Literature Review: Strategic Planning and Performance in Small Business



Posted: Sunday, November 11, 2007

by
http://www.small-medium-business.blogspot.com

From the mid seventies we can note that scholars makes the distinction between small and large businesses in terms of needs, level of sophistication and range of strategic planning. Bracker and Pearson (1986), Rue and Ibrahim (1998), Perry (2001) and Wijewardena, Zoysa, Fonseka and Perera (2004) all formulate definitions of strategic planning which take the uniqueness of small businesses into account and allow for the fact that small businesses cannot draw on management and material resources in a manner similar to that of large organizations.

Empiric studies' findings indicate at a correlation between strategic planning and performance. Nevertheless, the findings are mixed. A survey of twenty-six experimental studies enabled Miller and Cardinal (1994) to identify a significant positive connection between strategic planning and small business performance. Robinson (1982) found a significantly high level of profitability as well as an increase in sales and returns on sales and the number of full time employees in a group of small businesses that employed external consultants for the purpose of strategic planning. Compared with other businesses, Bracker and Pearson (1986) discovered a significant increase in income and remuneration per entrepreneur in businesses that prepared strategic plans (the highest of four designated levels of strategic planning). No significant increase was detected in the measure salary expenditure divided on the sum total of sales. A significant differentiation in the rate of sales increase was found by Rue and Ibrahim (1998) in small businesses that incorporated written planning (basic or sophisticated), as opposed to other businesses. Perry (2001) detected a significant differentiation in the degree to which planning was conducted in small businesses that did not applied for bankruptcy as opposed to those that did. Wijewardena et al. (2004) define three levels of planning: no written planning; basic planning; and detailed planning. The findings indicate that the level of planning stands in direct proportion to the level of increase in sales. Yusuf and Saffu (2005) classify three levels of planning: low; moderate; and high. A connection was found between increase in sales and the low level of planning. No correlation was found between strategic planning and increases in market share or in profitability.

Dr. Rami Schayek combining the academic world as a researcher and a lecturer at the ben gurion university with a field work as the CEO of several small businesses concurrent with coaching many other small and medium businesses. You can see more from his work at www.small-medium-business.blogspot.com

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Top-level comments on this article: (2 total)
» left by andrew
from uganda 3 years 330 days ago.
thank you for publishing this document and am realy gratefull that i found it on the net . it has helped me find more about my reasearch as my supervisor required it
» left by Egbuche Arthur
from Nigeria 1 year 364 days ago.
this article was very helpful and therefore you are to keep it up.
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