Academic journal article Academy of Strategic Management Journal

Analysis of the Impact of Strategic Management on the Business Performance of Smes in Nigeria

Academic journal article Academy of Strategic Management Journal

Analysis of the Impact of Strategic Management on the Business Performance of Smes in Nigeria

Article excerpt

BACKGROUND TO THE STUDY

It is not only important for all businesses to understand why they are in business but also to put in place an attainable strategic plan to improve their business performances. This is because strategy is a source of sustainable competitive advantage and in recent years, large enterprises have adopted various strategic management practices to guarantee their fit within the constraints of their environment. Though this practice, as acknowledged in Kraja & Osmani (2013), is often seen to be important only to large corporations, most studies have shown that for every organization, either large or small, to succeed and attain a competitive advantage, it has to be strategic in their daily operations. However, the quality and strength of firms' competitive advantage, as proposed by the resource-based theory, relates to how effective internal resources of firms are utilized, instead of their position in the external environment (Makanga & Paul, 2017). In support of this, the contingency theory also drew attention of organizations to the need to develop managerial strategy based on the situations and conditions they are experiencing (Ahmed & Mukhongo, 2017), but literatures on Small and Medium-Sized Enterprises (SMEs) has paid little attention to the strategy-making processes of these firms and concentrated more on their low performance and high failure rate which is often blamed on lack of resources such as funds, land and skilled labor (Majama & Magang, 2017). Though lack of these resources can hinder these enterprises from exploiting relative strengths, business management specialists have argued that even on the availability of such resources, majority of these SMEs do fail due to lack of strategic planning resulting from poor management, lack of managerial education and lack of initiative (Eniola & Ektebang, 2014; Kraja & Osmani, 2013; Majama & Magang, 2017; Nwankwo, Ewuim & Asoya, 2012). It is obvious that SMEs can no longer be excluded from those factors that have driven larger organizations into using strategic decisions (Abosede, Obasan & Alese, 2016); therefore SMEs are now compelled to arrange their available resources and capabilities accordingly to gain competitive advantages in relation to their products, competitions and market. Therefore, to what extent will the adoption of strategic management practices influence the market shares, transaction volumes and consequently the business performances of SMEs in Nigeria?

LITERATURE REVIEW

Businesses, according to Eniola & Ektebang (2014) that fail to drive good planning practices and tools forward, will not only stay bound by slow, stovepipe planning processes, but also find it difficult to compete in good conditions. The survival-base theory also calls for every business manager to keep in mind the need to be strategic if they do not want their organizations to be crushed by competitors. Strategy is about achieving competitive advantage through being uniquely different in your industry (Porter, 1996; Adeyemi, Isaac & Olufemi, 2017). It is no longer competing for product leadership, rather competing in core competence leadership (Agha, Alrubaiee & Jamhour, 2011). Agha et al. (2011) further argues that defining core competences amid the formulation of strategies is intentionally to attain sustainable competitive advantages. Strategic management is thus a veritable tool in improving firms' competitiveness, performance level and structural development (Makanga & Paul, 2017). Branislav (2014) stated that the application of strategic management practices helps firms in exploiting and creating new and different opportunities for tomorrow. Therefore to straighten up operations and enable firms have vision and direction, strategic management is a route that is highly demanded (Ahmed & Mukhongo, 2017). This is because it provides an overall direction to an enterprise in the setting of objectives, in developing of long-term policies and plans designed to achieve these objectives and then in allocating resources to implement the plans (Abosede et al. …

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