CHAPTER ONE

INTRODUCTION

1.1 Background of Study

The role of small-to-medium-sized enterprises (SMEs) is becoming increasingly

prominent throughout the world. For example, in the United States, SMEs
represent an overwhelming majority of all businesses and account for almost
one-half of the gross national product. SMEs create two-thirds of all new jobs
and invent more than one-half of all technological innovations in the United
States (U.S.Small Business Administration, 2005).Similarly, in most developing
countries; SMEs are the most important source of new employment
opportunities. SMEs make substantial contributions to employment and
comprise the majority of businesses in the nation (Burns & Dewhurst, 1996;
Bushong, 1995).In Nigeria, the largest number of business is comprised of
SMEs. Their distribution is concerned in all sectors including manufacturing,
trade and service. Many studies have suggested that business failure is due
largely to an organization’s failure to make strategic plan.
Most firms desire growth in order to prosper and not just to survive. Business
growth, however, means different things to different organizations. Indeed,
there are many parameters a company can select to measure its growth. The
most meaningful yardstick is one that shows progress with respect to an
organization's stated goals. The ultimate goal of most companies is profit, so net
profit, revenue, and other financial data are often utilized as "bottom-line"
indications of growth. Other business owners, meanwhile, may use sales
figures, number of employees, physical expansion, or other criteria to judge
organizational growth. Many firms desire growth because it is seen generally as
a sign of success, progress. Organizational growth is, in fact, used as one
indicator of effectiveness for small and large businesses and is a fundamental

1
concern of many practicing managers. (Cole, 2002) Strategic planning is a key
driver of business growth.
According to Crosby (1999)business growth also triggers an almost inevitable
"diminution of consensus about organizational goals." He attributed this "in part
to the inherent difficulty of getting a larger number of people who know each
other less well to agree about anything, in part to the importation of new people
and ideas, but mostly to the brute fact that as an organization grows, its
relationships to its members and to the environment necessarily change.

Caplow(2009) points out that such growth can be particularly disorienting for
employee and owner alike: "often the people involved may not realize that
anything significant has occurred until they discover by experience that their
familiar procedures no longer work and that their familiar routines have been
bizarrely transformed .Business owners, then, face a dizzying array of
organizational elements that have to be revised in accordance with changing
realities. Maintaining effective methods of communications with and between
employees and departments, for example, become ever more important as the
firm grows. Similarly, good strategic planning practices have to be implemented
and maintained. Establishing and improving standard practices is often a key
element of organizational growth as well. Indeed, a large business that
undergoes a significant burst of growth will find its operations transformed in
any number of ways. And often, it will be the owner's advance strategic
planning and management skills that will determine whether that growth is
sustained, or whether internal constraints rein in that growth prematurely
Therefore it should be noted that organization growth are marked by either
rapid increases in revenues, company shares, profitability and prospects of it to
sustain itself in future. Business growth has its basis to a larger extend on
strategic planning of the organization. It’s with this respect that strategic

2
planning should be employed by organization to enhance their growth(Cole,
2002).
Numerous researches has been made on strategic planning and business growth
(Odongo & Datche 2015; Olusanya & Oluwasanya, 2014), but few or no
literature has handled strategic planning and business growth in small and
medium scale firms in Rivers state. It is against this backdrop that this study is
designed to close this gap by examining the relationship between strategic
planning and business growth of small and medium scales firms in Rivers State.
The study will therefore adopt internal analysis and external analysis as the
dimensions of strategic planning, and adopt sales volume and physical
expansion as measures of business growth.

1.2 Statement of the problem

The problems encountered with business growth are that business owners
seeking to guide their organizations through periods of growth, whether that
growth is dramatic or incremental often encounter difficulties (Caplow, 2009).
After all, when a firm is small in size, the entrepreneur who founded it and
usually serves as its primary strategic and operational leaders can often easily
direct and monitor the various aspects of daily business. In such environments,
adds that the small business owner can also "understand a larger proportion of
the relationships subordinates have with each other and with outsiders.
Organizational growth, however, brings with it an inevitable dilution of that
"hands-on" capability, while the complexity of various organizational tasks
simultaneously increases. "As the organization grows," said Caplow, "control
becomes more complex by the mere accretion of numbers.
Despite the fact that strategic planning has brought far reaching revolution
which has tremendously transformed most business landscape, it is still plagued
with some constraints. Past and recent research studies have made it clear that

3
there is an increased internal and external uncertainty due to merging
opportunities and threats, Failing to recognize and understand events and
changing conditions in the competitive environment, Basing strategies on a
flawed set of assumptions, Pursuing a one-dimensional strategy that fails to
create or sustain a long-term competitive advantage. Many organizations spend
most of their time realizing and reacting to unexpected changes and problems
instead of anticipating and preparing for them.

It is in view of the above mentioned issues that the researcher intends to carry
out this study in order to proffer workable solutions to the problems highlighted.
Therefore this research work seeks to investigate the relationship between
strategic planning and business growth in small and medium scale firms in
Rivers state.

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 1.3 Conceptual Framework
t
Strategic Planning Business Growth

Internal Analysis Sales Volume

External Analysis Physical Expansion

Source: El-Mobayed(2006) and Gica and Negrusa(2011) for dimensions of

strategic planning. Unger (2011) for measures of business growth

1.4 Aim and Objective of the Study

The aim of the study is to examine the relationship between strategic planning
and business growth of small and medium scale firms in Rivers State. The
specific objectives of the study include to:
i. Determine the relationship between internal analysis and sales volume of
small and medium scale firms in Rivers State.
ii. Ascertain the relationship between internal analysis and physical
expansion in small and medium scale firms in Rivers State.
iii. Identify the relationship between external analysis and sales volume of
small and medium scale firms in Rivers State.

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iv. Establish the relationship between external analysis and physical
expansion of small and medium scale firms in Rivers State.

