Strategic planning / entrepreneurship and size of business

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Chapter 3 Strategic Planning

We shall not cease from exploration And the end of all our exploring Will be to arrive where we started ,And know the place for the first time.
Eliot

Introduction

The chapter defines what strategic planning is. It then concentrates on the strategic planning process. The process defines what strategic planning is. Each of the different stages is analysed in detail and contextualised in relation to strategic planning and corporate entrepreneurship. In cases where there are different approaches, these are discussed in detail and a dominant position identified. The discussion on strategic planning is based on the conventional approach.
The strategic planning construct is explored in detail. The different strategic planning views ranging from the traditional / classic, the incremental and the emergent convergent are explained in terms of what they are and how they relate or differ from each other. The study adopts the traditional (conventional) approach as the basis of analysis and so the whole detailed strategic planning process is presented with this bias.

The strategic planning process

Traditionally, strategic planning is the process of

• analysing the business’s external and internal environment
• developing a vision and mission
• formulating overall goals
• identifying general strategies to be pursued
• allocating resources to achieve business goals,
• deciding how these will be monitored and controlled (Hellriegel, Jackson, Slocum, Staude, Amos, Klopper, Louw & Oosthuizen 2001; Thompson & Strickland 2001; Pearce & Robinson 2000; Kaplan & Norton 2001; Drucker 1974; Hitt, Duane & Hoskisson 2003; Stonehouse & Pemberton 2002).

Strategic planning becomes a sequence of analytical and evaluative procedures to formulate an intended strategy and the means of implementing it. Strategic planning is one of the constructs of strategic management. The strategic management process of “formulation, implementation and evaluation” becomes the operationalisation of strategic planning (Thompson & Strickland 2001:7).
Business strategy is part of strategic planning and it is generally prescriptive in nature, envisaging a process of “formulation” (deciding what to do) followed by implementation (taking action). The production of a written statement of business objectives, namely the “mission statement”, is a key feature of strategic planning (Barnes 2002:131)
This is supported by Daft (2002:139), who points out that strategic planning set out decisions and actions used to “formulate” and “implement” strategies that will provide a competitively superior fit between the business and its environment in order to achieve business goals.
Kargar and Parnell (1996:41) posit that strategic planning is an attitude and a process concerned with the future consequences of current decisions and that it links short, intermediate, and long-range plans. It does not attempt to make future decisions or even forecast future events. It adjusts plans to the emerging business environment, manages the business analytically, links, directs and controls complex business through a practical working management system which plays a vital role in the performance of a business.
Morris and Kuratko (2002:153) point out that strategic planning is the formulation of long-term plans for the effective management of external threats and opportunities in the light of a business’s internal strengths and weaknesses. It defines the future of the business. This includes defining the business’s mission, specifying achievable objectives, developing strategies and setting policy guidelines.
Smit and Cronje (2002:138) point out that strategic planning has as its objective the long-term survival of the business in a volatile environment. To survive the management has to formulate a vision and mission statement, scan the internal and external environment for opportunities and threats, formulate long-term goals and choose a strategy that will lead to goal attainment.

Strategic planning perspectives

Parnell (2005:159) presents two approaches to strategy: strategy as an art and as a science. According to the art perspective, the lack of environmental predictability and the fast pace of change suggest that the inherent value of strategic planning is limited. Strategists should incorporate substantial creativity and intuition in order to design a comprehensive strategy for the business. The science perspective views the business environment as largely objective, analysable and to a great extent predictable. Strategic managers therefore follow a systematic process of environmental, competitive and internal analysis and build the business strategy on this foundation.
Grattan (2004:66) supports the assertion that strategy formulation is an art, guided by whatever science can be brought to bear, and that when it comes to strategy formulation, positioning and resources need to be considered since these are complementary and not alternative.
Pitcher (2003:50) cites George Santayana, who wrote that “man’s progress has a poetic phase in which he imagines the world, then a scientific phase in which he sifts and tests what he has imagined”.
The resources premise is in agreement with Chandler‘s (1962:13) classic definition of strategy, that it is “ the determination of long-term goals and objectives of business and the adoption of courses of action and the allocation of resources necessary for carrying out those goals.
Kim and Mauborgne (1999:197) provide two differing strategic planning logics. They call these “conventional” and “value innovation.” The distinguishing presumption of value innovation is that the industry’s conditions are not given but can be shaped. A business therefore pursues a quantum leap in value to dominate the market and does not view competitors as a benchmark. These same approaches, outlined by Miller (1998) under the terms “rational” and “incremental”, are briefly discussed below.

