Generic marketing strategies for small and medium-sized enterprise medium-conceptual framework and examples from


Presented by,

Sagar Popat & Dhruv Mahajan

as more Asia economies open up.Introduction Today¶s SMEs will grow tomorrow¶s major corporate institutions. their SMEs to fuel their economic growth. Governments are being urged. the more advanced economies face increased competition for foreign investment. . economies in the region are looking towards . overAt the same time. to µtake strong and deliberate actions to accelerate small business development¶ In Asia. This is to avoid over-relying on foreign MNCs and investment.

when the Asian currency crisis began. The niching strategy. Aggravated economic problems and political turmoil have frightened away many of these MNCs. which is widely recommended for SMEs. but. is not unique or exclusive to SMEs as bigger firms have also been practicing niche marketing. Since July 1997.SMEs need to play more active role in Malaysia & Indonesia. Increasingly competitive environment and in the face of competition from bigger firms that possess plentiful resources. SMEs are simply viewed as just smaller versions of corporations and hence. given the same strategic prescriptions that are implicitly meant for big corporations. Too often. .

!!! . an SME can also follow a deterrence strategy in market entry in order to deter bigger incumbent firms from embarking. an SME can also free ride on the market development efforts of bigger firms by supplying an identical product to that of bigger firms.Objective of the Article Niching is not the only strategy available to the SME.. How an SME can successfully carry out a substitution strategy by filling market gaps..

competition . focus on market niches.Framework of Strategies for SMEs SMEs due to cost disadvantage and resource limitation. Success of SME depends on the reaction on the MNCs.wait and see Fight . MNCs can either Accommodate .price wars.

. big firm will be forced to accommodate the SME.When an SME enters a market niche initially ignored by a bigger firm Offering a product which is substitutable to that offered by a big firm. SMEs can also give a higher quality product and market niche than that of a bigger firm. Avoiding the cost of fight. Big firm can counter offer a similar product under same or a new brand.

. the best example of this is the big departmental stores and the corner market shops in Asia.When an SME enters a market niche initially ignored by a bigger firm Substitution strategy both the SMEs and the bigger firm can co-exist profitably. In such a market niche big firm and the SME fight on the factors other than price which ultimately leads to the survival of SME.

Incumbent firm will either. . Lower down the overall profitability Loose a particular share of market Asian Markets oftenly see parallel importing by SMEs usually in stuff like imported cars.When an SME enters a market segment currently supplied by a bigger firm SME introduces an identical product and slice away incumbents share of market by offering at a lower price.

. . since 1997.When an SME enters a market segment currently supplied by a bigger firm They sell cars at a lower price because they don¶t spend on advertisement. Asia. have been imported by these parallel importers. BMW. etc.. promotion and sometimes even after sales service. many luxury cars like Mercedes. SMEs in such case should try to form strategic alliances. Sometimes incumbent firm reacts aggressively to the entry of SME. Lexus. In Asia.

When an SME enters a market segment currently supplied by a bigger firm These alliances allow the SME to defend and survive the actions of the incumbent firm. Thus these type of strategic moves forces the bigger firm to accommodate the SMEs. a cooperative venture formed by small grocery stores in singapore. Their combined resources allowed them to upgrade themselves to mini supermarkets. Example: Econ minimart. . computerise their operations and enjoy economies of scale through bulk purchases and most importantly they were able to deter the big firm adopting aggressive actions against them.

Table showing. The incumbent¶s reactions to the SME¶s entry decision SMEs strategic target Incumbent¶s reactions Accommodates Fights Strategic deterrence Enters ignored market Substitution strategy niche Enters served market segment FreeFree-riding strategy Strategic deterrence .

Managerial Implications SMEs often face incumbents well endowed with resources in the markets of entry. ‡ . other than the niche marketing. The strategy framework and the generic strategies have two important managerial implications for SMEs ‡ Framework for choice of market entry strategies by SMEs The SME should capitalize on the incumbents dilemma in relation to its market entry. Article identifies three generic marketing strategies to fight incumbent.

.Framework for choice of market entry strategies by SMEs Choice of market entry strategy depends on. Strategic target Anticipated incumbents reaction Substitution strategy can be applied because big firms find it too costly to take aggressive actions as they serve a wider segment of the market. Free riding is suggested if SME lack resources to embark on market development.

SME should exploit this time by providing better service and thus creating its own market.The SME should capitalize on the incumbent s dilemma in relation to its market entry Big firms often take time to decide wether to accommodate or to fight the entry of SME. Bigger firms face problems in reacting aggressively because they have to weigh the cost of fight. .

free-riding and freestrategic deterrence.Conclusion The study shows that there are some other marketing strategies for SMEs besides widely advocated niching or focus strategy. These strategies are substitutions. Research is under-going through case studies to find underother marketing strategies for SMEs. .

. The growth of SMEs is Limited because the aggression of the bigger firms will increase with the growth of the SMEs.Critical Evaluation Niche marketing is not the only marketing strategy available for the SMEs. SMEs should concentrate on product differentiation rather than engaging in price wars.

SMEs should avoid being the first mover in developing new markets. SMEs can follow the niching strategy of supplying differentiated products.Research Gap SMEs should see the individual structure and capabilities to seek the market opportunities. only if they possess sustainable competitive advantages over the bigger firms. . SMEs can develop their own marketing strategies seeing the reaction of bigger firm.

then what happens when this enterprises grow to a substantial size? .Questionnaire Why bigger firms chose to ignore the market which is being profitably served by the SMEs? If the smallness of SMEs is the reason for neglect.

.Thank you.

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