Strategic Management and Market Orientation as Influencer of Business Performance among Small and Medium Enterprises

Strategic Management and Market Orientation as Influencer of Business Performance among Small and Medium Enterprises

Kimberly O. Matao¹, Sharamie N. Padernal², John Mark B. Lazaro³, Helaria B. Carmona⁴

^1,2Student, Santo Tomas College of Agriculture Sciences and Technology,

³Instructor, Santo Tomas College of Agriculture Sciences and Technology,

⁴Vice-President, Santo Tomas College of Agriculture Sciences and Technology

DOI: https://dx.doi.org/10.47772/IJRISS.2025.90600066

Received: 27 May 2025; Accepted: 29 May 2025; Published: 30 June 2025

ABSTRACT

This research examined how small and medium-sized enterprises (SMEs) in Santo Tomas, Davao del Norte, were affected by strategic management and market orientation on the company performance.  A total of 132 SMEs were randomly selected from a stratified database, and the data were analyzed using a quantitative descriptive-correlational approach. The data was mostly collected through a customized survey questionnaire, and hypotheses were tested through multiple regression analysis with a p-value threshold of 0.05. Findings revealed significant relationships between Strategic Management (p = 0.003) and Market Orientation (p = 0.023) with business performance. However, only Strategic Management significantly influenced business performance (p = 0.040), while Market Orientation (p = 0.379) did not demonstrate a statistically significant impact. To improve business performance, SME owners and managers are encouraged to enhance strategic management processes, particularly leadership development. Training programs that build strategic leadership and management skills are essential. Additionally, strengthening market orientation efforts through customer focus, inter-functional coordination, and regular market research is vital to stay aligned with customer preferences and competitive trends. Future research may identify specific elements of market orientation that significantly impact business performance, enabling SMEs to target their efforts effectively. Expanding studies to diverse contexts can provide broader insights into how market orientation influences performance in varying environments.

Keywords: Business Performance, Market Orientation, Strategic Management, Small and Medium Enterprises, Santo Tomas Davao del Norte

INTRODUCTION

Business performance pertains to the attainment of organizational goals essential for the organization’s survival, including both financial and non-financial outcomes (Rehman et al., 2019). However, numerous small and medium-sized enterprises (SMEs) around the world have encountered challenges in securing funding. (Manyanga et al., 2023). Ali et al. (2020) discovered that many businesses struggle to develop new products that align with customer preferences and market trends due to insufficient marketing capabilities, lack of skilled marketing staff, and inexperienced management. In addition, Upadhya and Patil (2023) added that numerous small and medium-sized enterprises (SMEs) find it challenging to survive beyond four years. Poor cost management is a significant factor contributing to these failures. To reduce short-term costs, SMEs often make decisions that harm their long-term viability.

In Nigeria, according to Umar (2023), the operational performance challenge encountered by SMEs arises from a lack of strong commitment from top management, insufficient emphasis on continuous improvement, failure to prioritize customer needs, and inadequate employee development. Additionally, in Padang City, Indonesia, Putra et al. (2020) emphasize that lack of business

knowledge, business skills, and innovation significantly affected business performance. Furthermore, Udriyah et al. (2019) stated that in Selangor, Malaysia, textile SMEs have poor inter-functional coordination that hampers performance. The managers need to strengthen collaboration between divisions, particularly in marketing. Additionally, improvements are needed in customer and competitor orientation, with a stronger emphasis on fulfilling customer needs and developing competitive marketing strategies to boost business performance.

In Ragay, Camarines Sur, according to Calambas (2023), micro-entrepreneurs face challenges in improving sales and customer relationships. Financial planning is critical, and it is important to develop strategies to meet the demands of their businesses. Furthermore, Mendoza et al. (2023) highlight a problem in Cavite where micro and small enterprises (MSEs) need to enhance their entrepreneurial skills, broaden their business networks, and utilize low-cost financial institutions to improve performance. Moreover, Aguilar et al. (2024) highlight an issue in Santa Cruz, Laguna, where numerous small businesses prioritize gradual growth and sustainable practices rather than pursuing rapid expansion that negatively impacts overall business performance.

In Surigao del Sur, Saranza et al. (2024) emphasize that the lack of clear goals among business owners hinders business performance and efficiency. Regular monitoring of operations and continuous personal and professional development are essential for staying informed, innovative, and effective in managing their enterprises. Moreover, Samana & Manigo (2024) identified that SMEs in Tagum City need to promote proactiveness to encourage employee initiative, and employees must receive training in leadership, soft skills, and hard skills to effectively implement business plans and tackle challenges. As customers become more technologically savvy, targeting the market and providing this training can improve their business performance. Additionally, Quimada et al. (2024) emphasize that in Davao del Norte, department stores need to improve market orientation and specific action for managers, such as conducting market research, competitor analysis, and employee training to enhance market orientation and drive better results to boost business performance.

Many studies examine the underlying causes of business performance and its performance indicators. Along with the many challenges faced by SMEs, business performance must necessarily be put into place to boost performance outcomes. However, due to a lack of research, SMEs may not fully comprehend the negative consequences of not having strategic management on their business performance (Lo & Sugiarto, 2021). Similarly, according to Alhammad et al. (2021), researchers should offer a structured approach to enhance business strategy and performance. In line with this, there is no study proposed that focuses on strategic management and market orientation as influencers of business performance in SMEs, specifically in a local setting. As a result, this research differs from others because its main goal is to thoroughly examine how small and medium-sized business owner approach strategic management and market orientation as influencers of their business performance.

This study mainly focused on the retail SMEs in the Municipality of Santo Tomas to emphasize the significant understanding concerning strategic management and market orientation as an influencers of business performance. Therefore, this study’s overarching goal is to fill what is lacking in the literature by investigating the ways in which strategic management and market orientation might boost the performance of small and medium-sized businesses (SMEs), with a focus on the local environment.

Statement of the Problem

The purpose of this study was to investigate whether or not a correlation exists between the success of SMEs and their strategic management and market orientation practices.

