A STUDY ON STRATEGY DEVELOPMENT BY SMES FOR INDUSTRY Mamta
Research Scholar, Jayoti Vidyapeeth Womens University, Jaipur Dr. Mini Amit Arrawatia
Professor Jayoti Vidyapeeth Women’s University, Jaipur Abstract:-
Purpose:-SMEs are considered as engine for economic growth all over the world. After theglobalization of market, SMEs have got many opportunities to work in integration with large-scaleorganizations. They cannot exploit these opportunities and sustain their competitiveness if they focusonly on certain aspects of their functioning and work in isolation. This paper tries to identify the majorareas of strategy development by SMEs for improving competitiveness of SMEs in globalised market.
Design/methodology/approach:-About 84 research papers, mainly from referred internationaljournals are reviewed to identify thrust areas of research. On the basis of review, gaps are identifiedand research agenda is proposed.
Originality/value:-This paper explores major areas for research on SMEs. It will be of great valuefor researchers and professionals involved on SMEs management.
Keywords:-Globalization, Small to medium-sized enterprises, Competitive strategyPaper type General review.
1. INTRODUCTION
Little Furthermore medium Undertakings would recognize spine of budgetary development altogether nations. They help previously, giving particular occupation opportunities, go about as supplier of
merchandise Furthermore
administrations with extensive associations. Smes need aid characterized by a amount about elements Also criteria, for example, location, size, age, structure, organization, number from claiming employees, bargains volume, worth from claiming assets, proprietorship through advancement engineering (Rahman, 2001). For manufacturing sector, Smes go about as master suppliers from claiming components, parts, Also sub-assemblies with bigger organizations in view those things might a chance to be processed toward a less expensive cost over the expansive organizations Might attain in- house.
Absence of item caliber supplied toward them Might adversely influence the aggressive capacity of the bigger associations. Lion's share of Smes have basic frameworks procedures, which permits flexibility, prompt feedback, short choice making chain, superior Comprehension Furthermore snappier light of client necessities over bigger associations. Despite these supporting aspects for SMEs, they are around enormous weight will support their intensity in household and in addition worldwide businesses. Owing should
worldwide competition, innovative developments Furthermore evolving necessities about consumers, aggressive paradigms need aid ceaselessly evolving.
These progressions need aid driving organizations on compete, all the while along separate extents for example, configuration Also improvement from claiming product, manufacturing, distribution, correspondence Furthermore promoting.
As stated by Chiarvesio et al.
(2004), a heading firm is described toward element key conduct technique As far as innovation, association oversaw economy for market Furthermore suppliers, internationalization courses capability on c Furthermore wrist bindings business networks, and so forth throughout this way, observing and stock arrangement of all instrumentation may be enha.According to Leachmanet al. (2005), superior manufacturingperformance leads to competitiveness. It is synonymous with productivity and isassumed to capture quality as well as efficiency feature (Porter, 1998). In most of thestudies, competitiveness of an organization is measured in terms of certain financialparameters.
Man et al. (2002) and Vargas and Rangel (2007) have observed thatbusiness performance is positively related with development of internal capabilitiessuch as soft technology (methods and processes that support the firm) and
hardtechnology (externally acquired equipment, in house development of machinery andinnovation in raw materials) and a strategy of continuous improvement, innovationand change.For continuous improvement and change, SMEs have to benchmark themselveswith the best in industry. This study will try to synthesize different issues related withthe competitiveness through review of literature to identify the directions for futureresearch on strategy development by SMEs.
Framework adopted for classifying thisliterature is shown in Figure 1.
According to this framework, market condition will bemajor guiding force for deciding strategies and priorities. Based
on these priorities,organizations have to adopt different processes and management practices. Effective implementation of these processes will lead to performance improvement.
Processesand performance have to be reviewed with respect to benchmark standardscontinuously in order to develop dynamic strategies.
2. MARKET CONDITION FOR SMES AFTER GLOBALIZATION
Improvements in competitors’ capabilities have shortened product life cycles, elevated product complexity and expanded accessibility to new technical breakthroughs.
Recently intense competition requires that firms excel simultaneously in several areaswithout trade-off, including innovativeness and responsiveness to their customers.Rise in global competition has compelled the firms to increase performance standardsin many dimensions such as quality, cost, productivity, product introduction time andsmooth flowing operations. Different pressures on SMEs are conformance to quality,i.e. low-defect rates, product features or attributes, competitive price and performance(Corbett and Campbell- Hunt, 2002). Capacity of a firm to maintain reliable andcontinuously improving business and manufacturing processes to meet abovechallenges appears to be a key condition for ensuring its competitiveness in the longrun (Lagace and Bourgault, 2003).
