Smes Practice Strategic Management
Dec 3, 2020 in Research

Background

The significant role that small and medium enterprises (SMEs) play in world economies has been widely acknowledged. SMEs, organizations having not more than 200 employees, constitute the largest business industry in all countries. As a result, governments have adopted policies and initiatives aimed at supporting and promoting the growth of SMEs. Many authors agree that SMEs are important drivers of economic growth as well as employment. At the macro-economic level, SMEs have been instrumental in creating employment in both developed and developing economies. Moreover, SMEs are making significant contributions to the Gross Domestic Product (GDP) of states. For instance, in the US, SMEs account for about 30% of the GDP of New Zealand and Australia, 57% - in Japan, and 51% in the US. At the micro-economic level, governments often look upon SMEs as the cornerstone to achieving economic regeneration. Since the 1980s, significant restructuring has occurred in large firms in the forms of job exporting, outsourcing, downsizing and rationalizing. This change has resulted in the slicing of employment opportunities globally. However, with the growth of SMEs, employees who have lost their jobs in large companies have been absorbed back into employment. The resulting multiplier effect implies that the employment offers income to countries and regions, which in turn helps stimulate economic activity that drives wealth and creates further employment.

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In the modern-day commercial environment, SMEs are dominant in several crucial economic sectors, including construction, service, and retail. In addition, SMEs form important backward and forward links to the supply chain of capital-intensive sectors, including defense, marine, mining, and automotive. Moreover, the presence of SMEs alongside large companies offers crucial structural and competitive balance. As a result, they help to prevent the domination of the market by few large companies. With regard to entrepreneurial activity, SMEs focus on niche and fragmented markers that large companies cannot enter because of their perceived unattractiveness. In addition, regardless of their overall limited involvement in research and development, SMEs make significant contribution to innovation. For instance, SMEs in Australia account for about 54% of all major technological innovations despite the fact that their research and development investment represents merely 20% of all expenditures in technological innovation. Possibly due to the relationship between innovation and entrepreneurial activity, SMEs often facilitate the emergence of novel industries and the formation of large corporations in the future.

Statement of the Problem

The specific research problem to be tackled by the proposed research study relates to the poor performance levels and high failure rates of SMEs. Despite their significant contributions, the sustained development of the SME sector remains a rampant problem, which can be attributed to the lack of proper application of strategic management principles. Strategic management is a critical success factor for all organizations. In the case of SMEs, strategic management is of ultimate importance, because SMEs are still growing and are in need of sound managerial principles to spur organizational growth. In the literature, the application of strategic management by SMEs remains an issue of debate with some authors maintaining that strategic management is not suited for SMEs because of their small size. Moreover, these authors claim that SMEs face numerous constraints and limited resources that make strategic management an impractical fit for these organizations. Amidst these debates, high failure rates of SMEs remain a growing problem. Leitner and Guldenberg showed that the average lifetime of SMEs is about 2.5 years, which is primarily attributed to poor application of strategic management. Although there are divergent views regarding the application of strategic management in SMEs, its benefits for the performance of organizations cannot be overlooked. Tell indicated that the absence or presence of strategic management is a core determinant of the triumph of SMEs. Successful SMEs depend significantly on commercial or technological innovation, or focusing on a niche strategy involving product/service differentiation. Even with the implementation of these strategies, any growing firm encounters numerous problems when moving through the various stages of its lifecycle; nevertheless, they are still powerful for ensuring the success of a firm in a competitive business environment. Studies have shown that owners and managers of SMEs are informed of about concept of strategic management, though they have little interest in its application, since they assume that it is only fit for large companies.

For smaller organizations, such factors as globalization, uncertainty and complexity of the business environment pose significant challenges. A challenging business environment highlights the need for SMEs to adopt strategic thinking and planning in order to survive. The strategic behavior of SMEs has been characterized as disordered, unformulated, and not in concordance with the logical steps from strategy formulation to implementation. Studies have shown that SMEs seldom adhere to the classical analytical strategic management process all the way from formulation to implementation, as the large companies do. Although such managerial approach is beneficial in the sense that it offers SMEs more flexibility when compared to large organizations, SMEs face considerable challenges stemming from limited resources that hamper their growth. As a result, smaller firms are incapable of committing considerable time and effort to pursuing strategies. Studies have also affirmed that strategic management is beneficial to all organizations, both large and small, in terms of performance. A significant number of SME failures can be attributed to managerial causes such as lack of long-term planning, decision-making by one individual, inadequate information regarding markets and customers, imbalance between managerial competencies and skills, and lacking technical competencies. Thus, there is the need to explore the degree to which SMEs practice strategic management as well as the perceptions of SME managers towards strategic management.

