The impact of strategic management on performance of small and medium scale enterprises (a study ofkaduna metropolis)

Thesis Overview

<p> <b><b></b></b></p><p><b><b><b>INTRODUCTION</b></b></b></p><p><b><b><b></b></b></b></p><b><b><b><p><b>1.1 <br></b><b>Background of the Study</b></p><p><b></b></p><b><p><b>&nbsp;</b></p><p><b></b></p><b><p>The Nigeria economic environment is<br>changing rapidly and this change is characterized by such phenomena as the<br>globalization, changing customer and investor demands, ever-increasing<br>product-market competition. To complete successfully in this environment,<br>organizations continually need to improve their performance by reducing cost,<br>innovating products and processes and improving quality, productivity and speed<br>to market. “Strategic management is an ongoing process that evaluates and<br>controls the business and the industries in which the company is involved,<br>assesses its competitors and set goals and strategies to meet all existing and<br>potential competitors, and then reassess each strategy annually or quarterly to<br>determine how it has been implemented and whether it has succeeded or needs<br>replacement by a new strategy to meet charged circumstances, new technology,<br>new competitors, a new economic environment, or a new social, financial or political<br>environment”(Adidu&amp;Olanye2016).</p><p>The<br>small and medium scale enterprises (SMEs) are the driving force in economic<br>growth and job creation in both developed and developing countries due to their<br>ability to experiment new approach at minimum cost and create a standardized<br>product/ services that can meet the needs of a large target market. However,<br>more than half of newly established businesses survive beyond five years.<br>Hence, the identification of those factors which empirically lead to<br>entrepreneurial success and failure which would assist in equipping small<br>business owners with the necessary managerial skills to survive in today’s<br>competitive environment as well as exploits several strategies that will<br>improve their operational efficiencies (Simsek and Yüzbasioglu2009).</p><p>The performance of organization is the<br>focus of intensive research efforts on how well an organization performs its<br>mission and accomplishes is its goals of programs delivery is to paramount<br>concern. The success of failure of a strategy is significantly determined by<br>the quality of leadership displayed by the strategy leader normally the CEO,<br>during the strategy implementation process. In today’s increasingly chaotic<br>world and an ever changing environment, it is not enough to just keep the<br>organization afloat it is far more essential to make steady progress toward<br>some well- defined objectives. Strategic<br>management provides overall direction to the enterprise and involves specifying<br>the organization’s objectives, developing long-term policies and plans designed<br>to achieve these objectives, and then allocating resources to implement the<br>plans. The implementation of strategic management increases competitiveness,<br>reduce costs, improve decision-making, facilitate implementation of the<br>employee motivation system, shorten delivery times, higher quality of customer<br>satisfaction, etc It is felt that strategic management, is a key pillar for<br>corporate survival, it must be adopt and applied to ensure better SMEs<br>performance, on a more consistent basis (Thompson, 2007).</p><p>As business competition is tighter and<br>market conditions is more dynamic, many Small and Medium enterprises (SME) in<br>Kaduna State develop their efforts to understand how SME can maintain or<br>improve their marketing and financial performances. In order to be able to compete,<br>some strategic and policy management experts have encouraged companies to<br>implement strategic management practices.The contribution of Small and Medium<br>Enterprises SME to economic growth and sustainable development is globally<br>acknowledged (CBN, 2004). There is an increasing recognition of its pivotal<br>role in employment generation, income redistribution and wealth creation<br>(NISER, 2004). The small and medium enterprises SME represent about 87 per cent<br>of all firms operating in Nigeria (USAID, 2005).</p><p>Despite<br>Small and medium scale enterprises<br>important contributions to economic growth, small enterprises are plagued by<br>many problems including stagnation and failure in most sub-Saharan African<br>countries (Bekele, 2008). In Nigeria, the problem is not limited to lack of<br>long-term financing and inadequate management skills and entrepreneurial<br>capacity alone, but also, includes the combined effect of low market access,<br>poor information flow, discriminatory legislation, poor access to land, weak<br>linkage among different segments of the operations in the sector, weak<br>operating capacities in terms of skills, knowledge and attitudes, as well as<br>lack of infrastructure and an unfavourable economic climate(Bekele, 2008).</p><p>The<br>CBN found the reasons for the slow pace in utilization of the SMIEIS fund to<br>include: the desire of the Banks to acquire controlling shares in the funded<br>enterprises and the entrepreneurs’ resistance to submit control; inability of<br>the banks to adapt equity investment which is quite different from what the<br>banks are familiar with in credit appraisal andmanagement, and lack of proper<br>structure for effective administration of the scheme when it took off among<br>other factors. Responding to the findings, the Bankers’ Committee took a policy<br>decision to extend funding under the scheme to all business activities<br>including even non-industrial enterprises, except for general commerce and<br>financial services. The name of the scheme was changed from SMIEIS to Small and<br>Medium Enterprises Equity Investment Scheme (SMEEIS) to reflect the expanded<br>focus. Also, the limit of banks’ equity investment in a single enterprise was<br>increased from N200 million to N500 million, making room for medium size<br>industries (Bekele, 2008).