Managing Small Business example Anthias Consulting Ltd, The Natural Music Group and the Konnect9 - Essay Example

?Managing Small Business Table of Contents page Table of contents 2 Introduction 3 Anthias Consulting, Ltd 4 History of the company 5 Services provided by the company 5 The SME business owner 6 The owner-manager activity: Institutional networking 7 Literature on network marketing in SMEs 8 Networking as strategic thrust 8 Networking by SMEs and its impact on bank financing 12 Conclusion 14 References 15 Introduction More recently, the unmistakeably growing trend in special interest and niche-directed SMEs has drawn attention to the particular attribute of the small and medium enterprise as a versatile and dynamic business form. In the course of searching for the topic of this paper, I narrowed my options to three SME companies, which I believe are each unique in their approach – Anthias Consulting Ltd which deals with scientific instruments and analytical chemistry; Konnect9 which helps businesses dispose of their surplus goods by channelling them to those sectors in need, thereby contributing to environmental sustainability; and The Nachural Music Group, a West Midlands enterprise which is comprised of a music label and a business specialising in live event production, consultancy and corporate video production (SDE, 2009). Each of these businesses reflects the particular interests of their owner-founders, and cater to specialised services in support of big business. Their areas of expertise make them unsuitable to classify in just one traditional industry; instead, they cater to special needs of particular customers, and may be thought of straddling two or more different but interdependent industries and exploring the connections between them. Konnect9 combines charity work with inventory recovery and recycling; Nachural Music Group treads the fields of music and the visual and communication arts on the one hand, and business on the other; and finally Anthias Consulting Ltd., which bridges science and business. Of the three, I have chosen to present Anthias Consulting as the focus of study in the management of small businesses. For me, this company most exemplifies, among the three under consideration, the pioneering insight that best characterises the entrepreneurial spirit. Enterpreneurships are dynamic, unstraddled by the organisational inefficiencies of large businesses, and quick to adjust their products and services to changes in the market. For me, Anthias Consulting Ltd. and its founder, Diane Turner, strongly embody this attribute and provide us a good basis for further investigation into SMEs. Anthias Consulting, Ltd. The SME chosen for analysis is Anthias Consulting, Ltd., a Cambridgeshire, UK based firm that specializes in providing larger firms services in the field of analytical chemistry (Anthias Consulting website, 2011). The firm provides its clients with training, method development, and consultation in the area of scientific instrumentation where it grounds its expertise. The firm’s clients include both manufacturers and end-users, thus effectively catering to the B2B and B2C markets. It provides services to scientific instrument manufacturers by providing the interface – “bridging the gap” – from manufacturer to customers, through product demonstration, method development, applications support, instrument training, manual authoring, application notes, on-site assistance, training solutions, product testing and IT support (Enterprising Women, 2011a). The firm supplies multinational corporations as well as small companies, and caters not only to manufacturing but also the pharmaceutical and construction industries (SDE, 2009). For its end user customers, Anthias Consulting provides consultancy advice, method development, troubleshooting as well as instrument training. The hold a series of seminars throughout Europe (Enterprising Women, 2011a). The firm currently operates in the UK, Ireland, the Netherlands, Slovenia and Germany, and may expand its services to other areas in Europe (Supplier Diversity Europe [SDE], 2009). History of the company Early in Turner’s scientific career, the opportunity to set up her own business presented itself quite by accident. She had noticed a flaw in the analysis of a particular procedure in a chemical plant, and recommended a simple adjustment in the plant’s operations. Because of the minor change she had prescribed which the company subsequently adopted, Turner had enabled the company to arrive at a more accurate determination of the yield, to a true value of 96% from what was originally thought to be 17% (SDE, 2009, p. 6). This simple incident caused Diane Turner to realize that she had the unique ability of being able to see the broad perspective of a problem, while others tended to see only the narrow point of view. It occurred to Turner that this talent could cater to a recurring technical need that exists in many manufacturing, educational, and other technological firms. She then proceeded to turn this talent into a productive, and lucrative, enterprise servicing a wide range of businesses over a vast geographical territory (Anthias Consulting website, 2011). Its unique competency in this regard is