Research Topic

The impact of Strategic Management Practices on SME performances: A

Cross-Case Analysis of SMEs in Lagos State. Nigeria.

5000 WORDS

INTRODCUTION

SME’s in developing and other countries usually focus attention on how to improve financial and
marketing performance. As a result of competition between Businesses and dynamic market
conditions, businesses are encouraged by policy and strategic experts to put in place strategic
management practices to be able to compete effectively.

The following have been identified as key characteristics of the organisation chosen for this
research work.

(1) Owners manage the business and this means there is no distinct separation of powers
between managers and the owners of the business.
(2) The owner’s equity is used to fund the business
(3) The SME is local in its operation although some are also able to export.
(4) In terms of size, Assets, employees and infrastructure they are usually categorized as
small
(5) Business is more labour intensive utilizing resources which can be sourced locally and its
business operations may be spread across multiple locations.
Background to the Study

The world today has an increasing need for the enhancement of businesses due to the
inconsistency of the business world. Today, the world has become a global village giving
opportunities for businesses to grow and get new markets all over the world. Nevertheless,
growing a business either locally or inter-nationally has many challenges. It is noted that
businesses always seek different ways to ensure growth in opportunities and strategies.

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Strategic management is a young discipline celebrated 30 years ago. It is based on developing
new ways of thinking that is needed by the issues facing the field of business policy. Assembling
the resources in the organisation during the production process to obtain the final product is also
very important. Enterprise resource planning therefore is a necessary tool needed in every
organisation to ensure growth. To ensure a proper management of the resources in an
organization, they need to implement good strategies in all stages of production.

Businesses, according to Eniola & Ektebang (2014) that fail to drive good planning practices and
tools forward, will not only stay bound by slow, stovepipe planning processes, but also find it
difficult to compete in good conditions. The survival-base theory also calls for every business
manager to keep in mind the need to be strategic if they do not want their organizations to be
crushed by competitors. Strategy is about achieving competitive advantage through being
uniquely different in your industry (Porter, 1996; Adeyemi, Isaac & Olufemi, 2017). It is no
longer competing for product leadership, rather competing in core competence leadership (Agha,
Alrubaiee & Jamhour, 2011). Agha et al. (2011) further argues that defining core competences
amid the formulation of strategies is intentionally to attain sustainable competitive advantages.
Strategic management is thus a veritable tool in improving firms’ competitiveness, performance
level and structural development (Makanga & Paul, 2017). Branislav (2014) stated that the
application of strategic management practices helps firms in exploiting and creating new and
different opportunities for tomorrow. Therefore to straighten up operations and enable firms have
vision and direction, strategic management is a route that is highly demanded (Ahmed &
Mukhongo, 2017). This is because it provides an overall direction to an enterprise in the setting
of objectives, in developing of long-term policies and plans designed to achieve these objectives
and then in allocating resources to implement the plans (Abosede et al., 2016).

It is not only important for all businesses to understand why they are in business but also to put
in place an attainable strategic plan to improve their business performances. This is because
strategy is a source of sustainable competitive advantage and in recent years, large enterprises
have adopted various strategic management practices to guarantee their fit within the constraints
of their environment. Though this practice, as acknowledged in Kraja & Osmani (2013), is often
seen to be important only to large corporations, most studies have shown that for every
organization, either large or small, to succeed and attain a competitive advantage, it has to be