</p><p>Small<br>and Medium Business organization in Kaduna State has been viewed from the point<br>of importing various kinds of inputs (resources), such as human resources,<br>capital, managerial and technical inputs. These inputs are then transformed to<br>provoke output which takes the form of goods and services. Also the<br>relationship between the organization and the Kaduna society which focuses on<br>the demands and legitimate rights of different claimants such as employees,<br>consumers, suppliers, stakeholders, government and the community, the small and<br>medium business operates in an external environment of opportunities and<br>constraints. Thus no single approach is sufficient for all times and in all<br>circumstances with external environmental factors affecting the organization<br>performance as well as those factors within the organizations (Adeoye, 2012).</p><p>&nbsp;Kaduna<br>State SMEs business organizations do not operate in vacuum of an ineffective<br>management of complex and dynamic society which requires the assessment of<br>strengths and weaknesses of the organization and the opportunities and threats<br>provided by the challenges of the external environment, hence for survival and<br>growth, organizations must cope and adopt to these challenges posed by the ever<br>changing environment (internal &amp; external) in which managers operate.<br>Mangers must not only be aware of what constitutes the elements of their<br>business environment but also should be able to respond to the forces of the<br>environment which inevitably impinges on the operations of the business organization(Adeoye, 2012).</p><p>Strategic<br>management must be employed for a more structured strategic management model,<br>due to its size, scope of operations, and need to encompass stakeholder views<br>and requirement. The private firm can exercise strategic choice, even in the<br>face of external constraints. The way and manner they face strategic issues can<br>affect the overall growth and development of the organization. It goes without<br>saying that the strategic framework must also address fundamental issues such<br>as resource base, infrastructure constrains, appropriate level of technology<br>and raw materials input. The relationship between the strategic management<br>practices and corporate performances was inconsistent. Some argue that there is<br>a strong relationship between the two variables, but no less believe that the<br>two variables do not have a strong relationship. As a result, until now, there<br>is still a research gap in regard to the effect of strategic management<br>practices on business performance. It is against this backing that this<br>research examinesthe impact of strategic management<br>on performance of<br>small and medium scale enterprises in Kaduna metropolis.</p><p><b>1.2 &nbsp;</b><b>Statement</b><b>&nbsp;of the Research Problem</b></p><p><b></b></p><b><p>Small<br>and Medium enterprises in Nigeria are faced with numerous problems that hamper<br>the growth and development of these enterprises. This support the saying that,<br>the successes of any business whether small, big or mega depends largely on the<br>performance of people in management of its finance, although, all business<br>organization irrespective of their objectives have philosophy of growth,<br>survival and adaptivesness.<br>Small and Medium Enterprises (SMEs) in Nigeria have not performed creditably<br>well and hence have not played the expected vital and vibrant role in the<br>economic growth and development of Nigeria. This situation has been of great<br>concern to the government, citizenry, operators, practitioners and the<br>organised private sector groups, in spite of the numerous opportunities made available to assist small<br>scale businesses many small scale businesses in the State are still either not<br>doing well or have failed resulting to further unemployment and poverty with<br>their attendant consequences on the state Kuye, (2004).</p><p><b>&nbsp;</b></p><p><b></b></p><b><p>Some Nigerian Business Organizations are without formal<br>plans or where there are formal plans they do operate without adhering to them.<br>Some argued that the market place changes so fast for a plan to be useful. All<br>business organizations are heading somewhere but unfortunately some do not know<br>where they are going, then any road will lead them there. This therefore<br>emphasizes the need for organizations to utilize strategic planning<br>concepts.Strategic management implementation has been challenging to many organizations.<br>They crunch vast amounts of consumer data, hold planning sessions frequently,<br>and use various techniques to develop strategy. Still, they miss the mark a lot<br>of the times. Some strategic management problems faced by organizations<br>include;Companies tend to ignore one complication along the way: They can’t<br>develop models of the increasingly complex environment in which they operate.<br>As a result, contemporary strategic-planning processes don’t help enterprises<br>cope with the big problems they face.</p><p>Several Chief Executive Officers (CEOs) admit that they are<br>confronted with issues that cannot be resolved merely by gathering additional<br>data, defining issues more clearly, or breaking them down into small problems.