Strategy, structure, and financial performance : a case study of Farmlands Trading Society.
Degree GrantorUniversity of Canterbury
Degree NameMaster of Commerce
Structural contingency theory states an organisation's structure should be aligned with its strategy in order to maximise performance (Dent, 1990). Prior research has focused narrowly on this premise (Fisher, 1995). The existing research has concentrated on only one aspect of business strategy; either typology, position, or mission (Langfield-Smith, 1997). Also, structure has been investigated only in terms of management control systems, such as budgeting, and performance evaluation (Langfield-Smith, 1997). To overcome these limitations case study research should describe the wider organisational context of strategy, structure, and performance (Fisher, 1995; Otley and Pollanen, 2000). Therefore, this thesis describes Farmlands Trading Society's entire strategy, structure, and financial performance. It was found that Farmlands' corporate strategy is customer and profitability driven. Its business strategy is derived from these aspects. Typology, position, and mission have been tailored towards each of Farmlands' four customer groups. Operational strategy delivers the corporate and business goals. Farmlands matches its strategy to customer objectives and behaviour. To achieve a match, its structure is used to determine the appropriate strategy, monitor the strategy, and respond to change in customers. Controls in Farmlands are tight, and employees participate in determining goals and budgets. Leadership from the Chief Executive ensures managers and employees communicate with each other so that customer objectives are meet. Linking customers, strategy, and structure in the manner described has been successful, as financial performance has improved significantly over time.