Entrepreneurial Marketing for SMEs

Luca Cacciolatti, Soo Hee Lee

• Publisher: Palgrave Macmillan
• Year: 2015
• Print ISBN: 9781137532565
• eBook ISBN: 9781137532589
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Entrepreneurial Marketing for SMEs contextualizes the practice of marketing amongst SMEs, and critically discusses major issues of Entrepreneurial Marketing with a relevant and up-to-date academic body of knowledge.

1

Introduction

In your everyday life, you might have encountered products or services that were not provided by large corporations. While you might have purchased a well-known brand of soft drink from a small coffee shop, the shop might have been run by a family or by an entrepreneur. Likewise, you might have gone to a small bakery and have purchased some stone-baked bread. Again, this business was not run by a multinational, but by an entrepreneur or a family.

Also, the car or motorbike you drive, although produced and sold under a big brand name, is, in fact, produced by assembling lots of small mechanical parts that are often produced by small businesses. These small businesses often supply larger organisations.

In everyday life, the chances of interacting with small businesses are very high. Small businesses are generated by the inventiveness of people (the entrepreneurs) who have a particular ability to identify opportunities. These people are also particularly brave, in the sense that, although they are aware of the risks they might incur in starting and running a business, they are not afraid of taking risks.

Although the motivations that push entrepreneurs (and often their families) to embark on a business adventure there are many entrepreneurs that – with their brave actions – contribute to the wealth of local economies by providing chances for local employment. They also contribute to local life with the provision of important products and services, be it a mini-market, a corner shop, or a cleaning company. Some of these small businesses start as very tiny businesses and then expand and grow over the years to the size of large organisations. Many multinationals that operate on international markets nowadays started as small businesses 100 or 150 years ago.

Entrepreneurs not only contribute to the wealth of local economies, but from a sociological point of view, in some emerging economies (e.g., Brazil, Russia, India and China, or in the case – of other communist countries, like Cuba and Vietnam), entrepreneurs also play an important role determining social change, slowly contributing to the emergence of market economies as opposed to planned economies. They generate a shift in the image of entrepreneurship: repositioning small business owners by moving them from negative associations towards idols of success.

However, over 30 years of globalisation caused markets to become increasingly competitive – by increasing the difficulty of doing business successfully – but also opened markets to opportunities due to their increased fragmentation – allowing firms to specialise their offer in order to appeal to more and more different and demanding customers. Small businesses face the big challenge imposed by their limited size: a limitation in available resources..

In order to address the challenges of this new world, entrepreneurs and small business owners need a better understanding of their markets and of which customers purchase what product, where and at what price. Small businesses face an increasingly desperate need to engage with marketing, which can help them support their operations in the market in an efficient and effective way. Marketing is essential to small businesses in order to provide their customers and consumers with what they need and want. However, conducting marketing in small businesses is different than in larger organisations because multinationals do not have the constraints in terms of resources that small businesses have. Nevertheless, small businesses can capitalise on having the flexibility to adapt to changing market conditions and on their typical decision-making speed, which larger organisations, with more rigid hierarchical organisational structures, lack.

1.1   What is entrepreneurial marketing?

Small and Medium Sized Enterprises (SMEs) are more sensitive to changes in the environment than larger businesses. They have fewer resources to face economic downturns, but they also have a special flexibility in the way they operate, allowing them to take swift decisions when these are needed. They also have inner characteristics, such as management style, affecting how their operations are run, which is significantly different from how larger companies run their businesses.

A particularly interesting strand of academic literature on SMEs has been developing in the interface between marketing and entrepreneurship. While taking the unique nature of SMEs into consideration, researchers have been actively trying to understand how these characteristics relate to SME marketing practices. Entrepreneurial marketing is therefore a subject of increasing academic interest, particularly as opposed to marketing practices in larger businesses.

SMEs have a peculiar perception of the value of marketing, and this affects their strategic thinking in marketing, which is therefore affected by their unique nature. This makes their attitude towards marketing very different from larger organisations. Most SMEs do not have a formal marketing department; some SMEs do not even admit they do marketing. For some of them, marketing is a taboo subject, and they do not like the idea of being associated with the mass production coming from multinationals. SMEs are often proud that their products are homemade or manufactured in a small business.

After stating this, it should be noted it is also true that SMEs perception of the effectiveness of marketing, either consciously or unconsciously, will determine a more or less formalised development of their marketing strategy, and this will ultimately affect their marketing practices.

Carson et al.^[2] suggest that the small scale of SMEs determines their little impact on their environment, and they have very little power to modify environmental forces to their advantage. In economic terms, SMEs have to accept the industry’s imposed price, and they must accept the fact they have no real impact on the overall market. Furthermore, Hill ^[5] maintains SMEs are usually the weaker partner in a marketing channel relationship. This pushes them towards a type of marketing that will determine how SMEs perceive the value of marketing and how they should approach it.

Because of their small or medium size, along with the lack of formal hierarchical structures and the generalist small business owner’s know-how, some SMEs are not aware they are marketing practitioners. Their marketing is therefore unconsciously incorporated into their way of doing business ^[3]. And because of that, SMEs also have the tendency to focus on short-term goals rather than long-term objectives because of their limited time to dedicate to planning, their limited marketing and strategy expertise, and their lack of resources, due to resource constraints. Therefore, small business owners tend not to be ‘planners’ but ‘men of action’^[8].

An important characteristic of entrepreneurial marketing is the figure of the ‘entrepreneur’. S/he has a great ability to identify and exploit opportunities. Due to their unique cognitive abilities ^{[10, 11]}, entrepreneurs show idiosyncratic abilities and pursue patterns of opportunity identification ^[6]. Some authors ^[1] indicate that entrepreneurial opportunity recognition and business development are influenced by (1) entrepreneurial alertness, (2) information asymmetry and prior knowledge, (3) social networks, (4) personality traits, and (5) opportunity type.