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strategic in their daily operations. However, the quality and strength of firms’ competitive
advantage, as proposed by the resource-based theory, relates to how effective internal resources
of firms are utilized, instead of their position in the external environment (Makanga & Paul,
2017). In support of this, the contingency theory also drew attention of organizations to the need
to develop managerial strategy based on the situations and conditions they are experiencing
(Ahmed & Mukhongo, 2017), but literatures on Small and Medium-Sized Enterprises (SMEs)
has paid little attention to the strategy-making processes of these firms and concentrated more on
their low performance and high failure rate which is often blamed on lack of resources such as
funds, land and skilled labor (Majama & Magang, 2017). Though lack of these resources can
hinder these enterprises from exploiting relative strengths, business management specialists have
argued that even on the availability of such resources, majority of these SMEs do fail due to lack
of strategic planning resulting from poor management, lack of managerial education and lack of
initiative (Eniola & Ektebang, 2014; Kraja & Osmani, 2013; Majama & Magang, 2017;
Nwankwo, Ewuim & Asoya, 2012). It is obvious that SMEs can no longer be excluded from
those factors that have driven larger organizations into using strategic decisions (Abosede,
Obasan & Alese, 2016); therefore SMEs are now compelled to arrange their available resources
and capabilities accordingly to gain competitive advantages in relation to their products,
competitions and market. Therefore, to what extent will the adoption of strategic management
practices influence the market shares, transaction volumes and consequently the business
performances of SMEs in Nigeria.

2.1 Defining SMEs

There is no universally accepted definition of a small business as it varies largely based on
context and country (Palmer et al, 2011). Businesses may be small, medium, or large in scale
based on qualitative judgment. In the developed market economies like the USA, Canada, and
UK, the criteria focus primarily on the employment and revenue potentials. In Nigeria, the
accepted definition for an SME is that business organization which has an asset base of 200
million Naira or less, excluding the cost of land and working capital. The number of employees
for such a firm is between 10-300 (Lee et al, 2016). In UK, SME’s are described as businesses
with an annual turnover of less than 2 million pounds, with an employee base of 200 or less
(DWP, 2012). In Japan SME’s are defined a small-scale firm based on paid-up capital, industry
type and the count of paid employees (Skinner, 2015). Within Japan’s manufacturing sector, they

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are defined as those firms which have paid-up capital below 100 million Yen and less than 300
employees, where as in the wholesale trade they are defined as those firms which have less than
100 employees and paid-up capital below 30 Million Yen.

Within the Nigerian definition, there is hardly any demarcation to distinguish small firms from
medium scale enterprise (Uffot, 2018). The Central bank of Nigeria defines within its 1998
Monetary Policy Circular no 22 that small scale firms are those which do not have an annual
turnover greater than 50,000 Naira (Odit and Gobardhun, 2011). In reference to Nigerians
Budget in 1990 small scale firms for the purposes of commercial loans, were described in the
budget as those with annual turnover below 50,000 Naira (Kombo, 2016). However, the National
Economic Reconstruction Fund (NERFUND) defined small scale enterprises as those which
have annual turnover below 10 Million Naira (Kombo, 2016).

Genty et al (2015) defines an SME as any business organization which has a turnover below
400,000 Naira. Similarly, the Federal Ministry of Commerce defines that SMEs are those which
have made an investment of 750,000 Naira or below, exclusive of cost of land, and provide paid
employment to less than 50 people (Federal Ministry of Commerce Nigeria, 2011). These SMEs
may exist in various organizational forms, like, Limited Liability Company, partnership and sole
proprietorship. The management structure of such a firm could be either a structured hierarchical
form, or through an informal employer-employee relationship form (Hitt et al, 2015). They could
either be labour intensive or simple in operations with basic technologies in place. In general, for
such organizations, the sources of funding are limited (Folusho, 2015). The common source of
funding is the personal resources or savings of the entrepreneur, friends, or family members. In
some SME’s, there could be investments from partners or business associates, banks, informal
financial markets, specialized funds provided by the NERFUND or other financial institutions
like NIDB, or BOI (Etebefia and Akinkumi, 2013). These small-scale firms have a definite role
to play in economic development, such as better employment generation, higher technological
development, capacity building, technology acquisition, better standard of trade and living in
their area of operation (Dugguh, 2015). They are also responsible for growth and development of
allied industries at upstream and downstream levels. By assisting allied sectors, they also help in
industrial dispersal, export promotion and economic upliftment of rural areas (Dalziel, 2010).

