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The role of accounting home elevators business strategy formulation

Abstract

Although strategy development in large businesses has been well recorded, the procedure of strategy deployment in Small and Medium Corporations (SMEs) has not been extensively investigated by academic research workers. This study tries to provide new empirical research and the practical realities on the type and practice of strategic planning in Greek companies. Its major target is to examine the formulation of strategic planning in Greek SMEs and also the role of accounting information on the business enterprise strategy of SMEs in Greece.

The results of the research indicate a confident relationship between tactical planning execution and accounting information received by accountants and used by SMEs no relationship with other resources of advice such as administration agencies or loan company advisors. The significance that is given to sales, costs and gains signifies an enterprise planning rather than a strategic planning orientation of Greek SMEs

Keywords: strategic planning, proper activities, external advisors, accounting information

Introduction

Academic books in proper management of small and medium companies (SMEs) has been not a lot of. Although the type of tactical planning procedures has been shown to have an important effect on the performance of companies [1], the field of tactical planning in SMEs is still in the early phases of its development. Its adolescence, in accordance with other competent regions of business and management theory, is evidenced by inconsistent and conflicting viewpoints [2] and just a few researchers have attended to the strategy-making functions of SMEs [3].

Limited research can even be seen on the utilization of information from SMEs when strategically planning. Drury and Tayles [4] suggested that there is a need for more research that explores in much increased depth how managers use financial and non financial information. Recent research shows that most SMEs are unable to utilize accounting and financial information. Owner-managers of SMEs may be expected to be completely aware of the product/service market segments that their business are located in, but they might not learn or proficient in accounting or financial management [5]. The purpose of this study is to increase the developing literature on proper planning implementation in SMEs in Greece. Specifically the aims of the analysis are to explore the level of tactical planning of SMEs, to investigate the actions that owner/managers plan beforehand and identify inside and external advisors that help SMEs to strategically plan.

Strategic Management and Strategic Planning

Strategy is a term that is broadly used by mature and middle managers. However the term appears to have multiple of meanings. There is no commonly accepted and general so this means of strategy [6]. Due to this fact this is of strategy has been the main topic of extensive research since the 1960s. It has been described as the procedure of identifying the long-term goals and goals of an organization, by adopting a specific plan of action and by allocating sufficient resources [7].

This traditional and logical meaning was later challenged by Mintzberg contention that strategy was more a structure of action caused by planned or unintended strategies. Mintzberg stated that strategy could be something more than an explicit course of action. His five strategy measurements that he known were: "strategy as plan", "strategy as pattern", "strategy as ploy", "strategy as perspective" and "strategy as position". These have been the basis for checking this is of technique to a wider framework of use [8].

Strategic planning specializes in the setting up of long-term organizational targets, and the execution of plans made to achieve them. The right definition of tactical planning can be "the devising and formulation of organizational level strategies which establish the broad and flexible targets, strategies and policies of a business, driving the organization towards its eye-sight into the future" [2]. Porter [9] noted that further work was needed to enable business to comprehend strategic planning by arguing that "while there's been considerable improvement in growing frameworks that clarify differing competitive success, at any given time, our knowledge of the vibrant process by which firms understand and in the end attain superior market positions is far less developed. "

The SMEs literature

Small and medium size enterprises (SMEs) play an essential part for the economic progress of a country. SMEs contribute to outputs and employment and also affect the competitive capacity of the top organizations [10]. SMEs can influence the competitiveness of large organizations by giving high quality inputs [11]. The need for small and medium size businesses for future economical development has been shown in several policy papers which have concentrated attention on the role of entrepreneurship, owner-managers and the tiny company sector [12].

3. 1 The SMEs sector in Greece

The contribution of the SMEs in the development, the employment and interpersonal coherence in Greece is significant. In Greece, enterprises that have fewer than 50 employees form about 99. 5 % of the full total number of companies and utilize the 74 per cent of the work power of the private sector. It should also be noted that Greek SMEs provide 70% of the new employment, reinforce the regional development and financial balance of the regions and make part of a cohesive financial and sociable website link in Greek contemporary society. The role of SMEs in the nationwide economy and occupation is essential, since the main business model in Greece is and it'll remain the micro business which employs less than 10 persons.

According to the conditions set by the European Percentage, Greece has more than 733. 000 licensed SMEs, that over fifty percent, 394. 000 or the 53. 7 % does not make use of any salaried personnel and they make use of 11 people normally. [13]

3. 2 Strategy in SMEs

Academic research has been conducted on several wide-ranging fronts in order to identify strategy in SMEs, from planning techniques, to the average person personality of the owner-manager and the progress of an array of available advisory services providing information on proper choice. Perry et al [14] argued that strategy should be analyzed in the each day operating environment of the tiny firm. The formulation of strategy in SMEs has been the theme of many academic research workers. Some studies [15] reviewed the link between planning and performance in SMEs, while others [16] explored the issue of defining planning and proper planning, and its own measurements, such as planning formality and performance in the tiny firm framework.

