Megha 1

FAMILY RUN SMEs IN NEPAL AND THEIR APPROACH TO MARKETING
By
MEGHA SANGHAI
2007
A Dissertation presented in part consideration for the degree of MA Marketing
ABSTRACT
This exploratory research aims to study the role of marketing and its relevance in small and medium sized family businesses in Nepal by comparing it to the combined review of authors and academicians in the field of SME/ entrepreneurial marketing. Although marketing is a key factor in the survival and development of business ventures, SMEs in Nepal cannot do conventional marketing because of the limitations of resources which are inherent to Nepalese SMEs and also because business owner/ managers in Nepal behave and think differently from conventional marketing decision-making practices that take place in large enterprises. In this context the discussion focuses on the characteristics of the Nepalese SMEs and how they have an impact upon the marketing characteristic within their firm. The key findings with respect to marketing competency in Nepalese SMEs and to what extent formal marketing planning is practiced in these enterprises are analyzed. An examination of eight key marketing approaches indicates that SME/ entrepreneurial marketing differ from traditional marketing theory. Family run SMEs in Nepal tends to be customer-oriented, driven by the needs and wants of their customer. They target markets through bottom-up approach where they rely on customer recommendations. Even though they unconsciously follow the marketing mix, they prefer interactive marketing methods. The prefer gathering information through networking. These approaches play to their strengths and represent marketing that is more appropriate in their contexts.
ACKNOWLEDGEMENT
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I thank God and my parents for helping me through this dissertation by showing me the way, no matter how difficult the time was and always being very supportive of all my decisions.
I would like to express my sincere appreciation to my supervisor, Dr. Deborah Roberts, for guiding me throughout my dissertation and meeting me whenever I wanted help. Without her help, I wouldnt have managed to complete my dissertation with this ease. Thank you, Deborah.
Also Dr. Hannah Noke for guiding my work and helping me figure out the solutions for all the problems.
My sincere gratitude to all the interviewees for their invaluable time, acknowledging that, this study would not have been possible without their assistance and support.
Finally, special thanks to all my friends for their constant support and encouragement, and making this year in Nottingham memorable.
TABLE OF CONTENTS
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ABSTRACT ACKNOWLEDGEMENT LIST OF FIGURES AND TABLES Chapter One INTRODUCTION
Page 1 Page 2 Page 6 Page 7
1.1 Background of the Study .7 1.2 Research Objectives 9 1.3 Structure of the Dissertation ..10 Chapter Two - LITERATURE REVIEW Page 12
2.1 Introduction ...12 2.2 Defining a SME .12 2.3 Defining Family Business .13 2.4 Difference Between Family Business and a Non-Family business ...15 2.5 Defining Marketing ...17 2.5.1 Marketing as a Philosophy ...18 2.6 Marketing in SMEs ...18 2.6.1 Why is Marketing Different for SMEs .19 2.7 Marketing Characteristics of Small Firms 21 2.7.1 2.7.2 Qualitative Attributes ..21 Marketing Constraints on Small Firms ...22
2.8 Marketing and Entrepreneurship Interface 23 2.8.1 2.8.2 Importance of Marketing .23 Organisational Development and the Role of Marketing ....24
2.9 SME/ Entrepreneurial Approaches to Marketing ..26
2.9.1 2.9.2 2.9.3
Customer-Orientation Vs. Innovative-Orientation ..27 Top-down Vs. Bottom-up Strategy..29 Product, Price, Promotion and Place Vs. Interactive and Wordof-Mouth Marketing 30
2.9.4 2.9.5 2.9.6 2.9.7 2.9.8 2.10 2.11 2.12
Market Research Vs. Networking ...31 The Sales Orientation ..34 Marketing Planning .35 Personal Contact Marketing ....36 Marketing Decision-Making ...36
The Holistic Model of SME Marketing ..37 Problems with the Approaches 39 Chapter Summary 42 Page 45
Chapter Three METHODOLOGY
3.1 Introduction ...45 3.2 Research Objective and Question .45 3.3 Research Method ...47 3.3.1 3.3.2 Qualitative Vs. Quantitative ....47 Interview ..48
3.4 Stages of Conducting the Research ...51 3.5 Data Analysis 57 3.6 Chapter Summary ..58 Chapter Four - FINDINGS AND ANALYSIS Page 59
4.1 Introduction ...59 4.2 Findings and Analysis ...59 4.2.1 Approach A Customer-Orientation Vs. Innovation-Orientation
...60 4.2.2 4.2.3 Approach B Top-Down Vs. Bottom-Up Strategy 61 Approach C - Product, Price, Promotion and Place Vs. Interactive and Word-of-Mouth Marketing .63 4.2.4 4.2.5 4.2.6 4.2.7 4.2.8 Approach D Market Research Vs. Networking ...66 Approach E Sales-Oriented ..68 Approach F - Marketing Planning ...70 Approach G Personal Contact Marketing 73 Approach H Marketing Decision-Making 74
4.3 Analysis Grid .79 4.4 Additional Findings ...80 4.5 The New Typology 84 4.6 Chapter Summary ..85 Chapter Five - RECOMMENDATIONS AND CONCLUSION Page 86
5.1 Introduction ...86 5.2 Recommendation for Researchers/ Academicians and Practioneers 87 5.3 Recommendation for Small and Medium Family Businesses in Nepal 88 5.4 Limitations 90 5.5 Conclusion 91 REFERENCES APPENDIX Interview Questionnaire Page 93 Page 108
LIST OF FIGURES AND TABLES
Figure 1: Related Academic Fields.10 Figure 2: Holistic Model of SME Marketing .37 Table 1: Proposed Differences between Family-Owned and Managed Firms and NonFamily Controlled Firms .17 Table 2: SME/ Entrepreneurial Marketing Vs. Traditional Marketing ..27 Table 3: Entrepreneurial Marketing Process Compared to Traditional Marketing Concepts ..42 Table 4: List of Interviewees ..52 Table 5: Profile of the Interviewees ...53 Table 6: Approaches of Marketing .57 Table 7: Findings from Approach A ...60 Table 8: Findings from Approach B ...61 Table 9: Findings from Approach C ...63 Table 10: Findings from Approach D ....66 Table 11: Findings from Approach E .....68 Table 12: Findings from Approach F .....70 Table 13: Time Spent on Four Factors ...71 Table 14: Findings from Approach G ....73 Table 15: Findings from Approach H ....74 Table 16: Frequency of Meeting for Marketing Decision-Making 75 Table 17: Analysis Grid .....79 Table 18: The New Typology for SME/ Entrepreneurial Marketing .84
Chapter 1 INTRODUCTION
1.1 Background of the Study
This is an exploratory study, which aims to study the small and medium family businesses in Nepal with respect to their marketing strategies and approaches.
Small-to-medium sized enterprises may be defined in various ways but research findings (Brock and Evans, 1986) generally conclude that small businesses make major contribution to the economic development and employment of a country. Millions of small operations are responsible for generating more than 90% of the GDP of not only individual countries but also the planet as a whole (Peter Cochrane, 2006). Whats more important is that the majority of these smaller firms remain privately owned. Also they are often family controlled and managed (Wang and Poutziouris, 2004). Various other authors and researchers have supported Wang and Poutziouris (2004) in their view that the family business sector is estimated to account for about 60 per cent-75 per cent of all businesses and to a large extent contribute to wealth creation, job generation and national competitiveness.
A family business globally, represents the most significant form of company ownership and is by far the largest employer group (Department of Industry, Science & Technology, 1995; Lank, 1995). A reason for a lack of research in the family business field could be because of the lack of a tight definition of what constitutes the family 8
business (Wortman, 1995). Liz (1995) proposed a definition of a family business that covered the three main issues of the family business, namely extent of ownership/ management, degree of family involvement and the availability of family members for generational transfer - a business firm may be considered a family business to the extent that its ownership and management are concentrated within a family unit and to the extent its members strive to achieve and/or maintain intra-organizational familybased relatedness.
All firms must be involved in some aspect of marketing, as all firms need customers. But how does a small family firm get involved in marketing? Marketing may be inborn or spontaneous but only when a firm/enterprise adopts certain aspects of marketing functions will they continue to exist and grow. But the question is why small and medium firms are not very understanding of their marketing functions, why dont they give it the same level (if not more) of importance as other functions like finance and accounting. What are the different characteristics of small firms that influence the marketing undertaken by them in various stages of development? (Carson, 2001)
Even though the basic marketing principles are universally and equally valuable to both large and small and medium firm businesses, academicians and researchers have addressed the marketing/ entrepreneurship interface only recently (Davis et al., 1985). Marketing in the small and medium sized enterprises has been a debatable issue among both academics and practitioners for over two decades (Brodie et al., 1997, Gilmore et al., 2001 and Cromie, 1990). Marketing theory development in SMEs has been somewhat limited and often relies on the application of classical marketing models used in large businesses to smaller businesses (Chaston and Mangles, 2002). The
development of theories to explain the behaviour of SMEs towards marketing has generally been qualitative or descriptive (Carson, 1990) and only a few have been thoroughly tested in practice. Cannon (1991) points out that due to the research into marketing in small business having increased, the empirical evidence has been generated in an ad hoc manner which has led to an absence of a systematic approach to the subject (Siu and Kirby, 1998).
1.2 Research Objectives
Entrepreneurship, entrepreneurs and SMEs are a growing phenomenon in Nepal. In the past years we have seen researchers have given a lot of attention to the research and development in this field in the western countries and a few in Asia, but there does not seem to be too many authors and researchers that have contributed to the marketing aspect of an entrepreneur and SMEs in Nepal. There hasnt been significant research work examining the nature of marketing in the field of SMEs (Styles and Seymour, 2005) and family businesses in Nepal.
The review combines literature of related academic fields. This figure depicts the overlap of 4 distinct research sources (Neubauer and Lank 1998).
Figure 1: Related Academic Fields
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Entrepreneurship Ownermanaged Business
Small and MediumSized firms
Family Business
1.3 Structure of the Dissertation
The Structure of this dissertation is as follows.
Chapter 2 contains the review of various authors in the field, covering diverse literature in the area of entrepreneurial and SME marketing, including the marketing and entrepreneurship interface, SMEs approach to marketing and how SMEs define marketing.
Chapter 3 identifies the research objectives and questions and also describes the methodology employed in this research, which guides the data collection and analysis.
Chapter 4 explores the perspectives of diverse family business owners of traditional marketing and entrepreneurial marketing. Findings from the interviews are quoted and compared. In this chapter the analysis of the findings with respect to theories in chapter 2, literature review is also discussed.
Chapter 5 provides recommendation to the small and medium family businesses in
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Nepal based on the findings and the opportunities. This chapter also states the limitations of the study. In the end it concludes the entire project and summarizes the entire research.
Chapter 2
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LITERATURE REVIEW
2.1 Introduction
In Bruno and Leideckers (1998) paper there is evidence that small and medium businesses fail because of lack of marketing or poor marketing practices including planning and implementation. With the evolving market needs, firms need to adapt themselves to the changing environment and customer needs, marketing helps facilitate the process (Carson, 1993).
The focus of the review is to explore the difference in traditional marketing and marketing practices of SMEs and entrepreneurs from the viewpoint of eminent authors and researchers.
2.2 Defining Small-to-Medium-size-Enterprises
No one definition defines a SME completely. Different government agencies have different requirements to define a SME. McMahon et.al. (1993) Referred to defining small business as a vexing and enduring difficulty and went on to indicate, Small enterprises are easier to describe than to define in precise terms. In other words, you will know one when you see one. What small enterprises in fact have in common, and which sets them apart from large enterprises, are other less tangible attributes that are more difficult or even impossible to measure (p.9). They have summarized a common view that small firms are best identified by their inherent characteristics. Baker (1999)
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uses the term SME as the definition itself, which is small-to-medium-size-enterprise.
Small and medium-sized enterprises (SMEs), however they are defined are the lifeblood of most economies. SMEs make a major contribution to economic activity and employment in market economies (Wang & Poutziouris, 2004). On an average, they represent over 90% of enterprises and accounts for 50-60% of employment at a national level. SMEs are important in supporting economic growth and livelihoods in developing countries, because they tend to use more labor-intensive production processes than large enterprises, boosting employment and promoting entrepreneurship (Luetkenhorst, 2004). It is therefore obvious that majority of smaller firms remains privately owned, and is often family controlled (Wang & Poutziouris, 2004).
2.3 Defining Family Business
...throughout our economic history no institution has driven economic development the way the family-based enterprise has (Neubauer and Lank, 1998 p. xiii). Whether utilizing a broad or narrow definition of family business, it is clear that family businesses comprise a very significant proportion of business throughout the world. Family businesses can range in size from a small corner store to a large multinational corporation (Birley and Godfrey, 1999).
The application of a broad definition of family business in the United States resulted in approximately 92 per cent of American businesses being classified as family businesses. These businesses accounted for 50 per cent of national GDP and employed 59 per cent of the workforce (Shanker and Astrachan, 1996). According to another US
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study a family business owner-manager resides in approximately one out of every ten American households (Heck and Trent, 2002).
It is generally accepted that a family's involvement in the business makes the family business unique; but the literature continues to have difficulty defining the family business (Chua et.al., 1999). Surveys done by the Australian Family and Private Business in 1997 and 2003 provide two different definitions. In 1997, the survey classified a business as a family business when any one or more of the four following criteria were met:
More than 50 per cent of the ownership was held by a single family; More than 50 per cent of the ownership was held by more than one family; A single family group effectively controlled the business; or The majority of senior management was drawn from the same family.
Whereas in the 2003 survey, they used a self-identification method, asking businesses to nominate whether they thought they were a family or a non-family business (Smyrnios et al., 2003).
Neubauer and Lank, 1998 define a family enterprise as a proprietorship, partnership, corporation or any form of business association where the voting control is in the hands of a particular family. Litz (1995, p. 103) defined family business as a business firm may be considered a family business to the extent that its ownership and management are concentrated within a family unit and to the extent its members strive to achieve and/or maintain intra-organizational family-based relatedness. This
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definition incorporated the three broad issues: the extent of ownership or management, the degree of family involvement and the availability of family members for generational transfer (Smyrnios et al., 1998).
2.4 Differences between Family Business and Non-Family Business
How family firms differ from professionally managed firms has been a key concern of numerous studies. Some argue there are no significant differences (Daily & Thompson, 1994), whereas others have found that family firms differ from non-family firms in certain key areas. For example, Dreux (1990) and Chami (1998) argue that family enterprises are complex entities because of their administrative and governance systems, which stem from the business and family systems. Moreover, family and nonfamily firms have been found to differ with respect to patterns of influence, organizational climate, and organizational processes (File, Prince, & Rankin, 1994). In addition, family firms have been determined to be more stable and conservative (Donckels & Frhlich, 1991); show slower growth and less participation in global markets (Gallo, 1993); but tend to have a long-term commitment horizon (Harris, Martinez, & Ward, 1994).
