Financial analysis as a strategic tool: the case of SMEs in the Republic of Kosova
Abstract
This paper examines the use of financial analysis as a strategic tool in SMEs. Empirical data are collected from 303 SMEs in the Republic of Kosova, operating in production, trade and service sectors. The aim of this study is to assess the extent to which the business financial analysis is employed in the sampled enterprises and to determine whether there are differences in the usage of it, within small and medium-sized enterprises and sectors. The results show that Kosovan SMEs greatly use financial analysis as a strategic tool. Moreover, significant differences are found between small and medium-sized enterprises regarding its usage and no significant differences among production, trade and service sectors. This paper contributes to the existing scientific literature, especially in the strategic management field. Additionally, this paper will likely contribute to decision makers’ increased use of business financial analysis as a strategic tool in their enterprises.
Keyword : business financial analysis, strategic tool, SMEs, transition economy, Kosova
How to Cite
Qehaja, A. B., & Ismajli, H. (2018). Financial analysis as a strategic tool: the case of SMEs in the Republic of Kosova. Business: Theory and Practice, 19, 186-194. https://doi.org/10.3846/btp.2018.19
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Helfert EA (2001) Financial analysis: tools and techniques: a guide for managers. New York: McGraw-Hill, 221-296.
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Hussey DE (1997) Strategic management: from theory to imple- mentation. Butterworth-Heinemann, England.
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Jarzabkowski P, Kaplan S (2015) Strategy tools‐in‐use: a fra- mework for understanding “technologies of rationality” in practice. Strategic Management Journal 36 (4): 537-558. https://doi.org/10.1002/smj.2270
Jarzabkowski P, Giulietti M, Oliveira B, Amoo N (2012) “We don’t need no education” – or do we? Management education and alumni adoption of strategy tools. Journal of Management Inquiry 22 (1): 4-24. https://doi.org/10.1177/1056492612460588
Kalkan A, Bozkurt ÖÇ (2013) The Choice and use of strategic planning tools and techniques in Turkish SMEs according to attitudes of executives. Procedia-Social and Behavioral S ciences 99: 1016-1025. https://doi.org/10.1016/j.sb-spro.2013.10.575
Laamanen T (2017) Reflecting on the past 50 years of Long Range Planning and a research agenda for the next 50. Long Range Planning 50 (1): 1-7. https://doi.org/10.1016/j.lrp.2017.02.001
Lisiński M, Šaruckij M (2006) Principles of the application of strategic planning methods. Journal of Business Economics and Management 7 (2): 37-43. https://doi.org/10.1080/16111699.2006.9636122
Ministry of Trade and Industry (2011) SME development strategy for Kosovo 2012-2016 (with vision to 2020). Prishtina.
Ministry of Trade and Industry (2013) Strategy for private sector development 2013-2017. Prishtina.
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Nag R, Hambrick DC, Chen MJ (2007) What is strategic mana- gement, really? Inductive derivation of a consensus definition of the field. Strategic Management Journal 28 (9): 935-955. https://doi.org/10.1002/smj.615
O’Brien F (2009) Supporting the strategy process: a survey of UK OR/MS practitioners. Journal of the Operational Research Society 62 (5): 900-920. https://doi.org/10.1057/jors.2011.2
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Pandey IM (1995) Essentials of financial management (4th ed) Vikas Publishing House.
Pasanen M (2011) Strategic management tools and techniques in SMEs. In: Society of Interdisciplinary Business Research (SIBR) 2011 Conference on Interdisciplinary Business Rese- arch. https://doi.org/10.2139/ssrn.1867897
Phillips P, Moutinho L (2018) Contemporary issues in strategic management. Routledge.
Planellas M (2013) In search of the essence of strategy, a model for strategic management in three stages. ESADE Business School Research Paper, 3-26. https://doi.org/10.2139/ssrn.2353362
Prescott JE, Grant JH (1988) A manager’s guide for evaluating competitive analysis techniques. Interfaces 18 (3): 10-22. https://doi.org/10.1287/inte.18.3.10
Rigby D, Bilodeau B (2015) Management tools & trends 2015. London, Bain & Company.
