7 a framework for examining strategy and strategy-types in small firms

A FRAMEWORK FOR EXAMINING STRATEGY AND STRATEGY-TYPES IN SMALL FIRMS

BERNICE KOTEY AND MICHAEL HARKER Faculty of Business

Sunshine Coast University College Australia

ABSTRACT

A framework for examining strategy in small firms is proposed which portrays strategy as a pattern within the interrelated functional activities that comprise the strategy. Strategy is depicted as a competitive tool and two strategy-types are proposed – proactive and reactive strategies. It is suggested that all small firms can be placed on a proactive-reactive continuum based on their strategic orientation. It is also proposed that proactive strategies will be associated with higher performance levels than reactive strategies.

INTRODUCTION

The overall contribution of small firms to economic development is well documented in the literature (Dollinger 1995, Hisrich 1988, Kuratko and Hodgetts 1998) . This contribution is dependent on the individual performance of each small firm, particularly with respect to economic objectives such as job creation, technological advancement and generation of tax revenue for the government (Kotey and Meredith 1997). The performance of each firm is in turn determined by the strategy it employs in business operation. Research on strategies in small and growing firms (that is, research on the means by which small firms contribute to economic development) is woefully inadequate (Robinson and Pearce 1984, 129). Existing research is often characterized by 'big business syndrome’ (Loucks 1981) as strategy concepts developed for large firms are applied to small firms. There is also the tendency for research in this area to be restricted to activities in certain functional areas only, so that it is not possible to identify patterns across functional areas and to define wholly a firm’s strategy. Further, strategy-types proliferate when strategies derived empirically cannot be interpreted in terms of pre-defined strategies.

In this study the existing literature on strategy in general and specifically, on strategy in small firms is reviewed with the aim to develop a framework for future research into strategies in small firms. Two strategy-types are proposed, proactive strategy (associated with high performance) and reactive strategy (with relatively lower performance levels). It is suggested that all firms adopt these strategies in varying degrees. Small firms may therefore be classified by the position of their strategies on a proactive-reactive continuum. A holistic view of strategy is advocated, involving the examination of activities across all functional areas and delineation of interrelationships or patterns among these activities.

Page 1 of 16A FRAMEWORK FOR EXAMINING STRATEGY AND STRATEGY-TYPES IN SM...

5/4/04http://www.sbaer.uca.edu/research/1998/ICSB/y002.htm

STRATEGY

The term 'strategy' derives from the art of war, where it was used to describe the process of planning and executing national or power bloc policies by using available resources to over-come the enemy (Karloff 1989). Its use as terminology in business management has become particularly common since the early seventies when, following the oil crisis, rapid growth markets in which firms flourished in the 1950s and 1960s were replaced by a so-called "hostile-environment" (Hall 1980). This environment was characterized by slow and erratic growth in markets, intensified inflationary pressures, increased regulatory demands, intensified competition and changing investment decisions (Neck 1984). With these environmental developments, it became necessary for firms to adopt 'strategies' which would enable them maintain competitive positions in the marketplace, or else be eliminated.

Strategies, in the field of business management, are plans that integrate an organization’s major goals, policies and action sequence into a cohesive whole (Mintzberg et al 1995). They spell out the objectives or purposes of the enterprise, provide major policies to guide or limit actions and detail major action sequences necessary to accomplish defined objectives within the limits of organizational resources.Strategies also define the range of businesses which the enterprise will pursue, its organizational structure, and the contributions (economic and non-economic) which it would make to stakeholders, employees, customers and communities (Mintzberg et al 1995).

In large firms, strategies are usually explicitly stated and documented. However, in small firms, strategies are often informal and are inferable from management’s actions and decisions (Pearce and Robinson 1985, Bamberger 1983). Therefore, an examination of strategy based on realized or implemented activities will provide a more accurate picture of a small firm’s strategy than that based on intended activities or plans. Mintzberg et al (1995) noted that strategy evolves over time and is a blend between planned activities and unplanned reactions to new developments. So that even where business plans are prepared and strategies formulated, these are altered frequently to conform with the dynamism and partly unpredictability of competition and the surrounding environment, and with the forever changing trends in consumer needs and expectations. Hemant and Clint (1997) also reported that contrary to the static and predetermined process portrayed in the literature, strategy formulation, particularly in small firms, follows an ad hoc and unpredictable process with decisions often based on owner-managers’ subjective interpretations of their day-to-day situation and gut feel. Research models which examine strategies as ‘ex post’ results would therefore portray a more realistic picture of a small firm’s strategy than those based on ‘ex-ante’ activities.

