Performance assets in argentinean industrial:
Julio Rodriguez Rey
Université de Lorraine / ERPI
Equipe de Recherche des processus Innovatifs, France.
Logistics Studies and Application Centre-CEAL,
School of Engineering, Universidad Nacional de Cuyo, Argentina
Université de Lorraine / ERPI
Equipe de Recherche des processus Innovatifs, France.
Université de Lorraine / ERPI
Equipe de Recherche des processus Innovatifs, France.
Université de Lorraine / ERPI
Equipe de Recherche des processus Innovatifs, France.
Logistics Studies and Application Centre-CEAL,
School of Engineering, Universidad Nacional de Cuyo, Argentina
SME performance referentials are very different according to the industry sector. Literature about SMEs importance is abundant but its performance measurement is poorly treated. The low tech sectoris still even more unattended in this subject. In the development economies, the most of SME belongs to can be characterized as low tech.In this partiality, firms are particularly sensible to managerial performance, particularly because the education level of its human resources is lower than the high tech firms.In the present work, a set of SMEsbelonging to two different sectors – Construction and Foods–are analyzed using an new managerial performance evaluation approach, that use a dynamic based in value chain concepts, but including a new framework in which four main concepts are proposed to evaluate the firms performance: Product, Associated services, Information and Operationalefficiency.Two comparisons are made: Inter-sector and Intra-sector. Results are presented and further research are proposed.
According to (Howitt, 2007), in the firms exist an Innovation Dilemma; between stability and creativity. On the one hand, companies require stability and static routines to accomplish daily tasks efficiently and quickly to compete today (Meunier, 2007). On the other hand, companies need to develop new ideas and new products to be competitive in the future. Hence they need to nurture a creative environment where ideas can be tested and developed. This poses one of the most fundamental problems for management today
The firm needs to ensure there is a constant pressure to drive down costs and improve efficiency in its operations. At the same time it needs to provide room for new product development and improvements to be made. The operations of the firm provide enormous scope for innovation(Trott, 2005).
According to (Kotler, 2003), management is the task of making trade-offs and juggling contradictions. “The ultimate corporate balancing act: Cut back and grow. Trim down and build. Accomplish more, and do it in new areas, with fewer resources.” Everyone in a company has a different agenda. The advertising manager sees the company’s salvation as being in more advertising; the sales manager wants more salespeople… and the R&D department wants more money for product improvement and new product development. If every department only does its own job well, the company will fail. Departments have individual agendas, not company agendas.
Is frequentthat the SMEs managers could not have a clear vision in the sense of the balance of the firm’s activity(Garengo, Biazzo, & Bitit, 2005). Definitely, firms that manufacture and sell innovative products are in a different position than the firms that works with very established product(Beal & Yasai-Ardekani, 2001).We can think for example in a food enterprise that is specialized in some ancient cheese and other which main product is a nutritional supplement to high competitive sports. Obviously, the environment pressure over the second one will be higher, starting in the relatively unknown of the product existence, properties, etc. Of course that the more innovative firm will have the competitive advantage of the new product, that will give the opportunity to access to specialized markets with an important increment in profits. (Boly, 2004)
In the present work, a model of managerial performance, based in four criteria (Product, Associated Services, Information and Operational efficiency) is presented. These four criteria can define the firm strategy in a particular market. The elements of marketing mix(Kotler, 1999) are included. Product characteristics are included in the Product criteria but in this last, other considerations have been made about production process, and other factors related to industrial sectors (forecasts, production planning, etc.). The services criteria(Giget, 2000)(Porter M. , 1997) includes the augmented product characteristics, warranties, distribution, after sales services, etc. In the information criteria promotion is included, but also are contemplate the firm image, the public info about finances health, CSR, environmental actions, etc. Lastly, in the efficiency, the cost management, are included, the process dimension, and the internal efficiency. The correct management of these four criteria allows to the firm to sale itsproduction and reinvest the obtained resources, after paying all the used resources, in improve the firm performance and produce more or produce better, entering in a virtuous cycle of growth(Forcadell, 2004). But to arrive to these results, some particulars activity must be done. The production, identified as the most critical activity in an industrial SME is only one of these activities. Adequate market research and innovation activities must been carried out to determinate what to produce, advertisement must be done to aware to market that the offers exists, distribution activities will put the product in the right places, etc. (Kotler, 2003).All these action must be done and coordinate and it is only possible if the firm arrive to a certain level in managerial performance.
These four criteria were selected as main factors due the closest relationship with firm’s profits. Other factors (for example, product quality, product advertising, etc.) don’t assure firms profit and consequently growth. Other set of factors, all similar on enclosed in strategy orientation assure firm profit, but they are sometimes very difficult to measure(Salles, 2003). Additionally, strategic alignment always impliesthe fit of these four criteria as main consequence. (Giget, 2000). These four criteria, that in the present work are considered as consequence of the managerial performance,aremore evident to asset by the firms in the sense of possible enhancements actions. The four criteria can be viewed as main business process in the firm.
