The influence of strategy formulation practices on the perceived financial performance of small and medium enterprises: The Zimbabwean experience

Background: The role of strategy formulation in enhancing the performance of small and medium enterprises (SMEs) has attracted much attention amongst researchers worldwide. However, little research has been conducted on the strategy formulation practices of SMEs and their implications for the perceived financial performance of these firms, especially in the developing world. Aim: This study was aimed at establishing the impact of strategy formulation on the perceived financial performance of SMEs in Zimbabwe. Setting: Primary research was conducted in Harare, the capital city of Zimbabwe. Methods: The study took a case study design in which the researcher collected data from manufacturing SMEs in Harare, Zimbabwe. Stratified random sampling was employed to draw 368 questionnaire respondents from the five manufacturing classes that emerged from the population. Data were analysed using both descriptive and inferential statistics. Results: The study established that strategy formulation is somewhat prevalent amongst SMEs in Zimbabwe. The five strategy formulation activities as put forward by the theory are found in Zimbabwean SMEs. The results revealed that strategy formulation significantly influences both short-term and long-term perceived financial performance of SMEs in Zimbabwe. Conclusion: The study has implications at a practical and managerial level. Whilst supporting SMEs is commendable, governments should prioritise the provision of management and entrepreneurial training for SMEs to foster the adoption of strategy formulation. This study suggests that SMEs should make strategy formulation a priority, a key ingredient to the success of their enterprises. It is necessary to inculcate the necessary culture, which supports effective strategy formulation. The study proposes suggestions for future research.