Assessment of Strategic Management Practices in Small Agribusiness Firms in Tanzania

Abstract

Strategic management (STM) is recognized as an important element for firms’ success; however, small firms, especially in agribusiness, have widely been overlooked because it is often thought that a systematic STM is exclusively for large corporate firms. Firms engage in STM practices such as environmental analysis, formulation of mission and vision statements, strategic planning, implementation, evaluation, etc., regardless of their size. The firms need to work out strategic plans to exploit the existing market, but past research shows that they differ in their capacity to implement and manage strategies. Whether or not they implement, the ability depends on the features of the firm itself, its resources and the conditions in the external environment. However, the need of STM practices for small firms is not well understood and the determinants for its successful application in small firms are not evidently known. With regard to African agribusiness firms, there is scant research on how the environmental factors determine the application of STM practices. Hence, using empirical data from 229 firms in Tanzania, the study conducts partial least squares structural equation modelling (PLS-SEM) analyses to estimate a model of the determinants of STM application that leads to firm performance, a mediating effect of STM application and a multigroup analysis by application of finite mixture PLS technique (FIMIX-PLS). Lastly, a case study is given to demonstrate challenges facing agribusiness firms in Tanzania. In the first part of the analysis (Chapter two), the study explores to what extent the application of STM practices is affected by internal and external factors of the firms. Ideas from resource-based theory (RBT) and industrial organization (I/O) are used to build a conceptual model and formulation of hypotheses. Results show significantly that better strategic actions reside in the capabilities of firm managers, whereas many external factors, such as access to public infrastructure, did not turn out to have a significant influence. Application of STM was more prevalent in firms with extra access to funds. Hence the study calls on policymakers to accelerate, promote and advocate for more supportive services such as accessible financial services as well as managerial training programmes. Impacts of other factors are explained in detail. The findings have interesting implications for the management of agribusiness firms in African countries and other developing and emerging economies. In the second part of the analysis (Chapter three), a mediation analysis is performed to demonstrate the role of strategic management in facilitating effective use of resources to achieve performance. Using ‘level of managerial expertise’ and ‘access to market information’ as primary resources, this research presents various arguments about their contribution to firm performance. Results indicate that the investigated resources alone do not directly contribute to firm performance unless there is an application of strategic management. Further investigation based on multigroup analysis shows three groups of firms which differ in their resources-performance relationship. The results imply that the small firms’ paths to achieve performance are different hence managers ought to identify a fit between their resources and strategic actions in order to improve the firm performance. The study provides manifold managerial implications for small firms that seek to improve firm performance. It is useful for small firm managers to apply modern management techniques of firm operations in order to make timely strategic decisions depending on the available resources. Lastly, the case study explains challenges that can affect achievement of firms’ strategies for agribusiness firms in Tanzania (Chapter four). Some of these challenges include: stringent business regulations, poor availability of storage facilities, poor infrastructure, inability to penetrate international markets, poor progress in the implementation of policy recommendations and poor collaboration between scientist, researchers and actors in food supply chains. Considering the challenges, the firms should focus on improving their business skills, engage in public-private partnership programs and communicate policy shortfalls to the government. Overall, this study provides an early inquiry into small firms’ STM application. More progress surrounding the application can be further explained with the help of in-depth case studies and analyses of longitudinal data.