Factors Influencing the Performance of Small to Medium-Sized Enterprises: An Empirical Study in the Czech Republic

This paper discusses the conclusions of research projects undertaken at the University of Economics in Prague, Czech Republic and which had the aim of measuring the performance of SMEs. Initially a pilot study of one company was used and this adopted, as a vehicle of study, the European Foundation for Quality Management model. Secondly, a more extensive study into a random sample of 50 firms was introduced. This was assembled from a database supplied by the Association of Small Businesses in the Czech Republic, by using a further six analytical components, developed at the University of West Bohemia. Thereafter, through the administration of multidimensional regression analysis the findings were analysed. The sample firms composed 13 in rubber and plastics; 20 in machinery; 12 in steel and steel products and 5 in mechanical engineering sectors. The conclusions have proven that more than 50% of the companies did not have a defined mission or strategy, more than 30% performed poorly in marketing activities, just 28% underwent certification approvals and 70% had no integrated supply chains. The challenges for the future of Czech SMEs are to improve product development, link into Czech Business Schools programmes and to learn more effectively from the most successful SMEs in developed countries. Over the past three decades it has become fashionable among academics to focus investigation on small and medium sized organisations (SMEs). The empirical and intellectual basis of much SME research is rather varied consequently, the work reported here builds upon SME research and more precisely links into the strategy paradigm. The business environment is increasingly characterised by permanent and rapid changes. These changes are caused by intensive global competition, developments in technology and better communication networks using the Internet. They influence the activities of all kinds of firms, but there arc special problems that affect SMEs more than larger businesses. More precisely they are often weak in their management calibre, they find considerable difficulties in accessing capital, they are poor negotiators when seeking funds and generally offer poorer products in an increasingly sensitive market place. Regardless of these barriers, SMEs represent a formidable economic force, creating 37% GDP of the Czech Republic and provide employment for 60% of the labour force. In particular this paper concentrates on performance measurement as it was perceived to be in a sample of firms within the Czech Republic, it progresses to analyse development potential among the sample firms. The methodological approach adopted is twofold. Firstly, a pilot study examined one Czech firm - Axis Ltd - by introducing an EFQM model. Secondly, a more extensive study into 95 firms was introduced using a further six analytical components, developed at the University of West Bohemia. The results combined to form a comprehensive body of works which add to our understanding of the performance of the sample firms. Quite clearly SMEs have a pivotal part to play in the economy of the Czech Republic, as Table 1 indicates. Research Objective To examine development potential using a set of tangible and intangible factors directly influencing the future success of contemporary SMEs in the Czech Republic. Background The critical role of managers consists of continuous assessment of a firm's performance and evaluation of competitive advantage aimed at seeking steady improvement and potential development. Such approaches have their roots in economic theory, emphasising economies of scale and critical market characteristics (Chandler, 1990, Porter, 1985, Hart, 1992 and Chaffee, 1985). However, standard procedures of performance assessment, which have been used in the past, do not necessarily reflect new entrepreneurship approaches. More recently the resource-based approach has developed, suggesting that how a firm cultivates and develops its resources can be significant in determining strategies, (Spender 1993, Lei, Hitt & Bertis, 1996). …