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Identifying the Inter-Relationships Between the Company’s Strategic Sectors

Author

Listed:
  • Dragoş Bîlteanu

    (Bucharest University of Economic Studies, Bucharest, Romania)

  • Florentina Olivia Bălu

    (University of Geneva, Geneva, Switzerland)

  • Irina Stancu

    (University of Geneva, Geneva, Switzerland)

Abstract

To reveal the inter-relationships between the strategic axes of the analyzed company, we used the Balanced Scorecard Analysis (BSC) and the Partial Least Squares (PLS) technique. The PLS technique identifies strategic areas (or axes) by grouping performance indicators that have the highest percentage of explaining the variance within the indicator group. We linked the strategic axes with the company’s performance sectors, while the PLS model illustrated the interaction between the company’s strategic lines as well as the interaction between the company’s performance indicators and their respective groups. We started with principal component analysis (PCA) to identify the most important activity sectors for the company (for example, axis 1 = Profitability), to which we associated between 4 and 9 relevant performance indicators and selected those that were most correlated with their respective strategic sectors. We used the PLS technique for principal component analysis to show the correlations between the company’s strategic sectors. The intensity of the relationships within the company allowed us to predict potential strategic lines for improving managerial performance. The BSC enabled us to explain the relationship between corporate governance variables and company performance. Within the causal relationships, we provided a logical explanation of how the analyzed business sectors are interconnected.

Suggested Citation

  • Dragoş Bîlteanu & Florentina Olivia Bălu & Irina Stancu, 2024. "Identifying the Inter-Relationships Between the Company’s Strategic Sectors," Journal of Financial Studies, Institute of Financial Studies, vol. 16(9), pages 68-80, May.
    • Handle: RePEc:fst:rfsisf:v:16:y:2024:i:9:p:68-80
    DOI: 10.55654/JFS.2024.9.16.05
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    References listed on IDEAS

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    1. Ricardo Malagueño & Ernesto Lopez-Valeiras & Jacobo Gomez-Conde, 2018. "Balanced scorecard in SMEs: effects on innovation and financial performance," Small Business Economics, Springer, vol. 51(1), pages 221-244, June.
    2. Oana Alexandra Albertsen & Rainer Lueg, 2014. "The balanced scorecard’s missing link to compensation," Journal of Accounting & Organizational Change, Emerald Group Publishing Limited, vol. 10(4), pages 431-465, October.
    3. Bernard Morard & Alexandru Stancu & Christophe Jeannette, 2013. "Time Evolution Analysis And Forecast Of Key Performance Indicators In A Balanced Scorecard," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 7(2), pages 9-27.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Strategic lines; Balanced Scorecard (BSC); Partial Least Squares (PLS); Principal Component Analysis (PCA); Corporate Governance.;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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