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The process of strategy change in a state-owned
Enterprise operating under crisis
A case study on China Eastern Airlines
during Covid-19 pandemic
BACHELOR THESIS WITHIN: Business Administration NUMBER OF CREDITS: 15
PROGRAMME OF STUDY: International Management AUTHOR: Yushuo Li, Alexander Yavuz
TUTOR: Gershon Kumeto JÖNKÖPING May 2021
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Bachelor Thesis within Business Administration
Title: The process of strategy change in a state-owned enterprise operating under crisis. A case study on China Eastern Airlines during Covid-19 pandemic
Authors: Yushuo Li, Alexander Yavuz
Tutor: Gershon Kumeto
Date: 2021-05-24
Key terms: Strategy, Strategy change process, Pressures for change, Covid-19, business in crisis, State-owned enterprise
Abstract
Background: Understanding the process of strategy change offers a unique insight into the
functioning of an enterprise. While well-researched in the context of Western private firms, this process has attracted relatively little attention in state-owned Chinese enterprises. A research on this topic is particularly pertinent today, when many Chinese state-owned enterprises have attracted attention of international investors and the Covid-19 pandemic situation has created unprecedented challenges for daily operations of enterprises.
Purpose: In order to understand the process strategy change, this research has focused on the
elements of the strategy change process and the role of institutional pressures in it on an example of China Eastern airline: a state-owned listed enterprise in China.
Method: This is a qualitative case study based on 7 semi-structured interviews with the
employees of China Eastern Airlines. A thematic analysis is used for analyzation of the primary data.
Findings/Conclusion: This research has confirmed the presence of concurrent processes of
planned and emergent strategy change processes and the impactful role of normative and coercive pressures in the processes of change. Several deviations from the previous theories of strategy change were detected and attributed to the differences in national and
organizational culture. The findings of this research confirm the general similarity of the process of strategy change during and outside crisis and highlight the potential cultural differences in strategy change in Western and Chinese firm.
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Acknowledgements
First of all, we would like to take the opportunity to thank our tutor, Gershon Kumeto, for being available and giving us constructive feedback and support through the seminars and the whole thesis process.
Secondly, we would like to thank China Eastern Airlines and all the participants for their willingness to take part in our study. Without their contributions with valuable analysis and reflections the thesis would not be possible.
Finally, we would also like to thank Anders Melander for providing the thesis guidelines and dedicating time to read the final paper.
Jönköping International Business School
24th of May 2021
_____________________ _____________________
4 Table of content
1. INTRODUCTION ... 6
1.1 BACKGROUND ... 6
1.1.1 State-owned Enterprises ... 7
1.1.2 Strategy and its types ... 7
1.1.3 Coercive, mimetic and normative pressures ... 8
1.2PROBLEM STATEMENT ... 9
1.3 PURPOSE AND RESEARCH QUESTION ... 9
1.4 METHOD ... 10
1.5 DELIMITATIONS ... 10
2. THEORETICAL FRAME OF REFERENCE ... 12
2.1 LITERATURE REVIEW METHOD ... 12
2.1.1 Search strategy ... 12
2.1.2 Search Criteria ... 12
2.1.3 Selection Criterion ... 12
2.2 STRATEGY CHANGE ... 12
2.2.1 Intended Strategy as a Plan ... 13
2.2.2 Emergent strategy or strategy as a pattern ... 14
2.2.3 Previous analysis of change and strategy ... 15
2.3 PRESSURES FOR CHANGE ... 16
2.3.1 Coercive pressure ... 16
2.3.2 Mimetic pressure ... 17
2.3.3 Normative pressure ... 17
2.4 CONCEPTUAL FRAMEWORK ... 18
3. METHODOLOGY ... 19
3.1RESEARCH METHOD AND DESIGN ... 19
3.2 RESEARCH STRATEGY ... 19 3.2.1 Case Selection ... 20 3.3 DATA COLLECTION ... 21 3.3.1 Interviews ... 21 3.3.2 Instruments ... 21 3.3.3 Procedure ... 22 3.4 QUALITY OF DATA ... 23 3.4.1 Credibility ... 23 3.4.2 Transferability ... 23 3.4.3 Confirmability ... 23 3.4.4 Dependability ... 24 3.5 ETHICAL CONSIDERATION ... 24 3.6 DATA ANALYSIS ... 25
3.7 PROFILE OF THE CASE STUDY COMPANY ... 25
4. FINDINGS ... 26
4.1 STRATEGY CHANGE PROCESS ... 26
4.1.1 Planned Strategy Change Process ... 26
4.1.2 Emergent change process ... 27
4.2EXTERNAL PRESSURES ... 29
4.2.1 Coercive pressure ... 29
4.2.2 Mimetic pressures ... 30
4.2.3 Normative pressure ... 30
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4.4 PLAN ORIGIN OF STATE-OWNED ENTERPRISE ... 31
5. ANALYSIS ... 33
5.1.STRATEGY CHANGE PROCESS ... 33
5.1.1. Planned strategy change process ... 33
5.1.2. Emergent strategy change ... 34
5.1.3. Overall process ... 35
5.2.EXTERNAL PRESSURES ... 36
5.2.2. Coercive pressure ... 36
5.2.1. Mimetic pressure... 36
5.2.3. Normative pressure... 37
5.2.4. The effect of institutional pressures on the strategy change process ... 37
5.3.SPECIFICITY OF A CHINESE STATE-OWNED ENTERPRISE RESPONSE TO CRISIS ... 37
6. CONCLUSION ... 39 7. DISCUSSION ... 41 7.1 CONTRIBUTIONS ... 41 7.2 PRACTICAL IMPLICATIONS ... 41 7.3 LIMITATIONS ... 42 7.4 CRITICAL REFLECTION ... 42 7.5 FUTURE RESEARCH ... 43 8. REFERENCES ... 44 9. APPENDICES ... 49
6 1. Introduction
1.1 Background
The state-owned enterprises are playing a major role in our economy nowadays, with 10% of the world largest firms are state-owned (VoxEU, 2013). Many of the state-owned enterprises in the developing world are public companies and their stock is available on major stock exchanges for trading. While being an interesting investment opportunity, state-owned listed companies are characterized by a very specific type of risk, namely, the conflict of interest between the foreign state and the investor (Sotiroff, 2019), which manifests particularly in the state meddling with the decision-making. Especially, in crisis situations, the interference of the government in the management of a state-owned enterprise can take unexpected forms, often more positive than negative. For example, in the recent standout between USA and Chinese government related to the ban of US flights into China, to protect its airlines (Chokshi, Swanson, & Wang, 2020) and to stabilize market performance (SCMP, 2020) the Chinese government concedes to lifting the ban. This example shows that it is essential for an investor to know, understand and have confidence in the decision-making process during crisis in state-owned enterprises in order to invest wisely.
