All around the world, SMEs are perceived as the engine room of economic growth, job creation and poverty alleviation, due to their flexibility and quick adaptability to change. It is believed that, for developing countries to address their social and economic challenges, it would be beneficial if they leverage the potential that the SME sector potentially possess. However, despite the government focus on supporting and encouraging the establishment of SMEs through the small business development programmes in order to address these social challenges, SME sector has experienced a high degree of business mortality, which impacts negatively on the ability to create sustainable employment opportunities in the long term. This view is supported by the work of (Ligthelm and Cant 2003). According to the global economic monitor (GEM), the small business mortality in South Africa is among the highest in the world. It is said that that most newly established SMEs will not survive beyond 48 months Von Broembsen, as cited in Olawale and Garwe (2010: 730). One of the reasons that lead to the high failure rate of SMEs is the lack of strategic planning and the poor allocation of resources. The literature review suggests that SMEs that embark on strategic planning are the ones that are most likely to experience sales growth, personnel growth and asset value growth, as opposed those that do not do any strategic planning at all. The primary objective of this research was to establish how a strategic planning process can be used as an investment decision-making tool for manufacturing SMEs in the Nelson Mandela Metropole. In order to address this research problem, the following sub-problems had to be solved: What strategic planning processes do current SME managers use?; What strategic performance measurement systems do SME owner-managers currently use?; What capital budgeting techniques are currently being used by SME’s in the region?; How do SME owner-managers evaluate the risk of the projects at hand?. The research design was methodological triangulation in nature, that is, using both qualitative and quantitative methodologies, though a quantitative paradigm was more dominant that the qualitative paradigm. A questionnaire was designed as a primary source of data collection from a selected sample group. The empirical study revealed that there is some level of strategic planning amongst SMEs, however, it is mostly informal and unstructured. It also emerged that strategic planning can be used as more than just a performance measurement tool, it can contribute more effectively to strategic alignment, organisational learning and diffusion of knowledge throughout the organisation. The empirical study also suggests that SMEs understand that capital budgeting is critical for the success of the organisations. However, very few SMEs have a formal capital budgeting process. It also became evident that most SMEs are still relying on the traditional capital budgeting techniques; that is, ‘gut feel’ and the payback methods of evaluating projects. The empirical study suggests that the largest group of SMEs rely on break-even analysis and scenario planning as the major indicators of the impact the projects will or may have on the organisation. The recommendations have thus been made to address the challenges facing SMEs with regard to strategic planning, strategic performance measurement, capital budgeting and project risk evaluation.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nmmu/vital:21094 |
| Date | January 2013 |
| Creators | Kikine, Bereng Nimrode |
| Publisher | Nelson Mandela Metropolitan University, Faculty of Business and Economic Sciences |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis, Masters, MBA |
| Format | xiii, 109 leaves, pdf |
| Rights | Nelson Mandela Metropolitan University |
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