Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

(W34,301
I(’

Business Planning
Small Firms
William

H
...
Lon Addam

I-low
do
strategic
ancc? Ijo
planning
additioii
funding,

successful
high-growth
cornpanics
USC
planning
to improve
conlpany
performsuccessful
companies
document
strategic
proccsscs
with written
business
plans? In
to using
the business
plan for start-up
arc there unrccognizcd
bcnetits
fi-on1 using
business
plans!
These
and
siinilar
qucations
proniptc~l
the authors
to investigate
the USC of
stratqic
planning
and the resulting
written
business
plains by high-grom:th
buGncsscs-the
‘INC
...

130th curvcy
and iiitervicw
data wcrc Sathcrcd
to
help tind helpful
mswcrs
to these qucstioiis
...

SWOT
(Strengths,
Weakncsscs
...

However,
in
rcccnt
years inany
critics have csprcsscd
conccrii
William H
...
H
...

Brian
Davis
is Professor
of Business
Administration,
The Willard Eccles Research Fellow and Directorof the
Small Business lnstltute
at Weber State Unwerslty

/Y3

$6
...
oo
Ltd

in Successful

and Brian

Strategic planning has been widely publicized during the last
decade, but what has been accomplished
by this management
activity in smaller, high-growth
firms? Business plans have
been widely recommended
for start-up funding, but we have
notedadditionaluses
for business plans in practice
...
500’ firms
...
Results of this study show that
fast-growth
firms develop written business plans as a product
of strategic planning, mainly by five key management
personnel
...
Finally, the
completion of strategic planning ispositively
associated with a
firm’s profitability
...


lYY3

Davis

that ‘form became
in many firms
...

For cxanlplc,
Kobinson
ct al
...

Their
findings
suggest
that a
company’s
stage
of dcvclopment
may
play
a
con tingcn t rolc in terms
of strategic
planning
intensity
and that basic planning
activity
has a
positive
impact
on small-firm
perforinancc
...
They
rcportcd
;I link bctwecn
strategic
planning
and
success
over
tinlc
but
indicated
that
strategic
planning
was sporadic
and tcniporary
among
small
firnls
...
cs
...
’
Another
study idc,ltiticd
lack oftimc
and lack of skill5 as the dominant
rcasous for not
engqing
in ptanriing
...

A few studies
have ii)c:iuded
the use of business
plans, but typically
only as a small part of ail overall
strategic-planning
focus
...
300 firms
that rcspondcd
to their early-1980s
survey
devclopcd a business
plan for start-up
purposes
...
Benefits
accruing
to these firms wcrc also
studied
...
Formal written plans arc
considcrcd
to be bcttcr than informal,
unwritten
plans for several reasons:
Critical thinking and group decision making
...

lfrternal and external communication
...

Cotltrol mechanism for course correction
...


Statement

of Purpose

The preceding
studies
questions for CEOs:
(1) 130 fast-growth
plans that grow

kindle

several

important

firms develop written business
out of strategic planning?

(2) If so, how are the plans dcvcloped

and used?

(3) What
profit)

process

arc the benefits
(to both
of written business plans?

and

The present study sought to answer these questions
so the resulting information
could be made available
to other similar firms
...
’
Survey

response

mailings

to these

from

194 CEOs,

All 500 CEOs of the 1989 INC
...

Companies
had been selected for this list according
to the following
criteria:
To gain a spot on the 1989 INC
...

Rankings [were] based on the percentage
increase in sales_fiom
2984 rlrroqh 2988
...
Holding
and utilities [were] not

INC
...
8 per cent
...

The survey data also
revealed that over 90 per cent of the planning firms
perform their formal planning at least once a year, as
follows :
Frequency
Monthly
Quarterly
Semiannually
Annually
Other

Per cent
19
...
9
18
...
3
7
...

Do fast-growthjrms
develop written business plans that
grow out of strategic planning?
Of the 166 firms that engage in strategic planning,
158 (95 per cent) prepare written plans resulting
from the strategic plans
...

