CHAPTER 6

Strategic Planning for Small

Business

S T R AT E G I C P L A N N I N G F O R S M A L L
BUSINESS
The concept, called strategic planning, is borrowed
from the military and has found useful applications
in large corporate enterprise. Its relevance to small
business, however, has also been recognized.

W H AT I S S T R AT E G I C P L A N N I N G ?
Strategic planning refers to the process of

determining the primary objectives of the

entrepreneurship and then adopting courses of action
and allocating resources to achieve those objectives.
The definition involves three distinct steps:
1. Determination of objectives,
2. adoption of course of action, and
3. allocation of resources.

T H E D E T E R M I N AT I O N O F
OBJECTIVES
The objectives of the firm are important components of the firms
strategic planning activities but before these are determined, the
firms mission statement must first be developed.
The Mission Statement
This term refers to the basic description of the fundamental
nature, rationale, and direction of the firm. It consists of three
concerns.
1. how the entrepreneur intends to use his resources;
2. how the entrepreneurs expects to relate to the ever-changing
environment; and
3.the kinds of values the entrepreneur intends to offer to his
customers.

Strategic Objectives
This term refers to specific performance targets
that the entrepreneurship hopes to accomplish. The
objectives define, in specific terms, how the firms
mission will be realized.

ADOPTION OF COURSE OF ACTION

After the primary (or strategic) objectives are
established, the entrepreneur must develop a
strategy which is alternately called course of action.
In developing realistic strategies, the entrepreneur
can make use of the most popular tools. These are
the following:
1. SWOT analysis, and
2. forecasts of future sales performance.

SWOT Analysis
The firm which is fully aware of its internal
environment (specifically its strengths and
weaknesses) as well as its external environment
(specifically threats and opportunities) is most likely
to develop a strategy that considers the firms needs.
The firms STRENGTH refers to a skill, a
competence, a valuable organizational resource or
competitive capability, or an achievement that gives
the firm a market advantage.

The firms WEAKNESS refers to something a

company lacks or does poorly (compared with
others) or a condition that puts it at a disadvantage.
OPPORTUNITY refers to the chance offered by
the external environment to improve the firms
situation significantly.
THREATS refer to a challenge posed by an
unfavorable trend or development in the external
environment that would lead to, in the absence of
purposeful entrepreneurial action, the erosion of the
entrepreneurships position.

Forecasts of Future Sales Performance

Forecasts are supplementary tools for SWOT
analysis. It is an estimate prediction of the future
sales or income of the firm.

I M P L E M E N T I N G S T R AT E G I C P L A N S
Strategies are useless unless they are
implemented. To put strategies into action, the
following activities are required:
1. identifying the specific methods to be used; and
2. deploying the resources needed to implement the
intended plans.

Identifying Specific Methods

Strategies determine the best way to use
resources. There is a need, however, to develop
tactics which will be used to implement the
strategies.
Deploying the Resources
the specific aim of planning is to be able to
deploy the right quality and quantity of resources in
the various activities required to achieved the
objectives.

F U N D A M E N TA L
S T R AT E G I E S F O R S M A L L
B U S I N E SS
There are certain basic strategies that are
necessary for the survival of small business. These
are the following:
1. the flexibility strategy;
2. the strategy of effectiveness as priority; and
3. the strategy of starting simple.

The Flexibility Strategy

Small business ventures are not usually afforded
the advantages enjoyed by large business. It is very
difficult for small business to effect changes in its
environment because its resources are usually limited.
The Strategy of Effectiveness as a Higher Priority
Effectiveness is sometimes sacrificed for the sake of
efficiency. Although efficiency is a desirable goal, it is
oftentimes disastrous for small business to neglect
effectiveness.

Start Simple
In starting a new business venture, the
entrepreneur often encounters problems related to
financing. The temptation is great for the
entrepreneur to finance all the activities required in
operating the venture.

S T R AT E G Y C O N C E R N S O F S M A L L
BUSINESS
In determining what strategy to adapt, the
entrepreneur is confronted with two general
situations:
1. Is he organizing a new business, or
2. Is he currently running an old business?

New Business
This term refers to one that will be operated for
the first time by the small business operator. If so,
his options consist of the following:
1. acquiring an existing business;
2. organizing a new business; and
3. buying a franchise.

Strategies for a Going Concern

The strategic problems of small business are not
as intense as those large business.
Any or all of the following strategies are applicable
to small business:
1. Segment markets The small business operator
will have to identify the market segment with which
it has an expertise, then compete.

2. Efficient use of research and development

Since the small business cannot fight the research
and development efforts of big companies, it must
concentrate its R and D efforts to lowering process
costs or to bring new products to the market.
3. Think small The small business can still be
strong with being small. The emphasis must be on
profits rather than sales growth, and specialization
rather than diversification.

WHY SMALL BUSINESS

O P E R AT O R S I G N O R E
S T R AT E G I C P L A N N I N G ?
Important as it is, strategic planning in small business
management is often ignored. This situation is true in many
parts of the world including Philippines. The reasons could
be any of the following:
1. Lack of expertise Few small business operators are
trained in strategic planning.
2. Inability to get started Even if small business
operators are convinced about the importance of planning,
they fail to get started for lack of sufficient exposure to
planning activities.

3. Uncontrollable, often intangible variables The

uncontrollable and often in tangible variables
complicate planning which later on discourages the
small business operator from repeating the exercise.
4. Resource poverty Planning requires time, but the
small business operator oftentimes does not have it
5. Focus on daily operations The daily requirements
of small business usually keep the small business
operator so busy that he is left with no time for
planning.

6. Failure to realize the importance of strategic

planning The small business operator is exposed to
the environment of successful Filipino businessmen
who do not engage in strategic planning.