Learning to grow – Empirical analysis of dynamic capabilities of SMEs in Brazil. André Francisco...

8/2/2019 Learning to grow Empirical analysis of dynamic capabilities of SMEs in Brazil. Andr Francisco Wolf.

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A thesis submitted to the Wiesbaden Business School in

fulfillment for the degree of

Master of Arts

in

International Business Administration

of University of Applied Sciences Wiesbaden

(Hochschule RheinMain)

Learning to grow

Empirical analysis of dynamic

capabilities of SMEs in Brazil

Supervisor: Prof. Dr. Klaus NorthCo-supervisor:

Prof. Dr. Franz Giesel

Submitted by: Andr Francisco WolfAuf der Unterheide 15

65549 Limburg

Wiesbaden, October 15, 2011


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Executive Summary I

Executive Summary

This thesis is part of a project called Sustainable competitiveness of SMEs in

turbulent economic and social environments - a network approach or dynamic

SME as short version. The project tries to combine European innovation and

organizational learning models with Latin American survival strategies in

turbulent economies.

Dynamic SME is a four year project which started in April this year with support

of Marie Curie International Research Staff Exchange Scheme Fellowship within

the seventh European Community Framework Programme. On the one hand theproject has the objective to strengthen research partnerships through staff

exchanges and networking activities between two European research

organizations from Germany, Hochschule RheinMain, and Spain, Universidas

Autnoma de Madrid, and two Latin American research organizations from

Brazil, Universidade Federal de Santa Catarina, and Argentina, Universidad

Nacional de Rosario. On the other hand it has the scientific objective to create a

co-evolvement process towards a successful management model for SMEs thatcombines the European innovation and organizational learning model with Latin

American survival strategies in turbulent economies.

European universities already have experience in cooperation with SMEs. One

example is the project learning to grow (Wachstum lernen - lernend wachsen)

initiated by Professor Klaus North from Hochschule RheinMain in cooperation

with RKW Deutschland. The method developed for learning to grow is the

basis for this thesis. European approaches have, however, not been tested in

turbulent economic environments.

In the course of dynamic SME the method of the project learning to grow,

which has already proved being successful in Germany, will be tested in turbulent

markets such as in Argentina and Brazil to find out to what extent it is applicable

and what can be learned with the turbulent conditions in Latin America.


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Executive Summary II

Actually the diagnosis done for fifteen companies in this thesis is the first of seven

steps for managing growth.

Seven steps for managing growth

Source: cf. Hardwig et al. 2011, p 139

The diagnoses of the fifteen companies interviewed for this thesis led to thefollowing conclusions: In general the companies had very interesting processes

and routines to move the levers of the growth-wheel. Many examples given in the

interviews with the executives disclosed highly developed innovation and

knowledge management capabilities. E.g. the many processes to identify

opportunities for growth with the help of external and internal parties described in

the analysis of questions one and two.

But there are problems too. The differentiation practiced by many of the fifteen

SMEs between white and blue-collar workers for instance. Furthermore, some

companies act very informal without any routines and structures.

The analysis of different classifications of the fifteen SMEs showed that a higher

level of innovativeness led to a higher mean value of the self-assessment. That


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Executive Summary III

proofed that, in the case of the fifteen companies in Brazil, the ones which

evaluated their performance in regard of the sixteen questions as high, do also

have a higher level of innovativeness. The companies having a lot of routines andsystem to manage growth developed many innovations of products and processes

in the last years.

Another observation was that the Companies which invested more into R&D also

evaluated their performance higher in the self-assessment. Furthermore, it was

analyzed that the mean value of the self-assessment was rising with the number of

employees a company had. The group of companies with the highest number ofemployees had a significantly higher mean value than the other ones. The

competitiveness index of MSEs in Santa Catarina developed by SEBRAE and

Deloittes study, in which a list of Brazilian SMEs with the highest growth rates

was elaborated, proved that the results of the interviews with the fifteen SMEs

were akin to experiences other Brazilian companies had.

The fact that the fifteen Brazilian SMEs evaluated the relevance of the sixteen

questions for the competitive position very high in average shows that the

majority of the companies is aware of the importance of the subject.

Mean values of self-assessment and the relevance for competitive position of all

fifteen companies for the questions1-16


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Table of Contents IV

Table of Contents

Executive Summary ................................................................................................. I

Table of Contents .................................................................................................. IV

Abbreviations used ................................................................................................ VI

Figures .................................................................................................................. VII

1 Introduction ..................................................................................................... 1

1.1 Scope ................................................................. .............................................................. 1

1.2 Objectives ........................................................................................... ............................. 2

1.3 Mode of investigation .............................................................. ........................................ 3

2 Small and medium enterprises in Brazil ......................................................... 52.1 Characterization of SMEs in Brazil ................................................................................. 5

2.2 Challenges faced by Brazilian SMEs ............................................................. .................. 5

3 The project Aprender a crescer - Learning to grow ............................... 13

3.1 Dynamic capabilities .................................................... ................................................. 13

3.2 Project learning .............................................................. ................................................ 16

3.3 Aprender a crescer - Learning to grow .............................................................. ..... 18

4 Analysis of data ............................................................................................. 22

4.1 Applying Learning to grow in Brazil ......................................................... ................ 22

4.2 First challenge of the growth wheel: Identify opportunities for growth ........................ 25

4.2.1 Analysis of each question of the first challenge of the growth wheel ................... 25

4.2.2 General impression of the first challenge of the growth wheel ............................. 31

4.3 Second challenge of the growth wheel: Develop objectives for growth ........................ 33

4.3.1 Analysis of each question of the second challenge of the growth wheel .............. 33

4.3.2 General impression of the second challenge of the growth wheel ........................ 38

4.4 Third challenge of the growth wheel: Realize opportunities for growth ....................... 39

4.4.1 Analysis of each question of the third challenge of the growth wheel .................. 39

4.4.2 General impression of the third challenge of the growth wheel ............................ 44

4.5 Forth challenge of the growth wheel: Manage growth .......................................... ........ 46

4.5.1 Analysis of each question of the fourth challenge of the growth wheel ................ 46

4.5.2 General impression of the fourth challenge of the growth wheel.......................... 51

4.6 Analysis of the different company-classifications ......................................................... 52

4.7 Final analysis ........................................................................... ...................................... 57

5 Conclusion .................................................................................................... 61

Appendices ............................................................................................................ 65

Appendix A ............................................................................... ................................................. 65

Appendix B................................................................................................................................. 66


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Table of Contents V

Appendix C................................................................................................................................. 67

Appendix D ............................................................................... ................................................. 68

Appendix E ...................................................................................................... ........................... 69

Appendix F ...................................................................................................... ........................... 70

Appendix G ............................................................................... ................................................. 71

Appendix H ............................................................................... ................................................. 72

Appendix I ....................................................................................................... ........................... 73

Appendix J ............................................................ ................................................................. ..... 74

Appendix K ............................................................................... ................................................. 75

Appendix L ...................................................................................................... ........................... 76

Appendix M .......................................................... ................................................................. ..... 77

Appendix N ............................................................................... ................................................. 78

Appendix O ............................................................................... ................................................. 79

Appendix P ...................................................................................................... ........................... 80

Appendix Q ............................................................................... ................................................. 81