Other major challenges for SMEs are up gradation oftechnology (Kleindl, 2000), human resource development (Hudson et al., 2001), newproduct development (Sonia and Francisca, 2005) and finally managing its supplychain through collaboration and partnerships
with customers, suppliers, distributors,competitors, and other organizations such as consulting firms and research centers(Soh and Roberts, 2005; Bennett and O’Kane, 2006).In such a challenging environment, the capacity of a firm to maintain reliable and continuously improving business and manufacturing processes appears to be a keycondition for ensuring its sustainability in the long run (Denis and Bourgault, 2003).
Vos (2005) has observed that managers of SMEs have poor skills in reflecting upontheir companies strategically. SMEs often are oriented towards serving local niches ordeveloping relatively narrow specializations (Urbonavicius, 2005). They may haveconstraints due to the scarcity of resources, flat organizational structure, lack oftechnical expertise, paucity of innovation, occurrence of knowledge loss, etc. The flatstructure of SMEs can often leave employees frustrated because they are often unableto realize their short and mid-term career goals. That is why SMEs may find it difficultto employ high-caliber
staff and even harder to retain them (Ghobadian and Gallear,1996).
Major constraints on SMEs in meeting the challenges of competitiveness are:-
Inadequate technologies as well as other resources (Gunasekaranet al., 2001;Hashim and Wafa, 2002).
Excessive cost of product development projects (Chorda et al., 2002).
Lack of effective selling techniques and market research (Hashim and Wafa,2002).
Unable to meet the demand for multiple technological competencies (Muscatelloet al., 2003; Narula, 2004).
Information gap between marketing and production functions as well as lack offunds for implementing expensive software such as ERP system (Xionget al.,2006).
3. STRATEGY DEVELOPMENT
An firm’s aggressive technique tags the possibility items markets, long haul objectives, approaches for accomplishing the destinations. Associations must ceaselessly Audit their manufacturing methodologies on identify the viewpoints for business priority, result structure, manufacturing configuration, Furthermore venture (Errin, 2004;
Silveira, 2005). Change projects ought further bolstering match operational objectives Also targets (Muda Furthermore Hendry, 2003; Sum, 2004;
Raymond and St-Pierre, 2005).
Fundamental errand of corporate method may be not will portray the current state- of-art, Be that as should distinguish Furthermore investigate center competencies that must be included.
Generally those present competencies cam wood turned into outdated Also start should capacity similarly as center rigidities. Building center competencies gets vital to long haul aggressive preference on account of points of interest emanating starting with those product-price-performance-tradeoffs are Practically transient (Kak Also Sushil, 2002). SMEs, which join operations on their benefits of the business strategies, beat those rivalry. O’Regan et al. (2006a, b) bring watched that high-growth organizations put a more excellent stress around outer drivers for example, such that key orientation, their working nature's domain and the utilization of e- commerce compared for organizations Hosting static alternately declining deals.
As SMEs are faced with unfamiliar products and processes on a fairly regularbasis, they must develop programs for improving their skills and competencies(Fuller-Love, 2006). They can get competitive advantage by developing internal andexternal capabilities (Lai-Yu, 2001). According to Corbett and Campbell-Hunt (2002),companies should focus their energy and resources on innovative product and itsniche. Singh et al. (2006) have observed that SMEs should be flexible in developingtheir strategies.
Chou and Hsu (2005) have suggested that by developing industryportals, SMEs can aggregate flexibility and agility, despite their lack of resources.
For the SME to grow from local to world class status, entrepreneurial actions needto be undertaken. This includes recognizing and exploiting market opportunitiesthrough the use of advanced technology, such as advanced manufacturing systems(AMS), creating new distribution channels, products,
services and customer
segments(Sambamurthyet al., 2003).
World class SMEs develop themselves throughdiversification and extended networks (Caglianoet al., 2001). They can outperformlocal and transition SMEs with regards to the development of networks and markets(Raymond and Croteau, 2006).
