Strategic planning refers to the process by which a company defines its strategy (Bryson et.al.1988). Strategy is a mean of fulfilling the shareholders expectation through allocating the resources in the most optimal level. Strategic planning thus is concerned with the future operation of an organization and the decisions that are made are decisions about how to gain advantage over competition. The strategic planning decisions match the resources and activities of the firm to the environment.We will write a custom Strategic Planning for Small Businesses specifically for you
for only $14.00 $11,90/page 308 certified writers online Learn More
Strategic planning is thus concerned with what the business does, for who does it serves and how it can do in order to excel. The techniques that are involved in strategic planning include; SWOT analysis, PEST analysis, STEER analysis as well as EPISTEL analysis (May, 2010). SWOT analysis is an acronym which stands for strengths, weaknesses, opportunities as well as threats. The aim of SWOT analysis meant to define the direction of the organization based and challenging environment.
It can be used to exploit core competence of the organization and further reveal possible threats emanating from macro-environmental environment. PEST analysis refers to the external environmental forces that have the potential to significantly influence the likely success of products and services (Rea & Kerzner, 1997). The PESTLE framework shows some of the macro environmental influences as including political, economic, social, technological, legal and environmental uncertainty.
STEER analysis entails the social cultural, technology, ethical, economical-inflation as well as regulatory forces that affects a business organization.
EPISTEL analysis is the environmental uncertainty, polical, international, socio-cultural, technological, and economical as well as legal factors that affect a business environment (Lund & Marksade, 2006).
The strategic planning decisions are dependent on both the environment and also the values that are set by the shareholders in the organization. The stakeholders include existing customers, potential customers, competitors, suppliers, shareholders, creditors, labor markets, trade unions, consumer associations, employees and international blocs.
The Chief Executive Officer through his or her visionary creativity enhances the process of Strategic planning. Strategic planning is usually an overwhelming process that requires a lot of resources. However, despite the challenges that are involved in the process of strategic planning; the process provides many benefits with regards to a business organization. This is because it helps to define the organization’s future directions (Lieberman, 2010).Get your
100% original paper on any topic done
in as little as 3 hours Learn More
Small businesses and strategic planning
Just like big organizations, strategic planning is also used in small businesses as well. With regards to strategic planning, small businesses need to anticipate the threats as well as the opportunities. The small businesses needs to concern themselves on how to gain advantage over competitors, what new opportunities can be created in the market and the extent to which this meets the customers’ needs (Rea & Kerzner, 1997).
The strategic questions that the small businesses needs to consider as far as strategic planning is concerned includes; what products or services that the business should offer based on competition, should the business be technology leaders or followers among others. Small businesses also require considering such aspects relating to future strategies such as the kind of changes that are going on in the environment and how the changes can affect the business and its activities (Lieberman, 2010).
Some of the means that small businesses can apply so as to ensure that change is realized as a result of strategic planning includes setting the objectives such as delivering value for money e.t.c. These objectives that are set should be specific entailing that they should not be vague. For strategic planning to be effective, the small businesses should also ensure that the process is accomplished at the right time and also the personnel that are involved in the whole process should be competent (Bryson et.al.1988).
Strategic planning and performance of small companies
Strategic plans acts as a manual to small businesses by giving them guidance on how to carry their trade (Lieberman, 2010). As the business progresses, the activities becomes complex. Strategic planning thus serves as a reminder to the small businesses about the understanding of the mission as well as vision statement (Lund & Marksade, 2006). With this regard, the strategic planning enables small businesses to build standards for the distribution of resources, to provide a unique insight into the business values and future directions to the external parties, establish boundaries for objectives and strategy formulation and also to establish standard for performance and long multiple dimensions.
Strategic planning enables small businesses to determine its set of threshold resources that enables them to exist in a given business e.g. physical resources. It enables the small businesses to manage competition in the business environment using their available resources. The resources that small businesses require to have in order to successfully implement strategic decisions includes physical resources i.e. the production capacity, human resources, financial resources among others.
Strategic planning enables small business to have cost efficiency which is determined by a number of cost drivers such as economies of scale, supply cost, productive design and experience. In order for small firms to deliver value for money, they must minimize costs. Customers are willing to pay a given price only to those goods which give value to what they pay. Strategic planning is important as far as small businesses are concerned because it helps them to manage costs to keep prices low-Cost efficiency is a measure of the level of resources needed to create a given level of value (Rea & Kerzner, 1997).
Strategic planning is important as far as small businesses are concerned because helps them to benchmark their products and services to those of competitors and hence enabling them to perform better than the competitors. Strategic planning enables small businesses to use some of the benchmarking basis as historical performance, industry norms among others so as to enhance their efficiency.We will write a custom
Strategic Planning for Small Businesses
specifically for you!
