8/3/2019 Braning as a Competitive Advantage for SMEs
1/12
RU. Int. J. vol.1(1), 2007
25
Braning as a Competitive Advantage for SMEs
Angkana Anarnkaporn
E-mail: [email protected]
Abstract
The world of branding is clearly dominated by big businesses. Yet, in
developing countries like Thailand, small- to medium-sized enterprises (SMEs)
comprise the largest number of businesses in the economy. In order to provide a
clearer picture of the character of branding as a strategy in SMEs, this study exploredthe concept and degree of brand orientation in the SME sector. Seven key
components of brand activities were identified and tested on SME owners and
managers in various industries in Thailand. Next, the study investigated the
relationship between brand positioning strategies and bases of segmentation in a
SME business. Furthermore, this study examined the effect of each segmentation
base on the different strategic positioning options used by SMEs. The results show
that there is a significant positive relationship between brand orientation and five of
the brand activities. Furthermore, it was found that there is a significant positive
relationship between the level of segmentation and the four types of brand
positioning strategies. The findings suggest the combined use of both macro- and
micro-bases of segmentation in order to leverage similar strategic positioning across
global markets. However, micro-bases of segmentation are suggested for firms
seeking differential positioning strategies. An effective use of the proposed
framework will have salient implications for SMEs, including cost efficiencies,
opportunities to transfer products globally, expansion opportunities of current
operations, and development of more effective brand positioning decisions.
Introduction
A critical question many small- to medium-sized businesses (SMEs) often
ask is whether it is worthwhile spending a substantial amount of money, time and
energy in rethinking their marketing practices, adopting a strategic marketing
approach, and going through the branding exercise. Most SMEs may well subscribe
to the popular belief that strategic marketing and branding are the domains of large
companies and MNCs. Though tempted to reorganize their marketing practices and
adopt branding strategies, SMEs often do not have the financial, infrastructural and
human resources that enable them to do so. As a result, many are carried by the
inertia that dictates marketing to be selling and exists to support production. In
general, brand theories are usually about big companies and multinationals, since the
attention of brand management has been focused primarily on them. Open randomly
8/3/2019 Braning as a Competitive Advantage for SMEs
2/12
RU. Int. J. vol.1(1), 2007
26
any management book and more than likely you will find big companies like Procter
& Gamble, IBM, Unilever, McDonalds, Ford, or Coca-Cola being used as brandingexamples. It has left us with the unclear picture of where SMEs fit into brand
theories. When brand management is discussed in books or journals, SMEs are
hardly recognized or treated as a separate entity in spite of the fact that the majority
of all businesses belong to the small- to medium-sized enterprises group.
If that is the case, several questions concerning SMEs can be raised: if the
firm is small but has lofty ambitions, what should it do? Does strategic marketing
and branding really matter to SMEs? How can SMEs strategically rethink, reorganize
their marketing practices and strategies, and build brands on a small budget? These
are salient issues, which SMEs need to address.
The main purpose of this study is to provide an understanding of the role of
branding in creating competitive advantage in SMEs. The study is conducted onSMEs in Thailand that encourages free trade and is one of most dynamic economies
in the Southeast Asia region. This research hopes to provide insights and guidelines
for SMEs to follow in selecting appropriate strategies for their brands. The specific
objectives of this research are as follows:
1. To identify the level of brand orientation in SMEs.
2. To test brand activity factors in SMEs.3. To test relationships among brand activity factors related to brand
orientation level.
4. To test segmentation base factors in SMEs.5. To test the relationship between the level of segmentation and brand
positioning strategy among SMEs.
Branding Challenge for SMEs
Competition in the global economy becomes fiercer day by day, and as
technology advances, so does the competition. In order to survive, grow and
compete in this competitive climate, entrepreneurs of small- and medium- sized
enterprises have to study market conditions and implement effective strategies. Of
all the competitive tools available to SMEs, we argue that branding should be among
the top of the list.
A brand within a small geographic market has great opportunities to steal
market share from the gigantic global brands, with its ability to serve the customer in
a more flexible and creative way than its bigger counterparts. Stibel (1988) noted
that with a well-planned brand strategy, not only national but also small companies
could overcome the market competition. An example would be the case of
Community Coffee versus General Foods Maxwell House and Procter & Gambles
Folgers. Community Coffee, a small regional coffee roaster was losing its market
share to those national companies that have put enormously into national advertising.
