Strategic planning for increased profit in the small business

This article examines the problems facing the owner-managers of small businesses, and details the investment required in strategic process development which would guarantee the critical 5 per cent difference to ensure the successful growth and adaptability of the company. Formal strategic planning needs to blend with team development to create the concept of ‘strategy-in-use’ and the development of effective management teamwork out of a planning process.     

Do your planning processes meet the reality test?

Sophisticated planning systems and touted techniques have never been a guarantee of success to a business. We believe this is because there has been too much focus on the content of strategy rather than the underlying process, and because the process is often poorly matched to the nature of the problem. For strategic situations the issues are usually complex and unpredictable with many unknowns and a large human factor, typical of the problem category defined as ‘wicked’. This article identifies a set of seven fundamental process principles for dealing with such problems. The principles are a starting point in the effort to codify the ‘art’ of successful strategic planning. Several examples of the use of the principles in business contexts are provided.     

Corporate planning and Corporate Collapse

In this article John Argenti describes what he found during a year's investigation into company failure that he undertook for a recently published book ‘Corporate Collapse’. At first it was difficult to see any pattern but certain conclusions gradually emerged as he discussed the causes and symptoms of failure with more and more people.

Many of the lessons are of particular significance for bankers, shareholders, accountants and others but John Argenti believes there are a number of extremely important lessons for corporate planners as well—especially as ‘defective response to change’ turns out to be one of the prime causes of failure in mature companies.     

Strategic control of factory automation

This article identifies strategic control as an unexpected difficulty in implementing the ‘factory of the future’ and as a major stumbling block to firms in their automation efforts. The concept of strategic control is discussed and an example is given. The results of a study in this area are then described and used to explain how managers have unknowingly relinquished control of the manufacturing operation. The article concludes with advice for managers in setting up strategic control systems in their firms that will facilitate rather than hinder the progress of factory automation.     

Towards 1992: A strategy for training

1992 is now 3 years away and much is now being spoken and written on the free market within Europe following the magic date. The need for businesses to think about a strategy for training to equip their staff to take advantage of the new opportunities is ever more important. Training has historically lived under the ‘stop-go’ policy. When business is good, we can afford training; when business is bad, training is the first to suffer. The author has tried to formulate a strategic approach to ensure people become conscious of the necessity of management involvement and commitment in training. The 1990s offer great potential to companies who direct activities to these opportunities, and those who meet the threat will be winners.     

Why we need a revolution in strategic planning

The author uses a metaphorical concept of Newtonian planning in an Einsteinian environment to express the predicament facing planners in an environment subject to sudden and unpredictable change. The conventional ‘Newtonian’ approach assumes a sense of order and control whereas the current environment is turbulent, disordered and potentially out of control. He makes recomendations for strategic planners that accept the limitations of existing and foreseeable analytical techniques.     

Manpower planning at national and company level

Discussions of manpower planning take place in the context either of national plans or of company plans. From time to time the view has been expressed that the coverage and the time scale of these two types of planning are so different that there is nothing in common between them. This paper considers whether, in practice, ‘manpower’ is really so different from ‘personnel’. After all, the individuals regarding whom both plans are made are the same people; in both cases the planners are concerned with the posts they are to fill, with their salaries and with their mobility.     

Business planning in successful small firms

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 noted additional uses for business plans in pratice. This article reports methods and results of strategic planning and written business plans in high-growth ‘INC. 500’ firms. In spite of a variety of obstacles, over half of the firms conduct strategic planning on a regular basis. 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. Written business plans are used more for internal management purposes than for start-up funding. Finally, the completion of strategic planning is positively associated with a firm's profitability. Based on survey and interview data, this article describes a four-phase model to help ensure effective integration of strategic planning processes and the resulting written business plans.     

Developing realistic scenarios for the environment: Lessons from Brent Spar

Why did Shell—renowned for its scenario planning—find itself so badly adrift with the Brent Spar? And why, later in 1995, was it wrong-footed again in Nigeria? The answers reflect deep currents already clear to the company's scenario writers in the 1980s, but retaining their ability to surprise. The authors conclude that Shell's scenarios have been ‘individualist’, ‘hierarchist’ or some combination of the two; none have adopted an ‘egalitarian perspective’. They also suggest that the ‘Values Shift’ scenario—developed for European Partners for the Environment—may hold clues to future shifts in business strategy.     

Corporate strategy and entrepreneurial vision

The author here describes her conception of strategic vision from the basis of which she has developed a successful business using information technology and a scattered work- force working from their own homes or from a neighbourhood work centre. She defines her term ‘corporate planning by vision’ and outlines its strengths and weaknesses.     

Competitive strategies for service businesses

The Journal's American Editor writes to introduce a group of articles on the theme ‘Competitive Strategies for Service Businesses’. With the globalization of economic activity, productivity is of immediate concern to business worldwide—and as much in the service industries as in manufacturing. As competition intensifies, industries are re-structured and new technologies are introduced, strategic planning and competitive strategy have an important role to play. The following articles examine the role of planning in the service industries.     

The increasing power of store brands: Building loyalty and market share

An important evolution in the retailing industry is the growing success of store brands. Still, their level of penetration varies widely across countries and industries. We provide an operational measure to quantify the power of store brands along two dimensions: the intrinsic loyalty of their customer base, and their conquesting power to attract potential switchers. Based on their position along these two dimensions, we classify store and national brands as ‘Giants’, ‘Misers’, ‘Fighters’ or ‘Artisans’. We use the proposed operationalization to evaluate the absolute and relative strength of Albert Heijn, the leading Dutch store brand, in 19 product categories.     

