ADDIS ABABA UNIVERSITY

SCHOOL OF GRADUATE STUDIES

COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT

INSTILLING STRATEGY MANAGEMENT CULTURE

AT THE ETHIOPIAN SUGAR CORPORATION

BY:

ASSEFA YIMER

ADVISOR:

DR. MOHAMMED SEID

MAY, 2015

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 Addis Ababa University
School of Graduate Studies
College of Business and Economics
Department of Management

INSTILLING STRATEGY MANAGEMENT CULTURE

AT THE ETHIOPIAN SUGAR CORPORATION

A Thesis Submitted to the School of Graduate Studies of Addis Ababa

University in Partial Fulfillment of the Requirements for the Degree of
Master of Business Administration

By

Assefa Yimer

Advisor

Dr. Mohammed Seid

Addis Ababa, Ethiopia

May, 2015

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 Addis Ababa University

School of Graduate Studies

College of Business and Economics

Department of Management

Instilling Strategy Management Culture

At The Ethiopian Sugar Corporation

A Thesis Submitted to the School of Graduate Studies of Addis Ababa University in Partial
Fulfillment of the Requirements for the Degree of Master of Business Administration

By

Assefa Yimer

Approved by the Examining Board:

___________________________ __________________
Chairman, Department’s Graduate Committee

Dr. Mohammed Seid ___________________

Advisor
__________________________ ____________________

External Examiner
__________________________ ___________________

Internal Examiner
__________________________ ___________________

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 Acknowledgements

I would like to sincerely acknowledge the following people and institutions.

I am particularly grateful to my supervisor Dr. Mohammed Seid, for his keen interest in my work,
constant supervision, and insightful critiques of drafts. His input eased the process of revision
considerably. The academic staff of the department of management of Addis Ababa University for
tremendous knowledge they imparted to me.

My parents, mother: Asegedech G/brehiwot, father: Yimer Atilabachew, who wanted to make me
who I am. My dearly loved wife Fikirte Feyssa for her endurance and encouragement to do my
work. My baby girl: Makda Assefa and baby boy: Girum Assefa for their companionship and
understanding throughout the study period.

All family members who contributed towards my success and indispensable friends who gladly
shared my responsibilities when I was in need of it.

Finally, those of my intimate friends also receive my due regard for the wonderful service they
offered to me.

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 Table of Contents
Acknowledgement iv
List of Tables v
List of Figures vi
Acronyms vii
Abstract Viii

CHAPTER I ...........................................................................................................................................12
Introduction and Background................................................................................................................12
1.1.Introduction....................................................................................................................................12
1.1.1. Why Strategy Management Culture?..................................................................................13
1.1.2. Why Lean-Kaizen Supply Chain? ......................................................................................14
1.1.3. Why Balanced Scorecard (BSC) & Hoshin Kanri (HK)? ....................................................15
1.2.Background of the Study and Case Company ..................................................................................16
1.2.1. The Case Company............................................................................................................16
1.2.2. Areas of the Study .............................................................................................................18
1.3. Statement of the Problem ............................................................................................................22
1.4. Research Questions and Hypothesis .............................................................................................23
1.5. Objectives ...................................................................................................................................24
1.5.1. General Objective..................................................................................................................24
1.5.2. Specific Objectives ................................................................................................................24
1.6. Significance of the Study ..............................................................................................................24
1.7. Scope of the Study ........................................................................................................................24
1.8. Limitation of the Study ..................................................................................................................25
1.9. Organization of the Paper ............................................................................................................25
CHAPTER II ..........................................................................................................................................26
LITERATURE REVIEW ......................................................................................................................26
2.1. Strategy.......................................................................................................................................26
2.2. Strategic Management ................................................................................................................28
2.3. Organizational Culture & Strategic Management ..........................................................................31
2.4. Balanced Scorecard and Strategic Management ..........................................................................33
2.4.1 Application of BSC in Sugar Industry.....................................................................................42
2.5 Hoshin Kanri and Strategy Management .......................................................................................47

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 2.5.1 Catchball Process as Part of HK Process .................................................................................50
2.5.2 Daily Management as Part of HK Process...............................................................................50
2.5.3 Cross Functional Management as Part of HK Process .............................................................51
2.5.4 Total Executive Audit as Part of HK Process ..........................................................................53
2.6 Integrated BSC & HK for Strategic Management ............................................................................53
2.7 Supply Chain and Strategic Management .....................................................................................55
2.8 Lean-Kaizen Supply Chain and Competitive Performance ..............................................................58
2.8.1 Lean-Kaizen Approach...........................................................................................................58
2.9 Models Used in this Study .............................................................................................................62
2.9.1 Denison Organizational Culture Survey model .......................................................................62
2.9.2 A Model of the Elements of Strategic Management ................................................................66
2.9.3 SWOT Analysis .....................................................................................................................70
2.9.4 Model for Strategic Supply Chain Management .....................................................................70
2.9.4 The integrated model of BSC & HK .......................................................................................73
2.10. Conceptual Framework ................................................................................................................73
2.10.1. Strategy Management Culture and Lean-Kaizen Supply Chain.............................................74
2.10.2. Lean-Kaizen Supply Chain and Competitive Performance ....................................................77
CHAPTER III ..............................................................................................................................................78
Materials and Methods ..........................................................................................................................78
3.1 The Models Used in the Study ......................................................................................................78
3.2. Research Design ...........................................................................................................................79
3.3. Sampling and Data Collection .........................................................................................................79
3.5 Data Analysis.................................................................................................................................80
Chapter IV ..............................................................................................................................................81
Results and Discussion ...........................................................................................................................81
4.1. The Response Rate.........................................................................................................................81
4.2. Denison Organizational Culture Survey for Individual Factories ......................................................82
4.3. Model of the Elements of Strategic Management ..........................................................................85
4.3.1. Documentary of the Factories ................................................................................................85
4.3.2. Strategic Position ..................................................................................................................86
4.3.3. Strategic Choices ...................................................................................................................88
4.4. SWOT Analysis .............................................................................................................................90
4.5. Model of Strategic Supply Chain ...................................................................................................93
4.5.1. The External Environment .......................................................................................................94

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 Regional Factors ..............................................................................................................................94
Global Factors .................................................................................................................................95
Green Factors ..................................................................................................................................95
4.5.2. The Internal and Supply chain Environment ............................................................................95
4.5.3. The Four Strategic Principles ..................................................................................................97
4.5.4. The Strategy Development Process..........................................................................................97
4.6. Challenges to Lean-Kaizen Implementation ....................................................................................99
4.7. The Integrated Model of BSC & HK .............................................................................................100
4.7. Relationships among the Variable in the Conceptual Framework................................................101
4.7.1. Reliability and Validity Measures ........................................................................................101
4.7.2. Descriptive Statistics ...........................................................................................................102
4.7.3. Correlation and Regression Analysis ...................................................................................105
Chapter V .............................................................................................................................................107
Conclusion and Recommendations ......................................................................................................107
5.1. Conclusion .................................................................................................................................107
5.2. Recommendations ....................................................................................................................109
5.3. Recommendations for Future Research .....................................................................................110
References .............................................................................................................................................111
Appendices.............................................................................................................................................120

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 List of Tables

Table No. Title Page

2.1 Strategic Supply Chain Model 70

4.1 Descriptive Analysis for Elements of Strategic Management 88

4.2 SWOT Analysis for ESC 94

4.3 Descriptive Analysis for Elements of Strategic Supply Chain 95

4.4 Challenges for Lean-Kaizen Implementation 102

4.5 Summary for Factor Analysis of SC & CP 104

4.6 Descriptive Statistics 104

4.7 Survey Response on the extent of the lean-kaizen supply chain practices 105

4.8 Survey Response on the extent of the Strategy management culture 106

4.9 Survey Response on the extent of the Competitive Performances 106

4.10 Relationship between Lean-kaizen supply chain practices and

Competitive Performance 107
4.11 Regression Model Summary 107

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 List of Figures

Figure Title Page

2.1 Strategy as a Fit between Company’s Activities 28

2.2 The Balanced Scorecard Framework 34
2.3 Strategy Map Example 36
2.4 The Principles of a Strategy-Focused Organization 37
2.5 Barriers to Strategy Execution 38
2.6 The Management System: Linking Strategy to Operations 39
2.7 Implementation model of the Balanced Scorecard 38
2.8 Sugar Manufacturing Processes 42
2.9 Products of ESC 43
2.10 Strategic Map of ESC 46
2.11 The FAIR Cycle of Strategic Management 47
2.12 Implementation model of Hoshin Management 51
2.13 Integrated Model for BSC & HK 54
2.14 The PDCA Cycle 58
2.15 Sugarcane Supply Chain 60
2.16 Denison Organizational Culture Model 62
2.17 A model of the elements of strategic management 65
2.18 Integrated Model for BSC & HK, Modified 72
2.19 Conceptual Framework 74
4.0 Number of years respondent have worked in their factories 83
4.1 Mission 83
4.2 Adaptability 85
4.3 Consistency 85
4.4 Involvement 86
4.5 The interaction between lean-kaizen supply chain and SMC 108

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 Acronyms
BOD Board of Directors

BSC Balanced Scorecard

DOCS Denison Organizational Culture Survey

ESC Ethiopian Sugar Corporation

FAIR Focus, Alignment, Integration, Review

HK Hoshin Kanri

QCDE Quality, Cost, Delivery, Education

SCOR Supply Chain Operations Reference

SMC Strategy management culture

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 Abstract

Strategic management is the larger, more holistic process that encompasses the planning,
implementation, evaluation, and updating of a strategic agenda aimed at maintaining the most
viable fit between an organization and its external environment and moving into the future in a
deliberate, purposeful manner. Successful cultural change results from having a clear idea about
what type of culture the business needs, identifying the specific attributes that go along with it,
and then focusing on managing the drivers that shape and influence culture which is of paramount
importance for effective and efficient execution of strategies. Strategic management and supply
chain are not separable aspects. Hence, instilling strategy management culture in the supply, if
applies lean-kaizen approach, results in competitive performances. The tools of strategic
management: Balanced scorecard and Hoshin Kanri can make this possible. The paper illustrated
the moderating effect of strategy management culture on the relationship between lean-kaizen
supply chain and competitive performances. The study showed they are positively related and the
moderator also has positive interaction effect on this relationship. Thus, it possible to instill
strategy management culture in the lean-kaizen supply chain through balanced scorecard and
hoshin kanri integration.

Keywords: Strategic Management, Strategy Management Culture, Balanced Scorecard, Hoshin

Kanri, Lean-Kaizen

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 CHAPTER I
Introduction and Background
1.1. Introduction

Change is a process and an alteration of a company’s strategy, organization or culture as a result of

changes in its several features of organizational life such as the organizational mission and
strategy, its structure, products and processes, its people and culture, and the nature of the
technology employed. These features of the organization are themselves affected by the nature of
internal and external environment. Change must begin internally, and then involve significant and
relevant partners.

Before any change is undertaken it makes complete sense to undertake an appraisal of the
organization and its operating environment. This would comprise an external and internal analysis
together with a stakeholder mapping and analysis. The resulting highlighting of internal strengths
and weaknesses, with external threats and opportunities, and understanding the needs and wants of
stakeholders, should combine into an understanding of what needs to change in the vision,
mission, and strategy. Strategic management is therefore required as a vital force to inject change
in the organizations. No business organization may succeed in improving on its performance
without strategic management. In the long run, no organization may indeed, survive in today’s
highly volatile and competitive dynamic business environment, therefore strategic management
assumes added important as it embraces organizational change.

Strategic management is the larger, more holistic process that encompasses the planning,
implementation, evaluation, and updating of a strategic agenda aimed at maintaining the most
viable fit between an organization and its external environment and moving into the future in a
deliberate, purposeful manner. While strategic planning is the “cornerstone” of the strategic
management process (Vinzant & Vinzant, 1996), strategic management is the overarching process
of managing large scale, sometimes very fundamental change in order to assure a high level of
performance in the long run.

There is now widespread agreement among management theorists that it is necessary to view
strategic management from a cultural perspective because successful organizational performance
often rests upon the degree of support that strategies receive from the organization's culture

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(David, 1993). Acceptance and engagement to follow the new strategy will rely on the underlying
culture of the organization. If there is no appropriate culture, strategy will fail and the mission and
vision will remain hollow phrases.

Of course, organizational culture is critical to the implementation of any type of strategy, since it
generally influences the firm’s business model. The efforts made by some authors to relate culture
to organizational effectiveness (Denison, 1991) in order to strengthen the relations among culture,
strategy and competitiveness that offer good lesson. In fact, organizational culture can be a source
of competitive advantage due to its influence on the definition and change of employees’ behavior
and the firm’s business model and also affects strategic leaders and their work (Hitt et, al., 2007).

In recent years there has been increasing recognition of the role that organizational culture plays in
the formulation and implementation of firm strategies and in influencing the success or otherwise
of those strategies. Organizational culture captures the subtle, elusive and largely unconscious
forces that shape a workplace. Often remarkably resistant to change, culture can present a major
strength or weakness for an organization. It can be an underlying reason for strengths or
weaknesses in any of the major business functions (Brown, 1995 as cited by Dawler, et al., 2014).

Therefore, an organization’s culture which affects its strategic management initiatives is widely-
held to be significant barriers to effective and efficient strategy implementation and execution. In
order to have competitive performance instilling strategy management culture is thus a necessary
prerequisite for companies. This type of culture involves various aspects both within the
organization and outside of it to formulate strategy, implement it and secure the reaching of
defined objectives. Yet, all this will be ineffective if there is no adequate culture to enable all the
relevant agents in a company’s supply chain to interact as efficiently as possible.

1.1.1. Why Strategy Management Culture?

Managing change within specific cultures and changing the cultures themselves as a way of
altering strategy or enhancing performance enable to understand what culture is and how culture
itself changes. An incompatible business culture may lead to more resistance to change and a
longer duration of implementing change. The success of change management is significantly
influenced by the acceptance of change by management and employees.

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Many studies have tried to prepare some conceptual models and test the effect of organizational
culture on strategy. Organizational culture seemed to have some substantial influence on
organization’s strategy (Mantere, 2000; Van Der Maas, 2008; Van Buul, 2010). According to Buul
(2010), a fundamental part of managing strategy implementation process should take into account
organizational culture as a powerful aspect of status quo. What the literature has not clarified is
which types of cultures strengthen or undermine the strategy formulation and implementation
process. Also, there is lack of empirical study on this subject. Culture is a means to an end, not an
end itself. The end is company’s business strategic agenda. Successful cultural change results from
having a clear idea about what type of culture the business needs, identifying the specific attributes
that go along with it, and then focusing on managing the drivers that shape and influence culture
rather than trying to manage culture itself (Paul et al., 2006).

However, creating strategy management culture in view of supply chain receives very limited
research attention. Therefore, with the importance of culture as a unifying and encouraging factor,
it has to be considered in the strategic management process which cannot be separated from
supply chain. Thus, it is a must to clarify which kinds of cultures will help organization formulate,
implement and evaluate its strategic objectives and will carefully consider supply chain.

1.1.2. Why Lean-Kaizen Supply Chain?

Vonderembse et al., (2006) observe that competition has shifted from company orientation to
supply chain orientation, thus supply chain improvement has become a necessity for survival.
Moreover, the two fields of strategic management and supply chain management are interrelated
and should not be considered as separate areas. Supply chain would be a network of people who
converted raw materials into distributed products (Handfield & Nichols, 2002). Supply chain
management should not be considered only as a logistical function but to be viewed as strategic
plan in order to sustain and improve buyer-supplier relationship (Carr and Pearson, 1999).
Accordingly, concentrating on continuous improvements of SCs and the factors influencing it
regarding making an effective or ineffective SC will be of high importance.

Strategic management requires continuous improvement approach such as Lean and/or Kaizen
internally in a firm as well as in its supply chain. Chen et, al., (2010) point out that the
implementation of programmes like kaizen helps to make operations more flexible and also
highlight that with the implementation of lean the company cannot only increase its flexibility, but
it can also improve its overall competitiveness. Imai (cited in Kerrin, 2002,) even made reference
14
to this when he stated that ‘external agencies such as customer and suppliers provide a source of
problems for the continuous improvement process and joint problem solving between customer
and suppliers is vital to a successful CI system.’ Researchers increasingly propose the
implementation of lean in the supply chain as a way to achieve the required competitive advantage
(Cudney and Elrod, 2011; Womack and Jones, 1994). Agus and Hajinoor (2012) argue that lean is
the very basis of supply chain management. There are several case examples on how
implementations of lean in the supply chain have resulted in important improvements (Eriksson,
2010; Perez et al., 2010; Wee and Wu, 2009). Thus, it is important to have a detailed
understanding of the area, lean in the supply chain and due consideration of lean-kaizen
application in the supply chain is of paramount importance.

There is no study on the direct co-relation between performance of an organization and strategy
management culture in the operation of the entire supply chain particularly in Ethiopia. It is thus
apparent that strategic management tools focus too much on performance measurement at a firm
level. Performance measurement is an integral part of performance management (which provides
a systematic link between organizational strategy, resources, and processes framing the continuous
improvement journey), but it is not enough simply to measure. Performance measurement in
isolation is incomplete (IMA, 1998). Moreover, they are not directly related to the building of
company’s strategy management culture – in that they ignore this culture to be considered in both
the lean-kaizen approach and supply chain perspective, and thus fail to develop such culture
impedes strategy implementation and execution.

All the above paragraphs depicted lack of sufficient evidence on how to instill strategy
management culture in an organization particularly in a supply chain. It is so imperative to instill
strategy management culture in the organization’s supply chain. This study will focus on this
culture development in the supply chain using integration of two strategic management tools: BSC
& HK.

1.1.3. Why Balanced Scorecard (BSC) & Hoshin Kanri (HK)?

Both Balanced Scorecard and Hoshin Kanri are powerful tools for strategic management of
organizations; they focus on the vision and put an emphasis on the importance of deployment of
strategies down to operational initiatives, communication and continuous organizational learning.
Implementing them jointly facilitates the strategic management process and thereby creates a

15
culture of strategy management. Even though their focal points address the same issues, they differ
in the way they operate. The Balanced Scorecard clearly describes the perspectives to focus upon
and builds the strategic framework, while Hoshin Kanri presents a brilliant way of strategy
deployment, communication, and execution.

Balanced Scorecard and Hoshin Kanri are analogous tools (Tennant et al., 2001; Witcher, 2003),
both seek breakthrough performance, alignment of strategies, and integrated targets for all levels
within an organization, yet there are areas where they differ. According to DeBusk G. and DeBusk
C. (2011) combining Hoshin Planning with the Balanced Scorecard is extraordinarily effective in
achieving breakthrough results in lean or lean six sigma organizations. There is little study on
whether this combination grounds strategic management can be instilled as culture in the operation
of the entire lean-kaizen supply chain to culminate into a sustainable competitive performance.
There has been no identified dedicated research of HK role in Ethiopian strategic management
literature. And there is also less evidence of Hoshin Kanri application at sugar manufacturing
enterprise. The paper begins with a brief review of Hoshin Kanri and Balanced Scorecard, then
describes their integration, and finally illustrates its application to cane sugar supply chain to
structure and implement strategies in order to meet the ever-changing needs of organizations. Due
consideration will be given to Ethiopian Sugar Corporation which has been implementing lean-
kaizen tool and deploying BSC in its sugar manufacturing factories with less consideration of its
complete supply chain.

The study also contributes to the existing knowledge on strategy management and supply chain
practices.

1.2. Background of the Study and Case Company

1.2.1. The Case Company

Sugar industry is one of the largest agro-based processing industries in Ethiopia and plays a
significant role in the socioeconomic development of the country. Currently, the Ethiopian Sugar
Corporation (ESC), the only sugar sector role player and a catalyst for the country’s economic
development including energy supply, job creation and tax revenue, is working hard to
strategically manage all sugar manufacturing factories that are accountable to it. The Corporation
also establishes six new sugar development projects in addition to the three existing factories in
the different parts of the country. Kaizen is the biggest change that has been implementing in the
factories and projects, and is poorly supported by other tools and techniques for instance business
16
process reengineering & quality management systems for improvement. It is through Kaizen that
major changes are happening and recently ESC applying Balanced Scorecard approach
envisioning better strategy execution.

The sugar factories have had a five year strategic plans (2009-2014) which was not implemented
as required. At the moment, the industry is facing several challenges in connection with the
strategic plan including poorly developed strategic management, lack of integration among
functions, gap of participatory approach, unplanned & delayed purchasing process and supply,
poor service rendering, absence of performance based performance measurement, which made it
difficult to measure performances against targets and to reward best performers, poor
communication among superiors and subordinates, there was no way put in place to communicate
the strategy to the end user, lack of a well-institutionalized monitoring, evaluation and reporting
system, no one takes accountability and responsibility for the overall performance in the supply
chain rather focus on their own domain, no close involvement of customers and suppliers in
strategy crafting process, no collaborative practices are actively being performed by supply chain
partners to eliminate non-value added activities throughout the supply chain, and lack of a proper
implementation framework was a major shortcoming in the outgoing plan. This made it difficult to
implement the strategic actions and to measure performances against targets.