According to (Garengo, Biazzo, & Bitit, 2005) the managerial performance measurement in SME is not correctly developed. In the present work we propose a model to asset managerial performance in SME that is simple, robust and balanced. This model configures a top-down approach in which the cited four criteria are in the top level and in a inferior level are the firm activities. These activities that in fact are organizational process in the firms that contribute to the main business process. Lastly, activities come from practices, a series of tasks that are comunly developed in the company. An example of this task can be Production Planning.
2. SME Characterization
Micro, small and medium-sized enterprises (SMEs) play a central role in the economy. They are a major source of entrepreneurial skills, innovation and employment. In the enlarged European Union of 25 countries, some 23 million SMEs provide around 75 million jobs and represent 99% of all enterprises(OECD, 2010).However, they are often confronted with market imperfections. SMEs frequently have difficulties in obtaining capital or credit, particularly in the early start-up phase. Their restricted resources may also reduce access to new technologies or innovation(European Community, 2003).
Additionally, smaller firms differ from larger firms in terms of their organizational structures, managerial styles, responses to the environment, and how they compete. SMEs must overcome size disadvantages by creating advantages in flexibility of production, speed of attack, niche strategies focusing on price and quality, and disrupting the status quo through innovation(Bierly III & Daly, 2007).
Many SMEs have some difficulties converting research and development into effective innovation. Many of these difficulties are organization specific. It is suggested that, in general, investment in R&D, thenumber of new products introduced, the need to meet technological changes in both processes and products and the importance of prototype development are the most important attributes of innovation in manufacturing SMEs. SMEs face important challenges as they decide whether to build on their existing organizational capabilities or pursue entirely new business ventures(O’Regan, Ghobadian, & Gallear, 2006).
According to (Salles, 2003) the SME cannot benefit of big volumes of production, scale economies, etc. They should base their offer on the differentiation, much more than the big companies. Most of the SMEsrun in an environment of informality. (Meunier, 2007)States that the SMEs face highs degree of financial problems and the typical tools of strategic analysis are not pertinent. The SMEs should think before in surviving rather than grow, so the fight is centered about the vulnerability factors. It is better the SMEs don't face openly to the competition, but rather they look for a niche strategy. SMEs have a necessity of constantly contrast its strategic ambitions against its financial possibilities.
Smaller and especially newfirms often lack this organizational capability and, thus, experience running the risk of engaging inmanagerial undertakings without experience. Reflecting on the perils of innovation, it needs to be noted that innovation is a taskfraught with high failure rates or at least temporary unprofitability(Rosenbusch , Brinckmann, & Bausch, 2011).
By (OECD, 2010) Small manufacturing firms are almost as innovative as large firms. Additionally, SMEs also conduct a growing share of R&D. SMEs, however, are reported to face a number of impediments to their growth and survival including limited access to financing, limited market power, the lack of management skills, high share of intangible assets, deficient accounting track and insufficient assets(Yoguel & Moori-Koenig, 2000). The scenario of business in that it operates an SME is conditioned by a group of factors, among those that stand out the regulatory frameworks, the rules and political macroeconomic, the industrial strategy and politics, the access to the markets, the degree of complexity of the productive network and the technological and organizational characteristics of the leaders companies in the sector.
SMEs suffer from a lack of resources both human and financial so becoming a part of innovative consortia allows them to share R&D costs, but also knowledge, provides indirect opportunities for marketing through consortia partners, and also diffuses the envy, failure and blame culture that pervades European society(Taplin, 2006).
3. Management and performance in SME
Differences between companies in cost or price derive from the hundreds of activities required to create, produce, sell, and deliver their products or services, such as calling on customers, assembling final products, and training employees. Cost advantage arises from performing particular activities more efficiently than competitors. Similarly, differentiation arises from both the choice of activities and how they are performed. Activities, then, are the basic units of competitive advantage(Porter M. E., 2008).
Some companies are able to get more out of their inputs than others because they eliminate wasted effort, employ more advanced technology, motivate employees better, or have greater insight into managing particular activities or sets of activities. Differences in operational effectiveness are an important source of differences because they directly affect relative cost positions and levels of differentiation(Porter, Simon, & Schuster, 1998).
