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

studies to be conducted to understand the relationship between strategic planning and performance of SMEs. Despite extensive research on strategic planning, the question of whether strategic planning affects organizational performance remains inconclusive (Chaib Lababidi, Lababidi, Colak and Dayan, 2020). Some studies (e.g., Arasa and K'obonyo, 2012; Auka and Langat, 2016; Donkor et al., 2018; Kornelius, Supratikno, Bernarto and Widjaja, 2021; Otieno, et al., 2017; Sandada, et al., 2014) have found a significant positive relationship between strategic planning and firm performance, whereas others have found no significant relationship (Ajonbadi, Otokiti and Adebayo, 2016; Gica and Negrusa, 2011). As a result, the inconsistency of the empirical findings does not compel a conclusion about the relationship between strategic planning and firm performance. There is also debate in the literature about whether strategic planning is unidimensional or multidimensional, as well as its operationalization (Phillips and Moutinho, 2014; Rudd, Greenley, Beatson, and Lings, 2008). This current study attempts to address this issue by looking at strategic planning from a multidimensional perspective, utilizing strategy formulation and implementation, which appears to be lacking in the context strategic planning process of SMEs. Another point of contention is the choice of performance measures for evaluating firm performance. For example, researchers (e.g., Elbanna, 2012; Phillips and Moutinho, 2014; Rudd et al., 2008) have observed that most research in the planning-performance domain focuses primarily on assessing performance through financial measures, limiting the complete understanding of performance. As a result, this study conceptualized firm performance through the four balanced scorecard measurement perspectives, namely, financial perspective, internal business perspective, learning perspective, and customer perspective (Elbanna, 2012; Kaplan and Norton, 1992). Furthermore, most existing studies on strategic planning and firm performance focus on larger organizations and the general business context, particularly in developed countries (Koufopoulos, Logoudis and Pastra, 2005; Pollanen, Abdel-Maksoud, Elbanna and Mahama, 2017; Pucci, Nosi and Zanni, 2017). However, due to contextual differences in culture, economic policies, and legal environments, the findings may not be applicable to developing countries. More importantly, it has been argued that strategic planning may not always improve firm performance in the absence of proper environmental analysis (Makinde and Asikhia, 2017). This is due to the increasingly complex, dynamic, and competitive environment in which today's businesses operate. According to Ajonbadi et al. (2016), strategic planning may not be successful in the absence of an intervening variable. As a result, the current study incorporates the external business environment as a moderating factor in the relationship between strategic planning and the performance of SMEs. II. L iterature R eview, H ypothesis D evelopment and T heoretical F ramework a) Firm Performance Firm performance is the most important aspect of an organization because every activity of the organization is geared towards enhancing performance. This why Memon and Tahir (2012) viewed performance as the achievement of valuable outcomes in an organization, such as high returns. According to Awino (2013), organisational success is determined by the high returns the organisation is able to record and the ability to identify performance drivers from the top to the bottom. Firm performance is a firm's ability to achieve the desired outcome as determined by the firm's major shareholders. It is also used to determine whether the actual outcome of an organization is what was intended (Al Qudah, Osman and Safizal, 2014). Smith and Reece (1999) defined business performance as an organization's ability to achieve its desired outcome or result as determined by the company's major shareholders. Wongrassamee, Gardiner, and Simmons (2003) define firm performance as an organization's ability to meet the needs of its employees, customers, and other stakeholders while also meeting its planned business objectives. However, the performance of a business firm could be measured using the financial and non-financial measures (Taouab and Issor, 2019). The financial measures include measures such as firm profits, earning per share, total shareholder return, returns on assets (ROA), return on sales (ROS), and return of equity (ROE) measures the financial success of a firm. Non-Financial performance measures the non-financial aspects of the firm. This measures focus on issues regarding; market share, efficiency, productivity, innovation, product quality, customer satisfaction, employee turnover, delivery time, waiting time, attainment of strategic objectives, among others (Datar, Kulp, and Lambert, 2001; Ibrahim and Lloyd, 2011; Monday et al., 2015).Looking through the preceding argument, it can be said that the key function of performance measurement is to determine whether or not the organizational strategy is being met. b) Strategic Planning Several researchers have argued the need for organizations to engage in strategic planning. One crucial claim of such arguments is that strategic planning creates a link between an organization's objectives, goals, and resources (Mitchelmore and Rowley, 2013; Shah, 2013). The key components of the strategic planning process are about where the 56 Global Journal of Management and Business Research Volume XXII Issue IX Version I Year 2022 ( ) A © 2022 Global Journals Bridging the Gap between Strategic Planning and SMEs Performance: Role of External Business Environment