Brand management in SME myth or reality? – A Literature review

Abstract

Very little attention has been paid by the academicians in the area of brand management for small and medium enterprises (SMEs) (Abimbola and Vallaster,2007; Karke,2005; Wong and Merrilees,2005;Inskip,2004) despite the fact that 95 to 99 percents of business are considered as SMEs worldwide(OECD,2005). Although enough studies are available in the area of SMEs’ marketing (Carson,1990; Carson and Cromie,1990;Carson and Gilmore,2000; Gilmore et al.,1999;Gilmore et al., 2001), but these studies don’t touch upon branding. Interestingly, plethora of research has been carried out on branding in the context of large firms (Aaker,1991; Aaker and Keller,1990; Srivastva and Schoker,1991). In the quest to identify suitable research question, the current paper explores the weather branding is the myth or reality for SMEs.

Key words: SMEs, Brand Management, size, branding, resource, brand barriers

Understanding SMEs

According to some Authors, small firms are characterized by uncertainty, dynamism, innovation, and flexibility. Uncertainty generates dynamism, innovation, and flexibility, which are found in SMEs with limited resources (Hill, 2001). The term SMEs not only refers to the small size of the firms but also reflects how they interact with their environments relative to their size and in comparison to larger firms (Shuman & Seeger, 1986). SMEs are found to be different from larger firms in their managerial style, ownership, and independence (Coviello & McAuley, 1999).

SMEs usually have limited management capacity and insufficient capabilities for accessing and analyzing information because of their small size and lack of resources (Hill, 2001). The classic definition of SMEs has classified firms by the number of employees and/or by the value of their assets or net worth. generally, numerical definitions of an SME usually use one of the following measurements: number of employees, amount of inventory held in one year, or the value or net worth of the firm, The size classification varies within geographic regions and across countries relative to the size of the economy. A minimum as well as a maximum size is often set for SMEs (Desouza, & Awazu, 2006). The Department of Trade industry in the United Kingdom (UK) (DTI, 2005) has defined, SMEs as the firms with employees less than 250 people. As mentioned in the table below, the European Commission upgraded its definition of SMEs in May 2003 for both number of` employees and net worth (EU, 2006).

Criteria for SMEs: Europe

Criteria

Micro Enterprises

Small Enterprises

Medium Enterprises

No of Employees

Less than 10

Between 10 and 49

Between 50 and 250

Net worth

Less than â‚¬2 Million

â‚¬10-â‚¬49 Million

â‚¬50 Million and above

Source: Economic Commission for Europe (2006)

Table- 1

Summary of Definition of SMEs

Chang & Powell (1998)

” …. SMEs are the fastest growing segment of most economies and are perceived to be more flexible and adoptable in terms of structure and speed of response than larger organizations…… ” (p. 199)

Chiao, Yang, & Yu (2006)

” …. In accordance with Taiwan’s official definition of SMEs, we have classified firms with less than 200 employees as SMEs. Firms larger than this have been classified as large enterprises. This relatively strict definition has its limitation to compare with other studies which as generally defined less than 500 employees by the American Small Business Administration (SBA).” (p.481)

Hill (2001)

“It is also clear that organizational structures in small firms are much less rigid, sophisticated and complex than large firms. This means that the more fluid arrangements that prevail in small firms do not inhibit the creativity and flexibility which are necessary for continued success”. (p.178)

Kock (as cited in Hill,Nancarrow, & Wright, (2002).

“… [SMEs] play a significant role in providing possibilities for employment, innovation, money, variety, self-fulfillment, independence etc” (p.362).

Liedholm & Mead ( as cited in Wengel, & Rodriguez,2006)

“The great majority of micro enterprises are indeed non-growing enterprises that remain fully reliant on unpaid family labor. Hence, many micro-enterprises are established during economic crises as the result of the lack of better employment opportunities elsewhere so that many of the micro-enterprises started during crises are likely to close down during the economic recovery”. (p.27)

Sharif Kalafatis & Samouel (2005)

” …. Given the lack of widely accepted definition of SMEs we employed the criteria of less than 250 employees used by the DTI, the European Commission and specified in the UK Companies Act 1985â€¦” (p.410)

We can see that several common variables or concepts are found across these definitions. If we consider the conceptual aspects of these definitions, SMEs are characterized by newness, flexibility, and agility. On the other hand according to the numerical aspects of the definitions, SMEs are most commonly identified as a company with fewer than 200 or 250 employees.

