Small Medium Scale Enterprises (SMEs) play an important role in the major economies around the globe, hiring more than half of all private sector employees in this country and is responsible for almost half of the gross domestic product (GDP) of this country.SMEs are increasingly regarded as an important source of innovation, employment, and competition within industries, the search for factors that might facilitate the success of these businesses is growing (Carter, Stearns, Reynolds, & Miller, 1994), this is because of the high failure rates and low profit margins which threatens most SMEs. Factors such as human capital has a major influence on the success of SMEs so does strategic planning and corporate performance.
Rue and Ibrahim (1998) argue that strategic planning is one of the key issues for SMEs. A strategic plan is mainly about setting a direction for an organization, devising its goals and objectives, identifying a range of plans of action designed to achieve a long term goal. Strategic Planning enables SMEs to track growth, establish budgets, prepare for unforeseen changes in the market place and can be utilized to attract financing and to manage company’s objectives. No or Ineffective deployment of strategic planning can even be considered the main reason for failure to achieve expected or projected performance in many SMEs thus the need for an outlined Strategic Plan for the “ABC Company”
To begin with, a business plan being regarded as both the first step in strategic planning process as well as its overall documentation is the written form of the firm’s overall strategic plan, which aims to put in place tools, techniques, and processes that identify and achieve the business’s long-term goals. A business plan addresses key questions about the vision an enterprise strives to achieve and the operational details about how it aims to get there. It can thus be defined as “a written document that describes the current state and the presupposed future of an organization” (Honig & Karlsson, 2004, p. 29). This plan assists businesses with staying on track thus meeting goals and making larger profits.The development of a vision of how the future will unfold and ABC Company’s role in it, setting of company goals and objectives which allows for a later evaluation of performance, the evaluation of the firms distinctive competences (the particular imitable skills and strengths) which yields a long term sustainable competitive advantage, the application of the SWOT analysis by which a firm can assess its market and environmental conditions impacting on its strategic plan are the elements of strategic planning
Although no one can foresee the future, it is possible to prepare for the future and/or alternative futures and align the enterprise accordingly. Strategic planning assist entrepreneurs in recognizing the breadth and complexity of their business. The level of uncertainty is reduced by providing a better understanding of the circumstances of its business, and hence to better prepare for the future. Accordingly, strategic planning and SWOT analysis helps to cope with the insecurities of businesses, and thus brings a beneficial value for the future, even above the sole acquisition of capital. It saves time and enhances management professionalism after start up. . Lyles, Baird, Orris, and Kuratko (1993) state that a more advanced and more detailed strategic planning results in a more substantial corporate growth.