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STRATEGIC MANAGEMENT FOR SMALL AND …

STRATEGIC MANAGEMENT FOR SMALL AND medium ENTERPRISES By Chiew Ming Chak, MBA Matriculation Number: 9766 A dissertation submitted in fulfillment of the requirements for the degree of Doctor of Philosophy in the University of St. Clements October 1998 ABSTRACT A research was set out to evaluate STRATEGIC planning as a MANAGEMENT tool for the SMALL and medium enterprises, with a view to help them achieve a more predictable and stable growth, over the long term. By and large, the usual framework of analysis, choice and implementation of strategy was followed. Emphasis had been directed on the threat aspects, which most SMEs had taken for granted.

STRATEGIC MANAGEMENT FOR SMALL AND MEDIUM ENTERPRISES By Chiew Ming Chak, MBA Matriculation Number: 9766 A dissertation submitted in fulfillment

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1 STRATEGIC MANAGEMENT FOR SMALL AND medium ENTERPRISES By Chiew Ming Chak, MBA Matriculation Number: 9766 A dissertation submitted in fulfillment of the requirements for the degree of Doctor of Philosophy in the University of St. Clements October 1998 ABSTRACT A research was set out to evaluate STRATEGIC planning as a MANAGEMENT tool for the SMALL and medium enterprises, with a view to help them achieve a more predictable and stable growth, over the long term. By and large, the usual framework of analysis, choice and implementation of strategy was followed. Emphasis had been directed on the threat aspects, which most SMEs had taken for granted.

2 SMEs are also urged to take a hard look at some of the STRATEGIC tools which had not gained much popularity or acceptance, such as the Government Assistance Schemes, KSFs-Competence Matrix, Baseline information, Impact Analysis etc. Discussions had been kept simple, while retaining the essence, with the SMEs in mind. Elaborate, abstract and overly academic perspectives had been sidelined, to ensure relevance. Empirical evidence in the forms of survey findings, case study and views of senior business professionals were considered to reconcile the documentary research, in arriving at the final conclusions. Care was also taken to maintain objectivity, which could be easily affected with the writer s own 25 years of business experience and the resultant paradigms formed.

3 The conclusion is that STRATEGIC MANAGEMENT is largely relevant to SMEs. And so long as due attention is paid to threats and crisis handling, the vulnerability of SMEs should be reduced. That leaves only the last problem to deal with time constraint among the SMEs, which is said to be limiting their application of STRATEGIC MANAGEMENT . To partly solve the problem, stage-wise implementation had been proposed, along some priority and relevance guidelines, suiting to the operating reality of the SMEs. However, considering the universal laws of cause and effect, SMEs must recognize the inevitability to apply as many techniques as possible, in order to get the maximum results.

4 To use time and workload as a convenient excuse can often be a good justification for not strategizing; overcoming the temptation to do so leads to a more rewarding and satisfying venture for the entrepreneurs. The choice is up to each SME. DECLARATION I certified that this thesis does not incorporate without acknowledgement any material previously submitted for a degree or diploma in any university; and that to the best of my knowledge and belief it does not contain any material previously published or written by another person where due reference is not made in the text. CHIEW MING CHAK October, 1998 ACKNOWLEDGEMENT My thanks due to many people, whose experiences and knowledge I have drawn on over many years, on the subject on STRATEGIC MANAGEMENT .

5 Much inspiration was given to me by Dr Lim Shian Ghee who encouraged me to take up the challenge. Going into academic research at an unfavorable time of economic downturn required a special type of courage. On hindsight, it was the right decision after all. Instead of brooding away and reading the gloomy news on newspapers cover to cover which I have no control, spending the time to build up my capability seems more meaningful. Incidentally, capability building is an important message of STRATEGIC MANAGEMENT . I would also like to record my appreciation to all the entrepreneurs and business professionals whom I had the privilege to seek views from; without which this dissertation would not be able to complete.

6 I should add thanks to my wife, Irene, for guiding me to tame the computer, and spent immense hours personally to help me prepare the exhibits which undoubtedly are of the highest standards. Her moral support and patience for my absent-mindedness throughout the research period is greatly appreciated; without which the journey would certainly be much longer and harder. Last but not least, I thank Team Specialty Chemicals for allowing me to use it as the case study, and also my colleagues who tolerated my sub-optimal performance at work in the last eight months. LIST OF EXHIBITS 2-1 Definitions of SMI in Malaysia 8 3-1 Definitions of Strategy 22 3-2 STRATEGIC MANAGEMENT and Operation MANAGEMENT 24 3-3 MOST STRATEGIC MANAGEMENT Model 27 4-1 A Sample of Documenting Customer Analysis Based on Strategy 34 4-2 Some Criteria for Market Segmentation 37 5-1 Competitor Profile 45 6-1 Types of Key Success Factors 53 7-1 The Five-forces Chart 59 7-2 A Sample of a Five-forces Analysis 65 8-1 A Superimposed PEST/Five-forces Chart 69 8-2 PEST Analysis of Environmental Influences 70 8-3 A Sample of PEST Analysis 72 10-1 Performance Indicators 86 10-2 Financial Ratios 87 11-1

