Factors to Achieve Growth and Profitability for Small Firms - Case Study Example

Business Customer Inserts Name Customer Inserts Tutor’s Name 18th November, 2014 Introduction The business sector in Malaysia is riddled with the presence of a lot of companies that operate in different sectors of the economy. These firms contribute significantly to the Malaysian economy and as a result, SIMDEC (Small and medium Industries Development Corp) undertook a study of 53 small firms based in the town of Chunglun with interest in understanding the fundamentals factors affecting growth of these firms. This analysis looks into the factors which affect the growth of these firms as analyzed in the study. Analysis According to SIMDEC, SME firms are categorized into three categories namely; micro, small and medium enterprises which employ between 5 and 50 employees. These organizations gross between RMB 200,000 to 1 million. It is well understood that for business to succeed, they must be driven by philosophy which guides their operations. As a result, these companies have the need to grow their operations and businesses to ensure that they get the best figures in terms of growth. These small and medium firms utilized market orientation to ensure that they understand their customers and grow their businesses tremendously (Masroor 2014, p. 2). Market orientation should be analyzed from different viewpoints as shown below; a) Conceptual framework: whereby market orientation is analyzed in direct connection to growth of a small or a medium firm. b) Marketing concept: the factors of marketing affect the growth of small firms whereby marketing has positively or negatively impacted the growth of firms. It has been analyzed that market orientation has affected the growth of several companies and firms. The major factors that affect market orientation include; target market, consumer needs, co-ordinated marketing and profitability. Market orientation should affect sales growth and ROI (return on Investment) due to the fact that it involves practices and factors which are related to implementation of marketing concepts (Balakrisnan 1996, p. 258-261). Several organizations and small firms rely on organizational culture to ensure that superior values are passed onto the customer (Masroor 2014, p. 4). As a result, it is imperative to ensure that there is a consistency of the factors such as; customer orientation, competitive orientation and inter-functional co-ordination. Customer orientation focuses on building customer oriented goals which focuses on understanding the needs of the customer and coming up with services which will assist in building the customer better (Masroor 2014, p. 3). Competitive orientation focuses on understanding the potential, strategy and capacity of competitors in relation to their performance in the market. While, inter-functional co-ordination refers to the need of utilizing the organizational functions in ensuring that customer information is shared in relation to factors which affect customer satisfaction. According to Narver and Slater (1990), there is a positive relationship between market orientation and sales growth (Narver 1990, p. 26). The performance of SME firms in Malaysia especially in Chunglun is measured by profitability whether it is based on sales growth or return on investment. Consequently, a study was undertaken to measure these factors and ensure that there exists a relationship between customer orientation and sales growth. As a result, the research study conducted in Chunglun was based on measuring the effect of market orientation on firms’ growth and effect on profitability (Balakrisnan 1996, p. 265). In the process of undertaking the research qualitative and quantitative data sources were utilized in the research. SIMDEC provided quantitative data source of the number of employees used in defining an SME firm (Masroor 2014, p. 6). The research study was conducted on 53 firms within different sector of the Chunglun economy while the same time measuring four different variables (customer orientation, competitor orientation, inter-coordination and performance of small firms). The independent variables in this study were customer orientation, competitor orientation and inter-coordination which were analyzed against the dependant variable (performance of small firms). When the research variables and all factors to be used in the research had been outlined; the hypotheses for the study were developed to test the three variables of market orientation against the performance of small firms. These hypotheses were; a) ‘There is a significant association between the three components/variables of market orientation and the small firm performance. b) ‘The three components of market orientation are significant predictor of the firm’s performance.’ The research study was conducted by issuing questionnaires which were distributed to 67 firms with 53 firms giving their response. The three component of market orientation each had several variables which assisted in determining the relationship of the components to the performance of the small firms. The results of the research study show that the performance of small firms is closely related due to a positive Pearson correlation with the three independent variables at a significance level of (p < 0.001). This analysis also helped to confirm the assumption that the firm’s performance would have positive relation with market orientation (Masroor 2014, p. 9). This means that if small firms become market oriented then the overall performance will be high or great as proved in previous studies. Hypotheses two was tested by use of regression analysis whereby all the three variances were included in the regression model. From the regression model, we understand that competitor orientation appeared very strong due to a standardized beta value of .371 while customer orientation had a standardized beta value of .265. Hypotheses two based on the regression analysis did indeed show that competitor orientation and customer orientation significantly affected the performance of small firms (Masroor 2014, p. 10-12). From the results of the research we can conclude that SME firms need to ensure value is created by leveraging on leadership and other factors to ensure the customer always get value from the organization. Conclusion Small firms rely on several factors to achieve growth and profitability and one of these factors is market orientation. Market orientation ensures that these firms understand their customers and ensure value is built based on the major components which affect market orientation. The research study undertaken in Chunglun, Malaysia outlines the importance of market orientation on performance of SME firms. References Narver, J & Slater, S 1990, ‘The effect of a market orientation on business profitability’, Journal of Marketing, Vol. 54(10), pp. 20-35. Balakrisnan, S 1996, ‘Benefits of Customer & Competitive Orientation in Industrial Markets’, Industrial Marketing Management, Vol. 25(4), pp. 257-270. Masroor, M 2014, ‘Effect of Market Orientation on Small Business Performance in Small Town in Malaysia: An Empirical Study on Malaysian Small Firms’, Universiti Utara Malaysia, Vol. 1, pp. 1-14. Read More