1.5 Research Questions

The following research questions are raised to help shape the direction of this
study:
i. What is the relationship between internal analysis and sales volume of
small and medium scale firms in Rivers State?
ii. What is the relationship between internal analysis and physical expansion
of small and medium scales firms in Rivers State?
iii. What is the relationship between external analysis and sales volume of
small and medium scale firms in Rivers State?
iv. What is the relationship between external analysis and physical expansion
of small and medium scale firms in Rivers State?
1.6 Research Hypotheses
The following null hypotheses have been formulated to help guide the study:
H01: There is no significant relationship between internal analysis and sales
volume of small medium scales firms in Rivers State.
H02: There is no significant relationship between internal analysis and physical
expansion of small and medium scale firms in Rivers State.
H03: There is no significant relationship between external analysis and sales
volume of small and medium scale firms in Rivers State.
H04: There is no significant relationship between external analysis and physical
expansion of small and medium scale firms in Rivers State.

1.7 Significance of the Study

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The study is designed to examine the relationship between strategic planning
and business growth of small and medium scales firms in Rivers State. Thus,
the study will be significant to the following groups and personnel:
Practical significance
Policy maker: First, it will provide a deeper understanding of the appropriate
strategic plan that required to be adopted by organisations to influence business
growth.
Human Resource Teams: Human resource teams will use the findings of this
study to formulate viable policy documents that will boost business growth.
Theoretical significance
Researchers and Students: Researchers and students who may wish to
carryout similar studies will benefit using this study as it offers a reference for
future research that might examine the relationship between non-monetary
compensation and employee performance or related topics.

1.8 Scope of the Study

The scope considered in this study includes content scope, geographical scope,
and unit of analysis.
Content Scope: The elements covered in the independent variable (strategic
planning) are: Internal analysis and External analysis while that of dependent
variable (Business growth) are: Sales volume and Physical expansion
Geographical Scope: The study is centred on small and medium scale firms in
Rivers State.
Study Unit Scope: The unit of analysis for this study is at the micro level. Due
to the type of primary data needed for this research, respondents will comprise
of employees of the small and medium scale firms in Rivers State.

1.9 Definition of Terms

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 This section clarifies some terms within the context of this research.
These terms are as follows:
Strategic Planning: Is a process in which organizational leaders determine their
vision for the future as well as identify their goals and objectives for the
organisation.

Internal Analysis: It is an objective audit of the characteristics of your

enterprise that leads to identifying strengths and weaknesses, relative to rivals
and in the context of different markets.

External Analysis: It is an objective assessment of the changing world in

which an enterprise operates, in order to have an early warning system for
identifying potential threats and opportunities.

Business Growth: Is a stage where the business reaches the point for expansion
and seeks additional options to generate more profit.

Sales Volume: Is the number of units sold within a reporting period.

Physical Expansion: A business strategy in which growth is obtained by

increasing the number of stores in which customers can buy a company’s
products and service

1.10 Organization of the study

The study is structured into five chapters as follows

Chapter one covers the over view of the Strategic planning and business growth
containing the background of the study, the statement of the problems, Research
questions and hypothesis, significance of the study and operational definition of
terms Chapter two gives the reviews of related literature of some of the work of
scholars, practitioners, and other who have contributed to the study, it therefore

8
create a link to this current study. Chapter three describes the research
methodology used in the description of the population, research design, methods
of data collection and sampling techniques.
Chapter four shows the presentation and analysis of data. Chapter five provides
the discussion, conclusion and recommendation of research findings.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 Theoretical Framework

2.1.1 Contingency Theory

Wright, (1994) presented the contingency theory and argued that high financial
returns are associated with organizations that focus on developing a strategic
and beneficial fit within its environment. According to Wright et al., (1994),
unlike the theory of evolution and industrial organization, the contingency
theory sees a continuous link between an organization and its environment at
different levels of strategic implementation. Further, the contingency theory
asserted that organizational performance is a joint outcome of environmental
elements and a firm’s strategic actions (Porter, 2008; Wright et al., 1994).
In addition to the environmental changes that impacted strategic constructs in
business, Tang and Thomas (1992) argued that in order to be effective, an
organization can choose to become proactive by operating in industries where
the opportunities and threats are similar to the organizations strengths and
weaknesses. Should the forces of the industry were to turn unfavorable, the firm
may choose to relocate to a more favorable location where its resources and
competencies could be better utilized (Tang & Thomas, 1992). For example,
Tang and Thomas (1992) articulated that a firm may choose to diversify its
market portfolio by investing in advertising, but strategic choices alone are not
enough to explain the ability of an organization to compete with clusters of
firms in a saturated industry. Furthermore, any proactive initiatives the
organization implements to differentiate itself from its competitors will depend
on the ability of the firm to react to its competitor’s strategic initiatives in a
systematically different manner (Tang & Thomas, 1992). Further, Grant (2001)
also articulated Wright et al., (1994) conceptualization of the resource-based

10
theory by arguing that in addition to an organization’s environmental forces, the
ability for the firm to develop and sustain its competitive strategic advantage
depends on the firm’s unique resources that complement its key variables such
as capital, equipment, employees, knowledge, and information.
Next Grinyer, Al-Bazzaz and Yasai-Ardekani (1986) argued that literature on
the issues of strategic constructs can be traced to scholars such as Fiedler who
developed the contingency theory. According to the contingency theory, there
are many ways that strategists can organize and lead an organization, and that
which works well for organizations in one environment may not work for
another in a different or similar environment.

2.1.2 The Industrial Economics Approach

Small firms in most cases commence production at a scale below the minimum
efficient size for their industry. If firms fail to achieve minimum efficient size
for their specific industry they will be potentially vulnerable and may eventually
close because of competition from other companies which are operating at or
above the minimum efficiency. Many small firms, even if they are not efficient,
may reach the minimum efficient size for their industry by selling to relatively
uncompetitive and partially protected local and regional markets. Given that the
long-run average cost curve is L-shaped rather than U-shaped (that is, costs per
unit of current output above the minimum efficient scale do not vary with the
volume of output), subsequent expansion will depend upon whether growth is a
strategic goal for the firm, and whether the firm can meet the varying demands
of the marketplace. Clearly distinctions need to be drawn between technological
economies and managerial and financial economies, although the concept of
economies of scale is a static one and our concern is with dynamic issues,
namely the process of growth.