7 A SWOT Analysis 94 12-1 Porter s Value Chain 100 12-2 Value Chain 103 12-3 Tear-down Analysis 107 12-4 Cost Allocation in Team s Variable Budget in % 108 13-1 Capability Identification by Functions 113 14-1 A Sample of Unweighted KSF-Competence Matrix 124 14-2 A Sample of Unweighted KSF-Competence Matrix 124 15-1 The BCG Chart 130 16-1 A GE Business Screen 135 16-2 Example of Weighted Rating Calculation 137 16-3 Sub-variables of Business Strength/Competitive Position 138 17-2 SWOT Diagram with Recommended Strategies 145 18-1 Impact Analysis 149 20-1 Types of Rites and their Role in Culture Change 162 20-2 Culture-Competitive Advantage Relationship 163 22-1 A Format for Recording Tactical Ideas from Analysis 173 22-2 A Format for Recording Tactical Ideas from Intuition 174 23-1 Some Examples of Long-range Objectives 181 24-1 Organizational Purpose 187 24-2 Some Examples of Mission Statements 189 25-1 Options to Split up Long-range Objectives 195 25-2 Splitting up Long-range Objectives as Task Plan 199 25-3 Developing Activities from Objectives 202 26-1 Generic Strategies 206 27-1 Directions for Business Development 212 28-1 Expansion Methods Matrix 220 31-1 Alert System Matrix for Environmental Issues 245 31-2

8 Examples of Format of Writing Contingency Plan 246 32-1 Profitability Analysis 254 34-1 A Funds Flow Analysis 263 34-2 Breakeven Analysis 265 34-3 Resource Deployment Analysis 267 35-1 Stakeholder Reactions towards a Strategy 271 35-2 Activities Planning and Resource Preparation 279 37-1 A Flow Chart to Prepare a Master Budget 287 38-1 Sample of a Bar Chart 294 38-2 Sample of a Summary Sheet 295 38-3 A Sample of PERT Chart 296 TABLE OF CONTENTS Extract ii Declaration iv Acknowledgement v List of Exhibits vi PART I: INTRODUCTION Chapter 1 Aims and Thesis Organization 2 Chapter 2 SMALL and medium Enterprises 7 Chapter 3 STRATEGIC MANAGEMENT an Overview 17 PART II: EXTERNAL ANALYSIS Chapter 4 Customers Analysis 31 Chapter 5 Competitors Analysis 42 Chapter 6 Key Success Factors 51 Chapter 7 The Five-Forces Analysis 58 Chapter 8 Pest Analysis 68 Chapter 9 Government Assistance Programs 78 PART III: INTERNAL ANALYSIS Chapter 10 Baseline Information 84 Chapter 11 Strength and Weakness Review 92 Chapter 12 Price and Cost Competitiveness 98 Chapter 13 Capability, Core Competence and Competitive Advantage 111 PART IV.

9 INTERACTIVE ANALYSIS Chapter 14 KSF-Competence Matrix 121 Chapter 15 BCG Matrix 127 Chapter 16 GE Business Screen 134 Chapter 17 SWOT Matrix 142 Chapter 18 Impact Analysis 148 PART V: STAKEHOLDER WISHES AND EXPECTATIONS Chapter 19 MANAGEMENT Values and Vision 154 Chapter 20 Organization Culture 160 Chapter 21 Business Ethics 166 PART VI: ESTABLISHING STRATEGIC DIRECTIONS Chapter 22 Ideas for Strategies 172 Chapter 23 Long Range Objectives 180 Chapter 24 Mission 187 PART VII: STRATEGY GENERATION Chapter 25 Annual Objectives and Activities 198 Chapter 26 Generic Competitive Strategies 205 Chapter 27 Directions for Development 211 Chapter 28 Expansion Methods 219 Chapter 29 Strategies towards Buyers and Sellers 227 Chapter 30 Rival-Driven Strategies 236 Chapter 31 Threat-Base Strategies 243 PART VIII: STRATEGIC CHOICE Chapter 32 Returns Analysis 251 Chapter 33 Risks Analysis 257 Chapter 34 Feasibility Analysis 262 Chapter 35 Stakeholder Reaction Analysis 270 PART IX.

10 STRATEGY IMPLEMENTATION Chapter 36 Planning and Resource Allocation 277 Chapter 37 Budgeting and Controls 284 Chapter 38 Scheduling STRATEGIC Tasks 292 Chapter 39 Leading Implementation 299 Chapter 40 Conclusions 305 Appendix PART I Introduction CHAPTER 1 AIMS AND THESIS ORGANIZATION Background Importance of SMIs SMALL and medium Industries (SMIs) play a very important role in a nation s economy. This is true for both developed and developing countries. SMIs also constitute a high proportion of a nation s business activities and generate more employment opportunities than the large corporations in recent years.


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