Methodological Approaches to Strategic Management of Small and

Medium-sized Businesses in the Context of the Negative Impact

and Continuing Nature of the COVID-19 Pandemic

Liudmila Yu. Filobokova

and Sergey I. Bogatyrev

MIREA - Russian Technological University, Moscow, Russia

Keywords: Covid 19 Pandemic, Strategic Management, Methodological Support, Non-formalized Approaches, Small

and Medium-sized Businesses.

Abstract:

The COVID-19 pandemic is a protracted process that has a negative impact on the development of the world

economic system and all its constituent elements. A high level of such influence is observed in small and

medium-sized businesses, which, due to their distinctive features, are most susceptible to the influence of

external factors. Changing the priority of buyers, shifts towards essential goods and the use of digital

technologies, a decrease in the purchasing power of the population, the need for flexible pricing and cost

management as living conditions, predetermine the need to adapt strategic management, which is often denied

by the founders and leaders of small and medium-sized enterprises. Methodological support of strategic

management of the SME sector acquires scientific and practical value when using non-formalized approaches

based on expert assessments for a long time lag. The purpose of the study is to develop and substantiate the

methodological support of strategic management of SMEs in the context of COVID-19, achieved by solving

such problems as: identification of key success factors (KSF) of SMEs; modification of the methodological

support of PESTEL - analysis of environmental factors; adaptation to the conditions of SME functioning,

methodological support, analytical tools, M. Porter's five competitive forces. Approbation (testing) of

methodological support allows it to be extrapolated to the practice of strategic management of SMEs in

Russia.

1 INTRODUCTION

Small and medium-sized businesses (SMEs) are

highly appreciated by the world community due to its

functional role and load in ensuring the development

of the world and national economies in the format of

sustainable socio-economic development.

At the end of 2020, the UN published an analytical

review, according to which about 90 % of all

economic entities in the world belong to the category

of micro, small and medium-sized enterprises, in

which up to 70 % of the entire working-age

population is involved, and the contribution to the

formation of world GDP exceeds 50 %.

To give a higher status to the system of "small and

medium-sized enterprises", June 27, 2017 by the

Resolution of the UN General Assembly was

https://orcid.org/0000-0003-4542-3835

https://orcid.org/0000-0003-4212-9948

proclaimed as the Day of Micro, Small and Medium

Enterprises.

Subjects of SMEs have a wide range of distinctive

features that make it possible to identify their totality

as an open, active, flexible and adaptive system,

which is a subsystem (or a meso-level system) in

relation to the systems of the regional economy and

the national economy.

One of the distinguishing features of SMEs is its

high dependence on the external environment (an

entrepreneur becomes such if he/she is able to meet

the rapidly changing needs of the external

environment) and this circumstance makes him/her

most vulnerable to the negative impact of the

COVID-19 pandemic.

A significant reduction in market demand and a

change in its needs negatively affected the overall

business sector in Russia, but this was most

Filobokova, L. and Sergey, I.

Methodological Approaches to Strategic Management of Small and Medium-sized Businesses in the Context of the Negative Impact and Continuing Nature of the COVID-19 Pandemic.

DOI: 10.5220/0011111600003439

In Proceedings of the 2nd International Scientiﬁc and Practical Conference "COVID-19: Implementation of the Sustainable Development Goals" (RTCOV 2021), pages 119-125

ISBN: 978-989-758-617-0

119

pronounced in SMEs, which in 2020 are

characterized by a significant decrease in the share of

participation in the formation of the country's GDP

(up to 18 %), capital turnover (proceeds from sales)

and other qualitative and quantitative indicators of

activity.

Both in the world economy and in Russia, almost

half of SMEs are engaged in three types of economic

activity:

- retail;

- services sector;

- construction.

These are the sectors of the national economy

most vulnerable to the negative impact of COVID-19.

There are not only threats of deterioration in the

values of qualitative and quantitative indicators of

SME activity, but also threats to its economic security

and the implementation of its strategic goals in the

socio-economic development of Russia - the

formation of a competitive environment in the

national economy.

