction .................................................................................................. 66 4.2 Descriptive Statistics .................................................................................... 66 4.3 Results of Hypotheses .................................................................................. 69 4.4 Discussion of Findings ................................................................................. 79 CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS .......................................................... 84 5.1 Introduction .................................................................................................. 84 5.2 Summary ...................................................................................................... 84 5.3 Conclusion ................................................................................................... 85 5.4 Implication of the Study............................................................................... 86 5.5 Recommendations ........................................................................................ 86 5.6 Limitations ................................................................................................... 87 REFERENCES ............................................................................................................ 88 APPENDICES ............................................................................................................. 98 Appendix 1: Research Questionnaire ....................................................................... 98 Appendix 2: Supplementary Tables ....................................................................... 101 University of Ghana http://ugspace.ug.edu.gh viii LIST OF TABLES Table 2.1: Stages Of Strategic Management Model .................................................... 16 Table 2.2: Phases of the Strategic Management Model ............................................... 17 Table 4.1: Owner and Firm Demographic Distribution ............................................... 67 Table 4.2: Descriptive Statistics of Firm Age and Size. .............................................. 68 Table 4.3: Means, SD, Skewness, Kurtosis and Alpha Reliabilities of key study variables ..................................................................................................... 68 Table 4.4: Descriptive Statistics of Emphasis of Strategic Management Practices ..... 70 Table 4.5: Relative strength of Strategic Management Practices Employed ............... 70 Table 4.6: Descriptive Statistics of Strategic Management Tools ............................... 72 Table 4.7: Relative strength of Strategic Management Tools Employed .................... 72 Table 4.8: ANOVA for Strategic Management Practices on Firm Sector ................... 73 Table 4.9: ANOVA for Strategic Management Practices by size of Firms ................. 74 Table 4.10: ANOVA for Strategic Management Practices by Ownership .................. 76 Table 4.11: ANOVA for Strategic Management Tools by Firm Sector ...................... 77 Table 4.12: ANOVA for Strategic Management Tools by size of Firms .................... 78 Table 4.13: ANOVA for Strategic Management Tools by Ownership ....................... 79 University of Ghana http://ugspace.ug.edu.gh ix LIST OF FIGURES Figure 2.1: PESTLE ..................................................................................................... 29 Figure 2.2: Political factors .......................................................................................... 30 Figure 2.3: Economic factors ....................................................................................... 32 Figure 2.4 Social factors .............................................................................................. 33 Figure 2.5 Technological factors ................................................................................. 35 Figure 2.6 Legal factors ............................................................................................... 37 Figure 2.7: Environmental factors ............................................................................... 38 Figure 2.8 Porter‟s five Forces..................................................................................... 39 Figure 2.9 Conceptual Framework .............................................................................. 58 University of Ghana http://ugspace.ug.edu.gh ../../Afford/Downloads/SUSAN%20SENA%20GUDU%20(10263289).doc-for%20submission.doc#_Toc451159097 x LIST OF ABBREVIATIONS ASEAN Association of Southeast Asian Nations BEA Break Even Analysis CEOs Chief Executive Offices DVD Digital Versatile Disc ECOWAS Economic Community of West African States EM Emerging Market IMF International Monetary Fund PEST/PESTLE Political, Economic, Social, Technological, Legal & Environmental RIM Research in Motion SM Strategic Management SWOT Strengths, Weaknesses, Opportunities, and Weaknesses UN United Nations UNIDO United Nations Industrial Development Organization WTO World Trade Organization University of Ghana http://ugspace.ug.edu.gh xi ABSTRACT It is argued that strategic management practices positively influence the competitiveness of firms. In the light of this the study examines the strategic management behaviors (practices and tools) adopted by firms from emerging markets, using Ghana as a case study. To address this issue, literature was extensively reviewed out of which a conceptual model consisting of a sample of key strategic management practices and tools that enhance firm competitiveness was adapted and validated using data from Ghana. The study sampled 390 respondents from the manufacturing and service sub-sectors that were purposively and conveniently drawn. By employing mean rankings and analysis of variance (ANOVA) to confirm and/or refute the proposed model, the following were among the key findings. First, development of annual goals and long-term goals were among the common strategic management practices used by Ghanaian firms. Secondly, concerning the strategic management tools, doing a SWOT analysis, and examining critical success factors (CSFs) were commonly used. Following from the findings, the study recommends that firms from Ghana must link the application of strategic practices and tools to their key performance measures. This will enable them to identify the outcomes of strategic behaviours and assess their impact on competitive indicators. It was further recommended that the ministry of Trade and Industry in collaborations with various industries and their associations must include some of the key strategic tools and practices as standards of best practices. University of Ghana http://ugspace.ug.edu.gh 1 CHAPTER ONE INTRODUCTION 1.1 Background Globalization has made businesses competitive throughout the world. As a result of globalization, firms from emerging markets are admonished to grow and develop in order to catch up with their counterparts from the developed world (Gorodnichenko, Gao & Terell, 2008; Liang, Ren, & Sun, 2014; David, 2011; Nafula & Zubiran, 2012). According to Gorodnichenko, Svejnar, and Terrell (2008), opening of borders to trade and foreign investment creates a favorable chance for domestic firms in emerging market economies to come out with new ideas in order to improve their competitive status. Moreover, a firm‟s control and reputation in domestic markets may be notably enhanced if the firm competes globally. However, some firms in emerging markets most especially African firms are not competitive enough to meet the demand in the global market. This could be as a result of poor branding of products, poor delivery of goods and services, inability to make good use of technology and others. Some researchers such as Grant (2003) and Orndoff (2002) have emphasized the relevance of strategic management practices and tools in enhancing the competitiveness of firms. They assert that, managers use strategic management practices to support situation analysis and evaluation of strategic choices in order to enhance performance (Grant, 2003; Orndoff, 2002). In this regard, the use of strategic tools/practices in what they deem to be meaningful processes of strategic decision making is very important in enhancing performance (Jarzabkowski & Kaplan, 2012). University of Ghana http://ugspace.ug.edu.gh 2 Hitt, Boyd, and Li (2004), and Dandira (2012) supported this view by saying strategic management has been recommended as one of the effective tools in increasing organizational performance through effective decision making and efficient strategy formulation, implementation and evaluation. Based on the arguments raised so far on the relevance of strategic management practices and tools in enhancing competitiveness among organizations, it is expedient to assess the extent to which firms in emerging markets from Ghana employ strategic practices and tools in their quest to become globally competitive. 1.2 Statement of the Research Problem Following the globalization influences on firms in the global market, it is identified that compared to firms from the developed countries, the competitiveness of firms from emerging markets including Ghana is low. However, studies (eg Greenwald & Kahn, 2005 and Soh, 2014) argued that strategic management practices and tools are among the factors that enhance firms‟ competitiveness. Whilst Ghana is considered among the emerging markets, to date no systematic studies examine the extent of the competitiveness of the Ghanaian firms from strategic management perspective. In the light of the foregoing gap, this study seeks to examine the extent of adoption of strategic management practices and tools among Ghanaian firms. 1.3 Research Objectives University of Ghana http://ugspace.ug.edu.gh 3 The main objective of the study is to examine the extent of adoption of strategic management practices and tools among the Ghanaian firms. Specifically, the study seeks to: i. Examine the relative strength of strategic management practices employed by firms in Ghanaian. ii. Examine the relative strength of strategic management tools employed by Ghanaian firms. iii. Examine the extent to which the strategic management practices differ according to firm demographics (sector, size and ownership). iv. Examine the extent to which the strategic management tools differ according to firm demographics (sector, size and ownership). 