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Strategic Management Practices and Challenges. The Case of Small and Medium Scale Enterprises in Harare

Doctoral Thesis / Dissertation 2014 226 Pages

Business economics - Operations Research

Excerpt

Table of Contents

Dedication

Acknowledgements

Abstract iii

List of Abbreviations

List of tables

List of Figures

Table of Contents

CHAPTER 1
1.1 Introduction
1.2 Background to the study
1.2.1 Possible Barriers to SME development in Zimbabwe
1.2.2 Government and Stakeholder Efforts
1.2.3 Non-Governmental Initiatives: The SMEs Association of Zimbabwe
1.3 Statement of the problem
1.4 Objectives of study
1.5 8 Questions
1.6 Significance of the Study
1.7 Data analysis
1.8 Limitations
1.9 Conclusion
1.10 Research plan

CHAPTER 2 LITERATURE REVIEW
2.1 Introduction
2.2 Nature and Structure of Small and Medium Scale Businesses in Zimbabwe
2.2.1 SMEs with well-structured management systems
2.2.2 SMEs with semi-structured management systems
2.2.3 SMES without defined management systems
2.3 Management Styles and Systems in Small and Medium Scale Business in Africa
2.4 Leadership Styles in SMEs
2.4.1 The Autocratic Style
2.4.2 The Bureaucratic Style
2.4.3 Democratic leadership style
2.4.4 Laissez faire leadership style
2.4.5 The people-oriented leader
2.4.6 The task-oriented leader
2.4.7 The servant Leader
2.4.8 Transformational leader
2.5 What is Strategic Management?
2.5.1 The Strategic Management Process illustrated
2.5.2 Importance and Benefits of Strategic Management in SMEs
2.5.3 Characteristics of an effective strategy
2.5.4 Possible Tests of a Winning Strategy
2.6 The strategic management process in practice
2.6.1 Strategy Formulation
2.6.2 What is a Vision?
2.6.3 Vision Formulation
2.6.4 The Corporate Vision
2.6.5 Mission Statement
2.7 Importance of a Mission statement in the SME
2.7.1 Components of a mission statement
2.8 Business level strategy
2.8.1 The Functional level Strategy
2.9 Challenges and Pitfalls in the Application of Strategic Management
2.9.1 Technical and capacity related obstacles
2.10 Characteristics of Best Run Companies
2.10 Control
2.10.1 Types of controls
2.10.2 Fundamentals of effective controls for successful SME management
2.11 Conclusion

CHAPTER 3 CHAMELEON SURVIVAL STRATEGY MODEL
3.1 Introduction
3.2 The Open Systems Thinking
3.3 Key tenets of the general systems theory
3.4 The SME as a system
3.5 Chameleon Survival Strategy Model
3.4.1 Interpretation of the Model
3.6 Significance of the Model
3.7 Conclusion

CHAPTER 4 RESEARCH METHODOLOGY
4.1 Introduction
4.2 Research design
4.3 Theoretical perspectives and methodologies
4.3.1 Qualitative approach
4.3.2 Quantitative approach
4.4 Comparison of qualitative and quantitative approaches
4.5 Approaches applied in this study
4.6 Population
4.7 Sample
4.7.1 Drawing the sample
4.8 Instruments of data collection
4.8.1 Questionnaires
4.8.2 Interviews
4.9 Data analysis
4.9.1 Qualitative data
4.9.2 Quantitative data
4.10 Limitations
4.11 Delimitations
4.12 Conclusion

CHAPTER 5 RESEARCH FINDINGS
5.0 Introduction
5.2Demographic information
5.2.1 Gender
5.3.2 Age
5.3.3 Level of Education
5.3.4 Position in Company
5.3.5 Nature of Business
5.3.6 Number of Employees
5.3.7 Years of Operation
5.4 Research data
5.4.1 Importance of Strategic Management in running the organisation
5.4.2 Incorporation of Strategic Management in the Organisation
5.4.3 How Small and Medium Scale Business Owners Regard strategic Management
5.4.4 Formal or Informal Approaches to Management
5.4.5 Need for Training in Business Planning
5.4.6 The Legal and Policy Framework in Zimbabwe and Promotion of Strategic Management
5.4.7 Adherence to the Fundamentals of Strategic Management in SMEs
5.4.8 Support from Government and Stakeholders
5.4.9 Lack of Knowledge and Skills
5.4.10 Inexistence of a Record Keeping System
5.4.11 The Need to Devise Adaptation Strategies for Survival
5.4.12 Existence of a Record Keeping System
5.4.13 Effectiveness of Strategic Management in SMEs
5.4.14 Management Systems and Strategic Management
5.4.15 Clarity of Organisational Vision and Mission
5.4.16 Appropriateness of strategic Management
5.4.17 Lack of Futuristic Planning and Negative Organisational Performance
5.4.18 Planning and Organisational Performance
5.4.19 Negative Effects of the Economic Environment on Strategic planning
5.4.20 Leadership Styles and the Adoption of Strategic Management
5.4.21 Approaches to Planning
5.4.22 Management of Funds
5.4.23 Adherence to Statutory Requirements
5.4.24 Employee Contracts
5.4.25 Management Systems and Strategic Management
5.4.26 Existence of Organisational Mission
5.4.27 Engagement in long term planning
5.4.28 Use of short term planning
5.4.29 Financial Management by the owner of the business
5.5 Conclusion

CHAPTER 6 ANALYSIS AND DISCUSSION
6.1 Introduction
6.2 Reliability of the research questionnaire
6.3 Data analysis strategy
6.3.1 Review of findings against best practice
6.4 Review of data in light of the Chameleon Survival Strategy Model
6.4.1 Constant multi-pronged monitoring of the environment
6.4.2 Use of unique attributes and competences to gain competitive advantage
6.6 Consolidation of position in the market
6.7 Standardisation and stability of operations
6.8 Adaptation to changes and developments in the environment
6.9 Effective strategy formulation and implementation
6.10 Strategic positioning for survival
6.11 The SME Chameleon Survival Strategy Index
6.11.1 SME Chameleon Survival Strategy Index Implementation
6.11.2 Average Index
6.12 Strategic Management Challenges to SMEs
6.12.1 Lack of adequate knowledge and capacity
6.12.2 Use of inappropriate management systems
6.12.3 Poor Leadership Styles
6.12.4 Lack of transparency, accountability and formal guidelines
6.12.5 Failure to separate the organisation from personal business
6.12.6 Failure to link up with stakeholders
6.12.7 Negative Perception of Strategic Management
6.12.8 Lack of political will
6.12.9 Lack of focus
6.12.10 Ineffective financial management
6.12.11 Lack of employee motivation
6.12.12 Conflict of Interest
6.13 Conclusion

CHAPTER 7 IMPLICATIONS, RECOMMENDATIONS AND CONCLUSIONS
7.1 Introduction
7.2 General recommendations
7.2.1 Adoption of the Chameleon survival Strategy model by stakeholders
7.2.2 Application of the Model
7.3 Recommendations to SME practitioners
7.3.1 Establishment of formal and standardized operational systems
7.3.2 Establishment of Human Resources Management Systems
7.3.3 Engagement in Constant Benchmarking
7.3.4 Adherence to Statutory Requirements
7.3.5 Introduction of Internal Business Monitoring and Evaluation Systems
7.3.6 Separating the Business from Personal Life
7.3.7 Adoption of the Chameleon Survival Strategy Model
7.4 Recommendations and Implications to Stakeholders Supporting SMEs
7.4.1 Training in the Nature and Application of Strategic Management
7.4.2 Business Planning Training in Vernacular Languages
7.4.3 Capacity Building in Records Management
7.4.4 Financial Management Training
7.4.5 Human Resources Management Training
7.4.6 Training in Corporate Governance
7.5 Recommendations and Implications to Government
7.5.1 Review of Empowerment Programmes
7.4.1.1 Proposed partners in the development of SME empowerment programmes
7.5.2 Monitoring and Evaluation of the Effectiveness of Interventions
7.5.3 Consistency of Legal and Policy Provisions with the Needs of SMEs
7.6 Areas for Further Research
7.7 Conclusion

References

APPENDIX A: LETTER OF CONSENT xvi

APPENDIX B: ADMINISTERED QUESTIONNAIRE xvii

APPENDIX C: NORMALISED QUESTIONNAIRE xx

APPENDIX D: INTERVIEW GUIDE xxiii

APPENDIX E: HARARE CBD SME LOCATION xxix

APPENDIX F: HARARE - GLENVIEW SME LOCATION xxx

APPENDIX G: HARARE – KOEFMANNS - MAGABA SME LOCATION xxxi

Dedication

This thesis is dedicated to my wife Bessie and our four sons, Jacques, Dieudonné, Aimé and Volonté.

Acknowledgements

I would like to acknowledge the strict and focused guidance I got from my supervisors, Professor Isaac Chaneta and Professor Claude Mararike. Thank you for sharing your wisdom with me and seeing me through.

I also am grateful for the financial support that was kindly offered to me by the POSCO Fellowship Fund which went a long way in ensuring the effective accomplishment of this work.

I also extend my gratitude to colleagues in the Faculty of Commerce and the UZ post Graduate Centre for their constant encouragement and moral support.

Lastly but not least I would like to express my sincere gratitude to Professor Levy Nyagura the Vice Chancellor, for inspiring and motivating me together with other colleagues through his drive to ensure all lecturers in the University attain PhDs.

Abstract

This research was carried out with the objective of establishing the challenges faced by small and medium scale entrepreneurs in their efforts to adopt strategic management in their value chains. A review of relevant literature revealed that strategic management is a very important approach that all businesses need, no matter their size, in order to enhance effectiveness. It is known to support professionalism, profitability and sustainable value addition when applied according to best practice.

