Executive Summary

Small and medium-sized businesses have recently started paying more attention to systematic strategic management, although there is still room for improvement in terms of efficient management practices. Their competitiveness and development can be furthered for example by working more closely with strategic information, focusing on certain types of innovation, taking advantage of potential opportunities on the international market, or employing a more systematic approach to managing strategy implementation. These are the main findings of the extensive international study on strategic management in small, medium-sized and family businesses, carried out under the direction of the Mendel University in Brno in cooperation with Sweden’s Jönköping International Business School, Slovakia’s School of Management, the Association of Small and Medium-sized Enterprises and Crafts of the Czech Republic and the POPAI CE Association.

Data collection amongst owners and managers in over 1000 carefully selected companies in the Czech Republic, Slovakia, Sweden and Finland, was carried out by the STEM MARK agency.  The research also identified some significant development risks present in family companies. 

Project Coordinator, Alena Hanzelkova from the Mendel University in Brno stated: “the research has shown that a considerable number of Czech and international SMEs already engages in management approaches typical for systematic strategic management, despite the fact that they are naturally inclined towards a more intuitive and ad hoc management style.”

Specifically, small and medium-sized businesses tend to:

  • Ensure that when setting a strategy, all key groups/members – especially owners and management – accept and support the strategy,
  • Set goals and assess their performance,
  • Focus on selecting and solidifying clear competitive advantages,
  • Focus on the issues of corporate culture and organizational structure as the cornerstone of a successfully implemented strategy,
  • Deal with the company’s ownership structure, including its quality and functionality,
  • Focus on innovation- specifically developing existing products or the innovation of business processes,
  • Work with certain types of “hard” strategic data – specifically, information about customers, their demands and level of satisfaction, developments in the demand for their products/services, at least partially with information regarding changes in legislature, developments in technology,
  • Employ a more systematic approach to assessing the availability of resources – especially financial resources and expertise/skills, which they consider to be crucial for the company’s development. 

The research also confirmed that there are, however, other practical tools and approaches for strategic management that a significant number of SMEs is not taking advantage of:

  • Strategies are set for shorter periods, 2 years max.,
  • When setting their strategy, companies still tend to neglect opportunities to expand into the international market,
  • In terms of innovation, companies are less inclined to expand their product lines and develop new products or utilize new technologies,
  • They do not sufficiently monitor their competitors’ activities, trends or changes in society that can potentially impact their business,
  • Companies are also less concerned with considering and assessing certain resources – especially contacts and social networks, time constraints for strategy implementation or suppliers,
  • Companies often claim that their employees are not always familiar with the strategy and thus are unaware of what is expected of them in order for the strategy to be successful,
  • Companies have a lower tendency to use detailed annual plans for the day-to-day management of the strategy’s implementation.


All of the above-mentioned aspects can bring about significant opportunities or pose as threats for SMEs in terms of efficient management and future development. Libor Musil, founder and owner of the successful Czech company, Liko-s, and recipient of the “Family Company of the Year Award 2014 AMSP ČR”, adds: “Without corporate culture regulations, setting and efficiently assessing the achievements of individual employees, the company finds itself in a state of chaos and is only capable of implementing very basic strategies. What results is a struggle to get by, day by day, and live from paycheck to paycheck. Nobody likes this. Shared corporate culture and a clear organizational structure, where each employee’s responsibilities are clearly defined, are essential aspects of attaining higher strategic objectives. And that’s basically what it comes down to – setting high goals and trying to attain them.” 

It is worth noting that Czech, Slovak, Swedish and Finnish SMEs alike, all engage in strategic management to a relatively similar extent, differing then in their approaches to certain sub-aspects of strategic management. Czech SMEs, compared to their international counterparts, fail to plan several years ahead when formulating their strategies, which can pose as a potentially significant risk. Karel Havlíček, Chairman of the Association of Small and Medium-sized Enterprises and Crafts of the Czech Republic, and entrepreneur comments on this issue: “Every company, including SMEs, must be aware of the direction it’s going in and where it’ll be in the next few years – both in terms of the company’s objectives and key products. It is not entirely necessary for every small company to draw up a strategic plan, however the company’s owner or management is responsible for knowing the company’s long-term objectives. Consequently, the owner/management must be capable of succinctly and efficiently communicating the strategy to key employees, bankers or even suppliers. The company will stay afloat only as long as it manages to do the above.” “It is also crucial for the company’s long-term plans to be realistic – the company can benefit from formulating its plans on the basis of hard data about the internal and external environment, which is usually easily accessible. Most companies, however, still don’t work with this type of data,” notesDaniel Jesenský, president of POPAI CE, which provides services for similar, primarily production-based SMEs.

In addition, Czech SMEs are also less concerned with the development opportunities that new technologies offer, and when implementing new projects, they do not, compared to their competitors, sufficiently assess their contacts and networks – a practice which can significantly impact the success of a new project. Czech (and similarly Slovak) companies also claim to experience significantly greater difficulties, unlike Scandinavian companies, in the areas of legislature and its stability, government bureaucracy and corruption.  Project Director and Associate Professor Pavel Žufan adds:  “It is also interesting to note that pressure from competition is more often perceived by Scandinavian companies than Czech companies, and even more-so, Slovak companies, only 29% of which stated competing businesses to be a major issue.”

The research study assessed family companies according to certain characteristics that are specific for this type of business. A significant risk for both Czech and international family businesses was primarily the fact that only a small percentage of companies engaged in systematic intergenerational transfers. This risk was most prominent amongst Czech and Slovak family companies. “The company’s founder stepping down from actively managing the company and handing over the business to the next generation is a complicated and risky process. In order for this process to be successful, both generations must be able to handle all of the difficult and ongoing changes, not only in terms of the company and its operations, but also issues of a personal nature,” comments Matti Koiranen on the topic of intergenerational transfers. Koiranen is a Professor Emeritus at the Finnish University of Jyväskylä and one of the leading experts on managing family companies. “The ultimate foundation is open communication, respect and trust between both generations,” he adds.

A significant number of family companies also indicated that they had experienced problems when attempting to balance family life with work. Family companies can be at risk if they have not clearly defined the criteria for involving family members in business activities or remunerating them.

SMEs can find strategic management support on our new, free platform, www.strategy4smes.cz. Available in Czech, Slovak, Swedish and English, companies can test themselves to find out to what extent the company is being strategically managed, compare their results with aggregated data from other SMEs in the Czech Republic, Slovakia, Sweden and Finland, and most importantly, take advantage of our online lessons on strategic management.

More information about the project: Alena Hanzelková, Mendel University in Brno, tel.: 775 958 733, alena_kerkovska@gmx.net

PARTNERS


REFERENCES

Project title: Education in Strategic Management for SMEs managers/owners
Project number: CZ/12/LLP-LdV/TOI/134004
Acronym: ESM for SMEs


This project has been funded with support from the European Commission.

This web page reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.


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International Research on Strategic Management in Small, Medium-Sized and Family Companies