EFFECTS OF STRATEGIC PLANNING ON GROWTH OF SMES

1.1 Introduction

The small business strategic plan must communicate the vision and mission of owners to employees and customers. The study will enhance the growth of small businesses in the Nigerian economy through the understanding of the relationship between effective strategic planning and business growth. Small businesses are usually started by a small number of owners or sometimes single owner and usually with no formal procedures and operations. Owners usually manage small businesses with little skills and knowledge to the extent where the growth stage is critical requiring clear vision and mission for success.

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.

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1.2 Background of Study

Historical facts show that prior to the late 19th century, cottage industries controlled the economy of Europe. The industrial revolution changed the status quo and introduced mass production model, which triggered an unexpected reappraisal of the role and importance of small and medium sized enterprise in the global economy. Findings by economics over the years showed that small firms and entrepreneurships play a much more important role in economic growth and development. Many economics developed and developing here come to realize the value of small business. They are seen to be characterized by dynamism, within innovations, efficiency, and their small size allow for faster decision making process.

Governments all over the world have realized the importance of this category of companies and have formulated comprehensive public policies to encourage, support and fund the establishment of SMES. Developments in small and medium enterprises are sin quo non for employment generation, solid entrepreneurial base and encouragement for the use of local raw materials and technology.

Nigeria's SMEs (general an umbrella term for firms with less than 250 employees), at present experienced a lot of problems and hardship and this is not just as a result of the economic downfall. There are a number of bottlenecks, including serious under capitalization with difficulty in gaining access to bank credits and other financial markets, corruption and a lack of transparency but most damagingly, a seemingly lack of government interest in and support for the roles that SMEs play in national economic development and competitiveness. Looking back, there has never been any real attempt on the part of government to formulate any tangible and lasting policies or programmes to support small business sector what is more damaging, however, is that this lack of support for small businesses have been negatively complemented by misplaced government intervention in what is seen as the commanding heights of the economy.

The woeful failure of such capital projects like the Iwopin paper mill, the Ajaokuta steel complex, the Bachita sugar factory and Leyland Daf, all come to mind here. A study done by the federal office of statistics shows that 97% all business in Nigeria employs less than 100% employees. Looking at the earlier definition of SMEs, it therefore means that 97% of all business in Nigeria are to use the umbrella term “small business”. The SMEs provides on average, 50% of Nigeria employment and 50% of its industrial output. The proportion of Nigerian SMEs and their impact on the economy is pretty much similar to those in other countries of the world especially in the advanced economics. In the UK and US, SMEs are seen as largely essential for European employment.

This is what strategic planning and control come in place. Government has to efficiently plan its policies and formulate programmes that enhance the growth and sustenance of SMEs in the country. Thus, the effect of strategic planning as they affects the growth and development of SMEs shall be the key focus of this research work.

Historical Background Of Star Paper Mill Star paper mill limited (RC 22622) was incorporated as a paper converting company in 1977. The company has four major divisions. Star paper mill Limited also has offices in Lagos, Ibadan, Kaduna, Kano and Suleja.

The premier plants located at Aba, produces school exercise books of different types and a wide rang of stationary. It has an installed capacity of 25,000 metric tones per annum which translated into 38 million exercise books per annum in addition to 152 million envelopes of various sizes. Other products include typing sheets, duplicating paper and foolscap fly. The current percentage utilization is about 75 percent.

The second factor was commissioned in 1984 as a waste paper recycling plants, with an installed capacity of 10 metric tones of tissue paper in jumbo reels per day. By 1992, a new paper machine was installed with the capacity of 60metic tones per day. Presently, the owerrinta plant has a total capital of 60 metric tones per day. This plant utilizes waste paper and paper off- cuts as its main sources of raw material and that constitute 90% both in volume and in naira value of the plant requirement locally sourced. Just recently, a new product line sanitary towards for ladies with the brand name of “every woman” became a new addition to the stable.

Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Effects of Strategic Planning on Growth of Small and Medium Scale Enterprises (SMEs).

