Strategic Management and Financial Performance in South Korean Apparel Retail Stores

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Date
2005-11-16
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Publisher
Virginia Tech
Abstract

The research objectives were to determine (a) interrelationships among components of Korean apparel retail stores' management strategies, (b) effects of perceived environmental uncertainty on their management strategies, (c) effects of stores' management strategies on their performance, and (d) market-orientation strategies the stores have implemented. Four hundred top managers of Korean apparel stores in Seoul, Busan, Suwon, Daejeon, and Daegu completed a questionnaire. A structural equations model was used to test the hypotheses concerning relationships between the research variables. The exogenous variables include components of perceived environmental uncertainty (market turbulence, competitive intensity) and top management's willingness to adapt a changing market (top-management emphasis and risk aversion). The endogenous variables include components of market-orientation strategy (intelligence generation, intelligence dissemination, response design, response implementation), organicity of organizational structure (centralization, formalization, specialization), and satisfaction with store performance (relative to other Korean retail stores, relative to key competitors).

Many of the hypotheses were supported. Perceived market turbulence positively affected stores' market-orientation strategies and functional specialization. Market orientation strategy positively affected stores' functional specialization and centralization of decision making. Intelligence generation positively affected satisfaction with store performance relative to other Korean retail stores and relative to key competitors, and response implementation positively affected satisfaction with store performance relative to other Korean retail stores. Some positive relationships were found between perceived environmental uncertainty and top management's willingness to adapt to a changing market. Also, seven of the eight tested relationships were significant and positive between market-orientation strategy and top management's willingness to adapt to a changing market. Top-management emphasis positively affected organicity of organizational structure. Formalization of store structure positively affected satisfaction with store performance relative to other Korean retail stores and relative to key competitors.

A major conclusion is that Korean apparel stores' top managers did not view environmental conditions as important influences on their stores' performance, although their perceptions of environmental uncertainty affected their stores' strategic management in such terms as response design, intelligence generation, and intelligence dissemination.. In addition, despite the positive effects of perceived environmental uncertainty on stores' centralization and functional specialization, the top managers appeared reluctant to fundamentally change their stores' organizational structures.

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Keywords
Market Orientation, Strategic Management, South Korea, Perceived Environment
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