What is strategy and why is it important? Find here the answers to these questions. The strategic planning essay below explains the impact of strategy on the spheres of marketing and logistics as well as on small businesses in general.
- What Is Strategy
- The Importance of Strategy for Businesses
- Improving Business Performance
- The Main Problems
- Conclusion
Introduction
Strategic planning is a process of making certain choices within an organization. It can be defined as a designed process that is meant to support organizational leaders both locally and internationally in terms of operations methods, goals and objectives. Alternatively, strategic planning can be defined as a management tool used for the purpose of enabling an organization to work effectively and efficiently towards achieving its goals and objectives.
The process of managing the operations of a business is referred to as strategic because it entails how best a business organization respond to the circumstances arising from a dynamic and in other cases hostile business environment.
Meanwhile, Small business is a kind of business entity that is owned privately by an individual or a group of partners and that which operates with a small number of labor forces. Small business may include privately owned partnerships, sole proprietorships and corporations. Nonetheless, it is important to note that the legal definition of a small business varies greatly according various nations of the world; this also depends on the type of industry in which a business entity may be categorized into.
This research paper will examine strategic planning; with regards to this, the essay will examine the strategic planning, practices, importance of strategic planning and the pitfalls of strategic planning amongst small businesses and finally provides a conclusion about strategic planning in small businesses.
What Is Strategy in Business?
It has always been falsely thought strategic planning is only for big and multinational corporations. It is important to note that strategic planning is crucial for every organization, both for profit and non-profit organizations. In this case, strategic planning is very crucial for small business organizations.
Small business organizations require to be more committed to strategic thinking and actions more than the large scale established business entities. In the process of conducting strategic planning, small organizations are preparing to meet future business challenges as they remain focused in meeting their strategic goals and objectives.
Strategic planning prepares small businesses to deal with the future in five steps. The first one is that the firm foresees both potential opportunities and threats in order to meet its vision and mission. The second step is that the small businesses make decisions on how best they can respond to potential business opportunities and threats that they will encounter.
The third step is for the small businesses to single out the likely sources from which the opportunities and threats will originate from. The fourth step entails examining the viability of an opportunity and the likelihood of the risk occurrence. The last step calls for measures in potential threats alleviation or seizing available opportunities (Center for Management and Organization Effectiveness, 2010).
While performing strategic planning, it is important to review the small businesses’ past performance, the current and the projected or expected future performance. Knowing where the businesses have come from, where they are now and where they expect to go is very important during strategic planning process (Neely, 2002).
An example of a small business entity is Ann Taylor, an American business for a group of women specializing in apparel retail chain stores. The business makes use of its expert personnel resources in formulating strategic planning. In the process, the business anticipates issues, identify latent problems and establishing strategies to address the problems and take advantage of arising opportunities.
Strategic Planning & Its Importance for Small Businesses
One of the most important functions of strategic planning is that it assists a small business organization to set the direction of its future. In this case, strategic planning is like a map clearly outlining how a business destination is to be reached (Marien, 1990).
The strategic planning process helps small business organizations to identify their available resources and hence plan on how to appropriately and effectively utilize the resources for maximum benefit of the small businesses. Besides, it provides a framework within which a small business organization can operate so as to realize both of its short-term and long-term objectives.
For instance, compared to those that do not plan, small businesses that engage in strategic planning have been found to register higher sales growth and financial performance; this implies that strategic planning is necessary for accelerated business growth (Hodgetts, 1992).
Strategic planning is also away of communicating information about the small businesses. Through strategic planning, small business entities get to inform its employees and other significant stakeholders on the position of the business and where the business anticipates going in terms of growth.
It also communicates the input employees have contributed and hence enable them to understand the role they play in the organization. Moreover, strategic planning also helps the small businesses to set clear strategies on how to tackle the future possible challenges and take advantage of the potential opportunities that are likely to arise. The success of these strategies requires the commitment of all stakeholders who must be provided with necessary and sufficient resources (Hodgetts, 1992).
Strategic Planning as a Way to Improve Business Performance
The link between strategic planning and performance of small business organizations has been a theme of rising interests in relation to strategic management. It is important to note that strategic planning is a process that provides a long-range strategic schedule which includes a statement about a business objectives and mission statement.
