Strategic Behavior in Small and Medium-Sized Firms: Preliminary Considerations

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Tracing the evolution of management theory over several decades, one can observe a striking change in the direction of a greater concern for holistic understanding. There has been a shift in emphasis from explaining particular aspects of management to understanding the total process or mechanism. Parallel to this development, a remarkable surge of interest in small business has occurred. Figure 1 illustrates some interesting connections between these two developments.

The pattern of relationships shown in figure 1 would seem to suggest that as interest in small business grows, interest in strategic questions declines. A more cautious interpretation is that these two tendencies exert pressure in opposite directions. The planning euphoria of the technocrats with their scientific management and their naive belief in the feasibility and "Shapeability" of the future gave impetus to the need for a forward-looking orientation. In scientific management the most important goal is maximization of the economic and technical performance of the enterprise in order to achieve economies of scale. This, in turn, created a strong disposition to behave strategically. These tendencies, however, have been offset to some extent by the spread of the human (or humanizing) perspective, which emphasizes that goals can be better achieved in communiites of small size, with the result that large companies have chosen to perform their operations in smaller, more close-knit units. The holistic approach with its focus on understanding realities and seeing the whole as opposed to only the parts has contributed a similar offsetting effect.

The Nature of Strategic Management

Strategic management obviously means managementin pursuit of and on the basis of a strategy. The strategy is the course by means of which a change is effected, specifically a change in behavior. This course tends to be both comprehensive and long-term, and involves more than planning, which is, after all, a separate and quite different matter from the implementation of a plan. This is mentioned because, in practice, strategic management is often taken to be an alternative to planning.

Looked at comprehensively, however, strategic management includes planning, as can be seen in figure 2, in which the elements of the St. Gallen Management Model have been combined with the elements of the Kirsch/ Trux model.

Strategic management is a complex process in which no element can be looked at separately because many elements are integrated and combined.

It is also possible to represent the strategic management process twodimensionally, as Hinterhuber does:

1. Analysis of the firm's starting position and prospects on the basis of a comparison of the opportunities and threats of environmental developments, the company's strengths and weaknesses, and the values and social concerns of management;

2. Formulation of strategies by which the desired product/ market combinations are to be realized and the long-term profit objectives achieved;

3. Design of functional policies that will serve the executives in the different spheres of operation and/or departments of the firm as guidelines for drawing up plans of action in harmony with the strategies;

4. Moulding of the organization required to carry out the strategies and functional policies, including motivating the persons involved and supervising the system.

The steps in the strategic management process, as perceived by Hinterhuber and by Kirsch/Trux, are compared graphically in figure 3.

All in all, strategic management involves an attempt to cope more effectively with the great and rising demands emanating from both outside and inside the firm by:

* Giving the development of the firm a long-range direction;

* Formulating and applying an overall concept of the firm;

* Generating, implementing, and controlling basic strategies and substrategies;

* Utilizing such special "Strategic" tools as strengths/weaknesses analysis and opportunity/risk analysis, among others. …