1.4 Research Questions From the research objectives, the study seeks to examine the following research questions: i. What is the relative strength of strategic management practices Ghanaian firms‟ employ? ii. What is the relative strength of strategic management tools Ghanaian firms employ? iii. To what extent do the practices differ according to firm demographics (sector, size and ownership)? iv. To what extent do the tools differ according to firm demographics (sector, size and ownership)? University of Ghana http://ugspace.ug.edu.gh 4 1.5 Research Hypotheses In relation to the research objectives and questions the following hypotheses were developed: H1: There is a relative difference among strategic management practices employed by Ghanaian firms (Chapter 2, sub-section 2.2.6.1.1) H2: There is a relative difference among strategic management tools employed by Ghanaian firms (Chapter 2, sub-section 2.2.6.1.1) H3a: There is a significant association between firm sector and strategic management practices. (Chapter 4, sub-section 2.2.3) H3b: There is a significant association between firm size and strategic management practices. (Chapter 4, sub-section 2.2.3) H3c: There is a significant association between firm ownership and strategic management practices. (Chapter 4, sub-section 2.2.3) H4a: There is a significant association between firm sector and strategic management tools. (Chapter 4, sub-section 2.2.3) H4b: There is a significant association between firm size and strategic management tools. (Chapter 4, sub-section 2.2.3) H4c: There is a significant association between firm ownership and strategic management tools. (Chapter 4, sub-section 2.2.3) 1.6 Justification of the Study The study is to inform managers and CEOs on strategic management behaviours of firms in Ghana. It is also to enable them understand the usefulness of these practices. Findings of the study will add to knowledge and literature on the subject matter in developing countries of which Ghana is not exempted. The findings will: University of Ghana http://ugspace.ug.edu.gh 5 i. Support and enrich theory and model of strategic management practices in firms. ii. Allow the identification of the concept and framework of strategic management practices and also create awareness among firms on the importance of strategic management behaviors as a tool for competitive advantage. iii. It will help policy makers in formulating the appropriate policies regarding strategic management behaviors. 1.7 Delimitations Though the study seeks to examine strategic management practices and tools of firms, it will be difficult to provide a comprehensive analysis of all the practices identified in literature. The study focused on the following strategic management practices namely; mission, annual goals, trend analysis, action plan, competitor analysis and ongoing evaluation. Strategic management tools on the other hand reviewed are; Critical Success Factors, SWOT analysis, Stakeholder analysis, Value Chain analysis, PEST/PESTEL, Porter‟s five forces analysis and Break-even analysis. These practices and tools are regarded as success factors critical in achieving competitive advantage (Bart & Hupfer, 2004; Kantrabutra, 2010). 1.8 Limitations Findings from the study were drawn from firms in Accra only. This could not represent all firms in Ghana. Generalization was limited since firms in Ghana were not largely represented. University of Ghana http://ugspace.ug.edu.gh 6 The study made use of non-probability sampling methods which comprised of purposive and convenience sampling techniques. These techniques are liable to biases such as representation of sample which could affect the generalization of findings to the target population. Also, design was limited to quantitative only. This could affect generalization as well since respondents could not express their views if mixed method was used. 1.9 Chapter Disposition This thesis is organized in five main chapters. The first chapter presents the background information, problem statement, research objectives, research questions, justification, scope, delimitation and limitation of the study. Chapter two reviews available literature on strategic management practices and tools, strategic management models; a conceptual model was developed, and a concise definition of the key concepts provided. The third chapter provides adequate information on the methodology. This is followed by chapter four which examines the hypotheses developed in the study. Results are presented and analyzed statistically in this chapter. The last chapter (5) looked at the summary, conclusions and recommendations of the study. Implications of strategic management practices for firms, as well as suggestions for future studies were provided. University of Ghana http://ugspace.ug.edu.gh 7 CHAPTER TWO LITERATURE REVIEW 2.1 Introduction Competitiveness has increasingly gained prevalence across the globe (Momaya, 2011; World Economic Forum, 2005, 2006, 2007; Pillania, 2007, 2008). The international trade theories affirmed that different countries have different comparative advantages. Thus, if a country is rich in natural resources or capital, it has a comparative advantage over the others. However, in the current knowledge economy, knowledge as a resource has no natural home base and can be transferred easily anywhere to be related to natural resources. This chapter therefore defines key concepts in the study. The chapter further looks at strategic management models in relation to strategic practices and tools. An empirical literature was reviewed on selected strategic practices and tools. A conceptual framework was developed from David‟s models. The practices and tools that informed the study were; Annual goals, long-term objectives, action plan, mission statement, ongoing evaluation, trend analysis and competitor analysis being the practices. The tools on the other hand are; critical success factors, SWOT analysis, stakeholder analysis, break even analysis, value chain analysis, PESTLE, and Porter‟s five forces. 2.2 Definition of Terms The key terms below are explored because of their relative importance to the understanding of the study. University of Ghana http://ugspace.ug.edu.gh 8 2.2.1 Strategy According to Thornhill (2007), Boje (2008), and Palli, Vaara, and Sorsa (2009), strategy is the art of creating value. They also contend that, strategy allows firms to achieve as they reduce costs and as well improve on their products. Strategy to them emphasizes only a limited set of actions and provides a concise market situation that increases competitor advantage over other firms. They further argue that, strategy is seen as a dialogue which has its own detailed conditions of opportunities that enable certain ways of acting and at the same time restricting other actions. Strategy therefore, is to lead a firm through changes and shifts to protect its future growth and sustainable achievement. David (2011) also defined Strategy as the means by which long-term objectives are achieved. To him, a firm‟s strategies may include geographic expansion, diversification, acquisition, product development and re-thinking, market penetration, retrenchment, divestiture, liquidation, and joint ventures. David further opined that, strategies are likely measures that necessitate top management decisions and large amounts of the firm‟s resources. In addition, strategies affect a firm‟s long-term success, usually for at least five years; hence strategies are future-oriented. Strategies however have diverse functional outcomes that need the concern of both the external and internal factors of the firm to encounter. A well-defined strategy therefore integrates a firm‟s major plans, objectives, policies and programmes and commitments into a cohesive whole. It marshals and allocates limited resources in the best way, which is defined by an analysis of a firm‟s unique strengths and weaknesses and of opportunities and threats in the environment. It University of Ghana http://ugspace.ug.edu.gh 9 considers how to deal with the potential actions of intelligent opponents. A strategy is therefore a firm‟s way of creating unique value and be able to attract the customers so as to remain in competitive environment in the business world. Strategy making has increasingly been regarded as a context dependent, socially accomplished activity directed toward the achievement of strategic goals and constructed through actions and interaction of multiple actors or groups distributed throughout an organization (Hendry, Kiel & Nicholson, 2010). Other authors however opined that, strategy is a socially skillful, positioned activity arising from the measures and interactions of various level actors, and they see strategy not only as something a firm has, but something that its affiliates do to make the firm competitive (Jarzabkowski, Balogun & Seidl, 2007; Vaara & Whittington, 2012; Whittington, 2007). Markides (2004) has a different view, he asserts that, in spite of the clear significance of strategy to the success of a firm and various research on strategy, most academics have very little to say about what strategy really is. Other authors also refer to strategy as a means of achieving future plans and goals of the organization by management to compete and improve performance to enhance development and growth of the firm (Pearce & Robinson 2013; Thompson, Peteraf & Strickland, 2012). The definitions of strategy by David (2011); Pearce & Robinson (2013); and Thompson, Peteraf, & Strickland (2012) have been operationalized for the purpose of this study. Thus, strategy is seen as a firm‟s long-term and future plan, or success that will enable firms to grow and develop to remain competitive in the global market. University of Ghana http://ugspace.ug.edu.gh 10 2.2.2 Strategic Management Strategic management is the process in which an organization develops and implements plans that promote the goals and objectives of that organization. The process of strategic management is a continuous one that changes as the organizational goals and objectives evolve (David, 2011; Wicks, 2014). Firms engage in strategic management to ensure that they adapt to trends and external changes such as globalization. Wicks (2014) suggested key concepts which characterize strategic management and the development of organizational goals. At the core of the strategic management is the creation of goals, a mission statement, values and organizational objectives. Organizational goals, the mission statement, as well as values and objectives guide the organization in its pursuit of strategic opportunities. Nag, Hambrick and Chen (2007) also recognized the field of strategic management as the major anticipated and growing initiatives taken by general managers on behalf of owners, involving utilization of resources to enhance the performance of the firms in their internal and external environments. Lynch (2009), also defined Strategic Management as scholarly frameworks, theoretical models, and thoughts that enable company managers to discover opportunities for providing value to customers and to make sure that there is value and profit. Strategic management in effect is the way in which the company defines its business and links together the two most important concepts: knowledge and relationships. Dincer, Tatoglu and Glaister (2006), in their view argue that strategic management places importance on the resource distribution and plans throughout the firm. Therefore, strategic management is regarded as a conscious planning process University of Ghana http://ugspace.ug.edu.gh 11 introduced by management based on detailed industry analysis and aimed at designing an organized grand strategy for the firm. Pearce and Robinson (2013) also defined strategic management as a means of formulating, implementing and evaluating plans that aim at achieving organizational goals amd objectives. From the definitions reviewed, it is plausible to say that, strategic management is all about where a firm wants to be, when to get there, and how to get there to remain competitive in the world of business. It therefore makes firms more responsible in shaping their future goals and objectives. A firm or an organization however goes through certain practices or behavior to achieve this long-term goal to successfully grow and develop in the competitive market. These practices are in effect the components of strategic management practices discussed in the study. 