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In reducing their costs, firms in an industry will be involved in a competitive
struggle, and, against a given industry demand, some firms will be forced out of
the industry as other firms grow to their minimum efficient scale (Hitchens,
1976). The fact that firms exist at different sizes led to the rejection of the
perfect-competition model and to the development of the concept of imperfect
competition with falling demand curves to individual firms. Hence, some firms
may expand to the minimum efficient scale in their industry even if they are not
efficient producers.
A number of growth models have been developed in industrial economics but
primarily to explain the behaviour of large firms. For example, in their seminal
book on industrial economics, Hay and Morris (1979) introduce the chapter
concerned with the growth of firms by arguing that the theory of growth of
firms should be more 'realistic' and that the predominance of multiproduct firms
of very large size "suggests that there may be no limit to the size of a firm in the
long run. Only if there is a constraint on how rapidly a firm can expand would
there then be any limit on its size and then only in the short run". Size is,
therefore, simply a function of growth; it is not conceptualized as an influence
upon the growth rate. This implies that the owner-managed single-plant firm
and the multinational corporation occupy different points along the same
continuum of corporate development (Taylor & Thrift, 1982). Furthermore, Hay
and Morris(1979) also assume that "the theory must partly focus on the firm
itself as an organization able to manipulate to some extent the competitive
environment in which it finds itself, rather than as just a passive unit whose
performance depends
on various structural characteristics of the market". For the great mass of small
manufacturing businesses, which must function largely as price-takers and in
many cases operate within a dependent relationship as suppliers to large firms
who have the power to squeeze their profit margins, this assumption is
inappropriate except insofar as small firms can adapt their product to suit

12
markets of different competitiveness. Hence, the unequal power relationships
that occur between large and small firms in such commercial arrangements as
licensing, franchising, sub-contracting, and access to venture capital need to be
explicitly recognized in any theory of small-firm growth.

2.2.0 Conceptual Reviews

2.2.1 Concept of Strategic Planning

The literature about strategy has become so diverse and vast and any review
would not be able to cover all perspectives, views and positions. There is not a
unique definition of strategy. Different researchers as Chandler (1962), Learned
et al. (1965), Mintzberg (1987), Penrose (1993), Craig (2003), Lynch (2006)
and Huff (2009) tried to explain the concept of strategy in their own time. They
presented the image of markets and economy trends in which the strategy is
created. The term “strategy” includes different organization’s activities and
orientations which change and develop together with the business activity: the
strategy adapts to new situations on the market. We can define organization’s
strategy according to its action and decision because „strategy can be formally
expressed or silent but still observable by actions and decisions the organization
makes (Hatten 1982). Various researchers gave different and interesting
definitions of strategy, but what is relevant for the research of this paper are
similar terms in the definition. Sandler and Craig (2003) considered it very
difficult to find the definition of strategy which can unify all definitions
presented by previous authors, so they defined the elements/keywords every
strategy definition must contain: purpose or mission; polities; defining the
business the company is in; defining the kind of company; objective or goals;
strengths and weaknesses; opportunities and threats; key success factors; key
decision; capabilities and competences; planning and scheduling;
implementation and sustainable competitive advantage.

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Huff et al. (2009) identified strategy characteristics important for the
organization and summarized them as follows:

Communication of compelling purpose or vision to all in the organization and

outside it who want to know it;

Connection between organization’s strength and market’s opportunities;

Generating more resources than it requires;

Coordinating activities directed to reasonable and submitted achieving success

Capability to adapt and react in new market conditions

Their understanding of strategy definition explains “the desired goals and

information on what to do, who will do it, how it will be done, and finally for
whom and why the outcomes are valuable” (Huff et al., 2009:6).

The uniform strategy definition that would satisfy theoretical and practical
approaches will never be found because the term “strategy” covers different
activities and organization goals which develop alongside the business
processes continually adapting to new market situations.

The mission and vision statements can mirror the business situation especially
in times of crisis and can use the vision and mission statements to define
strategy as well as to predict the future organization’s actions.

Strategic planning according to Stoner and Fry (1987) is a management tool

designed to enable organizations competitively adapt to anticipated or future
changes in the environment. The process provides an overview and analysis of
the business and its relevant environment. That is describing the firm‟s current
conditions and recognizing the key external factors affecting its success. The
process then describes an action plan of how the business will proceed to
capitalize on its strengths while minimizing or avoiding threats.

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Kotler (1991) describes strategic planning as a managerial process of
developing and maintaining a viable fit between the organization’s objectives
and resources and its changing market opportunities. The aim of strategic
planning is to shape and reshape the company’s business and products or
services so that they combine to produce satisfactory profits and growth.
Strategic planning is often defined as an integrated system or process included
in the strategic management process, which ranges from formulation to
implementation (Ansoff, 1965). Strategic planning is a process itself by which
the members of an organization envision the future and develop the procedures
to achieve the future (Pfeiffer, et al, 1989). Strategic planning according to
Bryson (1995) is based on the premise that leaders and managers of public and
nonprofit organizations must be effective strategists if their organization are to
fulfill their missions, meet their mandates, and satisfy constituents. Bryson also
states that, strategic planning is an excellent method for an organization- a
governmental or quasi-governmental one- to contend with fluctuating situations
and circumstances. He argues that strategic planning’s aim is to think and act
strategically. Although many authors define the concept of strategic planning
differently, the various definitions above, nevertheless share a common theme;
the future prosperity and survival of an organization in its environment.

2.2.2.0 Dimension of Strategic Planning

2.2.2.1 External environment

External environments comprises of factors existing outside the organization.
Regardless the industry, these factors will have enormous effect on any firm’s
growth and survival. Firms have to be aware of the conditions in its external
environment and firms have to identify and understand the most significant

15
threats and opportunities in its external environment that influences the
company. External environments consist of many different factors comprising
an enormous entity, including political, sociological, demographical, global and
technological factors, customer preference and related industries factors, to
name a few. External environments can be divided into three major areas
including general, industry and competitor environments, (Lynch, 2006).

Five Forces
Michael Porter has developed a method to analyze a firm’s external
environment.
This method is called the Five Forces Model and it has been developed based on
industry environment aspect. According to the model, a firm will be confronted
with five different forces that will impact the firm’s competitiveness. These
forces are threat of new entrants, bargaining power of suppliers, bargaining
power of buyers, threat of substitute products and rivalry among competing
firms. (Lindroos & Lohivesi, 2006).

