Good Example Of Essay On The Influence Of Local Culture On The

MARKETING STRATEGY IN SMEs

The Influence of Local Culture on SMEs
Harvard – 8 pages – 15 sources Expectation out of this essay is:Showing that the theories is understood; applying theory correctly; providing evidence to back up your arguments; comparing and discussing different points of view; critical discussion – not just description, and definitely not just regurgitating lecture notes or tutorial material. Draw on previous empirical studies, theoretical papers, visiting speakers, and case studies.
1. Introduction:
There are hundreds of definitions of “local culture’. One is everyday life in specific locations that reflects people’s feelings of propriety (Encyclopedia Britannica, 2014). In terms of the influence on the success of small and medium enterprises (SMEs), local culture is also linked with use of technology, dependence of the company on local purchases and production, availability of employees, degree of support of local regulatory agencies, type of legal system, social networking, and the attitude of financial institutions toward funding opportunities.
In the European Union (EU), classification as an SME is dependent on how many people are employed, the percentage of turnover, and the economic state of the company (Ec.europa.eu 2014).
Figure 1: Factors involving definition of small and medium-sized enterprises (SMEs) Provided by the European Union in 2014 (Ec.europa.eu 2014)
A huge number of companies worldwide are SMEs that play important roles in local economies. (Philip, 2010). They not only contribute through employment opportunities and the purchase of local commodities, SMEs promote individuals and groups to venture into the world of the entrepreneur. They encourage importation and exportation, stimulating local markets and diversifying activities (UNECE, 2003). In addition, SMEs are more dependent on local economy that larger companies. Their opportunities to gather information on exterior markets and an inability to change organizational strategies in a situation where a large company would simply exit an area of business create a reliance on local support.
It is apparent from information available through papers, presentations, and press releases that the encouragement of SMEs is a global process. However, the support of local culture of the startups and initial operations of these fledging companies is crucial to their survival.
1.2 Problems with Technology
Ashford (2014) reports that a survey of SMEs in the United Kingdom revealed fears of the possibility of network failure, cyber attacks, and loss of information. Of those participating, 27 percent felt marketing opportunities on the internet were some of the top opportunities for business success but 39 percent were concerned about technologic problems. Some of the local issues include lack of skilled employees and a workforce that is aging. Emphasis is placed on the need for planning for potential technological risks.
1.2 Dependence on Local Purchases and Production
The Annual Report on SMEs by the European Commission revealed the increased dependence on local consumers for business success (Ec.europa.eu, 2015). Larger corporations deal with export of products to national or international markets. However, SMEs lack the funding for activities in the beginning phases of development; therefore, income based on consumption of the community is vital.
A report from the Solomon Islands emphasized the importance of SMEs in established a local independence from external assistance (Solomon Islands Chamber of Commerce and Industry, 2015). The lack of SMEs using local resources such as the logging industry damage the economy of the Solomon Islands, forcing dependence on over US$250 million in international assistance. However, only about 15 percent to 20 percent of the funds are spend on development of internal industry. The area is working to promote training for the local population to increase the number of SME and to increase accessibility to rural resources.
1.3 Availability of Employees
Small and medium enterprises can be extremely diverse with multiple different components (Pansiri and Temtime, 2010). However, they are primarily reliant on relatively few industrial areas such as foods and manufacturing. The production of goods used in local cultures account for more than 60 percent of registered SMEs globally. Small and medium enterprises compose approximately 99 percent of the businesses in the EU (Prah, 2011), only eight percent function in the area of exported good compared with 19 percent of larger businesses (Lenihan, Andreosso-O'Callaghan, & Hart, 2010).These numbers indicate the importance of local consumers to a SME.
Rujirawanich, Addison and Smallman (2011) conducted a study in Thailand concerning the importance of the necessity in understand local environment and culture, particularly in regards to SMEs. They evaluated how Hofstede’s five dimensions of culture influence manufacturing innovation in that country. The values are goals attainable within a timeframe versus results that require long periods, masculine goals versus humanistic ones, equal distribution of power, the need for formal policies, and individual needs versus group needs (Businessmate.org, 2015). Their conclusion was that cultural influences can modify these values and introduce additional factors. This finding is important when determining the influence values in various cultures on the success of SMEs in the community.
When discussing availability of employees there are a number of factors that come into play: competing wages by large corporations, ability of employees to travel to and from their jobs, and aging workforce, and the quality of employees is a problem for SMEs. An example is the Andalusian, Spain labor market which has high unemployment, temporary workers, and unskilled labor (Marchese and Potter, 2010). It is felt an overdependence on the construction industry is to blame, even educated employees are scarce. The decreased quality of laborers is traced to lower rates of compliance with compulsory education and enrollment at universities. The perception of the area is that there is a disconnection between local vocational training facilities and job placement, a separation of SME needs and access to employees, and a deficit of a workforce strategy. The local liaison offices are understaffed for sufficient contact with SMEs concerning the need for employees. Andalusia feels this one of a number of problems the country needs to address.
Korea performed a statistical analysis of the wage gap between large companies and SMEs (Kim Hyung-rok, 2015). The report revealed that the income an employee could expect at an SME is 56.7 percent of the wage for a similar employee at a larger corporation. In other words, an employee earning $100 at a large business will earn $56.70 at a smaller one. Benefits, pensions, and time paid off are also unequal. It was recommended that governmental support be investigated in the form of policies or subsidies.
Kenya is an excellent example of problems acquiring employees due to transportation issues. The public transportation system is run by independent owners of one or two minibuses (Schoenholzer, 2013). Driver incentives concerning time restrictions result in reckless driving, accidents, casualties, and property damage. Installation of monitoring devices in the van promotes compliance by drivers as licenses will be revoked on proof of poor driving. Although this action is a step in the right direction in getting employees to the SMEs safely, a discussion of a public transportation system run by the city government has yet to happen.
1.4 Support of Local Regulatory Agencies
Pansiri and Temtime (2010) have found a correlation between governmental support for small businesses and their success, particularly in developing countries. A favorable regulatory environment add flexibility to the implementation of regulations, builds community infrastructure, promotes partnership with the local culture, and increases use of local goods (Qimiao Fan World Bank, 2002).
Regulations, particularly regarding labor relations, are a stumbling block for SMEs globally (Lee, Torm and Vazquez-Alavarez, 2013). Information for government evaluation is based largely on large companies, leaving SMEs out of the equation. Studies in developing countries such as Vietnam, where SMEs are primarily household firms, are needed to reach a consensus on ways to assist SMEs with regulatory compliance.
1.5 Type of Legal System
The legal system of a local culture is also important to the success of SMEs (Mazzarol & Choo, 2003). Many times, significant amounts of a budget are allocated to bribing local authorities in developing countries. When the local culture provides for a stable legal framework, SMEs can be assured the system doesn’t change conditions favorable for business, have access to recourse in disputes, and can understand the laws applicable to their business and their interpretation (Qimiao Fan World Bank, 2002).
Japan is aggressive in enhancing local support for SMEs (SME Support, Japan, 2012). The Organization for Small & Medium Enterprises and Regional Innovation, Japan defines them as the “backbone of Japan’s economy”. They provide support by dispatching experts in management in collaboration with local business associations, promote a safety net through a mutual system of local assistance, and give aide in infrastructure problems such as improving facilities or relocation.
1.6 Networking
Entrepreneurs use networking to access knowledge, ideas, and working capital (Abbott, Murenzi and Musana, 2012). In order to reduce risks based on inexperience or lack of information, the managers of SMEs create ties with other business owners to create channels for resources. National and international networking is out of the range of SMEs and a positive relationship between the company and the local culture is imperative to the creation of an effective network.
A study conducted by Sawyerr, McGee and Peterson (2003) addresses the effectiveness of networking in promoting the success of SMEs. Using 153 companies dealing with technology and meeting the criteria of a SME, they found that in the face of decreasing sales the owners-managers increased networking activity. Improved company performance supported the increased activity in networking.
An OECD conference in Turkey met to discuss the promotion of SMEs as important to a global economy (Promoting Entrepreneurship and Innovative SMEs in a Global Economy, 2004). It quoted a study of 14 OECD countries concerning the owner-managers of SMEs opinions of their challenges in operations. Of those interviewed, 19% felt financing was their biggest challenge, 17% stated it was their lack of education and training as businesses owners, 16% felt it was lack of local support, and 15% stated regulations was a burden. One part of the meeting suggested the local problem of acceptance of SMEs into business associations. While the associations have the power to bring local financing institutions into a cooperative partnership with the smaller businesses, they don’t have the weight to carry their part of the alliance. In addition, business associations can encourage SMEs by offering advice on business management skills as mentors.
1.7 The Attitude of Financial Institutions
The roles of formal and informal lending institutions available to the SMEs are vital in providing funding for start-up, operations, and expansion (Cook and Nixson, n.d.). In a study concerning financing for SMEs in Nigeria, Aruwa (2004) used a random sample of 10 financial sources and 20 SMEs to address availability and accessibility of funding. He found that while options are numerous due to government initiatives, it is difficult for SMEs to acquire the funds. Informal sources were more responsive to the needs of smaller businesses, so it is recommended that community banks participate in local business associations.
A case study conducted by Shah and Khedkar (2011) addressed the lack of growth of SMEs in India. It addresses the need of SMEs for adequate delivery of credit, improved risk management, and altered banking attitudes, among others. The discussion if of the SIDBI in regards to operations dealing with finance in India. It is not a commercial bank as much as a development banking institution. It discussed mergers, global ventures, and the needs of various types of clients. It was clear from the study that the Reserve Bank of India is promoting the development of SMEs in that country by creating a partnership between and branches of SIDBI to increase availability of funds.

