Journal of Business Research, vol.

3, 2001
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A Study on Business Plan Practice in Bangladesh

Tahmina Haque*
Abstract: This paper is based on a field study of twenty large, medium and small businesses in Dhaka city. The findings indicate that the business plan is necessary part of all kinds of businesses, small to large scale of investment. Almost all types of business make their both short-term and longterm plans, known as tactical plan and strategic plan or business plan respectively. Organizations usually figure out a yearly plan, keeping the main structure unchanged. However, they do not publish it, rather, they use it only for their internal purpose. Besides the business plan as a whole, each separate unit has its own plan. Business plan helps managers to compare actual performance with the projected one, changes in planned activities in response to new information, any changes in the context that made additional funding necessary. This study finds that the business plan is an essential tool for the entrepreneur, manager, promoter, intrapreneur, investors and employees of the organization.

1. Introduction A plan is indispensable to run a business. A well thought out plan can draw the way to achievement. It bridges the gap from where a business is to where it wants to go. Planning is one of the most important steps advancing through a business activity. Planning may be short-term or long-term, or they may be strategic or operational. It may differ in scope depending on the type, size, and mission of the start-up operation. Planning process begins with a mission that helps to the development of goals and plans to achieve performance. The mission incorporates top management's vision, a clear picture where the organization should be in future in the long run. The mission is generally known as organization's philosophy, self-concept, public image, location, technology, and concern for survival, customer targets and product (Bovee, Thill, Wood, Dove editors, 1993). Mission is dynamic, which should be changed with the changes of time and environment. Goals exactly determine where the organization wants to go and what must be achieved, thus allowing managers to develop the plans that will translate the mission into reality. Although top managers and board of directors are responsible for establishing the mission as the top most goals, but goals are set and used by the lower level managers to guide the planning process throughout the organization. Planning helps to focus organizational decisions and actions on the path that management has selected as the most effective and efficient means of achieving the desired ends. Plans are developed on three levels: strategic, tactical and operational. Strategic planning is a long-term planning that covers the time span from 5 to 20 years. It is usually prepared by top managers to achieve long-term goal of the organization. Corporate level strategy sets the overall direction for the organization, defines the business in which a company will compete, and determines how resources will be allocated. Top level managers prepare the corporate level strategy that covers the time of 3 to 5 years or longer. Tactical plan is a
____________________________ * Lecturer, Department of Business Administration, Jahangirnagar University, Savar, Dhaka.

A Study on Business Plan Practice in Bangladesh

short-term plan, which covers the time span from 1 to 5 years, and is usually prepared by the top and middle level managers. The main purpose of tactical plan is to implement the strategic planning. Marketing plan, financial plan, production plan etc., are the tactical plans that are narrow in scope than strategic plan. Business level strategy is derived from corporate level strategy and defines how a company will compete in each of its chosen businesses, including the product and market choices (Bovee, Thill, Wood, Dove editors, 1993). From the perspective of each strategic business unit (SBU), business level strategy may drive strategic goals and plans, but from the perspective of SBU's parent, businesslevel strategy drives the tactical goals and plans that are meant for achieving the organization's overall strategic goals and plans in the planning process. Operational plans are developed by lower levels of management, which cover the time span from one year or less to achieve day-to-day activities of the organization. Functional-level strategy supports business-level strategy by specifying activities in each of the functional areas within an organization, such as marketing, finance or other functions (Bovee , Thill, Wood, Dove editors, 1993). Functional-level strategies are typically developed by middle managers of each functional area, which generally drives the operational goals and plans for achieving tactical goals. Functional-level strategy is narrower in scope than a business-level strategy because each strategy deals only with the part of the business level strategy (Bygrave, W.D., 1994). Business Plan is a selling document that conveys the excitement and promise of a business to any potential stakeholders (Saleh, M.A., 1992). In other words, a business plan is a document that sets out plans, shows that the plans can be achieved, and demonstrates that the outcome satisfies the reader's requirements. A business plan is most usefully thought of as an internal operating document, not a showpiece for raising money. Therefore, a business plan for a new venture is an opportunity to convince both promoters and potential investors that the proposed project is viable (Saleh, M.A., 1992). And the promoter should view the new venture not only as a proposal to be used for raising money but also as a strategic plan for the business to be used to monitor and control future performance (Sahlman, W.A., 1997). 2. Objectives The main objectives of the present study are: To see whether the organization prepare their business plans To see what ingredients they include as components of their business plans 3. Methodology Data have been collected from 24 enterprises of different ownership structure (namely, sole proprietorships, partnerships, and public limited company) with convenient sampling and availability of information of the organization. Out of 24, 7 (29.0%) are large, 11 (46.0%), are medium and 6 (25.0%) are of small size. Table-1 in Appendix provides the distribution. The selected enterprises belong to different sectors: ready-made garments, banking and finance, food processing, poultry firms, manufacturing (foundry), and information technology. The size of these organizations was determined on the basis of number of employees working in that organization. Primary data have been collected through a structured questionnaire, conducting personal interviews of the selected

