CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The issues of strategic planning continue to attract considerable national and international attention and have again appeared at the top of the agenda with the current global financial meltdown. The ongoing global financial crisis has further reinforced the message that strategic planning in firms, especially in financial institutions, should always aim at protecting the interests of all stakeholders, which include shareholders, depositors, creditors, regulators and the public.
The strategic planning of banks in developing economies is important for several reasons.
- banks have an overwhelmingly dominant position in the financial systems of developing economies, and are extremely important engines of economic growth (King and Levine 1993 a, b).
- banks in these developing economies are typically one of the most important sources of finance for the majority of firms.
- Third, banks in developing countries are the main depository for the economy’s savings and provide the means for payment.
Given the importance of banks, strategic planning now assumes a central role in view of the peculiar contractual form of banking, strategic planning mechanisms for banks should encapsulate depositors and shareholders. There is substantial evidence to show the positive link between finance sector development (FSD), and economic growth and poverty reduction (King and Levine, 1993; Levine and Zervos, 1998; and Rajan and Zingales, 1998).
The Nigerian banking industry therefore has a significant role to play in the development of the country’s economy. Banks have been the main sources of financing in the Nigerian financial market and bank loans were the predominant sources of debt financing in the economy (Central Bank of Nigeria Annual Report 2006). Strategic planning is particularly important in the Nigerian banking industry because a number of recent financial failures, frauds and questionable business practices had adversely affected investors’ confidence. In 1995, several CEOs and directors of banks in Nigeria where arrested for non-performing loans that were given to themselves, relations and friends. Some of the banks that could not meet the Central Bank of Nigeria (CBN) recapitalization requirement in 2006, where found to be saddled with non-performing loans that were given to directors and their friends.
The financial health and performance of banks are important for the economic growth of Nigeria. This is why the regulator of the industry in Nigeria, the Central Bank of Nigeria, had decided to reform the industry in order to achieve global competitiveness. The strategic planning landscape in the Nigerian banking industry has been dynamic and has generated interest from within and outside the country. In recent times, banks performance have not been the encouraging and this has raise significant concerns that bother on the area of strategic planning. In this regard, analysis, researchers, industry watchers, strategic managers have continued to ask the question that the marginal performance of the banks is because they have been strategic in their planning given the increase volatility of the environment in which they operate.
A recent study by Gibson and Cassar (2005) cast doubt on the causal relationship between planning and performance, . Thus, this studyis set to examine the relationship between strategic planning on organizational performance in banks in Asaba. Given the fact that strategic planning is first being embraced in the developed countries, it is important that the implications of this practice is researched and documented.
1.2 STATEMENT OF RESEARCH PROBLEM.
Strategic planning has become the preferred approach in the organization in terms of steering the institutions towards achieving their goals. It is important that all employees in organization understand the process and how their own contribution can help achieve the overall organizational goal. Many organizations spend most of their time realizing and reacting to unexpected changes and problems instead of anticipating and preparing for them. Empirical findings to date on the impact of strategy planning on organizational performance have been inconsistent; therefore this inconsistency has created a gap that need to be filled. Hence this study identified the strategic planning variables such as: strategic intents, strategic diagnosis, environmental analysis and strategic choice as a critical factors that are likely to affect organizational performance?
1.3 OBJECTIVES OF THE STUDY
The general objective of this study, is to investigate the impact of strategic planning on organizational performance in three banks in Asaba, Delta state.
The specific objective is to:
- Assess the relationship between strategic intents and organization performance.
- Assess the relationship between strategic diagnosis and organizational performance.
- Assess whether there is a relationship between environmental analysis and organizational performance
- Assess the relationship between strategic choice and organizational performance.
1.4 RESEARCH QUESTIONS
This study made to an attempt towards findings answers to the research questions;
- Is there any significant relationship between the strategic diagnosis and organizational performance?
- Is there any significant relationship between the strategic diagnosis and organizational performance?
- To what extent does environmental analysis influences organizational performances?
- Is there any significant relationship between strategic choice and organizational performances?