7.3 DISCUSSION OF RESEARCH OBJECTIVES
7.3.1 Research Objective One: SME strategy formulation
The first objective sought to determine the extent to which manufacturing SMEs in Harare, Zimbabwe have adopted strategy formulation. Five strategy development activities were considered in this study.
These activities were identified in various country-specific studies and global studies as being practiced
168
during strategy formulation, for instance, in Zimbabwe (Sandada, 2015), Nigeria (Monday et al., 2015), South Africa (Adendorff et al., 2011), Ireland (Germanos, 2012), USA (Fathi et al., 2017).
The analysis of results showed that strategy formulation has been widely adopted by manufacturing SMEs in Harare. This conclusion was reached as 65.7 % of these enterprises reported being engaged in strategy formulation to some extent. Qualitative insights showed that the majority of the interview participants had an understanding of the process of strategy formulation as they highlighted critical aspects such as the matching of internal resources, the development of plans, goals, and objectives.
Thus, the findings revealed that strategy formulation is predominantly associated with plan-making.
These results dismiss the allegations by Magaisa et al. (2013) that manufacturing SMEs in Zimbabwe are not engaged in strategy formulation as their study findings revealed that strategic management approaches and techniques are not in full operation in these enterprises. The findings of this study are, therefore, unique and new in Zimbabwe, a developing country, hence contribute to the existing body of knowledge.
However, the findings of this study resonate well with other studies in the developed world. In their study of strategic process approaches of SMEs in Australia, Wiesner and Millett (2012) found out that 66.7% of SMEs are involved in strategy formulation. Kraus et al. (2007) observed that SMEs are engaged in strategy development, however, the level of formality differs from large and well- established enterprises. In a study of strategic management practices in Chinese manufacturing SMEs, Chen and Liu (2012) found out that regarding strategy formulation, 73.0 % of the investigated SMEs have well-established business planning systems.
Strategy formulation has been observed to be on the rise in various parts of the world in SMEs (Sandada, 2015). For instance, a study by Neneh and Van Zyl (2012) in South Africa indicated that about 53.0 % of SMEs engage in strategic planning practices to enhance their survival. Sandada and Chikwama (2016) posit that the high failure rate amongst SMEs has been attributed to a lack of strategic planning.
Thus, the results of this study suggest that manufacturing SMEs in Zimbabwe are now able to achieve their potential of sustained growth and survival since they embrace strategy formulation.
The high extent of strategy formulation in SMEs in Harare can be attributed to environmental dynamism (Simba & Nyandoro, 2016). Sandada and Chikwama (2016) in their study of drivers of strategic planning in Zimbabwean SMEs found out that environmental dynamism positively influences the adoption of strategic planning [β = 0.195, p<0.05 (p=0.009)]. Thus, cognisant of the prevailing volatile and chaotic business environment, strategy formulation plays in the growth of SMEs in Zimbabwe Nyamwanza (2015).
169
Interesting to note is that strategy formulation was witnessed in all the five manufacturing sectors of the SMEs in Harare. This implies that strategy formulation is not sector-specific. These findings validate the findings of Hin et al. (2013) whose study discovered that strategic planning in Malaysian SMEs is done across all SMEs despite the nature of business.
A discussion on the findings of each of the strategy formulation activities is presented in the following section.
Step 1: Development of the strategy purpose
The first step in strategy formulation is the development of the strategic purpose. Thus, respondents were requested to give their level of agreement as to whether they are involved in setting the strategy purpose. The results of the study revealed that 66.2 % of the SMEs in Harare indicated that they have well-articulated vision and mission statements. These results validate the findings of Sandada (2015) whose study of strategic planning dimensions of SMEs in Zimbabwe found high factor loadings (with a variance of 7.24 %) on vision and mission statements implying a high presence of these strategic documents.
In a study conducted in South Africa, Tseka (2018) discovered that the majority of SMEs (70.1 %) emphasise upon the establishment of the mission and vision statements. George et al. (2012) assert that the mission and vision set out a company's long-term goals and aspirations clearly and briefly, thus, provides a picture of where the organization is heading.
However, the findings indicated that the strategic purpose is normally not communicated to everyone (M = 3.42±SD = 0.913). These results imply that the respondents expect employees not to be so conversant with the vision of the manager/founder. These findings resonate well with the assertion made by Nyamwanza (2015) that SMEs owners/managers in most cases do not communicate the mission and vision to their employees. However, Analoui & Karami (2003: 114) cited in Adendorff et al. (2011) does not support these findings as they believe that the strategic purpose should be communicated to all stakeholders.
Step 2: Establishing strategy objectives
According to Analoui & Karami (2003: 122), specifying strategic objectives is the second step in strategy formulation. The results of the study indicated that 63.6 % of the participating enterprises agreed that they are engaged in setting objectives during their strategy development process. In a similar study conducted in South Africa, Tseka (2018) found out that small businesses put moderate (18.2 %) and considerate (46.5 %) emphasis on long term objectives, and moderate (21%) to considerate (56.6%)
170
on short term objectives. Dess, Lumpkin & Eisner (2010) posit that strategic objectives (both long term and short term) guide how the enterprises fulfill their strategic purpose.
