Navigating Strategic Trade-Offs and Financial Performance: Evidence from Somali Firms.

Abstract:

Somalia’s private sector, which contributes over 90% of employment and trade output, operates within a fragile economic landscape marked by limited access to formal financing, reliance on internal funds, and institutional weaknesses. This study examines the impact of mutually exclusive business strategies—namely new capital investments, project selection, and stock investments—on the financial performance of Somali firms. Grounded in Decision Theory, the research employed a descriptive, explanatory, and correlational design under a positivist philosophy to ensure objective measurement and statistical rigor. Data were collected from 160 departmental heads across 53 companies using structured questionnaires and analyzed through SPSS. Descriptive statistics captured respondent perceptions, while Pearson correlation and univariate regression tested relationships and hypotheses. Results revealed that mutually exclusive strategies significantly and positively influence firm performance, with a moderate correlation (R = 0.381, p = 0.004). The findings underscore the role of strategic investment decisions, stakeholder engagement, and diversification in enhancing profitability, return on assets, and return on equity. The study concludes that implementing mutually exclusive strategies individually strengthens financial outcomes, while coordinated integration maximizes synergistic benefits, minimizes resource overlap, and supports sustainable growth in Puntland’s business environment. Recommendations include prioritizing high-potential projects, establishing clear guidelines for stock investments, and embedding these strategies within comprehensive strategic plans to optimize long-term performance.