Global Journal of Management and Business Research, A: Administration and Management, Volume 22 Issue 9

Bridging the Gap between Strategic Planning and SMEs Performance: Role of External Business Environment Ismaheel Adewumi Raji α & Amidu Lawal σ Abstract- Given the fact that strategic planning takes a central position in firm’s operational activities, particularly in a rapidly changing business environment, but research into circumstance under which key strategic planning elements enhance firm performance is lacking in the extant literature. As a result, this study investigates the moderating role of external business environment in strategic planning elements-SMEs performance relationship. A survey research design was used via self-administered questionnaire with a view to collecting data from 497 registered SMEs operating in Lagos- Nigeria. The sample was chosen using a simple random sampling technique Data was analysed by SPSS and Partial Least Square- Structural Equation Modelling (PLS-SEM via PLS3). Findings revealed that significant positive relationships exist between strategy formulation, strategy implementation and SMEs performance. Findings further revealed that external business environment moderated the relationship between strategy implementation and SMEs performance. The implications, limitations and suggestions for future research were also discussed. Keywords: strategic planning; strategy formulation; strategy implementation; external business environment and SMEs. I. I ntroduction mall and medium-scale enterprises (SMEs) are critical to the economic growth and development of both developing and developed countries. It is estimated that 90% of private firms are SMEs, and that they account for more than 60% of total employment and more than 50% of GDP in emerging economies (World Bank, 2018; United Nations and Industrial Development Organization [UNIDO], 2016; Organisation for Economic Co-operation and Development [OECD], 2017). However, the contributions of SMEs to African economic growth are somewhat low, particularly in Nigeria, where employment and GDP rates are steadily declining (Asu, 2019). According to a recent report from the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) for 2021, Nigerian SMEs are currently in critical condition, which has been exacerbated by the COVID-19 pandemic. As a result, SMEs' managers must respond strategically in order to keep their businesses from collapsing while also providing them with a competitive advantage. Author α σ : Ahmadu Bello University. e-mails: dewumi07@gmail.com, amidulawal55@gmail.com However, SMEs in African economies are characterised by low performance and high failure rate (Donkor, D onkor a nd Kwarteng, 2018; Majama and Magang, 2017). The low performance and high failure of African SMEs have been attributed to a variety of factors, including a lack of strategic orientation and planning, insufficient government support, lack of access to finance, environmental factors, lack of managerial capabilities, and government policies, among others (Agabi, 2015; Ezekiel, Glory, and Alfred, 2016; Ahmad, Rahman, Rajendran, and Halim, 2020). Quite a number of business management experts argue that, despite the presence of many of these factors, some SMEs still record abysmal performance as a result of ineffective strategic planning (Majama and Magang, 2017) and a competitive business environment (Ibidunni, Ogundana and Okonkwo, 2021). As the business environment becomes more volatile, including stiff competition, strategic planning takes centrepoint and becomes increasingly important in business management (Wheelen and Hunger, 2012). Anyieni (2014) and Emeka (2015) assert that organizations that use strategic planning are better able to overcome uncertainties and survive in a volatile business environment, and they are also more likely to perform well. According to studies (e.g., Donkor, et al., 2018; Jayawarna and Dissanayake, 2019), one of the major reasons for the failure of SMEs in developing countries is their inability to successfully practice strategic management in their businesses. AlQershia (2021) also revealed that without adequate strategic planning, SMEs may not survive the current economic situation. In addition, a substantial number of research have pointed out that SMEs sector has witnessed minimal adaptation of strategic planning and the few that adopted strategic planning adopt informal and unstructured strategic planning (Awale, Namusonge and Warren, 2016; Magaisa, Matipira and Kanhai, 2014). Nonetheless, studies (such as Dubihlela and Sandada, 2014; Magaisa et al., 2014; Sandada, Pooe and Dhurup, 2014) are of the view that research on these SMEs still remains scarce despite the importance and immense contribution of the sector to the economy. Muhoho (2016) posits that it has become imperative for more S 55 Global Journal of Management and Business Research Volume XXII Issue IX Version I Year 2022 ( ) A © 2022 Global Journals