that Anthias Consulting has mastery of both the perspective of the supplier as well as the needs of the customer, allowing them to relate to the concerns of both. Services provided by the company The firm has addressed many issues such as eradicating noxious gases from new buildings as well as new cars, identifying and freeing up bottlenecks in the workflow procedure, advising on the purchase of highly sophisticated instruments from a third-person perspective, and assessing the techniques associated with instrument deployment, such as training personnel on their proper use and maintenance (SDE, 2009). To provide an idea of the level of sophistication in the firm’s service, we shall enumerate hereunder Anthias Consulting’s areas of expertise that are within its core competencies (Anthias Consulting website, 2011). Gas Chromatography (GC) Gas Chromatography Mass Spectrometry (GC-MS, GC-ToFMS) Multi-Dimensional GC (2D, GCxGC, GCxGC-ToFMS, heart-cutting) Large Volume Injection (LVI) Programmable Temperature Vaporisers (PTV) Selective Discrimination Thermal Desorption and Extraction (TD) Pyrolysis (PY) Static and Dynamic Headspace (SHS, DHS) Purge and Trap (P&T) Solid Phase Extraction (SPE) Solid Phase Micro-extraction (SPME, SBSE) Automated sample preparation Others (specialized customer requests) The SME business-owner Anthias Consulting’s founder and owner, Diane Turner, has a passion and talent for analytical chemistry. She has been featured in “Enterprising Women” which highlighted her unusual capabilities and qualifications that make her an exceptional blend of scientist and entrepreneur. Turner has an MSc in Instrumental and Analytical Methods in Biological and Environmental Chemistry (Pharmaceutical Analysis) from the University of Warwick. For many years, she worked as an Applications Chemist for a small instrument distributor, after which she took the leap from employee to entrepreneur, and in 2005 began Anthias Consulting. The transformation required a great deal of encouragement from her colleagues as well as clients she had consulted with. “Diane is far more interested in what an instrument can do rather than what it is and is keen to spread that knowledge through working with people from all aspects of instrumentation, from the manufacturer to the end user” (Enterprising Women, 2011a). Turner attributes her special competency to her grasp of the theory as well as its application. “There is a lack of people with my specialist knowledge, the ability to apply it, and willingness to travel. There is no language barrier for me, in science” (Turner in SDE, 2009). The owner-manager activity: Institutional networking As with most entrepreneurs, Turner’s move to business ownership from science career was prompted by a desire to attain a greater flexibility in her life and allow her more time for trips home and attention to her social advocacies and professional affiliations. A superb and experienced scientist, she was however a novice at business. She therefore sought the assistance of her local enterprise agency which provided her the initial business training. At the agency, however, she was warned that she would encounter difficulty in establishing her business because of her gender and her chosen field, science (Enterprising Women, 2011b). Aware of the drawbacks, Turner resorted to support organisations, namely Enterprising Women, and the Cambridge Association for Women in Science and Engineering (AWISE). These organisations provided Turner two important networks – one for business, the other for science. Through Enterprising Women, she had been put into contact with leads to her initial clients during their several collaboration-building events. Contacts obtained in this manner have led to plans for a scientific instrumentation consultancy alliance currently being established in the Cambridge area (Enterprising Women, 2011b). Through the largely social encounters through her networks, Turner has been able to establish, by word-of-mouth recommendations from her friends and peers, a roster of big corporate and multinational clients that supper her thriving and profitable business. Comprising its principal marketing effort, Anthias Consulting’s success is attributable to the growth in its reputation principally by word of mouth recommendations, particularly among the science and business groups, and by cost-efficient web-based marketing used by most SMEs (SDE, 2009). Literature review on network marketing in SMEs It is evident from the foregoing that while SMEs cannot undertake, for cost-efficiency purposes, the type of high-profile marketing effort that is resorted to by big business. SMEs cannot afford expensive publicity stunts or advertising campaigns, but they can “influence the informal process of word-of-mouth” (WOM) to project competence and credibility to convince prospective customers with a relatively unknown company. Owner-managers must be able to trigger positive (and minimise negative) WOM publicity (Stokes & Lomax, 2002). The topic of networking and word-of-mouth in an SME are of particular interest to me because I consider it the major problem facing an upstart small scale business. By understanding how other companies had overcome this hurdle, at such