Successful Small

Business
Strategies
By Dr. W.A. Owusu-Ansah
Email: woansah@gmail.com
KNUST School of Business
MCS-651/14 Lecture VI Week 6
Learning objectives
Understand why the strategic management
process is different for entrepreneurs, small
business owners and large businesses
Account for small business strategy in terms
of the 4 Ms: management; marketing; money
and motives
Assess and apply different models of small
business growth
Appreciate the importance of learning as a key
factor in successful small business strategies
Introduction
aims at providing a basic understanding of the
role of strategy in the small business and
entrepreneurship context.
In particular, it is noted that strategic
management in a smaller business does not
follow the same path or necessarily have the
same priorities as in larger firms.
While achieving competitive advantage with
a view to raising shareholder value is the
primary objective in larger firms, most small
businesses are more concerned with issues of
survival and dealing with the uncertain
environment.
What is a Strategy?
Students definition and perspective

Can Small Businesses (SMEs) have strategies?

- Centrality of owner-manager, the formality of

the structure, resource constraints,
vulnerability of external context and change,
limited product range and market focus.
 Defining strategy

A strategy is defined as an action (or actions) a company takes to achieve

one or more of its goals
the determination of the basic long-term goals and objective of an
enterprise, and the adoption of courses of action and the allocation of
resources necessary for carrying out these goals (Alfred Chandler)
Is the direction and scope of an organisation over the long term, which
achieves advantage in a changing environment through its configuration of
resources and competencies with the aim of fulfilling stakeholder
expectations
Strategy is characterized as being either:
A plan
A pattern
A ploy
A perspective (especially entrepreneurial)
A position (see Mintzberg et al. 1998)
...That brings enterprises objectives, policies and activities into a
cohesive whole
NB: Implication: rational thinking/decision making and planning
Entrepreneurship and Strategic Mgt Process

Entrepreneurship is about doing, enacting and

realising rather than simply planning and controlling
Clearly a tension between alert to opportunities
and holding a vision both of what to be achieved
and how this will be accomplished
Types of strategy
Deliberate strategy
Strategy may be formulated as a deliberate plan of
stated, or unstated, intentions.

Some entrepreneurs produce a business plan before

start up, 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. Examples of strategies that emerge as
patterns, before conversion to deliberate strategies,
include:
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
Money strategies are sometimes difficult to
deliberately plan, except in the short to medium term
 Exercise 1

List of small businesses operating locally

Discuss the launch of a new product or service

within that business
Examples might include:
1. An independent manufacturer of phones (rLG etc)
2. A hairdresser / Fashion Designer
3. A bottled water company
4. A window manufacturer
5. A financial institution (including banks)
6. A management consultancy.
 Realised strategy
In practice most carefully planned strategy is not
fully implemented
Implemented strategies are a mixture of
deliberate and emergent
Small businesses strategy exists on a continuum
between very planned and deliberate to frequently
unplanned, unstructured approaches
Where they fit is dependent on personality of the
founder and the objectives of the business
Strategy and control and value paradoxes:
Successful entrepreneurship requires a mgt touch
reconciling both intended and emergent strategies
Strategic mgt of control and value paradoxes
Key issues affecting new venture
strategy
Liability of newness (Stinchcombe, 1965) or establishing credibility in
the business no track record
to pursue opportunities without regard to resource they control that
individual deem entrepreneurial - clearly chicken & egg scenario
Chronic short of resources lead to asset parsimony
Parsimonious path to profit
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 beg what can be salvaged (McGrath, 2000)

How can we reconcile this with KAMAs advice to participants of My Business 2010
programme? (22nd October 2010 Joyfm programme)
The POINT:
to find ways of avoiding costly investments and commitments until
there are revenue streams to justify them.
The philosophy is that assets and fixed costs are earned by the
evidence of income
Asset parsimony a la MOI
Do not buy new what you can buy used
Do not buy used what you can lease
Do not lease what you can borrow
Do not borrow when you can barter
Do not barter what you can beg (moral obligation is
incurred)
Do not beg what you can scavenge
Do not scavenge what you can get for free
Do not take for free what someone will pay you for
Do not take payment for something that people will
bid for (create an auction)
 What makes a good strategy (2)
An opportunity has the qualities of being
attractive, durable, and timely and is anchored in a
product or service, which creates or adds value for its
buyer or end user (Timmons and Spinelli, 2003)
Reconciliation of deliberate and emergent themes
But also manage tension known and what is believed
to be true
Normal vs. Different thinking process
Effectuation theory how decision takes place in
ambiguous and uncertainty contexts (means, effects
constrained (enabled) by environment.
The logic: Decision based on affordable loss (or
acceptable risk) rather than expected return; Strategic
alliances rather than competitive analyses;
exploitation of contingencies vs. pre-existing
knowledge; control unpredictable future vs. predict
Business failure
Insufficient turnover
Poor management and supervision
Lack of proper accounting
Competition
Not enough capital
Bad debts
Excessive remuneration to the owners
Source: The Office of the Official Receiver in the UK
What are the causes in Ghana???
External influences including macro-economic factors e.g.
interest rates, levels of consumer demand as well as micro-
environmental factors intensity of competition
Internal factors personal attributes, skills and
competencies of entrepreneur are crucial in crisis
management
 The 4 Ms of small business strategy
Consensus over critical areas for survival
Marketing (targeting market and with what product?) is
it owner or market determined?
Money (inability to raise fund and/or mismanagement)
Lack of proper financial controls and information
Management (of resources including personnel
(internally) and people outside organisation)
The competence of owner-manager is an ultimate
determinant of survival or failure choice of business
and unwillingness or inability to draw others in to help
Motives
NB: None is mutually exclusive
Key influences in small firm
strategies
Phased influences in growth
strategies
Critical factors in small
business strategies
 Conclusion
Though strategy is often associated with larger, fully developed
businesses, it is of central importance to small business
Entrepreneur requires a new venture strategy even before business
moves from opportunity identification to real-life enterprise
This strategy is not set in stone, must be open to change and
adaptation
Entrepreneurs adopt effectual thinking to deal with uncertainty
Effectuation involves focusing on the means (i.e. resources, ideas,
people, contingencies) rather than the ends (new markets, firms,
services etc.)
Different parts of business life cycle bring different challenges
(nascent entrepreneur overcoming liability of newness vs. acquiring
dynamic capabilities)
While there can be no prescriptive SB strategy that will be
successful in every context, it is possible to identify basic influences
within the controllable environment, as management, marketing
and money.
Beyond survival, a fourth M- motives of the owner manager is a
key.