Get your first paper with 15% OFF Learn More
Strategic planning enables small businesses to determine their competence and core competence (Lieberman, 2010). Competence is the activities that give a business organization an advantage over its competitors. Core competence gives a business organization an ability to create critical success factors for a particular customer group better than other providers. In order to achieve this advantage, core competence must fulfil the following; it must relate to an activity or process in the product or service which adds value in the customer’s eye, it must lead to a level of performance slightly better than that of competitors among others (Abraham, 2006).
Common pitfalls of strategic planning
The common challenges characterized with strategic planning includes the following; random selection of the members that are involved in the planning process. In some instances, the people who are involved in the strategic planning process lacks skills necessary to implement the strategies successfully (May, 2010). In order to avoid such a situation there is need for the planning team to have the required skills.
Another pitfall that is common in strategic planning is viewing the process as just an event only. Strategic planning is a process should include all the stakeholders so as to ensure that there is efficiency in the process (Lieberman, 2010). Strategic planning also requires to be integrated into the daily operations of a business and thus the managers regard the process as an integral one as far as the success of a business organization is concerned.
Sometimes, the planners lack education so as to successfully develop good strategic plans. This thus poses a challenge as far as the performance of a firm is concerned. The lack of adequate education on the part of planners means that they are not able to perform their duties effectively and enthusiastically (Lund & Marksade, 2006). In order to avoid the occurrence of this blunder, there is need to train the strategic planners. The training needs to be thorough so as to ensure that they are well competent.
Lack of involvement of employees to the process of strategic planning is also a major challenge. Employees require being involved in the process so as to add their valuable input. It also allows the employees to feel as part and parcel of the whole process and not resist it once it is being implemented.
Timing also acts as a barrier as far as successful development of strategic planning is concerned. The planning team should be organized and should try to accomplish one task at a time. They should never allow the current year’s strategies to be implemented using the resources of past year. They can avoid this by ensuring that the timing strategies are in consistent with the budgeting process (May, 2010).
Lack of adequate information with regards to strategic planning is also a major challenge. The management should ensure that the planning team have adequate information that is required for strategic thinking during the meeting sessions. Every person who is involved in strategic planning should be given a chance to present his or her gathered information during the meeting. This is important as it ensures that all the members in the planning team are equipped with relevant knowledge of coming up with a successful strategic planning and also ensures that all the members have managerial skills.Not sure if you can write
Strategic Planning for Small Businesses by yourself?
We can help you
for only $14.00 $11,90/page Learn More
Another mistake that acts as a pitfall with regards to strategic planning is conducting the sessions in workplaces. Usually there are many interruptions in workplaces i.e. offices that hinders the successful completion of strategic plans. The lack of concentration affects the quality of the strategic decisions that are made. The meeting place thus should not be working places but rather places where there is no interruptions (Nalson, 2008).
Another factor that provides a pitfall in strategic planning is not allocating the whole process sufficient time. The whole process needs sufficient time so as to ensure that it meets the expected standards. The planning team should consider planning as an n investment which requires to be done after consultations and so the team members need not be in a hurry to speed up the whole process (Lund & Marksade, 2006).
Communication is vital as far as the strategic planning process is concerned and lack of proper communication is a major challenge. The managers should ensure that their ideas are similar with that of the team members so as to ensure that there is concensus.They should ensure that there is participation among all the members by asking questions.
Strategy once developed should be communicated so as to ensure that it’s well implemented. Some people decides not to make it open by publishing it and this is a common pitfall as it does not allow the employees to know what is going on as far as their duties in implimenting the plans is concerned.
Other common pitfalls include the resistance to the strategic changes, not linking strategic plans with budgeting process and also failure to revise strategic plans made (Hulbert, 1987).
Abraham, C. (2006). Strategic planning: a practical guide to competitive Success. Stamford: Thomson/South-western.
Bryson, R. (1988). Strategic planning: threats and opportunities for planners. Los Angeles: American Planning Association.
Hulbert, O. (1987). Corporate strategic planning. New York: Columbia University Press.
Lieberman, C. (2010). Strategic planning: Journal of Strategic planning for Organizational success. Durham: Durham web Design Company.
Lund, M. & Marksade, S. (2006).10 Steps to Successful Strategic Planning. American Society for Training and Development. Stamford: Cengage Learning.
May, M. (2010). Strategic Planning. US: Business Expert Press.
Nalson, S. (2008). Strategic planning for results. Alabama: University of Alabama Press.
Rea, P. & Kerzner, H. (1997). Strategic Planning: A Practical Guide. New York: John Wiley and Sons.