The Strategic Management In Small Enterprises Commerce Essay

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The dominant paradigm in strategic management is characterised by two principal functions: strategy formulation and implementation. There are two important contributors to these approaches Ansoff (1965), Andrews (1971, 1986) and Porter (1979, 1980, 1985, and 1998).

In general strategic management is about how the strategy is developed at a first stage and implemented at a second stage. (Stacey 1993; Karami, 2002).

Ansoff and Mc Donnell (1990) separated goal setting from strategy. Strategic management has been defined by, as a process of a systematic approach for managing strategic change which consists of positioning the firm through strategy and capability planning, real time strategic response through issue management and systematic management of resistance during strategic implementation.

Johnson and Scholes (1993) suggest that is not sufficient to state that strategic management is the management of the process of strategic decision-making, because strategic management is different in nature from other aspects of management.

Small -medium enterprises (SME) according to Preston et al (1986) is independently owned and operated and which is not dominant in its field of operation.

For example Scott and Bruce (1987) provided the qualitative definition of an SME. They indicated that an SME is one which has three characteristics:

Management is autonomous usually managers are also the owners.

Capital is complete and ownership is held by an individual or small group.

Operations are mainly local. Workers and owners are in one home community, but markets need not be located in the same community.

Research background

Small scale enterprises worldwide have been recognized as engines of growth and development (Harper, 1984; et al, 1997; Ba-el and Felsenstein, 1990) and in many countries there has been some considerable effort to support them so as to create the necessary employment opportunities, incomes and productive capacity. Moreover the evidence available about the role of small enterprises some of the reasons for them being preferred as follow: ease of formation, capital requirements, flexibility, mobility and a variety of other factors.

Seen from a global perspective, small enterprises have a specific position in global economic affairs. The global market is conquered by world class competitors in the form of multinationals and for the developing countries, small business appears to be the way to compete. http://www.evancarmichael.com/African-Accounts/1639/20-Background-Entrepreneurship-and-Small-Business-Enterprise-Growth-in-Uganda.html

Specifically the increase in the role of SMEs in the United Kingdom is better than anywhere else in the world. It seems thought that all the new firms are really small and that as a consequence shows that the share of SMEs in employment and GDP appears to be less than in most other Organisation for Economic Co-operation and Development (OECD) countries.

SMEs have made an important contribution to innovation, and to maintain competition in the business market. Moreover SMEs have increased the entrepreneurial culture and the flexibility of the economy.

Furthermore small enterprises constitute the backbone of economic activity and employment in most countries. The role of them in society is therefore an area of great interest. Politicians, interest groups, professionals and others seek to support the development of small enterprises and to secure healthy working conditions.

Although it seems that small enterprises are somewhat puzzling. The drive towards growth is resisted by many owners of small enterprises who are quite satisfied with being small. Health and safety policy interventions and regulations are often met with fierce resistance from small enterprises, although many of them have good and close relationships between owners and employees.

In previous research done about environmental analysis SMEs in particular, studies have investigated the relationships between the different environmental conditions and the usage of different types of information sources by executives in formulating competitive strategy found that (1) high and low rich information sources were used less under highly changing, unpredictable conditions and (2) low rich information sources( such as income statements , memos or letters) were used more than high rich sources ( face to face discussions with workers, customers or suppliers) under steady, expected circumstances.

Results suggest that environmental conditions affect the type of sources (low rich versus high rich) used by executives in selecting a competitive strategy (that is low cost leadership or differentiation ).

Jennings and Lumpkin (1992) argued that the types of information that CEOs seek differ according to their firms competitive strategies. This shows that strategy can determine scanning behaviour as well as being affected by it.

Research objectives

Interest in small-scale enterprise in the UK has increased enormously in the recent years. This has been paralleled with an equally large increase in research on this form of economic activity. Disappointingly, much of the research has not been high quality; due to mainly failures to recognize the special problems studying the small business poses from researchers. Despite the great increase in the small business in the UK it is importance in the economy is often still underestimated ( Storey, 1994). One reason for this is that there remains tendency to see small businesses as less central to economic activities are the focus of newspapers and television business programmes.

The main aim of this paper it to investigate and evaluate small enterprises and the strategy that they use to operate and perform it.

Research questions

What is the basis for comparative advantage for small enterprises?