Appendix R................................................................................................................................. 82

Appendix S ...................................................................................................... ........................... 83

Appendix T ...................................................................................................... ........................... 84

Appendix U ............................................................................... ................................................. 85

Appendix V ............................................................................... ................................................. 86

References ............................................................................................................. 99

Versicherung ....................................................................................................... 101


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Abbreviations used VI

Abbreviations used

ACATE - Associao Catarinense de Empresas de TecnologiaACIF - Associao Comercial e Industrial de FlorianpolisACIRS - Associao Comercial e Industrial de Rio do SulBNDES - Brazilian Development Bank (Banco Nacional de

Desenvolvimento Economico e Social)

cf. - confer; compareCI Brasil - Programa do Circuito Integrado BrasilCNPq - Conselho Nacional de Desenvolvimento Cientfico e

Tecnolgico

e.g. - exempli gratiFAPESC - Fundao de Amparo Pesquisa e Inovao do Estado deSanta Catarina

FESC - Faculdade Evanglica de Santa CatarinaFIESC - Federao das Indstrias do Estado de Santa Catarina

FINEP - Financiadora de Estudos e ProjetosMSE - Micro and small enterprisesNGS - Ncleo de Gesto para a SustentabilidadeR&D - Research and DevelopmentSEBRAE - Servio Brasileiro de Apoio s Micro e Pequenas EmpresasSIMMMERS - Sindicato das Indstrias Metalrgicas, Mecnicas e do

Material Eltrico

SME - Small and medium enterprisesUFSC - Universidade Federal de Santa Catarina


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Figures VII

Figures

Figure 2.1 Major challenges SMEs will be facing middle and long term ...................................... 6

Figure 2.2 Which parties influence strategic decisions made by SMEs ........................................ 6

Figure 2.3 Does your company have a documented strategic planning? .................................... 7

Figure 2.4 Why is innovation important for SMEs ................................................................ ....... 9

Figure 2.5 Innovation and growth - Initiatives undertaken by SMEs to upgrade the stage of

innovation.................................................................................................................... 9

Figure 2.6 Barriers to technological innovation ......................................................... ................ 10

Figure 2.7 Challenges regarding human resources and people management ........................... 11

Figure 2.8 Factors that hinder firms' access to credit ........................................................... ..... 12

Figure 3.1 Sensing, seizing, transforming ........................................................ ........................... 15Figure 3.2 Correlation between project management and learning .......................................... 17

Figure 3.3 The growth-wheel .................................................... ................................................. 19

Figure 3.4 Seven steps for managing growth ............................................................................. 21

Figure 4.1 Aprender a crescer - As alavancas do crescimento ................................................... 22

Figure 4.2 Self-assessment ......................................................... ................................................ 23

Figure 4.3 Evaluation of relevance ....................................................... ...................................... 23

Figure 4.4 Identify opportunities for growth ............................................................. ................ 32

Figure 4.5 Mean values for questions 1 - 4 ................................................................ ................ 32

Figure 4.6 Develop objectives for growth ....................................................... ........................... 38

Figure 4.7 Mean values for questions 5 - 8 ................................................................ ................ 38

Figure 4.8 Realize opportunities for growth opportunities ........................................................ 44

Figure 4.9 Mean values for questions 9 - 12 .............................................................. ................ 45

Figure 4.10 Manage growth ............................................................... ...................................... 51

Figure 4.11 Mean values for questions 13 - 16 ........................................................ ................ 52

Figure 4.12 Companies classified into best, medium and worst mean values ........................ 52

Figure 4.13 Companies classified by number of employees .................................................... 53

Figure 4.14 Companies classified by innovativeness .......................................................... ..... 54

Figure 4.15 Companies classified by investments in R&D ....................................................... 55

Figure 4.16 Companies classified by annual growth ........................................................... ..... 56

Figure 4.17 Mean values of self-assessment and the relevance for competitive position of all

fifteen companies for the questions1-16 ......................................................... ..... 57

Figure 4.18 Linear regression (mean values of each question) ............................................... 58

Figure 4.19 Competitiveness index of MSEs in Santa Catarina (SEBRAE) ................................ 59


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1. Introduction 1

1 Introduction1.1 ScopeThe world is growing together more and more but what can we learn from eachother? This thesis is part of a project called Sustainable competitiveness of SMEs

in turbulent economic and social environments - a network approach or

dynamic SME as short version. The project tries to combine European

innovation and organizational learning models with Latin American survival

strategies in turbulent economies.

Dynamic SME is a four year project which started in April this year with supportof Marie Curie International Research Staff Exchange Scheme Fellowship within

the seventh European Community Framework Programme. On the one hand the

project has the objective to strengthen research partnerships through staff

exchanges and networking activities between two European research

organizations from Germany, Hochschule RheinMain, and Spain, Universidas

Autnoma de Madrid, and two Latin American research organizations from

Brazil, Universidade Federal de Santa Catarina, and Argentina, UniversidadNacional de Rosario. On the other hand it has the scientific objective to create a

co-evolvement process towards a successful management model for SMEs that

combines the European innovation and organizational learning model with Latin

American survival strategies in turbulent economies.

European universities already have experience in cooperating with SMEs.

Researchers have developed appropriate action learning methodologies and

support mechanisms to enhance innovation and knowledge management

capabilities. One example is the project learning to grow (Wachstum lernen -

lernend wachsen) initiated by Professor Klaus North from Hochschule

RheinMain in cooperation with RKW Deutschland. The method developed for

learning to grow provides a basis for this thesis.


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1. Introduction 2

European approaches have yet not been tested in turbulent economic

environments. The researchers in Argentina and Brazil support innovation in local

SMEs acting under those challenging circumstances. There is a rich experiencewith social entrepreneurship, cooperative ownership and other flexible governance

models of SMEs in Latin America which might also provide answers to the

challenges of future SME development in Europe.

In the course of dynamic SME the method of the project learning to grow,

which has already proved being successful in Germany, will be tested in turbulent

markets, such as in Argentina and Brazil, to find out to what extent it is applicableand what can be learned with the turbulent conditions in Latin America.

1.2 ObjectivesIn order to answer the key question of the project dynamic SME What would be

a successful management model for SMEs that combines European innovation

and organizational learning models with Latin American survival strategies in

turbulent economies? this thesis is a first step to introducing and testing the

method oflearning to grow in Brazil.

The first component of the methodology is a diagnosis of innovation and

knowledge management capabilities of SMEs with the help of interviews with

executives of different companies.

For this dissertation executives of fifteen companies located in Santa Catarina,

federal state of Brazil, were interviewed.

The main objective of this thesis is to evaluate the answers given in the interviews

and giving a first impression of innovation and knowledge management

capabilities of Brazilian SMEs.


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1. Introduction 3

1.3 Mode of investigationDuring a two month stay in Florianopolis the questionnaire for interviews with

SMEs, developed for the project learning to grow in Germany, has beencustomized to meet characteristics of Brazilian SMEs. Afterwards interviews with

executives of fifteen SMEs located in the cities Florianpolis, Jaragu do Sul,

Joinville and Rio do Sul were made.

The Research-Center for Sustainability Management (NGS) a Research and

Development Laboratory linked to the Department of Knowledge Engineering

and Management of the Federal University of Santa Catarina (UFSC) helped tocustomize the questionnaire and to get in contact with the companies interviewed

for the thesis.