In India the current definition of SME is based on the investment made in the Plant and machinery. The definition is mentioned below:

” At present, a small scale industrial unit is an undertaking in which investment in plant and machinery, does not exceed Rs.1 crore, except in respect of certain specified items under hosiery, hand tools, drugs and pharmaceuticals, stationery items and sports goods, where this investment limit has been enhanced to Rs. 5 crore. A comprehensive legislation which would enable the paradigm shift from small scale industry to small and medium enterprises is under consideration of Parliament. Pending enactment of the above legislation, current SSI/ tiny industries definition may continue. Units with investment in plant and machinery in excess of SSI limit and up to Rs. 10 crore may be treated as Medium Enterprises (ME). ” [1]

Present Scenario of Indian SMEs

Small and Medium Enterprises (SMEs) play a vital role for the growth of Indian economy by contributing 45% of industrial output, 40% of exports, employing 60 million people, create 1.3 million jobs every year and produce more than 8000 quality products for the Indian and international markets. SME’s Contribution towards GDP in 2009 was 17% which is expected to increase to 22% by 2012. There are 26.1 million MSME Units in India and 12 million persons are expected to join the workforce in the next 3 years. SMEs are the fountain head of several innovations in manufacturing and service sectors, the major link in the supply chain to corporate and the PSUs. By promoting SMEs, the rural areas of India will be developed.

SMEs are now exposed to greater opportunities than ever for expansion and diversification across the sectors. Indian market is growing rapidly and Indian entrepreneurs are making remarkable progress in various Industries like Manufacturing, Precision Engineering Design, Food Processing, Pharmaceutical, Textile & Garments, Retail, IT and ITES, Agro and Service sector [2] .

Challenges to SME Sector in India

Despite its commendable contribution to the Nation’s economy, SME Sector is faceing numerous challenges related to various aspects of the business like – absence of adequate and timely banking finance, limited capital and knowledge, non-availability of suitable technology, low production capacity, ineffective marketing strategy, identification of new markets, constraints on modernization & expansions, non availability of highly skilled labour at affordable cost, follow-up with various government agencies to resolve problems etc. Our focus in this paper will be on the issues of marketing strategy to be more specific branding aspect [3] . Government is focusing on all the issues faced by the SMEs for example Bombay Stock Exchange, National Stock Exchange and MCX Stock Exchange (MCX-SX) are mulling to establish separate Exchange for SMEs in order to provide them access to equity market, which will enhance not only SMEs access to capital but overall marketability and identity. Moreover, Department of Scientific & Industrial Research, Ministry of Science & Technology, Government of India has conducted a study on Technology branding in SME (2009) to address the branding issues related to SMEs. However a lot more need to be explored as far as branding of SMEs is concerned. Our paper will explore the few research questions which still need to be addressed for SME branding.

Marketing in SMEs

All firms must be involved in some aspect of marketing irrespective of their size, since all firms require customers. But how does a small and medium firm get involved in marketing? Marketing in the small and medium sized enterprises has been a debatable issue among both academics and practitioners for over two decades (Brodie et al., 1997, Gilmore et al., 2001 and Cromie, 1990). SMEs have difficulty in adopting conventional marketing because of the limitations of resources that are natural to all SMEs. SME owner/manager behave and think differently from conventional marketing decision-making practices in large organizations. It is well documented that SMEs have unique characteristics that differentiate them from conventional marketing in large organizations (Gilmore et.al., 2001). As cited in Carson (2001), Schollhammer and Kuriloff (1979) put ahead five characteristics of small businesses.

Scope of operations -Unlike several large firm serving national and international markets, small firms generally opt for serving a local or regional market.

Scale of operations – As small businesses are relatively small in a given industry, they tend to have a very limited share of a given market.

Ownership – Small firms are usually managed directly by their owner(s) as that one person or at the most a few other people generally own the equity of small firms.

