Abstract:
Over the years, SMEs have gained wide reorganization as a major source
of employment, income generation, poverty alleviation and regional development in Sri
Lanka. Strategy making in business firms has also been identified as a vital process of
coping with rapid changes and stiff competition in the today's business environment.
This study aims to examine the nature of strategy making and its relationship with firm
performance, and moderating influences on the underline relationship of small and
medium enterprises. A sample of ISO small and medium enterprises pertaining to six
manufacturing sectors in North Central Province in Sri Lanka provided the data for an
empirical test of these issues. Data, collected through the standard questionnaire from
owner managers of the selected firms, were analyzed using the descriptive statistical
techniques as well as the inferential statistical techniques of correlation, hierarchical
regression, ANOVA and chi-square test. The analysis was conducted using SPSS 16
version.
The study found that significant and positive influence of strategy making on
the firm performance. Results of hierarchical regression show that the relationship
between strategy making and performance is moderated by the internal factors such as
owner's experience and education level and as well as the external environment
conditions. The findings further indicate that the firms whose managers promote
strategy making maintain better performance levels than those who do not. Accordingly,
strategic making is identified as a mechanism to overcome constraints imposed by
limited resources in small firms to take advantage of new opportunities arising from
challenging environmental conditions.