The crisis is an important factor that mostly leads to change in organizations. Change in organizations has previously been analyzed using the concepts of mimetic, normative and coercive pressures (Latif et al., 2020). This is particularly relevant when understanding of existing and emergent cultural elements (institutions) is in focus. When governments all over the world have adopted various strategies for prevention of Covid-19, the changes
implemented have led to the emergence of new institutions, similar in many ways but also differing across countries and countries. The changes by the governments have triggered changes in the normal functioning of enterprises.
The change in the daily life of an organization can indicate strategy change (Milburn, Schuler, & Watman, 1989). For example, the recent Covid-19 crisis has brought a dramatic drop in customers and sales for airlines industries. Accordingly, the companies needed to create new strategies to survive and deal with loss of profits and expenses. During the process of strategy change, both planned strategy (which follow specific guidelines and plan) and emergent strategy (which is created ad-hoc, without guidelines and procedure) processes (Mintzberg, 1987) can be observed. These different change processes have been analyzed using a step-by-step process for a planned (Quinn, 1978) and emergent (Fink et.al, 1971).
7 1.1.1 State-owned Enterprises
Stated Owned Enterprises are identified as those enterprises where state owns over 50.01% of shares at the national or sub-national level, the state-owned enterprise can implement the government's will by receiving trade-distorting state subsidies or direct command (coercive pressure), regardless of the country (VoxEU, 2013). 10% of the world largest firms are state-owned (VoxEU, 2013). Top countries with the highest number of state-state-owned enterprises among their top firms are China (96%), the United Arab Emirates (88%), Russia (81%) (VoxEU, 2013).
State-owned enterprise differs from private owned firms. First, State-owned enterprises do not solely aim at making money, and they bear a lot of social responsibilities from the government; private enterprises must first consider whether they can make money, and advertise their social responsibilities (Li, 2020). Second, the decision-making of state-owned enterprises is risk-control-oriented; the decision-making of private enterprises is
opportunistic-oriented (Li, 2020). Third, State-owned enterprises must pay attention to the overall situation, political correctness is the first; private enterprises must look at the boss, whether the boss's likes or dislikes. Fourth, the work enthusiasm of employees in state-owned enterprises is mainly driven by ambition; the work enthusiasm of employees in private
enterprises is mainly driven by material stimulation. Fifth, it is very difficult to fire employees in state-owned enterprises, even if the employee did bad job; in private
enterprises, it is easy to fire employees, even if the employees are elites who have created great value (Li, 2020); in private enterprises, even if you are a relative of the boss, you have to work. In summary, Private owned company’s major pressure come from the need of making profit, while for a state-owned company the major pressure comes from the government, which we will discuss further as coercive pressure.
1.1.2 Strategy and its types
Strategy is a complex concept to define (Mintzberg, 1987). Following Mintzberg's (1987) advice to focus on the definition that helps understanding the phenomenon in context, we will focus on the definitions relevant to the change that a strategy can be subject to. In particular, the definitions of strategy as a pattern – emergent strategy - and strategy as a plan – planned strategy - will be used in this study.
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According to Mintzberg (1987) the strategy as a plan (planned strategy) is a guideline to deal with a situation. Mintzberg (1987) argues that the strategy as a plan is defined by mainly two characteristics: being made in advance of the activities and processes defined by them and being developed consciously and purposefully. Strategy as a pattern (or emergent strategy) it a set of consistent behaviors that emerge in a stream of actions Mintzberg (1987).
The processes associated with strategy as a plan and strategy as a pattern have been discussed separately in literature:
The process of planned strategy involves SWOT analysis, then analysis of current investment and product line, and external factors, establishing of broad goals, identification of gap between desired and actual, then allocation of resources required for the plan, finally
modifying it to fit subdivisions, then change of the long-term plan according to the analysis, and finally implementation, monitoring, and revision (Quinn, 1978).
The process of strategy as a pattern involves the initial shock, maintenance of the old system and mechanized handling of problems associated with the stage of defensive retreat, tentative planning and goal setting, and finally adaptation and change leading to growth (Fink et al.,1971).
1.1.3 Coercive, mimetic and normative pressures
The behavior of enterprises is dependent on the institutional environment, in which the company operates (Latif et al, 2020). This influence can be described by coercive, mimetic and normative pressures.
Coercive pressure: the concept of coercive pressure suggests that firms are subjected to pressures from government policy and regulations (DiMaggio & Powell, 1983).
Mimetic pressure arises when a firm sees another firm within the same industry as successful under the same situation (Balabanov & George, 2018). Particularly, in uncertain situations, a firm perceived as successful tends to be a model for the other firms (DiMaggio & Powell, 1983). In that situation, firms will tend to change strategy to mimic the successful firm. Normative pressure is the pressure from different stakeholders that leads companies to
conform to their demands; this pressure arises from expectations, values, and norms within a
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The pressures interplay to trigger changes within an organization (e.g., Latif et al, 2020, Hoejmose, 2013). While most of the previous literature dealt with institutional pressures as a trigger of sustainability and reporting transformations (e.g., Latif et al, 2020, Hoejmose, 2013), Covid-19 crisis can be also analyzed from the point of view of institutional pressures. For example, contact tracing reporting has been implemented within many organizations and responsible behavior practices were not only encouraged but also expected and to a certain degree enforced by these expectations.
1.2 Problem Statement
Previous research has highlighted how employees experience the organizational and strategy change in a State-owned company (Raynard et al, 2020) as well as how employees behave in crisis situations i.e. (Weick, 1993). Fink et al. (1971) have developed a framework of
organizational response to crisis in general, without a particular focus on state-owned enterprises. This model has been extensively used after that in various studies (e.g., Hale, 2005, Billings et al, 1980). It has also been applied to educational organizations (Murphy & Meyers, 2007). Even though schools are often state-owned, the application of Fink’s crisis process theory specifically in the context of a state-owned listed organization has never been attempted. Nevertheless, the application in such a context may shed light into the processes in state-owned companies under various institutional pressures attributed to global crisis. It is logical to assume that due to the direct government control, the pressure from the government and society will be different for a state-owned organization. Previous research had discussed state-owned enterprises in crisis from the law point of view (Backer, 2010), and the point of view of the relationship between the state and the organization (Jones & Zou, 2017);
however, the process point of view remains underexplored.
Overall, the process of strategy change in state-owned enterprises in crisis situation has not been sufficiently discussed in the literature.
This research, therefore, will focus on the process of strategy change in state-owned organizations under conditions of crisis.
