Thesis:

Influence of strategic management practices on financial performance of small and medium manufacturing firms in Nairobi county, Kenya.

The business environment has become more competitive, resulting in increased consumer alternatives, reduced pricing, increased competition, and lower profit margins, all of which have increased the importance of strong strategic marketing practices. Only until a firm has developed a distinct strategy can it construct an effective marketing mix. Several studies have found that a majority of strategic projects fail, which is cause for concern. Specifically, in spite of the strategic importance given to the SME sector by Kenya’s vision 2030, SMEs continue to perform dismally in the market. The main objective of the study was to determine the effect of strategic management practices on financial performance of SMEs in Nairobi County. The specific objectives of this study were to determine the influence of environmental scanning, market positioning practices, cost leadership practices and differentiation practices on financial performance of manufacturing SMEs in Nairobi County. The study was guided by three main theories including McKinsey 7s Model, Resource-Based Theory and Game Theory. This study used a descriptive research design which aims at revealing the actual phenomenon in question exactly the way it is without any alterations. The study was conducted in the Central Business District (CBD), Nairobi, where most of the firms are located. The population for this study were 58 managers and owners from 58 manufacturing SMEs in Nairobi County. This study employed a census sampling approach in selecting the sample population for the study and target respondents were the managers, owners or their equivalents in the SMEs. Data was collected using questionnaires and analyzed using descriptive and inferential analysis. The findings of the descriptive statistics indicate that environmental scanning practices play a significant role in influencing the financial performance of manufacturing SMEs in Nairobi County. The analysis of market positioning practices suggested a mixed level of utilization among manufacturing SMEs in Nairobi County. The model summary indicated that the combination of Differentiation Practices, Market Positioning Practices, Environmental Scanning, and Cost Leadership Practices explains approximately 29.9% of the variance in financial performance (R square= 0.299). the adjusted R square, which accounts for the number of predictors in the model, stands at 0.241, suggesting a relatively moderate fit. Additionally, market positioning, cost leadership, and differentiation practices also demonstrated positive and significant coefficients (β= 0.182, p= 0.015; β= 0.325, p= 0.043; β= 0.329, p= 0.012, respectively), indicating their importance in enhancing SME financial performance. The study revealed that cost leadership practices significantly influence the financial performance of manufacturing SMEs in Nairobi County. The study concluded that environmental scanning plays a significant role in influencing the financial performance of manufacturing Small and Medium Enterprises (SMEs) in Nairobi County. Contrary to expectations, the study found that there is no statistically significant relationship between market positioning practices and financial performance among SMEs in Nairobi County. The study recommended that manufacturing SMEs in Nairobi County prioritize and enhance their environmental scanning practices to improve their financial performance. The study also recommended that manufacturing SMEs in Nairobi County should pay particular attention to refining their market positioning practices enhancing financial performance.