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The present study’s aim is the identification of those factors affecting the utilization of the appropriate Turnaround Strategies by the SMEs in order to achieve their survival and viability. Therefore, this study focus on factors deriving from the SMEs’ external business environment (economic crisis, industrial or sector environment, competition intensity etc.), as well as on factors deriving from the SMEs’ internal business environment (adequacy of resources, organizational level, firm size, financials, personal profile characteristics). Thus, the external business environment factors identification (i.e. an economic crisis effect), that led numerous SMEs to decline; demands at the same time the Turnaround Situation’s Severity estimation by the firm’s top-level management. This in turn will allow leading executives to choose the appropriate Turnaround Strategies for the firm’s recovery during a Turnaround Process. This sequence of actions leads the researcher to choose the third category of the theoretical approaches, as described in section 2.4, which the present research will be based on. From the theoretical approaches of this category the one which may be considered to have laid down the theoretical

foundations on which most subsequent research approaches have relied, is that of Robbins and Pearce (1992) for the following reasons:

• A Turnaround Situation Severity caused by external or internal factors

• The “Turnaround” is a multi-stage process

• Retrenchment Policies

• Entrepreneurial Expansion

• Growth Strategies

• Final Outcome: Performance and Survival

The researcher will differentiate the Turnaround Model developed by Robbins and Pearce (1992), for the needs of the present study in the following stages or phases.

• According to Robbins and Pearce (1992), during decline situations, provoked due to external business environment factors (i.e. economic crisis), Retrenchment Strategies have few possibilities of being successful. So, the Retrenchment Strategies could be replaced by Investment Strategies.

• Organizational Change could also be the first stage or phase of the conceptual Turnaround model that the researcher developed, by adopting the findings of the Cater and Schwab (2008) research approach, as a top-level management change by hiring external experts in Turnaround management (in the case of Greek SMEs) is crucial for a successful Turnaround Process.

The importance of the organizational change which is essential in a declining business organization, has been supported by other researchers (Lohrke et al., 2004; Cater and Schwab 2008), although this has not been studied by the Robbins and Pearce Turnaround Model. Thus, based on the literature, and, specifically for the 1st stage on the Cater & Schwab (2008) research model, and for the 2nd and 3rd stages, as well as external and internal factors on the Robbins & Pearce (1992) research model, the structure for a conceptual Turnaround Model, as depicted in figure 2.10, should include the following phases or stages:

• Factors identification

a. External factors, with particular emphasis on Crisis Effect, the extent of which is a function of two individual factors: Competition Intensity and SME size.

b. Internal factors with special tension to SMEs’ managers’ or owners’ personal profile characteristics, as well as the SME’s level of leverage.

• The adopted Turnaround Strategy mix consists of the following strategies in a Turnaround Process sequence, namely: Organizational Change Strategies, Investment vs Retrenchment Strategies, Market Strategies and Innovation Strategies, where the researcher has differentiated which Strategies should be followed, in comparison to the existing literature. A successful Turnaround Process could lead to a better performance and viability.

A Conceptual Turnaround Model

Source: Personal development based on Robbins and Pearce (1992) and Cater & Schwab (2008)

2.10

Conclusions

Although SMEs constitute the vast majority of business activity in Greece, as in most countries worldwide, becoming the backbone for their national economies (Avlonitis and Salavou, 2007), there is nevertheless, very little literature on Turnaround Strategies for SMEs, and, even less, on Greek SMEs.

The Turnaround literature suggests that a business organization’s decline could be caused by factors derived either from the external or the internal business environment. According to Robbins and Pearce (1992), a declining firm has very few possibilities for recovery after retrenchment, if the decline causes are derived from the firm’s external business environment. In this case, the firm should follow investment policies such as: new products production, increasing shares in existing markets, expansion of new markets (i.e. export orientation), and innovation. On the other hand, if the causes of decline are derived from the firm’s internal business environment, then, a Turnaround Process, including retrenchment strategies, should be followed by the firm for recovery. The Turnaround Process is a multi-stage process (Cater and Schwab, 2008; Chowdhury, 2002; Jagafa and Wood, 2012; Robbins and Pearce, 1992), consisting of the retrenchment stage, during which retrenchment policies aim to ensure the firm’s stabilization, followed by the recovery stage where investment policies aim for the firm’s growth, the firm having been stabilized during the previous stage. The time period needed for each stage’s completion is also considered as critical for a successful Turnaround Process by many authors (Chowdhury, 2002; Jagafa and Wood, 2012; Robbins and Pearce, 1992). Market strategies as well as Innovation Strategies (repositioning) are the primary strategies for the stage of recovery. According to Cater and Schwab (2008), organizational change is the basic requirement for the firm in order to be engaged in a Turnaround Process through which the firm’s sustainability and viability is the desirable outcome.

From this point of view, Turnaround Strategies could be categorized into three main categories, as follows:

•Organizational Change •Retrenchment vs Investment

•Growth Strategies (Market Strategies, Innovation Strategies)

The first one is the requirement for a successful Turnaround Process for the SME, during which, Investment or Retrenchment policies could be adopted for the stabilization period (Cater and Schwab, 2008; Chowdhury, 2002; Jagafa and Wood, 2012; Lohrke et al., 2004: Robbins and Pearce, 1992). Market Strategies, along with Innovation Strategies, could then be adopted as the necessary Growth Strategies, whether the SMEs choose to follow growth policies (Pearce and Michael, 1997; Pasanen, 2003; Okpara, 2009). On the other hand, depending on the causes that provoked the decline situation, SMEs’ could choose to follow direct investment policies.