Contents Section 1 Introduction....................................................................................................... Section 2 Critical Appraisal............................................................................................... Section 3 Conclusion......................................................................................................... Section 4 Reference List....................................................................................................

2 4 14 15

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Introduction 1.0 The main aims of this essay are to critique the business planning process (BPP) with a focus on the contribution each element makes to the creation of a robust business venture. I will be using the BPP from Paul Burns, Entrepreneurship small business start-up, growth & maturity, 2011, p.368; this is included in the appendix. I have chosen this BPP as the structure demonstrates a clear order of which facilitates the writing process, with a clear view of incorporating most of the important aspects, as detailed in much of the literature. The BBP suggests the combination of mission statement, strategic objectives, customer analysis, its strategy for growth, marketing and financial projections will facilitate the entrepreneurial venture (Burns, 2010). Its purpose is said to enable entrepreneurs to articulate the strategic vision of the firm, however, there is some debate about the effectiveness of this planning process (Stokes and Wilson 2010, pg.175). I will be looking at this debate in more detail, with a view of understanding how each element may facilitate as well as negate the activities of a new venture. Personal Aims/Mission Statement: A mission statement should succinctly sum up the firms fundamental purpose and its longterm aspirations; articulating its intentions, overall strategic management processes and serving to identify the organisation (Corporate strategy and business planning). As such, advocates of the business plan recommend devising a mission statement as a way to clarify business objectives, facilitating the allocation of organisational resources and leading the entrepreneur to identify external constraints and adopt a strategic vision (Break the curve). Its suggested that a business plan acts as a corporate constitution, energising stakeholders to pursue common goals, presenting the firm and its employees with the challenge of attaining

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the mission, hence facilitating the implementation of change. However, it is argued that as operating environments alter so rapidly, blind adherence to a pre-existing mission could inhibit entrepreneurial creativity and responsiveness to changing environments, bringing the mission into disrepute as decisions taken in such competitive environments can be inconsistent with the contents of the statement. 222

Mission statements, arguably, provide direction and guidance to everyone in a business; they are said to provide crucial information to internal and external stakeholders about the purpose of the firm, providing unity and cohesion among staff and allowing the enterprise to differentiate itself from competitors (The business Plan Workbook). However, planning may impede itself from functioning as its proponents claim it should as mission statements often encapsulate intended competencies and may leave the enterprise vulnerable to competitors.

Business Objectives/ an internal: external analysis An objective is a statement of intent with a view of accomplishing the organisations mission. They evoke the formulation of strategy, used to set targets for various functional activities and, as they are often expressed in quantitative terms, objectives can be used to motivate and measure performance. Objectives are concerned with identifying internal strengths and weaknesses so as to develop and exploit core competencies and, with clarification in mind, will often provide opportunity to reconcile any differences. This in turn allows them to assess how effectively their resources have been deployed in relation to their external environment. It is argued then, that such internal and external appraisal methods can accommodate the conceptualisation of coherent and attainable strategic objectives. These selected strategies, however, will often impose constraints on the pursuit of activities and employed resources
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and can prove very restrictive in a rapidly changing external environment. This could delay their reaction capabilities and lead to a loss of competitive advantage; Michael Naylor of general motors once said: Strategic planning faces one big problem. There are no facts about the future, only opinions. 181

Customer analysis/Market segmentation A customer analysis involves identifying the characteristics that most define your consumers and is used to facilitate the growth potential of a new business by way of market segmentation. This involves breaking a market group into self contained and relatively homogeneous sub-groups of consumers, allowing the business to use its resources effectively; influence purchasing behaviour, and; modify advertising messages appropriately (Bennett 1996). Despite the subsequent over-concentration on a small number of customers, experienced by many small firms, some argue that this process serves as a competitive tool. They suggest it allows entrepreneurs to identify and configure internal activities to meet the requirements of their consumer groups, thus exploiting the potential benefits associated with sophisticated segmentation strategies.

