Description
Detailed description about strategic management of small firms a proposed framework for entrepreneurial ventures.
Proceedings for the 17th Annual SEAANZ Conference 2004 26-29 September
Entrepreneurship as the way of the Future Brisbane Queensland
1
Strategic Management of Small Firms:
A Proposed Framework for Entrepreneurial Ventures
Tim Mazzarol
University of Western Australia
Graduate School of Management
[email protected]
ABSTRACT
Strategic management has been the subject of a substantial literature since the 1950s but has
principally focused on the large corporation. By contrast the literature relating to strategic
management within the small firms sector has remained limited. Much of the existing literature
has dealt with business planning rather than strategic management, or the process of strategy
within the smaller firm. This paper outlines a proposed framework for understanding the strategic
management of small entrepreneurial firms and draws upon the literature to illustrate aspects of
the proposed model. Future directions for research using the framework are discussed.
Proceedings for the 17th Annual SEAANZ Conference 2004 26-29 September
Entrepreneurship as the way of the Future Brisbane Queensland
2
THE IMPORTANCE OF STRATEGIC THINKING
Strategic management is largely associated with the large corporation and most of the theories
associated with the subject have been developed for large firms. Small firms
1
are generally
owned and led by owner-managers who make strategic decisions based more on pragmatic
intuition than academic principles (Ennis, 1998). However, while the lack of formal planning
within small firms is recognised, the importance of strategic awareness and personal commitment
from the entrepreneur is viewed as having the potential to serve as a counterweight (Gibb &
Scott, 1985). The possession of a strategic plan has been advocated as important to the success
of small firms, particularly to outline the strategic direction of the firm, coordinate action and assist
in achieving goals (Sandberg, Robinson & Pearce, 2001; 2001).
The majority of small firms are led by owner-managers who are strategically myopic. While this
may seem a harsh comment, it reflects their lack of long-term vision as to where their company is
headed, and their stronger orientation toward operational rather than strategic issues. Such
strategic myopia may be attributed to the managerial environment in which many small business
owners find themselves; too often they are busy dealing with the daily challenges associated with
running their firm to find sufficient time to consider their future strategic directions. However, the
ability to think and act strategically is probably the most important attribute an owner-manager
can have, and one that is critical to sustained business development. For example, a study of
906 CEOs of Fortune 500 fast growth firms in the United States identified that 86 percent had
long-term plans for the ownership of their businesses, 79 percent had formal written business
plans and 85 percent made decisions in consultation with their senior management (Sexton &
Seale, 1997).
In comparison to the Fortune 500 companies, the majority of small firms lack formal business
plans and a coherent approach to strategy formulation (Unni, 1984). A survey of 500 small
businesses in the United States during the mid-1990s found that fewer than 42 per cent
possessed a formal business plan (Managing Office Technology, 1994). It has been argued that
small business owner-managers do not plan because they lack the knowledge, confidence or
skills to do so (Posner, 1985). Research into the impact formal business planning has on small
firm performance remains equivocal due in part to the general absence of such planning within
the majority of companies. For many owner-managers the absence of formal business planning
is attributed to such things as: i) a lack of time to devote to such activities; ii) lack of knowledge
1
A small firm refers to those with less than 200 employees and includes micro firms (
Detailed description about strategic management of small firms a proposed framework for entrepreneurial ventures.
Proceedings for the 17th Annual SEAANZ Conference 2004 26-29 September
Entrepreneurship as the way of the Future Brisbane Queensland
1
Strategic Management of Small Firms:
A Proposed Framework for Entrepreneurial Ventures
Tim Mazzarol
University of Western Australia
Graduate School of Management
[email protected]
ABSTRACT
Strategic management has been the subject of a substantial literature since the 1950s but has
principally focused on the large corporation. By contrast the literature relating to strategic
management within the small firms sector has remained limited. Much of the existing literature
has dealt with business planning rather than strategic management, or the process of strategy
within the smaller firm. This paper outlines a proposed framework for understanding the strategic
management of small entrepreneurial firms and draws upon the literature to illustrate aspects of
the proposed model. Future directions for research using the framework are discussed.
Proceedings for the 17th Annual SEAANZ Conference 2004 26-29 September
Entrepreneurship as the way of the Future Brisbane Queensland
2
THE IMPORTANCE OF STRATEGIC THINKING
Strategic management is largely associated with the large corporation and most of the theories
associated with the subject have been developed for large firms. Small firms
1
are generally
owned and led by owner-managers who make strategic decisions based more on pragmatic
intuition than academic principles (Ennis, 1998). However, while the lack of formal planning
within small firms is recognised, the importance of strategic awareness and personal commitment
from the entrepreneur is viewed as having the potential to serve as a counterweight (Gibb &
Scott, 1985). The possession of a strategic plan has been advocated as important to the success
of small firms, particularly to outline the strategic direction of the firm, coordinate action and assist
in achieving goals (Sandberg, Robinson & Pearce, 2001; 2001).
The majority of small firms are led by owner-managers who are strategically myopic. While this
may seem a harsh comment, it reflects their lack of long-term vision as to where their company is
headed, and their stronger orientation toward operational rather than strategic issues. Such
strategic myopia may be attributed to the managerial environment in which many small business
owners find themselves; too often they are busy dealing with the daily challenges associated with
running their firm to find sufficient time to consider their future strategic directions. However, the
ability to think and act strategically is probably the most important attribute an owner-manager
can have, and one that is critical to sustained business development. For example, a study of
906 CEOs of Fortune 500 fast growth firms in the United States identified that 86 percent had
long-term plans for the ownership of their businesses, 79 percent had formal written business
plans and 85 percent made decisions in consultation with their senior management (Sexton &
Seale, 1997).
In comparison to the Fortune 500 companies, the majority of small firms lack formal business
plans and a coherent approach to strategy formulation (Unni, 1984). A survey of 500 small
businesses in the United States during the mid-1990s found that fewer than 42 per cent
possessed a formal business plan (Managing Office Technology, 1994). It has been argued that
small business owner-managers do not plan because they lack the knowledge, confidence or
skills to do so (Posner, 1985). Research into the impact formal business planning has on small
firm performance remains equivocal due in part to the general absence of such planning within
the majority of companies. For many owner-managers the absence of formal business planning
is attributed to such things as: i) a lack of time to devote to such activities; ii) lack of knowledge
1
A small firm refers to those with less than 200 employees and includes micro firms (