The Relationship between Management and Strategic Practices and Successful Start-up Businesses - Research Paper Example

Critical Analysis of the relationship between Management and Strategic Practices and Successful Start-Up Businesses – Doctorate Degree Dissertation Proposal 1.0 Research Aims and Objectives The aim of the research is to “identify the management and strategic trends that are common to successful start up businesses”. In attaining this end, the following objectives would be explored: 1. An examination of the leadership, management and control systems and structures that exist in successful start up companies. 2. An evaluation of the capital structures and accounting and internal reporting regimes that are utilised by successful start ups. 3. An assessment of the supply chain management and marketing trends and their position in reducing costs and supporting survival. 4. A critical review of these companies sensitivity and adjustments to elements of business in the 21st Century, including globalisation, e-commerce and modern structures in business in the 1.1 Background According to a research conducted by David Birch, then a professors with the Massachusetts Institute of Technology (MIT), 85% of all start up businesses fail in the first year (Kuratko and Hodgetts, 2008: p19). Michael Gaber conducted further research on the subject. He stated that out of the firms that survive the first year, 80% fail in the first five years whilst another 80% fails in second five years (Hamel, 2011: p203). This means that most businesses that are commenced in every year is likely to fail in the first year. If it survives, it could fail by the fifth year or tenth year. The implication is that business survival is one that can be attained by a few entrepreneurs who avoid some obvious pitfalls which could potentially destroy the business. Another set of scholars, Welch et al (2011) identified that the reason for the fold up of start-ups are connected with two main issues: the first is the lack of capital and the second relates to poor management skills. This problem is complicated by the lack of a business plan and the lack of a clear focus. The position taken by scholars indicate that business failures have some roots and pitfalls which when avoided, can ensure that a business remains successful and survives the most dangerous years. 1.2 Research Problem Business failure in the first few years of incorporation is fairly common. However, it seems there is a solution to this problem. Welch et als position indicate that the problem with business failure relates to the lack of capital and the absence of appropriate managerial skills. This is because when a company has enough money to acquire assets and hold as working capital, it can get the appropriate tools, equipment and assets it needs. It is also apparent that if a business has enough working capital, it can pay its bills and remain solvent in that quest. More importantly, a firm with skilled and talented managers can always combine resources in the right proportions and this would lead to solutions. Numerous management theories have been formulated over the past 150 years. Many of the management theories have evolved and are not really applicable any longer. In the first 13 years of the 21st Century, a lot of different changes have been experienced in the field of business and management. A researcher might therefore be interested in several views and ideas relating to how the few start ups survive. For instance, what are the common trends of management in these companies? What do they put in place to ensure that they always remain solvent? What do successful companies do in relation of maintaining a steady earning? What kind of business plan do they use and how do they adapt it to their corporate strategy successfully? Research work is needed because there are new trends in modern business that makes todays business very distinct and unique from businesses in that existed in the past. Hence, there is the need to use modern research methods and approaches to critique and analyse elements of strategy and management that keep some few businesses successful through the first seven years and beyond. 2.0 Literature Review This section of the research proposal would examine the core elements and what they mean to business problems. It would draw an insight to the main ideas and concepts that would be studied in the research. 2.1 Leadership and Control “Leadership refers to the corporate governance systems and structures that are used in an organisation” (Chapman, 2009: p1326). In other words, leadership is about how a firm is directed and ran by the people who head it. In all organisations, the shareholders own the entity by virtue of the fact that they pool resources to set up the entity. However, corporate entities have separate existence from their owners. This is because they are run by directors who represent the shareholders and there are managers who handle the day-to-day running of the company. Delegation refers to the managers and directors handing out function and activities of a company to employees and other members of the organisation (Barrow, 2011). Thus, management gives authority and responsibility to members of the organisation. However, authority and responsibility comes with accountability. Thus, every organisation has a system of control and reporting to ensure that they are in touch with the