The following questions were the targets of this effort:

What is the level of strategic management in terms of:

• formulation;
• implementation;
• monitoring;
• leadership?

What is the level of market orientation in terms of:

• customer orientation;
• competitor orientation;
• inter-functional coordination;
• profit emphasis?

What is the level of business performance in terms of:

• financial performance;
• non-financial performance; and
• operational performance?

Is there a significant relationship between:

• strategic management and business performance in small and medium enterprises?
• market orientation and Business Performance in small and medium enterprises?

Do strategic management and market orientation have influence the relationship with Business Performance in small and medium enterprises?

Hypotheses

To find out if the variables are significantly related to each other, the researchers came up with the following hypotheses:

• For SMEs, the correlation between strategic management and company performance is weak.
• In small and medium firms, there is no substantial correlation between market orientation and business performance.
• Lastly, small and medium-sized businesses’ performance is unrelated to strategic management and market orientation.

Theoretical Framework

This study underpins the idea of Barney (1991) on his notion about the theory of Resource-Based View. This theory elaborated that companies could acquire a competitive edge by utilizing distinct resources and skills, which forms the basis of this research.  Using these resources to boost performance is a key component of effective strategic management.  According to Paliwal and Sanexa (2023), when it comes to strategic management, a company’s unique internal resources those that are valuable, rare, hard to replicate, and well-structured are the most important factor in securing a competitive advantage and improving business performance. Strategic management allows firms to make educated decisions that enhance their market position and propel overall performance by analyzing industry structure and competitive landscapes, as highlighted by the Five Forces Model of Porter (1980).

On the other hand, this study is also anchored in the Stakeholder Theory by Freeman (1984), which states that firms should prioritize the needs of all stakeholders, including customers. Focusing on understanding and meeting market demands aligns with the interests of various stakeholders, ultimately contributing to better business performance. According to Musa and Lysenko (2022), Stakeholder theory highlights the value of involving diverse stakeholders in business decisions. This approach fosters a greater understanding of market needs, ultimately resulting in better business performance and positive financial results. Customer Relationship Management by Payne (2005) also stated the significance of understanding and responding to customer needs. A strong market orientation enables businesses to implement effective customer relationship management strategies, fostering loyalty and retention, and driving better business performance.

Conceptual Framework

The conceptual framework presented in Figure 1 illustrates the connections between the various variables in the research.

The first independent variable examined in this study is strategic management, which includes the indicator of formulation. This aspect of strategic environmental management entails proactive planning to address environmental challenges that might impact a company’s success, taking into account its strengths and weaknesses. It is about creating long-term strategies to manage environmental opportunities and challenges. (Varghese, 2024). In this study, this involves planning and creating a roadmap for a business to achieve its goals. This involves considering factors like what the business has available, what the market is like, and how competitors are doing.

The second indicator is implementation, which refers to the process of putting management plans, methods, and rules into action across different areas like growth programs, financial plans, and procedures. If a business doesn’t execute these strategies effectively, it can quickly fail. (Rani, 2019). In the course of the study, this involves a process of putting a company’s strategies into action to achieve its goals. This involves breaking down strategies into specific tasks and making sure the company has the resources it needs to succeed.

The third indicator is monitoring, which refers to collecting and analyzing information to see if your business is moving toward its goals. Strategic control is about taking action based on what you learn from this analysis (Lastiri, 2023). It is about monitoring and assessing how well a company is doing in reaching its goals. This is important to make sure strategies are working and are adjusted if needed.

The fourth indicator involves leadership, which refers to effectiveness. It is about the leader’s ability to share the business goals and values with employees and make good decisions for the organization without having to rely on strict rules and regulations (Abu Mostafa et al., 2021). In this study, this refers to a leader’s ability to guide a company towards its goals. This involves inspiring employees, creating a company culture that supports these goals, and making sure everyone is working towards the same vision.

The second independent variable is market orientation, specifically focusing on customer orientation, which involves a framework that prioritizes the customer above all other stakeholders within the organization. In essence, customer orientation entails understanding customer desires and needs, predicting their actions, and responding in an appropriate manner (Andreassen, 1994, as cited in Aulia and Soetjipto, 2022). In this study, this refers to a strategic approach where companies make sure that what is offered matches customer wants. This is important for staying successful and competitive in the long run.

 The second indicator is competitor orientation, which refers to a business strategy that focuses on outperforming other businesses in the market. It means striving to be better than competitors in terms of products, services, or business practices (Ferreira et al., 2020). This involves analyzing competitors’ strategies, strengths, weaknesses, and market positioning. By systematically monitoring the competitive landscape, organizations can make more informed decisions and enhance competitive advantage.

 The third indicator is inter-functional coordination, which refers to working together to share resources, information, and collaboration, which helps build trust with customers. It is like a psychological connection between employees, managers, and departments, all working together to achieve a common goal (Boonmalert et al., 2020). In this study, this involves helping different departments work together and share information to improve how the business works, create new ideas, and perform better.

The dependent variable is business performance with the following indicator: financial performance, which refers to a subjective assessment of a business’s ability to utilize its core business assets to generate revenue. It is also a general indicator of a business’s overall financial health during a specific time period (Kenton, 2022). In this study, this refers to the assessment of a business’s financial condition and effectiveness.

The second indicator is non-financial performance, which refers to measuring a business’s success in areas beyond financial results, such as employee development, customer satisfaction, and operational efficiency (Kumar et al., 2022). This refers to factors that contribute to a business’s success but cannot be quantified in terms of money.

The third indicator is operational performance, which refers to a business’s effectiveness in utilizing its human, financial, and material resources to work efficiently and achieve goals. It focuses on the relationship between actions and results (Wong et al., 2019). It is about the business’s ability to effectively and efficiently manage its internal operations to accomplish its objectives.

METHODOLOGY

In this chapter, the researchers laid out the framework for the study that investigated how strategic management and market orientation interact as elements impacting SME performance, as well as the research topic, research instrument, data collection procedures, and statistical methods used to analyze the results.

