Strategy Formulation and Financial Performance Perceptions and Relationships. The Mediating Role of Strategic Approaches.

  • Mugove Mashingaidze Great Zimbabwe University
  • More Chinakidzwa Harare Institute of Technology
Keywords: descriptive approach, prescriptive approach, financial performance, small and medium enterprises, strategy formulation approaches; strategy formulation, Zimbabwe.


The study investigated the relationship between strategy formulation and financial performance perceptions of manufacturing SMEs in Zimbabwe. The study further examined the mediating role of strategic approaches on the relationship between strategy formulation and financial performance in the SMEs. A quantitative study of 368 SMEs was done in Harare, Zimbabwe using a self-administered questionnaire. Structural Equation Modelling (SEM) was performed to test the research hypotheses. Results indicate that the key activities of strategy formulation as stipulated by literature are somewhat observed among manufacturing SMEs in Zimbabwe. The results showed a statistically significant influence of strategy formulation on both short-term and long-term financial performance perceptions. However, the study established a non-statistically significant mediation relationship between strategy formulation and financial performance via both the prescriptive and the descriptive approaches. Despite this study's importance, the current study results could be biased because the mediation effect was tested using cross-sectional data. A longitudinal survey would be ideal for testing the strategic approaches' mediation effect.


Abosede A. J., Obasan, K. A. & Alese, O. J. (2016). Strategic Management and Small and Medium Enterprises (SMEs) Development: A Review of Literature. International Review of Management and Business Research, 3(2): 75-86.
Adeyemi, I.I., Isaac, O.A. & Olufemi, A.S. (2017). Strategic management: A policy. Still, they sustainable business development in small and medium scale enterprises in Nigeria. Archives of Business Research, 5(9), 108-118.
Agwu, M.E. (2018). Analysis of the impact of Strategic Management on the Business Performance of SMEs in Nigeria. Academy of Strategic Management Journal, 17(1), 1-20.
Ahmed, A.S. & Mukhongo, A. (2017). Role of strategic management practices in Organisational performance of customs department in Mogadishu, Somalia. Imperial Journal of Interdisciplinary Research, 3(9), 1201-1211.
Akinwande, M. O., Dikko, H. G., & Samson, A. (2015). Variance Inflation Factor:As a condition for the inclusion of a suppressor variable(s) in regression analysis. Open Journal of Statistics, 5, 754-767.
Anyanga S. O. & Nyamita M. O. (2016). The Major Growth Strategies Adopted by Small and Medium Enterprises in Kenya: A Case of Kisumu County, International Journal of Advanced and Multidisciplinary Social Science, 2(1), 11-26.
Aremu, M. A. & Oyinloye, O. O. (2015). Relationship Between Strategic Management And Firms’ Performance In Nigerian Banking Industry. Journal of Business and Management Review, 4(3), 28-42.
Auka, D.O. & Langat, J.C. (2016). Effects of Strategic Planning on Performance of Medium Sized Enterprises in Nakuru Town. International Review of Management and Business Research, 5(1), 188-203.
Batista, P. C., De S., Lisboa, J. V. De O., Augusto, M. G., & Almeida, F. E. (2016). Effectiveness of business strategies in Brazilian textile industry. Revista de Administração [RAUSP], 51(2), 225-239.
Bomani, M. (2017). Government policies and strategies in dealing with challenges confronting small and medium enterprises: A case of Harare, Zimbabwe, Unpublished PhD Thesis University of Kwazulu-Natal, Durban, South Africa.
Bomani, M., Fields, Z. & Derera, E. (2015). Historical overview of small and medium enterprise policies in Zimbabwe. Journal of Social Sciences, 45(2): 113–129.
Burugo, V.M. & Owour, D. (2017). Influence of strategic management practices on business profitability in Kenya. (A case study of Chai trading company limited). Imperial Journal of Interdisciplinary Research, 3(9), 923-947.
Chinakidzwa, M., & Phiri, M. (2020). Impact of digital marketing capabilities on market performance on small to medium enterprise agro-processors in Harare, Zimbabwe. Business: Theory & Practice, 746-757.
Cokins, G. (2017). Strategic Business Management: From Planning to Performance, John Wiley & Sons, New York, NY, USA.
Conz, E., Denicolai, S. & Zucchella, A. (2017). The resilience strategies of SMEs in Mature clusters”, Journal of Enterprising Communities: People and Places in the Global Economy, 11(1), 186-210.
Corsi, C., & A. Prencipe. (2017). Foreign Ownership and Innovation in Independent SMEs. A Cross-European Analysis. Journal of Small Business & Entrepreneurship, 30 (5): 397–430.
