The study examined the impact of strategic management on economic development in Nigeria: a study of the oil sector. It further probed into how this has impacted on the management efficiency and effectiveness as strategic planning is essential in corporate organisations. Primary and secondary data were used for the study. The study made use of questionnaire to elicit information from employees in the oil sector. Data collected were analysed using descriptive and inferential statistics. The hypotheses were tested using the Pearson’s Product Moment Correlation Coefficient to establish the significance of relationship between the various variables used in measuring performance. The results of the hypotheses revealed that there is a significant and positive correlation between strategic management and economic development in Nigeria. The study therefore, concludes that strategic planning is beneficial to organisations in achieving set goals and recommends that oil companies and other corporate organisations alike, should engage in strategic management in order to enhance economic development in Nigeria.
Keywords: strategy, strategic management, performance, economic development, oil sector
Strategic management is a forward-looking exercise and all managers should be involved with it. If strategic plan is available and well implemented, an oil sector will have little or no challenge in managing external changes. For businesses to survive, it should be able to operate successfully with environmental forces that are unstable and uncontrollable and which can greatly affect decision making process. Oil sectors adapt to these environmental forces as they plan and carry out strategic activities. It is through strategic planning that an oil sector can predict changes in the environment and act pro-actively, (Adeleke, Ogundele and Oyenuga, 2008; Bryson, 1988 in Uvah, 2005). However, It has been observed that most oil sectors are more concerned with the formulation of strategic plan and not how to implement them (Douglas 2003). He therefore concluded that “plan without effective and measurable implementation is no plan at all.” No matter how super a plan is, it has to be well implemented to achieve the desired result (Phillips and Petterson, 1999). St-Hilaire (2011) believes that the usage of strategic plan is very important to oil sector’s ability to achieve and maintain competitive advantage over other oil sectors.
Several studies have concluded that there is a positive relationship between strategic planning and economic development in Nigeria. McIlquham-Schmidt (2010), Robbins, Bergman, Stagg and Coulter (2008), Silverman (2000) Pearce and Robinson (2007) Smith and Golden (1989) Hill, Jones and Galvin (2004) Danso (2005). Veskaisri, Chan and Pollard (2007) posited that without a clearly defined strategy, a business will have no sustainable basis for creating and maintaining a competitive advantage in the industry where it operates. They are also of the opinion that effective planning and implementation has positive contribution to the financial performance of oil sectors. In the same vein, Aremu (2000) states that some Nigerian business oil sectors are without formal plans or where there are formal plans, oil sectors operate without adhering to them. Dauda, Akingbade and Akinlabi (2010) Metropolis concluded that strategic management practices enhance both oil sector profitability and company market share and therefore suggest that strategic planning concepts should be adopted by business oil sectors. On the other hand, Miller and Cardinal (1994) and Rogers, Miller and Judge (1999) concluded that the role of formal planning systems in business management is only informational. It was however observed that most researches on strategic planning and performance relationship focused on oil sector’s profitability, market share, earnings per share, net asset, working capital, expansion, etc. as the performance measurement. The lack of involvement of this particular group may make the plan unpopular, thereby making compliance a difficult issue. This study therefore tries to fill this gap by investigating the relationship between strategic planning and economic development in Nigeria in the oil sector system. In order to achieve the objectives of this research work, the following questions guided the Work:
1. To what extent does the oil sector carry out strategic management?
2. To what extent does the oil sector comply with plans to ensure performance?
3. To what extent does the use of strategic planning affect economic development in Nigeria?
The following hypotheses were also tested:
H1: The level of compliance with strategic planning has no significant effect on economic development in Nigeria.
H2: There is no significant relationship between the extent of strategic planning and economic development in Nigeria
2. Review of Relevant Literature and Theoretical Framework
2.1 Conceptual and Empirical Literature
Strategy is a broad based formula for how business is going to compete and what policies will be needed to carry out the goals in order to achieve success (Porter 1980, in Aremu, 2010), (Kazmi, 2008). In other words, strategic management is involved in deploying a firm’s internal strengths and weakness to take advantage of its external opportunities and minimize its external threats/problems (Adeleke, Ogundele and Oyenuga, 2008; Thompson and Strickland (2003); (Nwachukwu, 2006). Strategic planning is all about an enabling environment to achieve and sustain superior overall performance and returns. (Johnson, Scholes and Whittington, 2008).
Aremu (2010) posits that strategy is needed to focus effort and promote coordination of activities. Without strategy an oil sector becomes bunch of individuals, hence strategy is required to ensure collective actions and concentration of efforts towards achieving oil sectoral plans and objective. Johnson and Scholes (1993) in Aremu (2010) view corporate strategy from cultural perspective, he described it as a strategy based on the experiences, assumptions and beliefs of management overtime and which may eventually permeate the whole oil sector. Strategic management is thinking through the overall mission of a business by establishing what the business is all about (Drucker (1974), in Akingbade, Akinlabi, and Dauda, (2010). The process of strategic planning takes into account the entire decision making process and the issues that an oil sector faces. According to Uvah, (2005), the strategic planning process is as important as the actual plan and its implementation. He further suggested a strategic planningprocess which includes Plan Design which deals with the design stage of a strategic planning exercise and should resolve questions such as who should be responsible for what? The next stage is the formulation stage. According to Minzberg (1991) in Adeleke (2008), the following processes in formulating plans were highlighted:
a) Environmental Analysis: the environment in strategic planning emphasises the need for oil sector to establish a link between their internal and external environments.
b) Resource Analysis: this is an inevitable means of identifying the strength and weaknesses of a firm over its competitors
c) Determination of the Extent to which Strategy Change is required: this is a top level management decision on whether or not to modify the existing strategy or its implementation. This is based on what is called performance gap (Stoneir and Andrews, 1977)
d) Decision-Making: this bothers on what to do and how it is to be done
e) Implementation: this requires the practice of the chosen strategy. It is implemented through a process of allocation of resources, adapting the oil sector structure to suit the strategy and creating an appropriate climate for carrying out the chosen strategy.
f) Control: this is to ensure that implementation is being achieved in line with objectives and in conformity with the chosen strategy. This may be accomplished by establishing a planning unit or forming a review committee made up of top-level managers.
The next stage is the implementation stage which includes outlining the achievements of goals, allocation of necessary resources, tasks, schedules and other actions being specified (Daft 2008). It must be noted that the hardest part of strategic planning is implementation, that is to effect what is planned and to be alert to the event of any opportunity for action that is clearly better than that in the original plan and then to adjust the plan accordingly to fit emerging circumstances. (Uvah, 2005). The last stage is the evaluation and review stage. This stage deals with monitoring, evaluation, feedback and review of the plans. This is necessary so as to ensure consistency between implementation and the planned strategic directions. The role of education as an instrument for promoting the socio-economic, political and cultural development of any nation can never be over-emphasised (Ajayi and Ekundayo, 2008). According to Abdulkareem (2001), a nation’s growth and development is determined by its human resources.
Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.
- Quote paper
- Newman Enyioko (Author), 2020, Impact of Strategic Management on Economic Development in Nigeria, Munich, GRIN Verlag, https://www.grin.com/document/536651