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Strategy Formulation in Small Business: The Hong Kong Experience.

SHUI-YING CHAN IS WITH THE CITY University of Hong Kong and M.J. Foster is associate dean of the Faculty of Business at Kingston University, England. This paper describes the results of a study examining the strategy formulation process in small businesses in Hong Kong in the mid-1990s. It is believed to be the first such study. A sample of some 42 businesses were examined to determine how their actual planning behaviour compared with that predicted from a simple, three-stage model of the strategy formulation process based on the literature in both strategy and small business. The impact of elements of owner-managers' backgrounds on the process was also examined. The sample of companies covered a wide range of businesses with the bulk being in the service segments of various sorts, this being representative of the Hong Kong economy. The `westernised Chinese' nature of most of Hong Kong's residents was seen to be an important contextual factor to observed behaviour. The paper concludes with some brief suggestions for future behaviour by such small firms.

STRATEGY, ITS FORMULATION, OR creation, and implementation are recognised as key aspects of the management of all large organisations, be they profit making or non-profit making enterprises. In the world of the small business, strategy may be much less formal in its nature, at the extreme the small owner-managed business may have an implicit rather than an explicitly stated strategy. Some authors are sceptical of the existence of clearly visible strategies in many small business settings, see e.g. Curran (1996). In practice, some small businessmen may simply keep doing what they have done of late, assume market conditions will continue much as before and hope for the best. The sceptics may see this as an absence of strategy. Our view is that the unavoidable presence of competition with a, perhaps implicit, imperative to make decisions relating to the business' future means that one should regard such behaviour as a form of passive decision making, allied to historic strategy acceptance. Thus, as Hofer and Schendel (1978, p11) succinctly put it, "Every firm has a strategy, even though not every strategy is a good one."

Here we have an important juxtaposition of ideas: the inevitable existence of strategies be they `deliberate' or `casually emergent' (happenstantial, with apologies to Henry Mintzberg), and the variability of their success in delivering desirable outcomes. This apparent dissonance has caused management scholars to study patterns of activity with a view to isolating what may be the path to achieving good strategies and the range of benefits to flow from an explicit consideration of strategy within the individual organisation. In addition to the obvious, hoped-for benefit of good economic performance, such explicit organisation (Ansoff, 1984); helps to unify organisational behaviour and action (Quinn, 1988); and, by nurturing such competitive advantage as the firm may possess, seeks to ensure its very survival (Grant, 1991). In short, strategy, strategic planning (being the precursor thinking of strategies which are delivered) and strategy's implementation play a central role in the survival and continued development of a business.

Despite some research into the relative success of pursuing active policies of formal strategic planning or strategy formulation, see eg Armstrong (1981) and Greenley (1986) for summaries of such studies, there has been relatively little study of the situation in small businesses. Such as there has been tends to focus on the US, see e.g. Robinson and Pearce (1983 and 1984), Aram and Cowen (1990), or Europe, see e.g. Bridge and Peel (1999). In particular, prior to the study described in this paper, there had been no reported research on the formulation of strategy in small businesses in Hong Kong, although such businesses form a major part of the private sector of the Hong Kong economy. Given Grant's observation on firm survival above, this seemed to be a particularly important omission given the high rate of attrition amongst small businesses observed across a wide range of jurisdictions, see e.g. Burns and Dewhurst (1986), Steinhoff and Burgess (1989), El-Namaki (1990) and Siropolis (1994). Moreover, direct, episodic observation by the authors leads us to believe that Hong Kong is no different to other countries in this respect.

Georgellis et al (2000) and Perren et al (1999) provide additional, up-to-date evidence supporting this view that continued health and, beyond that, growth in small businesses is likely to depend on an adoption of planning and explicit decision-making routines. They do not, however, diagnose the nature of the planning which may be best chosen by small businesses.

