The influence of strategy-making types on IT alignment in SMEs

The Authors

Michael Kyobe, Department of Information Systems, University of Cape Town, Cape Town, South Africa

Abstract

Purpose – The purpose of this paper is to evaluate and compare the influence of three strategy-making modes (planned, adaptive and entrepreneurial) on IT-business strategy alignment in small to medium-sized enterprises (SMEs).

Design/methodology/approach – Empirical research using a questionnaire was conducted. In total, 108 SME owners and managers participated in the study and the data were analysed using quantitative techniques.

Findings – The planned mode provided better results as predicted. Each strategy-making mode was found to influence certain specific aspects of alignment and performance. For instance the planned mode ensures better understanding of business and IT objectives and provides high growth sales. The adaptive mode encourages participation of stakeholders in planning and improves communication and staff productivity. The entrepreneurial mode can facilitate immediate revision of plans in organizations operating in dynamic and competitive environment.

Research limitations/implications – Many factors influencing alignment were excluded. Second, the study was conducted in only three provinces and excluded the views of staff and IT personnel. These limit generalization of findings.

Practical implications – Assistance in planning and access to support programmes are necessary. Understanding the impact of SME characteristics can also assist the government in prioritizing resource allocations and focusing development programmes. The inconclusive results of this study, the impact on alignment of practices such as corporate governance, use of the balanced scorecard, and affirmative action should be researched further.

Originality/value – This was the first attempt to investigate the relationship between strategy-making practices and IT alignment in South African SMEs. It provides empirical evidence confirming that these practices influence specific aspects of alignment and performance. SME managers can adopt the approach used to identify practices that ensure better alignment.

Article Type:

Research paper

Keyword(s):

Small to medium-sized enterprises; Corporate strategy; Strategic alignment; South Africa.

Journal:

Journal of Systems and Information Technology

Volume:

Number:

Year:

2008

pp:

22-38

Copyright ©

Emerald Group Publishing Limited

ISSN:

1328-7265

Introduction

The alignment of information technology (IT) and the business goals (hereafter referred to as alignment) is crucial to the success of organizations. Recent studies, however, show that organizations are struggling in addressing alignment challenges (Levy et al., 2003). According to a METAGroup survey of CIOs globally, alignment and value management were ranked as the top issues of concern to CIOs in 2005 (CRM Today, 2005). The Standish Chaos report of 2003 indicates that 71 per cent of all projects were challenged or delivered late and that US IT projects had a waste of $140 billion. Stanleigh (2005) also cites a report by Pricewaterhouse Coopers (2004), which indicated that only 2.5 per cent of global businesses achieve 100 per cent project success. The major reason for these failures has been attributed to poor alignment of projects with core strategies of the organizations (Stanleigh, 2005).

While researchers have made great effort to address these problems and have identified numerous factors influencing alignment, the impact on alignment of the process by which strategies emerge in SMEs has not been examined (O'Regan and Ghobadian, 2002). Strategy-making practices influence the quality of strategy, content of strategy and business performance. Therefore, it is contended that such practices may also impact on the business–IT strategy relationship in these organizations. This relationship has not been examined before, therefore a contribution is made in this direction by investigating the influence of three common strategy-making types alignment (planned, adaptive and entrepreneurial) on alignment in SMEs. The SMEs in South Africa are thought to be small or medium businesses employing less than 100 people (Department of Trade and Industry, 1997).

In the following sections, the author reviews literature on strategic alignment, business strategy and strategy-making modes, IT strategy and performance. The research proposition and methodology are then presented followed by a discussion of the findings. Finally, conclusions are drawn and recommendations for future directions are suggested.

Literature review

Strategic alignment

There is no precise definition for strategic alignment. Various definitions have been provided to describe this concept, e.g. “strategic alignment” (Henderson and Venkatraman, 1993); “linkage” (Reich and Benbasat, 2000); “integration” (Wilkinson and Dale, 1999), and there seems to be no consensus on how to achieve it. In the current study, alignment is defined as the process of ensuring that the choices made about acquiring; developing; and deploying IT are consistent with business goals, organizational factors, the external environment and vice versa.