Conclusion

Although it is universally recognized that SMEs constituted the majority of businesses around the world, here has been little research conducted on problems and solutions, particularly in low-income countries (Cook and Nixson, n.d.). Of the studies performed, the major amount has been empirical rather than theoretical. Therefore, it is recommended that researchers expand the topic of corporate success from large companies to SMEs in various locales. The influence of local culture is more significant to a business without the resources to expand past the boundaries of a single community.
In addition, studies of the attitudes of local culture are documented for business entities and government offices. However, the attitudes and influence of the people in the community are rarely addressed apart from problems with employment and transportation. Field studies gathering data from interviews and surveys may shed light on underlying challenges for SMEs on the level of local culture and perceptions.
That being said, it is to the benefit of the local culture and the SMEs to work in a cooperative partnership for success. The goals of the community (jobs, higher per family income, economic stability) are in line with the goals of the small business (need for more payroll when expansion is indicated, higher profitability, and economic stability. The barriers seem to be the perception of local culture that SMEs are such a financial risk that investment is not considered worthwhile. In order to reduce the risk of investing an in SME, groundwork is required in creating opportunities for acquisition of technology, promoting local consumption and employees, assuring stable regulatory and legal systems, providing productive networking opportunities, and encouraging financial institutions to invest in these businesses.

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