Espacios. Vol. 33 (7) 2012. Pág. 15
Strategic Information Management in Small and Medium Enterprises: A Quantitative Study with Latin American Researchers
Gestión de información estratégica en la Pequeña y Mediana Industria (PyME): Un estudio cuantitativo con investigadores de América Latina
Recibido: 29-12-2011 - Aprobado 12-04-2012:
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Small and medium enterprises (SMEs) currently bear great representativeness for the Brazilian market, accounting for 99.2% of the total percentage of formal companies in the Country according to data of the Brazilian Service of Support for Micro and Small Enterprises (SEBRAE, 2005).
Despite the increasing relevance of small companies in the Brazilian economy, its business failure rate is still quite high. According to a survey performed by SEBRAE (2008), the business failure rate of such companies reaches 27% in the first year, 38% in the second, and 64% of the companies will go out of business before the sixth year. There are several factors listed in literature for this occurrence, such as the lack of a formal planning (DORNELAS, 2008), the narrow vision of what goes on within their environment (PEARCE II; CHAPMAN; DAVID, 1982) and factors related to the outer environment, such as economy data and world crises (SEBRAE, 2008).
Hence, an improved management of one’s information might provide greater edge to smaller companies and the resulting decrease of the aforementioned business failure rate. For McGee and Prusak (1994), the organizations capable of dealing with the capacity of managing information, in other words, of acquiring, handling, interpreting and efficiently using information, will produce competitive edge.
It was observed that the analysis of the environment is approached in several academic studies and is defined by Pearce II, Chapman and David (1982) as an organized manner of contemplating the world beyond the company, in order to anticipate opportunities and foretell threats. Cancellier et al (2005) quote that, although studies related to this activity are still more focused on major companies, environmental monitoring has a lot to add for SMEs.
There are several challenges faced by these companies upon search, analysis and monitoring of information, however, the lack of resources, time and the attitude of owners are the primary factors related to the lack of systematization for such techniques (ALMEIDA; MENEZES, 1997).
Currently, due to the greater availability of information that can be acquired from different sources, SMEs are able to access several data that were formerly only available for major companies. Nevertheless, according to Choo (2002), merely seeking for information is not enough to ensure it will be strategic for the company. Therefore, the management of information remains a challenge for companies, mainly for small and medium enterprises, which rely on fewer resources.
It is believed that SMEs in general will not follow a program to seek information about its environment, and, therefore, will not analyze which variables must be investigated so that the data acquired can be relevant for their businesses. They act intuitively, mainly seeking for operational information instead of strategic, and, generally, they will do so reactively.
Even with such an improved information acquisition resource as the Internet, there is still a lack of systematization for the processes so that the information acquired virtually can become tools to assist the owners of SMEs. Benczúr (2005) affirms that browsing the Internet searching for data does not mean that the company is strategically managing the information of its environment, because, in general, this attitude will only settle specific issues.
Few studies aim at understanding the reality of SMEs in other Latin American countries, whereas, the enhanced understanding of practices of distinct researchers, within a different scenario, might improve techniques, clear issues, and give rise to new achievements. In view of this context, this article aimed at answering the following question: How do small and mid-size Latin American enterprises strategically manage their environmental information?
From a general perspective, the study aimed at analyzing the information management practices in different Latin America countries trough the viewpoint of local researchers in order to cross-reference the ongoing study with other contexts. In specific terms, the study was mainly focused on: (1) identifying which steps are used by small and medium enterprises to seek, analyze and use their environmental information and (2) analyzing the similarities and discrepancies of the strategic information management used in the different countries under research.
This article enables the sharing of information acquired in other countries, assisting entrepreneurship researchers with viewpoints of different scenarios, allowing the preview of different practices and realities.
The literature review provided the foundation for the field research framework, and secondary data are being acquired on the contextualization of SMEs and strategic management of information, considering concepts and processes.
2.1 Concept and Peculiarities of Small and Medium Enterprises
Different conceptualizations of SMEs are present in literature, whereas, several parameters may be considered to define a company’s size, such as gross revenue, number of associates and specific characteristics, as cited by Almeida and Moreira (2004). When studying technology companies, Benczúr (2005) considered three relevant aspects to define their size: number of hierarchical levels, number of associates and sales outcomes.