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For conducting this study, SMEs have been defined as those organizations which have made
investments in machinery up to 50,000 Naira, and equipment up to 2 Million Naira (These
organisations are assumed to be of employee size 50-100 (Federal Ministry of Commerce
Nigeria, 2011). Though this definition may not be entirely reflective of the typical characteristics
of Nigerian SMEs in terms of employee base or capital, yet, for standardisation purposes this
definition is assumed to hold true. In general, the SMEs in Nigeria may need the framing of a
separate definition.

2.2. Key Trends Impacting SMEs performances in Nigeria.

In any other developing nation, small and medium enterprises are a crucial and necessary
component of the economy of Nigeria. The nation depends on the growth and development of
these companies as they constitute more than 97% of the corporate organizations in (Ejemobi,
2013). These companies also support the growth and flow of money in the economy of Nigeria
[12]. According to Hess et al (2016), SMEs of a nation aid in creating sources and opportunities
for extensive employment because of the labor-intensive nature of the entrepreneurship business
models and they also develop an entrepreneurial business spirit among the young generation.
These companies also perform the value addition to the economy as usually they operate on
abundantly available raw materials in the country and enhance the market value through
processing them innovatively. These industries also serve intermediate goods and services to
industries of larger scale goods and service companies. In this entire process of developing
effective goods and services, these small and medium scale enterprises also support the local
population by enhancing their skills and technological knowledge. Thus, the growth of SMEs in
Nigeria has aided the country in developing and growing, but these industries are also facing
challenges on several fronts. This includes:

2.2.1. Financial Challenges:

In Nigeria, more than 80% of small and medium scale industries face financial challenges and
issues (Ejemobi, 2013). Despite the fact that there is plenty of availability of funds in Nigerian
market, but the accessibility of the same is still a challenge for small and medium scale
industries. These challenges are due to several reasons such as unavailability of credit

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information, low credit worthiness and strict policies of funding organizations (Ishak et al, 2012).
According to Kombo (2016) issues such as this where the capital is not provided to short firms
and rather are provided to larger firms who may not be performing as efficient resource
utilization as these small firms. There are even cases as stated by Oyedijo (2017) when managers
or owners of larger firms have taken organizational loans from financial institutions, only to
spend on their personal expenses such as new marriages and buying houses abroad. As per Binks
and Ennew (2015) the challenges that SMEs face is more an attitudinal challenge of banks and
the imperfection of the capital markets of the regions, such as in Africa and Asia. Also, as per a
study by Bruch and Hiemenz (2015), the SMEs of Asia also face similar challenges in accessing
capitals from banking institutions.

2.2.2. Management Challenges:

The inability to effectively manage and train human resources has also been an aspect of struggle
for SMEs of Nigeria. According to findings of Wood and West [20], lack of experience of
management and available of competitive individuals to handle the business have been the
causes of failure of 90% of SMEs (Ejemobi, 2013). The inability of the management to handle
business scenarios as well as lack of proper documentation has also been one of the major causes
of failures of SMEs (Kombo, 2016). Usually SMEs require complex sets of activities to be
performed in the business such as procurement, supply chain management, financial
management, strategy formulations and so on; all of which require expert human resources, an
aspect SMEs fail to address in their early stages (Lee etal, 2016.
2.2.3. Infrastructural Challenges
The challenges of infrastructure are also real in Nigeria which makes it very challenging for
SMEs to survive and grow in the country. Infrastructure includes shortage of water,
transportation facilities inadequacies, electrical power supply and waste management system
(Moses and Adebisi, 2013). Thus, in Nigeria, the growth of the SMEs is stunted because of lack
of adequate infrastructure availability from the government and also, because these start-ups
could not afford to invest from themselves for developing all the infrastructures they need
(Ejemobi, 2013).

