 These are expenses that have not yet been paid for operations.

- Accrued liabilities
 This is the book value of all capital equipment, as well as other assets owned by the
company, such as land and buildings, less depreciation.
- Capital and plant
 This form of financial statement that indicates a company’s financial situation as of a
specific date.
- Balance sheet
 The difference between current cash flow and cash flow the prior period is referred to
as:
- current
 All fixed and variable expenses required in the day-to-day operations of the business are
included in this category.
- Overhead
 Special offers, coupons, contests, premium, prizes, and trade-in are just a examples of
ways to reinforce the sales message.
- Sales promotion
 An entrepreneur can compete with others more successfully by learning about their
strategies, as well as their advantages and disadvantages.
- Competitive analysis
 It refers that jobs are grouped into working units; could be according to functions, products or
territory.
- Decentralized
 The authority is widely delegated to subordinates.
 The concentration of authority for decision-making in the hands of one or few.
 Centralized
 The achievement of individual objectives should contribute to the accomplishment of overall
organizational objectives.
 Hierarchy of Objectives
STRATEGIC PLANNING FOR SMALL BUSINESS

 The concept, called strategic planning, is borrowed from the military and has found useful
applications in large corporate enterprise. Its relevance to small business, however, has also been
recognized.

What is Strategic Planning?

 Strategic planning refers to the process of determining the primary objectives of the
entrepreneurship and then adopting courses of action and allocating resources to achieve
those objectives. The definition involves three distinct steps:

1. Determination of objectives,
2. adoption of course of action, and
3. allocation of resources

THE DETERMINATION OF OBJECTIVES

 The objectives of the firm are important components of the firm’s strategic planning
activities but before these are determined, the firm’s mission statement must first be
developed.

The Mission Statement

 This term refers to the basic description of the fundamental nature, rationale, and
direction of the firm. It consists of three concerns.
1. how the entrepreneur intends to use his resources;
2. how the entrepreneurs expects to relate to the ever-changing environment; and
3. the kinds of values the entrepreneur intends to offer to his customers.

Strategic Objectives

 This term refers to specific performance targets that the entrepreneurship hopes to
accomplish. The objectives define, in specific terms, how the firm’s mission will be
realized.
ADOPTION OF COURSE OF ACTION

 After the primary (or strategic) objectives are established, the entrepreneur must develop a
strategy which is alternately called course of action.

 In developing realistic strategies, the entrepreneur can make use of the most popular tools.
These are the following:

1. SWOT analysis, and

2. forecasts of future sales performance.

SWOT Analysis

The firm which is fully aware of its internal environment (specifically its strengths and
weaknesses) as well as its external environment (specifically threats and opportunities) is most
likely to develop a strategy that considers the firm’s needs.

- The firm’s Strength refers to a skill, a competence, a valuable organizational resource or

competitive capability, or an achievement that gives the firm a market advantage.

- The firm’s Weakness refers to something a company lacks or does poorly (compared with
others) or a condition that puts it at a disadvantage.

- Opportunity refers to the chance offered by the external environment to improve the firm’s
situation significantly.

- Threats refer to a challenge posed by an unfavorable trend or development in the external

environment that would lead to, in the absence of purposeful entrepreneurial action, the
erosion of the entrepreneurship’s position.

FORECASTS OF FUTURE SALES PERFORMANCE

 Forecasts are supplementary tools for SWOT analysis. It is an estimate prediction of the
future sales or income of the firm.

IMPLEMENTING STRATEGIC PLANS

 Strategies are useless unless they are implemented. To put strategies into action, the
following activities are required:

1. identifying the specific methods to be used; and

2. deploying the resources needed to implement the intended plans
Identifying Specific Methods

- Strategies determine the best way to use resources. There is a need, however, to
develop tactics which will be used to implement the strategies.

Deploying the Resources

- the specific aim of planning is to be able to deploy the right quality and quantity of
resources in the various activities required to achieved the objectives.

FUNDAMENTAL STRATEGIES FOR SMALL BUSINESS

 There are certain basic strategies that are necessary for the survival of small business. These
are the following:

1. the flexibility strategy;

2. the strategy of effectiveness as priority; and
3. the strategy of starting simple.

The Flexibility Strategy

- Small business ventures are not usually afforded the advantages enjoyed by large
business. It is very difficult for small business to effect changes in its environment
because its resources are usually limited.