Quantitative and qualitative approaches to data gathering were applied to enable the researcher to establish a richer picture of the exact situation on the ground. Quantitative data were collected from a sample of 292 respondents while qualitative data were obtained from a sample of 127 key informants and stakeholders. Drawing inspiration from the survival strategies of the chameleon, the researcher postulated the Chameleon Survival Strategy Model for small and medium-scale enterprises. The model was then used as a benchmark in the analysis of quantitative data, which were treated using the statistical package for the social sciences (SPSS) and qualitative data, which were content analysed. The chameleon survival strategy was used as the standard to assess the extent to which small and medium scale enterprises were compliant with the fundamentals of strategic management as exhibited by the chameleon in its environment.

The key findings were that SMEs failed the Chameleon Survival Strategy Model test, based on the overall value of the model’s index obtained after data analysis. It was observed that SMEs did not practice strategic management and were therefore not consistent with the chameleon survival strategies, outlined in the model’s seven attributes.

The conclusions drawn, recommendations and implications of the study on Government policy, the work of stakeholders and entrepreneurs, are presented in this document. The conclusions point to the need for Government and stakeholders to revisit their interventions and support programmes targeting entrepreneurs, to include strategic management capacity development. The lack of knowledge and exposure was found to be the key reason for entrepreneurs’ failure to embrace strategic management in their operations. It is also recommended that Government and

stakeholders carry out constant needs assessment to establish the exact needs of entrepreneurs, which tend to be quite dynamic. The participatory involvement of entrepreneurs in policy formulation and review is also recommended. Entrepreneurs are encouraged to review their operations and mainstream professionalism and the establishment of sustainable business structures.

List of Abbreviations

illustration not visible in this excerpt

List of tables

Table 1: The Chameleon Survival Strategies

Table 2: Qualitative vs. Quantitative

Table 3: Importance of Strategic management in the running of organisation

Table 4: Ease of incorporation of strategic management

Table 5: Appreciation of the importance of Strategic Management

Table 6: 4 Formal or Informal Approaches to Management

Table 7: Need for Training in Business Planning

Table 8: The Legal and Policy Framework in Zimbabwe

Table 9: Adherence to the Fundamentals of Strategic Management in SMEs

Table 10: Support from Government and Stakeholders

Table 11: Lack of Knowledge and Skills

Table 12: Inexistence of a Record Keeping System

Table 13: The Need to Devise Adaptation Strategies for Survival

Table 14: Effectiveness of Strategic Management in SMEs

Table 15: Management Systems and Strategic Management

Table 16: Clarity of Organisational Vision and Mission

Table 17: Appropriateness of strategic Management

Table 18: Lack of Futuristic Planning and Negative Organisational Performance

Table 19: Planning and Organisational Performance

Table 20: Negative Effects of the Economic Environment on Strategic planning - Interviews

Table 21: Leadership Styles and the Adoption of Strategic Management - Interviews

Table 22: Approaches to Planning - Interviews

Table 23: Management of Funds - Interviews

Table 24: Adherence to Statutory Requirements - Interviews

Table 25: Employee Contracts - Interviews

Table 26: Respect for Plans and Blue Prints - Interviews

Table 27: Reliability Analysis

Table 28: Attribute 1 - Constant multi-pronged monitoring of the environment

Table 29: Attribute 2 - Use of unique attributes to gain competitive advantage

Table 30: Attribute 3 - Consolidation of position in the market

Table 31: Attribute 4 - Standardisation and stability of operations

Table 32: Attribute 5 - Adaptation to changes and developments in the environment

Table 33: Attribute 6 - Effective strategy formulation and implementation

Table 34: Attribute 7 - Strategic positioning for survival

Table 35: Attribute 1: Eyes that can revolve around independently of each other

Table 36: Attribute 2: Projectile, ballistic and sticky tongue to catch prey

Table 37: Attribute 3: Specially designed feet with a human like grasp

Table 38: Attribute 4: Long prehensile tail for stability

Table 39: Attribute 5: Bumpy skin with special cells that change colour

Table 40: Attribute 6: Careful and well calculated movements

Table 41: Attribute 7: Strategic positioning abilities

Table 42: SME Chameleon Survival Strategy Index Implementation

Table 43: One-sample t-test

Table 44: Proposed Adoption of the Chameleon survival Strategy model

List of Figures

Figure 1: The Value of Servant leadership

Figure 2: The strategic management process

Figure 3: Elements of Strategic Management

Figure 4: The five main stages of benchmarking

Figure 5: The Control Process

Figure 6: The Business Value addition chain

Figure 7: A general system

Figure 8: Lessons for SMEs from the Survival Strategies of the Chameleon

Figure 9: The organisation as an open system

Figure 10: Sampling framework

Figure 11: Responents' Gender

Figure 12: Respondents' Age

Figure 13: Level of Education

Figure 14: Position in Company

Figure 15: Nature of Business

Figure 16: Number of Employees

Figure 17: Years of Operation

Figure 18: Importance of Strategic Management in running the organisation

Figure 19: Incorporation of Strategic Management in the Organisation

Figure 20: How Small and Medium Scale Business Owners Regard strategic Management

Figure 21: Formal or Informal Approaches to Management

Figure 22: Need for Training in Business Planning

Figure 23: The Legal and Policy Framework in Zimbabwe

Figure 24: Adherence to the Fundamentals of Strategic Management in SMEs

Figure 25: Support from Government and Stakeholders

Figure 26: Lack of Knowledge and Skills

Figure 27: Inexistence of a Record Keeping System

Figure 28: The Need to Devise Adaptation Strategies for Survival

Figure 29: Existence of a Record Keeping System

Figure 30: Effectiveness of Strategic Management in SMEs

Figure 31: Management Systems and Strategic Management

Figure 32: Clarity of Organisational Vision and Mission

Figure 33: Appropriateness of strategic Management

Figure 34: Lack of Futuristic Planning

Figure 35: Planning and Organisational Performance

Figure 36: Negative Effects of the Economic Environment on Strategic Planning

Figure 37: Leadership Styles and the Adoption of Strategic Management

Figure 38: Approaches to Planning

Figure 39: Management of Funds

Figure 40: Adherence to Statutory Requirements

Figure 41: Employee Contracts

Figure 42: Management Systems and Strategic Management

Figure 43: Existence of Organisational Mission

Figure 44: Engagement in long term planning

Figure 45: Use of short term planning

Figure 46: Financial Management by the owner of the business

Figure 47: Respect for Plans and Blue Prints

Figure 48: Constant multi-pronged monitoring of the environment

Figure 49: Use of unique attributes and competences to gain competitive advantage

Figure 50: Consolidation of position in the market

Figure 51: Standardisation and stability of operations

Figure 52: Adaptation to changes and developments in the environment

Figure 53: Effective strategy formulation and implementation

Figure 54: Strategic positioning for survival

Figure 55: The SME Chameleon Survival Strategy Model

Figure 56: The SME Chameleon Survival Strategy Index

Figure 57: The SME Chameleon Survival Strategy Index Parameters

Figure 58: The SME Chameleon Survival Strategy Indices Graph

Figure 59: The Recommended SME Chameleon Survival Strategy Model

Figure 60: Prioritised Strategic Management Capacity Building Content

Figure 61: The SMEs Empowerment Partners’ Network

CHAPTER 1

1.1 Introduction

The small and medium scale enterprises (SME) sector in Zimbabwe has been a very important entity of the economy since the country’s attainment of independence in 1980. It has been known for employing a significant percentage of the country’s working population, a characteristic which inspired the establishment of a Government Ministry, specifically targeting its interests (World Bank, 2013). Government recognises the importance of the SME sector as an integral component of the country’s economy, which significantly supports livelihoods at different levels. The sector currently employs at least 3.7 million people across the country, a figure that is not comparable to employment statistics in the formal sector, which at the time of this research was at 900 000 (Ndiweni et al, 2014). In view of this, the SME sector is therefore the major source of employment in Zimbabwe. It is a fact that the sector can only effectively contribute to national development if it is managed and administered in a professional manner, following business management fundamentals (Maphosa, 1998). For this to occur, there is need to start from the grassroots, that is, in the business itself where effective planning, strategy formulation and implementation should be incorporated in the day-to-day activities of the business. Due to their origins and other circumstances under which they are founded, small and medium scale enterprises often run without following any plan or framework and sometimes without organisational structures (RBZ, 2009). In the majority of businesses, owners do not know when to introduce structures and strategic planning as the business grows, while in some, the owners just refuse to let go and keep running the business from their pocket and even when it has grown big enough for structures to be introduced.

The researcher sought to establish the challenges and obstacles entrepreneurs face in their efforts to introduce and sustain strategic management in their operations. The research also sought to establish strategies that entrepreneurs have been implementing to circumvent the identified challenges and obstacles.

1.2 Background to the study

The need for small and medium scale businesses to appreciate the importance of strategic management has become quite pertinent in light of the ever-changing global economic environment. It is even more important for businesses operating in Zimbabwe, given the dynamic nature of the country’s economic environment. If implemented properly, strategic management improves the management of a company’s resources, effectively reducing weaknesses and possibilities of business failure. Proper strategic management enables business owners to separate business transactions from personal transactions, thus improving financial management. Entrepreneurs generally tend not to apply strategic management programmes in their businesses, while some do not even value the strategic planning process. Some SME business persons use the company account as their personal account or vice-versa. A significant percentage of SMEs in Zimbabwe operates without any laid down business plans to guide business activities (Maphosa, 1998).

Some SMEs hardly have growth strategies or prospects of diversifying and increasing competitiveness. A sizeable number of SMEs are managed in an unprofessional manner without following business ethics and even statutory requirements such as paying tax and engaging in appropriate labour practices. In view of these and other characteristics, the researcher hoped to establish the challenges and obstacles faced by SMEs, hindering them from fully implementing strategic management in their operations. The researcher hoped to produce recommendations that would inspire the adoption of strategic management in SMEs, helping them graduate into mainstream businesses that offer competitive products and services.