<br>Their planning techniques don’t generate fresh ideas, and implementing the<br>solutions those processes come up with is fraught with political peril.</p><p>Most Organizations do not progress at all walloping in<br>serious planning problems.Therefore, there is need for the research to<br>investigate why the above problems persist and examine ways by which strategic<br>planning could assistfor better performance of small and medium scale enterprises in<br>Kaduna.</p><p><b>1.3 &nbsp;</b><b>Research Questions</b></p><p><b></b></p><b><p>The<br>study is set to answer some research questions derived from general and<br>specific objectives and also from the statement of the problem.</p><p>&nbsp; &nbsp; &nbsp; &nbsp;<br>i. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <br>To what extend does strategic management<br>affect the performance of Small<br>and Medium Scale enterprises?</p><p>&nbsp; &nbsp; &nbsp; ii. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; <br>Is<br>there any significant relationship between organization strategic management<br>and organizational performance?</p><p><b>1.4 &nbsp;</b><b>Objectives of the Study</b></p><p>&nbsp; &nbsp; The purpose of the study is to assess the<br>extent to which strategic management factors affects the turnover of small<br>business enterprises the<br>specific objectives are to:</p><p>&nbsp; &nbsp; &nbsp; &nbsp;<br>i. &nbsp; &nbsp; <br>Determine the extent to which strategic<br>management is practice by Small<br>and Medium Scale enterprises.</p><p>&nbsp; &nbsp; &nbsp; ii. &nbsp; &nbsp; Determine<br>the relationship between the level of competition and adoption of strategic<br>management by theSmall<br>and Medium Scale enterprises in Kaduna State of Nigeria</p><p><b>1.5 &nbsp;</b><b>Statement of Hypotheses</b></p><p><b></b></p><b><p>The<br>following formulated null hypotheses would be tested in order to help provide<br>answers to the research questions;</p><p><b>H01:</b>There is no significant effect<br>between Strategic management and organizational performance</p><p><b>H02:</b>There is significant effect between<br>Strategic management and organizational performance.</p><p><b>1.6<br>Significance of the Study</b></p><p><b></b></p><b><p>This<br>study tries to portray the need for effective Competitive Strategies in SMEs as<br>they contribute to the economy of every nation. The need for this study is<br>further emphasized in Nigeria, where small and medium scale enterprises over<br>the years have been battling with cases of failure. This study will therefore<br>be of tremendous value to the entrepreneur operating in the SMEs as it will<br>help them in facilitating their Competitive Strategic decision that will help<br>them stand the test of time. The study will also serve as an invaluable<br>contribution to literature on Competitive Strategic management that students,<br>academician, researchers and the general public can gained from especially as<br>it may concern the increase and benefit of applying Competitive Strategies for<br>Small and Medium Scale Enterprise in Nigeria to enhance their productivity.</p><p><b>1.7<br>Scope of the Study</b></p><p><b></b></p><b><p>The<br>scope of this study covers the role of strategic management in Small and Medium<br>Scale Enterprises in Kaduna state with particular interest on some randomly<br>selected SMEs operating in the southern and northern parts of Kaduna<br>metropolis. By choosing different SMEs, which engage in different businesses,<br>the researcher will be able to assess the role of Competitive Strategic<br>management process which will enable him to ascertain its contributions and<br>impact on their existence, which will also provide the researcher with a basis<br>for making objective conclusion.</p><p><b>1.8 Definition of Key Terms</b></p><p>Definitions of terms<br>used in this study are as follows:</p><p><b>Small<br>Business Enterprises: </b>these are small business that mostly use power and<br>small machines and employ a small number of workers Elegido (1996).</p><p><b>Performance<br>Management:</b>&nbsp;This referred to a strategic and integrated<br>approach to increasing the effectiveness of organization by improving the<br>performance of the people who work in them and by developing the capabilities<br>of teams and individual contributors Ciano, (2011).<b></b></p><b><p><b></b></p><b><p><b>Performance:<br></b>This is task, accomplishment, execution,<br>carrying out, working out of anything order or undertaken in other words it is<br>an outcome of work that provided the strongest linkage to the strategic goals<br>of the organization, customer satisfaction and economic contributions Elegido<br>(1996).<b></b></p><b><p><b></b></p><b><p><b>Management: </b>The act of running and controlling a business or similar organization.</p><p><b>Organizational Performance:<br></b>this means that an<br>organization is able to establish and disseminate a clear sense of purpose and<br>direction, establish an appropriate structure with effective legislative and<br>administrative frameworks, Organizational strengthening and capacity building<br>means building an effective organization capable of identifying, choosing and<br>implementing activities that will enhance its long-term performance.</p><p><b>Strategic Management: </b>it is an act of enhances<br>productivity and the effectiveness of organizations.</p><p><b>Strategy:</b>&nbsp;is a process of<br>manage a game plan for strengthening the organization’s position, pleasing<br>customers and achieving performance targets</p></b></b></b></b></b></b></b></b></b></b></b></b></b></b></b> <br><p></p>