2.2.4. Socio-Cultural Challenges:

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The social and cultural norms of Nigeria are also a challenge that the industry faces in the
country. For instance, as per Gupta etal (2015), most of the entrepreneur of Nigeria are short
sighted and not very much interested in growing their businesses. Rather they are more focused
in reaping the profitability from their otherwise young businesses. Many of these young
entrepreneurs also end up spending the valuable earnings from the business into their own
personal wishes, which is a waste of the valuable business capital (Kar et al, 201). Again, the
strong biasness of the Nigerian population against the goods produced in their own nations as
compared to foreign goods, is also harmful to local businesses. Strategizing and planning has
also been a challenge of SMEs of Nigeria which is a cultural as well as professional issue
(Oyediji, 2017). According to Ojiako (2015), ineffective planning and lack of effective
implementation is one of the major causes of failures of SMEs in Nigeria
2.2.5. Economic Challenges:
The markets if Nigeria along with its prices are dominated by large shop owners which are
usually backed by rich politicians. It is not allowing local small scale SME owners to flourish
(Afolabi, 2013). Along with dominance by politicians, high renting costs in profitable areas, lack
of deregulation and protection and support to local industries have also been major causes of
demise of the businesses. Previous studies have shown that, among these several problems,
challenges related with financial decisions and actions have a strategic importance for
SMEs in Nigeria, as the efficient and effective conduct of financial management has the
potential to elevate or diminish the performance of a small and medium sized company
(Öndeş and Güngör, 2013; Şahin, 2011; Çetin, Akyüz and Genç,2011)

2.2.6. Accounting Inefficiencies:

The accounting system of SMEs are not only inefficient and lack proper standards, they are also
ineffective in determining the health and guiding the businesses (Ejemobi, 2013).
2.2.7.Taxation:
There is also multiple taxation for businesses which is managed by government hired tax
consultants, who are inefficient and unproductive in their ways of managing and auditing the
taxes paid by organization (Ekpo and Bassey, 2016). The taxation system and their
implementation are also done without considering its negative impact on household income and
business sustainability.

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2.2.8. Policy Instability:
The instability in the policy environment of Nigeria has also caused lack of growth of the SMEs
in the country. For instance, policies of the government in 1980s which prohibited to export raw
cocoa to foreign buyers after a defined deadline (Afolabi, 2013). This resulted in expenses for
SMEs to buy machineries to process cocoa, within a very short deadline. This caused destruction
of many SMEs. Many such policies of Nigeria have led to demise of several SMEs within a very
short period of their inception (Arena, 2011). All these not only caused challenges to the growth
of the economy but also created a negative and ineffective business environment around Nigeria
(Afolabi, 2013). Thus, there is need of systematic analysis and resolution of the challenges being
faced by the SMEs of Nigeria (Aremu and Adeyemi, 2011). These small industries need to
prepare themselves to the weaknesses of the business environment and utilize strengths (Abor,
2015). According to Agwu and Emeti (2014), among the several strategies available for
managers or owners of SMEs to deal with these kinds of situations, some of them includes
strategy formulation, innovation, operational efficiency enhancement, quality management,
integration of business processes and better human resource management.
With the spate of modernisation, SMEs are aware of the importance of applying the potential
tools of attraction, development, and retention of talent through the training and development of
their employees. This involves identifying the training strategies for the development of small
and medium enterprise (SME), job satisfaction and intellectual growth (Beynon, et al., 2015).
Investment in the training of employees is a major priority of many SMEs.
Apart from the training of employees, there are other factors like education and experiences that
are important requirements, which adequately contribute to the training that employees receive in
order to enhance their performance at work and also adapt to a change in environment (Tarutė &
Gatautis, 2014). Not much emphasis was put on training in the past to deal with competition that
originates as a result of business or environmental changes. This has dramatically changed as it is
discovered that a company or venture that engage in innovative training practices, tend to be
more effective in its financial performance than those companies or competitors that do not have
such training (Kar et al, 2011).
2.2.9. Marketing and Exporting:

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As lack of information on foreign market opportunities, inadequate financing and technical
knowledge lower the competitiveness of products and services, SMEs in Nigeria mostly target
the domestic market.
2.2.10. Entrepreneurship:
With its young demographic structure, Turkey has a significant but mostly unutilized potential
for entrepreneurship, where the main causes are insufficient technical knowledge on preparing
business plans and difficulties in finding the startup capital, needed to undertake the high costs of
launching the business.

