Review of Related Literature and Studies
This Chapter presents the conceptual framework of the study that determines the relationship of Entrepreneurial Management and Operation of Small Business in General Santos City.Conceptual Framework Despite the financial slump experienced everywhere, the wheels of our local economy continue to turn as our development spirals upwards, new business continue to open, and fresh investments pour in providing more employment and livelihood opportunities for the Generals, and in turn resulting to an increased capability to provide for the families necessities, especially education.
Because of the growing industry competition and market demands, our entrepreneurs become more skilled, more ingenious, more creative and more determined.Small business is often regarded as entrepreneurship driven.
The booming economic activity in General Santos City, its competitive development such as infrastructure, the presence of malls, traffic light, newly constructed commercial buildings and more than 12,000 plus registered businesses are some that create dynamic communities in the city.
Hence, the city was identified as the area of great advancement and these are all due to Small businesses investments. Small businesses are vital for economic growth and development in both industrialized and developing countries, by playing a key role in creating new jobs. Financing is necessary to help them set up and expand their operations, develop new products, and invest in new staff or production facilities. Many small business start out as an idea from one or two people, who invest their own money and probably turn to family and friends for financial help in return for a share in the business.
Figure 1. Conceptual Framework Chart The conceptual framework as shown in figure 1 is composed of three components. The first component is the Entrepreneurial Management and their Operation which can gives impact in various areas it can also often closely associated with the firm’s overall success and survival. This makes the second component includes the Operation by the business as to Planning, Organizing, Leading, and Controlling. These component can create an impact to the industry that affects their operation at some point.
Thus, makes the third component as composed of entrepreneurial orientation of small businesses as to innovativeness, pro – activeness, and Risk – Taking to seeks opportunity and take a bold action such as venturing into unknown market and committing resources to introduce new products or services ahead. Related Literature Small Business is very important segments in the society. (Kao & Liang, 2001) defined small business as one that is owned independently (that is, it is not a subsidiary of a larger firm) and managed by its entrepreneur/owner with little or no delegation of decision-making to employees.
Planning refers to process by knowing their strengths and weaknesses are and where they stand in the market place. The link to planning is provided by Fitzroy & Hubert, (2004) who also noted similarities between entrepreneurs and successful senior managers in their ability to plan across longer time perspective than junior managers or most non-managerial individuals. Thus, according to this line theory, planning should not be regarded as merely a bureaucratic exercise but more as evidence of a high managerial and organizational propensity and a necessary condition for sustained business growth.
Entrepreneur and successful managers are more adept than other business owners and managers at overcoming apparent informational and production limitations to approach the theoretical production possibility frontiers of their enterprises. However, few-if-any- enterprises actually operate to full theoretical capacity and few targets are completely achieved even by firms that are generally considered to be successful. It is often argued that most business in fact only operate within an even more restricted set- the possibility set- of possibilities that owners deem to be relevant to their business.
This suggest an even closer and more constant link between managerial perception and intentionality and the business performance of an enterprise. (Kenney, 2008) Organizing It is a requirement to utilize the fullest potential of resources such as people, capital, and asset to ensure the success of the plans. Organizing coordinates the resources that needed to implement the plan. In organizing, company structure is established, relationships are formed and resources are allotted appropriately to realize the objectives sought for.
A good and sound management organization may refer to in general refers to increase in size. In research, firm growth has been operationalized in many ways and different measures have been used. This may be one reason for the contradictory results reported by previous studies (Weinzimmer et al. , 1998:235), though other explanations have also been presented (Delmar et al. , 2003; Davidsson & Wiklund, 2000). Entrepreneurs must also be able to balance their managerial duties with leadership activities.
In other words, they have to be able to handle both the day to day operations of the business as well as decision making obligations that determine the organization’s long term direction, philosophy, and future. It is a precarious relationship, but entrepreneurs must be both managers and visionaries in order to build their organization. Indeed, it is contented that many otherwise talented entrepreneurs have failed because they were unable to strike an appropriate balance between details of management and the larger mission that guides the new venture.