As the importance of family business has become more recognized, Wortman, (1994) and Brockhaus, (1994) have both called for rigorous investigations that consider issues beyond succession, which has captivated most of the research interest. It does not appear that there have been attempts to determine whether family and non-family businesses differ in their processes of innovation. Daily and Dollinger (1992) found that in family-run firms, leaders are focused on family-centered issues for e.g. in a firm
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where there are five brothers (joint family) handling the business and all of them are owners, they tend to be biased towards their son to handle a specific project instead of giving it to a manager who actually deserves it. In contrast, other research suggests that because of their private ownership, family firms can take unusual market risks that publicly held companies are unable to take. As such, this study aims to identify the processes of innovation between family and non-family enterprises (Tanewski et al, 2003).
Researchers in family business believe that family influence makes a family business distinct from a non-family one. To determine if this is so, family business research needs to identify the nature of family firms distinctions, if any, and determine if and how these distinctions result from family involvement (Chrisman et al, 2005).
Majority of family businesses are small-to-medium in size and entrepreneurial hence we look at the literature of SME and entrepreneurship.
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Table 1 Proposed Differences between Family-Owned and Managed Firms and NonFamily Controlled Firms
Family Owned Managed Family members in managerial positions have lifetime and personal stake in firm Family members in managerial position may be with firm entire career Failure of the business had dramatic personal and career implications for family members, especially those in senior management position Likelihood of family members in managerial position being terminated in low Personal gain results from a sense of pride in organizations growth, success, job creation and family wealth creation Organizational performance tends to correlated with managerial compensation be Organizational performance tends to be less directly correlated with what a particular manger earns Decision-making is often more participative and term-based Internal control system tend to be more formalized The manager is accountable to stockholders Not Family Controlled
Managers interest in firm is limited more so to specifics of employment contract Managers have seldom remain with one firm for entire career Failure of business has relatively less personal impact on the manger Likelihood of a manager being terminated or hi/her position eliminated is greater Personal gain results from advancement, promotion and increased compensation
Decision-making tends to be more centralised, although this may lessen across generations Internal control system tend to be more informal Family member mangers are accountable to self, family
Morris et al, 1997, p.388 2.5 Defining Marketing
Some of the standard definitions of marketing by CIM and AAM are, the management process responsible for identifying, anticipating and satisfying customer requirements profitably, Chartered Institute of Marketing (UK). American Association of Marketing has two definitions of marketing, first, as an organizational function and a set of processes for creating; communicating and delivering value to customers and for
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managing in ways that benefit the organization and its stakeholders. Second, marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.
The three definitions suggest an innovative and operational approach to marketing that can be interpreted in terms of the activities that larger firms and organizations carry out when practicing marketing.
2.5.1 Marketing as a Philosophy
According to the marketing concept, marketing as a philosophy means that, the firm should base all its activities on the needs and wants of customers in selected target markets (Gronroos, 1989).
2.6 Marketing in SMEs
According to Padmore et.al. (2006), there is no definition of marketing for SMEs that can be readily found in the literature. According to Stokes, (2000) SMEs and entrepreneurs are less aware of the other, theoretical and strategic meanings of the term marketing.
Stokes (2000) conducted an interview on forty business owners and the report suggested that most of them connected marketing with selling and promotions only. The business owners gave some spontaneous definitions of marketing, which focused
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on customer purchasing and promotions. Identifying customer needs, and other nonpromotional aspects of marketing such as product development, pricing and distribution, were mostly ignored. Many owners suggested that their business was dependent on word-of-mouth recommendations and therefore 'they did not have to do any marketing' Stokes (2000).
Stokes (2000) went on to define marketing in terms of tactics to attract new business. In other words marketing methods such as product development, pricing, advertising and selection of distribution channel which helps implement strategy.
2.6.1 Why is Marketing Different for SMEs
There are two concepts to marketing; one is the traditional concept as is presented in marketing textbooks such as Kotler (1997) and marketing as practiced successfully by entrepreneurs and managers of family businesses.
Crosier (1975) gave a list of fifty different definitions of marketing in his literature, but there are a few underlying principles which can be classified into three distinct elements (Webster, 1992) and a fourth necessary element by Kohli and Jaworski, (1990): marketing as an organizational culture, as a strategic process and as a series of tactical functions or methods, all of which require market intelligence (Stokes, 2000).
Marketing as an organizational philosophy refers to a set of values and beliefs whose central importance is the customer, which influences the success of the organization. Marketing as a strategy involves, research and analysis of the market place in order to
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divide it into meaningful groups or segments of buyer-types and then one or more segments are chosen as the most appropriate targets for marketing activities. Lastly an appeal is made to this target group through an appropriately positioned product or service.
Marketing methods are techniques, such as product development, pricing, advertising and selection of distribution channels, which help in implementing the strategy. These are generally referred to as elements of the 'marketing mix', commonly summarized as the four 'Ps' of product, price, promotion and place.
Marketing intelligence are the members of marketing oriented organization that undertake information related activities defined by Kohli and Jaworski (1990: 3) as the 'organization wide generation, dissemination and responsiveness to Market intelligence'. (Stokes, 2000)
According to these elements (Webster, 1992), Stokes (2000) defined marketing in terms of the organizational philosophy of marketing orientation guided by segmentation, targeting and positioning strategies, operationalised through the marketing mix and underpinned throughout by market intelligence.
2.7 Marketing Characteristics of Small firms
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SMEs have difficulty in adopting conventional marketing because of the limitations of resources that are natural to all SMEs. SME owner/manager behave and think differently from conventional marketing decision-making practices in large organizations. It is well documented that SMEs have unique characteristics that differentiate them from conventional marketing in large organizations (Gilmore et.al., 2001).
2.7.1 Qualitative attributes
Cited in Carson (2001), Schollhammer and Kuriloff (1979) put ahead five characteristics of small businesses.
Scope of operations Rather than serving national and international markets, small firms opt for serving a local or regional market.
Scale of operations As small businesses are relatively small in a given industry, they tend to have a very limited share of a given market.
Ownership Small firms are usually managed directly by their owner(s) as that one person or at the most a few other people generally own the equity of small firms.
Independence As small firms are not a part of a complex enterprise system or a small division of a large enterprise they are considered independent. Another
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reason why they are considered independent is because even though their freedom is curbed due to obligations to financial institutions, the firms owner/manager has ultimate authority and control over the business.
Management style In a small business the managers tend to know all the employees personally. Employees participate in all aspects of managing the business.
2.7.2 Marketing Constraints on Small Firms
According to Carson (2001), there are basically three broad types of constraints on marketing for a small firm.
Limited resources Limitations such as finance, marketing knowledge, and time contribute to limited marketing activity in comparison with large companies and competitors.
Lack of specialist expertise Employees and managers in small businesses tend to be more of generalists than specialists. Marketing specialists is often the last of requirements for a small firm that is looking for expanding; rather they tend to opt for finance or productions specialists.
Limited impact on the market place small businesses tend to get fewer orders, less customers and fewer employees in comparison with large companies. Also because of limited resources and lack of marketing expertise, the impact in the
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media front through advertising and PR is often negligible.
2.8 Marketing and Entrepreneurship Interface
The marketing/ entrepreneurship interface has developed a substantial body of literature over time. Marketing has a lot to offer to the study of entrepreneurship (Murray, 1981; Hills, 1987). Marketing and entrepreneurship have three key areas of interface:
Change Opportunistic Innovative
They are both change focused, opportunistic in nature and innovative in their approach to management (Collinson & Shaw, 2001). The basic of the interface between the two concepts involves the theme of Putting entrepreneurship into Marketing (Day et.al., 1998).
2.8.1 Importance of Marketing
Marketing is an important aspect for the development of any business. There are a number of differences between entrepreneurial characteristics and marketing, some of them being over-reliance on limited customer base, very little marketing expertise and unplanned effort. Entrepreneurs and small business owners interpret and practice marketing at their own ease, which of course doesnt conform to the standard textbook theories and practices Stokes (2000).
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The importance of marketing in entrepreneurship and SMEs is on a rapid growth. Hisrich (1992) talks about the relationship between the two and its importance. He has given three reasons for the relationship, firstly because marketing is one business function that has to be used suitably by the entrepreneurs and the SMEs to either launch or develop the new venture successfully. Secondly entrepreneurs have a limited knowledge of marketing. Finally, entrepreneurs are poor planners and managers they often under-estimate the time and effort needed to carry out a marketing task and they frequently over estimate the resulting sales.
2.8.2 Organisational Development and the Role of Marketing
Siu & Kirbys (1998) in their paper discuss studies done by various authors, to see where does marketing lie in relation to organizational growth. The earlier studies done on small business growth and development focused on organizational development (Churchill and Lewis, 1983), strategic operational decisions (Kazanjian, 1984) and corporate culture (Flamholtz, 1986). Marketing was seen as only one of the research areas, not the major research thrust.
Churchill and Lewis (1983) identified five stages in the development of a small firm. These are:
Existence
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Survival Success Take-off Resource mature
Marketing is believed to exist as a major issue in the Existence stage only. The owner-manager at this stage takes charge of the marketing and sales activities. A marketing system does not exist in the firm. As the small firm grows, marketing becomes a minor issue. A marketing system develops and becomes systematized and formalized. Professional-managers replace the owner-manager and takes charge of the immediate marketing and sales functions. With growth, marketing decreases from critically important to modestly irrelevant.
Marketing is also identified as a derivative of business strategies. Flamholtz (1986) has used the organizational culture approach to explain the seven-stage model of organizational growth and development. Only the first four stages are relevant, as they show the behavior of small business. They are: New venture Expansion Professionalism Consolidation The identification and definition of a target market and product and services development, receives attention in Stage 1 that is the new venture, but its importance decreases alongside firm growth. Marketing is not given an important role in the firms
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growth management. Market positioning, niche marketing, market segmentation, and market observation are treated as minor or secondary strategic plans.
2.9 The SME/ Entrepreneurial Approach to Marketing
The process of managing entrepreneurial marketing is different from the process of managing regular approaches to marketing. One of the main reasons for this issue is that where entrepreneurial marketing is practiced, it generally takes place within a not so stable environment, which in turn hampers the opportunities for engaging in the marketing planning process, which is adopted when planning regular marketing activities.
There is a distinct variation between what successful small business owners and entrepreneurs actually do and what marketing theory proposes. The way small and medium business owners approach their target markets is through bottom-up selfselection, recommendations of customers and other influence groups, rather than depending on top-down segmentation, targeting and positioning processes. They also prefer interactive marketing to traditional marketing, which comprises the 4Ps. They use informal networking to gather information rather than formalized intelligence systems. These aspects basically represent marketing that is more appropriate in entrepreneurial contexts, rather than marketing, which is second best due to resource limitations (Stokes, 2000).
Eight differences in approaches have been explained below:
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Table 2: SME/ Entrepreneurial Marketing Vs. Traditional Marketing
SME/ Entrepreneurial Marketing Approach A Approach B Approach C Approach D Approach E Approach F Approach G Approach H Innovation-Oriented Bottom-Up Strategy Word-of-Mouth/ Interactive Marketing Networking Sales Oriented Marketing Planning Personal Contact Marketing Marketing Decision-Making
Traditional Marketing Customer-Oriented Top-Down Strategy Marketing Mix - 4Ps Market Research
2.9.1 Customer-Orientation Vs. Innovative-Orientation
Marketing as an organizational philosophy stated previously reflects that an evaluation of market needs comes before the development of new product or service but entrepreneurial business owners generally do it the other way round as they tend to start with an idea and then try to find a market for it. Certain well-known entrepreneurs such as Roddick, Branson, Sugar and Dyson did not find their early businesses on doing market analysis, but on an intuitive feel for what was required (Stokes 2000). Creativity and innovation in product or service developments are the hallmarks of successful entrepreneurship (Drucker, 1986). This does not mean that customer needs are not taken into account. This is particularly done because of the eagerness to develop new concepts and ideas innovation orientation- rather than contributing to the principles of customer orientation.
It would not be right to assume that entrepreneurial innovation involves major breakthroughs and inventions, they usually consist of incremental adjustments and smaller ways to existing products, services or market approaches rather than going in
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for large-scale developments. (Rothwell, 1986; Henry & Walker, 1991). Some small firms do make the mistake of getting into major breakthroughs and growing rapidly and as a result, the majority who grow slowly through making small but regular improvements survive. These small developments may mean, approaching a new market segment, improving services to existing customers, stocking new lines and so on (Stokes 2000).
