THE EFFECT IF STRATEGIC PLANNING ON SMALL BUSINESS SUCCESS: A CASE

STUDY OF District in Hargeisa SOMALILAND

CHAPTER ONE
INTRODUCTION
1.1 INTRODUCTION

This chapter will discuss the following sub sections: - background of the study, statement of the
problem, purpose of the study, objectives of the study, research questions, hypothesis, scope of
the problem, significance of the study, and operational definition of key words.

1.1.1 BACKGROUND

This study the researcher will examine the Impact of Strategic planning on Small Business
Enterprises Success in Hargeisa Somaliland. The most of the business located in the Hargeisa are
Small business, so that this research was targeted to investigate the reasons that small business
enterprises are earlier to fail from the market, to solve the problem and maximize the number of
small business enterprises success in Hargeisa Somaliland, based on evidence The Effect on
strategic planning on small business Enterprise success. This problem will mostly cause lack of
knowledge, experience, skills on strategic planning by the entrepreneurs. His role of small
Business enterprise is becoming increasingly prominent throughout the world, the Small
Business Enterprises represent an overwhelming majority of all businesses and account for
almost one-half of the gross national product. Small Business enterprises create two thirds of all
new jobs and invent more than one-half of all technological innovations in the United States
(Muriithi, 2017). Globally, academicians and practitioners have called for increased use of the
strategic planning in Small Business Enterprises as the role of strategic planning in large
companies and the conception that decisions-making triumphs in enterprises regardless of size
have been advocated for. In this sense, many empirical studies point out a link between strategic
planning and Small Business Enterprises (Grades Fixer, 2019). Strategic planning in
organizations originated in the 1950s and was very popular and widespread between mid-1960s
to mid-1970s. During this time, people believed it was the answer 2 for all problems, and
corporate America was "obsessed" with strategic planning. (Osorio, 2007). Although our
understanding of a strategy as applied in management has been transformed, one element
remains the key: aim to achieve competitive advantage (CA) (Slocum, 2005). Similarly, in most
developing countries, small Business enterprises are the most important source of new
employment opportunities. Small Business enterprises make substantial contributions to
employment and comprise the majority of businesses in the nation (Burns, P. & Dewhurst, J,
1996). In addition, (Mbuta, W. S. &N kandela, A. , 1998) appreciated the importance of Small
Business Enterprises in contributing to job creation and output growth is now widely accepted in
both developed and developing countries (X, 2021). Of particular interest is the process of
expansion of these enterprises from micro or small size, as it is when they become growth
oriented Small Business Enterprises make their most tangible contribution to economic growth.
Most small businesses in Africa lack a formal mode of planning. This clearly suggests that the
key reason for failure for Small Business Enterprises is not only lack of access to finance, but
also lack of planning (Hassan ali, N. 2012). This is not necessarily due to lack of know-how, but
rather lack of acknowledgement or importance of the same in ordinary course of business. This
trend leads to difficulty in exploiting opportunities in form of market identification and
penetration and widening distribution channels that could positively impact the business. Today
most Small Business Enterprises are suffering from lack. In Somaliland, the largest number of
businesses is comprised of small Business enterprises. Their distribution is covered in all sectors
including manufacturing, Retailers, wholesaler, trade and service. Strengthening small Business
enterprises is a main issue to consider when it comes to growth and income distribution in the
country. In World Bank reported that Almost 30% of GDP 3 is derived from the livestock
industry followed by 20% from wholesale and retail trade (including the informal sector); 8%
from crops and 6% from real estate activities. In 2012, Somaliland’s trade deficit was
approximately $496 million, which was financed through a combination of remittances and
external aid. Somaliland has very low levels of investment, ranked approximately 180th in the
World for gross fixed capital formation as a percentage of GDP. Furthermore, Somaliland has
very low employment-to-population ratios, with 38% for males and 47% for females 15-24 year
olds in Borama, Hargeisa and Burao (Bank, 29 Jan 2021). All these statistics underscore the huge
contribution of small Business enterprises to the Somaliland economy, unfortunately, many
small Business enterprises fail each year. According to the Somaliland Ministry of Commerce,
the failure rate was 69% in 2010. This indicates that business failure is a huge problem among
small Business enterprises. Notwithstanding their many contributions Small Business Enterprises
have witnessed high failure rates and poor performance levels (Jocumensen, 2004). Many are
faced with the threat of failure within the first few months of their starting. It has also been
recognized that while most Small Business Enterprises grow strongly after start up, only a
minority experience sustained and consistent growth through the full lifecycle and become large
firms (Mazzarol, Reboud & Souter, 2009). Strategic planning is an important tool for the growth
of companies as well as further development or scale expansion. In Somaliland, Small business
Enterprises have achieved fast Growth in recent decades. They are the main source of
Somaliland economic growth due to its contribution to job creation, the improvement in Gross
Domestic Product. The contributions these Small Business Enterprises make to the economic
development and growth of Somaliland are substantial because many people are employed by
these enterprises. The possession of a strategic plan has been advocated as important to the
success of small firms, particularly to outline the 4 strategic direction of the firm, coordinate
action and assist in achieving goals (Sandberg, Robinson and Pearce 2001). Although it has
suggested that strategic planning is appropriate for both large and small firms (Schwenk and
Shrader 1993).

