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This paper is going to put forward and explore the discussion of market planning in SMEs and at what point, if at all, does a marketing plan become imperative for SMEs. Within the study of marketing and market planning for small businesses we must first acknowledge that marketing theory was first derived from the examination of large corporations (Freel, 2000; Carter and Jones-Evans, 2006; Brooksbank et al, 2004). Furthermore formal marketing strategies are considered essential in sustaining competitive advantage for any business (Johnson et al, 2008; Hogarth-Scott et al, 1996). Fuller (2002), Hill (2001) and Reijonen (2010) affirm that the need for, and the use of, formal marketing plans differ between SMEs and large corporations; thus needing an accurate definition of SMEs and their market approach. So, what can be classified as a SME and how can we explore their different market approaches? The European Commission (2008) defines SMEs as any firm employing fewer than 250 people and during the end of the twentieth century the study of formal marketing plans in SMEs have been in continual debate as to whether or not formal market planning is truly fundamental for success.
Bruno and Leidecker (1988) argue that without the appropriate approach to marketing and creating an operative marketing plan, SMEs are more prone to fail. In opposition Gilmore et al. (2001) believes that SMEs, because of their limited resources, finance and knowledge, are unable to use market planning efficiently and therefore unable to provide for changing customer needs (Carter and Evans; 2006). Studies show that the application of traditional marketing strategies to SMEs has proven to be unsuccessful because plans heavily rely on the marketing knowledge of the owner-manger (Wynarczyk et al., 1993; Hall 1995; Rosalind J and Rowley J, 2011). Simpson et al. (2006) found evidence that there is confirmation suggesting a direct correlation to business success and market planning for SMEs, however Hogarth-Scott et al., (1996) found that owner-managers do not have the appropriate skills to fulfill market planning productively. The aim of this paper is to bring together the variety of theories surrounding market planning that affect SMEs and attempts to shine light on the discussion of marketing as a strategy or tactic and market intelligence in accordance to the fundamental question of: when do marketing plans become truly vital for SMEs?
By glancing at the start-up stages of SMEs and the value of a marketing plan, when looking for external finances is crucial. As it is the fundamental step of any business outline, equity investors often look at this before considering any further interest into a potential investment (Mason and Stark, 2004; Mason and Harrison, 2002). Thus market planning for SMEs in this instance are likely to be of a much higher priority as any potential investor assumes risk when financing a business venture (Shepherd and Zacharakis, 1999). This creates a portrait that demonstrates knowledge of the target market and presents a new venture plan of how the owner-manger is going to engage in this market. However a marketing plan is not only used in terms of securing loans from external sources, which arguably may be a significant factor during business start-ups but not one that can be classed as key; Hill (2001) states that without the presence and indication of continuous dedication to market planning business angels and banks will deny to lend any financial aid. So, is the need for a marketing plan vital for SMEs after start-up and can there be a focused study towards SMEs into a subject field that was defined by Crosier (1975) in fifty singular definitions? Stokes (1997) stated that market planning and marketing was only an operation that larger firms concentrate on. Further research into literature has provided an insight into the discussion towards the exploration of marketing in regards to SMEs and throughout their tactical and strategic approaches.
So, how would tactical methods used by SMEs be directly lined with creating and applying a formal and detailed marketing plan? By examining Carsons's (1991) ideology; stating that basic marketing theory does not apply to SME's mainly because the time spent on recourses to market are ineffective and how in a fast-paced and changing atmosphere it is near impossible for an SME to generate such knowledge (Hall, 1995). Arguably the lack of market awareness and control heavily relies upon the small consumer base of the SMEs and knowledge of the owner-manager (Wynarczyk et al., 1993); this creates a problematic situation when the owner-manager tends to be a generalist rather than having any managerial and marketing experience or skills (Hogarth-Scott et al., 1996). In turn forming an unnecessary need for a formal marketing plan as they lack the market knowledge to create an appropriate outline. On the other hand Jain (1999) summarizes what a fundamental marketing plan must consist of and how it is applicable to any business situation. It must demonstrate, in relation to sustaining competitive advantage and a competent marketing strategy, how it should provide a detailed plan of an acceptable market offering. With this in mind what becomes of SMEs in a niche or local area where competition is weak or even non-existent where sustaining competitive advantage and market awareness is not essential?
Guest speaker Jennifer Coatesworth (2011), SME owner of 'Yummy Cupcake Company' declared that because there was a lack of direct competition in the local area, there was no need for a market plan at that point in time. Jennifer acknowledged the lack of competition and decided to focus on other aspects like gaining a larger consumer base; this refers to Simpson et al. (2006) where different market orientation is applicable in a variety of business conditions due to different dynamics; thus an atypical approach can be taken. However in Jain's (1999) philosophy it would have proven very difficult to devise a tactical approach for market entry without market planning or awareness. Conversely this method can be seen as an advantage when reviewing such factors involving influence of the owner-manager and informal systems of communication that heavily rely on networking and word of mouth even when no formal competition exists (Rosalind J and Rowley J, 2011).