Many entrepreneurs eventually reach a point where they realize that these twin obligations cannot be fully met alone. It is at this point that staffing decisions can become a critical component of long term business success. In general, entrepreneurs should search for ways to delegate some of their management tasks rather than their leadership tasks. After all, in most cases the new business has long been far more dependent on its founders.
Inspiring others to do their part effectively in carrying out the organization’s plans. Entrepreneurial leaders have some specific leadership attributes. Entrepreneurial leadership is leadership that is based on the attitude that the leader is self-employed. Leaders of this type: take initiative and act as if they are playing a critical role in the organization rather than a mostly important one and energize their people, demonstrate entrepreneurial creativity, search continuously for new opportunities and pursue them, take risk, venture into new areas and provide
strategic direction and inspiration to their people, take responsibility for the failures of their team, learn from these failures and use them as a step to ultimate success and strategic achievement.Entrepreneurial leadership involves instilling the confidence to think, behave and act with entrepreneurship in the interest of fully realizing the intended purpose of the organization to the beneficial growth of all stakeholders involved.
Controlling is a six-step process that involves several systematic approaches to ensure performances standards are met in the most efficient way.
While controlling is a complicated management function, its importance must not be under – rated. They must (1. ) Establish performance standards. Performance standards give employees an idea of what is expected of them and tells how you assess their performance. This key is to maintain management control. (2. ) Conduct a job analysis and create a job description for each position within the company. Give feedback regularly and give annual performance appraisals. This makes the employee aware of individual chance and weaknesses.
Entrepreneurship establish and maintain an environment within the business to encourage a efficiency among employees period the functions of management involve planning, organising, directing, and controlling of resources. This function is influence by objectives set by the entrepreneur. They are closely related to each other and interdependent. Organising ordinates the resources that needed to implement the plan. (Brown, et. al, 2005).
To innovate successfully, firms must break out of the patterns that have shaped their thinking. For example, Tim Warren, director of research and technical services at the oil giant Royal Dutch/Shell, was sure that Shell’s employees had vast reserves of innovative talent that had not been tapped; investing in new technology, R&D, and continuous improvement- for successful innovation, firms must seek advantages from the latest technologies. Innovativeness is concerned with supporting and encouraging new ideas, experimentation and creativity likely to result in new products, services or processes ( Fitzroy and Hubert, 2007 ).
The indicators used to assess innovativeness comprised the level of involvement in R&D, the extent of innovation and qualifications of the workforce. Firms were asked to indicate their level for involvement in R&D. For a small number of firms (13) R&D was their primary activity. In total, almost 60 % claimed to be highly involved in R&D, although a quarter undertook of R&D. The 2005 survey on the effects of entrepreneurial orientation, asked the nature of innovations as between product/service, process and logistics or delivery of service.
Some firms recorded innovative activity across a broad spectrum whereas others recorded innovations only in respect of product or service. The diversity or extent of innovative activity was considered an important indicator of innovativeness (Daft, 2005) Pro – activeness The concept of pro – activeness refers to a firm’s efforts to seize new opportunities. Firms can use to act proactively: (1) introducing new products or technological capabilities ahead of the competition- maintaining a high level of pro-activeness is central to the corporate culture of some major corporations.
(2) Continuously seeking out new product or service offerings- firms that provide new resources or sources of supply can benefit from a proactive posture. Pro-activeness is concerned with ‘first mover’ and other actions aimed at seeking to secure and protect market share and with a forward-looking perspective reflected in actions taken in anticipation of future demand (Lumpkin Dess, 2005 ). The indicators of pro-activeness used here comprised collaboration; incidence and extent, innovations, (in particular the incidence of ‘novel’ innovations); activities designed to protect intellectual property and market structure.
Information was sought about formal or in formal collaboration or alliances with other organizations during the 2 years prior to the 2005 study and the purpose of collaboration had relationship with atleast one of the following, ‘firms in the same line of business’ ‘customers’ and ‘suppliers’. The majority (more than two thirds) reporting collaborative partnerships gave more than one purpose. However, regardless of the type of organization collaborated with the purpose of collaboration was dominated by market-related issues.