1.2. PROBLEM STATEMENT

A number of small business have not given attention to strategic planning of small business
enterprises in Somaliland in relation of their business, despite its importance in the success of
their small business, this could be lack of sound knowledge in strategic planning practices by
owners or managers. Despite the high rate of failure of Small Business Enterprises in
Somaliland, studies which assess the effectiveness of strategic planning on the performance of
Small Business Enterprises are lacking. Effective strategic planning is a vital aspect of business
management because it offers firms flexibility in strategy implementation. With strategic
planning, firms are able to identify their development goals and growth options, look deeply into
to their opportunities and strategically plan to fully exploit the opportunities presented. Also,
they can continuously assess the external business environment within which they operate, to be
in a position to react to changes in the environment rapidly and effectively to maintain a
competitive edge. In Somaliland, the most businesses that the people start is small business
because of it’s the easiest business they can start, so no one known the secret behind that many
small businesses fail earlier in the last 8 years. In this the researcher examining way reveal and
solve the problems that cause earlier failure of the small business. The researcher investigates the
destinations of Mahamuud Haybe, 26 June and Ibrahim kood-buur districts, to look down the
effects of the Strategic Planning on the small business Enterprises success.

1.3. OBJECTIVES OF THE STUDY

1.3.1. GENERAL OBJECTIVE
The general objective of this study will examine the Effects of Strategic planning on small
business success: case study in Hargeisa Somaliland

1.3.2 SPECIFIC OBJECTIVES

1. To determine the profile of the respondents
2. To Investigate the effects of strategic planning on Small Business Enterprise Success
3. To determine if there is a significance relationship between Strategic plan and small
business Enterprises success.
4. To Identify challenges that faced in Small Business Enterprise during lack strategic
planning

1.4 RESEARCH QUESTIONS

1. What is the profile of the respondent?

2. How strategic planning effect small business Enterprise success?
3. What the challenge that face in business enterprises that haven’t strategic plan?

1.5 RESEARCH HYPOTHESIS

According to the view of the researchers, was based on their opinion after they make a feasibility
study and further of reading into the effects of strategic planning on small business Enterprises
success. They appoint out that the hypothesis of this study will be based on Alternative
hypothesis. There is a relationship between Strategic Planning and small business Enterprises
success

1.6. SCOPE OF THE STUDY

1.6.1. GEOGRAPHICAL SCOPE
The study will be conducted in Hargeisa Somaliland. Hargeisa has five districts and they are
Mahmoud Haybe, Ahmed Dhagah, Ibrahim koodbuur, 26 June, Gacan Libaax. The research area
will be Ibrahim kood-buur, and 26 June district because they are the best locations that small
business Enterprises are existing.