The remainder of this paper reports on an empirical study which explored strategy formulation amongst Hong Kong's small businesses in the mid-1990s. More exactly, the paper looks at: the nature of the formulation process in that setting, indexed against a theoretically derived three part model of the process; the impact on that process of the background of the owner managers; and a range of organisational characteristics which make a context for these questions. The study formed the core of the postgraduate studies of one of the authors. The observational data were collected in the latter half of 1993.

The rest of the paper is arranged in five sections which consider: the Hong Kong business context; the development of a set of hypotheses based on the literature in strategy and small business; methodology; presentation of the empirical results and their possible explanation; and the conclusion and recommendations.

As will be explained in the third section, strategy formulation differs somewhat in small businesses as compared to larger firms (e.g. it tends to be less formal). This will be reflected in our hypotheses. A further key question is whether strategy behaviour in Hong Kong's small businesses then differs from that in US or EU small firms because of local factors. This is in essence what the evidence showed.

The Hong Kong Business Context

As intimated in the introduction, Hong Kong is in some sense `a place of small businesses'. Certainly government and large corporations are very important elements of the Hong Kong economy but small business is the focus of the bulk of private sector enterprises and accounts for a large proportion of the private sector employment. In 1991, as this research was planned, the three most populous segments of the economy, by numbers of enterprise, were (i) wholesale, retail, hotel and catering (approx. 150k), (ii) manufacturing (approx. 44k); and (iii) finance and insurance (approx. 34k), accounting for 88 per cent of the 260k private sector enterprises. Over 80 per cent of those businesses employed less than 20 people: they were what Palvia et al (1994) call very small businesses (VSBs). The three major segments mentioned above employed 1807k persons, of which 830k (46 per cent) were in firms with less than 20 staff. This was from a labour force totalling 2806k. [See Yeung et al (1995) and Hong Kong in Figures (1997).]

From these figures one can see very clearly just how important small business was to the Hong Kong economy in 1991. By the time that all the data had been collected for this study, the picture remained very similar. Table 1 gives a breakdown of private enterprises by sector in December 1994 and shows the number and proportion in each segment with less than 50 employees, i.e. the proportion of what we shall define to be small businesses.
Table 1
Private Enterprises by Industry Sector, December 1994

Industry Sector                 No. of         No. with less
                            establishments   than 50 staff (%)

Wholesale, retail,             185,429            183,387
import/export,
restaurants, hotel, etc.                          (98.9)

Finance, insurance, etc.        48,627            47,797
                                                  (98.3)

Manufacturing                   33,863            32,424
                                                  (95.8)

Community, social and           26,581            25,708
                                                  (96.7)

Transport, storage and          9,286              8,969
communications                                    (96.6)

Construction                    1,116               809
                                                  (72.5)

Total                          304,902            299,094
                                                  (98.1)

Source: Hong Kong Monthly Digest of Statistics, May 1995, Table 2.5.


From these data, one can see just how important the small business sector is to Hong Kong's economy, especially in employment terms. This is motive enough to study the strategy formulation process at work in these firms, given one of the fundamental purposes of strategy is to sustain and nurture the enterprise. The reason for study becomes even more poignant when we recall how bad are the attrition rates commonly associated with small businesses around the world.

Another aspect of the Hong Kong business context which merits attention is the `Chineseness' of the place. It may be argued that this cultural dimension is something which should be borne in mind when attempting to study the strategy formulation process in Hong Kong's small businesses. If there is a particular pattern among Hong Kong's small businesses when it comes to strategy formulation, is the pattern attributable primarily to their being small businesses, being part of a Chinese society or a combination of the two?

Hong Kong's development as a modern business centre took place as a colony under British rule, a situation which formally changed only on 1st July, 1997, when Britain ceded sovereignty to the People's Republic of China (PRC). 95 per cent or more of the population is ethnic Chinese: hence the ambient culture is one which could be described as `westernised Chinese'. It has been suggested by various studies of the management ideology of Hong Kong Chinese that there are four distinctive characteristics which may be seen to reflect its Chinese nature. These are familism (Limlingan, 1987); paternalism, especially in relation to leadership style (Redding and Wong, 1986); relation orientation -- the underpinning notion behind guanxi (Bond and Hwang, 1986); and insecurity, and hence managerial defensiveness (Redding and Hsiao, 1990).

