Strategic Management Practices and Trends in SME Performance
Applying strategic management practices is believed to influence the performance of SMEs as per one of the recent studies. Thus, the role of strategic management in SMEs success is rising. The easy of doing business in Kenya has been improving! That is good news, as published by the World Bank reports. As per the report, Kenya has moved 21 places and took position 92, joining other countries such as Mauritius, South Africa and Rwanda that rank top 100 in ease of doing business.
However, National Bureau of Statistics indicates that about 2.2 million SMEs died in the last five years and that 400,000 SMEs are dying annually. Reasons for failure have always of focused on aspects such as limited capital, competition, poor infrastructure, lack of access to credit, and limited markets. This means that critical aspects of strategic management practices are usually not given attention when considering reasons for SMEs failure. The way a business is managed determines the extent to which it can succeed and find its way towards achieving the strategic aims of the founders.
That is the gap that Mumbe & Njuguna (2019) were interested in addressing. Their research focused on strategic management practices and performance of Small and Medium-Sized Enterprises. Findings from their study were meant to help identify how strategic management practices could minimise failure of SMEs in Kenya. Although the study was contextualised in Kitui County, the findings from the study are readily generalizable to other parts of Kenya given the contextual similarity of Kenya’s business environment. Their objectives of their study were:
- To establish how services delivery affects performance of SMEs in Kitui County, Kenya.
- To assess how adoption of ICT affect the performance of SMES in Kitui County, Kenya.
- To examine how customer service affects performance of SMEs in Kitui County, Kenya.
Citing Srivastava and Verma (2012), Mumbe & Njuguna (2019) argued that strategic management comprises of actions that determine the long-term prospects of an organization for purposes of attaining a competitive advantage. The aspects of strategic management that Mumbe & Njuguna (2019) focused on included services delivery effects, adoption of ICT and customer service. The authors analysed how strategic management practices could influence business performance from the standpoint of McKinsey’s 7S Model, Resource-based theory, and Ansoff Strategic Success Theory.
From the objectives above, it is evident that the independent variable was strategic management practices. The independent variables could be constructed from various aspects of the dependent variable-Mumbe & Njuguna (2019) chose service delivery, adoption of ICT, and customer service. Whereas the authors provide a specific explanation of strategic management and performance based on literature, they failed to define the three elements of strategic management to make them more understandable to the readers. Given that two of the independent variables (customer service and service delivery) seem to mean the same thing, perhaps defining them could have helped create that difference and explanation why the more-like same variables were tested under one study. From the general point of view, when a business delivers a service, it is obviously delivering it to the customers; hence, customer service looks more like a subset of customer delivery. For future publications, it will be important to define the key variables and ensure that they are clear to the readers to avoid unnecessary confusions.
Using a descriptive research design was consistent with the expectations of most social research studies. A descriptive design seeks to identify and describe the status of affairs as at a given point in time. In fact, most social science studies adopt of cross-sectional timeframe because data reflects a snapshot nature-collected within a short time. This is unlike longitudinal timeframe that is based on an extended period of time during which data is collected during given intervals. A total of 442 SMEs operating in Kitui town were targeted from which a sample of 111 SMEs was selected and data collected from the owners using questionnaires.
Findings from the study revealed that service delivery through employee involvement, customer awareness, and in-time delivery. Adoption of ICT as a strategic management was found to strongly influence performance of SMEs through use of mobile phones and utilisation of computer and internet. Customer service practices that Mumbe & Njuguna (2019) found to affect performance included employee engagement, customer satisfaction, customer retention, and customer feedback. The three aspects: service delivery (correlation=0.512), ICT correlation=0.613), and customer service (correlation=0.651) were strongly correlated with SMEs performance. The strong correlation was further supported the regression analysis which revealed significant levels of 0.000 (p<0.05) for all variables.
If you want to approximate the effect of strategic management practices on performance, you can use the regression equation:
Y= 1.095 + 0.192 Service Delivery + 0.191 ICT+ 0.359 Customer Service…….(i)
The above analysis was carried out using Statistical Package for Social Sciences (SPSS). Other statistical packages that could have been used to achieve the same purpose include STATA, R, and Eviews. However, these depend on the nature of data that was collected as specified in the proposal.
Now, the question was: how can we use strategic change management practices to prevent failure of SMEs? According to Mumbe & Njuguna (2019), do the following:
- Adopt a democratic style of leadership
This strategic management practice for full engagement of employees. When employees are fully engaged, they help identify areas of weaknesses and areas that require improvement. Employee engagement is also a motivational endeavour in an organisation. Democratic leadership style has been credited as the best style of leadership in modern-day organisations. In democratic leadership contexts, strategic management practices allows organisational members to share ideas and opinions, engages everyone in the decision-making process, and encourages creativity through rewards. However, the final decision remains with the leader after taking into consideration the worries and interests of the people. Although democratic leadership has been previously criticised for being time-consuming, the long-term benefits exceeds the short-term limitations because it minimizes chances of resistance to decisions made.
- Ensure you have an awareness of your customers in terms of their needs, purchase trends, and other characteristics.
As a strategic management practice, understanding your customers is instrumental towards fully meeting their needs. One of the core provisions of total quality management is to ensure that customer requirements are met. How can one satisfy the needs of customers if they do not understand them? With the current technology, using the internet and social media, it is possible to track customer needs and maximise on this knowledge to predict their trends and characteristics.
- Deliver goods and services to customers within the required timelines.
Timeliness is one of the elements of total quality management that inspire customers’ trust and confidence. Timeliness is the greatest dimension of service quality. Long queues tend to frustrate customers; hence, there is need for the strategic management team working all means to reduce the waiting time if they want to attract and retain customers.
- Ensure that you pick and respond to all mobile phone communications
Communications come in through various channels such as messages, calls, and using other mobile platforms such as WhatsApp. When a message comes from a client and it is ignored, a negative picture of the business is tainted. SMEs seeking audience in the contemporary highly competitive and dynamic business environment are called upon to ensure effective and timely communication as one way of connecting with customers.
- Use internet and computers to store files, print files, and embrace internet for both research and communications.
Use social media networks such as Facebook, Twitter and Instagram for research and marketing communications. There are several methods and techniques that companies can use to store information. Technology is advanced, which can be harnessed to store and retrieve information when required.
- Act on customer feedback instantly.
Immediate responses that are useful are critical for customer satisfaction and retention. The resulting interactivity is critical for two-way communications, which are critical aspects of service quality dimensions. Whether it is in social media, through website review, social media platforms comments-it is crucial to respond to each feedback. While responding, ensure that you keep the rules of response not to display a negative image of the organisation.
Mumbe, J. R., & Njuguna, R. (2019). Strategic Management Practices and Performance of Small and Medium-Sized Enterprises in Kitui County, Kenya. Journal of Strategic Management, 3(2), 30-45.
Link to the Article
https://stratfordjournals.org/journals/index.php/journal-of-strategic-management/article/view/303 Just several other journal articles that have been accepted to be published in this journal, Mumbe & Njuguna (2019) displayed excellence in research and credibility of the findings. The results presented in this study can be used to inform businesses in the area of strategic management practices as well as inform theory/background to the study in research. The authors recommend that similar studies should be replicated to other counties in Kenya because this study was based on Kitui County, which may exhibit a degree of dissimilarity with other counties in Kenya. Moreover, more scientific studies could be carried out involving larger respondent sizes and use of mixed methodologies. The advantage of this is that it could enhance the reliability and generalisability of the findings.