Entrepreneurial Marketing And Marketing In Small Firms

Introduction:

Researchers widely agree that marketing in small firms differ from that of their larger counterparts (e.g. Fillis, 2002; Gilmore et al., 2001; Hill, 2001a; Coviello et al., 2000.) Stokes (2000) adds that in small firms, marketing is used for the needs of the moment and only little attention is paid to plans, strategies and analysis. They are close to their markets, have great flexibility which they value (Evans and Moutinho, 1999), have the capacity to operate on slim margins, and can instigate decisions quickly (Rogers, 1990). The marketing function in SMEs is hindered by constraints such as poor cash flow, lack of marketing expertise, business size, tactical customer-related problems, and strategic customer-related problems (Doole et al., 2006; Chaston, 1998; Carson, 1985). Yet, despite such restrictions, SME’s successfully use marketing to generate sales (Guersen, 1997; Romano and Ratnatunga, 1995).

Motwani, Jiang and Kumar (1998) highlight the differing operational priorities of small firms, (as compared with larger organisations), and synopsise small firm characteristics as follows: “On the one hand, small firms are believed to have an edge over larger firms in flexibility, innovation, and overhead costs, while on the other, they are limited by the amount of market power, capital and managerial resources. Despite the differences, it has been noted that the basic marketing concepts, such as segmentation, customer orientation, targeting, positioning and seeking for competitive advantage apply to small as well as to large enterprises (Hogarth-Scott et al., 1996).

Scholars note that both marketing theories and entrepreneurship theory privilege the notion of value creation, that is, the notion that elements are combined in a manner that results in the provision of value to the user (Morris et al., 2002). Marketing has much to offer the study of entrepreneurship (Murray 1981; Hills 1987) and likewise entrepreneurship can look to marketing as the key function within the firm, which can encompass innovation and creativity. Omura et al. (1993) perceive the interface between the two disciplines as having distinct areas of both difference and overlap. The differences are between traditional marketing, which operates in a consistent environment, where marketing conditions are continuous. And the firm is satisfying clearly perceived customer needs and pure entrepreneurship, which operates in an uncertain environment, where market conditions are discontinuous and the needs of market are as yet unclear. The overlap exists in two areas; one where market conditions are continuous and entrepreneurship aids the process of identifying as yet unperceived needs and secondly in a discontinuous market where entrepreneurship guides marketing strategy to develop existing needs in a new environment.

Elaine Collinson and Eleanor Shaw (2001) marketing and entrepreneurship have three key areas of interface; they are both change focused, opportunistic in nature and innovative in their approach to management.

Conceptual Framework:

During the last 60 years marketing thought has experienced several changes. It has evolved from production and sales centered into customer and relationship focused marketing. Instead of short-term individual transactions marketers have started to value long-lasting relationships. Interaction has proven to be more efficient than one-way communication and it has been realised that marketing is not a task of just marketing department but the whole organisation (See Gro¨nroos, 2006.) There is no clear or unifying definition or theory of marketing in SMEs. (Simpson et al., 2006.).

Motwani, Jiang and Kumar (1998) highlight the differing operational priorities of small firms, (as compared with larger organisations), and synopsise small firm characteristics as follows (p. 8): “On the one hand, small firms are believed to have an edge over larger firms in flexibility, innovation, and overhead costs, while on the other, they are limited by the amount of market power, capital and managerial resources”. Small firms typically have limited impact in their given markets, and limited network access (Me Gaughey, 1998). Barnes (2001) identified several drivers that enhance closeness between the small firm and the customer. These drivers include: knowing the customer personally, feeling of locality, easy accessibility, lack of bureaucracy and concentration on long-term profitability.

In the context of small firms, customer orientation is a concept, which comprises customer understanding orientation and customer satisfaction focus. It seems that adoption of customer orientation may enhance the performance of small firms. It is argued small firms with higher degree of customer orientation are likely to be more profitable than their less customer-oriented counterparts. (Appiah-Adu and Singh, 1998.)

Marketing in SMEs continues to evolve throughout the life-cycle of the enterprise in response to new product and market demands, while satisfying customer requirements, taking into consideration the inherent characteristics and behaviours of the owner/manager, and the size and life-cycle stage of the firm (Gilmore et al., 2001; Carson, 1993). In small enterprises, the entrepreneurs have pivotal roles in marketing. The marketing practices seem to rely on their personal contacts and are often driven by the certain way they do business (Simpson et al., 2006). They depend also on owner-manager’s attitude to, experience of and expertise in marketing (McCartan-Quinn and Carson, 2003).

Traditionally some marketing approaches concentrate on the marketing mix. However, instead of focusing on the traditional marketing paradigm of the 4Ps (product, price, place and promotion), or the 7Ps adopted by service marketing (product, price, place, promotion, people, process and physical evidence), entrepreneurs stress the importance of promotion and word-of-mouth, and have identi¬ed one of the unique selling points of their business as the nature of their personal contact with customers and their focus on the four Is (Information, Identi¬cation, Innovation and Interaction) (Stokes, 2000).