The first three of these characteristics may be seen as deeply rooted in the philosophy of Confucianism, although they, or similar features, may also be observed in the context of certain other religious philosophies such as Judaism and Christianity, see Foster and Minkes (1999).

Redding and Hsiao (1990) posit insecurity as a perhaps inevitable result of the historical upheaval, over a period of more than half a millennium, which has created the Chinese diaspora. Its result has been an inbred defensiveness in the mind of the overseas Chinese businessman (especially the small player) as he sought to establish himself in a hostile environment. Although, as we write, it can be argued that Hong Kong's Chinese are no longer `overseas' this is still their heritage in 1999. It is often said that Hong Kong is a very entrepreneurial place. Our own experience is that, certainly among typical small businesses, there are many insecure/defensive managers for every true entrepreneur.

Development of Hypotheses

In this section we shall explain how we arrived at the hypotheses which wee then tested using data collected by means of an extensive questionnaire.

Briefly, the literature on strategic planning in small businesses suggests that it tends to be: unstructured, less than comprehensive in its coverage and sporadic (for further detail see Chan, 1997). Robinson and Pearce (1984) suggested that it should aptly exhibit the following four characteristics:

1. shorter planning horizons than for bigger companies;

2. be relatively informal in its nature;

3. incorporate participants other than the owner manager, including extra firm players;

4. accept relatively open initial objectives.

This may be seen to fit well with the call for planning in small businesses to be `practical' in orientation, Golde (1964).

Bearing in mind the conventional view of strategic planning in the large organisation and the above calls for a relatively informal, practical approach, we adopted a simple framework for the development of strategy in small businesses as shown in Figure 1. The three components of this simple model are: recognition of the need for strategic thought; undertaking strategic analysis (or audit); and, evaluation and hence strategic choice.
Figure 1
The Simplified Model of Strategy Development

Recognition for need for strategic thought

[arrow down]

Undertaking strategic audit

[arrow down]

Evaluation and hence strategic choice


With this framework to hand we can look at how small businesses in Hong Kong may set about the three components. In the light of earlier work elsewhere, see e.g. Sexton and Van Auken (1982, 1985) and Pearce and Robinson (1984), it seemed likely that such firms would tend to be reactive rather than proactive in their planning. This leads to the first hypothesis:
   H1: The recognition of strategic need in small businesses tends to be
   reactive in orientation.


Moving on to the second aspect of the model in Figure 1, this deals with carrying out strategic analysis or audit prior to evaluation. Implicit in this simplified model is the idea that the assessment of the opportunities for and threats to the small business will necessarily force out the major options for evaluation -- the third stage of the model. Following Rice (1983), it is suggested that the ways in which owner managers acquire business information and the sources they employ to collect such information are a distinctive characteristic of the strategy formulation process.

In the light of a range of prior studies, such as Johnson and Kuehn (1987), Fann and Smeltzer (1989), and Daft and Lengel (1984), we set the second hypothesis as follows:
   H2: Small business owner managers tend to collect strategic planning
   information via internal or personal sources rather than through (indirect)
   external channels.


In both the second and third phases of our simplified model, it may be expected that the degree of comprehensiveness of that the degree of comprehensiveness of the process will tend to be limited. Indeed, Robinson and Pearce (1984) found that their sample firms often did not search aggressively for alternative options but rather accepted the first `attractive' option to reveal itself. Given this, we propose:
   H3: Strategy formulation in small businesses will be characterised by its
   limited comprehensiveness.


