The Impact of Strategic Planning on Financial Performance of Small and Medium Scale Enterprises

The Impact of Strategic Planning on Financial Performance of Small and Medium Scale Enterprises

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Chapter One of The Impact of Strategic Planning on Financial Performance of Small and Medium Scale Enterprises

INTRODUCTION

Strategic planning is defined as unified, comprehensive and integrated plan design to ensure that the basic objectives of an enterprises is achieved, it also known as long-term planning simply defined as the formal process of determining long, medium and short-term objectives and goals of an industry and how to achieve them.

Enterprises employ strategic planning on financial planning of varying degree of completeness.

Sexton and Auken identify four levels of strategic planning in small and medium enterprises as: strategic planning at zero level (i.e no strategic planning) strategic planning at level 1 (i.e. knowledge of sales but not profit) strategic planning at level 2 (i.e knowledge of sales but not profit) and strategic planning of level 3 (i.e knowledge of sales and profit and adopting measures to achieve the projected sales and profits).

On a variety of financial performance strategic planning measures for both medium and small scale enterprise. These studies have been undertaken especially those of small firms have drawn conflicting conclusion by saying that strategic planning provides structure for decision making helping small and medium scale enterprises manager take a long-term view.

It is a highly value tool that is usually employed by successful and best-managed business enterprises throughout the world it is a plan of business enterprises reveals it’s objectives, purpose, goals and patterns of and defines the range of business the enterprises is to pursue.

Planning is the fundamental function of management, it is the formal process of setting objectives and determining the means of achieving objectives.

Strategic planning is a process by which some one can envisioning future and develop the necessary procedures and operations to influence and achieve that future.

Strategic planning consists of set of underlying processes that are intended to create or manipulate a situation to create a more favourable outcome for an industry.

Industries, however appear to gain more because they can derive considerable benefits not only from adaptive thinking but also from integration and control.

Small scale enterprises can derive considerable benefits from adaptive thinking but probably gain less than large firms from integration and control aspects of strategic planning.

The effectiveness of strategic planning can be measured in terms of the extent to which it influences organizational performances which affect it’s survival rate. Pel extra industry will be use as case study.

STATEMENT OF THE PROBLEM

Business firm needs strategic plans to set direction for themselves in order to outperform competitions, exploit opportunities and circumvent through threatening environment.

It is an annual process and considered a very import enterprises activity. It can be considered a longitudinal study because it examines a set of institutions to identify changes in their performance over time.

Strategic planning is one of the most misunderstood and poorly used tools in many organizations with detailed plan created arduously over months at great effort only to gather dust and languish after they have duly acknowledged and then filed away.

OBJECTIVES OF THE STUDY

Strategic planning is important on financial performance of an enterprises.

The purpose of these study are as follows:

(1)    To examine the extent in which strategic planning intensity determined managerial and environmental factors.

(2)    To determine whether there is a link between strategic planning and organizational survival.

(3)    To ascertain whether strategic planning implementation enhance organization return on investment.

(4)    To determine whether strategic planning enhance better organizational probability.

RESEARCH QUESTION

In order to achieve the objective of the study the following question will be addressed.

1.     To what extent does strategic planning enhance better organizational profitability?

2.     To what extent does strategic planning intensity determine by managerial and environmental factor?

3.     Is there a link between strategic planning and organizational survival?

4.     To what extent does strategic implementation enhance organization return on investment?

HYPOTHESES

To provide answers to the research questions the following hypotheses will be tested.

1.     Ho:   Strategic planning intensity is not determined by

managerial and environmental factors.

        Hi:    Strategic planning intensity is determined by

managerial and environmental factors.

2.     Ho:   There is no link between strategic planning and

enterprises survival.

        Hi:    There is link between strategic planning and

enterprises survival.

3.     Ho:   Strategic implementation does not enhance

organization return on investment.

Hi:    Strategic implementation enhances organization return on investment.

SCOPE OF THE STUDY

The study embraces the strategic planning on financial performance in small and medium scale enterprise. It covers primary objectives in strategic planning like the quality objective timeless and reliability objectives.

SIGNIFICANCE OF THE STUDY

A study like this is suppose to make a theoretical and practical contribution to strategic planning. It would provide basis for closer search of the methodology and practice of strategic planning in small and medium scale enterprises it will try to answer the question of what is to be done, how it should be done and when it should be done. This research study will stimulate further research into other aspect of strategic planning and how it will aid the financial performance of an enterprise.

LIMITATIONS OF THE STUDY

This study shall be carried out among junior, senior and management of financial aspect of Pel-extra Industry Lagos State, in order to ensure a balance response.

However it is pertinent to state that such content as: Inadequate time, unavailable resources and some other things for the study might limit the scope of the study.

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