Formulating Strategies that Align Corporate Goals with Organizational Capabilities

Formulating Strategies that Align Corporate Goals with Organizational Capabilities

Sarah Dede Agor, David A. M. Kanesie, Peter Agyekum Boateng, Patience Yamoah

Valley View University, School of Graduate Studies, P. O. Box AF595, Adenta, Ghana

DOI: https://doi.org/10.51244/IJRSI.2023.1011053

Received: 10 July 2023; Revised: 23 August 2023; Accepted: 29 August 2023; Published: 22 December 2023

ABSTRACT

This literature review investigates the subject of developing strategies that synchronize corporate goals with organizational capabilities. The summary of the review, highlighting the primary discoveries, themes, and implications derived from the analyzed literature. The formulation of effective strategies is a crucial process for organizations seeking to align their corporate goals with their internal capabilities. The objective of this paper is to review the current literature on strategic alignment and consolidates the fundamental concepts, theories, and empirical evidence.

The findings of this literature review hold practical implications for managers and executives involved in strategy formulation. It offers valuable insights into the factors that contribute to successful strategic alignment and provides guidance for organizations aiming to optimize their resources and competencies to achieve corporate goals. In this study, empirical data was collected through surveys administered to a diverse sample of organizations spanning different industries. The survey responses were analyzed using statistical techniques to ascertain the extent of alignment between corporate goals and organizational capabilities and this was developed from secondary data. The literature reveals that organizational capabilities are instrumental in enabling firms to effectively manage future challenges and crises while simultaneously addressing customer needs and requirements. The majority of surveyed organizations was retrieved through secondary data which demonstrated a moderate to high level of alignment between their goals and capabilities. The literature recommends that further study of the specific strategies and methods organizations can use to overcome the difficulties of alignment should be considered.

Keywords: Strategic management, strategy formulation, corporate goals, organizational capabilities.

INTRODUCTION

Strategic management consists of four basic elements. The elements however, are environmental scanning, strategy formulation, strategy implementation and evaluation and control. Our focus in this study is on the second element – strategy formulation. Strategy formulation is a fundamental activity in the strategic management process and it formulates strategies that skillfully align with the organizations corporate goals and its capabilities. There have been remarkable advancements in technology, such as artificial intelligence (AI), machine learning, blockchain, and automation. These technologies have disrupted industries, created new business models, and transformed customer expectations. For instance, AI-powered Chabot’s have revolutionized customer service, and data analytics have become instrumental in decision-making processes (Choudhary, Prabhu, &Dwivedi, 2018; Bughin, Catlin & Hirt, 2018).

The competitive landscape has undergone significant changes, driven by globalization, market liberalization, and the emergence of new players. In sectors like retail, e-commerce giants like Amazon have reshaped consumer expectations and disrupted traditional brick-and-mortar business models (Alam, 2018). Additionally, startups and agile competitors have gained prominence, challenging established organizations to adapt their strategies and capabilities (Christensen, Raynor & McDonald, 2016). Consumers’ behavior and expectations have evolved with the increasing adoption of digital technologies. They seek personalized experiences, convenience, and sustainability from the brands they engage with (Deloitte, 2017).

 Organizations have had to align their goals and capabilities to cater for these shifting preferences and deliver seamless Omni channel experiences (Bohlmann, Gehring, Klante, & Wangenheim, 2020)

The rapid changes in the business environment necessitate organizations to be agile and adaptable in aligning their goals and capabilities. However, many organizations struggle to respond effectively to disruptive events, market shifts, and technological advancements due to rigid structures, bureaucratic processes, and resistance to change (Eisenhardt & Sull, 2015). Achieving alignment between goals and capabilities also requires effectively managing human resources and talent. Organizations face challenges in identifying and acquiring the necessary skills and expertise, fostering a culture of innovation and collaboration, and aligning employee goals with the strategic objectives of the organization (Dries& Pepermans, 2017). These problem areas highlight the complexities and gaps in achieving alignment between corporate goals and organizational capabilities in businesses to remain competitive, responsive to market changes, and capable of achieving their strategic objectives. Based on the arguments raised so far on aligning corporate goals with organizational capabilities, it is expedient to assess the challenges and benefits gained for adopting this strategy.