2.2.3 Strategic Planning Strategic planning is a difficult process that takes an organization into an unknown field. It is a risk taking venture which does not offer outright direction for a firm‟s success; rather, it engages the firm through a process and provides a structure for addressing issues of concern and finding solutions to problems (David, 2011). Accordingly, Johnson, Whittington and Scholes (2011) refer to strategic planning as a systematic process in developing an organizational strategy. It plays a psychological role where people in strategy development help to crerate ownership of their strategy. It as well provides a sense of security to managers who think they should proactively detect and handle issues concerning the firm. University of Ghana http://ugspace.ug.edu.gh 12 Thompson, Peteraf and Strickland (2012: 86), opined that strategic planning involves outlining the future course and business intentions, performance targets, and strategies or approaches to adopt in order to achieve the desired objectives/goals of the firm or organization. 2.2.4 Emerging Markets (EM) Hoskisson, Eden, Lau and Wright (2000) referred to Emerging Markets as low- income and fast growth economies that have gone through radical changes in the past. Hoskisson et al. (2000) again assert that emerging markets are conceptualized as those countries that have started economic liberalization and implemented free-market principles such as increased transparency, privatization, deregulation and others, in order to advance their global competitiveness. The notable EMs are; Middle and South America, Africa, and the ASEAN (Association of Southeast Asian Nations) countries. The developed markets however are represented by North America, Western Europe, Australia, New Zealand and Japan. According to the International Monetary Fund, the developed/advanced market group comprises also the Newly Industrialized Economies; Hong Kong, Singapore, Korea, Taiwan and Israel, whilst the other countries are referred as emerging and developing markets/economies (International Monetary Fund, 2011). Wai-Chung (1999) also referred to emerging markets as newly industrialized economies in Asia, Africa, Eastern Europe and Central and South America. He further said the term "emerging market" implies the superiority of "advanced industrialized economies", and has been used for two reasons. First, is to describe these markets as "developing", "emerging", "and less developed." More so, emerging markets are those University of Ghana http://ugspace.ug.edu.gh 13 economies experiencing rapid internal transformations which enable them to make increasingly important contributions to the global economy. Second, the term "emerging markets" is well-grounded and implicit in the business, economics and development studies literature. Mahajan and Banga (2006), based their definition of Emerging Markets (EMs) on GDP per capita, as opposed to Gross National Income (GNI), to determine emerging markets because they opined GDP excludes payments from other countries. Payments from abroad can be up to 30 – 40% of GNP. Thus, GDP is a better measure of domestic growth and economic performance. They endorsed the use of GDP after amendment for purchasing power parity and currency fluctuations as these adjustments communicate development levels better across countries for the purposes of most marketers. A group of 152 EMs includes all countries classified as “middle income” or “low-income” by the World Bank (2006), as “middle human development,” “low human development” or “developing” by the United Nations (2005), and as “developing countries” by the World Trade Organization (WTO) (WTO, 2005). Per the various definitions, Emerging Markets therefore are the “transition economies” of the former Soviet Union, the Eastern Bloc, and Asia and the so-called “developing countries” of Africa where Ghana is located, Asia, the Middle East, and Latin America. The study however adopts Hoskisson et al‟s (2000) definition which conceptualized emerging markets as those countries that have started economic liberalization and implemented free-market principles such as increased transparency, University of Ghana http://ugspace.ug.edu.gh 14 privatization, deregulation and others, in order to advance their global competitiveness. 2.2.5 Globalization Globalization according to Pearce and Robinson (2011) refers to “the strategy of pursuing opportunities anywhere in the world that enable a firm to optimize its business functions in the countries in which it operates.” Hayakawa, Machikita, and Kimura (2012) present a review of the large number of studies which have just considered the relationship between globalization and firm level Total Factor Production (TFP). They however defined globalization in relation to the firm‟s exports and imports, firm‟s outward investment, foreign investment in the firm and trade liberalization/import competition in the industry in which the firm operates. Globalization in effect is a borderless world as a result of advancement in technology, communication and information, and transportation. Without these advancements therefore, there would not be trade liberalization or global market. Before a firm enters a global market, it is important for the firm to conduct both internal and external assessment to ensure a strong market and stability of their firms. 2.2.6 Competitiveness Firm competitiveness is a global concern which is crucial to the growth and development of emerging market firms. Competitiveness of firms enhances efficiency and effectiveness of firms in the global market. It is therefore the ability of a firm to offer goods and services that meet the quality standard of the domestic and world market at a competitive price. Competitiveness also provides enough income on the resources in use or consumed in producing them (Thompson, Peteraf, & Strickland , University of Ghana http://ugspace.ug.edu.gh 15 2012). Ghanaian firms however need to adopt good and defensive strategic management practices and tools that could help them maintain their competitive advantage. This is because the stronger their strategies, they are less attacked by rivals. More so, they have less impact if there is any competition, and as well compel rivals to diverts their efforts to other competitors. All these help firms to fortify their competitive positiions. 2.2.7 Models of Strategic Management (SM) Behaviour There are various models of strategic management practices that have been advanced in theory and adopted by researchers in various studies (David, 2011; Pearce and Robinson, 2013). Among the existing models are; the Pearce and Robison‟s (2011) 14-stage model of strategic management behavior. In this model, the authors argued that in order to be competitive, firms or organizations must constantly undertake 14 main practices which consists of constantly 1) revising mission, 2) undertaking social responsibility, 3) promoting ethical behavior , 4) scanning the global environment, 5) scanning the domestic environment, 6) conducting internal assessment, 7) developing long-term objectives and design generic grand strategies, 8) conducting strategic analysis, 9) identifying strategic choice, 10) designing strategic reward systems, including policies, 11) structuring the organization, 12) designing appropriate culture, 13) designing strategic control and 14) designing entrepreneurship behaviors. The next model of strategic management practices is the David‟s (2011) strategic management model which is crucial for firm competitiveness. The model has been grouped into main three stages (strategy formulation, implementation and evaluation). Strategic practices that fall within the formulation stage are: 1)Development of Vision University of Ghana http://ugspace.ug.edu.gh 16 and Mission Statements, 2) Performing External Audit, 3) Performing Internal Audit, 4) Establishing Long-Term Objectives, 5) Generate, Evaluate and Select Strategies, 6) Annual goals, and 7) Trend analysis. The second stage which is the implementation also has the following: 1) Management Issues, 2) Marketing, Finance, Accounting, Research and Development, 3) Action plan, the third stage under the model is strategy evaluation. The practices under it are: 1) Measure performance, 2) Evaluate performance 3) ongoing Evaluation and 4) Competitor analysis. The above concepts including their corresponding tools are represented in the table below (see Table 2.1). Table 2.1: Stages Of Strategic Management Model No. Stages Strategic Practices Corresponding Tools 1. Strategy Formulation Development of Vision and Mission Statements Performing External Audit, Performing Internal Audit, Establishing Long-Term Objectives, Generate, Evaluate and Select Strategies, Annual goals Trend Analysis Stakeholder analysis SWOT analysis SWOT analysis Value chain analysis PESTLE, Porter‟s five force SWOT analysis SWOT analysis 2. Strategy Implementation Management Issues Marketing, Finance, Accounting, Research and Development, Action Plan Critical Success Factors Activity schedules Flow charts Activity Schedule 3. Strategy Evaluation Measure Performance Evaluate Performance Ongoing Evaluation Competitor Analysis Break Even Analysis Break Even Analysis Break Even Analysis Break Even Analysis Source: David, 2011 The next model of strategic management practices is that of Vasile, Popescu, Iancu & Popescu (2014) which has been grouped into five phases. They are: 1)Defining the business and the company mission, 2) Setting strategic objectives and performance targets, 3) Formulating a strategy to achieve the target objectives, 4) Implementing University of Ghana http://ugspace.ug.edu.gh 17 and executing the strategic plan, and 5) Evaluating performance and reformulating the strategic plan. They are of the view that these practices are very