STRATEGIC PLANNING AND PERFORMANCE:

A STUDY OF SELECT COMPANIES IN INDIAN

AUTOMOBILE INDUSTRY
STRATEGIC PLANNING AND PERFORMANCE:
A STUDY OF SELECT COMPANIES IN INDIAN
AUTOMOBILE INDUSTRY
STRATEGIC PLANNING AND PERFORMANCE:
A STUDY OF SELECT COMPANIES IN INDIAN
AUTOMOBILE INDUSTRY
STRATEGIC PLANNING AND PERFORMANCE:
CHAPTER – 2
A STUDY OF SELECT COMPANIES IN INDIAN
AUTOMOBILE INDUSTRY

REVIEW OF
STRATEGIC PLANNING AND PERFORMANCE:
A STUDY OF SELECT COMPANIES IN INDIAN
LITERATURE
AUTOMOBILE INDUSTRY
STRATEGIC PLANNING AND PERFORMANCE:
A STUDY OF SELECT COMPANIES IN INDIAN
AUTOMOBILE INDUSTRY
STRATEGIC PLANNING AND PERFORMANCE:
A STUDY OF SELECT COMPANIES IN INDIAN
AUTOMOBILE INDUSTRY
STRATEGIC PLANNING AND PERFORMANCE:
A STUDY OF SELECT COMPANIES IN INDIAN
AUTOMOBILE INDUSTRY
 CHAPTER OUTLINE

Section No TITLE OF THE SECTION Page No.

2.1 Introduction 17

2.2 Strategic Planning 17-24

2.2.1 Operational Flexibility 24-27

2.2.2 Financial Flexibility 27-33

2.2.3 Structural Flexibility 33-35

2.2.4 Technological Flexibility 35-39

2.3 Research Gap 39

 Review of Literature

2.1 Introduction

The core of this review of literature is the study of strategic planning on performance.
This chapter considers the importance of strategic planning in different companies and
industries. The most important points of strategic planning in this review of literature
is flexibility of the organization in the operational, technological, financial and
structural areas, which affect on financial and non-financial performance. The role and
importance of these factors has been studied through the impact of rapid adaptation of
company’s resources to the market situation as well as competitiveness. A detailed
analysis of internal and external environment of the organization, identification of the
strengths and weaknesses, external opportunities and threats play a very important role
in designing strategic planning, which has been referred in this review of literature. One
of the most important points in this chapter is that companies should pursue cost
leadership or differentiation strategy in order to compete in market.

2.2 Strategic planning

Umpfenbach et al (2018) argue that product classification planning can concentrate on

platform improvement for promoting sustainability of derivative products with
overlapping plan, supply, manufacturing and distribution network.

Kaleka and Morgan (2017) survey that marketing capability has the most significant
role on future strategic intention.

Medvecká et al (2017) claimed that companies for better decision making in the new
global market need strategic planning.

Papke-Shields and Boyer-Wright (2017) found that strategic planning characteristics

can be positively united into a generalized project management which potentially gives
useful elements about the project management behaviours and project success.

Papulova and Gazova (2016) consider that strategic decision making includes basic
decisions which determine the future direction and orientation of an organization.

Amoli and Aghashahi (2016) found that strategic management affect the process of
planning, predicting changes and managing the organization. Strategic management

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 Review of Literature

and planning prepare a roadmap for success of organization in competitive

environment.

Karakaya et al (2016) stated that managers are willing to know about the corporate
philosophy of competitiveness, entrepreneurial vision, self-motivation of managers,
their creativeness in decision-making for organizational strategic planning.

Riahi and Moharrampour (2016) suggested that strategies of the company and
company situation can help the managers for planning the future of business strategy.

Nazemi et al (2015) identify that the barriers in implementing strategic plan at Mashhad
Electronic Energy Distribution Company. By qualitative research method data were
collected from11 top managers of MEEDC through face to face interview from January
2014 to March 2014. The interview was based on Snowball sampling method. They
recognized eight barriers in this study. Barriers include: cultural, structural, managerial,
environmental, lack of sufficient resources, independent strategy formulation, HRM,
lack of effective performance measure. They found that: 1. Manager should believe
Strategic planning. 2. Top managers should motivate senior managers and their
subordinates by participating them in deciding about company’s goal. The incentives
can be financial or non-financial.

Sari (2015) considers key performance indicators at corporate level using PT.Inti
Lunhur Fuja Abadi(ILUFA).They use Prism method for integration of key performance
indicators. Performance Prism facets involve: Satisfaction, Contribution, Strategy,
Process, Capabilities. The results show that financial audit in investor, customer
complaint, healthy level of employees and time of payment for supplier are the most
important key performance indicators for financial audit. All these have been done for
development of organization, increasing efficiency and effectiveness in all levels of
organization and achieving objectives to meet stakeholder satisfaction.

Nurcahyo and Wibowo (2015) affirm that manufacturing strategy notably is

influenced by manufacturing capability while this strategy effects performance of
Indonesian automobile component industry.

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 Review of Literature

Sołoducho-Pelc (2015) found that formalization of strategy, preparing of development

plans in a long-run, long-time cooperation with business partners are the most important
factors for success of the company.

