The Role Of Strategic Planning On The Growth And Survival Of Small And Medium Scale Enterprise
1.1 Background the of the Study
The sole aim of every business is to make profit and attain growth. Small and medium scale enterprises play a very important role in a nation’s economy. This is true for both develop and developing countries. Small and medium scale enterprises also constitute a high proportion of a nation’s business activities and generate more employment opportunities than the large corporations on recent years.
Tajudin Ramli, the chairman of Apec (Asia Pacific Economic Corporation) Business council, emphasized the importance of small and medium scale enterprise in his remark in Australia: He states that “small and medium scale enterprise represent 80 to 90 percent of business in each Apex economy and are by far the largest providers of employment. For business to survive and attain growth, and owners/managers of the business need to plan strategically. Business planning has significant effect to the survival and well-being of small enterprise of all types specially in times of economies crucial role in small firm’s success and survival. According to Tapinos (2005) state that strategic planning consist of planning process that are under-taken in firms to develop different strategies which might contribute to performance past studies that examined successful small firms have also pointed out that well-developed. Soundly implemented and properly controlled planning process contributes to a firm’s success (Bracker 1986).
Growth is often viewed to be necessary for survival (Davidson 1991), but some findings have proved that, there are entrepreneurs who do not pursue growth, survival is often enough for them (Delmar, 2008). According to Poutziouris (1999), states that “growth oriented owners/directors” aim at increasing business size and becoming owners of large and successful businesses, whereas survival oriented managers do not aim a these previous research has extensively studied the effects of these strategic orientations on small firms actual growth and performance.
It is felt that strategic planning, a key pillar for corporate survival, may be adopted and applied to ensure better small and medium scale enterprise performance. Despite all these past studies on strategic planning small and medium enterprise is still faced with same special problems and challenges. Anthony Robbins, the most famous neuro linguistic programming specialist, once remarked “To keep on doing the same thing and expect a different result is a form of insanity” therefore, the essence of this work is to look at what strategic planning plays.
1.2 Statement of the Problem
The growth of any business organization can be determined by the strategic planning organized by management for the survival of that organization small and medium scale enterprise are very vulnerable, and their failure rate is very high so high that no nation can afford to ignore. The business statistic of Nigeria observed that “60 percent of existence”. Also empirical studies have established that the first one to three years is the most critical time for new firms as regards their survival and possibility to die is much bigger for small business than larger firms (Davidson 1991).
Small and medium scale enterprises are good performer with good sales, healthy profit and strong cash flow. Beneath the good exterior, there may be some problems brewing away, which are contingent to the business activities of the enterprise and the ambitions of the entrepreneurs. Symptoms to the eventual problems could be over-expanding and over diversification leading to over-stretching of management and resource.
Additionally, most survival small and medium scale enterprise could be in mediocre performance levels, even good performers of today can fall tomorrow, as exemplified by chief executive officer of Hewlett Packard, what make us highly successful this year could be our downfall “next year”. Despite all the past research on strategies might have planned. Therefore the essence of this work is to examine the role of strategic planning to small and medium scale enterprises.
1.3 Purpose of the Study
The purpose of the study includes the following:
- To examine the role of strategic planning in an enterprise success.
- To examine an uncover the militating factors against the survival and growth of small and medium scale business organizations.
- To examine current strategies planning processes in small and medium scale businesses.
- To examine the environmental factors that affects the success of strategic planning in an enterprise.
1.4 Research Questions
- Does strategic planning have direct impact on the growth and survival or small and medium scale enterprise?
- Does the militating factor hinder the survival and growth of small and medium scale business?
- Does the current strategic planning process affect small and medium scale business?
- Does environmental factors brings development to small and medium scale business?
1.5 Research Hypotheses
Spiegel (1999:28) defined hypothesis as a way of comparing two things using an assumption which may or may not be true.
This study contains the research hypothesis formulated and given as:
Ho: strategic planning has no direct effect on the growth and survival of small and medium scale businesses.
Ho: Environmental factors does not affect the success of strategic planning in an enterprise.
Ho: current strategic planning processes not too weak to address the issue of enterprise survival and growth.
1.6 Significant of the Study
This study is of significance in the following ways:
- Strategic planning enables small and medium scale enterprise to prepare for and deal with rapidly changing environment in which the organization operates.
- Strategic planning is better able to give the small and medium scale enterprise direction and purpose.
- Strategic planning also assists in the longer time between current decisions and their future result.
- Strategic planning will further assist managers of small and medium scale enterprise to initiates development project, which will enhance rapid rural-urban expansion in the economy of Uyo, Akwa Ibom State.
