The recent economic downtown, which had its epicenter in the United States and spilled to other countries across the world, saw an unprecedented deterioration in the way organizations conducted business and sustained their competitive efficiencies. Many companies in the United States, including the Lehman Brothers and Bear Sterns, were forced to file for bankruptcy due to the aftershocks of the recession.
The report by Gulluce and Parent (2011), titled “Survival of the Smallest: Examining the Impact of Recession on Small Business”, attempts to provide informative insights into how Canadian small and middle-sized enterprises (SMEs) survived the recession. The following is a critique of the report.
Undoubtedly, there are many things that a management scholar would validate after reading the report, but equally perplexing is the fact that some information seems to lack solid management underpinning. The authors have done well to bring into the limelight the strategies that were being used by small businesses in Canada to deal with the recession; however, they fail to account for the impact of the recession on these businesses.
For instance, it is agreeable how the authors suggest various strategies that were being employed by SMEs during the recession (e.g., cutting costs, venturing into new markets, and making personal sacrifices such as holiday cancellations and downgrading own salary), but details about why these strategies were being implemented are rather scanty.
A comprehensive analysis of the impacts of the recession (e.g., fall of consumption, rise of unemployment, increased number of bankrupt businesses, credit reductions and mounting social distress), in my view, would have led to a more salient understanding of the strategies that were being used by small companies in Canada to deal with the recession.
Overall, the report is not only insightful but also informative, and demonstrates how SME business owners take drastic measures such as scaling down their own salaries, taking more debt, venturing into new markets and creating new job opportunities to ensure their businesses thrive during challenging and uncertain times.
Other important strategies include turning to local markets to capture new markets, product diversification in Canada and abroad, recruiting new customers, reducing prices, increasing advertising/promotional efforts through expanding online presence, decreasing the number of employees, and freezing the wages and salaries of owners as well as employees (Gulluce & Parent, 2011).
Such strategies, in my view, serve as a stimulus package that could be used by SMEs to spur competitive efficiencies and performance. However, it is highly unlikely that many of these strategies may work in large organizations due to the entities’ complex organizational structure, large number of employees and massive financial outlays.
Undoubtedly, these strategies seem relevant in the small business context, but some are irrelevant when it comes to assisting big organizations deal with the ramifications of a financial crisis.
Strategies such as product/service diversification, increasingly advertising/promotional efforts, reducing federal corporate income tax, employee training and development, reducing government regulation (red tape) and undertaking geographical expansion, seem relevant across board and can be used by small and big companies to minimize the adverse effects of an economic recession.
Government-oriented financing of small businesses has been used as a stimulus strategy in times of financial strain not only in Canada but also globally (Gulluce & Parent, 2011). However, strategies such as undertaking personal sacrifices and freezing employees’ salaries may appear relevant in small business settings but quite irrelevant in big organizations due to their impractical nature.
This report is a must read for small business owners interested in taking their businesses to the next level even in times of great difficulty. Indeed, small business owners will derive motivation from the knowledge that they can achieve sustained economic growth during economic recessions if they adopt and internalize the correct set of strategies.
Gulluce & Parent (2011) mentioned Growth Oriented Enterprises (GOEs) to imply organizations that continue to achieve growth and competitiveness into the economic recession; that is, organizations that only took the crisis as a chance to capitalize on new markets and opportunities.
The strategies that were used by GOEs to ride the wave of the recent economic recession need to be disseminated to small business owners as SMEs are increasingly exposed to a multiplicity of challenges arising from their internal and external business environments. Hence, the challenge for owners is to develop the capacity to design and implement the discussed strategies and use them to boost their businesses, operationally and competitively.
To conclude this critique, it is worth noting that most Canadian small businesses were able to wade through the recent economic recession by applying a multiplicity of home-grown strategies, including working for long hours, market and product/service diversification in Canada and internationally, reducing red tape and other government regulations, boosting presence in local markets through sustained advertising and promotional activities, freezing owners’ and employees’ wages, making personal sacrifices and facilitating government funding and financing, among others (Gulluce & Parent, 2011).
The challenge now is for Canadian scholars to develop initiatives that can be used to identify which strategies are effective in specific instances and case scenarios so as to achieve synergistic efficiencies.
Reference
Gulluce, C., & Parent, L.M. (2011). Survival of the smallest: Examining the impact of recession on small business. Canadian Federation of Independent Business (1971-2011). Web.