Improving operational effectivenessmay require capital investment, different personnel, or simply new ways of managing. Improvement can be done on multiple dimensions of performance at the same time. Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. The essence of strategy is in the activities. Strategy is about combining activities.Growth in enterprises arrives mainly for increment of market share. This can be get operating in the actual market and obtaining the market share from the competence, creating new markets in the blue ocean way(Chan Kim & Mauborgne, 2005), by diversification or by internationalization. Additionally, there are also three ways of acting: Internal growth (sales growth in the same company), external growth (fusion and acquisitions) and alliances. (Strategor, 2007)
(Porter M. , 1985)define two generic strategies to compete: Cost and differentiation. To SMEs, the cost strategy is hard to get due the impossibility to arrive to scales economy. Differentiation allows to SME create an niche of market in which it can operates like monopolist in some way. To achieve that, all the activities in the firm must be correctly carried out. In this work, a model of enterprise is proposed
(Forcadell, 2004)states that the grow and development of the firms depends of the management of its resources. There is a dynamic between resources and strategy. Thus, the current resource portfolio of the firm determines the future strategy and current strategy determines the future resource portfolio of the company.The activities of entrepreneurship generate resources that can be: (1) the origin of a new company (2) surplus that can be used for the growth of the company or its sale in the market. Growth came from surplus resources that are specific to the company. Resources that can´t be considered surplus, determines the restructuring of the business portfolio of the company.The degree of specificity of the resources to grow determines the development directions of the company. High specificity will determine a strategy of specialization. If specificity is weaker, a diversification strategy is achieved.Development contributes to the accumulation of new resources. The growth will create deficit of resources and the company must get them. The degree of specificity of the resources determines the choice of a development method.A growth strategy successfully implemented will facilitate the leverage of the portfolio of resources and capabilities. This will facilitate the achievement of sustainable competitive advantages and the consequent maximization of joint value of the portfolio company's business.
(Chan Kim & Mauborgne, 2005)refers as the 4 hurdles to overcome by management: First is cognitive: waking employees up to the need for a strategic shift. They feel comfortable whit know situations. The second hurdle is limited resources. Resources normally are being cut, and not raised. Third is motivation: How do you motivate key players to move fast and tenaciously to break the status quo? The final hurdle is politics.
4. Argentinian SMEs
Argentinian SMEs are mostly familiar ownership. A high proportion of argentinian SME are created and managed for familiar groups. Almost 70% meet these parameters and rise near the 85% in the small firms. The 45% is yet managed by its founders. The familiar characteristic impacts over several economic and productivity aspects such as control, expansion, etc. Most of firms aren’t news in the market, they have a vast fund of knowledge. Almost 60% of the firms have a minimal age of 20 years and only 12% are newer than 12 years. The ager SMEs have been developed considerable knowledge stocks about management, technics and relates to engineering, all of them adapted to the uncertain macroeconomic always present in the environment. The newer firms are generally smaller in investment and in workforce size. They tend to be less productivity and operate in the lower layer of the market, where the competitive pressure isweaker. In argentinian SMEs converges formal knowledge and learning acquired “on the way”. The education level of owners is about 60% media school and only 10% are university graduates with an important level of diversification about the specificscope of the firm. In the low tech firms, this difference accentuates. The great part of learning is achieved by doing and resolving problems. The productivity likening with other firms appears to be significant in the results. The argentinian SME have a workforce of about 50 stable employees. (Farinelli & Piñero, 2005)
Argentinian SME have register a low level in investment in the last years and a technological path with important interruptions. About 15% of SMEs doses not register an important investment in the last 6 years. The 40% have done a medium size investment (under U$100.000) and the rest have done investment over this amount. The average age of the equipment is about 12 years. Incorporation of new equipmenthas mainly the goal of cost reduction, increase quality and increase production. (Yoguel & Moori-Koenig, 2000)
In the argentinian SME the management is strongly centralized and based in abilities linked to manufacturing. The decision making process are centralized and restricted to the owners. In few cases consulting services are used either public or private. Managerial activities are sustained almost totally in manufacturing skills, possible because the experience of founders that usually tends to be the manager (Marteau, 2002). SME tends to diversify its offers as response to the almost constant crisis keeping a high level of horizontal integration.Argentinian SMEs are weakly linked with the regional industrial web due constants change in its offer and target markets. It is not observed in the firms the concentration strategy that allows increase knowledge via specialization. Outsourcing is utilized only faced to demand variation but not as a work division strategy. (Bruera, 2011)
SMEs are almost exclusively oriented to the internal market. Most of SME have tried to export without good results. In part, this occurs due to the administrative difficult that are present in the exportation process. Other strong reason is the existence of a pseudo-service, for example, parts treatment, etc. (Yoguel & Boscherini, 1996). Argentinian SMEs are strong business to business oriented. Large proportion of SME does not sell its product to the final market. The other parte sell its products mostly to some external commercialization channel. Most of SMEsdon’t have strategies to medium time. A reduced subset considers as key success factors doing important technical-organizational changes (Farinelli & Piñero, 2005).