The definition of strategy in SMEs is often regarded as person centred somewhat than process driven. The performance of small organizations is linked with the leadership style of the owner. Nahavandi and Malekzedah [17] in 1993 argued that the style and personality of the supervisor is central to the strategy classification process.

Noble [18] after a series of exploratory interviews with the managing directors of SMEs, shows that tactical deployment often fails therefore of SMEs' incapability to forecast and conquer implementation barriers. O'Regan and Ghobadian [3] indicated lots of general obstacles associated with the constraint of strategic planning implementation such as communication was insufficient, implementation needed longer than expected, a shortfall in worker skills, targets of strategy weren't clearly comprehended by the personnel, ineffective co-ordination of implementation, crises distracted attention from execution, unexpected exterior problems arose and exterior factors impacted on implementation.

Research Design

This research applies the quantitative solution to examine the implementation of proper planning in SMEs in Greece. The central goal of the research is to provide empirical data on how SMEs use strategic planning and the type of advice they use to assist them.

Data were gathered by means of a study questionnaire, all questions used a five-point Likert type size; with a response of just one 1 indicating an item received 'not agree' and 5 indicating an item received 'agree'.

The sample consists of small and medium enterprises that are found in the Greek capital Athens and belong to the service and developing sector. Questionnaires were sent out to a whole test of 546 owner managers of small and mid-sized corporations. A postal questionnaire was used rather than sending e-mails, in order and also to protect the individuals' anonymity and because some owner-managers were not familiar with the utilization of e-mails. From a total of 546 questionnaires mailed, 178 were delivered, representing a 32 % response rate. Out of the 19 were found to own missing data and were deemed void. Therefore, data was collected from a complete of 159 sets, representing a reasonable response rate of around 29 %.

The questionnaire consisted of 4 sections, within the following aspects:

Strategic planning implementation in SMEs

Strategic planning activities

Advisors that affect proper planning

Accounting information used for proper planning

Prior to distributing the questionnaire to the sample, a pilot research was conducted to discover any errors, ambiguities, insufficient answers, or highlight any challenging questions. Enterprises that participated in the pilot study were excluded from the key study.

Research Questions of the study

Question 1: Is there a significant romance between Strategic Planning Execution and the Total Strategic Planning Activities?

Question 2: Is there a substantial marriage between Strategic Planning Execution and the use of inner advisors?

Question 3: Will there be a significant relationship between Strategic Planning Execution and the use of exterior advisors?

Question 4: Is there a significant romantic relationship between Strategic Planning Implementation and the use of accounting information?

Findings and Discussion

The conclusions of the present research are contradictory using respects. Despite a sizeable most respondents indicating that their companies undertake tactical planning, there is limited evidence of sensible strategic planning in the sense of setting up long-term business goals. Research by Stonehouse and Pemberton [2] that was conducted for British SMEs got the similar results. Within their research the 92 per cent of the companies indicated that they take on tactical planning, either highly organised or of an over-all nature. They may have found that the majority of these organizations were concentrated on short-term sales, cost and revenue targets somewhat than longer-term goals.

6. 1 Strategic planning execution and proper planning activities

Question 1 examined the relationship between proper planning execution and proper planning activities In order to answer the above question relating with the strategic planning execution and the proper planning objectives, relationship assessments and T-tests were utilized.

First the researchers by using factor evaluation divided the proper planning activities (goals) into three categories. Inside the first category were sales, costs, profits, production/service treatment and customer service. In the second category were staff training, staff appraisal, staff recruitment and advertising and in the 3rd category were the market share, the development of the size of the organization and the objective of the company. By using Pearson's and Spearman's correlation it was discovered that strong romance between proper planning implementation and strategic activities exists limited to sale targets, cost targets, profit targets, production outcome targets as well as for the improvement of quality service. Greek owner professionals of SMEs in their great bulk when strategically planning, disregard activities such as staff appraisal, training and recruitment, advertising, objective fulfillment and market share targets.

The above email address details are good findings reported by Stonehouse and Pemberton [2]. They discovered that contradictions between proper planning implementation and tactical planning activities could be explained in terms of a notable difference in belief between managers and academics on the type of tactical planning. Furthermore, most Greek companies refer to strategic planning, however in practice they may be more concerned with short-term objectives and what would be deemed by academic research workers as business planning.

6. 2 Tactical planning and interior advice and assistance

Question 2 reviewed the partnership between tactical planning execution and recruiting capital and inside advisors employed for tactical planning in Greek SMEs. Pearson Relationship and Spearman Correlation tests were found in order the study question to be replied.

