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EFFECTS OF STRATEGIC PLANNING ON THE PERFORMANCE OF SMES

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

In the 20th century, the subject of strategic planning has been particularly applied to Organizations. It is viewed as the science and art of the formulation, implementation and evaluation of cross-functional decisions that enable an organization to achieve its objective.  Strategic planning applies the integration of all functional units in the organization consisting of marketing, finance and accounting, operations and production and management to attain organizational success. Strategic planning constitutes as an organizational process which aims at channeling both human and other organizational resources in the profitable attainment of the needs of customers and other principal stakeholders. Strategic planning implementation is guided by the stated policies, mission statement and strategic goals and objectives. The behavior of top management and other key managers in the organization. Strategic management requires the specification of strategic aims and objectives in the light of its internal resources and external factors. It specifies the target customers to serve with the right product and services through the effective and efficient allocation of resources (Cole, 1997). Strategic planning as explained by Lamb (1984) indispensable for SMES to be more proactive and secure the future.

Strategic planning applies the integration of all functional units in the organization consisting of marketing, finance and accounting, operations and production and management to attain organizational success. Strategic planning constitutes as an organizational process which aims at channeling both human and other organizational resources in the profitable attainment of the needs of customers and other principal stakeholders. Strategic planning implementation is guided by the stated policies, mission statement and strategic goals and objectives. The behavior of top management and other key managers in the organization. Strategic management requires the specification of strategic aims and objectives in the light of its internal resources and external factors. It specifies the target customers to serve with the right product and services through the effective and efficient allocation of resources (Cole, 1997). The research therefore seeks to investigate effect of strategic planning on the performance of SMES in south-west Nigeria.

1.2       Statement of the Problem

The growing significance of SMES cannot be overemphasized in view of its contribution to the economic growth of the country through the provision of employment for a large segment of the population and revenue derivation. However, SMES are faced with challenges in respect of formulating and implementing strategic plans. The inability to be proactive and secure the future with success has been the reason for many folding up of SMES and as well as their inability to grow rapidly. Consequently, management experts have advocated the need for SMES to deploy strategic planning as a measure to ensure the effective and efficient channeling of resources to profitably meet the growing needs of customers with innovative products and services. Many of the growing challenges encountered by SMES in the evolution and implementation of strategic planning include management inability to support strategy, lack of adequate resources, no alignment of activities with strategy and inability to manage change and lack of human resources to implement strategic plans. Consequently, the problem confronting the research is to appraise effect of strategic planning on the performance of SMES in south-west Nigeria.

1.3       Research Objectives

The main objective of this study is to evaluate the effect of strategic planning on the performance of SMEs in South-West Region of Nigeria. Specific objectives include:

i.            To find out factors which influenced SMEs to adopt strategic planning in their operations.

ii.            To describe the contribution of the strategic planning in SMEs to improve performance.

iii.            To examine factors influencing effectiveness of strategic planning in enabling the SMEs to improve performance to achieve their goals.

iv.            To determine challenges faced by SMEs in the adoption and implementation of strategic planning.

1.4       Research questions

i.            What are the factors which influenced SMEs to adopt strategic planning in their operations?

ii.            Has strategic planning contributed in improving performance of SMEs?

iii.            What are the factors influencing effectiveness of strategic planning in enabling the SMEs to improve performance?

iv.            What are the challenges faced by SMEs in the adoption and implementation of strategic planning?

1.5       Research Hypothesis

Ho:      There is no significant effects of strategic planning on the performance of SMES in south-west Nigeria.

Hi:       There is no significant effects of strategic planning on the performance of SMES in south-west Nigeria.

1.6       Significance of the Study

Research on effectiveness of strategic planning in the performance of SMEs is crucial because it is of much importance to different people at different levels of SMEs and other business organizations as explained below;

i.                 It will enable owner-managers in most of the SMEs and entrepreneurs in different businesses to understand and take into consideration effective strategic planning as a tool for greater performance and goal achievement. This study will create awareness on the contributions of effective strategic plan which can motivate more persons to adopt it in their operations.

ii.               This study also aims to increase awareness to all the employees in the SMEs used as a case study and other organizations in the business industry on factors which can influence the success of their strategic plans so as to put more effort in the formulation and implementation. Through this study they might be committed in the whole process and its achievement because strategic plan is not all about how many things are done but how they are done to achieve the organization goals.

iii.             Also, it adds value to the body of knowledge as many practitioners are aware of the strategic planning but they do not know the reasons some organizations fail to achieve their desired goals while they have a strategic plan guiding them. Through this study they shall be able to understand the factors which can contribute in making the strategic plan successful in achieving the goals and improving performance by different organizations.

iv.             In addition, this study provides useful reference material for researchers who are interested in pursuing further research on effectiveness of strategic plan in achieving goals by an organization. 

1.7       Scope of the Study

The study focuses the effect of strategic planning on the performance of SMEs. The study will be conducted in South-West Region of Nigeria.

1.8       Limitations of the Study

The demanding schedule of respondents at work made it very difficult getting the respondents to participate in the survey. As a result, retrieving copies of questionnaire in timely fashion was very challenging. Also, the researcher is a student and therefore has limited time as well as resources in covering extensive literature available in conducting this research. Information provided by the researcher may not hold true for all businesses or organizations but is restricted to the selected organization used as a study in this research especially in the locality where this study is being conducted. Finally, the researcher is restricted only to the evidence provided by the participants in the research and therefore cannot determine the reliability and accuracy of the information provided. Other constraints include:

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9       Definition of Terms

Internal Environment: The internal environment of the firm consists of the factors within the firm Comprising of its strengths and weaknesses, resources, culture and structure (Beal, 2000).

Performance Measure: Performance measurement consist of the informative methodology of what to measure and how to measure it.

Objective: The objectives of the firm are regarded as the outcome or   result of the planned activities of the firm which must be consistent with the mission, targets and objectives of the firm.  (Johnson et al., 2007).

Strategic Planning: It is viewed as the science and art of the formulation, implementation and evaluation of cross-functional decisions that enable an organization to achieve its objective. Strategic planning applies the integration of all functional units in the organization consisting of marketing, finance and accounting, operations and production and management to attain organizational success.

Strategic Management: Strategic management consist of those managerial decisions and actions which channels the resources of the firm towards the attainment of the long-term objectives of the firm taking into consideration both the internal and external factors of external opportunities and threats and organization’s strengths and weaknesses. Wheelen and Hungers’ study (2006).