1.3 Purpose and research question
The purpose of this study is to understand the process of strategy change in a state-owned enterprise during crisis. Specifically, the coercive pressure, mimetic and normative
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institutional pressures during crisis interplay to cause change within organizations. The change involves both planned and emergent modifications of strategy, which will be explored through the lens of planned strategy (Quinn, 1978) and emergent strategy (Fink et al.,1971). In addition to filling the gap of knowledge, this study will also help the investors to
understand the decision-making processes in state-owned listed Enterprises during crisis situations.
In order to fulfill the purpose of the study, the following questions will be answered:
RQ1: How does strategy change process unfold in state-owned enterprises during crisis? RQ2: How do institutional pressures, especially from the state-owner, affect the strategy change process of state-owned enterprises during crisis?
1.4 Method
In this paper we will use a single case study method. The case under the study has been selected as China Eastern Airlines, a mainly state-owned company directly under the jurisdiction of the central government (Lyn, 2019). It is the first airline of China's civil aviation listed in Hong Kong, New York and Shanghai stock exchange (Lyn, 2019), thus being of interest to international investors.
The data will be collected in the form of semi-structured interviews with employees on different levels in the organization of China Eastern Airlines operating in China. The data will be analyzed qualitatively using thematic analysis.
The interviews will be held in Chinese language and will then be processed and translated into English.
1.5 Delimitations
The study will be limited to the process of strategy change in state-owned enterprises in crisis. A single case study selected for this research limits the applicability of the findings of these studies in countries different in cultural and institutional structure from China; however, the growing interest in Chinese listed companies makes it worthy both from practical and theoretical points of view.
As a qualitative study, this study cannot offer generalization to the population, and only generalization to the theory will be sought. As a snapshot study, this study does not intend to
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capture the development of change over the years, but to capture the process as recounted by the participants.
12 2. Theoretical Frame of Reference
2.1 Literature review method
2.1.1 Search strategy
We followed a systematic review approach to find articles for this review. These articles are mainly selected from peer-reviewed journals databases: Emerald, Science Direct, Wiley. The articles reviewed are about change process, strategy, planned strategy, emergent strategy, enterprises in crises, and institutional theory, regardless of time period or journal. The airline’s business environment during Covid-19 and strategy change in previous crisis or
other companies have also been consulted to understand the context and background.
2.1.2 Search Criteria
Two sets of keywords are used to search articles. The first set of keywords was composed to include all possible theories of strategy change process. These included ‘Strategy change process’, ‘strategy change process during Covid-19’, ‘process of strategy change’, ‘strategy innovation process’. The second set of keywords included different components of the strategy change process, according to the intended strategy section below. These keywords included, ‘coercive pressure and strategy change’, ‘mimetic pressure and strategy change’, ‘normative pressure and strategy change’, ‘modification of old strategy’, ‘emergent strategy’, in addition, in order to better understand coercive pressure and strategy change and the uniqueness of state-owned enterprise, the keywords related to institutional pressures were combined with ‘airline business during Covid-19’, ‘China’s governmental strategy against Covid-19” and also “state-owned enterprise’. We also searched “strategy in airline
companies” associated with similar social/economic crisis or in other parts of the world, by including keywords like “SARS airline effect”, “airline’s strategy against Covid-19”.
2.1.3 Selection Criterion
The examined articles were selected to collect the studies related to strategy change process, particularly: (1) strategy change due to external pressures; (2) state-owned enterprises as opposed to private enterprises during crisis; (3) global crisis and institutional change.
2.2 Strategy Change
Mintzberg (1987) described the concept of strategy as a combination between planned strategy and emergent strategy (among others). Similarly, Quinn (1978) argued that the strategy change tends to evolve as the result of internal decision and external event coming
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together to create a consensus in the top management (Quinn, 1978). Thus, strategy change has both intended and emergent components.
2.2.1 Intended Strategy as a Plan
We will first review the attributes of an intended strategy change.
According to Quinn (1978), intended strategy change should be done using formal systems planning approach, which is a systematic analysis of the factors with a step-by-step process, the main element includes:
1.Strength, Weakness, Opportunity, Threats (SWOT) analysis
2. Project current investment, product lines, sales and profits into current and future needs 3. Analyzing external and opponent actions for possible opportunity and threat
4. Establishing broad goals for subsidiary companies 5. Identifying gaps between existed and desired result
6. Communicating assumptions and plan with company subdivision
7. Request proposed plan with supporting resource/actions needed from subdivision 8. Reviewing and revising the divisional plan to fit the organizational goal
9. Changing the long-term plan 10. Implement the plan
11. Monitoring and revising
The potential intended flow of strategy change, connecting the items in the list above, is presented in Figure 1 below.
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Figure 1. Example of intended flow of strategy change. Made based on Quinn (1978).
To conclude, identifying any or all subprocesses listed above may indicate planned change of strategy.
2.2.2 Emergent strategy or strategy as a pattern
In reality, change of strategy in large organizations do not usually follow highly formalized textbook approaches (Quinn, 1978). Instead, the incremental changes over time lead to strategy change. Understanding the process of emerging strategy could be viewed from the point of view of the general change in an organization in response to a crisis. Fink et al. (1971) have developed a framework of processes that an organization undergoes in response to a crisis. These processes are allocated to the following phases: shock, defensive retreat, acknowledgement, adaptation and change. The definitions of the phases and the processes that an organization undergoes during them are discussed below:
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- Shock is defined as the initial stage of becoming aware of a threat to organizational survival. The stage is accompanied by the process of awareness, concern of
individuals within the organization about themselves, fragmentation of interpersonal relationships (Fink et al, 1971).
- Defensive retreat stage starts when organizations impose a control structure designed to reduce the treat. The processes associated with this stage is maintenance of the old system, centralization of decision-making, protective cohesion, ritualized
communication, mechanized handling of problems (Fink et al, 1971).
- Acknowledgement stage is characterized by realization that the defensive retreat state is defeating and growth preventing. The processes in this stage are
self-examination and interpersonal confrontation, exploration of problems, tentative planning and goal setting, trying out of structural changes, growing excitement about the future changes (Fink et al, 1971).
- Adaptation and Change is the stage of the renewal of the growth process. It is
characterized by the following processes: growth, interdependent work, authentic and congruent communication processes, task-oriented decision-making, project-based leadership emergence, effective coping, exhaustive examination of alternative goals (Fink et al, 1971).
2.2.3 Previous analysis of change and strategy
Despite in an ideal world strategy changes according to a plan as proposed by Quinn (1978), in real world change happens due to some combination of convoluted processes and has been analyzed in literature as such.