According to Fiegener and Coakley (2002), strategic alignment has been examined from the content perspective (e.g. content of the business and IT strategies to be aligned) and process perspective. The later looks at the processes by which alignment is made, e.g. mutual understanding between business and IT executives and the patterns or clusters of alignment (Croteau et al., 2001; Tallon and Kraemer, 2003). Henderson and Venkatraman (1993) also developed a model that examines more comprehensively the alignment process. This model emphasizes the need to ensure alignment between four domains of business strategy, IT strategy, organizational infrastructure and processes and IT infrastructure and processes. While most existing alignment models emphasize the rational planning processes, Ciborra (1997) and Ciborra et al. (2000) argue that limited consideration has been given to the practical realities of managers. He maintains that alignment should not be seen as a product of a rational planning process, but rather as a relation involving various actors and based on the concepts of care, cultivation and hospitality.

Chan (2002) suggests that in order to improve alignment, researchers should

focus on those aspects of alignment that are less well understood and examine managerial practices that can improve the probability of alignment; and
examine the key components of alignment that impact IS performance.

To heed this call, the present research examines the influence of the strategy-making practices on the linkage between business and IT strategies and on the performance of SMEs. The elements of this relationship are discussed in more detail in the following sections.

Business strategy

Business strategy may be defined as:

A coordinated plan that gives the outlines for decisions and activities of a firm and is focused on the application of the resources that a company has at its disposal in such a way that the activities have an additional value to the environment so that the firm can achieve its own goals (Gibcus and Kemp, 2003, p. 11).

Business strategy has been studied extensively in large organizations and from various perspectives. For instance, some writers have perceived strategy as allocation of resources, as creating a unique position, and as integration (Gibcus and Kemp, 2003). Porter (1980) proposed the generic strategies – cost leadership, differentiation and focus while Miles, Raymond and Snow (1978) identified four strategic orientations: defenders, reactors, prospectors and analysers. There is also a growing belief that faced with new set of challenges, an entrepreneurial approach to strategy is vital to success (Dess et al., 1997). Yet another school of thought consider strategy to be less about the selection of markets and market positions, and more about the building and nurturing of key internal capabilities (Senge, 1999).

Researchers hold different views on business strategy in small organizations. Some argue that business strategic planning is not practiced by small firms due to poor skills, limited resources, short focus, etc (Ogunmokun et al., 1999). However, there is strong evidence to suggest that successful entrepreneurs rely on proactive planning (Gundry and Kickul, 2004). Furthermore, most SMEs that have successfully competed with large firms have done so by adopting differentiating strategies or focusing on core competencies in areas such as delivery speed, personal experiences, connections, commitment, good reputation with customers and devotion (Cooper and Artz, 1995; Croteau et al., 2001; Rangone, 1999). A business strategy can ensure efficient allocation of resources, provide direction of business operations, create shared understanding of challenges and goals and provide a structured means of identifying and evaluating resources. Therefore formulation of such strategy is vital for SMEs.

Strategy-making types

Strategy-making is the manner in which organizations make important decisions leading to the development of strategies (Verreynne, 2004). This process is usually viewed as rational in nature and studies conducted on strategic alignment in SMEs have mainly assumed a planned business strategy. Verreynne (2004) argues however that SMEs place differing emphasis on strategy-making and may employ different strategy-making types. These are discussed in the following sections.

Planned, adaptive and entrepreneurial types

The common strategy-making modes are the planned (rational), adaptive and entrepreneurial (Schwartz and Teach, 2000). The planned mode involves the analysis of the environment, formulation and evaluation of alternatives and the selection of one for implementation. In the adaptive or emergent mode decisions are made incrementally and involve most of the stakeholders. Vision guides action in this mode and a common set of beliefs drives this strategy-making practice. Entrepreneurial strategy-making involves extensive use of emergent strategies by managers with limited involvement of other stakeholders (Verreynne, 2004). In this mode, there is little opportunity to influence decisions through politics and culture usually drives the vision of the entrepreneur.

