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Strategy and planning process in the Small Business and the Small & Middle Enterprises (SME) Sector

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  1. Introduction
  2. The impacts of planning on the success of a strategy
  3. Attitude of owner-managers towards Planning
  4. The drawbacks of Planning
  5. How entrepreneurs actually formulate their strategy
  6. Conclusion
  7. References

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, [...]

[...] Following this example, entrepreneurs often recognise after a failure that they should have asked help in their planning process to allow the survival of their business and concentrate on innovation. (Larty, Entr 207, Tutorial 4). Thus, effective planning must be supported by adequate financial control system and communication tools which focusing on the market niche the business is targeting (O'Gorman p292). Of course, as the entrepreneurial organisation grows, settles down and begins to take the machine form, the visionary strategy of the leader may have to be pinned down through strategic programming (Cooper et al p258). [...]

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