Based on the foregoing lessons, the incoming Strategic Plan (2015-2019) has been formulated.
The objectives, strategies and activities prepared using BSC as a strategic management tool
following the party-line of the Corporation fully to refurbish and revive the sugar industry to
positioning itself competitively. However, beginning from strategic plan development, the
following problems is upholding and taking place: very internally focused, the set goals and
strategies of the organization are directly deployed down the organization hierarchy with limited
dialogue, some teams received the policy irrevocable accomplishment ‘fait accompli’- without the
catchball/ feedback opportunity, employees don’t often fully grasp the concept of connecting
strategy with operations; they are still struggling from the past culture, there is no mechanism put
to link the overall corporate strategy with the supply chain and there is no measure set to follow
the entire supply chain performance; supply chain improvement project not be seen as a key part
of that overall strategy; only sell-buy relationship available, the ESC has been implementing
kaizen management system in its factories and projects since the last three years, nevertheless,
there is little connection between the strategy and continuous improvement/lean initiatives which
has considerable impact on the organizational performance together with the supply chain. Thus
17
the implementation of the kaizen plan was done in isolation as well as confined within the walls of
the factories; no inclusion of the supply chain. Furthermore, lack linking of strategic initiatives
with budget and corporate culture has given scant attention.

This research focuses on Ethiopian sugar sector and strives to analyze the barriers to strategic
management as well as lean-kaizen implementation in its supply chain, and addresses these by
instilling strategy management culture as a means of executing objectives and strategies for
competitive performance.

The paper first describes when the set objectives and strategies not planned and executed well, this
impacts the economy. Then, in order to reveal the barriers of the strategic management that take
place within the sugar factories & their associated supply chain and to identify the way for
creating, fostering, and sustaining strategy management culture in the supply chain for competitive
performances, this study will look the integration of Balanced Scorecard and Hoshin Kanri tools
of strategic management to build this culture.

1.2.2. Areas of the Study

1.2.2.1. Strategy Management Culture (SMC)

Strategic management is defined as a process, during which an organization develops its

strategies, that begins with missions and visions made tangible as firm-wide goals and objectives.
After specifying the firm direction, strategic management proceeds through strategic analysis and
planning, formulation of plans then implementation of the plans, and at last evaluation of past
results (Tim, 2006). Bateman and Snell (2002,) have defined strategic management as “integrating
strategic planning and management into a single process”. A further definition of strategic
management is that it is “a set of managerial decisions and actions that determine the long-run
performance of a corporation” (Wheelen & Hunger, 2008). Wheelen and Hunger (2008) suggest
there are four phases involved in using strategic management. These are environmental scanning,
strategy formulation, strategy implementation and evaluation and control.

Kaplan and Norton (2004) state that an organization’s strategic statement describes how it intends
to create value for its shareholders, customers and employees. Wixley and Everingham (2001)
state that strategic planning includes deciding what business the company should be in, who its
customers are, and how success will be measured.

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A strategy management culture is something embodied the practicalities of everyday working life
in an organization. It ensures that the performance system of an organization and budget would be
well aligned with the strategic planning approach. In absence of this culture and its consideration
in the supply chain, sound corporate strategies can face difficulty during execution stage among
the stakeholders and the overall performance will be insufficient.

1.2.2.2. Lean-Kaizen Supply Chain

Lean supply chain can be defined as a set of organizations directly linked by upstream and
downstream flows of products, services, finances and information that collaboratively work to
reduce cost and waste by efficiently and effectively pulling what is needed to meet the needs of
the individual customer (Richard H. et al, 2015). Lean supply chain management involves
implementation of lean concepts, principles, practices and techniques across the whole supply
chain. Lean principles and techniques can be applied to achieve the supply chain management
tasks. The remarkable result from lean management implementation depends on success of
supplier integration which involves careful selection of competent suppliers, effective information
sharing, and long- term relationship (So and Sun, 2010). These needs leverage the organizations to
create customer driven, value-added products and services. This research focuses on lean-kaizen
supply chain in which strategy management culture is expected to be instilled. In the pursuit of
strategic management, managers need to consider their supply chain and require a system to
develop policies, communicate, allocate resources, focus and align actions, and control and
evaluate corporate performance. For Lean to be truly effective and to take cost/waste out of
processes, it must focus not only on the manufacturing process, but on the entire supply chain.
This system will be looked by this study using application of the combined balanced scorecard and
Hoshin Kanri tools of strategic management.

Therefore, to be more successful companies need to approach from a strategic perspective and to
create a corporate culture which able manages strategies thereby reach goals. And also there is a
need to foster that culture and to consider lean-kaizen system in supply chain for competitive
performance. This success is expected to be met by the careful instilment of strategy management
culture in the lean-kaizen supply chain through the integration of balanced scorecard and Hoshin
Kanri tools.

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1.2.2.3. Balanced Scorecard

The Balanced Scorecard (BSC) translates a firm’s mission and strategy into a set of
understandable performance measures (indicators), so that the strategy could be understood,
communicated and measured; thus, serving as a basis for all the activities. Moreover, the
indicators allow monitoring the accuracy level of strategy implementation (Kaplan & Norton,
1996). In order to respond to the firm’s vision and strategy, the BSC uses four business
perspectives:
1) A financial perspective that establishes the financial objectives that must be attain in order
to satisfy the shareholders’ interests.
2) A customer perspective that establishes the objectives that will permit to meet the
customers’ needs in order to reach the established financial aims.
3) An internal processes perspective that establishes the processes in which excellence needs
to be achieved in order to satisfy customers.
4) A learning and growth perspective that establishes the way in which the firm must learn
and innovate to attain all the goals proposed in the other perspectives.

Basically, the Balanced Scorecard is about creating a strategic framework, where all corporate
actions fit together in a cause and effect chain, setting goals and measuring performance, and
communicating with everyone to provide them with a clear understanding of the effects of their
own actions on the organization’s vision (Kaplan & Norton, 2001). Kaplan & Norton (2001)
expand the use of a scorecard as a tool for managing strategy by creating strategy maps and
aligning the organization to the strategy at the individual level by creating personal scorecards.
Doing so facilitates developing strategic awareness and making strategy everyone’s everyday job.
Thus, the organization translates its strategy into deliverable and achievable activities and targets.
The BSC is a performance measurement system (Kaplan and Norton, 2001a; Niven, 2002), a
strategic management system (Kaplan and Norton, 1996a, b), and a communication tool (Kaplan
and Norton, 1992; Niven, 2002). Apart from financial measurement, which is the essence of the
BSC, it also emphasizes: the role of the customer; internal processes; and innovation and learning.
“The balanced scorecard includes financial measures that tell the results of actions already taken.
And it complements the financial measures with operational measures on customer satisfaction,
internal processes, and the organization’s innovation and improvement activities - operational
measures that are the drivers of future financial performance” (Kaplan and Norton, 1992).

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1.2.2.4. Hoshin Kanri

Hoshin Kanri (HK) is described by Akao (1991) as a systematic approach that integrates the entire
organization’s daily activities with its strategic goals. The ‘daily activities’ incorporate not only
operations, but also everything that is necessary for an organization’s routine management of its
mission. Hoshin Kanri perceives the strategic management of an organization as a process and
implements process control activities to strategic management. Deming’s PDCA (Plan-Do-
Control-Act) cycle is adapted to Hoshin Kanri as the FAIR (Focus-Alignment- Integration-
Review) cycle by Witcher & Butterworth (1999).

The catchball process remains at the heart of Hoshin Kanri, which is the key process for alignment
and integration of strategies. The catchball process is a two-way communication system that is
essential for the deployment of targets and means to every level of the organization. It gives all the
participants in the process the opportunity to throw ideas back and forth, at each level, about what
can be done to achieve each strategy, where there might be problems and what commitments need
to be made to address these problems. To deploy the vital few objectives within the organization,
target and means deployment is used. Targets are defined as expected results and means are the
guidelines for achieving a target. Hoshin Kanri (Akao, 1991) offers an alternative way to
overcome the common problems associated with strategic management, in that it connects
managers and employees by a systematic deployment process through vertical and horizontal
communication, where the goals set by the management are deployed and all endeavors are
aligned to the same vision and goal.

1.2.2.5. Integration of BSC and HK

In fact the balanced scorecard was originally developed from hoshin kanri (Kaplan & Norton,
1993 as cited by Witcher & Chau, (2007). Each system has its shortcomings; the combination of
the differences can overcome the individual weaknesses of each methodology. By inheriting the
powerful aspects of each tool, an integrated methodology is developed, where the Balanced
Scorecard is used for building the strategic framework and Hoshin Kanri for planning,
implementation, and documentation.

The balanced scorecard and hoshin kanri are, hierarchically, high order capabilities including
supply chain integration, which are dynamic in the sense they give to the corporate level a
capacity to manage and influence strategic management activities through the organization
overtime. An effective strategic management system provides the long-term stability for firm as a
21
whole to manage and control change in the short-term. Combining balanced scorecard with hoshin
kanri makes this possible (Witcher & Chau, 2007). The Balanced Scorecard is a performance
based approach, and it considers the results and what is achieved as important. On the contrary,
Hoshin Kanri is a process-based approach and concentrates not only on the results but also the
means (or how) to reach them. Although both tools are valuable for strategic management of an
organization, they are likely to become more efficient when merged, creating a synergy (Asan &
Tanyas, 2007). Their integration also creates culture of strategy management which clearly links
supply chain performance and performance measurement with the chosen strategic direction of the
firm thereby achieves competitive performance.

Therefore, instilling strategy management culture is vital to achieve better overall corporate
performance and to create responsive/efficient supply chain through the joint application of both
strategic management tools: Balanced Scorecard and Hoshin Kanri.

1.3. Statement of the Problem

The sugar industry is a major contributor to the agricultural sector which is the mainstay of the
economy and supports livelihoods of the Ethiopian population. The industry will have to enhance
its competitiveness along the entire supply chain and reduce production costs significantly to be in
line with the top ten sugar producing countries as stated in the Ethiopian Sugar Corporation’s
(ESC-the Case Company) vision statement in the strategic plan.

Many strategic planning tools have been developed and implemented in the sugar sector. These
tools took organizational culture for granted as described in various literatures. But, what the
literature has not clarified is which types of cultures strengthen or undermine the strategy
formulation, implementation and execution process. Also, there is lack of empirical study on this
subject; hence it is a must to clarify which kind of culture will help this and meet breakthrough
results.

As various literatures described organizations envisioning achieving breakthrough results in its

lean-kaizen enterprises need to integrate BSC with Hoshin Kanri rather than implementing BSC
alone as the case company. According to Kaplan & Norton (2008), integrating balanced scorecard
& Hoshin Kanri as strategic management system brings breakthrough results specifically in lean
organization. Kaplan and Norton (1992, 1996, 2001) described that all organizations (for-profit
and not-for-profit) can adapt BSC. Use of the balanced scorecard for sugar manufacturing
companies is reported widely (Junior, et al., 2008). Despite its broad usage, none of the mentioned
22
studies illustrates a clear, step by step execution of strategies. Moreover, there is no evidence of
Hoshin Kanri application in cane sugar supply chain. However, their integration in different
sectors is evidenced, to mention few for instance from automotive manufacturing sector: Toyota
and Nissan, from electronics sector: Canon and Hewlet-Packard (Witcher & Chau, 2007, Yang &
Yeh, 2009), from educational sector: Istanbul Technical University (Asan & Tanyas, 2007), from
chemical sector: Thai Carbon Black (Kaplan & Norton, 2008) but not for sugar sector.

In order to meet demands, keep up with the change, and remain competitive improved
management actions such as cost cutting and productivity improvements along the supply chain
should also be continued and intensified in the next planning period of ESC. Hence, the Ethiopian
sugar industry needs to be managed through strategic concepts. To that effect, there should be
insight study to identify and introduce a helpful culture to effectively and efficiently implement
and execute strategies. Joint application of HK & BSC can create this culture. Since local
companies have not adopted HK & BSC integration as a system in Ethiopia, therefore, a study has
to be done in connection with introduction of HK & BSC to instill strategy management culture in
their supply chain to solve the pressing problems particularly facing the sugar factories and to link
strategy and operational initiatives rather than using BSC in isolation as the case company does.
This paper will also give stress on the point whether lean-kaizen supply chain will be successful in
achieving competitive performance.

1.4. Research Questions and Hypothesis

 The research looks to answer the following questions:

 How do sugar factories practice strategic management currently?
 What the organizational culture is missing in supporting strategies on which to instill cultural
change?
 How can BSC & HK be integrated to instill SMC?
 What are the existing hindrances and opportunities to instill SMC in cane sugar supply chain?
 What are the main parameters to achieve lean-kaizen in supply chain?
 What are the major factors determining competitive performance in the sugar industry?

 The testable hypothesis from the research questions can be “Strategy management culture
moderates the relationships between lean-kaizen supply chain and competitive performances”.

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 1.5. Objectives

1.5.1. General Objective

This study examines the application of BSC & HK to SMC instilment that in turn impacts on lean-
kaizen supply chain practices which affects firm’s competitive performance by making an
application in ESC.

1.5.2. Specific Objectives

 To assess the case company’s orientation of strategic management, problems hindering its
effectiveness and identify approaches seem to be helpful in trying to overcome them.
 To identify the type of organizational culture for effective strategy execution.
 To explore the possibilities and key considerations in adapting and adopting the combined
BSC & HK system and introduce it to sugar factories’ working culture in Ethiopia.
 To provide information on the importance of Lean-Kaizen system in cane sugar supply chain.
 To illustrate the linkages among strategic management tools, SMC, Supply chain and
Competitive Performance of sugar factories in Ethiopia and identify the effective approaches
to forging such linkage.

1.6. Significance of the Study

There should be insight study on instilling SMC via HK & BSC combination in companies
working system, since local companies have not adopted HK & BSC integration as a system in
Ethiopia, therefore, a study has to be done in connection with introduction of HK & BSC to instill
SMC in their supply chain. This study will also give stress on the point whether SMC will be
successful in supply chain performance and results. There are no previous well documented
studies on this topic with regard to the sugar factories. By doing this, the study will contribute to
the literature of the subject under study and has important managerial implications for instilling
the SMC in an organization’s supply chain to achieve maximum impact on competitive
performance. Most importantly, it initiates the case organization to reassess its existing practices
with a view to create strategy management culture. More specifically this study will serve as a
stepping stone for further study on the issue.

1.7. Scope of the Study

The scope of the study is to improve the supply chain activities at sugar factories to more efficient
systems, by application of Lean Kaizen tools and techniques, in which a culture of strategy
24
management is to be instilled using BSC & HK jointly. This study will only take two strategic
management tools and other tools will not be considered. Moreover, only three sugar factories
will be included for data collection and hence other newly developing sugar projects will not be
considered. This study will also not compare and contrast the findings of the three factories one
with the other, since it’s strongly believed that the factories are similar in regard to strategy
management. Models for measuring competitive performances will not be employed rather than
findings from respondents of questionnaire.

1.8. Limitation of the Study

This study was limited to the three existing sugar factories, the sugar development projects were
not included, and also it focused on big sized organization type, the findings may be or may not be
generalized to other small and medium size organizations. The model to measure the competitive
performances did not apply in the study. Lack of sufficient and relevant literature that relate
strategy management culture with lean kaizen supply chain and enhancement of competitive
performances considered to be limitations for this research.

1.9. Organization of the Paper

This study paper is organized into five chapters: chapter one contains the introduction part dealing
with background of the study and company, the research problem, objectives of the study, scope,
limitations and significance of the study. The second chapter discusses the literature review about
the subject matter. In chapter three the research methodologies presented. In chapter four data
presentation, analysis and interpretation of the study and finally, chapter five presents the
conclusions, recommendations and future studies.

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 CHAPTER II
LITERATURE REVIEW
This chapter presents the review of different journals, articles, and books regarding this research
undertaking.

2.1. Strategy

The word strategy is well recognized and widely used in the modern business world, despite the
existence of different definitions of strategy. Contemporary thoughts in the field of strategic
management imply that strategy should be understood as the creation of the company’s future
which is the result of collective social activity. Thus, strategy is everywhere where there is
competition; in wartime, sport, companies etc. Strategies may be at the country, company or
individual level. Strategy as a whole has always been important whether the organization is big or
small.

For Michael Porter (1996), strategy is about achieving competitive advantage through being
different – delivering a unique value added to the customer, having a clear and enactable view of
how to position yourself uniquely in your industry. According to Hit, et.al, (2007) a strategy is an
integrated and coordinated set of commitments and actions designed to exploit core competencies
and gain a competitive advantage. Strategy can be defined as the management action plan for
achieving the chosen objectives. It commits the organization to specific products, market,
resources and technology. It determines the basic long-term goals & objectives of an enterprise
and the adoption of courses of action and the allocation of resources necessary for carrying out
these goals. Short and long term objectives are the main points in a strategy. George et al., (2005)
expressed that the fundamental objective of using any type of strategy is to gain strategic
competitiveness (is achieved when a firm successfully formulates and implements a value-creating
strategy.) and earn above-average returns (are returns in excess of what an investor expects to earn
from other investments with a similar amount of risk.). A properly developed strategy also
rationalizes the firm’s vision and mission along with the actions taken to achieve them (Ketchen et
al., 2004).

A strategy of a corporation forms a comprehensive master plan that states how the corporation will
achieve its mission and objectives. It maximizes competitive advantage and minimizes
competitive disadvantage (Wheelen and Hunger, 2008). According to these scholars the typical

26
business firm usually considers three types of strategy: corporate, business, and functional as
explained below.

1. Corporate strategy describes a company’s overall direction in terms of its general attitude
toward growth and the management of its various businesses and product lines. Corporate
strategies typically fit within the three main categories of stability, growth, and retrenchment.

2. Business strategy usually occurs at the business unit or product level, and it emphasizes
improvement of the competitive position of a corporation’s products or services in the
specific industry or market segment served by that business unit. Business strategies may fit
within the two overall categories, competitive and cooperative strategies.

3. Functional strategy is the approach taken by a functional area to achieve corporate and
business unit objectives and strategies by maximizing resource productivity. It is concerned
with developing and nurturing a distinctive competence to provide a company or business unit
with a competitive advantage.

Business firms use all three types of strategy simultaneously. A hierarchy of strategy is a grouping
of strategy types by level in the organization. Hierarchy of strategy is a nesting of one strategy
within another so that they complement and support one another. Functional strategies support
business strategies, which, in turn, support the corporate strategy.

When choosing a strategy, firms make choices among competing alternatives. While making a
strategy, many factors have to be taken into account. Some of them are external and others
internal. To enact a successful strategy requires that there is fit among a company’s activities, that
they complement each other, and that they deliver value to the firm and its customers (Fig. 2.1).

27
 Fig. 2.1 Strategy as a Fit between Company’s Activities ( Brane Kalpič, (2002)

Any organization has to take into account all the possible factors influencing its strategy and also
identify the constant changes. Strategic management combines these activities of the various
functional areas of a business and external factors to achieve organizational objectives.

2.2. Strategic Management

Strategic management is one of managerial activities to set vision, mission, strategy, goals and
other tactics. Currently, strategic management is getting growingly critical for organizations due to
a lot of competition and a wide range of services for the customer to choose from. Strategic
management is the art and science of formulating, implementing and evaluating cross-functional
decisions that will enable an organization to achieve its objectives. It is the process of specifying
the organization's objectives, developing policies and plans to achieve these objectives, and
allocating resources to implement the policies and plans to achieve the organization's objectives.
Strategic management means that the management team is going to direct employee activities
towards the achievement of specific goals and implementation plans. Without using strategic
management, your decision-making can be reactionary, which can lead to costly mistakes.

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Strategic management begins with writing a plan that includes long-term goals, assigns each goal
a deadline and a method of measuring whether you have achieved it.

Strategic management is the larger, more holistic process that encompasses the planning,
implementation, evaluation, and updating of a strategic agenda aimed at maintaining the most
viable fit between an organization and its external environment and moving into the future in a
deliberate, purposeful manner. While strategic planning is the “cornerstone” of the strategic
management process, (Vinzant & Vinzant, 1996) described that strategic management is the
overarching process of managing large scale, sometimes very fundamental change in order to
assure a high level of performance in the long run. Strategic management also enables an organization
to identify ways of penetrating new markets, globally and nationally.

The strategic management process is the full set of commitments, decisions, and actions required
for a firm to achieve strategic competitiveness and earn above-average returns (Hit, et. al, 2007).
The firm’s first step in the process is to analyze its external and internal environments to determine
its resources, capabilities, and core competencies—the sources of its “strategic inputs.” With this
information, the firm develops its vision and mission and formulates its strategy. To implement
this strategy, the firm takes actions toward achieving strategic competitiveness and above-average
returns.

The evaluation and control of performance completes the strategic management process (Wheelen
and Hunger, 2008). According to them Evaluation and control is a process in which corporate
activities and performance results are monitored so that actual performance can be compared with
desired performance. Performance is about the potential for future successful implementation of
actions in order to attain the objectives and targets (Lebas, 1995). It includes the actual outcomes
of the strategic management process. The practice of strategic management is justified in terms of
its ability to improve an organization’s performance, typically measured in terms of profits and
return on investment. When corporate cultures are similar, performance problems are minimized
(Very et, al, 1997). For evaluation and control to be effective, managers must obtain clear, prompt,
and unbiased information from the people below them in the corporation’s hierarchy.

David (1998) agrees that an organization becomes more proactive by way of strategic
management, enabling it to initiate and influence, rather than to respond to activities that cause
changes to its environment. Management and employees should, accordingly, become involved in

29
the strategic management process, which will improve communication at all organizational levels
and create a feeling of cohesion throughout the organization. All concerned will then buy into the
process and feel included in it, if their views and input are given due consideration.

