Description
In this detailed criteria resolve teaching business planning an analysis of content and learning outcomes.
TEACHING BUSINESS PLANNING:
An analysis of content and learning outcomes
Manisha Karia*
AIS St Helens, Auckland
Email: [email protected]
Hanoku Bathula
AIS St Helens, Auckland
Email: [email protected]
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TEACHING BUSINESS PLANNING:
An analysis of content and learning outcomes
ABSTRACT
Business education has become very challenging in the context of globalisation and consequent rapid
change. Recent focus has been on how to make the learning more experiential to prepare students
smoothly for professional responsibilities. One such critical skill is to understand and design effective
business plans. This paper describes the content and delivery of a business planning course in a business
degree programme and then examines its impact on the learning outcomes of students. Overall, the
results indicate that significant learning has taken place in this course resulting in improvement in the
applied and integrating skills required for preparation of a business plan.
Keywords: business education, management courses/curriculum, skills development/training,
experiential/student centred learning, entrepreneurial learning, entrepreneurship
The rising pressures of globalisation and uncertainty underscore the importance of higher education in the
modern world (Hay 2008; Marginson & van der Wende 2007). Appropriate education assists students in
gaining skills, knowledge and abilities to meet the challenges of globalization. By gaining the right skills
and knowledge, they can gain a competitive advantage (Ahlawat & Ahlawat 2006). Several authors
(Skinner, Saunders & Beresford 2004; Snyder 2003) raise questions about the level of intellectual
capabilities, and technical and critical thinking skills required by graduates to be successful. The role of
higher educational institutions is to ‘prepare and train future workforce that is equipped with skills needed
to compete in the global arena’ (Ahlawat & Ahlawat 2006: 104).
Broadly the goal of business education is to impart skills that will equip students to take up managerial
responsibilities and develop their businesses (Gibb 1996). Business education focuses on several ‘applied
and cross-border skills’ which are necessary for students to work successfully in the business community
(Cordell 2001). Several pedagogical approaches have been offered by educational institutions to provide
experiential learning such as computer simulations, case studies (written and live cases), client-sponsored
projects, data-modelling and decision, field visitation, and role playing (Cordell 2001; Solomon, Weaver
& Fernald 1994). For business education to be effective, it has to closely follow the current needs and
trends of the business environment and equip students with the required skills.
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One of the important skills to be imparted through business education is the ability to prepare a business
plan either for a new venture or expansion (Cordell 2001). Evidence suggests that those who prepare
business plans perform well compared to those who do not, and that business owners who have a plan
before starting a business are under a lower risk of termination as against those who have no plans (Shane
& Delmar 2004). Planning compels businesses to think about issues such as environmental changes and
also ensures their ability to make sound financial investments after having identified risks, thereby
increasing the chances of success (Zuckerman 2004).
The current study evaluates the effectiveness of a business planning course taught in an undergraduate
business programme. The three main objectives of the study are:
• To describe the content and delivery of a business planning course.
• To examine the perceived effectiveness of the business planning course relating to entrepreneurial
skills gained by students.
• To examine the usefulness of business plans as a pedagogical tool in imparting knowledge and skills
to identify and integrate key business functional areas.
The remainder of the paper is presented as follows. Section two discusses the importance of business
education and business planning. Section three explains the methodology used for this study. Section
four describes the content and delivery of the business planning course. Section five presents the findings
and discusses the implications. The final section concludes the paper with limitations and suggestions.
BUSINESS EDUCATION AND BUSINESS PLANNING
Benefits of business education
Business education should help students develop skills to face the challenges of the economic and social
needs of the society (Cheung 1998). Gibb (1996) underlines the philosophy of business education where
the programmes should give the participants an insight as well as knowledge, to develop their businesses.
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More specifically, business education should impart knowledge and skills in the areas of general problem-
solving, decision-making, communication, coordination of resources, critical thinking and creativity, and
the ability to deal with financial issues (Cheung 1998; Holter and Kopka 2001; Özhemirand,
Hacifazlioglu & Sanver 2006; Snyder 2003). From an entrepreneurial perspective, the main aim of any
business education is to improve the capability of the students to identify good business opportunities and
evaluate these opportunities in terms of feasibility and visualize a business model that can be
commercialized (Thandi & Sharma 2004). Such an increase in the capability of potential entrepreneurs
will improve their decision making ability and conscious belief to bring about the desired results in
performance, a phenomenon referred to as entrepreneurial self efficacy (Bandura 1997). In an empirical
study of MBA students, Zhao, Seibert, and Hills (2005) have observed that formal learning was positively
related to student’s self-efficacy and to their intentions to become entrepreneurs.
Robertson, Collins, Medeira and Slater (2003) highlight the importance of business education in assisting
in breaking down barriers that aspirants face in starting a business. Prior research indicates that business
failure rates are quite high and are, in most cases, attributed to managerial incompetence (Harris &
Gibson 2006; Perry 2001). Further, business education is expected not only to transfer knowledge but
also to help develop insights into the processes of different aspects such as business start-up, survival,
growth and internationalization (Gibb 1996). The challenge therefore lies in the area of transferring
course content and ensuring that students gain the appropriate management skills deemed necessary for
businesses to survive. There are several learning methods that are being used for this purpose: project-
based learning, through problem-solving: real and simulated case studies, seminars and workshops
(Cordell 2001; Gibb 1996). It is vital that business schools consider the development of business
curricula strategically and design a pedagogy that is structured ‘leading to better, more equilibrated and
persisting business planning attitudes’ (Schamp & Deschoolmeester 1998: 174).
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Need for business planning
A business plan is a comprehensive written report of the goals of the business, and includes discussion of
the business concept, operational plan, marketing plan, financial issues, organisational (structure) issues,
and legal requirements (Meloy 1998; Zuckerman 2004). It serves as a road map that details the starting
point, direction, and destination of a business (Svatko 1988).
