Business: Theory and Practice

ISSN 1648-0627 / eISSN 1822-4202

2021 Volume 22 Issue 1: 222–230
https://doi.org/10.3846/btp.2021.12549

THE RELATIONSHIP BETWEEN STRATEGIC MANAGEMENT PRACTICES

AND THE GROWTH OF SMALL AND MEDIUM ENTERPRISES (SMES)
IN GHANA

Alex ADDAE-KORANKYE1*, Bernard Agyei ARYEE2

1Central Business School, Central University, Accra, Ghana
2USAID, Accra, Ghana

Received 21 April 2020; accepted 13 January 2021

Abstract. The main goal of the study was to examine or investigate the impact of strategic management practices on the
growth of SMEs in Ghana. Purposive sampling technique was employed to sample 190 SMEs in Accra, though 150 SMEs
responded to the questionnaire. With the help of SPSS version 22, Multiple regression analysis was conducted to assess the
impact of strategic management practices on the performance and hence growth of SMEs in Ghana. The study revealed a
significant positive relationship between strategy formulation and growth of SMEs in Ghana. The study also found a sig-
nificant positive relationship between strategy implementation and the growth of SMEs in Ghana, but found a negative
relationship between strategy evaluation and growth of SMEs in Ghana. However, overall, the study found a positive rela-
tionship between effective and efficient application of strategic management practices and the growth of SMEs in Ghana.
As a contribution to policy and practice, the study recommended among others that policy makers, managers and owners
of Small and Medium Enterprises (SMEs) should employ strategic management experts especially in the field of strategy
evaluation to enhance the quality of their strategy evaluation process so as to positively influence the performance and
growth of SMEs.
Keywords: growth, Small Medium Enterprises (SMEs), strategic management, strategy formulation, strategy implementa-
tion, strategy evaluation.
JEL Classification: D2, M2, M1, L1.

Introduction 50% of value added to Gross Domestic Product (GDP)

within the OECD community (OECD, 2010).
Small and Medium Enterprises (SMEs) are increasingly Owing to the contribution of SMEs in Ghana and
recognised as important drivers of economic growth, the world at large, they are required to be profitable,
productivity, innovation and employment, and are widely survive, grow and hence remain sustainable and com-
accepted as a key aspect of economic dynamism (His- petitive. However, SMEs face various challenges in their
rich, 2014). These small businesses dominate the African quest to achieve the above and expand their market
business environment because they account for almost 90 share. Among these challenges, is management inepti-
percent of all businesses in Africa and they are the engine tude, which often leads to the collapse of many SMEs.
of growth through their ability to generate employment, To address the challenge of management, SMEs are en-
increase income and hence increase the Gross Domestic couraged to adopt strategic management practices and
Product (GDP) of countries (Muriithi, 2017). In Ghana, strategies in their administration. Strategic manage-
for instance, the small businesses account for 90 percent ment according to Bryson (2011) is simply a tool used
of the business market, they employ 85 percent of the as a guide to the attainment of the business vision. It
Ghanaian workforce and contribute about 70 percent of stipulates the procedural steps and programmes an or-
the country’s Gross Domestic Product (GDP). Small and ganisation seeks to pursue to move the firm from its
Medium Enterprises (SMEs) continue to be very impor- current state to an expected future outcome in the pro-
tant to many developing countries; they form 99% of total cess of time. It focuses on the best and most effective
establishments, 67% of employment, and contribute over means to reach organisational success.

*Corresponding author. E-mail: [email protected]

Copyright © 2021 The Author(s). Published by Vilnius Gediminas Technical University

This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unre-
stricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Business: Theory and Practice, 2021, 22(1): 222–230 223

