Application of Strategic Planning Tools and Concepts in SMES in Nairobi CBD

A Project Report Submitted to the Chandaria School of Business in Partial Fulfilment of the Requirements for the Masters of Business AdministrationThe general objective of the study was to examine the application of strategic planning tools and concepts in small and Micro enterprises (SMEs) in Nairobi CBD. The study was guided by the following objectives: to examine the various strategic planning tools and concepts adopted by SMEs in Nairobi CBD, to analyze the challenges faced by SMEs in Nairobi CBD in the application of strategic planning tools and concepts and to establish how the application of strategic planning tools and concepts affects SMEs in Nairobi CBD. Descriptive research design was employed in the study. The population under study was 1000 micro enterprises in Nairobi CBD. The random sampling technique was used to determine the sample size because of the heterogeneity of the population and to facilitate high response rate. The sample size was 300 respondents, out of which 60 percent responded. The data was analyzed using with the help of the statistical package for social sciences (SPSS). The analyzed data was thereafter presented in form of tables and charts. It was revealed from the study that the most commonly used techniques are financial analysis for own business, SWOT analysis, PEST analysis as well as Porter’s five forces all having a mean of more than 4.00. The results show moderate use of techniques such as: financial analysis for competitors, experience curve analysis, human resource analysis, spreadsheet “what if” analysis as well as analysis of key (critical) success factors. The results show less focus on techniques such as scenario construction, core capability analysis, value chain analysis, stakeholder analysis and analysis of organisational culture by SMEs operating in Nairobi. In the light of findings the study concludes with regards to the challenges faced by SMEs in the application of strategic planning tools and concepts revealed that the process of applying strategic planning tools and concepts was faced with the following challenges: Lack of Effective Communication (100%), lack of education and training on how to use them (81%), employee competency prevented the application of the tools (70%), organization Structure in the usage of tools, lack of employee empowerment (68.3%), resistance to change leading to lack of adoption of new ways (91%), lack of direction by top leadership (70%), lack of long term view of the business, failure to see how the tools could be beneficial (80%), general short-termism view of the business (70%), inadequate finances and finally (79%), seeing planning as a waste of time (90.7%). Finally the regression analysis revealed that there was a direct positive relationship between strategic planning techniques and tools and SME performance (.519). This finding indeed indicates that performance of SMEs in Kenya is influenced by the use of strategic planning techniques and tools. The study recommends that it is important that scanning should also include a focus on internal strategic factors. Secondly, SMEs should make use of important strategic planning tools and techniques such as scenario construction and analysis of organisational culture. Techniques such as scenario construction could be useful to SMEs work in a highly unpredictable environment. The use of this technique could provide these SMEs with an approach to flexible planning by developing several alternative views of the future. The study further recommends the need for SMEs to find out reasons for the negative attitudes towards strategic planning by some employee; perhaps via the use of interviews. Further there is needed to find out the nature of the problems which restricted the effectiveness of the implementation of SMEs strategy planning tools and concepts. Finally the study recommends that the managers of these SMEs should have a positive attitude to strategic planning and make an effort to use strategic planning tools and techniques they consider that the implementation of strategy in their SMEs is not effective. Strategy implementation is the most difficult and important part of strategic management. No matter how superior the formulated strategy is, an SME will not benefit if it is implemented incorrectly