Corporate governance and balanced scorecard

There are also good practices usually adopted by large organizations, which can ensure effective strategy formulation and implementation. Two of these practices are corporate governance and the balanced scorecard (BSC) (Davig et al., 2004; Gabrielson, 2003; Abor and Adjasi, 2007). According to Abor and Adjasi (2007), corporate governance is a process or structure used to direct the affairs of an organization towards achievement of accountability and ultimate goals of stakeholders. A good governance system is designed by all stakeholders and describes how a company may be run, directed and controlled. It holds to account those given the responsibility to manage the organization. This could be achieved by ensuring adequate separation of the management and directorship or board roles, effective mix of independent and non-independent directors and the establishment of appropriate controls to ensure the integrity of financial reporting.

While research on corporate governance goes back to the 1930s, most of this has focused on large organizations. Gabrielson (2003) argues that concepts of corporate governance are applicable to small businesses. These organizations are faced with many governance issues, e.g. continuity and succession; conflicts between managers, owners, family and non-family members; the influence and demands of creditors, suppliers, venture capitalists and the need to address regulatory requirements (Menkhoff and Kay, 2000; Abor and Adjasi, 2007). These challenges raise the need for strong governance in order to protect the interests of stakeholders, ensure proper accounting practice and information disclosure. Furthermore, good governance can lead to increased transparency, better prospects of obtaining funding or attraction of more third-party investment.

BSC is also a useful management framework that can be adopted to enhance the development and implementation of strategic plans. This framework developed by Kaplan and Norton (1992), allows managers to examine each area of the organization, its vision and strategy through the financial, customer, internal process and learning and growth lenses. It can help management teams articulate, communicate and monitor the implementation of strategy. Andersen and Lawrie (2001) argue that this framework is useful to small firms since it formalizes the description of strategic objectives and priorities in a way that builds consensus and allows for ownership of the strategy formulation process. Furthermore, employees can align their behaviors with the intended goals of the organization thereby ensuring greater commitment and learning during the strategy formulation process.

While great benefits can be derived by SMEs from the adoption of these practices, limited studies have been conducted in these areas and very few organizations are reported to have actually adopted these practices. Therefore this study will be limited to the three common strategy-making approaches (planned, adaptive, and entrepreneurial).

The influence of strategy-making types

Further evidence suggests that the influence of strategy-making types on strategy and performance may also differ. For instance, the planned mode can allow for better evaluation of the environment. According to Balabanis and Spyropoulou (2007) and Dess et al. (1997), the adaptive or participative mode can minimise potential conflicts with stakeholders while the entrepreneurial mode may be appropriate in situations where prompt action is required to deal with hostile environmental conditions. It encourages initiative, risk taking and more aggressive response. There are also indications that the unplanned or emergent approaches to strategy formulation may lead to better alignment by ensuring that as business and IT/IS strategies unfold along unanticipated paths, potential strategic misalignments are identified and could be minimized (Fiegener and Coakley, 2002). The impact of these different strategy-making types on alignment is investigated empirically in this study.

IT strategy

IT strategy may be defined as the choices firms make about acquiring or developing and implementing technology to help reach the goals of the organization. Three components have been used to conceptualize IT strategy: technology scope, systemic competencies and IT governance (Henderson and Venkatraman, 1993). Technology scope includes all essential information applications and technologies that the business uses to support business activities. Systemic competencies include those capabilities or attributes that play a role in the creation of new business strategies or better support existing ones. For instance, IT applications assist strategy formulation in the analysis of the environment for threats and opportunities. IT governance looks at IT authority issues, selection and prioritization of IT projects, allocation of IT resources and responsibilities.

While many studies have examined the operational use of IT, the focus on its strategic importance in SMEs has been limited. Researchers argue that there is little possibility of developing IT strategies in small organizations because of limited resources, poor planning and lack of expertise. Furthermore, IT strategy development has been hampered by the fact that IT section heads are likely to hold junior positions to influence planning decisions. In many cases IT departments or operational units still operate as subsystems of accounting, administration or finance functions (Association of Certified Chartered Accountants, 1998). Consequently, there has been lack of appropriate IT policies in many small organizations. However, with the recent developments in the digital world and the need to ensure compliance with government legislations on the use of IT, SMEs have been advised to adopt good practices such as development of IT policies. Michalsons and Hughes (2005) argue that in the case of controversial issues relating to the authenticity and admissibility of electronic imaging, an organization would be in a better position to counter technical challenges to evidential weight if it consistently adopted good practice in IT.

