Effect of selected strategic planning practices on performance of small and medium enterprises in Nakuru town, Kenya

Abstract

Strategic planning enables enterprises to understand their unique position and identify how to make valuable choices so as to attain a competitive edge in the industry in future. Adoption of strategic planning enables SMEs to perform better and enables them achieve high profits, increased customer referrals due to satisfaction, increased sales, well structured survival plans, high innovation levels, high quality products, improved products, enhanced processes, high technological levels, enhanced management practices as well as increased international growth rates all these benefits are not enjoyed by SMEs operating in Nakuru Town since most of them fails during the first few years of operations. The general objective of the study was to determine the effect of adoption of selected strategic planning practices on performance of SMEs in Nakuru Town. The specific objectives that guided the study were to; evaluate the effects of adoption of strategic planning on profitability of Small and Medium Size Enterprises; establish the effect of adoption of strategic planning on customer satisfaction of Small and Medium Size Enterprises and evaluate the effects of strategic planning adoption on survival rate of Small and Medium Size Enterprises. A descriptive and inferential survey research design was applied where data collection was done by use of self administered structured questionnaires. Stratified random sampling method was used to select 291 businesses from a total of 1064 SMEs operating in Nakuru Town were 255 responses were received translating to 87.6% response rate. Information was sought on the extent to which SMEs have adopted strategic plans, profitability, customer satisfaction and business survival rate. The findings are presented using tables, frequencies, percentages, means and standard deviations. The study used both qualitative and quantitative data analysis. Content analysis was used to analyze the qualitative data with the help of Statistical Package for Social Science Version 21 while quantitative data was analyzed so as to generate both descriptive and inferential statistics. The R squared of 0.674 shows that the independent variables accounted for 67.4% of the variance on performance of Small and Medium Scale Enterprises in Nakuru Town while 32.6% are explained by other variables outside the study. There was a strong positive relationship between extent of adoption of strategic plan and profitability of SME since it had a Pearson Correlation of (r (255) =0.815, P < 0.001), Customer satisfaction (r (255) =0.802, P < 0.001), business survival strategies (r (255) =0.812, P < 0.000). The study recommends that SMEs managers and owners should ensure that the key resources such as the manpower, money, machines, materials and proper working methods are availed in their enterprise since inadequate resources are likely to lead to incomplete adoption of strategic plans in the enterprise. The study recommends that SMEs should adopt leadership styles that will encourage staff participation in long term planning decisions. The study also recommends that the entrepreneurs should seek and employ highly trained and competent managers to oversee the operations of their enterprises. Highly trained and qualified managers are able to competently plan in the long term to ensure enhanced enterprise performance in organizations.