The problems facing most competitive firms are completely different from those of concern to the lowest level of competitiveness. The most competitive have difficulty competing in international markets and to incur high costs of logistics, among others. The less competitive, however, receive strong competition in the domestic markets; have problems with decreased profit margins and increased production costs. Beyond business, differences between industrial sectors in terms of competitiveness are important. In the case of sectors that receivestrong competitive pressures from imported goods, high levels of competitiveness are found.(Fundación Observatorio Pymes, 2010)
5. Environment characterization
5.1 Construction sector
The construction sector in Argentina, during the years of the current analysis had a marked expansion in rates of about the 10% annually, depending of the specific areas. Since 2003,construction activityincreased from11,000 to 26,000registered companies,of whichover 90% are small and medium enterprises (SMEs), and grew from 70,000 to500,000 employees, of which 50,000jobswere createdin 2011(Instituto Nacional de Estadísticas y Censos (INDEC), 2010-2011). One of the most important reason was the unpredictably economy of the next years together with interesting surplus in the agricultural sector and the fall of absolute dollar acquisitive power. This way, the constructions appears as a safe place to invest due the always present idea that real-estate market is a safe place to invest and the prices always go up. In the technological aspect, the construction market is catalogued as traditional. The most of the construction components are in the maturity state in the product life cycle. The firms in the present work belong(almosttotally) to the traditional subset (metalwork, windows, doors, ceramics, etc.). Only there is one firm that belongs to the medium tech subset in the sense that works with new materials to make kitchen countertops. Nevertheless, there are within the panel, firms that have implement news technology to its manufacturing process, mostly in the automation area.
In the operation area in where the study was carried out, there is an intense but stable competence. The products are “traditional”, the competence is almost always price intensive, following for the quality intensive. The firms generally don’t sell directly to the final customer; they use the commercial channel of the big construction shops or by media of professionals. Advertising is not well developed, and brand strategy is almost inexistent, the large construction retail companies take care of this issue. The outside competition is weak due the high logistics costs of moving construction material, given to the local products comparative advantages(Ruggirello, 2011).
5.2 Food sector
The food sector in the period of the present analysis (2009-2011) was in expansion at rates near 17%. This expansion is due not only to the food consummation increases, but to the level of elaboration in the alimentations products. Today trends (Bio, Diet, regional, additives, etc.) generates value on the food products and increase the sales prices, increasing this way the total sales volume.(SAGPyA, 2006)
Theglobal food marketcurrently occupiesa leading role. Food demandis expanding rapidly, driven by the increasein world population, economic growth in emerging marketsand the emergenceof new consumerswith high purchasing power. In developed countriesthere is a growingdemand fordifferentiatedfood: organic, organic and gourmet.Thesestructural trendsensurea growing marketforArgentine productsand newbusiness opportunities foritspremium food andhighvalue added(Ministerio de relaciones exteriores Comercio Internacional y Culto, 2012). The sector is characterizedby a combination oflocal and foreignleading firmswithglobal presence andinnovative small businessesthat exploitmarketniches exclusive.(Deloitte, 2011)
In the interest area, there is an intense competence. This competence includes foreign providers, even internationals. Food preservation and relative low cost in logistics, allows this competition. The firms that are linked to the raw materials of local production (sugar, lemon, berries, etc.) have a comparative advantage to export. The sector is, depending of the final product, of low and medium tech. The internal market is strong with about 3.000.000 consumers in the argentiniannorthwestern, but some firms open its market to the central zone of the country, with about 25.000.000 of habitants(Instituto Nacional de Estadísticas y Censos (INDEC), 2010-2011)
6. Maturity grid
In the present work a maturity grid approach is selected. To support management and enable improvement, performance assessmentsare commonly used. One way of assessing organizational capabilities is by means of maturity grids.Dealing with hundreds of requirements can be frustrating.Most maturity grids apply to companies in any industry and donot specify what a particular process should look like. Theyidentify the characteristics that any process and every enterpriseshould have in order to design and deploy high-performanceprocesses.Typically structured around agrid in the cells it provides descriptivetext for the characteristic traits of performance at each level,also known as a “behaviorally anchored scale”(Maier, Moultrie, & Clarkso, 2012).
Maturity grids describes, in a few phrases, the characteristic behavior exhibited by a firm at a number of levels of `maturity’,for each of several key process areas.Maturity grids are a way of describing the characteristicsof an activity at a number of different levels ofperformance. At the lowest level, the performance ofan activity may be rather ad hoc, or depend on the initiativeof an individual, so that the outcome is unlikely to bepredictable or reproducible.As the level increases, activitiesare performed more systematically and are welldefined and managed. At the highest level, best practicesare adopted and continually improved.For repetitive activities, it is likely the existence of defined process, to ensure consistency of approach and outcome. Oneway to look at maturity levels is in respect of suchprocesses. Is there a process at all? If so, is it effectiveand efficient? Are people aware of it or is it ignored?Is the process itself seen as a potential source of competitiveadvantage, subject to periodic review andimprovement?(Farrukh, Fraser , & Gregory, 2003)
Maturity grids tend to be simple and serve as diagnostic tools withoutaspiring to provide certiﬁcation. They may beused as a stand-alone assessment or as a subset of a broaderimprovement initiative and to assess Maturity of Organizationalcapabilities that refer to, for example, innovation, project management, etc.A common principle is to represent maturity as a numberof cumulative stages, where higher stages build on the requirements of lower stages. Four leverage points have been proved to be worth to use: 1) existence and adherence to a structured process; 2) alteration of organizationalstructure; 3) emphasis on people; and 4) emphasis on learning. In a grid, cell descriptions“reveal” the researchers’ views of an organization, its processes,people, and products.
