The strategic planning of SMES in Malaysia: A view of external environmental scanning

ABSTRACTThe business world today is getting more competitive and many companies are looking for ways to survive in the market competition especially Small Medium Enterprises (SMEs). This research was aimed at investigating whether formal strategic planning is relevant to SMEs and whether the strategic planning model suggested by Wheelen and Hunger (2008) is applicable to SMEs in the Asian context and in particular the Malaysian context. The main focus was to determine how important external environment scanning was to SMEs in the Northern states of Malaysia and do SMEs perform the external environment scanning which resemble the Wheelen and Hunger (2008) strategic planning model. The sample of the research comprised of SMEs in the Northern states of Malaysia which covered Perlis, Kedah and Penang. The population of the samples was derived from the directory of SMEs from the website. A purposive sampling was used and a cross sectional study was conducted where data was collected over a period of weeks through mail questionnaire and individual administrated questionnaires. The result of the research suggested that most SMEs do have some form of formal strategic planning. Further to this, it also indicated that environment scanning is getting more attention from the SME in today's competitive market. The findings suggested that most of the SMEs do have strategic planning which resembles the Wheelen and Hunger Strategic Planning Model. There is a strong indication that the model of Wheelen and Hunger Strategic Planning is applicable to the practice of SMEs in the Northern region in Malaysia.Keywords: Small Medium Enterprise; Strategic Planning; Environment Scanning.1. INTRODUCTIONSmall and Medium Enterprise (SMEs) are vital to determine the growth of economy in all countries. In the heat of today's competition, most of the SMEs are struggling to survive in the market. In order to be successful, SMEs need to possess various types of resources including financial, technological, human and knowledge resources (Brush et al., 2001). According to Hashim (2011), SMEs in Malaysia represent majority of the business enterprises and they make up more than 90% of the total number of businesses as they can be found in various industries. As reported in the SME Annual report 2009/2010, SMEs accounted for about 99% of total business establishments, 56% of total employment and 19% of the total exports of the country.Despite their importance in the national economy, studies have revealed that SMEs in Malaysia encounter various problems in their operations that affect not only their sustainability but also their business activities. This study intended to help managers to understand how strategic planning can be done with the model suggested by Wheelen and Hunger (2008). The main objective of the journal was to examine whether SME did strategic planning and whether the strategic planning model suggested by Wheelen and Hunger (2008) applies to the SME in the Asian context, in particular the Malaysian context. The research attempted to examine whether external environment scanning was done in SMEs in Malaysia as proposed by the model and how the environmental factors fared in terms of their importance to these SMEs. This study contributed to knowledge on how relevant the model is to SME in Northern States in Malaysia and how the Wheelen and Hunger (2008) model can help SMEs to do their strategic planning and especially the environmental scanning.2. LITERATURE REVIEWAccording to Normah (2006), the Chief Statistician from Department of Statistics Malaysia, SMEs has been the backbone of the Malaysian economic growth in driving industrial development. This is due to their sheer numbers, size and nature of operations, in promoting endogenous sources of growth and strengthening the infrastructure for accelerated economic expansion and development in Malaysia. For such reasons, the success of SMEs is very important to ensure the consistent growth of the country's economy. …