Effendi and Kusmantini (2015) examine the moderating effect of contingency

variables on the relationship between formal strategic planning and company
performance. Contingency variables include: organizational structure, organizational
culture, company size and environmental turbulence. The primary data gathered from
sixty-four small and medium enterprises through interview and questionnaires. In this
paper, there are five hypotheses and six variables. Variables in this research consist of:
one dependent variable, one independent variable and four moderating variables.
Dependent variable is company performance, Independent variable is formal strategic
planning, Moderating variables are environmental turbulence, organizational structure,
company size and organizational culture. The result shows that from five hypotheses,
one of them is accepted and remaining four hypotheses are not accepted by facts.

Stancu and Meghisan (2014) analyse the factors that influence the buying decision
towards mobile telecommunication. Factors include: economic factors, social factors,
cultural factors, and psychological factors. The research was done during March – April
2013 by questionnaires survey and a sample of 165 telephone owners. Statistical
methods for interpreting data are: t-test, factor analysis and descriptive statistics and
analysing the data have been done with SPSS software. Factors that are important for
customer in decision making are: operator’s identity, history of successful relationship
between operator and customer that is dependent on operator to ensure customer
satisfaction with a product or service. Customers choose telecommunication companies
whom staff focuses on helping customers to meet long term needs and wants. So,
mobile companies should have a close relationship with customer and provide them
attractive offer.

Al Hijji (2014) claimed that this model involves strategy formulation, strategy
implementation, strategy evaluation and control. The model is used by three sequential
steps: pre-planning, planning and post-planning. It suggests that three connection
channels link with the relevant elements of model.

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 Review of Literature

Zhang et al (2013) affirm that strategic flexibility has a significant influence on the
adaption of green management activities.

Arasa and K'Obonyo (2012) analyse the relationship between strategic planning and
firm performance with regards to strategic planning steps. Strategic planning steps
consist of: defining firm’s corporate direction, appraisal of business environment,
identification and analysis of firm’s strategic issues, strategy generation, evaluation and
control system (independent variables), firm performance (dependent variable). Two
objectives of this study are: 1. To examine the relationship between strategic planning
steps and firm performance. 2. To examine the relationship between strategic planning
constituent variables and firm performance. Findings indicate that strategic planning
steps have positive relationship with firm performance. There is a positive relationship
between strategic planning and financial and non-financial performance.

Tafti et al (2012) explain the evolutionary trend of strategic planning from traditional
economy to innovation economy. Strategic planning was from 1950s and consists of
four stages: first stage: emerging strategic planning, Second Stage: Emerging Balanced
scorecard (BSC), third stage: Emerging Robust strategy and forth stage: Emerging
Poised strategy. This paper is based on discussion of evolutionary trend in strategic
planning. In innovation economy, Poised strategy has been introduced and some of its
tools are as follows: customer knowledge management (CKM), communities of
practice (COPs), Prosumerism, open innovation and Poised strategy Scorecard.
Traditional strategic planning involves: Analysis, Formulation, Implementation and
change. New strategic planning includes Business ecosystem sense-making, Business
model reinvention and strategy thrust.

Owolabi and Makinde (2012) considers the effects of strategic planning on corporate
performance in university education. Babcock University is case study of this paper and
both primary and secondary data are used by survey method, also descriptive and
inferential statistics are used for analysing the data. The objective of the study is to
assess whether the workers understand and also have knowledge about strategic
planning in an organization. Three hypotheses in this paper are: Hypothesis 1: the
category of workers involved in strategic planning has no significant effect on how
effective the plan is. Hypotheses 2: The level of compliance with corporate
performance. Hypotheses 3: There is no relationship between the extents of strategic

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 Review of Literature

planning and corporate performance. The results show that universities are a part of
economy in the world and they must be aware about what is happening in the world.
All workers are important variables and can help to reach organizational goals and also
better performance.

Lang et al (2012) concluded that in order to succeed in competitive market, it is vital

for manufacturing industry to evaluate the future planning, investment, innovation
activities.

Bastian and Muchlish (2012) discussed that there is an important and positive
correlation between the strategic and non-financial measure in evaluation of firm
performance.

Witek-Crabb (2012) find out there is a considerable and remarkable relationship

between sustainability of strategic management and market efficiency.

Zohrabi and Manteghi (2011) suggest a general framework to formulate strategy in

educational organization. This strategy is based on Malcolm Baldrige National Quality
Award (MBNQA) education criteria for choosing competitive strategies. They selected
one Iranian university for their case study: They have used five models for formulating
strategy in educational organization. These models are: 1. SWOT analysis matrix 2.
Balanced Scorecard. 3. Quality Function Development 4. MBNQA education criteria
5. Fuzzy Screening. For reducing uncertainty and ambiguity of data, they have used
Fuzzy QFD to increase the capability and efficiency of the model.

Akinyele and Fasogbon (2010) considers the impact of strategic planning on

organizational planning and survival. The main objective is re-evaluation of the
relationship between strategic planning and performance. The First Bank of Nigeria
was used as a case study. There are three hypotheses here which taken from objective
of this paper. A survey technique is used for collecting primary data and these data are
gathered from senior and junior staffs. Most of staffs are believed that strategic planning
has the significant role on increasing better organizational performance. Most of
respondents agree that there is a relationship between organizational survivals and
strategic planning.