How effective is strategic management for small enterprises?

Methodology

The methodology of the current dissertation includes the secondary research and the primary research.

First of all, the potential features of the dissertation, which might be observed using a plan, can be identified on the basis of a literature review (secondary research).

First of all, the possible features of this situation will be observed using a schedule, can be identified on the basis of a literature research (secondary research).

Such a literature review will present certain things as worthy of inclusion, and should allow the researcher to prioritise those aspects of the situation to be researched and observed.

Using a huge number of organisations would be really nice but this not practical. The researcher was limited by the speed and accuracy with which it is possible to observe and analyse data. So items for inclusion will be restricted to the most significant and relevant, because it is simply not feasible to include everything. Previous research and previous theories provided the key to deciding which features of the simulation warrant the focus of the attention.

Structure of the dissertation

This paper involves the discussion of issues that occur in small enterprises and how effective is the strategic management process regarding the literature review and the research on small companies in Parc Menai Bangor.

Chapter 2 - literature Review

Research in small enterprises has been developing over the past two decades. There are a variety of academic journals which focus specific on small enterprises in national economies. There is an impression that these studies cover every aspect of the topic. However analysing the topic there are remains for further development of this topic.

Moreover there is a big need for more practical research in management and marketing issues small enterprises are issues that have occurred already is difficult for them to be called numerous. It must be said those problems occurred in short supply, especially in relation with strategy, are no doubt of great worth but still insufficient.

Traditionally research concerning strategy was based on traditional on world-famous, successful corporations. Craven et al (1994) point out that conceptual focus and experiential examination of the strategy which has centered on problems and experiences of large firms.

Research in entrepreneurship has debated the differences between entrepreneurial and small business ventures for quite some time, arguing that entrepreneurial ventures are small growth-oriented, strategically-innovative firms, while small business ventures are neither growth oriented nor strategically innovative. However, scholars often treat both types of ventures analogously in terms of both construct and theory, which poses clear problems given their differences. As a result, opportunities have been missed to advance both the understanding of new firm survival and growth and the understanding of how theoretical perspectives in strategic management apply to entrepreneurial and small business ventures. Since there is a recognisition about the strategies of small firms than the strategies of large firms, these problems present a substantial opportunity to refine strategic management theory for the entrepreneurial and small business contexts. Thus, this paper is going to examine the extent to which small firms may engage in strategic pursuits of competitive advantage to determine the applicability of strategic management theories to the contexts.

Entrepreneurial ventures and small businesses both play important roles for economic growth and job creation in society (Solomon, 1986; Storey 1994). Given their significance, agreeing with Carland and colleagues' (1984) statement that small firms are neither innovative nor strategic? Making an assumption that most firms face competition of some sort, then should not all such small firms theoretically pursue some form of strategy. If so, most prior research on small firm strategy, which tends to raise non-growth-oriented small firms with growth-oriented firms, may have missed substantial opportunities to understand better, how theoretical perspectives in strategic management apply to entrepreneurial and small business ventures.

Theory development

The configuration approach in small enterprises.

The configuration approach belongs to the type of methods characterized by terms such as holistic, universalistic, integrative, synergetic, universal.. The roots of the configuration approach can be found in older approaches which were swept away from the ordinary of business administration in help of up-and coming quantitative methods. Concepts of this scenery mislaid influence in the second half of the 20th century. These days, similar but modernized approaches are growing in German as well as English management literature.

The configuration approach allows, or even better yet requires, a dynamic perspective: The growth of a firm needs to be interpreted as a series of configurations over time. The history of a company is therefore the history of a series of configurations (which is similar to one of the demands of the resource-based view).

However, interventions by the entrepreneur will direct the development of the firm towards the desired configuration.

In principle, configurations are unique; however, similar configurations may allow to create typologies. Experience with certain types of configurations can help identify the strategic position of an individual enterprise and to estimate its prospects for further development. It can also help define interventions in the sequence of typical phases in the configuration history in order to avoid dangerous paths and to move towards favourable paths. The configuration approach can thus be combined easily with the life cycle approach in strategic management theory.