instrumental in ensuring firm growth and development leading to its competitiveness in the world market. These concepts including their corresponding tools are outlined in the table below (Table 2.2). Table 2.2: Phases of the Strategic Management Model Phases Practices Corresponding Tools 1 Defining the business and the company mission, Stakeholder analysis and SWOT analysis 2 Setting strategic objectives and performance targets PESTLE, 3 Formulating a strategy to achieve the target objectives, PESTLE, value chain analysis 4 Implementing and executing the strategic plan Flow charts Activity Schedule 5 Evaluating performance and reformulating the strategic plan Break Even Analysis Source: Vasile, Popescu, Iancu and Popescu (2014) The following paragraph however explains the practices and tools that inform the study in addition to their empirical studies. David‟s (2011) model was adapted and used as a conceptual framework (see the discussions of the sub-themes below, including Figure 2.9). This model is chosen because it is much easier and simpler to University of Ghana http://ugspace.ug.edu.gh 18 understand. More so, the practices and tools used in this study were selected because they are crucial in terms of firm competitiveness (David, 2011; and Pearce & Robinson, 2013). Also, of the practices that David‟s model outlined, the study does not consider all the practices. The discussions are however based on the three stages of David‟s model (strategy formulation, implementation and evaluation) outlining each practices and their tools in each stage. The specific practices addressed under Strategy Formulation are: Mission Statements, Long-Term Objectives, Annual goals, and Trend Analysis whilst the tools are; Stakeholder analysis, SWOT analysis, value chain analysis, PESTLE, and Porter‟s five force. The specific Strategy Implementation practice discussed is Action plan whilst the tool is Critical Success Factors. The third stage being Strategy Evaluation also looked at Ongoing Evaluation, and Competitor Analysis as practices and Break Even Analysis as the tool. 2.2.7.1 Strategy Formulation Strategy formulation is the first phase of David‟s model. It includes both the strategic practices and tools. The practices are; development of a mission statement, annual goals, setting up long-term objectives, and conducting trend analyses. The strategic tools on the other hand are SWOT analysis, Value Chain analysis, Stakeholder analysis, PESTLE and Porter‟s five forces. According to David, strategy formulation decisions entrust an organization to specific products, markets, resources, and technologies over a period of time towards a competitive advantage (David, 2011). The following paragraph explains the selected practices and tools in detail. However, these tools and practices are variables that inform the hypotheses of the study (chapter 1 sub-section 1.5, H1 & H2) University of Ghana http://ugspace.ug.edu.gh 19 2.2.7.1.1 Strategic Management Practices (H1) Strategic management practices refer to what firms do to develop, implement and evaluate strategy (Johnson, Scholes & Whittington, 2011). In other words, strategic management practices are the actions taken by firms to gain competitive advantage over others. Such practices include; mission and vision statements; trend analysis, annual goals, ongoing evaluation; long-term objectives; action plan, competitor analysis, and others. From the practices enumerated, it is obvious to say that strategic management practices are the formal procedures a firm undertakes in their quest to gain competitive advantage. This section therefore addresses hypothesis one (1) which looks at the relative difference among strategic management practices employed by Ghanaian firms. Mission Statements Hill (2008), referred to mission statement of a firm as the purposes and the reason of its existence. A successful mission statement starts by convincingly expressing the firm's purpose. The mission statement ought to direct the dealings of the firm, highlight on its general goal; provide a course, and facilitate decision-making. It also provides "the framework or context within which the firm‟s strategies are formulated. He therefore suggested that, a good Mission statement should include the following; Goal(s) of the firm, how the firm offers value to stakeholders and an affirmation of a firm's sole base of purpose. The question why firms exist is really answered by a mission statement. Amin and Majid, (2011); and (Al Hijji, 2014) however, referred to mission as a unique fundamental purpose which makes firms distinct from other related firms and University of Ghana http://ugspace.ug.edu.gh 20 determines its operation range in terms of product, technology, and market. Formulation of such a mission should therefore be done in a way that the values and strategic decision makers‟ priorities and preferences should be reflected in it. A good example of Mission statement by Dessert Bakery of UK states; “Rutabaga Sweets is a hospitality company dedicated to providing high-quality desserts in a comfortable atmosphere for clients who seek a fun “gourmet” experience outside restaurants. We intend to make enough profit to generate a fair return for our investors and to finance continued growth and development in quality products. We also maintain a friendly, fair, and creative work environment, which respects diversity, new ideas, and hard work.” (bplans.com/dessert_bakery_business_plan). Another example from Unilever Ghana states; “Our mission, adding vitality to life is what sets us apart. We offer consumers options that help them feel good, look good and get more out of life across our foods, home and personal care brands.” (unileverghana.com). Forbes and Seena (2006) strongly came out that, a mission statement is fundamental because it motivates staff and helps them to make informed decisions. Ungerer, Pretoriuos, and Herholdt (2007), stated that the firm‟s mission ensures employee commitment, and develops insight into area in which the firm would be operating. A number of studies have examined the relationship between mission statement and firm performance (Bart & Hupfer 2004; Hirota, Kubo, Miyajima, Hong & Park, 2010). Forbes and Seena (2006), for instance, offered strong proof of the impact of mission statement on performance from a study of 18 not-for-profit hospitals. University of Ghana http://ugspace.ug.edu.gh 21 Similarly, Hirota, et al (2010) confirms in their study that firm‟s mission and policies add to better performance. According to Pearce and Robinson (2011), in the emergent of a new business or formulating course for an existing firm, the basic goals, distinctiveness and philosophies which will shape a firm‟s strategic posture must be established. Mission therefore, is the basic unique purpose that sets a firm apart from other firms of its type and identifies its operation in product and market terms. Thompson and Strickland (2001) also opined that mission addresses issues such as customer needs, firm‟s activities, technologies, competencies and focuses on the way the firm creates and delivers value to customers‟ satisfaction. According to Bart et al (2001), a profit-making mission statement consists of three essential components: Key market -who is your target client/customer? Contribution – what unique product or service do you provide to that client? And Distinction – what makes your product or service unique, so that the client would choose you? It makes tangible the leader‟s view of the route and intention of the firm. Various authors posit that, mission statements are generally used as strategic management practices and are usually promoted in business strategy courses (Green and Medlin, 2003; Atrill, Omran, & Pointon, 2005). Mullane (2002), in support affirmed that top management loyalty to the mission statement may influence the effect the mission statements have on firm performance. A mission-performance model was however developed to moderate the effect of top management loyalty on the link between mission statements and firm performance. Results from various empirical studies came out with a positive link between mission statements and firm performance. Green and Medlin (2003) for instance developed a University of Ghana http://ugspace.ug.edu.gh 22 scale to measure mission statement excellence and then tested its connection with financial performance. They also arrived at a positive and significant relationship between mission statement and financial performance. Sidhu (2003), in his study of firms competing in the dynamic Dutch multi-media industry, suggest that comprehensive mission statements correlated with outstanding performance. Likewise, while studying Japanese firms, Hirota, Kubo, Miyajima, Hong, & Park (2010) found empirical data for a positive relationship between mission statements and firm performance. Annual Goals Every strategic direction is guided by the goals of the organization. Even though mission statements clearly state goals of a firm, goals give a picture of a firm‟s intention to secure its continued existence through growth and development (Pearce II & Robinson, 2011: 26). A firm will not satisfy its stakeholders‟ aims if it does not survive in the competitive environment. Annual goals are statements that describe what a firm or an organization can reasonably be expected to accomplish within a twelve month period. These goals are activities that the firm will embark upon to achieve the desirable outcome. The annual goal identifies the areas in which the firm wants to grow in order to have a market share. For instance a firm introducing a new product in the market will need to develop an annual goal plan that will guide the growth of that product in the market. The stated goals must be measurable. A measurable goal contains four critical components. These are timeframe, conditions, behavior and criterion. University of Ghana http://ugspace.ug.edu.gh 23 Time frame: This identifies the amount of time in the goal period and is usually specified in the number of weeks or a certain date or period for completion of a specific task. Conditions: The manner in which progress towards the attainment of the goal is specified. The condition explains the specific resources available to achieve the goal. The condition of the goal normally relate to the behavior being measured. Behavior: This identifies the performance being monitored. It is the representation of the action that can directly be observed and measured. Criterion: It identifies how much, how often, or to what standard the behaviour must occur in order to demonstrate that the goal has been achieved. The amount of growth expected is measured by the goal criterion. Trend Analysis Tatum (2015) refers to trend analysis as looking at how a potential driver of change has developed over time, and how it is likely to develop in the future. Rational analysis of development partners