Baker, Addams and Davis (1993) argue that written business plans are not only used by start-up
companies but also existing firms. Others emphasise the use of business plans to enhance the chances of
survival and success of businesses (Schamp & Deschoolmeester 1998; Cordell 2001; Perry 2001;
Hormozi, Sutton, McMinn & Lucio 2002) and also to minimize changes of failure of business (Perry,
2001). Therefore, businesses must draw up written plans in which all critical functional areas such as
sales, staffing, human resources, and finance are examined. Furthermore, Armstrong (2001) maintains
that the true objective of business plans is to infuse appropriate attitudes and motivations. When
entrepreneurs have growth generating and planning attitudes, they were found to generate higher business
growth (Schamp & Deschoolmeester 1998), which is as important as, if not more important than, starting
the business.
Teaching business plans
Teaching business plans is yet another pedagogical tool among the repertoire that will enhance a student’s
ability to a) analyse future scenarios (Bers, Lynn & Spurling 1997), b) understand the financial future and
funding related issues (Mason & Stark 2004), c) identify and minimize risks (Sykes & Dunham 1995),
and d) use plans as a communication device (Baker et al. 1993). Castrogiovanni proposes that learning
occurs during the business planning process and ‘it enhances the efficiency of a new business when
operations begin’ (1996: 807). He also suggests that this learning in turn will improve the chances of
business survival.
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Business plans are promoted by educational and governmental institutions, bankers and investors (Honig
2004). Business plans have generally been taught to professionals in organizations through special
training sessions like enterprise workshops, though some of them gain the knowledge of developing plans
through their formal education. Currently, teaching business planning has become a norm in business
curricula throughout the world. Business planning has been included as part of the pedagogy for several
courses such as entrepreneurship, new venture management, small business management, and enterprise
training and development (Hills 1988; Cordell 2001).
Concerns on effectiveness of business plans
Despite these benefits, not everyone is keen on using business plans. Hindle and Mainprize (2006)
question the credibility of the plans since new scenarios are constantly evolving and uncertainties may be
difficult to determine. They suggest that businesses should leave room for some flexibility to ensure new
scenarios and contingencies are dealt with. Honig criticises the use of business plans as they ‘may
psychologically limit the framework of options available to an organisation and may be outdated due to a
constantly changing environment’ (2004: 260). He also refers to the conflicting results of previous
studies into the relationship between performance of companies and their business plans. Even as a
pedagogical tool, use of business plans to educate entrepreneurs has received much criticism on the
grounds that it restricts participants from thinking outside the box, and limits the range of activities and
potential solutions pursued by nascent entrepreneurs (Honig 2004). Notwithstanding these pitfalls,
business plans are still a popular pedagogy for teaching business students. The shortcomings identified
by these different studies can serve as a guide to making a more robust business plan (Hindle &
Mainprize 2006). For example, Price and Meyers (2006) explain that business plans are very important
because they are a tool to conceptualisation and packaging of ideas. At the very least, good business plans
reduce the odds of failure (Crawford-Lucas 1992).
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By completing a business plan, students can gain a broader understanding in the main functional areas of
business such as finance, marketing, production, law and management. Additionally these skills help
students in their current or future managerial jobs. In the process of writing a business plan several issues
are considered: i) industry research ii) competitor analysis iii) understanding of funding requirements iv)
cash flow v) critical risks vi) suppliers vii) stakeholders viii) operating cycle ix) credit requirements x)
future growth and xi) human resource requirements, to name a few. On the whole, the focus is on
developing conceptual skills to integrate the information from various sources and to channel the
resources to meet the stated objectives of the firm.
METHODOLOGY
For the purpose of this study, the sample is drawn from students of an undergraduate programme of a
business school based in Auckland. This programme has been taught for over eight years and is well
established. Initially, the study examined the course content, coverage and the delivery strategies used.
In addition, the reports of students’ evaluation and external moderator’s comments were also considered.
In order to examine the effectiveness of the course, questionnaires were distributed among students who
have completed this course during the years 2005 – 2007. The questionnaire was given to respondents
soon after they completed their written and oral presentation of their business plans, and before the
release of their course results. This was deliberately done to avoid any bias or influence the course results
may have on the students’ views on their self assessment.
The survey questionnaire was divided into four main sections: a) learning in key management functional
areas, b) sources influencing choice of business ideas, c) learning achieved in entrepreneurial skills, and
d) level of confidence in performing entrepreneurial activities. A five-point Likert scale ranging from ‘1’
not confident to ‘5’ very confident was used to let the respondents indicate their perceived level of
confidence in knowledge and skills gained to undertake managerial/entrepreneurial roles. At the end of
the questionnaire, the respondents were also asked to comment on overall benefits and problems relating
to the business planning course. In all, a total of 161 usable responses were received, with the response
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rate being 81 percent. Of these, 59 percent of the respondents were female and 41 percent were male.
About 70 percent of the respondents had some work experience prior to attending the course.
COURSE DESCRIPTION
Students are required to develop a business plan for a new venture or for expansion of an existing
business. The main objective of this course is to impart knowledge and skills to prepare a robust business
plan that recognises all potential opportunities and critical risks of a new venture. Students are required to
draw up a specific business plan using the knowledge gained from other undergraduate courses such as
Marketing, Accounting, Management, and Economics studied earlier as part of the degree programme.
Typically, the final report of the business plan includes: an executive summary, mission/vision statement,
business concept, unique capabilities, operational aspects, organisational structure, marketing issues,
financial management, legal requirements, timelines and recommendation about viability. Main aspects
covered in the course may be seen in Table 1.
One of the distinguishing features of this course is the ‘practical approach’ in its delivery that provides
opportunity for experiential learning. This overcomes the deficiencies identified in other business
planning courses by Honig (2004). Each student is given the opportunity to develop a business plan
individually and is supervised by a qualified staff member, who regularly monitors the progress and
motivates the student to complete the business plan. Workshops are conducted in different functional
areas such as market research, finance and presentation to provide students who require additional
support. Students are encouraged to use research data from both primary and secondary data sources.
They are also encouraged to build contacts with traders and suppliers while gaining an insight into the
business. Once students prepare the business plan, they submit a formal report and also make a
presentation, followed by question and answer sessions, as part of the assessment.
Such a practical approach to teaching business plans to students was appreciated by a number of external
faculty (both from university and industry), who were involved as supervisors. The course was also
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externally moderated by the Head of the Business faculty of a premier university in New Zealand. The
process of moderation included evaluating the course content; interviewing the students and supervisors;
evaluating quality control procedures; an appraisal of students’ final report, presentation material and the
marking. The external moderator’s report was very appreciative of the course content and its delivery as
seen from the remarks received: that the business planning course “is robust and an academically
excellent course….”. The positive comments made by external moderators endorse the relevance and
importance of this course.