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 Review of Literature

Nadkarni and Narayanan (2007) considers the role of moderating effect on industry
clock speed as a mediator on the relationship between strategic schemas, strategic
flexibility and firm performance. A sample of 225 firms from 14 industries are selected,
which 7 industries are fast-clock speed and the remaining are slow-clock speed between
1980 and 1990. The data were taken in COMPUSTAT data base. Complexity and focus
are two main characteristics of strategic schemas that are mostly relevant to strategic
flexibility. Finding of the study describes that strategic flexibility has an important role
on strategic schemes, and increases strategy in slow-clock speed industries.

von Gelderen et al (2000) examine strategic, uncertainty and performance of small

business founders with less than 50 employees in Amsterdam. Data was collected by
interview. In this research 5 forms of strategies are considered: 1. Reactive 2.
Opportunistic 3. Complete 4. Critical point and 5. Habit strategy. It is suggested that
strategies used for small business start-up are dependent on type and level of
environmental uncertainty.

Barringer and Bluedorn (1999) investigate the relationship between corporate

entrepreneurship intensity and five specific strategic management practices. The five
specific strategic management consist of: scanning intensity, planning flexibility,
planning horizon, locus of planning and control attributes. There are 2 control variables:
environmental turbulence and environmental complexity. A sample of 169
manufacturing firms in the U.S were selected for this study. Data was collected by 2
ways: a self-report mail survey and the Compustal Annual Data Type. Finding suggests
that entrepreneurship intensity is affected by scanning intensity, planning flexibility,
locus of planning and strategic control. Relationship between corporate
entrepreneurship and strategic management can influence economic growth (new
product, new method of production, innovation).

Piëst (1994) investigates the relationship between planning comprehensiveness, the

complexity and variability of the strategy pursued by SMEs. A sample of 154
enterprises is used and each enterprise has 200 or fewer employees in the Dutch
Machinery Industry. Data were collected by questionnaires and CEOs of the enterprise
filled them. For measuring planning comprehensiveness, four categories of planning
activities were determined: 1. Analysing the present strategic position of the enterprise
2. Forecasting the future strategic position 3. Generating strategic options 4. Evaluating

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 Review of Literature

strategic options. Three indicators for measuring strategic complexity and visibilities
are: 1. product-market domain 2. Product-market dynamism 3. Product-market
innovation. Result shows that variability has a positive relationship with forecasting
practices.

Zabid et al (1991) consider the extent of planning and the essential characteristics of
planning in Malaysian Insurance. The questionnaires sent to 59 companies which were
active in life, general and composite insurance and only 36 companies responded the
questionnaires. The questionnaires were about the nature, type of planning, mission,
objective, internal and external analysis. Planning activities in these studies involve:
functional level, short term and medium term. Findings show that almost 89% of firms
follow a combination strategy of growth and stability, 75% focus on the effectiveness
of the planning system in gaining corporate goals and 37% are trying to reach better
performance. Employees should be aware of organizational goals; organization must
increase the level of commitment and confidence of the employees and also support
them for effective performance of strategic plans.

Cool and Schendel (1988) investigate the relationship between firm performance and
strategic group membership. Data were collected from pharmaceutical industry in the
U.S in 1963-1982. A combination of variance-covariance matrix testing, multi varieties
analysis of variance and cluster analysis is used for measuring the data. The results
show that members of strategic groups have different performance, so those with
moderate view have more power in strategic group and performance relationship.

Robinson (1982) considers the impact of outsiders-based strategic planning on the

effectiveness of small firms. For this article sample of 101 small firms is selected and
they received strategic planning consultation from Small Business Development Centre
(SBDC). Chi-square test used for examining the two control groups; the small business
population in Georgia, and small business population in United States. In this study,
dimensions of effectiveness in operational organization are included following: growth,
profitability, productivity and employment. The result shows that firms with outside
planning consultation can improve their weakness in planning orientation, time
allocation skills and commitment.

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 Review of Literature

Dyson and Foster (1982) survey the relationship of participation and effectiveness in
strategic planning. In this paper, 10 different organizations in the United Kingdom are
used as a sample and data were collected by interviews. Conceptual frameworks of
effectiveness involve the following: 1. Clear statement of objectives 2. Integration of
planning function 3. Catalytic action of planning function 4. Riskiness of formulation
5. Depth of evaluation 6. Treatment of uncertainty in evaluation 7. Resource planned
8. Data used 9. Iteration in process 10. Assumption made 11. Quantification of goals
12. Control system. Feasibility of implementation frameworks for measuring
participation are: i. Interest group participation ii. Degree of communication iii.
Involvement in decision-making. The result shows that changing in various attributes
of effectiveness would lead to changing in participation.

2.2.1 Operational Flexibility

Roman et al (2017) found that performance improvement of organizational programs

can support managers to achieve organizational goals.

Augusto et al (2017) realized that acquisition of innovation is achieved by use of

measurement and control; this will bring the competitive advantage.