2.2.11.Environment:
In Nigeria, as in most parts of the world, the demand for environmentally-friendly products and
services is increasing. However, the complexity of environmental legislation and the height of
costs to comply with the legislation are discouraging the SME owners and entrepreneurs from
meeting that demand.
Labor:
Due to high percentage of social security premiums, cost of skilled labor in Nigeria is higher
than most developing economies. This, combined with low levels of education and technical
capabilities of employees, creates a major disadvantage for competitiveness of SMEs.
Research Area

This research seeks to explore the impact of strategic management on SMEs performances: A
Cross - Case Analysis of SMEs in Lagos State. Nigeria. Previous research have resulted in
inconsistencies with some arguing there is a relationship which is strong and others no
relationship between the two variables.

This is the gap which this study aims to fill by taking into consideration Literature on Strategic
Management Principles, measuring the effect on the two variables and how they contribute to the
growth of small and medium size enterprises (SMEs) in Lagos State. It also seeks to advance the
transformative theory.

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The aims and focus of the research

The aim of this study is to empirically investigate the impact of Strategic Management practices
on SMEs performance: A Cross - Case Analysis of SMEs in Lagos State, Nigeria. The specific
objectives are:

(i) To evaluate the impact of business ethics on the performance of SMEs in Lagos State,
Nigeria.
(ii) To analyse the effect of strategic planning on the performance of SMEs in Lagos State,
Nigeria
(iii) To assess the influence of motivation on the performance of SMEs in Lagos State,
Nigeria
(iv) To explore the relationship environmental sustainability has on the performance of SMEs in
Lagos State, Nigeria.
Research Questions
The following are the research questions to be addressed
 What is the nature of Strategic management practices within SMEs in Lagos State,
Nigeria?
 What is the level of SMEs performance with focus on SMEs in Lagos State?
 What is the impact of Strategic management practice on SME performance in Lagos,
Nigeria?
 What recommendations could be provided to SMEs in Lagos, Nigeria for the
improvement of its Strategic management practices?
Research methods and methodology.

Research methodology establishes the theoretical and practical framework. The Research design
will make use of deductive and inductive approaches, quantitative (Survey) and qualitative (Case
study) using selected SME’s in Lagos State. Data will be collected from two main sources,
primary and secondary. Primary data will be collected with the help of semi-structured
questionnaire and secondary data from Journals, Books, Magazines, Annual reports and Progress
reports. Analysis of the data will rely on the latest version of SPSS statistical software (25.0)
using a descriptive analysis of the data and correlation techniques. CronBach Alpha will be used
to test for reliability.

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STRATEGIC MANAGEMENT THEORIES

The greatest economic problem in the world today is that of scarcity. The factors of production
used to produce goods, services are scarce but the needs, and wants of individuals are unlimited.
Due to this in the market scenario, competition sets in giving room for organizations to always
make efforts to a better quantity and quality of their products to better satisfy their customers and
be market leaders in the case of barriers to entry. Strategic management therefore becomes a very
important tool used by organizations like company X to manage the organization and her scarce
resources to obtain her goals in the organization.

This chapter will be based on analyzing the strategies firms consider for growth. The definition
of strategic management by some authors will be presented. The elements of success in an
organization will first be looked at which consist of a profound understanding of the competitive
environment, its long-term goals and objective appraisal of resources. With the strategies
implemented by firms, four different points of views will be analyzed. The classical,
evolutionary, systematic and process strategies by firms will be analysed in this section.

It is important to note that strategic management is an act that carefully defines the process of
managing the internal and external activities of an organization to obtain the goals of the
organization over a given period. Organizations therefore set up strategies and implement them
to ensure a higher productivity and achieving their goals. Over the years, researchers on
strategies that organizations can adopt to ensure better quantity and quality of their products have
developed many different theories. Some of these the-ories will be analyzed in this topic.
Nevertheless, it is important to note that strategy plays a fundamental role in the success of every
organization. The fundamental question to take note of is the idea of Sun Tzu who wrote in his
book titled “the act of war” asked what the characteristics of a strategy are which are conducive
to success?