After analyzing its strong and weak points, Community Coffee found a way to turn
an apparent weakness into a potent weapon. Its sales force was tied to a store-to-door
8/3/2019 Braning as a Competitive Advantage for SMEs
3/12
RU. Int. J. vol.1(1), 2007
27
sales/distribution system that was extremely expensive for the national brand
companies, but this system has enabled the company to be in contact with itscustomers on a regular basis. Accompanied by an aggressive program of trade
allowance and new product introduction, this regional coffee roaster more than
doubled its share in the regional market within two years.
Investment in media takes a great amount of money. This misconception has
led many SMEs to think that they only have to focus on product and price. Actually,
what happens is that the global brands are forced to invest heavily in media due to
their lack of ability to be present locally everywhere. The process makes customers
feel closer to global brands than the smaller brands that they are often physically
closer to. However, brand building is not done solely through advertising and media.
Advertising only plays a part in brand building. SMEs can use its closer physical
connection with the customer to create a compelling experience with the customer.They can emphasize their brands strengths and credibility with their customers and
reassure them that their small brand is the better option.
Many SMEs are sub-contracted to manufacture brand name goods for foreign
companies. When comparing revenue from subcontracted work or OEM (original
equipment manufacturer) with revenue earned from producing their own brand,
many differences can be noticed. Since the production base for many foreign
companies is selected based on lower labor costs, this carries a risk for manufacturers
who depend on these contracts, because in case labor costs are found to be cheaper
elsewhere they would lose orders and therefore revenue (Pehrsson, 2004). Hui and
Zhous (2003) study shows that when congruence between brand origin and country
of manufacture occurs, the latter information has no significant effect on product beliefs and global product attitude. When country-of-manufacture information
indicates that a branded product is made in a country with a less reputable image than
that of the brands origin, the information produces more negative effects on product
evaluations for low equity brands than high equity brands. Thakor (1996) asserted
that the origins cues are already embedded within many well-known brand names,
and that mere manipulation of country of assembly or manufacture probably does not
eliminate the effects of those cues. For example, a Samsung sound system or Toyota
car assembled in a country outside the country of origin may not stop people from
continuing to regard them as a Korean or Japanese brand respectively.
SME operators should create a distinctive brand for their products with the
objective of becoming accepted both overseas and within the country. Establishing a
respected name for products would give manufacturers the potential to compete in
the world market. One of the first things to ensure a strong brand is the quality of the
product. SME operators must pay attention to quality in order to satisfy customers
and build product confidence. Several marketing strategies can be employed to build
customer awareness, including the launching of public relation campaigns,
distribution of information about the products, and promotions emphasizing the
quality of goods and services. Customers will eventually accept and embrace these
products.
8/3/2019 Braning as a Competitive Advantage for SMEs
4/12
RU. Int. J. vol.1(1), 2007
28
SMEs in Thailand
In Thailand, a country with about 64 million people, the largest number of
businesses is comprised of SMEs. They are present in all economic sectors including
manufacturing, trade and service. Strengthening SMEs is a main issue to consider
when it comes to growth and income distribution in the country. The Institute for
Small and Medium Enterprises Development (ISMED) reported that SMEs in
Thailand represent over 90 percent of the total number of entrepreneurs in nearly all
business sectors, and employ over 60 percent of the labor force. Furthermore, SMEs
contributed between 38% and 39% of the total GDP in Thailand from 1999 to 2003.
In 2003, the value of industrial exports from Thai SMEs was over 45% of all
industrial products exported from Thailand. All these statistics underscore the huge
contribution of SMEs to the Thai economy.Unfortunately, many SMEs fail each year. According to the Thai Ministry of
Commerce, the failure rate was 69% in 2002. This indicates that business failure is a
huge problem among SMEs.
