Effects of environmental factors on corporate strategy and performance of manufacturing industries in Indonesia
Abstract: The purpose of this
study was to examine and obtain empirical evidence of the effects of external
and internal environmental factors on the strategy and performance of
manufacturing companies.
Design/methodology/approach: This study used primary data obtained by
distributing questionnaires to 150 respondents of manufacturing companies in
Indonesia spreading over six major cities in Java such as Jakarta, Banten,
Bandung, Yogyakarta, Semarang and Surabaya. Samples were taken by using the
systematic random sampling technique. The technique was used since those major
cities had different numbers of manufacturing companies. Subsequently, the
feasibility of the model was tested. Several indices of model feasibility would
be used to test the model developed in this structural equation model. In case
of a sub-optimal model, a model modification was to be performed by adding or
removing paths so that the chi-square values would decrease by the values of
the index.
Findings and Originality/value: Results showed that internal and external
environmental factors, through the operating environments and the remote
environments of manufacturing industries, jointly affected the companies’
understanding of the condition of the industrial environments to establish
strategic goals in order to achieve optimal performance of manufacturing
industry.
Practical implications: The internal and external environmental factors
through the operating and remote environments had effects on the strategy of
manufacturing companies in Indonesia. However, both internal and external
environments did not affect the performance of manufacturing companies in
Indonesia. There was a tendency that manufacturing companies were to observe
the occurring macro-economic conditions. Manufacturing industries were faced
with the pressures from competition, customers and suppliers that affected
companies’ revenue. Performance of manufacturing industries was more influenced
by macro-economic conditions that have not recovered from the global crisis.
Originality/value: This study was conducted to determine the effects of
environmental factors on the corporate strategy and performance. The effects of
the industrial environments are crucial since the more complicated changes in
the industrial environments the greater the impacts it has on the resources,
structures and processes in the company. Environmental factors of the industry
present both organizational strengths and weaknesses, which would affect the
strategy and performance of the industry.
Author: Rachmad Hidayat,
Sabarudin Akhmad, Mu' alim
Journal Code: jptindustrigg150038