Chapter 6 STRATEGIC PLANNING FOR SMALL BUSINESS
Small business needs to be successful. The high rate of small business failure makes the need more urgent.
Strategic Planning provides answer .In strategic planning, the major objectives of the organization are determined, and strategies are formulated to achieve those objectives.
WHAT IS STRATEGIC PLANNING:
Strategic planning refers to the process of determining the primary objectives of entrepreneurship and then adopting courses of action and allocating resources to achieve those objectives.
The definition involves three distinct steps:
1. determination of objectives
2. adoption of course of action
3. allocation of resources
Mission statement-refers to the basic description of the fundamental nature, rationale and direction of the firm.
1. how the entrepreneur intends to use his resources
2. how the entrepreneur expects to relate to the ever changing environment
3. the kinds of values the entrepreneur intends to offer to his customers
Strategic Objectives- this term refers to specific performance targets that the entrepreneurship hopes to accomplish.
Adoption of Course of Action
A strategy is a carefully designed plan for achieving the firm's objectives.
In developing realistic strategies, the entrepreneur can make use of the most popular tools.
These are the following:
1. SWOT analysis
2. forecasts of future sales performance
SWOT analysis is an organized method of assessing a firm's strengths and weaknesses and the opportunities and threats in the external environment that confront or will confront the firm.
Strength -refers to kill a competence a valuable organizational resource or competitive capability or an achievement that gives the firm a market advantage.
Weakness -refers to something a company lacks or does poorly( compared with others ) or a condition that puts it at a disadvantage.
Opportunity- refers to the chance offered by the external environment to improve the firm's situation significantly.
Threats -refer to a challenge posed by an unfavorable trend or development in the external environment that would led to, in the absence of purposeful entrepreneurial action, the erosion of the entrepreneurship position.
Forecasts of Future Sales Performance
Forecasts are supplementary tools for SWOT analysis. It is an estimate or prediction of the future sales or income of the firm. Forecasts may be short term (one year or less), medium –term (one to five years), long term (over five years).
Implementing Strategic Plans
Strategies are useless unless they are implemented. To put strategies into action, the following activities are required:
1. identifying the specific methods to be used
2. deploying the resources needed to implement the intended plans
Identifying Specific Methods
If "establish branches in strategic locations" is stated strategy, the tactical plan to implement it may appear as follows:
1. identify strategic locations
2. determine the potentials of the identified strategic locations
3. set a timetable for installing the branches
Deploying the Resources
The specific aim of planning is to be able to deploy the right quality and quantity of resources in the various activities required to achieve the objectives. The resources would be indicated in terms of human and nonhuman elements.
Fundamental Strategies for Small Business
These are certain basic strategies that are necessary for the survival of small business.
These are the following:
1. the flexibility strategy
2. the strategy f effectiveness as priority
3. the strategy of starting simple
Strategy Concerns of Small Business
In determining what strategy to adapt, the entrepreneur is confronted with two general situations.
1. Is he organizing a new business
2. Is he currently running an old business
New Business- this term refers to one that will be operated for the first time by the small business operator. If so his options consist of the following:
1. acquiring an existing business
2. organizing a new business
3. buying a franchise
Strategies for a Going Concern
The strategic problems of small business are not as intense as those of large business. Even is small business cannot compete head-on with big business its size has a built-in maneuverability which is a very important competitive weapon.
Any or all of the following strategies are applicable to small business:
1. Segment market-the small business operator will have to identify the market segment with which it has an expertise, then compete.
2. Efficient use or research and development- since the small business cannot fight the research and development efforts of big companies, it must concentrate its R and D efforts to lowering process costs or to bring new products to the market.
3. Think small- the small business can still be strong with being small. The emphasis must be on profits rather than sales growth, and specialization rather than diversification.
Why Small Business Operators Ignore Strategic Planning
Important as it is strategic planning in small business management is often ignored. This situation is true in many parts of the world including the Philippines.
The reasons could be any of the following:
1. Lack of Expertise- Few small business operators are trained in strategic planning.
2. Inability to get started- Even if small business operators are convinced about the importance of planning, they fail to get started for lack of sufficient exposure to planning activities.
3. Uncontrollable often intangible variables- the uncontrollable and often intangible variables complicate planning which later on discourages the small business operator from repeating the exercise.
4. Resource poverty- planning requires time but the small business operator oftentimes does not have it. This is so because he must attend to the problems related to lack of adequate capital, managerial experience, outside advice, management specialist, and other key assets.
5. Focus on daily operations- the daily requirements of small business usually keep the small business operator so busy that he is left with no time for planning.
6. Failure to realize the importance of strategic planning- the small business operator is exposed to the environment of successful Filipino businessmen who do not engage in strategic planning. This gives sufficient reason to disregard the benefits of strategic planning. It is ironic that even if studies show the usefulness of strategic planning this activity is not fully appreciated.
Strategies for a Going Concern
The strategic problems of small business are not as intense as those of large business. Even is small business cannot compete head-on with big business its size has a built-in maneuverability which is a very important competitive weapon.
Any or all of the following strategies are applicable to small business:
1. Segment market-the small business operator will have to identify the market segment with which it has an expertise, then compete.
2. Efficient use or research and development- since the small business cannot fight the research and development efforts of big companies, it must concentrate its R and D efforts to lowering process costs or to bring new products to the market.
3. Think small- the small business can still be strong with being small. The emphasis must be on profits rather than sales growth, and specialization rather than diversification.
Why Small Business Operators Ignore Strategic Planning
Important as it is strategic planning in small business management is often ignored. This situation is true in many parts of the world including the Philippines.
The reasons could be any of the following:
1. Lack of Expertise- Few small business operators are trained in strategic planning.
2. Inability to get started- Even if small business operators are convinced about the importance of planning, they fail to get started for lack of sufficient exposure to planning activities.
3. Uncontrollable often intangible variables- the uncontrollable and often intangible variables complicate planning which later on discourages the small business operator from repeating the exercise.
4. Resource poverty- planning requires time but the small business operator oftentimes does not have it. This is so because he must attend to the problems related to lack of adequate capital, managerial experience, outside advice, management specialist, and other key assets.
5. Focus on daily operations- the daily requirements of small business usually keep the small business operator so busy that he is left with no time for planning.
6. Failure to realize the importance of strategic planning- the small business operator is exposed to the environment of successful Filipino businessmen who do not engage in strategic planning. This gives sufficient reason to disregard the benefits of strategic planning. It is ironic that even if studies show the usefulness of strategic planning this activity is not fully appreciated.