4. COMPETITIVE PRIORITIES
Focused necessities speak to An comprehensive situated for tasks, which if be performed the manufacturing capacity so as should help the business system (Kim Furthermore Arnold, 1996). Intensity of a agency may be mostaccioli reliant on its capacity on perform great Previously, extents for example, cost, quality, delivery, reliability Also speed, advancement Also adaptability will adjust itself to varieties sought after (Carpinetti et al. , 2000). Same time arrangement of the manufacturing capacity with vital necessities may be center on competitiveness, those constant change of the manufacturing capacity assumes a significant complimentary part in the mission of intensity in the long run.
Four generally acknowledged focused necessities are cost, delivery, nature Also adaptability. Aggressive necessities might be utilized Likewise
measures for intensity (external) ability (internal).According to Fleury and Fleury (2003),organizations should optimize the quality/price ratio for operational excellence. Lau(2002) have observed that quality and lower cost are the top ranking competitivefactors among US electronics and computer industries.
Dangayach and Deshmukh(2005) have observed that SMEs give highest priority to quality and the least priorityto flexibility. Lagace and Bourgault (2003) have advocated for linking ofmanufacturing improvement programs and practices with the competitive prioritiesof SMEs. Therefore, competitive priorities will have to be decided very carefullybecause it will set the direction for adoption of different processes or managementpractices by the organization.
5. PROCESSES / MANAGEMENT PRACTICES
Organizations need competence to organize and manage work processes in new andefficient ways to compete in the market. These practices may be related with topmanagement commitment, development of alliances, organization culture, cleanproduction, innovation and knowledge management, research and development, supplier development, quality management, technology management, informationtechnology (IT) applications, measurement of performance and competitiveness.
Contributions of researchers for development of different processes are discussed infollowing sections.
5.1 Leadership/top management support
Those Main oversaw economy of the association may be straightforwardly answerable for figuring out a suitable association culture, dream personal satisfaction strategy. So as with upgrade net benefit and income and in addition to decrease expense from claiming quality, directors must pass on their necessities Furthermore desires should their workers. In SMEs, significant issue is that holder of the shares of the organization generally doesn't agent satisfactory force and obligation will highest point administrators of the organization.
O’Regan et al. (2005) bring watched that heading adrift organizations have a tendency to bring higher levels from
claiming strengthening with more amazing contribution highest point oversaw economy over key issues for example, staff headway Also disciplinary matters.
Those triumph of little organizations may be by attributed of the manageress skills, preparing and education, and the particular foundation of the company’s leader(s).Managers must develop a system thatmotivates workers to think and act flexibly and productively to meet company goal.Adoption of new manufacturing changes by SMEs may be hampered due to theirlimited financial and human resources. However, the flexibility often associated withSMEs may counterbalance this difficulty, provided that managers are capable ofdefining a clear manufacturing strategy (Chapman and Hyland, 2000).
Researchershave found that the drive to invest in new improvement programs is influenced mainlyby senior management, regardless of firm size (Schroder and Sohal, 1999).
Leadershipplays a significant role in framing organization strategy (Egbuet al., 2005),benchmarking of performance (Deroset al., 2006) and in shaping the quality focus ofcompanies (Sila and Ebrahimpour, 2005). Firms whose managers have been able tomake shift in their business paradigms and are open to create change and toincorporate new business practices have been able to match multinational competitors(Vargas and Rangel, 2007).
5.2 Organization culture
Those challenge in the recent past administrators may be on grow an authoritative society that helps improvement. Over high-performing firms, association society may be All the more connected with improvement (O’Regan et al. , 2006a, b). Issues from claiming little organizations to Creating a caliber society are imperviousness to change, absence of experience over personal satisfaction management, absence of assets. Dealing with authoritative society viably obliges clarity in the personalities from claiming chiefs over the kind about society particular standards values that will help those associations arrive at its key targets. Backing for bringing risks, change and tolerance to mistakes fortifies Innovativeness.
It need been found that the individuals representatives with high-job fulfillment exhibited the most elevated inventiveness At dedication to organization might have been helter skelter At help for Innovativeness might have been accessible from the association Also coworkers (Zhou Also George, 2001).
Society and social fit need aid All the more significant for Smes over different associations on an SME may be probable should a chance to be quite concealed clinched alongside An culture, as opposed huge organizations, the place a few societies might make display.It is easier to attain culturalchange in SMEs than in larger organizations.
However, it is probably more difficult forSMEs management to recognize the need for change (Ghobadian and Gallear, 1996).McAdam and McClelland (2002) have observed a strong correlation between theculture of continuous improvement and innovation in SMEs. Quality culture is a keyenabler in the development of innovation management. Flat structure of SMEs andfewer departmental interfaces normally result in a more flexible work environment.