The process of change of strategy have been explored by McCarthy (2003). Using a sample
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more planned and deliberate approach to strategy development, in other words, planned strategy processes start to dominate emergent ones.
At the same time, Covid-19 crisis has been identified as a reason for the development of coopetition (Crick & Crick, 2020). Coopetition strategies were previously analyzed as emergent strategies, i.e., strategies that were not intended but appeared spontaneously under influence of various environmental factors (Mariani, 2007).
Weick and Quinn (1999) also suggested to add dimensions of rhythm and rate to characterize planned and emergent change. Specifically, on the micro-level of analysis (within
organization), the authors argued that strategy changes due to small but frequent adjustments across organizational units.
Further we review the influence of the environment on the change of organizations with a particular focus on strategy change.
2.3 Pressures for change
Organizational strategy often changes due to organizational (e.g., Murphy & Meyers, 2007,
Sellnow, 1993), country-level (Jones & Zhou, 2017, Tsai, 2006), or global crises (e.g.,
Witcher & Chau, 2012). However, to understand the process of strategy change, it is important to understand the forces driving the change. These forces have been explained in the institutional theory as coercive, mimetic, and normative pressures (DiMaggio & Powell, 1983).
2.3.1 Coercive pressure
The concept of coercive pressure suggests that firms are subjected to pressures from government policy and regulations (DiMaggio & Powell, 1983). Government control has been recognized as playing a main role in resulting strategic change of organizations (Deng 2009). The government policy in communist countries like China, economical operations are largely controlled by the government even though it is a market-based economy (Child & Tse, 2001). For example, governmental regulation still exerts significant influence on scarce resources, such as capital and land (Meyer & Lu, 2005). Strategic change by firms that are approved by the government may help to gain access to State-owned resources that could possibility contribute to the profit-making process. When it comes to Covid-19, governments are encouraging firms to make strategic change that will not facilitate the spread of the virus
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of through regulations and policies sometimes even subsidy. It is sometimes mandatory for the firm change the strategy according to governmental policy.
Coercive pressure from the Chinese government has been discussed in the literature due to its
power. For example, Whelan & Muthuri (2017) have found that the pressure from the
national government in China on the organizations is so strong that it overpowers the international common shared values. Additionally, the instances of Chinese government interfering with the governance of their own enterprises are not rare and could be considered as an established practice (Sun, 1999), which is different from democratic countries. In countries in other parts of the word, such as EU countries, similar pressure is seen to state-owned enterprises to make it a tool for the government to implement the services for the state while following their values when some of the private owned enterprises may refuse to provide service for vulnerable consumers or remote areas (European Union, 2016).
2.3.2 Mimetic pressure
Mimetic pressure arises when a firm sees another firm within the same industry is successful under the same situation especially handling uncertainty (Balabanov & George, 2018). In the uncertain situation, perceived successful firm tends to be models on other firms (DiMaggio & Powell, 1983). In that situation, firms will change strategy to the one that is successful in the example firm. For example, in the context of strategic change triggered by
internationalization, firm tends to change their strategy to imitate successful firms’ market entry strategy (Guille, 2002). Since the Covid-19 time is very uncertain with government policy and consumer behavior, imitation of strategies of more successful firms is expected. In addition, by learning from peer firm’s failure, a company may adjust its strategy to avoid the same failures.
However, it is likely that mimetic pressure had much lesser role under the conditions of abrupt changes introduced by the pandemic.
2.3.3 Normative pressure
Normative pressure is the pressure of other people that leads us to conform to their demands, it arises from expectations, values and norms within a company (Latif et al., 2020).
Normative pressure comes from suppliers, associations, customers, and even the media. They voice their concern to force the company to change in order to maintain a good reputation.
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Companies are pressured to change because with damaged reputations can suffer both loss of external loss and competitive advantage lose (Latif et al., 2020).
2.4 Conceptual Framework
Change in organizations is analyzed through the lens of institutional theory, more precisely through the influence of coercive, mimetic and normative pressures (DiMaggio & Powell, 1983). At the same McCarthy (2003) has claimed that strategy is crisis-driven, therefore, during crisis, not only change in organizations is expected but specifically a change of strategy. Such change can be both emergent and planned.
Thus, to explain the process of change of strategy, we will adopt the lens of coercive, mimetic and normative pressures as driving forces of change, which, at the time of crisis, takes form of emergent and planned strategy change (see Figure 2). Exploring the actual process of strategy change is expected to improve our understanding of the role of institutional pressures in the change processes in state-owned organizations attributed to crisis.
19 3. Methodology
3.1 Research method and design
Our research approach is a qualitative case study, where primary data was collected by conducting interviews with employees of an organization (our case under study). Firstly, we used deductive method by creating a conceptual framework (Figure 2) based on existing theory of processes of strategy change. Secondly, insights emerged in the study that cannot be explained by the conceptual framework were used for inductive theory building or extension: this approach has been previously successfully tested in multiple studies
(e.g., Burgess (1984), Bryman (1988), Silverman (2015) and Hammersley (2020)). Thus, the research design is firstly confirmatory and then exploratory.
The study was done using qualitative method of interviews. Qualitative methodologies derive from interpretivist sociological tradition (Mason, J. (2017). The essence of this tradition is an iterative process of research where findings are compared to everyday experiences and meanings, until a full picture of the phenomenon under study emerges (Mason, 2017). In this study, in-person and/or online interviews were used to collect the data; thematic analysis method have been used iteratively until the phenomenon is fully explained. See appendix 1. We have based our study on social constructivist perspective. In this perspective the meanings and interpretations of the reality and events by the research participants are of interest
(Creswell & Poth, 2018). Thus, we, as researchers, have sought to capture the widest variety of views on the processes of strategy change during crisis in order to confirm, challenge, and extend existing theories.
3.2 Research Strategy
Our research approach is a qualitative case study, where primary data was collected by conducting interviews with employees of an organization (our case under study). Firstly, we used deductive method by creating a conceptual framework (Figure 2) based on existing theory of processes of strategy change. Secondly, insights emerged in the study that cannot be explained by the conceptual framework were used for inductive theory building or extension: this approach has been previously successfully tested in multiple studies
(e.g., Burgess (1984), Bryman (1988), Silverman (2015) and Hammersley (2020)). Thus, the research design is firstly confirmatory and then exploratory.
The study was done using qualitative method of interviews. Qualitative methodologies derive from interpretivist sociological tradition (Mason, J. (2017). The essence of this tradition is an
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iterative process of research where findings are compared to everyday experiences and meanings, until a full picture of the phenomenon under study emerges (Mason, 2017). In this study, in-person and/or online interviews were used to collect the data; thematic analysis method have been used iteratively until the phenomenon is fully explained. See appendix 1. We have based our study on social constructivist perspective. In this perspective the meanings and interpretations of the reality and events by the research participants are of interest
(Creswell & Poth, 2018). Thus, we, as researchers, have sought to capture the widest variety of views on the processes of strategy change during crisis in order to confirm, challenge, and extend existing theories.