Wherein, medical experts note that COVID-19

will not disappear from people's lives for many years

to come, and State Duma Deputy A. Fairakhov

believes that this infection will always coexist with

people, having a seasonal character, and Honored

Doctor of Russia T. Kusaiko notes that the

coronavirus will remain, its mutation will always be,

and we see how quickly it happens.

In this situation, which has a high probability of

further continuation, it is necessary to adapt all

elements of the national economy system and, above

all, the element most susceptible to negative impact -

SMEs in the interests of life support, solving the

stated goals and objectives.

Adaptation is achieved by effective management

measures, primarily at the strategic level with the

development of possible scenarios and models.

The purpose of the study is to develop and

substantiate methodological approaches to the

strategic management of small and medium-sized

businesses in the face of the negative impact and the

continuing nature of the COVID-19 pandemic.

To achieve the stated goal, the following tasks

were solved:

- to identify the key success factors (KSF) of SMEs

in the context of the long-term nature of COVID-19;

- to modify and test the methodological support of

PESTEL – analysis of environmental factors of

SMEs in Russia in the conditions of the long-term

nature of COVID-19;

- to adapt to the conditions of functioning of small

and medium-sized businesses with the long-term

nature of COVID-19, the methodological support of

analytical tools of M. Porter's five competitive

forces.

2 STUDY METHODS

There are many strategic management models

competitive advantages, differentiation, vertical

integration, etc., but a number of models were

specially developed for SMEs. Linneman Strategic

Management Models for SMEs; Green and Jones,

Shuman and Seeger, Aram and Cowan, Foster, Berry,

Beal have one foundation, are based on the same

concepts, they contain a search for opportunities to

adapt to constantly changing business conditions in

small organizational and economic forms of

management, and the authors note that the strategic

management process shall consist of four stages:

- thorough study (scanning) of the environment;

- strategy formulation;

- implementation of the strategy;

- evaluation and control (Kusajko, Fattahov, 2021).

Scanning is the collection and study of

information about the factors of the external and

internal environment, identification of strategic

factors that determine the future. The simplest and

most reliable way to perform a scan is SWOT

analysis, an abbreviation of which was first voiced in

1963 by Harvard Business School professor C.R.

Andrews, who holds that the assessment of internal

strengths and weaknesses leads to the identification

of distinctive competencies, and the assessment of

threats and the capabilities of the external

environment allows to identify potential success

factors (Houmvud, Endryus, 2021).

To assess (understand) the strengths and

weaknesses in the long-term nature of COVID-19 and

its negative impact on the development of SMEs, the

authors propose to modify the KSF (Key Success

Factors) toolkit, representing characteristics,

indicators and circumstances that, with proper

attention and management have a significant impact

on the success of an organization in a competitive

environment in a particular industry segment

(Endryus, 1981).

The key questions that need to be answered when

performing a research in the KSF format are:

- firstly, what are the needs of clients and what they

want to receive from SMEs;

- secondly, what resources are needed for SMEs in

order not only to survive, but also to maintain a

certain position in the competition.

In order to get an answer to the first question, the

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authors shall be positioned as a buyer, which allowed

them to formulate criteria for the attractiveness of a

purchased product (product, service, work) (Table 1).

The results obtained in the process of KSF

research are reflected in the understanding of the

strengths (S) and weaknesses (W) of SMEs, reflected

in the SWOT analysis matrix. In addition to the

strengths and weaknesses, the SWOT-analysis matrix

is supplemented by the results of the study of

opportunities and threats carried out using the PEST

(EL) – analysis and analysis of M. Porter's Five

Forces (Bushar, K., Koh, Dzh., 2012).

The abbreviation PESTEL corresponds to the first

letters of the main external factors that require

assessment:

- Political;

- Economic;

- Social;

- Technological;

- Environmental;

- Legal.

In carrying out the PESTEL analysis of SMEs

(Table 2), the authors used the following markers:

- N - currently affecting, the probability of the

influence ending within 12 months;

- NB - is currently in effect and will continue to

have an impact for more than 12 months;

- VPZ is not currently affected, but will have an

impact in the future.

- VUZ - affects short-term (period up to 6 months);

- P - has a positive effect;

- O - negatively affects;

- N - does not have a significant effect;

- CF - critical factors;

- OWF - very important factors;

- VF - important factors;

- SF - significant factors;

- NF - not important factors;

- VR - affects and will increase the impact;

- VP - affects without changing the significance

(with constant significance);

- NU - affects, but will reduce the impact.