The Strategy of Effectiveness as a Higher Priority

- Effectiveness is sometimes sacrificed for the sake of efficiency. Although efficiency is

a desirable goal, it is oftentimes disastrous for small business to neglect effectivenss.

Start Simple

- In starting a new business venture, the entrepreneur often encounters problems

related to financing. The temptation is great for the entrepreneur to finance all the
activities required in operating the venture.

STRATEGY CONCERNS OF SMALL BUSINESS

 In determining what strategy to adapt, the entrepreneur is confronted with two general
situations:

1. Is he organizing a new business, or

2. Is he currently running an old business?

 New Business

 This term refers to one that will be operated for the first time by the small business
operator. If so, his options consist of the following:
1.acquiring an existing business;
2.organizing a new business; and
3.buying a franchise.

Strategies for a Going Concern

 The strategic problems of small business are not as intense as those large business.

 Any or all of the following strategies are applicable to small business:

1. Segment markets – The small business operator will have to identify the market
segment with which it has an expertise, then compete.
2. Efficient use of research and development – Since the small business cannot fight the
research and development efforts of big companies, it must concentrate its R and D
efforts to lowering process costs or to bring new products to the market.
3. Think small – The small business can still be strong with being small. The emphasis
must be on profits rather than sales growth, and specialization rather than
diversification.

WHY SMALL BUSINESS OPERATORS IGNORE STRATEGIC PLANNING?

 Important as it is, strategic planning in small business management is often ignored. This
situation is true in many parts of the world including Philippines. The reasons could be any of
the following:

1. Lack of expertise – Few small business operators are trained in strategic planning.
2. Inability to get started – Even if small business operators are convinced about the importance
of planning, they fail to get started for lack of sufficient exposure to planning activities.
3. Uncontrollable, often intangible variables – The uncontrollable and often in tangible variables
complicate planning which later on discourages the small business operator from repeating the
exercise.
4. Resource poverty – Planning requires time, but the small business operator oftentimes does
not have it
5. Focus on daily operations – The daily requirements of small business usually keep the small
business operator so busy that he is left with no time for planning.
6. Failure to realize the importance of strategic planning – The small business operator is
exposed to the environment of successful Filipino businessmen who do not engage in strategic
planning.
 CHAPTER 9:
Organizing, Directing, and Controlling the Small Business

ORGANIZING THE SMALL BUSINESS

 Organizing is the means by which management blends human and nonhuman resources
through the design of a formal structure tasks and authority.

 Its objective is to produce an organizational structure for the firm which indicates who
performs which task and who supervises whom.

THE APPROPRIATE ORGANIZATIONAL STRUCTURE

 An appropriate organizational structure must be adapted by each enterprise.

 The type of organization which has to be considered will depend on how many persons
are needed to assist in accomplishing the objectives of the firm.

 It is not necessary for the entrepreneur to start with phase one. He may adapt any start
up as he finds it applicable

THE OWNER’S CONCERN IN THE ORGANIZATIONAL STRUCTURE

1. Activities necessary to reach the goals must be identified

2. An analysis of the jobs to be performed must be made

3. The placement of people with the interest and qualifications in performing the jobs.

DIFFERENT TYPES OF ORGANIZATIONAL STRUCTURES

A. Specialization – dividing the total work into small, specialized tasks, and assigns employees to
specific tasks.

B. Departmentalization – jobs are grouped into working units; could be according to functions,
products or territory.

C. Delegation of Authority – some tasks are assigned to subordinates who will be delegated with
commensurate authorities.

D. Span of Management – the number of subordinated reporting to a supervisor or the business

owner himself/herself.

E. Hierarchy of Objectives – the achievement of individual objectives should contribute to the

accomplishment of overall organizational objectives.
 F. Degree of Centralization –degree of authority

 Centralized – concentration of authority for decision-making in the hands of one or few

 Decentralized - authority is widely delegated to subordinates.

IMPORTANCE OF ORGANIZATIONAL STRUCTURE IN SMALL BUSINESS

 Economics plays an important part – will the structure provide more benefits than other
structure type?

DIRECTING THE SMALL BUSINESS

 Directing takes care of the actual implementation

 Skills required for effective directing:
1. Communicating with subordinates
o Functions of Communication: inform, motivate, control and express emotion
2. Counseling
3. Motivating
4. Disciplining

CONTROLLING THE ORGANIZATION

 The process of efficient performance to attain the objectives of the firm.

- Establishing goals and standards

- Measuring performance against the established goals and standards
- Reinforcing success and correcting shortcomings