people who are primarily tasked with running the company (Chapman, 2009). This means that for any company to succeed and gain results, there is the need for the company to have the right reporting systems and structures. This is because reporting and monitoring enables the primary people charged with governance and running company translate their vision and ideas to different people in the organisation and remain in control over affairs in the company at all times. The success of a start-up depends on the level of control and monitoring that is exerted by the main custodians of the primary vision of the company. This is because the primary members put in charge of attaining the core vision of the start up would always have the duty of ensuring that the company operates with the best systems and structures from time to time. This research would study the extend and commonalities in the monitoring and control systems of the successful companies that survive through the first seven years of operation. The reason why reporting and control are important is that there is a chance that there could be some overrides of the fundamental ideas and views of a given company (Henderson, 2009). This is because the people charged with management and corporate governance need to ensure that they meet the best ideas and the best levels of activities through supervision. Thus, the board is tasked with carrying out fundamental risk management and internal control under the principles of corporate governance (Henderson, 2009). The use of corporate governance always leads to communication systems that culminate in the organisations cultural standards (Reuvid, 2006: p181). This is because corporate governance leads to the creation of an organisational chart which describes the dominant reporting trends in a company. Through this, organisations form cultures and traditional ways of doing things which pervasively describe the entity and defines its social systems and structures. Thus, the way and the extent to which the governance and control structures work would ensure that a given company would meet these ends or not. The study would try to critique and deduce the trends in these companies. 2.2 Capital Structure, Accounting and Internal Reporting When a company is established, the governance structures are first to be defined. This is because it evolves naturally from the quest to find representatives for the companys owners. However, the raising of capital is significant and important because a company can do little without the requisite capital. Aside the capital that companies come up with, there are almost always the need to raise funds from some other sources. Bonnet identifies that “...bank debts are popular means of funding start-up entities”(2011: p8). This is because most start ups get the challenge of gaining investor confidence because they have limited tangible results to justify their propositions. As such, the main source of funding include the bank. There are three elements of a start up firm that a bank would look up to before giving out a loan. This include: risks, collateral and signals (Bonnet, 2011). The average bank would always look out for the risks that they would expose themselves to if they provide a loan to a start up entity. They would avoid a high risk entity and support a lower risk entity. Secondly, most start ups do not have enough collateral, save a few assets of the owners. These might not be enough to get sufficient funds to provide bailouts for such companies when things get extremely bad. On the other hand, banks also look out for signals to confirm the eligibility of a start up for a loan. Hence, there is the need for a good and successful start up to get all these three pointers right if it is to survive the toughest economic circumstances in times of need. Another element of contention in the operation of a start up is the way the company blends its working capital requirement and fixed asset position (Needles and Powers, 2007). This is because a company would always have a challenge of holding optimum assets to help it to operate and meet the objectives that it stands for. The danger of holding too much of a firms resources in fixed assets is that it could lead to a lock up of working capital which could lead to over-capitalization. On the other hand, a new business would also need to get enough money to operate the company and fund its primary business activities. This means they need optimum working capital. However, spending aggressively on funding work activities could potentially lead to over-trading. So there is the need for a successful start up to blend these two different elements of management in order to survive the challenge of balancing the spending and structures of the company. Also, the accounting systems for internal reporting of start ups are important (Gibson, 2008). This means such companies would have to maintain a system of checking the ways and means the employees work to attain the best results. Some companies use the balanced score card and other cost accounting systems like activity based costing and other methods. It is essential to ascertain which of these approaches to internal reporting and accounting works best for a start up entity and how often it is used. The research would ascertain the different approaches and the most dominant approaches used by the most successful start ups today. 