The analysis of the five competitive forces of M.

Porter is an analytical toolkit that allows you to

explore the external microenvironment and outline an

Table 1: Identification of key success factors (KSF) of SMEs in the long-term nature of COVID-19.

Buyer inquiries

(what do customers want?)

How SMEs survive in the competition (need for resources)

Key Success Factors

(

KSF

)

Retail:

- convenience and availability;

- flexibility of pricing;

- value of goods;

- essential goods and, first of all,

food group and medicines.

Service sector:

- convenience and accessibility;

- price and value of the service;

- digital interaction: online and

offline.

Construction:

- flexibility of pricing;

- the possibility of mortgage

lending;

- quality of construction and

repair work.

Required internal potential:

- development of human capital;

- activation of innovative processes in the search for new

products and technologies;

- development of strategic thinking and introduction to the

practice of strategic analysis and strategic planning

management.

Required potential generated by the external environment:

- tax aspects (introduction of a number of targeted benefits);

- property aspects (minimization of lease payments, wide

involvement of government contracts in the implementation);

- administrative aspects (first of all, measures to preserve

workers, simplification of administrative regulations during

interaction);

- financial and credit aspects (providing loans both during the

pandemic and during the recovery period; reducing the cost

of settlement and cash services to banks, etc.);

- ecological aspects (revision of the norms and standards that

determine the size of the payment);

- social aspects (wider involvement in social projects and

programs, contributing, inter alia, to the development of

social entrepreneurship);

- educational aspects (development of the continuing

education system in accounting, tax aspects, financial and

strategic management in SMEs);

- accounting aspects (expanding the list of FSBU and PBU,

securing a simplified accounting method or exempting

certain methodological requirements from execution).

A high degree of

readiness for

innovations, innovative

processes, product

(work, service) updates.

A high degree of

flexibility in

relationships with real,

potential and latent

buyers.

Flexibility and

differentiated pricing.

Possibility of prompt

decision-making.

Readiness for

innovation and

widespread use of

digital technologies and

tools.

Methodological Approaches to Strategic Management of Small and Medium-sized Businesses in the Context of the Negative Impact and

Continuing Nature of the COVID-19 Pandemic

121

Table 2: Assessment of the factors of the external environment for the development of SMEs in Russia in the context of the

long-term nature of COVID-19 using the PESTEL analysis toolkit.

Environmental factors

Time

influence

characteristic

Characterizati

on of

influence by

Characteristic

of influence

on dynamics

Relative

significance

of the factor

Impact on SMEs in the

Long Term Nature of

COVID-19

P. Political:

- changing the political situation

in the countr

VPZ P VR OWF

The degree of

influence is high and

will

row

Е. Economic:

- the rate of inflation;

- effective demand of the

population;

- access to raw materials markets;

- access to financial markets;

- the need for re-profiling and

shifts in the

roduct ran

NB O VR OWF

The impact is high,

negative and will

grow

S. Sociocultural:

- readiness to implement social

projects

-participation in the medical

provision of the population

- level of social protection

VPZ P VR SF

The degree of

influence is moderate,

but has a positive

character with the

possibility of entering

new market segments,

thereby reducing the

level of social tension

T. Technological:

- participation in government

programs to support

technological re-equipment;

- renewal of equipment and

technologies

NB O VR OWF

The impact is high,

negative and will

grow

E. Environmental:

- introduction of environmental

management;

-ecological payments;

- "green" technologies

VPZ N VP SF

The degree of

influence is

insignificant, but will

increase

L. Legal :

- development of the legal

framework in the field of SMEs;

-development of administrative

ulations for su

ort

NB P NU SF

The degree of

influence is moderate

and will decline

action plan (strategy, programs) with the maximum

use of competitive advantages.

Within the framework of this toolkit, five such

competitive forces are subject to assessment

(analysis), such as:

- intra-industry competition;

-the threat of the emergence of new players on the

market;

- the market power of buyers;

- the market power of suppliers;

- the threat of the appearance of substitute goods.

