Small Business Management: Theory and Practice

597 Pages·2020·10.646 MB·English

by  Tim Mazzarol, Sophie Reboud

Springer Texts in Business and Economics
Tim Mazzarol
Sophie Reboud
Small Business
Management
Theory and Practice
Fourth Edition
Springer Texts in Business and Economics
More information about this series at http://www.springer.com/series/10099
Tim Mazzarol • Sophie Reboud
Small Business
Management
Theory and Practice
Fourth Edition
Tim Mazzarol Sophie Reboud
University of Western Australia Burgundy School of Business
Crawley, WA, Australia Dijon, France
ISSN 2192-4333 ISSN 2192-4341 (electronic)
Springer Texts in Business and Economics
ISBN 978-981-13-9508-6 ISBN 978-981-13-9509-3 (eBook)
https://doi.org/10.1007/978-981-13-9509-3
3rd edition: © Tilde Publishing and Distribution 2017
© Springer Nature Singapore Pte Ltd. 2020
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Contents
1 The Role of the Small Business Within the Economy .......................... 1
1.1 Introduction .................................................................................... 1
1.2 Small Firms in an International Context ........................................ 2
1.3 Defining the Small Firm................................................................. 3
1.4 Small Business Contribution to Employment ................................ 7
1.4.1 The Job Generation Process and Gazelles ....................... 7
1.4.2 The Importance of Non-employing ‘Nano-Enterprises’ .. 8
1.5 The Working Lives of Small Business Owners ............................. 9
1.6 Problems Facing Small Businesses ................................................ 11
1.7 Myths About Small Firms .............................................................. 12
1.8 The Growth Cycle of Small Firms ................................................. 15
1.9 The Dynamics of a Healthy SME Sector ....................................... 17
1.10 Causes of Small Business Failure .................................................. 18
1.11 Small Business vs. Large Business ................................................ 20
1.12 Enhancing the Capacity of Small Business ................................... 20
1.13 Developing Small Business Policies .............................................. 21
Bibliography ............................................................................................. 25
2 Entrepreneurs vs. Owner-Managers ..................................................... 31
2.1 Introduction .................................................................................... 31
2.2 The Enterprise Environment: Entrepreneurial Ecosystems ........... 31
2.2.1 Government Policy........................................................... 32
2.2.2 Regulatory Framework and Infrastructure ....................... 33
2.2.3 Funding and Finance ........................................................ 34
2.2.4 Mentors, Advisors and Support Systems ......................... 35
2.2.5 Universities as Catalysts .................................................. 36
2.2.6 Education and Training .................................................... 37
2.2.7 Human Capital and Workforce ......................................... 37
2.2.8 Local and Global Markets ................................................ 37
2.3 The Heterogeneity of SMEs, an Issue for Both Researchers
and Policy Makers .......................................................................... 38
2.3.1 Micro and Small Firms .................................................... 38
2.3.2 Medium-Sized Firms ....................................................... 39
2.3.3 Nano Firms and ETI ......................................................... 40
v
vi Contents
2.4 Enterprise, Entrepreneurship and Small Business
Management ................................................................................... 41
2.5 Characteristics of the Entrepreneur ................................................ 42
2.5.1 The Woodcutter ................................................................ 43
2.5.2 The Butterfly .................................................................... 43
2.5.3 The Libertine .................................................................... 43
2.5.4 The Bricoleur ................................................................... 44
2.5.5 The Convert ...................................................................... 44
2.5.6 The Missionary ................................................................ 44
2.6 Myths of the Entrepreneur ............................................................. 45
2.7 The Process of Entrepreneurship ................................................... 47
2.8 Entrepreneurs vs. Owner-Managers ............................................... 49
2.9 Effectuation Theory ....................................................................... 50
2.10 Models of New Venture Creation ................................................... 52
2.11 The Stages of Small Business Start-Up ......................................... 56
2.12 Success and Failure in Small Business Start-Ups .......................... 58
2.13 Barriers and Triggers to Business Start-Up ................................... 59
2.14 Case Studies of Small Business Starters and Non-starters ............ 61
2.14.1 Starter Case Study 1 – Ian, Graphic Designer ................. 61
2.14.2 Starter Case Study 2 – Luke, Education Software
Consultant ........................................................................ 62
2.14.3 Starter Case Study 3 – Geoff, Sports Equipment
Manufacturer .................................................................... 63
2.14.4 Non-starter Case Study 1 – Helen, Marketing Officer ..... 63
2.14.5 Non-starter Case Study 2 – Michael, Specialist Health
Services for the Elderly .................................................... 64
Bibliography ............................................................................................. 65
3 Surviving the Early Years ....................................................................... 69
3.1 Introduction .................................................................................... 69
3.2 Assessing Opportunities ................................................................. 69
