CHAPTER

CHAPTER15
15

Strategic
Strategic Planning
Planning for
for Emerging
Emerging Ventures
Ventures

Reference
Reference Book-
Book- Kuratko
Kuratko
The
The Nature
Nature of
of Planning
Planning in
in Emerging
Emerging Firms
Firms
Most entrepreneurs’ planning for their ventures is
informal and unsystematic.
The need for formal, systematic planning arises
when:
 The firm is expanding with constantly increasing
personnel size and market operations
 A high degree of uncertainty exists
 There is strong competition
 There is a lack of adequate experience, either
technological or business
 Strategic
Strategic Planning
Planning
Strategic Planning
 The formulation of long-range plans for the effective
management of environmental opportunities and
threats in light of a venture’s strengths and
weaknesses.

 Includes:
• Defining the venture’s mission
• Specifying achievable objectives
• Developing strategies
• Setting policy guidelines
 Strategic
Strategic Planning
Planning (cont’d)
(cont’d)
Basic Steps in Strategic Planning:
1. Examine the internal and external environments of
the venture (strengths, weaknesses, opportunities,
threats).
2. Formulate the venture’s long-range and short-range
strategies (mission, objectives, strategies, policies).
3. Implement the strategic plan (programs, budgets,
procedures).
4. Evaluate the performance of the strategy.
5. Take follow-up action through continuous feedback.
Figure
Figure::
The
TheStrategic
Strategic
Management
Management
Process
Process

Source: Michael A. Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management:
Competitiveness and Globalization, 6th ed (Mason, Ohio: South-Western Publishing, 2005).
 Key
Key Dimensions
Dimensions Influencing
Influencing aa Firm’s
Firm’s
Strategic
Strategic Planning
Planning Activities
Activities
Demand on strategic managers’ time
Decision-making speed
Problems of internal politics
Environmental uncertainty
The entrepreneur’s vision
 Step 1: Commitment to an open planning process.
 Step 2: Accountability to a corporate conscience.
 Step 3: Establishment of a pattern of subordinate
participation in the development of the
strategic plan.
 Strategic
Strategic Planning
Planning (cont’d)
(cont’d)
Reasons for the Lack of Strategic Planning
 Time scarcity
 Lack of knowledge
 Lack of expertise/skills
 Lack of trust and openness
 Perception of high cost
 The
The Value
Value of
of Strategic
Strategic Planning
Planning
Findings of Strategic Planning Studies
 Strategic planning is of value to a venture and that
planning influences a venture’s survival.
Benefits of Long-Range Planning
 Cost savings
 More efficient resource allocation
 Improved competitive position
 More timely information
 More accurate forecasts
 Reduced feelings of uncertainty
 Faster decision making
 Fewer cash-flow problems
Strategic
StrategicPlanning
PlanningLevels
Levels

Source: Jeffrey S. Bracker and John N. Pearson, “Planning and Financial Performance in Small, Mature Firms,” Strategic Management Journal 7 (1986): 507.
 Strategic
Strategic Planning
Planning Levels
Levels
Strategy Level 0 (SL0): no knowledge (predictive ability) of next
year’s sales, profitability, or profit implementation plans

Strategy Level 1 (SL1): knowledge only of next year’s sales, but no

knowledge of upcoming industry sales, company profit, or profit
implementation plans

Strategy Level 2 (SL2): knowledge of next year’s company and

industry sales, but no knowledge of company profit or profit
implementation plans

Strategy Level 3 (SL3): knowledge of company and industry sales

and anticipated profit, but no profit implementation plans

Strategy Level 4 (SL4): knowledge of next year’s company and

industry sales, anticipated company profits, and profit implementation
plans
 Strategic
Strategic Planning
Planning Levels
Levels (cont’d)
(cont’d)
Strategic Planning Categories (Rue and Ibrahim)
 Category I: No written plan
 Category II: Moderately sophisticated planning
 Category III: Sophisticated planning
• Results demonstrated that more than 88% of firms with
Category II or Category III planning performed at or above the
industry average compared with only 40% of those firms with
Category I planning.

All research indicates:

 Firms that engage in strategic planning are more
effective than those that do not.
 The planning process, rather than merely the plans, is
a key to successful performance.
 Fatal
Fatal Vision
Vision in
in Strategic
Strategic Planning
Planning
Fatal mistakes that entrepreneurs fall prey to in
their attempt to implement a strategy:
 Flaw 1: Misunderstanding industry attractiveness

 Flaw 2: No real competitive advantage

 Flaw 3: Pursuing an unattainable competitive position

 Flaw 4: Compromising strategy for growth

 Flaw 5: Failure to explicitly communicate the

venture’s strategy to employees
 Strategic
Strategic Positioning:
Positioning:
The
The Entrepreneurial
Entrepreneurial Edge
Edge

Strategic Positions
 Are often not obvious, and finding them requires
creativity and insight.