These plans would have been prcpared when the firms were at least three years old
...
Year
prepared
Year

in which

the last business

No
...


plan was

Per cent*
36
...
5%
5
...
6%
18
...
0%

indicated a plan would be prepared in the following

Are Written Plans Developed
and Used?
Table 2 reveals that the CEO is more frequently
involved than any other person, with 93
...

However, the Vice President of Marketing
(81
...
1 per cent) arc also key players
...
Individu,ils

Range

Planning
ii~volvcd

Vol
...
and COO)
Vice President of Marketing
Vice President of Flnance/Accountlng
Chairman
of the Board
Vice President of Production/Operations
Outside Accountant
Outside Board Members
Vice President of Management
InformatIon
Vice President of Research and Development
Outside Attorney
Vice President of Human Resources
Outside Banker
Vice President of Planning

93
...
7%
79
...
0%
68
...
4%
45
...
8%
39
...
3%
36
...
1%
26
...
8
4
...
7
4
...
5
2
...
2
3
...
8
1
...
5
4
...
4 per
c
...
The
other
offiiccm lijtcd
in Table
2
...
,ltcSorics
...
rittcii
plans
;Irc used by on-going
coinpanics
...

T‘,ibIc 3 discloses that tlic major
ux-5 of tlic writtcm
plaii~ arc for intcrn~il
man:qelllcllt purp~‘ses:
to guide
company
operations
(X9
...
5
per cent), and to establish
inccntivcs
ti,r inaiiagcrs
(73
...

Coiivcrscly
...


One of
f~cl tlidt
ofthcir
cciit of
Table

the Inost importalIt
findings
is that CEOs
key t;iccts
\tratcgic
planniii g has improvcd
Klst-growth
cornpanics
...
How

the busillcss

plan

mcnt as an outgrowth
of their planning
...

How do the responding
CEOs feel about the succc‘ss
of their written
business
plans? Tnblc 5 shows that
over two-thirds
of the companies
reported
success
in
all arcns for which the business plan was used
...

CEOs feel that their business
plans arc cffcctive
in
achieving
the goals for which they wc‘rc dcvcloped
...
2s not all firms would
be
conccrncd
with new funding
...

In addition
to CEOs’ _f&/ir~~qs about
the succccs
of
busiiicss
pl, dii5, an important
:
nic;1surc
of success is
protitability
: 110~s use of :i written
plan correlate
w
...

500 firms
wcrc

m’as used
Per cent using plan
for this purpose’

Usage rating
(Mean)
+

( Base = 158)
To guide company
operations
To measure company
performance
To establish
incentives
for managers
To obtain on-going
funding
To obtain funds for growth
or new company
institutions
To assist in attracting
major customers
To obtain funds for growth
or new company
capatallsts
+ Scale Anchors:
O-Not
Used, 6= Primary Use
r Use IS defined as a rating of 1 or higher on scale

direction

from

financial

89
...
5%
72
...
5%
38
...
2%
17
...
6
3
...
7
2
...
7
1
...
Improvements

from

strategic

Planning

in Successful

Small

Firms

85

planning
Per cent of companies
reporting
improvement*
(Base=166)

Area of improvement

94
...
4%
93
...
4%
92
...
2%
91
...
O%
91
...
0%

Profitability
Marketing/product
mix
Industry
leadership
Decision making
Communication
and unity
Motivation
Operations
management
Allocation
of resources
Controls
Asset growth

Improvement
(Mean)

rating
+

3
...
1
4
...
0
4
...
0
3
...
0
3
...
4

+ Scale Anchors:
0= No Improvement;
B=Great
Improvement
* Improvement
is defined as a rating of 1 or higher on scale

Table

5
...
0%
91
...
3%
82
...
4
4
...
1
4
...
1%
72
...
9%

4
...
5
3
...

The most-profitable
companies
wcrc
identified
as those in the profit range of 16 per cent
or more
...

