Task 1. Discuss about determinants of Effective Financial Risk Management in Small Business?
Task 2. Discuss business cycle management and firm performance?
A hypotheitico- deductive model is a description of a scientific research model: the process of scientific research or enquiry being conducted on the basis of a formulated hypothesis. The term refers to the process of conducting an investigation of various scientific theories and/ or hypotheses in a systematic manner. Strictly speaking, the principal aim of the hypotheitico- deductive studies is to investigate and find out the answers to any set of any specific set of questions or to prove any hypothesis (Adler, 2010). Needles to say, the central goal of any hypothetico-deductive method is to find out a definitive answer to the research questions being considered, through the analysis of the hypothesis. The research must be conducted using a systematic process and series of predefined steps must be followed, along with the rigid consideration of a standard protocol or policy (Beke, 2010). However, it should also be kept in mind that the rules might vary significantly based on the domain of science in which the research is being conducted. It is important for managers to understand the importance of such research methodologies as the theories of scientific management that are being implemented in almost every industry across the word depend on the results of such research methods. The influence of scientific management can be perceived in the day to day activities of business operations like that of planning, cost accounting, quality control, process design, and/ or ergonomics. The knowledge of such theories provides the managers with the capability to understand the various policies and strategies involved in industrial management. The knowledge of quantitative analysis provides a tool for the measurement of the numbers and figures that can be utilized to measure the efficiency of various operations of the business.
In each and every hypothetico-deductive research approach, a review of literatures that depict the results of past researches must be conducted so as to gain an insight to those questions the answers for which has still not been found out. In course of preparing this research paper, three existing literatures have been reviewed, the details of which have been provided in the following section (Berman, 2005).
Task 1: In the article titled as ‘Determinants of Effective Financial Risk Management in Small Business: A Theoretical Framework’, the researchers have developed a theoretical model that could be used to find out the factors that have the potential to increase the efficiency of the various strategies used to manage the financial risks involved in small businesses (Rahman, Yaacob & Radzi, 2015). The research has been done using hypothetico-deductive’ methodologies, that is the authors have conducted their research based on certain hypothesis, and have aimed at finding materials that would provide a proof of the hypothesis to be true.
The various potential factors that have an immense influence on the financial risks experienced by small sized business include the type of leadership prevalent in the business, the types and extent of training programs that are being made available to the employees, the technology being used in the business houses, the nature of the entrepreneurship and the accounting systems used in the organization (Box & Platts, 2005).
The factors that have been discussed and elaborated in this article have been defined based on various already existing article and literature that were reviewed for conducting the research. However, in this context, some cases studies of successful implementation of risk management processes in small scaled businesses of Malaysia has also been considered, since Asian countries are renowned for the very fact implementation of management strategies.
The authors are of the opinion that, since in small scaled businesses the financial constraints are managed by the owners themselves, these owners should also have the sufficient leadership qualities required for managing the organizations amidst the various financial risks and/ or constraints (‘Fraud Risk Management’, 2015). The authors also emphasize on the provision of a good training program to the employees and to the management, as the transfer of knowledge among them and the development of the necessary skill set would only be beneficial to effectively managing the business, thus ensuring success of the business houses (Garvare & Johansson, 2010).
The researches have emphasized on the incorporation of information technology in various sectors of the small scaled businesses in order to manage the finances of their business. According to the articles reviewed by the authors, about 30 percent of the small scaled business houses of Malaysia use various their own websites in order to draw the attention of their customers, besides using various other software tools that facilitate the management process.
Last but not the least, the authors solicitate for such an orientation of the entrepreneurship that would allow the owners to take risks, implement innovative ideas and act in a proactive manner while expanding the domain of their business.
The theoretical framework thus developed by the authors suggests the incorporation of the following potential factors to efficiently manage the financial risks associated with the small scaled industries:
Source: Rahman, Yaacob, & Radzi,. (2015). Determinants of Effective Financial Risk Management in Small Business: A Theoretical Framework. Information Management And Business Review, 7(2,), 87-92.
Task 2: In the article titled as ‘Business cycle management and firm performance: Tying the empirical knot’, the authors to have tried to provide an empirical support to the idea that the difference between the firms that have high levels of performance with those having a lower performance level is the incorporation of the practices and strategies of business cycle management or the BCM (Navarro & Bromiley, 2015). The self exploratory research focuses on the relationship between the performance of a business firm and the various business cycle management theories that have been implemented in the firm. The authors have reviewed a wide range of already existing literature for conducting the study and have defined the potential factors based on the experimental findings mentioned in those research papers. The authors have also gathered data from the various case studies and analyses that are widely available in this domain. The empirical analysis of data has been based on the data about sample pairs of business houses having high and low performance levels, as collected from the S&P 500.
The initial explanation provided by the authors is based on the updated version of the standard behavioral theory as implemented by various firms or the BTOF (Steensen, 2010). The theory of BTOF is based on the assumption that most of firms operate using activities which include various parameters and that these parameters are adjusted time to time based on the feedbacks that the firms get from the market. As for example, an organization that experiences frequent shortages in their inventory might actually have to change the routine and activities that it follows in order to procure its raw materials, such that a high level of stock can be maintained.
The authors are of the opinion that instead of adapting BTOF models, which provide slow and misleading conclusions most of the time, the firm should implement behavioral theory routines that would them to manage the business cycles in a proactive manner. The firm can actually search for problem sectors at first, within a BTOF models, and then research for routines that could be used to provide better routine performances.
In order to implement a proactive model of the behavioral theory, it is suggested by the authors to put emphasis on the following sectors of the operation of the business firm:
The theoretical framework thus developed by the research article connects the performance level of any organization with the following domains of operational activities:
However, since all these operational activities include a wide range of activities, the authors have pointed out the very basic operations that should be targeted in order to increase the level of performance of an organization, the activities being mentioned in the following sections:
Source: Navarro, & Bromiley,. (2015). Business cycle management and firm performance: Tying the empirical knot. JSMA.
Conclusion:
In both the articles, the authors used various primary and secondary data so as to prove the hypothesis they had formulated. The data collected from the already existing literature have been helpful in the process of analysis: which in turn have helped in the process of deriving conclusion and formulating the conceptual research framework. Both the research groups have also refereed to various case studies and analyses in the domains of their study.
The analysis of the case study have provided them with a much better insight into business management domains in which the researches were being conducted. However, while the first article provided results based on the secondary researches only, the authors of the second article have incorporated the data found through secondary research into some pre-existing business management theories.
However, the rule that has been pointed out by these research papers is that a wide range of literature must be surveyed before any research work so as to gain a clear idea of research questions which should be answered.
References:
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