Strategy Formulation and Financial Performance Perceptions and Relationships. The Mediating Role of Strategic Approaches

Despite the positive role played by strategy formulation on the survival of small and medium enterprises (SMEs), little research has been conducted on the mediating role of strategy formulation approaches on the relationship between strategy formulation and financial performance of manufacturing SMEs in Zimbabwe. This study fills this knowledge gap by investigating the mediating role of strategy formulation approaches on the link between strategy formulation and financial performance in Zimbabwe. The study adopted a quantitative research approach in which empirical evidence was collected through structured questionnaires from 368 SME owner/managers in the manufacturing industry. Despite a positive and significant relationship between strategy formulation and financial performance, there was a statistically insignificant influence of strategy formulation on both short term and long term financial performance through the prescriptive approach. There was also a statistically insignificant influence of strategy formulation on both short term performance and long term performance through the descriptive approach. The implication for practice was derived from the outcome of the analysed data which suggests that SMEs would enhance their financial performance by using either of the approaches as long as they have the right strategy.