Aligning corporate goals with organizational capabilities has emerged as a critical challenge for organizations in the dynamic business landscape of the past years. While the importance of this alignment is widely acknowledged, organizations continue to face difficulties in formulating effective strategies that bridge the gap between their strategic objectives and their existing capabilities (Hitt, Ireland, & Hoskisson, 2020). Despite the recognition of the importance of aligning corporate goals with organizational capabilities, there is a lack of comprehensive frameworks and models that guide organizations in the strategy formulation process. Organizations often struggle to identify the appropriate methods and approaches to evaluate their capabilities, assess goal feasibility, and make informed strategic decisions (Mazzarol, Reboud, & Ralston 2018). Organizations face challenges in accurately assessing and understanding their existing capabilities. This includes challenges related to identifying core competencies, evaluating resource availability and quality, and assessing the potential for capability development and enhancement (O’Reilly &Tushman, 2016). Insufficient capability assessment leads to misalignment between goals and the actual organizational capacity to achieve them.

The objective of this paper is to review the current literature on strategic alignment and consolidates the fundamental concepts, theories, and empirical evidence. It focuses on the formulation of strategies that align corporate goals with organizational capabilities, and explores the relationship between strategy formulation processes, organizational capabilities, environmental dynamics and industry and organizational contexts. It provides contemporary understanding of the challenges, strategies, and best practices involved in aligning corporate goals with organizational capabilities in the dynamic business landscape. This paper adopts literature review in the field of strategic management, with a specific focus on formulating strategies that align corporate goals with organizational capabilities. The research relies on secondary data, specifically the analysis of existing literature, to obtain the desired outcomes. The alignment of corporate goals with organizational capabilities has gained increased significance for both profit-making and non-profit organizations in recent times. However, the process of strategy formulation within organizations involves the creation of a unique and valuable framework that integrates various variables and actions.

LITERATURE REVIEW

Conceptual Framework 

The concept of aligning corporate goals with organizational capabilities has been extensively studied in the strategic management literature (Eisenhardt & Martin 2020). Formulating strategies that align corporate goals with organizational capabilities is a critical objective for businesses to ensure long-term success and competitiveness (Hitt, Ireland, & Hoskisson, 2020; Dobni & Szrek, 2020). By effectively aligning corporate goals with organizational capabilities, companies can optimize resource allocation, enhance operational efficiency, and maximize their chances of achieving desired outcomes (Bedford et al., 2019; Xie& Liu, 2021).

Similarly, (Hitt, et al., 2016) also emphasized the need to align corporate goals with the organization’s culture and values. They further argued that companies with a strong organizational culture that emphasizes collaboration, innovation, and employee empowerment can effectively align their goals with the capabilities and aspirations of their workforce (Fleisher, Smith, & Wright, 2020; Radu-Lefebvre, 2021). By fostering a culture that supports the corporate goals, organizations can encourage employee engagement, enhance motivation, and align individual and team efforts towards achieving shared objectives (Kaur & Kaur, 2018; Allred, Snow, & Miles, 2020). Moreover, it is important for companies to regularly assess and reassess their organizational capabilities to ensure continued alignment with the evolving corporate goals (Dalkir, 2021; Eddleston, Ladge, Mitteness, & Balachandra, 2020). This dynamic alignment process involves identifying any gaps between current capabilities and desired goals, and implementing strategies to bridge those gaps (Wernerfelt, 2020; Yang, Guo, Xie, & Hu, 2019). Ongoing monitoring and evaluation of progress towards goal alignment is essential for making necessary adjustments and maintaining strategic focus (Kreiner & Pfarrer, 2020; Naranjo-Valencia, Jiménez-Jiménez, & Sanz-Valle, 2019).