IMPACT ON KNOWLEDGE AND SKILLS
The experience and knowledge gained through this kind of ‘practical’ course is expected to help students
develop entrepreneurial and managerial abilities and take a holistic approach to realizing creative ideas.
Results from the survey of participants of a business planning course are discussed below.
Knowledge of business content
To start a new business or to expand an existing business, knowledge of different areas such as finance,
environmental scanning, marketing and information technology is necessary (Hisrich, Peters & Shepherd
2005). Students were asked to indicate the degree to which they learnt different areas of business and
their responses are shown in Table 2.
The results from the survey indicate that students report to have gained knowledge in all the crucial areas
of business. The top three areas are marketing, risk identification and environment scanning, which are
core to business and critical for any business to succeed. This supports the findings from previous studies
(Galloway, Anderson, Brown & Wilson 2005; Henry, Hill & Leitch 2005). Learning gains in the area of
marketing equip students with appropriate skills to deal with issues such as target markets, estimating the
number of customers and the like while knowledge about scanning the environment helps them to
comprehend the constant changes in the environment making them better prepared. Students reported a
higher degree of learning in finance. Incidentally, this is an area where many SMEs in New Zealand were
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found to be lacking (New Zealand Herald 2005). Overall, this course enabled students to improve their
knowledge in all the important areas required for launching a new business. One student remarked, “this
course enables students to mimic an entrepreneur’s role … it helps students in improving the ability of
critical thinking, business planning and research skills”. Such perception of improvement in their
knowledge and skills by the students increases their self-efficacy (Bandura 1997), which in turn, enhances
firm performance (Forbes 2005).
Sources influencing the choice of business idea
Opportunity recognition and evaluation is the underlying premise of setting up or expanding a business
(Shane & Venkataraman 2000). In order to choose viable business opportunities, business owners may
have to look at various sources (DeTienne & Chandler 2004; Young 2002). Many business schools are
challenged in identifying tools for teaching students ‘opportunity recognition’ and ‘business evaluation
skills’. In this course, students search and choose a business idea/topic from a range of sources so as to
gain experience similar to what an entrepreneur would face when starting a business. Therefore
respondents were asked to identify the main sources that influenced their choice of business idea for their
project (see Table 3).
Many respondents have identified more than one source as influencing their choice of business idea.
Two main sources of information identified were other business courses (39 percent) and textbooks (30
percent), which underscore the importance of formal business education on identification of opportunities
for business (Hytti & O’Gorman 2004; Koch 2005). Not surprisingly, most of the business plans were in
the area of retail and international trade, which were related to specialisations offered in the degree
programme (See Table 4 for the range of industries covered). Other sources identified are friends (37
percent); past and/or present students (24 percent) and parents/acquaintances (11 percent) which suggest
the importance of networking and learning from others’ experiences (McDermott 2004).
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Enterprise skills
Entrepreneurial skills are core to all growth-oriented firms and are well established in the literature (for
example, Galloway et al. 2005; Reynolds, Hay, Bygrave, Camp & Autio 2000; Robertson et al. 2003;
Roodt 2005). The main entrepreneurial skills identified are networking, time-management,
communication, creativity and critical thinking, which were found, in other studies, to be crucial for
entrepreneurship (Henry et al. 2005; Schamp & Deschoolmeester 1998). These skills are equally
important even for students who intend to work for other businesses (Holter & Kopka 2001). Baker et al.
(1993) observe that the major obstacles for planning for a successful business are time constraints, market
uncertainty, lack of expertise, budget constraints, and resistance to change.
The business planning course seeks to enable students to gain multi-faceted skills required to start and/or
expand a business. Findings from table 5 indicate that the participants believe that they have acquired
these skills. In fact, one student commented, “[this course] has improved my … skills and I feel confident
about how to set up a new business by myself”. However, the gain in the financial analysis skills is the
lowest (3.63), although some learning has taken place. Over all, students have reported improvement in
their entrepreneurial skills.
Entrepreneurial and managerial activities
While undertaking this project, students had to perform different activities such as identifying
opportunities, formulating strategies, designing organizational structure etc. Based on their experience in
undertaking these activities, students were asked to indicate the degree of confidence in performing
different entrepreneurial and managerial activities. The results are shown in Table 6.
Students have reported gaining confidence in performing a range of entrepreneurial activities, particularly
in the critical entrepreneurial activities such as scheduling a time frame, identifying a target market, and
developing strategies to manage problems. Although students have reported gains in knowledge relating
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to finance area (see Table 2 and Table 5), their overall learning is relatively low in finance compared to
the other functional areas. This is similar to the problems faced by New Zealand SMEs in financial
aspects (New Zealand Herald 2005). When businesses are looking for outside finance, their business
plans will be critically examined. Therefore students would be required to understand financial aspects
more clearly. If students are found to have problems in learning financial aspects, an option would be to
analyse the programme structure and add further workshops in the area of finance to help them gain more
understanding and confidence in this area.
Other aspects of study
Undertaking research is essential to developing a business plan. Students were therefore asked about the
major sources of information for their business plans. Their responses indicate that they have relied more
on sources such as the Internet, Trade and Enterprise New Zealand, books and reading from previous
projects. Not unexpectedly, the use of non-formal sources such as networking, talking to friends, and
accountants was found to be less as expected in a formal degree level course.
As regards to their career options, 64 per cent indicated plans to start their own business in the future.
However, nearly half of these respondents (31 per cent) wanted to gain work experience through prior
employment before starting their own business, which corroborates with a similar finding by Collins,
Hannon and Smith (2004). Taking up employment will help them to gain experience, sharpen their skills
and reduce the risk of failure when they start their own business.
LIMITATIONS AND CONCLUSION
While the results from this study indicate clear gains in learning experience in preparation of business
plans, it is not without limitations. For instance, this study considers only the student’s perception of their
gaining skills, which does not necessarily indicate their level of learning in an objective manner.
