The Effect of Strategic Leadership on Competitive Strategy and Business Performance: Evidence from Indonesian SME's
Sidik Priadana1*, Denok Sunarsi2, Wahyitno3, Aden Prawiro Sudarso4, Agustina Mogi5, Farida Agustin6, Laila Irawati7, Supriyadi8
Heri Sapari Kahpi9, Didi Wandi10, Agus Purwanto11
1Universitas Pasundan, Bandung, Jawa Barat, Indonesia.
2.3.4.5.7
Universitas Pamulang, Tangerang Selatan, Banten, Indonesia
6.8Universitas Al-Khairiyah, Cilegon, Banten, Indonesia
9.10Sekolah Tinggi Ilmu Ekonomi Banten, Serang, Banten, Indonesia
11Pelita Harapan University, Indonesia Coresponding Email: [email protected] ABSTRACT
The purpose of this research is to analyze the effect of strategic leadership on competitive strategy, strategic leadership on business performance, competitive strategy on business performance. The model used to analyze the data in this study is the SEM-PLS Structural Equation Modeling. Respondents in this study were employees of SMEs in Tangerang, questionnaires were distributed electronically with simple random sampling technique and the results of questionnaires were returned as many as 150 respondents. Based on the results of data analysis, it is concluded that strategic leadership has a significant effect on business performance, competitive strategy has no significant effect on business performance, strategic leadership has a significant effect on competitive strategy.
Keywords: Strategic Leadership, Competitive Strategy, SMS's, Business Performance.
INTRODUCTION
The business world, which triggers a competitive environment, has spurred every organization to continue to improve and maximize their business and business potential.
Bandung City itself the number of MSMEs from year to year is increasing. increase and maximize their business and business potential. Tangerangg City itself the number of MSMEs is increasing from year to year. In facing the current intense competition, small and medium companies must pay attention to their strategies in order to be able to face this competition. One of the strategies that must be carried out by a company to survive in the tough competition is a competitive strategy. Competitive strategy can be described as a process of how a company builds and develops various strategic resources that have the potential to generate competitive advantage. Increasing competition, leadership is what is needed, one of which is strategic leadership. Strategic leadership further means the ability of leaders to manage, coordinate, influence and motivate and improve the performance of the people they lead to achieve organizational goals, especially in SMEs.
Based on preliminary observations, in fact there are not many companies that survive in the food industry, especially MSMEs due to high competition but leaders who are not responsive to this high competition, this is indicated by the ineffective strategic leadership which results in not surviving in the competition. SME in Tangerang City and show that the company does not survive or has decreased turnover because it is unable to face competition. From the
above statement, that by not involving employees in providing new ideas on menus and marketing, employee ignorance of the company's vision and goals, and all problems and decisions taken by leaders, this indicates that strategic leadership in the company is not working, so that this This has an impact on companies that are difficult to compete in the industry, this has an impact on company turnover.Meanwhile, according to Agyapong (2013) it is stated that developing in this competitive business environment requires a sustainable competitive advantage through coherent business and competitive strategies, and SMEs gain a competitive advantage. through their ability to develop and acquire organizational resources and capabilities, take strategic market positions, and implement competitive strategies to recognize opportunities and threats in the external environment.