Levels of Strategy

Strategies are formulated and implemented at various levels in a business. Three strategy levels identified for large firms are corporate, business and functional levels (Pearce and Robinson 1985). Corporate strategies are formulated at the corporate level



by the board of directors, chief executives and administrative officers. They identify the mission of the overall organization, that is, the scope of its business and the structure and management of the overall group of activities (Thompson 1993). Corporate strategies also include the objectives and strategies of individual segments of the organization and their functional areas. They are translated into business level strategies (Pearce and Robinson 1985).

Business strategies provide concrete, functional objectives and strategies for individual divisions of the large organization and identify competitive methods to be adopted at the individual business level. In large firms, business strategy development and implementation are responsibilities of unit managers, but require the approval of the board of directors (Pearce and Robinson 1985).

Functional strategies are at the operational level. They are the means by which business and corporate strategies are implemented. They are short-termed and cover areas such as production, marketing, research and development, finance and personnel (Pearce and Robinson 1985).

In large organizations, the responsibility of formulating and implementing functional strategies are with middle managers. However, functional strategies are reviewed and approved at the business or corporate level (Pearce and Robinson 1985).

There are only two levels of strategy in small firms, business and functional. This is because small firms specialize in one or few products or services and owner-managers are individually responsible for the development, manufacture and marketing of products or group of products (Thompson 1993). Owner-managers decide on enterprise objectives and choose a competitive position for the enterprise in its selected product/market arena (Pearce and Robinson 1985).

They are also responsible for translating business strategies into functional area strategies. Therefore, in small firms, the responsibility of formulating and implementing both business and functional strategies lies with the owner-manager. An effective study of strategy in small firms should cover both business and functional level strategies.

Strategy as a Network of Interrelated Activities

Porter (1991) portrayed the firm as a set of discrete but interrelated economic activities, with the configuration and interrelationships among these activities defined by its strategy. He argued that the discrete activities are part of an interdependent system in which the cost and effectiveness of an activity is affected by the way other activities are performed. In support of Porter, Galbraith and Schendel (1983) advised that changes in any one activity should be consistent with other activities. The authors also cautioned against independent examination of the constituent elements of a strategy, arguing that in effect this will constitute a study of only part of the whole. Covin (1991) also emphasized this concept of strategy, describing strategy as a collection of individual business-related decisions. He postulated that the identification of patterns among the collection of decisions permits a complete and adequate



depiction of a firm’s overall strategy.

The concept of strategy as interrelated activities applies equally to both small and large firms as effective operation of a business, irrespective of size, requires consistency among decisions and actions. However, since decisions and activities are rarely documented in small firms (Kotey 1995), strategy patterns may not be as clearly visible as in large firms. In spite of this, a careful study of the business actions of an owner-manager over a period of time should reveal some consistency or pattern. This is because the personality characteristics of the owner-manager has strong influence on business activities in small firms (Kotey and Meredith 1997) and personality characteristics, according to the psychology literature, tend to be relatively stable over time (Robbins 1991).

The activities that constitute a strategy may be grouped into functional areas. Therefore, the overall business strategy may be thought of in terms of functional area strategies (Galbraith and Schendel 1983) and ultimately in terms of activities, actions and decisions that make up these functional area strategies. Key functional areas and associated activities are:

1. Marketing -includes selecting customer target groups and gathering information on them to determine acceptable products and quality levels. It also covers price setting and choice of appropriate promotion techniques and distribution channels. Marketing also involves decisions on customer service and support (Vorhies et al 1997).

2. Finance - covers decisions on capital structure, methods of raising capital, capital expenditure, profit distribution and retention and working capital levels. It also includes performance monitoring, that is, budget preparation and variance analyses (Pierson et al 1998).

3. Human resource - deals with staff recruitment and selection; employee training, performance assessment and remuneration; compensation, reward and disciplinary systems; industrial relations and levels of employee participation in decision-making (Schuler et al 1992).

4. Production - covers selection of location and suppliers; inventory and productivity levels; production technology and capacities; plant size and levels of efficiency in production (Gaither 1996).

5. Research and development - includes decisions on new product development, new production technologies and marketing techniques, patent acquisition, basic versus applied research and levels of imitation (Johnson and Scholes 1997).