Secondly, even if the students have perceived to have gained many skills, there is no guarantee that these
skills will be translated to commercial ventures. Thirdly, many students have had prior work experience
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and the current study did not isolate the impact of such prior learning on the overall learning occurred
during this course. Fourthly, students’ entrepreneurial self-efficacy and entrepreneurial intention was not
examined prior to the course.
Notwithstanding the above limitations, this study reveals that teaching business planning to students in a
formal way does equip them with necessary skills. Business plans not only give the students the
necessary confidence to start a new venture but also provide them with the skills to manage it
competently by exposing themselves to ‘real-world experience’ as part of their study, without
concomitant financial risks. Overall, the students did gain the skills and knowledge required to start and
manage a business. Lucas and Cooper (2004) argue that pedagogical approaches that focus on
entrepreneurship enable participants to gain confidence and provide a chance to build self-efficacy.
Consequently, aspiring potential entrepreneurs, who complete such courses, are more likely to build
successful and sustainable businesses; non-aspirants too can make positive contributions to the
organisations they join (Lucas & Cooper 2004). Furthermore, students taking the course can become
aware of areas they are not very knowledgeable about and can seek assistance to overcome any
difficulties. One such difficult area, identified in this study, is financial aspects.
Further studies can be undertaken on the need for customisation of business plans for specific industries
and to also undertake a longitudinal study to examine the extent to which students, who have completed
this course, have used the skills in their careers.
It is necessary to appreciate that business planning is only one specialised aspect of business education.
The overall learning of the course can be further improved only in conjunction with all pre-requisites and
related business courses of the undergraduate programme. The challenge that academicians face is to
maintain the rigour and relevance of the business planning course in the current dynamic business
environment.
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Table 1: Outline of the Course
Topics covered during the course:
• idea recognition, identifying the uniqueness of the business;
• scanning of the environment, undertaking research;
• surveying cultural issues;
• addressing operational issues including location analysis, production process, capacity planning,
resource requirements;
• marketing: includes target market, product features, price, promotion and distribution, merchandising;
• identifying and analysing legal aspects;
• organisation: human resource requirements, job descriptions;
• financial issues: includes sales forecast, establishment costs, cash flow forecasts and planning, pro
forma financial statements, performance evaluation;
• other issues include management information systems; risk identification, taxation, insurance, and
milestones.
Aim of this course is to help students:
• gain business knowledge and skills;
• gain confidence in undertaking independent research;
• in developing networks and learning to negotiate;
• in managing time: students have to draw a timeline for both writing the plan and a milestone schedule
for the company;
• improve communication skills: written and oral; confidence in presenting the plan; and
• gain confidence in decision making.
Structure of the course:
• students are supervised one on one by a staff member with industry experience;
• each individual student writes a business plan on an opportunity he / she has identified;
• students have to cover various sections of the plan;
• students undertake research and analyse competitors and the market;
• research is undertaken through secondary and primary sources;
• they also attend a series of workshops organised to assist students;
• students complete a written document based on the business opportunity, and identify the potential
risks and how to deal with them, and also make a presentation..
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Table 2: Knowledge of Business Content
Key Areas Mean
Standard
Deviation
Marketing 4.14 0.75
Critical Risks 4.01 0.76
Environment scanning 3.96 0.78
Operational Issues 3.92 0.74
Organisational structure 3.87 0.71
Human Resources 3.83 0.74
Financial projections 3.83 0.92
Management Information Systems 3.82 0.77
Cultural issues 3.77 0.74
Table 3: Sources Influencing the Choice of Business Idea
Sources Number of
Responses
Per cent*
Learnt about the topic in one of the business courses
63 39
Suggested by a friend
60 37
Found in the textbooks
45 30
Suggested by a past and/or present students
39 24
Found in newspaper
34 21
Previous experience in this area
23 14
Recommended by supervisor
19 12
Parents/acquaintances have a similar business
17 11
Found in journal article
13 8
Total
161
*Note: Percentages do not add up to 100 as some respondents cited more than one factor
17
Table 4: Range of Industries Covered by Business Plans (Last 8 Years)
Industry
Number of
Business plans Percentage
Retail business 82 31.18
Import/Export 18 6.84
Café 15 5.70
Recreational services 14 5.32
Personal 13 4.94
Online/Web-based/Electronic businesses 9 3.42
Travel and tours 9 3.42
Child-care 9 3.42
Restaurant 8 3.04
Health product and services 8 3.04
Manufacturing 5 1.90
Communication/devices 5 1.90
Advertising & graphic design 5 1.90
Agriculture, Forestry, Fishing 4 1.52
Wholesale business 4 1.52
Cultural and handicrafts 4 1.52
Property/Business Services 3 1.14
Computer services 3 1.14
Meat 3 1.14
Accommodation 2 0.76
Finance & Insurance 2 0.76
Education 2 0.76
Solar power 1 0.38
Other Services* 35 13.31
*includes funeral services; massage parlours; beauty parlours; hair removals, dating agencies, private
investigation, security service, training consultants etc
Table 5: Enterprise Skills Learnt
Enterprise skills Mean Standard
Deviation
Networking 4.00 0.68
Time-management 3.90 0.93
Communication 3.90 0.77
Creativity 3.82 0.75
Critical thinking 3.81 0.80
Leadership 3.79 0.80
Social 3.76 0.71
Negotiation 3.67 0.80
Financial analysis skills 3.63 0.93
18
Table 6: Level of Confidence in Performing Entrepreneurial and Managerial Activities
Entrepreneurial activities
Mean
Standard
Deviation
Scheduling a time frame
4.02 0.66
Identifying required information
4.00 0.66
Identifying a target market
3.97 0.66
Developing strategies to manage risks and problems
3.90 0.73
Recognising potential problems
3.88 0.79
Identifying the number and type of staff required 3.85 0.79
Analysing environmental factors 3.84 0.68
Designing an organisational structure
3.84 0.72
Identify a new business opportunity 3.84 0.71
Identifying required resources
3.83 0.76
Calculating breakeven point
3.81 0.87
Job designing and job specification 3.79 0.77
Designing a product mix
3.77 0.70
Calculating the market size and potential
3.75 0.77
Calculating a sales forecast
3.73 0.87
Developing a pricing structure
3.72 0.82
Identifying relevant legal issues
3.68 0.80
Analysing financial reports
3.63 0.93
Calculating financial statements
3.63 1.04
doc_336418357.pdf
In this detailed criteria resolve teaching business planning an analysis of content and learning outcomes.