The questionnaire is based on the method used in Germany. The questions were

developed and organized in the framework Learning to grow the levers of

growth by Professor Klaus North (Figure 4.1, p. 22). The sixteen questions are

divided into four challenges and each of the challenges is divided into two levers.

For the Brazilian market some questions needed to be adapted and a short

explanation of the project was added to inform the companies in advance. At the

end of the questionnaire four questions were subjoined to classify the companies.

The final version of the questionnaire used in Brazil is attached to this thesis

(Appendix V, p. 86).

This thesis analyses the answers given in the interviews. Subsequent to this

introduction the chapters two, reconsidering challenges Brazilian SMEs are

facing, and three, explaining the project learning to grow based on dynamic

capabilities and project learning, are providing the theoretical basis of the thesis.

Chapter four analyzes the data collected in the fifteen interviews. Firstly, the

answers of the different companies to each question are compared to see which


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1. Introduction 4

common practices are used and what are best and worst practices. Secondly, the

numerical results of the companies divided into different classifications are

compared.

Finally, chapter five provides the conclusion.


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2. Small and medium enterprises in Brazil 5

2 Small and medium enterprises in Brazil2.1 Characterization of SMEs in BrazilIn Brazil the definition of SMEs varies depending on the viewpoint of differententities like SEBRAE or BNDES for instance (Hner 2011). These definitions and

detailed information about SMEs in Brazil can be found in Hners thesis SMEs

in turbulent times - A comparative analysis between Argentina, Brazil and

European Countries. Hners dissertation is also a part of the project dynamic

SME.

This dissertation is focusing on the difficulties SMEs have when they are growing

and therefor the following text will look at the challenges Brazilian SMEs are

facing.

2.2 Challenges faced by Brazilian SMEs

Navegar com habilidade e eficincia em mares revoltos, fugindo da deriva

e aproveitando os bons ventos para imprimir velocidade, tarefa difcil, queexige planejamento, capacitao e constante aprimoramento. Esse tem sido

o desafio enfrentado pelos comandantes das pequenas e mdias empresas

(PMEs) brasileiras nos turbulentos oceanos de um mercado em intensa

competio. (Deloitte 2008, p 3)

The quote is from an annual study released by Deloitte in which a list of Brazilian

SMEs with the highest growth rates is elaborated each year since 2006.

The SMEs which participated in Deloittes survey of 2010 named future

challenges (Figure 2.1). The figure shows that SMEs in Brazil having a high

growth rate are concerned with technology, human resources, their administration

and financial situation.


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SMEs have to handle these challenges in order to stay competitive. But the growth

of a company also affects all aspects of these challenges. Therefor SMEs have to

use and organize all their resources wisely when they are growing.

Figure 2.1 Major challenges SMEs will be facing middle and long term

Source: cf. Deloitte 2010, p 9

In the following, four questions concerning the growth are examined.

Which parties involved can help SMEs to grow?

There are a lot of different parties involved in the success of a company. If SMEs

want to be competitive they have to use all sources to be successful. Figure 2.2

shows that clients have the highest influence on strategic decisions made by

SMEs, followed by employees and suppliers.

Figure 2.2 Which parties influence strategic decisions made by SMEs


20

4062

68

77

78

85

Compete withthe informal market

Getresourcesto finance operations

Createconditions foranagile and efficientadministration

Differentiate productsfrom the competition

Attract and retainhighly qualifiedprofessionals

Stay up todatetechnologically

Competitive costs

Percentage of companies that indicated each item; question with multiple answers (%)

10

30

31

32

45

89

Distributors

Investors

Government

Suppliers

Officials

Customers

Percentage of companies that indicated each item; question with multiple answers (%)


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The purpose of a company is to gain profits by selling products, which can be

goods or services. Because of the fact that the products are sold to the clients it is

obvious that companies orientate their decisions towards the customers. Theproducts are developed and produced by the employees and the materials for

production are furnished by the suppliers.

These parties have a major influence on the growth of a company. SMEs have to

observe the consumers needs and deliver the most innovative product to fulfill

them.

To be successful in developing the best product SMEs should use internal and

external knowledge. Following this patent clients, suppliers and employees can

help a company to detect opportunities for success.

How the fifteen companies of this survey are using internal and external

knowledge is shown in chapter 4.2.

How does the strategy influence the growth of SMEs?

When a company is growing it needs clearly structured strategic guidelines to

guarantee an organized growth and keep the objectives in mind. The survey of

Deloitte shows that most of the SMEs with the highest growth rates in Brazil are

having a strategic plan (Figure 2.3).

Figure 2.3 Does your company have a documented strategic planning?


63

26

7 3 1 Yes, it hasadocumentedstrategic planning

Yes,but the planning is notdocumented

No, butwe plan to have itshort-term

No, butwe plan to haveit the next 3to 5 years

No andwe do not wish to have one


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Developing strategic planning is extremely important for a good setting out of

objectives and creating long term value (Deloitte 2010, p 11). These plans take

into account the internal and external conditions and the evolution of the companyestimated by their managers. In addition it considers the basic premises that the

company must follow to have a consistent and sustained process.

But it is not enough to develop a strategy (O'Reilly & Pfeffer 2000). If a company

wants to be successful it has to communicate its strategy to the employees. The

staff has to know the strategy to help achieving the objectives. If not they might

go to a wrong direction.

Employees can even help to build up a companys strategy. Often employees have

more detailed information about their department than the executives and are

thinking of other aspects which can help the company in being more efficient or

innovative. Furthermore, the employees do not only have to know the strategy. It

is important that they are motivated to pursue the objectives outlined in the

strategy.

In how far the companies of this survey are having and using strategy planning is

written in chapter 4.3.

How can the employees help SMEs to grow?

Entrepreneurs indicate that the release process and adoption of new products,

services, technology and role models has become a key factor for gaining

competitiveness of organizations, capable of generating value for customers and

other stakeholders (Deloitte 2008, p 25).

Figure 2.4 shows that innovation, in particular, is an important factor for

achieving faster growth rates than the competition, besides facilitating the entry

into untapped markets and attracting and retaining talents (Deloitte 2009, p 22).


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Figure 2.4 Why is innovation important for SMEs


Thats why companies of the survey of 2008 undertake many initiatives to

advance innovation (Figure 2.5).

Figure 2.5 shows that innovation has a lot to do with human resources. Sixty-four

percent of the companies of the survey prioritize the education of its professionals

in order to achieve a higher state of innovation. In addition fifty-seven percent

recognize and encourage employees to contribute innovative ideas.

Figure 2.5 Innovation and growth - Initiatives undertaken by SMEs to

upgrade the stage of innovation


8

22

42

49

82

Other reasons

To becomeattractive toaninvestment fund

To attract andretain the besttalents

In order toenter an untapped market

Togrow fasterthan the competition

Question with multiple answers (%)

29

48

50

57

64

66

85

Having aneffective research and development

Evaluatethe acceptanceof products and/ orservices on

the market regularly

Develop partnershipswith suppliersto developnew

products and /or services

Recognize andencourageemployeescontributing

innovative ideas

Prioritizethe training ofprofessionals

Constantly investing in technology

Innovation ispart ofbusiness strategy

Extract of the 100 fastest growing companies between 2005 and 2007, multiple answers (%)


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These facts underline the importance of the employees. If a company wants to be

innovative constantly it has to install processes and routines using all input

available. A whole staff will have more ideas than one entrepreneur or theexecutives most probably.

