The Effects of the External Environment on Internal Management Strategies within Micro, Small and Medium Enterprises; Kenyan Case
W L Njanja School of Business, Kabarak University (ex student, UNISA) Nakuru-Eldama Ravine Highway Private Bag - 20157 KABARAK, Kenya E-mail: lnjanja@kabarak.ac.ke Martin Ogutu Department of Business Administration University of Nairobi, Kenya E-mail: Ogutum@uonbi.ac.ke Rene’ Pellisier Department of Business Management, University of South Africa Pretoria, South Africa E-mail: Pellir@unisa.ac.za Received: August 4, 2011 doi:10.5539/ijbm.v7n3p194 Accepted: October 19, 2011 Published: February 1, 2012
URL: http://dx.doi.org/10.5539/ijbm.v7n3p194
The research was self financed for doctoral study.
Abstract The Kenya is a developing country where 85% of employment is generated by MSMEs .The country has been experiencing the upsurge of too many challenges all at once. These includes an experimental ‘coalition government’, economic recession, implementing a new constitution, cultural diversity and the animosity behind it. These challenges may impact the performance of enterprises by affecting the management strategies. The study addresses the effects on management strategies such as marketing strategies, human relations strategies, strategic management and interpersonal factors among others. The objective is to test effects of external environment on the internal management strategies within the MSMEs. Results from the study indicated significant correlations between the management strategies and the environmental factors. However, there was no significant effect of the environment on the performance of the MSMEs. It is concluded that the external environment affects performance by affecting the management strategies the firms undertakes. A major control factor will be the nature of the firm and the calibre of management in practice which will dictate strategies undertaken to react to the environment. Keywords: Environmental factors, Management strategies, MSME’s (micro, small and medium enterprises), SMEs and MSEs 1. Introduction
1.1 Environmental forces
It is important to note that organisation performance does not happen in a vacuum but within a certain environment which has challenges and opportunities, (Walter et al 2008: 530-540). Environmental forces create challenges and opportunities for the organization (Gibb 2006:263-283, Pearce & Robinson 2007:83-114). Managers / owners must react and adapt to changes in their internal and external environment. Globalization is
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ISSN 1833-3850
E-ISSN 1833-8119
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International Journal of Business and Management
Vol. 7, No. 3; February 2012
an example of an opportunity for an organisation (Maxwell, Rankine & Macvicar 2007, Pearce & Robinson 2007:126-127). Improved technologies, such as transportation and communications, have enabled companies to expand into global or worldwide markets. Globalization affects how organisations are managed. Managers must learn to deal effectively with multiple cultures and political systems in the midst of rapidly changing markets and technology. They must be able to anticipate this changing environment and develop the vision and competencies at all levels in their organisations to embrace this dynamic future (Njanja, 2009:10). The move towards economic liberalization proposed in the late 1980s and 1990s in Kenya was aimed at reducing distortions in the economy; deregulation of markets has had adverse impact on MSEs (Sessional Paper No. 2, 2005). The effects include increased macro-economic instability characterized by high inflation rate, current account deficits and policy uncertainty. While the effects have been harmful to all private enterprises, the MSMEs have been particularly hurt given their small size, and because they have fewer options to ride over