To construct and adequate, a series of step must to be done:1) Specify Audience, 2) Define Aim, 3) Clarify Scope and 4) Select Maturity Levels (Rating Scale)
Then, it is necessary to formulate Cell Text: Intersection of Process Areas andMaturity Levels): It is one of themost important steps. Processcharacteristics need to be described at each level of maturity.A mechanismto formulate the cell text as rating scaleconsist in identify extreme ends of the scale, i.e., best and worst practices, and then, to determine characteristics of all the stages in between.
To set the administration mechanism is necessary to determinate if it will have Focus on process (raising awareness): Individual scores are taken as prompts for a discussion and identiﬁcationof steps for improvement, or focus on end results (benchmarking) where thescores are collated to give an overall assessment of the capability and anoverall maturity level
Finally arrives the evaluation stage: It is necessary make a previous Validation: Once a grid is populated, it must be testedfor validity and relevance. In terms of veriﬁcation, through application, the method developed needs to be evaluated against the successcriteria and requirements(Maier, Moultrie, & Clarkso, 2012).
7. Performance measurement in SME
In recent years, literature has identified the increasing complexity of small and medium-sizedenterprises (SMEs) and highlighted their sensitivity to differences in managerial culture andmanagement systems. Research has shown that performance measurement systems (PMSs)could play an important role in supporting managerial development in these companies. Constrain PMSs in manufacturing SMEs are defined, e.g. lackof financial and human resources, wrong perception of the benefits of PMS implementation,short-term strategic planning. PMSs should support SMEs to manageuncertainty, to innovate in their products andservices, and to sustain evolution and changeprocesses.PMS could support the decision-making processes in SMEs and help themimprove their management processes andstrategic control(Garengo, Biazzo, & Bitit, 2005).
In addition, SMEstend to have poor strategic planning and donot fully understand what their critical successfactors are.New technologies help to reducethe costs of implementing PMS. The mains difficulties to SMEs adopting performance measurementsystems are: lack of time for non-operational activities and the weak understanding of top managers in the PMS project(Taticchi, Balachandran, Botarelli, & Cagnazzo, 2008).Despite the recognized importance of performance measurement in SMEs, there are almost no models specifically aimed to SMEs.SMEs are characterized by poor strategic planning and their decision-making processes are not formalized.SMEs require approaches that respond to their specific needs and are efficient and easy to implement.
(Chennell, Dransfield & Field, 2000)identify, among others, the following factors
Alignment between strategy and performance measurement is particularly important in SMEs due the lack of formalized strategy, and implementing a PMS could promote the definition or formalization of business strategy.The approach to assessing stakeholder satisfaction in SMEs must be simple.
Balance: Scholars take different approaches to balance: : Balance between internal and external measures, Balance in measures different organizational levels, Balance related to the results–determinants relationship and (Kaplan & Norton, 1996) propose balancing four different perspectives based on the nature of the measures (financial and non-financial) and the object of the measures (internal and external). Balanced models can be defined as models that adopt different perspectives of analysis and manage them in a coordinated way.SMEs are characterized by a focus on operational and financial aspects and often only measure the performance of single aspects such as profits. They need to increase their strategic managerial approach to align decision-making processes to strategic objectives are marked as important and viable by a balanced model.
Process oriented:management is becoming a part of thelanguage and actions of many organizations.Organizations should replacefunctional performance measures with process-related measures.Since SMEs are small, theyhave more visible end-to-end business processes,which make process orientation a simpler.
Depth and Breadth: Depth is the level of detail towhich performance measures and indicatorsare applied. The breadth of a PMS relates tothe scope of the activities included in PMS. SMEs should use PMSs that focus on breadth, not depth. Causal relationship between results and determinants is strongly recommended
Clarity and Simplicity: It is marked that the PMS has to have the following characteristics:
According to the literature, SMEs need a simple PMS that can give the management focused, clear and useful information. The number of measures used should be limited. Most of the models analyzed are characterized by strategy alignment and favor strategyimprovement(Garengo, Biazzo, & Bitit, 2005).
8. Proposed Model
From strategy analysis, (Strategor, 2007) and also from the marketing discipline, the mission of a company, no matter their size or activity, should be accepted by customers and / or group of stakeholders. This acceptation covers various aspects of which the product or service is the most obvious and perhaps the most important. But we cannot leave out other aspects such as the services associated to the sale of the product, information, and the operational efficiency that is an important factor to price setting(Mintzberg, 2001).