But employees have to be qualified in order to help a company to grow. Figure

2.6 demonstrates that forty-seven percent of the SMEs of Deloittes survey name

the lack of qualified staff as a barrier to technological innovation.

Figure 2.6 Barriers to technological innovation


SMEs have to either contract qualified employees or train their staff to create

space for innovation.

In chapter 4.4 is written how companies in Santa Catarina which participated in

the survey of this thesis are using their employees to realize opportunities for

growth.

What has to be organized when SMEs are growing?

SMEs have to manage the growth intelligently. More and more aspects are

influencing the success of small business. Even SMEs are seeing importance for

internationalization (Deloitte 2008, p 21). Deloitte observed in its survey that

8

10

17

35

47

74

Lack ofappropriate technologyfor SMEs

Lack of knowledgein information technology

Lack ofadequate externaltechnical consulting

Lack ofspecific financial resources

Lack of qualified staff

High costsof innovation



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twenty-nine percent of the fastest growing SMEs in Brazil expressed the intention

to create units or offices abroad.

Internationalization and other movements are leading to several challenges that

have to be mastered by growing SMEs. One of these challenges is human

resources. Human resources are seen as a decisive factor for the sustainability of

organizations by business leaders (Deloitte 2008, p 19). As mentioned before the

difficulty for SMEs are to maintain a qualified team.

To cope with the challenges regarding human resources, which can be seen inFigure 2.7, Brazilian SMEs have to train their workforce, attract and retain

specialists.

Figure 2.7 Challenges regarding human resources and people management


Another detail which has to be managed is the financing of growth. Companies

which are growing need financial resources to invest them in new equipment,

workforce and development costs.

21

24

25

33

39

58

59

63

Provide an adequate work-life-balance to the

employees

Followthe tracksof remunerationchargedby the

market

Meetemploymentquotasestablished by the

government

Difficultytoretain the best professionals

Track trendsin relationto variable remunerationand

benefits

Difficultyin attractingskilled labor

Labourlegislation

Technical deficienciesof new professionalsentering

the market

Extract of the 100 fastest growing companies between 2005 and 2007, multiple answers (%)


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But Deloittes survey points out that the demand for financial resources is

currently not a major objective for the fastest growing SMEs in Brazil (Deloitte

2009, p 18). Only twenty-seven percent seek mechanisms to raise financialresources, both internal and external. The new economic environment accentuates

the existing difficulties in raising funds for SMEs, because financial institutions

tend to become more cautious in lending to corporations.

The main source of funds used by SMEs is the reinvestment of profits, according

to statements of eighty percent of the fastest growing SMEs (Deloitte 2009, p 18).

Figure 2.8 shows some factors hindering the firms in taking a loan.

Figure 2.8 Factors that hinder firms' access to credit


What measures are used to manage growth by the fifteen companies, which

participated in this survey, is explained in chapter 4.5.

4

16

37

51

55

81

Requirements ofcorporate governance

Time required for loan repayment

Availabilityof credit lines

Guarantee-requirements

Paperworkfor loansand financing

Interest rates on loans



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3. The project Aprender a crescer - Learning to grow 13

3 The project Aprender a crescer - Learning to grow3.1 Dynamic capabilitiesThe project learning to grow is based on the concept of dynamic capabilities. In1997 Teece was the first to define dynamic capabilities as:

() the firms ability to integrate, build, and reconfigure internal and

external competencies to address rapidly changing environments. (Teece et

al. 1997, p 516)

In order to have a competitive advantage companies have to develop a unique

selling proposition (Reeves 1961, pp 4648). With the market-based-view andthe resource-based-view there are two approaches claiming to be the best way

to create such a unique selling proposition.

The marked-based-view is characterized by porter`s five forces analysis, which

derives five forces that determine the competitive intensity and therefore

attractiveness of a market (Porter 1979). The five forces are the threat of substitute

products, the threat of established rivals, the threat of new entrants, the bargainingpower of suppliers and the bargaining power of customers.

Porters framework is used by the majority of companies to determine the

attractiveness of a market and position them in the market. The widely-spread use

of the marked-based-view makes it more and more difficult for companies to

achieve a unique selling proposition by using it. Thats why Teece observed that

the resource-based-approach is the better way to develop a unique selling

proposition (Teece et al. 1997, p 513). Teece propounded the view that firms

competitive advantages are based on their specific and difficult-to copy resources.

Furthermore, Teece suggested a definition for a dynamic capabilities framework

(Teece et al. 1997, pp 515516). This framework describes the process of

transforming factors of production into dynamic capabilities. Companies can buy

factors of production, like land, capital or unskilled labor in factor markets. These


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factors have to be transformed into firm-specific resources which are difficult or

even impossible to copy. When different firm-specific resources are put together

in clusters these can become organizational routines or competencies. Some ofthese competencies are fundamental for the business of a company and are

therefore called core competencies. Dynamic capabilities are the firms ability to

integrate, build, and reconfigure internal and external competencies to react to

rapidly changing environments. Dynamic capabilities can help a company to

adapt its core competencies to new conditions.

But it is not enough for a company to fulfill its functions efficiently. To havedynamic capabilities it also has to be economically successful (Helfat 2007, pp

1316). The creation of dynamic capabilities is a difficult task (Hardwig et al.

2011, pp 3536). They are a firm-specific combination of resources depending on

the competencies of the company. On that account it is not possible to give a

general solution for that problem.

Figure 3.1 shows model for dynamic capabilities developed by Teece. Teece

introduces readers to three classes of capabilities that he describes as sensing,

seizing and managing threats/transforming (Teece 2007, p 1319).

Sensing is a firms ability to identify, filter and calibrate opportunities (Teece

2007, pp 13221326). Companies have to develop routines to advance the

sensibility for new technologies and trends on the market. Different foundations

can help to use all available internal and external resources to master this task.

Teece defines four foundations:

The direction of internal R&D processes and selection-processes of newtechnologies.

The detection of new knowledge of suppliers and partners and the use ofthis knowledge.

Identify opportunities by analyzing market potential and customer needs.


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Collaborations with research institutions, universities, associations, orcooperation in networks, to tap external knowledge or to gain new

perspectives.

Seizing is a companys ability to capture identified opportunities (Teece 2007, pp

13261334). Therefor these opportunities have to be transformed into products or

processes. The following foundations help seizing opportunities:

Developing a customer solution or business model. Set the right enterprise boundaries to prevent activities to hinder one

another. Define the decision-making process to guarantee investments into the best

opportunities.

Building loyalty and commitment among the staff.

Figure 3.1 Sensing, seizing, transforming

Source: cf. Teece 2007, p 1342


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Managing threats/transforming is a firms ability to enhance its internal resources

(Teece 2007, pp 13341341). Also for this dynamic capability Teece mentions

four foundations: Decentralization and near decomposability to rearrange business models,

organizational structures and routines in order to ensure performance.

