Part 5
Growth and
Development of
Entrepreneurial
Ventures
CHAPTER 15
Strategic Planning for
Emerging Ventures
Entrepreneurship
PowerPoint Presentation by Charlie Cook
The University of West Alabama
© 2007 Thomson/South-Western.
All rights reserved.
theory | process | practice
Seventh edition
Donald F. Kuratko • Richard M. Hodgetts
Chapter Objectives
Studying this chapter should provide you with the
entrepreneurial knowledge needed:
1. To introduce the importance of planning for an
entrepreneurial venture
2. To discuss the nature of strategic planning
3. To examine the key dimensions that influence a firm’s
planning process
4. To discuss some of the reasons why entrepreneurs do
not carry out strategic planning
5. To relate some of the benefits of strategic planning
© 2007 Thomson/South-Western. All rights reserved.
15–2
Chapter Objectives
Studying this chapter should provide you with the
entrepreneurial knowledge needed:
6. To examine four of the most common approaches
entrepreneurs use to implement a strategic plan
7. To review the nature of operational planning for a
venture
© 2007 Thomson/South-Western. All rights reserved.
15–3
The Nature of Planning in Emerging Firms
Most entrepreneurs’ planning for their ventures is
informal and unsystematic.
The need for formal, systematic planning arises
when:




The firm is expanding with constantly increasing
personnel size and market operations
A high degree of uncertainty exists
There is strong competition
There is a lack of adequate experience, either
technological or business
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15–4
Strategic Planning
Strategic Planning


The formulation of long-range plans for the effective
management of environmental opportunities and
threats in light of a venture’s strengths and
weaknesses.
Includes:
• Defining the venture’s mission
• Specifying achievable objectives
• Developing strategies
• Setting policy guidelines
© 2007 Thomson/South-Western. All rights reserved.
15–5
Strategic Planning (cont’d)
Basic Steps in Strategic Planning:
1. Examine the internal and external environments of
the venture (strengths, weaknesses, opportunities,
threats).
2. Formulate the venture’s long-range and short-range
strategies (mission, objectives, strategies, policies).
3. Implement the strategic plan (programs, budgets,
procedures).
4. Evaluate the performance of the strategy.
5. Take follow-up action through continuous feedback.
© 2007 Thomson/South-Western. All rights reserved.
15–6
Figure 15.1
The Strategic
Management
Process
Source: Michael A. Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management:
Competitiveness and Globalization, 6th ed (Mason, Ohio: South-Western Publishing, 2005).
© 2007 Thomson/South-Western. All rights reserved.
15–7
Key Dimensions Influencing a Firm’s
Strategic Planning Activities
Demand on strategic managers’ time
Decision-making speed
Problems of internal politics
Environmental uncertainty
The entrepreneur’s vision

Step 1: Commitment to an open planning process.
 Step 2: Accountability to a corporate conscience.
 Step 3: Establishment of a pattern of subordinate
participation in the development of the
strategic plan.
© 2007 Thomson/South-Western. All rights reserved.
15–8
Strategic Planning (cont’d)
Reasons for the Lack of Strategic Planning

Time scarcity
 Lack of knowledge
 Lack of expertise/skills
 Lack of trust and openness
 Perception of high cost
© 2007 Thomson/South-Western. All rights reserved.
15–9
The Value of Strategic Planning
Findings of Strategic Planning Studies

Strategic planning is of value to a venture and that
planning influences a venture’s survival.
Benefits of Long-Range Planning

Cost savings
 More efficient resource allocation
 Improved competitive position
 More timely information
 More accurate forecasts
 Reduced feelings of uncertainty
 Faster decision making
 Fewer cash-flow problems
© 2007 Thomson/South-Western. All rights reserved.
15–10
Table 15.1 Strategic Planning Levels
Source: Jeffrey S. Bracker and John N. Pearson, “Planning and Financial
Performance in Small, Mature Firms,” Strategic Management Journal 7 (1986): 507.
© 2007 Thomson/South-Western. All rights reserved.
15–11
Strategic Planning Levels
Strategy Level 0 (SL0): no knowledge (predictive ability) of next
year’s sales, profitability, or profit implementation plans
Strategy Level 1 (SL1): knowledge only of next year’s sales, but no
knowledge of upcoming industry sales, company profit, or profit
implementation plans
Strategy Level 2 (SL2): knowledge of next year’s company and
industry sales, but no knowledge of company profit or profit
implementation plans
Strategy Level 3 (SL3): knowledge of company and industry sales
and anticipated profit, but no profit implementation plans
Strategy Level 4 (SL4): knowledge of next year’s company and
industry sales, anticipated company profits, and profit implementation
plans
© 2007 Thomson/South-Western. All rights reserved.
15–12
Strategic Planning Levels (cont’d)
Strategic Planning Categories (Rue and Ibrahim)