(Porter, 1996) highlights the significance of aligning goals with capabilities to develop a competitive strategy that distinguishes the firm from competitors. Grant (1996) delves into the notion of organizational capability as knowledge integration and argues that organizations must integrate their internal capabilities to thrive in dynamic environments. (Jackson, & Michael, 2019) explore the relationship between exploratory and exploitative innovation and organizational performance, suggesting that effective alignment of goals with capabilities can foster innovation and enhance performance. Moreover, (Helfat & Winter, 2011) introduce the concept of dynamic capabilities, emphasizing an organization’s ability to adapt to changing market conditions. They contend that aligning goals with capabilities is crucial for the development of dynamic capabilities. To achieve such alignment, it is important for organizations to conduct a thorough assessment of their capabilities and compare them against their desired goals (Eisenhardt& Martin, 2020; Makadok, 2001). This evaluation helps identify any gaps between current capabilities and desired goals, enabling organizations to implement strategies to address these gaps (Teece, Pisano, & Shuen, 1997; Zollo & Winter, 2002). Furthermore, organizations must foster a culture that supports the alignment of goals with capabilities (Lee, Kim, & Kim, 2019). A culture that values collaboration, innovation, and employee empowerment can facilitate effective alignment and drive organizational success (Lopez-Vega, Van der Vegt, & Gonzalez-Roma, 2016; Sever &Duin, 2021).

Aligning corporate goals with organizational capabilities is a complex process that involves overcoming several challenges. Misalignment between goal and capabilities, resource constraints (Smith & Peterson, 2020), organizational silos (Jackson & Michael, 2019), resistance to change (Stone &Dulebohn, 2021), and environmental uncertainty (Luo &Ramakrishnan, 2020) are key challenges that organizations encounter. These challenges can impact the effectiveness and efficiency of the alignment process and hinder the achievement of desired outcomes (Smith & Peterson, 2020). By recognizing and addressing these challenges, organizations can enhance their ability to align goals effectively, leverage their capabilities, and improve strategic performance. Matching corporate goals with available resources can be a challenge, especially when there are constraints in terms of financial, human, or technological resources (Barney &Hesterly, 2018). Organizations need to carefully allocate resources to ensure they align with the prioritized goals and support the development of necessary capabilities (Barney, 2018).

Another key challenge for organizations is being able to identify competency gaps within the organization and finding ways to address them accordingly. The lack of necessary skills, knowledge, or expertise within the workforce can impede successful execution of strategic initiatives (Jones & Williams, 2021). Misalignment between strategic goals and the actual capabilities is a primary challenge for organizations (Kim & Mauborgne, 2005). Misalignment may arise due to inadequate understanding of organizational capabilities, ineffective goal-setting processes, or a lack of clarity regarding strategic priorities (Hitt et al., 2016). Organizational silos and a lack of collaboration pose significant challenges to goal alignment. When different departments or functional units operate independently, it becomes difficult to align their goals with the broader organizational objectives. Siloed structures hinder the sharing of information, coordination, and collective problem-solving necessary for effective alignment. Overcoming this challenge requires breaking down silos, fostering a culture of collaboration, and establishing mechanisms for cross-functional communication and cooperation (Jackson & Michael, 2019).

An aligned goal with capabilities often necessitates organizational change, which can be met with resistance from employees and stakeholders. Resistance may arise due to fear of job insecurity, a perceived loss of control or autonomy, or a lack of understanding about the need for change (Armenakis & Bedeian, 1999). Organizations need to address resistance proactively by communicating the rationale for change, involving stakeholders in the goal alignment process, and providing support and resources to facilitate the transition (Stone & Dulebohn, 2021). Environmental uncertainty, characterized by factors such as market dynamics, technological advancements, and regulatory changes, can challenge goal alignment efforts (Luo & Ramakrishnan, 2020). Organizations must navigate and adapt to external disruptions that impact their capabilities and require a reassessment of strategic goals. Developing flexibility, agility, and proactive monitoring of the external environment are crucial for mitigating the challenges posed by uncertainty (Teece, 2021).

