top of page
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute

Economics and Business

Quarterly Reviews

ISSN 2775-9237 (Online)

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
crossref
doi
open access

Published: 26 May 2023

Investigating the Effect of Strategic Planning on the Financial Performance of SMEs in Namibia

Ester Twahafifwa Kafidi, T. Kaulihowa

Namibia University of Science and Technology

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, management journal

Download Full-Text Pdf

doi

10.31014/aior.1992.06.02.505

Pages: 20-32

Keywords: Strategic Planning, Small and Medium Enterprises, Financial Performance, Windhoek, Namibia

Abstract

Small and Medium Enterprises (SMEs) are hypothesised to play a critical part and serve as a crucial source of income and employment creation in many economies. SMEs contribute about 12% of the Namibian Gross Domestic Product (GDP) and provide employment or income to about 160 000 Namibian citizens. Namibia has witnessed remarkable growth in the number of SMEs in recent decades, with over 28 000 formally registered SMEs. However, most SMEs in Namibia experience difficulties, some of which may threaten their existence. Numerous external and internal factors impact business performance: failure to develop strategic plans, lack of finance, poor financial management, and lack of suitable management skills. The literature argues that financial performance challenges faced by SMEs can be mitigated with a clear and well-articulated strategic plan. This study set out to investigate the effect of strategic planning on the financial performance of SMEs. The results confirm that strategic planning has a positive effect on the financial performance of SMEs. However, many SMEs indicated that they had never done strategic planning. The study also found that Issue-based strategic planning is a commonly used strategic planning model. Policy implications indicate that although strategic planning is found to enhance SMEs' financial performance, the majority of them lack an optimal mix of strategic planning elements. The study recommends using strategic planning to set clear financial performance targets and for relevant stakeholders to introduce policies that help equip SME owners/managers with the optimal mix of business management skills.

References

  1. Abdullah, T. M. (2010). Profit Maximization Theory,  Survival-Based Theory and Contingency Theory: A Review on Several Underlying  Research Theories of Corporate Turnaround. Journal Ekonom, 136-143.  Retrieved from https://www.researchgate.net

  2. Abesiga, P. (2015). Strategic Management Practices and  the Performance of Small and Medium, Agribusiness Enterprises (SMAEs) in  Western Uganda. Research Proposal, Mbarara University of Science and  Technology, Mbarara, Uganda . Retrieved from https://utamu.ac.ug

  3. Aboramadan, M., & Borgonovi, E. (2016). Strategic  management practices as key determinants of superior non-governmental  organizations' performance. Problems of management in the 21st century, 11(2),  71-92. Retrieved from https://scientiasocialis.it

  4. Abosede, A. J., Obasan, K. A., & Alese, O. J. (2016).  Strategic Management and Small and Medium Enterprises (SMEs) Development: A  Review of Literature. International Review of Management and Business  Research, 315-335. Retrieved from https://www.researchgate.net

  5. Amwele, H. N. (2013, July). An empirical investigation  into the factors affecting the performance of SMEs in the retail sector in  Windhoek, Namibia. Master's Thesis, Harold Pupkewitz Graduate School of  Business , Windhoek, Namibia. Retrieved from https://ir.nust.na

  6. Anthony, R. N., Hawkins, D. F., & Merchant, K. A.  (2011). Accounting: Text and Cases (13th ed.). New York: McGraw-Hill  Education.

  7. April, W. I. (2005). Critical Factors that influence the  success and failure of SMEs in Namibia in the Khomas Region. Master's  Thesis, University of Stellenbosch . Retrieved from https://scholar.sun.ac.za

  8. Babafemi, I. D. (2015). Corporate Strategy, Planning and  Performace Evaluation: A Survey of Literature. Journal of Management  Policies and Practices, 3(1), 43-49. doi:10.15640/jmpp.v3n1a6

  9. Campbell, R. H. (2010). Strategic Planning and  organization performance in a volatile economic environment. Doctoral  Thesis , Capella University . Retrieved from http://www.academia.edu

  10. Cant, M. C., Erdis, C., & Sephapo, C. M. (2014). Business  Survival: The Constraints Experienced by South African SMEs in the Financial  Sector. International journal of academic research in business and social  sciences, 565-579. doi:10.6007/IJARBSS/v4-i10/1255

  11. Daniel, J. (2012). Sampling Essentials: Practical Guidelines  for Making Sampling Choices. California: Sage Publications. Retrieved from  https://books.google.com