Zhikang (2017) claimed that for remaining in the future of the world’s economic
development companies should save resources, increase the competitiveness of
enterprises and protect the environment.

Badurdeen and Jawahir (2017) argue that capabilities and strategies in the product,
process and system areas are for empowering value creation via sustainable
manufacturing.

da Silva and Borsato (2017) consider company’s competitive market needs to strictly
control performance indicators. It is possible to determine the processes and activities
that are done satisfactory over competitors which influence the profitability of the
companies.

Inoue et al (2016) found that product design which can be improved is the main factor
for understanding a sustainable society and can potentially modify an underperforming
operation.

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 Review of Literature

Bhanot et al (2016) investigate that automobile firms require strategic changes in

operating situations, when there is a balance between economic and environmental
concerns.

Keckl et al (2016) found that strategic approaches are relying on the suitability of the
assembly groups, support reducing capability bottle-necks, work overload and reduce
idle-time.

Pugna et al (2016) confirm that by assigning quality attributes to an elasticity curve,

determining a potential life-cycle path is possible for specific characteristics. So,
designing a new product or service should exactly fit with customer needs.

Mohsenzadeh and Ahmadian (2016) claimed that competitive strategies are as a

mediator between the production capability and export performance but it does not have
effect on marketing competency and export performance.

Hasan and Ali (2015) stated that the main factors for success of firm performance are
green innovation and green promotion.

Aláč (2015) affirms that decision making and production planning are important factors
that effect on company’s flexibility in finding market demand.

Kızıloglu and Serinkan (2015) suggest that functional units play an important role in
preparation of strategic plan. Firms must support strategic management and specify best
alternative strategies in details.

Stanciu et al (2014) discussed that international and European standard are very
important for improving quality. Companies can be beneficial in competitive market
for long-term.

Aracıoğlu et al (2013) consider the indicators of critical factors that influence the
performance of the company. The goal of the study is to focus on measuring and
evaluating performance in strategic management perspectives. Data were collected by
questioners in Turkey. A logistic regression model was used for analysing data. In this
study, management indicators are: working hours, the number of faulty products and
production capacity of workers. The result shows that companies should measure
factors that affect efficiently in decision making process and performance of company.

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 Review of Literature

Idar et al (2012) examine the features, characteristics and role of performance system
in manufacturing companies. Data were collected by Semi-Structural interview with 10
open questions I Czech large companies. Analysis of 6 cases were done through Cross-
Case analysis. The result shows that it is not clear how strategy can affect on
performance. Some managers use PMS as a tool to control, evaluate, review the
strategic objectives and activities; others use PMS for the comprehensive overview of
business operation.

Striteska (2012) reported that automobile loans are major factors in production strategy
and it is very important in predicting for future sales.

Yildirim et al (2012) consider the effect of market orientation as mediators to strategic

planning practices and performance. Data were collected through mail survey
questionnaires from Malaysian SMEs. The results show that there is an important
relationship between strategic planning practices and performance and also between
market orientation and performance. Market orientation acts as a mediator between
strategic planning practices and performance.

Pellegrinelli et al (2012) suggest that for the production of components in a dynamic

market strategic results can be used. This is specified by frequent management of
products and changes in the demand.

Luo et al, (2011) conclude that firms from different economies in global market
become more interactive than before; so concurrently there is competition and
cooperation among them.

Lin (2011) affirms that the cost of green materials in automobile industry is high, so
companies should attempt to increase the quality of products as well as image of the
firms to succeed in the market.

Dangayach and Deshmukh (2003) claim that in automobile industry quality plays an
important role. In competitive automobile market, innovation and new product
development and continuous improvement of products are necessary.

Murray et al (1995) investigate the relationship between sourcing strategy and market
performance and how this relationship was influenced by contingency factors. Data

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 Review of Literature

were collected through personal interview from subsidiaries of six multinational firms
in the American Midwest in 1992. In this study, they want to measure product market
performance (dependent variable), sourcing strategy (independent variable) and
sourcing related variables (moderator). The result shows that financial, product
innovation, process innovation and asset specificity are important moderate variables
that support the contingency model of global sourcing strategy.

2.2.2 Financial Flexibility

Falát and Holubčík (2017) argue that marketing communication has a significant role
in consumer acceptance of new products. Marketing communication causes growth and
financial stability in any organization.

Klačmer Čalopa (2017) found that business managers and owners do not affect the
financial decision-making of the whole organization; Even though they are worried
about financial results.

Tietjen and Jørgensen (2016) concluded that strategic planners have a crucial role in
financing and they should perceive the productive relationships between goals, human
resources and work places.

Bonifaci et al (2016) suggested that there is strength and weakness of action in a project
and both depends on exogenous and endogenous elements. It demonstrates that
financial evaluation is as an indicator for identifying weaknesses that effect the
implementation of project.

Andrikopoulos and Markellos (2015) found that on the basis of past variation, the
leasing automobile values can be changed in automobile market price.

Dogan (2015) represented that in strategic entrepreneurship, entrepreneurial

companies can increase performance and development of sustainable competition; it is
possible through enhancement of profit and market share. So, new and long- established
enterprise for sustainable competitive advantage must incorporate entrepreneurship
with strategic management.

