Alignment of business strategy and IT strategy in small businesses

Strategic use of IT among SMEs has gained much attention recently as bothreseachers and practitioners view this as one of the avenues for smaller firms tocompete successfully. However, very little empirical work has been done tounderstand the issue. This study helps to fill this gap in the important research areaby exploring the alignment of business strategy and IT strategy among UKman facturing firms with less than 150 employees. A mail survey of Chief ExecutiveOfficers generated 256 responses to an eight page questionnaire.Factor analysis of the nine business strategy and the nine IT strategy variablesyielded three business strategy factors and three IT strategy factors which could besensibly identified with strategy areas and which clearly showed a fit between the twosets. Based on these two set offactors, the measurement of IS alignment was exploredusing two methods: (1) the 'moderation' or interaction approach, and (2) the'matching' or difference approach. The finding of this study provides support for pastobservation that the `moderation' approach of measuring fit' is more meaningfulwhen the performance criterion is included in the research model.By using a multistep cluster analysis, two distinct groups of SMEs are identified basedon the alignment between quality-oriented, product-oriented, and market-orientedbusiness strategy and IT strategy which support these strategies. The group of SiviEswhich has a high degree of alignment for the three strategy areas are found to achievebetter organisational performance than the group of SÄLIEs with a low degree of ISalignment. Interestingly, the findings of this study also indicate that the degree ofalignment between business strategy and IT strategy is related to the level of ITsophistication and the level of CEO's commitment to IT.In summary, this study has extended our understanding of IS alignment and hasprovided useful insights for CEOs of small and medium-sized companies in planningtheir IT utilisation.