The five forces model is an important template to help firms determine whether
the industry is attractive and has potential to earn above-average returns.
According to Hitt et al. (2007), the industry is unattractive and there are small
chances to achieve competitive position, if there are low entry barriers, buyers
and supplier have strong bargaining power, there exists intense rivalry among
competitors and there will be strong competitive threat of product substitutes.
Firms should be aware of all these forces when they are planning their strategies
and considering industries to enter.

2.2.2 Internal environment

The internal environment contains factors that have influence on a company’s
resources. According to Hitt et al. (2007), ”The resources are the sources of

16
capabilities, some of which lead to development of the firm’s core competences
or its competitive advantage”. Internal and external environments have to meet
each other in the way that the firm can build a strategy that can lead to
competitive advantage and above-average earnings. External environments can
create opportunities and threats for a firm but internal environmental conditions
can turn these opportunities and threats to competitive advantage by using the
organization’s capabilities, unique resources and core competencies. Internal
environment focuses on the firm’s capabilities and core competencies, which
can be identified and understood by using concepts of value chain and core
competencies. (Hitt et al. 2007).

Competitive advantage
The most important objective of the firm is to build and implement a strategy
that will generate a competitive advantage. Barney describes competitive
advantage: “A firm has a competitive advantage when it is able to create more
economic value than rival firms. Economic value is simply the difference
between the perceived benefits gained by a customer who purchases a firm’s
products or services and the full economic cost of these products and services.
Thus, the size of a firm’s competitive advantage is the difference between the
economic value a firm is able to create and the economic value its rivals are
able to create” (Barney, 2007).

Companies are ultimately aiming to achieve sustainable competitive advantage,

which enables companies to succeed in the long run. Michael Porter argues that
a company can generate competitive advantage in two different ways, either
through differentiation or cost advantage. According to Porter’s definition,
differentiation means the capability to provide customers superior and special
value in the form of product’s special features and quality or in the form of after
sales customer service.

17
As a result of differentiation, company can demand higher price for its products
or services. A company will earn higher profits due to differentiation in case the
expenses will stay comparable to the costs of competitors. (Porter, 2006).
A company can gain competitive advantage through cost advantage. It can be
gained if the company can have an edge to its competitors in producing
products or services with lower costs. When a company has lower costs, it has
the possibility to design, produce and market the products in a more efficient
way, even though the products would be substitutable. Due to a cost advantage
company can gain superior profits compared to competitors. (Zimmerer&
Scarborough, 2002).
Uniqueness Perceived By The Customer Low-Cost Position

Differentiation Low Cost

INDUSTRY

TARGET
Differentiation Focus Cost focus
MARKET

NICHE

Source: Pakanen (2012)

2.2.3 Concept Of Business Growth

According to Penrose (2006), growth is the product of an internal process in the

development of an enterprise and an increase in quality and/or expansion.
“Growth is defined as a change in size during a determined time span” (Dobbs
& Hamilton, 2007).According to Janssen (2009), a company´s growth is
essentially the result of expansion of demands for products or services. “It first
results in a growth in sales and consequently in investments in additional
production factors to adapt itself to new demands” (Janssen, 2009). However,
Achtenhagen et al. (2010) researched entrepreneurs´ ideas on growth and listed
the following: increase in sales, increase in the number of employees, increase

18
in profit, increase in assets, increase in the firm´s value and internal
development. Internal development comprises development of competences,
organizational practices in efficiency and the establishment of professional sales
process. This was the most important index for entrepreneurs that participated in
the research. However, increase in the number of employees was not necessarily
considered a sign of growth.

Davidsson et al. (2010) reported that growth may be related to new markets,
especially in the case of technology firms, with reference to diversification.
They are also of the opinion that growth may occur alternatively as an
integration of part of the value chain, a sort of vertical growth, or when a firm
introduces itself within a market not related to the technology in which it works,
which would be a non-related diversification. Another type of growth may be
related to the combination of market-product by entrance into the market. Brush
et al. (2009) define growth as “geographical expansion, increase in the number
of branches, inclusion of new markets and clients, increase in the number of
products and services, fusions and acquisitions”. According to these authors,
growth is above all a consequence of certain dynamics built by the
entrepreneurs to construct and reconstruct constantly, based on the assessment
made on their firms and on the market. Entrepreneurs are not the sole vectors
since there are many other agents involved, such as clients, kin, suppliers and
others. In fact, growth is a “socially constructed factor” (Leitch et al., 2010).
According to Penrose (2006), frontier progress in the milieu or expansion is the
product of a constant dynamism since growth intentions change as a result of
constant evaluations and re-evaluations that entrepreneurs make as agents. It
may result in the displacement of the firm to another place and in fixing itself in
the same place. It is the “growth dilemma” (Davidsson et al., 2010), full of
risks.

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However, the difficulty in analyzing the firm´s growth at the precise moment
should be underscored (Mckelvie & Wiklund, 2010). It is easier to investigate
the antecedent factors that affect growth and the consequences of growth
(Leitch et al., 2010) and more difficult to investigate growth dynamics or the
manner firms grow (Mckelvie & Wiklund, 2010).

2.2.4.0 Measures Of Business Growth

2.2.4.1 Sales volume

Organizations exist to attain certain mission for undefined period of time. In

order to exist in the business for a long period of time, organizations must look
for effective and efficient ways of doing business activities to achieve
organizational objectives. At present due to environmental dynamism and
competitiveness, the struggle for survival and succeeding in the business has
become more difficult and challenging in the competent global world
(Rajasekhara, 2008).
Today, business is conducted in a dynamic environment where every thing is
changing and changing fast. A successful business is one which not only
recognizes this fact and prepares to face the challenges posed by the change but
influences the speed and direction of the change to make the conditions more
conducive for its survival and growth. Churchill (2003), stated that the highly
dynamic and competitive environment of the 21st century demands a more
responsive, flexible approach to sales management. Sales are becoming less
hierarchical with fewer layers of management while more responsibility is being
given to the sales person.

As the marketing mix is based on the companies understanding of its consumers

the right management of these elements will have a major impact on the
performance of sales. Price is one of the key factors of the marketing mix as it

20
represents what a company earns in return for its efforts. Its setting is to be
regarded with care as both undercharging (lost margin) and overcharging (lost
sales) can have dramatic effects on the profitability. When setting price a
producer has to be aware about the elasticity of its product. An elastic product
would react to a small change of price with a large change in demand. An
inelastic product is not as price sensitive and a change in price would only lead
to a small change in demand. Looking at the industry, especially in the low
price and small vehicle mass market, price is a very decisive factor for sales.