When we move firmly to the third stage of the model, strategic choice or the actual making of decisions, a potential distinction of the small business environment, from decision-making in large organisations, is the extent to which owner/managers rely on their own knowledge and experience and how much they involve others. Several authors such as Robinson and Pearce (1984) and Curtis (1983) offer findings pointing in this direction of limited consideration. On the other hand, Gilmore (1971) espoused simple, group oriented methods, which would be suited to small business use, which might have offered a counterpoint, while others have suggested that the inclusion of outsiders could have a positive influence on creativity, and hence the firm's ultimate performance (see e.g. Chrisman and Leslie, 1989).

In the light of these mixed signals, the next hypothesis was formed from a minimalistic standpoint, viz:
   H4: a) small business owner/managers will rely on their own knowledge and
   experience in making strategic decisions. b) there will be a low level of
   involvement of persons other than the owner/manager in the making of
   strategic decisions in small businesses.


The last of our main group of hypotheses concerns the potential effects of the key decision makers' characteristics on the elements of the strategy formulation process discussed hitherto. The characteristics of the owner/managers in the sample which were examined were: their gender, their level of education and relevant experience in their chosen industries. These factors are proposed as germane to the context respectively by: Nelson (1987), Smeltzer and Fann (1989) and Olsen and Currie (1992); Brush (1992); and Pelham and Clayson (1988) inter alia.

Overall therefore, the fifth hypothesis can be expressed as:
   H5: Differences in the individual characteristics of the key decision
   makers in small businesses will be associated with significant differences
   in their firms' strategy formulation processes.


This composite hypothesis was subdivided into four parts in which the characteristic variations of the decision-makers were linked to: a) the orientation of the strategy process; b) the information search behaviour of the players; c) the comprehensiveness of the process; and d) how `closely held' was the decision-making process.

Methodology

The target population was small businesses in Hong Kong, defined to be those with 2 to 49 employees (including the owner(s)). Sole traders were excluded since one of the contextual factors used was the role of subordinates in the planning process. It was also a condition of inclusion that subjects were not subsidiaries of larger companies.

With these requirements in mind, the Hong Kong Owner-Managers Association (HOMA) was chosen as the sample targeted. HOMA was established in 1989 and in 1993, the year of the main data covering a range of industrial and commercial sectors.

A questionnaire was designed in English and tested using a small number of personal interviews in the Spring of 1993. After refinement, the new instrument was translated into Chinese and piloted with nine diverse sectored companies in August/September 1993. After further refinement, including some reduction in length, the final questionnaire, comprising mainly closed questions, was sent out in October and November 1993.

The questionnaire was sent out to 245 members of HOMA, all members bar those who were only middle managers in their enterprises. After follow-up, by means of telephone calls and a letter to respondents whose initial response was partial or confusing, a total of 44 usable responses were to hand by the end of December 1993, a respectable response rate of 18 per cent. Two of these responses came from respondents who had participated in the second pilot phase. In fact, 2 of the 44 usable responses came from enterprises with more than 49 employees, leaving a data set for analysis of 42.

It could, perhaps, be argued that the sample was atypical in that respondents were members of a `professional club'. As such, they might be seen as more proactive in the field of management philosophy than some of their peers in the Hong Kong context. They were also relatively well educated. These comments suggest a degree of structural bias in the sample, which may have implications for interpretation of the empirical data reported. Nevertheless, the sample was representative in that it gave good sectoral coverage and the actual respondents exhibited a range of personal attributes (see next section for details). One area of imbalance was the male/female split.

Even if there is some bias in the sample population, the results will be valuable: a) for their novelty value; and b) because the sub-population explored (relatively professional small businessmen) is itself a substantial and growing element within the large total population of Hong Kong small businesses.

Data were coded and hypotheses tested using various statistical tests as appropriate.

A final discursive analysis sought to explain the empirical outcomes in terms of the ambient cultural factors noted in the second section of the paper.

The sample, although representing a fairly typical response rate for postal questionnaires (arguably better than usual in the Hong Kong context), was still modest in absolute terms and as such the results must be regarded as indicative rather than definitive. There is also the usual caveat concerning cross-sectional work, although small business is a tricky arena for longitudinal work given the high attrition rates of such businesses.