  12. David, F. R. (2007). Strategic Management concepts (11th  Edition). New Jersey: Pearson Prentice Hall.

  13. Development Bank of Namibia. (2020). DBN's lending and  support programmes for SMEs in Namibia. Windhoek.

  14. Dobrovic, J., Lambovska, M., Gallo, P., & Timkova, V.  (2018). Non-Financial Indicators and their importance in small and medium  sized enterprises. Journal of Competitiveness, 41-55. doi:10.7441/joc.2018.02.03

  15. Gomera, S., Chinyamurindi, W., & Mishi, S. (2018).  Relationship between strategic planning and financial performance: The case of  small, micro and medium-scale businesses in the Buffalo City Metropolitan. South  African Journal of Economic and Management Sciences, 21(1), 1-9.  doi:10.4102/sajems.v31i1.1634

  16. Grant, R. M. (2010). Contemporary strategy analysis. Chichester: John Wiley and sons.

  17. Grant, R. M. (2016). Contemporary strategy analysis: text  and cases. West Sussex: John Wiley & Sons.

  18. Hough, J., Thompson, A. J., Strickland III, A., &  Gamble, J. E. (2011). Crafting and Executing Strategy: Creating Sustainable  High Performace in South African businesses. Berkshire: McGraw-Hill  Education.

  19. Ibegbulem, A. B., & Okorie, C. (2018). Strategic  Planning Process Characteristics and SMEs Performance: A Study of SMEs in  Delta and Edo States. International Journal of Innovative Finance and  Economics Research, 103-116. Retrieved from http://www.seahipaj.org

  20. Jayawarna, S., & Dissanayake, R. (2019). Strategic  Planning and Organisational Performance: A review on conceptual perspectives. Archives  of Business Research, 7(6), 171-180. doi:10.14738/abr.76.6684

  21. Kambwale, J. N., Chisoro, C., & Karodia, A. M. (2015).  Investigation into the causes of small and medium enterprise failures in  Windhoek, Namibia. Arabian Journal of Business and Management Review (OMAN  Chapter), 80-109. doi:10.12816/0019074

  22. Kraus, S., Reiche, S., & Reschke, C. (2005). The role of  strategic planning in SMEs: Literature review and implications. Annual  Meeting of the British Academy of Management , (pp. 13-15). Oxford.  Retrieved from https://www.researchgate.net

  23. Krejcie, R. V., & Morgan, D. W. (1970). Determining  sample size for research activities. doi:10.1177/001316447003000308

  24. Lo, P., & Sugiarto, S. (2021). Strategic Planning in  SMEs: A Case Study in Indonesia. Journal of Asian Finance, Economics and  Business, 8(2), 1157-1168. doi:10.13106/jafeb.2021.vol8.no2.1157

  25. Lobontiu, G. (2002). Strategies and Strategic Management  in Small Business. MPP Working Paper, Copenhagen Business School,  Department of Management, Politics and Philosophy , Copenhagen, Denmark.  Retrieved from https://www.researchgate.net/publication/265272727

  26. Majama, N. S., & Magang, T. I. (2017). Strategic  Planning in Small and Medium Enterprises (SMEs): A Case study of Botswana  SMEs. Journal of Management and Strategy, 74-103.  doi:10.5430/jms.v8n1p74

  27. Mamula, T., & Popovic-Pantic, S. (2015). Relationship  between innovativeness and strategic planning: Empirical research. Industrija,  47-65. doi:10.5937/industrija43-8717

  28. Mazzarol, T. (2003). The Strategic management of small  firms: does the theory fit the practice? Crawley: CEMI. Retrieved from  http://.www.cemi.com.au

  29. Mcintyre, G. (2020, November 20). What Percentage of Small  Businesses Fail? (And Other Need-to-Know Stats). Retrieved from Fundera Inc  Web site: http://www.fundera.com

  30. Mulford, C. L., Shrader, B., & Hansen, H. B. (1988). Operational  and Strategic Planning in Small Businesses. Iowa: North Central Regional  Center for Rural Development, Iowa State University. Retrieved from  http://books.google.com

  31. National Policy on Micro Small and Medium Enterpri. (2016).  Retrieved from https://mit.gov.na

  32. Nghishekwa, T. N. (2019). An investigation into the  factors that limit SME's access to business advisory services: A case study of  the Windhoek Incubator Centre. Master's thesis, University of Namibia,  Windhoek, Namibia. Retrieved from https://repository.unam.edu.na

  33. Omalaja, M. A., & Eruola, O. A. (2011). Strategic  Management Theory: Concepts, Analysis and Critiques in Relation to Corporate  Competitive Advantage from the Resource-based Philosophy. Economic  Analysis, 44, 59-77. Retrieved from https://www.library.iens.bg.ac.rs

