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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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2. Small and medium enterprises in Brazil 6
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
Source: cf. Deloitte 2010, p 9
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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2. Small and medium enterprises in Brazil 7
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?
Source: cf. Deloitte 2010, p 11
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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2. Small and medium enterprises in Brazil 8
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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2. Small and medium enterprises in Brazil 9
Figure 2.4 Why is innovation important for SMEs
Source: cf. Deloitte 2009, p 22
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
Source: cf. Deloitte 2008, p 25
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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2. Small and medium enterprises in Brazil 10
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
Source: cf. Deloitte 2009, p 23
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
Question with multiple answers (%)
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2. Small and medium enterprises in Brazil 11
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
Source: cf. Deloitte 2008, p 19
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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2. Small and medium enterprises in Brazil 12
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
Source: cf. Deloitte 2009, p 18
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
Question with multiple answers (%)
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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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3. The project Aprender a crescer - Learning to grow 14
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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3. The project Aprender a crescer - Learning to grow 15
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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3. The project Aprender a crescer - Learning to grow 16
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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3. The project Aprender a crescer - Learning to grow 17
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
Source: cf. Hardwig et al. 2011, p 102
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3. The project Aprender a crescer - Learning to grow 18
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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3. The project Aprender a crescer - Learning to grow 19
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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3. The project Aprender a crescer - Learning to grow 20
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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3. The project Aprender a crescer - Learning to grow 21
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
Source: cf. Hardwig et al. 2011, p 139
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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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4. Analysis of data 23
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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4. Analysis of data 24
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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4. Analysis of data 25
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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4. Analysis of data 26
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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4. Analysis of data 27
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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4. Analysis of data 28
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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4. Analysis of data 29
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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4. Analysis of data 30
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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4. Analysis of data 31
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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4. Analysis of data 32
Figure 4.4 Identify opportunities for growth
Source: Hardwig et al. 2011, p 56
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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4. Analysis of data 33
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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4. Analysis of data 34
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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4. Analysis of data 35
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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4. Analysis of data 36
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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4. Analysis of data 37
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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4. Analysis of data 38
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
Source: Hardwig et al. 2011, p 62
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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4. Analysis of data 39
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