Strategic management practices adopted by an SME The study used purposive sampling technique to sam-
can affect its performance and hence its growth. Strate- ple 190 respondents, while questionnaire was used to so-
gic management practices can be adopted in terms of licit information from the SMEs. Further, with the help of
organisational structure, resource allocation, corporate Statistical Product and Service Solution (SPSS) Ordinary
culture, leadership and conflict management. All of these Least square regression was used to analyse the data.
aspects are essential to performance, growth and hence The following is the structure of the article: Introduc-
sustainability of SMEs. This study therefore examines the tion, Literature review, Research Methods (Methodology),
relationship or correlation between strategic management Results, Discussion and Conclusions.
practices and growth of SMEs in Ghana. In other words,
the study examines the impact of strategic management 1. Literature review
practices (strategy formulation, strategy implementation,
and strategy evaluation) on the growth of SMEs in Ghana. 1.1. The concept and definition of strategic
Most studies on the relationship between strategic management
management practices and organisational growth or per- There is no single definition of strategic management,
formance have concentrated on large firms Lawal et al. which is generally acceptable (Markiewicz, 2011). Howev-
(2012) cited by Ali and Qun (2019). However, the main er, Thompson and Strickland (2003) defined strategic man-
challenge lies with the small firms which do not have agement as the process whereby managers establish an or-
enough resources and capacity to formulate, implement ganisation’s long-term direction, set specific performance
and evaluate strategic management practices. The appli- objectives, develop strategies to achieve these objectives in
cation of strategic management practices is so crucial not the light of all the relevant internal and external circum-
only to large firms but more importantly to SMEs because stances, and undertake to execute the chosen action plans.
of their contribution to employment and hence econom- Sababu (2007) asserts that strategic management also en-
ic growth especially in developing countries. The study compasses the development of long term plans for efficient
therefore examined the relationship between strategic management of environmental opportunities and threats
management practices and the growth of SMEs in Ghana. in line with the organisational strengths and weaknesses.
Specifically the study sought to examine the correlation According to Pearce and Robinson (2007), strategic man-
between strategy formulation, strategy implementation, agement involves a combination of decisions and actions
strategy evaluation and the growth of SMEs in Ghana. that guide the formulation and implementation of plans
Available literature is not very clear on the relationship intended to achieve organisational objectives. It is the art
between strategic management practices and the growth and science of formulating, implementing and evaluat-
of SMEs. Specifically, while some authors find significant ing cross-functional decisions that enable an organisation
positive relationship between strategy formulation and the to achieve its objective. This definition implies strategic
growth of SMEs, other studies report no significant im- management focuses on integrating management, market-
pact. A similar results occurs on the relationship between ing, finance/accounting, production/operations, research
strategy implementation and the growth of SMEs. Though and development, and computer information systems to
a number of authors claim a significant positive correla- achieve organisational success.
tion between strategy implementation and the growth of Strategic management is a complex subject which has no
SMEs, others find no significant relationship. Finally while right answers but has clear-cut underlying principles. Differ-
some literature report a significant positive relationship ent strategic management authors and researchers raise the
between strategy evaluation and the growth of SMEs, oth- question: “Why do some companies succeed while others
er findings claim no significant effect. What is the situ- fail?” Wheelen and Hunger (2012) argue that organisations
ation in Ghana? It is this gap which the study sought to succeed if their strategies are appropriate for the circum-
fill. Based on the above, the study sought to achieve the stances they face. Strategic management is the process and
following specific objectives: approach of specifying an organisation’s objectives, devel-
– To find out the relationship between strategy imple- oping policies and plans to achieve and attain these objec-
mentation and the growth of Small and Medium En- tives, and allocating resources to implement the policies and
terprises (SMEs) in Ghana. plans. In other words, strategic management can be seen as
– To determine the correlation between strategy imple- a combination of strategy formulation, implementation and
mentation and the growth of SMEs in Ghana. evaluation (David, 2011). According to Abdiwali (2019) stra-
– To investigate the effect of strategy evaluation on the tegic management defines the purpose of the organisation
growth of SMEs in Ghana. and the plans and actions to achieve that purpose. It is that
– To what extent does strategic management practices set of managerial decisions and actions that determine the
influence the growth of Small and Medium Enter- long term performance of a business enterprise. It involves
prises (SMEs) in Ghana? Is the relationship between formulating and implementing strategies that will help in
strategic management practices and the growth of aligning the organisation and its environment to achieve or-
SMEs in Ghana positive or negative or no relation- ganisational goals. In short, strategic management provides
ship at all? overall direction to an organisation.
224 A. Addae-Korankye, B. A. Aryee. The relationship between strategic management practices and the growth of small...