These key functional areas and their associated activities are portrayed in Figure 1.



Unlike the situation in large firms, activities are often not explicitly divided into departments or functional areas in small firms as only one person, the owner-manager, is responsible for all decisions and actions. Even where supervisors are appointed to take charge of some functional areas the owner-manager still prefers to make most (if not all) decisions and to approve all activities in order to maintain control over the business (Stanworth and Curran 1989). It is possible, however, to group activities into functional areas for analytical purposes.

Functional strategies should be consistent with each other and when integrated should combine into a complete business strategy (Porter (1991). Galbraith and Schendel (1983) suggested that an important normative test for a firm's strategy should be the internal consistency among its functional area strategies.

STRATEGIES AS COMPETITIVE TOOLS

It is possible to identify a pattern among the interrelated activities that comprise a strategy (Mintzberg et al 1995). This pattern spells out a firm’s competitive position in relation to others in the industry. Porter (1991) suggested that for a firm to compete effectively, it must operate within defined scopes of product range, buyer segments, geographic locations and degree of vertical integration. Further, the direction of the firm in each of these areas should be consistent with each other and together should indicate the way it intends to compete (Covin and Slevin 1988, 1989, Covin 1991). Galbraith and Schendel (1983) noted that a firm’s strategy directs or constraints the options available to its future competitive activity. The concept of strategy as a position in relation to rivals in the industry has given rise to what is referred in the literature as 'strategy-types'. Galbraith and Schendel (1983, 156) defined strategy-type as 'a consistent pattern or combination of managerial controllable or decision components representing scope, resource deployments and competitive advantage; and the direction in which these resources are shifting over time, which characterizes the way businesses tend to compete'. Other terminologies used in the literature to describe strategy-types include 'gestalts', ‘strategic postures’, and 'strategic archetypes' (Robinson and Pearce 1988,



Covin 1991).

Strategy-Types

Two approaches to classifications of strategy-types which have generated comparatively high interest and investigation are those proposed by Miles and Snow (1978) and Porter(1980).

Miles and Snow (1978) proposed four strategy-types - prospectors, defenders, analyzersand reactors. Prospector firms operate within broad product or market domains and aim to be at the fore-front of their industries with new products. They monitor continuously a wide range of environmental conditions and events in search of new product and market opportunities. Defenders aim at locating and maintaining secured niches in relatively stable product areas. They do this by focusing on a limited product or service range and by protecting their market domains with higher quality products, superior service or lower prices. Defenders are not interested in being at the forefront in their industry (Davig 1986). The analyzer strategy is a hybrid between the defender and prospector strategies (Davig 1986). It involves locating and exploiting new product and market opportunities whilst maintaining a firm base of traditional products and customers. Analyzers emphasize production and strive for improved efficiency.

The reactor strategy is characterized by inconsistencies in activities and decisions. Firms which adopt this strategy avoid taking risk in developing new products or services unless threatened by competition (Davig 1986). They are unable to respond appropriately to their environment because of poor definitions of their strategy and lack of fit between the enterprise structures, processes and the chosen strategy (Zajac and Shortell 1989).

Porter (1980) proposed three strategy-types associated with high performance and another, 'stuck-in-the-middle', which impact negatively on performance. The three performance enhancing strategy-types are cost leaders, differentiators and focus strategy. Cost leaders aim at achieving overall cost leadership in their industry by establishing high relative market shares, favorable access to raw materials or some other cost advantage. They engage in aggressive construction of efficient scale facilities and tightly control costs and overheads. Cost leaders place emphases on asset use, employee productivity and discretionary expenses (Segev 1989).

They compete by pricing their products below those of competitors. Differentiators offer products or services perceived industry-wide to be unique along dimensions such as design or brand image, technology, features, customer service or dealer network (Porter1991). Their aim is to entice brand loyalty by customers, minimize customer sensitivity to price and increase profit margins by erecting entry barriers.

Focused strategists compete in a narrow segment of the market, based on buyer type, product type or geographic factors. They may choose the differentiation or cost leadership strategy or may adopt a combination of these two strategy-types (Segev 1989). Porter’s (1980) fourth strategy-type, 'stuck-in -the middle', was ascribed to firms



which lack the market share and capital investment required to adopt fully either the low cost or the differentiation strategy. Such firms pursue either one or more of the above three strategies in a more limited way.