The
least profitable
companies
were
classified as those in the profit range of 0 per cent or
less; 24 firms fell into this category
...
5
per cent (13 of 17) for the
nzost profitable
and 75 per cent (18 of 24) for the lenst
profitable
...

Howcvcr,
that 100 per cent (17 of 17) of the most profitable
firms perform
strategic
planning,
while
79
...


How Do Selected Firms Use Business Plates in Strategy
Implementation?
A major company
in an area rcccntly
described
as
Software
Valley
(in central
Utah)
is the highly
successful
WordPerfect
Corporation-an
INC
...
’
Examining
WordPerfect’s
strategic
planning
and business
plan processes
gives insight
into its successful
planning
and implementation
procedures
...

The seven-member
strategic planning
group at WordPerfect
includes
the Chairman
of the
Board,
President,
Sr
...
Vice
Prcsidcn-General
Cou~~scl,
Sr
...
Vice President-Sales
and Markcting, and Vice President-Finance
and ...

Following
the establishment
of strategic
plans
...

For communication
effectiveness,
the strategic plans
arc packqcd
as an acronym
for easy rcmcmbering
...

The three
main
parts of WISE
arc information
processing,
information
sharing,
and information
presenting,
and all WordPerfect
products
and goals
fit in one of these system elements
...

Thus,
WordPerfect
developers
and
sales people
alike
arc

86

Long

Range

Planning

Vol
...

As Steve Schmutz,
a WordPerfect
Area
to choose
all
Manager,
says, ‘We’d like everyone
WordPerfect
products,
but that’s just not realistic
...

Strategic
plans arc communicated
throughout
the
organization
in three ways
...

For
this
event
the
cntirc
company
shuts down,
cvcn the customer-support
group
...

Second,
strategic
plans arc communicated
in writas well
as other
critical
ing
...

WordPerfect
tries to
exploit
clcctronic
mail
as much
as possible
for
internal
communication,
so most
of the forinal
internal
information
is transmitted
using this means
...

Each manager
and each
cmploycc
is cxpcctcd
to establish
goals consistent
with the corporate
strategic
plans
...

Quarterly
and at the end of the year, cmployccs
and
managers
arc evaluated
on the dcgrcc to which their
goals
have
been
attained
...

In bctwccn
the formal
quarterly
rcvicws,
WordPcrfcct
managers
stay tuned
to input
from
customcrs
and other sources of pcrtincnt
information
that could impact the business plan
...

As an cxamplc,
WordPcrfcct’s
four major
U
...
distributors
consistently
feed information
into the clcctronic-mail
system,
and area salts managers
enter
what
they
have
lcarncd
during
the day
...
Others
‘My findings
arc consistent
might
respond
with,
with that’, or ‘That doesn’t seem to bc the cast in my
The
information
gathcrcd
and
analyzed
arca’
...

WordPerfect
managers
arc convinced
that strategic
plam+ng,

1993
coupled
with cffcctivc
written
and spoken
communication
of the plans,
pays great dividends
in
today’s fast-paced,
high-tech
world
...

processes
successfully
since 1085
...

The Salt Lake City-based
company now reports over S6 million
in annual net salts
...
Cullimorc,
Jr
...
On a
monthly
basis, the top managcnlcnt
team IliCCtS to
assess----and
alter as nccdcd--both
the short-term
and long-term
objcctivcs
...

At the monthly
meeting,
cacti managcmcnt
team
mcmbcr
is charged
with specific assignnicnts
rclating to the objectives
identified
and reports
on the
status of those assignments
at the next monthly
meeting
...

Top managcmcnt
rcvicws
the written
plans
and
accomplishments
at a monthly
strategic
planning
meeting
...

Our marketing
strategy
is formed in large part from
dcalcrs
in the
field
who
work
directly
with
customers
...

and
strategic
planning
helps us stay on track’
...
’ A rcccnt addition
to
the INC
...

