Evaluating the Marketing Capability of SMEs - Case Study Example

Evaluating the Marketing Capability of SMEs in UK Using MarKit Diagnostic Analysis Table of Contents Table of Contents 2 Introduction 3 2.Critical Success Factors in Marketing in SMEs 4 3.Showcasing the key diagnostic audit tools available to benchmark marketing capability of SMEs 5 4.Evidence of understanding of benchmark marketing capability 5 5.Application of actual audits/tools that are currently available to businesses 6 6.Conclusion and Recommendation 7 Reference List 9 1. Introduction The growing discipline of entrepreneurial marketing is quite varied from the mainstream marketing approaches by combining the best-practices of marketing and entrepreneurship in the case of SMEs mostly. This synergistic approach is turning advantageous to small-firms. Mostly applied to turbulent situations, the approach of entrepreneurial marketing still has a limited reach. However, it could be applied to wide range of firms, through strategic orientation of market and entrepreneurial orientation (Bhuian, Menguc and Bell, 2005; Webb, et al., 2011; Gilmore, 2010). In the light of literature survey, the essay would elucidate on the concepts of Entrepreneurial Marketing and the benefits for SMEs. Using a case study analysis, the essay would explain the need for benchmarking entrepreneurial marketing capability for SME through marketing audits. The concept of entrepreneurial marketing is more suited to dynamic environments, thought to improve the performance of SMEs. With a loose construct to this belief, it is sometimes confusing to judge the interrelationship on generalisations and applicability of both identified disciplines. The strategy remains on how this combined form of marketing can help small businesses and SME compete in challenging environments. This leads us to a variety of factor identification, such as, strategy, tactics competitive advantage, customer value (Duus, 1997; Morris, Schindehutte and LaForge, 2002; Bäckbrö and Nyström, 2006; Miles and Darroch, 2006; Webb, et al., 2011), effects on performance, entrepreneurial trait, word-of-mouth, stress management, personal networks and implementation (Hill and Wright, 2000; Collinson and Shaw, 2001; Bjerke and Hultman, 2002; Carson, 2010, Shaw, 2004). The blended value proposition of entrepreneurship and marketing trying to merge concepts has led to intricacies and varied interpretations (Morris, Schindehutte and LaForge, 2002). In the absence of a universal concept or definition, it presents both an opportunity and challenge for research in this direction. The entire section has been divided into two broad sections. In the first section, the factors related to success entrepreneurial marketing would be identified through an intensive literature survey. On the basis of the research problem identified, the next section of the essay will deal with evaluating the marketing audit tool to assess the success of SMEs in the UK, chosen for the purpose of the study. 2. Critical Success Factors in Marketing in SMEs The concept could be broadly approached from two directions, strategy and tactics (Bjerke and Hultman, 2002; Jones and Rowley, 2011). That is to say, Strategy relates to a firm’s competitiveness towards entrepreneurial or conventional firms in order to achieve an advantage on the basis of customer value. On the other hand, tactics deals with the design and implementation of the conceived entrepreneurial marketing approach. It also refers to the psychological traits of the entrepreneur to bear stress and utilise their personal networks and connections, among other characteristics (Bjerke and Hultman, 2002). To sum up, the concept encompasses both orientation and interaction for a firm pursuing new opportunities in a market place and renewing existing operations to add more value as per customer needs. It specifically denotes a marketing approach that is customer and competitor oriented, coordinated, based-on intelligence and distributive, and proactive the processes of innovation and risky ventures (Keefe, 2004). A longitudinal study on small firms in Belfast indicated marketing in case of small firms is considered to be peripheral and entrepreneurs are not also receptive to marketing, unless expansion, profit and revenue level-off. It is mostly found that marketing in the case of small business is selling, advertising and promotion (Gotteland and Boule, 2006; Schindehutte, et al., 2008; Jones and Rowley, 2011). For a resource-based firm, internal capabilities and resources are determinants of competitive edge. Using rare and un-substitutable resources and capabilities, proper marketing planning and marketing auditing determine the efficiency of businesses, even at the time of economic recessions (Loya, 2011). This, points towards adoption of a robust marketing audit for the assessment of marketing