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 Review of Literature

Altuntaş (2014) claimed that competitive strategy of cost leadership has a positive
relationship with bargaining power of suppliers. In brand image, financial strategy has
most significant relationship with competitive strategy of differentiation.

Claudiu (2011) suggested that in Business to Business market, companies should be

aware of different parts of a market (financial resource, labour force, service, goals,
customers).

Coombs and Gilley (2005) examine the effect of stakeholder management on CEOs
compensation level and interaction between stakeholder management and financial
performance for predicting CEO compensation level. A sample of 406 Fortune 1000
firms and their CEOs are used from 1995 to 2001 for analysing the data. There are
dependent variables (salary, bonus, stock option granted value and total companies) and
independent variables (community relation, diversity, employee relation,
environmental impact and product safety /quality). In this research they found that
stakeholder management has a negative effect on CEO compensation and the only form
of compensation that is affected by interaction between SM and financial performance
is generative. SM wants to increase their level of financial performance by reducing
CEOs compensation, thus CEOs may risk on their personal wealth by adapting
stakeholder- related initiatives.

Gibson and Cassar (2005) investigate the longitudinal analysis of relationship

between planning and performance in small firms. Data were collected by
questionnaires in 1994-1995. The following criteria are necessary for analysis of the
firms: 1. Be an active firm each year 2. Provide responses to all surveys 3. Have less
than 200 full-time equivalent employees in 1995. 4. Have positive sales each year. In
this paper the focus of performance management is on growth of employment and sales
income. The result shows that firms with improvement in their performance are pioneer
to those firms with planning introduction. So, planning is popular for better
performance of firms.

Baker (2003) examines the impact of formal strategic planning and financial
performance on food processing sector. In this paper, five processing food industries
are used to consider the relationship between formal strategic planning and financial
performance. The processing food industries are Confectionary, dairy (fresh milk),

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 Review of Literature

canned and frozen vegetables, baked goods, Jams, jellies and spreads. The survey
technique is used for collecting data from five processing food industries. Average pre-
tax return on assets (ROA) was used for measuring financial performance for 3 years.
The results show that there is a positive relationship between strategic planning and
financial performance in food processing industries.

Hopkins and Hopkins (1997) consider an integrated model of relationship among

managerial, environmental and organizational factors, strategic planning intensity and
financial performance. A survey technique is used for gathering Data and causal
examination used for analysing data. 112 chief executive officers respond to survey of
financial performance. In this paper variables are: 1. Performance factors includes:
income, return on equity, deposit, growth. 2. Environmental factors include:
environmental complexity, environmental change. 3. Organizational factor are: size,
structural complexity. 4. Managerial factors include: strategic planning expertise,
planning performance belief. 5. Intensity factors are: mission, objectives, internal
analysis/external analysis, attractiveness, implementation and control. The results show
that there is an important relationship between strategic planning intensity and financial
performance. Banks play a mediator role in strategic planning-financial performance
relationship. There is a reciprocal relationship between strategic planning intensity and
financial performance. It means strategic planning intensity has a significant role on
better performance and better performance in turn create greater strategic planning
intensity.

Kivijärvi and Tuominen (1996) consider a corporate wide organizational decision

support system to protect financial and other strategic planning in a WOOD Processing
company. They used two methods for decision process: corporate model and evaluation
procedure. Strategic planning is very important for decision making in forest industry
and it supports whole organization. Forest industry has internal and external strategy to
finance for the necessary funds and it must be done under certain criteria. Strategies are
involved: momentum strategy, depreciation strategy, conservative rational earning
strategy, aggressive retained earning strategy, no control limits strategy, method
gearing strategy and geared up strategy. Financial criteria include: production rate,
inventory, cash balance, profit, net worth and total debt. The quality and quantity of
information for strategic decision making can be developed by a computer-based

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integration that combines with traditional data, subjective evaluation and planning
model for improving the effectiveness of Wood Processing Company.

Capon et al (1994) examine the impact of strategic planning on financial performance.

The study of corporate planning was done by meta-analysis in 113 Fortune 500
manufacturing firms. Fortune 500 is an annual list of the 500 largest industrial
corporations in the U.S published by Fortune magazine. Ranking of corporation are
based on: revenue, profit and market value. There were three criteria to classify the
113 firms by planning practice. Hypothesis of financial performance are: corporate
strategic planning (24 firms), division strategic planning (37 firms), corporate financial
planners (34 firms), division financial planners (11 firms) and non-planners (7 firms).
They found that those firms that focus on resource allocation of corporate levels their
performance are better than those who don’t focus on allocation resources at corporate
level. Firms with planning system that focus on financial and budget system don’t have
improvement in their performance. Non- planners’ small firms are able to outperform
their activities in short period, but the possibility of long-term survival is very low.