Good strategy formulation and better implementation/execution is the most trust worthy signs of
good management. Strategy formulation (as Wheelen and Hunger, 2008 described) is the
development of long-range plans for the effective management of environmental opportunities and
threats, in light of corporate strengths and weaknesses. It includes defining the corporate mission,
specifying achievable objectives, developing strategies, and setting policy guidelines. They also
defined Strategy implementation as a process by which strategies and policies are put into action
through the development of programs, budgets, and procedures. This process might involve
changes within the overall culture, structure, and/or management system of the entire organization.
Except when such drastic corporate wide changes are needed, however, the implementation of
strategy is typically conducted by middle- and lower-level managers, with review by top
management. Implementation is operationally defined as those senior-level leadership behaviors
and activities that will transform a working plan into a concrete reality (Schaap, 2006).

Formulation of a strategy for an organization is difficult; implementing or executing this strategy

throughout the organization is even more difficult (Hrebiniak, 2006). Implementation is a process
that takes longer than formulation (Hrebiniak, 2006). Thompson & Strickland (2003) have
stressed that the strategy-implementing / strategy-executing task is the most complicated and time-
consuming part of strategic management (cited in Schaap, 2006). In formulating a strategy, due
consideration must be given to a variety of action plan in order to facilitate selection of the action
plan that will most likely lead to the achievement of the organization’s objectives. If the chosen
plan does not accomplish the objectives, an alternative plan must be developed and implemented
by management.

Strategy implementation entails the establishment of policies and annual objectives, as well as the
allocation of resources. Annual objectives are essential for the implementation of strategies, as
they form the basis for allocating resources; serve as the primary device for evaluating managers;
are the major instrument for monitoring progress towards reaching long-term objectives and assist
in the establishment of priorities at all levels in an organization (David, 1998).

30
Kaplan and Norton (2000) state that a study of 275 portfolio managers revealed that the ability to
execute strategy appeared to be more important than the strategy itself. They also state that the
concept of creating value has moved from the arena of tangible assets to that of the intangible.
Employees’ intangible capabilities, knowledge and relationships create competitive advantage,
making it necessary to link business units, support units and employees to the devising of an
appropriate strategy. Processes,systems and a language for communicating strategy assist
organizations with the implementation of strategy.

The implementation of strategies require a contribution from everyone in the organization. All
employees must understand the strategies, and must manage their activities daily in agreement
with one another to achieve the set strategies. Nowadays strategy implementation/execution is
becoming a key challenge for organizations. The major factors influencing strategy
implementation/execution success ranges from the people who communicate or implement the
strategy to the systems in place for monitoring and reviewing of the progress. Hence, better
understanding on these issues and their importance for successful strategy implementation should
take due attention.

This review indicates that strategic management improves an organization’s competitive

performances by making it effective and efficient.

2.3. Organizational Culture & Strategic Management

Cultural change in order to achieve a strategic aim has been very much a part of management
thinking throughout the last two decades. The culture of an organization is its set of values, norms
and beliefs. Some of the factors influencing an organization’s culture are: the founder’s
philosophy, structure of the organization, the management style used within the different
departments, and the nature of the interpersonal relationships and the relationships of the
employees, nature of the activities the organization is involved with, location of the organization
and technology used. Corporate culture is the collection of beliefs, expectations, and values
learned and shared by a corporation’s members and transmitted from one generation of employees
to another. Corporate/organizational culture shapes the behavior of people in a corporation, thus
affecting corporate performance. In this study both organizational & corporate cultures are used
interchangeably.

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Organizational culture refers to the complex set of ideologies, symbols, and core values that are
shared throughout the firm and that influence how the firm conducts business. It is the social
energy that drives—or fails to drive—the organization (Hit, et. al, 2007). Organizational culture is
a set of shared values by members in the organization and it is a source of advantage when
employees are held together tightly by their belief in it (Tetrick & Silva, 2003). The organizational
culture influences how the firm conducts its business and helps regulate and control employees’
behavior, it can be a source of competitive advantage (Gupta & Govindarajan, 2000). Thus,
shaping the context within which the firm formulates and implements its strategies—that is,
shaping the organizational culture—is a central task of strategic leaders (Gupta & Govindarajan,
2001). Proactive organizational cultures constantly use processes to anticipate future market needs
and to satisfy them before competitors learn how to do so.

Shared values and effective leadership are important for achieving cross-functional integration and
implementing innovation (Wenger & Snyder, 2000). Highly effective shared values are framed
around the firm’s vision and mission, and become the glue that promotes integration between
functional units. A vision can be said to link business with corporate culture, creating a common
standard of values for the individual performance of employees. A written vision statement helps
achieving a shared vision throughout the organization and in shaping the culture to support the
strategies. Thus, the firm’s culture promotes unity and internal innovation (Hamel, 2000). A
change in mission, objectives, strategies, or policies is not likely to be successful if it is in
opposition to the accepted culture of a firm. Hence, a change in culture and managing it towards
strategy execution should be in place.

Changing a firm’s organizational culture is more difficult than maintaining it, but effective
strategic leaders recognize when change is needed. Incremental changes to the firm’s culture
typically are used to implement strategies (Sims, 2000). More significant and, sometimes, even
radical changes to organizational culture are used to support the selection of strategies that differ
from those the firm has implemented historically. Regardless of the reasons for change, shaping
and reinforcing a new culture require effective communication and problem solving, along with
the selection of the right people (those who have the values desired for the organization), effective
performance appraisals (establishing goals and measuring individual performance toward goals
that fit in with the new core values), and appropriate reward systems (rewarding the desired
behaviors that reflect the new core values) (Burgelman & Doz, 2001).

32
Evidence suggests that cultural changes succeed only when the firm’s CEO, other key top
management team members, and middle-level managers actively support them (Hornsby et, al.,
2002). To effect change, middle-level managers in particular need to be highly disciplined to
energize the culture and foster alignment with the strategic vision (Axelrod, 2002).

Cultural change involves significant amounts of communication. To motivate people to change,

there must be a compelling vision which is clearly linked to the organization’s strategy and
ongoing management attention to how well the change is occurring. Strategic management helps
in creating the organizational culture through developing the mission, vision and values.
Additionally, a proper strategic management facilitates the formation of a culture of integrity,
competitive work ethic, embracing technology, value creation for customers, suppliers and
shareholders. With this type of sustained organizational culture, an organization can expect
competitive performance through the effective and efficient strategy execution. Thus, the
leadership must create the future through strategic management to sustain the organization in the
competitive environment. To that end, strategic management tools need to be carefully selected as
enablers to build a sustained culture.

2.4. Balanced Scorecard and Strategic Management

Ethiopia has been implementing various management tools to cope up with the needs of its
citizens and to be competitive in this dynamic world. As part of this, the government has now
under building stage of one of the strategic management tools, i.e., Balanced Scorecard (BSC),
following the Business Process Reengineering-resulted some encouraging results, in all public
sectors to manage strategies and performances thereby bring and sustain a remarkable result. In
this regard, hopeful achievements have been registered in terms of finance, customer satisfaction,
and process improvement.

The Balanced Scorecard was developed by two men, Robert Kaplan, an accounting professor at Harvard
University, and David Norton, a consultant also from the Boston area, who are called the scorecard
architects. According to Kaplan & Norton (1992), initially the BSC was developed as a
comprehensive performance measurement system encompassing a coherent set of financial and
non-financial performance measures covering different perspectives of the organization. The need
to measure future performance developed over time, with strategies having to be measured. These
measures are developed in Financial (What must we do to create sustainable economic value?),
Customer (What do our customers require from us and how are we doing according to those

33
requirements?, Internal Business Process (To satisfy our stakeholders, what must be our levels of
productivity, efficiency, and quality?) and Learning and Growth (How does our employee
performance management system, including feedback to employees, support high performance?)
perspectives (Kaplan and Norton, 1992). These perspectives are the summary of the vision and
strategy of an organization.

The Balanced Scorecard framework, fig. 2.2, features the processes most critical for successful
strategy execution. To make the framework operational, companies can focus on achieving the
critical process objectives that are shown on the strategy map, as well as the learning and growth
objectives that drive the key process improvements. The framework enforces a discipline around
strategy implementation by challenging executives to carefully translate their strategies into
objectives, measures, targets, and initiatives in four balanced perspectives. The cause-and-effect
relationship links the four perspectives and their performance measures. This emphasis is
represented by the growing importance of the strategic map.

Fig.2.2 The Balanced Scorecard Framework (Kaplan & Norton, 1996)

The strategy map is a graphical summary of strategy which is shown in Figure 2.3. It portrays the
main assumptions of company’s strategy arranged in four perspectives which have the strategic

34
initiatives and their respective performance measures. The map plays an important role as
communicator of strategy. It also provides a one-page visual representation of all the strategic
themes. By building a strategy map around a collection of strategic themes, executives can
separately plan and manage each of the key components of the strategy but still have them operate
coherently. The themes, which operate across functions and across business units, also support the
boundary-less approach necessary for successful strategy execution.

Corporate strategy is described by a strategy map that identifies the specific sources of synergies.
Managers then cascade this map vertically to business units, whose own strategies can then reflect
objectives related to their local strategies and objectives that integrate with the corporate strategy
and the strategies of other business units. The objectives and measures appearing on Strategy Map
and Balanced Scorecard can tell strategic story. Strategy Maps communicate the strategic
destination, while performance measures housed within the Balanced Scorecard monitor the
course, allowing us to ensure we remain on track.

Capelo and Ferreira (2009), after conducting experimental research using a business game,
concluded that if the BSC is implemented along with the Strategic Map, the combination helps
executives to create mental business models that resemble reality, enabling them to make good
decisions. However, if only the BSC is implemented (without including the Strategic Maps), the
executives end up creating mental models further removed from reality than if they were provided
with economic-financial information.

35
 Fig. 2.3 Strategy Map Example (Kaplan & Norton, 2001a)

Through the evolvement of BSC, other changes were made again in procedure to develop and
implement the frame that still has four perspectives besides the critical of many authors. BSC is
seen as a strategic management tool to communicate, implement, control, and the strategy
implementation. The Figure 2.4 illustrates the five principles of Strategy-Focused Organization
where previous BSC frame is in the center. The five principles: (1) translate the strategy into
operational terms, (2) align the organization to the strategy, (3) make strategy everyone’s everyday
job, (4) make strategy a continual process, and (5) mobilize change through executive leadership
(Kaplan & Norton, 2001). The development and use of strategy maps play a very important role in
aligning and communicating the strategy through the organization (Kaplan & Norton, 2004). The
balanced scorecard is a tool that facilitates communicating with and educating all staff about the
new strategies.

36
 Fig. 2.4. The Principles of a Strategy-Focused Organization (Kaplan & Norton, 2004)

BSC is no more than a template in which it can be customized for the specific elements of an
organization or industry. The selection of the perspectives should be based on what are necessary
to tell the story of the strategy and create a competitive advantage for the organizations. Indeed,
some organizations focus on their key strategies to set up another perspective (Kaplan and Norton,
2001a). For example, some public sector organizations institute a social responsibility perspective
or a cultural perspective. The scorecard architects, in 1996, presented BSC as a strategic
management system describing management process and principles to develop and implement a
strategy-focused organization. Moreover, they characterize BSC being a model that proposes to
define a balanced set of organizational performance indicators and as a tool intended to
communicate and manage the strategy and also as a system to control strategy (Kaplan & Norton,
1996, 2000). Malina & Selto (2001) indicated that BSC is incorporated into the routine; it is a

37
support for the culture of the organization; it helps transmit confidence; it provides an expansion
of the dialogue about strategy. Kaplan and Norton (2006) explained that to achieve organizational
synergy, the alignment must not only affect the board of directors, shareholders, and business and
support units, but also the customers, suppliers and partners. This new contribution proposes that
the BSC is used for alignment the company with different external interested groups.

Kaplan and Norton believe that for many organizations strategy execution prove so elusive due to
four barriers that must be surmounted before strategy can be effectively executed. These barriers
are presented in figure 2.5. Balanced Scorecard Collaborative (2002) explained these barriers as:

Vision barrier – No one in the organization understands the strategies of the organization.
People barrier – Most people have objectives that are not linked to the strategy of the
organization.
Resource barrier – Time, energy, and money are not allocated to those things that are critical to
the organization. For example, budgets are not linked to strategy, resulting in
wasted resources.
Management barrier – Management spends too little time on strategy and too much time on
short-term tactical decision-making.

Fig. 2.5 Barriers to Strategy Execution (Balanced scorecard collaboration, 2002)

38
From the figure above, research findings indicate that, most often than not, only 5 percent of the
workforce understands their company strategy, 25 percent of managers have incentives linked to
strategy, 60 percent of organizations don’t link budgets to strategy, and 86 percent of executive
teams spend less than one hour per month discussing strategy (Balanced Scorecard Collaborative,
2002). The Balanced Scorecard is the tool that is expected to answers this complex triad of
challenges. Furthermore, Thompson and Mathys (2008) identified four aspects that generate
problems during BSC implementation: there is a gap in the understanding of the centrality and
importance of processes; the alignment between the different BSC indicators is not understood;
appropriate measures are needed; and understanding of how the organization’s strategy influences
each of the BSC indicators is needed. This method is not sufficient alone and must be used in
addition to other tools.

Finally, Kaplan and Norton (2008) proposed the Execution Premium, a comprehensive and
integrated management system that links the strategy planning into the company’s operational
execution. This new model is a circle containing six stages shown in Figure 2.6.

Fig. 2.6 The Management System: Linking Strategy to Operations (Kaplan & Norton, 2008)
39
The system has many moving parts and interrelationships, and it requires simultaneous
coordination among all line and staff units. The six major stages of the system are:

Stage 1: Managers develop the strategy using the strategy tools described in the preceding
section. In this stage, the CEO leads the change agenda and drives it from the top to
reinforce the mission, values, and vision.
Stage 2: The organization plans the strategy using tools such as strategy maps and Balanced
Scorecards. In this stage, the executive leader validates the strategy map as an expression
of the strategy articulated in Stage 1 and challenges the organization with stretch targets
that take all employees outside their comfort zones.
Stage 3: Once the high-level strategy map and Balanced Scorecard have been articulated,
managers align the organization with the strategy by cascading linked strategy maps and
Balanced Scorecards to all organizational units. They align employees through a formal
communication process and link employees' personal objectives and incentives to
strategic objectives. In this stage, leadership drives alignment of organizational units and
is essential for communicating vision, values, and strategy to all employees.
Stage 4: With all organizational units and employees aligned with the strategy, managers can now
plan operations using tools such as quality and process management, reengineering,
process dashboards, rolling forecasts, activity-based costing, resource capacity planning,
and dynamic budgeting. In this stage, leadership supports the cross-organizational unit
process improvements.
Stage 5: As the strategy and operational plans are executed, the enterprise monitors and learns
about problems, barriers, and challenges. This process integrates information about
operations and strategy in a carefully designed structure of management review
meetings. In this stage, the leader's openness and skill in running the strategy
management review meeting determines its effectiveness for fine-tuning the strategy
throughout the year.
Stage 6: Managers use internal operational data and new external environmental and competitive
data to test and adapt the strategy, launching another loop around the integrated strategy
planning and operational execution system. In this stage, the leader must allow even a
well-formulated and executed strategy to be challenged in light of new external
circumstances, data collected about the performance of the existing strategy, and new
suggestions from employees throughout the organization. Being willing to welcome and

40
 subject existing business strategies to fact-based challenges is one of the hallmarks of
effective leadership.

This new model is based on a continuous improvement approach, because it is reviewed

continuously, which reflected in stages 5 and 6. In addition, this approach allows the organization
to be adapted to the changes coming from the context and learn from their experience. They also
proposed the only modification linked to the structure of the organization, such as the creation of a
strategic management office that would be responsible for ensuring efficient implementation of the
system.

BSC introduced by Kaplan and Norton so as to evaluate strategy. After its introduction, BSC was
developed by other researchers. But, the BSC method has some weaknesses. Kanji & Sa (2002)
claim that the Balanced Scorecard is not a participative but a top down approach. Lohman et al.
(2004) report that, in an organization they studied, the Balanced Scorecard did not support
development, communication, and implementation of strategies. Kaplan and Norton (2006) argue
that the BSC has since the introduction evolved to a system for managing the execution of
strategy. According to Kanji & Sa (2002), the Balanced Scorecard provides only a conceptual
framework. Hence, the lack of an implementation methodology may cause deviations from the
merit of the concept itself (Malina & Selto, 2001; Kanji & Sa, 2002). There are two shortcomings
in the strategic framework of the BSC. The first is that the adopters might not be aware of how to
conceive their strategies from a SWOT (strengths, weaknesses, opportunities, threats) analysis and
how to identify the key performance indicators (KPIs) in their critical success factors (CSFs)
(Clarke, 1997 as cited in Yang & Yeh, 2009). The other problem is the deployment of the overall
vision, strategies and strategic objectives to the organization’s units or departments in order to link
individual efforts and accomplishments to business objectives. However, this deployment is very
important in the implementation of the BSC (Yang & Yeh, 2009).

An implementation model for BSC (developed by Kaplan & Norton, 2004)), is presented in Figure
2.7.

41
 Fig.2.7 Implementation model of the Balanced Scorecard (Kaplan and Norton’s (2004)

2.4.1 Application of BSC in Sugar Industry

Sugar industry is one of the largest agro-based processing industries in Ethiopia and plays a
significant role in the socioeconomic development of the country. Sugarcane is an important
industrial and cash crop in Ethiopia and it is a source of raw material for entire sugar industry (fig.
2.8). Sugar is a strategic and essential commodity, which is an important food item that is also a
critical raw material in various industries such as food, beverage and pharmaceutical industries.
Sugar is a prime requirement in every household. Sugar produced in Ethiopia is white sugar/not
refined. There is a rising trend in usage of sugar that could be attributed to greater urbanization,
rising standard of living and change in food habit. Today there is a significant gap between sugar
consumption and production in Ethiopia. Molasses is the chief by-product of sugar industry and is
the main raw material for alcohol production and alcohol-based industries. The second by-product
of sugar industry is bagasse, which is the fibrous material left over after crushing and is the chief
source of power in the sugar mills. This is also being used as a raw material in the paper industry.
The third by-product of sugar industry is filter cake, which contains many plant nutrients and
42
could be an important source of organic matter, major and micro-nutrients. By making use of
byproducts, many sugar factories have been establishing facilities to produce power, alcohol,
ethanol, bio-compost, etc. Green tops of sugarcane are used as cattle feed. The sugar sector is
facing competition and struggling to sustain in the new environment. Hence, to achieve desired
goals the sector has to focus on the effective and efficient management tools.

Fig. 2.8 Sugar Manufacturing Processes

43
The Outputs produced by the Ethiopian Sugar Corporation are shown in the figure 2.9.

Sugarecane

Related
Sugar Molasses Bagasse
Products

White Steam &

Ethanol Fruits
Sugar Electric

Animal
Raw Sugar Fertilizer Blockboard
Feeds

Industrial Industrial Packed

Fertilizer
Alcohol Paper Foods

Industrial
Sugar
Fig. 2.9 Products of ESC, Source: BSC Document of ESC, 2015(own translation from Amharic)

The Ethiopian Government is firmly working to realize its vision of making the country as one of
the middle-income countries by 2025. To this end, it has put in place an aggressive and a
comprehensive civil service reform across the country. As a result, almost all public organizations,
including the sugar sector are under reform since 2002. Business Process Reengineering (BPR) is
chosen as the main reform tool to be applied across the country. Establishing an integrated
performance management system is one of the requirements of BPR for which BSC is found to be
the right fit for the kind of change that is being practiced in the country.

According to Kaplan and Norton (1992, 1996, 2001), all organizations (for-profit and not-for-
profit) can adapt BSC. The BSC has been widely used in manufacturing organizations, service
organizations, non-profit organizations, and governmental organizations with excellent effects
(Kaplan and Norton, 2001b). These scholars have shown in their latest research that the BSC also
can produce the promised effects. Examples of these results can be seen in companies such as
Mobil Oil and Rockwater, which have increased their competitiveness and profitability
considerably with the implementation of the BSC. Having realized such benefits of BSC, a large
number of companies have been adopting it since 1990s. In their study, Kaplan and Norton (2001)
reported that by 2001 about 50 percent of the Fortune 1000 companies in North America and
about 45 percent of companies in Europe were using the BSC. There are some sugar
manufacturing companies implemented BSC; Brazilian companies (Junior et al, 2008).

44
Currently, the Ethiopian Sugar Corporation (ESC), the only sugar sector role player and a catalyst
for the country’s economic development including energy supply, job creation and tax revenue, is
working hard to strategically manage all sugar manufacturing factories that are accountable to it.
The Corporation also administers three existing projects, establishes nine new sugar development
projects in addition to the three existing factories in the different parts of the country. Kaizen is the
biggest change that has been implementing in the factories and projects, and is poorly supported
by other tools and techniques for instance business process reengineering & quality management
systems for improvement. It is through Kaizen that major changes are happening and since
February 2015 ESC applying Balanced Scorecard approach envisioning better strategy execution.

The corporation has started its operations 4 years ago. Nowadays, it employs 62, 420 people in the
factories & projects and 630 employees at the head quarter to support the factories and projects.
Including the community around the factories and projects around 128, 521 employments created.
During harvest period 2014/2015, the corporation has processed approximately 5.3 million tons of
sugarcane. Before BSC implementation, there was strategic planning process which was not
linked to the business strategic goals and to the follow-up of the progress and the main tools for
running the business were the budget and the operational objectives and targets, Following the
party line order, the Balanced Scorecard framework with the four common perspectives were
chosen as management tool to support better the decision making process. The development of
strategy map was the most important activity during the BSC implementation. Since August 2014,
a team of 17 directors has taken part in developing the strategy map. Then, they have negotiated
the map with the executives’ management team. Finally, the BODs have approved the strategy
map. The employee, who was involved in BSC implementation, was main source of information.
The Corporation set the new mission, vision and value in its BSC document as presented below.

