CHAPTER 6:

STRATEGIC PLANNING FOR SMALL

BUSINESS

PRESENTED BY :

MARY ANN DIMCO

RAUL DE LA CRUZ III

FAITH CABANDO

BSBA 2-A
What is Strategic planning?

 Strategic planning refers to the process of determining

the primary objectives of the entrepreneurship and
then adopting courses of actions and allocating
resources to achieve those objectives.
 Strategic Planning

Determination of Primary Objectives

Adoption of Courses of Action

Allocation of Resources
The Determination of objectives
 The objectives of the firm are
important components of the firm’s
strategic planning activities but before
these are determined, the firm’s
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 the three concerns:
1. How the entrepreneur intends to use his resources.
2. How the entrepreneur expects to relate to the ever-
changing environment
3. The kinds of values the entrepreneur intends to offer
to his customer.
Example of Mission Statement
“ The mission of Birdie Poultry
Products is to provide the various poultry
requirements of consumers. The services of retailers
located in the various malls and public markets in
Nueva Ecija are tapped as means of distributing our
products. In addition to the assortment of products, we
stress quality and efficient service. We intend to cover
all towns of Nueva Ecija within five years through
effective pricing and promotion.”
Strategic Objectives
 This term refers to specific performance targets that
the entrepreneurship hopes to accomplish.

Examples of strategic objectives:

1. Expand production capacity by 50% within two
years.
2. Increase sales by 50% by the year 2012;
3. Increase market share by 10% every two years; and
4. Increase the number of outlets by three within three
years.
Adaption 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.
 A strategy is carefully designed plan for achieving the
firms objectives.
 A strategy indicates how the entrepreneur will attempt
to accomplish the goals with the resources available.
Examples of strategies :
1. Establish branches in strategic location;
2. Design a system that will attract persons with high
potentials to work with the company.
3. Engage in the recruitment of the retailers from
nearby provinces; and
4. Engage in building up the company’s image as a
reliable supplier of quality poultry products.
Popular tools in developing realistic strategies
1. SWOT analysis
2. Forecast of future sale performance

SWOT analysis.
 Is an organized method of assessing a firm’s
strengths and weaknesses and the opportunities and
threats in the external environment that confront or
will confront the firm
 The purpose of SWOT analysis is to match the
firm’s strengths and weaknesses with the external
opportunities and threats to determine what strategy
to adopt.
Strength
 In firm’s strength refers to a skill a competence a
valuable organizational resource or competitive
capability or an achievement that gives the firm a
market advantage.

Examples of Strength:
1. A recording firm’s unique line-up of contract
singers.
2. The firm’s exclusive supply contract with reliable
manufacturer.
Weakness
 in firm’s weakness refers to something a company
lacks or does poorly(compared with others) or a
condition that puts it at a disadvantage.

Examples of Weakness:
1. The lack of qualified managers
2. Poor design of the firm’s product
3. Low employee morale; and
4. Poor location of the firm’s sales offices.
Opportunities
 This refers to the chance offered by the external
environment to improve the firm’s situation significantly.

Examples of Opportunities:
1. For the motorcycle trading firm: the escalating cost of
fuel.
2. For a small restaurant: the withdrawal from business of
a major competitor.
3. For a tailor residing in a provincial city; the absence of
reliable tailoring shop.
Threats
 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 entrepreneurship’s position
Example of threats
1. To the grocery store: the proposed opening of all
mall in the vicinity.
2. to the restaurant located along the highway: the
proposed construction of a diversion road by passing
the highway and the restaurant.
2. Forecast Of Future Sales Performance
 Forecast are supplementary tools for SWOT analysis.
 It is an estimate or prediction of the future sales or
income of the firm.
 It may be short-term (one year or less) medium term( one
to five years) long term(over five years).
Implementing strategic plans
1. Identifying the specific methods to be used
2. Deploying the resources needed to implement the
intended plans.
Identifying Specific Methods
1. identify strategic locations
2. Determine the potential of the identified strategic
locations
3. Set a timetable for installing the branches.
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 achieve the objectives.

Fundamental strategies for small business

1. The flexibility strategy
2. The strategy of effectiveness as priority
3. The strategy of starting simple.
 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.
 A firm that concentrates on efficiency may be able to
reduce its expenses but it may not be able to generate
sufficient income to keep it a float.
Advantages in choosing the subcontract
option
1. He has more time to attend more important task like
searching for new markets
2. He is relieved of the burden of financing the
subcontract task.

 The general idea is for the business venture to start

simple and absorb slowly the more complicated task
as it grows.
Strategy Concerns Of Small 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.
3. Buying a franchise.
 SITUATION

New Business Old Business

Acquire an Compete with

existing small business
business

Start a new
Compete with
business large business

Buy a
franchise
Strategies for a Going Concern
Any or all of the following 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 .
2. Efficient use of research and development
3. Think small- 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 Operators Ignore Strategic
Planning
 Important as it is strategic planning in small business
management is often ignored.
 This situation is true in many parts of the world
including the Philippines.
The reason could be the following:
1. Lack of expertise – few small business operators are
trained in strategic planning.
2. Inability to get started – they fail to get started for
lack of sufficient exposure to planning activities.
3. Uncontrollable often intangible variables. It
complicates planning which later on discourages the
small business operator from repeating the exercise.
4. Resource poverty
5. Focus on daily operations
6. Failure to realize the importance planning
Summary
 Small business needs to be successful. The high rate of
small business failure makes the need more urgent.
 Strategic planning provides an answer.
 In strategic planning the major objectives of the
organization are determined and strategies are formulated
to achieve those objectives.
 A carefully designed plan for achieving the objectives is
called strategy.
 The strategy adapted will depend on whether a new
business is being considered or an old business is
currently operated.