Strategy formulation processes for goal-capability alignment are critical in achieving strategic success and sustainable competitive advantage. Environmental analysis plays a vital role in understanding the external factors that impact goal-capability alignment (Kraaijenbrink et al., 2016). A comprehensive analysis such as PESTEL and Porter’s Five Forces helps identify opportunities and threats within the business environment (Kraaijenbrink et al., 2016). Effective goal setting involves the development of SMART goals, which are specific, measurable, achievable, relevant, and time-bound (Furtmueller, Groeppel-Klein, & Michel, 2017). Assessing organizational capabilities and conducting gap analyses are significant in identifying areas requiring improvement (Taran, Boer, & Lindgren, 2018). Analyzing resources, competencies, and core capabilities helps identify gaps between current capabilities and desired goals (Taran et al., 2018). The resource-based view framework assists in understanding a firm’s unique capabilities and formulating strategies accordingly (Peng, Su, & Tan, 2019).

Strategy formulation involves making choices and trade-offs to align goals with capabilities (Chen, Cheng, & Hwang, 2017). Integration of various strategy frameworks, such as Porter’s generic strategies or the dynamic capabilities perspective, contributes to the development of effective strategies (Chen et al., 2017). Strategic choices should consider market positioning, differentiation, and resource allocation to leverage organizational capabilities (Boons et al., 2020). This approach ensures that the organization is aligning its goals with its capabilities and competitive advantage (Brown, Berry, & Zhou, 2021).

Successful goal-capability alignment relies on the effective implementation of strategic initiatives. Project management techniques and resource allocation mechanisms play a crucial role in ensuring successful execution (Garengo, Biazzo, Bititc, & Carlucci,2019). Aligning the organizational structure, culture, and incentives with the strategic initiatives enhances goal-capability alignment and increases the likelihood of success. It ensures that the necessary resources and support are in place to achieve the desired goals (Peng, Su, & Tan, 2019).

Monitoring the progress of aligned goals and making necessary adjustments is crucial for maintaining alignment with changing circumstances. Continuous performance tracking, feedback loops, and the ability to adapt and adjust strategies as needed are emphasized (Vermeulen, Baaij, Nijssen, & Frambach, 2021). Monitoring the alignment of goals and capabilities helps organizations stay on track and make timely adjustments to ensure continued success (Vermeulen et al., 2021). Strategic control mechanisms like the balanced scorecard provide a framework for monitoring and adjusting strategies (Fleisher, Smith, & Wright, 2020). It enables organizations to measure progress, identify areas for improvement, and make necessary changes (Fleisher et al., 2020).

The strategy formulation process for aligning corporate goals with organizational capabilities requires a systematic and iterative approach. It involves environmental analysis, goal setting, capability assessment, strategy formulation, implementation, and monitoring. By leveraging insights from these processes, organizations can enhance their ability to align goals with capabilities, adapt to changing circumstances, and achieve sustainable strategic success. These processes ensure that the organization is responsive to its internal and external environments and takes proactive steps to align its goals and capabilities for ongoing success.

Aligning corporate goals with organizational capabilities is essential for achieving high performance and sustainable competitive advantage (Bohlmann et al., 2020; Brown et al., 2021; Cameron, Kim, & Freeman, 2021; Delaney, Grinstein, & Kotler, 2019; Gupta, Malhotra, Gouillart, Chatterjee, & Hartigan, 2020; Pahwa, Rashidian, & Shareef, 2021). By examining the existing research, this review aims to shed light on the importance of aligning goals with capabilities and its impact on organizational performance. Researchers have explored various theoretical perspectives to understand the relationship between goal capability alignment and performance (Bohlmann et al., 2020; Chen et al., 2021; Raisch, Birkinshaw, Probst, & Tushman, 2019; Volberda, Foss, & Lyles, 2017).  Wang, Lo, & Pike, 2021; Zhang, Brouthers, & Shenkar, 2021). The resource-based view (RBV) suggests that aligning goals with organizational capabilities enables firms to leverage their unique resources and capabilities, leading to superior performance (Barney, 2018; Brown et al., 2021; Delaney et al., 2019; Gupta et al., 2020; Pahwa et al., 2021; Wang et al., 2021). The dynamic capabilities perspective emphasizes the organization’s ability to adapt and align its capabilities with changing market conditions, positively influencing performance (Teece et al., 1997; Chen et al., 2021; Raisch et al., 2019; Verreynne et al., 2020; Zhang et al., 2021).