Small firms are most likely to differ considerably in the types of strategies they pursue. However, growth is a core assumption of strategic management theories. For a selection of reasons, the vast majority of firms are and remain small, pursuing strategies to survive, either not wishing to, or not successfully pursuing and achieving the growth strategies of large firms. Such strategies for survival may be characterized by plans such as using minimal overhead (Ebben & Johnson, 2006; Winborg & Landstrom, 2001), choosing an attractive industry (Stearns, Carter, Reynolds, & Williams, 1995), and building a loyal customer base (Liao & Chuang, 2004). Conversely, strategies for (small firm) growth may be characterized by tactics such as a focus on management and workforce training to grow the size of the employee base, issuing equity to external stakeholders to fund growth, developing technological sophistication to monitor and manage growth, seeking flexibility to adjust to new Small Business Strategies and changing markets, and introducing new products (Storey, 1994). Since most small firms appear to pursue survival strategies (Carland et al. 1984), and survival predominately depends upon a loyal customer base (Reider, 2008), we decided to narrow our scope of small business strategies to focus on exploring two strategic approaches consistent with building a loyal customer base -- providing the highest possible quality, and providing better customer service (Liao & Chuang, 2004). Since another strategic approach to small business survival includes minimal use of resources (Ebben & Johnson, 2006; Winborg & Landstrom, 2001), we also retain this approach within the scope of our study. In the next sections, we review the literature on these different strategies and offer testable hypotheses about the relationship between their use and a small firm's ability to survive and grow. Through examining the relationship between these dominant small business strategies and their effects on survival and growth, we can shed some light on the differences and applicability of strategic management theory to the small business context.

Small firm Strategies

As it has been discussed thus far, because small firms vary considerably in their resource positions (Cooper, 1981), from the goals and objectives of their founders (Carter, Gartner, Shaver, & Gatewood, 2003; Evans & Leighton, 1989; 1990), and their potential for survival and interests in growth (van Praag, 2003), small firms will also vary substantially in the types of strategies they follow. However, growth is a core assumption of strategic management theories, yet as it has been argued previously, for a variety of reasons, the vast majority of firms are and remain small, pursuing strategies to survive, either not capable to, or not successfully pursuing and achieving the growth strategies of large firms. Such strategies for survival may be characterized by plans such as using minimal overhead (Ebben & Johnson, 2006; Winborg & Landstrom, 2001), choosing an attractive industry (Stearns, Carter, Reynolds, & Williams, 1995), and building a loyal customer base (Liao & Chuang, 2004). Conversely, strategies for (small firm) growth may be characterized by tactics such as a focus on management and workforce training to grow the size of the employee base, issuing equity to external stakeholders to fund growth, developing technological sophistication to monitor and manage growth, seeking flexibility to adjust to new and changing markets, and introducing new products (Storey, 1994). Since most small firms appear to pursue survival strategies (Carland et al. 1984), and survival predominately depends upon a loyal customer base (Reider, 2008), we decided to narrow our scope of small business strategies to focus on exploring two strategic approaches consistent with building a loyal customer base -- providing the highest possible quality, and providing better customer service (Liao & Chuang, 2004). Since another strategic approach to small business survival includes minimal use of resources (Ebben & Johnson, 2006; Winborg & Landstrom, 2001), we also retain this approach within the scope of our study. In the next sections, we review the literature on these different strategies and offer testable hypotheses about the relationship between their use and a small firm's ability to survive and grow. Through examining the relationship between these dominant small business strategies and their effects on survival and growth, we can shed some light on the differences and applicability of strategic management theory to the small business context.

Chapter 3 - Methodology

Introduction

The current chapter provides the details of the research methodology and design used in the research study. An explanation of the appropriateness of the research design and the methodology is given. Included in this section is the research carried out the sampling methodology, and the date collection procedures and rationale. The appropriateness and the reliability of the instruments selected as well as an explanation of the data analyses used n their appropriateness to the research study discussed.

research strategy

The research strategy followed includes two methods: secondary data and primary research.

secondary research methodology

Initially the possible features of this dissertation, which might be observed using a schedule, can be identified on the basis of a literature research, as Chava and David Nacmias (1997) point out in their book "Research Methods in the Social Sciences".

Such a literature review will present those certain things as worthy of inclusion, and should allow the researcher to prioritise those aspects of the situation to be observed. It would be great if a huge number of items in the schedule could be presented, but unfortunately this is not practical. The researcher was limited with speed and accuracy to collect a large number of items. So the items for inclusion need to be restricted to just the most significant and most relevant, because it is simply not feasible to include everything. Previous research and previous theories provided the key to deciding which features to focus of the stimulation warrant to focus of the attention.

