AS Business: Strategies during hard economic times

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BUSINESS STRATEGIES AND PERFORMANCE
DURING DIFFICULT ECONOMIC CONDITIONS
For the Department of Business Innovation and Skills
(BIS)
John Kitching
Robert Blackburn
David Smallbone
Small Business Research Centre, Kingston University
Sarah Dixon
School of Management, Bath University
June 2009
URN 09/1031
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Contents
EXECUTIVE SUMMARY
1. INTRODUCTION, RESEARCH OBJECTIVES AND METHODS
2. RESEARCH CONTEXT
2.1 Defining Difficult Economic Conditions
2.2 The Current Crisis
3. ANALYTICAL FRAMEWORK
4. THE BUSINESS STRATEGY AND MANAGEMENT LITERATURE
4.1 Business Strategy: General Considerations
4.2 Strategic Adaptation to Environmental Jolts, Turbulence and Radical Institutional
Change
4.3 Strategic Adaptation to Recession
4.4 Retrenchment Strategies
4.5 Investment Strategies
4.6 `Ambidextrous' Strategies
4.7 Business Size as an Influence on Strategic Adaptation to Difficult Economic
Conditions
4.8 International Experience
5. CONTEMPORARY COMMENTARY ON THE CURRENT CRISIS
6.…read more

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EXECUTIVE SUMMARY
Introduction and Research Objectives
This report reviews the available literatures in order to: (i) identify the
pressures, threats and opportunities facing businesses operating in difficult
economic conditions such as those currently being experienced in the UK and
globally (ii) identify the strategies adopted by businesses that have
experienced such conditions and (iii) assess which strategies proved to be
problematic and those that have allowed businesses to respond dynamically,
survive and emerge strongly as economic conditions improved.…read more

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The increasing globalisation of economic activity ­ the interconnectedness of
economic activity across national frontiers renders the current crisis different
from previous recessions.
The current recession may well constitute a `structural break' or `phase shift' in
the economy, in which the previously held assumptions about how it functions
and economic models are open to question. The outcome of the current
recession may be a new economic order, the nature of which cannot be fully
understood today.
Recessions impact unevenly on industries, countries, regions and firms.…read more

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Conversely, the `pitstop' theory of
business behaviour in recession treats firms as more willing to innovate
because the opportunity costs of not undertaking such action are lower than
during more buoyant times. Both UK and international data, for example, from
Japan and Russia, suggests that recession imposes threats on businesses but
also opens up new opportunities.
Business strategies. Recessions present businesses with a dilemma:
whether to cut costs to conserve resources, or to invest in new products and
processes to exploit competitor weakness.…read more

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Ambidextrous' strategies combine retrenchment and investment. It is
likely that most firms adapt under recession conditions through judicious
cost/assetcutting behaviour and through investment in product innovation
and market development. Choosing the appropriate investments to make
and costs to cut takes on additional importance during recession when
market selection pressures are at their most severe.
Strategy and Performance
No single strategy. Business performance is highly variable under recession
conditions, and no particular strategy can guarantee survival and success.…read more

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Business size can affect how recession conditions impact on businesses and
their ability to respond. The more limited resource base of small enterprises
compared with larger firms, particularly in terms of finance and management
capabilities, can affect their ability to scan, analyse and respond to major
environmental change. Conversely, small firms often possess the flexibility to
adjust resource inputs, processes, prices and products quickly in response to
environmental shocks.…read more

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Proppingup outmoded business models or industries in structural decline, a
process accentuated by recession, may be less desirable than more
experimental forms of intervention.
Assessment/interpretation
Studies of business adaptation under recession conditions vary in scope and
quality. Much analysis and commentary is descriptive, and often prescriptive,
rather than explanatory. Sources often provide little explanation of why
businesses adapt in the ways they do, the conditions that enable, or constrain,
particular adaptations, or the specific factors that affect performance
outcomes.…read more

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UK actors. The literature focusing on organisational responses to
recession conditions rarely takes such global influences explicitly into account.
Perhaps this relates, at least in part, to the previous UK recession occurring
nearly 20 years ago when globalising tendencies were less prominent than
they are today.…read more

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