For a long time the Thai government has been focusing on an export-led
growth strategy, which means that the development direction of Thai SMEs is to
compete in the world market. Unfortunately, Thai SMEs suffer from the so-called
nutcracker effect: (a) in terms of production cost, especially labor cost, Thai SMEs
cannot compete with neighboring competitors that have lower labor cost such as
China, Indonesia, and Vietnam, and (b) in terms of product quality and technological
advancement, Thai SMEs cannot compete with their counterparts in Italy, Japan, or
Taiwan. Thai SMEs are using labor-intensive and old-fashion technology to produce
goods of the same quality as products from China and Vietnam, but with higher
production cost. Therefore, Thai SMEs are facing the problem of declining
competitiveness, which leads to the problem of limited access to capital as well.
Furthermore, SMEs have not been able to increase capital via stock markets because
of lack of expertise. Meanwhile, borrowing from commercial banks is very costly
and difficult.
Lack of creative entrepreneurship is another one of Thai SMEs weaknesses.
Most Thai SMEs are family-run and rely on the family members limited experience.
This traditional style of running a business may work well for the local market but is
usually far below the acceptable standard for the international market.Finally, SMEs have not been getting much help from the Thai government.
SME promotion has been under government consideration for many years. However,
government agencies are not ready to play an effective role in promoting SMEs. For
these agencies to be effective, several things have to be changed, including the
structure of organization and the capability of human resources in the public sector.
Currently, there are some obstacles for SMEs to access public facilities.
Nonetheless, the government is currently promoting industry standardization
and has assigned the state-run Thai Industrial Standards Institute to expedite issuing
certificates for products made by local communities so that they are acceptable by
8/3/2019 Braning as a Competitive Advantage for SMEs
5/12
RU. Int. J. vol.1(1), 2007
29
consumers while simultaneously upgrading products to globally acceptable
standards. The government has a firm policy to support the private sector in creatingbrands. In addition, it has become a driving force especially in the fashion industry
helping to create Thai Go, a brand name for Thai designers. These products are
now on sale and compete with well-known foreign brands. While the quality is
similar, the prices are quite different.
The public sector also has several plans to create strong Thai brands, one of
these being called Bangkok the city of fashion. If this plan is actually
implemented, many Thai entrepreneurs and products will be created. Creating
brands for goods is thus important for SMEs operators to take into consideration
along with building recognition. Hopefully, if SMEs operators can attach importance
to these factors, it would not be difficult for them to achieve success in their
businesses.
Theoritical Framework
Concept of Brand Orientation
The term brand orientation was first defined by Urde (1994) as an
approach in which the process of the organization revolve around the creation,
development, and protection of brand identity in an ongoing interaction with target
customers with the aim of achieving lasting competitive advantages. The goal of
brand orientation is: (1) to represent either functional or business-unit focus on
brands that support strong customer and stakeholder relationships regardless of the brand being at the corporate level or product level, or being a service or
manufactured product (Bridson and Evans, 2004), and (2) to enable an
organization to have a clear brand vision and identity.
Three developing trends - decreasing product divergence, increasing media
costs and integration of markets - are identified in the business world today as
causing brand orientation to become a competitive strategic choice (Urde, 1994). The
globalization and integration of markets have opened up large markets as well as
created the most competitive environment for business. Regional pacts such as the
European Union, the North America Free Trade Agreement, APEC, etc. have all
intensified the global competition. Neither multinational corporations nor
entrepreneurs are able to avoid the eventuality of global competition. Seen in this
light, a branding strategy seems to be the most effective way in differentiating ones
product, yet keeping ones marginal advantage. To achieve the full power of
competitive edge, companies should focus their strategy on brands, which can be
described as brand orientation. Brand orientation focuses on consumers' utilitarian
satisfaction. In order to achieve brand objectives, organizations need to manage their
internal and external activities to maximize value-adding capabilities beyond the
functional aspects, for example, a delivery of service and quality among customers
and other key stakeholders. The brand is the key to building customer loyalty in the
8/3/2019 Braning as a Competitive Advantage for SMEs
6/12
RU. Int. J. vol.1(1), 2007
30
marketplace, and all communications associated to the brand should be related to
appropriate competitive positioning and value. The brand and building brand equityare recognized as being significant factors in achieving positional advantage in the
market and, thus, financial benefits.