Analysis of the Data and Its Interpretation

In this section we look at the five hypotheses described in section 3, after first examining the respondents' characteristics.

Table 2 shows the characteristics of the respondents. Two interesting features are the relatively high proportion with tertiary education and their high level of experience. The modal age was the thirties.
Table 2
Characteristics of Respondents

Characteristic           Number   %

Sex of respondents
  Male                     36     86
  Female                    6     14

Education Level
  Tertiary                 17     41
  Below Tertiary           25     59

Industry Experience
  5 years or less           8     19
  6-9 years                10     24
  10 or more years         24     57

Position in Firm
  Owner/Partner            36     86
  Manager                   6     14

Respondent's Age
  less than 30              3      7
  30-39                    32     76
  40-49                     6     14
  older than 49             1      3


Table 3 shows the complementary set of data to Table 2, viz the respondent companies' profiles. They were well spread over six industrial segments, with a relatively small proportion in manufacturing reflecting general trends in the Hong Kong economy. The sample companies were evenly split between the very small and not quite so small, while two-thirds had been in business for over five years. This suggests that companies may be more likely to be prepared to lay themselves open to scrutiny if they have succeeded to the extent of this level of longevity.
Table 3
Profile of Respondents' Companies

Descriptor               Number     %

Business type
  Sole Proprietorship      13     31.0
  Partnership               9     21.4
  Limited Co.              20     47.6

Industrial Sector
  Manufacturing             6     14.3
  Wholesaling               2      4.8
  Retailing                 5     11.9
  Import/Export             9     21.4
  Restaurant                1      2.4
  Service                  19     45.2

Period of existence
  5 years or less          14     33.3
  6-9 years                17     40.5
  more than 9 years        11     26.2

Number of Employees
  9 or less                23     54.8
  10 or more               19     45.2

Annual sales last year
  HK$5m or less            24     57.1
More than HK$5m            18     42.9


The fact that over half the sample were other than limited companies may reflect an avoidance of an additional bureaucracy associated, or perceived to be associated, with registration in limited form.

The results of the tests conducted to test the various hypotheses are summarised in Table 4.
Table 4
Summary of Outcomes of Tests of Hypotheses

Hypothesis                       Outcome             Test(s) Employed

H1: Strategic need       Not supported               Univariate
normally reactive                                    chi-square
not proactive

H2: SP information       Direct external channel     Paired sample
tends to be gathered     use somewhat higher than    t-tests
from internal or         internal/personal
personal sources         network: i/p network
                         significantly more than
                         indirect external.
                         Hence, partial support
                         for H2

H3: Formulation will     Highly significant          Kolmogorov-Smirnov
tend to have limited     support for the             GOF (with
comprehensiveness        hypothesis                  uniform Dbn across
                                                     range of areas of
                                                     analysis)

H4: a) Owner/managers    a) is rejected at highly    a) univariate Chi-
self-reliant in SDM;     significant level; and b)   square
and b) low involvement   is not supported            b) K-S GOF
of others in SDM                                     (uniform Dbn over
                                                     involvement of
                                                     parties)

H5: Differences in       Gender, education level     Chi-square non-
owner/managers           and industry experience     parametric test
characteristics will     had no significant          for differences
be matched with          effect on orientation;      and Mann-Whitney
significant              comprehensiveness; and      used in the
differences in           reliance and involvement    rejected elements.
formulation process      in SDM.

                         Gender, education level     Partial support
                         and industry experience     via t-tests for
                         had impact on               elements relating
                         information search          to Info. Search
                         behaviour.                  Behaviour.
                         Hence, H5 partially
                         supported with regard to
                         information search.


A very clear rubuttal of Hypothesis 1 emerged from the data with the sample being almost evenly split between those whose strategic orientation was proactive and those who were reactive. This is interesting in that it contrasts strongly with previous empirical findings which were motivators for the initial framing of the hypothesis. A possible explanation might be the relatively experienced profile of the respondents.

