An empirical investigation into formalised strategic planning in small and medium enterprises (SMEs) in Sri Lanka

An energetic Small and Medium Enterprise (SME) sector plays a pivotal role in the growth of any economy as it provides a number of benefits for economies, irrespective of their level of development. Recognising this reality, governments around the world increasingly encourage and support SMEs as part of their overall national development strategies (Abdullah & bin Bakar, 2000), and Sri Lanka is no exception. The commitment of the government of Sri Lanka to the strengthening of the country's SME sector is clearly stipulated in its national economic policies. Despite this external push from the government, SMEs in Sri Lanka have yet to improve their sustainability (Wijesinghe et al., 2011, 2012). Prior research suggests a positive relationship between strategic planning and business performance. As such, it is highly likely that internal factors such as having formalised plans among SMEs could help to facilitate their survival and growth. The purpose of this paper is three-fold: 1) to explore, by means of an empirical investigation, the strategic behaviour of Sri Lankan SMEs; 2) to examine the reasons for adopting such behaviour; and 3) to ascertain whether their strategic behaviour is related to their performance in business. Due to the exploratory nature of this study, a mixed methods research approach is used. Ansoff's (1988) model, which indicates that strategic behaviour can be reactive, proactive-ad hoc or proactive-systematic, is adapted to analyse the data collected from a survey of 150 selected SMEs and eight case studies. The respondents are the owners or senior managers responsible for long-term planning and decision-making. Findings reveal that less than 25% (32) of the respondents are using formal strategic plans. Further analysis confirms that these same respondents, classified as employing a proactive systematic approach, experienced growth in their operations.