In general, the literature review revealed a paucity of scholarly activity on
brands and their management in the business sector, despite the fact that marketing
ideas have been applied to the business sector for at least 30 years (Kotler and Levy,
1969). Those articles that did exist, however, relied primarily on case study reports
and brand practice papers and few of them have mentioned brand orientation in the
SME context. Hankinson (2001) defined brand orientation as the extent to which the
organization regards itself as a brand. The author operationalized brand orientation in
terms of four core brand activities, namely: 1) understanding the brand; 2)
communicating the brand; 3) using the brand as strategic resource, and 4) managingthe brand. Based on these four themes, Hankinson developed a scale to measure
brand orientation. This research will adopt Hankinsons brand orientation scale to
study SMEs in Thailand.
Hybrid Segmentation Approach
Many early segmentation theories were based on macro-level factors such as
economic (Kotler, 1986); cultural (Whitlock, 1987); geographic (Daniels, 1987) and
technological (Huszagh et al, 1986). However, later studies found that the pre-
determined country bases were inadequate for segmentation when considered
without behavioral bases (Helsen et al, 1993; Nachum, 1994). A hybrid approach
that considers both country bases (macro-level) as well as buyer response bases
(micro-level) was found to be more realistic (Hassan et al, 2003). Hybrid
segmentation strategy was developed to identify the indicators/ attributes of brands
that are suitable for the implementation of global market programs (Helsen et al,
1993; Luqmani et al, 1994; Kale and Sudharshan, 1987; Kreutzer, 1988; Hassan and
Katsanis, 1991). Market segmentation must be examined in order to determine the
best brand positioning strategy. In this study, hybrid segmentation strategies were
utilized as a framework to evaluate four brand-positioning strategies, namely:focus
strategy, geo-centric strategy, operationalized strategy, and localization strategy.
Model & Hypothesis
Our research model captures the two important dimensions of a brand
strategy: the level of brand orientation and the level of segmentation. The level of
brand orientation is hypothesized to be associated with seven brand activity
variables: understanding the brand, brand management, influence upon others,
communicating the brand, brand communication tools, strategic use of brand and
brand objectives. The level of segmentation is hypothesized to be associated with
four strategic positioning types: focused strategy, geocentric strategy, optimization
8/3/2019 Braning as a Competitive Advantage for SMEs
7/12
RU. Int. J. vol.1(1), 2007
31
strategy and localization strategy. The research model is presented in Figure 1.
The first set of hypotheses (H1 to H7) was developed to explore therelationship between the level of brand orientation and the seven brand activity
factors:Hypothesis 1: There is a positive relationship between the level of brand
orientation and the level of understanding the brand (U) in SMEs.
Hypothesis 2: There is a positive relationship between the level of brand orientation
and the level of management of brand (M) in SMEs.
Hypothesis 3: There is a positive relationship between the level of brand orientation
and the ability to influence others (I) to adopt a brand approach to their SME
business.
Hypothesis 4: There is a positive relationship between the level of brand orientation
and the level of communicating the brand (C) in SMEs.
Hypothesis 5: There is a positive relationship between the level of brand orientation
and the range of brand communication tools (T).
Hypothesis 6: There is a positive relationship between the level of brand orientation
and the level of strategic use of brand (S) in SMEs.
Hypothesis 7: There is a positive relationship between the level of brand orientation
and the usage of brand to fulfill a range of business objectives (O).
Since markets have evolved, a hybrid approach consisting of country bases
and buyer response base is found to be the appropriate approach (Hassan et al, 2003).
This approach helps identify and profile segments on an inter-market basis and
develop strategies to reach them with brands. However, a review of the literature
reveals a dearth of empirical studies that examine the link between segmentation and
strategic brand positioning, especially with reference to SMEs. In order to better
define the parameters of the relationship between brand positioning and
segmentation in SMEs, a second set of hypotheses was generated to examine the
relationship between market segmentation and brand positioning strategy:Hypothesis 8: There is a positive relationship between the level of segmentation and
focused strategy in SMEsHypothesis 9: There is a positive relationship between the
level of segmentation and geocentric strategy in SMEs. Hypothesis 10: There is a
positive relationship between the level of segmentation and optimization strategy in
SMEs. Hypothesis 11: There is a positive relationship between the level of
segmentation and localization strategy in SMEs.