IT alignment in SMEs

The impact of IT is realized mainly in combination with other organizational factors such as business strategies, mass customization and time-to-market (Byrd et al. 2006). Lack of proper alignment of IT-strategy with business strategy remains a serious challenge for SMEs (Levy et al., 2003). It has been reported that opportunities to use IT in SMEs are usually not identified, prioritized or formally authorized and in many cases not implemented based on importance to business objectives. Furthermore, planning for IT is not a continuous process (Ciborra et al., 2000). IT decisions are never revised as the business needs evolve, outdated software and hardware are often used and IT resources are under-utilized to an extent that they cannot support business goals effectively. There is therefore a need to ensure alignment in these organizations.

Organizational performance

Literature also suggests that alignment of IT with business strategy improve business performance. Business performance may be defined as the well-being and strength of the enterprise relative to its competitors. Alignment of IT with business strategy and other organizational requirements is believed to improve organizational performance and enhance competitiveness (Reich and Benbasat, 2000). Researchers also argued that a firm's inability to realize sufficient value from its IT investments is due in part to an absence of strategic alignment (Presley, 2006). These claims are however based on samples collected from large organizations. In this study, we examine the impact on SME performance of the alignment of the IT strategy with business strategy.

Conceptual model and proposition

This study aims to measure the influence of three strategy-making types (planned, adaptive and entrepreneurial) on IT-business alignment and performance in SMEs. Figure 1 represents the elements investigated in this study.

While there is evidence to suggest that different strategy-making types could yield performance improvements in different strategic orientations (Verreynne, 2004), the global complexities and dynamic challenges experienced today demand that SMEs engage in more proactive planning (Gundry and Kickal, 2004). Therefore the researcher proposes that SMEs that adopt the planned strategy-making type will have better IT alignment results. Hence

H1. SMEs that adopt the planned strategy-making type will have better IT alignment results than those that adopt other strategy-making types.

Venkatraman (1989) provides several perspectives of alignment (fit), which could be used in its measurement. He identifies fit as moderation, fit as mediation, fit as matching, fit as gestalts, fit as profile deviation and fit as covariation. In this study, the matching concept was adopted. IT alignment was measured by determining the absolute difference between the rating for business strategy and IT strategy on certain items.

Methodology and data collection

Questionnaire

A questionnaire consisting of two parts was developed (Appendix). Most of the questions were adopted from previous studies, but modified to capture data relevant to the current SME study. These were measured on a five-point Likert scale whereby 1 represented “strongly disagree” and 5 “strongly agree”. The first section collected basic information about the organization and the number of employees.

In section B, questions B1A-B1D were used to determine the strategy-making approach the organization adopted. Items were mainly adapted from the work of Hart (1991) and Dess et al. (1997). Respondents were, for instance, asked to indicate whether their business plans were prepared by the owner or manager alone; whether all stakeholders were involved in planning and their process was guided by common beliefs or values; or whether their planning process involved analysis of the business environment, evaluation of alternatives and preparation of a formal (written) business plan. Questions B1F-B2E asked the respondents to indicate their agreement or disagreement with statements that measured the alignment of their business plans with IT plans. Premkumar and King (1994) suggested that the existence of integration mechanisms such as effective communication between business and IS managers and the participation of IS managers in business planning should be established. Henderson and Sifonis (1988) suggested further that the existence of relationships between business and IT objectives could be established by measuring the internal and external consistence of business and IT planning output. Cresap et al. (1983) measured alignment by asking respondents to identify the extent to which: the business plan stated information system needs; the IS plan made reference to items in the business plan; line and staff managers participated in information system planning; and business and information system planning calendars were synchronized. This approach of looking for cross-references between IT and business objectives as evidence of alignment was adopted in this study.

