The purpose of this study is to explore Stategic Adaptation Patterns of Small Firms in Korea to the Environmental Decline.
Since late 1980's, Labour intensive and low technology-based, export oriented manufacturing industries which had contributed to nation's economic growth have experienced rapid labour cost increase in the domestic fields and fierce price competition in the international markets stirred by under-developed countries.
In these industrial sectors, Samll and medium size firms which have only limited number of Strategic Business Units have tried to avoid price competition and maintain profitability by strategic means such as foreign investment, production-facility automation, development of product design & brand, etc.
This thesis reconstructs concepts of environmental decline which was developed by strategic management thoerists and organization ecologists. Two demensions of environmental decline-Range of effects and speed of decline-which charaterize effects of environmental decline to focal organization was introduced to classify the various effects of environmental decline.
And then, we use three strategic dimensions-doamin extension, cost reduction, and differenciation- to generally categorize each individual firm's adaptation strategy. Four adaptaton strategy types were conceptually identified using three strategic dimensions and their clssificability were examined empirically with some cases of small firm's strategy.
Using the typology of environmental decline and adaptation strategy, we coceptually identified strategy type for each environmental decline condition which was effective for profitability and long-term survival of individual firm. Futhermore Functional Distinctive competences required to implement each strategy were hypothesized.
Empirical research for 25 samll and medium size firms which faced environmental decline was conducted to explore validity of conceptual framework using cluster analysis and other statistical techniques.
Limited data points didn't allow us to reach the strict conclusion about the contingeny relationship between types of environmental decline and types of strategy types. But empirical evidence suggested following hypothetical results and future research using large sample data should be followed to empirically test the suggested conceptual hypotheses.
① If the environmental decline was occurred rapidly in the broad sectors of organization domain, It is effective for Small firm to extend its domain with efficiency oriented competitive weapons.
② If the environmental decline affect to the limited area of the organization domain or their speed is not rapid, Differenciation stratrgy can be used effectively to avoid price competition and obtain normal profit.
③ Domain extension or differenciation strategy needs high financial and personnel investments, thus for any firms in weak capability position, It is appropriate to adapt negatively to all types of the environmental decline.