Typically small firms will have higher levels of creditors relative to stocks and total assets and lower levels of retained profit than larger organisations (Chittenden and Bragg, 1997). Bird (1992) and Burns (1996) offer an insight into the differing perspectives of the small business owner/manager and the bank manager. “This is the situation in which, in order to obtain additional funding from the bank, the businessman agrees to provide regularly to the bank manager cash-flow forecasts, lists of outstanding debtors/ creditors and other means to evaluate assets and liabilities. The result is that valuable time must be spent with the bank manager (who probably has no hands-on experience of running a business like yours) while he tells you what you can and cannot do” (Bird, 1992, p. 4). “The bank manager gains little from the success of the business but stands to lose a lot if it fails” (Burns, 1996, p. 186).

Small business success is dependent not only on the presence of products and markets, but also on the efficacious marketing of those products within those markets (Smith, 1990). While the underlying principles of mar- keting are equally applicable to large and small firms alike, a lack of sophisticated marketing is perceived to be problematic for smaller firms (Cromie, 1991). Within the small firm, the boundary between marketing and selling becomes very blurred, as most small firms’ marketing takes place during the selling process (Oakey, 1991) and for many small firm owner/ managers the perception is that selling is marketing.

Kuratka (1995), entrepreneurship is an area which is relevant to both small and large firms the reason why it is so often associated with small and medium enterprises is that, firstly entrepreneurial activity is often more visible in the smaller firm an secondly, when firms experience growth it can be difficult to sustain an entrepreneurial focus in a multi layered management structure. In addition to organizational structure, the entrepreneurial personality has direct effect on the way in which management is undertaken (Chell, 1986). Entrepreneurs, by their nature, will focus on various opportunities at once and are not easily convinced by the sequential, structured approach to management, which is the focus of most management/ marketing texts (O’Brien and Hart, 1999).

A lack of capital is frequently the main deterrent to the prospective entrepreneur (Karger, 1981) with undercapitalisation recognised as a major weakness of many new and small firms (Barber and Manger, 1997), often leading to their demise (Job, 1983).

Growth issues and the subsequent impact on resources and skill requirements is a key area of current research in entrepreneurial marketing activity (Collinson and Quinn, 1999). Hills et al. (2008) recently investigated the evolution and development of this scholarship and found that indeed, marketing among entrepreneurs deviates from mainstream marketing. Carson (1993, p. 12) describes EM as the “experience, knowledge, communication abilities and judgment of the owner-manager, key competencies on which marketing effectiveness depends,” while Zontanos and Anderson (2004) offer the four P’s: person, process, purpose, and practices, as a better frame for understanding marketing in entrepreneurial firms.

Less formal organisational structures, such as those within SMEs, have been identified as being conducive to innovation, as they encourage a corporate culture which enables participation, networking, inclusion, and experimentation throughout the organisation (Johne and Davies, 2000; Carroll, 2002). Moreover, the environmental uncertainties and challenges faced by SMEs may prompt an innovative response to establish competitive advantage (Ashford and Towers, 2001; McAdam et al., 2000).

Burns and Harrison (1996) reiterate that the reason for starting the business is the key differentiator between the small business owner/manager and the entrepreneur, a view which is compatible with Burns (1996), who distinguishes between two different kinds of small businesses; the “life-style” business set up to provide an adequate level of income for the founder; and the “entrepreneurial” business which is founded to grow. O’Shea (1998) distinguishes between entrepreneurial and non-entrepreneurial small businesses from the perspective of their likely impact on economic equilibrium, with entrepreneurial firms exerting a “spontaneous, discontinuous and a qualitative influence”, and non-entrepreneurial ones representing “a static, inert and quantitative influence”.

Research Questions:

This research aims at identifying the differences between marketing by small firms & marketing in SME’s.

Will explore the commonalities & differences if there are any in marketing in SME’s & entrepreneurial marketing.

Will try to describe & present in an understandable manner the real just of entrepreneurial marketing & its characteristics.

Studying the market practices in both the manufacturing & service SME’s in Multan.

Will try to find relationship/relationships in marketing practices (right from product development and selling), relationship with others, entrepreneurial back ground, training and education and growth expectations.

Will try to develop a model of marketing in Pakistani SME’s vis-à-vis their capital restraints.

Will also explore the role of human capital & social capital in determining the shape of market in SME’s/ Entrepreneurial firms.

Will identify areas of future research in this field.

Efficacious marketing of the products in market ensures the success of firm.

Marketing in SME’s continuously change throughout the life cycle.

Interpersonal contacts and 4I’s (Information, Identification, Innovation and Interaction) are source of entrepreneur promotion techniques.

Customer satisfaction & customer orientation have strong association with success of SME’s.

WOM (Word of mouth) is most influential way of promotion and its reliability in SME’s.

Methodology:

Population:

SME’s with maximum revenues of 50 million Rs/ Anum will be our population. Firms from retail, manufacturing & other service industries will be part of population. However SME’s whose major reliance is exporting will not be part, only those SME’s who’s major focus and source of revenue is domestic market are included. Moreover micro enterprises will not be part of population.

Sample:

2 or 3 categories of SME’s will be developing based on sales/ number of employees.

Firm belonging to service and manufacturing sector will be selected probably the sample size between 15 to 18 case studies with about 5 case studies in each category.

Analysis will be templates used by Robert.K.Yin (2003a, 2003b) will be used to develop a theory of small firms/entrepreneurial marketing of firms operating in Multan.