The Zimbabwean economy, at the time of the study, was characterised by considerable economic stability owing to the Government’s adoption of more stable foreign currencies in 2009. This move came about at a time when economic instability and hyper-inflation had led to the degeneration of formal business processes across all sectors (RBZ, 2009). The era which lasted almost a decade led to the development of a wide range of small and medium scale businesses, both formal and informal as people devised all sorts of survival strategies. What this meant was that almost every formally employed Zimbabwean got involved in some form of entrepreneurial activity to supplement the poor salaries. The adoption of the multi-currency approach saw the gradual re-establishment of sanity in the economy, (Noko, 2011), and it was at this point that the need for effective strategic planning and business structuring became a necessity for all businesses, SMEs included. Lack of appreciation of this approach to management and the short- term advantages enjoyed through informal business practices kept a significant percentage of entrepreneurs reluctant to follow proper business management paradigms.

The Zimbabwean Government confirmed its appreciation of the fact that SMEs were a vehicle for economic growth and employment generation across all sectors of the economy (RBZ, 2012). It was, therefore, found by the researcher to be of great importance to identify and understand, through research, the challenges faced by SMEs in their development from quasi-informal operations to formal businesses that make full economic sense to the country. This is inspired by the fact that SMEs are a significant component of the Zimbabwean economy just as it is in many other economies in the world (Goriwondo, 2012; RBZ, ; Manyani, 2014). SMEs need to be nurtured and supported to ensure their survival, growth and development (RBZ, 2006; Zindiye et al, 2012).

1.2.1 Possible Barriers to SME development in Zimbabwe

Due to a wide range of problems and key amongst them, failure to formalise operations and to apply strategic management in their businesses, SMEs in Zimbabwe face a number of adversities in their efforts to grow and graduate into the mainstream economy (Manyani, 2014; Nyanga, 2013). Amongst the challenges they face are:

- limited access to finance;
- limited access to infrastructure;
- limited knowledge and skills in marketing;
- limited entrepreneurial and business management skills;
- lack of meaningful access to real estate;
- unavailability of supportive information;
- failure to cope with the regulatory and policy environment.

Some SMEs find it difficult to access finance from banks and even from specific funds that have been established for their benefit. Due to SMEs’ lack of the required collateral security and failure to articulate their visions and futuristic developments, financial institutions are sceptical and highly careful when choosing businesses to support (Gangata, 2013). More than 80% of SMEs in Zimbabwe are born out of necessity and the need to sustain one’s livelihood in face of unemployment and a hostile economic environment (ILO, 2008). Due to this fact, a lot of business persons suddenly find themselves in business without having done any careful planning prior to implementation. Planning is done following developments on the ground which creates challenges when it is time to formalise and grow accordingly. A significant percentage of SMEs bask in the comfort of tax evasion, profiteering and improper financial management and accounting practices (Hove et al, 2013). The lack of logical frameworks to guide their operations often makes them high-risk businesses without clear decision support systems. For those SMEs that get popular enough to attract the attention of Government authorities, their collapse comes the moment they are served with papers detailing their income tax and other statutory obligations. This could be significantly reduced if entrepreneurs are empowered with the fundamentals of strategic management at an early stage as their businesses grow (Msipah, 2013; Maseko et al, 2011). It is with these clear facts in mind that the researcher sought to engage entrepreneurs and help devise ways and means to contribute to the formalisation efforts that the Government of Zimbabwe has put in place towards the enhancement of the SME sector, into the vibrant economic development prong that it should be.

1.2.2 Government and Stakeholder Efforts

The Government and other stakeholders have over the years sought to encourage SMEs at different levels to formalise their operations and mainstream strategic management in their value chains. Amongst the functions and objectives of the Ministry of Small and Medium Scale Enterprises and cooperatives as outlined on the Government website (http://www.zim.gov.zw, 20/12/2012) are to:

- formulate and implement policies for micro, small and medium enterprises (SMEs) and cooperative development;
- develop legal and regulatory framework for micro, small and medium enterprises and cooperative development;
- promote, coordinate and monitor innovative financing schemes for micro, small and medium enterprises and cooperative development;
- provide skill and management training that support entrepreneurship and growth of small business as well as cooperatives;
- facilitate linkages between large enterprises, SMEs and cooperatives;
- provide business consultancy services to SMEs and cooperatives;
- ensure that infrastructural facilities are provided for SMEs and cooperatives;
- research into investment and marketing opportunities for SMEs and cooperatives;
- develop and maintain a data bank of SMEs and Cooperatives;
- administer the Micro, Small and Medium Enterprises Development Fund;
- liaise with and coordinate sector Ministries involved in the promotion of SMEs and cooperatives;
- provide technical designing and production services to SMEs and Cooperatives;
- provide legal advice;
- provide human Resources Management & Development services; and
- provide Financial and Administrative Services

These roles provide numerous opportunities for the Ministry to ensure that businesses are run in an orderly manner across the country. The researcher continues to follow the activities of the Ministry, sharing ideas during conferences and workshops on the importance of logical structuring and futuristic planning in SMEs. Government through other arms such as the Zimbabwe Revenue Authority, the National Social Security Authority and the Ministry of Labour and Social Welfare has also encouraged entrepreneurs to adhere to good corporate governance guidelines. The question that remains arises from the fact that despite all these efforts by Government, a significant percentage of SMEs continues to operate informally.

1.2.3 Non-Governmental Initiatives: The SMEs Association of Zimbabwe

The Association was formed in December 2011 and then got registered as a non-profit making Trust in 2012. At the time of the research, its membership exceeded 600 entrepreneurs from around the country and was still growing as more entrepreneurs got familiar with its mandate. It defines a business as a small enterprise if it has turnover of less than US$240 000 or if its assets are valued below US$100 000. A medium scale business is one that has a turnover and assets above the thresholds for small enterprises but less than US$1 million turnover and assets value.

Its objectives as outlined on the web site (SMEAZ, 2014) are:

- advocating for the rights of SMEs at all relevant national fora, which include engagement with Government, quasi government organisations, non-governmental organisations, municipal councils and any other relevant local and international stakeholders;
- advancing the cause of SMEs through activities such as: promotion and development of markets, sourcing and channelling of capital and technical assistance to SMEs, education, training and encouraging the development of infrastructure, e.g factory shells and incubation units; and
- interactions with other national associations and groupings in order to ensure that SMEs’ interactions with their members are mutually beneficial.

This initiative has been able to bring together entrepreneurs from different sectors under one roof, creating opportunities for effective lobbying and advocacy. The Association needs to spread its wings around the country to increase its membership and coverage. The researcher views it as an important stakeholder together with other non-governmental organisations which are training and developing entrepreneurs to enhance their business management skills. This shows that quite a lot of work is being done to encourage SMEs to run in a professional manner and that the outcome of this research will help enhance the efforts that have been put in place by different stakeholders.

1.3 Statement of the problem

Although the small and medium scale business sector is viewed as an important component of the economy and a significant generator of employment, the sector is known to have a wide range of weaknesses and shortcomings. Due to the fact that most SMEs grow organically and following the vision of the founding entrepreneur, a lot of businesses in this sector are administered in a haphazard manner. Some businesses lack proper structures and management systems, while in some cases, the founding director is the one in charge of everything, from receipting cash, banking and withdrawals to more complicated entrepreneurial duties (Muranda, 2003). Such challenges tend to be the obvious result of poor planning and lack of futuristic thinking among entrepreneurs. Small businesses tend to believe that strategic management is only important and appropriate in big organisations that have well-structured management systems. Few of them realise the importance of strategic management in helping the organisation establish structures and systems following the business’ needs, as it grows into the formal entity that it should be. For a significant number of entrepreneurs who have not gone through formal management training, ignorance and misconceptions about strategic management, make it difficult for them to adopt it in their work. It is in light of these and other factors that the study sought to establish the challenges and obstacles that SMEs face in their efforts to introduce and apply strategic management in their business operations. The research also sought to establish the perceptions and knowledge levels about strategic management amongst small and medium scale businesses in Zimbabwe, with the objective of bridging the knowledge gaps to make the average entrepreneur see the importance of well-defined strategic planning.

1.4 Objectives of study

- To determine the extent to which small and medium size enterprises practise strategic management in running their businesses.
- To establish the range of challenges and obstacles SMEs experience in their efforts to incorporate strategic management in their businesses.
- To establish entrepreneurs’ appreciation of the importance of strategic management.
- To establish the training needs of entrepreneurs, with regards to the application of strategic management
- To assess the extent to which legal and policy frameworks governing the operations of SMEs encourage the application of strategic management.

1.5 Questions

- Do entrepreneurs practise strategic management in their businesses?
- What challenges and obstacles do SMEs face in their efforts to incorporate strategic management in their operations?
- To what extent do entrepreneurs appreciate the importance of strategic management?
- What are the training needs of SMEs with regards to strategic management?
- Do legal and policy frameworks targeting SMEs in Zimbabwe encourage the application of strategic management?

1.6 Significance of the Study

The continued increase in the number of small and medium scale businesses in Zimbabwe and undoubtedly the Southern Africa Region, has necessitated the need for research in this area. It is a fact that although some countries have high unemployment rates, a good percentage of the unemployed in such economies are involved in a variety of economic activities, which help them earn a living (ILO, 2008). In view of the size of the population involved in SMEs in Zimbabwe, the researcher feels that this sector needs to be promoted from a mere subsistence and economically insignificant sector to a vibrant one, that contributes to the national economy (RBZ, 2012; Goriwondo, 2010). One major way in which this could be achieved is by making sure that strategic management and planning are applied, taking all aspects of business management, financial management and quality management into consideration. The research should inspire small and medium scale businesses to:

- introduce strategic management and planning in their businesses and thereby enjoy the benefits of this approach to business management;
- maximise profitability by instituting measures that ensure efficient financial management, marketing and service or product quality; and
- maximise the use of strategic partnerships and synergistic linkages in business management and planning.

Researchers and stakeholders would also greatly benefit from the study since it would enable different interested parties to compare and contrast their management programmes and review them accordingly. Some players in the SME sector tend to view strategic management and planning as a waste of time and resources as well as a very challenging process. The products of the research will provide a simplified approach to strategic management and planning by clearly articulating the benefits it brings to the business. The study will therefore attempt to clear misconceptions so that entrepreneurs and stakeholders view strategic management positively. Furthermore, the study will be of benefit to the Zimbabwean government which has committed a large amount of resources towards the establishment of SMEs, even though their failure rate has been quite disappointing (RBZ, 2009).