To define the company size, SEBRAE (2005) uses certain criteria related to the field of operations and the number of associates, classifying SMEs as those that comprise between 10 and 99 associates, within trade and services, and between 20 and 499 associates within the industrial sector. The National Bank for Economic and Social Development (BNDES, 2002) considers small and mid-size the enterprises with annual gross operating income ranging between BRL 1,200 and 60 million.
The analysis of specific characteristics of companies is also a criterion for their classification, relating such characteristics to the company’s size. In the study carried out by Almeida and Moreira (2004) and Cancellier et al (2005), aspects such as the decision-making focused on few individuals, intense participation of the owner, resource limitation, deficient process organization, enhanced flexibility and quick implementation of the decisions are emphasized.
Berte et al (2007) mention as a peculiarity of small and medium enterprises the existence of few hierarchical levels and, with regard to information, which is the scope of this study, the informality in the search for information performed through the contact network.
However, in view of the subjectivity degree presented by the analysis based on the specific characteristics, the criterion used by SEBRAE (2005) was considered for this study, as set forth in table 1.
Table 1: Classification of the size of trade and service companies
Source: Adapted by SEBRAE (2005)
As mentioned above, for the purposes of this study, companies that have between 10 and 99 employees in the trade/service sector, and between 20 and 499 in the industrial sector, shall be considered SMEs.
2.2 Strategic Information Management
Nonaka and Takeuchi (1997) define information as the flow of messages within a given context and a means towards knowledge building. McGee and Prusak (1994) consider information as an important strategic resource of organizations, where data are collected and organized, and once labeled, are managed in such a way to produce competitive edge.
The search and use of information have undergone changes throughout the past years, mainly due to the appearance of Internet, which provides a greater availability of information. Fidelis (2001) affirms that the ease for acquiring data conceals the difficulty in finding actually useful information.
Several generic management or monitoring models are described in literature, as set forth in table 2, whereby, most of them will not focus the effort on SMEs. Cancellier et al (2005) also add that when small and medium enterprises fail to use a model, much of the information will be specific and operational, instead of strategic.
Table 2: Examples of information management or monitoring models
Source: Developed with basis on the studies of McGee and Prusak (1994), Aaker (1983) and Cancellier et al (2005).
McGee and Prusak (1994) remark that information will facilitate the implementation of strategies when it discloses opportunities and threats arising from the changes and development of the outer environment. In view of this context, this study will analyze the management of information in three broader aspects, suggested by McGee and Prusak (1994), which comprise the steps presented by the authors in table 2: the search for information, and its interpretation and use through the standpoint of researchers from different Latin America countries.
Search for Information
The definition of priorities is a crucial step for the systematization of the information management process in companies of any size, especially small companies that, with fewer resources, can focus their efforts on the strategic actions for their businesses. According to Almeida (2009), defining the environmental variables that influence the company facilitates the collection of information, but an excessive amount of data shall not be produced for this process.
Similarly, in this preparation step, the sources of information shall be taken into account according to each variable, whereby, for SMEs, the ease of access to information must be allowed for, as mentioned by Pearce II, Chapman and David (1982).
Aaker (1983) suggests that companies should use familiar sources, facilitating the monitoring process. The others must be evaluated according to the value produced by the activity.
With regard to the definition of responsibility by the process, Aaker (1983) suggests that the ones who are most exposed to the sources of information should be prioritized, as well as those directly involved with the strategic planning or related areas.
Therefore, in this step, the aspects related to the selection of variables and sources, definition of responsibility and data collection will be analyzed.
Interpretation of the Information
For Choo (2002), the capacity of identifying opportunities relies on the courage to analyze the future, being the analysis and interpretation of the environment of prime importance for the organizations
McGee and Prusak (1994) find that the use of information is what makes the information management process influence the decision-making process and the strategic development of companies. Aaker (1983) suggests that the analysis of information shall rely on the support of experts, which might be unfeasible for small companies, as defended by Xavier and Cancellier (2008).
Cancellier et al (2005) present an analysis method that consists of the cross-referencing of different pieces of information and regular discussions between company directors. Due to the fact it is focused on the reality of SMEs, this proposal provided the grounds for the interviews in this research step, which has also considered the way populate store information.
Use of the Information
McGee and Prusak (1994) stress that there should be a group to take charge of the spread of information, while the development of actions fomenting the access and use of information is considered crucial. For Cancellier et al (2005) the spread of the information could take place along analysis discussions; however, both steps will eventually consolidate into one.