Reger et al (1992) investigate the effect of regulation and deregulation on strategic

choice and performance. Data were collected by telephone interview and mail survey
from 563 U.S banking industry. A path analysis model is used for analysing the data.
In this study, there are dependent and independent variables. Dependent variables are:
financial performance variables (ROA-return on asset and bankers’ risk). Independent
variables are: 1. Regulation and deregulation variables (total scope of regulation and
number of changes in regulations 2. Strategic choice variables are: i. ratio of personal
to commercial loans ii. ratio of agriculture loans iii. ratio of estate loans d. ratio of
foreign loans to total iv. ratio of asset in non-banking subsidiaries to total v. ratio of net
interest income to total asset. It is concluded that deregulation has direct and indirect
effect on risk and return on asset. Also, it has direct effect on firm’s strategic choice.

Capon et al (1990) consider the determinants of financial performance. A sample of

320 published studies were selected and data were collected from ABI Inform, on-line
and national economic working paper series. Samples are related with environmental,
strategic and organizational factors to financial performance. A meta-analysis is used
for analysing the data. The results of the study describe that environmental variables

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have an important effect on business performance industry (concentration & growth)

and other factors like size has less effect on the performance of business.

Pearce et al (1987) investigate the impact of grand strategy and planning formality on
financial performance. The specific areas that they analysed are as follows: The
relationship between grand strategy and performance and the relationship between
grand strategies and strategic planning formality. Questionnaires were sent to 97
manufacturing firms for collecting the data. The finding of the study shows that the
value of a product or service that is in the mind of consumer and he is willing to pay
for it, is a means for improving a firm’s financial performance. Strategic planning
formality is an important factor in organization performance. In general, formality is
related to performance in a positive manner and to the grand strategic in a comparable
degree.

Chakravarthy (1987) surveys tailoring a strategic planning system to its context. Data
were collected by questionnaire survey from 111 firms and respondents were senior
executive. For exploring the relationship between internal and external fits regression
and one-way analysis were used. External fit includes: portfolio and financial pressure.
Internal fit focuses on cultural context. Finding of the study describes that system rating
is unrelated to financial performance. There is no important fit between planning system
and its rating. There is no fit between planning system which is used in the context of
the firm surveyed. The planning system of the firm surveyed were poor in external and
internal fits.

Pullinger and Hare (1987) reported an empirical study of characteristics of the

strategic planning process and how these were related to financial performance. Data
were collected from 21 U.K companies by interview. Financial data are divided into 4
groups: 1. Size 2. Probability 3. Performance 4. Growth. The results show that informal
information has more influence on increasing financial performance. A number of
informal channels of communication that are used and percentage type of information
which we get, have positive relation on financial performance.

Rhyne (1986) examines the relationship between financial performance and

characteristics of corporate planning systems. Characteristics of planning involves: 1.
Short-term forecasting (less than 1 year) 2. Budgeting (normally 1 year) 3. Annual

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planning (1 year) 4. Long-range planning (5, 10, or 15 years) 5. Strategic planning (5,
10, or 15 years). For this study the following proposition is suggested: long-term
financial performance related to firm’s industry will be positively related to planning
systems at a higher point on the planning continuum. A survey method is used for
collecting data and evaluated with one tailed t-test method. Firms with planning system
show long-term financial performance relative to their industry. Firms with superior
performance are able to recognize industries that have potential profits.

Pearce (1983) investigates the relationship between internal versus external orientation
to financial measures of strategic performance. Eight commercial banks were selected
for collecting data with questionnaires. Performance measure includes: profitability
policy and risk policy. Profitability policy involves: 1. Profit margin 2. Return on
average assets 3. Net interest spread 4. Return on average equity. Result indicates that
four profitability policies have positive relations with high internal and low external
orientation. Top management should be aware of market situation and external
environment for satisfying the company’s planning requirement.

Wood and LaForge (1979) consider the impact of comprehensive planning on

financial performance. Questionnaires with 18 questions was designed and sends to 50
banks throughout the U.S. In this study, financial performance was analysed over the
five years (1972-1976) with regard to two kinds of performance measures: 1. Growth
in net income 2. Return on owner’s investment. Banks are divided into 4 groups as
follows: comprehensive formal planners, partial formal planners, control group and no
formal planning system. Results show that banks with comprehensive formal planners
are in better position and perform better than those without formal planning system and
do better than a randomly selected control group.

Robinson and Pearce (1983) investigate the relationship between formality of

planning performance and financial performance. A sample of 85 U.S banks in south
of Carolina were used for collecting by questionnaire. Goals of this research consist of
the following: 1. Profit margin 2. Return on asset 3. Loan growth 4. Return on equity.
Formal planners didn’t observe any improvement in performance ranking from 1977 to
1979 against non-planners. Six dimensions of strategic decision making involve 1.
Scanning the environment 2. Goal and objectives 3. Distinct company 4. Authority
relationship 5. Resource deployment 6. Monitoring and controlling. Formalization of

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goods, targets and objectives are strongly significant and formal planners placed more
emphasis on goods and objectives.

2.2.3 Structural Flexibility

Ali et al (2018) reported that strategic human resource management is a positive factor
and has an important relation with operational performance. Employee’s relations are
a mediator between strategic HRM and organizational performance.

Burger et al (2017) suggested that particular flexibility types and abilities are necessary
for motivating companies to reconfigure the processes of achieving their goals in
competitive market.

Kohl et al (2016) found that integrated evaluation system in the structure of an

organization can help managers to achieve innovation and efficiency.

