Comprehension of External Environment, Decision Making, Strategy Implementation and Performance of Micro, Small and Medium Enterprises in Kinshasa - Dr Congo

Abstract

The ability of managers to comprehend the environment in which they operate and make decisions about strategy implementation which in turn affects performance of organisations is scarcely documented in empirical studies. The purpose of this study was to examine the relationships between comprehension of external environment, decision-making, strategy implementation and performance of micro, small and medium enterprises in Kinshasa, Democratic Republic of Congo. This study tested the nexus between comprehension of external environment and performance, the effect of comprehension of external environment on both decision making and strategy implementation, the influence of decision making and strategy implementation respectively on performance, the moderating role of decision making and mediating role of strategy implementation on the relationship between comprehending the external environment and the performance of micro, small and medium enterprises (MSMEs) operating in different industries in Kinshasa. A positivist paradigm with deductive approach and a cross-sectional survey design were used. Primary data was collected using a drop-and-pick later questionnaire which was distributed to 643 respondents from MSMEs that were officially registered and operating in Kinshasa. Secondary data was collected from the MSMEs’ past financial documents such as balance sheets, statement of cash flows, and profit and loss statements. Both financial (return on asset, increase in sales and profit) and non-financial (managers’ qualitative assessment of customer satisfaction, employee satisfaction, growth in number of employees and improvement in number of customers) measures were used to measure the performance of the MSMEs. The findings were that comprehension of external environment had a statistically significant effect on performance (B = 0.748, t = 9.873, p < 0.05), on decision making (B = 0.105, t = 13.406, p < 0.05) as well as on strategy implementation (B = 0.80, t = 35.214, p < 0.05). Further, both decision making and a strategy implementation had statistically significant influence on performance (B = 0.762, t = 8.46; B = 0.45, t = 5.962 p < 0.05). While decision making significantly moderated the relationship between comprehension of external environment and performance, strategy implementation significantly mediated the relationship between comprehension of external environment and performance. These findings contribute to theory, policy and management practices. The study recommends that MSMEs should enhance managers’ intuitive and rational decision making skills, ensure that cultural norms of the community are well understood, and embrace technology to enhance creativity and innovation. Lastly, the government should create a centre for capacity building of MSMEs through seminars, workshops and conferences. This study also recommends further studies on more factors affecting the performance of MSMEs in Kinshasa.