Some of the common sources of getting these innovative ideas in case of entrepreneurs and small businesses have been the word-of-mouth communications. Word-of-mouth marketing is important all throughout the process of innovation because it plays an important role in consumer adoption of new products and services (East, 1997). It can generally be known as one of those informal, face-to-face communications, which is vital in all the aspects of entrepreneurial marketing.
2.9.2 Top-down Vs. Bottom-up Strategy
Marketing as a strategy involves the entire process of segmentation, targeting and positioning, so that the products and services are focused on appropriate buyer groups. But, entrepreneur owner-managers tend to arrive to their customers through a different route. Majority of the marketing textbooks (e.g. Doyle, 1994) support a top-down approach to the market whose strategy develops in an orderly manner. Initially, using demographic, psychological and other buyer-behavior variables and the profiles of these particular market segments are developed. Then, the attractiveness of each
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segment is evaluated by selecting the target markets, and finally, the market position is selected and communicated which will differentiate the product or service from its competitors. (Stokes 2000)
A review of niche marketing approach by Dalgic and Leeuw (1994) suggested that targeting is achieved by attracting an initial prospective customer base and then looking for more of the same. Some of these evidences suggest that a few successful small entrepreneurs seem to carry out bottom-up targeting process in which the organization begins by serving the needs of a few customers and then expanding the base slowly as their experiences and resources prove favorable.
The discussions carried out on the approach to marketing with the focus- groups and owner- managers threw light on a targeting process, which included three stages namely, identification of marketing opportunities, which are informal in nature. They are tested through trial and error in the market based on the expectations of the entrepreneurs and then, sometimes, backed up by a formal research. The next stage talks about attracting initial customers by being in regular contact with them and getting to know their preferences and needs better. Lastly they aim at expanding through these initial customers by getting them to recommend the business to others with similar needs through word-of-mouth marketing. This is basically done by self-selection and encouragement by the entrepreneur rather than the formal approach to marketing (Stokes 2000).
Some of the advantages and disadvantages of the bottom-up approach Stokes talks about in his paper can be focused here. It requires fewer resources when compared to
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the top-down approach and is more flexible and adaptable to implement which usually appeals to small business enterprises. The disadvantages that have been identified and which can be regarded as some of the problems reveal that it is less certain of success as it is over-dependant on reactive rather than proactive marketing strategies. It takes longer to penetrate into market and this in turn results in a limited customer base.
Entrepreneurial marketing resembles aspects of relationship marketing, which gives importance and realizes the need to create and develop a supportive network in which a firm can flourish (Gummesson, 1987).
2.9.3 Product, Price, Promotion and Place Vs. Interactive and Word-of-mouth Marketing
Entrepreneurial marketing activities do not fit easily into these existing models of marketing mix, which is regarded as one of most important approaches to marketing. The entrepreneurs in turn prefer interactive marketing where they look out for conversational relationships in which they can listen to, and respond to, the voice of the customer, rather than undertaking a formal procedure of the market research to understand the market place. This generally serves as a unique selling proposition (USP) for the small firms. They interact with customers in a way, which even the large firms, with their latest technologies fail to match. They spend ample time knowing their customers individually and responding to them in the required manner. (Orr, 1995)
Word-of-mouth can be defined as Oral, person-to-person communication between a perceived non-commercial communicator and a receiver concerning a brand, a
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product or a service offered for sale (Arndt, 1967). Entrepreneurial marketing relies heavily on word-of-mouth communications as research studies indicate that recommendations from customers, suppliers or other referrals are the number one source of new customers for small firms.
2.9.4 Market Research Vs. Networking
Formalized marketing intelligence gathering plays an important role in every stage of traditional marketing process whether strategic or tactical (Kohli and Jaworski, 1990). On the contrary successful entrepreneurs shy away from such formal market research methods. Their informal way of gathering information helps them monitor their own performance in relation to their competitors and the possible threats that they might face. There is an important outcome that there has been no significant research work examining the nature of marketing competencies in SMEs (Carson, 1993). According to Hill in his article, some findings show that there is a spectrum of competencies that can be associated with the practice of effective marketing in the SMEs. This spectrum of level 1 competency comprises experience, knowledge, communication, judgment and intuition.
Experience is the foundation level competency without which competent marketing cannot occur. It proves to be important in every aspect of SMEs activities and firms that are particularly entrepreneurial in nature. It enhances shapes and guides opportunistic instinct and thus influences marketing decisions. With regard to the competency of knowledge, which is also a foundation level competency, the main interpretation of the
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findings is that, as a result of the sales focus of SMEs, the need for technical/product knowledge is particularly dominant (Hill, 2001).
Communication also being a foundation level competency plays an important role. Internal and external communication plays a key role in enabling competent marketing to occur. It basically describes a set of competencies which include personality, relationship building, internal communication, trust, people skills, approachability, listening skills, adaptability, empathy and honesty. It is very important that communication should be done in a tactical manner and is really a component part of all the other management areas. Judgment is another foundation level competency, which influences decision-making. Pye (1991) has recognized that management success is dependant on sound judgment. The final foundation competency is that of intuition, which is in turn dependant on quality experience and to a certain extent to knowledge. (Hill, 2001)
A major contribution of this approach supports a spectrum of level 2 competencies comprising vision, opportunity focus, relational communication and commitment. These competencies are particularly entrepreneurial in character. Vision, characterizes an informal way of articulating and perhaps results in commitment to the marketing planning process. It encourages environmental scanning and thus helps in identifying suitable opportunities. Relational communication has been mentioned above which is a cluster of a few other competency elements. Commitment again is a bunch of certain competencies, which include motivation, ambition, achievement, enthusiasm, selfconfidence and aggression. It has gained importance in the approach of SMEs by being attached to the sales and personal selling orientation of the SMEs in the research. These
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elements also play an important role in comprising a set of level 3 competencies which are much more operational in nature (Hill 2001).
The level 2 and level 3 competencies are a consequence of the sales focus of the SMEs. This does not mean that they do not sell; it rather suggests that they engage in other marketing activities, for instance, it focuses on planning but still that marketing in practice by SMEs is sales focused. A higher level of competency does not only reveal marketing sophistication but also points out that it is entrepreneurial in nature. The studies suggest that the inseparability of competencies result in effective marketing performance, which in turn predominantly depends on the marketing activity being carried out and the specific marketing environment in which it occurs (Hill 2001). 2.9.5 The Sales Orientation
There are basically three types of sales persons operating within the SME context. They are the entrepreneurial sales person, the ambitious/career sales person and the long service sales person. Among all of them, it has been examined that the entrepreneurial sales person is the most important type because of the selling activity practiced in SMEs. The entrepreneurial sales person is loud, exhibits high level of competency, shows commitment, is aggressive, opportunistic, extremely motivated, and has vision, creativity and intuition (Hill 2001). Comer and Dubinsky (1985) suggest that sales orientation is not only a crucial area of SME strategy but is also the driving force behind many organizations today.
Brockhaus and Horwitz (1986) propose that there are no significant differentiating features between entrepreneurs and small business owners or managers, entrepreneurial
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type-selling orientation is what characterizes much of the marketing activities of SMEs. The relationship between sales success and motivation is well documented (Chowdhury, 1993; Churchill et al., 1985). The levels of motivation in sales persons increase significantly when they have confidence in the product itself. Thus, sales behavior is seen to be heavily dependant on motivation. The main interpretation is that, the reason the sale competencies are similar to the marketing competencies is a result of predominant sales orientation of such firms (Hill, 2001).
The sales people of these small firms carry out their gathering and use of market information very effectively. They objectively analyze such information, and then analyze the results of their own actions and decisions and then learn from experience in order to make better judgments in respect of key business decisions. Another interesting approach of the SMEs is that, whilst they are sales driven they also focus to a large extent on customer needs. The focal point here is that, the SME is perhaps highly skilled at such consummation (Hill 2001).
2.9.6 Marketing Planning
Hill (2001) found that companies engaged in fairly sophisticated marketing planning, but there were a few firms who followed a non-planning culture in the operational practices. All companies engaged in marketing planning with many committed to three year marketing plans, but which were reviewed annually. This reflects that they did have, with them, the professional support and a formal network of bankers, accountants and financial backers who enable the SMEs to produce formal plans and outline the direction in which the company is heading (Hill 2001).
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As a general approach, this contradicts previous studies carried out into the nature of marketing planning in SMEs because previous studies suggest that the marketing planning in SMEs were both under utilized and misunderstood (Mackintosh and Tynan, 1994; Dodge et al., 1994; Watkins and Blackburn, 1986; Dunn et al., 1986). Several reasons were given so as to why this shift towards an increased market orientation took place. Basically, the studies were carried out in 1980s and heavily tended to draw conclusions on previous work. But, today small firms have graduates with fresh theoretical knowledge of tools and techniques of formal marketing Hill (2001). These graduates bring to SMEs innovation and put the systems of planning they have acquired, into practice. The data indicates that the firms engage in planning and more importantly they practice the control and review of their activities. Another significant aspect reflects in the corrective action taken by them to continually improve their marketing activities. This finding again states that the companies are undertaking proactive actions, which again contradict too much of the literature that has been stated. One of the aspects here, is new and has not received any attention in small firms marketing literature which reflects that much of the marketing planning carried out in SMEs is actually formed by the marketing plans of customers and suppliers and vice versa (Hill 2001).
2.9.7 Personal Contact Marketing
Previous studies show that the SMEs tend to use networks informally which influence their decision-making processes. If buyer-seller communication is enhanced through increased use of networks then the firms offering can best be met to the unique needs
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of each market segment. This research however contradicts the previous studies by exposing that SMEs actually give importance to their formal networks. There are of course many small firms who do not engage in formal planning but the fact is that they are decreasing in number (Hill 2001).
2.9.8 Marketing Decision-Making
SME decision-making process can be defined as a continuum ranging from routine programmed decisions to unpredictable, non-programmed or intuitive decisions (Simon, 1960). It has been noted that entrepreneurs generally indulge in carrying out non-programmed and intuitive decisions. Risk taking is one of the major characteristics associated with the entrepreneurial personality. It has been studied that making joint marketing decisions is one of the characteristic of the SME, which tends to be informal in certain circumstances and formal in some (Hill 2001). In his article, Jimmy Hill detects risk in the two specific activities of the SMEs namely the buying process and the setting of prices.
2.10 A Holistic Model of SME marketing
Hill (2001), in his article summarized the entire process of the SMEs by illustrating a holistic model of SME marketing.
Figure 2: Holistic Model of SME Marketing
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The model is neither vastly entrepreneurial nor is it completely related to conventional marketing. However, if the disciplines of marketing and entrepreneurship are viewed as parent disciplines of SME marketing then the character of SME marketing has inherited the genes of both (Hill 2001).
Commonly, marketing practioneers and particularly entrepreneurs and owner-managers carry out research in an artistic manner, which is the naturalistic approach to gathering market information. This is supported by what Kahn (1970) said when he stated that: what a man sees depends upon what he looks at and also upon what his previous visual-conceptual experience has taught him to see therefore, artistic in this sense relates to the interpretation that is individualistically in the eye of the beholder, whether this is the artist who created the piece or the viewer of the piece (Carson and Coviello, 1996).
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There was an analysis which was done in the article written by Kirby and Siu (1999) by the name Small firm marketing: A comparison of Eastern and Western marketing practices, about Chinese owner-managers in Hong Kong to determine whether Chinese small firms exhibit the same marketing activities and behavior as their counterparts do. The analysis suggested that Chinese small firms are production oriented; whereas American firms are customer oriented. Chinese firms have limited marketing expenditure and their owners have limited marketing expertise, the owner-managers do most of the jobs, whereas the American small firms have chief marketing executives to do their job. They also suggest that Chinese do little marketing planning, whereas the Americans devote extensive interest to its activities planning. Thus, it is not unusual to discover that Chinese small firm marketing can be described as entrepreneurial and their marketing planning activities are yet unstructured. This research reflects that all small firms function in a different manner pertaining to the available resources and the environment in which they carry out their activities.
2.11 Problems with the Approaches
Certain problems with the approaches carried out by the entrepreneurs and the SMEs are very likely to be encountered. Hisrich and Peters (1992) have commented that entrepreneurs often have limited understanding of marketing. They often believe that the only condition necessary for a sale is to have the innovative product or service available. Entrepreneurs are poor planners and managers, they often end up underestimating the time and effort needed to accomplish a marketing task and over-estimate the resulting sales.