The success of strategic management practices to a continually monitor internal and external events and
large extent depends on the effectiveness of strategy for- trends so that timely changes can be made as needed
mulation, strategy implementation, and strategy evalua- (Aluko et al., 2004).
tion (Ali & Qun, 2019). Wheelen and Hunger (2012) submitted that results
Thompson and Strickland (2003) define strategy of strategy evaluation are essential for further action
formulation as a phase or sub-process of strategic man- if the process is showing any problems that affect the
agement in which a firm creates its direction, defines its functioning of the firm towards its goal. Therefore,
objectives and set a course for the organisation to fol- firms need to evaluate their strategies on a continuous
low. It starts with environmental scanning whose pur- basis (King’ola, 2001; Tunji, 2013), so that corrective
pose or objective is to appraise the important factors action could be taken to eliminate the problems that
that would affect both now and the future development hinder the achievement of a firm’s objectives (David,
of the firm as well as determining the specific factors 2011).
of influence in the strategic formulation process (Beal,
2000). The environment of an organisation usually con- 1.2. Strategic management practices of SMEs
sists of two aspects: the internal environment and the
The success of strategic management practices and hence
external environment. According to Beal (2000), the in-
the growth/performance of SMEs depends to a large ex-
ternal environment of the organisation which shows the
tent on the effectiveness of strategy formulation, strategy
parameters within the company consists of strengths
implementation, and strategy evaluation (Ali & Qun,
and weaknesses, the culture, structure and resources of 2019). However the adoption of strategic management
the company. The external environment on the other practices among SMEs remains poor. Owners and man-
hand can be divided into general and specific environ- agers of SMEs rarely articulate the business strategy or
ment. The general environment context which is also engage in any formal planning (Njanja, 2009). There is
called macro- environment are those factors that could however a strong relationship between the owner/man-
affect all firms in a particular social environment, and ager and strategy pursued by SMEs. The strategy chosen
which always has a direct impact on firms. The SLEPT will mostly reflect the priorities of the owner (Carter &
module, which includes social, legal, economic, politi- Jones-Evans, 2006). Although strategic management has
cal, and technological environment can be used in the mostly been applied in large organisations, it cannot be
analysis of this environment, while the specific environ- ignored in SMEs. The environment in which the Ghana-
ment consists of micro-environmental factors that have ian SMEs exists is very competitive and the firms need
a direct impact on a specific firm (Beal, 2000). These to develop strategies to enable them grow and hence give
factors include government, competitors, creditors, em- them competitive advantage. With increasing challenges
ployees, industry associations and local communities. in the business environment, managers of SMEs must
The strategy formulation process conjoins the have the capability to adapt and restructure the enterprises
strengths and weaknesses internally to effectively man- to address constraints facing them. As asserted by Pilla-
age the opportunities and threats externally (Fowler & nia (2008) SMEs need to adopt superior strategic manage-
Hope, 2007). ment practices to enable them grow, remain sustainable
After the formulation of a strategy, it is necessary to and achieve competitive advantage.
implement it. The implementation of the strategy is to According to Njanja (2009) SMEs spend almost twice
promote and develop programmes to put the strategies as much of their research and development budget on
and policies that were formulated into action (Wheelen fundamental research as do large firms and are more in-
& Hunger, 2012). It has to do with managerial inter- novative per employee than large firms. The reasons for
ventions that brings organisational actions in line with lack of strategic management practices in many SMEs
strategic intention (Woodridge & Floyd, 1990). It dis- vary from lack of enough time to prepare the plans, unfa-
plays the finishing result of the organisation’s effort on miliarity with strategic planning, lack of skills and lack of
strategy and also depicts the tendency of the organisa- trust and openness on the part of owners. As opined by
tion’s development in the future. As reported by Karami Lawal et al. (2012) the strategic management practices of
(2007) previous studies have shown that the structure SMEs should entail relatively short planning horizon, be
of the organisation, leadership and human resources informal and not overly structured, encourage participa-
(employees) play an important role in the implementa- tion of employees and outside parties, avoid early setting
tion of the strategy. of objectives as it will interfere with creative thinking and
Strategy can neither be formulated nor adjusted to focus on strategic thinking, and not just planning. For this
changing circumstances without a process of strategy reason firms that pursue sustainable strategic management
evaluation. Whether performed by an individual or as base the formulation, implementation, and evaluation of
part of an organisational review procedure, strategy their strategies on an analysis of the ecological issues they
evaluation forms an essential step in the process of face, the values they hold that support sustainability and
guiding an enterprise (Glueck, 1980). Strategic evalu- growth, and the ecological interests of their stakeholders
ation is based on the belief that an organisation should (Nyariki, 2013).
Business: Theory and Practice, 2021, 22(1): 222–230 225

1.3. The impact of strategic management practices study found that implementation of issues of management
on the growth of small and medium enterprises activities by firms that were exposed to societal or politi-
(SMEs) cal predicaments significantly and positively influenced
organisational outcome variables.
Muogbo (2013) cited by Mohamud et al. (2019), stud-
ied the impact of strategic management on organisational
growth and development (a study of selected manufactur-
ing firms in Anambra state). The results from the analysis
indicated that strategic management was not common
among the manufacturing firms; that the adoption of
strategic management had significant effect on competi-
tiveness and growth and also influences manufacturing
firms; that strategic management had effect on employ-
ee’s performance and that its adoption had significantly
increased organisational productivity of manufacturing
Figure 1. The relationship between strategic management firms. Again, strategic management enhances structural
practices and the growth of SMEs (source: author’s own
creation)
development of manufacturing firms. The study conclud-
ed that though strategic management was not common in
business practices among manufacturing firms in Anam-
The above framework (Figure 1) indicates the relationship
bra State, it was identified as veritable tool for improving
between strategic management practices (strategy formu-
the competitiveness, performance levels, and structural
lation, strategy implementation, and strategy evaluation)
development of manufacturing firms in Anambra State in
and the growth of SMEs.
particular and Nigeria in general.
As stated earlier, the success of strategic management
Yunus et al. (2010) studied strategic management prac-
and hence the growth/performance of SMEs depends to
a large extent on the effectiveness of strategy formulation, tices and corporate performance of selected small business
strategy implementation, and strategy evaluation (Ali & enterprises in Lagos metropolis. The study established that
Qun, 2019). Over the years, empirical research in strate- strategic management has effect on the market share of
gic management has been centered on identifying which small enterprises studied. In addition, implementation of
set of strategies and practices would enable organisations strategic management was found to have positive relation-
to achieve growth and hence economic success. An effi- ship with organisational profitability and hence growth.
cient and effective strategic management system can lead However, for the positive effect to be felt, the study recom-
to an increase in desired results be it economic or social mended that appropriate strategic planners, strategic situ-
growth. ation, strategic analysis and choice have to be put in place.
A number of studies related to strategic management, Njanja (2009) studied management strategies affect-
performance, growth and sustainability have been done ing performance of micro, small and medium enterprises
in Ghana and internationally. Lawal et al. (2012) studied in Kenya. The study found that globalisation factors and
the effect of strategic management on organisational per- other factors external to the businesses such as incentives,
formance. The study found that the adoption of strategic regulation and policy issues, and infrastructure had very
management techniques improved organisational perfor- high effects on the management structures, systems and
mance and improved relative standing of organisation that other internal factors of the firm. This study however did
was with different societal and political issues. Another not show any clear cut relationship between management
study conducted in Nigeria by Ajao and Grace (2012) practices and performance.
cited by Mohamud et al. (2019), using questionnaire to Otieno (2013) studied strategic issue in management
sample 283 organisations also found that effective strategic practices by small and medium enterprises in Mombasa
planning and effective implementation indeed has a posi- County using descriptive survey design and data col-
tive impact on organisational performance and growth. lected from primary sources using questionnaire. The
Furthermore, a similar study by Mohamud et al. (2019) in study found profitability as the most important perfor-
Somalia revealed a positive relationship between growth/ mance measure in SMEs, followed by market share, in-
performance of SMEs and effective implementation of novation and liquidity respectively. Further, majority of
strategic management practices. organisations perceived strategic issue in management to
Heugens (2003) studied strategic issues in manage- the future success and growth of organisations as very im-
ment and organisational outcomes and assessed whether portant and essential confirming that SMEs in Mombasa
strategic issues and management activities contribute County were aware of the importance of strategic issue in
anything worthwhile to corporate performance, growth management in the success of an organisation. The study
and sustainability by reporting two studies on the issues also found that environmental as well as managerial fac-
in management strategies of Dutch food firms during tors influenced strategic issue in management practices by
the introduction of genetically modified ingredients. The SMEs in Mombasa County.
226 A. Addae-Korankye, B. A. Aryee. The relationship between strategic management practices and the growth of small...