Cospecialization to adapt strategies, structures and processes. Governance and incentive structures to enable learning and the generation

of new knowledge.

Knowledge management to guide learning, building of internal and usingexternal knowledge.

This model was basically developed for big corporations (Hardwig et al. 2011, p

39). Thats why the model has to be adapted to fulfill the purposes of SMEs. How

the model was adapted is explained in the chapters 3.3 and 4.1.

3.2 Project learningA project is a temporary mission with a defined time period and budget (Chatfield& Johnson 2004). Projects are undertaken to meet unique goals and objectives,

typically to bring about beneficial change or added value (Nokes 2007, pp 89).

The temporary nature of projects stands in contrast with normal business

activities, which are repetitive permanent, or semi-permanent functional activities

to produce products or services (Dinsmore & Cooke-Davies 2006, pp 4346).

Project learning combines the attributes of a project with organizational learning.

Project learning complements the classic project management, but requires an

additional space to develop learning and change potentials (Hardwig et al. 2011, p

99). A project gives a structured task, which is manageable and comprehensive.

Due to the limited time and the reduced complexity a project can be structured for

systematical learning of an organization.


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Project learning is an activity of a group of employees and / or managers of a

company (Hardwig et al. 2011, p 100). On behalf of the management the group

develops and organizes a temporary and strategically important task in order todevelop the companys competencies. Challenges related to real business are first

identified and then the group plans and realizes the change needed to face the

challenge. At the same time the competencies of employees, teams and the

organization as a whole will be developed by creating new rules and routines.

These competencies help the company to respond quickly and successfully to

rapidly changing environments. Consequently individual and organizational

learning is linked by project learning.

To secure the aspect of organizational learning in a project additional learning

objectives have to be set up to support building competencies of a company.

Figure 3.2 shows the interrelations between project management and learning.

Figure 3.2 Correlation between project management and learning



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Project learning is a conscious intervention in the routine of a business. With the

help of project learning even SMEs can develop and use strategic core

competencies that are required for the generation of sustainable profitable growth.

3.3 Aprender a crescer - Learning to growAs mentioned in the introduction, in the course of the project learning to grow,

the method, which is the basis of this thesis, has been developed. It took place in

Germany guided by the University of Wiesbaden in cooperation with RKW

Deutschland GmbH, a company sponsored by the Center for Innovation and

rationalization of German industry. The project was successfully finished in 2010.

The project has been created to help SMEs to become more competitive, by

guiding them in building up innovation and knowledge management

competencies. In Germany, 124 SMEs participated in the diagnosis and 24 of

these were chosen to develop an individually tailored project, fulfilling the

fundamentals of project learning, with the help ofgrowth-consultants.

The model of dynamic capabilities developed by Teece is very analytical and

directed to big corporations (Hardwig et al. 2011, pp 5155). The experience

gained by the analysis of the 124 SMEs was used to adapt Teeces approach to the

needs of this category of companies and create a tool which is more related to

practice. The result was the growth-wheel shown in Figure 3.3.

The growth-wheel helps SMEs to develop core competencies needed for growth

(Hardwig et al. 2011, pp 5354). These competencies are developed with the help

of project learning. The growth-wheel is divided into four types of challenges

which have to be handled in order to manage growth. These challenges are:

1. Identify opportunities for growthCompanies have to identify new growth opportunities and customer

needs. By identifying new opportunities and trends early companies can

make their growth sustainable.


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2. Develop objectives for growthMany SMEs have to adapt their corporate strategy to realize identified

opportunities for growth.3. Realize opportunities for growth

In order to realize opportunities for growth managers of SMEs have to

pass on responsibilities to their employees. Only by developing

competencies of the staff and upgrading the collaboration SMEs can use

their potential to a higher extend.

4. Manage growthCompanies that have grown strongly over a long period have to handleconsequences of their growth: The organization has to be adjusted or by

implementing a new hierarchical level or new management principles.

Other problems might be the supply of key resources (e.g. skills

shortages, financial constraints).

Figure 3.3 The growth-wheel

Source: Hardwig et al. 2011, p 54


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Each of the four challenges has two levers of growth assigned to it (Hardwig et al.

2011, p 55). Levers of growth are starting points for the development ofcompetencies in SMEs. They give a practical response to the four challenges of

growth. The levers of growth are moved by project learning.

The growth-wheel does not have to be followed step by step (Hardwig et al. 2011,

p 55). It is not necessary to begin with the first challenge, identify opportunities

for growth, or following the wheel clockwise. In fact the growth-wheel supports a

SME to find out which business-related growth challenge it is facing at a certain

moment and defining the lever which has to be moved to handle it. Because a

company facing such a growth challenge needs to develop exactly these

structures, processes or competencies which help to handle it. To identify the

levers of growth, a diagnostic procedure has been developed which allows the

analysis of the growth situation of the company to select the appropriate starting

point for an initiative to enhance competencies for growth.

One of the SMEs which were chosen to develop a project in Germany was the

machine factory Gustav Eirich GmbH & Co KG. This company designed a

structured process for managing growth divided into seven incremental steps

(Hardwig et al. 2011, pp 138139).

The seven steps for managing growth demonstrated in Figure 3.4 on the next page

serve as a guideline for the development, implementation and accomplishment of

projects.

The seven steps are grouped into three major phases. The first two steps are part

of the preparation. Firstly, the growth-potential has to be analyzed. Secondly, a

project to realize growth-potential is initiated. The next phase, called

configuration, consists of the steps three to five. Subsequent to the project-

initiation the project-team and its leader have to assume responsibility. Afterwards


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a change-process is planned and then the actual change and learning process

happens. The final phase serves for the documentation. The results are reflected

and evaluated and afterwards transferred.

Figure 3.4 Seven steps for managing growth



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4. Analysis of data 22

4 Analysis of data4.1 Applying Learning to grow in BrazilAs written in the introduction the questionnaire developed in Germany needed tobe modified in order to meet Brazilian characteristics. As a first step the

diagnostic procedure developed by the project learning to grow in Germany to

analyze the growth situation of the company was translated into Portuguese and

some of the questions were modified. The sixteen questions are arranged around

the growth-wheel, positioned next to the adequate lever of growth. The result was

a map of the method learning to grow for Brazil, named Aprender a crescer -

As alavancas do crescimento(Figure 4.1).

Figure 4.1 Aprender a crescer - As alavancas do crescimento

Source: compiled by Silke Bartsch based on Hardwig et al. 2011, pp 149150


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The diagnostic procedure assigns two evaluations to each question. On the one

hand the executives of interviewed SMEs are asked to give a self-assessment of

the companys performance in regard to each question. On the other hand they areasked to estimate the relevance of each question for the competitive position of

their company.

The self-assessment of a companys performance in regard to each question is

symbolized with a traffic light and divided into three grades shown in Figure 4.2.

Figure 4.2 Self-assessment

The relevance of each question for the competitive position of a company is

divided into four levels demonstrated in Figure 4.3. An important detail: The

relevance should be evaluated independently from the own performance.

Figure 4.3 Evaluation of relevance


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The numbers of both evaluation systems are used for the numerical analysis in

this chapter.

The sixteen questions were rearranged to make it easier for the executives to readthem. Furthermore, explanatory examples were added to each question. An

explanation of the project learning to grow was enclosed to inform the SMEs

about the project, its objectives and the benefits the company can achieve.