These mentioned criteria allow to the firm to comply with the mission statement. This condition is indeed necessary for the growth of the company. In addition, the company must meet its profitability targets in terms of management of its internal costs by the operational efficiency while keep in mind this strategic goals that gives it the necessary robustness to survive in the long term (Meunier, 2007). Two companies with similar commercial operations and environment can have very different profits due to different management styles. In (Hughes, 2001) it is noted that management practices are more constrains to SME development than the financial factors. (Kotler, 2003)stay that It is not enough to be profitable. Companies must also grow. In fact, if you don’t grow, you won’t be profitable for long
There is multiples approaches for the modeling of the companies. According to (Porter M. , 1985) an enterprise can be modeled by mean of the value chain. This approach does focus in the activities that add value and in the support activities. The primary activities that he identifies are: Internal Logistics, Operations, External Logistics, Marketing and sales and Service. Those are the activities implied in the physical creation of the product and their sale and transfer to the buyer. He identifies also support activities: Supplying, Technology, Human resources and Infrastructure. (Salles, 2003)proposes a specific SMEs model and adds specifically the Innovation function. The following components are enlisted: The productive function (Where the human resources are included), the economic function and of relationship with the market, the financial function, the innovation function and of administration of change next to the system of information. (Giget, 2000)propose six essential functions: Two resources functions (human and financials) and three competences functions (designing, production and marketing). Over all, there is the managerial function. Marketing function contain the supply chain management and three transversal functions are found: Quality, Communication (internal and external) and Innovation.
According to the earlier analysis, the following activities are proposed in the present model:
Planning:Includes all the activities that derive in an intellectual result in plan formwith a spatial and temporal coordination of the necessary resources(Porter M. , 1985)(Salles, 2003)(Giget, 2000).
Decision and control:(Mintzberg, 1992)It identifies the tactical level and the middle line management. Includes the progress measuring and consumption of resources as well as taking the necessary decisions to maintain the planed direction.It interacts strongly with the planning and operations activities.
Financial Management:(Giget, 2000)Payments, collections, general accounting, taxes, etc. Implies the operations of the accounting also. The financial administration offers an essential service to the rest of the structure via the acquisition of all the resources that the company needs to operate. It is an important source of profit by the management of accounting cycles.
Technology management:(Boly, 2004)It embraces all the aspects related with, improvements of products and processes, support to the analysis of the technological and competitive environment, planning, decision making, organizational learning, etc.
Product design:(Giget, 2000)(Trott, 2005)It envolves specifically the client understanging methodology (QFD, needs analysis, etc.) and the design of concepts that respond to these clients. It is important to separate this activity from commercialization and planning activities due the high charge of creativity, problem solving, ingenious and other soft and even artistic activities.
Human Resources:(González, Camargo, Nemery, & Sepúlveda, 2010)It takes in charge the development of the individuals linked to the working and organizational capabilities, career management, instruction, general formation, remuneration, successions, definition of the job, etc.
Marketing:(Kotler, 1999)It is about market research, product specification, market development, marketing mix decisions, etc. It acts strongly over the information activity in the sense of publicity and promotion.
Internal Execution:(Giget, 2000) It encompasses all the activities linked to the production or sevuction itself, including the basic operations to add value from the production inputs to the final products or services. In this area, that is the most important in the operative sense, may converge several associated technologies, like mechanicals, electronics, etc.
Service:(Strategor, 2007)It is about the operations that don't have as immediate purpose the product or main service, but the generation of the activities related to the enlarged product like warranty, after-sales, inverse logistic, etc.
Logistics and supply chain management:(Suhong, Ragu-Nathanb, & Ragu-Nathan, 2004) It includes the activities of movement of materials and information from the raw materials to the final client like operations (Internal logistics), providing, and distributions.
This way, activities are defined. In the present work, these activities are aimed to industrials SMEs. Then, several practices were defined. Practices were defined as the way of determinate task is done. For example, the product design can be carried out by acquiring patents, copying, via own I+D, etc. Then, the practice defines the way a task is carried out.
According with the early viewed about the need to measure the performance in SMEs, an approach is proposed. It is centered in four main criteria that configure the business process: The product, its associated services, the information and the operational efficiency. These criteria were selected was selectedbearing in mindthat they must be:
Considering the seven constraints listed below, the proposed model is built in two levels: The main level, the four main criteria is inferred by the intensity or quality of the contributing activities. The activities are respectively obtained by having in main the practices that converges in its by aggregation. Practices, that in fact are task performed in the firm, are obtained directly by the survey(Fig. 1). To have and objective evaluation, the survey utilize the maturity grid approach(Garengo, Biazzo, & Bitit, 2005), achieving this way a relative measurement given by the referential embedded in the maturity grid survey.