1.7 Data analysis

Quantitative data were analysed using the Statistical Package for the Social Sciences (SPSS), while qualitative data were content-analysed using trend and factor analysis.

1.8 Limitations

The only limitation, though not significant was the unavailability of funds to travel around and meet entrepreneurs extensively and the failure to have had enough time with respondents, due to the nature of their work. Some entrepreneurs tended to be always in a hurry and could at times not spare enough time to go through questionnaires and the interviews.

1.9 Conclusion

In light of the objectives of the research, the researcher envisaged the generation of new interest and knowledge in strategic management at grassroots level, which would help steer small businesses into the mainstream economy. The research involved mixing and exchanging views with small-scale business persons who used little or no business models and those that believed planning was not important in the running of their business. It is the researcher’s hope that the process and its outcomes will help demystify strategic management for the modest business person operating at the lowest levels of the economy.

1.10 Research plan

- Chapter one contains amongst other components the background to the study, the statement of the problem, the objectives of the study and its significance.
- Chapter two establishes the research’s theoretical framework through a critical review of related literature and researches linked to the subject under review.
- Chapter three deals with the research model.
- In chapter four, the research methods and approaches used to gather primary and secondary data are fully dealt with.
- Chapter five presents the empirical evidence and findings of the research.
- Chapter six analyses and discusses the research findings.
- Chapter seven presents a summative conclusion of the research, holistically considering the research objectives and findings. The chapter ends with recommendations and an outline of areas recommended for further research.

CHAPTER 2 LITERATURE REVIEW

2.1 Introduction

With the objective of enhancing the research’s theoretical framework and informing judgement and analysis, various authors and researchers in small and medium scale business development and management were consulted. The activities of Small and Medium Scale Enterprises (SMEs) generally come in different forms and orientations, in light of their origins and the dynamic nature of management and leadership systems associated with these businesses. The size and scope of SMEs tend to depend on the vision of their founders and the environment in which the business operates. SMEs that develop in healthy economies tend to be better structured and to have strategic direction compared to those developing in unstable economic environments. In this chapter, the range and nature of SMEs in Zimbabwe and Harare, are explored considering the management and leadership styles. Strategic management and entrepreneurship are defined followed by a review of literature on the importance and application of strategic management in SMEs. Challenges and pitfalls in the application of strategic management are also reviewed leading to an analysis of some of the best practices cited in the literature.

2.2 Nature and Structure of Small and Medium Scale Businesses in Zimbabwe

Small and medium scale businesses have been classified in a wide range of ways by the World Bank (World Bank, 2013), and different authors and researchers such as Lisenda (1997) and Bolden (2000), with the objective of devising formulae for their analysis. In Zimbabwe SMEs are classified by nature of business, by size and market share in the economy (SMEAZ, 2013). For the purposes of supporting this research, SMEs are classified in the following way:

2.2.1 SMEs with well-structured management systems

Such businesses have at least a strategic planning framework and their activities follow a systematic pattern. They have reporting systems and they carry out research and follow up their findings. They make use of any findings they get to improve operations and to refocus their vision and activities. SMEs of this nature have the potential of graduating into the mainstream economy, fully complying with statutory obligations. They have marketing plans and they engage in futuristic planning following their growth needs. Their human resources management systems are well organised and their employees have some form of job security. Their businesses are viable and profitable and have a bright future (Pasanen, 2003) (MacNabb, 1995).

2.2.2 SMEs with semi-structured management systems

This group of SMEs formalises operations following the whims of the owner. Operations involve a mixture of haphazard business activities and well organised fulfilment of contractual obligations at times. The owners from time to time choose to act professionally or to completely disregard the principles of business ethics (Pelham, 1999). Contracts entered into with such enterprises are unpredictable and risky, given that goal posts can be shifted at any time. All the activities and systems of the business from human resources management and marketing to financial management are semi-formal and highly dynamic sometimes in the negative sense (Poutziorus et al, 1999). The business sometimes operates from hand to mouth with an uncertain future. This makes employee job security and motivation to be close to non-existent in such businesses (Storeuy, 1994).

2.2.3 SMES without defined management systems

SMEs in this cluster are often run by opportunists who focus on making money, without futuristic thinking. Business owners see no value in establishing effective management systems due to the limited scope of their vision. The business is not run following any kind of rationality as business transactions are events, which come and pass without proper recording. There is a deliberate disregard of the need to manage finances professionally (Wiklund, 1998). In some cases, the owner is the cashier, the accountant and the banker, so all company funds are received and kept by one person. Such businesses are characterised by low employee morale, lack of job security and sometimes even inexistence of employment contracts (Vesalainen, 1995) (Vinnell and Hamilton, 1999).

2.2 Management Styles and Systems in Small and Medium Scale Business in Africa

Small and medium scale businesses in Africa are known to apply a wide range of management styles as their businesses develop from humble beginnings to meaningful income generating ventures. According to Vesalainen (1995), every management system should be driven by the logic of the managerial functions of planning, leading, organising and controlling. A system that lacks any of these functions risks encountering challenges, which may jeopardize the success of its operations and the achievement of envisaged goals. Researchers concur that small and medium scale businesses tend to be run without well-structured management systems and without following any laid down guidelines. Entrepreneurs in this sector tend to make use of any kind of style for as long as it satisfies short-term needs which do not necessarily fit into the long- term plans of the business. Researchers in African entrepreneurship such as, Gyekye, (1988), Mbiti(1969) and Mbigi(1997) concur that family background and socio-cultural factors have a bearing on the way small and medium scale businesses are run. This scenario explains the general disregard of logic and order that characterises some businesses. Cultural and religious background also inspires a wide range of characteristics among businesses, given that they come with all sorts of belief systems and intuitions.

Religious beliefs and ideologies have seen business practitioners turning to all kinds of unorthodox ways of enhancing and improving their businesses. There are those that are superstitious, those who believe that one can only succeed when one has charms or when one respects certain rituals (Gelfand, 1956). This, in some cases, leads to the loss of money and time as the business owner pursues ceremonies and rituals at the expense of working hard. Instead of planning for the future and mapping out strategic direction for the businesses, entrepreneurs of this nature believe that there is a force somewhere that determines their success, no matter how much effort they apply. Such beliefs in some countries, as in the case of ‘Dipheko’ in Botswana, lead to ritual murders and other occult practices which do not practically assist the business (Burke, 2000) and (Hadzizi, 2011).

Families play a very important role in the development of the child into adulthood across Africa. In some cases family principles shape one’s personality and leadership qualities to a large extent. The family can have both positive and negative influence on the way entrepreneurs run their businesses (Andre de Waal and Chipeta, 2013). In Zimbabwe, the concept of the extended family cements people together that there might be no difference between the way one interacts with immediate family members and distant cousins. The average adult in Zimbabwean societies is considered successful when he or she is capable and is willing to support his people or community. The strong family relationship tends to affect the way one does business with relatives or in some cases people from one’s own community (Chen Li Yuen, 2004). Entrepreneurs with such a background are known to spend money recklessly at the expense of the business, when visited by friends and relatives at the workplace. Although they might be aware of the dangers, the ego and pride that come with the fact that one is capable of helping people from his community, sometimes outweigh all logic, leading to acts that cause serious cash flow problems. This tendency is also known to be motivated by religious beliefs and principles (Gyekye, 1988). As an example, a businessman whose religion emphasises the need to give blindly may be tempted to offer foodstuffs and drinks to visitors who are members of his church without considering the cash flow problems this might cause. This has, in some cases, also influenced recruitment policies, where people are employed by the organisation on the basis of their religious or cultural background rather than their competencies (Nyasani, 1997).

2.3 Leadership Styles in SMEs

Small and medium-scale business practitioners around the world, apply a wide range of leadership styles in their organisations. This is done either unknowingly, by those who have not received any business management training or consciously by those who have an understanding of the dynamics of leadership styles. It is a fact that no single leadership style is best for all situations in the business’s value chain (Gumbe, 2010). The study of the range of leadership styles helps entrepreneurs learn to always align their leadership styles with the requirements of the business. In their celebrated book “The Leadership Challenge , Kouzes and Posner (2012) present the leadership role as one of mobilizing others to have the desire to achieve and accomplish extraordinary things for the organisation. They argue that leadership is generally about leaders’ practices towards the transformation of values into action plans, dreams into reality and challenges into innovative outcomes as the organisation carries out its mandate. In their understanding, leadership is about creating a climate in which people turn challenging opportunities into remarkable success.

In light of these responsibilities for the leader in the organisation, there is need for entrepreneurs to appreciate the range of leadership styles and those situations and circumstances under which they would work best (Thompson A.A, Strickland A.J., Gamble J.E and Jain AK, 2006).

2.3.1 The Autocratic Style

According to Gumbe (2010), under this style, managers centralise authority in every respect and specifically in decision making. There is little or insignificant consultation with other members of the organisation and the leader’s decision is final (Osborne, 2008; Williams, 2005). Subordinates are expected to follow and obey orders without questions. Though this style could be the most effective in times of crisis and when the leader is the only one with the relevant expertise, it tends to have some serious shortcomings when applied in their shituations. This style, if not properly applied, could lead to the development of autocratic leaders who are all powerful and who run the business according to their own whims (Cadwell, 2004; Osborne, 2008). This tendency is quite common in small and medium-scale businesses, especially in view of their origins and orientation (Goriwondo, 2013).

2.3.2 The Bureaucratic Style

This style involves the management of the business according the laid down rules and regulations. All business activities are done according to policy and procedure with very little or no flexibility (Penney, 2010; Sidle, 2005). In cases where issues in question are not covered by regulations and policy, they get referred to a different level of authority and this can be time consuming and cumbersome (Osborne, 2008). This style is best used in cases involving routine and repetitive tasks and where funds and confidential information are involved. It also works in high security business environments involving confidential information and activities (Topping, 2002). Among its shortcomings, there is the stalling of progress due to red-tape and abuse of office, where people spend time waiting for decisions to be made by a chain of people (Cadwell, 2004).