3.2.1 Case Selection
The case selection criteria included in this study were as follows: a listed, state-owner company in a country presenting high interest to the investors; country-wide crisis to allow examination of the institutional level pressures for change.
For our case study we chose China Eastern Airlines. China Eastern Airlines is a state-owned company (Lyn, 2019) with headquarters in Shanghai and subsidiaries in different cities such as Kunming and Guangzhou. It is totally 71.74% state-owned (ICAO, 2008) and around 30 percent private owned.
China Eastern Airlines is one of the major state-owned airline company in China (China Eastern Airlines, 2018). China Eastern Airlines Group Co., Ltd. ranked 155th in the "2016 Top 500 Chinese Enterprises". It is the first airline of China's civil aviation listed in Hong Kong, New York and Shanghai stock exchanges (Lyn, 2019). Overall, Chinese companies have presented a growing interest among international investors since the reforms of
last decade (Carpenter, 2015). Logically, an airline company of high ranking is attractive for international investors. In addition, since the open-door policy and the implementation of a market economy, China still uses state-owned enterprises as main means of intervention in the economy (Garnaut, Song, & Yao, 2006), therefore the case of China is relevant to the investors and special.
Alternatively, we could have selected any other listed company from the "2016 Top 500 Chinese Enterprises" bulletin; however, we’ve chosen China Eastern Airlines due to easy access to this company due to personal connections of one of the researchers. In a qualitative research, underpinned by social constructivist perspective having a pre-existing relationship with the object(s)/subject(s) of study is considered beneficial as the bias is unavoidable and
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the relationships may bring extra insights and allow fuller disclosure during the interviews and better interpretation of the interview transcripts (Creswell & Poth, 2018). To control for the bias, the second researcher, who is not conducting the interviews) have served as a critic and an outsider in the interpretation of the results.
The crisis we chosen is the crisis associated with Covid-19 pandemic because it is a country-level and even global crisis thus allowing the insight into the institutional pressures of
organizational change. Any other global or country-level crisis could have selected; however, for an investigation based on narratives collected in interviews, recency is important as after some time, the memories of participants fade, and their stories become less accurate.
3.3 Data Collection
3.3.1 Interviews
In order to answer the research question, structured questions were asked during interviews for the participants to express their thoughts freely.
Semi-structured interview guide was be used, questions may be different with different participants as the interviewer adjusted to the information provided by the interviewee and have simply guided the interviewee to continue the story relevant to the research questions. The participants can control the length of their answers according to their willingness of expression. In addition, researchers can change the following questions or response immediately after the participants answers the questions (Kallio et al, 2016). Such flexibility is important in social constructivist paradigm, as it allows the meanings to be developed and communicated during interviews (Creswell & Poth, 2018).
3.3.2 Instruments
The instrument for data collection is presented in Appendix 1. The
researchers have conducted online or in person meetings with employees in China Eastern Airlines to ask them about old and new strategies used and adopted by the company since the beginning of the Covid-19 pandemic, the interviews were conducted in Chinese, transcribed and translated into English for analysis in English.
Besides the questions written in the interview guide, the researcher may pose other sub questions based on the previous answer. This is permissible and encouraged by interpretive methodology (Mason, 2017) as it allows the researcher to follow an iterative process,
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switching between data collection and interpretation as deemed necessary. All deviations from the original interview plan were noted for analysis. The questions were not sent to the participants to ensure that the participants cannot discuss the questions between themselves, thus potentially preparing answers in groups, before the interviews.
3.3.3 Procedure
The selection criteria of the respondent include: 1. is currently an employee of China Eastern Airlines, 2. are a part of strategy implementation and development.
The number of interviewed is 7, with an average duration of 33 minutes
Participant number Position Duration
1 Minister of group department 50 min
2
Flight dispatcher (operation
deployment) 30 min
3 Department deputy manager 30 min
4 Common employee 30 min
5 Middle management 30 min
6 Head of small department 30 min
7 Common employee 30 min
Table 1 Interview Participants and duration
First the company’s respondent was contacted to get approval to join the study. Then the researchers contacted the participants to explain the study and schedule a date. Finally, on pre-agreed meeting time, GDPR Thesis Study Consent Form were forwarded and signed, then the interview can be started.
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3.4 Quality of Data
The essential factor with the trustworthiness of findings from a qualitative content analysis is validity (measuring the right things) and reliability (measuring the things right).
(Graneheim & Lundman, 2004). To make sure the validity, after we ask the background, then we ask questions developed from the model of planned strategy change and emergent
strategy change, which can distinguish between the model they used. Then to make sure the reliability, we ask further questions based on the respondent's response to a question until get enough information relevant to the topic.
3.4.1 Credibility
The whole paper has been reviewed and given feedback by the tutor for several sessions. To establish a high level of trustworthiness, the researchers have evaluated and made change to the project frequently. Data collection from previous literature was extensive and relevant for the research question, this can be seen section 2.1 Literature review method.
We have made sure the voluntary participant's responses are honest and open by given possibility to withdraw, anonymity and confidentiality.
3.4.2 Transferability
The findings of this research can have implications to investors who is looking to invest in state-owned enterprise or for the government employees. Due to limited time and resource the investigator conducts a qualitative study with small sample size, and it may be difficult to apply the result to a larger population. Therefore, it may be argued it has a low transferability to enterprise outside China or facing a different crisis. However, we believe that our
findings were extended the current theories of the process of strategy change are therefore, important to see the full picture of the phenomenon.
3.4.3 Confirmability
The researchers in this study have taken necessary steps to reduce bias from the authors. This is done by taking notes of researchers’ thoughts during interviews and analysis. Also having two researchers safeguards to a certain degree from bias as the researchers can hold each other accountable for any one-sided interpretations. Equally importantly, the interview guide has been created open-mindedly, allowing the research participants to express
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themselves freely without feeling the need to comply with certain expectations: the result of the study should emerge from the data itself, notwithstanding previous theories and
frameworks. The coding process is demonstrated in section 3.1.3 Data analysis, to prove that the data were not twisted in any way. In addition, the use of raw quotes collected from the interviews in the final report have increased the level of confirmability.
3.4.4 Dependability
For the entire process to be logical, traceable, and clearly documented, detailed description of the data gathering is presented in section 3.1.2 with instrument and procedure to support the dependability criterion. In addition, the researchers have followed the same methods for analysis of all interviews.