Interesting to note was that the objectives are not communicated to everyone in the organisation (M = 2.962±SD = 1.367). These results are validated by Majama and Magang (2017) who discovered that only top management in SMEs knows what the company wants to achieve while all other employees are in darkness. Wang et al. (2017) argue that reluctance to share strategic information with stakeholders negatively affects strategy planning in small firms. Nyamwanza (2015) concurs and adds that, consequently, the strategic orientation in SMEs is a replica of the owner’s vision and ambitions.
Step 3: Environmental scanning
In this study, 66.0 % confirmed that they involve themselves in scanning their environments and the majority agreed that they analyse their industry before formulating their strategies (M= 3.834±SD = 0.838). These results imply that in today’s uncertain and turbulent environment, scanning the business environment becomes mandatory in strategy formulation. Nyamwanza (2015) acknowledges that during their interaction with the environment SMEs in Zimbabwe discover opportunities and drive their organisation in new directions.
In a similar study in South Africa, Musandiwa (2014) discovered that 56.3 % are involved in formal environmental scanning as they have officeholders specifically for that. Musandiwa's (2014) study revealed that both internal and external environmental scanning is important to tax operators in Gauteng province, South Africa. Strategic management literature shows that environment scanning is important as it enables firms to note their strengths, weaknesses, opportunities, and strengths (Gabriela, 2012:410).
In a study aimed at understanding environmental scanning in manufacturing SMEs in Botswana, Jorosi (2008) confirmed that environmental audit allows SMEs to make informed decisions. In a similar study of the strategic management practices of Chinese manufacturing SMEs, one participant pointed out that managers in the Chinese manufacturing SMEs see environmental scanning as an important element to strategy formulation, however, they prefer informal ways of collecting information (Chen & Liu, 2012).
Step 4: Integration of internal and external data
The findings of the study show that 69.7 % indicated that they agreed to the integration of data from both external and internal sources whilst formulating their strategies. This implies that after scanning the environment for factors affecting the operations of their business, they carefully integrate data to formulate their strategies. According to Helms et al. (2011:271), successful strategy formulation requires firms to integrate both external and internal data.
171
In a similar study, Musandiwa (2014) established that taxi association in South Africa consider both external and internal data in formulating their strategies (M=4.46, SD=0.335). Isaack and Muathe (2017) in their study conducted in Kenya, Nairobi concluded that that the ability of firms to make a SWOT analysis of themselves enables them to develop appropriate strategies. It was also discovered that strategy making is a result of many forces acting on firms (M = 3.478±SD = 1.182). These results are a testimony that, indeed, SMEs in Zimbabwe practice environmental scanning and ultimately use the results of the environmental audit in strategy development.
Step 5: Strategy analysis and choice
The results indicated that 62.7 % of the respondents indicated that they are involved in analysing alternative strategies and making the final choice. According to Djordjević and Drucker (2014), it is important to analyse every option that SMEs have so that strategies are well chosen for implementation.
Hence, the findings of the study validate the disposition of literature. In a study of SME strategic management practices in Kenya, Okwachi, Gakure, and Ragui (2013) established that virtually all SMEs in Kenya contends that strategy analysis and choice plays an important role in strategy formulation, hence they argue that effective choice of strategy produces market and financial breakthroughs for firms.
The results of the study further illustrated that strategy is not the responsibility of everyone (M = 3.239±SD = 0.966); implying that SMEs owner/managers in Zimbabwe do not consider everyone in the selection of their ultimate strategies. Goel and Tuominen (2012:9) claim that participation by everyone in strategy making is important in business. The results of the study seem, however, to validate the findings by Amurle and Gakure (2013) who acknowledge that, indeed, strategy selection in SMEs is the sole responsibility of top managers or the owner in most cases.
It was also established that SME strategies are based on the vision of the founder (M = 4.059±SD = 0.764). The ownership or source of the vision is also critical in strategy formulation. In SMEs, the vision resides in the owner and not in the team (Sandada & Chikwama, 2016). This implies that most of the strategies are shaped by the owner's business philosophy. This validates Nyamwanza (2015)'s belief that most strategic planning in SMEs is anchored by the owner's motivations and targets. Furthermore, the results of the study support the fact that many of the traditional small businesses in Zimbabwe are anchored on social visions, which emphasise the welfare of the owner and/or the family, hence, the social visioning (Sandada, 2015; Nyamwanza, 2015; Simba & Nyandoro, 2016).
The qualitative insights showed that although the majority of manufacturing SMEs in Zimbabwe appreciate the role played by strategy making in their enterprises, the process of strategy making in most cases can be described as mere adjustments and reconditioning to the ever-changing business
172
environment. This validates the study findings of Mufudza et al. (2013) who claim that strategic management in SMEs is normally from an informal fashion-centered on the owner who holds multiple functions.
The findings from the qualitative study showed that both the market forces and the resources embodied by the firm are important in strategy making. These findings validate the assertion by Bekele (2018) that when formulating strategies, the two perspectives should complement each other, thus, allowing a more balanced view. These findings point to the fact that the strategy formulation of SMEs in Zimbabwe is guided by the two theoretical streams, the MBV and the RBV. These findings are unique and add to the existing body of knowledge.