Effects Of Strategic Management Practices On Firm Performance Of Small And Medium Size Enterprises In Thika Town

Abstract

Strategic management practices are usually geared towards increasing managerial efficiency and effectiveness so as to increase the current as well as future operations. Strategic planning is primarily focused towards a framework for the management at all levels to envisage the firm’s future. The SMEs play a very vital role in economic development of any nation. This importance cannot be under-estimated. The performance of SMEs has been given a lot emphasis due the fact that they contribute in creating employment, poverty eradication and contribute the GDP of developing economies. Due the ever changing and turbulent operating environment, SMEs seem to struggling due the competition from large business firms. The purpose of this study was to evaluate the effects of strategic management practices on firm’s performance of SMEs in Thika Town. The research was interested in establishing the strategic management practices embraced by SMEs in Thika Town. The researcher wanted to evaluate the effect of strategic management practice on profits; the effect of strategic management practice on operational performance as well as the effect of strategic management practice on competitiveness. The study was anchored on three theories of resource-based theory; game based theory as well as Porter’s Theory of Competitive Advantage. The researcher used both cross-sectional and descriptive survey design. The population of the study was the top 100 SMEs in Thika Town as registered by both Kiambu County and Thika Sub-County targeting the managers and owners. Since the population was not large enough the researcher conducted a census. The researcher used primary data, which was collected semi – structured questionnaires. In order to get the relationship between the variables, the researcher run a multiple regression. The research was able to collect 81 duly questionnaires for the analysis. This response rate translates to 81%. Majority of SMEs in Thika have been in operation for less 15 years and most of them have engaged less than 40 employees. The research findings indicate that most of the SMEs have embraced strategic management practices though at different levels. Strategic implementation takes a center stage followed by formulation and finally the strategy evaluation and control. There is compelling evidence that strategic management practice have a positive effect on profitability, operational performance and competitiveness. the multiple regression indicates that performance is enhanced through strategy formulation by 0.2629, through strategy implementation by 0.2553 and through strategy evaluation by 0.1452 per unit. The research recommends that a similar study should conducted nationally to evaluate the same. Secondly, the researcher recommends a longitudinal study should be done for the same. The researcher also recommends that the management of SMEs should embrace the strategic management practices and should involve all levels of the management so to reap the benefits accruing to strategic management practices. The researcher also recommends that the policy makers should be on the forefront in championing for the embracing of strategic management practices