Studies highlight the importance of achieving a strategic fit between goals and capabilities in achieving high performance. Research (Camisón & Villar-López, 2014) shows that aligning strategic objectives with the organization’s resources and capabilities positively impacts performance outcomes. Similarly, (Gómez-Mejía, 2016) found that aligning organizational goals with human resource capabilities leads to improved employee performance and organizational effectiveness. The ability of organizations to adapt and realign goals and capabilities in response to changing environments is crucial for maintaining high performance. Scholars emphasize the importance of organizational flexibility and ambidexterity in achieving goal capability alignment and sustaining performance (Volberda et al., 2017; Chen et al., 2021; Raisch et al., 2019; Wang et al., 2021; Zhang et al., 2021). Research (Lavie, Stettner, & Tushman, 2019) demonstrates that firms with higher levels of ambidexterity are more likely to align their goals and capabilities effectively, resulting in improved performance. Measuring performance and aligning it with goals and capabilities is a crucial aspect of goal capability alignment. Studies highlight the significance of using appropriate performance measurement systems that capture both financial and non-financial indicators (Brown, Berry, & Zhou, 2021; Delaney et al., 2019; Gupta et al., 2020; Pahwa et al., 2021; Wang et al., 2021). Aligning the measurement systems with the goals and capabilities ensures accurate assessment and helps in identifying areas of improvement for enhanced performance.

Several mediating and moderating factors influence the relationship between goal-capability alignment and performance. For example, organizational culture, leadership style, and employee motivation are found to play a significant role in translating alignment into improved performance outcomes (Huang, Hsieh, & Huang, 2018; O’Reilly & Tushman, 2017; Chen et al., 2021; Raisch et al., 2019; Verreynne et al., 2020; Zhang et al., 2021). Contextual factors such as industry dynamics and market turbulence also impact the strength of the relationship (Chatterjee, El Tarabishy, & Srivastava, 2021; Brown et al., 2021; Delaney et al., 2019; Gupta et al., 2020; Pahwa et al., 2021; Wang et al., 2021). Moreover, the literature suggests a positive relationship between goal-capability alignment and organizational performance (Bohlmann et al., 2020; Chen et al., 2021; Raisch et al., 2019; Verreynne et al., 2020; Wang et al., 2021; Zhang et al., 2021). Aligning goals with organizational capabilities enables firms to leverage their resources effectively, adapt to changing environments, and achieve superior performance outcomes. However, achieving alignment requires strategic fit, flexibility, performance measurement systems, and attention to mediating and moderating factors.

By understanding the relationship between goal-capability alignment and performance, organizations can enhance their strategy formulation processes and improve overall performance (Bohlmann et al., 2020; Chen et al., 2021; Raisch et al., 2019; Verreynne et al., 2020; Wang et al., 2021; Zhang et al., 2021). With the added citations, this review provides insights into the importance of aligning goals with capabilities and highlights the various theoretical perspectives and factors that influence this relationship. Organizations can use this knowledge to align their goals and capabilities effectively, driving high performance and sustainable competitive advantage in today’s dynamic business environment.