Leadership is a process by which individuals influence groups to achieve general goals Northouse in Thoyib (2012). This understanding is sharpened that leadership is the ability to instill confidence and gain support from organizational members to achieve organizational goals. Dubrin, A. J. In Thoyib (2012). Meanwhile, according to Dess et al. (2008) leadership is a change agent who is successful in convincing how they implement strategies to achieve their vision and mission. So it can be concluded that leadership is a person's ability to influence other people or members in achieving organizational goals. Furthermore, Yulk (2010) the ability of leaders to take strategic actions depends on the historical factors of the organization (organizational culture) which are influenced by changes in the external environment (the presence of new competitors, technological developments, decreased demand for services / products, different political / regulatory climates), strengthening strategies and increased consistency between strategy, organizational structure, culture and human resources. Bianco and Schermerhorn in Winerungan and Thoyib (2012) argue that the characteristics or characteristics of strategic leadership are: being involved in change, being more proactive in communicating change, unwilling to change leadership to become an external consultant and not only having a vision for change but accompanied by a sustainable capacity for the implementation of change. , always encourages the creation of positive, independent behavior change and allows others to do the same and is brave enough to take risks. Rothaerment (2015) states that "Strategy Leadership is the behavior and styles of executives that influence others to achieve the organization". Meanwhile, according to Ireland and Hitt (2008) defines strategic leadership as "the ability to anticipate, envision, maintain flexibility and empower others to create strategic change as necessary. Meanwhile, Sachin and Bansidhar (2013) define strategic leadership as “the ability to influence others to voluntarily make day-to-day decisions that enhance the long- term viability of the organization, while at the same time maintaining its short-term financial stability. ".
According to Chandler (1962) strategy is the setting of long-term goals and objectives of a company and the direction of action and allocation of resources needed to achieve those goals and objectives.
Whereas in the new strategic management, Mintzberg in Porter (2015) suggests 5Ps which are the same as strategy, namely Strategy is Planning (Plan) The concept of strategy cannot be separated from the aspects of planning, direction or reference for the company's steps to achieve a goal in the future. However, strategy is not always a planning for the future that has not been implemented.
Strategy also concerns everything that has been done before. Strategy is a Pattern (Patern).
According to Mintzberg (2014) "strategy is patern", hereinafter referred to as intended strategy, because it has not been implemented and is oriented towards the future. Or it is also called the realized strategy because it has been carried out by the company. Strategy is a position (Position), namely positioning a particular product to a specific target market. Strategy as a position tends to look downward, that is, to a point of view where a certain product meets the customer, and to look outside, that is, to review various aspects of the external environment. Strategy is a Perspective (Perspective) if in terms of Patterns and Positions it tends to look downward and outward, then in Perspective it tends to look more inward, that is, into the organization, and upward, that is, to see
the grand vision of the company. Strategy is a game (Play) which means strategy is a certain maneuver to outwit an opponent or competitor. A brand, for example, launches a second brand so that its position remains firm and untouchable, because competing brands will be busy fighting against the second brand. The company's way of gaining a sustainable competitive advantage is at the heart of its competitive strategy. The choice of competitive strategy is based on the competitive advantage that can be developed by the organization. How the organization will compete in an industry is a competitive strategy choice.
According to Porter in Wheelen and Hunger (2012), a competitive strategy can be done with cost leadership, differentiation, and focus or commonly referred to as a generic competitive strategy.
Porter in Wheelen and Hunger (2012) reveals several strategies that companies can use to compete.
Some of the core aspects of Porter's theory are that competition is the core of success and failure.
This means that success or failure depends on the company's courage to compete. Competitive strategy is intended to maintain profit levels
METHOD
Operational Definition of Variables and Indicators
The model used to analyze the data in this study is the SEM-PLS Structural Equation Modeling. This model is used because in the conceptual model there are latent variables and their indicators, and to find out how much influence each latent variable has. Based on the research conceptual framework, four research hypotheses can be identified which will be confirmed with the data as follows. The probability sampling technique is a sampling technique carried out by providing opportunities or opportunities for all members of the population to become samples. The analytical method used in this research is structural equation modeling (SEM) to determine the causal relationship between latent variables contained in structural equations. The analysis tool used is with the help of Smart PLS. The method used in this research is quantitative methods, data collection methods by distributing questionnaires to employees of SMEs. The instrument used to measure all the variables of this study was adapted from (Bogler, 2001), with 5 items for each variable. Each closed question / statement item is given five answer options, namely: strongly agree (SS) score 5, agree (S) score 4, disagree (KS) score 3, disagree (TS) score 2, and strongly disagree (STS) ) score 1. The method for processing data is by using PLS and using the SmartPLS version 3.0 software as a tool.
