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This research has a purpose to examine the role of hybrid business strategy in mediating the influence of external environment and the capability of resources on business performance. The structural equation modelling (SEM) based on AMOS is the analysis technique that was used to examine the hypothesis in this research. A total of 135 people were selected as sample with the criteria as follows: is a small and medium enterprise in Bali that has operated for at least one year. The research results show that (1) the external environment has a positive and significant influence on business performance; (2) resource capability has a positive and significant influence on business performance; (3) external environment has a positive and significant influence on the implementation of hybrid strategies; (4) resource capability has a positive and significant influence on the implementation of hybrid strategy; (5) the implementation of hybrid strategy has a positive and significant influence on business performance; (6) hybrid business strategy is able to significantly mediate the influence of external environment on business performance; (7) hybrid business strategy also significantly mediates the influence of resource capability on business performance. The theoretical implications attained from this research is that the business strategy concept can be developed from various available business strategy choices such as innovation strategy, service strategy, differentiation strategy, partnership strategy, and promotion strategy. Meanwhile, the practical implication and recommendation in this research is that marketers are expected to be able to develop other hybrid business strategies by integrating or combining several available business strategy choices in line with the external environment conditions and the capability of the resources owned by the SME.

The Influence of External Environment and Resource Capability on the Hybrid Business Strategy and Business Performance