formal strategic planning in hospitality SME's

Authors Avatar

Essay 5A

Critically evaluate the impact of formal strategic planning on the business performance of Hospitality SME’s.

Introduction

Marketing strategy is the process by which the organization translates its business objective and business strategy into market activity”. Fifield, P (1992)

Formal strategic planning in the hospitality SME’s has evolved considerably in recent years there is still a tendency for the process to be the preserve of senior management. Implementation at intermediate levels of the organisation is often restricted, with middle managers unsure about the longer term objectives of the organisation or the means of achieving them. This approach will need to change as hospitality organisations become more proactive at the unit and departmental level in order to maintain their market position in the face of greater competitive and economic pressure.

Based on the importance of trends identification and analysis for strategic planning and decision making, and on the processes of strategy development, this essay explores and assesses the relevance and structure of a formal strategic planning process to be adopted by hospitality SME’s, the barriers to this process and possible actions to overcome them.

Formal strategic planning process

The formalisation of strategies is not a generalised procedure amongst organisations (Mintzberg, 1992, 1994). In reality, as Mintzberg has identified strategies can be formally developed (intended strategies), or “incrementally developed in the course of action” (realized strategies).

Based on the importance of trends identification and analysis for strategic planning and decision making, and on the processes of strategy development, this essay explores and assesses the relevance and structure of a formal strategic planning process to be adopted by hospitality SME’s, the barriers to this process and possible actions to overcome them.

Hospitality SME’s face diverse markets and competitive pressures and it is not therefore possible to develop a prescriptive approach to the process. Strategy in the hospitality SME’s will be concerned with two substantial indicators in the economy, the level of business activity and the amount of disposable income for leisure purposes.

The standardisation of service to an agreed level is also a major problem for hospitality operators attempting to develop a strategic planning. The interaction between customer and staff member is such an important feature of the hospitality product that it must be part of the planning process and yet implementing and controlling this important aspect of the business represents one of the greatest challenges to hospitality SME’s.

The use of formal strategic planning may improve performance in one subsystem of an organisation, but if the balance between desired strategic outputs and the basic principles of organisation dynamics and culture are disturbed it may result in a significant cost for the organisation as a whole. Monkhouse (1995) argues that SME’s are often at a disadvantage as relevant benchmark tools and techniques may either be unknown or inaccessible. As well, the transfer of competitive benchmarking practices in SME’s may not be as great as claimed as the learning examples come from larger companies. There is also some confusion on the variety of terminology that exists to describe business performance measurement, specifically the differences between competitive comparison analyses (CCA) and benchmarking (Bergin et al., 2000). SME’s, which characteristically may have few resources available, a lack of knowledge, fears of commercial confidentiality or poor strategic planning (Monkhouse, 1995; Ogden, 1998; Jones and Hwang, 2002; McAdam and Kelly, 2002), may then only implement one-off projects instead of focusing on continual improvement. Unless the barriers are understood, SME’s are unlikely to benefit from the fundamental features of benchmarking studies to raise their performance standards to world class (McAdam and Kelly, 2002).

Join now!

Barriers to implementing formal strategic planning

Limited resources

When forming performance measurement strategies, Hospitality SME operators do not always appear confident in formulating, implementing and assessing their plan. Some have difficulties in articulating the critical success factors, indicators and targets used to assess their company’s performance. Therefore, they often rely on their “hard” financial information, such as cost per unit and monetary income. However, there seemed to be an increasing awareness of the need to adopt a more “balanced” approach in order to achieve results that can directly inform business strategy. “Soft” indicators, which are not affected ...

This is a preview of the whole essay