Business planning is perceived by both governments and business support infrastructure, such as the Business Links, to be an essential ingredient to the success of small businesses (Beaver, 2002, p88). Similarly, O'Gorman bases his idea on the fact that one approach to developing a successful strategy could be to engage in a formal planning process (2000, p291). Although planning is frequently used and implemented in large corporations, it relies on different means for coordination and control in SMEs, due to differences in scale. The extensive research on corporate strategy is not relevant for small businesses since they are more driven by new opportunities and strive to minimize their commitment to resources. (Stevenson and Gumpert, 1985, pp86-87).
This paper evaluates the statement of O'Gorman about the impact of planning on a successful strategy for small and medium-sized firms. Firstly, the notion of planning for SMEs in formulating their strategy will be analysed. In a second part, the paper will present the reasons why in reality owner managers of small businesses do not engage as formally as managers of large corporations in the planning process. Finally, the paper will evaluate the considerations presented to clarify the initial hypothesis.
[...] The essential value of a well-crafted business plan is that it enables small firms to organise more formally their strategy in the long-term. Small firms need planning as an aid to innovation in business processes and to evaluate their actions and productivity. In addition, planning provides a framework for the assessment of the overall performance, bearing in mind that assessment triggers the will to improve. On a long-term basis, planning is also vital to prepare the succession of the owner-manager and give the firm objectives to follow without its founder. [...]
[...] and Scholes, K. (2002), “Exploring corporate strategy”, 6th Edition, Prentice Hall. Larty, J (2004) “Real attitudes to failure”, ENTR 207, Tutorial 4. McNichols, T. J. (1977), “Policy making and executive action” (5th Edition) New York: Mc Graw-Hill Mintzberg, H and Waters, A. (1982), “Tracking strategy in an entrepreneurial Academy of Management Journal, Vol No pp 465-499. Mintzberg, H. (1994), Rise and Fall of Strategic Planning”, London: Prentice Hall O'Gorman, C. (2000) “Strategy and the Small in Carter, S and Jones-Evans, [...]
[...] (1977) Management: Tasks, Responsibilities, Practices, London: Pan Books Ennis, S. (1998), “Marketing Planning in the smaller evolving Firm: Empirical Evidence and Reflections”, Irish Marketing Review, Vol No 2., pp40-61. Foster, M.J. (1993), “Scenario Planning for the Small Business”, Long Range Planning, Vol.26, Iss pp 123-129. Gibb, A., Scott, M. (1985), ”Strategic awareness, personal commitment and the process of planning in the small business”, The Journal of Management Studies. Oxford: Vol Iss. p. 597-632. “Entrepreneur Hamid, I. (2005), “Avondale Tutorial ENTR 208. [...]
[...] However, these studies have principally focused on large corporations, excluding the early stages of these companies while they are still small and struggling to survive. The theories and models that are applied to large firms are hardly compatible to small businesses since they inhabit a different world (Beaver p70). In his research on entrepreneurs, Wickham (2001, p293), broadly describes strategy as actions an organisation takes to pursue its business objectives”. Thus, strategy is a direction, a guide or a course of action into the future, a path to get from here to there, to reach a target (Cope, lecture 5). [...]
[...] The benefits from formal planning system for a small firm are crucial in the survival of a new business (Hisrich and Peters 1995, p372; Ibrahim et al p52) How entrepreneurs actually formulate their strategy Wickham states that “entrepreneurs do not talk strategy so much about ends as about means”. Strategy relates to the approach that the business will take to achieving its goals and the tasks that must be undertaken in order to create the new world (2001, p271). In this, entrepreneurs are reliant on the fact that people will be attracted to the journey as well as the destination (Cope, lecture as they are risk-takers that want to get a thrill out of the experience. [...]
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