provides a far more reliable basis for assumption and expectation than reliance on more intuition. Trend analysis does not predict what the future will look like; it becomes a powerful tool for strategic planning by creating plausible detailed pictures of what the future might look. Tatum (2015) assert that, trends vary in their breath of application: trends in such areas as demographics-population and migration patterns for example are broadly applicable in sectors of firms and organizations. Each trend suggests many lines of enquiry. Identifying and understanding trends in the market assists firms to forecast future sales and anticipate events and changes that can impact business. Trends in the University of Ghana http://ugspace.ug.edu.gh 24 market can be identified by understanding the pattern of growth or decline in sales resulting from changes in environmental factors such as; seasonality, population, social, technology, economic cycles and political climate. Trend analysis can look at short, medium and long term trends and can provide information on growth and decline rates for overall markets and individual segments. A trend analysis is therefore a strategic management practice that is used to assess the preceding businesses in terms of business capacity and income generation. It also evaluates the existing economic status of the firms. The analysis is then used to determine prospect of the business in terms of where the economy would move to in the near future. Trend analysis in effect is to provide firms with knowledge on what to anticipate if the firm continues to utilize its existing product line, and strategies, as done in the past. A trend analysis may anticipate if a firm perform well in the future economic situation, or anticipate changes crucial for the firm‟s survival (Tatum, 2015). Trend analysis addresses issues such as increased competition in the global market, changes in technology, as well as satisfying consumer needs and expectations. Other issues include age of manufacturing facilities; changes in employment laws and regulations could have some influence on the analysis, most especially if they are highly relevant to the existing policies and procedures of the business under scrutiny. The trend analysis process therefore predicts the challenges a firm may encounter in the future. It also determines the future of the firm if the existing business model is maintained (Tatum, 2015). University of Ghana http://ugspace.ug.edu.gh 25 This prediction is in connection with the information gathered on the dynamics of the global market. It is important for the analyst to determine the level of influence each of the considered elements is expected to exert so as to use such determinations to frame the projection of the firm. This will determine the competitiveness of the firm. Tatum (2015) stressed the importance of business trend analysis that, it projects the likely occurrences with a company under specific business environments. When management is not enthused about the results, other possible changes such as reducing costs or changing products, could be integrated into the analysis to project a different outcome. By using this practice effectively, management can decide what changes to make and what aspect of model to retain in order to keep the organization sustainable and feasibly to enhance competitive advantage. Long-Term Objectives According to David (2011), Objectives are defined as specific results that an organization seeks to achieve in pursuing its basic mission for more than a year. Objectives are essential for organizational success because they state direction; aid in evaluation; create synergy; reveal priorities; focus coordination; and provide a basis for effective planning, organizing, motivating, and controlling activities. Objectives should be challenging, measurable, consistent, reasonable, and clear. In a multidimensional firm, objectives should be established for the overall firm and for each division. Hitt, Ireland, and Hoskisson (2004) as well as Pearce & Robinson (2013:12) also referred to objectives as wide, high-level preferred outcome and specific, considerable University of Ghana http://ugspace.ug.edu.gh 26 outcomes needed to make a firm‟s vision a reality. Bradley (2014) also came out that Long-term objectives describe any goal that has a time frame beyond one year. Such goals which are usually referred to as long term, consist of developing a new product, growing annual revenue and developing a comprehensive marketing and public relations strategy. Importantly, long-term goals must not go on forever. While they take more time than short-term objectives, long-term goals must be realistic and time bound. 2.2.7.1.2 Strategic Management Tools (H2) Hypothesis two (2) on the other hand looked at the relative difference among strategic management tools employed by Ghanaian firms. The following are the tools discussed under the strategy formulation stage of the model. Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis provides a good framework for firms from emerging markets to focus better on serving the needs of their customers and other stakeholders. According to Pearce II and Robinson (2005), a good fit would maximize the firm‟s strength and opportunities and minimize their weaknesses and threats. Therefore, when the SWOT analysis is properly utilized, firms are encouraged to adopt a successful and fruitful strategy. Bartol and Martin (1991) further opined that, SWOT analysis is the examination of a firm‟s internal strengths and weaknesses, and its external opportunities and threats. It is a general tool designed to be used in the preliminary state of decision-making and as a precursor to strategic management in various kinds of application. David (2011) University of Ghana http://ugspace.ug.edu.gh 27 supported these authors but was quick to say that, SWOT analysis may lead the firm to exaggerate a single internal or external factor in formulating strategies. More so, there are interrelationships among the key internal and external factors that SWOT does not disclose and that may be important in devising strategies. Empirical findings on SWOT analysis have been discussed further at page 77. Value Chain Analysis Value chain analysis provides a rational and systematic framework for describing and evaluating the roles and relationships of people and organizations that exist in complex and dynamic systems and net-works. This includes understanding the flows of materials and commodities and value-adding activities between the different parts of value chains. Hietschold; Reinhardt, and Gurtner (2014) opined that, to understand the behavior, responsibilities and motivation of people within the value chain, it is important to consider their social, cultural, economic and personal needs and beliefs. Irvine (2014) also supported their view by saying value chain analysis has people as a primary focus, thereby enabling an understanding of their roles, motivations and behaviors in context with cultural, socio-economic and other drivers. Pearce and Robinson (2011, 155), also referred to value chain analysis as an effort to appreciate how a business creates value by investigating the contributions of various activities within the business to that they value. It considers the costs across the chain of activities the firm performs to establish where low-cost advantages and cost disadvantages exist. It also enable managers to better understand their firms‟ competittive advange by looking at the business as a process. University of Ghana http://ugspace.ug.edu.gh 28 Stakeholder Johnson, Whittington, and Scholes (2011: 139) referred to stakeholder as individuals or groups who rely on the organization to attain their own goals or aims. They are responsible or accountable for the growth or success of the organization. It is however important to note that decisions made by management of every firm are well informed or influenced by the expectations of its stakeholders. Johnson et al, (2011) therefore assert that the more the stakehoolders the more their influence become a challenge to the firms or organizations because they have varying and conflicting expectations. Managers of firms are however encouraged to decide or critically take a view on which stakeholder having a greater influence, which of their expectations need the most attention and to what extent do their expectations and influences vary. Pearce and Robinson (2013, 15), referred to stakeholders as people who influence the success and growth of an organization. They are also interested in the activities of management because their proirities as stakeholders are to achieve certain aims and objectives as a group and individuals. From the definitions of these authors, there is every indication that stakeholders are mostly interested in the success and growth of the organization. PESTLE This is a strategic management tool regarded as an environmental influence which was formerly PEST but now PESTEL leading to the addition of two new environmental influences. According to Johnson et al (2011) PESTEL provides key and relevant list of influences that enhance the successs or failure of strategies University of Ghana http://ugspace.ug.edu.gh 29 adopted by a firm. The elements include: Political, Economic, Social, Technological, Legal and Environmental. P o l i t i c a l E c o n o m i c S o c i a l Technological L e g a l Environmental Figure 2.1: PESTLE Source: Adopted from Cradle, Paul & Turner (2010) Firms need to identify external factors within their environment that could have an impact on their operations. The firm will mostly not have control over these factors, but must be aware and strategize towards them. As firms become more globalized, expanding the existing borders, PESTLE technique ensures serious analysis of each border in the sub-region to enable the firm access their impact critically. It is very important for firms to study the changing situations of these factors enumrated above to enable them identify the effects of such changes on their firms. Also, managers are to note that identifying key factors for change helps when they focus on these PESTLE factors in order to make decisions that allow for effective action in enhancing competitiveness. The PESTLE tool is mostly used when a firm is: 1. Launching a new product or service 2. Entering a new region or country University of Ghana http://ugspace.ug.edu.gh 30 3. Considering a new route to the market 4. Working as part of a strategic project team The purpose of the PESTLE Analysis is to identify issues that fit two key criteria: 1. Issues that are outside the control of the firm 2. Issues that will have some level of impact on the firm Political Factors Political Factors Government Leadership Corruption Levels Government stability Trade restrictions or reform Bureaucracy issues Employment & operational laws Tax regulations