Population and Sample
The population in this study were employees of SMEs in Jabodetabek whose numbers have not been identified with certainty. The questionnaire was distributed electronically using simple random sampling technique. The results of the questionnaire returned were 150 respondents.
Fig 1. Research Model
SL : Strategic Leadership, CS: Competitive Strategy , BP : Business Performance.
Based on the theoretical study and previous research above, the research model is as in Figure 1, while the research hypothesis is as follows:
H1: Strategic Leadership has a significant effect on Competitive Strategy H2: Strategic Leadership has a significant effect on Business Performance H3: Competitive Strategy has a significant effect on Business Performance
RESULT AND DISCUSION
Deskripsi Sampel
Tabel 1. Respondents Profile
Atribute Total
Age < 30 Years 56
30 - 40 Years 44
> 40 Years 50
Gender Male 74
Female 76
Work Periode < 5 Years 54
5-10 Years 50
> 10 Years 46
Test Results of the Validity and Reliability of Research Indicators
The testing phase of the measurement model includes testing for convergent validity, discriminant validity and composite reliability. The results of the PLS analysis can be used to test the research hypothesis if all indicators in the PLS model have met the requirements of convergent validity, discriminant validity and reliability testing.
Convergent Validity Testing
Convergent validity test is done by looking at the loading factor value of each indicator against the construct. In most references, a factor weight of 0.5 or more is considered to have sufficiently strong validation to explain latent constructs (Chin, 1998; Hair et al, 2010;
Ghozali, 2014). In this study, the minimum limit for the accepted loading factor is 0.5, provided that the AVE value of each constructis> 0.5 (Ghozali, 2014).
Fig 2. Model valid
Fig 3.Model valid
Based on the estimation results of the PLS model in the image above, all indicators have a loading factor value above 0.5 so that the model has met the convergent validity requirements. Apart from looking at the loading factor value of each indicator, convergent validity was also assessed from the AVE value of each construct. The AVE value for each construct of this study is more than 0.5. So the convergent validity of this research model has met the requirements. The value of loadings, cronbach's alpha, composite reliability and AVE for each complete construct can be seen in table 2 below:
Table 2.Cronbach's Alpha, Composite Reliability, and Average Variance Extracted (AVE)
Cronbach's Alpha
rho_A Composite Reliability
Average Variance Extracted (AVE)
BP 0.981 0.987 0.986 0.946
CS 0.949 0.950 0.964 0.846
SL 0.933 0.933 0.949 0.789
Construction Reliability Testing
Construct reliability can be assessed from the Cronbach's alpha value and the composite reliability of each construct. The recommended composite reliability and cronbach's alpha value is more than 0.7. (Ghozali, 2014). The results of the reliability test in Table 2 above show that all constructs have composite reliability and Cronbach's alpha values are greater than 0.7 (> 0.7). In conclusion, all constructs have met the required reliability.
Desriminant Validity Testing
Discriminant validity is done to ensure that each concept of each latent variable is different from other latent variables. The model has good discriminant validity if the AVE square value of each exogenous construct (the value on the diagonal) exceeds the correlation between this construct and other constructs (values below the diagonal) (Ghozali, 2014). The results of discriminant validity testing using the AVE square value, namely by looking at the Fornell-Larcker Criterion Value are obtained as follows:
Table 3. Descriminant Validity
BP CS SL
BP 0.973
CS 0.396 0.920
SL 0.490 0.772 0.888
The results of the discriminant validity test in Table 3 above show that all constructs have a square root value of AVE above the correlation value with other latent constructs (through the Fornell-Larcker criteria) so that it can be concluded that the model has met discriminant validity.