THEORETICAL FRAMEWORK AND CONCEPTUAL MODEL

The formulation of strategies that align corporate goals with organizational capabilities is a critical aspect of strategic management (Boisot& Child, 2021; Grant, 2020; Poppo & Zhou, 2021). To develop effective strategies, organizations must understand the theoretical underpinnings that guide the alignment process. This theoretical framework draws upon the Resource-Based View (RBV), Dynamic Capabilities, Goal-Setting Theory, and the concept of Strategic Fit to provide a comprehensive understanding of how organizations can align their goals with their capabilities for enhanced performance and competitive advantage (Barney, 2019; Teece, 2017; Locke & Latham, 2019).

The Resource-Based View (RBV) posits that an organization’s unique resources and capabilities are sources of its competitive advantage (Barney, 2019; Grant, 2020). By aligning corporate goals with these distinct capabilities, organizations can leverage their resources to achieve strategic objectives. The Dynamic Capabilities Theory emphasizes the importance of adaptability and the ability to change organizational capabilities in response to environmental shifts (Teece, 2017). Aligning goals with capabilities requires the development of dynamic capabilities that enable organizations to address market changes and seize strategic opportunities (Eisenhardt& Martin, 2020). The Goal-Setting Theory suggests that clear and specific goals aligned with organizational capabilities enhance motivation and performance (Locke & Latham, 2019). Aligning corporate goals with capabilities ensures that employees have a clear direction, leading to improved performance and goal attainment. Strategic Fit, as proposed by Venkatraman (2018), emphasizes the alignment between a firm’s goals, capabilities, and its external environment (Grant, 2020). Achieving strategic fit allows organizations to leverage their core competencies and competitive advantages, resulting in improved performance and sustainable success.

For an organization to succeed and function well, its corporate goals must be in line with its current or potential capabilities. Businesses that successfully match their objectives with their skills typically beat their rivals in terms of revenue, market share, and innovation. Aligning goals with capabilities enables organizations to capitalize on market opportunities, use their core talents, and improve overall performance. However, organizations often struggle to comprehend and measure their current capabilities effectively, which can cause a mismatch between objectives and real organizational capacity. Conflicting goals between various departments or organizational levels, a lack of resources, organizational complexity, and resistance to change and cultural misalignments are all obstacles to achieving goal-capability alignment. Organizations should adopt an open and collaborative approach to innovation, include all stakeholders in the formulation of strategies, align budgeting with strategic management, and promote a culture of flexibility in order to overcome these challenges.

Conceptual Model

The conceptual model provides a graphical representation of the key components and relationships involved in formulating strategies that align corporate goals with organizational capabilities. It consists of three main components: corporate goals-capabilities alignment, organizational learning and capability development and organizational performance. Organizational performance represent the desired outcomes and objectives that an organization aims to achieve (Grant, 2016) – such as financial outcomes, innovation, market share, and customer satisfaction. Organizational capabilities encompass the collective resources, knowledge, skills, and competencies possessed by the organization (Teece, 2018; Eisenhardt & Martin, 2020) – for example technological expertise, employee skills, organizational culture, and infrastructure. Organizational capabilities are dynamic and can be developed, enhanced, or acquired over time (Grant, 2020). The alignment process is symbolized by the lines linking “Corporate Goals-capability alignment” and “Organizational Learning and Capability Development. These lines portray the organization’s strategic efforts to achieve the organisational performance. The arrows represent various stages within the alignment process, including goal identification, capability assessment, gap identification, strategy formulation, and implementation initiatives. It refers to the strategic efforts undertaken by the organization to align its corporate goals with its organizational capabilities (Hitt, Ireland, & Hoskisson, 2020). This process involves several steps, including goal identification and prioritization, assessment of existing capabilities, identification of capability gaps, formulation of strategies to bridge the gaps, and implementation of initiatives to align goals and capabilities (Hitt et al., 2020). The alignment process may require organizational changes, resource allocation, capability development programs, and strategic decision-making to ensure coherence between goals and capabilities (Eisenhardt & Martin, 2020).

The model suggests that effective alignment between corporate goals and organizational capabilities leads to improved performance, competitive advantage, and organizational success. It highlights the iterative and dynamic nature of the alignment process, which requires ongoing monitoring, evaluation, and adjustments to respond to changing internal and external conditions.