These five forces determine the attractiveness of a

particular industry for a particular entrepreneur, but

in this study, the authors consider only the three most

attractive spheres of the economy for SMEs (retail

trade, services and construction).

For a qualitative and quantitative assessment of

factors, the authors have developed and offer the

following scale of assessment points (Table 3).

Table 3: Scale of assessment of indicator questions

reflecting the five competitive forces of SMEs in Russia in

the context of the long-term nature of COVID-19.

The de

ree of influence of the com

etitive force Points

1. Degree of influence is extremely low 1

2. Degree of influence is low 3

3. Increased degree of influence 5

4. Hi

h de

ree of influence 8

5. Ver

h de

ree of influence 10

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Table 4: Indicator questions for analyzing the degree of dependence of Russian SMEs on the competitive forces of M. Porter

in the context of the long-term nature of COVID-19.

Competitive

stren

Industry segment Indicator questions

Intra-industry

competition

1. Retail

2. Sphere of services

3. Construction

Are there many players operating in the industry market?

What is the structure of the industry market.

What are the prospects for the development of the industry segment.

What are the advantages of competitors.

The threat of the

emergence of

new players on

the market

1. Retail

2. Sphere of services

3. Construction

Are there any restrictions on the entry into the industry market of new players

who could potentially be competitors?

How difficult is it to enter the distribution channels.

How much will be required for new technologies.

How lar

e can be costl

“switches” to a new

roduct.

Market power of

buyers

1. Retail

2. Sphere of services

3. Construction

The industry market is represented by large and small buyers.

Can buyers dictate their terms of purchase and to what extent?

What share of the industry market is occupied by large businesses and leading

companies (excluding SMEs).

Bargaining power

of suppliers

1. Retail

2. Sphere of services

3. Construction

To what extent are relationships with suppliers developed and what character

they are?

Is it possible to change the supplier with minimal costs.

How flexible is the

ricin

and sales

olic

of su

liers.

Threat of

substitute

roducts

1. Retail

2. Sphere of services

3. Construction

How easy it is to replace the offered product.

Whether the substitute is capable of replacing the offered product in whole or

in part.

When developing indicator questions, the authors

used the results of many years of expert research

conducted personally and with the involvement of

managers, specialists and founders of small and

medium-sized enterprises, as well as individual

entrepreneurs (Table 4).

The authors considered large businesses operating

in similar industry segments as the closest

competitors of the external microenvironment of

SMEs. In the process of testing the developed

methodological support, the following results were

obtained (Table 5).

Table 5: Results of the analysis of M. Porter's five forces

for SMEs in Russia in the context of the long-term nature

of COVID-19.

Competitive

strength

Industry segment Evaluation

oints

Intra-industry

competition

1. Retail

2. Sphere of services

3. Construction

The threat of the

emergence of new

players on the

market

1. Retail

2. Sphere of services

3. Construction

Market power of

buyers

1. Retail

2. Sphere of services

3. Construction

Bargaining power

of suppliers

1. Retail

2. Sphere of services

3. Construction

Threat of substitute

products

1. Retail

2. Sphere of services

3. Construction

TOTAL NUMBER

OF POINTS

1. Retail

2. Sphere of services

3. Construction

3 STUDY RESULTS

Based on the results of the study conducted by the

authors using the methodological support developed

by them for the strategic management of SMEs in

Russia in the long-term nature of COVID-19,

conclusions were drawn that allow the development

and implementation of well-grounded management

decisions.

Therefore, use of the modified methodological

support of PESTEL - analysis of environmental

factors of SMEs in Russia in the conditions of the

long-term nature of COVID-19, made it possible to

reveal that:

- in terms of time, the main factors influencing

SMEs have not been fully implemented, but they are

capable of having an impact in the future time period

(VPZ);

- the current changes in their majority can have a

positive impact on development of the system of

small and medium-sized businesses;

Methodological Approaches to Strategic Management of Small and Medium-sized Businesses in the Context of the Negative Impact and

Continuing Nature of the COVID-19 Pandemic

123

- according to their importance, the factors were

distributed between "very important factors" and

"significant factors";

- the external environment, having a certain

negative impact on the state and dynamics of

development of SMEs, does not form criticality for

the system and predetermines the need for its

adaptation and flexible response to changes in both

market demand and economic opportunities.

