Small business management and Entrepreneurship David Stokes Nicholas Wilson Small Business Management and Entrepreneurship Fifth Edition

Lecture outline Successful small business strategies What is a strategy? New venture strategy Survival strategy Growth strategy A composite model

Strategy Strategy can be described as either being a plan, pattern, perspective that brings together an organization’s major objectives, policies, and activities into a cohesive whole. Objectives represent what is to be achieved Policies are rules or guidelines with define limits Activities are detailed actions necessary to achieve objectives

Deliberate strategy Strategy may be formulated as a deliberate plan of stated, or unstated, intensions. Some entrepreneurs produce a business plan before startup, which sets out their intended course of action

Emergent strategy Some strategies are not conceived in advance but emerge as a consistent pattern during the course of events. Marketing approaches which are often on a reactive basis until a pattern emerges Management strategies, especially those involving people, often emerge as unplanned reactions to factors previously unknown.

Realized strategy Strategies which are usually a mixture of deliberate and emergent strategies.

New venture strategy Entrepreneurs and small business founders face several problems when starting a new venture most important being the shortage of resources. This forces the founder to exploit a particular strategy which has been termed asset parsimony. The so called “parsimonious path to profit” can be categorized in the following ways: Never buy new what can be bought second hand Never buy what can be rented Never rent what can be borrowed Never borrow what can be begged Never borrow what can be salvaged

Opportunity recognition Competitive advantage or profitability

Survival strategy Critical factors in closure of small businesses Insufficient turnover Poor management and supervision Lack of proper accounting Competition Not enough capital Bad debts Excessive remuneration to the owners

We can also categorize the causes in terms of: External influences Internal factors

Management, marketing and money Factors which are controllable by the owner-manager Management – concerned with the effective and efficient use of resources Marketing – represents relationship of the enterprise with the customers Money – enables the whole system to work

Strategies beyond survival The strategies will depend on the objectives of the enterprise. Motives can point to one strategy which is opposed by money or management Management considerations may indicate a strategy which is opposed by the motives of the owner Marketing strategies may run counter to motives Money influences may be diminished by personal motives.