Moreover, four questions to classify the companies were attached to the end of the

questionnaire. All put together resulted in a map which was send to the

participating SMEs in advance. The questionnaire is annexed to the thesis and canbe found in Appendix V.

Each of the fifteen interviews was done with an executive at the location of the

company. All interviews were recorded and the answers written down.

Firstly, the executives answered the questions by explaining which processes,

routines and competencies the company actually has and gave a self-assessment

of their performance.

Secondly, the firms executives evaluated the relevance of each question for the

competitive position of their company. Finally the four classifying questions were

answered.

The answers given by the fifteen SMEs in regard to the sixteen questions are

analyzed in the chapters 4.2 to 4.5. For each question the common, best and worst

practices are assembled. The sixteen questions are divided into the four challenges

of growth.

Chapter 4.6 compares the numerical results of the self-assessment and evaluation

of relevance. Therefor the companies are classified by different criteria. Both,


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self-assessment and evaluation of relevance are individual opinions of the

executives which led to very different perspectives of their own situations.

4.2 First challenge of the growth wheel: Identify opportunities for growth4.2.1 Analysis of each question of the first challenge of the growth wheel

Question 1:

Our Company recognizes opportunities and trends in the markets

of reference and captures external knowledge of suppliers, partners

and customers systematically.

The most common activities to recognize opportunities and trends with the help ofsuppliers, partners and customers are the following: Most of the 15 companies

visit national and some even international fairs to see what is newly developed in

their market segments. Also the cooperation with public organizations, like

ACATE, SEBRAE or FIESC, is practiced by several companies. The SEBRAE

(Servio Brasileiro de Apoio s Micro e Pequenas Empresas) is mostly frequented

by start-ups and small companies to help with general information and trainings,

but also to access new markets, technologies and innovations, as well as find

contact to financial services more easily (SEBRAE 2011a). The ACATE

(Associao Catarinense de Empresas de Tecnologia) is a sub-organization of the

SEBRAE and is in charge of the development of the technological sector in the

federal state of Santa Catarina (ACATE 2011). The organization takes care of

three technological companies interviewed for this thesis and helps them to

organize their business and analyze the technological markets. The chamber of

industry and commerce is called FIESC (Federao das Indstrias do Estado de

Santa Catarina) and represents the whole industry of the federal state (FIESC

2011). Another form of organization which is used by the 15 companies to

observe tendencies in the market are industrial, business and trade associations of

their segments.


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Nearly all of the fifteen companies stated that they frequently talk to their clients

to get a feeling what future developments are. Furthermore suppliers and other

business partners were mentioned as source for this type of information.

Some companies had superior ways to recognize opportunities and trends in the

markets of reference with the help of their suppliers, partners and customers.

Company A, a car repair business, reported that suppliers come to their shop to

give information and training about new developments and trends of the car

industry (Appendix A, p. 65). This company also informed that they use theiraftersales to ask their customers what they expect in future.

Another good example is company I, an engineering company producing movable

car lifters, which, on the one hand, has a joint venture with a German company, to

produce new products, and, on the other hand, does benchmarking with the help

of a specialized institute (Appendix I, p. 73).

A very scientific way to observe the market is pursued by company J, a

technological company providing analog intellectual property design (Appendix J,

p. 74). To observe the US American market they pay a sales-consultant who gives

them general information about the market and helps them to get in contact with

potential customers. For the European market they get information from a Swiss

professor and a French Ph.D. student is writing his dissertation about the global

market for their products.

The worst example in regard to the first question was company E, a forwarding

agent for the tobacco industry, which denied the existence of any form of market

observation at all (Appendix E, p. 69). Other, especially younger and therefor

smaller, companies like company D declared to be working very informal and

bearing any routines and systematics for their market monitoring (Appendix D, p.

68).


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Question 2:

Our company is able to capture the knowledge of our employees

systematically.

All companies answered to use the ideas of their employees somehow and that

their staff feels free to propose ideas, but when it came to the question if this

happens systematically there were many differences. In the worst cases, as in

companies E and G, the answer was that ideas of the employees are used but

without any routine or system (Appendix E, p. 69; Appendix G, p. 71).

But some similarities where found in regard to this question. A majority has

periodic meetings of different departments and areas to talk about their ideas, their

opinions about new products and where the employees can bring in their ideas for

innovation. Also when it comes to decision-taking many of the fifteen companies

involve their employees. Especially for the solution of problems with products or

services and their quality decisions are taken together with the employees.

Suggestion boxes for new ideas and proposals were also mentioned by several

companies. Most of the companies also have schedules to collect the ideas given

in meetings or suggestion boxes. Later on these ideas are evaluated and often

discussed to see if they are feasible or not. Many companies stated to give a

feedback to everyone giving an idea and in some companies an employee who

gave an idea which was realized later on is awarded somehow.

Some companies had superior methods to provoke their staff to give ideas.

Company C, a cookie-factory, has a program called BIS Boas Ideias e

Solues - Good Ideas and Solutions - accumulating all the ideas of the

employees (Appendix C, p. 67). Company H, a producer of boilers generating

electrical and thermal energy, has a campaign for quality (Ao da qualidade) to

use the knowledge of their staff to improve the quality of the products (Appendix

H, p. 72). The campaign collects all the ideas given by the workers in regard to

the quality and a committee evaluates the feasibility of these ideas. The company


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buys a desired product for those whose idea is approved by the committee. The

intranet is used by company O, a producer of data transmission technology, to

give employees the chance to register ideas (Appendix O, p. 79). Company L,which develops minimally invasive surgical devices, informs all employees about

the newest developments via e-mail in order to give them the opportunity to share

their thoughts about it (Appendix L, p. 76).

But there were also enterprises which focused mainly on white-collar employees

regarding this question. Companies J, M and N mentioned in different ways that

they only refered to their upper level employees for the solution of problems,development of new ideas or decision-making (Appendix J, p. 74; Appendix M, p.

77; Appendix N, p. 78). Company J is resolving product-based problems,

concerning quality or production, together with all type of employees. But more

comprehensive problems of the business, like strategy or financial topics are only

brought to management level.

Question 3:

Activities of our company are directed at our customers and we

create new opportunities based on the (future) needs of our

customers.

The self-assessment as well as the Evaluation of relevance for the own

competitiveness regarding this question has the highest mean value of all 16

questions (Figure 4.17, p. 57). This means that, in average, the companies

evaluate their own performance in regard to this question relatively high as well

as the relevance of this question for them being competitive. All companies

attested to direct their activities at their customers. But there were differences in

how far the contact with the consumer has a systematic approach.

In the worst cases, namely companies E and G, the company just talks to their

clients and asks them for their opinions and expectations but without any

documentation or regularity (Appendix E, p. 69; Appendix G, p. 71).


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In general the enterprises, interviewed for this dissertation, mentioned to be very

attentive towards their consumers needs. Many of these companies developproducts together with their clients especially if these are business clients.

Company L, producing minimally invasive surgical devices, said that their

customers, medical surgeons, created a need which the company tried to satisfy

(Appendix L, p. 76). They met with surgeons and these told them what they need

and afterwards both together developed the device.