Of 74 CEOs giving reasons for collaboration 62 mentioned either ‘to expand the range of products/services’ and/or ‘to provide access to new markets’. Half of the remaining CEO’s gave ‘meeting current customer/client needs’ as the purpose of collaboration. Given that market-related issues dominated reasons for collaboration, firms were assessed for pro-activeness in terms of the diversity of organizations with which they had collaborated.
In common with other studies of small businesses ( Kitson and Wilkinson, 2006) the majority of firms (60%) could be classified as operation in “niche markets”: confronting 5 or fewer serious competitors. Although striving to establish dominance in a niche market may demonstrate pro-activeness, account also needs to be taken of the extent to which that market is dominated by one or two customers, on which the firm is highly dependent. Few firms (13%) were dependent on a single customer for more than 50% of turnover.
It can be suggested that the ideal “niche market” sought is where customers dependence is relatively low and serious rivals few. Such situations were considered to have a “positive” niche market effect. The reverse situation relatively high customer dependence combined with higher numbers of serious rivals was considered to have a ‘negative’ effect and intermediate situation a ‘neutral’ effect. On the basis of the above indicators the firms were ‘scored’ in terms of their level of pro-activeness.
Risk taking refers to an entrepreneurs tendency to take a bold action such as venturing into unknown new market, committing a large portion of resources to ventures with uncertain outcomes, and/or borrowing heavily, firms can use the following two methods to reinforce their competitive position through risk taking: (1)Researching and assessing risk factors to minimize uncertainty although all new business endeavors are inherently risky, firms that do their homework can usually reduce their risk; (2) using techniques that have worked in other domains-risky methods that other firms have applied successfully may be used to advance corporate ventures. (ferreire,2008). Measuring the extent to which individuals differ in their willingness to take risk is contentious.
Early work in small business research tended to be focused on various psychological characteristics such as locus of control and tolerance of ambiguity. CEO’s subjective evaluation of their approaches towards risk is also fraught with difficulty since what one person regards as a ‘calculated’ approach another may regard as ‘aversion’. Others have suggested that the differentiating factor is the way risks are calculated (Norton and Moore, 2004). This study focused on behavior which might willingness to invest with uncertain returns: level of spending on R&D and investment in training as indicated by level of off-job training for full-time employees.
Just over half of the firms undertaking R&D spent an average of less than 10% of turnover on R&D in the 2 years prior to the 2005 study but a quarter recorded levels of more than 10% of turnover. Few firms (28) had sought venture capital and those that had were evenly divided in terms of success. Seeking venture funding was regarded as indicative of a willingness to take risks.
The impact of involvement in technology sectors was evident from the incidence and extent of training undertaken. Many studies of small firms suggest that they do not train. However like other recent studies ( Barnett and storey, 2004) the incidence of training in the firms in this study was high. Almost two thirds provided some off-job training for full-time employees and in a quarter over 20% of full-time employees were given such training. As with employment growth and qualification of the workforce, relative training performance was assessed in respect of employment size.
The study conducted by Poutziouos, Michaela and Soufani reports the findings of an empirical investigation on the economic factors affecting small businesses in General Santos City. The study involved interviews in SME’s postal survey with responses from further companies, and entrepreneurship of small businesses.
The findings show that although short-term entrepreneurship practices improve as companies grow there is scope for the owner- managers of small businesses to strengthen their trade credit management in order to reduce costs and enhance business performance. Moreover, they have to consider more financial options.
This report has documented the key findings of many organizations responding global forces by re-engineering business process and shifting to horizontal organizations structures with self- directed teams. Some are adopting structural innovations such as the network, to focus their core competencies while outside specialists handle other activities. In addition to these structural changes, today’s organizations face the need for dramatic strategic and structural change, and for rapid innovations in technology and products. (Daft 1998). The report looked t how economic factors affects small businesses in General Santos City, and how these business manage their organizations.
