University of Strathclyde Department of Design, Manufacture and Engineering Management Glasgow, UK Strategy Process in Manufacturing SMEs by Aylin Ates A thesis presented in fulfilment of the requirements for the degree of Doctor of Philosophy 2008 COPYRIGHT STATEMENT ‘The copyright if this thesis belongs to the author under the terms of the United Kingdom Copyrights Acts as qualified by the University of Strathclyde Regulation 3.49. Due acknowledgement must always be made of the use of any material contained in, or derived from, this thesis.’ ii ACKNOWLEDGEMENTS I wish to give my sincere thanks to those who contributed suggestions, inspiration, and cases to this research. Thanks to EPSRC (Engineering and Physical Sciences Research Council) and University of Strathclyde, Department of Design, Manufacture and Engineering Management for funding this doctoral study. Also, thanks to industrial collaborators in case study companies. I would like to mention the generosity, encouragement, advice and constructive criticism I have received on this thesis and over the last three years from my supervisor, Prof. Umit Bititci. Not enough can be said about the friendly and professional assistance of Prof. Bititci during the course of this research. He has shown an incredible ability to give quick, helpful and challenging comments on large amounts of text. He has been very supportive during all my years as a doctoral student. I would also like to express my thanks and appreciation to my present and former colleagues and friends at the University of Strathclyde who inspired me greatly and made this journey much joyful: Marisa Smith, Cigdem Altin-Gumussoy, Katherine Davis, Eileen Hearl, Alina Shamsuddin, Carrie Shaw, Margo Hutchison, Maneesh Kumar, Jose Hernandez, Adrian Shields, Trevor Turner, Figen Cakar, Peter Ball, Fran Ackermann, John Davis, Alex Duffy, Robert van der Meer and Jill MacBryde. My very special thanks go to David MacKay and Catherine Maguire whom I worked with in the larger project and have given me extensive feedback on my thesis. You all have made my life in Glasgow enjoyable both professionally and personally. Many thanks go to my internal examiner Dr. Kepa Mendibil and my external examiner Prof. Mike Gregory for their valuable suggestions on my thesis for future publications. Last but not least, I am grateful to my sisters and brothers; Deniz, Yasemin, Ozgur, Yeliz, Baris, the source of much joy, encouragement, and support, specially my mother, Leyla Ates and my father, Hasan Ates, I can not express in words how much I love you! Despite all support I have received, responsibility for any shortcomings in my doctoral thesis is of course mine alone. Glasgow, June 2008 Aylin Ates iii CONTENTS Page Title Page i Copyright Statement ii Acknowledgements iii Contents iv List of Tables viii List of Figures ix Abstract x Chapter 1 INTRODUCTION 1 1.1 Contextualising the Research 3 1.2 Why is this Topic Timely and Interesting to Investigate? 5 1.3 What Does This Research Do? 5 1.4 Thesis Structure 7 2 A PROCESS-BASED APPROACH TO STRATEGY 9 MANAGEMENT: A Review of SME Context 2.1 Historical Development of Strategy Management 9 2.1.1 Rational (Planning / Analytical) approach 10 2.1.2 Emergent strategy approach 12 2.1.3 Processual approach to strategy 14 2.1.4 Underlying theoretical framework: A processual view to 16 strategy 2.2 SME Strategy 21 2.2.1 What is an SME? 22 2.2.2 Entrepreneurship strategy and strategic management 23 2.3 Key Focus of the SME Strategy 25 2.3.1 Flexibility and responsiveness 25 2.3.2 Pursuit of opportunities 26 2.3.3 Risk taking 26 2.3.4 Innovation, unconventional thinking and creativity 26 2.3.5 Less structured decision making mechanisms 26 2.3.6 Organising and allocating limited economic resources 29 effectively 2.3.7 Operational focus 29 2.3.8 Further research questions 30 2.3.9 Strategy tools, methods and techniques 32 2.4 Towards a Conceptual Framework for the SME Strategy 32 Process 2.4.1 Environmental scanning/ gathering, assimilating and 33 processing internal and external environmental information 2.4.2 Strategic planning/ formulation/ strategy development 33 process 2.4.3 Deployment of strategic plans/ implementation/ execution 35 2.4.4 Discovering and exploiting opportunities 35 iv 2.4.5 Selecting strategies 36 2.4.6 Communication 36 2.4.7 Reorganisation and organisational change 36 2.4.8 Strategy reformulation/ revisions/ evaluation/ modifying 37 strategy 2.5 The Anatomy of the Strategy Process 39 2.6 Summary of Chapter 2: The purpose revisited 49 3 MANAGEMENT RESEARCH OVERVIEW: Focusing on 51 Case Study Method 3.1 Introduction: Scoping the Field in Research Paradigms 51 3.2 Debate Around Research Philosophies 52 3.2.1 Ontology 52 3.2.2 Epistemology 53 3.2.2.1 Positivist paradigm 54 3.2.2.2 Interpretivist paradigm 54 3.2.2.3 Critical realist paradigm 55 3.2.2.4 Action research 55 3.2.3 Methodology 56 3.2.4 