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The entrepreneurial dilemma reflection

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INB 356 SME Management

Post-seminar reflection – week 3

In week three we were introduced to different models/theories of companies’ growth and the different factors that separate the fast growing SMEs from the rest. In addition, we completed the 1st part of this assignment (applying two models to the case-study; growing pains). Following this is our reflection on the knowledge we gained during the discussion on Friday’s session.  

Although we have analysed many important and accurate aspects of the case study, we have realised that there are some issues that need some revision. In the following part we will look into some additional point of views on the case-study. We will revise our views on both Churchill and Mintzberg, look more into the accuracy of each one, as well as clarify some assumptions mentioned in our pre-seminar analysis.

  • During the in-class discussion of Churchill we realized that there are a couple of arguments which should have been taken into account during our pre-seminar report, as there seemed to be a general disagreement of what exact phase Softhouse is positioned within at the time the case-study was written. To be able to find Softhouse’s key problems and thereby make recommendations, we find it vital to decide on what phase they are positioned within, as this model recommends different solutions and advice for each phase.

Based on the information from the case-study it seems clear to us that Softhouse’s key problems occurs within phase three of Churchill’s model. Phase three is concerned with the issues that arise when SMEs enter the phase of stabilization and profitability. Softhouse is the market leader within this sector, and maintains their position due to their competitive advantage – being innovative, efficient and flexible.  

During the seminar, it was argued that Softhouse in fact has passed phase three, maybe even phase four and five. The arguments used were many, yet the most relevant were; Softhouse is already going for growth, and have done so since they ended their partnership, they have been a profitable and stabilized business for quite some time, and their client-base has also been growing rapidly for quite some time.

In our post-seminar reflexion we therefore need to argue whether we still agree with our previous analysis, or whether we should alter our opinions. The point of views argued in class, are all relevant. It was argued that Softhouse meets most criterias required to be considered as a phase four, or even phase five, business. We agree with this, yet the key problems that are portrayed by the case-study are generally met at an earlier phase of the Churchill-model, namely phase three. Birley&Muzyka clearly states that within phase three, any business must make sure that ineffective management does not reduce their competitive abilities, and that basic financial, marketing and production systems must be in function in order to succeed any further (Birley S. Muzyka D. 2000, p.253). In addition to this, Churchill emphasizes that problems occurred during the growth of SMEs will need to be solved and managed before being able to enter the next phases of the model (Birley S. Muzyka D. 2000, p.253).

In conlusion, it is apparent that we still share the same point of views that we did in our pre-seminar analysis; we believe the key problems faced by Softhouse occur in phase three of the model applied. Nevertheless, we also agree with the new judgments brought forward in class, and we understand the importance of being critical to our own views. More importantly however, we have learnt that these models may never entirely fit with the real world, and we now grasp the importance of being able to criticise our sources and their relevance to the topic matter (see next section).

  • During the in-class discussion of Mintzberg we realized that we need to clarify some issue discussed in our pre-seminar report. By using this model we analysed the case-study by looking at Softhouse through the four perspectives separately. We now see that our pre-analysis lacked some clarification of the connections between each one, as the perspectives of strategy and financial are external factors, and the structural and organisational are more internal.

We learned that the key problems faced by Softhouse were not external but internal, and due to their “external success” the company was still able to grow. But in order to continue growing further they need to deal with the internal problems before it start to affect their customers and growth.

We will now look further into some of the internal problems that came up during the Friday-session. Firstly, the importance of a good relationship with the customer and the issue Softhouse had with the technology and the level of difficulty is important. The technology was not as user-friendly as the customer needed it to be. This was something that they need to improve in order to maintain good customer relationship. They will also need to improve their services like their web-based services in order to build a better relationship with their foreign customers and also attracting new foreign customers through making the services more accessible at all hours on the web.  

The need for an HR department was something that we agreed on. The HR department should provide sufficient management training as well as create a system of rewards in order to increase the motivation of the employees. There should be possibilities of career development in order to attract the most qualified people to work at Softhouse. The HR department also need a new recruitment system. At this stage they are employing young people without much experience and often just through people in the company. They need get a recruitment system in place and to start looking at other ways to recruit qualified people and possibly start an organized training program to train graduated in their company.

As previously mentioned in our last analysis, they need to hire a director with sufficient management training in order to implement the new organisational changes. There need to be a clear difference between managers and directors.

  • As already mentioned, we were clearly not critical enough when applying these models in our pre-seminar report. We now thoroughly understand the importance of being critical when applying sources and models, and we would now like to elaborate on the accuracy of both models, by comparing them. We have applied two very different models of growth. Churchill is a typical stage-model, while Mintzberg is said to be static. Carter & Jones discusses Churchill’s model in a critical manner, and say that formalised “stage-models” may be relevant, but tend to have little application as tools to explain the growth of SMEs for many reasons. Some SMEs usually develop more rapidly in relation to certain functions or dimensions than others as well as boundaries between phases may be unclear rather than distinct (Carter S. Jones-Evens D. 2006, p. 108). No company is predetermined, thus, it is often difficult to apply the stage model in practice by positioning the company in a certain “growth stage”. This is also proven during class discussion; due to Softhouses growth in different dimensions, groups had different ideas of what stage of growth the company was at the time. Mintzberg, however, look at growth in four different perspectives, rather than stages. Therefore we have the perception that this model is a more accurate and useful model to apply. As discussed in our pre paper, one can identify issues/challenges/problems in each perspective of the company. This makes it easier to identify and make better assumptions of changes that need to be dealt with as well as provide recommendations.

As a conclusion of this part of reflection we now understand the importance of being critical to theories. It is important to elaborate different models when it comes to purpose of use and accuracy.

References:

Books:

Birley Sue. Muzyka Dan. Mastering Entrepreneurship. Prentice Hall. 2000.

Carter Sara. Jones-Evans Dylan. Enterprise and Small Business. Prentice Hall. 2006.

Wickham P. Strategic Entrepreneurship. FT. 2006

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