Besides, strategic pan also entails strategies showing how the business objectives will be achieved. It also provides the yard stick by which all the business performance can be monitored and checked or controlled (Watson, 2007).
Going by the above points, it is therefore important to mention that strategic planning is crucial for organizational performance. Several research studies have indicated that there is strong relationship between strategic planning and the performance of a given small business organization; in fact, more research findings have shown that small business organizations that engage in strategic planning perform more than those that do not do strategic planning. For this reason, the value of strategic planning cannot be wished a way.
The process of doing formal planning forces individuals involved to bring out ideas that are essential in propelling the organization towards its goals and objectives (Watson, 2007).
The importance of strategic planning in improving the performance of small businesses is reinforced by recent research findings that indicate that the more complex the strategic plan the higher the performance of a small business organization; it is noteworthy to mention that these findings are not only applicable to small businesses, but also to any business entity or organization that is involved in strategic planning (Watson, 2007).
However, it is of significance to mention that formulating and putting into place strategic planning process is one thing of its own and implementing it is another. Failure to implement strategic plan may make strategic planning process unproductive.
It is also crucial to mention that the success of strategic planning in improving business performance is greatly dependent on the available resources and whether the stakeholders, especially the employees, understand fully the content of the business strategic plan. Otherwise, the process of strategic planning does not guarantee improved business performance as its positive impact still depends of steps taken by the business organizations in implementing the strategic plan.
The Problems of Strategic Planning
As much as strategic planning has a lot of benefits to business organizations, it is a process that has its own negative side. One of the problems associated with strategic planning is that it is costly, especially with small businesses. The process may require the hiring of strategic planning consultants who may need to be paid large amount of money.
The big problem with strategic planning is that the planning process may not be completed; strategic planning is more detailed and in most cases requires a level of commitment that may prove to fatigue planners (Kerzner & Rea, 1997). This may leave the general plans already put into place to appear as white elephant projects.
Strategic Planning Conclusion
Strategic planning is an important process of small businesses. Small businesses undertake strategic plans in order to determine where they have come from, their current position and projected future position in terms of business performance. Strategic planning also helps a small business to formulate strategies to meet future business challenges and take advantage of potential opportunities.
Besides, it also assists the business organizations in determining the amount of resources they have and hence decide on how to best allocate them for the benefit of business organizations.
Strategic planning can actually be described as a management tool used in managing the business operations of a given business entity. In this case, it used to manage the future of the business organization and hence position the businesses at positions where they can strategically meet their business goals and objectives effectively and efficiently (Marien, 1990).
Strategic planning improves the overall performance of small businesses. In relation to this, it is important to note that research findings point out that the more complex the strategic plan the higher the performance of a business organization.
However, it is important to be aware of the fact that the process of strategic planning is not a guarantee that a business entity will enhance its performance. The successful implementation of strategic plan requires sufficient resources and also that all the stakeholders understand the contents of the strategic plan.
Strategic planning process does not only have its good part; it has a number of problems associated with it. Strategic planning process is elaborate and sometimes may get complex and hence may be left unfinished due to lack of motivation to complete the planning process. Besides, strategic planning is relatively costly in terms of finances and time.
This is one of the reasons many business entities, especially the small businesses fail to be involve in strategic planning. The consequence is that such small businesses may not have strong and effective strategies to tackle future business challenges and take advantage of beneficial opportunities that are likely to arise in the business process (Marien, 1990).
Reference List
Center for Management and Organization Effectiveness. (2010). Strategic Planning is for Small Businesses Too-Part1. Retrieved from: https://cmoe.com/blog/strategic-planning-is-for-smaller-businesses-too/.
Hodgetts, R. (1992). Effective Small Business Management. U.S: Harcourt.
Kerzner, H. & Rea, P. (1997). Strategic Planning: A Practical Guide. New Jersey: John Wiley and Sons.
Marien, M. (1990). Future Survey 1990: A Guide to the Recent Literature of Trends, Forecasts, and Policy Proposals. United States: Transaction Publishers.
Neely, A. (2002). Business performance measurement: theory and practice. London: Cambridge University Press.
Watson, G. (2007). Strategic benchmarking reloaded with six sigma: improve your company’s performance using global best practice. New Jersey: John Wiley and Sons.