The new mission of the industry is to ‘building human capital and modern technology that would
enable to utilize the potential resources of the country for development, produce sugar, sugar co-
products and make use of the by-products and satisfy the local demand and ensuring the benefit of
people thereby support the development of the country seizing a significant export share’.

The new vision for the industry is ‘Ensuring sustainable growth and become one of the ten
competitive sugar producing countries of the world in 2023’.
.

45
The new value for the industry includes sustainable change & competitiveness, ethical,
productivity is the base of our existence, serving the public interest, continuous learning,
encouraging creativity & work excellence, team work, and environmental protection is the
foundation for our development, human resource development.

Profitability Growth
Finance
Perspective Improve Financial Reduce Costs
Resources & Revenue

Customer Improve Trust & Improve Product

Perspective Customer Satisfaction Availability

Increase Production

Enhance Productivity Increase Community

Participation & Benefits

Increase supply of products &

Inputs

Improve Strategic Expand Cane

Internal Process
Partnership Development & Factories
Perspective
Reduce Risk Exposure

Improve Environmental Increase the Youth &

Protection & Women Beneficiaries
Development

Improve Working Methods &

Structure

Improve Workplace Increase Human Resource

Comfort Development

Learning & Growth Enhance Workers Enhance Usage of

Perspective Motivation Technology & Information
Communication
Increase Institutional
Capability

Fig. 2.10 Strategic Map of ESC

As shown in the figure 2.10 above, there are total of 20 objectives and 86 measures cascaded to
the sugar factories and projects under the Ethiopian Sugar Corporation. There are performance
measures for each objective for the next five years (2015/16-2019/20) and their commentary in
table.

46
2.5 Hoshin Kanri and Strategy Management

Hoshin Kanri originated in Japan as early as the 1960s although it remained unrecognized by
Western observers and managers until the late 1980s. Practice of Hoshin Kanri is first documented
in the case of Bridgestone Tire Company, winners of the prestigious Deming Prize, which in 1965
published internally The Hoshin Kanri Manual (Akao, 1991). At about the same time Komatsu
developed a Hoshin Kanri process which proved to be influential in the early literature, and
Toyota in 1965 implemented "Policy Control" recognized as Hoshin Kanri (Nemoto, 1983).

A commonly found translation of Hoshin Kanri is: Hoshin as 'policy' or 'target and means', and
Kanri as 'planning' or 'management or control'. The word Hoshin is composed of two Chinese
characters: ho and shin; ho meaning method or form, and shin meaning shiny needle or compass;
Kanri meaning management or control. Taken together the two words mean a 'methodology for
strategic direction setting'. Translation in this form is to be found in literature in this area (for
example see Akao, 1991, King, 1989, Shiba, 1993, Soin, 1992). A variety of differing terms have
been adopted within a Western context and the rationale for this reflects commentators' attempts to
promote an understanding of Hoshin Kanri acceptable to a Western audience. Such terms include:
policy deployment, management by policy, policy control, Hoshin planning and managing for
results.

Hoshin Kanri is defined as "all organization activities for systematically accomplishing the long
and mid-term goals as well as yearly business targets which are established as the means to
achieve business goals. In many cases it is used for yearly targets (Akao, 1991). It is described by
Akao (1991) as a systematic approach that integrates the entire organization’s daily activities with
its strategic goals. The ‘daily activities’ incorporate not only operations, but also everything that is
necessary for an organization’s routine management of its mission. Newcomb ( 1989) states that
‘policy deployment helps create cohesiveness within a business that is understood throughout; it
provides a structure with which to identify clear organizational goals’, and Watson ( 1991) says it
‘provides a step-by step planning, implementation and review process for managing change’.

"Hoshin planning (Hoshin Kanri) helps to control the direction of the company by orchestrating
change within a company. This system includes tools for continuous improvement, breakthroughs
and implementation. The key to Hoshin planning is that it brings the total organization into the
strategic planning process, both top-down and bottom-up. It ensures that the direction, goals, and
objectives of the company are rationally developed, well defined, clearly communicated,
47
monitored, and adapted based on system feedback”. (King, 1989). “HK clarifies specific annual
target policies derived from the long and medium term policies that encompass the long term
visions of the company. It strives to achieve targets through action plans intended to improve the
control system. These action plans are then deployed for their targets and their policies. " (Akao
1991).

Hoshin Kanri is used by leading companies such as Hewlett- Packard, NEC Japan, Xerox, and
Procter and Gamble – offers an alternative way to overcome the common problems associated
with strategic management, in that it connects managers and employees by a systematic
deployment process through vertical and horizontal communication, where the goals set by the
management are deployed and all endeavors are aligned to the same vision and goal (Akao, 1991).
Organizations identified as using some form of Hoshin Kanri in the West include AT&T, Digital,
Hewlett-Packard, Nissan and associated companies, Philips, Procter &Gamble, Rover and Xerox.
Anecdotal evidence indicates that practice in America is more widespread than in Europe or the
UK (Butterworth & Rosemary, 2001).

Hoshin Kanri perceives the strategic management of an organization as a process and implements
process control activities to strategic management. Deming’s PDCA (Plan-Do-Control-Act) cycle
is adapted to Hoshin Kanri as the FAIR (Focus-Alignment- Integration-Review) cycle by Witcher
& Butterworth (1999), which is presented in Figure 2.9. FAIR is an annual cycle, which begins
when management ‘acts’ to review the previous year’s performances and formulates the strategic
focus for the coming year, which is expressed as the ‘vital few objectives’. Then the cycle turns to
the ‘plan’ phase and the vital few objectives are aligned with annual plans and deployed by the
‘catchball process’ through the business units. "An important feature of policy deployment is co-
ordination among all levels at the planning (set up) stage for the target-means. This assures
uniformity of methods used, a common understanding of upper level policy, and participation by
lower levels. " (Akao, 1991).

Akao argues that central to the organizational alignment which is one of Hoshin Kanri's
differentiating features: "It is a means to pull together the forces within a company and to unite
the minds internally (co-ordinate the vectors), to perpetually improve its performance by adjusting
quickly to changes. " (Akao, 1991). The ‘do’ phase is the integration of the vital few objectives
into daily management, in other words the plans are executed where the PDCA cycle is used
continuously for taking corrective actions, process improvement and standardization. The ‘control’
48
phase is a review of the annual performance. Data from a completed cycle are fed back into the act
phase, so the cycle starts over.

Fig. 2.11 . The FAIR Cycle of Strategic Management (Witcher & Butterworth, 1999)

The ACT stage of the cycle is that which brings about organizational FOCUS.
The PLAN stage of the cycle brings about organizational ALIGNMENT.
The DO stage of the cycle brings about organizational INTEGRATION.
The CHECK stage of the cycle brings about organization wide REVIEW.

The definitions suggest a management process which encompasses the extent of activities relating
to the strategic management process, and is more in line with the translation of Hoshin Kanri as a
'method for strategic direction setting'. As such this is much broader than the meaning implicit in
the term 'policy deployment' used by Akao who recognizes the limitations of his work in focusing
upon the deployment process. According to the Hoshin Kanri literature, the Hoshin Kanri process
in its entirety should assist organizations in closing what the strategy literature describes as the
formulation/implementation gap. The importance of connecting strategy with operations was
noted by Reid (1989), and Pettigrew & Whipp (1993). It is the integration phase of Hoshin Kanri
which in practice facilitates the connection of strategic with operational concerns. It is at this stage
of the process that implementation occurs. Akao has little to say about the implementation of the
policy plan arguing that this is largely determined by the culture and purpose of the company.
49
Hoshin Kanri is especially valuable in its inherent ability to align employees from all levels of the
organization to a common goal and to ensure that they are aware of where they stand in relation to
top management strategy. Thus, it facilitates integration of long term and short term goals in the
organization as well as integration of these corporate goals with those of the individual employee .

Hoshin Kanri practitioners complain about determining the vital few objectives, and declare
conflicts in arranging them into a framework. One very noteworthy contribution of Hoshin Kanri
is the catchball process, the process of give and take between levels that helps to communicate
strategic and operational initiatives in organizations.

2.5.1 Catchball Process as Part of HK Process

The catchball process remains at the heart of Hoshin Kanri, which is the key process for alignment
and integration of strategies. "Catchball refers to the reiterative up, down, and horizontal
communications necessary for effective determination of target and means.” (Akao, 1991). To
deploy the vital few objectives within the organization, target and means deployment is used.
Targets are defined as expected results and means are the guidelines for achieving a target.

A major characteristic of HK is the cascading process, called ‘catchball’, which enables two-way
communication that is both strategically top-down and bottom-up in adaptation under the existing
hierarchical management structure and matrix process structure to engage all parts of the
organization in the dialog (Su & Yang, 2013).

2.5.2 Daily Management as Part of HK Process

The basis for Hoshin Kanri is argued to be daily management. Daily management is defined as:
"all the activities that each department must perform for itself on a daily basis that are necessary
to most efficiently achieve their business goals. These activities are the most fundamental of
business management. “(Akao, 1991).

The management of the hoshins and targets in daily management makes continuous improvement
(or kaizen) an important part of Japanese strategic management. Since the executive team decides
its hoshins in the general context of the health of the business, so that both the hoshin and the
targets are made relevant to the executive’s goals, and provide a link between in daily
management to corporate strategy (despite its importance, the nature of this link was not fully

50
understood by Western firms when they adopted Japanese quality management ideas (Lillrank,
1995; Cole, 1998).

Hoshin Kanri is about the management of the whole organization, and flexibility and
responsiveness are achieved through daily management which seeks to integrate organizational
activities. By highlighting the importance of cross functional management in the development of
an organizational form which facilitates the management and alignment of resources, this research
further informs this approach to strategic management.

2.5.3 Cross Functional Management as Part of HK Process

As part of Hoshin Kanri it is necessary to manage the objectives through the establishment of a
cross-functional team. Akao defines cross-functional management as: "Control activities that
include planning for individual business elements like quality, cost, and delivery from a company-
wide (or business group) point of view" (Akao, 1991).

The management of objectives in Japanese firms uses a common framework of four sets of
perspectives: “quality”, which covers customer concerns; “cost”, which covers efficiency and
financial objectives; “delivery”, which includes objectives concerning internal processes, logistics
and innovation; and “education”, which includes the development of human resources, morale and
safety. This grouping of objectives served to provide a common framework for managing
objectives firm wide and was developed during the early years of hoshin kanri in the 1960s, when
executive led cross-functional management teams were established at Toyota and Komatsu to
review the progress of strategic objectives in daily management (Koura, 1993).

Cross-functional management evolved in Japan to integrate issues which were delineated as

functional (such as Quality, Cost, Delivery and Education (QCDE) issues, although there are
others, into the departmental activities of the organization, and to clarify lines of accountability
and responsibility relative to issues which affect all parts of an organization. Management of
targets which relate to these functions requires an approach which crosses organizational
boundaries.

Cross functional management was an organizational arrangement (Lillrank, 1995) which was
important in facilitating alignment of interlinking target and means. The Hoshin Kanri literature
which was influenced by Japanese practice touched upon structural arrangements for those

51
policies and associated targets and means which would require management across internal
organizational boundaries. The research suggests that the importance of the arrangement for cross
functional management have been largely overlooked in Western practice. Cross functional
management was an organizational arrangement found to be critical not only in the alignment
stage of the process but also in the management of targets in such a way which ensured that
strategic priorities were not crowded out by the expediency of day to day management.

An implementation model for Hoshin management (developed by Yang, 1995), is presented in

Figure 2.10.

Fig. 2.12. Implementation model of Hoshin Management (Yang, 1995).

52
2.5.4 Total Executive Audit as Part of HK Process

A crucial component of hoshin kanri is the capability it brings to executive management for
learning about the organization (especially the operational activities). This part of hoshin kanri is
called a top executive audit (TEA- a form of strategic operational review). The audit aims to
provide an understanding of the way the core business processes, the hoshins, and the
improvement objectives being managed, within the context of annual planning and daily
management (Witcher et al., 2007).

2.6 Integrated BSC & HK for Strategic Management

The balanced scorecard and hoshin kanri (Witcher & Chau, 2007) are core capabilities in the sense
that each is an approach that is central to the strategic management of the firm. Strategic
management is the overall and general management of a firm’s, or an organization’s, long-term
purpose. This definition is usefully broad enough to encompass competitive firms and non-profit
organizations, including public sector agencies. The BSC is represented as long-term strategy,
while hoshin kanri is the management of longer-term strategy as its short-term implementation and
execution. These researchers explained that an effective strategic management system provides the
longer-term stability for the firm as a whole to manage and control change in the short-term.
Combining the balanced scorecard with hoshin kanri makes this possible. The scorecard in this
representation is a corporate level and longer-term component of strategic management. Hoshin
kanri, on the other hand, is used to translate corporate level strategy into short-term components
across the functional levels of the firm and organization.

Balanced Scorecard and Hoshin Kanri are analogous tools (Tennant et al., 2002; Witcher, 2003;
Andersen et al., 2004; McCarthy, 2005), both seek breakthrough performance, alignment of
strategies, and integrated targets for all levels within an organization, yet there are areas where
they differ. First of all, the Balanced Scorecard is a performance based approach, and it considers
the results and what is achieved as important. On the contrary, Hoshin Kanri is a process-based
approach and concentrates not only on the results but also the means (or how) to reach them. In
this respect, the Balanced Scorecard is perceived to be target-oriented and Hoshin Kanri as means-
oriented.

In order to reveal the differences between the two their strengths and weaknesses should also be
mentioned. Kanji & Sa (2002) claim that the Balanced Scorecard is not a participative but a top
down approach. Lohman et, al. (2004) report that, in an organization they studied, the Balanced
53
Scorecard did not support development, communication, and implementation of strategies.
According to Kanji& Sa (2002), the Balanced Scorecard provides only a conceptual framework.
Hence, the lack of an implementation methodology may cause deviations from the merit of the
concept itself (Malina & Selto, 2001; Kanji & Sa, 2002). On the other hand, Hoshin Kanri
practitioners complain about determining the vital few objectives, and declare conflicts in
arranging them into a framework. One very noteworthy contribution of Hoshin Kanri is the
catchball process, the process of give and take between levels that helps to communicate strategic
and operational initiatives in organizations.

The QCDE scheme is universal in Japanese and many Western hoshin kanri companies and its
form is very similar to the four perspectives of the well-documented balanced scorecard (Witcher
and Chau, 2007), and, in fact, the balanced scorecard was originally developed from hoshin kanri
(Kaplan and Norton, 1993). However, the QCDE scheme is less about setting longer-term
objectives and measures than to provide the firm as a whole with a common language to facilitate
transparency and cross-functional problem solving.

The idea of the balanced scorecard’s four perspectives is similar to one used within hoshin kanri.
This is the QCDE grouping of objectives used in hoshin kanri, where quality objectives and
measures (Q), are comparable to those in the scorecard’s customer perspective, because customers
ultimately define what quality means; cost (C), similarly covers financial objectives and measures;
delivery (D), covers process objectives in a similar way to the internal business perspective, and
education (E), objectives resemble learning and growth and cover people-based objectives and
measures. This similarity of objective categorization is unacknowledged in the scorecard and
hoshin kanri literatures. However, according to Schneiderman (2001), the key to linking strategy
to action is not the balanced scorecard itself but the underlying processes that make it work.
Elsewhere, he points to a lack of an obvious hoshin kanri type system, which can serve to deploy
and manage objectives at a level in the organization where improvement in operational
performance is managed (Schneiderman, 1999).

The scorecard’s strength lies in its ability to clarify long-term statements of corporate purpose.
Hoshin kanri, on the other hand, is strong as a management system for the deployment and
execution of purpose as short-term actions. Even though their focal points address the same issues,
they differ in the way they operate. The Balanced Scorecard clearly describes the perspectives to
focus upon and builds the conceptual framework, while Hoshin Kanri presents a brilliant way of
54
deployment, communication, and execution (Asna & Tanyas, 2007). BSC evaluates the
performance in 4 perspectives. It used to analyze the tasks fast with Key Performance Indicator
(KPI). Hoshin is based on continuous improvement and process oriented. When there is a need of
improvement in the targets evaluated by BSC within four dimensions, Hoshin management steps
in (Karatop, et al., 2012).

From the literature review it is clear that both tools are valuable for strategic management of an
organization that the Balanced Scorecard facilitates building the strategic framework; however, it
lacks details on communicating strategies, leaving this mainly to the user. This gap is supposed to
be filled by the use of Hoshin Kanri. Simultaneously, the difficulty in determining the vital few
objectives in Hoshin Kanri can be overcome with the help of the framework the Balanced
Scorecard provides. Combining a performance oriented approach with a process oriented approach
certainly creates synergy. Within this paper, the Balanced Scorecard is utilized in drawing the
organization’s strategic route and Hoshin Kanri in deployment and execution of the plans and
documentation of the activities as shown in the figure 2.11.

Fig,2.13 Integrated Model for BSC & HK (Asan & Tanyas,2007)

2.7 Supply Chain and Strategic Management

The reason for a written vision statement is to aid communication of the vision across the whole
organization and often to customers and suppliers as well. Towill (1996) concludes that supply
chain processes can be greatly improved by simplifying decision making procedures. A strategic
management process requires decisions that are shown below.

Strategic or long-term planning decisions aim to identify the optimal strategic network of the
supply chain (Chopra and Meindl, 201). Tactical or middle term planning decisions aim to

55
optimally coordinate, integrate and synchronize the flow of information and marketable product
along the supply chain (Stadler, 2005; Pibernik and Sucky, 2007). Operational or short-term
planning decisions aim to handle incoming customer orders in the best possible manner (Chopra
and Meindl, 2010). Decisions at operational level enclose scheduling problems related with the
flow of product or information through the chain following the guidelines of the master plan.

Supply chain management cannot be separated from the strategic planning process. During a
strategic planning exercise, an organization decides whether it will form a active partner in a
supply chain or whether it will face global challenges alone. Cohen and Roussel (2005) are of the
opinion that a supply chain must be viewed as a strategic asset before supply chain management
can be implemented successfully. In other words, supply chain management should not be considered
only as a logistical function but to be viewed as strategic plan in order to sustain and improve buyer-
supplier relationship (Carr and Pearson, 1999). Thus, planning for the supply chain also implies
planning collaboratively with the external environment, which consists of customers, suppliers and
other role-players in the supply chain (Hugo et al., 2004).

All these prescribe that supply chains and strategic management seem to be interrelated and
planning them in a strategic way is essential. Accordingly, concentrating on improvements of
supply chains and the factors influencing it regarding making an effective or ineffective supply
chain will be of high importance.

A supply chain is a network of facilities that perform functions of product development,

procurement of materials between facilities, the manufacturing of products, and distribution of
goods to customers (Beamon, 1998). A supply chain is a network with some members or players.
The members within the network play various roles which help to accomplish the aim for creating
the network. Within supply chain, materials usually flow from supplier to the end customer.
Information flow in the supply chain network follows two ways: upstream to downstream and
downstream to upstream. Materials flow from upstream to downstream involve flow of raw
materials and components to the focal organization, finished or semi-finished goods flow from the
focal organization to distribution centers or warehouse. Then, the goods flow from the warehouse
to the end customers. These flows involve long and short distance transportations. The information
flow involves exchange of information within the network on order placement, customer need
information, delivery information, etc. To that effect, the supply chain has to be improved.

56
Through improved processes such as communication, information sharing and the establishment
of collaborative planning and forecasting muda/wastes in the supply chain can be reduced. Hence
applying lean-kaizen approach helps to achieve this. Over the last few years supply chain
professionals have been working on means to reduce wasted effort and excessive inventories by
applying the principles of lean manufacturing across the supply chain. In order to accomplish this
task supply chain partners must first understand what Lean-kaizen is, and then increase the level of
collaboration and teamwork between themselves.

For seeking the efficient and effective cooperation between organizations of a supply chain, each
chain member must seek not only to improve its own individual competitiveness (i.e. quality, cost,
delivery lead time, and etc.) but also improve the competitiveness and performance of all
enterprises in its supply chain. This involves sharing of information, working together to reduce
costs, cut lead-time and building total quality into all the stages of the supply chain (Davis, 1993).

Makweba & Xu, (2009) concluded that, the majority of food processors operate individually
without any strong relationship with their downstream partners apart from sell-buy relationship.
Each member within the network seeks to optimize individual profit rather than the entire supply
network. This is an implication of yet, reform heterogeneous supply chains is not an easy task,
since each company has individual work structure, organizational structure, work flow,
information flow, and culture. Therefore, food supply chain needs effective management,
integration, knowledge, and due attention throughout the supply chain. If properly implemented
supply chain management can improve the company’s responsiveness, flexibility and efficiency
(Olsson and Skjolde, 2008). The supply chain in the Ethiopian industry including the sugar
industry cannot be an exception from these explanations.

