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specific background that run SMEs will face the necessity to take a dip in this method as even though “the exit of any enterprise from a crisis entailed losses” there is a significant difference in the degree of devastation.
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adopted retrenchment as the main strategy. However, according to TASS (Russian news agency) Mao Shenjun, representative of the State Statistical Office of the People’s Republic of China by the end of March, 80% of SMEs have restored their activities (ТАСС, 2020). This is consistent with the findings of Robbins, D., & Pearce, J. A. (1993) who found out that “retrenchment firms achieve significant turnaround in performance ” (Robbins, 1993). However, by cutting most employees at the bottom of crisis events, SME owners risk losing valuable team members with whom to develop the business, if not tomorrow, then the day after. Indeed, experience proves the Rico, M., & Puig, F. (2019) suggestion that recovery needs to be prepared.
Another strategy that should be highlighted as advocated by some researchers is persevering. Successful measures within this strategy are, for instance, reduction of working days or working hours, another option. In the management literature, there is no consensus on the effectiveness of pursuing preserving the way. Some researchers suggest that the fundamental feature of this strategy is a faster and easier recovery, while others are inclined to believe that for many companies that can be dangerous to get involved. The first party considers it as an effective solution as “frequent strategic changes reduce the value of a strategic renewal” (Kraus, 2020).
However, the second group of researchers keeps insisting that it all depends on the initial amount of the resources that the company disposes as well as on the crisis length. Still, for the purpose of this paper, it is crucial to state that the recent studies tend to find explanations of comparative success of this strategy in overcoming "traditional problems (e.g., succession, scarce resources, financial competency, and solvency), face competition, and sustain market positions" (Orengo Serra, 2017).
In the restrictions of this new COVID-19 world for many enterprises innovating strategy has become the new normal. This strategy is defined by stating that pursuing it companies’ “search for new options, extend existing projects to reach different market segments, and monitor different methods of projects execution within the crisis boundaries” (Крутик, & Муравьев, 2001).
Temporarily re-profile the business is one of the widespread options that was opted by many enterprises including Russian ones. This is put into practice by returning to work idle capacities and staff members to produce products or providing services that are relevant during a pandemic.
Another option that was widespread especially in such big cities as Saint-Petersburg is to focus on delivery and new marketing channels. Indeed, investment in delivery has become more interesting even for small companies because of cheaper technologies due to digitization in transportation, storage, warehousing logistics. Overall, this strategy helps to shorten the distance to the consumer, establish direct communication to the target audience, test new products with low costs. However, here again,” as history has shown, great opportunities in economic crisis can be offered only for
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companies that have spare resources and bold ideas” (Nicholas, 2008).
Taking into consideration the significant popularity of this strategy it is crucial to provide a more detailed description of certain measures. The most general recommendations that are mentioned in the theoretical papers will be discussed below. However, due to their vagueness, it is hardly possible to give them a critical review on practice
1) Generating new products, utilizing new technologies, providing new services;
2) Application of new techniques in R&D, production, marketing, management;
3) Transition to new organizational structures;
4) New resource types and new management approaches traditional resources.
Nevertheless, a more detailed observation of the suggestion considering the internal environment of the organization may be more fruitful as they are rather concrete and can be divided into groups. Firstly there are product innovations for instance portfolio or business ones aimed at the creation and promotion of new products, technologies or services). "Initial success depended largely on the ability to produce a good that meets market demand, while subsequent profits depended on marketing and the level of production that guarantees the required amount of the sale at the lowest cost" (Коротков, 2021). Another brunch is centered around functional innovations such as industrial, scientific or technological. However, it should be noted, that when we are discussing SME innovation strategies it is incorrect to state categorically that entrepreneurs in this sector often utilize it due to the considerable amount of financial and human resources that the latter requires. Thus, " modest resource base of small enterprises compared to larger enterprises, particularly in terms of finance and management capacity, may affect their ability to identify, analyze and respond to major environmental changes" (Stepanyan, 2018). In addition, during periods of falling sales, enterprises are more likely to face market size constraints, as economic shocks will reduce the customer's average check. Hence, another means through which the innovation strategy can be put into action is "adjusting to the economic turbulence by adopting market diversification (expansion of activities), and such strategies led to greater efficiency"
(Hayter, 1985; Stepanyan, 2018). Further, we may name organizational innovations and conversion as a means of accommodation within discussing crisis strategy. Concerning the first option, inner company development is usually implied as following a different organizational structure may "lead to the demonstration of the ability to be agile, enable more optionality in operations" (Ernst & Young Global Limited, & Gaurav, 2020). Still, if the entrepreneur or the manager of the SME decides to adopt this innovation strategy it is important "to take into account
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micro-level, within-person factors that positively influence adaptation to organizational change"
(Van den Heuvel, 2009) as not all subordinates may easily settle into a new structure. Lastly, in the situation of the current crisis in all of its contradictions, we may acknowledge that "lower costs and enhanced productivity do not automatically imply improved market performance" (Hayter, 1985) as there are certain beyond market forces therefore the complete shift of the production towards new products for some enterprises has become rescue bot.