There are many characteristics of a strategy to succeed but in this study, four common factors are
frequently observed in organizations that implements a good strategic management. They are

 Goals that are simple, consistent and long term

 Profound understanding of the competitive environment
 Objective appraisal of resources
 Effective implementation. Without effective implementation, the best-laid strategy is of
little use.
The diagram below gives an understanding of the above four factors of successful strategy.

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FIGURE 1. Common element of successful strategies (Adapted from Robert S. Grant, 1991)

Figure 1 describes the success strategies which when effectively implemented enhance growth in
the organization. The organization needs to set values of being simple, consistent and having
long-term goals. There should be a profound understanding of the competitive environment and
objective appraisal of the resources. Just like the case of the armies who need strategies,
organizations also need business strategies to give direction and purpose to deploy resources in
most efficient manner and to coordinate the decisions made by different individuals.

Definition of strategic management

According to Huskisson (Madhok 2014, 69-76 [Huskisson 1999, 1-16]), strategic management is
primarily concerned with the actions organizations take to achieve competitive advantage and
create value for the organization and its stakeholders. Strategic management can also be defined
as the systemic process identifying internal and external factors of an organization to define
better objectives, formulate, evaluate and implement strategies to achieve the objective. In the
above definition, there are two main key points to take note of which are the competitive
advantage and value creation.

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With respect to the competitive advantage in the market, firms want to be better off than their
competitors in the market are. They try to give reasons to their customers on why they should be
preferred than others in the market. Organizations might do this by differentiating their products.
Critical analyses on some of the theories in this research will further explain this idea. Two basic
types of competitive advantage such as cost advantage and differentiation advantage are
identified. The concept of competitive advantage is what makes a company better than the others
in the minds of your customers. (Amedeo 2017, 1-15).

Value is also added to the organization and to the stakeholders. The organization might aim to
maximize their profit and minimize cost. There is the need profit to move the investment forward
and to develop the organization. Nevertheless, for better understanding, five different points of
creating value can be analyzed how the strategy of a firm creates value in an organization. A
firm’s strategy defines its ultimate value proposition in term of those it is serving. The first thing
to do for an organization is to know your customers and define yourself in terms of your
customers. Different customers might have different value proposition. The values an
organization is interested in and that she gives to the customers are the values the customers’
demands from the organization. For example, different customers have different reasons why the
drive a car. Maybe it is because of the size of the car, or the color of the car, or the horsepower of
the car. All these are the values the customers have, and the values are what should be of prime
importance to the organization. A strategy is an overriding purpose that can align and mobilize
all parts of the organization. The strategy should be exciting and challenging to all the firm’s
stakeholders (everyone connected to the firm). Explains that the strategy should identify the
business the firm wants to be in and differentiate it from others in its marketplace. Strategy is
innovation and forward looking. It considers the future. A strategy should contain broad based
goals and the specific means of measuring progress towards reaching those goals. Measurements
towards meeting goals in an organization are very important to ensure the adjustments and obtain
the goals (Academic J. 2018).

Strategies implemented by firms

Different organizations implement different strategies to manage their internal and external
activities. The choice of the organizations on which strategy to adopt depends on the

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management. It should be noted that no strategy is better off than others. The graph below shows
some different types of strategies

FIGURE 2. Different types of strategies (adopted from Whittington R. 2000, 3-9)

From the above figure the horizontal axes represent the points from the deliberate point of view
to the emergent action. The vertical axes represent the profit maximization point of view, and the
other represents the political point of view (Mintzberg 2006). An understanding of the above
figure gives more light to strategic management.

The classical approach was a widely used method in the 1980s and 1990s. It presents a deliberate
rational approach to the objective of profit maximization by making use of the Pestle analysis as
a strategic planning tool (Mullins, 2007).