TEACHING BUSINESS PLANNING:
An analysis of content and learning outcomes
Manisha Karia*
AIS St Helens, Auckland
Email: [email protected]
Hanoku Bathula
AIS St Helens, Auckland
Email: [email protected]
1
TEACHING BUSINESS PLANNING:
An analysis of content and learning outcomes
ABSTRACT
Business education has become very challenging in the context of globalisation and consequent rapid
change. Recent focus has been on how to make the learning more experiential to prepare students
smoothly for professional responsibilities. One such critical skill is to understand and design effective
business plans. This paper describes the content and delivery of a business planning course in a business
degree programme and then examines its impact on the learning outcomes of students. Overall, the
results indicate that significant learning has taken place in this course resulting in improvement in the
applied and integrating skills required for preparation of a business plan.
Keywords: business education, management courses/curriculum, skills development/training,
experiential/student centred learning, entrepreneurial learning, entrepreneurship
The rising pressures of globalisation and uncertainty underscore the importance of higher education in the
modern world (Hay 2008; Marginson & van der Wende 2007). Appropriate education assists students in
gaining skills, knowledge and abilities to meet the challenges of globalization. By gaining the right skills
and knowledge, they can gain a competitive advantage (Ahlawat & Ahlawat 2006). Several authors
(Skinner, Saunders & Beresford 2004; Snyder 2003) raise questions about the level of intellectual
capabilities, and technical and critical thinking skills required by graduates to be successful. The role of
higher educational institutions is to ‘prepare and train future workforce that is equipped with skills needed
to compete in the global arena’ (Ahlawat & Ahlawat 2006: 104).
Broadly the goal of business education is to impart skills that will equip students to take up managerial
responsibilities and develop their businesses (Gibb 1996). Business education focuses on several ‘applied
and cross-border skills’ which are necessary for students to work successfully in the business community
(Cordell 2001). Several pedagogical approaches have been offered by educational institutions to provide
experiential learning such as computer simulations, case studies (written and live cases), client-sponsored
projects, data-modelling and decision, field visitation, and role playing (Cordell 2001; Solomon, Weaver
& Fernald 1994). For business education to be effective, it has to closely follow the current needs and
trends of the business environment and equip students with the required skills.
2
One of the important skills to be imparted through business education is the ability to prepare a business
plan either for a new venture or expansion (Cordell 2001). Evidence suggests that those who prepare
business plans perform well compared to those who do not, and that business owners who have a plan
before starting a business are under a lower risk of termination as against those who have no plans (Shane
& Delmar 2004). Planning compels businesses to think about issues such as environmental changes and
also ensures their ability to make sound financial investments after having identified risks, thereby
increasing the chances of success (Zuckerman 2004).
The current study evaluates the effectiveness of a business planning course taught in an undergraduate
business programme. The three main objectives of the study are:
• To describe the content and delivery of a business planning course.
• To examine the perceived effectiveness of the business planning course relating to entrepreneurial
skills gained by students.
• To examine the usefulness of business plans as a pedagogical tool in imparting knowledge and skills
to identify and integrate key business functional areas.
The remainder of the paper is presented as follows. Section two discusses the importance of business
education and business planning. Section three explains the methodology used for this study. Section
four describes the content and delivery of the business planning course. Section five presents the findings
and discusses the implications. The final section concludes the paper with limitations and suggestions.
BUSINESS EDUCATION AND BUSINESS PLANNING
Benefits of business education
Business education should help students develop skills to face the challenges of the economic and social
needs of the society (Cheung 1998). Gibb (1996) underlines the philosophy of business education where
the programmes should give the participants an insight as well as knowledge, to develop their businesses.
3
More specifically, business education should impart knowledge and skills in the areas of general problem-
solving, decision-making, communication, coordination of resources, critical thinking and creativity, and
the ability to deal with financial issues (Cheung 1998; Holter and Kopka 2001; Özhemirand,
Hacifazlioglu & Sanver 2006; Snyder 2003). From an entrepreneurial perspective, the main aim of any
business education is to improve the capability of the students to identify good business opportunities and
evaluate these opportunities in terms of feasibility and visualize a business model that can be
commercialized (Thandi & Sharma 2004). Such an increase in the capability of potential entrepreneurs
will improve their decision making ability and conscious belief to bring about the desired results in
performance, a phenomenon referred to as entrepreneurial self efficacy (Bandura 1997). In an empirical
study of MBA students, Zhao, Seibert, and Hills (2005) have observed that formal learning was positively
related to student’s self-efficacy and to their intentions to become entrepreneurs.
Robertson, Collins, Medeira and Slater (2003) highlight the importance of business education in assisting
in breaking down barriers that aspirants face in starting a business. Prior research indicates that business
failure rates are quite high and are, in most cases, attributed to managerial incompetence (Harris &
Gibson 2006; Perry 2001). Further, business education is expected not only to transfer knowledge but
also to help develop insights into the processes of different aspects such as business start-up, survival,
growth and internationalization (Gibb 1996). The challenge therefore lies in the area of transferring
course content and ensuring that students gain the appropriate management skills deemed necessary for
businesses to survive. There are several learning methods that are being used for this purpose: project-
based learning, through problem-solving: real and simulated case studies, seminars and workshops
(Cordell 2001; Gibb 1996). It is vital that business schools consider the development of business
curricula strategically and design a pedagogy that is structured ‘leading to better, more equilibrated and
persisting business planning attitudes’ (Schamp & Deschoolmeester 1998: 174).
4
Need for business planning
A business plan is a comprehensive written report of the goals of the business, and includes discussion of
the business concept, operational plan, marketing plan, financial issues, organisational (structure) issues,
and legal requirements (Meloy 1998; Zuckerman 2004). It serves as a road map that details the starting
point, direction, and destination of a business (Svatko 1988).