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officials (mid level or top level managers of the organizations). For secondary information, annual reports, company prospectus, selected books, and journals have been consulted. 4. Findings For the assessment of different business organizations, various points about plan and activities are compared among the three categories of business organizations. As shown in Table: 2 in Appendix, each of the company has its own plan. Purpose of business plans varies in terms of sale and number of business contracts. It is not for attracting the employees. Neither business planner nor plan reader is not different among the business categories. Failure of plan is attributed by lack of experience in writing business plan, lack of information and faulty setting of business goals; none of these are different among three categories of business. Type of plan varies significantly among the different category of business. Most of the large business organization prepares operational plan (57.1%), whereas summary plan is (63.6%) prepared by medium organization (see Table3 in Appendix). Information of the company encompasses business strategy, management team, skill of the personnel, form of ownership and information about entrepreneur, investors and promoters. All the three business categories utilize these factors significantly except business strategy (see Table-4 in Appendix). About marketing plan (85.7%) of large organization (36.4%) of medium organization has their separate marketing plan, but in small business they have no marketing plan. Among the individual information about marketing plan, only SWOT analysis varies among the business organization (see Table-5 in Appendix). Other auxiliary plans such as financial plan, legal plan are different among the organization but not the production plan. Small organizations have none of these plans (see Table-.6 in Appendix). From the study we see that the running business organization has its existing plan. Every year it makes some changes in the business plan. The organization has both short term and long term plan. Usually short-term plans are prepared for the achievement of long-term plan. These long-term plans are known as strategic plan that involves allocating resources, and decision-making. In Bangladesh the large businesses have their long-term plan, which is also known as business plan, which they review once a year. Short-term plan is set to achieve the mission of the organization. So a manufacturing organization's mission of production of goods known as long term objectives, but the objective of marketing department is the short term objective. Or in any garments industry in our country the short term objectives is to produce specific good, but the long-term objective is horizontal or vertical integration of the same sector. Is business plan necessary either for a new business start-up or for the coming year in an ongoing enterprise? The answer is yes. All new ventures whether they funded by venture capital or intrapreneurial businesses-need to pass the same acid tests. For any business there are two activities first, entrepreneurial activities, two, some routine tasks which can be delegated. It is not possible to check all stages of business. It is wise to have tight control on the entrepreneurial tasks and delegation of other task to the staff. What's wrong with most business plan? Most waste too much ink on numbers and devote too

A Study on Business Plan Practice in Bangladesh

little to the information that really matters to intelligent investors (Bygrave, W.D., 1994). Good planning should be based on the specific goals and objectives and helps employees to know what is expected from them. One should have a good idea of where the business to be in one or two years. If there are changes within the circumstances one should be prepared to change one's plan accordingly. A business plan should be developed in an appropriate way so that it would become a valuable document. While preparing a business plan every person concerned with information, time, flexibility and control. From the above discussion of the business plan the framework systematically assesses the four interdependent factors critical to every new venture: The people: The most important asset of an organization is its people. If they are upgraded, action-oriented and capable of making independent decisions, there is certain growth. To keep energetic and talented personnel, they should be encouraged to take part in planning process as well to assume responsibility for taking action to accomplish these plans (Sahlman, W.A., 1997). The opportunity: a profile of the business itself -what it will sell and to whom, whether the business can grow and how fast, what its economics are, who and what stand in the way of success (Sahlman, W.A., 1997). The context: the regulatory environment, interest rate, demographic trends, inflation and the like, basically the factors that are not possible to change (Sahlman, W.A., 1997). Risk and reward: an assessment of everything that can go wrong and right, and a discussion of how the entrepreneurial team can respond and succeeded (Sahlman, W.A., 1997).