2.3 The Relationship between Strategic Planning and Business Growth.

Strategic planning is a key driver of business growth, Since it has to emerge as

a strategic business partner helping the top management build an organization
that is good not just for today, but for tomorrow and beyond. It is now working
with the top management to propel the organization forward. Strategic planning
should be reviewed and we stopped looking at what is happening in other
strategies and start looking at best strategic planning practices in small and
medium scale firms. (Crosby, 1999).

Strategic planning has been defined as the process of formulating, implementing

and evaluating business strategies to achieve future objectives. To develop a
strategic plan, the plan should contain statement of organization mission and
goals, strategies for obtaining and utilizing the necessary technological,
marketing, and financial and human resources to achieve organization goals.

Organization growth has its basis to a larger extend on strategic planning of the
organization. It’s with this respect that strategic planning should be employed
by organization to enhance their growth.(Cole, 2002)

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2.4 Empirical Reviews

Glen and Weerawardena (1996) conducted a study in Queensland and reported

that in small firms the strategic planning differ from large firms. The findings of
their study stated that the process of planning sophistication (PPS) is
dependable upon the size of the enterprise, the degree of external advisory
assistance and the entrepreneurial intensity of the owners/manger. These factors
affect the degree of planning sophistication individually and through interaction
with other factors in small firms and more accurate and careful encouragement
to planning practices benefit the firms in their performance. Phillips (1996)
conducted a study in UK hotel sector and purported that the key planning
characteristics of sophistication, thoroughness, formality and participation were
positive and in most cases significantly related business performance indicators.

Berman et al. (1997) reported that the studies that examined the nature of
business planning activities undertaken by small firms suggested that a
relationship exists between enhanced sales growth and the implementation of
sophisticated business planning techniques. Whereas Michalisin et al.(as cited
in Veskaisri et al., 2007) stated that firms can achieve sustainable competitive
advantage from such resources as strategic planning.

The study of Grant (2003) pointed to a process of planned emergence in which

strategic planning systems provided a mechanism for coordinating decentralized
strategy formulation within a structure of demanding performance targets and
clear corporate guidelines. The study shows that these planning systems
fostered adaptation and responsiveness, but showed limited innovation and
analytical sophistication. French et al. (2004) conducted a study with 145 usable
responses in Australian small firms and showed no significant relationship
between the performance measures and factors identified but a significant

22
relationship between net profit and informal planning was emerged. No
relationship was found between any of the factors, i.e., vision, mission, latent
abilities, competitor orientation and market orientation and the performance of
firms in Australian context.

The studies of Birley and Westhead (1990); Covin (1991) and Sharader et al.
(1989) found relationships between planning and firms’ performances that were
very small or insignificant.
A quantitative critique of 28 studies concluded that formal planning is valuable
for firms. The results were particularly favorable for manufacturing firms: nine
studies found formal planning to be associated with better performance and
none found detrimental performance (Armstrong, 1991). Whereas Using meta-
analysis to aggregate the results of 29 samples on a total of 2496 organizations
and thus accumulating previous studies found modest correlation between
planning and nine/9 performance measures (Boyd, 1991).

The study of Risseeuw and Masurel (1994) conducted in small real estate firms
in the Netherlands reported that planning have hardly any effect on small firms’
performance, which mean that considerable no effect of planning on
performance was found. Baird, Lyles and Orris (1994) proposed in mid-western
United States with completed questionnaires returned from 188 firms that small
firms which do more formal planning will also have a more comprehensive
strategic decision process and adopt a wider variety of alternative strategies than
non-formal planners. This increased attention to the decision process and the
consideration of more strategic options may be associated with higher levels of
growth and profitability for the formal planners.
Miller and Cardinal (1994) suggested in an empirically tested model by using
meta-analytic data and drawn from 26 previously published studies that
strategic planning positively influences firm performance and also the methods

23
factors were primarily responsible for the inconsistencies reported in the
literature. The substantive contingency factors that they examined in their study
did not have a large impact and some of those factors had been thoroughly cited
as important by previous researches.

2.5 Operational Framework

Strategic Planning Business Growth

Internal Analysis Sales Volume

Physical Expansion
External Analysis

24
 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Research Design

Research design is an explanation on how relevant data are acquired and how
the data are analysed using the appropriate statistical techniques. It is defined by
Baridam (2001) as the method and plan used to collect data and test relationship
between the variables hypothesized.

For the purpose of this study, a cross-sectional survey design, a subset of quasi
experimental research field survey of some selected small and medium scale
companies in Port Harcourt metropolis.

3.1 Population of the Study

A population is the summation or totality of elements in a given location of

interest. Okafor (2002), defined research population as a complete set of items
that is of interest to a researcher or investigator.

The target population of the study is 1749 which is the numbers of the Small
and Medium Scale Enterprises in Port Harcourt (Source:Businesslist.com.ng). I
will carry out research on the employees of five (5) SMEs in Port Harcourt
which is my accessible population. These SMEs were chosen because of easy
access. These SMEs are:

S/N Name of SME No of employees Address

1. Eloti Designs 5 Trans-Amadi, Port
Harcourt

25
2. Kusha Catering 15 5, Okwuruola Road, off
Stadium Road, Port
Harcourt.
3. Konet Mills Ltd 15 Plot 205, Chokota Road,
Igbo-etche, Port Harcourt.
4. Virtues Events Consults Ltd 50 5, Ordu str., off Rumuola
bus stop, Port Harcourt.
5. SOVA Prolific Ltd 5 Eagle Island, Port
Harcourt.
Total 90

3.2 Sample Size Determination / Sampling Technique

This research work is limited to selected SMEs in Portharcourt. In order to

determine the sample size of this study, the Taro Yamane’s Formula was used
with a significant level of 5%.

The Formula is:

N
Where; n = 1+ N ¿ ¿

where,

n = sample size selected

e = level of significance = 0.05

N = population size

The sampling size is:

26
 N
n = 1+ N ¿ ¿

n = 90

1+ (90) (0.05)2

= 90

1+ (90)0.0025

= 90

1.225

= 73

The sample size for the study is 73.