Independence – As small firms are not a part of a complex enterprise system or a small division of a large enterprise they are considered independent. Another reason why they are considered independent is because even though their freedom is curbed due to obligations to financial institutions, the firm’s owner/manager has ultimate authority and control over the business.

Management style – In a small business the owners/managers tend to know all the employees personally. Employees participate in all aspects of managing the business.

SMEs have to face three broad types of constraints on marketing ( Carson,2001):

Limited resources – Limitations such as finance, marketing knowledge, and time contribute to limited marketing activity in comparison with large companies and competitors.

Lack of specialist expertise – Employees and managers in small businesses tend to be more of generalists than specialists. Marketing specialists is often the last of requirements for a small firm that is looking for expanding; rather they tend to opt for finance or productions specialists.

Limited impact on the market place – small businesses tend to get fewer orders, less customers and fewer employees in comparison with large companies. Also because of limited resources and lack of marketing expertise, the impact in the media front through advertising and PR is often negligible.

According to Padmore et.al. (2006), no definition of marketing for small and medium sized enterprises (SMEs) can be readily found in the literature and those attempts at definition or discussion often link marketing with entrepreneurial behavior (Carson et al., 1995; Reynolds, 2002). Though the basic marketing principles are universally and equally valuable to both large and small and medium firm businesses, academicians and researchers have addressed the marketing/ entrepreneurship interface only recently (Davis et al., 1985). The marketing/ entrepreneurship interface has developed a substantial body of literature over time. Marketing has a lot to offer to the study of entrepreneurship (Murray, 1981; Hills, 1987). Marketing and entrepreneurship have three key areas of interface:

Change

Opportunistic

Innovative

They are both change focused, opportunistic in nature and innovative in their approach to management (Collinson & Shaw, 2001). The basic of the interface between the two concepts involves the theme of “Putting entrepreneurship into Marketing” (Day et.al., 1998).

We can see that there are enough evidence in literature suggesting the difference in marketing in large organisations and smaller organisation. However, if the disciplines of marketing and entrepreneurship are viewed as parent disciplines of SME marketing then the character of SME marketing has inherited the genes of both (Hill 2001). Although enough studies are available in the area of SMEs’ marketing (Carson,1990; Carson and Cromie,1990;Carson and Gilmore,2000; Gilmore et al.,1999;Gilmore et al., 2001), but these studies don’t touch upon branding ( ).

Brand, branding and strategic brand management

Brands are conditional, intangible and legal assets for firm. They act like signal of perceived value to all the stakeholders. The perceived value (benefits) may range from functional to psychological associations. This signal is influenced by the interaction among the firm the various stakeholders (also between stakeholders) through the various point of contact. So in spite of understanding the brand as separate themes, we should look at it holistically as a value indicator for various stakeholders ( Maurya, Prahlad and Anand, 2010).Brands take on unique, personal meaning to consumers that facilitate their day to day activities and enrich their lives. As consumers’ lives become more complicated, rushed, and time starved, the ability of a brand to simplify decision making and reduce risk is invaluable (Keller,2003). Although manufacturing processes and product design may be easily duplicated, lasting impressions in the minds of individuals and organizations from years of marketing activity and product experience may not be so easily reproduced. In this sense, branding can be seen as a powerful means to secure competitive advantages.

Brands are a direct consequence of the strategy of market segmentation and product differentiation. Branding means more than just giving name and signaling to the outside world that such a product or service has been stamped with the mark and imprint of an organization. Branding consists in transforming the product category; it requires a corporate long term involvement, a high level of resources and skills (Kapferer, 2004).