Methods and techniques 58 3.3 Summary of Research Design 58 3.4 A Review of Research Methodologies and Methods 59 3.4.1 Survey research 60 3.4.2 Multivariate research design 62 3.4.3 Experimental research 62 3.4.4 Model building 63 3.4.5 Grounded theory 63 3.4.6 Case study method 65 3.4.6.1 When to employ case study research 65 3.4.6.2 Case study research types 66 3.4.6.2.1 Explanatory/ causal case studies 66 3.4.6.2.2 Descriptive case studies 66 3.4.6.2.3 Exploratory case studies 66 3.4.6.2.4 Theory building 67 3.4.6.2.5 Theory testing 68 3.4.6.2.6 Theory extension/refinement 68 3.4.6.3 Core tasks while conducting case study research 69 3.4.7 Interviews 71 3.5 Choices Researchers Have to Make 72 3.6 Criteria for Assessing the Quality of Research 74 3.6.1 Data/ research evidence 75 3.6.2 Contribution to knowledge 76 3.6.3 Contribution to practice 76 3.6.4 Internal validity 76 3.6.5 External validity/Generalisability 76 3.6.6 Construct validity 77 3.6.7 Reliability 77 3.7 Summary of Chapter 3 82 4 RESEARCH DESIGN 83 4.1 Research Design Addressing This Study 83 4.1.1 Broad research problem 84 4.1.2 The researcher’s preferences 85 v 4.1.3 Ontology choice exploration for this study: Objective 86 ontology 4.1.2 Epistemology choice for this study: Critical realist 88 paradigm 4.1.3 Methodology choice for this research: Inductive approach 89 4.1.4 Research methods/techniques for this research: Case study 91 method 4.1.4.1 Case study versus Survey method 92 4.1.4.2 Case study versus Experiments 93 4.1.4.3 Case study versus Participation 93 4.1.4.4 Summary: Case study method choice for this research 93 4.2 Case Study Design Addressing This Study 96 4.2. 1 Case study type 96 4.2. 2 Getting started: Defining the specific research questions 98 4.2. 3 Selecting case study organisations 98 4.2.3.1 Unit of analysis 100 4.3 Summary of Chapter 4 101 5 FIELD WORK: Data Collection and Presenting 103 5.1 Exploratory Stage 104 5.2 Case Study Selection Stage 105 5.3 Research Design Modification Stage: Case study protocol 107 refinement 5.3.1 Case study protocol to get prepared for the field work 107 5.4 Case Study Data Collection Process 110 5.4.1 Collecting case study evidence 111 5.5 Case Study Reports 113 5.6 Company Profiles 114 5.7 Summary of Chapter 5 114 6 FIELD WORK: Multiple-Case Study Qualitative Data 116 Analysis and Results 6.1 Display Data and Coding 117 6.1.1 Unit of analysis 118 6.1.2 Taxonomy and coding book 119 6.2 Within-Case Displays 120 6.2.1 Within-Case exploring and describing 120 6.2.2 Within-Case explaining and predicting 121 6.2.2.1 Thematic based interpretation and Counting 121 6.2.2.2 Thematic based interpretation and Mapping 122 6.3 Blairs of Scotland 123 6.3.1 Pre-1997: before the new MD was appointed 124 6.3.2 Post-1997: after the new MD was appointed 124 6.3.3 Strategic initiatives (Unit of Analysis) 125 6.3.4 Coding 125 6.3.4.1 Coding result for Blairs of Scotland 126 6.3.5 Blairs of Scotland conceptually ordered map 130 6.3.6 Researcher’s interpretations 131 6.4 Cemtron 135 6.4.1 Strategic initiatives 136 6.4.2 Coding 136 6.4.2.1 Coding result for Cemtron 136 6.4.3 Cemtron conceptually ordered map 138 vi 6.4.4 Researcher’s interpretations 139 6.5 Houston Co-pack 144 6.5.1 Strategic initiatives 144 6.5.2 Coding 145 6.5.2.1 Coding result for Houston Co-pack 145 6.5.3 Houston Co-pack conceptually ordered map 147 6.5.4 Researcher’s interpretations 148 6.6 TFC Cables 151 6.6.1 Strategic initiatives 152 6.6.2 Coding 152 6.6.2.1 Coding result for TFC 153 6.6.3 TFC Cables conceptually ordered map 155 6.6.4 Researcher’s interpretations 156 6.7 Cross-Case Analysis 160 6.7.1 Cross-case analysis results 161 6.7.1.1 Answers to research question 1 162 6.7.1.2 Answers to research question 2 164 6.7.1.3 Answers to research question 3 168 6.7.1.4 Answers to research question 4 169 6.7.1.5 Answers to the broad research question 170 6.8 Summary of Chapter 6 170 7 DISCUSSIONS 172 7.1 A Critical Review of the Research Objectives 172 7.2 Discussion on Findings 173 7.2.1 The usefulness of a process theory in this study 173 7.3 Theoretical Contribution 174 7.4 Implications for Managerial Practice 177 7.5 Assessing the Research Quality 187 7.6 Limitations 196 7.7 Future Research Directions 198 7.8 Some Personal Reflections and Lessons 199 8 CONCLUSIONS AND KEY LEARNING POINTS 201 8.1 Research Conclusions 201 8.2 Key Learning Points 203 8.2.1 Implications for theory 206 8.2.2 Implications for practice 208 Bibliography 209 Appendices 226 vii LIST OF TABLES Page Table 2.1 Summary of key focus and authors in strategy approaches 19 Table 2.2 SME definition 23 Table 2.3 The anatomy of the strategy process 42 Table 2.4 Definitions for strategy process activities 46 Table 3.1. Ontologies and epistemologies in social science research 57 Table 3.2. Matching research purpose with case study types 69 Table 3.3 Process of building theory from case studies 70 Table 3.4 