Hard Times Call for Strategic Measures : A study of how SMEs seek to increase performance in a declining industry

Abstract: An industry is constantly affected by its environment and the changes that occur within it. These environmental forces are the drivers of the industry’s evolution and throughout its life an industry undergoes irreversible transformations, which creates an industry life cycle. The competitive pressure on firms has increased the importance of developing competitive strategies throughout the industry’s life. This becomes especially important when the industry reaches the decline stage. There are different strategies that are suggested for firms to undertake in a declining industry. However, these strategies do not consider small and medium-sized enterprises, thus they might not be the most suitable for these firms to undertake. In addition, international activities have not been seen as a way to increase performance in a declining industry. The purpose of this study is therefore to fill this gap by investigating how small and medium-sized enterprises seek to increase their performance in a declining industry. To fulfil this purpose, we have conducted a qualitative case study of four SMEs currently operating in a declining industry. The empirical data was collected through interviews at each case company.The theoretical framework includes the theoretical concept of the industry life cycle, strategies specific for declining industries, theories regarding how firm chooses to compete, and different theories regarding international activities. The chapter ends with a theoretical synthesis that is developed from the theories presented earlier in the chapter. The empirical chapter presents the findings from the interviews with the case companies.In the analysis, the theoretical framework is connected to the empirical data, and is the basis for our conclusions. After conducting this study we can conclude that small and medium-sized enterprises seek to increase their performance by undertaking a niche strategy as their end-game strategy, compete with a differentiations strategy, and by a large scope of international markets, which enables them to shift their market focus from unbeneficial markets to more beneficial markets.