Factors for Success in Small Manufacturing Firms

ABSTRACT: FACTEURS DE REUSSITE DANS LES PETITES ENTREPRISES DE MANUFACTURE Cet article presente les resultats d'une etude portant sur 22 petites entreprises de manufacture localisees dans Ie Nord-Ouest du Wisconsin. Les compagnies representees dans cet echantillon ont ete analysbes par rapport A l'accroissement moyen des ventes dans leur secteur industriel, pendant une periode de trois ans. Les compagnies ayant atteint ou depasse Ie taux general de croissance ont ete classees comme entreprises "reussies"; celles ayantatteint un taux de croissance inferieur au taux moyen de l'industrie representee ont ete considerees comme "moins reussies". Les resultats de l'equete revelent que les modes d'exploitation et une aptitude a la specialisation sont des facteurs cle pour la reussite. Les compagnies ayant reussi avaient gagne en competitivite en se specialisant-produits, marches, clientele. Small business failure is a common occurrence. Recent data indicate a failure rate of about 70 percent. At the same time, small business has been cited as a major contributor to economic growth and job creation. The purpose of this article is to explore the factors that may have an impact on the success of small manufacturing enterprises. Because the study is exploratory, it does not identify industry-specific strategies, managerial abilities, or other specific characteristics related to the successful operation of small manufacturing firms. Nevertheless, the study provides the basis for more refined research that will enable us to develop guidelines for business organization, strategy, and employment of resources. Such guidelines could help to improve the ability of small business enterprises to develop and prosper in an increasingly competitive and complex world. BACKGROUND Successful businesses must seek a balance between the ends to which the organization aspires and the ways and means available to achieve them. A study of 37 well-run companies carried out by the consulting firm of McKinsey & Company found seven policy areas that affected long-term organizational success.sup. 1 These areas are strategy, structure, systems, staff, skills, style, and shared values or goals. Other researchers have suggested that low market-share businesses can compete effectively through specialization.sup. 2 Specialization can include products, markets, and customers as well as price, cost, manufacturing capability, and other factors. Porter has suggested that competitive scope can have a powerful impact on competitive advantage.sup. 3 Narrow scope or specialization can provide a competitive advantage through the ability of a firm to provide products and services or perform activities better than more broadly based competitors. Based on the findings reported above, it is suggested that a successful small manufacturing business is likely to have the following characteristics. * An owner/ manager with experience in the business. * Specialized knowledge of manufacturing processes or product knowledge. * Previous supervisory or managerial experience. * Access to adequate financial resources. * A competitive advantage based on costs, product specialization, customer specialization, or various forms of price/ quality specialization. * A well-developed strategy developed through a formal or informal process. SAMPLE AND METHODOLOGY A sample of 30 small manufacturing companies was drawn from the Chamber of Commerce and Industrial Directories in northwest Wisconsin. The small sample size was dictated by limited resources and the small total number of manufacturing industries in the region. Personal interviews were conducted in order to elicit greater depth and clarity of response than could be accomplished using a mailed questionnaire. For purposes of the study, a small manufacturer was defined as one having fewer than 200 employees. …