Other strategy-types have been identified by several researchers with a current trend towards empirically-derived strategy-types. Galbraith and Schendel (1983), for example,identified ten strategy-types by cluster analysis - six for firms in consumer product industries and four for firms producing industrial goods. Their classifications were based on variables such as price, promotion, quality and new product development. Hambrick (1983) also employed cluster analysis to derive strategy-types based on four dimensions, cost efficiency, asset parsimony, differentiation and scale or scope, adopted from Porter's (1980) three typologies.

Application of Existing Strategy-types to Small Firms

Based on the assumption that small enterprises adopt strategy-types similar to larger firms, some researchers have sought to apply or to test the application of proposed strategy-types to small firms (Davig 1986, Shuman and Seeger 1986). Existing strategy-types may however, have limited application to small firms, given that small firms face unique environmental conditions, particularly severe resource constraints. For example, the application of some of Porter’s strategy-types to small firms has been questioned. Miller and Toulouse (1986) argued that due to resource constraints, small firms are unlikely to achieve meaningful manufacturing economies of scale and to perform successfully if they adopt cost leadership strategies. The authors noted that small firms may, however, employ a focused differentiation strategy involving product innovation, high quality or novel design. This strategy, they explained, will enable small firms meet effectively, the needs of a select group of customers and stay in close contact with them. Miller and Toulouse (1986) cautioned that pursuit of both cost leadership and differentiation strategies involving mass marketing, may reduce performance in small firms. A similar argument could be made for Miles and Snow’s prospector strategy. Small business owners may not have the resources to operate in broad product or market domains nor the time to continuously monitor a wide range of environmental conditions and events.

STRATEGY-TYPES IN THE SMALL BUSINESS SECTOR

Few researchers have endeavored to identify strategy-types in the small business sector.Many of the available studies fail to cover the breath of activities necessary to ensure a holistic description of a firm’s strategy. There is the tendency to focus on management-orientations in certain functional areas only. Existing research in this area also lacks rigorous empirical base. Some of the research on strategy-types in small firms is reviewed in this section, with an aim of examining common patterns and drawing a basis for a framework for future research.

Smith (1967) one of the earliest researchers in this area studied owner-managers of small manufacturing firms. He identified two personality-types and their associated strategic orientations - craftspersons and opportunistic owners. Smith noted that



craftspersons base their marketing strategies on personal relationships, limit their sources of finance to equity – (personal savings and money from friends and relatives) and adopt relatively rigid strategies.

He also observed that craftspersons have low levels of social awareness and involvement. Opportunistic owners were described as market-oriented, continuously searching for new opportunities and new possibilities. They seek finance from diverse sources and employ innovative and diverse competitive strategies. Opportunistic ownersalso tend to delegate more often than do craftspersons.

Miller and Friesen (1982) examined firms in various industry sectors and adopted a contingency approach to distinguishing entrepreneurial from conservative firms. The authors reported that entrepreneurial firms employ competitive strategies aimed at dramatic innovations whilst conservative firms are reactive to innovation, engaging in innovation only with pressure from competitors or customers.

Covin and Slevin (1986, 1988, 1989) and Covin (1991) also studied firms in differing industry sectors and identified two strategy-types, entrepreneurial and conservative. Theresearchers observed that firms with entrepreneurial strategies are innovative and proactive. Their organizational structures are highly adaptable and are controlled with open communication. In contrast, firms with conservative strategies are risk-averse, non-innovative and reactive. They have mechanistic structures which tend to be traditional, tightly controlled and hierarchical.

Chell, Haworth and Brearley (1991) researched owner-managers in various industry sectors and reported four types of business owners, identified by growth-orientations of their firms -entrepreneurs, caretakers, administrators and quasi-entrepreneurs. The authors described entrepreneurs as proactive in strategic orientation, exercising initiative and controlling events rather than reacting to them. Entrepreneurs were noted to search for business opportunities with high success probabilities. They place strong emphasis on innovation, as reflected in the products or services offered, market served and/or asset investments. Entrepreneurs use various sources of finance and strive for the best in developing their businesses. They develop images or product concepts that enhance the visibility of their products and endeavor to raise the profiles of their businesses through elaborate business networks. In contrast, caretakers concentrate on daily operations of their firms and tend to react to problems rather than anticipate and decide on how to deal with them. They often do not desire growth and have no specific strategy.

