Academic journal article Entrepreneurial Executive

Strategic Planning: A Practical Primer for the Entrepreneur

Academic journal article Entrepreneurial Executive

Strategic Planning: A Practical Primer for the Entrepreneur

Article excerpt

INTRODUCTION

Entrepreneurs are primarily concerned with recognizing opportunities and seizing the initiative (Baron & Ensley, 2006). However, once seized, the organization needs to be able to survive in a competitive environment. For this follow-on survival, one needs strategic management skills in addition to the entrepreneurial skills already held (Ireland, 2007).

Strategic planning is beneficial to the small business. Studies show that it is strongly related to small business financial success (Katz & Green, 2007; Wheelen and Hunger, 2004). For example, Schwenk and Shrader (1993) applied meta analysis to the result of previous studies on formal strategic planning and the performance of small firms. The researchers found that even though the size of the effects of strategic planning for specific studies is not that large, the overall relationship between formal planning and performance is significant and positive.

Rue and Ibrahim (1998) found that greater planning sophistication is positively related to growth in sales though there was no significant relationship between planning and return on investment. Last, a study by Baker, Lon and Davis (1993) of high growth INC firms showed that 86% conducted strategic planning. Some 94% of these reported an improvement in profits. Ibrahim, Angelidis & Parsa (2008) showed similar results in small, family-owned businesses. In this article we intend to provide entrepreneurs a practical primer to strategic management in a very easy to understand format by following the process using a fictional restaurant in an urban environment.

PURPOSE

Entrepreneurs pour their hearts and souls into new ventures for years until they finally start to pay off (Mitchell et al., 2002). Perhaps they have heard of strategic planning but haven't really had time to pursue it as a process. The problem is that few know much about strategic management and have fewer still have ever participated in the process. And, unlike in larger organizations that may have strategic management departments, the onus for everything in smaller, start-up organizations, falls to the owner/manager.

Therein lay the purpose of this article--to remove some of the mystery associated with strategic management and to provide practical guidance towards taking the next step in managing an on-going business. A summary of the strategic planning process and a list of suggestions for conducting the process are provided. We think you will find that the process is pretty much common sense and easier to accomplish than originally thought.

The importance of strategic management to a business can be summed up with the old saying--"If you don't know where you are going, any road will take you there". Prudent use of the information contained in this article will help ensure that you and your company will find the road to success and will continue to follow it year-after-year.

THE STRATEGIC MANAGEMENT PROCESS

Your first step in learning the strategic management process should be to put yourself at ease. Although, the name itself invokes a grandiose scheme that may seem bigger than life, strategic management is, in fact, little more than an exercise in time management. It's all about how to achieve what's important when faced with conflicting demands and limited resources. Second, don't get caught up in the hype of strategic management. Too many organizations go through the motions but lose sight of the intent. These companies are ridiculed in mainstream culture such as in the Dilbert comic strip. Remember the intent of strategic management is to set your company up for future success.

The following discussion includes descriptive steps in the strategic planning process. The first phase of strategic management is planning followed by implementation. We concentrate on the planning process here by showing how things should progress while giving some practical examples. …

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