Accordingly, there was a collection of data about the disclosure of the environment’s information and about the context which the SMEs use this information. Several aspects came to evidence throughout the interviews and were added to the previously presented steps, which represent a peculiarity of the qualitative research.
In order for the suggested goal to be achieved, a qualitative and exploratory research was chosen so that greater knowledge could be acquired on the context of the information in small and medium enterprises located in Latin American countries. The data were collected through interviews held with researchers of information management, entrepreneurship or related areas.
According to Godoy (1995), the qualitative research provides the researcher with greater understanding about different phenomena from the interviewees’ standpoint, using spanning and self-defining questions. In this research, this spanning characteristic allowed a greater development of the realities of different countries.
The selection of the interviewees occurred through the two following methods:
(1) The Brazilian researchers have been selected by convenience, whereby their knowledge in the field of this research was also considered.
(2) Researchers of other countries have been selected by judgment, considering the extent that they could contribute to the purpose of the research. Accordingly, a survey was performed on various Universities in several Latin American countries and invitations were sent through email or the social network Linkedin.
Twenty invitations were sent, whereas six were discarded because the researchers were not involved with the field or did not respond to the invitation. Therefore, 14 valid responses were considered, according to the profile of the respondents presented in table 3.
In view of the access difficulty encountered by some researchers due to the distance, it was selected the online interview method, which occurred asynchronously, as described by Flick (2009). Questionnaires were sent to the participants, who returned them between September/October 2010. After the reception and consolidation of the answers, in the required cases, another contact was made with the interviewee so that issues could be solved and standpoints tested, as mentioned by Godoy (1995).
Table 3: Profile of the respondents of the research
The questionnaire was considered the primary instrument of research, because, as affirmed by Selltiz et al (2007), when answering it, interviewees are not under pressure to provide immediate answers, and are allowed to consult previous questions or academic texts, which is an important factor to answer the questions required by this research.
Along with the questionnaire, all interviewees received the definitions of the terms used in the research, such as small and medium enterprises and information management, as per the proceeding emphasized by Flick (2009). They were also required to answer the questions by solely considering the scientific researches or academic literature they had access to.
The questionnaire was developed in four sections and the questions approached issues related to:
The data were consolidated and analyzed according to the steps described by Bauer and Gaskell (2000): transcription, classification and analysis.
The main outcome of this research was the analysis of the methodology used by small and medium enterprises for the management of information in different Latin American countries, from the perspective of specialized researchers, comparing the practices to the secondary data acquired from literature.
In general terms, it could be observed with the research that the small and medium Latin American enterprises do not follow a methodology to manage their environment’s information, and this activity is not as developed in small-size companies. This issue was addressed by the study of Cancellier et al (2005), when they affirm that the information monitoring models are not suitable to the reality of small-size companies.
According to table 4, information still receives little attention in the environment of SMEs, whereby it was mentioned by interviewee E 12 that in his country SMEs will not consider information management a priority. He believes they are rather concerned about economic issues and the operational day-by-day, instead of having a long-term vision. The deficient attention rendered to the environment was also stressed in the research of Pearce II et al (1982).
Several reasons were mentioned to justify the lack of such practice, as owners’ lack of time and specific resources for this activity, according to the study of Almeida and Menezes (1997).
It was observed that Brazilian and Chilean researchers were unanimous when saying that SMEs will seek information for the operational decisions, emergency issues and short-term actions. Nevertheless, in the other countries there was no consensus. The researchers in Mexico also find that the SMEs manage their information strategically when developing the long-term strategic planning.
Table 4: General perceptions of interviewees with regard to information of SMEs in their country
With regard to the steps suggested by McGee and Prusak (1994) presented within table 2 of the theoretical grounding, it could be observed that most of the interviewees believe small and medium enterprises will even seek information, however, they will not analyze or spread it in a fashion that it could be strategically applied to their businesses, according to table 5.
Table 5: Comparative analysis of the steps mentioned by the interviewees
It is important to note that nearly all interviewees believe SMEs will seek information on the environment, as remarked in the study of Benczúr (2005). However, although they believe that companies use what they seek, only 05 respondents think that companies analyze and interpret the information acquired. Each of the steps suggested by the aforementioned authors is analyzed next:
Search for Information
Regarding the search for information, most of the interviewees mentioned having used specialized magazines and major media vehicles as primary sources, as well as data acquired from the Internet. In Brazil, SEBRAE (Brazilian Service of Support for Micro and Small Enterprises) was mentioned as a source of additional information, as well as social networks and the sectoral associations.