observations and operations, since marketing effectiveness is the fundamental dimension for goal attainment. Prescriptive approach to diagnose relates to a codified body of knowledge concerning organizational problems. A very good example of such a concept is the diagnostic self-assessment (Biazzo and Bernardi, 2003). The relationship between marketing and entrepreneurship has an effect on the performance of small firms and small businesses. It now becomes essential to analyse the practice in details. Using secondary data from pre-applied test results, the study applies the approaches of diagnostic audit tools to ascertain the marketing capabilities of a representative SME. 3. Showcasing the key diagnostic audit tools available to benchmark marketing capability of SMEs Small and medium scale enterprises account for 90 per cent of global enterprises and 50-60% of employment, 60% of employment in developing countries, contributing substantially to national and regional economic development and gross domestic product growth (Raynard and Forstater, 2002; Morsing and Perrini, 2009). Previous longitudinal research indicated that causal processes, other than organizational culture, training, team-work, communications and change-management are responsible for success in business. Again, the general trend of benchmarking SMEs suggests stages of planning, analysis, implementation and review, to be the usual trend. It has also extended to cultural aspects, such as leadership, people management and other critical assets, bearing in mind that SMEs are very different form the industries (Gray, Saunders and Goregaokar, 2012). The success factors of Entrepreneurial Orientation (EO), Learning orientation (LO), Entrepreneurial Learning (EL) have been found to be effective in business through a study involving 27 UK firms (Sullivan, 2000). Again, the firm-based factors and its organizational features, of Age, Sectors/Markets, Size, Legal Entity (Storey, 1994; Bruder, et al., 1992; Holmes, Hunt and Stone, 2010) and Business strategies of Finance, Market Orientation, Management Practices, Network and Social Capital determine success of SMEs. The structural dimension of monitoring, tailoring and offering solution, Relational dimension of ties, intensity and reciprocation, Cognitive dimension sharing tactics and knowledge impart the entrepreneurial proactiveness (Burt, 1992; Nahapiet and Ghosal, 1998; De Carolis, Litzky and Eddleston, 2009). 4. Evidence of understanding of benchmark marketing capability In analysing a effective marketing capability, the MarKit Marketing capability audit tool helps in identifying the internal/micro-environmental and the external /macro-environmental factors for critical success of small businesses. Keeping customer value at the heart of the analysis, the perceived benefits are ascertained to be positive or negative. The positive benefits are related to product benefits, service benefits, relational benefits, image benefits. The negative benefits include monetary costs, time costs, energy costs and psychological costs. Through a comprehensive analysis of the previous studies, the current research provides a research design to evaluate the identified success factors for SMWs in the UK. A set of six consecutive Focus Group Discussions in this exploratory research were carried out with participants from selected commercial sectors and geographies in the UK, a wide range of views were investigated, indicating that the entrepreneurial attitudes and behaviour is contextual, flexible and dynamic. A questionnaire survey was deployed to collect background information on the SMEs, on the basis of the literature survey. Other than demographic data, 13 factual questions were designed for data collection. The three-stage research design began with the instrument design, data gathering and validation of the core propositions, which emerged in the focus groups through an online questionnaire survey. Of the total of 1,664 questionnaires that were returned, 1,600 questionnaires contained appropriate responses. 80% or more of them were answered in consideration to the critical questions. The selection of the sector-wise and representative sample, it was found that 36% of the SMEs in UK belong to the commercial sector (Gray, Saunders and Goregaokar, 2012). The members elected for survey were the Members of selected Chambers of Commerce in SE, Midlands and northern part of England, including the other employer groups, such as Directors of Institutes (36%). The Directories of small businesses (23%) were considered and the existing SME contacts (5%) were contacted (Gray, Saunders and Goregaokar, 2012). The demographic data was collected from the UK Department of Business Innovation and Skills (2011). 