doing business at the edge of the world: die wirtschaftskrise aus sicht von kleinunternehmen in...
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Doing business at the edge of the world:Die Wirtschaftskrise aus Sicht von Kleinunternehmen in Neuseeland
Dr Martina Battisti & Prof David Deakins
New Zealand Centre for SME ResearchMassey University, New Zealand
University of Applied Sciences Vorarlberg25 Maerz 2010
within approx. 900 km. radius of Wellington, you will meet:
4 million people andno other country
With approx. 900km. radius of Dornbirn, you will meet:
340 million peopleand about 20 countries
Besides the 4 million people you will meet:
- 45 million sheep - 10 million cattle &- 68,000 pairs of penguins
New Zealand’s economy
- NZ is one of the most geographically isolated countries in the world.
- NZ is a small economy with a small domestic market.
- NZ economy relies heavily on - Agriculture &- Tourism
- Consistently ranked as one of the world’s most liberalised countries.
SMEs in numbers
Number of New Zealand Number of Austria
Employees No. % Employees No. %0 to 5 412,579 90% 0 to 9 267,910 90%
6 to 49 43,597 10% 10 to 49 25,300 8%50 to 99 2,178 1% 50 to 248 4,914 2%
Total SMEs 458,354 99.% Total SMEs 298,124 99%source: NZ Ministry of Economic Development, 2008 & WKO, 2008
A research programmeThe aim of BusinesSMEasure is to examine how SMEs in NZ develop over time:
longitudinal research that allows to undertake in-depth analysis of a large
number of firms, through a mixed method approach:Module I: site visits & interviews with the firm’s
owner-managersModule II: longitudinal survey
and be responsive to emerging issues
Module I: Site visits & interviews
To date we have visited and interviewed 400 firms in NZ in 8 studies with 50 interviews each. The interviews covered the following topics:
- Access to finance- Business growth- Business assistance- Employee learning- Management development- Export- Sustainability
Module II: Longitudinal survey
The longitudinal survey was launched in 2007- annual survey- approx 1400 SMEs in the panel- aim is to explore the factors that influence SME
development - Focus is on firm characteristics and on owner-manager
characteristics- topics covered so far:
- Collaboration, Succession, Innovation, Research & Development, Sustainability, Finance, Management Development, Managing under Recession
Survey 2009
Stratified sampling frame 4,165
Usable respondents 1,447
Response rate 35%
Micro (0-5)
768 58%
Small (6-49)
534 40%
Medium (50 – 99)
26 2.0%
Total 1328 100%
Firm Size by employees (FTEs) Firm size by turnover
< $500k 522 42%
$500k< $1m 238 19%
$1m plus 485 39%
1245 100%
Selected Business Demographics
Male 1097 78%
Female 307 22%
Total 1404 100%
Gender
Services 496 39%
Manuf. 263 20%
Other sectors 527 41%
Total 1286 100%
Sector Location1
Main urban 977 69.7%
Satellite urban 61 4.4%
Independent urban (rural)
302 21.6%
Rural 61 4.4%
Total 1401 100%
1. Definitions as per Statistics New Zealand categories
The context 2008-9 was the deepest recession facing the world economy
since the 1930s (World Bank, 2009), affecting both demand & the availability of credit.
NZ was the first country to be hit by the recession, but due to domestic factors rather than global impact. Overall recession was the longest, but also the shallowest, because of relatively sound financial system and commodity exports.
Crisis has impacted on companies of all sizes Conventional wisdom is that SMEs are particularly vulnerable
Key Questions
How has the economic crisis impacted on small firms?
How have firms responded?
Managing under recessionLittle literature directly related to strategic adaptation under recession conditions
3 broad types of strategic adaptation: retrenchment investment ‘ambidextrous’
Vulnerability hypothesis:
Small firms’ limited resources affects ability to scan, analyse
& respond to environmental shocks
Resilience hypothesis:
Small size may enable a flexible approach – permitting rapid
adjustment of resource inputs, processes, prices & products
Impact of The Recession: Timing
Not felt the recession 367 27%
First felt recession during:
2007 44 4%
2008 429 43%
2009 518 52%
Total 991 100%
Note: significant effect re timing and location, urban firms felt it earlier in 2007 and 2008, rural firms felt it stronger in 2009
Timing of Recession Impact
The Impact of the Recession
Change in Firm Performance 2007-09
2007 2008 2009
Per cent of firms reporting growth in t/over and profitability
37% 24% 16%
Totals 1208 1481 1416
0 10 20 30 40 50 60 70
Late payment by customers
Level of cash at bank
Bad debts or uncertainty over …
Credit periods and credit terms
Availability of bank finance
Per cent
Type of Recession ImpactsFinance related effects Respondents indicating negative effect
SME Strategies – Top 10Selected reported actions to increase or maintain performance
Action taken Per cent of firms
Introduced new or improved products 54%
Personally worked longer hours 48%
Increased sales effort 44%
Reduced numbers employed 40%
Selling to new types of customers 38%
Selling more to existing customers 31%
Used new suppliers 30%
Increased advertising/promotional exp 30%
Cancelled personal holidays 28%
Invested personal savings 27%
Strategies differ by performance
Firms with growth in sales turnover and profitability were more likely to have/be:
Firms with no growth in sales turnover and profitability were more likely to have/be:
Introduced new or improved products/services
Reduced selling prices
Selling more to existing customers Reduced numbers employedSelling more to new types of customers Introduced wage/salary freezeInvested in new equipment Invested personal savingsMade changes to the mgt team Reduced investment expenditureIncreased numbers employed Extended payment periods to suppliersTaken greater care in recruitment of staff Sold personal assets to compensate for
poor business performanceIncreased employee training Cancelled personal holidaysOpened new branches and outlets
Conclusions I• Despite overall deteriorating firm performance over the last
three years, not all firms were equally affected by the recession. The silver lining is that roughly one quarter of firms reported increased turnover and increased profitability.
• Negative finance related effects were less pronounced than expected especially with regard to availability of bank loans/overdrafts.
• We even found positive effects that were related to the changes in labour market.
Conclusions II• Diversity of experiences were mirrored in the actions small
firm owner-managers took to maintain or increase their firm’s performance.
• Small firms per se are neither vulnerable nor resilient, it is the decisions of the owner-managers and the actions they set that influence a firm’s performance.
• Majority of respondents increased personal finances, instead of using external finance. But firms become more vulnerable the fewer resources they are able to mobilise. As such we expect to see an increased effect of the global recession in 2010 as firms exhaust personal resources or exhaust cost cutting measures.
Thank you!
Time for questions ....