Due to the lack of supply chain networking, the Ethiopian industries are highly subjected to
unnecessary costs (storing, handling, moving, etc) (Debebe, A., 2004). The other problem that is
observed in Ethiopian industries is longer lead times (procurement, conversion, distribution)
which results in unnecessary inventory costs, adds cost to products without adding value and
customer dissatisfaction due to stock-out that highly affects the consumer which results major
economical impact on the organizations. This scholar also described that Ethiopia is one of the
developing countries where more value is not given to increase customer service level and product
expectation, which result in loss of customers that have large economical impact on the
organization. So this problem can rectify using supply chain that can serve to increase customer
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service level. No matter how good the company is internally, the quality of its supply chain is vital
to providing value to its customers. Long-term success requires that all links in the supply chain
provide quality, consistency, efficiency and the likes. It is possible through lean-Kaizen approach
application in the supply chain.

2.8 Lean-Kaizen Supply Chain and Competitive Performance

2.8.1 Lean-Kaizen Approach

Lean is a systematic approach to the search for activities that add value through eliminating muda
in all aspects of organizational processes (Womack et al., 1990). DeBusk G. and DeBusk C.
(2011) define lean as an overarching philosophy or system focusing on delivering value to the
customer, improving flow of products/services, eliminating waste, and respecting people. Lean
organizations concentrate on improving flow of products and services through the entire system
rather than optimizing individual and departmental performance reports. Unfortunately, traditional
accounting and performance measurement systems- with their emphasis on departmental
efficiencies and absorption of overhead- work, at least in part, against lean goals.

Waste, especially in the form of inventory, is kept low by increasing flow (reducing cycle times)
and producing to meet customer demand. Lean has the ability to be a cultural change agent and, in
fact, is dependent on cultural change for success. Lean must be understood as Lean Enterprise, an
enterprise with customer-oriented organization which values customers, suppliers and employees.
Therefore, in the lean enterprise, the role of leaders and supervisors is to motivate, coach, train and
facilitate the work of those adding value rather than to tell them what to do. Lean production is
founded on the idea of Kaizen which is defined as continual improvement (EPA, 2003).

Lean production is characterized by optimizing resource use, and it involves the elimination of
waste in every aspect of an organization’s operation. Waste is anything that adds cost but not
value to a product and includes both material (scrap etc.) and human (down-time) elements. One
of the elements of lean production is Just in time (JIT) production. First developed by Toyota in
the 1950s this involves a form of production characterized by making the production of what is
required, exactly when it is required, an imperative. Buffer stocks and work in progress are kept to
a minimum.

Kaizen is a Japanese word that basically means “continuous improvement or the principles of
continuous improvement” (Lillrank and Kano, 1989). Continuous improvement is an ongoing
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program of improving quality, costs, and lead time of processes and products through the
cooperative efforts of all concerned. According to Oakland (1993), the search for continuous
improvement in the products and processes is another feature of lean production. As defined by
Sanchez and Perez (2001), continuous improvement is a process that requires involvement of
employees at different levels and support of management. Kaizen is considered as the building
block of all lean production method. In his book, Imai (1986) emphasized that the key to Japan
competitive success in the face of fierce global competition is the adoption of kaizen in the firms.
He focused on the kaizen management practices that can be put to work for improvement of
processes. According to him, kaizen is a vital approach to problem solving, however, its
application requires change in the corporate culture. People are kept enthused by continuously
being allowed to change their processes in Kaizen events (Vasilash, 2000).

Perfection is relentlessly pursued through kaizen, or continuous improvement efforts, throughout

the organization (DeBusk G. and DeBusk C., 2011). Continuous improvement is often referred to
as Kaizen, a concept explained by Imai (1986): "Organized KAIZEN activities involve everyone in
a company - managers and workers - in a totally integrated effort toward improving performance
at every level. This improved performance is directed towards satisfying such cross-functional
goals as quality, cost, scheduling, manpower development and new product development. It is
assumed that these activities ultimately lead to increased customer satisfaction. “(Imai,1986).

Continuous improvement of processes requires skills in the tools and techniques which allow the
self-management of processes and the application of problem-solving skills. Central to continuous
improvement is the concept of the PDCA cycle. The PDCA cycle is applied as a way of working
at every level of an organization to ensure continuous improvement as processes are continually
evaluated and refined. This can be seen in figure 2.12.

Figure 2.14 The PDCA Cycle

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Plans are made (P), implemented (D), results are checked (C), where necessary corrective action is
taken to bring the plan back on line (A), and the cycle begins again. Choosing a theme,
understanding the current situation, setting a goal, causality analysis and planning improvement
measures are stages of the process which fall within the Plan stage of the cycle. Tentative
implementation of the improvement measures fall within the Do stage. Evaluating results is the
Check stage, while formulating an improvement proposal is the Act stage of the cycle.

The Lean-Kaizen approach focuses on improving the quality of processes in organizations by

reducing their cycle time and operating costs, creating continuous flows, satisfying customers and
eliminating waste (or muda, to use the Japanese term) (Taylor and Brunt, 2001; Liker, 2004). It is
based on a combination of two kinds of approach to, or programmes for, improvement: Lean
production or Lean thinking; and Kaizen. The lean thinking techniques and tools used to
implement and/or apply lean system in order to eliminate and minimize muda/wastes are some
time referred to as “kaizen building blocks” (Imai, 1997; Bateman and David, 2002). In other
words, the journey toward lean can be initiated in implementing a kaizen effort using the building
block techniques and tools for instance 5S, muda elimination and standardization can be
considered as the basic pillars to apply lean thinking approach in an organization (Bateman and
Brander, 2000; Brunet and New, 2003).

There is a growing body of evidence that indicates lean-kaizen can be implemented in whatever
improvement programmes concerned with processes and operations that aim to eliminate and
minimize muda (waste), improve the work-flow of the processes and the involvement of the
citizen-client with processes (Furterer and Elshennawy, 2005; Radnor et al., 2006; Krings et al.,
2006). The techniques that have been reported as having practical and direct application to the
public sector are; value stream mapping, the 5S, process mapping, kaizen blitz or quick kaizen and
six sigma (Furterer and Elshennawy, 2005; Radnor et al., 2006; Radnor and Walley, 2008). This
study considers the importance of this lean-kaizen approach in supply chain.

Lean-Kaizen supply chain management involves implementation of lean-kaizen concepts,

principles, practices and techniques across the entire supply chain to make the chain more flexible
and responsive. Lean supply chain management started receiving attention in agri-food sector in
2005. The research work in the sector is concerned with the improvement of value chain activities
in the processing of agricultural food. The supply chain scope starts from production at farm,

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processing, packaging and distributions to the end customers (Ugochukwu, 2012). This type of
chain is also applicable to sugarcane supply chain presented in Figure 2.13.

In the supply chain perspective there is further complexity in that there can be many more actors
as most supply chains entail a farm-to-fork integrated approach. Such relationships are often
governed by contractual arrangements between actors in the chain. Contract manufacturing
agreements between processing companies and distributors and retailers ensure that processing
firms have sufficient throughput and retailers are guaranteed timely and competitive supplies.
Such an arrangement potentially increases greater market certainty and productivity and
consequently benefits all actors in the supply chain (Swinnen , 2006). However, all these activities
call for efficient co-ordination within the supply chain. Often, binding contractual agreements are
a centre-piece of initiatives to co-ordinate forward and backward integration between actors in the
supply chain.

Fig, 2.15: Sugarcane Supply Chain

Input- includes various chemicals, fertilizers, machineries, implements, vehicles, fuel & oil, spare
parts, labors, etc.

Cane Production- refers the production of sugarcane on farm.

Processing- show converting of sugarcane into different forms like juices, bagasse.

Output- includes sugar, ethanol, bioelectricity, molasses, alcohol, animal feeds.

Packing- Storing the output in Bags.

Wholesale Distribution- refers those big organizations receiving output and distributes to
different geographical locations.

Retail- refers those small organizations distribute outputs to final consumers.

Successful lean implementation is approached from a strategic perspective and companies seek to
reach certain goals with lean initiatives. As creating a lean workplace requires changing the
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corporate culture a robust change management strategy is needed (Parks, 2002). The adoption of a
supply chain approach would involve a considerable cultural change for organization to meet
competitive performance. Carefully selected Kaizen events should support the organization’s
strategy and vision. Strategic consideration of the lean-kaizen approach in an organization’s
supply chain helps in effective and efficient strategy execution and in achieving competitive
performances.

According to Rooyen J. et al, (2011) competitiveness is defined as the ability to sustain trade in
the local and global environment. Competitive performance is viewed as the ability to sustain
trade against the competition in the global market. Organizations pursuing sound quality
management practices are likely to achieve better supply chain performance due to the reduced
variances associated with the use of quality management practices. Further integrating quality
goals with supply chain management goals enhance the capability of the organization for
achieving other strategic goals (Flynn & Flynn, 2005). There is scope for extending the
organizational forms, processes, tools and techniques of internal total quality into the supply
chain. Total quality relationship will need to reach beyond the customer relationship into the
whole supply chain (Levy et al., 1995).

The performance of a firm is a function of how effective it is in converting a plan into action and
executing it. An approach is currently being needed which clearly links supply chain performance
and performance measurement with the chosen strategic direction of the firm. This can be
achieved through implementation of Joint BSC & HK and lean-kaizen supply chain approaches.

2.9 Models Used in this Study

There are different models used as a baseline in this research. These are reviewed as follows.

2.9.1 Denison Organizational Culture Survey model

The corporate culture is an integral part of each enterprise. Analysis of corporate culture may be
done using several different models. Analysis of corporate culture helps to diagnose the current
state of the level of corporate culture, its content and strength. Based on the results of diagnostics
is possible to define the strengths and weaknesses of corporate culture. These results are important
for influencing, changing and creating a desired culture in the future. Denison Organizational
Culture Survey (DOCS) incorporates an analysis of internal and external environment and
monitors the stability and flexibility of the company. The Denison model measures four essential

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traits of all organizations: Mission, Adaptability, Involvement and Consistency (figure 2.14). With
the Denison model corporate culture of the case company was analyzed with respect to selected
three sugar factories. Researched level of corporate culture is compared to an ideal view of
Denison’s corporate culture model.

The model recognizes that cultural traits, managerial behaviors, and even organizational strategies
can all be linked to a core set of beliefs and assumptions about the organization and its
environment. These core beliefs and assumptions lie at the heart of an organization’s culture. In
the Denison Organizational Culture Model, these core beliefs and assumptions are summarized in
terms of four main cultural “traits” that appear, through research, to have an impact on
organizational performance.

Fig 2.16 Denison Organizational Culture Model Circumplex (2000)

The Denison model of organizational culture highlights those four key traits that an organization
should master in order to be effective. Each of the four traits is represented by a color on the
circumplex model. This color coding helps to group the related constructs into the four traits and
also helps provide visual and intuitive feedback in the reports. DOCS questionnaire examines and
the model also defines for each of these four traits, three indices of managerial practice, and then

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measures these twelve resultant indices with a 60-item questionnaire which are elaborated in the
questionnaire to set of 4x15 questions (issues). Each question in this questionnaire is scored on a
scale from 1 to 5 (1 – the best grade, 5 – the worst grade). It is desirable to achieve in all areas of
the best grades. Achieved level in each quadrant is then expressed by percentile in chart.

This model divides the corporate culture into four quadrants that represent the characteristics
(traits) that affect efficiency of enterprise as follows:

- Mission – sets out a clear sense of existence and direction of the enterprise.
- Adaptability – an enterprise's ability to adapt to change, to the external environment.
- Involvement – is the rate of participation and initiative of all employees
- Consistency – indicates the extent to which the values, beliefs and standards of behavior are
acquired and shared among employees.

The traits and the indices are presented in terms of two underlying dimensions, flexibility vs.
stability on the horizontal axis and an external vs. internal focus on the vertical axis.

The profile splits horizontally to distinguish between an external focus (top half) and an internal
focus (bottom half). Involvement and Consistency address the internal dynamics of an
organization, but do not address the interaction of the organization with the external environment.
Adaptability and Mission, in contrast, take as their focus the relationship between the organization
and the external environment.

The profile splits vertically to distinguish between a flexible organization (left half) and a stable
organization (right half). Involvement and Adaptability emphasize an organization's capacity for
flexibility and change. Opposite that, Consistency and Mission emphasize the organization’s
capacity for stability and direction. A system oriented toward Adaptability and Involvement will
introduce more variety, more input, and more possible solutions to a given situation than a system
oriented toward a high level of Consistency and a strong sense of Mission. In contrast, a bias
towards Consistency and Mission is more likely to reduce the variety and place a higher emphasis
on control and stability.

Generally, organizations with strengths in two of the traits often share certain orientations and
outcomes as explained below.

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External Focus (Adaptability + Mission): An organization with a strong external focus is focused
on adapting and changing in response to the external environment. It has a constant eye on the
marketplace and a strong sense of where it is headed. A strong external focus typically impacts
revenue, sales growth, and market share.

Internal Focus (Involvement + Consistency): An organization with a strong internal focus is

focused on the dynamics of the internal integration of systems, structures, and processes. It values
its people and prides itself on the quality of its products or services. A strong internal focus has
been linked to higher levels of quality, fewer defects and less rework, good resource utilization,
and high employee satisfaction.

Flexibility (Adaptability + Involvement): A flexible organization has the capability to change in

response to the environment. Its focus is on the marketplace and its people. A flexible organization
is typically linked to higher levels of product and service innovation, creativity, and a fast
response to the changing needs of customers and employees.

Stability (Mission + Consistency): A stable organization has the capacity to remain focused and
predictable over time. A stable organization is typically linked to high return on assets,
investments and sales, as well as strong business operations.

Denison’s research has demonstrated that effective organizations have high culture scores in all
four traits. Thus, effective organizations are likely to have cultures that are adaptive, yet highly
consistent and predictable, and that foster high involvement, but do so within the context of a
shared sense of mission.

Normative Database and Percentiles

Denison generates results by comparing an organization to the results of 888 organizations (over
280,000 individual respondents) in the normative database. The percentile scores indicate how
well the organization ranks in comparison to the other organizations in the database (Denison,
2000). Organizations represented in the normative database come from a wide variety of countries
and industries. Throughout ongoing research the researchers have found that different industries,
from finance to pharmaceuticals, and even different countries have very similar results to the
global database. The model translates effectively to different national cultures and environments.

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2.9.2 A Model of the Elements of Strategic Management

Strategic management can be thought of as having three main elements within it (Johnson et, al.,
2008). As a corporate strategy model, it provides a breakdown of sub-elements that can be used to
describe what is happening and show how each sub-element and element contribute to the
strategic management of an organization. Strategic management includes understanding the
strategic position of an organization, making strategic choices for the future and managing
strategy in action (Johnson et, al., 2008).

Fig. 2.17 A model of the elements of strategic management

(Source: Johnson, Scholes and Whittington, 2008)

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The interconnected circles of Figure 2.15 are designed to emphasize the nonlinear nature of
strategy. Position, choices and action elements should be seen as closely related, and in practice
none has priority over another. Figure 2.15 shows these elements.

1) Strategic Position

Strategic position is concerned with identifying the impact on strategy of the external
environment, an organization’s strategic capability (resources and competences) and the
expectations and influence of stakeholders. The sorts of questions this raises are central to future
strategies and the sub-elements include:

The Environment

The organization exists in the context of a complex political, economic, social, technological,
environmental (i.e. green) and legal world. This environment changes and is more complex for
some organizations than for others. How this affects the organization could include an
understanding of historical and environmental effects, as well as expected or potential changes in
environmental variables. Many of those variables will give rise to opportunities and others will
exert threats on the organization – or both. A problem that has to be faced is that the range of
variables is likely to be so great that it may not be possible or realistic to identify and understand
each one. Therefore it is necessary to distil out of this complexity a view of the key environmental
impacts on the organization.

The Strategic Capability

The strategic capability of the organization – made up of resources and competences. One way of
thinking about the strategic capability of an organization is to consider its strengths and
weaknesses (for example, where it is at a competitive advantage or disadvantage). The aim is to
form a view of the internal influences – and constraints – on strategic choices for the future. It is
usually a combination of resources and high levels of competence in particular activities or core
competences that provide advantages which competitors find difficult to imitate.
Purpose of the Organization and Stakeholder Expectation
The major influences of stakeholder expectations on an organization’s purposes. Purpose is
encapsulated in an organization’s vision, mission and values. Here the issue of corporate
governance is important: who should the organization primarily serve and how should managers
be held responsible for this? This raises issues of corporate social responsibility and ethics.

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Culture
This sub-element examines how cultural and historical influences can also influence strategy.
Cultural influences can be organizational, sectoral or national. Historical influences can create
lock-in on particular strategic trajectories. The impact of these influences can be strategic drift, a
failure to create necessary change.

2) Strategic Choices
Strategic choices involve the options for strategy in terms of both the directions in which strategy
might move and the methods by which strategy might be pursued. The sub-elements are:
Business Level Strategy
There are strategic choices in terms of how the organization seeks to compete at the business level.
Typically these involve pricing and differentiation strategies, and decisions about how to compete
or collaborate with competitors.
Corporate Level Strategy
At the highest level in an organization there are issues of corporate-level strategy, which are
concerned with the scope, or breadth, of an organization. These include diversification decisions
about the portfolio of products and the spread of markets. Corporate-level strategy is also
concerned with the relationship between the separate parts of the business and how the corporate
‘parent’ adds value to these various parts.
International Strategy
International strategy is a form of diversification, into new geographical markets and how to
prioritize and enter these markets, by export, licensing, direct investment or acquisition. It is often
at least as challenging as diversification.
Innovation
Most organizations have to innovate constantly simply to survive as being first-mover into a
market, or simply a follower, and how much to listen to customers in developing new products or
services and, building key external relationships, and timing of exit.
Evaluation and Methods
Organizations have to make choices about the methods by which they pursue their strategies.
Many organizations prefer to grow ‘organically’, in other words by building new businesses with
their own resources. Other organizations might develop by mergers/acquisitions and/or strategic
alliances with other organizations. Organizations must understand the success criteria according to
which different strategic choices can be evaluated.

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3) Strategy Into Action

Strategy in action is concerned with ensuring that strategies are working in practice. This sub-
element includes the following:

Processes of Strategy Development

It is important to consider the strategy development processes of an organization. The strategies
that an organization actually pursues are typically a mixture of the intended and the emergent.
Intended strategies are the product of formal strategic planning and decision making, but the
strategy that is actually pursued is typically somewhat emergent, including bottom-up initiatives,
rapid responses to unanticipated opportunities and threats, and sheer chance.

Organizing
Organizing or structuring an organization to support successful performance. This includes
organizational structures, processes and relationships (and the interaction between these elements).

Resourcing
Resourcing strategies in the separate resource areas (people, information, finance and technology)
of an organization in order to support overall strategies. The reverse is also important to success
that is the extent to which new strategies are built on the particular resource and competence
strengths of an organization.

Managing Change
Managing strategy very often involves strategic change. This will include the need to understand
how the context of an organization should influence the approach to change and the different types
of roles for people in managing change. It also looks at the styles that can be adopted for
managing change and the levers by which change can be effected.

Practice of Strategy
This considers the actual practice of strategy. This gets involved inside the overall processes of
strategy development and change to look at the detailed activities involved- the people included in
strategy, the activities they have to do and the kinds of methodologies they use to do it.
This study explores how organization/managers can analyze and challenge these sub-elements on
the organization as a whole and also on strategy. Specifically the research focus on the case
company understudy and take some sub-elements altogether.

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2.9.3 SWOT Analysis

A SWOT analysis is the most widely used analysis in the world. It consists of four parts: strengths,
weaknesses, opportunities and threats. The first two (strengths and weaknesses) are a part of the
internal environment of an organization and the last two (opportunities and threats) are part of the
external environment of an organization. This is because managers and other leaders of an
organization can affect the strengths and weaknesses, whereas the opportunities and threats it may
face, such as governmental changes, wars, competition etc. A SWOT analysis can help identify and
understand key issues affecting business, but does not necessarily offer solution.

Strengths within an organization are its abilities that make it strong in the industry and help it
achieve set goals. These abilities could be a product, a service, a brand or anything that helps it
gain advantage over competitors. An absence of certain strengths can be viewed as a weakness.
Weaknesses can be of many kinds: poor building constructions, poor staff choice, managers that
cause problems, poor vision made by some managers. It can be anything that keeps the
organization from building strong front towards competitors. Strategies do not usually depend on
weak points of an organization. Opportunities are what the organization identifies as means of
achieving goals or helping achieve goals. Finally threats are factors that can cause a delay in
achieving goals and objectives. Mostly, everyone sees that threats come from competitors, but
they can also come from the government or the society.

2.9.4 Model for Strategic Supply Chain Management

According to Hugo et al. (2004), instead of individual organizations continuing to compete on

their own, nowadays supply chains compete against one another. The mutual strengths of all
organizations involved in the supply chain are applied to focusing on creating value for customers
in such a way that the supply chain as a whole outperforms other supply chains. Hugo et al. (2004)
provide a model for strategic supply chain, which is illustrated in Table 2.1.

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 Political, Legal and Economic Factors

Cmpetitive Forces Competencies Cost and Financial Resources

Plan
Corporate Strategy
Vision, Mission & Milestones

Social and Cultural Factors

Distribution Factors
Technological Factors

Business Unit Strategy

Supply Factors
Growth, ROI, Profitability, Cash

Delivery

Sources
Functional Strategies
Croos-Functional Processes

Supply-Chain Strategy
Material Flow, Costs, Relationships, Services, HRM

Make

Product Technology & Innovation Teamwork

Regional and Global Fators Green Factors

Table 2.1 Strategic Supply Chain Model (Source: Hugo et al., 2004)

The outer perimeter of the supply chain management model illustrates the external environment
pressures that impact on the organization and its strategic processes. The internal and supply chain
environment forms the next level of pressure. The impact of such pressure must be considered
when the organization designs its business model around the four strategic processes of plan,
source, make and deliver that have been popularized in the supply chain operations reference
(SCOR) model during its development by the Supply Chain Council (Hugo et al., 2006). The four
processes continuously add value when integrated with the processes of other firms that also form
part of the supply chain.