The review on Greek SMEs has not found a substantial relationship between proper planning and recruiting capital utilized. Most owner professionals surveyed did not share the fact that the personnel have the skills or the experience to aid in the deployment of strategic plans. This final result can be verified by the results of research question 1, that owner managers don't have long-term plans because of their personnel recruitment, training and appraisal

The above results are in contradiction with a study on Spanish SMEs by Aragon-Sanchez and Sanchez-Marin [19] who exposed that owner professionals focus their attention on human resources as a key element that allows them to accomplish a sustainable advantage. They noted that the competitiveness of SMEs is dependant on internal elements recognized by resources such as staff and their skills.

But other studies had similar results using what was found about the Greek SMEs. O'Regan and Ghobadian [3] discovered lots of general barriers associated with the constraint of strategic planning implementation. Their pilot research established eight main barriers with the shortfall in worker skills being one of them. The research by Hall and Young [20] on 182 failed small companies indicated that the main cause for the failing of these companies were shortages in working capital (51. 4 per cent).

6. 3 The need of external advice

Question 3 examines the relationship between strategic planning execution and the utilization of external advice by the owner managers. Pearson Correlation and Spearman Relationship testing were used for the examination of this question.

The results of this research suggest that SMEs in Greece acquire valuable external advise in order to plan strategically mainly from accountants. Administration agencies and loan provider advisors aren't contributing as beneficial advisors for the dog owner managers in support of a minority of the respondents declare that they acquire useful guidelines for tactical planning. Pearson's correlation test shows that there is a significant relationship between strategic planning execution and the utilization of accountants, since there is not really a significant marriage between other external advisors (administration agencies and bank or investment company advisors) and strategic planning execution.

These results are in line with previous studies that have investigated the connection of strategy formulation and exterior advice. Berry, Sweeting and Goto [21] conducted a research on SMEs situated in Manchester and found that most of the business advisers got limited use by the owner managers. Only accountants acquired an integral role in the operations of the SMEs but typically on statutory work. They have also discovered that accountants made a significant effort to switch into the value-adding regions of the SMEs; at it was recognized by the owner managers in the test.

Alattar [22] discovered that the use associated with an accountant to be responsible for the accounting function in the enterprise resulted in a provision of more information which was helpful for maintaining better planning and control. Deakins et al [12] review indicates that an important activity for accountants is to do something as a consultant to the owner managers and that involves offering advice on interior planning, decision-making and control. Gooderham et al [23] stated that in many countries, smaller business accountants play an important role as business advisers in addition to providing accounting services.

6. 4 Accounting Information used as tools for proper planning implementation

Question 4 evaluated the partnership between proper planning implementation and accounting information used as an instrument by owner managers for tactical planning in SMEs using Pearson Relationship and Spearman Relationship.

This research has shown that owner professionals of Greek SMEs take under serious thought the accounting information they acquire from external advice plus they apply them as tools when they put into practice their strategic strategies. This finding was regular with what should have been expected as accounting information have been recognized as crucial elements of strategic planning

Stonehouse and Pemberton [2] known that there surely is little proof consumption of the "tools" of tactical analysis with the most frequent tool associated with internal financial evaluation. Collis and Jarvis [5] recognized the three main sources of information found in the management of small companies; management accounts; cash flow information and loan company statements. They may have discovered that most SMEs use accounting information such as income and loss accounts, balance sheet, cash flow affirmation and forecast and ratio analysis in order to monitor the profitability and for planning and controlling. Hall and Young's research [20] confirmed that poor use of accounting information was one of the key reasons that led into failure the 38 per cent of the 21 small corporations surveyed. Randal and Horsman [24] found that the shortage and misuse of accounting information added to small organization failure. Holmes and Nicholls [25] suggested that the quality of accounting information utilised within small businesses experienced a positive marriage using their performance.

Conclusion

This research has attempted to take a look at from the respondents' perspective the degree to which Greek SMEs use strategic planning and the impact of accounting information in the look and deployment of these plans. This paper has tried to recognize relationships and variations, on the list of SMEs surveyed, between tactical planning execution and (1) proper planning activities of the organization; (2) the individual learning resource capital; (3) exterior advice from, authorities agencies, banks and accountants; (4) accounting information such as income and loss accounts, cost accounts, sales accounts, accounting ratios from the total amount sheet and sales forecasts.

The results of the analysis show that owner managers when strategically plan emphasise on activities such as gains, sales, costs, production results and costumer service. The value that is directed at short-term financial aims (sales, costs, income) confirms a predisposition towards business planning rather than tactical planning. Other business objectives, that are nearer related to proper planning such as the company's mission, human source of information training, market talk about targets and venture size goals are completely overlooked from strategic planning by a lot of the owner professionals.

The use of accounting information and advice received from accountants were, based on the owner managers, the most important factors that facilitated them during the design and execution of their strategic plans. Inside the contrary, it was found that the human resources of the SMEs and external advice from federal government agencies and banks did not have an important role in proper planning execution.

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