As well as reviewing their internal potential however, a review of their external environment will be equally as important to enable the appropriate identification of market segments, most commonly defined using demographic variables, and the effect of rapidly changing technologies; the needs and requirements of consumers are ever changing, and so the effectiveness of any sophisticated segmentation strategies will need frequent reviewing if the company are to sustain their competitive edge. 187

Marketing strategy

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Marketing strategies are devised using information obtained through market research in the previous step. They are dynamic and interactive and as such they communicate the benefits of your products or services to stake holders, serving to keep marketing in line with the companys mission. They provide opportunity to identify external environmental factors such as competitors, allowing for appropriate strategies to be devised. This information, however, is the fundamental underpinning of your marketing plan. It is designed to meet objectives and detail implementation and so could lead to faulty marketing decisions if the data isnt analysed correctly. If information isnt interpreted correctly, or if managers fail to review the strategy according, the company may respond inappropriately, or not at all, to changes in the industry, their customers needs or in the broader economic climate; it becomes a necessary and time consuming activity, frequently reviewing your external environment so as to maintain competitive advantage. 152

Marketing Mix As businesses formulate such competitive strategies it is necessary to assess these market conditions so as to successfully employ elements of the marketing mix. McCarthy (1975) summarised the notion of the marketing mix as the 4 Ps; Product, Price, Promotion and Place (Fifield, 1998, p.218). Its suggested that this model is effective in identifying the isolated effects of each element, however; after identifying the relationship between each of these variables, Reibstein (2004?) suggests that their combined contribution is less effective. For marketing objectives to be achieved each element of the marketing mix must be wellintegrated using accurate market research, but Reibstein argues that information about competitors, the trade and the sales force are inadequate; and, as the sample size or quality of market research is often insufficient, the mix used to implement the devised strategy could prove to be ineffective. 142

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Marketing plans It is the purpose of the marketing plan to integrate all of these marketing activities and so any distortion of information would detract from the successful co-ordination of activities such as efficient deployment of resources and development of new products. Despite this, should the information be collated and interpreted appropriately, the marketing plan provides a structural process to firms, enabling them to identify and evaluate market opportunities and outcomes. It contains sales targets, budgets and marketing policies, identifies effective implementation strategies and allows for the maximisation of the firms core competencies. For these benefits to materialise however staff must possess the relevant marketing skills, abilities and resources; all of which are often in short supply in a new start up venture. Often, only a few members of staff are conducting all value-adding activities and with limited funding, making it very difficult for the real potential of these activities to be realised. 151 1217 200

Operating needs Financial Plans Many new businesses require some form of funding to start trading and, according to Kuratko and Hodgetts (2010), the business plan is the minimum document required to obtain this funding (Stokes and Wilson 2010). Financial projections, such as a profit and loss forecast, balance sheet and a statement of cash flow should be included in this section (Bennett 1996). Cash flow is arguably the most important, it details the aggregate planned income and expenditure thus providing information about the flow of capital crucial to the sustainability of a new venture; many highly profitable companies have ceased trading due to poor cash flow management (PWC, 2010). Unlike accounting however, business planning looks to the future and so the financial documents are essentially educated estimates of the, often overly

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optimistic, entrepreneur. As a result, the forecasted sales and performance of the firm are not always objective and can often underestimate start up and operating costs possibly forgetting about post-sale responsibilities, such as warranty and servicing altogether.

All elements combined. The business planning process! While the contribution of each element varies, so to does the capability of the entrepreneur implementing them. To carry out the activities in the BPP effectively, certain skills and behaviours are required, bringing the process itself into disrepute; many start-up firms consist of, at most, only a few members, each of whom are required to conduct the activities themselves, regardless of their background. Consequently, the business planning activity as a whole has itself been the subject of much debate. Advocates of this process maintain that planning facilitates goal attainment and enables entrepreneurs to turn abstract goals into operational activities while others, such as Bhide (2000), argue that the BPP interferes with the efforts of managers to undertake valuable organising activities suggesting that it is harmful to the creation of a new venture creation (Bhide, 2000 cited in Delmar and Shane, 2003).

Conclusion: The business plan acts as a tool to help entrepreneurs attract new funds; it plays a key role in allocating resources throughout the business with a view to maximise the firms core competencies. Advocates of the BPP suggest that it speeds venture development decisions, enabling firm founders to anticipate problems in its external environment and configure its internal activities accordingly (Stokes and Wilson 2010, pg.175). Bird (1988) disagrees, he suggests that this process is undermined by the uncertainty and fast pace of entrepreneurial situations, a suggestion supported by Bhide (2000) who categorised the business planning

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activities as counterproductive administrative behaviour (Delmar and Shane 2003). With each element contributing to this administrative behaviour and, arguably, further negating this process by incorrectly interpreting this information, a problem only exacerbated by inexperienced firm founders.

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