Research Design

This study used a quantitative descriptive correlation research approach. According to Ghanad, (2023), quantitative research focuses on measuring and analyzing numerical data to draw general conclusions about a larger population. It involved collecting data, using statistical methods to analyze it, and interpreting the results to test specific hypotheses.

Additionally, descriptive research gathers information by observing and describing things as they are. It uses tools like surveys, questionnaires, rubrics, interviews, or rankings. This type of research is often a starting point for new research areas or researchers, providing valuable background on a population, topic, or situation (Deckert & Wilson, 2023). Furthermore, Bhandari, (2021) correlational research is the researcher studies how different things are related to each other without trying to change them. A correlation shows how closely two or more things are connected, and it can be either positive or negative.

The research design concentrated on collecting quantifiable information regarding business strategic planning, customer orientation, and overall performance. Using a descriptive methodology, this study sought to understand the relationship between SME strategic management, market focus, and financial performance.  As part of this strategy, researchers used statistical analysis to measure the relative importance of these factors.  Moreover, the correlational method was employed to examine the linkage between market orientation and business performance, as well as the link between strategic management and business performance.

Research Subject      

Small and medium business owners from Santo Tomas, Davao del Norte, participated in this study.  There 200 small and medium-sized enterprises (SMEs) made up the overall sample for this research.  The sample size and total number of respondents were also determined using a stratified sampling procedure.

This study examined retail businesses that employed at least four or more employees and operated in sectors such as clothing stores, electronics stores, hardware stores, and grocery stores. To be eligible, these businesses must have been open for a minimum of one year and interacted directly with customers. They were also required to offer a wide variety of products to cater to different consumer preferences. Participants had to be at least 18 years old to ensure they were legally eligible to engage in business and decision-making activities. Additionally, participants were required to have basic knowledge of strategic management and market orientation to ensure a baseline level of understanding relevant to the research context. Only businesses with a valid license were included in the study, as this indicated formal operation within the retail sector. The business was also required to have a monthly income of at least 100,000 pesos to focus on enterprises with a certain level of financial stability and operational scale. Conversely, this study excluded businesses with fewer than three employees, temporary or seasonal businesses, wholesale businesses, franchise locations without independent operations, and retailers that exclusively sold through third-party platforms.

Research Instrument

For this study, three (3) research instruments were modified and adapted from existing questionnaires. These were carefully chosen and adjusted to meet the goals of the study. Additionally, the panel validated these three research instruments.

Strategic Management Questionnaire. The study used a modified adapted questionnaire to get the level of Strategic Management, it is from the research study titled “Integrating Sustainability into Strategic Management: A Path Towards Long-Term Business Success” by Alkhodary (2023). The questionnaire included 12 items covering the following aspects: formulation (3 items), implementation (3 items), monitoring (3 items), and leadership (3 items). Respondents rated each item using a 5-point Likert scale, with options ranging from 5- Strongly agree, 4- Agree, 3- Moderately agree, 2- Disagree, and 1- Strongly disagree.

Market Orientation Questionnaire. The study used a modified, adapted questionnaire to determine the level of market orientation; it is from the research study titled “Measuring Market Orientation: A Multi-factor, Multi-item Approach” by Deng and Dart (1994). There was a total of 26 questions on the survey, with 12 focusing on customers, 6 on competitors, and 8 on interdepartmental cooperation.  Participants were asked to rate each topic on a 5-point Likert scale, where 5 represents strongly agree, 4 represents agree, 3 represents moderate agreement, 2 represents disagree, and 1 represents strongly disagree.

Business Performance Questionnaire. “The Impact of Service Quality on Business Performance in Hospitality Industries: An Empirical Study” by Abu Nazir et al. (2016) is the source for the modified questionnaire that was utilized in this study to measure the degree of company performance.  There are five (5) questions pertaining to financial performance, five (5) to non-financial performance, and five (5) to operational performance; a total of fifteen (15) questions made up the survey.  Each topic was evaluated by respondents using a 5-point Likert scale: 5-Strongly agree, 4-Agree, 3-Moderately agree, 2-Disagree, and 1-Strongly disagree.

Statistical Treatment of Data          

The data was computed and the hypothesis was tested using the following statistical methods at a significance level of 0.05.

Mean. The mean is one of several measures of central tendency and is the most widely used indicator of the “typical value” for a variable in a distribution (Cooksey, 2020). It helped to assess the strategic management, market orientation, and business performance.

Pearson r. Pearson’s correlation coefficient is a number that shows how closely two things are related in a straight line. It tells if it goes up or down together (Weisburd et al., 2020). This was used to determine the importance of the connection between strategic management, market orientation, and business performance in small and medium-sized enterprises, thereby addressing the third research question.

Multiple Regression Analysis. A dependent variable’s connection with many independent variables could be described using multiple regression analysis, a statistical approach. It is a valuable tool for reducing information gaps in sparse data sets by combining them with densely mapped data sets (Paasche and Schroter, 2023). The data were gathered primarily through structured questionnaires and analyzed using descriptive correlation along with multiple regression analysis (Adewara et al.,2023). The results likely showed a strong connection between strategic management, market orientation, and business performance.

RESULTS AND DISCUSSIONS

In this chapter, the study’s findings and results, derived from the collected data, are presented and analyzed. Additionally, the null hypotheses proposed in the research were tested.

Level of Strategic Management in terms of Formulation

In terms of formulation, Table 1 displays the level of strategic management.  At 4.70 (the very high level), the item “Our business has a clear and well-defined long-term vision and mission” stands out. It was followed by “Our business has a systematic approach to developing strategic plans, including the use of SWOT analysis, scenario planning, or other strategic tools” at 4.50 (the descriptive equivalent of very high).  A very high descriptive score of 4.24 was assigned to the item “The process of formulating strategic plans in our business involves input from all relevant stakeholders,” which was the lowest item mean.