3.5 Ethical consideration
Before the interview the GDPR Thesis Study Consent Form were translated into Chinese using google translate, then sent and explained to the participants then get signature and send to tutor, any participants don’t agree with the form were be excluded from this study.
• Respect for the company - the company was respected, and their image would not be harmed because of this study.
• Justice - everything was done legally and informed in advance.
• Confidentiality - The data is only used for this study, any sensitive information disclosed by the participants, whether related to the participant or the company are not published.
• Freedom - interviewee can leave any question unanswered if they feel they do not want to talk about it.
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3.6 Data analysis
Our analysis was concurrent with data collection, as we took notes and make memos during and between interviews and modify the questions if such modification has contributed to better realizing the objectives of this study.
To evaluate the data, the content of interview was recorded and transcribe into text and translated into English, if there are expression that can change meaning in translation it was be noted. The interviews text was then be analyzed using thematic analysis
using Nvivo software. Specifically, we used coding, category creation and theme extraction (Miles & Saldaña, 2020).
Coding is analysis of text which describe similar data chunk, category coding is grouping of similar concept coding. We had begun with First Cycle coding by reading the text and labeling them with words, then Second Cycle coding by grouping the first cycle coding to derive even more general themes through jottings and memoing (Miles & Saldaña, 2020). We then connect those bullet points with the concepts in our paper to relate the finding of the case to the existing theory. This comparison with the theory resulted in assertions to confirm existing theoretical understandings and propositions to extend the existing theory or develop a new one.
Since the analysis were performed by two researchers, it increases the explanatory ability and provide sound interpretation of the data (Burla et al., 2008; Schreier, 2012).
3.7 Profile of the case study company
China Eastern Airlines is a state-owned company with headquarters in Shanghai and subsidiaries in different cities such as Kunming and Guangzhou. China Eastern Airlines is one of the major state-owned airline company in China (China Eastern Airlines, 2018). China Eastern Airlines Group Co., Ltd. ranked 155th in the "2016 Top 500 Chinese Enterprises", Is a wholly state-owned company directly under the jurisdiction of the central government (Lyn, 2019). It is the first airline of China's civil aviation listed in Hong Kong, New York and Shanghai (Lyn, 2019). It is totally 71.74% state-owned (ICAO, 2008) and around 30 percent private owned.
26 4. Findings
Themes Codes Codes Codes Codes
Employee relations
Happiness Support and
responsibility
Safety Employee
support Operational
changes
Cost-benefit Efficiency Response to
pressure from competition Innovative marketing Implementation participants
All employees High-level
management Government involved in planning Previous strategy Previous strategy focus
Development Stability &
safety
Government Analyzing/plan
ning for the future
Expansion post pandemic
Execution graduate change
Coercive pressure Government pressure in mode of work Planning pressure Regulation's pressure Normative pressure Expectation from shareholder Expectation from society Mimetic pressure Competitive pressure
Table 2. Thematic Analysis
4.1 Strategy change process
4.1.1 Planned Strategy Change Process
All participants have confirmed that the company does analyze the strengths, weaknesses, opportunities, and threats before it does the strategy change and all of them have also mentioned that current investment, product and sales profit factors affect the formulation of the plan. This analysis is done regularly:
we have to analyze every month and every quarter, and then the
analysis is basically still a systematic analysis, and then we also make some [adjustments] based on the analysis. (Participant #1)
All the participants except for Participant #4 agreed that external factors are considered when revising the original plan. In particular, the following external factors are considered:
...technological innovation, marketing innovation, company resources, the strengths and weaknesses of the company and its opponents, the strategy of
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the opponent, and the situation of the company and the opponent (Participant #2).
Internal conditions, such as "internal actual conditions" (Participant #3) were also considered in the planning of a strategy.
The participants were also asked whether there is a gap existed between the current strategy and the desired strategy. Only two participants thought that the original desired strategy was not fully realized, five of them affirmed that the goal is reached. Two of them, however, mentioned that later changes were implemented to improve the original strategy plan: - “No, [the goal has not been fully reached immediately], [the new plan emerged] after the creation of a preliminary plan, and later ...changes” (Participant #1)
- “If it is not fully reached, [we] further optimize the operation, marketing, and control levels.” (Participant #2).
Thus, while most participants believed in the success of the planned strategy, some also mentioned the elements of adjustment that emerged and were important for the success of the change.
4.1.2 Emergent change process
This section will discuss the elements of the emergent strategy change process revealed in the interviews.
4.1.2.1 Shock stage
Despite the strong name of this stage, this stage is mostly characterised by awareness and increased attempts to ensure protection. It was apparent in the interviews that all interviewees except Participant #4 noticed this stage. The difference was mostly in the range of effects of the pandemic that the interviewees were willing to discuss. For example, Participant #1 noticed the financial aspect: “One of the impacts [of Covid-19] on work is that you must invest more in protection” (Participant #1). For Participant #3, the Human Resources aspect was the most important: “The personnel isolation regulations once caused a strain on the company's human resources” (Participant #3).
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Participant #2 and some others (Participant #5, #6, #7) discussed the operational impacts: “[the effect is] workplace pandemic prevention requirements, flight operation pandemic prevention procedures, work and meeting modes change” (Participant #2).
4.1.2.2 Defensive retreat stage
In the defensive retreat stage, employees affected by a change try to reinstate stability and maintain the old system. Sometimes, this is done using old strategies that worked before, such as "reduce expenses " (Participant #3) or "monitor and predict passenger demand " (Participant #2)
At the same time, the management tried to increase control of the situation by "adjust[ing] human resources...for pandemic prevention and control work " (Participant #5).
4.1.2.3 Acknowledgement stage
The acknowledgement stage is associated with exploration of problems and cooperation between employees. One of the participants mentioned that a special software system was made available to the employees to put forward suggestions: “every company employee can put forward some targeted suggestions on this platform.” (Participant #4)
Another participant discussed cooperation or "develop together" (Participant #7) as one of the measures promoted to increase competitiveness:
4.1.2.4 Extent of change
According to all the participants, the extent of change was mainly small while the major company strategy remained the same: “changes are small, because the main business is the same” (Participant #3).
Several explanations for the lack of change were offered. Firstly, the size and history of the airline were quoted as the causes:
...change is small … the overall direction remains the same. Because of the large scale of the company, the long history of the establishment, the large number of personnel involved and the pain points of operation, the reform
can only be carried out gradually (Participant #2).
Another opinion was that the strategy formulated by the government remained in place and did not allow much deviation:
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There are small changes, but the overall direction remains the same. Because the country has formulated the 14th Five-Year Plan, all enterprises are operating around the country's macro policies and moving
forward steadily. The management emphasizes the need to maintain strategic determination (Participant #5).