To define the criteria a bibliography review was done. (Chennell, Dransfield, & Field , 2000)postulates 5 Value-adding areas , in which an firm must be successful to survive and prosper, Business (stakeholders such as owners and shareholders), Customers, People (the employees of the enterprise), Strategic Partners (Key contractors, suppliers or collaborators) and Community (Professional, industry and local groups). Success is not defined in absolute terms; it is assessed in terms of the additional value that the enterprise provides to the stakeholders. Measures may be interpreted as being based on the ‘investment’ of money, labor, resources, support, etc. (Porter M. , 1997)stays that operational effectiveness is necessary but Not Sufficient. Together with strategy are both essential to superior performances, which after all, is the primary goal of any enterprise. A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both. (Kotler, 2003)Identifies the Components of the Market Offering as: Products featuring and Quality, Value-based prices and service mix and quality.Also remark the importance of service, brand, packaging and information differentiation. Finally caution about corporate social responsibility, understandingbroaderconcernsandtheethical,environmental,legal, and social context o fmarketing activities and programs. The cause and effects of marketing clearly extend beyond the company and the consumer to society as a whole.
According with the “Marketing Mix approach” (Kotler, 1999)a set of controllable tactic marketing tools (product, price, place and promotion) that the firm blends to produce the response it wants in the target market are defined. In the current work is proposed that is possible to extend this concept to a wider one, that additionally to marketing have in mind the company dynamics and its relationship with the entire environment.
Criteria 1: Product-Value
The fundamental level is the core benefit: the service or benefit the customer is really buying. A hotel guest is buying "rest and sleep."Thepurchaserofadrillisbuying"holes.". Atthesecondlevel,it is necessary toturn the corebenefitintoa basic product.
Thusa hotelroomincludesabed,bathroom,towels,desk,dresser,andcloset. The product concept is taken (Kotler, 1999) and defined as having as many as five characteristics: a quality level, features, styling, a brand name and packaging.
Criteria 2: Associated Services
The separation between the core products an augmented product is necessary to our analysis because today, most competition takes place at the augmented product level. Successful companies add benefits to their offers that will not only satisfy, hut also delight the customer. In the augmented product are included characteristics like the availability, the delivery, the ergonomics along the product life cycle, the warranty, the sales ambience, financing and ways of payment, etc. In other words, all the characteristics that are not central to the product itself but they make a big difference in its acquisition, utilization and final dispose(Lambin & Chantal de Moerloose, 2007).
Criteria 3: Information
Then, the information sub-criteria basically is part of the marketing mix in the sense of promotion, but also another characteristics has been have in mind, like information and communication of company’s image, financial health, the communication of action aboutfirms social responsibility, the fact to belong to certain regions, etc. All the information about the company that the client can have access to, either formally or informally, affects the way the client perceives to the product and the company’s image. Innovation must be transmitted to the client in the sense of the value of the product and the elaborating process. The client then incorporates this information in the form of perceived value.
(Boly, 2004)enumerates the eight basics forms of value added: Financial, strategic, intellectual, commercial, functional, linked to reputation, linked to novelty degree and hedonist. Of those, several are strongly linked to the information, like the strategic value to the industrial products or this linked to the novelty and reputation in the consumer products. He considers the value in the product as an extension of its performance concept.
Criteria4: Operational efficiency
Then, the “Resources market” sub-criteria is proposed to include all the exchanges between the enterprise and the resources market. This instance is considered very important because it have a close relation with the overall costs(Beal & Yasai-Ardekani, 2001).
Efficiency to deal with the resources market (that is supplying, provider’s development, innovation in buying process - i.e reverse auctions) have a direct relation with the overall costs. In this sense, if not a sufficient condition for profitability(Porter M. , 1997), the operational efficiency is a necessary condition. (Meunier, 2007). Innovation is also important in that related to the resources because the propositions of new process, new ways of production, and new business model, that can be imply significant reduction in costs and time. For example, postponement production approach(Suhong, Ragu-Nathanb, & Ragu-Nathan, 2004).
(Salles, 2003) cautionthe importance of providers to the SME, the need of diversify the sources, having alternatives providers panel. It is enlisted too the need to obtain better conditions in the relationship. The characteristic of volume strategy is known by the strong forces that the firm has over its providers, but the capabilities of the company to manage its providers panel it is vital even to the firms in niche strategy. The incoming logistic is a vital circumstance in the SME, the continues search for better process, better service, and generally better conditions as technical as economic. Strong competitive advantages are originated in providers. Also enlist that logistic providers (transport, couriers, etc. and informatics providers (systems, computers, software, etc.) Information technology has proved to be an important advantage too.
9. Methods and Data
In the present work, a panel of 35 SMEs was examined. These firms belong to two different environments. The firsts 24 of them are industrials SMEs that are related to construction industry and industrializes construction products like windows, doors, floors, structures, etc. The rest of the firms are industrial SMEs related to the food sector. Then, the practices are aggregated into activities and finally in the four main criteria, as is described below.