Finally yet importantly the strategy of exit should be described. As it is noted by researchers, in the Russian public mind, bankruptcy has come to be associated with crisis management in general (Ryakhovskaya, 2013). Nevertheless, at the beginning of the 21st century even in Russian managerial science the scope of exit strategy has become significantly larger.
Indeed, lately, it is closer to the following- for many companies bankruptcy is an end of the business, instead, it is a voluntary logical step that entails the adaptation of the different development direction. To put it differently, “a successful business exit can free up new resources and create fresh opportunities for a strategic renewal and the foundation of a new firm” (Kraus, 2020),
Crisis leadership managerial implications.
Literature review of the crisis management theories would be incomplete without the observation of researches dedicated to leaders’ communication clarity that supports their staff members during the crisis. The approach to analyzing leadership that will be explored in this work will focus on how a leader handles economic and social crisis. Many prosperous SMEs owners because of limited human resources have to be a combination of both a manager and a leader.
Obviously, entrepreneurs, small business representatives act like managers when they put in practice a clear action. Simultaneously, in some cases, they are in charge of creating a vision and inspiring the subordinate.
Four essential tasks for an owner-manager/leader in times of critical changes have been defined in a number of articles. Among the tasks, that are attributed directly to the manager the sense-making is in most cases listed as the vital one. It requires recognition and an approach to the crisis situation with expertise and vision. Maitlis (2010) has recognized “the linking of sensemaking within organizational change and social change” (Maitlis, and Sonenshein, 2010), emphasizing the external to the organization-social side of the crisis and the manager’s responsibility for adequately perceiving the new socio-economic conditions. How it can be defined that a manager has successfully accomplished this task and helped the business out? He/she has achieved or regained collective commitment, ensured that all staff members share the enterprise
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identity, developed coherence of expectations with long term partners. Further goes the objective of decision making. By the latter most researcher imply a proper external and internal analysis in conjunction with the strengthening team activities. In particular, researchers in Russia suggest
“diagnostics and monitoring of under control facilities, advance and proactive environmental analysis as well as building resilience against loss”( Maitlis, 2010) . Success depends on whether the manager was able to overcome time, emotional, and financial limits while making urgent decisions. Meaning-making can’t be easily measured from the external perspective. Presumably, that is the reason behind the comparatively small amount of national researchers who describe it in their papers. Nonetheless, according to Van den Heuvel (2009), “it was shown to be positively related to positive employee functioning during times of organizational change” (Van den Heuvel, 2009). In other words, the core idea is to maintain the reliance and confidence of the employees by ensuring open and fair communication. Adjustment through learning is associated with those steps that manager take to strengthen the firm after the crisis resolution, whether he/she was able to get the most out of the situation to facilitate the processes and to establish a durable business structure. The whole ecosystem should be considered to properly evaluate the degree of a manager's success considering this last task. The holistic view may include a comparison with competitors, accessing the company's pre and post-crisis portfolio, asking for direct opinions from the employees. Interestingly enough, that Russian researchers suggest completing this task on a constant basis “since the external instability of the country is itself a risk factor” (Крутик, &
Муравьев, 2001).
Internal factors influencing crisis management strategy
Internal factors are related to the activity of the firm, its economic marketing strategy, objective and psychological characteristics of management. Internal variables are the main characteristics of the internal organization. All internal variables, as well as the organization as a whole, are the consequence of the implementation of earlier decisions. At a given moment, however, not all variables are fully controlled.