Category I: No written plan
Category II: Moderately sophisticated planning
Category III: Sophisticated planning
• Results demonstrated that more than 88% of firms with
Category II or Category III planning performed at or above the
industry average compared with only 40% of those firms with
Category I planning.
All research indicates:


Firms that engage in strategic planning are more
effective than those that do not.
The planning process, rather than merely the plans, is
a key to successful performance.
© 2007 Thomson/South-Western. All rights reserved.
15–13
Fatal Vision in Strategic Planning
Fatal mistakes that entrepreneurs fall prey to in
their attempt to implement a strategy:

Flaw 1: Misunderstanding industry attractiveness

Flaw 2: No real competitive advantage

Flaw 3: Pursuing an unattainable competitive position

Flaw 4: Compromising strategy for growth

Flaw 5: Failure to explicitly communicate the
venture’s strategy to employees
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15–14
Strategic Positioning:
The Entrepreneurial Edge
Strategic Positions

Are often not obvious, and finding them requires
creativity and insight.

Entrepreneurs often discover unique positions that
have been available but simply overlooked by
established competitors.
© 2007 Thomson/South-Western. All rights reserved.
15–15
Figure 15.2
The Integration of Entrepreneurial and
Strategic Actions
Source: R. Duane Ireland, Michael A. Hitt, S. Michael Camp, and Donald L. Sexton, “Integrating Entrepreneurship and
Strategic Management Actions to Create Firm Wealth,” Academy of Management Executive 15(1) (February 2001): 51.
© 2007 Thomson/South-Western. All rights reserved.
15–16
Table 15.2 Alternative Views of Strategy
Source: Reprinted by permission of Harvard Business Review from “What Is Strategy?” by Michael E. Porter, (November–
December 1996): 74. Copyright © 1996 by the Harvard Business School Publishing Corporation; all rights reserved.
© 2007 Thomson/South-Western. All rights reserved.
15–17
Table 15.3 Strategic Approaches: Position, Leverage, Opportunities
Source: Reprinted by permission of Harvard Business Review from “Strategy as Simple Rules,” by Kathleen M. Eisenhardt and
Donald N. Sull, January 2001, 109. Copyright © 2001 by the Harvard Business School Publishing Corporation; all rights reserved.
© 2007 Thomson/South-Western. All rights reserved.
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Implementing a Strategic Plan
Milestone Planning Approach

The use of incremental goal attainment that takes a
new venture from start-up through strategy
reformulation.

Advantages of milestone planning are:
• the use of logical and practical milestones
• the avoidance of costly mistakes caused by failure to consider
key parts of the plan
• a methodology for replanning, based on continuous feedback
from the environment.
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15–19
Table 15.4 A Milestone Planning Approach
MILESTONE
DESCRIPTION
1
Formulation of the basic idea for the new venture
2
Completion of a prototype (in this case, a new product)
3
Raising the seed capital
4
Conducting a pilot operation
5
Market testing
6
Start-up of operations
7
Sale to first major account
8
Reaction to the competition
9
Redesign or redirection of strategy
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15–20
Figure 15.3
The Entrepreneurial Strategy Matrix:
Independent Variables
Source: Matthew C. Sonfield and Robert N. Lussier, “The Entrepreneurial Strategic Matrix: A Model for New and Ongoing Ventures.“
Reprinted with permission from Business Horizons, May-June 1997, by the trustees at Indiana University, Kelley School of Business.
© 2007 Thomson/South-Western. All rights reserved.
15–21
Figure 15.4
The Entrepreneurial Strategy Matrix:
Appropriate Strategies
Source: Matthew C. Sonfield and Robert N. Lussier, “The Entrepreneurial Strategic Matrix: A Model for New and Ongoing Ventures.”
Reprinted with permission from Business Horizons, May-June 1997, by the trustees at Indiana University, Kelley School of Business.
© 2007 Thomson/South-Western. All rights reserved.
15–22
Table 15.5 Entrepreneurial Strategy: A Contingency Multistage
Approach
Source: Donald F. Kuratko and Harold P. Welsch, Entrepreneurial Strategy (Fort Worth, TX: The Dryden Press, 1994), 10.
© 2007 Thomson/South-Western. All rights reserved.
15–23
Figure 15.5 The Overall Planning Process For a Venture
Source: Richard M. Hedgetts and Donald F. Kuratko, Management, 3rd ed. (San Diego: Harcourt Brace Jovanovich, 1991), 174.
© 2007 Thomson/South-Western. All rights reserved.
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Key Terms and Concepts
entrepreneurial strategy
matrix
innovation
lack of expertise/skills
lack of knowledge
lack of trust and openness
milestone planning
approach
multistage contingency
approach
© 2007 Thomson/South-Western. All rights reserved.
operational planning
perception of high cost
policies
strategic planning
strategic positioning
SWOT analysis
time scarcity
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