Chell et al (1991) identified two other strategy-types - administrators and quasi-entrepreneurs. These strategy-types were not as clearly defined as the first two. The authors suggested that administrators and quasi-entrepreneurs could be positioned somewhere in the middle of the entrepreneur-caretaker continuum. Administrators were noted to manage professionally owned firms and to be more reactive than proactive. They are highly cost conscious. Quasi-entrepreneurs are moderately innovative, but proactive, adventurous and 'ideas-persons' with profiles of image makers. They are closer to the entrepreneurial end of the continuum and share other entrepreneurial



qualities.

Karagozoglu and Brown (1988) based their research on arbitrarily selected manufacturing firms in 23 industries. These authors also distinguished between entrepreneurial and conservative firms. They noted that entrepreneurial firms emphasize flexibility, innovation and risk-taking. These firms adopt proactive and aggressive strategies and compete primarily through new product or market development. Entrepreneurial firms operate in turbulent environments.

In contrast, conservative firms were found to emphasize efficiency but avoid risk and innovation. They compete by efficient production, low price, and high quality standards, a strategy identified by other researchers as incompatible with high performance in small firms (Miller and Toulouse 1986). Firms in this category prefer placid environments. Other researchers have categorized small firms by their orientation in specific managerial areas.

Ray and Hitchinson (1985) distinguished entrepreneurs from small business owners based on their attitudes to financial planning and control, and deployment of resources. Carland et al (1989) identified small business owners and entrepreneurs by their planning propensities; and Vickery (1987) distinguished patrimonial owners from entrepreneurs by the sources of finance employed. In each of these cases one category is more proactive than the other.

The above review indicates that although several strategy-types may be identified for small firms, two strategy-types will always be distinctive - proactive and reactive strategies. It is therefore possible to classify small firms by the extent to which their activities reflect one or the other of these two strategy-types. The two strategies are described below.

Proactive Strategies

Miller and Friesen (1983) defined proactiveness as the extent to which firms attempt to lead rather than follow competitors in key business areas such as introduction of new products or services, operating technologies and administrative techniques. Robinson and Pearce (1988) suggested that proactive strategies consistently emphasize product quality and/or product development. They referred to Zeithmal and Fry (1984) who reported that proactive strategies differentiate 'superstar' enterprises, (those able to concomitantly maintain increases in both profitability and market share) from lower performers.

Increases in market share and profitability require attracting new customers and retaining existing ones. Activities that will ensure this include defining target market, gathering information about targeted customers and improving existing products and/or developing new ones to meet their needs (Vorhies et al 1997, Robinson and Pearce 1988). Customers’ attention will have to be drawn to the firm’s products through advertising and identification with brand names, or some other promotion strategy. Attracting new and retaining existing customers are also dependent on the



quality of customer services offered. Customer services include, among others, assistance with purchase decision, home delivery, customer credit and prompt refund for goods returned. Exploration and use of new distribution methods, such as sales through retailers, salespersons, and other channels will improve the ability to attract and retain customers. These strategic activities involve initiative-taking and are therefore proactive.

Production processes become obsolete over time and firms will not be competitive if they continue with old production methods (Anderson et al 1989, Vickery et al 1993). New processes are necessary for new lines and for improving existing lines. However, innovation in production without attention to cost will leave the firm vulnerable to competitors selling similar products at lower prices (Wright et al 1990). To stay ahead of competitors, a firm must not only offer new and superior products, but must do so at prices affordable to consumers. Pro-active strategies therefore include employment of new and efficient production methods, attention to inventory and productivity levels and selection of reliable suppliers. They also require attention to storage, transport costs and wastage. Location is another factor which will influence production costs and marketing strategy. Pursuit of the initiatives above will require large amounts of capital beyond what the owner/manager could provide from personal funds. Proactive strategists seek cost effective funding from external sources. That is, they analyze the costs and benefits associated with alternative sources of funds and choose the most effective. Proactive strategists are also likely to plan and monitor cash flows to ensure that a reasonable level of liquidity is maintained. This means attention to working capital, capital expenditure and profit/capital withdrawal policies.

Superior human resources provide a competitive edge that is difficult to duplicate (Pfeffer 1995). Owner-managers pursuing proactive strategies will be concerned with the quality, motivation and retention levels of staff . They will attend to employees’ job satisfaction and well being. Proactiveness in human resource management also includes encouraging creativity among employees, involving them in the decision-making process, regularly assessing their performance, providing and requesting feedback to and from them, and providing training and opportunities for development.