Another common practice of the fifteen companies is the customer survey

(Appendix F, p. 70;Appendix N, p. 78). Many of these companies do customer

surveys after sales and some even do periodic surveys afterwards. These are used

to ask consumers how to improve products and what they would like to have in

future. Some of the 15 companies have established ISO standards which require

the company to do customer surveys.

Also in this question company H has a superb approach to satisfy their

consumers needs (Appendix H, p. 72). Before each sale of one of their electric

and thermal energy generating boilers they have a process which has to be

completed. This process includes visiting the client as well as the client visiting

company H to see how the boiler will be produced. The customer will also be

brought to another client of the company to see a working boiler. All these steps

are undertaken to secure the best information for the customer before he orders the

expensive product. During this process company H gets a huge return by the

customer and his expectations regarding the product. After each sale the company

does a customer survey with the client and repeats this survey each year to ask if

the customer is satisfied with his machine. Together with the regular reports

delivered by company Hs sales force this gives them the opportunity of

improving the quality of their existing products and develops new ones with the

help of their customers.


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Company C, a producer of sportswear for women, uses its sales people and store

managers to keep contact with the customers because the company has no directcontact to them (Appendix C, p. 67).

Question 4:

By the use of partnerships and networks with external partners

(research institutions, universities, associations, etc.) we create

opportunities for innovation and growth systematically.

In opposite to question 3, which has the highest mean values, question 4 is thequestion with the lowest mean values for the self-assessment and the relevance for

the own competitiveness (Figure 4.17, p. 57).

Many of the 15 companies told they would be afraid of losing their competitive

advantages if they collaborated with other institutions and therefor preferred

working on their own. There are mostly weak relations with governmental

institutions like the before mentioned FIESC, SEBRAE and ACATE, or others

like ACIF (Associao Comercial e Industrial de Florianpolis), ACIRS

(Associao Comercial e Industrial de Rio do Sul) and SIMMMERS (Sindicato

das Indstrias Metalrgicas, Mecnicas e do Material Eltrico). These linkages are

basically used to get little information about current market situations. Only

ACATE plays a more important role for three of the fifteen companies, which are

technology start-ups having their place of business at the ACATE building and

getting a lot of help to get their business started. This help includes administrative

help as well as trainings in different areas. Others said they worked only together

with business partners to develop their products and materials.

Companies D, E and G instead do not have any alliances with other institutions at

all (Appendix D, p. 68; Appendix E, p. 69; Appendix G, p. 71). Company C even

mentioned it was closed for other participants (Appendix C, p. 67). Company F

said quite the contrary F. It would have liked to have a kind of collaboration with


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universities or other institutions, but was not able to do so until now (Appendix F,

p. 70).

Much more successful in creating collaborations with institutions are others of the

fifteen companies. Company J has various types of institutions they collaborate

with (Appendix J, p. 74). They are participating at conferences of the organization

CI Brasil, which informs about integrated circuits, and also another organization

related to semi-conductors. They also collaborate with universities to get

technological knowledge and develop new products, like the laboratory for

integrated circuits of the federal university of Santa Catarina (UFSC), theuniversity Santa Maria of Rio do Sul (Universidade Santa Maria do Rio do Sul)

and also the federal technical university of Lausanne (cole polytechnique

fdrale de Lausanne). Company H worked together with the mechanical

engineering department of UFSC to develop new filters for their boilers for the

reduction of noxious emissions (Appendix H, p. 72). Company L works together

with different universities and foundations of the region, like UFSC, FINEP,

FESC or FAPESC, to develop minimally invasive surgical devices (Appendix L,

p. 76). They also get support of the CNPq (Conselho Nacional de

Desenvolvimento Cientfico e Tecnolgico) in form of scientific subsidies.

4.2.2 General impression of the first challenge of the growth wheelTo capture external knowledge and thereby identify new tendencies and chances

in the market of reference is an important step for a company (Hardwig et al.

2011, p 56). Therefor it is important for SMEs to have routines and systems for

observing the market.

The first two questions refer to the first lever of this challenge Identify

opportunities for growth. The leveris about building up chances in the business

environment (Figure 4.4).


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Figure 4.4 Identify opportunities for growth


The Brazilian companies interviewed for this thesis were on average quite

confident with their performance in regard to the first question. The mean value of

the self-assessment of the own performance for this question is 0.67 on a range

from zero to one (Figure 4.5).

The value goes with the answers given by the executives. Most of the companies

use their external parties to identify market opportunities. Also the mean value of

the evaluation of the relevance of this question for the competitive position of the

company is high. The value is 2.6 on a range between zero and three. That means

that the question is highly relevant for the majority of the fifteen companies.

Figure 4.5 Mean values for questions 1 - 4

The second question has mean values quite similar to the first question. The

answers given approve the high mean values. Most of the companies do have

systems and routines to capture the knowledge of their employees.

Self-

AssessmentRelevance

Self-

AssessmentRelevance

Self-

AssessmentRelevance

Self-

AssessmentRelevance

Self-

AssessmentRelevance

0.67 2.60 0.60 2.40 0.80 2.93 0.47 2.00 0.63 2.48

Question 1 Question 2 Question 3 Question 4 Questions 1-4


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The answers and numerical results for the first two questions prove that the first

lever of the first challenge of the growth-wheel is used quite homogeneously by

the fifteen SMEs interviewed.

Quite the opposite is true for the second lever. Whereas the third question has the

highest mean values for both, evaluation of self-assessment and relevance, the

fourth question has the lowest ones in both cases.

The answers given by the SMEs are coherent to the mean values. There is no

company which does not direct its activities towards its customers. A companyhas to do so in order to sell its products, which is purpose of a business. But many

of the fifteen companies are having a reserved attitude towards cooperation with

research institutes, universities or other organizations. The fear of losing a

competitive advantage is bigger than the expected positive effect such cooperation

could have.

In general the four questions of the first challenge of the growth-wheel were

evaluated as highly relevant for the competitive position.

4.3 Second challenge of the growth wheel: Develop objectives for growth4.3.1 Analysis of each question of the second challenge of the growth wheel

Question 5:

We have a convincing strategy and objectives for growth. We are

able to update our strategy and objectives quickly in order to

respond to new trends.

Also for the majority of the fifteen Brazilian companies the planning of strategies

and objectives is important for the success of their businesses. Therefor a lot of

them do a more or less formal planning. Generally an annual planning is done for

the business activities. This planning includes new products, sales forecasts,

machines, budget or the financial situation. In normal case the enterprises do


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document their planning and at the end of the year a target-performance

comparison is done. The bigger ones of the fifteen companies expand their

planning to the different departments, e.g. companies H and I (Appendix H, p. 72;Appendix I, p. 73). In addition some of the companies react to changes interfering

with their planning during the year. Company M registers these types of changes

and integrates them into their planning. If necessary an alignment of the strategy

is done (Appendix M, p. 77). Company I observes its planning each month in a

meeting and modulates it if needed (Appendix I, p. 73).

The planning of the long term strategy is done much more informal by many ofthe interviewed enterprises (Appendix L, p. 76). Company M represents quite the

contrary. It realizes meetings with all the investors to set up the strategy for the

long run (Appendix M, p. 77).