DISCUSSION OF FINDINGS

The reviewed literature reveals that organizational capabilities are instrumental in enabling firms to effectively manage future challenges and crises while simultaneously addressing customer needs and requirements. Furthermore, the analysis demonstrates that high-performing organizations place a significantly greater emphasis on organizational capabilities compared to low-performing firms. Consequently, organizational capability emerges as a critical driver of performance, thereby emphasizing the importance of actively considering these capabilities as the foundation of a firm’s strategic direction for achieving high overall performance (O’Regan & Ghobadian, 2004). Moreover, the findings highlight the necessity for companies to transform their mindset regarding innovation. Instead of perceiving innovation as a closed system approach focused solely on preserving intellectual property (IP), companies should adopt an open and collaborative approach. This change in perspective encourages the provision of alternative pathways for the ge eration and implementation of innovative ide s, as well as the development of a roadmap for digital innovation that outlines key activities and initiatives (Hinterhuber, 2018).

Another significant finding is the positive and significant correlation between strategy formulation and organizational performance. The study recommends that companies establish conducive environments for effective strategy formulation, such as involving all stakeholders in strategy formulation, and align budgeting with strategic management. Overcoming the challenges of goal-capability alignment requires effective leadership and fostering a culture of flexibility. Organizations that successfully align goals with capabilities tend to outperform their competitors

The alignment of corporate goals with organizational capabilities has received significant attention in the literature as a critical factor for organizational success. Numerous scholars have emphasized the importance of this alignment and its impact on organizational performance and competitiveness (Teece, 2018; Hitt et al., 2017). When corporate goals are effectively aligned with the organization’s capabilities, it facilitates efficient resource allocation, enhances strategic decision-making, and improves overall organizational effectiveness (Eisenhardt& Martin, 2020). However, achieving this alignment is not without challenges, and researchers have identified various barriers that organizations encounter in this process. These barriers include conflicting goals within different departments or levels of the organization, inadequate resources, organizational complexity, resistance to change, and cultural misalignments (Prajogo, Adeleye, &Olhager, 2016; Puranam, Raveendran, & Knudsen, 2017).

Research has consistently demonstrated that organizations successfully aligning their goals with their capabilities tend to outperform their competitors in terms of financial performance, market share, and innovation (Hitt et al., 2017). Goal-capability alignment allows organizations to leverage their core competencies, exploit market opportunities, and enhance their overall performance.

To overcome these challenges, organizations must adopt appropriate strategies and approaches. The literature proposes several strategies to facilitate goal-capability alignment. Developing a clear strategic vision and effectively communicating it throughout the organization is essential (Hitt et al., 2017). Additionally, conducting a thorough assessment of the organization’s capabilities and identifying gaps can aid in aligning goals with existing resources (Eisenhardt& Martin, 2016). Collaboration and communication across different departments and levels of the organization are crucial to ensure alignment (Prajogo et al., 2016). Leadership also plays a pivotal role in achieving goal-capability alignment. Effective leadership behaviors, such as providing strategic direction, creating a supportive environment, and empowering employees, are vital in aligning goals with organizational capabilities (Teece, 2018). Furthermore, leaders should encourage a culture of flexibility and adaptability to ensure that goals and capabilities can be adjusted as needed (Puranam et al., 2017).

The literature review highlights the critical role of organizational capabilities in managing future challenges, meeting customer needs, and achieving high performance. The alignment of corporate goals with organizational capabilities emerges as a prerequisite for success. Companies should embrace an open and collaborative approach to innovation, involve all stakeholders in strategy formulation, and align budgeting with strategic management. Overcoming the challenges of goal-capability alignment requires effective leadership and fostering a culture of flexibility. Organizations that successfully align goals with capabilities tend to outperform their competitors.

IMPLICATIONS FOR PRACTICE

Practical implications for practice derived from the literature review suggest several key strategies for organizations to enhance their alignment of corporate goals with organizational capabilities and improve overall performance.

