4

Planning and Strategy

in the Small Firm
 4.1 Introduction
The process of starting a new business is like jumping
from rock to rock up a stream, rather than constructing
the Golden Gate Bridge from a detailed blueprint.
(NCOE, 2001).
Small business owner-managers have been found to
have a less sophisticated approach to formal business
planning than their counterparts in larger firms. This is
generally related to a lower level of systematic data
gathering or a low level of statistical analysis. However,
owner-managers are strategically aware and realize the
 4.1 Introduction
Small business owner-managers have been found to
have a less sophisticated approach to formal business
planning than their counterparts in larger firms. This is
generally related to a lower level of systematic data
gathering or a low level of statistical analysis.
The lack of formal business planning has been
attributed to the high failure rate among small firms
particularly among start-ups (Castrogiovanni, 1996).
 4.2 Strategic Vision Not Strategic Planning
In starting any planning process, the owner-manager of
a small firm needs to have a clear idea of where they
are going, why they are going there, and how they
might get to wherever it is they chose to go.
The importance of knowing where you are going, or
you run the risk of ending up somewhere that you
would rather not be.
 4.2 Strategic Vision Not Strategic Planning
To ensure a clear focus and direction for a small business,
the owner-manager should give consideration to developing
a clear vision and mission for their business (Hall, 1992).
Owner-managers need to understand their core skills, i.e.
the things they are really good at, and identify the key
resources, e.g. the people, patents, markets, products, and
equipment, etc., that are likely to be essential for their
business success.
The more successful owner-manager is likely to be one who
can scan the environment and identify opportunities or
threats that may emerge.
 4.2 Strategic Vision Not Strategic Planning
The most common motivation for these entrepreneurs in
launching their venture was to create a business that would
fulfill their vision of the future.
A strong vision is an essential part of entrepreneurship but
successful entrepreneurs also have the ability to plan the
journey towards achieving their vision.
The Entrepreneurs’ Barometer found that forty-six percent
of successful entrepreneurs nominated effective strategy as
the key factor in the success of their business (Ernst & Young
2004).
Four types of strategic orientation (Borch and Huse (1993)
1. Managerial firms. These tended to analyze their markets and
made use of marketing strategies for enhancing their
competitive positioning.
2. Technological firms. These were actively seeking to gain a
competitive edge by launching new products that applied
technological innovations to identified market niches.
3. Traditional firms. These were generally risk-adverse firms and
avoided growth and major changes requiring strategic shifts
of direction.
4. Impoverished firms. These lacked any coherent strategies and
were typically reactive to the market and their competitors.
Four types of strategic orientation (Borch and Huse (1993)

The above-mentioned strategic profiles are consistent with

those found in larger firms (Miles, Snow, Meyer, & Coleman,
1978), and suggest that the firms with the greatest chance of
successful growth are the Managerial and Technological frms.
 4.3 Strategic Myopia and Strategic Options
A major problem for many small business owners is
that they suffer from what can be described as ‘strategic
myopia’ (Mazzarol & Reboud, 2009).
This is a condition in which they possess only short-
term and not long-term vision. It is the problem that
affects the Woodcutter entrepreneur, referred to in
Chap. 2, who is so focused on cutting his or her wood
that they fail to take the time to look around the forest
and work out where they are going.
 4.3 Strategic Myopia and Strategic Options
The reasons so few small business owners engage in strategic
planning is often attributed to their lack or time, or their lack of the
knowledge and skills to develop a plan.
They are also viewed as being unwilling to formalize their plans and
share their ideas and strategies out of fear that these will be stolen.
While these reasons are probably partially true, it is also likely that
many simply see little need to engage in strategic planning, because
they know where they are going and how they will get there.
If their business is operating in a stable environment with little
uncertainty and they know how to make their product or deliver
their service, why would they bother developing complicated
strategic plans?