The simple random probability sampling is used for this study reason being that
it will allow every member of the population to have an equal chance of being
selected. It will also allow the researcher to draw conclusions for the entire
population.

3.3 Validation of the Instrument

To validate the instrument used, it was first presented to two experts in

measurement and evaluation unit who carried out face validation to check for
adequacy. After which it was later presented to one expert in Management for
content validity. Their comments and corrections were used to prepare the final
draft of the questionnaire used for data collection.

3.4 Reliability of the Instrument

To ascertain that the instrument was reliable, that is, able to consistently elicit
the same information from the respondents, the researcher adopted the test re-
test technique. 15 copies of the questionnaire were administered to 15

27
respondents not participating in the study. The instrument was re-administered
to the same respondents within an interval of two weeks. The responses (results)
of the first and second tests were collated and subjected to a reliability test using
the Pearson Product Moment Correlation Analysis.

3.5 Methods of Data Collection

This research work used the primary source

The primary source includes:

 Questionnaires
 Personal observation
 Interview

3.6 Instrument for Data Collection

The instrument for data collection was a questionnaire. The questionnaire was
divided into two sections, A & B. Section A was used to gather demographic
information of the respondents, while section B was further divided into parts,
1, 2, 3 & 4. Each sections was assigned a five response options of strongly
agree (SA), agree (A), strongly disagreed (SD), and disagree (D) with a
corresponding value of 4, 3, 2 and 1.

3.7 Operational Measures of the Variables

A variable is a measurable characteristic of a person, object, place or event.

According to Joe (2005), variables are conditions or characteristics that
researcher observes, manipulates and controls and measures in order to obtain
relevant data that will address his research questions and research variables.

28
3.8 Data Analysis Technique

The data obtained from a study may or may not be in numerical or quantitative
form, that is, the form of numbers. If they are in numerical form, then we can
still carry out qualitative analysis based on the experience of the individual. On
the other hand, if they are in numerical form, we start by working out some
descriptive statistics to summarize the pattern of findings.

In this study, Spearman Rank Correlation Coefficient was used to test various
hypotheses formulated in chapter one. Using the Statistical package for social
science (SPSS) version 21. The rationale for this decision was due to the fact
that the researcher seeks to examine the relationship between Strategic planning
and organisational growth.

The formula is given as:

6∑ d2
rs = 1- N ( N 2−1)

Where;
rs = Rank order level
N = Number
d2 = Square of difference
Σ = Summation of.

29
 CHAPTER FOUR
DATA ANALYSIS, RESULTS AND DISCUSSION

4.1 Introduction

The previous chapter was the research methodology and method of data collection. This
chapter focuses on data analysis of the questionnaire and hypotheses testing. The chapter was
divided into analysis of demography and analysis of data.

4.2 Questionnaire Administration and Response Rate

Table 4.1 Questionnaire administration and response rate

Questionnaire
Frequency Percent Valid Percent Cumulative
Percent
retrieved copies 67 91.8 91.8 91.8
Valid unretrieved copies 6 8.2 8.2 100
Total 73 100 100
Source: Survey Data (2018)

The number of questionnaires distributed were 73 copies, but only 67 copies which represents
91.8%, the copies that were not retrieved were 6 copies.

With this information given by the number retrieved, 67 copies were used for the data
analysis.

Summary of Demographic Analysis

S/N Variables Frequency Percentage (%)

1. Sex
Male 50 74.6

Female 17 25.4
Total 67 100
2. Age
18-25 Yrs 2 3.0

30
 26-33 Yrs 8 11.9
34-41 Yrs 38 56.7
42-49 Yrs 15 22.4
50 and Above 4 6
Total 67 100
3. Marital Status
Married 24 35.8
Single 43 64.2
Total 67 100
4. Educational qualifications
O’Level 3 4.5
OND/HND 42 62.7
B.Sc 15 22.4
M.Sc 1 1.5
Others 6 8.9
Total 67 100
Source: SPSS 20.1 Output (Based on Research Data, 2018).

The table below shows the Mean and Standard Deviation of Items on internal analysis

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

Our firm determines its 67 1 5 4.67 .952
strength and weaknesses

Our firm identifies internal 67

1 5 4.08 1.232
capabilities and competencies

Our firm considers long-term 67

1 5 4.02 1.074
and short-term impact of
strength and weaknesses

We have internal 67
1 5 3.29 0.374
mechanisms that check the
sales growth of our company

31
 67
Valid N (listwise)

Researcher’s Desk (2018)

The table above presents the mean score of respondents to internal analysis with a mean score
of 4.26.
Mean and Standard Deviation on Items of external analysis
Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

Our firm identifies threat and 67 1 5 3.92 0.952
opportunities of competitors

Our firm is on the alert on 67 1 5 3.99 1.232

activities of suppliers

Our firm identifies behaviors 67 1 5 4.39 1.074

and preferences of customers

We conduct consistent 67 1 5 3.95 0.63

feedback analysis from our
customers and suppliers

Valid N (listwise) 67
Researcher’s Desk (2018)

The table above presents the mean score of respondents to External analysis with a mean
score of 4.1.
Mean and Standard Deviation on Items of Sales Volume
Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

Our workers are geared 64 1 5 4.72 .952
towards improving the
number of units sold

Our prices are satisfactory to 64

1 5 3.98 1.232
woo customers

We embark on product 64
1 5 4.08
upgrade regularly

32
We have internal 64

mechanisms that check the

sales growth of our company

Researcher’s Desk (2018)

The table above presents the mean score of respondents to Sales Volume of goals with a
mean score of 4.26.

Mean and Standard Deviation on Items of Physical expansion

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

We desire an international 64
1 5 3.08 .952
market for our products

The availability of workers in 64

1 5 2.89 1.232
our location is satisfactory

Our company has introduced 64

1 5 4.39 1.074
new products recently

We have plans to increase 64

1 5 3.82 0.33
our sales outlet

64
Valid N (listwise)

Researcher’s Desk (2018)

The table above presents the mean score of respondents to Physical expansion with a mean
score of 3.45.