2.3.3 Democratic leadership style

This style is also known as the participative style and is driven by the need to involve staff in all aspects of the business decision making, from planning to implementation and review of processes (Gumbe, 2010). It introduces the sense of ownership and belonging amongst staff, enhancing unity of purpose and harmony across the organisation’s value chain (Wooden et al, 2007; Williams, 2005; Cadwell, 2004).Although the leader has the final say he or she consults and gathers information from staff members first. The trust and recognition shown to staff by this approach inspires cooperation, team spirit and a positive approach to work. This style is best used when solving problems involving individuals or groups and when coordinating tasks that are dependent on the cooperation of teams and groups of employees (Thomas, 2004; Wooden, et al, 2007). This approach would not be appropriate in cases where time is limited and where large groups of people are involved as consultation might take too long a time for the logical conclusion of tasks. It is also important for the leader to keep monitoring and evaluating the effectiveness of this approach given that it can easily be abused and blamed for slow decision making (Topping, 2002)..

2.3.4 Laissez faire leadership style

This style is also referred to as the “free rein” or “hands off” style. The manager in this case provides very little or no direction as to the course of action, allowing staff to explore their innovation and creativity as much as possible (Gumbe, 2010).The staff set goals, formulate strategies and work out the relevant implementation plans without the direct influence of the leader. When used effectively, this approach inspires innovation and the development of leaders from among the members of staff (Sidle, 2005; Penney, 2010). This style works well when members of staff are highly skilled, educated and full of experience. Members also need to be well motivated and focused on the goals and objectives of the organisation. Leaders need to note that the laissez faire does not mean the toleration of disorder and loss of focus in the organisation (Cadwell, 2004; Siddle, 2005). If it is to be used, it should be done for the purposes of enhancing creativity and freedom of professional growth amongst staff rather than a way for the manager to find other things to do, away from the working environment (Goodnight, 2011; Williams, 2005; Thomas, 2004). Entrepreneurs who sometimes claim to use it leave the organisation in the hands of employees as they have fun or go in pursuit of unproductive ventures which end up draining all the capital from their businesses. If not properly applied, this style can lead to insecurity amongst staff as feedback from the leader may not be available when it is needed..

2.3.5 The people-oriented leader

This leader is supportive of staff, focusing on capacity development and enhancement to ensure professional growth. According to Fiedler (1967), under such a leader, job satisfaction is enhanced and employees love their work and the organisation is like their family.

2.3.6 The task-oriented leader

This leader focuses on the work to be done and the tasks to be carried out by each employee for the accomplishment of organisational goals. The danger with this approach tends to be that the needs of staff in aspects not related to work, may be ignored leading to demotivation and low staff morale (Fiedler, 1967). This approach can only be effective when used in conjunction with other approaches such as the democratic or participative style.

2.3.7 The servant Leader

This leader practically gives himself or herself to the service of the organisation and the people that make it up. Employees can use the leader as an instrument for enhanced productivity and professional growth. The leader follows the needs of staff and endeavours to meet them as much as possible. This approach is characteristic of leaders who exercise humility considering themselves as part of the organisation’s team, with a role to play in the enrichment of other people’s roles (Yukl, 2002). The illustration in Figure 1 demonstrates the value of servant leadership in a business.

illustration not visible in this excerpt

Source: http://www.coywire.com 20/03/2013)

Figure 1: The Value of Servant leadership

2.3.8 Transformational leader

This leader motivates the team to enhance effectiveness and efficiency (Penney, 2010). Using a wide range of communication channel the leader ensures that the job is done according to expectations (Burns, 1978). The leader strives to devise innovative ways to ensure the achievement of organisational objectives and goals.

Small and medium-scale business leaders need to apply all the leadership styles accordingly, taking into consideration their shortcomings and possible pitfalls.

2.4 What is Strategic Management?

According to Wheelen and Hunger (1988), strategic management is the bundle of managerial decisions and actions that help determine the long-run performance of an organisation. David (1999), defines strategic management as the art and science associated with the formulation, implementation, and evaluation of wide-ranging decisions that enable a firm to attain its goals. Harvey (1982) defines strategic management as the process of formulating, implementing and evaluating business strategies to achieve future goals. Strategic management is also defined as a continuous and iterative process aimed at keeping the organisation as a whole appropriately matched to its environment (Certo and Peter, 1999).

Harvey (1982) says strategic management is about the strategic systems approach which is about seeing the organisation as one whole that has interdependent parts. It is also about long- range planning that involves a longer time frame and competitive analysis that addresses such questions as:

- What business are we in?
- Who are our customers?
- Who are our competitors?

It is about developing a comprehensive vision of the future that provides a sense of purpose and direction for the organisation. It also is about developing a corporate culture that identifies and develops a sense of belonging, motivation and shared values, to accomplish the future goals. Thompson and Strickland (2006) say strategic management is about managerial decisions and skills that impact directly upon the organisation’s capacity to survive and adapt to market and environmental changes. It also enables the organisation to grow profitably, to move in a new direction and alter its mix of business interests in a significant way.

The Strategic Management Process consists of three major activities which are strategy formulation, strategy implementation and strategy evaluation as illustrated in Figure 2 below:

2.4.1 The Strategic Management Process illustrated

illustration not visible in this excerpt

(adapted from Wheelen and Hunger, (1988) and Thompson and Strickland (2006))

Figure 2: The strategic management process

2.4.2 Importance and Benefits of Strategic Management in SMEs

Strategic Management allows an organisation to be more proactive than reactive in shaping its own future. It allows an organisation to initiate and influence activities. One major advantage is the capacity it gives to organisations to motivate and empower the people who make up its human capital (David, 2001). David further defines empowerment as the act of strengthening employees’ sense of effectiveness by encouraging and rewarding them to participate in decision making and exercise initiative and imagination.

Strategic management is useful to every organisation because it provides long-term direction in planning (Kotler, 1991). It also helps the organisation adapt to changes in its operating environment and maintain competitive advantage. The strategic management process helps the organisation and its members establish its current status, mission and vision as well as objectives (Meek et al, 2001). This process maps the organisation’s future development, specifying the range of strategies and action plans that lead to its success.

2.4.3 Characteristics of an effective strategy

Every business, no matter how big or small, needs effective strategies that meaningfully respond to the needs of its value chain. Effective strategies have clear, specific, measurable, attainable, realistic and time bound objectives which are relevant to the needs of the organisation. According to Sadler, (2003), good strategies encourage workers to grow and be innovative and creative. The strategy must also concentrate on specific areas of improvement and focus as directed by the organisation’s vision. Flexibility of strategy enhances the possibility of relevant review and refocusing as the organisation progresses (Ritson, 2008; Morden, 2007). All the departments of the organisation should work together in harmony and unity of purpose. To gain competitive advantage over competitors, the organisation’s strategy should be executed with speed, diligence and secrecy so as to outwit unprepared competitors and opponents. (Hitt, et al, (2007); Alkhafaj, (2003); Macmillan et al, (2000); Hussey (1998). .

2.4.4 Possible Tests of a Winning Strategy

According to McMurray (2001), one test that is often used is called the “Goodness of fit Test”. In this test, the logic is that a good strategy should be well matched to the organisation’s internal and external circumstances. The extent to which there is strategic alignment between the strategy and the organisation’s current status and future plans, the more effective such a strategy is.

The Competitive Advantage Test ensures that a good strategy leads to sustainable competitive advantage in the organisation’s market. A strategy that does not come with any form of competitive advantage is as good as having no strategy at all (Porter, 1998). Strategies are meant to position the organisation in a special way that surpasses the efforts of its competitors.

The Performance Test is another test which the average business practitioner needs to consider. This is because a good strategy needs to enhance the organisation’s performance and thus increasing profitability (Thompson et al, 2013; Kuzmicki, 1998)

2.5 The strategic management process in practice

2.5.1 Strategy Formulation

Strategy formulation is the problem-solving process (often called strategic planning) of setting the firm’s vision and mission, analysing the environment, establishing long-term objectives, choosing the tools for achieving the objectives (strategies) and action plans that achieve those objectives and implementing them (Chaneta I, 2011; Morden, 2007). In the process of strategy formulation, top management has to develop a concept of what business the organisation is in and thereby establishing the purpose of its existence (Valdez, 2000; Sadler, 2003; Ritson, 2008).

2.5.2 What is a Vision?

A vision is a statement of hopes, aspirations, and/or wishes of the organisation’s future, that is, where the leadership would like the organisation to be in the future. It is a clear and challenging statement that serves as a beacon and control of the organisation (Valdez, 2000; Hussey, 1998). It prepares for the future while honouring the past. It empowers organisational members first and then the clients as they can all see where the organisation is going (Thompson et al, 2013).

2.5.3 Vision Formulation

This entails asking and answering such questions as:

- What do we want to be in five, ten or twenty years’ time?
- What do our capabilities lead us to be? and
- What does our market want us to be?

2.5.4 The Corporate Vision

A positive vision of the future is essential for providing meaning and direction to the present. Meaningful vision empowers organisations to solve problems and accomplish goals (Sadler, 2003; Hitt et al, 2007). Vision is a compelling image of the future that is offered by corporate leaders to share with the corporate community who should agree to support it (Thompson et al, 2013). For an organisation’s vision to be sound it should be:

- leader initiated;
- shared and supported;
- comprehensive and detailed; and
- positive and inspiring.

2.5.5 Mission Statement

A mission statement is a statement of purpose that distinguishes an organisation from other similar organisations in the same industry. (Thompson et al, 2013; Afuah, 2009). It identifies the scope of the organisation’s operations in product, service and market terms. In coming up with the mission statement, the strategists should answer the following questions:

- What is our business?
- What will it be?
- What should it be?