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Purpose Statement

The purpose of the proposed qualitative study is to explore the degree to which strategic management is applied by SMEs in the United States. The study also seeks to determine the suitability of strategic management for SMEs based on the views and opinions of owners and managers such organizations. To this end, a survey will be executed with a sample of 15 owners and managers of SMEs in the US in order to ascertain the level to which they incorporate strategic management practices in their businesses, as well as the suitability of strategic management. Since the managerial process in SMEs is mostly heterogeneous, the firms will be selected from a single industry the service sector. Data from the participants will be collected using semi-structured interviews. The findings of the study will make significant contributions to the scanty literature about the application of strategic management practices by SMEs. With regard to mid-sized organizations, the application of strategic management practices remains an issue of debate. There are some SMEs whereby the lack of strategic management tends to be beneficial. Still, there are firms that rely significantly on this practice. As a result, the findings of this research will be positioned into the ongoing debate concerning the suitability and application of strategic management by smaller organizations. Essentially, the findings of the study will be used to emphasize the importance of strategic management in SMEs or lack thereof. In addition to contributing to the existing literature, the results of the investigation will highlight important recommendations regarding managerial practices for SMEs. Lastly, the implications of the proposed research will help to increase growth and performance of SMEs.

Research Questions

1. What is the degree to which SMEs practice strategic management?

2. What is the suitability of strategic management for SMEs?

Research Methodology

The research methodology is an important consideration for any study, since it determines the entire process used in collecting data, including the selection of participants and the analysis of information. The suitability of the methodological approach is determined by its ability to answer the study questions. Three methodological approaches can be adopted by researchers qualitative, quantitative, and a mixed method. Qualitative approach focuses on uncovering new information as well as the relationship between the investigator and the phenomenon under examination. This technique is contrasted with the quantitative approach wherein the research and the research are separate entities, and focus is placed on measuring and analyzing causal associations between variables rather than describing a phenomenon. Other notable differences between qualitative and quantitative research stem from the degree of flexibility, the type of data required to answer the study questions, data collection instruments and methods, framing of the study questions, and adopted data analysis techniques. Specifically, the qualitative approach makes use of an interpretive method that seeks to yield and in-depth and holistic understanding of the issue under study by employing interactive and flexible data collection methods. The influence of the researcher in the process is also dominant when qualitative approach is used. On the other hand, quantitative approach focuses on the generalization of the findings to the study population by using structured data collection methods and statistical analyses. The researcher plays a minimal role in the research process in order to ensure objectivity. In the proposed research, qualitative approach will be used as it is considered to be the suitable to help address the research problem and achieve the objectives. The reason underpinning the selection of the qualitative approach stems from the need to perform an investigation that is holistic and comprehensive rather than limited by a set of variables. The emphasis is not on generalizing the findings of the study, but on understanding the extent to which strategic management is applied and is suitable for smaller organizations. Moreover, the exploratory nature of the proposed research poses the need to make use of a methodological approach that is open and unstructured, which is stipulated by the qualitative approach.

 

Research Design

Research design denotes the overall strategy chosen for integrating the various components of the study in a logical, coherent manner, which helps make sure that the research problem is addressed effectively. Saunders, Lewis, and Thornhill demonstrate that research design is the blueprint that guides the manner in which data will be collected, measured, and analyzed. It is also imperative to note that the study problem allows the design to be utilized or not. Given the nature of the research problem, the proposed study will make use of the exploratory design. According to Daymon and Holloway, exploratory design is suited for research problems involving few or no previous studies that can be relied upon conclusive assertions regarding a phenomenon, which is the case with the proposed study. In this situation, there are relatively few studies that have focused on investigating the extent to which SMEs apply strategic management. The aim of the exploratory research design is to gain familiarity and insights for subsequent investigations. The nature of the research problem has resulted in the choice of the exploratory research design in the sense that the researcher seeks to develop tentative theories in order to build a conceptual model to understand the application and suitability of strategic management by SMEs. Exploratory research design is used for research problems that are still at a preliminary phase. This is the case with the study problem to be tackled with the proposed research, as the application of strategic management by SMEs is a relatively unexplored topic in the literature.

Data Collection Process

The steps to be undertaken in sampling participants, the instruments used, and the analysis techniques used are described in the following subsections.