Hypothesis testing
Hypothesis testing in PLS is also known as the inner model test. This test includes a significance test for direct and indirect effects as well as a measurement of the magnitude of the influence of exogenous variables on endogenous variables. To determine the effect of Strategic Leadership on Competitive Strategy and Business Performance, a direct and indirect effect test is required. The effect test was performed using the t-statistic test in the partial least squared (PLS) analysis model using the SmartPLS 3.0 software. With the boothstrapping technique, the R Square value and the significance test value are obtained as shown in the table below:
Tabel 5. R Square
R Square R Square Adjusted
BP 0.241 0.224
CS 0.596 0.592
Based on Table 5 above, the R Square value for business performance is 0.241, which means that the business performance variable can be explained by strategic leadership and competitive strategy by 24.1%, while the remaining 75.9% is explained by other variables not discussed in this study. The value of R Square for competitive strategy is 0.596, which means that the competitive strategy variable can be explained by the strategic leadership variable by 59.6%, while the remaining 40.4% is explained by other variables not discussed in this study.
Table 6. Hypotheses Testing Original
Sample (O)
Sample Mean
(M)
Standard Deviation (STDEV)
T Statistics (|O/STDEV|)
P Values
CS -> BP 0.044 0.007 0.252 0.176 0.861
SL -> BP 0.456 0.487 0.231 1.973 0.049
SL -> CS 0.772 0.781 0.062 12.399 0.000
Meanwhile, Table 6 shows the T Statistics and P-Values which show the influence between the research variables that have been mentioned.
The relationship between strategic leadership and business performance.
Based on the results of the analysis in table 6, it is obtained T Statistics of 1.973> 1.96 and P- Values of 0.049 <0.050 so that it can be concluded that H1 is accepted, strategic leadership has a significant effect on business performance. An increase in strategic leadership variables will be followed by an increase in business performance and a decrease in the strategic leadership variable. followed by a decrease in business performance. The results of this study are in line with the results of research by Bahdin (2020); Bernarto (2020); Robby (2019) which states that strategic leadership has a significant effect on business performance.
The relationship between competitive strategy and business performance.
Based on the results of the analysis in table 6, it is obtained that T Statistics is 0.176 <1.96 and P-Values 0.861> 0.050 so it can be concluded that H2 is rejected, competitive strategy has no significant effect on business performance. An increase in the competitive strategy variable will not be followed by an increase in business performance and a decrease in the variable. competitive strategy will not be followed by a decrease in business performance.
The results of this study are in line with the results of research from Purwanto (2020);
Bernarto (2020); Robby (2019); Sartika (2020); SLamet (2020); Supriadi (2020) which states that competitive strategy does not have a significant effect on business performance.
The relationship between strategic leadership and competitive strategy
Based on the results of the analysis in table 6, it is obtained T Statistics of 12,399 <1.96 and P-Values of 0.000 <0.050 so that it can be concluded that H3 is accepted, strategic leadership has a significant effect on competitive strategy. An increase in strategic leadership variables will be followed by an increase in competitive strategy and a decrease in strategic leadership variables. followed by a decrease in competitive strategy. The results of this study are in line with the results of research by Bahdin (2020); Bernarto (2020); Robby (2019) which states that strategic leadership has a significant effect on competitive strategy.
CONLUSION
Based on the results of data analysis, it is concluded that strategic leadership has a significant effect on business performance, competitive strategy has no significant effect on business performance, strategic leadership has a significant effect on competitive strategy. In facing the current intense competition, small and medium companies must pay attention to their strategies in order to be able to face this competition. One of the strategies that must be carried out by a company to survive in the tough competition is a competitive strategy.
Competitive strategy can be described as a process of how a company builds and develops various strategic resources that have the potential to generate competitive advantage.
Increasing competition, leadership is what is needed, one of which is strategic leadership.
Strategic leadership further means the ability of leaders to manage, coordinate, influence and motivate and improve the performance of the people they lead to achieve organizational goals, especially in SMEs.
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