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Another important marketing problem is that of the limited financial and human resources in small firms. SMEs have less to spend on marketing even as a percentage of income. This happens because the fixed costs take up higher proportion of revenues, and these financial limitations in turn restrict them to employ marketing specialists (tend to be generalists rather than specialists) to do their jobs Weinrauch et al., (1991). He also argues that small firms lack strategic orientation. Decision-making tends to be haphazard and informal because of the way owner-manager does business. They make most decisions on their own; respond to current opportunities and circumstances in a chaotic manner according to personal and business priorities at any given point of time (Scase and Goffee, 1980). Surveys conducted by Hisrich (1992), of entrepreneurs in United States reveal that the two biggest problem areas are marketing and finance. Lack of marketing plan, accurate determination of market size, and reliable sales forecasts often hamper the initial seed of capital funding. Poor marketing effort will lead to poor sales, which in turn will leave them with inadequate cash flows. Marketing problems are separate but yet related to the financial problems (Hisrich, 1992).
It has also been depicted that small firms lack customer database and lack of formalized planning which in turn makes it extremely difficult to use transaction marketing techniques such as the 4Ps of marketing mix, market segmentation and so on (Zontanos and Anderson, 2004).
Owner-managers of small firms often tend to give marketing low priority compared to the other functions of their business, often regarding marketing as something that
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larger firms do (Stokes et al., 1997). Small businesses share marketing problems like limited scope, over-reliance on owner-managers marketing competency, unplanned effort and so on.
Word-of-mouth marketing is also not completely reliable as it has certain drawbacks. It is self-limiting. If a small business is too dependant on recommendations for new customers, its growth will get limited to those market areas in which its sources of recommendations operate. It is non-controllable: as a result, some may perceive there to be very less opportunities to influence recommendations other than providing the best possible service. (Stokes 2000).
There has been insufficient recognition to the sales orientation of SMEs. High risks in terms of marketing decision-making means more joint/shared marketing decisions will occur. This contradicts a popular view (Carson, 1985; 1990) that decision-making in small firms tend to be impulsive, haphazard and ad hoc. Differences in views lead to a confusion and hence it becomes a problem to implement them. There has been some recognition in the literature of the value of using personal contact networks to enhance and add value to SME marketing decisions there has been a general failure by SME policy makers to fully recognize the important role that networks play in their development (Hill 2001).
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2.12 Chapter Summary
Stokes (2000) summarized the marketing process in a form of the following table.
Table 3: Entrepreneurial Marketing Process Compared to Traditional Marketing Concepts Traditional Marketing Customer-oriented: Market-driven, product development follows. Top-down segmentation, targeting and positioning. The marketing mix Four/ Seven Ps. Formalised research and intelligence systems. 42 Entrepreneurial Marketing Innovation oriented: Ideadriven, intuitive assessment of market needs. Bottom-up targeting of customers and other influence groups. Interactive marketing methods, Word-of-mouth marketing. Informal networking and information gathering.
Marketing Principles Concept
Strategy
Methods
Market Intelligence
Some of the processes mentioned are standard doings of many successful ownermanagers and entrepreneurs. Of course, not all businesses are developed in this way, nor do all entrepreneurs operate exactly like this. Some do conform more to the textbook marketing model of reliance on formalized research and procedures. However the purpose of this research is to indicate that marketing is not alien to entrepreneurs nor is it according to traditional marketing theory. Rather it is marketing, which plays to entrepreneurial strengths by recognizing the aspects of entrepreneurship that can be injected into marketing principles. Entrepreneurial marketing need not be second-rate. Rather it is marketing which is appropriate in entrepreneurial contexts Stokes (2000).
Most of the above widely cited studies look at marketing planning in small firms that were carried out in the 1980s, and those that were conducted in the early and mid 1990s have basically just described the work done by authors previously. Research reflects that small firms in this era are more likely to be employ graduates with significant theoretical knowledge of the tools and techniques of formal marketing Hill (2001). SMEs and entrepreneurs are also growing in confidence in the marketing planning process.
SMEs are the lifeblood of Nepal. Binod Bahadur Shrestha, president of the FNCCI, Nepal says that the SME sector has made an important contribution to the Nepalese economy. Small and medium enterprises play an important role in creating selfemployment opportunities, mobilizing and using local resources, and raising the income of the rural population. During the year 2001, SMEs accounted for 96 percent of total industrial establishments, contributed 83 percent in employment generation by
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industrial sector, and shared about 80 percent in the industrial sectors contribution to national GDP said Govinda Dev Pandey, executive director of Small and Medium Enterprises Development Project (SMEDP). Hubertus von Welck, regional director, FNFt (Friedrich Naumann Foundation) said In any developing economy, small and medium enterprises hold tremendous potential for sustained growth. They generate huge employment making use of the locally available resources and endowments. SMEs in Nepal account for an overwhelming proportion of economic activities, making a notable contribution to trade, employment and national income. The SME sectors performance is very encouraging.
Studies have been done in the western countries but there hasnt been significant research done on small and medium family business in Nepal. Therefore, there is a need to research how small and medium family businesses in Nepal approach marketing. I intend to do this by interviewing small to medium family businesses in Nepal.
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Chapter 3 METHODOLOGY
3.1 Introduction
There are two major methods of research: qualitative and quantitative. Each of these two methods consists of number different research techniques. Each technique and methodology has its own strengths and weaknesses, which may or may not be suitable for all types of research. Therefore, it is important for a researcher to identify the appropriate methodology and technique in accordance with their research purposes. The studies that have been done by the various authors have been identified in the previous chapter; it also provides the research direction for this paper. Most work appears to have been conducted in the west. Therefore, this exploratory study is researching SME/ Entrepreneurial marketing in a different context that of Nepal.
In this chapter the best suited method of research methodology and technique for this research purpose has been evaluated.
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3.2 Research Objectives and Question
Every piece of research has its own aims, in accordance with which, the research objectives and the method of achieving these objectives should be derived. It is necessary for the researcher to know the suitability and the limitations of choosing the appropriate method so as to be able to take necessary precautions for increased validity, reliability and generalizibility of the research (Miles and Huberman, 1994).
The research is based on the assumption that entrepreneurial marketing is different from traditional marketing (Stokes, 2000), which has also been proved by the literature review. Given that there does not appear to have been research done on small and medium family businesses in Nepal, the objective of this paper is to understand the marketing approaches taken by entrepreneurs in Nepal. Also understand their limitations and what can be done to improve the situation. Thereby the research question for this paper is:
Q: How do small and medium family businesses in Nepal approach marketing?
The objectives of this research study are to investigate:
How marketing is practiced in small and medium family firms in Nepal,
Differences in the use of marketing techniques between firms in Nepal;
Are the techniques, adopted by firms in Nepal any different from what the
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literature states?
This paper aims to make contribution to the research field of SME/ Entrepreneurial marketing. Also it aims to research the relevance of marketing in family run SMEs.
3.3 Research Method
The research method chosen for this research is Qualitative Research Method.
3.3.1 Qualitative vs. Quantitative
As mentioned above, qualitative and quantitative research methods are the two major approaches employed by researchers. These two methods are different from each other in two major aspects. Qualitative research method seeks to describe and decode the meaning of naturally occurring phenomena in the social world through interpretative approaches (Easterby-Smith et.al., 2002) and therefore provides well-substantiated conceptual insights that reveal how broad concepts and theories operate in particular cases (Gephart, 2004). Quantitative research on the other hand emphasizes measurement and analysis of casual relations among other variables (Denzin and Lincoln, 2000).
Qualitative research stresses on the nature of reality constructed from societal members concepts-in-use (Schutz, 1973). Qualitative research has an inherently literary and humanistic focus and it also uses richly descriptive words, talk and texts as meaningful representations of concepts (Gephart, 2004). Researchers can collect information in a
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detailed and complete form (Sarantakos, 2005) and are able to examine the social phenomena in depth and can offer insightful depictions, due to direct access to the social behaviors of humans (Ching-Wei, 2006).
In brief qualitative research is any type of research that produces findings not arrived at by statistical procedures or any other means of quantification. It can refer to research about persons lives, lived experiences, behaviors, emotions and feelings as well as about organizational functioning, social movements, cultural phenomena and interactions between nations (Strauss and Corbin, 1990).
Therefore qualitative research interview method is used to conduct this research as this type of research is ideally suited to examine topics in which different levels of meanings need to be explored (Cassell and Symon, 2004). This is something that is very difficult to do with quantitative research method. As this study is exploratory in nature, qualitative research interview is the preferred method to conduct research and collect data.
3.3.2 Interview
If you want to know how people understand their world and their life, why not talk to them, suggested Kvale (1996). Since the ancient times conversations have been used as a medium to obtain knowledge (Kvale, 1996).
Research interview is one of the examples of qualitative research methods, others being questionnaires and observation (Hannabuss, 1996). Sanger (1996) stated that interviews
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are a prime source of data collection for a qualitative research. The elements of flexibility and negotiability make it an attractive method for researchers who need to gather different types of data in a short span of time (Cassell and Symon, 2004). The purpose of conducting an interview has been defined by Patton (1990) to find out what is on someones mind. We interview people to find out from them those things we cannot directly observe. Many people who adopt research identify the interview as a suitable method for gathering information. This is mainly because it allows the researcher to adjust the pace and style of asking questions so as to bring out the best in the respondents. Moreover, it is a very convenient way of gathering the information and opinions of people necessary for the research, or customers or the users. Examining the respondents views and responses provide a way to look at the social world which researchers chose to examine (Hannabuss, 1996).
There are different types of research interview, from the informal ones, where the process can be shaped to the individual situation and context and with the respondent more relaxed and un-assessed, to the fully structured interview, where a list of questions follow and organizing and quantifying the findings is generally straight forward. There are many stages in-between, where guidance can be given in an informal setting and where, within a structure, a fair number of open questions can be asked. The information from such interviews is usually gathered in written or audio form, depending on how both the interviewer and interviewee is convenient with (Hannabuss, 1996).
To conduct the research two types of interviews were chosen, electronic interview method and telephone interview. This was due to the distance involved. It was not
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feasible to travel all the way to Nepal to conduct the research therefore the research was conducted over the phone and e-mails.
Electronic interview according to Cassell and Symon, (2004) are research studies that use electronic communication facilities to access and communicate with participants. In this method a number of e-mails are exchanged over an extended time period. Initially only a small number of questions were asked. The participants had ample time to go through questions and e-mail back the replies.
Family enterprises are very secretive and they usually do not welcome researchers into their firms for research purposes, even when the researchers guarantee confidentiality. Due to this I have used electronic interviews where I formed a questionnaire and mailed the owner/managers also at some instances I chose to interview the subjects over the phone. Subjects in the beginning showed resistance to give interviews over the phone but once they read the questions and answered the initial bit via email they were ready to answer further questions and clarify doubts over the phone.
A semi-structured format will be adopted. It gives the researcher the flexibility to ask subsequent questions. The questions for a semi-structured interview are constructed prior to the interview and then sent to the participants to prepare the responses. This was combined with the phone and e-mail method. Phone interview enabled me to ask further questions to the replies that I received over the e-mail.
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3.4 Stages of Conducting the Research There are basically two main sources from which you can collect information: primary data and secondary data. Primary data involves data/ information, which is unique and methods that can be used to collect primary data is through survey, questionnaire and interview. Only primary data was available as the firms were not ready to share their market sale reports and most of them did not have too much information on their company websites.
Initially the researcher planned to use case study approach to analyze the data. But because the family firms didnt seem to have a well developed profile or readily available secondary data, the case study approach couldnt be done and therefore the researcher had to interview additional six firms totaling to twelve small and medium family firms in Nepal.
The whole procedure of the research was conducted in 3 stages. In the first stage the literature review was formed, views of various authors and researchers were found in academic journals and compiled. The knowledge gained from the review led to forming the initial draft questionnaire, which was based around Stokes (2000) and Hills (2001) typology of entrepreneurial marketing approaches.
In the second stage, research data was collected via primary sources. A pilot study was conducted in order to test the effectiveness of the questionnaire. Four students of University of Nottingham, who either owned or have worked in small-to-medium sized
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family business, participated. The pilot study helped to re-structure few of the questions, which were initially ambiguous and difficult to comprehend. Few other general questions were added on to the questionnaire as they helped the participants to understand the objective of the research (see questionnaire in appendices). This led to the final stage of data collection.
Data in the final stage was collected with the help of interviewing twelve employees of small-to-medium family business owner/managers in Nepal. The qualitative data was obtained by randomly selecting owners/managers of firms in Nepal.
Table 4: List of Interviewees
Interviewee Name Deepak Sureka Nikhil Chachan Sushant Chachan Anil Goenka A.K. Bose Siddharth Kedia Vishal Agarwal Mayur Patil Sanjay Bansal Raghu Pant Binod Shrestha Mayank Daga
Initials DS NC SC AG A.K.B SK VA MP SB RP BS MD
No. 1 2 3 4 5 6 7 8 9 10 11 12
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Table 5: Profile of the Interviewees