Although small firms are unable to afford the cost of employing skilled managers and technical experts these skills are available to them through independent consultants. Proactive strategies will involve seeking assistance from outside experts in areas where the firm lacks the necessary expertise. Proactive strategists also add value to their firmsthrough extensive net-working.

Finally, a proactive strategy requires continuous evaluation of the firm’s position vis-à-vis changes in environmental variables. It also involves redefining objectives and performance targets and re-thinking the firm’s strategic orientation. Documentation of planned and actual activities will facilitate monitoring of operations so that remedial actions can be taken in time to correct negative deviations and actions resulting in positive achievements reinforced.

From the description of activities that comprise a proactive strategy, it could be inferred

Page 10 of 16A FRAMEWORK FOR EXAMINING STRATEGY AND STRATEGY-TYPES IN S...


that it is analogous to strategies of Covin and Slevin's (1989), Karagozoglu and Brown's (1988) and Miller and Friesen's (1982) 'entrepreneurial' firms. Proactive strategies also include those adopted by Smith’s (1967) 'opportunistic' owners and Chell et al's (1991) 'entrepreneurs'.

Reactive Strategies

Reactive strategies are generally characterized by reactions to events in the environment as opposed to initiative taking. Firms pursuing this strategy avoid risk and undertake little innovation (Karagozoglu and Brown 1988). They imitate the more successful firms in the industry, but usually fall short in some important respect (Hambrick 1983). Covin (1991) noted that firms with reactive strategies are often confined to the lower price segments of the market as they tend to compete on the basis of price. They place emphasis on operating efficiency in consonance with their price-based competition. There is little advertising as firms pursuing this strategy offer products whose successes have already been tried and are subject to minor changes. Reactive strategists prefer stable and predictable environments where industry norms induce conformity in strategy and structure and leave little room for incentive and initiative (Miller and Friesen 1983). They adopt mechanistic structures with emphases on rules, policies, scheduling and other such means of promo-ting internal efficiency. Employee creativity and innovativeness are discouraged and there is pressure to complywith the status quo (Kuratko and Hodgetts 1998). The activities that comprise a reactive strategy are often not well integrated and are mismatched with demands of the environment (Hambrick 1983).

Firms with reactive strategies are comparable to Covin and Slevin's (1989) and Karagozoglu and Brown's (1988) conservative firms, and also to Smith’s (1967) craftspersons and Chell et al's (1991) caretakers. The concept of strategy-types is illustrated in Figure 2

In reality, all activities that comprise a firm’s strategy are not completely proactive or completely reactive.



Firms adopt varying combinations of the two strategy types. For example, firms pursuing proactive strategies may sometimes have to conform to industry norms and adopt standardized strategies in certain areas because they are the best strategies at the point in time.

However, a longitudinal study of a firm’s operations will reveal consistent proactiveness in a large number of business activities. In contrast, a similar study will reveal consistent reactive-ness in many areas of business operations for firms with reactive strategies even though they may be proactive in certain areas. Firms may be positioned along a proactive-reactive continuum depending on the degree of proactiveness and reactiveness in strategic-orientation. Firms near the proactive end of the continuum will achieve higher performance levels than those near the reactive end.

Strategy-type and Industry Sector

Every industry has its own unique variation of strategies that result in high performance,as each industry is unique with its own critical or key success factors and environmentalrequirements.

However, in every industry, strategies pursued by market leaders will differ from those pursued by low performers. Market leaders will be proactive in strategic-orientation and low performers reactive. Generally in any industry, firms with proactive strategies are those able to identify the key success factors and make effective use of them. While firms with proactive and reactive strategies can be identified in any industry sector, the distribution of firms among these strategy-types will differ between industries and between life cycle stages in the same industry.

SUMMARY AND CONCLUSION

The literature on strategy and strategy-type was reviewed and a framework proposed for examining strategy-types in small firms. It was argued that in every industry sector, firms with proactive strategies can be distinguished from those with reactive strategies and that all firms can be placed on a continuum of proactive-reactive strategy, based on their strategic-orientation.

Proactive strategies involve taking initiative and leading in the industry whilst reactive strategies involve imitation and passiveness. It was also proposed that proactive strategies will result in higher performance levels than reactive strategies. A holistic approach to studying strategies was suggested involving the examination of activities in all functional areas and assessment of interrelations among them. Further empirical research is required to test the model proposed in this article.