The External Environment

The external environment of an organization is influenced by political, legal, economic, social,

cultural, technological, regional, global, and green factors. The organization has no control over
the changes in these factors.

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The Internal and Supply Chain Environment

The internal and supply chain environment of an organization includes: product technology &
innovation, teamwork, supply factors, distribution factors, competitive forces, competencies,
costs, and financial resources.

The Four Strategic Processes

The business processes of every organization should design around the processes of planning,
sourcing, making/manufacturing, and delivery. The source, make, and delivery processes can be
considered at corporate, business and functional levels and should be integrated internally and
across supply chain partners, while planning must be done for the supply chain as a whole.

The Strategy Development Process

The strategy development process will be explored in terms of corporate strategy, business level
strategy, functional strategies and supply chain strategy. The square in the center of the model
shows the sequence of the strategic development process. The strategic management process starts
with the creating of the corporate strategy, which, in turn, provides the platform for all related
business strategies. Business processes are managed by means of cross-functional teams, each
with its own focus area and strategy. The supply chain strategy is formed when the activities of
each functional are integrated with those of suppliers and customers.

Corporate Strategy
Corporate strategy of an organization defines its core business and consists of the organization’s
vision, mission, and objectives/milestones. All actions must be evaluated in terms of its vision.
Business Level Strategy

The business level refers to the divisions in the corporation and factories, each of which must have
its own strategies and aligned with the corporate vision, mission, and objectives/milestones.
Functional Level Strategy
Functional strategy is seen interms of cross-functional processes and cross-organizational
integration.
Supply Chain Strategy
Supply chain strategy of an organization is seen in terms of material flow, the quality of
products/services, the costs of production/services, the relationships with suppliers and customers,
services offered, and human resource management involved.
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2.9.4 The integrated model of BSC & HK
The integrated model of BSC & HK of Asan & Tanya (2007) has been used with minor
modification so as to identify the gap of BSC in ESC and fill it with joint application of Hoshing
Kanri this helps strategy management culture to be instilled in the supply chain (fig 2.16).

Fig,2.18 Integrated Model for BSC & HK (Asan & Tanyas,2007- Modified)

2.10. Conceptual Framework

The conceptual model (figure 2.17) identifies the link between impacts of instilling strategy
management culture on the lean-kaizen supply chain which eventually may influence on corporate
competitive performance. Implementing BSC & HK jointly is expected to instill a culture of
strategy management which is proposed to moderate the relationship between lean-kaizen supply
chain and competitive performance.

Figure 2.19: Conceptual Framework

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2.10.1. Strategy Management Culture and Lean-Kaizen Supply Chain

The performance of any business organization in the competitive economy is highly dependent
upon the quality of its management with regard to proper implementation of strategic
management. Strategic management is an important and indispensable approach for the business
organization performance, and for any organization that wants to gain competitive advantages. An
organization strategic management has its ultimate objective in the development of its corporate
values, managerial capabilities, organizational responsibilities and operational decision making at
all hierarchical levels and across all business and functional lines of authority. As well as the
formulation of a strategy seems critical, its execution should be considered vital. Only
organizations which implement almost all their strategy achieve good records on profitability.

Organizational culture is the glue that holds the organization together, culture dictates the way in
which the members of an organization deal with each other and how they adapt to a changing
external environment. It is important to note the organizational culture, to build key relationships
with important business executives within the company, to make sure there is complete alignment
of the company’s supply chain needs with procurement teams who are supporting those
acquisitions (Leong and Teh, 2012).

Without having a culture of managing strategy, adaption of the new strategy will only be by
chance. You can have a good strategy in place, but if you don’t have the culture and enabling
systems that allow you to successfully implement that strategy, the culture of the organization will
defeat the strategy (HBR, 2008). To create that culture, set targets for the business and be explicit
about how these targets cascade down to individual managers. Then hold managers accountable
for delivering. Moreover, weekly and monthly reviews should focus on performance against
targets and pay close attention to problem areas. In communicating these expectations, company
leaders should focus on attaining milestones and how each team and unit can contribute to
achieving results (HBR, 2008). This culture can be established using combined BSC and HK tools
of strategic management.

Both balanced scorecard and hoshin kanri are powerful tools for strategic management of
organizations. They focus on the vision and put an emphasis on communication and continuous
organizational learning. Implementing them jointly facilitates the strategic management process in
that it provides a systematic conceptual framework and structures the implementation process.
Combined model based on BSC and HK works as guideline for establishing organizational values,

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vision, & strategies. This model enables managers and employees to execute strategies via
forming an integrative culture in organization. It also provides a structured tool for managers to
develop vision & goals and modify or rearrange them. On the other hand, HK continually evaluate
the organization performance and reflect effectiveness of work performed. Combining a
performance oriented approach-BSC with a process oriented approach-HK certainly creates
synergy (Arbab S. B., & Muosakhani, H. R., 2012).

Change must begin internally & must start at the top, and then involve significant and relevant
partners. Strategy can help in defining an organization to both insiders and outsiders. One needs to
understand that a clearly defined strategy that will lead to enthusiasm among various stakeholders,
suppliers, creditors, customers, promoter and employees as a result promote commitment that will
enhance better performance of business organization. Strategic management changes how
manager looks at competitors, customers, markets and even the organization itself. Its objective is
to stimulate management’s awareness of the strategic implication of environmental events and
internal decision.

Strategy management culture helps to consider the entire supply chain as part of the organization’s
strategy thereby enhances competitiveness performances. Because of the interdependence of
organizations, actions of any one intermediary can influence the operations of other linked
organizations and consequently it is important for all organizations in the supply chain to share a
common vision (Brito, 2001; Reason, 1999). To make this real a culture which considers the
supply chain as a strategic asset is needed to be ingrained in the chain. This culture can also help
supply chain members understand the needs of the end customer better and hence can respond to
market change quicker and to focus on cooperative relationships between members of the supply
chain and the strategic importance of supply chain management to the achievement of competitive
advantage. Competitiveness can be achieved in many ways including by reducing costs, enhancing
operations flexibility or by providing excellent quality of products and services.

To remain competitive, improved management actions such as cost cutting and productivity
improvements along the supply chain should continue and intensified using management systems
like lean-kaizen. On top of this, adoption of supply chain approach would involve a considerable
cultural change. In their article Sherman et, al. (2007), cited that an organization‘s culture
identifies how things get done in the organization. According to them culture drives expected
behaviors internal to the organization as well and those engaged when interacting with its
surrounding environment.
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It is important to notice lean manufacturing techniques and concepts represent one way operations
in manufacturing are changing their operations culture toward efficiency and continuous
improvement which is required by strategic management. Continuous improvement/kaizen is
valued more when the prevailing attitude and values change. Kaizen activity is one of key
elements towards successful lean manufacturing. A Kaizen lean production culture attempts to
constantly improve the supply chain operations and production process (Ketsarapong S., et al,
2012). Several lean manufacturing benefits to the supply chain operation include the waste
reduction foci and raising the response speed to customers. This also implies that when customer
satisfaction is improved, sales demand can rise as well. A business cannot also carry a high
operating cost.

As lean-kaizen is a fully integrated management philosophy, it is recommended that the idea of

continuous improvement is also transferred into those organizational functions which support
manufacturing and operations. It is relevant that all departments understand their roll in the lean-
kaizen transformation process. The best way to do that is by creating internal customer and
supplier relationships as well as external customer and supplier relationships (Ahrens T., 2006).
To that effect an organization better ensures to have a culture of strategy management which
enables strategically considering the entire supply chain.

Considering literatures, this study focus on instilling a strategy management culture, which allows
the strategy to be executed, as it requires changing how people think about the company and
altering habitual behaviors as though it could be a tough challenge. This cultural belief is instilled
into employees over a period of time until it becomes a semiconscious norm. Applying BSC &
HK jointly facilitates the strategic management process in that it provides a systematic conceptual
framework and structures the implementation process to foster that culture.

Organizations with strategy management culture are better able to execute on strategy; their
employees maintain a health external focus on customers and competitors rather than on internal
politics as well as they take personal responsibility for overall business performance, not just their
slice of it. This will help managers and decision-makers build up a productive environment for the
personnel consequently promote outputs in strategy implementation with higher degrees of
productivity.

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2.10.2. Lean-Kaizen Supply Chain and Competitive Performance

Today organizations are using different tools and techniques to improve and sustain in the market.
The kaizen and lean tools help organization to identify value-added, wastes and non value-added
but required activities. The continuous improvement allows the organizations to improve their
productivity at a shop floor and align their decision at strategic level and focuses on the
manufacturing performance which tends to optimize the process and market related aspects.

A well-integrated supply chain can generate economies of scale and scope and therefore increase
the operating efficiency and profitability of all actors in the supply chain (World Bank, 2005).
Thus, it is necessary to reduce and eliminate waste or non-value adding activities in the total
supply chain flow (Mohammed et al., 2008). This can be achieved by applying lean-kaizen
approach in the supply chain.

The supply chain is becoming an essential part of the firms’ strategy to increase long term
competitiveness (Mefford 2009). Hence, firms should fully complement their supply chain into
their strategies to obtain better competitive performance. Competitive activity incorporates
market-based moves that question the status quo of the market or customer-based service through
strategic initiative or innovation in services/products (Chen, 1996; Roberts & Grover, 2012). The
outcome of competitive activity is measured as competitive performance, which reflects a firm’s
ability to achieve its objectives and competitiveness, including increasing market sharing and
profitability, and innovation in service development and marketing actions (Rai & Tang, 2010).
For this paper, special attention will be accorded to competitive performance from the financial
and non-financial perspectives. Hence, competitive performance in the Ethiopian Sugar industry
can be defined as “The ability to achieve its objectives & competitiveness and expand the trade of
sugar produced in Ethiopia relative to its competitors, in order to attract investment and other
scarce resources to achieve sustainable returns”.

This study will provide an insight to the decision maker in respect of making an association with
regard to firms’ competitive performances which are influenced by lean-kaizen supply chain
which in turn is moderated by strategy management culture that can be instilled through BSC and
HK integration.

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 CHAPTER III
Materials and Methods

This study aims to instill SMC in the sugar supply chain through BSC and HK integration. The
researcher draws on the literature to develop a theoretical model. The model includes one
independent variable, one dependent variable and one moderator. Besides, the study illustrated the
moderating effect of SMC on the linkage between supply chain and competitive performance. The
following methods employed for the study.

3.1 The Models Used in the Study

Denison (2000) Organizational Culture Survey model which uses 60 items on a five point
Likert scale with anchors strongly disagree (=1) to strongly agree (=5) was used for a baseline
assessment of current cultural strengths as well as weaknesses that are holding the case company
back from achieving its strategic goals and to identify the type of culture need to be created.

Johnson, Scholes and Whittington’s (2008) model of the elements of strategic management has
been used as the core focus in this research for analyzing the strategic components in the three
sugar factories. As a corporate model, it provides a breakdown of sub-elements that can be used to
describe what is happening and show how each sub-element and element contribute to the
strategic management of an organization. Parts of the strategic planning model developed by the
Ethiopian Sugar Corporation have been based around corporate concepts of strategic management.
The Johnson et al. (2008) model provides a consistent means of comparison between the ESC
documents and the research findings. A model of the elements of strategic management (Johnson
et al., 2008) was utilized which provides a more recent model that identifies the complex
interaction of key elements needed in strategic management and also SWOT analysis used.

The integrated model of BSC & HK of Asan & Tanyas (2007) was applied so as to create and
instill SMC with some modification by using open ended questions and interviews.

Hugo et.al. (2006) a model for strategic supply chain management was used to assess the supply
chain practices of the case company using open ended questions and interviews.

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 3.2. Research Design
The study consisted of empirical research design to determine the relationship between the
variables of interest. Survey design was used. This is the most appropriate method towards
effectively addressing the research objectives. Data was collected across teams of sugar factories
under study. Interviews were conducted across the targeted teams in the factories and focused
group discussions were held. Moreover, observation performed via field trips to the factories sites.
The chosen research strategy that was used is case study, which allowed the researcher to compare
the theories with a practical situation, and implementation issues can be well explored through
case study research (Ellram, 1996).

3.3. Sampling and Data Collection

Both primary and secondary data were sourced and utilized for purposes of addressing the
research objectives. Secondary data was gathered from annual reports and other documents. The
research work was conducted mainly based on primary data. Primary data collected on strategic
management process, supply chain practices, lean-kaizen application and also on some
competitive performance indicators using a five point Likert scale. The data collection instrument
used for this research was well structured questionnaire that distributed to 240 employees who
included a mix of managers, directors, section heads, team leaders and supervisors of three
manufacturing firms within the sugar sector. Personal interview with 3 general managers and 18
deputy managers of manufacturing firms within the studied sector was conducted. The purposive
sampling technique used in selecting the samples for this study. Information also gathered through
site observations and used for the study analysis.

3.4. Reliability and Validity Tests

Reliability and validity are very important criteria when doing a research. To check on the internal
consistency of data measurement instrument, reliability test of each scale will be carried out using
Cronbach’s alpha. Alpha values over 0.7 indicate that all scales can be considered reliable
(Nunally, 1978). According to Sekaran (2002) values between 0.50 and 0.80 are acceptable while
values below 0.50 are considered less reliable and therefore unacceptable. To reduce the total
number of items to manageable factor, Factor analysis for each of the item scales will be used.
Principal components analysis will also be used to extract factors with Eigen value greater than 1.
To validate use of factor analysis, sampling adequacy measurement tests will be carried out using
the Kaiser-Meyer-Olkin (KMO) statistics.

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3.5 Data Analysis

Descriptive statistics was used for data analysis with the Statistical Package for the Social
Sciences (SPSS) version 20 being used to aid the analysis. The use of descriptive statistics in data
analysis was due to its appropriateness in finding out the basic features of the study data and hence
aid in realization of the research objectives. Regression analysis was done for the competitive
performance (dependent variables) against the lean-kaizen supply chain (independent variables).
In addition, a regression model was used to evaluate the overall relationship between lean-kaizen
supply chain and competitive performance and the moderating effect of strategy management
culture on this relationship. A five point Likert type scale was used to capture the data on the
variables. The Likert type scale is an acceptable technique for purposes of carrying out parametric
statistical analysis.

Regression Model

The specified model for this study showed that the performance of the factories under
consideration is a function of major variables. The model is developed after reviewing of various
literatures and the researchers experience in the industry. Accordingly, the model specified is the
following:

CP=  0 + 1LKSC + 2SMC + 3 (SMC *LKSC) + 

Where, CP= Competitive Performance, LKSC= Lean-Kaizen Supply Chain, SMC= Strategy
management culture, 0,  1 and 2 are regression constants, 3 is constant for the interaction terms
of LKSC & SMC, = Error term.

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 Chapter IV
Results and Discussion
This chapter deals with presentations, discussion and interpretation of the data collected through
questionnaire and interview. The discussion particularly focused on response rate, Denison’s
organizational culture survey, model of the elements of strategic management, SWOT analysis,
model of strategic supply chain, integrated model of BSC and HK, relationships among the
variable in the conceptual framework, correlation and regression analysis and summary of
findings. This chapter also presents the results of data analysis which are presented in tables,
figures and graphs, and discussion on the findings of the study. In this case study, the results are
discussed in general terms to safeguard the secrets of the factories considered in the research.

4.1. The Response Rate

A total of 240 questionnaires were sent to the three sugar factories. A total of 228 replies (factory
1 accounts, 33%, factory 2, 34% and factory 3, 32%) were received, representing a 95% response
rate which was an excellent rate, 70% of the respondents had over 5 years of working experience
(fig. 4.0) in the sugar industry thus ensuring accuracy and authenticity of the information provided
for the study. Interviews were carried out with 3 factory general manages and 18 deputy general
managers. Thus, based on the responses obtained from the respondents data presentation and
analysis were made as follows.

Fig. 4.0 Number of years respondents have worked in their factories

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4.2. Denison Organizational Culture Survey for Individual Factories

The following section displays the results of the analysis of corporate culture in the individual
factories. The below graphs depict what level achieved by individual undertakings given to the
"Denison ideal model" in four major traits of corporate culture.

Mission

The mission consists of three parts: vision, objectives and strategic direction. All factories have
achieved in this quadrant the somewhat remarkable score in the strategy part. There is
interdependence between strategy and corporate culture. The strategy is a determinant of corporate
culture and corporate culture affects the process of creating and implementing the factory’s
strategy. The analysis shows that strategy of the factory is a bit clear for employees and they are
fairly informed about this strategy (Fig. 4.1). Mission is the second strongest trait in the corporate
culture of surveyed factories.

Adaptability
The analysis revealed the ability of the factories to adapt to changes in internal and external
environment needs appropriate attention. The factories are forced to react to changes that are
happening in the external environment (the needs and requirements of customers, competition,
suppliers). It brings them changes also in the internal environment (introduction of new

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technologies, work organization) fig.4.2. Adaptability is the third trait in the corporate culture of
surveyed factories. A company can enhance its performance by fitting its supply chain governance
strategies to the culturally founded relational norm expectation across partners (Fred, 2010).

Consistency
The weakest characteristic of corporate culture is consistency. The principles, values and standards
of conduct are not equally sensed in all levels of the enterprise organizational structure. This part
of corporate culture is a source of integration, coordination and control. The employees in various
teams do not have a common position in relation to factory objectives and the goals at different
levels do not perceive in the mutual consistent. There is silo thinking in most of the divisions in
the factories Fig.4.3.

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Involvement

Involvement is clearly designed orientation to teamwork, expertise, skills and transfer of

competencies to the workers. In the factories strong teamwork exists because they do have kaizen
development team. Therefore, each team member has expertise and skills that are necessary for his
employment except the newly hired employees. Fig.4.4. Involvement is the strongest trait of
corporate culture in the surveyed factories.

The various results observed by the three factories differ partly because it is influenced by factory
size, and corporate culture has social character, which is directly related to human beings. The
more employees an enterprise has, the more difficult to implement the entire contents of the
corporate culture at all levels of the factory organizational structure. The highest and lowest items
are identified as follows.
Highest Scores
62 People work like they are part of a team
58 Everyone believes that he or she can have a positive impact
57 Our vision creates excitement and motivation for our employees
54 There is a long term purpose and direction
52 Leaders have a long term viewpoint

Lowest Scores
18 There is widespread agreement about goals
20 There is a "strong" culture
23 There is good alignment of goals across levels
25 The leaders and managers "practice what they preach"
29 Customer input directly influences our decisions
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To conclude, the corporate culture of the surveyed factories is in a dynamic equilibrium. The
strongest trait of the enterprises is Involvement and the weakest quadrant is Consistency, where
the analysis achieved in all factories the lowest score. Analysis of corporate culture has shown that
factories are flexible. The analysis revealed the ability of factories to work in a team spirit and
most employees are highly involved in their work. Employees are part of the factory. Values,
standards of behavior, objectives and other elements of corporate culture should be accepted and
respected at all levels of the organizational structure, but they are not equally felt in all levels of
the enterprise organizational structure.

4.3. Model of the Elements of Strategic Management

The strategic management practices of this case study have been based around the Johnson,
Scholes and Whittington (2008) model with utilizing some of the sub-elements altogether. They
believe three main elements identify the framework for successful strategic management. Their
focus has been primarily on the practices in the corporate sector. There is no available information
whether this model has been used in an earlier research into strategic planning in sugar sector. The
three main elements (the strategic position, strategic choices and strategy into action) that Johnson
et al. (2008) have identified are inter-linked and inform each other constantly on a day-to-day
basis and are essential to long-term direction of the organization. Each main element has some
sub-elements that feed into the main element as described in the previous section.

4.3.1. Documentary of the Factories

All the three factories develop a BSC document as part of their five years strategic plan. They
followed the layout, checklists and the forms as described in the Ethiopian Sugar Corporation
(ESC) BSC guiding document adhering to the direction given from the BSC training workshops.
The goals and objectives are almost the same for the factories except the details of the activities
and their measures that have some differences. As per the ESC direction all of the strategic plans
of the factories covered a five years plan. The annual plan for each factory is based around the
goals as specified by the strategic plan.

All the factories have incorporated the strategic and annual plans in the same document, it shows a
clear link between them and but it is difficult to separately understand them. In this document on
average 19 objectives and 76 measures, taken out of the 21 strategic objectives with 86 measures
of the ESC BSC guideline, are identified over a five year time frame with each of the goals broken
down to form more detailed objectives. Targets are set for each year. However, there is no
85
indicated initiative to execute these goals and the budget allocated for it. Information regarding to
the strategic position particularly about the background information of the organizational culture
are not provided in their documents. All of the factories have had their BSC charter signed off and
approved filling the ESC requirements.

The questionnaires and the interview schedules were based around the work of Johnson et al.
(2008) as the model provided a clear way to identify the complex, often ambiguous nature of
strategic management within organizations as follows. Table 4.1 showed the responses.