Profile of the Interviewees 1 - DS Name Age Sex Qualification Industry Sector Main Products/Services Deepak Sureka 40 Male MBA Consumer Imaging Photographic Equipment Canon/Olympus 2 - NC Nikhil Chachan 24 Male MBA (Marketing) Edible Oil Vegetable oil, Refined Soya bean Oil Refined Palm Oil, Refined Palmolien Oil, Mustard Oil 3 - SC Sushant Chachan 24 Male MBA (Finance) Cement OPC (Ordinary Portland Cement) and PPC (Portland Pozzolana Cement) Cements Vishwakarma, Jagdamba, Ambe No Designated Department 4 Approx. 15,000 GBP
Major Competitor
Sony/Nikon
Shiv Shakti, Annapurna, Krishna
Marketing Department Number of Employees Annual Marketing Budget
Yes 4 Approx. 75,000 GBP
No Approx. 23,000 GBP
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Profile of the Interviewees 4 - AG Name Age Sex Qualification Industry Sector Anil Goenka 37 Male MBA (Marketing) Photo Imaging, Consumer Durables Color Film, Color Paper Digital Printing Machines AC, CD, DVD. Kodak, Mitsubishi, LG Samsung, Sony Yes 5 Approx. 1,00,000 GBP 5 - AKB A.K. Bose 35 Male DME, B.COM Agro Industry 6 - SK Siddharth Kedia 27 Male MA Accounting and Finance Manufacturing
Main Products/Services
Branded (packet) CTC and Orthodox Tea
Polyester Yarn
Major Competitor
Muna, Kailash, Mechi Brand CTC Tea
Yes 10 Not more than 3% of the Turnover.
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Profile of the Interviewees 7 - VA Name Age Sex Qualification Industry Sector Vishal Agarwal 26 Male MA Management Garments, Import Export, Pharma Electronics, Textiles 8 - MP Mayur Patil 22 Male B.Com, Inter Chartered Accountancy Construction 9 - SB Sanjay Bansal 40 Male MBA Cement Manufacturing
Main Products/Services
Flooring and Flooring Related Products
Ordinary Portland Cement, Pozzolona Portland Cement Jagdambe, Nirman, Ambe Cement Yes 12 Approx. 380,000 GBP
Major Competitor
Marble Centre, Hindustan Marbles
Yes 4 Less than 10,000 GBP
Profile of the Interviewees
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10 - RP Name Age Sex Qualification Raghu Pant 35 Male M. Com, A.C.I.I., Chartered Insurer Insurance Non-Life Insurance Other insurance companies Yes 15 Approx. 4,000 GBP
11 - BS Binod Shrestha 29 Male MBA
12 - MD Mayank Daga 24 Male B.Com
Industry Sector Main Products/Services Major Competitor
Multi Brand Outlet Clothing Peanuts, Eighteen
Automobile Spare parts, Accessories Other automobile companies Yes 5 N/A
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Interviews were initially conducted via phone and e-mail. Respondents were asked to answer the questions with regard to any one of their products/services. They were assured that there answers would be kept confidential and they were informed that in the context of this research, there is no such thing as a correct or incorrect answer. Further questions were asked over telephone interviews, which gave the interview and the research more depth and understanding of the research in question.
3.5 Data Analysis
Data collected from both the telephone and electronic interviews were combined. The data was then analyzed and coded using the typology derived from Hill (2001) and Stokes (2000). See below the list of approaches.
Table 6: Approaches of Marketing
SME/ Entrepreneurial Marketing Approach A Approach B Approach C Approach D Approach E Approach F Approach G Approach H Innovation-Oriented Bottom-Up Strategy Word-of-Mouth/ Interactive Marketing Networking Sales Oriented Marketing Planning Personal Contact Marketing Marketing Decision-Making
Traditional Marketing Customer-Oriented Top-Down Strategy Marketing Mix - 4Ps Market Research
Once the data had been coded the interpretative process began, where the researcher had to derive meanings from the data. The findings were then reported, compared and contrasted with the previous works done by various authors and researchers. There were additional findings, which was then analyzed.
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3.6 Chapter Summary
This research attempts to explore the approaches of marketing adopted by small and medium family enterprises in Nepal. More specifically this research aims to contribute to the field of SME/ Entrepreneurial marketing. In this field there seems to be some research conducted in the west but there doesnt appear to be any research conducted in Nepal. This is an exploratory research to see how do small and medium family businesses in Nepal approach marketing, what are the different marketing techniques practiced in Nepali firms, are the techniques adopted by firms in Nepal any different from what the academic journals state.
The research method chosen to conduct this research is qualitative research interview. Two different kinds of interviews were chosen: electronic (e-mail) and telephone due to the far distances involved. Semi-structured interviews with a few open-ended questions helped the researcher focus on the research question and facilitate comparison between the interviews. The interviewees profile and company details have been listed. The data collected was analyzed against Stokes (2000) and Hills (2001) typology.
Chapter 4 FINDINGS and ANALYSIS
4.1 Introduction
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This chapter focuses on data collected by conducting an exploratory study of the marketing approaches of twelve small and medium family firms in Nepal. The information gathered helped in the analysis of how family businesses in Nepal understand marketing and how they adapt to it, different methods they inculcate in their firm, how it benefits the firm and their understanding of the different approaches of marketing. The findings from the interviews are analyzed with respect to the theories and reviews of authors, academicians and researchers in the field.
4.2 Findings and Analysis
Entrepreneurial/ SME marketing is different from traditional marketing and this statement is supported by the review in chapter 2. The studies previously done in this field appeared to be conducted in the western countries and there doesnt appear to be research done in Nepal. The following findings have been collected via conducting electronic and telephone interviews of owners/ managers/ retailers/ manufacturers of small to medium family businesses in Nepal. Data collected is analyzed in comparison with the typology of Stokes (2000) and Hill (2001).
4.2.1 Approach A Customer - Orientation Vs. Innovation - Orientation
Table 7: Findings from Approach A
Customer-Oriented Interviewees
Innovation-Oriented
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1 - DS 2 - NC 3 - SC 4 - AG 5 - AKB 6 - SK 7 - VA 8 - MP 9 - SB 10 - RP 11 - BS 12 - MD
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Majority of the interviewees were found to be customer oriented rather than innovation oriented. Ten out of the twelve interviewees believe that the evaluation of the market needs and the customer needs comes before the development of the new product/ service. Only two of the interviewees considered the approach of starting with a new idea moving on to new products and then finding a market for them.
The focus of customer orientation of the Nepali family run SMEs is supported by the following responses of the interviewees. We have to understand the language of our customers.
What our customers want is of a high importance to us. Even though we want to try making a few changes to our products but when our customers tell us that thats not what they are looking for, we stick to their requirements.
On the contrary the literature states that in entrepreneurial marketing, owner/ managers tend to be more innovation oriented rather than customer oriented (Stokes, 2000). Even
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though entrepreneurial innovation doesnt tend to involve major breakthroughs and inventions, but they usually tend to start with a new idea and then find a market for it (Stokes, 2000). However the interview findings are supported by Hisrichs (1992) paper where he says that one of the most important aspect of the marketing/ entrepreneurship interface is that both should be based on customer orientation with the customer being the focal point.
4.2.2 Approach B Top Down Vs. Bottom Up Strategy
Table 8: Findings from Approach B
Top - Down Interviewees 1 - DS 2 - NC 3 - SC 4 - AG 5 - AKB 6 - SK 7 - VA 8 - MP 9 - SB 10 - RP 11 - BS 12 - MD
Bottom - Up
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Nine out of twelve respondents tend to adopt a Bottom up approach, as they believe that serving the needs of a few customers and then growing the customer base slowly as and when the resources prove favorable.
Signs of bottom up approach amongst the family run SMEs in Nepal is supported by the following responses of few of the interviewees.
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To start with we target a small group of customers and see what they feel about our products. Once we achieve our targets, only then we prefer to move on to a bigger market.
We depend on expanding our businesses through our initial customers who promote our brand through word of mouth marketing.
However, three of the respondents strongly agreed on the top down approach of marketing.
We segment our target markets into buyer groups and based on their purchasing behavior do we strategize.
This could be because the industry that the three interviewees belong to require the demographics and psychographic profiles of the market before they strategize.
The interview findings of the majority of the respondents is supported by the literature in which Dalgic and Leeuw (1994) have done a review of niche marketing approach and they also believe that targeting is often achieved by attracting an initial prospective customer base and only after that do the successful SMEs and entrepreneurs look for more of the same. Stokes (2000) carried out focus group discussion on the approaches to marketing and the owner/ managers suggested that the targeting process includes three stages:
Identification of marketing opportunities, which are informal in nature
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Attracting initial customers by being in regular contact Expanding through these initial customers.
This strategy requires fewer resources when compared to the top-down approach (Stokes, 2000), which is in turn beneficial to the SMEs as financial resources are limited. Also bottom-up approach is more flexible and easily adaptable to implement, which appeals to small business enterprises.
4.2.3 Approach C - Product, Price, Promotion and Place Vs. Interactive and Word of - Mouth Marketing Table 9: Findings from Approach C
4Ps Marketing Mix Interviewees 1 - DS 2 - NC 3 - SC 4 - AG 5 - AKB 6 - SK 7 - VA 8 - MP 9 - SB 10 - RP 11 - BS 12 - MD Yes Yes
Word-of-Mouth, Interactive Marketing
Yes Yes Yes
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Out of the twelve interviewees eight adopt the concepts of 4Ps of the marketing mix and nine amongst the 12 respondents adopt the word of mouth marketing. Amongst the interviewees three of the firms tend to adopt both, the marketing mix and the interactive marketing.
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The mixed responses of the interviewees are supported by the following quotes.
For us both is important as we are very price conscious market so whatever consumers buy they need to see value in it. Since information that flows is not efficient and people are not very tech savvy, word of mouth is also very important as consumers place strong emphasis on other peoples brand experience.
Unconsciously informal marketing mix but mainly rely on word of mouth.
Nepals market being so competitive that everyone is dropping their prices as the customers want the cheapest product and everyone is cutting down their price to increase their own market share.
Unconsciously we do adopt marketing mix as in altering product, price but not in the formal 4Ps style. But we rely heavily on word of mouth communication.
Amongst the 4Ps difference forms of promotions are used like Advertising but even though word of mouth communication is important we pay little attention to it.
With high competition and the industry sector it is very important to maintain, long term cordial relationships with suppliers and dealers to ensure further dealings, hence we emphasize word of mouth communication to promote our brand and relationship with customers.
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Respondents views indicate that the SMEs in Nepal understand the importance of marketing mix in their marketing planning, however they rely mostly on word of mouth amongst all the other promotional tools. The reason for the same being that the family businesses in Nepal gives a lot of importance to relationship and trust building.
Interacting directly with their customers serves as a unique selling proposition (USP) for the small firms (Orr, 1995). Part of his (Orr, 1995) findings also contradicts the above research done on Nepal, he specifies that owner/ managers marketing activities do not fit easily into the existing models of marketing mix but from the above findings its clear that even though the family run SMEs in Nepal dont give 4Ps a lot of importance but they tend to follow it unconsciously. Entrepreneurial marketing relies heavily on word of mouth communication and as research studies suggest that recommendations from customers, suppliers and other dealers are the number one source of new customers for small firms (Arndt, 1967).
4.2.4 Approach D Market Research Vs. Networking
Table 10: Findings from Approach D
Market Research Interviewees 1 - DS 2 - NC 3 - SC 4 - AG 5 - AKB
Networking
Yes Yes Yes Yes Yes
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6 - SK 7 - VA 8 - MP 9 - SB 10 - RP 11 - BS 12 - MD
Yes Yes
Yes Yes Yes Yes Yes Yes
Eight out of the twelve respondents depend only on their networks to know their market. While one respondent depends on both formal market research/ survey to help them analyze their data. However two of the twelve respondents believe in conducting a formal market research.
Extracts from some of the interviews are shown below.
Usually we do not do any market research, but where necessary it will be more based on networking.
We interact with out customers and ask them for their feedback all the time, if there are any grievances and un-satisfaction we do follow up on that. We are in constant touch with our customers, we interact with our dealers, the press and our pro users and if something is amiss we definitely review it and try to rectify it whenever possible.
To an extent both forms of data collection are important. We need to conduct a formal market research to see what is the latest fashion, latest style. Formal market research also helps us distinguish our competitors, though networking helps us to know the different price offerings, it gives us the more experienced knowledge as our old staff
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and experienced staff is in constant touch with our dealers. To grow our network in the market we also maintain the good relationship with dealers who help us get more dealers. Basically its important build a good and strong relationship with our consumers and dealers.
We have our men their in the market who give us a regular update of what is happening and if there is something we should pay immediate attention to, that to is taken care of in a swift.
We work with a Professional Ad agency, who does the market research and data collection. Hence it would be a more Formal Approach. Kohli and Jaworski (1990) say that formalized marketing intelligence, whether strategic or tactical, is very important and it plays a vital role in gathering market information. On the contrary entrepreneurs/ owners/ managers in Nepal believe in their own informal way of gathering information, which helps them keep a track of their own performance in relation to the competitors. Hills (2001) findings show that there is a spectrum of competencies that is associated with the practice of effective marketing in the SMEs.
Experience Communication Judgment Intuitions
The findings from this research shows that the family run SMEs have faith in their
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networks and they rely more on the experience, the communication skills, judgment and the intuitions of their employee. Formal market research might give formalized data and information but for Nepali owner/ managers thats just a formality and a marketing tool.
4.2.5 Approach E - Sales Oriented
Table 11: Findings from Approach E
Sales Oriented Interviewees 1 - DS 2 - NC 3 - SC 4 - AG 5 - AKB 6 - SK 7 - VA 8 - MP 9 - SB 10 - RP 11 - BS 12 - MD Yes No No Yes Yes No Yes Yes Yes Yes Yes Yes
Eight amongst the twelve interviewees agreed to the fact that sales orientation is the driving force behind their organizations, (Comer and Dubinsky, 1985), amongst which few of the firms believed that being sales oriented was not very important and to a certain extent they were sales oriented but there are other factors that drives them. However, three of the firms completely disagreed to this statement.
Example:
This is just one part of the equation, you really need to maintain good relations with 68
dealers as well as have a good PR, especially with the press.
Sales would be one aspect. Improving service levels, bringing the latest technological developments to the market are some of the other driving forces.
Its sales all the way.
Sales orientated no I would disagree as being customer oriented is the driving force of our organization. I wouldnt call ourselves sales oriented, I would rather refer to it as Quality Sales as we do not believe in push-sales.
Yes, sales, sales, sales and only sales, thats our chant for success. Thats what motivates our employees to work harder and go there in the market and get more deals.
Sales oriented only to a certain extent, there are a lot of other factors that need to be kept in the mind and which needs to drive us to do more work like customers, there appreciation and brand recognition. But yes to a certain extent more the sales, the better for us.
From the findings its clear that being sales oriented is important but only to a certain extent. Even the literature states that while SMEs are sales driven they also tend to focus to large extent on the customer needs (Hill, 2001). The important point here is that that family run SMEs and their sales people are highly skilled at such
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consummation (Hill, 2001). Another important aspect that can be understood from the findings is that sales success leads to motivation (Chowdhary, 1993; Churchill et al., 1985). Higher the sales, the level of motivation of sales person increases significantly. Therefore, the sales behavior is seen to be directly dependent on motivation (Hill, 2001).
4.2.6 Approach F - Marketing Planning
Table 12: Findings from Approach F

