Strategic Agility in Environmental Turbulence A case of Banking Sector in Indonesia

Abstract

Adapting to environmental turbulence is mandatory for every player in the banking sector. They need to develop rational strategies and respond effectively. Environmental Turbulence especially market turbulence and technological turbulence, which happen lately in banking industry, require firms to review their strategies continuously. Strategic agility with its dimensions: strategic sensitivity, resource fluidity, and collective commitment, is a capability of a firm that has been identified as a key to succeed in a highly competitive and rapidly changing environment. Strategic agility is also known as a source of competitive advantage which will also enhance performance of the firm. This study tries to examine strategic agility and its dimension and reveal its importance in the banking sector in order to gain competitive advantage in environmental turbulence. Furthermore, this study explores the application of strategic agility and its potential to improve unit performance through competitive advantage. The population of this study is managers in one of private bank in Indonesia. This study uses Structural Equation Modelling (PLS-SEM) to analyze the data. Findings of this study suggest that strategic agility has a role to gain competitive advantage by taking advantages from environmental turbulence specifically in market and technological turbulence which in turn will also improve firm performance.

The Moderating Effect of Environmental Turbulence on the Strategic Agility-Performance Relationship: Empirical Evidence from Lagos State, Nigeria

“…Arokodare (2020) defined strategic agility as "the ability of the organisation to sense changes in dynamic, fast-paced environments, and to quickly respond to these changes by seizing market opportunities and maintaining competitiveness through building, combining, enhancing, mobilising and reconfiguring its capabilities and in the process attaining and sustaining superior performance beyond its competition" (p. 45). This definition amplifies the conceptualization of strategic agility and its dimensions by Mavengere (2013) and Anggraini and Sudhartio (2019). Anggraini and Sudhartio (2019) stated that strategic agility consists of three capabilities: strategic sensitivity, collective commitment, and resource fluidity, all three of which must support each other to achieve success.…”

“…Oginni and Adesanya (2013) averred that organisations face an increasingly dynamic, complex, and unpredictable environment, where technology, globalisation, resource shortages, wide swings in the business cycle, changing social values, competitors, customers, suppliers, and a multitude of other dynamic forces impact on overall performance of these organisations. Environmental turbulence, according to Anggraini and Sudhartio (2019), is defined as environmental conditions with high level of uncertainty and risk. Environmental turbulence is an important construct that captures volatility in the corporate environment.…”

“…In sum, Anggraini and Sudhartio (2019) asserted that environmental turbulence is unpredictable change in the munificence and complexity of an organizational business environment because the extent of change is unexpected as well as the larger the unpredictable change, the bigger the negative impact on organizational business process and performance.…”

“…One of the main issues in this process is coping with uncertainty created by environmental turbulence. In today's 21st century market conditions, oil and gas companies are faced with variability of dynamic changes that frequently occur both concurrently and unpredictably and which forces oil and gas companies to revise their work practices and methods continuously in order to adapt quickly (Anggraini & Sudhartio, 2019). In this context, strategic agility is known as the ability of an organization to manage market change through rapid proactive responses to threats and market opportunities in order to achieve targeted firm performance.…”

“…Oil and gas marketing companies in developing economies like Nigeria have found it increasingly difficult and challenging in achieving targeted firm performance due to turbulent business environment and unstable policies characterized by poor strategic agility measures towards shifting economic policies, organizational culture rigidity, regulatory uncertainty and infrastructural deficit (PWC, 2018). Anggraini and Sudhartio (2019) emphasized that most organisations are not sure how to deal with turbulent environments, thus adversely affecting firm performance. Specifically, Oyerinde, Olatunji, and Adewale (2018) and Arokodare and Asikhia (2020) stated that strategic agility measures misplacement towards environmental turbulence and this led to adverse effect on the performance of oil and gas companies in Nigeria.…”