This part of the study includes readings in literature and studies which have bearings on the present study. In view of this, the literature reviewed were those that concentrate on financial management capability, financial resources, financial management skills, performance, and eatery business.
Financial Management Capability
The capability research of the firm encompasses a broad group of scholarship built on the combined basis of partly overlapping theoretical frameworks. It ranges from the resource- based views and knowledge-based views (Wu, Y., 2011). In the knowledge-based views, viewing knowledge as the core resource of a firm, capabilities are defined as the know-how that enables organizations to perform certain activities (Dosi,
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Financial management is an aspect of management that small business owners need to be proficient in because it is regarded as one of the factors that increases start-up and new firm survival rates (Orford, Herrington & Wood 2004). However, it is also one of the skills that are required when growth is planned (Roodt 2005). Gitman (2010) and Marx, J., De Swardt, C., Beaumont-Smith, M. & Erasmus, P. (2010) state that, in addition to financing, the financial manager must ensure that cash is managed efficiently so that the business can become profitable. The study of He, L. (2010) state that Chinese SME’s pay more attention to profits rather than cash flow in daily evaluation. While the study of Fraker, G. (2011) asserts that failed restaurants often had inadequate financial management, including weak controls (cash and inventory). Schwarze, C. L. (2008) asserted that enterprise owners first acquire financial management skills to achieve short-term goals in order to survive, and at a later stage, acquire financial management skills for long-term decision making as their business …show more content…
However, the resource based view ignores the knowledge aspect and since the SMEs are owner-managed, then the study of Turyahebwa, A. & Sunday, A., (2013) considers the extent to which knowledge and skills of owners boost performance. According to Meredith (2003), financial management is concerned with all areas of management, which involve finance not only the sources, and uses of finance in the enterprises but also the financial implications especially the total performance of the enterprise. One performance measure that is widely used among small businesses, as a subjective indicator of the overall business performance is the degree of owner/manager satisfaction with the business performance. Few researchers have consulted owner/managers about their views on success of their small business ventures (Simpson M., Tuck, N., and Bellamy S., 2004). Performance can thus be measured in both financial and non-financial terms through level of sales (Umeze, G., & Ohen, S., 2014). Several researchers evaluate financial performance through growth in sales, net income (Nyamao, et, al., 2012) and number of employees (Lerner, M., & Almor, T., 2002). For small firms however, subjective performance or self-reported measures (Ethiraj, S. K., Kale, P., Krishnan, M. S., & Singh, J. V. 2005) and non-financial measures appear to be more essential than
As with many small business owners they vision of their business usually only extends to their own abilities. They are driven and full of determination and believe their abilities will be able to sustain the business to success. Unfortunately, many small businesses lack the knowledge to be able to effectively be owners’ and leader’ to their organizations.
Before venturing into performance investigation of a small enterprise, one must understand what is the scope and hardships faced by a small enterprise in the UK. Small companies are the big contributors to the economy of the UK. There are around five million small businesses in the UK, which is approximately more than 50% of the economy. (Rich, 2016) The enterprise must work in the right direction at a right pace to stand out from the rest of the business units. The management in an enterprise must know the strengths and weaknesses of the business enterprise to drive it through the thick and thin in the market.
Selecting a business strategy that details valuable resources and distinctive competencies, strategizing all resources and capabilities and ensuring they are all employed and exploited, and building and regenerating valuable resources and distinctive competencies is key. The analysis of resources, capabilities and core competencies describes the external environment which is subject to change quickly. Based off this information a firm has to be prepared and know its internal resources and capabilities and offer a more secure strategy. Furthermore, resources and capabilities are the primary source of profitability. Resources entail intangible, tangible, and human resources. Capabilities describe environment and strategic environment. Core competencies include knowledge and technical capability. In this section we will attempt to describe in detail the three segments which are resources, capabilities, and core competencies.
Thesis: Businesses deem financing necessary when they are just beginning, expanding, or recovering; Debt financing and equity financning have many advantages and disadvantages but also change the entire accounting method that is to be considered while running the business.
Pitts and Koufopoulos (2012) argue that resources and capability are highly important internal factors that should be taken into account by the organization in order to obtain the successful performance in the long run.
Firm resources refers to all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc. The firm controlled ...
In an organizational theory, a dynamic capability is the capabilities of the organization to persistently adapt the organization 's resources baseline. Such concepts were defined by Pisco, Shuen and Teece (1997), paper a Strategic Management and also Dynamic Capabilities, as "an organization’s ability to establish, reconfigures and also integrate external and internal competence to focus dynamic changing environments (Barney, 1995).
It is also perhaps not feasible to evaluate the attractiveness of an industry independent of the resources a firm brings to that industry. It is thus argued that this theory be coupled with the Resource-Based View (RBV) in order for the firm to develop a much more sound strategy. It provides a simple perspective for accessing and analysing the competitive strength and position of a corporation, business or organisation.
Resources are organization’s productive assets and capabilities are what an organization is capable of doing. The relationship between resources and capabilities of a company forms a competitive advantage. Capabilities and resources help in gaining value and competitive advantage over competitors.
Maintaining a company’s financial assets is a daunting task. Cash management techniques and short-term financing provide accounting executives with the tools needed to survive the constant changes within the economy. The combination of these tools and the knowledge of the world economy will assist companies in maintaining current assets and facilitates growth.
Firstly, there is a need to focus on the company competitive dimensions before embarking on the decisions. In this aspect, the Competitive capabilities are the Cost, Quality, Time, and Flexibility dimensions that a process or value chain actually processes and is able to...
Small businesses have been considered the mainstay in countries around the world. In many European countries for example, the small business has been considered crucial to the success and flourishment of the country in general. Most individuals start upon a small business venture in the hopes of realizing ownership, independent profits and personal success. Small businesses can prove extremely successful when planned properly. Studies suggest that several small businesses, however, close or fail within the first few years of operation. This failure suggests that a majority of small business owners may not have as yet realized the crucial success factors necessary for successful implementation of a small business.
In the past, the company performance was measured by asking ‘how much money the company makes?’ To a certain extent, they are right because gross revenue, profitability, return on capital, etc. are the results that companies must bring to survive. Unfortunately, in today business if the management focuses only on the financial health of the company, numerous unwanted consequences may arise.
Owning a business can be a lot harder than a person would think. There are many things that have to be done, that only those behind the scenes are able to see. There are also many concerns that entrepreneurs have. They wonder if
Management of SMEs is an acknowledged challenge that has proved difficult to overcome (OECD, 2000). SME owners are often managers of their enterprises and usually have no formal qualifications in management and leadership (De Kok, Uhlaner, & Thurik, 2006). Pansiri and Temtime (2008) observed that although most of them understand the concepts of their business goals and objectives, they may not necessarily make good managers. The management approach adopted by owners depends on the goals and personal expectations of these individuals (Collins & Clark, 2003). In most cases, SME owners do not foresee growth beyond a certain level. They aim to achieve their personal objectives with no effort put toward expansion