  34. Otieno, D. O. (2019). Effect of Strategic planning on the  financial performance of professional service small and medium size  enterprises in Kenya. Doctoral Thesis, Jomo Kenyatta University of  Agriculture and Technology, Nairobi, Kenya. Retrieved from  http://hdl.handle.net/123456789/5231

  35. Otieno, D. O., Namusonge, S., & Mugambi, F. (2017).  Effect of Strategic Management Process on the Performance of Small and Medium  Size Enterprises in Kenya. International Journal of Arts and Commerce, 5(6),  1-14. Retrieved from http://www.ljac.org.uk

  36. Ouakouak, M. L. (2017). Does a strategic planning process  that combines rational and adaptive characteristics pay off? Evidence from  Europen firms. Australian Journal of Management, 328-349.  doi:10.1177/0312896217721589

  37. Pearce, J. A., & Robinson, R. B. (2003). Strategic  Management: Formulation, Implementation and Control (8th Edition). New  York: McGraw-Hill/Irwin. Retrieved from http://books.google.com

  38. Porter, M. (2008). The Five Competitive Forces That Shape  Strategy. Harvard Business Review, 24-41.

  39. Prahalad, C. K., & Hamel, G. (1990). The Core Competence  of the Corporation. Harvard Business Review, 1-15. Retrieved from  https://hrb.org

  40. Pushpakurami, M. D., & Watanabe, T. (2009). Do  strategies improve SME performance? An empirical analysis of Japan and Sri  Lanka. Meijo Asian Research Journal, 1(1), 61-75. Retrieved from  http://marc.meijo-u.ac.jp

  41. Reboud, S., & Mazzarol, T. (2008). Strategic Planning in  SMEs, A Review of the English and French Literature. ANZAM Annual  Confrence. Auckland, New Zealand. Retrieved from https://www.academia.edu

  42. Robinson, R., & Pearce, J. (1984). Research Thrusts in  Small Firm Strategic Planning. Academy of Management Review, 128-137.  doi:10.2307/258239

  43. Salman, R., & Normalini, M. K. (2020). The Mediating  Effect of Strategic Planning on the Relationship between Innovative Culture  and SMEs Performance. Review of International Geographical Education, 11(5),  4076-4086. doi:10.48047/rigeo.11.05.288

  44. Sandada, M., Pooe, D., & Dhurup, M. (2014). Strategic  Planning and Its Relationship with Business Performance Among Small and Medium  Enterprises in South Africa. International Business & Economic  Research, 13(3), 659-669. doi:10.19030/iber.v13i3.8602

  45. Saxena, P. K. (2009). Management in Organisations: A  System and Human Resources Approach. New Delhi: Global India Publications.  Retrieved from http://books.google.com

  46. Schoneburg-Schultz, D., & Schultz, R. (2006). Small  and Medium Enterprises in Namibia - A brief situational analysis. Windhoek: Integrated Southern Africa Business Advisory. Retrieved from  http://www.technosol.de

  47. Sheehama, J. K., & Shihomeka, S. P. (2017). Exploring  sustainable economic challenges and opportunities experienced by the funded  small and medium enterprises at a selected commercial bank in Namibia. International  Journal of Current Research, 9(10), 60024-60036. Retrieved from  http://www.journalcra.com

  48. Simidele, A. A. (2015). A Review of Literature Conducted  on Strategic Planning. Masters Thesis, Ekiti State Univerisity , Faculty  of Management Sciences . Retrieved from https://www.academia.edu

  49. Suklev, B., & Debarliev, S. (2012). Strategic Planning  Effectiveness comparative analysis of the Macedonian context. Economic and  business review, 14(1), 63-93. doi:10.15458/2335-4216.1204

  50. Taiwo, A. S., & Idunnu, F. O. (2007). Impact of  Strategic Planning on Organizational Performance and Survival. Research  Journal of Business Management, 1(1), 62-71. doi:10.3923/rjbm.2007.62.71

  51. Tarifi, N. (2021). A Critical Review of Theoretical Aspects  of Strategic Planning and Fim Performance. Open Journal of Business and Management,  1980-1996. doi:10.4236/ojbm.2021.94107

  52. Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic  capabilities and strategic Management. Strategic Management Journal,  509-533. Retrieved from https://onlinelibrary.wiley.com

  53. van Scheers, L., & Makhitha, K. M. (2016). Are Small and  Medium Enterprises (SMEs) planning for strategic marketing in South Africa? Foundations  of Management, 8, 243-250. doi:10.1515/fman-2016-0019

bottom of page