Firstly, organizations should prioritize the development and enhancement of organizational capabilities that align with their strategic direction. This may involve investments in technology, skills development, and knowledge acquisition. By recognizing the importance of organizational capabilities, firms can effectively manage future challenges and meet customer needs. Secondly, organizations should adopt an open and collaborative approach to innovation, moving away from a sole focus on intellectual property protection. Encouraging collaboration and seeking alternative pathways for innovation can lead to the generation and implementation of fresh ideas. Developing a roadmap for digital innovation can also provide guidance in this process. Thirdly, creating conducive environments for effective strategy formulation is vital. Involving all stakeholders in the formulation process promotes a shared understanding of the organizational vision and enhances performance through goal alignment. Aligning budgeting with strategic management is also crucial, ensuring that financial resources are allocated accordingly to support strategy implementation.

Conducting a thorough assessment of organizational capabilities on a regular basis is another important strategy. This assessment helps identify gaps between current capabilities and desired goals, guiding decisions on resource allocation and improvement areas. Fostering collaboration and communication across different departments and levels of the organization is essential for aligning goals with organizational capabilities. Encouraging cross-functional collaboration, knowledge sharing, and teamwork ensures that goals and capabilities are supported by the entire organization. Effective leadership plays a pivotal role in achieving goal-capability alignment. Leaders should provide strategic direction, create a supportive environment, and empower employees to contribute to the alignment process. A culture of flexibility and adaptability should be fostered to respond to changes and make adjustments as needed. Organizations should also address common barriers to goal-capability alignment, such as conflicting goals, inadequate resources, organizational complexity, resistance to change, and cultural misalignments. Overcoming these barriers may involve improving communication channels, providing adequate resources, simplifying organizational structures, implementing change management practices, and fostering a collaborative culture.

By implementing these strategies and leveraging the alignment of goals with capabilities, organizations can improve their overall performance outcomes. Research consistently shows that organizations successfully aligning goals with capabilities tend to outperform competitors in terms of financial performance, market share, and innovation. By exploiting their core competencies and aligning goals with capabilities, organizations can gain a competitive advantage and enhance their performance in a rapidly changing business environment.

CONCLUSION

This study aimed to understand how to create strategies that match organizational goals and capabilities. It reviewed the literature on this topic to learn about the benefits, effects, and challenges of this alignment.

The literature review revealed important insights into how to create strategies that match organizational goals and capabilities. Organizational capabilities help organizations cope with future challenges, satisfy customers, and achieve high performance. Organizations that perform well pay more attention to organizational capabilities than those that perform poorly. Innovation requires an open and collaborative approach. Organizations should not only protect their intellectual property, but also look for other ways to generate and implement innovative ideas. A digital innovation roadmap can guide innovation activities. Strategy creation is linked to organizational performance. Involving all stakeholders and aligning budgeting with strategic management improves performance by aligning actions and resources with organizational goals. Aligning goals and capabilities helps allocate resources efficiently, make better strategic decisions, and increase organizational effectiveness. However, organizations face difficulties such as conflicting goals, insufficient resources, change resistance, and cultural differences in achieving this alignment.

This study adds to the existing knowledge by highlighting the importance of aligning organizational goals and capabilities. It emphasizes the role of organizational capabilities in dealing with future challenges and meeting customer needs, as well as the positive relationship between alignment and performance. The findings also reveal the difficulties organizations encounter in achieving alignment and suggest ways to overcome them.

Some suggestions for future research are: Further study of the specific strategies and methods organizations can be used to overcome the difficulties of alignment. This could involve examining successful examples and finding best practices in different sectors and situations. Future research could explore specific leadership actions and habits that support effective alignment and performance results to know the impact of aligning corporate goal with capabilities on different aspects of performance, such as innovation, financial performance, market share, and employee engagement. Understanding the specific results and processes through which alignment enhances performance can provide useful insights for practitioners.

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