Firstly, the existence of a profound resource base. Under the terms of resource-based theory, which has a long history since the mid-20th century the long-term market success of a company depends on its ability to confidently assure sustainable resources. This factor reflects the interdependence of an enterprise’s resources and its productivity and thus resilience in crisis situations. A number of researches have proved that "access to adequate resources spurs the development of sustainable competitive advantage and superior performance" (Bretherton, 2005) which indicates the significance of this factor for small and medium enterprises. As Russian
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researchers frequently notice, in times of persistent recession and uncertainty not many SMEs engage in long-term strategies as their actions are dedicated to "day-to-day survival". Nevertheless, having access to resources, especially in a wide sense: "finance, management skills, technical expertise, provides a competitive advantage during downturns as it leads to innovative solutions"
(Stepanyan, 2018).
Secondly, executives’ qualifications and experience. Some scholars suggest that it may contribute to a more successful company policy. Some entrepreneurs run businesses based on background general knowledge and common practice instead of academic education or extracurricular entrepreneurial courses. With regard to strategic management, there is no unity among the business representatives. Mike Simpson and Nicki Tuck in the paper "Small business success factors: the role of education and training" state that "there was some conflicting evidence that training may be very important for the success of some organizations/ categories but not others" (Simpson, 2004). In addition, considering this controversial point some researchers conclude that "experience is related to productivity but not profitability" (Soriano, 2010). Hence, the connection between training and performance is complicated. Due to the particular situation with the SME under consideration the experience could play a significant role while the education of the owners is not related to their occupation and its effect is questionable. Still, in the case of the domestic managerial and academic sphere, there is a firm belief in education as a decisive factor, though the focus lately has shifted towards the promotion of entrepreneurial mindset, key and variable competencies and “soft” skills.
The third factor under the consideration is product/service type. In this case, it reflects the demand of buyers for certain goods/activities. Obviously, when supplies become scarce, the company has to continually "re-prioritize delivery of products and services that are absolutely critical to meet customer needs and provide market stability" (Ernst & Young Global Limited, 2020). What is more, the issue may occur not only with the supplies but with the trend of online shopping. From the market overview, we may suppose that while some goods can be easily displayed on the online marketplaces, for others it is hardly possible or may require additional financing. others. Regardless of this impediment, from the other perspective, if the product type makes it possible "to go digital" "the presence of more SMEs on the platform also increases the level of competition from other SMEs" (OECD, 2021). The latter spurs the overall innovative approach as entrepreneurs are willing to "adapt their products to the new business circumstances"
(OECD, 2021).
Lastly, experience in external markets or a wide range of professional contacts is a factor
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that helps to develop business opportunities. In the current globalized and interconnected economy SMEs often require the involvement of supporting parties. Consequently, a number of researchers highlight that the "success of small firms depends on the supporting networks, the demand-and- supply related networks and the social networks" (Premaratne, S. & Eindhoven University, 2002).
The internal factor of the social and professional network is in charge of increased awareness and effective resource "extraction". Concerning the relationships described above some scholars argue that especially within the developing economies informal cooperation takes on a particular place.
The level of interaction of entrepreneurs is a major feature of regional business ecosystems. For instance, a number of researches can be found about the Chinese emerging economy, where the collective business environment that consists of group standards and personal relations has an important practical utility for information acquisition, goodwill insurance, risk management (Su, 2020). This year, in particular, resource sharing has become the most intense manifestation of networking and relationships in the business sphere. Russian market observers note that "labor force sharing (when an affected company was able to temporarily place its employees in another firm) was a notable crisis management solution" (Кузнецов, 2020). In the current context of the new crisis, Russian banks assess the risks of lending to SMEs as extremely high, which adversely affects the sector’s performance. However, "informal cooperation may be aimed at reducing the transaction costs of each of the participating SME. This, in turn, increases the profitability and output of small firms." (Egorova, 2019). All in all, it can be concluded that social ties are of special interest to SME owners.
The overmentioned features are also connected to each other. The improvement of one variable can cause both an improvement and a deterioration in the overall performance of an organization. The synergy of internal variables contributes to the overall goals of the organization and in the case of COVID-19 to resilience as well. However, the choice of action plan in crisis may depend on other factors as well.