Branding represents one of the core marketing practices that emphasizes the continuity and connectedness of firm with the external environment of which consumers are important constituents. Through branding, firms of different sizes are able to create, nurture and innovate their market-based assets perceivable by consumer, firms are able to nurture perceived brand value and consumer brand equity, which in turn create profitability for the firm. Brand, therefore represents an important determinant both of the effectiveness and ability of the firm to link its internal and external environment successfully. In consumer marketing, brands often provide the primary points of differentiation between competitive offerings, and as such they can be critical to the success of companies. Hence, it is important that the management of brands is approached strategically (Wood, 2000). According to Keller (2003) Strategic brand management involves the design and implementation of marketing programs and activities to build, measure, and manage brand equity. The strategic brand management process is defined as involving four main steps:

1) Identifying and establishing brand positioning and values

2) Planning and implementing brand marketing programs

3) Measuring and interpreting brand performance

4) Growing and sustaining brand equity

Research in small business and branding has been defined to be in the stage of “infancy” (Boyle, 2003; Karke, 2005), and even considered as “oxymoron” (Merrilees, 2007). This is partly due to lack of understanding of the real meaning of branding. In fact, small businesses, such as local corner shops, may even fail to recognize that they are a brand (Merrilees, 2007).Almost scant literature is available on branding for startup SMEs.

Below mentioned is the list of published work on SME brand:

Year

Journal

Author

context

2010

European Journal of Marketing

Martine Spence and Leila Hamzaoui Essoussi

SME brand building and management: an exploratory study

2010

Journal of product and brand management

Sabrina Bresciani, Martin J. Eppler

Brand New ventures Insight on start-Up’s

2008

Journal of Small Business Management

Pierre Berthon, Michal T. Ewing, and Julie Napoli

Brand Management in small to Medium-sized Enterprises

2008

Journal of Small Business Management

Jukka Ojasalo

Brand building in software SMEs: an empirical study

2007

Qualitative Market Research: An International Journal

B. Merrilees

A theory of brand-led SME new venture development

2007

Qualitative Market Research: An International Journal

Temi Abimbola and Akin, Kocak

Brand, identity and reputation in SMEs and entrepreneurial organizations

2007

Ru. Int. Journal

Angkana Anarnkaporn

Branding as a Competitive Advantage for SMEs

2005

Journal of product and brand management

Frank B.G.J.M. Krake

Successful brand management in SMEs: a new theory and practical hints

2005

Journal of product and brand management

Mowle, J. and Merrilees, B.

A functional and symbolic perspective to branding Australian SME wineries

2005

Journal of product and brand management

Ho Yin Wong and Bill Merrilees

A brand orientation typology for SMEs: a case research approach

2004

The Journal of Brand Management

I Inskip

Corporate branding for small to medium-sized businesses A missed opportunity or an indulgence?

2001

Journal of Research in Marketing & Entrepreneurship:

Temi Abimbola

Branding as a Competitive Strategy for Demand Management in SME

Abimbola(2001) is the pioneer of SME branding and specifically on branding as competitive strategy . I Skip in the year 2004 has analyzed the issues of Corporate branding for small to medium-sized businesses – a missed opportunity or an indulgence? Morespecifically in B2B segment. In the quest of exploration of SME branding three studies (Karke,2005;Wong and Merilees,2005; Mowels and Merilees,2005) have contributed significantly, all based on case study methodology. Karke(2005) developed a new model for the role of brand management in SME-Through a metaphor of a “funnel”; using Keller (2008) guidelines for SME branding.Wong and Merilees(2005) proposed two models: firstly, a typology of branding-archetypes developing on a ladder (minimalist,embryonic and integrated brand orientation), based on the level level of brand orientation and performance of the organization.

Secondly, Authors proposed a broad brand strategy process model, with four interconnected elements; brand distinctiveness; brand orientation; brand barriers and brand marketing performances. In another study Wong and Merilees (2005) studied the branding approaches of Australian SMEs wineries and developed a model for SME winery branding which highlights the functional and symbolic value inherited in the brand. Moreover, they also identified two approaches to branding: Product driven and market driven branding. Yet in another recent study (Abimbola and Vallaster,2007) has provided a immensely valuable broad overview of historical examination of brand, organization identity and reputation in SMEs. In the same year (2007) Anarnkaporn has argued branding as a tool for competitive advantage. In a related study B Merrilees(2007) has propose a theory of brand-led SME new venture development. Temi Abimbola and Akin, Kocak (2007) has contributed to the existing literature by analyzing the issue of Brand, identity and reputation in SMEs and entrepreneurial organizations. Another recent study by Ojasalo et. al. (2008) investigates the specificity of brand building in software SMEs . Pierre Berthon, Ewing, and Napoli(2008) has compared brand Management in small to medium-sized enterprises with larger organization to explore the further evidence of differences. In the year 2010, Bresciani, Eppler has provided guidelines to brand New ventures start-Up’s. In the same year Spence and Essoussi has explored the issue of SME brand building and management by conducting an exploratory study.