Damkea EJ, Gimenezb, F.A.P. & Damkeca, J.W. (2018). Strategic configurations and performance: A study in Micro and Small business Retailers. Management Journal, 5(3), 11–27.
David, M. E. & David, F. R. (2017). The quantitative strategic planning matrix: a new marketing tool. Journal of Strategic Marketing, 25(4), 342–352.
Derera, E., Croce, F., Phiri, M. & O’Neill, C. (2020). Entrepreneurship and economic empowerment in Zimbabwe: Research themes and future research perspectives. The Journal for Transdisciplinary Research in Southern Africa, 16(1), a787.
Donkor, J., Donkor, G.N.A., & Kwarteng, C. (2019). Strategic planning and performance of SMEs in Ghana: The moderating effect of market dynamism. Journal of Innovation and Entrepreneurship, 12(1), 62-76.
Galbreath, J., Lucianetti, L., Thomas, B. & Tisch, D. (2020). Entrepreneurial orientation and firm performance in Italian firms: The moderating role of competitive strategy. International Journal of Entrepreneurial Behavior & Research, 26(4), 629-646.
Germanos, G. (2012). The Process of Strategy Formulation in Small and Medium Enterprises in Greece and the Role of Accounting Information, Unpublished PhD Thesis, University of Birmingham, Birmingham.
Government of Zimbabwe (2018). Towards an upper-middle income economy by 2030 “New Dispensation Core Values”, 19 April 2018, Washington DC.
Hettihewa, S., & Wright, C. S. (2018). Nature and importance of small business in regional Australia, with a contrast to studies of urban small businesses. Australasian Journal of Regional Studies, 24(1), 96–121.
Jamil, R. A. & Shar, T. A. (2015). Critical Exploration of Prescriptive and Emergent approaches to Strategic management: A review paper, International Journal of Information, Business and Management, 7(3): 91-100.
Khan, J.W. M. & Khalique, M. (2014). A Holistic Review of Empirical Studies of Strategic Planning and Future Research Avenues, International Journal of Academic Research in Economics and Management Sciences, 3(6): 53-72.
Kumar P. (2015). Correlation between Strategic Planning and Firm Performance. International Journal of Management & Business Studies, 5(2): 2231-2463.
Lynch, R. (2015). Strategic Management. (7th ed.). Edingburgh Gate: Pearson Publishing.
Mabenge, B.K., Ngorora-Madzimure, G.P.A. & Makanyeza, C. (2020). Dimensions of Innovation and their effects on the Performance of Small and Medium Enterprises: The Moderating role of Firm’s Age and Size, Journal of Small Business & Entrepreneurship, 4(1), 1-26.
Mageto, J.N. (2018). Logistics outsourcing and Performance of Small and Medium Enterprises in Nairobi. PhD Unpublished. University of Johannesburg. South Africa.
Majama, N. S & Magang, T. (2017). Strategic Planning in Small and Medium Enterprises (SMEs): A Case Study of Botswana SMEs, Journal of Management and Strategy, 8(1): 74-103.
Makanyeza, C. & Dzvuke, G. (2015). The Influence of Innovation on the Performance of Small and Medium Enterprises in Zimbabwe. Journal of African Business, 16 (1-2): 198–214.
Mamman, A., Bawole, J., Agbebi, M. & Alhassan, A.R. (2019). SME Policy Formulation and Implementation in Africa: Unpacking Assumptions as Opportunity for Research Direction. Journal of Business Research, 9(7), 304–315.
Mom, A.-R. (2018). Why do management theories fail? Reasons and solutions. A perspective of African context. International Journal of Economics and Management Sciences, 7(3).
Mugozhi, F. & Hlabiso, G. (2017). Determinants of Small to Medium Enterprises’ Success or Failure: An Ex-post Appraisal of Start-up Business by Young Entrepreneurs in Zimbabwe. The International Journal of Humanities & Social Studies, 5(3): 1-18.
Mutengezanwa, M. (2018). Financial literacy among Small and Medium Enterprises in Zimbabwe. Unpublished DBA Thesis University of Kwazulu-Natal, Durban, South Africa.
Nkulu, M. (2012). The use of strategic planning for small, medium and micro enterprises in the retail industry. Unpublished Master of Commerce Dissertation). University of Johannesburg. Johannesburg.
Nwachukwu C, Chladkova H. & Fadeyi, O. (2017). Strategy formulation process and Innovation performance nexus. International Journal for Quality Research, 12(1), 147–164.