Thus, Secondary research gave the researcher an insight regarding decision making in SMEs. What has already been researched can be identified. Only after having comprehended fully what the examined issue means, its concepts, theories, major variables, conceptual definitions was the researcher able to implement the research conducted by different small and medium enterprises in Parc Menai Business Park in Bangor.

Some important literature research has been conducted through books and updated articles. May articles provided the study with many interesting insights regarding the types of strategies small firms choose to implement in the organization and of course the level of importance of having specific type of strategy implementing small and medium enterprises.

Additionally, secondary data were also used through a review of the literature review on strategic management in SMEs in order to develop research questions and theoretical framework.Certainly the most updated sources are Internet and E-libraries. Therefore, the researcher has mainly based the study on online articles and publications regarding the examined issues. Some important literature research has been conducted through books and articles.

Qualitative data were collected through interviewing different people in Parc Menai Business Park. Furthermore a theory was developed as a result of the data analysis. There were 10 questions to which Managers or employees who are involved in strategic decisions within the organization were called to answer the particular questionnaire. All of they were close - ended questions, since there results will need to be analysed and using open-ended can be interpreted wrong for this specific research.

primary research methodology

Bichta (2003) described three types of research methods that can be used to perform research: quantitative, qualitative, and mixed methods. in a quantitative approach, mainly post-positivist claims are made, such as cause and effect, research variables, hypotheses, questions, experiments and surveys are used, and data, is gathered using predetermined instruments that will yield statistical data. A qualitative approach is based primarily on constructivist perspectives or advocacy/participatory perspectives and uses inquiry approaches such as narratives, phenomenological explication, ethnographies, grounded theory studies, or case studies. With these methods, data is collected using open-ended questions with the purpose of developing themes or a theory using data.

A mixed methods approach combines both quantitative and qualitative data methods. in a mixed methods approach, numerical data is collected using surveys and text data is collected using interviews.

source of data

The current study discusses the strategic management for SMEs and decision making strategies for small businesses. The source if data includes questionnaires that were answered by managers and decision making from general companies that are based in Parc Menai Business Park in Bangor.

data collection

Quantitative data were collected by given out questionnaires to the managers of SMEs or to employees who are involved in any decision making for the business. There were 10 questions to which the managers were called to answer. All of them were close-ended managers had a choice of specific answers to choose from the questionnaire.

The data taken from the questionnaires would be specific as to come to a specific conclusion. The number of questionnaires the researcher took out was 50 as they there is limit on time. The responses were 42 out of the original 50 which was very satisfying.

All the questions were close ended and were akin to find the most popular answer that all the candidates answered in the questionnaire. Furthermore the most appropriate answers selected from the questionnaire were the most applicable to the small businesses which took part in the survey. As far as the position adopted during the approaching the small businesses with the questionnaires is concerned, a positivistic approach is preferred since this is the appropriate one when the interview follows a fairly standardised set of questions, whilst offering some flexibility, and allowing the views of the interviewee to become known. Moreover, it was extremely helpful in the case examined, as it required a good deal of thought and responses needing to be explored and clarified. In addition, the researcher had the opportunity to identify non-verbal clues, which were present and could be used to develop secondary questions.

Furthermore, primary data was collected with questionnaires answered by managers of SMEs.

data analysis

When collecting the data the researcher used different approaches on how respondents perceive the issue of taking part in a survey. For the specific study the researcher used quantitative analysis. Data were gathered by means of a survey questionnaire, some questions used a five point Likert type scale from 1 to 5. The researcher used surveys to collect data which focus on factual information depending on the purpose, combining it with the protocol analysis which is a method which is a rigorous methodology for eliciting verbal reports of thought sequences as a valid source of data of thinking. Questionnaires were distributed to a sample of 50 owner managers or employees involved in decision making of small and medium enterprises. The respondents that took part at the survey all of them had taken an important decision in the past 5 years for the organization they work or own. Due to some outlying and incomplete responses are skipped for the analysis, 42 respondents are used out of the original 50 as a basis of the classification. All if these respondents were responsible for the management of the day- to -day business and the strategic decisions in the organization.