Hypotheses Testing

The stated hypotheses in section 1.5 of chapter one is being subjected to testing using
spearman’s rank order correlation coefficient. The data from the questionnaire administered
were logged into the SPSS type of spearman rank order correlation coefficient.

The tested hypotheses were interpreted through the Dana’s (2001) correlation decision
framework. Where

± 00– 0.19 (Very weak)

33
 ± 0.20- 0.39 (Weak)

± 0.40- 0.59 (Moderate)

± 0.60- 0.79 (Strong)

± 0.80- 0.99 (Very strong)

± 1 (Perfect)

We accepter 5% as the level of significance in this study.

Decision Rule

The decision rule was that the null hypothesis should be rejected if calculated t-value is less
than tabulated t-value of 0.01and therefore accepts the alternative hypothesis by concluding
that there is a significant relationship between the two variables involved.

Table 4.7 Statistical Analysis for Hypothesis One

H01: There is no relationship between internal analysis and sales volume of Small and
Medium Scale Firms In Port Harcourt.

Internal analysis Sales volume

Correlation Coefficient 1.000 .772

Internal analysis Sig. (2-tailed) . .028

N 67 67
Spearman's rho
Correlation Coefficient .772 1.000

Sales volume Sig. (2-tailed) .028 .

N 67 67

Source: Survey Data (2018)

From the result above, the correlation coefficient (r = 0.772) between internal analysis and
sales volume shows a strong positive relationship. The coefficient of determination (r2 =
34
0.596) indicates that 59.6% of sales volume can be explained by internal analysis. The
significant value of 0.028 (p< 0.05) reveals a significant relationship. Based on that, the null
hypothesis was rejected. This implies that, there is a significant relationship between internal
analysis and sales volume of Small and Medium Scale Firms In Port Harcourt.

Table 4.2 Statistical Analysis for Hypothesis Two

H02: There is no relationship between internal analysis and physical expansion of Small
and Medium Scale Firms In Port Harcourt.

Internal analysis Physical

expansion

Correlation Coefficient 1.000 .601

Internal analysis Sig. (2-tailed) . .000

N 67 67
Spearman's rho
Correlation Coefficient .601 1.000

Physical expansion Sig. (2-tailed) .000 .

N 67 67

Source: Survey Data (2018)

From the result above, the correlation coefficient (r = 0.601) between internal analysis and

Physical expansion shows a moderate and positive relationship. The coefficient of

determination (r2 = 0.3612) indicates that 36.12% of Physical expansion can be explained by
internal analysis. The significant value of 0.000 (p< 0.05) reveals a significant relationship.
Based on that, the null hypothesis was rejected. This implies that, there is a significant
relationship between internal analysis and Physical expansion of Small and Medium Scale
Firms In Port Harcourt.

Table 4.2 Statistical Analysis for Hypothesis Three

35
H03: There is no relationship between external analysis and sales volume of Small and
Medium Scale Firms In Port Harcourt.

external analysis Sales

volume

Correlation Coefficient 1.000 .710

external analysis Sig. (2-tailed) . .000

N 67 67
Spearman's rho
Correlation Coefficient .710 1.000

Sales volume Sig. (2-tailed) .000 .

N 67 67

Source: Survey Data (2018)

The result above shows the correlation coefficient (r = 0.710) between external analysis and
Sales volume. It shows a strong positive relationship. The coefficient of determination (r 2 =
0.5041) indicates that 50.41% of Sales volume can be explained by external analysis. The
significant value of 0.000 (p< 0.05) reveals a significant relationship. Based on that, the null
hypothesis was rejected. This implies that, there is a significant relationship between external
analysis and Sales volume of Small and Medium Scale Firms In Port Harcourt.

Table 4.2 Statistical Analysis for Hypothesis Four

H04: There is no relationship between external analysis and physical expansion of Small
and Medium Scale Firms In Port Harcourt.

36
 External analysis Physical
expansion

Correlation Coefficient 1.000 .492

External analysis Sig. (2-tailed) . .000

N 67 67
Spearman's rho
Correlation Coefficient .492 1.000

Physical expansion Sig. (2-tailed) .000 .

N 67 67

Source: Survey Data (2018)

The result above shows the correlation coefficient (r = 0.492) between external analysis and
Physical expansion. It shows a moderate and positive relationship. The coefficient of
determination (r2 = 0.2421) indicates that 24.21% of Physical expansion can be explained by
external analysis. The significant value of 0.028 (p< 0.05) reveals a significant relationship.
Based on that, the null hypothesis was rejected. This implies that, there is a significant
relationship between external analysis and Physical expansion of Small and Medium Scale
Firms In Port Harcourt.

4.4 Discussion Of Findings

The first hypothesis (H01) stated that there is no significant relationship between internal
analysis and sales volume of Small and Medium Scale Firms In Port Harcourt. This was
tested at 5% significance level using Spearman Rank correlation coefficient. Our analysis
showed a p-value of 0.028 while the alpha value was 0.05, therefore, following the decision
rule the null hypothesis was rejected and the alternate hypothesis accepted which state that
there is a significant relationship between internal analysis and sales volume of Small and
Medium Scale Firms In Port Harcourt. Our analysis also showed correlation coefficient of
0.772 and coefficient of determination of .596%. This implies that there is a strong and

37
positive relationship between internal analysis and sales volume of Small and Medium Scale
Firms In Port Harcourt.

The second hypothesis (H02) stated that there is no significant relationship between internal
analysis and physical expansion of Small and Medium Scale Firms In Port Harcourt. This
was tested at 5% significance level using Spearman Rank correlation coefficient. Our
analysis showed a p-value of 0.000 while the alpha value was 0.05, therefore, following the
decision rule the null hypothesis was rejected and the alternate hypothesis accepted which
state that there is a significant relationship between internal analysis and physical expansion
of Small and Medium Scale Firms In Port Harcourt. Our analysis also showed correlation
coefficient of 0.601 and coefficient of determination of 36.12%. This implies that there is a
strong and positive relationship between internal analysis and physical expansion of Small
and Medium Scale Firms in Port Harcourt.