Badawy et al, (2016) argued that key performance indicators have a specific role for
planning and controlling the organization via supporting information, making
transparency and supporting the decision making of management to achieve the
organizational goals.

Bagheri (2016) affirms that the process of economic, social and technological changes
are significant in the strategic planning and human resources. Organization must adapt
itself with these changes. The important factors for human resource development are:
cooperation, coordination, integration and alignment of human resources.

Zehir et al (2016) claimed that entrepreneurial orientation acts as a mediator between

financial performance and strategic human resource management. It operates as a
partial mediator between human resource management and employee performance.

Kazmi et al (2016) found that there is a significant relationship between the theoretical
concepts of strategic management and product innovation which support the
effectiveness of industrial team working.

Kliuchnikova and Pobegaylov (2016) confirm that corporate management for

organizational improvement involve an innovative approach for selecting
communication strategy, enhancing company’s image and effective marketing. Up-to

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date technologies are very important for technological support and for better interaction
between the company’s structural patterns.

Nam and Kim (2016) concluded that in semiconductor industry, rational culture and
group culture affect job satisfaction. Automobile industry is affected by group culture,
hierarchical and development culture. Development and rational culture have a positive
impact on organizational commitment.

Rashid et al (2016) found that the leadership change flexibility is essential in accepting
the situation and strategic planning performance.

Ibrahim (2016) The significant factors of distributive justice and motivations are
manager’s political interests and it is the main factor of employee’s job satisfaction in
the organization.

Ursić et al (2016) found that there is not certain conceptual framework in second
homes planning and it should be concerned.

Striteska and Jelinkova (2015) reported that strategic concept is dynamic and flexible
in every organization and it must react rapidly to the changes in competitive
environment. Companies must have awareness about the implementation of strategic
concept.

Koch et al (2014) found that effective element for industrial enterprise is fluctuations
of manufacturing systems in highly dynamic environment. The reconfiguration
planning needs investigation and realization of affected manufacturing resources and
processes.

Çınar and Karcıoğlu (2013) suggested that successful companies in competitive

market must pay attention to strategy, professional behaviour and human resources.

Şentürk (2012) states that the most important factors in hotel industry are:
organizational factors, innovation activities, improve communication and competitive
planning.

Dekkers and Kanapathy (2012) reported that in organizational structure, the key
factors for the firms are flexibility, cost and responsiveness.

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 Review of Literature

Besler and Sezerel (2012) concluded that one of the important management tools in
human resource is increasing employees’ loyalty and commitment, high responsibility
and improving corporate image.

I Ürü et al (2011) found that risk taking has a high innovation and creativity and can
improve performance in dynamic environment.

Lee (2007) examines whether the new ventures success in the biotech industry relates
with the characteristics of strategic alliance. A sample of 189 Taiwan biotech firms
were selected and data were collected by benchmarking questionnaires. In this study 6
hypothesis were tested. Factors analysis are involved: alliance, structure, alliance
partner relationship, alliance type, absorptive capacity and new venture success. The
result reveals that strategic alliance has important role in the improvement of SMEs
new venture success.

D'costa (1995) confirms that Indian automobile industry reflects the interaction of
changing institutional elements and global forces that effect industrial restructuring in
a developing economy.

Jemison (1987) analyses strategy content, organizational process, performance level

(return) and performance variation (risk). A sample of 20 Indian banks were selected
which assets were between $ 125 and $ 550 million. In this study data were collected
in following ways: 1. Archival data from 1975 to 1979. 2. Questionnaires and 3.
Interviews. Organizational process variables consist of: 1. Decision centralization 2.
Planning activities 3. Environmental interaction 4. Departmental interdependence 5.
Distribution of influence on strategic decisions. The result shows that organizational
process and strategy are related to both risk and return and the related processes to risk
and return are different, so the processes are not the same.

2.2.4 Technological Flexibility

Jianhua et al (2017) found that government financial investment, preferential tax

policy and government procurement are the three main factors with which government
can support companies for technology of new energy vehicle.

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Ruiz-Jiménez and del Mar Fuentes-Fuentes (2016) argue that in technology sector,
management capabilities have a special effect on innovation performance of SMEs.
SMEs in technology sector can get better outcome in product and process innovation
with managers who have particular capabilities.

Ahmad and Zabri (2016) realized that there is a positive relation between the size of
the company, modern technology and participation of owner/manager.

Harsasi (2015) concluded that supply and technological uncertainty play an important
role in strategic supply management. The strategic supply management has a crucial
effect on the performance of buyer and seller.

Masoumik et al (2015) affirm that there is a positive correlation between the

competitive benefits, environmental performance and green strategies. The findings of
the study mention that a clean technology strategy has significant effect on generating
competitive benefits.

Mišanková and Kočišová (2014) discussed that strategic management is very vital for
the firms and without it companies cannot succeed in the competitive market for long-
run.

Dekkers and Kanapathy (2012) reported that in manufacturing flexibility there is a

suitable fit between environmental and internal strategies; the company with
technology variables can benefit from the competitive advantage and improve its
performance.

Lee et al (2010) found that regulatory standard has an effective role in forcing
technological innovation and specifying role of technological modification.