Questions B4A-B4D measured the organization's performance. Managers were asked to indicate their subjective assessment of IS contribution to performance. This approach has been used in previous studies since it can capture a wide concept of business performance. In addition, it may not be easy to obtain objective measurement of performance in SMEs since managers are usually reluctant to disclose actual figures and also the fact that record keeping is poor (Rwigema and Karungu, 1999). The measures were adapted from Venkatraman (1989) and Watson (1990). Respondents were requested to provide accurate information based on recent business results and where possible current financial records were examined. The results obtained were tested for reliability and compared to those obtained in previous studies.

A preliminary version of the questionnaire was discussed with scholars and managers and was piloted with 12 respondents. Some questions were reworded and the original structure of the questionnaire was amended. Furthermore, the questionnaire was also reviewed and approved by the University's ethics committee before it was administered.

Sampling

This research was conducted in SMEs currently engaged in e-commerce since these are most affected by the challenges of the digital age. The questionnaire was sent to SME managers or SME owners in the urban and rural areas of the Western Cape, Free State and Kwa-Zulu Natal provinces. The list of SMEs was obtained from the Braby's 2006 business database. A total of 300 SMEs were selected randomly, of which 100 operate in Kwa-Zulu Natal, 100 in Free State and 100 in the Western Cape provinces. The researcher wanted to obtain a sample representative of the main ethnic groups in South Africa (i.e. whites, colored, Indians and blacks) since there have differences in characteristics. According to Orford et al. (2004), colored, Indian and White entrepreneurs predominantly live in urban areas while over 51 per cent of black entrepreneurs live in rural areas. The Free State province has more poor black entrepreneurs in rural areas, Western Cape Province has more colored entrepreneurs and Kwa-Zulu Natal province has a higher population of Indian SME owners. Furthermore, the researcher also ensured that the sample consisted of SMEs practicing planned, adaptive and entrepreneurial strategy-making types. SME managers in urban/metropolitan areas are usually more educated, are exposed to more challenges and opportunities and are more likely to formally plan their work than those in rural areas. Most rural SMEs are mainly family owned and possess characteristics similar to those found in the entrepreneurial group.

Respondents were mainly owner managers or business managers. These were selected because of their involvement in business planning and IT implementations. Oostheizen (1996) surveyed the hierarchy of strategies in service organizations in the Western Cape Province and confirmed that strategy formulation and action in small firms are vested in relatively limited members of senior management.

Results and analysis

The questionnaire was posted to SME managers or owners. A cover letter explaining the purpose of the study and a pre-paid return envelope were enclosed. Follow-up phone calls were made after one week to encourage the managers to complete the questionnaire. Out of the 300 questionnaires sent out, 120 were received. Only 108 of these were useful. Twelve were not completed correctly and these respondents declined to get involved any further. The response rate was therefore 36 per cent. Of these respondents (rural and urban combined), 34 had adopted the deliberate approach to strategy-making, 21 the adaptive approach and 53 the entrepreneurial approach. Table I presents the characteristics of the respondents.

First, items used in the model were identified using factor analysis procedure. This allows for the analysis of the interrelationships among the variables and factors. The factors were extracted using correlation matrices and the method of principal component. Loadings 0.50 or greater are considered to be significant (Hair et al., 1995). Table II represents the standardized factor loading for the items that determined the strategy-making types. Factor analysis of planning practices confirmed existence of three constructs. Factor 1 (planned = 0.61); factor 2 (adaptive = 0.72 and 0.57); factor 3 (entrepreneurial = 0.58).

Table III represents the standardized factor loading for the items that measured alignment. A number of items loaded on their appropriate factors. Only those items that loaded 0.50 or more on a factor were considered and are listed in Table III (Hair et al., 1995). BIF (business planners understand IT value influences factor 1 the most. This indicates that by appreciating the value of IT to a business, managers can be in a better position to state its contribution and make appropriate revisions to their plans when changes arise. B2D (IT personnel understand business needs) loaded highly on factor 2. By understanding business requirements clearly, IT personnel ensure that limited resources are utilized adequately by developing systems that support business needs. B4B loaded the highest on factor 4 thereby appearing to be the best measure of performance in this study.