Strengths and weaknesses of research interviews 72 Table 3.5 Key choices of research design 73 Table 3.6 Research design viewpoints related to research quality 78 Table 3.7 Some ways to deliver research quality criteria in case studies 79 Table 3.8 Summary of research quality criteria in this research 80 Table 4.1. Relevant characteristics for different research ontologies 87 Table 4.2. Research method choice for this study 95 Table 4.3 Case study type for this research 97 Table 5.1 Case study companies: Company profiles and business facts 115 Table 6.1 Strategy process conceptual framework based on theory (taxonomy) 120 Table 6.2 Example of coding table for Blairs of Scotland 127 Table 6.3 Cross-case analysis of to answer the RQ1 163 Table 6.4 Cross case analysis of strategic initiatives 310 Table 6.5 Cross-case analysis matrix for thematic pattern searching 312 Table 6.6 Pattern searching across within-case analysis answers to the RQs 316 Table 7.1 Summary of evaluation of research quality criteria based in 188 literature Table 7.2 Process of building theory from case studies 193 Table 8.1 Emergent and deliberate nature of approaches to strategy 206 viii LIST OF FIGURES Page Figure 1.1 Locating manufacturing SME strategy process as a subject 4 Figure 2.1 Deliberate and emergent Strategies 13 Figure 2.2 Various kinds of strategies, from rather deliberate to mostly 20 emergent Figure 2.3 Answers to some research questions based on literature on the topic 38 of SME strategy process Figure 2.4 Strategy process framework based on theory 44 Figure 3.1 Choice of research methods related to ontology 53 Figure 3.2 Research methodology design building blocks 58 Figure 3.3 Research design map 60 Figure 3.4 The process of theory building 67 Figure 3.5 Research design and related method choices 73 Figure 4.1 Research design activity map 84 Figure 4.2 Paradigm choice for this study 89 Figure 4.3 The REL triangle 90 Figure 4.4 Research design choice map for this research 95 Figure 5.1 Research activities used for field work in this research 104 Figure 5.2 Data collection activities map 111 Figure 5.3 Triangulation of data in this study 113 Figure 6.1 Data analysis process summary 117 Figure 6.2 Emphasis on activities in Blairs of Scatland 128 Figure 6.3 Emphasis on activities in Cemtron 137 Figure 6.4 Emphasis on activities in Houston Co-pack 146 Figure 6.5 Emphasis on activities in TFC 154 Figure 6.6 Within case analysis about emphasis on phases 162 Figure 6.7 Within case analysis about emphasis on activities 164 Figure 6.8 Qualitative data design summary 171 Figure 8.1 Strategy dynamics in SMEs 205 ix ABSTRACT Strategy process has been widely publicised during the last three decades, but what has been accomplished by strategy management literature in manufacturing small to medium sized enterprises (SMEs)? The application of strategy management in manufacturing SME practices can be seen as posing particular challenges. It is argued in literature that there is a need to understand whether and how managers in manufacturing SMEs have taken up the language and practice of planning, strategic analysis and execution. This research suggests a process and activity based approach to look at the practice of strategy management in SMEs in order to tackle this challenge. This exploratory study based on four comprehensive case studies investigates the strategy stories via exploring key strategic initiatives and activities, how they link together and which strategy tools, methods and techniques are used. This research concludes that a process based approach is useful and valid to understand strategy in SMEs because this view decomposes the process phases into activities which managers are more comfortable to talk through. However, we need to understand SME managers’ language around strategising. There is an indication that if we change the language of SME managers, the findings of this study would map onto main stream strategy management theory clearly. It is found that the dynamics of the manufacturing SME strategy process have both emergent and planned dimensions. SME managers execute the strategy process mainly from an informal fashion by holding multiple functions and with limited application of strategy management methods and techniques. At an activity level, SMEs seem to be putting more emphasis on external environmental scanning (customers, suppliers, competitors, universities and lenders) and defining grand strategy and goals. This implies that SME strategy process is characterised by market based orientation, opportunity seeking and strategic awareness rather than resources or core competencies/ capabilities. Although this study’s findings may be criticised because they are grounded on four companies, robust dimensions and insights into dynamics of the strategy process in manufacturing SMEs are achieved through saturation among emergent themes in data. x