SMEs IN UNITED KINGDOM

The importance of SME's in United Kingdom and the marketing characteristics and innovations used to survive

The importance of SME's in United Kingdom and the marketing characteristics and innovations used to survive

Chapter II: Literature Review

SMEs Industry in United Kingdom

United Kingdom's SME industry has gone through huge developments since the past decade. United Kingdom's SMEs used to be controlled by the Ministry of Commerce (now Ministry of Domestic Trade). This system was comprised of a high degree of central planning and political and administrative allocation. Since there was a shortage of goods, demand exceeded supply to a large degree. Under this situation, there was no competition among manufacturers and among retailers. Therefore, there was virtually no need for manufacturers or retailers to be market-oriented. It was not until the 1990s that foreign firms were allowed to set up joint ventures (JVs) in SMEs, bringing the need for advanced marketing perspectives. As a result, competition gradually came into play in the Britain market (Sternquist, 2007, pp. 121-29).

Before the mid-1990s, there were no commercial buyers in SMEs. Product assortment was based on government allocation, so there was no attempt to match product offerings to customer needs. After the late 1990s, the entry of foreign investments greatly accelerated the marketization and modernization of the Britain SME industry (Sternquist, 2007, pp. 124). Local SMEs in Britain began to face competition from foreign retailers who provided higher value at a lower price. During that time, the original sellers' market gradually evolved into a buyers' market, and products were no longer in short supply (Sternquist, 2007, pp. 127). Increased consumer demand for product variety and choices became evident. Therefore, manufacturers and retailers came to realize the importance of differentiating their product offerings. This required an intensive investigation into customer needs and competitor activities. Consequently, market orientation became a potential competitive advantage for both manufacturers and retailers in United Kingdom. The development of UK's economy has led to more cross-cultural research in the marketing field (Sternquist et al. 2007). Since then, Britain firms have begun to realize the importance of market orientation and product differentiation. SME behavior in UK is similar to that of the rest of Europe. Therefore, investigating market orientation research framework within the Chinese retail environment would provide a fruitful comparison to the U.S. and other European countries where market orientation and channel relationships are more frequently studied.

Market Orientation; SME Performance

Porter (2011, pp. 1-9) originally developed the notion of competitive advantage, which occurs when a SME pursues a strategy by utilizing its resources to achieve either cost reduction or superior value compared to its competitors in the same industry. Such resources that SME utilize must be valuable, rare, inimitable and non-transferable and can be tangible or intangible (Chen, et. al., 2011, pp. 85-94). Consumer markets are segmented in nature. In order to satisfy the target segments, SMEs are advised to utilize resources and produce tailored products and/or services. As the Competitive Advantage Theory postulates, every SME (SME) possesses some unique ...