The role of strategic planning in the performance of small, professional service firms

Abstract

Using a sample of small, regional professional service firms, this paper investigates relationships between firm performance and aspects of strategic planning. Constructs measuring vision, mission, latent abilities, competitor orientation and market orientation are identified using exploratory factor analysis and respondents categorised as non‐planners, informal planners, formal planners and sophisticated planners. Multiple performance measures were used to assess the relationship between these factors and categories and firm performance. While no significant relationship between the performance measures and factors is identified, a significant relationship between net profit and informal planning emerges. These mixed results bring into question the value of the classical strategic planning process as a means of achieving a sustainable competitive advantage in the market analysed.

Towards a new framework for SMEs success: a literature review

“…The fact that strategic planning is strongly linked to the performance of small businesses and is an important contributor to their growth is well documented in the business literature (French et al, 2004;McMahon, 2001;Okpara and Wynn, 2007;Orser et al, 2000;Richbell, 2006). Kraus et al (2006), in their analysis of 24 empirical studies into the relationship between strategic planning and SME performance, also conclude that there is a positive relationship between the two.…”

Strategic Planning and Reality of External Environment of Organizations in Contemporary Business Environments

“…Strategic planning and assessment of its value, remains an important and relevant research topic for those interested in organizational and management development (French, Kelly, & Harrison, 2004). Joel Ross and Michael Kami are of the opinion (as cited in David, 2013) that "Without a strategy, an organization is like a ship, without a rudder going around in circles.…”

“…Whereas O'Gorman and Doran (1999) warned that the blind adoption of strategic planning models used by large organizations are probably inappropriate for most of the small firms. The only study conducted by French et al (2004) with such constituent components of strategic planning as (vision, mission, latent abilities of entrepreneurs, market orientation and competitors' orientation) in Australian small firms. French et al (2004) conducted a study in Australia in small firms on the relation between strategic planning and firms' performances with the constituent components of strategic planning as follow (1) vision (2) mission (3) latent abilities of entrepreneurs (4) market orientation and (5) competitors' orientation.…”

“…The only study conducted by French et al (2004) with such constituent components of strategic planning as (vision, mission, latent abilities of entrepreneurs, market orientation and competitors' orientation) in Australian small firms. French et al (2004) conducted a study in Australia in small firms on the relation between strategic planning and firms' performances with the constituent components of strategic planning as follow (1) vision (2) mission (3) latent abilities of entrepreneurs (4) market orientation and (5) competitors' orientation. But in their conclusion and discussion of their findings French et al (2004) argued that they have forgot an important component of strategic planning known as customers' orientation in their study and in future studies this important component should be included otherwise the validity of the study will be questionable.…”

“…French et al (2004) conducted a study in Australia in small firms on the relation between strategic planning and firms' performances with the constituent components of strategic planning as follow (1) vision (2) mission (3) latent abilities of entrepreneurs (4) market orientation and (5) competitors' orientation. But in their conclusion and discussion of their findings French et al (2004) argued that they have forgot an important component of strategic planning known as customers' orientation in their study and in future studies this important component should be included otherwise the validity of the study will be questionable. Therefore, the study of Khan and Khalique (2014) aims to be conducted with the following six/6 substituent components of strategic planning as (1) vision (2) mission (3) latent abilities of entrepreneurs (4) market orientation (5) competitors' orientation and (6) customers' orientation.…”