Small Business Strategy in Australia

Article excerpt

INTRODUCTION

The economic and social significance of the small business sector in Australia has been widely acknowledged. Holmes (1988, p. 51) reported that in Australia, "small businesses (less than 20 employees) account for at least 85 per cent of enterprises, employ 45 per cent of the private sector workforce and contribute 33 per cent of the economy's gross domestic product." Given the importance of small business to the economy and the evidence that small businesses that engage in strategic planning have improved performance (Robinson, p. 1982), the current study aims to investigate further the relationship between strategy and business success. For the purpose of this study, entrepreneurship, self-employment, and the establishment of a small business are used interchangeably according to the definition of an entrepreneur as "one who owns and starts a new and small business (Moore, 1990, p. 275).

BACKGROUND

Research in business has recognised the critical role of strategy for organizational survival and success. Canon (cited in Higgins and Vincze, 1989, p. 2), in discussing organizational strategy, stated that "of all the contrasts between the successful and unsuccessful business, or between the leader and follower, the single most important differentiating factor is strategy." Many researchers have investigated organizational business strategy (Greenwood and Hinings, 1988; Hambrick, 1983; Jauch and Kraft, 1986; Jauch and Glueck, 1988; Miles and Snow, 1978; Miller, Kets de Vries, and Toulouse, 1982; Porter, 1985; Shirley, 1989; Snow and Hambrick, 1980; Zahra and Pearce, 1990). In contrast, information concerning the strategic behavior of small businesses is limited (Low and MacMillan, 1988; Olson and Bokor, 1995). The current study addresses this deficiency in the research by examining the relationship between business strategy and small business success based on the assumption that "in small companies, strategies are usually the sole reflections of the owner/operator" (Olson and Currie, 1992, p. 49).

Strategy has been defined in many ways. In the broadest sense, all activities undertaken in a business contribute to the firm's strategy. The term generally refers to "the overall purposes, goals, and scope of a firm" (Shirley, Peters, and El-Ansary, 1981, p. 37). Therefore, strategy by its very nature is both eclectic and cross-disciplinary.

Some researchers have viewed strategy as an extension of decision-making (Clifford, 1980; Fredrickson, 1984; Hofer and Schendel, 1978; Quinn, 1980). For example, Mintzberg (1978, p. 936), stated that "strategy is a pattern in a stream of decisions," while Clifford (1980, p. 268) defined strategic decisions as "... wide ranging, multi-dimensional and complex and are key decisions in the organization as they affect its overall pattern of development." Further e (Shirley et al., 1981). More precisely, strategic management refers to "the fit between the internal capabilities of a given organization and the attractive opportunities and significant threats in its external environment" (Harrison, 1986, p. ix).

Although business strategy is frequently discussed in the literature, according to Herbert and Deresky (1987, p. 136), "very little empirical research has been conducted; this is due in part to the methodological difficulties in identifying and measuring business-level strategy." One approach for studying strategic content has been the development of typologies to classify patterns of strategic behavior (Anderson and Paine, 1975; Galbraith and Schendel, 1983; Miles and Snow, 1978; Porter, 1985). For instance, Miles and Snow (1978) developed a typology based on post-hoc identification of patterns in the product-market strategies of 52 firms in the electronics, food processing industries and 19 general hospitals. In subsequent studies, 16 firms in the college textbook publishing industry were classified by two independent groups of judges based on observations and interview data. …