The integration of the two disciplines of marketing and entrepreneurship is therefore critical to the marketing-entrepreneurship interface and to the development of entrepreneurial marketing as a subject area. Entrepreneurial marketing therefore represents an alternative marketing management approach under the specific conditions that characterise SMEs ^{[4, 7, 12, 13]}. As indicated by some researchers, ‘entrepreneurial marketing entails the proactive identification and exploitation of opportunities for acquiring and retaining profitable customers through innovative approaches to risk management, resource leveraging and value creation’. ^[9]

1.2   Reading guidelines

Before heading forward with the next chapters in the book, we decided to include a very short section giving some reading guidelines. This book is thought and designed for university researchers and doctoral students.

We are all different, and we all have different learning styles. Some of us tend to learn by imagery and visual stimulation; others are more inclined to learn better when the stimulation is auditory or sensorial. Some people are more analytical and need a certain level of abstraction, while other students need a very practical approach.

Although it is not possible to cover all learning styles in a book as such, it is nonetheless possible to give some suggestions on how to read this specific book.

The very first thing to do with the book is to look at the table of contents to familiarise yourself with the chapters of the book. This gives you an idea of how the book is structured, how many chapters it is made of, and what main topics are dealt with..

Once you are familiar with the book’s structure, we recommend looking at the topics dealt with in each chapter. You can find this in the table of contents (as subsections of each chapter).

We would recommend reading all the chapter sections in a chapter as if you were reading a post on a blog. The brevity of all sections should help you digest the content of the book better while speeding up your learning.

Although most of the chapters are written in a brief and accessible way, you will find that they mainly focus on theory.

References

[1]Ardichvili A, Cardozo R, Ray S. A theory of entrepreneurial opportunity identification and development. Journal of Business Venturing. 2003; Vol.18 (No. 1): pp. 105–23.

[2]Carson, Cromie S, McGowan P, Hill J. Marketing and Entrepreneurship in SME’s: An Innovative Approach. Englewood Cliffs, NJ: Prentice Hall; 1995.

[3]Carson D, Gilmore A. Marketing at the interface: not ‘what’ but ‘how’. Journal of Marketing Theory and Practice. 2000; Vol.8 (No. 2): pp. 1–7.

[4]Collinson E, Shaw E. Entrepreneurial marketing – a historical perspective on development and practice. Management Decision. 2001; Vol.39 (No. 9): pp. 761–6.

[5]Hill J. A multidimensional study of the key determinants of effective SME marketing activity: part 1. International Journal of Entrepreneurial Behaviours & Research. 2001; Vol. 7(No. 5): pp. 171–204.

[6]Holmen M, Magnusson M, McKelvey M. What are innovative opportunities? Industry and Innovation. 2007; Vol.14 (No. 1): pp. 27–46.

[7]Miles MP, Darroch J. Large firms, entrepreneurial marketing processes, and the cycle of competitive advantage. European Journal of Marketing. 2006; Vol.40 (No. 5/6): pp. 485–501.

[8]Moriarty J, Jones R, Rowley J, Kupiec-Teahan B. Marketing in small hotels: a qualitative study. Marketing Intelligence & Planning. 2008; Vol.26 (No. 3): pp. 293–315.

[9]Morris MH, Schindehutte M, LaForge RW. Entrepreneurial marketing: a construct for integrating emerging entrepreneurship and marketing perspectives. Journal of Marketing Theory and Practice. 2002: pp. 1–19.

[10]Shane S. A general theory of entrepreneurship: the individual-opportunity nexus. Northampton, MA: Edward Elgar; 2003.

[11]Shane S, Venkataraman S. The promise of entrepreneurship as a field of research. Academy of Management Review. 2000; Vol. 25 (No. 1): pp. 217–26.

[12]Shaw E. Marketing in the social enterprise context: is it entrepreneurial? Qualitative Market Research: An International Journal. 2004; Vol. 7 (No. 3): pp. 194–205.

[13]Stokes D. Entrepreneurial marketing: a conceptualisation from qualitative research. Qualitative Market Research: An International Journal. 2000; Vol. 3 (No. 1): pp. 47–54.

2

The Nature of the Small and Medium-Sized Enterprise

When we study small businesses we often wonder: how do we define small businesses? How small or big is a small business? And what size is a medium or large business? These are all legitimate questions that students reading about entrepreneurship may encounter.

SMEs (small and medium-sized enterprises) present differences with larger organisations. Although the most obvious distinction is size, this variable is not the only discriminant used to define what a small business is.

This chapter describes the main characteristics which governmental organisations use to define what SMEs are. Section 2.1 defines SMEs while presenting a taxonomy – i.e., a classification based on selective criteria – of small businesses.

As often happens in the biological world, small organisms or animals struggle for survival as fragile prey of bigger, stronger competitors. Nevertheless, over time, small animals have developed different strategies to grant the survival to their species. Likewise, SMEs often lack resources (e.g., financial and human...

Table of contents

• Cover
• Title
• 1  Introduction
• 2  The Nature of the Small and Medium-Sized Enterprise
• 3  Small Business Owners and Their Environment
• 4  Entrepreneurial Cognition and Learning
• 5  Growth Strategies within an SME Context
• 6  The Role of Structured Marketing Information in SMEs Decision-Making
• 7  Internationalisation Strategies
• 8  Value Propositions: How to Build SMEs Offering
• 9  Pricing and Distribution Decisions in a Context of Low Distribution Capacity
• 10  Building Brands in SMEs
• 11  Supply Chain Relationships Management: SMEs Partners
• Notes
• Bibliography
• Index