From the descriptive analysis in Table 4.1 at least 77 % of all the respondents did not agreed that
The ESC way of managing strategies had positive outcomes in the two elements: strategic position
and strategy into action, but more than 90% it was good in strategic choices that was used in the
study. The greatest impact on strategic management was on overall strategic choices with a mean
of 4.46. This shows the strategic management of the case company could greatly improve by
having sound strategic choices.
Table 4.1 Descriptive Analysis for Elements of Strategic Management

Strongly Strongly
Elements of Strategic Disagree-2 Neutral-3 Agree-4 Mean
Disagree-1 Agree-5
Management
% % % % %
Strategic Position 12.7 64.3 3.2 13.5 6.3 2.23
Strategic Choices 8.6 72.4 19 4.46
Strategy into Action 6.4 71.1 3.2 10.2 9.1 2.58

4.3.2. Strategic Position

The strategic position element contains four sub-elements, strategic capability, the environment
culture, and expectations & purposes.

Strategic Capability

The sub-element of strategic capability determines whether a firm has the physical, financial,
human and intellectual resources/capability to undertake a specific strategic objective. This sub-
element covers a number of leadership and management areas that are needed within the strategic
management process. Resources are major factors to adequately fulfill the requirements of
strategic planning in the corporate sector. Human resources that are capable and think strategically
would make use of effective ways in the strategic planning process. Self-review determines the

86
sub-element strategic capability. The respondents replied that they are using a checklist to report
the actual performance against the planned goal as part of the review. Self-review is an important
aspect of establishing strategic position and informing strategic planning (Hipkins et al., 2007).

The physical facilities like workers’ residences, offices and equipments are relatively fulfilled in
the existing factories and also the system of using fuel & oils are well established. But there is
high shortage of transportation services and IT.

The ESC effort to acquire financial resources required to carry out various activities and investing
them according to the prioritized projects are remarkable. However, there is shortage of finance,
there is weak financial management system and database management also not supported by IT.

Understanding of the concepts of the terms strategy, strategic plan, operational plan and tactical
plan is essential for effective strategic management. The response of the respondents from
management team and professionals for the questionnaire regarding these terms showed that they
were able to use various range of terminology and had access to develop their ability thereby
improve their strategic thinking. However, the capability of the front line workers needs to be
improved so as to increase the numbers of strategic thinkers in the factories. When corporations,
particularly factories begin developing their strategic plans there is a continual compromise
between resources and strategic goals (Wheelen & Hunger, 2008). They need to be preparing
themselves in knowing their resources ahead.

The Environment

Environmental scanning is a corporate term used to identify the future environment in which
organizations will be operating. The environment sub-element proved difficult for respondents to
describe accurately. The simplest way to conduct environmental scanning is through SWOT
Analysis (Strengths, Weaknesses, Opportunities and Threats) which has been done by the case
company and explained in the coming section.

Culture

The existing sugar factories develop a certain culture over a number of years. They have
implemented kaizen management system thereby begins fostering continuous improvement
culture and embraces creativity. Corporate culture that help translating a vision into action and
achieving high performances and managing strategy has given scant attention.
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Expectation and Purposes

The third-sub element that influences a firm’s strategic position is expectation and purposes. In a
firm’s strategic plan, accountability and the influence of the stakeholders need due attention.
Stakeholders are “those individuals or groups who depend on an organization to fulfill their own
goals and on whom, in turn, the organization depends” (Johnson et al., 2008). The main
stakeholders of the factories include BOD/the government (which is entrusted to provide the
governance over the Corporation) determines the resourcing level, strategic goals to be achieved
and the regulations to which the factories must adhere to produce, Ethiopian Electric Power
Corporation which provides electricity & also buys bioelectricity from factories and others. There
is a general lack of stakeholders’ involvement in developing formulation and strategic direction of
the plan.

4.3.3. Strategic Choices

In this element Johnson et al. (2008) use five sub-elements to describe this process. These
business-level strategies made up of business units (managers in factor settings), corporate-level
strategies (senior corporate leadership), international strategy, innovation- the development,
directions and methods and evaluation are necessary to make those decisions.

Business Level Strategies

Business level strategies represent what happens within various divisions and teams in the
factories. Each divisions and teams are unique and as such has unique needs to meet in addition to
the factories strategic goals. Variations in terms of staff numbers and the operations they carry out
requires different resources be it physical, financial and others. Each divisions and teams therefore
is unique in determining what strategic resources they need and how to make those strategic
choices.

Corporate Level Strategies

Corporate level strategies involve looking at the wider aspects of the factories. This also includes
how improvements can be made at the business level (divisions and teams). There is no question
that the Corporate leadership is responsible to lead and coordinate the entire strategic management
process. However, there is a minimal support from the senior management teams (Deputy Director

88
Generals and Managers), that assist in many of the management and leadership tasks that are
associated with setting direction and strategic planning.

After the direction has been set, the method (or means) is developed which any strategic direction
will be pursued (Johnson et al., 2008). Essentially, the “how” when making strategic choices. In
the corporate sector, one tool that is often associated with strategic planning is the SWOT analysis
(Wheelen & Hunger, 2008). This analysis is used to identify a preferred strategic choice from a
range of ideas.

The findings suggest that the respondents have almost followed this strategic intent process. As a
result, there appears to be a wider sense of strategic purpose and a shared understanding of the
factories’ goals.

International strategy, Innovation and Methods

It is challenging to enter into different geographical markets by exporting as the case company
envisaged to neighboring countries. Hence, it needs proper diversification of products as well as
reducing production costs. To that effect innovation should be given great priority and alternative
methods should be in place to pursue with its strategies.

4.3.4. Strategy into Action

Strategy into action combines five sub-elements that contribute to the implementation of the
strategic goals. Those sub-elements are organizing, resourcing, practicing, processes and
managing change. The implementation of strategic goals is a critical phase in this process.
Regardless of how fantastic the goal, the preparatory work or resourcing, if it is not actually
implemented then no change will occur.

Organizing

One aspect of implementation is that of organizing the structure, processes and relationships that
ensure the successful implementation of strategic goals. The use of an annual plan is part of the
structure and processes factories use to implement the strategic plan. The annual plan provides the
detail that the strategic plan does not. All of the managers responded that the annual plan
facilitated the day-to-day running of the factories. Specific strategic goal had objectives and/or
targets, timelines and people responsible for overseeing the implementation. Factory wide goals
were not discussed because there is no cross functional teams established to do so.
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Processes, Resources and Practicing

Enabling people to implement the strategic goals is another important aspect and one the
Principal’s especially pay particular attention to. The most common way to achieve this is through
professional development (targeted to specific goals) and providing leadership opportunities to be
more involved in the strategic process.

The top management of the factories indicated that the middle-level managers and front line
workers were the most important people in implementing the strategic goals as they were the ones
who interacted directly with the shop floors. To do this middle-level & front line workers must be
a part of the decision making process, feel they are well supported in terms of resources and part
of the shared vision of the factory. Part of this is the use of professional development as a way of
implementing the strategic goals. All of the respondents indicated professional development as
one of the ways that strategic goals are implemented.

Managing Change

The last sub-element that enables the implementation of the strategic goals is managing change.
Change is a fundamental result of strategic planning because it reflects that there has been
movement from one practice to another after a given time frame (Johnson et al., 2008).
Organizational change is made up of two factors that affect the type of change that occurs
(Johnson et al., 2008).

All of the top level managers in the factories explained that change needed to be managed well. By
this they have said that people will get emotional about change and understand that change can be
a difficult process. A reason for this may be because historically there was a period where a lot of
change happened without adequate resourcing or consultation, just something everyone had to do.

4.4. SWOT Analysis

A SWOT analysis is the most widely used analysis in the world. It consists of four parts: strengths,
weaknesses, opportunities and threats. The first two (strengths and weaknesses) are a part of the
internal environment of an organization and the last two (opportunities and threats) are part of the
external environment of an organization. The focus of a SWOT analysis should be on factors that
have a great impact on the organization’s previous performance, factors influencing the future
performance and factors that differentiate the organization from its competitors. A SWOT analysis

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based on the report made by ESC and after that the researcher did a general SWOT analysis for the
results gathered.

In the corporate sector, one tool that is often associated with strategic planning is the SWOT
(Strength, Weaknesses, Opportunities and Threats) analysis (Wheelen & Hunger, 2008). This
analysis is used to identify a preferred strategic choice from a range of ideas. ESC specifically
used a SWOT analysis during BSC building as shown in the table 4.2.

Table 4.2 SWOT Analysis for ESC

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 Helpful Harmful
Analysis Points Strength Weakness
Ready for change Limited human resource development
Adequate skill Gap on positive attitude
Human Resources
On-job training Lack of efforts on turnover reduction
Good labor-management relationship Training without gap assessment
Relative good industrial peace No fully condicve work environment
Quality and attractive workplace Shortage on participation and transparency
Work Environment Fair benefits ans salary Limited Infrstructures
Safety issues
Limited open communication
Partnership with higher education institute Unclear Job description for employees
Monitoring & Evauation system avaiable Lack of ICT
Kaizen management is implemented Poor product development experience
Internal Environment

Methods
Twining arrangment among factories & projects No Training impact assessment
Inadequate Manuals & Policies
Poorly related reward & performance
Beginning inventory management No database for properties
Centrally managed to facilitate fair distribution No consistent coding
Proprety Administration
No property disposal system
Lack of proper utilization of resources
Centralized procurement High lead time
Input Supply
Input from domestic products Unplanned & disintegrated supply
Ready for change Limitation to work in integration
Commited to to achieve mission Limitation of implementing capacity
Management Lack of strategic management skill
Gap being participative
Lack of succession plan
Geat effort to obtain fiance Weak financial management system
Fanacial Assets
Priritizing of financial assets Poor financial database
Physical Facility Relatively good facilities for workers Limited facilities for projetcs
Service Provision Fair sugar distribution No standard for service provision
Structure Centralized structure No structure with repspect to workflow

Opportunity Threats
Suitable strategy & policy Limitation of port & logistics services
Stable political system Trade-off between employment & mechanization
Political
Unique focus for sugar sector
Good support from government
External Environment

Demand is increasing for suar Inadequate professionals

Cheap labor workforce Employees Turnover
Lack of ecperience on Contract administation &
Social
Sugar professionals are developing in universities project management
Preserve the environment Limited capacity of domestic contractors
Outgrowers are benefited
Fairable land, water, weather for sugar development Cost of inputs inceasing time to time
Large suagr market domestically & abroad Shortage of finance
Economical
Comparative & proximity advantages Tough compitition
High land productivity
Partnership with developed nation for technology transfer Limited technological capacity
Technology
High productive cane varities costly & unreliable

Source: 2015-Own Translation of Amharic to English from BSC Document)

The task of environmental scanning for factories falls to the corporate leadership. It is assumed
they have the allotted time available and are the main source of information from the ESC. As part

92
of the ESC’s planning model for BSC charter there is a requirement for a set of objectives and
goals over the next 5 years. Factory managers were asked whether they felt they were able to
predict what the future environment would be like. All three managers indicated that while there
are some aspects of certainty, it is becoming increasingly harder. This is because in order to
predict factors that will influence the future environment then there is a presumption that factories
have some form of control about this, i.e., clearly not the case and a shortfall in the financial
resources that the factory has to budget for the next five years. Hence, factories are very much
future orientated but are realistic in terms of what they assertively plan and expect from the
stakeholders.

4.5. Model of Strategic Supply Chain

This section explained the status quo of the ESC, focusing on the three factories, at the time of this
study, in regards to the supply chain in terms of the model of strategic supply chain management
as presented by Hugo et al. (2004).

The practices of the supply chain in the ESC explored in terms of its external environment, the
internal & supply chain environment, the four strategic processes, and the four strategic
development processes as follows. Table 4.3 showed the descriptive statistical analysis.

These results shown on Table 4.3 reveals that all the elements that characterize the strategic supply
chain that was used in the study, 95.7 % of the respondents agreed that external environment
considered in the strategic planning phase of the case company which had the highest mean of
4.85.

Table 4.3 Descriptive Analysis for Elements of Strategic Supply Chain

Strongly Strongly
Disagree Neutral- Agree-
Elements of Strategic Disagree- Agree- Mean
-2 3 4
Supply Chain 1 5
% % % % %
External Environment - - 4.3 66.4 29.3 4.38
Internal & Supply chain
Environment 19.3 74.5 2.1 4.1 2.86
The four Strategic -
Processes - 32.4 33.5 34.1 3.33
The four Strategic -
Development Processes 23.3 48.6 19.6 8.5 2.16

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4.5.1. The External Environment

The external environment of an organization is influenced by political, legal, economic, social,

cultural, technological, regional, global, and green factors. The organization has no control over
the changes in these factors.

ESC is operating in suitable sugar development strategy and policy, stable political environment,
and the sector is given unique attention by the government. But the logistics and port service is
very limited as well as at high cost, and as the focus of the government is to reduce
unemployment, reducing production costs through mechanization is found impossible. Sometimes
ESC infringes with laid off employees and community people due to compensation for
displacement and property theft. This could have ended up in the constitutional court and had the
potential to incur costs.

There are suitable and adequate agricultural lands, water and climatic conditions to produce
sugarcane which create comparative advantage, the demand for sugar products are increasing in
direct proportion with the population, large market and proximity advantage for sugar and related
products. However, the soaring prices for inputs, shortage of finance and the tough competition in
the sugar market are the challenges for ESC.

The population and their purchasing power is increasing time to time, relatively cheap labor, the
higher educational institution starts graduating sugar technologists, the sugar development
contributes to the environment protection, and the number of sugarcane outgrowing farmers and
community people are growing. Nevertheless, there is high employee turnover, lack of project
management and contract administration experiences, the capacity limitations of the domestic
contractors and consultants are the major drawbacks for ESC.

The best practices from industrial countries are being transferred based on partnership. ESC has no
technological capability to compete with those developed nations, and highly productive and
disease resistant varieties requiring huge investments are becoming threats.

Regional Factors

The ESC leadership particularly the director general, public relation deputy director general office
and the factories management are carrying out meetings with the regional bodies where the sugar

94
factories are located regarding the community, displacement, compensation and security issues.
But there are no regular meetings, experience sharing.

Global Factors

The leadership as well as the employees infrequently attends selected seminars and trainings
abroad. So as to explore global opportunities all people should update themselves in latest
developments and obtain relevant information consistently.

Green Factors

The environmental protection as one of the strategic objectives of the ESC is considered during
the planning activities. The activities include afforestation, soil & water conservation, disposal of
factory effluents, draining of irrigation waters and runoff minimization. But, practically there are
limited efforts in these factors particularly the effluent and chemical disposals and reduction of
destruction effects of overflow of lakes and rivers.

4.5.2. The Internal and Supply chain Environment

The internal and supply chain environment of an organization includes: product technology &
innovation, teamwork, supply factors, distribution factors, competitive forces, competencies,
costs, and financial resources.

Product Technology and Innovation

The manufacturing processes of the sugar factories have to be economical and waste free. This can
be best achieved through utilization of latest technology and innovative methods for instance using
supply chain management. From the existing factories except one are old and all of them are not
innovative. The collaboration and integration with suppliers and customers for knowledge sharing
process that enable to innovate the factories are very weak.

Teamwork

Teamwork in the factories is remarkable because they are organized in the form of quality control
circles which help in improving team spirits. However, there is no inclusion of major suppliers and
major customers; hence there is no room for discussion on strategies and objectives of the
factories with them. The internal integration among the divisions and teams is too weak.

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Supply Factors

The procurement and supply of inputs and capital assets are performed centrally by ESC. This
approach may reduce incurring of foreign currency because it gives opportunity to motivate
domestic manufacturers to supply the needed inputs. There is a database for suppliers and the
invitation to submit bids are aired on news and newsletters besides some long term contracted
suppliers. Though there is high lead time, poor quality, lack of specifications for supplies, not
integrated & planned supply. Understanding for supply chain management and working based on
this is a key gap in ESC.

Distribution Factors

There is equitable sugar distribution system among the regions. The service provision for
distribution of products is not at the level to adequately satisfy customers, there is no service
delivery standard and system to improve the service. The main causes of this are the internal
processes of the factories are not integrated and unable to smoothly flow materials and information
internally.

Competitive Forces

The experiences and knowledge of competitive forces can be improved by collaborating with
other supply chain members and firms. Decreasing production costs enable to achieve customer
satisfaction there by help to become competitive. The practices of the ESC in such collaboration
can be said weedy.

Competencies

The management and staff of the factories need continuous updating. The competencies of front
line workers have to be improved through training and capacity building thereby enhances their
processes. Most of the employees lacked the knowledge of managing supply chain, the training
should focus on this issue.

Costs

The costs of the factories are reducing by the kaizen development team who apply the kaizen tools
and techniques. This performance is achieved inconsistently, i.e. needs frequent follow up to make
it the way of making business.

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Financial Management

The ESC effort to acquire financial resources required to carry out various activities and investing
them according to the prioritized projects are remarkable. However, there is shortage of finance,
there is weak financial management system and database management also not supported by IT.

4.5.3. The Four Strategic Principles

The business processes of every organization should design around the processes of planning,
sourcing, making/manufacturing, and delivery. The source, make, and delivery processes can be
considered at corporate, business and functional levels and should be integrated internally and
across supply chain partners, while planning must be done for the supply chain as a whole.

In ESC planning is done by the corporate deputy director generals in consultation with the
factories general managers and the source and make are done by the initiation of the factories and
delivery processes are determined by the corporation and executed by both. At the time of this
study, No integration of all these processes with supply chain partners and lack value adding
activities. The reason for this is no cross-functional management teams or cross-organizational
integration with the chain players excepting outsourcing processes to suppliers who could perform
the particular process required in the most cost-efficient way possible. During the planning
process there was no involvement of ESC’s suppliers and customers.

4.5.4. The Strategy Development Process

The strategy development process of ESC will be explored in terms of corporate strategy, business
level strategy, functional strategies and supply chain strategy.

Corporate Strategy

Corporate strategy of an organization defines its core business and consists of the organization’s
vision, mission, and objectives/milestones. All actions must be evaluated in terms of its vision.
The strategic plan of the ESC included its vision, mission, values, objectives and strategies.
However, this is not adequately known by all employees, suppliers and customers. The BSC of
ESC was compiled for each functional unit but not communicated to all employees and did not
understand well particularly by the front line workers in the factories. But, it has give due attention
by the management of ESC as well as the factories. Performance measurement is carried out
weekly.
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Business Level Strategy

The business level refers to the divisions in the corporation and factories, each of which must have
its own strategies and aligned with the corporate vision, mission, and objectives/milestones. A
BSC for each business level of ESC already designed that means objectives set for each business
level and individual employees. All signed off following their hierarchy for trucking the
performances. Action plans regarding how objective should be met prepared by all teams. A
system of recognition and reward for objectives reached not yet been established.

Functional Strategies

The objectives are cascaded top down to each teams and individuals. Each team manages its own
activities in isolation and no internal integration of the functions in the factories. No collaboration
between the ESC and suppliers and customers existed, no cross-functional management team
established, no cross-organizational integration existed except outsourcing processes to suppliers
who could perform the particular process required in the most cost-efficient way possible, and no
supply chain partners’ integration existed at the time of the study. All these showed the ESC is
alienated from supply chain management principles.

Supply chain Strategy

Supply chain strategy of an organization is seen in terms of material flow, the quality of
products/services, the costs of production/services, the relationships with suppliers and customers,
services offered, and human resource management involved.

Material Flow

In ESC, materials are purchased as and when required, no maximum, minimum or reorder level
for inventory levels. Sourcing is done by obtaining quotations from suppliers, mostly from three
known suppliers, or a public tender. Awarding of tenders and contracts are carried out by bid
committee established from different directorates. This is the same for factories which are allowed
to purchase locally. There is purchasing policy set by ESC. There is problem of transportation
mostly to bring goods via ports. The IT systems not developed to integrate with those of the
suppliers and customers in order to empower the entire supply chain.

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Quality

There are quality problems in the purchased inventories, the services provision and processes
needs continuous improvement besides the delay of the delivery from ESC to the factories.

Costs

Since there is no cross-functional teams in ESC; factories, there is a possibility of duplicating

processes that add no value this in turn creates inappropriate logistics management.

Relationships

There are no formed relationships between ESC and the suppliers and customers which enable to
form supply chain.

Services

The level of service that should be provided for the community is determined by the community
through proper involvement. ESC lacks this.

Human Resource Management

There are procurement and property administration division in ESC as well as in factories.
However, there is a gap in becoming capable of coping with the latest IT required to perform their
logistic activities in particular and supply chain practices in general.

4.6. Challenges to Lean-Kaizen Implementation

The results in Table 4.4 shows the greatest challenge to lean-kaizen implementation was Shortage
of time for discussion and implementation process with a mean of 4.96. This was followed closely
by Organizational culture changes difficulty and poor understanding of lean-kaizen concepts each
with a mean of 4.88. Similarly the least challenge was lack of financial resources or lack of
interest to allot small budget and lack of commitment and support from senior and middle
management with means of 2.26 and 2.86, respectively. This implies that successfully
implementation of lean-kaizen requires solving these and other problems not indicated here
(Ugochukwu, 2012).

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 Table 4.4 Challenges for Lean-Kaizen Implementation
Strongly
Disagree- Neutral- Agree- Strongly
Disagree- Mean
Challenges 2 3 4 Agree-5
1
% % % % %
Organizational culture
- - - 30.6 69.4 4.88
changes may not be easy
Lack of commitment and
support from senior and 16.8 75.9 - 7.3 - 2.86
middle management
Poor understanding of lean-
- 4.4 - 62.6 33.0 4.88
kaizen concepts
Lack of financial resources
or lack of interest to allot 28.4 48.6 14.3 8.7 2.26
small budget
Shortage of time for
discussion and - - - 68.9 31.1 4.96
implementation process

4.7. The Integrated Model of BSC & HK

From the models discussed in the previous sections the pressing problems regarding strategic
development and execution, and supply chain management practices of the ESC including the
three sugar factories were well identified. Strategy management culture should be instilled to solve
these problems, hence the BSC and HK integration which is proved and explained in many
research papers is chosen.

