The Integrative Management Model for Restructuring Small and Medium-Sized Enterprises (SME)

By Tamosiunas, Andrius | E+M Ekonomie a Management, July 2017 | Go to article overview

The Integrative Management Model for Restructuring Small and Medium-Sized Enterprises (SME)


Tamosiunas, Andrius, E+M Ekonomie a Management


Introduction

Restructuring processes are continuous in market economies. Technological progress, diffusion of innovations results in market disruptions and convergences. The latter create new markets and value networks, impact the scope and scale of consumption and related businesses changing the nature of competition and market dynamics. Such evolution affects all sectors of economic systems including processes of integration and globalization, causing enterprises to restructure in order to maintain or strengthen their market position. The last decades of the global economy (including the latest economic crisis) showed restructuring as a radical and complicated way of reconstruction related to a great risk due to its essentiality and extent; thus, it is vital both for SMEs and economic systems. Yet by the definition (EC, 2005), data on SMEs is fragmented, limited and publicly unavailable. Consequently, scientific researches on SME restructuring are scarce and fragmentary. There has been no research to form the basis for preparation and effective implementation of economically justified SME restructuring programmes (plans) made until now. Having in mind the context, the paper synthesizes a vast spectrum of literature and empirical data in the attempt to systematically approach this issue with specific focus on rationalization of SME restructuring processes as a complex. For this purpose, the author proposes the integrative model for the management of SME restructuring programmes that allows rationalizing the management of restructuring process and the use of human, material and financial resources. This enables SMEs to identify, adjust and implement measures for reconciliation of controversial management methods in order to strengthen and balance interactions between strategic, tactical and operational tasks. In addition, this helps to focus on permanent improvement of management systems of SMEs seeking for divergent and sustained competitive performance.

1. SME Restructuring in EU

Restructuring is a prerequisite of economic systems whereas business entities must adapt to dynamic target environment and shape it in order to remain resilient and competitive. The majority of studies, however, cover issues of larger restructuring cases and focus less of SMEs, which represent more than 99% of European businesses and contribute to nearly 50% of global GDP (EC, 2005).

As per findings stemming from the analysis of SME restructuring cases in the EU during the last 10 years, SME restructuring is often reactive and unplanned. Yet once started, decisions are quick and flexible. As leaders, owners and CEOs (reporting directly to owners) are keen to improve in terms of time, effort and money. Grounds for such insight have also been found when interviewing 18 Lithuanian, 26 Latvian enterprises during the period of 2008-2013 seeking to examine why and how businesses have been influenced by restructuring. It was observed that SME restructuring often represents one of the following types: * internal restructuring (adjustment of internal processes or structures and their interaction) - heterogeneous and due for business expansion or bankruptcy, closure or outsourcing via sub-contracting (e.g., accounting, legal services, maintenance of IT, transportation) locally and internationally (e.g., consultancy); yet also caused by relocation and merger/acquisition. While this type is the most informal (limiting the amount of official statistical data), it prevailed during 2005-2010 in Europe (EC, 2013a; EIM, 2010; De Kok et al., 2011) taking the following forms:

* change strategies, incl. diversification, expansion, and cost cutting prevailing during the peak of recession in 2009;

* upgrade of internal processes and structures;

* production upgrade;

* communication networks upgrade;

* business transfers and successions and this trend is anticipated to continue up to 2021 (EC, 2006; Kowalewska, 2010). …

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