Strategies for Superior Performance under Adverse Conditions: A Focus on Small and Medium Sized High-Growth Firms

Abstract

In this paper we study how small and medium sized firms successfully decouple themselves from declining markets. Based on detailed interviews with 20 small business top managers, we observe that most firms employ a multiple-strategy approach, simultaneously pursuing a differentiation and a product-service customization strategy. Most aimed to serve the entire market spectrum but aimed to differentiate themselves through aggressive innovative and product customization. Following this strategy, firms actively search for the high-margin products, avoid aggressive price competition, while at the same time keeping a very tight tab on costs. Most surprisingly, there is agreement that operating in such a market environment is rather ‘exciting’, pointing to the special role the manager plays in identifying the strategies that can alleviate the negative effects of the environment and grow irrespectively.

Keywords: declining industries, small firms, over-performers, divergence

JEL Classification: M13