STRATEGIC PLANNING AS A DETERMINANT OF PERFORMANCE IN SMALL AND MEDIUM ENTERPRISES: A CASE OF ELGEYO MARAKWET COUNTY, KENYA

Abstract

Ansoff and McDonnell (1990) defined strategic management as a process through which a firm manages its relationship with the environment in which it operates. It consists of strategic planning, capability planning, and management of change. Strategic management therefore is a continuous activity that enables the organization plan for the exploitation of opportunities using its internal strengths while minimizing the impact of threats posed by the environment in the light of the organization‟s weakness. This study aimed at assessing strategic planning as a determinant of Performance in Small and Medium Enterprises. The objectives of the study were: - To determine the effects of financial perspective on performance, to evaluate the effects of customer perspective on performance and to assess the contribution of the internal business perspective on performance. The study was informed by Balanced Score Card theory and a survey research design was used. A population of 2000 small and medium enterprise business persons in Elgeyo Marakwet County was assessed. A sample size of 95 from the target population was used. The study employed a stratified sampling technique for the sub-county and then simple random sampling. Data was analyzed by linear multiple regressions. In conclusions the County Government did not support SMEs as far as financial perspective is concerned for instance giving out loans and these retarded the sales growth. Correlation results revealed a significant and positive relationship. From the findings HO1 showed that there is no significant relationship between financial perspective and performance with (β = 0.017, p < 0.847). HO2 findings showed that customer perspective and performance had no relationship with (β = 0.299, p< 0.009) and finally HO3: indicated that internal business perspective and performance contributed less to the performance as it was indicated with a (β = -.061, p< .487). The study made the following recommendations: - There is need for the county government and microfinance institutions to support SMEs financially that is by offering them cheap, affordable and low interest loan. There is need for increased product quality of SMEs, maintain customer loyalty, increased customer satisfaction. On internal business perspective on the performance in Small and Medium Enterprises, County government should improve working environment to be conducive for SMEs. The study suggests that other study be done and verify the dimensions developed in this study and to enhance the generalizability of the research findings, future inquiries could employ more diversified samples across genders and diverse international customer environments.