Does this in fact suggest that SMEs or owner managers are unable to adequately design market plans or be effective planners (Greenley, 1988)? Fuller (1994) examined a model created by Carson (1990) to research five SME manufacturing firms in order to shine light upon market planning theory. If we look at the four-stage process of Carson's fifth model (Reactive, Tinker Marketing, Entrepreneurial Marketing and Proactive Marketing), specifically entrepreneurial marketing, the owner-manager gains knowledge of marketing as the firm progresses through the development process. Fuller's (1994) studies showed that none of the SMEs ever actually reached the final stage of development. This links with Reijonen's (2010) theory of SMEs and market orientation strategies, more specifically how universal market planning has to fit specific characteristics of marketing within SMEs in accordance to certain situations. Thus suggesting that the final stage of Carson's (1990) fifth model is inapplicable in terms owner-managers becoming specialized market planners in their industries. Furthermore, Lancaster and Waddelow's (1999) study of SME Senior-managers showed that owner-managers prefer not to make a formal marketing plan because their industries were too dynamic and that any plan formulated would not be applicable after half a fortnight. Liu (1995) suggests that large corporations undergo market planning more frequently and vigorously in comparison to SMEs. Does this imply that, if in fact we can attempt to generalize owner-managers, a formal marketing plan is completely irrelevant financially and in the short-term or long-term planning of an SME? I would suggest that even though the fourth stage of the process was not reached, firms actually did go through stages of interactive marketing as the SMEs evolved through their different growth stages.
Taking a more positivist approach to market planning Simpson et al. (2006) attempts to provide further insight onto testing the validity of market planning and applicability of different models concerning SMEs (Carson, 1990). His point of view with the support of Siu and Kirby (1998) was [counter-arguing (Gilmore's et al., 2001; Wynarczyk et al., 1993; Hall 1995; Stokes et al. 1997)] that basic marketing principles are applicable to SMEs as well as large corporations, needing only several adjustments to reduce risk and understand consumer needs, however the support from networking and word of mouth are in mutual agreement from both perspectives. Furthermore, that the nature of industries, growth stages of SMEs, diverse market offerings and varied management styles were all determining factors of a situation specific marketing practice. This applies when considering the different varieties of marketing involving interaction, network, transaction and relationship marketing (Coviello et al., 2002). Greenlay et al. (2004) proposes that through the pursuit of effective market planning, owner-managers are able to exploit market opportunities by being market orientated, having the willingness to learn, and taking on a innovative approach to marketing. Let's take for example Carl Haggensen and his wife who bought a coffee shop (J. Atkinson & Co.) situated in Lancaster, these two owner-managers took over and refurbished the entire idea and feel of the coffee shop. Throughout Carl's presentation he showed how his focus was kept on track by a constantly revamping and frequently updating his business plan that was heavily focused on market planning, networking and word of mouth however Carl being from a marketing background might show that his previous experiences gave him that edge over competitors. This links back with Simpson's et al. (2006) theory where accurate market planning can prove to be a positive resource in SME operations in a sense that it can be a determining factor of success in the market place, however some SMEs are 'Market Weak' because they have a poor idea of how to create a competent market offering through market planning. Referring back to Greenlay et al. (2002), he argues that these processes of tactical approaches to market are methods acquired from previous practices and learning on the job generates competitive advantage (Hill, 2001), creating a 'hands-on' and idiosyncratic approach to marketing. This was also supported by Smallbone et al. (1990) who believed that SMEs could only survive by adjusting to new conditions as a constant process of development. Does this mean that market planning would prove ineffective as they must adopt to an ever-changing plan to further be able to engage in developing opportunities (Greenlay et al., 2004)? Gilmore et al. (2001) described this process as "haphazard, informal, loose, unstructured, spontaneous and conforming to industry norms", nonetheless still a form of marketing within SMEs and their various characteristics.
Typically any small business takes a formal marketing approach as ineffective however I might add that the point in which market planning becomes beneficial is still heavily dependant on strength of competition, the industry it functions in and the available [yet limited] market knowledge. Kingston University underwent a study where small business owners associate marketing with a focus on promotion and selling (consumer orientated) because their lack of market knowledge did not enable them to plan effectively (previously noted by Lancaster and Waddelow, Fuller). Thus it may be a better utilization of time, as stated by Jennifer, to focus less on market planning, however with the growth of SMEs in various markets and increasing forms of competition and market change provides for a higher need for a formal marketing plan. Also with the increasing study and research of formal market planning within SMEs gives way to more knowledge of the different approaches owner-managers can use in the field in order to confidently compete in any given market situation.
The question at hand needs more investigation and the theories used within this paper are from a variety of different market situations and were complied during different economic situations thus creating an unavoidable grey-area. Research carried out should be more specific when outlining certain sectors or business-owners and their approach to market, SME markets should be segmented in specific industries in an attempt to create more trends where competition, economic change and ways to market can be more applicable. However by overlooking the various theories examined in this essay the fatal point is that we cannot over-generalize small business owners in an attempt to create an explanation or response to the question at hand and that dynamic markets might prove to be difficult to study in accordance to finding clarification. As shown at the beginning of this discussion the only real need for a formal marketing plan is when SMEs are looking for funding to either start-up or expand, because as research shows some business owners are able to function competitively and successfully with and some without market planning by taking specified approaches relied upon various characteristics of owner-managers and industrial situations.
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