Green and Medlin (2003) for instance developed a instrument because it enabled the researcher to reach a
scale to measure mission statement excellence and then large number of sampled SMEs within a short period of
tested its connection with financial performance. They time.
also arrived at a positive and significant relationship be-
Sample Size Calculation = {n = N/(1+Ne²)},
tween strategic management practices and organisational
growth. Further, Ali and Qun (2019) examined the re- where: n = minimum sample size; N = Population, e = mar-
lationship between strategic management practices and gin of error. Using a margin of error of 5%, and population
the growth of SMEs in Bangladesh and found a posi- of 500; the minimum sample size = 500/1+500(0.05²) =
tive correlation between strategic management practices 181. The study therefore used a sample size of 190 but
and growth/performance of SMEs. Specifically, the study those who responded to the questionnaire were 150 SMEs.
found that 89% of the variance in the growth/performance
of SMEs is due to effective application of strategic manage- 2.2. Data analysis
ment practices.
Data obtained were checked for errors and inconsisten-
cies. The data were then coded and entered into the com-
1.4. Hypotheses puter. The statistical product and service solution (SPSS)
From the literature and previous studies the following hy- version 22 was used to capture the data and run multiple
potheses were framed and tested. regression for the analysis.
a. The impact of Strategy formulation on the growth Data concerning the firms’ general background infor-
of SMEs in Ghana. mation, nature of strategic management practices applied
H0: Strategy Formulation has no significant impacts and factors influencing choice of strategy were coded and
on the growth of Small and Medium Enterprise analysed. As said earlier, multiple regression analysis was
(SMEs) in Ghana. run to determine the relationship between strategic man-
H1: Strategy Formulation has significant positive im- agement variables and the growth of SMEs. As indicated
pact on the growth of SMEs in Ghana. above the variables used to define or represent strategic
b. The impact of Strategy implementation on the management practices are strategy formulation, strategy
growth of SMEs in Ghana. implementation, and strategy evaluation. The relationship
H0: Strategy Implementation has no significant im- between the dependent and independent variables was
pact on the growth of SMEs in Ghana. explained by:
H1: Strategy Implementation has a significant positive
impact on the growth of SMEs in Ghana. G = f ( X1 , X2 , X3 ) . (1)
c. The impact of Strategy Evaluation on the growth
of SMEs in Ghana. The function (equation 1) means that Growth (G) is a
H0: Strategy Evaluation has no significant impact function of strategy formulation (X1), strategy implemen-
on the growth of Small and Medium Enterprise tation (X2) and strategy evaluation (X3). In other words,
(SMEs) in Ghana. growth of SMEs depends on strategy formulation, strat-
H1: Strategy Evaluation has a significant positive im- egy implementation, and strategy evaluation. The multiple
pact on the growth of SMEs in Ghana. regression model (econometric model) developed by the
study took the following form:

2. Research methods G = β0 + β1 X1 + β2 X 2 + β3 X3 + e , (2)

2.1. Research design, sample and data collection where: G is Growth as measured by composite score of
financial and nonfinancial performance indicators; X1 is
The study adopted quantitative research design. The popu- strategy formulation; X2 is Strategy Implementation; X3 is
lation included all registered SMEs in the Central Business Strategy Evaluation; β1, β2, β3 are the coefficients, which
district of Accra, the capital of Ghana which have been in represent the change in growth when there is a unit change
operation for at least three years. The estimated population in strategy formulation, strategy implementation, and
was 500 SMEs as at the time of the study. Based on Slovin’s strategy evaluation respectively; β0 = a constant, which
formula of sample determination {n = N/(1+Ne²)}, Tejeda represents growth of SMEs when there is no adoption of
and Punzalan (2012), purposive sampling technique was strategic management practices; e is the error term.
employed to sample 190 registered SMEs which have been
in operation for at least 3 years for the study. The study 2.3. Validity and reliability
used purposive sampling because the study was interested
in only registered SMEs which have been in operations Cronbach Alpha which was computed to test the reliabil-
for at least 3 years. These are the respondents who could ity of the impact of strategic management practices on
provide the necessary data or information to address the the growth of SMEs in Ghana revealed a figure of 0.856
objectives of the study. Out of the sample of 190 SMEs one which indicates a very strong internal consistency because
hundred and fifty (150) filled or responded to the ques- according to Ursachi et al. (2015) a reliability of 0.70 or
tionnaire. Questionnaire was used as the data collection higher is sufficient proof of reliability in the social sciences.
Business: Theory and Practice, 2021, 22(1): 222–230 227