5. Application of actual audits/tools that are currently available to businesses The external/macro factors in a MarKit analysis, understands customer needs, developing and maintaining relationships, understanding market condition, understanding the competition, understanding targeting and positioning, sales effectiveness and effective Networking. The internal/micro factors involve analysis of, understanding the planning process, understanding integrated marketing communications, understanding the marketing competencies, understanding of the evaluation and control systems, understanding product development capabilities and displaying a strategic vision and human resource development for Marketing. The critical success factors have been analysed to report as below (Gray, Saunders and Goregaokar, 2012): Year-on-year success: On the basis of the outputs of the study, applying the audit kits, it was found that SMEs (with five or more employees) consider year-on-year success as growth in terms of greater personal reputation, enhanced quality of life, more autonomy and personal satisfactions. Success for them does not mean growing fast, but gradually accruing revenues to maintain cash flow and create shareholder value. Finance – The major source of finance for SMEs come from personal and family savings, bank loan, revenue from other sources and remortgage of personal property. Nearly 42 % of the SMEs have agreed to use more than one sources of finance for their businesses. Cash flow and Liquidity – 95% of SMEs consider success to be dependent on future and managing for cash flow and liquidity, other than managing people and sales. Social Capital - 94% of SMEs consider direct referrals to be of least importance, while 67% considering them essential and 26% considering it extremely important. Social media is also very important in success, through channels of, LinkedIn, Twitter, Facebook, online blogging etc. Entrepreneurial Orientation - SMEs significantly relate the success of their businesses to being competitively aggressive, proactive in the market, risk taking started trading, their location and age. Being open minded or open to hearing feedbacks at all times and taking failure as a part of a learning process also help in succeeding. Learning orientation – The component of learning motivation in entrepreneurship is related to dedication to learning, a shared vision, open mindedness and approach to learning from crises and failure. Purchasing external consultancy and advice - 77% of SMEs invest on advice/consultancy regarding having a website, along with strategies of managing cash flow and liquidity, future planning for business, advertising and sales. Outsourcing and Exporting - According to the survey, 48% of SMEs in UK outsource and export and only 7% of them have a planning to do so in the future. The survey also revealed that 38% of SMEs consider outsourcing to be of least importance to the continuing success in business and 37% of SMEs currently export outside the UK. 6. Conclusion and Recommendation An analytical study among representative samples of SMEs in the UK have revealed that a diagnostic auditing of micro and macro environmental factors for assessing customer value in business are determined mostly by entrepreneurial motivation, such as open-mindedness and learning about new possibilities, not only from personal contacts but also through other networks that triggers critical success in their businesses. Reference List Bäckbrö, J. and Nyström, H., 2006. Entrepreneurial marketing: Innovative value creation. [pdf] Jönköping University. Available at: [Accessed 27 January 2015] Bhuian, S.N., Menguc, B. and Bell, S.J., 2005. Just entrepreneurial enough: the moderating effect of entrepreneurship on the relationship between market orientation and performance. Journal of Business Research, 58(1), pp.9-17. Bjerke, B. and Hultman, C.M., 2002. Entrepreneurial marketing: The growth of small firms economic era. 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Reflections on methodologies for research at the marketing/entrepreneurship interface. Journal of Research in Marketing and Entrepreneurship, 12(1), pp. 11–20. Gray, D. E., Saunders, M. N., and Goregaokar, H., 2012. Success in challenging times: Key lessons for UK SMEs. [pdf] University of Surrey. Available at :< https://www.surrey.ac.uk/sbs/files/Success_in_Challenging_Times_Full_Findings.pdf> [Accessed 27 January 2015]. Hill, J. and Wright, L.T., 2000. Defining the scope of entrepreneurial marketing: A qualitative approach. Journal of Enterprising Culture, 8(1), pp.23-46. Holmes, P., Hunt, A. and Stone, I., 2010. An analysis of new firm survival using a hazard function. Applied Economics, 42, pp.185-195. Miles, M.P. and Darroch, J., 2008. A commentary on current research at the marketing and entrepreneurship interface. Journal of Small Business Management, 46(1), pp.46-49. Morris, M.H., Schindehutte, M. and LaForge, R.W., 2002. 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