If these questions are answered, the organisation would have been given its identity, character and make-up (Thompson et al, 2013). During that exercise of coming up with the mission statement, top management should bear in mind the fact that the mission statement should depict the organisation’s character, image and scope of activities in ways that are detailed enough to distinguish it from other organisations. The shaping of an organisation’s future begins with clarity of the organisation’s purpose of existence. According to Peter Drucker(1980), a business is defined by the need the customer satisfies when he/she buys a product or service. So the satisfaction of a customer should be the starting point of the mission statement of every business. Derek Abel (1980) expanded on Peter Drucker’s idea and said business should be defined in terms of:

- customer needs or what is being satisfied;
- customer groups or who is being satisfied;
- technologies or how customer needs are being satisfied; and
- changing technology.

Answering what will our business be, is the most important and necessary step in setting the direction for the organisation (Thompson et al, 2013). This requires the strategist to look ahead and try to anticipate the impact of:

- changing custom;
- changing customer markets; and
- the impact of all these changes on the business.

Answering what will our business be will help the organisation to identify the customer’s unsatisfied wants and then modify, extend and develop its existing business concepts. What our business should be is an equally important question to ask. By taking that dimension, the organisation is addressing such issues as:

- How can innovations be converted into new businesses?
- What technologies are opening up or can be created to the advantage of the customer?
- Which things should the organisation continue doing and which should it plan to discontinue?

2.6 Importance of a Mission statement in the SME

According to IFAC (2006) and Sadler (2003) having a mission statement is very important in SMEs because it:

- Promotes and encourages unanimity within the organisation;
- Provides a basis, or standard, for allocating organisational resources;
- Establishes a general tone or organisational climate/culture;
- Serves as a focal point for individuals to identify with the organisation’s purpose and direction and deters those who cannot, from participating further in the organisation’s activities;
- Facilitates the translation of objectives into a work structure involving the assignment of tasks to responsible elements within the organisation (Olson, P. & D. Bokor, 1995);
- Specifies organisation purposes, translating them into key result areas which enable the assessment and control of cost, time and performance parameters;
- Provides the general framework for the establishment of organisational policies;
- Provides perspective on economic and/or organisational growth (Vesalainen, 1995);

2.6.1 Components of a mission statement

The major components include the following:

- Products/Services – What are the organisation’s major products/services?
- Markets – Where does the organisation operate/compete?
- Technology – Is technology a primary concern of the organisation?
- Concern for survival, growth, and fiscal viability – Is the organisation committed to economic objectives?
- Self-concept – What are the distinctive competencies of the company or company’s major competitive advantage?
- Concern for public image – To what extent is the public image a major concern of the organisation?
- Concern for people – What is the organisation’s attitude toward management and staff?

In coming up with a mission statement, the strategist should establish specific objectives that will help the organisation to keep focused (Thompson and Strickland, 2007). The objectives, which need to be specific, measurable, achievable, time-bound and challenging, play a very important role in the strategic management process. They provide direction for organisational efforts, for providing a means for setting priorities and resolving conflicts across the organisation. They also inspire motivation and the measures for organisational performance (Valdez, 2000).

2.7 Business level strategy

This relates to how a Strategic Business Unit (SBU) intends to do its business focusing on a:

- Particular product;
- Product line or;
- Group of related products.

Business level strategies focus on how to compete effectively and profitably in a distinct, identifiable and strategically relevant line of business. (Levy M. and Powell P. 2005)

2.7.1 The Functional level Strategy

The functional level strategy is designed for the functional areas of the SBU ; such areas as the production and marketing. The primary focus of the functional strategy is on maximizing the achievement of targeted objectives (Thompson et al. 2006).

2.8 Challenges and Pitfalls in the Application of Strategic Management

Small and medium scale business practitioners tend to shun strategic management even in light of its benefits to the organisation. In Africa, strategic management is viewed as an exercise for the big organisation due to psychological and socio cultural obstacles which overshadow the objective assessment of the importance of futuristic planning (Gyekye, Kwame, 1988). In some cultures there is a belief that everything about life is predetermined by God or a superior being, so planning is not important. Following this notion, some entrepreneurs just work with what is available, grabbing opportunities as they come. This approach poses challenges when the business meets obstacles or problems. Entrepreneurs have a tendency to seek solutions from their gods or other supernatural powers leading to a wide range of complications. In some communities, rather than go back to the drawing board and establish the real cause of problems in the organisation’s value chain, business persons consult oracles and fortune tellers who often mislead them and shift one’s focus away from the real causes of failure. In The Holy Bible, Job who was a business man with a lot of assets experienced problems which destroyed his wealth and threatened even his own life. Job remained steadfast on his faith and knew who to ask and where to go for solutions. As the story in the Bible reveals, through his faith and the wise counsel from God, his wealth and legacy were restored (Job 1 Vs. 1-4). This would not have happened had Job followed the counsel of the devil or if he had sought solutions from the wrong persons. This Biblical story is a good example of the influence that religious and sociocultural beliefs and practices can positively or negatively affect the performance of a business and the way it is managed. The entrepreneur’s background his or her beliefs and cultural upbringing tend to influence the structure of the business, the organisation’s culture and the choice of strategies (MacNabb, 1995).

2.8.1Technical and capacity related obstacles

Due to the lack of capacity to understand the benefits of strategic management, some managers just shun it and choose to use the methods they are used to. The fact that a sizeable percentage of entrepreneurs do not have any formal management training, strategic management becomes a highly technical process not useful to the average person.

2.9 Characteristics of Best Run Companies

Harvey (1982) divided companies into two major groups, the winners and the losers. The winners are anticipative and future oriented as they have a strategic plan and their culture fits well with their plans. They also value strategy flexibility and are responsive to developments in the environment around them. The losers are those that stick to one strategy and only act when prompted by circumstances or developments in the environment. They hardly have a plan to guide them and their culture does not support competitiveness and growth. They tend to be slow in adapting to changes around them.

The development of an effective and objective strategic plan helps to clarify the organisation's plans and ensures that key leaders are all "on the same script". Far more important than the strategic plan document, is the strategic planning process itself (Sutherland and Canwell, 2004). It is important to involve all stakeholders within the company and also the necessary outsiders in the planning process. No stones should be left unturned in the process, which should incorporate results from a business evaluation process as well as an environmental and competitor analysis. It is important for institutions to realise that a plan is no good for the organisation if it is not properly implemented (Katsioloudes, 2002). Some organisations hire consultants to draw very good plans which are either implemented wrongly or not implemented at all.

Strategic management is defined by Certo and Peter (1999) as a continuous and iterative process aimed at keeping the organisation as a whole appropriately matched to its environment. This helps keep the business in tune with management and marketing forces both outside and inside the firm. It also gives overall vision and direction to the business upon which all efforts can be directed (Certo and Peter, 1999). In entrepreneurship, it is imperative for practitioners to focus on strategic alignment or consistency between the organisation and its environment. Strategic consistency exists when the actions of an organisation are consistent with the expectations of management, the market and the business’ context. Strategic management should involve all the levels of the organisation including the Board of Directors and other managerial levels, depending on the organisational structure.

As a process, strategic management needs to be on-going, evaluating and controlling the business in relation to the environment around it. Through it, organisations carry out competitor analysis, setting goals and strategies annually, or as required to ensure survival and sustainability. Strategies are then reviewed to check if they are consistent with the changing circumstances, new technology and other dynamics of the operating environment (Lamb, 1984; Thompson et al, 2006).

Due to either ignorance or lack of interest, small and medium scale business persons have often ignored the need for strategic management in their enterprises. Strategic management or just planning has been viewed as a complicated and difficult process, which is a waste of time. Research has however shown that all this is not true and that strategic planning actually makes business management easier and more interesting. It is a fact that the word “strategic” often brings to mind images of management geniuses and experts sitting in sophisticated corporate boardrooms thinking deep, profound, visionary thoughts (Aggarwal P. and Rajiv V., 2003). Many small business owners cannot identify with these “large corporation” visions and unfortunately ignore the importance of strategic management and planning. Strategic planning is important for businesses, no matter how small (Mintzberg, H. Ahlstrand, B. and Lampel, J, 1998). Strategic planning is not so much a complex technical task as it is a way of thinking (Thompson et al, 2006). Evaluating the business strengths and weaknesses, setting long-term goals, and adjusting paths based on successes and failures along the way, translates into strategic planning. This can be equated to personal situations, which often demand that we sit down and plan ahead in view of our strengths and weaknesses and the experiences of life we have had. This helps the individual avoid wasting time and energy on strategies that do not work and avoid repeating mistakes. In the same way, businesses should learn from past experiences and plan for the future strategically, to increase competitive advantage and profitability.

Strategic Market Management (SMM) is based on the assumption that the rapidly changing business environment cannot be dealt with using a planning cycle (Kotler, 1991). Although the process starts by setting long-term business goals, strategic decisions are made as and when needed in order to cope with market surprises and to take advantage of opportunities that may be open for only a short period of time. While ensuring that the decisions are consistent with the long-term goals of the company, strategic market planning allows businesses to respond quickly to critical changes in the marketplace, that provide windows of opportunity presented by the changing environment (Burns and Derhurst, 1990).

SMM keeps its sights on the business’s long-term goals while allowing the business to quickly respond to market changes. This definitely helps the business to keep its head above the water, readjusting and adapting to the dynamics of the market.

In general, strategic planning determines where an organisation is going over the next year or more, how it is going to get there (Drummond and Ensor, 2001). The focus of a strategic plan is usually on the entire organisation, while the focus of a business plan is usually on a particular product, service or programme.

There are a variety of perspectives, models and approaches used in strategic planning. The way that a strategic plan is developed depends on the nature of the organisation's leadership, culture, complexity and expertise of planners (Liebeskind, 1996).

Quite often, an organisation's strategist already knows much of what will constitute the strategic plan. However, the process of developing the strategic plan greatly helps to clarify the organisation's current and future plans and ensure that key leaders are all on the same script (Johnson and Scholes, 2008). Of more importance than the strategic plan document, is the strategic planning process itself. It is important to make the process as participatory as possible for every level of the organisation to fully understand it and therefore own it during implementation. A strategic plan that is imposed on the people without considering their views, aspirations and intuitions can be very difficult to implement (Katsioloudes, 2002).

illustration not visible in this excerpt

Source: Johnson and Scholes, 1999

Figure 3: Elements of Strategic Management

According to the illustration in Figure 3, strategic management consists of three elements namely, strategic analysis, strategic choice and strategic implementation. If properly implemented, the process can make the organisation strategically positioned to meet the challenges confronting it internally and externally.

