Effect of Strategic Management Practices on the Performance of Small and Medium Sized Enterprises in Kenya

Strategic management practices are crucial for firms as they enable them to align their resources, goals, and actions towards achieving their objectives, gain a competitive advantage, and improve their performance. However, despite the increased recognition of the role played by proper strategy management, most of SMEs continue to experience poor performance despite them implementing strategies. Particularly, the deteriorating performance of SMEs in Kenya is a cause for concern, given the significant role they play in the country's economy. This study aimed to investigate the effect of strategic management practices on the performance of SMEs in Kenya. The study was anchored on three theories; McKinsey 7S Model, Resource-Based View (RBV) Theory and Game Theory. The study adopted the descriptive research design was undertaken at Meru County. For this study, the target population will constitute of registered SMEs in Meru County in Kenya based in the CBD. Slovin’s formula (1960) was used to attain a sample of 96 SMEs which was selected using stratified random sampling. The study used primary data which was collected using questionnaires. The data collecting tools were pre-tested on ten respondents to improve reliability and validity. To establish the validity of the research instruments, the researcher was in consultation with the university supervisor and other experts on the flow wording and format of the research questionnaire. The data was analyzed using content analysis, descriptive statistics and inferential statistics. The analyzed data was then represented in figures and tables. The study found that strategic planning, formulation, implementation, and monitoring all have a positive and significant impact on the financial performance of SMEs in Kenya. Specifically, strategic planning (r = .430**, β = 0.255), formulation (r = .427**, β = 0.871), implementation (r = .417**, β = 0.501), and monitoring (r = .296**, β = 0.206) were all strongly associated with better financial outcomes, with strategic management practices collectively explaining 72.1% (R2= .721) of the variance in financial performance. The study recommends that SMEs in Kenya develop comprehensive strategic planning frameworks to enhance their financial performance. Additionally, the study recommends that government agencies develop and promote guidelines for enhancing strategic planning among SMEs. The study further recommends that SMEs adopt a holistic approach to strategic management by integrating planning, formulation, implementation, and monitoring practices. The study suggests further research into the impact of strategic planning on the long-term sustainability of SMEs in Kenya. Additionally, examining the role of external factors, such as economic fluctuations or technological advancements, in influencing the effectiveness of strategic planning would provide a more comprehensive understanding of its impact on sustainability.