Marketing Planning Interviewees 1 - DS 2 - NC 3 - SC 4 - AG 5 - AKB 6 - SK 7 - VA 8 - MP 9 - SB 10 - RP 11 - BS 12 - MD Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Each of the twelve companies spends some amount of time in planning their marketing strategies. But the question is how much time do each of them spend on each of the following four factors:
Preparing business plans for the future Developing marketing strategies and plans Preparing external communications/ promotions activities
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Evaluating the performance of marketing strategies and plan
Table 13: Time Spent on Four Factors

Time Spent On Preparing business plans for the future Developing marketing strategies and plans Preparing external communications/ promotions activities Evaluating the performance of marketing strategies and plans Not at all 0 Limited 8 A great deal 4
The numbers in each column represent the number of companies that chose the specific time they spent on each of the factors.
From the table above its evident that each of the small to medium family firms engages in marketing planning. From the information gathered its clear that few firms spend limited time on preparing a business plan for the future, preparing external communications and promotional activities and evaluating the performance of marketing strategies and plans. However for developing marketing strategies and plans majority of the firms spend a great deal of time.
Yes, we do spend time on planning our marketing activities but we dont tend to spend too much time on evaluating the performance. If there isnt much difference in the sales then we get to know that the strategy we applied hasnt worked for us so we have to then come up with something different. As for preparing external communications we 71
rely on advertising and that we outsource to an advertising agency, we do hold meetings with them on regular basis but we dont tend to spend great amount of time.
Every year we plan out our business plans for the future and spend enough time in evaluating strategies however, unless and until things really go out of track, we do not spend time on testing their effectiveness.
The findings indicate that even though there is a considerable amount of time spent on making marketing planning but there isnt any formal structure to it. According to the literature (Hill, 2001) SMEs spend considerable time on marketing planning and testing its effectiveness, the findings also reveal that each of the SMEs spends considerable time on planning activities however, depending upon the results the amount of time spent on testing the strategies effectiveness varies. These firms depend a lot on their suppliers and customers and they carry out their marketing planning according to what suits them best (Hill, 2001).
4.2.7 Approach G Personal Contact Marketing
Table 14: Findings from Approach G
Personal Contact Marketing Interviewees 1 - DS 2 - NC 3 - SC 4 - AG 5 - AKB 6 - SK 7 - VA Yes Yes Yes Yes Yes Yes Yes
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8 - MP 9 - SB 10 - RP 11 - BS 12 - MD
Yes Yes Yes Yes Yes
All the firms believe that personal contact marketing is of a high importance.
We have to maintain a good rapport with our buyers and sellers, they help us increase our sales and get more customers.
When it comes to using my personal contacts for the benefit of my firm, I dont hold back even though sometimes it becomes an obligation, its necessary to maintain good relations with our personal contact even in the business front. They help us communicate our message to their suppliers who later help us grow.
Personal contacts benefit the brand name and the product as they indulge in word-ofmouth communication and promote our brand to other consumers and we return the favor by promoting their brand.
Networking is of a high importance. Well spread network helps our brand recognition and brand identity and value. We trust our buyers and sellers when it comes to promoting our brand. They help us improve our services and alter our products according to the needs of our consumers.
Its evident from the findings that personal contact networking plays a vital role for SMEs and the Nepali SMEs unanimously agree that most of their deals are done using
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personal contacts. They believe in enhancing the buyer-seller communication, which helps the firms in meeting the unique needs of the different market segments that they cater to (Hill, 2001).
4.2.8 Approach H Marketing Decision-Making
Table 15: Findings from Approach H

