EFFECT OF STRATEGY IMPLEMENTATION AND STRATEGY EVALUATION ON THE FINANCIAL PERFORMANCE OF PROFESSIONAL SERVICE SMES IN KISUMU COUNTY, KENYA

Abstract

Small and Medium Enterprises (SMEs) remain pivotal to Kenya’s economic development through job creation, innovation, and income generation. Despite their importance, professional service SMEs often experience weak financial performance due to poor execution and inadequate monitoring of strategic plans. This study examined the effect of strategy implementation and strategy evaluation on the financial performance of professional service SMEs in Kisumu County, Kenya. Anchored on the Balanced Scorecard Model and the Dynamic Capabilities Theory, the study adopted a descriptive research design targeting 245 professional service SMEs, with a sample of 152 selected through stratified random sampling. Data were collected using structured questionnaires and analyzed through descriptive and inferential statistics using SPSS version 28. Reliability was confirmed with a Cronbach’s Alpha coefficient of 0.83. Regression results indicated that both strategy implementation (β = 0.229, p < 0.01) and strategy evaluation (β = 0.263, p < 0.001) had positive and statistically significant effects on financial performance, jointly explaining 72.4% of the variation in performance (R² = 0.724). The study concludes that consistent implementation and continuous evaluation of strategies enhance profitability, liquidity, and growth. It recommends that SMEs institutionalize structured implementation frameworks with clear performance indicators and feedback mechanisms to ensure strategic alignment and long-term sustainability.