Strategic Considerations in the Financial Services Industry: Does Strategic Consistency Influence Performance?

ABSTRACT This paper suggests that the consistency of strategic leadership decisions is relevant to the performance of a firm. An organization with consistency in decision making across six relevant marketing strategy variables (promotion, price, channels, products, markets, and technology) is described as exhibiting "purity-of-form". An empirical examination is performed in the financial services industry investigating the relationship of strategic consistency to both profitability and market share while controlling for the firm's environment, structure, and size. The findings indicate that a consistent strategy may have a positive effect on share performance, with high-levels of strategic leadership observed in the better-performing group. The authors suggest that either (a) a "pure form" utilizing high levels of strategic leadership or (b) a "mixed" strategic leadership form is preferable in the financial services industry. No relationship is found between strategic consistency and profitability. INTRODUCTION An issue that has become a dominant focus in the strategic management literature is the identification and categorization of actions considered to be strategic in nature, and the subsequent classification of those variables into strategic configurations (Kaufman, Wood, & Theyel, 2000; Miles & Snow, 1978; Miller, 1986; 1987a; Porter, 1980; Woodside, Sullivan & Trappey, 1999). The purpose of this paper is to develop and empirically test one such strategic configuration, the consistency of strategic form. As in previous strategic typologies, the basis of the proposed strategic configuration is the assumption that successful firms tend to implement a consistent strategy across a variety of strategic dimensions. Specifically, this consistency may be described as a "pure" form strategic configuration. In contrast, a strategic configuration with inconsistency across the marketing variables may be referred to as being of a "mixed" form. Thus, firms can implement one of three configurations regarding consistency of strategy: (1) pure-form: high levels, (2) pure-form: low levels, or (3) mixed-form. In addition to presenting a new strategic classification scheme, the current study addresses some limitations of previous research in this field by using an expanded variety of covariates. The paper begins with a review of the relevant literature, followed by descriptions of the sample and the measures. We then present the analysis and conclude with a discussion of the findings and limitations of the study. COMPONENTS OF A STRATEGIC CONFIGURATION The use of technology, research and development, the introduction of new products, the shifting or expansion into new markets, and the focusing of specific market segments are only a few of the ways in which the strategy of the firm has been empirically measured (Miles & Snow, 1978; Porter, 1980; Miller, 1987b; VanderWerf & Mahon, 1997). The variables of the strategic configuration used in this study are based on previous studies examining multiple aspects of strategy, the components of which are noted as being part of marketing decision making (McDaniel & Kolari, 1987; McKee, Varadarajan & Pride, 1989; Smith, Guthrie & Chen, 1989). As such, six salient strategic marketing variables are proposed for inclusion in the present strategic typology: (1) products or services, (2) promotion campaigns, (3) pricing, (4) distribution, (5) technologies, and (6) markets. Consistent with previous research, the selected strategic variables can be described as relating to the degree to which a firm aggressively deals with their current and future market environments. In fact, firms with an aggressive posture may seek to gain first-mover advantages in each of these strategic domains (Pleshko, Heiens & McGrath, 2002). Extending this view of marketing leadership, or initiative, the proposed conceptualization suggests that it is the consistency with which strategic decisions are made across these six domains that is important to a firm's success. …