8/3/2019 Braning as a Competitive Advantage for SMEs
8/12
RU. Int. J. vol.1(1), 2007
32
Methodology
This study uses a survey design. A questionnaire was developed to capture
information on three areas: demographic information, brand orientation, and brand
positioning. In Part 1, the respondents were asked general demographic questions
such as company position level, age, gender, educational level, and the industry in
which they work, and so on. Part 2 of the survey contained 30 Likert-scale items
measuring brand orientation, as developed by Hankinson (2002). Part 3 of the
survey contained 3 items, as developed by Hassan and Craft (2005): the first item
contained 14 macro-level segmentation base statements; the second item contained
22 micro-behavioral level segmentation base statements, and the third item contained
four brand positioning strategic statements.
In order to increase generalizability of the results of study, the researchertargeted SMEs from different industries. A total of 1,000 questionnaires were mailed
out and 517 were returned and used for analysis.
Data were analyzed by factor analysis to determine the number of brand
activity factors and segmentation base factors that are relevant to SMEs in Thailand.
For this purpose, principal component analysis with varimax rotation was used. The
factor analysis of 26 items generated 7 factors as follows: (1) Understanding the
brand, (2) managing the brand, (3) ability to influence others, (4) communicating the
brand, (5) brand communication tools, (6) the strategic use of brand and (7) the usage
of brand to fulfill a range of business objectives. Factor analysis on segmentation
base variables produced 7 factors: (1) macro-economic, (2) macro-cultural, (3)
macro-demographic, (4) micro-demographic, (5) attitude and usage, (6) micro-culture, and (7) brand loyalty. Correlation analyses were used to test the hypotheses.
The results are reported in the section below.
Results & Discussion
The results show that the majority of the survey participants were either
business owners or partners (59%), while participants occupying middle to high
management positions came in second (31%) and the remainder (10%) occupied
other positions. In terms of age, 31% of the participants were aged between 30-40,
30% between 40-60, and 21% between 25-30. With respect to gender, the
distribution was almost equal, with female participants accounting for slightly more
than 51% of the respondents. In terms of educational background, most of the
participants possessed at least basic college education. The majority had a bachelors
degree (37.33%) while those with a masters degree were a close second (34.82%).
Together these 2 groups accounted for over two-thirds of the participants. More than
half of the participants were working for SMEs that have in existence for over 10
years.
8/3/2019 Braning as a Competitive Advantage for SMEs
9/12
RU. Int. J. vol.1(1), 2007
33
In terms of brand orientation, the majority of the participating organizations
(50.29%) exhibited a medium level of brand orientation. 43.24% showed a highlevel of brand orientation while 6.47% were classified as having a low level of brand
orientation. With respect to the segmentation base factors, the results show that the
respondents considered all these factors to be either moderate or moderate-to-high
when looking at the market for their product and/or service. The localization
strategy was used the most followed by focused strategy, optimization strategy
and geocentric strategy. In summary, SMEs had indicated that the level of
segmentation is essential to some extent in considering the appropriate market for
their products and services. Attitude and usage were found to be the most important
segmentation factors while localization was the most frequently used positioning
strategy.
Brand Orientation vs. Brand Activities
The hypotheses in this study were tested using correlational analysis. With
regard to the relationship between brand orientation and brand activity factors, the
results show that 3 out of the 7 hypotheses were supported, that is, H1 (p
8/3/2019 Braning as a Competitive Advantage for SMEs
10/12
RU. Int. J. vol.1(1), 2007
34
focus on specific brand tasks so that a culture of brand centrality will develop
throughout the organization. Such a culture will enable the SME to compete moreefficiently in an increasingly competitive environment.
To a certain extent, this study confirms that brand orientation may play a
critical role in guiding a firms growth. The study also shows the relevance of
branding activities to SMEs. This research demonstrates that brand orientation can
be a positive force for brand-marketing performance. With the construct of brand
activities being clearly articulated, SMEs can now understand their own situations
better and implement the appropriate brand activities to guide strategic planning and
future market activities.