The incremental approach

According to the incremental approach, strategy is not designed from the start in any comprehensive way and managers know that the environment they operate in is uncertain and ambiguous. Strategy then emerges from interaction between different groupings of the people in the business (Quinn 2003:16).
The incremental approach to planning assumes that the future is unknown and unpredictable. External forces are assumed to be too powerful to be controlled by businesses and therefore managers find it difficult to control plans. The assumption is therefore that managers should constantly adjust strategies as plans are overtaken by developments outside their ability to predict and control. The incrementalists stress the flexibility to react to unpredictable opportunities and accidents and to “muddle through” without a defined or sustained sense of direction.

The rational approach

In contrast, “rational planning”, also referred to as formal planning, is a process of logically approaching the task of identifying the ends a business pursues and determining the means by which those ends can be reached. This is a process designed to translate strategic intentions into manageable agendas for action (Miller 1998:39).
According to Szulansky and Amin (2001:541), the problem to be solved and all the alternatives available for its solution are known in advance. The strategist’s main role is to collect information diligently, develop alternatives and choose the one that maximises value. Strategic planning instils discipline in strategy-making with its formal process that allows planners to consider issues consistently and systematically, using such tools as the planning cycle, capital budgeting procedures and integrated decision making at different levels.

Chapter 1 Context of study 
1.1 Introduction
1.2 Importance of study
1.3 Definition of terms
1.4 Outline of proposed study
Chapter 2,Introduction to strategic planning and corporate entrepreneurship 
2.1 Introduction
2.2 Strategic planning / entrepreneurship and size of business
2.3 Entrepreneurship / strategic planning and performance
2.4 Strategic entrepreneurship
2.5 Planning and strategic thinking
2.6 Chapter summary
Chapter 3 Strategic planning 
3.1 Introduction
3.2 Strategic planning process
3.3 Strategic planning perspectives
3.4 Situation audit
3.5 Mission and vision statemen
3.6 Environmental analysis
3.7 Developing strategies
3.8 Goal formulation
3.9 Strategy implementation and control
3.10 Strategic planning and performance
3.11 Chapter summary
Chapter 4 Corporate entrepreneurship 
4.1 Introduction
4.2 The evolution of corporate entrepreneurship (CE)
4.3 Aspects of entrepreneurship
4.5 Entrepreneurship and leadership
4.6 Entrepreneurial culture
4.7 Corporate entrepreneurship (CE) and performance
4.8 Importance of corporate entrepreneurship
4.9 Public sector entrepreneurship
4.10 Problems faced by entrepreneurs
4.11 Chapter summary
Chapter 5,Corporate entrepreneurship and strategic planning: The relationship 
5.1 Introduction
5.2 Corporate entrepreneurship (CE) and strategic planning (SP): The relationship
5.3 Entrepreneurial strategic thinking
5.4 Strategic leadership
5.5 Chapter summary
Chapter 6 Research methodology 
6.1 Introduction
6.2 Methodology
6.3 Chapter summary
Chapter 7 Presentation and interpretation of data 
7.1 Introduction
7.2. Descriptive statistics
7.3 Factorial designs
7.4 Correlations
7.5. Analysis of variance (ANOVA)
7.6 Managerial implications
7.7 Chapter summary
Chapter 8 Conclusions and recommendations 
8.1 Introduction
8.2 Recommendations and conclusions
8.3 Strategic planning
8.4 Entrepreneurial orientation
8.5 New product introduction
8.6 Performance
8.7 Contribution of study
8.8 Limitations of study
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