Uotila et al (2009) analyse the relative exploration versus exploitation orientation and
financial performance. Exploration activities consists of: search, variation, risk taking,
experimentation, play, flexibility, innovation and discovery. Exploitation activities
involve the following: refinement, choice, efficiency, production, selection,
implementation and execution. Data were collected from279 manufacturing firms from
1989 to 2004. There are 2 hypotheses in this study. 1. The relative exploration
orientation of the firms exhibits a curvilinear (inverted u-shaped) relationship to the

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 Review of Literature

future financial performance of the firm. 2. Industry technological dynamism positively

moderates the relationship between relative exploration orientation and future financial
performance of the firm. There are dependent / independent and moderating effect and
control variables. Dependent variable is market share and Independent variables are
exploration and exploitation activities. A moderate effect is industry technological
dynamism. Control variables include: company size and company R&D intensity.
There is also dummy variable to estimate R&D limitation. Generalized Method of
Moments (GMM) methodology is used for testing the hypotheses. Result shows that
there is an inverted U-shaped relationship between the relative share of explorative
orientation and financial performance which is a curvilinear relationship. This
relationship moderates positively by R&D intensity of the industry that the firm is
active and operates in it.

Rudd et al (2008) consider the mediating effects of four type of flexibility on strategic
planning and performance relationship. Four types of flexibility are as follows:
operational flexibility, financial flexibility, structural flexibility and technological
flexibility. Dependent variables include: financial and non-financial performance.
Flexibility acts as a mediator between strategic planning and firm performances. Data
were collected by questionnaires from large and medium size U.K manufacturing
organization. Path analysis is used as a method for analysing the data. It found that
operational and financial flexibility have an important role in improving financial
performance; non- financial performance is improved through structural and
technological flexibility. Non-financial performance is focused on moral and relation
of employees and financial performance is searching for financial returns.

Mohdzain and Ward (2007) investigate the information system strategic planning
(ISSP) in multinational organization. Three aspects of ISSP that are important in
showing the nature of ISSP among subsidiaries are: Responsibility for ISSP, the focus
of ISSP and the approach used for ISSP. The research was done by interview and
collecting data was by semi-structure interview. Nine companies were involved in
collecting data. Two Japanese, three US companies and four European companies.
Three companies in the field of electronic industry, two companies are active in food
and beverage and four remaining are in financial, chemical, machinery, equipment and

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textile. Information system planning in most multinational companies is for planning

of tactical and short –term strategies and overcoming IT planning.

Morgan and Strong (2003) examine the relationship between business performance
and dimensions of strategic orientation. It considers an empirical investigation of
medium and large high technology, industrial and manufacturing firms. The
relationship between 6 dimensions of firm’s strategic orientation and business
performance are studied. The 6 dimensions are as follows: Aggressiveness, Analysis,
Defensive, Proactiveness, Futurity and Riskiness. Data were collected by survey
questionnaires. The results describe that in strategic orientation analysis futurity and
defensiveness have relation to business performance.

Joshi et al (2003) claimed that the firm with sufficient experience about technology
can only be successful in short-time.

Husain and Pathak (2002) considers alignment of strategic priorities and

performance. Data were collected from a matched pair of general manager and
manufacturing manager in the Mid-Atlantic region of the U.S. For measuring data
regression analysis was used. This study considers manufacturing manager and general
manager accept strategic priorities, whether this can increase the performance of
manufacturing unit or not. Finding of the study indicates that organizational variables
have an important role in moderating the relationship between alignment of priorities
and manufacturing performance.

Luo and Park (2001) investigate strategy alignment and performance of market-
seeking MNCs in China. It focuses on uncertain and dynamic market of China based
on the special formation of business strategy and environment. Data were collected
from 113 foreign subsidiaries in China based on survey questionnaires in 1997. The
questionnaires measure three dimensions: complexity, dynamism and hostility. These
three dimensions evaluates each of the eight environmental sectors: buyers, suppliers,
competitors, economic, technological, regulatory, social-cultural, international sectors.
T-test method used for measuring data. MNCs in China are facing with uncertain
environment, ambiguity in property right and institutional requirement to enter
transition economies. It is important for MNCs subsidiaries to recognize and perceive
local market to success in uncertain market.

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 Review of Literature

Ramanujam et al (1986) review 7 key dimensions of planning system. Dimensions of

planning systems include 2 parts: 1. Design elements 2. Organizational context of
planning. Design elements are:1. System capability 2. Use of techniques. 3. Attention
to internal facets 4. Attention to external facets 5. Functional coverage. Organizational
context of planning is: 1. Resource provided for planning 2. Resistance to planning. A
sample of 207 executives of Fortune 500 responded to questionnaires. A discrimination
analysis method was used for analysing data. The result of the study describes that
determinants of the effective planning system are different, based on the special
criterion of effectiveness.

2.3 Research Gaps

1. Only few studies are focused on strategic planning and non-financial

performance.

2. There is limited investigation about the role of technological flexibility in

mediating the relationship between operational, financial, structural flexibility
and non-financial performance.

3. There are limited researches about the role of strategic planning in automobile
industry in India.

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