In the study of Berry & Sweeting (2002) stated that deficiencies in Economic Factors have been repeatedly cited as a root cause of business failure. (Najak and Greenfield 1994) two arguments are advanced for such deficiencies in SMEs; that new entrepreneurship is not relevant and that SME managers are unable to make up use of business. Here, it is argued that Business ideas are relevant to SME’s but that a process of innovations combining both knowledge to overcome a barrier of belief and an external shock are necessary in order for innovation to take place. These ideas were explored through a survey to SMEs from both service and manufacturing business in General Santos City. It was observed that the use of organizational techniques is negatively related to growth in turnover.
However, the use of organizational techniques that were related to the product market was found to be positively related to growth in turnover and that owner/mangers belief in the importance of organization in business decisions was strong related growth very negatively related to size. The second theme of the research was the significance of the role of external advisors. Prima facie it was suggested that external advisors may be key agents of change, but the study revealed that their perceived value was relatively low. The findings of this survey suggest that when entrepreneurship is perceived to be relevant then it use does support business growth but innovation in accounting in SME requires further research.
In a study of measuring organizational performance by Wood & Walmsley (2004); it reports on the analysis methods used during a recent multinational experiment that was aimed exploring concepts for a new planning process within a condition of nations. In February 2004 over 400 participants from other countries took part in the multinational experiment conducted in a distributed collaborative environment. These participants formed a virtual coalition headquarters in order to plan an appropriate response to a crisis situation.
These new planning process required “whole-of-government”’ approach encompassing government departments, coordination of coalition partners, government agencies, non-government organizations and other international application of appropriate organizational structures and process together with supporting information system and technologies.
The challenge of this study and researcher was to design and develop valid and robust measures of organizational performance. They found out that changes to the way the constructs were operational are required in order to take account of the practical complexities of measuring performance. In another study on organizational performance by Mcmillan, Diedrich and Entin (2005), immersive “virtual” simulations offer an opportunity to gain insight and experience in new, innovative, organizational structures.
Assessing the performance of these new organizations represents a considerable challenge due to the myriad of complex interrelated factors that may contribute to the outcomes observed in the simulation. Theories and models, often in the form of “constructive” simulations of organizational performance, can guide the development of empirical performance measures by linking detailed behaviors to overall outcomes for organizations.
Constructive simulations can be used to create meaningful test conditions for immersive performance measurement , to identify those aspects of performance that are most critical to measure, and to predict the effects of organizational structures on performance. Considerable challenge, however.
This chapter provides examples of the use of the theories and constructive simulations to structure empirical data collecting of organizational performance, and discusses the lessons learned from these efforts. The focus is on organizational structures for military command and control, including innovative structures associated with the new and rapidly evolving concept of “network-centric warfare” The study of Berry and Rodriguez (2001) reviewed the experience of small and medium enterprises in recent years in the Philippines. It notes that while Philippines economic growth picked up in the early 1990s/, the share of its small and medium enterprises (SMEs) in manufacturing employment and value added stayed roughly constant. However, the overall stability masks some dynamism across firm sizes and sectors.
Thus, very small firms (with less than 10 workers) had higher than average rates of growth of total factor productivity during 1988-94c while larger firm (of between 50and 200 workers) experienced a decline in productivity. Toward the end of decade, the Philippines were affected by the economic factors but less seriously than some other Asians countries.
Small firms do not seem to have been worse hit than larger firms. The Philippines has shown slow growth for decades, despite some recent recovery efforts. The evidence indicates that the SME sector was emerging from the deep economic crisis of the 1980s and experiencing the first positive effects of the economy wide reforms implemented in the late 1980’s and early 1990;s.
By the mid- 1990’s Philippine SMEs appeared to have recovered from long period of decline, but their performance, by itself, does not seem to have been vigorous enough to boost the Philippine economy after the 1997-98 crisis. Large firms and large foreign ownership have rationally characterized the Philippine manufacturing sector. During a period of deep market reforms in the 1990s; the country open up to more FDI. Trade and economic reforms help to improve the growth scenario without providing a period of high growth. During the current crisis the modern sector manufacturing dominated the recovery by exporting high-end items and helped to buffer other negative impacts on Philippine manufacturing while creating a new, but small, breed of SMEs: small or medium foreign-owned enterprises.