 Entrepreneurs often discover unique positions that

have been available but simply overlooked by
established competitors.
The
TheIntegration
Integrationof
ofEntrepreneurial
Entrepreneurialand
andStrategic
StrategicActions
Actions

Source: R. Duane Ireland, Michael A. Hitt, S. Michael Camp, and Donald L. Sexton, “Integrating Entrepreneurship and
Strategic Management Actions to Create Firm Wealth,” Academy of Management Executive 15(1) (February 2001): 51.
Alternative
AlternativeViews
Viewsof
ofStrategy
Strategy

Source: Reprinted by permission of Harvard Business Review from “What Is Strategy?” by Michael E. Porter, (November–
December 1996): 74. Copyright © 1996 by the Harvard Business School Publishing Corporation; all rights reserved.
Strategic
StrategicApproaches:
Approaches:Position,
Position,Leverage,
Leverage,Opportunities
Opportunities

Source: Reprinted by permission of Harvard Business Review from “Strategy as Simple Rules,” by Kathleen M. Eisenhardt and Donald N. Sull, January 2001, 109.
Copyright © 2001 by the Harvard Business School Publishing Corporation; all rights reserved.
 Implementing
Implementing aa Strategic
Strategic Plan
Plan
Milestone Planning Approach
 The use of incremental goal attainment that takes a new
venture from start-up through strategy reformulation.

 Advantages of milestone planning are:

• the use of logical and practical milestones
• the avoidance of costly mistakes caused by failure to consider
key parts of the plan
• a methodology for re-planning, based on continuous feedback
from the environment.
AAMilestone
MilestonePlanning
PlanningApproach
Approach
MILESTONE DESCRIPTION
1 Formulation of the basic idea for the new
venture
2 Completion of a prototype (in this case, a new

product)
3 Raising the seed capital
4 Conducting a pilot operation
5 Market testing
6 Start-up of operations
7 Sale to first major account
8 Reaction to the competition
The
TheEntrepreneurial
EntrepreneurialStrategy
StrategyMatrix:
Matrix:Independent
IndependentVariables
Variables

Source: Matthew C. Sonfield and Robert N. Lussier, “The Entrepreneurial Strategic Matrix: A Model for New and Ongoing Ventures.“ Reprinted with permission from
Business Horizons, May-June 1997, by the trustees at Indiana University, Kelley School of Business.
The
TheEntrepreneurial
EntrepreneurialStrategy
StrategyMatrix:
Matrix:Appropriate
AppropriateStrategies
Strategies

Source: Matthew C. Sonfield and Robert N. Lussier, “The Entrepreneurial Strategic Matrix: A Model for New and Ongoing Ventures.” Reprinted with permission from
Business Horizons, May-June 1997, by the trustees at Indiana University, Kelley School of Business.
Entrepreneurial
EntrepreneurialStrategy:
Strategy:AAContingency
ContingencyMultistage
MultistageApproach
Approach

Source: Donald F. Kuratko and Harold P. Welsch, Entrepreneurial Strategy (Fort Worth, TX: The Dryden Press, 1994), 10.
The
TheOverall
OverallPlanning
PlanningProcess
ProcessFor
ForaaVenture
Venture

Source: Richard M. Hedgetts and Donald F. Kuratko, Management, 3rd ed. (San Diego: Harcourt Brace Jovanovich, 1991), 174.
 Strategic
Strategic Planning
Planning Model
Model
AA BB CC DD EE
Where we are Where we want to be How we will do it How are we doing

Assessment Baseline Components Down to Specifics Evaluate

• Environmental Scan • Situation – Past, • Mission & Vision • Performance • Performance

Present and Future Measurement Management
• Background • Significant Issues • Values / Guiding • Targets / Standards of • Review Progress –
Information Principles Performance Balanced Scorecard
• Situational Analysis • Align / Fit with • Major Goals • Initiatives and • Take Corrective
Capabilities Projects Actions
• SWOT – Strength’s, • Gaps • Specific Objectives • Action Plans • Feedback upstream –
Weaknesses, revise plans
Opportunities,
Threats
 Major
Major Components
Components of of the
the Components
Strategic
Strategic Plan
Plan // Down
Down to
to Action
Action

Strategic Plan

Action Plans
Mission Why we exist
Evaluate Progress

Vision What we want to be

Goals What we must achieve to be successful

Objectives O1 Specific outcomes expressed in

O2
measurable terms (NOT activities)

Initiatives Planned Actions to

AI1 AI2 AI3 Achieve Objectives

Measures Indicators and

M1 M2 M3 Monitors of success

Targets T1 T1 T1 Desired level of

performance and timelines
 LIVE
LIVE PROJECT
PROJECT
Choose any business as an option given below:

 A Coffee Shop (own brand)

 A Publishing House
 Catering Service
 Financial Service
 5 Star Hotel

Task1: Scan the business environment before the

planning.
Task2: Develop an strategic plan for the selected venture.

Note : It should be fully original otherwise will be

marked zero
Last Date : 10th Feb’2011
Max Marks : 10