Ronda‐Pupo GA, Guerras‐Martin LÁ (2012) Dynamics of the evolution of the strategy concept 1962–2008: A co‐word analysis. Strategic Management Journal 33 (2): 162-188. https://doi.org/10.1002/smj.948
Saunders M, Lewis P, Thornhill A (2009) Research methods for business students. Pearson Education.
Smith MH, Smith D (2007) Implementing strategically aligned performance measurement in small firms. International Journal of Production Economics 106 (2): 393-408. https://doi.org/10.1016/j.ijpe.2006.07.011
Stacey RD (2012) Tools and techniques of leadership and ma- nagement: Meeting the challenge of complexity. Routledge. https://doi.org/10.4324/9780203115893
Stacey RD, Mowles CH (2016) Strategic management and or- ganisational dynamics: the challenge of complexity to ways of thinking about organisations (7th ed) Pearson Education.
Stacey RD (2007) Strategic management and organisational dynamics: the challenge of complexity to ways of thinking about organisations (5th ed) Pearson Education.
Stenfors S, Tanner L, Syrjänen M, Seppälä T, Haapalinna I (2007) Executive views concerning decision support tools. European Journal of Operational Research 181 (2): 929-938. https://doi. org/10.1016/j.ejor.2006.06.024
Stonehouse G, Pemberton J (2002) Strategic planning in SMEs – https://doi.org/10.1002/jsc.1960
Vaitkevičius S (2006) Modelling of strategic analysis in strategic management. Engineering Economics 4 (49): 37-47 http:// inzeko.ktu.lt/index.php/EE/article/view/11430
Van Gils A (2005) Management and governance in Dutch SMEs. European Management Journal 23 (5): 583-589. https://doi.org/10.1016/j.emj.2005.09.013
Vuorinen T, Hakala H, Kohtamäki M, Uusitalo, K (2017) Mapping the landscape of strategy tools: a review on strategy tools published in leading journals within the past 25 years. Long Range Planning. https://doi.org/10.1016/j.lrp.2017.06.005
Webster JL, Reif WE, Bracker JS (1989) The manager’s guide to strategic planning tools and techniques. Planning Review 17 (6): 4-48. https://doi.org/10.1108/eb054273
Wright RP, Paroutis SE, Blettner DP (2013) How useful are the strategic tools we teach in business schools? Journal of Mana- gement Studies 50 (1): 92-125. https://doi.org/10.1111/j.1467-6486.2012.01082.x
Akkizidis I, Stagars M (2016) Marketplace lending, financial analysis, and the future of credit: integration, profitability, and risk management. John Wiley & Sons. https://doi. org/10.1002/9781119099437
Aldehayyat JS, Anchor JR (2009) Strategic planning tools and techniques in Jordan: awareness and use. Strategic Change 17 (7‐8): 281-293. https://doi.org/10.1002/jsc.833
Aldehayyat JS, Al Khattab AA, Anchor JR (2011) The use of strategic planning tools and techniques by hotels in Jor- dan. Management Research Review 34 (4): 477-490. https://doi.org/10.1108/01409171111117898
Alexander J (2018) Financial planning & analysis and per- formance management. John Wiley & Sons. https://doi.org/10.1002/9781119491460
Ates A, Bititci U (2009) Strategy dynamics in small to medium- sized enterprises: evidence from UK manufacturing SMEs. In: 16th International European Operations Management Association Conference, 14-17 June, Göteborg, Sweden.
Ayyagari M, Beck T, Demirguc-Kunt A (2007) Small and medium enterprises across the globe. Small Business Economics 29 (4): 415-434. https://doi.org/10.1007/s11187-006-9002-5
Barney JB (1991) Firm resources and sustained competitive advantage. Journal of Management 17 (1): 99-120. https://doi.org/10.1177/014920639101700108
Baruch Y (1999) Response rate in academic studies – a compa- rative analysis. Human Relations 52 (4): 421-438. https://doi. org/10.1177/001872679905200401
Berisha Qehaja A, Kutllovci E, Shiroka Pula J (2017a) Strategic management tools and techniques usage: a qualitative review. Acta Universitatis Agriculturae et Silviculturae Mendelia- nae Brunensis 65 (2): 585-600. https://doi.org/10.11118/ actaun201765020585
Berisha Qehaja A, Kutllovci E, Shiroka Pula J (2017b) Strategic management tools and techniques: a comparative analysis of empirical studies. Croatian Economic Survey 19 (1): 67-99. https://doi.org/10.15179/ces.19.1.3
Clark DN (1997) Strategic management tool usage: a comparative study. Strategic Change 6 (7): 417-427.