The third hypothesis (H03) stated that there is no significant relationship between external
analysis and sales volume of Small and Medium Scale Firms In Port Harcourt. This was
tested at 5% significance level using Spearman Rank correlation coefficient. Our analysis
showed a p-value of 0.000 while the alpha value was 0.05, therefore, following the decision
rule the null hypothesis was rejected and the alternate hypothesis accepted which state that
there is a significant relationship between external analysis and sales volume of Small and
Medium Scale Firms In Port Harcourt. Our analysis also showed correlation coefficient of
0.710 and coefficient of determination of 50.41%. This implies that there is a strong and
positive relationship between external analysis and sales volume of Small and Medium Scale
Firms in Port Harcourt.

The fourth hypothesis (H04) stated that there is no significant relationship between external
analysis and physical expansion of Small and Medium Scale Firms In Port Harcourt. This
was tested at 5% significance level using Spearman Rank correlation coefficient. Our
analysis showed a p-value of 0.000 while the alpha value was 0.05, therefore, following the
decision rule the null hypothesis was rejected and the alternate hypothesis accepted which
state that there is a significant relationship between external analysis and physical expansion
of Small and Medium Scale Firms In Port Harcourt. Our analysis also showed correlation

38
coefficient of 0.492 and coefficient of determination of 24.21%. This implies that there is a
moderate and positive relationship between external analysis and physical expansion of
Small and Medium Scale Firms in Port Harcourt.

CHAPTER FIVE

SUMMARY, CONCULSION, RECOMMENDATIONS AND SUGGESTION FOR

FURTHER STUDIES

5.1 SUMMARY

The study examined the relationship between Strategic planning and Business growth of small

and medium scale firms in Rivers State. The study measured business growth by using sales

volume and physical expansion while internal analysis and external analysis were adopted as the

dimensions of strategic planning. The study adopted quasi-experimental research design.

Structured questionnaire was the research instrument used in collecting relevant data. The study

sampled seventy three employees of five selected small and medium scale firms in Rivers Port

Harcourt using simple random sampling techniques. Seventy three questionnaire were

administered to the respondents while Sixty seven questionnaire were the valid questionnaire

returned, forming the basis of data analysis. Spearman Rank Correlation coefficient was used to

test the hypotheses formulated and the estimation was facilitated by Statistical Package for Social

Sciences (SPSS) 21.0 version. Findings emanating from the study are summarised as follow:

There is a strong and positive significant relationship between internal analysis and sales volume

of small medium scales firms in Rivers State.

There is a strong and positive significant relationship between internal analysis and physical

expansion of small and medium scale firms in Rivers State.

39
There is a strong and positive significant relationship between external analysis and sales volume

of small and medium scale firms in Rivers State.

There is a strong and positive significant relationship between external analysis and physical

expansion of small and medium scale firms in Rivers State.

5.2 CONCLUSION

Strategic planning can be considered important in driving small firm growth. This study has

added to the knowledge about the relationship between strategic planning and business

growth with insights on the importance of strategic planning elements, and has given

recommendations for strategic planning-induced growth. Identifying their internal and

external analysis, incorporating the elements of internationalization and networking in the

firm, focusing on growth, profit, and market, performing analyses of market and competition,

precisely formulating generic business strategies, and achieving company-wide support for

strategies can all be beneficial for the growth of small and medium firms.

5.3 RECOMMENDATION

Drawing from the findings, the following recommendations were put forward by the

researcher:

1. Management of small and medium scale firms should identify their strength in order

to have competitive advantage over their competitors and also identify and understand

their weaknesses to enable them come up with effective solutions in the strategic plan.

2. Small and medium scale firms should be able to seize any opportunities that will

generate more profit and help in the growth of their business.

40
 3. Management of small and medium scale firms should seek ways to attract customers

to patronise them in order to increase their sales volume and also make their products

affordable and their products should be worth the price.

4. Small and medium scale firms should be able to identify when more staffs should be

employed and also try to introduce new products to help the physical expansion of a

business.

5.4 SUGGESTION FOR FURTHER STUDIES

1. The study was conducted in Port Harcourt. Similar study should be conducted in other

geographical locations to confirm whether the result would be similar.

2. The study is limited to small and medium scale firms in Port Harcourt. Future studies

should duplicate same in other sectors like health sector, banking sector, educational

sector, and large scale firms and so on.

3. The study only employed questionnaire which is primary source of data. Meanwhile,

the result would have probably been different or more investigative, if consideration

was made to conduct interview to augment the study findings. Future studies should

take this into consideration.

4. Also, the study should make use of other variables as the dimension strategic planning

other than the variables used in this study.

5. The study should make use of other variables to measure business growth other than

the variables used in this study.

41
 Section A

Please kindly fill in your opinion by ticking the appropriate box. Each question should only
have one answer.

Demographic Characteristics.

1. Gender: Male Female

2. Age Category: 0-15 16-25 36-35 46-55 56-above
3. Marital status: Single Married
4. Occupation: Civil servant Student Others specify
5. Educational background: O’Level ND/HND B.SC M.SC Ph.D
Others, specify

SECTION B

Please tick (√ ) in the box the option that best explains your opinion.

Key: Strongly Agree-SA, Agree-A, Disagree-D, Strongly Disagree-SD

QUESTIONNAIRE ITEM ON STRATEGIC PLANNING

S/N Internal analysis (4) (3) (2) (1)

SA A D SD
M1 Our firm determines its strength and weaknesses

42
M2 Our firm identifies internal capabilities and competencies

M3 Our firm considers long-term and short-term impact of

strength and weaknesses

M4 There is consistent check on our firm’s internal activities

S/N External analysis (4) (3) (2) (1)

SA A D SD
M4 Our firm identifies threat and opportunities of
competitors
M5 Our firm is on the alert on activities of suppliers
M Our firm identifies behaviors and preferences of
customers
M8 We conduct consistent feedback analysis from our
customers and suppliers

ITEMS ON BUSINESS GROWTH

S/N Sales Volume (4) (3) (2) (1)

SA A D SD
M7 Our workers are geared towards improving the
number of units sold
M8 Our prices are satisfactory to woo customers
M9 We embark on product upgrade regularly
We have internal mechanisms that check the sales
growth of our company

S/N Physical expansion (4) (3) (2) (1)

SA A D SD
M10 We desire an international market for our products

43
M11 The availability of workers in our location is
satisfactory
M12 Our company has introduced new products
recently
We have plans to increase our sales outlet

44