Another possible explanation for the small changes observed was suggested by Participant #1:
previous strategy ...is ineffective ...[but] sometimes there is too much investment, and then when the response may be slow at the beginning, the
loss will increase if the capacity is not adjusted in time (Participant #1).
4.2 External pressures
This section summarizes the responses related to the institutional pressures experiences and noticed by the employees.
4.2.1 Coercive pressure
The participants were asked to discuss the pressure from the government onto the company during the pandemic. Participant #3 saw the pressure only in the need to "...reduce losses". For participant #2, the pressures were largely operational, i.e., the pressure from the
government included: “...international flight operation (regulations), pandemic prevention requirements, (changes in) company operations, and personnel (psychological) stability” (Participant #2).
However, for Participant #1, the main pressure from the government was to make money in the near future: “State-owned Assets Supervision and Administration Commission require major state-owned enterprises to achieve profitability in the second half of the year [2021]” (Participant #1). Participant #1 has also discussed the importance of the role of a state-owned enterprise in the government's political goals:
as a major state-owned enterprise, [China Eastern airlines] still has a political position among the state-owned enterprises in China, and the political position is relatively high. It should be said that there are clear requirements, but it will not be said to be mandatory. You don't necessarily want to emphasize that it is mandatory...or something. But as a state-owned enterprise has a political position, it will go all out to find ways to meet the
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The interesting thing to note here is that non-mandatory requirements from the government are still prioritized by the enterprise.
4.2.2 Mimetic pressures
The participants were aware of the existence of pressures from their competitors. In the interviews it became clear that only Air China and China Southern Airlines were viewed as the competitors.
Different aspects of competitive pressure were discussed. For participant #2, the competition means increased pressure for the company due to decreased resources and consequently increased expenditure: “[competitors] intensify market competition, grab limited customers and human resources, and increase company operation and marketing costs.” (Participant #2). This opinion was shared by Participant #6 as well.
Participant #1 has highlighted that since the competition is tight, the relative success is temporary; however, it does make competitors search feverishly for what is the factor of that success with the goal to mimic it:
Our pressure comes from no matter what the data is, as long as it is
lower than (that of the competitors), we will feel it is a kind of pressure, and then feel that it will be our goal of improvement and we will stick to it
tightly (Participant #1).
In order to stay aware and on top of the competition, China Eastern airlines has also implemented regular reporting and analysis:
...we conduct a benefit analysis every month and every quarter, and then one of the most important aspects of the benefit analysis is to compare the
three major airlines... after the comparison, we will make our decision
(Participant #1).
Participant #4 and Participant #7 were of opinion that no competition pressure exists, while Participant #5 discussed the pressure as mostly affecting the operations.
4.2.3 Normative pressure
The majority of the respondent (6 out of 7) said that there was no pressure from suppliers, passengers, and aviation associations and other shareholders. Only Participant #2
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4.3 The impact of the pandemic on the company
During the interviews, the participants were asked to explain the impact of Covid-19 on the company. The participants explained different things they observed depending on their job role and position in the company. Most of the participants have mentioned decrease in flight volume and decrease in profit. Some participants mentioned increase in operational cost due to the governmental regulations against Covid-19, which require additional sanitation routines and equipment and other measures to stop the spread of the virus.
The participants have also noticed " wasted resources " (Participant #2) and decrease in salary and bonus (Participant #1, #2). The terms “decrease”, “drop”, and "fall" were mentioned in nearly every interview. For example:
- “Decrease in flight volume, increase in operating costs, decrease in sales and profits...” (Participant #2);
- “...direct passenger flow decreases, decreases, and then our income decreases, and it drops a lot, and then our personal bonus is also reduced” (Participant #1);
- "The number of passengers has decreased, and the company's main business income has dropped significantly” (Participant #3);
- “Earnings fall ...” (Participant #6).
4.4 Plan origin of state-owned enterprise
The interviewees were asked about the actors/participants in planning decisions for the company, all of them have mentioned the company is the main plan maker. Participant #1 also provided further details about the participating departments:
…[the origin of the plan] is generally at the leadership level of our company, as well as [at the level of] functional departments: one is the
planning department, the other is the marketing department, and the finance department.
Some interviewees also mentioned the government as another participant in the planning process:
- “The government and the company jointly develop a company plan” (Participant #2); - “The government formulates policies in terms of controlling the epidemic... the
company's senior management formulates policies in terms of deepening the reform of the enterprise and enhancing the vitality of operations” (Participant #5).
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Overall, the responses showed that the employees have different perspectives and understanding of the strategy planning process.
33 5. Analysis
The following chapter will present the answers to the research questions based on the analysis of the eight themes identified during the data consolidation. The answers will be analysed in relation to the existing literature in an attempt to verify and extend the existing theories and gain deeper insight into to the phenomenon of strategy change under conditions of crisis in state-owned enterprise.
The analysis will start with the first research question, i.e.:
RQ1: How does strategy change process unfold in state-owned enterprises during crisis? And continue with the second research question:
RQ2: How do institutional pressures, especially from the state-owner, affect the strategy change process of state-owned enterprises during crisis?
5.1. Strategy change process
The research has started with an assumption that the strategy change process in the researched company can follow either planned or emergent strategy change process. However, the data collected suggests that the elements from both planned and emergent processes were present. The following sections discuss the elements of both processes found in the discussions with the participants:
5.1.1. Planned strategy change process
The responses from the participants showed us that in the strategy change process, the participants recognized the following elements:
*Analyzation of Strength, Weakness, Opportunity, Threats
*Project current investment, product lines, sales and profits into current and future needs *Analyzing external and opponent actions for possible opportunity and threat
*ID gap existed between existed and desired result
These elements are part of the elements of strategy change process suggested by Quinn (1977); however, in this research we found only four elements out of eleven suggested in the initial framework (see Figure 1). The explanation for this can be also found in the actual
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interviews: several participants described the change of strategy as slow and insignificant, which can explain the fact that only the elements from the beginning of the Quinn's (1977) framework were found. If the study continued for a longer period of time (i.e., if another set of interviews could have been done a year from now), the complete list of elements in
Quinn’s (1977) framework could potentially have been found. Overall, based on the results of this study, Quinn's framework still provides a useful tool for analysis of a planned strategy change as no extra elements were found.
5.1.2. Emergent strategy change
Mintzberg (1987) observed that realized strategy in real world is a combination of planned and emergent strategy. According to Quinn (1977), emergent strategy change usually does not involve major change, but rather small change. In this study, the participants confirmed that the changes to the strategy during the period of the pandemic were rather small and, in fact, many elements of an emergent strategy process were observed.
