| After Skinner (1969) suggested that American manufacturing companies' decline has been brought by misalignment between corporate/business strategy and manufacturing strategy, many researchers (Hayes and Wheelwright, 1984; Wheelwright, 1984; Kotha and Orne, 1989) have made variants of the argument which emphasize the importance of the close strategic linkage/fit between business and functional strategies. In particular, close strategic linkage among the business, the operations, and the marketing strategies in managing service firms has been asserted to be crucial to a service firm's success by many researchers (Heskett, 1986; Lovelock, 1990; Kellog and Nie, 1995). Their assertions has been accepted broadly by both academicians and industrial practitioners. However, their assertions lack of strong empirical evidence. Hence, this study is an attempt to research strategic management of service sector, specifically, the retail banking units of U.S. banking industry. The purpose of this research is to examine performance implications of internal strategic fit which is defined as strategic coalignment among the business, the operations and marketing strategies. A conceptual construct of internal strategic fit is established based upon Miles and Snow's (1978) strategy theory. In addition, by using data from retail banking industry, performance implications of the internal strategic fit has been explored from both the reductionistic and the holistic perspectives. Results of the research show that performance of retail banks is not significantly different across three strategic groups (Defenders, Analyzers, and Prospectors). Therefore, retail bank's performance variation can be attributed to the within-strategic group performance variation. Regarding the impact of internal strategic fit upon performance, results of this research indicate that internal strategic fit is significantly and positively related to the performance. Thus, a significant portion of the variation in performance among retail banks is believed to be explained by internal strategic fit attained by retail banks. |