The study presented in a forum of International Development Studies on September 2005, attempted to analyze the ways of government’s bureaucratic system in the service delivery of SME sector affects the day-to- day operations of small enterprises, along with other related issues such as the central- local government relations, decentralization, partnership and networking approach, and the demand- supply driven public services. It looked at the experience of the Philippine government’s policies and programs aim at SME’s growth. Dubbed as the national SME Development Agenda.
The agenda incorporate a comprehensive and integrated approach to SME development, under the national government’s direction. Apparently, the agenda are centrally planned. Designed and implemented. At the lowest level of the government hierarchy, the local government units are entirely left only the monitor and coordinate the implementation of central government actions. Hence, the role and accountability of local stockholders are of well defined (especially the local government’s).
Citing Zamboanga City, the economic center of western Mindanao region, the local government is lacking ownership involvement, and commitment to this national initiative. Despite this national government-led support scheme. SMEs are continually facing some problems and pressures pertaining to their business operations. Analysis on the effect of national government’s a support scheme at the firm level is presented, with some implications toward the end. The study of Tamangan, Jocef and Habito (2004) discussed the role of SMEs in economic development has been well recognized. SMEs have been regarded as an important contributor to employment generation and wealth creation in developing economy.
Ironically, however, SMEs have been discriminated against considering a raft of issues, In almost all countries, there is either a separate policy statement for SME (or for micro or cottage industries) or a general industrial policy statement with some potions of relating to SMEs. Philippines SME development policies that have been set in place may have been in light of major Philippine industrial development policies.
Historically, the common thread that binds Philippine industrial policies has been the emphasis on policies regarding expansion of exports, increases in foreign investments, development of the private sector, and enhancement of domestic linkages. Moreover, there might have been industrial policies that may have been undermined SME development because inherent scale biases.
Inroads regarding SME development have been realized in the economy thus far, but Philippines SMEs can still derive some lessons from the Japanese experience, particularly Japanese practices regarding subcontracting and clustering. There is also a need to realize that it is now insufficient to address commonplace themes and roadblocks experienced by Philippine SMEs identified through historical experiences, Nowadays, it is inescapable to acknowledge the concerns regarding SMEs will have to be considered and addressed in light of globalization, which is most easily comprehended in terms of international trade. Bilateral trade cooperation is mutually beneficial.
One way for Japan to encourage Philippine SME development, as part of bilateral trade cooperation, is to identify and to open some Japanese markets to Philippine SME exports. Hence, sector (or even sub-sector) identification in general, and product identification in particular, is a necessary first step to this end. The study of Salazar (1984) which was conducted among the 230 SMEs located in Region III, IV, NCR and VII in which the SMEs are located. The result of the study presented the economic factors practices adopted by the SMEs on cash forecasting, cash maintenance, sourcing of funds, allocation of borrowed funds and control measures for
daily operations. A study of Stan, Landry and Evans (2004) on boundary spanners’ satisfaction with organizational support services: An internal communications perspective, offered insights into how internal communication by both managers and service providers impact a boundary spanners’ satisfaction with support services. The study used path analysis or structural equation modelling as a statistical tool. Results indicated that service provider and manager communications are largely complementary and that satisfaction with service outcomes, rather than service quality, appears to have an enduring impact upon a boundary spanners’ overall job satisfaction.
Small and medium enterprises have long been building blocks of the Philippine economy comprising more than a majority of the total businesses operating in the country. Despite the numbers given and their contributions, many problems beseech the sector. One is in the aspect of the Economic Factors. Areas such as accounting systems, financing, working capital management and capital budgeting are some of the basic concerns of an SMEs which if not given the necessary attention could have an impact on the performance of the enterprise as a whole. The organizational performances of these enterprises are also dependent on these Economic Factors practices such as their competitive advantage, profitability, productivity, sustainability and innovation.