On the issue of validity, the questionnaire which was used 3.2.2. Analysis of Variance (ANOVA)
to collect data for the study was pre-tested and refined to Table 3 presents the results of the ANOVA for examining
remove all ambiguities and hence it measured what it was the significance of the estimated model. Sum of Squares
supposed to measure. In addition to that, the researcher (SS), mean squares (MS), F-Statistics and P-value were
took time to explain some aspects of the questionnaire to estimated.
those SMEs who requested for clarity to ensure that all As shown in Table 3 the F-statistics of the estimated
their responses were accurate. model is 94.788 with a P-value of 0.000. Since the P-value
is less than the 5% (0.05) significance value, the study con-
3. Results cludes at 5% significance level that the estimated model is
significant for examining the relationship between strate-
The study used Ordinary Least Square (OLS) regression
gic management practices and the growth of Small and
to examine the relationship between strategic manage-
Medium Enterprises (SMEs) in Ghana.
ment practices and the growth of SMEs in Ghana. The
variables used to define strategic management practices Table 3. ANOVA statistics (source: Field Data, 2019)
are strategy formulation, strategy implementation, and
strategy evaluation. Sum of Mean Sig.
Model df F
Squares Square (P-value
3.1. Multi collinearity assumption Regression 460.527 3 153.509 94.788 .000
Multi collinearity test was conducted to determine if there 1 Residual 155.473 96 1.620
exists correlation among the independent variables (Strat- Total 616.000 99
egy formulation, strategy implementation and strategy
evaluation). Tolerance scores and Variance Inflation Fac- Table 4 presents the results of the estimated Ordinary
tors (VIF) were estimated as shown in Table 1. Least Square (OLS) Regression Model for examining the
As shown in Table 1, the tolerance scores and Variance impact of strategic management practices on the growth
Inflation Factor (VIF) for all the variables are above 0.12 of Small and Medium Enterprises (SMEs) in Ghana. Co-
and below 10 respectively. This therefore indicates that efficient estimates, Robust Standard Errors (Robust Std.
there existed no multicollinearity in the estimated Ordi- Error), t-statistics and Probability Values (P-value) were
nary Least Square (OLS) regression model. The multicol- estimated.
linearity assumption is met.
Table 4. Estimated OLS regression model for the dependent
Table 1. Collinearity statistics (source: Field Data, 2019) variable sustainability (source: Field Data, 2019)

Collinearity Statistics Coeffi­ Robust Std.

Regressors t P-Value
Variables cients Error
Tolerance Score VIF
Strategy
Strategy Formulation 0.158 7.799 0.11 0.05 2.35 0.021
Formulation
Strategy Strategy
0.178 5.605 0.19 0.10 10.47 0.000
Implementation Implementation
Strategy Evaluation 0.153 6.516 Strategy
−0.13 0.06 −2.25 0.027
Evaluation
3.2. Model summary and Analysis of Variance Constant −5.27 1.97 −2.68 0.009
(ANOVA)
As shown in Table 4, the variable Strategy Formula-
3.2.1. Model summary
tion has coefficient of 0.11 and a P-value of 0.021. This
Table 2 presents the results on the summary of the es- indicates that holding other variables constant a percent-
timated model for the study. Correlation coefficient (R), age (1%) increase in Strategy Formulation, increases the
R-square and adjusted R-square are estimated. growth of Small and Medium Enterprises (SMEs) in Gha-
As shown in the Table 2, the Adjusted R-square of the na by 0.11%. This relationship is significant at 5% signifi-
estimated model is 74% thus 0.740. This indicates that cance level since the P-value of 0.021 is less than the 5%
74% of the changes in the dependent variable (growth) (0.05) significance value.
are explained by predictor variables Strategy Formulation, In addition, the variable Strategy Implementation has
Strategy Implementation and Strategy Evaluation. Thus, coefficient of 0.19 and a P-value of 0.000. This indicates
the estimated model has a very good predictive power. that “other things being equal” for a percentage (1%) in-
crease in Strategy Implementation, the growth of Small
Table 2. Model summary (source: Field Data, 2019) and Medium Enterprises (SMEs) in Ghana increases by
0.19%. This relationship is also significant at 5% signifi-
Model R R Square Adjusted R Square
cance level since the P-values 0.000 is less than the 5%
1 0.865 0.748 0.740 (0.05) significance value.
228 A. Addae-Korankye, B. A. Aryee. The relationship between strategic management practices and the growth of small...

