How to Improve Your Business through Strategy

The response of many a small business proprietor to exhor­tations from a consultant or adviser – especially from the academic world – that the prospects of his or her business could be improved through strategic planning would be to reach for the nearest blunt instrument.

There could be a variety of reasons for such a negative re­action – such as the belief that strategic planning is a luxury for large firms with the money and personnel to carry out the processes, that it is irrelevant to small firms who only have the time to concentrate on survival. Or it could be lack of under­standing of a language in which the concept of strategic manage­ment is described and a consequent fear of that which is not understood.

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But strategic planning in business is not necessarily an irrele­vant abstraction, it can have pointed, practical applications for even the smallest firm, especially if a firm is going to grow rather than merely survive. Without the jargon which often sur­rounds the idea, it is even a simple process.

A European Small Business Seminar, held in Austria, and sponsored by the European Foundation for Management Development, in fact took as its theme ‘Survival by Strategic Management’. There were critical voices there suggesting that strategic planning in this context was simply another example of academic theorists trying to apply big company concepts to small firms.

But the organisers had anticipated the criticism and -unusually for conferences of this kind – had arranged for a number of small businessmen and women not merely to attend but actually to take an active part in the conference in discuss­ing why and how they had approached strategic planning in their businesses.

Two of the companies were from Austria, one from Denmark, and one from the Republic of Ireland, all from widely differing sectors of industry, from sports goods to concrete pre-casting machinery. The stories of two of them illustrate how strategic management has a meaning for small firms as well as large -and probably also that many firms are already planning strategic­ally without realising that that is what is called.

Grabner Sports of Austria was started in 1975 by Wolfgang Grabner who, while working for an Austrian sports goods com­pany, had seen a number of openings in the market. His company grew quickly, making and selling a number of accessories for different sports.

Turnover and staff increased every year and the company moved into a new factory in 1980. But Mr Grabner began to become concerned about trends in the economy, in particular when he saw well-known and established firms in the sports goods field running into difficulties and going out of business.

He saw the need to develop new strategies in order to con­tinue and build the company’s growth in the future and so embarked on a study of the company’s strengths and carried out research into likely future trends. He picked up several pointers to likely trends from a study the Patelle Institute in Frankfurt of potential changes in leisure time needs up to the end of the century.

With the help of consultants recommended by the chamber of commerce the company drew up a written plan of where it wanted to go. In outline the plan was to create, produce and sell products which people needed in their leisure time, products for ‘daring’ sports, to be distributed in traditional sports shops and warehouses.

Finally, ‘We want to become the number one in number two items,’ that is not to make skis or bicycles but to produce appro­priate ranges of accessories. As the increase in leisure time would come to a considerable extent from people being out of work rather than from increased wealth they saw that ‘the avail­able money for leisure will decrease due to high costs of living and sinking income’.

The products were therefore oriented towards items which would help people keep down the cost of their leisure-time activities.

With the help of the manager of the innovation institute linked to the chamber of commerce a group including a designer, sales consultant, champions in various sports, a doctor, a leisure psychologist, and members of the company, was brought together which in regular sessions over two years created and developed a new product line for leisure and spare time.

While it was first the recognition by Mr Grabner of the need for forward planning, it is interesting to note the number of times which he mentioned the help from the chamber of com­merce assisting with links to the right kind of advisers in various areas with which Mr Grabner himself, as a small firm proprietor employing about 50 people, was unfamiliar, an important link­ing and signposting activity.

‘I am now never afraid about the future – on the contrary I am confident and looking forward to the next decades,’ says Mr Grabner. The problems facing Moffett Engineering of Clontibret in County Monoghan were quite different but over the last ten years the company has changed from being a low technology, production-oriented, local market company employing three people to one with medium to high technology, employing 38 skilled people, exporting 90 per cent of its output, and with a positive market orientation.

‘The key to the progress of our company has been strategic management,’ says Carol Moffett, the firm’s managing director, who took over the company in 1972 in her early twenties, on the death of her father. At that time three people were employed in servicing the local market, making moulds for the concrete industry, friction saws for cutting steel and also doing some sub-contract work.

They continued as before for about three years but began to realise they were in a declining market with increased com­petition. They recognised a need to find new products with improved technology, improve marketing and the skills of the workforce.

‘I didn’t understand then that this was a part of the strategic planning process,’ says Miss Moffett.

More emphasis was placed on marketing of the products they were already making and sales showed a marked improvement. Profitability increased, giving the firm confidence to recruit more skilled workers.

Participation in a business development programme at the Irish Management Institute in 1978 forced her to make a detailed, written plan for the company’s development. She examined the strengths and weaknesses of Moffett Engineering and then first set about putting right the weaknesses.

They examined the environment in which they operated and identified its competitive advantages.

They knew that the way forward in the concrete industry was to mechanise so they began a programme of research and development into a concrete products pre-casting machine, resulting in the Moffett Multicast System launched in 1980. A cash grant of 50 per cent towards direct development costs was received from the Industrial Development Authority. The com­pany now has a continuing research and development pro­gramme.

A new purpose-built factory was equipped with modern machinery – with a 50 per cent grant towards capital costs from the IDA and long-term funding from the Irish Development Bank.

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In parallel with the factory construction a more sophisticated market plan was developed and a decision made to concentrate on the British market because it was big, close, and its concrete industry was under pressure to cut costs.

The company now manufactures a range of eight different machines and systems for the concrete industry, exporting 90 per cent of its output, mostly to Britain but also as far as Australia.

‘I am convinced that it would not have been possible for us to survive and grow if we had not recognised the need for a strategic plan for our company. We are now fully committed to the whole concept of strategic planning and we are confident that we can continue to grow and prosper in the years ahead,’ says Miss Moffett.

The two examples illustrate clearly that there is nothing magical or mystical about strategic planning and that it can be relevant and beneficial to the smaller company. Stripped of the jargon which can so easily surround it, strategic planning is little more than knowing where the company is going and preparing the way to reach that target.

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About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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