5. Conclusion Each business has its plan but the plan varies according to its size, nature, and type of its operations or producing goods or services. The main objectives of preparing a business plan are to collect fund or to attract investors. The main plan may remain confidential, but some of its parts are available to all the employees of the organization. However, it is not sure whether the available portion is a published one or not. This plan is a main weapon to offset competitors. It acts as a guide to the entrepreneur, promoter, investors, shareholders and key employees within the organization. Whether the business is in a stage of development stage or growth stage or maturity stage or declining stage or even it is in the stage of divestiture, the necessity of business plan could not be ignored. The plan would be prepared by an experienced professional consultant of the related field; otherwise, there will have a chance to over or under estimate the planning. It is actually essential tools for start-up or mature business. The secret to successful writing of business plan is rewriting (Bygrave, W.D., 1994). A business plan is never really a complete one. As the business environment changes constantly, it is necessary to keep the plan up-todate by rewriting it. If you write a business plan in a vacuum-because you feel it is something you are suppose to do-you run the risk of engaging in a painful process of conceptualizing and in the end conveying a sense of aimlessness (Bygrave, W.D., 1994). But if you write the business plan with one or more specific purposes and audiences in mind, you likely feel a greater sense of commitment and produce a more focused and practical document (Bygrave, WD., 1994). In everywhere Business Plans are much longer than is necessary or

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appropriate because it is easy to write a long one. But Business plan should be as short as possible covering the necessity.

References l. Bovee, C.L., et all. (1993). Management. McGraw-Hill, Inc., New York. 2. Bygrave, W.D. (1994). The Portable MBA in Entrepreneurship. John Willey & Sons, Inc., New York. 3. Saleh, M.A. (1992). New Venture Creation: A Guide to Prepare Business Plan for Small Enterprise. Dhaka University Journal of Business Studies. Vol. 13 (2). 147-160. 4. Sahlman, W.A. (July-August 1997). How to Write a Great Business Plan. Harvard Business Review. 98108.

A Study on Business Plan Practice in Bangladesh

Appendix Table 1: Frequency of Different Types of Business: Type of the Business Frequency (%) Large size 7(29.0) Medium size 11 (46.0) Small size 6(25.0) Total 24 (100.0) Table 2: Information about Business Plan of Different Size of Business Variables Business size Large Medium 7(100.0) 11(100.0) Have a business plan: Purpose of plan: To sell business 5(71.4) 1(9.1) To obtain bank loan 2(28.6) 7(63.6) To obtain large contract 3(42.9) 1(90.9) To attract key employees 4(57.1) 10(90.9) Key person for business: Promoter & his team 6(85.7) 5(45.5) Entrepreneur 1(14.3) 5(45.5) Marketing consultants Other employee/person 1(9.1) Reader of the business plan: Employees 1(14.3) Investors 1(14.3) Venture capitalists Suppliers Consultants 2(28.6) 7(63.6) All above & other persons 3(42.9) 4(36.4) Why business plan fails: Goal sets are unreasonable 3(42.9) 4(36.4) No experience in writing business 1(14.3) 5(45.5) Lack of information 2(28.6) 2(18.2) Other reasons (Within parenthesis are percentage)

Small 6(100.0) 6(100.0) 3(50.0) 6(100.0) 6(100.0)

6(100.0) 3(50.0) 3(50.0) -

Journal of Business Research, Vol. 3, 2001

Table 3: Information about the Type of Plan that Organization Prepares: Variables Business size Large Medium Small Types of plan: Summary plan 1(14.3) 7(63.6) 6(100.0) Full plan 2(28.6) 4(36.4) Operational plan 4(57.1) Others Total 7(100.0) 11(100.0) 6(100.0) (Within parenthesis are percentage) Table 4: Information Included within the Heading of Company: Variables Business size Large Medium Small 6(85.7) 7(63.6) Business strategy 7(100.0) 11(100.0) 6(100.0) Management team 7(100.0) 11(100.0) 6(100.0) Skills of the personnel 7(100.0) 11(100.0) 6(100.0) Forms of ownership Information about 7(100.0) 11(100.0) 6(100.0) entrepreneur, investors &promoters (Within parenthesis are percentage) Table 5: Information about the Marketing Plan of Business: Variables Business size Large Medium Small Have marketing 6(85.7) 4(36.4) plan: About marketing plan: SWOT analysis 7(100.0) 6(54.5) Customers 7(100.0) 9(81.8) 6(100.0) information Competitor 7(100.0) 8(72.7) 6(100.0) information Pricing information 5(71.4) 8(72.7) 6(100.0) Distribution channels 6(85.7) 9(81.8) 6(100.0) (Within parenthesis are percentage)

A Study on Business Plan Practice in Bangladesh

Table 6: Other Type of Plan Included as a Part of Business in the Organizations Variables Have production plan Have financial plan Have legal planning Large 4(57.1) 6(85.7) 6(85.7) Business size Medium Small 5(45.5) 9(81.8) 3(27.3) -

(Within parenthesis are percentage)