3.3 A Systematic Scanning and Building Process ............................... 71
3.3.1 Assessing the Potential Rent ............................................ 73
3.3.2 Assessing the Residual Rent ............................................ 74
3.3.3 Assessing the Appropriable Rent ..................................... 76
3.4 Causes of Small Business Success or Failure ................................ 76
3.5 Opportunity Screening for New Ventures ...................................... 78
3.6 Start-Up Check List ....................................................................... 81
3.6.1 Motivation and Determination ......................................... 81
3.6.2 Evaluating the Idea and the Market ................................. 82
3.6.3 Assessing the Need for Resources ................................... 86
3.6.4 Assessing Personal Abilities ............................................ 88
3.6.5 Planning and Teamwork ................................................... 88
3.6.6 Assisting the Survival of the New Small Firm ................. 89
Bibliography ............................................................................................. 92
Contents vii
4 Planning and Strategy in the Small Firm ............................................. 95
4.1 Introduction .................................................................................... 95
4.2 Strategic Vision Not Strategic Planning ......................................... 95
4.3 Strategic Myopia and Strategic Options ........................................ 97
4.3.1 Three Strategic Options ................................................... 97
4.4 The Benefits of Planning ................................................................ 99
4.5 The Major Types of Business Plan ................................................ 101
4.5.1 Applications for Finance .................................................. 102
4.5.2 Plans for Customers and Suppliers .................................. 103
4.5.3 Plans for Internal Use ....................................................... 103
4.6 Key Issues in Business Planning .................................................... 104
4.7 Writing a Business Plan ................................................................. 105
4.7.1 The Opportunity ............................................................... 107
4.7.2 The Environmental Context ............................................. 107
4.7.3 The Risk-Reward ............................................................. 107
4.7.4 The Team .......................................................................... 108
4.8 Designing the Business Model ....................................................... 108
4.9 The ‘Business Model Canvas’ for Business Model Design ........... 109
4.9.1 Customer Segments and Market Segmentation ............... 111
4.9.2 The Customer Value Proposition (CVP) .......................... 112
4.9.3 Customer Relationships ................................................... 113
4.9.4 Channels – Your Go to Market Mechanism ..................... 114
4.9.5 Revenue Stream – Capturing Value ................................. 115
4.9.6 Key Resources .................................................................. 116
4.9.7 Key Activities ................................................................... 118
4.9.8 Strategic Partners ............................................................. 119
4.10 Strategy as a Continuous Process .................................................. 120
4.10.1 Vision and Mission – Where Are You Going and Why? .. 121
4.10.2 Critical Success Factors – What You Need to Succeed .... 124
4.10.3 Objectives – What You Must Do to Succeed ................... 125
4.11 The Strategy Development Framework ......................................... 126
4.11.1 TOWS Matrix Analysis .................................................... 127
4.11.2 Assessing Competitive Threats ........................................ 127
4.11.3 Assessing Market Opportunities ...................................... 127
4.11.4 Assessing Resource Weaknesses ...................................... 128
4.11.5 Assessing Resource Strengths .......................................... 128
4.11.6 Dynamic Capabilities ....................................................... 129
4.12 Environmental Scanning and Market Assessment ......................... 130
4.13 Knowing the Rules of the Game .................................................... 131
4.14 Analysis of Industry Structure ....................................................... 133
4.14.1 Phase 1 – Analysis of the Current Industry Structure ...... 133
4.14.2 Phase 2 – Analysis of Key Changes
Within the Industry Structure ........................................... 136
4.14.3 Phase 3 – Analysis of the Future Industry Structure ........ 137
4.14.4 Key Stakeholders ............................................................. 138
viii Contents
4.15 Conducting a SWOT Analysis ....................................................... 139
4.16 Finding Your Competitive Advantage ............................................ 141
4.17 Building on Distinctive Competencies .......................................... 142
4.18 Strategic Planning Responses ........................................................ 144
4.18.1 The Shopkeeper ............................................................... 145
4.18.2 The Salesman ................................................................... 145
4.18.3 The Administrator ............................................................ 145
4.18.4 The CEO .......................................................................... 146
4.18.5 The Four Planning Responses and Risk ........................... 146
4.18.6 Areas of Focus Within the Four Planning Responses ...... 147
Bibliography ............................................................................................. 149
5 Creating Customers ................................................................................ 153
5.1 Introduction .................................................................................... 153
5.2 Marketing the Small Business ....................................................... 153
5.3 Small Business Marketing Success Factors ................................... 155
