Purple Ocean Strategy: How to Support SME's Recovery

Abstract

This mainly conceptual paper suggests a new approach, aimed at supporting SMEs’ strategic realignment in the recovery phase after the economic crisis of 2008-2009. The analysis of the impact of the recent crisis on the performance of the Italian medium-size firms allows the identification of the levers on which their recovery can be based. Italian medium-size enterprises [MSEs] represent an interesting laboratory for experimentation for at least three reasons: 1) the recovery process is weaker in Italy, compared to that of other European countries; 2) the global character of the crisis penalized in particular these firms, more concentrated on the "Made in Italy" productions, because of their higher degree of internationalization (on average, 40% of their revenues); 3) these firms started a diversified process of strategic repositioning. The characteristics of the crisis, and the adopted strategies for reacting to it, show the critical importance of the following key strategic moves: • Emphasis on quality, design, and new products development, vs. penetration pricing strategies and reduction of the price-premium factor. • Investigation and identification of new markets and products with more attractive value/price ratios. • Focus on strategy’s value creation: a more efficient use of the invested capital, due to its scarcity and cost (and therefore more attention to the capital charge and to the spread between return and cost of capital), and better orientation to the medium-long term, in order to (re)create a permanent competitive advantage.

The suggested model, starting from the Blue Ocean Strategy’s approach, identifies the weaknesses of its original formulation, and proposes its integration and development, aimed at providing SMEs with a more articulated and systematic framework (i.e. the "strategic and economic control dashboard" or, in short, Strateco Dashboard ®), that equips managers with the qualitative and quantitative tools for "piloting" the key competitive success factors [KCSFs], in terms of both managing the components of value, and measuring its economic and financial impact.

Keywords: strategies for facing crises, Blue Ocean Strategy (BOS), small and medium-sized firms (SMEs), decision support systems, value creation of strategy, economic crisis, financial feasibility of strategy, strategic management simulation

JEL Classification: L10, M10, M30