THE EFFECT OF STRATEGIC PLANNING ON PROFITABILITY OF SMALL MEDIUM ENTERPRISES

Abstract

Although attention is paid to the effectiveness of business and political relations in emerging economies, there is not much research that explicitly examines business and political relations in the development of small and medium enterprises (SMEs) in emerging economies. The main aim of this study is to investigate importance of strategic planning in attaining competitive advantage in SMEs of Pakistan. The data was collected from different SMEs of Pakistan based on Non probability purposive sampling technique; the data was collected through questionnaires. Descriptive statistics, correlation matrix, and linear regression model were applied for analysis. The independent variables were Vision statement, mission statement, objectives, values and SWOT analysis. According to the results of the study vision statement, mission statement, and objective were found insignificant in achieving competitive advantage whereas, a positive and significant relationship was found for value statement and SWOT analysis with competitive advantage. The results of the study suggested that in Pakistan less attention is paid on development of vison and mission statement which might be the cause of high percentage of failure among many SMEs in Pakistan. As lack of strategic preparation can cause the business to collapse when managers fail to update their goals and objectives regularly therefore strategic it is very important for SMEs to pay significant attention on its strategic planning process, as they have a very significant role in sustainable economic growth of the country.