REFERENCES

Anderson, J.C., Cleverland G. and Schroeder R.G. (1989), "Operations Strategy: A Literature Review", Journal of Operations Management, 8 (2), 133-158



Bamberger I. (1983), "Value Systems, Strategies and Performance of Small and Medium-sized Firms", International Small Business Journal, 1(4) Summer, pp. 25-39.

Carland J.W., Carland, J.C. and Aby, C.D. (1989), An Assessment of the Psychological Determinants of Planning in Small Businesses, International Small Business Journal, 7 (4), pp23-34

Chell, E., J. Haworth, and S. Brearley (1991), The Entrepreneurial Personality: Concepts, Cases and Categories. London: Routledge.

Covin, J.G., and D. P. Slevin (1986), "The Development and Testing of Organizational Level Entrepreneurial Scale", In R. Ronstadt, J. Hornaday, R. Peterson and K. Vesper (Eds.), Frontiers of Entrepreneurship Research, Wellesley, Massachussett: Babson College, Center for Entrepreneurship Studies, 623-239.

Covin, J.G., and D. P. Slevin (1988), "The Influence of Organizational Structure on the Utility of an Entrepreneurial Top Management Style," Journal of Management Studies, 25 (3), 217-234.

Covin, J.G. and D. P. Slevin (1989), "The Strategic Management of Small Firms in Hostile and Benign Environments", Strategic Management Journal, 10, 75-87.

Covin, J. G. (1991), "Entrepreneurial Versus Conservative Firms: A Comparison of Strategies and Performance," Journal of Management Studies, 28 (5), 439-462.

Davig, W. (1986), " Business Strategies in Smaller Manufacturing Firms," Journal of Small Business Management, 24 (1), 38-46.

Dollinger, Marc J. (1995), Entrepreneurship, Strategies and Resources, Austen Press , Irwin, USA, pp. 4-8

Galbraith, C., and D. Schendel (1983), "An Empirical Analysis of Strategy Types," Strategic Management Journal, 4, 153-173.

Hall, W.K. (1980), "Survival Strategies in a Hostile Environment", Harvard Business Review, 58 (5), 75-85

Hambrick, D. C. (1983), "High Profit Strategies in Mature Capital Goods Industries: A Contingency Approach," Academy of Management Journal, 26(4), 687-707.

Hemant Sashittal- and Clint Tankersley (1997), "The strategic market planning-implementation interface in small and midsized industrial firms: An exploratory study" , Journal of Marketing Theory and Practice, 5 (3), Summer, pp. 77-92

Hisrich R. D. (1988) Entrepreneurship: Past, Present and Future, Journal of Small Business Management, 26 (4) October pp. 1-4



Johnson, G., and K. Scholes (1997), Exploring Corporate Strategy. Text and Cases, Fourth Edition, London: Prentice-Hall International.

Karagozoglu, N., and W. Brown (1988), "Adaptive Responses by Conservative and Entrepreneurial Firms," Journal of Product Innovation Management, 5, 269-281.

Karlof, B. (1989), Business Strategy, A Guide to Concepts and Models, MacMillan Press Ltd., London and Bassingstroke

Kotey, B. and Meredith, G.G. (1997), "Relationships Among Owner/manager Personal Values, Business Strategies and Enterprise Performance", Journal of Small Business Management, 35 (2) April pp.37-64

Kotey, B. (1995), "Planning, Enterprise Performance and Owner/manager Personal Values", Journal of Enterprising Culture, 3 (4), pp. 409-426

Kuratko Donald F and Hodgetts Richard M. ( 1998), Entrepreneurship: A Contemporary Approach, Fourth Edition, The Dryden Press, Harcourt Brace College Publishers, USA

Loucks K.E. (1981), "A Survey on Research on Small Business Management and Entrepreneurship in Canada", In K.H. vesper (editor), Frontiers of Entrepreneurship Research, Babson College, pp. 111-117

Miles, R. E. and C.C. Snow (1978), Organizational Strategy, Structure and Process, New York: McGraw-Hill.

Miller, D., and J.M. Toulouse (1986), "Chief Executive Personality and Corporate Strategy and Structure in Small Firms," Management Science, 32 (11), 1389-1409.