Clark DN, Scott JL (1999) Strategic level MS/OR tool usage in the United Kingdom and New Zealand: a comparative survey. Asia-Pacific Journal of Operational Research 16 (1): 35-51. https://doi.org/10.1057/jors.1995.148
Cooper DR, Schindler PS (2014) Business research methods. New York: McGraw-Hill Irwin.
Culkin N, Smith D (2000) An emotional business: a guide to understanding the motivations of small business decision takers. Qualitative Market Research: An International Journal 3 (3): 145-157. https://doi.org/10.1108/13522750010333898
David FR (2011) Strategic management concepts and cases (13th ed) Prentice Hall International, Inc.
David FR, David FR (2017) Strategic management: a competitive advantage approach. Pearson Education.
Dess GG, Lumpkin GT, Eisner AB, McNamara G (2014) Strategic management: Text and cases (7th ed) New York: McGraw-Hill.
Elbanna S (2007) The nature and practice of strategic planning in Egypt. Strategic Change 16 (5): 227-243. https://doi. org/10.1002/jsc.797
Gică OA, Balint CI (2012) Planning practices of SMEs in North-Western region of Romania – an empirical investiga- tion. Procedia Economics and Finance 3: 896-901. https://doi.org/10.1016/S2212-5671(12)00247-X
Glaister KW, Falshaw JR (1999) Strategic planning: still going strong? Long Range Planning 32 (1): 107-116. https://doi.org/10.1016/S0024-6301(98)00131-9
Glaister KW, Dincer O, Tatoglu E, Demirbag M, Z aim S (2008) A causal analysis of formal strategic planning and firm performance: evidence from an emerging countr y. Management Decision 46 (3): 365-391. https://doi.org/10.1108/00251740810863843
Grant RM (1991) The resource-based theory of competitive advantage: implications for strategy formulation. California Management Review 33 (3): 114-135. https://doi.org/10.2307/41166664
Grüber S (2015) Intangible values in financial accounting and reporting: an analysis from the perspective of financial analysts. Springer.
Gunn R, Williams W (2007) Strategic tools: an empirical inves- tigation into strategy in practice in the UK. Strategic Change 16 (5): 201-216. https://doi.org/10.1002/jsc.799
Helfert EA (2001) Financial analysis: tools and techniques: a guide for managers. New York: McGraw-Hill, 221-296.
Hitt MA, Ireland RD, Hoskisson RE (2009) Strategic manage- ment concepts & cases: competitiveness and globalization. Cengage Learning.
Hussey DE (1997) Strategic management: from theory to imple- mentation. Butterworth-Heinemann, England.
Hussey DE (1998) Strategic management: from theory to imple- mentation. Oxford: Butterworth-Heinemann.
Jarzabkowski P, Kaplan S (2015) Strategy tools‐in‐use: a fra- mework for understanding “technologies of rationality” in practice. Strategic Management Journal 36 (4): 537-558. https://doi.org/10.1002/smj.2270
Jarzabkowski P, Giulietti M, Oliveira B, Amoo N (2012) “We don’t need no education” – or do we? Management education and alumni adoption of strategy tools. Journal of Management Inquiry 22 (1): 4-24. https://doi.org/10.1177/1056492612460588
Kalkan A, Bozkurt ÖÇ (2013) The Choice and use of strategic planning tools and techniques in Turkish SMEs according to attitudes of executives. Procedia-Social and Behavioral S ciences 99: 1016-1025. https://doi.org/10.1016/j.sb-spro.2013.10.575
Laamanen T (2017) Reflecting on the past 50 years of Long Range Planning and a research agenda for the next 50. Long Range Planning 50 (1): 1-7. https://doi.org/10.1016/j.lrp.2017.02.001
Lisiński M, Šaruckij M (2006) Principles of the application of strategic planning methods. Journal of Business Economics and Management 7 (2): 37-43. https://doi.org/10.1080/16111699.2006.9636122
Ministry of Trade and Industry (2011) SME development strategy for Kosovo 2012-2016 (with vision to 2020). Prishtina.
