EFFECTS OF STRATEGIC PLANNING ON FINANCIAL PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN KENYA: A CASE OF MAKUENI COUNTY
Abstract
The purpose of this study was to determine the link between strategic planning and financial performance of SMEs in Makueni County. The study employed a cross sectional research design and a sample was used to represent the whole population. Questionnaires were used to collect data and were quantitatively analysed and a regression model was used to do the analysis of the findings. The regression model was a good statistical tool used in this study for it showed how the variables were interdependent by confirming their relationships from the correlation analysis. The findings confirmed that strategic planning had an effect on financial performance and the study thus concluded that strategic planning practices had an effect on net profits of SMEs in Makueni County with a 71.6% effect. There was also a positive effect of organizational characteristics on how SMEs make strategic decisions to affect their financial performance therefore concluding that organizational characteristics had an effect on financial performance of Makueni County’s SMEs. There was also a positive effect of industry factors on financial performance and thus this study concludes that industry factors have an effect on financial performance of SMEs in Makueni County. The combination of the variable gave a result of 74% change which meant that strategic planning through the influence of organization characteristics and industry factors have a 74% change in the net profits of the SMEs. However, the study found industry factors to be influencing more on the implementation of the strategic plans rather than the formulation of the strategic plans. The study agreed with the previous authors who found a positive relationship with the variables. The study recommended that SMEs in Makueni County should tailor and design their organizational structure to be able to effectively adopt strategic planning practices in the organisation. The organisation structure should be able to give priority to strategic planning and this would go long way in enhancing strategic planning practices. The study further suggested that SMEs in Makueni County should enhance their competiveness in their respective industries in order to be in a better position to identify and adopt strategic planning that would enable the organisation increase its financial performance.
Key Words: strategic planning, organizational characteristics, industry factors, financial performance
CITATION: Kisilu, A. M., Okumu, N., & Fr. Mathenge, P. (2019). Effects of strategic planning on financial performance of small and medium enterprises in Kenya: A case of Makueni County. The Strategic Journal of Business & Change Management, 6 (3), 762 – 777.
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DOI: http://dx.doi.org/10.61426/sjbcm.v6i3.1354
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