Segmentation vs. Brand Positioning Strategy
With respect to the relationship between segmentation base and brand
positioning strategy, all the hypotheses were supported, that is, H8 (p
8/3/2019 Braning as a Competitive Advantage for SMEs
11/12
RU. Int. J. vol.1(1), 2007
35
similar segmentation members are represented. Second, segmentation can create
opportunities for transferring products, brands and ideas across subsidiaries indifferent locations or regions. Finally, enhancing our understanding of market
segmentation strategies will pave the way for more effective brand management
decisions that may result in better market performance.
Conclusion & Significance of study
Since there is a little information on brand orientation and brand positioning
in SMEs, this study makes a significant contribution to the study of branding in the
small business and entrepreneurial sectors. All prior studies about brand orientation
have been conducted in Western countries. This study is the first that combined the
study of brand orientation and brand positioning among SMEs in Thailand.On a practical level, this study is expected to increase SME awareness of
salient brand activities such as understanding the brand, managing the brand,
influencing others to adopt brand approach, communicating the brand, the strategic
use of brand, brand communication tools, and the usage of brand strategy to fulfill
business objectives. Furthermore, by introducing the principle of segmentation-based
strategic positioning, this study will help SMEs choose the right strategy and the
right market to establish brands more efficiently, not only domestically but also
globally.
References
Bridson, K. & Evans, J. (2004). The secret to a fashion advantage is brand
orientation.International Journal of Retail & Distribution Management,
32(8-9), 403-414.
Daniels, J. D. (1987). Bridging national and global marketing strategies through
regional operations.International Marketing Review, 2(3), 29-44.
Hankinson, P. (2001). Brand orientation in the charity sector: A framework for
discussion and research.International Journal of Nonprofit and Voluntary
Sector Marketing, 6(3), 231-242.
Hassan, S. S. & Craft, S. H. (2005). Linking global market segmentation decisions
with strategic positioning options. The Journal of Consumer Marketing, 22
(2-3), 81-90.
Hassan, S. S., Craft, S. H. & Krtam, W. (2003). Understanding the new bases for
global market segmentation.Journal of Consumer Marketing, 20(5),
446-60.
8/3/2019 Braning as a Competitive Advantage for SMEs
12/12
RU. Int. J. vol.1(1), 2007
36
Hassan, S. S. & Katsanis, L. R. (1991). Identification of global consumer segments: a
behavioral framework,Journal of International Consumer Marketing, 3(2),11-28.
Helsen, K., Jedidi, K. & Desarbo, W. S. (1993). A new approach to country
segmentation utilizing multinational diffusion patterns.Journal of Marketing,
57, 60-71.
Hui, M., & Zhou, L. (2003).Country-of-manufacture effects for known brands.
European Journal of Marketing, 37(1), 133-156.
Huszagh, S.M., Fox, R.J. & Day, E. (1986). Global marketing: an empirical
investigation. Columbia Journal of World Business, 20(4), 31-43.
Kale, S.H. & Sudharshan, D. (1987). A strategic approach to international
segmentation.International Marketing Review, 4, 60-70.
Kotler, P. (1986). Global standardization-courting danger.Journal of Consumer
Marketing, 3(2), 13-15.
Kotler, P. & Levy, S. (1969). Broadening the concept of marketing.Journal of
Marketing, 33(1), 10-15.
Kreutzer, R.T. (1988). Marketing mix standardization: an integrated approach inglobal marketing.European Journal of Marketing, 22(10), 19-30.
Luqmani, M., Yavas, U. & Quraeshi, Z.A. (1994). A convenience-oriented approach
to country segmentation.Journal of Consumer Marketing, 11(4), 29-40.
Nachum, L. (1994). The choice of variables for segmentation of the international
market.International Marketing Review, 11(3), 54-67.
Pehrsson, A. (2004). Strategy competence: a study of successful business
establishments. Strategic Change, 13(5), 271-282. Thakor, M. (1996). Brand
origin: conceptualization and review. Journal of Consumer Marketing, 13(3),27.
Urde, M. (1994). Brand orientation-A strategy for survival. Journal of Consumer
Marketing, 11(3), 18-32.
Whitloc k, J.M. (1987). Global marketing and the case for international product
standardization.European Journal of Marketing, 21(9), 32-44.