Strategic planning and strategic awareness in small enterprises - a study of small engineering firms in Bangladesh

Abstract

This thesis explores the practice of strategic planning and its effect on the performance of small engineering firms in Bangladesh. Small businesses play an important role in the economy of Bangladesh. Despite substantial efforts on the part of the government, such as provision of hardware and software support and many promotional incentives, the growth and performance of small industry in general and engineering industry in particular, appears to be unsatisfactory. Although the research findings are inconclusive the literature in the developed industrialised countries generally recommends that small firms need to use strategic planning as an essential tool for improving their performance. It was therefore hypothesised that the lack of strategic planning is one of the major factors responsible for under-performance of small engineering firms in Bangladesh. To address the research issues about strategic planning practice and its link with performance, a conceptual framework was developed incorporating certain characteristics of firms, the personal backgrounds of owner-managers and of the environment that could influence the relationship. Adopting both quantitative and qualitative approaches this study has examined the research issues based on the data collected through interviews with 141 owner-managers of small engineering firms in the Dhaka city, where most of the engineering firms are located. Overall, the findings of the study indicate that even though strategic planning in a formal sense is unlikely to exist in small firms, owner-managers of successful firms are well aware of opportunities and threats in their environment, their strengths and weaknesses as well as the implications (strategic awareness) of their project. Small firms can improve their performance through strategic planning, but only if it is based on an understanding of the opportunities and threats in the environment, and of their own strengths and weaknesses which enable them to assess both the short and long-term implications (strategic awareness) of the project. The present findings highlight the dangers of assuming that the process of strategic planning (normative/formalisation) will, by itself, lead to improvements in performance. Researchers who have concluded that strategic planning does not generally benefit the performance of small firms appear to have been incorrect. It can be said that conceptual and methodological differences across studies have been largely responsible for the debates concerning the value of strategic planning in small business. The present study thus highlights the importance of heightening the awareness of small firms about the environment, and of triggering their portfolio of ideas, and in doing so, seeking also to encourage effective exploitation of ideas by heightening the strategic awareness of the firms. This strategy emphasises the importance of 'software' support such as provision of information, counselling, training, and education. For providing such services the implications of the research are that this should be as proactive as possible, maximising personal contact with the owner-managers, possibly by setting up agencies on regional basis and manned by experienced staff, particularly in the provision of market and other environmental information.