 A mean score of 4.48 indicates a very high level of strategic management in terms of formulation.  In other words, the formulation of strategic management of the company owners is always on full display.  The average mean’s standard deviation (SD) of 0.60 suggests that the strategic variables’ measurements of variability management in terms of formulation are close to the mean. Therefore, this reveals that homogeneity responses of the business owners and manager in this indicator.

The above outcomes suggest that the small and medium enterprises under focus appear to give priority to achieving a clear vision, structured planning, and stakeholder participation. These steer successful strategic management. If these practices are emphasized, they probably attain long-term prosperity and market advantage. Moreover, the strong means for all three items indicate that SME’s owners and managers ensure that their business has a well-defined long-term vision and mission.

According to Munyakho and Orina (2024), formulating strategies enables SMEs to remain proactive by predicting and responding to changes in the business environment. Pushpakumari et al., (2021) furthered this argument by showing that strategic management practices, such as formulation, directly improve performance indicators, including market share, revenue, profitability, and return on investment. All these findings serve to reiterate the importance of strategy formulation as a step that small and medium enterprises need to undertake in order to flourish and assist the stakeholders with practical suggestions.

Level of Strategic Management in terms Of Implementation

In terms of actual execution, Table 2 shows the degree of strategic management.  The second item, “Our business has a dedicated team responsible for implementing strategic plans,” has a mean score of 4.25 and a very high evident average of 4.32, along with a highly elevated and equivalent description of very high.  Items such as “The implementation of strategic plans in our business is supported by adequate resources (funding, technology, etc.)” had the lowest item means, at 2.32, and were described as extremely high.

 The average score of 4.24 given by business owners for the degree of strategic management execution was characterized as “very high.”  This proves that firm leaders always make a point of displaying strategic management in action.  Furthermore, the measurable gaps of strategic management in terms of implementation are indeed not far from the average, as indicated by the figure of standard deviation of 0.68 (SD), which is fairly near to the average mean.

Kabeyi (2019) argued that strategies are best executed when crafted for appropriate personnel at proper levels, as was noted here. Furthermore, it elaborated on the need for every employee to be involved in the strategic management process because it cultivates a sense of ownership and increases the probability of successful implementation (Cherono & Njeru, 2024). Moreover, Vidal et al. (2024) argued that the constraints to implementation affect strategic management practices to a greater degree, by which poorly framed strategies faced significantly lower sales performance relative to businesses that strategically framed and adopted positions. These statements strengthen the argument in favor of precise and comprehensive structures for strategy implementation, as well as the need for proactive cultivation of supporting processes.

Level of Strategic Management in terms Of Monitoring and Evaluating   

The degree of strategic management as it pertains to monitoring and evaluation is shown in Table 3.  A mean score of 4.22 (the descriptive equivalent of very high) was recorded for the first item, “The monitoring and evaluation process in our business is transparent and involves feedback from all stakeholders.” The second item, “Our business regularly tracks key performance indicators (KPIs) to evaluate the progress of its strategic plans,” had a mean score of 4.00.  “Our business uses a data-driven approach to make informed decisions about its strategic plans” received the lowest item mean of 3.69 and was described as high.

 On average, strategic management is at a high level when it comes to monitoring and evaluating, with a mean score of 3.97.  This makes the strategic management of the company owners through evaluation and monitoring more obvious.  In addition, the category mean has a standard deviation of 0.66, suggesting that the variables measuring the variability of strategic management for monitoring and evaluation are quite near to the mean.  Consequently, this demonstrates that the responses of company owners or managers to this signal are uniform.

The results reveal that SMEs prioritize monitoring their strategic management processes. They excel in transparency and regular KPI tracking, which are crucial for effective strategic management.

However, SME’s must improve the use of data analytics and evidence-based decision-making. By enhancing this aspect, SMEs can further strengthen their strategic monitoring processes and overall performance.

The findings supported the study of Nkutt et al., (2024) who stressed the importance of regular monitoring in improving business performance and added that SMEs focus on boosting strategy formulation processes and ensure the necessary resources are allocated for effective implementation.  Furthermore, Korankye and Aryee, (2021) supported that SMEs should involve strategic management experts, particularly in the area of strategy evaluation, to enhance the quality of the evaluation process, ultimately boosting performance and fostering growth. Additionally, Rice, (2024) supported that SMEs engaging in systematic planning and monitoring could significantly enhance business future performance.

Level of Strategic Management in terms Of Leadership

Table 4 displays the leadership level of the strategic management team.  Among the items, “The leadership in our business encourages innovation and risk-taking in the pursuit of strategic goals” has the second-highest mean score (4.01, the descriptive equivalent of very high), while “The leadership in our business actively communicates the strategic vision and mission to all employees” ranks second with a mean score of 3.97.  When compared to other items, “The leadership in our business provides a clear and consistent direction for strategic management” had the lowest item mean of 3.67 and a high descriptive equivalent.

 A category mean of 3.88 indicates a high level of strategic management in terms of leadership.  In many cases, this indicates that the strategic leadership management of the company owners is readily apparent.  Further, with an average mean standard deviation of 0.86, it is clear that leadership-related indicators of strategic management variability are quite near to the mean.  Thus, it is evident that the answers of company owners and managers to this signal are quite consistent.

The findings supported by Badmus, (2024), that strategic leadership enhances employee dedication by aligning organizational goals with individual aspirations, fostering a shared purpose, and cultivating a culture of trust and engagement. Susanto, (2023) further emphasizes that strategic leadership shapes the way SMEs formulate strategies, ensuring these plans align with the unique characteristics of the business. This alignment not only improves performance and competitiveness but also builds trust in leadership, which positively impacts the success of SMEs. Similarly, Israel et al., (2023) reveal that strategic leadership influences SME performance through initiatives like organizational learning and fostering strong cultural values.

