Designing a Model for Improving Small and Medium-Sized Enterprises (SMEs)

Business improvement has always been one of the basic issues in the business world. Due to the growing changes in technology, pervasive competition and the changing needs of customers, companies must pay attention to the permanence and improvement of their business processes in order to continue their survival and growth. Business improvement means improving efficiency and performance, reducing resource wastage, and increasing profitability of an enterprise. This process involves continuous evaluation of performance, identification of strengths and weaknesses, providing effective solutions for improvement and development, and implementing necessary changes. The main goal of this research is to develop a suitable model for improving small and medium-sized enterprises. This research is exploratory in terms of its purpose, and practical in terms of its type of use. It adopts a mixed exploratory research strategy. The statistical population of the study included senior managers in the qualitative phase and managers and experts working in small and medium-sized enterprises in the quantitative phase. The data collection tool used in the qualitative part of the study included in-depth interviews. The data obtained from these interviews were coded and analyzed through several stages, leading to the development of a model extracted from the findings of the qualitative part. Subsequently, based on the obtained model, questionnaire items were designed for each of the components of the model and distributed among the employees working in small and medium-sized enterprises. The collected data were examined and analyzed, and based on the findings, the final model of the research was identified. Keywords: improvement, business improvement, small and medium-sized enterprises (SMEs) Introduction Small and medium-sized enterprises (SMEs), with their unique characteristics, play a critical role in decision-making systems, particularly in developing countries (Ghosh et al., 2021). In other words, entrepreneurs, equipped with skills to identify environmental opportunities and strengths, and the capability to drive initiatives to develop these opportunities, are the true pioneers of economic and social transformation (Abitu, 2022, pp. 51-62). Therefore, establishing and supporting entrepreneurial SMEs is one of the core priorities in any country's economic development programs. The failure or exit of such enterprises from the cycle of employment creation and value generation not only results in resource wastage but also discourages entrepreneurs from contributing to national economic development, thereby disrupting dynamism in the entrepreneurial sector (Chorev & Anderson, 2020, pp.162-174). Given the current conditions and required resources for developing SMEs to enhance their competitiveness and achieve a deserved position in active markets, creating a suitable framework for improving SMEs is essential. Therefore, this research aims to address the following research question: How can a model for improving SMEs be designed and developed in Iran? Methodology This research adopts a mixed-methods strategy, combining both quantitative (positivist) and qualitative (interpretative) approaches. The research design is exploratory. In the first (qualitative) phase, the statistical population comprised senior managers and experts in SMEs, who were studied through purposive and judgmental sampling using directed interviews. In the second (quantitative) phase, the statistical population included managers and employees of SMEs, with accessible non-random sampling used for data collection. Findings Based on Strauss and Corbin's methodology, the data analysis process was conducted in three main stages: open coding, axial coding, and selective coding. To extract the components shaping each variable of the SME improvement model, the research followed Glaser's unstructured school of thought. The steps for qualitative content analysis of interviews included: Extracting key verbal evidence (key points); Conceptualization; Categorization; and Presenting the model. After identifying the components of the SME improvement model, a questionnaire was designed based on the identified variables and was distributed among managers and employees of SMEs. The collected data were analyzed using structural equation modeling via Smart PLS software. Confirmatory factor analysis validated the indicators in the final model. To assess the effects of the variables, structural equation modeling (SEM) was used, to develop an influence-based structural model for SME improvement. Construct validity values (AVE) for all constructs exceeded 0.4, while the composite reliability (CR) and Cronbach's alpha were above 0.7, indicating acceptable levels of reliability and validity of the research instruments. Discussion and Conclusion To improve SMEs, four main components were identified: value proposition, customers, business capabilities, and core strategies. The results revealed three intervening factors influencing the SME improvement model: strategy capability, motivation levels, and governing mechanisms. The contextual factors extracted for SME improvement comprised three dimensions: appropriate technology, entrepreneurial culture and mindset, and access to information. The results identified five strategies for improving SMEs: Product development; Market development; Customer relationship development; Internal marketing; and Technology acquisition and transfer. The most significant outcomes of SME improvement were identified as two key dimensions: organizational and inter-organizational impacts. Recommendations Based on Research Findings Strategic Workforce Planning: Effective workforce planning to attract and retain skilled personnel in areas such as sales, marketing, and IT can create competitive advantages and drive SEM growth. Supportive Leadership Mindset: Fostering supportive attitudes among senior managers toward entrepreneurial activities can significantly contribute to SME development. In this regard, competent, skilled managers with an entrepreneurial orientation are critical for promoting innovation, growth, and organizational development. Strategic Planning Alignment: Employing effective strategic planning approaches ensures alignment between strategy design and implementation across business levels. Innovative Product Development: Developing innovative and complementary products alongside existing offerings enhances customer choice and purchasing power in both domestic and international markets. Research and Development: Many identified SME improvement components lack substantial theoretical literature, often borrowing from other disciplines like HR and marketing (e.g., human resource development, market research). Future studies should focus on identifying and elaborating on all influencing factors specific to SME improvement. Declaration of interest: none