Validity and reliability tests

In order to ensure content validity, the items used for measurement were obtained from the previous studies as indicated above. The researcher also determined the reliability or internal consistency of each variable by calculating the Cronbach alpha coefficient and the results are presented in Table IV. Most of the Cronbach alpha coefficients were above 0.60, thereby reflecting relatively high levels of construct reliability.

Measuring IT alignment

As indicated in the previous sections, IT alignment was measured by determining the absolute difference between the rating for business and IT strategies on the following items: understanding of business and IT objectives; participation in business and IT planning; content of IT and business plans; and revision of business/IT plans when changes take place. For instance, two questions were set to measure the content of the business and IT plans. The first one determine if the business plan specified the contribution of IT to business and the corresponding question determined whether the IT plan addressed business priorities. The difference in ratings on these items was then calculated. If this difference were low, this would indicate a higher level of IT alignment.

Discussion

The group that adopted the planned mode had better alignment and performance results compared with the adaptive and entrepreneurial groups (Tables V-VIII). Managers in the planned group, who mainly operate in the urban areas, appear to have better understanding of business and IT objectives, were encouraged to participate in planning and specified both their IT and business needs. Some of the managers in this group had prepared business plans before in order to obtain funds from financial institutions. Some organizations were already using strategic planning tools, which facilitated rigorous analysis of business and marketing requirements. This possible explains the higher level of understanding of business and IT objectives in this group. The planned group also reported the highest improvement in sales growth (4.97) and profit margin (3.78) (Table VIII). These findings are consistent with those of Miller et al. (2001), who also found that managers of small businesses practicing extensive planning and control, perceived greater successes in their businesses. H1 was therefore supported.

It should be mentioned, however, that most organizations in the planned group are located in urban areas where they have easy access to markets and government support programmes. This explains further the reported improvement in planning capabilities. However, the score on revision of plans for this group was not high. While no clear explanation could be provided for this, Tallon and Kraemer (2003) suggest lack of flexibility in IT infrastructures or governance. Further analysis shows also that the planned group did not score highly on staff productivity. This may not be surprising since earlier studies show that few staff members are usually involved in this exercise and that the beliefs and preferences of managers usually influence decisions made (Verreynne, 2004).

The adaptive group consisting of both urban and rural SMEs scored relatively highly on revision of plans, participation in business and IT planning, improved communication (Table VI) and improved staff productivity (Table VIII). The researcher found that organizations in this group were involved in some form of local business networks. Some of them were active members of labour and business unions and had implemented affirmative action policies. Adoption of such policies and activities seems to encourage development of collaborative effort and abilities to communication freely. This is consistent with earlier finding by Dess et al. (1997). It is surprising however to find that this group did not score highly on understanding of business and IT objectives.

Table VII indicates that fairly low scores were obtained by SMEs that adopted the entrepreneurial approach. This suggests that business planners in these organizations do not seem to understand the value of IT. They do not participate in IT planning sessions and not many revise plans when the need arises. This group formed the majority of the respondents (49 per cent) and mainly consisted of rural SMEs owned by family members. The researcher also found that there was limited access to support and training programmes, and planning in this group was mainly done by the owner with limited involvement of other stakeholders. Alignment and performance results were also the lowest, particularly the score on improved staff productivity. This strongly supports earlier observation that entrepreneurs have strong desire for autonomy and control and are traditional in their practices (Yu, 2001). Such behavior tends to affect the development of specialized skills in areas like IT, which are needed to enhance staff innovativeness and competencies. Dans (2003) reports that in such organizations, decisions to adopt a particular technology are driven by the firm owner's desires rather than by formal approaches such as “cost-benefit or strategic analysis”, which ensure proper evaluation and alignment of IT strategies.