Nyamwanza, T. (2015). Strategy Implementation for Survival and Growth among Small to Medium-sized Enterprises (SMES) in Zimbabwe. PhD Thesis: Midlands State University, Zimbabwe.
Omsa, S., Ridwan, M. & Jayadi, M. (2017). The Effect of Strategic Management Practices on SME Performances in Makassar, Indonesia. American Journal of Theoretical and Applied Business, 3(4), 71-80.
Papulova, Z. & Papula, J. (2014). Approaches to Strategy: Practice of Slovak Enterprises, World Journal of Social Sciences, 4(2): 123 – 133.
Pashaa, O. & Poisterb, T.H. (2017). Exploring the Change in Strategy Formulation and Performance Measurement Practices Under Turbulence. Public performance & management review, 40(3), 504–528.
Peng, S., Ferreira, F. & Zheng, H., (2017). A university-industry cooperation model for Small and medium enterprises: the case of Chengdu KEDA Optoelectronic Technology Ltd. International Journal of Learning and Change, 9(1), 29-45.
Pratiwi, A. W. Sutopo, R. Zakaria & Rasli, AM. (2017). Formulating strategy through QSPM based on SWOT framework: a case study spin-off company in Malaysia. Advanced Science Letters, 23(9), 8646–8651,
Preacher, K. J., & Hayes, A. F. (2008). Asymptotic and resampling strategies for assessing and comparing indirect effects in multiple mediator models. Behaviour Research Methods, 40(3), 871-891.
Qamruzzaman, M. & W. Jianguo. (2018). SME Financing Innovation and SME Development in Bangladesh: An Application of ARDL. Journal of Small Business & Entrepreneurship, 31 (6): 521–545.
Ralph, I., Williams, J.R., Smith, A., Joshua, R., Aaron, B., Scott, C., Manley, A., William, C. & Mcdowell, C. (2020) Small business strategic management practices and performance: A configurational approach, Economic Research- Ekonomska Istraživanja, 33(1), 2378-2396.
Ramaya, T., Cheah, J., Chuah, F., & Memon, M. (2018). Partial least squares structural equation modelling (PLS-SEM) using SmartPLS 3.0: An updated guide and practical guide to statistical analysis (2nd ed.). KualaLumpur: Pearson.
Ryuta, T., Kobayashi, K., Takano, Y., Miyashiro, R., Nakata, K., & Matsui, T. (2019). Mixed Integer Quadratic Optimization Formulations for Eliminating Multicollinearity Based on Variance Inflation Factor. Journal of Global Optimisation, 73(2), 431-446.
Salloum, C., Azzi, G., Mercier Suissa, C. & Khalil, S. (2016). The impact of the presence of women in management on the firms’ performance. International Journal of Entrepreneurship and Small Business, 27(2–3): 213–246.
Sandada, M. & Chikwama, R.T. (2016). The Driving Forces for the Practice of Strategic Planning in SMEs: Evidence from Harare Metropolitan Province, Zimbabwe. Acta Universitatis Danubius, 12(6), 95-114.
Sheth, J. N. (2020). Borderless media: Rethinking international marketing. Journal of International Marketing, 28(1), 3-12.
Shu, C., De Clercq, D., Zhou, Y. & Liu, C. (2019). Government institutional support, entrepreneurial orientation, strategic renewal, and firm performance in transitional China. International Journal of Entrepreneurial Behavior & Research, Vol. 25 No. 3, pp. 433-456.
Sibanda, K., P. Hove-Sibanda & Shava, H. (2018). The Impact of SME Access to Finance and Performance on Exporting Behaviour at Firm Level: A Case of Furniture Manufacturing SMEs in Zimbabwe. Acta Commercii, 18 (1): a554.
Song, H. & Hung Kee D. M. (2017). Entrepreneurial SMEs Surviving in the era of Globalisation: Critical Success Factors in Global Opportunities for Entrepreneurial Growth: Coopetition and Knowledge Dynamics within and across Firms, 3(2): 75-90.
Thomas, L. & Ambrosini, V. (2015). Materialising strategy: The role of comprehensiveness and management controls in strategy formation in volatile environments. British Journal of Management, 4 (26), 105-124.
Thompson jnr. A A., Strickland, AJ., Gamble, J.E. & Jain, AK. (2016). Crafting and Executing Strategy: The Quest for Competitive Advantage-Concepts and Cases, Tata McGraw-Hill Publishing Company Limited, New Dehli.
Wheelen, T. L. & Hunger, J. D. (2014). Strategic Management and Business Policy (13th edition). New York: Prentice Hall Inc.