The practices intensities were taken as independents variables and they wereobtained directly from a survey to managers (sometimes owners) at charge of the firms. The survey method was an interview of about one hour.
The approximate annual profit growth was taken like a control variable to verify the validity of results. This data is not precisely known in most of SMEs due in part, to the informality level. But due to be the most important financial data in the enterprise, is almost always know by the manager, evenly the lack of precision.
The practices intensities were obtained via a maturity grid approach by 26 sentences in which 5 stages different of maturity were presents for each one (Fig. 2). Anexpert panel methodology to define the specific questions was carried out. To address the expert panel, the approach specific to SME used in (Salles, 2003)was strongly analyzed. Following, one of these grids is shown.
Fig. 2. Maturity grid for the marketing research practice
Aggregating measured Practices in Management Activities:
The calculation of management activities was obtained from the level of practices and via the value chain approach that was mainly used to define the activities. According to (Ben Rejeb, Boly, & Morel-Guimaraes, 2008)the outcomes of the practices were analyzed. It is important to define these outputs in a unique way and at the same time, in an evaluable way. According to (Morel et al, 2011), activities represent aptitude and efficacy that the firm has to use its resources in order to obtain results. These are not easily observable and barely formalized in the SMEs. These doesn´t have enough traceability to can identify a posteriori.
By media of a multi-criteria aggregation, practices are translated in activities (Fig.3). According to a bibliographic research specific for SME, the weights are given to each practice in function of the importance over the activity (Table 1).
Let’s suppose we have m Activities and k Practices, the activities will be calculated as:
Fig 3: Activities evaluation by a weighted sum of the practices intensities.
Where Wn are the weights of each practice over the specific Activitym.The following table shows an example of this procedure over the Planning Activity.
Table 1.Bibliographic determination of the Activities weights
Aggregating Activities in the four main criteria
To aggregate activities in the different criteria, again an expert panel methodology was used. The panel methodology consist in show theactivities impacting over the criteria based in a bibliographic research and ask to SME managers to give priorities among them. Based in the answers, a ranking was made and the weights were attributed. Here we present the example for the Product main criteria.
Table 2. Parameters defined for the main criteria “Associated services”
The activities are aggregated in the main criteria by a weighted sum.
Fig 4.Criteria value obtained by a weighted sum.
10. Data presentation
In the following table it is possible to observe the values obtained for the food sector.
Table 3: Food firms panel and its main criteria values
Table 4: Inter-sector comparison results
To validate the model, an intra-sector analysis was done. In it, firms have been divided according to the last year financial performance. According to the present approach, the most performer firms should have higher values in the four main criteria. The panel of construction sector firms have been divided in two panels of 12 firms and then analyzed. The results are shown in the table
Table 5: Intra-sector (Construction) comparison results
A method relatively simple to evaluate the SMEs performance was presented. This method is specifically designed to SMEs due the simplicity of the variables involved and the ergonomic in application. The methodology applied allows the firms contrast its main management capabilities against a referential specifically developed via the maturity grid approach.
From the obtained results it is possible observe that food sector appears to be better developed in the four main criteria (Table 4). Nevertheless, differences have a poor statistical significance. The criteria or Product, Associated services and Operational Efficiency shows the biggest mean differences. Information doesn’t show assignificantly different trough the two examined sectors.
The differences between sectors could be explained by the presence of exporting SMEs in the food sectors and also by the higher presence of certificated firms in the food panel. This sector is more exposed to certification needs (ISO, HACCP, traceability, etc.) than the construction sector that usually is not certified due its products profiles(Terlaak, Andrew, & King, 2006).
In the intra-sector analysis, the asset of the firm was consistent with their performances (Table 5). There is an important statistical significance in the mean differences. In this way, it is possible to state that the current performance measurement system is able to be used as indirect financial performance indicator in the sense of comparing the firms against a known panel. Other important implication of the present work is that the SMEs managerial performance differs strongly according to their financial performance and weakly according to the sector in which they operate.
13. Limitations and further research
The first limitation is the size and spatial pattern of the current sample. About 80% of the sample was taken in the Tucumán state and there are very different patterns in all the states belonging to argentinian northwestern. Tucumán is a state that has two main productions (Lemon and sugar cane) and these productions are not the main industries in the other states. Other limitation is the main product of the firms. There are a very wide range of products in the sample, even within the sectors. This implies differences in the technology management and can impact overt the evaluated results.
A calibration of the model could be needed. In this way, the introduction to the panel of high tech SMEs is necessary like other industrial firms with strong product design intensity. The two analyzed panels have similar dynamics in several aspects.
Lastly, the introduction to competitive environment variables to the model could be interesting. In the present work, the firms have an external referential that not necessary match with its managerial needs. The presence of environmental referential can be illustrative to the current state and additionally, very useful to define a competitive strategy.
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|Recibido el: 02-07-2012; Aprobado el: 20-07-2012|