Baker, Addams and Davis (1993) argue that written business plans are not only used by start-up
companies but also existing firms. Others emphasise the use of business plans to enhance the chances of
survival and success of businesses (Schamp & Deschoolmeester 1998; Cordell 2001; Perry 2001;
Hormozi, Sutton, McMinn & Lucio 2002) and also to minimize changes of failure of business (Perry,
2001). Therefore, businesses must draw up written plans in which all critical functional areas such as
sales, staffing, human resources, and finance are examined. Furthermore, Armstrong (2001) maintains
that the true objective of business plans is to infuse appropriate attitudes and motivations. When
entrepreneurs have growth generating and planning attitudes, they were found to generate higher business
growth (Schamp & Deschoolmeester 1998), which is as important as, if not more important than, starting
the business.
Teaching business plans
Teaching business plans is yet another pedagogical tool among the repertoire that will enhance a student’s
ability to a) analyse future scenarios (Bers, Lynn & Spurling 1997), b) understand the financial future and
funding related issues (Mason & Stark 2004), c) identify and minimize risks (Sykes & Dunham 1995),
and d) use plans as a communication device (Baker et al. 1993). Castrogiovanni proposes that learning
occurs during the business planning process and ‘it enhances the efficiency of a new business when
operations begin’ (1996: 807). He also suggests that this learning in turn will improve the chances of
business survival.
5
Business plans are promoted by educational and governmental institutions, bankers and investors (Honig
2004). Business plans have generally been taught to professionals in organizations through special
training sessions like enterprise workshops, though some of them gain the knowledge of developing plans
through their formal education. Currently, teaching business planning has become a norm in business
curricula throughout the world. Business planning has been included as part of the pedagogy for several
courses such as entrepreneurship, new venture management, small business management, and enterprise
training and development (Hills 1988; Cordell 2001).
Concerns on effectiveness of business plans
Despite these benefits, not everyone is keen on using business plans. Hindle and Mainprize (2006)
question the credibility of the plans since new scenarios are constantly evolving and uncertainties may be
difficult to determine. They suggest that businesses should leave room for some flexibility to ensure new
scenarios and contingencies are dealt with. Honig criticises the use of business plans as they ‘may
psychologically limit the framework of options available to an organisation and may be outdated due to a
constantly changing environment’ (2004: 260). He also refers to the conflicting results of previous
studies into the relationship between performance of companies and their business plans. Even as a
pedagogical tool, use of business plans to educate entrepreneurs has received much criticism on the
grounds that it restricts participants from thinking outside the box, and limits the range of activities and
potential solutions pursued by nascent entrepreneurs (Honig 2004). Notwithstanding these pitfalls,
business plans are still a popular pedagogy for teaching business students. The shortcomings identified
by these different studies can serve as a guide to making a more robust business plan (Hindle &
Mainprize 2006). For example, Price and Meyers (2006) explain that business plans are very important
because they are a tool to conceptualisation and packaging of ideas. At the very least, good business plans
reduce the odds of failure (Crawford-Lucas 1992).
6
By completing a business plan, students can gain a broader understanding in the main functional areas of
business such as finance, marketing, production, law and management. Additionally these skills help
students in their current or future managerial jobs. In the process of writing a business plan several issues
are considered: i) industry research ii) competitor analysis iii) understanding of funding requirements iv)
cash flow v) critical risks vi) suppliers vii) stakeholders viii) operating cycle ix) credit requirements x)
future growth and xi) human resource requirements, to name a few. On the whole, the focus is on
developing conceptual skills to integrate the information from various sources and to channel the
resources to meet the stated objectives of the firm.
METHODOLOGY
For the purpose of this study, the sample is drawn from students of an undergraduate programme of a
business school based in Auckland. This programme has been taught for over eight years and is well
established. Initially, the study examined the course content, coverage and the delivery strategies used.
In addition, the reports of students’ evaluation and external moderator’s comments were also considered.
In order to examine the effectiveness of the course, questionnaires were distributed among students who
have completed this course during the years 2005 – 2007. The questionnaire was given to respondents
soon after they completed their written and oral presentation of their business plans, and before the
release of their course results. This was deliberately done to avoid any bias or influence the course results
may have on the students’ views on their self assessment.
The survey questionnaire was divided into four main sections: a) learning in key management functional
areas, b) sources influencing choice of business ideas, c) learning achieved in entrepreneurial skills, and
d) level of confidence in performing entrepreneurial activities. A five-point Likert scale ranging from ‘1’
not confident to ‘5’ very confident was used to let the respondents indicate their perceived level of
confidence in knowledge and skills gained to undertake managerial/entrepreneurial roles. At the end of
the questionnaire, the respondents were also asked to comment on overall benefits and problems relating
to the business planning course. In all, a total of 161 usable responses were received, with the response
7
rate being 81 percent. Of these, 59 percent of the respondents were female and 41 percent were male.
About 70 percent of the respondents had some work experience prior to attending the course.
COURSE DESCRIPTION
Students are required to develop a business plan for a new venture or for expansion of an existing
business. The main objective of this course is to impart knowledge and skills to prepare a robust business
plan that recognises all potential opportunities and critical risks of a new venture. Students are required to
draw up a specific business plan using the knowledge gained from other undergraduate courses such as
Marketing, Accounting, Management, and Economics studied earlier as part of the degree programme.
Typically, the final report of the business plan includes: an executive summary, mission/vision statement,
business concept, unique capabilities, operational aspects, organisational structure, marketing issues,
financial management, legal requirements, timelines and recommendation about viability. Main aspects
covered in the course may be seen in Table 1.
One of the distinguishing features of this course is the ‘practical approach’ in its delivery that provides
opportunity for experiential learning. This overcomes the deficiencies identified in other business
planning courses by Honig (2004). Each student is given the opportunity to develop a business plan
individually and is supervised by a qualified staff member, who regularly monitors the progress and
motivates the student to complete the business plan. Workshops are conducted in different functional
areas such as market research, finance and presentation to provide students who require additional
support. Students are encouraged to use research data from both primary and secondary data sources.
They are also encouraged to build contacts with traders and suppliers while gaining an insight into the
business. Once students prepare the business plan, they submit a formal report and also make a
presentation, followed by question and answer sessions, as part of the assessment.
Such a practical approach to teaching business plans to students was appreciated by a number of external
faculty (both from university and industry), who were involved as supervisors. The course was also
8
externally moderated by the Head of the Business faculty of a premier university in New Zealand. The
process of moderation included evaluating the course content; interviewing the students and supervisors;
evaluating quality control procedures; an appraisal of students’ final report, presentation material and the
marking. The external moderator’s report was very appreciative of the course content and its delivery as
seen from the remarks received: that the business planning course “is robust and an academically
excellent course….”. The positive comments made by external moderators endorse the relevance and
importance of this course.