Summary of the Level of Strategic Management in Small and Medium Enterprises

Tabulated in Table 5 provides an overview of the degree of strategic management in SMEs.  With a variance of 0.66 and the highest average mean of 4.48 among all the items, “Formulation” clearly indicates that it is always present in these organizations.   With a mean score of 4.24 and a standard deviation of 0.68, “Implementation” is second, indicating that it is likewise very common, while it is low ranking. “Leadership,” displays high corresponding descriptions while having the lowest average mean of 3.88.

The data showed that small and medium-sized businesses (SMEs) have a reasonably high degree of strategic management, with an average score of 4.14 and consistent implementation, as shown by a low variation of 0.72.  Given this, it is safe to assume that most SMEs possess a strong grasp of strategic management principles.  The findings further show that SMEs have all the necessary tools to achieve their long-term objectives successfully.

The results are supported by the study of Ekon and Isayas (2022), which concludes that for the benefits of strategic management practices to be reflected in the SMEs, firms must be able to implement and evaluate the strategy formulated. Moreover, Sari’s (2024) statement provides practical recommendations for SME managers to optimize their strategic management processes and offers insights for policymakers to create supportive environments for SME growth in emerging markets.

Level of Market Orientation in terms of Customer Orientation

Table 6 shows the degree of customer-centric market orientation.  Among the items, “Our business would be much better off if our sales force just worked a bit harder” has the second-highest mean score (4.42), while “In our business, marketing’s most important job is to identify and help meet the needs of our customers” has the highest mean score (4.44), which is the descriptive equivalent of very high.  The item “We concentrate on production and let our distributors worry about sales” received the lowest item mean of 4.01 and was described as high.

 A category means of 4.28 indicates a level of consumer orientation that is quite high in terms of market orientation.  This means that the owners’ focus on customers is constantly front and center in their market orientation.  Market orientation measures of variability in terms of consumer orientation are close to the mean, as indicated by the 0.67 standard deviation in the category mean.

The data shows the homogeneity of business owners’ and managers’ responses in this indicator. Bekata and Kero’s (2024) study emphasizes how important customer orientation is to open innovation and SME performance. It suggests that a strong customer focus can drive innovation, leading to improved business outcomes. Additionally, Domi et al. (2019) indicate that a strong customer focus contributes positively to business performance, emphasizing the significance of comprehending and satisfying client needs.

Level of Market Orientation in terms of Competitor Orientation

Table 7 shows the degree of market orientation relative to the level of competition.  The item “We target opportunities based on competitive advantage.” gets the second-highest mean score (4.17), followed by “We regularly analyze our competitors’ marketing programs.” with the highest mean score (4.29), which is the descriptive equivalent of extremely high.  In contrast, “We respond rapidly to competitors’ actions” received the lowest item mean of 4.13 and was described as high.

A category means of 4.18 indicates a high level of market orientation relative to competitor orientation.  This indicates that the owners’ market orientation is typically clearly focused on competing with others.  In addition, the category mean has a standard deviation of 0.75, which suggests that the measures of market orientation variability with respect to competitor orientation are near the mean.  The fact that all company owners and managers gave the same answer to this indicator proves it.

Given the emphasis mentioned, according to Ogundare and Merwe (2024), competitive advantage, which is impacted by proactiveness and competitor orientation, also helps SMEs operate better in SME sectors. Moreover, Ombaka and Jagongo (2023) emphasize that SMEs adopting a strong competitor orientationsuch as analyzing competitors’ marketing strategies and training sales teams to monitor market activity tend to achieve better business performance. The ability to anticipate and respond to competitive threats helps them stay relevant, foster innovation, and build resilience in a constantly changing market. Furthermore, Putra (2024) highlighted that market orientation, particularly in observing and reacting to competitors’ actions, significantly contributes to the marketing success of MSMEs. When businesses align competitor insights with their strategic advantages, their marketing performance improves, indicating that competitive awareness should be an essential part of strategic planning.

Level of Market Orientation in terms of Inter-Functional Coordination

According to Table 8, the degree of market orientation was determined by the degree to which different departments worked together.  At 4.47, the item describing how well each department’s activities are integrated gets the highest mean score, followed by the item describing how well each department’s activities are integrated.  The marketing team here has a lot of say in how new products are made, with a mean score of 4.25.  Items such as “In our business, marketing is confined to the sales/marketing department” had the lowest item mean of 4.02 despite having a high descriptive equivalent.

 A descriptive equivalent of a high level of market orientation is indicated by an average mean of 4.19 in terms of inter-functional coordination.  Because of this, it is not uncommon for business owners’ market orientation to be apparent in how they coordinate different functions.  Furthermore, the measures of variability of market orientation in terms of inter-functional coordination are near the mean, as indicated by the standard deviation of 0.70 in the average mean.  This proves that the reactions of company owners and managers to this metric are consistent with one another.

The results supported the findings of Munarak (2019) that inter-functional coordination leads to efficient coordination of SMEs’ personnel and activities for optimal performance. Long-term focus assists SMEs in emphasizing long-term, enduring activities and investments that convey and deliver value to customers, the firms themselves, and all other stakeholders. Lastly, the achievement of the profit objective justifies all the investments SMEs make over time. According to Mukthar and Azhar’s, (2020), internal marketing also highlights inter-functional cooperation as a starting point for raising business performance and customer satisfaction.  Furthermore, it is confirmed by Mamnam et al. (2021) that inter-functional alignment significantly affects corporate success.  This is because inter-functional coordination enhances teamwork in achieving the company’s goals, the free flow of information inside an organization, and communication between departments and personnel.

Level of Market Orientation in terms of Profit Emphasis

Table 9 revealed the level of market orientation in terms of profit emphasis. The item “We have a good idea of the sales potential for each of our markets” has the highest mean of 4.37 with the descriptive equivalent of very high, followed by the item “Our accounting system could fairly quickly determine the profitability of each the profitability of each our product lines” with a mean of 4.16. On the other hand, the item “Our business does very little formal marketing planning” got the lowest item mean of 4.04 with a descriptive equivalent of high.

