In a fast-paced globalized world it is very important for transnational corporations (TNCs) to be competitively agile. The Asian currency crisis, shifting foreign direct investment and trade patterns, rise of regional trading blocks, and ongoing developments of the Internet have created environmental turbulence. To gain a competitive advantage, strategic flexibility has become a must for most TNCs. Based on the global strategy framework developed by Yip (1995) and the relevant strategy literature three key areas of strategic flexibility were identified. They are: (i) market flexibility, (ii) production flexibility, and (iii) competitive flexibility. The basic research question was “Does strategic flexibility improves firm profitability?” Three hypotheses were developed, and tested on data from 227 Fortune 500 companies. The independent variables were market flexibility, production flexibility and competitive flexibility, and the dependent variables were the three performance measures Return on Sales (ROS), Return on Assets (ROA) and Earnings before Interest and Tax Margin (EBITM). All three areas of strategic flexibility were found to be significantly related to the firm performance measures.
competitive environment, firm performance, strategic flexibility
