Functional Strategies for Small Businesses During Crisis Situations: A Case Study Approach, Lecture notes of Classical Literature

Download Functional Strategies for Small Businesses During Crisis Situations: A Case Study Approach and more Lecture notes Classical Literature in PDF only on Docsity! Academy of Entrepreneurship Journal Volume 27, Issue 3, 2021 1 1528-2686-27-3-527 FUNCTIONAL STRATEGIES FOR SMALL BUSINESSES DURING CRISIS SITUATIONS Samson Nambei Asoba, Walter Sisulu University Nteboheng Patricia Mefi, Walter Sisulu University ABSTRACT Crisis situations are often unforeseeable and they have the capacity to cause the collapse of small businesses or disrupt their general operations. As a result it is essential to consider the functional strategies that can be pursued by small business to ensure their viability and continuity. This study employed the case study approach to explore the functional strategies that can be available to ensure the survival, sustainability and continuity of small businesses. The study considered the crisis situation created by the Covid-19 pandemic and relied on it to select a case study of a small business that endured the pandemic and continued in operation despite many other small businesses having closed. A telephone interview conducted with the small business entrepreneur as well as observations of the nature of operations conducted by the small business entrepreneur to remain operational were the main data collection methods adopted. The results of the study indicated that crisis-fit functional strategies that could be adopted by small business entrepreneurs include repurposing operations, collaborating with relevant stakeholders, remodeling traditional operations as well as adopting customer centric approaches. The study recommended that small business entrepreneurs should always have a generalized crisis response plan to enhance their capacity to handle disruptive situations Keywords: Crisis, Functional Strategies, Small Businesses, Entrepreneur, Change Management. INTRODUCTION Opportunities for business may come enshrined within a crisis. This is evident if one considers the Fourth Industrial Revolution (4IR) and the Covid-19 pandemic. While the unprecedented phenomena can be regarded as a crisis, they can also be seen as opportunities for business, both small and large (Matt & Rauch, 2020). Small businesses have always been known for their entrepreneurial spirit, innovativeness, responsiveness and nearness to the market (Stimpson & Farguharson, 2011; Matt & Rauch, 2020). The 4IR brought technological dimensions for strengthening these characteristics. It also appears that the COvid-19 has been a work up call on the operations of SMMEs. Despite the blow that Covid-19 presented as well as the collapse of several SMMEs, after the pandemic small businesses are likely to emerge stronger and resilient (Lose et al., 2020). New functional strategies for the operations of small businesses are likely to emerge following the lessons that were learnt from the Covid-19 pandemic. Functional strategies are ‘within business strategies that provide a game plan for managing a particular activity in ways that support the overall business strategy (Thompson, Strictland & Gamble, 2008). Functional strategy is normally implemented under the responsibility of heads of functions. Academy of Entrepreneurship Journal Volume 27, Issue 3, 2021 2 1528-2686-27-3-527 CRISIS SITUATIONS AND FUNCTIONAL STRATEGIES A crisis is an unpredictable event that often have negative consequences for enterprises and organizations (Taneja et al., 2014; Du Plessis & Keyter (2020). It is a point of inflexion that can lead to remarkable disagreement, threat, confusion, disruption, interruption or emergency (Du Plessis & Keyter, 2020). During emergencies and crisis situations small businesses and entrepreneurs have to adopt defence mechanisms (Paraskevas & Altinay, 2013; Deloitte & Touche, 2016). Following the same argument, Du Plessis and Keyter (2020) argued that crises often hit small businesses and entrepreneurs significantly and without new functional strategy shifts they cannot survive. Henry et al. (2020) acknowledge the significance of functional strategies to survive the complications arising from the crisis. In the case of the Covid-19 pandemic, restriction policies which were introduced to curb its spread caused significant business failure (Mhlaba, 2020). While there are many functional strategies for small businesses which are relevant in crisis situations, Varma (2018) argues that crisis situations require responsible, servant and ethical functional strategies. To Fernandez and Shaw (2020) small businesses in crisis situations benefit from functional strategies that are agile and innovative. In contrast, Pillay and Barnes (2020) take the view that that there is no one best functional strategy for a crisis and entrepreneurs are expected to manoeuvre their organisations through and out of the crisis in the best possible way. Crisis management literature recognises that when faced with a crisis, leaders essentially need to develop a crisis plan, implement the crisis plan, evaluate the success of the plan and prepare for the next crisis in circular fashion (Du Plessis & Keyter, 2020). The Covid-19 pandemic has significantly resuscitated interest in the study of crisis and disaster management. Jha (2021) referred to Henri Mitzberg’s four Ps of strategy as essentials to crisis situations. In the study, it is suggested that crisis situations require planning, setting up ploys, creating a pattern for crisis management, positioning during crisis situations as well as creating a crisis handling perspective. On the other hand, studies such as those of Gigauri (2020) and Pourron (2020) took a human resource based approach to the handling of crisis situations as they stress that people remains the basis of organizational resuscitation. As such they suggest the essence of strategies that are based on strong leadership and effective communication during crisis situations. On the other hand, Seetharama (2020) and Lose et al. (2020) advocated for the re-hauling the value proposition models of an organization and create an operation strategy based on fitting within the crisis. As such re-modelling, re-purposing and re-strategising have been identified in the literature as essentials for the handling of crisis situations. These studies on strategies for business continuity during crisis situations suggest that