A Critical Assessment of the Influence of Strategic Planning on the Success of SMES in Enugu State

 CHAPTER ONE

INTRODUCTION

1.1    BACKGROUND OF THE STUDY

Small and medium-sized firms (SMEs) play an important economic role in Nigeria, and Nigerian economic planners have acknowledged their relevance in economic growth (Berry 1998). Because micro and small size firms are accelerators for socioeconomic growth, the government has prioritized SMEs as a means of fostering larger engagement in the private sector. SMEs are a means for achieving national microeconomic goals such as job creation at a low investment cost and apprenticeship training expansion (Balasundaram 2009).

In Nigeria, SMEs employ 64 percent of the labor force and generate more than 18 percent of the country’s GDP (GDP). This sector accounts for more than 85 percent of all enterprises and 40 percent of overall employment. Furthermore, according to a recent poll, 80 percent of the 300,000 employment generated in 2009 were in the SME sector. This belies their little stature. It is widely recognised that micro and small-scale entrepreneurs, particularly agribusiness and rural companies, have made significant contributions to economic progress (Ayyagari, Beck & Demirguc-Kunt 2003). The sector contributes to the national goal of creating job opportunities, educating entrepreneurs, producing money, and providing a source of income for the majority of Nigeria low-income households.

However, a fundamental issue in SME management is the lack of senior management’s economic expertise or an over-focus on technical problem solutions without regard for commercial difficulties. Formal plans, as well as market-related results or cost restrictions, are sometimes only offered on an ad hoc basis. Furthermore, the related instruments are often developed intuitively rather than conceptually by a small group of persons (Berman, Gordon & Sussmann 1997). In light of this, one critical topic to address is the need of strategic planning for SMEs.

Over the previous two decades, the term “strategic” has grown in use. A plethora of relevant publications have been created, particularly in the united states. due to the widespread use of strategic management tools in large corporations and the commonly held belief that rational economic decision making should prevail in all organizations, practitioners and academics alike have recently argued for a greater emphasis on strategic planning in smes.Several empirical investigations support this viewpoint, revealing a correlation between strategic planning and success (Ciavarela, Buchholtz, Riordan and Gatewood & Stokes 2004)

1.2 STATEMENT OF THE PROBLEM

Despite their numerous contributions, SMEs have had high failure rates and dismal performance levels (Berry 1998). Many businesses confront the prospect of collapse within the first few months of operation. It has also been recognized that, while most SMEs expand rapidly when they are founded, only a small percentage of them have sustained and constant growth over their whole existence and grow to become huge corporations (Armstrong 2002).

Most strategic management principles and tools are seen to be applicable regardless of firm size. However, SMEs, in particular, are frequently unable to get all necessary resources, preventing successful action execution. In comparison to larger corporations, SMEs often have fewer resources, less access to human and financial capital, and less access to selling markets, as well as less established management. As a result, the use of formal planning procedures is frequently lacking, particularly up to a certain ‘critical scale’ (Berman, Gordon & Sussmann, 2007).

1.3 OBJECTIVES OF THE PROBLEM

The primary objective of this study is to critically assess the influence of strategic planning on the success of smes. Other objectives of this study are:

  1. To examine the frequency SMEs carry out strategic planning.
  2. To examine the extent in the use of strategic planning on SMEs in Enugu State

iii.      To examine the challenges facing SMEs in using strategic planning in Enugu State

  1. To assess the benefits of strategic planning on SMEs in Enugu state.

1.4 RESEARCH QUESTIONS

The following questions will be answered by this study.

  1. How frequent do SMEs carry out strategic planning?
  2. To what extent is the use of strategic planning on SMEs in Enugu State?

iii.      What are the benefits of strategic planning on SMEs in Enugu state?

  1. To what level do SMEs comply with strategic planning.
  2. What are the challenges facing SMEs in using strategic planning in Enugu State?

1.5 SIGNIFICANCE OF THE STUDY

This study will be beneficial to small and medium enterprises as the findings of this study will reveal how important and effective strategic planning is for SMEs. Additionally, subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regards to paternalistic leadership styles and their effects on workplace relationships.

1.6 SCOPE OF THE STUDY

This study will be focused on critically assessing the influence of strategic planning on the success of smes. This study will further ascertain the frequency SMEs carry out strategic planning, the extent in the use of strategic planning on SMEs, the challenges facing SMEs in using strategic planning in Enugu State and the benefits of strategic planning on SMEs. This study will be using SMEs in Nsukka Local Government Area as enrolled participants for this study.

1.7 LIMITATTIONS OF THE STUDY

This study will be limited to critically assessing the influence of strategic planning on the success of smes. This study will further be limited to the frequency SMEs carry out strategic planning, the extent in the use of strategic planning on SMEs, the effects of strategic planning on SMEs and the benefits of strategic planning on SMEs. This study will be using SMEs in Nsukka Local Government Area as enrolled participants for this study and this will serve as a limitation to this study as further research is needed if the findings of this research is to be used any where else.

1.8 DEFINITION OF TERMS

Assessment: the action of assessing someone or something

Strategic planning:  is an organization’s process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. It may also extend to control mechanisms for guiding the implementation of the strategy.

Small and medium enterprises: is a business that maintains revenues, assets or a number of employees below a certain threshold.

 

REFERENCES

Armstrong, J S, 1982. “The value of formal planning for strategic decisions

Ayyagari, M, Beck, T, & Demirguc-Kunt, A, (2003).Small and Medium Enterprises across the Globe: A new Database (no.3127).The Washington DC: The World Bank

Balasundaram, N, (2009) Incidence of Strategic Planning in Small Business: An Overview

Berman, J. A., Gordon, D. D., & Sussmann, G. 1997. A study to determine the benefits small business firms derive from sophisticated planning versus less sophisticated types of planning. Journal of Business and Economic Studies, 3(3): 1-11.

Berry, M. 1998. Strategic planning in small high tech companies. Long Range Planning, 31(3): 455-466.

Ciavarela, M.Buchholtz, K, Riordan, S, Gatewood, R. & Stokes, G, (2004). The Big Five and Venture Survival: is there a Linkage? Journal of business venturing, 19:465-483. Journal of small business management, 1(3):11-17

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