Furthermore, the variables Strategy Evaluation has in Ghana. Specifically, a one percent increase in strategy
coefficient of −0.13 and a P-value of 0.027. This again in- evaluation decreases growth of SMEs by 0.13. In addition
dicates that holding other variables constant, a percent- to the above the adjusted R-square of 0.740 means that
age (1%) increase in Strategy Evaluation, leads to 0.13% 74% of changes in the growth of SMEs in Ghana is due
decrease in the growth of Small and Medium Enterprises to the application of strategic management practices. The
(SMEs) in Ghana. This relationship is also significant at implication is that there is a strong positive relationship
5% significance level since the P-values 0.027 is less than between strategic management practices and the growth
the 5% significance value 0.05. of SMEs in Ghana.
Finally, a constant coefficient of −5.27 which is sig- There are a number of studies from Nigeria, South
nificant at 5% significance level with a P-value of 0.009 Africa, Somalia, Kenya, Bangladesh, etc. that confirm or
indicates that when all the independent variables (strategy corroborate the findings of the current study. For example,
formulation, strategy implementation, and strategy evalu- the studies by Lawal et al. (2012), Mahamud et al. (2019),
ation) are held constant, the growth of Small and Medium Muogbo (2013), Yunus et al. (2010), Ajao and Grace
Enterprises (SMEs) in Ghana decreases by 5.27%. In other (2012) in Nigeria revealed a positive relationship between
words, when SMEs do not practice strategic management implementation of strategic management practices and
in their operations, their growth reduces by 5.27%. This performance and hence growth of SMEs.
implies that the practice of strategic management enhanc- Secondly, a study by Hieu and Nwachukwu (2019)
es growth of SMEs in Ghana. on strategic management practices and the growth of or-
As explained above and also from Table 4, the specific ganisations in Vietnam also confirm the findings of the
regression equation is: current study that effective implementation of strategic
management practices impact positively on organisations’
G = −5.27 + 0.11SF + 0.19 SI − 0.13SE + e,
performance and hence their growth. Ali and Qun (2019)
where G = Growth of SMEs; SF = Strategy Formulation; also examined the impact of strategic management prac-
SI = Strategy Implementation; SE = Strategy Evaluation; tices and the growth of SMEs in Bangladesh and found
e = error term, which represents all other factors that in- a positive correlation between strategic management
fluence growth of SMEs. practices and growth/performance of SMEs. Specifically,
the study found that 89% of the variance in the growth/
4. Discussion performance of SMEs was due to effective application of
strategic management practices.
4.1. Theoretical contribution Further, Mohamud et al. (2015) studied the effect of
The study revealed that Small and Medium Enterprises strategic management on the growth/performance of or-
(SMEs) in Ghana adopt strategy formulation, strategy ganisations, and found a positive relationship. This con-
evaluation and strategy implementation as their strategic firms the findings of the current study. In Kenya, separate
management practices. The effective and efficient formula- studies by Njanja (2009) and Otieno (2013) on the impact
tion and implementation of strategic management would of strategic management on organisational performance
improve the management of the Small and Medium En- also found a positive relationship between effective stra-
terprise (SMEs) and consequently the productivity, perfor- tegic management practices and growth of organisations.
mance, profitability and growth of the Small and Medium These again corroborate the findings of the current study.
Enterprises (SMEs) in Ghana. On the other hand applica- Notwithstanding the above, when the strategic man-
tion of strategy evaluation reduces the growth of SMEs agement practices; strategy formulation, strategy imple-
in Ghana. mentation and strategy evaluation are not effectively and
The specific model from the regression output (Ta- efficiently done by organisations including Small and
ble 4) is; Medium Enterprises (SMEs) or when they are not imple-
mented at all, the quality, performance and the growth of
G = −5.27 + 0.11SF + 0.19SI − 0.13SE + e, Small and Medium Enterprises (SMEs) would be affected
where G = Growth of SMEs; SF = Strategy Formulation; negatively.
SI = Strategy Implementation; SE = Strategy Evaluation; This further implies that as Small and Medium Enter-
e = error term. prises (SMEs) effectively increase their strategy formula-
The above equation implies that there is a positive tion and implementation, their performance and growth
relationship between Growth and strategy formulation. increases. This is because strategy formulation and imple-
Specifically, a one percent increase in Strategy formula- mentation enable Small and Medium Enterprises (SMEs)
tion increases growth of SMEs by 0.11%. There is also a to identify their strengths and weaknesses and efficiently
positive relationship between strategy implementation and and effectively manage them in line with their organisa-
growth of SMEs. From the specific model, a one percent tional goals and objectives. This would enable Small and
increase in strategy implementation will lead to 0.19% in- Medium Enterprises (SMEs) to achieve their short- run
crease in growth of SMEs. Further, there is a negative rela- and long- run sustainability and growth. The attainment of
tionship between strategy evaluation and growth of SMEs the goals and objectives of Small and Medium Enterprises
Business: Theory and Practice, 2021, 22(1): 222–230 229