The level of market orientation in terms of profit emphasis has an average mean of 4.14 with a descriptive equivalent of high. This means that the business owners’ market orientation in terms of profit emphasis is oftentimes evident. Moreover, the standard deviation of 0.75 in the average mean indicates the measures of variability of market orientation in terms of profit emphasis are close to the mean.  Therefore, this shows the homogeneity of business owners and managers responses in this indicator.

The findings aligned with the study of Setiawan et al. (2022) found that well-formulated business strategies positively impact competitive advantage through performance and innovation.  Furthermore, Zubaidi & Indra, (2021) support that profitability positively affects capital structure decisions, which in turn can impact the firm’s growth and sustainability. It implied that profitability and growth influence the capital structure of MSMEs, considering company size as a control variable. Additionally, Asika & Konya (2020) emphasized that businesses may adopt a highly competitive approach and allocate more resources to marketing, product services, and quality enhancements compared to their rivals, with the goal of maximizing profitability.

Summary of the Level of Market Orientation in Small and Medium Enterprises

Table 10 provides a snapshot of the degree of market orientation across SMEs.  With an average mean of 4.28 and a variation of 0.67, the item “Customer Orientation” stands out among the rest, showing that these businesses consistently prioritize their customers.  On the other hand, “Inter-functional Coordination” is quite common, followed by number two with an average mean of 4.19 and a variance of 0.70.  With an average mean of 4.14, “Profit Emphasis” is the lowest-ranked, yet it displays high corresponding descriptors anyway.

On the whole, SMEs have a high degree of market orientation was consistently applied, as shown by a low variance of 0.72 and an average score of 4.20.  This provides evidence that a focus on the market is a cornerstone of most SMEs.  The findings also show that SMEs have a keen eye for the market, which helps SMEs provide value-based offerings that boost demand and consumer happiness.

The finding aligned with the study of Chaudhary et al. (2023), which revealed that the interplay between high market orientation, strategic flexibility, and lower competition intensity leads to superior firm performance. As such, it is necessary for small firms to align market-oriented strategies with capabilities and the competitive environment to achieve better performance. Additionally, D’souza et al. (2022) support this by showing the positive effect of market orientation on SME performance, while Hamel and Wijaya (2020) provide empirical evidence demonstrating how market orientation drives improved business performance. These studies aligned with the results of this study, which emphasize that a market-oriented approach is a key factor for SMEs to succeed in a competitive environment.

 Level of Business Performance in terms of Financial Performance

Table 10 provides a snapshot of the degree of market orientation across SMEs.  With an average mean of 4.28 and a variation of 0.67, the item “Customer Orientation” stands out among the rest, showing that these businesses consistently prioritize their customers.  On the other hand, “Inter-functional Coordination” is quite common, followed by number two with an average mean of 4.19 and a variance of 0.70.  With an average mean of 4.14, “Profit Emphasis” is the lowest-ranked, yet it displays high corresponding descriptors anyway.

Summary of the Level of Market Orientation in Small and Medium Enterprises

According to Table 11, the degree of financial performance of the company was reported.  With a mean score of 4.38 (the descriptive equivalent of extremely high), the item “Considering strategy and market orientation, the revenue of a business will completely improve” comes in second, while “Improving product and service image can increase market share” receives the highest score.  When compared to other items, “Enhanced service quality will lead to improved business assets” had the lowest item mean of 4.19 and a high descriptive equivalent. With a mean score of 4.27, which is the descriptive equivalent of very high, the degree of financial success for businesses is impressive.  Because of this, the success or failure of a business owner’s venture is constantly visible.  Furthermore, with a standard deviation of 0.69 in the average mean, it may be inferred that the financial performance metrics used to measure corporate success are quite near the mean.  This indicator shows that company owners’ and managers’ answers are very similar.

Given the findings, it is emphasized that SMEs strongly recognize the importance of aligning business strategies with market orientation, product/service quality, and branding to achieve strong financial results. Improving these areas will boost revenue, profitability, and market share. By prioritizing these key factors, SMEs could secure long-term growth and sustainability in an increasingly competitive market.

The finding is supported by the idea of Bartolacci et al. (2020), a systematic literature review (SLR) provides a thorough understanding of the relationship between sustainability and SMEs’ financial performance. It is also found that most studies support a positive correlation between sustainability and SMEs’ competitiveness and financial performance.  Furthermore, the study’s findings of Kafidi & Kaulihowa (2023) stated that strategic planning could be used to establish specific financial performance goals and to help relevant stakeholders implement policies that give SME owners and managers the best possible mix of business management abilities. Additionally, Lussak, (2020) found that survival was impacted by financial performance. Investigating operations management among SME entrepreneurs must be a crucial area of study due to the rising death rates and the requirement for SMEs to remain sustainable. This is due to the fact that one of the key functional areas that would have an impact on SMEs’ sustainability is the operation function.

Level of Business Performance in terms of Non-Financial Performance

The degree of non-financial success as measured by the company is shown in Table 12. The items “Improved product and service quality can enhance the expansion of new products and services” and “The retail store maintains the relationship between consumer and supplier” top the list, while the item “Higher service quality will lead to a more effective market orientation” comes in second with a mean score of 4.40, 4.40 and 4.38, respectively, indicating a very high level of agreement.  When compared to other items, “Enhanced service quality will lead to improved business assets” had the lowest item mean of 4.19 and a high descriptive equivalent.

The non-financial performance level of the company is quite strong, with an average mean score of 4.37.  Because of this, the non-financial performance of the company is always manifested.  A non-financial measure of business performance variability is around the mean, with a standard deviation of 0.62.  Consequently, this demonstrates that the replies of company owners and managers in this indicator are consistent with one another.