1.6.2 CONTENT SCOPE

This study focused on the Effects of Strategic planning on small business success in Hargeisa
Somaliland

1.6.3 TIME SCOPE

This study is conducted on the Effects of Strategic planning on small business success I capital
city of Somaliland Hargeisa .the study was take months starting from 20 Feb 2024 to 20 May
2024

1.7 JUSTIFICATION OF THE STUDY

This study is unique its own the Effects of Strategic planning on small business success as no
research has been conducted to examine
1.8. SIGNIFICANCE OF THE STUDY
This study will be of importance to three main groups of people. Firstly, it will serve those
In the industry and the economy as a whole. The findings from this study will serve to inform the
Policy and decisions regarding the Small Business Enterprises in the country. This will help to
Create and enabling environment for small Business enterprises to operate. Secondly In
academia,
This study will benefit other scholars who are engaging in studies related to strategic planning in
General and strategic planning related to small Business enterprises in particular. This work will
Serve as a reference guide to such studies for them to build upon. Lastly, this study will benefit
Small Business enterprises in Somaliland. The findings of this study can be used by these small
Business enterprises in devising plans and strategies so that they can perform in their business
environment"
1.9. THEORETICAL FRAMEWORK
Kumar(2016) difined Customer buying behavior as a process by which consumers identify their
needs, collect information, evaluate alternatives, and make the purchase decision he also stated
that consumer buying behavior is a series of choices made by a consumer prior to making a
buying that begins once the customer has established a willingness to buy.

1.10 CONCEPTUAL FRAMEWORK

The conceptual framework in this study acts as a guide for the researcher in evaluating the
Effectiveness of strategic planning in the performance of SMEs. It was mentioned by Wang C.
ET
Al (2007) that strategic planning leads to increased firm performance yet the majority of SMEs
do
Not plan and the reasons why are not well known as such it needs to be advocated for different
SMEs to apply in their operations. Adoption of strategic planning by Small Business Enterprises
In their operation can be influenced by different factors and probably that is the reason some do
it while others are not. In the process of adoption Small Business Enterprises tend to face
different
Challenges which might have impact in the effectiveness of strategic planning. With effective
Strategic planning this study assumes that the following factors are concerned; involvement of
key
People, proper strategic plan implementation and flexibility of strategic plan. Various
contributions of effective strategic planning in the operations of the business determine the
performance Improvement and goal achievement in Small Business Enterprises. Basing on
various
Contributions of strategic planning in Small Business Enterprises it can be easy to determine if it
Is successive in improving performance and goal achievement in the operation of different
enterprises.

1.11 DEFINITION OF KEY CONCEPTS

Strategic: (from Greek στρατηγία stratēgia, "art of troop leader; office of general, command,
Generalship") is a high-level plan to achieve one or more goals under conditions of uncertainty.
In
the sense of the "art of the general", which included several subsets of skills including "tactics",
siege craft, logistics etc., the term came into use in the 6th century CE in East Roman
terminology
and was translated into Western vernacular languages only in the 18th century. From then until
the
20th century, the word "strategy" came to denote "a comprehensive way to try to pursue political
ends, including the threat or actual use of force, in a dialectic of wills" in a military conflict, in
which both adversaries interact. Decisions or plans designed to impact favorably the key factors
on which the desired outcome of organization, game, system, venture, or war, depends (x, 2017).
Planning: is the process of thinking about the activities required to achieve a desired goal. It
involves the creation and maintenance of a plan, such as psychological aspects that require
conceptual skills. There are even a couple of tests to measure someone’s capability of planning
well. As such, planning is a fundamental property of intelligent behavior. Strategic planning: is
an
organization's process of defining its strategy, or direction, and making decisions on allocating
its
resources to pursue this strategy. It may also extend to control mechanisms for guiding the
Implementation of the strategy (even, 2021).
Strategic planning became prominent in corporations during the
1960s and remains an important aspect of strategic management. It is executed by strategic
planners or strategists, who involve many parties and research sources in their analysis of the
organization and its relationship to the environment in which it competes.
Small business: are privately owned corporations, partnerships, or sole proprietorships that have
fewer employees and/or less annual revenue than a regular-sized business or corporation.
Businesses are defined as "small" in terms of being able to apply for government support and
qualify for preferential tax policy varies depending on the country and industry. Small businesses
range from fifteen employees under the Australian Fair Work Act 2009, fifty employees
according
to the definition used by the European Union, and fewer than five thousand employees, to
qualify
for many U.S. Small Business Administration programs. While small businesses can also be
classified according to other methods, such as annual revenues, shipments, sales, assets, or by
annual gross or net revenue or net profits, the number of employees is one of the most widely
used
measures Small business enterprise: is a business that employs a small number of workers and
does not
have a high volume of sales. Such enterprises are generally privately owned and operated sole
proprietorships, corporations or partnerships. The legal definition of a small-scale enterprise
varies
by industry and country (Grant, 2020)

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