Question

Explain why is strategic management is important to small businesses. Discuss the three basic strategies from which entrepreneurs can choose. Provide an example of each one.

Answer 1

Helps in creating a mission or vision for the business.

Set goals for the company to achieve.

Helps in achieving competitive advantage.

Helps managers create strategies to minimize weaknesses to take advantage of opportunity and avoid threats.

Helps to get various cost benefits.

3 basic strategies are:-

Competitive advantage:-

Combination of a company's resources with its capabilities.

Produce price based competitive advantage.

Complete advantage is important in small intense business where competition is intense Example local farm.

Financial resources:-

Obtaining of bank fund in small business is difficult.

Has sufficient revenue to support the development of products.

Strong financial position allows a company to take advantage of opportunities.

Examples:- deposits with financial institutions.

Intellectual property:-

Adds to Asset value and makes financing easier.

Effective way of producing a better product.

A reputation for high quality enhances company's brand Recognition.

Examples:- Tangible inventions such as machine devices and materials.