EFFECT OF FIRM SIZE ON THE RELATIONSHIP BETWEEN STRATEGIC PLANNING DIMENSIONS AND PERFORMANCE OF MANUFACTURING FIRMS IN KENYA

Abstract

Strategic planning has been regarded as a prerequisite to successful organizational outcomes and while the contexts of strategic planning differs by sector and geographical orientation, there is renewed interest in strategic planning- performance linkage in developing economies, this, due in part to the realization of the role of firm based factors such as strategic planning dimensions. This study aimed to determine the relationship between strategic planning dimensions and firm performance in the manufacturing sector in Kenya and to establish, the moderating effect of firm size on the relationship between strategic planning and firm performance in the manufacturing firms in Kenya. The study was informed by not only the low performance of the manufacturing sector over the past two decades, but also, by the mixed results and contentious debate on the effect of strategic planning dimensions of management participation, functional integration, strategic orientation and strategic control on performance. The study has adopted the use of multidimensional constructs to study strategic planning dimensions and performance linkage. The study utilized a cross sectional survey design, while stratified simple random sampling were used to obtain the sample comprising 191 firms in twelve subsectors among manufacturing firms in Nairobi and its surroundings. Data was collected through a structured questionnaire for key managers involved in the strategy formulation and implementation. Out of the 191 questionnaires administered, 111 were returned and found usable questionnaires, representing 58% which is adequate for this stream of research. SPSS Software was utilized to analyze data. Inferential data analysis was carried out by use of correlation analysis. Regression models were fitted using multiple regression analysis and hypothesis testing were done using standard F and T-tests. The study revealed that strategic planning analyzed through the dimensions of management participation, functional integration, strategic orientation and strategic control were significant and positively related to firm performance. However, firm size, was not found to moderate the relationship between strategic planning dimensions and firm performance in the manufacturing firms in Kenya. Thus, emphasis on specific strategic planning dimensions contribute positively to both large firms and small firms despite their difference in resources and development levels. The study contributes to the strategic planning performance discourse in the context of developing countries and furthers the discussion on the factors moderating in the relationship between strategic planning dimensions and firm performance. The study confirms that, firm size is neither a prerequisite nor a factor for successful application of strategic planning dimensions in both small and medium and large firms in the manufacturing sector in Kenya. The study recommended high participation and involvement of top management in the whole process of strategic planning, anchoring of deliberate functional integration processes in the firm, heightened strategic oriented paradigms for market orientation, customer focus and competitiveness and the development, design and customization of management control systems to enhance implementation, monitoring and evaluation of the strategic planning process outcomes.