Miller, D. and P.H. Friesen (1982), "Innovation in Conservative and Entrepreneurial Firms: Two Models of Strategic Momentum," Strategic Management Journal 4 (2), 221-235.

Miller, D., and P.H. Friesen (1983), "Strategy-Making and Environment, The Third Link," Strategic Management Journal, 4, 221-235

Mintzberg H. Quinn James B. and Voyer John (1995), The Strategy Process, Englewood Cliffs, New Jersey, Prentice Hall, Collegiate Edition.

Neck, P. A. (1984), Strategic Management For National Small Enterprise Development Programs, PhD. Thesis, University Of New England, Armidale

Pearce, J. A,. and R.B.J. Robinson (1985), Strategic Management: Strategy Formulation and Implementation, Homewood, Illinois: Richard D. Irwin Inc.

Pfeffer, Jeffrey (1995). Producing Sustainable Competitive Advantage Through the Effective Management of People, The Academy of Management Executives, 9 (February),



55-72.

Phillips, L.W., D.R. Chang and R.D. Buzzell (1983), "Product Quality, Cost Position and Business Performance: A Test of Some Key Hypotheses", Journal of Marketing, 47 (Spring), 26-43

Pierson G., Brown R., Easton S., and Howard P. (1998), Business Finance, Seventh Edition, The McGraw-Hill Companies Inc, Sydney, Australia.

Porter, M.E. (1980), Competitive Strategy,: Techniques For Analysing Industries and Competitor, New York: Free Press.

Porter, M.E. (1991), "Towards a Dynamic Theory of Strategy," Strategic Management Journal 12, 95-117.

Ray, Graham and Hutchinson, Patrick (1985), "The Entrepreneur, Accounting Information and Financial Control", Management Forum, 11(4) December, pp223-232

Robbins S. P. (1991), Organizational Behavior: Concepts, Controversies and Applications, 5th Edition, Prentice-Hall International Editions.

Robinson, R. B. and J. A. Pearce (1984), " Research Thrusts in Small Firms Strategic Planning", Academy of Management Review, 9 (1) January, pp. 128-137.

Robinson, R. B., and J.A. Pearce (1988), "Planned Patterns of Strategic Behavior and Their Relationship to Business-Unit Performance," Strategic Management Journal 9 (1) January/February, 43-60.

Schuler, R.S., P.J. Dowling, J.P. Smart, and V. L. Huber (1992), Human Resource Management in Australia, Second Edition, Australia: Harper Educational Publishers.

Segev, E. (1989), "A Systematic Comparative Analysis and Synthesis of Two Business-Level Strategic Typologies", Strategic Management Journal, 10, 487-505.

Shuman, J. C. and Seeger, J.A. (1986), "The Theory and Practice of Strategic Management in Smaller Rapid Growth Firms", American Journal of Small Business 11(1) (Summer), 7- 18.

Smith, N.R. (1967), The Entrepreneur and His Firm: The Relationship Between the Type of Man and Type of Company, East Lansing: Michigan State University Press.

Stanworth, J. & Curran, J. (1989). Employment relations in small firms. In P. Burns and J. Dewhurst (Eds.), Small Business and Entrepreneurship, 158 - 177.

Thompson, J.L (1993), Strategic Management, Awareness and Change. 2nd Edition, Chapman and Hall, London



Vickery S.K., C. Droge and R.E. Markeland (1993), "Production, Competence and Business Strategy: Do They Affect Business Performance?", Decision Science, 24(2) March/April, 435-455

Vickery, Lister (1987), Equity Financing in Small Firms, In Paul Burns and Jim Dewhurst (eds), Small Business and Entrepreneurship, MacMillan Press Ltd., Hampshire, pp 204-225

Vorhies, D.W, Harker M., and Rao C.P. , "The Capabilities and Performance Advantages of Market-Driven Firms" European Journal of Marketing, forthcoming

Wright, P., M. Kroll, B. Kedia, and Pringle (1990), "Strategic Profiles, Market Share and Business Performance," International Management, (May/June), 23 - 28

Zajac, and Shortell (1989)" "Changing Generic Strategies: Likelihood, Direction and Performance Implications", Strategic Management Journal, 10, 413-430.

Zeithaml, C. P., and L.W. Fry (1984), "Contextual and Strategic Differences Among Mature Business in Four Dynamic Performance Situations", Academy of Management Journal, 27, pp. 41- 860