The study’s findings showed how social media used among SMEs is related to both financial and non-financial performance. It improves brand image and reputation, engages and cultivates consumer connections and loyalty (Qalati et al., 2021), and makes product and service promotion easier (Abed, 2020). Additionally, using non-financial performance metrics, such as customer satisfaction and employee engagement, clarifies job expectations and strengthens procedural fairness. Employees feel more fairly assessed when evaluations are based on comprehensive criteria rather than just financial outcomes (Lestari et al., 2022). Moreover, it is important to determine managerial compensation for SMEs, especially in uncertain environments where financial metrics alone are insufficient. By incorporating factors like customer loyalty and operational efficiency, SMEs can develop more balanced reward systems (Alves & Laurencia, 2022).

Level of Business Performance in terms of Operational Performance

The operational performance level of the company is shown in Table 13.  The item with the highest mean score, 4.37 (the descriptive equivalent of very high), is “Strategy can bring continuous improvements and efficiency to service operational activity.” The next three items, “Planning and strategy can reduce costs,” “Better service quality can lead to an increase in customer satisfaction,” and “The business operation can run smoothly and efficiently,” each have a mean score of 4.28.  However, with a descriptive equivalent of extremely high and an item mean of 4.23, the statement “Strategic implementation can thoroughly improve the process efficiency of a retail store.” followed.

With an average mean of 4.29, which is the descriptive equivalent of very high, the degree of operational success for businesses is impressive.  When it comes to operational performance, the owners’ company performance is always visible.  Businesses’ operational performance metrics show low dispersion around the mean, with a standard deviation of 0.66.

The study confirms the findings of Adegboyegun et al. (2020) that the control environment and control activities have a favorable effect on SMEs’ operating performance. Therefore, in order to improve operating performance, SMEs should preserve and capitalize on the benefits of the control environment and control activities. In addition, Peltola et al. (2022) stressed that the company’s innovative efforts to achieve these objectives are inextricably linked to its operational performance, a resource activity that influences the company’s capacity to achieve its performance and achievements.  Furthermore, Lee, (2021) emphasized that enhancing an organization’s production, marketing, technology commercialization, R&D, and other capacities has a positive effect on its financial and operational success.

Summary of the Level of Business Performance in Small and Medium Enterprises

According to Table 14, small and medium-sized businesses function at a certain level.   Out of all the components, “Non-financial Performance” stands out with an average mean of 4.37 and a variation of 0.62. This indicates that these companies consistently demonstrate non-financial performance. The “operational performance” is also very common, coming in at number two, with a mean of 4.29 and a standard deviation of 0.66. Despite having a low average mean of 4.27, “Financial Performance” demonstrates strong corresponding descriptors and was rated last.

As it was apparent from the table, the overall level of business performance in small and medium enterprises (SMEs) is relatively very high, with an average score of 4.31 and a consistent application, as indicated by a low variation of 0.66. It indicates that SMEs generally have a solid foundation in business performance. Additionally, the results also highlighted that it is likely to contribute positively to overall success and competitiveness in the market.

The study of Kurniawan (2024) emphasized that adopting digital accounting systems and securing strong managerial support are pivotal for improving business operations. In the current competitive environment integrating technology and leadership backing are fundamental needs for SMEs to improve efficiency and overall business performance. Similarly, Wall (2021) reinforced that implementing innovative strategies is necessary to improve business performance and for SMEs to maintain long-term viability, attain sustainable growth, and stay competitive. Moreover, Singthong et al. (2023) highlighted that SMEs must strengthen their entrepreneurial and marketing capabilities to maximize government support and secure financial resources. Collectively, these studies underscore that enhancing business performance is a critical necessity for SMEs, as it directly influences their sustainability, growth, and market competitiveness.

Significance of the relationship between Strategic Management, Market Orientation, and Business Performance in Small and Medium Enterprises.

For SMEs, Table 15 shows how market orientation, strategic management, and company performance are related. A significant relationship between strategic management and market orientation as an influencer of business performance was found in the correlation analysis (p>0.05). The coefficient determination for strategic management was 0.254, while for market orientation, it was 0.198.  One interesting finding is that the two variables are significantly correlated (p-values less than 0.05) and have a weak positive correlation in terms of degree of correlation.  This proves that market orientation and strategic management are strongly related to company success.  This led to the rejection of the null hypothesis.

According to Wakjira and Kant, (2023) research, market orientation is essential for company performance and can boost customer and employee happiness. The findings also show that businesses that are focused on the market are better able to comprehend the wants of their clients, which enables them to create better products and obtain a competitive edge to have better performance. Ngetich (2023) stated that organizations can enhance overall business performance and better match their strategies with customer needs by implementing a market-oriented approach. The study found that by reviewing business strategies, analyzing competitors, discussing future needs with customers, concentrating more on customers than competitors, and disseminating data on customer satisfaction at all levels, market orientation helps retail stores concentrate on making sure that customers are satisfied.

Regression Analysis on the Strategic Management and Market Orientation as influencer of Business Performance among Small and Medium Enterprises

Regression analysis was performed to determine the significant influence of strategic management and market orientation on business performance for small and medium enterprises. The results in Table 16 revealed that market orientation does not appear to be a statistically significant influencer of business performance for small and medium enterprises.

This study discovered a robust correlation between SMEs’ strategic management efficacy and performance across a variety of financial and non-financial metrics. The impact of strategic management on the efficiency and productivity of small and medium-sized enterprises (SMEs) was investigated by Ishtiaq et al. (2021).  Good strategic management techniques are associated with improved financial and non-financial outcomes for organizations. Boosted customer happiness, loyalty, and long-term profitability are further outcomes of strategic management that are amplified by a robust company culture.  This highlighted the significance of establishing a supportive culture and implementing strong strategic management techniques for SMEs to thrive in competitive marketplaces.  The results, however, indicated that strategic management appears to significantly affect the performance of small and medium-sized firms (𝑘 0.005).   The beta result (β=0.153) indicates that for every unit increase in strategic management, there was a 0.153-unit improvement in business performance.   The results also contradict the study’s hypotheses at the 5% level of significance.