time when I may be in a position to establish my own enterprise, I would have the benefit of the ideas, insights and experiences of the cases we are studying about here. Networking as strategic thrust. Networking can be more than a back-up or support activity; it can be the central mechanism by which a firm may adapt to changes in its economic and social environment. When a firm’s principal goals and plans are built with a key reliance on the networking function, then networking becomes a strategic approach by which the SME may develop. A article by Carson, Gilmore and Rocks (2004) focused on how small local grocery and food distribution channels in Northern Ireland addressed the entry of UK multiples Tesco, Sainsbury, and Safeway in the late 1990s to early 2000s. Prior to the entry of these multiples, the industry was characterised by a relatively friendly cooperation among long-time channels members of suppliers and distributors (Carson, et al., 2004). A state of equilibrium appears to have been attained, with majority of existing players being aware of their positions in the market and operating within the limits of what have come to be accepted as customary practices. Upon entry of the multiples, however, a resurgence of competitive activity described by the study as “ever-increasing and far-reaching” began to characterise the industry. The fact that the new competitiveness was broad and sustained indicated that a fundamental structural shift was taking place, not the mere adjustment that accompanies a temporary displacement. The article states: “The entry of the big UK multiples changed the marketing infrastructure dramatically. Almost overnight suppliers and distributors had no market. They had to learn to deal with new, large and apparently ruthless customers. These multiples also threatened established niche retail marketing by upsetting long-standing local supplier arrangements” (Carson, Gilmore & Rocks, 2004, p. 369). The study, which involved 12 SMEs that consisted of local manufacturers, channel intermediaries, wholesalers, and independent retailers, focused on the manner by which they addressed the strategic changes through their marketing network processes, on MNPs. MNPs are comprised of three dimensions: the structural, relational, and the usage dimension. The structural dimension is defined in terms of the sources and physical structure of the network. The relational dimension is described by the linkages it employs and is defined by the strength of these linkages; this is probably the most relevant component of the MNP and the key to its “behavioural dynamic” (Carson, et al., 2004, p. 371). Last is the usage dimension, which is described by the degree and nature of the impact created by MNPs in the marketing efforts of SMEs. A conceptual diagram of this framework follows: Marketing network processes in SMEs Among the three dimensions of the MNP, the study mentions the importance of the relational dimension as definitive of the nature of the network, and in this dimension the level of cooperation is that which describes the degree of interdependence between the SME owner-manager and each member of the marketing network. This is manifested in the coordinated market activities between them. However, while this provides the capacity for results, this does not inherently describe the effectiveness of the network as a marketing device. The role of MNPs is therefore determined by the usage dimension, the extent to which SME members employ their networks to realize their marketing objectives (Carson, et al., 2004, p. 374). There is a great deal of confirmation between the findings of the Carson, Gilmore and Rocks study, and the experience of Turner in the development of Anthias Consulting Ltd. Turner joined networks whose infrastructure had already been established, and successfully developed close coordinated relations with their co-members, as testified by the referrals provided her by individuals in the network with whom she has developed friendships. Furthermore, coordinated marketing activities in the form of market collaboration events have enhanced the effectiveness of the system. From the success enjoyed by Anthias in marketing its services and building a thriving clientele base of multinationals across Europe, it is evident that the networking effort resorted to by Turner as marketing strategy proved highly effective. There is an observation that one may make in the case of Anthias, however, that are not mentioned or accounted for the in the Carson study. This is the usefulness of multi-disciplinary networking which was employed by Turner. It appears that much of Turner’s success through Anthias resulted from not only the marketing network Enterprising Women, which caters to marketing specialised for women, but likewise through the scientific community to which Turner likewise affiliated herself. While the Carson study did not necessarily discount this, the Anthias case shows that even where marketing is not the main purpose of the network, a network based on profession or discipline may likewise prove effective, particularly where the discipline is highly specialised. This does not even yet consider the use of socialized networking such as Twitter