6. MEASUREMENTS OF
PERFORMANCE AND
COMPETITIVENESS
To manageable Growth On profoundly focused worldwide market, execution estimation need turn into an crucial part from method improvemen Toward Smes.
Powerful execution estimation framework assumes a paramount part in supporting manageress improvement in the associations (Garengo et al. , 2005).
Execution estimation may be characterized concerning illustration those methodology for quantifying the effectiveness adequacy for manufacturing framework. Execution for an endeavor is often measured concerning illustration a proportion of yield to enter. Those outputs constitute the items of the endeavor and the inputs would those assets utilized by the endeavor (Choudhary, 2001). It will be profoundly key that every last one of factors, both unmistakable and intangible, ought further bolster to be incorporated done examining associations execution.
Traditionally, authoritative execution need been measured by
utilizing main fiscal indicators for example, profit, business sector share, sales, Furthermore Growth rate.Financialindicators measure only past performance. Garget al. (2003) suggest that as most smallfirms are privately held, it is unlikely that their CEOs will be willing to provide detailedaccounting data on the firms performance. Therefore, they suggest the use of“subjective and self-reporting measures of performance.” Performance of anorganization relative to its industry standards is termed as its competitiveness.Vastag and Montabon (2001) have measured competitive advantage by using fivepoint Likert scales, which compared the firm’s unit cost of manufacturing, deliveryspeed, etc. with its competitors. This comparison with best in industry is also referredas benchmarking.
The core of the current interpretation of benchmarking is (Denkenaet al., 2006):
Measurement of the own and the benchmarking partners’
performance level.
Comparison of performance levels, processes, practices, etc.
Learning from the benchmarking partners to introduce improvements.
Improvement, which is the ultimate objective of any benchmarking study.
Benchmarking contributes to the CI in performance factors. Deroset al. (2006) havedeveloped a benchmarking implementation framework for automotive manufacturing SMEs but it has been validated with only six pilot case studies,not tested empirically. They have divided key performance measures in twocategories, i.e. hard measures and soft measures. Hard or tangible measures includework-in-progress levels, lead-time, delivery-time, rejection (percent), rework (percent),product quality, product reliability, process cycle time, employees skill level, etc. Thesoft measures may include management commitment towards quality improvement, improvement in customer’s satisfaction for both internal and external customers,existence and practice of team working, employee’s involvement, rewards andsuggestion schemes, etc.
7. BENCHMARKING OF PROCESSES AND PERFORMANCE
For having continuous improvements on different processes and performance, SMEshave to set some benchmark standards as their target. Benchmarking will havepositive impact on competitiveness (Cassellet al., 2001;
Carpinetti and Melo, 2002).Identification and transfer of best practices is considered a difficult task for SMEs dueto severe resource constraints and limited knowledge of benchmarking methodologies.They often have difficulty in identifying their reference group. The selection of mostappropriate reference group plays a key role in benchmarking since it greatlyinfluences the performance indicators that will be used by enterprises throughout theexercise (Sousa et al., 2006).
Benchmarking starts with a deep understanding of the internal processes.
Then,competitors, dissimilar organizations or different units of the same organization arecomparatively analyzed. Practices and performance change frequently. Therefore, organizations should adopt benchmarking as an on-going process. Benchmarking involves lot of processes and activities, which are complex. Basic steps ofbench marking are planning, information gathering, analysis of the gaps between theenterprise and its partner and adoption or implementation of changes (Ribeiro andCabral, 2006).
8. CONCLUDING REMARKS
It need been watched that everywhere those world, Smes are viewed as similarly as significant sourball for monetary development. Smes need not provided for due consideration for Creating their successful methodologies in the previous.
The reviewed written works uncovers that the greater part of the methodologies need been figured for transient objectives concerning illustration mossy cup oak from claiming them would restricted over their working. On the send out front, they are confronting a lot of people imperatives because of their constrained assets absence of improvement previously, ability improvement.
Major problems are related withknowledge loss, product design and development capability, training infrastructureand networking. SMEs are
also not following any comprehensive framework fordeveloping their strategies and quantifying their competitiveness.
Present paper hastried to identify different areas of strategy development by them.
On the basis of gapsidentified, further study need to be carried out to develop a holistic approach,i.e. considering all aspects of organization functioning for strategy development. Thisframework should also enable them in benchmarking of their processes andperformance for continuous improvement.
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