Stability of neighbours Figure 2.2: Political factors Source: Adopted from Cradle, Paul & Turner (2010) Firms must keep abreast with the potential policy changes in any government they wish to invest. Even though the political climate might be relatively stable, there may be changes in policy at the highest level and these can have serious implications. Changes in government priorities can result in new initiatives as well as changes in trade regulations or taxation. Some of the governmental changes that may have implications for firms are: 1. Employment laws University of Ghana http://ugspace.ug.edu.gh 31 2. Consumer protection laws 3. Environmental regulations 4. Taxation regulations 5. Trade restrictions or reforms 6. Health and safety requirements The creation of global bodies such as the Economic Community of West African States (ECOWAS) has led to trade liberarisation which sort to encourage free movement of goods and services into members states. The ECOWAS protocol of trade allows tax free movement of products manufactured in the fifteen member states. Firms however have few restrictions in doing business in these member states. The level of corruption in a country is also a matter of consideration in using this analysis. A highly considered factor is the political stability in the neighbouring countries, the level of press freedom and the country‟s overall attitude to foreign investment (Cadle, Paul & Turner 2010; Johnson, Whittington & Scholes 2009; Kotler, Keller, Goodman & Hansen 2009; McDonald & Wilson 2011). University of Ghana http://ugspace.ug.edu.gh 32 Economic Factors Economic Factors Finance & credit Cost of living Inflation Working practices GDP & GNP Taxes & duties Exchange rates Globalisation Figure 2.3: Economic factors Source: Adopted From Cradle, Paul & Turner (2010) The economic factors include assessing the potential changes to a country‟s economy with respect to inflation rates, taxes, interest rates, exchange rates, trading regulations and excise duties. The operational efficiency also considers factors such as unemployment rates, skill levels, availability of expertise, wage patterns, working practices, and labour cost trends. The economic viability of the market depends on the cost of living of the target group or the purchasing power parity and the availability of credit or finance. Firms must create or formulate strategies to fit the changes in the economic situation and in particular the financial aspects of the macro-economic situation of the counrty. Some of these impacts that require critical attention are: tax issues, potential issues of profitability and trade tariffs or embargoes. In order to attract foreign investment into the country, Ghana has adopted the Free zone system. This sector allows foreign companies that are registered under it to operate tax free business for a period of ten years. This is an incentive to encourage businesses in the University of Ghana http://ugspace.ug.edu.gh 33 global village into the country. Tax holidays are also other forms of rewarding firms that oeprate in Ghana. The rising inflation in an economy adversely affect the pricing and purchasing power of the target customers. Firms would analyse critically the rate of growth or the market‟s confidence in the economy before deciding to establish in that economy. For instance, Ghana has to seek bailout from the International Monetory Fund (IMF), a 3- year programme in order to restore investor confidence in the country‟s economy for the period 2015-2017. Firms normally have access to official indicators of a country most of which are available online, such as Gross Domestic Product (GDP), Gross National Product (GNP) and consumer-based indices often highlight areas where more detailed information is required (Cadle, Paul & Turner 2010; Johnson, Whittington & Scholes 2009; Kotler, Keller, Goodman & Hansen 2009; McDonald & Wilson 2011). Social Factors Social Factors Social mobility Ethics & religion Lifestyle Education Historical issues Attitudes & beliefs Demographics Cross-cultural communications Figure2.4 Social factors Source: Adopted from Cradle, Paul & Turner (2010) University of Ghana http://ugspace.ug.edu.gh 34 The social factors that must be considered need to be those that have direct impact on the market. Some of these includes: 1. Age distribution 2. Population growth rate 3. Employment levels 4. Income statistics 5. Education and career trends 6. Religious beliefs 7. Cultural and social conventions. The country‟s attitude towards health, career and environmental issues are highly considered. Another factor that plays critical roles is cross-cultural comunication. Ghana is surrounded by Francophone countries, how well can Ghana communicate with her neighbours. In international business or global markets, communication is key (Cadle, Paul & Turner 2010; Kotler, Keller, Goodman & Hansen 2009; McDonald & Wilson 2011). University of Ghana http://ugspace.ug.edu.gh 35 Technological Factors Technological Factors K now ledge m anagem ent system s Quality & pricing Rate of Change Eliminate bottlenecks Intellectual property Use of outsourcing Resource & development Network coverage Production efficiency Patents & licenses G o v e r n m e n t a c t i v i t y & l e g i s l a t i o n Figure2.5 Technological factors Source: Adopted from Cradle, Paul & Turner (2010) The technological factor has become the most critical area of development today. Any firm that is not abreast with technology will lag behind. It has become the future determinants of every firm. The pace of technology is becoming more rapid, and often changes that impact the market come from unexpected sources. For example, could the film industry ten years ago have predicted that people would stream their new releases rather than go to the cinema or buy a DVD? The use of PESTLE technique will equip firms to brainstorm some of things like this and even make most bizarre suggestions. What seems to be impossible today may become commonplace in just a few years to come. University of Ghana http://ugspace.ug.edu.gh 36 The technological factor can be put into two areas: manufacture and infrastructure. By exploiting opportunities to update or alter their production a firm can gain market share, thereby attaining a strong competitive advantage. Such activities include: 1. Automation 2. Improved quality of parts and end product 3. Incentives 4. Significant cost savings 5. Use of outsourcing to control costs and offer greater flexibility Firms now have greater freedom of choice when deciding how best to manage their operations due to technology. For instance, the knowledge-based systems have enabled management to make better and more informed decisions in real time. Firms can now streamline their workflow and eliminate operational bottlenecks due to the rapid growth of networking capabilities both in terms of being more reliable and having extensive coverage internationally. Firms that fail to keep up with technological advances leave opportunities for a smaller producer or new entrants to enter their market. That is what happened to mobile phone producers Research in Motion (RIM), the makers of the BlackBerry and Nokia, who were slow to embrace smartphone technologies. The result was that they both lost significant market share to Apple and Samsung. (Cadle, Paul & Turner 2010; McDonald & Wilson 2011). University of Ghana http://ugspace.ug.edu.gh 37 Legal Factors Legal Factors C onsum er Health & Safety Taxation Advertising Compliance Employment Import & export Regulatory bodies Figure 2.6 Legal factors Source: Adopted from Cradle, Paul & Turner (2010) Firms must investigate both current and impending legal issues that may affect industry in the country of interest. Areas to look at are employment, competition, health and safety. Setting up of regulatory bodies to monitor the behavior of firms in the area of their operations is healthy for business. Insurance and banking organizations have to demonstrate their legal compliance to the regulatory body, which has implications for how they operate. The level of market share is often restricted (eg. under the Antitrust laws of America) to prevent organizations having a healthy control of a market or obtaining it through acquisition (Cadle, Paul & Turner, 2010). University of Ghana http://ugspace.ug.edu.gh 38 Environmental Factors Environmental Factors Energy availability & cost Ecological consequences Infrastructure Social implication Legislation Cyclical weather Disposal of materials Contamination Figure 2.7: Environmental factors Source: Adopted from Cradle, Paul & Turner (2010) Environmental protection has become a key factor in the establishment of an organisation or a firm and this must firmly be regulated by the central government. Ghana has established a body known us Environmental Protection Agency under the laws of Ghana Act, 1994 (Act 490). The EPA is mandated by law to oversee all environmental issues and advice government accordingly. Johnson, Whittington & Scholes (2009) identifies natural disasters or weather cycles such as monsoons can create too high a risk for firms to operate in a particular region. The physical conditions, extent, and maturity of a country‟s infrastructure may impose uneconomic costs on an organization. Weather conditions could also cause logistical problems at certain times of the year. Before operating in a country with high temperatures and humidity a firm may want to determine the availability, financial viability and the reliability of air conditioning. University of Ghana http://ugspace.ug.edu.gh 39 Environmental factors include infrastructure, cyclical weather, disposal of materials, energy availability and cost, and the ecological consequences of production processes. Porter’s Five Forces This is a framework developed by Porter (1980;1998). The five forces framework helps to identify the attractiveness of firms in relation to five competitive forces; the threat of entry, the threat of substitutes, the power of buyers, the power of suppliers and the extent of rivary between competitors. These forces according to Porter make the structure of a firm. He assert that an attractive firm structure offers good profit potential to its firm (Hough, Thomptson Jr, Strickland, & Gamble, 2011; Johnson et al, 2011; Pearce & Robinson, 2013). Below is a model of Porter‟s five forces: Figure 2.8 Porter’s five Forces Source: Adapted from Hough et al, 2011 Threat of New Entrants Rivalry between Competitors The power of Suppliers The power of Buyers Threat of Substitutes University of Ghana http://ugspace.ug.edu.gh 40 The threat of entry refers to the ability of a firm to enter a global market/industry. This is influenced by the degree of competition in the market. A good firm has higher barriers to entry to prevent new competitors. Such barriers include; scale and experience, access to supply or distribution channel, legislation, and