IMPACT ON KNOWLEDGE AND SKILLS
The experience and knowledge gained through this kind of ‘practical’ course is expected to help students
develop entrepreneurial and managerial abilities and take a holistic approach to realizing creative ideas.
Results from the survey of participants of a business planning course are discussed below.
Knowledge of business content
To start a new business or to expand an existing business, knowledge of different areas such as finance,
environmental scanning, marketing and information technology is necessary (Hisrich, Peters & Shepherd
2005). Students were asked to indicate the degree to which they learnt different areas of business and
their responses are shown in Table 2.
The results from the survey indicate that students report to have gained knowledge in all the crucial areas
of business. The top three areas are marketing, risk identification and environment scanning, which are
core to business and critical for any business to succeed. This supports the findings from previous studies
(Galloway, Anderson, Brown & Wilson 2005; Henry, Hill & Leitch 2005). Learning gains in the area of
marketing equip students with appropriate skills to deal with issues such as target markets, estimating the
number of customers and the like while knowledge about scanning the environment helps them to
comprehend the constant changes in the environment making them better prepared. Students reported a
higher degree of learning in finance. Incidentally, this is an area where many SMEs in New Zealand were
9
found to be lacking (New Zealand Herald 2005). Overall, this course enabled students to improve their
knowledge in all the important areas required for launching a new business. One student remarked, “this
course enables students to mimic an entrepreneur’s role … it helps students in improving the ability of
critical thinking, business planning and research skills”. Such perception of improvement in their
knowledge and skills by the students increases their self-efficacy (Bandura 1997), which in turn, enhances
firm performance (Forbes 2005).
Sources influencing the choice of business idea
Opportunity recognition and evaluation is the underlying premise of setting up or expanding a business
(Shane & Venkataraman 2000). In order to choose viable business opportunities, business owners may
have to look at various sources (DeTienne & Chandler 2004; Young 2002). Many business schools are
challenged in identifying tools for teaching students ‘opportunity recognition’ and ‘business evaluation
skills’. In this course, students search and choose a business idea/topic from a range of sources so as to
gain experience similar to what an entrepreneur would face when starting a business. Therefore
respondents were asked to identify the main sources that influenced their choice of business idea for their
project (see Table 3).
Many respondents have identified more than one source as influencing their choice of business idea.
Two main sources of information identified were other business courses (39 percent) and textbooks (30
percent), which underscore the importance of formal business education on identification of opportunities
for business (Hytti & O’Gorman 2004; Koch 2005). Not surprisingly, most of the business plans were in
the area of retail and international trade, which were related to specialisations offered in the degree
programme (See Table 4 for the range of industries covered). Other sources identified are friends (37
percent); past and/or present students (24 percent) and parents/acquaintances (11 percent) which suggest
the importance of networking and learning from others’ experiences (McDermott 2004).
10
Enterprise skills
Entrepreneurial skills are core to all growth-oriented firms and are well established in the literature (for
example, Galloway et al. 2005; Reynolds, Hay, Bygrave, Camp & Autio 2000; Robertson et al. 2003;
Roodt 2005). The main entrepreneurial skills identified are networking, time-management,
communication, creativity and critical thinking, which were found, in other studies, to be crucial for
entrepreneurship (Henry et al. 2005; Schamp & Deschoolmeester 1998). These skills are equally
important even for students who intend to work for other businesses (Holter & Kopka 2001). Baker et al.
(1993) observe that the major obstacles for planning for a successful business are time constraints, market
uncertainty, lack of expertise, budget constraints, and resistance to change.
The business planning course seeks to enable students to gain multi-faceted skills required to start and/or
expand a business. Findings from table 5 indicate that the participants believe that they have acquired
these skills. In fact, one student commented, “[this course] has improved my … skills and I feel confident
about how to set up a new business by myself”. However, the gain in the financial analysis skills is the
lowest (3.63), although some learning has taken place. Over all, students have reported improvement in
their entrepreneurial skills.
Entrepreneurial and managerial activities
While undertaking this project, students had to perform different activities such as identifying
opportunities, formulating strategies, designing organizational structure etc. Based on their experience in
undertaking these activities, students were asked to indicate the degree of confidence in performing
different entrepreneurial and managerial activities. The results are shown in Table 6.
Students have reported gaining confidence in performing a range of entrepreneurial activities, particularly
in the critical entrepreneurial activities such as scheduling a time frame, identifying a target market, and
developing strategies to manage problems. Although students have reported gains in knowledge relating
11
to finance area (see Table 2 and Table 5), their overall learning is relatively low in finance compared to
the other functional areas. This is similar to the problems faced by New Zealand SMEs in financial
aspects (New Zealand Herald 2005). When businesses are looking for outside finance, their business
plans will be critically examined. Therefore students would be required to understand financial aspects
more clearly. If students are found to have problems in learning financial aspects, an option would be to
analyse the programme structure and add further workshops in the area of finance to help them gain more
understanding and confidence in this area.
Other aspects of study
Undertaking research is essential to developing a business plan. Students were therefore asked about the
major sources of information for their business plans. Their responses indicate that they have relied more
on sources such as the Internet, Trade and Enterprise New Zealand, books and reading from previous
projects. Not unexpectedly, the use of non-formal sources such as networking, talking to friends, and
accountants was found to be less as expected in a formal degree level course.
As regards to their career options, 64 per cent indicated plans to start their own business in the future.
However, nearly half of these respondents (31 per cent) wanted to gain work experience through prior
employment before starting their own business, which corroborates with a similar finding by Collins,
Hannon and Smith (2004). Taking up employment will help them to gain experience, sharpen their skills
and reduce the risk of failure when they start their own business.
LIMITATIONS AND CONCLUSION
While the results from this study indicate clear gains in learning experience in preparation of business
plans, it is not without limitations. For instance, this study considers only the student’s perception of their
gaining skills, which does not necessarily indicate their level of learning in an objective manner.