for enhancing one’s business (Bulearca & Bulearca, 2010). Networking then becomes an intrinsic tool for matching need with provider, even without a specifically marketing objective. Networking by SMEs and its impact on bank financing The first study presented a case situated in UK in much similar circumstances and Anthias Consulting, thus strong parallels may be drawn between them. A study is now chosen from an emerging Asian economy, and on networking as an influence on the financial aspect, in order to see whether a difference in context and environment would mean a difference in application. The article by Le and Nguyen (2009) examined the impact of networking by SMEs on their access to financial resources for development. The key channel for sourcing financing in this environment is through banks. The study sought to test the hypothesis that networking helps in facilitating prospects for obtaining financing, a topic of considerable interest (Baoshan Ge, Hisrich & Dong, 2009). In general, networking aids lending institutions in obtaining information, locating new and untapped markets, and to better secure their investments. Networking could provide banks with information on legitimacy, thereby giving SMEs an advantage in getting bank loans approved. On the other hand, corporate borrowers use networks as vehicles for gaining access to resources, searching for much needed information, and gaining support from other parties that may be benefited by the firm’s enhanced operations. The experience in emerging economies is that banks tend to overly rely on information from networks, resulting in a good proportion of loans not being repaid (Le & Nguyen, 2009). The study distinguished among several types of networks, and found that the type of network employed created different impacts for the bank financing process. The diagram that follows presents the framework arrived at by the study. The study found that official networks contribute to the chances that a firm may be approved for a bank loan, but they do not necessarily affect the size of the loan approved. This tends to suggest that official networks are useful for companies seeking to secure bank loans for the first time, but not for those that have already gotten loans in the past. Managerial networks did not significantly affect the chances a bank loan will be approved, but the bank loan ratio shows that such networks significantly affects the amount of loans taken out. On the other hand, the bank loan ratio that is indicative of the amount loaned. Finally, SMEs that have strong ties to social networks were less likely to borrow from banks than from other sources, thereby reducing the need for bank loans (Le & Nguyen, 2009). In general, the SMEs of the developed Western economies tend to rely more on securitization of loans through banks rather than borrowing directly from banks (Salinas, 2008). That being said, membership in networks tends to enhance a firm’s ability to source financing because of the legitimacy conveyed by the network. As much was experienced by Anthias Consulting, which found in its marketing network affiliation with Enterprising Women a pool of both business expertise and resources. Therefore, despite differences in contexts and details, the general legitimacy conveyed by networking aids in the SME’s access to financial, logistical, and knowledge resources. Conclusion Anthias Consulting Ltd. provided a good vehicle for analysing the implications of the networking activity on the management of small and medium scale businesses, with respect to strategic marketing and financial sourcing. There is a strong affirmation of the effectiveness of networking for and SME to become known, to benefit by word of mouth in order to gain clientele, and to obtain some much needed assistance from peers and colleagues in the matter of assuring potential customers of the competency of the new company. The network provides structural, relational, and usage dimensions to the marketing effort of SMEs as to constitute a strategic advantage available to them. Anthias has also shown that resorting to more than one network in one discipline greatly aids in the success of the SME. On the matter of finance, there is a slight discrepancy only in so far as the institutional structure is concerned. Overall, it may still be concluded that networks are helpful to SMEs in securing finance by conveying legitimacy to the small business. Wordcount = 3,000 excluding references, content page and title page References “Anthias Consulting Ltd.” Enterprising Women, 2011a. 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Accessed 16 June 2011 from http://siteresources.worldbank.org/EXTECAREGTOPPRVSECDEV/Resources/570954-1211578683837/Salinas_S&P_SME_CLOs_in_Europe_and_LA.pdf Stokes, D & Lomax, W 2002 “Taking control of word of mouth marketing: the case of an entrepreneurial hotelier,” Journal of Small Business and Enterprise Development, vol. 9, no. 4, pp. 349-357 Supplier Diversity Europe (SDE) 2009 “Spotlight on Small and Medium Enterprises: Anthias Consulting, Ltd.” Supplier Diversity Europe Newsletter, Jan/Feb 2009. Accessed 16 June 2011 from http://www.supplierdiversityeurope.eu/Documents/SDEuropeNewsletter_Jan-Feb_09.pdf Read More