ECONOMIC RATIONALE FOR CHOOSING STRATEGIC ALTERNATIVES FOR THE DEVELOPMENT OF SERVICE ENTERPRISES IN CONDITIONS OF HIGH MARKET COMPETITION

Abstract

The purpose of this study is to quantitatively assess the relationship between the strategic characteristics of service enterprises, the economic outcomes associated with their implementation, and enterprise development indicators under conditions of high market competition. The economic rationale behind Strategic Choice was assessed by evaluating the four elements of financial performance, operating efficiency, investment intensity, and the alternatives' contribution to business competition. To establish an evaluation framework for assessing this rationale, the researchers used both comparative and cluster analyses as well as correlation analysis to identify measurable development criteria. An empirical sample of 60 businesses that provide computer and communications equipment repairs (in Ukraine) and five EU countries (Germany; France; Poland; Czech Republic; Spain) provided data for the observations collected during the time period of 2019-2023. Data for these observations were obtained from statistical databases, company statements, and non-financial reports published by international organizations. Comparison indicated significant differences between Ukrainian and EU companies on all major strategic performance metrics. Digitalization of business models and employee participation exhibited strong positive associations with outcomes. Conversely, there was a weak direct association between CSR spending and outcomes. However, this relationship is typical of a long-term implementation process. Three distinct clusters emerged from cluster analysis of the companies based upon their performance characteristics. A majority of the Ukrainian companies were categorized into the lowest-performing cluster. In contrast, most of the EU companies were categorized into the highest-performing cluster. This research provides managers with a practical framework to sequence initiatives aimed at digital transformation, innovation, and employee engagement. Managers may prioritize initiatives such as adopting CRM software systems, integrating ERP systems, implementing select AI services, or making more systematic ESG reporting among SMEs. Policymakers can also use these findings to guide policy decisions. Tax relief policies and competitive grant programs that are targeted toward digital innovation services and incubators for digital services can support innovation capacity and promote rapid modernization throughout the industry.