differentiation (Hough et al, 2011; Johnson et al, 2011; Pearce & Robinson, 2013). Substitutes are goods and services that offer similar benefit to an industry but through another process. A solar energy for instance can be a substitute for a hydropower to provide electricity, alluminium is also a substitute for steel in automobiles etc. Most managers concentrate on competitors in their own industries and neglect the threat posed by substitutes. This could reduce the demand for a product as customers change to the substitutes making the former product outmoded. The third force is the power of buyers. Buyers are the direct customers and not the consumers. Powerful buyers are able to demand for cheap prices, improvement on goods and services which could reduce the profit of firms. Buyer power also increases when certain conditions prevail. They are; concentrated buyer who are a few large customers accounting for the majority sales. This increases their power. Low switching costs which occurs when buyers could easily switch between one supplier to another with a strong negotiation power. This then affects suppliers desperate for their business. The third is the buyer competition threat which occurs if the buyer has the capability to supply itself. The power of suppliers is the fourth force. They supply the firms with what they need to produce goods and services. The factors that account for supplier power are the University of Ghana http://ugspace.ug.edu.gh 41 reverse of that of buyers. They are; concentrated suppliers (where producers are more than supply, suppliers become powerful); high swithing cost (when it is expensive to move from one supplier to another, firms become dependent on them) and supplier competition threat (suppliers increase their power when able to cut off all middle men). The last force is the competitive rivalry. This is when firms/organizations with similar goods and services are targeting same customers. Increase in competitive rivalries affects the performance of the existing firm (Hough et al, 2011; Johnson et al, 2011; Pearce & Robinson, 2013). 2.2.7.2 Strategy Implementation Strategy implementation which is the second stage of David‟s also requires a firm to set up annual objectives, formulate policies, motivate employees, and allocate resources in order to execute formulated strategies. It has to do with developing action plans, identifying Critical success factors, redirecting marketing efforts, drawing budgets, making good use of information systems, as well as employee compensation to organizational performance. This phase is however referred to as the action stage because strategy formulated is put into action (David, 2011; Pearce & Robinson, 2011). After strategy is formulated, it is then put into action by the identification of human resources, the allocation of budgets, and the adoption of efficient procedures. To be successful, management need involve key actors and also ensure team work towards developing key issues. First, is the organizational structure of the firm, which ensures effective communication between all employees, and outlines decision-making authority; the structure is to match the strategy and size of the firm. Second issue is University of Ghana http://ugspace.ug.edu.gh 42 the organizational culture, which deals with essential assumptions and values that are shared by employees the way they are to perceive, think, feel, and behave in the firm. This, in effect is some of the critical success factors that could enhance firms growth and development (Al Hijji, 2014). Another key issue is the development of policies and measures that are important to be followed in providing services and managing different resources. Two key variables discussed under this stage are Action plan (as practice) and Critical Success Factors (as tool). Action Plan (H1) Pearce and Robinson, (2013:13) explained Action plan as a means of translating the generic and grand strategies into actions of four elements. The first element has to do with identifying specific action needed to be undertaken in the next one or less year as a form of building competitive advantage. Action plans also issue a clear time frame for its execution and completion. The element is about creating accountability to identify those responsible for specific actions. The fourth element is about having specific, measurable and realistic objectives that the action aims to achieve. An action plan according to Nagy & Fawcett (2014) is an opportunity for management to turn a dream of the organization into a reality. It then makes the organization's vision easier to materialize. An action plan provides the framework upon which the strategies and action steps of the firm or organization would be used to meet its goals and objectives. Developing an action plan is a very crucial first step success of the firm. A good action plan predicts the firm‟s credibility; it increases efficiency, and makes the firm accountable. In addition, the action plan enhances team University of Ghana http://ugspace.ug.edu.gh 43 work through equal share of responsibility among workers. This in effect makes a firm to grow and develop to remain competitive (Nagy & Fawcett, 2014). Nagy and Fawcett (2014) however suggest that, management need to provide support and reinforcement during the planning process in order to be successful. They also indicate that, good planning takes much time; mostly for about months to produce a comprehensive plan of action. Therefore, it is important to recognize and appreciate the contributions of all participants, most especially key leaders. This will make them feel enthused the next time they are called upon to work. Firms are also encouraged by these authors to set goals before they start to develop their action plans. The following are however important when developing an Action Plan: Actions strategies - This talks about how key challenges of the firm would be addressed. Tacks required - It refers to how specific strategies would be accomplished by listing the individual steps needed to achieve goals and objectives Persons responsible – It involves the identification of people by management who will be responsible for the completion of tasks. Additional resources - These are resources needed to complete the task. It is therefore important to identify such resources in the course of planning. Time table - Planners need to specify the time for which each task is to be completed in order to meet the organization‟s targeted goals and objectives. Status - This is to indicate whether action has commenced or not. Performance measurement or milestones - this refers to the assessment tools needed to determine the success of each action identified upon completion. This could be done through developing programmes that will attract people, assigning qualified people to specific work, and providing motivation packages. University of Ghana http://ugspace.ug.edu.gh 44 This addresses hypothesis one (1) which looks at the relative difference among strategic management practices employed by Ghanaian firms. Critical Success Factors (H2) Yadav and Barve (2014) refer to Critical Success Factors (CSFs) as the conditions, features, or variables that when properly nurtured, sustained, maintained or managed can have a significant effect on the success of the organization. Critical success factors have been applied to various management purposes resulting in various studies. For example hospital service quality by Shieh, Wu, and Huang (2010); business management by Trkman (2010); total quality management by Hietschold, Reinhardt, and Gurtner (2014) and supply chain management (SCM) by Power, Sohal, and Rahman (2001). Bullen and Rockart (1986) referred to CSFs as few key areas where things must go right for a business to grow and in order to achieve a firm‟s goal. On the basis of a literature review and a pilot survey, 13 CSFs were identified for Indian SMEs to focus on during implementation of SCM. These are top management commitment, development of effective SCM strategy, devoted resources for supply chain, logistics synchronization, use of modern technologies, information sharing with supply chain members, forecasting of demand based on point of sales (POS), trust development in supply chain partners, developing just in time (JIT) capabilities in the system, development of reliable suppliers, higher flexibility in production system, focus on core strengths, and long-term vision for survival and growth. University of Ghana http://ugspace.ug.edu.gh 45 The objective of this study was to identify the impact of CSFs for SCM on the performance of Indian SMEs in the context of emerging global market. From their study, it was observed that the critical success factors (CSFs) had positive impact on various groups of performance such as customer service and satisfaction, innovation and growth, financial performance, and internal business of Indian SMEs. Further finding on analysis sector of firms showed that different CSFs impact on varying performance criteria in different sectors. It was also opined that to confront the challenges of a global market, firms in India are now recognizing the value of CSFs implementation on a larger scale. Firms are however encouraged to make use of CSFs and keep them in mind while deciding their priorities. (Kumar, Singh, & Shankar, 2014). This addresses hypothesis two (2) which looks at the relative difference among strategic management tools employed by Ghanaian firms. 