Formal Strategic Plan for Small Businesses

Only available on StudyMode
  • Download(s) : 63
  • Published : December 3, 2012
Open Document
Text Preview
BULETINUL

Universităţii Petrol – Gaze din Ploieşti

Vol. LXI
No. 3/2009

11 - 17

Seria
Ştiinţe Economice

Incidence of Strategic Planning in Small Business:
an Overview
Nimalathasan Balasundaram
Department of Commerce, University of Jaffna, Thirunelveli, Jaffna, SriLanka email: bnimalathasan@yahoo.com

Abstract
During the last several years, extensive attention has been paid to the issues relating to strategic planning. Even practitioners and academicians have continued their debates on the merits of strategic planning. The literature on planning in small business has grown considerably over the past decades. With a few notable exceptions, many scholars have recommended that small firms need to use strategic planning as an essential tool for their improved performance. According to Gibb and Scott (1985) strategic planning can almost certainly influence the growth of the company and provide a framework for enhancing this or it can also help maintain the existing size and capability of the firm. However, the preconceived notions of strategic planning support the idea that formal strategic planning practices heighten the owner managers’ ability to think strategically (Porter, 1980; Lyles et al., 1993). Hence, the present study is initiated on incidence of strategic planning in small business. Secondary data have been taken from research monographs, books, and journals etc. Therefore, this study will contribute to the existing stock of knowledge in the literature of strategic planning in small business. Finally, based on the empirical findings strategic planning contributed significantly to the relationship with the overall performance of small business under study.

Keywords: strategic planning, small business, performance
JEL Classification: M1, M14, M16

Introduction
Importance of strategic planning as a major activity of organizational management is being increasingly accepted by both academician and professional managers. The literature on planning in small business has grown considerably over the past decades. With a few notable exceptions, many scholars have recommended that small firms need to use strategic planning as an essential tool for their improved performance.

Support for the planning process in small firms comes from a variety of writers in a number of forms (Gibb and Scott, 1985). It is often asserted that strategic planning is essential for a small as well as a large business for no other reason than that it helps them to take better advantage of the opportunities which lie in the future and to forestall the threats that it contains (Steiner, 1967). Strategic planning is seen as a necessary attribute of entrepreneurship. Carland et.al., (1984) used the term “entrepreneur” to mean the innovative owners of small firms who use strategic management practices. Strategic planning is also assumed to be associated with

12

Nimalathasan Balasundaram

success. As Bamberger (1980) noted there is a positive relationship between the existence of a more or less formal strategic planning system and the firm’s growth.

Concept of Strategic Planning
Strategic planning was defined operationally by three elements of the strategic planning process: environment awareness, the existence of idea or formal documentation of a future strategic course of action, and awareness of both short and long term implications of strategies. Environmental awareness is a concept from business management by which businesses gather information from the environment, to better achieve a sustainable competitive advantage. To sustain competitive advantage the company must also respond to the information gathered from environmental scanning by altering its strategies and plans when the need arises. Strategic planning consists of planning processes that are undertaken in firms to develop strategies that might contribute to performance (Tapinos, et.al, 2005). Key aspects of strategic planning are: a long-time horizon,...
tracking img