The Balanced Scorecard is a performance based approach, and it considers the results and what is
achieved as important. The ESC implemented BSC through top down approach with little
dialogue. But, adequate top down and bottom up approach needs to be followed which are
possible through a catchball method of HK to obtain buy-in and reach the set goals. Hoshin Kanri
(Akao, 1991) offers an alternative way to overcome the common problems associated with
strategic management, in that it connects managers and employees by a systematic deployment
process through vertical and horizontal communication, where the goals set by the management
are deployed and all endeavors are aligned to the same vision and goal. ESC also lacks integration
and collaboration with its suppliers and customers even if implemented BSC. Thus, cross-

100
functional management and cross-organizational management should be established using HK and
focusing on supply chain integration become apparent. The joint application of BSC and HK also
creates culture of strategy management which clearly links supply chain performance and
performance measurement with the chosen strategic direction of the firm thereby achieves
competitive performance.

4.7. Relationships among the Variable in the Conceptual Framework

Conceptual framework has been developed as depicted in this paper. The relationships of the
variables are to be validated statistically for proper application. The results from SPSS are
presented below. Before analyses were performed on the data set, reliability and validity of the
measurement instrument has to be measured as follows.

4.7.1. Reliability and Validity Measures

Reliability and validity are very important criteria when doing a research. To check on the internal
consistency of data measurement instrument, reliability test of each scale carried out using
Cronbach’s alpha. Alpha values over 0.7 indicate that all scales can be considered reliable
(Nunally, 1978). According to Sekaran (2003) values between 0.50 and 0.80 are acceptable while
values below 0.50 are considered less reliable and therefore unacceptable. To reduce the total
number of items to manageable factor, Factor analysis for each of the item scales was used.
Principal components analysis was used to extract factors with Eigen value greater than 1. To
validate use of factor analysis, sampling adequacy measurement tests were carried out using the
Kaiser-Meyer-Olkin (KMO) statistics.

Table 4.5 shows the results from factors analysis. Factor analysis was applied to items of supply
chain (SC) and competitive performance (CP) variable. Among 25 items in the questionnaire, 10
items were extracted during the factor analysis. A total of 15 items were reduced to two
underlying factors loadings. 12 items are identified for supply chain (SC), and three items were
identified for competitive performance (CP), respectively. The KMO value of 0.824 indicated for
sampling adequacy. Cronbach’s alphas among 15 items in the questionnaires exceeded 0.7, 0.843
for the supply chain and 0.798 for competitive performances, respectively.

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 Table 4.5 Summary for Factor Analysis of SC & CP
ITEMS SC CP
LKSC1 0.990
LKSC2 0.917
LKSC3 0.884
LKSC4 0.826
LKSC5 0.763
LKSC6 0.716
LKSC7 0.670
LKSC8 0.658
LKSC9 0.569
LKSC10 0.524
LKSC11 0.465
LKSC12 0.455
CP1 0.546
CP2 0.655
CP3 0.765
Cronbach’s Alpha 0.843 0.798
KMO (Kaiser-Meyer-Olkin) Value 0.824

4.7.2. Descriptive Statistics

Descriptive statistical analysis used to analyze the three variables of the conceptual framework
developed for this study answered the basic research questions and meets the stated objectives of
this study. The analyses were on strategic management, supply chain practices and competitive
performances. For the analysis of all these variables, mean and standard deviation was used.

Particularly mean value of the respondents has considered as an important indicator to the extent
of the company’s practices on each items. To conclude, the case company’s practices on each
variable, group mean was calculated and used. The mean and group mean statistical values
approaching to 2.00 and less indicates the poor performance, 3.00, average/moderate while 4.00
and 5.00 indicates higher and very high/excellent performance of the company on that particular
item and variable, respectively.

Table 4.6 Descriptive Statistics

N Minimum Maximum Mean Std. Variance
Deviation
Supplychain 228 2.85 3.80 3.3599 .18573 .034
Competitive Performance 228 2.00 4.20 3.1421 .39084 .153
StrMngtCulture 228 2.33 4.07 3.2383 .26739 .071
Valid N (listwise) 228
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Table 4.6 above depicts that all items scored a mean value of greater than 3.0. This indicates that
the overall performance of the case company was found to be on average/moderate. Overall
supply chain, strategy management culture and competitive performances represent 3.3599,
3.2383 and 3.2383, respectively. The response extent on the items of each variable is presented
below.

The results in Table 4.7 show that buyer-supplier relationships (SC11) had the highest extent of
practices by the case company with a mean of 4.58 responded by 90% of the respondents, this
highest extent be due to the case company major practice is focused on buyer-supplier
relationships. The supply chain practice with least extent was integration and collaboration with
key chain players with a mean of 2.02 responded by 81.9% of the respondents.

Table 4.7 Survey Response on the extent of the lean-kaizen supply chain practices

Strongly Strongly
Disagree-2 Neutral-3 Agree-4
Items Disagree-1 Agree-5 Mean
% % % % %
SC1 30.8 46.2 14.4 8.6 2.86
SC2 28.6 38.4 15.4 9.5 8.1 2.80
SC3 16.5 23.1 5.4 48.8 6.2 3.88
SC4 24.3 23.1 - 43.8 8.8 3.78
SC5 3.6 9.4 - 48.5 38.5 4.32
SC6 23.1 46.2 - 18.9 11.8 2.96
SC7 38.5 46.2 - 7.5 7.8 2.04
SC8 25.1 21.1 - 38.5 15.3 3.48
SC9 12.6 46.2 4.8 19.8 16.6 3.15
SC10 15.4 12.4 5.7 59.2 7.3 4.21
SC11 5.7 4.3 - 46.2 43.8 4.58
SC12 43.3 38.6 2.7 12.3 3.1 2.02

The analysis in Table 4.8 shows that 95.7% of the respondents were in agreement with a mean of
4.88 that the culture of strategy management (SMC1) in their factories not well developed.

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 Table 4.8 Survey Response on the extent of the Strategy management culture

Strongly Strongly
Disagree-2 Neutral-3 Agree-4 Mean
Items Disagree-1 Agree-5

% % % % %
SMC1 - - 4.3 66.4 29.3 4.88
SMC2 19.3 74.5 2.1 4.1 - 2.86
SMC3 - 32.4 - 33.5 34.1 3.33
SMC4 23.3 48.6 - 19.6 8.5 2.16
SMC5 6.4 71.1 3.2 10.2 9.1 2.38
SMC6 23.1 46.2 - 18.9 11.8 2.76
SMC7 38.5 46.2 - 7.5 7.8 2.04
SMC8 25.1 21.1 - 38.5 15.3 3.48
SMC9 12.6 46.2 4.8 19.8 16.6 3.15
SMC10 15.4 12.4 5.7 59.2 7.3 4.36
SMC11 16.5 23.1 5.4 48.8 6.2 3.48
SMC12 24.3 23.1 - 43.8 8.8 3.58
SMC13 3.6 9.4 - 48.5 38.5 4.12
SMC14 12.7 64.3 3.2 13.5 6.3 2.23
SMC15 - 8.6 - 72.4 19 4.26

Results from descriptive statistics in Table 4.9 shows that, the performance measure which is
influenced most by lean-kaizen supply chain practices is reduction of cost (CP2) with a mean of
3.34, 61.6% of the respondents answered. This is followed closely by improvement in flexibility
and responsiveness with a mean of 3.14 and respondent of 61.15. This implies that the sugar
manufacturing factories in Ethiopia would benefit most by fully complement their supply chain.
Table 4.9 Survey Response on the extent of the Competitive Performances

Strongly Strongly
Disagree-2 Neutral-3 Agree-4 Mean
Items Disagree-1 Agree-5

% % % % %

CP1 15.7 23.2 - 25.1 36.0 3.14

CP2 15.4 14.6 8.4 28.2 33.4 3.34

CP3 - 18.4 23.1 30.7 27.8 3.01

The researcher held an interview with different managers of the case company to triangulate, and
state the extent of the supply chain and strategic management practices and the current and
expected performances of the three factories in the future.
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4.7.3. Correlation and Regression Analysis

The regression analysis done using data from the 3 respondent factories showed that there is a
positive relationship between lean-kaizen supply chain practices and all the competitive
performance measures improvement as indicated by the values of R. The results also show a
strong correlation between the dependent and the independent variables as shown by the values of
R2. The results of this analysis are shown in Table 4.10.

Table 4.10 Relationship between Lean-kaizen supply chain practices and Competitive Performance
Competitive Performance R R2 Adjusted R2
CP1 0.846 0.717 0.689
CP2 0.748 0.650 0.610
CP3 0.885 0.778 0.758

Table 4.11 Regression Model Summary

Mo R R Adjusted Std.Error of Change Statistics
Square R Square the Estimate
R F df1 df2 Sig.F
Square Change Change
Change
1 0.941 0.868 0.856 4.8102 0.868 1 11 0.000
(a)
a Predictors: (Constant), Lean-kaizen supply chain index
The correlation between independent variable (lean-kaizen supply chain) and dependent variable
(competitive performance) was positive. Lean-Kaizen supply chain had a correlation of 0.941,
p<0.01 with competitive performances. Which means that the respondents are more likely to
evaluate lean-kaizen supply chain was positive when competitive performances are positive.

The parameters of this model were estimated using multivariate regression analysis. The regression
between independent variable (overall lean-kaizen supply chain) to examine the relationship to
overall competitive performances (CP) showed that the model seem to be reliable (p-value for
F<0.01 and adjusted R-square of 0.856 (Table 4.11). Hence, supply chain is the most important
determinant in overall competitive performances.

The moderator analysis showed that the interaction between the strategy management culture and
supply chain. To examine if SMC moderates the relationship between the lean-kaizen supply chain
and the competitive performances, interaction terms were created and entered in moderated
hierarchical regressions. For the moderating influence of strategy management culture on the
relationship between lean-kaizen supply chain and competitive performances, it was found that
105
SMC had a significant influence on the relationship between lean-kaizen supply chain and
competitive performances (= 0.54, t=2.66, p<0.01).

4.8. Graphical Presentation of the Overall Effect of SMC

Fig. 4.5: The interaction between lean-kaizen supply chain and SMC
The graph shows that the strategy management culture (SMC) strengthens the impact of lean-
kaizen supply chain on the competitive performances and also facilitates the organization
performances. An organization’s SMC, if fully complement its supply chain, will perform better.
The intersection point of the two lines describes the score on SMC where the predicted
performance scores are the same for the two groups- strongly and weakly instilled SMC. Thus,
when SMC corresponds to a score at the intersection point, the performance scores of the
organization are predicted to be the same in the two lean-kaizen supply chain conditions- thinly
and fully complemented supply chain. As the score of SMC exceeds the scores at the intersection
point, the performance scores are predicted to be higher in fully complemented lean-kaizen supply
chain than in thinly complemented lean-kaizen supply chain and vice versa.

The results suggest some insights into the instilment of strategy management culture. It is
important to link the lean-kaizen supply chain to a specific organizational culture, specifically
strategy management culture and to create it to execute strategies more effectively thereby gain
competitive performances.

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 Chapter V
Conclusion and Recommendations

5.1. Conclusion

The best formulated corporate strategies can stagger during the execution stage if it is
implemented without a strategy management culture. There will be inadequate concerted effort to
achieve competitive performances. This calls the importance of strategic formulation and
execution among all the key stakeholders including the supply chain players.

The case company’s condition regarding its culture, strategic management and supply chain
practices was studied and the gaps on these aspects identified through different models, and
conceptual frameworks developed to analyze whether the intended strategy management culture
impacts the link between the lean-kaizen supply chain and competitive performances which
showed significant influence. Thus by instilling a culture of strategy management, it is possible to
solve the problems observed in the case company and achieve competitive performance
sustainably.

Generally from the analysis carried out some strong aspects are observed. In contrast there are
challenges including: predicting the external environment or the five years plan is found difficult
for the factories, lack of competency and experience in managing supply chain, and giving scant
attention to corporate culture during strategy formulation and execution. To look these in detail the
barriers observed are presented as follows.

The barriers to strategic management include: lack of greater and visible management
commitment to strategic management, lack of results focus, inadequacy of information and data
required for planning and strategic decision making, poor understanding of the concept of value in
the organization, lack of ability to promote strategy management culture, lack of top down and
bottom up communication during planning, shortage of understanding on strategy execution in
daily basis.

The barriers to supply chain practices include: the case company’s orientation towards SCM is
traditional that lacks substantial indicators of an integrated, efficient and effective SCM, customers
not getting what they need when they need it, long lead time, and poor integration with suppliers,
not having effective flexible production system that could respond to the changing market and
customer’s preference, case company’s poorness in training and IT leads to weak integration both
with internal and external partners.
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The barriers for lean-kaizen implementation include: organizational culture changes may not be
easy, lack of commitment and support from senior and middle management, and poor
understanding of lean-kaizen concepts, a lack of financial resources or lack of interest to allot
small budget, lack of skilled resources, and shortage of time for discussion and implementation
process.

In this study, the following results were obtained: the correlation analysis showed that supply
chain management practices are related to competitive performances of the organization. For the
hypothesis, this study found a significant relationship between them. Therefore, the better supply
chain practices results better competitive performances. Based on these findings, companies
should consider and improve their entire supply chain management effectively through lean-
kaizen implementation, so that competitive performances can be increased.

The aim of the research presented in this paper was also to add to the knowledge on strategic
management and supply chain management practices by exploring the relationship between
strategy management culture, lean-kaizen supply chain, and competitive performances. By
developing and testing a research framework and conducting an analysis with valid and reliable
instrument, overall, this study contributes to the knowledge of the role of supply chain
management practices as well as the importance and how to instill strategy management culture
for improved competitive performances.

The findings of this research have several important implications for practitioners. First, as today’s
business competition is moving from among organizations to between supply chains partners,
organizations are increasingly adopting supply chain management practices, in the hope for
generating supply chain flexibility & responsiveness and competitive performances of the
company. Research finding showed that the respondents indicated that their factories have not
embarked upon a program aimed specially at implementing supply chain management as well as
not on the position of building a culture that support new strategies and effectively managing
strategies for their better achievements. Hence, instilling SMC in SC is an effective way of
competing because the factories can fully complement their supply chain better than ever, and the
implementation of SCM practices does have a strong impact on overall competitive performances
of companies. The result of this study has began to be implemented in ESC, i.e., the Hoshin Kanri
implementation is undertaking in integration with BSC in one of the divisions- Kaizen and change
management division at the head quarter of Ethiopian Sugar Corporation since end of April 2015.

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 5.2. Recommendations

Instilling a strategy management culture is no easy task; it is even a challenge for high performing
organizations. Because transforming a culture requires influencing people’s deepest beliefs and
most habitual behaviors, it is often underestimated in efforts to change how firms work as
explained about ESC. Developing a culture, which values and practices strategy management is a
long term effort involving attention to the social, organizational, managerial, and technical
components of that behavior. Past efforts have often assumed that formulating a plan and
implementing it without considering the culture as well as the supply chain is enough for
competitive performances, which is ineffective practice. Successful cultural change results from
having a clear idea about what type of culture the business needs, identifying the specific attributes
that go along with it, and then focusing on managing the drivers that shape and influence culture
rather than trying to manage culture itself. Hence, organizations should make a concerted effort to
refocus their efforts on these culture and supply chain aspects to foster a true strategy management
culture.

On the basis of the findings and conclusion reached, the following recommendations were made in
order to improve the strategic management and supply chain management of the case company.

 To create an effective strategy management culture, encourage a wider set of people to

contribute to the strategic planning effort, align this plan with everyday performance
management, focus all planning processes on organizational and managerial
effectiveness, and integrate team, individual performance planning and align the budget
with the planning approach.
 To flourish strategy management culture in an organization, concerted effort is needed
to overcome the barriers to developing strategy management culture.
 To foster strategy management culture, managers should spend their attention on
strategic issues likely to have the biggest effects on long-term performance of the
organization that means deal with shorter term operational problems separately from
strategic planning and monitoring of strategy execution.
 To embed productive strategy management culture throughout the organization, there
may be a need for improved communication, suitable support system, sound teamwork,
out-of silo thinking, and more meetings.
 The case company is suggested to improve its relationship with suppliers from simply
buy-sale relationship to a modern supply chain relationship through establishing
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 strategic or long term relationship, contract, and continuous information to minimize the
dissatisfaction of customers due to shortage of materials and products.
 ESC is suggested to integrate the internal operational units, so as to bring about flexible,
responsive and efficient production by networking the functional units of the
organization with appropriate IT and by breaking functional silos to encourage
coordination and interdependent work design.
 ESC is highly suggested that to prepare training program with competent institutions for
its employees and managers in order to enable them to be competent, committed,
responsive, finally which improves internal operation and customers service.
 The identified barrier of lean-kaizen implementation can be overcome by adopting a
culture of proper communication, training and motivation in the organization.
 The case company should improve and invest on IT facilities to enhance information
sharing both internally and externally.

5.3. Recommendations for Future Research

Further research in the areas of strategy management culture and supply chain relationships using
various variables and constructs will be particularly useful. Moreover, more measurement of
competitive performances in relation to the impact of supply chain will be of paramount
importance. Furthermore, more studies should be carried out to examine the prospects of lean-
kaizen management in the sugar sector to achieve excellent strategy execution and an effective
supply chain.

110
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 Appendix A
Survey Questionnaire
The survey questions include strategy management culture (SMC) with 15 items, supply chain
(SC) practices with 12 items, competitive performances (CP) with 3 items and lean –kaizen
implementation challenges with 5 items.

Put (X) for a 5-point Likert Scale (1 = Strongly Disagree, 2 = Disagree, 3 = Neutral, 4 = Agree, 5
= Strongly Agree).

5-point Likert Scale

In your factory:
1 2 3 4 5
Most employees are highly involved in their work.
Information is widely shared so that everyone can get the
information he or she needs when it's needed.
Everyone believes that he or she can have a positive impact.
Business planning is ongoing and involves everyone in the process
to some degree.
Cooperation across different parts of the organization is actively
encouraged.
Teamwork is used to get work done, rather than hierarchy.
Teams are our primary building blocks.
Work is organized so that each person can see the relationship
between his or her job and the goals of the organization.
The "bench strength" (capability of people) is constantly improving.
There is continuous investment in the skills of employees.
Problems seldom arise because we have the skills necessary to do
the job.
The leaders and managers "practice what they preach.
There is a clear and consistent set of values that governs the way we
do business.
Ignoring core values will get you in trouble.
When disagreements occur, we work hard to achieve "win-win"
solutions.
There is a "strong" culture.
It is easy to reach consensus, even on difficult issues.
There is a clear agreement about the right way and the wrong way to
do things.
People from different parts of the organizational share a common
perspective.
It is easy to coordinate projects across different parts of the
organization.
There is good alignment of goals across levels.
We respond well to competitors and other changes in the business
environment.
New and improved ways to do work are continually adopted.
Attempts to create change seldom meet with resistance.
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 5-point Likert Scale
In your factory:
1 2 3 4 5
Customer comments and recommendations often lead to changes.
All members have a deep understanding of customer wants and
needs.
We encourage direct contact with customers by our people.
Innovation and risk taking are encouraged and rewarded.
Few things "fall between the cracks".
Learning is an important objective in our day-to-day work.
We make certain that the "right hand knows what the left hand is
doing.
There is a long-term purpose and direction.
There is a clear mission that gives meaning and direction to our
work.
There is a clear strategy for the future.
Our strategic direction is clear to me.
Leaders set goals that are ambitious, but realistic.
The leadership has "gone on record" about the objectives we are
trying to meet.
We continuously track our progress against our stated goals.
People understand what needs to be done for us to succeed in the
long run.
. Our vision creates excitement and motivation for our employees.
We are able to meet short-term demands without compromising our
long-term vision.

Interview Questions
Decisions are usually made at the level where the best information is available.
Teams are our primary building blocks.
Authority is delegated so that people can act on their own.
The capabilities of people are viewed as an important source of competitive advantage.
People work like they are part of a team.
There is a characteristic management style and a distinct set of management practices.
There is an ethical code that guides our behavior and tells us right from wrong.
We seldom have trouble reaching agreement on key issues.
Our approach to doing business is very consistent and predictable.
Working with someone from another part of this organization is not like working with someone
from a different organization.
The way things are done is very flexible and easy to change.
Different parts of the organization often cooperate to create change.
The interests of the customer seldom get ignored in our decisions.
Leaders have a long-term viewpoint.
We view failure as an opportunity for learning and improvement.
Our strategy leads other organizations to change the way they compete in the industry.
There is widespread agreement about goals.
We have a shared vision of what the organization will be like in the future.

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 Appendix B

Statistical Analysis

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123
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 DECLARATION
I, the undersigned, declare that, this study “Instilling Strategy Management Culture at the
Ethiopian Sugar Corporation” is my original work and has not been presented for a degree in
any other university, and that all sources of materials used for the study have been duly
acknowledged.

Declared by:
Name____Assefa Yimer Atilabachew________________________
Sign_____________________________
Date_____________________________

Confirmed by Advisor:
Name____________________________
Sign_____________________________
Date__________________________

125