(SMEs) implies that their productivity, performance, prof- and the growth of Small and Medium Enterprises (SMEs)
itability and growth would sustainably increase. in Ghana. In summary, the study found that there is a sig-
The current study finally assessed the influence of nificant positive relationship between strategy formulation
strategy evaluation on the growth of Small and Medium and growth of SMEs, Secondly, the study revealed that
Enterprises (SMEs) in Ghana and revealed that strategy strategy implementation and growth of SMEs in Ghana
evaluation has a statistically significant negative influence are positively related, implying that “other things being
on the growth of Small and Medium Enterprises (SMEs) equal”, effective implementation of strategic management
in Ghana. Thus, for a percentage increase in the strategy practices will enhance the growth of SMEs in Ghana. The
evaluation, the growth of Small and Medium Enterprises study however, found that strategy evaluation has a signifi-
(SMEs) in Ghana decreases by 0.13%. This could mean cant negative relationship with growth of SMEs in Ghana.
that the cost of strategy evaluation by Small and Medium The findings of the study therefore rejects H0 but sup-
Enterprises (SMEs) in Ghana exceeds the revenue or re- port H1 because strategy formulation and strategy imple-
turns the Small and Medium Enterprises (SMEs) generate mentation have significant positive relationship with the
which could also mean that SMEs in Ghana lack strategy growth of SMEs, however in the case of strategy evaluation
evaluation experts. the findings of the study support H0 but rejects H1 be-
As a result, the more SMEs in Ghana adopt strategy cause strategy evaluation has significant negative relation-
evaluation the more their profitability and growth de- ship with the growth of SMEs. However, it can be said that
creases. Also, the negative influence of strategy evaluation overall the effective application of strategic management
on the growth of Small and Medium Enterprises (SMEs) practices significantly impact positively on the growth of
could be as a result of poor and ineffective adoption of SMEs in Ghana, and all organisations in general. This is
strategy evaluation of Small and Medium Enterprises because Adjusted R-square of 0.740 implies that 74% of
(SMEs). This would prevent the Small and Medium Enter- the growth of SMEs is due to the application of strategic
prises (SMEs) from benefiting positively from their adop- management practices.
tion of strategy evaluation. In a similar study conducted The contributions of this study are enormous. Policy
by Otieno (2013) it was revealed that when strategic man- makers, managers and owners of SMEs will be informed
agement practices are ineffective, implementation coupled by the findings of this study to formulate and implement
with organisational challenges, could negatively affect the policies to enhance their strategic management practices
performance of Small and Medium Enterprises (SMEs). in line with strategy formulation and strategy implemen-
tation to further increase the performance, profitability,
4.2. Practical contribution growth and sustainability of SMEs.
As contribution to policy and practice, the study has made Further, policy makers including owners and manag-
it clear that effective and efficient application of strategic ers of SMEs will use the findings of this study as a basis
management leads to growth of SMEs in Ghana. From to employ strategic management experts especially in the
the above results, strategy formulation has a positive re- field of strategy evaluation to enhance the quality of their
lationship with growth of SMEs. Secondly, there is also a strategy evaluation process so that strategy evaluation
positive relationship between strategy implementation and positively influence the performance, growth and sustain-
the growth of SMEs in Ghana. The above should inform ability of SMEs in Ghana.
policy makers, managers and owners of SMEs in Ghana to Based on the findings of the study Managers/Owners
employ mechanisms to enhance their application of strat- and Policy makers of SMEs will be proactive and embrace
egy formulation and implementation in order to improve the tenets that will enhance strategic planning which will
the performance and hence the growth of SMEs in Ghana. ensure the firm’s sustainability and growth in turbulent
It also means that they should engage experts in the field and unpredictable business environment situations. The
of strategic management to enhance the performance and responsibility for strategic thinking should be viewed as
hence growth of SMEs. the responsibility of all managers/policy makers and not
Secondly, from the results of the study, strategy evalu- just top-level executives alone.
ation has a negative relationship with performance and Furthermore, since SMEs in Ghana play a significant
hence growth of SMEs in Ghana. This should be a con- role in terms of their contribution to Ghana’s economic
cern to policy makers, managers and owners of SMEs. growth the researcher recommends that the government
They should employ experts in the field of strategic man- of Ghana should focus on giving technical assistance to
agement especially in the field of strategy evaluation to en- SMEs in the area of strategic planning/strategic manage-
hance the quality of strategy evaluation process to improve ment so that they can have significant positive impact on
performance and enhance the growth of SMEs. the country’s economy growth.

Conclusions Acknowledgements
In general, the study has provided insight into the impact The researchers express their gratitude to the SMEs who
of strategic management practices on the performance spent their valuable time to answer the questionnaire.
230 A. Addae-Korankye, B. A. Aryee. The relationship between strategic management practices and the growth of small...