2.3 Supply Chain Management and Marketing In most entities around the world today, supply chain management principles are used to monitor the sourcing of raw materials, transport them to the entity, and also ship out produced goods to external consumers (Batter, 2012). Supply chain management provide important methods of cutting down costs and promoting efficient ways and methods of requesting for essential materials in companies. It is important to ascertain which of the supply chain systems and structures work best for start up companies. Keillor states that “start up companies are tempted to try to push their products through the supply chain” (2012: p133). In other words, there is the need for new companies to offload their products by pushing it onto consumers through the use of hired advertisers and hired marketers. It is important to ascertain whether this really works or not. There are pull chain systems that enables retailers to rather come acquiring and although it is a preserve of established entities, it is possible it can be applied to the start up entities. Also, outsourcing supply chain management is an essential element and aspect of start up entities (Batter, 2012). This is because such entities need to cut down costs and they would be more willing to seek professional and external support to guide and provide them with necessary information for the design and the operation of a supply chain management system. The study would try to deduce and understand the most popular methods of supply chain and other marketing trends that are used for businesses that succeed in the first seven years of their operation. 2.4 Sensitivity to Modern Changes According to Hitt et al, 2012, there are many modern elements of carrying out business which are beneficial to the operation and maintenance of start up entities around the world today. For instance, e-commerce is cheap and can be employed at a very low cost to help a firm sell to consumers around the globe (Hitt et al, 2012). There are also elements of niche marketing that can be done through the use of these advanced and automated systems for the promotion and enhancement of these modern production systems and trends. There is a strong point for the use of modern and automated techniques and systems like e-commerce. This is because they enable a firm to attain a global reach (OECD, 2011). This is commonly utilized by start ups to enable them to sell their products and services to different people in nations around the world. The use of the Internet and other systems can also enable a small start up in an obscure part of the world to gain global exposure for their brand and products. This is a short way of getting the best of global and modern trends through the use of minimal efforts and activities. The essence of the paper would be to try to deduce and identify the position of these modern and new entities and how they manage to survive by using these new techniques and systems to support their operations. 3.0 Research Approach The research would be conducted in a way and manner that it would cover a large scope of global communities around the world. This section would showcase the scope of the research and the various tools and techniques that would be used to study the situation at hand and provide a way of investigating the research questions. 3.1 Research Sample Sampling is used when a researcher cannot test 100% of the possible variables, hence it allows the researcher to test a group of entities in the wider population with the hope of getting information that can be representative of the whole population (Bernstein, 2011). This research would tend to examine trends that represent the managerial, strategic and operational commonalities amongst start ups that have survived for over seven years and are still in contention. Thus, the sample would cut across the following dimensions. 3.1.1 Scope of The Research The research would include the observation of a total of 30 firms that commenced operations no more than 7 years ago. This would include companies that operate in different sectors and different countries. The research would include collecting data about the various themes that fall under the four objectives. Information would be collected through various forms of interviews with the owners of the firms that would be studied. 3.1.2 Geographical Scope The companies that would be studied would include companies that would be taken from five developed countries: United States, United Kingdom, Australia, Hong Kong, and Germany. There would be also samples taken from the BRICS countries, Brazil, Russia, India, China and South Africa. This would provide an overview of the various elements and structures of the study. 3.1.3 Industry Classification There would be another set of classification that would be based on the industry type. There would be a focus on manufacturing and service industries. They would be grouped on the basis of the regional centres that they represent: whether they represent the developed world or the emerging economies. 