The Sustainable Marketing Concept in European SMEs

Edyta Rudawska, Edyta Rudawska

• Publisher: Emerald Publishing Limited
• Year: 2018
• ISBN:
  9781787540408
• Topic: Business
• Subtopic: Marketing
• Index: Business

The food and drink sector represents Europe's largest manufacturing industry, its largest employer and is a major player in the global economy. It also has one of the greatest environmental impacts. In order to maintain competitive advantage, SMEs need to address their environmental impact and integrate sustainability into their marketing strategies and operations.
The Sustainable Marketing Concept in European SMEs: Insights from the Food & Drink Industry brings together contributions from leading scholars to provide new knowledge and applications for the implementation of sustainable marketing orientation and sustainable marketing mix tools in SMEs operating in the industry. It will be the first publication focussing on the scope of sustainable marketing applications by SMEs providing comparison, data analysis and insights from Western Europe and Central - Eastern Europe.
The book is a result of an international cooperation undertaken by leading researchers from Poland, Croatia, the UK, Russia, Germany and Spain, all with many years of experience in issues related to marketing and sustainability.

PART I: THE THEORETICAL BASIS FOR THE DEVELOPMENT OF SUSTAINABILITY MARKETING CONCEPT IN SMEs

Chapter 1

Business Environment Challenges and Trends for Contemporary SMEs in Europe

Zhanna Belyaeva

Abstract

The volatile and ambiguous state of the global economy is changing prerequisites in the corporate environment paradigm. Contemporary small- and medium-sized businesses fill in the gaps in the value chains originally created by big businesses. Such a change in the global environment is calling for a completely new system of values bringing on new challenges for small- and medium-sized enterprises (SMEs). The smart solution to overcome the barriers might be found in the course of sustainable development. The idea of sustainable development of the world economy was originally developed by large corporations and governments of different countries based on scarcity and irresponsible use of natural resources. The corporate approach is to gain positive economic effect through implementation of large-scale projects to transform business models. The society, as the main recipient of the ‘products’ of business and state activities, represents its interests in a heterogeneous way; In fact, there is ample evidence this is due to a number of social, economic, political and cross-cultural factors. In correlation with the above-mentioned vectors of interests of global stakeholders, the implementation of sustainable development policies includes the development of new products; the reorganization of production, incentive and process assessment systems; as well as leading cross-functional organizational changes. Despite the commitment of senior management and institutional efforts to spread the concept of sustainable development via global corporations, practical cases are often characterized by organizational resistance and inertia. According to some authors, cultural, structural and routine communications – emerging at different corporate levels – become agents of influence on large, medium and small firms (Banerjee, 2008). Such a combination of economic and social processes forms a special environment for the development of contemporary SMEs in Europe. The chapter pinpoints the challenges and drivers for SMEs’ development in an ambiguous environment, as well as the prerequisites for the formation of sustainable development of the business as a state of art.

Keywords: Business trends; volatile environment; SMEs in Europe; sustainability

Context of SME Integration in the Global Business Environment

Current global economy shapes local sociocultural trends in applying new flexible drivers including digitalization and international knowledge transfer. Globalization stimulates the creation of a qualitatively new business environment, which pursues a better integration of small and medium businesses worldwide while stimulating structural consequences elsewhere. The modern digitalization of all business processes plays a special role in strengthening international cooperation in supply and services, which, on the one hand, allows more efficient coordination of research, marketing and production around the world, and, on the other hand, causes irreparable damage to thousands of intermediaries and representatives of SMEs. Almost instant communication allows for the trading of financial instruments 24 hours a day, and therefore more sensitive to return are the allocation of resources within firms, industries and countries.

The growth of global markets stimulates competition and forces governments to adopt market policies, both domestically and internationally. Modern technologies have significantly reduced the cost of information and opportunities for participation in the global economy. In fact, there is ample evidence that SMEs do not only thrive in today’s business environment, but their global presence is also being felt. An overview of the participation of SMEs in the global economy reveals at least three areas of activity: trade, innovation and services (Leitner, 2011; Naudé, 2010; Saleh & Ndubisi, 2006). The most frequently discussed topic in the international SME literature is their role as exporters from their national jurisdictions to foreign clients. The opportunities and challenges faced by SMEs in this role are well known. The second-most important issue in the literature is SMEs and innovation (including social innovation) and technology, especially SME service providers with larger multinational companies (MNCs) in local markets.

Some of the existing research literature, including Aris (2006), Blagov (2013), Hussain, Si, Xie and Wang (2010), Stefanovića, Miloševićb and Miletića (2009), Ritchie and Brindley (2005), highlight the various challenges faced by SMEs in the context of globalization due to recession, barriers from a global source, low productivity, unwillingness to pay more for inclusion into global value chains, lack of efficient management, poor funding, difficulties in accessing talents and technology, and administrative barriers. Another study by Naudé (2010) enlisted barriers to entrepreneurship, such as structural change and economic growth, income and wealth inequalities, welfare measures and poverty traps, along with market failures. In addition, SMEs are engaged in strengthening global problems, emerging ICT technologies and the production process, as well as increasing the cost of factors affecting export competitiveness. SMEs are divided into three different categories, depending on their capabilities and their success, passing through the challenges.

Another type of SME that aims to become internationally competitive one that is eager to invest in regionalization strategy (McMahon, 2001). These SMEs face barriers to entering the foreign market due to their limited production and lack of compliance with international standards. However, investment in human and social capital goes beyond the financial possibilities of such companies (Blagov, 2013). There are a bunch of companies enjoying governmental protection due to the innovativeness of their products and strategic positioning (Leitner, 2011). Although the roles and types of SMEs seem to be transparent, there are still different approaches to defining the size and legal frameworks, for what are referred to as SME in the global economy.