Population and Sampling Technique

The population for the proposed study comprises of SMEs in the service sector in the US. Therefore, the participants of the proposed study will comprise of managers and owners of SMEs because of the role that they play with respect to making decisions for the business. As a result, they are in a better position to understand the strategic management process. Web-based search will be used to locate the contact details of SME managers and owners. This step will be followed by the use of convenience sampling in recruiting the participants. Convenience sampling entails the selection of participants primarily because of their availability. In this respect, SME owners and managers who will be accessible and ready to participate in the research will be recruited. Additionally, it is crucial to note that the selected SMEs will have to meet the criteria for SME definition in the US having not more than 500 employees. The target sample size for the proposed research is 15 managers and owners, which is expected to yield data saturation. In qualitative research studies, there are no determinate rules for computing the sample size; the only important factor to be considered is data saturation, which refers to the point at which no new data emerges from the participants. When collecting data, the author will continue recruiting participants until data saturation is achieved. The setting for the proposed study will be the state of California, US. Prior to starting the process of data collection, the researcher will send formal requests to participants and make arrangements with them regarding the venue and mode of data gathering. A formal request for participation will be sent alongside with the information sheet that outlines the background, purpose and objectives of the research. An informed consent form will also be sent with the formal request for participation.

Instruments Used

The proposed study will be executed using the survey strategy, which is frequently utilized when evaluating peoples opinions. In the survey strategy, the researcher administers questions to respondents using such tools as questionnaires and interviews. The reason for the use of the survey strategy stems from its well-known effectiveness in collecting information pertaining to diverse views and opinions. The survey strategy also facilitates the gathering of vast amounts of data from participants within a relatively short time. The specific survey instrument that will be used in the proposed study is the semi-structured interview, in which the researcher uses a set of preconceived, open questions in order to guide the discussion with respondents. Semi-structured interviews provide the interviewer with an opportunity to follow up on pertinent issues that may emerge during the discussion. The advantage of the semi-structured interview is its flexibility. Other survey instruments such as questionnaire are extremely structured and inflexible, which makes them unsuitable for an exploratory study. Therefore, the empirical nature of the study problem poses the need to utilize open and unstructured instruments that can facilitate the discovery of new information. The interviews will be conducted via the telephone because of convenience. There is no doubt that managers and owners of SMEs have busy schedules; therefore, telephone interview was selected for this reason. Other likely options that will be considered at the request of participants is video-link interviews with the help of Skype. The sessions will be recorded and later transcribed verbatim to facilitate analysis.

Proposed Analysis Techniques

Collected data will be analyzed using thematic content analysis, which entails the identification of dominant themes expressed by participants. Content analysis also entails exploring the relationships between the uncovered themes. The content analysis process will draw upon the interview guide. In this regard, the author will cross examine the responses of participants to the various issues in order to determine any similarities and differences between the responses of participants. Commonly expressed themes will be flagged through the process of coding, which will be facilitated by a codebook. In order to further explicate the themes discovered in the research, direct quotes from the responses of participants will also be presented. An inductive approach will be used when analyzing the data and the analysis will not be guided by a preconceived conceptual framework.

Reliability/Trustworthiness

Validity is a pertinent issue in any form of research, especially quantitative. Even in qualitative studies, it is important for the findings to be trustworthy and reliable. To this end, trustworthiness and reliability of the findings will be improved by first ensuring that the author builds a rapport with the respondents. Rapport plays an integral role in creating a comfortable environment between the interviewer and the interviewee, which in turn enables interviewees to articulate openly and honestly. Moreover, respondents will be given a chance to review their answers before the interview sessions are closed. In addition, privacy, anonymity, and confidentiality of participants will be guaranteed to help increase the likelihood of honest responses.

Limitations

The proposed study is not without limitations. The first constraint is attributed to the qualitative methodological approach, as the results of the study cannot be generalized to the study population. Another limitation is associated with the use of the survey strategy, which does not guarantee that participants will offer trustworthy responses. Semi-structured interviews are self-reported; therefore, falsified responses are likely.

Ethical Considerations

Ethical issues are important in any form of research. They require researchers to recognize the rights enjoyed by participants, such as the option to refuse to take part in the research; the right not to be subjected to any form of suffering; the right to not be offered inducements that seek to compel them to participate; the right to be contacted at sensible times; and the right to dictate the time of the research. Based on these rights, the proposed study will take into consideration ethical issues including voluntary participation, informed consent, confidentiality and anonymity, and a guarantee of no harm. A number of steps will be undertaken to ensure that these principles are considered. First, no researcher will be forced to participate in the study. Contributors will be provided with an informed consent containing pertinent details concerning the study, such as the purpose, benefits to participants, and the use of the findings. The information gathered during the interviews will not be disclosed to anyone under any circumstance and will be destroyed one year after the study has been conducted. In addition, the researcher will refrain from collecting any personal data that could be used for the identification of the participants.

 
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Conclusion

The proposed research has the main aim of exploring the extent to which SMEs in the US apply strategic management. Moreover, the study seeks to ascertain the suitability of the strategic management in SMEs based on the views and opinions of owners and managers of SMEs in the service sector in the US. In order to achieve this objective, surveys will be administered to 15 owners and managers of SMEs using semi-structured interviews. Data will be analyzed using thematic content analysis. It is expected that the findings of this research will make a significant contribution to the literature and will have managerial implications for SMEs.

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