The Impact of Strategic Management Practices on Business Performance of SMEs in Western Province, Sri Lanka

Abstract

Small and Medium-Sized Enterprises (SMEs) play a significant role in fostering inclusive growth in Sri Lankan contemporary economy. Despite their importance, SMEs are frequently confronted with a variety of challenges that impede their growth and optimal performance. Admittedly, when these challenges are not addressed, SMEs have an enormous likelihood of failure. Hence, embracing strategic management practices conceptually enables companies to deal with difficulties, comprehend their strategic position, and discover the ways to make strategic choices for the foreseeable future, while overseeing strategy in action. Even though numerous amounts of study available to use in a foreign context, such contents are insufficiently relevant for Sri Lankan contexts. Hence, there is a gap in the knowledge of strategic management practices among SMEs. Accordingly, the purpose of this study is to investigate the impact of strategic management practices on the business performance of SMEs in the Western province of Sri Lanka. A positivist research philosophy led the study, while a quantitative method and a cross-sectional survey design were put in place. The unit of analysis is SMEs, while the owners, directors, and managers of SMEs are the respondents. Structured questionnaires are employed to collect data using the Google form-based method under simple random sampling techniques. A sample size of 380 SMEs covering all sectors that exist in the study area was drawn from a population of 37,264 SMEs. Descriptive and Inferential statistics are used to empirically and statistically analyze the data collected for the study with the aid of SPSS version 25. Pearson correlation is used to examine the relationship between constructs, whilst Multiple regression analyses is used to test the hypotheses. The findings reveal that environmental scanning had the highest positive impact on SME's performance followed by strategy implementation, strategy formulation, and strategy evaluation showed a significant positive impact on performance. Therefore, this study concludes that SME owners/managers must embrace proper strategic management practices as a holistic process in order to achieve the expected performance in SMEs. It is consequently recommended that top management for all the SMEs strive to make the strategic management process as inclusive as possible from the lower-level employees to senior management.