there are micro, meso and macro strategies for business continuity and survival in crisis situations. Studies such as those of Gerdeman (2021) observed that the crisis can change the operational environment and demand for new styles of doing business. In the case of the Covid-19 pandemic, Gerdeman (2021) observed that the traditional workplace was destroyed and there was need to adopt new ways. The concluding remark that is indicated by these assertions is that crisis situations and management involve the adoption of new ways which organizations should be ready to adopt. STUDY PROBLEM AND OBJECTIVES Crisis situations affect the survival and continuity of business operations. Small business can collapse and fail to resuscitate themselves after the crisis situation. As a result, there is need to assess the functional strategies for the survival and continuity of small business operations. Academy of Entrepreneurship Journal Volume 27, Issue 3, 2021 5 1528-2686-27-3-527 pre-crisis functional strategy. Table 2 provided has been expanded to reveal the sub themes and concepts related to those shown in Table 1. Table 2 THEMATIC CODING CHART 1. Entrepreneur's profile 2. History of business 3. Pre-crisis functional strategy 4. Crisis situation functional strategies 1.1Gender Male 2.1 Major periods of business success and failure 3.1 Vision Short term Lack of drive 4.1 Adaptive strategies Vision for safety See the post-covid era See past the crisis 1.2 Age 36 year old 2.3 Shifts in customer value proposition 3.2 Mission Just provide a service 4.2 Repurposing strategies Modifying product offering New purpose 1.3 Years of running small business 22 years in business 2.5 Source of finance for starting business 3.3 Customer relationship Simply relate to those 4.3 Remodelling strategies 1.4 Product/ service offered Offer transport services 2.6 Business cycles Four years in business 22 years in business Faced the 2009/2010 financial deprssssion Learn a lot from the disturbances Nearly collapsed in 2011 Had a business boom in 2018 3.4 Business process Re-purposing the business Started sanitiser re-selling using movable vehicles Adaptation to crisis, sought essential service certificate, Transport essential workers to and work Adopted recent technologies Used digital customer link platforms Providing free covid-awareness community campaign increased 1.5 Health Energetic Trust my health I am not easily sick 3.5 Product offering One line product offering 9 Other strategies for the crisis Flexible business patterns 1.6 Education Holds a degree in business amangement 3.6 leadership strategy transformal Production strategy Customer centric methods 3.7 Marketing strategy Traditional methods As shown in Table 2, there were several functional strategies which were revealed as important in combating the crisis situation. The coding and thematic analysis process showed that crisis situations demand a dynamic small business entrepreneur who is able to borrow from past experience, to interpret the future and stir the business with a vision that after the crisis, there will be a new business order. In addition, it is also shown that the small business functional strategy was mainly based on fitting in the crisis. A crisis fit functional strategies characterized by the creation of mechanisms and processes that are centred on fitting in the situation as opposed to opposing it seemed essential. The themes in Table 2 were followed by observation sessions conducted at the business premises of the small business entrepreneur. It was found that the small business entrepreneur had created an website on which clients were reffered to assistance. The premises were loaded with Covid-19 posters and other information artefacts, in Academy of Entrepreneurship Journal Volume 27, Issue 3, 2021 6 1528-2686-27-3-527 particular a giant stone crafted to depict washing of hands was place there. Masks were being given for free at the premises. It was also observed that that despite the small business entrepreneur having traditionally focused on transport services, they were now selling sanitisers from an outlet door of the main offices. There was clear evidence of adaptability and repurposing the business model of the entrepreneur. Following these findings, Figure 2 shows the main findings of this study. FIGURE 2 SSUMMARY OF STUDY FINDINGS The results of the study as depicted in Figure 2 demonstrate that small businesses have to follow crisis-fit strategies to foster survival and business continued. These results seem to be consistent with those of Lose et al. (2020) who found similar small business needs in crisis situations. The results also echo those of Farguharson (2011) and Matt and Rauch (2020) who found that small business adaptability, repurposing and agility were critical to foster continuity and sustainability during crisis situations. In addition, the work of Du Plessis & Keyter (2020) also demonstrated the essential role of implanting necessary re-modelling collaborative strategies to ensure survival during crisis situations. CONCLUSION This study has demonstrated that crisis situations require crisis-fit strategies that can enhance the survival and continuity of business operations. The crisis fit strategies include the adaptation of traditional business models, the remodeling of operations, re-defining functional operations as well as collaborating with relevant stakeholders to ensure appropriate responses. Data collected from the case study conducted showed that some functional strategies that are relevant for enhancing the survival of small businesses include re-puposing, adoption of new lines of business and the emphasis on the safe guarding the welfare and life of people during the crisis. Such as focus is likely to result in a customer centric approach to business operations during crisis situations. The results of this study seemed to support the literature on crisis management and also on strategic management with specific reference to crisis situations. Academy of Entrepreneurship Journal Volume 27, Issue 3, 2021 7 1528-2686-27-3-527 RECOMMENDATIONS Taking regard for the findings of this study, small businesses are recommended to draft generalized crisis response plans that are meant to serve as a framework to ensure fitting into the crisis. The crisis response planse should provide generalized guidelines for ensuring that small business handle crisis for continued viability. 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