Behaviour in the matter of strategic information search showed a pattern which led to partial support for the main theme of Hypothesis 2. It was found that there was a much greater propensity to use internal/personal networks for such purposes than entirely external sources. However, so-called directly related external channels were slightly more in use than internal personal sources. Hence the partiality of the conclusion. This would seem to reflect an understanding of the need to tap into sources beyond one's immediate knowledge -- perhaps for intelligence about markets and the activities of competitors -- when considering issues of strategy. However, the preferred external source would be one to which one's existing network would give immediate access. This is behaviour which fits very much with the notions of familism and relationship orientation noted in section 2 as archetypal elements of the Chinese psyche. With the benefit of hindsight one might suggest that the hypothesis should perhaps have been set to accord with this pre-existing understanding of context. To put it another way, prior research may have been tainted, from a Hong Kong perspective, by its essentially US origins.

The third Hypothesis was arguably the part of the story which most fully fulfilled prior expectations. On the basis of an overall (4-point) measure of comprehensiveness, almost 70 per cent of the sample scored in the lower half of the scale, almost half at the very lowest level. The picture quite simply is of fairly sketchy data collection and analysis as the basis for key decisions within these small firms. This is a somewhat depressing fact but not unexpected, unless Hong Kong's small businessmen were to be much more thorough than their western counterparts.

The rejection of Hypothesis 4's parts again may be explicable in terms of the Chinese context of the study. The survey data showed clearly that owner/managers in these small businesses did use the knowledge and expertise of colleagues in both the creative and final evaluative phases of what we have refered to in this paper as `strategy formulation'. Within Chinese societies, there is typically a more collectivist turn of mind than would be typical in the US or the EU. This would explain why the bosses turned to others for advice and input. This may be especially true because many small firms are also family firms. Thus, in consulting subordinates, one is still `keeping things in the family', often literally and semi-literally in that non-family members of family firms can become in some sense `honorary family members'.

It was also clear from the responses that firms were consulting parties outside the firm as well as subordinates. One of the main reasons given for seeking such help was simply lack of a particular knowledge or skill within the firm -- ranging from marketing expertise, through financial advice to technology input. Of course, a degree of self-awareness is called for as a prerequisite to such action. However, that need once accepted, Hong Kong is in some sense a giant village within which it will be comparatively easy to access suitable help which is recommended by one of one's own network. Guanxi will likely mean that someone can call in a favour on your behalf -- repayable at some future time, no doubt.

When we turn to the impact of the respondents' personal characteristics, the picture was, as with the second hypothesis, a mixed one. As summarised in the Table, gender, education level and industry experience had no significant effect in most phases of the model process. It was in the area of information search that an effect was found. Here, women were found to stick more closely to their immediate network/channels than men. Might this suggest that the conservatism noted earlier as typical of the Chinese is even more deeply ingrained in women?

`Perhaps' may be the best answer. Our interpretation of this is that it reflects a widely held view that women tend to be more people-oriented in their management style generally. That being so, to find that they may put more trust in, and hence use their subordinates, in the information search process is unsurprising. Also, part of being Chinese is reputedly a sense of familism (see section 2). This added to the female trait of people orientation would lead naturally to female owner/managers also involving their family and close friends in this area.

Turning to education level, there was no significant difference between the more and less educated groups (a 40/60 split) in their propensity to use an internal/personal network. The difference then was marked for the use of the directly related external network, but back to not significant for indirectly related external sources. This `hill shaped' finding appears consistent with the explanation proposed in connection with Hypothesis 2. There we suggested that certain cultural characteristics might explain the importance of the directly related network. Here, the better educated subgroup, before behaving `in a Chinese fashion', would appreciate the benefits to be gained from a degree of external network usage precisely because of the technical insights afforded by their education.