The main focus of the classical approach is for an organization to make profit from the strategy
employed. Tools employed include planning, commanding and analyzing .This approach ensures
that a lot of effort goes into planning so that the desired outcome of success can be achieved.

Organisations making use of the classical approach think through, plan well to make things
happen (Mullins 2007, 44).It depends on the market ability to ensure the achievement of the
profit maximisation goal.

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This approach relies on the ability of the market to secure a unitary goal of profit maximization
with costs kept as low as possible and other options available to the company are kept open. This
leads to the evolution of cost benefit analysis and this makes it irrelevant the strategy employed
by the organization. Organisations focus more on their areas of core competencies to decide
whether to go into a particular market or not.

A good example is the Apple Company. They evolved from computer competency to ipad and
iphone

They have focused on adding value to their customers through changes to their product lines
emerging in a timely manner to the market with the market left to decide which is the best. This
approach is similar to the classical approach as it also has as it’s focus profit maximization.

Difference however lies in how the approaches evolve and the fact that the environment is
unpredictable and could change with time. This is similar to the process strategy but differ by
allowing the market to take the lead in determining the status quo and working on it (Whittington
2001, 12-15).

Individuals within the organization consolidate their personal goals with that of the organization.

The approach relies on bringing people on board, propelling the organisation forward whilst also
aiming to settle any issues within the organization. Choice of strategy to be used is the main set
back of this approach

This approach has a limited choice of strategies to be adopted. Strategy can be defined as the
long term objectives / goals of the organization and the actions employed in terms of resource
allocation for the set goals to be achieved (Whittington 2001, 12-13 [Chandler, 1962]).

This is a systematic approach that assists the organisatiion in achieving it’s objectives. The
approach depends on the type of socio economic systems in operation and how these are aligned
with the organisations goals (Whittington 2001, 12-13). Outcomes and processes also depend on

the ability of the organization to adjust to the cultural rules of the society . Value creation and
competitive advantage are better implemented if the right strategies are put in place. There is no

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one strategy that suits all businesses and each organization has to determine which strategy is
best suited for it.

Changes in the market also requires changes in the strategy employed to impact on value
creation and competitive advantage. Organisations needs to know their environment and the best
way to influence it. Business ethics and it’s impact on the environment also need to be
considered.

BUSINESS ETHICS AND SUSTAINABLE DEVELOPMENT

We have various concepts and theories in place which has helped in shaping the business
environment. Business ethics has played a significant role in the success of organisations
although some failures have also been recorded. Unethical behaviour of some organisations have
been identified as a major source of failure and this study aims to look at these unethical
behaviours and proffer solutions that can be implemented by the organisations. There will also
be an in depth analysis as to why business ethics fail before solutions are proffered.

3.1 Reasons for the failure of business ethics

Company management often find it difficult to trust employees in an organization as employees

have been found to have engaged in unethical behaviours.

These behaviours have been traced to both employees and organisations that engage in unethical
practices. For instance, an organization that goes against environmental laws through pollution of
the environment basically because such an organization is trying to save on the cost of treating
their waste products. On the part of the employees a ready example is the log in system which is
not being used in the appropriate manner thus creating additional work for the manager.

Another issue identified was globalization which in some aspects is seen to be unfair and
unsustainable with some organisations engaging in unethical practices such as abuse of human
rights, forced labour and child labour (Sethi 2013, 61-100).

Organisations sometimes work in a selfish manner putting aside ethical values of the
environment from where they are operating although it is also recognized that not all
organisations are able to adapt to different environment. Organisatiosn are often not bothered

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about other organisations because they are operating from a selfish point of view (Whittington
2001).

Other authors like Foucault (2000, 2-9) have identified other ethical issues like moral
obligations, feelings, intentions and recognition of these moral obligations and all these must be
worked on.