SMEs can choose the right strategy to take depending on circumstances and after taking into consideration their aims and objectives.

Literature presents a wide range of business management strategies some of which are not appropriate for SMEs. Amongst the most important strategies for the average SME growth strategies are of paramount importance as entrepreneurs seek to earn more and increase their influence in the market. The management of growth in the SME is by no means an easy task (Arbaugh and Camp, 2000) given that growth is heavily dependent on strategy (Weinzimmer, 2000). Thompson (2001) identifies four types of growth strategies namely: organic growth, acquisition, strategic alliance and joint venture. SMEs can choose from these depending on their needs and aspirations.

A look at the range of strategies that focus on the products’ performance in the market, separates four possible strategies that organisations can adopt. One approach is that of market penetration strategy which aims at establishing a market base for a new or rejuvenated product (Burns, 1989). Other strategies could involve product development, new market development and venturing into new markets. For all these endeavours the business needs to formulate specific strategies to ensure effectiveness and success (Pistrui et al., 1997).

After selecting the right strategy, it is important for the whole organisation to get geared up for the implementation process, which should be supported by a monitoring and evaluation programme to avoid loss of focus.

Strategic management processes of this nature can further be enhanced by a process called benchmarking. There are basically four types of benchmarking: internal, competitive, functional and generic. According to Oakland J. (2001), benchmarking is one of the best ways to institute and promote effective change in an organisation. This is achieved by drawing lessons from others’ successes and failures and integrating all this to develop appropriate strategies and best practices. Benchmarking can help the organisation review internal and external aspects of its business without losing focus.

The concept of benchmarking is based on the ancient Japanese quotation, which goes ‘If you know your enemy and know yourself, you need not fear the result of a hundred battles’ (Sun Tzu, The Art of War, 500BC cited in Oakland, 2002) The process of benchmarking is illustrated in Figure 4 below:

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Source: (Oakland J. 2002)

Figure 4: The five main stages of benchmarking

The major objectives of benchmarking according to Oakland (2002) are to:

- change the perspectives of executives and managers;
- compare business practices with those of world class organisations;
- challenge current practices and processes; and
- create improved goals and practices for the organisation.

2.10 Control

Amongst the most important functions of management is the controlling of business processes and activities. Controlling involves determining what is being accomplished, evaluating the performance and if necessary, applying corrective measures so that the performance takes place according to plans. Lack of control systems and procedures often hinders effectiveness in SMEs around the world. (Clark, D. & N. Berkeley & N. Steuer 2001).

2.10.1 Types of controls

- Pre-controls – input control
- Concurrent – process control
- Feedback controls – output control

The control Process

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Figure 5: The Control Process

2.10.2 Fundamentals of effective controls for successful SME management

In order to achieve sustainable success and to strategically position the business in its operating environment, entrepreneurs need to ensure that their control systems have the following characteristics:

- responsiveness to changing environmental factors;
- based on objective standards;
- sensitive to detect and report any deviations from the standards in time;
- Capable of forecasting future changes or trends that may create gaps in performance;
- pinpoint deviation set critical points during the company’s operations;
- understandable to all executives at all levels of the organisation;
- payoff should outweigh the cost; and
- indicate the nature of corrective action to be adopted when deviations occur.

The strategic management process helps ensure sustainable organisational profitability informing the business on which areas to concentrate on and which ones to avoid. Strategic control is one task that helps the entrepreneur correct activities in the organisation’s value chain and tying any loose ends that might exist.

2.11 Conclusion

Various researchers and authors in management from around the world, agree that every business, no matter how big or small, requires some form of planning for it to progress in a healthy manner. SMEs tend to arise from dynamic situations and origins, some of which are very informal and haphazard in nature. Due to this fact, a lot of them are not really products of strategic planning. To begin to introduce this approach to management at a later stage is generally quite difficult due to a number of reasons. Amongst the reasons there is the lack of formal training amongst SME owners, psychological and socio-cultural barriers as well as economic obstacles. The literature review has enabled the researcher to establish the best practices in strategic management and how SMEs could benefit from this approach to management.

The next chapter deals with the research model which guides the treatment and analysis of information gathered during the findings.

CHAPTER 3 CHAMELEON SURVIVAL STRATEGY MODEL

3.1 Introduction

In order to effectively study the challenges faced by Small and Medium-Scale Enterprises in the application of strategic management, the research is modelled following the logic of the systems theory. This theory was proposed in the 1940's by the biologist Ludwig von Bertalanffy, and furthered by Ross Ashby (1956). Von Bertalanffy (1969) emphasized that real systems are open to, and interact with, their environments, and that they can qualitatively acquire new properties through adaptation, resulting in continual evolution. In an attempt to understand the world, the systems theory considers the individual or the living entity as a collection of interactive processes, which collectively form a system. The system’s identity and nature is directly and indirectly influenced by its environment, which helps determine its orientation. This approach to the interpretation of the world, introduces a dimension which likens systems to biological organisms with interdependent interactions within them.

The researcher approaches the study of small and medium scale enterprises with the assumption that these businesses are like organisms that need to be able to survive in their environment. For them to achieve this, their internal systems need to be strategically oriented to deal with the dynamic conditions of their environment. Following the logic of the open systems paradigm of the general systems theory, an organism can only survive when the systems that constitute its structure are capable of dealing with the challenges emanating from the environment around it. In the same light, the small and medium scale business needs to be structured in a way that prepares it to deal with any challenges from its environment. Its internal systems also need to be working in harmony and there should be synergy between the operations of its internal systems and what it needs to deal with in its operating environment. A closer look at the systems theory would help clarify this approach to the study of SMEs.

3.2 The Open Systems Thinking

This theory originated from biological studies inspired by the work of Charles Darwin on the evolution of species. Further refinement of the theory is contained in the work of Ludwig von Bertalanffy (1969) who made reference to the open systems theory which enabled the comprehensive study of biological phenomena. This was inspired by the acceptance of the fact that biological systems do not operate independently and that they interact with their environment for growth and survival.

Open systems have four specific characteristics which make the open systems theory most appropriate for the study of SMEs. The first characteristic is the interchange between the system and its environment which is a key issue in this theory. Just as biological organisms, the SME interacts with its environment, constantly evolving and adapting to the conditions around it. The activities of the SME tend to be inspired by the threats and opportunities in the environment in which they exist. Secondly, an open system is made up of a wide range of variables and a complex network of interrelationships. Though the internal environment strives to achieve quality and cost effectiveness, such variables tend to be externally driven hence the need for the organisation to effectively understand its environment.

Thirdly, for control and regulation purposes, open systems use anticipatory management which involves the anticipation of errors and problems before they occur (Laszlo, 1996). This enables the business to take corrective measures and put in place precautionary mechanisms. Fourthly, open systems are flexible and dynamic in nature for they move away from prescribed and rigid standards. They seek continuous improvement rather than mere stability, which results in the achievement of dynamic equilibrium. Like organisms, SMEs operate in constant interaction and interchange with their environment, resulting in a relationship of interdependence or symbiosis.

In light of these characteristics, the open systems theory becomes an appropriate approach to the study of organisational phenomena, which includes the design of management, monitoring and control systems as well as futuristic planning (Montuori, 1989).

3.3 Key tenets of the general systems theory

The following are key tenets of the General systems theory, which also enhances its appropriateness in the study of SMEs:

illustration not visible in this excerpt

Source:Adapted from Kusek and Rist 2004

Figure 6: The Business Value addition chain

- Open to environment: Open systems are capable of importing energy from their environment giving them the ability to grow and change over time (Kast and Rosenzweig, 1972). Growth can be directly or indirectly influenced by the environment but always linked to the developmental needs of the organism. To survive effectively, SMEs need to have such abilities in view of the dynamic nature of the environment around them.

- Teleology or purpose: The general systems theory assumes that every system has a goal or a purpose to achieve. Darwin Online (2013) ascribes the goal of survival to the species he studied and concluded that the primary goal of every organism is survival and that all its actions can be traced back to that goal. A similar scenario exists in the operations of SMEs. The basic concept driving the efforts of the business is maintaining profitability and the realisation of returns from resources invested. A business that does not break- even cannot logically survive for long in a normal economic environment.

- Value addition (inputs to inputs): This tenet describes the work of a system as a process of transforming inputs acquired from the environment into outputs which go back to the environment. The SME draws inputs from its environment and processes them into useful products that meet the needs of stakeholders in its environment as illustrated in Figure 6.

The internal environment is within the full control of the SME and this is made up of organisational systems and policies. This is where inputs acquired from the macro environment are subjected to some logical processing which leads to the production of outputs in the task environment. In the task environment there is interface between the organisation and clients, as well as stakeholders. Here the SME is not in total control. The forces of the operating environment and the macro environment have an influence on the activities of the business. Once the outputs are complete and ready for the market, they are released into the macro environment, to compete with other products of the same nature. The consumption of these products by clients in the macro environment results in outcomes and impacts which are attributable to the business. The higher the quality of outputs, the significance of outcomes and relevance and depth of the impacts, the more competitive the business is. The value chain shows how the effectiveness of the business depends on its relationship with the environment around it and the value it adds to inputs acquired from the same environment to produce useful outputs.

- The notion of feedback: Feedback enables the system to adjust so as to attain the state that strategically positions it in its environment. The organism uses two forms of feedback systems, negative or error control feedback and feed forward control. Negative feedback comes about when errors occur and the system needs to adjust or take corrective action while feed forward control is anticipatory, where the system prepares itself for what might occur, taking precautionary actions (Kast and Rosenzweig, 1972). The SME needs to have a system that responds to feedback from its environment as it focuses on its goals as illustrated in Figure 7.

illustration not visible in this excerpt

Source: Robert H. Giles, 2013)

Figure 7: A general system

- Homeostasis: This tenet refers to the system’s ability to achieve dynamic equilibrium which maximises its prospects of survival and sustainability. Dynamic equilibrium does not only point to a standard state but the state that is best suited to the environment, leading to some form of evolutionary development. An SME that operates in a hyperinflationary economy for example, needs to seek to achieve dynamic equilibrium that ensures competitiveness and survival in its environment (Kast and Rosenzweig, 1972).