- Strategic planning enables various businesses and other enterprise to achieve success in the growing complexity of managerial job.
1.7 Scope of the Study
This research was made to cover small and medium scale enterprise in Uyo, Akwa Ibom State with particular emphasis on the strategic planning of the organization name. Assure Electronic.
1.8 Limitation of the Study
Several limitations were encountered during the study and they are:
Poor financial positions of the researcher however, limit the researcher’s effort towards a better quality project. If funds were available the research would have been extended to many organization.
The duration for this study was limited. The researcher being a student writes under pressure of other academic work as well as numerous commitments, hence time is highly limited.
As human beings bias cannot be rule out. This is because some respondents did not co-operate with the researchers by not giving honest information for fear of possible intimidation inspite of the assurance of confidentiality given to them.
1.9 Definition of Terms
For the interest of prospective reader and better understanding of the work, it is good to define some concept and terms that may sound unfamiliar to non business students. It is briefly define below:
The word business is derived from a Greek word “busy: it could be seen as an activity engaged in with a view to maximize profit. Any money earning activities are therefore regarded as business
Small scale business:
According to advanced learners dictionary, small scale business is an organization or an activity performed, which are not large is size in a layman’s sense, small and medium scale business means a kind of business established without enough capital and is not large in size. An example is a sole proprietor etc. but Osaze (1986) defined small scale business as one which is owned managed, controlled by one or two person, one has differentiated organization structure, has a relatively small share of member and employs less than so people.
Medium scale business:
According to Advance learners dictionary, medium scale business is an organization or activity performed, which is neither too small nor to large, but it is average in size. In layman’s sense, medium scale business means a kind of business established with average capital and is not too large in size and example is partnership business.
According to Potter (1980:17), strategic are approaches by which long term objective are to be achieved in an organization. This includes expansion product development diversification, acquisition, market penetration and many more.
Digman (1986:248) define planning as a process by which manages put up plan to achieve their aims in an organization.
is defined as the set of decision and actions resulting in the formulation and implementation of strategies designed to achieve the objective of the organization (Pearce and Robinson (1986:25)
David (19991:28) defines strategic management as the art and science of formulation, implementing and evaluating cross section business decision that enable an organization to achieve its objectives.
Summary, Conclusion and Recommendation
It is important to ascertain that the objective of this study was to ascertain the role of strategic planning on the growth and survival of small and medium scale enterprises.
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in examining the role of strategic planning on the growth and survival of small and medium scale enterprises.
This study was undertaken to assess examine the role of strategic planning on the growth and survival of small and medium scale enterprises. The study opened with chapter one where the statement of the problem was clearly defined. The study objectives and research hypotheses were defined and formulated respectively. The study reviewed related and relevant literatures. The chapter two gave the conceptual framework, empirical and theoretical studies. The third chapter described the methodology employed by the researcher in collecting both the primary and the secondary data. The research method employed here is the descriptive survey method. The study analyzed and presented the data collected in tables and tested the hypotheses using the chi-square statistical tool. While the fifth chapter gives the study summary and conclusion.
5.3 Conclusion and Recommendation
This study adds to the existing literature on SMEs by specifically investigating strategic planning of these organisations in a developing country. The main findings of the study reveal that strategic planning is limited in SMEs, in Nigeria. The study also finds that strategic plans in SMEs in Nigeria plans are informal and undocumented. Majority of organisations plan for a year to three years and there isa little usage of strategic planning tools with the most common being financial analysis. The study however establishes some factors which prevent SMEs from engaging in strategic planning activities. Lack of knowledge of the planning process is the leading factor affecting planning followed by the size of the business. SMEs felt that since they are mostly a one man business, they are flexible and focus on operational activities instead of the time consuming strategic plans. This suggests that owner managers of SMEs lack business management or entrepreneurial skills that will make them aware of the importance of growth activities such as strategic planning. These findings are in accordance with Ghobadian and O’Regan (2002), who posit that firms which value strategic planning will have a formal strategic planning approach.
According to the authors, such firms are more likely to give active consideration to potential barriers than firms using non formal planning. Since SMEs contribute significantly to the economy of the country, it is fundamental that entrepreneurial training and coaching be taken to greater heights to equip SME owner managers with the right skills to enable them to engage in planning activities to ensure survival and growth of the SME sector. Overall, this study has important implications for the SMEs, the Entrepreneurial development agencies as well as the government of Nigeria. Since previous researches have shown that strategic planning benefits SMEs significantly but the findings of this study suggest that SMEs in Nigeria engage in Strategic Planning to a small extent. This is an indication that strategic planning is not easy and certain educational platforms need to be established to aid in educating SME owner/managers to plan and successfully implement strategies.
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