The results of the analysis of the degree of

dependence of Russian SMEs on the competitive

forces of M. Porter in the conditions of the long-term

nature of COVID-19 allow us to state that the highest

level of competition is observed in the retail trade,

and the lowest - in the construction sector.

The strategy for the development of small and

medium-sized businesses in the Russian Federation

for the period up to 2030 provides for three stages of

its implementation: the first stage - 2016-2018, the

second stage - 2019-2025 and the third stage - 2026-

2030.

The second stage provides for provision of

sustainable dynamics of the development of the

system of small and medium-sized businesses,

ensured by the achieved results of management at the

first stage of the strategy implementation.

The negative consequences and long-term nature

of COVID-19, along with other factors, do not allow

the system of small and medium-sized businesses in

Russia to ensure sustainable development dynamics.

Wherein, the given trajectory continues to be general

and requires adjustments taking into account changes

in the external environment.

Strategic approaches require flexible adaptation

of the methodological support for the management of

small and medium-sized businesses (as a subject and

object of management) to those negative

consequences that take place and will affect the state,

potential and development results in the medium

term. Non-formalized methodological approaches to

such management are reflected in this article.

4 DISCUSSION OF STUDY

RESULTS

The issues of the state and strategy of development of

small and medium-sized businesses in Russia receive

serious attention both from the scientific community

and from the government.

The audit of the ongoing national projects in the

field of small and medium-sized businesses, carried

out by the Accounts Chamber of Russia, allowed the

supreme body of state financial control not only to

state that this segment of the national economy is the

most important factor in ensuring socio-economic

development, but, despite the difficult situation, this

segment held out and did not significantly surrender

its positions Porter, M., 2016.

I. Savelyeva and V. Maydanik paid attention to

the methodological peculiarities of developing

strategies by small innovative enterprises, who noted

that a strategy shall be based on the potential of an

economic entity and be adapted to rapidly changing

environmental factors.

When investigating the problems of managing

small and medium-sized businesses, V. Klimova, A.

Klimova and S. Chekuldaeva note that the condition

for business communication and the standard form of

information transfer is business planning, which is so

necessary in ensuring the sustainable development of

small business (Savel'eva, I.N., Majdanik, V.I.,

2016).

K. Kurbanova, T. Zhumadieva and G.

Annakulieva pay attention to tax aspects and their

penetration into the digital economy in the context of

the COVID-19 pandemic, who note that this

circumstance affects all sectors of the economy,

including small and medium-sized businesses and

requires making strategic decisions (Klimova, V.,

Klimova, A., Ghekuldaeva, S., 2021).

The issues of assessing strategic financial stability

using non-formalized methodological support are

researched by L. Filobokova, who suggests

identifying 5 types of financial condition of small and

medium-sized businesses (Kurbanova, K.,

Zhumadilova, T., Annakulova, G., 2021).

In this article, the authors present the results of a

study conducted in the field of methodological

support for the strategic management of small and

medium-sized enterprises in the context of the

negative impact and continuing nature of COVID-19.

The presented methodological support is an

intermediate result of scientific research. The authors

believe that the negative impact and the continuing

nature of COVID-19 predetermine the study of their

relationship with the economic security of the system

of “small and medium-sized enterprises”.

5 CONCLUSIONS

The COVID-19 pandemic has entered life, affecting

all areas of activity, including entrepreneurship in

small and medium-sized businesses. The functioning

and development of the "small and medium-sized

business" system requires the development and

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justification of strategic management decisions,

taking into account the distinctive feature of such an

external factor. The peculiarities of the system itself

predetermine non-formalized methodological

approaches in the development of management

decisions, which make it possible to neutralize

negative consequences and bring the system to the

level of sustainable dynamics. These prerequisites

determined the purpose of the study carried out by the

authors and consisting in the development and

substantiation of methodological approaches to the

strategic management of small and medium-sized

businesses in the face of the negative impact and the

continuing nature of the COVID-19 pandemic. The

tasks that have been identified to achieve the set goal

have been solved. The author's developments have

passed practical testing (approbation) and can be used

in the practice of strategic management of small and

medium-sized businesses.

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Continuing Nature of the COVID-19 Pandemic

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