Secondly, even if the students have perceived to have gained many skills, there is no guarantee that these
skills will be translated to commercial ventures. Thirdly, many students have had prior work experience
12
and the current study did not isolate the impact of such prior learning on the overall learning occurred
during this course. Fourthly, students’ entrepreneurial self-efficacy and entrepreneurial intention was not
examined prior to the course.
Notwithstanding the above limitations, this study reveals that teaching business planning to students in a
formal way does equip them with necessary skills. Business plans not only give the students the
necessary confidence to start a new venture but also provide them with the skills to manage it
competently by exposing themselves to ‘real-world experience’ as part of their study, without
concomitant financial risks. Overall, the students did gain the skills and knowledge required to start and
manage a business. Lucas and Cooper (2004) argue that pedagogical approaches that focus on
entrepreneurship enable participants to gain confidence and provide a chance to build self-efficacy.
Consequently, aspiring potential entrepreneurs, who complete such courses, are more likely to build
successful and sustainable businesses; non-aspirants too can make positive contributions to the
organisations they join (Lucas & Cooper 2004). Furthermore, students taking the course can become
aware of areas they are not very knowledgeable about and can seek assistance to overcome any
difficulties. One such difficult area, identified in this study, is financial aspects.
Further studies can be undertaken on the need for customisation of business plans for specific industries
and to also undertake a longitudinal study to examine the extent to which students, who have completed
this course, have used the skills in their careers.
It is necessary to appreciate that business planning is only one specialised aspect of business education.
The overall learning of the course can be further improved only in conjunction with all pre-requisites and
related business courses of the undergraduate programme. The challenge that academicians face is to
maintain the rigour and relevance of the business planning course in the current dynamic business
environment.
13
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Table 1: Outline of the Course
Topics covered during the course:
• idea recognition, identifying the uniqueness of the business;
• scanning of the environment, undertaking research;
• surveying cultural issues;
• addressing operational issues including location analysis, production process, capacity planning,
resource requirements;
• marketing: includes target market, product features, price, promotion and distribution, merchandising;
• identifying and analysing legal aspects;
• organisation: human resource requirements, job descriptions;
• financial issues: includes sales forecast, establishment costs, cash flow forecasts and planning, pro
forma financial statements, performance evaluation;
• other issues include management information systems; risk identification, taxation, insurance, and
milestones.
Aim of this course is to help students:
• gain business knowledge and skills;
• gain confidence in undertaking independent research;
• in developing networks and learning to negotiate;
• in managing time: students have to draw a timeline for both writing the plan and a milestone schedule
for the company;
• improve communication skills: written and oral; confidence in presenting the plan; and
• gain confidence in decision making.
Structure of the course:
• students are supervised one on one by a staff member with industry experience;
• each individual student writes a business plan on an opportunity he / she has identified;
• students have to cover various sections of the plan;
• students undertake research and analyse competitors and the market;
• research is undertaken through secondary and primary sources;
• they also attend a series of workshops organised to assist students;
• students complete a written document based on the business opportunity, and identify the potential
risks and how to deal with them, and also make a presentation..
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Table 2: Knowledge of Business Content
Key Areas Mean
Standard
Deviation
Marketing 4.14 0.75
Critical Risks 4.01 0.76
Environment scanning 3.96 0.78
Operational Issues 3.92 0.74
Organisational structure 3.87 0.71
Human Resources 3.83 0.74
Financial projections 3.83 0.92
Management Information Systems 3.82 0.77
Cultural issues 3.77 0.74
Table 3: Sources Influencing the Choice of Business Idea
Sources Number of
Responses
Per cent*
Learnt about the topic in one of the business courses
63 39
Suggested by a friend
60 37
Found in the textbooks
45 30
Suggested by a past and/or present students
39 24
Found in newspaper
34 21
Previous experience in this area
23 14
Recommended by supervisor
19 12
Parents/acquaintances have a similar business
17 11
Found in journal article
13 8
Total
161
*Note: Percentages do not add up to 100 as some respondents cited more than one factor
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Table 4: Range of Industries Covered by Business Plans (Last 8 Years)
Industry
Number of
Business plans Percentage
Retail business 82 31.18
Import/Export 18 6.84
Café 15 5.70
Recreational services 14 5.32
Personal 13 4.94
Online/Web-based/Electronic businesses 9 3.42
Travel and tours 9 3.42
Child-care 9 3.42
Restaurant 8 3.04
Health product and services 8 3.04
Manufacturing 5 1.90
Communication/devices 5 1.90
Advertising & graphic design 5 1.90
Agriculture, Forestry, Fishing 4 1.52
Wholesale business 4 1.52
Cultural and handicrafts 4 1.52
Property/Business Services 3 1.14
Computer services 3 1.14
Meat 3 1.14
Accommodation 2 0.76
Finance & Insurance 2 0.76
Education 2 0.76
Solar power 1 0.38
Other Services* 35 13.31
*includes funeral services; massage parlours; beauty parlours; hair removals, dating agencies, private
investigation, security service, training consultants etc
Table 5: Enterprise Skills Learnt
Enterprise skills Mean Standard
Deviation
Networking 4.00 0.68
Time-management 3.90 0.93
Communication 3.90 0.77
Creativity 3.82 0.75
Critical thinking 3.81 0.80
Leadership 3.79 0.80
Social 3.76 0.71
Negotiation 3.67 0.80
Financial analysis skills 3.63 0.93
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Table 6: Level of Confidence in Performing Entrepreneurial and Managerial Activities
Entrepreneurial activities
Mean
Standard
Deviation
Scheduling a time frame
4.02 0.66
Identifying required information
4.00 0.66
Identifying a target market
3.97 0.66
Developing strategies to manage risks and problems
3.90 0.73
Recognising potential problems
3.88 0.79
Identifying the number and type of staff required 3.85 0.79
Analysing environmental factors 3.84 0.68
Designing an organisational structure
3.84 0.72
Identify a new business opportunity 3.84 0.71
Identifying required resources
3.83 0.76
Calculating breakeven point
3.81 0.87
Job designing and job specification 3.79 0.77
Designing a product mix
3.77 0.70
Calculating the market size and potential
3.75 0.77
Calculating a sales forecast
3.73 0.87
Developing a pricing structure
3.72 0.82
Identifying relevant legal issues
3.68 0.80
Analysing financial reports
3.63 0.93
Calculating financial statements
3.63 1.04
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