Only company A revealed not to have done any planning and the strategy of

company D exists only in the mind of the two entrepreneurs (Appendix A, p. 65;

Appendix D, p. 68). Company J is a start-up and began to formalize a strategic

planning for this year, but they did not finish. Moreover they think that the

strategy should be formalized differently (Appendix J, p. 74). Company N instead

has a well elaborated strategy, but is not contend with the participation of the

employees (Appendix N, p. 78). They would like them to help developing the

strategy and be more anxious to help reaching the objectives proclaimed in the

strategy.

Question 6:

We are able to develop new business models that create long term

value.

The ways to achieve creation of long term value are varying a lot between the

enterprises polled for this thesis. While company A declared not to have planned

any new business models or products at that moment, company F does not have a

formalized way to guarantee long term value (Appendix A, p. 65; Appendix F, p.


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70). The company is searching for new products and business models but without

a plan.

A more promising procedure is done by companies I and J, which integrate the

development of new business models into their annual planning (Appendix I, p.

73; Appendix J, p. 74). Thereby they assure to provide the necessary financial and

human resources for these objectives. Company M analyses its product portfolio

periodically in order to detect where to force the development of new ones

(Appendix M, p. 77). Furthermore the board conceives of a long term strategy for

5 to 10 years. This long term strategy helped the company to amplify their productrange. The company had focused on the production of plastic panels for white

goods before. Now they produce plastic parts for the automotive industry in

addition to that. This kind of amplification is also done by others of the fifteen

companies. Company B, producing women sportswear, created own concept-

stores to have a direct contact with their clients and develop a stronger brand

(Appendix B, p. 66). But they had to broaden the spectrum of products to make

the concept-stores worthwhile. Thus a beachwear line was introduced beside the

sportswear.

Both, companies H and O, want to transform from a producing to a service

company (Appendix H, p. 72; Appendix O, p. 79). To achieve this goal company

H has outlined a strategy to strengthen their service quality and become the best

attendance company of Brazil by 2013. Company O formalized a five year

process to guide this transformation.

The development of new business models is a characteristic of Company N

(Appendix N, p. 78). It was always a pioneer and the first company, which tried to

get the public permission for a toll road in Brazil. The company has a department

for the development of new services and business models. The company tries to

fight the fluctuation of their earnings by focusing on new business models with

long term cash flows.


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Question 7:

The corporate strategy does not only exist in the mind of the

entrepreneur. It is communicated intensely and the employees are

involved in the development to understand how they can contribute

to the success of the business.

Several of the fifteen enterprises of the survey communicate the corporate strategy

to their employees. Company H stated that all employees were informed about the

strategy. The enterprise used the bulletin board to spread the information

(Appendix H, p. 72). A staff meeting at the beginning of the year is used bycompany M to inform their employees about objectives and corporate strategy

(Appendix M, p. 77). Also company N uses an annual meeting for the same

purpose (Appendix N, p. 78).

All the employees of company L are informed about the corporate strategy, but

the enterprise regretted that the procedure is very informal and is actually

developing more systematic information (Appendix L, p. 76). Due to being a

small company the whole personnel of company J knows the strategy and how

they can contribute to the success of the business (Appendix J, p. 74).

Company B mentioned an internal journal they wanted to initiate to inform the

staff about actual news of the company and strengthen the corporate identity

(Appendix B, p. 66).

Only few enterprises failed regarding this question. Company D does not have

any information exchange concerning the strategy with the employees (Appendix

D, p. 68). Companies F and O do only inform the employees on management

level about the strategy, but the other part of the staff does not get this information

(Appendix F, p. 70; Appendix O, p. 79).


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Question 8:

Our company knows how to inspire our employees regarding the

goals of the company.

Even the inspiration of employees in regard to the company objectives is not

formalized by company D (Appendix D, p. 68). But the other interviewed

companies have different ways of doing so.

A common model in the fifteen companies is a monetary approach. The

production area of company B has production targets for each weak and the

workers receive a salary bonus if the target is achieved (Appendix B, p. 66).Company F works with sales quotas for their vendors (Appendix F, p. 70). The

rest of the business has to contribute in order to achieve the goal. But now the

company also wants to implement a system to give all employees a share in the

profits at the end of a business year. The enterprise wants the share to depend on

productivity, sick days, further trainings and other parameters. Company I already

has such a system, which allows the staff to participate in the profit (Appendix I,

p. 73). Their system is not linked to the salary of the employees. Each one gets the

same share of the profit which means a big deal and huge motivation for the ones

earning low wages.

Another enterprise with profit participation is company H (Appendix H, p. 72).

All employees receive a part of the profit as a bonus at the end of the year.

Because of the time-consuming production of huge boilers the company

introduced another bonus to assure the punctual delivery to the customer. Each

time a boiler is handed over on the agreed date the employees receive two percent

of the receipts. The enterprise has a very low fluctuation of the staff, which shows

satisfaction and a high motivation of the employees.

Company C attributes the high motivation of the employees to the low hierarchy

and company J is sure that all their employees are stimulated to contribute to the

success of the business because it is a small upcoming enterprise and all the staff


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know the objectives and feel how they are being a part of the success (Appendix

C, p. 67; Appendix J, p. 74).

4.3.2 General impression of the second challenge of the growth wheelThe second challenge and its two levers are shown in Figure 4.6. The questions

five and six are assigned to the first lever called Formulation of a growth-

strategy.

Figure 4.6 Develop objectives for growth


Performance and relevance were evaluated quite equally for both questions

(Figure 4.7). The values of either of the questions are relatively high, which

combines with the answers analyzed in the chapter before. Most of the companies

have documented strategic planning and business models creating long term

value.

Figure 4.7 Mean values for questions 5 - 8

The two questions assigned to the second lever of the challenge, enthusing the

employees for the growth-targets, are different to the ones of the first lever. The

Self-

AssessmentRelevance

Self-

AssessmentRelevance

Self-

AssessmentRelevance

Self-

AssessmentRelevance

Self-

AssessmentRelevance

0.63 2.53 0.67 2.53 0.50 2.53 0.53 2.73 0.58 2.58

Questions 5-8Question 6Question 5 Question 7 Question 8


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relevance for the competitive position was evaluated high in case of the seventh

(2.53) and very high in case of the eighth question (2.73). But the self-assessment

of the performance in regard to both questions is close to 0.5, which means thecompanies think they are doing it more or less good in average. Nonetheless the

answers given by the executives showed that there are some routines applied in

regard to these questions.

The second challenge has the highest mean value for the relevance of all four

challenges of the growth-wheel (2.58). But the performance, evaluated in the self-

assessment, has the lowest mean compared to the other three challenges. Onecould assume that, in case of the fifteen SMEs in Santa Catarina, the challenge of

developing objectives for growth offers the biggest potential for improvement

combined with a high relevance for the competitive position.

4.4 Third challenge of the growth wheel: Realize opportunities for growth4.4.1 Analysis of each question of the third challenge of the growth wheel

Question 9:

Our employees think and act with the spirit of an entrepreneur

and act with a high degree of responsibility.

A good participation of the staff in the technical development of the products was

reported by company J. The employees take decisions and feel responsible for

them (Appendix J, p. 74). Company I said that the delegation of responsibility was

common practice and the climate was pos

Learning to grow – Empirical analysis of dynamic capabilities of SMEs in Brazil. André Francisco...

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