Marketing Decision-Making Interviewees 1 - DS 2 - NC 3 - SC 4 - AG 5 - AKB 6 - SK 7 - VA 8 - MP 9 - SB 10 - RP 11 - BS 12 - MD Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
From the findings its evident that Nepal based family run SMEs have some form marketing decision-making in their firms. But how often do they need to make those decisions, can be seen from the table below.
Table 16: Frequency of Meeting for Marketing Decision-Making
Frequency of meetings held for marketing decisionsmaking Interviewees 1 - DS 2 - NC 3 - SC 4 - AG Weekly Monthly As when required As when required
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5 - AKB 6 - SK 7 - VA 8 - MP 9 - SB 10 - RP 11 - BS 12 - MD
Quarterly Weekly Quarterly Twice in a week Regularly Weekly Monthly Once a fortnight
The responses of the interviewees indicate that they hold meetings for making marketing decisions regularly. Some of the firms even met on daily basis to take decisions on their strategies.
At least weekly. The frequency of meetings depends on if we are in the midst of changing our campaigns etc. Hence during some periods its daily as well.
Meetings are held as when required but mostly it is on weekly basis. We have something called the season for our products where we have to be on our toes when it comes to planning and taking decisions for promotions. During those times we hold meeting daily and come up with strategies that will help us penetrate through our customers.
For us we dont need to meet on everyday basis or on weekly basis. We meet once in three months and strategize for the next three months. That I think is enough for our products. We have a range of tea products, which ranges from premium tea to affordable tea. Every three months after we review our performance we come to a unanimous decision on how we are going to promote our tea and what our new strategies is.
The findings support the literature the decision making process for these Nepal based 75
SMEs. The marketing decision making process for them ranges from a routine programmed decisions to unpredictable, non-programmed or intuitive decisions (Simon, 1960). For them sometimes its a routine to hold meetings to take decisions and sometimes as one interviewee mentions that during their season period they make decisions, as the situation demands it. So for family run SMEs in Nepal the process does range from making regular decisions to intuitive decisions.
A characteristic of SMEs is that marketing department alone does not take marketing decisions. Other departments are also involved in the process.
The meetings are initially held only for the marketing department but sometimes the sales department also comes in.
Involves people from cross section across departments.
We dont have a designated marketing department, so our sales and finance department employees sit together and make these decisions. We dont see the need to have a complete separate department for the marketing activities as our sales and finance employees are well equipped with the knowledge for marketing and they alone can take those decisions.
As such we have no designated marketing department but we have around 5 employees taking care of the marketing activities from the other departments.
There is no bifurcation of departments, some employees handle dual activities.
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Our meetings need to cover all the other departments.
The process of planning is held only for the marketing department but when it comes to making the final decisions we involve the other departments too as we get a better perspective of what we are going to do and its necessary for the finance department to get involved as we need to keep in mind the funds available to us.
Its quite evident from the responses of the interviewees that marketing decisionmaking is a joint effort. Making joint marketing decisions can be recognized as one of the characteristics of the Nepali family run SMEs (Hill, 2001).
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4.3 Analysis Grid
Table 17: Analysis Grid
1 - DS Approach A Customer Oriented Innovation Oriented Approach B Bottom-Up Top-Down Approach C Marketing Mix Word-of-Mouth Approach D Market Research Networking Approach E Sales Oriented Approach F Marketing Planning Approach G Personal Contact Marketing Approach H Marketing Decision-Making Yes Yes Yes Yes Yes Yes Yes Yes
2 - NC Yes
3 - SC Yes
4 - AG Yes
5 - AKB Yes
6 - SK Yes
7 - VA Yes
8 - MP Yes
9 - SB Yes
10 - RP
11 - BS Yes
12 - MD
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Yes
Yes Yes
Yes Yes Yes Yes Yes
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4.4 Additional Findings
Based on the interviews and the research conducted, there were a few additional findings that came up, which are further necessary to keep in mind before coming to a conclusion.
The Nepals economy is evolving. With increasing globalization and rising opportunities in Nepal, many multinationals are investing in Nepal. The Nepal based firms are tying up with MNCs and encouraging them to invest in Nepal via different entry modes such as licensing, franchising etc.
Importance and need of qualified professionals is being recognized and appreciated by Nepal firms. Training of existing employees and employment of skilled professionals is being encouraged. Many new good education institutions have been established and the young generation of Nepal is being encouraged to join these institutions for specialized studies. Also, opportunities to go out of the country have risen. Thus, more and more students are enrolling for studies abroad.
Looking at the larger firms, their success rate and professionalism, the SMEs too want to grow and become big in their respective fields. They are willing to make changes and adapt themselves to the new working practices and business ethics of large multinationals. The willingness to grow and adapt to new changes can thus be seen in Nepals firms.
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SMEs have recognized the importance of marketing and understand that it is an important aspect for growth of firms. Previously for them, marketing was linked to small scale advertising, and word of mouth. However, the trend is now changing and with more graduates being employed, the term marketing and its importance is being understood. New tools other than advertising such as relationship building are being practiced. Some of the firms have tried their hand in marketing and failed, but they are still willing to try again and reap its benefits.
The SMEs now understand the meaning of competition and the concept of gaining a competitive advantage much better. Most SMEs in Nepal have competition amongst family which was not appreciated earlier. However, the trend now has changed and firms dont mind competing amongst each other as long as it is a healthy competition. They help each other but they also understand that they are competitors.
All the above mentioned findings are supported by the extracts from the respondents interviews described below, adding empirical evidence to the research.
Extracts from some of the interviews:
I feel the need for marketing in any organization is essential for future even if it does not face any competition. In marketing, there will be opportunities by the customers/ consumers feedback for 3Ds namely; Development of product, Development of distribution, Development of Business.
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We did try some marketing in the past, we got a limited response but we are still giving it a second try.
Marketing is extremely critical for growth.
As we are ISO 9000-20001 certified company we need to follow what it is to be the best.
We did invest moderately in marketing and we can see the little changes so that means we are reaping its benefits and marketing is a continuous affair.
Our firm to some extent has a strong marketing orientation. We havent been investing heavily in marketing but we have been reaping its benefits. There are many aspects of marketing, some will connect very well with consumers and others may not, its all trial and error. So if some marketing activity does not show favorable results we abandon them or modify them. In todays competitive market, marketing is very important. Competition is rife, though our products could probably still sell, it is important to complete the consumer experience through marketing which reinforces his/ her decision on the purchase. On the whole for us marketing and sales are two distinct functions. Marketing creates a pull for our products from the consumers. The function of sales is to push our products through the dealer network to consumers.
There is a lot of competition and marketing is gradually becoming our prime concern.
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I would say we are marketing and a sales oriented organization, and we are conscious of the importance of the right marketing strategy. Some activities and campaigns perform better than others. We have had instances when promotions did not yield desired results and we have had to change some key elements or even stop them. We firmly believe that to attain market leadership, which is our goal, marketing is a key element for our success. Almost all organizations that I have been exposed to depend on Marketing in some form or the other for their success.
Nepal market was sellers market till some time back. But now its moving towards marketing concept. Slowly the concepts are coming to use. Business houses slowly understand the importance of marketing. The investment in marketing has been very less for us. But now budgeting for marketing is given importance, seeing its positive returns. In particular reference with Nepalese scenario the marketing concepts is still are its early stage. There is very little investment in market research. The business houses are still running with the traditional mindset. Not willing to try new strategies. One important fact marketing here is considered as only media planning, whereas media is just one part of marketing.
Based on these quotes and the analysis of the previous typology framed from the literature of Hill (2001) and Stokes (2000), the new typology for the SME/ Entrepreneurial marketing is suggested.
4.5 The New Typology
Table 18: The New Typology for SME/ Entrepreneurial Marketing
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SME/ Entrepreneurial Marketing Customer-Oriented Bottom-Up Strategy Word-of-Mouth/ Interactive Marketing 4Ps Marketing Mix Networking Sales Oriented Marketing Planning Personal Contact Marketing Marketing Decision-Making
Based on the findings and the analysis the new typology for the Nepalese family run SMEs is given. They are more customer-oriented than innovation-oriented, follow both word-of-mouth and unconsciously the 4Ps - marketing mix but rely more on word-ofmouth and direct interactions. They reach their customer through a bottom-up strategy. The research is based on networking amongst their dealers and suppliers, sales are the motivation factor for the firms. Spend limited time on their marketing planning. Personal contacts act as a boon, as they help in getting more deals and help maintain the brand image. Marketing decisions are made by a cross section of departments. Marketing is not alien to the SMEs; its just that they tend to practice it more casually and unconsciously.
4.6 Chapter Summary
In this chapter the findings from the electronic and telephone interviews were
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interpreted and analyzed with respect to the views of the various academicians and researchers in the field of SME/ entrepreneurial marketing. The eight different approaches of traditional marketing and SME/ entrepreneurial marketing mentioned in the review were discussed separately and analyzed. Extracts from the interview for each of the aspects has been quoted. With respect to the findings and the analysis the new typology for the SMEs in Nepal has been suggested.
The research that has been done in this field of SME marketing has all been done in the 80s or the 90s. There is a need for further research in this field. Recommendations for the marketing and entrepreneurship interface are mentioned in the next chapter.
Chapter 5 RECOMMENDATIONS and CONCLUSIONS
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5.1 Introduction
The objective of this exploratory study has been shaped from the outset beliefs of authors and academicians in the field of SME/ entrepreneurial marketing. Much of what has been written on the process of SME/ entrepreneurial marketing in general does not equate with the reality of the family run SMEs in Nepal which leads to make some suggestion for both practioneers/ researchers and small and medium family in businesses in Nepal.
There has been a lot of research that has been conducted in the west and mostly they have been tested against larger enterprises. Even though research has been conducted for small and medium enterprises, there doesnt appear to be much research on Nepalese SMEs. With the development and rising growth rate in Nepal and importance of SMEs for the overall economic development there is a need to explore this area in detail. Thus, a few recommendations are suggested for academicians.
Based on the findings it is revealed that SMEs do approach marketing, however, it is more in an informal and unconscious way. Looking at the success rate of large businesses that carry out such tactics in an organized manner, recommendations are made for SMEs in Nepal.
5.2 Recommendation for Researchers/ Academicians and Practioneers
Small firm marketing practices have been assessed in the past pertaining to the existing models based on large firm practices (Coviello et al., 2000). Probably this is the reason
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why small firms have always been criticized as non-traditional, informal, short-term, and non-strategic. However as the marketing discipline has been undergoing a transformation with new shifts emerging as relationship marketing, it is now appropriate to assess small firm practices in a broader perspective (Day et al., 1998).
Another very important implication is that, while studying the marketing phenomenon within the SME context a qualitative methodology is more effective. It is extremely important to get close to the companies and to research the respondents and be able to observe SMEs over time. It is better to use qualitative approach in this respect. Traditionally, SME policy makers used quantitative surveys to examine the activities of SMEs. As a result it is suggested here that, they should add a range of qualitative methods to their methodological toolbox (Hill, 2001).
Further research is required in several areas. First, the holistic model should be tested across a range of industry sectors. Second, although the firms that were selected for this research were based in Nepal and in some aspects of their activities it would be better to verify the model through international study. Third, further research is required to clarify the link between sales and marketing competencies in SMEs and how such competencies relate to entrepreneurial competency frameworks. Some clinical research on how to develop the key foundation marketing capabilities could be useful. There is a major need to determine effective means of developing capable marketing managers and marketing decision-makers in SMEs (Stokes, 2000). Also not all businesses are developed formally and in a structured manner nor do all entrepreneurs operate efficiently, some do conform more to the textbook marketing model on formalized research and procedures. However, the purpose of this concept is
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to point out that marketing is not alien to entrepreneurs but nor is it according to traditional marketing theory. There are conclusions in some of the literature that marketing undertaken by entrepreneurs and small business owners is only like this because of insufficient resources and specialists and hence is inferior to the traditional marketing carried out by larger organizations (Barclays Review, 1997), yet entrepreneurial marketing need not be second-rate. Rather it is marketing which is more appropriate in entrepreneurial/ SME contexts.
5.3 Recommendation for Small and Medium Family Businesses in Nepal
It is very important for the entrepreneurs and SMEs to look at the problems and the drawbacks to derive a practical solution in order to overcome the drawbacks. Marketing is one business that must be used appropriately by the entrepreneur to launch and develop the new venture successfully. It is very important that both marketing and entrepreneurship should be based on customer orientation with the customer being the focal point (Hisrich, 1992).
In addition according to Hill (2001) the typical constituents of SMEs formal network such as, the bankers, accountants and financial backers are demanding that SMEs produce formal plans that outline the direction in which the company is headed. They refuse to lend any money unless there is an ongoing and realistic commitment to marketing planning. These two factors have played a major role in improving the status of such enterprises environmental change has effected a change over 15 years in SME market practices. It has resulted in a slow but a considerable shift to a higher level of expertise and greater marketing competence in such firms (Hill, 2001).
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Sound marketing is very important for the development of a new product or service as well as a successful venture. It is the misguided belief of the entrepreneurs and SMEs that every consumer in the market needs and wants their innovation, which leads to inventions being hidden in a bag therefore no market feedback can be obtained (Hisrich, 1992).
Entrepreneurship is much more internally oriented. It is necessary for all the internal aspects of the venture to come together in order for the launch to be successful (Hisrich, 1992). Training programs are required which take account of the SME circumstances, something concerning the lines of work-based learning, which will facilitate the development of a networking competency (Hill, 2001).
Market orientation relies on research to determine customer needs. Only market information can determine strategic segmentation and targeting. The success of adjustments to the marketing mix is tracked by consumer research. Unfortunately, successful entrepreneurs shy away from such formal research methods of gathering market information, which is an important aspect of their marketing activities. Entrepreneurs should reconsider this issue and look into it (Stokes, 2000). Marketing should be enhanced and improved with experience. Owner mangers should use their strengths to overcome their weaknesses, learn from mistakes and assess what went wrong in order to avoid such mistakes in future, learn from successes and assess all of the circumstances that contribute to success. (Gilmore et al., 2001)
5.4 Limitations
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Every piece of research has its own set of limitations, which can arise during the course of conducting it. This research faced the following limitations -
Penaloza (1994) suggested that the researcher should be careful enough to avoid any kind of bias with the research subjectivity. This is mainly because of the reason that researchers working in their own culture tend to avoid keeping a critical distance from their work as they may hold a set of assumptions about their own culture (McCracken, 1998) hence influence the interpretation of data analysis. This research is based on analyzing a Nepalese perspective and I, being a Nepalese, had awareness of a lot of facts, which might have influenced the results at some point of time.
The sample size of the interviews being tested should be large enough to increase its validity. It was possible to interview only twelve SMEs from Nepal as the research was done via e-mail and telephone. The SME managers dont take such research work very seriously and even though I sent out e-mails to twenty-four family-run SMEs in Nepal I received delayed replies from only twelve.
Initially, case study approach was planned to do this study. But because many of these companies didnt have full fledged website and they werent ready to share their secondary data, case study approach was dropped and more interviews had to be conducted in the last minute to get a slightly larger sample size.
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One of the main limitations was the distance. Nepal being so far away and this study being done in U.K., it was not feasible to go to Nepal and conduct the research. The interviewees were a little conscious of giving phone interviews and they were not ready to get the interviews recorded.
5.5 Conclusion
This exploratory study provides a review of the difference in approaching marketing for family run SMEs in Nepal. The research revealed that the present approaches to marketing by Nepalese SMEs are different from the traditional marketing and at par with SME/ entrepreneurial marketing. There are different approaches to marketing for SMEs and entrepreneurs and the typology derived from Hill (2001) and Stokes (2000) provided a useful framework also a starting point for the analysis of Nepalese SMEs marketing strategies. However the studies suggest that the marketing characteristics of these interviewees do not necessarily follow the eight approaches of marketing. According to Carson (1985), marketing constraints and limitations, like limited resources, lack of specialist expertise and limited impact on the marketplace, apply to most small and medium firms. These limitations, combined with SME characteristics, influence their marketing practices. Siu and Kirby (1998) suggest that due to the ownermanagers personal characteristics, the marketing behavior of small and medium firms is pushed. Therefore, marketing in small businesses is different from that in larger firms. With respect to Siu and Kirbys (1998) paper it can be said that the interviewees have characteristics of a craftsman entrepreneur (Smith, 1967) that are market oriented and make use of their personal contacts and relations in marketing.
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In concluding this study its necessary to emphasize that small and medium business owner/ managers are generalists (Stamworth and Gray, 1991) and it might be wrong to suggest that they should become marketing specialists.
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APPENDIX
Interview Questionnaire
1. Name: 2. Qualification: 3. Address: 4. Industry Sector: 5. Major Products: 6. Major Competitors: 7. Number of Employees:
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8. Do you have a marketing department? How many employees are there in this department? 9. Approximately what is your annual marketing budget? (Include all activities associated with gathering market information and selling) (Free Response). 10. Please tick from the following, the marketing activities that you adopt in your firm? Customer relations Advertising Sales Pricing Market Research Sales forecasts Sales control Public relations Product planning Credit extension Sales training Quality control Dealer relations Sales recruiting Product services Product schedule Inventory control Packaging Warehousing After Sales Service
11. Choose any one Evaluation of market needs comes before the development of new product/service. Generally start with a new product and then try finding a market for it.
12. How do you understand your customer needs? 13. Which one of the below to you tend to adopt? Bottom-up: Serving the needs of a few customers and then expanding the base slowly as your experiences and resources prove favorable. Top-down: Using demographic, psychological and other buyer-behavior variables to develop profiles of the particular market segments. 14. Do you give more importance to word-of-mouth communication or formal 107
marketing methods like marketing mix product, price, promotion and place? 15. Do you interact with your customer? 16. Do you ask your customers for a feedback on the products and services they have used? If yes do you review and act on them? 17. If you are conducting market research and data collection, how do you conduct it? (For e.g. carrying out the formal market research or depend on networking) 18. Is being sales oriented the driving force behind your organization? 19. How much time would you say your company spends on: (Not at all, minimal, limited or a great deal) Preparing business plans for the future Developing marketing strategies and plans Preparing external communications/promotions activities Evaluating the performance of marketing strategies and plans
20. How often do you hold meeting for making marketing decisions? 21. Is the meeting only for the marketing department or does it involve other departments also? 22. Does your organization have a strong marketing orientation and does it whole-heartedly adopt the principles and practices of marketing? 23. Has your organization invested heavily in marketing but has not, as yet, reaped its benefits? 24. Has your organization tried some marketing in the past and, having seen little rewards for the effort, abandoned such efforts? 25. Do you believe that there is little need for marketing in your organization, as it does not face competition? 26. If you would like to make any additional comments on any of the topics covered by this questionnaire please do so.
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FAMILY RUN SMEs IN NEPAL AND THEIR APPROACH TO MARKETING