The analysis of the interviews has confirmed to presence of the following stages in the strategy change process in China Eastern airline:
Shock stage: the initial stage when the pandemic was declared was described by the
participants in negative terms, including fear, loss, waste of valuable resources. However, no mentioning of fragmentation of personal relationships (Fink et al, 1971) was mentioned. On the contrary, the employees discussed “happiness stations” (Participant #1) set up at work to promote the feeling of connectedness and care and sending out condolences' letters to the employees and families not at work.
Defensive retreat stage: the defensive retreat stage did not show up that clearly in the responses of the participants. While the participants mentioned increased investment in protection from the pandemic, which is in line with protective cohesion described by Fink et al. (1971), no evidence of ritualized communication, mechanized handling of problems, or centralized decision-making was found. Overall, maintenance of the old system characteristic to this stage (Fink et al., 1971) was evident mostly in no change of the financial goals and operational objectives of the company. The difference between the description of the stage provided by Fink et al. (1971) and the findings of this study may be explained by the different organizational culture and consequently, different perceptions of the employees regarding ritualized communication, mechanized handling of problems, and centralized decision-making.
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Acknowledgement stage: this stage is associated with self-examination, exploration of problems, tentative planning, trying out of structural changes, and growing excitement about the future (Fink et al., 1971). In the analyzed interviews, only the evidence for tentative planning and exploration of problems was found. The absence of more advanced elements of this stage can be explained by the fact that the company have just entered in this stage and more time is required for structural changes to become obvious, which would then trigger excitement about the future. No discussion of self-examination in the interviews can also be attributed to the influence of Chinese culture where "losing face" in public is generally avoided and discussing of personal feelings and emotions may lead to "losing face".
Adaptation and Change stage was not observed in the interviews, which likely signifies that it is too early in the strategy change process to come to this stage.
5.1.3. Overall process
The results of the study give an indication of how the process of strategy change unfolds in a crisis situation. In line with Mintzberg's (1987) theory, the change of strategy happens due to a “merge” of planned strategy and emergent strategy. However, due to the timing of this research, not a full process was observed. Rather the beginning of the process of strategy change was apparent, with only a few participants recognizing that the changes associated with the pandemic resulted in any changes in strategy. In addition to what has been discussed in the previous theories (Quinn, 1977, Finn, 1971), this study has identified several
divergences that might be attributed to the difference in organizational and national culture in China Eastern airlines. These differences include the apparent absence of self-examination, ritualized communication, centralized decision making, and mechanistic handling of problems. These findings should be interpreted with caution as they are likely to mean the difference in perception regarding these processes as opposed to the actual absence of these processes.
This description of the strategy change process is expected be useful for investment analysts, who want to understand the impact of crisis on Chinese state-owned enterprises and how the change unfolds and what it might imply – strategically and operationally.
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5.2. External Pressures
In examining the pressures affecting China Eastern airline during the Covid-19 crises, this study has found elements of mimetic, normative, and coercive pressures. These pressures and their influence are discussed in this section.
5.2.2. Coercive pressure
Coercive pressure is defined as a set of formal and informal pressures, manifested in
regulation, sanctions, and punishments (Latif et al., 2020). In this research the focus was on coercive pressure from the government on China Eastern airline and its impact on the change of strategy. While wide-ranging impacts of the governmental pressures arising from the regulations to fight pandemic were discussed by the participants, their impacts were mostly operational. The role of government in the strategy change process was discussed in milder terms, where the government was discussed as a partner in the definition of a new strategy and the company itself was seen as the main decision maker. These results confirm that coercive pressure exists and for state-owned enterprises is coming mainly from the government. They also confirm that this pressure is able to affect wide range of company operations, especially this seems to be the case in crisis, when the government increases regulations in the areas, which are normally left for individuals and companies to decide. However, the role of the state coercive pressure in the change of strategy was not found to be decisive. As with the previous results, caution should be exercised in interpreting these findings because the discussion of the government pressure in mild terms may be associated with cultural expectations as well as with the actual mild pressure.
5.2.1. Mimetic pressure
Mimetic pressure arises when a firm sees another firm within the same industry is successful under the same situation (Balabanov & George, 2010). In this study, the participants
confirmed that this pressure is always current – during the pandemic as well as before it. In fact, the examination of the competitors is done regularly on a monthly basis, and any number suggesting better performance by another airline is a source of concern and, consequently, pressure to improve the results of China Eastern airline. Additionally, this pressure is exacerbated by the fact that state-owned enterprises get their performance objectives from the government and the crisis has increases the competition for each passenger due to reduced demand.
37 5.2.3. Normative pressure
Normative pressure arises from company norms and values and is exhibited by suppliers, customers, etc. (Latif et al., 2020). In this research, the participants rejected the presence of this pressure, thus, confirming that they have not felt this pressure in the situation of the pandemic. While it is unlikely that the pressure does not exist, the findings can be interpreted as this type of pressure was deprioritized as other concerns filled the minds of the
participants. For the purposes of this study, the conclusion is that this pressure did not play any significant role in the change of strategy.
5.2.4. The effect of institutional pressures on the strategy change process
Based on the findings of this research coercive pressure and mimetic pressures played a role in organizational change and were a trigger for the start of the strategy change process. This is in line with the previous research on the influence of institutional pressures on the change processes in organizations. The interesting finding here is that the mimetic pressure
manifested in the same processes and behaviors during the crisis as before the crisis (i.e., monthly analysis of competitors); however, this pressure has increased due to increased competition for customers and no alteration of the pre-pandemic performance goals. Coercive pressure was found to increase its reach to all areas of life of employees, reaching well
beyond their working lives. However, the impact of the coercive pressure was discussed mostly in terms of operational changes, and changes on a strategy level were described in general, as if the crisis had no impact of the development of strategy. Normative pressure has not been observed by the participants as an important contributor to the strategy change process. This is rather different from observations of previous researchers, who discussed normative pressure as an important contributor to adoption of new reporting strategies (Latif et.al, 2017), creation of new environmental strategies (Hyatt & Berente, 2017), acquisition of strategic knowledge (Liao, 2018) among others. This might seem contradictory to the
previous research; however, the most likely explanation is that cognitively, Chinese
employees are less aware of the presence of normative pressure. This is due to the importance of interdependence in Chinese culture and consequently the prevalence of holistic cognition that does not differentiate, in an ideal case, an individual from the group/collective (Varnum et al., 2008).
5.3. Specificity of a Chinese state-owned enterprise response to crisis
In answering the two research questions, this study came across interesting divergences from the previous theories. Particularly, in the process of strategy change, the elements of
