PNR Paper

The Positive Impact of Strategic Planning on Small Firm Growth

Bottom line: At PNR, we are big fans of strategic planning. Most organisations struggle with strategic planning, and are even less effective when it comes to its execution. We’ve solved this challenge by applying the principles of agility to the highest levels of an organisation. By implementing our Agile Strategic Planning methodology, we help executive teams determine their goals, and ultimately accelerate their achievement by providing alignment, focus, measurability and accountability.

While many SMBs do not formulate business plans, the authors found that strategic planning and systematic decision-making can be considered an important predictor of firm growth.

What they found:

  • Mission, Vision and Objectives:
    The difference between vision and mission is in the time component. The mission determines what the company does whereas the vision communicates what the company will become and do in the future. In order to grow, executives need to formulate an exact, clear mission and vision of their firm, what they want to become and where they want to be. Once the executives have a clear mission and vision, they need to flesh out corporate objectives that will be centred around the market, financials, product and service.

    In this paper, the authors found that growth firms were more likely to have a clear vision than a clear mission because of the orientation on the future. On the other hand, non-growth firms were more likely to have a clear mission than a clear vision. Furthermore, growth firms were more driven by profit making and market opportunities than non-growth firms and were more likely to have international expansion as part of their strategy. Growth firms were less focused on the imitation of competitors and on the education of the entrepreneur, but both of them saw innovation and quality as important in achieving their strategy.

  • Strategies:
    As previous research has shown, successful small firms tend to use advanced planning and activity analysis. Strategy can be defined as actions performed by the firm in order to achieve its business objectives and to deliver a unique mix of value to customers. The role of strategy is to put the result of strategic analyses of the internal and external environment in action and help the firm to achieve desired results despite the environmental unpredictability. To do so, executives can use strategic management tools and techniques such as market analysis, SWOT analysis, resource allocation plans, as well as scenarios and strategic planning. More specifically, strategic planning is a process that forces executives to think about business questions and search for solutions which encourages learning and improvements.

    In this paper the authors found that growth firms were more likely to have a well-formulated strategy for the achievement of their objectives, vision and mission and they were more likely to use specific strategies such as differentiation, cost leadership, and focus/niche. However, the authors did not find a significant difference between the use of strategic analysis techniques. Growth firms were more likely to analyze the market and the competition, whereas non-growth firms relied on the analysis of internal capabilities. Both of them used the same techniques to formulate the strategy, combined with the intuition of executives. In conclusion, growth firms tend to put more emphasis on the strategic planning practices than non-growth firms (customers and their needs, SWOT, competitive analysis, determining objectives for the coming year with communication to employees and optimization of existing capabilities).

Final words: According to the research of the authors, SMBs executives need to be aware that strategic planning practices, processes and techniques are important factors in driving firm growth. More specifically, formulating a clear vision and strategy, focusing on growth, profit, and markets, incorporating elements of internationalization in the vision, performing analyses of the market and competition, and communicating the strategies to achieve company-wide support are all be beneficial for the growth of SMBs.

Read more: Branda Skrt, Bostjan Antoncic. Strategic Planning and Small Firm Growth: An Empirical Examination. Managing Global Transitions 2 (2): 107–122, http://www.fm-kp.si/zalozba/ISSN/1581-6311/2_107-122.pdf.