- Equi-finality: This points to the ability to achieve required results from a wide range of efforts and initiatives. Though the system might apply a variety of strategies and devices all its efforts must culminate in the achievement of the same result as guided by its vision (Kast and Rosenzweig, 1972). For the purposes of survival and responding to the requirements of the environment, the SME can engage in different activities and approaches. What is important is for it to maintain focus on its vision and eventually achieve the same result as intended in its blue print (Gresov and Drazin, 1997).

3.4 The SME as a system

Following the logic of the systems theory, the researcher views the SME as a system, an approach which is supported by Robins and Barnwell (2006), who state that such a view point provides insights into the make-up of organisations. The SME is made up of interdependent parts, which work together to form a unified system that is called the company. This system should be capable of adjusting and evolving in response to developments in the environment. One example of interest in this study is the system of the Chameleon, a lizard that developed special abilities that enable it to survive in harmony with its environment (Le Berre and Bartlett, 2009). An organisation that is capable of living in harmony with its environment, surviving, developing and effectively achieving its goals, can be described as an efficient system. In such an organisation or organism, the internal systems would be structured in such a way that they respond accordingly to stimuli and dictates from the surrounding environment, leading to the achievement of a state of dynamic equilibrium.

3.5 Chameleon Survival Strategy Model

Although the chameleon’s characteristics can easily be associated with negativity when likened to the behaviour of humans, this research takes a positive approach to the study of the chameleon as a biological system. One way of interpreting a business that acts like a chameleon could be that it is bound to be unreliable, with the tendency to change and to deceive those it deals with. In this study the researcher looks at the chameleon as a biological system that has sought to guarantee its survival and success over the years through the adoption of a wide range of adaptations to its environment. For sustainable survival, the SME should, therefore, be a system that is open to and interacts with its environment, evolving positively and negatively in response to developments in its environment. In light of this fact, the model exhibited in Figure. 8 below and the explanation in Table 1 on the next page, show the analogy between the chameleon and the SME.

illustration not visible in this excerpt

(Strategic Positioning and Effective Resource Utilisation)

Figure 8: Lessons for SMEs from the Survival Strategies of the Chameleon

3.4.1 Interpretation of the Model

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Table 1: The Chameleon Survival Strategies

Surviving in a dynamic, hostile and dangerous business environment requires the adoption of a wide range of strategies and techniques. The small and medium scale business in Zimbabwe finds itself in an environment that is not only unpredictable but also quite harsh and highly dynamic. Following the systems theory, every entrepreneur needs to imagine the enterprise as a sustainable and self-correcting system that strives to survive in the macro environment around it. In today’s globalised business environment, one needs to be tactful and strategic enough to keep pace with the ever-changing environment. For one to progress to the next level and grow into a bigger business, there is need for careful planning as well as tactful strategy execution. What is important is for the business to remain focused on survival, while planning future growth and development, as this is best achieved by making use of the resources and capabilities that one has to inspire and kick-start sustainable growth. The survival strategies of the chameleon, though seemingly too modest, offer a very good practical example of how the contemporary business in Zimbabwe could survive effectively in an unpredictable economy.

The simplest lesson to learn from the chameleon is that for survival, the business needs to move with the times and ensure that it is strategically positioned following trends in the economy around it. SME proprietors need to appreciate that focus should be on what matters most (that is survival) and from there one can think about growth, diversification and progression. As a way to camouflage itself from enemies and its prey, the chameleon changes colour in response to the conditions in its surroundings. It also makes full use of the resources it is endowed with; the eyes which can focus in different directions at the same time, a ballistic tongue that can flash out to catch its prey from a distance twice its length away, without the whole body moving, the ability to walk on the ground, climb trees and conceal itself without being noticed (Herrel et. al. 2001). The chameleon also appreciates its capabilities and weaknesses very well. It does not try to do what it cannot do, and as it walks, all its moves are diligently calculated. By establishing the range of obstacles that hinder the full application of strategic management in SMEs, the researcher seeks to encourage entrepreneurs to adopt strategic management and make the best use of their capabilities and resources at their disposal just as the chameleon does.

3.6 Significance of the Model

The research is modelled around the open systems theory, likening the SME to the chameleon and establishing how SMEs could be designed and managed following the logic of the animal’s characteristics and survival strategies. The key issue to be highlighted is the need for the business to establish a synergistic relationship with its environment without losing focus on its goals. Development and evolution should be guided by the needs of the organisation as it interacts with its environment, moving only when it is necessary and when one is sure it is the right time, conserving energy for use at the right time and making maximum use of the resources and skills at one’s disposal. As illustrated in Figure 9, the SME can only survive and develop accordingly if it is run as a system that interacts and responds positively to developments in its environment.

illustration not visible in this excerpt

Figure 9: The organisation as an open system

What results from this model is the concept of survival of the fittest (the chameleon way). This model helps demystify strategic management and make entrepreneurs appreciate that strategic management models are everywhere around us and that nature is the best teacher. Various studies of the natural environment show that a number of animals and plants have learnt to survive within their environments, evolving accordingly to achieve effective competitive advantage. The key lesson to be drawn from this model is that strategic management for the SME should not be a complex and technical process that only the educated and trained can do, but a simple way of life focusing on the fundamentals of survival and successes in one’s environment.

3.7 Conclusion

The research sought to reveal the problems faced by SMEs in Harare in adopting strategic management, following the tenets of the open systems theory as does the chameleon in its natural environment. Research questions focused on the interrogation of the way businesses conduct their work in relation to developments in the environment around them. The researcher believes that the adoption of this model by small and medium scale businesses will enable them to achieve competitive advantage in their environment, no matter how small they might be. The chameleon, though quite a relatively small organism when compared to bigger animals like buffalos, hippopotamuses and elephants, is capable of enjoying its life to the fullest by responding positively and adapting to the environment around it, using the resources it is endowed with. In a nutshell, following the world view of the systems theory paradigm, the research is conducted comparing the SME and its environment to a biological system, represented by the chameleon and the natural environment around it. The next chapter focuses on research methodology.

CHAPTER 4 RESEARCH METHODOLOGY

4.1 Introduction

Research methodology is an approach to the systematic resolution of a research problem. It is the science of establishing how research is scientifically done. It presents the various steps to be followed by the researcher in studying the identified research problem. It is of paramount importance for every researcher to be clear about the research methods to be applied and the methodology to be adopted. The assumptions underlying the different techniques are also of importance to the researcher when deciding on the approaches to use.

In this study, the research design is modelled following the principles of ethnography, which is defined as a qualitative method aimed to learn and understand cultural phenomena which reflect the knowledge and system of meanings guiding the life of a cultural group. It is often employed for gathering empirical data on human societies and cultures. It is an approach that seeks to develop an understanding of the day to day activities of people in local settings. Data collection is often done through participant observation, interviews and questionnaires. Ethnography aims to describe the nature of those who are studied (i.e. to describe people, an ethnos) through writing. Data analysis is framed following the systems theory, which advocates for the in-depth study of systems with the objective of developing best practices that enhance sustainability.

4.2 Research design

According to Saunders et al (2003) researchers can use three distinct research designs and these are exploratory, descriptive and explanatory. According to Sarantakos (1998), research design is the overall strategic direction that the research process takes, starting from the theoretical framework determination to data collection and analysis. It is a framework for the collection, measurement and analysis of the research data (Cooper and Schindler, 2003). The researcher used exploratory study which sought to establish the way Small and Medium Scale Enterprises (SMEs) operate to find out the practical scenarios on the ground. The researcher sought new insight into the way SMEs operate, asking questions and assessing phenomena following standard research guidelines (Robson, 2002). The research was conducted in three ways: a review of relevant literature, gathering data from stakeholders, key informants and conducting primary research in the targeted sample. Exploratory research was chosen because of its flexibility and adaptability to changes in the research environment (Schvaneveldt, 1991).

4.3 Theoretical perspectives and methodologies

Theoretical perspectives tend to influence the orientation, process and the path followed by the researcher. Three distinct theoretical perspectives or paradigms can influence the researcher’s choice of methodologies applied in the implementation of the research process, namely, positivism, interpretive social science and critical theory (Terre Blanche & Durrheim, 1999). The positivism or quantitative and interpretive or qualitative approaches are discussed here-under.

4.3.1 Qualitative approach

This type of research depends mainly on direct observations and descriptive analysis of interactions and outcomes. In some cases it can rely on the researcher’s intuitive skills and capabilities. Qualitative research studies objects as they are, without making statistical inferences, finding percentages or converting figures to numerical data. Data takes the form of attitudes, impressions and viewpoints rather than numbers and percentages as in the case of quantitative research (Meville & Goddard, 1996). Its emphasis is on the empathetic understanding of human behaviour and phenomena. Reality in this case is in the people’s minds and is best understood through those experiencing it, becoming subjective rather than objective. It seeks to understand the world on the basis of the interpretations of those living in it rather than from a specialist’s point of view or on the basis of a pre-set formula. Outlined below are the advantages of this approach to enquiry, according to Sarantakos (1998):

- it involves researching people in natural settings making findings closer to reality;
- it endeavours to capture reality in interaction with the context and surrounding environment without using preconceived ideas or pre-structured models and formulae;
- It attempts to present the information gathered verbally in a detailed and complete form as obtained from the respondents;
- this approach stresses interpretations and meanings, which result in a richer understanding of the phenomena under study;

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Pages
226
Year
2014
ISBN (eBook)
9783656949800
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9783656949817
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2.6 MB
Language
English
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strategic management practices challenges case small medium scale enterprises harare

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Title: Strategic Management Practices and Challenges. The Case of Small and Medium Scale Enterprises in Harare