What does this indicates? Is branding not relevant for small and medium enterprises? Even if it is relevant, do we need separate study to understand SMEs branding?

According to Padmore et.al. (2006), no definition of marketing for small and medium sized enterprises (SMEs) can be readily found in the literature and those attempts at definition or discussion often link marketing with entrepreneurial behavior (Carson et al., 1995; Reynolds, 2002). The discipline of SMEs is broadly based in management; marketing and enterprises Carson et al. (1995) and these are unique and different to traditional marketing in large firms (Carson and Cromie, 1990). It was viewed that an SME-specific version of marketing mix borrowed from traditional marketing 4Ps can guide the SME thinking and doing business (Carson and Gilmore, 2000). SME marketing in practice is thought to be largely done though networking (Gilmore et al., 2001); a combination of transaction, relationship, interaction and network marketing (Brodie et al., 1997); through the use of Internet marketing (Chaffey et al., 2000) or e-commerce (Rayport and Jaworski, 2001).

Further, from their study on SMEs, Sashittal and Tankersley (1997) have found that market planning and implementation are highly related. Further, Leonidou (2004) viewed those internal barriers like informational, functional and marketing barriers crucial behind successful internationalization of SMEs. The reviewed literature reported similar problems at several occasions: bad image of products in the foreign market and insufficient foreign demand (Cardoso, 1980; Gereffi 1992), The role and relevance model of marketing in SMEs has been described in theory elsewhere (Simpson and Taylor, 2002). The basic descriptive matrix (Figure 1.1) gave rise to a new typology of SMEs based on the internal organization for marketing activities (i.e. the role of marketing) and the demands of the external competitive business environment (i.e. the relevance of marketing).

The model is the closest to the SME’s actual scenario today. According to profounder of the theory, there are two aspects of marketing. On one hand, the need for marketing is inherently generated within the organization and the second, where the external environment dominates the need for marketing. Where the role of marketing is major, in other words, inherently felt need of the organization to go for aggressive marketing, it can be a marketing dominated or marketing led organization. Sectors where the external pressure for marketing is high due to enhanced competition or because the demand side pressures are high, leads to the organization’s focus on marketing.

Very little attention has been paid by the academicians in the area of brand management for small and medium enterprises (SMEs) (Abimbola and Vallaster,2007; Karke,2005; Wong and Merrilees,2005;Inskip,2004) despite the fact that 95 to 99 percents of business are considered as SMEs worldwide(OECD,2005). Although enough studies are available in the area of SMEs’ marketing (Carson, 1990; Carson and Cromie, 1990; Caarson and Gilmore, 2000; Gilmore et al.,1999;Gilmore et al., 2001), but these studies don’t touch upon branding. Interestingly, plethora of research has been carried out on branding in the context of large firms (Aaker,1991; Aaker and Keller,1990; Srivastva and Schoker,1991).

We will first discuss the issue of branding, brand management and then the following questions will be analyzed with the help of scant literature available on SME brand management.

Is branding relevant for SMEs? Is there a separate need for research in SME brand management? What are the practices/models ( if applicable) to SME brand management?

Cited in Carson (2001), Schollhammer and Kuriloff (1979) put ahead five characteristics of small businesses.

Scope of operations – Rather than serving national and international markets, small firms opt for serving a local or regional market.

Scale of operations – As small businesses are relatively small in a given industry, they tend to have a very limited share of a given market.

Ownership – Small firms are usually managed directly by their owner(s) as that one person or at the most a few other people generally own the equity of small firms.

Management style – In a small business the managers tend to know all the employees personally. Employees participate in all aspects of managing the business.

Marketing Constraints on Small Firms

According to Carson (2001), there are basically three broad types of constraints on marketing for a small firm.

Limited resources – Limitations such as finance, marketing knowledge, and time contribute to limited marketing activity in comparison with large companies and competitors.

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