3.1.4 Hypotheses The research would involve a critical literature review of the subject of start ups and the challenges they go through. The literature review would cover the different elements and aspects of the research and the topic that would be studied. This would culminate in the creation of hypotheses which would be used as the possible answers for the survival of start ups in the world of business. A hypothesis is a tentative statement that is tested for its truthfulness or falsity (Bernstein, 2011). The hypotheses would be formulated and used to guide the data collection phase of the research. After a critical research review, statements would be formulated and critiqued throughout the study to form conclusions that would be tested. A total of four hypotheses would be deduced from the four research objectives and used to set the framework for the field work 3.2 Data Collection Data collection would be done in three main parts. The first part would involve the collection of information from top members of the corporate start-ups that would be studied. They would be collected through the collection of information from surveys that would be sent through the Internet. This would be done through the use of close ended questionnaires that would be sent to top level management of the companies that would be selected to participate in the study. The second phase of data collection would be done through the collection of information about national economic trends in the global business environment and how it affects the global community. This would be done through the interview of three academics who know about trends in the macroeconomic activities of the two broad regions of the world. The third set of information would be collected through the interview of five different consultants in the respective fields that would be studied. This would provide segmental information of trends and identities that would explain the trends identified in the first phase through the company responses. 3.3 Data Analysis Data from the first phase would be collated in a statistical matter. The information would be grouped under respective headings on the basis of industry, nationality and regional zones. This would provide a visual impression of the results that would be attained from the various studies and the research works. The interviews in phases two and three would be summarized and critiqued to justify the dominant trends that explain the survival of these different start ups. There would be major issues and problems that would be used to justify the different trends. Statistical methods and tools would be used to explain the trends and justify the different possible explanations for the dominant trends in the survival of these start ups. Also, information about why others failed would be sourced from these interviews and explanations. This would provide a strong thesis of how firms survive and why some other firms fail in the same industries and nations around the world. 3.4 Inferences The various hypotheses that would be confirmed or rejected by the entire research and the entire study. This would be done on the basis of the data analysis and the critique of the information that would be acquired in the research and analysed. The inferences would be generalized and used as a theory to explain the management and strategic trends that supports the survival and growth of modern businesses. 4.0 Timeline This research and study would be done through a doctorate degree system. It would be done within a period of 3 – 4 years and hence would involve four main phases which would enable the researcher to demonstrate all the necessary skills for the completion of a PhD. Stage 1: This would involve the initial write up and the acquisition of approval for further studies and further analysis of the various research areas. Stage 2: This would involve the researchers study of the necessary skills and the necessary elements of a PhD including statistical methods and systems. Stage 3: This will be a field work phase which would involve the collection of information for the completion of the research. The field work would include the collection of data and the compilation of the research work and preliminary findings on the topic. Stage 4: The compilation of the final findings and the dissemination of these findings to the project committee for approval. References Barrow, C. (2011) Business Start Ups Hoboken, NJ: John Wiley & Sons. Batter, L. (2012) Supply Change Management London: Lulu Bernstein, R. (2011) Research Methods London: SAGE Publications. Bonnet, J. (2011) The Shift to the Entrepreneurial Society Surrey: Edward Elgar Publishing. Chapman, C. S. (2009) Handbook of Management Accounting London: Elsevier Publishing. Gibson, C. H. (2008) Financial Reporting and Analysis: Using Financial Accounting System Mason, OH: Cengage. Hamel, M. (2011) The Entrepreneurs Creed: The Principles and Practice of 20 Successful Entrepreneur. Singapore: Armour Publishing PTE. Henderson, J. P. (2009) The Small Business Self Starter Handbook London: iUniverse. Hitt, M. A., Ireland, R. D. and Hoskinson, R. E. (2012) Strategic Management: Competitiveness and Globalisation Mason, OH: Cengage. Keillor, D. B. (2012) Retailing in the 21st Century London: Greenwood Publishing Group. Kuratko, D. F. and Hodgetts, R. M. (2008) Entrepreneurship: Theory and Practice Mason, OH: Cengage Needles, B. E. and Powers, M. (2007) Financial Accounting Mason, OH: Cengage OECD (2011) Women Entrepreneurs in Small and Medium Enterprises New York: OECD Publishing. Reuvid, J. (2006) Start Up and Run Your Own Business London: Kogan Page. Welch, S. H., Alolinsky, H. I., and Stephens, C. M. (2011) JK Lassers New Rules for Estate and Tax Planning Hoboken, NJ: John Wiley and Sons Publishing. Read More