Big businesses and governments are still not aware of the growing role of SMEs that provide an overall sustainable model. The whole idea of sustainable development was based on the world’s big business at the very beginning, although the same was developed with the expansion of a multi-stakeholder approach supported by many scientists and practitioners. Sustainable development evolved from acknowledging social and environmental degradation causing economic malfunctioning of several countries, such that a message was formulated to build a ‘[…] development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (1987 Brundtland Report) towards a plan ‘to actively promote corporate responsibility and accountability on the basis of the Rio, including through comprehensive development and effective implementation of intergovernmental agreements and measures, international initiatives and public–private partnerships and relevant national regulations and the continuous improvement of corporate practices in all countries’ (2002 World Summit on Sustainable Development, Johannesburg).

The paradigm of sustainable development has emerged over the past two decades. In 2015, 17 sustainable UN goals were approved to be adopted by all organizations of the world economy, including small and medium businesses. As a result, the political, economic, social and environmental aspects of the development of the business environment has become the responsibility of international business leaders, as well as governments, while at the level of SMEs, adaptation of such tasks is not implemented effectively.

The nature of the business environment for modern SMEs globally is largely determined by local economic and global political situation, legal, sociocultural, technological, geographic environment, as well as institutional and information systems. In our opinion, the change in the support vector from start-ups to enterprises operating at the global level should significantly change the business environment. It should be borne in mind that only a minor percentage of small companies can grow into medium and large businesses. In most developed countries, the share of SMEs in the total number of enterprises is about 90%, and 60% of the labour force are co-created by these firms. It is important to understand that it is the existing SMEs that are interested in development who have already demonstrated their desire to the public that they need support.

Creating Shared Values and Diversity Challenges: Contemporary SMEs

The analysis of world practice makes it possible to distinguish several types of approaches to determining the status of SMEs, differing in their formal features and in the vector of their national support. As more and more SMEs are now struggling to survive due to the enormous pressure created by both globalization and the competition from giant multinational firms, it is important to distinguish the competitive advantages of small enterprises in alternative ways.

Krajnakova, Navikaite and Navickas (2015) outline the growing desire for compromise from SMEs as an evolving trend in national and international markets. Monitoring of modern methods reveals the management of customer satisfaction and the application of the stakeholder approach to the activities of SMEs in order to achieve competitive advantages. Customer satisfaction management is seen as the basis of the competitive strategy of many companies. Despite the traditional competitive advantages that are closely related to SMEs, such as company structure, culture, human resources, product/service development, a new type of customer satisfaction management should be developed. Attention to the problem is illustrated by a number of OECD studies on the specifics of the internationalization of SMEs and regular monitoring of the SME Policy Index.

A number of researchers in Western Europe pointed out to the development of e-commerce as a new gate to the world’s SMEs in connection with facilitating access to international markets (Mariussen & Ndlovu, 2012). Nevertheless, researchers from Eastern Europe and Asia note the insufficient use of information technologies as a serious threat for the development of SMEs (Janitaa & Chongb, 2013). This is explained by the different approach of governments in providing support to small- and medium-sized businesses, but not all countries are legally and ethically ready for digitalization of their business.

Another important gap lies in defining the concept of competitive advantage of SMEs. For example, the slowdown in economic growth in Russia in 2014–2015 and the introduction of trade sanctions negatively affected the SME economy in Eastern Europe. SMEs play a significant role in the social and economic development of the business environment of Eastern and Western Europe, but specific levers of influence and potential have not been fully disclosed up to date.

Flexible planning of measurable and direct costs for involvement in impact investing under the umbrella of corporate social responsibility (CSR) becomes another trend in the advantages of SMEs. Distance between consumers and an SME company is much less compared to large businesses, which allows the introduction of targeted programmes that create value for both business and society. In addition, the importance of green economic incentives is growing (Kärnä, Hansen & Juslin, 2001; Papadas, Avlonitisb & Carriganc, 2017). However, in this area too, the role of socio-ecological economic incentives for the relationship between social and financial indicators has not been comprehensively studied in the case of small- or medium-sized firms. Obviously, the ways of developing and measuring incentive mechanisms will be determined by country and industry specifics. At the same time, the formation of a progressive business environment depends on a qualitative monitoring of the results of economic incentives: what tools are the most effective and lead to the sustainable development of SMEs and industries in general are yet to be fully developed. The state budgets not always serve as a backup for new and innovative regulatory approaches, such as economic value incentives. For this reason, traditional management and control methods are most commonly used even today. At the same time, co-creation of social and ecological value brings a new wave of loyal customers. The ratio between the index of social progress and GDP per capita is non-linear; therefore, economic development itself cannot fully explain social progress and vice versa. As countries reach high levels of income, opportunities for further social progress resulting from economic development are ending, while the economic growth creates new social and environmental problems (Geels, McMeekin, Mylan & Southerton, 2015).

SMEs represent the main forces of socio-economic development and also numerous industries of any country with a market economy. It is a proven fact that SMEs are the major emerging force of developed economies; little has been published in the comparative forces of Central-Eastern and Western Europe. SMEs form the basis of economic development. Thus, CSR is a symbiosis of socially responsible actions and economic benefits for the company. The socially responsible strategy of a company includes economic, social and environmental tools, both internally and externally, to create long-term relationships with the stakeholders for sustainable development. Due to the...