The crisis management is very important during the lifecycle of a company. They will be faced to crisis and they are managing it differently from large company to SMEs. During this literature review our objective is to understand why does the SMEs have some trouble to mange crisis efficiently. In a first part, we will do an analysis of the crisis management and turnaround management and in a second part we will understand how SMEs use these different kind of management to face to a crisis.
I- Crisis Management Process
There are 3 differents kind of crisis : Strategy crises , Success crises , crises of liquidity
a. Definition of crisis
The word crisis comes from the Greek language; it means “unintentional”,”unexpected”, “a sustained obstruction”
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They represent in Europe, represents 99% of all businesses. (cf. Ec Europa, 2018). Due to their size they are very affected by economic shift. They are very often failing to do a turnaround after a crisis. So for them it’s a very important menace. The amount of company failure due to a crisis is rising around 75% for company having less than 10 employees. (Cf. Kraus, Moog, Schlepphorst, Raich, 2013)
Crisis occured more often in the pioner phases
a. Advantages in SMEs
SMEs are very performing and present a lot of advantages to success a turnaround strategy. A study of thirty SMEs, shows that these companies take care of the indicators. They are awarded and tried to detect a soon as possible the different signs. Their proximity with the customer and the market make them able to predict the customers’ reactions, and being aware of any problem quickly.
Their proximity with their employees also is an advantage; the board meets the workers every day and has a proximity relationship. This kind of relationship helps the communication inside the organization, and helps the involvement of the salaries in the crisis. They are very well placed to know how to offer ideas for turnaround management. (Cf. Kraus, Moog, Schlepphorst, Raich, 2013)
b. Disadvantages in
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They have indentified the following weakness:
- SMEs misinterpret the different signs cause of a lack of management skills. (Cf. Kraus, Moog, Schlepphorst, Raich, 2013)
- SMEs don’t allow time or money to the analysis of their environment and the different pondrome (Cf. Kraus, Moog, Schlepphorst, Raich, 2013)
- SMEs’ manager most of the time behoove the crisis to external factors but ignore the possibility that the crisis comes from the inside de company (ex : high cost of production, old fashion product,..). Managers are too deep inside the operation to understand they can do something to counter the crisis. So they are ignoring that they can do some personalized measures (Cf. Kraus, Moog, Schlepphorst, Margit Raich, 2013; Cater and Schwab, 2008 & Goltz, 2014)
- The SMEs sometimes are too confident and tried to change their core business, but they forget their commercial formula that was working before. (John Cater and Andreas Schwab, 2008)
- SMEs use simple indicators, they are not enough interesting to do a prognostics - The SMEs differentiate hardly the 3 different kind of crisis: Strategy crises , Success crises , crises of
Crisis is an event that is unplanned, unwanted, and dangerous and leads to hard decision making. There are many different types of crisis such as economic crisis, mental health crisis, situational crisis, social crisis, adventitious crisis and many more. Every type of crisis affects people more than we think and know. There is always someone who loses and who gains during a crisis. People who lose are usually the ones who are affected the most such as losing a job, losing a family member or someone close to them, losing their homes and sometimes even their own lives. The people who gain are usually the rich people who prey on the poor and usually gain from making money and the poor’s lives miserable.
The ability of a company to maintain a good reputation is directly linked to the company’s ability to retain its stakeholders (Peterson, 2005). During a negative event or crisis situation, a company needs to ensure that it has effective strategies and resources in place, to deal with it responsibly, efficiently to minimize losses in share price value and public perceptions of corporate reputation (Coldwell .D, Joosub .T, & Papageorgiou .E, 2012). It is always advantageous to analyze past crises in order to develop a conceptual understanding of crisis situations and appropriateness of various means of coping with them (STERN, E. K., pg.1, 2009).
Crisis is defined as a major, unpredictable event that has potentially negative results. The event and its aftermath may significantly damage an organization and its employees, products, services, financial condition and reputation. There are many types of crises, for example, economic crises, physical crises, personnel crises, criminal crises, information crises, reputation crises and natural crises. This incident has been grouped into physical crises, natural crises and economic crises. In order to prevent crises from adversely affecting the firm, organizations need effective plans and procedures in place to prevent crises if possible or to mitigate their effects when they do occur.
Ineffective management is a global issue that causes billions of dollars in loss to businesses each year. A report from the Chartered Management Institute indicates that in th...
There are many definitions for what is considered to be a crisis. Alan Jay Zaremba, author of the textbook ”Organizational Communication,” combines several definitions of the word to conclude that a crisis is “an incident that occurs unexpectedly, could damage an organization’s reputation, values, and/or performance, and requires effective communication. (Zaremba, 2010) In the case of the Nuance Group, their current situation completely blindsided the organization, was a nightmare for their reputation, and communication was now the key element in restoring their image. This was indeed a crisis.
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An organization’s quick response to crisis and effective crisis management are both vital to their sustainability. Blue Bell Creameries faced crisis in April, when a bacterial contamination caused operations to halt world-wide. Crisis management for this company has involved much more than finding and fixing the issue. This company has responded to financial loss, legal ramifications, employee impact, and perhaps the most crucial – public perception.
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According to Jones and Tilley (2003), poor financial management is a serious hurdle when starting a business. Lack of funds and investment capital are the major challenges that have accounted for the high rates of failure among SMEs.
exactly qualifies as a crisis? According to Sloth (2004), a crisis is. a situation that has reached a critical phase for which dramatic and... ... middle of paper ... ...
A crisis can be defined as an extraordinary event, disclosure, or set of circumstances that threatens, or is perceived to threaten, the welfare of one or more staff, customers and stakeholders, or the integrity, objectives and reputation of the organisation. Crisis management is the application of strategies designed to help an organization deal with a sudden and significant negative event. (Janes, T 2010)
Financial crises have influenced the os of financial markets in past. The most important the Great Depression in 1929-30, the 1970s inflation failures and the banking difficulties in the 1990s led to problems in the financial markets causing serious disturbance. The recent financial crisis which became known in 2007, though the roots were implanted much earlier, has been the worst situation financial markets have ever faced.
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