The study by Rahman (2021) suggests that market orientation’s effects on company success can differ based on specific contexts and factors. Furthermore, studies have identified scenarios where the relationship between market orientation and performance is not straightforward. For instance, research on SMEs in the creative economy sector found that while market orientation directly affects performance, innovation practices did not mediate this relationship as expected (Nasrah, 2023). However, According to Al Abdulkareem (2024) emphasized in his study, businesses that take the time to plan strategies carefully tend to have better business performance.

This shows that solid strategic management plays a key role in helping businesses reach their goals more effectively. Likewise, Aljahdali and Ali (2024) emphasized that when an organization nurtures a strong and supportive culture, it further enhances the effectiveness of strategic management, leading to improved business performance. It implies that effective strategic management significantly enhances business performance.

SUMMARY OF FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

Summary of Findings

1.For the level of strategic management, formulation achieved the highest average score of 4.48, indicating a very high rating and a standard deviation of 0.66. Implementation followed with an average score of 4.24, also categorized as very high, with a standard deviation of 0.68. Monitoring and evaluation received an average of 3.97, corresponding to a very high descriptive equivalent and a standard deviation of 0.66. Conversely, leadership had the lowest average score of 3.88 and a standard deviation of 0.86. Moreover, the overall average is 4.14, with a standard deviation of 0.72, classified as very high.

2.For the level of market orientation, customer orientation achieved the highest average score of 4.28, which corresponds to a descriptive level of very high, with a standard deviation of 0.67. Following closely is inter-functional coordination, which has an average score of 4.19, rated as high, and a standard deviation of 0.70. Competitor orientation follows inter-functional

3.coordination with a mean score of 4.18, also categorized as high. Conversely, profit emphasis recorded the lowest average at 4.14, classified as high, with a standard deviation of 0.75. Additionally, the overall average stands at 4.20, with a standard deviation of 0.72, and is described as very high.

4.For the level of business performance, non-financial performance achieved the highest average score of 4.37 with a standard deviation of 0.62. This was closely followed by operational performance, which had an average of 4.29 and a standard deviation of 0.66. Furthermore, all indicators have a similar descriptive classification of very high. Additionally, the overall mean was 4.31 with a standard deviation of 0.66, also classified as very high.

5.Strategic Management has a significant relationship with business performance among small and medium enterprises (r=0.254, p=0.003). Specifically, the correlation between these two variables is a weak positive one, and since the p-value is below the 0.05 significance threshold, the relationship is considered significant. This implies a meaningful connection between strategic management and the business performance of small and medium enterprises, leading to the rejection of the null hypothesis. Conversely, market orientation similarly demonstrates a significant relationship with business performance in small and medium enterprises (r=0.198, p=0.023). Again, the degree of correlation is low and positive, and because the p-value is below 0.05, this relationship is also significant. Thus, there is a significant connection between market orientation and the business performance of small and medium enterprises, resulting in the rejection of the null hypothesis.

6.Strategic management influences business performance (𝛽 = 0.153, 𝑝 < 0.040), but market orientation does not significantly influence business performance (𝛽 = 0.077, 𝑝 < 0.379). Given the significance values, we reject the null hypothesis concerning strategic management while accepting the null hypothesis regarding market orientation.

Conclusions

• The level of strategic management is high. The results of this study indicate that it has a significant impact on business performance. Moreover, it implies that SMEs generally have a strong foundation for improving business performance. Additionally, the findings highlighted that SMEs are well-equipped to navigate their strategic goals effectively to enhance business performance.
• The level of market orientation is high. The results of this study showed that SMEs consistently apply market orientation principles. The components Customer Orientation and Inter-functional Coordination indicated a strong presence in SMEs, further reinforcing the alignment of business functions with market needs. However, Profit Emphasis ranks the lowest, yet it still reflects a high level of importance. Moreover, the findings confirm that market orientation remains significant across SMEs, indicating that it has a strong market focus, enabling them to deliver value-based propositions that enhance customer satisfaction and drive business growth.
• There is a significant relationship between strategic management and business performance among small and medium enterprises. Based on the result of the study, SMEs are able to adopt effective strategic management practices that enhance their business performance. Additionally, market orientation shows a significant link to business performance within small and medium enterprises. The study’s findings suggest that SMEs that concentrate on market aspects such as customer needs, competition, and the external environment are likely to achieve better performance.
• Strategic management significantly influences business performance among small and medium enterprises. Conversely, market orientation does not have a significant influence on the performance of small and medium enterprises. SMEs should focus on strategic management as a core business practice ensuring that businesses are structured, goal-driven, and prepared for competition and challenges while also refining their market orientation strategies to enhance customer engagement and competitiveness.

Recommendations

Small and medium enterprises (SMEs) owners or managers may undergo training in data tools and incorporate regular reviews into their planning processes. Leaders should enhance communication, clearly articulate to the company’s vision and goals, and align their team through training programs. Promoting a culture of creativity, calculated risks, and learning from both successes and failures is vital for continuous improvement.

Small and medium enterprises (SMEs) owners or managers may involve all departments in marketing efforts to ensure everything aligns with customer needs. Production and sales teams may work closely together to match products with market demand instead of relying only on distributors. SMEs may also create detailed marketing plans with clear goals, strategies, and target audiences, regularly reviewing them with everyone involved to stay on track and meet business goals.

SME owners or managers may focus on excellent customer service by training staff, using feedback, and adopting efficient technology. They must optimize processes, embrace continuous improvement, and use data to understand customer needs. Tailoring products, using targeted marketing, and regularly updating strategies based on market trends are key to staying competitive and boosting sales.

Based on our findings, although market orientation is accepted, Orbaningsih et al. (2024) confirmed that market orientation has a significant influence on Business performance in SMEs, which emphasizes that SME managers may develop the capability to interpret market demands effectively and engage actively in marketing their products to enhance sustainability and performance.

Future researchers are encouraged to identify the key elements of strategic management that are strongly linked or influence to business performance. This will help SMEs to focus their efforts on the areas that will yield the greatest returns. By conducting similar studies in diverse contexts, researchers can validate findings and uncover broader patterns in the relationship between strategic management and market orientation on business performance.

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