The sample that took part at the survey is consisted mostly of Welsh firms covering different industries: construction, business services, law services manufacturing.

The questionnaire included 10 questions, covering the following aspects.

Strategic planning activities

Main aim of the business

Forces affecting the planning of the SMEs

chapter summary

chapter 4- findings

This chapter is going to present the results from the survey in Parc Menai Business Park. First an overview of the survey is going to be presented and then the results of the survey are described presenting them for each question separately.

introduction

Small businesses took part in conducting questionnaires. There were different businesses from various industries that took part in the survey. The response was very satisfactory and most of the businesses were quite positive and open to answer the questionnaire.

data analysis

Question 1- Type of Business

Most of the businesses that took part at the survey were professional businesses and a very few family businesses. A few professional businesses were run as a family business. Many small firms tend to apply professional business as they are safer when starting a new business and many have the background on how to run a business which most people that take the step to start a new business need some help and seminars on how to start and run a business.

Question 2 - company formal

Most firms (95%) that took part at the survey have a written business plan and a written format of a mission statement.

For many small firms it is an advantage as a written business plan is a formal statement of a set of business goals for every organization. In the written business plan the reasons are written on why they are believed to be attainable and what is the plan for reaching the goals for each small business. Furthermore a written mission statement is a formal short written statement on the purpose of the business. Usually a mission statement shows the actions of the organizations well as spelling out its overall goal, giving a sense of direction and guide in decision-making for the organization. For many SMEs a written business plan and a written mission statements is very important as there this may help when the time comes for the business to make important decision making.

Question 3 - main aim of the business

As it seen below at the pie chart, 43% of the respondent answered that the main aim of the organization is long term profit. Then follows up with 26% of respondent's main aim is growth. It is seen that many SMEs have a long term plan to grow bigger. Then 19% main aim is customer satisfaction. All these variables are very important aims for every small business, but at the moment as the economy is at this stage, most companies are suffering from the economic recession and many are still recovering from it, keeping a long term profit is the main aim especially for SMEs at there is always the risk of not surviving as the large organization take over as a conclusion small firms are in a very dangerous position in the market as always the bigger always wins the smallest. Most SMEs that took part at the survey were very open and relaxed to fill in the questionnaire without many hesitations as the small businesses are most closed and small on giving out information about them.

Question 4- planning activities

Respondents answered this question about the organization, how much emphasis they give in planning activities for the business and how important are different tools to their organization. As seen by the results shown below in a graph 48% of the respondents give strong emphasis on the importance of having a mission statement, which represents the company's vision and what clients and customers would like to see and expect for the business, furthermore 60% of the respondents believe the same about having a trend analysis as a trend analysis can plan and predict the outcome for every SMEs as well as providing information on current issues that may occur in near future and this will help SMEs to prevent them for happening with correct planning. Furthermore this helps to identify current product trends and how SMEs can determine the strength of the market they are in by being innovative all these things are all results of having a trend analysis. Moreover it helps to eliminate uncertainties in business, such as slow sales, and inventory overstock and seasonal consumer demand. Strong emphasis is given for a competitor analysis SMEs use tools such as Porters value chain and the five forces model which help to identify competition. Long term plans, annual goals, short term action plans and finally an ongoing evaluation of the business. Most of the small businesses that participated in the survey found to give strong emphasis to all of these as all these contribute an important step for the whole of SMEs strategic management.

Question 5 - product and services improvement

Question 5 examines any in a period of 5 years if any improvements were made by the organizations in products or services. In conclusion there is a strong relationship between these two questions. As it has seen at the above question small/medium enterprises give a strong emphasis to strategic planning for their organizations, as seen at the pie chart below 83% of the respondents answered that new or improved products and services have been launched into the market each business operated. The relationship between these two questions is very strong.

Question 6 -

As it seen from the results many SMEs are develop the products and services from mostly the business itself or in collaboration with another firm. Most SMEs develop and produce their own products or services. Most SMEs are innovative in producing new products or services, many SMEs produce competitiveness established on internal elements supported by resources such as personnel and skills of the employees.

Question 7 -

Question 8

Question 9

Question 10

Chapter 5 - Discussion and Conclusion

Based on the findings on through the survey, we may conclude that most SMEs use and find strategic planning very effective for the SMEs performance through a long term business plan.

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