Integrating strategic issues into strategic management

The notion of a ‘strategic issues’ is rather pervasive in the field of planning in both conceptual [5, 19] and practical contexts. For instance, sometime ago the Wall Street Journal [41] reported that at least 50 large firms have created positions of ‘issues management director’; a dramatic increase in the number of such positions. ‘True’ strategic issues have a readily apparent importance to any organization; yet the process of identifying such issues and of integrating them into strategic planning and management is not well developed. Most treatments of strategic issues deal only with specific segments of the overall process through which relevant issues may be initially identified and finally translated into appropriate strategy [e.g. 5, 17]. This paper demonstrates that it is practical to develop a comprehensive process of ‘strategic issue management’ (SIM) that will facilitate the systematic identification, assessment and analysis of such issues. Such a process can ensure that issue-related factors are fully integrated into the formulation and implementation of strategy and plans. As such, SIM is a process whereby strategic issues may become an integral element of strategic management.     

EIS—A guide for executives

Although the use of executive information systems (EIS) is increasing, many senior executives have such mixed feelings about them that there is an ‘EIS paradox’. Information managers and software suppliers believe this is because senior executives are intimidated by information technology, but this does not hold up to scrunity. The EIS paradox occurs because of failure to explain coherently how EIS fit with other aspects of the organizational database and what EIS can and cannot do for a senior executive and his or her organization. This article is designed to close the ‘information gap’ about EIS specifically for senior executives. The change in terminology from ‘data processing’ to ‘information technology’ is symptomatic of a change in the way in which computers are used. Rather than being the mere province of the data professional, information technology as exemplified by EIS can be applied to tasks where judgement and selectivity are required. The crucial point about EIS is, however, that computing can complement and increase managerial qualities of imagination and intelligence but not replace them.     

Assessing the performance of a development bank

The performance of a development bank can be assessed on the basis of ‘financial function’ and ‘development function’ criteria. While the financial function measures its operational efficiency in terms of the profitability of its investment operations, the developmental function evaluates its allocational efficiency as reflected by its investment activities for the economic development of the country and the stimulation of the capital market. The objective of this paper is to appraise the performance of the Industrial Finance Corporation of India, in terms of its profitability. The profitability has been analysed with reference to its (i) operating earnings, (ii) cost of operations, (iii) gross and net profit margins on the loan portfolio and (iv) rate of return and capital appreciation on the securities portfolio. The paper concludes with suggested measures to improve its profitability in future.     

Market segmentation: an integrated framework

Contrary to the narrow, demand-oriented approach to market segmentation taken in much of the marketing and planning literature, this article illustrates a broader, integrated framework which includes both the demand and supply sides of the competitive equation. The author argues that starting with ‘product’ characteristics is both an easier and more actionable way of segmenting markets than the traditional marketing approach that typically begins with the customer or ‘people’ characteristics. This approach can be employed by a business to make decisions about entering a market segment, differentiating a brand from its competition, positioning it in the market and communicating its quality to the customers. Customers, too, generally rely on product characteristics to perceive and evaluate the quality claims made by different competitors. Thus, the article bridges an important gap between strategy formulation and strategy implementation: an area often neglected in the strategy literature. The proposed approach focuses not only on customer benefits or needs, but also on the resources necessary to satisfy them and demonstrates this with examples from Apple, Church & Dwight and many other companies. To show a practical application, the article presents a price-quality-benefit segmentation profile of the US toothpaste market which revealed three strategic groups.     

New business development in mature firms

New business development (NBD) is one of the main strategic options for the ‘mature’ company. The authors discuss the reasons why NBD should be considered and suggest a framework for developing new businesses. The results of a two year investigation of a sample of 14 UK companies' NBD initiatives are presented. Half of the sample have either abandoned or are reducing their new business activities. The reasons are manifold and relate to a failure to define specifically the role of the NBD initiatives; a lack of appreciation of the risks, long time spans for development and the high financial commitment associated with NBD; a weakening of the mainstream business (this in itself suggesting that companies often leave NBD ‘too late’); and a naive approach toward marketing. Some lessons for mature companies' future involvement in NBD are drawn.     

Pricing and the Internet:: Frictionless Commerce or Pricer’s Paradise?

Are firms competing in a new world of frictionless e-commerce or is the Internet a pricer’s paradise? It is not safe, at the moment, to say that the Internet is lowering online prices, decreasing price dispersion and increasing online customer price sensitivity.The strategic issue for firms pricing on the Net is avoiding the ‘commodity trap’ and taking advantage of the ‘other side’ of information transparency. Firms should increasingly rely on finer segmentation of their customers and resort to dynamic and smart pricing, product and price versioning and bundling. Multichannel and customer lifetime value pricing will become strategic issues.     

Long term planning for coal

The Interim Report of the Coal Industry Examination was published in June 1964, representing the result of Tripartite discussions between the Government, the National Coal Board and the unions. One of the principal conclusions of this report was that the government endorsed the Board's long-term ‘Plan for Coal’ as a broad strategy for the industry. It is perhaps appropriate, therefore, to review at the present time the kind of considerations which needed to be taken into account in drawing up a long-term ‘Plan for Coal’.     

Cutting back bureaucracy in a public service

The British public service is respected for its efficiency and objectivity. But it has a music hall reputation for bureaucracy and lack of initiative. As with many long-acquired reputations, nothing nowadays could be further from the truth. A revolution has swept through the corridors of Whitehall and the many other places throughout the UK where the public service is alive and well. This revolution has been described in Morley,¹ and other articles² have shown how strategic planning and management have been adopted by individual parts of the public sector. Having set the scene in ‘Building a New Organization for Nature Conservation’,² the author now describes how English Nature moved on to reflect its new strategic approach in a different organization structure which broke many of the traditional mores of the public sector.