2.2.7.3 Strategic Control and Evaluation Strategy control and evaluation is the third phase of the strategic management model. Managers frantically pay attention to which particular strategies are not effective enough. Strategy evaluation is about getting information on such strategies. Every strategy according to (Al Hijji, 2014; and David, 2011) is subject to future change. This is because external and internal factors are regularly changing. Competitors are equally doing everything possible to meet the changing demands of consumers. This is achieved through ongoing evaluation. Competitor analysis and break-even analysis are the practices and tools identified in this phase. Strategy evaluation is needed to keep firms in the global market. A firm which is able to take strategy-evaluation serious is able to gain competitive advantage over its competitors (David, 2011; Pearce & Robinson, 2011). University of Ghana http://ugspace.ug.edu.gh 46 This stage is to ensure that the quality of services provided, and the performance of all firm‟s units and employees are well-matched with its requirements. This is done through close supervision of the employees, and continuous evaluation of services. Quality control is achieved through a system of quality monitoring at every stage of the implementation process. The measurement process is carried out to look at the extent to which the firm‟s performance meets these factors. There is the opinion therefore that, the blend of the two methods helps in getting better results. The framework however suggests that, internal evaluation should be done on an ongoing basis and applied by management at every level of the firm. More so, the external evaluation which focuses on competitors should be conducted at least once during the period of the strategy. Firms are to use the results of the various measurements to monitor the direction of the strategy implementation, so as to decide on the action plans. Moreover, the evaluation and control are to explore the strengths and the weaknesses of employees, in relation to the motivation system and training programs. The results of the different kinds of measures help the firm‟s management to identify issues that must be considered when developing further strategies (Al Hijji, 2014). Two variables that conform the study under this stage are ongoing evaluation and competitor analysis (as practices) and Break Even Analysis (as a tool). Ongoing Evaluation and Control (H1) Ongoing evaluation and control systems are among the most essential practices of strategic management because of their ability to allow managers to monitor performance and readdress firms‟ actions when necessary. Traditionally, strategic University of Ghana http://ugspace.ug.edu.gh 47 controls have been thought of as systems that help to implement strategies as planned. The rapid change in Firm‟s environments, nevertheless, has caused many to reconsider and expand upon this view (David, 2011; Al Hijji, 2014). According to Pearce and Robinson (2013), the evaluation and control is the point at which the results of a given strategy are monitored and determined with regards to how many goals have been achieved. According to him, Strategy evaluation includes three main activities as Review of main principles of firms‟ strategy; Compare expected results with actual result; Taking corrective action to ensure the accuracy of performance and operation based on plans. Meanwhile, there are criteria for strategy evaluation, Procedure stabilities such as their Compatibility with environmental factors; Feasibility; and having a competitive advantage. Arens, Elder, and Beasley (2006) made reference to Control activities such as policies, procedures and practices that assure management that their objectives would be achieved. They also suggest that control activities relate to policies and procedures pertaining to the segregation of duties, information processing, physical control and performance reviews In short, the internal control activity components include policies and procedures designed to ensure that management‟s directives are effectively implemented. The monitoring factor on the other hand refers to a process of assessing the quality of controls. It covers current and periodical evaluations of the external supervision of internal controls by management or other parties outside the process. Monitoring University of Ghana http://ugspace.ug.edu.gh 48 ensures that controls are operating as intended and that they are modified appropriately to cater for changes in conditions (Arens, Elder, & Beasley, 2006: 283). Arens et al, (2006) argued that core objective of an internal control system is to provide the firm with a foundation for evaluating the success of internal control. It has been suggested that periodic monitoring may be useful and provides a chance to think about the constant usefulness of the ongoing actions. Henri (2006) has also argued that monitoring activity is more successful in situations that echo a regular course of action. On the other hand, firms that operate in dynamic environments and are characterized by unofficial internal control activities may necessitate monitoring to ensure that the continuous changes are in line with the firm‟s objectives. The main issue therefore is the amount of monitoring necessary to interact with internal control activities so as to ensure the best value of internal control systems for firms that operate with different strategic orientations is achieved. Competitor Analysis (H1) Competittor analysis is another practice under the third stage of the mode. It refers to how a firm is able to identify specific values of its competitors in order to take competitor advantage over them. This is achieved if management is able to design good strategies in understanding the firm‟s industry and competition (Pearce & Robinson, 2013; Al Hijji, 2014). Pearce & Robinson (2013) suggest the following as factors that could help managers and CEOs identify their prospective competitors; University of Ghana http://ugspace.ug.edu.gh 49 (i) “How do other firms define the scope of their market?”. This implies ones firms have same definitions of their industry, they are likely to see each others as competitors. (ii) “How similar are the benefits the customers derive from the products and services that other firms offer?”. Ones firms are producing similar goods and services to their customers, there is the likelihood of increase in substitute among firms. This then makes firms quite aggressive in introducing new products in the market to meet their customers‟ needs and expectations, hence becoming competittive. A typical example is what is pertaining in the banking and insurance sectors. They keep on introducing new products to attract customers. In the manufacturing sector also, most expecially with alcoholic beverages, manufacturers keep adding new taste and value to their products. (iii) “How committed are the other firms to the industry?”. This is a very important question which needs to be critically considered by competitors because it highlights the long-term goals and objectives of firms. Vital information or data of competitors are highly needed to track their progress and commitment levels. Such data could provide information on their intention to expand facilities, introduce new products and among others. Pearce & Robinson (2013) also came out that management need to avoid certain vital mistakes when identifying competitors. They include overemphasising existing competitors whilst ignoring potential entrants. Paying attention to the larger competitors and ignoring the smaller ones. Overlooking potential international competitors, not being fast to read a shift in the focus of competittors as far as products and strategies are concern, thinking the purpose of strategy is to outsmart the University of Ghana http://ugspace.ug.edu.gh 50 competitors and not paying attention to customers‟ needs and expectations among other some of the mishaps that can be encountered in competitor analysis. It is therefore important for firms to note that competitiveness helps firms to improve their chances of designing strategies that could increase their access to environmental opportunities available. Break Even Analysis (BEA)(H2) Break Even Analysis as a strategic management tool answers questions such as “what is the minimum level of sales that ensure the firm will not experience lost” or “how much can sales be decreased and the firm still continue to be profitable”. It analyses the level of sales at which a firm is likely to make a zero profit. This approach determines the sales a firm needs to break even (Baker, 2000; Cartwright, 2002). Break -even point is determined at the point where total income from sales is equal to total expenses (fixed and variable). In other words, the point corresponds to the level of production capacity, under which the firm works at a lost. The authors further explained, if all the firm‟s expenses were variable, break –even analysis is then not relevant. However, in practice, total cost could be considerably affected by long-term investment of the firm that produces fix-cost. A firm therefore needs to satisfy its shareholders by estimating the level of goods or services sold that covers both fixed and variable cost. Others also came out that, Break even Analysis is based on identifying production cost with variable cost (cost that change when the production output changes) and fixed cost (cost which is not directly related to the amount of production). The fixed University of Ghana http://ugspace.ug.edu.gh 51 cost covers expenses on administration, rent, overheads, depreciation and others. Variable cost on the other hand covers expenses on wages, row materials, and seller‟s commission. In spite of the fixed and variable costs, others such as plant maintenance, cost of utilities, and insurance associated with the factory and production manager‟s wages, are given special treatment. Total variable and fix cost are therefore compared with sales revenue so as to determine the amount of sales or production at which the business makes neither a profit nor a lost (Lancaster, & Massingham, 2000; Ross, Westerfield, & Jaffe, 2002). 2.3 Further Empirical Literature on Firms’ Behaviour This section reviews related work of some authors on strategic management practices and tools of firms. Various strategies were identified as relevant to firm performance and competitiveness. Dermol (2012), in her study in Slovenia on relationship between mission statement and company performance identified that, Companies which had a mission statement focusing on company performance and growth do not give the notion to be more successful than other companies with or without mission statement. Rather, companies that focus their mission statements on the implementation of various resources and relationships gave the notion of being able to enhance performance. However, the scope of mission statements might be exceptional for Slovenian firms. Demol‟s (2012) findings therefore implies that it is critical for firms to state their missions with reference to the scope or components of the mission statement so as to enhance performance. University of Ghana http://ugspace.ug.edu.gh 52 A quantitative study which explored the mediating role of organizational commitment in explaining and clarifying the relationship between mission statement and performance in the non-profit health care setting was conducted by Macedo and Pinho (2006) in Portugal. The study revealed that, organizational commitment is an important mediator on the linkage between mission and performance. This implies that mission statement can enhance performance only if there is some level of commitment from the firm or organization. However, a very current study by Williams, Morrell, and Mullane (2014) on reinvigorating the mission statement through top management commitment suggest that, the influence of mission statements on firm performance has been studied and debated, but no reliable results was arrived at. The study however suggests that, it is as a result of moderating influences, particularly the commitment of top management, and if not well studied, will influence outcomes. In another related literature on strategic management practices of small firms in emerging industries with regards