For the Chilean researchers, there is little information available about the environment for companies with fewer resources, whereas the SMEs eventually acquire it directly through consulting firms and associations. In Peru, the SMEs also use informal sources such as network of friends, customers and suppliers, acquiring the information in meetings and through the internet.
The interviewees in Mexico cited Internet as the most common source of information, but they also considered social networks and associations quite important for the search of information performed by smaller companies. Interviewee E 10 affirmed that the greatest challenge faced by such companies is that they will not always find information to match their needs or their terms.
For the Argentinean researchers, small and medium enterprises do not use a methodology to seek information, whereas the Internet is widely used and it is common for companies to recruit specialized consulting firms for market study. However, they affirm that strategic resources are unknown by owners, in addition to the lack of personnel qualification and technical resources to seek information on the environment.
As to accountability, some of the interviewees could not answer and the others believe there is no specific delegation.
Interpretation of the Information
The Brazilian interviewees believe that there is a lack of methodology for the interpretation of the information, whereby only a few companies apply a specific methodology for this activity.
The Peruvians and Chilean companies are also devoid of methodology for the analysis of their information; there are no specific records or database.
The Argentinean interviewees believe that this step depends on the sector and on the size of companies, and it should not be generalized for all SMEs. They also believe that major small and medium enterprises analyze the information to get guidance for the decision-making process through technical support (such as intranets, extranets and corporate knowledge portals).
For the Mexican researchers, SMEs in their country analyze the information based on the trends, favoring the variables that facilitate the decision-making process and ensure greater edge. They believe, however, in the informality of the process and direct greater attention to the financial data.
Use and Spread of information
With regard to the use of the information, the Brazilian researchers mentioned that information is used intuitively, operationally and with no statistical criteria. For respondent E 2, the most used information is the one related to sales and inventory. They believe that the use of blogs and social networks for spreading the information has been increasing.
For Chileans, the information is used for short-term, operational actions, which are not quite focused on strategic definitions. There is also a lack of dissemination through social networks, intranets or so.
In Peru, medium enterprises are already making use of blogs for spreading information; however, such tools are not very popular among said companies. The interviewees believe that SMEs use information for short-term operational decisions.
The Mexican interviewees said that most of the information is used operationally. Interviewee E 9 stated that the lack of management triggers the loss of information, for its importance is ignored when SMEs are making a decision. They do not believe that smaller companies are using Internet resources to spread information about their environment.
The Argentinean interviewees believe that small and medium enterprises use information on their environment when they need market definitions and short-term operational decisions. They were not unanimous about the use of Internet resources for the spread of said information.
This research indicated that there are several similarities among the aspects related to information management in SMEs of different Latin American countries. The foremost similarity noticed is the lack of a model to organize this management, whereas such activity is still performed intuitively and generally much more focused on operational issues.
Despite the general awareness on the crucial character of this information management for the development of future strategies and for the competitiveness of small companies, this activity is not well structured according to most interviewees.
The use of internet for spreading the information collected from the environment is still in its early stages, whereby only Peruvian interviewees commented that medium enterprises already use blogs for that.
A relevant difference noticed when comparing the perceptions of Brazilian researchers with those of the interviewees from other countries, relates to the sources used to acquire information from the environment. This study suggests that, in this sense, small and medium Brazilian enterprises are better organized and rely on several data sources to carry out their researches. In other countries, the sources are more focused on the social network of the owner or the company.
It is important to mention that for most interviewees the lack of a methodology for managing the information of the environment seems to be related to the lack of a strategic attitude; and that was mentioned by researchers from all interviewed countries.
This research bears certain limitations related to the specific characteristics of the qualitative research, as it does not allow generalizations for all SMEs of the interviewed countries. Furthermore, it reflects the standpoints of researchers specialized in entrepreneurship or related areas, selected by judgment, which might influence the issues related to this selection.
Thus, the data analyzed by this study might be used as a basis for a new research including quantitative analysis to handle the data surveyed and analyzed in this study with a statistic approach.
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1 Universidade de São Paulo, Brasil firstname.lastname@example.org