However, their average score on revision of business plans (1.0, Table VII) and on growth in sales (3.50, Table VIII) were surprisingly closer to those of the planned and adaptive groups, respectively. This was mainly influenced by the positive responses of firms engaged in the finance and marketing services. These firms usually compete in highly uncertain environment, which compels them to develop competencies in these fields and possibly abilities to revise their plans as demands change.

Conclusions

The objective of this study was to empirically investigate the extent to which strategy-making types influence the alignment of IT and business strategy. The findings confirm our suspicion that strategy-making types influence alignment. They also support the proposition that in the present environment, the planned mode yields better results than other strategy-making types. The worst results were obtained by the entrepreneurial group.

This study shows that each strategy-making type influenced certain aspects of alignment and may have some strengths and limitations. The planned approach appears to encourage better understanding of business and IT objectives and ensures clearly specified business and IT needs than the rest of other types. However, this approach does not seem to enable constant revision of business and IT plans. The adaptive approach encourages participation of stakeholders in planning, enables constant revision of plans and improved communication. This was attributed to the local network relationships, union membership and the possible influence of the affirmative action, which seems to encourage collaborative effort in these organizations. While the entrepreneurial approach did not reflect many good results, it seems that organizations operating especially in highly competitive and uncertain environment e.g. (marketing and finance) may benefit from its ability to enable immediate revision and improvement to existing plans as challenges arise. In terms of performance, again certain specific influences can be noted. The planned approach provided high growth in sales while the adaptive approach resulted in improved communication and staff productivity. Only slight improvement in sales was reported by the entrepreneurial group and the approach adopted by this group does not seem to encourage staff productivity. None of the strategy-making types appear to have resulted in high growth profit margins however. Perhaps organizations need to consider a more integrative approach where the strengths of each method are taken into consideration (Pun, 2004). This approach should be investigated further.

There are implications for SME managers, the government and researchers. Since majority of the SMEs surveyed adopted the entrepreneurial approach, and this approach revealed poor results, appropriate assistance in planning should be provided to this important sector of the economy. The research also raises the need for improved access to business and support programmes for rural SMEs. While a blanket approach has been adopted by the government in the past to address SME issues, this study shows differences in SME characteristics may impact on the planning decisions, alignment strategies and performance outcomes differently. Understanding the impact of these characteristics can assist the government in prioritizing resource allocations and also help focus its skills development and e-commerce campaigns. The study could not find clear explanations for the poor score by the planned group on revision of plans and reasons why the adaptive group scored low on understanding of business and IT plans. In addition, it would also be interesting to know and compare the impact of other practices such as corporate governance and BSC on alignment. These problems and relationships should be investigated in future research. Finally, this study found that the government affirmative action policy encouraged participative effort in some organizations. While there are reports indicating that some organizations are reluctant to adopt this policy (Visagie, 1997), future studies can shed more light on its role in ensuring alignment.

This research has some limitations. First, the two alignment factors (Business and IT strategies) were examined in isolation. Other factors such as environmental constraints, personal profile of managers and organizational structure could have direct or indirect influence on the alignment relationships and performance results. Second, this study was only conducted in three provinces therefore generalization of findings may be limited. Future studies should be extended to other areas and the results compared to findings from similar organizations in other parts of the world. There could also be a possible response bias associated with our survey since data was only collected from owners or business managers. Views of IT personnel and staff in the organizations surveyed should have been obtained and compared to confirm further the validity of the responses. Techniques such as triangulation should have been employed to improve data accuracy although this would have constrained the limited budget of the researcher.

Figure 1Conceptual model

Table IProfile of respondents

Table IIFactor loadings on strategy-making types

Table IIIFactor loading on dimensions of alignment

Table IVReliability test

Table VIT alignment in SMEs (adopted the planned strategy-making practice)

Table VIIT alignment in SMEs (adopted the adaptive strategy-making practice)

Table VIIIT alignment in SMEs (entrepreneurial strategy-making practice)

Table VIIIMean performance scores and one-way ANOVA between SME groups and performance

References

Abor, J., Adjasi, C. (2007), "Corporate governance and the small and medium enterprises sector: theory and implications", Corporate Governance: International Journal of Business in Society, Vol. 7 No.2, pp.111-22.