Effects of strategic management practices on financial performance of micro and small enterprises authority in Kenya

Abstract

Many state corporations in Kenya face significant challenges due to the absence of formalized planning and strategic approaches, contributing to their high failure rates. This study aims to explore whether the integration of strategic management practices can enhance organizational effectiveness and stimulate growth within these corporations. Specifically, it focuses on evaluating the potential influence of strategic management practices on the financial performance of the micro and small enterprises authority (MSEA) in Kenya. This research explored key components of strategic management, namely environmental scanning, strategy formulation, strategy implementation, and strategy evaluation and control, to determine their influence on the financial outcomes of the MSEA. Balanced Scorecard, Resource Based View, Dynamic Capability and Strategic Fit Theories guided the study. The study adopted descriptive survey design where quantitative data was collected. Data collection instruments included; Questionnaire for all the management cadres. The study population was 96 participants where census techniques was used to get the sample size of 96 respondents. The pilot study was carried out and face and content validity of the research instruments were assessed by experts’ opinion to ascertain their relevance, meaningfulness and appropriateness to the respondents. Reliability of the instruments was resolved through the internal consistency where Cronbach’s Alpha Coefficient of 0.7 and above was considered acceptable. Analysis of variance indicated that model was significant at a confidence level of 95% since the PValue was 0.000b and hence >0.05. The R - Squared of the study model was able to explain 75.9% of changes in financial performance of MSEA in Kenya. Data were descriptively analyzed using means and standard deviations, and inferentially by Pearson's correlation and regression analysis to measure strength and direction. Inferential analysis study findings established that the four variables; environmental scanning (β= 0.654, p<0.05), strategy formulation (β= 0.443, p<0.05), strategy implementation (β= 0.568, p<0.05) and (β= 0.358, p<0.05) were found to be statistically significant in influencing the financial performance of MSEA in Kenya. The study concludes that since the model of the study was significant at a confidence level of 95% with a P – Value of 0.000b, the study therefore recommends that environmental scanning, strategy formulation, strategy implementation and strategy evaluation practices which were found to be statistically significant should be addressed so as to create a safer and more supportive environment that would enable improved financial performance of MSEA in Kenya.