[ILLUSTRATION OMITTED]

Finally, it was found that those with less industry experience went furthest afield for what was deemed requisite knowledge (e.g. to trade associations and government bodies) and this was significant in a statistical sense. This showed a good self-awareness if nothing else. Two possible explanations suggest themselves. First it may be because those with less industry experience are younger and, very likely, better educated. They are therefore more knowledgeable and prepared to break away from their immediate circle to find appropriate information. The second reason is that their very inexperience necessarily creates a driven need to search widely, at least until a pool of knowledge and quality contacts have been developed.

Conclusions and Recommendation

The overall conclusions to be drawn from the foregoing analysis might be summed up by saying that a generic, robust theory of strategy formation does not fit well the small business context and particularly that of Hong Kong small businesses (HKSBs). The results of this study strongly support the premise posited elsewhere (Dyson and Foster (1983)) that strategic planning (strategy formation) is a highly contextual activity. One of the key contingency factors making up the context in Hong Kong is the `westernised Chineseness' of the participants, almost all of whom were under 50 years of age. Within that, the elements which we saw as playing the most evident mediating role in our study were `familism' and an emphasis on relationship building, or guanxi (in its best sense, not to be confused with its often pejorative use as a euphemism for corruption).

The lack of comprehensiveness of approach found, while expected in other countries' SBs too, was also seen by the authors as `very Hong Kong'. Hong Kongers are often seen as opportunistic, as followers rather than innovators. They lack the patience to take things step by step: they hanker after the quick fix or short-cut. Only time will tell whether the western modification of the Chinese psyche in Hong Kong, drawn from British colonial rule and exposure to western style educational philosophy from a wider background, will persist (or even strengthen) or whether reversion to PRC sovereignty will see a change to being `more Chinese'. Of course, China itself is changing at the same time so the mix is complex.

It would be interesting to see a replication of this work, ideally with a bigger sample, and an exploration of the relationship between the strategy formation process with actual delivered performance. It is suggested that, in any such replication, the starting hypotheses be modified in the light of our own mixed findings. As part of this study, some attempt was made to link the formation factors to perceived organisational performance (participants were asked to assess their company performance relative to their own expectations) but the results were inconclusive.

At the time of the empirical phase of the study, the questionnaire was developed around the very simple model shown in Figure 1. This was felt to be appropriate in view of the very crude systems of decision-making found in small businesses not only in Hong Kong but also elsewhere. In the light of our improved understanding of the HKSB context, it is suggested that the following slightly more detailed model of the strategy formation process be considered as a basis for future research work and as a helpful guide to the small businesses themselves.

As for advice to HKSBs, the following three points are suggested:

(i) more small businesses should follow the path of attempting to be more rather than less proactive in this area of work;

(ii) a greater willingness to be a little more comprehensive at least in the stage of formulating options to evaluate may be worthwhile, although it is appreciated that no small business will welcome an excessively bureaucratic approach;

(iii) those small businesses not already availing themselves of outside sources of strategic information should consider carefully their reluctance; women seem to be particular losers in this aspect.

One way for HKSBs to approach the third recommendation would be to make use of the available computer technology. In this way they could tap in to the wealth of business information available via the internet -- they could `surf the e-zone'. This would be a way to gain `outside' information without having to trust persons outside one's immediate network. The problem, of course, with the e-zone is the plethora of information available and hence how to sift it effectively.

These recommendations are couched in terms of the study's Hong Kong context, since that was the empirical base. It might well be speculated that similar advice will also be appropriate at least to other SE Asian small businesses (where the influence of the Chinese diaspora is strong) and perhaps even more widely.

Acknowledgement

Chan Shui-Ying wishes to acknowledge, with grateful thanks, the financial support she received from the City University of Hong Kong in the form of a research scholarship, and to all those who helped and advised her, particularly the survey respondents.

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Author:Chan, Shui-Ying; Foster, Mike
Publication:International Small Business Journal
Geographic Code:9HONG
Date:Apr 1, 2001
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