An example is the issue of sick leave which is often abused by employees that do not want to
come to work or are slow at doing an assigned task or not doing the work as required in an
effective and efficient manner. Employees do not consider the implications of their actions on
the organization and are only money conscious (Jeanes 2016, 5). Competitors and investors are
not primarily motivated by the ethical practices of organisations while market forces are
recognized as weak and unable to have a compelling effect on organisations. Goal of
organisations is minimisation of costs and maximization of profits (Zsolnai 2016, 93-104).

Reflexivity requires us to question what we know and assumptions taken for granted.
Organisations and individuals alike dismiss ethical issues as unimportant and hence disregard
them (Jeanes 2016, 5).

Researches have the theoretical background to ethics and have little or no knowledge about the
practical side of ethics and it’s implications for organisations. They unwittingly ignore ethics in
their research which therefore impacts negatively on the organization which the research centres
on (Jeanes 2016, 5).

Other researchers on the other hand have linked ethics with power in the organization and see it
as a tool for exercising control over the employee which is not true. Employees should have the
understanding that they need to work together as a team with Management giving directive
which should not imply control in a negative way (Jeanes 2016, 5).

Research has identified that emotions play a key role in response to ethical issues for instance in
the case of fraud the law should be applied and not emotions as emotions go against both the
society and the organisations roles (Bakan 2005, 30-41). Research has revealed that emotions
impacts on how organisations make decisions while handling unethical behaviours. Some of the

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factors used cannot be justified which at times includes favouritis this tends to affect the growth
of the organization(Baker 2017).

Emotional triggers include the joys/pain of people which makes the brain to react in a
sympathetic way. Concern/ Response to a situation depends to a large extent on how a person
behaves

Volkswagen organization was recognized with an Ethics Business Award for sustainability and
corporate social responsibility but shortly after was issued with a notice for violating clean air act
(Rhodes 2016, 2).

3.2 Some remedies for the failure of business ethics

Researchers have identified that Business ethics plays a very important role in managing the
corporate environment and the respect that society has for the organization.

Effort has been directed to resolving issues related to the business environment by different
international bodies. Issues such as inequality and poverty has been neglected by movement on
Corporate Social responsibility (CSR). This has led to the need for regulations to be put in place
such as treaties and laws. Collins Mayer is in support of establishment of Trusts with a Board of
Trustees. He identified limited liability of organisations as a factor responsible for irresponsible
behaviour of organisations.

I am in agreement with this assertion as some organisations act in a detrimental manner only to

pay compensation for their actions after profiting from the negative act

Specific examples include depositing waste products in the river in some African countries by
some organisations which is dangerous and is environmental pollution to the community.
Penalties can be put in place to stop this detrimental action (Zsolnai 2016, 93-104).

Another solution is through laws passed domestically to tackle company behaviours abroad.
Alien Tort Act was used by USA to prosecute organisations for human rights violations in
foreign countries.

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The issue of imbalances in International Law however needs to be addressed through leadership
and political will which to a large extent the World Trade Organisation is in a position to
influence the paradigm of free trade.

Ferdinand (2007), is of the view that ethos is ethics but ethos has nothing to do with rules or
ways of being as it is not possible to put a legislation in place to govern how a person will make
a judgement whilst exercising freedom (Foucault Jeanes 2016, 5).

Conceptual framework

Guided by the theory of deliberate, emergent, and reactive strategies of Mintzberg and Waters
(1985), the study will be modeled on the figure below. The figure depicts the dependent variable
as the informal strategic management mode.

Figure 1 Conceptual framework on the interaction between informal strategic

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Conclusion

In conclusion organisations face ethical issues in running their businesses which can be from the
perspective of the organization or even the employees. The effect of unethical behaviour can be
felt both on the environment and growth of the organization.

Conclusively the above research work from some business ethical articles, it has been discovered
that most businesses face business ethical problems, which can be from either the employees or
employers in an organization.

There are many unethical behaviors in the society, which affects the environment as well as the
growth of the organization. Such behaviours can be cultural, social, political and economic. A
good knowledge about business ethics impacts positively on the individual and the organization
provided cooperation is maintained and the relevant factors are used correctly (Jeanes 2016, 5-9).

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