A Dissertation presented in part consideration for the degree of MA Marketing

ABSTRACT ACKNOWLEDGEMENT LIST OF FIGURES AND TABLES Chapter One INTRODUCTION

Page 1 Page 2 Page 6 Page 7

2.9 SME/ Entrepreneurial Approaches to Marketing ..26

2.9.1 2.9.2 2.9.3

2.9.4 2.9.5 2.9.6 2.9.7 2.9.8 2.10 2.11 2.12

Chapter Three METHODOLOGY

LIST OF FIGURES AND TABLES

1.1 Background of the Study

1.2 Research Objectives

Figure 1: Related Academic Fields

Entrepreneurship Ownermanaged Business

Small and MediumSized firms

1.3 Structure of the Dissertation

The Structure of this dissertation is as follows.

Chapter 5 provides recommendation to the small and medium family businesses in

2.2 Defining Small-to-Medium-size-Enterprises

uses the term SME as the definition itself, which is small-to-medium-size-enterprise.

2.3 Defining Family Business

2.4 Differences between Family Business and Non-Family Business

Morris et al, 1997, p.388 2.5 Defining Marketing

2.5.1 Marketing as a Philosophy

2.6 Marketing in SMEs

2.6.1 Why is Marketing Different for SMEs

2.7 Marketing Characteristics of Small firms

2.7.1 Qualitative attributes

2.7.2 Marketing Constraints on Small Firms

media front through advertising and PR is often negligible.

2.8 Marketing and Entrepreneurship Interface

Change Opportunistic Innovative

2.8.1 Importance of Marketing

2.8.2 Organisational Development and the Role of Marketing

Survival Success Take-off Resource mature

2.9 The SME/ Entrepreneurial Approach to Marketing

Eight differences in approaches have been explained below:

Table 2: SME/ Entrepreneurial Marketing Vs. Traditional Marketing

2.9.1 Customer-Orientation Vs. Innovative-Orientation

2.9.2 Top-down Vs. Bottom-up Strategy

2.9.4 Market Research Vs. Networking

2.9.6 Marketing Planning

2.9.7 Personal Contact Marketing

2.9.8 Marketing Decision-Making

2.10 A Holistic Model of SME marketing

Figure 2: Holistic Model of SME Marketing

2.11 Problems with the Approaches

2.12 Chapter Summary

Marketing Principles Concept

3.2 Research Objectives and Question

Q: How do small and medium family businesses in Nepal approach marketing?

The objectives of this research study are to investigate:

How marketing is practiced in small and medium family firms in Nepal,

Differences in the use of marketing techniques between firms in Nepal;

3.3 Research Method

3.3.1 Qualitative vs. Quantitative

Table 4: List of Interviewees

Table 5: Profile of the Interviewees

Shiv Shakti, Annapurna, Krishna

Marketing Department Number of Employees Annual Marketing Budget

Yes 4 Approx. 75,000 GBP

No Approx. 23,000 GBP

Branded (packet) CTC and Orthodox Tea