Ministry of Trade and Industry (2013) Strategy for private sector development 2013-2017. Prishtina.
Ministry of Trade and Industry (2015) 15 years of transition in Kosovo: Implications for trade. Prishtina.
Nag R, Hambrick DC, Chen MJ (2007) What is strategic mana- gement, really? Inductive derivation of a consensus definition of the field. Strategic Management Journal 28 (9): 935-955. https://doi.org/10.1002/smj.615
O’Brien F (2009) Supporting the strategy process: a survey of UK OR/MS practitioners. Journal of the Operational Research Society 62 (5): 900-920. https://doi.org/10.1057/jors.2011.2
O’Regan P (2016) Financial information analysis: the role of accounting information in modern society. Routledge.
Pandey IM (1995) Essentials of financial management (4th ed) Vikas Publishing House.
Pasanen M (2011) Strategic management tools and techniques in SMEs. In: Society of Interdisciplinary Business Research (SIBR) 2011 Conference on Interdisciplinary Business Rese- arch. https://doi.org/10.2139/ssrn.1867897
Phillips P, Moutinho L (2018) Contemporary issues in strategic management. Routledge.
Planellas M (2013) In search of the essence of strategy, a model for strategic management in three stages. ESADE Business School Research Paper, 3-26. https://doi.org/10.2139/ssrn.2353362
Prescott JE, Grant JH (1988) A manager’s guide for evaluating competitive analysis techniques. Interfaces 18 (3): 10-22. https://doi.org/10.1287/inte.18.3.10
Rigby D, Bilodeau B (2015) Management tools & trends 2015. London, Bain & Company.
Ronda‐Pupo GA, Guerras‐Martin LÁ (2012) Dynamics of the evolution of the strategy concept 1962–2008: A co‐word analysis. Strategic Management Journal 33 (2): 162-188. https://doi.org/10.1002/smj.948
Saunders M, Lewis P, Thornhill A (2009) Research methods for business students. Pearson Education.
Smith MH, Smith D (2007) Implementing strategically aligned performance measurement in small firms. International Journal of Production Economics 106 (2): 393-408. https://doi.org/10.1016/j.ijpe.2006.07.011
Stacey RD (2012) Tools and techniques of leadership and ma- nagement: Meeting the challenge of complexity. Routledge. https://doi.org/10.4324/9780203115893
Stacey RD, Mowles CH (2016) Strategic management and or- ganisational dynamics: the challenge of complexity to ways of thinking about organisations (7th ed) Pearson Education.
Stacey RD (2007) Strategic management and organisational dynamics: the challenge of complexity to ways of thinking about organisations (5th ed) Pearson Education.
Stenfors S, Tanner L, Syrjänen M, Seppälä T, Haapalinna I (2007) Executive views concerning decision support tools. European Journal of Operational Research 181 (2): 929-938. https://doi. org/10.1016/j.ejor.2006.06.024
Stonehouse G, Pemberton J (2002) Strategic planning in SMEs – https://doi.org/10.1002/jsc.1960
Vaitkevičius S (2006) Modelling of strategic analysis in strategic management. Engineering Economics 4 (49): 37-47 http:// inzeko.ktu.lt/index.php/EE/article/view/11430
Van Gils A (2005) Management and governance in Dutch SMEs. European Management Journal 23 (5): 583-589. https://doi.org/10.1016/j.emj.2005.09.013
Vuorinen T, Hakala H, Kohtamäki M, Uusitalo, K (2017) Mapping the landscape of strategy tools: a review on strategy tools published in leading journals within the past 25 years. Long Range Planning. https://doi.org/10.1016/j.lrp.2017.06.005
Webster JL, Reif WE, Bracker JS (1989) The manager’s guide to strategic planning tools and techniques. Planning Review 17 (6): 4-48. https://doi.org/10.1108/eb054273
Wright RP, Paroutis SE, Blettner DP (2013) How useful are the strategic tools we teach in business schools? Journal of Mana- gement Studies 50 (1): 92-125. https://doi.org/10.1111/j.1467-6486.2012.01082.x