Strategic planning among service sector based Small and Micro Enterprises in Nairobi
Strategic Planning is an integral part of the existence of any organization. According to Johnson and Scholes (2002), the process of developing strategy is one that all organizations go through. Strategic Planning as a subject matter has been increasingly adopted by organizations in Kenya. The bulk of this effort has been concentrated within large scale organizations and NGO’s (Okanda 2004). The SME sector is very dynamic, with several thousand being set up in Kenya every year offering a wide variety of services and products. Equally, a large number of these SMEs collapse within 12 months of their establishment (Fielden et al 2000). This is indicative of the extremely dynamic and volatile environment that SMEs operate in. Very little research has been done regarding strategic planning in Small and Micro Enterprises (Okanda 2004). This study therefore was done to bridge that gap by investigating the strategic planning practices of small and micro enterprises in Kenya. The research sought to answer the following questions; to what extent do SMEs undertake strategic planning and what are the challenges they face in developing and implementing their plans? Specifically, the objectives of the study were to establish the strategic planning processes undertaken by small and micro enterprises in the Service sector in Nairobi, Kenya, and to identify the challenges faced by small and micro enterprises in developing and implementing these plans The research was exploratory in nature, and used the IFC definition of an SME to determine what companies shall constitute the study population. The population of the study was 2,400 service center based SMEs operating in Nairobi and a sample of 10% was selected using a proportionate, stratified sampling procedure, amounting to 240 companies. Data collection was through the use of structured questionnaires and a drop and pick later method. The research found out that SMEs in Nairobi do carry out strategic planning. The research also shows that SMEs conduct environmental analysis, but it is mostly internal as opposed to external analysis. The study was successful in highlighting the problems faced by SMEs in the implementation of their plans, these problems stemming mainly from internal and external environmental factors, including competitive forces, customers, industry dynamics, as well as internal resources and planning dynamics. Though very insightful, this research has only shed a little light on what is a fairly complex issue. Further research needs to be done to properly lay out the thinking and planning processes that go into setting up small businesses. Future research could also look in greater detail at the issue of the implementation of plans in small businesses. The report is organized into 5 chapters: Chapter 1 is the introduction that highlights the key concepts in the study, providing a background on SMEs in Kenya and the prevailing situation with regard to their planning processes. The exact nature and extent of the problem under investigation in this study is also outlined, as are the objectives of the research. This chapter closes with an assessment of the significance of the study to various interest groups. Chapter 2 is the literature review, which covers the history of strategic planning, the nature of strategic planning and strategic decisions, the process of strategic planning and development, the value of strategic planning and deeper insights into the SME sector in Kenya. Chapter 3 covers the methodology of the research, covering the research design, population and sample selection, data collection and data analysis. Chapter 4 covers the findings of the research, with chapter 5 providing the summary, conclusion and areas of future research proposed by this research. The document has a copy of the data collection instrument used in the research, as well as a detailed list of the references used to compile the literature and other sections of the research.