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1.3 Statement of Problem

Investigation revealed that the growing significance of SMES cannot be overemphasized in view of its contribution to the economic growth of the country through the provision of employment for a large segment of the population and revenue derivation. The problem facing small and medium scale business as a result of the economic downfall, there are a number of bottlenecks, including services under capitalization with difficulty in gaining access to bank credits and other financial markets.

However SMES are faced with challenges in respect of formulating and implementing strategic plans. The inability to be proactive and secure the future with success has been the reason for many folding up of SMES and as well as their inability to grow rapidly. Consequently management experts have advocated the need for SMES to deploy strategic planning as a measure to ensure the effective and efficient channeling of resources to profitably meet the growing needs of customers with innovative products and services.

Many of the growing challenges encountered by SMES in the evolution and implementation of strategic planning include management inability to support strategy, lack of adequate resources, no alignment of activities with strategy and inability to manage change and lack of human resources to implement strategic plans. Consequently the problem confronting the research is to appraise Effects of Strategic Planning on Growth of SMEs in south-west Nigeria.

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1.4 Aim and Objectives of Study

The aim of the study is to investigate the Effects of Strategic Planning on Growth of Small and Medium Scale Enterprises (SMEs). In achieving this aim, the following specific objectives were laid out as follows:

1. To ascertain the effects of strategic planning as a tool in the growth and survival of SMEs in the country.
2. To measure the contribution of strategy planning in the enhancement of productivity and workers performance.
3. To identify the steps and processes that should be taken in implementing strategic planning in an organization.
4. To identify the problems militating against the survival of SMEs in the country and make recommendations on how to solve these problems.

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1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• What roles do strategic planning have to play in the survival of small and medium scale enterprises?
• Does strategic planning play any role in the growth and survival of small and medium enterprises in the country?
• Have strategic planning lead to the achievement of corporate objectives?
• Have strategic planning enhances the productivity of small scale businesses?
• What steps and process should be taken in implementing strategic planning in an organization?
• What are the problems facing SMEs in the country and how can these problems be solved?
• What are the problems militating against the survival of SMEs in the country and how can these problems be solved?
• What is the contribution of strategic planning and control to the attainment of cooperate objective?

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1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: Strategic planning does not lead to the achievement of corporate objectives
• H1: Strategic planning leads to the achievement of corporate objectives

Hypothesis Two

• H0: Strategic planning does not enhance the productivity of small scale businesses
• H1: Strategic planning enhances the productivity of small scale businesses

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1.7 Significance of Study

The findings of this study (when completed) will be of importance to managers, employees and future researchers.

1. The manager, this study will help him realize that strategic planning and control tool for achieving of organization goals.
2. In the area of employees, they will be able to concentrate their energy on important issues this way, they will be able to bring out their best.
3. The future researchers who may wish to undertake related topics in this stud may find out that this work will be valuable guide to their endeavor.

This study will also be of immense benefit to small and medium scale business operators in particular and other business (large) organizations in general to determine the effective of strategic planning and control. The study will determine the factors or problems limiting the effectiveness of strategic planning and control in an organization. Also, the study looks into the problems or factors militating against the survival of small and medium scale enterprise and tends to make recommendations and suggestions on how to solve these problems.

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1.8 Scope of the Study

The scope of this research is focused on the Effects of Strategic Planning on Growth of SMEs (Small and Medium Scale Enterprises) but because of time and cost the study was limited to Abia state with star paper mill limited Aba, as a case study.

The researcher was of the views that since the industries and firms are located in the same geographical and socio-economic conditions, the constraints and challenges affecting one, affects others.

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1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
3. Research material: availability of research material is a major setback to the scope of the study.
4. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
5. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

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1.10 Definition of Terms

To ensure that the research work is easily understood, some technical terms used will be explained.

Objectives: These are the future expectations of an individual’s cooperate body or organization. They are the targets which an organization hopes to achieve. Objectives are usually on a long term basis.

Strategic Planning: This is a process of defining organization strategic, decision and making decisions on allocation its resources, to measure this strategy, includes its capital and people.

Organization: This is an organized body of persons or cooperate bodies aiming towards a particular objective.