Relationship between strategic planning and financial performance: The case of small, micro- and medium-scale businesses in the Buffalo City Metropolitan

Abstract

Background: Arguments are made for strategic planning as an important organisational capability used to realise a firm’s goals and objectives. Despite this, conflicting views appear to emerge from the extant literature over the link between strategic planning and financial performance. Notably, within a South African context, a few studies have been conducted ascertaining this relationship especially within small, medium and micro-enterprises (SMMEs). Aim and setting: The study aimed to determine this relationship using survey responses from a sample of 225 respondents classified as owners or managers of SMMEs operating within theBuffalo City Metropolitan in the Eastern Cape Province of South Africa. Method: Data were analysed through regression and correlation analysis. Results: Findings reveal strategic planning to have a positive relationship with the financial performance of the SMMEs. Furthermore, aspects of strategic planning (formulation, implementation, evaluation and control) were also found to have a positive relationship with financial performance. Conclusion: Suggestions for theory and practice are made based on these findings, including how the adoption and usage of strategic planning cannot only be an important organisational capability but also a basis for attaining a competitive advantage within the SMME.