Cunningham
Communication
is number
one in
rcvcnuc
growth
in its industry
in Silicon
Vallcy
...
plus Marketing,
Communication,
and Account
Professionals
(each
of whom
rcprcscnts
other input teams)
...

Ci~riniiigli~~ni
uses ,1 concise,

Business
executive-summary-type
catc the strategic
plans
the firm
...


do
of

(2) The

business
plan development
team generally
consists of the following
five key management
personnel:
Chairman
of the Board, CEO, Vice
President
of Marketing,
Vice
Prcsidcnt
of
Finance/Accounting,
and
Vice
President
of
Production/Operations
...


of obstacles,
the large
(3) In spite of a variety
majority
of fast-growth
firms conduct
strategic
planning
at least annually
...

The data from
this study
suggest
that highgrowth
firms are strongly
committed
to frcqucnt strategic
planning
sessions
...

Further,
contrary
to the thinking
of many
written
business
plans
are
business
writers,
prepared
and used by on-goingjrms, not just by
start-up
companics
...

The
irony of this conclusion
is that a higher number
of CEOs
report
some success using
business
plans for internal
management
purposes
but
that the degree of success is greater for cxtcrnal
funding
objectives
...

(

This
study
suggests
a significant
association
between
strategic
planning
and profitability
...


Discussion
Many of today’s businesses
engage
in at least some
degree of strategic
planning,
but they must ensure
that their follow-through
is in order, particularly
in
using written
business plans for periodic
evaluation
and course correction
and for communication
with
all managers
and employees
...

500 firms
that employ
effective
planning
and implementation
practices
...

Phase 1
...
Mcmbcrs
of the
top-management
team develop
the firm’s mission,
core values, and core compctcncies
...


1
...


26

Dcccmbcr

&-cats, and cxtcnding
planning
as far as appropriate
into the future (typically,
from one to three years),
the team preparcs
the firm’s plans
...
*
Prcpnre
full
Phase
2
...

11~
velop
condensed
documentation
(cxccutivc
summary),
listing
specific
plans
and objcctivcs,
for
gcncral
communication
purposes
...


Phase
3
...
u
Distribute
condcnscd
plan documentation
to
,111dcpartmcnts
for USC by all employees
...


1003
play a significant
role in an organization’s
ctfcctivcncss
...


1111711
...
Robinson,
Jr
...
Pearce II, George S
...
Mescon,
The Relationship
Between
Stage of
Development
and Small Firm Planning and Performance,
Journal
of Small Business Management,
April, 45-52
(1984)
...
Sexton and Philip Van Auken, A Longltudlnal
Small Business
Strategic
Planning,
Journal of Small
Management,
January,
7-l 5 (1985)
...
Scott Armstrong,
Performance,
Long

(4)

Vasudevan
Ramanujam
and N
...


(6)

Bill Parks, Phillp D
...
Bokor, Don’t mistake
business plans for planning
(it may be dangerous
to your financial
health),
Journal
of SmaN Business Strategy,
February,
15524
(1991)
and Charles B
...
Mulford,
and Virginia
L
...


strategic
plan, can

(6)

“The Business
Plan contents
mclude Executive
Summary,
Company
Hlstory,
MIssion
Statement,
Description
of Products/Services,
Marketlng
Strategies,
Organizational
Structure,
Financial
Plans (Cash
Flow and Pro forma Statements),
and Production/Operation
Plans
...
Shuman, John J
...
Mount,
J
...
Zinger
and G
...
Co/llp/ctr~ _f;~rrrr~/ wvicw
...

Make
appropriate
corrections
in either organizational
operations
or in
the business
plan itself
...

Following
all four phases
will help product
incrcascs

of this model
in organizational

each year
cffccti-

VCIICSS
...
500 were selected,
Business

Study of
Business

Week, October

Inc
...


(1989)

---

Title: Business planning in successful firms
Description: Business plan is an important part of any business, by creating a perfect business plan, you will create a door to your success.

Buy These NotesPreview