Declaration of conflict of interest Mohamud, G. Y., Mohamud, A. S., & Mohamed, B. H. (2019).
The relationship between strategic management and organi-
Authors do not have any conflict of interest. sational performance in Mogadishu-Somalia. European Jour-
nal of Research and Reflection in Management Science, 3(2),
42−51.
Funding
Muogbo, U. S. (2013). The impact of strategic management on
The research was not supported by any external funding. organisational growth and development (A study of selected
manufacturing firms in Anambra State). IOSR Journal of Busi-
ness and Management (IOSR-JBM), 7(1), 24−32.
References https://doi.org/10.9790/487X-0712432
Muriithi, S. (2017). African Small and Medium Enterprises
Abdiwali, K. A. (2019). Effects of strategic management practices
(SMEs) contributions, challenges, and solutions. European
on firm performance of medium and large telecommunica-
Journal of Research and Reflection in Management Science,
tion companies in Mogadishu, Somalia. International Journals
5(1), 36−47.
of Academic and Research, 1(2), 57−71.
Njanja, L. (2009). An investigation into management strategies af-
https://doi.org/10.32898/ibmj.01/1.2article05
fecting performance of Micro, Small and Medium Enterprises
Ajao, O. S., & Grace, M. O. (2012). The effects of strategic plan-
in Kenya [Doctor of Commerce Dissertation, University of
ning on corporate performance in university education: A
South Africa]. South Africa.
study of Babcock University. Kuwait Chapter of Arabian Jour-
Nyariki, R. N. (2013). Strategic Management as a competitive tool
nal of Business and Management Review, 2(4).
in enhancing performance of SMEs in Kenya. MBA Project,
Ali, M., & Qun, W. (2019). Strategic management practices and
University of Nairobi, Kenya.
performance of SMEs in Bangladesh. International Journal of
OECD. (2010). OECD studies on SMEs and entrepreneurship
Advanced Research, 7(1), 69−78.
SMEs, entrepreneurship and innovation. OECD Publishing.
https://doi.org/10.21474/IJAR01/8298
Otieno, M. (2013). Strategic issue management practices by Small
Aluko, M., Odugbesan, O., Gbadamosi, G., & Osuagwu, L.
and Medium Enterprises in Mombasa County, Kenya. MBA
(2004). Business policy and strategy. Remof Themes Limited
Project, University of Nairobi, Kenya.
(Educational Publishers).
Pearce, J. A., & Robinson, R. B. Jnr. (2007). Strategic manage-
Beal, R. M. (2000). Competing effectively: environmental scan-
ment: formulation, implementation and control (10th ed.).
ning, competitive strategy, and organisational performance in
Mc Graw-Hill/Irwin.
small manufacturing firms. Journal of Small Business Manage-
Pillania, K. (2008). Strategic issues in knowledge management
ment, 38(1), 27−47.
in Small and Medium Enterprises. Knowledge Management
Bryson, J. M. (2011). Strategic planning for public and non-profit
Research & Practice, 6(4), 334−338.
organisations: a guide to strengthening and sustaining organi-
https://doi.org/10.1057/kmrp.2008.21
sational achievement. John Wiley & Sons, NJ.
Sababu, B. M. (2007). Strategic management, the analytical ap-
Carter, S., & Jones-Evans, D. (2006). Enterprise and small business:
proach (1st ed.). Jomo Kenyatta University, Kenya.
principles, practice & policy (2nd ed.). Pearson Education.
Tejeda, J. J., & Punzalan, J. R. B. (2012). On the misuse of Slovin’s
David, F. (2011). Strategic management: concepts and cases
formula. The Philippine Statistician, 61(1), 129–136.
(13th ed.). Pearson Education Limited.
Thompson, A. A., & Strickland, A. J. (2003). Strategic manage-
Fowler, S. J., & Hope, C. (2007). Incorporating sustainable busi-
ment: concepts and cases. McGraw-Hill.
ness practices into company strategy. Journal of Business
Tunji, S. T. (2013). Effective internal controls system as antidote
Strategy and the Environment, 16(1), 26–38.
for distress in the banking industry in Nigeria. Journal of
https://doi.org/10.1002/bse.462
Economics and International Business Research (JEIBR), 1(5),
Glueck, W. F. (1980). Strategic management and business policy.
106−121.
McGraw-Hill Inc.
Ursachi, G., Horodnic, I. A., & Zait, A. (2015). How reliable are
Green, J. K., & Medlin, B. (2003). The strategic planning pro-
measurement scales? External factors with indirect influence
cess: the link between mission statement and organisational
on reliability estimators. Precedia Economics and Finance,
performance. Academy of Strategic Management Journal, 2(1),
20(1), 679−686.
23−32.
https://doi.org/10.1016/S2212-5671(15)00123-9
Heugens, P. P. M. A. R. (2003). Strategic issues in management
Wheelen, T. L., & Hunger, J. D. (2012). Strategic management
and organisational outcomes. Utrecht School of Economics,
and business policy: towards global sustainability (13th ed.).
Utrecht University.
Prentice Hall.
Hieu, V. M., & Nwachukwu, C. E. (2019). Business management.
Woodridge, B., & Floyd, S. W. (1990). The strategy process,
D. A. Tsenov Academy of Economics, Svishtov.
middle management involvement, and organisational per-
Hisrich, R. D. (2014). Entrepreneurship. McGraw-Hill.
formance. Strategic Management Journal, 11(3), 231−241.
Karami, A. (2007). Strategy formulation in entrepreneurial firms.
https://doi.org/10.1002/smj.4250110305
Ashgate Publishing Limited.
Yunus, M., Moingeon, B., & Lehmann-Ortega, L. (2010). Building
King’ola, S. N. (2001). Challenges of strategic implementation at
business models: Lessons from the Grameen Experience. Long
Geomax Consulting Engineers (GEC) [Unpublished Master
Range Planning. https://doi.org/10.1016/j.lrp.2009.12.005
Thesis, University of Nairobi], Kenya.
Lawal, F. M., Omone, O. E., & Oludayo, O. (2012). Effect of stra-
tegic issue in management on organisational performance.
Transnational Journal of Science and Technology, 2(10), 17−29.
Markiewicz, P. (2011). Change management in the strategic im-
plementation process. Intellectual Economics, 5(2), 257−267.
Copyright of Business: Theory & Practice is the property of Vilnius Gediminas Technical
University and its content may not be copied or emailed to multiple sites or posted to a
listserv without the copyright holder's express written permission. However, users may print,
download, or email articles for individual use.