5.4 Everyone Is Responsible for Marketing ......................................... 156
5.5 Creating Customers Via ‘Customerising’ ...................................... 157
5.5.1 Creating Customer Delight .............................................. 157
5.5.2 Strategic Networking ....................................................... 159
5.5.3 Developing a Business Generating System ..................... 159
5.6 A Marketing Framework ................................................................ 161
5.7 Identifying Customers’ Needs and Wants ...................................... 162
5.7.1 Conducting Market Research ........................................... 163
5.7.2 Focus Groups and Interviews ........................................... 163
5.7.3 Focus Groups Versus Interviews ...................................... 164
5.7.4 Surveys ............................................................................. 164
5.7.5 Sampling Issues for Surveys ............................................ 165
5.7.6 Data Collection Methods ................................................. 166
5.7.7 Boosting Response Rates ................................................. 167
5.7.8 Data Analysis ................................................................... 168
5.8 Assessing Your Market Performance ............................................. 168
5.8.1 Classifying Customers for Performance .......................... 168
5.8.2 Key Trends and KPIs ....................................................... 169
5.9 Developing a Sales Strategy ........................................................... 170
5.9.1 Developing a Sales Platform ............................................ 171
5.9.2 The Sales Track ................................................................ 173
5.9.3 The Sales Cycle ................................................................ 173
5.9.4 The AIDAS Model ........................................................... 174
5.9.5 The Customer Contact Matrix ......................................... 175
5.9.6 Use 10/30/60 Formula ...................................................... 175
5.9.7 Monitoring Sales Activity ................................................ 176
5.9.8 Handling Objections ........................................................ 176
5.9.9 Closing the Sale ............................................................... 177
Contents ix
5.10 The Marketing Mix ........................................................................ 177
5.10.1 Targeting Customers – Market Segmentation
Strategies .......................................................................... 178
5.10.2 Requirements for Segmentation ....................................... 179
5.10.3 Market Positioning – Finding Your Niche ....................... 179
5.10.4 Branding – Avoiding the Middle Ground ........................ 180
5.10.5 Products and Services ...................................................... 181
5.10.6 Pricing .............................................................................. 182
5.10.7 Placement ......................................................................... 182
5.10.8 Promotion ......................................................................... 184
5.10.9 Process ............................................................................. 186
5.10.10 People ............................................................................... 186
5.10.11 Physical Evidence ............................................................ 186
5.11 The Building Blocks of Increased Business .................................. 187
5.11.1 Service Quality Framework ............................................. 187
5.11.2 Business Building Blocks ................................................ 188
References ................................................................................................. 189
6 The Process of Growth in the Small Firm ............................................ 193
6.1 Introduction .................................................................................... 193
6.2 The Growth of Small Firms ........................................................... 193
6.3 Learning to Manage Growth .......................................................... 195
6.4 Managing Growth Profitably ......................................................... 197
6.5 Managing Through Crisis Points ................................................... 198
6.6 Small Business Growth Is Not Always Linear ............................... 201
6.7 Owner-Manager’s Influence on Growth......................................... 202
6.8 Stages of Strategic Change in Owner-Manager Thinking ............. 206
6.9 Models of Small Business Growth Management ........................... 207
6.9.1 Growth via Product-Market Development ....................... 208
6.9.2 A Framework for Entrepreneurial Growth ....................... 210
6.10 Key Considerations for Growth ..................................................... 216
6.10.1 Reasons for Growth ......................................................... 217
6.10.2 Measuring Growth in the Small Firm .............................. 218
6.10.3 Means of Achieving Growth in the Small Business......... 218
6.11 Factors Associated with Small Firm Growth ................................. 221
6.11.1 Key Data Awareness ......................................................... 222
6.11.2 Not Price Driven .............................................................. 222
6.11.3 Business Generating System ............................................ 222
6.11.4 Use of Experts and Family ............................................... 223
6.11.5 Other Qualities ................................................................. 224
Bibliography ............................................................................................. 225
7 Small Firms and Human Resources ...................................................... 229
7.1 Introduction .................................................................................... 229
7.2 Human Resource Management and Small Firms ........................... 229
7.3 Comparisons of HRM in Small and Large Firms .......................... 231